City of San Mateo
San Mateo, California
Comprehensive
Annual Financial Report
For the Year Ended June 30, 2003
CITY OF SAN MATEO
SAN MATEO, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2003
Prepared by:
FINANCE DEPARTMENT
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2003
Table of Contents
Page
i
INTRODUCTORY SECTION
Table of Contents....................................................................................................................... .............................. i
Transmittal Letter ............................................................................................................................... .................... v
Directory of City Officials ............................................................................................................................... ..... ix
Map of City’s Location....................................................................................................................... .................... x
Organization Chart ............................................................................................................................... ................ xi
GFOA Certificate of Excellence in Financial Reporting .................................................................................. xii
CSMFO Certificate of Excellence in Financial Reporting .............................................................................. xiii
FINANCIAL SECTION
Independent Auditors’ Report......................................................................................................................... ... 1
Management’s Discussion and Analysis ........................................................................................................... 3
Basic Financial Statements:
Government- Wide Financial Statements:
Statement of Net Assets......................................................................................................................... . 17
Statement of Activities and Changes in Net Assets ............................................................................ 18
Fund Financial Statements:
Governmental Fund Financial Statements:
Balance Sheet ............................................................................................................................... ..... 24
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets................................................................. 27
Statement of Revenues, Expenditures and Changes in Fund Balances ..................................... 28
Reconciliation of the Governmental Statement of Revenues,
Expenditures, and Changes in Fund Balances to the Government- Wide
Statement of Activities and Changes in Net Assets ............................................................... 30
Proprietary Fund Financial Statements:
Statement of Net Assets .................................................................................................................... 32
Statement of Revenues, Expenses and Changes in Net Assets ................................................... 33
Statement of Cash Flows................................................................................................................... 34
Notes to Basic Financial Statements ............................................................................................................. 36
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2003
Table of Contents, Continued
Page
ii
FINANCIAL SECTION, Continued
Required Supplementary Information:
Budgets and Budgetary Accounting....................................................................................................... 78
Defined Pension Plan........................................................................................................................... .... 92
Supplementary Information:
Non- Major Governmental Funds:
Combining Balance Sheet......................................................................................................................... 86
Combining Statement of Revenues, Expenditures and Changes in Fund Balances........................ 88
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:
Police Grants Special Revenue Fund................................................................................................ 90
Community Development Block Grant Special Revenue Fund................................................... 91
Fire Protection Special Revenue Fund ............................................................................................. 92
HOME Special Revenue Fund .......................................................................................................... 93
Gas Tax Special Revenue Fund......................................................................................................... 94
Construction Services Special Revenue Fund................................................................................. 95
Advance Planning Special Revenue Fund ...................................................................................... 96
Parking Special Revenue Fund ......................................................................................................... 97
Solid Waste Special Revenue Fund .................................................................................................. 98
General Obligation Debt Service Fund ............................................................................................ 99
Parking Bonds Debt Service Fund.................................................................................................. 100
Internal Service Funds:
Combining Statement of Net Assets..................................................................................................... 102
Combining Statement of Activities and Changes in Net Assets....................................................... 104
Combining Statement of Cash Flows ................................................................................................... 106
Capital Assets Used in the Operation of the Governmental Funds:
Schedule by Source......................................................................................................................... ........ 110
Schedule of by Function and Activity .................................................................................................. 111
Schedule of Changes in Capital Assets by Function and Activity ................................................... 112
STATISTICAL SECTION ( Unaudited)
General Government Revenues by Source – Last Ten Fiscal Years .............................................................. 114
General Government Expenditures by Function – Last Ten Fiscal Years .................................................... 115
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2003
Table of Contents, Continued
Page
iii
STATISTICAL SECTION ( Unaudited), Continued
Assessed Value of Real and Personal Property – Last Ten Fiscal Years....................................................... 116
Property Tax Rates – All Direct and Overlapping Governments – Last Ten Fiscal Years ......................... 117
Special Assessments Billings and Collections – Last Ten Fiscal Years ......................................................... 118
Computation of Direct and Overlapping Debt ................................................................................................ 119
Computation of Legal Debt Margin................................................................................................................... 120
Demographic Statistics – Last Ten Fiscal Years ............................................................................................... 121
Revenue Bond Coverage – Sewer Enterprise Fund – Last Ten Fiscal Years ................................................ 122
Property Values and Construction – Ten Fiscal Years .................................................................................... 123
Principal Taxpayers...................................................................................................................... ....................... 124
Property Tax Levies and Collection – Last Ten Fiscal Years.......................................................................... 125
Ratio of Annual Debt Service Expenditures - General Bonded Debt to
Total General Governmental Expenditures - Last Ten Fiscal Years ....................................................... 126
Ratio of Net General Obligation Bonded Debt to Assessed Value and
Net Bonded Debt Per Capita - Last Ten Years........................................................................................... 127
Miscellaneous Statistics ............................................................................................................................... ....... 128
iv
November 18, 2003
Honorable Mayor
Members of the City Council
City of San Mateo, California
The Comprehensive Annual Financial Report ( CAFR) of the City of San Mateo, California
for the fiscal year ended June 30, 2003 is hereby submitted. The CAFR includes the
independent auditor’s report. The City Charter ( Section 5.26) requires that an independent
Certified Public Accountant, employed by the City Council, conduct an annual audit of the
City’s financial transactions and issue appropriate reports to the City Council. The financial
statements are presented in conformity with generally accepted accounting principles
( GAAP), including Statement No. 34 of the Governmental Accounting Standards Board
( GASB 34) that required significant changes to both the format and the contents of the
audited financial reports.
Responsibility for both the accuracy of the data and the completeness and fairness of the
presentation, including all disclosures, rests with the City. We believe that the data
enclosed are accurate in all material respects, and are presented in a manner designed to
fairly set forth the financial position and results of operations of the City. All significant
disclosures necessary to enable the reader to gain an understanding of the City's financial
affairs have been included.
Caporicci and Larson, a firm of licensed certified public accountants, have audited the City
of San Mateo’s financial statements.
The contents of this letter have changed significantly from the previous years due to the
implementation of GASB 34. GASB 34 requires the inclusion of Management’s Discussion
and Analysis as required supplementary information that is subject to audit. Therefore, the
tables, charts, and the analysis of the financial condition and the result of operations are
now in the Management’s Discussion and Analysis document in the Financial Section.
This Comprehensive Annual Financial Report is presented in three sections:
1. Introductory Section - This section includes this transmittal letter, the City's
organizational chart, a list of municipal officers, and most recent certificates awarded to
the City for excellence in financial reporting.
2. Financial Section - Included in this section are the Auditor’s Report, Management’s
Discussion and Analysis, Basic Financial Statements, Combining and Individual fund
Statements, and the required schedules and information, including the new
Management’s Discussion and Analysis required by GASB 34.
vi
3. Statistical Section - Although this section contains substantial financial information,
these tables differ from financial statements in that they present some non- accounting
data, cover multiple fiscal years, and are designed to provide demographic and
economic data, reflect financial trends.
Profile of the City
The City was incorporated in 1894, and was originally chartered in 1922. The current
charter was adopted in 1971 and revised in 2002. San Mateo has a Council- Manager form
of government. The five Council members serve at- large for four- year terms. The Council
selects a Mayor from among its members each December for a one- year term. The City
Manager, appointed by the Council, serves as chief executive officer and is responsible for
the day- to- day administration of City affairs. The City Council also appoints a City
Attorney. There are nine Advisory Boards and Commissions that are appointed by the City
Council.
The City of San Mateo is located in San Mateo County, on the Peninsula in the San
Francisco Bay Area. It is bordered by Burlingame to the north, Foster City to the east,
Belmont to the south, Hillsborough and San Mateo County to the west. The City is
conveniently situated 19 miles south of San Francisco and 30 miles north of San Jose. It
covers an area of 14.6 square miles, including 3.87 square miles of tidelands from San
Francisco Bay to the east and a range of coastal mountains to the west. The population of
San Mateo was approximately 72,000 in 1970 and 93,721 as of January 2003.
The City provides a full range of municipal services. These include police and fire
protection, public works, parks & recreation, library, planning and zoning, building, sewer
service, street maintenance, economic development, and general administrative services.
The City offers thirty parks, six recreation centers, three libraries, and an 18- hole golf
course. California Water Service, a private company, provides water to the residents of the
City of San Mateo. The San Mateo Performing Arts Center hosts productions by numerous
local, regional, and international artistic enterprises, including the Peninsula Ballet Theatre,
the Peninsula Civic Light Opera, and the Peninsula Symphony. San Mateo has abundant
shopping areas, including two major regional shopping centers, Hillsdale Shopping Mall
and Bridgepointe. Horse racing fans can enjoy Bay Meadows, which features
thoroughbred racing each year from August through January.
The City operates on a two- year budget cycle ( Business Plan). The two- year budget process
requires that each department submit two one- year expenditure plans and revenue
estimates to the City Council for approval. In each alternate year the Department Heads
present mid- cycle performance reports to the City Manager and City Council to summarize
budget status to date and to obtain approval for year- 2 funding. The Department Heads
are responsible for containing expenditures within their budgeted appropriations as
approved by the City Council. The level of budgetary control is the department within
each fund. The City also maintains an encumbrance accounting system as one technique of
accomplishing budgetary control. Encumbered amounts in the operating budget lapse one
year after the end of the fiscal year. The City utilizes a five- year plan for capital
improvements. The plan serves as a guide for the allocation of future resources. However,
specific funding in the budget covers one year only.
vii
The City's management has adopted a set of " organizational principles" which reflect the
management philosophy. These principles are: service to the community is our purpose;
we all work for one organization; look at the long term; seek constant improvement; and
lead by example. These principles are intended to guide management actions throughout
the City organization.
The goals of City management are to see that necessary and desired services are provided
in an efficient and effective manner, and that planning and improvement take place to
provide for the community's future.
Factors Affecting Financial Condition
The City’s overall financial condition remained stable in fiscal year 2002- 03, despite flat
general fund revenues. The economic recovery continues at a slow pace contributing to
further decline in sales and hotel taxes. The assessed valuation of property, the highest in
San Mateo County, grew 7% in 2002- 03 over the prior year.
The potential for loss of revenue by the City to the State in order to fix the State budget
deficit continues to be of serious concern to us as it is to other California cities.
The City remained well below the voter mandated Gann Appropriations Limit for the fiscal
year 2002- 03, reaching only 53.3% of the legal limit. The Gann Limit was $ 101.1 million and
the City’s appropriations subject to the limit were $ 53.9 million.
Cash Management
The City follows the practice of pooling cash and investments of all funds with the City
Treasurer. The City maintains these temporarily idle funds under the " prudent person"
rule. This affords the City a broad spectrum of investment opportunities as long as the
investment is deemed prudent and allowable under current legislation of the State of
California, and the terms of the City's Investment Policies. Investment policies are
reviewed by the outside investment advisory committee and City Council each year; also,
Quarterly Investment Reports appear on the Council’s agenda.
At the end of the fiscal year the City Portfolio, excluding invested bond proceeds, stood at
$ 103.8 million. The average yield for the year was 2.79% ( 365 day equivalent), and the City
earned $ 2.72 million in interest income. The recognized investment income in the financial
statements include the effect of market value fluctuations. This approach resulted in a
recognized return of 3.11% ( as compared to the 2.79% without mark up for market value
fluctuations). The City’s investment practice of “ hold to maturity” will, over time, offset the
effect of market fluctuations on reported earnings.
Risk Management
The City operates two Risk Management programs: General Liability and Workers'
Compensation, with self- insurance amounts of $ 500,000 and the excess insurance coverage
of $ 10 million. Both Programs are reported as internal service funds. The General Liability
Fund receives its revenue from a charge to the General Fund. The Workers' Compensation
Program receives its revenues through charges to the benefiting departments of the City.
viii
Awards and Acknowledgments
Certificate of Achievement
The Government Finance Officers Association of the United States and Canada ( GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for
its Comprehensive Annual Financial Report ( CAFR) for the fiscal year ended June 30, 2002
as it did for the preceding twelve years.
The California Municipal Finance Officers Association ( CSMFO) also awarded a Certificate
for Outstanding Financial Reporting to the City for its CAFR for the fiscal year ended
June 30, 2002
as it did for the preceding thirteen years.
To be awarded a Certificate of Achievement, a governmental unit must publish an easily
readable and efficiently organized CAFR, whose contents conform to program standards.
Such reports must satisfy both generally accepted accounting principles and applicable
legal requirements.
These certificates are valid for a period of one year. We believe our current report
continues to conform to both Certificate requirements, and we are submitting it to GFOA
and CSMFO to determine its eligibility for another certificate.
Acknowledgements
The preparation of the comprehensive annual financial report on a timely basis was made
possible by the dedicated service of the entire staff of the Finance Department and our
auditors from Caporicci and Larson. Each member of the department and the audit team
has our sincere appreciation for the contributions made in the preparation of this report.
In closing, the staff wishes to express deep appreciation to the Council for their leadership
and support and especially for their responsiveness to the financial concerns of the City.
Sincerely,
ARNE L. CROCE JOHN L. de RUSSY
City Manager Finance Director/ City Treasurer
ix
City of San Mateo
San Mateo, California
City Council
Claire Mack, Mayor
Carole Groom, Deputy Mayor
Jan Epstein, Council Member
Sue Lempert, Council Member
John Lee, Council Member
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of San Mateo
San Mateo, California
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, each major fund, and the aggregate remaining fund information of the City of San Mateo,
California ( City), as of and for the year ended June 30, 2003, which collectively comprise the City’s basic
financial statements as listed in the table of contents. These financial statements are the responsibility of
the City’s management. Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United States
and the standards applicable to financial audits contained in Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall basic financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business- type activities, each major fund,
and the aggregate remaining fund information of the City as of June 30, 2003, and the respective changes
in financial position and cash flows, where applicable, thereof for the year then ended in conformity
with generally accepted accounting principles in the United States.
As described in Note 1 to the basic financial statements, the City adopted Statements of the
Governmental Accounting Standards Board No. 34, Basic Financial Statements – and Management’s
Discussion and Analysis – for State and Local Governments; No. 37, Basic Financial Statements – and
Management’s Discussion and Analysis – for State and Local Governments: Omnibus; and, No. 38, Certain
Financial Statement Note Disclosures.
In accordance with Government Auditing Standards, we have also issued our report dated September 25,
2003 on our consideration of the City’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral
part of an audit performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
2
To the Honorable Mayor and Members of the City Council
of the City of San Mateo
San Mateo, California
Page 2
The accompanying Required Supplementary Information, such as management’s discussion and
analysis, budgetary comparison information and other information as listed in the table of contents, is
not a required part of the basic financial statements but is supplementary information required by the
Governmental Accounting Standards Board. We have applied certain limited procedures, which
consisted principally of inquires of management regarding the methods of measurement and
presentation of the Required Supplementary Information. However, we did not audit the information
and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City’s basic financial statements. The accompanying supplementary
information is presented for purpose of additional analysis and is not a required part of the basic
financial statements. The supplementary information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole. The introductory and statistical
sections have not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we express no opinion on them.
Oakland, California
September 25, 2003
3
Management's Discussion and Analysis
As management of the City of San Mateo, we offer readers of the City’s financial statements this narrative
overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2003. This
document has been prepared for the first time with the implementation of the Statement No. 34 of the
Governmental Accounting Standards Board ( GASB 34). GASB 34 has made significant changes to both the
contents and the format of the financial statements of governmental agencies. The key changes are the
inclusion of the Government- wide Financial Statements on a full accrual basis including the cost of the
infrastructure and the related depreciation. These changes present the government financial reports on the
same basis applicable to the private sector. We encourage readers to consider the information presented
here in conjunction with additional information that we have furnished in our letter of transmittal, which
can be found on page v of this report.
I. Financial Highlights
• The assets of the City of San Mateo exceeded its liabilities at the close of the fiscal year by $ 394M
( net assets). Of this amount $ 295M was invested in capital assets, net of related debt. The balance
was restricted for capital projects, $ 68M, debt service and other 15M, and unrestricted $ 16M.
• The City's total net assets increased by $ 6.8M; representing $ 7.4M increase in governmental and
$ 0.7M decrease in business- type activities.
• As of the close of the fiscal year, the City’s governmental funds, including the general, special
revenue, debt service, capital projects funds, reported combined ending fund balances of $ 111M, a
decrease of $ 19M in comparison with the prior year. Approximately $ 19.3M is available for
spending at the government's discretion on operating activities and $ 54.6M is available and
committed to the capital projects ( unreserved fund balance), both of which are subject to
restrictions relating to the various funding sources.
• At the end of the current fiscal year, unreserved fund balance for the general fund was $ 8.3M, or
14 percent of total general fund expenditures. This amount includes $ 4M emergency reserve, $ 2M
service stability reserve, $ 0.9M unrealized gains on investments, and $ 1.4M undesignated.
• The total bonded debt decreased by $ 3.1M during the fiscal year. This decrease was due to the
annual repayment of bonded debt.
II. Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City of San Mateo’s basic
financial statements. The City of San Mateo’s basic financial statements are comprised of three components:
1) Government- wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial
Statements. This report also contains other supplementary information in addition to the basic financial
statements themselves.
Government- wide Financial Statements. The Government- wide Financial Statements consist of a statement
of net assets and a statement of activities and are designed to provide readers with a broad overview of the
City’s finances, in a manner similar to a private- sector business.
The Statement of Net Assets presents information on all of the City’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may serve
as a useful indicator of whether the financial position of the City is improving or deteriorating.
4
The Statement of Activities presents information showing how the government's net assets changed during
the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise
to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are
reported in this statement for some items that will only result in cash flows in future fiscal periods ( e. g.,
uncollected taxes and earned but unused vacation leave).
Both of the government- wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues ( governmental activities) from other functions that are
intended to recover all or a significant portion of their costs through user fees and charges ( business- type
activities). The governmental activities of the City include general government, public safety, public works,
community and economic development, and parks and recreation and library. The business- type activities
of the City include a Sewer and Golf operations.
The Government- wide Financial Statements include not only the City itself but also the Redevelopment
Agency. Financial information for this component unit is blended with the financial statements of the
primary government itself. The Redevelopment Agency, although also legally separate, functions for all
practical purposes as a department of the City, and therefore has been included as an integral part of the
primary government.
The Government- wide Financial Statements can be found on pages 17- 19 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over
resources that have been segregated for specific activities or objectives. The City, like other state and local
governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal
requirements. All of the funds of the City can be divided into three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental Funds. Governmental funds are used to account for essentially the same functions reported
as governmental activities in the Government- wide Financial Statements. However, unlike the
Government- wide Financial Statements, Governmental Fund Financial Statements focus on near- term
inflows and outflows of spendable resources, as well as on balances of spendable resources available at the
end of the fiscal year. Such information may be useful in evaluating a government's near- term financing
requirements.
Because the focus of governmental funds is narrower than that of the Government- wide Financial
Statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government- wide financial statements. By doing
so, readers may better understand the long- term impact of the government's near- term financing decisions.
Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures,
and changes in fund balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
The governmental funds comprise 16 individual funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and
changes in fund balances for the general, redevelopment, city housing, and capital projects funds, which are
considered to be major funds. Data from the other 12 governmental funds are combined into a single,
aggregated presentation. Individual fund data for each of these non- major governmental funds is provided
in the form of combining statements elsewhere in this report.
A budgetary comparison statement has been provided for the funds that have an adopted budget to
demonstrate compliance with this budget.
The Governmental Fund Financial Statements can be found on pages 24- 30 of this report.
5
Proprietary Funds. The City maintains two different types of proprietary funds. Enterprise funds are used
to report the same functions presented as business- type activities in the Government- wide Financial
Statements. The City uses enterprise funds to account for its Sewer and Golf operations. Internal service
funds are an accounting device used to accumulate and allocate costs internally among the City of San
Mateo’s various functions. The City uses internal service funds to account for its workers compensation,
dental, other employee benefits, and vehicle and equipment replacement activities. Because these services
predominantly benefit governmental rather than business- type functions, they have been included within
governmental activities in the government- wide financial statements.
Proprietary funds provide the same type of information as the Government- wide Financial Statements, only
in more detail. The proprietary Fund Financial Statements provide separate information for the Sewer and
Golf operations. Conversely internal service funds are combined into a single, aggregated presentation in
the proprietary fund financial statements. Individual fund data for the internal service funds is provided in
the form of combining statements elsewhere in this report.
The proprietary Fund Financial Statements can be found on pages 32- 34 of this report.
Notes to the Basic Financial Statements. The notes provide additional information that is essential to a full
understanding of the data provided in the government- wide and fund financial statements. The Notes to
the Basic Financial Statements can be found on pages 36- 75 of this report.
Other Information. In addition to the basic financial statements and accompanying notes, this report also
presents certain required supplementary information concerning the City’s progress in funding its
obligation to provide pension benefits to its employees. Required supplementary information can be found
on page 78- 82 of this report.
The combining statements referred to earlier in connection with non- major governmental funds and
internal service funds are presented immediately following the required supplementary information on
pensions. Combining and individual fund statements and schedules can be found on pages 86- 112 of this
report.
III. Government- wide Financial Analysis
Statement of Net Assets. This is the first year San Mateo has prepared its Financial Statements in
conformance with GASB 34. As a result, comparative data on prior years is not available. As noted earlier,
in future years, net assets may serve over time as a useful indicator of a government's financial position. In
the case of the City, total assets exceeded liabilities by $ 394M at the close of the fiscal year.
By far the largest portion of the City of San Mateo’s net assets ( 75 percent) reflect its investment in capital
assets ( e. g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets
that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these
assets are not available for future spending. Although the City of San Mateo’s investment in its capital
assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be
provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
6
Summary of Net Assets
June 30, 2003
Governmental Business- Type
Activities Activities Total
Current and other assets $ 167,864,649 $ 26,683,954 $ 194,548,603
Capital Assets, net of depreciation 276,372,360 90,785,270 367,157,630
Total assets 444,237,009 117,469,224 561,706,233
Long- term liabilities outstanding 102,108,389 39,702,156 141,810,545
Other liabilities 23,141,927 2,571,729 25,713,656
Total liabilities 125,250,316 42,273,885 167,524,201
Net assets:
Invested in capital assets, net of
related debt 244,890,368 50,410,270 295,300,638
Restricted 58,846,950 24,177,906 83,024,856
Unrestricted 15,249,375 607,163 15,856,538
Total net assets $ 318,986,693 $ 75,195,339 $ 394,182,032
An additional portion of the City of San Mateo’s net assets ( 21 percent) represents resources that are subject
to external restrictions on how they may be used. The remaining balance, ( 4%), of unrestricted net assets
that may be used to meet the government's ongoing obligations to citizens and creditors, subject to
restrictions of various funding sources as applicable.
At the end of the fiscal year 2002- 03, the City is able to report positive balances in all three categories of net
assets, both for the government as a whole, as well as for its separate governmental and business- type
activities. The City’s net assets increased by $ 6.8M during the fiscal year. This increase is the net result of
all the revenues and expenses and cannot be attributed to any specific items.
Governmental Activities. Governmental activities increased the City’s net assets by $ 7.4M, while the
business type activities showed a decrease in net assets of $ 0.7M. Since this is the first year of reporting
under GASB 34, comparable prior year amounts are not available, and therefore changes cannot be shown.
The charts that follow show the program revenues, general revenues, and expenses by function for all City
activities, including the Redevelopment Agency.
7
8
Statement of Changes in Net Assets
For the year ended June 30, 2003
Governmental Business- Type
Activities Activities Total
Revenues:
Program revenues:
Charges for services $ 15,574,810 $ 17,399,751 $ 33,036,933
Operating grants and contributions 5,755,091 - 5,755,091
Capital grants and contributions 13,527,322 - 13,527,322
General revenues:
Property taxes 28,484,434 - 28,484,434
Sales taxes 16,808,215 - 16,808,215
Other taxes 12,959,657 - 12,959,657
Franchise fees 1,680,801 - 1,680,801
Motor vehicle fees 5,425,107 - 5,425,107
Other 1,605,742 681,650 2,224,890
Total revenues 101,821,179 18,081,271 120,056,810
Expenses:
General government 8,238,194 - 8,238,194
Community development 11,038,434 - 11,038,434
Public safety 34,568,771 - 34,568,771
Public works 9,439,824 - 9,439,824
Parks and recreation 11,831,743 - 11,831,743
Library 4,588,897 - 4,588,897
Interest on long- term debt ( unallocated) 5,240,945 - 5,240,945
Depreciation expense ( unallocated) 9,462,887 - 9,462,887
Sewer - 15,666,201 -
Golf - 3,076,354 -
Total expenses 94,409,695 18,742,555 113,152,250
Increase in net assets 7,411,484 ( 661,284) 6,750,200
Net assets - 7/ 1/ 02, as restated 311,575,209 75,856,623 387,431,832
Net assets - 6/ 30/ 03 $ 318,986,693 $ 75,195,339 $ 394,182,032
• Charges for services are primarily fees for recreation, building, planning, engineering, golf, and
sewer services
• Operating and capital grants and contributions include Federal and State grants and other
governments and private contributions including impact fees.
• Property taxes include the general, voter- approved debt service, and the redevelopment property
taxes.
• Other taxes include mainly hotel, business, property transfer, and gas taxes.
• General government expenses include City Council, City Clerk, City Manager, City Attorney,
Human Resources, Finance, and Information Technology departments, and the general liability
insurance.
9
• Community development expenses include planning, building, housing, neighborhood
improvements, code enforcement, economic development, and the Redevelopment Agency
( including capital expenditure).
• Public safety expenses cover Police and Fire services.
• Public works expenses are for engineering, streets, street lights, and traffic signals operations and
maintenance.
• Parks and recreation expenses cover the operations and maintenance of the City parks, community
centers, and the senior center as well as the recreation services.
• Library expenses are for the operation and maintenance of one main and two branch libraries.
Business- type Activities. Business- type activities decreased the City’s net assets marginally by $ 0.7M. The
golf and sewer enterprise activities are fully supported by fees. Their expenses include indirect costs and in
lieu fees of $ 1.6M charged by the general fund for support and general City services.
IV. Financial Analysis of the Government's Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related
legal requirements.
Governmental Funds. The focus of the City of San Mateo governmental funds is to provide information on
near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing
the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of
a government's net resources available for spending at the end of the fiscal year. It should, however, be
noted that most of the unreserved amounts have been designated by the City Council for specific uses.
As of the end of the current fiscal year, the City of San Mateo’s governmental funds reported combined
ending fund balances of $ 110M, a decrease of $ 19M in comparison with the prior year. Approximately half
of this total amount, $ 19.3M, is available for spending at the government's discretion ( unreserved fund
balance) on operating activities and $ 54.6M is available and committed to the capital projects, both subject
to restrictions relating the various funding sources.
The remainder of fund balance is reserved to indicate that it is not available for new spending because it has
already been committed 1) to pay for existing contracts and purchase orders ($ 18M), 2) to pay debt service
($ 10.8M), 3) property held for resale ($ 6.8M), or 4) for a variety of other restricted purposes ($ 1M).
10
The general fund is the chief operating fund of the City. At the end of the current fiscal year unreserved
fund balance of the general fund was $ 8.3M, while total fund balance was $ 9.2M. As a measure of the
general fund' s liquidity, it may be useful to compare both unreserved fund balance and total fund balance
to total fund expenditures. Unreserved fund balance represents 14 percent of total general fund
expenditures, while total fund balance represents 15 percent of that same amount.
The fund balance of the City of San Mateo’s general fund decreased by $ 3M during the current fiscal year.
Key factors in this decline are a decline in revenues, in particular sales and hotel taxes, and increased
retirement costs.
The Redevelopment fund has a total fund balance of $ 47.8M, most of which is reserved for capital projects
and debt service. The net decrease in fund balance during the current year in the RDA was $ 12.3M,
primarily due to the use of funds for the construction of the Main Street garage.
Proprietary Funds. The City of San Mateo proprietary funds provide the same type of information found in
the government- wide financial statements, but in more detail.
Unrestricted net assets of the Sewer fund at the end of the year amounted to $ 0.8M, and those for the golf
operation amounted to -$ 0.2M. The total growth in net assets for both funds was -$ 0.6M and -$ 0.07M,
respectively. Other factors concerning the finances of these two funds have already been addressed in the
discussion of the City of San Mateo business- type activities.
V. General Fund Budgetary Highlights
The general fund expenditures came under the budget by $ 4.0 million. The expenditure savings were the
result of a citywide effort to cut costs in order to cope with increased expenses, in particular retirement
costs, while facing declining ongoing revenues. The general fund total revenues were below the adopted
budget estimates by $ 1.3M, primarily due to shortfall in sales tax.
The amendments to the general fund budget during the year comprised of carry over encumbrances of the
prior year of $ 0.7M, and transfer to the workers compensation self insurance fund of $ 2.7M. The general
fund ending fund balance amounted was $ 1.4M better than expected when the 03- 04 budget was adopted.
Up to half of this amount is subject to the “ variable pay” provision of the agreements with the employee
bargaining groups.
During the current fiscal year, unreserved fund balance in the general fund decreased to $ 8.3M,
representing $ 4M Emergency Reserve, $ 2M Service Stability Reserve, $ 0.9M unrealized gain on
investments, and $ 1.4M undesignated.
VI. Capital Asset and Debt Administration
Capital Assets. The City of San Mateo’s investment in capital assets for its Governmental and Business
Type activities as of June 30, 2003, amounts to $ 367M ( net of accumulated depreciation). This investment in
capital assets includes land, buildings, improvements, machinery and equipment, park facilities, roads,
highways, bridges, sewer and storm systems, and the golf course. The total increase in the City’s investment
in capital assets net of depreciation for the current fiscal year was $ 10M or 3% ( a 5% increase for
governmental activities and a 4% decrease for business- type activities).
Major Capital asset events during the current fiscal year included the following: Housing Projects $ 3.3M,
Main Street Garage Rebuild $ 9M, Fire Station # 26 $ 2.2M, East Third Avenue Landfill Closure $ 1.1M,
City/ Property Owner Joint Concrete Repair, $ 0.7M, Main Street Pedestrian Improvements $ 2M, Sewer
Collection System Rehab $ 0.75M, Wastewater Treatment Plant Expansion Phase II $ 0.9M, Street
Reconstruction $ 2.6M, Shoreline Park Improvements $ 1.1M, Park Citywide Play Area Upgrade $ 0.8M,
11
Library Branch Improvements $ 0.4M, New Library $ 1.4M, and Finance / HR Systems replacement and
upgrade $ 1.2M.
Capital Assets
( Net of depreciation)
Government Business- Type
Activities Activities Total
Non- depreciable assets:
Land $ 35,202,549 $ 4,217,298 $ 39,419,847
Construction in progress 16,446,337 13,268,065 29,714,402
Total non- depreciable assets 51,648,886 17,485,363 69,134,249
Depreciable assets ( net of depreciation):
Building and improvements 17,483,605 10,417,168 27,900,773
Treatment plant & transmission
lines 62,348,401 62,348,401
Machinery and equipment 8,226,651 456,338 8,682,992
Infrastructure 199,013,217 - 199,013,217
Total depreciable assets ( net) 224,723,475 73,221,907 297,945,381
Total capital assets $ 276,372,360 $ 90,785,270 $ 367,157,630
Additional information on the City of San Mateo’s capital assets can be found in Note 5 on pages 55- 56 of
this report.
Long- term Debt. At the end of the current fiscal year, the City had total bonded debt outstanding of
$ 130.7M. Of this amount, $ 15.4M comprises debt backed by the full faith and credit of the government. The
remainder of the City of San Mateo debt represents bonds secured solely by specified revenue sources; i. e.,
the Redevelopment Agency tax increments.
Outstanding Debt
General Obligation and Revenue Bonds
( Including Redevelopment)
( In Thousands)
Governmental
Activities
Business- type
Activities
Total
2003 2002 2003 2002 2003 2002
General obligation bonds $ 15,375 $ 15,885 $ - $ - $ 15,375 $ 15,865
Special Assessment Debt with
City Commitment
100 195 - - 100 195
Revenue Bonds 74,855 76,310 40,375 41,470 115,230 117,780
Total $ 90,330 $ 92,390 $ 40,375 $ 41,470 $ 130,705 $ 133,860
The City of San Mateo’s total debt decreased by $ 3.2M ( 3%) during the current fiscal year. The decrease was
due to annual repayment of existing debt. The City did not issue any new bonds in 2002- 03.
The City maintained its AA rating from Standard & Poor’s Corporation and Aa2 rating from Moody's for
general obligation debt. The Moody’s rating for the Redevelopment Agency is Baa ( uninsured).
State statutes limit the amount of general obligation debt a governmental entity may issue to 15 percent of
its total assessed valuation. The current debt limitation for the City is $ 1.5 billion and at June 30, 2003 the
12
City was only at 1% of its legal debt limit. Additional information on the City of San Mateo long- term debt
can be found in Note 7 on pages 57- 68 of this report.
VII. Economic Factors and Next Year's Budget
The economy at both the national and State level continue to grow at a sluggish rate. The State’s significant
budget deficit and the possibility that the local revenue being reallocated as part of a solution to balance the
State’s budget continues to threaten the City revenues.
The local economy is further impacted by the slump in the high tech industry and Silicon Valley. We are
also challenged by the rising retirement cost, which is partly caused by the lower performance of the
investments of the Public Employees Retirement System ( PERS).
The City has a diverse economic base that includes residential, retail, and commercial assets. While the sales
and hotel taxes have decreased, the property and property transfer taxes increased, mitigating the impact of
the economic slowdown. We have also been able to reduce expenditures without any significant impact on
services.
We have adopted a balanced budget for the 2003- 04 fiscal year, taking all the known factors into account.
VIII. Requests for Information
This financial report is designed to provide a general overview of the City of San Mateo’s finances for all
those with an interest in the government's finances. Questions concerning any of the information provided
in this report or requests for additional financial information should be addressed to the Finance Director,
330 West 20th Avenue, San Mateo, California, 94403.
BASIC
FINANCIAL STATEMENTS
13
14
GOVERNMENT- WIDE
FINANCIAL STATEMENTS
15
16
City of San Mateo
Statement of Net Assets
June 30, 2003
Governmental Business- Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments $ 93,606,910 $ 17,641,526 $ 111,248,436
Restricted cash and investments with fiscal agents 24,927,316 6,794,491 31,721,807
Accounts receivable 5,723,782 272,761 5,996,543
Interest receivable 670,568 60,000 730,568
Taxes receivable 4,139,145 - 4,139,145
Prepaids and supplies 462,026 110,119 572,145
Property held for resale 6,810,498 - 6,810,498
Total current assets 136,340,245 24,878,897 161,219,142
Noncurrent assets:
Deferred charges - 1,805,057 1,805,057
Loans and notes receivable, net 31,524,404 - 31,524,404
Capital assets:
Non- depreciable 51,648,886 17,563,363 69,212,249
Depreciable, net 224,723,474 73,221,907 297,945,381
Total capital asset 276,372,360 90,785,270 367,157,630
Total noncurrent assets 307,896,764 92,590,327 400,487,091
Total assets 444,237,009 117,469,224 561,706,233
LIABILITIES
Current liabilities:
Accounts payable 4,193,755 328,192 4,521,947
Interest payable 2,155,927 823,713 2,979,640
Retentions payable 379,586 - 379,586
Accrued salaries and wages payable 1,165,297 117,630 1,282,927
Deposits payable 3,613,362 147,194 3,760,556
Claims and judgments payable - due within one year 1,500,000 - 1,500,000
Landfill closure and postclosure cost payable - due within one year 7,424,000 - 7,424,000
Vacation and sick leave payable - due within one year 530,000 - 530,000
Bonds payable - due within one year 2,180,000 1,155,000 3,335,000
Total current liabilities 23,141,927 2,571,729 25,713,656
Noncurrent liabilities:
Deferred revenue ( unearned) 784,524 - 784,524
Claims and judgments payable - due in more than one year 5,977,000 - 5,977,000
Landfill closure and postclosure costs payable - due in more than one year 3,675,000 - 3,675,000
Vacation and sick leave payable - due in more than one year 3,521,865 482,156 4,004,021
Bonds payable - due in more than one year 88,150,000 39,220,000 127,370,000
Total noncurrent liabilities 102,108,389 39,702,156 141,810,545
Total liabilities 125,250,316 42,273,885 167,524,201
NET ASSETS
Invested in capital assets, net of related debt 244,890,368 50,410,270 295,300,638
Restricted for:
Capital projects 46,099,430 21,759,000 67,858,430
Debt service 10,847,804 2,418,906 13,266,710
Other 1,899,716 - 1,899,716
Total restricted 58,846,950 24,177,906 83,024,856
Unrestricted 15,249,375 607,163 15,856,538
$ 318,986,693 $ 75,195,339 $ 394,182,032
Primary Government
See accompanying Notes to Basic Financial Statements.
Total net assets
17
City of San Mateo
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2003
Operating Capital
Charges for Grants and Grants and
Functions/ Programs Expenses Services Contributions Contributions Total
Primary Government:
Governmental activities:
General government $ 7,436,817 $ 2,000,793 $ 44,140 $ - $ 2,044,933
Community development 11,038,434 4,499,758 2,123,028 2,945,277 9,568,063
Public safety 34,568,771 2,976,320 1,159,618 501,820 4,637,758
Public works 9,439,824 2,990,288 1,796,694 6,466,062 11,253,044
Parks and recreation 11,831,743 2,801,482 307,661 1,558,084 4,667,227
Library 4,588,897 306,169 323,950 2,056,079 2,686,198
Non- departmental 801,377 - - - -
Interest on long- term debt ( unallocated) 5,240,945 - - - -
Depreciation expense ( unallocated) 9,462,887 - - - -
Total governmental activities 94,409,695 15,574,810 5,755,091 13,527,322 34,857,223
Business- type activities:
Sewer 15,666,201 14,454,267 - - 14,454,267
Golf 3,076,354 2,945,484 - - 2,945,484
Total business- type activities 18,742,555 17,399,751 - - 17,399,751
Total primary government $ 113,152,250 $ 32,974,561 $ 5,755,091 $ 13,527,322 $ 52,256,974
General Revenues:
Taxes and fees:
Property taxes
Sales taxes
Other taxes
Franchise fees
Motor Vehicle fees
Total taxes and fees
Investment earnings
Total general revenues
Change in net assets
Net assets - beginning of year, as restated ( Note 14)
Net assets - end of year
See accompanying Notes to Basic Financial Statements.
Program Revenues
18
Governmental Business- Type
Activities Activities Total
$ ( 5,391,884) $ - $ ( 5,391,884)
( 1,470,371) - ( 1,470,371)
( 29,931,013) - ( 29,931,013)
1,813,220 - 1,813,220
( 7,164,516) - ( 7,164,516)
( 1,902,699) - ( 1,902,699)
( 801,377) - ( 801,377)
( 5,240,945) - ( 5,240,945)
( 9,462,887) - ( 9,462,887)
( 59,552,472) - ( 59,552,472)
- ( 1,211,934) ( 1,211,934)
- ( 130,870) ( 130,870)
- ( 1,342,804) ( 1,342,804)
( 59,552,472) ( 1,342,804) ( 60,895,276)
28,484,434 - 28,484,434
16,808,215 - 16,808,215
12,959,657 - 12,959,657
1,680,801 - 1,680,801
5,425,107 - 5,425,107
65,358,214 - 65,358,214
1,605,742 681,520 2,287,262
66,963,956 681,520 67,645,476
7,411,484 ( 661,284) 6,750,200
311,575,209 75,856,623 387,431,832
$ 318,986,693 $ 75,195,339 $ 394,182,032
and Changes in Net Assets
Net ( Expense) Revenue
19
20
FUND
FINANCIAL STATEMENTS
Governmental Fund Financial Statements
Proprietary Fund Financial Statements
21
22
GOVERNMENTAL FUND FINANCIAL STATEMENTS
General Fund accounts for resources traditionally associated with government which are not required legally
or by sound financial management to be accounted for in another fund.
Redevelopment Agency Fund accounts for:
a. Revenue and expenditures of the Agency's low and moderate income housing activity. Use of funds is
restricted by law.
b. Tax increment revenues used to pay principal and interest on general long- term debt of the Agency.
c. The acquisition and construction of the Agency's capital projects. Funding is provided by tax increments
transferred in from the Agency's debt service funds.
City Housing Special Revenue Fund accounts for revenues from a former Federal Rental Rehabilitation
program, loan payments from the First Time Homebuyer program, and income generated by contracts for
services provided by the City to other jurisdictions.
General Projects Capital Projects Fund accounts for the expenditures for capital improvements for the City,
including equipment, acquisition and construction of parks, recreation areas, public safety facilities or other
public works. The primary sources of funding are intergovernmental revenues and transfers from other
governmental funds.
Other Governmental Funds is the aggregate of all the non- major governmental funds.
23
City of San Mateo
Balance Sheet
Governmental Funds
June 30, 2003
City General
Redevelopment Housing Projects
General Agency Special Revenue Capital Projects
ASSETS
Cash and investments $ 10,541,850 $ 16,447,308 $ 626,734 $ 36,432,679
Restricted cash and investments held by fiscal agents - 24,823,906 - -
Accounts receivable 325,832 - - 4,345,060
Interest receivable 556,322 114,246 - -
Taxes receivable 3,886,973 - - 203,960
Due from other funds 39,234 - - -
Prepaids and supplies 337,026 - - -
Property held for resale - 6,810,498 - -
Loans and notes receivable - 22,049,798 6,674,817 -
Total assets $ 15,687,237 $ 70,245,756 $ 7,301,551 $ 40,981,699
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 1,149,545 $ 321,230 $ - $ 2,214,742
Retention payable - - - 379,586
Accrued salaries and wages payable 973,622 25,772 - 51,359
Due to other funds - - - -
Deposits payable 3,596,029 5,770 - -
Deferred revenue 784,524 22,049,798 6,674,817 -
Total liabilities 6,503,720 22,402,570 6,674,817 2,645,687
Fund Balances:
Reserved:
Encumbrances 550,242 161,721 13,360 17,300,133
Petty cash 38,300 - - -
Prepaids and supplies 337,026 - - -
Debt service - 9,845,179 - -
Landfill closure - - - -
Property held for resale - 6,810,498 - -
Unreserved, designated:
Construction - 26,459,149 - 20,907,086
Future emergencies 4,000,000 - - -
Future years' expenditures - 3,625,000 - -
Arbitrage liability - - - 128,793
Service stability 2,000,000 - - -
Unrealized gain on investments 861,897 - - -
Unreserved, undesignated, reported in:
General fund 1,396,052 - - -
Special Revenue funds - 941,639 613,374 -
Total fund balances 9,183,517 47,843,186 626,734 38,336,012
Total liabilities and fund balances $ 15,687,237 $ 70,245,756 $ 7,301,551 $ 40,981,699
See accompanying Notes to Basic Financial Statements.
Major Funds
24
Other Total
Governmental Governmental
Funds Funds
$ 13,930,083 $ 77,978,654
103,410 24,927,316
864,250 5,535,142
- 670,568
48,212 4,139,145
95,582 134,816
- 337,026
- 6,810,498
6,594,214 35,318,829
$ 21,635,751 $ 155,851,994
$ 163,029 $ 3,848,546
- 379,586
95,643 1,146,396
134,816 134,816
1,675 3,603,474
6,594,214 36,103,353
6,989,377 45,216,171
121,761 18,147,217
- 38,300
- 337,026
1,002,625 10,847,804
572,000 572,000
- 6,810,498
7,206,848 54,573,083
- 4,000,000
- 3,625,000
- 128,793
- 2,000,000
- 861,897
- 1,396,052
5,743,140 7,298,153
14,646,374 110,635,823
$ 21,635,751 $ 155,851,994
25
26
City of San Mateo
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2003
Total Fund Balances - Total Governmental Funds $ 1 10,635,823
Capital assets used in governmental activities were not current financial resources.
Therefore, they were not reported in the Governmental Funds Balance Sheet. Except for
the internal service funds reported below, the capital assets were adjusted as follows:
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Non- depreciable $ 51,648,886 $ - 5 1,648,886
Depreciable, net 224,723,474 ( 3,967,435) 2 20,756,039
Total capital assets $ 276,372,360 $ ( 3,967,435) 2 72,404,925
Other long- term assets were not available to pay for current- period expenditures and,
therefore, were deferred in funds. 3 1,068,829
Interest payable on long- term debt did not require current financial resources. Therefore,
interest payable was not reported as a liability in Governmental Funds Balance Sheet. ( 2,155,927)
Internal service funds were used by management to charge the costs of certain activities,
such as insurance, to individual funds. The assets and liabilities of the Internal service
funds were included in governmental activities in the Government- Wide Statement of Net
Assets:
Workers' Compensation Insurance ( 291,917)
Dental Self- Insurance 9 7,948
Comprehensive Liability Insurance 1 ,415,101
Vehicle & Equipment Replacement 1 0,999,463
Benefits 2 93,313
Total internal service funds 1 2,513,908
Long- term liabilities were not due and payable in the current period. Therefore, they were
not reported in the Governmental Funds Balance Sheet.
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Claims and judgments payable - due within one year $ ( 1,500,000) $ 1,500,000 -
Landfill closure and postclosure cost payable - due within one year ( 7,424,000) - ( 7,424,000)
Vacation and sick leave payable - due within one year ( 530,000) - ( 530,000)
Bonds payable - due within one year ( 2,180,000) - ( 2,180,000)
Claims and judgments payable - due in more than one year ( 5,977,000) 5,977,000 -
Landfill closure and postclosure costs payable - due in more than one year ( 3,675,000) - ( 3,675,000)
Vacation and sick leave payable - due in more than one year ( 3,521,865) - ( 3,521,865)
Bonds payable - due in more than one year ( 88,150,000) - ( 88,150,000)
Total long- term liabilities $ ( 112,957,865) $ 7,477,000 ( 105,480,865)
Net Assets of Governmental Activities $ 3 18,986,693
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Net Assets were different
because:
27
City of San Mateo
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the year ended June 30, 2003
City General
Redevelopment Housing Projects
General Agency Special Revenue Capital Projects
REVENUES:
Property taxes $ 1 6,787,068 $ 1 0,277,829 $ - $ -
Sales taxes 1 5,521,725 - - 1 ,286,490
Other taxes 1 1,669,156 - - -
Special assessments - - - -
Licenses, building and other permits 1 ,683,540 - - -
Fines, forfeitures and penalties 1 ,043,495 - - -
Intergovernmental 6 ,188,029 - - 8 ,648,155
Charges for services 3 ,422,397 - - 1 01,939
Investment income 1 ,148,862 1 ,760,033 8 ,144 5 59,292
Indirect and in- lieu fees 2 ,457,051 - - 1 ,002,174
Garbage collection surcharge - - - 5 ,040
Parking meter and lease revenue - - - -
Impact fees - - - 5 91,187
Other revenues 2 ,245,373 1 ,079,956 1 32,727 5 86,536
Total revenues 6 2,166,696 1 3,117,818 1 40,871 1 2,780,813
EXPENDITURES:
Current:
General government
City Council 3 57,378 - - -
City Manager 7 79,415 - - -
City Clerk 3 55,778 - - -
City Attorney 6 09,040 - - -
Business services 1 ,858,784 - - -
Information technology 2 ,489,482 - - -
Human resources 9 87,973 - - -
Community development 9 85,445 2 ,680,892 1 75,638 -
Public safety
Police 1 9,279,969 -
Fire 1 2,566,047 -
Public works 3 ,740,194 - - -
Parks and recreation 1 0,335,013 - - -
Library 4 ,497,892 - - -
Non- departmental 8 01,377 - - -
Capital outlay - 1 6,843,572 - 2 2,436,228
Debt service:
Principal - 1 ,455,000 - -
Interest and fiscal charges - 4 ,431,720 - -
Total expenditures 5 9,643,787 2 5,411,184 1 75,638 2 2,436,228
REVENUES OVER ( UNDER) EXPENDITURES 2 ,522,909 ( 12,293,366) ( 34,767) ( 9,655,415)
OTHER FINANCING SOURCES ( USES):
Transfers in 1 ,515,000 - - 6 ,894,181
Transfers out ( 7,400,000) - - -
Total other financing sources ( uses) ( 5,885,000) - - 6 ,894,181
Net change in fund balances ( 3,362,091) ( 12,293,366) ( 34,767) ( 2,761,234)
FUND BALANCES:
Beginning of year 1 2,545,608 6 0,136,552 6 61,501 4 1,097,246
End of year $ 9 ,183,517 $ 4 7,843,186 $ 6 26,734 $ 3 8,336,012
See accompanying Notes to Basic Financial Statements.
Major Funds
28
Other Total
Governmental Governmental
Funds Funds
$ 1 ,419,536 $ 2 8,484,433
- 1 6,808,215
5 81,929 1 2,251,085
1 24,997 1 24,997
3 ,530,177 5 ,213,717
- 1 ,043,495
3 ,473,435 1 8,309,619
5 91,680 4 ,116,016
5 17,690 3 ,994,021
- 3 ,459,225
1 ,024,581 1 ,029,621
1 ,017,897 1 ,017,897
- 5 91,187
1 ,137,456 5 ,182,048
1 3,419,378 1 01,625,576
- 3 57,378
- 7 79,415
- 3 55,778
- 6 09,040
- 1 ,858,784
- 2 ,489,482
- 9 87,973
4 ,399,254 8 ,241,229
8 77,440 2 0,157,409
1 ,096,125 1 3,662,172
1 ,441,182 5 ,181,376
- 1 0,335,013
- 4 ,497,892
- 8 01,377
- 3 9,279,800
6 05,000 2 ,060,000
8 61,901 5 ,293,621
9 ,280,902 1 16,947,739
4 ,138,476 ( 15,322,163)
3 65,000 8 ,774,181
( 4,874,181) ( 12,274,181)
( 4,509,181) ( 3,500,000)
( 370,705) ( 18,822,163)
1 5,017,079 1 29,457,986
$ 1 4,646,374 $ 1 10,635,823
29
City of San Mateo
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in
Fund Balances to the Government- Wide Statement of Activities and Changes in Net Assets
For the year ended June 30, 2003
Net Change in Fund Balances - Total Governmental Funds $ ( 18,822,163)
Capital Outlay Expenditures
Governmental funds reported capital outlay as expenditures. However, in the Government-
Wide Statement of Activities and Changes in Net Assets, the cost of those assets was
allocated over their estimated useful lives as depreciation expense. This was the amount of
capital assets recorded in the current period. $ 39,279,800 $ ( 12,616,965) 26,662,835
Government-
Wide Statement
of Net Assets
Internal
Service Funds
Depreciation expense on capital assets was reported in the Government- Wide Statement of
Activities and Changes in Net Assets, but they did not require the use of current financial
resources. Therefore, depreciation expense was not reported as expenditures in the
Governmental Funds. $ ( 9,462,887) $ 1,010,467 ( 8,452,420)
Payment of vacation and sick leave payable was an expenditure in governmental funds, but
the payment reduced vacation and sick leave liabilities in the Government- Wide Statement
of Net Assets. 136,922
Payment of landfill closure and postclosure cost payable was an expenditure in
governmental funds, but the payment reduced landfill closure and postclosure cost
liabilities in the Government- Wide Statement of Net Assets. 151,000
Repayment of bond principal was an expenditure in governmental funds, but the
repayment reduced long- term liabilities in the Government- Wide Statement of Net Assets. 2,060,000
Revenues in the Government- Wide Statement of Activities and Changes in Net
Assets that did not provide current financial resources were not reported as
revenues in the governmental funds. 4,149,099
Interest expense on long- term debt was reported in the Government- Wide Statement of
Activities and Changes in Net Assets, but they did not require the use of current financial
resources. Therefore, interest expense was not reported as expenditures in governmental
funds. The following amount represented the change in accrued interest prior year. 52,676
Internal service funds were used by management to charge the costs of certain activities,
such as insurance and fleet management, to individual funds. The net revenue of the
internal service funds was reported with governmental activities. 1,473,535
Change in Net Assets of Governmental Activities $ 7,411,484
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Activities and Changes in
Net Assets were different because:
30
PROPRIETARY FUND FINANCIAL STATEMENTS
Sewer Fund accounts for the activities of the wastewater collection and treatment system, which provides
service to the residents of the City and some neighboring cities.
Golf Fund accounts for the activities of the San Mateo Municipal Golf Course, which provides recreational
facilities to the public.
Internal Service Funds are used to account for the financing of goods and services provided by one
department or agency to other departments or agencies on a cost reimbursement basis.
31
City of San Mateo
Statement of Net Assets
Proprietary Funds
June 30, 2003
Governmental
Activities
Internal
Sewer Golf Total Service Funds
Current assets:
Cash and investments $ 17,641,106 $ 420 $ 17,641,526 $ 15,628,256
Restricted cash and investments
with fiscal agents 5,973,121 821,370 6,794,491 -
Accounts receivable 256,399 16,362 272,761 188,640
Interest receivable 40,000 20,000 60,000 -
Prepaids and supplies - 110,119 110,119 125,000
Total current assets 23,910,626 968,271 24,878,897 15,941,896
Noncurrent assets:
Deferred charges 1,714,147 90,910 1,805,057 -
Loans and notes receivable - - - 455,575
Capital assets:
Non- depreciable 17,320,363 243,000 17,563,363 -
Depreciable, net 62,611,298 10,610,609 73,221,907 3,967,435
Total capital asset 79,931,661 10,853,609 90,785,270 3,967,435
Total noncurrent assets 81,645,808 10,944,519 92,590,327 4,423,010
Total assets 105,556,434 11,912,790 117,469,224 20,364,906
Current liabilities:
Accounts payable 171,193 156,999 328,192 345,209
Interest payable 5 99,033 224,680 823,713 -
Accrued salaries and wages payable 99,485 18,145 117,630 18,901
Deposits payable 1 46,142 1,052 147,194 9,888
Claims and judgments payable - - - 1,500,000
Bonds payable - due within one year 1 ,005,000 150,000 1,155,000 -
Total current liabilities 2 ,020,853 550,876 2 ,571,729 1,873,998
Noncurrent liabilities:
Claims and judgments payable - - - 5 ,977,000
Vacation and sick leave payable 4 10,513 71,643 482,156 -
Bonds payable - due in more than one year 29,200,000 10,020,000 39,220,000 -
Total noncurrent liabilities 2 9,610,513 10,091,643 39,702,156 5,977,000
Total liabilities 31,631,366 10,642,519 42,273,885 7,850,998
Invested in capital assets, net of related debt 49,726,661 683,609 50,410,270 3,967,435
Restricted for:
Capital projects 21,759,000 - 2 1,759,000 -
Debt service 1,597,536 821,370 2 ,418,906 -
Unrestricted 841,871 ( 234,708) 607,163 8 ,546,473
Total net assets $ 73,925,068 $ 1,270,271 $ 75,195,339 $ 12,513,908
See accompanying Notes to Basic Financial Statements.
ASSETS
LIABILITIES
NET ASSETS
32
City of San Mateo
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
For the year ended June 30, 2003
Governmental
Activities
Internal
Sewer Golf Total Service Funds
OPERATING REVENUES:
Charges for services $ 13,231,072 $ 2,735,082 $ 15,966,154 $ 16,287,270
Connection fees 371,529 - 371,529 -
Impact fees 187,112 - 187,112 -
Other 664,554 210,402 874,956 17,787
Total operating revenues 14,454,267 2,945,484 17,399,751 16,305,057
OPERATING EXPENSES:
Costs of sales and services 9,356,611 1,006,343 10,362,954 17,421,900
Administration 383,486 981,124 1,364,610 249,118
Depreciation and amortization 4,342,553 545,341 4,887,894 1,010,467
Total operating expenses 14,082,650 2,532,808 16,615,458 18,681,485
OPERATING INCOME ( LOSS) 371,617 412,676 784,293 ( 2,376,428)
NONOPERATING REVENUES EXPENSES:
Interest income 619,148 62,372 681,520 349,963
Interest expense and fiscal charges ( 1,583,551) ( 543,546) ( 2,127,097) -
Total nonoperating revenues ( expenses) ( 964,403) ( 481,174) ( 1,445,577) 349,963
INCOME ( LOSS) BEFORE TRANSFERS ( 592,786) ( 68,498) ( 661,284) ( 2,026,465)
Transfers in - - - 3,500,000
Change in net assets ( 592,786) ( 68,498) ( 661,284) 1,473,535
NET ASSETS:
Beginning of year 73,494,346 1,338,769 74,833,115 7,072,938
Prior period adjustments 1,023,508 - 1,023,508 3,967,435
Beginning of year, as restated 74,517,854 1,338,769 75,856,623 11,040,373
End of year $ 73,925,068 $ 1,270,271 $ 75,195,339 $ 12,513,908
See accompanying Notes to Basic Financial Statements.
33
City of San Mateo
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2003
Governmental
Activities
Internal
Sewer Golf Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers/ other funds $ 14,316,818 $ 2,709,509 $ 17,026,327 $ 16,172,348
Cash payments to suppliers for goods and services ( 9,811,539) ( 2,170,721) ( 11,982,260) ( 14,839,348)
Cash received from ( payments to) others 806,489 214,179 1,020,668 17,787
Net cash provided ( used) by operating activities 5,311,768 752,967 6,064,735 1,350,787
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in - - - 3,500,000
Net cash provided by noncapital financing activities - - - 3,500,000
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Changes in capital assets ( 1,899,453) ( 89,075) ( 1,988,528) ( 1,010,467)
Long- term debt repayment ( 955,000) ( 140,000) ( 1,095,000) -
Interest expense and fiscal charges ( 1,583,551) ( 543,546) ( 2,127,097) -
Net cash provided ( used) by capital and related financing activities ( 4,438,004) ( 772,621) ( 5,210,625) ( 1,010,467)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income 619,148 62,372 681,520 349,963
Net cash provided ( used) by investing activities 619,148 62,372 681,520 349,963
NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS 1,492,912 42,718 1,535,630 4,190,283
CASH AND CASH EQUIVALENTS - Beginning of year 22,121,315 779,072 22,900,387 11,437,973
CASH AND CASH EQUIVALENTS - End of year $ 23,614,227 $ 821,790 $ 24,436,017 $ 15,628,256
FINANCIAL STATEMENT PRESENTATION:
Cash and investments $ 17,641,106 $ 420 $ 17,641,526 15,628,256
Restricted cash and investments with fiscal agents 5,973,121 821,370 6,794,491 -
Total $ 23,614,227 $ 821,790 $ 24,436,017 $ 15,628,256
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income ( loss) $ 371,617 $ 412,676 $ 784,293 $ ( 2,376,428)
Adjustments to reconcile operating income ( loss)
to net cash provided ( used) by operating activities:
Depreciation and amortization 4,342,553 545,341 4,887,894 1,010,467
Changes in assets and liabilities:
Accounts receivable 518,105 ( 5,573) 512,532 340,653
Interest receivable 9,000 ( 20,000) ( 11,000) -
Prepaids and supplies - ( 110,119) ( 110,119) 31,219
Deferred charges 141,935 3,777 145,712 -
Loans and notes receivable - - - ( 455,575)
Accounts and interest payable ( 168,272) 128,463 ( 39,809) 124,550
Accrued salaries and wages payable 99,485 18,145 117,630 18,901
Due to other funds - ( 217,563) ( 217,563) -
Deposits payable - 1,052 1,052 -
Claims and judgments payable - - - 2,657,000
Vacation and sick leave payable ( 2,655) ( 3,232) ( 5,887) -
Total adjustments 4,940,151 340,291 5,280,442 3,727,215
Net cash provided ( used) by operating activities $ 5,311,768 $ 752,967 $ 6,064,735 $ 1,350,787
See accompanying Notes to Basic Financial Statements.
34
35
NOTES TO BASIC
FINANCIAL STATEMENTS
City of San Mateo
Notes to Basic Financial Statements
For the year ended June 30, 2003
36
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of San Mateo, California ( City) have been prepared in conformity
with generally accepted accounting principles ( GAAP) as applied to governmental agencies. The
Governmental Accounting Standards Board ( GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City’s accounting
policies are described below.
A. Financial Reporting Entity
The City of San Mateo ( City) was incorporated as a charter city on September 4, 1894; the current charter
was adopted in 1971. The City operates under the Council- Manager form of government and provides
the following services: public safety, including police and fire; building inspection; parks and streets;
sanitation; leisure services; planning and zoning; general administration services; and redevelopment.
As required by GAAP, these basic financial statements present the City and its component units, entities
for which the City is considered to be financially accountable. Blended component units, although
legally separate entities are, in substance, part of the City’s operations and data from these units are
combined with data of the City. Each blended component unit has a June 30 year- end. The City had no
discretely presented component units. The following entities are reported as blended component units:
The San Mateo Redevelopment Agency ( Agency) was created in 1969, pursuant to the State of
California Health and Safety Code, Section 33000. The purpose is to engage in the economic
revitalization and redevelopment of areas in the City determined to be in decline. The Agency is
controlled by the City and has the same governing board as the City, which also performs all
accounting and administrative functions for the Agency. The Agency’s financial activities have been
aggregated and merged (“ blended”) with those of the City in the accompanying basic financial
statements in the Redevelopment Agency Housing Special Revenue Fund, the Redevelopment
Agency Debt Service Fund and the Redevelopment Agency Capital Projects Fund.
The San Mateo Joint Power Financing Authority ( Authority) was established solely to assist the City
in the issuance of certain enterprise fund revenue bonds. It is controlled by and financially
dependent on the City; its financial activities were accounted for as part of the respective enterprise
funds.
The Agency’s financial statements, as well as financial information relating to the Authority can be
obtained from the City of San Mateo at 330 West 20th Avenue, San Mateo, CA 94403- 1388.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity with its own self- balancing accounts that comprise its assets, liabilities, fund equity,
revenues and expenditures or expenses. These funds are established for the purpose of carrying out
specific activities or certain objectives in accordance with specific regulations, restrictions or limitations.
Governmental resources are allocated to and accounted for in individual funds based upon the
purposes for which they are to be spent and the means by which spending activities are controlled.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
37
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Government- Wide Financial Statements
The City Government- Wide Financial Statements in clued a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of Governmental and
Business- Type Activities for the City accompanied by a total column. Fiduciary Activities of the City
are not included in these statements.
The basic financial statements are presented on an “ economic resources” measurement focus and the
accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets,
as well as infrastructure assets, and long- term liabilities, are included in the accompanying Statement of
Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which the liability is incurred.
Certain types of transactions reported as program revenues for the City are reported in three categories:
• Charges for services
• Operating grants and contributions
• Capital grants and contributions.
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables and receivables. All internal balances in the Statement of Net Assets have been
eliminated except those representing balances between the governmental activities and the business-type
activities, which are presented as internal balances and eliminated in the total primary government
column. In the Statement of Activities, internal service fund transactions have been eliminated;
however, those transactions between governmental and business- type activities have not been
eliminated. The following interfund activities have been eliminated:
• Due to/ from other funds
• Advances to/ from other funds
• Transfers in/ out
The City applies all applicable GASB pronouncements ( including all NCGA Statements and
Interpretations currently in effect) as well as the following pronouncements issued on or before
November 30, 1989 to the business type activities, unless those pronouncements conflict with or
contradict GASB pronouncements: Financial Accounting Standards Board ( FASB) Statements and
Interpretations, Accounting Principles Board ( APB) Opinions, and Accounting Research Bulletins ( ARB)
of the committee on Accounting Procedure. The City applies all applicable FASB Statements and
Interpretations issued after November 30, 1989 except those that conflict with or contradict GASB
pronouncements.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
38
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non- major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net
assets as presented in these statements to the net assets presented in the government- wide financial
statements. The City has presented all major funds that met those qualifications.
All governmental funds are accounted for on a spending or “ current financial resources” measurement
focus and the modified accrual basis of accounting. Accordingly, only current assets and current
liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in
Fund Balances present increases ( revenues and other financing sources) and decreases ( expenditures
and other financing uses) in net current assets. Under the modified accrual basis of accounting,
revenues are recognized in the accounting period in which they become both measurable and available
to finance expenditures of the current period.
Revenues are recorded when received in cash, except that revenues subject to accrual ( generally 60 days
after year- end) are recognized when due. The primary revenue sources, which have been treated as
susceptible to accrual by the City, are property tax, taxpayer- assessed tax revenues ( sales taxes, transient
occupancy taxes franchise taxes, etc.), grant revenues and earnings on investments. Expenditures are
recorded in the accounting period in which the related fund liability is incurred.
The Reconciliation of the Fund Financial Statements to the Government- Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Assets, a Statement of Revenues,
Expenses and Change in Net Assets, and a Statement of Cash Flows for all proprietary funds.
Column representing internal service funds is also presented in these statements. However, internal
service balances and activities have been combined with the governmental activities in the government-wide
financial statements.
Proprietary funds are accounted for using the “ economic resources” measurement focus and the accrual
basis of accounting. Accordingly, all assets and liabilities ( whether current or noncurrent) are included
on the Statement of Net Assets. The Statement of Revenues, Expenses and Change in Fund Net Assets
presents increases ( revenues) and decreases ( expenses) in total net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses
are those expenses that are essential to the primary operations of the fund. All other expenses are
reported as nonoperating expenses.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
39
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
C. Cash, Cash Equivalents and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term
investments with original maturity of three months or less from the date of acquisition. Cash and
cash equivalents are combined with investments and displayed as cash and investments.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and
for External Investment Pools, highly liquid market investments with maturities of one year or less at time
of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is
used as fair value for those securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund ( LAIF), which has invested a portion of the pool funds in Structured Notes and Asset-
Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State
of California collateralizing these investments. In addition, these Structured Notes and Asset- Backed
Securities are subject to market risk as to change in interest rates.
D. Restricted Cash and Investments
Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and
for acquisition and construction of capital projects. Cash and investments are also restricted for
deposits held for others within the enterprise funds.
E. Prepaids and Supplies
Certain payments to vendors reflect costs applicable to future accounting periods. Supplies are valued
at cost on a first- in first- out basis. Inventory in the General Fund consists of expendable supplies held
for consumption by all departments of the City. The cost is recorded as an expenditure at the time
individual inventory items are withdrawn for use ( consumption method). The General Fund inventory
amount is equally offset by a fund balance reservation, which indicates that it does not constitute
expendable available financial resources. Supplies in the enterprise funds consist principally of
materials and supplies for utility operations and are expensed as consumed.
F. Property Held for Resale
Property held for resale consists of land and project costs relating to property acquired or constructed
which will be sold under terms of disposition and development agreements between the Agency and
developers. The property held for resale is recorded at the lower of cost or estimated net realizable
value. Reported amounts are fully reserved, which indicates that they do not constitute available
spendable resources.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
40
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
G. Capital Assets
Capital assets, which include land, buildings, improvements, equipment, furniture, and infrastructure
assets ( e. g. roads, sidewalks, and similar items), are reported in the applicable governmental or
business- type activities in the Government- Wide Financial Statements. Capital assets are recorded at
historical cost or estimated historical cost if actual cost in not available. Donated assets are valued at
their estimated fair value on the date donated.
City policy has set the capitalization threshold for reporting capital assets at the following:
General Capital Assets $ 10,000
Infrastructure Capital Assets $ 100,000
For capital assets, depreciation is recorded on a straight- line basis over the useful lives of the assets as
follows:
Sewer Treatment Plant and Transmission
Lines
60 years
Buildings and Improvements 20 - 25 years
Machinery and Equipment 3 – 15 years
Infrastructure 25 – 50 years
The Governmental Accounting Standards Board ( GASB) issued Statement No. 34 requires the inclusion
of infrastructure capital assets in local governments’ basic financial statements. In accordance with
Statement No. 34, the City has included the value of all infrastructure into its Basic Financial Statements.
The City defines infrastructure as the basic physical assets that allow the City to function. The assets
include:
• Streets system
• Site amenities such as parking and landscaped areas used the City in the conduct of its
business
Each major infrastructure system can be divided into subsystems. For example, the street system can be
subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices
( signs, signals and pavement markings), landscaping and land. These subsystems were not delineated
in the Basic Financial Statements. The appropriate operating department maintains information
regarding the subsystems.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
41
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
G. Capital Assets, Continued
The City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure
reporting. The City conducted a valuation of its infrastructure assets as of July 1, 2003. This valuation
determined the original cost using one of the following methods:
1. Use of historical records where available.
2. Standard unit costs appropriate for the construction/ acquisition date.
3. Present cost indexed by a reciprocal factor of the price increase from the
construction/ acquisition date to the current date.
The accumulated depreciation, defined as the total depreciation from the date of
construction/ acquisition to the current date on a straight line method using industry accepted life
expectancies for each infrastructure subsystem. The book value was then computed by deducting the
accumulated depreciation from the original cost.
Interest accrued during capital assets construction, if any, is capitalized for the business- type and
proprietary funds as part of the asset cost.
H. Interest Payable
In the government- wide financial statements, interest payable of long- term debt is recognized as the
liability is incurred for governmental fund types and proprietary fund types.
In the fund financial statements, propriety fund types recognize the interest payable when the liability is
incurred.
I. Deferred Revenue
In the Government- Wide Financial Statements, deferred revenue is recognized for transactions for
which revenue has not yet been earned. Typical transactions recorded as deferred revenues in the
Government- Wide Financial Statements are long- term loans receivable and prepaid charges for services.
In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the
revenue recognition criteria based on the modified accrual basis of accounting. The City records
deferred revenue for transactions for which revenues have not been earned, or for which funds are not
available to meet current financial obligations. Typical transactions for which deferred revenue is
recorded are grants received but not yet earned or available.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
42
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
J. Claims and Judgments
The short- term and long- term workers’ compensation claims liability is reported in the Workers’
Compensation Insurance Internal Service Fund. The short- term and long- term general claims liability is
reported in the Comprehensive Liability Insurance Internal Service Fund. The short- term liability
which will be liquidated with current financial resources is the amount of settlement reached, but unpaid,
related to claims and judgments entered.
K. Long- Term Debt
Government- Wide Financial Statements - Long- term debt and other long- term obligations are reported as
liabilities in the appropriate activities.
Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the
bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium
or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the
related debt.
Fund Financial Statements - The fund financial statements do not present long- term debt but are shown in
the Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of Net
Assets.
Bond premiums and discounts, as well as issuance costs, are recognized during the current period.
Bond proceeds are reported as other financing sources net of the applicable premium or discount.
Issuance costs, whether or not withheld from the actual net proceeds received, are reported as debt
service expenditures.
L. Property Taxes
San Mateo County ( County) assesses properties and it bills, collects, and distributes property taxes to all
taxing entities including the City. Under State law, known as the Teeter Plan, the County remits the
entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and
unsecured property taxes are levied on January 1.
Secured property tax is due in two installments, on November 1 and March 1, and becomes a lien on
those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax
is due on July 1, and becomes delinquent on August 31. Collection of delinquent accounts is the
responsibility of the County, which retains all penalties.
The term “ unsecured” refers to taxes on personal property other than real estate, land and buildings.
These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by
the City in the fiscal year they are levied, provided they become available as defined above.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
43
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
M. Net Assets
Government- Wide Financial Statements
Invested in Capital Assets, Net of Related Debt – This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that attributed to the acquisition,
construction, or improvement of the assets.
Restricted Net Assets – This amount is restricted by external creditors, grantors, contributors, or
laws or regulations of governments.
Unrestricted Net Assets – This amount is all net assets that do not meet the definition of “ invested
in capital assets, net of related debt” or “ restricted net assets” as defined above.
Fund Financial Statements
Reservations of fund balances of governmental funds and retained earnings of proprietary funds are
created to either satisfy legal covenants; including State laws, that require a portion of the fund equity
be segregated or identify the portion of the fund equity not available for future expenditures.
N. Use of Restricted/ Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City’s policy is to apply restricted net assets first.
O. Use of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ
from these estimates and assumptions.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
44
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
P. Implementation of New GASB Pronouncements
The City adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
• Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and
Local Governments
• Statement No. 37, Basic Financial Statements – and Management’s Discussion and Analysis – for State
and Local Governments: Omnibus
• Statement No. 38, Certain Financial Statement Note Disclosures
GASB No. 34 is a new financial reporting requirement for local governments in the United States. The City
has implemented this pronouncement and has restructured much of the information that it has presented
in the past. The main goal is to make the reports more comprehensive and easier to understand and use.
GASB Statement No. 37 addresses selected issues and amends GASB Statements No. 21, Accounting for
Escheat Property, and No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State
and Local Governments. These Statements make selective changes including accounting for Escheat
Property, Management’s Discussion and Analysis, Capitalization of Construction – Period Interest,
Modified Approach for Reporting Infrastructure, Program Revenues and Major Fund Criteria.
GASB Statement No. 38 establishes and modifies disclosure requirements related to Summary of
Significant Accounting Policies, actions taken to address violations of significant finance – related legal and
contractual provisions, debt and lease obligations, short- term debt, disaggregation of receivable and
payable balances, and interfund balances and transfers.
2. CASH AND INVESTMENTS
The City maintains a cash and investment pool for all funds. Certain restricted funds which are held and
invested by independent outside custodians through contractual agreements are not pooled. These
restricted funds include cash and investment held by trustees.
A. Cash Deposits
The carrying amounts of the City’s cash deposit were $ 7,418,414 at June 30, 2003. Bank balances before
reconciling items were $ 8,697,496 at June 30, 2003, the total amount of which was insured and/ or
collateralized with securities held by the pledging financial institutions in the City’s name as discussed
below.
The California Government Code requires California banks and savings and loan associations to secure the
City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this
manner shall have the effect of perfecting a security interest in such collateral superior to those of a general
creditor. Thus, collateral for cash deposits is considered to be held in the City's name.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
45
2. CASH AND INVESTMENTS, Continued
A. Cash Deposits, Continued
The fair value of pledged securities must equal at least 110% of the cash deposits or first trust deed
mortgage notes with a value of 150% of the deposit as collateral for all deposits. California law also allows
institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of
the City’s total cash deposits. This collateral is held by the institution but is considered to be held in the
City’s name and places the City ahead of general creditors of the institution. The City has waived collateral
requirements for the portion of deposits covered by the federal deposit insurance.
B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code,
the following investments are authorized:
• United States Treasury Bills, Bonds, and Notes
• Obligations Issued by Agencies of the United States Government
• Bankers’ Acceptances
• Negotiable Certificates of Deposit
• Repurchase Agreements
• Time Certificate of Deposits
• California Local Agency Investment Fund
• San Mateo County Pool
• California Asset Management Program
• Mutual Funds
• Guaranteed Investment Contracts
The City’s investments are carried at fair value as required by generally accepted accounting principles
of the United States. The City adjusts the carrying value of its investments to reflect their fair market
value at each fiscal year- end, and it includes the effects of these adjustments in investment income for
that fiscal year.
The City is a voluntary participant in the Local Agency Investment Fund ( LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
The City’s investments with LAIF at June 30, 2003, include a portion of the pool funds invested in
Structured Notes and Asset- Backed Securities. These investments include the following:
Structured Notes - are debt securities ( other than asset- backed securities) whose cash flow
characteristics ( coupon rate, redemption amount, or stated maturity) depend upon one or more indices
and/ or that have embedded forwards or options.
Asset- Backed Securities, the bulk of which are mortgage- backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a
pool of mortgages ( such as Collateralized Mortgage Obligations) or credit card receivables.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
46
2. CASH AND INVESTMENTS, Continued
B. Investments, Continued
As of June 30, 2003, the City had $ 53,984,420 invested in LAIF, which had invested 2.327% of the pool
investment funds in Structured Notes and Asset- Backed Securities. The LAIF fair value factor of
1.002846280 was used to calculate the fair value of the investments in LAIF.
The City is also a voluntary participant in the San Mateo County Investment Fund ( County Pool) that is
regulated by California Government Code Section 16429 under the oversight of the Treasurer of the
County of San Mateo. The City reports its investment in the County Pool at the fair value amount
provided by the County. The balance available for withdrawal is based on the accounting records
maintained by the County Pool, which are recorded on an amortized cost basis. Included in the County
Pool’s investment portfolio are US Treasury Notes, Obligations issued by agencies of the United States
Government, LAIF, Corporate Notes, Commercial Paper, collateralized mortgage obligations,
mortgage- backed securities, other asset- backed securities, and floating rate securities issued by federal
agencies, government- sponsored enterprises, and corporations.
Fair Value of Investments
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and
for External Investment Pools, investments were stated at fair value. The offset was to recognize an
unrealized gain of $ 861,897as of June 30, 2003.
C. Risk Category
Governmental Accounting Standards Board Statement ( GASB) No. 3 requires that deposits and
investments be classified by credit risk.
Classification of deposits and investments by credit risk are as follows:
Deposits
Category 1 - Insured or collateralized with securities held by the entity or by its agent in the entity’s
name.
Category 2 - Collateralized with securities held by the pledging financial institution’s trust
department or agent in the entity’s name.
Category 3 - Deposits which are uninsured or uncollateralized.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
47
2. CASH AND INVESTMENTS, Continued
C. Risk Category, Continued
Investments
Category 1 - Insured or registered securities held by the entity or its agent in the entity’s name.
Category 2 - Uninsured and unregistered, with securities held by the counterparty’s trust
department or agent in the entity’s name.
Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust
department or agent, but not in the entity’s name.
Investments Not Subject to Categorization - Investments in the California Local Agency Investment
Fund ( LAIF) are not categorized, as GASB No. 3 does not require categorization of investment pools
managed by another agency. Certain fiscal agent investments are not categorized because the
underlying assets are open- ended mutual funds. Guaranteed investment contracts are not
categorized because they are direct contractual investments and are not securities. All such
investments are not required to be categorized under interpretive guidelines issued by the GASB.
The following is a summary of pooled cash and investments, including restricted cash and investments
at June 30, 2003:
Business
Governmental Type
Activities Activities Total
Cash and Investments $ 9 3,606,910 $ 1 7,641,526 $ 1 11,248,436
Restricted Cash and Investments
Held by fiscal agents $ 2 4,927,316 $ 6 ,794,491 $ 3 1,721,807
Total cash and investments $ 1 42,970,243
Government- Wide Statement of Net Assets
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
48
2. CASH AND INVESTMENTS, Continued
C. Risk Category, Continued
Deposits and investments including cash and investments held by fiscal agents were categorized as
follows at June 30, 2003:
Fair
1 2 Uncategorized Value
City Treasury:
Demand Deposits:
Cash deposits $ 7,418,414 $ - $ - $ 7,418,414
Time Certificate of Deposit 400,000 - - 400,000
Total demand deposits 7,818,414 - - 7,818,414
Investments:
California Local Agency Investment Fund - - 53,984,420 53,984,420
San Mateo County Pooled Investment Fund - - 28,288,592 28,288,592
Money Market
Mutual Funds ( U. S. Government Securities) - - 1,020,000 1,020,000
U. S. Government Agency Issues 20,137,010 - - 20,137,010
Total investments 20,137,010 - 83,293,012 103,430,022
Total City Treasury $ 27,955,424 $ - $ 83,293,012 $ 111,248,436
Restricted Cash and Investments
Held by Fiscal Agents:
Cash $ - $ 103,410 $ - $ 103,410
Investments:
California Local Agency Investment Fund - - 24,079,720 24,079,720
Money Market
Mutual Funds ( U. S. Government Securities) - - 2,414,764 2,414,764
Investment Contract - - 5,123,913 5,123,913
Repurchase Agreements - - - -
Total restricted cash and investments
held by fiscal agents - 103,410 31,618,397 31,721,807
Total $ 27,955,424 $ 103,410 $ 114,911,409 $ 142,970,243
Category
At June 30, 2003, the City had no category 3 deposits or investments.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
49
3. INTERFUND TRANSACTIONS
A. Due To/ From Other Funds
At June 30, 2003, the City had the following due to/ from other funds:
Non- major
General Governmental
Due To Other Funds Fund Funds Total
Non- major Governmental Funds $ 39,234 $ 95,582 $ 134,816
Due From Other Funds
Current interfund balances arise in the normal course of operations and are expected to be repaid
shortly after the end of the fiscal year.
B. Transfers
At June 30, 2003, the City had the following transfers in/ out which arise in the normal course of
operations.
General Non- major
Projects Governmental Internal
General Capital Projects Funds Service Funds Total
General $ - $ 3,900,000 $ - $ 3,500,000 $ 7,400,000
Non- major Governmental Funds 1,515,000 2,994,181 365,000 - 4,874,181
Total $ 1,515,000 $ 6,894,181 $ 365,000 $ 3,500,000 $ 12,274,181
Transfers In
Transfers Out
4. LOANS AND NOTES RECEIVABLE
A. Government- Wide Financial Statements
At June 30, 2003 the City’s loans and notes receivable consisted of the following:
Loans and notes receivable $ 35,774,404
Allowances for potential forgiveness ( 4,250,000)
Loans and notes receivable, net $ 31,524,404
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
50
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements
The City and the Agency engage in programs designed to encourage construction or improvement in low-to-
moderate income housing or other projects. Under these programs, loans are provided under favorable
terms to homeowners or developers who agree to spend these funds in accordance with the City’s and
Agency’s terms. In the governmental fund financial statements, these loans have been offset by deferred
revenue or a reservation of fund balance as they are not expected to be repaid immediately.
Loans and notes receivable, including accrued interest and related deferred revenue, comprised balances
from the following programs, all of which are discussed below:
Balance Balance
Description Year Due June 30, 2003 June 30, 2002
Governmental Funds:
First- Time Homebuyer Loans Various $ 1 5,919,901 $ 1 4,813,305
Home Rehabilitation Loans Various 2 ,602,589 3 ,265,542
106 N. Eldorado 2036 4 50,000 4 50,000
Darcy Building 2040 1 ,500,000 1 ,587,222
Edgewater Isle Senior Apartments 2048 3 ,074,866 3 ,072,740
Belmont Building 2032 8 00,000 8 00,000
Merkel Building 2005/ 2011 8 6,763 3 20,243
St. Matthew Hotel 2036 2 ,176,928 2 ,062,446
Rotary Hacienda 2028 2 ,197,019 2 ,112,287
Turning Point 2018 5 66,863 3 74,262
12 N. Idaho Street 2034 1 10,436 1 10,436
200 S. Delaware Street 2049 1 ,395,180 1 ,296,688
Employees' Housing Assistance Program Various 8 8,387 8 7,409
232 S. Humboldt Street 2021 5 35,000 4 67,150
11 S. Delaware Street 2032 3 74,907 3 50,000
El Camino Family Housing 2042 3 ,439,990 -
Total governmental funds 3 5,318,829 3 1,169,730
Internal Service Funds:
Employee Loan Open 4 55,575 -
Total $ 3 5,774,404 $ 3 1,169,730
First- Time Homebuyer Loans
The Redevelopment Agency has provided various loan programs for First Time Homebuyers since 1989. In
general they provide secondary financing for low and moderate buyers in the City of San Mateo that have
deferred payments in order to allow the buyer to maximize their purchasing capacity. The various loan
terms are described below:
Gateway Commons Original Buyers - Second loans up to $ 45,000 accrue interest that compounds
annually. Payment of principal and interest is paid upon sale of property. Units are sold at market
value and the Agency also receives as payment a share of the appreciation based on the percentage of
the Agency loan to original purchase price. The Agency has first right of refusal to purchase unit to roll
over to new eligible buyer.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
51
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
First- Time Homebuyer Loans, Continued
First Time Buyer Resale Program - Subsequent buyers at Gateway Commons and other first time buyer
complexes have different loan terms: Second loans up to $ 60,000 accrue interest that is compounded
annually. The resale price is restricted by applying the percentage increase in median income from the
time of the purchase date to the sale date, to the initial sales price. The Agency has the first right of
refusal to roll unit to new eligible at the restricted sales price. The principal is repaid, but payment of
the accrued interest is waived. If the Agency does not exercise option to purchase, the unit can be sold
at fair market value to a non- eligible buyer. In this case the principal, interest and appreciation share
payment is paid to the Agency.
Neighborhood Purchase Program - A second loan of up to 20% of the purchase price, or maximum of
$ 60,000 accrues simple interest of 3% per year. This is an amortized loan where monthly payments are
deferred for five years and then repaid over 25 years. This program is no longer active. There are no
resale price restrictions.
CASA Program - Secondary funds of up to 20% of the purchase price, or maximum of $ 60,000 are
available from a partnership between the Agency and the program lender, City National Bank. Buyers
obtain a first loan with the bank. The bank and the Agency each provide half of the secondary funds in
second and third position respectively. Loan repayment is deferred until sale or refinance, at which
time the original loan, plus a percentage of the appreciation is distributed to the Agency and the bank.
This program is no longer active. There are no resale price restrictions.
Countywide Home Investment Partnership ( CHIP) Program - This program provides a second loan of
up to 20% of the purchase price, or maximum of $ 60,000. No interest and no payments are due for 10
years. Then payments are amortized at 4% for 25 years. Upon sale of the property or refinance, an
appreciation share payment is due to the Agency. This program is designed to partner with other local
secondary loan programs, such as the Community College District program that provides the same loan
terms, only the interest and payments are deferred for five years. There are no resale price restrictions.
Meadow Court Program - This program provides first- time homebuyers down payment assistance in an
amount not to exceed $ 60,000 for the purchase of the Meadow Court. The loans are secured by a second
deed of trust to eligible homebuyers who obtain a conventional mortgage from a private lender. The
original term of the loan is 40 years with an interest rate varying between 4% and 10%. At year 31,
provided that the property has not been sold or transferred, 10% of principal and interest will be
forgiven each year until year 40, at which time the entire note is forgiven.
Included in the programs above are loans to qualifying City employees. At June 30, 2003, the balances of
these loans totaled $ 450,000.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
52
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Home Rehabilitation Loans
The City administers various housing rehabilitation loan programs using Community Development Block
Grant funds, Redevelopment Agency Housing Set- Aside funds and City Housing Funds. Under these
Programs, individuals with incomes below a certain level are eligible to receive low interest, variable term
loans, secured by deeds of trust for rehabilitation work on their homes. The maximum loan limit is $ 85,000
and $ 100,000 for historic properties. The loan repayments may be amortized over the life of the loans,
deferred or a combination of both.
106 N. Eldorado
The City loaned $ 450,000 to Housing Association for the Needy and Dispossessed, Inc. ( HAND), a non-profit
organization, to acquire and rehabilitate six apartment units at 106 N. Eldorado for low- income
housing. The loan bears no interest and is due in 40 years. If the property has not been sold or transferred,
beginning in 2027, ten percent of the principal will be forgiven annually until 2036, at which time the entire
loan principal will be forgiven.
Darcy Building
On June 30, 2000, the City and the Agency had made four loans, the proceeds of which were used to
conduct substantial rehabilitation and residential conversion of the Darcy Building for low income
households. The loans carry interest at rates which vary from 0% to 5% with a term of 30 years. If the
property remains in the developer’s hands, two of the loans allow partial forgiveness beginning in year 30,
with full forgiveness in year 40.
Edgewater Isle Senior Apartments
On June 30, 2000, the City and the Agency had a receivable from the Human Investment Project for the
purchase and minor rehabilitation of ninety- two low and moderate income senior rental units at Edgewater
Isle. Payments of principal and 3% interest are deferred until 2048 or the sale or transfer of the property.
Belmont Building
On June 30, 2000, the City and the Agency had made two loans, the proceeds of which were used to convert
this building into six one- bedroom units for very low income families. The loans bear no interest and are
for a term of 40 years. If the property remains in the developer’s hands, beginning in year 2023, ten percent
of the principal will be forgiven annually until year 2032, at which time the entire loan principal will have
been forgiven.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
53
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Merkel Building
The Agency has two loans of equal amount, secured by second and third deeds of trust respectively, on the
Merkel Building. These loans bear interest at 5% and 8%, respectively, with payments starting in 2000 and
continuing for eleven and five years respectively, at which time the entire remaining principal and accrued
interest balances are due.
St. Matthew Hotel
On June 30, 2000, the City and the Agency had a receivable from a developer, which used these funds to
rehabilitate this hotel into a single room occupancy development for very low- income households. Interest
is at 0% to 3%; principal and interest are due in 2036.
Rotary Hacienda
In 1998, the Agency entered into a Development and Disposition Agreement with Rotary Hacienda Inc. for
the construction and operation of an 82- unit senior rental housing project. The Agreement includes a
promissory note in the amount of $ 968,383, which bears simple interest at a rate of 8.75% compounded
annually, and is due on December 30, 2028.
Turning Point
On June 26, 1988, the Agency and the Mid- Peninsula Coalition Belle Haven, Inc., entered into an agreement,
which provided loans of $ 69,262 in City funds and $ 305,000 in Agency funds to assist with the acquisition
and development of an emergency housing shelter called Turning Point. The loan bears no interest and is
due in 2018; however, repayment is not required as long as the facility remains a shelter.
12 N. Idaho Street
In 1994, HAND, Inc., a non- profit organization, received loans of $ 100,000 from the Agency and $ 10,436
from the City to assist in the purchase of a six- unit apartment building located at 12 N. Idaho Street to be
used as an affordable housing complex. The Agency loan carries an interest rate of 10% and is for a period
of 40 years and the City loan carries no interest and is for a period of 15 years. Principal payments on both
loans are deferred until the earlier of sale or transfer of the property or the maturity date.
200 S. Delaware Street
On October 6, 1999, the City and the Agency loaned $ 1,216,000 to Housing Association for the Needy and
Dispossessed, Inc. ( HAND) to acquire and rehabilitate sixteen units at 200 S. Delaware Street for low-income
housing. The loan bears an interest rate of 3%. Principal and interest are due in 2049. However,
HAND has an option of renewing the loan agreement for another fifty years.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
54
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Employees’ Housing Assistance Program
The City has a housing assistance program for City employees for housing located within San Mateo City
limits. This program provides short- term loans up to $ 75,000 to finance rental deposits or closing costs for
home ownership. Loan repayments are deducted from employees’ paychecks over a period of up to five
years or are due upon leaving employment.
232 S. Humboldt Street
On February 9, 2001, the City and the Agency loaned $ 500,000 to Mateo Lodge, Inc., to rehabilitate nine
units at 232 S. Humboldt Street for low- income housing. The loan bears an interest rate of 3%. Principal
and interest are due in 2021. However, Mateo Lodge, Inc. has an option of renewing the loan agreement for
another twenty years.
11 S. Delaware Street
On June 17, 2002, the City loaned $ 660,000 to HAND to acquire and rehabilitate eleven units at 11 S.
Delaware Street for affordable housing. The loan bears an interest rate of 3%. Principal and interest are due
in 2032. However, HAND has an option of renewing the loan agreement for another thirty years.
El Camino Family Housing
In December 2002, El Camino Family Housing, L. P., received a loan of $ 3,386,000 from the Agency to
develop the Santa Inez Apartments which is to be used as an affordable housing complex. The Agency loan
carries an interest rate of 3% and is for a period of 40 years. Annual payments of principal and interest in
the amount of $ 140,688 from the borrower’s “ available cash flow” will be required annually. In the event
the “ available cash flow” is inadequate to remain current, the loan shall nevertheless be due and payable in
40 years.
Employee Loan
In March 2003, a newly appointed city employee received a loan of $ 455,575 from the City to assist with
obtaining suitable housing. The City and Employee agreed to hold title to the property purchased as an
investment and for use as a personal residence by Employee and his family. The agreement will terminate
upon whichever of the following events shall first occur: ( 1) Termination of the employment relationship
between the City and Employee by either party. ( 2) The death of Employee. ( 3) The failure by Employee to
occupy said Property as his principal place of residence for a period of ninety consecutive days. The City
and Employee will share in the profits and losses of the property at 52.6% and 47.4% respectively.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
55
5. CAPITAL ASSETS
A. Government- Wide Financial Statements
At June 30, 2003 the City’s capital assets consisted of the following:
Governmental Business- Type
Activities Activities Total
Non- depreciable assets:
Land $ 35,202,549 $ 4,217,298 $ 3 9,419,847
Construction in progress 16,446,337 1 3,346,065 29,792,402
Total non- depreciable assets 51,648,886 1 7,563,363 69,212,249
Depreciable assets:
Buildings and improvements 34,828,746 1 1,790,969 46,619,715
Treatment plant & transmission lines - 1 16,816,252 116,816,252
Machinery and equipment 21,382,026 2 ,812,757 24,194,783
Infrastructure 312,146,886 - 3 12,146,886
368,357,658 131,419,978 499,777,636
Less accumulated depreciation 143,634,184 58,198,071 201,832,255
Total depreciable assets 224,723,474 73,221,907 297,945,381
Total capital assets $ 276,372,360 $ 90,785,270 $ 3 67,157,630
The following is a summary of changes in the capital assets for governmental activities during the fiscal
year:
Prior Period
Balance Adjustments Balance
July 1, 2002 Additions Retirements ( Note 14) June 30, 2003
Non- depreciable assets:
Land $ 33,412,669 $ - $ - $ 1,789,880 $ 35,202,549
Construction in progress 11,102,772 26,560,159 ( 21,216,594) - 16,446,337
Total non- depreciable assets 44,515,441 26,560,159 ( 21,216,594) 1,789,880 51,648,886
Depreciable assets:
Building and improvements 25,685,042 9,510,143 ( 366,439) - 34,828,746
Machinery and equipment 25,604,325 720,042 ( 4,942,341) - 21,382,026
Infrastructure - 11,706,451 - 300,440,435 312,146,886
51,289,367 21,936,636 ( 5,308,780) 300,440,435 368,357,658
Less accumulated depreciation - 9,462,887 - 134,171,297 143,634,184
Total depreciable assets, net 51,289,367 12,473,749 ( 5,308,780) 166,269,138 224,723,474
Total capital assets $ 95,804,808 $ 39,033,908 $ ( 26,525,374) $ 168,059,018 $ 276,372,360
Depreciation expense for governmental activities for the year ended June 30, 2003 was $ 9,462,887 which
was not allocated to departments/ functions.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2003
56
5. CAPITAL ASSETS, Continued
A. Government- Wide Financial Statements, Continued
The following is a summary of changes in the capital assets for business- type activities during the fiscal
year:
Prior Period
Balance Adjustments Balance
July 1, 2002 Additions Retirements ( Note 14) June 30, 2003
Non- depreciable assets:
Land $ 4 ,217,298 $ - $ - $ - $ 4 ,217,298
Construction in progress 11,312,551 1,919,629 ( 909,623) 1,023,508 1 3,346,065
Total non- depreciable assets 1 5,529,849 1,919,629 ( 909,623) 1,023,508 1 7,563,363
Depreciable assets:
Golf building and improvements 1 1,790,969 - - - 1 1,790,969
Sewer treatment plant
and transmission lines 116,080,684 9 09,624 ( 174,056) - 1 16,816,252
Machinery and equipment 3 ,793,287 41,802 ( 1,022,332) - 2 ,812,757
1 31,664,940 951,426 ( 1,196,388) - 1 31,419,978
Less accumulated depreciation 54,533,661 4,742,182 ( 1,077,772) - 5 8,198,071
Total depreciable assets, net 77,131,279 ( 3,790,756) ( 118,616) - 7 3,221,907
Total capital assets $ 92,661,128 $ ( 1,871,127) $ ( 1,028,239) $ 1,023,508 $ 90,785,270
Depreciation expense for business- type activities for the year ended June 30, 2003 was $ 4,742,182.
B. Fund Financial Statements
The fund financial statements do not present General Government Capital Assets but are shown in the
Reconcilia