City of San Mateo
San Mateo, California
Comprehensive
Annual Financial Report
For the Year Ended June 30, 2006
CITY OF SAN MATEO
SAN MATEO, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2006
Prepared by:
FINANCE DEPARTMENT
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents
i
Page
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 .................................................................................................................. 35
Required Supplementary Information:
Budgets and Budgetary Accounting ................................................................................................................. 80
Defined Pension Plan ............................................................................................................................... .......... 83
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
ii
Page
FINANCIAL SECTION, Continued
Supplementary Information:
Major Governmental Funds:
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:
Redevelopment Debt Service Fund...................................................................................................... 87
Non- Major Governmental Funds:
Combining Balance Sheet.......................................................................................................................... .. 90
Combining Statement of Revenues, Expenditures and Changes in Fund Balances............................ 92
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:
Police Grants Special Revenue Fund.................................................................................................... 95
Community Development Block Grant Special Revenue Fund....................................................... 96
Fire Protection Special Revenue Fund ................................................................................................. 97
HOME Special Revenue Fund .............................................................................................................. 98
Gas Tax Special Revenue Fund............................................................................................................. 99
Construction Services Special Revenue Fund................................................................................... 100
Advance Planning Special Revenue Fund ........................................................................................ 101
Parking Special Revenue Fund ........................................................................................................... 102
Solid Waste Special Revenue Fund .................................................................................................... 103
Landfill Bond Debt Service Fund ....................................................................................................... 104
General Obligation Debt Service Fund .............................................................................................. 105
2% Hotel Tax Capital Project Fund .................................................................................................... 106
Internal Service Funds:
Combining Statement of Net Assets......................................................................................................... 108
Combining Statement of Activities and Changes in Net Assets........................................................... 110
Combining Statement of Cash Flows ....................................................................................................... 112
STATISTICAL SECTION ( Unaudited)
Net Assets by Component...................................................................................................................... ................. 117
Changes in Net Assets ............................................................................................................................... .............. 118
Governmental Activities Tax Revenues by Source............................................................................................... 120
Fund Balances of Governmental Funds ................................................................................................................. 121
Changes in Fund Balances of Governmental Funds ............................................................................................ 122
Assessed Value and Estimated Actual Value of Taxable Property .................................................................... 123
Direct and Overlapping Property Tax Rates ......................................................................................................... 124
City of San Mateo
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
iii
STATISTICAL SECTION ( Unaudited), Continued
Page
Principal Property Taxpayers ............................................................................................................................... .. 125
Property Tax Levies and Collections ...................................................................................................................... 126
Ratios of Outstanding Debt by Type ...................................................................................................................... 127
Ratios of General Bonded Debt Outstanding........................................................................................................ 128
Direct and Overlapping Governmental Activities Debt ...................................................................................... 129
Legal Debt Margin Information .............................................................................................................................. 130
Pledged – Revenue Coverage ............................................................................................................................... .. 132
Demographic and Economic Statistics ................................................................................................................... 133
Principal Employers for County of San Mateo...................................................................................................... 134
Full- Time Equivalent City Government Employees by Function ...................................................................... 135
Operating Indicators by Function ........................................................................................................................... 136
Capital Asset Statistics by Function....................................................................................................................... 137
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vi
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, an 18-
hole golf course, and three libraries including a newly constructed main library. 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, the Hillsdale Shopping Mall and
Bridgepointe.
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. Budgetary control is managed at department level and fund level. 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.
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.
Local Economy
San Mateo is the premier city on the mid- Peninsula, located between San Francisco and San Jose. It benefits
from a strong and diverse economic base. It features a diverse mix of economic components, with
established financial institutions such as Franklin Templeton and leading edge information technology
companies such as Serena Software, Keynote Systems, and Netsuite. Also, San Mateo continues to be an
innovation center for exciting new businesses such as YouTube ( to be acquired by Google Inc.) and a strong
base for national, regional, and independent retailers.
As in the previous year, overall economic growth in San Mateo continues to reflect a broader recovery from
the economic contraction that followed the dot- com decline and September 11, 2001. The most recent data
indicates that local sales tax revenue continues to grow at a slow yet gradual pace, led by in the general
retail category. Retail accounts for nearly half of San Mateo’s annual sales tax generation. Additionally,
transportation and food product businesses have continued to grow steadily, with three- year highs in each
category.
Employment in San Mateo, with a total of approximately 50,000 jobs, is concentrated in three sectors:
professional and financial services; health, educational and recreational services; and retail. According to
Association of Bay Area Governments ( ABAG) projections, future job growth will occur primarily in the
first two of these sectors, led by a 15% increase in professional and financial services jobs between 2000 and
2015. Unemployment in San Mateo is approximately 3.4%, which is below both the California ( 4.9%) and
national ( 4.6%) unemployment levels.
vii
The real estate market continues to be strong, despite showing recent signs of cooling off. The median
home value in the City is still in excess of $ 700,000.
The total 2006 assessed value for all property in the City of San Mateo is approximately $ 14 billion,
reflecting an 8.6% increase from the previous year.
Most economic indicators show a gradual and steady increase in the overall economic vitality in San Mateo.
Long- term Financial Planning
The City monitors the revenues and expenditures on a regular basis to ensure that the ongoing
expenditures remain within ongoing revenues. We also maintain a multi- year financial projection model
that helps us stay financially sound beyond the current year.
We maintain an emergency reserve of $ 7.3M, an increase of $ 3.3M from the prior year, as a last resort
source and a service stability reserve of $ 2.35M to cope with unexpected revenue shortfalls.
In addition, the City maintains adequate reserves for estimated cost of workers compensation and liability
claims to the extent that we are self- insured for such claims. The City also annually budgets and sets aside
adequate funds in a sinking fund for future replacement of vehicles and equipment.
Major Initiatives
The Bay Meadows Phase II development plan for the 83- acre site would build a significant number of
residential, office, and commercial units in the “ rail corridor”. The build out is expected to take 15 to 20
years and is projected to have a significant positive impact on the City’s General Fund in future years.
The City has acquired a site for the new 43,000 square foot Police Station and plans are underway for
construction to begin in 2007. The estimated project costs is $ 53M, with funding from, Measure C 2% hotel
tax and bonds, Redevelopment Agency, sale of existing site, and General Fund allocations.
The new 90,000 square- foot Main Library was successfully completed and opened in August 2006.
Accounting System and Internal Controls
Note 1 in the Basic Financial Statements provides a detailed explanation of the significant accounting
policies. In developing and evaluating the City's accounting system, consideration is given to the adequacy
of controls. Internal accounting controls are designed to provide reasonable assurance regarding:
safeguarding of assets against loss, accuracy and reliability of accounting data, and adherence to prescribed
policies. The concept of reasonable assurance recognizes that the cost of a control should not exceed
benefits likely to be derived and that the evaluation of costs and benefits require estimates and judgments
by management.
Awards and Acknowledgments
Certificates of Achievement. The Government Finance Officers Association of the United States and
Canada ( GFOA) has awarded the Certificate of Achievement for Excellence in Financial Reporting to the
City for its Comprehensive Annual Financial Report ( CAFR) for the past 16 years.
viii
The California Municipal Finance Officers Association ( CSMFO) has also awarded the Certificate for
Outstanding Financial Reporting to the City for its CAFR for the past 17 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.
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 the awards.
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 & 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 City Council for their leadership and their
support and especially for their responsiveness to the financial concerns of the City.
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x
xi
xii
xiii
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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, 2006.
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 $ 433M
( net assets). Of this amount $ 301M was invested in capital assets, net of related debt. The
balance was restricted for capital projects of $ 64M, debt service and other $ 22M, and unrestricted
$ 46M. This includes all City and Redevelopment Agency assets.
• The City's total net assets increased by $ 25M; representing $ 19.5M increase in governmental and
$ 5.5M increase 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, and Redevelopment funds, reported combined ending
fund balances of $ 114M, a decrease of $ 7M in comparison with the prior year. Approximately
$ 69M is available for spending at the government's discretion on operating and capital activities
( of which $ 12M is in the general fund), and $ 33M is available for and committed to the capital
projects ( unreserved fund balance) both of which are subject to restrictions relating to the
various funding sources002E
• At the end of the current fiscal year, unreserved fund balance for the general fund was $ 11.6M,
or 17 percent of total general fund expenditures. This amount includes $ 7.3M emergency reserve
( increased by $ 3.3M), $ 2.35M service stability reserve, and $ 1.9M designated for subsequent
year’s expenditure.
• The total net long- term debt decreased by $ 3.78M during the fiscal year. The decrease was
mainly due to annual payments of bonds including General Obligation, Redevelopment Tax
Allocation, Sewer Revenue Bonds and Joint Power Financial Authority.
II. Overview of the Financial Statements
This discussion and analysis is 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 Financial
Statements. This report also contains other required 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 changes in the City’s financial position.
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.,
loans receivable 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 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 15- 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 two categories: governmental funds and
proprietary 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 18 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, capital projects, redevelopment capital projects, redevelopment
special revenue, redevelopment debt service, and city housing, 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.
5
The basic Governmental Fund Financial Statements can be found on pages 23- 30 this report.
Proprietary Funds. The City maintains two 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’s various functions.
The City uses internal service funds to account for its general liability, fleet and building maintenance,
vehicle and equipment replacement, workers compensation, dental, and other employee benefits programs.
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 basic Proprietary Fund Financial Statements can be found on pages 31- 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 35- 78 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 79- 83 of this report.
III. Government- Wide Financial Analysis
Net Assets. As noted earlier, 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 $ 433M at the close of the fiscal year.
By far the largest portion of the City of San Mateo’s net assets ( 70%) reflect its investment in capital assets
( e. g., infrastructure, land, buildings, machinery, and equipment), less any outstanding related debt used to
acquire those assets. 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 i. e. future income, since the capital assets themselves cannot be used to
liquidate these liabilities.
An additional portion of the City of San Mateo’s net assets ( 25%) represents resources that are subject to
external restrictions on how they may be used. The remaining balance, ( 5%), that is unrestricted net assets,
may be used to meet the government's ongoing obligations to citizens and creditors, subject to the
applicable restrictions of various funding sources.
6
CITY OF SAN MATEO’S NET ASSETS
( Amounts expressed in millions)
2006 2005 2006 2005 2006 2005
Current and other assets $ 1 52 $ 1 60 $ 30 $ 40 $ 1 82 $ 200
Capital Assets, net of depreciation 375 350 109 94 4 84 444
Total assets 527 510 139 134 666 644
Long- term liabilities outstanding 152 154 51 53 2 03 207
Other liabilities 2 6 26 4 3 30 2 9
Total liabilities 178 180 55 56 2 33 236
Net assets:
Invested in capital assets, net of related debt 254 203 47 38 3 01 241
Restricted 69 120 18 16 87 136
Unrestricted 26 7 19 24 45 3 1
Total net assets $ 3 49 $ 3 30 $ 84 $ 78 $ 4 33 $ 408
Total
Governmental
activities Business- Type activities
At the end of the fiscal year 2005- 06, 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 net assets increased by $ 25M 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 $ 19.5M, while the
business type activities showed an increase in net assets of $ 5.5M. The charts that follow show the program
revenues, general revenues, and expenses by function for all City activities, including the Redevelopment
Agency.
Revenues by Source - Governmental Activities
Operating grants
and contributions
6%
Capital grants and
contributions
13%
Property taxes
34%
Property Transfer
Tax
7%
Franchise fees
2%
Motor vehicle in lieu
fees
2%
Other
4%
Charges for
services
13%
Sales taxes
13%
Other taxes
6%
7
Expenses by Function - Governmental Activities
General
government
9%
Community
development
12%
Public w orks
14%
Public safety
41%
Depreciation
Expense
( unallocated)
7%
Library
5%
Parks and
recreation
12%
CITY OF SAN MATEO
Statement of Changes in Net Assets
For the Year Ended June 30, 2006
( Amounts expressed in millions)
05- 06 04- 05 05- 06 04- 05 05- 06 04- 05
Revenues:
Program revenues:
Charges for services $ 16.0 $ 15.6 $ 19.6 $ 19.4 $ 35.6 $ 3 5.0
Operating grants and contributions 7 .2 5.6 - - 7.2 5 .6
Capital grants and contributions 15.4 13.6 3 .9 - 19.3 1 3.6
General revenues:
Property taxes 4 0.9 34.6 - - 40.9 3 4.6
Sales taxes 1 5.9 15.4 - - 15.9 1 5.4
Property transfer taxes 9.0 7.3 - - 9.0 7 .3
Other taxes 6 .8 7.9 - - 6.8 7 .9
Franchise fees 2 .2 1.9 - - 2.2 1 .9
Motor vehicle in lieu fees 2 .2 4.5 - - 2.2 4 .5
Other 4 .9 2.1 1.1 0.8 6.0 2 .9
Total revenues 120.5 108.5 24.6 20.2 145.1 1 28.7
Expenses:
General government 9 .5 9.0 - - 9.5 9 .0
Community development 1 2.3 18.0 - - 12.3 1 8.0
Public safety 4 1.7 33.7 - - 41.7 3 3.7
Public works 1 3.7 18.7 - - 13.7 1 8.7
Parks and recreation 1 2.1 11.3 - - 12.1 1 1.3
Library 4 .8 4.6 - - 4.8 4 .6
Interest on long term debt 6 .9 8.1 - - 6.9 8 .1
Sewer - - 16.3 15.5 16.3 1 5.5
Golf - - 2.9 3.0 2.9 3 .0
Total expenses 1 01.0 103.4 19.2 18.5 120.2 1 21.9
Increase in net assets 19.5 5 .1 5.4 1.7 24.9 6 .8
Net assets - Beginning of fiscal year 3 24.6 324.6 78.6 76.9 408.3 4 01.5
Net assets - Ending of fiscal year $ 3 44.1 $ 3 29.7 $ 8 4.0 $ 7 8.6 $ 433.2 $ 408.3
Governmental activities Business- Type activities Total
8
• Charges for services are primarily fees for recreation, building, fire, planning, engineering, sewer,
and golf services
• Operating and capital grants and contributions include Federal and State grants and other
governments and private contributions including impact fees. Capital grants and contributions
increased by $ 5.7M due to donations for the new main library and to contributions from local
agencies for the Waste Water Treatment Plant Phase II project.
• Property taxes include the general, voter- approved debt service, and the redevelopment property
taxes. Property tax revenue increased by $ 6.3M due to receipts of a property taxes in lieu of motor
vehicles and due to increases in assessed values and in ERAF receipts.
• Other taxes include mainly hotel, business, property transfer, and gas taxes. Property transfer tax
revenue increased by $ 1.7M due to significant one time transfers.
• General government expenses include City Council, City Clerk, City Manager, City Attorney,
Human Resources, Finance, and Information Technology departments, and the general liability
insurance.
• Community Development expenses include planning, building, housing, neighborhood
improvements, code enforcement, economic development, and the Redevelopment Agency
( including capital expenditure). Community Development expenses decreased by $ 5.7M due to
non- recurring payments paid for County projects in the prior year.
• Public Safety expenses cover Police and Fire services. Increases in Public Safety expenses were due
to increases in compensation, benefits, and capital expenses.
• Public Works expenses are for engineering, streets, streetlights, and traffic signals operations and
maintenance. Public Works expenses decreased by $ 5M due to non- recurring landfill closure
expenses paid in the prior year.
• 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’ net assets increased by $ 5.4M. The sewer and golf
enterprise activities are fully supported by fees. Their expenses include indirect costs and in lieu fees of
$ 1.8M charged by the general fund for support and general City services.
Revenues by Source - Business-type
Activities
Charges
for
services
79%
Other
21%
Expenses by Function - Business- type
Activities
Golf
15%
Sewer
85%
9
IV. Financial Analysis of the Funds
Governmental Funds. The focus of the 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 fiscal year, the City’s governmental funds, including the general, special revenue, debt
service, capital projects, and Redevelopment funds, reported combined ending fund balances of $ 114M, a
decrease of $ 7M in comparison with the prior year. Approximately $ 69M is available for spending at the
government's discretion on operating and capital activities ( of which $ 12M is in the general fund), and
$ 33M is available for and committed to the capital projects ( unreserved fund balance) both of which are
subject to restrictions relating to 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 2) to pay debt service, and 3)
property held for resale.
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 $ 11.6M, while total fund balance was $ 12.2M. 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 17 percent of total general fund
expenditures, while total fund balance represents 18 percent of that same amount.
The general fund balance increased by $ 1.8M during the current fiscal year.
The Redevelopment fund has a total fund balance of $ 49.9M, most of which is reserved for capital projects
and debt service. The net decrease in fund balance during the current year was $ 7.7M, primarily due to
expenditures of $ 11M on capital projects.
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 $ 19.4M. The golf fund had a
deficit unrestricted net assets of $ 0.1. The net assets of the Sewer Fund increased by $ 5.8M. The Golf Fund’s
net assets decreased by $ 0.3M. 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 condition improved during the year. The revenues came in at $ 73.3M, better than the
budget by $ 7.8M. Approximately $ 5.5M of the variance was due to one time funds in excess of the budget
received from property transfer tax caused by several large transactions, early repayment of a loan by the
State ( known as VLF backfill loan), and refunds from ERAF ( Educational Revenue Augmentation Fund).
The additional revenues were used to supplement capital improvement program funding by $ 3.2M in 2005-
06, additions to reserves of $ 3.3M, and with the balance carried over into 2006- 07 to help fund certain
limited term programs.
The expenditures overall came under the budget by $ 0.6M net. The fiscal year 2005- 06 was a tight budget
year and as a result some departments’ expenditures marginally exceeded the budget. This was caused
primarily by some police programs that had been underfunded in the budget, and the preparation for
operations of the much larger New Main Library that opened in August 2006.
10
The emergency reserve was increased from $ 4M to $ 7.3M. This together with the service stability reserve of
$ 2.35M bring the General Fund reserves to a total of $ 9.65M, representing 53 days of expenditure versus 37
days in the prior year.
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, 2006, amounts to $ 448M ( 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 $ 38M or 9% ( a 7.6% increase for
governmental activities and a 14.9% increase for business- type activities).
Major Capital asset activity during the current fiscal year included the following: New Main Library
$ 24.9M, Waste Water Treatment Plant Expansion Phase II $ 13.2M, Shoreline Park Development Project
$ 6.5M, Street Reconstruction & Rehab $ 4.2M, Storm Sewer Improvements $ 1.6M, New Police Station $ 1.4M,
3rd and 4th Ave. Streetscape $ 1.1M, and Marina Lagoon $ 1.1M.
City of San Mateo
Capital Assets
( Amounts expressed in millions)
05- 06 04- 05 05- 06 04- 05 05- 06 04- 05
Non- depreciable assets:
Land $ 42.4 $ 42.4 $ 4.2 $ 4 .2 $ 46.6 $ 46.6
Construction in progress 59.3 38.7 29.0 19.2 88.3 57.9
Total non- depreciable assets 101.7 81.1 33.2 23.4 134.9 104.5
Depreciable assets ( net of depreciation):
Building and improvements 19.9 19.6 9.3 9.7 29.2 29.3
Treatment plant & transmission lines 0.0 0.0 64.4 59.8 64.4 59.8
Machinery and equipment 8.8 9.4 0.7 0.7 9.5 10.1
Infrastructure 209.6 205.8 0.0 0.0 209.6 205.8
Total depreciable assets ( net) 238.3 234.8 74.4 70.2 312.7 305.0
Total capital assets $ 340.0 $ 3 15.9 $ 107.6 $ 93.6 $ 447.6 $ 409.5
Government activities Business- Type activities Total
Additional information on the City of San Mateo’s capital assets can be found in Note 7 on pages 58- 60 of
this report.
Long- term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $ 191M.
Of this amount, $ 36M comprises debt backed by the full faith and credit of the City. The remainder of the
debt represents bonds secured by specified revenue sources; i. e., the Redevelopment Agency tax
increments, and sewer and golf revenues.
11
CITY OF SAN MATEO
OUTSTANDING DEBT
General Obligation and Revenue Bonds
( Including Redevelopment)
( In Millions)
Governmental Activities Business- type Activities Total
2006 2005 2006 2005 2006 2005
General obligation bonds $ 36.21 $ 37.28 0 0 36.21 37.28
Revenue Bonds 103.37 104.89 $ 52.00 $ 53.19 155.37 158.08
Total $ 139.58 $ 142.17 $ 52.00 $ 53.19 $ 191.58 $ 195.36
The City’s total debt decreased by $ 3.78M ( 2.0%) during the current fiscal year. The decrease was due to
regular periodic payments of principal
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 up to 15 percent
of its total assessed valuation. The current debt limitation for the City is $ 2 billion and at June 30, 2006 the
City was only at 1.7% of its legal debt limit. Additional information on the City of San Mateo long- term debt
can be found in Note 8 on page 61 of this report.
VII. Economic Factors and Next Year's Budget
The economy at the national, state, and local levels continue to grow, but at a slow pace. The California
economy is starting to show strains from the housing slowdown. However, the lack of housing supply in
San Mateo provides a buffer in home price declines. Additionally, the local economy has steadied from a
slump in the high tech industry that started in 2000 and continues to grow at a gradual pace.
The City has a diverse economic base that includes residential, retail, and commercial assets. Due to the
slow local business climate, the revenue from sales tax is not expected to increase significantly. However,
the historically stable residential real estate market is expected to contribute to the continued growth in
property tax revenues and maintain the healthy level of revenue from property transfer tax.
We have adopted a balanced budget for the 2006- 07 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.
12
BASIC
FINANCIAL STATEMENTS
13
14
GOVERNMENT- WIDE
FINANCIAL STATEMENTS
15
16
City of San Mateo
Statement of Net Assets
June 30, 2006
Governmental Business- Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments $ 103,449,727 $ 1 3,773,325 $ 117,223,052
Restricted cash and investments with fiscal agents 33,188,158 14,912,475 4 8,100,633
Accounts receivable 1,438,680 1 ,525,336 2,964,016
Interest receivable 1 ,517,892 1 75,900 1,693,792
Taxes receivable 4,451,872 - 4,451,872
Prepaids and supplies 630,932 9 9,405 730,337
Interfund balances 1 47,362 ( 147,362) -
Property held for resale 6,810,498 - 6 ,810,498
Total current assets 151,635,121 3 0,339,079 181,974,200
Noncurrent assets:
Deferred charges 1,097,200 7 33,567 1,830,767
Loans and notes receivable, net 33,941,419 - 3 3,941,419
Capital assets:
Non- depreciable 1 01,720,891 3 3,226,066 134,946,957
Depreciable, net 2 38,344,412 7 4,364,834 312,709,246
Total capital asset 3 40,065,303 107,590,900 447,656,203
Total noncurrent assets 375,103,922 108,324,467 483,428,389
Total assets 5 26,739,043 138,663,546 665,402,589
LIABILITIES
Current liabilities:
Accounts payable 6 ,863,955 516,631 7,380,586
Interest payable 2,851,691 1,060,628 3 ,912,319
Retentions payable 3 ,928,996 - 3,928,996
Accrued salaries and wages payable 2 ,021,258 193,878 2,215,136
Deposits payable 4 ,642,034 2 73,410 4,915,444
Deferred revenue ( unearned) 7 31,884 - 731,884
Claims and judgments payable - due within one year 1,500,000 - 1 ,500,000
Landfill postclosure cost payable - due within one year 125,000 - 125,000
Vacation and sick leave payable - due within one year 351,000 3 9,000 390,000
Bonds payable - due within one year 3,325,000 1 ,345,000 4,670,000
Total current liabilities 2 6,340,818 3 ,428,547 2 9,769,365
Noncurrent liabilities:
Claims and judgments payable - due in more than one year 6,100,000 - 6 ,100,000
Landfill postclosure costs payable - due in more than one year 3,625,000 - 3,625,000
Vacation and sick leave payable - due in more than one year 4,052,062 501,286 4,553,348
HELP loan payable 1 ,200,000 - 1,200,000
Bonds payable - due in more than one year, net 1 36,257,407 5 0,658,756 186,916,163
Total noncurrent liabilities 1 51,234,469 5 1,160,042 2 02,394,511
Total liabilities 1 77,575,287 5 4,588,589 232,163,876
NET ASSETS
Invested in capital assets, net of related debt 2 53,801,385 4 7,346,978 301,148,363
Restricted for:
Capital projects 50,972,267 13,477,120 6 4,449,387
Debt service 10,910,970 3 ,306,859 1 4,217,829
Special projects 6,965,989 6 62,196 7,628,185
Total restricted 68,849,226 17,446,175 8 6,295,401
Unrestricted 26,513,145 19,281,804 4 5,794,949
$ 3 49,163,756 $ 8 4,074,957 $ 433,238,713
See accompanying Notes to Basic Financial Statements.
Primary Government
Total net assets
17
City of San Mateo
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2006
Operating Capital
Charges for Grants and Grants and
Functions/ Programs Expenses Services Contributions Contributions Total
Primary Government:
Governmental activities:
General government $ 9,485,772 $ 2,609,976 $ 118,102 $ - $ 2,728,078
Community development 12,333,880 3,073,993 2,857,186 23,897 5,955,076
Public safety 41,648,116 3,876,421 673,517 11,488 4,561,426
Public works 13,682,357 3,305,192 3,424,008 2,312,299 9,041,499
Parks and recreation 12,123,125 2,802,519 - 2,081,027 4,883,546
Library 4,819,650 319,088 133,089 10,954,274 11,406,451
Interest on long- term debt 6,897,570 - - - -
Total governmental activities 100,990,470 15,987,189 7,205,902 15,382,985 38,576,076
Business- type activities:
Sewer 16,280,226 17,023,153 - 3,984,520 21,007,673
Golf 2,954,403 2,578,255 - - 2,578,255
Total business- type activities 19,234,629 19,601,408 - 3,984,520 23,585,928
Total primary government $ 120,225,099 $ 35,588,597 $ 7,205,902 $ 19,367,505 $ 62,162,004
General Revenues:
Taxes:
Property taxes
Sales taxes
Property transfer taxes
Transient occupancy taxes
Business license taxes
Other taxes
Franchise taxes
Unrestricted motor vehicle taxes
Total taxes
Investment earnings
Loss on sale of assets
Total general revenues
Change in net assets
Net assets - beginning of year
Net assets - end of year
See accompanying Notes to Basic Financial Statements.
Program Revenues
18
Governmental Business- Type
Activities Activities Total
$ ( 6,757,694) $ - $ ( 6,757,694)
( 6,378,804) - ( 6,378,804)
( 37,086,690) - ( 37,086,690)
( 4,640,858) - ( 4,640,858)
( 7,239,579) - ( 7,239,579)
6,586,801 - 6,586,801
( 6,897,570) - ( 6,897,570)
( 62,414,394) - ( 62,414,394)
- 4,727,447 4,727,447
- ( 376,148) ( 376,148)
- 4,351,299 4,351,299
( 62,414,394) 4,351,299 ( 58,063,095)
40,871,277 - 40,871,277
15,905,701 - 15,905,701
9,006,399 - 9,006,399
3,222,162 - 3,222,162
3,015,203 - 3,015,203
550,033 - 550,033
2,167,952 - 2,167,952
2,182,069 - 2,182,069
76,920,796 - 76,920,796
4,973,233 1,131,240 6,104,473
( 26,625) - ( 26,625)
81,867,404 1,131,240 82,998,644
19,453,010 5,482,539 24,935,549
329,710,746 78,592,418 408,303,164
$ 349,163,756 $ 84,074,957 $ 433,238,713
$ 84,074,957
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 governmental which are not required
legally or by sound financial management to be accounted for in another fund.
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, measure A ( half cent sales
tax), developer impact fees and transfers from other governmental funds.
Redevelopment Capital Projects Fund accounts for 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.
Redevelopment Special Revenue Fund accounts for the revenue and expenditures of the Agency's low and
moderate income housing activity. Use of funds is restricted by law.
Redevelopment Debt Service Fund accounts for tax increment revenues used to pay principal and interest on
general long- term debt and pass thru payments of the Agency.
City Housing Special Revenue Fund accounts for revenues from a former Federal Rental Rehabilitation
program and loan payments from the First Time Homebuyer program.
Non- Major Governmental Funds is the aggregate of all the non- major governmental funds.
23
City of San Mateo
Balance Sheet
Governmental Funds
June 30, 2006
General Redevelopment Redevelopment
General Capital Projects Capital Projects Special Revenue
ASSETS
Cash and investments $ 14,635,935 $ 37,719,680 $ 1,966,563 $ 9,843,634
Restricted cash and investments held by fiscal agents - 4,461,522 19,638,494 4,130,693
Accounts receivable 312,853 785,559 - -
Interest receivable 1,251,892 10,000 204,000 40,000
Taxes receivable 3,846,314 - - -
Due from other funds 247,681 - - -
Prepaids and supplies 346,683 - - -
Property held for resale - - 6,810,498 -
Loans and notes receivable - - 285,689 24,946,023
Total assets $ 20,641,358 $ 42,976,761 $ 28,905,244 $ 38,960,350
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 1,393,038 $ 3,849,198 $ 29,576 $ 31,779
Retention payable - 3,928,996 - -
Accrued salaries and wages payable 1,734,712 72,292 - 12,546
Due to other funds - - - -
Deposits payable 4,632,146 - - -
Deferred revenue 723,499 - 285,689 24,946,023
Total liabilities 8,483,395 7,850,486 315,265 24,990,348
Fund Balances: ( Note 9)
Reserved 563,082 25,205,060 26,490,340 4,734,345
Unreserved, designated, reported in:
General Fund 11,570,000 - - -
Special revenue funds - - - 9,043,920
Debt service funds - - - -
Capital projects funds - 9,921,215 1,540,689 -
Unreserved, undesignated, reported in:
General Fund 24,881 - - -
Special revenue funds - - - 191,737
Capital projects fund - - 558,950 -
Total fund balances 12,157,963 35,126,275 28,589,979 13,970,002
Total liabilities and fund balances $ 20,641,358 $ 42,976,761 $ 28,905,244 $ 38,960,350
See accompanying Notes to Basic Financial Statements.
Major Funds
24
City Non- Major Total
Redevelopment Housing Governmental Governmental
Debt Service Special Revenue Funds Funds
$ 3,407,389 $ 413,166 $ 15,244,477 $ 83,230,844
3,936,052 - 1,021,397 33,188,158
- - 340,268 1,438,680
- - 12,000 1,517,892
- - 605,558 4,451,872
- - - 247,681
- - - 346,683
- - - 6,810,498
- 6,872,815 7,660,571 39,765,098
$ 7,343,441 $ 7,285,981 $ 24,884,271 $ 170,997,406
$ 21,441 $ 31,794 $ 195,210 $ 5,552,036
- - - 3,928,996
- - 168,079 1,987,629
- - 100,319 100,319
- - - 4,632,146
- 6,872,815 7,668,956 40,496,982
21,441 6,904,609 8,132,564 56,698,108
7,322,000 11,308 4,363,806 68,689,941
- - - 11,570,000
- 370,064 5,096,074 14,510,058
- - 721,970 721,970
- - 828,000 12,289,904
- - - 24,881
- - 5,741,857 5,933,594
- - - 558,950
7,322,000 381,372 16,751,707 114,299,298
$ 7,343,441 $ 7,285,981 $ 24,884,271 $ 170,997,406
Major Funds
25
26
City of San Mateo
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2006
Total Fund Balances - Total Governmental Funds $ 114,299,298
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 $ 101,720,891 $ - 101,720,891
Depreciable, net 238,344,412 ( 3,256,984) 235,087,428
Total capital assets $ 340,065,303 $ ( 3,256,984) 336,808,319
Deferred revenue recorded in the Fund Financial statements resulting from activities in
which revenues were earned but funds were not available are reclassified as revenues in the
Government- Wide Financial Statements. 33,485,844
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. ( 2,851,691)
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: 15,260,255
Deferred charges on issuance of long- term debt were not current financial resources.
Therefore, they were not reported in the Governmental Funds Balance Sheet. This amount
is to be amortized over the life of the long- term debt. 1,097,200
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 ( 125,000) - ( 125,000)
Vacation and sick leave payable - due within one year ( 351,000) - ( 351,000)
Bonds payable - due within one year ( 3,325,000) - ( 3,325,000)
Long term liabilities - due in more than one year ( 151,234,469) 6,100,000 ( 145,134,469)
Total long- term liabilities $ ( 156,535,469) $ 7,600,000 ( 148,935,469)
Net Assets of Governmental Activities $ 349,163,756
See accompanying Notes to Basic Financial Statements. 3 49,163,756
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, 2006
General Redevelopment Redevelopment
General Capital Projects Capital Projects Special Revenue
REVENUES:
Property taxes $ 2 7,034,392 $ - $ - $ 2,156,731
Sales taxes 16,141,282 1,581,558 - -
Other taxes 1 5,149,365 - - -
Licenses, building and other permits 2,167,952 - - -
Fines, forfeitures and penalties 2 ,097,422 1 1,488 - -
Intergovernmental 2,550,872 9,997,018 - -
Charges for services 5,236,515 9 ,837 - -
Investment income 1,289,043 3 96,956 961,530 631,074
Indirect and in- lieu fees - 1,189,177 - -
Garbage collection surcharge - 5,002 - -
Parking meter and lease revenue - - - -
Impact fees - 607,213 - -
Other revenues 1 ,678,628 3,509,868 8 0,631 277,456
Total revenues 73,345,471 17,308,117 1,042,161 3,065,261
EXPENDITURES:
Current:
General government:
City Council 336,172 - - -
City Manager 903,015 - - -
City Clerk 4 24,546 - - -
City Attorney 7 76,252 - - -
Business services 2,178,248 - - -
Information technology 2,624,373 - - -
Human resources 1,283,975 - - -
Community development 795,517 - 853,105 783,210
Public safety:
Police 23,586,434 - 434,491 -
Fire 1 4,633,777 - - -
Public works 3,768,514 - - -
Parks and recreation 10,282,039 - - -
Library 4,679,854 - - -
Non- departmental 7 00,054 - - -
Capital outlay - 26,717,211 11,022,000 148,777
Debt service:
Principal - - - 170,000
Interest and fiscal charges - - - 324,130
Total expenditures 66,972,770 26,717,211 12,309,596 1,426,117
REVENUES OVER ( UNDER) EXPENDITURES 6,372,701 ( 9,409,094) ( 11,267,435) 1 ,639,144
OTHER FINANCING SOURCES ( USES):
Transfers in 1,515,000 6 ,199,441 2,055,981 -
Transfers out ( 6,085,000) - - -
Total other financing sources ( uses) ( 4,570,000) 6,199,441 2 ,055,981 -
Net change in fund balances 1,802,701 ( 3,209,653) ( 9,211,454) 1,639,144
FUND BALANCES:
Beginning of year 10,355,262 38,335,928 37,801,433 1 2,330,858
End of year $ 1 2,157,963 $ 35,126,275 $ 28,589,979 $ 1 3,970,002
See accompanying Notes to Basic Financial Statements.
Major Funds
28
City Non- Major Total
Redevelopment Housing Governmental Governmental
Debt Service Special Revenue Funds Funds
$ 8,626,925 $ - $ 3,053,229 $ 40,871,277
- - - 17,722,840
- - 644,432 15,793,797
- - 4,192,039 6 ,359,991
- - 3,284 2,112,194
- - 3,133,024 15,680,914
- - 750,546 5 ,996,898
437,187 9,301 581,806 4,306,897
- - - 1,189,177
- - 1,033,445 1,038,447
- - 1,631,695 1,631,695
- - - 607,213
- 66,961 861,837 6,475,381
9,064,112 76,262 1 5,885,337 119,786,721
- - - 336,172
- - - 903,015
- - - 424,546
- - - 776,252
- - - 2,178,248
- - 45,845 2,670,218
- - - 1,283,975
- 248,598 4 ,351,959 7 ,032,389
- - 728,291 24,749,216
- - 1,469,686 16,103,463
- - 2,088,745 5 ,857,259
- - - 10,282,039
- - - 4,679,854
2,357,456 - - 3,057,510
- - 8,067 37,896,055
1,220,000 - 1,195,000 2 ,585,000
3,578,741 - 2,190,446 6 ,093,317
7,156,197 248,598 12,078,039 126,908,528
1,907,915 ( 172,336) 3,807,298 ( 7,121,807)
- - 297,859 10,068,281
( 2,055,981) - ( 2,227,300) ( 10,368,281)
( 2,055,981) - ( 1,929,441) ( 300,000)
( 148,066) ( 172,336) 1,877,857 ( 7,421,807)
7,470,066 553,708 14,873,850 121,721,105
$ 7,322,000 $ 381,372 $ 16,751,707 $ 114,299,298
Major Funds
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, 2006
Net Change in Fund Balances - Total Governmental Funds $ ( 7,421,807)
Capital Outlay
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. $ 3 7,896,055 $ ( 3,618,680) 34,277,375
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. $ ( 10,594,028) $ ( 683,284) ( 9,910,744)
Accrued vacation and sick leave payable was an expenditure in governmental funds, but
the accrued payable increased vacation and sick leave liabilities in the Government- Wide
Statement of Net Assets. ( 458,831)
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. 618,500
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. 2,585,000
Revenues that have not met the revenue recognition criteria in the Fund Financial
statements are recognized as revenue in the Government- Wide Financial Statements. 17,048
Loans and notes receivable were recorded at gross amounts in the Fund Financial
statements. However, in the Government- Wide Financial Statement an estimated
amount for allowance for potential forgiveness has been expensed. The following
amount represented the current year amount for allowance for potential forgiveness. ( 213,432)
Cost of issuance was an expenditure in governmental funds, but in the Government- Wide
Statement of Net Assets, an asset, deferred charges was recorded and is being amortized
over the life of the bond. This amount is the current year amortization expense. ( 42,200)
Government-
Wide Statement
of Net Assets
Internal Service
Funds
Loss on the sale of capital assets was reported in the Government- Wide Statement of
Activities and Changes in Net Assets, but they were not reported as expenditures in
governmental funds. ( 26,625) ( 14,666) ( 11,959)
Payment of long- term debt premium was recorded as an expenditure in governmental
funds, but the payment increased long- term liabilities in the Government- Wide Statement
of Net Assets. 4,230
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 from prior year. ( 762,053)
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. 771,883
Change in Net Assets of Governmental Activities $ 19,453,010
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:
Repairs and
Maintenance
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 Poplar Creek 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, 2006
Governmental
Activities
Internal
Sewer Golf Total Service Funds
ASSETS
Current assets:
Cash and investments $ 1 3,772,865 $ 4 60 $ 1 3,773,325 $ 2 0,218,883
Restricted cash and investments with fiscal agents 1 4,175,330 7 37,145 1 4,912,475 -
Accounts receivable 1 ,505,902 1 9,434 1 ,525,336 -
Interest receivable 1 55,000 2 0,900 1 75,900 -
Prepaids and supplies - 9 9,405 9 9,405 2 84,249
Total current assets 2 9,609,097 8 77,344 3 0,486,441 2 0,503,132
Noncurrent assets:
Deferred charges 7 33,567 - 7 33,567 -
Loans and notes receivable - - - 4 55,575
Capital assets:
Non- depreciable 3 2,982,066 2 44,000 3 3,226,066 -
Depreciable, net 6 4,966,535 9 ,398,299 7 4,364,834 3 ,256,984
Total capital assets 9 7,948,601 9 ,642,299 1 07,590,900 3 ,256,984
Total noncurrent assets 9 8,682,168 9 ,642,299 1 08,324,467 3 ,712,559
Total assets 1 28,291,265 1 0,519,643 1 38,810,908 2 4,215,691
LIABILITIES
Current liabilities:
Accounts payable 481,242 3 5,389 5 16,631 1 ,311,919
Interest payable 8 45,723 2 14,905 1 ,060,628 -
Accrued salaries and wages payable 163,075 3 0,803 1 93,878 3 3,629
Deposits payable 2 73,410 - 2 73,410 9 ,888
Due to other fund - 1 47,362 1 47,362 -
Claims and judgments payable - due within one year - - - 1 ,500,000
Vacation and sick leave payable - due within one year 3 3,540 5 ,460 3 9,000 -
Bonds payable - due within one year 1 ,145,000 2 00,000 1 ,345,000 -
Total current liabilities 2 ,941,990 633,919 3,575,909 2 ,855,436
Noncurrent liabilities:
Claims and judgments payable - due in more than one year - - - 6 ,100,000
Vacation and sick leave payable - due in more than one year 4 31,056 70,230 5 01,286 -
Bonds payable - due in more than one year 41,278,340 9 ,380,416 50,658,756 -
Total noncurrent liabilities 4 1,709,396 9,450,646 5 1,160,042 6,100,000
Total liabilities 4 4,651,386 10,084,565 54,735,951 8,955,436
NET ASSETS
Invested in capital assets, net of related debt 47,500,000 ( 153,022) 47,346,978 3 ,256,984
Restricted for:
Special projects 662,196 - 6 62,196 1 ,417,038
Capital projects 13,477,120 - 13,477,120 -
Debt service 2,569,714 737,145 3,306,859 -
Unrestricted 1 9,430,849 ( 149,045) 19,281,804 10,586,233
Total net assets $ 8 3,639,879 $ 4 35,078 $ 8 4,074,957 $ 1 5,260,255
See accompanying Notes to Basic Financial Statements. - - - -
Enterprise Funds
32
City of San Mateo
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
For the year ended June 30, 2006
Governmental
Activities
Internal
Sewer Golf Total Service Funds
OPERATING REVENUES:
Charges for services $ 1 6,684,419 $ 2 ,310,981 $ 1 8,995,400 $ 2 5,087,306
Connection fees 2 44,453 - 2 44,453 -
Impact fees 4 8,089 - 4 8,089 -
Other 4 6,192 2 67,274 3 13,466 2 16,490
Total operating revenues 1 7,023,153 2 ,578,255 1 9,601,408 2 5,303,796
OPERATING EXPENSES:
Costs of sales and services 1 0,816,620 1 ,363,891 1 2,180,511 2 4,495,082
Administration 7 33,250 6 65,710 1 ,398,960 3 05,217
Depreciation and amortization 3 ,106,634 4 04,546 3 ,511,180 6 83,284
Total operating expenses 1 4,656,504 2 ,434,147 1 7,090,651 2 5,483,583
OPERATING INCOME ( LOSS) 2 ,366,649 1 44,108 2 ,510,757 ( 179,787)
NONOPERATING REVENUES ( EXPENSES):
Interest income 1 ,100,334 3 0,906 1 ,131,240 6 66,336
Loss from disposal of capital assets ( 717,865) - ( 717,865) ( 14,666)
Interest expense and fiscal charges ( 905,857) ( 520,256) ( 1,426,113) -
Total nonoperating revenues ( expenses) ( 523,388) ( 489,350) ( 1,012,738) 6 51,670
INCOME ( LOSS) BEFORE TRANSFERS 1 ,843,261 ( 345,242) 1 ,498,019 4 71,883
Capital contribution 3 ,984,520 - 3 ,984,520 -
Transfers in - - - 3 00,000
Total transfers in and capital contributions 3 ,984,520 - 3 ,984,520 3 00,000
Change in net assets 5 ,827,781 ( 345,242) 5 ,482,539 7 71,883
NET ASSETS:
Beginning of year 7 7,812,098 7 80,320 7 8,592,418 1 4,488,372
End of year $ 8 3,639,879 $ 4 35,078 $ 8 4,074,957 $ 1 5,260,255
$ 8 3,639,879 $ 4 35,078 $ 8 4,074,957 $ 1 5,260,255
$ - $ - $ - $ -
See accompanying Notes to Basic Financial Statements.
Enterprise Funds
33
City of San Mateo
Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2006
Governmental
Activities
Internal
Sewer Golf Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 16,519,738 $ 2,318,624 $ 18,838,362 $ 25,093,386
Cash payments to suppliers for goods and services ( 11,797,951) ( 1,451,860) ( 13,249,811) ( 24,584,823)
Cash paid to employees ( 661,145) ( 655,576) ( 1,316,721) ( 303,612)
Cash received from ( payments to) others 46,192 387,367 433,559 857,490
Net cash provided ( used) by operating activities 4,106,834 598,555 4,705,389 1,062,441
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers in - - - 300,000
Net cash provided by noncapital financing activities - - - 300,000
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition of capital assets ( 14,099,952) - ( 14,099,952) ( 480,262)
Long- term debt repayment ( 47,257) ( 101,642) ( 148,899) -
Interest expense and fiscal charges ( 1,036,857) ( 523,802) ( 1,560,659) -
Net cash provided ( used) by capital and related financing activities ( 15,184,066) ( 625,444) ( 15,809,510) ( 480,262)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income received 1,089,334 30,906 1,120,240 666,336
Net cash provided ( used) by investing activities 1,089,334 30,906 1,120,240 666,336
NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS ( 9,987,898) 4,017 ( 9,983,881) 1,548,515
CASH AND CASH EQUIVALENTS - Beginning of year 37,936,093 737,362 38,673,455 18,670,368
CASH AND CASH EQUIVALENTS - End of year $ 27,948,195 $ 741,379 $ 28,689,574 $ 20,218,883
FINANCIAL STATEMENT PRESENTATION:
Cash and investments $ 13,772,865 $ 460 $ 13,773,325 $ 20,218,883
Restricted cash and investments with fiscal agents 14,175,330 737,145 14,912,475 -
Total $ 27,948,195 $ 737,605 $ 28,685,800 $ 20,218,883
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income ( loss) $ 2,366,649 $ 144,108 $ 2,510,757 $ ( 179,787)
Adjustments to reconcile operating income ( loss)
to net cash provided ( used) by operating activities:
Depreciation and amortization 3,106,634 404,546 3,511,180 683,284
Changes in assets and liabilities:
Accounts receivable ( 685,884) 7,643 ( 678,241) 6,080
Deferred charges ( 886,367) ( 79,584) ( 965,951) 1,207
Accounts payable ( 94,964) ( 8,385) ( 103,349) ( 90,948)
Accrued salaries and wages payable 25,788 3,412 29,200 1,605
Deposits payable 228,661 - 228,661 -
Due to other fund - 120,093 120,093 -
Claims and judgments payable - - - 641,000
Vacation and sick leave payable 46,317 6,722 53,039 -
Total adjustments 1,740,185 454,447 2,194,632 1,242,228
Net cash provided ( used) by operating activities $ 4,106,834 $ 598,555 $ 4,705,389 $ 1,062,441
NON- CASH ACTIVITIES:
Loss from disposal of capital assets $ ( 717,865) $ - $ ( 717,865) $ ( 14,666)
Capital contribution 3,984,520 - 3,984,520 -
See accompanying Notes to Basic Financial Statements.
Enterprise Funds
34
35
NOTES TO BASIC
FINANCIAL STATEMENTS
City of San Mateo
Notes to Basic Financial Statements
For the year ended June 30, 2006
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, 2006
37
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Government- Wide Financial Statements
The City’s Government- Wide Financial Statements include 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.
These 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 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
• 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, 2006
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.
The City reports the General Fund, Redevelopment Agency Fund, City Housing Special Revenue Fund
and General Projects Capital Projects Fund as major governmental funds of the City.
General Fund accounts for resources traditionally associated with governmental activities which
are not required legally or by sound financial management to be accounted for in another fund.
General 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, Measure A ( half cent sales tax), developer impact fees and transfers from other
governmental funds.
Redevelopment Capital Projects Fund accounts for 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.
Redevelopment Special Revenue Fund accounts for revenue and expenditures of the Agency’s low
and moderate income housing activity. Use of funds is restricted by law.
Redevelopment Debt Service Fund accounts for tax increment revenues used to pay principal and
interest on genera long- term debt and pass thru payments of the Agency.
City Housing Special Revenue Fund accounts for revenues from a former Federal Rental
Rehabilitation program and loan payments from the Fist Time Homebuyer program.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
39
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
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.
A 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.
The City reports the Sewer, Golf and Internal Service Funds as proprietary funds of the City.
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 Poplar Creek Golf Course, which provides
recreational facilities to the public.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
40
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Internal service fund balances and activities have been combined with governmental activities in the
government- wide financial statements, and are comprised of the following funds:
Workers’ Compensation Insurance Fund accounts for all workers’ compensation self- insurance
activities.
Dental Self- Insurance Fund accounts for the City’s self- insurance activities related to the dental
plan it provides to its employees.
Benefits Fund accounts for charges for other funds and expenditures relating to employee
benefits other than those accounted for in the Workers’ Compensation and Dental Self-
Insurance Funds.
Comprehensive Liability Insurance Fund accounts for the general liability self- insurance
transactions.
Vehicle and Equipment Replacement Fund accounts for rental charges to the City departments and
the replacement of vehicles and equipment.
Fleet and Building Maintenance Fund accounts for the charges to users departments and the
expenses relating the maintenance of the City vehicles and buildings.
Fiduciary Fund Financial Statements
The City has no fiduciary funds.
C. Cash, Cash Equivalents and Investments
The City pools cash resources of its various funds to facilitate cash management. Cash in excess of
current requirements is invested and reported as investments. It is the City’s intent to hold current
investments until maturity. However, the City may, in response to market conditions, sell investments
prior to maturity in order to improve the quality, liquidity or yield of the portfolio. Interest earnings are
apportioned among funds based on ending accounting period cash and investment balances.
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and highly
liquid investments with original maturity of three months or less from the date of acquisition.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB No.
3), certain disclosure requirements for Deposits and Investment Risks were made in the following areas:
􀂃 Interest Rate Risk
􀂃 Credit Risk
􀂉 Overall
􀂉 Custodial Credit Risk
􀂉 Concentrations of Credit Risk
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
41
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
C. Cash, Cash Equivalents and Investments, Continued
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year- end and other disclosures.
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 the Local Agency Investment Fund ( LAIF), an investment pool managed by the
State of California. LAIF 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 a result of changes 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. Supplies in the General Fund consist 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 supplies
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.
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 of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
42
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
G. Capital Assets, Continued
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 - 35 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 infrastructures 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.
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, 2002. 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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
43
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 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, long- term loans receivables, and prepaid
charges for services.
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 governmental 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 as
other financing sources or uses. Bond proceeds are reported as other financing sources.
Proprietary Fund Financial Statements use the same principles as those used in the Government- Wide
Financial Statements.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
44
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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.
M. Net Assets
Government- Wide Financial Statements
In the Government- Wide Financial Statements, net assets are classified in the following categories:
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 – This amount is restricted by external creditors, grantors, contributors, or laws or regulations
of governments.
Unrestricted – 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. Vacation and Sick Leave Payable
For governmental funds, vacation and sick leave payable are recorded as current and non- current
liabilities only on the government- wide financial statements. Vacation and sick leave payable are
payable from the General Fund. For proprietary funds, current and non- current liabilities for vacation
and sick leave payable are recorded as expenses in both the government- wide financial statement and
the fund financial statement.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
45
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
O. 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.
P. 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.
Q. New Pronouncements
In 2006, the City adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statement:
􀂾 GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries – The Statement establishes accounting and financial reporting standards for
impairment of capital assets. A capital asset is considered impaired when its service utility has
declined significantly and unexpectedly. This Statement also clarifies and establishes accounting
requirements for insurance recoveries.
􀂾 Statement No. 44, Economic Condition Reporting: The Statistical Section ( Amendment of NCGA
Statement 1) – The Statement establishes the objectives of the statistical section and the five
categories of information it contains; financial trends information, revenue capacity information,
debt capacity information, demographic and economic information, and operating information.
􀂾 GASB Statement No. 46, Net Assets Restricted by Enabling Legislation – The Statement addresses
selected issues and amends GASB Statement No. 34, Basic Financial Statements and Management's
Discussion and Analysis for State and Local Governments. The Statement enhances the usefulness
and comparability of net asset information and clarifies the meaning of legal enforceability. The
Statement also specified accounting and financial reporting requirements for restricted net
assets.
􀂾 GASB Statement No. 47, Accounting for Termination Benefits – The Statement provides accounting
guidance for state and local governmental employers regarding benefits ( such as early-retirement
incentives and severance benefits) provided to employees that are terminated. The
Statement requires recognition of the cost of involuntary termination benefits in the period in
which a government becomes obligated to provide benefits to terminated employees.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
46
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. Deposits
The carrying amount of the City’s cash deposit was a negative amount of $ 225,329 at June 30, 2006. Bank
balances before reconciling items were $ 901,493 at June 30, 2006, 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.
The market value of pledged securities must equal at least 110% of the City’s cash 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. The City may and has waived collateral requirements for cash
deposits, which are fully insured up to $ 100,000 by the Federal Deposit Insurance Corporation.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be
held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and
investments is allocated on an accounting period basis to the various funds based on the period- end cash
and investment balances. Interest income from cash and investments with fiscal agents is credited directly
to the related fund.
B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code,
the following investments are authorized:
Maximum Maximum
Maximum Percentage of Investment in
Authorized Investment Type Maturity Portfolio One Issuer
Securities issued by the U. S. Treasury 5 years No limit No limit
U. S. Agency Securities and Instrumentality 5 years 70% 35% of portfolio
Banker's acceptances 180 days 30% 5% of portfolio
Non- negotiable certificates of deposit 3 years 30% 5% of portfolio
Negotiable certificates of deposit 2 years 30% 5% of portfolio
Repurchase agreements 90 days 10% 5% of portfolio
Local Agency Investment Fund N/ A 65% 65% of portfolio
San Mateo County Pool N/ A 30% 30% of porfolio
Money Market/ Mutual Funds N/ A 20% 20% of portfolio
Prime Commercial Paper 270 days 15% $ 1 million
Mid- term Corporate Notes 5 years 10% $ 1 million
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
47
2. CASH AND INVESTMENTS, Continued
B. Investments, Continued
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 using the aggregate method in all
funds and component units, resulting in the following investment income in all funds and component
units:
Interest income $ 3 ,787,730
Unrealized gain in changes in fair value of investments 4 9,039
Total investment income $ 3 ,836,769
The City portfolio value fluctuates in an inverse relationship to any change in interest rate.
Accordingly, if interest rates have risen, the portfolio value will have declined. If interest rates have
fallen, the portfolio value will have risen. In accordance with GASB Statement No. 31, the portfolio for
year- end reporting purposes is treated as if it were all sold. Therefore, fund balance must reflect the
portfolio’s change in value. These portfolio value changes are unrealized unless sold. The City’s policy
is to buy and hold investments until maturity dates.
The City’s investments are carried at fair value as required by generally accepted accounting principles.
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, 2006, 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.
As of June 30, 2006, the City had $ 17,790,542 invested in LAIF, which had invested 2.567% of the pool
investment funds in Structured Notes and Asset- Backed Securities. The LAIF fair value factor of
0.998185821 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. 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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
48
2. CASH AND INVESTMENTS, Continued
C. Summary of Cash and Investments
The following is a summary of cash and investments at June 30, 2006:
Governmental Business- Type
Activities Activities Total
Cash and investments $ 103,449,727 $ 13,773,325 $ 1 17,223,052
Restricted cash and investments $ 33,188,158 $ 14,912,475 $ 4 8,100,633
Total cash and investments $ 1 65,323,685
Government- Wide Statement of Net Assets
D. Risk Disclosures
Interest Risk: Interest rate risk is the market value fluctuation due to overall changes in the interest rates. It
is mitigated by limiting the average maturity of the City’s portfolio not to exceed three years.
Investments held in the City Treasury grouped by maturity date at June 30, 2006, are shown below:
Investment Type Fair Value 1 year or less 1- 2 years 2- 3 years 3- 4 years 4- 5 years
Deposits $ ( 225,329) $ ( 225,329) $ - $ - $ - $ -
Securities of U. S. Government
Treasury and Agencies:
FFCB 7 ,879,200 5 ,927,800 1 ,951,400 - - -
FHLB 2 4,710,400 1 3,825,200 4 ,970,200 5 ,915,000 - -
FHLMC 1 4,765,700 5 ,949,800 6 ,875,300 - 1 ,940,600 -
FNMA 1 9,765,200 1 0,880,400 4 ,923,600 1 ,981,600 - 1 ,979,600
US Securities 1 7,746,500 1 5,771,600 9 90,800 9 84,100 - -
Money Market 3 ,721,531 3 ,721,531 - - - -
Local Agency Invesments Funds 1 7,790,542 1 7,790,542 - - - -
San Mateo County Pool 9 ,169,308 9 ,169,308 - - - -
Time Deposits 1 ,900,000 1 ,900,000 - - - -
Total $ 1 17,223,052 $ 8 4,710,852 $ 1 9,711,300 $ 8 ,880,700 $ 1 ,940,600 $ 1 ,979,600
Investment Maturities ( in years)
Liquidity Standard: As a means of maintaining liquidity, the City’s investment policy limits are as follows:
Maturity % of Portfolio
Up to six months 25% ( Minimum)
Six months to five years 75% ( Maximum)
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
49
2. CASH AND INVESTMENTS, Continued
D. Risk Disclosures, Continued
Credit Risk. Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a
real or perceived change in the ability of the issuer to repay its debt. According to the City’s investment
policy, no more than 5% of the total portfolio may be invested in securities of any single issuer, other
than the US Government, its agencies and instrumentalities, San Mateo County Pool and LAIF. If a
security is downgraded by either Moody’s or S& P to a level below the minimum quality required by the
City, it shall be the City’s policy to sell that security as soon as practicable.
At June 30, 2006, the City had the following deposits and investments:
Fitch Moody's S& P
Deposits P- 1 A1
Investments:
Time Deposit of Certificates
Securities of U. S. Government Agencies:
FFCB Aaa AAA
FHLB Aaa AAA
FHLMC Aaa AAA
FNMA Aaa AAA
US Treasuries Aaa AAA
Local Agency Investment Funds
San Mateo County Pool AA/ V1+
Money Market Funds Aaa AAA
Credit Quality Ratings
B or better
Not Rated
Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investments or collateral securities that are
in the possession of an outside party. None of the City’s investments were subject to custodial credit risk.
3. INTERFUND TRANSACTIONS
A. Due To/ From Other Funds
At June 30, 2006, the City had the following due to/ from other funds:
General
Due To Other Funds Fund
Non- major Governmental Funds $ 100,319
Golf Enterprise Fund 147,362
Total $ 247,681
Due From Other Funds
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
50
3. INTERFUND TRANSACTIONS, Continued
A. Due To/ From Other Funds, Continued
The amounts due to the general fund from other funds represent reclassified temporary negative cash
balances pending grant reimbursements or other receivables. Current inter- fund 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, 2006, the City had the following transfers in/ out which arise in the normal course of
operations.
General Non- Major
Projects RDA Governmental Internal
General Capital Projects Capital Projects Funds Service Funds Total
Major Funds:
General $ - $ 5 ,785,000 $ - $ - $ 3 00,000 $ 6 ,085,000
RDA Debt Service - - 2 ,055,981 - - 2 ,055,981
Non- major Governmental Funds 1 ,515,000 4 14,441 - 2 97,859 - 2 ,227,300
Total $ 1 ,515,000 $ 6 ,199,441 $ 2 ,055,981 $ 2 97,859 $ 3 00,000 $ 1 0,368,281
Transfers In
Transfers Out
Transfers from the general fund to the capital projects fund represent the general fund funding capital
projects mainly for streets, parks, and building component replacement.
Transfers from the CDBG fund to the capital projects fund are for CDBG eligible projects.
Transfers from gas tax fund to the general fund are for street related expenditures in the general fund.
Transfers from gas tax fund to the capital projects fund are for street related expenditures in the capital
projects fund.
Transfers from the general fund to the internal service funds are for the purpose of bringing the funding
levels in those funds to the policy level.
Transfer from the solid waste fund to the capital projects are for the garbage transfer station.
Transfer from the central parking improvement district fund to the capital projects are for the long
range parking.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
51
4. LOANS AND NOTES RECEIVABLE
A. Government- Wide Financial Statements
At June 30, 2006 the City’s loans and notes receivable consisted of the following:
Loans and notes receivable $ 40,220,673
Allowances for potential forgiveness ( 6,279,254)
Loans and notes receivable, net $ 33,941,419
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 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, 2006 June 30, 2005
Governmental Funds:
First- Time Homebuyer Loans Various $ 1 6,567,851 $ 1 6,345,722
Home Rehabilitation Loans Various 2 ,265,804 2 ,348,202
106 N. Eldorado 2036 4 50,000 4 50,000
Darcy Building 2040 1 ,502,811 1 ,501,559
Edgewater Isle Senior Apartments 2048 3 ,320,141 3 ,238,383
Belmont Building 2032 8 00,000 8 00,000
Merkel Building 2005/ 2011 2 2,882 4 5,625
St. Matthew Hotel 2036 2 ,270,595 2 ,239,373
Rotary Hacienda 2058 4 ,078,564 4 ,028,000
Turning Point 2018 1 ,074,648 1 ,060,340
12 N. Idaho Street 2034 1 10,436 1 10,436
200 S. Delaware Street 2049 1 ,509,120 1 ,471,140
Employees' Housing Assistance Program Various 8 9,487 8 7,072
232 S. Humboldt Street 2021 5 80,000 5 65,000
11 S. Delaware Street 2032 9 09,942 8 85,050
El Camino Family Housing 2042 3 ,744,730 3 ,643,150
Droese Loan - Steiners Jewelry 2029 2 02,806 1 92,631
Mitter Loan 2015 6 0,000 6 0,000
Swanson - 349 North Claremont 2025 1 06,507 7 ,688
Lesley Foundation 2020 9 5,807 4 76
Cora Loan 2026 2 ,967 -
Total governmental funds 3 9,765,098 3 9,079,847
Internal Service Funds:
Employee Loan Open 4 55,575 4 55,575
Total $ 4 0,220,673 $ 3 9,535,422
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
52
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
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.
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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
53
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Meadow Court Program - This program provides first- time homebuyers down payment assistance in
an amount not to exceed $ 60,000 for the purchase of units at 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.
At June 30, 2006, the balances of all First- Time Homebuyer loans amounted to $ 16,567,851.
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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
54
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
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.
Merkel Building
The Agency holds a loan and second deed of trust in the amount of $ 100,000 at 5% interest for the
rehabilitation and historic preservation of the Merkel Building. Payments on the loan, which was made
in 1995, were deferred until 2000 and will be paid in full by 2012.
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. Annual payments on the 3% loan are
based on available cash flow, if any.
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.
In 2003, the Agency entered into two Predevelopment Loan Agreements with Rotary Hacienda Inc. for
the purchase of land and predevelopment of the Rotary Floritas Apartments project. The Agreement
includes two promissory notes in the amount of $ 1,800,000 and $ 1,200,000, which bears a simple interest
at 3.00% compounded annually, respectively. Both Agreements are due on October 30, 2058.
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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
55
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
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.
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.
City of San Mateo
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
56
4. LOANS AND NOTES RECEIVABLE, Continued
B. Fund Financial Statements, Continued
Droese Loan – Steiners Jewelry
On July 28, 2004, the City entered into loan agreement with Michael and Shawna Droese. The
agreement includes two promissory notes in the amount of $ 100,000 and $ 85,000, which bears 5.5%
interest rate. Payment shall be made in 300 equal payments of principal and interest at the rate of
$ 614.09 due on the first day of every month starting October 1, 2004. Both agreements are due on
October 1, 2029.
Mitter Loan
On June 6, 2005, the City entered into promissory note with Laurence Kelly Mitter to loan $ 60,000. The
note carries no interest rate and is for a period of 10 years. Principal payment is deferred for the fir