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HomeMy WebLinkAbout2005-02-09 e-packetSPECIAL MEETING CITY COUNCIL OF THE CITY OF SOUTH SAN FRANCISCO P.O. Box 711 (City Hall, 400 Grand Avenue) South San Francisco, California 94083 Meeting to be held at: MUNICIPAL SERVICES BUILDING CITY COUNCIL COMMUNITY ROOM 33 ARROYO DRIVE WEDNESDAY, FEBRUARY 9, 2005 6:30 P.M. NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, the City Council of the City of South San Francisco will hold a Special Meeting on Wednesday, the 9m day of February, 2005, at 6:30 p.m., in the Municipal Services Building, Community Room, 33 Arroyo Drive, South San Francisco, California. Purpose of the meeting: 1. Call to Order 2. Roll Call 3. Public Comments - comments are limited to items on the Special Meeting Agenda 4. Interview applicants for the Library Board of Trustees 5. Discussion and motion to appoint applicant to the Library Board of Trustees 6. Adjournment City/Clerk City of South San Francisco Inter-Office Memorandum DATE: TO: FROM: SUBJECT: February 9, 2005 Honorable Mayor and City Council Members City Clerk ~~ CITY COUNCIL SPECIAL MEETING- INTERVIEW APPLICANTS FOR LIBRARY BOARD OF TRUSTEES VACANCY The current vacancy on the Library Board of Trustees is a result of John Baker's resignation on January 7, 2005. The expiration of this term is June 30, 2006. The public notice of vacancy was posted on the City's website, Community Channel 26, Grand Avenue and Orange Avenue Libraries, and City Hall. The schedule of interviews is as follows: 1) 6:35 p.m.: Francisca Hansen 2) 6:45 p.m.: Juan Miranda Applicants who were previously interviewed on January 25, 2005 and indicated and interest in the Library Board are: · Patrick Houlihan · Violeta Fowler Copies of their applications are attached. If there is a consensus to move forward with the appointment process this evening, a ballot has been provided. Motion to confirm the appointments is required, Enc: 1) Applications 2) Council Questions 3) Ballot for Library Board of Trustees AGENDA REDEVELOPMENT AGENCY CITY OF SOUTH SAN FRANCISCO REGULAR MEETING MUNICIPAL SERVICE BUILDING COMMUNITY ROOM WEDNESDAY, FEBRUARY 9, 2005 7:00 P.M. PEOPLE OF SOUTH SAN FRANCISCO You are invited to offer your suggestions. In order that you may know our method of conducting Agency business, we proceed as follows: The regular meetings of the Redevelopment Agency are held on the second and fourth Wednesday of each month at 7:00 p.m. in the Municipal Services Building, Community Room, 33 Arroyo Drive, South San Francisco, California. Public Comment: For those wishing to address the Board on any Agenda or non-Agendized item, please complete a Speaker Card located at the entrance to the Community Room and submit it to the Clerk. Please be sure to indicate the Agenda Item # you wish to address or the topic of your public comment. California law prevents Redevelopment Agency from taking action on any item not on the Agenda (except in emergency circumstances). Your question or problem may be referred to staff for investigation and/or action where appropriate or the matter may be placed on a future Agenda for more comprehensive action or a report. When your name is called, please come to the podium, state your name and address for the Minutes. COMMENTS ARE LIMITED TO THREE (3) MINUTES PER SPEAKER. Thank you for your cooperation. The Clerk will read successively the items of business appearing on the Agenda. As she completes reading an item, it will be ready for Board action. RAYMOND L. GREEN Chair JOSEPH A. FERNEKES Vice Chair RICHARD A. GARBARINO, SR. Boardmember PEDRO GONZALEZ Boardmember KARYL MATSUMOTO Boardmember RICHARD BATTAGLIA Investment Officer SYLVIA M. PAYNE Clerk BARRY M. NAGEL Executive Director STEVEN T. MATTAS Counsel PLEASE SILENCE CELL PHONES AND PAGERS HEARING ASSISTANCE EQUIPMENT lS AVAILABLE FOR USE BY THE HEARING-IMPAIRED AT REDEVELOPMENT AGENCY MEETINGS CALL TO ORDER ROLL CALL AGENDA REVIEW PUBLIC COMMENTS CONSENT CALENDAR 1. Motion to approve the minutes of January 26, 2005 2. Motion to confirm expense claims of February 9, 2005 3. Transmittal of Annual Financial Report for FY 03-04 and resolution on necessity of planning and administrative expenses ADJOURNMENT REGULAR REDEVELOPMENT AGENCY MEET1NG AGENDA FEBRUARY 9, 2005 PAGE 2 RDA AGENDA ITEM #3 Redevelopment Agency Staff Report DATE: TO: FROM: SUBJECT: February 9, 2005 Redevelopment Agency Board Jim Steele, Financial Officer AGENCY ANNUAL FINANCIAL STATEMENTS FOR 2003-04 AND PLANNING AND ADMINISTRATIVE EXPENSE RESOLUTION FOR THE LOW AND MODERATE INCOME HOUSING FUND RECOMMENDATION The Agency's annual financial statements for 2003-04 are hereby transmitted to the Board. It is recommended that the Board adopt a resolution determining that 2004-05 planning and administrative expenses in the Low Moderate Income Housing Fund are necessary for the production, improvement, or preservation of low and moderate income housing in South San Francisco. BACKGROUND/DISCUSSION Enclosed for the Board's information and action is the 2003-04 annual financial statements of the Agency. The Code requires that the Board take action on the finding. This report is issued to the State Controller's Office and Housing and Community Development Department and is also used by bond rating agencies and bond trustees. The City uses the information in the report to develop budgets for the next fiscal year and to forecast available funds for future development. The report looks at the Agency as a whole and by project area. The format of this report differs from that presented in the City' s budget document because of accounting requirements. The RDA financial statements are also presented within the City' s Comprehensive Annual Financial Report that will be transmitted separately to the City Council. The audit finding on the last page of the report discusses a procedure dictated by Health and Safety Code Section 33334.3(d). The State Legislature intended that Low and Moderate Income Housing Funds be used, to the fullest extent possible, toward the production, improvement, or preservation of housing with planning and administrative expenditures kept at reasonable levels. To emphasize this directive, the referenced Code Section dictated that redevelopment agencies must annually prepare a written determination that such planning and administrative expenses are necessary for the production, improvement, or preservation of such housing. California Health and Safety Code Sections 33080.1 and 33080.2 require that the Agency' s Board be presented with the statements and its audit finding, and be informed that failure to correct the finding may result in the filing of an action by the State Attorney General. RDA Staff Report To~ Re: Date: Redevelopment Agency Board Agency Annual Financial Statements for 2003-04 and Planning and Administrative Expense Resolution for the Low & Moderate Income Housing Fund February 9, 2005 Page: 2 Agency staff has determined that the combined $372,592 in planning and administrative expenses in the Low and Moderate Income Housing Fund are necessary for the production, improvement, or preservation of low and moderate income housing and, at 6.5% of the overall Housing Fund budget, are not disproportionate to the direct costs for the production, improvement or preservation of housing. To take action on the audit finding and to bring the Agency in compliance with State code, staff recommends that the Board adopt the attached resolution for fiscal year 2004-05. In the future, staff will include this language in annual budget resolutions brought to the City Council. FISCAL IMPACT There is no fiscal impact from the actions in this staff report. Budgetary actions for the current fiscal year have already considered the results presented in the financial statements. By: Finance Officer Approved.~_. · -15garry M. Nag~el Executive Director ATTACHMENTS: Resolution Agency Financial Statements DW/JS/BN:ed RESOLUTION NO. REDEVELOPMENT AGENCY, CITY OF SOUTH SAN FRANCISCO, STATE OF CALWORNIA A RESOLUTION DETERMINING THAT PL.~NING AND ADMINISTRATIVE EXPENSES FOR FISCAL YEAR 2004,-05 ARE NECESSARY FOR THE PRODUCTION, IMPROVEMENT, OR PRESERVATION OF LOW AND MODERATE INCOME HOUSING PURSUANT TO SECTION 33334.3(d) OF THE CALIFORNIA HEALTH AND SAFETY CODE WHEREAS, by Section 33334.3(c) of the California Health and Safety Code, the moneys in the Agency's Low and Moderate Income Housing Fund shall be used to increase, improve, and preserve the supply of low and moderate income housing within the territorial jurisdiction of the Agency; and WHEREAS, by Section 33334.3(d) of the Code, it is the intent of the California Legislature that the Low and Moderate Income Housing Fund be used to the maximum extent possible to defray the costs of production, improvement, and preservation of Iow and moderate income housing and that the amount of money spent for planning and general administrative activities associated with the development, improvement, and preservation of that housing not be disproportionate to the amount actually spent for the costs of production, improvement, or preservation of that housing. The Agency shall determine annually that the planning and administrative expenses are necessary for the production, improvement, or preservation of low and moderate income housing; and WHEREAS, the Agency has determined that the combined $372,592 budgeted in 2004-05 for planning and administrative expenses in the Low and Moderate Income Housing Fund are necessary for the production, improvement, or preservation of low and moderate income housing and at 6.5% of the overall Housing Fund budget, are not disproportionate to the direct costs spent on the production, improvement or preservation of such housing. NOW, THEREFORE, BE IT RESOLVED by the Redevelopment Agency Board of the City of South San Francisco that planning and administrative expenses for fiscal 2004-05 are necessary for the production, improvement, or preservation of low and moderate income housing, pursuant to Section 33334.3(d) of the California Health and Safety Code. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the Redevelopment Agency of the City of South San Francisco at a the __ day of ,2005 by the following vote: AYES: meeting held on NOES: ABSTAIN: ABSENT: S:\Current Reso's\2-9-05agency.annual.financial.statement.res.doc ATTEST: Clerk CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2004 CiTY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2004 Table of Contents Page Independent Auditors' Report ............................................................................................................ 1 Management's Discussion And Analysis .......................................................................................... 3 Basic Component Unit Financial Statements: Agency-wide Financial Statements: Statement &Net Assets ...................................................................................................... 12 Statement of Activities ........................................................................................................ 13 Fund Financial Statements: Major Governmental Funds: Balance Sheet .................................................................................................................. 16 Balance Sheet - Reconciliation of Governmental Fund Balances to Net Assets of Governmental Activities ........................................................................................... 18 Statement &Revenues, Expenditures, and Changes in Fund Balances ........................ 20 Reconciliation &the Net Change in Fund Balances - Total Governmental Funds with the Statement of Activities ...................................... 22 Notes to Component Unit Financial Statements ........................................................................ 23 Supplemental Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budgetary Basis: Capital Project Funds: Gateway ..................................................................................................................... 34 Downtown .................................................................................................... 35 Shearwater ................................................................................................................. 36 El Camino .................................................................................................................. 37 Low and Moderate Housing .................................................................................... 38 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2004 Table of Contents (Continued) Page Debt Service Funds: Gateway ..................................................................................................................... 39 Downtown ................................................................................................................. 40 Low and Moderate Housing ..................................................................................... 41 Report On Compliance And On Internal Control Over Financial Reporting Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards ................................................................................... 43 Schedule of Current Year Finding ............................................................................................. 44 V AAZE & SSOCIA TES INDEPENDENT AUDITOR'S REPORT A CCOUNTA NC Y CORPORATION 1931 San Miguel Drive - Suite 100 Walnut Creek, California 94596 (925) 930-0902 · FAX (925) 930-0135 E-Mail: maze@mazeassociates, com Website: www. mazeassociates, com Members of the Board of the City of South San Francisco RedeVelopment Agency South San Francisco, California We have audited the accompanying basic component unit financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of South San Francisco Redevelopment Agency (Agency), a component unit of the City of South San Francisco, as of and for the year ended June 30, 2004, as listed in the Table of Contents. These component unit financial statements are the responsibility of the Agency's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards for financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the component unit financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the component unit financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion, In our opinion the component unit financial statements referred to above present fairly in all material respects the respective financial position of the governmental activities, each major funds, and the aggregate remaining fund information of the Agency at June 30, 2004 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles in the United States of America. In accordance with Government Auditing Standards, we have alsO issUed reports dated November 19, 2004 on our consideration of the Agency's internal control structure and on its compliance with laws and regulations. Management's Discussion and Analysis is supplementary information required by the Government Account~g Standards Board, but is not part of the basic component unit financial statements. We have applied certain limited procedures to this information, principally inquiries of management regarding the methods of measurement and presentation of thiS information, but we did not audit this information and we express no opinion on it. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplemental Information listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the government,wide and fund financial statements, and in our opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole. November 19, 2004 A Professional Corporation 1 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 Our discussion and analysis of the Redevelopment Agency of the City of South San Francisco financial performance provides an overview of the Agency's financial activities for the fiscal year ended June 30, 2004. Please read it in conjunction with accompanying basic financial statements. The South San Francisco Redevelopment Agency (the "Agency") management's discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Agency's financial activity, (c) identify changes in the Agency's financial position (its ability to address the next and subsequent year challenges), and (d) identify individual fund issues or concerns. Since the Management's Discussion and Analysis (MD&A) is designed to focus on the current year's activities, resulting changes and currently known facts, please read it in conjunction with the Agency's financial statements. FINANCIAL HIGHLIGHTS During 2003-04, the Agency's tax increment and other governmental revenue exceeded expenses by $10.1 million, compared to $7.8 million for 20024)3. As of the close of the current fiscal year, the Agency's governmental funds reported combined ending fund balances of $58.7 million, a decline of $0.6 million in comparison with the prior year. The Agency's capital assets increased by $4.4 million during the fiscal year ending up at $20.7 million. The Agency's June 30, 2004 debt balance of $46.8 million reflected an increase of $4.3 million from the previous year. USING THIS ANNUAL REPORT The primary focus of the report is on both the Agency as a whole (government-wide) and the major individual funds (programs). Both perspectives (government-wide and major fund) allow the user to address relevant questions, broaden a basis for comparison, and enhance the Agency's accountability. Government-Wide Financial Statements The Statement of Net Assets, which is similar to a Balance Sheet, reports all financial and capital resources for the Agency. The statement is presented in the format where assets minus liabilities, equals '~Net Assets", formerly known as equity. Assets and liabilities are presented in order of liquidity, and are classified as "Current" (convertible into cash within one year), and "Non-current". The focus of the Statement of Net Assets (the "Unrestricted Net Assets") is designed to represent the net available liquid (non-capital) assets, net of liabilities, for the entire Agency. Net Assets (formerly equity) are reported in three broad categories: Net Assets, Invested in Capital Assets, Net of Related Debt: This component of Net Assets consists of all Capital Assets, reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 Restricted Net Assets: This component of Net Assets consists of restricted assets; when constraints are placed on the asset by creditors (such as debt covenants), grantors, contributors, laws, regulations, etc. Unrestricted Net Assets: Consists of Net Assets that do not meet the definition of''Net Assets Invested in Capital Assets, Net of Related Debt", or "Restricted Net Assets". 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 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. The focus of the statement of Activities is the "Change in Net Assets", which is similar to Net Income or Loss. Fund Financial Statements The fund financial statements provide detailed information about the most significant funds. Some funds are required to be established by State law and by bond covenants. However, the Agency's Board establishes other funds to help it control and manage money or meet legal responsibilities for using certain taxes, grants and other money. 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 f'mancial 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. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 ANALYSIS OF THE AGENCY AS A WHOLE Statement of Net Assets The following table reflects the condensed Statement of Net Assets: TABLE I NET ASSETS June 30, 2004 2003 Current and other assets Capital assets Total assets $ 63,416,044 $ 68,560,222 20,754,754 16,353,003 84,170,798 84,913,225 7,034,194 10,587,666 45,288,000 41,225,000 52,322,194 51,812,666 Current and other liabilities Long-term liabilities Total liabilities Net assets: Restricted 26,450,402 29,336,371 Unrestricted 5,397,902 3,764,188 Total net assets $ 31,848,304 $ 33,100,559 For more detailed information see the Statement of Net Assets in the Agency-wide financial statements. The prior year amount reported as Invested in Capital Assets, Net of Related Debt has been reclassified to unrestricted net assets to conform to the current year presentation. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 Change in Net Assets Table 2 presents details on the change in Net Assets: TABLE 2 cHANGE IN NET ASSETS Beginning net assets Capital asset restatement Expenses: Redevelopment Interest on long-term debt Total expenses Revenues: Tax increment Interest and rental Other Total revenues Assumption of debt Ending net assets 2003 -04 2002-03 $ 33,100,559 $17,809,84I (3,293,151) - (7,010,358) (3,867,478) (3,291,578) (2,253,858) (10,301,936) (6,121,336) 16,515,890 16,387,125 773,455 2,336,806 763,487 2,688,123 18,052,832 21,412,054 (5,710,000) $ 31,848,304 $ 33,100,559 Redevelopment expenses increased due to major capital outlays financed by Agency bond proceeds. Due to the rise in market interest rates, the maturity of older medium-term bonds with high interest rates, the sale of certain investments due to weak investment ratings, and because of lower cash balances, interest revenue declined from the previous year. See the Capital Assets and Debt Administration analysis for an explanation of the capital asset restatement and assumption of'debt that occurred in 2003-04. ANALYSIS OF THE AGENCY'S MAJOR FUNDS Downtown Capital Project and Debt Service Funds and 1999 Certificates of Participation Fund For fiscal 2003-04, $6.7 million in Downtown project area tax increment, $0.4 million in property rentals and investment income, and $2.6 million in bond reserves went toward the following purposes: $5 million transferred to the City of South San Francisco to acquire the land and building for the new Central Fire Station; $1.4 million transferred to the Low and Moderate Income Housing Fund, to meet the 20% housing set aside requirement; $0.4 million in required pass-through tax increment payments paid to schools; $1.6 million to operate and manage the Agency and it's properties, including $0.7 million in new 2003-04 costs assumed from the City; $0.8 million toward principal and interest payments on the Downtown Central Redevelopment Project 1997 tax allocation revenue bonds; and new debt payments assigned fi.om the General Fund in 2003-04, in this case $0.4 million in principal and interest on the Conference Center's 1999 Certificates of Participation. The bonds issued in 1997 financed land acquisitions, parking, and public infrastructure in the Downtown project area. The 1999 certificates of participation financed the land and improvements for the City's Conference Center. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 Due to ERAF shlf~s to the state, tax revenues fell below fiscal 2002-03's amount of $7.2 million. Investment revenue was below last year's $0.8 million due to the interest rate changes and portfolio activity discussed previously. Low and Moderate Income Housing Capital Project Fund This fund holds the 20% in annual Agency property tax increment that must be set aside for low and moderate income housing needs. The fund received $3.5 million in such revenues, up slightly from $3.4 million last year. The Housing fund provided and spent $1.1 million in housing loans, grants and program costs and $0.3 million in debt service on the Gateway tax allocation revenue bonds, as mentioned in the Gateway Debt Service Fund discussion below. $13.1 million from current and prior years' revenues remain in fund balances restricted or designated for planned housing development, up from $11.3 million a year ago. Last year's housing outlay was higher at $2.8 million, because of the Willow Gardens, Commercial Avenue and Mission/Chestnut projects. Debt service payments were unchanged. Gateway Capital Project Fund In fiscal 2003-04, the fund transferred $5.6 million to the City of South San Francisco for capital projects, with $3.4 million going toward construction of the U.S. 101 freeway off-romp to Oyster Point Boulevard and $2.2 million going into the new Gateway ehildeare center. Both projects will serve the large biotech workforce in the Gateway redevelopment area. The fund balance declined from $12 million at the beginning of the fiscal year to $6.2 million at the end &the year. Gateway Debt Service Fund The South San Francisco Capital Improvements Financing Authority issued $31,720,000 in 1999 Revenue Bonds that, in turn, purchased two bond series issued by the Agency: the $28,045,000 1999 Tax Allocation Bonds Series A (Gateway Redevelopment Project) and the $3,675,000 1999 Tax Allocation Bonds Series B (Housing Set-Aside Revenues), with all bonds maturing in 2018. Property tax revenues from the Gateway project area and Low and Moderate Income Housing Fund pay debt service on the Series A and B bonds and accordingly the Financing Authority's revenue bonds. Gateway property tax revenues in excess of debt service are required by bond covenants to be reserved for bond defeasement, and those accumulated excess funds are held by an outside trustee. The City shows these reserves in the Gateway Debt Service fund. The Gateway Series A bonds refinanced the Gateway Redevelopment Project 1993 Tax Allocation bonds. $1.4 million in interest and $1.1 million in principal were paid on the 1999 bonds in fiscal 2003-04. The $5.2 million transferred in from the Gateway Capital Project Fund and the Low and Moderate Income Housing Fund represented the amount needed to cover this year's debt service payments and bond reserve. Last year, $3.8 million from Capital Project and Housing Funds went toward $1.8 million in debt service payments and $2 million in bond reserves. The bond reserve account rose from $12.2 million in fiscal 2002-03 to $15.1 million at the end of fiscal 2003-04. Shearwater and El Camino Capital Project Funds The Shearwater Fund assumed a $0.8 million advance receivable due from the El Camino Fund during the current fiscal year. This receivable was formerly in the City of South San Francisco's General Fund, which had originally made the advance in the late 1990s to kickoff some traffic improvement projects in the El Camino redevelopment area in the late 1990s. To help alleviate the General Fund's budget problems, Shearwater repaid the General Fund for amount owed on the advance and assumed the receivable due from El Camino. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of year end, the Agency had $20.7 million invested in a variety of capital assets as reflected in the below Table 3, which represents a net increase (addition, deductions and depreciation) of $4.4 million from the end of the prior year. The net land increase of $2.4 million includes a net $3.3 million decrease shown as a capital asset restatement in the above change in net assets Table 2. The restatement is the result of some prior year land acquisitions and dispositions not reported previously. During 2003-04, the Agency acquired land for $5.7 million, predominantly for the future new Central Fire Station. Construction in progress increased $2.2 million because of construction on the new Gateway childcare center. TABLE 3 CAPITAL ASSETS AT JUNE 30, (Net of Depreciation) Land Buildings & Improvements Land Improvements Infrastructure Machinery & Equipment Office Equipment Furniture & Fixtures Vehicles Construction in progress 2004 2003 $ 13,06t,964 $ 10,630,329 3,052,540 3,052,540 2,125,119 2,125,t19 188,297 188,297 125,076 133,859 23,452 23,452 21,506 21,506 24,042 24,042 2,545,967 383,025 Less: Accumulated depreciation (413,209) (229,166) Total $ 20,754,754 $16,353,003 Debt Outstanding As of year-end, the Agency had $46.8 million in debt outstanding compared to $42.5 million in the prior year-end, an increase of $4.3 million. Pursuant to a resolution of the Agency's Board, tax increment revenues were pledged toward debt service on the 1999 Certificates of Participation. This pledge serves as an assumption of debt from the City of South San Francisco during 2003-04 and is reflected in Table 4 below and in the change in net assets Table 2 shown earlier. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2004 TABLE 4 OUTSTANDING DEBT AT JUNE 30, 2004 2003 Downtown Tax Allocation Bonds 1997 Revenue Bonds 1999 Certificates of Participation 1999 HUD Section 108 Loan 2000 $ 10,390,000 $ 10,610,000 29,085,000 30,175,000 5,590,000 1,750,000 1,750,000 Total $ 46,815,000 $42,535,000 FINANCIAL CONTACT Questions about this report or requests for additional financial information should be directed to the City of South San Francisco Finance Department, P.O. Box 7I l, South San Francisco, CA 94083, phone (650) 877-8507. CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES The Statement of Net Assets and the Statement of Activities summarize the entire Agency's financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the Agency's assets and all its liabilities, as well as ali its revenues and expenses. This is known as the full accrual basis--the effect of all the Agency's transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Agency funds have been eliminated. The Statement of Net Assets reports the difference between the Agency's total assets and the Agency's total liabilities, including all the Agency's capital assets and all its long-term debt. The Statement of Net Assets presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the Agency's net assets, by subtracting total liabilities from total assets. The Statement of Net Assets summarizes the financial position of all the Agency's Governmental Activities in a single column. The Statement of Activities reports increases and decreases in the Agency's net assets. It is also prepared on the full accrual basis, which means it includes all the Agency's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The format of the Statement of Activities differs considerably from those used in the past. h presents the Agency's expenses that are listed by program fa'st. Program revenues--that is, revenues which are generated directly by these programs--are then deducted from program expenses to arrive at the net expense of each program. The Agency's general revenues are then listed and the Change in Net Assets is computed and reconciled with the Statement of Net Assets. 11 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS ~IYNE 30, 2004 ASSETS Governmental Activities Cash and investments $23,443,312 Cash and investments with fiscal agent 2,400 Receivables: Accounts 23,831 Accrued interest 299,574 Due from City 3,981,499 Loans 9,383,967 Restricted cash and investments 26,281,461 Capital assets: Nondepreciable 15,607,931 Depreciable, net of accumulated depreciation 5,146,823 Total assets 84,170,798 LIABILITIES Current liabilities: Accounts payable 369,409 Deposits 27,555 Deferred revenue 4,30~-, 173 interest payable 806,357 Current portion of long-term debt 1,527,000 Noncurrent portion of long-term debt 45~288,000 Total liabilities 52,322,494 NET ASSE'I~ Res~cted for: Debt service 16,439,480 Capital projects 10,010,922 Total reslricted net assets Unrestricted Total net assem 26,450,402 5,397,902 $31,848,304 See accompanying notes to financial statements 12 CITY OF SOUTH SAN FRANCISCO RF-~EVELOPMENT AGENCY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 Expenses: Redevelopment Interest on long-term debt Total Expenses General revenues: Tax allocation increment Interest and rental Total general revenues Special Item- Assumption of Debt (Note 6D) Change in Net Assets Net Assets-Beginning as restated Net assets-Ending See accompanying notes to financial statements Governmental Activities $7,010,358 3,291,578 10,301,936, 16,515,890 773,455 763,487 18,052,$32 (5,710,000) 2,040,896 29,807,408 $31,848,304 13 FUND FINANCIAL STATEMENTS GASB 34 revises the format of the Fund Financial Statements so that only individual major funds are presented, while non-major funds are combined in a single column. Major funds are defined generally as having significant activities or balances in the current year. No distinction is made between Fund types and the practice of combining like funds and presenting their totals in separate columns (Combined Financial Statements) has been discontinued, along with the use of the General Fixed Assets and General Long-term Debt Account Groups. All Agency Funds were determined to be Major Funds in fiscal 2004. They are described below: The GATEWAY, DOWNTOWN, SHEARWATER and EL CAMINO CAPITAL PROJECT FUNDS - These funds account for property tax increment revenues used for capital projects connected with the Gateway, Downtown, Shearwater and El Camino project areas respectively. LOW AND MODERATE INCOME HOUSING CAPITAL PROJECT FUND - This fund accounts for the 20% share of property tax increment revenue directed toward low and moderate income housing projects. The GATEWAY DEBT SERVICE FUND - This fund accounts for debt repayments and serves as a bond retirement sinking fund for the 1999 revenue bonds. The DOWNTOWN DEBT SERVICE FUND - This fund accounts for debt repayments on the 1997 Downtown tax allocation bonds. The 1999 CERTIFICATES OF PARTICIPATION DEBT SERVICE FUND - This fund accounts for repayments on this debt issue. 15 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 20O4 ASSETS Cash and investments Cazh and invcstmenta with fiscal agent Receivables: Accounts Accrued interest Due from the City Advances to other funds Loans Restricted cash and investments Total Asse~s CAPITAL PROJECT FUNDS Gateway Downtown Shearwater El Camino Fund Fund Fund Fund $2,455,123 $6,489,742 $2,232,866 2,400 ,$2,147 4,358,524 $6,855,794 23,831 83,554 3,981,499 3,088,161 565,402 1,785,997 $16,020,586 21,579 844,591 $3~099,036 $1,702,582 11,005 $1,713,587 LIABILITIES Accounts payable Deposits Advancea fi'om other funds Deferred revenue Total Liabilities $36~38 $266,834 500 656,000 2,787,538 692~638 3,054,872 $3,088,161 3,088,161 $52,627 844,591 897,218 FUND BALANCES: Reserved for: Encumbrances Advances, inventory and prepaid Loans receivable Future loan obligations Restated assets Unreserved Designated Undesignated 842,175 67,598 3,088,161 565,402 3,748,651 1,806,161 1,572,330 6,163,156 1,500,000 5,938,392 Total Fund Balances 12,965,714 Total Liabilities and Fund Balances $6,855,794 $16,020,586 See accompanying notes to financial statements 844,591 (s33,7 6) 10,875 $3~099,036 22,160 794,209 816,369 $I,713,587 16 CAPITAL PROJECT FUND Low/Mod Iucome Housing Fund DEBT SERVICE IRJNDS Gateway Fund Downtown Fund 1999 Certificates of Participation Total Governmental Funds 10,443,586 86,111 8,818,565 3,866~01 $23,214,663 $41,678 15,078,973 $15,120,651 $10, t05 778,002 $788,107 $119,413 3,395 413,564 $536,372 $23,443,312 2,400 23,831 299,574 3,981,499 3,932,752 9,383,967 26,281,461 $67,348,796 $7,660 27,055 860,635 895~50 $1,000 1,000 $2,200 2,200 $2~50 2,450 $369,409 27,555 3,932,752 4,304,173 8,633,889 427,896 8,818,565 1,026,633 9,128,124 2,918,095 22,319,313 $23,214,663 15,119~51 15,119,651 $15,I20,651 785,907 785,907 $788,107 533,922 533,922 $536,37~2 1,359,829 3,932,752 9,383,967 1,026,633 31,122,416 4,418,095 7,471,215 58,714~907 $67,348,796 17 THE CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES JUNE 30, 20O4 Total Fund Balances reported on the governmental funds balance sheet Amounts reported for Governmental Activities in the Statement of Net Assets are different fi.om those reported in the Governmental Funds above because of the following: CAPITAL ASSETS Capita] asse~s used in Governmental Activities are not current assets or financial resources and therefore arc not reported in the Governmental Funds. $58,714,907 20,754,754 ACCRUAL OF NON-CURRENT REVENU~ AND EXPENSES Revenues which are deferred on the Fund Balance Sheets because they are not available currently are taken into revenue in the Statement of Activities. Interest Payable LONG-TERM ASSETS AND LIABILITIES The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds: Long-term debt NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements (806,357) (,16,815,O00) $31,848,304 18 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2004 CAPITAL PROJECT FUNDS Gateway Downtown Shearwater El Camino Fund Fund Fund Fund REVENUES: . Tax allocation increment Interest and rental Charges for services Other Total Revenues EXPENDITURES: Capital project outlay Capital outlay Debt service Principal retirement Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF KEVENUES OVEK EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfer (out) to City for capital outlays Transfers in Transfers (out) Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Fund balance, Jul3, 1 Fund balance, June 30 $6,028,500 $6,674,343 $2,156,676 28,984 389,041 16,302 4 71,187 6,128,671 7,063,388 2,172,978 $1,656,371 8,981 175,805 1,841,157 251,950 1,921,891 278,753 274,346 251,950 5,876,721 17,948 104,261 38,959 1,939,839 383,014 313,305 5,123,549 1,789,964 1,527,852 100 (5,007,603) (2,663,772) (452,689) (7,671,275) (452,689) (5,558,709) (6,184,351) (11,743,060) (32,594) (346,794) (379,388) See accompanying notes to the financial statements. $6,163,156 $I2,965,714 $10,875 $816,369 (5,866,339) (2,547,726) 1,337,275 1,148,464 12,029,495 15,513,440 (1,326,400) (332,095) CAPITAL PROJECT FUND Low/Mod Income Housing Fund DEBT SERVICE FUNDS Gateway Fund Dowutown Fund 1999 Certificates of Participation Total Governmental Funds $144,900 144,900 $135,631 135,631 $27,949 27,949 $21,667 516,491 538,158 $16,515,890 773,455 4 763,483 18,052,832 1,323,541 1,323,541 (1,178,641) 1,090,000 1,391,846 2,481,846 (2,346,215) 220,000 644,633 864,633 (836,654) 257 120,000 287,574 407,831 I30,327 4,050,738 1,430,000 2,485,22t 7,965,959 10,086,873 (55,716) 3,460,957 (294,974) 3,110,267 5,219,012 5,219,012 859,016 859,016 403,595 403,595 100 (t0,654,622) 9,942,580 (9,942,580) (10,654,522) 1,931,626 20,387,687 $22,319,313 2,872,797 12,246,854 $15,119,651 22,332 763,575 $785,907 533,922 $533,922 (567,649) 59,282,556 $58,714,907 21 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Reconciliation of the NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with l~e STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified ac. cmal basis, with the Change in Net Assets of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis. NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Activities are different because of the following: CAPITAL ASSETS TRANSACTIONS Governmental Funds report capital outlays as expenditures. However, in the Staiement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Depreciation expense is deducted fxom the fund balance Capital assets addition, net of retirement ACCRUAL OF NON-CLrRRENT ITEMS The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change): Interest payable LONG-TERM DEBT PAYMENTS Repayment of bond principal is an expenditure in the governmental funds, but in the Statement of Net Assets the repayment reduces long-term liabilities. Special Item - Assumption of D~bt Repayment of debt principal is added back to fund balance CHANGE IN NET ASSETS OF GO--MENTAL ACTIVITIES See accompanying notes to financial statements ($567,649) (189,532) 7,884~34 (8O6,357) (5,710,0o0) 1,430,000 $2,oao,896 22 CiTY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES i Description of The City of South San Francisco Redevelopment Agency and Redevelopment Plan - The City of South San Francisco Redevelopment Agency (Agency) was established in 1981 under the provisions of the Community Redevelopment Law (California Health and Safety Code), for clearance and rehabilitation of areas determined to be in a declining condition in the City of South San Francisco. The Agency is authorized to f'mance the Redevelopment Plan fxom various sources, including assistance from the City, the State and federal government, property tax increments, interest income and the issuance of Agency notes and bonds. Management and administrative support services are provided by the City. The City Manager serves as the Executive Director, the City Economic and Community Development Director as the Assistant Director and Secretary, and the City Finance Director as the Finance Officer of the Agency. The Agency is an integral part of the City of South San Francisco and, accordingly, the accompanying financial statements are included as a component of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City's basic f'mancial statements. The Agency is engaged in the redevelopment of four areas described below: The Shearwater Redevelopment Project (Shearwater) consists of a privately owned land parcel, formerly owned and operated by U.S. Steel. The Property is currently under development. The Gateway Redevelopment Project (Gateway) consists of privately owned land parcels. The largest property owner, Hines Development Company, has undertaken a large scale, phased development over a multi-year period provided in the amended and restated Owner Participation and Development Agreement dated August 20, 1992 between the Agency and Homart Development Company, the previous land owner (the Homart Agreement). The Downtown Center Redevelopment Project (Downtown) consists of various land parcels in the downtown area and in other commercial and industrial areas within the City, which are primarily located east of the Bayshore Freeway (U.S. 101). The Board has undertaken plans to upgrade these areas and to encourage better land use through public improvements. The E1 Camino Corridor Redevelopment Project (El Camino) consists primarily of undeveloped and under developed parcels along the central arterial street west of U.S. 101. This area, which is bisected by a creek and railroad tracks, is being developed in conjunction with the recent Bay Area Rapid Transit (BART) railway extension to the San Francisco International Airport. Basis of Presentation - The Agency's Component Unit Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. The accompanying financial statements are presented on the basis set forth in Government Accounting Standards Board Statements No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, No. 36, Recipient Reporting for Certain Non-exchange Revenues, an ,~mendment of G, dSB Statement No. 33, No. 37, Basic Financial Statements~nd Management's Discussion and Analysis--for State and Local Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures. 23 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1 - SUMMARY OF SIGNYFIC~T ACCOUNT POLICIES (Continued) These Statements require that the financial statements described below be presented. Government-wide Statements: The Statement of Net Assets and the Statement of Activities include the financial activities of the overall Agency government. Eliminations have been made to minimize the double counting of internal activities. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Agency's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund f'mancial statements provide information about the Agency. Separate statements for each governmental fund are presented. The emphasis of fund financial statements is on major individual funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. Major Funds - GASB Statement 34 defines major funds and requires that the Agency's major governmental-type funds be identified and presented separately in the fund financial statements. Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The Agency may also select other funds it believes should be presented as major funds. The Agency reported all of its governmental funds in the accompanying financial statements as major funds: Gateway, Downtown, Shearwater and El Camino Capital Project Funds - These funds account for property tax increment revenues used for capital projects connected with the Gateway, Downtown, Shearwater and E1 Camino project areas respectively. Low And Moderate Income Housing Capital Project Fund - This fund accounts for the 20% share of property tax increment revenue directed toward low and moderate income housing projects. Gateway Debt Service Fund - This fund accounts for debt repayments and serves as a bond retirement sinking fund for the 1999 revenue bonds. Downtown Debt Service Fund - This fund accounts for debt repayments on the 1997 tax allocation bonds. 1999 Certificates of Participation Debt Service Fund - This fund accounts for repayments on this debt issue. Basis of Accounting - The government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. 24 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements I' NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued) Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Agency considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Non-exchange transactions, in which the Agency gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Other revenues susceptible to accrual include interest and charges for services. Under the terms of grant agreements, the Agency may fund certain programs with a combination of cost- reimbursement grants, categorical block grants, and unrestricted redevelopment revenues. Thus, both restricted and unrestricted net assets are available to finance program expenditures. The Agency's policy is to first apply restricted grant resources to such programs, followed by unrestricted redevelopment revenues if necessary. Capital Assets - All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed fixed assets are valued at their estimated fair market value on the date contributed. Capital assets excluding infrastructure are capitalized if costs exceed $5,000. The similar threshold for infi'astructure is $100,000. With the implementation of GASB Statement 34, the Agency is required to record all its public domain (infrastructure) capital assets, which include roads, bridges, curbs and gutters, streets and sidewalks and drainage systems. Infrastructure assets are transferred to the City upon completion as the City will maintain them. GASB 34 required such assets to be excluded from the Agency's financial statements and included in the City's financial statements. GASB Statement 34 allows the Agency up to four years to record all its infrastructure assets at June 30, 2003. With the implementation of GASB 34 the Agency has recorded additions and improvements to infrastructure classified as streets, storm drains, and traffic control devices since fiscal 2003. Historical value for infrastructure assets acquired in prior years since 1980 will be retroactively recorded by June 30, 2006. GASB Statement 34 requires that all capital assets with limited useful lives be depreciated over their estimated useful lives. Alternatively, the "modified approach" may be used for certain capital assets. Depreciation is not provided under this approach, but all expenditures on these assets are expensed, unless they are additions or improvements. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year's pro rata share of the cost of capital assets. 25 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements INOTE ! - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued) Depreciation of all capital assets is charged as an expense against operations each year and the total amount of depreciation taken over the years, called accumulated depreciation, is reported on the balance sheet as a reduction in the book value of capital assets. Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The Agency has assigned the useful lives listed below to capital assets. Buildings & Improvements Land Improvements Infrastructure Machinery & Equipment Furniture & Fixtures 50 years 30 years 65 years 5-20 years 12 years F. Capital assets, excluding infrastructure, are recorded if acquisition or construction costs exceeds $5,000. The similar threshold for infrastructure is $100,000. NetAssets - GASB Statement 34 adds the concept of Net Assets, which is measured on the full accrual basis, to the concept of Fund Balance, which is measured on the modified accrual basis. Net Assets is the excess of all the Agency's assets over all its liabilities, regardless of fund. Net Assets are divided into three captions under GASB Statement 34. These captions apply only to Net Assets, which is determined only at the Government-wide level, and are described below: Invested in CapitalAssets, net of related debt describes the portion of Net Assets which is represented by the current net book value of the Agency's capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the Agency cannot unilaterally alter. These principally include resources received for debt service requirements; redevelopment funds restricted to low and moderate income purposes. Unrestricted describes the portion of Net Assets which is not restricted as to use. Fund Balance Reserves and Designations - Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund's balance may be reserved or designated for future expenditure. Reserves are restrictions placed by outside entities, such as other governments, which restrict the expenditures of the reserved funds to the purpose intended by the entity which provided the funds. The Agency has reserved fund balances as follows: Reserve for Encumbrances - To account for assets set aside for goods and services to be received. 26 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Continued) [ ! Reserve for Advances - To account for advance payments received set aside to represent mounts that do not represent available current resources. Reserve for Loans Receivable - To account for assets that have been set aside to represent loans receivable amounts that do not represent available current resources. Reserve for Future Loan Obligations - To account for bond proceeds to be loaned for future redevelopment projects. Reserve for Restricted Assets - To account for assets that are restricted pursuant to the Agency' long-term debt agreements. Unreserved-designated - To reflect amounts specifically designated for projects/activities by official action of the Agency. Designations are imposed by the City of South San Francisco Redevelopment Agency to reflect future spending plans or concerns about the availability of future resources. Designations may be modified, amended or removed by The City of South San Francisco Redevelopment Agency. Budgets and Budgetary Accounting - Prior to June 1, the City Manager submits to the City Council a proposed operating budget for the upcoming fiscal year. The proposed budget includes a summary of proposed expenditures and forecasted revenues of the Agency's governmental funds. The City Council adopts the budget by June 30 through passage of an adopted resolution. The Agency Executive Director may transfer appropriations from one program, activity, or object to another within the same fund. However, transfers of appropriations which increase total fund appropriations must be approved by the Agency Board. All unexpended appropriations lapse at the end of the fiscal year. L Property Tax Increment - All property taxes are levied and collected by the County Auditor of the County of San Mateo and paid to the various taxing entities including the Agency. Secured taxes are due on November 1 and February I and become delinquent on December 10 and April 10, respectively. Unsecured taxes are due on July 1 and become delinquent on August 31. The lien date for secured and unsecured property taxes is January 1 of the preceding fiscal year. Property tax increment revenues include only property taxes resulting from increased assessed values and are recognized in the fiscal year for which the taxes have been levied, provided they become available and measurable within the current period or soon enough thereafter to be used to pay liabilities of the current period. [NOTE 2- CASH AND INVESTMENTS l Agency cash not held by the Trustee is included in a Citywide cash and investment pool. The City's cash is fully collateralized with securities held by an agent of the pledging financial institution in the City's name. City statutes permit investments in U.S. Treasury securities, obligations issued by agencies of the United States Government, banker's acceptances, commercial paper, certificates of deposit, repurchase agreements, Local Agency Investment Fund, San Mateo County Investment Fund, mutual funds and medium term notes that meet specified rating requirements. 27 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements INOTE 2 -- CASH AND INVESTMENTS (Continued) ] The City's investments are carried at fair value instead of cost, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. The Agency's cash and investments comprise the following at June 30, 2004 are as follows: Investment Agreements and Pooled Investments (non categorized): Money Market Funds (U.S. Securities) Investment Agreement Local Agency Investment Fund 2004 $12,011,991 4,258,550 14,845,000 31,115,541 18,611,632 $49,727,173 $23,443,312 2,400 26,281,461 $49,727,173 City of South San Francisco Treasury Total Cash and Investments Financial Statement Presentation: Cash and investments Cash and Investments with fiscal agent Restricted cash and investments Total Agency Cash and Investments NOTE 3 - DUE FROM CITY OF SOUTH SAN FRANCISCO As of June 30,2004, the City Sewer Rental Fund owes Redevelopment Agency Downtown Capital Projects Fund in the amount of $3,981,499. The outstanding balances will be paid off from the State Water Resources Control Board loan draw down. 28 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements [NOTE 4 - INTER-FUND TRANSACTIONS ] A. Transfers Transfers between funds during the fiscal year ended June 30, 2004 were as follows: FROM FUND: TO FUND:. AMOUI~f: Redevelom Agency Capiml Projcct Funds: C_~eway Debt Service Fund Low Mod Housing Capital Project Fund $4,924,037 (A) 1,2fo0314 Low Mod Housing Capital Project Fund Downtown Debt Service Fund Gateway Debt Service Fund 1999 Certificates of Participation Debt Service fund 1,401,161 (B) 759,156 (A) ~,~60 (^) 403,595 (A) Low Mod Housing RDA Gateway Debt Service Fund 294,974 (A) Shearwater RDA LowMod Housing Capital Project Fund 452,689 CB) El Camino RDA Low Mod Housing Capital Project Fund 346,794 (B) Total $9,942,580 The reasons for ~hese transfers are se~ forth belo~ (A) For debt service (B) Set aside 20% of propert7 tax incremcm for Low and Moderate Housing Capital Project Fund. B. Long-term Interfund Balances In the late 1990's the City General Fund advanced funds to the Shearwater Redevelopment Agency Capital Project Fund as seed money for the Oyster Point Boulevard widening done in the 1990's and to the El Camino Redevelopment Agency Capital Project Fund, for traffic improvements made in the late 1990's, During the year ended June 30, 2003, the Downtown Redevelopment Agency Capital Project Fund project area assumed $3.6 million of the General Fund advance to Shearwater, with $3,088,161 being the unpaid balance at June 30, 2004. During the year ended June 30, 2004, Shearwater Redevelopment Agency Capital Project Fund took over the $844,591 balance of the City General Fund advance to E1 Camino at Redevelopment Agency Capital Project Fund. The outstanding balances will be paid off by 2033 with property tax increments, at a variable interest rate equal to the earnings rate of the City's overall investment portfolio. 29 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 5 - CAPITAL ASSETS Changes in the Capital Assets consisted of the following: Adjustment Balance and Balance July 1, 2003 Additions Retirements June 30, 2004 Governmental activities Capital assets not being depreciated: Land $10,630,329 $2,431,635 $13,061,964 Conslxuction in Progress 383,025 2,162,942 2,545,967 Total capital assets not being depreciated 11,013,354 4,594,577 15,607,931 Capital assets being depreciated: Buildings and Improvements 3,052,540 3,052,540 Land lmpmv~nent$ 2,125,119 2, i 25, l 19 Infrastructure 188,297 188,297 Machinery & Equipment 133,859 ($8,783) 125,076 Office Equipment 23,452 23352 Furniture and Fixtures 21,506 21,506 Vehicles 24,042 24,042 Total capital assets being depreciated 5,568,815 (8,783) 5,560,032 Less accumulated depreciation for. Buildings and Improvements (60,314) (93,848) (I 54,162) Land Improvements (95,230) (70,837) (166,067} Infrastructure (3,138 ) (6,277) (9315) Machinery & Equipment (44,247) (10,423) 5,489 (49,1 g 1) Office Equipment (8,375) (3,350) (11,725) Furniture and Fixtures (4,339) (1,792) (6,131) Vehicles (13,523) (3,005) (16,528) Total accumulated depreciation Net capital assets being depreeialed (229,166) (189,532) 5,489 (413,209) 5,339,649 (189,532) (3,294) 5,146,823 $16,353,003 $4,405,045 ($3,294) $20,754,754 Governmental activity capital assets, net Depreciation expense has been allocated to the Redevelopment activity on the statement of activities. The Agency disposed of land in fiscal 2002. The disposal was properly reported in the City of South San Francisco's financial statements. However, during fiscal year ending June 30, 2003, the Agency did not record the retiremem of the properties which had a net book value of $4,550,819. Beginning net assets have been restated to exclude the net book value &the properties. In fiscal 2003, the Agency received a land donation for the Gateway Childcare Center. The land was recorded by the City of South San Francisco, but was not recorded in the Agency's financial statements. The book value of the land is $1,257,668. Beginning net assets have been restated to include the value of this land. 30 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements I NOTE 6 - LONG-TERM OBLIGATIONS A summary of governmental activities long-term debt changes for the fiscal year ended June 30, 2004, follows: Authorized Principal Principal and Outstanding Assumption Outstanding Current T~e of Obli;gation , Issued June 307 2003 of Debt Retirements June 30, 2004 Portion 2000 HUD Section 108, 4.4 to 6.6%, due 8/1/23 (A) 1999 Revenue Bonds, 3.3 to 5.0~, due 9/I118 (B) 1997 Downtown Tax Allocation Bond, 3.75 to 5.25°/% due 9/1/27 (C) 1999 C.~rtifica~ of Participation, 3.2 to 5.0¥% due 4/1/29 (D) $1,750,000 $1,750,000 $1,750,000 $12,000 31,720,000 30,175,000 $1,090,000 29,085,000 1,160,000 11,590,000 10,610,000 220,000 10,390,000 230,00~ 6~145,000 .,, $,5~710~000 12%000 .. 5~590~000 125,000 Total Rrd~lopment Agency $51,205,000 $42,535~000 $5,710,000 $t,430,000, ~$46,815,000 ~ (A) In May 2000, the City and Redevelopment Agency secured a "Contract for Loan Guarantee Assistance under Section 108 of the Housing and Community Development Act of 1974, in the aggregate principal amount of $1,750,000 (the 2000 HUD Section 108 Loan). The proceeds of the HUD Section 108 Loan were used to finance the acquisition of real property (and related relocation), rehabilitation of rental housing, and the rehabilitation of a public facility, pursuant to 24 CFR Statute 570.703(a), (d), (h) and (I). Under the Contract, the City and lhe Redevelopment Agency pledge: (a) ali allocations or grants under Section 106 of Title I, or Section 108 (q) of Title I; (b) program income, as defined at 24 CFR Section 570.500 (a); (c) tax increment revenues and receipts available to the Redevelopment Agency; (d) all proceeds from foregoing; and (e) all funds or investments in accounts established by the Contract. (It) On February 1, 1999, the City of South San Francisco Capital Improvements Financing Authority (CIFA) issued $31,720,000 of 1999 Revenue Bonds to finance tax allocation bonds of the Redevelopment Agency. The 1999 revenue bonds are obligations of the CIFA although the Redevelopment Agency is required to make bond principal and interest payments from tax increment revenue. The 1999 Revenue Bonds are, in substance, obligations of the Redevelopment Agency, and have therefore been recorded as such in these financial statements. The 1999 Revenue Bonds were issued to provide funds to pay loans (Homart Development), to finance redevelopment activities and to refund the 1993 Gateway tax allocation bonds, which were due in 20t 8. Net proceeds of $9,614,978 plus an additional $956,470 of 1993 bond reserve funds were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for ali future debt service payments on the 1993 bonds. As a result, the 1993 bonds are considered to be defeased and the liability for those bonds has been removed. As of June 30, 2004, $8,365,000 of principal remained outstanding on the 1993 bonds. (C) On September 1, 1997, the City of South San Francisco Redevelopment Agency (the Agency) issued $11,590,000 of Downtown/Central Redevelopment Project 1997 Downtown Tax Allocation Bonds to finance land acquisition, parking improvements and public infrastructure improvements by the Agency in connection with the Project Area, to fund a reserve fund for the Bonds, and to pay the issuance costs relating to the Bonds. 31 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements I NOTE 6 - LONG-TERM OBLIGATIONS (Continued) (D) On February 1, 1999, the City issued $6,145,000 of 1999 Certificates of Participation (COPs) to finance the acquisition of the land and improvements used and operated as the City of South San Francisco Conference Center. During fiscal 2003/04, pursuant to a resolution of the Redevelopment Agency Board, tax increment revenues were pledged to pay debt service on the 1999 COPS. This pledge operates as an Assumption of Debt which has been reflect in the table above. As of June 30, 2004, future debt service are as follows: Governmental Activities Year Endin] June 30 Princip, al Interest 2005 $1,527,000 $'2,241,467 2006 1,627,000 2,177,466 2007 1,837,000 2,104,849 2008 1,952,000 2,023,506 2009 2,072,000 1,935,849 2010-2014 12,445,000 8,077,449 2015-2019 16,595,000 4,478,184 2020-2024 4,315,000 1,747,157 2025-2028 4~445~000 561,506 Totals $46,815,000 $25~347,433 NOTE 7 - PASS-THROUGH PAYMENTS AND TAX INCREMENT SHIFT TO EDUCATIONAL I REVENUE AUGMENTATION FUND (ERAF) I Pursuant to California Redevelopment Law (Health and Safety Code Section 33607.5), the Agency is obligated to pass-through a portion of the gross tax increment received on the Project Area to jurisdictions within the project area. In fiscal 2003-2004, the Agency calculated and remitted $416,885 in pass-through payments to the affected jurisdictions. During fiscal 2003-2004, the State of California directed that a portion of the incremental property taxes which had been received in prior years by redevelopment agencies be paid instead to local educational agencies. During fiscal 2003-2004, the Agency paid $975,190 to the ERAF as a result of the State's directive. The State also directed that the above amounts be included in the Agency's total incremental property tax receipts for purposes of calculating the amounts to be set aside for Low and Moderate Income Housing. 32 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements INOTE 8- COMMITME, NTS AND CONTINGENCIES The Agency leases land to a private developer, Magnolia Plaza Associates, who built and operates low and moderate income multi-family housing on the leased land. At the end of the 75-year lease, May 1, 2062, title to all improvements on the land shall vest to the Agency. Lease revenue is included in interest and rental revenues. Future minimum payments to be received under the land as follows: Year Ending Land Lease June 30, Payments 2005 $51,800 2006 51,$00 2007 51,800 2008 51,800 2009 51,800 Thereafter 2,693,600 Total $2,952,600 The Agency is involved in several legal proceedings arising from its normal operations. It is the opinion of management that any obligations which may result from such legal proceedings will not have a material effect on the financial position of the Agency. 33 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY GATEWAY CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 REVENUES; Tax allocation increment Interest and rental Other Total Reve~aues EXPENDITURES: Current: Capital Outlay EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers (out) to City for capital outlays Transfers (out) Total other financing sources (u~es) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Adjustment to budgetary basis: Encumbrance adjustn~nt Fund balance, July 1 Fund balance, June 30 Budget $6,364,000 600,000 7,000 6,971,000 782,522 6,188,478 (7,096,429) (3.,453,793) (10,550,222) {$.4,361,744) Actual Amounts $6,028,500 28,984 71,187 6,128,671 455,898 5~672,773 (5,558,709) (6,184,351) (11,743,060) (6,070,287) 203,948 12,029,495 $6,163,156 Variance with Final Budget Positive ,, (Nqr~tive) ($335,500) (571,0t6) 64,187 (842,329) 326,624 (515,705) 1,537,720 (Z730,558) (1,192,835) ($1,708,543) 34 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY DOWNTO~ CAPITAL PROJECTS FUND SCHEDULE OF ICEVENLrES, EXPENDITURES A2CD CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 REVENUES: Tax allocation incremtmt Int~r~t and rental Cha-,l~s for services Total Revenues EXPENDITURe: Capital outlay Debt service: Prindpal retirm-ngnt Int~re~'t and fiscal charges Total Expendit~es EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Proce,xls from sale of capital assets Transfers (out) to City for capital outlays '[Yansf~rs (out) Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Adjustment to budgetary basis: Encumbrance adjustments Fund balance, July I Fund balance, June 30 Budget Actual Amounts Variance with Final Budget Positive $6,972,700 $6,674,343 ($298,357) 612,400 389,041 (223,359) 4 4 7,585,100 7,063,388 (521,712) 3,788,209 66,648 15,000 3,869,857 3,715,243 (7~74,313) (2,242,853) (9,517,166) 1,989,489 17,948 2,007,437 5,055,951 100 (5,007,603) (2,663,772) (7,671,275) (2,615,324) 67,598 15,513,440 $12,965,714 (55,801,923) 1,798,720 66,648 (2,948) 1,862A20 1,340,708 100 2,266,710 (420,919) 1,845,891 $3,186,599 35 CITY OF SOL~I'I-I SAN FRANCISC© KEDEVELOPMENT AGENCY SHEARWATER CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JLrNE 30, 2004 REVENUES: Tax allocation increment Interest and rental Total Revenues EXPENDITURES: Capital outlay Debt service: Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers (out) Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Fund balance, July 1 Fund balance, June 30 Budget Actual Amoun~ $2,146,000 $2,156,676 25,000 16,302 2,171,000 2,172,978 Variance with Final Budget Positive $10,676 (8,698) t,978 341,093 278,753 62~40 800,000 104,261 695,739 1,141,093 383,014 758,079 1,029,907 1,789,964 760,057 (437,950) (452,689) (14,739) (437,950) (452,689) (14,7397 $591,957 1,337,275 (1,326,400) $10,875 $745,318 36 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY EL CAMINO CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 REVENUES: Tax allocation increment Interest and rental Other Total Revenues EXPENDITURES: Capital outlay Debt service Principal m-irement Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers (ou0 to City for capital outlays Transfers (ou0 Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Adjustment to budgetary basis: Encumbrance adjustments Fund balance, July I Fundbalance, June 30 Budg~ Actual Amoun~ Variance with Final Budget Positive ~ative) $1,954,000 $I,656,371 ($297,629) 5,000 8,981 3,981 175,805 175,805 1,959,000 1,841,157 (I17,843) t,002,279 28,733 12,138 1,043,150 915,850 296,506 38,959 335,465 1,505,692 02,594) (346,7~4) (379,388) 1,126,304 22,160 (332,095) $816,369 (656,053) (390,800) (1,046,853) ($131,003) 705,773 28,733 707,685 589,842 623,459 44,006 667,465 $1,257,307 37 CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY LOW/MOD HOUSING CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED ~RqE 30, 2004 REVENUES: Interest and nmtal Total Revenues EXPENDITURES: Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers (out) to City for capital outlays Transfers in Transfers (out) Total other financing soure~ (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Adju~mcnt to budgetary baals: Encumbrance adjustments Fund balance, July 1 Fund balance, June 30 Budget Actual Amounts $370,000 $144,900 370,000 144,900 2,345,094 1,751,437 2,345,094 1,751,437 (1,975,094) (] ,606,537) Variance with Final Budget Positive (Negaave) ($225,100) (225,1o9 593,657 593,657 368,557 (3,035,000) (55,716) 2,979,284 3,487,340 3,460,957 (26,383) (293,425) (294,974) ( 1,549~ 158,915 3,110,267 2,951,352 ,($1,816,179~ 1,503,730 $3,319,909 427,896 20,387,687 $22,319,313 38 CITY OF SOUTH SAN FRANCISCO REDEVELOPIVIENT AGENCY GATEWAY DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPEND1TUP~ES .~ND CHANGES IN FUND B2(LANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 REVENUES: Interest and rentals Total Revenues EXPENDITURES: Debt service Principal retirement Interest and fiscal charge Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Fund balance, July 1 Fund balance, June 30 Budget $ ] ,090,000 1,384,418 2,474,418 (2,474,418) 2,180,993 2,180,993 ($293 Actual Amounts $135,631 135,631 1,090,000 1,391,846 2,481,846 (2,346,215) 5,219,012 5,219,012 2,872,797 12,246,854 $15, I 19,651 Variance with Final Budget Positive ('Negative} $135,631 t35,631 (7,428) (7,428) 12S~03 3,038,019 3,038,019 $3,166,222 39 CITY OF SOIJITI SAN FRANCISCO REDEVELOPMENT AGENCY DOWNTOWN DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITUP.~S AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Interest and rentals Total Revenues EXPENDITURES Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Fund balance, July l Fund balance, June 30 Budget Actual Variance Positive (Negative) $27,949 $27~949 27~49 27,949 $340,000 220,000 120,000 1,053,656 64~,633 409,023 1,393,656 864,633 529,023 (1,393,656) (836,684) 556,972 848~13 859,016 10,703 848,313 859,016 10,703 ($545,343) 22,332 763,575 $785,907 $567,675 4O CITY OF SOUTH SAN FRANCISCO REDEVELOPMENT AGENCY LOW/MOD INCOME HOUSING DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 EXPENDITURES Debt s~,-rvice: Interest and fiscal cha~es OTHER FINANCING SOURCF_.S (USES) Transfers in EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Fund balance, July I Fund balance, June 30 Budl~et Actual V~riance Positive , (Ne~tive) 41 V AAZE & SSOCIA TES ACCOUNTANCY CORPORATION 1931 San Miguel Drive - Suite 100 Walnut Creek, California 94596 (925) 930-0902 · FAX (925) 930-0135 E-Maih maze@mazeassociates.com Website: www, mazeassociates.com REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENT A UDITING STANDARDS Members &the Governing Board of the City of South San Francisco Redevelopment Agency South San Francisco, California We have audited the financial statements of the City of South San Francisco Redevelopment Agency as of and for the year ended June 30, 2004, and have issued our report thereon dated November 19, 2004. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to fmanciaI audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Agency's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts including provisions contained in the Guidelines for Compliance Audits of California Redevelopment Agencies. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. Except as noted in the Schedule of Current Year Finding, the results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance .on the internal control over financial reporting, Our consideration of the internal control over financial reporting would not necessarily disclose ali matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce tea relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However we did communicate other matters to the Agency Board in our separate Memorandum on Internal Controls dated November 19, 2004. This report is intended for the information of the Board, management and federal awarding agencies and pass-through entities. However, this report is a matter of public record and its distribution is not limited. November 19, 2004 A Professional Corporation 43 SCHEDULE OF CURRENT YEAR FINDING Finding 04-1: Housing Fund Planning and Administrative Expenditures The Agency did not prepare a written determination showing that planning and administrative expenditures were necessary for the production, improvement or preservation of low and moderate income housing for the year ended June 30, 2004, as required by Health and Safety Code Section 33334.3(d). Management Response: Management will implement the comment with the next fiscal year. 44 AGENDA CITY COUNCIL CITY OF SOUTH SAN FRANCISCO REGULAR MEETING MUNICIPAL SERVICE BUILDING COMMUNITY ROOM WEDNESDAY, FEBRUARY 9, 2005 7:30 P.M. PEOPLE OF SOUTH SAN FRANCISCO You are invited to offer your suggestions. In order that you may know our method of conducting Council business, we proceed as follows: The regular meetings of the City Council are held on the second and fourth Wednesday of each month at 7:30 p.m. in the Municipal Services Building, Community Room, 33 Arroyo Drive, South San Francisco, California. Public Comment: For those wishing to address the City Council on any Agenda or non-Agendized item, please complete a Speaker Card located at the entrance to the Council Chamber's and submit it to the City Clerk. Please be sure to indicate the Agenda Item # you wish to address or the topic of your public comment. California law prevents the City Council from taking action on any item not on the Agenda (except in emergency circumstances). Your question or problem may be referred to staff for investigation and/or action where appropriate or the matter may be placed on a future Agenda for more comprehensive action or a report. When your name is called, please come to the podium, state your name and address (optional) for the Minutes. COMMENTS ARE LIMITED TO THREE (3) MINUTES PER SPEAKER. Thank you for your cooperation. The City Clerk will read successively the items of business appearing on the Agenda. As she completes reading an item, it will be ready for Council action. RAYMOND L. GREEN Mayor JOSEPH A. FERNEKES Mayor Pro Tem RICHARD A. GARBARINO, SR. Councilman PEDRO GONZALEZ Councilman KARYL MATSUMOTO Councilwoman RICHARD BATTAGLIA City Treasurer SYLVIA M. PAYNE City Clerk BARRY M. NAGEL City Manager STEVEN T. MATTAS City Attorney PLEASE SILENCE CELL PHONES AND PAGERS HEARING ASSISTANCE EQUIPMENT AVAILABLE FOR USE BY THE HEARING IMPAIRED AT CITY COUNCIL MEETINGS CALL TO ORDER ROLL CALL PLEDGE OF ALLEGIANCE INVOCATION PRESENTATIONS · Proposed Ferry Service - Steve Morrison, Water Transit Authority AGENDA REVIEW PUBLIC COMMENTS ITEMS FROM COUNCIL · Announcements - South San Francisco Chamber of Commerce 2005 Awards and Recognitions · Committee Reports CONSENT CALENDAR 1. Motion to approve the minutes of January 19, 25 and 26, 2005 2. Motion to confirm expense claims of February 9, 2005 o Resolution authorizing the execution of an agreement with Callander Associates for design of the SSF/BART linear park in an amount not to exceed $391,794 and amend capital improvement budget Resolution accepting grant funds from the Urban Park Act of 2001 for the Orange Memorial Park Recreation Building Replacement Project in the amount of $2.34 million and amend capital improvement budget Resolution authorizing the City Engineer to sign a Waiver of Claims and Indemnification Agreement with the Metropolitan Transportation Commission Resolution authorizing agreement to participate in the Office of Traffic Safety Comprehensive Countywide DUI Traffic Enforcement/Education and Seat Belt Safety Grant Program ADMINISTRATIVE BUSINESS Report and Transmittal of the Comprehensive Annual Financial Report (CAFR) for FY 2003 -04 o Transmittal of 2nd quarter financial report and resolution amending the FY 2004-05 general fund operating budget COUNCIL COMMUNITY FORUM ADJOURNMENT REGULAR CITY COUNCIL MEETING FEBRUARY 9, 2005 AGENDA PAGE 2 StaffReport AGENDA ITEM #3 DATE: TO: FROM: SUBJECT: February 9, 2005 Honorable Mayor and City Council Sharon Ranals, Director of Recreation and Community Services Resolution Authorizing the City Manager to Execute an Agreement with Callander Associates, Landscape Architecture, Inc., for Design of the Linear Park and Amending the 2004/05 Capital Improvement Budget RECOMMENDATION: It is recommended that the City Council adopt a resolution authorizing the City Manager to execute an agreement with Callander Associates, Landscape Architecture, Inc., in an amount not to exceed $391,794, for design of the South San Francisco Linear Park, and amend the 2004/05 Capital Improvement Budget to change the funding source for the Linear Park design from developer fees to Prop 12 funds. BACKGROUND/DISCUSSION: The city has been pursuing the installation of a Linear Park to extend between the South San Francisco and the San Bruno BART stations. At the regular meeting of January 12, 2005, the City Council approved a resolution authorizing the City Manager to accept $1,932,900 in Federal Surface Transportation Funds administered by the Metropolitan Transportation Agency (MTC) to be allocated toward construction of a segment of the park, specifically the section from Tanforan to Orange Avenue. Prior to notification of the grant award, design of the Linear Park was approved in the 2004/05 Capital Improvement Program. Although the application for grant funds showed a portion of the grant to be used for design, given the strict requirements for the expenditure of federal funds, such as a lengthy pre-authorization required for consultant services above a certain threshold, the plan is to proceed with the design using residual funds that were set aside for parks and recreation improvements from Proposition 12, the Park Bond Act of 2000. The MTC grant funds will be applied to construction. The consultant agreement is for the full design of the trail from Tanforan to Orange Avenue. In addition, the consultant agreement includes funding for full design of the section from Orange to Chestnut. In the event construction bids are favorable or potential grant funds are awarded in the near future, a bid alternate to also construct a section from Orange to Chestnut could be accomplished. Also included in the contract is some funding for design refinement on the section from Chestnut to Staff Report To: Honorable Mayor and City. Jancil Date: February 9, 2005 Subject: Agreement with Callander Associates Page 2 Lawndale. Due to some unknown land use outcomes in this area, it may not be prudent to fully execute a design of this section completely to the construction document phase. However, some design refinement can help to inform some of the land use alternatives possible, and will also enhance the project's readiness both for future grant applications and negotiations for developer park-in-lieu fees. On October 26, 2004, the City invited the following firms with previous experience in trail planning to submit proposals for design of the Linear Park: Edaw, San Francisco Callander Associates, San Mateo Alta Planning and Design, San Rafael MPA Design, San Francisco SWA Group, San Francisco Carducci and Associates, San Francisco Gates and Associates, Danville AAM Design, Lafayette Harris Design, Oakland On November 15, 2004, proposals were received from SWA Group, MPA Design, and Callander Associates. Proposals were evaluated by city staff including Dennis Chuck, Senior Civil Engineer, Bob Hahn, Senior Civil Engineer, and Sharon Ranals, Director of Recreation and Community Services. Callander Associates was selected as the recommended landscape architecture firm because of their excellent experience with trail projects, including the Monterey Recreation Trail and Transportation Corridor and E1 Cerrito BART Corridor Trail; familiarity with the city and performance on past projects, including the Parks, Recreation and Open Space Master Plan; the award-winning Sculpture Garden, Sister Cities Park, the Linear Park Master Plan, and preparation of four grant applications that received funding. The firm has demonstrated a firm understanding of the Linear Park project, and has extensive experience in working with the community, BART, SamTrans, and other stakeholders. It is anticipated that an addendum for completion of construction drawings to 100% for the section from Chestnut to Lawndale will be executed with Callander at some point in the future. The schedule for this work will be determined based on the outcome of land use discussions in this area, and the availability of construction funds for the remaining portion of the alignment. Finally, it should be noted that staff and the consultant are continuing to work with BART and SamTrans toward a formal agreement for easement, right of way, and maintenance of the trail, although one has not yet been finalized. In addition, staff is coordinating with PG&E with regard to their installation of the Jefferson-Martin power line near the same alignment of the future Linear Park. FUNDING: The 2004/05 Capital Improvement Budget appropriates $417,000 for design of the Linear Park. As indicated above, the funds to be used are deferred Proposition 12 Funds in account 51-2110. StaffReport To: Honorable Mayor and City c~ancil Date: February 9, 2005 Subject: Agreement with Callander Associates Page 3 By: Sharon Ranals Director of Recreation and Community Services Appro~ed~, ~~'~~ . ~C~tTMMa~a~;grel Q-~ Attachments: 1. Resolution 2. Consulting Services Agreement RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION AUTHORIZING AN AGREEMENT WITH CALLANDER ASSOCIATES, LANDSCAPE ARCHITECTURE, INC., IN AN AMOUNT NOT TO EXCEED $391,794 FOR DESIGN OF THE SOUTH SAN FRANCISCO LINEAR PARK AND AMENDING THE 2004/05 CAPITAL IMPROVEMENT PROGRAM BUDGET WHEREAS, staff recommends an agreement between Callander Associates Landscape Architecture, Inc. and the City of South San Francisco in an amount not to exceed $391,794 for design of the South San Francisco Linear Park; and WHEREAS, the 2004/05 Capital Improvement Program budget appropriates $417,000 for design of the Linear Park; and WHEREAS, the funds to be used are deferred Proposition 12 Funds in account 51-2110. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby authorizes an agreement with Callander Associate Landscape Architecture, Inc., in an amount not to exceed $391,794 for design of the South San Francisco Linear Park and amends the Capital Improvement Program budget to change the funding source for the Linear Park design from developer fees to Prop 12 funds. BE IT FURTHER RESOLVED that the City Manager is hereby authorized to execute the agreement on behalf of the City of South San Francisco. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the __ day of ,2005 by the following vote: AYES: NOES: ABSTAIN: ABSENT: S :\Current Reso'sk2-9-05callander.associates.agreement-res.doc ATTEST: City Clerk CONSULTING SERVICES AGREEMENT BETWEEN THE CITY OF SOUTH SAN FRANCISCO AND CALLANDER ASSOCIATES LANDSCAPE ARCHITECTURE, INC. THIS AGREEMENT for consulting services is made by and between the City of South San Francisco ("City") and Callander Associates Landscape Architecture, Inc. ("Consultant") (together sometimes referred to as the "Parties") as of ,200_ (the "Effective Date"). Section 1. SERVICES. Subject to the terms and conditions set forth in this Agreement, Consultant shall provide to City the services described in the Scope of Work attached as Exhibit A, attached hereto and incorporated herein, at the time and place and in the manner specified therein. In the event of a conflict in or inconsistency between the terms of this Agreement and Exhibit A, the Agreement shall prevail. 1,1 Term of Services. The term of this Agreement shall begin on the Effective Date and shall end on December 1,2006, the date of completion specified in Exhibit D, and Consultant shall complete the work described in Exhibit A prior to that date, unless the term of the Agreement is otherwise terminated or extended, as provided for in Section 8. The time provided to Consultant to complete the services required by this Agreement shall not affect the City's right to terminate the Agreement, as provided for in Section 8. 1.2 Standard of Performance. Consultant shall perform all services required pursuant to this Agreement in the manner and according to the standards observed by a competent practitioner of the profession in which Consultant is engaged in the geographical area in which Consultant practices its profession. Consultant shall prepare all work products required by this Agreement in a substantial, first-class manner and shall conform to the standards of quality normally observed by a person practicing in Consultant's profession. 1.3 Assignment of Personnel. Consultant shall assign only competent personnel to perform services pursuant to this Agreement. In the event that City, in its sole discretion, at any time during the term of this Agreement, desires the reassignment of any such persons, Consultant shall, immediately upon receiving notice from City of such desire of City, reassign such person or persons. 1.4 Time. Consultant shall devote such time to the performance of services pursuant to this Agreement as may be reasonably necessary to meet the standard of performance provided in Section 1.1 above and to satisfy Consultant's obligations hereunder. Section 2. COMPENSATION. City hereby agrees to pay Consultant a sum not to exceed $391,794, notwithstanding any contrary indications that may be contained in Consultant's proposal, for services to be performed and reimbursable costs incurred under this Agreement. In the event of a conflict between this Agreement and Consultant's fee estimate, attached as Exhibit B, regarding the amount of compensation, the Agreement shall prevail. City shall pay Consultant for services rendered pursuant to this Agreement at the time and in the manner set forth herein. The payments specified below shall be the only payments from City to Consultant for services rendered pursuant to this Agreement. Consultant shall submit all invoices to Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 1 of 14 City in the manner specified herein. Except as specifically authorized by City, Consultant shall not bill City for duplicate services performed by more than one person. Consultant and City acknowledge and agree that compensation paid by City to Consultant under this Agreement is based upon Consultant's estimated costs of providing the services required hereunder, including salaries and benefits of employees and subcontractors of Consultant. Consequently, the parties further agree that compensation hereunder is intended to include the costs of contributions to any pensions and/or annuities to which Consultant and its employees, agents, and subcontractors may be eligible. City therefore has no responsibility for such contributions beyond compensation required under this Agreement. 2.1 2,2 2.3 2.4 2.5 Invoices. Consultant shall submit invoices, not more often than once a month during the term of this Agreement, based on the cost for services performed and reimbursable costs incurred prior to the invoice date. Invoices shall contain the following information: · Serial identifications of progress bills; i.e., Progress Bill No. 1 for the first invoice, etc.; · The beginning and ending dates of the billing period; · A Task Summary containing the original contract amount, the amount of prior billings, the total due this period based upon task matrix as approved by the City, the balance available under the Agreement, and the percentage of completion; Monthly Payment. City shall make monthly payments, based on invoices received, for services satisfactorily performed, and for authorized reimbursable costs incurred. City shall have 30 days from the receipt of an invoice that complies with all of the requirements above to pay Consultant. Final Payment. City shall pay the total sum due pursuant to this Agreement within sixty (60) days after completion of the services and submittal to City of a final invoice, if all services required have been satisfactorily performed. Total Payment. City shall pay for the services to be rendered by Consultant pursuant to this Agreement. City shall not pay any additional sum for any expense or cost whatsoever incurred by Consultant in rendering services pursuant to this Agreement. City shall make no payment for any extra, further, or additional service pursuant to this Agreement. In no event shall Consultant submit any invoice for an amount in excess of the maximum amount of compensation provided above either for a task or for the entire Agreement, unless the Agreement is modified prior to the submission of such an invoice by a properly executed change order or amendment. Hourly Fees. Fees for work performed by Consultant on an hourly basis shall not exceed the amounts shown for 4.0 services per Exhibit A and hourly rates per Exhibit C - Schedule of Compensation. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 2 of 14 2.6 Reimbursable Expenses. Reimbursable expenses are specified below, and shall not exceed thirteen thousand and eight hundred dollars ($13,800.). Expenses not listed below are not chargeable to City. Reimbursable expenses are included in the total amount of compensation provided under this Agreement that shall not be exceeded. 2.7 Payment of Taxes. Consultant is solely responsible for the payment of employment taxes incurred under this Agreement and any similar federal or state taxes. 2.8 Payment upon Termination. In the event that the City or Consultant terminates this Agreement pursuant to Section 8, the City shall compensate the Consultant for all outstanding costs and reimbursable expenses incurred for work satisfactorily completed as of the date of written notice of termination. Consultant shall maintain adequate logs and timesheets in order to verify costs incurred to that date. 2,9 Authorization to Perform Services. The Consultant is not authorized to perform any services or incur any costs whatsoever under the terms of this Agreement until receipt of authorization from the Contract Administrator. Section 3. FACILITIES AND EQUIPMENT. Except as set forth herein, Consultant shall, at its sole cost and expense, provide all facilities and equipment that may be necessary to perform the services required by this Agreement. City shall make available to Consultant only the facilities and equipment listed in this section, and only under the terms and conditions set forth herein. City shall furnish physical facilities such as desks, filing cabinets, and conference space, as may be reasonably necessary for Consultant's use while consulting with City employees and reviewing records and the information in possession of the City. The location, quantity, and time of furnishing those facilities shall be in the sole discretion of City. In no event shall City be obligated to furnish any facility that may involve incurring any direct expense, including but not limited to computer, long-distance telephone or other communication charges, vehicles, and reproduction facilities. Section 4. INSURANCE REQUIREMENTS. Before beginning any work under this Agreement, Consultant, at its own cost and expense, unless otherwise specified below, shall procure the types and amounts of insurance listed below against claims for injuries to persons or damages to property that may arise from or in connection with the performance of the work hereunder by the Consultant and its agents, representatives, employees, and subcontractors. Consistent with the following provisions, Consultant shall provide Certificates of Insurance, attached hereto and incorporated herein as Exhibit E, indicating that Consultant has obtained or currently maintains insurance that meets the requirements of this section and under forms of insurance satisfactory, in all respects, to the City. Consultant shall maintain the insurance policies required by this section throughout the term of this Agreement. The cost of such insurance shall be included in the Consultant's bid. Consultant shall not allow any subcontractor to commence work on any subcontract until Consultant has obtained all insurance required herein for the subcontractor(s) and provided evidence thereof to City. Verification of the required insurance shall be submitted and made part of this Agreement prior to execution. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 3 of 14 4.1 4.2 Workers' Compensation. Consultant shall, at its sole cost and expense, maintain Statutory Workers' Compensation Insurance and Employer's Liability Insurance for any and all persons employed directly or indirectly by Consultant. The Statutory Workers' Compensation Insurance and Employer's Liability Insurance shall be provided with limits of not less than ONE MILLION DOLLARS ($1,000,000.00) per accident. In the alternative, Consultant may rely on a self-insurance program to meet those requirements, but only if the program of self-insurance complies fully with the provisions of the California Labor Code. Determination of whether a self-insurance program meets the standards of the Labor Code shall be solely in the discretion of the Contract Administrator. The insurer, if insurance is provided, or the Consultant, if a program of self-insurance is provided, shall waive all rights of subrogation against the City and its officers, officials, employees, and volunteers for loss arising from work performed under this Agreement. Commercial General and Automobile Liability Insurance, 4.2.1 General requirements. Consultant, at its own cost and expense, shall maintain commercial general and automobile liability insurance for the term of this Agreement in an amount not less than ONE MILLION DOLLARS ($1,000,000.00) per occurrence, combined single limit coverage for risks associated with the work contemplated by this Agreement. If a Commercial General Liability Insurance or an Automobile Liability form or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the work to be performed under this Agreement or the general aggregate limit shall be at least twice the required occurrence limit. Such coverage shall include but shall not be limited to, protection against claims arising from bodily and personal injury, including death resulting therefrom, and damage to property resulting from activities contemplated under this Agreement, including the use of owned and non- owned automobiles. 4.2.2 Minimum scope of coverage. Commercial general coverage shall be at least as broad as Insurance Services Office Commercial General Liability occurrence form CG 0001 or GL 0002 (most recent editions) covering comprehensive General Liability and Insurance Services Office form number GL 0404 covering Broad Form Comprehensive General Liability. Automobile coverage shall be at least as broad as Insurance Services Office Automobile Liability form CA 0001 (ed. 12/90) Code 8 and 9. No endorsement shall be attached limiting the coverage. 4.2.3 Additional requirements. Each of the following shall be included in the insurance coverage or added as a certified endorsement to the policy: The insurance shall cover on an occurrence or an accident basis, and not on a claims-made basis. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 4 of 14 4.3 4,4 Any failure of Consultant to comply with reporting provisions of the policy shall not affect coverage provided to City and its officers, employees, agents. Professional Liability Insurance. 4.3.1 General requirements. Consultant, at its own cost and expense, shall maintain for the period covered by this Agreement professional liability insurance for licensed professionals performing work pursuant to this Agreement in an amount not less than ONE MILLION DOLLARS ($1,000,000) covering the licensed professionals' errors and omissions. Any deductible or self-insured retention shall not exceed $150,000 per claim. 4,3.2 Claims-made limitations. The following provisions shall apply if the professional liability coverage is written on a claims-made form: The retroactive date of the policy must be shown and must be before the date of the Agreement. Insurance must be maintained and evidence of insurance must be provided for at least five years after completion of the Agreement or the work, so long as commercially available at reasonable rates. If coverage is canceled or not renewed and it is not replaced with another claims-made policy form with a retroactive date that precedes the date of this Agreement, Consultant must provide extended reporting coverage for a minimum of five years after completion of the Agreement or the work. The City shall have the right to exercise, at the Consultant's sole cost and expense, any extended reporting provisions of the policy, if the Consultant cancels or does not renew the coverage. do A copy of the claim reporting requirements must be submitted to the City prior to the commencement of any work under this Agreement. All Policies Requirements. 4.4.1 Acceptability of insurers. All insurance required by this section is to be placed with insurers with a Bests' rating of no less than A:VII. 4.4.2 Verification of coveraqe. Prior to beginning any work under this Agreement, Consultant shall furnish City with complete certified copies of all policies, including complete certified copies of all endorsements. All copies of policies and certified endorsements shall show the signature of a person authorized by that insurer to bind coverage on its behalf. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 5 of 14 4.4.3 4.4.4 4.4.5 4.4.6 4.4.7 Notice of Reduction in or Cancellation of Coverage. A certified endorsement shall be attached to all insurance obtained pursuant to this Agreement stating that coverage shall not be suspended, voided, canceled by either party, or reduced in coverage or in limits, except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City. In the event that any coverage required by this section is reduced, limited, cancelled, or materially affected in any other manner, Consultant shall provide written notice to City at Consultant's earliest possible opportunity and in no case later than ten (10) working days after Consultant is notified of the change in coverage. Additional insured; primary insurance, City and its officers, employees, agents, and volunteers shall be covered as additional insureds with respect to each of the following: liability arising out of activities performed by or on behalf of Consultant, including the insured's general supervision of Consultant; products and completed operations of Consultant, as applicable; premises owned, occupied, or used by Consultant; and automobiles owned, leased, or used by the Consultant in the course of providing services pursuant to this Agreement. The coverage shall contain no special limitations on the scope of protection afforded to City or its officers, employees, agents, or volunteers. A certified endorsement must be attached to all policies stating that coverage is primary insurance with respect to the City and its officers, officials, employees and volunteers, and that no insurance or self-insurance maintained by the City shall be called upon to contribute to a loss under the coverage. Deductibles and Self-Insured Retentions. Consultant shall disclose to and obtain the approval of City for the self-insured retentions and deductibles before beginning any of the services or work called for by any term of this Agreement. During the period covered by this Agreement, only upon the prior express written authorization of Contract Administrator, Consultant may increase such deductibles or self-insured retentions with respect to City, its officers, employees, agents, and volunteers. The Contract Administrator may condition approval of an increase in deductible or self-insured retention levels with a requirement that Consultant procure a bond, guaranteeing payment of losses and related investigations, claim administration, and defense expenses that is satisfactory in all respects to each of them. Subcontractors. Consultant shall include all subcontractors as insureds under its policies or shall furnish separate certificates and certified endorsements for each subcontractor. All coverages for subcontractors shall be subject to all of the requirements stated herein. Variation. The City may approve a variation in the foregoing insurance requirements, upon a determination that the coverage, scope, limits, and forms of Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 6 of 14 such insurance are either not commercially available, or that the City's interests are otherwise fully protected. 4.5 Remedies. In addition to any other remedies City may have if Consultant fails to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, City may, at its sole option exercise any of the following remedies, which are alternatives to other remedies City may have and are not the exclusive remedy for Consultant's breach: · Obtain such insurance and deduct and retain the amount of the premiums for such insurance from any sums due under the Agreement; Order Consultant to stop work under this Agreement or withhold any payment that becomes due to Consultant hereunder, or both stop work and withhold any payment, until Consultant demonstrates compliance with the requirements hereof; and/or · Terminate this Agreement. Section 5. INDEMNIFICATION AND CONSULTANT'S RESPONSIBILITIES. Consultant shall indemnify, defend with counsel selected by the City, and hold harmless the City and its officials, officers, employees, and agents from and against any and all losses, liability, claims, suits, actions, damages, and causes of action arising out of any personal injury, bodily injury, loss of life, or damage to property, or any violation of any federal, state, or municipal law or ordinance, to the extent caused, in whole or in part, by the willful misconduct or negligent acts or omissions of Consultant or its employees, subcontractors, or agents, by acts for which they could be held strictly liable, or by the quality or character of their work. The foregoing obligation of Consultant shall not apply when (1) the injury, loss of life, damage to property, or violation of law arises wholly from the gross negligence or willful misconduct of the City or its officers, employees, or agents and (2) the actions of Consultant or its employees, subcontractor, or agents have contributed in no part to the injury, loss of life, damage to property, or violation of law. It is understood that the duty of Consultant to indemnify and hold harmless includes the duty to defend as set forth in Section 2778 of the California Civil Code. Acceptance by City of insurance certificates and endorsements required under this Agreement does not relieve Consultant from liability under this indemnification and hold harmless clause. This indemnification and hold harmless clause shall apply to any damages or claims for damages whether or not such insurance policies shall have been determined to apply. By execution of this Agreement, Consultant acknowledges and agrees to the provisions of this Section and that it is a material element of consideration. In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of city, Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 7 of 14 Section 6. STATUS OF CONSULTANT. 6.1 6.2 Section 7. 7.1 7.2 7.3 7.4 7.5 Independent Contractor. At all times during the term of this Agreement, Consultant shall be an independent contractor and shall not be an employee of City. City shall have the right to control Consultant only insofar as the results of Consultant's services rendered pursuant to this Agreement and assignment of personnel pursuant to Subparagraph 1.3; however, otherwise City shall not have the right to control the means by which Consultant accomplishes services rendered pursuant to this Agreement. Notwithstanding any other City, state, or federal policy, rule, regulation, law, or ordinance to the contrary, Consultant and any of its employees, agents, and subcontractors providing services under this Agreement shall not qualify for or become entitled to, and hereby agree to waive any and all claims to, any compensation, benefit, or any incident of employment by City, including but not limited to eligibility to enroll in the California Public Employees Retirement System (PERS) as an employee of City and entitlement to any contribution to be paid by City for employer contributions and/or employee contributions for PERS benefits. Consultant No Agent. Except as City may specify in writing, Consultant shall have no authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent. Consultant shall have no authority, express or implied, pursuant to this Agreement to bind City to any obligation whatsoever. LEGAL REQUIREMENTS. Governing Law. The laws of the State of California shall govern this Agreement. Compliance with Applicable Laws. Consultant and any subcontractors shall comply with all laws applicable to the performance of the work hereunder. Other Governmental Regulations. To the extent that this Agreement may be funded by fiscal assistance from another governmental entity, Consultant and any subcontractors shall comply with all applicable rules and regulations to which City is bound by the terms of such fiscal assistance program. Licenses and Permits. Consultant represents and warrants to City that Consultant and its employees, agents, and any subcontractors have all licenses, permits, qualifications, and approvals of whatsoever nature that are legally required to practice their respective professions. Consultant represents and warrants to City that Consultant and its employees, agents, any subcontractors shall, at their sole cost and expense, keep in effect at all times during the term of this Agreement any licenses, permits, and approvals that are legally required to practice their respective professions. In addition to the foregoing, Consultant and any subcontractors shall obtain and maintain during the term of this Agreement valid Business Licenses from City. Nondiscrimination and Equal Opportunity. Consultant shall not discriminate, on the basis of a person's race, religion, color, national origin, age, physical or mental handicap or Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 8 of 14 disability, medical condition, marital status, sex, or sexual orientation, against any employee, applicant for employment, subcontractor, bidder for a subcontract, or participant in, recipient of, or applicant for any services or programs provided by Consultant under this Agreement. Consultant shall comply with all applicable federal, state, and local laws, policies, rules, and requirements related to equal opportunity and nondiscrimination in employment, contracting, and the provision of any services that are the subject of this Agreement, including but not limited to the satisfaction of any positive obligations required of Consultant thereby. Consultant shall include the provisions of this Subsection in any subcontract approved by the Contract Administrator or this Agreement. Section 8. TERMINATION AND MODIFICATION, 8,1 Termination. City may cancel this Agreement at any time and without cause upon written notification to Consultant. Consultant may cancel this Agreement upon 30 days' written notice to City and shall include in such notice the reasons for cancellation. In the event of termination, Consultant shall be entitled to compensation for services performed to the effective date of termination; City, however, may condition payment of such compensation upon Consultant delivering to City any or all documents, photographs, computer software, video and audio tapes, and other materials provided to Consultant or prepared by or for Consultant or the City in connection with this Agreement. 8,2 Extension. City may, in its sole and exclusive discretion, extend the end date of this Agreement beyond that provided for in Subsection 1.1. Any such extension shall require a written amendment to this Agreement, as provided for herein. Consultant understands and agrees that, if City grants such an extension, City shall have no obligation to provide Consultant with compensation beyond the maximum amount provided for in this Agreement. Similarly, unless authorized by the Contract Administrator, City shall have no obligation to reimburse Consultant for any otherwise reimbursable expenses incurred during the extension period. 8,3 Amendments. The parties may amend this Agreement only by a writing signed by all the parties. 8.4 Assignment and Subcontracting, City and Consultant recognize and agree that this Agreement contemplates personal performance by Consultant and is based upon a determination of Consultant's unique personal competence, experience, and specialized personal knowledge. Moreover, a substantial inducement to City for entering into this Agreement was and is the professional reputation and competence of Consultant. Consultant may not assign this Agreement or any interest therein without the prior written approval of the Contract Administrator. Consultant shall not subcontract any portion of the Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 9 of 14 8.5 8.6 Section 9. 9.1 9.2 performance contemplated and provided for herein, other than to the subcontractors noted in the proposal, without prior written approval of the Contract Administrator. Survival. All obligations arising prior to the termination of this Agreement and all provisions of this Agreement allocating liability between City and Consultant shall survive the termination of this Agreement. Options upon Breach by Consultant. If Consultant materially breaches any of the terms of this Agreement, City's remedies shall include, but not be limited to, the following: 8.6.1 Immediately terminate the Agreement; 8.6.2 Retain the plans, specifications, drawings, reports, design documents, and any other work product prepared by Consultant pursuant to this Agreement; 8.6.3 Retain a different consultant to complete the work described in Exhibit A not finished by Consultant; or 8.6.4 Charge Consultant the difference between the cost to complete the work described in Exhibit A that is unfinished at the time of breach and the amount that City would have paid Consultant pursuant to Section 2 if Consultant had completed the work. KEEPING AND STATUS OF RECORDS. Records Created as Part of Consultant's Performance, All reports, data, maps, models, charts, studies, surveys, photographs, memoranda, plans, studies, specifications, records, files, or any other documents or materials, in electronic or any other form, that Consultant prepares or obtains pursuant to this Agreement and that relate to the matters covered hereunder shall be the property of the City. Consultant hereby agrees to deliver those documents to the City upon termination of the Agreement. It is understood and agreed that the documents and other materials, including but not limited to those described above, prepared pursuant to this Agreement are prepared specifically for the City and are not necessarily suitable for any future or other use. City and Consultant agree that, until final approval by City, alt data, plans, specifications, reports and other documents are confidential and will not be released to third parties without prior written consent of both parties unless required by law. Consultant's Books and Records, Consultant shall maintain any and all ledgers, books of account, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for services or expenditures and disbursements charged to the City under this Agreement for a minimum of three (3) years, or for any longer period required by law, from the date of final payment to the Consultant to this Agreement. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 10 of 14 9.3 Inspection and Audit of Records. Any records or documents that Section 9.2 of this Agreement requires Consultant to maintain shall be made available for inspection, audit, and/or copying at any time during regular business hours, upon oral or written request of the City. Under California Government Code Section 8546.7, if the amount of public funds expended under this Agreement exceeds TEN THOUSAND DOLLARS ($10,000.00), the Agreement shall be subject to the examination and audit of the State Auditor, at the request of City or as part of any audit of the City, for a period of three (3) years after final payment under the Agreement. Section 10 MISCELLANEOUS PROVISIONS. 10.1 Attorneys' Fees, If a party to this Agreement brings any action, including an action for declaratory relief, to enforce or interpret the provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. The court may set such fees in the same action or in a separate action brought for that purpose. 10.2 Venue. In the event that either party brings any action against the other under this Agreement, the parties agree that trial of such action shall be vested exclusively in the state courts of California in the County San Mateo or in the United States District Court for the First District of California. 10.3 Severability. If a court of competent jurisdiction finds or rules that any provision of this Agreement is invalid, void, or unenforceable, the provisions of this Agreement not so adjudged shall remain in full force and effect. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision of this Agreement. 10.4 No Implied Waiver of Breach. The waiver of any breach of a specific provision of this Agreement does not constitute a waiver of any other breach of that term or any other term of this Agreement. 10.5 Successors and Assiqns. The provisions of this Agreement shall inure to the benefit of and shall apply to and bind the successors and assigns of the parties. 10,6 Use of Recycled Products. Consultant shall prepare and submit all reports, written studies and other printed material on recycled paper to the extent it is available at equal or less cost than virgin paper. 10.7 Conflict of Interest. Consultant may serve other clients, but none whose activities within the corporate limits of City or whose business, regardless of location, would place Consultant in a "conflict of interest," as that term is defined in the Political Reform Act, codified at California Government Code Section 81000 et seq. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 11 of 14 10.8 10.9 10.10 Consultant shall not employ any City official in the work performed pursuant to this Agreement. No officer or employee of City shall have any financial interest in this Agreement that would violate California Government Code Sections 1090 et seq. Consultant hereby warrants that it is not now, nor has it been in the previous twelve (12) months, an employee, agent, appointee, or official of the City. If Consultant was an employee, agent, appointee, or official of the City in the previous twelve months, Consultant warrants that it did not participate in any manner in the forming of this Agreement. Consultant understands that, if this Agreement is made in violation of Government Code §1090 et. seq., the entire Agreement is void and Consultant will not be entitled to any compensation for services performed pursuant to this Agreement, including reimbursement of expenses, and Consultant will be required to reimburse the City for any sums paid to the Consultant. Consultant understands that, in addition to the foregoing, it may be subject to criminal prosecution for a violation of Government Code § 1090 and, if applicable, will be disqualified from holding public office in the State of California. Solicitation. Consultant agrees not to solicit business at any meeting, focus group, or interview related to this Agreement, either orally or through any written materials. Contract Administration. This Agreement shall be administered by ("Contract Administrator"). All correspondence shall be directed to or through the Contract Administrator or his or her designee. Notices. Any written notice to Consultant shall be sent to: 10.11 Any written notice to City shall be sent to: City Clerk City of South San Francisco 400 Grand Avenue South San Francisco, CA 94080 Professional Seal. Where applicable in the determination of the contract administrator, the first page of a technical report, first page of design specifications, and each page of construction drawings shall be stamped/sealed and signed by the licensed professional responsible for the report/design preparation. The stamp/seal shall be in a block entitled "Seal and Signature of Registered'Professional with report/design responsibility," as in the following example. Seal and Signature of Registered Professional with Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 12 of 14 report/design responsibility. 10.12 Integration, This Agreement, including the scope of work attached hereto and incorporated herein as Exhibit A, represents the entire and integrated agreement between City and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral. 10.13 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one agreement. Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 13 of 14 The Parties have executed this Agreement as of the Effective Date. CITY OF SOUTH SAN FRANCISCO CONSULTANT Barry M. Nagel, City Manager Name: Title: Attest: Sylvia Payne, City Clerk Approved as to Form: Steven T. Mattas, City Attorney 207532_1 Consulting Services Agreement between City of South San Francisco and Callander Associates Landscape Architecture, Inc. Page 14 of 14 EXHIBIT B INSURANCE CERTIFICATES 207532_1 Consulting Services Agreement between City of and --Exhibit B [DATE] Page 1 of 1 Exhibit A South San Francisco Linear Park - Scope of Work In an effort to guide and control the schedule, scope and improvement costs of the South San Francisco Linear Park, Callander Associates has developed the following scope. Modifications and refinements can be accommodated at the project start and adjusted periodically throughout the process as may be beneficial to the project. Items shown in boldface italics represent the deliverables or work documents to be provided at that task. Copies of each deliverable will be submitted to MTC and other stakeholder's where required. The limits of work for Phase One of the South San Francisco Linear Park are from Tanforan Avenue to Chestnut Avenue. An optional task has been indicated to develop 30% construction documents for the segment from Chestnut Avenue to Lawndale Boulevard. Elements to be included within this area include those items indicated in the March 2003 South San Francisco BART Linear Park Master Plan and supporting cost estimates. These include, but are not necessarily limited to: Phase One - Tanforan to Chestnut · Class One multi-use pathway · Trailhead nodes at Huntington, Spruce, and Chestnut (Orange Avenue traiLhead complete) · Interpretive area at Spruce trailhead · Pedestrian crossing improvements at Spruce (including pedestrian activated signal, colored concrete crosswalk, and signal interconnect) · Dog Park · Trail lighting and site furniture (benches, trash receptacles, bollards, etc.) · Comprehensive trail signage (informational kiosk, way finding, mile markers, etc.) · Landscaping and irrigation · Bid Alternate will be prepared for the segment from Orange Avenue to Chestnut Avenue, including the dog park. · Estimate total cost of construction is $3,055,381 Optional Task - Chestnut to Lawndale - 30% submittal only · Class One multi-use pathway · Eliminate on-street parking on E1 Camino, just north of Chestnut Avenue, and reconfigure curb alignment to allow for a sidewalk, class one bike path, and buffer planting. · Trailhead nodes at Chestnut Avenue, SSF BART Station, and Lawndale Boulevard · Trail lighting and site furniture (benches, trash receptacles, bollards, etc.) · Comprehensive trail signage (informational kiosk, way finding, mile markers, etc.) · Landscaping and irrigation - · Estimate total cost of construction is $2,649,384 P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 1 of 8 · Plans will be prepared to a 30% design development level of completion only to facilitate coordination with BART, Samtrans, PG&E, and other stakeholders as well as prepare for additional grant/funding opportunities. · The fees indicated are predicated on the optional task being completed concurrently with phase one plans. 1.0 MASTER PLAN (complete) 2.0 DESIGN DEVELOPMENT 2.01 Initial Meeting (City): Review scope, schedule and cost for both construction and design services with City staff. Review City process. Identify available and required City documents, define project goals, update design program, and submit written meeting summary. 2.02 Initial Meeting (BART): Review scope and schedule for both construction and design services with City and BART staff. Review BART process for design review, encroachment applications, and maintenance agreements. Identify available and required BART documents (it is assumed that BART will supply construction drawings, previous topos, and appraisal maps in AutoCAD 2002 format); define project goals; update design program; and submit written meeting summary. 2.03 Document Review: Obtain and review other information that may be pertinent from Planning, Parks and Recreation, Engineering, and BART. Review existing design guidelines, documents, or other existing base information provided by City and BART. Evaluate adequacy and/or need for additional information. Prepare summary memo. 2.04 Schedule: Prepare and maintain a detailed time schedule in MS Project format for the entire project through construction. 2.05 Topographic Survey: Topographic base maps will be prepared at 20 scale based upon newly flown rectified aerial photographs. Horizontal and vertical control will be provided. Information to include contours at one foot intervals, existing tree locations and sizes, surface and subsurface utility information based upon available record information, property lines, and other existing features. Submit electronic topographic survey in AutoCAD 2002 for City records. 2.06 Traffic Study: A traffic study will be prepared for the Spruce Avenue intersection. Study will evaluate the location of the signal after analysis of site P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 2 of 8 2.07 2.08 2.09 2.10 2.11 2.12 distances, vehicle and pedestrian safety issues, queuing effects on adjacent intersections, interconnection and coordination with existing traffic signals on Spruce, and potential impacts on adjacent business driveways. Submit (7) copies of the 8-~A x 11 draft traffic study for review. Upon written comments the traffic study will be revised incorporating responses and submitted as the final report. The final report will form the basis for the design of the pedestrian traffic signal. Utility Evaluation: Verify proposed multiple water, electrical, and storm drain service connections for domestic and irrigation water service, storm drainage, and pedestrian lighting. Indicate same on overlay of topographic survey and designate as utility connections diagram. Site Reconnaissance: Conduct site reconnaissance with topographic survey in hand. Evaluate access, grades, utilities, trees, fences, buffers, etc. Photograph site for in-house study and reference, as well as for future presentations. Prepare digital photo log for studio use. A copy of the photo log will be submitted to MTC as the required record of pre-construction conditions. Base Maps: Using prepared topographic survey, prepare twenty scale base maps, prepare in AutoCAD 2002 format, within project limits, conforming to City of South San Francisco standards. Horticultural Soils Analysis: Obtain up to ten horticultural soils samples to verify agricultural suitability of existing soils; submit letter report. Geotechnical Report: Take borings of existing corridor at approximately 500 feet on center, within the project limits, to determine suitability of subgrade for drainage and structural suitability for foundations and pavements. Two additional deep borings will be taken at pedestrian bridge site (optional task) to determine structural stability of soil for bridge foundation. Provide summary report detailing above including pavement section recommendations for parking lots, trails, and pedestrian walkways. In addition, provide preliminary recommendations for bridge foundation type. Preliminary Design Plans - 30% Submittal: Based on the comments received from the above meetings, the approved master plan, and the analysis of other items, proceed to develop construction documents to a 30% level of completion. All drawings shall be prepared on AutoCAD 2002. Package to include: · title sheet · preliminary grading plan (including storm drain points of connection) (1:20) · preliminary layout plan (1:20) P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 3 of 8 · prehminary irrigation plan (including water point of connection) (1:20) · preliminary planting plan (1:20) · preliminary construction details · preliminary lighting plan (including electrical point of connection) (1:20) · outline specifications and bid form 2.13 Cost Estimate: Prepare a preliminary list of quantities and provide a preliminary construction cost estimate. 2.14 Design Development Book: Confirm final selections of pre-manufactured items and design details for major features with City staff. Prepare packet of information to contain catalog cuts and information on site amenities, site furniture, irrigation equipment, electrical equipment, plant materials, and related items as well as design details. Submit seven copies of the Design Development Book to City for review and approval. 2.15 Signage Concepts: Provide conceptual designs for the park and trail signage program for the entire length of the Linear Park. Family of signage to include directional, way finding, mileage markers, and others. Prepare conceptual signage plan indicating proposed locations and design level details of signage. 2.16 Image Boards: Prepare one materials board and one plant materials board for presentation purposes. Boards to include proposed trail lights, benches, paving materials, plant materials and other pertinent site furnishings and materials. All materials to be consistent with the master plan. 2.17 Workshop Announcement and Presentation: Prepare 5-½ x 8-½ announcement for distribution by City staff. Announcement to contain images from schematic design plans and text information about project. Submit camera-ready original for reproduction and distribution by City. Prepare "powerpoint" presentation and related materials for public workshop. 2.18 Staff Meeting (City/MTC): Review above documents in a work session with City and MTC staff; review workshop goals and develop consensus for proceeding. Prepare written meeting summary. 2.19 Staff Meeting (BART/SamTrans): Review above documents in a work session with City, BART, and SamTrans staff; identify potential conflicts and develop consensus for proceeding. Prepare meeting summary. 2.20 Staff Meeting (Flood Control District)(Optional Task): Review above documents in a work session with City and Flood Control District staff; discuss P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 4 of 8 2.21 2.22 3.0 3.01 3.02 3.03 joint use agreements, review process, and develop consensus for proceeding. Prepare written meeting summary. Staff Meeting San Francisco Water Department (SFWD): Review above documents in a work session with City and SFWD staff; identify areas along the trail alignment owned by SFWD; discuss joint use agreements, review process, and develop consensus for proceeding. Prepare written meeting summary. Public Workshop #1/Commission Meeting: Present the above information in a joint workshop with community and Park and Recreation Commission; elicit and document comments, concerns and issues; develop consensus for proceeding. Prepare written meeting summary. CONSTRUCTION DOCUMENTS Construction Documents - 60% Submittal: Based on the comments received from the above meetings and the analysis of other items, proceed to develop construction documents to a draft 60% level of completion. Plans shall adhere to City of South San Francisco Design Standards and Specifications and Caltrans standards where appropriate. Package to include; title sheet · key map/general notes · demolition plan · grading and drainage plan · roadway construction plan (Spruce Avenue intersection only) · signing and pavement marking plan · site construction plan and enlargement areas · irrigation plans · planting plans · construction details · irrigation/planting details · electrical plans Update Cost Estimate: Prepare an updated list of quantities and provide an updated construction cost estimate for improvements. Draft Specifications: Prepare draft contract specifications book and bid form, using City of South San Francisco standard boilerplate, Standard Specifications, and Caltrans local programs manual as appropriate. P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Ca[lander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 5 of 8 3.04 3.05 3.06 3.07 3.08 3.09 3.10 3.11 3.12 Staff Meeting (City/MTC): Review above documents in a work session with City and MTC staff; develop consensus for proceeding. Prepare written meeting summary. Staff Meeting (BART/SamTrans): Review above documents in a work session with City, BART, and SamTrans staff; develop consensus for proceeding. Prepare written meeting summary. Construction Documents - 90% Submittal: Based on the comments received from the above meetings and the analysis of other items, proceed to develop construction documents to a draft 90% level of completion. Submittal shall include updated cost estimate and specifications. Staff Meeting (City/MTC): Review above documents in a work session with City and MTC staff; develop consensus for proceeding. Prepare written meeting summary. Staff Meeting (BART/SamTrans): Review above documents in a work session with City, BART, and SamTrans staff; develop consensus for proceeding. Prepare written meeting summary. Storm Water Plan: Prepare required storm water pollution prevention plan (SWPPP) in order to obtain the necessary General Permit for the project from the California State Water Resources Control Board (SWRCB). The plan shall include required information such as existing conditions description and plan, scope of construction, grading plan, inventory of contractor's activities, special site conditions, best management practices (BMPs) for contractor activities, BMPs for erosion and sediment control, post construction BMPs, and monitoring/maintenance plan. Submit seven (7) copies of SWPPP to City for application and submission to SWRCB. Agency Coordination: Allow for up to forty (40) hours of coordination with the various stakeholder agencies including BART, SamTrans, and SFWD to review proposed layout and to assist City in obtaining joint use agreements and plan approvals. Permit or other Agency Reviews: No services have been provided. Bid Documents/100% Submittal: After review of the 90% submittal by the City, proceed to modify the documents for submission as a final bidding package. Provide seven (7) sets of full size plans, plus mylar originals of plans and camera P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 6 of 8 3.13 3.14 ready specifications for bidding. Provide electronic files for the plans and specifications in AutoCAD 2002 and MS Word formats. Final Landscape Architect's Estimate: Prepare an updated list of quantities and provide an updated landscape architect's construction cost estimate. Project Archive: Submit one archive CD-ROM of all electronic data including construction documents, specifications, cost estimate, survey, and other base information provided by the City to be scanned and included in electronic format. 4.0 BIDDING AND CONSTRUCTION ADMINISTRATION During the bidding and construction of the South San Francisco Linear Park, Callander Associates can provide a variety of construction administration services. Based upon our working knowledge of City inspectors, past construction administration involvement, and our knowledge of trail construction we would recommend the following. The City will take the primary lead in coordinating and review contractor activities. 4.01 a. b. C. d. e. f. Pre-construction Phase Attend pre-bid meeting and assist City staff as directed. Conduct pre-construction conference and prepare meeting minutes. Review coordination and communication procedures. Assist City in responding to bidder's questions and issuing addenda during bid period. Incorporate addenda into updated construction documents prior to start of construction. Assist City staff in making award recommendations. 4.02 a. b. eo Construction Phase Review shop drawings and submittals required by technical specifications. Assist City and Construction Manager in responding to contractor requests for information. Respond to and assist in preparing change orders for City execution. Attend on-site construction reviews during construction to assist City inspection staff, followed by written field reports. Scheduled review meetings to include grading, layout review prior to paving operations to confirm smooth curves and aligmnent of pathway, soil preparation, and plant material review. Attend substantial completion walk through and submit written field report; develop "punch list" items and follow-up with corrective measures. 4.03 Geotechnical Engineering Services a. On-site testing of compaction during construction is available as additional services. P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 7 of 8 4.04 a. Post-Construction Attend final completion walk through and submit written field report; develop "punch list" items and follow-up with corrective measures. Revise construction documents to incorporate "Record Information" as provided by Contractor for City "As-built" records. P1403LExhibitAScopel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 8 of 8 Exhibit B South San Francisco Linear Park - Fee Estimate Professional Services The following lump sum fees for tasks 1 through 3, and hourly fees for task 4, are proposed and will remain valid for a period of sixty days from the date of this proposal. We have estimated our time and expenses based on the overall project budget, with drawings and services being prepared in a single package at one t/me. Subconsultants · Civil Engineering and Survey - MacLeod and Associates, Inc. · Electrical Engineering - Zeiger Engineers, Inc. · Traffic Engineering - RKH Civil and Transportation Engineering · Geotechnical Engineering - GeoForensics · Cathy Genetti Reinhard - Graphic Design (Three interpretive panels at Spruce Avenue) land arch civil/ dec eng traffic geo graphic subtotal survffy 2.0 Design Development .................... $66,398 ...... $41,790 ...... $7,325.. $3,000 ........ $4,000 .......... $0 $122,513 3.0 Construction Documents .............. $90,997 ...... $18,370 .... $16,725.. $7,800 ........ $1,000... $9,000 $143,892 4.0 Bidding and Construction Administration (hourly, with an allowance of) .................... $35,580 ............... $0 ...... $3,250 ......... $0 ............... $0 ............ $0 $38,830 Reimbursable Expenses ................ $11,400 ........ $1,000 ......... $500 ..... $700 ........... $200 ............ $0 $13,800 Subtotal ......................................... $204,375 ...... $61,160 .... $27,800 $11,500 ........ $5,200 ....... $%000 $319,035 Optional Task - Chestnut to Lawndale 2.0 Design Development .................... $41,261 ...... $16,073 ...... $5,325 .. $3,000 ........ $4,000 ............ $0 $69,659 Reimbursable Expenses .................. $2,500 ........... $200 ......... $200 ..... $100 ........... $100 ............. $0 $3,100 Subtotal ............................................ $43,761 .... $16,273 ...... $5,525.. $3,100 ........ $4,100 ............. $0 $72,759 Reimbursable Expenses Per attached Standard Schedule of Compensation dated 2005 (SM), reimbursable expenses includes five sets of prints at each phase of service. The actual reimbursable expenses incurred shall be invoiced at Callander Associates' expense, plus a fifteen-percent administration charge. The above total shall be established as an interim allowance with monthly invoicing showing the amounts incurred and balance remaining Total Estimated Compensation for Fees and Reimbursable Expenses .... $391,794 P1403ExhibitBFeeEstimatel-25-05 (2) © copyrighted 2005 Callander Associates Landscape Architecture, Inc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 25, 2005 Page 1 of 1 South Exhibit C San Francisco Linear Park Schedule of Compensation Standard Schedule of Compensation 2005 SM General The following list of fees and reimbursable expense items shall be used in providing service in the agreement. These amounts shah be adjusted in January, upon issuance of an updated Standard Schedule of Compensation: Hourly Rates Senior Principal $182/hour Principal $135/hour Associate 1 $130/hour Associate 2 $120/hour Associate 3 $109/hour Landscape Architect 1 $104/hour Landscape Architect 2 $99/hour Landscape Architect 3 $94/hour Construction Manager $103/hour Assistant 1 $83/hour Assistant 2 $78/hour Assistant 3 $68/hour Assistant 4 $62/hour Word Processor $82/hour Reimbursable Expenses All costs for photography, printing and plotting, special dehvery, insurance certificate charges, charges for waivers of subrogation, local business licenses, sales taxes, assessments, fees, mileage, all CADD and visual simulation ancillary costs, such as data transfers, tapes and outside services, and all other costs directly related to the project will be billed as a reimbursable expense at our cost plus a fifteen percent (15%) administration charge. The cost of professional hability insurance and aH costs associated with cell phones, electronic mail, faxes, long distance phone charges and related telecommunications shall be charged as a combined surcharge of 2.5% on the total fees. Payments Payments are due within ten days after monthly billing with amounts more than thirty days past due subject to a 1.5% per month interest charge. Retainer amounts, if indicated, are due upon signing the agreement and shall be applied to the final invoice for the project. P1403FeeSchedule2005-SM © copyrighted 2005 Callander Associates Landscape Architecture, Lnc. South San Francisco Linear Park Callander Associates Landscape Architecture, Inc. January 11, 2005 Page 1 of 1 Exhibit South San Francisco Linear Park - Project Schedule , mi)er I April I Sept~,,&er ] Feb~uav/ I July 2 in,al ~ (~) 5day~ M~5 F, ~1~5 ~- - ~nt rev~w 5 day~ M~ ~/05 Fh ~1 i~5 ~ ~ S~U~ '5 days" ~ ~ ~d ~ 1~5 6 t~ ~y 25~yS ~/05 F~ ~11/05/ [~~~~ --~-~ ~m s~dy 15 days M~ ~14~05 F~ ~4~5 ~ ~ u~ ev~u~ 10 ~ys M~ ~14105 Fd ~5 { ~ Sia fe~i~ 10 ~ys Men ~1~1o~ ~ ~2~bs ~ 1 o ba~ mare 5 days M~ ~i4~5: Fd ~8~5[ 12- g~t~ni~ re~ 20 ~ys M~ ~105 F~ ~05 ~ ; 14 ~st e~te 5 days ~ ~05 F~ ~29~ ~ 15 des~n d~{ ~ ~ da~s M~ ~i~ F~ i0 ~yS Mon 4i1~05 F~ 4i~9~5 18 ~ a~t and ~sena~ 10 ~ys Men ~14105 FH ~25i05 19 ~Mff~g (~ / MTC) 15~ys u~o~ F~5 ~ ~ ~ ~e~g (F~ ~ ~) 10 ~ys M~ ~05 F~ ~1 ~5 , ~ 28 u~am ~ es~ 5 da~ ~ 714~05 F~ 7/~5 ---~7 dra~ ~s 5 days M~ 7/4i~5 F~ 7/8~5 28 Saff m~ {~ / MTC) 15 days M~ 7/11~S F~ 7129~5 31 ~ffm~g (~ I MTC) is~ys Mon ~05 F~ ~1~5 ~ : 32 s~ ~e~ (~RT I ~s) 15 ~ys Men W~i05 ~d ~1 ~5 [ ~ ~- st~ wamr ~ 5 d~ ~ 9/1~ F~ ~3~5. ' ] 35 ~ ~ ~ ~ m~ 0 days :' 36 ~ ~d ~ 15 rays Mm ~19~05 Fd 1017~5 [ .~ ~a. (4 .~ 20 days MOrt 1~5 FH 11/4~5 43 ~t~s~ {i2 w~) ~YS Uon~~ Fd 11124~ ~ ~ ~ ~s~t~ L~a~ ~c~t~t~e, Inc. J~ 11, 2~5 EXHIBIT E INSURANCE CERTIFICATES 207532_1 Consulting Services Agreement between [DATE] City of and --Exhibit B Page 1 of 1 Staff Report ,4 GEND,4 ITEM #4 DATE: February 9, 2005 TO: Honorable Mayor and City Council FROM: Sharon Ranals, Director of Recreation and Community Services SUBJECT: Resolution Approving Acceptance of $2.34 Million in Grant Funds from the Urban Park Act of 2001 and Amending the 2004/05 Capital Improvement Budget for Construction of Orange Memorial Park Recreation Building RECOMMENDATION: It is recommended that the City Council adopt a resolution accepting $2.34 million in grant funds from the State of California Urban Park Act of 2001 for the design and construction of a new Recreation Building at Orange Memorial Park, and appropriate an additional $1.54 million in the 2004/05 Capital Improvement Program for a new project, "Orange Memorial Park Recreation Building Replacement", total budget of $3.88 million. BACKGROUND/DISCUSSION: In 1990 the city prepared the Park, Recreation and Open Space Master Plan, which was updated in 1997. The document was intended as a 15-year plan to establish community priorities for parks and recreation, guide decision making and direct expenditures. Orange Memorial Park was identified as the most important of the city's parks, and the improvement of facilities was given top priority. A site specific Master Plan was also completed in 1990 for Orange Memorial Park. Given the shortage of capital improvement funds in recent years, the strategy of dividing the park into quadrants, and improving sections as funds became available has been pursued. To date, improvements to the park have included construction of a new parking lot, installation of the Sculpture Garden, renovation of the large playground, construction of a new picnic shelter, and improvements to Tennis Drive. The existing Recreation Building has been well used over the years. However, not only has the facility become worn and dated, but the potential recreation programming that can be offered to the community is limited by the building's design and condition. Renovation or replacement of the existing building was recommended in the Orange Park Master Plan of 1990. In 2003 the city applied for competitive grant funds available through several grant programs, including the State of California Urban Park Act of 2001, as authorized by the City Council by Resolution No. 98-2003. The city was notified in December of 2004 that $2.34 million was awarded. Staff Report To: Honorable Mayor and City Council Date: February 9, 2005 Subject: Grant Funds from Urban Park Act of 2001 Page 2 The existing 2,300 square foot single activity room structure is to be replaced with a larger structure at 5,600 to 6,000 square feet. The project includes demolition of the old recreation building, Scout Cabin, adjunct storage building, and the basketball courts. The new structure has two separate activity rooms each with separated restrooms and storage facilities. The second activity room increases the programmability of the building, and allows for rental spaces for the community for events and receptions, potentially through the use of a sliding door. Site improvements include outdoor patio spaces for access by classes and rental groups. The project also includes relocation of the basketball courts further west adjacent to Colma Creek. Mature eucalyptus and magnolia groves in the area will be retained and landscape improvements will enhance the site. A new set of stand-alone restrooms is planned to serve the new basketball courts and adjacent soccer field. The area will also include new benches, lighting, and other site improvements. Upon addition of this project to the Capital Improvement Project, the process of selecting an architect will begin. It is anticipated that more community outreach will be done to ensure that all user groups have input into the design. Construction would be planned so as not to conflict with the city's annual Day In The Park event, to start after September of 2005. A more detailed schedule will be developed with the architect. FUNDING: The attached budget amendment appropriates the following to a new capital project, "Orange Memorial Park Recreation Building Replacement". $2,340,000 268,000 165,000 357,000 750,000 $3,88O,O0O Urban Park Act Grant Funds - Competitive Per Capita Park Bond Grant Funds, encumbered by State - Non-competitive Roberti-Z'Berg Park Bond Block Funds - Non-competitive, encumbered by State Zone IV Developer Fees, on hand Fairfield Development Park-in-Lieu Fees, anticipated to be received in 2006 Total By: Sharon Ranals Director of Recreation and Community Services Approved~,,~, X-(-~-~. Cik~ty MMina~;grel ~-~-'-~ Attachment: Resolution RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION ACCEtrI'ING $2,340,000 MILLION IN GRANT FUNDS FROM THE URBAN PARK ACT OF 2001 AND AMENDING THE 2004/05 CAPITAL IMPROVEMENT PROGRAM BUDGET FOR CONSTRUCTION OF ORANGE MEMORIAL PARK RECRF~TION BUILDING WHEREAS, staff recommends acceptance of $2,340,000 million in grant funds from the State of California Urban Park Act of 2001 for the design and construction of a new recreation building at Orange Memorial Park and appropriates an additional $1,540,000 million in the 2004/05 Capital Improvement Program budget for a new project, "Orange Memorial Park Recreation Building Replacement," total budget of $3,880,000 million; and WHEREAS, the budget amendment appropriates the following to a new capital project, "Orange Memorial Park Recreation Building Replacement." $2,340,000 $268,000 $165,000 $357,O00 $750,000 $3,880,000 Urban Park Act Grant Funds - Competitive Per Capita Park Bond Grant Funds, Non-competitive - encumbered by State Roberti-Z'Berg Park Bond Block Funds - Non-competitive, encumbered by State Zone IV Developer Fees, on hand Fairfield Development Park-in-Lieu Fees, anticipated to be received in 2006 Total NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby accepts $2,300,000 million in grant funds from Urban Park Act of 2001 and amends the 2004/05 Capital Improvement Program budget by appropriating $1,540,000 million for construction of Orange Memorial Park Recreation Building. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the __ day of ., 2005 by the following vote: AYES: NOES: ABSTAIN: ABSENT: S:\Current Reso's~2 -9-05grant.£unds.from.urban.park.res.doc ATTEST: City Clerk Staff Report DATE: TO: FROM: SUBJECT: AGENDA ITEM #5 February 9, 2005 Honorable Mayor and City Council Marty Van Duyn, Assistant City Manager 2005 CYCLE OF THE METROPOLITAN TRANSPORTATION COMMISSION'S REGIONAL SIGNAL TIMING PROGRAM RECOMMENDATION It is recommended that the City Council adopt a resolution authorizing the City Engineer to sign a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. BACKGROUND/DIS CUS SION The 2005 cycle of the Metropolitan Transportation Commission's (MTC) Regional Signal Timing Program (RSTP) provides jurisdictions assistance in developing and implementing signal coordination plans using consultants hired and funded by MTC. The City of South San Francisco has applied to MTC for and received approval to develop and install signal interconnect timings along Hickey Boulevard from El Camino Real to Junipero Serra Boulevard. Currently on Hickey Boulevard, there is an existing conduit and interconnect cable between the signals but no coordinated timings. The new timings will allow the traffic to flow more efficiently and with fewer delays. In order to allow MTC's consultant to design the system, MTC requires the City to execute a "Waiver of Claims and Indemnification" agreement between MTC and the City of South San Francisco. By this resolution, the City Council of the City of South San Francisco authorizes the City Engineer to execute such an agreement. FUNDING MTC funds the consultant directly and there will be no consultant costs for the City. There are suffi/~n.t?.n~i f; stafl t~ review the c°nsultant's pr°ducts'~F) ,. ~--~' By:(_' .Mart' Van~' u~_ )/r'47y~D~ Ap proved:,~f.a~"-~ M~. Nagel (:- ~ ~.~__ ~ Assistant City lVl~nager City Manager Attachment: Resolution Wavier of Claims and Indemnification Agreement BN:MV:RR RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION AUTHORIZING A WAIVER OF CLAIMS AND INDEMNIFICATION AGREEMENT BE~IWVEEN THE METROPOLITAN TRANSPORTATION COMMISSION AND THE CITY OF SOUTH SAN FRANCISCO WHEREAS, staff recommends a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby authorizes a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. BE IT FURTHER RESOLVED that the City Engineer is hereby authorized to execute the agreement on behalf of the City of South San Francisco. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the __ day of ,2005 by the following vote: AYES: NOES: ABSTAIN: ABSENT: ATTEST: City Clerk S:\Current Reso's\2-9-05Waiver.of. claim. MTC.res.doc WAIVER OF CLAI2ViS AND INDEMNIFICATION AGREEMENT Between METROPOLITAN TRANSPORTATION COMMISSION And TIZ[E CITY OF SOUTH SAN FRANCISCO TillS AGREEMENT is made and entered into as of the 9th day of February, 2005, by and between the Metropolitan Transportation Commission, a regional transportation planning agency established pursuant to California Government Code § 66500 et seq., (herein called "MTC"), and The City of South San Francisco (herein called "CITY"). W1TNESSETH WHEREAS, MTC has entered into a technical services agreement with several consulting firms (herein called "the Consultants"), under which the firms will provide assistance to various Bay Area cities in the retiming of traffic signals in those cities (herein called "the lh'oject"); and WHEREAS, CITY is participating in the Project by receiving assistance from one of the Consultants (herein called "the Consultant"); WHEREAS, the parties wish to define CITY' s obligations to MTC respecting waiver of claims and indemnity; NOW, THEREFORE, the parties hereto agree as follows: 1.0 WAIVER OF CLAIMS AGAINST MTC CITY waives all claims by CITY, its directors, supervisors, officers, employees, or agents against MTC, its commissioners, officers, and/or employees for damages, loss, injury and/or liability, direct or indkect, resulting from CITY' s participation in the Project and/or the services provided to CITY by the Consultant under contract to MTC. CITY' s waiver shall not apply to liability arising from and caused by the adjudicated or admitted negligence or willful misconduct of MTC, its commissioners, officers, and/or employees. 2.0 INDEMNIFICATION AND DEFENSE CITY agrees to indemnify, hold harmless and defend MTC, its commissioners, officers, and employees from any and all third party claims, demands, lawsuits, liability, loss, damages, injury and/or liability, direct or indirect (including any and all costs and expenses in connection therewith), resulting from or in connection with provision of services to CITY by the Consultant under contract with MTC, to the extent such claims, demands, etc. are not covered by the Consultant' s indemnification of MTC in the Consultant's contract with MTC. CITY's indemnification obligation shall not apply to liability arising from and caused by the adjudicated or admitted negligence or willful misconduct of MTC, its commissioners, officers, agents, and employees. IN WITNESS WHEREOF, this agreement has been executed by the parties hereto as of the date first written above. METROPOLITAN TRANSPORTATION COMMISSION THE CITY OF SOUTH SAN FRANCISCO Steve Heminger, Executive Director Ray Razavi, City Engineer Aparovedr~ to form: Steve Mattas, City Attorney A GEND 4 ITEM #6 DATE: February 9, 2005 TO: Honorable Mayor and City Council FROM: Mark Raffaelli Chief of Police SUBJECT: AGREEMENT TO PARTICIPATE IN THE OTS COMPREHENSWE COUNTYWIDE DUI TRAFFIC ENFORCEMENT / EDUCATION AND SEAT BELT SAFETY GRANT PROGRAM RECOMMENDATION It is recommended that City Council adopt the attached Resolution approving the South San Francisco Police Department's participation in the countywide agreement with the State of California Business, Transportation & Housing Agency, Office of Traffic Safety (OTS) DUI Traffic Enforcement / Education and Seat Belt Safety program. The grant is administered through the Daly City Police Department. All personnel costs are reimbursable through the grant. The grant provides for ten fully equipped Harley Davidson motorcycles valued at $26,500 each for cities participating in the grant. The South San Francisco Police Department will receive one of the motorcycles. BACKGROUND/DISCUSSION San Mateo County ranks 18th worst out of the 58 counties in fatal collisions, 12th worst in pedestrian fatalities, ~d 1~th Worst in bicycle collisions. Rankings were also poor in the area of DUI collisions. Collaborative efforts have been made to address these problems but have been hindered because many agencies do not have the resources to fully participate. The San Mateo County Chiefs and Sheriff Association recognized the problem and applied for the grant on a countywide basis. The grant provides a total of $585,000 in overtime funding that can be used by all law enforcement agencies in the County to provide staff to work: · DUI checkpoints. · Special enforcement strike teams that target specific violations such as seat belt and pedestrian safety. · Other traffic safety efforts as defined by participating agencies. Ten fully equipped police motorcycles valued at $265,000 were included in the grant, with the South San Francisco Police Department receiving one of these motorcycles. Staff Report Subject: Participation in the OTS Countywide Program Page 2 FUNDING Funding for the grant runs from October 1, 2004 through December 31, 2006. The City is not required to provide matching funds. All personnel costs for participating in the program will be paid from the grant. The City of South San Francisco will be able to use the motorcycle during the gra]~ period. At the conclusion of the grant, the motorcycle will be the property of the City of South/San Francisco. Only cost during the grant period will be routine maintenance related to the motorcycle. Mark Raffaelli ~--B~I~. Nagel~ Chief of Police City.Manager Attachment: Resolution RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION APPROVING AN AGREEMENT TO PARTICIPATE IN THE OTS COMPREHENSIVE COUNTYWIDE DUI TRAFFIC ENFORCEMENT / EDUCATION AND SEAT BELT SAFETY GRANT PROGRAM WHEREAS, it is recommended that City Council approve the South San Francisco Police Department's participation in the countywide agreement with the State of California Business, Transportation & Housing Agency, Office of Traffic Safety (OTS) DUI Traffic Enforcement/ Education and Seat Belt Safety program; and WHEREAS, the grant provides a total of $585,000 in overtime funding that can be used by all law enforcement agencies in the county to provide staff to work; and WHEREAS, ten fully equipped police motorcycles valued at $265,000 were included in the grant, with South San Francisco Police Department receiving one of these motorcycles; and WHEREAS, the funding for the grant runs from October 1, 2004 through December 31, 2006; and WHEREAS, the only cost during the grant period will be routine maintenance related to the motorcycle. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby approves an agreement to participate in the OTS Comprehensive Countywide DUI Traffic Enforcement/Education and Seat Belt Safety Grant Program. BE IT FURTHER RESOLVED that the City Manager is hereby authorized to execute the agreement on behalf of the City of South San Francisco. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the ~ day of ,2005 by the following vote: AYE S: NOES: ABSTAIN: ABSENT: ATTEST: City Clerk AGENDA ITEM # 7 DATE: TO: FROM: SUBJECT: February 9, 2005 Honorable Mayor and City Council Jim Steele, Director of Finance COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR 2003-04 RECOMMENDATION The City's Comprehensive Annual Financial Report for 2003-04 is hereby transmitted to the City Council. BACKGROUND/DISCUSSION Enclosed for the Council's information is the 2003-04 annual financial report of the City. Debt rating agencies, bond trustees, insurance companies, granting authorities, and other public agencies use this report to gauge the credit and debt worthiness of the City. On September 22, 2004, staff presented Council with preliminary year-end results of the General Fund for 2003-04. At that time, Council adopted budget actions, comprising mostly of funding shifts, to address revenue shortfalls. This final report incorporates those budget actions and leaves the General Fund with an undesignated reserve of $3.85 million at June 30, 2004. In addition to the General Fund, the report contains comprehensive information on City funds other than the General Fund, including the redevelopment agency, capital project, and sewer funds. Management's discussion and analysis, beginning on page 13, discusses the structure of the report, the overall financial performance of the City, and the financial trends of/ts largest funds. CONCLUSION Budgetary actions for the current fiscal year have already considered the results presented in this report. Staff recommends no further action from Council. By: j~ Finance Director M-B/a~y lVtl-. Nagel City Manager ATTACHMENT: Comprehensive Annual Financial Report DW/JS/BN:ed CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2004 Prepared by: Department of Finance City Hall P.O. Box 711 South San Francisco, California 94083 CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2004 Table of Contents Page [FINANCIAL SECTION I Independent Auditor's Report on Basic Financial Statements ................................................................ 11 Management's Discussion and Analysis ................................................................................................ 13-30 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets ..................................................................................................................... 33 Statement of Activities .................................................................................................................. 34-35 Fund Financial Statements: Major Governmental Funds: Balance Sheet ............................................................................................................................ 40-41 Reconciliation of the Governmental Funds--Balance Sheet with the Statement of Net Assets ............................................................................................................. 42 Statement of Revenues, Expenditures, and Changes in Fund Balance .................................... 44-45 Reconciliation of the Net Change in Fund Balances Total Governmental Funds with the Statement of Activities ...................................................................................... 46 Revenues, Expenditures and Changes in Fund Balances -Budget and Actual: General Fund ........................................................................................................................ 47 Federal Aviation Grant Fund ................................................................................................ 48 INTRODUCTORY SECTION I Letter of Transmittal ....................................................................................................................................... 1-5 Certificate of Achievement for Excellence in Financial Reporting ................................................................. 7 Organization Chart ............................................................................................................................................. 8 City Council and Directory of City Officials .................................................................................................... 9 CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2004 Table of Contents [FINANCIAL SECTION (Continued): ] Page Major Proprietary Funds: Statement of Net Assets ................................................................................................................. 50 Statement of Revenue, Expenses, and Changes in Fund Net Assets ............................................ 51 Statement of Cash Flows ................................................................................................................ 52 Fiduciary Funds: Statement of Fiduciary Net Assets ................................................................................................. 54 Notes to Basic Financial Statements .................................................................................................. 57-90 Other Supplemental Information: Major Governmental Funds Other Than the General Fund and Special Revenue Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual: Redevelopment Agency Gateway Debt Service Fund ............................................................. 93 Redevelopment Agency Downtown Capital Project Fund ...................................................... 94 Redevelopment Agency Low and Moderate Income Housing Capital Project Fund ............. 95 Capital Improvement Capital Projects Fund ............................................................................ 96 Non-major Governmental Funds: Combining Balance Sheets ....................................................................................................... 100-103 Combining Statements of Revenues, Expenditures, and Changes in Fund Balance ................................................................................................................. 104-107 Budgeted Non-major Government Funds: Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual ..................................................................... 108-114 CITY OF SOUTH SAN FRANCISCO, CALIFORNIA Comprehensive Annual Financial Report For the Year Ended June 30, 2004 Table of Contents FINANCIAL SECTION (Continued): Page Internal Service Funds: Combining Statement of Net Assets ................................................................................................ 116 Combining Statement of Revenues, Expenses and Changes in Net Assets ................................... 117 Combining Statement of Cash Flows .............................................................................................. 118 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities - All Agency Funds ......................120 STATISTICAL SECTION I General Governmental Expenditures by Function - Last Ten Fiscal Years .......................... 122-123 General Governmental Revenues by Source -Last Ten Fiscal Years ................................... 124-125 Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years .................. 125 Assessed and Estimated Actual Values of Taxable Property -Last Ten Fiscal Years .................. 127 Property Tax Levies and Collections - Last Ten Fiscal Years ...................................................... 128 Principal Taxpayers ......................................................................................................................... 129 Special Assessment Billings and Collections - Last Ten Fiscal Years ......................................... 130 Ratio of General Bonded Debt to Assessed Value and Bonded Debt Per Capita - Last Ten Fiscal Years ................................................................................... 131 Schedule of Revenue Bond Coverage - Sewer Rental Enterprise Fund, Last Ten Fiscal Years . 132 Demographic Statistics - Last Ten Fiscal Years ............................................................................ 133 Property Values, Construction and Bank Deposits - Last Ten Fiscal Years ................................ 134 Computation of Legal Debt Margin ................................................................................................ 135 Computation of Direct and Overlapping Bonded Debt .................................................................. 136 Miscellaneous Statistics ............................................................................................................ 137-143 OFFICE OF THE CITY MANAGER (650) 877-8500 FAX (650) 829-6609 Honorable Mayor and Members Of the City Council City of South San Francisco South San Francisco, California December 30, 2004 The Comprehensive Annual Financial Report (CAFR) of the City of South San Francisco (the City) for the fiscal year ended June 30, 2004, is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City.' To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to prigsent fairly the financial position and results of operations of the various funds and account groups of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. ORGANIZATION OF THE REPORT The Comprehensive Annual Financial Report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section contains information on the City's organizational structure, it's scope of services, the City's economic outlook, and various accomplishments. The Financial Section contains the independent auditor's report on the basic financial statements, Management's Discussion and Analysis (MD&A) of the fiscal year, the basic financial statements and notes that explain the City's financial position and operating results, and supplementary statements, schedules, and notes that provide additional detailed information relative to the basic financial statements. This transmittal letter, read in conjunction with the MD&A, assists readers in assessing the City's financial condition. The Statistical Section includes pertinent financial and non-financial statistical data that present various financial, economic, and social trends and other information about the City for the last ten years. CITY HALL, 400 GRAND AVENUE, P.O. BOX 711, SOUTH SAN FRANCISCO, CA 94083 This report includes all financial activities (funds and account groups) of the City of South San Francisco, including financial information for the City, as the primary government, and for its component units, for which the City is considered financially accountable. The component units are included because of the significance of their governing, operational, and/or financial relationships with the city. BACKGROUND OF THE CITY The City encompasses approximately 9.5 square miles and has a population of 61,724. It employs approximately 403 full-time equivalent and 67 full-time equivalent part-time employees. South San Francisco is a full service city which includes public safety (police, fire and paramedics), libraries, parks, cultural and recreational activities, senior citizen services, public works, public improvements, engineering, planning, building regulation, economic development, drainage, street lighting, and general administrative services. Sewer service, downtown parking operations, and storm water management are accounted for in the City's enterprise funds. The Conference Center Authority is included in the financial statements by discrete presentation - that is, the Authority's financial data is reported in a column separate from the financial data of the City. Water and refuse services are provided by private and other govern, mental entities. South San Francisco was incorporated and became a general law city of the State of California on September 19, 1908. The form of government is the Council-Manager plan. The Council is composed of a Mayor and four Council Members who are elected at large. Each Council Member serves a term of four years, with a rotating Mayor chosen by majority vote of the Council, for a term of one year. The City Manager is the administrative head of the government of the City, under the direction of the City Council. The offices of City Clerk and City Treasurer are elected. The City Attorney is appointed by the City Council. All department heads are appointed and serve under the administrative direction of the City Manager. All other officers and employees of the City are appointed by the City Manager and serve under the administrative direction of their department heads. ECONOMIC OUTLOOK The nation's economy is still showing very weak signs of recovery and some economists, including the UCLA's Anderson Forecast, warn that the economy could slump again in 2005. The Conference Board's composite index of leading indicators slipped in September for the fourth straight month, signaling the economic soft patch will persist. Locally, the Bay Area is still slowing overall tepid growth and has not added back significantly to the jobs lost in 2000-01. Semiconductor sales, one key indicator of -2- future Silicon Valley growth, which in turn impacts the entire Bay Area, are projected by the Semiconductor Industry Association to decline in 2005. On a positive note, BT Commercial reports that office vacancies in South San Francisco was 27.7% in the third quarter of 2004, compared to 48.3% a year before. The Office/R&D vacancy rate in South San Francisco/Burlingame was 12.2% in the third quarter of 2004 compared to 10.9% a year before. MAJOR ACCOMPLISHMENTS In 2004, the City completed and opened the $21.4 million freeway off-ramp from southbound U.S. Hwy 101 to Oyster Point Boulevard. It's opening allowed commuters to have easier access to South San Francisco's major biotechnology center. In 2004, the Downtown Redevelopment Agency acquired a vacant building and real property at 480 North Canal Street for $3.65 million. The plan is to convert the building and site into the new Central Fire Station and Fire administration headquarters and potentially house the Emergency Operations Center and Fire prevention offices, after securing additional funding. The City of South San Francisco launched a new first time homebuyer program. This program is open to individuals and households wllo live or work in the City of South San Francisco. The program will provide qualified buyers a Iow-interest loan of up to $100,000 to purchase a home on the open market or one of two Below Market Rate (BMR) homes in the new Oak Farms development. Registration and payment for recreational classes can now be done on-line through the City's website. FINANCIAL INFORMATION In developing and appraising the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets; and (3) transactions being properly executed in accordance with management's authorization. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. Basic characteristics of sound internal accounting control include segregation of accounting duties, approvals of accounting transactions, and regular reconciliation of detail and control records. All internal control evaluations occur within this framework. We believe that the City's internal accounting controls adequately safeguard assets and provide reasonable assurances of proper recording of financial transactions. The City adopts fiscal year budgets for its general, special revenue, debt service, enterprise, and capital project funds. Most budgets are prepared on a line item basis and controlled by monthly management reports. The government also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts lapse at year-end. However, encumbrances generally are reappropriated as a part of the following year's budget. Debt Administration. The City has outstanding tax allocation bonds, lease revenue bonds, special assessment debt, and certificates of participation that are supported by specific revenue sources. These are not considered to be general tax-supported obligations. There are also various capital leases and notes payable in governmental and proprietary funds. Cash Manaqement. The City pools all of its idle funds for investment purposes and manages its investments following objectives that maintain safety of principal, liquidity, and yield. June 30, 2004 investments and their weighting consisted of the San Mateo County investment pool (34%), the California Local Agency Investment Fund (19%), U.S. government agency obligations (19%), a money market pool of US securities (13%), an investment management fund (5%), medium-term notes (2%), with the remaining 8% in cash and bank accounts. The City held at fair value, $94.7 million in investments and cash at June 30, 2004. Investments earned an average yield of 2.94%. The average days to maturity of the June 30 portfolio was 214 days. Capital Assets of the City comprise land, buildings, infrastructure, machinery, equipment, furniture, fixtures, and vehicles owned and used by general government and proprietary functions. Assets are reported within the basic financial statements. Risk Management. The City maintained a risk management program for workers' compensation, general liability, and property damage. As part of this comprehensive plan, monies have accumulated in the self-insurance internal service fund to meet potential losses. In addition, a safety committee of City employees reviews all accidents and recommends preventive measures to minimize future accident-related losses. The City self-insures the deductible or retention levels of its workers compensation, general liability and property damage insurance policies. A third party administrator handles worker compensation claims. The Association of Bay Area Governments' municipal pool insurance plan provides the City's general liability and property damage coverage along with claims and risk management services. An employers' casualty insurance company provides workers compensation coverage in excess of the deductible. -4- OTHER INFORMATION Independent Audit. The City engaged an independent accounting firm to audit the books of accounts, financial records, transactions, and financial statements. Their report covering 2003-04 is in the Financial Section of this report. Award. The City's comprehensive annual financial report for the fiscal year ended June 30, 2003 received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association. The award signified the report's attainment of easily readable and efficiently organized content and satisfaction of generally accepted accounting principles and legal requirements. The award is valid for a period of one year only. However, the City believes that this current report continues to conform to program eligibility requirements. Acknowledgments. The preparation of the comprehensive financial report was made possible by the dedicated services of the entire staff of the Finance Department and our auditors. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. Respectfully submitted, '~._.a. r~.M.~ Nag¢ C~ty Manager -5- City Certificate of Achievement for Excellence in Financial Reporting Presented to of South San Francisco, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2003 Certificate of Achievement for Excellence in Financial ~,.~4,, ~; ....... *~ *',, *.he Govermment F~ance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President Executive Director -7- ORGANIZATION CHART THE PEOPLE OF THE CITY OF SOUTH SAN FRANCISCO city Clerk City Council City Treasurer City Attorney City Manager Police Economic & Community Development Finance Fire Recreation & Community Services Human Resources Library Public Works Information Technology CITY OF SOUTH SAN FRANCISCO CITY COUNCIL AND DIRECTORY OF OFFICIALS JOSEPH A. FERNEKES COUNCILMAN CITY COUNCIL* KARYL MATSUMOTO MAYOR RAYMOND L. GREEN MAYOR PRO TEM RICHARD A. GARBARINO, SR. COUNCILMAN PEDRO GONZALEZ COUNCILMAN CITY OFFICIALS SYLVIA M. PAYNE CITY CLERK BARRY M. NAGEL CITY MANAGER STEVEN T. MATTAS CITY ATTORNEY RICHARD BATTAGLIA CITY TREASURER MARK J. RAFFAELLI CHIEF OF POLICE DEPARTMENT MANAGERS MARTY VAN DUYN ASSISTANT CITY MANAGER PHILIP D. VVHITE FIRE CHIEF TERRY WHITE DIRECTOR OF PUBLIC WORKS SHARON RANALS DIRECTOR OF RECREATION & COMMUNITY SERVICES JIM STEELE DIRECTOR OF FINANCE VALERIE SOMMER LIBRARY DIRECTOR DOUG HOLLIS DIRECTOR OF INFORMATION TECHNOLOGY ELAINE YAMANI HUMAN RESOURCES DIRECTOR (INTERIM) * As of June 30, 2004 AAZ£ & $$0CIA TE$ INDEPENDENT AUDITOR'S REPORT ON BASIC FINANCIAL STATEMENTS ACCOUNTANCY CORPORATION 1931 San Miguel Drive - Suite 100 Walnut Creek, California 94596 (925) 930-0902 · FAX (925) 930-0135 E-Mail: maze @ mazeassociates, com Website: www. mazeassociates, com To the Honorable Mayor and Members of the City Council City of South San Francisco, California We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of South San Francisco as of and for the year ended June 30, 2004, which collectively comprise the City's basic financial statements as listed in the Table of Contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the component unit financial statements of the South San Francisco Conference Center Authority, California, which represents 2% and 3% of the assets and revenues and 3% and 4% of expenses and liabilities of the reporting entity, respectively. These component unit financial statements were audited by other auditors, whose report thereon has been furnished to us. Our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of these other auditors. We conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of South San Francisco as of June 30, 2004 and the respective changes in the financial position and cash flows, where applicable, thereof for the year then ended in conformity with generally accepted accounting principles in the United States of America. Management's Discussion and Analysis and Budget and Actual statements for the general fund and Federal Aviation Grant Special Revenue Fund are not a required part of the basic financial statements but are supplementary information required by the Government Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit this information and express no opinion on it. In accordance with Government Auditing Standards, we have also issued reports dated November 19, 2004 on our consideration of the City's internal control structure and on its compliance with laws and regulation. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The supplemental information listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic statements of the City of South San Francisco. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical section listed in the Table of Contents have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. November 19,2004 ~ O~%' ~x~a~ -ll- A Professional Corporation CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information Government Accounting Standards Board Statement 34 (GASB 34) requires the City of South San Francisco to provide this overview of its financial activities for the fiscal year. Please read this in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. FISCAL 2003-04 FINANCIAL HIGHLIGHTS While General Fund revenues exceeded last year by $2.1 million, it was still $2.2 million below the forecast used in the original adopted budget for 2003-04. When looking at overall City revenues that encompass other government activities and business enterprises such as Redevelopment Agency property taxes, gasoline and transportation taxes, capital and operating grants, and sewer wastewater fees, revenues declined to a lesser degree. The City was affected by the loss of a major sales tax provider and continuing sluggishness in business-to- business commerce and construction material segment. This resulted in sales taxes falling $1.4 million below budget and negating any sales tax growth that the City had forecasted. Motor vehicle license fees fell $0.8 million below budget because of the state's takeaway and borrowing of funds due to the City. Hotel (transient occupancy) taxes were stagnant as well, reflecting the general slowdown of the travel industry. General Fund investment earnings came in $0.4 million below last year and the budget while overall City investment earnings came in $2.9 million lower than last year. Both were due to upswings in the prevailing interest rate environment and due to the gradual repositioning of the City's investment portfolio out of corporate medium-term bonds. General Fund and Redevelopment Agency property taxes came in $1.8 million better than last year. Overall charges for services rose $3.1 million over last year. The lower revenue picture pitted against rising wage and benefit costs resulting from CalPERS retirement benefit enhancements, health insurance increases, and salary increases in accordance with bargaining group contract formulas, resulted in the City adopting expenditure "' '*o and .....,4~, ..... ~-~ of ¢~ ~ ~,~ ~"'"' in the a,~,~pte'~ ~, ,,4g..~ ~,,,~ in b.*:o other major budget amendments during the fiscal year. Financial highlights of the year include the following: · The City's total net assets increased $21 million during fiscal 2003-04 to an ending June 30, 2004 balance of $185.1 million. · Total City revenues, including program and general revenues, were $100.3 million in fiscal 2003-04 down slightly from $101.3 million in 2002-03. Total expenses were $79.1 million compared to $73 million last year. · Net assets in governmental activities rose from $137 million to $157'.8 million at June 30, 2004, while net assets in business-type activities inched upward from $27.1 million to $27.3 million. · Governmental program revenues declined slightly from $30.9 million to $29.8 million in fiscal 2003-04. Program expenses rose from $60.4 million to $64.6 million. · Revenues generated from business-type activities were $14.6 million in fiscal 2003-04. Business-type expenses were $14.5 million. · General Fund revenues of $49 million rose $2.1 million from the previous year. Expenditures of $51.5 million represented an increase of $2 million over the prior year. · The overall General Fund balance of $12.7 million at June 30, 2004 represented a decrease of $1.3 million from last year. The unreserved, undesignated portion of this balance decreased from $4.3 million to $3.9 million during the year ended June 30, 2004. -13- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT This Comprehensive Annual Financial Report is in six parts: 1) The Introductory Section, which includes the Transmittal Letter and general information, 2) Management's Discussion and Analysis (this part), 3) The Basic Financial Statements, which include the Government-wide and the Fund financial statements, along with the notes accompanying these statements, 4) Required Supplementary Information and the accompanying notes, 5) Other Supplementary Information including combining statements for non-major governmental funds, internal service funds, other budgetary information, and a fiduciary statement of changes in assets and liabilities, and 6) The Statistical Section. Basic Financial Statements The Basic Financial Statements comprise the City-wide Financial Statements and the Fund Financial Statements. These two sets of financial statements provide two different views of the City's financial activities and financial position. The City-wide Financial Statements provide a longer-term view of the City's activities as a whole, and comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on the full accrual basis, similar to that used by corporations. The Statement of Activities provides information about all the City's revenues and all its expenses, also on the full accrual basis, with the emphasis on measuring net revenues or expenses of each the City's programs. The Statement of Activities explains in detail the change in Net Assets for the year. All of the City's activities are grouped into Government Activities and Business-type activities, as explained below. All the amounts in the Statement of Net Assets and the Statement of Activities are separated into Governmental Activities and"i~usiness-type Activities in order to provide a summary of these two activities of the City as a whole. The Fund Financial Statements report the City's operations in more detail than the government- wide statements and focus primarily on the short-term activities of the City's General Fund and other Major Funds. The Fund Financial Statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt and other long- term amounts. Major Funds account for the major financial activities of the City and are presented individually, while the activities of Non-major funds are presented in summary, with subordinate schedules presenting the detail for each of these other funds. Major Funds are explained below. The fiduciary statements provide financial information about the activities of Non-Obligated Assessment Districts, for which the City acts solely as agent. Note 1 to the Basic Financial Statements provides a summary of the City's significant accounting policies, fund categories, fund types and account groups. CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) City-wide Financial Statements The Statement of Net Assets and the Statement of Activities present information about the following: Governmental activities--All of the City's basic services are considered to be governmental activities, including general government, fire, police, public works, parks, recreation, maintenance services, library, and economic and community development. These services are supported by general City revenues such as taxes, and by specific program revenues from grants, contributions, and fees. The City's governmental activities include two separate legal entities, the City of South San Francisco Redevelopment Agency and the City of South San Francisco Capital Improvements Financing Authority, because the City Council governs both of these entities, with services provided solely to the City. Business-type activities--All the City's enterprise activities are reported here, including sewage treatment, parking, and storm water management. Unlike governmental services, user fees fully support these services. Component Unit - The City of South San Francisco Conference Center Authority comprises the component unit. The Authority serves the City and other interests and it has a governing body separate from the City Council. Citywide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. Fund Financial Statements The Fund Financial Statements provide detailed information about each of the City's most significant funds, called Major Funds. The concept of major funds, and the determination of which are major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead, each Major Fund is presented individually, with all Non-major Funds summarized and presented only in a single column. Subordinate schedules present the detail of these Non-major funds. Major Funds present the major activities of the City for the year, and may change from year to year as a result of changes in the pattern of City's activities. Fund Financial Statements include governmental, enterprise and internal service funds as discussed below. Governmental Fund Financial Statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. Capital assets and other long- lived assets, along with long-term liabilities, are not presented in the Governmental Fund Financial Statements. Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis, as in the past, and include all their assets and liabilities, current and long-term. Since the City's Internal Service Funds provide goods and services only to the City's governmental and business-type activities, their activities are reported only in total at the Fund CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) level. Internal Service Funds may not be Major Funds because their revenues are derived from other City Funds. These revenues are eliminated in the citywide financial statements and any related profits or losses are returned to the activities, which created them, along with any residual net assets of the Internal Service Funds. Comparisons of Budget and Actual financial information are presented only for the General Fund and other Major Funds that are Special Revenue Funds. Fiduciary Statements The City is the agent for certain assessment districts, holding amounts collected from property owners which await transfer to these Districts' bond trustees. The City's fiduciary activities are reported in the separate Statement of Fiduciary Net Assets and the Statement of Changes in Assets and Liabilities. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its own operations. FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE This analysis focuses on the net assets and changes in net assets of the City's Governmental Activities (Table and Charts 1 through 5) and Business-type Activities (Tables 6 and 7) presented in the City-wide Statement of Net Assets and Statement of Activities. A comparative analysis is presented for fiscal years 2002-03 and 2003-04. Governmental Activities Governmental Net Assets Table 1 Governmental Net Assets at June 30, (in Millions) Cash and investments Other assets Capital assets Total assets 2004 2003 $ 90.6 $ 96.7 21.8 17.2 131.7 109.4 $ 244.1 $ 223.3 Long-term debt outstanding Other liabilities Total liabilities $ 52.9 $ 53.6 33.5 32.7 $ 86.4 $ 86.3 Net assets: Invested in capital assets, net of debt $ 88.9 $ 76.4 Restricted 60.0 41.9 Unrestricted 8.8 18.7 Total net assets $ 157.7 $ 137.0 The City's net assets from governmental activities (including Redevelopment) increased $20.7 million to $157.7 million at June 30, 2004. The increase from a revenue and expense CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) perspective is explained in Table 3, Change in Governmental Net Assets. Significant changes in assets and liabilities are explained as follows: Cash and investments decreased from $96.7 to $90.6 million. The net cash outflow contributed to the City's acquisition or construction of $22.3 million in capital assets. This capital outlay also caused invested in capital assets, net of debt to increase by $12.5 million. Other assets increased $4.6 million to $21.8 million primarily due to a short-term cash advance from the governmental Redevelopment Agency to the business- type Sewer Enterprise Fund prior to the Sewer Fund's receipt of loan proceeds on July 1, 2004 from the State Water Resources Control Board. Because the City operates on a pooled cash basis, capital outlays in the Sewer Fund may be fronted by another City fund prior to their reimbursement by loan proceeds. Restricted net assets increased $18.1 million mostly due to a $5.5 million increase in Redevelopment Agency capital project funds, $3.9 million added to the Agency's bond retirement debt service account, and $7.3 million in special revenue funds related to development impact fees, maintenance districts, and solid waste management that are shown as restricted net assets this year as opposed to them being shown as unrestricted net assets last year. This reclassification led to the decline in unrestricted net assets. Change in Governmental Net Assets Chart 2 Revenues h,, Source - I'~.n~a~'nman{'al h,~'h~i~';,~,e O~Q~-Q~ Operating Grants and Capital Grants and Contributions 5% Charges for Services Contributions 10% 14% Miscellaneous 6% Investment earnings Motor vehicle in lieu 4%-~. Other taxes Transient occupancy taxes 5% Sales taxes 13% ~roperty taxes 33% The percentage of 2003-04 revenues by source were consistent with the previous year, with the largest fluctuations being capital grants and contributions decreasing from 18% to 14% and property taxes increasing from 30% to 33%. Table 3 below shows that total 2003-04 revenues of $85.5 million for the City's governmental activities represented a $2.5 million or 2.8% decrease from the previous year. General revenues dropped $1.3 million. A $0.9 million decline in sales taxes represented a severe hit in -17- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) the business-to-business and construction material sectors that make up much of the City's sales tax base. Due to the rise in market interest rates, the maturity of older medium-term bonds with high interest rates, due to the sale of certain investments due to weak investment ratings, and because of lower overall cash balances, investment earnings declined $2.7 million from the previous year. Motor vehicle in-lieu taxes declined $0.8 million due to the state's borrowing of these dollars from cities to alleviate the state's budget crunch. However some of these general revenue declines were offset by a $1.8 million increase in property taxes, $0.5 million of it from a refund of excess Educational Revenue Augmentation Fund (ERAF) reallocation amounts. Program revenue areas decreased $1.2 million during 2003-04. Because the City received a large County Transportation Authority grant in the previous year, capital grants and contributions decreased $4.9 million, however this was mostly offset by a $3.1 million increase in charges for services representing additional revenues for Fire department services, Police services, recreational programs, and building permit revenues. Total governmental expenses increased $4.4 million or 7.3% to $64.8 million for 2003-04. The City incurred pay raises averaging 12.5% for police, 7.6% for fire, and 8.9% for others, based on surveys among other neighboring cities. The City adopted a retirement benefit enhancement and faced double-digit percentage growth in health insurance costs. The largest expense increases were in the fire, police, parks, recreation and maintenance areas, reflecting the large number of employees in those areas. To alleviate the effect, the City adopted $3.2 million in budget cuts at the beginning of the fiscal year, including the freezing of 22 positions and adopted new service revenue and fee increases of $3.1 million. After seeing that General Fund year-end revenues were going to be about $2.2 million below budget, the City shifted $1.4 million in expenses from the General Fund to other governmental funds primarily and charged $0.2 million in additional administrative costs to other governmental funds. 'r,,,., ~, ,,,~,, revenues exceeded expenses by,,,_,,. ,~:or~ -~ ,.,, ,;,,.,, ,., , ,, ,,., eas,, ,~I""- ; ............ ~,v ~,, ,,, ,~, ,,,=,*'-I,-'"*,=L ~oS~,o"" '-*" ,,y~-" +~-I", ,,o amount. This increase was $6.9 million below fiscal 2002-03's increase. -18- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) The Statement of Activities presents expenses, program revenues, and general revenues detail. These elements effect the Change in Governmental Net Assets as follows: Table 3 Change in Governmental Net Assets (in Millions) Expenses General government Fire department Police department Public works department Parks, recreation and maintenance Library Economic and community development Interest on long-term debt Total expenses Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Total program revenues General revenues: Taxes: Property taxes Sales taxes Transient occupancy taxes Motor vehicle in lieu Other taxes Investment earnings Miscellaneous Total general revenues Total revenues Change in net assets Net assets - beginning Net assets - ending 2003-04 2002-03 $ 7.1 $ 7.7 13.7 11,5 13,9 12.5 2.3 2.5 12.2 11.6 4.7 4.2 7.7 7.2 3.2 3.2 $ 64.8 $ 60.4 $ 13.3 $ 10.2 4.8 4.2 11.6 16.5 $ 29.7 $ 30.9 $ 28.8 $ 27.0 11.0 11.9 3.9 3.9 2.8 3.6 4.6 4.1 0.7 3,4 4.0 3.2 $ 55.8 $ 57.1 $ 85.5 $ 88.0 20,7 27.6 137.0 109.4 $ 157.7 $ 137.0 in -3.9- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) Expense and Program Revenue Analysis Chart 4 Expense and Program Revenue Comparison in Governmental Activities 2003-04 Unit in Millions $12 , ~ $4 $2 S- General Fire government department Police department Public works Parks, rec. and Library Econ. and department maint, services comm. development Table 5 Net (Expense) Revenue from Services Governmental Activities (in Millions) General government Fire department Police department Public works department Parks, recreation and maintenance services Library Economic and community development Interest on long-term debt Total 2003-04 2002-03 $ (4.8) $ (6.0) (12.2) (10.3) (11.7) (10.6) 10.4 14.5 (8.1) (8.1) (3.4) (3.0) (1.8) (2.7) (3.2) (3.2) $ (34.8) $ (29.5) The above Chart 4 and Table 5 illustrate the difference between program revenues and expenses. Program revenues consist of capital and operating grants and contributions and fees for services. General City revenues not shown in the chart, such as property taxes, sales and transient occupancy taxes, motor vehicle in-lieu taxes, and investment earnings, cover the shortfall between program revenues and expenses. General government includes the City Council, City Manager, City Treasurer, City Clerk, finance and human resource functions that are traditionally funded by general City revenues. General government expenditures dropped $0.6 million in fiscal 2003-04 due to budget savings and department reorganizations. -20- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) · The $2.2 million increase in Fire department expenses were partially offset by a $0.4 million increase in inspection, permit and paramedic fees. Police expense increases of $1.3 million were countered by a $0.3 million increase in parking and traffic fines and police service charges. Public Works department expenses do not include capital outlays, which are funded by program revenues; such capital outlays are added directly to the City's capital asset base, as required by full accrual accounting principles. The City added $32.3 million in governmental capital assets during 2003-04. To construct some of these assets, Public Works employed $11.4 million in capital grants and contributions, down $4.9 million from the previous year. A $0.6 million increase in parks, recreation and maintenance expenses was offset by an equal increase in recreational activity charges, childcare fees, and facility rental fees. Library program revenues including an increase of $0.1 million in various state grants helped offset a $0.5 million increase in expenses. The Economic and Community Development department incurred $0.5 million in additional expenses, but generated an additional $1.2 million in building plan check review and permit fees and Community Development Block Grants. The City accrued and paid $3.2 million in long-term debt interest in both fiscal years, resulting from the Redevelopment Agency's 1997 tax allocation bonds, the Agency's 1999 revenue bonds, the City's Capital Improvement Financing Authority's 1999 certificates of participation, federal Housing and Urban Development department loans, and the Price C ,b/Cn.~tcn note n.q~/~hlA that fin~ncecl fha Cjty'~ ~nq ~tOn nf I~nct underneath the retailer's parking lot. Business-type Activities Table 6 Business-type Net Assets at June 30 (in Millions) 2004 2003 Cash and investments $ 1.8 $ 7.1 Other current assets 8.3 1.3 Capital assets 85.7 77.2 Total assets $ 95.8 $ 85.6 Long-term debt outstanding $ 64.2 $ 56.1 Other liabilities 4.3 2.4 Total liabilities $ 68.5 $ 58.5 Net assets: Invested in capital assets, net of debt $ 21.6 $ 21.1 Restricted 1.9 1.9 Unrestricted 3.8 4.1 Total net assets $ 27.3 $ 27.1 -2:].- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) Table 7 Change in Business-type Net Assets (in Millions) 2003-04 2002-03 Net Revenues from Business-type activities: Sewer Rental $ 0.1 $ 0.3 Parking District 0.1 Storm Water Total net revenues $ 0.1 $ 0.4 General revenues: Investment earnings 0.1 0.3 Change in net assets 0.2 0.7 Net assets-beginning 27.1 26.4 Net assets-ending $ 27.3 $ 27.1 The net assets of business-type activities increased $0.2 million during fiscal 2003-04, resulting from $0.1 million in net revenues from the City's Sewer Rental enterprise activity, plus an additional $0.1 million in unrealized investment gains and interest income. Sewer Rental net revenues were down from $0.3 million from the last year. Depreciation expense jumped $1.5 million from the previous year due to this being the first full year of depreciation on the Water Quality Control Plant expansion. The Parking District broke even after earning $0.1 million in the previous year. With parking revenues remaining flat, the shifting of $0.1 million in personnel costs from the General Fund brought down net revenues this year. The unchanged storm water assessment rates along with minor increases in personnel costs, kept the Storm Water Enterprise Fund at a break-even point. Cash and investments plunged from $7.1 million to $1.8 million and other current assets rose from $1.3 million to $8.3 million because of $6.2 million in State Water Resources Control Board loan proceeds that was received the day after the close of the fiscal year and booked as a receivable at June 30, 2004. This loan reimbursed and financed much of the current year's work-in-progress on the wet weather management program, resulting in a capital asset increase of $8.5 million. FINANCIAL ANALYSIS OF THE CITY'S FUNDS Governmental Funds Governmental funds highlight the City's near-term inflows, outflows, and balances of spendable resources. Such information can be helpful in determining the City's financial status. Unreserved fund balance is a major indicator of designated and uncommitted resources available for spending in future fiscal years. At June 30, 2004, the City's governmental funds (including Redevelopment) reported combined fund balances of $83.8 million, which is a decrease of $1 million compared with the prior year. -22- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) Governmental fund revenues decreased 1.3% or $1.1 million this year to a new total of $85.4 million, reflecting mixed results over several categories. Property taxes for the'General Fund and Redevelopment Agency rose $1.8 million or 6.7% to $28.8 million, including $0.5 million in refunds from the County of excess monies deposited into the Educational Revenue Augmentation Fund. Investment results caused interest and rental income to plunge 47.6% from $6.3 million in the previous year to $3.3 million this year. Higher market interest rates caused a drop in bond and US Treasury and federal agency security prices in the City's portfolio, meaning the market value declined and year-end portfolio totals include that decline in market value. The City also sold two medium-term bonds from the portfolio before their maturity because their investment ratings had fallen below the parameters of City's investment policy. These bonds along with other medium-term bonds that matured consisted of older issues with higher interest rates. The City is transitioning out of medium-term bonds as an investment holding to reduce investment risk in the portfolio. Average City cash balances were also lower. The combined effect was a drop in interest earnings and an increase in unrealized losses from investments. Charges for services rose $0.9 million or 8.2% this year to $10.2 million due to higher building permit fees, recreational fee revenues, police service revenues, and fire inspection and paramedic fees. Intergovernmental revenues rose $0.7 million or 4%. Federal and local monies for capital projects declined, but grants and contributions for community development, parks, libraries, and local law enforcement task forces rose. Governmental fund expenditures increased 7.2% or $5.8 million this year to a new total of $87.5 million. Of this increase, $2.1 million was in the General Fund, $2.4 million was in the Capital Improvement Fund, with the remainder primarily in the Redevelopment Agency. See the analysis of major governmental funds for further information on the increase. In 2003-04, overall governmental fund revenues fell below expenditures by $2.1 million. Combined with a positive $1.1 million coming in from transfers and other financing sources, the June 30, 2004 fund balance dropped $! million from a year ago. In 2002-03, governmental fund revenues exceeded expenditures by $4.9 million with $1.8 million coming in from transfers and other financing sources. Proprietary Funds Enterprise Fund net assets totaled $27.3 million at June 30, 2004, an increase of $0.2 million from the previous year. This resulted from 2003-04 net income before transfers of $0.2 million, slightly below last year's net income of $0.6 million. Enterprise operating revenues were $14.6 million this year, up nearly $1.6 million or 12.3% from last year. Enterprise Fund operating expenses were $13 million in fiscal 2003-04, exceeding last year's expenses by $1.8 million or 16.1%. 2003-04 combined non-operating revenues and expenses resulted in an additional expense of $1.4 million. Last year, the two numbers combined resulted in $1.1 million in expense. Further discussion is provided in the analysis of enterprise funds. Analysis of Maior Governmental Funds General Fund General Fund revenues were $49 million this fiscal year, $2.1 million or 4.5% above last year's results, but $2.2 million below the General Fund's original budget for revenues. Higher property -23- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) tax receipts and charges for services exceeded lower investment returns, flat sales and property taxes, and lower intergovernmental revenues. Property taxes surged, increasing $1.6 million or 17.1% from last year to reach $11.3 million in 2003-04. However $0.5 million of this was an ERAF refund from the County, a refund that may not continue next year. The remaining jump came from the non-secured tax roll rising higher than expected. The City had originally budgeted property taxes to rise $0.5 million or 4.8%. Other taxes of $18.3 million remained unchanged from the prior year, however the City originally budgeted them to rise to $20.5 million. Sales taxes did not grow as anticipated as business-to- business transactions and the sale of construction materials continued to lag in the City. Intergovernmental revenues decreased $0.9 million, or 18.4%, from the prior year to $4 million, mostly resulting from the state's withholding and borrowing of motor vehicle license fees due to the City. This was $0.9 million below the original budget. The rise in market interest rates and investment portfolio repositioning discussed in the analysis of governmental funds above caused interest revenues, including unrealized gains, to decline from $2.9 million last year to $2.5 million this year. License and permit revenues at $4 million were mostly unchanged from last year. In forecasting an increase in permit and franchise fees and anticipating revenue from large development projects, the City had budgeted license and permit revenues to rise to $4.7 million. However, the rise didn't occur as the economic slowdown continued to severely affect the number of building permits issued, electrical usage declined, natural gas rates lowered, and a higher proportion of fees from a large project went toward the Sewer Enterprise Fund rather than the General Fund. Actual charge for service revenues at $7.8 million surpassed the original budget by $1.2 million and exceeded 2002-03 results by $1.6 million due to healthy attendance in sports and recreational classes, increased police service revenues, and higher fire inspection and paramedic fees. Fines and forfeitures remained unchanged from last year and consistent with the budget. As the City forecasted and responded to the decline in revenues at the end of the fiscal year, the City took $1.62 million in additional budget actions comprising a mix of expenditure shifts and General Fund charges to the Redevelopment Agency, maintenance district special revenue funds, and enterprise funds. It also reduced the General Fund's revenue budget to more closely correspond to actual revenues realized at year-end. The following expenditure analysis comes after these shifts. General Fund expenditures rose $2 million or 3.9% from last year resulting from increases in PERS employer costs related to the 2.7% at 55-retirement enhancement for miscellaneous employees and the actuarial effect of the poor stock market performance of recent years. The increase is also due to wage increases and double-digit medical cost upswings. However, the resulting $51.5 million in expenditures and encumbrances was $1.5 million or 2.9% below final budget reflecting savings realized from the freezing of vacant positions, ongoing department saving efforts, and early retirements. Major individual program fluctuations from last year were as follows: Fire Department expenditures increased $2 million or 18%, reflecting a 7.6% wage increase and a PERS employer cost increase for Fire employees from 0% to 20.4% of covered payroll. Police CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) expenditures rose $1.3 million or 10% reflecting a 12.5% wage increase at mid-year and a PERS employer cost increase from 1.4% to 21.3% of covered payroll. City Attorney expenditures are down $0.2 million or 21% because of the completion of last year's trial on land use. Library spending increased $0.3 million or 8% due to new internal charges for technology support of the many computers used in the library system. Public Works dropped $0.1 million or 13% from last year and realized budget savings of $0.3 million due to department reorganization and a reduced capital program. Economic and Community Development budget savings of $0.3 million came from ongoing department savings and position vacancies. Human resources, at $0.2 million, realized the next largest budget savings by trimming contract work and supplies, and by eliminating unnecessary recruitment and testing costs. At June 30, 2004, the General Fund balance comprised $3.9 million in unreserved, undesignated dollars, $4.5 million for emergencies and economic contingencies, $3.6 million for future economic development, and $0.7 million for encumbrances and capital projects. The S3.9 million unreserved, undesignated amount represents discretionary resources available for absorbing future expenditures that exceed revenues. This amount decreased by $0.4 million from the prior year, to absorb some of the revenue reductions described above. The overall General Fund Balance decreased from $14 million to $12.7 million during 2003-04. $1 million in net transfers into the fund offset $2.3 million in excess expenditures over revenues. Federal Aviation Grant Fund Monies for the Aircraft Noise Insulation Program are received and expended in this fund, with the goal of improving the insulation of residential structures from jet noise emanating from San Francisco International Airport (SFO). The City is currently in the Program's eighteenth phase, covering multi-family units in Westborough, Burl Burl, Brenb.*;ood and Avalon. The $0.5 million in project expenditures for fiscal 2003-04 was an increase from the $0.4 million expended in the prior fiscal year. $1.7 million was budgeted in this fund, entirely supported by Federal grants from SFO. Since this is a multi-year project, unspent appropriations will continue into the next fiscal year. In 2003-04, an additional 282 single-family homes were added to the program for construction or architectural work. Capital Improve~ment Fund The City consolidates and reports its governmental fund-type capital project expenditures in this fund. Resources consist of transfers from the general fund, major and non-major Redevelopment Agency funds and gasoline taxes and transportation sales taxes from non- major governmental funds. Resources also come from federal, state, and local grants, contributions from other cities, utilities and private enterprises. Entire capital projects are appropriated in one-year, but expended over multiple years, with unspent appropriations carried-forward year-to-year until completion. $23.8 million was expended and $5.6 million encumbered in 2003-04, compared with $21.4 million and $10.9 million, respectively, in fiscal 2002-03. This accounted for most of the $22.3 million in governmental capital assets added in 2003-04. $14.1 million in expenditures and $6.1 million in encumbrances come from construction and design of the interchange at Oyster Point Boulevard and U.S. Highway 101. The flyover portion of the interchange is complete while construction of the hookramps will continue into fiscal 2004-05. $1.9 million in infrastructure was accomplished, including street rehabilitation and repaying, traffic signal improvements, and pedestrian crosswalk improvements. $7.5 million in public facility improvements were accomplished most notably the $5 million land and building acquisition funded by the Downtown Redevelopment Agency for the -25- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) new Central Fire Station and Fire headquarters and $2.2 million toward construction of the childcare center in the Gateway Redevelopment project area. Gateway Debt Service Redevelopment Agency Fund The South San Francisco Capital Improvements Financing Authority issued $31,720,000 in 1999 Revenue Bonds that, in turn, purchased two bond series issued by the Redevelopment Agency (RDA): the $28,045,000 1999 Tax Allocation Bonds Series A (Gateway Redevelopment Project) and the $3,675,000 1999 Tax Allocation Bonds Series B (Housing Set-Aside Revenues), with all bonds maturing in 2018. In the Gateway Debt Service Fund, property tax revenues from the RDA Gateway project area pay debt service on the Series A bonds. Property tax revenues in excess of debt service are required by bond covenants to be reserved for bond defeasement, and those accumulated excess funds are held by an outside trustee. The City shows these reserves in the Gateway Debt Service fund. The Gateway Series A bonds refinanced the Gateway Redevelopment Project 1993 Tax Allocation bonds. $1.2 million in interest and $0.9 million in principal were paid on the Series A bonds in fiscal 2003-04. The $4.9 million transferred in from the Gateway Capital Project RDA Fund represented the amount needed to cover this year's debt service payments and bond reserve. Last year, $3.8 million from the Capital Project Fund went toward $1.8 million in debt service payments and $2 million in bond reserves. The bond reserve account rose from $12.2 million in fiscal 2002-03 to $15.1 million at the end of fiscal 2003-04. Note 5 in the accompanying Notes to Basic Financial Statements also discuss the bond issues. Downtown Capital Project Redevelopment Agency Fund The Redevelopment Agency's (RDA) project area covering Downtown Central is one of two RDA areas with the majority of property tax revenues. For fiscal 2003-04, $6.7 million in tax increment, $0.4 million in ,~,~,~"~,, r",~t~ ~,~,~ investment ~,nc,',,~" ...... ~,~,~ '~ ~ million ~, bond reserves went toward the following purposes: $5 million transferred to the Capital Improvement Fund to acquire the land and building for the new Central Fire Station; $1.4 million transferred to the Low and Moderate Income Housing RDA Fund, to meet the 20% housing set aside requirement; $0.4 million in required pass-through tax increment payments paid to schools; $1.6 million to operate and manage the RDA and it's properties, including $0.7 million in new 2003- 04 costs assumed from the General Fund; $0.8 million toward principal and interest payments on the Downtown Central Redevelopment Project 1997 tax allocation revenue bonds; and new debt payments assigned from the General Fund in 2003-04, in this case $0.4 million in principal and interest on the Conference Center's 1999 Certificates of Participation. The bonds issued in 1997 financed land acquisitions, parking, and public infrastructure in the Downtown project area. The 1999 certificates of participation financed the land and improvements for the City's Conference Center. Note 5 in the accompanying Notes to Basic Financial Statements further explain the debt issues. Due to ERAF shifts to the state, tax revenues fell below fiscal 2002-03's amount of $7.2 million. Investment revenue was below last year's $0.8 million due to the interest rate changes and portfolio activity discussed previously. Low and Moderate Income Housing Capital Project Redevelopment Agency Fund This fund holds the 20% in annual Redevelopment Agency (RDA) property tax increment that must be set aside for Iow and moderate income housing needs. The fund received $3.5 million in such revenues, up slightly from $3.4 million last year. The Housing fund provided and spent $1.1 million in housing loans, grants and program costs and $0.3 million in debt service on the -26- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) Gateway RDA tax allocation revenue bonds, as mentioned in the Gateway Debt Service RDA Fund discussion above. $13.1 million from current and prior years' revenues remain in reserves for planned or anticipated housing development, up from $11.3 million a year ago. Last year's housing outlay was higher at $2.8 million, because of the Willow Gardens, Commercial Avenue and Mission/Chestnut projects. Debt service payments were unchanged. Other Governmental Funds Presented as a group in the Basic Financial Statements, these funds are individually presented as Supplementary Information. Analysis of Enterprise Funds Sewer Rental Fund The Sewer Rental fund reported operating income of $1.6 million in the current year, down slightly from an operating income of $1.7 million in the prior year. Operating revenues increased $1.6 million or 13% from the previous year to $13.9 million, the result of increased capital outlay reimbursements from other cities that use the treatment plant and collection system. Operating expenses increased $1.7 million this year or 16% to $12.3 million mainly due to higher depreciation costs from the treatment plant expansion. Net non-operating expenses of $1.4 million this year rose slightly from the $1.2 million of last year, due to lower investment earnings. The operating income and net non-operating expense led to the net assets of this fund increasing $0.2 million to approximately $25 million. The four-stage, multi-year wet weather capital improvement program continued during the fiscal year, largely funded by the State Water Resources Control Board loan. The expansion and improvements to the wastewater collection system and pump stations will control sewer system overflows as ordered by the Regional Water Quality Control Board. In July 2004, the City Council adopted a five-year rate increase plan, to cover the capital outlays and debt service for these improvements. A total of $2 million of the $25 million in this Fund's Net Assets was unrestricted at the fiscal year end. The unrestricted monies are earmarked for the capital improvements not covered by the State loan. Parking District Fund Operating income declined $70,000 or 74% from last year to an operating income total of $24,000 this year. Parking fee revenue increased slightly to $313,000. Operating expenses rose significantly by $77,000 to $289,000 this year due to the shift of a parking enforcement officer from the General Fund. Interest income declined $45,000 from last year's results. Total non- operating revenues of $5,000 on top of the operating income results caused net assets to remain relatively unchanged from the previous year's value $1.6 million. $1.1 million of net assets are unrestricted but the City anticipates using it for future parking expansion. Storm Water Fund Current year operating revenues from County storm water assessment fees were flat at $0.4 million compared to last year. Operating expenses remained unchanged at $0.4 million. The fund broke even with operating income just as it did in 2002-03. Net assets, all unrestricted, at June 30, 2004, remained unchanged at $0.6 million. -27- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) CAPITAL ASSETS GASB Statement 34 requires the City to add infrastructure to its reportable capital assets. Infrastructure includes streets, drainage systems, and traffic control and safety devices. Previously, governments excluded the value of such property from their reports of fixed assets. The City has until the end of fiscal 2005-06 to fully report the depreciated value of all such assets acquired or built since 1980. Until the City can compile the list of infrastructure assets, the City shall report the infrastructure built or acquired annually and shall depreciate such assets over their useful lives. The City reports the depreciated book value of other types of capital assets such as buildings, land, equipment and furniture, on a City-wide Statement of Net Assets. Such information is summarized below and is more completely detailed in Note 3 to the Basic Financial Statements. The City depreciates all its capital assets, except land. At June 30, 2004, the City had $217.4 million, net of depreciation, invested in a broad range of capital assets used in governmental and business-type activities, as shown in Table 8 below: Table 8 Capital Assets (in Millions) at June 30 Go vernmen tal Activities: Land Buildings and improvements Equipment and vehicles Furniture and fixtures Infrastructure - streets* Infrastructure - traffic control devices* Infrastructure - storm drains* Construction in progress Less accumulated depreciation Totals * Additions during the fiscal year only 2004 2003 $ 46.5 $ 40.8 53.9 47.9 11.7 12.1 1.3 1.3 3.1 0.9 0.3 0.3 0.1 0.1 33.6 23.4 (18.8) (17.4) $ 131.7 $ 109.4 Business-type Activities Land $ 0.5 $ 0.5 Clean water facilities and transmission lines 68.8 68.8 Buildings and improvements 10.4 10.4 Equipment and vehicles 9.0 9.0 Infrastructure - streets 1.4 - Construction in progress 12.3 2.6 Less accumulated depreciation (16.7) (14.1) Totals $ 85.7 $ 77.2 The $5 million North Canal Avenue parcel for the new Central Fire Station and the $0.7 million parcel at 312 Miller Avenue, both acquired by the Redevelopment Agency, account for the rise in governmental land assets. Buildings and improvements in governmental funds jumped $6 million due to the improvements at Orange Park, the Bay Trail improvement, the upgrade of a fire station, and the interior modification of the police station. The completion of the 2002 phase -28- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) of street resurfacing accounts for the $2.2 million increase in street infrastructure. The Oyster Point Boulevard and US 101 interchange project and the Gateway childcare center project account for much of the $10.2 million increase in construction in progress. Phase I of the Wet Weather program, funded by a State Water Resources Control Board loan to the Sewer Rental Enterprise Fund, accounts for the $9.7 million increase in business-type construction in progress. Completion of the Colma Creek bridge improvement, part of the Wet Weather program, comprised the $1.4 million infrastructure addition in business-type activities. DEBT ADMINISTRATION Each of the City's debt issues is discussed in detail in Note 5 to the Basic Financial Statements. A summary of the City's outstanding debt for the past two fiscal years is as follows: Table 9 Outstanding Debt (in Millions) at June 30 Governmental activities 2004 2003 Tax allocation, revenue bonds, and loans (issued and incurred by the Redevelopment Agency) $ 41.2 $ 42.5 Certificates of participation 5.6 5.7 Notes payable 5.1 4.0 Revenue bonds 0.3 0.3 Special assessment debt with City commitment 0.1 Capital leases 0.6 0.9 Business-type Activities State Water Resources Board loans $ 52.8 $ 53.5 $ 64.2 $ 56.1 On September 11, 2001, the City entered into a long-term loan agreement with the San Mateo County Transportation Authority for the Oyster Point Project Phases II and Ilia, in an aggregate principal amount of not to exceed $10.7 million. The note payable will have an interest rate equal to the rate of return on the Authority's investments and will be repaid in full by June 2008. Funds are drawn down as needed to advance funds needed for the developer fees that will pay for the City's share of the Oyster Point Boulevard exit and access ramps with U.S. Highway 101. The City received $1.1 million in note proceeds during fiscal 2003-04. To finance the expansion of the City's water quality control plant jointly owned with the City of San Bruno, and the improvement to the regional wastewater collection and treatment system, the State Water Resources Control Board has issued $76.9 million in three loan packages to the City's Sewer Rental Enterprise fund. The City has employed $66.1 million in loan proceeds since 1993, adding $10.5 million during fiscal 2003-04. Principal and interest repayments commence on the loans upon completion of the project related to each loan package, with $2.4 million in principal repaid this fiscal year. The three current loans outstanding have fixed interest of 3.0%, 2.6%, and 2.5% and are due in 2013, 2022 and 2025. Because of the regional benefits and equity interest in this project, the City of San Bruno shares in the loan repayments. As mentioned in the analysis of major governmental funds, two Redevelopment Agency project areas have outstanding tax allocation and revenue bonds that were issued in 1997 and 1999 to -29- CITY OF SOUTH SAN FRANCISCO MANAGEMENT'S DISCUSSION AND ANALYSIS Required Supplementary Information (Continued) fund various redevelopment projects. Bond principal repayments, covered by Agency property tax revenues, amounted to $1.3 million for the current fiscal year. In June 2003 the South San Francisco Capital Improvements Financing Authority issued $5.865 million of Refunding Revenue Serial Bonds that bear interest at 2.0% to 4.0 % and are due in 2018. The proceeds from these Bonds defeased and refunded the Authority's outstanding 1993 Revenue Bonds that had previously refinanced 1991 bonds that supported the acquisition and construction of the City's conference center. Just as with the old bonds, the new debt will be paid with a $2.50 per room, per night transient occupancy tax for the conference center levied and collected by the City. The South San Francisco Conference Center Authority, an independently governed component unit of the City that operates the conference center, reports the liability of this debt in its own separately issued financial statement. Debt Without City Commitment Special assessment districts in different parts of the City have also issued debt to finance infrastructure and facility construction in their respective districts. At June 30, 2004, a total of $1.9 million in special assessment district debt was outstanding, issued by three special assessment districts. This debt is secured by special assessments on the real property in the districts that issued the debt. Although the City bears no responsibility on the debt, it does act as the districts' agent in the collection and remittance of assessments. South San Francisco Magnolia Plaza Associates, a developer, is responsible for repaying a $6.1 million Magnolia Plaza Senior Apartment note due in 2017 out of rent revenue received from the 1987 apartment development. Note 5 to the Basic Financial Statements provides further information on these debt issues outside of the City's liability to pay. ECONOMIC OUTLOOK AND MAJOR ACCOMPLISHMENTS The economic outlook and major accomplishments of the City are discussed in the accompanying Transmittal Letter. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide readers with a general overview of the City's finances. Questions about this report or requests for additional financial information should be directed to the City of South San Francisco Finance Department, P.O. Box 711, South San Francisco, CA 94083, phone (650) 877-8507. The City's website is at www.ssf.net. -30- Basic Financial Statements Government-wide Financial Statements -31- CITY OF SOUTH SAN FRANCISCO STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES The Statement of Net Assets and the Statement of Activities summarize the entire City's f'mancial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the City's assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis--the effect of all the City's transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between City funds have been eliminated. The Statement of Net Assets reports the difference between the City's total assets and the City's total liabilities, including all the City's capital assets and all its long-term debt. The Statement of Net Assets presents similar information to the old balance sheet format, but presents it in a way that focuses the reader on the composition of the City's net assets, by subtracting total liabilities from total assets. The Statement of Net Assets summarizes the f'mancial position of all the City' s Governmental Activities in a single column, and the financial position of all the City's Business-Type Activities in a single column; these columns are followed by a total column which presents the financial position of the entire City. The City's Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City's Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City' s Business Type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City's net assets. It is also prepared on the full accrual basis, which means it includes all the City's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The format of the Statement of Activities differs considerably from those used in the past. It presents the City's expenses first, listed by program, and follows these with the expenses of its business-type activities. Program revenues that is, revenues which are generated directly by these programs--are then deducted from program expenses to arrive at the net expense of each governmental and business-type program. The City's general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Assets is computed and reconciled with the Statement of Net Assets. Both these Statements include the financial activities of the City, the City of South San Francisco Redevelopment Agency and the City of South San Francisco Capital Improvements Financing Authority, which are legally separate but are component units of the City because they are controlled by the City, which is financially accountable for their activities. Data for the South San Francisco Conference Center Authority is reflected as a discretely presented component unit of the City. This data is presented separately from other funds of the City to reflect operations under control of a governing body with a voting majority which is different from the City Council. -32- ASSETS Cash a~t investments Cash and investments with fiscal agent Receivables: Accounts Aecnled in. rest Due ~ other governments Due from Conference Center Du~ from Pmnm'y Government In~..] balances Deposit Invcnn~ Ummnrtizcd bond discou~ Prepaid items Rest~cted cash and iuvestmcnts Capi~l assets: Nondeprcciable Dc/~rcciable, net accumulated dcprcciat/on Tom1 Assets LIABILIT~S Accoums payable Accrued sul.~es ~d Accrued interest payable Due to p~ma~y government Due to Conference Center Other payable Deposits Deferred Revenue Long-tean ]iah~]i~es due within one year: Compensated absemees obligation Debt and capitallease obligations Matutexl bonfls and interest payable Non~u~ent ]iabih'ties: Accrued insurance losses Compensated absences obligation Noneutre~ portion of long-te~m debt Total LiaNlities NET ASSETS Invested fi~ capital assets, net of rented debt Restricted for: Special ~eve~ae projects Debt service Capitalprojeets Total Res~cted Net Assets Unrestricted Total Net Assets CITY OF SOUTH SAN FRANCISCO STATEMENT OF NET ASSETS JUNE 30, 2004 Primary Government Governmental Business.Type Activities Activities Total Component Unit $63,980,144 $1,772,294 $65,752,438 $1,359,900 421,944 421,944 491,467 4,043,945 1,251,523 5,295,468 370,636 515,363 12,822 528,185 2,445,996 10,499,101 12,945,097 71,055 71,055 1,070 3,981,499 (3,981,499) 10,424,006 10,424,006 171,010 559,937 730,947 34,364 34,364 196,188 63,740 700 64,440 26,237,398 26,237,398 80,180,465 12,872,103 93,052,568 51,569,326 72,864,984 124,434,310 5.201,266 244,140,255 95,851,965 339,992,220 7,620,527 3,384,192 2,542,265 5,926,457 133,947 1,663,357 1,663,357 6,198,686 1,285,645 7,484,331 71,055 1,070 1,070 72,836 112 72,948 58,375 1,632,762 t,632,762 182,838 10,728,571 118,482 10,847,053 531,852 55,938 587,790 32,851 1,727,018 2,455,288 4,182,306 305,000 5,980 5,980 4,887,216 4,887,216 4,378 340 371,123 4,749,463 51,157,208 61,740,278 112,897,486 4,866,001 86,369,088 68,569,131 154,938,219 5,650,067 88 ,960,212 21,541,521 110,501,733 30,265 9,733,350 9,733,350 17,475,299 17,475,299 491,467 32,728,474 1,935,907 34,664,381 59,937,123 1,935 ,907 61,873,030 491,467 8,873,832 3,805,406 12,679.238 1,448,728 $157,771,167 $27,282,834 $185,054,001 $1,970,460 See accompanyflag notes to fma~ial statements -33- CITY OF SOUTH SAN FRANCISCO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 Functions/Programs Primary Government Governmental Activities: General government P"tre Police Public Works Parks, recreation and m~imenance services Library Economic and community development Interest on long-term debt Total Governmental Activities Business-type Activities Sewer rental Parking District Storm Water Total Business-type Activities Total Primm~ Government Component Unit Conference Center Charges for Expenses Services Program Revenues Operating Grants and Contributions $6,992,700 $2,140,949 $ 9,000 13,722,509 1,562,388 13,944,144 1,861,660 397,843 2,392,790 175,712 1,249,518 12,159,195 3,209,976 871,489 4,662,937 154,795 1,110,048 7,515,708 4,225,062 1,181,090 3,235,435 Capital Grants and Contributions $11,353,163 274,953 64,625,418 13,330,542 4,818,988 11,628,116 13,807,258 8,820,583 290,314 312,875 401,315 405,578 14,498,887 9,539,036 $79,124,305 $22,869,578 $2,672,414 $1,114,088 3,524,006 3,524,006 $8,342,994 General revenues: Taxes: Property taxes Sales taxes Transient occupancy taxes Other taxes Motor vehicle in lieu Investment earnings Miscellaneous Transfers Total general revenues and transfers Change in Net Assets Net Assets - Beginning Net Assets - Ending See accompanying notes to financial statements 1,581,840 1,581,840 $13,209,956 -34- Net(Expenses) Revenues and Changes in Net Assets Primary Government Governmental Activities Business. Type Component Activities Total Unit ($4,842,751) (12,160,121) (11,684,641) 10,385,603 (8,077,730) (3,398,094) (1,834,603) (3,235,435) (34,847,772) ($4,842,751) (12,160,121) (11,684,641) 10,385,603 (8,077,730) (3,398,094) (1,834,603) (3,235,435) (34,847,772) (34,847,772) $119,171 22,561 4,263 145,995 145,995 119,171 22,561 4,263 145,995 (34,701,777) ($1,558,326) 28,798,270 10,990,867 3,945,974 4,664,923 2,782,118 660,704 3,771,293 6,938 55,621,087 20,773,315 136,997,852 $157,771,167 55,196 (6,938) 48,258 194,253 27,088,581 $27,282,834 28,798,270 10,990,867 3,945,974 4,664,923 2,782,118 715,900 3,771,293 55,669,345 20,967,568 164,086,433 $185,054,001 1,724,585 26,658 1,751,243 192,917 1,777,543 $1,970,460 -35- Basic Financial Statements Fund Financial Statements -37- FUND FINANCIAL STATEMENTS Only individual major funds are presented, while non-major funds are combined in a single column. Major funds are def'med generally as having significant activities or balances in the current year. No distinction is made between Fund types and the practice of combining like funds and presenting their totals in separate columns (Combined Financial Statements) has been discontinued, along with the use of the General Fixed Assets and General Long-term Debt Groups of Accounts. The funds described below were determined to be Major Funds by the City for fiscal 2004. Individual non- major funds may be found in the Supplemental section. This fund accounts for resources traditionally associated with government, such as administration, public safety, library, parks maintenance, and recreation, outside of those accounted for in other funds. FEDERAL AVIATION GRANT SPECIAL REVENUE FUND This fund accounts for federal monies received for insulating structures against ah-pon noise. REDEVELOPMENT AGENCY FUNDS: GATEWAY DEBT SERVICE FUND - This fund accounts for principal and interest associated with debt repaid by property tax increments from the Gateway project area. It is also a sinking fund required by 1999 bond covenants for bond retirement purposes. DOWNTOWN CAPITAL PROJECT FUND - Accounts for property tax increment revenues used for capital projects connected with the Downtown project area. LOW AND MODERATE INCOME HOUSING CAPITAL PROJECT FUND - This fund accounts for the 20% share of property tax increment revenue directed toward low and moderate income housing projects. CAPITAL IMPROVEMENT FUND To account for expenditures associated with the acquisition, construction, or improvement of City owned facilities and infrastructure. Funding comes from the general fund, special revenue funds, grants and fees. -39- CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2004 ASSETS Cash and investments Cash and investments with fiscal agent Receivables: Accotmts Accrued interest Due from other governments Due from other funds Advances to other funds Due from Conference Center Loans Inventory Prepaid items Restricted cash and investments Total Assets Federal Aviation Grant $11,270,351 $5,258,034 1,848,354 108,553 30,875 2,075,983 71,055 34,364 59,390 $15,468,050 $5,288,909 Redevelopment Agency Gateway Debt Service $41,678 15,078,973 $15,120,651 Capital Improvement Redevelopment A~ency Downtown Capital Project $1,104,272 1,891,576 572 $6,489,742 2,400 23,831 83,554 3,981,499 3,088,161 565,402 83,725 $3,080,145 1,785.997 $16,020,586 LIABILITIES AND FUND BALANCES Accounts payable Accrued salaries and benefits Other payable D .eposits Deferred Revenue Due to Conference Center Due to other funds Advances from other funds Malured bonds payable Matured interest payable $582,382 1,663,357 1,743 $2,001 513,860 5,286,908 1,070 Total Liabilities 2,762,412 5,288,909 Fund Balances: Reserved for: Encumbrances Bond and note requirements Advances, inventory and prepaid Loans receivable Futttre loan obligation Restricted assets Unreserved, reported in: General fund Special revenue funds D~bt service funds Capital projects funds 270,693 93,754 12,341,191 60,792 (60,792) Total Fund Balances $1,000 Total Liabilities and Fund Balances 1,000 15,119,651 12,705,638 15,119,651 $15,468,050 $5,288,909 $15,120,651 See accompanying notes to basic f'mancial statements $1,874,719 33 592,448 580,002 3,047,202 5,666,575 75,728 (5,709,360) 32,943 $3,080,145 $266,834 500 2,787,538 3,054,872 67,598 3,088,161 565,402 1,806,161 7,438,392 12,965,714 $16,020,586 -40- Redevelopment Agency Other Low Mod Housing Governmental Capital Project Funds Total Governmental Funds $10,443,586 $18,496,126 $53,062,111 419,544 421,944 276,727 4,040,488 86,111 131,223 482,566 370,013 2,445,996 3,981,499 844,591 3,932,752 71,055 8,818,565 1,040,039 10,424,006 34,364 59,390 3,866,401 5,422,302 26,237,398 $23,214,663 $27,000,565 $105,193,569 $7,660 27.055 860,635 $232,531 $2,967,127 1,663,357 15 1,791 1,012,759 1,632.762 699,628 10,728,571 1,070 505,155 505,155 3,932,752 3,932,752 5,000 5,000 980 980 895,350 6,388,820 21,438,565 427,896 1,175,593 7,669,147 533,922 533,922 844,591 4,026,506 8,818,565 1,040,039 10,424,006 1,026,633 1,026,633 9,128,124 4,820,334 30,949,998 2,918,095 22,319,313 $23,214,663 12,341,191 9,174,880 9,114,088 9,186 9,186 3,013,200 7,660,327 20,611,745 83,755,004 $27,000,565 $105,193,569 -41 - CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES JUNE 30, 2004 Total fund balances reported on the governmental funds balance sheet $83,755,004 Amounts reported for Governmental Activities in the Statement of Net Assets are different from those reported in the Governmental Funds because of the following: Capital assets used in Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds. Internal service funds are used by management to charge the cost of management of communication, telephone, building, fleet maintenance, equipment replacement, worker's compensation, employee benefits, insurance, and post-retirement healthcare benefits to individual funds. The assets and liabilities are included in Governmental Activities in the Statement of Net Assets. Interest payable on long-term debt does .not require the use of current financial resources and, therefore, are not reported in the Governmental Funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. Non-current portion of compensated absences Net assets of governmental activities See accompanying notes to financial statements 128,608,542 7,394,215 (6,198,686) (52,236,337) (3,551,571) $ 157,771,167 -42- CITY OF SOUTH SAN FRANCISCO GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2004 Redevelopment Federal Agency Aviation Gateway Capital General Grant Debt Service Improvement REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Licenses and permits Charges for services Fines and forfeitures Other Total Revenues $11,269,815 18,349,855 4,000,804 $519,235 2,484,077 19,705 4,039,527 7,773,204 1,061,231 10,157 48,988,670 538,940 EXPENDITURES Current: City Council City Clerk City Treasurer City Attorney City Manager Finance Non-deparmaental Human Resources Fire Police Public Works Parks, recreation and maintenance Library Economic and Community Development Information systems Other Capital outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures 180,054 377,904 34,734 754,158 659,110 1,509,341 744,307 758,337 13,427,723 13,742,254 1,312,628 10,549,612 4,469,947 2,724,719 3,642 12,308 12,926 538,940 $134,463 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Issuance of debt and capital leases Proceeds from sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) 134,463 945,000 1,240,704 Net Change in Fund Balances Fund balance, July 1 Fund balance, June 30 51,273,704 538,940 2,185,704 (2,285,034) (2,051,241) 20,382 1,406,422 (429,097) 997,707 (1,287,327) 13,992,965 $12,705,638 See accompanying notes to financial statements 4,924,038 4,924,038 2,872,797 12,246,854 $15,119,651 Redevelopment Agency Downtown Capital Project $9,963,214 2,103 886,733 123,530 10,975,580 $6,674,343 389,041 4 7,063,388 18,834,787 1,429 5,007,603 1,921,891 23,843,819 (12,868,239) 17,948 1,939,839 5,123,549 1,100,926 185,000 11,419,282 12,705,208 (163,031) 195,974 $32,943 100 (7,671,375) (7,671,275) (2,547,726) 15,513,440 $12,965,714 -44- Redevelopment Agency Other Total Low Mod Housing Governmental Governmental Capital Project Funds Funds $10,854,112 $28,798,270 877,791 19,227,646 2,704,730 17,187,983 $144,900 156,124 3,330,413 4,039,527 1,526,769 10,186,710 1,061,231 1,404,088 1,537,775 144,900 17,523,614 85,369,555 410 642,474 7,115 122,117 291,826 1,044,568 606,358 !,563,068 717,183 741,871 180,054 377,904 34,734 754,158 659,110 1,509,751 1,386,781 765,452 13,427,723 13,864,371 20,978,181 11,594,180 4,469,947 6,816,036 1,429 745,513 5,724,786 599,866 1,557,174 1,357,966 2,629,544 1,323,541 6,371,281 87,476,828 (1,178,641) 11,152,333 (2,107,273) 1,100,926 205,482 3,460,957 1,716,468 22,927,167 (350,690) (14,709,067) (23,160,229) 3,110,267 (12,992,599) 1,073,346 1,931,626 (1,840,266) (1,033,927) 20,387,687 22,452,011 84,788,931 $22,319,313 $20,611,745 $83,755,004 -45- CITY OF SOUTH SAN FRANCISCO Reconciliation of the NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2004 NET CHANGE IN FUND BALANCES - TOTAL GOVE~AL FUNDS Amounts reported for Governmental Activities in the Statement of Activities are different because of the following: Capital Assets Transactions Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Expenditures for capital assets Current year depreciation Long Term Debt Proceeds and Payments Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Assets. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial resources and therefore is not reported as revenue or expenditures in governmental funds (net change): Interest payable Compensated absences Allocation of Internal Service Fund Activity Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities. CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements ($1,033,927) 24,162,973 (1,772,326) (1,100,926) 1,557,174 (604,888) 117,015 (551,780) $20,773,315 -46- CITY OF SOUTH SAN FRANCISCO GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 Budgeted Amounts Actual Original Final Amount Variance with Final Budget Positive (Negative) Resources (inflows): Property taxes $10,084,000 $11,269,000 $11,269,815 $815 Other taxes 20,544,949 18,341,000 18,349,855 8,855 Intergovernmental 4,871,985 4,370,587 4,000,804 (369,783) Interest and rentah 2,952,1 O0 2,507,1 O0 2,484,077 (23,023) Licenses and permits 4,661,600 3,779,493 4,039,527 260,034 Charges for services 6,620,168 7,939,338 7,773,204 (166,134) F'mes and forfeitures 1,048,500 1,062,000 1,061,231 (769) Other 435,000 15,000 10,157 (4,843) Amounts available for appropriation 51,218,302 49,283,518 48,988,670 (294,848) Charges to appropriations (outflows) City Council 195,002 208,172 180,054 28,i ! 8 City Clerk 406,497 405,841 377,904 27,937 City Treasurer 35,159 60,104 34,734 25,370 City Attorney 440,331 783,336 754,158 29,178 City Manager 748,707 693,851 659,387 34,464 Finance 1,655,534 1,538,938 1,512,841 26,097 Non-departmental 833,840 811,665 744,307 67,358 Hnman Resources 943,440 987,014 758,337 228,677 Fire 13,475,745 13,528,117 13,439,298 88,819 Police 14,264,946 13,809,146 13,782,541 26,605 Public Works 990,784 1,689,656 1,366,891 322,765 Parks, recreation and maintenance 11,015,314 10,648,265 10,549,612 98,653 · ~ .ibr-,ay 4,101,498 4,66 I, 870 4,480,947 ! 80,923 Economic and community development 2,685,168 3,140,518 2,824,800 315,718 Information systems Other 4,445 4,445 3,642 803 Debt service: Principal repayments 271,688 12,308 12,308 Interest and fiscal charges 44,590 12,928 12,926 2 Lease purchases 2,198 2,198 Total charges to appropriations 52,112,688 52,998,372 51,494,687 1,503,685 OTHER FINANCING SOURCES (USES) Proceeds fxom sale of capital assets Transfers in Transfers out Total Other Financing Sources (Uses) 20,382 20,382 1,095,400 1,225,956 1,406,422 180,466 (130,000) (600,930) (429,097) 171,833 965,400 625,026 997,707 372,681 $71,014 ($3,089,828) (1,508,310) $1,581,518 Revenues in excess of charges to appropriations and other financing sources (uses) Fund Balance, July 1 13,992,965 Adjustment to budgetary basis: Encumbrance adjustments 22O,983 $12,705,638 Fund Balance, June 30 " See accompanying notes to financial statements -47- CITY OF SOUTH SAN FRANCISCO FEDERAL AVIATION GRANT FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR TIlE YEAR ENDED JUNE 30, 2004 Intergovernmental Interest and rental Total Revermes EXPENDITURES: Cu~ent: Public Works Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES). Transfers (out) Total other 17mane/rig sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Fund bahnee, July 1 Fu~ balance, June 30 Variance with Final Budget Budgeted Amounts Positive Original ~ Actual Amounts (Negative) $1,693,000 $1,693,000 $519,235 ($1,173,765) 19,705 19,705 1,693,000 1,693,000 538,940 (1,154,060) 1,723,735 1,723,735 538,940 1,184,795 1,723,735 1,723,735 538,940 1,184,795 (30,735) (30,735) 30,735 (15,ooo) 15,ooo (15,000) 15,000 ($30,735) ($45,735) $45,735 See accompatFfing notes to financial -48- MAJOR PROPRIETARY FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges. The concept of major funds established by GASB Statement 34 extends to Proprietary Funds. The City reported all enterprise funds as major proprietary funds. GASB 34 does not provide for the disclosure of budget versus actual comparisons regarding proprietary funds that are major funds. SEWER RENTAL FUND This fund accounts for user charges and debt proceeds supporting the operation, maintenance, and capital expansion of the wastewater collection and treatment system. PARKING DISTRICT FUND This fund accounts for meter and parking permit fees used to maintain parking facilities. STORM WATER FUND This fund accounts for user charges sustaining the Storm Water Management Program mandated by state and federal authorities. -49- ASSETS Currealt assets: Cash and investments Cash and investn~'uts with fiscal agent R~ceivables: Accounts Accrued interest Due from other governments Due from other funds Deposit Prepaid Items Inventory Total current assets Noncurrent assets: Capital assets: Nondepreciable Depreciable, net accumulated depreciation Total non-current assets Total Assets CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF N'ET ASSETS JUNE 30, 2004 Business-type Activities - Enterprise Funds Gov~tai Activities Sewer Parking Storm R~atal District Water Internal Total Service Funds $1,165,832 $606,462 $1,772,294 $1,247,356 30 1,989 7,259 10,499,101 554,937 5,000 700 $10,918,033 4,137 1,251,523 3,457 3,574 12,822 32,797 10,499,101 505,155 559,937 171,010 700 4,350 12,304,083 1,178,121 614,173 14,096,377 11,634,802 12,595,571 276,532 72,577,957 250,925 85,173,528 527,457 97,477,611 1,705,578 12,872,103 36,102 72,864,984 3,141,249 36,102 85,737,087 3,141,249 650,275 99,833,464 14,776,051 LIABILITIES Current liabilities: Accounts payable Accrued interest payable Other payable Due to other governments Due to other funds Deferred Revenue Compensated absences obligation Current pon/on of long-term debt Total current liabilities Noncurrent liabilities: Accrued iasurance losses Compensated absences obligation Noncurrent portion of long-term debt Total uoncurront liabilities Total Liabilities NET ASSETS: Invested in capital assets, net of related debt Restricted Unrestricted Total Net Assets 2,537,039 1,285,645 112 3,981,499 118,482 53,330 2,455,288 175 5,051 2,542,265 417,065 1,285,645 112 71,045 3,981,499 118,482 2,608 55,938 531,852 2,455,288 167,818 10,431,395 175 7,659 10,439,229 1,187,780 4,887,216 342,348 20,202 8,573 371,123 826,769 61,740,278 61,740,278 480,071 62,082,626 20,202 8,573 62,111,401 6,194,056 72,514,021 20,377 16,232 72,550,630 7,381,836 20,977,962 527,457 36,102 21,541,521 2,493,360 1,935,907 1,935,907 2,049,721 1,157,744 597,941 3,805,406 4,900,855 $24,963,590 $1,685,201 $634,043 $27,282,834 $7,394,215 See accompanying notes to f'mancial statements -50- CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2004 OPERATI2NG REVENUES Charges for services Other cities' participation Connection and other fees Developer fees Parking fees Total Operating Revenues OPERATING EXPENSES Personnel expenses Professional services Program supplies lnsm-a~ce Self-insurance and claims Repair and maintenance Rents and leases Utilities Administration Depreciation Other Total Operating Expenses Operating Income (Loss) NONOPERATIING RES~NUES (EXPENSES) Interest income Loss on sale of fLxed assets Interest expense Other Total Nonoperating Revenues (Expenses) Income (loss) before transfers TRANSFERS Transfers in Transfers out Change in Net Assets Net Assets - July 1 Net Assets - June 30 Business-type Activities. Enterprise Funds Sewer Parking Storm Rental District Water Total Governmental Activities Internal Service Funds $8,820,583 $405,578 $9,226,161 $10,448,594 3,523,976 3,523,976 1,415,813 1,415,813 166,027 166,027 $312,875 312,875 13,926,399 312,875 405,578 14,644,852 10,448,594 4,108,309 160,985 239,204 4,508,498 6,334,855 892,635 215 44,002 936,852 522,289 875,891 20,566 13,843 910,300 737,072 100,555 811 1,758 103,124 698,678 1,363,210 502,603 15,185 517,788 663,983 1,316,950 1,316,950 1,056,181 5,301 2,705 1,064,187 483,474 796,909 84,817 73,140 954,866 2,614,227 16,457 6,944 2,637,628 508,773 75,254 56 75,310 12,339,514 289,152 396,837 13,025,503 11,312,334 1,586,885 23,723 8,741 1,619,349 (863,740) 47,812 4,899 2,485 55,196 22,240 (6,647) (1,416,013) (1,416,013) (1,003) 30 30 (1,368,171) 4,899 2,485 (1,360,787) 218,714 28,622 11,226 258,562 14,590 (849,150) 240,000 (6,938) (6,938) 211,776 28,622 11,226 251,624 (609,150) 24,751,814 1,656,579 622,817 27,031,210 8,003,365 $24,963,590 $1,685,201 $634,043 $27,282,834 $7,394,215 See accompanying notes to financial statements -51- CITY OF SOUTH SAN FRANCISCO PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash received fi.om customers Cash payment to suppliers for gooch and services Cash paymem to employees for services Cash received from interfimd service provided Cash payment for judgments and claims Net Cash Provided by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other receipts lnteffund receipts Interfund disbursements Net Cash Provided by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIlgS Principal paid on long-term debt Interest paid on long-term debt Acquisition of capital assets Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Net Cash Provided by Investing Activities Net Increase (Decrease) In cash and cash equivalents Cash and cash equivalents, July 1, 2003 Cash and cash equivalents, June 30, 2004 Reconciliation of operating income (loss) to net cash provided by operating ac~vifies: Operating Income (loss) Adjustments to recondle operating income (loss) to cash flows from operating activities: Depredation Net change in assets and liabilities: Accounts and lease receivables Due fi.om other government agencies Deposit Prepaid Items Accounts payable Other payable Due to other government agencies Deferred Revenue Accrued insurance losses Compensated absence obligations Net Cash Provided by (Used in) Operating Activities Business.type Activities - Enterprise Funds Sewer Parking Storm Rental District Water Total $13,866,291 $312,845 $405,577 $14,584,713 (4,067,324) ( 116,699) ( 154,602) (4,338,625) (4,190,782) (158,180) (238,315) (4,587,277) Governmental Activities Service }hands ($3,065,204) (6,216,137) 10,445,409 (876,879) 5,608,185 37,966 12,660 5,658,811 287,189 30 30 3,981,499 3,981,499 240,000 (6,938) (6,938) (505,155) 3,974,591 3,974,591 (265,155) (2,394,025) (2,394,025) (276,362) ( 1,449,466) ( 1,449,466) (1,004) (11,178,447) (11,178,447) (477,725) (15,021,938) (15,021,938) (755,091) 82,924 5,090 3,016 91,030 28,121 82,924 5,090 3,016 91,030 28,121 (5,356,238) 43,056 15,676 (5,297,506) G04,936) 5,356,238 1,122,776 590,786 7,069,800 11,622,969 $1,165,832 $606,462 $1,772,294 $10,918,033 $1,586,885 $23,723 $8,741 $1,619,349 ($863,740) 2,614,227 16,457 6,944 2,637,628 508,773 (60,108) (30) (1) (60,139) (3,185) (554,937) (5,000) (559,937) (10,800) (700) (700) (4,350) 2,157,201 11 (3,913) 2,153,299 81,522 (530) (530) 15,520 (81,000) (81,000) 29,620 29,620 486,331 (82,473) 2,805 889 (78,779) 77,118 $5,608,185 $37,966 $12,660 $5,658,811 $287,189 See accompanying notes to basic financial statements -52- An agency fund is used to account for assets held by the City acting as an agent for another government entity. The £mancial activity of this fund, excluded from the Entity-wide financial statements, is presented in a separate Fiduciary Fund financial statement. NONOBLIGATED ASSESSMENT DISTRICTS AGENCY FUND This fund accounts for the collection of assessments and related repayments of the following special assessment bonds: the 1989 E1 Camino Plaza Assessment District Series 89A & 89B and the 1990 Pointe Grand Business Park Assessment District Series 90A. -53- CITY OF SOUTH SAN FRANCISCO FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2004 ASSETS Receivables: Accrued interest Restricted cash and investments Total Assets Agency Fund Non- Obligated Assessment Districts $5,229 899,206 $904,435 LIABILITIES Deferred contributions from property owners Total Liabilities $904,435 $904,435 See accompanying notes to financial statements -54- Basic Financial Statements Notes to the Financial Statements. -55- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS INOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ] Description of the Financial Reporting Entity - The City has presented those entities, which comprise the primary government along with its discretely presented component unit in the basic financial statements. As required by generally accepted accounting principles, these financial statements present the City of South San Francisco (the City) as the Pr/mary Government, with its component units for which the City is considered financially accountable. The component units discussed below are included in the City's reporting entity because of the significance of their operational and financial relationships with the City. Description of Blended Component Units - The accompanying basic f'mancial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City's blended component units, entities for which the City is considered to be f'mancially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City' s operations and so data from this unit is combined with the City. The City's following blended component units are described below. The City of South San Francisco Redevelopment Agency (the Agency) was established in 1981 to develop certain portions of the City's older industrial areas. The Agency is governed by the City Council in a separate capacity as members of the Redevelopment Agency Board. The City of South San Francisco Redevelopment Agency's component unit financial statements may be obtained from the City' s Finance Department at 400 Grand Avenue, South San Francisco, CA 94080. The City of South San Francisco Capital Improvements Financing Authority is a joint exercise of powers authority created in 1991 between the City and the City of South San Francisco Redevelopment Agency. The Financing Authority is authorized to borrow money through the purchase or issuance of bonds, notes, or other obligations for the purpose of making loans to the City and other public entities to finance capital improvements. The City Council members serve as the Board of Directors. Description of Discrete Component Unit - The City of South San Francisco Conference Center Authority was established in 1992 to manage and operate the South San Francisco Conference Center. The Authority is governed by a Board of nine commissioners consisting of two Council members and seven representatives from various businesses appointed by City Council. The Authority does not meet the criteria of a blended component unit, since the City Council is not the component unit's governing body and the Authority does not provide services entirely to the City. However the City is fmancially accountable and is able to impose its will on the Authority. The Authority is therefore considered a discrete component unit with its financial data reported separately from the financial data of the City. The City of South San Francisco Conference Center Authority financial statements may be obtained from the Authority at 255 South Airport Boulevard, South San Francisco, CA 94080. -57- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation The accompanying f'mancial statements are presented on the basis set forth in Government Accounting Standards Board Statements No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, No. 36, Recipient Reporting for Certain Non-exchange Revenues, an Amendment of GASB Statement No. 33, No. 37, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments; Omnibus, and No. 38, Certain Financial Statement Note Disclosures. These Statements require that the f'mancial statements described below be presented. Government-wide Statements - The Statement of Net Assets and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the f'mancial activities of the overall City government, except for fiduciary activities. Interfund transfers and amounts owed between funds within the primary government have been eliminated from the statements. Amounts representing interfund services and uses remain in the statements. These statements distinguish between the governmental and business- type activities of the City. Governmental activities generally are £manced through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to fmancing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. -58- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Financial Statements: The fund f'mancial statements provide information about the City's funds, including fiduciary funds and blended component units. Separate statements for each fund category - governmental, proprietary, and fiduciary - are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column, All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Major Funds GASB Statement 34 defines major funds and requires that the City's major governmental and business-type funds be identified and presented separately in the fund financial statements. All other funds, called non-major funds, are combined and reported in a single column, regardless of their fund-type. Major funds are def'med as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds. The City reported the following major governmental funds in the accompanying financial statements: General Fund - Accounts for resources traditionally associated with government, such as administration, public safety, library, parks, maintenance, and recreation, outside of those accounted for in other funds. Federal Aviation Grant Special Revenue Fund - Accounts for Federal monies received for insulating structures against airport noise. Capital Improvement Fund - Accounts for expenditures associated with the acquisition, construction, or improvement of City-owned facilities and infrastructure. Funding comes from the General Fund, Special Revenue funds, grants and fees. -59- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Redevelopment Agency Funds: Gateway Debt Service Fund - Accounts for principal and interest associated with debt repaid by property tax increments from the Gateway project area. It is also a sinking fund required by 1999 bond covenants for bond retirement purposes. Downtown Capital Project Fund - Accounts for property tax increment revenues used for capital projects connected with Downtown project areas. Low and Moderate Income Housing Capital Project Fund - Accounts for the 20% share of property tax increment revenue directed toward low and moderate income housing projects. The City reported all enterprise funds as major funds in the accompanying financial statements. The enterprise funds are: Sewer Rental Fund - Accounts for user charges and debt proceeds supporting the operation, maintenance, and capital expansion of the wastewater collection and treatment system. Parking District Fund - Accounts for meter and parking permit fees used to maintain parking facilities. Storm Water Fund - Accounts for user charges sustaining the Storm Water Management Program mandated by state and federal authorities. The City also reports the following fund types: Internal Service Funds. These funds account for self insurance, health and retirement benefits, City services and equipment replacement; ail of which are provided to other departments on a cost-reimbursement basis. Fiduciary Funds. An agency fund is used to account for assets held by the City as an agent for special assessment districts that service debt for which the City is not obligated for repayment. The financial activities of this fund, excluded from the Government-wide £mancial statement, are presented in a separate Fiduciary Fund f'mancial statement. -60- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting The government-wide, proprietary, discretely presented component unit and fiduciary fund £mancial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other financing sources. Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, interest revenue, licenses and permits, charges for services, fines and forfeitures. Sales taxes collected and held by the state at year end on behalf of the City are also recognized as revenue. Other receipts and taxes are recognized as revenue when the cash is received. Non-exchange transactions, in which the City gives or receives value without directly, receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement ~ants, categorical block grants, and general revenue. Thus, both restricted and unrestricted net assets may be made available to fmance program expenditures. The City's policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. The City considers restricted shared state revenues such as gasoline taxes and public safety sales taxes, restricted locally imposed transportation sales taxes, frees, forfeitures, licenses, permits, charges for services, and program grants as program revenues. Certain indirect costs are included in program expenses reported for individual functions and activities. -61- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS [ NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City follows statements and interpretations of the Financial Accounting Standards Board and its predecessors that were issued on or before November 30, 1989, in accounting for its business- type activities, unless they conflict with Government Accounting Standards Board pronouncements. G. Budgets, Budgetary Accounting, And Encumbrances The City is not legally required to budget any of its funds, but does so to enhance City management's effectiveness in their financial planning efforts and to enhance control over the City's operations. Budgets are adopted on a modified accrual basis, except for encumbrances and for the Capital Improvement Fund. Encumbrances are considered expenditures in the year of the purchase order issuance. The Capital Improvement Fund is adopted on a multi-year project basis with unexpended and unencumbered budgets reappropriated in the following year. The City operates under the general laws of the State of California (the State) and annually adopts a budget effective July 1 for the ensuing fiscal year for the General fund; Special Revenue funds except for the City Programs fund; Debt Service funds; Capital Projects funds except for the Inactive Bonds fund; and Enterprise funds. The budget is adopted by the City Council and controlled at the department level for the General fund and at the fund level for all other funds with adopted budgets. From the effective date of the budget, the amounts stated therein as proposed expenditures become appropriations to the various City departments. The City Council may amend the budget by resolution during the fiscal year. The department heads may authorize transfers within one object category within the same department within a fund. The City Manager may authorize transfers between object categories and departments within a fund, or between capital projects with the same funding source. All appropriations lapse at year-end, except for capital projects and encumbrances. Original adopted budgets and final amended budgets are presented in the basic f'mancial statements. Supplementary budget appropriations were necessary during the year ended June 30, 2004. Encumbrance accounting, under which, purchase orders, contracts and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the budgetary process. Encumbrances outstanding at year-end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Encumbrances are reappropriated in the following year. The budgetary comparison statements present comparisons of the legally adopted budget with actual charges to appropriations on a budgetary basis. In order to provide a meaningful comparison, the actual charges on a budgetary basis include encumbrances, which is a basis that differs significantly from those used to present financial statements in conformity with generally accepted accounting principles. Cash Equivalents - For purposes of the statement of cash flows, the City considers all highly liquid investments (including all restricted assets) with maturity of three months or less when purchased to be cash equivalents. The City maintains a cash and investment pool that is available for use by all funds. As the proprietary funds' share of this pool is readily available when needed, such share is also considered to be cash equivalent. Deposit assets in the proprietary funds are related to -62- /. CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS insurance and benefits and are not considered cash equivalents for purposes of the statement of cash flows. Inventory and Prepaid Items consist of consumable supplies. Inventory is stated at cost (first-in, first-out method). The costs are recorded as expenditures at the time the individual inventory or prepaid item is consumed. Reported inventory and prepaid items are equally offset by a fund balance reservation, which indicates that they do not constitute "available spendable resources" even though they are a component of net current assets. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fak market value on the date contributed. GASB Statement 34 allows the City up to four years to record all its infrastructure assets at June 30, 2003. With the implementation of GASB 34 the City has recorded additions and improvements to infrastructure classified as streets, storm drains, and traffic control devices since fiscal 2003. Historical value for infrastructure assets acquired in prior years since 1980 will be retroactively recorded by June 30, 2006. GASB Statement 34 requires that all capital assets with limited useful lives be depreciated over their estimated useful lives. Alternatively, the "modified approach" may be used for certain capital assets. Depreciation is not provided under this approach, but all expenditures on these assets are expensed, unless they are additions or improvements. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The mount charged to depreciation expense each year represents that year' s pro rata share of the cost of capital assets. -63- CITY OF SOUTI-I SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The City has assigned the useful lives listed below to capital assets: Buildings Clean water facilities and transmission lines Improvements Machinery and equipment Furniture and fixtures Infrastructure 50 years 40 years 30 years 5-20 years 12 years 2040 years Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Capital assets, excluding infrastructure, are recorded if acquisition or construction costs exceeds $5,000. The similar threshold for infrastructure is $100,000. Vacation and sickpay are accrued as earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. After five to twenty years of employment, one half of accumulated sick leave becomes vested, up to a maximum amount as specified under labor contract provisions. The vested portion is available for current use or, if unused, is payable at termination or retirement. The City's liability for compensated absences, such as vacation and sick leave, is recorded in proprietary funds. The liability for compensated absences is determined annually. For all governmental funds, amounts expected to be paid out of current f'mancial resources are recorded as liabilities of the Health and Retirement Benefits Internal Service fund and charged-out to the governmental funds; the long- term portion is recorded in the Statement of Net Assets. Proprietary fund liabilities are recorded within their respective funds. -64- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFIC~ ACCOUNTING POLICIES (Continued) The changes of the compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $4,950,089 $505,840 $5,455,929 Additions 286,310 15,208 301,518 Payments (326,207) (93,987) (420,194) Ending Balance $4,910,192 $427,061 $5,337,253 Current Portion $531,852 $55,938 $587,790 L, Compensated absences are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the Health and Retirement Benefits Internal Service Fund. Property Tax Levy, Collection and Maximum Rates - State of California Constitution Article X[II A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts. The County of San Mateo assesses properties, bills for and collects property taxes on the schedule that follows: Secured Unsecured Valuation/lien dates Levy dates Due dates (delinquent as of) January 1 July 1 50% on November 1 (December 10) 50% on February 1 (April 10) January 1 July 1 July 1 (August 31) The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. Property taxes levied are recorded as revenue and receivables when they are collected during the fiscal year of levy or within 60 days of year-end. Pension Costs are funded currently as determined each July 1 by an actuary. -65- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS L NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Unbilled Services - for the Sewer Rental Enterprise Fund are accrued at year-end. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported mounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates. NOTE 2 - CASH AND INVESTMENTS go The City's goal is to invest at the maximum yield, consistent with safety and liquidity, while individual funds can process payments for expenditures at any time. The City's investments are carded at fair value, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. Categorization of Credit Risk of Securities Instruments The City and its fiscal agents invest in individual investments and in investment pools. Individual investments are evidenced by specific identifiable pieces of paper called securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to maximize security, the City employs the trust department of a bank as the custodian of all City managed investments, regardless of their form. The City catego62es its indi.,4dua! securities insmaments in ascending order to reflect the relative risk of loss of these instruments. This risk is called Credit Risk, the lower the number, the lower the rislc The three levels of risk prescribed by generally accepted accounting principles are described below: Category 1 - Securities instruments in this category are in the City's name and are in the possession of the trust department of the bank employed by the City solely for this purpose. The City is the registered owner of securities held in book entry form by the bank' s trust department. Category 2 - Securities insmunents and book entry form securities in this category are in the bank's name as the City's agent, but are held by its trust department in the City' s name. Category 3 - Investments in this category include only City-owned securities instruments or book entry form securities which were not in the City's name or not held by the bank's trust department. Pooled Investments - Pooled investments are not categorized because of their pooled, rather than individual, nature. -66- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS [NOTE 2 - CASH AND INVESTMENTS (Continued) I Investments are carded at fair value and were categorized as follows at June 30, 2004: City Treasury: Securities of llhe U. S. Government or its agencies Repurchase agreements Investment agreements Medium term corporate notes Money market pool (US Securities) San Mateo County Investment Pool Local Agency Investment Fund Non- Category 1 Categor7 2 Categorized Total $14,031,966 $3,262,566 2,215,296 $17,294,532 $125,000 125,000 4,258,550 4,258,550 2,215,296 12,076,115 12,076,115 31,493,617 31,493,617 17,959,373 17,959,373 Total City and Fiscal Agent 16,247,262 3,262,566 65,912,655 85,422,483 Cash Deposits Petty Cash 7,879,383 7,879,383 9,120 9,120 Total Cash and Investments 16,247,262 3,262,566 73,801,158 93,310,986 South San Francisco Conference Center Authority: Local Agency Investment Fund 1,251,504 1,251,504 Petty Cash Cash Deposits 100 100 108,296 108,296 Total South San Francisco Conference Center Authority Total Cash and Investments $16,247,262 $3,262,566 1,359,900 1,359,900 $75,161,058 $94,670,886 Financial Statement Presentation: Cash and investments available for operations Cash and investments with fiscal agent Restricted cash and investments $65,752,438 421,944 26,237,398 Total City Cash and Investments South San Francisco Conference Center Fiduciary Fund restricted cash and investments Total Cash and Investments 92,411,780 1,359,900 899,206 $94,670,886 The City does not allocate investments by fund. Each proprietary fund's portion of Cash and Investments Available for Operations is in substance a demand deposit available to f'mance operations, and is considered a cash equivalent in preparing the statement of cash flows. -67- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS [NOTE 2 - CASH AND INVESTMENTS (Continued) ] B. Cash Deposits Cash in banks is entirely insured (category 1) or collaterali?ed by an agent of the institution holding the deposit in the City's name (category 2). California law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the deposit or first trust deed mortgage notes with a value of 150% of the deposit as collateral for all municipal deposits. This collateral remains with the institution, but is considered to be held in the City's name and places the City. ahead of general creditors of the institution. The City has waived collateral requirements for the portion of deposits covered by federal deposit insurance. The following is a summary of the City's cash deposit at June 30, 2004: Bank Balance Carrying Before Amount Reconciling Items Bank Balance Bank Balance Insured Collateralized City Government $7,879,383 $8,338,317 $162,561 $8,175,756 Component umt: South San Francisco Conference Center Authority 108,296 166,265 100,000 66,265 -68- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 2 - CASH AND INVESTMENTS (Continued) I C. Authorized Investments The City's Investment Policy and the California Government Code allow the City to invest in the following, provided the credit ratings of the issuers are acceptable to the City. U.S. Treasury Securities Obligations issued by agencies of the U.S. Government Banker's Acceptances Commercial Paper Certificate of Deposit Repurchase Agreements Local Agency Investment Fund San Mateo County Investment Fund Mutual Funds Medium Term Notes Commercial paper must be rated 'A-I' by Standard and Poor's or 'P-I' by Moody's. Medium-term notes must be rated 'A' or better by Standard and Poor's. The City's normal practice is to hold investments until maturity. For medium-term corporate notes, however, the City may sell them before maturity if the bond ratings on the notes fall below 'A'. D. Local Agency Investment Fund 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 reports its investment in LAIF at the fair value amount provided by LAIF. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligation, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government- sponsored enterprises, and corporations. E. San Mateo County Investment Fund The City is a voluntary participant in the San Mateo County Investment Fund (SMCI1~) that is regulated by California Government Code Section 53600 under the oversight of the treasurer of the County of San Mateo. The City reports its investment in SMCIF at the fair value amount provided by SMCIF. The balance available for withdrawal is based on the accounting records maintained by SMCIF, which are recorded on an amortized cost basis. Included in SMCIF's investment portfolio are U.S. TreasUry Notes, obligations issued by agencies of the U.S. Government, LAIF, corporate notes, commercial paper, mortgage-backed securities, other asset- backed securities, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. -69- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS L NOTE 3 - CAPITAL ASSETS Capital Asset Changes - Changes in capital assets during the fiscal year consist of: Govermnental activities Capiud ass~.s not being depreciated: Land Construction in Progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and Improvements Infrastructure - Streets Infxastmcmre - Storm Drains Infrastructure - Traffic Control Devices Equipment & Vehicle Furniture and Fixtures Balance Balance July 1, 2003 Additions Retirements Tranffers lune 30, 2004 $40,840,638 $5,724,786 $46,565,424 23,405,287 18,489,541 ($66,998) ($8,212,789) 33,615,041 64,245,925 24,214,327 (66,998) (8,212,789) 80,180,465 47,873,783 6,019,537 53,893,320 943,590 2,193,252 3,136,842 134,725 134,725 299,043 299,043 5,273,971 (514,801 ) 4,759,170 1,298,407 (5,508) 1,292,899 Total capital assets being depreciated Less accumulated depreciation for: Buildings and Improvements InfrasWacture - Streets Infrastructure - Storm Drains Infrastructure - Traffic Control Devices Equipment & Vehicle Fumimm and Fixmre~ 55,823,519 (520,309) 8,212,789 63.515,999 (9,709,363) (1,313,440) (11,022,803) (15,727) (68,007) (83,734) (1,684) (3,368) (5,052) (7,476) (14,952) (22,428) (3,715,566) (282,682) 532,969 (3,465,279) (401,733) (89,877) 2,984 (488,626) Total accumulated depreciation Net Governmental Fund Program Capital Assets Being Depreciated Internal Service Fund Capital Assets Equipment & Vehicle Accumulated depreciation Net Internal Service Capital Assets Being Depreciated Governmental activity capital assets, net (13,851,549) (1,772,326) 535,953 (15,087,922) 41,971,970 (1,772,326) 15,644 8,2i2,789 48,428,077 6,859,598 525,449 (489,254) 6,895,793 (3,680,654) (508,773) 434,883 (3,754,544) 3,178,944 16,676 (54,371) 3,141,249 $109,396,839 $22,458,677 ($105,725) $131,749,791 -70- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 3 - CAPITAL ASSETS (Continued) BnOn~ss-type activities Capital assets, not being depreciated: Land Construction in Progress B.~.n~ Balance July 1, 2003 Additions Retirements Tmnsfem June 30, 2004 $544,400 $17,820 $562,220 2,644,974 11,143,219 ($26,354) ($1,451,956) 12,309,883 3,189,374 11,161,039 (26,354) (1,451,956) 12,872,103 Total capital assets not being depredated Capital assets, being depreciated: Buildings and Improvements Clean Wamr Facilities & Lines InfrasmteU~ - Streets Equipn~nt & Vehicle 10,369,347 68,774,439 10,367 9,002,002 33,394 31,154 (18,325) Total capital assets being depreciated 10,369,347 66,557 68,851,363 1,385,399 1,385,399 9,017,071 31,154 Less acom'~dated depreciation fcax. Buildings and ~vements Clean Water Facilities & Lines Infrastructure - Streets Equipment & Vehicle 88,176,942 43,761 (18,325) 1,451,956 89,654,334 18,325 Total accumulated depreciation (2,950,305) (212,121) (4,744,315) (1,740,482) (23,090) (6,465,111) (659,339) (10,316) (2,596) 18,325 Net capital assets being depreciated Bnsiness-type activity capital assets, net (14,170,047) (2,637,628) Component Unit: South San Francisco Confe:~ence Center Buildings and Improvements Furniture and Yaxtures M~h.ine~ and equiprmnt 74,006,895 (2,593,867) $77,196,269 $8,567,172 ($26,354) $16,426 $8,037,676 621,236 239,737 Total: 8,898,649 16,426 Less accunmlated depreciation (3,344,691) (369,118) Component unit, net $5,553,958 ($352,692) (3,162,426) (6,484,797) (23,090) (7,106,125) (12,912) (16,789,350) 1,451,956 72,864,984 $85,737,087 8,054,102 621,236 239,737 8,915,075 (3,713,809) $5,201,266 Capital Asset Contributions - Some capital assets may have been acquired using federal and State grant funds, or were contributed by developers or other governments. GASB Statement 34 requires that these contributions be accounted for as revenues at the time the capital assets are contributed. Depreciation Allocation - Depreciation expense is charged to functions and programs based on their usage of the related assets. The mounts allocated to each function or program are as follows: -71- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 3 - CAPITAL ASSETS (Continued) Governmental Activities Governmental Fund Programs General government Economic & Community Development Pol/ce Ftre Libraly Maintenance Recreation Internal Set, dee Funds Depreciation Expense $432,807 798,208 18,377 100,957 57,327 26,359 338,291 508,773 Total Governmental Activities $2,281,099 $2,614,227 16,457 6,944 $2,637,628 Business-Type Activities Sewer Rental Parking Storm Water Total Business.Type Activities NOTE 4 - INTER-FUND TRANSACTIONS A. Inter-fund Receivables and Payables Amounts due to or due from other funds reflect inter-fund balances for services rendered or short- term loans expected to be repaid in the next fiscal year. Advances due to or due from other funds are long-term loans between Redevelopment Agency project areas that are to be repaid in their entirety over several years. At June 30, 2004, inter-fund receivables and payables consisted of: ~temal Service Funds Sewer Rental Enterprise Fund Non-major Governmental Funds Redevelopment Agency Downtown Capital Project Advances from Advances to Due from Due to Other Funds Other Funds Other Funds Other Funds $505,155 $3,981,499 $3,932,752 $844,591 505,155 3,088,161 3,981,499 Total $3,932,752 $3,932,752 $4,486,654 $4,486,654 As of June 30, 2004, the South San Francisco Conference Center owed the City General Fund $71,055, with the General Fund owing back $1,070 to the Conference Center. -72- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 4 - INTER-FUND TRANSACTIONS (Continued) In the late 1990's the General Fund advanced funds to the Shearwater Redevelopment Agency Capital Project Fund as seed money for the Oyster Point Boulevard widening done in the 1990's and to the E1 Camino Redevelopment Agency Capital Project Fund, for traffic improvements made in the late 1990's. In the last two fiscal years, the Downtown Redevelopment Agency Capital Project Fund and the Shearwater Redevelopment Agency Fund repaid the General Fund for these advances and assumed the receivable, restructuring them as advances between Redevelopment Agency project areas, As of June 30, 2004, Shearwater owed $3,088,161 to Downtown and E1 Camino owed $844,591 to Shearwater. The outstanding balances will be paid off by 2033 with property tax increments, at a variable interest rate equal to the earnings rate of the City's overall investment portfolio. Internal Balances - Internal balances are presented in the Entity-wide fmancial statements only. They represent the net interfund receivables and payables rern~ining after the elimination of all such balances within governmental and business-type activities. Transfers - Resources may be transferred from one City fund to another. Transfers routinely fund capital projects or capital outlays, lease or debt service payments, operating expenses and low and moderate-income housing projects. -73- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS L NOTE 4 - INTER-FUND TRANSACTIONS (Continued) Transfers between funds during the fiscal year ended June 30, 2004 were as follows: FROM FUND: TO FUND: General Fund Capital Improvement Fund Other City Obligations Debt Service Funds Self Insurance Internal Service Fund Capital Project Funds: Redevelopment Agency (RDA) Gateway RDA Gateway Debt Service Funds Capital Improvement Fund RDA Low Mod Housing Capital Project Fund RDA Downtown Capital Improvement Fund RDA Low Mod Housing Capital Project Fund Other City Obligations Debt Service Funds RDA Downtown & Low Mod Housing Debt Service Funds RDA Low Mod Housing Other City Obligations Debt Service Funds RDA Low Mod Housing Debt Service Fund R_DA Shearwater RDA Low Mod Housing Capital Project Fund RDA EL Camino Capital Improvement Fund RDA Low Mod Housing Capital Project Fund Nonobligated Capital Project Capital Improvement Fund Non-major Governmental Funds General Fund Capital Improvement Fund Sewer Rental Enterprise Fund Capital Improvement Fund Total The reasons for these transfers are set forth below: (A) For capital projects (B) For debt service (C) For general liability increase (D) Set aside 20% of property tax increment for Iow and moderate housing (E) For maintenance and operating expenses AMOUNT: $85,930 103,167 240,000 4,924,038 5,558,711 1,260,312 5,007,603 1,401,162 403,595 859,015 55,716 294,974 452,689 32,594 346,794 69,912 1,406,422 657,595 6,938 $23,167,167 (A) (B) (C) (B) (A) (D) (A) (D) (B) (B) (B) (B) CD) (A) CD) (A) (E) (A) (A) -74- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5 - LONG-TERM OBLIGATIONS A summary of governmental and business-type activities transactions for the fiscal year ended June 30, 2004, follows: Authorized and Balance at Issued June 30, 2003 Additions Governmental Activities: Redevelopment Agency (I): 2000 HUD Section 108, 4.4 to 6.6%, due 8/1/23 (2) 1999 Revenue Bonds, 3.3 to 5.0%, due 9/l/18 (3) 1997 Downtown Tax Allocation Bonds, 3.75 to 5.25%, due 9/1/27 (4) Balance at Current Repayments June 30, 2004 Portion $1,750,000 $1,750,000 $1,750,000 $12,000 31,720,000 30,175,000 $1,090,000 29,085,000 1,160,000 11,590,000 10,610,000 220,000 10,390,000 230,000 Total Redevelopment Agency 1999 Certificates of Participation, 3.2 to 5.0%, due 4/1/29 (5) 1989 California Health Facilities Financing Authority (CHFFA) Revenue Bonds, 7.2%, due 9/23/11 (6) 1988 Costco (Price Club) Notes, 8.5%, due 12/6/06 (7) 2003 San Mateo County Transportation Authority Note, rate varies, due 10/1/08 (8) Total Other Bonds and Notes 42,535,000 1,310,000 41,225,000 1,402,000 6,145,000 5,710,000 120,000 5,590,000 125,000 563,000 328,330 29,881 298,449 32,200 2,270,000 2,270,000 2,270,000 2,852,888 1,751,962 $1,100,926 2,852,888 10,060,292 1,100,926 149,881 11,011,337 157,200 Special Assessment Debt with City Commitment: 1978 Gellert Boulevard Extension Project, 5.6-5.75%, repaid 7/2/03 (9) Total Governmental Activities Debt 954,000 85,000 85,000 52,680,292 1,100,926 1,544,881 52,236,337 1,559,200 Capital Leases (10): 1997 Ambulance, 5.625%, repaid 10/03 1997 Quint, 5.25%, repaid 1/10/04 1998 Ambulance, 5.375%, due 9/25/04 1998 Quint, 4.57 to 5.0%, due 12/23/08 2000 Fire Truck, 5.72%, due 7/14/10 2000 Ambulance & Sweeper, 5.72%, due 7/05 1998-2000 Various Copier,7.7%-I 1.5%, due various Total Capital Leases Net Govermmental Long-Term Obligations 12,308 12,308 89,065 89,065 38,338 25,218 13,120 13,120 389,933 63,700 326,233 66,648 246,445 27,157 219,288 28,733 141,558 54,240 87,318 57,387 18,911 16,981 1,930 1,930 936,558 288,669 647,889 167,818 $53,616,850 $1,100,926 $1,833,550 $52,884,226 $1,727,018 $5,536,708 $432,292 $5,104,416 $445,261 50,553,782 1,961,733 48,592,049 2,010,027 $10,499,101 10,499,101 $56,090,490 $10,499,101 $2,394,025 $64,195,566 $2,455,288 Business-Type Activities (11): 1993 State Water Resources Loan, 3.0%, due 10/8/13 1999 State Water Resources Loan, 2.6%, due 8/1/22 2004 State Water Resources Loan, 2.5%, due 10/15/25 Total Enterprise Fund Debt $7,899,017 47,721,252 21,258,529 Component Unit - Conference Center (12): 2003 Revenue Bonds, 2.25% to 4.0%, due 9/1/18 Unamortized refunding loss on 2003 bonds Total Conference Center $5,865,000 $5,865,000 $325,000 $5,540,000 $305,000 (392,913) (23,914) (368,999) $5,472,087 $301,086 $5,171,001 $305,000 -75- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5 - LONG-TERM OBLIGATIONS (Continued) (1) The City has pledged incremental property taxes (related to the specific properties) of the Redevelopment Agency (2) In May 2000, the City and Redevelopment Agency secured a "Contract for Loan Guarantee Assistance under Section 108 of the Housing and Community Development Act of 1974, in the aggregate principal amount of $1,750,000 (the 2000 HUD Section 108 Loan). The proceeds of the HUD Section 108 Loan were used to f'mance the acquisition of real property (and related relocation), the rehabilitation of rental housing, and the rehabilitation of a public facility, pursuant to 24 CFR Statute 570.703(a), (d), (h) and (1). Under the Contract, the City and the Redevelopment Agency pledge: (a) all allocations or grants under Section 106 of Title I, or Section 108 (q) of Title I; (b) program income, as de£med at 24 CFR Section 570.500 (a); (c) tax increment revenues and receipts available to the Redevelopment Agency; (d) all proceeds from foregoing; and (e) all funds or investments in accounts established by the Contract. (3) On February 1, 1999, the City of South San Francisco Capital Improvements Financing Authority (CIFA) issued $31,720,000 of 1999 Revenue Bonds to provide funds to pay loans (Homart Development), to finance redevelopment and housing activities and to refund the 1993 Gateway tax allocation bonds, which were due in 2018. The 1999 revenue bonds are obligations of the CIFA although the Redevelopment Agency is required to make bond principal and interest payments from tax increment revenue. The 1999 Revenue Bonds are, in substance, obligations of the Redevelopment Agency, and have therefore been recorded as such in these financial statements. The 1999 Revenue Bonds were issued Net proceeds of $9,614,978 plus an additional $956,470 of 1993 bond reserve funds were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1993 bonds. As a result, the 1993 bonds are considered to be defeased and the liability for those bonds has been removed. As of June 30, 2004, $8,365,000 of principal remained outstanding on the 1993 bonds. (4) On September 1, 1997, the Redevelopment Agency of the City of South San Francisco (the Agency) issued $11,590,000 of Downtown/Central Redevelopment Project 1997 Downtown Tax Allocation Bonds to finance land acquisition, parking improvements and public infrastructure improvements by the Agency in connection with the Project Area, to fund a reserve fund for the Bonds, and to pay the issuance costs relating to the Bonds. -76- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5 - LONG-TERM OBLIGATIONS (Continued) (5) On February 1, 1999, the City issued $6,145,000 of 1999 Certificates of Participation (COPs) to finance the acquisition of the land and improvements used and operated as the City of South San Francisco Conference Center. During fiscal 2003/04, pursuant to a resolution of the Redevelopment Agency Board, tax increment revenues were pledged to pay debt service on the 1999 COPS. (6) 1989 California Health Facilities Financing Authority Revenue Bonds - In April 6, 1989 the City received $563,000 from the California Health Facilities Financial Authority for construction of the adult day care facility in the Magnolia Senior Center. Debt service payments are made from general revenues of the General Fund and interest revenues from the Capital Improvements Fund. (7) 1988 Costco (Price Club) Notes - In 1988 the City borrowed money from a retail company then known as Price Club to purchase land from a ttfird party adjacent to their store located in the City, which now operates as a Costco Wholesale store. The City leases the land back to the company for lease payments equaling a percentage of Costco's gross annual sales at the location. The note bears interest at 8.5%, and matures in December 2006. The lease payments made to the City by Costco, are offset against the City's obligation to Costco, first for interest, then for principal. Costco will forgive any outstanding balances at maturity. At June 30, 2004, outstanding principal of the notes was $2,270,000. (8) On September 11, 2001, the City entered into a long-term "Funding Agreement" with San Mateo County Transportation Authority for the Oyster Point Project Phase H-Ilia, in the aggregate principal amount of $10,752,000. The note has an interest rate equal to the rate of return on the Authority's investments (6.036% at June 30, 2004) and will be repaid in full by October 1, 2008. In fiscal 2003 the City began to draw down proceeds of this note in order to construct the Oyster Point Boulevard flyover from U.S. Hwy 101. Funding for the repayment will f~rst come from Oyster Point developer fees. Shearwater redevelopment project area tax increment or other sources of funding can be used if needed to repay the loan by 2008. (9) Special Assessment Debt with City Commitment - Debt service payments are made from special assessment tax levies from the specific special assessment district property owners. In the event of a delinquency in the payment of an installment in the assessments levied, the City must purchase the delinquent property and pay from available funds the amount of the delinquency. At June 30, 2004 all remaining outstanding principal were repaid in full. (10) The City has entered into long-term capital leases with various financing agencies. Under these capital leases, all leased assets shall be distributed to the City at the end of the lease terms and shall thereafter remain the sole property of the City. Therefore, these capital leases have been recorded at the present value of the future minimum lease payments at the date of inception of the lease, and the corresponding assets have been included in the Statement of Net Assets as appropriate. Capital lease payments are made from revenues of the Equipment Replacement Internal Service Fund, Redevelopment Agency and General Fund. -77- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5 - LONG-TERM OBLIGATIONS (Continued) (11) The three loans were authorized by the State Water Resources Control Board to improve and expand the City's wastewater treatment plant. Loan proceeds were issued as the projects progressed and debt service payments commenced one year after project completion. Sewage treatment user fees support the debt service payments. One third of the annual debt service payment on the 1993 loan is reimbursable from the City of San Bruno through a joint construction and ownership agreement of the wastewater treatment plant. The City is currently developing an amended agreement with the City of San Bruno to reimburse the City for a portion of the 1999 debt service payments (12) On June 1, 2003, the City of South San Francisco Capital Improvement Financing Authority (the CIFA) issued $5,865,000 of 2003 Revenue Bonds. The CIFA was created through a joint exercise of powers agreement between the City and the City of South San Francisco Financing Authority for the purpose of obtaining financing for capital improvements. The 2003 revenue bonds are obligations of the CIFA although the Authority is required to make the bond principal and interest payments in return for the use and ownership of the improvements to the leased buildings that comprise the Conference Center's facilities. The Authority has pledged the $2.50 tax imposed on the City's hotel occupants on a per day per room basis as the sole source of repayment of these obligations. The 2003 revenue bonds are, in substance, obligations of the Authority and have therefore been recorded as such in these descretely presented component unit financial statements. The 2003 revenue bonds were issued for the purpose of refunding prior 1993 revenue bonds, which were due in 2018. The refunding reduced required interest payments and did not extend the maturities on the bonds. The proceeds from these bonds are transferred to a trustee to be placed in an irrevocable trust to redeem the 1993 revenue bonds. The funds were invested in U.S. Treasury Notes with a cost of $5,082,742, which represents the amount necessary to pay the redemption price and interest through the call date. Accordingly, the 1993 revenue bonds were removed from the balance sheet at June 1, 2003. The advance refunding reduced the Authority's total debt service payments over the next 15 years by $881,056 and resulted in an economic loss of $392,913, which has been deferred in accordance with GASB Statement No. 23, Accounting and Financial Reporting for Refunding of Debt Reported by Proprietary Activities. This loss is being amortized over the remaining life of the old debt. As of June 30, 2004, approximately $5,150,000 of principal remained outstanding on the defeased 1993 revenue bonds. -78- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5 - LONG-TERM OBLIGATIONS (Continued) I Future debt service requirements, including interest and capital leases, at June 30, 2004, were as follows: For the Yea~ Governmental Activities Ended June 30 Principal Interest Component Unit Business-Type Activities Conference Center Authority Principal Interest Principal Interest 2005 $1,727,018 $2,294,679 $2,455,288 $1,416,525 $305,000 $161,431 2006 1,79 ! ,830 2,218,680 2,520,907 1,350,908 310,000 154,513 2007 4,249,729 8,646,171 2,999,294 1,546,007 320,000 147,426 2008 4,955,997 2,506,184 3,078,754 1,466,546 325,000 140,169 2009 2,19 ! ,258 1,951,376 3,160,327 1,384,974 335,000 133,162 2010-2014 12,613,394 8,090,323 17,103,187 5,623,318 1,810,000 536,090 2015-2019 16,595,000 4,478,184 16,316,659 3,417,881 2,135,000 212,203 2020-2024 4,315,000 1,747,157 15,263,054 1,198,065 2025-2029 4,445,000 561,506 1,298,096 48,879 Tomls $52,884,226 $32,494,260 $64,195,566 $17,453,103 $5,540,000 $1,484,994 Certificates of Participation and Capital Leases are issued for the purpose of f'mancing the construction or acquisition of projects def'med in each leasing arrangement. Projects are leased to the City for lease payments which, together with unspent proceeds of the leasing arrangement, will be sufficient to meet the debt service obligations of the leasing arrangement. At the termination of the leasing arrangement title to the project will pass to the City. Leasing arrangements are similar to debt; they allow investors to participate in a share of guaranteed payments which are made by the City. Because they are similar to debt, the present value of the total of the payments to be made by the City is recorded as long-term debt. The City's leasing arrangements are included in long term obligations discussed above. A summary of capital assets leased through the issuance of leasing arrangements follows: Leasing Arrangement Net Fund/Activity Book Value Capital Leases 1999 Certificates of Participation Governmental Activity Governmental Activity $1,484,941 5,325,000 -79- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 6 - DEBT WITHOUT CITY COMMITMENT [ The City has sponsored the issuance of the following debt, for which the City is not liable for repayment but is only acting as agent for the property owners and bondholders: Balance at Balance at Current July 1, 2003 Repayments June 30, 2004 Portion 1989 E1 Camino Plaza Assessment District Series 89A, 6.5 to 7.2%, due 9/2/09 1989 E1 Camino Plaza Assessment Dislrict Series 89B, 9.5 to 9.75%, due 9/2/09 1990 Pointe Grand Business Park Assessment District Series 90A, 7.0 to 7.75%, due 9/2/11 1987 Magnolia Plaza Senior Apartments variable interest rates, due 5/1/17 $310,000 $35,000 $275,000 $40,000 205,000 20,000 185,000 25,000 1,625,000 135,000 1,490,000 145,000 6,100,000 6,100,000 Tot~ $8,240,000 $190,000 $8,050,000 $210,000 For ail debt issues above, bond principal and interest payments will be made from installment payments on unpaid assessments on properties within the assessment districts. For Magnolia Plaza Senior Apartments, the bond will be repaid by South San Francisco Magnolia Plaza Associates (a developer) out of rent revenue received from the project, pursuant to the Developer Loan made by the City of South San Francisco to the developer. -80- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 7 - NET ASSETS AND FUND BALANCES GASB Statement 34 adds the concept of Net Assets, which is measured on the full accrual basis, to the concept of Fund Balance, which is measured on the modified accrual basis. A. Net Assets Net Assets is the excess of all the City's assets over all its liabilities, regardless of fired. Net Assets are divided into three captions under GASB Statement 34. These captions apply only to Net Assets, which is determined only at the Government-wide level, and are described below: Invested in Capital Assets, net of related debt describes the portion of Net Assets which is represented by the current net book value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. These principally include assets restricted due to Redevelopment Agency bond covenants or low and moderate income housing loan agreements. Unrestricted describes 'the portion of Net Assets which is not restricted to use. B. Fund Balance In the fund f'mancial statements, fund balances represent the net current assets of each fund. Net current assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund' s balance may be reserved or designated for future expenditure. C. Reservations Reserves are restrictions placed by outside entities, such as other governments, which restrict the expenditures of the reserved funds to the purpose intended by the entity which provided the funds. The City cannot modify or remove these restrictions or reserves. Reserve for encumbrances represents the portion of fund balance set aside for open purchase orders. Reserve for bond/note requirements represents amounts required to be held in reserve per bond convenants. Reserves for advances, inventory and prepaid are the portions of fund balance that are not available for appropriation due to funds being advanced to other City funds, assets held in inventory and assets committed for future expenses. Reserve for loans receivable represents fund balances that cannot be appropriated because the assets have been loaned out in various City improvement programs. Reserve for future loan obligations represents fund balances set aside strictly for potential furore loans, as required by the various loan programs. -81- CITY OF SOUTtt SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 7 - NET ASSETS AND FUND BALANCES (Continued) Reserve for restricted assets is the portion of fund balance legally restricted for the payment of principal and interest on long-term obligations. D. Designations The unreserved-designated fund balances include mounts which have been internally designated to be set aside and are not considered to be available for immediate appropriation. The components of the unreserved fund balance for the Governmental Funds at June 30, 2004 are as follows: Unreserved, designated for: Economic contingencies Potential catastrophic events Capital projects and maintenance Future economic development City programs Redevelopment Agency Capital Project Other General Low Mod Governmental Fund Downtown Housing Funds $3,500,000 1,000,000 388,544 3,600,000 $1,500,000 $2,918,095 $4,652,168 976,073 Total unreserved, designated 8,488,544 1,500,000 2,918,095 5,628,241 3,852,647 5,938,392 6,569,025 $I2,341,191 $7,438,392 $2,918,095 $12,197,266 Total unreserved, undesignated Total unreserved fund balances Net Deficit The Self Insurance Internal Service Fund had a net deficit in the amount of $2,525,962 at June 30, 2004. The City Council adopted a reserve policy to fund, at a minimum, fifty percent of its potential future liabilities in the Self Insurance Fund. The above deficit results in a 50% funding level at June 30, 2004. City management believes that this is a prudent funding level considering the anticipated cash flow requirements and the probability of the liabilities. -82- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 8 - RETIREMENT BENEHTS [ A. CALPERS Safety and Miscellaneous Employees Plans Substantially all City employees are eligible to participate in pension plans offered by California Public Employees Retirement System (CALPERS) an agent multiple employer defined benefit pension plan which acts as a common investment and administrative agent for its participating member employers. CALPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. The City's employees participate in the separate Safety (police and fire) and Miscellaneous (all other) Employee Plans. Benefit provisions under both Plans are established by State statute and City resolution. Benefits are based on years of credited service, equal to one year of full time employment. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CALPERS; the City must contribute these amounts. The Plans' provisions and benefits in effect at June 30, 2004, are summarized as follows: Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of annual salary Reqtfired employee contribution rates Required employer contribution rates Police Fire Miscellaneous 5 Years service 5 Years of service 5 Years service Monthly for life Monthly for life Monthly for hfe 50 50 50 3.0% 3.0% 2.0%-2.7% 9% 9% 8% 21.291% 20.446% 4.15% All qualified permanent and probationary employees are eligible to participate in PERS. A credited service year is one year of full time employment. The City's labor contracts require it to pay the employees contributions as well as its own. These ~,~,-,~,,*,,,,,,,,, p,o,,s~,,ns ~ ,~ '~' and ~.. o~ other -~-~-;~'~"t~--~ are established by state statute and City ordinance. Contributions necessary to fund PERS on an actuarial basis are determined by PERS and its Board of Administration. CALPERS determined contribution requirements using a modification of the Entry Age Normal Method. Under this method, the City' s total normal benefit cost for each employee from date of hire to date of retirement was expressed as a level percentage of the related total payroll cost. Normal benefit cost under this Method was the level amount the employer must pay annually to fund an employee's projected retirement benefit. This level percentage of payroll method was used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution requirements were also used to compute the actuarial accrued liability. The City did not have a net pension obligation since it paid these actuarially required contributions monthly. CALPERS used the 3-year smoothed market method of valuing the Plan's assets. An investment rate of return of 8.25% was assumed, including inflation at 3.5%. Annual salary increases were assumed to vary by duration of service. Changes in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial methods were amortized as a level percentage of payroll on a closed basis over 20 years. Investment gains and losses were accumulated as they were reali?ed and 10 percent of the net balance was amortized annually. -83- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 8- RETIREMENT BENEFITS (Continued) PERS has reported that the value of the net assets in the Plan held for pension benefits changed as follows during the year ended June 30, 2002, the most recent available: Begimng balance June 30, 2001 Contributions received Benefits and refunds paid Transfers and miscellaneous adjustments paid Expected investment earnings credited Expected actuarial value of assets, June 30, 2002 Market value of assets June 30, 2002 Actuarial value of assets June 30, 2002 Safety Police Safety Fire Miscellaneous $59,743,756 $64,966,460 $75,216,691 535,663 593,333 1,140,811 (1,982,085) (2,694,833) (2,381,084) 2,859 794 20,426 4,870,493 5,274,796 6,156,055 $63,170,686 $68,140,550 $80,152,899 $50,440,186 $55,542,457 $64,044,057 $55,484,205 $61,096,703 $70,448,463 Audited annual f'mancial statements and ten year statistical comparison are available from CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709. -85- NOTE [NOTE CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS 8 - RETIREMENT BENEFITS (Continued) Deferred Compensation Plan City employees may defer a portion of their compensation under a City sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at termination, retirement, death or in an emergency as defined by the Plan. The laws governing deferred compensation plan assets require plan assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City's property and are not subject to City control, they have been excluded from these f'mancial statements. Other Post-Employment Benefits The City provides certain health care benefits for all employees who retire after attaining age 50 with at least five years of service. Benefits are provided as authorized by various memorandums of understanding entered into by the City and its employees. This program covered 222 retirees as of June 30, 2004. The City provides fully paid medical coverage under various health care plans. The City pays premiums on behalf of retirees monthly. Expenditures are recognized as premiums are incurred. During the year, expenditures of $480,000 were recognized for postretirement health care. 9 - JOINTLY GOVERNED ORGANIZATIONS The City participates in the jointly governed organizations discussed below through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each joint organi?ation is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint organization, including selection of management and approval of operating budgets, [ndependent of any influence by member municipalities beyond their representation on that board. Obligations and LiabiLities of this joint organization are not the City's responsibility and the City does not have an equity interest in the assets of each joint organization except upon dissolution of the joint organization. Oyster Point Marina (OPM) was established in 1977 by the City and the San Mateo County Harbor District (Harbor District) for the purpose of expanding, improving and operating the Oyster Point Marina and Park. The governing board consists of two of the City's council members and two Harbor District commissioners. The Harbor District operates OPM. Operation of the Marina provides revenues for the marina's operations. The City retains title to the land; however, the City is not liable for any obligations of the San Marco County Harbor District. Condensed unaudited financial information may be obtained from San Marco County Harbor Dislrict, #1 Johnson Pier, Half Moon Bay, CA 94019. -86- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 9 - JOINTLY GOVERNED ORGANIZATIONS (Continued) INOTE Peninsula Traffic Congestion Relief Alliance (PTCRA) was formed from the merger of The Inter City Transportation Systems Management Agency and Multi-City Transportation Systems Management Agency (MCTSMA) in 2000. The members are Cities of South San Francisco, Brisbane, Colma, Daly City, Half Moon Bay, Millbrae, Pacifica and San Bruno and seven other members for the purpose of mitigating traffic congestion. The governing board consists of one council member from each member city. The finance director of Daly City acts as the treasurer and controller of PTCRA. The individual cities are not liable for the debts, liabilities or obligations of PTCRA. Each member city has an equal interest in FI'CRA. Condensed accrual basis unaudited financial information may be obtained from the City of Daly City Finance Department, 333 90~h Street, Daly City, CA 94015. Mobile Air Compressor Unit (MACU) was established in 1989 by the Cities of South San Francisco, Daly City, San Bruno, Pacifica, Brisbane and the Colma Fire Protection District for the purpose of purchasing and maintaining certain specialized fire equipment for the use of members. Purchase of equipment is funded by members in proportion to each member's share of interest. Routine maintenance is funded annually by a $1,500 charge to each member. Unusual costs are shared by members according to each member's share of interest. The City's proportionate share of interest is 28.6%. The entire entity is presented as part of the Inter-Agency Special Revenue Fund. City/County Association of Governments (C/CAG) was established in 1990 by the County of San Mateo and the Cities of San Mateo County for preparation, adoption, monitoring and enforcing of Countywide state mandated plans. A Board of Directors consisting of one council member from each member city and one member from the County Board of Supervisors governs C/CAG. The city treasurer of San Carlos acts as the treasurer of C/CAG. The individual cities and the County are not liable for the debts, liabilities, or obligations of C/CAG. Condensed unaudited cash basis fmancial information may be obtained from the City of San Carlos Finance Department, 666 Elm Street, San Carlos, CA 94070. 10 - RISK MANAGEMENT Insurance Coverage The City participates in Association of Bay Area Governments (ABAG) Plan Corporation, a non profit benefit corporation established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. ABAG Plan provides $10,000,000 of general liability coverage per occurrence and is responsible for paying claims in excess of the City's $100,000 deductible. For the year ended June 30, 2004, the City paid ABAG Plan $489,000 in premiums and did not receive a refund of premiums paid in prior years. ABAG Plan has not determined the value of the City's interest in its net assets. Financial statements may be obtained from ABAG Services, P.O. Box 2050, Oakland, CA 94694-2050. The City has also purchased excess coverage insurance for worker's compensation claims from CSAC Excess Insurance Authority $500,000 self-insured retention. For the past three fiscal years, general liability and worker compensation settlements did not exceed insurance coverage. -87- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS NOTE 10 - RISK MANAGEMENT (Continued) Liability for Uninsured Claims The City provides for the uninsured portion of claim.q and judgments in the Self Insurance Internal Service Fund. Claims and judgments, including a provision for claims incurred but not reported, are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims. The City's liability for uninsured claims is limited to workers' compensation and general liability claims, as discussed above, and was estimated by management based on prior years claims experience as follows: Balance, beginning of year Current year claimq and changes in est/mates Claims Paid Fiscal 2003-2004 Fiscal Workers' Compensation $4,200,000 General 2002-2003 Liability Total Total $200,885 $4,400,885 $4,247,656 594,496 1,685,687 1,252,278 (108,165) (1,199,356) (1,099,049) 1,091,191 (1,091,191) Balance, end of year $4,200,000 $687,216 $4,887,216 $4,400,885 NOTE 11 - COMMITMENTS AND CONTINGENCIES The City is ~"~': ~' ' '~ ~,oje,.~ to litigation arising in the nomaal course of business. In ~e opinion of hh.. City Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the City. The City participates in Federal and State grant programs. These programs have been audited by the City's independent auditors in accordance with the provisions of the Federal Single Audit Act of 1984 including 1996 amendments and applicable State requirements. No cost disallowances were proposed as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed bY the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial. -88- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS L NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued) A. Operating Lease The City has entered into operating leases for temporary buildings for after school programs, for vehicles and for copiers. Some of the leases terminated during the current fiscal year, while others continue up through 2014. City expenditures were $179,162 for operating leases during the fiscal year ended June 30, 2004. Future minimum operating lease commitments are as follows: Year ending June 30 2005 $171,131 2006 158,258 2007 140,968 2008 79,203 2009 17,567 2010-2014 35,~34 $602,261 NOTE 12 - RENTAL REVENUES FROM USE OF CITY PROPERTY [ The Conference Center Authority, a discrete component unit, leases land from the City under an operating lease commencing on January 1, 1999, with a 30-year term from February 1, 1999, to January 31, 2029. The rent mount is subject to re-negotiation at the option of either party between January 1 and February 28, 2009 and 2019. These leases are considered for accounting purposes to be operating leases. Property lease revenue from the Conference Center Authority during the year fiscal year ended June 30, 2004, was $420,000. The cost and carrying amount of leased land under this lease receivable is $5,325,000. Furore minimum lease payments from the Conference Center Authority land leases are as follows: Component Unit Year ending June 30 Conference Center 2005 $420,000 2006 420,000 2007 420,000 2008 420,000 2009 420,000 2010-2014 2,100,000 2015-2019 2,100,000 2020-2024 2,100,000 2025-2029 2,100,000 Total $10,500,000 -89- CITY OF SOUTH SAN FRANCISCO NOTES TO BASIC FINANCIAL STATEMENTS I NOTE 12 - RENTAL REVENUES FROM USE OF CITY PROPERTY (Continued) Related to a long-term obligation mentioned in Note 5 to the Basic Financial Statements, Costco, a retailer, uses a parking lot on real property leased from the City. Lease payments are based on a percentage of Costco's gross annual sales, with minimum annual rent set at $400,000, payable in monthly installments of $33,333. In fiscal 2004 lease payments were $503,167. The City Redevelopment Agency leases land to South San Francisco Magnolia Plaza Associates (Magnolia Plaza), upon which Magnolia Plaza has constructed a multifamily rental housing development. The period of the lease is 75 years beginning May 1, 1987. At expiration or termination of the lease, title to all improvements on the land shall vest in the Agency. In fiscal 2004 lease payments were $51,800. The City leases land to the County of San Mateo for the County Health Center. The period of the lease is 7 years beginning April 4, 2000. At expiration or termination of the lease, title to all improvements on the land shall vest in the City. In fiscal 2004 lease payments were $99,366. The City leases land to Sitike Counseling Center for general office use. The period of the lease is 10 years beginning December 2, 1996. At expiration or termination of the lease, title to all improvements on the land shall vest in the Agency. In fiscal 2004 lease payments were $82,596. Future minimum lease revenues for the Costco, Magnolia Plaza, County Health and Sitike leases are as follows: Year ending June 30: Costco Magnolia Plaza County Health Sitike 2005 $400,000 $51,800 $99,804 $82,596 2006 400,000 51,800 99,804 82,596 2007 173,151 51,800 99,804 61,947 2008 51,800 99,804 2009 51,800 99,804 2010-2014 259,000 232,876 2015-2019 259,000 2020-2024 259,000 2025-2029 259,000 2030-2034 259,000 2035-2039 259,000 2040-2044 259,000 2045-2049 259,000 2050-2054 259,000 2055-2059 259,000 2060-2064 103,600 Total $973,151 $2~952~600 $731~896 $227,139 Total $634,200 634 200 386 702 151 604 151 604 491 876 259 000 259 000 259 000 259000 259000 259 000 259 000 259 000 259000 103 600 $4,884,786 -90- Other Supplementary Information MAJOR GOVERNMENTAL FUNDS, OTHER THAN GENERAL FUND AND SPECIAL REVENUE FUNDS REDEVELOPMENT AGENCY FUNDS: GATEWAY DEBT SERVICE FUND - This fund accounts for principal and interest associated with debt repaid by property tax increments from the Gateway project area. It is also a sinking fund required by 1999 bond covenants for bond retirement purposes. DOWNTOWN CAPITAL PROJECT FUND - This fund accounts for property tax increment revenues used for capital projects connected with the Downtown project area. LOW AND MODERATE INCOME HOUSING CAPITAL PROJECT FUND - This fund accounts for the 20% share of property tax increment revenue directed toward low and moderate income housing projects. CAPITAL IMPROVEMENT FUND To account for expenditures associated with the acquisition, construction, or improvement of City owned facilities and infrastructure. Funding comes from the general fund, special revenue funds, grants and fees. -92- CITY OF SOUTH SAN FRANCISCO GATEWAY DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR ~ YEAR ENDED JUNE 30, 2004 Budget ActualAm___ounm $134,463 134,463 Va~uce with Fn~d Budg=t Positive (Negative) REVENUES: Interest ~ rentals $134,463 134,463 Total Reveames EXPENDITURES: Debt sexvice Principal retirement Interest and fiscal charge $945,000 1,235,993 945,000 1,240,704 (4,711) (4,711) 129,752 2,743,045 2,743,045 $2,872,797 Total Expenditures 2,180,993 (2,180,993) 2,180,993 2,180,993 2,185,704 (2,051,241) 4,924,038 4,924,038 EXCESS (DEFICIENCY) OF ~ES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES 2,872,797 Frond balance, J~y 1 Fund balance, Jane 30 12,246,854 $15,119,651 -93- CITY OF SOUTIt SAN FRANCISCO DOWNTOWN CAPITAL PROJECTS FUND SCltEDL~E OF REVENUES, EXPENDITURES AND CIJA2qGES IN FUND BALANCES BUDGET A_ND ACTUAL (NON GAAP LEGAL BASIS) FOR TIlE YEAR ENDED JUNE 30, 2004 Budget Actual Amounts Var~unce with Final Budget Positiw (Negative) REVENUES: Tax allocation/ntamnem Interest axil rental Charges for services $6,972,700 $6,674,343 ($298,357) 612,400 389,041 (223,359) 4 4 Total Revermes 7,585,100 7,063,388 (521,712) EXPENDITURES: Ctm-ent: Economic and Comrmmity Development Capital outlay Debt service Prflacipal retirement Interest and fiscal charges 3,343,209 445,000 66,648 15,000 1,989,489 17,948 2,007,437 5,055,951 100 (7,671,375) (7,671,275) 1,353,720 445,000 66,648 (2,948) Total Expenditures 3,869,857 3,715,243 (9,517,166) (9,517,166) ($5,801,923) 1,862,420 1,340,708 100 1,845,791 1,845,891 $3,186,599 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers (out) Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES (2,615,324) Adjustment to budgetary basis: 67,598 Fund balance, July 1 15,513,440 $12,965,714 Fund bahnee, June 30 -94- CITY OF SOUTtt SAN FRANCISCO LOW/MOD HOUSING CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR ~ YEA. RENDED JUNE 30, 2004 REVENUES: Lnt~est and rental Total Revennes EXPENDITURES: Cunt: Eccmomic and Connmmity Development Capitalprojeet outlay Capital outlay Total ExpenditUXes EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTH]ER FINANCING SOURCES (USES) Transfers in Transfers (out) Total other f~naneing sources (uses) EXCESS (DEFICIENCY) OFREVENUF_.S AND OTHER SOURCES OVER EXPENDrlTJRES AND OTHER USES Adjustment to budgetaxy basis: Eaeum~anee adjustments Fund balance, July 1 Fund balance, June 30 Budg~ ActualAmounts $370,000 $144,900 370,000 144,900 Valance with Final Budget Positive (Negative) ($225,100) (225,100) 1,345,094 1,034,254 310,840 1,000,000 717,183 282,817 2,345,094 1,751,437 593,657 (1,975,094) (1,606,537) 368,557 3,487,340 3,460,957 (26,383) (3,328,425) (350,690) 2,977,735 158,915 3,110,267 2,951,352 ($1,816,179) 1,503,730 $3,319,909 427,896 20,387,687 $22,319,313 -95- CITY OF SOUTH SAN FRANCISCO CAPITAL IMPROVEMENT CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (NON GAAP LEGAL BASIS) FOR THE YEAR ENDED JUNE 30, 2004 Budget Actual Amoun~ Vmiance with Fiml. Budget Positive (N~gatiw) Intergovernmental Interest and remtals Charges for service Other $10,447,513 $9,963,214 ($484,299) 2,103 2,103 6,771,777 886,733 (5,885,044) 105,343 123,530 18,187 Total Revennes 17,324,633 10,975,580 (6,349,053) EXPENDIT LIRE S: Current: Public Works Information Systems Capital project outlay Capital outlay 40,495,028 25,263,640 15,231,388 83,689 1,429 82,260 5,007,603 30,272,672 (19,297,092) (5,007,603) 10,306,045 3,956,992 Total Expenditures 40,578,717 (23,254,084) EXCESS (DEFICIENCY) OF REVENUF_.S OVER EXPENDITURES OTHI~ FINANCING SOURCES (USES) Issuance of debt and capital leases Proceeds from sale of capital assets Transfers in Transfers (out) 22,704,638 (51,591) 1,100,926 185,000 il,419,282 1,100,926 185,000 (11,285,35o') 51,591 Total other financing sources (uses) 22,653,047 ($601,037) 12,705,208 (6,591,884) (9,947,839) ($5,990,847) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES Adjustment to budgetary basis: Encmnbranee adj~stmems 6,428,853 Ftmd balance, July 1 195,974 $32,943 Fund balance, Jane 30 -96- NON-MAJOR GOVERNMENTAL FUNDS Special revenue funds are used to account for revenue sources that are restricted by law or administrative action to expenditures for specified purposes. Special revenue funds used by the City of South San Francisco include: Gas Tax - Accounts for State monies received and expended for street improvements, repairs, engineering, and administration under Slxeets and Highway Code Sections 2105, 2106, 2107, and 2107.5. Includes sales taxes on gasoline received from the State's Traffic Congestion Relief Fund. Inter-Agency - Accounts for joint programs, managed by the City, that are co-sponsored by other government agencies or by community organizations. Developer Impact - Accounts for fees deposited for planning and engineering reviews or for future development that will increase childcare facilities throughout the City and improve transportation capacity in areas east of U.S. Highway 101. Communi ,ty Development Block Grant - Accounts for Federal monies received to be expended for development of jobs and suitable housing for low-income residents. Miscellaneous Grant - Accounts for federal monies received for miscellaneous projects. Property Tax Levy. - Accounts for a property tax imposed on residents to support the 1979 lease revenue bonds which financed the purchase and renovation of a municipal services building. Maintenance District - Accounts for a property tax imposed on residents to provide funds for the maintenance of landscaped areas within housing developments. Transportation Sales Tax - Accounts for the sales tax that provides resources for street improvements and repairs. Solid Waste Reduction - Accounts for revenues and expenditures associated with the waste reduction, recycling, composting and household hazardous waste programs for residents and businesses. Supplemental Law Enforcement Services - Accounts for State monies provided for designated Police department services. Ci~. Programs - Organizations and individuals provide revenues that fund certain city programs and services. -98- NON-MAJOR GOVERNMENTAL FUNDS (Continued) Debt service funds account for the accumulation of governmental resources used to pay general long-term debt principal and interest, excluding those involving proprietary funds. Debt service funds used at the City of South San Francisco include: Obligated Assessment Districts - Accounts for the accumulation of resources and payment of special assessment bond principal and interest from special assessment levies for which the City is obligated in some manner for payment. Other City Obligations - Accounts for principal and interest on City obligated debt other than those supported by special assessments or the Redevelopment Agency. Redevelopment Agency Downtown - Principal and interest associated with the 1997 Downtown Tax Allocation Bonds, supported by property tax increment in the Downtown redevelopment project area. Redevelopment Agency Low Mod Housing - Principal and interest associated with the 1999 Revenue Bonds and the 2000 Housing and Urban Development Section 108 loans, supported by the Agency' s property tax increment allocated for low and moderate income housing purposes. Capital projects funds are used to account for resources used for the acquisition and construction of capital facilities or major capital equipment, except for capital improvements financed by proprietary funds. Capital projects funds used at the City of South San Francisco include: Redevelopment ' projecm co~ected ~m me Gateway project Redevelopment Agency Shearwater - Accounts for property tax increment revenues used for capital projects connected with the Shearwater project area. Redevelopment Agency E1 Camino - Accounts for property tax increment revenues used for capital projects connected with the E1 Camino Corridor project area. Nonobligated Capital Projects - Accounts for the construction of assets financed by non-obligated debt. Inactive Bonds - Accounts for bond proceeds remaining from matured assessment debt issues kept in reserves until disposition is determined. -99- CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2004 ASSETS Cash and investments Cash and investments with fiscal agent Receivables: Accounts Accrued interest Due from other governments Loans Advance to other funds Restricted cash and investments Total Assets SPECIAL REVENUE FUNDS Community Developer Development Miscellaneous Gas Tax Inter-Agency Impact Block Grant Grants $1,253,965 $104,844 $3,734,365 $9,232 7,362 59,800 4,886 $1,321,127 $109,730 262,284 21,682 $272,377 31,007 990,039 280,543 $4,018,331 $1,542,959 $40,239 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Other payable Deposits Deferred revenue Due to other funds Advances from other funds Matured bonds payable Matured interest payable Total Liabilities Fund Balances: Reserved for: Encumbrances Loans receivable Advances to other funds Bond and note requirements Reserved for restricted assets Unreserved Designated Undesignated Total Fund Balances Total Liabilities and Fund Balances $352 $44,917 742,212 $29,019 18,525 $25,103 505,155 352 787,129 552,699 25,103 $28,734 772,696 519,697 6,240 149,752 31,215 990,039 91,077 1,900,856 12,061 1,180,594 1,321,127 109,378 3,231,202 $1,321,127 $109,730 $4,018,331 280,543 (311,537) 15,136 990,260 15,136 $1,542,959 $40,239 -100- SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS Property Tax Levy Maintenance Transportation District Sales Tax Solid Supplemental Waste Law Enforce- Reduction ment Services City Programs $3,635 $2,720,692 $875,708 $504,172 $99,184 $1,184,750 5,351 1,943 Obligated Assessment Districts 14,443 619 $9,272 5,980 3,699 50,000 5,233 $3,635 $2,722,635 $881,059 $518,615 $99,803 $1,243,682 $15,252 $31,327 $24 $32,891 15 270,547 $86 31,327 24 5,000 980 303,453 6,066 $85,092 50,000 224,892 $3,635 2,466,416 3,635 2,691,308 $3,635 $2,722,635 440,279 288,829 355,688 229,762 881,059 518,591 $881,059 $518,615 5,233 884,996 $99,803 99,803 940,229 $99,803 $1,243,682 9,186 9,186 $15,252 (Con~nued) -101- CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2004 ASSETS Cash and investments Cash and investments with fiscal agent Receivables: Accounts Accrued interest Due from other governments Loans Advance to other funds Restricted cash and investments Total Assets DEBT SERVICE FUNDS Other Redevelopment Redevelopment City Agency Agency Obligations Downtown Low Mod Housing $119,413 413,564 3,395 $10,105 778,002 CAPITAL PROJECT FUNDS Redevelopment Redevelopment Agency Agency Gateway Shearwater $2,455,123 $2,232,866 42,147 21,579 $536,372 $788,107 4,358,524 844,591 $6,855,794 $3,099,036 LIABII~ITIES AND FUND BALANCES Liabilities: Accounts payable Other payable Deposits Deferred revenue Due to other funds Advances from other funds Matured bonds payable Matured interest payable Total Liabilities Fund Balances: Reserved for: Encumbrances Loans receivable Advances to other funds Bond and note requirements Reserved for restricted assets Unreserved Designated Undesignated Total Fund Balances Total Liabilities and Fund Balances $2,450 $2,200 2,450 2,200 533,922 785,907 533,922 785,907 $536,372 $788,107 $36,638 656,000 $3,088,161 692,638 3.088,161 842,175 3,748,651 844,591 1,572,330 (833,716) 6,163,156 10,875 $6,855,794 $3,099,036 -102- CAPITAL PROJECT FUNDS Total Redevelopment Nonobligated Nonmajor Agency Capital Inactive Governmental El Camino Projects Bonds Funds $1,702,582 $542,568 $943,755 11,005 3,280 999 $18,496,126 419,544 276,727 131,223 370,013 1,040,039 844,591 5,422,302 $1,713,587 $545,848 $944,754 $27,000,565 $52,627 $232,531 15 1,012,759 699,628 505,155 844,591 3,932,752 5,000 980 897,218 6,388,820 22,160 $10,225 79,863 $944,753 794,209 455,760 1 1,175,593 1,040,039 844,591 533,922 4,820,334 5,628,241 6,569,025 816,369 545,848 944,754 20,611,745 $1,713,587 $545,848 $944,754 $27,000,565 -103- CITY OF SOUTH SAN FRANCISCO NON'MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: Economic and Community Development Public Works Parks, recreation and malmenance Finance Human Resources Non-departmental Police Other Capital outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund balance, July 1 Fund balance, June 30 Gas Tax $1,135,855 5,120 1,140,975 1,140,975 (778,456) (778,456) 362,519 958,608 $1,321,127 SPECIAL REVENUE FUNDS Inter-A~ency Developer Impact Community Development Block Grant $18,000 637,270 655,270 $15,386 1,121,842 288,354 1,425,582 $1,169,122 6,680 1,175,802 7,115 642,474 6,639 150,356 107,171 17,784 3,650 607,663 656,228 (958) (958) 110,336 $109,378 278,961 1,146,621 1,146,621 2,084,581 $3,231,202 607,663 568,139 (36,000) (36,000) 532,139 458,121 $990,260 Miscellaneous Grants $364,562 364,562 364,562 (364,562) (364,562) 15,136 $15,136 -104- SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS Property Tax Levy Maintenance District Solid Transportation Waste Sales Tax Reduction Supplemental Law Enforce- ment Services City Pro,rams Obligated Assessment Districts $1,012,093 3,558 1,015,651 $777,791 4,726 $17,191 173,325 $100,000 810 $12,854 231,602 216,441 $472 782,517 190,516 100,810 460,897 472 1,026,784 184,655 122,117 181,516 4,496 85,000 2,380 1,026,784 184,655 122,117 181,516 91,876 (11,133) 782,517 5,861 (21,307) 279,381 (91,404) (108) (773,721) (111,171) (108) (773,721) (111,171) (11,241) 8,796 (105,310) (21,307) 279,381 (91,404) 2,702,549 872,263 623,901 121,110 660,848 100,590 $2,691,308 $881,059 $518,591 $99,803 $940,229 $9,186 $3,635 $3,635 (Continued) -105- CITY OF SOUTH SAN FRANCISCO NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: Economic and Community Development Public Works Parks, recreation and maintenance Finance Human Resources Non-departmental Police Other Capital outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund balance, July 1 Fund balance, June 30 DEBT SERVICE FUNDS CAPITAL PROJECT FUNDS Other Redevelopment Redevelopment Redevelopment Redevelopment City Agency Agency Agency Agency Obligations Downtown Low Mod Housing Gateway Shearwater $6,028,500 $2,156,676 $21,667 $27,949 $1,168 28,984 16,302 71,187 27,949 1,168 6,128,671 2,172,978 21,667 251,950 278,753 257 149,866 416,591 220,000 145,000 644,633 151,142 104,261 864,633 296,142 251,950 383,014 (836,684) (294,974) 5,876,721 1,789,964 859,016 294,974 (11,743,060) (452,689) 859,016 294,974 (11,743,060) (452,689) 22,332 (5,866,339) 1,337,275 763,575 12,029,495 (1,326,400) $785,907 $6,163,156 $10,875 566,714 (545,047) 562,478 562,478 17,431 516,491 $533,922 -106- CAPITAL PROJECT FUNDS Redevelopment Nonobligated Agency Capital Inactive E1 Cnmino Projects Bonds Total Nonmajor Governmental lq~mds $1,656,371 8,981 $2,105 $3,392 175,805 5,063 6,410 1,841,157 7,168 9,802 $10,854,112 877,791 2,704,730 156,124 1,526,769 1,404,088 17,523,614 274,346 410 545,313 1,563,068 291,826 1,044,568 410 7,115 642,474 122,117 741,871 599,866 38,959 1,357,966 313,305 410 545,313 6,371,281 1,527,852 6,758 (535,511) 11,152,333 (379,388) (69,912) (379,388) (69,912) 1,148,464 (63,154) (535,511) (332,095) 609,002 1,480,265 $816,369 $545,848 $944,754 1,716,468 (14,709,067) (12,992,599) (1,840,266) 22,452,011 $20,611,745 -107- CITY OF SOUTH SAN FRANCISCO BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other GAS TAX INTER-AGENCY Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) $1,247,000 $1,135,855 ($111,145) $38,000 $18,000 ($20,000) 40,000 5,120 (34,880) 486,500 637,270 150,770 Total Revenues 1,287,000 1,140,975 (146,025) 524,500 655,270 130,770 EXPENDITURES Current: Economic and Community Development Public Works Parks, recreation and maintenance Finance Human Resources Non-departmental Police Other Capita! Outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTItER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Adjustment to budgetary basis: Encumbrance adjustments Fund balance, July 1 Fund balance, June 30 29,000 13,355 15,645 486,500 643,806 (157,306) 8,000 6,639 1,361 523,500 663,800 (140,300) 1,287,000 1,140,975 (146,025) 1,000 (8,530) (9,530) (1,835,755) (778,456) 1,057,299 (1,835,755) (778,456) 1,057,299 ($548,755) 362,519 $911,274 $1,000 (8,530) ($9,530) 958,608 $1,321,127 7,572 110,336 $109,378 -108- DEVELOPER IMPACT COMMUNITY DEVELOPMENT BLOCK GRANT MISCELLANEOUS GRANTS Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $879,041 $1,169,122 $290,081 $226,556 $364,562 $138,006 $15,386 $15,386 12,000 6,680 (5,320) $340,835 1,121,842 781,007 288,354 288,354 115,354 (115,354) 340,835 1,425,582 1,084,747 1,006,395 1,175,802 169,407 226,556 364,562 138,006 295,695 287,864 7,831 1,214,037 668,976 545,061 124,118 107,171 16,947 17,784 (17,784) 3,650 (3,650) 419,813 416,469 3,344 1,214,037 668,976 545,061 (78,978) 1,009,113 1,088,091 (207,642) 506,826 714,468 226,556 364,562 138,006 (878,637) 878,637 (36,000) (36,000) (184,056) (364,562) (180,506) (878,637) 878,637 (36,000) (36,000) (184,056) (364,562) (180,506) ($957,615) 1,009,113 $1,966,728 ($243,642) 470,826 $714,468 $42,500 ($42,500) 137,508 61,313 2,084,581 458,121 15,136 $3,231,202 $990,260 $15,136 (Continued) -109- CITY OF SOUTH SAN FRANCISCO BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: Econorn/c and Community Development Public Works Parks, recreation and maintenance Finance Human Resources Non-departmental Police Other Capital Outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Adjustment to budgetary basis: Encumbrance adjustments Fund balance, July 1 Fund balance, June 30 MAINTENANCE DISTRICTS TRANSPORTATION SALES TAX Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) $903,000 $1,012,093 $109,093 $867,100 $777,791 ($89,309) 40,000 4,726 (35,274) 5,500 3,558 (1,942) 908,500 1,015,651 107,151 907,100 782,517 (124,583) 1,079,613 1,026,784 52,829 1,079,613 1,026,784 52,829 (171,113) (11,133) . 159,980 907,100 782,517 (124,583) (242,500) (108) 242,392 (1,372,585) (926,929) 445,656 (242,500) (108) 242,392 (1,372,585) (926,929) 445,656 ($413,613) (11,241) $402,372 ($465,485) (144,412) $321,073 2,702,549 $2,691,308 153,208 872,263 $881,059 -110- SOLID WASTE REDUCTION SUPPLEMENTAL LAW ENFORCEMENT OBLIGATED ASSESSMENT DISTRICTS Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $17,191 $100,000 $100,000 810 $810 $472 $472 $173,325 $17,191 173,325 173,325 190,516 17,191 100,000 100,810 810 472 472 566,968 184,655 382,313 323,797 122,117 201,680 $5,235 4,496 739 85,000 85,000 2,380 2,380 566,968 184,655 382,313 323,797 122,117 201,680 92,615 91,876 739 (393,643) 5,861 399,504 (223,797) (21,307) 202,490 (92,615) (91,404) 1,211 (37,500) (111,171) (73,671) (37,500) (111,171) (73,671) ($431,143) (105,310) $325,833 ($223,797) (21,307) $202,490 ($92,615) (91,404) $1,211 623,901 121,110 100,590 $518,591 $99,803 $9,186 (Continued) -111- CITY OF SOUTH SAN FRANCISCO BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCI-~,DULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Property taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: Economic and Community Development Public Works Parks, recreation and maintenance Finance Human Resources Non-departmental Police Capital Outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Adjustment to budgeta~ basis: Encumbrance adjustments OTHER CITY OBLIGATIONS FInal Budget REDEVELOPMENT AGENCY DOWNTOWN DEBT SERVICE Actual Variance Variance Positive Final Positive (Negative) Budget Actual (Negative) $21,667 $21,667 21,667 21,667 $27,949 $27,949 $257 257 27,949 27,949 29,881 149,866 (119,985) $340,000 220,000 120,000 102,667 416,591 (313,924) 1,053,656 644,633 409,023 132,805 566,714 (433,909) 1,393,656 864,633 529,023 (132,805) (545,047) (412,242) (1,393,656) (836,684) 556,972 130,000 562,478 432,478 848,313 859,016 10,703 130,000 562,478 432,478 848,313 859,016 10,703 ($2,805) 17,431 $20,236 6545,343) 22,332 $567,675 Fund balance, July 1 516,491 763,575 Fundbalance, June 30 $533,922 $785,907 -112- REDEVELOPMENT AGENCY LOW MOD HOUSING DEBT SERVICE REDEVELOPMENT AGENCY GATEWAY CAPITAL PROJECT REDEVELOPMENT AGENCY SHEARWATER CAPITAL PROJECT Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $6,364,000 $6,028,500 ($335,500) $2,146,000 $2,156,676 $10,676 $1,168 $1,168 600,000 28,984 (571,016) 25,000 16,302 (8,698) 7,000 71,187 64,187 1,168 1,168 6,971,000 6,128,671 (842,329) 2,171,000 2,172,978 1,978 782,522 455,898 326,624 341,093 278,753 62,340 145,000 145,000 148,425 151,142 (2,717) 104,261 (104,261) 293,425 296,142 (2,717) 782,522 455,898 326,624 341,093 383,014 (41,921) (293,425) (294,974) (1,549) 6,188,478 5,672,773 (515,705) 1,829,907 1,789,964 (39,943) 293,425 294,974 1,549 (10,550,222) (12,381,287) (1,831,065) (437,950) (452,689) (14,739) 293,425 294,974 1,549 (10,550,222) (12,381,287) (1,831,065) (437,950) (452,689) (14,739) ($4,361,744) (6,708,514) ($2,346,770) $1,391,957 842,175 12,029,495 $6,163,156 1,337,275 ($54,682) (1,326,400) $10,875 Continued) -113- CITY OF SOUTH SAN FRANCISCO BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHF~DULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2004 REVENUES Propexty taxes Other taxes Intergovernmental Interest and rentals Charges for services Other Total Revenues EXPENDITURES Current: Economic and Community Development Public Works Parks, recreation and maintenance Finance Human Resources Non-departmental Police Other Capital Outlay Debt service: Principal repayments Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTI~R FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES Adjustment to budgetary basis: Encumbrance adjustments Fund balance, July 1 Fund balance, June 30 REDEVELOPMENT AGENCY EL CAMINO CAPITAL PROJECT NONOBLIGATED CAPITAL PROJECTS Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) $1,954,000 $1,656,371 ($297,629) 5,000 8,981 3,981 $2,105 $2,105 175,805 175,805 5,063 5,063 1,959,000 1,841,157 (117,843) 7,168 7,168 1,002,279 274,346 727,933 $410 410 28,733 28,733 12,138 38,959 (26,821) 1,043,150 313,305 729,845 410 410 915,850 1,527,852 612,002 (410) 6,758 7,168 (1,046,853) (379,388) 667,465 (160,000) (69,912) 90,088 (1,046,853) (379,388) 667,465 (160,000) (69,912) 90,088 ($131,003) 1,148,464 $1,279,467 ($160,410) (63,154) $97,256 (332,095) 609,002 $816,369 $545,848 -114- INTERNAL SERVICE FUNDS Internal service funds accotmt for depax~uaent services and financing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. Internal service funds used at the City of South San Francisco include: Self Insurance - Accounts for workers' compensation, general liability and property damage claim activity and financing is represented in this fund. Health and Retirement Benefits - Accounts for health and retirement benefits paid on the behalf of eligible City employees. City Service - Accounts for communications services, vehicle maintenance, and building maintenance provided to City departments. Equipment Replacement - Accounts for resources set-aside for the future replacement of City vehicles and equipment. -115- CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS JUNE 30, 2004 ASSETS Current assets: Cash and investments Receivables: Accounts Accrued interest Due from other funds Deposit Prepaid items Total current assets Noncurrent assets: Capital assets, net accumulated depreciation Total Assets Health and Serf Retirement City Service Insurance Benefits $961,471 3,457 2,614 Equipment Replacement Total $2,375,084 $4,535,974 $3,045,504 $10,918,033 12,393 125,000 17,790 505,155 46,010 4,350 3,457 32,797 505,155 171,010 4,350 967,542 2,512,477 5,091,489 3,063,294 11,634,802 247,701 2,893,548 3,141.249 1,215,243 2,512,477 5,091,489 5,956,842 14,776,051 LIABILITIES Current liabilities: Accounts payable Other payable Current portion of compensated absences Cmxent portion o, long-term ~eut Total current liabilities Noncurrent liabilities: Accrued insurance losses Compensated absences obligation Noncurrent portion of long-term debt Total noncurrent liabilities Total Liabilities 177,854 151,223 61,580 26,408 417,065 8 71,037 71,045 45,062 486,790 531,852 222,924 151,223 619,407 194,226 1,187,780 284,373 4,887,216 542,396 480,071 4,887,216 826,769 480,071 284,373 4,887,216 542,396 480,071 6,194,056 507,297 5,038,439 1,161,803 674,297 7,381,836 NET ASSETS: Invested in capital assets, net of related debt Unrestricted Total Net Assets 247,701 460,245 (2,525,962) 3,929,686 2,245,659 3,036,886 2,493,360 4,900,855 $707,946 ($2,525,962) $3,929,686 $5,282,545 $7,394,215 -116- CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2004 OPERATING REVENUES Charges for services Total Operating Revenues Health and Self Retirement Equipment City Service Insurance Benefits Replacement Total $6,235,762 $1,420,724 $1,771,780 $1,020,328 $10,448,594 6,235,762 1,420,724 1,771,780 1,020,328 10,448,594 OPERATING EXPENSES Personnel expenses 3,567,582 Professional services 457,463 Program supplies 627,610 Insurance 139,122 Self-insurance and claims Repair and maintenance 645,908 Utilities 483,474 Depreciation 64,023 Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest income Gain (loss) on sale of fixed assets Interest expense Total Nonoperating Revenues (Expenses) 325,702 2,441,571 64,777 49 559,556 1,363,210 109,462 18,075 444,750 6,334 855 522 289 737072 698 678 1,363 210 663 983 483 474 508 773 5,985,182 2,313,245 2,441,620 572,287 11,312,334 250,580 (892,521) (669,840) 448,041 (863,740) 1,836 8,257 12,147 (12,527) 5,880 (23) (980) (10,714) 8,257 17,047 239,866 (884,264) (669,840) 465,088 240,000 239,866 (644,264) (669,840) 465,088 468,080 (1,881,698) 4,599,526 4,817,457 $707,946 ($2,525,962) $3,929,686 $5,282,545 22,240 (6,647) (1,003) 14,590 (849,150) 240,000 (609,150) 8,003,365 $7,394,215 Net income (loss) before transfers TRANSFERS IN Change in Net Assets Net Assets - July 1 Net Assets - June 30 -117- CITY OF SOUTH SAN FRANCISCO INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from interfund service provided Cash payment to supplier~ for goods and services Cash payment to employees for services Cash payment for judgments and claims Net Cash Provided by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Disbursement to other funds Transfers in Net Cash Provided by Noncapital F'mancing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on capital lease Interest paid Net capital assets transactions Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Net Cash Provided by Investing Activities Net Increase (Decrease) in cash and cash equivalents Cash and cash equivalents, beg%ning Cash and ca~ equivalents, ending Health and Serf Retirement Equipment City Service Insurance Benefits Replacement Total $6,232,577 $1,420,724 $1,771,780 $1,020,328 $10,445,409 (2,353,655) (624,333) 15,549 (102,765) (3,065,204) (3,564,992) (201,375) (2,449,770) (6,216,137) (876,879) (876,879) 313,930 (281,863) (662,441) 917,563 287,189 (505,155) (505,155) 240,000 240,000 240,000 (505,155) (265,155) (3,304) (273,058) (276,362) (23) (981) (1,004) ( 19,564) (458,161 ) (477,725) (22,891) (732,200) (755,091) 1,224 12,978 13,919 28,121 1,224 12,978 13,919 28,121 292,263 (28,885) (1,167,596) 199,282 (704,936) 669,208 2,403,969 5,703,570 2,846,222 11,622,969 $961,471 $2,375,084 $4,535,974 $3,045,504 $10,918,033 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to cash flows from operating activities: Depreciation Net change in assets and liabilities: Accounts and lease receivables Deposit Prepaid items Accounts payable Other payable Accrued insurance losses Compensated absence obligations Net Cash Provided by (Used in) Operating Activities There were no noncash investing, capital and l'mancing activiflez $250,580 64,023 (3,185) (65,634) (78) 68,224 $313,930 ($892,521) ($669,840) $448,041 ($863,740) 444,750 508,773 124,327 486,331 (10,800) (4,350) (1,943) 15,598 8,894 24.772 (3,185) (10,800) (4,350) 81,522 15,520 486,331 77,118 ($281,863) ($662,441) $917,563 $287,189 -118- AGENCYFUND An agency fund is used to account for monies where the City is acting as an agent for another government entity. The agency fund used at the City of South San Francisco consisted of: Nonobligated Assessment Districts - To account for the collection of assessments and related repayments of the following special assessment bonds: the 1989 E1 Camino Plaza Assessment District Series 89A & 89B and the 1990 Pointe Grand Business Park Assessment District Series 90A. -119- CITY OF SOUTH SAN FRANCISCO AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2004 ASSETS Nonobligated Assessment Districts Balance Balance June 30, 2003 Additions Deductions June 30, 2004 Accrued interest Restricted cash and inveslments Total Assets LIABILITIES Deferred cou~butioas from property owners Total Liabilities $4,806 $5,229 $4,806 $5,229 881,960 399,748 382,502 899,206 $886,766 $404,977 $387,308 $904,435 $886,766 $904,435 $886,766 $904,435 $886,766 $904,435 $886,766 $904,435 -120- Statistical Section -121- CITY OF SOUTH SAN FRANCISCO GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS (Note 5) Elected Officials City Attorney City Manager Finance Human Resources Economic & Community Development (1) Non-Departmental Fire Police Public Works Parks, Recreation & Maintenance Services (2) Library Information Technology (3) Other (4) Capital Outlay Debt Service TOTAL 1994-95 1995-96 1996-97 1997-98 Notes: (1) $ 295,241 $ 302,637 $ 329,146 $ 363,612 296,899 237,662 364,011 535,535 398,652 442,002 408,219 500,422 939,196 930,632 990,943 964,570 398,450 416,690 387,419 484,932 2,540,927 2,014,676 2,859,187 3,480,517 1,550,207 483,311 435,706 449,196 7,502,527 8,078,423 9,259,062 9,278,164 8,306,180 8,817,393 9,274,701 9,601,477 3,176,321 2,881,680 700,986 780,459 5,240,600 5,268,786 7,968,086 8,302,552 1,782,168 1,838,341 1,748,764 1,919,739 i2,538 iz,~ ii,852 ii,86i 13,822,411 18,066,883 21,649,780 30,999,420 2,200,877 2,072,529 1,938,174 2,363,492 $ 48,463,194 $ 51,864,613 $ 58,326,036 $ 70,035,948 From fiscal years 1995-96 through 2001-02, the Building Division operated in Economic & Community Development rather than Fire, returning to the Fire department in 2002-03. (2) In fiscal year 1996-97 maintenance services were transferred from Public Works to Parks, Recreation and Maintenance Services. (3) In fiscal year 2000-01, the Information Technology established its own department, whereas, previously it had been part of the Police Department. (4) In fiscal year 2002-03, development costs formerly recorded in an agency fund were reclassed into governmental funds. (5) This table includes current, capital outlay, and debt service expenditures of the primary government's General, Special Revenue, Debt Service and Capital Project Funds. Source: Basic Financial Statements -122- 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 420,886 $ 454,347 $ 486,985 $ 524,247 $ 544,188 $ 592,692 1,344,067 894,688 757,571 1,150,835 950,389 754,158 559,763 573,468 631,564 657,956 755,225 659,110 1,031,834 1,110,316 1,261,183 1,482,380 1,573,161 1,509,751 647,434 640,830 789,035 778,251 793,635 765,452 5,262,188 4,405,241 4,553,763 5,005,099 7,185,798 6,816,036 588,589 524,147 636,236 586,562 1,409,853 1,386,781 10,175,757 10,433,628 11,610,379 12,338,436 11,398,309 13,427,723 11,111,677 11,481,302 11,937,095 12,246,038 12,604,652 13,864,371 1,267,531 ,998,651 10,174,412 19,692,262 23,148,810 20,978,181 9,552,367 9,764,334 10,841,193 11,166,142 11,242,386 11,594,180 2,450,073 2,824,162 3,371,278 3,828,969 4,151,880 4,469,947 743,595 895,686 1,172,723 1,429 7,678 884,674 i,i70,399 i ,I48,968 i08,i45 /~0,51~ 23,298,837 25,375,041 9,501,839 891,065 717,175 5,724,786 6,467,147 3,053,691 3,715,734 3,793,286 3,878,447 4,186,718 $ 74,185,828 $ 73,418,520 $ 72,182,261 $ 76,186,182 $ 81,634,776 $ 87,476,828 GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION City Attorney Finance Debt Service Library 5% ECD Parks, Rec. & Maint Services 15% Police 16% FOR FY 2003-04 Info Tech 0% Human Resources 1% City Manager 1% Non-Depar[mental 2% Elected Officials 1% Other 0% Public Works 24% Fire 15% -123- CITY OF SOUTH SAN FRANCISCO GENERAL GOVERNMENTAL REVENUES BY SOURCE LAST TEN FISCAL YEARS Inter- Special Year Property Taxes Other Taxes Governmental Assessments 1994-95 $ 10,423,563 $ 15,103,229 $ 15,124,893 $ 208,525 1995-96 10,081,886 16,902,229 19,824,554 147,278 1996-97 10,988,786 18,191,838 17,262,174 182,542 1997-98 11,516,713 18,957,865 18,222,350 94,881 1998-99 12,435,032 19,689,123 12,598,477 99,015 1999-2000 14,798,094 22,460,802 12,178,691 119,984 2000-01 15,153,405 24,844,805 8,468,984 66,528 2001-02 27,006,989 21,523,851 13,779,307 161,471 2002-03 26,924,977 19,291,374 16,529,017 43,214 2003-04 28,797,798 19,227,646 17,187,983 472 Note: This table includes the General, Special Revenue, Debt Service, and Capital Project funds of the primary government. ~Source: Basic Financial Statements General Governmental Revenue By Source for FY 2003-04 Fines and Forfeitures Property Taxes Charges for Current 1% Other 2% 33% Services 13% _icenses and Permits 5% Interest and Rents 7% Special Assessments 0% Inter-Governmental 2O% Other Taxes 23% -124- Interest and Rents Licenses and Charges for Permits Current Services Fines and Forfeitures Other Total 2,493,913 $ 1,721,872 $ 2,076,958 $ 395,637$ 3,093,588 1,967,822 2,501,579 492,698 3,438,496 2,257,936 2,742,096 419,971 4,632,557 2,474,893 2,777,338 532,443 3,502,660 2,960,744 5,069,296 738,419 4,503,502 3,526,152 4,723,218 883,277 8,111,976 4,151,300 7,791,794 932,545 5,000,690 4,177,528 11,590,371 915,270 6,294,552 3,933,562 11,091,039 907,768 3,330,413 4,039,527 10,186,710 1,061,231 1,072,888 $ 48,621,478 1,194,726 56,206,360 1,508,618 56,992,457 1,865,394 61,074,434 1,239,575 58,332,341 3,395,952 66,589,672 3,022,679 72,544,016 6,182,454 90,337,931 1,474,351 86,489,854 1,474,351 85,306,131 $100 General Governmental Revenue By Source $9O $80 $70 $60 $50 $40 $30 $20 $10 $- 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2000 [] Property Taxes [] Special Assessments [] Charges for Current Services [] Other Taxes [] Interest and Rents [] Fines and Forfeitures -125- 2001-02 2002-03 2003-04 [] Inter-Governmental [] Licenses and Permits · Other CITY OF SOUTH SAN FRANCISCO PROPERTY TAX RATES--ALL DIRECT AND OVERLAPPING GOVERNMENTS (PER $100 OF ASSESSED VALUATION) LAST TEN FISCAL YEARS School Miscellaneous Year City County (1) Districts Special Districts TOTAL 1994-95 0.0012 1.00 0.0133 (5) 0.0168 1.0049 (1,2) 1995-96 0.0012 1.00 0.0 0.0152 (6) 1.0043 (1,3) 1996-97 0.0012 1.00 0.0001 0.0051 (6) 1.0023 (1,4) 1997-98 0.0000 1.00 0.0271 0.0 1.0259 (1,7) 1998-99 0.0000 1.00 0.0250 0.0 1.0241 (1,8) 1999-2000 0.0000 1.00 0.0250 0.0 1.0245 (1,9) 2000-01 0.0000 1.00 0.0241 0.0 1.0248 (1,10) 2001-02 0.0000 1.00 0.0223 0.0 1.0224 (1,11) 2002-03 0.0000 1.00 0.2780 0.0 1.0282 (1,12) 2003-04 0.0000 1.00 0.2620 0.0 1.0265 (1,13) Notes: (1) Like other cities, South San Francisco includes several property tax rate areas with different rates. A mean average is indicated. (2) Of the 58 tax rate areas in the City, 45 have a tax rate of 1.0012 percent. (3) Of the 58 tax rate areas in the City, 46 have a tax rate of 1.0012 percent, and 12 have a rate of 1.0164 percent. (4) San Bruno School District only. (5) Westborough Water District. (6) Of the 58 tax rate areas in the City, 42 have a tax rate of 1.0012 percent, 12 have a rate of 1.0063 percent, which includes Westborough Water Distdct debt service, and 4 have a rate of 1.0013 percent, which includes either San Bruno Park bonds or Jefferson Union High School bonds. (7) Of the 58 tax rate areas in the City, 53 have a tax rate of 1.0271 percent, which includes South San Francisco Unified School District bonds, 4 have a rate of 1.0159, which includes either San Bruno Park bonds or Jefferson Union High School bonds, and one at a tax rate of 1.000 percent. (8) Of the 58 tax rate areas in the City, 53 have a tax rate of 1.025 percent, which includes South San Francisco Unified School District bonds, 4 have a rate of 1.0148, which includes Jefferson Union High School bonds, one has a rate of 1.0293, which includes San Bruno Park bonds, and one at a tax rate of 1.000 percent. (9) Of the 60 tax rate areas in the City, 55 have a tax rate of 1.025 percent, which includes South San Francisco Unified School District bonds, 3 have a rate of 1.0193, which includes Jefferson Union High School bonds, one has a rate of 1.0325, which includes San Bruno Park bonds, and one at a tax rate of 1.0225 percent, for a single SSFUSD bond. (10) Of the 60 tax rate areas in the City, 55 have a tax rate of 1.0241 percent, which includes South San Francisco Unified School District bonds, 3 have a rate of 1.037, which includes Jefferson Union High School bonds, one has a rate of 1.0353, which includes San Bruno Park bonds, and one at a tax rate of 1.0184 percent, for Series 99 SSFUSD bonds. (11) Of the 62 tax rate areas in the City, 57 have a tax rate of 1.0223 percent, which includes South San Francisco Unified School District bonds, 3 have a rate of 1.0181, which includes Jefferson Union High School bonds, one has a rate of 1.0434, which includes San Bruno Park Elementary and San Mateo High bonds, and one at a tax rate of 1.0172 percent, for Series 99 SSFUSD bonds. (12) Of the 62 tax rate areas in the City, 57 have a tax rate of 1.0278 percent, which includes South San Francisco Unified School District bonds and San Mateo Jr. College bond, 3 have a rate of 1.0194, which includes Jefferson Union High School bonds, one has a rate of 1.0591, which includes San Bruno Park Elementary and San Mateo High bonds, and one at a tax rate of 1.0234 percent, for Sedes 99 SSFUSD bonds. (13) Of the 63 tax rate areas in the City, 57 have a tax rate of 1.0262 percent, which includes South San Francisco Unified School District bonds and San Mateo Jr. College bond, 4 have a rate of 1.0187, which includes Jefferson Union High School bonds, one has a rate of 1.0514, which includes San Bruno Park Elementary and San Mateo High bonds, and one at a tax rate of 1.0220 percent, for Series 99 SSFUSD bonds. Source: San Mateo County Auditor -o Controller's Office, Schedule of Tax Rates and Valuation of Taxable Property -126- CITY OF SOUTH SAN FRANCISCO ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS REAL PROPERTY Year Assessed Value Assessed Value PERSONAL PROPERTY TOTAL Assessed Value Assessed Value as a Percentage of Estimated Actual Value 1994-95 $ 4,244,302,092 $ 790,705,508 $ 5,035,007,600 100.0% 1995-96 4,338,371,749 786,543,226 5,124,914,975 100.0% 1996-97 4,444,808,890 744,251,045 5,189,059,935 100.0% 1997-98 4,552,235,956 772,131,729 5,324,367,685 100.0% 1998-99 4,784,370,522 866,790,855 5,651,161,377 100.0% 1999-2000 5,251,338,822 877,173,032 6,128,511,854 100.0% 2000-01 5,984,521,986 910,307,591 6,894,829,577 100.0% 2001-02 6,681,008,734 972,206,231 7,653,214,965 100.0% 2002-03 7,494,186,456 925,633,109 8,419,819,565 100.0% 2003-04 8,057,419,428 1,244,331,375 9,301,750,803 100.0% Notes: Assessed values are established by the County Assessor's Office following the full cash value method used throughout the State of California. This value will change only if improvements are made, the property is resold, or by appeal of a property holder. Adjustments in 1994-95 real property reflect secured and unsecured gross assessments of land and improvements including Oyster Point Marina assessments. Personal property includes secured and unsecured assessments, plus the assessed value of pleasure, commercial and research craft at the Marina. $1o ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY $9 $8 $7 $6 $5 $4 $3 $2 $1 $- [] PERSONAL PROPERTY [] REAL PROPERTY 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 Source: San Mateo County Assessor 2003-04 -127- CITY OF SOUTH SAN FRANCISCO PROPERTY TAX RATES, LEVIES AND COLLECTIONS (1) LAST TEN FISCAL YEARS Year Rate (2) Levies (3) Allocations Collections Apportionments Delinquencies Delinquent taxes as a Percent of Allocations 1994-95 1.00 (4) $ 6,341,791 (4) $ 6,341,791 (4) 1995-96 1.00 (4) 6,433,531 (4) 6,433,531 (4) 1996-97 1.00 (4) 6,713,060 (4) 6,713,060 (4) 1997-98 1.00 (4) 6,830,718 (4) 6,830,718 (4) 1998-99 1.00 (4) 7,197,865 (4) 7,197,865 (4) 1999-2000 1.00 (4) 7,621,354 (4) 7,621,354 (4) 2000-01 1.00 (4) 8,228,319 (4) 8,228,319 (4) 2001-02 1.00 (4) 8,614,725 (4) 8,614,725 (4) 2002-03 1.00 (4) 9,300,314 (4) 9,300,314 (4) 2003-04 1.00 (4) 10,296,831 (4) 10,296,831 (4) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $11 $10 $9 $8 $7 $6 Allocations Apportionments J 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 Notes: (1) Excludes State Reimbursed Exemptions and deductions for County property tax administration. (2) County adopted full cash value method of valuation rather than assessed valuation. (3) Levies include real and personal property. (4) Information not applicable. All general purpose property taxes are levied by the county and allocated to other governmental entities. Source: San Mateo County Auditor- Controller's Office; Finance Department Revenue Reports -128- THE CITY OF SOUTH SAN FRANCISCO TOP TEN PROPERTY OWNERS BASED ON GROSS ASSESSED VALUES JUNE 30, 2004 Secured Unsecured Combined Property Owner, Par- City Par- city city Primary Use & A~lency cels Value Portion cels Value Portion Value Portion 1 Genentech Inc. 17 $ 869,263,335 11.22% 9 $ 253,728,107 16.31% $ 1,122,991,442 12.07% Industrial, Unsecured Tax Dist. #1 2 United Airlines Inc. 7 374,670,513 24.08% 374,670,513 4.03% Unsecured, Tax Dist. #1 3 Slough BTC LLC 5 144,108,385 1.86% 144,108,385 1.55% Unknown, Shearwater RDA 4 Gateway Center LLC DE 1 118,024,368 1.52% 118,024,368 1.27% Unknown, Gateway RDA 5 Britannia Point Grand LP 9 111,913,464 1.44% 111,913,464 1.20% Industrial, Downtown Central RDA 6 BNP Leasing Corp. 2 81,701,200 1.05% 81,701,200 0.88% Industrial, Tax Dist. #1 7 SFO Fuel Co. LLC 1 79,169,807 5.09% 79,169,807 0.85% Unsecured, Tax Dist. #1 8 Gateway Blvd LLC 3 60,180,000 0.78% 60,180,000 0.65% Unknown, Gateway RDA 9 Costco VVholesale Corp. 1 30,919,875 0.40% 3 26,886,093 1.73% 57,805,968 0.62% Unknown, El Camino Corridor RDA 10 Kaiser Foundation HPI 1 47,191,358 0.61% 2 9,053,902 0.58% 56,245,260 0.60% Unknown, El Camino Corridor RDA Top Ten Totals 39 $ 1,463,301,985 18.89% 22 $ 743,508,422 47.78% $ 2,206,810,407 23.72% Source: HdL Coren & Cone, San Mateo County Assessor 2003/04 Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone. -129- CITY OF SOUTH SAN FRANCISCO SPECIAL ASSESSMENT COLLECTIONS LAST TEN FISCAL YEARS Assessments Assessments Year Due Collected 1994-1995 $179,133 $208,525 1995-1996 166,172 147,278 1996-1997 165,501 182,542 1997-1998 94,890 94,881 1998- 1999 98,528 99,015 1999-2000 94,193 41,158 2000-2001 90,756 66,528 2001- 2002 97,800 161,471 2002 -2003 46,909 43,214 2003-2004 472 1,400 1,200 1,000 800 600 400 200 0 ACCUMULATED SPECIAL ASSESSMENT COLLECTIONS ---Assessments Due .mAssessments Collected 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Note: This table includes only those assessments where the City is "obligated in some manner." Sources: San Mateo County Auditor - Controller's Office General Purpose Financial Statements -130- CITY OF SOUTH SAN FRANCISCO RATIO Of NET GENERAL OBLIGATION BONDED DEBT TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS Year Population (1) Assessed value (2) Ratio of Net Net Bonded Gross Less Debt Net Bonded Debt Net Bonded Debt to Bonded Service Bonded to Assessed Debt per General Debt Reserve Debt (3) Value Capita Expenditures 1994-1995 57,335 $ 5,035,007,600 N/A N/A N/A N/A N/A N/A 1995-1996 56,972 5,124,914,975 N/A N/A N/A N/A N/A N/A 1996-1997 57,608 5,189,059,935 N/A N/A N/A N/A N/A N/A 1997-1998 59,208 5,324,367,685 N/A N/A N/A N/A N/A N/A 1998-1999 60,938 5,651,161,377 N/A N/A N/A N/A N/A N/A 1999-2000 62,551 6,128,511,854 N/A N/A N/A N/A N/A N/A 2000-2001 60,552 6,894,829,577 N/A N/A N/A N/A N/A N/A 2001-2002 61,724 7,653,214,965 N/A N/A N/A N/A N/A N/A 2002-2003 61,724 8,419,819,565 N/A N/A N/A N/A N/A N/A 2003-2004 61,724 9,301,750,803 N/A N/A N/A N/A N/A N/A Notes: (1) State Department of Finance. A new method of estimation has lowered population assessments for the State and most cities since FY 1995-96. (2) San Mateo County Assessor (3) The City has no general obligation bonded debt. -131- CITY OF SOUTH SAN FRANCISCO SCHEDULE OF REVENUE BOND COVERAGE SEWER RENTAL ENTERPRISE FUND LAST TEN FISCAL YEARS Year Direct Net Revenue Gross Operating Available Revenues (1) Expenses (2) for Debt Service DEBT SERVICE REQUIREMENTS Principal Interest Total Covera.qe 1994-1995 $ 6,897,401 $ 5,660,918 $1,236,483 $ 80,000 $ 14,475 $ 94,475 13.1 1995-1996 6,849,527 5,671,667 1,177,860 90,000 9,750 99,750 11.8 1996-1997 7,662,970 6,282,552 1,380,418 95,000 5,000 100,000 13.8 1997-1998 8,340,426 6,866,059 1,474,367 100,000 2,500 102,500 14.4 1998-1999 9,861,996 6,719,296 3,142,700 0 0 0 n/a 1999-2000 10,366,881 6,795,700 3,571,181 0 0 0 n/a 2000-2001 10,475,263 71875,181 2,600,082 0 0 0 n/a 2001-2002 11,886,357 8,314,101 3,572,256 0 0 0 n/a 2002-2003 12,504,872 9,473,780 3,031,092 0 0 0 n/a 2003-2004 13,974,242 9,725,289 4,248,953 0 0 0 n/a $14 $13 $12 $11 $10 $9 $8 $7 $6 $5 Revenues (1) 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Notes: (1) Gross revenue includes operating revenue and nonoperating revenue. (2) Direct operating expenses include operating expenses (except depreciation) and nonoperating expenses (except interest expense). Source: City of South San Francisco, Department of Finance -132- CITY OF SOUTH SAN FRANCISCO DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS Per Capita School Percent Year Population Income Enrollment Unemployed (1) 1994-1995 (2) 57,335 $ 20,130 9,800 4.41% 1995-1996 (2) 56,972 (4) 20,570 10,100 3.79% 1996-1997 (2) 57,608 (4) 21,208 10,175 2.97% 1997-1998 (2) 59,208 (4) 21,929 10,121 2.51% 1998-1999 (2) 60,938 (4) 22,762 10,002 2.25% 1999-2000 (2) 62,551 (4) 23,718 9,330 1.76% 2000-2001 (3) 60,552 (4) 36,045 9,890 1.85% 2001-2002 (3) 61,724 (4) 37,212 9,078 4.32% 2002-2003 (3) 61,724 (4) 37,901 9,370 5.17% 2003-2004 (3) 61,724 (4) 38,260 9,328 4.55% (5) (5) (5) (5) (5) e 80 '° ~ i~Poputation,- ...... = / .I, Per Capita Income ($) I O 50 40 30 20 10 ...... -_ ................... _'-_. .......... .-. ..................................................................... 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Notes: (1) Data represents San Mateo county-wide rate only and is not seasonally adjusted. (2) Per-capita incomes from 1991 to 2000 are based on 1990 census data adjusted for inflation. (3) Per-capita incomes from 2001 to 2002 are based on 2000 census data for San Mateo County and adjusted for inflation. (4) State Department of Finance. A new method of estimation has lowered population assessments for the State and most cities. (5) This revision is the result of incorporation of the 2000 Census population controls at the State level and changes in methodology. Sources: Population - State of California, Department of Finance. Per Capita Income - US Census & State of California, Department of Finance. School Enrollment - South San Francisco Unified School District. Unemployment Rate - State of California, Employment Development Department. -133- CITY OF SOUTH SAN FRANCISCO PROPERTY VALUE (1), CONSTRUCTION AND BANK DEPOSITS LAST TEN FISCAL YEARS CONSTRUCTION Commercial Residential Total Assessed Permits Permits Bank Year Property Value Issued Value Issued. Value Deposits (2) 1994-95 $ 5,035,007,600 391 $ 46,849,070 755 $ 12,452,758 $ 748,167,000 1995-96 5,124,914,975 416 63,673,198 877 23,841,722 693,304,000 1996-97 5,189,059,935 517 57,308,734 1,051 47,692,788 766,286,000 1997-98 5,324,367,685 442 80,833,435 1,026 50,993,955 791,570,000 1998-99 5,651,161,377 550 120,854,554 1,150 39,729,137 832,131,000 1999-2000 6,128,511,854 510 145,313,933 1,356 56,934,744 865,417,000 2000-01 6,894,829,577 556 266,181,156 1,135 27,172,750 901,057,000 2001-02 7,653,214,965 381 241,158,927 1,269 41,516,938 927,793,000 2002-03 8,419,819,565 276 102,699,390 914 60,292,756 981,385,000 2003-04 9,301,750,803 318 57,626,270 1,223 55,313,882 1,111,964,000 Notes: (1) Assessed values are established by the County Assessor's Office. This value will change only if improvements are made or the property is resold. Prior to 1981-1982, assessed values were set at 25% of the purchase price of the property. The County Assessor's Office converted to full cash value on March 1, 1981. Full cash value is now the uniform method use in the State of California. (2) Federal Deposit Insurance Corporation Sources: FDIC; San Mateo County Assessor; Building Department 1,400 1,200 1,000 800 600 Construction Permits Issued 400 200 Construction Value 300 ,250 200 150 100 $80 $- 1994- 1995- 199~ 1997- 1998- 1999- 2000- 2001- 2002- 2003- 95 96 97 98 99 2000 01 02 03 04 -134- CITY OF SOUTH SAN FRANCISCO COMPUTATION OF LEGAL DEBT MARGIN JUNE 30, 2004 Assessed Value $ 9,301,750,803 Legal Debt Limit* $ 930,175,080 Less Outstanding Bonded Debt Legal Debt Margin $ 930,175,080 * Legal debt limit is 10% of assessed value of property subject to taxation. Source: San Mateo County Assessor -135- CITY OF SOUTH SAN FRANCISCO COMPUTATION OF OVERLAPPING GENERAL OBLIGATION DEBT JUNE 30~ 2004 2003-2004 Assessed Valuation: Redevelopment Incremental Valuation: Adjusted Assessed Valuation: $ 9,188,225,294 1,733,469,308 $ 7,454,755,986 OVERLAPPING TAX AND ASSESSMENT DEBT: San Mateo Community College Distdct Jefferson Union High School District South San Francisco Unified School District City of Brisbane Marina Boulevard and Lagoon Road Reassessment District City of South San Francisco 1915 Act Bonds TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT % Applicable 8.121 0.180 86.697 24.216 100.000 Debt 6~30~04 $ 7,677,643 46,188 30,569,504 1,582,516 1,950,000 $ 41,825,851 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: San Mateo County General Fund Obligations 8.121 San Mateo County Board of Education Certificates of Participation 8.121 San Mateo County Flood Control District Certificates of Participation 55.978 City of South San Francisco Certificates of Participation 100.000 San Mateo Community College District Certificates of Participation 8.121 South San Francisco Unified School District Certificates of Participation 86.697 TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT: $ 34,359,036 387,778 8,242,761 5,590,000 2,508,171 2,167,425 $ 53,255,171 COMBINED TOTAL DEBT: $ 95,081,022 (1) (1) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2003-2004 Assessed Valuation: Total Direct and Overlapping Tax and Assessment Debt 0.46% Ratios to Adiusted Assessed Valuation: Combined Direct Debt ($5,590,000) 0.07% Combined Total Debt 1.28% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6~30~04: $0 Source: California Municipal Statistics, Inc. -136- THE CITY OF SOUTH SAN FRANCISCO NET TAXABLE ASSESSED VALUES LAST TEN FISCAL YEAR HISTORY Lien Year Secured Nonunitary Unsecured Net Total AV 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 4,244,302,092 4,338,371,749 4,444,808,890 4,552,235,956 4,784,370,522 5,092,850,309 5,705,764,724 6,357,726,237 6,985,846,680 7,636,095,696 7,367,260 7,037,781 16,871,277 14,746,743 13,181,558 $ 790,705,508 786,543,226 744,251,045 772,131,729 866,790,855 928,786,337 1,074,600,234 1,187,439,388 1,305,343,886 1,538,948,040 5,035,007,600 5,124,914,975 5,189,059,935 5,324,367,685 5,651,161,377 6,029,003,906 6,787,402,739 7,562,036,902 8,305,937,309 9,188,225,294 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $- [] Unsecured · Nonunitary [] Secured 1994-95 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2000 Source: HdL Coren & Cone, San Mateo County Assessor Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone. -137- THE CITY Of SOUth SAN FRANCISCO TAXABLE PROPERTY VALUES JUNE 30, 2004 Parcels TRAs Values Land Improvements Personal Property Fixtures Total Value Exemptions Real Estate Home owners * Total Exemptions * Total Net Value less Home owners exemption * Secured Nonunitary Unsecured Taxable Utilities Roll Total 17,558 117 2,422 20,097 56 15 38 109 $ 2,851,996,635 4,313,850,261 4O4,4O7,629 164,444,454 $ 7,734,698,979 $12,208,152 $ 32,500,612 619,033 508,601,887 354,373 841,396,021 173,572,331 $13,181,558 $ 1,556,070,851 $ 2,896,705,399 4,823,071,181 1,246,158,023 338,016,785 $ 9,303,951,388 $ 98,603,283 $ 14,922,226 .$ 113,525,509 75,304,600 603,694 75,908,294 $ 98,603,283 $ $ 14,922,226 $ 113,525,509 $ 7,636,095,696 $ 13,181,558 $ 1,541,148,625 $ 9,190,425,879 Taxable Property Values for FY 03-04 Improvements 52% Personal Property 13% Fixtures 4% Land 31% Notes: Home owners exemption is not included in total exemptions. Source: HdL Coren & Cone, San Mateo County Assessor 2003/04 Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone. -138- THE CITY OF SOUTH SAN FRANCISCO PROPERTY TAX DOLLAR BREAKDOWN JUNE 30, 2004 City of South San Francisco* 16.89% County Education Tax 3.80% San Mateo Junior College General Purpose 7.30% Colma Creek Flood Control SU 1.49% Colma Creek Flood Control 0.53% County Harbor District 0.38% Bay Area Air Pollution 0.23% General County 25.69% South San Francisco Unified 43.69% ATI (Annual Tax Increment) Ratios For Tax Rate Area 013-020, Excluding Redevelopment Factors & Additional Debt Service *ERAF (Educational Revenue Augmentation Fund) general fund tax shifts are not included in tax ratio figures. Source: HdL Coren & Cone, San Mateo County Assessor 2003-04 Annual Tax Increment Tables, (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the wdtten consent of HdL, Coren & Cone. -139- THE CITY OF SOUTH SAN FRANCISCO USE CATEGORY SUMMARY FOR BASIC PROPERTY VALUES JUNE 30, 2004 Category Parcels Assessed Value Residential 15,471 $ 3,720,977,032 40.0% Commercial 435 630,629,338 6.8% Industrial 761 2,319,546,992 24.9% Recreational 11 11,808,491 0.1% Institutional 42 75,704,610 0.8% Government 6 6,057,896 0.1% Miscellaneous 62 19,739,901 0.2% Vacant Land 288 183,729,459 2.0% Exempt 203 0.0% SBE Nonunitary 117 * 13,181,558 0.1% Unsecured 2,422 * 1,556,070,851 16.7% Unknown 329 766,505,260 8.2% Totals 17,608 * $ 9,303,951,388 Net Taxable Value $ 3,706,331,710 628,910,891 2,313,821,610 11,808,491 7,228,459 6,057,896 19,676,817 183,729,459 13,181,558 1,541,148,625 758,530,363 $ 9,190,425,879 40.3% 6.8% 25.2% 0.1% 0.1% 0.1% 0.2% 2.0% 0.0% 0.1% 16.8% 8.3% Assessed Value Net Taxable Value Unknown Unknown 8.2% 8.3% Unsecured Unsecured 16.7% 16.8% Residential Residential 40.0% 40.3% Vacant Land 2.0% Vacant Land Others 1.5% 2.0% Others 0.7% Industrial Commercial Commercial 24.9% 6.8% 25.2% 6.8% Notes: Total for parcels does not include SBE Nonunitary and Unsecured parcels. Source: HdL Coren & Cone, San Mateo County Assessor 2003/04 Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone. -140- THE CITY OF SOUTH SAN FRANCISCO GROWTH SUMMARY BY AGENCY JUNE 30, 2004 Percentage Growth of Assessed Values by Agency between FY 02-03 and FY 03-04 RDA County City Tax El Camino I Downtown Distdct #1 Corridor Shearwater GatewayI Central Secured Land 8.3% 7.8% 7.8% 14.4% 2.0% 17.1% 3.9% Improvements 5.2% 7.6% 6.9% 18.2% 84.9% -3.6% 6.4% Personal Prop. 18.8% 51.3% 58.0% -0.2% -14.3% 15.7% ~ 33.6% Exemptions 12.2% 8.2% 14.5% 4.0% 0.0% 0.0%! 19.6% Net Total 6.6% I 9.3% 9.3% f 18.7% ! 40.1%I 0.2% i 6.5% SBE Nonunitary Land -100.0% -12.1% -4.0% i 14.2%~ 0.0% 5.0%I -28.7% Improvements -100.0% 14.2% 14.2% 14.2% 0.0% ! 14.2% ! 14.2% Personal Prop. -100.0%1 14.2% 14.2% 14.2% 0.0% 14.2%! 14.2% Exemptions 0.0% ! 0.0% 0.0% I 0.0% 0.0% 0.0% i 0.0% Net Total -100.0%1 -10.6% -3.0%1 14.2% 0.0% 7.7% I -27.5% Unsecured Land 2.1% -33.2% -44.3% 5085.7% 583.7% 0.0%t 2.6% Improvements 5.6% 9.9% 14.4% 337.0% 0.0% -18.6% 9.8% Personal Prop. -5.9% 30.3% 36.2% 44.7% 2975.1% -5.4% 20.3% Exemptions 2.0% 51.0% -12.9% 131.9% 0.0% 0.0% 13327.1% 4 ,~ O! I Net Total -2.1% I 18.1% 23.5% i 61.5% 117351.6% ~ -,3..+~o ~ 13.8% Combined Land 7.9% 6.9% 6.8% 14.5% 2.1% 17.0%{ 3.3% Improvements 5.3% 7.9% 7.9% 21.4% 94.1% -6.9% 6.8% Personal Prop. -3.1% 36.4% 42.8% 15.3% 42.4% -4.5% 24.5% Exemptions 9.1% 12.4% 10.5% 12.7% 0.0% 0.0%1 59.5% INet Taxable AV 5.6%t 10.6% 11.5% 19.8%I 45.1%! -3.5% I 7.4% Taxing District,, Total Net Assessed Values RDA Net Assessed Values El Camino Corridor 12.1% Shearwater 10.9% Gateway 31.3% Source: HdL Coren & Cone,-San Mateo County Assessor Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone. -.141 - THE CITY OF SOUTH SAN FRANCISCO TOP PROPERTY OWNER SUMMARY JUNE 30, 2004 Property Owner (Number of Parcels) Assessed Value 1 Genentech Inc. (26) 2 United Airlines Inc. (7) 3 Slough BTC LLC (5) 4 Gateway Center LLC (1) 5 Britannia Point Grand LP (9) 6 BNP Leasing Corp. (2) 7 SFO Fuel Co. LLC (1) 8 Gateway Blvd LLC (3) 9 Costco Wholesale Corp. (4) 10 Kaiser Foundation Health Plan Inc. (3) 11 HPTMI II Properties Trust (2) 12 Carramerica Realty Corp (1) 13 Elan Pharmaceuticals Inc. (5) 14 Kashiwa Fudosan America Inc. (2) 15 Bedford Property Investors Inc. (5) 16 Sierra Point Ten LP (2) 17 BP Gateway Center LLC (1) 18 Slough SSF LLC (3) 19 CF Gateway LLC DE (2) 20 Shelton Properties (2) 21 Sanrio Inc. (4) 22 Hines Oyster Point LLC (1) 23 Sugen Inc. (1) 24 Felcor CSS Holdings LP (1) 25 Britannia Biotech Gateway LP (2) 1,122,991,442 374,670,513 144,108,385 118,024,368 111,913,464 81,701,200 79,169,807 60,180,000 57,805,968 56,245,260 55,682,186 46,156,500 46,098,558 43,430,674 40,396,047 38,660,246 38,600,000 36,934,200 34,800,000 34,749,896 32,828,884 32,366,944 32,214,535 32,165,153 31,728,368 Source: HdL Coren & Cone, San Mateo County Assessor 2003/04 Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the wdtten consent of HdL, Coren & Cone. -142- THE CITY OF SOUTH SAN FRANCISCO TOP PROPERTY TAXPAYERS BASED ON ESTIMATED TOTAL REVENUE JUNE 30, 2004 Assessed Estimated Estimated RDA Propert7 Owner (Number of Parcels) Value Total Revenue 1% Revenue 1 Genentech Inc. (26) $ 1,122,991,442 $ 2,756,259 $ 1,355,477 2 Slough BTC LLC (5) 144,108,385 1,294,817 1,269,834 3 Gateway Center LLC (1) 118,024,368 1,151,483 1,145,404 4 Britannia Point Grand LP (9) 111,913,464 881,259 832,656 5 Gateway Blvd LLC (3) 60,180,000 587,135 584,042 6 HPTMI II Properties Trust (2) 55,682,186 549,788 548,176 7 United Airlines Inc. (7) 374,670,513 526,472 - 8 Elan Pharmaceuticals Inc. (5) 46,098,558 461,539 461,539 9 Costco Wholesale Corp. (4) 57,805,968 434,707 407,904 10 BP Gateway Center LLC (1) 38,600,000 376,594 374,606 11 CF Gateway LLC DE (2) 34,800,000 339,520 337,728 12 Hines Oyster Point LLC (1) 32,366,944 319,581 318,644 13 Felcor CSS Holdings LP (1) 32,165,153 313,813 312,157 14 Britannia Biotech Gateway LP (2) 31,728,368 309,552 307,9t8 15 Theravance Inc. (1) 30,815,197 308,522 308,522 16 HMS Gateway Office LP (2) 31,510,982 307,431 305,813 17 Sierra Point Ten LP (2) 38,660,246 304,429 287,688 18 Slough SSF LLC (3) 36,934,200 290,837 274,844 19 Sugen Inc. (1) 32,214,535 274,909 265,319 20 Rouse & Associates (2) 25,735,968 251,088 249,763 21 Blue Line Transfer Inc. (1) 31,691,257 249,552 235,829 22 Britannia Gateway II LP (1) 25,091,711 244,803 243,510 23 Dorset Holdings Gateway LLC (2) 24,553,440 239,551 238,286 24 SSF Landing Hotel Co. (1) 24,199,214 236,095 234,849 25 Gainey One Trust (2) 29,710,404 233,975 221,113 Note: The Estimated Total Revenue for each owner is the estimated revenue for that owner; the Estimated RDA 1% Revenue estimates the revenue apportioned as 1% increment. Although these estimated calculations are performed on a parcel level, County Auditor/Controllers' Offices neither calculate nor apportion revenues at a parcel level. Source: HalL Coren & Cone, San Mateo County Assessor 2003/04 Combined Tax Rolls (NC407261404) This report is not to be used in support of debt issuance or continuing disclosure statements without the wdtten consent of HdL, Coren & Cone. -143- AGENDA ITEM #8 Staff Report DATE: February 9, 2005 TO: Honorable Mayor and City Council FROM: Jim Steele, Director of Finance SUBJECT: TRANSMITTAL OF SECOND QUARTER FINANCIAL REPORT AND RESOLUTION AMENDING THE 2004-05 GENERAL FUND OPERATING BUDGET RECOMMENDATION: It is recommended that the City Council approve the attached resolution amending the 2004-05 operating budget for the changes discussed in the attachments to this staff report. BACKGROUND/DISCUSSION: This staff report transmits the second quarter financial results, and recommends several changes to the 2004-05 General Fund operating budget. The changes staff recommends in the budget amendment are: 1. Change General Fund revenues by a total of $383,628, as detailed in Attachment B-1. The largest change is due to a much larger ERAF refund from the County than projected. 2. Formally incorporate the fresh start PERS refinancing savings, approved by Council in September 2004, into the budget. This will result in $1,240,000 in expenditure savings, as detailed in Attachment B- 1. These changes are discussed in more depth in the Quarterly Financial Report (Attachment A). FISCAL IMPACT: Staff projects that the General Fund will end the fiscal year with a General Fund Undesignated Reserve of $3.3 million, including the items in this staff report and budget amendment. Prepared by: ~ J~V~fi Steele t~nance Director Approved K~B~ 1V~. Nag~ ~ City Manager ~x~_ ATTACHMENTS: JS/BN:ed Quarterly Financial Report (Attachment A) Resolution (Attachment B) Summary of Budget Amendment Changes (Attachment B-I) General Fund Operating Budget and Reserves (Attachment C) Transient Occupancy Tax Collection Report (Attachment D) City of South San Francisco Attachment A Quarterly Financial Report 2nd Quarter 2004-05 February 9, 2005 OVERVIEW This is an update of revenues and expenditures as of the second quarter 2004-05, i.e., through December 2004. At this point of the year, roughly half of property tax revenues are received, along with information on one quarter of this year's sales tax data, which is reported in arrears. The largest franchise fee payments, from PG&E, don't get paid until the fourth quarter. Economy The U.S. Bureau of Economic Analysis (BEA) released figures in late January that showed nationwide Gross Domestic Product had grown by 4.4% in 2004, up from the prior year. However, growth slowed in the 4th quarter. The BEA also reported that nationwide, spending on computer and, software rose dramatically in the 4th quarter of 2004, a promising sign for the Bay Area for 2005. However, economists from the State Finance Department and the Association of Bay Area Governments (ABAG) projected in late January that while the Bay Area is showing signs of economic improvement, it should experience slow to moderate job growth in 2005 and 2006. Bay Area household incomes are projected by ABAG to grow slightly more than inflation in 2005 and 2006, and the Bay Area is expected to lag the State in a slow recovery. Until Silicon Valley regains its footing, the entire Bay Area will likely experience slow growth Another sign of the local economy is the commercial real estate market. BT Commercial Real Estate reports that the office vacancy rate in So. San Francisco was 24.1% in the fourth quarter of 2004, compared to 35.7% the year before, and compared to 27.7% last quarter. The Office/R&D vacancy rate in So. San Francisco was 7.9% in the fourth quarter 2004 compared to 10.1% the year before, and compared to 12.2% last quarter. This information, plus the rebound of construction sales tax (see section on Sales Tax below) are indications our revenues may pick up next year. Top General Fund Revenues The top ten revenues below total over half of General Fund revenues. Proper~y Taxes 1 ] ,zuz b,t~u~ bu.u%I 1 u,uuz [4uu; - ERAF Refund 285 0.0%I 1,075 790 Transient Occupancy Tax 4,100 1,705 41.6%I 4,420 320 Motor Vehicle In Lieu Fees 2,848 1,197 42.0%I 2,965 117 BuildingFranchise and Fees Fire 2,750 761 27.7%I 2,750 Permits 2,451 1,175 47.9%I 2,451 Recreation Fees 2,383 933 39.2%I 2,383 Business License Fees 1,540 671 43.6%I 1,650 110 Paramedic Fees 1,000 397 39.7%I 1,000 interest Earnings 417 201 48.2%I 420 3 Subtotal: 40,453 16,794 41.5%~ 41,270 817 Based on the sales tax data received for the period July-September 2004, it appears that receipts may come in slightly under budget. Property taxes, as reported last quarter, appear to be about $400,000 under budget. Transient Occupancy Taxes (TOT) have continued the trend of rising occupancy and room rates. Given that and the fact of the voter approved increase in the TOT to 9% for the second half of the year, staff now projects TOT will end the year $320,000 over budget. -1- Quarterly Financial Report 2nd Quarter 2004-05 The largest variance in revenues is a positive $790,000, representing a refund of excess ERAF funds collected by the County last year. This is discussed further below. Summary At the midpoint of the year, total General Fund revenues therefore now appear to be on a pace to come in $384,000 over the amended budget. When compared to last fiscal year actual revenue results, this represents a $2.7 million increase. However, much of this year's revenues are the result of internal fund shifts, the ERAF refund which cannot be counted on annually, and new actions the Council approved, such as raising fees and the TOT rate. When excluding these either non-recurring events or new items, one can get to a more comparable understanding for what is occurring economically for South San Francisco. Making those adjustments, therefore, results in this year's revenues to come in $1.1 million, or 2.2% higher than last year's actuals on a recurring, or comparable revenue basis. 1. Sales and Use Taxes Sales and Use Taxes are the City's largest single revenue source, and, along with hotel (TOT) tax revenues, the' most volatile. South San Francisco's sales tax base is heavily business-to- business, and not consumer related. This means our sales tax revenues are more susceptible to business downturns, and have not benefited as much from the strength of consumer spending during this past downturn. With 3 months of economic data available from the State Board of Equalization, staff projects that Sales Tax will come in at budget except for a decline on an accounting basis, due to a delay in the timing of the final State/County payment for the triple flip. This is consistent with what staff reported in the first quarter's report to Council, with the exception that the triple flip adjustment loss has been reduced slightly. Construction sales taxes are up. Because construction occurs prior to business expansion, -2- this is a very positive development. However, auto sales, out of state biotech equipment purchases, and light industry sales were down slightly from the prior quarters. One potential threat to City revenue on the horizon is from the merger between Cingular and AT&T Wireless. That merger has already resulted in some positions being eliminated from the South San Francisco office. Cingular is a top ten sales tax generator, generating cell phone sales from their Gateway Blvd. office tower. Given the major impact to the City if they relocate their sales office, City staff has been in contact with Cingular's real estate department to discuss options for them to consider in staying in South San Francisco. 2. Property Taxes Roughly half of property taxes are received in December. As was reported last quarter, it appears Property Taxes may be down $400,000 from budget, due to a decline in the unsecured roil for 2004-05. Unsecured property taxes are those taxes paid on equipment and furnishings. The reason for the decrease is that the continued economic decline has impacted taxes paid by United Airlines, the largest unsecured taxpayer. In addition, office vacancies as of January 2004 reduced unsecured taxes for numerous other businesses. 2a. ERAF Refund from the County For the past two years, the County has refunded 90% of excess ERAF funds built up in the County' s reserves back to cities and redevelopment agencies. Because San Mateo County has such a high proportion of basic aid districts that do not rely on State (or ERAF) funds, excess funds have built up, because the State ERAF formulas do not adjust for three counties in California that are largely basic aid counties. Staff budgeted a refund for this year of half of last year's refund, since last year's refund was for two years of built up excess, while this year's is for only one year. However, due to changes in State education funding formulas this year, as Quarterly Financial Report 2nd Quarter 2004-05 well as declines in school enrollments and increases in assessed values overall, this year's refund is projected to be even higher than last year's. Based on payments to date and conversations with the Controller's Office, staff projects to receive $1.0 million in refunds in the General Fund by year-end, or $790,000 more than budget. Unfortunately, due to the complex set of variables having to do with overall assessed valuation and changes in school funding formulas, the County has said they are unwilling to project this year's eventual refund, let alone next year's. A task force of County finance officials is attempting to write a white paper on how to forecast for the ERAF refund in the future. Because some fear that these funds could be vulnerable to State confiscation in the future, as they may be outside of Proposition lA protections, it is wise for the City to continue to budget for these dollars conservatively. 3. Transient Occupancy Taxes (TOT) TOT taxes are paid one month in arrears. For the first 5 months of the year through November, the City has received $166,000 Average year to date occupancy and room rates are up at 72.4% and $74.93 compared to 66.6% and $70.84 for the same period a year ago. Given this improvement, and the passage of the TOT ballot measure, which raised the TOT to 9% on January 1, 2005, staff is now projecting that TOT revenue will come in at $4.42 million for the year, or $320,000 over budget. 4. Motor Vehicle In Lieu Fees (MVILF) Based on year to date receipts, staff is now projecting that this revenue will come in slightly over budget. 5. Franchise Fees. The largest revenue source, the payment from PG&E, isn't received until April, so no change is recommended here. 6. Building, Fire, and Planning Fees. Year to date building permit receipts are $130,000 higher than last fiscal year to date. While $56,000 is for a large permit paid for by Genentech, and may not be part of a larger trend, this is still positive information. Staff projects no overall increase by year-end at this point, but there may be some upside growth here before year-end. Recreation Fees The largest revenues are paid in the Spring, and staff believes the current budget is still realistic for this fiscal year. Business License Taxes This source of revenue is made up of business licenses and commercial parking taxes. Business license renewals aren't due until January 31st, and parking taxes are paid a quarter in arrears. Given the improvement we have seen in the parking receipts, however, staff believes there will be some growth by year-end in this category. 9. Paramedic Fees These payments are received in arrears, and staff believes the current budget is still realistic. I0. Interest Earnings Interest earnings are on track to meet budget at this point of the year. Expenditures Actual salaries and benefit expenditures are trending below budget year to date. Staff expects there to be salary savings by year-end. The exact savings at year-end will not be known until salary setting is complete for all bargaining units after January 1, with Police being a large unknown. At this point, it is estimated that year-end savings will be between $200,000-$400,000, over and above the $1.2 million fresh start savings that is being factored into the budget. -3- Salaries and Benefits 40,155 14,444 19,747 6,371 49% 44% Non-Salaries Total General Fund Operating Budget 54,599 26,118 48% RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION APPROVING AN AMENDMENT TO THE 2004-0,5 GENERAL FUND OPERATING BUDGET WHEREAS, staff recommends to change General Fund revenues by a total of $383,628; and WHEREAS, staff recommends formally incorporating the fresh start PERS refinancing savings, approved by Council in September 2004, into the budget; this will result in $1,240,000 in expenditure savings; and WHEREAS, staff projects that the General Fund will end the fiscal year with a General Fund Undesignated Reserve of $3.3 million. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby approves the second quarter financial result changes as shown in Attachments B-1 and C and approves an amendment to the 2004-05 General Fund Operating Budget by changing General Fund revenues by a total of $383,628. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the __ day of ., 2005 by the following vote: AYES: NOES: ABSTAIN: ABSENT: S:\Current Reso's\2-9-05second.quarter.financial.report.res.doc ATTEST: City Clerk Attachment B-1 Midyear 2004-05 General Fund Operating Budget Amendment Changes Revenues and Other Financing Sources Property Taxes ERAF One Time Refund from County Sales Tax Transient Occupancy Tax Motor Vehicle In Lieu Fees Revenue from Other Agencies Business License Charges for Services Fines Interest Transfers In Total Revenues: Midyear Budget Amendment Changes -400,000 789,854 -122,841 320,000 117,405 -401,555 110,000 69,000 -74,000 3,000 -27,235 383,628 Expenditures PERS refinancing -1,240,000 Attachment C Revenues and Other Financing Sources Property Taxes ERAF One Time Refund from County New State Reimbursement to offset Sales Tax diversion by State to fund State Deficit Bonds Est. of New ERAF Shift from State Sales Tax Transient Occupancy Tax Motor Vehicle In Lieu Fees Revenue from Other Agencies Franchise Fees Business License Building and Fire Permits Charges for Services Fines Interest Net Loss on Investments Rent Administrative Charges Other Transfers In Plus Prior Year Carryovers Total Revenues and Other Financing Sources Midyear 2004-05 General Fund Operating Budget Amended Midyear Actual Actual Budget Budget 2002-03 2003-04 2004-05 2004-05 Difference from Midyear to Amended Budget Positive Impact (Adverse Impact) 9,622,976 10,732,355 11,202,000 10,802,000 -400,000 537,460 285,000 1,074,854 789,854 12,194,963 11,287,900 11,476,500 11,353,659 -122,841 3,917,243 3,945,974 4,100,000 4,420,000 320,000 3,622,146 2,780,323 2,848,000 2,965,405 117,405 1,266,721 1,220,479 1,622,868 1,221,313 -401,555 1,873,804 2,602,529 2,750,000 2,750,000 1,878,853 1,579,865 1,540,000 1,650,000 110,000 2,054,709 2,459,659 2,451,000 2,451,000 4,554,519 5,925,338 5,103,345 5,172,345 69,000 907,768 1,061,231 1,089,000 1,015,000 -74,000 1,053,492 445,671 417,000 420,000 3,000 (304,194) 1,832,252 2,342,600 2,494,000 2,494,000 1,651,311 1,847,868 2,135,000 2,135,000 468,139 543,992 508,271 508,271 1,168,236 1,406,422 2,645,235 2,618,000 -27,235 $ 48,087,132 $ 50,415,471 52,667,219 53,050,847 383,628 270,693 270,693 $ 48,087,132 $ 50,415,471 52,937,912 53,321,540 383,628 Expenditures Administration Economic & Comm. Dev. Fire Library Police Public Works (formerly Maintenance Services) Parks, Rec & Maint. Svcs. Public Works A29 6,387,828 5,017,940 5,125,473 5,125,473 2,623,375 2,728,364 3,617,508 3,617,508 11,387,186 13,449,414 15,114,830 15,114,830 3,953,664 4,469,946 4,532,440 4,532,440 12,471,829 13,742,256 15,869,747 15,869,747 5,572,236 5,308,014 5,308,014 10,696,566 1,170,689 1,312,462 Recreation and Community Services PERS refinancing Subtotal, Operating Budget Expenditures 4,981,080 5,031,272 5,031,272 -1,240,000 $ 48,691,137 $ 51,273,698 54,599,284 53,359,284 1,240,000 1,240,000 Net Operating Budget Impact $ (604,005) $ (858,227) (1,661,372) (37,744) Attachment C Total General Fund Operating and Capital Budget, & Changes to General Fund Reserves Net Operating Budget Impact (from Table I) Less Transfers to Capital Projects: Less Transfers to Debt Service Plus (Minus) One-Time Transactions: Plus Favorable Resolution of Genentech Property Tax Settlement: Plus (Minus) Favorable (Unfavorable) Reduction in funds set aside for legal settlement: Less Unfavorable Increase in Projected Workers' Compensation Liability: Net Impact on General Fund Reserves Year End Actual 2002-03 (6O4,005) (733,000) (452,000) 1,122,000 700,000 (1,200,000) Year End 2003-04 $ (858,227) (87,606) (103,167) (238,362) (1,167,005) $ (1,287,362) Adol~ted Midyear Budget Budget 2004-05 2004-05 (227,907) (37,744) (626,044) (1,014,588) (130,000) (130,000) (983,951) (1,182,332) IGeneral Fund Reserves Projection I. Discretionary Reserves/ Liquid Reserves Available Emergencies Economic Contingencies Designaged for future Economic Development Projects Undesignated Reserve 1,000,000 1,000,000 1,000,000 1,000,000 3,500,000 3,500,000 3,500,000 3,500,000 3,600,000 3,600,000 3,600,000 3,600,000 4,323,000 3,852,647 3,587,687 3,329,552 II. Non-Discretionary Reserves/ Reserves Already Committed Encumbrances Advances to Other Funds Inventory and Other Appropriated Capital Projects Subtotal, Non Discretionary (Committed) Reserves Total General Fund Reserves 283,000 270,693 845,000 51,000 93,754 391,000 388,544 34,000 93,754 $ 1,570,000 $ 752,991 34,000 93,754 $13,993,000 $ 12,705,638 11,721,687 11,523,306 Transient Occupancy Tax (TOT) Summary through Residential Hotels Rooms Occupancy Rate not included NOV,'04 NOV,'03 % Change Business Hotels (17) 2,322 63.6% 59.6% 6.7% Economy Hotels (10) 548 56.1% 55.6% 1.0% November Nov,'04 $ 75.93 $ 50.66 2,870 62.2% 58.9% 5.6% 71.57 2004 Average Room Rate TOT Collected Nov,'03 Change % Change Nov,'04 Nov,'03 Change $ 72.24 $ 3.69 5.1% $266,701 $253,350 $13,351 $ 47.77 $ 2.89 6.0% $36,893 $30,990 $5,903 68.05 $ 3.53 5.2% 303,594 284,340 $19;254 % Change 5.3% 19.0% 6.8% ATTACHMENT "D" StaffReport DATE: TO: FROM: SUBJECT: February 9, 2005 Honorable Mayor and City Council Marty Van Duyn, Assistant City Manager 2005 CYCLE OF THE METROPOLITAN TRANSPORTATION COMMISSION'S REGIONAL SIGNAL TIMING PROGRAM RECOMMENDATION It is recommended that the City Council adopt a resolution authorizing the City Engineer to sign a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. BACKGROUND/DISCUS SION The 2005 cycle of the Metropolitan Transportation Commission's (MTC) Regional Signal Timing Program (RSTP) provides jurisdictions assistance in developing and implementing signal coordination plans using consultants hired and funded by MTC. The City of South San Francisco has applied to MTC for and received approval to develop and install signal interconnect timings along Hickey Boulevard from E1 Camino Real to Junipero Serra Boulevard. Currently on Hickey Boulevard, there is an existing conduit and interconnect cable between the signals but no coordinated timings. The new timings will allow the traffic to flow more efficiently and with fewer delays. In order to allow MTC's consultant to design the system, MTC requires the City to execute a "Waiver of Claims and Indemnification" agreement between MTC and the City of South San Francisco. By this resolution, the City Council of the City of South San Francisco authorizes the City Engineer to execute such an agreement. FUNDING MTC funds the consultant directly and there will be no consultant costs for the City. There are suff~.t.fu.n~i; stafl ti review the c°nsultant' s pr°ducts' By: - Approved:~ ~Ma~. y'~_.Du~_~ klSfa~ M'. Nagel ~_ Assistant City M-a'nager City Manager Attachment: Resolution Wavier of Claims and Indemnification Agreement BN:MV:RR RESOLUTION NO. CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA A RESOLUTION AUTHORIZING A WAWER OF CLAIMS AND INDEMNIFICATION AGREEMENT BETWEEN THE METROPOLITAN TRANSPORTATION COMMISSION AND THE CITY OF SOUTH SAN FRANCISCO WHEREAS, staff recommends a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of South San Francisco that the City Council hereby authorizes a Waiver of Claims and Indemnification Agreement between the Metropolitan Transportation Commission and the City of South San Francisco. BE IT FURTHER RESOLVED that the City Engineer is hereby authorized to execute the agreement on behalf of the City of South San Francisco. I hereby certify that the foregoing Resolution was regularly introduced and adopted by the City Council of the City of South San Francisco at a meeting held on the __ day of ,2005 by the following vote: AYES: NOES: ABSTAIN: ABSENT: ATTEST: City Clerk &\Current Reso's\2-9-05Waiver.of. claim. MTC.res.doc WAIVER OF CLAIMS AND INDEMNIFICATION AGREEMENT Between METROPOLITAN TRANSPORTATION COMMISSION And TIlE CITY OF SOUTH SAN FRANCISCO THIS AGREEMENT is made and entered into as of the 9th day of February, 2005, by and between the Metropolitan Transportation Commission, a regional transportation planning agency established pursuant to California Government Code § 66500 et seq., (herein called "MTC"), and The City of South San Francisco (herein called "CITY"). WITNESSETH WHEREAS, MTC has entered into a technical services agreement with several consulting firms (herein called "the Consultants"), under which the firms will provide assistance to various Bay Area cities in the retiming of traffic signals in those cities (herein called "the Project"); and WHEREAS, CITY is participating in the Project by receiving assistance from one of the Consultants (herein called "the Consultant"); WHEREAS, the parties wish to define CITY' s obligations to MTC respecting waiver of claims and indemnity; NOW, THEREFORE, the parties hereto agree as follows: 1.0 WAIVER OF CLAIMS AGAINST MTC CITY waives all claims by CITY, its directors, supervisors, officers, employees, or agents against MTC, its commissioners, officers, and/or employees for damages, loss, injury and/or liability, direct or indirect, resulting from CITY' s participation in the Project and/or the services provided to CITY by the Consultant under contract to MTC. CITY's waiver shall not apply to liability arising from and caused by the adjudicated or admitted negligence or willful misconduct of MTC, its commissioners, officers, and/or employees. 2.0 INDEMNIFICATION AND DEFENSE CiTY agrees to indemnify, hold harmless and defend MTC, its commissioners, officers, and employees from any and all third party claims, demands, lawsuits, liability, loss, damages, injury and/or liability, direct or indirect (including any and all costs and expenses in connection therewith), resulting from or in connection with provision of services to CITY by the Consultant under contract with MTC, to the extent such claims, demands, etc. are not covered by the Consultant' s indemnification of MTC in the Consultant's contract with MTC. CITY's indemnification obligation shall not apply to liability arising from and caused by the adjudicated or admitted negligence or willful misconduct of MTC, its commissioners, officers, agents, and employees. IN WITNESS WHEREOF, this agreement has been executed by the parties hereto as of the date first written above. METROPOLiTAN TRANSPORTATION COMMISSION THE CiTY OF SOUTH SAN FRANCISCO Steve Heminger, Executive Director Ray Razavi, City Engineer Ap ove to form: ~= ~teve M~-~as~ City Attorney