This section of the County of Santa Cruz (the “County”) comprehensive annual financial report presents a discussion and analysis of the County’s financial performance during the fiscal year ended June 30, 2003.  Please read it in conjunction with the transmittal letter at the front of this report and the County’s basic financial statements following this section.

 

FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

OVERVIEW OF THE FINANCIAL STATEMENTS

 

This discussion and analysis are intended to serve as an introduction to the County’s basic financial statements.  The County’s basic financial statements comprise three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the basic financial statements.  Required Supplementary Information is included in addition to the basic financial statements.

 


Government-wide Financial Statements

 

The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business.

 

The statement of net assets presents information on all County assets and liabilities, with the difference between the two reported as net assets.  Over time, increases or decreases in net assets may serve as a useful indicator of whether or not the financial position of the County is improving or deteriorating.

 

The statement of activities presents information showing how the County’s net assets changed during the most recent fiscal year.  All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.  Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave.

 

Both of these government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities).  The governmental activities of the County include general government, public protection, health and sanitation, public assistance, education, recreation and culture, and public ways and facilities.  The business-type activities of the County include the County Disposal Sites CSA 9, Boulder Creek CSA 7, Rolling Woods CSA 10, Septic Tank Maintenance CSA 12, Freedom County Sanitation District, Davenport Sanitation District, Place de Mer CSA 2, Sand Dollar Beach CSA 5, Trestle Beach CSA 20, Summit West CSA 54, and Graham Hill CSA 57 operations.

 

Component units are included in our basic financial statements and consist of legally separate entities for which the County is financially accountable and that have substantially the same board as the County or provide services entirely to the County.  The Santa Cruz County Sanitation District is reported as a discretely presented component unit of the County.  The District is managed by the County Department of Public Works and provides sanitation services to the unincorporated areas of the County.

 

Fund Financial Statements

 

The fund financial statements are designed to report information about groupings of related accounts which are used to maintain control over resources that have been segregated for specific activities or objectives.  The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.  All of the funds of the County can be divided into three categories:  governmental funds, proprietary funds, and fiduciary funds.

 


Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements—i.e. most of the County’s basic services are reported in governmental funds.  These statements, however, focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available for spending.  Such information may be useful in determining what financial resources are available in the near future to finance the County’s programs.

 

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements.  By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions.  Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

 

The County maintains several individual governmental funds organized according to their type (general, special revenue, debt service, and capital projects).  Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general fund and the Redevelopment Agency, which are considered to be major funds.  Data from the remaining governmental funds are combined into a single, aggregated presentation.  Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report.

 

The County adopts an annual appropriated budget.  The budget is a compilation of operating budgets from individual functional units within the General Fund, Special Revenue Funds, Capital Projects Funds, and Proprietary Funds (operating plans).  Budgets are adopted for all funds except for Debt Service Funds and certain special revenue funds, namely, Public Finance Authority, Health Services, and Health and Sanitation Funds.  A budgetary comparison schedule has been provided for the General Fund and Special Revenue-Redevelopment Agency to demonstrate compliance with these budgets.

 

Proprietary funds are generally used to account for services for which the County charges customers—either outside customers, or internal units or departments of the County.  Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail.  The County maintains the following two types of proprietary funds:

 

 


  • Internal Service funds are an accounting device used to accumulate and allocate costs internally among the County’s various functions.  The County uses internal service funds to account for its central duplicating, information services, public works, service center, and self-insurance (risk management, dental and health, liability and property, workers’ compensation, employee benefit staffing, and state unemployment insurance) functions.  Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements.  Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.

 

Fiduciary funds are used to account for resources held for the benefit of parties outside the County.  Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s own programs.  The fiduciary funds the County maintains are agency funds.  Since agency funds are custodial in nature (i.e., assets equal liabilities), they do not involve the measurement of results of operations.

 

Notes to the Basic Financial Statements

 

The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

 

Required Supplementary Information (other than MD&A)

 

In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning the County’s general fund budgetary comparison schedule and progress in funding its obligation to provide pension benefits to its employees.

 

Combining Statements and Schedules

 

The combining and individual fund statements and schedules referred to earlier in connection with non-major governmental funds, enterprise and internal service funds, and fiduciary funds are presented immediately following the required supplementary information.

 


GOVERNMENT-WIDE FINANCIAL ANALYSIS

 

Net Assets

 

 

Governmental Activities

Business-type Activities

                               Total                            .

 

2003

2002

2003

2002

2003

2002

Variance (%)

Assets:

 

 

 

 

 

 

 

 

Current and other assets

$254,297,579

$253,925,889

$23,763,717

$26,396,080

$278,061,296

$280,321,969

(  0.81)

 

Capital assets

  97,331,950

  93,506,619

22,342,521

22,117,405

119,674,471

115,624,024

  3.50

 

 

 

 

 

 

 

 

 

 

     Total assets

351,629,529

347,432,508

46,106,238

48,513,485

397,735,767

395,945,993

  0.45

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current and

 other liabilities

 

113,760,969

 

94,562,277

 

1,817,410

 

1,587,194

 

115,578,379

 

96,149,471

 

20.21

 

Long-term liabilities

174,174,014

179,264,844

  4,678,669

  5,000,852

178,852,683

184,265,696

(  2.94)

 

 

 

 

 

 

 

 

 

 

     Total liabilities

287,934,983

273,827,121

  6,496,079

  6,588,046

294,431,062

280,415,167

  5.00

 

 

 

 

 

 

 

 

 

 

Net assets:

 

 

 

 

 

 

 

 

Invested in capital assets,

 net of related debt

 

43,068,978

 

14,260,350

 

20,301,446

 

19,419,459

 

63,370,424

 

33,679,809

 

88.16

 

Restricted net assets

19,585,321

28,822,444

277,013

290,581

19,862,334

29,113,025

(31.78)

 

Unrestricted net assets

    1,040,247

  30,522,593

19,031,700

22,215,399

  20,071,947

  52,737,992

(61.94)

 

 

 

 

 

 

 

 

 

 

     Total net assets

$  63,694,546

$  73,605,387

$39,610,159

$41,925,439

$103,304,705

$115,530,826

(10.58)

 

 

Analysis of Net Assets

 

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position.  For the County, assets exceeded liabilities by $103,304,705 at the close of the current fiscal year.

 

The largest portion of the County’s net assets $63,370,424 (61%) reflects its investment in capital assets (e.g. land, building and structures, and equipment), less any related debt used to acquire those assets that is still outstanding.  The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.  Although the County’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

 

An additional portion of the County’s net assets, $19,862,334 (19%) represents resources that are subject to external restrictions on how they may be used. 

 

The remaining (20%) represents the unrestricted net assets, $20,071,947 which may be used to meet the government’s ongoing obligations to citizens and creditors.

 

At the end of the current fiscal year, the County reported positive balances in all three categories of net assets, both for the County as a whole, as well as for its separate governmental activities. 

 


Changes in Net Assets

 

 

Governmental Activities

Business-type Activities

                              Total                           .

 

2003

2002

2003

2002

2003

2002

Variance (%)

Revenues:

 

 

 

 

 

 

 

 

Program revenues:

 

 

 

 

 

 

 

 

  Charges for services

$  57,282,985

$  54,793,723

$10,923,487

$10,947,617

$  68,206,472

$  65,741,340

3.75

 

  Operating grants and contri.

188,238,700

187,809,995

389,260

534,212

188,627,960

188,344,207

0.15

 

  Capital grants and contri.

-        .

-        .

9,224

6,524

9,224

6,524

41.39

 

General revenues:

 

 

 

 

 

 

 

 

  Property taxes

58,190,576

55,625,116

-        .

-        .

58,190,576

55,625,116

4.61

 

  Other taxes

13,069,921

19,800,407

-        .

-        .

13,069,921

19,800,407

(      33.99)

 

  Interest and investment income

5,423,752

7,682,370

517,153

856,389

5,940,905

8,538,759

(      30.42)

 

  Miscellaneous

    9,775,877

  11,268,371

     512,796

       86,640

  10,288,673

  11,355,011

(        9.39)

 

 

 

 

 

 

 

 

 

 

     Total revenues

331,981,811

336,979,982

12,351,920

12,431,382

344,333,731

349,411,364

(        1.45)

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

  General government

23,334,622

24,700,704

-        .

-        .

23,334,622

24,700,704

(        5.53)

 

  Public protection

106,222,864

100,368,360

-        .

-        .

106,222,864

100,368,360

5.83

 

  Health and sanitation

75,039,192

76,974,991

-        .

-        .

75,039,192

76,974,991

(        2.51)

 

  Public assistance

86,609,599

87,275,868

-        .

-        .

86,609,599

87,275,868

(        0.76)

 

  Education

3,469,990

3,132,635

-        .

-        .

3,469,990

3,132,635

10.77

 

  Recreation and culture

8,125,177

7,552,638

-        .

-        .

8,125,177

7,552,638

7.58

 

  Public ways and facilities

31,029,943

32,544,591

-        .

-        .

31,029,943

32,544,591

(        4.65)

 

  Interest on long-term debt

8,742,496

12,837,784

-        .

-        .

8,742,496

12,837,784

(      31.90)

 

  County Disposal Sites CSA

-        .

-        .

12,260,297

9,750,973

12,260,297

9,750,973

25.73

 

  Boulder Creek CSA

-        .

-        .

396,283

376,962

396,283

376,962

5.13

 

  Rolling Woods CSA

-        .

-        .

62,643

79,007

62,643

79,007

(      20.71)

 

  Septic Tank Maintenance CSA

-        .

-        .

718,478

632,328

718,478

632,328

13.62

 

  Freedom County Sanitation Distr.

-        .

-        .

530,424

346,128

530,424

346,128

53.25

 

  Davenport Sanitation District

-        .

-        .

378,715

299,785

378,715

299,785

26.33

 

  Place de Mer CSA

-        .

-        .

64,456

44,013

64,456

44,013

46.45

 

  Sand Dollar Beach CSA

-        .

-        .

211,602

196,945

211,602

196,945

7.44

 

  Trestle Beach CSA

-        .

-        .

33,280

33,170

33,280

33,170

0.33

 

  Summit West CSA

-        .

-        .

3,541

18,924

3,541

18,924

(      81.29)

 

  Graham Hill CSA

         -        .

         -        .

         7,481

            333

           7,481

             333

2,146.55

 

 

 

 

 

 

 

 

 

 

     Total expenses

342,573,883

345,387,571

14,667,200

11,778,568

357,241,083

357,166,139

       0.02

 

 

 

 

 

 

 

 

 

 

Change in net assets

(  10,592,072)

(    8,407,589)

(     2,315,280)

652,814

(    12,907,352)

(    7,754,775)

(      66.44)

 

 

 

 

 

 

 

 

 

 

Restated net assets, beginning

73,605,387

82,773,722

41,925,439

44,270,417

115,530,826

127,044,139

(        9.06)

 

Prior period adjustment

       681,231.

(       760,746)

        -        .

(  2,997,792)

       681,231

(    3,758,538)

    118.12

 

 

 

 

 

 

 

 

 

 

Net assets, ending

$  63,694,546

$  73,605,387

$39,610,159

$41,925,439

$103,304,705

$115,530,826

(      10.58)

 

 

Analysis of Changes in Net Assets

 

The County’s net assets decreased by $12,907,352 (exclusive of prior period adjustment) during the current fiscal year.  These decreases are explained in the government and business-type activities discussion below.

 


Governmental activities.  Governmental activities decreased the County’s net assets by $10,592,072, thereby accounting for 82% of the total decrease in net assets of the County.  Key elements of this decrease are as follows:

  

 

 

 

 

 

 

 

 

 Business-type activities.  Business-type activities decreased the County’s net assets by $2,315,280.  Key elements of this decrease are as follows:

 

 

 

 

FINANCIAL ANALYSIS OF THE COUNTY’S FUNDS

 

As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

 


Governmental Funds

 

The focus of the County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources.  Such information is useful in assessing the County’s financing requirements.  In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.  Types of governmental funds reported by the County include the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Project Funds.

 

At June 30, 2003, the County’s governmental funds reported combined ending fund balances of $164,645,485, a decrease of $13,067,709 (exclusive of prior period adjustment and decrease in reserve for inventories) in comparison with the prior year.  Approximately 73% or $120,980,795 of the combined ending fund balances constitutes unreserved fund balance, which is available to meet the County’s current and future needs.  The remainder of fund balance is reserved to indicate that it is not available for new spending because it has been committed: (1) to pay debt service $10,693,693; (2) to fund fixed asset acquisition $12,712,931; (3) to liquidate contractual commitments of the period $12,988,792; (4) for a variety of other purposes $7,269,274.

 

Revenues for governmental functions totaled $331,305,398 in fiscal year 2002-2003, which represents a decrease of $6,200,675 or -1.84% from fiscal year ended 2001-2002.  Expenditures for governmental functions, totaling $346,953,017 increased by $1,155,535 or 0.33% from the fiscal year 2001-2002.  In the fiscal year 2002-2003, expenses for governmental functions exceeded revenues by $15,647,619.

 

The general fund is the primary operating fund of the County.  At June 30, 2003, unreserved fund balance of the general fund was $28,067,547 while total fund balance reached $31,693,524.  As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures.  Unreserved fund balance represents 10% of total general fund expenditures of $269,973,526, while total fund balance represents 12% of that same amount.

 

The following table presents the amount of revenues from various sources as well as increases or decreases from the prior year.

 

Revenues Classified by Source

Governmental Funds

 

 

          FY 2003          .

          FY 2002          .

Increase/(Decrease)

 

 

Revenues by Source

 

Amount

% of

Total

 

Amount

% of

Total

 

Amount

% of

Change

 

 

 

 

 

 

 

 

Taxes

$  71,260,497

21.51

$  75,425,523

22.35

($4,165,026)

(  5.52)

 

Licenses

7,776,634

2.35

7,557,113

2.23

219,521

2.90

 

Fines, forfeitures and penalties

4,312,197

1.30

4,692,668

1.39

(     380,471)

(  8.11)

 

Use of money and property

5,423,752

1.64

7,682,370

2.28

(  2,258,618)

(29.40)

 

Aid from other governmental agencies

187,134,942

56.48

188,342,183

55.80

(  1,207,241)

(  0.64)

 

Charges for current services

45,194,154

13.64

42,543,942

12.61

2,650,212

6.23

 

Other revenues

  10,203,222

    3.08

  11,262,274

    3.34

(  1,059,052)

(  9.40)

 

 

 

 

 

 

 

 

 

Totals

$331,305,398

100.00

$337,506,073

100.00

($6,200,675)

(  1.84)

 

 
The following provides an explanation of revenues by source that changed significantly from the prior year.

 

·         Taxes  – the result is from the repeal of the Utility Use Tax.

 

·         Fines, forfeitures and penalties – the result of an audit adjustment to realign distributions amongst participating agencies.

 

·         Use of money and property – a major decline in the reinvestment rates earned on the Treasurer’s Pooled Investments. Rates dropped from 6.276% to 3.279% from 2000-01 to 2001-02. A decrease of 2.997%. In 2002-2003 the rates decreased by 1.291% from the prior year or 1.988%

 

·         Charges for current services – the result of increase street improvement fees of $1 million, increase in recordation fees, jail booking fees, and a general increase in fees due to the loss of the utility tax.

 

·         Other revenues – the result of last fiscal year where the City of Santa Cruz purchased the County of Santa Cruz’s financial interest in the homeless shelter for $743,288 and the County of Santa Cruz received a fire insurance settlement of $253,499. The remainder is contributions from other funds for the mold removal project at the new health services facility on the Emeline Street campus.

 

The following table presents expenditures by function compared to prior year amounts.

 

Expenditures Classified by Function

Governmental Funds

 

 

          FY 2003          .

          FY 2002          .

Increase/(Decrease)

 

Expenditures by Function

 

Amount

% of

Total

 

Amount

% of

Total

 

Amount

% of

Change

 

 

 

 

 

 

 

 

General government

$  20,886,273

6.02

$  22,228,087

6.43

($1,341,814)

(  6.04)

 

Public protection

101,844,827

29.35

96,865,192

28.01

4,979,635

5.14

 

Health and sanitation

73,562,270

21.20

74,752,115

21.62

(  1,189,845)

(  1.59)

 

Public assistance

85,112,340

24.53

85,076,011

24.60

36,329

0.04

 

Education

3,421,184

0.99

3,067,150

0.89

354,034

11.54

 

Recreation and culture

7,916,680

2.28

7,299,961

2.11

616,719

8.45

 

Public ways and facilities

28,944,355

8.34

31,089,554

8.99

(  2,145,199)

(  6.90)

 

Capital outlay

10,681,308

3.08

11,860,959

3.43

(  1,179,651)

(  9.95)

 

Debt service-bond redemption

5,329,686

1.54

4,352,757

1.26

976,929

22.44

 

Debt service-interest and fiscal charges

    9,254,094

    2.67

    9,205,696

    2.66

     48,398

  0.53

 

 

 

 

 

 

 

 

 

Totals

$346,953,017

100.00

$345,797,482

100.00

$1,155,535

  0.33

 

 


The following provides an explanation of expenditures by function that changed significantly from the prior year.

 

·         General government – three major components included the cost associated election equipment purchases of $209,210, a change in billing methodology affecting Intra-fund Charges in the County Counsel Office decreasing the net county cost by $447,040, and decrease in facilities management costs of $566,400.

 

·         Public protection – increased expenditures associated with salaries and related operating expenditures for the Sheriff ($1,712,175), Detention ($1,368,370), and Family Support ($1,314,663).

 

·         Education – the result of a prior period adjustment providing additional property taxes which were appropriated and expended..

 

·         Recreation and culture – the result of higher labor costs associated with a new contract and capital expenditures.

 

·         Public ways and facilities – the result of completion of several major infrastructure capital projects.

 

·         Capital outlay – the decrease reflects the reduction of expenditures for the road pavement improvement program from funds appropriated in 2000-01 in the amount of $7 million. An additional $5 million was appropriated in 2001-02 and another $1 million in 2002-03 from one-time revenue sources to improve the unincorporated area roadways.

 

·         Debt Service bond redemption – the increase is due to the new money associated with the refunding of the 1987 Certificates of Participation and the 1994 Series B.

 

Other financing sources and uses are presented below to illustrate changes from the prior year:

 

Other Financing Sources (Uses)

Governmental Funds

 

 

           FY 2003            .

          FY 2002          .

Increase/(Decrease)

 

 

Amount

% of

Total

 

Amount

% of

Total

 

Amount

% of

Change

 

 

 

 

 

 

 

 

 

Proceeds from sale of capital assets

$         3,408

0.13

$         6,097

0.05

($         2,689)

(  44.10)

 

Proceeds from long-term debt

-        .

-    .

11,748,244

99.95

(  11,748,244)

(100.00)

 

Debt issue cost

(       267,107)

(     10.35)

-        .

-    .

(       267,107)

-     .

 

Premium on long-term debt

192,196

7.45

-        .

-    .

192,196

-     .

 

Proceeds from refunding bonds

8,377,728

324.73

-        .

-    .

8,377,728

-     .

 

Payments to bond refunding

  escrow agent

 

(    5,726,315)

 

(   221.96)

 

-        .

 

-    .

 

(    5,726,315)

 

-     .

 

Transfers in

42,696,585

1,654.96

52,856,283

449.67

(  10,159,698)

(  19.22)

 

Transfers out

(  42,696,585)

(1,654.96)

(  52,856,283)

(449.67)

10,159,698

  19.22

 

 

 

 

 

 

 

 

 

Totals

$  2,579,910

    100.00

$11,754,341

100.00

($40,096,660)

(  77.33)

 


The current year excess of revenues and other financing sources over expenditures and other financing uses is presented below:

 

Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds

 

 

Major Funds

 

Nonmajor Funds

 

 

 

General

Fund

 

Redev

Agency

Special

Revenue

Fund

Debt

Service

Fund

Capital

Projects

Funds

 

 

Total

 

 

 

 

 

 

 

Revenues

$269,079,277

$16,657,745

$43,177,256

$   334,193

$  2,056,927

$331,305,398

Expenditures

(  269,973,526)

(  10,003,713)

(  48,176,551)

(   8,117,919)

(  10,681,308)

(  346,953,017)

Net other financing

    Sources (uses)

 

(      4,620,058)

 

(    7,771,595)

 

   3,330,877

 

7,771,595

 

  3,869,091

 

    2,579,910

 

 

 

 

 

 

 

Net change in fund balances

(      5,514,307)

(    1,117,563)

(    1,668,418)

(        12,131)

(    4,755,290)

(   13,067,709)

 

 

 

 

 

 

 

Fund balances, beginning

37,051,712

72,414,798

43,400,570

6,884,521

17,305,474

177,057,075

Prior period adjustment

         -        .

        -        .

        -        .

      -        .

     500,000

       500,000

Restated Fund

    balances, beginning

 

  37,051,712

 

72,414,798

 

43,400,570

 

6,884,521

 

17,805,474

 

177,557,075

 

 

 

 

 

 

 

Change in fund balances

    reserved for inventories

 

       156,119

 

        -        .

 

        -        .

 

      -        .

 

        -        .

 

       156,119

 

 

 

 

 

 

 

Fund balances, ending

$ 31,693,524

$71,297,235

$41,732,152

$6,872,390

$13,050,184

$164,645,485

 

The fund balance in the County’s general fund decrease of $5,514,307 (excluding decrease in reserve for inventories) during the fiscal year was explained above under the caption Analysis of Changes in Net Assets which shows the $3,000,000 operating transfer out to fund the road management improvement capital projects, use of the Federally Qualified Health Facilities reserve of $475,000, and the loss of the Utility User Tax.

 

Proprietary Funds

 

The County’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

 

The County Disposal Sites CSA had total net assets of $29,030,506 at June 30, 2003 of which  $15,991,953 is unrestricted.  The $1,017,336 total decrease in net assets for the County Disposal Sites CSA is discussed below. 

 


The following table shows the Enterprise Funds’ actual revenues, expenses and results of operations for the current fiscal year:

 

 

Major Fund

 

 

 

County Disposal

Sites CSA

Nonmajor

Funds

 

Total

 

 

 

 

 

Operating revenues

$ 9,339,148

$2,047,341

$11,386,489

 

Operating expenses

(  10,454,601)

(  2,160,167)

(  12,614,768)

 

 

 

 

 

 

Operating loss

(    1,115,453)

(     112,826)

(    1,228,279)

 

Net non-operating revenues (expenses)

       98,117

   122,521

     220,638

 

 

  

 

 

 

Net income (loss) before contributions

(    1,017,336)

9,695

(    1,007,641)

 

Capital contributions

          -     .

       9,224

         9,224

 

 

 

 

 

 

Change in net assets

($  1,017,336)

$    18,919

($    998,417)

 

 

The net loss before contributions of the enterprise funds of $1,007,641 resulted primarily from a net loss of $1,017,336 for the County Disposal Sites CSA.  The change in net assets for the County Disposal Sites CSA decreased by $1,982,958 compared to the prior year’s net income of $965,622.  This decrease reflects reduced gate fees due to the waste diversion program, purchase of capital equipment, and increased operating expenditures.

 

The internal service funds’ activities attributable to the enterprise funds amounts to a decrease in net assets of $1,316,863.

 

GENERAL FUND BUDGETARY HIGHLIGHTS

 

Differences between the original budget and the final amended budget resulted in a $15,284,693 increase in amounts available for appropriations and a $10,571,512 increase in charges to appropriation.  This can be briefly summarized as increased appropriations for negotiated salary and benefit increases, purchase of new District Attorney Case Management software ($315,392), grants for bioterrorism and community access program for substance abuse in the Health Services Agency ($854,000), increased appropriations for adoptions ($544,444), aid for families with dependent children ($1,225,000), substance abuse ($205,653), regional employment training ($510,000), and  year end adjustment for the funding transfer from County Service Areas 38 for extended police protection ($4,852,946).

 

During the year, actual amounts available for appropriation (revenues and other financing sources) were less than budgetary estimates by $26,058,258.  Majority of this negative variance amount, $23,103,176, represents the negative variance of the transfers in from the other funds. Actual charges to appropriations (expenditures and other financing uses) were less than budgetary estimates by $19,858,399.  This positive variance is mainly due to the services and supplies positive variance of $12,711,568 and the other charges positive variance of $5,995,246.  These are due public transfer payment being lower than anticipated and grants that are re-budgeted at year-end along with corresponding revenues.

 


CAPITAL ASSETS AND DEBT ADMINISTRATION

 

Capital Assets

 

The County’s capital assets for its governmental and business-type activities as of June 30, 2003, totaled $119,674,471 (net of accumulated depreciation).  This investment in capital assets includes land, buildings and structures, and equipment.  The increase in the County’s investment in capital assets for the current period was $4,050,447 or 3.50%.

 

Major capital asset events during the current fiscal year included the following:

 

 

 

For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year.  Fund financial statements record capital asset purchases as expenditures.

 

Capital assets for the governmental and business-type activities are presented below to illustrate changes from the prior year:

 

 

 

Governmental Activities

 

Business-type Activities

 

               Total               .

Increase/

(Decrease)

 

 

2003

 

2002

 

2003

 

2002

 

2003

 

2002

% of

Change

 

 

 

 

 

 

 

 

 

Land

$  31,780,653

$  31,780,653

$  1,858,849

$  1,858,849

$  33,639,502

$  33,639,502

-    .

 

Buildings and

  structures

 

91,802,433

 

86,306,678

 

23,902,520

 

23,940,259

 

115,704,953

 

110,246,937

 

4.95

 

Equipment

  47,546,612

  44,379,874

  8,480,832

  6,629,140

  56,027,444

  51,009,014

9.84

 

 

 

 

 

 

 

 

 

 

Total

$171,129,698

$162,467,205

$34,242,201

$32,428,248

$205,371,899

$194,895,453

5.38

 

 

The County’s infrastructure assets are not recorded in the government-wide financial statements. 

 

Additional information on the County’s capital assets can be found in Note 5 on pages 64-65 of this report.

 


Long-term debt

 

The County’s long-term debt for governmental and business-type activities are presented below to illustrate changes from the prior year:

 

 

 

Governmental Activities

 

Business-type Activities

 

               Total              .

Increase/

(Decrease)

 

 

 

2003

 

2002

 

2003

 

2002

 

2003

 

2002

% of

Change

 

 

 

 

 

 

 

 

 

Refunding certificates

    of participation

 

$  28,286,230

 

$  26,550,000

 

$       -       .

 

$       -       .

 

$  28,286,230

 

$  26,550,000

 

6.54

 

Lease revenue

    refunding bonds

 

27,759,008

 

29,435,912

 

-       .

 

-       .

 

27,759,008

 

29,435,912

 

(  5.70)

 

Revenue bonds

3,870,000

4,160,000

-       .

-       .

3,870,000

4,160,000

(  6.97)

 

CA Health Facility

1,521,732

1,651,861

-       .

-       .

1,521,732

1,651,861

(  7.88)

 

Tax allocation bonds

109,050,000

111,070,000

-       .

-       .

109,050,000

111,070,000

(  1.82)

 

Local assessment bonds

75,000

110,000

-       .

-       .

75,000

110,000

(31.82)

 

Loans payable

2,027,822

1,271,788

2,041,075

2,612,455

4,068,897

3,884,243

4.75

 

Capital leases

       927,874

    1,216,748

       -       .

     85,491

       927,874

    1,302,239

(28.75)

 

 

 

 

 

 

 

 

 

 

Totals

$173,517,666

$175,466,309

$2,041,075

$2,697,946

$175,558,741

$178,164,255

(  1.46)

 

 

For the governmental activities, the County had total long-term debt outstanding of $173,517,666 as compared to $175,466,309 in the prior year (excluding compensated absence and estimated claims).  This amount was comprised of $28,286,230 of refunding certificates of participation, $27,759,008 of lease revenue refunding bonds, $3,780,000 of revenue bonds, California Health facilities financing authority debt of $1,521,732, Redevelopment Agency Tax Allocation Bonds of $109,050,000, loans payable of $2,027,822, local assessment bonds of $75,000 and Capital leases of $927,874.  During the year, retirement of debt amounted to $11,735,198.  Additions amounted to $9,786,555.

 

For the business-type activities, the County had total long-term debt outstanding of $2,041,075 as compared to $2,697,946 in the prior year (excluding postclosure liability).  This amount was all loans payable.  During the year, retirement of debt amounted to $656,871.  There were no additions to long-term debt for business-type activities.

 

The component unit, Santa Cruz County Sanitation District, had total long-term debt outstanding of $31,866,741 as compared to $33,266,743 in the prior year (excluding discount).  This amount was comprised of Revenue Bonds of $4,180,000, Limited Obligation Improvement Bonds of $1,165,000, Certificates of Participation of $6,060,000 and loans payable of $20,461,741.  During the year, retirement of debt amounted to $1,400,002.  There were no additions to long-term debt for the component unit.

 

The County’s total debt decreased by $2,605,514 (or 1%) during the current fiscal year (excluding compensated absence, estimated claims, and postclosure liability).  The key factor in this decrease resulted primarily from the scheduled principal payments of the liabilities due to the refunding of the 1994 Series A, and the 1987 Certificates of Participation Notes.

 

Additional information on the County’s long-term debt can be found in Note 9 on pages 68-78 of this report.

 


ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

 

·         The County financial position is presently in line with the budgetary parameters set by the Board of Supervisors and as amended for the 2002-2003 fiscal year. However, the General Fund’s ending undesignated year end carry-over fund balance will be less than the prior year due to fewer vacant positions and the salary and employee benefit increases approved by the Board of Supervisors for the County’s General Representation Group of Employees and Public Safety Employees.

 

·         Real property assessment at January 1, 2003 showed an average increase of 6.72% from the prior year, property tax growth is expected to continue in new fiscal year.

 

·         Sales tax revenue is expected to increase slightly due to continued consumer confidence caused by the slow economic recovery.  However, our budget estimates were held flat for 2002-03 and we anticipate achieving that estimate for the fiscal year.

 

·         The financial deficits of the State of California have shifted financial responsibilities to local agencies. The State has failed to reimburse counties for state mandated programs for the prior and current fiscal years without any promise of when or if these owed monies will ever be repaid. To track monies owed to the county by the state, accounts receivables have been established with offsetting reserves in the event that the State fails to carry out its obligations.  At yearend $2.3 million was designated.

 

·         Substantial State budget cuts are anticipated next year.  The County will address the effects of these budget cuts once the amounts are known.

 

·         During the current fiscal year, unreserved fund balance in the general fund decreased to $33,560,911.  The County has appropriated the full amount for spending in the current fiscal year budget but expects to have about $15-$20 million balance remaining at year end for the 2003-04 fiscal year.

 

·         Meanwhile, the County is developing a proposed budget for the 2004-2005 fiscal year.  Due to slow economic growth in revenues and projected increased labor costs, departments have been asked to submit budgets that reflect minor increases or no increase in the net cost to the county.

 

·         For further discussion, please see the accompanying transmittal letter.

 

REQUESTS FOR INFORMATION

 

This financial report is designed to provide a general overview of the County’s finances for all those with an interest in the government’s finances.  Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Auditor-Controller’s Office, County of Santa Cruz, 701 Ocean Street, Room 100, Santa Cruz, CA 95060.