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Home My WebLink AboutAzusa RDA Final 12-23-09 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2009 203 North Brea Blvd Suite 203 Brea, CA 92821 Lance Soll & Lunghard, LLP 41185 Golden Gate Circle Suite 103 Murrieta, CA 92562 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2009 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA JUNE 30, 2009 TABLE OF CONTENTS Page Number INDEPENDENT AUDITORS' REPORT Financial Audit ................................................................................................................................... 1 Compliance Audit ................................................................................................................................3 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Assets ..................................................................................................................5 Statement of Activities .....................................................................................................................6 Fund Financial Statements: Balance Sheets - Governmental Funds ..........................................................................................7 Reconciliation of the Balance Sheet of Government Funds to the Statement of Net Assets ........................................................................................................9 Statement of Revenues, Expenditures and Changes in Fund Balances ......................................................................................................10 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .....................................................................................................................12 Budgetary Comparison Statement – Combined Low and Moderate Housing Fund ................................................................................................................. 13 Notes to Financial Statements ........................................................................................................... 14 COMBINING AND INDIVIDUAL FUND SCHEDULES Combining Project Area Balance Sheet - All Governmental Funds .............................................. 32 Combining Project Area Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Funds ................................................................. 34 Computation of Low and Moderate Income Housing Funds Excess/Surplus ............................................................................................................................. 36 INDEPENDENT AUDITORS' REPORT To the Honorable Chair and Members of the Governing Board Redevelopment Agency of the City of Azusa, California We have audited the accompanying financial statements of the governmental activities and each major fund of the Redevelopment Agency of the City of Azusa (Agency), a component unit of the City of Azusa, California, as of and for the year ended June 30, 2009, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Redevelopment Agency of the City of Azusa's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Redevelopment Agency of the City of Azusa as of June 30, 2009, and the respective changes in financial position thereof and the respective budgetary comparison for the combined Low and Moderate Housing Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards issued by the Comptroller General of the United States, we have also issued our report dated November 23, 2009, on our consideration of the Redevelopment Agency of the City of Azusa's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Agency has not presented a management’s discussion and analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, the basic financial statements. Lance, Soll & Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL: 714.672.0022 Fax: 714.672.0331 www.lslcpas.com 41185 Golden Gate Circle Suite 103 Murrieta, CA 92562 TEL: 951.304.2728 Fax: 951.304.3940 Brandon W. Burrows, C.P.A Donald L. Parker, C.P.A Michael K. Chu, C.P.A David E. Hale, C.P.A, C.F.P. A Professional Corporation Donald G. Slater, C.P.A Richard K. Kikuchi, C.P.A Susan F. Matz, C.P.A. To the Honorable Chair and Members of the Governing Board Redevelopment Agency of the City of Azusa, California Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The combining project area statements and computation of low and moderate income housing funds excess/surplus are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. November 23, 2009 2 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Chair and Members of the Governing Board Redevelopment Agency of the City of Azusa, California We have audited the financial statements of the governmental activities and each major fund of the Redevelopment Agency of the City of Azusa as of and for the year ended June 30, 2009, which collectively comprise the Redevelopment Agency of the City of Azusa’s basic financial statements and have issued our report thereon dated November 23, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Redevelopment Agency of the City of Azusa’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Agency’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Agency’s financial statements that is more than inconsequential will not be prevented or detected by the Agency’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Agency’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Lance, Soll & Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL: 714.672.0022 Fax: 714.672.0331 www.lslcpas.com 41185 Golden Gate Circle Suite 103 Murrieta, CA 92562 TEL: 951.304.2728 Fax: 951.304.3940 Brandon W. Burrows, C.P.A Donald L. Parker, C.P.A Michael K. Chu, C.P.A David E. Hale, C.P.A, C.F.P. A Professional Corporation Donald G. Slater, C.P.A Richard K. Kikuchi, C.P.A Susan F. Matz, C.P.A. To the Honorable Chair and Members of the Governing Board Redevelopment Agency of the City of Azusa, California Compliance and Other Matters As part of obtaining reasonable assurance about whether the financial statements of the Agency are free of material misstatements, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Such provisions included those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies, issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. 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. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards issued by the Comptroller General of the United States and under the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller. This report is intended for the information of the Audit committee, management and the State Controller. However, this report is a matter of public record and its distribution is not limited. November 23, 2009 4 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA STATEMENT OF NET ASSETS JUNE 30, 2009 Governmental Activities Assets: Cash and investments 4,183,114$ Receivables: Tax increment 452,097$ Accounts 137,012 Interest receivable 42,241 Loans 2,288,950 Total Receivables 2,920,300 Due from other governments 640,971 Land held for resale (net)43,079,722 Deferred charges 1,875,395 Prepaid costs 495 Restricted assets: Cash and investments with trustees 12,690,620 Capital assets (Net of Depreciation): Land and improvements 1,383,685 Total Capital Assets 1,383,685 Total Assets 66,774,302 Liabilities: Accounts payable and accrued expenses 2,187,689 Due to other governments 20,265,888 Deposits from others 115,676 Other current liabilities 38,945 Long-term liabilities: Due within one year 1,325,000 Due in more than one year 95,661,137 Total Long-Term Liabilities 96,986,137 Total Liabilities 119,594,335 Net Assets: Invested in capital assets, net of related debt 1,383,685 Restricted for: Community development 8,159,132 Debt service 4,573,675 Unrestricted (66,936,525) Total Net Assets (52,820,033)$ See Notes to Financial Statements 5 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Net (Expense) Revenues and Changes in Operating Capital Net Assets Charges for Contributions Contributions Governmental Expenses Services and Grants and Grants Activities Functions/Programs Governmental Activities: General government 2,127,314$ -$ -$ -$ (2,127,314)$ Community development 5,809,760 - - - (5,809,760) Interest on long-term debt 5,952,271 - - - (5,952,271) Total Governmental Activities 13,889,345$ -$ -$ -$ (13,889,345) General Revenues: Taxes (net of pass-through payments)5,206,551 Intergovernmental 1,180,452 Use of money and property 1,376,079 Miscellaneous revenue 43,671 Total General Revenues 7,806,753 Change in Net Assets (6,082,592) Net Assets at Beginning of Year (46,737,441) Net Assets at End of Year (52,820,033)$ Program Revenues See Notes to Financial Statements 6 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2009 Special Capital Debt Debt Revenue Projects Service Service Low and Moderate Tax Housing Project Increment Bonds Assets: Cash and investments 1,169,646$ 1,474,355$ 733,603$ -$ Cash and investments with trustee 4,634,615 3,992,493 - 4,063,512 Receivables: Tax increment - - 452,092 - Accounts 2 6,010 131,000 - Interest receivable 6,222 6,100 5,153 24,334 Loans 1,146,450 1,142,500 - - Due from Debt Service funds 90,345 - - - Due from Low and Moderate Housing Funds - - - - Due from City - - 640,971 - Land held for resale 7,053,882 36,902,070 - - Allowance for decline in value - (876,230) - - Prepaid costs - - - - Total Assets 14,101,162 42,647,298$ 1,962,819$ 4,087,846$ Liabilities and Fund Balances: Liabilities: Accounts payable 687,658 192,227$ 156$ -$ Interest payable - - - - Deposits from others - 115,676 - - Due to Debt Service funds 46 - - - Due to Low and Moderate Housing Funds - - 90,345 - Due to City 132,596 18,723,145 614,950 - Due to other governments - - 148,499 - Deferred revenue 1,146,450 737,528 641,342 - Salaries and benefits payable - - - - Unearned revenue - 5,460 - - Total Liabilities 1,966,750 19,774,036 1,495,292 - Fund Balances: Reserved: Land held for resale 7,053,882 36,025,840 - - Long-term loans receivable - 404,972 - - Prepaid costs - - - - Unreserved: Designated: Debt service - - 467,527 4,087,846 Continuing projects 5,080,530 - - - Undesignated - (13,557,550) - - Total Fund Balances 12,134,412 22,873,262 467,527 4,087,846 Total Liabilities and Fund Balances 14,101,162 42,647,298$ 1,962,819$ 4,087,846$ Merged Project Area Merged Project Area Merged Project AreaCombined See Notes to Financial Statements 7 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2009 Assets: Cash and investments Cash and investments with trustee Receivables: Tax increment Accounts Interest receivable Loans Due from Debt Service funds Due from Low and Moderate Housing Funds Due from City Land held for resale Allowance for decline in value Prepaid costs Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Interest payable Deposits from others Due to Debt Service funds Due to Low and Moderate Housing Funds Due to City Due to other governments Deferred revenue Salaries and benefits payable Unearned revenue Total Liabilities Fund Balances: Reserved: Land held for resale Long-term loans receivable Prepaid costs Unreserved: Designated: Debt service Continuing projects Undesignated Total Fund Balances Total Liabilities and Fund Balances Other Total Governmental Governmental Funds Funds 805,510$ 4,183,114$ - 12,690,620 5 452,097 - 137,012 432 42,241 - 2,288,950 - 90,345 46 46 - 640,971 - 43,955,952 - (876,230) 495 495 806,488$ 63,605,613$ 16,136$ 896,177$ 12,133 12,133 - 115,676 - 46 - 90,345 639,119 20,109,810 7,579 156,078 - 2,525,320 33,485 33,485 - 5,460 708,452 23,944,530 - 43,079,722 - 404,972 495 495 18,302 4,573,675 79,307 5,159,837 (68) (13,557,618) 98,036 39,661,083 806,488$ 63,605,613$ See Notes to Financial Statements 8 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2009 Fund balances of governmental funds 39,661,083$ Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.1,383,685 Deferred revenue is present in governmental fund financial statements to indicate that receivables are not available currently; however, in the Statement of Net Assets these deferrals are eliminated.2,525,320 Bond issuance costs is an expenditure in the governmental funds, but it is deferred charges in the statement of net assets: Unamortized debt issuance costs - amortized over life of new bonds 1,875,395 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. Bonds payable (57,056,201) Developer loans (8,974,171) Loans from City (31,756,129) Other debt (76,359) Unamortized net original issue discounts and (premiums)876,723 Accrued interest payable for the current portion of interest due on Tax Allocation Bonds has not been reported in the governmental funds.(1,279,379) Net assets of governmental activities (52,820,033)$ See Notes to Financial Statements 9 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Special Capital Debt Debt Revenue Projects Service Service Combined Low and Moderate Tax Housing Project Increment Bonds Revenues: Taxes and assessments -$ -$ 8,684,891$ -$ Use of money and property 175,882 267,084 20,401 53,345 Miscellaneous revenue 250 159,449 - - Total Revenues 176,132 426,533 8,705,292 53,345 Expenditures: Current: General government 252,013 696,221 - - Community development 987,760 2,812,100 - - Capital outlay - 751,000 1,258,900 - Debt service 238,455 510,100 2,752,241 3,525,726 Other expenditures - 38,922 - - Total Expenditures 1,478,228 4,808,343 4,011,141 3,525,726 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,302,096) (4,381,810) 4,694,151 (3,472,381) Other Financing Sources (Uses): Transfers in 11,346,870 5,690,398 473,858 2,869,670 Transfers out (724,720) (473,858) (4,981,564) (15,430,000) Long-term debt issued - - 1,988,087 18,295,000 Pass-through agreement payments - - (2,635,097) - Bond discount - - - (530,483) Total Other Financing Sources (Uses):10,622,150 5,216,540 (5,154,716) 5,204,187 Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses 9,320,054 834,730 (460,565) 1,731,806 Fund Balances: Beginning of Year 2,814,358 22,038,532 928,092 2,356,040 End of Year 12,134,412$ 22,873,262$ 467,527$ 4,087,846$ Merged Project Area Merged Project Area Merged Project Area See Notes to Financial Statements 10 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Revenues: Taxes and assessments Use of money and property Miscellaneous revenue Total Revenues Expenditures: Current: General government Community development Capital outlay Debt service Other expenditures Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Long-term debt issued Pass-through agreement payments Bond discount Total Other Financing Sources (Uses): Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses Fund Balances: Beginning of Year End of Year Other Total Governmental Governmental Funds Funds 153,921$ 8,838,812$ 6,969 523,681 28,614 188,313 189,504 9,550,806 1,104,207 2,052,441 - 3,799,860 909 2,010,809 413,069 7,439,591 105,720 144,642 1,623,905 15,447,343 (1,434,401) (5,896,537) 1,260,384 21,641,180 (31,038) (21,641,180) 318,590 20,601,677 (92,703) (2,727,800) - (530,483) 1,455,233 17,343,394 20,832 11,446,857 77,204 28,214,226 98,036$ 39,661,083$ See Notes to Financial Statements 11 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Net change in fund balances - total governmental funds 11,446,857$ Amounts reported for governmental activities in the statement of activities differ because: Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets.1,612,969 Bond issuance costs is an expenditure in the governmental funds, but it is deferred charges in the statement of net assets: Debt issuance costs on bonds issued 555,678 Amortization for current fiscal year (80,162) Unamortized premium or discounts on bonds issued are revenue or expenditures in the governmental funds, but these are spread to future periods over the life of the new bonds: Current year original issuance premium on bonds issued 530,483 Amortization for current fiscal year (32,821) Collections on receivables and loan transactions offset by deferred revenue are reported as revenue and expenditures in governmental funds; however, they do not provide revenue or expenses in the statement of activities. 852,398 Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of those assets in capitalized and allocated over their estimated useful lives through depreciation expense: Depreciation (58,399) Proceeds of debt is revenue in the governmental funds, but these are additions to the statement of net assets.(20,696,746) Revenues reported in the governmental funds which were previously deferred and meet the revenue recognition criteria currently and, therefore, are not reported as revenues in the Statement of Activity.275,991 Expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Current accrual of interest due on bonds (1,279,379) Prior year accrual of interest due on bonds 790,539 Change in net assets of governmental activities (6,082,592)$ See Notes to Financial Statements 12 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA BUDGETARY COMPARISON STATEMENT COMBINED LOW AND MODERATE HOUSING FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 2,814,358$ 2,814,358$ 2,814,358$ -$ Resources (Inflows): Use of money and property 70,000 70,000 175,882 105,882 Other 25,000 25,000 250 (24,750) Transfers from other funds 1,516,370 11,276,370 11,346,870 70,500 Amounts Available for Appropriations 4,425,728 14,185,728 14,337,360 151,632 Charges to Appropriation (Outflow): General government 130,500 361,000 252,013 108,987 Community development 874,000 10,599,000 987,760 9,611,240 Debt service 149,820 149,820 238,455 (88,635) Transfers to other funds 584,840 983,139 724,720 258,419 Total Charges to Appropriations 1,739,160 12,092,959 2,202,948 9,890,011 Budgetary Fund Balance, June 30 2,686,568$ 2,092,769$ 12,134,412$ 10,041,643$ See Notes to Financial Statements 13 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 I. SIGNIFICANT ACCOUNTING POLICIES Note 1: Organization and Summary of Significant Accounting Policies a. Description of the Reporting Entity The Redevelopment Agency of the City of Azusa is a component unit of a reporting entity that consists of the following primary and component units: Reporting Entity: Primary Government: City of Azusa Component Units: Redevelopment Agency of the City of Azusa Azusa Public Financing Authority Azusa Industrial Development Authority The attached basic financial statements contain information relative only to the Redevelopment Agency of the City of Azusa as one component unit that is an integral part of the total reporting entity. They do not contain financial data relating to the other component units. The Agency was created by Ordinance No. 1055 of the Azusa City Council, adopted on May 7, 1973. The Agency was established pursuant to the Community Redevelopment Law of California as codified in Part I of Division 24 of the State of California Health and Safety Code. The principal objectives of the Agency are to upgrade residential neighborhoods, improve the commercial environment, generate added employment opportunities and strengthen the City of Azusa's economic base. The principal project of the Agency is known as the Central Business District Redevelopment Project, which was approved by Ordinance No. 2062 on September 18, 1978. This project has undergone five amendments which were approved by Ordinance No. 2077 on July 2, 1979, by Ordinance No. 2113 on July 20, 1981, by Ordinance No. 2197 on November 28, 1983, by Ordinance No. 2249 on December 17, 1984 and by Ordinance No. 2250 on December 17, 1984. A second project of the Agency, known as the West End Redevelopment Project, was approved by Ordinance No. 2196 on November 28, 1983. On November 7, 1988, Ordinance No. 2382 was passed which approved the merger of the Central Business District Redevelopment Plan and West End Redevelopment Plan. On July 17, 1989, the City Council passed Ordinance No. 2402, which approved the redevelopment plan for the Ranch Center Redevelopment Project. On October 6, 2003, Ordinance No. 03-06 was passed to add new territory and amend and restate various limits for the Central Business District and the West End Redevelopment Projects. On June 26, 2008, Ordinance No. 08-09 passed to add new territory to the Merged Central Business District and West End Project, and increase the combined tax increment cap to $300 million. 14 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 1: Organization and Summary of Significant Accounting Policies (Continued) b. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and fiduciary funds even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. c. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Agency considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. 15 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 1: Organization and Summary of Significant Accounting Policies (Continued) The Agency reports the following major governmental funds: Combined Low and Moderate Housing Fund Merged Project Area: - Project fund - Tax increment fund - Bonds fund Governmental Fund Types Special Revenue Funds account for that portion of tax increment and other revenues that have been legally restricted for increasing or improving housing for low and moderate income households. From April 1, 1985, through December 31, 1988, the Agency established a finding declaring that a substantial effort was being made to meet low and moderate income housing needs of the community by means of other state, local and federal funding sources, including the Community Development Block Grant program of the City of Azusa. Accordingly, all tax increment revenues were allocated to the debt service funds, as prescribed by Section 33334.2 of the Health and Safety Code. After December 31, 1988, the Agency allocated a minimum of 20% of the tax increment revenues received to the special revenue funds. From July 1, 1991, to June 30, 1993, the Agency has established a finding that a substantial effort was being made to meet its existing and projected housing needs of the Ranch Center Project Area by means of funding by the Community Development Block Grant Program. Tax increment revenues have been appropriately allocated to the Ranch Center debt service fund. Debt Service Funds account for the accumulation of resources for the payment of interest and principal on general long-term debt. Capital Projects Funds account for financial resources segregated for the development and redevelopment of the project areas, including acquisition of major capital facilities, other costs of benefit to the project areas and administrative expenses incurred in sustaining the Agency. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. d. Assets, Liabilities and Net Assets or Equity 1. Cash and Investments The Agency’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments for the Agency are reported at fair value. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. 16 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 1: Organization and Summary of Significant Accounting Policies (Continued) 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectibles. Property tax revenue is recognized in the fiscal year for which the taxes have been levied providing they become available. Available means then due or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter (not to exceed 60 days) to be used to pay liabilities of the current period. The County of Los Angeles collects property taxes for the Agency. Tax liens attach annually as of 12:01 A.M. on the first day in January preceding the fiscal year for which the taxes are levied. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one-half of the taxes on real property are due November 1; the second installment is due February 1. All taxes are delinquent, if unpaid, on December 10 and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent on August 31. 3. Inventories, Prepaid Items and Land Held for Resale All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Land purchased for resale is capitalized as inventory at acquisition costs or net realizable value if lower. 4. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $2,500 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. 17 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 1: Organization and Summary of Significant Accounting Policies (Continued) In accordance with GASB Statement No. 34, the Agency is required to report general infrastructure assets. The Agency does not have any infrastructure assets. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Property, plant and equipment of the primary government, as well as the component units, are depreciated using the straight-line method over the following estimated useful lives: Assets Years Structures and improvements 20 - 99 Furniture and equipment 5 - 25 5. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the governmental activities statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 6. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 18 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) II. STEWARDSHIP Note 2: Stewardship, Compliance and Accountability a. Budgetary Data General Budget Policies The Governing Board approves each year's budget submitted by the Executive Director prior to the beginning of the new fiscal year. The Board conducts public meetings prior to its adoption. The budget is prepared by fund, function and activity, and includes information on the past year, current year estimates and requested appropriations for the next fiscal year. Supplemental appropriations when required during the period are also approved by the Board. Intradepartmental budget changes are approved by the Executive Director. In most cases, expenditures may not exceed appropriations at the departmental level. At fiscal year-end all operating budget appropriations lapse. During the year, several supplementary appropriations were necessary. Encumbrances Encumbrances are estimations of costs related to unperformed contracts for goods and services. These commitments are recorded for budgetary control purposes in the Special Revenue, Capital Projects and Debt Service funds. Encumbrances outstanding at year-end are reported as a reservation of fund balance. They represent the estimated amount of the expenditure ultimately to result if unperformed contracts in process at year-end are completed. They do not constitute expenditures or estimated liabilities. As of June 30, 2009, there were no encumbrances reported. Budget Basis of Accounting Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). III. DETAILED NOTES ON ALL FUNDS Note 3: Cash and Investments As of June 30, 2009, cash and investments were reported in the accompanying financial statements as follows: Cash and investments 4,183,114$ Cash and investments with trustees 12,690,620 16,873,734$ The Agency follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under provisions of bond indentures. Interest income earned on pooled cash and investments is allocated to the various funds based on cash and investment balances. Interest Income from cash and investments with fiscal agents is credited directly to the related fund. 19 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 3: Cash and Investments (Continued) Deposits At June 30, 2009, the carrying amount of the Agency’s deposits was $229,437, and was equal to the bank balance. The California Government Code requires California banks and savings and loan associations to secure a government entity’s deposits by pledging government securities with a value of 110% of its deposits. California law also allows financial institutions to secure an Agency’s deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency. Investments Under provision of the Agency’s investment policy, and in accordance with the California Government Code, the following investments are authorized: U.S. Treasury Obligations (bills, notes and bonds) U.S. Government Agency Securities and Instrumentalities of Government Sponsored Corporations Mutual Funds Commercial Paper Repurchase Agreements Certificates of Deposit Negotiable Certificates of Deposit Passbook Savings Accounts Medium Term Corporate Notes Bank Money Market Accounts Local Agency Investment Fund (State Pool) Investments Authorized by Debt Agreements The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the Agency’s investment policy. Investments in State Investment Pool The Agency 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. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer’s Office audits the fund annually. The fair value of the position in the investment pool is the same as the value of the pool shares. 20 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 3: Cash and Investments (Continued) GASB Statement No. 31 The Agency adopted GASB Statement No. 31, Accounting and Financial Reporting for certain investments and for External Investment Pools, as of July 1, 1997. GASB Statement No. 31 establishes fair value standards for investments in participating interest earning investment contracts, external investment pools, equity securities, option contracts, stock warrants and stock rights that have readily determinable fair values. Accordingly, the Agency reports its investments at fair value in the balance sheet. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement. Credit Risk The Agency's investment policy limits investments in medium term notes (MTNs) to those rated A or higher by Standard and Poor's (S&P) or by Moody's. As of June 30, 2009, the Agency's investment in medium term notes consisted of various investments rated A/AAA by Moody’s and by S&P. All securities were investment grade and were legal under State and Agency law. Investments in U.S. government securities are not considered to have credit risk; therefore, their credit quality is not disclosed. As of June 30, 2009, the City's investments in external investment pools and money market mutual funds are unrated. Custodial Credit Risk The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. As of June 30, 2009, none of the Agency’s deposits or investments were exposed to custodial credit risk. Interest Rate Risk The Agency's investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Agency's investment policy states that no investment may have a maturity of more than five years without receiving prior Agency Board approval. The only exception to these maturity limits shall be the investment of the gross proceeds of tax-exempt bonds, and reserve funds associated with bond issues. The Agency has elected to use the segmented time distribution method of disclosure for its interest rate risk. 21 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 3: Cash and Investments (Continued) As of June 30, 2009, the Agency had the following investments and original maturities: Less than 1 to 3 More than Fair 6 months years 5 years Value California Local Agency Investment Fund 3,953,677$ -$ -$ 3,953,677$ Cash with Fiscal Agents Money Market Mutual Funds 10,911,896 - - 10,911,896 Investment Agreements - - 1,778,724 1,778,724 14,865,573$ -$ 1,778,724$ 16,644,297$ Investment Maturities (in Years) Note 4: Capital Assets A summary of changes in capital assets follows: Balance at Balance at July 1, 2008 Additions Deletions Transfers June 30, 2009 Capital Assets not being depreciated: Land 410,420$ -$ -$ $410,420$ Total Capital Assets not being depeciated 410,420 - - - 410,420 Capital Assets being depreciated: Structures and Improvements 1,427,802 - - - 1,427,802 Total Capital Assets being depeciated 1,427,802 - - - 1,427,802 Less accumulated depreciation: Structures and Improvements 396,138 58,399 - - 454,537 Total Accumulated Depreciation 396,138 58,399 - - 454,537 Total Capital Assets, net of accumulated depreciation 1,442,084$ (58,399)$ -$ -$ 1,383,685$ Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government 58,399$ Note 5: Long-Term Debt a. A description of long-term debt outstanding (excluding defeased debt) of the Agency as of June 30, 2009 follows: Tax Allocation Bonds Tax allocation bonds payable consisted of the following at June 30, 2009: 22 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) Balance Outstanding $11,580,000 2003 Series A Merged Project Area Tax Allocation Refunding Bonds, dated December 1, 2003, were issued to refund the 1994 Series A Merged Project Area Tax Allocation Bonds. Principal payments ranging from $425,000 to $1,235,000 are due annually on August 1 beginning in the year 2004 through the year 2023. Interest rates ranging from 3.00% to 4.60% per annum are payable on February 1 and August 1. Both principal and interest payments are secured by tax increment revenues. 9,265,000$ $9,022,800 Series A Merged Project Area Tax Allocation Bonds, dated February 17, 2005, were issued to finance redevelopment projects. The issue consists of $7,765,000 Current Interest Bonds which are subject to annual sinking fund installment payments ranging from $715,000 to $1,170,000 beginning August 1, 2027 through August 1, 2034, bearing interest at 4.50% per annum: and Capital Appreciation Bonds of $1,257,800 due beginning August 1, 2024 through August 1, 2027, bearing interest rates ranging from 5.16% to 5.33% per annum. Debt service payments on the bonds are secured by tax increment revenues.9,346,201 $15,780,000 Series A Merged Project Area Tax Allocation Bonds, dated July 31, 2007, were issued to finance redevelopment projects. Current Interest Bonds are subject to annual sinking fund installment payments ranging from $340,000 to $365,000 beginning August 1, 2008 through August 1, 2009, bearing interest rates from 5.27% to 5.30% per annum. Term Bonds are due beginning August 1, 2010 through August 1, 2035, with installment payments ranging from $385,000 to $1,625,000, bearing interest rates ranging from 5.77% to 6.15% per annum. Debt service payments on the bonds are secured by tax increment revenues.15,440,000 $4,790,000 Series A Merged Project Area Tax Allocation Bonds, dated July 31, 2007, were issued to refund the 1997 tax allocation bonds. Current Interest Bonds are subject to annual sinking fund installment payments ranging from $80,000 to $140,000 beginning August 1, 2008 through August 1, 2021, bearing interest rates ranging from 4.00% to 5.00% per annum. Term Bonds are due beginning August 1, 2022 through August 1, 2036, with installment payments ranging from $150,000 to $305,000, bearing interest rates ranging from 5.25% to 5.30% per annum. Debt service payments on the bonds are secured by tax increment revenues.4,710,000 $6,715,000 Series A Merged Project Area Tax Allocation Bonds, dated December 18, 2008, were issued to finance redevelopment projects. Current Interest Bonds are subject to annual sinking fund installment payments ranging from $70,000 to $140,000 beginning August 1, 2009 through August 1, 2018 with interest rates ranging from 4.5% through 6.75%. Term Bonds are due August 1, 2023, August 1, 2028, and August 1, 2034 for $1,850,000, $1,815,000, and 2,045,000 with interest rates of 7.5% and 8.2%. Debt service payments on the bonds are secured by tax increment revenues.6,715,000 23 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) Balance Outstanding $11,580,000 Series B Merged Project Area Housing Tax Allocation Bonds, dated November 25, 2008, were issued to finance redevelopment projects. Current Interest Bonds are subject to annual sinking fund installment payments ranging from $125,000 to $355,000 beginning August 1, 2009 through August 1, 2020 with interest rates ranging from 3.5% through 6.6%. Term Bonds are due beginning August 1, 2024 and August 1, 2038, for $1,075,000 and $8,420,000, respectively, and carry interest rates of 6.75% and 7.0%. Debt service payments on the bonds are secured by tax increment revenues.11,580,000 Total bonds payable 57,056,201$ The Azusa Redevelopment Agency has pledged, as security for bonds it has issued, a portion of the tax increment revenue that it receives. The Agency has committed to appropriate each year, from these resources, amounts sufficient to cover the principal and interest requirements on the debt. The remaining principal and interest on such debt is reflected in the debt service schedules which follow and amounted to $110,945,144. For the current year, the total tax increment revenue recognized net of pass-through payments by the Agency was $5,206,551 and debt service on bond outstanding was $2,970,048. Obligation Under Developer Agreement On October 4, 1988, the Redevelopment Agency of the City of Azusa entered into a developer agreement with the Price Company. Since fiscal year 1988-1989, the Price Company advanced to the Agency $4,558,300 for the purpose of redeveloping the Price Company site located in the West End project areas. Interest on the advance accrues at a rate of 9.5% per annum. Accrued unpaid interest is compounded annually. Sales tax revenues received from the site have been pledged as security for the repayment of principal and interest. Annual repayments to Price Company are due on the last business day of December, March, June and September, beginning December 31, 1989, based upon the following allocation of sales tax revenues: First $493,000 to Agency Next $490,000 to Price Company Next $178,000 to Agency Next $178,000 to Price Company Then balance divided 50% to the Agency and 50% to Price Company Payments will continue for a period of 25 years through October 31, 2015, or until all accrued interest and principal are paid in full, whichever occurs first. In the event that the entire interest and principal has not been repaid as of October 31, 2015, the unpaid balance will be forgiven. The outstanding principal and matured unpaid interest balance at June 30, 2009, is $8,974,171. Loans from City Loans from the City of Azusa bear interest at various rates and are due in varying installments. At June 30, 2009, these obligations consisted of the following: 24 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) Merged Project Area – CBD On October 3, 1994, the City of Azusa authorized an advance to the Agency of $2,000,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from pledged tax increment revenues. Interest accrues at 5.25% per annum. Principal payments beginning October 1, 2014 and interest are due annually in varying installments through October 1, 2033. The balance outstanding at June 30, 2009, is $4,462,262. On April 21, 1997, the City of Azusa authorized an advance to the Agency of $2,462,355 for the purpose of carrying out the Redevelopment Plan. As of June 30, 2002, the full amount had been advanced. The note is payable from pledged tax increment revenues and land sales proceeds. Interest accrues at 6% per annum. The terms of the note, as amended by the Board on August 4, 1997, commence on the date that the loan proceeds were received by the Agency. The first payment is due in 2014, and annually thereafter until 2033. The balance outstanding at June 30, 2009, is $1,325,225. On December 1, 2003, the City of Azusa authorized an advance to the Agency of $4,825,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from pledged tax increment revenues. Interest rates range from 2% - 4.4% per annum, payable on February 1 and August 1. Principal payments are due annually on August 1 beginning in 2004 through 2020. The balance outstanding at June 30, 2009, is $3,695,000. On November 7, 2005, in conjunction with the Talley Building development, the City of Azusa authorized an advance to the Agency of $150,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from accumulated tax increment funds in excess of those pledged for payment of Agency bonded indebtedness, and/or may be paid from any other funds available to the Agency. Interest accrues at 5% per annum. Payments on the Note will be deferred for the first three years after receipt of proceeds, and then annually until paid in full, over a term of 20 years. The balance outstanding at June 30, 2009, is $164,050. On February 27, 2006, in conjunction with the purchase of real property by the Agency from the Azusa Valley Water Company, the City of Azusa authorized an advance to the Agency of $94,950 for the purpose of carrying out the Redevelopment Plan. $57,450 was payable upon conveyance of property and the balance of $37,500 was evidenced by a Promissory Note. Interest accrues at 5% per annum. Principal and interest payments are due as follows: five (5) successive, annual installments of $8,662 each, beginning February 27, 2006. The fifth and final payment shall be increased or decreased, as necessary, to equal the entire then-outstanding principal balance, accrued interest and all other sums due and payable under this Note. The balance outstanding at June 30, 2009, is $16,378. Merged Project Area – West End On May 15, 1989, in conjunction with the Price Company Developer Agreement, the Agency entered into an agreement with the City of Azusa to transfer to the City sales tax revenues received by the Agency that otherwise would have been received by the City. Payment under this agreement is to be made by July 1 for sales tax revenues received in the preceding fiscal year. Unpaid amounts will accumulate as debt to the Agency. Interest will accrue at a rate of 7% per annum from the date payment is due to date of repayment by Agency to the City. The balance outstanding at June 30, 2009, is $14,893,493. 25 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) On July 2, 2007, the Agency approved the purchase and sale agreement between the Agency and the City of Azusa for the property located at 850 W 10th Street and reimbursement by the RDA to the City of Azusa and Light Fund for acquisition cost of $1,615,878. The purchase price is reflective of acquisition price of $828,000 plus 5% simple interest over a 30 year term. The first payment is due at year 15 with annual payments of $53,863 amortized over a period of 30 years culminating in a balloon payment at the close of the 30 year note of $861,801. The balance outstanding at June 30, 2009, is $1,615,878. Ranch Center Project Area On June 30, 1989, the City of Azusa advanced to the Agency $500,000 for the purpose of carrying out the Redevelopment Plan. The balance in the accompanying financial statements includes interest accrued through the balance sheet date. The note is payable from pledged tax increment revenues. Interest accrues at 8% per annum and principal and interest is due annually in varying installments through June 30, 2014. The balance outstanding at June 30, 2009, is $1,641,420. On August 7, 1989, in conjunction with the Westland Reserves, Inc. Developer Agreement, the Agency entered into an agreement with the City of Azusa to transfer to the City sales tax revenues received by the Agency that otherwise would have been received by the City. Payment under this agreement is to be made by July 1 for sales tax revenues received in the preceding fiscal year. Unpaid amounts will accumulate as debt to the Agency. Interest will accrue at a rate of 7% per annum from the date payment is due to date of repayment by Agency to the City. The balance outstanding at June 30, 2009, is $198,169. On July 1, 1991, the City of Azusa authorized an advance to the Agency of $227,030 for the purpose of carrying out the Redevelopment Plan. Additional amounts were authorized for a total advance of $1,550,277. The balance in the accompanying financial statements includes accrued interest through the balance sheet date. The note is payable from pledged tax increment revenues. Interest accrues at a rate of 8% per annum. Principal and interest are due in one installment on June 30, 2039. The balance outstanding at June 30, 2009, is $1,755,277. On July 18, 1994, the City of Azusa authorized an advance to the Agency of $485,000 for the purpose of carrying out the Redevelopment Plan. The balance in the accompanying financial statements includes accrued interest through the balance sheet date. The note is payable from pledged tax increment revenues. Interest accrues at a rate of 6% per annum. Principal and interest are due in annual installments through June 30, 2024. The balance outstanding at June 30, 2009, is $1,152,777. Combined Low and Moderate Income Housing Fund On July 1, 1991, the City of Azusa authorized an advance to the Agency, which was funded on July 10, 1991, of $2,300,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from pledged tax increment revenues and 20% set-aside low-to-moderate income housing fund revenues. Originally, interest accrued at 9% per annum and principal and interest were due in annual installments through June 30, 2002. The terms of this advance were revised June 5, 1995, beginning with payment due June 30, 1995. Interest accrues at 6% per annum. Principal and interest are due in annual installments through June 30, 2016. The balance outstanding at June 30, 2009, is $836,200. 26 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) Total Loans from City at June 30, 2009, amount to $31,756,129. Other Long-Term Debt Payable Employee Leave Benefits 76,359$ b. The following is a summary of the changes in long-term debt of the Agency for the fiscal year ended June 30, 2009: Balance Balance Due Within July 1, 2008 Additions Repayments June 30, 2009 One Year Merged Project Area City Loans - Principal 23,148,062$ -$ 565,325$ 22,582,737$ -$ City Loans - Unpaid Interest 1,971,385 1,618,164 - 3,589,549 - Developer Loans - Principal 4,558,300 - - 4,558,300 - Developer Loans - Unpaid Interest 4,045,946 369,925 - 4,415,871 - Bonds - 2003 Tax Allocation Refunding 9,710,000 - 445,000 9,265,000 450,000 Bonds - 2005 Tax Allocation, Series A 9,266,698 79,503 *- 9,346,201 - Bonds - 2007 Tax Allocation, Series A 15,780,000 - 340,000 15,440,000 365,000 Bonds - 2007 Tax Allocation, Series B 4,790,000 - 80,000 4,710,000 85,000 Bonds - 2008 Tax Allocation, Series A - 6,715,000 - 6,715,000 70,000 Bonds - 2008 Tax Allocation, Series B - 11,580,000 - 11,580,000 355,000 Total 73,270,391 20,362,592 1,430,325 92,202,658 1,325,000 Ranch Center City Loans - Principal 3,380,175 - - 3,380,175 - City Loans - Unpaid Interest 1,048,879 318,589 - 1,367,468 - Total 4,429,054 318,589 - 4,747,643 - Combined Low and Moderate Housing City Loans - Principal 1,018,844 - 182,644 836,200 - Total 1,018,844 - 182,644 836,200 - Unallocated Between Project Areas Employee Leave Benefits 60,794 15,565 - 76,359 - Total 60,794 15,565 - 76,359 - Total - All Project Areas City Loans - Principal 27,547,081 - 747,969 26,799,112 - City Loans - Unpaid Interest 3,020,264 1,936,753 - 4,957,017 - Developer Loans - Principal 4,558,300 - - 4,558,300 - Developer Loans - Unpaid Interest 4,045,946 369,925 - 4,415,871 - Bonds Payable 39,546,698 18,374,503 865,000 57,056,201 1,325,000 Employee Leave Benefits 60,794 15,565 - 76,359 - Total 78,779,083$ 20,696,746$ 1,612,969$ 97,862,860 1,325,000$ Adjustments: Unamortized net original issue (discount) or premium (876,723) Net Long-term Debt 96,986,137$ * Additions include $79,503 for accreted interest for the fiscal year ended June 30, 2009. 27 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 5: Long-Term Debt (Continued) c. The following schedule illustrates the debt service requirements to maturity for bonds outstanding as of June 30, 2009. Excluded are obligations for which the actual amounts of annual debt service depend on various factors that are not yet determinable. Principal Interest Principal Interest Principal Interest 2009 - 2010 450,000$ 367,085$ -$ 349,425$ 365,000$ 915,545$ 2010 - 2011 460,000 354,279 - 349,425 385,000 894,779 2011 - 2012 475,000 339,779 - 349,425 410,000 871,863 2012 - 2013 495,000 323,516 - 349,425 430,000 847,650 2013 - 2014 515,000 305,519 - 349,425 450,000 822,284 2014 - 2019 2,870,000 1,206,794 - 1,747,125 2,690,000 3,676,179 2019 - 2024 4,000,000 510,276 - 1,747,125 3,240,000 2,767,988 2024 - 2029 - - 3,416,201 1,775,920 1,905,000 2,018,891 2029 - 2034 - - 4,960,000 2,931,427 3,250,000 1,218,008 2034 - 2039 - - 970,000 237,620 2,315,000 171,124 2039 - 2044 - - - - - - Totals 9,265,000$ 3,407,248$ 9,346,201$ 10,186,342$ 15,440,000$ 14,204,311$ Principal Interest Principal Interest Principal Interest 2009 - 2010 85,000$ 237,811$ 70,000$ 502,963$ 355,000$ 708,583$ 2010 - 2011 85,000 234,230 80,000 499,388 125,000 697,626 2011 - 2012 90,000 230,423 80,000 495,188 125,000 691,533 2012 - 2013 95,000 226,305 85,000 490,544 130,000 685,158 2013 - 2014 100,000 221,968 95,000 485,250 135,000 678,364 2014 - 2019 570,000 1,035,718 595,000 2,321,219 815,000 3,261,161 2019 - 2024 710,000 881,501 1,850,000 2,021,938 985,000 2,958,964 2024 - 2029 920,000 670,500 1,815,000 1,205,306 2,805,000 2,341,763 2029 - 2034 1,185,000 393,658 1,095,000 503,400 3,650,000 1,193,500 2034 - 2039 870,000 70,755 950,000 38,000 2,455,000 108,325 Totals 4,710,000$ 4,202,869$ 6,715,000$ 8,563,196$ 11,580,000$ 13,324,977$ 2003 Tax Allocation Refunding Bonds, Series A 2005 Tax Allocation Refunding Bonds, Series A 2007 Tax Allocation Bonds, Series A 2007 Tax Allocation Bonds, Series B 2008 Tax Allocation Bond Series A Housing Tax Allocation Bond 2008 Series B d. As of June 30, 2009, the Agency has issued various residential mortgage revenue bonds. The proceeds of these bonds were used to purchase mortgage loans made to homeowners for the purpose of financing residential property. These bonds, secured by first trust deeds and private mortgage insurance, were issued from 1985 through 1992. Although the Agency has arranged this financing program, these bonds are not payable from any revenues or assets of the Agency. Generally, the bondholders may look only to the mortgage loans and other assets held by trustees for security on the indebtedness. Accordingly, since these bonds do not constitute an obligation of the Agency, they are not reflected in Long-Term Debt in the accompanying financial statements: Original Year Amount Balance at Issued Issued June 30, 2009 Due Date Taxable Collateralized Refunding Bonds-Series 1992 1992 9,903,000$ 303,000$ December 1, 2012 Single Family Mortgage Revenue Refunding Bonds 1992 10,000,000 6,670,000$ October 1, 2012 28 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 6: Low and Moderate Housing Fund Per Section 33334.2 of the Health and Safety Code, not less than 20% of all taxes allocated to the Agency pursuant to Section 33670 must be set-aside for purposes of increasing, improving and preserving the community’s supply of low and moderate income housing. Towards this end, the Agency has set-aside the following amounts: Tax Increment Percentage Amount Receipts(1)Set-Aside Set-Aside Merged Project Area 7,780,430$ 20%1,556,086$ Ranch Center Project Area 153,921 20%30,784 Total 7,934,351$ 1,586,870$ (1) Includes Los Angeles County portion. The amount of $1,586,870 is represented as transfers of tax increment from the Merged Project and Ranch Center debt service funds to the combined low and moderate income housing special revenue fund. As of June 30, 2009, there were no amounts determined to be excess surplus as defined by the Health and Safety Code. IV. OTHER DISCLOSURES Note 7: Insurance The Azusa Redevelopment Agency is covered under the City of Azusa’s insurance policies. Therefore, the limitation and self-insured retentions applicable to the City of Azusa also apply to its redevelopment agency. Additional information as to coverage and self-insured retentions can be obtained by contacting the City. Note 8: Interfund Receivable, Payable and Transfers The composition of interfund balances as of June 30, 2009, is as follows: a. Due To/From Other Funds Tax Increment - Merged Project Area Nonmajor Funds Total Due from Other Funds (receivable): Nonmajor Funds 90,345$ 46$ 90,391$ Total 90,345$ 46$ 90,391$ Due to Other Funds (payable) The amounts due to the Combined Housing Fund of $90,391 relates to tax increment receivable amounts due from the Debt Service Funds. 29 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 8: Interfund Receivable, Payable and Transfers (Continued) b. Interfund Transfers The transfers out of $473,858 from the Merged Project Area Capital Project Fund were for debt service payments. The transfers out of $4,981,564 from the Merged Project Area –Tax Increment Fund were to move 20% set-aside of tax increment revenue, fund capital projects, and allocate administrative expenditures. The transfers out of $15,430,000 from the Merged Project Area Bond fund consisted of $9,760,000 to the Low and Moderate Housing Fund and $5,670,000 to the Merged Project Fund in order to move bond proceeds to fund capital projects. The transfers out of $755,758 from nonmajor funds were to move 20% set-aside of tax increment revenue, fund capital projects, allocate administrative expenditures, and provide debt service. Capital Project Debt Service Debt Service Merged Project Area Merged Project Area - Tax Increment Merged Project Area - Bonds Nonmajor Funds Total Capital Projects: Merged Project - Project -$ 20,398$ 5,670,000$ -$ 5,690,398$ Low and Moderate - - 9,760,000 - 9,760,000 Debt Service: Merged Project-Tax Increment 473,858 - - - 473,858 Merged Project-Bonds - 2,396,176 - 473,494 2,869,670 Nonmajor Funds - 2,564,990 - 282,264 2,847,254 Total 473,858$ 4,981,564$ 15,430,000$ 755,758$ 21,641,180$ Transfers Out Transfers In: Note 9: Pass-Through Agreement Payments At June 30, 2009, the Agency had expenditures of $2,727,800 to other agencies and entities related to specific pass-through agreements. Central Business Ranch District West End Center Total Pass-Through Payments Agencies and Entities: L.A. County Pass-Through Agrmts 943,943$ 1,414,027$ 82,493$ 2,440,463$ City of Azusa (statutory)253 - - 253 Azusa Unified School District 52,356 33,655 4,359 90,370 Citrus College 3,117 3,662 3,109 9,888 Other Taxing Agencies 87,801 96,283 2,742 186,826 Total Pass-Through Payments 1,087,470$ 1,547,627$ 92,703$ 2,727,800$ Merged Project Area Project Area 30 Redevelopment Agency of the City of Azusa Notes to Financial Statements (Continued) Note 10: Subsequent Events SERAF Tax Increment Revenue Shift for fiscal year 2009-2010 and 2010-2011 On July 23, 2009, the California Legislature passed SB 26, requiring a shift in tax increment revenues during fiscal years 2009-2010 and 2010-2011 to be deposited into the county “Supplemental” Educational Revenue Augmentation Fund (SERAF) and which is to be distributed to m eet the State’s Prop 98 obligations to schools. It is estimated that the Agency’s share of the SERAF shift for fiscal year 2009 -2010 and 2010-2011 will amount to approximately $2,489,504 and $512,545, respectively. In October 2009, the California Redevelopment Association and its member agencies filed a legal action in an attempt to stop these amounts from having to be paid. As of the date of this report, no legal determination has been made by the courts on that action. Should these amounts be required to be paid, looking at current resources, it is uncertain as to whether the Agency will have sufficient resources to accomplish those payment(s). If the Agency is unable to make the payment(s) it would be subject to the provisions of the law which substantially restrict its operational ability. Property acquisitions and disposals Subsequent to the end of the year the agency purchased approximately $4 million dollars in properties used for capital projects. The agency also sold properties to Target for approximately $7 million dollars for capital project developments. 31 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA COMBINING PROJECT AREA BALANCE SHEET ALL GOVERNMENTAL FUNDS JUNE 30, 2009 Capital Special Debt Debt Capital Projects Revenue Service Service Projects General Combined Tax Agency Housing Tax Revenue Fund Fund Increment Bonds Project Cash and investments 688,672$1,169,646$733,603$ -$1,474,355$ Cash and investments with trustee - 4,634,615 - 4,063,512 3,992,493 Receivables: Tax increment - - 452,092 - - Accounts - 2 131,000 - 6,010 Interest - 6,222 5,153 24,334 6,100 Loans - 1,146,450 - - 1,142,500 Due from Debt Service Funds - 90,345 - - - Due from Low and Moderate Housing Funds - - - - - Due from City - - 640,971 - - Land held for resale - 7,053,882 - - 36,902,070 Allowance for decline in value - - - - (876,230) Prepaid costs 495 - - - - Total Assets 689,167 $ 14,101,162 $ 1,962,819 $ 4,087,846 $ 42,647,298 $ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 16,136$687,658$156$ -$192,227$ Interest payable - - - - - Deposits from others - - - - 115,676 Due to Debt Service Funds - 46 - - - Due to Low and Moderate Housing Funds - - 90,345 - - Due to City 639,119 132,596 614,950 - 18,723,145 Due to other governments - - 148,499 - - Deferred revenue - 1,146,450 641,342 - 737,528 Salaries and benefits payable 33,485 - - - - Unearned revenue - - - - 5,460 Total Liabilities 688,740 1,966,750 1,495,292 - 19,774,036 Fund Balances: Reserved: Land held for resale - 7,053,882 - - 36,025,840 Long-term loans receivable - - - - 404,972 Prepaid costs 495 - - - - Unreserved: Designated: Debt service - - 467,527 4,087,846 - Continuing projects - 5,080,530 - - - Undesignated (68) - - - (13,557,550) Total Fund Balances 427 12,134,412 467,527 4,087,846 22,873,262 Total Liabilities and Fund Balances 689,167 $ 14,101,162 $ 1,962,819 $ 4,087,846 $ 42,647,298 $ Merged Project Area 32 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA COMBINING PROJECT AREA BALANCE SHEET ALL GOVERNMENTAL FUNDS JUNE 30, 2009 Cash and investments Cash and investments with trustee Receivables: Tax increment Accounts Interest Loans Due from Debt Service Funds Due from Low and Moderate Housing Funds Due from City Land held for resale Allowance for decline in value Prepaid costs Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Interest payable Deposits from others Due to Debt Service Funds Due to Low and Moderate Housing Funds Due to City Due to other governments Deferred revenue Salaries and benefits payable Unearned revenue Total Liabilities Fund Balances: Reserved: Land held for resale Long-term loans receivable Prepaid costs Unreserved: Designated: Debt service Continuing projects Undesignated Total Fund Balances Total Liabilities and Fund Balances Debt Capital Service Projects Debt Capital Special Tax Service Projects Revenue Increment Project Funds Funds Funds 37,900$78,938$771,503$2,241,965$1,169,646$ - - 4,063,512 3,992,493 4,634,615 5 - 452,097 - - - - 131,000 6,010 2 63 369 29,550 6,469 6,222 - - - 1,142,500 1,146,450 - - - - 90,345 46 - 46 - - - - 640,971 - - - - - 36,902,070 7,053,882 - - - (876,230) - - - - 495 - 38,014$ 79,307 $ 6,088,679 $ 43,415,772 $ 14,101,162 $ -$ -$156$208,363$687,658$ 12,133 - 12,133 - - - - - 115,676 - - - - - 46 - - 90,345 - - - - 614,950 19,362,264 132,596 7,579 - 156,078 - - - - 641,342 737,528 1,146,450 - - - 33,485 - - - - 5,460 - 19,712 - 1,515,004 20,462,776 1,966,750 - - - 36,025,840 7,053,882 - - - 404,972 - - - - 495 - 18,302 - 4,573,675 - - - 79,307 - 79,307 5,080,530 - - - (13,557,618) - 18,302 79,307 4,573,675 22,952,996 12,134,412 38,014$ 79,307 $ 6,088,679 $ 43,415,772 $ 14,101,162 $ Ranch Center T O T A L S 33 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA COMBINING PROJECT AREA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Capital Special Debt Debt Capital Projects Revenue Service Service Projects General Combined Tax Agency Housing Tax Revenue Fund Fund Increment Bonds Project Revenues: Taxes and Assessments: Tax increment - $ - $ 7,780,430 $ - $ - $ Sales and use tax - - 904,461 - - Use of Money and Property: Interest income 4,866 175,882 20,401 53,345 87,338 Rental income - - - - 179,746 Other revenue: Miscellaneous revenue 28,614 250 - - 158,723 Land donated from City - - - - 726 Total Revenues 33,480 176,132 8,705,292 53,345 426,533 Expenditures: Current: General Government: Administrative costs 946,242 155,935 - - 108,256 Professional services 157,965 96,078 - - 587,965 Community Development: Real estate acquisitions - - - - 750 Operation of acquired property - 41,321 - - 510,277 Relocation payments - - - - 2,230,000 Disposal costs - - - - 7,600 Rehabilitation costs - 151,357 - - 63,473 Subsidy to low and moderate housing - 795,082 - - - Capital Outlay: Project improvement costs - - 1,258,900 - 751,000 Acquisition of fixed assets 909 - - - - Debt Service: Debt issuance costs - - - 555,678 - Interest expense 82,347 55,811 2,186,916 2,105,048 510,100 Long-term debt repayments - 182,644 565,325 865,000 - Other Expenditures: Grant expenditures - - - - 38,922 Contributions from City 105,720 - - - - Total Expenditures 1,293,183 1,478,228 4,011,141 3,525,726 4,808,343 Excess of Revenues over (under) Expenditures (1,259,703) (1,302,096) 4,694,151 (3,472,381) (4,381,810) Other Financing Sources (Uses) Transfers in 1,260,130 9,760,000 473,858 2,869,670 5,690,398 Transfers out - (724,720) (3,425,478) (15,430,000) (473,858) Housing set-aside transfers in - 1,586,870 - - - Housing set-aside transfers out - - (1,556,086) - - Long-term debt issued - - 1,988,087 18,295,000 - Pass through agreement payments - - (2,635,097) - - Bond discount - - - (530,483) - Total Other Financing Sources (Uses) 1,260,130 10,622,150 (5,154,716) 5,204,187 5,216,540 Excess of Revenues and Other Sources over (under) Expenditures and Other Uses 427 9,320,054 (460,565) 1,731,806 834,730 Fund Balances Beginning of Year - 2,814,358 928,092 2,356,040 22,038,532 End of Year 427 $ 12,134,412 $ 467,527 $ 4,087,846 $ 22,873,262 $ Merged Project Area 34 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA COMBINING PROJECT AREA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2009 Revenues: Taxes and Assessments: Tax increment Sales and use tax Use of Money and Property: Interest income Rental income Other revenue: Miscellaneous revenue Land donated from City Total Revenues Expenditures: Current: General Government: Administrative costs Professional services Community Development: Real estate acquisitions Operation of acquired property Relocation payments Disposal costs Rehabilitation costs Subsidy to low and moderate housing Capital Outlay: Project improvement costs Acquisition of fixed assets Debt Service: Debt issuance costs Interest expense Long-term debt repayments Other Expenditures: Grant expenditures Contributions from City Total Expenditures Excess of Revenues over (under) Expenditures Other Financing Sources (Uses) Transfers in Transfers out Housing set-aside transfers in Housing set-aside transfers out Long-term debt issued Pass through agreement payments Bond discount Total Other Financing Sources (Uses) Excess of Revenues and Other Sources over (under) Expenditures and Other Uses Fund Balances Beginning of Year End of Year Debt Capital Service Projects Debt Capital Special Tax Service Projects Revenue Increment Project Funds Funds Funds 153,921 $ - $ 7,934,351 $ - $ - $ - - 904,461 - - 254 1,849 74,000 94,053 175,882 - - - 179,746 - - - - 187,337 250 - - - 726 - 154,175 1,849 8,912,812 461,862 176,132 - - - 1,054,498 155,935 - - - 745,930 96,078 - - - 750 - - - - 510,277 41,321 - - - 2,230,000 - - - - 7,600 - - - - 63,473 151,357 - - - - 795,082 - - 1,258,900 751,000 - - - - 909 - - - 555,678 - - 330,722 - 4,622,686 592,447 55,811 - - 1,430,325 - 182,644 - - - 38,922 - - - - 105,720 - 330,722 - 7,867,589 6,101,526 1,478,228 (176,547) 1,849 1,045,223 (5,639,664) (1,302,096) - 254 3,343,528 6,950,782 9,760,000 (254) - (18,855,732) (473,858) (724,720) - - - - 1,586,870 (30,784) - (1,586,870) - - 318,590 - 20,601,677 - - (92,703) - (2,727,800) - - - - (530,483) - - 194,849 254 244,320 6,476,924 10,622,150 18,302 2,103 1,289,543 837,260 9,320,054 - 77,204 3,284,132 22,115,736 2,814,358 18,302 $ 79,307 $ 4,573,675 $ 22,952,996 $ 12,134,412 $ Ranch Center T O T A L S 35 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA COMPUTATION OF LOW AND MODERATE INCOME HOUSING FUNDS EXCESS/SURPLUS Low and Moderate Low and Moderate Housing Funds - All Project Areas Housing Funds - All Project Areas July 1, 2008 July 1, 2009 Opening Fund Balance 2,814,358$ 12,134,412$ Land held for resale -$ (7,053,882)$ Unspent debt proceeds (Section 33334.12 (g)(3)(B))- (3,975,280) Less: Unavailable Amounts - (11,029,162) Available Low and Moderate Income Housing Funds 2,814,358 1,105,250 Limitation (greater of $1,000,000 or four years set-aside) Set-Aside for last four years: 2008 - 2009 - 1,586,870 2007 - 2008 1,508,994 1,508,994 2006 - 2007 1,379,024 1,379,024 2005 - 2006 1,287,007 1,287,007 2004 - 2005 1,256,872 - Total 5,431,897$ 5,761,895$ Base Limitation 1,000,000$1,000,000$ Greater amount 5,431,897 5,761,895 Computed Excess/Surplus None None 36