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Home My WebLink AboutAzusa RDA FinancialStatements2011 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2011 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, 2011 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA JUNE 30, 2011 TABLE OF CONTENTS Page Number INDEPENDENT AUDITOR’S REPORT Financial Audit ................................................................................................................................... 1 Compliance Audit ................................................................................................................................3 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Assets ..................................................................................................................5 Statement of Activities .....................................................................................................................7 Fund Financial Statements: Balance Sheets - Governmental Funds ..........................................................................................8 Reconciliation of the Balance Sheet of Government Funds to the Statement of Net Assets ........................................................................................................11 Statement of Revenues, Expenditures and Changes in Fund Balances ......................................................................................................12 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .....................................................................................................................14 Budgetary Comparison Statement – Combined Low and Moderate Housing Fund ................................................................................................................. 15 Notes to Financial Statements ........................................................................................................... 17 COMBINING AND INDIVIDUAL FUND SCHEDULES Combining Project Area Balance Sheet - All Governmental Funds ............................................... 40 Combining Project Area Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Funds .................................................................. 42 Computation of Low and Moderate Income Housing Funds Excess/Surplus ............................................................................................................................... 44 INDEPENDENT AUDITOR'S REPORT To the Honorable Chair and Members of the Governing Board Azusa Redevelopment Agency City of Azusa, California We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Azusa Redevelopment Agency (the Agency), a component unit of the City of Azusa, California, as of and for the year ended June 30, 2011, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Agency'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 the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Agency, as of June 30, 2011, and the respective changes in financial position thereof and the respective budgetary comparison for the Combined Low and Moderate Housing Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. We would like to draw the reader’s attention to Note 12 – “California Redevelopment Agency Uncertainty”. The note provides information on two bills passed, AB1X26 and 27 which dissolve redevelopment agencies effective October 1, 2011 and provide an option to avoid dissolution by making certain defined payments. In accordance with Government Auditing Standards, we have also issued our report dated December 27, 2011, on our consideration of the Agency’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 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. Brandon W. Burrows, CPA David E. Hale, CPA, CFP A Professional Corporation Donald G. Slater, CPA Richard K. Kikuchi, CPA Susan F. Matz, CPA Shelly K. Jackley, CPA Bryan S. Gruber, CPA 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 To the Honorable Chair and Members of the Governing Board Azusa Redevelopment Agency Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency’s financial statements as a whole. The 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 financial statements. These are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 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. Brea, California December 27, 2011 2 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE AND INTERNAL CONTROL OVER COMPLIANCE To the Honorable Chair and Members of the Governing Board Azusa Redevelopment Agency City of Azusa, California Compliance We have audited the Azusa Redevelopment Agency’s (the Agency) compliance with the California Health and Safety Code as required by Section 33080.1 for the year ended June 30, 2011. Compliance with the requirements referred to above is the responsibility of the Agency’s management. Our responsibility is to express an opinion on the Agency’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guidelines for Compliance Audits of California Redevelopment Agencies, June 2011, issued by the State Controller and as interpreted in the Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies, August 2011, issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on redevelopment program has occurred. An audit includes examining, on a test basis, evidence about the Agency’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Agency’s compliance with those requirements. In our opinion, the Agency complied, in all material respects, with the compliance requirements referred to above that are applicable to the redevelopment program for the year ended June 30, 2011. Internal Control Over Compliance Management of the Agency is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit, we considered the Agency’s internal control over compliance to determine the auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control over compliance. A deficiency in internal control over compliance 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 and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. Brandon W. Burrows, CPA David E. Hale, CPA, CFP A Professional Corporation Donald G. Slater, CPA Richard K. Kikuchi, CPA Susan F. Matz, CPA Shelly K. Jackley, CPA Bryan S. Gruber, CPA 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 To the Honorable Chair and Members of the Governing Board Azusa Redevelopment Agency Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses in internal control over compliance. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended for the information of management, the City Council, and the California State Controller and it is not intended to be and should not be used by anyone other then these specified parties. Brea, California December 27, 2011 4 AZUSA REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS JUNE 30, 2011 Governmental Activities Assets: Cash and investments 2,765,603$ Receivables: Tax increment 1,010,437$ Accounts 34,024 Interest receivable 49,516 Loans 1,982,355 Total Receivables 3,076,332 Due from other governments 8,084,222 Land held for resale (net)15,900,363 Deferred charges 1,711,587 Advances to other funds 1,567,111 Restricted assets: Cash and investments with trustees 4,122,490 Capital assets (Net of Depreciation): Land and improvements 1,985,317 Total Capital Assets 1,985,317 Total Assets 39,213,025 Liabilities: Accounts payable and accrued expenses 1,553,614 Due to other governments 6,802,100 Deposits from others 15,000 Other current liabilities 1,623,731 Long-term liabilities: Due within one year 1,245,251 Due in more than one year 98,962,714 Total Long-Term Liabilities 100,207,965 Total Liabilities 110,202,410 Net Assets: Invested in capital assets, net of related debt 369,439 Restricted for: Community development 9,957,762 Low and moderate housing 14,465,493 Debt service 4,234,315 Unrestricted (100,016,394) Total Net Assets (70,989,385)$ See Notes to Financial Statements 5 THIS PAGE INTENTIONALLY LEFT BLANK 6 AZUSA REDEVELOPMENT AGENCY STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2011 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 1,603,948$ -$ -$ -$ (1,603,948)$ Community development 1,317,403 - - - (1,317,403) Interest on long-term debt 6,963,454 - - - (6,963,454) Contributions to other governments 4,214,150 - - - (4,214,150) Other 1,417 - - - (1,417) Total Governmental Activities 14,100,372$ -$ -$ -$ (14,100,372) General Revenues: Taxes (net of pass-through payments)5,153,714 Intergovernmental 1,231,919 Use of money and property 300,146 Other 81,513 Total General Revenues 6,767,292 Program Revenues See Notes to Financial Statements Total General Revenues 6,767,292 Change in Net Assets (7,333,080) Net Assets at Beginning of Year (63,831,715) Restatement of Net Assets 175,410 Net Assets at End of Year (70,989,385)$ See Notes to Financial Statements 7 AZUSA REDEVELOPMENT AGENCY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 Special Capital Capital Debt Revenue Projects Projects Service Agency Combined Fund Low and Moderate General Tax Housing Agency Project Increment Assets: Cash and investments 92,550$ 1,423,781$ 933,793$ 178,800$ Cash and investments with trustee - - - - Receivables: Tax increment - - - 1,010,385 Accounts 580 1,187 29,234 2,492 Interest 349 - - - Loans 1,106,116 - 876,239 - Due from Capital Projects funds - - - 1,360,025 Due from Debt Service funds - - - 37,648 Due from Low and Moderate Housing Funds - - - 818,295 Due from City - - 8,032,773 - Land held for resale 12,898,382 - 3,229,874 - Allowance for decline in value - - (227,893) - Advances to other funds 1,567,111 - - - Total Assets 15,665,088$ 1,424,968$ 12,874,020$ 3,407,645$ Liabilities and Fund Balances: Liabilities: Accounts payable 28,299$ 38,777 72,095$ 169,192$ Deposits from others - - 15,000 - Due to Capital Projects funds - - - - Due to Debt Service funds 818,295 558,499 801,526 - Due to City 1,000,000 831,536 1,316,074 3,383,927 Due to other governments - - - 262,455 Deferred revenue 1,106,116 - 791,858 45,664 Salaries and benefits payable 3,889 52,731 - - Advances from other funds - - - 1,567,109 Total Liabilities 2,956,599 1,481,543 2,996,553 5,428,347 Fund Balances: Nonspendable: Land held for resale 12,898,382 - 3,001,981 - Long-term receivables - - 84,381 - Advances from other funds 1,567,111 - - - Restricted for: Debt utilization and/or by debt covenants - - - - Community development - - 6,791,105 - Unassigned (1,757,004) (56,575) - (2,020,702) Total Fund Balances 12,708,489 (56,575) 9,877,467 (2,020,702) Total Liabilities and Fund Balances 15,665,088$ 1,424,968$ 12,874,020$ 3,407,645$ Merged Project Area Merged Project Area See Notes to Financial Statements 8 AZUSA REDEVELOPMENT AGENCY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2011 Assets: Cash and investments Cash and investments with trustee Receivables: Tax increment Accounts Interest Loans Due from Capital Projects funds Due from Debt Service funds Due from Low and Moderate Housing Funds Due from City Land held for resale Allowance for decline in value Advances to other funds Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Deposits from others Due to Capital Projects funds Due to Debt Service funds Due to City Due to other governments Deferred revenue Salaries and benefits payable Advances from other funds Total Liabilities Fund Balances: Nonspendable: Land held for resale Long-term receivables Advances from other funds Restricted for: Debt utilization and/or by debt covenants Community development Unassigned Total Fund Balances Total Liabilities and Fund Balances Debt Service Other Total Governmental Governmental Bonds Funds Funds 514$ 136,165$ 2,765,603$ 4,122,490 - 4,122,490 - 52 1,010,437 414 117 34,024 49,167 - 49,516 - - 1,982,355 - - 1,360,025 - 66 37,714 - - - 818,295 - 51,449 8,084,222 - - 16,128,256 - - (227,893) - - 1,567,111 4,172,585$ 187,849$ 37,732,155$ -$ -$ 308,363$ - - 15,000 - 66 66 - 37,648 2,215,968 - - 6,531,537 - 8,108 270,563 - - 1,943,638 - - 56,620 - 2 1,567,111 - 45,824 12,908,866 - - 15,900,363 - - 84,381 - - 1,567,111 4,172,585 61,730 4,234,315 - 80,295 6,871,400 - - (3,834,281) 4,172,585 142,025 24,823,289 4,172,585$ 187,849$ 37,732,155$ Merged Project Area See Notes to Financial Statements 9 THIS PAGE INTENTIONALLY LEFT BLANK 10 AZUSA REDEVELOPMENT AGENCY RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2011 Fund balances of governmental funds 24,823,289$ 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 1,985,317 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.1,943,638 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 1,711,587 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 (54,768,015) Developer loans (9,685,015) Loans from City (36,456,678) Other debt (106,064) Unamortized net original issue discounts and (premiums)807,807 Accrued interest payable for the current portion of interest due on Tax Allocation Bonds has not been reported in the governmental funds.(1,245,251) Net assets of governmental activities (70,989,385)$ See Notes to Financial Statements 11 AZUSA REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Special Capital Capital Debt Revenue Projects Projects Service General Agency Combined Fund Low and Moderate General Tax Housing Agency Project Increment Revenues: Taxes and assessments -$ -$ -$ 9,245,867$ Use of money and property 66,327 6,198 133,910 - Miscellaneous revenue 41,058 152 40,302 1 Total Revenues 107,385 6,350 174,212 9,245,868 Expenditures: Current: General government 159,688 1,080,107 292,633 - Community development 22,456 - - - Capital outlay - 200,499 862,458 950,919 Debt service 44,195 8,537 14,762,491 3,613,822 Other expenditures - - 1,417 - Total Expenditures 226,339 1,289,143 15,918,999 4,564,741 Excess (Deficiency) of Revenues Over (Under) Expenditures (118,954) (1,282,793) (15,744,787) 4,681,127 Other Financing Sources (Uses): Transfers in 1,582,207 1,388,568 - 69,454 Transfers out (1,592,160) - (2,919,646) (2,661,708) Long-term debt issued 44,195 - 24,750 3,439,295 Pass-through agreement payments - - - (2,662,049) Payment to Educational Revenue Augmentation Fund - - - (504,536) Miscellaneous - (105,775) (3,291,712) (303,634) Total Other Financing Sources (Uses):34,242 1,282,793 (6,186,608) (2,623,178) Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses (84,712) - (21,931,395) 2,057,949 Fund Balances: Beginning of Year, as previously reported 12,793,201 (56,763) 31,808,314 (4,253,325) Restatements - 188 548 174,674 Beginning of Year, as restated 12,793,201 (56,575) 31,808,862 (4,078,651) Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses (84,712) - (21,931,395) 2,057,949 End of Year 12,708,489$ (56,575)$ 9,877,467$ (2,020,702)$ Merged Project Area Merged Project Area See Notes to Financial Statements 12 AZUSA REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 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 Payment to Educational Revenue Augmentation Fund Miscellaneous Total Other Financing Sources (Uses): Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses Fund Balances: Beginning of Year, as previously reported Restatements Beginning of Year, as restated Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses End of Year Debt Service Other Total Governmental Governmental Bonds Funds Funds -$ 156,675$ 9,402,542$ 145,411 473 352,319 - - 81,513 145,411 157,148 9,836,374 - - 1,532,428 - - 22,456 - - 2,013,876 4,314,765 382,183 23,125,993 - - 1,417 4,314,765 382,183 26,696,170 (4,169,354) (225,035) (16,859,796) 4,121,327 43,312 7,204,868 - (31,354) (7,204,868) 88,126 388,620 3,984,986 - (95,179) (2,757,228) - (8,493) (513,029) - - (3,701,121) 4,209,453 296,906 (2,986,392) 40,099 71,871 (19,846,188) 4,132,486 70,154 44,494,067 - - 175,410 4,132,486 70,154 44,669,477 40,099 71,871 (19,846,188) 4,172,585$ 142,025$ 24,823,289$ Merged Project Area See Notes to Financial Statements 13 AZUSA REDEVELOPMENT AGENCY 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, 2011 Net change in fund balances - total governmental funds (19,846,188)$ Amounts reported for governmental activities in the statement of activities are different 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. 16,266,911 Bond issuance costs is an expenditure in the governmental funds, but it is deferred charges in the statement of net assets: Amortization for current fiscal year (81,904) 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: Amortization for current fiscal year (34,458) 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.(311,854) 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: Capital outlay expenditures removed 718,430 Depreciation (58,399) Proceeds of debt is revenue in the governmental funds, but these are additions to the statement of net assets. Loans (3,896,860) Accreted interest on tax allocation bonds (88,126) Compensated absences (12,622) (3,997,608) 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 (1,245,251) Prior year accrual of interest due on bonds 1,257,241 Change in net assets of governmental activities (7,333,080)$ See Notes to Financial Statements 14 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA BUDGETARY COMPARISON STATEMENT COMBINED LOW AND MODERATE HOUSING FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 , as restated 12,793,201$ 12,793,201$ 12,793,201$ -$ Resources (Inflows): Use of money and property 5,000 5,000 66,327 61,327 Other 10,000 10,000 41,058 31,058 Long-term debt issued - - 44,195 44,195 Transfers from other funds 1,576,110 1,576,110 1,582,207 6,097 Amounts Available for Appropriations 14,384,311 14,384,311 14,526,988 142,677 Charges to Appropriation (Outflow): General government 232,000 232,000 159,688 72,312 Community development 125,000 125,000 22,456 102,544 Debt service 149,790 149,790 44,195 105,595 Transfers to other funds 1,504,280 1,504,280 1,592,160 (87,880) Total Charges to Appropriations 2,011,070 2,011,070 1,818,499 192,571 Budgetary Fund Balance, June 30 12,373,241$ 12,373,241$ 12,708,489$ 335,248$ See Notes to Financial Statements 15 THIS PAGE INTENTIONALLY LEFT BLANK 16 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 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. 17 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 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. 18 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 1: Organization and Summary of Significant Accounting Policies (Continued) The Agency reports the following major governmental funds: Combined Low and Moderate Housing Fund General Agency 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. 19 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 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. 20 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 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 Infrastructure 5 – 25 30 – 65 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, government funds report the following fund balance classification: Nonspendable Fund Balance The non-spendable fund balance classification includes amounts that cannot be spent because they are either (a) not in a spendable form or (b) legally or contractually required to be maintained intact. The “not spendable form” criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts. It also includes the long term amount of loans and notes receivable. 21 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 1: Organization and Summary of Significant Accounting Policies (Continued) Restricted Fund Balance The restricted fund balance classification includes amounts that reflect constraints placed on the use of resources (other than non-spendable items) that are either (a) externally imposed by creditors (such as through bonded debt reserve funds required pursuant to debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance The committed fund balance classification includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council, the City’s highest level of decision-making authority. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specific use by taking the same type of action (for example legislation, resolution, ordinance) it employed to previously commit those amounts. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. City Council action to commit fund balance needs to occur within the fiscal reporting periods; however the amount can be determined subsequently. Assigned Fund Balance The assigned fund balance classification includes amounts that are constrained by the City’s intent to be used for specific purposes, but that are neither restricted nor committed. The policy hereby delegates the authority to assign amounts to be used for specific purposes to the Administrative Services Director/Chief Financial Officer for the purpose of reporting. 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. Budget Basis of Accounting Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). 22 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 III. DETAILED NOTES ON ALL FUNDS Note 3: Cash and Investments As of June 30, 2011, cash and investments were reported in the accompanying financial statements as follows: Cash and investments 2,765,603$ Cash and investments with trustees 4,122,490 6,888,093$ 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. Deposits At June 30, 2011, the carrying amount of the Agency’s deposits was $156,689 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 23 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 3: Cash and Investments (Continued) 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. 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, 2011, 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, 2011, the City's investments in external investment pools and money market mutual funds are unrated. On August. 5, 2011, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to AA+ from AAA. As a result, on August. 8, 2011, Standard & Poor's Ratings Services lowered its issuer credit ratings and related issue ratings on various Federal Home Loan Bank, Federal Farm Credit Bank, Fannie Mae and Freddie Mac to AA+ from AAA. The City invests in LAIF which invests in various underlying securities, including the federal agency securities listed above. While LAIF is not rated, the federal agency securities are, and these have been affected by this rating change. 24 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 3: Cash and Investments (Continued) 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, 2011, none of the Agency’s deposits or investm ents 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. As of June 30, 2011, the Agency had the following investments and original maturities: Less than 1 to 3 3 to 5 Fair 6 months years years Value California Local Agency Investment Fund 2,608,915$ -$ -$ 2,608,915$ Cash with Fiscal Agents Money Market Mutual Funds 1,013,531 - - 1,013,531 Investment Agreements - 1,698,723 1,410,235 3,108,958 3,622,446$ 1,698,723$ 1,410,235$ 6,731,404$ Investment Maturities (in Years) 25 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 4: Capital Assets A summary of changes in capital assets follows: Balance at Balance at July 1, 2010 Additions Deletions Transfers June 30, 2011 Capital Assets not being depreciated: Land 410,420$ -$ -$ -$ 410,420$ Total Capital Assets not being depreciated 410,420 - - - 410,420 Capital Assets being depreciated: Structures and Improvements 1,427,802 - - - 1,427,802 Infrastructure - 718,430 - - 718,430 Total Capital Assets being depreciated 1,427,802 718,430 - - 2,146,232 Less accumulated depreciation: Structures and Improvements 512,936 58,399 - - 571,335 Total Accumulated Depreciation 512,936 58,399 - - 571,335 Total Capital Assets, net of accumulated depreciation 1,325,286$ 660,031$ -$ -$ 1,985,317$ Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government 58,399$ 26 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt a. A description of long-term debt outstanding (excluding defeased debt) of the Agency as of June 30, 2011, follows: Tax Allocation Bonds Tax allocation bonds payable consisted of the following at June 30, 2011: 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 $1,235,000 are due annually on August 1 beginning in the year 2004 through the year 2023. Interest rates ranging from 3.00% to 4.60% per annum are payable on February 1 and August 1. Both principal and interest payments are secured by tax increment revenues. 8,355,000$ $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.9,518,015 $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.14,690,000 $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.4,540,000 27 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) Balance Outstanding $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.6,565,000 $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 $8,420,000, respectively, and carry interest rates of 6.75% and 7.0%. Debt service payments on the bonds are secured by tax increment revenues.11,100,000 Total bonds payable 54,768,015$ 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 $102,545,813. For the current year, the total tax increment revenue recognized net of pass-through payments by the Agency was $5,153,714 and debt service on bond outstanding was $4,164,727. 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 28 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) 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, 2011, is $9,685,015. Loans from City Loans from the City of Azusa bear interest at various rates and are due in varying installments. At June 30, 2011, these obligations consisted of the following: 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, 2011, is $4,943,099. 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, 2011, is $1,144,538. 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, 2011, is $3,255,000. 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, 2011, is $190,272. 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, 29 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) as necessary, to equal the entire then-outstanding principal balance, accrued interest and all other sums due and payable under this Note. The balance was paid in full as of June 30, 2011. On March 3, 2008, the City of Azusa authorized an advance to the Agency of $11,000,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from pledged tax increment revenues and land sales proceeds. Interest accrues at 6.5% per annum from the date of the loan to the repayment by Agency to the City. The Agency transferred a variety of property held for resale to the City as payment in full for the outstanding advance balance of $5,456,945. This loan is considered paid in full in fiscal year 2010-2011. On March 24, 2008, the City of Azusa authorized an advance to the Agency of $5,300,000 for the purpose of carrying out the Redevelopment Plan. As of June 30, 2009, the full amount had been advanced. The note is payable from pledged tax increment revenues and land sales proceeds. Interest accrues at the prevailing LAIF annual rate. The terms of the note commence on the date that the loan proceeds were received by the Agency. The Agency transferred a variety of property held for resale to the City as payment in full for the outstanding advance balance of $5,440,510. This loan is considered paid in full in fiscal year 2010-2011. On December 21, 2009, the City of Azusa authorized an advance to the Agency of $3,310,000 for the purpose of carrying out the Redevelopment Plan. The note is payable from pledged tax increment revenues and land sales proceeds. Interest accrues at 6.5% per annum from the date of the loan to the repayment by Agency to the City. The Agency transferred a variety of property held for resale to the City as payment in full for the outstanding advance balance of $3,421,996. This loan is considered paid in full in fiscal year 2010-2011. On July 27, 2009, the City of Azusa authorized an advance to the Agency of $450,000 for the purpose of carrying out the Redevelopment Plan. As of June 30, 2011, the full amount had been advanced. The note is payable from revenue proceeds generated by the project. Interest accrues at 5.5% per annum. The terms of the note commence on the date that the loan proceeds were received by the Agency. The first payment is due in 2011, and annually thereafter until 2015. The balance outstanding at June 30, 2011, is $474,750. On May 2, 2011, the City of Azusa authorized an advance to the Agency of $513,029 for the purpose of paying the fiscal year 2010-2011 Supplemental Education Revenue Augmentation Fund (SERAF) payment. Of this amount, $195,124 was the Combined Merged Project Area portion of the loan. The note is payable from future tax increment. Interest accrues at 6% per annum. The terms of the note commence on the date that the loan proceeds were received by the Agency. There isn’t any set debt service payment schedule. The balance outstanding at June 30, 2011, is $196,824, which includes accrued interest. 30 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) 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, 2011, is $18,072,163. 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, 2011, is $1,615,878. On May 2, 2011, the City of Azusa authorized an advance to the Agency of $513,029 for the purpose of paying the fiscal year 2010-2011 Supplemental Education Revenue Augmentation Fund (SERAF) payment. Of this amount, $309,412 was the West End Merged Project Area portion of the loan. The note is payable from future tax increment. Interest accrues at 6% per annum. The terms of the note commence on the date that the loan proceeds were received by the Agency. There isn’t any set debt service payment schedule. The balance outstanding at June 30, 2011, is $312,109, which includes accrued interest. 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, 2011, is $1,893,205. 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, 2011, is $226,883. 31 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) 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, 2011, is $2,047,356. 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, 2011, is $1,295,261. On May 2, 2011, the City of Azusa authorized an advance to the Agency of $513,029 for the purpose of paying the fiscal year 2010-2011 Supplemental Education Revenue Augmentation Fund (SERAF) payment. Of this amount, $8,493 was the Ranch Center Project Area portion of the loan. The note is payable from future tax increment. Interest accrues at 6% per annum. The terms of the note commence on the date that the loan proceeds were received by the Agency. There isn’t any set debt service payment schedule. The balance outstanding at June 30, 2011, is $8,566, which includes accrued interest. 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, 2011, is $780,774. Total Loans from City at June 30, 2011, amount to $36,456,678. Other Long-Term Debt Payable Employee Leave Benefits 106,064$ 32 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) b. The following is a summary of the changes in long-term debt of the Agency for the fiscal year ended June 30, 2011: Balance Balance Due Within July 1, 2010 Additions Repayments June 30, 2011 One Year Merged Project Area City Loans - Principal 35,178,947$ 962,455$ 14,552,699$ 21,588,703$ -$ City Loans - Unpaid Interest 7,012,529 1,603,401 - 8,615,930 - Developer Loans - Principal 4,558,300 - - 4,558,300 - Developer Loans - Unpaid Interest 4,807,738 898,189 579,212 5,126,715 - Bonds -2003 Tax Allocation Refunding 8,815,000 - 460,000 8,355,000 475,000 Bonds -2005 Tax Allocation, Series A 9,429,889 *88,126 - 9,518,015 - Bonds -2007 Tax Allocation, Series A 15,075,000 - 385,000 14,690,000 410,000 Bonds -2007 Tax Allocation, Series B 4,625,000 - 85,000 4,540,000 90,000 Bonds -2008 Tax Allocation, Series A 6,645,000 - 80,000 6,565,000 80,000 Bonds -2008 Tax Allocation, Series B 11,225,000 - 125,000 11,100,000 125,000 Total 107,372,403 3,552,171 16,266,911 94,657,663 1,180,000 Ranch Center City Loans - Principal 3,380,175 8,493 - 3,388,668 - City Loans - Unpaid Interest 1,702,476 380,127 - 2,082,603 - Total 5,082,651 388,620 - 5,471,271 - Combined Low and Moderate Housing City Loans - Principal 736,579 44,195 - 780,774 - Total 736,579 44,195 - 780,774 - Unallocated Between Project Areas Employee Leave Benefits 93,442 70,108 57,486 106,064 65,251 Total 93,442 70,108 57,486 106,064 65,251 Total - All Project Areas City Loans - Principal 39,295,701 1,015,143 14,552,699 25,758,145 - City Loans - Unpaid Interest 8,715,005 1,983,528 - 10,698,533 - Developer Loans - Principal 4,558,300 - - 4,558,300 - Developer Loans - Unpaid Interest 4,807,738 898,189 579,212 5,126,715 - Loans - Other Governments - - - - - Notes Payable - - - - - Bonds Payable 55,814,889 88,126 1,135,000 54,768,015 1,180,000 Employee Leave Benefits 93,442 70,108 57,486 106,064 65,251 Total 113,285,075$ 4,055,094$ 16,324,397$ 101,015,772 1,245,251$ Adjustments: Unamortized net original issue (discount) or premium (807,807) Net Long-term Debt 100,207,965$ * Additions include $88,126 for accreted interest for the fiscal year ended June 30, 2011. 33 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 5: Long-Term Debt (Continued) c. The following schedule illustrates the debt service requirements to maturity for bonds outstanding as of June 30, 2011. Excluded are obligations for which the actual amounts of annual debt service depend on various factors that are not yet determinable. Principal Interest Principal Interest Principal Interest 2011 - 2012 475,000$ 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 - 2015 530,000 286,248 - 349,425 480,000 795,477 2015 - 2016 550,000 265,310 - 349,425 505,000 767,084 2016 - 2021 3,120,000 958,125 - 1,747,125 3,010,000 3,343,242 2021 - 2026 2,670,000 207,388 1,125,469 1,747,125 2,625,000 2,415,354 2026 - 2031 - - 4,542,546 2,384,135 2,465,000 1,759,976 2031 - 2036 - - 3,850,000 1,861,981 4,315,000 771,056 2036 - 2041 - - - - - - Totals 8,355,000$ 2,685,885$ 9,518,015$ 9,487,491$ 14,690,000$ 12,393,986$ Principal Interest Principal Interest Principal Interest 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 - 2015 105,000 217,405 100,000 479,275 145,000 670,833 2015 - 2016 110,000 212,513 110,000 472,575 155,000 662,389 2016 - 2021 620,000 979,700 700,000 2,232,331 915,000 3,153,898 2021 - 2026 785,000 804,644 2,120,000 1,723,131 1,595,000 2,785,544 2026 - 2031 1,020,000 568,233 2,185,000 893,750 3,210,000 1,921,850 2031 - 2036 1,310,000 261,555 1,090,000 288,800 3,800,000 669,200 2036 - 2041 305,000 8,083 - - 890,000 - Totals 4,540,000$ 3,730,829$ 6,565,000$ 7,560,844$ 11,100,000$ 11,918,769$ 2003 Tax Allocation Refunding Bonds, Series A 2005 Tax Allocation Refunding Bonds, Series A 2007 Tax Allocation Bonds, Series A Housing Tax Allocation Bond 2008 Series B 2008 Tax Allocation Bond Series A 2007 Tax Allocation Bonds, Series B d. As of June 30, 2011, 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, 2011 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 34 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 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 7,754,267$ 20%1,550,853$ Ranch Center Project Area 156,675 20%31,335 Total 7,910,942$ 1,582,188$ (1) Includes Los Angeles County portion. The amount of $1,582,207 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, 2011, 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, 2011, is as follows: a. Advances To/From Other Funds On December 2007, the Combined Low and Moderate Housing Fund advanced $1,350,000 to the Merged Project Area –Tax Increment Fund for purposes of the Merged Redevelopment Project Area. The loan will be repaid to the 20% set-aside fund at a rate of 5% simple interest per annum, with all principal and interest paid in full by June 30, 2011. The balance outstanding at June 30, 2011, is $1,567,111. b. Interfund Transfers The transfers out of $1,592,160 from the Combined Low and Moderate Housing Fund were to allocate administrative expenditures and provide debt service. The transfers out of $2,919,646 from the Merged Project Area Capital Project Fund were for debt service payments. The transfers out of $2,661,708 from the Merged Project Area –Tax Increment Fund were to move 20% set-aside of tax increment revenue, provide debt service, and allocate administrative expenditures. 35 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 8: Interfund Receivable, Payable and Transfers (Continued) The transfers out of $31,354 from nonmajor funds were to move 20% set-aside of tax increment revenue. Special Revenue Capital Project Debt Service Combined Housing Fund Merged Project Area Merged Project Area - Tax Increment Nonmajor Funds Total Special Revenue: Combined Housing Fund -$ -$ 1,550,853$ 31,354$ 1,582,207$ Capital Projects: General Agency 277,713 - 1,110,855 - 1,388,568 Debt Service: Merged Project-Tax Increment - 69,454 - - 69,454 Merged Project-Bonds 1,314,447 2,806,880 - - 4,121,327 Nonmajor Funds - 43,312 - - 43,312 Total 1,592,160$ 2,919,646$ 2,661,708$ 31,354$ 7,204,868$ Transfers In: Transfers Out c. Due To/From other funds The due to debt service funds of $818,295 from the Combined Low and Moderate Housing Fund, $801,526 from the Merged Project Area Capital Project Fund, and $596,147 from the Nonmajor Governmental Funds were for short term borrow of operating activities. These will be repaid in the next fiscal year. Special Revenue Capital Project Capital Project Combined Housing Fund Merged Project Area General Agency Nonmajor Funds Total Debt Service: Merged Project-Tax Increment 818,295$ 801,526$ 558,499 37,648$ 2,215,968$ Nonmajor Funds - - - 66 66 Total 818,295$ 801,526$ 558,499$ 37,714$ 2,216,034$ Due from other funds Due to other funds 36 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 9: Pass-Through Agreement Payments At June 30, 2011, the Agency had expenditures of $2,757,228 to other agencies and entities related to specific pass-through agreements. Central Business Ranch District West End Center Total Pass-Through Payments Agencies and Entities: L.A. County Pass-Through Agrmts 832,007$ 1,555,645$ 87,101$ 2,474,753$ City of Azusa (statutory)43,412 55,072 - 98,484 Azusa Unified School District 92,366 57,065 4,897 154,328 Citrus College - 6,808 3,181 9,989 Other Taxing Agencies 5,902 13,772 - 19,674 Total Pass-Through Payments 973,687$ 1,688,362$ 95,179$ 2,757,228$ Merged Project Area Project Area Note 10: Restatement of Fund Balances and Net Assets Beginning fund balance has been restated as follows: Capital Projects - Merged Project Area: 548$ 188 Debt Service - Merged Project Area - Tax Increment Fund: 174,674 Total Governmental Funds restatements 175,410$ To record an expenditure for an item that was purchases in the prior year. To record a loan principal payment that was no recorded in the prior year. To record an expenditure for an item that was purchases in the prior year. Note 11: Transactions with the State of California SERAF Shift for fiscal year 2010-2011 and 2011-2012 On July 23, 2009, the State adopted legislation, requiring a shift of monies during fiscal years 2009-2010 and 2010-2011 to be deposited into the County “Supplemental” Educational Revenue Augmentation Fund (SERAF). These monies were to be distributed to meet the State’s Prop 98 obligations to schools. The California Redevelopment Association (CRA) and its member agencies filed a legal action in an attempt to stop these amounts from having to be paid; however, in May 2010 the Sacramento Superior Court upheld the legislation. This decision is in the process of being appealed by CRA and its member agencies. The payment of the SERAF was due on May 10, 2011, for fiscal year 2010-2011 and it was made in the amount of $513,029. The legislation allowed this payment to be made from any available monies present in any project area(s). Subsequent legislation was passed which even allowed the funding for this payment to be borrowed from the Low 37 REDEVELOPMENT AGENCY OF THE CITY OF AZUSA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2011 Note 11: Transactions with the State of California (Continued) and Moderate Income Housing Fund with appropriate findings from its legislative body. Any amounts borrowed from Low and Moderate Income Housing (including any suspended set-aside amounts) are to be repaid by June 30, 2015. If those amounts are not repaid, by that date, then the set-aside percentage to Low and Moderate Income Housing will increase from 20% to 25% for the remainder of the life of the Agency. To accomplish the payment, the City advanced the Agency $513,029. In the accompanying financial statements, the amount paid to the County has been reported as an advance. Note 12: California Redevelopment Agency Uncertainty On July 18, 2011, the California Redevelopment Association (“CRA”) and the League of California Cities (“League”) filed a petition for writ of mandate with the California Supreme Court, requesting the Court to declare unconstitutional two bills that were passed as part of the 2011-12 State Budget, AB1X 26 and 27. AB1X 26 dissolves redevelopment agencies effective October 1, 2011. AB1X 27, give redevelopment agencies an option to avoid dissolution if it commits to making defined payments for the benefit of the State, school districts and certain special districts. In 2011-12, these payments amount to a state-wide total of $1.7 billion. In 2012-13 and subsequent years, the payments total $400 million, annually. Each city or county’s share of these payments is determined based on its proportionate share of state-wide tax increment. CRA and the League contend that AB1X 26 and 27 are unconstitutional because they violate Proposition 22 which was passed by the voters in November, 2010. The effect of the legislation is to achieve a possible unconstitutional result, the use of redevelopment agencies’ tax increment funds to benefit the State and other units of local government, by way of threatening of the dissolution of redevelopment agencies. Therefore, the CRA and the League have requested that the Court issue a stay, suspending the effectiveness of AB1X 26 and 27 until the Court can rule on its constitutionality. CRA and the League also asked the Court to expedite the briefing and hearing of the case so that a decision can be rendered by the Court before January 15, 2012, when the first payments are due. On August 11th, the California Supreme Court agreed to hear the case and granted a partial stay which was subsequently clarified. As of the time of the issuance of this report, the outcome of AB1X 26 and 27 upon the Agency is unknown and consequently the status and even future existence of the Agency is uncertain as such. In accordance with AB1X 27, the Agency has passed a resolution of intent to continue and will be required to make a payment to the State in the estimated amount of $860,944 by January 15, 2012, to avoid dissolution. 38 THIS PAGE INTENTIONALLY LEFT BLANK 39 AZUSA REDEVELOPMENT AGENCY COMBINING PROJECT AREA BALANCE SHEET ALL GOVERNMENTAL FUNDS JUNE 30, 2011 Special Capital Capital Debt Debt Revenue Projects Projects Service Service Combined General Tax Housing Agency Tax Revenue Fund Fund Project Increment Bonds ASSETS Cash and investments 92,550$1,423,781$933,793$178,800$514$ Cash and investments with trustee ---- 4,122,490 Receivables: Tax increment --- 1,010,385 - Accounts 580 1,187 29,234 2,492 414 Interest 349 --- 49,167 Loans 1,106,116 - 876,239 -- Due from Capital Projects Funds - - - 1,360,025 - Due from Debt Service Funds - - - 37,648 - Due from Low and Moderate Housing Funds - - - 818,295 - Due from city -- 8,032,773 -- Land held for resale 12,898,382 - 3,229,874 -- Allowance for decline in value - - (227,893) - - Advances to other funds 1,567,111 - - - - Total Assets 15,665,088$ 1,424,968$ 12,874,020$ 3,407,645$ 4,172,585$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 28,299$38,777$72,095$169,192$-$ Deposits from others - - 15,000 - - Due to Capital Projects Funds - - - - - Due to Debt Service Funds 818,295 558,499 801,526 - - Due to city 1,000,000 831,536 1,316,074 3,383,927 - Due to other governments --- 262,455 - Deferred revenue 1,106,116 - 791,858 45,664 - Salaries and benefits payable 3,889 52,731 --- Advances from other funds --- 1,567,109 - Total Liabilities 2,956,599 1,481,543 2,996,553 5,428,347 - Fund Balances: Nonspendable: Land held for resale 12,898,382 - 3,001,981 - - Long-term receivables - - 84,381 - - Advances from other funds 1,567,111 - - - - Restricted for: Debt utilization and/or by debt covenants - - - - 4,172,585 Community development - - 6,791,105 - - Unassigned (1,757,004) (56,575) - (2,020,702) - Total Fund Balances 12,708,489 (56,575) 9,877,467 (2,020,702) 4,172,585 Total Liabilities and Fund Balances 15,665,088$ 1,424,968$ 12,874,020$ 3,407,645$ 4,172,585$ Merged Project Area 40 AZUSA REDEVELOPMENT AGENCY COMBINING PROJECT AREA BALANCE SHEET ALL GOVERNMENTAL FUNDS JUNE 30, 2011 ASSETS Cash and investments Cash and investments with trustee Receivables: Tax increment Accounts Interest Loans Due from Capital Projects Funds Due from Debt Service Funds Due from Low and Moderate Housing Funds Due from city Land held for resale Allowance for decline in value Advances to other funds Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deposits from others Due to Capital Projects Funds Due to Debt Service Funds Due to city Due to other governments Deferred revenue Salaries and benefits payable Advances from other funds Total Liabilities Fund Balances: Nonspendable: Land held for resale Long-term receivables Advances from other funds Restricted for: Debt utilization and/or by debt covenants Community development Unassigned Total Fund Balances Total Liabilities and Fund Balances Capital Debt Projects Service Special Capital Debt Tax Revenue Projects Service Project Increment Funds Funds Funds 80,128$56,037$92,550$2,437,702$235,351$ ---- 4,122,490 -52 -- 1,010,437 100 17 580 30,521 2,923 --349 - 49,167 -- 1,106,116 876,239 - - - - - 1,360,025 66 - - 66 37,648 - - - - 818,295 1 51,448 - 8,032,774 51,448 -- 12,898,382 3,229,874 - - - - (227,893) - - - 1,567,111 - - 80,295$ 107,554$ 15,665,088$ 14,379,283$ 7,687,784$ -$-$28,299$110,872$169,192$ - - - 15,000 - - 66 - - 66 - 37,648 818,295 1,360,025 37,648 -- 1,000,000 2,147,610 3,383,927 -8,108 -- 270,563 -- 1,106,116 791,858 45,664 --3,889 52,731 - -2 -- 1,567,111 - 45,824 2,956,599 4,478,096 5,474,171 - - 12,898,382 3,001,981 - - - - 84,381 - - - 1,567,111 - - - 61,730 - - 4,234,315 80,295 - - 6,871,400 - - - (1,757,004) (56,575) (2,020,702) 80,295 61,730 12,708,489 9,901,187 2,213,613 80,295$ 107,554$ 15,665,088$ 14,379,283$ 7,687,784$ T O T A L S Ranch Center 41 AZUSA REDEVELOPMENT AGENCY COMBINING PROJECT AREA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Special Capital Capital Debt Debt Revenue Projects Projects Service Service Combined General Tax Housing Agency Tax Revenue Fund Fund Project Increment Bonds Revenues: Taxes and Assessments: Tax increment -$-$-$7,754,267$-$ Sales and use tax --- 1,491,600 - Use of Money and Property: Interest income 66,326 6,198 43,127 - 145,411 Rental income 1 -90,783 -- Other revenue: Miscellaneous 41,058 152 40,302 1 - Total Revenues 107,385 6,350 174,212 9,245,868 145,411 Expenditures: Current: General Government: Administrative costs 87,660 887,000 113,680 -- Professional services 72,028 193,107 178,953 -- Community Development: Operation of acquired property 22,256 ---- Rehabilitation costs 200 ---- Capital Outlay: Project improvement costs - 200,000 862,458 950,919 - Acquisition of fixed assets -499 --- Debt Service: Interest expense 44,195 8,537 443,041 2,801,361 3,179,765 Long-term debt repayments -- 14,319,450 812,461 1,135,000 Other Expenditures: Grant expenditures --1,417 -- Total Expenditures 226,339 1,289,143 15,918,999 4,564,741 4,314,765 Excess of Revenues over (under) Expenditures (118,954) (1,282,793) (15,744,787) 4,681,127 (4,169,354) Other Financing Sources (Uses) Transfers in - 1,388,568 - 69,454 4,121,327 Transfers out (1,592,160) - (2,919,646) (1,110,855) - Housing set-aside transfers in 1,582,207 - - - - Housing set-aside transfers out - - - (1,550,853) - Long-term debt issued 44,195 - 24,750 3,439,295 88,126 Pass through agreement payments - - - (2,662,049) - Payment to Educational Revenue Augmentation Fund - - - (504,536) - Contribution to City - (105,775) (3,291,712) (303,634) - Total Other Financing Sources (Uses)34,242 1,282,793 (6,186,608) (2,623,178) 4,209,453 Excess of Revenues and Other Sources over (under) Expenditures and Other Uses (84,712)$-$(21,931,395)$2,057,949$40,099$ Fund Balances Beginning of Year, as previously reported 12,793,201$(56,763)$31,808,314$(4,253,325)$4,132,486$ Restatements - 188 548 174,674 - Beginning of Year, as restated 12,793,201 (56,575) 31,808,862 (4,078,651) 4,132,486 Excess of Revenues and Other Sources over (under) Expenditures and Other Uses (84,712)- (21,931,395) 2,057,949 40,099 End of Year 12,708,489$ (56,575)$ 9,877,467$ (2,020,702)$ 4,172,585$ Merged Project Area 42 AZUSA REDEVELOPMENT AGENCY COMBINING PROJECT AREA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 Revenues: Taxes and Assessments: Tax increment Sales and use tax Use of Money and Property: Interest income Rental income Other revenue: Miscellaneous Total Revenues Expenditures: Current: General Government: Administrative costs Professional services Community Development: Operation of acquired property Rehabilitation costs Capital Outlay: Project improvement costs Acquisition of fixed assets Debt Service: Interest expense Long-term debt repayments Other Expenditures: Grant expenditures 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 Payment to Educational Revenue Augmentation Fund Contribution to City Total Other Financing Sources (Uses) Excess of Revenues and Other Sources over (under) Expenditures and Other Uses Fund Balances Beginning of Year, as previously reported Restatements Beginning of Year, as restated Excess of Revenues and Other Sources over (under) Expenditures and Other Uses End of Year Capital Debt Projects Service Special Capital Debt Tax Revenue Projects Service Project Increment Funds Funds Funds -$156,675$-$-$7,910,942$ ---- 1,491,600 454 19 66,326 49,779 145,430 --1 90,783 - -- 41,058 40,454 1 454 156,694 107,385 181,016 9,547,973 -- 87,660 1,000,680 - -- 72,028 372,060 - -- 22,256 -- --200 -- --- 1,062,458 950,919 ---499 - - 382,183 44,195 451,578 6,363,309 --- 14,319,450 1,947,461 ---1,417 - - 382,183 226,339 17,208,142 9,261,689 454 (225,489) (118,954) (17,027,126) 286,284 - 43,312 - 1,388,568 4,234,093 - - (1,592,160) (2,919,646) (1,110,855) - - 1,582,207 - - - (31,354) - - (1,582,207) - 388,620 44,195 24,750 3,916,041 - (95,179) - - (2,757,228) - (8,493) - - (513,029) - - - (3,397,487) (303,634) - 296,906 34,242 (4,903,815) 1,883,181 454$71,417$(84,712)$(21,930,941)$2,169,465$ 79,841$(9,687)$12,793,201$31,831,392$(130,526)$ - - - 736 174,674 79,841 (9,687) 12,793,201 31,832,128 44,148 454 71,417 (84,712) (21,930,941) 2,169,465 80,295$ 61,730$ 12,708,489$ 9,901,187$ 2,213,613$ T O T A L S Ranch Center 43 AZUSA REDEVELOPMENT AGENCY 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, 2010 July 1, 2011 Opening Fund Balance 12,793,201$ 12,708,489$ Less Unavailable Amounts: Land held for resale (11,582,075)$(12,898,382)$ Advance to other funds (1,483,635) (1,567,111) (13,065,710) (14,465,493) Available Low and Moderate Income Housing Funds (272,509) (1,757,004) Limitation (greater of $1,000,000 or four years set-aside) Set-Aside for last four years: 2010 - 2011 - 1,582,207 2009 - 2010 1,596,331 1,596,331 2008 - 2009 1,586,870 1,586,870 2007 - 2008 1,508,994 1,508,994 2006 - 2007 1,379,024 - Total 6,071,219$ 6,274,402$ Base Limitation 1,000,000$ 1,000,000$ Greater amount 6,071,219 6,274,402 Computed Excess/Surplus None None 44