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Home My WebLink About; ; 1994 Parking Authority Audit Report; 1994-06-30PARKING AUTHORITY OF THE CITY OF CARLSBAD Financial Statements and Supplemental Data Year Ended June 30, 1994 (With Independent Auditor's Report Thereon) PARK- J AUTHORITY OF THE CITY OF C .LSBAD Financial Statements and Supplemental Data Year Ended June 30, 1994 TABLE OF CONTENTS Independent Auditors' Report 1 Financial Statements: Combined Balance Sheet - All Governmental Fund Types and Account Group 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 3 Notes to Combined Financial Statements 4 Supplemental Data: Combining Balance Sheet - Debt Service Funds 10 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 11 Schedule of Insurance Coverage 12 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Board of Directors Parking Authority of the City of Carlsbad Carlsbad, California Independent Auditors' Report We have audited the accompanying component unit financial statements of the Parking Authority of the City of Carlsbad (the Authority), as of and for the year ended June 30, 1994, as listed in the accompanying table of contents. These component unit financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the Parking Authority of the City of Carlsbad as of June 30, 1994, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion of the component unit financial statements taken as a whole. The combining financial statements and schedule listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the component unit financial statements of the Parking Authority of the City of Carlsbad. Such information has been subjected to the auditing procedures applied in the audit of the component unit financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. August 10, 1994 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION P/, .ING AUTHORITY OF THE CITY OF G JBAD Combined Balance Sheet - All Governmental Fund Types and Account Group June 30, 1994 Governmental Fund Tvpes Debt General Service Account Group General Long-term Debt Totals (Memorandum Onlv) Assets and Other Debits Cash and investments (note 2) Net investment in direct financing leases (note 3) Accrued interest receivable Due from other funds (note 5) Amount available in debt service funds Amount to be provided for retirement of general long-term debt Total assets and other debits $3,000 $3.000 372,584 693,944 8,472 2,032 1.077.032 381,056 693.944 1.075.OOP 375,584 693,944 8,472 2,032 381,056 693.944 2.155.032 Liabilities and Fund Balances Liabilities: Due to other funds (note 5) Deferred revenue Revenue bonds payable (note 4) Total liabilities Fund balances: Reserved for debt service Unreserved - undesignated Total fund balances Total liabilities and fund balances $ -2,032 693,944 695.976 1.075.000 1.075.000 381,056 381.056 $3.000 1.077.032 1.075.OOP 2,032 693,944 1.075.000 1.770.976 381,056 3.000 384.056 2.155.032 See accompanying notes to combined financial statements. -2- PA. iNG AUTHORITY OF THE CITY OF G. JBAD Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Year Ended June 30, 1994 Revenues: Lease payments Interest income Total revenues General $ - Debt Service 46,955 32.287 79.242 Totals (Memorandum Only) 46,955 32.287 79.242 Expenditures: Principal retirement Interest Administrative Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year 3.000 Fund balances at end of year $3.000 200,000 93,200 293.200 (213.958) 18,108 (20.347) (2.239) (216,197) 597.253 381.056 200,000 93,200 2.239 295.439 (216.197) 20,347 (20.347) (216,197) 600.253 384.056 See accompanying notes to combined financial statements, -3- PARK 3 AUTHORITY OF THE CITY OF i ILSBAD Notes to Combined Financial Statements Year Ended June 30, 1994 (1) Organization and Summary of Significant Accounting Policies The Parking Authority of the City of Carlsbad (the Authority) was created pursuant to the Parking Law of 1949 and was authorized by the City Council on April 19, 1966 for the purpose of providing and expanding public parking facilities for the City of Carlsbad (the City). A five-member commission appointed by the City Council governs the Authority. The Authority is not subject to federal or state income taxes. The Authority is an integral part of the reporting entity of the City. The accounts of the Authority have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Authority. Only the accounts of the Authority are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad. The accounting policies of the Authority conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Authority are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and the account group are summarized by type in the financial statements. Fund types and the account group used by the Authority are as follows: GOVERNMENTAL FUND TYPES Governmental funds are used to account for the Authority's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following are the Authority's governmental fund types: General Fund The general fund is the general operating fund of the Authority. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of, general long-term debt principal, interest and related costs. PAR! G AUTHORITY OF THE CITY OF RLSBAD Notes to Combined Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (a) Basis of Presentation. (Continued) GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Authority's general long-term debt. It is used to account for all long-term obligations of the Authority. (b) Measurement Focus and Basis for Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities generally are included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available spendable resources. Governmental fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., both measurable and available). Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include interest income. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt, which is recognized when due. (c) Budgets The Authority does not adopt an annual budget; thus, no budgetary comparisons are presented. (d) Investments Investments are stated at cost or amortized cost which approximates market value. (e) Total Columns Total columns on the combined statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balance in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. -5- PARK 3 AUTHORITY OF THE CITY OF ^ .ILSBAD Notes to Combined Financial Statements (Continued) <* (2) Cash and Investments Cash and investments held by the Authority at June 30, 1994 consisted of the following: Deposits $ 3,000 Investments 372.584 $375.584 The Authority's investment policy and state statutes authorize the Authority to invest in obligations of the U.S. Treasury, its agencies and instrumentalities, commercial paper rated A-l by Standard and Poor's Corporation or P-l by Moody's Commercial Paper, banker's acceptances with a maximum maturity of 270 days, repurchase and reverse repurchase agreements, certificates of deposit with national and state licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments, San Diego County investment pool and the State Treasurer's investment pool. Under the California Government Code, a financial institution is required to secure deposits made by state or local governmental units by pledging securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. As of June 30, 1994, all of the Authority's deposits were classified as category 1. The bank balance equals the carrying amount. Classification of Investment by Credit Risk As defined in Governmental Accounting Standards Board Statement No. 3, investments in securities are categorized in the following manner: Category 1 - Investments that are insured or registered, which are held by the Authority or its agent in the Authority's name. Category 2 - Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Authority's name. Category 3 - Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Authority's name. -6- PARK, J AUTHORITY OF THE CITY OF C XSBAD Notes to Combined Financial Statements (Continued) (2) Cash and Investments. (Continued) Category Carrying Market Type of Investment 1 2 3 Amount Value U.S. Treasury notes and bills $ - 109,705 - 109,705 110,000 Government agency obligations ^_ 151.406 - 151.406 150.000 $ - 261.111 - 261,111 260,000 Investment in mutual funds - Pacific Horizons 111.473 111.474 Total investments $372.584 371.474 (3) Lease Agreements Leases have been executed between the Authority and the City under which the City agreed to make annual payments of $138,000 and $174,000 for the lease of a parking facility and its subsequent expansion, respectively. The leases have been recorded by the Authority as direct financing leases. Lease payments are due quarterly and terminate on the date of retirement of the related revenue bonds. Under the terms of the lease agreements and the bond resolutions, Debt Service Funds in excess of the next interest and principal payments may be used as follows: First, to maintain a reserve of $68,000 and $156,000, respectively, for the 1969 and the 1981 Bonds. Next, to pay the General Fund for any expenses of the Authority and to maintain the fund balance at $3,000, and then as credits to the City for rentals due under the leases. Due to the excess monies in the 1969 Bond Service Fund during the fiscal year ending June 30, 1994, no lease payments were required from the City under the parking facility lease. A lease payment of $46,955 was required during the fiscal year ending June 30, 1994 from the City under the expansion lease to cover debt service payments during the year for the 1981 bond issue. (4) Revenue Bonds Payable The following is a summary of changes in revenue bonds payable for the year ended June 30, 1994: -7- PARK G AUTHORITY OF THE CITY OF *LSBAD Notes to Combined Financial Statements (Continued) (4) Revenue Bonds Payable. (Continued) Series 1969 Series 1981 Totals Revenue bonds payable June 30, 1993 $350,000 925,000 1,275,000 Bonds retired 100.000 100.000 200.000 Revenue bonds payable, June 30, 1994 $250.000 825.OOP 1.075.000 Revenue bonds payable at June 30, 1994 were comprised of the following individual issues: 1969 Parking Revenue Bonds: 1969 Carlsbad Parking Authority Revenue Bonds, remaining principal due in amounts of $125,000 on October 1 of each year through 1995, interest payable on October 1 and April 1 at 6.4% per annum. The bonds are subject to call in whole or in part at the option of the Authority at prices ranging from 100.5% to 105% of the principal amount of the bonds. 1981 Parking Revenue Bonds: 1981 Carlsbad Parking Authority Revenue Bonds, remaining principal due in amounts ranging from $100,000 to $150,000 on February 1 of each year through 2001, interest payable on August 1 and February 1 at 8.0% per annum. Bonds maturing on or after February 1, 1991 are subject to call in whole or in part at the option of the Authority at prices ranging from 100.25% to 102% of the principal amount of the bonds. Debt service requirements to maturity for the revenue bonds payable are as follows: Year Ending June 30. Series 1969 Series 1981 Totals Less amounts interest 1995 1996 1997 1998 1999 Thereafter representing $137,000 129,000 - - -_ 266,000 16.000 166,000 158,000 150,000 167,000 157,000 309.000 1,107,000 282.000 303,000 287,000 150,000 167,000 157,000 309.000 1,373,000 298.000 Total revenue bonds payable $250.OOP 825.OPP 1.P75.0PP -8- PARK ; AUTHORITY OF THE CITY OF C .LSBAD Notes to Combined Financial Statements (Continued) (4) Revenue Bonds Payable. (Continued) At June 30, 1994, the Authority was in compliance with all significant debt covenants. (5) Due To and From Other Funds The following table shows amounts due from other funds within the Authority to other funds within the Authority at June 30, 1994: Interfund Interfund Receivable Payable Bond Service Funds: Series 1969 $1,893 Series 1981 139 Reserve Funds: Series 1969 - 1,893 Series 1981 - 139 Totals $2.032 2.032 -9- SUPPLEMENTAL DATA ARKING AUTHORITY OF THE CITY OF CARLSL Combining Balance Sheet - Debt Service Funds June 30, 1994 Assets Investments Net investment in direct financing lease Accrued interest receivable Due from other funds Total assets Bond Service Funds Reserve Funds Series 1969 Series 1981 Series 1969 Series 1981 Totals 67,842 151,421$147,591 30,827 1,689 1.893 $182.000 5,730 663,117 14 139 372,584 693,944 2,051 4,718 8,472 - - 2.032 69.893 156.139 1.077.032 Liabilities and Fund Balances Liabilities: Due to other funds $ - - 1,893 Deferred revenue 30.827 663.117 - Total liabilities 30,827 663,117 1,893 Fund balances - reserved for debt service 151.173 5.883 68.000 Total liabilities and fund balances S182.OOP 669.000 69.893 139 139 156.000 2,032 693.944 695,976 381.056 156.139 1.077.032 -10- PARKING AUTHORITY OF THE CITY OF CARLS. , Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds Year Ended June 30, 1994 Revenues: Lease payments Interest income Total revenues Bond Service Funds Reserve Funds Series 1969 Series 1981 Series 1969 Series 1981 Totals $ - 12.484 46,955 1.695 12.484 48.650 46,955 5.624 12.484 32.28712.484 5.624 12.484 79.242 Expenditures: Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 100,000 19.200 119.200 100,000 74.000 174.000 (106.716) (125.350) 5,625 12,483 (363) (1.876) 5.262 10.607 (101,454) (114,743) 252.627 120.626 S1S1.173 5.883 (5.624) (5.6241 68.000 68.000 200,000 93.200 12.484 (213.9581 18,108 (12.484) (20.347) (12.484) (2.239) (216,197) 156.000 597.253 156.000 381.056 -11- PAR! 3 AUTHORITY OF THE CITY OF ». ALSBAD Schedule of Insurance Coverage Year Ended June 30, 1994 Insurance coverage maintained by the City of Carlsbad with the Authority listed as additional insured at June 30, 1994 includes: Type of Coverage All risk including rental income Mobile equipment Honesty Blanket Bond Valuable papers Service interruption Amount of Coverage $500,000,000 5,000,000 1,500,000 25,000,000 5,000,000 Term 05/15/94 to 05/15/95 05/15/94 to 05/15/95 04/16/94 to 04/16/95 05/15/94 to 05/15/95 05/15/94 to 05/15/95 Effective January 1, 1986, the Authority has not been covered under a liability insurance policy but has been included under the City of Carlsbad's self-insurance program. -12- CARLSBAD REDEVELOPMENT AGENCY Component Unit Financial Statements Year Ended June 30, 1994 (With Independent Auditors' Report) iRLSBAD REDEVELOPMENT AGE .Y Component Unit Financial Statements Year Ended June 30, 1994 TABLE OF CONTENTS Page Financial Section: Independent Auditors' Report 1 Component Unit Financial Statements: Combined Balance Sheet - All Governmental Fund Types and Account Groups 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Special Revenue and Debt Service Funds 4 Notes to Component Unit Financial Statements 5 Auditors' Opinion on Compliance with Audit Guidelines for California Redevelopment Agencies 13 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS (714)474-2020 The Board of Commissioners Carlsbad Redevelopment Agency Carlsbad, California INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the Carlsbad Redevelopment Agency, a component unit of the City of Carlsbad, as of and for the year ended June 30, 1994, as listed in the table of contents. These component unit financial statements are the responsibility of the management of the Carlsbad Redevelopment Agency. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the component unit financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the component unit financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall component unit financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the Carlsbad Redevelopment Agency at June 30, 1994, and the results of operations for the year then ended, in conformity with generally accepted accounting principles. September 23, 1994 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CARLSBAD REDEVELOPMENT AGENCY Combined Balance Sheet - All Governmental Fund Types and Account Groups June 30, 1994 Assets and Other Debits Cash and investments (note 3) Loan receivable Taxes receivable Interest receivable Due from City of Carlsbad Amount available in debt service fund Amount to be provided for retirement of advances Amount to be provided for retirement of bonds Governmental Fund Types Account Group Totals Special Debt Capital Long-term (Memorandum Only) Revenue Service Projects Debt 1994 1993 $1,402,574 102,387 5,527 21,093 1,199,592 2,005,865 2,702,775 22,109 17,709 23,668 6,111,214 6,877,662 102,387 102,387 27,636 51,145 62,470 48,037 1,199,592 2,045,683 2,045,683 1,787,772 8,369,823 8,369,823 7,924,846 13.449.317 13.449.317 9.397.228 Total assets and other debits S2.731.173 2.045,683 2.726.443 23.864.823 31.368.122 26.189.077 Liabilities and Fund Balances Liabilities: Accounts payable Accrued expenses Advances from the City of Carlsbad (note 5) Bonds payable (note 5) Total liabilities 715 9,905 10.620 33,048 20,114 33,763 30,019 35,349 21,573 8,369,823 8,369,823 7,924,846 - 15.495.000 15.495.000 11.185.000 53.162 23.864.823 23.928.605 19.166.768 Fund balances: Reserved for loan receivable (note 7) Reserved for debt service (note 7) Reserved for low and moderate income housing (note 7) Reserved for encumbrances (note 7) Unreserved: Designated for approved capital projects (note 7) Undesignated (note 7) Total fund balances 102,387 1,817,758 800,408 2,045,683 42,116 2,071,685 559.480 2.720.553 2.045.683 2.673.281 102,387 102,387 2,045,683 1,787,772 1,817,758 2,319,379 42,116 211,532 2,872,093 2,459,371 559.480 141.868 7.439.517 7.022.309 Total liabilities and fund balances $2.731.173 2.726.443 23.864.823 31.368.122 26.189.077 See accompanying notes to component unit financial statements. -2- CARLSBAD REDEVELOPMENT AGENCY Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Year Ended June 30, 1994 Totals Revenues: Property tax increment Intergovernmental Charges for services Interest Miscellaneous Total revenues Expenditures: General government Housing and welfare Capital outlay Debt service: Principal Interest and fiscal charges Payment to refunded bond escrow agent (note 5) Debt issuance costs State mandated payment (note 8) Total expenditures 101.494 Special Debt Revenue Service $ 322,067 1,288,269 58,762 61,391 162 380,991 1.349.660 101.494 7,385 907.790 1,709.777 489,113 92.472 Capital Projects 30,800 37,426 113,471 26.572 208.269 608,069 2,301,117 - - (Memorandum 1994 1,610,336 1 30,800 37,426 233,624 26.734 1.938.920 2 608,069 101,494 2,301,117 7,385 907.790 1 1,709,777 489,113 92.472 Onlv) 1993 ,652,576 29,800 750 356,750 19.174 .059.050 753,104 81,437 231,860 290.000 .329,644 257.278 Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Proceeds of advances from the City of Carlsbad Payment to refunded bond escrow agent Proceeds of refunding bonds Proceeds of bonds, net of discount Administrative fee received from bond refunding Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses 279,497 Fund balances at beginning of year 2.441.056 Fund balances at end of year $2.720.553 3.206.537 2.909.186 6.217.217 2.943.323 279.497 (1.856.877) (2.700.9171 (4.278.297) (884.273) 3,129,717 3,129,717 464,061 (2,580,717) (549,000) (3,129,717) (464,061) - - - - _ 474,777 (10,964,372) 10,964,372 4,220,728 _ 474,777 (10,964,372) 10,964,372 4,220,728 — _ 464,061 - -- 36.616 2.114.788 2.580.717 4.695.SOS 500.677 257,911 (120,200) 1.787.772 2.793.481 2.045.683 2.673.281 417,208 (383,596) 7.022.309 7.405.90S 7.439.517 7.022.309 See accompanying notes to component unit financial statements. -3- CARLSBAD REDEVELOPMENT AGENCY Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Special Revenue and Debt Service Funds Year Ended June 30, 1994 Special Revenue Debt Service 395.000 124,290 Budget Revenues: Property tax increment Interest Miscellaneous Total revenues Expenditures: Housing and welfare Debt service: Principal Interest and fiscal charges Payment to refunded bond escrow agent Debt issuance costs State mandated payment (note 8) Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers out Payment to refunded bond escrow agent Proceeds of refunding bonds - Proceeds of bonds, net of discount - Total other financing sources (uses) - Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses 270,710 Fund balances at beginning of year 2.441.056 Fund balances at end of year S2.711.766 124.290 270.710 Variance- Favorable Actual (Unfavorable)Budget Actual on Budgetary Variance- Basis Favorable (Note 2) (Unfavorable! $ 320,000 75,000 - 322,067 58,762 162 2,067 (16.238) 162 1,280,000 60,000 - 1,288,269 61.391 - 8,269 1,391 - 380.991 101,494 101.494 279.497 279,497 2.441.056 (14.009) 1.340.000 1.349.660 22,796 22.796 8.787 (2.045.940) (1.382.100) (2,580,717) (2.580,717) (10,964,372) (10,964.372) 10,964,372 10,964,372 4.220.728 4.220.728 8,787 1.640.011 1.640.011 (405,929) 257,911 1.787.772 1.787.772 9.660 235,000 859,550 1,709,777 489,113 92.500 3.385.940 7,385 433,013 1,709,777 489,113 92.472 2.731.760 227,615 426,537 28 654.180 663.840 663,840 2.720.553 8.787 1.381.843 2.Q4S.683 663.840 See accompanying notes to component unit financial statements. -4- CARLSBAD REDEVELOPMENT AGEiwY Notes to Component Unit Financial Statements Year Ended June 30, 1994 (1) Organization and Summary of Significant Accounting Policies The Carlsbad Redevelopment Agency (the Agency) was established in July 1976 with the adoption of Ordinance No. 1191 by the Carlsbad City Council pursuant to the California Community Redevelopment Law, now codified as Part 1, Division 24, of the State of California Health and Safety Code. The Agency has the broad authority to acquire, rehabilitate, develop, administer and sell or lease property. The Agency is not subject to federal or state income taxes. The principal objectives of the Agency are to eliminate blighted influences within the "Village Area" of the City of Carlsbad, stimulate and attract private investment, generate added employment through increased specialty goods and services and expand the City's sales tax revenue. The Agency is an integral part of the reporting entity of the City of Carlsbad (the City). The funds and account group of the Agency have been included within the scope of the general purpose financial statements of the City because the City Council is the governing board over the operations of the Agency. Only the funds and account group of the Agency are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad, California. The accounting policies of the Agency conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Agency are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and account group are summarized by type in the financial statements. The fund types and account group used by the Agency are as follows: GOVERNMENTAL FUND TYPES Governmental funds are used to account for the Agency's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following are the Agency's governmental fund types: -5- .RLSBAD REDEVELOPMENT AGEi f Notes to Component Unit Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (a) Basis of Presentation. (Continued) Special Revenue Funds Special revenue funds are used to account for revenues derived from specific sources (other than major capital projects) that are restricted by law or administrative regulation to expenditures for specified purposes. Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of general long-term debt principal, interest and related costs. Capital Projects Funds Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Agency's general long-term debt. This account group is used to account for all long-term obligations of the Agency. (b) Measurement Focus and Basis for Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities are included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available spendable resources. The modified accrual basis of accounting is utilized by the governmental fund types. Revenues are recognized when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include the tax increment on real property taxes and interest income. -6- v .RLSBAD REDEVELOPMENT AGEN , / Notes to Component Unit Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (b) Measurement Focus and Basis for Accounting. (Continued) Real property taxes are levied on October 15 against owners of record at March 1. The taxes are due in two installments, on November 1 and February 1, and become delinquent after December 10 and April 10, respectively. Tax liens attach annually as of 12:01 a.m. on the first day of March in the fiscal years for which the taxes are levied. Under the provisions of NCGA Interpretation 3, property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt which is recognized when due. (c) Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the governmental funds. Encumbrances outstanding at year-end do not constitute expenditures or liabilities, but are reported as reservations of fund balance for subsequent-year expenditures. (d) Cash and Investments The Agency participates in the pooled cash and investment fund of the City of Carlsbad. Pooled investments are stated at cost or amortized cost. The Agency's equity in the pooled cash is included in the financial statements as cash and investments. Interest earned as a result of the pooling is allocated to the Agency based on average monthly cash balances. (e) Compensated Absences Vacation pay is payable to employees at the time used or upon termination of employment. The cost of accumulated vacation expected to be paid in the next 12 months is recorded as a fund liability; currently no amounts are expected to be paid after 12 months. (f) Total Columns Total columns on the accompanying combined financial statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balance in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. -7- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (2) Budgetary Data The budget for the Agency is established by the City of Carlsbad. The City Manager is authorized to make transfers of appropriated amounts within a fund for up to $25,000. Revisions that alter the total appropriations of any fund must be approved by the City Council with the exception of budget adjustments which involve offsetting revenues and expenditures. The City Manager is authorized to increase or decrease an appropriation for a specific purpose where the appropriation is offset by unbudgeted revenue which is designated for said specific purpose. Quarterly budget reviews are conducted each year and any major changes to the adopted budget are approved by the City Council at that time. Budgets are adopted on the modified accrual basis, except that encumbrances are treated as budgeted expenditures in the year purchases are committed. Expenditures may not exceed budgeted appropriations at the departmental level. Unencumbered appropriations lapse at year-end. Annual budgets are adopted for the special revenue and debt service funds. The following schedule is a reconciliation of the budgetary and GAAP Debt Service fund balances: Debt Service Fund balance - budgetary basis $2,045,683 Debt service on advances from City of Carlsbad - not budgeted (474,777) Proceeds of advances 474.777 Fund balance - GAAP basis $2.045.683 (3) Cash and Investments The Agency participates in the pooled cash fund of the City. Authority for Deposits and Investments The Agency's investment policy and state statutes authorize the Agency to invest in demand and time deposits, obligations of the U.S. Treasury, its agencies and instrumentalities, commercial paper rated A-l by Standard and Poor's Corporation or P-l by Moody's Commercial Paper record, banker's acceptances with a maximum maturity of 270 days, repurchase and reverse repurchase agreements, certificates of deposit with national and state licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments, and the State Treasurer's investment pool. State statutes require that all deposits be insured or collateralized. Depositories holding public funds on deposit are required to maintain collateral in the form of a pool of securities with the agent of the depository having a market value of at least 10 to 50 percent in excess of the total amount of all public funds on deposit. -8- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (31 Cash and Investments. (Continued) Classification of Investments by Credit Risk: As defined in Governmental Accounting Standards Board Statement No. 3, the Agency's investments in securities are categorized in the following manner: Category 1 - Category 2 - Category 3 - Investments that are insured or registered, which are held by the Agency or its agent in the Agency's name. Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Agency's name. Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Agency's name. At June 30, 1994, the Agency had the following investments which are not categorizable by credit risk: Investment Investment in mutual funds Investment in state pool (LAIF) Investment in City's pooled cash fund Total investments The carrying amount equals the market value. Carrying Amount $ 717,983 2,757,774 2.635.457 $6.111.214 (4) Pension Plan The Agency's employees are included in the City's pension plan which is administered by the California Public Employees Retirement System (PERS). PERS is an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. All full-time employees are eligible to participate as members of the PERS. Benefits vest after an employee has been a member of the plan for five years. Employees are eligible to retire after age 50 with 5 years of credited service. Annual retirement benefits are determined based on age at retirement, the length of membership service and the amount of earnings based on the highest twelve consecutive months average. The PERS also provides death and disability benefits. These benefit provisions and all other requirements are established by state statute. -9- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (4) Pension Plan. (Continued) Employees are required to make contributions equaling 7% of gross pay. This is paid by the City for the benefit of the employees in lieu of salary. The City is also required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted by the PERS Board of Administration. Additional disclosures required by Governmental Accounting Standards Board Statement No. 5 are not available for the Agency as a separate entity. This information for the City's reporting entity is presented in the Comprehensive Annual Financial Report of the City of Carlsbad. Long-term Debt The following is a summary of changes in long-term debt for the year ended June 30, 1994: Advances from the City of Carlsbad Bonds payable Total Principal Balance at July 1. 1993 Additional Obligations $ 7,924,846 474,777 11.185.000 15.495.000 $19.109.846 15.969.777 Deletions 29,800 11.185.000 11.214.800 Principal Balance at June 30. 1994 8,369,823 15.495.000 23.864.823 Since activation of the Redevelopment Agency in July 1976, the City has advanced the Agency monies for approved expenditures. Advances from the City bear interest equal to the City's interest rate received on pooled investments. There is no stated maturity date. On August 15, 1993, the Agency issued $15,495,000 in tax allocation bonds with an average interest rate of 5.3% to finance redevelopment activities within the Village Redevelopment Project Area and to advance refund $11,185,000 of outstanding 1988 series tax allocation bonds with an average interest rate of 7.3%. The bonds were purchased at a discount of $309,900. Proceeds of $10,964,372 plus an additional $1,709,777 of 1988 series monies were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1988 series bonds. As a result, the 1988 series bonds are considered to be defeased and the liability for those bonds has been removed from the general long-term debt account group. -10- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (5) Long-term Debt. (Continued) Payments to the escrow agent from resources provided by the refunding issue have been classified as other financing uses - payment to refunded bond escrow agent. Payments to the escrow agent from other resources have been classified in the accompanying financial statements as debt service expenditures - payment to refunded bond escrow agent. As a result of the advance refunding, the Agency reduced its future cash payments by almost $1,500,000 and obtained an economic gain (difference between the present values of the debt service payments on the old and new debt) of approximately $364,000. Debt service requirements to maturity for the bonds, including sinking fund payments, are as follows: 1995 $ 815,340 1996 1,049,040 1997 1,046,178 1998 1,047,659 1999 1,048,352 2000-2004 5,221,575 2005-2009 5,215,425 2010-2014 5,201,606 2015-2019 5,179,694 2020-2024 5.143.341 30,968,210 Less amounts representing interest (15.473.210) Bonds payable $15.495.000 At June 30, 1994, the Agency was in compliance with all significant debt covenants. (6) Obligations Under Operating Leases In June 1988, the Agency entered into an agreement to lease a parking lot on State Street from a private party. The lease requires monthly rental payments for twenty years. Total annual rent payments are $46,517 for fiscal year ending June 30, 1995 with annual cost of living adjustments required and market value adjustments required every 5 years after fiscal year ending June 30, 1988. The future minimum rental payments have been calculated with a 6% annual cost of living adjustment. In May 1990, the Agency entered into an agreement to lease a parking lot on Carlsbad Village Drive from a private party. The lease requires annual rental payments for five years. Total annual payments are $43,500 for fiscal year ending June 30, 1995. The Agency has a purchase option on the property which it intends to exercise at the end of the fifth year. The following is a schedule by year of future minimum rental payments required under operating leases at June 30, 1994: -11- CARLSBAD REDEVELOPMENT AGENCY Notes to Component Unit Financial Statements (Continued) (6) Obligations Under Operating Leases. (Continued) Year Ending June 30. Annual Rental Payments 1995 $ 90,017 1996 49,308 1997 52,266 1998 55,402 1999 58,726 Thereafter 715.333 Total minimum lease payments $1.021.052 (7) Fund Balances Reserves for the loan receivable and low and moderate income housing are established to show that certain assets are already committed for other purposes and are not available for discretionary expenditures. Reserve for debt service represents resources legally restricted to the payment of general long-term debt principal and interest maturing in future years. Reserve for encumbrances represents commitments related to unperformed contracts for services and undelivered goods. Unreserved-designated for approval capital projects represents the fund balance expected to be used for the acquisition or construction of major capital facilities. Unreserved-undesignated balances represent the fund balance remaining after reduction for reserved and designated fund balances. (8) State Mandated Payment The Agency was required by the State Department of Finance, pursuant to a letter dated October 1, 1993, to shift a portion of tax increment money to the Educational Revenue Augmentation Fund. The Agency funded its $92,472 payment from Agency tax increment funds. -12- CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS MAIN IRVINE, CALIFORNIA 92714 (714) 474-2020 The Board of Commissioners Carlsbad Redevelopment Agency Carlsbad, California Auditors' Opinion On Compliance With Audit Guidelines for California Redevelopment Agencies We have audited the combined financial statements of the Carlsbad Redevelopment Agency (a component unit of the City of Carlsbad, California) as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Compliance with laws and regulations applicable to the Carlsbad Redevelopment Agency is the responsibility of the Carlsbad Redevelopment Agency's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Carlsbad Redevelopment Agency's compliance with provisions of laws and regulations contained in the Guidelines For Compliance Audits of California Redevelopment Agencies issued by the State Controller's Office, Division of Local Government Fiscal Affairs. The results of our tests indicated that, with respect to the items tested, the Carlsbad Redevelopment Agency complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Carlsbad Redevelopment Agency had not complied, in all material respects, with those provisions. This report is intended for the information of the Carlsbad Redevelopment Agency, and the State Controller's Office. However, this report is a matter of public record and its distribution is not limited. September 23, 1994 -13- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Carlsbad, California Single Audit Report on Federal Assistance Programs For the fiscal year ended June 30, 1994 CITY OF CARLSBAD Single Audit Report on Federal Assistance Programs For the fiscal year ended June 30, 1994 TABLE OF CONTENTS Page Independent Auditors' Report on Schedule of Federal Financial Assistance 1 Schedule of Federal Financial Assistance 2 Independent Auditors' Report on Internal Control Structure Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 3 Independent Auditors' Report on Internal Control Structure Used in Administering Federal Financial Assistance Programs 5 Independent Auditors' Report on Compliance Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 8 Independent Auditors' Report on Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs 9 Independent Auditors' Report on Compliance with General Requirements Applicable to Federal Financial Assistance Programs 10 Independent Auditors' Report on Compliance with Specific Requirements Applicable to Nonmajor Federal Financial Assistance Program Transactions 11 Findings and Recommendations 12 Status of Prior Audit Findings 13 C^OlN rv\LJ CERTIFIED PUBLIC ACCOUNTANTS * PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714)474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. These general purpose financial statements are the responsibility of the management of the City of Carlsbad, California. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements of the City of Carlsbad, California, taken as a whole. The accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in that schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. September 23, 1994 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Schedule of Federal Financial Assistance For the fiscal year ended June 30, 1994 U.S. Department of Housing and Urban Development Direct Assistance: Section 8 Certificate Program Section 8 Housing Voucher Program Community Development Block Grant Subtotal Federal Domestic Program Assistance Identification Number Number 14.856 14.855 14.218 CA16E077006 /016 CA16V007002 7006 B93MC060563 Federal Federal Assistance Assistance Received (1) Expenditures $2,127,570 563,165 1.185.918 3,876,653 2,129,699 544,883 2.350.744* 5,025,326 U.S. Department of Health and Human Services Pass-through from the County of San Diego: Senior Nutrition Program 13.635 30718 70,151 77,238 U.S. Department of Afiriculture Pass-through from the County of San Diego: Senior Nutrition Program 10.558 30718 28,116 28,116 U.S. Department of Education Pass-through from the California State Library: Library Services 84.034 40-2422 40-2576 40-2646 T2-918 82,316 92,550 U.S. Federal Emergency Management Aeencv (FEMA1 Pass-through from the California Office of Emergency Services: FEMA Assistance Total federal financial assistance 83.516 979-073-11194 65.609 $4.122.845 5.223.230 (1) Based on actual cash receipts from July 1, 1993 through June 30, 1994. * Includes $1,199,592 for a land purchase to be financed from the proceeds of a Section 108 loan. See accompanying independent auditors' report. -2- CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. We have conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the City of Carlsbad, California, for the year ended June 30, 1994, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the City of Carlsbad, California, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions, or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purposes of this report, we have classified the significant internal control structure policies and procedures in the following categories: revenues/receipts, purchases/disbursements and payroll/personnel. -3- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION The Honorable Members of City Council City of Carlsbad, California Page Two For all of the control categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. However, we noted certain matters involving the internal control structure and its operation that we have reported to the management of the City of Carlsbad, California, in a separate letter dated September 23, 1994. This report is intended for the information of City management and the agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. September 23, 1994 #CONRAD ^ASSOCIATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS CERTIFIED PUBLIC ACCOUNTANTS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of the City of Carlsbad, California, for the year ended June 30, 1994 and have issued our report thereon dated September 23, 1994. We have also audited the City's compliance with requirements applicable to major federal financial assistance programs and have issued our report thereon dated September 23, 1994. We conducted our audits in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget (OMB) Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and about whether the City of Carlsbad, California, complied with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audits for the year ended June 30, 1994, we considered the internal control structure of the City of Carlsbad, California, in order to determine our auditing procedures for the purpose of expressing our opinions on the general purpose financial statements of the City of Carlsbad, California, and on the compliance of the City of Carlsbad, California with requirements applicable to major programs and to report on the internal control structure in accordance with OMB Circular A-128. This report addresses our consideration of internal control structure policies and procedures relevant to compliance with requirements applicable to federal financial assistance programs. We have addressed internal control structure policies and procedures relevant to our audit of the general purpose financial statements in a separate report dated September 23, 1994. The management of the City of Carlsbad, California, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations -5- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION The Honorable Members of City Council City of Carlsbad, California Page Two in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures used in administering federal financial assistance programs in the following categories. Accounting Controls • Purchases/Disbursements • Payroll/Personnel • Revenues/Receipts Administrative Controls General Requirements: Political Activity Davis-Bacon Act Civil Rights Cash Management Relocation Assistance and Real Property Management Federal Financial Reports Allowable Costs/Cost Principles Drug-Free Workplace Act Administrative Requirements Spec fie Requirements: Types of Services Eligibility Matching, Level of Effort, or Earmarking Reporting Release of Funds Environmental Review Program Income Monitoring Subrecipients Claims for Reimbursements For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. -6- The Honorable Members of City Council City of Carlsbad, California Page Three During the year ended June 30, 1994, the City of Carlsbad, California, expended 96 percent of its total federal financial assistance under major federal financial assistance programs. We noted a certain matter involving the internal control structure and its operation that we consider to be a reportable condition under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the City of Carlsbad, California's ability to administer federal financial assistance programs in accordance with applicable laws and regulations. The reportable condition noted is found in the Findings and Recommendations section of this report. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that noncompliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control structure policies and procedures used in administering federal financial assistance would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe that the reportable condition described in the findings and recommendations section is not a material weakness. We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Carlsbad, California, in a separate letter dated September 23, 1994. This report is intended for the information of the City management, and the agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. September 23, 1994 -7- CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the general purpose financial statements of the City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the City of Carlsbad, California, is the responsibility of the management of the City of Carlsbad, California. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that for the items tested, the City of Carlsbad, California, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. The results of our audit procedures disclosed no immaterial instances of noncompliance with the requirements referred to above. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. September 23, 1994 -8- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOCIATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. We have also audited compliance by the City of Carlsbad, California, with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; release of funds; environmental review; program income; monitoring subrecipients; and claims for reimbursements that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1994. The management of the City of Carlsbad, California, is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit of compliance with those requirements in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures did not disclose noncompliance with the requirements referred to above. any immaterial instances of In our opinion, the City of Carlsbad, California, complied, in all material respects, with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; release of funds; environmental review; program income; monitoring subrecipients; and claims for reimbursements that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1994. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. September 23, 1994 -9- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION V-^OlN IVvLj CERTIFIED PUBLIC ACCOUNTANTS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE c IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. We have applied procedures to test whether the City of Carlsbad, California, has complied with the following requirements applicable to its federal financial assistance programs, the major programs of which are identified in the schedule of federal financial assistance, for the year ended June 30, 1994: political activity, Davis-Bacon Act, civil rights, cash management, relocation assistance and real property management, federal financial reports, allowable costs/cost principles, Drug-Free Workplace Act and administrative requirements. Our procedures were limited to the applicable procedures described in the Office of Management and Budget's "Compliance Supplement for Single Audits of State and Local Governments". Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Carlsbad, California, had not complied, in all material respects, with those requirements. Also, the results of our procedures did not disclose any immaterial instances of noncompliance with those requirements. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. */ ' 4 September 23, 1994 -10- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOC1ATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET. SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Honorable Members of City Council City of Carlsbad, California INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS We have audited the general purpose financial statements of City of Carlsbad, California, as of and for the year ended June 30, 1994, and have issued our report thereon dated September 23, 1994. In connection with our audit of the 1994 general purpose financial statements of the City of Carlsbad, California, and with our consideration of the City's internal control structure used to administer federal financial assistance programs, as required by Office of Management and Budget Circular A-128, "Audits of State and Local Governments", we selected transactions applicable to certain nonmajor federal financial assistance programs for the year ended June 30, 1994. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed, eligibility, and special requirements that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Carlsbad, California, had not complied, in all material respects, with those requirements. Also, the results of our procedures did not disclose any immaterial instances of noncompliance with those requirements. This report is intended for the information of City management and agencies that provided federal financial assistance to the City. This restriction is not intended to limit the distribution of this report, which is a matter of public record. September 23, 1994 -11- MEMBERS Of AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY OF CARLSBAD Findings and Recommendations For the fiscal year ended June 30, 1994 HUD Section 8 Utility Allowances During our single audit testwork over the Section 8 Housing Assistance Payments Program, we noted seven instances where the building type noted on the Inspection Checklist was not used to calculate the utility allowance. The caseworker computing the utility allowance will occasionally use a building type allowance that is not consistent with the Inspection Checklist. Not using the proper building type may result in a miscalculation of the utility allowance, resulting in a Housing Assistance Payment being made that is not in accordance with HUD requirements. Recommendation We recommend that efforts be made to properly ensure that the utility allowance is computed based upon the correct building type. Any discrepancies as to the type of structure involved need to be investigated and the resolution properly documented. City Response Regarding Corrective Actions Planned "The Housing Authority agrees with the Auditor's recommendation. During the single audit, seven instances were noted where the building type identified on the Inspection Checklist was inconsistent with the building type documented by the owner on the Lease Agreement. Staff have been instructed to ensure that the building type identified by the owner and the inspector is consistent. When inconsistencies occur, staff have been instructed to investigate and properly document the resolution of those discrepancies. Additionally, the inspector and staff have been educated to properly identify buildings by type per HUD regulations." -12- CITY OF CARLSBAD Status of Prior Audit Findings The prior year single audit findings have been adequately resolved. -13- CITY OF CARLSBAD PUBLIC IMPROVEMENT CORPORATION Financial Statements and Supplemental Data Year Ended June 30, 1994 (With Independent Auditors' Report Thereon) CITY OF C ^LSBAD PUBLIC IMPROVEMENT L ,RPORATION Financial Statements and Supplemental Data Year Ended June 30, 1994 TABLE OF CONTENTS Page Independent Auditors' Report 1 Financial Statements: Combined Balance Sheet - Governmental Fund Type and Account Group 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 3 Notes to Combined Financial Statements 4 Supplemental Data: Combining Balance Sheet - Debt Service Funds 8 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds 9 CONRAD CERTIFIED PUBLIC ACCOUNTANTS SSOCIATES A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92714 (714) 474-2020 The Board of Directors City of Carlsbad Public Improvement Corporation Carlsbad, California Independent Auditors' Report We have audited the accompanying component unit financial statements of the City of Carlsbad Public Improvement Corporation (the Corporation) as of and for the year ended June 30, 1994, as listed in the accompanying table of contents. These component unit financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these component unit financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of the City of Carlsbad Public Improvement Corporation as of June 30, 1994, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the component unit financial statements taken as a whole. The combining financial statements listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the component unit financial statements of the City of Carlsbad Public Improvement Corporation. Such information has been subjected to the auditing procedures applied in the audit of the component unit financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. August 10, 1994 -1- MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION CITY L CARLSBAD PUBLIC IMPROVEMENT COL rJATION Combined Balance Sheet - Governmental Fund Type and Account Group June 30, 1994 Governmental Fund Type Debt Service Account Group General Totals Long-term (Memorandum Debt Only) Cash and investments held by trustee (note 2) $ 872,882 - 872,882 Net investment in direct financing lease (note 3) 6,654,771 - 6,654,771 Interest receivable 29,972 - 29,972 Amount available in debt service funds - 900,229 900,229 Amount to be provided for retirement of certificates of participation - 6.654.771 6.654.771 Total assets $7.557.625 7.555.000 15.112.625 Liabilities and Fund Balance Liabilities: Deferred revenue $6,654,771 Certificates of participation payable (note 4) - Total liabilities 6.654.771 7.555.000 7.555.000 6,654,771 7.555.000 14.209.771 Fund balances: Reserved for arbitrage (note 5) Reserved for debt service (notes 4 and 5) Total fund balances Total liabilities and fund balances $ 2,625 900.229 902.854 2,625 900.229 902.854 $7.557.625 7.555.000 15.112.625 See accompanying notes to combined financial statements, -2- CITY . CARLSBAD PUBLIC IMPROVEMENT CO vRATION Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds Year Ended June 30, 1994 Revenues: Lease payments Interest on investments Total revenues Debt Service $792,025 74.124 866.149 Expenditures: Principal Interest Administrative Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Total other financing sources (uses) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 275,000 590,054 4.317 869.371 (3.222) 76,352 (76.352) (3,222) 906.076 $902.854 See accompanying notes to combined financial statements, -3- CITY OF L .iLSBAD PUBLIC IMPROVEMENT v APORATION Notes to Combined Financial Statements Year Ended June 30, 1994 (1) Organization and Summary of Significant Accounting Policies The City of Carlsbad Public Improvement Corporation (the Corporation) was organized on June 1, 1988 under the Nonprofit Public Benefit Corporation law for the purpose of financing and constructing certain improvements on the parcel of property known as Hosp Grove. The Corporation is not subject to federal or state income taxes. The Corporation is an integral part of the reporting entity of the City of Carlsbad, California (the City). The accounts of the Corporation have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Corporation. Only the accounts of the Corporation are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad. The accounting policies of the Corporation conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant policies: (a) Basis of Presentation The accounts of the Corporation are organized on the basis of funds and an account group, each of which is considered to be a separate accounting entity. The operations of each fund and account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. The various funds and the account group are summarized by type in the financial statements. The fund types and the account group used by the Corporation are as follows: GOVERNMENTAL FUND TYPE Governmental funds are used to account for the Corporation's expendable financial resources and related liabilities. The measurement focus is upon determination of changes in financial position. The following is the Corporation's governmental fund type: Debt Service Funds Debt service funds are used to account for the accumulation of resources for, and payment of, general long-term debt principal, interest and related costs. GENERAL LONG-TERM DEBT ACCOUNT GROUP This account group is used to establish accounting control and accountability for the Corporation's general long-term debt. It is used to account for all long-term obligations of the Corporation. CITY OF L ALSEAD PUBLIC IMPROVEMENT ^ APORATION Notes to Combined Financial Statements (Continued) (1) Organization and Summary of Significant Accounting Policies. (Continued) (b) Measurement Focus and Basis of Accounting Governmental fund types are accounted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities are generally included on their balance sheets, and the reported fund balance provides an indication of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available, spendable resources. Governmental fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual (i.e., both measurable and available). Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Revenues that are accrued include interest income. Governmental fund expenditures are recognized when the liability is incurred, except for principal and interest on long-term debt, which is recognized when due. (c) Budgets The Corporation does not adopt an annual budget, therefore, no budgetary comparisons are presented. (d) Investments Investments are stated at cost or amortized cost which approximates market value. (e) Total Columns Total columns on the combined statements are captioned "Totals (Memorandum Only)" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in fund balances in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. -5- CITY OF C tLSBAD PUBLIC IMPROVEMENT ^ 1PORATION Notes to Combined Financial Statements (Continued) (2) Cash and Investments Authority for Investments The Trust Agreement by and among the Bank of America, as successor trustee, the Corporation and the City of Carlsbad, dated June 1, 1988, authorizes the trustee to invest in Federal Treasury Securities, Federal Agency Securities, interest-bearing demand or time deposits, obligations of U.S. corporations having assets in excess of $500,000,000 and carrying one of the three highest ratings by Moody's and Standard and Poor's Corporation, repurchase agreements, money market funds, commercial paper rated A-l by Standard and Poor's Corporation and P-l by Moody's Commercial Paper with original maturities of not more than 180 days, bankers acceptances with maturities of not more than 270 days, and tax-exempt obligations rate in one of the three highest ratings by Moody's and Standard and Poor's Corporation. Classification of Investment by Credit Risk As defined in Governmental Accounting Standards Board Statement No. 3, investments in securities are categorized in the following manner: Category 1 - Investments that are insured or registered, which are held by the Corporation or its agent in the Corporation's name. Category 2 - Uninsured and unregistered investments, for which the securities are held by the counterparty's trust department or agent in the Corporation's name. Category 3 - Uninsured and unregistered investments, for which the securities are held by the counterparty or by its trust department or agent, but not in the Corporation's name. As of June 30, 1994, the Corporation had $3,882 invested in mutual funds and $869,000 invested in a guaranteed investment contract which are not categorizable by credit risk. (3) Lease Agreements Under the terms of a lease agreement dated June 1, 1988, the City has leased property known as Hosp Grove to the Corporation and the Corporation has leased back to the City the same property and all improvements constructed thereon. The Agreement requires the City to pay semiannual lease payments to the Corporation equal to the debt service requirements of the Certificates of Participation issued by the Corporation on June 1, 1988 (the Certificates). The lease payments are due on each January 15 and July 15 until the Certificates have been paid in full. In addition, the City must pay all taxes, assessments, insurance, maintenance and utilities on the property and its improvements. The lease expires on August 1, 2008 or upon the date of retirement of the Certificates. The lease has been accounted for as a direct financing lease. -6- CITY OF L <*LSBAD PUBLIC IMPROVEMENT v RPORATION Notes to Combined Financial Statements (Continued) (4) Certificates of Participation The Corporation issued the Certificates on June 1, 1988 in the amount of $8,690,000 pursuant to a Trust Agreement by and among the Corporation, the City and the Trustee. The Certificates represent an undivided interest in the lease payments made by the City of Carlsbad to the Corporation. Interest is payable at rates ranging from 5.75% to 7.6% per annum. The Certificates mature on August 1 of each year through 2008. Certificates maturing on August 1, 2008 are subject to mandatory redemption on August 1 in each year on or after August 1, 2001, in amounts reflected in the debt service requirements below. Certificates maturing on or after August 1, 1999 are subject to call in whole or in part at the option of the Corporation at prices ranging from 100% to 102% of the principal amount of the Certificates. The Corporation is required to maintain a debt service reserve of $869,000. As of June 30, 1994, the balance is $900,230. Debt service requirements to maturity for the Certificates are as follows: Year ending June 30. 1994 $ 866,873 1995 866,733 1996 859,795 1997 860,985 1998 859,880 1999-2003 4,281,360 2004-2009 4.251.200 $12,846,826 Less amounts representing interest (5.291.826) & 7.555.000 Changes in general long-term debt from the previous year result from payments of principal on the Certificates. At June 30, 1994, the Corporation was in compliance with all significant debt covenants. (5) Fund Balances The reserve for arbitrage represents amounts which may be owed to the federal government under the Tax Reform Act of 1986. The reserve for debt service represents resources legally restricted to the payment of general long-term debt principal and interest maturing in future years. -7- SUPPLEMENTAL DATA CITY v. CARLSBAD PUBLIC IMPROVEMENT CO. .RATION Combining Balance Sheet - Debt Service Funds June 30, 1994 Lease Payment Reserve Assets Cash and investments held by trustee Net investment in direct financing lease Interest receivable Total assets $ 3,057 6,654,771 7 $6.657.835 869,825 29.965 899.790 Total 872,882 6,654,771 29.972 7.557.625 Liabilities and Fund Balances Liabilities: Deferred revenue Total liabilities 6.654.771 6.654.771 6.654.771 6.654.771 Fund balances: Reserved for arbitrage Reserved for debt service Total fund balances Total liabilities and fund balances 2,625 439 3.064 899.790 899.790 2,625 900.229 902.854 $6.657.835 7.557.625 -8- CITY . CARLSBAD PUBLIC IMPROVEMENT CC JRATION Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Debt Service Funds Year Ended June 30, 1994 Revenues: Lease payments Interest on investments Total revenues Lease Payment $792,025 1.112 $793.137 Reserve 73.012 73.012 Total 792,025 74.124 866.149 Expenditures: Principal $275,000 Interest 590,054 Administrative 4.317 Total expenditures 869.371 Excess (deficiency) of revenues over (under) expenditures (76.234) Other financial sources (uses): Operating transfers in 76,352 Operating transfers out - Total other financing sources (uses) 76.352 Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses 118 Fund balances at beginning of year 2.946 Fund balances at end of year $ 3.064 73.012 275,000 590,054 4.317 869.371 (3.222) 76,352 (76.352) (76.352) (76.352) - (3,340) (3,222) 903.130 906.076 899.790 902.854 -9-