HomeMy WebLinkAbout; ; 2003-04 Redevelopment Agency Audit Report; 2004-06-30c
_. Carlsbad Redevelopment Agency
- Financial and Compliance Report
Year Ended June 30,2004
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Contents
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Independent Auditor's Report on the Financial Statements
and Supplementary Information 1 and 2
Financial Section
Management's Discussion and Analysis 3-6
Statement of net assets 7
Statement of activities a
Balance sheet-govemmental funds 9 and 10
Reconciliation of the balance sheet-govemmental funds to the statement of net assets 11
Statement of revenues, expenditures and changes in fund balances-govemmental funds 12 and 13
Reconciliation of the statement of revenues, expenditures and changes in fund balances-
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Statement of revenues, expenditures and changes in fund balance-budget to actual-
15 and 16
Basic Financial Statements
governmental funds to the statement of activities
Low-Moderate Income Housing Funds
Notes to financial statements 17-24
Supplementary Information
Combining schedule of revenues and expenditures-budget and actual (budgetary basis)-
Computation of Low-Moderate Income Housing excesslsurplus funds
debt service funds 25
26 and 27
Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed in accordance with
Government Auditing Standards 2a
McGladrey & Pullen
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Independent Auditor’s Report on the Financial Statements
and Supplementary Information
To the Board of Commissioners
Carlsbad Redevelopment Agency
Carlsbad, California
We have audited the accompanying financial statements of the governmental activities and each major fund of the
Carlsbad Redevelopment Agency (the Agency), a blended component unit of the City of Carlsbad, as of and for the
year ended June 30,2004, 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 an opinion 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 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 financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities and each major fund of the Agency as of June 30,2004, and the
respective changes in financial position, and the respective budgetary comparison for the Low-Moderate Income
Housing Fund for the year then ended, in conformity with accounting principles generally accepted in the United
States of America.
In accordance with Government Auditing Standards, we have also issued our report, dated September 30,2004 on
our consideration of the Agency’s internal control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
The management‘s discussion and analysis as listed in the table of contents is not a required part of the basic
financial statements but is supplementary information required by accounting principles generally accepted in the
United States of America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
McGladrey 8 Pullen. LP is a member firm of RSM International, an affiliation of separate and independent legal entities.
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Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
the Agency's basic financial statements. The combined schedule of revenues and expenditures-budget and actual
(budgetary basis) debt service funds and computation of Low-Moderate Income Housing excesslsurplus funds, listed
in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a
required part of the basic financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
San Diego, California
September 30,2004
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Financial Section
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Management’s Discussion and Analysis
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The Carlsbad Redevelopment Agency (Agency) established the Village project area in 1981 to help in eliminating
blight and blighting influences from the Village downtown area, and to achieve desired development, reconstniction
and rehabilitation, including but not limited to, residential, commercial, industrial and retail. The Agency established a
second project area, the South Carlsbad Coastal project area, in 2000. The Agency finances projects with advances
made by the City of Carlsbad (City) and a tax allocation bond issue. City advances and bond debt service payments
are paid with yearly property tax increment revenue.
As management of the Carlsbad Redevelopment Agency, we offer readers of the Agency’s financial statements this
overview and analysis of the financial activities of the Agency for the fiscal year ended June 30,2004. Management
wants to assist the reader of these financial statements to better understand the impact of financial decisions made
by the Agency. This analysis will focus on the significant changes in an effort to explain the Agency’s overall financial
condition.
Overview of the financial statements: The Agency’s basic financial statements include three components:
(1) government-wide financial statements, (2) fund financial statements and (3) notes to the financial statements.
Government-wide financial statements: The government-wide statements are designed to provide readers with a
broad overview of the Agency’s finances, in a manner similar to a private-sector business. The statements comprise
the statement of net assets and the statement of activities.
Statement of net assets-presents information on all of the Agency’s assets and liabilities (including all of its
capital assets and long-term liabilities) with the difference between the two reported as net assets. Increases or
decreases in net assets may indicate whether the financial position of the Agency is improving or deteriorating over
time.
Statement of activities-presents information showing how the Agency’s net assets changed during the fiscal
year. Changes in net assets are reported on a full accrual basis, or as soon as the underlying event giving rise to
the change occurs, regardless of the timing of related cash flows.
The government-wide financial statements can be found on pages 7 and 8 of this report.
Fund financial statements: The fund financial statements provide more detailed information about the individual
funds of the Agency and reinforce information provided in the government-wide statements. Funds are separate
accounts established to maintain control over resources that are segregated for specific activities or objectives. All of
the Agency’s funds are governmental funds.
Fund financial statements focus on near-tern inflows and oufflbws of spendable resources and the balances of
spendable resources available at the end of the fiscal year. Since the fund financial statements measure only current
revenues, expenditures and fund balances, they exclude capital assets, long-term debt and other long-term amounts.
The basic governmental fund financial statements can be found on pages 9-16 of this report.
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Government-wide Financial Analysis
The Agency's liabilities exceeded assets by $10.4 million at the close of the fiscal year. This deficit was created when
the City's General fund loaned the Agency money to cover debt service costs during the period won after the
Agency's bonds were issued, and when tax increment revenues weren't sufficient to cover the entire debt expense.
Redevelopment agencies typically leverage current tax increment revenues by issuing long-term debt (including
loans from the City) in order to raise capital to promote economic development within the project areas.
Total assets increased by $2.2 million during 2004. This increase is comprised of a $2.5 million increase in the cash
balance, which is offset by a $200,000 reduction in loans receivable and a $100,000 reduction in net capital assets.
The increase in the cash balance is the result of a $950,000 increase in the Agency's property tax revenue for 2004
compared to 2003 and a cash transfer in the amount of $828,000 that was made from the City's General Capital
Construction Fund to help fund a future property purchase.
Liabilities at June 30,2004 amount to $26.6 million. Of this amount, $12.8 million is outstanding debt on a tax
allocation bond issue and $1 3.2 million is the advance owed to the City. During fiscal year 2004, the Agency paid
back $300,000 on the City advance.
Carlsbad Redevelopment Agency
Net Assets
2003 2004
Current and other assets
Capital assets
Total assets
Liabilities
Long-term liabilities
Total liabilities
Net assets (deficits):
Invested in capital assc..;
Unrestricted
Total net assets
$ 7,609,332 $ 9,896,380
6.381.859 6.305.897
13.991 .I 91 16.202.277
697,532 905,442
25,913,764 25,678,891
26,611,296 26,584,333
6,375,950 6,302,817
(18,996,055) (1 6,684,873)
$ (12,620,105) $ (10,382,056)
Fiscal Year 2004 Governmental Activities
The increase in net assets for governmental activities was $2.2 million. This increase was generated by total
revenues of governmental activities of $4.5 million offset by $2.3 million in total costs of governmental activities.
The Agency's fiscal 2004 revenue came primarily from property tax increment, which increased by $950,000, or 44%, in fiscal year 2004. The Agency receives tax increment from two redevelopment project areas: the Village area and
the South Carlsbad Coastal area. The Village area saw an increase of 9%, or $175,000, in property taxes in 2004
compared to 2003, while the South Carlsbad area saw an increase of 444%, or $775,000, for the same time period.
The increase in the South Carlsbad area occurred because the Agency had not yet incurred enough debt in this
project area to claim the entire amount of incremental property taxes available in 2003. The Agency was able to
collect more in property taxes in 2004 because more debt had been incurred. They Agency received a federal HOME
capital grant in 2003 to help fund a property purchase. The Agency did not request any HOME grant funds in 2004.
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Charges for services revenue represents rental income collected from tenants of the Agency's affordable senior
apartment building that totaled $394,492 and permits issued by the Agency that totaled $12,916 for fiscal year 2004,
which is an increase of $23,160, or 6%, from the prior year. Investment earnings contributed an additional $193,336
to the Agency's revenue in 2004 compared to $273,675 earned in 2003. The decrease of $80,339 is mainly due to
the combination of a 4% decrease in the average daily cash balance, a 19% drop in the average yield on the portfolio
for the fiscal year end and a negative year-end market value adjustment of $97,200.
Agency expenses in fiscal year 2004 included $1,274,546 of interest expense on the advance from the City and the
Agency's Tax Allocation Bonds, $309,334 for administration of affordable housing activities and $724,262 for
depreciation, administrative and program costs.
Carlsbad Redevelopment Agency
Changes in Net Assets
2003 2004
Revenues:
Program revenues:
Charges for services
Capital grants
General revenues:
Incremental property taxes
Investment earnings
Miscellaneous
Total revenues
Expenses:
Community development
General government
Interest on long-term debt
Total expenses
Excess (deficiency) before transfers
Transfers in (out)
Changes in net assets
Net assets (deficit) at the beginning of the year
Net assets (deficit) at the end of the year
$ 384,248 $ 407,408
268,649
2,167,746 3,117,893
273,675 193,336
5,257
3,099,575 3,718,637
322,515 309,334
664,854 724,262
376.351 827.554
1 , 1 74,190 2,238,049
(13,794,295) (12,620,105)
$ (12,620,105) $ (10,382,056)
The Agency's fund financial statements: At June 30,2004, the Agency's governmental funds reported a combined
deficit fund balance of $3.6 million, a reduction in the deficit fund balance of about $1.9 million from the prior fiscal
year. The Agency's revenues exceeded expenditures by $1 .I million. Net transfers into the Agency amounted to
$828,000. This represented a transfer in from the City's General Capital Construction Fund to help fund the future
purchase of the Carlsbad School District's portion of the City's Senior Center building.
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Capital assets and long-term debt: There was one addition to capital assets during the current fiscal year. The
Agency purchased copier equipment for $15,760. Total long-term debt outstanding as of June 30,2004 amounted to
$26.1 million, which includes the advance to the City of Carlsbad for $13.2 million, future principal payments on the
Agency’s Tax Allocation Bonds in the amount of $12.8 million and capital lease obligations of $3,100.
Notes to the financial statements: The notes provide additional information that is essential to a full understanding
of the data provided in the government-wide and fund financial statements. The notes to the financial statements can
be found on pages 17-24 of this report.
Contacting the Agency’s Financial Management This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a
general overview of the Agency’s finances and to demonstrate the Agency’s accountability for the money it receives.
If you have questions about this report or need additional information, contact the Finance Department, 1635
Faraday Avenue, Carlsbad, California 92008. We can also be reached at (760) 602-2430, or visit us on-line at
www.ci.carlsbad.ca.us.
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Statement of Net Assets
June 30,2004
Cash and Investments
Receivables
Taxes
Interest
Other, net
Loans Receivable
Capital Assets, net
Total assets
$ 7,752,261
33,981
496
18,358
2,091,284
6,305,897
$ 16,202,277
Accrued Liabilities
Due to Other Governments
Current Portion of Long-term Debt
Deposits Payable
Noncurrent Liabilities
Advances from the City of Carlsbad
Due in more than one year
Total liabilities
$ 264,297
237,424
383,080
20,641
13,218,891
12.460.000
$ 26,584,333
Net Assets (Deficit)
Invested in Capital Assets, net of related debt
Unrestricted (Deficit)
Total net assets (deficit)
See Notes to Financial Statements.
$ 6,302,817
(1 6,684,873)
$ (1 0,382,056)
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Carlsbad Redevelopment Agency
Statement of Activities
Year Ended June 30,2004
Net Revenues
(Expenses) and
Program Changes in
Revenues Net Assets
Charges for Governmental
FunctionslPrograms Expenses Services Activities
Governmental activities:
Community development $ 309,334 $ 407,408 $ 98,074
(724,262) General government 724,262
Interest on long-term debt 1,274,546 (1,274,546)
Total governmental activities $ 2,308,142 $ 407,408 (1,900,734)
General revenues:
Property tax increment 3,117,893
Income from property and investments 193,336
Intergovernmental-City of Carlsbad 827,554
Total general and
intergovernmental revenues 4,138,783
Changes in net assets 2,238,049
Net assets (deficit) at beginning of year
Net assets (deficit) at end of year
See Notes to Financial Statements.
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(12,620,105)
$ (1 0,382,056)
Carlsbad Redevelopment Agency
Balance Sheet-Govemmental Funds
June 30,2004
Special Revenue Funds
Income Tyler Court
Assets Housing Apartments
Low-Moderate
Cash and Investments
Receivables
Taxes
Interest
Other, net
Loans Receivable
Total assets
$ 2,727,912 $ 704,360
6,796
99
2,091,284
$ 4,826,091 $ 704,360
Liabilities and Fund Balances
Liabilities
Accrued liabilities $ 4,033 $
Due to other governments
Advances from the City of Carlsbad Deposits payable 20,641
Total liabilities 4,033 20,641
Fund Balances
Reserved for:
Loans receivable
Low-Moderate Income Housing
Encumbrances
Designated for continuing appropriations
Undesignated
Total fund balances (deficit)
Total liabilities and fund balances
Unreserved:
2,091,284
210,000
674
2,520,100 683,719
4,822,058 683,719
$ 4,826,091 $ 704,360
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See Notes to Financial Statements.
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Debt Service Funds
Village South Carlsbad Total
Redevelopment Redevelopment Capital Governmental
Area Area Projects Funds
$ 1,901,887 $ 1,056,939 $ 1,361,163 $ 7,752,261
27,185 33,981
397 496
18,358 18,358
2,091,284
$ 1,929,469 $ 1,056,939 $ 1,379,521 $ 9,896,380
$ -$ -$ 34,946 $ 38,979
237,424 237,424
12,960,970 257,921 13,218,891
20,641
12,960,970 495,345 34,946 13,515,935
2,091,284
210,000
80,207 80,881
1,264,368 1,264,368
(1 1,031,501) 561,594 (7,266,088)
(1 1,031,501) 561,594 1,344,575 (3,619,555)
$ 1,929,469 $ 1,056,939 $ 1,379,521 $ 9,896,380
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Carlsbad Redevelopment Agency
Reconciliation of Balance Sheet-Governmental Funds to the Statement of Net Assets
June 30,2004
Total fund balances-govemmental funds. $ (3,619,555)
Amounts reported for governmental activities and in the statement of net assets are different
because:
Capital assets, net of accumulated depreciation, used in governmental activities are not
financial resources and, therefore, are not reported in the funds.
Interest payable on long-term debt does not require current financial resources. Therefore,
interest payable is not reported as a liability in the funds.
Long-term liabilities (other than advances from the City of Carlsbad) are not due and payable
in the current period and, therefore, are not reported in the funds.
Net assets (deficit) of governmental activities
See Notes to Financial Statements.
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6,305,897
(225,318)
(1 2,843,080)
$ (10,382,056)
Carlsbad Redevelopment Agency
Statement of Revenues, Expenditures and Changes in Fund Balances-GovernmentaI Funds
Year Ended June 30,2004
Special Revenue Funds
Income Tyler Court
Housing Apartments
Low-Moderate
Revenues:
Property tax increment $ 671,063 $
Charges for services 394,492
Income from property and investments
Total revenues
Expenditures:
Current:
General government
Community development
Principal retirement
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues over expenditures
Debt Service:
Other financing sources (uses):
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Fund balance (deficit), beginning of year
Fund balance (deficit), end of year
105,314 6,669
776,377 401,161
73,194 236,140
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172
73,985 236,140
702,392 165,021
702,392 165,021
4,119,666 51 8,698
4,822,058 $ 683,719
See Notes to Financial Statements.
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Debt Service Funds
Village South Carlsbad Total
Redevelopment Redevelopment Capital Governmental
Area Area Projects Funds
$ 1,734,557 $ 712,273 $ - $ 3,117,893
12,916 407,408
15,086 1531 1 50,756 193,336
1,749,643 727,784 63,672 3,718,637
16,276 11,145 620,879 648,300
309,334
360,000 2,210 362,829
1,238,435 41,624 614 1,280,845
1,614,711 52,769 623,703 2,601,308
134,932 67501 5 (560,031) 1 ,I 17,329
1,929,752 1,929,752
(240,000) (862,198) (1,102,198)
(240,000) 1,067,554 827,554
134,932 435,015 507,523 1,944,883
( 1 1,166,433) 126,579 837,052 (5,564,438)
$ (11,031,501) $ 561,594 $ 1,344,575 $ (3,619,555)
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Carlsbad Redevelopment Agency -
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances-
Year Ended June 30,2004
Governmental Funds to the Statement of Activities
Net change in fund balances-total governmental funds.
Amounts reported for governmentat activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the government-wide
statement of activities, the cost of those assets is allocated over their useful lives and
reported as depreciation expense.
Purchase of capital assets
Depreciation expense
Repayment of bond principal is an expenditure in governmental funds, but the repayment
reduces long-term liabilities in the government-wide statement of net assets. This amount
represents long-term debt repayments.
In the statement of activities, interest is accrued on long-term debt whereas, in the
governmental fund statements, an interest expenditure is reported when due.
Change in net assets of governmental activities
15,760
(91,722)
$ 1,944,883
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362,829 -
- 6.299
$ 2,238,049 I
See Notes to Financial Statements.
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Carlsbad Redevelopment Agency
Statement of Revenues, Expenditures and Changes in Fund Balance-Budget and Actual-
Year Ended June 30,2004
LowModerate Income Housing Funds
Variance from
Final Budget-
Budgeted Amounts Actual Amounts Over
Original Final (Budgetary Basis) (Under)
Revenues:
Taxes
Income from property and
Total revenues
investments
$ 495,400 $ 495,400 $ 671,063 $ 175,663
33,000 33,000 145,779 1 12,779
528.400 528.400 816.842 288.442
Expenditures:
Current, community development
Debt service:
Principal retirement
Interest and fiscal charges
Total expenditures
Net change in fund balances
Fund balance at beginning of year
Fund balance at end of year
136,274 255,160 73,868 (1 81,292)
619 61 9 619
172 172 172
137.065 255.951 74.659 (181.2921
391,335 272,449 742,183 469,734
4,118,201 4,118,201 4,118,201
$ 4,509,536 $ 4,390,650 $ 4,860,384 $ 469,734
See Notes to Financial Statements.
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Carlsbad Redevelopment Agency
Statement of Revenues, Expenditures and Changes in Fund Balance-Budget and Actual-
Year Ended June 30,2004
Low-Moderate income Housing Funds, Continued
Budget-to-GAAP Reconciliation
Revenues:
Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison
schedule (previous page). $ 816,842
The recording of unrealized gains and losses on the City's investments are shown for
financial reporting purposes (pursuant to GASB 31), but are not shown for budgetary
purposes. (40,465)
$ 776,377
Expenditures:
Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary
Differences-budget to GAAP:
comparison schedule (previous page). $ 74,659
Encumbrances are shown in the year encumbered for budgetary purposes, but in the
year paid for financial reporting purposes. (674)
$ 73,985
See Notes to Financial Statements.
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Carlsbad Redevelopment Agency
Notes to Financial Statements
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Note 1. 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 Communriy 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 and South Carlsbad
project areas of the City of Carlsbad, California, (the City), stimulate and attract private investment, generate added
employment through increased specialty goods and services, and expand the City’s sales tax revenue.
The accounting policies of the Agency conform to accounting principles generally accepted in the United States of
America as applicable to governmental units. The following is a summary of the more significant policies.
Description and scope of the reporting entity: The Agency is an integral part of the reporting entity of the City.
The funds of the Agency have been included within the scope of the basic financial statements of the City because
the City Council is the governing board over the operations of the Agency. Only the funds 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.
Government-wide and fund financial statements: The government-wide financial statements (Le., the statement
of net assets and the statement of activities) report information on all of the nonfiduciary activities of the Agency. 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 user fees and charges for support. The Agency does not have any
business-type activities.
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 to 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, if any. Taxes and other items not
properly classified as program revenues are reported as general revenues.
Separate financial statements are provided for the governmental funds. Major individual governmental funds are
reported in separate columns in the fund financial statements. There were no nonmajor funds as of June 30,2004.
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. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and
contractual requirements of the individual programs are used as guidance. Property taxes are recognized as
revenues in the year for which they are levied.
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Carlsbad Redevelopment Agency
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies, Continued
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 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. Principal and interest on long-term debt are recorded as fund
liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early
in the following year.
The Agency's primary source of revenue is property taxes, referred to in the accompanying financial statements as
"property tax increment." Property taxes allocated to the Agency are computed in the following manner: property
taxes related to any incremental increase in assessed values after the adoption of a Redevelopment Plan are
allocated to the Agency; all taxes on the "frozen" assessed valuation of the property are allocated to the City and
other districts receiving taxes from the project area.
The Agency has no power to levy and collect taxes and any legislative property tax reduction would lower the amount
of tax revenues that would otherwise be available to pay the principal and interest on bonds or loans from the City.
Conversely, any increase in the tax rate or assessed valuation or any elimination of present exemptions would
increase the amount of tax revenues that would be available to pay principal and interest on bonds or loans from the
City.
The Agency is also authorized to finance the Redevelopment Plan from other sources, including assistance from the
City, the state and federal governments, interest income and the issuance of Agency debt.
Real property taxes are levied on October 15 against property owners of record on January 1 of that year. 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:Ol a.m. on the first day of January in the fiscal year for which the
taxes are levied.
The Agency has presented the following major funds:
The Low-Moderate Income Housing special revenue fund is used to account for money administered by the Agency
for designated low- and moderateincome housing projects.
The Tyler Court Apartments special revenue fund is used to account for the operations of the affordable senior citizen
apartment project.
The Village Redevelopment Area debt service fund is used to account for the accumulation of resources for, and
payment of, principal and interest on the Agency's bonds, issued to finance improvements for the downtown area of
the City.
The South Carlsbad Redevelopment Area debt service fund is used to account for the accumulation of resources to finance improvements in the southern area of the City.
The Capital Projects fund is used to account for capital projects of the Agency.
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c
Carlsbad Redevelopment Agency c
Notes to Financial Statements c
Note 1. Summary of Significant Accounting Policies, Continued
Use of estimates: The preparation of financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying note disclosures.
Accordingly, actual results could differ from those estimates.
c
Cash and investments: Cash includes amounts in demand and time deposits. Investments are reported in the
accompanying balance sheet at fair value, except for certain certificates of deposit and investment contracts that are
reported at cost because they are not transferable and they have terms that are not affected by changes in market
interest rates.
c
IC- Changes in fair value that occur during a fiscal year are recognized as income from investments reported for that
fiscal year. Income from property and investments includes interest earnings; changes in fair value; any gains or
losses realized upon the liquidation, maturity or sale of investments; property rentals; and the sale of Agency-owned
property. P
1.
The Agency maintains its cash and investments for all funds, except for assets held by fiscal agents, with the City as
pooled cash and investments. Each fund's share of the pool is displayed in the accompanying financial statements as
cash and investments. Investment income earned by the pooled investments is allocated to the various funds on a
monthly basis, based on each fund's average cash and investments balance.
Restricted cash and investments represent amounts that are restricted under the terms of debt agreements.
Capital assets: Capital assets, which include land, buildings, equipment and infrastructure assets (e.g., roads,
bridges, traffic signals, and similar items), are reported in the governmental activities columns in the government-
wide financial statements. Capital assets are defined by the Agency as assets with an initial, individual cost of more
than $10,000 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.
c
c
The cost of normal maintenance and repairs that do not add to the value of an asset or materially extend an asset's
useful life are not capitalized. Construction-in-progress costs are transferred to their respective fixed asset category
upon completion. - Depreciation is charged to operations, in the statement of activities, using the straight-line method based on the
estimated useful life of an asset. The estimated useful lives of depreciable assets are 10-50 years for building and
improvements.
In June 1999, GASB Statement No. 34 was issued, which requires the inclusion of infrastructure capital assets in
local governments' basic financial statements. The Agency has no infrastructure to be included in the capital assets.
Long-term obligations: In the government-wide financial statements, long-term debt and other long-term obligations
are reported as liabilities in the applicable governmental activities statement of net assets. Bond premiums, discounts
and 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 are amortized over the term of the related debt.
c
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Carlsbad Redevelopment Agency
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies, Continued
In the fund financial statements, governmental fund types recognize bond premiums, discounts and 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.
Net assets: Net assets represent the difference between assets and liabilities. Net assets invested in capital assets,
net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances
of any borrowings used for the acquisition, construction or improvement of those assets. Net assets invested in
capital assets, net of related debt, exclude unspent bond proceeds. Net assets are reported as restricted when there
are limitations imposed by creditors, grantors, or laws or regulations of other governments. Restricted resources are
used first to fund appropriations.
Fund equity: The reserved portion of the fund balances represents those amounts that have been legally identified
for a specific purpose or amounts that are not available to liquidate current liabilities. The unreserved portion
represents the amount available for future appropriations. Designated fund balances represent tentative plans for the
future use of financial resources.
Use of restrictedlunrestricted net assets: When an expense is incurred for purposes for which both restricted and
unrestricted net assets are available, the Agency's policy is to apply restricted net assets first.
Unrestricted net assets: The Agency's unrestricted net assets are in a deficit position primarily because long-term
debt is in excess of capital assets owned by the Agency. The Agency issues debt for construction andlor acquisition
of assets, which it then turns over to the City or to private parties within the redevelopment project area.
Note 2. Budgetary Data
During May or June, the City Manager submits to the City Council a proposed operating budget for the fiscal year
commencing the following July 1. Public hearings are conducted at the City Council meetings to obtain citizens'
comments during June. The City Council finalizes the budget no later than July 1.
The City Manager (as the Agency Executive Director) is authorized to make transfers of appropriated amounts from
one department to another within a fund. The legal level of budgetary control is at the fund level. Budgets have been
adopted for the Low-Moderate Income Housing special revenue fund and the debt service funds, in total. A budget is
not adopted for the Tyler Court Apartments special revenue fund. Revisions that alter the total appropriations of any
fund must be approved by the City Council, with the exception of budget adjustments that 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. Monthly
reports are provided to the City Council during the year, and any changes to the adopted budget are approved by the
City Council as necessary.
Budgets for governmental type funds 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 fund level. All appropriations lapse at fiscal year end
unless the City Council takes action in the form of a resolution to continue the appropriation into the following fiscal
year.
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c Carlsbad Redevelopment Agency
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Notes to Financial Statements
Note 2. Budgetary Data, Continued
For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses
pursuant to GASB Statement No. 31, and actual expenditures have been adjusted to include encumbrances
outstanding.
Note 3. Cash and investments
The Agency's cash and invested cash are pooled with the City's cash and invested cash. Income from the investment
of pooled cash is allocated to the Agency's funds on a monthly basis, based upon the average monthly balance of
the fund as a percent of the average monthly total pooled cash balance. Individual investments cannot be identified
with any single fund because the City may be required to liquidate its investments at any time to cover large cash
outlays required in excess of normal operating needs. Cash and invested cash consist of U.S. government-backed
securities and investments in State of California Local Agency Investment Fund, as well as corporate notes. The City
values all of its cash and invested cash at fair value on a portfolio basis. The City manages its pooled idle cash and
investments under a formal investment policy that is reviewed by the Investment Committee and adopted annually by
the City Council and that follow the guidelines of the State of California Government Code.
Invested cash is stated at fair value. The increase in the fair value of investments is recognized as an increase to
interest income revenue. The City normally holds investments to term; therefore, no realized gainlloss is recorded.
Note 4. Loans Receivable
Loans receivable represent monies provided to low- and moderate-income residents in the City for home
improvements or down payments made to acquire certain residences within the City and to the developers of such
residences qualifying as low- and moderate-income housing. As of June 30,2004, there were three loans
outstanding, totaling $2,091,284, of varying terms, which are typically paid off over the final years of the term.
Transfer of ownership of the property prior to the final year of the loan causes the balance owed to become due and
payable to the Agency. The loans are collateralized by the property acquiredldeveloped.
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Carlsbad Redevelopment Agency
Notes to Financial Statements
Note 5. Capital Assets
Capital asset activity was as follows for the year ended June 30,2004:
Balance at Balance at
July 1,2003 Increases Decreases June 30,2004
Capital assets not being depreciated,
land $ 2,977,883 $ -$ - $ 2,977,883
Capital assets being depreciated:
Buildings and improvements 3,905,653 3,905,653
Equipment 15,760 15,760
depreciated 3,905,653 15,760 3,921,413
Total capital assets being
Less accumulated depreciation for:
Buildings and improvements (501,677) (86,994) (588,67 1)
Equipment (4,728) (4,728)
Total accumulated
Total capital assets being
Governmental activities
depreciation (501,677) (91,722) (593,399)
depreciated, net 3,403,976 (75,962) 3,328,014
capital assets, net $ 6,381,859 $ (75,962) $ - $ 6,305,897
Depreciation expense of approximately $92,000 was charged to the general government functionlprogram on the
statement of activities.
Note 6. Long-term Debt
The following is a summary of changes in the principal balance of long-term debt for the year ended June 30,2004:
Principal Principal Due
Balance at Balance at Within
June 30,2003 Additions Reductions June 30,2004 One Year
Governmental activities: I
Bonds $ 13,200,000 $ - $ 360,000 $ 12,840,000 $ 380,000
Obligation under capital
lease 5,909 2,829 3,080 3,080
activity $ 13,205,909 $ - $ 362,829 $ 12,843,080 $ 383,080
Total governmental 3
22
Carlsbad Redevelopment Agency c
Notes to Financial Statements c
Note 6. Long-term Debt, Continued
c-
Long-term debt at June 30, 2004 is comprised of the following:
1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds,
principal due in amounts ranging from $360,000 to $1,000,000 on September 1 of
each year through 2024. Interest payable on March 1 and September 1 at rates
varying from 5.25% to 5.30% per annum. The Agency posted a surety bond in lieu
of cash reserve in the amount of $1,055,953. $ 12,840,000
c
c
c Equipment leased under capital lease obligation. The lease term is 60 months, with
interest at 15.11%, expiring June 2005. The lease is secured by the underlying
equipment. 3,080
12,843,080
Less current portion 383,080
$ 12,460,000
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c
c
The annual requirements, principal and interest to amortize the outstanding debt as of June 30,2004 are as follows:
Governmental Activities
Principal Interest Years Ending June 30, c
2005
2006
2007
2008
2009
201 0-2014
201 5-201 9
2020-2024
$ 380,000 $ 665,978
395,000 645,634
420,000 624,240
440,000 601,665
465,000 577,909
2,715,000 2,486,606
3,505,000 1,674,694
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4,520,000 623,341
$ 12,840,000 $ 7,900,066
The Tax Reform Act instituted certain arbitrage restrictions with respect to the issuance of tax-exempt bonds.
Arbitrage regulations deal with the investment of all tax-exempt bond proceeds at an interest yield greater than the
interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if
applicable rebates are not paid to the federal government at least every five years. P
c During the current year, the Agency performed calculations of excess investment earnings on various bonds and
financings in accordance with arbitrage regulations. The Agency has determined that no arbitrage rebate liability
exists as of June 30,2004.
Note 7. Advances from the City of Carlsbad c
.- Since activation of the 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. The outstanding balance at June 30, 2004 is $13,218,891.
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Carlsbad Redevelopment Agency
Notes to Financial Statements
Note 8. Fund Balances
Reserves for the loan receivable and low- to 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 encumbrances represents commitments related to unperformed contracts for services and undelivered
goods.
Unreserved-undesignated balances represent the fund balance remaining after reduction for reserved and
designated fund balances.
Note 9. Risk Management
The Agency is exposed to various risks of loss related to torts; thefts of, damage to and destruction of assets; errors
and omissions; and natural disasters. The Agency, through the City, carries liability insurance. The Agency carries no
insurance coverage for natural disasters. Since the Agency does not have any employees (it uses employees from
the City), it is not liable for injury to employees, workers' compensation, or employee health and accident insurance.
The City has had no reductions in insurance coverage, nor did the City have any settlements that were in excess of
insurance coverage in any of the three preceding years.
Note 10. Commitments and Contingency
Operating lease: 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, adjusted annually based upon an increase in the
Consumer Price Index, not to exceed 6% of the previous year's rents, and readjusted in years 10 and 15, based
upon market rental values, through August 2007.
Approximate minimum future rental payments under operating lease as of June 30,2004 are as follows:
Years Ending June 30, Amount
2005
2006
2007
2008
$ 83,700
83,700
83,700
7,000
$ 258,100
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Supplementary Information
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Carlsbad Redevelopment Agency
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Combined Schedule of Revenues and Expenditures-Budget and Actual (Budgetary Basis)
Year Ended June 30,2004
Debt Service Funds
Actual
Amounts Variance
(Budgetary Favorable
Budget Basis) (Unfavorable)
Total revenues $ 2,066,200 $ 2,527,580 $ 461,380
Total expenditures 1,686,718 1,667,480 19,238
Net change in fund balance $ 379,482 $ 860,100 $ 480,618
Redevelopment areas:
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Carlsbad Redevelopment Agency
Computation of Low-Moderate Income Housing ExcesslSurplus Funds
Year Ended June 30,2004
Project Area I
Village
Fund Balance-Beginning of Year
Adjustments
Less unavailable funds-included in beginning fund balance:
Rehabilitation loans
Future loan
Encumbrances
Total unavailable funds
Available Fund Balance-Beginning of Year
Current year proceedsluses (actual plus changes in unavailable):
Proceeds
Uses
Changes in unavailable amounts
Available Fund Balancend of Year
Encumbrances
Available Fund Balance-for Excess Surplus
Does available fund balance for excesslsurplus exceed $1 ,OOO,OOO?
If so, enter available fund balance and evaluate that amount against tax increment.
Does available fund balance for excesslsurplus exceed the greater of prior four years'
If less, enter zero.
set-aside deposits or $1 ,OOO,OOO?
Tax increment set-aside amounts:
Fiscal year 199940
Fiscal year 2000-01
Fiscal year 2001-02
Fiscal year 2002-03
Total set-aside deposited into fund
ExcesslSurplus Funds
Greater of available fund balance for excesslsurplus less prior four years' tax increment
set-aside deposits
Reconciliation to Ending Fund Balance
Ending GAAP fund balance
Available fund balance-end of year above
Rehabilitation loans
Future loan
Encumbrances
Ending Fund Balance
26
$ 3,975,436
2,290,024
21 0,000
1,465
2,501,489
1,473,947
534,306
(51,324)
200,205
2,157,134
(674)
$ 2,156,460
$ 2,156,460
346,360
393,824
372,475
398,628
1,511,287
$ 6451 73
$ 4,458,418
$ 2,156,460
2,091,284
21 0,000
674
$ 4,458,418
Carlsbad Redevelopment Agency c
Computation of Low-Moderate Income Housing ExcesslSurplus Funds, Continued
Year Ended June 30,2004
Project Area II
South Carlsbad c
Fund Balance-Beginning of Year
Adjustments
$ 144,230 c
Less unavailable funds, included in beginning fund balance:
Rehabilitation loans
Prepaid expenses
Encumbrances
Total unavailable funds
c
Available Fund Balance-Beginning of Year
Current year proceedsluses (actual plus changes in unavailable):
Proceeds
Uses
Changes in unavailable amounts
144,230 c
7 242 , 07 1
(22,661) c
Available Fund Balance-End of Year
Encumbrances
Available Fund Balance-for Excess Surplus
363,640
c
$ 363,640
Does available fund balance for excesslsurplus exceed $1 ,OOO,OOO?
If so, enter available fund balance and evaluate that amount against tax increment.
If less, enter zero.
P
Does available fund balance for excesslsurplus exceed the greater of prior four years'
set-aside deposits or $1 ,OOO,OOO?
Tax increment set-aside amounts:
Fiscal year 199940
Fiscal year 2000-01
Fiscal year 2001-02
Fiscal year 2002-03
Total set-aside deposited into fund
c
c
125,145 c 43,652
168,797
ExcesslSurplus Funds
Greater of available fund balance for excesslsurplus less prior four years' tax increment
set-aside deposits
c
c $
7 Reconciliation to Ending Fund Balance
Ending GAAP fund balance $ 363,640
Available fund balanc-nd of year above
Rehabilitation loans
Encumbrances
Ending Fund Balance
$ 363,640 c-
$ 363,640 c
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McGladrey & Pullen
Certified Public Accountants
Independent Auditor's Report on ,.rternal Control over Financial Reporting
and on Compliance and other Matters Based on an Audit of Financial Statements
Performed in accordance with Government Auditing Standards
To the Board of Commissioners
Carlsbad Redevelopment Agency
Carlsbad, California
We have audited the accompanying financial statements of the governmental activities and each major fund of the
Carlsbad Redevelopment Agency (the Agency), a blended component unit of the City of Carlsbad, as of and for the
year ended June 30,2004, which collectively comprise the Agency's basic financial statements, and have issued our
report thereon dated September 30,2004. We conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the Agency's internal control over financial reporting in order to
determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to
provide assurance on the internal control over financial reporting. Our consideration of the internal control over
financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might
be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low level the risk that misstatements caused
by error or fraud in amounts that would be material in relation to the financial statements being audited may occur
and not be detected within a timely period by employees in the normal course of performing their assigned functions.
We noted no matters involving the internal control and its operation that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Agency's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements, noncompliance with which could have a direct and material effect on the determination of financial
statement amounts. This included those provisions of laws and regulations identified in the Guidelines for
Compliance Audits of California Redevelopment Agencies, issued by the State Controller, and as interpreted in the
Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies, issued
by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants.
However, providing an opinion on compliance with those provisions was not an objective of our audit and,
accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards.
This report is intended for the information of the Board of Commissioners and management of the Agency, and is not
intended to be, and should not be, used by anyone other than those specified parties.
San Diego, California
September 30,2004
McGladrey B Pullen, UP is a member firm of RSM International,
an affiliation of separate and independent legal entities.
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