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HomeMy WebLinkAbout1990-02-06; Housing & Redevelopment Commission; 151; 1988-89 Annual Financial ReportP HOUSING AND,@EDEVELOPMENT COMMISS-N - A%&A BILL a 1 A AB# 151 TITLE: MT& 2/6/W 1988-89 ANNUAL FINANCIAL REPORT DEPT. RED RECOMMENDED ACTION: Accept the 1988-89 Carlsbad Redevelopment Agency Combined Financial Statements. ITEM EXPLANATION: The Carlsbad Redevelopment Agency is required by state law to prepare an annual financial statement for review by its legislative body. The report is also submitted to the California State Controller’s Office for inclusion in a state-wide report. The 1988-89 Carlsbad Redevelopment Agency Annual Financial Report provides an audited summary of the Agency’s fiscal affairs for the year, including revenues, expenditures, detailed assets and liabilities, cash and fund balances. During 1988-89, Carlsbad Redevelopment Agency revenues increased by $767,000, from $1.5 million to $2.2 million. Property taxes declined slightly because the final payment on the redevelopment increment was not received prior to closing the books; while interest on bond funds and cash reserves totaled $900,000. Spending on capi ta1 projects such as the village area streetscape and bond debt service costs resulted in an increase in expenditures of $4.2 million, from $1.7 million to $5.9 million. During 1988-89, the City loaned an additional $1.1 million to the Carlsbad Redevelopment Agency to fund capital projects. Total City advances were $5.9 million at year end. A reserve of $726,000 has been set aside to fund future low and moderate housing requi rements. FISCAL IMPACT: The report presents the current financial condition of the Carlsbad Redevelopment Agency. In itself, it has no fiscal impact, but it serves to point out several problem areas, such as an expanding debt to the City. Based on increased assessed valuations for property in the redevelopment area, staff anticipates about a 20% increase in incremental property tax revenue. EXHIBITS: 1 - Carlsbad Redevelopment Agency Combined Financial Statements for the fiscal year ending June 30, 1989 with comparative totals for June 30, 1988. (On file in the City Clerk’s office). / i CIlllGsMD REDEVELORfDlT AGQ(cI Combined Financial Statements June 30, 1989 with Comparative Totalo for June 30, 1988 (With Independent Auditors' Report Thereon) Certified Public Accountants Peat Marwick Main St Co. 750 B Street San Diego, CA 92101 t t &&tore ReFm The Aonorable Member8 of City Council Carlsbad Redevelopment Agency Carlsbad, California: We have audited the component unit combined financial statements of the Carlsbad Redevelopment Agency as of and for the year ended June 30, 1989. These component unit combined financial etatementr aye the re8ponribility of the Agency’8 management. Our responsibility ie to expresr an opinion on these component unit combined financial statements ba8ed on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standard8 require that we plan. and perform the audit to obtain reasonable a88urance about whether the component unit financial statement8 are free of material miestatement. An audit include6 examining, on a test basis, evidence supporting the amount8 and dirclorurcr in the component unit financial etatementr. An audit al80 include8 a88e88ing the accounting principle8 used and significant ertimater made by management, a8 well a8 evaluating the overall financial etatement preeentation. We believe that our audit provide8 a reaeonable ba8i8 for our opinion. In our opinion, the component unit combined financial rtatementr referred to above preeent fairly, in all material redpect8, the financial porition of the Carlsbad Redevelopment Agency at June 30, 1989 and the rerult of its operation8 for the year then ended in conformity with generally accepted accounting principler. October 20, 1989 Member Firm of Klynveld Peat Marwck Goerdeler $% it , 1 I I z:a a.01 1 I t .$ vlvl c .!! .” 3; 1.. I I gg . . ..i. -T- -.-. . - m ,“, ;I 3 ’ 0.e -. a. 2% : K’ a r. : 2 F ;ps7 iTn.2 24 :zz--’ 1 e-c “:m 2 LYEam z.“z ” -“E 3 -. 3 : : k -. s= ;2: ‘“2 : -2:: 1 n . -: 1 : . -- . . l .--2-i,. . .-i -.A*- -1- l (I, N % t 8 E t 5 t; L z J 1. w g t P s 2 % t 1 2; m-n 2 -. f :. z: 23 u- ,- CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements June 30, 1989 (1) Ornanization and Sumaarv of Sinnificant Accou&inn~ The Carlsbad Redevelopment 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 principal objectives of the Agency are to eliminate blighted influences within the “Village Area” of the City of Carlrbad, 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 exercises oversight responsibility 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 sumnary of the more significant policies: (a) -of The accounts of the Agency are organised on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund or account group are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, (Continued) CARLSBAD REDEVELOPMWT AGENCY Notes to Combined Financial Statements, Continued (1) Wizatirv of Sipnificsnt Accounti Polj&ee. Continued (a) Basic of Prwtation. Con- : revenues, and expenditures. The various funds and account groups are sunxtarized by type in the financial statements. Fund types and account groups used by the Agency are as follows: 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: 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 h-vice Flub Debt service funds are wed to account for the accumulation of resources for, and payment of general long-term debt principal, interest and related costs. Pro- Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. This account group is used to establish accounting control and accountability for the Agency’s general long-term debt. It is used to account for all long-term obligations of the Agency. (Continued) ,- , 3 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued . . (1) QrPanization and Sunrmarlr of UguUcant Accoun!&g Policies. Contu (b 1 Meamument 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 funds types report increases (revenues ) and decreases (expenditures) in available spendable resources. The modified accrual basis of accounting is utiliced by the governmental fund types. Revenues are recognited 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. Real property taxes are levied on October 15 against owners of record at March 1. The tax are due in two ins tallments, on November 1 and February 1, and become delinquent after December 10 and April 10, respectively. Under the provisions of NCGA interpretation 3, property tax revenue is recognised 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 recognised when the liability is incurred except for principal and interest on long-term debt which is recognited when due. (cl -: Encumbrance accounting, under which purchase orders, contracts and other coavnitmenta for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is (Continued) 4 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued (1) Ornanizationt Accomtimz Policies. Continued (cl Encumbrances.: 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 a8 reservations of fund balance for subsequent-year expenditures. (d) Caoh : The Agency participates in the pooled cash and investment fund of the City of Carlsbad. Pooled investments are stated at cost or amorticed COBt. The Agency’s equity in the pooled cash ie included in the financial statemento ar carh and invertmento. Interest earned as a reeult of the pooling is allocated to the Agency based on ite average monthly balances. (e) ComDcnoatcdAbecnces: Vacation pay is payable to employear at the time rued or upon termination of employment. Sick leave accrued but unused is cumulative from year to year. The tort of accumulated vacation and sick leave expected to be paid in the next 12 months ir recorded as a fund liability and amounts expected to be paid after 12 months (if any) is recorded in the general long-term debt account group. (f) Total: Total columnr on the accompanying combined financial rtatementr 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 changer in fund balances in conformity with generally accepted accounting principles. Neither ir Buch data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of thir data. The budget for the Agency is established by the City of Carlrbad. The City’e Manager is authoriced to make transfera of appropriated amounts within a fund and function for up to $15,000. Revirionr that alter the total appropriations of any fund or function nnut be approved by the (Continued) 5 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statement8, Continued (2) lhubetarv Data, Contimed city Council. A mid-year budget review. is conducted each year. Any major changes to the adopted budget are approved by the City Council at that time. Budgets are adopted on the modif ied accrual basis, except that encumbrances are treated as budgeted expenditures in the year purchase8 are commit ted. 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, however, no appropriation war made for the interest paid on advances from the City of Carlebad which resulted in actual expenditures exceeding budgeted on a budgetary baBiB for the debt service fund. There were no encumbrances outstanding for the debt service or the special revenue funds as of June 30, 1989. (3) Caeh The Agency participates in the pooled cash fund of the City. In addition, some depOBitS are held Beparately by reveral of the Agency’8 funds. itv for &Q.QgitB and : The Agency’s investment policy and state statutes authorize the Agency to inveet in demand and time depollitr, obligation8 of the U.S. Trearury, its agencies and instrumentalities, caarmarcial paper rated A-l by Standard and Poor’s Corporation or P-l by Moody’s Camsercial Paper record, banker’ B acceptances with a maximtrm maturity of 270 day8, 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 depocrits be insured or collateralited. DepOBitOrieS holding public fuIIdB on depOBit are required to maintain collateral in the form of a pool of securities with the agent of the depoeitory having a market value of at least 10 to 50 percent in excess of the total amount of all public funds on deposit. (Continued) 6 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued (3) Cash and Invesmte. Con- Inveam . Cow : The following Bu888ary presents the amount of the Agency deposit8 which are fully insured or collateralized with securities held by the Agency or its agent in the Agency’s name (Category One), those deposits which are collateralized with securitier held by the pledging financial institution’s trust department or agent in the Agency's name -(Category Trio), and those deposits which are not collateralited or are collateralized with securities held by the pledging financial institution or its trust department or agent but not in the Agency’8 name (Category Three) at June 30, 1989. Catzry Catxry ?X Total Bank 'i&2 Cash on deposit with financial institution $ - 5,101,165 5,101,165 5,101,165 Cash on deposit with trustee A 3aMs!aQ -3Aa49aQ3 $ A &AdaaQ5.101.165- - At June 30, 1989, the Agency had $1,903,234 invested in the pooled cash fund of the City. AB Becuritier are not used aB evidence of the Agency’r investment in this fund, these amounts cannot be classified according to the level of risk aBBUOIed by the Agency. The Agency’s employees are included in the City’ B pension plan which is administered by the California Public Employeer Retirement System (PERS). PERS is an agent multiple-employer public employee retirement Bystem that acts ar a co888on invertment and administrative agent for participating public entitiee within the state of California. (Continued) 7 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued (4) Pension Plan. Cm!dmed 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 the age of 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. Employees are required to make contributions ranging from 7 to 9 percent Of gtOBB pay. The City is 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 PEW 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. (5) langdun Debt The following ir a amary of changes in long-term debt for the year ended June -30, 1989: Principal Balance July 1, Additional Principal Balance June 30, Advances from the City of Carlrbad $ 4,736,490 1,115,649 5,852,139 Bonds payable lZ.OOO.OOQ (Continued) - a CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued (5) bars-Term Debt. Conbu.e.d Since activation of the Redevelopment Agency in July 1976, the City has advanced the Agency monies for approved eXpenditureB. Advance8 from the City require interest at 10% per year. There ie no stated maturity date. The Bonds payable consist of $12,000,000 in 1988 Carlsbad Housing and Redevelopment Conrnission Tax Allocation Bonds. Principal iB due in amounts ranging from $255,000 to $595,.OOO on April 1, of each year through 2003, a principal payment of $2,890,000 on April 1, 2007, and a principal payment of $3,950,000 on April 1, 2011. The principal payments of $2,890,000 and $3,950,000 are subject to mandatory sinking fund redemption which amounts are reflected in the debt service requirements below. Interest is payable on October 1 and April 1 of each year at rates varying from 5.5% to 7.55% per annum. Debt service requirements to maturity for the bonds, including sinking fund payments, -are as follows: 1990 1991 1992 1993 1994 1995-1999 2000-2004 2005-2009 Thereafter Less amounts representing interest Bonds payable (6) Oblinationr $ 877,352 1,132,352 1,133,328 1,137,938 1,135,828 5.740.522 5.818.676 5,893,370 782.334 25,251,696 $r2.000.000 In June 1988, the City's Redevelopment Agency entered into an agreement to lease a parking lot from a private party. The lease requires annual rental payments of $37,020. Rent expense was $21,293 for the year ended June 30, 1989. (Continued 1 9 CARLSBAD REDEVELOPMENT AGENCY Notes to Combined Financial Statements, Continued (6) Obligations Under Operatinp Leases. Contu The following is a schedule by year of future minimum rental payments required under the operating lease at June 30, 1989: Annual r ew 30, 1990 1991 1992 1993 1994 Thereafter $ 37,020 37,020 37,020 37,020 37,020 Total minimum lease payments uQua!J (7) Deferred Deferred revenue in the special revenue and debt service fund8 repreeents property tax increment8 due but not available. (8) Fund Reserve for debt 8eZViCe represent8 reaourcea legally rertricted to the payment of general long-term debt principal and interert maturing in future year8. Reeerves for loan receivable and 8Ub8eqUent eXpenditute8 are established to show that certain aseetr are already committed to other purposes and are not available for dircretionary expenditure8. Reserve for encumbrance8 repre8ent cownitment8 related to unperformed contract8 for eervicee and Undelivered goodr. Unreretved-underignated balances repreeent the fund balance (deficit) remaining after reduction for rererved and derignated fund balances. As of Jtme 30, 1989, one of the capital project8 fundr, the Redevelopment Project Fund, had a deficit fund balance of $1,238,460. It is anticipated that thir deficit will be eliminated through advance8 from the City of Carlebad or transfers from other fUnd8 of the Agency. J-Peat ‘Marwick Certified Public Accountants Peat Marwick Main 8 Co. 750 I3 Street San Diego, CA 92101 4ndeoent Auditors’ Reoort Board of Director8 Carlsbad Redevelopment Agency Carlsbad, California: We have audited the component unit combined financial statements of the Carlsbad Redevelopment Agency as of and for the year ended June 30, 1989, and have issued our report thereon dated October 20, 1989. The60 component unit comb ined financial etatemente are the rerponribility of the Agency’s management . Our responsibility is to express an opinion on these component unit combined financial statement8 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 rearonable assurance about whether the component unit financial statement8 are free of material mi88tatement. An audit include8 examining, on a test basis, evidence supporting the amount8 and dieclorurer in the component unit financial statements. An audit also include8 arrearing the accounting principles used and eignif icant estimate8 made by management, as well as evaluating the overall financial statement prerentation. We believe that our audit provider a rearonable barir for our opinion. In connection with our audit of the component unit combined financial statement8 of the Carlrbad Redevelopment Agency for the year ended June 30, 1989, we al80 performed tart8 of compliance a8 required by the “Guideline8 for Compliance Audit8 of California Redevelopment Agencie8” irrued by the State Controller’8 office of the rtate of California. Based on there procedurer, we noted no instance8 of noncompliance with the Controller’r Office guideline8 referred to above for the year ended June 30, 1989. October 20, 1989