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2000 RRA Financial ReportI 1 1 I 1 1 u 1 1 I a 1 Rosemead Redevelopment Agency Rosemead, California ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 309 2000 ~01111111111\ A M.... L I I :1 1 1 1 1 'I I 1 I I I I ROSEMEAD REDEVELOPMENT AGENCY FINANCIAL AND COMPLIANCE REPORT NNE 30, 2000 I I I I 1 I I 1 I 1 I I I 1 I I I CONTENTS INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION I FINANCIAL STATEMENTS Combined balance sheet - all fund types and account groups 2 and 3 Combined statement of revenues, expenditures and changes in fund balances - all governmental fund types 4 and 5 Combined statement of revenues, expenditures and changes in fund balances - budget and actual - all governmental fund types 6-8 Notes to financial statements 9-19 SUPPLEMENTARY INFORMATION Combining balance sheet 20 Combining statement of revenues, expenditures and changes in fund balances - special revenue funds 21 Computation of low-moderate housing excess/surplus funds 22 and 23 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAL AUDITING STANDARDS 24 and 25 I I McGLADREY& PULLEN, L L P ® Certified Public Accountants INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION To the Governing Board Rosemead Redevelopment Agency Rosemead, California RSM international We have audited the accompanying general purpose financial statements of the Rosemead Redevelopment Agency (the Agency), a component unit of the City of Rosemead, California, as of and for the year ended June 30, 2000. These general purpose financial statements are the responsibility of the Agency's management. 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 and the standards applicable to financial audits contained in Governmental Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and 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 general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Agency as of June 30, 2000, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. I I In accordance with Government Auditing Standards, we have also issued a report dated September 8, 2000 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 and grants. 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. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining fund statements and the computation of low-moderate housing excess/surplus 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 general purpose financial statements of the Agency. Such information 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. ' Pasadena, California September 8, 2000 P ' ROSEMEAD REDEVELOPMENT AGENCY COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2000 Assets and Other Debits Cash and investments Receivables Restricted cash and investment Due from the City of Rosemead Property and equipment Other Debits Amount available in Debt Service Fund Amount to be provided for retirement of general long-term debt Total assets and other debits Liabilities, Equity and Other Credits Liabilities Governmental Fund Types Special Debt Capital Revenues Service Proiecv $ 6,510,731 $ - $ 14,219,238 82,378 11,191 447,465 - 2,324,304 - $ 6,593,109 $ 2,335,495 $ 14,666,703 Accounts payable and accrued liabilities $ 19,853 $ $ 158,307 Due to the City of Rosemead - 204,373 Tax allocation bonds - - Total liabilities 19,853 362,680 Equity and Other Credits Investment in general fixed assets - - Fund balances: Reserved for Debt Service - 2,335,495 Reserved for Low-Moderate Income Housing 6,358,788 - - Unreserved, designated for redevelopment projects 214,468 - 14,304,023 Total equity and other credits 6,573,256 2,335,495 14,304,023 Total liabilities, equity and other credits $ 6,593,109 $ 2,335,495 $ 14,666,703 See Notes to Financial Statements. 2 1 1 1 1 t Account Groups Totals (Memorandum Only) General General Fixed Long-term Assets Debt 2000 1999 $ $ - $ 20,729,969 $ 20,976,413 - 541,034 449,872 - 2,324,304 2,322,185 - 1,017,762 9,444,660 - 9,444,660 9,346,119 - 2,335,495 2,335,495 2,333,376 - 32,634,505 32,634,505 32,966,624 $ 9,444,660 $ 34,970,000 $ 68,009,967 $ 69,412,351 $ $ $ 178,160 $ 268,155 204,373 - 34,970,000 34,970,000 35,300,000 34,970,000 35,352,533 35,568,155 9,444,660 - 9,444,660 9,346,1 19 - - 2,335,495 2,333,376 - 6,358,788 5,857,163 - - 14,518,491 16,307,538 9,444,660 - 32,657,434 33,844,196 $ 9,444,660 $ 34,970,000 $ 68,009,967 $ 69,412,351 3 1 ROSEMEAD REDEVELOPMENT AGENCY COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2000 ' Special Debt Capital Revenues Service Projects ' Revenues: Property tax increment $ $ $ 2,990,564 Intergovernmental - ' Use of money and property 425,306 138,648 733,370 Other 4,190 - 29,991 ' Total revenues 429,496 138,648 3,753,925 Expenditures: ' Current: Improvements to project area Operating - 200,066 - - 2,016,636 - , Professional fees 10,025 - 41,013 City administrative services 90,000 - 977,374 Debt service: , Principal - 330,000 - Interest 1,942,258 Total expenditures Revenues over(under)expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources over (under) expenditures and other financing sources (uses) Fund balance, beginning Fund balance, ending See Notes to Financial Statements. 300,091 2,272,258 3,035,023 129,405 (2,133,610) 718,902 236,519 2,135,729 - - (2,372,248) 236,519 2,135,729 (2,372,248) 365,924 2,119 (1,653,346) 6,207,332 2,333,376 15,957,369 $ 6,573,256 $ 2,335,495 $ 14,304,023 4 1 1 1 1 1 1 Totals (Memorandum Only) 2000 1999 $ 2,990,564 $ 2,870,290 - 1,000,000 1,297,324 1,499,403 34,181 182 4,322,069 5,369,875 2,016,636 2,680,606 200,066 201,065 51,038 51,204 1,067,374 1,042,219 330,000 310,000 1,942,258 1,960,187 5,607,372 6,245,281 (1,285,303) (875,406) 2,372,248 2,772,439 (2,372,248) (2,772,439) (1,285,303) (875,406) 24,498,077 25,373,483 $ 23,212,774 $ 24,498,077 5 ROSEMEAD REDEVELOPMENT AGENCY COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2000 Special Revenue Funds Variance Favorable Budget Actual (Unfavorable) Revenues: Property tax increment $ - $ - $ Use of money and property 371,350 425,306 53,956 Other 5,000 4,190 (810) Total revenues 376,350 429,496 53,146 Expenditures: Current: Improvement to project area - - - Operating 5,161,940 200,066 4,961,874 Professional fees 10,100 10,025 75 City administrative services 90,000 90,000 - Debt service: Principal - - Interest Total expenditures 5,262,040 300,091 4,961,949 ' Revenues over (under) expenditures (4,885,690) 129,405 5,015,095 Other financing sources (uses): , Operating transfers: From other funds 236,519 236,519 (To) other funds (4,750,000) - 4,750,000 ' Total other financing sources (uses) (4,750,000) 236,519 4,986,519 ' Revenues and other financing sources over (under) expenditures and other financing uses $ (9,635,690) 365,924 $ 10,001,614 ' Fund balance, beginning 6,207,332 ' Fund balance, ending $ 6,573,256 See Notes to Financial Statements. 6 1 1 8 A A 0 A e Debt Service Fund Capital Projects Fund Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ - $ - $ - $ 2,800,000 $ 2,990,564 $ 190,564 135,000 138,648 3,648 330,000 733,370 403,370 - - - - 29,991 29,991 135,000 138,648 3,648 3,130,000 3,753,925 623,925 7,416,950 2,016,636 5,400,314 39,500 41,013 (1,513) 956,900 977,374 (20,474) 330,000 330,000 942,260 1,942,258 2 2,272,260 2,272,258 2 8,413,350 3,035,023 5,378,327 (2,137,260) (2,133,610) 3,650 (5,283,350) 718,902 6,002,252 2,272,260 2,135,729 (136,531) 585,279 (585,279) - - (585,279) (2,372,248) (1,786,969) 2,272,260 2,135,729 (136,531) (2,372,248) (2,372,248) $ 135,000 2,119 $ (132,881) $ (5,283,350) (1,653,346) $ 3,630,004 2,333,376 $ 2,335,495 15,957,369 $ 14,304,023 7 ROSEMEAD REDEVELOPMENT AGENCY COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - ALL GOVERNMENTAL FUND TYPES, CONTINUED Year Ended June 30, 2000 Totals Variance Favorable Budget Actual (Unfavorable) Revenues: Property tax increment $ 2,800,000 $ 2,990,564 $ 190,564 Use of money and property 836,350 1,297,324 460,974 Other 5,000 34,181 29,181 Total revenues Expenditures: Current: Improvement to project area Operating Professional fees City administrative services Debt service: Principal Interest 3,641,350 4,322,069 680,719 7,416,950 2,016,636 5,400,314 5,161,940 200,066 4,961,874 49,600 51,038 (1,438) 1,046,900 1,067,374 (20,474) 330,000 330,000 1,942,260 1,942,258 2 Total expenditures Revenues over (under) expenditures Other financing sources (uses): Operating transfers: From other funds (To) other funds Total other financing sources (uses) Revenues and other financing sources over (under) expenditures and other financing uses Fund balance, beginning Fund balance, ending See Notes to Financial Statements. 15,947,650 5,607,372 10,340,278 (12,306,300) (1,285,303) 11,020,997 2,857,539 2,372,248 (485,291) (5,335,279) (2,372,248) 2,963,031 (2,477,740) 2,477,740 $ (14,784,040) (1,285,303) $ 13,498,737 24,498,077 $ 23,212,774 8 I 1 [1 I I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Groups, and Significant Accounting and Reporting Policies Nature of operations The Rosemead Redevelopment Agency (the Agency) was established in June 1972 pursuant to State of California Health and Safety Code Section 33000 entitled Community Redevelopment Low. Its purpose is to finance street, park and utility improvements. It also acquires and constructs major capital facilities all within the Rosemead Project Area No. 1. The Agency is a component unit of the City of Rosemead (the City), California, and is included in the general purpose financial statements of the City. The Agency has the same fiscal year as the City. The financial statements contain information for the Agency only. The City financial statements can be obtained from the Finance Department of the City. The financial statements of the Agency have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Agency's accounting principles are described below: Reporting entity As required by GAAP, these financial statements present the government and its component unit, an entity for which the government is considered to be financially accountable. A blended component unit, although a legally separate entity, is, in substance, part of the government's operations and, therefore, data from this unit is combined with data of the primary government. The blended component unit included in the Agency's reporting entity is the Rosemead Housing Development Corporation (the Corporation). The Corporation is a California nonprofit public benefit corporation organized under Section 501(c)(3) of the Internal Revenue Code. The Corporation accounts for the construction, financing and operations of low-moderate income housing. The Corporation's financial statements can be obtained from the Finance Department of the City. Fund accounting The accounts of the Agency are organized on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, equity, revenue and expenditures. 9 L! ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Groups, and Significant Accounting and Reporting Policies, Continued ' The various funds and account groups are presented as follows: Governmental fund types The Special Revenue Funds account for the proceeds of specific revenue resources (other than major ' capital projects) that are legally restricted to expenditures for specified purposes. The Special Revenue Funds and their purposes are as follows: ' Low-Moderate Income Housing Set Aside Fund - Accounts for the 20% of gross property tax increment revenue received by the Agency to fund future projects involving the replacing or rehabilitation of low-moderate income housing within City limits. i Rosemead Housing Development Corporation - Accounts for the construction and financing of low-moderate income housing. ' The Debt Service Fund accounts for the accumulation of resources for the payment of general long-term debt principal, interest and related costs. The Capital Projects Fund accounts for the financial resources to be used for the improvement and rehabilitation of the community redevelopment project areas and acquisition or construction of major ' capital facilities within the Agency. Account groups ' The General Fixed Assets Account Group accounts for all Agency general fixed assets. The General Long-term Debt Account Group accounts for the outstanding principal balances of all ' Agency long-term debt expected to be financed from Governmental Fund Types. The following is a summary of the significant accounting and reporting policies: Basis of accounting ' Governmental Fund Types are accounted for using the modified accrual basis of accounting. Revenue is recognized in the accounting period in which it becomes both measurable and available to finance the expenditures of the current period. "Measurable" means the amount of the transaction can be ' determined. "Available" means collectible within the current period or soon enough thereafter to pay current liabilities. Expenditures are generally recognized in the accounting period in which the fund liability is incurred, if measurable, except expenditures for debt service on long-term obligations, which are recognized when due. 1 10 ROSEMEAD.REDEVELOPMENT AGENCY ' NOTES TO FINANCIAL STATEMENTS ' Note I. Nature of Operations, Reporting Entity, Description of Funds and Account Groups, and Significant Accounting and Reporting Policies, Continued ' Cash and investments The Agency pools cash and investment resources of some of its funds in order to facilitate the management of cash. Cash applicable to a particular fund is readily identifiable. The balance in the pooled cash accounts is available to meet current operating requirements. ' Investments are stated at fair value. The fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation. The fair ' value of the investments is generally based on published market prices and quotations from major investment firms. Investment earnings are allocated based on the source of funds. Receivables Property taxes attach as an enforceable lien on property as of March 1. Taxes are levied on July 1 and ' are payable in two installments on December 10 and April 10. The County of Los Angeles bills and collects the property taxes and remits them to the Agency in installments during the year. Property taxes received within 60 days after the Agency's fiscal year end are considered "measurable" and "available" and are accrued in the Agency's financial statements. All other receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. ' Property and equipment ' All property and equipment of the Agency are accounted for in the General Fixed Assets Account Group. Property and equipment items acquired or constructed for general governmental operations are recorded as expenditures in the fund making the expenditure and capitalized in the General Fixed Assets Account ' Group. All general fixed assets which were purchased or constructed are stated at cost. Assets acquired by gift ' or bequest are recorded at their fair market value at the date of transfer. No depreciation is recorded on general fixed assets. ' Fund balances The reserved portion of the fund balances represents that amount which has been legally identified for ' the specific purpose or it represents that amount which is not available to liquidate current liabilities. The unreserved portion represents the amount available for future appropriations. Designated fund balances represent tentative plans for future use of financial resources. I n I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 1. Nature of Operations, Reporting Entity, Description of Funds and Account Groups, and Significant Accounting and Reporting Policies, Continued Deferred revenue Under the modified accrual basis of accounting, revenues often are measurable but not available (available meaning legally available, administratively available and physically available). When revenue is measurable but not available, the asset should be recorded to establish accountability and the revenue should be deferred. Deferred revenue may also result from revenues being collected in advance of the fiscal year to which they apply or in advance of their legal due date. "Memorandum Only" total columns ' Included on the combined financial statements are total columns captioned "Memorandum Only" to indicate that they are presented only for informational purposes. Adjustments to eliminate interfund transactions have not been recorded in arriving at such amounts and the memorandum totals are not ' intended to fairly present the financial position or results of operations of the reporting entity taken as a whole. 11 I Additionally, the 1999 totals presented in the "Memorandum Only" columns are included to provide a summarized comparison with comparable 2000 amounts and are not intended to present all information necessary for a fair presentation of financial position and results of operations in accordance with generally accepted accounting principles. Budget matters Budgets presented in this report for comparison to actual amounts are presented in accordance with generally accepted accounting principles. The modified accrual basis of accounting is employed in the preparation of the budget. Reported budget amounts represent the original adopted budget as amended. The legal level of budgetary control is at the department level. Unexpended budgeted amounts lapse at the end of the budget year. 12 1 I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 2 Cash and Investments The components of cash and investments at June 30, 2000 are as follows: Cash: Cash in bank $ 1,013,436 Time certificates of deposit 1,850,000 Cash total 2,863,436 Investments: Debt securities investments Investment in State Treasurer's Investment Pool 1,710,157 16,156,376 ' Investments total 17,866,533 Cash and investments total $ 20,729,969 Cash The Agency maintains cash and investment pools that are available for use by all funds. Each fund's or fund type's share of the pool balance is reported in the financial statements as cash and cash investments. Earnings from the pooled investments are allocated monthly to each participating fund based on a ' formula that takes into consideration each fund's average investment in the pool. At year end, the carrying amount of the Agency's deposits was $2,863,436 and the bank balance was $2,887,045. Of the bank balance, $474,002 was covered by federal depository insurance or by collateral held in the Agency's name, and $2,413,043 was collateralized by depository collateral pools as described in the following paragraph. ' In accordance with state statutes, the Agency maintains deposits at those depository institutions insured by the Federal Deposit Insurance Corporation. The California Government Code requires California ' banks and savings and loan associations to collateralize the deposits of governmental entities by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of those deposits. California law also allows financial institutions to secure the deposits of governmental ' entities by pledging first trust deed mortgage notes having a collateral value of 150% of an agency's total deposits. I 13 ' I I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 2 Cash and Investments, Continued The cash deposits are classified in three categories of credit risk as follows: Category one includes deposits that are insured or collateralized with securities held by the entity or by its agent in the entity's name; Category two includes deposits that are collateralized with securities held by the pledging financial institution's Trust Department or agent in the entity's name; Category three includes deposits that are uncollateralized. 1 2 3 Bank Balance Cash deposits $ 474,002 $ 563,043 $ $ 1,037,045 Time certificates of deposit - 1,850,000 1,850,000 I Investments 1 I $ 474,002 $ 2,413,043 $ - $ 2,887,045 State statutes authorize the Agency to invest any available funds in securities issued or guaranteed by the United States Treasury or agencies of the United States, bank certificates of deposit, bankers acceptances, negotiable certificates of deposit, the State Treasurer's Investment Pool (LAIF), repurchase agreements, commercial paper and bonds, and registered warrants or treasury notes of the State of California and its local agencies. An advisory board has been established to monitor LAIF's compliance with regulations and investment alternatives established by the State. The Agency participates in a voluntary external investment pool, LAIF, which is managed by the State Treasurer. LAIF has oversight provided by the Local Agency Investment Advisory Board. The Board consists of five members as designated by State statute. The Chairman of the Board is the State Treasurer or his designated representative. The fair value of the Agency's shares in the pool approximates the fair value of the position in the pool. At June 30, 2000, the Agency's pooled investments in LAIF in the amount of $16,156,376 are not subject to custodial credit risk categorization. The total estimated fair value invested by all public agencies in LAIF is $43,227,355,507. Of that amount, 93.77% is invested in nonderivative financial products and 6.23% in derivative financial products. 14 1 1 ROSEMEAD REDEVELOPMENT AGENCY t NOTES TO FINANCIAL STATEMENTS i d nue Note 2. Cash and Investments, Cont ' The Agency's investments as of June 30, 2000 are categorized in the following sc hedule to give an indication of the level of risk assumed by the entity at year end: ' Category Investment 1 2 3 Fair Value U.S. government and government agency securities $ $ $ 1,216,138 $ 1,216,138 _ State and municipal bonds 494,019 494,019 $ $ $ 1,710,157 1,710,157 ' Investment in State Treasurer's Investment Pool 16,156,376 Total investments $ 17,866,533 t The three preceding risk description categories are defined as follows: ' Category Description 1 Investments that are insured, registered or for which the securities are held by the Agency ' or its agent in the Agency's name. 2 Uninsured and unregistered investments for which the securities are held by the counterparty's Trust Department (if a bank) or agent in the Agency's name. 3 Uninsured and unregistered investments for which the securities are held by the ' counterparty's Trust Department (if a bank) or agent, but not in the Agency's name. Restricted cash and investment ' All restricted cash and investment of the City are held by trustees or an escrow agent. The California Government Code provides that these funds, in the absence of specific governing provisions to the ' contrary, may be invested in accordance with the resolutions or indentures that specify the allowable investment of bond proceeds and funds earmarked for bond repayment. ' At June 30, 2000, the City's restricted cash and investment of $2,324,304, which is invested in a guaranteed investment contact which accrues interest monthly at a rate of 5.8%, maturing October 1, 2013, are not subject to custodial credit risk categorization. 1 15 ROSEMEAD REDEVELOPMENT AGENCY ' NOTES TO FINANCIAL STATEMENTS Note 3. Receivables ' Receivables as of June 30, 2000 consisted of the following: Special ' Revenue Debt Capital Fund Service Projects Total Property tax increment $ - $ - $ 134,006 $ 134,006 Accrued interest 82,378 11,191 203,468 297,037 Intergovernmental - - 109,991 109,991 $ 82,378 $ 11,191 $ 447,465 $ 541,034 Note 4. Reimbursement Agreements and Related-party Transactions ' The Agency has entered into various reimbursement agreements with the City which require the City to install certain public improvements for the benefit of the Rosemead Redevelopment Agency Project Area No. 1. In addition, the Agency reimburses the City for administrative services, facilities and other ' operating services which totaled $1,097,300 for the fiscal year ended June 30, 2000. The Agency and City are commonly controlled by the City Council. Note S. Property and Equipment ' During the year ended June 30, 2000, the changes in the general fixed assets were as follows: Balance Balance July 1, Acquisitions June 30, 1999 (Dispositions) 2000 ' Land Buildings and improvements Furniture and fixtures C $ 4,187,639 $ (79,000) $ 4,108,639 4,355,026 37,944 4,392,970 803,454 139,597 943,051 $ 9,346,119 $ 98,541 $ 9,444,660 1 1 16 I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCL4,L STATEMENTS ' Note 6. Long-term Debt ' The following is a summary of general long-term debt transactions fo r the year ended J une 30, 2000: Tax Tax Allocation Allocation ' Bonds Bonds Series 1993A Series 1993B Total ' Balance, July 1, 1999 $ 34,275,000 $ 1,025,000 $ 35,300,000 Payments of principal - (330,000) (330,000) ' Balance, June 30, 2000 $ 34,275,000 $ 695,000 $ 34,970,000 In November 1993, the Agency issued tax allocation bonds amounting to $34,275,000 (Series 1993A) and taxable tax allocation refunding bonds amounting to $2,435,000 (Series 1993B) to finance a portion of the cost of the redevelopment area known as Project Area No. I. The bonds bear interest ranging from ' 4.6% to 5.6% and 5.2% to 5.9% for Series 1993A and B, respectively. $14,652,398 of Series A proceeds and $2,382,551 of Series B proceeds, along with the existing reserve amount of $2,651,000 on deposit with the fiscal agent, 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 1987 and 1991 Tax Allocation Bonds which are, therefore, considered defeased. Series 1993A bonds mature after October 1, 2001 and before October I, 2033, and Series 1993B bonds mature on or before October 1 1 1 I, 2001. In addition, the 1993 Series A bond issue reallocated the $6,813,850 of proceeds from the 1991 bond issue deposited in the Low-Moderate Income Housing Set-Aside Fund in October 1991. The reallocation had the effect of satisfying the present value effect of the $423,574 borrowed from the Educational Revenue Augmentation Fund (ERAF) in fiscal year ended June 30, 1993 and satisfying the set-aside requirements as follows: $812,342 for fiscal year ended June 30, 1992, $828,398 for fiscal year ended June 30, 1993 and $469,142 for each of the fiscal years ended June 30, 1997 through June 30, 2022. The annual requirements, principal and interest to amortize the outstanding debt as of June 30, 2000 are as follows: During the Year Ending June 30, 2001 2002 2003 2004 2005 Years thereafter Series 1993A Bonds Series 1993B Bonds Principal Interest Principal Interest Total $ 1,892,193 $ 345,000 20,000 1,892,193 350,000 425,000 1,891,273 - 445,000 1,870,873 - 465,000 1,848,622 - 920,000 34,235,820 - 40,660 $ 2,277,853 20,650 2,282,843 - 2,316,273 - 2,315,873 - 2,313,622 - 67,155,820 $ 34,275,000 $ 43,630,974 $ 695,000 $ 61,310 $ 78,662,284 17 1 I I 1 I ROSEMEAD REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Note 6. Long-term Debt, Continued Tax allocation bonds, Series 1993A and B 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. 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, 2000. Note 7. 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 commercial liability insurance coverage. 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 which were in excess of insurance coverage in any of the three preceding years. Note 8. Commitments and Contingent Liabilities ' Low-Moderate Income Housing Set-Aside Fund Under State law, the Agency is required to set aside a portion of its property tax increment revenue for low-moderate income housing. The Agency has made findings that, for the years ended June 30, 1986 through June 30, 1991, it was allowed to defer funding of the set-aside. The set-aside amounts incurred 1 during the fiscal year ended June 30, 1994, 1995, 1996, 1997 and 1998 were also deferred until the fiscal year ending June 30, 2023, as provided by the Agency's adoption of the housing deficit repayment plan. As of June 30, 2000, the accumulated set-aside amount not yet funded was approximately $4,947,000. As required by law, the Agency devised a plan to fund the accumulating amount. Advance agreement ' In February 1995, the Agency approved an agreement with a local utility company to advance the utility company $117,600 required to install water distribution mains within the Agency redevelopment area. The agreement was put on hold by the Agency and, as of September 8, 2000, the agreement remains on ' hold. 18 ' I ROSEMEAD REDEVELOPMENT AGENCY 1 NOTES TO FINANCIAL STATEMENTS Note 9. Property Management and Operations The Agency through the Corporation has an agreement with a management company, dated July 1994, to operate the development housing. This agreement is automatically renewed for successive periods of one year, unless terminated by the Corporation. The management company is responsible for collecting 1 rents and receipts, employing an on-site manager and maintaining financial records. Total fees paid to the management company were $18,600 during fiscal year ended June 30, 2000. Note 10. Pronouncements Issued but Not Yet Adopted 1 In December 1998, the GASB issued Statement of Governmental Accounting Standards No. 33, Accounting and Financial Reporting for Nonexchange Transactions. This Statement establishes accounting and financial reporting standards for nonexchange transactions involving financial or capital resources (e.g., most taxes, grants and private donations). In a nonexchange transaction, a government gives (or receives) value without directly receiving (or giving) equal value in return. Statement No. 33 is required to be adopted for years beginning after June 15, 2000. The Agency has not completed its assessment of the effect that the adoption of Statement No. 33 will have on its financial statements. In June 1999, the GASB issued Statement of Governmental Accounting Standards No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. This Statement establishes new financial reporting model for state and local governments. The Agency will have to disclose the details about the full cost of providing government services and to allocate expenses and revenue to allow calculation of net costs program by program. The Agency will also need to report all capital assets, including infrastructure assets, and begin to track depreciation on these items year to year. The Agency will be required to implement the new financial model for its fiscal years ending June 30, 2003. However, for purposes of the retroactive reporting of major networks and subsystems of general infrastructure assets, the Agency will be required to implement this reporting as of fiscal year ending June 30, 2007. The Agency has not completed its assessment of the effect that the adoption of Statement No. 34 will have on its financial statements. 1 8 1 19 e 1 ROSEMEAD REDEVELOPMENT AGENCY COMBINING BALANCE SHEET - SPECIAL REVENUE FUNDS June 30, 2000 Assets Cash and investments Receivables Due from the City of Rosemead Total assets Liabilities and Equ Liabilities, accounts accrued liabilities Low-Moderate Income Rosemead Housing Housing Set-Aside Development Totals Fund Corporation 2000 1999 $ 6,276,410 $ 234,321 $ 6,510,731 $ 5,140,173 82,378 - 82,378 64,849 - - 1,017,757 $ 6,358,788 $ 234,321 $ 6,593,109 $ 6,222,779 $ - $ 19,853 $ 19,853 $ 15,447 Equity Fund balances: Reserved for low-moderate income housing 6,358,788 - 6,358,788 5,857,163 Unreserved, designated for redevelopment projects - 214,468 214,468 350,169 Total equity 6,358,788 214,468 6,573,256 6,207,332 Total liabilities and equity $ 6,358,788 $ 234,321 $ 6,593,109 $ 6,222,779 20 I ROSEMEAD REDEVELOPMENT AGENCY COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - SPECIAL REVENUE FUNDS ' Year Ended June 30, 2000 ' ' Low-Moderate Income Housing Set-Aside Fund Rosemead Housing Development Corporation otals 2000 999 Revenues: Intergovernmental $ - $ - $ - $ 1,000,000 ' Use of money and property 265,106 160,200 425,306 616,816 Other - 4,190 4,190 - ' Total revenues 265,106 164,390 429,496 1,616,816 • Expenditures: , Current: Operating - 200,066 200,066 201,065 Professional fees - 10,025 10,025 11,805 ' City administrative services 90,000 90,000 90,000 ' Total expenditures - 300,091 300,091 302,870 Revenues over (under) expenditures 265,106 (135,701) 129,405 1,313,946 Other financing sources (uses): Operating transfers: ' From other funds 236,519 236,519 638,885 (To) other funds - - (400,000) ' Total other financing sources (uses) 236,519 236,519 238,885 ' Revenues and other financing sources over expenditures and other financing uses 501,625 (135,701) 365,924 1,552,831 ' Fund balance, beginning 5,857,163 350,169 6,207,332 4,654,501 Fund balance, ending $ 6,358,788 $ 214,468 $ 6,573,256 $ 6,207,332 11 1 21 I COMPUTATION OF LOW-MODERATE HOUSING EXCESS/SURPLUS FUNDS ROSEMEAD REDEVELOPMENT AGENCY Year Ended June 30, 2000 I 1 I Proceeds Fund Balance - Beginning of Year Adjustments Less unavailable funds - included in beginning fund balance: Land held for resale Rehabilitation loans ERAF loan receivable Set-aside deferrals Unspent bond proceeds Total unavailable funds Available Fund Balance - Beginning of Year Current year proceeds/uses (actual plus changes in unavailable): Uses Changes in unavailable amounts Project Area 1 $ 5,857,163 (5,427,865) (5,427,865) 429,298 501,625 105,631 1 I Fiscal year 1997-98 Available Fund Balance - End of Year Encumbrances Unspent bond proceeds present Land sales - HS 33334.12(g)(3)(A) Available Fund Balance - for Excess Surplus Does available fund balance for excess/surplus exceed $1,000,000? If so, enter available fund balance and evaluate that amount against tax increment. If less, enter zero. Does available fund balance for excess/surplus exceed the greater of prior four years' set-aside deposits or $1,000,000? Tax increment set-aside amounts: Fiscal year 1995-96 Fiscal year 1996-97 Fiscal year 1998-99 ' Total set-aside deposited into fund Excess/surplus Funds ' Greater of available fund balance for excess/surplus or prior four years' tax increment set-aside deposits 11 1,036,554 $ 1,036,554 $ 1,036,554 709,334 691,181 708,027 2,108,542 11nA IAl 22 1 1 1 1 1 ROSEMEAD REDEVELOPMENT AGENCY COMPUTATION OF LOW-MODERATE HOUSING EXCESS/SURPLUS FUNDS, CONTINUED Year Ended June 30, 2000 Reconciliation to Ending Fund Balance Ending GAAP fund balance Available fund balance - end of year above Add unavailable funds - end of year Land held for resale Rehabilitation loans ERAF loan receivable Set-aside deferrals Other: Unspent bond proceeds Total unavailable funds 23 5,322,234 Area I $ 6,358,788 $ 1,036,554 $ 6,358,788 ' N McGLADREY& PULLEN, LLP ® Certified Public Accountants ' INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED ' IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ' To the Governing Board ' Rosemead Redevelopment Agency Rosemead, California RSM international We have audited the general purpose financial statements of the Rosemead Redevelopment Agency (the Agency), a component unit of the City of Rosemead, California, as of and for the year ended June 30, 2000, and have issued our report thereon dated September 8, 2000. We conducted our audit in ' accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standard issued by the Comptroller General of the United States. ' Compliance 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, t contracts and grants, 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 far 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 that are required to be reported under Government Auditing Standards. ' 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 internal control over financial reporting. Our ' consideration of internal control over financial reporting would not necessarily disclose all matters in internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more internal control component does not reduce to ' a relatively low level the risk that misstatements 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 internal ' control and its operations that we consider to be material weaknesses as defined above. 1 24 l _J 0 ' Pasadena, California September 8, 2000 1 I 1 1 1 I I 1 1 I This report is intended for the information of the Governing Board and management of the Agency and is not intended to be and should not be used by anyone other than those specified parties. A 1 25 i~i I~