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HomeMy Public PortalAboutCRA3BCRA AGENDA ITEM 3.B. FINANCIAL SERVICES DEPARTMENT MEMORANDUM DATE: April 5, 2011 TO: Community Redevelopment Agency FROM: Jose E. Pulido, Executive Directorek By: Monica Molina, Deputy Treasurer & Lee Ma, Accountant SUBJECT: TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY BASIC FINANCIAL STATEMENTS FOR FISCAL YEAR (FY) 2009-10 RECOMMENDATION: It is recommended that the Agency members receive and file Fiscal Year (FY) 2009-10 Temple City Community Redevelopment Agency Basic Financial Statements. BACKGROUND: 1. On May 24, 2010, the auditors from Mayer Hoffman McCann P.C. met with City Manager Pulido and Financial Services Manager Molina to discuss the process of FY 2009-10 audit and to conduct preliminary review. 2. On September 7, 2010, Mayer Hoffman McCann P.C., conducted the audit in the City for two weeks. During that time, auditors reviewed financial transactions; spoke to key personel regarding internal controls; and reviewed payroll records for accuracy. 3. On January 19, 2011, the City was informed that the City's field auditor was no longer working for Mayer Hoffman McCann P.C., and the field manager would complete the audit. At that time, the City was also informed that additional documentation will be required and that various bank and attorney confirmations were not submitted, which were required prior to the completion of the audit reports. 4. On March 9, 2011, Mayer Hoffman McCann P.C., informed the City that all confirmations were received by the various banks and attorneys and that the financial reports would be finalized and distributed to the City by the end of the week. Community Redevelopment Agency April 5, 2011 Page 2 ANALYSIS: This report contains the financial statements of the Temple City Community Redevelopment Agency. The statements primarily account for three different fund types within the Agency. 1. The Special Revenue Fund consists of the Low and Moderate Housing Fund that was established in December 1993. The primary revenue sources for this fund are 20% of tax increment; interest income; and any repayment of grants and loans. During FY 2009-10, the Low and Moderate Housing fund received $162,205 in tax increment; and $4,365 in interest income. This fund is responsible for 20% of the semi-annual bond payment. During FY 2009-10, the Agency made a total principal and interest bond payment of $123,944. Low and moderate income housing grants (Handyworker Program) are also funded from available revenues. A total of $249,120 in grants were issued during this fiscal year. The total administrative cost for this fund was $34,762. The equity in the Low and Moderate Income Housing fund balance decreased by approximately $242,500. This decrease was due to an increase in Handyworker program grants. The balance in this fund as of June 30, 2010 is $622,734. 2. The Debt Service Fund accounts for tax increment revenues and the repayment of agency indebtedness. Revenue sources for this fund are 80% of tax increment and investment earnings. During FY 2009-10 a total of $648,819 in tax increment and $673 in interest income was received. This fund is responsible for 80% of the semi-annual bond payments and debt service payments on City loans. In September 2005 the Agency refinanced its bonds and the Authority issued the 2005 Refunding Revenue Bonds. During FY 2009-10, the Agency paid a total of $627,225 in principal and interest for the bond and $300,000 for the City loan; of which 80% is paid through the Debt Service Fund. As of June 30, 2010, the indebtedness consisted of the balance owed for the 2005 Revenue Bonds ($6,900,000 in principal payments) and $4,073,226 in principal and interest owed to the City of Temple City for advanced funds. On November 13, 2009, Governor Schwarzenegger signed Senate Bill 68 (SB 68), amending provisions of budget bill AB X4 26, which diverted $2.05 billion of local redevelopment funds to their county Supplemental Educational Revenue Augmentation Fund (SERAF) for distribution to school districts and county offices of education serving redevelopment Project areas or housing supported by redevelopment. Redevelopment was required to allocate $1.7 billion in FY 2009-10 and another $350 million in FY 2010-11. Temple City Community Redevelopment allocation for FY 2009-10 was $330,160 of which $66,032 was paid out of the debt service fund. As of June 30, 2010, the total fund balance available for future debt payments is $648,814. Community Redevelopment Agency April 5. 2011 Page 3 3. The Capital Project Fund accounts for redevelopment administrative expenses; project costs; and improvements. A total of $106,740 in administrative expenses and $79,946 in legal fees were paid during FY 2009-10. The only revenue source for this fund is interest income, which received $40,699. During FY 2009-10, this fund was responsible for a $264,128 SERAF payment to the County. The balance in this fund as of June 30, 2010 is $2,319,852. Mayer Hoffman McCann P.C. reported that the financial statements fairly present the financial position of the Temple City Redevelopment Agency. The auditing firm stated that the Agency was not in compliance with the Health and Safety Code Section 33302 in that the City's Housing Element was not in compliance with Government Code Section 65300. The City did adopt an updated Housing Element on June 20, 2000. In October 2001, a revised Housing Element was also resubmitted to the State Housing and Community Development Department and was returned with comments. The Agency has been in the process of preparing an entirely new Housing Element for the planning period of 2008-2014. A first draft of this Housing Element was submitted in late 2008 and in October 2009 and a second draft of the Housing Element was sent to the State Department of Housing and Community Development. Additional comments were received in December 2009 which agency staff are working with the Housing Community Development to achieve a certified Housing Element. FISCAL IMPACT: This agenda item has no fiscal impact on the FY 2009-10 CRA Budget. CONCLUSION: Staff is recommending the Agency Members to receive and file FY 2009-10 Basic Financial Statements for the Temple City Community Redevelopment Agency. ATTACHMENT: Temple City Community Redevelopment Agency Basic Financial Statements TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY BASIC FINANCIAL STATEMENTS Year Ended June 30, 2010 (With Independent Auditors' Report Thereon) MI -IM Mayer Hoffman McCann P.C. An Independent CPA Firm TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY BASIC FINANCIAL STATEMENTS Year Ended June 30, 2010 TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS (Required Supplementary Information) BASIC FINANCIAL STATEMENTS: Page 1 3 Government -wide Financial Statements: Statement of Net Assets 12 Statement of Activities 13 Fund Financial Statements: Govemmental Funds: Balance Sheet 16 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 17 Statement of Revenues, Expenditures and Changes in Fund Balances 18 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Govemmental Funds to the Statement of Activities 19 Notes to Basic Financial Statements 21 REQUIRED SUPPLEMENTARY INFORMATION: Note to Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual: 40 Low and Moderate Income Housing Special Revenue Fund 41 SUPPLEMENTARY SCHEDULES: Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual: CRA Debt Service Fund CRA Capital Improvements Capital Projects Fund 44 45 TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY BASIC FINANCIAL STATEMENTS Year Ended June 30, 2010 TABLE OF CONTENTS, (CONTINUED} Page COMPLIANCE SECTION: Report on Compliance and Other Matters and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 49 MHM Mayer Hoffman McCann P.C. An Independent CPA Firm 2301 Dupont Drive, Suite 200 Irvine, California 92612 949-474-2020 ph 949-263-5520 fx www.mhm-pc.com Board of Directors Temple City Community Redevelopment Agency Temple City, California INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities and each major fund of the Temple City Community Redevelopment Agency ("Agency°), a component unit of the City of Temple City, California, as of and for the year ended June 30, 2010, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of the Agency. Our responsibility is to express opinions on these financial statements based on our audit. The prior year partial comparative information has been derived from the Agency's financial statements for the year ended June 30, 2009 and, in our report dated December 16, 2009, we expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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, 2010, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. The information identified in the accompanying table of contents as management's discussion and analysis and required supplementary information are not a required part of the basic financial statements, but are 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. -1- MHM 11 Board of Directors Temple City Community Redevelopment Agency Page Two Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The supplementary schedules listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued our report dated January 20, 2011 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 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 considered in assessing the results of our audit. Irvine, California January 20, 2011 -2- MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis of the Temple City Community Redevelopment Agency's financial performance provides an overview of the financial activities for the fiscal year ended June 30, 2010. Readers are encouraged to consider the information presented here in conjunction with the accompanying basic financial statements. Financial Highlights • The Agency's net assets decreased by $465,981 as a result of this year's operations. • The total revenue from all sources was $487,555. • The total cost of all Agency programs was $953,536. • The Agency's total debt decreased by $467,111 during the current fiscal year. The key factors in this decrease are the 2005 Revenue Bond payment ($295,000) and the net decrease of ($172,111) in the principle and interest loan obligation owed to the City of Temple City. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Temple City Community Redevelopment Agency's basic financial statements. The Temple City Community Redevelopment Agency's basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. Government -wide financial statements. The govemment-wide financial statements are designed to provide readers with a broad overview of the Temple City Community Redevelopment Agency's finances, in a manner similar to a private -sector business. The statement of net assets presents information on all of the Temple City Community Redevelopment Agency's assets and liabilities, with the difference between the two reported as total net assets. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the Agency is improving or deteriorating. The statement of activities presents information showing how the Agency's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing related to cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes). Both of the govemment-wide financial statements report on functions of the Temple City Community Redevelopment Agency that are principally supported by taxes and inter- governmental revenues (governmental activities). The governmental activities of the Temple City Redevelopment Agency include community services, low and moderate housing program and debt service. 3 Fund financial statements. A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Temple City Community Redevelopment Agency, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the Temple City Redevelopment Agency are governmental funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government - wide financial statements. By doing so, readers may better understand the long-term impact of the Agency's near -term financing decisions. Both the governmental funds balance sheet and the statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Temple City Community Redevelopment Agency maintains three individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the statement of revenues, expenditures, and changes in fund balances for the CRA capital improvements fund, the CRA debt service fund and the low and moderate housing fund, all of which are considered to be major funds. The Temple City Community Redevelopment Agency adopts an annual appropriated budget. A budgetary comparison statement has been provided to demonstrate compliance with this budget. Notes to basic 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. Government -wide Financial Analysis Our analysis focuses on the net assets and changes in net assets of the Agency's governmental activities for the fiscal year ending June 30, 2010. 4 Temple City Community Redevelopment Agency Condensed Statement of Net Assets Governmental Activities Current and other assets Capital assets Total assets Current and other liabilities Long-term liabilities Total liabilities 2010 2009 $ 3,748,173 $ 4,719,099 120,925 123,108 $ 3,869,098 $ 4,842,207 $ 250,381 $ 290,398 10, 973,226 11,440,337 $11,223,607 $11,730,735 Net Assets Invested in capital assets, Net of related debt $ 120,925 $ 123,108 Unrestricted (7,475,434) (7,011,636) Total net assets ($1,_354,509) ($x.888,528) During the current fiscal year the Agency's net assets decreased by $465,981. Key elements of the decrease are as follows: • A payment in the amount of $330,160 was made during this fiscal year to pay the obligated Supplemental Educational Augmentation Fund to the State. • Interest income decreased by 47% in comparison to last fiscal year; a total decrease of $40,000. Tax increment revenues decreased by approximately $100,000; 13% lower than last fiscal year. 5 Temple City Community Redevelopment Agency Changes in Net Assets Governmental Activities 2010 2009 Revenues Program revenues Charges for services $ $ General revenues Property taxes 440,818 878,420 Investment income 45,737 85,892 Other 1,000 1,579 Loss on sale of capital asset - - Total revenues $ 487,555 $ 965,891 Expenses Community services $ 251,303 $ 325,675 Low and moderate income housing 253,301 299,409 Interest on long-term debt 448,932 468,098 Total expenses Decrease in Net Assets Net Assets — Beginning of Year Net Assets — End of Year $ 953,536 465,981 (6,888,528) ($7,354,5091 $1,093,182 127,291 (6,761,237) ($6,888,528) Revenues - Governmental Activities ■ Property taxes 0 Investment income 6 Expenses - Govemmental Activities © Community services ■ Low & moderate income housing o Interest on long-term debt The Temple City Community Redevelopment Agency's total revenues are $487,555, while the total cost of all programs and services are $953,536. The following table represents the cost of each of the Agency's largest programs — community services, low and moderate -income housing and interest on long-term debt — as well as each programs' net cost. The net cost is the total program expenses less the associated program revenues earned by that activity. The table also shows the financial cost that was incurred by the Agency for each activity. Statement of Activities Govemmental Activities Community services Low and moderate income housing Interest on long-term debt Total Total Cost of Services 2010 $251,303 253,301 448.932 $953,536 Total Cost of Services 2009 $ 325,675 299,409 468.098 $1,093,182 The net cost of services indicates that the overall cost of the Temple City Community Redevelopment Agency is more than the revenues generated to support it. However, general revenues, such as tax increment and investment income, not associated with a particular activity, are not offset against the direct cost of services. 7 Financial Analysis of the Agency's Funds The Temple City Community Redevelopment Agency's governmental funds reported combined fund balances of a $3,591,400 at the end of the fiscal year. The equity in the Low and Moderate Income Housing fund balance decreased by $242,534. A large portion of this decrease ($249,120) was due to the funding of the Handyworker Program, which provides low and moderate -income owners grants up to $10,000 for minor home repairs. The primary revenue sources for this fund are 20% of tax increment and any repayment of grants and loans. This fund is responsible for 20% of the semi-annual bond payments. The equity in the CRA Debt Service fund balance decreased by $282,394. During the year ended June 30, 2005, the Agency restated the beginning fund balance of its debt service fund to exclude advances payable to the City. Within the context of the separately issued financial statements of the Agency, these amounts are considered to be long-term debt due to an external party (the City). Governmental funds are presented using the current financial resources measurement focus. Since long-term advances due to the City are not due and payable in the current period, they are not reported as governmental fund liabilities. Revenue sources for this fund are 80% of tax increment and investment earnings. This fund is responsible for 80% of the semi-annual bond payments and debt service payments on City loans. During FY 09-10 the Debt Service Fund paid 20% ($66,032) of the obligated Supplemental Educational Revenue Augmentation Fund (SERAF) to the State. The equity in the CRA Capital Improvements fund balance decreased by $409,472. This is attributed to the 80% ($264,128) obligated SERAF payment to the State and lower interest rates on investment income. Expenditures totaled $451,171 in FY 09-10. The Capital Improvement Fund earned $45,737 in investment income, which is its main source of revenue. Capital Assets and Debt Administration Capital Assets. As shown in the following table, as of June 30, 2010, the Temple City Community Redevelopment Agency had $120,925 invested in capital assets, including land and improvements net of depreciation. 8 Capital Assets At Year -End (Net of Depreciation) Governmental Activities 2010 2009 Land $106,732 $106,732 Improvements 14,193 16.376 Total $120,925 $12.,j08 Long -Term Debt. As of June 30, 2010, the Temple City Community Redevelopment Agency had approximately $10.9 million in long-term debt in the form of a loan payable relating to Parking Lease Revenue Bonds and advances payable to the City of Temple City. In December 1993, the Temple City Financing Authority (Authority) issued $1,400,000 of Serial Bonds and two issues of Term Bonds totaling $3,245,000 for a total amount of $4,645,000. In September 2005, the Authority issued $5,780,000 of Serial Bonds and $2,220,000 of Term Bonds. The Authority issued the 2005 Refunding Revenue Bonds to refund 1993 loan and make a new loan to the Agency. At June 30, 2010, the outstanding principal amount of loans payable from the City to the Temple City Financing Authority was $6,900,000. Advances payable to the City of Temple City are from three notes payable. All notes that were previously made by the Temple City Community Redevelopment Agency for debt existing as of October 1, 1998 and the unpaid accrued interest on these notes through June 30, 1998 were consolidated on October 6, 1998 into a notes payable totaling $4,650,544. The City entered into an additional note agreement dated January 7, 2003 for $115,824 to meet its obligation under a Disposition and Development Agreement. During Fiscal Year 04-05, the Agency started the proceedings of acquiring Block D by eminent domain. This required the Agency to make a deposit in the amount of $5,539,000 to the State Treasurer. The Agency required a loan from the City of Temple City in order to fund this amount. On November 30, 2004 the City issued a check in the amount $5,539,000 for the purchase of Block D through eminent domain. During fiscal year 2005-06 the Agency entered into an owner participation agreement with the property owners of Block D for future development and the Agency withdrew from acquiring Block D by eminent domain. In October 2005, the Agency received a refund from the State and repaid the loan to the City plus interest accrued for the duration of the loan. During FY07-08 the note agreement dated January 7, 2003 was paid in full. At June 30, 2010, the outstanding principal and interest balances for the remaining note is $4,073,226. 9 Outstanding Debt Governmental Activities 2010 2009 Loan payable 1993 Parking Lease Revenue Bonds $ 6,900,000 $ 7,195,000 (Backed by Redevelopment City Sales Taxes) 1998 Advances payable to the City of Temple City 4,073,226 4,245,337 Total $1Q,973,226 $11,440,337 Contacting the City's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the Agency's finances and to show the Agency's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Financial Services Department, at the City of Temple City, 9701 Las Tunas Drive, Temple City, CA. 91780. 10 GOVERNMENT -WIDE FINANCIAL STATEMENTS - 11 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Statement of Net Assets June 30, 2010 (With Comparative Totals for June 30, 2009) Governmental Activities 2010 2009 Assets: Cash and investments (note 3) Cash and investments with fiscal agent (note 3) Due from the City of Temple City Due from other govemments Interest receivable Loans receivable Capital assets (note 5): Land Improvements, net of accumulated depreciation Total assets Liabilities: Accounts payable Accrued interest payable Due to the City of Temple City Long-term liabilities: Portion due within one year: Bonds payable (notes 6 and 7) Advances from City (notes 6 and 8) Portion due beyond one year: Bonds payable (notes 6 and 7) Advances from City (notes 6 and 8) Total liabilities Net assets (deficit): Invested in capital assets Unrestricted Total net assets (deficit) $ 3,104,223 627,225 1,513 1,490 1,062 12,660 106,732 14,193 $ 3,973,239 627,364 91,818 14,018 12,660 106,732 16,376 3,869,098 4,842,207 4,052 106,268 140,061 69,318 109,759 111,321 305,000 295,000 300,000 200,000 6,595,000 6,900,000 3,773,226 4,045,337 11,223, 607 11, 730,735 120,925 123,108 (7,475,434) (6,886,528) $ (7,354,509) (6,763,420) See accompanying notes to basic financial statements. - 12 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Statement of Activities Year Ended June 30, 2010 (With Comparative Totals for Year Ended June 30, 2009) Program Revenues Operating Capital Charges for Contributions Contributions Net Governmental Activities Expenses Services and Grants and Grants 2010 2009 Governmental activities: Community services $ 251,303 - (251,303) (325,675) Low and moderate income housing 253,301 - (253,301) (299,409) Interest on long-term debt 448,932 - - (448,932) (468,098) Total governmental activities $ 953,536 - - (953,536) (1,093,182) General revenues: Property taxes 440,818 878,420 Investment income 45,737 85,892 Other 1,000 1,579 Total general revenues 487,555 965,891 Change in net assets (465,981) (127,291) Net assets (deficit) at beginning of year (6,888,528) (6,761,237) Net assets (deficit) at end of year $ (7,354,509) (6,888,528) See accompanying notes to basic financial statements. -13 (This page intentionally left blank) - 14 - FUND FINANCIAL STATEMENTS -15- TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Governmental Funds Balance Sheet June 30, 2010 (With Comparative Totals for June 30, 2009) Special Revenue Debt Capital Low and Service Projects Moderate CRA CRA Income Debt Capital Totals Housing Service Improvements 2010 2009 Assets Cash and investments $ 658,006 22,584 2,423,633 . 3,104,223 3,973,239 Cash and investments with fiscal agent - 627,225 - 627,225 627,364 Due from the City of Temple City 352 - 1,161 1,513 - Due from other governments 325 1,165 - 1,490 91,818 Interest receivable - 1,062 1,062 14,018 Loans receivable 12,660 - 12,660 12,660 Total assets Liabilities and Fund Balances $ 671,343 650,974 2,425,856 3,748,173 4,719,099 Liabilities: Accounts payable $ 951 2,160 941 4,052 69,318 Due to the City of Temple City 34,998 - 105,063 140,061 111,321 Deferred revenue 12,660 - 12,660 12,660 Total liabilities 48,609 2,160 106,004 156,773 193,299 Fund balances: Unreserved, reported in: Special revenue fund 622,734 - 622,734 865,268 Debt service fund - 648,814 - 648,814 931,208 Capital projects fund - 2,319,852 2,319,852 2,729,324 Total fund balances 622,734 648,814 2,3i 9,852 3,591,400 4,525,800 Total liabilities and fund balances $ 671,343 650,974 2,425,856 3,748,173 4,719,099 See accompanying notes to basic financial statements. - 16 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2010 Fund balances of governmental funds $ 3,591,400 Amounts reported for governmental activities in the Statement of Net Assets are different because: When capital assets (land and improvements) that are to be used in govemmental activities are purchased or constructed, the cost of those assets are reported as expenditures in governmental funds. However, the Statement of Net Assets includes those capital assets among the assets of the Agency as a whole. Capital assets not being depreciated 106,732 Capital assets being depreciated 87,327 Accumulated depreciation (73,134) Long-term liabilities applicable to the Agency's governmental activities are not due and payable in the current period and, accordingly, are not reported as governmental fund liabilities. All liabilities (both current and long-term) are reported in the Statement of Net Assets. Bonds payable Advances payable Accrued interest payable in the Statement of Net Assets differs from the amount reported in governmental funds due to accrued interest on long-term liabilities. (6,900,000) (4,073,226) (106,268) Deferred revenue balances relating to housing rehabilitation loans are not reported as liabilities in the Statement of Net Assets. 12,660 Net assets (deficit) of governmental activities $ (7,354,509) See accompanying notes to basic financial statements. - 17 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended June 30, 2010 (With Comparative Totals for Year Ended June 30, 2009) Special Revenue Debt Capital Low and Service Projects Moderate CRA CRA Income Debt Capital Totals Housing Service Improvements 2010 2009 Revenues: Tax increment $ 162,205 648,819 811,024 930,032 Investment income 4,365 673 40,699 45,737 85,892 Low income grant and loan repayments - - - 3,979 Other 1,000 1,000 1,000 Total revenues 166,570 649,492 41,699 857,761 1,020,903 Expenditures: Administration 34,762 15,022 106,740 156,524 124,555 Professional fees 1,278 15,553 79,946 96,777 174,854 Community services 249,120 249,120 323,492 Debt service: Principal 59,000 536,000 595,000 535,000 Interest 64,944 387,122 357 452,423 471,281 Pass -through payments 40,046 40,046 51,612 SERAF payment to State 66,032 264,128 330,160 Total expenditures 409,104 1,059,775 451,171 1,920,050 1,680,794 Excess (deficiency) of revenues over (under) expenditures Other financing sources: Proceeds of advances from City 127,889 127,889 134,889 Total other financing sources (uses) Net changes in fund balances Fund balances at beginning of year Fund balances at end of year (242,534) (410,283) (409,472) (1,062,289) (659,891) 127,889 127,889 134,889 (242,534) (282,394) (409,472) (934,400) (525,002) 865,268 931,208 2,729,324 4,525,800 5,050,802 622,734 648,814 2,319,852 3,591,400 4,525,800 See accompanying notes to basic financial statements. - 18 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2010 Net change in fund balances - total govemmental funds $ (934,400) Amounts reported for governmental activities in the Statement of Activities are different because: When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net assets decreased by the amount of depreciation expense charged for the year. Depreciation expense Repayment of long-term liabilities are expenditures in the govemmental funds and, thus, has the effect of reducing the fund balance because current financial resources have been used. For the Agency as a whole, however, the principal payments reduce the liabilities in the Statement of Net Assets and do not result in an expense in the Statement of Activities. Debt service principal - bonds payable Debt service principal - advances payable When new advances are issued the funds received from the issuance of advances are recorded as proceeds of advances in the governmental funds and an increase in a liability in the Statement of Net Assets. Accrued interest expense related to long-term liabilities. This amount is the difference between the amount of interest paid and the amount of interest incurred on long-term liabilities. (2,183) 295,000 300,000 (127,889) 3,491 Changes in net assets of governmental activities $ (465,981) See accompanying notes to basic financial statements. - 19 - (This page intentionally left blank) - 20 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements Year Ended June 30, 2010 (1) Summary of Significant Accounting Policies The following is a summary of the significant accounting policies of the Temple City Community Redevelopment Agency ("Agency"): (a) Fund Accounting The basic accounting and reporting entity is a 'fund". A fund is defined as an independent fiscal and accounting entity with a self -balancing set of accounts, recording resources, related liabilities, obligations, reserves and equities segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The accounting records of the Agency are organized on the basis of funds classified for reporting purposes described below. Management has determined and elected that all funds of the Agency are classified as major funds. Governmental Funds Special Revenue Fund The Low and Moderate Income Housing Fund is used to account for the portion of the Agency's tax increment revenue that is legally restricted for increasing or improving housing for low or moderate income households. Debt Service Fund The CRA Debt Service Fund accounts for tax increment revenues and bond proceeds required to be set aside for future debt service and related interest income. The fund is used to repay principal and interest on indebtedness of the Agency. Under provisions of the Health and Safety Code and the Agency's bond resolutions, this fund is referred to as a "Special Fund." Capital Projects Fund The CRA Capital Improvements Fund accounts for project improvements, interest income on invested funds and certain other income. The funds are expended primarily for redevelopment project costs and administrative expenses. Under provisions of the Health and Safety Code and the Agency's bond resolutions, this fund is referred to as a "Redevelopment Fund." -21 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (b) Basis of Accounting and Measurement Focus The basic financial statements of the Agency are composed of the following: • Govemment-wide financial statements • Fund financial statements • Notes to basic financial statements Financial reporting is based upon all GASB pronouncements, as well as the FASB Statements and Interpretations, APB Opinions, and Accounting Research Bulletins that were issued on or before November 30, 1989 that do not conflict with or contradict GASB pronouncements. FASB Pronouncements issued after November 30, 1989 are not followed in the preparation of the accompanying financial statements. Govemment-wide Financial Statements Government -wide financial statements display information about the reporting government as a whole. Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the Agency. Govemment-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government -wide financial statements. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of GASB Statement No. 33. Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. - 22 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (b) Basis of Accounting and Measurement Focus, (Continued) Amounts paid to acquire capital assets are capitalized assets in the government - wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the govemment-wide financial statements, rather than as an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure. Interfund balances are eliminated in the government -wide statements. Fund Financial Statements The underlying accounting system of the Agency is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Fund financial statements for the Agency's governmental funds are presented after the government -wide financial statements. These statements display information about governmental major funds individually. Governmental Funds In the fund financial statements, governmental funds are presented using the modified -accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The Agency generally considers revenues collected within ninety days after the fiscal year-end to be available. Revenue recognition is subject to the measurable and availability criteria for the govemmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. - 23 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (b) Basis of Accounting and Measurement Focus, (Continued) Imposed non -exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government -mandated and voluntary non -exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of 'available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of °available spendable resources° during a period. Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources,' since they do not represent net current assets. Recognition of governmental fund type revenues represented by noncurrent receivables are deferred until they become current receivables. Noncurrent portions of other long-term receivables are offset by fund balance reserve accounts. Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures. When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources. - 24 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (c) Relationship to the City of Temple City The Agency is an integral part of the reporting entity of the City of Temple City. The funds of the Agency have been included within the scope of the financial statements of the City because the City Council of the City of Temple City has financial accountability over the operations of the Agency. Only the funds of the Agency are included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City of Temple City, California. (d) Cash and Investments Investments are reported in the accompanying balance sheet at fair value. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation or sale of investments. (e) Capital Assets Capital assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exists. Donated capital assets are valued at their estimated fair market value on the date received. Generally, the Agency capitalizes purchases in excess of $500. Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the govemment-wide financial statements. Depreciation expense is charged as an expense against operations and accumulated depreciation is reported on the Statement of Net Assets. The useful life used for depreciation purposes is as follows: Improvements 40 years (f) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses, during the reporting period. Actual results could differ from those estimates. - 25 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (g) Prior Year Data Selected information regarding the prior year has been included in the accompanying financial statements. This information has been included for comparison purposes only and does not represent a complete presentation in accordance with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Agency's prior year financial statements, from which this selected financial data was derived. (h) Subsequent Events Management has evaluated subsequent events through November 19, 2010 (the date the financial statements were available to be issued). Management believes no events have occurred subsequent to the statement of financial position date and through November 19, 2010 that would require adjustments to or disclosure in the Agency's financial statements. (2) Organization and Tax Increment Financing Redevelopment Goals and Objectives The Agency was created by Ordinance No. 72.350 of the Temple City City Council, adopted on May 16, 1972. The Agency was established in pursuant to the Community Redevelopment Law as codified in Section 33000 of the State of California's Health and Safety Code. The general objective of the Redevelopment Plan adopted by the Agency is to promote commercial redevelopment and strengthen the City's retail sales tax base. The Redevelopment Plan provides for the demolition of buildings and improvements, the relocation of any displaced occupants, and the construction of streets, parking facilities, utilities and other public improvements. - 26 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) 12) Organization and Tax Increment Financing, (Continued) The Rosemead Boulevard Redevelopment Project is the only project area established by the Agency. The project area was established in 1972 and consists of 69 acres on the western edge of Temple City. The project area is divided into five blocks as follows: Block A: The Block A project is a 110,000 square -foot community shopping center on an eight -acre site, completed in late 1992. The center is anchored by TJ Maxx. The Agency assisted in site assembly and public improvements. Block B: Completed in 1975, Block B is composed of approximately 230,000 square feet of retail space, including a 95,000 square -foot K -Mart. The Agency financed land acquisition and the improvement of a 900 -space public parking facility. The City of Temple City leases and maintains the parking facility with the exception of a few parking pads which have recently been purchased by the associated businesses. Block C: This is a retail development site on 3.8 acres. A portion of the site was developed in the early 1980's and a Pep Boys automotive related retail and service center was constructed and opened in July 1994. Block D: The former Edwards Theater and an adjacent commercial building were demolished in 2007 to accommodate the Piazza Las Tunas project which was approved by the City/Agency in 2006. This mixed -use project would consist of approximately 125,000 square feet of retail and restaurant space, 52 residential condominium units, and a multi -story parking structure. Although the entitlements for this project were approved in 2006, the developer has not yet started construction due to financial difficulties. Currently, the developer is considering constructing a smaller, scaled down version of the approved project, without a residential component. However, at this time, no action has been taken by the City/Agency regarding the contemplated amended plans. Block E: A site with significant potential for large-scale promotional retail development, a nine -acre portion of the block within the project area is being reviewed for possible development. The Agency may assist with land acquisition. - 27 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (2) Organization and Tax Increment Financing, (Continued) Tax Increment Financing The law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment project. The assessed valuation of a redevelopment project last equalized prior to adoption of a redevelopment plan or amendment to such redevelopment plan, or "base roll", is established and, except for any period during which the assessed valuation drops below the base year level, the taxing bodies thereafter receive the taxes produced by the levy of the current tax rate upon the base roll. Taxes collected upon any increase in assessed valuation over the base roll ("tax increment") are paid and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes. L3) Cash and Investments Cash and investments as of June 30, 2010 are classified in the accompanying financial statements as follows: Statement of Net Assets: Cash and investments Cash and investments with fiscal agent $3,104,223 627.225 Total cash and investments $3,731,448 Cash and investments as of June 30, 2010 consist of the following: Deposits with financial institutions Investments $1,745,086 1.986.362 Total cash and investments $3,731,448 -28 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (3) Cash and Investments, (Continued) Investments Authorized by the Califomia Government Code and the Agency's Investment Policy The table below identifies the investment types that are authorized for the Agency by the California Government Code and the Agency's investment policy. The table also identifies certain provisions of the California Government Code (or the Agency's investment policy, if more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the Agency, rather than the general provisions of the California Government Code or the Agency's investment policy. Authorized by Maximum Maximum Investment Types Investment Maximum Percentage Investment Authorized by State Law Policy Maturity* of Portfolio* In One Issuer* Local Agency Bonds Yes 5 years U.S. Treasury Obligations Yes 5 years U.S. Agency Securities Yes 5 years State of California Obligation Yes 5 years Local Agency Obligations Yes 5 years Banker's Acceptances Yes 180 days Commercial Paper Yes 270 days Negotiable Certificates of Deposit Yes 5 years Repurchase Agreements Yes 1 year Reverse Repurchase Agreements Yes 92 days Medium -Term Notes Yes 5 years Mutual Funds Yes N/A Money Market Mutual Funds Yes N/A Mortgage Pass -Through Securities Yes 5 years County Pooled Investment Funds Yes NIA Local Agency Investment Fund Yes N/A JPA Pools (other investment pools) No N/A None None None None None 40% 25% 30% None 20% of base 30% 20% 20% 20% None None None None None None None None 30% 10% None None value None None 10% 10% None None $40,000,000 None * Based on state law requirements or investment policy requirements, whichever is more restrictive. - 29 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (3) Cash and Investments, (Continued) Investments Authorized by Debt Agreements Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Agency's investment policy. The table below identifies the investment types that are generally authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Authorized Maximum Investment Type Maturity Local Agency Bonds 5 years U.S. Treasury Obligations 5 years U.S. Agency Securities 5 years Banker's Acceptances 1 year Commercial Paper 1 year Negotiable Certificates of Deposit 1 year Repurchase Agreements 30 days Money Market Mutual Funds N/A Local Agency Investment Fund N/A Investment Agreements NIA Maximum Percentage Allowed None None None None 25% 30% None 20% None None Maximum Investment In One Issuer None None None None 10% None None 10% None None Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value will be to changes in market interest rates. One of the ways that the Agency manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. - 30 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) {3Z Cash and Investments, (Continued) Disclosures Relating to Interest Rate Risk, (Continued) Information about the sensitivity of the fair values of the Agency's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Agency's investments by maturity: Remaining Maturing (in Months) Investment Type State investment pool Federal agencies securities Held by fiscal agent: Money market mutual funds Total Total $ 209,137 1,150, 000 627,225 $ 1,986.362 12 Months Or 55 - 60 Less Months 209,137 627.225 836,62, 1,150, 000 1.150.000 Investments with Fair Values Highly Sensitive to interest Rate Fluctuations The Agency's investments (including investments held by trustees) include the following investments that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above): Mortgage -backed securities: These securities are subject to early payment in a period of declining interest rates. The resulting reduction in expected total cash flows affects the fair value of these securities, making them highly sensitive to change in interest rates. At fiscal year end, the fair value of investments in mortgage -backed securities totaled $1,150,000. -31 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (3) Cash and Investments, (Continued) Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Agency's investment policy, or debt agreements, and the actual rating as of year end for each investment type. Rating as of Year End Investment Type State investment pool Federal agencies securities Held by fiscal agent: Money market mutual funds Total Concentration of Credit Risk Total $ 209,137 1,150, 000 627225 $ 1.986,362 Minimum Legal Rating N/A AAA AAA AAA 1,150, 000 627, 225 1,777,225 Not Rated 209,137 209,137 The investment policy of the Agency contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and extemal investment pools) that represents 5% or more of total Agency investments are as follows: Issuer Investment Type Reported Amount Federal National Mortgage Association Federal agency securities Federal Home Loan Mortgage Corp. Federal agency securities Federal Home Loan Bank Federal agency securities $650,000 300,000 200,000 - 32 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (3j Cash and Investments, (Continued) Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker -dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Agency's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposit. The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure Agency deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2010, the Agency's investments in the following investment types were held by the same broker -dealer (counter -party) that was used by the Agency to buy the securities: Investment Type Reported Amount Federal agencies securities $1,150,000 For investments identified herein as held by bond trustee, the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government. Investment in State Investment Pool The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the Agency's investment in this pool is reported in the accompanying financial statements at amounts based upon the Agency's pro -rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. - 33 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (4) Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes are recorded initially in a pool, and are then allocated to the cities based on complex formulas. Accordingly, the Agency accrues only those taxes which are received from the County within thirty days after year end. Lien date Levy date Due dates Collection dates March 1 June 30 November 1 and February 1 December 10 and April 10 The Agency's primary source of revenue comes from property taxes. Property taxes allocated to the Agency are computed in the following manner: (a) The assessed valuation of all property within the project area is determined on the date of adoption of the Redevelopment Plan. (b) Property taxes related to the incremental increase in assessed values after the adoption of the Redevelopment Plan are allocated to the Agency. The Agency has no power to levy and collect taxes and any legislative property tax shift might reduce the amount of tax revenues that would otherwise be available to pay the principal of, and interest on, debt. Broadened property tax exemptions could have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any reduction of elimination of present exemptions would increase the amount of tax revenues that would be available to pay principal and interest on debt. -34- TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (5) Capital Assets The following is a summary of changes in capital assets for the year ended June 30, 2010: Balance at Balance at July 1, 2009 Additions Deletions June 30, 2010 Governmental Activities: Capital assets being depreciated: Improvements $ 87,327 Less accumulated depreciation for: Improvements (70,951) (2,183) Capital assets being depreciated, net 16,376 (2,183) Capital assets not being depreciated: Land 106.732 Total capital assets, net $123,108 (2,183) 87,327 (73,134) 14,193 106.732 120,925 Depreciation expense was charged to community services in the Statement of Activities. (6) Long -Term Liabilities Changes in long-term liabilities for the year ended June 30, 2010 were as follows: Additions Portion Due Portion Due Balance at and other Balance at Within Beyond July 1, 2009 Ad'ustments•Repavments June 30.2010 One Year One Year Governmental Activities: Bonds payable $ 7,195,000 - (295,000) 6,900,000 305,000 6,595,000 Advance payable to City -1998 4,245,337 127.889 (300,000) 4.073 300.000 3.773.226 Total Tong -term liabilities $11,440,337 127,889 £595,000 10.973226 6Q5,000 10,368,226 The Agency accrues unpaid interest on original principal balances of the 1998 City advance at the rate of 7% per year as stipulated in the loan agreement. - 35 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (7) Bonds Payable Refunding Revenue Bonds, Series 2005 In September 2005, the Temple City Community Redevelopment Agency (Agency) issued $5,780,000 of Serial Bonds and $2,220,000 of Term Bonds for a total amount of $8,000,000 to be paid from future tax increment revenues. The Series 2005 bonds were issued to refund $3,600,000 of outstanding Temple City Financing Authority (Authority) 1993 Revenue bonds and to provide the Agency with additional funds for redevelopment activities. Interest is payable semi-annually on March 1 and September 1 of each year, commencing March 1, 2006. Interest rates range from 3.0% to 4.9% on the serial bonds and 4.875% on the term bonds in amounts ranging from $240,000 to $495,000. The bonds maturing on or after September 1, 2015 are subject to redemption prior to maturity in whole or in part at the option of the Agency in amount of 100% of the principal amount. The Term Bonds maturing on September 1, 2025 will be subject to mandatory redemption, on September 1, 2022 and each September 1 thereafter at a redemption price equal to the principal amount thereof together with accrued interest thereon to the redemption date without premium. Under terms of the issue, a minimum of $627,225 is to be set aside in reserve funds. The balance in the reserve account at June 30, 2010 was $627,225. The outstanding bonds payable balance on June 30, 2010 is $6,900,000. Annual debt service requirements to maturity for the bonds payable are as follows: Year Ending June 30 Principal Interest Total 2011 $ 305,000 313,086 618,086 2012 315,000 301,096 616,096 2013 330,000 286,575 616,575 2014 345,000 271,080 616,080 2015 360,000 256,095 616,095 2016 375,000 240,105 615,105 2017 395,000 222,968 617,968 2018 410,000 204,650 614,650 2019 430,000 185,223 615,223 2020 450,000 164,650 614,650 2021 470,000 143,030 613,030 2022 495,000 120,105 615,105 2023 515,000 95,672 610,672 2024 540,000 69,956 609,956 2025 570,000 42,900 612,900 2016 595,000 14,503 609.503 Total $6,900.000 2.931,694 9,831,694 - 36 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (8) Advances from the City of Temple City All the notes previously made by the Agency for debt existing owed to the City as of October 1, 1998 and the unpaid accrued interest on these notes through June 30, 1998 were consolidated on October 6, 1998. The following represents the principal balances and accrued interest less repayments from the dates of issue through June 30, 2010 for advances from the City of Temple City: Note payable, dated October 6, 1998, with entire balance due June 15, 2017, plus interest on unpaid balance at 7%. The outstanding balance includes advances on the following dates: January 2, 1990, July 11, 1990, November 6, 1990, December 18, 1990, October 28, 1993, and January 31, 1996. Total $4,073,226 $4,073,226 Advances are repaid from excess tax increment revenues, if any, after payments of bonds are made. If tax increment revenue is not available to make annual interest payments, interest is accrued and increases the balance of the advances. Annual debt service requirements to maturity for the advances are not presented since there are no set repayment schedules. (9) Pledged Revenue The Agency has one debt issuance outstanding that is collateralized by the pledging of future tax increment revenues. The amount and term of the remainder of these commitments are indicated in the debt service to maturity tables presented in the accompanying notes. The purposes for which the proceeds of the related debt issuances were utilized are disclosed in the debt descriptions in the accompanying notes. For the current year, debt service payments as a percentage of the pledged gross revenue (or net of certain expenses where so required by the debt agreement) are indicated in the table below. This percentage also approximates the relationship of debt service to pledged revenue for the remainder of the term of the commitment: Description of Pledged Revenue Revenue Annual Amount of Pledged Tax increment $ 811,024 Annual Debt Service Payments (of all debt secured. by this revenue) 618,086 Debt Service as a Percentage of Pledged Revenue 76.21% - 37 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Notes to Basic Financial Statements (Continued) (10) Commitments and Contingencies Liabilities Deferred Low/Moderate Set Aside Under State law, the Agency is required to set aside a portion of its property tax increment revenue for low and moderate income housing. The Agency has made findings that, for fiscal years ended 1986 through 1996, it was exempt from funding any of the set -aside. As of June 30, 2010, the accumulated set -aside amount not yet funded was approximately $573,000. The law requires the Agency to devise a plan to fund the accumulated deferred set -aside amount. Such a plan was adopted for deferrals made through the 1995-96 fiscal year. (11) Unrestricted Net Assets GASB Statement No. 34 requires that a local government record in the statement of net assets, the local government's liability for debt issued to finance the construction of infrastructure and other assets owned by other parties. This is an integral part of the normal operations of a redevelopment agency and is necessary to produce the redevelopment benefits for which the Agency was established. GASB Statement No. 33 and 34 do not permit the recognition of assets for future tax increment revenues that are pledged for the annual retirement of bonded debt issuances. The negative equity resulting from the Agency's liability for this debt is required by GASB No. 34 has been reported in the accompanying financial statements as unrestricted net assets. (12) Expenditures in Excess of Appropriations Expenditures exceeded appropriations in the following fund: Variance Actual Positive Final Budget Expenditures (Negative) CRA Debt Service Fund $791,610 1,059,775 (268,165) Actual expenditures exceed appropriations in the CRA Debt Service Fund due to a $300,000 loan repayment that was made to the City. The repayment to the City was not budgeted and is only paid if excess tax increment revenues are available. - 38 - REQUIRED SUPPLEMENTARY INFORMATION -39- TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Note to Required Supplementary Information Year Ended June 30, 2010 (1) Budgets and Budgetary Accounting The Agency adopts an annual budget prepared on the modified accrual basis for all of its governmental funds. The Executive Director or his designee is authorized to transfer budgeted amounts between the accounts of any program. Revisions that alter the total appropriations of any department or fund are approved by the Board. Prior year appropriations lapse unless they are reappropriated through the formal budget process. Expenditures may not legally exceed appropriations at the fund level. Reserves for encumbrances are not recorded by the Agency. - 40 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY Low and Moderate Income Housing Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2010 (With Comparative Totals for Year Ended June 30, 2009) Variance with Final Budget Prior Original Final Positive Year Budget Budget Actual (Negative) Actual Revenues: Tax increment $ 130,000 178,000 162,205 (15,795) 186,006 Investment income 15,000 15,000 4,365 (10,635) 20,870 Low income grant and loan repayments - - - - 3,979 Total revenues 145,000 193,000 166,570 (26,430) 210,855 Expenditures: Administration 27,000 27,000 34,762 (7,762) 25,562 Professional fees 5,000 5,000 1,278 3,722 355 Community services 252,500 252,500 249,120 3,380 323,492 Debt service: Principal 59,000 59,000 59,000 57,000 Interest 66,310 66,310 64,944 1,366 67,257 Total expenditures 409,810 409,810 409,104 706 473,666 Net change in fund balances (264,810) (216,810) (242,534) (25,724) (262,811) Fund balances at beginning of year 865,268 865,268 865,268 1,128,079 Fund balances at end of year $ 600,458 648,458 622,734 (25,724) 865,268 -41 - (This page intentionally left blank) - 42 - SUPPLEMENTARY INFORMATION - 43 - TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY CRA Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2010 (With Comparative Totals for Year Ended June 30, 2009) Variance with Final Budget Prior Final Positive Year Budget Actual (Negative) Actual Revenues: Tax increment $ 712,000 648,819 (63,181) 744,026 Investment income 1,500 673 (827) 3,758 Total revenues 713,500 649,492 (64,008) 747,784 Expenditures: Administration 18,000 15,022 2,978 14,921 Professional fees 17,250 15,553 1,697 14,308 Debt service: Principal 236,000 536,000 (300,000) 478,000 Interest 388,525 387,122 1,403 400,984 Pass -through payments 65,800 40,046 25,754 51,612 SERAF payment to State 66,035 66,032 3 - Total expenditures 791,610 1,059,775 (268,165) 959,825 Excess (deficiency) of revenues over (under) expenditures (78,110) (410,283) (332,173) (212,041) Other financing sources: Proceeds of advances from City 127,889 127,889 134,889 Total other financing sources Net change in fund balances Fund balances at at beginning of year Fund balances at end of year 127,889 127,889 134,889 (78,110) (282,394) (204,284) (77,152) 931,208 931,208 1,008,360 $ 853,098 648,814 (204,284) 931,208 -44- TEMPLE CITY COMMUNITY REDEVELOPMENT AGENCY CRA Capital Improvements Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Year Ended June 30, 2010 (With Comparative Totals for Year Ended June 30, 2009) Variance with Final Budget Prior Final Positive Year Budget Actual (Negative) Actual Revenues: Investment income $ 60,000 40,699 (19,301) 61,264 Other 1,000 1,000 1,000 Total revenues 61,000 41,699 (19,301) 62,264 Expenditures: Administration 113,300 106,740 6,560 84,072 Professional fees 157,200 79,946 77,254 160,191 Debt service: Interest 4,000 357 3,643 3,040 SERAF payment to the State 264,130 264,128 2 - Total expenditures 538,630 451,171 87,459 247,303 Excess (deficiency) of revenues over (under) expenditures (477,630) (409,472) 68,158 (185,039 Net change in fund balances (477,630) (409,472) 68,158 (185,039) Fund balances at beginning of year 2,729,324 2,729,324 2,914,363 Fund balances at end of year $ 2,251,694 2,319,852 68,158 2,729,324 - 45 - (This page intentionally left blank) - 46 - COMPLIANCE SECTION -47- (This page intentionally left blank) - 48 - MGM Mayer Hoffman McCann P.C. An Independent CPA Firm 2301 Dupont Drive, Suite 200 Irvine, California 92612 949-474-2020 ph 949-263-5520 fx www.mhm-pc.com Board of Directors Temple City Community Redevelopment Agency Temple City, California REPORT ON COMPLIANCE AND OTHER MATTERS AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited the financial statements of the governmental activities and each major fund of the Temple City Community Redevelopment Agency ("Agency"), a component unit of the City of Temple City, as of and for the year ended June 30, 2010 and have issued our report thereon dated January 20, 2011. 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Agency's financial statements are free of material misstatements, 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 statements amounts. Such provisions included those provisions of laws and regulations identified in the Guidelines for Comptroller Audits of California Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Accomplishing Compliance Audits of Califomia 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 indicated that two instances of noncompliance that are required to be reported under Government Auditing Standards and are described in the following paragraphs. (1) Housing Element Previously, the Agency was not in compliance with Health and Safety Code Section 33302 in that the City's Housing Element was not in compliance with Government Code Section 65300. On June 20, 2000, the City adopted an updated housing element. This updated document was provided to the State Housing and Community Development Department and was returned with comments. In October 2001, a revised housing element was resubmitted to the State and was also returned with additional comments. The updated Housing Element specifically notes that the City has implemented a Housing Rehabilitation Program utilizing 20% set -aside and CDBG funds. Since 1995, the City has proactively offered housing rehabilitation assistance to eligible homeowners. The Agency has been working on a new Housing Element since 2008. In October 2009, the second draft of the Housing Element was sent to the State Department of Housing and Community Development (HCD). Additional comments were received in December 2009. Agency staff is working with HCD to achieve a certified Housing Element. - 49 - Board of Directors Temple City Community Redevelopment Agency Page Two (2) Planning and Administrative Expenditures During the fiscal year ended June 30, 2010, the Agency's Low and Moderate Income Housing Fund incurred $34,762 in planning and administrative expenditures. The administrative expenditures charged to the fund were made pursuant to an interagency agreement approved by the City Council and Board of Directors originally in June 1991 and most recently amended in July 2001. Section 33334.3(d) of the Health and Safety Code states, "The Agency shall determine annually that the planning and administrative expenses are necessary for the production, improvement, or preservation of low -and -moderate -income housing." The Agency did not make this determination annually as required by the Code. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Agency's financial statements will riot be prevented, or detected and corrected on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily disclose all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Board of Directors, management of Temple City Community Redevelopment Agency and the State Controller and is not intended to be and should not be used by anyone other than these specified parties. Irvine, California January 20, 2011 - 50 - ..!