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HomeMy WebLinkAbout15 2005-06 ANNUAL REPORT 12-04-06 AGENDA REPORT Agenda Item 15 Reviewed: City Manager Finance Director MEETING DATE: DECEMBER 4, 2006 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: REDEVELOPMENT AGENCY SUBJECT: 2005-2006 ANNUAL REPORT SUMMARY Redevelopment Law requires that the Redevelopment Agency submit to the legislative body an annual report of housing activity for the preceding fiscal year. RECOMMENDATION It is recommended the City Council take the following actions: 1. Receive and File an annual report of housing activity for FY 2005-2006. 2. Direct that a copy of an annual report of housing activity for 2005-2006 and all other required reporting documents and forms be executed in final form and filed with the City of Tustin, the State Controller and State Department of Housing and Community Development. FISCAL IMPACT There is no fiscal impact associated with this action. BACKGROU N D/DISCUSSION California Health and Safety Code Section 33080.1 require the preparation and filing of an annual report of housing activity by a redevelopment agency with its legislative body. A copy of this report must also be filed with the State Controller and with the State Department of Housing and Community Development within six months after the end of the Agency's fiscal year. City Council Report December 4, 2006 2005-2006 Annual Report Page 2 The annual report must contain the following information: 1. An independent financial audit of the previous fiscal year. The audit must include an opinion of the Agency's compliance with laws, regulations and administrative requirements governing activities of the Agency. 2. A fiscal statement containing the following information: a. The amount of outstanding indebtedness of the Agency. b. The amount of tax increment property tax revenue generated. c. The amount of tax increment revenues paid to taxing agencies pursuant to Section 33401. d. The required Annual Report of Financial Transactions to the State Controller's Office. 3. A description of the agency's progress, including specific actions and expenditures, in alleviating blight in the previous fiscal year. 4. A description of the Agency's activities affecting housing and displacement containing the information required by Section 33080.4 and 33080.7: a. The total number of households displaced or moved from their dwelling units as part of a redevelopment project during the 2005-2006 fiscal year. b. An estimate of the total number of households that will be displaced or removed during the 2006-2007 fiscal year. c. The total number of units which have been destroyed or removed from the housing stock during the 2005-2006 fiscal year. d. The total number of Agency assisted dwelling units constructed, substantially rehabilitated, acquired or subsidized during 2005-2006 for occupancy at affordable cost by persons and families of low to moderate income. City Council Report December 4, 2006 2005-2006 Annual Report Page 3 e. The status and use of the Low to Moderate Income Housing Fund, created pursuant to Section 33334.3. f. Any excess surplus funds which have accumulated in the Low to Moderate Income Housing Funds. Excess surplus funds are defined as any unexpended or unencumbered amount in the Housing Fund that exceeds the greater of $1,000,000 or the aggregate amount deposited in the fund in the preceding four (4) fiscal years. Monies are deemed encumbered if committed by a legally enforceable contract or agreement. g. Any other information the Agency believes is useful to explain its housing programs. 5. A list of, and status report on, all loans made by the redevelopment agency that are fifty thousand dollars ($50,000.00) or more, that in the previous fiscal year were in default, or not in compliance with the terms of the loan approved by the redevelopment agency. 6. A description of the total number and nature of the properties that the agency owns and those properties the agency has acquired in the previous fiscal year. 7. Any other fiscal information the Agency believes is useful. ANAL YSIS Since there is only one Agency meeting scheduled in December, 2006, it is necessary to provide the Agency's audit materials in draft form. While the materials are assumed to be substantially complete, the Finance Director and independent auditor may need to make non substantial adjustments to the final numbers prior to submitting them to the State. The following responds to specific information required by the State. 1. Independent Financial Audit and Compliance Audit: A copy of the draft independent financial audit and compliance audit for 2005- 2006 is included as Attachment I. City Council Report December 4, 2006 2005-2006 Annual Report Page 4 2. Fiscal statement: a. The amount of outstanding bonded indebtedness of the Redevelopment Agency, as of June 30, 2006, was reported to be $18,061,448. In addition, the Agency has outstanding loan obligations of $2,7761042 to the Town Center Housing Set-Aside Fund Deficit. b. The amount of gross tax increment property tax revenue received by the Redevelopment Agency in 2005-2006 was $10,186,630. c. The amount of tax increment paid to taxing agencies pursuant to Section 33401 was $2,000. d. The required annual report of financial transactions to the State Controller will be submitted with all final reporting documentation, forms and the final audit report prior to December 31, 2006. 3. The Agency provided financial assistance in the amount of $969,960 for the development of a 63 unit town home development. As a condition of approval, the Developer was required to provide ten affordable units; four units to very-low- income families and six units to moderate-income families. The ten restricted units have recorded affordability covenants for a period of 45 years. The site, adjacent to the South Central Project Area, consisted of blighted industrial property. This project removed the blighting influence to the adjacent South Central Project Area and increased ownership in the southwest section of the City. 4. Activities Affecting Housing and Displacement: a. The total number of households displaced or moved as part of the Town Center and South Central Redevelopment projects during 2005-2006 was 7. b. The total number of households estimated to be displaced as part of the Town Center or South Central project areas in 2006-2007 is O. c. The total number of low to moderate-income dwelling units demolished or removed from the housing stock in 2005'-2006 was 7. City Council Report December 4, 2006 2005-2006 Annual Report Page 5 d. The total number of Agency assisted dwelling units which were constructed, rehabilitated, acquired or subsidized in 2005-2006 for occupancy at an affordable housing cost by persons and families of low to moderate income was 50. e. As of June 30, 2006, the Agency's low to moderate-income housing set- aside fund balance for the South Central Project Area was $7,084,042, which after an adjustment for land held for resale results in an available fund balance of $6,379,042. The available funds balance does not reflect other Agency approved encumbrances as reported on the attached HCD Report Sched u Ie C. As of June 30, 2006, the Agency's low to moderate-income housing set- aside fund balance for the Town Center Project Area was $4,201,740, which after an adjustment for land held for resale results in an available fund balance of $2,404,676. The available funds balance does not reflect other Agency approved encumbrances as reported on the attached HCD Report Schedule C. As of June 30, 2006, the Agency's low to moderate-income housing set- aside fund balance for the MCAS Tustin Project Area was $1,498,890. The available funds balance does not reflect other Agency approved encumbrances as reported on the attached HCD Report Schedule C. f. As of July 1, 2006, there is no excess surplus in the Housing Set-Aside Fund for the combined Project Areas. g. These is no other information the Agency believes is useful to explain its housing program. 5. There are no loans of fifty thousand dollars ($50,000.00) or more that were in default or out of compliance with the terms of the loan during the previous fiscal year. 6. The Agency owns five parcels with a value of $3,847,064. The Agency did not acquire any property during the previous fiscal year. 7. There is no other fiscal information, which the Agency believes to be useful at the present time. City Council Report December 4, 2006 2005-2006 Annual Report Page 6 Agency staff will be available to respond to any questions at the City Council's meeting of December 4, 2006. As a result of the City Council's action, all final reporting documentation and forms will be filed with the State Controller and State Department of Housing and Community Development prior to December 31, 2006. Kimberly McAllen Redevelopment Project Manager Christine A. Shingleton Assistant City Manager Attachments: I. Draft June 30, 2006 Independent Financial Audit and Compliance Audit TUSTIN COMMUNITY REDEVELOPMENT AGENCY Annual Financial Report June 30, 2006 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Annual Financial Report June 30, 2006 TABLE OF CONTENTS Page Independent Auditors' Report 1 Management's Discussion and Analysis (Unaudited) 3 Basic Financial Statements: Statement of Net Assets 8 Statement of Activities 9 Balance Sheet - Governmental Funds 10 Reconciliation of the Balance Sheet of Governmental Statement of Net Assets to the 13 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Fund 14 Indepe and on Guidelines Other Matters Accordance with Reconciliation of Fund Balances of Revenues, Expenditures and Changes in I Funds to the Statement of Activities 17 19 Control over Financial Reporting udin the Provisions Contained in the Audits of Redevelopment Agencies) and Audit of Financial Statements Performed in ent Auditin Standards 29 September 29,2006 The Board of Directors of the Tustin Community Redevelopment Agency Independent Auditors' Report We have audited the accompanying financial statements of the governmental activities and each major fund information of the Tustin Community Redevelopment Agency (Agency), a component unit of the City of Tustin, California as of and for the year ended June 30,2006, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Agency management. Our responsibility is to express opinions .on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits. contained in Government Auditing Standards issued by the Comptroller General of the United States.. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in t cial statements. An audit also includes assessing the accounting principles used and signi 1es made by management, as well as evaluating the overall financial statement pre elieve that our audit provides a reasonable basis for our opInIons. In our opinion respective fi Agency ended in confo ferre 0 above present fairly, in all material respects, the ntal activities and each major fund information of the Ive changes in financial position thereof for the year then iples generally accepted in the United States of America. In accordance with uditin Standards, we have also issued our report dated September 29, 2006, on our consi the Agency's internal control over financial reporting and our tests of its compliance with cert rovisions of laws, regulations, contracts, grant agreements and other matters. The purpose of at 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. The management's discussion and analysis identified in the accompanying table of contents is not a required part of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board. 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 This page left blank intentionally. 2 TUSTIN REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2006 MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the Tustin Redevelopment Agency (Agency), we offer readers of the Agency's financial statements this narrative overview and analysis of the financial activities of the Agency for the fiscal year ended June 30, 2006. FINANCIAL HIGHLIGHTS . Agency assets exceeded its liabilities at the close of fiscal year 2005-06 by $38,819,381. Net assets consist of $14,409,822 in capital net assets, $1,718,091 in restricted net assets and $22,865,654 in unrestricted net assets. . The Agency's total net assets increased by $7,206,444 during fiscal year ended June 30, 2006. This was mostly due to new Tax increment from the Marine Base Project Area and various capital improvement projects not being started. . At the close of fiscal year 2005-06, the Agency's governmental funds reported combined ending fund balance of $38,667,248, an increase of$6,415,106 from prior year. Fund balance consists of $37,367,131 reserved for specific purposes and $1,300,117 in unreserved - undesignated deficit. . Total Agency debt of principal pay $960,000 during fiscal year 2005-06, which consisted entirely NCIAL STATEMENTS This discuss. statements 1) government- financial statement erve as an introduction to the Agency's basic financial ial statements are comprised of three components: (2) fund financial statements, and (3) notes to the basic Government-wide fina The government-wide fina cial statements are designed to provide readers with a broad overview of the Agency's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the Agency's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Agency is improving or deteriorating. See accompanying independent auditors' report. - 3 - TUSTIN REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2006 Government-wide financial statements (Continued) 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 of related cash flows. Thus, all of the current year's revenues and expenses are taken into account regardless of when cash is received or paid (e.g., uncollected taxes and earned but unpaid interest expense). The basic services of the Agency are considered to be governmental activities including Community Development and Interest Expense on Long-term Debt... All Agency activities are financed with property tax increment, rental income and investment income. The government-wide financial statements can be found pages.8 and 9 of this report. Fund financial statements Fund financial statements are designed to report information about groupings of related accounts use to maintain control over resources that have been segregated for specific activities or objectives. The Agency uses fund accountin re and demonstrate compliance with legal requirements. The Agency only has governme s. for essentially the same functions reported as governmental ents. However, unlike the government-wide InanCIa statements focus on near-term inflows and outflows of spendable resources available at the end of the fiscal uating a government's near-term financing requirements. Governmental funds are us activities in the ent- financial statem of spendable year. Suc Because the focu I funds is narrower than that of the government-wide financial statements, it is use e the information presented for governmental funds with similar information presented mental activities in the government-wide financial statements. By doing so, readers may bett derstand the long-term impact of the government's near-term financing decisions. Both the go rnmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Agency maintains individual governmental funds organized by their type (debt service and capital projects funds). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances. The fund financial statements can be found on pages 10 - 16 of this report. See accompanying independent auditors' report. - 4 - TUSTIN REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2006 Notes to the 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. The notes to the basic financial statements can be found on pages 19 - 28 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS The Agency's combined net assets are $38,819,381 $7,206,444 from $31,612,937. outline in Table 1. This is an increase of The statement of activities shows how the government's net assets changed during fiscal year 2004-05. On the following page is a summary of changes in net assets. During the current fiscal year, the Agency's net assets increased by $7,206,444. This is mostly due to New Tax increment from the Marine Base Project Area and various capital improvement projects not being started. See accompanying independent auditors' report. - 5 - TUSTIN REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2006 TABLE 2 Changes in Net Assets Fy04-05 REVENUES: General Revenues: Tax increment Investment and rental Other revenues Total Revenues $ 9,839,172 $ 1,036,995 119~040 1 0~995~207 EXPENSES: Program Expenses: Community Development Interest on long-term debt Total Expenses 1,719,106 839~428 2~558~534 8,436,673 23~176~264 CHANGE IN NET ASSETS NET ASSETS - BEGINNING OF YEAR NET ASSETS - END OF YE Fy05-06 10,186,630 1,748,321 116~458 12~051~409 3,866,757 978~209 4~844~966 7,206,444 31~612~937 $ 31,612,937 $ 38,819,381 NAL YSIS OF AGENCY FUNDS % Change 4% 69% (2%) 10% 125% 17% 90% 37% 23% nsure and demonstrate compliance with finance- Governme The focus of the mental funds is to provide information on near-term inflows, outflows and balanc resources. Such information is useful in assessing the Agency's financing requirements. ular, unreserved fund balance may serve as a useful measure of a Government's net resourc ailable for spending at the end of the fiscal year. Refer to pages 10 - 16 for more detail of governm ntal funds. As of June 30, 2006, the Agency's governmental funds reported combined ending fund balances of $38,667,248, an increase of $6,415,106 in comparison with the prior year. Of the $38,667,248, $1,300,117 constitutes unreserved - undesignated deficit fund balance. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed (1) to pay debt service of$25,837,693, (2) to land held for resale of $3,847,064, and (3) for a variety of low income housing purposes of $10,282,608. See accompanying independent auditors' report. - 6 - TUSTIN REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2006 CAPITAL ASSET AND DEBT ADMINISTRATION Caoital assets At the end of 2006, the Agency had $14,235,636 invested in a broad range of capital assets, including buildings and furniture, fixtures and equipment. TABLE 3 Capital Assets at Year-E.nd Land & CIP Building Furniture and fixtures, and equipment Accumulated depreciation Total $ $ Fv03-04 5,241,432 $ 11,814,198 $ 443,998 ( 3~089~806) 14,409,822 $ Fv04-05 5,287,730 11,814,198 443,998 ( 3~31 0~290) 14,235,636 % Change 1% 0% 0% 8% (1%) $ Lon2-term debt At the end of fiscal year 20 , a $960,000 decrease Outstanding bonded debt can cy had total bonded debt outstanding of $14,030,000, which is r. This is all attributable to principal reduction payments. ages 26-27 in the notes to the basic financial statements. This finan interest in the report or request of Tustin, 300 Centen general overview of Agency finances for all those with an s. estions concerning any of the information provided in this cial information should be addressed to the Finance Director, City tin, California, 92780, or call (714) 573-3060. See accompanying independent auditors' report. - 7 - TUSTIN COMMUNITY REDEVELOPMENT AGENCY Statement of Net Assets June 30, 2006 ASSETS Cash and investments Taxes receivable Interest receivable Deposits Loans receivable Land held for resale Restricted assets: Investments with fiscal agent Capital assets, not depreciated Capital assets, net of accumulated depreciation Total Assets LIABILITIES Accounts payable Interest payable Deferred revenue Due to the City of Tusti Noncurrent liabilities. Due within one year Due in more ne y Invested in capita Restricted for: Debt service Community development Unrestricted Total Net Assets See Accompanying Notes to Financial Statements. 8 Governmental Activities $ 41,414,767 319,982 285,098 30,000 1,093,082 3,847,064 1,718,091 5,287,730 8,947,906 62,943,720 931,592 53,503 1,101,505 8,007,739 1,000,000 13,030,000 24,124,339 14,235,636 1,718,091 12,784,671 10,080,983 $ 38,819,381 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Statement of Activities For the Year Ended June 30, 2006 Functions/programs: Governmental activities: Community development Interest on long term debt Expenses $ 3,866,757 978,209 Total Governmental Activities $ 4,844,966 General revenues: Taxes: Tax increment Rental income Investment earnings Total General Revenues See Accompanying Notes to Financial Statements. 9 Net (Expenses) Revenue and Changes in Net Assets Governmental Activities $ (3,866,757) (978,209) ( 4,844,966) 10,186,630 117,445 1,747,335 12,051,410 7,206,444 31,612,937 $ 38,819,381 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Balance Sheet Governmental Funds June 30, 2006 Debt Service Funds South Central Proj ect Area Town Center Proj ect Area Marine Base Proj ect Area ASSETS 30,396 145,591 $ 5,070,710 $ 2,919,804 1,677,348 46,962 162,967 47,968 Cash and investments Investments with fiscal agents Taxes receivable Interest receivable Deposits Loans receivable Land held for resale $ 16,316,455 Total Assets $ 16,492,442 $ 6,842,988 $ 3,082,771 LIABILITIES Accounts payable and accrued liabilitie Due to City of Tusti Deferred revenue $ 572,085 $ 8,423 8,423 572,085 Reserved for: Debt service $ 16,492,442 6,834,565 2,510,686 Land held for resale Low income housing Unreserved - undesignated Total Fund Balances (Deficits) 16,492,442 6,834,565 2,510,686 Total Liabilities and Fund Balances $ 16,492,442 $ 6,842,988 $ 3,082,771 See Accompanying Notes to Financial Statements. 10 South Central Proj ect Area Capital Projects Funds South Central Town Center Low Income Town Center Low Income Housing Proj ect Area Housing Marine Base Proj ect Area $ 1,679,410 $ 6,292,299 $ 23,469 $ 2,378,098 $ 5,276,375 31,355 37,585 457 10,260 14,799 55,810 20,930 15,000 15,000 1,064,076 29,006 1,345,000 705,000 1,797,064 $ 3,070,564 $ 8,169,770 $ 23,926 $ 4,250,358 $ 5,276,375 $ $ 22,378 1,548 $ 18,064 1,548 29,006 $ 274,827 5,001,548 48,618 5,276,375 1,345,000 705,000 6,379,042 1,797,064 2,404,676 (1,300,117) 44,883 7,084,042 4,201,740 $ 3,070,564 $ 8,169,770 $ 23,926 $ 4,250,358 $ 5,276,375 (Continued) 11 25,837,693 3,847,064 $ 1,498,890 10,282,608 (1,300,117) 1,498,890 38,667,248 $ 1,498,890 $ 48,708,084 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Balance Sheet Governmental Funds (Continued) June 30, 2006 Capital Projects Funds Marine Base Low Income Housing ASSETS Cash and investments Investments with fiscal agents Taxes receivable Interest receivable Deposits Loans receivable Land held for resale $ 1,458,147 40,743 Total Assets $ ,498,890 LIABILITIES Accounts payable and accrued liabilitie Due to City of Tusti Deferred revenue Reserved for: Debt service Land held for resale Low income housing Unreserved - undesignated Total Fund Balances (Deficits) Total Liabilities and Fund Balances See Accompanying Notes to Financial Statements. 12 Total Governmental Funds $ 41,414,767 1,718,091 319,982 285,098 30,000 1,093,082 3,847,064 $ 48,708,084 $ 931,592 8,007,739 1,101,505 10,040,836 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2006 Amounts reported for governmental activities in the Statement of Net Assets are different because: Fund balances for governmental funds When capital assets (land, buildings, equipment) that are to be used in governmental activities are purchased or constructed, the costs 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. Beginning balance, net of depreciation Current year additions Current year depreciation 14,409,822 46,298 (220,484) Ending balance, net of depreciation Ie to the Agency's ue and payable in the e not reported as fund ~ -term, are ed in governmental an expenditure when Net Assets See Accompanying Notes to Financial Statements. 13 $ 38,667,248 14,235,636 (14,030,000) (53,503) $ 38,819,381 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2006 Debt Service Funds South Central Proj ect Area Town Center Proj ect Area Marine Base Proj ect Area Revenues: Taxes Use of money and property Rental income Other revenue $ 2,792,674 $ 775,944 2,952,481 $ 2,224,136 345,781 Total Revenues 568,618 3,298,262 2,224,136 Expenditures: Current: General government Community services Educational Revenue Augmentation Fund payment Capital outlay Debt service: Principal retirement Interest and fiscal charg 25,688 212,513 28,691 523,693 67,813 266,909 266,909 2,947,858 827,989 1,979,220 Other Financing Sou Transfers in Transfers out ( 433,822) (773,970) (1,404,591 ) Total Other Financing Sources (Uses) ( 433,822) (773,970) (1,404,591 ) Net Change in Fund Balances 2,514,036 54,019 574,629 Fund Balances (Deficits), Beginning of Year 13,978,406 6,780,546 1,936,057 Fund Balances (Deficits), End of Year $ 16,492,442 $ 6,834,565 $ 2,510,686 See Accompanying Notes to Financial Statements. 14 115,650 960,000 690,980 177,103 620,760 2,470,273 244,916 South Central Proj ect Area $ 76,415 15,000 91,415 90,718 5,233 433,822 Capital Projects Funds South Central Town Center Low Income Town Center Low Income Housing Proj ect Area Housing Marine Base Proj ect Area $ 698,168 322,862 $ 57,305 67,842 1,146,177 $ 777,916 109,750 1 7,923 48,616 124 27,217 27,341 954,205 1,094,822 381,692 $ 113,263 233,994 4,022 338,868 381,692 452,131 572,513 (452,131) 773,970 1,404,591 433,822 773,970 1,404,591 429,286 51,355 563,295 572,513 952,460 (384,403) 7,032,687 (563,295) 3,629,227 (952,460) $ 44,883 $ 7,084,042 $ $ 4,201,740 $ (Continued) 15 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds (Continued) For the Year Ended June 30, 2006 Capital Projects Funds Marine Base Low Income Housing Total Governmental Funds Revenues: Taxes Use of money and property Rental income Other revenue $ 741,255 $ 10,186,630 1,630,876 117,445 116,458 Total Revenues 741,255 12,051,409 Expenditures: Current: General government Community services Educational Revenue Augmentation Fund payment Capital outlay Debt service: Principal retirement Interest and fiscal charg 37,742 2,006,610 804,019 703,513 6,415,106 Other Financing Sou Transfers in 2,612,383 Transfers out (2,612,383) Total Other Financing Sources (Uses) Net Change in Fund Balances 703,513 6,415,106 Fund Balances (Deficits), Beginning of Year 795,377 32,252,142 Fund Balances (Deficits), End of Year $ 1,498,890 $ 38,667,248 533,818 348,123 960,000 983,733 37,742 5,636,303 See Accompanying Notes to Financial Statements. 16 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2006 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances - total governmental funds 6,415,106 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. This is the amount by which depreciation ($220,484) exceeded capital expenditures $46,298 in the current period. $ (174,186) Repayment of long-term debt is reported as expenditures in governmental funds, and thus, has the effect of reducing . 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. Some expenses rtl the use of current fina expenditure . 960,000 atement of Activities do not require nd therefore are not reported as Net 5,524 $ 7,206,444 See Accompanying Notes to Financial Statements. 17 This page left blank intentionally. 18 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements June 30, 2006 I. Summary Of Significant Accounting Policies A. Description of Reporting Entity The Tustin Community Redevelopment Agency (Agency), a component unit of the City of Tustin, was established October 20, 1976, pursuant to the State of California Health and Safety Code, Section 33000, entitled "Community Redevelopment Law" . Its purpose is to prepare · and carry out plans for improvement, rehabilitation, and redevelopment of . blighted areas within the territorial limits of the City of Tustin. The City provides management assistance to the Agency, and the members of the City Council. also act as the governing body of the Agency. In accordance with GASB Code Section 21 00, "Defining the Reporting Entity", the Agency's financial activities will be included (blended) with the financial activities of the City of Tustin for reporting purposes. Tax Increment Financing The Agency's primary source of revenue, other than loans and advances from the City, comes fr erty taxes. Property taxes allocated to the Agency are computed i manner: (a) all p operty within the project area is determined edevelopment Plan. e incremental increase in assessed values after the Red elopment Plan are allocated to the Agency. All taxes assessed valuation of the property are allocated to the City ts. no power to levy and collect taxes, and any legislative property tax reductio might correspondingly reduce the amount of tax revenues that would otherwise be available to pay the principal of, and interest on, long-term debt. Broadened property tax exemptions could have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any reduction or elimination of present exemptions would necessarily increase the amount of tax revenues that would be available to pay principal and interest on long-term debt. 19 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 Financial reporting is based upon all GASB pronouncements, as well as the F ASB 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 pronouncement. F ASB pronouncements issued after November 30, 1989 are not followed in the preparation of the accompanying financial statements. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e.,. the statement of net assets and the statement of changes in net assets) report information on.all.ofthe activities of the Agency. For the most part, the effect of inter fund activity has been removed from these statements. Governmental activities, which normally are. supported by taxes and intergovernmental revenues, are.. reported. separately from. .business-type activities, which rely to a significant extent on fees and charges for support. The Tustin Community Redevelopment Agency has no business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to cus 0 purchase, use, or directly benefit from goods, services, or privilege a given function and 2) grants and contributions that are restricted e operational or capital requirements of a particular function. s not roperly included among program revenues es. he Agency's governmental funds are presented after fin ial statements. These statements display information individually and nonmajor funds in the aggregate for All funds of the Agency are reported as major funds. C. Basis of Accountin and Financial Statement Presentation 1. Measurement Focus Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded regardless of the measurement focus applied. In the government-wide Statement of Net Assets and the Statement of Activities, activities are presented using the economic resources measurement focus. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the government are reported. 20 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 In the fund financial statements, all governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balances (net current assets) are considered 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 are reported on the governmental fund balance sheets in spite of their. measurement focus... However, special reporting treatments are used to indicate that they should not be considered "available spendable resources", since they do not represent net current assets. Recognition of governmental fund type. revenue 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. Revenues, expenses, gains, losses,. assets, and liabilities resulting from nonexchange transaction are recognized in accordance with the requirements ofGASB Statement No. 33. nding measurement focus, expenditure recognition for es excludes amounts represented by noncurrent liabilities. et cu ent assets, such long-term amounts are not type expenditures or fund liabilities. Amounts ital assets are recorded as expenditures in the year that ther than as a fund asset. The proceeds of long-term as er financing sources rather than as a fund liability. duce long-term indebtedness are reported as fund expenditures. tricted and unrestricted resources are combined in a fund, considered to be paid first from restricted resources, and then stricted resources. 2. Basis of Accounting In the government-wide Statement of Net Assets and Statement of Activities, the governmental activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic assets used, regardless of timing of related cash flows. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. 21 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 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 in general considers revenues available if they are collected within six months after year end except for property taxes, which the Agency considers available if they are collected within 60 days after year end. Revenue recognition is subject to the .measurable and availability criteria for the governmental 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 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 nonexchange transactions are recognized as revenues when all applicable eligibility nts have been met. (the value at which a financial instrument transaction between willing parties other than e), except for certain investments which have a an one year when purchased, which are stated at Capital s are recorded at cost where historical records are available and at an esti ted original cost where no historical records exist. Contributed capital assets are valued at their estimated fair market value at the date of contribution. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of 1 year or more. The Agency does not own any infrastructure assets. Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the Government-Wide Financial Statements. The range of lives used for depreciation purposes of each capital asset class are: 22 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 Building Furniture, fixtures and equipment 50 years 1 0 years Land Held for Resale: Land held for resale is carried at the lower of cost or estimated realizable value. Fund balances are reserved in amounts equal to. the carrying value of land held for resale because such assets are not available to finance the Agency's current operations. 3. Description of Funds The Agency reports the following funds: Debt Service Funds are used to account. for. the current interest and principal payments on the long-term debt of the Agency. Capital Proiects Funds are used to account for resources used in developing the project areas as well as the administrative costs. incurred in sustaining Agency activities. overnmental funds are as follows: ebt Service Fund is used to account for the nd expenditures of the South Central Project Area. r Pr t Area Debt Service Fund is used to account for tax s and expenditures of the Tustin Center Project Area. e Pro.ect Area Debt Service Fund is used to account for tax enues and expenditures of the Marine Base Project Area. The South Central Proiect Area Capital Proiects Fund is used to account for the fiscal activity of the South Central Project Area. The South Central Low Income Housing Capital Proiects Fund is used to account for the redevelopment requirement to set-aside 20% of available tax increment, and to use those funds only for the benefit of providing low and moderate income housing to residents of the South Central Project Area. The Town Center Proiect Area Capital Proiects Fund is used to account for the fiscal activities of the Town Center Project Area. 23 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 The Town Center Low Income House Capital Proiects Fund is used to account for the redevelopment requirement to set aside 20% of available tax increment, and to use those funds only for the benefit of providing low and moderate income housing to residents of the Town Center Project Area. The Marine Base Proiect Area Capital Proiects Fund is used to account for the fiscal activities of the Marine Base Project Area. The Marine Base Low Income Housing Capital Proiects Fund is used to account for the redevelopment requirement to set-aside 20% of available tax increment, and to use those funds only for the benefit. of providing low and moderate income housing to residents of the Marine Base Project Area. II. Stewardship, Compliance and Accountability Budgetary Data The budgets of the Agency are primarily "long-term" budgets which emphasize capital outlay plans extending over one year. Because of the long-term nature of redevelopment proj ual" budget comparisons are not considered meaningful and, accordingly information is included in the accompanying financial statements. A. s reported in the accompanying financial statements consisted III. hand investrrents Restricted assets: Investrrents with fiscal aged $ 41,414,767 1,718,091 $ 43,132,858 The Agency's funds are pooled with the City of Tustin's cash and investments in order to generate optimum investment income. 24 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 B. Loans Receivable Multi-Family Development Loan: The Agency provided a Bridge Loan to Senior Apartment Developer to assist in the Development of 53 affordable rental units. The total outstanding balance as of June 30, 2006, was $250,000. Home Improvement Loans: The Agency has provided deferred home improvement loans to low- and moderate- income. households (rental and ownership). These deferred loans are due upon sale, . refinance, or when the rental units are no longer available as affordable units. . Term is 30 years. The total outstanding balance as of June 30, 2006, was $127,668. Homebuyer Program Loans: The Agency.has provided down payment assistance to qualified first time homebuyers. The loans provided. in the Ambrose Lane Development are due beginning in 2029, or when the . homeowner sells or refinances. The loans provided in the Tustin Grove Development are. due beginning in 2015, or when the homeowner sells or refinances. The total outstanding balance as of June 30, 2006, was $715,413. C. Capital Assets 5,241,432 46,298 5,287,730 Capital assets, Building - Civic 11,814,198 11,814,198 Furniture, fixture 443,998 443,998 Total capital assets, being depreciated 12,258,196 12,258,196 Less accmnulated depreciation (3,089,806) (220,484) (3,310,290) Total capital assets, being depreciated, net 9,168,390 (220,484) 8,947,906 Governmental Activities capital assets, net $ 14,409,822 $ (174,186) $ - $ 14,235,636 Balance at Additions Deletions Jlll1e 30, 2006 The following of the capital asset activity for the year ended June 30, 2006: 1,300,000 3,941,432 $ 46,298 $ 1,300,000 3,987,730 25 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 D. Long- Term Liabilities The following is a summary of the long-term liability activity for the year ended June 30, 2006: Balance July 1, 2005 Additions Deletions Balance June 30, 2006 Due Within One Year Tax allocation bonds $ 14,990,000 $ $ 960,000 $ 14,030,000 $ 1,000,000 Tax Allocation Bonds: On July 1, 1998, the Tustin Community. Redevelopment Agency issued $20,805,000 Tax Allocation Refunding Bonds to refund the Agency's Town Center Area Redevelopment. Project Tax Allocation Refunding Bonds, Series 1987, in aggregate principal amount of $5,145,000 and the Agency's Town Center Area Redevelopment Project Subordinate Tax Allocation Bonds, Series 1991 in aggregate principal amount of $12,880,000. As of June 30, 2006, the 1987 an bonds have been fully redeemed. annual installments ranging from ber 1, 1998. Interest is payable ith rates ranging from The bonds maturing on or after emption prior to maturity as a tio the Agency, on any date on or pri es ranging from 100% to 101 % of semIannua 3.5% Dec $14.030.000 26 TUSTIN COMMUNITY REDEVELOPMENT AGENCY Notes to Financial Statements (Continued) June 30, 2006 The annual requirements to amortize the tax allocation refunding bonds are as follows: Year Ending Jme 30, Principal Interest Total 2007 $ 1,000,000 $ 642,040 $ 1,642,040 2008 1,055,000 594,358 1,649,358 2009 1,105,000 547,365 1,652,365 2010 1,150,000 497,180 1,647,180 2011 1,205,000 443,289 1,648,289 2012-2016 6,920,000 ,269,335 8,189,335 2017 1,595,000 37,881 1,632,881 Total $ 14,030,000 $ 4,031,448 $ 18,061,448 E. Due to City of Tustin The City made loans to the South Central Project Area and the Marine Base Project Area. The total amount of the loans outstanding is $8,000,000 and is expected to be paid with future tax increment revenue. F. d Safety Code requires redevelopment agencies to set from project areas established before 1976 Ing. Between fiscal years 1985-86 and 1991- evelopment Agency deferred a total of $2,776,042 come housing obligation. On February 1, 1993, the iminate the deficit in subsequent years. 27 This page left blank intentionally. 28 September 29, 2006 The Board of Directors of the Tustin Community Redevelopment Agency Independent Auditors' Report on Internal Control Over Financial.Reporting and on Compliance (Including the Provisions Contained in the Guidelines for Compliance Audits of Redevelopment Agencies) and Other Matters 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 Tustin Community Redevelopment Agency, a component unit of the City of Tustin, California.as of and for the year ended June 30, 2006, which collectively comprise the Agency's basic financial statements, as listed in the table of contents, and have issued our report thereon dated September 29, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our control over financial reportin opinions on the basic fina reporting. Our consideratIon 0 matters in the internal control that in which the desi relatively low I relation to t employees internal control 0 Com liance and Other considered the Tustin Community Redevelopment Agency's internal etermine our auditing procedures for the purpose of expressing our nd not to provide an opinion on the internal control over financial control over financial reporting would not necessarily disclose all e esses. A material weakness is a reportable condition e internal control components does not reduce to a caused by error or fraud in amounts that would be material in may occur and not be detected within a timely period by rfor their assigned functions. We noted no matters involving the and Its operation that we consider to be material weaknesses. As part of obtaining reas e assurance about whether the basic financial statements of the Tustin Community Redevelopment gency are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Such provisions include those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies issued by the State Controller's Office, Division of Accounting and Reporting. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended for the information of the Board of Directors and management of the Tustin Community Redevelopment Agency and the State Controller's Office, Division of Accounting and Reporting and is not intended to be and should not be used by anyone other than these specified parties. 29