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HomeMy WebLinkAboutFin RA Financial Audit 2007-08Agenda Item No: 2 Meeting r5' Date: January 5 2009 SAN RAFAEL REDEVELOPMENT AGENCY SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: FINANCE Prepared by: Cindy Mosser ( Executive Director Approval: Finance Director SUBJECT: FINANCIAL AUDIT FOR THE REDEVELOPMENT AGENCY FOR FISCAL YEAR 2007-2008 RECOMMENDATION: ACCEPT THE FINANCIAL AUDIT FOR THE REDEVELOPMENT AGENCY FOR FISCAL YEAR 2007- 2008. BACKGROUND: As is required State law, the San Rafael Redevelopment Agency must complete an annual audit of its financial activities. The auditing firm of Maze and Associates, Accountancy Corporation conducted the audit for fiscal year 2007-2008. Their work was completed in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States. The Agency Board's approval and acceptance of fiscal year 2007-2008 audited financial report is needed to remain in compliance with State and Federal law. ANALYSIS: The actual results of the Agency's financial activities are presented in the Government -Wide Financial Statements. The liabilities of the Agency exceeded its assets at the close of the fiscal year by $29.6 million. The Agency's investment in assets is primarily in City owned property, and other than land held for resale or development; it does not hold property in its own name. Therefore, a negative net asset amount would be expected. Tax increment revenues are more than sufficient to cover debt related expenses. A financial summary of expenditures and revenues is shown in the Statement of Activities and Changes in Net Assets. Supplementary explanatory information is provided with a Management's Discussion and Analysis (MD&A) beginning on page 3. The MD&A provides key highlights and a summary view of performance of financial activities for the year ended June 30, 2008. FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 FISCAL IMPACT: No fiscal impact occurs by having the Agency Board accepts these reports. The fiscal year 2007- 2008 Annual Financial Audit Report is presented as the actual results of the Agency fmancial activities for the year. OPTIONS: The Agency Board can choose to either: 1) Accept the Fiscal Year 2007-2008 Annual Financial Audit, as presented, or 2) Reject the report. The Agency Board is required under current law to accept the report and file it with numerous County, State and Federal agencies. Rejecting this report would leave the Agency out of compliance with applicable laws. ACTION REQUIRED: Staff recommends Agency Board accept the report as presented. Attachment/Encl W:\Management Services- WorkFile\Finance- WorkFile\Council Material\Staff Reports\2008\Agency\Audit report fy2007-08-RDA.doc CITY OF SAN RAFAEL REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR TBE YEAR ENDED JUNE 30, 2008 This Page Left Intentionally Blank CITY OF SAN RAFAEL REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Table of Contents Page. Independent Auditor's Management's Discussion and Analysis Basic Component Unit Financial Statements: Agency -wide Financial Statements: Statementof Net Assets......................................................................................................10 Statementof Activities........................................................................................................11 Fund Financial Statements: Major Governmental Funds BalanceSheet..................................................................................................................14 Reconciliation of Governmental Funds -Fund Balances with the Net Assets of Governmental Activities......................................................................16 Statement of Revenues, Expenditures, and Changes in Fund Balances ........................18 Reconciliation of the Net Change in Fund Balances — Total Governmental Funds with the Statement of Activities......................................20 Notes to Component Unit Financial Statements........................................................................21 Supplemental Information: Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — Budgetary Basis: Debt Service Funds: 1999 Agency Bonds 2002 Agency Bonds Capital Project Funds: .33 Capital Improvement Projects...................................................................................35 Low and Moderate Income Housing SAN RAFAEL REDEVELOPMENT AGENCY BASIC COMPONENT UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Table of Contents (Continued) Page Supplemental Information (Continued): 1999 Bonds Capital Projects 1985 Capital Projects and Administration................................................................38 Report on Internal Control over Financial Reporting and on Compliance And Other Matters on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards............................................................39 Schedule of Prior Year Finding........................................................................................................41 MAZE & ASSOCIATFlo ACCOUNTANCY CORPORATION 3478 Buskirk Ave. -Suite 215 Pleasant Hill, California 94523 (925) 930-0902 • FAX (925) 930-0135 maze@mazeassociates.com INDEPENDENT AUDITOR'S REPORT www.mazeassociates.com Members of the Board of the San Rafael Redevelopment Agency San Rafael, California We have audited the accompanying component unit financial statements of the governmental activities and each major fund of the San Rafael Redevelopment Agency, a component unit of the City of San Rafael, as of and for the year ended June 30, 2008, as listed in the Table of Contents. These component unit financial statements are the responsibility of the Agency's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards for 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 as to whether the component unit financial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the component unit financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the component unit financial statements referred to above present fairly in all material respects the financial position of the governmental activities and each major fund of the San Rafael Redevelopment Agency for the year ended June 30, 2008 and the changes in financial position for the year then ended, in conformity with generally accepted accounting principles in the United States of America. hi accordance-withh Government Auditing Standards, we have also issued our report dated October 22, 2008 on our consideration of the San Rafael Redevelopment Agency's internal control over financial reporting and on 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. Management's Discussion and Analysis is not a required part of the basic component unit 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 required supplementary information. However, we did not audit the information and we express no opinion on it. r4CLOMA October 22, 2008 A Professional f-poration This Page Left Intentionally Blank REDEVELOPMENT AGENCY OF THE CITY OF SAN RAFAEL MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 As management of the Redevelopment Agency (Agency) of the City of San Rafael, 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, 2008. This document has been prepared as required by the Statement No. 34 of Governmental Accounting Standards Board (GASB 34). I. Financial Highlights Tax increment revenues are more than sufficient to cover debt related expenses and provide funding for both housing and non -housing priorities. The Agency continues to deliver high quality projects that have been planned based on neighborhood and business needs and goals. Fiscal year 2007-2008 provided construction of the Medway Canal Intersection Improvements and some underground work. Program funding for housing improvements continued to have a positive effect on the overall quality of life of the area. The Agency's investment in projects has resulted in strong demand for housing and considerable investment in renovations and additions to the existing housing stock. The following are the amounts received from tax increments in fiscal year 2007-2008 with comparative totals for the previous four fiscal years: Fiscal Year Receipt 2003-04 2004-05 2005-06 2006-07 2007-08 Total for the Year $4,574 447 $4,549,414 4 40 652 433 376 The liabilities of the Agency exceeded its assets at the close of the fiscal year by $29.6M (net assets). The Agency's investment in assets is primarily in City owned property, and other than land held for resale or development, it does not hold property in its own name. Therefore a negative net asset amount would be expected. As of the close of the fiscal year, the Agency's funds (all governmental) reported combined ending fund balances of $5.96M, which is a decrease of $3.01M in comparison with the prior year. Approximately $5.96M of this amount is available for spending at the Agency's discretion for the purposes of redevelopment (reserved fund balance). Of this amount, $2.9M has been reserved for capital projects. II. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Agency's basic financial statements. The Redevelopment Agency basic financial statements comprise of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide Financial Statements: The Government -wide Financial Statements are designedto 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. The Agency, while a separate legal entity, acts as a financial conduit for the City and as such does not hold title to the assets it helps construct. Therefore, its net assets are not any indication of its financial health. The statement of activities presents information showing how the government'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, 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 and earned but unused vacation leave). Fund Financial Statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The 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 Agency can be divided into two categories: capital projects fund and debt service fund. The Agency adopts an annual appropriated budget for all of its funds. A budgetary comparison statement has been provided to demonstrate compliance with this budget. Capital Projects: Capital projects fund is used to account for resources available for land purchase and capital improvements made in the project area using bond proceeds. Housing set aside fund is used to account for the 20% of the tax increments that is required by State Law to be used for low and moderate income housing purposes. Debt Service: Debt service fund is used to account for the repayment of principal and interest on debt. 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. Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information relating to the Agency's budgetary principles. III. Government -wide Financial Analysis By far the largest portion of the Agency's net assets reflects amounts designated for capital projects (e.g., land, building, machinery, and equipment). Unlike most other type of governmental bodies who provide day-to-day services, the main purpose of the Agency is to provide capital funds for the development of a certain geographical area of the City. The following table shows the components of the net assets. Redevelopment Agency Net Assets At June 30, 2008 Current assets $7.41\4 Noncurrent assets 1.5M Total assets 8.9M Current liabilities 2.8M Noncurrent liabilities 35.7M Total liabilities 38.5m Net assets: 4,925,169 Restricted 2.9M Unrestricted (32.5)M Total net assets ($29.6)M There was a decrease of $7.6M in the Agency's net assets during the fiscal year. Governmental Activities: All the activities of the agency are governmental and it has no business -type activities. Redevelopment Agency Changes in Net Assets Fiscal year ended 2007-08 General revenues: Property tax (tax increments) $ 4,533,376 Use of money and property 320,271 Miscellaneous 40,522 Transfers in from other city funds 31,000 Total general revenues and transfers 4,925,169 Net Expenses 12,518,102 Change in net assets (increase) (7,592,933) Net assets - beginning of year, as restated (22,008,323) Net assets - end of year $(29,601,256) IV. Financial Analysis of the Agency's Funds As noted earlier, the Agency uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. Governmental Funds: The focus of the Agency's Governmental Funds is to provide information on near-term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the Agency's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. It should, however, be noted that most of the unreserved amounts have been designated by the Agency for specific uses. The Agency is required by State law to set aside 20% of the tax increment revenue in a separate fund for low and moderate -income housing purposes. This capital projects fund had total revenue of $1.OM and expenditures of $.8M and a transfer for debt service payment of $0.3M. The expenditure includes $100K for project improvements, and $101K for subsidies to Low and Moderate Income Housing. The ending fund balance remained unchanged from the prior year balance of $3M. The debt service fund accounts for the principal and interests payments on all bonds. The capital projects funds other than the Low and Moderate Income Housing fund, account for all bond proceeds available for capital improvements and the related interest income. The interest income for the year is $259K. The expenditures amounted to $3.9M. The fund balance decreased by $2.9M to $2.9M at the year-end. All of this amount has been reserved for capital improvements. V. Budgetary Highlights The tax increment revenue was on target with the budgeted amount. Interest earnings were $62K more than estimated. The interest earnings are higher than the budget due to better than expected rates for investments held in the Local Agency Investment Fund. The operating expenditures overall remained within the budget. VI. Capital Asset and Debt Administration Capital Assets: As of June 30, 2008, the Agency's capital assets were $1.5M. Construction in progress represents $1.4M of the Agency's capital assets. As noted earlier the Agency acts as a financial conduit for the City of San Rafael therefore its investments in capital assets are recorded as City assets rather than Agency assets. Long-term Debt: At the end of the current fiscal year, the Agency had total bonded debt outstanding of $39.4M. The tax increments revenue of the Agency secures all bonded debt of the Agency. The Agency's debt decreased by $1.9M with the annual debt payments for the 1999 and 2002 Agency bonds. Additional information on the Agency long-term debt can be found in Note 6 of this report. VII. Economic Factors and Next Year's Budgets Since the Agency's primary source of revenue is tax increments, property values and new construction in the redevelopment area are the key economic factors that define the future resources of the agency. Tax increment revenue remained stable in fiscal year 2007-2008. It is reflective of the statutory increase permitted and the flat economy, which continues to suppress business activity in the commercial and industrial areas within the redevelopment project area. Although the housing market is weakening around the nation, the City on the other hand, has not seen the drastic decline in market value. The Agency's budget for fiscal year 2008-2009 brings no new surprises. Sufficient funds have been set aside to keep the Agency operations sustainable for several years. No new bonds are forecasted for the next year. Nevertheless, Agency staff continues to work with the County of Marin and other local agencies to see if a tax sharing restructuring can produce future revenues that can be pledged for new bonds. Bond issues not only pay for new projects, but provide revenue to pay for current staffing and operations. If a new bond measure is not achieved within the next five years, the Agency operations will be drastically reduced. The Agency will continue to receive funds for an existing capital project with Regional Measure A funds and Non -motorized Transportation Pilot Program funds. VIII. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the Agency's finances and to demonstrate the Agency's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of San Rafael Finance Department at 1400 Fifth Ave. Room 204, San Rafael, California 94901. This Page Left Intentionally Blank SAN RAFAEL REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES The Statement of Net Assets reports the difference between the Agency's total assets and the Agency's total liabilities, including all the Agency's capital assets and all its long-term debt. The Statement of Net Assets focuses the reader on the composition of the Agency's net assets, by subtracting total liabilities from total assets. The Statement of Net Assets summarizes the financial position of all the Agency's Governmental Activities in a single column. The Statement of Activities reports increases and decreases in the Agency's net assets. It is also prepared on the full accrual basis, which means it includes all the Agency's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual' basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The Statement of Activities presents the Agency's expenses that are listed by program first. Program revenues— that is, revenues which are generated directly by these programs—are then deducted from program expenses to arrive at the net expense of each program. The Agency's general revenues are then listed and the Change in Net Assets is computed and reconciled with the Statement of Net Assets. SAN RAFAEL REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Cash and investments (Note 2) Restricted cash and investments (Note 2) Receivables: Accounts Taxes Grants Interest Loans (Note 4) Capital assets (Note 5): Nondepreciable assets Depreciable assets, net Total Assets LIABILTMS Accounts payable Interest payable Developer bonds payable Arbitrage payable Long-term debt (Note 6): Due in one year Due in more than one year Total liabilities NET ASSETS (Note 1F) Restricted for: Debt service Capital projects Unrestricted Total net assets Governmental Activities $4,235,907 1,596,105 48,307 3,106 961,905 23,088 593,572 1,465,292 26,799 8,954,081 488,391 310,658 25,000 25,127 1,965,000 35,741,161 38,555,337 35,430 2,955,074 (32,591,760) ($29,601,256) See accompanying notes to financial statements 10 SAN RAFAEL REDEVELOPMENT AGENCY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 General revenues Taxes - 4,533,376 Investment earnings 320,271 Govemmental 40,522 Transfers in from the City, net (Note 3C) 31,000 Total general revenues and transfers Activities Net Change in Net Assets (7,592,933) Program Revenues (Expenses) Net Assets (Deficit) -Ending ($29,601,256) Capital Grants Revenues Charges for and Governmental Functions/Programs; Expenses Services Contributions Activities Primary Government Governmental Activities: General government $31,317 ($31,317) Public works and parks 137,530 (137,530) Community development/redevelopment 11,813,783 $22,356 $1,339,270 (10,452,157) Interest on long-term debt 1,897,098 (1,897,098) Total Primary Government $13,879,728 $22,356 $1,339,270 (12,518,102) General revenues Taxes - 4,533,376 Investment earnings 320,271 Miscellaneous 40,522 Transfers in from the City, net (Note 3C) 31,000 Total general revenues and transfers 4,925,169 Change in Net Assets (7,592,933) Net Assets (Deficit) -Beginning (22,008,323) Net Assets (Deficit) -Ending ($29,601,256) See accompanying notes to financial statements 11 This Page Left Intentionally Blank FUND FINANCIAL STATEMENTS Major funds are defined generally as having significant activities or balances in the current year. All Agency Funds were determined to be Major Funds in fiscal 2008. They are described below: The 1999 AGENCY BONDS DEBT SERVICE FUND is the debt service fund for the principal payments, interest payments, and related costs of the 1999 Project Tax Allocation Bonds. The 2002 AGENCY BONDS DEBT SERVICE FUND is the debt service fund for the principal payments, interest payments, and related costs of the 2002 Tax Allocation Refunding Bonds. The CAPITAL IMPROVEMENT PROJECTS CAPITAL PROJECTS FUND is the capital projects fund for the new resources received form the 2002 Agency Bonds that can be used for Agency operations, capital projects or payments to the San Rafael High School district under an established tax sharing agreement. The LOW AND MODERATE INCOME HOUSING CAPITAL PROJECTS FUND accounts for the 20% set- aside required by the State for low and moderate -income housing projects. The 1999 BONDS CAPITAL PROJECTS FUND is the capital projects fund of the Agency for the 1999 Project Tax Allocation Bonds. The 1985 CAPITAL PROJECTS AND ADMINISTRATION CAPITAL PROJECTS FUND is the general operating fund of the Agency. It is used to account for all financial resources except those required to be accounted for in the Low and Moderate Income Housing Fund and the debt service funds. 13 SAN RAFAEL REDEVELOPMENT AGENCY GOVERNMENTALFUNDS BALANCESBEET ASSETS Cash and investments available for operations (Note 2) Restricted cash and investments (Note 2) Receivables: Accounts Taxes Grants Interest Loans (Note 4) Due from other funds (Note 3A) Total Assets LIABILITIES Accounts payable Due to other funds (Note 3A) Developer bonds payable Arbitrage payable Deferred revenue Total Liabilities DEBT SERVICE FUNDS CAPITAL PROJECTS FUNDS Reserved for: Low and Capital Moderate 1999 Agency 2002 Agency Improvement Income Bonds Bonds Projects Housing 2,377,491 Debt service $35,430 $33,622 $1,885,260 $198,858 1,808 Total Liabilities and Fund. Balances $35,430 $1,897,846 $2,978,612 2,857 3,106 12,586 10,502 593,572 2,169,717 $35,430 $1,897,846 $2,978,612 $7,549 7,549 FUND BALANCES (Note 1G): Reserved for: Loans receivable 593,572 Improvement projects $1,897,846 Housing - 2,377,491 Debt service $35,430 Total Fund Balances 35,430 1,897,846 2,971,063 Total Liabilities and Fund. Balances $35,430 $1,897,846 $2,978,612 See accompanying notes to financial statements 14 CAPITAL PROJECTS FUNDS 1985 Capital Total Projects and Governmental 1999 Bonds Administration Funds $472,642 $2,118,167 $4,235,907 $1,594,297 1,596,105 29,000 16,450 48,307 25,127 3,106 961,905 961,905 23,088 33,200 3,670,140 593,572 2,169,717 $2,585,202 $2,134,617 $9,631,707 $472,642 $8,200 $488,391 2,169,717 2,169,717 25,000 25,000 25,127 25,127 961,905 961,905 3,629,391 33,200 3,670,140 593,572 (1,044,189) 2,101,417 2,955,074 2,377,491 35,430 (1,044,189) 2,101,417 5,961,567 $2,585,202 $2,134,617 $9,631,707 15 SAN RAFAEL REDEVELOPMENT AGENCY RECONCILIATION OF GOVERNMENTAL FUNDS -FUND BALANCES WITH THE NET ASSETS OF GOVERNMENTAL ACTIVITIES JUNE 30, 2008 Total Fund Balances reported on the governmental funds balance sheet $5,961,567 Amounts reported for Governmental Activities in the Statement of Net Assets are different from those reported in the Governmental Funds above because of the following. CAPITAL ASSETS Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. 1,492,091 ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES Revenues which are deferred on the Fund Balance Sheets because they are not available currently are taken into revenue in the Statement of Activities. Deferred revenue 961,905 LONG-TERM ASSETS AND LIABILITIES The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds: Long-term debt (37,706,161) Interest payable (310,658) NET ASSETS OF GOVERNMENTAL ACTIVITIES ($29,601,256) See accompanying notes to financial statements 16 This Page Left Intentionally Blank SAN RAFAEL REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Taxes and special assessments Use ofmoney and property Intergovernmental Charges for services Other revenue Total Revenues EXPENDITURES: Current: General govemment Public works and parks Community development(redevelopment Capital outlay Capital improvement/special projects Debt service: Principal Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVFREXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in (Note 3B) Transfers in from City (Note 3C) Transfers (out) (Note 3B) Total other financing sources (uses) Net Change in Fund Balances FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR DEBT SERVICE FUNDS CAPITAL PROSECT FUNDS Low and Capital Moderate 1999 Agency 2002 Agency Improvement Income Bonds Bonds Projects Housing $1,497,469 $2,071,381 $964,526 1,314 $75,851 60,628 11,522 1,497,469 2,072,695 75,851 1,036,676 822,400 179,000 60 695,000 1,195,000 802,469 876,381 1,497,469 2,071,381 179,000 822,460 1,314 (103,149) 214,216 300,240 (300,240) (300,240) See accompanying notes to the financial statements. 18 (300,240) 1,314 (103,149) (86,024) 34,116 2,000,995 3,057,087 $35,430 $1,897,846 $2,971,063 CAPITAL PROJECT FUNDS 1985 Capital Total Projects and Governmental 1999 Bands Administration Funds 31,317 $4,533,376 $92,666 $89,812 320,271 377,365 377,365 2,818,072 22,356 22,356 29,000 40,522 499,031 112,168 5,293,890 31,317 31,317 137,530 137,530 559,861 1,382,261 2,818,072 2,818,072 162,486 60,048 401,594 1,890,000 1,678,850 2,980,558 788,756 8,339,624 (2,481,527) (676,588) (3,045,734) 347,000 300,240 947,480 31,000 31,000 (347,000) (947,480) 378,000 (46,760) 31,000 (2,103,527) (723,348) (3,014,734) 1,059,338 2,824,765 8,976,301 ($1,044,189) $2,101,417 $5,961,567 19 SAN RAFAEL REDEVELOPMENT AGENCY Reconciliation of the NET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008 The schedule below reconciles the Net Changes in Fond Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis. NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($3,014,734) Amounts reported for governmental activities in the Statement of Activities are different because of the following: CAPITAL ASSETS TRANSACTIONS Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Capital outlay and other capitalized expenditures are added back to fund balance 2,712,134 Net retirements of capital assets are deducted from fund balance (9,921,361) Depreciation expense is deducted from the fund balance (2,629) ACCRUAL OF NON-CURRENT ITEMS The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change): Interest payable (8,588) Deferred revenue 961,905 LONG-TERM DEBT PAYMENTS Repayment of bond principal is an expenditure in the governmental funds, but in the Statement of Net Assets the repayment reduces long-term liabilities. Repayment of debt principal is added back to fund balance, net of =action 1,680,340 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES ($7,592,933) 20 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES A. Description of San Rafael Redevelopment Agency and Redevelopment Plan The San Rafael Redevelopment Agency (Agency) was established under the provisions of the Community Redevelopment Law (California Health and Safety Code, commencing with Section 33000) primarily to assist in the clearance and rehabilitation of areas determined to be in a declining condition in the City of San Rafael (City). Financial activity of the Agency commenced in July 1973. Under the Agency's Redevelopment Plan (Plan), approved in November 1972, the Agency will assist in the development of the property located in the central San Rafael business core and east San Rafael. The Plan was amended and restated in October 1998. The Agency receives incremental tax revenues on the developed property due to increases in assessed value. The Agency functions as an independent entity. The City Council serves as the, governing board of the Agency. The Agency is authorized to finance the Redevelopment Plan from various sources, including assistance from the City, the State and Federal government, property tax increments, interest income and the issuance of Agency notes and bonds. Management and administrative support services are provided by the City. The City Manager serves as the Executive Director, City Clerk as Secretary, and the City Finance Director as the Finance Officer of the Agency. The Agency is an integral part of the City of San Rafael and, accordingly, the accompanying financial statements are included as a component of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City's basic financial statements. A Basis of Presentation The Agency's Basic Component Unit Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. These Statements require that the financial statements described below be presented. Government -wide Statements: The Statement of Net Assets and the Statement of Activities include the financial activities of the overall Agency government. Eliminations have been made to minimize the double counting of internal activities. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Agency's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include charges paid by the recipients of goods or services offered by the programs. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements. The fund financial statements provide information about the Agency. Separate statements for each governmental fund are presented. The emphasis of fund financial statements is on major individual funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. 21 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Major Funds Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund -type total and five percent of the grand total. The Agency may also select other funds it believes should be presented as major funds. The Agency reported all of its governmental funds in the accompanying financial statements as major funds: The 1999 Agency Bonds Debt Service Fund is the debt service fund for the principal payments, interest payments, and related costs of the 1999 Project Tax Allocation Bonds. The 2002 Agency Bonds Debt Service Fund is the debt service fund for the principal payments, interest payments and related costs of the 2002 Tax Allocation Refunding Bonds.. The Capital Improvement Projects Capital Projects Fund is the capital projects fund for the new resources received from the 2002 Agency Bonds that can be used for Agency operations, capital projects or payments to the San Rafael High School district under an established tax sharing agreement. The Low and Moderate Income Housing Capital Projects Fund accounts for the 20% set-aside required by the State for low and moderate -income housing projects. The 1999 Bonds Capital Projects Fund is the capital projects fund of the Agency for the 1999 Project Tax Allocation Bonds. The 1985 Capital Projects and Administrative Capital Projects Fund is the general operating fund of the Agency. It is used to account for all financial resources except those required to be accounted for in the Low and Moderate Income Housing Fund and debt service funds. D. Basis ofAccoundng The government -wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The Agency considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures -in governmental funds. Proceeds of long-term debt and acquisitions under capital leases are reported as other financing sources. Non-exchange transactions, in which the Agency gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. 22 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (Continued) Other revenues susceptible to accrual include interest and charges for services. Under the terms of grant agreements, the Agency may fund certain programs with a combination of cost - reimbursement grants, categorical block grants, and unrestricted redevelopment revenues. Thus, both restricted and unrestricted net assets are available to finance program expenditures. The Agency's policy is to first apply restricted grant resources to such programs, followed by unrestricted redevelopment revenues if necessary. E. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed. Capital assets excluding infrastructure are capitalized if costs exceed $5,000. The threshold for infrastructure is $25,000. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year's pro rata share of the cost of capital assets. Depreciation of all capital assets is charged as an expense against operations each year and the total amount of depreciation taken over the years, called accumulated depreciation, is reported on the balance sheet as a reduction in the book value of capital assets. Depreciation is provided using the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The Agency has assigned the useful lives listed below to capital assets. Buildings and structures 50 years Machinery and equipment 5-20 years F. Net Assets Net Assets is the excess of all the Agency's assets over all its liabilities, regardless of fund. Net Assets are divided into three captions. These captions apply only to Net Assets, which is determined only at the Government -wide level, and are described below: Restricted describes the portion of Net Assets which is restricted to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the Agency cannot unilaterally alter. These principally include resources received for debt service requirements; redevelopment funds restricted to low and moderate income purposes. Unrestricted describes the portion of Net Assets which is not restricted as to use. 23 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Fund Balance Reserves Governmental fund balances represent the net current assets of each land. Net current assets generally represent a fund's cash and receivables, less its liabilities. Portions of a fund balance may be reserved or designated for future expenditure. Reserves are restrictions placed by outside entities, such as other governments, which restrict the expenditures of the reserved funds to the purpose intended by the entity which provided the funds. The Agency has reserved fund balances as follows: Reserve for Loans Receivable — To account for assets that have been set aside to represent loans receivable amounts that do not represent available current resources. Reserve for Improvement Projects — To account for capital projects made in the project area. Reserve for Housing — To account for projects for low and moderate income housing purposes. Reserve for Debt Service — To account for assets that have been set aside to represent funds legally restricted for the payment of principal and interest on long term debt. H. Budgets and Budgetary Accounting The Agency operates under the general laws of the State of California and follows the budgetary process of the City. Bi -annually, the Agency Board adopts two one-year budgets effective July 1 for each ensuing fiscal year. From the effective date of the budget, which is adopted and controlled at the fund level, the amounts stated therein as proposed expenditures, become appropriations. The Board may amend the budget by resolution during the two fiscal years. All unencumbered appropriations lapse at year-end. Bi -annual budgets are adopted for the debt service funds on a basis consistent with generally accepted accounting principles. The budgets are reviewed at mid -year each fiscal year to determine if any revisions are necessary. The Agency also adopts budgets bi-annually for capital outlay expenditures for its 1985 Capital Project and Administration Fund and three capital projects funds. Such budgets are based on a project time frame rather than a fiscal year "operating" time frame, reappropriating unused appropriations from year to year until project completion. Encumbrance accounting, under which purchase orders, contracts and other commitments for expenditures are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the budgetary process. 24 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Property Tax Increment The Agency's primary source of revenue, other than bond proceeds, is from property taxes. Property taxes allocated to the Agency are computed in the following manner: (1) the assessed valuation of all property within the project area is determined on the date of adoption of the Redevelopment Plan, and (2) property taxes related to the incremental increase in assessed values after the adoption of the Redevelopment Plan are allocated to the Agency; all taxes on the "frozen" assessed valuation of the property are allocated to the City and other districts. The Agency has no power to levy and collect taxes, and any legislative property tax de -emphasis might necessarily reduce the amount of tax increment revenues that would otherwise be available to pay the principal and interest on bonds or other debt of the Agency. 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 increment revenues that would be available to pay principal and interest on bonds or other debt of the Agency. All property taxes are levied and collected by the County Auditor of the County of Marin and paid to the various taxing entities including the Agency. Secured taxes are due on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured taxes are due on July 1 and become delinquent on August 31. The lien date for secured and unsecured property taxes is January 1 of the preceding fiscal year. J. Use of Estimates The preparation of financial statement in conformity with generally accepted accounting principles requires management to make estimates and assumption which affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 2 - CASH AND INVESTMENTS Agency cash not held by the Trustee is included in an Agency wide cash and investment pool. The Agency's cash is fully collateralized with securities held by an agent of the pledging financial institution in the Agency's name. The Agency's goal is to invest at the maximum yield, consistent with. safety and liquidity, while individual funds can process payments for expenditures at any time. The Agency's investments are carried at fair value, as required by generally accepted accounting principles. The Agency adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. A. Classification Cash and investments as of June 30, 2008 are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of Agency debt instruments or Agency agreements. Financial Statement Presentation: Statement of Net Assets: Cash and investments $4,235,907 Restricted cash and investments 1,596,105 Total cash and investments $5,832,012 25 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 2 - CASH AND INVESTMENTS (Continued) B. Investments Authorized by Debt Agreements The Agency must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the Agency fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with Agency ordinance, bond indentures or State statute. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements: 26 Maximum Maximum Minimum Credit Percentage of Authorized Investment Type Maturity Quality Portfolio U.S. Treasury Obligations N/A N/A No Limit U.S. Agency Securities 3 years N/A No Limit Category Banker's Acceptances 360 days Highest No Limit Rating Category Money Market Funds N/A Highest No Limit Rating Category Commercial Paper 270 days Highest No Limit Rating Guaranteed Investment Contracts N/A Category Highest No Limit (fully collateralized) (A) Rating Municipal Obligations N/A Two Highest No Limit Category Ratings (A) Guaranteed Investment Contracts must be fully collateralized with U.S. Treasury Obligations or U.S. Agency Obligations. 26 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 2 - CASH AND INVESTMENTS (Continued) G Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value 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. 12 Months Type of Investment or Less Money Market Mutual Funds $1,596,105 Local Agency Investment Fund 4,235,907 Total Cash and Investments $5,832,012 The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The Agency reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage- backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2008, these investments matured in an average of 212 days. Money Market Mutual Funds are available for withdrawal on demand and at June 30, 2008 matured in an average of 55 days. D. Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the bolder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. According to the Agency's investment policy, no more than $1,000,000 of the total portfolio may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentalities, and LAIF. If a security is downgraded by either Moody's or Standard and Poor's to a level below the minimum quality required by the Agency, it shall be the Agency's policy to sell that security as soon as practical. The actual rating as of June 30, 2008 for the mutual funds was AAAm, as provided by Standard and Poor's Investment Rating System. As an external investment pool, the Local Agency Investment Fund was not rated as of June 30, 2008. 27 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 3 — INTER -FUND TRANSACTIONS A. Inter fund Receivables and Payables Amounts due to or due from other funds reflect inter -fund balances for services rendered or short-term loans expected to be repaid in the next fiscal year. As of June 30, 2008, the 1999 Bonds Capital Project Fund owed the Low and Moderate Income Housing Capital Project Funds $2,169,717. B. Transfers Transfers between funds during the fiscal year ended June 30, 2008 were as follows: From Low and Moderate Income Housing Capital Projects Fund 2002 Agency Bonds Debt Service Fund To Fund Amount 2002 Agency Bonds Debt Service Fund 1985 Capital Projects and Administration Capital Projects Fund 1985 Capital Projects and Administration Capital Projects 1999 Bonds Capital Projects Fund (A) Transfer is for the housing portion of debt service. (B) Transfer is for administrative support. C. Transfer from the City $300,240 A 300,240 B 347,000 B $947,480 During fiscal year 2008 the Agency received transfers from the City in amount of $31,000 for administration support. NOTE 4 - LOANS RECEIVABLE A. Centertown Associates The City loaned Centertown Associates, Ltd, $303,000 at 3% interest due semiannually. The loan was made for the construction of 60 -units affordable Centertown apartments and is fully secured by a deed of trust. The final payment is due on July 31, 2065. As of June 30, 2008 the balance of the loan was $294,023. B. Marin Housing Authority On April 7, 2008 the Redevelopment Agency approved a loan in the amount of $333,000 to the Marin Housing Authority. This loan is funded by the Agency's Low and Moderate Income Housing Capital Projects Fund to assist the Authority in the acquisition of a housing unit so that the unit might remain in the City's Below Market Rate program. The Agency further approved a subsidy of up to $35,000 to reduce the sales price of the unit. As of June 30, 2008 the balance of the loan was $299,549. 28 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 5 — CAPITAL ASSETS Capital Assets at June 30 comprise: Governmental Activities Capital assets not being depreciated: Land Construction in progress Balance at Balance at June 30, 2007 Additions Retirements June 30, 2008 $39,000 $39,000 8,635,519 $2,712,134 ($9,921,361) 1,426,292 Total capital assets not being depreciate 8,674,519 2,712,134 (9,921,361) 1,465,292 Capital assets being depreciated: Buildings and structures 80,000 80,000 Machinery and equipment 14,809 14,809 Total capital assets being depreciates 94,809 94,809 Less accumulated depreciation for: Buildings and structures (55,200) (1,600) (56,800) Machinery and equipment (10,181) (1,029) (11,210) Total accumulated depreciation (65,381) (2,629) (68,010) Total net capital assets being depreci 29,428 (2,629) 26,799 Total governmental activity capital a $8,703,947 $2,709,505 ($9,921,361) $1,492,091 Depreciation expense.has been allocated to the Community development/redevelopment activity on the statement of activities. NOTE 6 - LONG-TERM DEBT A summary of governmental activities long-term debt changes for the fiscal year ended June 30, 2008, follow: Governmental Activities: 1999 Tax Allocation Bonds Current Interest Bonds 4.5%-5.0%, due 12/1/2022 Capital Appreciation Bonds 5.58%-5.6%, due 12/1/2022 2002 Tax Allocation Bonds 2.00%-5.25%, due 12/1/2021 Total Tax Allocation Bonds Authorized Balance Balance Current and Issued June 30, 2007 Additions Retirements June 30, 2008 Portion $21,115,000 $16,505,000 2,389,004 3,697,501 $209,660 $695,000 $15,810,000 3,907,161 $730,000 25,020,000 19,015,000 1,195,000 17 820,000 1,235,000 39,217,501 209,660 1,890,000 37,537,161 1,965,000 Note Payable, 8.000A, due 11/1/2024 169,000 169,000 169,000 Total Governmental Long-term Debt $39,386,501 $209,660 $1,890,000 $37,706,161 $1,965,000 F SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 6 - LONG-TERM DEBT (Continued) A. 7999 Tax Allocation Bonds - Current Interest Bonds and Capital Appreciation Bonds On June 16, 1999, the Agency issued Tax Allocation Bonds in the amount of $23,504,004. The bonds were issued as Current Interest Bonds in the aggregate principal amount of $21,115,000 and as Capital Appreciation Bonds in the original amount of $2,389,004. The proceeds of the bonds were used to finance certain redevelopment activities of benefit to the Agency's Central San Rafael Redevelopment Project Area. The Current Interest Bonds mature annually each December 1 from 2000 to 2022, in amounts ranging from $560,000 to $1,460,000 and bear interest at rates from 4.50% to 5.00%. Interest is payable semiannually on June 1 and December 1. The Current Interest Bonds maturing on or after December 1, 2008, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order of maturity or on a pro rate basis among maturities, on any date on or after December 1, 2007, at a price equal to the principal amount, plus accrued interest on the redemption date, plus a premium ranging from 0.00% to 2.00%. The Capital Appreciation Bonds mature annually after December 1 from 2018 to 2022, in amounts ranging from $1,440,000 to $2,070,000 and bear interest rates ranging from 5.58% to 5.60%. Interest on the Capital Appreciation Bonds will compound on each interest premium date and will be payable solely at maturity. The Bonds are secured, on parity with the 1992 and 1995 bonds, by a pledge and lien on tax revenues and amounts on deposit in certain funds and accounts held by the fiscal agent. The pledge of future tax increment revenues ends upon repayment of the $19.7 million in remaining debt service on the Redevelopment Agency's long term debt which is scheduled to occur in 2022. For fiscal year 2008 tax increment revenues amounted to $1.5 million and debt service amounted to $1.5 million. B. 2002 Tax Allocation Refunding Bonds On October 9, 2002, the Agency issued Tax Allocation Refunding Bonds in the amount of $25,020,000. The proceeds of the bonds were used to refund the 1992 Tax Allocation Refunding Bonds and the 1995 Tax Allocation Bonds. The Bonds mature annually each December 1 from 2002 to 2022, in amounts ranging from $540,000 to $1,920,000 and bear interest at rates ranging from 2.00% to 5.25%. Interest is payable semiannually on June 1 and December 1. The Bonds maturing on or after December 1, 2013, are subject to optional redemption prior to maturity, on any date on or after December 1, 2012, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from tax revenues to be derived from the redevelopment activities of the Agency related to the Central San Rafael Redevelopment Project Area. The pledge of future tax increment revenues ends upon repayment of the $17.8 million in remaining debt service on the Redevelopment Agency's longterm debt which is scheduled to occur in 2021. For fiscal year 2008 tax increment revenues amounted to $2.1 million and debt service also amounted to $2.1 million. G Note Payable At June 30, 2007, Notes Payable consisted of a $169,000 promissory note bearing interest at 8% with principal and accrued interest due and payable in November 2024. The note was assumed to finance the purchase of certain property by the Agency. The outstanding balance of the loan at June 30, 2008 was $169,000 plus accrued interest of $171,874 which is recorded as interest payable. till SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 6 - LONGTERM DEBT (Continued) D. Future Debt Service As of June 30, 2008, future debt service is as follows: For the Year Governmental Activities Ended June 30 Principal Interest 2009 $1,965,000 $1,603,776 2010 2,055,000 1,511,456 2011 2,150,000 1,414,287 2012 2,265,000 1,305,912 2013 2,380,000 1,186,144 2014-2018 13,879,946 3,958,130 2019-2023 16,765,054 1,063,464 2024-2025 169,000 1,025,000 Totals $41,629,000 $12,043,169_ Reconciliation of long-term debt: Less unaccreted disccur (3,922,839) Net long-term debt $37,706,161 NOTE 7 — NON -AGENCY OBLIGATIONS The following bond issues are not reported in the Agency's financial statements because these are special obligations payable solely from and secured by specific revenue sources described in the resolutions and official statements of the respective issues. Neither the faith and credit nor the taking power of the City, the Redevelopment Agency, the State of California or any political subdivision thereof, is pledged for payment of these bonds. 31 Original Outstanding Amount June 30,2008 San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds $3,590,529 $1,367,780 San Rafael Redevelopment Agency Variable Rate Demand Multifamily Housing Revenue Bonds 3,000,000 2,700,000 San Rafael Redevelopment Agency - Multifamily Housing Revenue Bonds-: 3,220,000 2,920,000 Multifamily Housing Revenue Bonds-: 1,025,000 985,000 Multifamily Housing Revenue Bonds-' 1,855,000 1,815,000 Multifamily Housing Revenue Bonds-' 6,000,000 5,745,338 31 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 8 — PASS-THROUGH PAYMENTS AND TAX INCREMENT SHIFT TO EDUCATIONAL REVENUE AUGMENTATION FUND (ERAF) In 1973, at the time of adoption of the Redevelopment Plan for the Redevelopment Project, the Agency entered into agreements with the County of Marin and with other taxing entities providing for limits on the amount of tax increment the Agency could receive pursuant to the Redevelopment Plan. These agreements were replaced by a Fiscal Agreement, dated September 11, 1984, by and between the Agency and the following taxing entities: County of Marin, City of San Rafael, San Rafael Elementary and High School Districts, and Marin Community College District. The Agreement has been amended from time to time concurrently with the issuance of bonds by the Agency. The Fiscal Agreement, as amended, contains limitations on the amount of tax increment revenues allocable annually to the Agency. This limits the amount of tax increment the Agency receives to the amount necessary to pay the debt service on the Agency's tax allocation bonds plus any amount necessary to make payments to the County of Marin pursuant to an agreement between the Agency and the County of Marin entitled Section 33401 Agreement (County) dated September 11, 1984, providing for the annual payment to the County of tax increment in an amount equal to the County's share of taxes that are attributable to the Agency's use of tax increment to pay debt service on the Bonds. In addition, the Agency also receives any amount it is required to set aside into the Housing Fund pursuant to Sections 33334.2, 33334.3, and 33334.6 of the Redevelopment Law to meet the Agency's low and moderate income housing obligation. On October 1, 2002 , the Agency entered into a second amendment to the Section 33401 Tax Sharing Agreement with the San Rafael High School District. This agreement provides for additional payments in the amount of $179,000 each fiscal year beginning with fiscal year 2002-03 through fiscal year 2021-22. NOTE 9 - COMMITMENTS AND CONTINGENCIES The Agency is presently involved in certain matters of litigation that have arisen in the normal course of conducting Agency business. Agency management believes, based upon consultation with the Agency Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the Agency. Additionally, Agency management believes that the Agency's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. 32 SAN RAFAEL REDEVELOPMENT AGENCY 1999 AGENCY BONDS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED .TUNE 30, 2008 REVENUES: Taxes and special assessments Total Revenues EXPENDITURES: Debt service: Principal Interest and fiscal obarges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES Net Change in Fond Balances FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR Variance with Final Budget Actual Positive Budget Amounts (Negative) $1,497,470 $1,497,469 ($1) 1,497,470 1,497,469 (1) 695,000 802,470 695,000 802,469 I 1,497,470 1,497,469 1 33 SAN RAFAEL REDEVELOPMENT AGENCY 2002 AGENCY BONDS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE ._. - _...... BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Taxes and special assessments Use ofmoney and property Total Revenues EXPENDITURES: Debt service: Principal Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers (out) Total other financing sources (uses) Net Change in Fund Balances FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR 34 Variance with Final Budget Actual Positive Budget Amounts (Negative) $2,071,380 $2,071,381 - $1 1,314 1,314 2,071,380 2,072,695 1,315 1,195,000 1,195,000 876,380 876,381 (1) 2,071,380 2,071,381 (I) 1,314 1,314 300,240 300,240 (300,240) (300,240) 1,314 $1,314 34,116 $35,430 SAN RAFAEL REDEVELOPMENT AGENCY CAPITAL RAPROVEMENT PROJECTS CAPITAL PROTECTS FUND SCHEDULE OF REVENUES, EXPENDFFURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Use of money andproperty Total Revenues EXPENDITURES: Capital impmvemenUspecial projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES Net Change in Fund Balances . FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR 35 Variance with Final Budget Actual Positive Budget Amounts (Negative) $80,000 $75,851 ($4,149) 80,000 75,851 (4,149) 179,000 179,000 179,000 179,000 (99,000) (103,149) (4,149) ($99,000) (103,149) ($4,149) 2,000,995 $1,897,846 SAN RAFAEL REDEVELOPMENT AGENCY LOW AND MODERATE INCOME HOUSING CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL .. _.. _. _. ...__ _...._. _. FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Taxes and special assessments Use ofmoney and property Other revenue Total Revenues EXPENDITURES: Current: Community development/redevelopment Capital improvement1special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES IHER FINANCING SOURCES (USES): Transfers (out) Told other th ancing sources (uses) Net Change in Fond Balances FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR Variancewith Final Budget Actual Positive Budget Amounts (Negative) $900,000 $964,526 $64,526 150,000 60,628 (89,372) 11,522 11,522 1,050,000 1,036,676 (13,324) 911,160 822,400 88,760 60 (60) 911,160 822,460 88,700 138,840 214,216 75,376 (300,240) (300,240) (300,240) (300,240) ($161,400) (86,024) $75,376 36 3,057,087 $2,971,063 SAN RAFAEL REDEVELOPMENT AGENCY 1999 BONDS CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Use of money and property Intergovernmental Other revenue Total Revenues EXPENDITURES: Capital outlay Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Tmusfers in Transfers in from City Total other financing sources (uses) FUND BALANCE, BEGINNING OF THE YEAR FUND BALANCE, END OF THE YEAR 37 Variance with Final Budget Actual Positive Budget Amounts (Negative) $92,666 $92,666 $900,000 377,365 (522,635) 29,000 29,000 378,000 378,000 900,000 499,031 (400,969) 900,000 2,818,072 (1,918,072) 162,486 (162,486) 900,000 2,980,558 (2,080,558) (2,481,527) (2,481,527) 347,000 347,000 31,000 31,000 378,000 378,000 (2,103,527) ($2,481,527) 1,059,338 ($1,044,189) SAN RAFAEL REDEVELOPMENT AGENCY 1985 CAPITAL PROJECTS AND ADMINISTRATION CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL -. FOR THE YEAR ENDED JUNE 30, 2008 REVENUES: Use of money and property Charges for services Total Revenues EXPENDITURES: Current: General government Public works and parks Community development/redevelopment Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers (out) Total other financing sources (uses) Net Change in Fund Balances NET ASSETS, BEGINNING OF YEAR Variance with Final Budget Actual Positive Budget Amounts (Negad-) $33,240 $89,812 $56,572 13,570 22,356 8,786 46,810 112,168 65,358 28,590 31,317 (2,727) 154,740 137,530 17,210 653,300 559,861 93,439 78,950 60,048 18,902 915,580 788,756 126,824 (868,770) (676,588) 192,182 300,240 300,240 (347,000) (347,000) 300,240 (46,760) (347,000) ($568,530) (723,348) ($154,818) 2,824,765 FUND BALANCE, END OF THE YEAR $2,101,417 38 MAZE & ASSOCIATES ACCOUNTANCY CORPORATION 3478 Buskirk Ave. -Suite 215 Pleasant Hill, California 94523 (925) 930-0902 • FAX (925) 930-0135 maze@mazeassociates.com www.mazeassociates.com REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAMTING STANDARDS Members of the Redevelopment Agency of the City of San Rafael, California We have audited the financial statements of the San Rafael Redevelopment Agency as of and for the year ended June 30, 2008, and have issued our report thereon dated October 22, 2008. We have conducted our audit in accordance with generally accepted auditing standards in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audit, we considered the Agency's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the 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 control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Agency's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Agency's financial statements that is more than inconsequential will not be prevented or detected by the Agency's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Agency's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the second paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. As part of our audits, we prepared and issued our separate Memorandum on Internal Control dated October 22, 2008. A Professiona3 Corporation Compliance and Other Matters As part of obtaining reasonable assurance about whether the Agency's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Our audit included tests of compliance with provisions of the Guidelines for Compliance Audits of California Redevelopment Agencies. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. This report is intended for the information of the Board, management and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than the above parties. October 22, 2008" JJ STATUS OF PRIOR YEAR FINDING Prepared by Management Finding 07-01: Blight Progress, Loan, and Property Reports Health and Safety Code Section 33080.1 requires Agencies to submit their Blight Progress, Loan, and Property reports to the State Controller's Office within six months of the fiscal year end. However, the Agency did not submit these reports to the State Controller's Office for fiscal 2006. The Agency should ensure that it submits all reports required by the Health and Safety Code. Current Year Status: The Blight Progress, Loan and Property reports for fiscal year 2007 were submitted to the State Controller's office on December 17, 2007, within six months of the fiscal year end. 41