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Home My WebLink AboutED RDA Annual Report, Blight Progress, etcCITY OF SAN RAFAEL 11 AGENDA ITEM NO.: MEETING DATE: December 19, 2011 San Rafael Redevelopment Agency Agenda Report Department: Redevelopment Prepared by,: Initials: Stephanie Lovette. A ting Economic Development Director Nancy Mackie, Executive Director SUBJECT: Approval of Redevelopment Agency Annual Report, including Blight Progress, Agency owned property, loan compliance, AB 987 and Affordable Housing reports. RECOMMENDATION: Approve Annual Report for the Redevelopment Agency and forward to the City Council for review and approval and make findings regarding administrative expenses paid from the affordable housing fund. BACKGROUND: The Annual Report provides data for each California redevelopment agency to the State Legislature and other interested parties. The State Controller Report shows the financial transactions and the Department of Housing and Community Development shows the affordable housing activities and expenditures. The legislative body (City Council) must approve the Annual Report per Community Redevelopment Law ("CRL"). Therefore, staff recommends the Agency approve the Report and forward it to the City Council. Staff has also prepared a housing report to provide additional information on the Agency's housing activities. The Agency spends approximately 27% percent of annual housing expenditures, excluding bond debt service, on planning and administrative charges. CRL Section 33334.3 W requires that the Agency make an annual determination that these charges are necessary for the production, improvement or preservation of affordable housing. In 2011, Agency staff provided support on the Housing Element update and provided technical assistance to the housing development community, in addition to administering the rental and ownership below market rate housing program. The Agency has entered into several loan agreements for affordable housing. The Report and Audit show that all these loans are current and have complied with the Agency's requirements contained in the document. AB 987, effective January 2008, requires the Agency to compile, maintain and make available to the public via the internet a list of new and substantially rehabilitated income restricted units that received Agency assistance. This report is on the City's website in the affordable housing resource area. FISCAL IMPACT: None. FOR AGENCY SECRETARY ONLY File No.: � jeA X, - k gency Meeting: Disposition: Cf L °'z,1,V ACTION REQUIRED: Approve the Annual Report in substantially final form with changes approved by the Finance Director, make the HSC 33334.3 (d) determination and forward to the City Council. EXHIBIT A: State Controllers Annual Report and Pass through Payments Report EXHIBIT B: Housing and Community Development Annual Report EXHIBIT C: Fiscal Report EXHIBIT D: Agency Audit EXHIBIT E: Statement of Indebtedness EXHIBIT F: Blight Progress, Agency loan and Agency owned property report EXHIBIT G: Affordable Housing Report EXHIBIT H: AB 987 Report EXHIBIT A c 0 E c tn u . ) U') (D 0 I? 0 U? C?CD 0 U') 00 CID to Lo CD to 0 m 0. !:3� (D te ca co C 0 0 < (1) 0 < (n M C) G) cc ca F-1 F] C') CY) CL 0 4D N (1) N 1 cm2 ! c) 10 V) ' Co Cc t-- i CO EL <1 to 0) Cc , 44 L LL Z cl, -7k- AW 0 CL r_ 0 CL a) LO tl?(D Zi (D o- < = v co d C? LO Qv &I E 0 a) i5 ! I I � -t *4 _j W a. 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Property Acquisition (1)Land Assets ofInc 8bnQ: (2)Housing Assets nfInc Sbn0: (3)Acquisition Expense: (4) Operation of Acquired Property: (5) Relocation Costs: (6) RelocationPayments: CDSite Clearance Costs: (8) Disposal Costs: (9) Other: Specify other: (10) Property Acquisition Subtotal: $0 b. Subsidies from the LMIHF (1)1stTime Homebuyer Down Payment Assistance: (3)Rental Subsidies: (3) Purchase ofAffordability Cov. (33413(b)2(B): California Department ofHousing and Community Development ' Redevelopment Agency Reporting System Agency -wide Expenditures SchC You are Here: Select Year > Schedule Menu "AaenuvWide Financials ^ Agency Wide Expenditure << Previous Agenoy:SANRAFAEL Fiscal Year :2O1U/ZO11 Prepared by: StephenieLovette p:oa Expenditure successfully saved * Admin The line items below over specific line items from the State Controller's Annual Report of Financial Transactions of Community Redevelopment Agencies to facilitate preparation of the report. Select Year Dollar amounts for most ibanns below from what reported on the State Controller's Annual Report of Financial Transactions of Community Redevelopment Agencies, Consolidated • FAQ Income Statement, except for reclassifying ofTransfers'[)ut to Internal Funds and the w User info reporting ofOther Uses aadiscussed below. ° Status 4. Expenditures and Other Uses w p,mt • Logout a. Property Acquisition (1)Land Assets ofInc 8bnQ: (2)Housing Assets nfInc Sbn0: (3)Acquisition Expense: (4) Operation of Acquired Property: (5) Relocation Costs: (6) RelocationPayments: CDSite Clearance Costs: (8) Disposal Costs: (9) Other: Specify other: (10) Property Acquisition Subtotal: $0 b. Subsidies from the LMIHF (1)1stTime Homebuyer Down Payment Assistance: (3)Rental Subsidies: (3) Purchase ofAffordability Cov. (33413(b)2(B): RDA Reporting System - Agency -wide Expenditures Specify other: Bitter 40,000, BMR ownership I57,159 rental 26,277, 33 north 25,612 elks 17,212 CE 120'587 Sae 66,636 HE 18,318 (5)Subsidies from the LM|HFSubtotal: (1) Debt Principal Payments: (u) Tax Allocation, Bonds & Nnbao: (b)Revenue Bonds & Certificates ofParticipation: (o)City/County Advances &Loans: (d)U.S.State & Other Long 'TenmDebt: (2)Interest Expense: (3) Debt Issuance Costs: (4) Other, ' Specify other: Ceotertown lease to bridge (5) Debt Service Subtotal: d. Planning and Administration Costs (33334.3(e)(1)) (1)Administration Costs: (2)Professional Services (not project baned): (3)Planning, Survey/Design (not project boaud): (4) Indirect Nonprofit Costs (33334.3(e)U>(B)\: (5) Other: Specify other: kBPlanning and Administration Costs Subtotal o.Dn/[>ff-SiteImprovements (33334.2(*)(2)): f. Housing Construction (33334.2(e)(5)): in $91,231 $383.161 $242,358 Page 2 of 3 l?JI 0/70ll RDA Reporting System - Agency -wide Expenditures Page 3 of 3 g. Housing Rehabilitation (33334.2(e)(7)): $106,373 h. Maintenance of Mobilehome Parks (33334.2(e)(10)): i. Preservation of At -Risk Units (33334.2(e)(11)): j. Transfers Out of Agency (1) For Use Outside Community: (2) For Transit Village Development Plan (33334.19): (3) Excess Surplus (33334.12(a)(1)(A)): (4) Other: Specify other: (5) Transfers Out of Agency Subtotal: $0 k. SERAF loan [See 33690) I. Other Specify other: Total Expenditure: $1,206,192 Save Redevelopment Agency Reporting Systern - Agency Wide Expenditures California Department of Housing and Community Development bn A — ,fDr) A /f,n;n I A n+;;+xrQT1e+ — 1 7l1 A /1) () 1 1 co LO (D SZ C3 0 (5 co aCi (D (AD co to U ,ems In (ts 0 (4) Co X 0to 00 1 0) 'R ! C14 E C/) 41 Hca 4) LL ;ani[ pow a) 'ra m L u co 4- 0 :z 0 W) co co 04ate. w 10 00 (D C4 N 6", V-'` t1 Q C% to 0 cc te. In U M .0 Cl) O Cl) N 'Tt W %k ca 04 04 California Redevelopment Agencies - Fiscal Year 201012011 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program Detail SAN RAFAEL Beginning Balance Adjustment to Beginning Balance Adjusted Beginning Balance Total Tax Increment From PAW $936,383 Total Receipts from PA (s) Other Revenues not reported on Schedule A Sum of Beginning Balance and Revenues Expenditure Item Debt Service Debt Principal Payments Other Housing Rehabilitation Subitem TaxAllocation, Bonds & Notes Subtotal of Debt Service Subtotal of Housing Rehabilitation Planning and Administration Costs Administration Costs Professional Services Subtotal of Planning and Administration Costs Subsidies from the LM1HF Other Subtotal of Subsidies from the LMJHF Page 1 of 3 12110111 $2,834,423 $0 $2,834,423 $1,057,453 $0 $3,891,876 Amount Remark $291,930 $91,231 $383,161 $106,373 $106,373 $242,358 $2,500 $244,858 Centertown lease to bridge $471,800 Ritter 40,000, BMR ownership 157,159 rental 26,277, 33 north 25,612 elks 17,212 CE 120,587 SAP 66,636 HE 18,318 $471,800 California Redevelopment Agencies - Fiscal Year 201012011 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program Detail SAN RAFAEL Expenditure Item Subitem Amount Remark Total Expenditures $1,206,192 Net Resources Available $2,685,684 indebtedness For Setasides Deferred $0 Other Housing Fund Assets Category Amount Remark SERAF Total Receivable $0 Total Other Housing Fund Assets $0 Total Fund Equity $2,685,684 200612007 $974408 200712008 $964526 sum of 4 Previous Years' Tax Prior Year Ending Excess Surplus for 200812009 $973704 Increment for 201012011 Unencumbered Balance 201012011 200912010 $953833 $3866471 $2,613,894 $0 Sum of Current and 3 Previous Years' Tax Increments $3,828,446 Adjusted Balance $1,565,684 Excess Surplus for next year $0 Not Resources Available $2,685,684 Unencumbered Designated $0 Unencumbered Undesignated $1,565,684 Total Encumbrances $1,120,000 Unencumbered Balance $1,565,684 Unencumbered Balance Adjusted for Debt Proceeds $0 Unencumbered Balance Adjusted for Land Sales $0 Excess Surplus Expenditure Plan No Excess Surplus Plan Adoption Date Page 2 of 3 12110111 California Redevelopment Agencies - Fiscal Year 2010/2011 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program Detail SAN RAFAEL Site Improvement Activities Benefiting Households Income Level Low Very Low Construction 0 0 Rehabilitation 0 0 Health and Safety Hazard 0 0 Land Held for Future Development Site Name Num Of Zoning Purchase Estimated Acres Date Start Date Use of the Housing Fund to Assist Mortgagors Income Adjustment Factors Home $ Non Housing Redevelopment Funds Usage Resource Needs LM1HF DepositslWithdrawls Document Document Name Date Agency audit 30 -JUN -11 Achievements Description Moderate Total 0 0 0 0 0 0 Requirements Completed Hope Custodian Custodian Name Phone City Clerk (415) 485-3306 Page 3 of 3 12110111 Remark COPY Source City Clerk sr Ln O tn tq 0 Co 0 to to 0) co to 0) 0 C NC -4 CL CO M 010 co to 0) VL tp to U. th x 0 C,A 4.4 (D t4 cm o o r tA < CU V, o U-1 tq < U. of < M m '13� < Z V)co 0 — < 'S co C% U(o V� to OE CL tis .2 1, tj iSf 0 C' V, 4) Q m tq CL.Q C> th, 0 to O LLS th 0 —M G. -A < C z o <Im California Redevelopment Agencies- Fiscal Year 201012011 Project Area Contributions to Low and Moderate Income Housing Fund SchA Project Area Financial Information Agency SAN RAFAEL Address 1313 Fifth Avenue PO BOX 151560 San Rafael CA 94915-1560 Project Area CENTRAL PROJECT Type: Inside Project Area Status: Active Plan Adoption: 1972 Plan Expiration Year. 2025 Amount Gross Tax Calculated Amount Amount Suspended Total % Cumulative Increment Deposit Allocated Exempted andlor Deferred Deposited Def. $4,500,046 $900,009 $936,383 $0 $0 $936,383 20.81% $0 Repayment $0 Category Interest Income $12,050 OtherRevenuel $109,020 Total Additional Revenue $121,070 Total Housing Fund Deposits for Project Area $1,057,453 Agency Totals For All Project Areas: Amount Gross Tax Calculated Amount Amount Suspended Total % Cumulative Increment Deposit Allocated Exempted andlor Deferred Deposited Def. $4,500,046 $900,009.2 $936,383 $0 $0 $936,383 21% $0 Total Additional Revenue from Project Areas: $121,070 Total Deferral Repayments: $0 Total Deposit to Housing Fund from Project Areas: $1,057,453 Page 1 of 1 12110111 RDA Reporting System - Sales of Owner Occupied Units Page 1 of 1 California Department of Housing and Community Development Redevelopment pent A ency Reporting System € `K Sales of Owner -Occupied Units Prior to the Expiration of + . Land Use Controls Sch A, pti; Sch B, p2 You are Here: Select Year > Schedule Menu > Protect Area Selector > Project Area Activitv Menu > Sales of Owner Occupied Units << Previous Page • Admin Agency:SAN RAFAEL Fiscal Year :2010/2011 Prepared by: Stephanie Lovette • Select Year • FAQ For Project Area:OUTSIDE PROJECT AREA • User Info • Status 9. Sales of Owner Occupied Units Outside the Project Area Prior to the Expiration of Land Use • Print Controls • Logout Section 33413(c)(2)(A) specifies that pursuant to an adopted program, which includes but is not limited to an equity sharing program, agencies may permit the sales of owner -occupied units prior to the expiration of the period of the land use controls established by the agency. Agencies must deposit sale proceeds into the Low and Moderate Income Housing Fund and within three (3) years from the date of unit sales, expend funds to make affordable an equal number of units at the same income level as the units sold. a. Report any sales of owner -occupied units during the reporting year. Proceed VL L M 11 Total Number of units sold in 2010/2011 I, $o (I I� 110 b. Report expended funds in the reporting year to make affordable an equal number of units sold over the last three years. Expended $ VIL L M O Total Equivalent to offset unit 2010/2011 sales I $0 �I �) I) II 0 Equivalent to offset unit 2009/2010 sales II $15,000 Equivalent to offset unit 2008/2009 sales I $o Equivalent to offset unit 2007/2008 sales �I $o II 110 Save Redevellop,slent. Agency Repo ting Systetn - Salva of Owner -Occupied Units Prior to the Expiration of Land Use Controls Ca lornia D3'p :rtr:cn! of Hous}ng and Cor"Imunity Dc;ve ooment https://ssw l .hcd.ca.gov/RDA/addEditSalesOwnerOccupied.i sp 12/10/2011 EXHIBIT C FISCAL REPORT FISCAL YEAR ENDING JUNE 30, 2011 SAN RAFAEL REDEVELOPMENT AGENCY CENTRAL SAN RAFAEL PROJECT AREA Annual Report Health and Safety Code Section 33080.1 requires all California Redevelopment Agencies to present an annual report to the legislative body and the State Controller's office within six months of the fiscal year end. The San Rafael Redevelopment Agency ("SRRDA") prepares the annual report and presents the report to the San Rafael City Council, their legislative body. The annual report must contain all of the following items: • Financial Transactions Report Filed with the State Controller ("FTR") (EXHIBIT A) • Description of housing activities and any housing displacement Housing and Community Development Report (HSC 33080.4 & 33080.7) (EXHIBIT B) • Independent audit report (EXHIBIT D) • Copy of the Agency's Statement of Indebtedness ("SOI") (EXHIBIT E) • Fiscal Statement (HSC 33080.5) (EXHIBIT C) • Blight progress report (HSC 33080.1 (d)) (EXHIBIT F) • List of Agency loans and status (HSC 33080.1 (e)) (EXHIBIT F) • Description of Agency owned property (EXHIBIT F) Fiscal Statement The HSC lists specific items to be included in the Annual Report. The majority of these items are included in the State Controllers Report, the Housing and Community Development Report and the Agency's audit. The HSC does not provide any information regarding the contents of the Fiscal Statement. The State Controller provided a "sample fiscal statement" to redevelopment agencies in November 2011. The SRRDA Fiscal Statement follows the format provided by the State Controller. San Rafael Redevelopment A2encv Plan adoption Plan Effectiveness Last date to receive Tax Increment Last Date for Property Acquisition (through Eminent Domain) Participation in Voluntary Alternative Redevelopment Program (AB xl 27) November 20, 1972 November 20, 2015 November 20, 2025 November 20, 2012 September 6, 2011 Ord. 1899 Fiscal Aizreement and ALencv Financing The Agency entered into a Fiscal Agreement with the County and K-14 Schools in 1984. This Fiscal Agreement limits the Agency's receipt of tax increment, allowing the County and Schools to annually receive additional property tax revenue generated by Agency activities in the Project Area. This is an unusual arrangement. Most redevelopment agencies receive tax increment from the Project Area which is reinvested in other projects to benefit the Project Area. The taxing entities share in the increased property taxes upon expiration of the Agency. The Fiscal Agreement has been very beneficial to the County and Schools but has severely constrained the activities of the SRRDA. The Fiscal Agreement provides that the County of Marin will receive 100% of the County share of all tax increment generated annually within the Project Area. The Agency is allowed to receive tax increment sufficient to pay debt service on tax increment bonds. The Agency must have the consent of the taxing entities before issuing any new bonds. The Agency last issued new bonds in 1999. The Agency also issued refunding bonds in 2002 and 2009 to take advantage of lower interest rates. The taxing entities allowed the SRRDA to refund the bonds and continue to receive tax increment in an amount equal to the original bond debt service. These two refunding bonds provided the SRRDA a small amount of capital and operational funding. Due to the restrictions imposed by the Fiscal Agreement, the Agency anticipates to run out of operational funds at the end of Fiscal Year 2012-13. The Agency also receives affordable housing funds in an amount equal to 20% of the funding allocated to the SRRDA for bond debt service. These affordable housing funds will continue until the Agency bonds are paid off in 2025). Therefore, the majority of Agency staff time in 2012 and beyond will be spent on activities related to affordable housing. San Rafael Redevelopment A4encv Fiscal Statement This Fiscal Statement incorporates the following documents: Financial Transactions Report (Attachment I) Statement of Indebtedness (Attachment III) Amount of Outstanding Indebtedness (Statement of Indebtedness FY 2010-I1) Amount of Tax Increment Allocated to the SRRDA (limited by the Fiscal Agreement) From FTR Total Debt as June 30, 1993 from FY 1992-93 SOI (HSC 33682) Total Payments on Existing Debt (FY ending June 30, 2011) from SOI Amount of tax increment paid to or spent on behalf of a taxing entity, other than K- 14 schools From FTR Capital Improvement Detail & Pass Through/School District Assistance Amount allocated to K-14 Schools $ 45,654,429 $ 4,500,046 $ 20,815,000 $ 4,330,253 $ 1,708,201 To Marin County. The Agency did not pay for any capital improvements. $179,000 From FTR Capital Improvement Detail & To SRHSD. The Agency did not pay for Pass Through/School District Assistance & any capital, improvements. This amount payments under HSC 33607 & 33681 does not take into account the tax Amount required for AB xl 27 payment in 2010-I1. To be paid from affordable housing funds. increment that is allocated to the K-14 Schools pursuant to the Fiscal Agreement $ 299,490 EXHIBIT SAN RAF AEL REDEVELOPMENT AGENCY BASIC COMPONENT LT-NLH FINANCIAL STATEMENTS FOR THE YEAR ENDED 3 LTNE 30, 2011 This Page Left tntentiom!N Blank CITY OF S-,tN RAFAEL REDEVELOPMENT AGENCY BASIC co.mpoNENT uNrF FINANCIAL STATEMENTS FOR THE YEAR ENDEDTUNE 30, 2011 Table of Contents Pate Independent Auditor's Report.... ......... .... ... --- ... --- ........ --- ------- ------ ... ---- ....... ....... -- ..... I Ntanagement's Discussion and Analysis ..,. ............ — .... --- ... ---............................,.....................3 Basic Component Unit Financial Statements: A(yenc\-v,,ide Financial Statements: Statement of Net Assets.......-� ........ .......... ......... --- 10 Statement of Activities.. ............ ..... - .......... ...... Al Fund Financial Statements. T)vlaJor Governmental Funds-, Balance 1-`,heet .... ........ ------- - -- ...... ...... ----_-....,................,...1.1 Reconciliation of Govemmcntal Funds -Fund Balances with the Net Assets of Governmental Activities...- .......... — ....... ... — ........ — ...... .. ........ ........ 17 Statement of Revenues. Fxpcnditures, and Chanoes in Fund Balances........................18 Reconciliation of the Net Change in Fund Balances - Total Governmental Funds with the Statement of Activities......................................?0 Notes to Component Unit Financial Statements. ............ ......... ...... --2 1 Supplemental Information: Schedule of Revenues, Expenditures and Changes in Fund Balance -- Budget and Actual — Budgetary Basis: Debt Service Funds: 2002 At�encx Bonds ... ',7 2009 Aaere-, Bon& . ....................... .. ..... Capital Project Funds: Capital Improvement Pro' s lect--- ... ...... .39 Lo.\A and Nloderate Income I lousina — -- � ----- -- ...... — .... ... -- --------- — ............ 10 SAN RAFAEL REDEVELOPMENT AGENCY BASIC COMPONENJ UNIT FINANCIAL STATEMENTS FOR THE YEAR ENDED JUTNE 30, 2011 Table of Contents (Continued) Pne- Supplemental Information (Continued): 1999 Bonds ... ---- ...... ............. - .............. — ......... ... .41 198-5 Capital Projects and Administration ... ................ ......... ..... —42 2009 Capital Projects ... — ............................... ...... —.— .......... — ...... ... ... A3 Excess Surplus Calculation. ........ ...... __ ... ... ...... - ............... ............ -- ...... 44 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed In Accordance with Government Auditing Mandards ... — .. .. ..... -- ...... ----45 Independent Auditor's Report On Compliance And On Internal Control Over Compliance In Accordance With The California Health And Safety Code As Required By Section 33080.1 ....... ............... -- ... ...... ....... ...... --47 Current Status of Prior Year Findings. ......... -- .............. ... . 49 INDEPENDENT AUDITOR'S REPORT Members of the Board of the San Rafael Redevelopment Agency San Rafael. California We have audited the accompanying basic component Unit financial statements of the governmental activities and each major fund of the San Rafael Redevelopment Agency (Agency), a component unit of the City of San Rafael, California, as of and for the year ended June 30, 2011, as listed in the Table of Contents. These basic component unit financial statements are the responsibility of the Agency's management. Our responsibility is to express an opinion on thcse 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 Governinent Auditing kandards 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 basic 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 basic 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. 2011, and the changes in financial position for the year then ended. in conformity with generally accepted accounting principles in the United States of America, As disclosed in -Note 11, the State of California adopted ABxl .16 on June 28. 2011, which suspends all new redevelopment activities except for limited specified activities as of that date and dissolves redevelopment agencies'17 which allows effective October 1. 2011 The State simultaneously adopted ABxl � redevelopment agencies to avoid dissolution by opting into an "alternative voluntary redevelopment program" requiring specified substantial aimual contributions to local school-, and special districts. These conditions raise substantial doubt about the Agency's ability to continue as a going concern. However, on August 11, 20t 1. the California Supreme Court issued a partial stay of ABNI 26 and a full stay of ABxI 27. but the partial stay did not include the section of ABx 1 26 that suspends all new redevelopment activities, Asa result. the accompaming financial statements have been prepared assuming that the A,,Y-ncN will continue as a !aoin2 concern. The financial statements do not include- ani, adJustments, that might result from the outcome of this uncertainty. As of July I '. 2010, the Agency adopted the provision of Governmental Accounting Standards Board Statement Number 54 (GASB 54). Fund Balance Reporting and Governmental Fund Type Definitions. As discussed in Note IG to the financial statements, the provisions of this statement affect the classification of fund balances reported in the financial statements. In accordance with Government auditing Standards, we have also issued our report dated November 23, 2011, 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 supplementar-, information. HoNNever, vve did not audit the infon-nation and we express no opinion on it. Our audit was made for the purpose of forming an opinion on the basic component unit financial statements taken as a whole. The supplemental information listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic component unit financial -statements of the San Rafael Redevelopment Agency. Such information has been subjected to the auditing procedures applied in our audit of the basic component unit financial statements, and in our opinion is fairly stated in all material respects in relation to the basic component unit financial statements taken as a whole. f[I��'Joi��,A.E.� AA/ November 23, 2011 REDEVELOPMENT AGENCY OF THE CITY OF SAN RAFAEL MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2011 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, 2011. This document has been prepared as required by the Statement No. 34, of Governmental Accounting Standards Board (GASB 34). 1. 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 2010-2011 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. 0 'Me following are the amounts received from tax increments in fiscal year 21010-2011 with comparative totals for the previous four fiscal years: Fiscal Year Receipt 2006-07 2007-08 2008-09 2010-11 Total for the Year 1,340,6"52 S 4,533,376 $ 4,5-19,772 4,428,261 $ 4,500,046 The liabilities of the Agencv exceeded its assets at the close of the fiscal year by S27.5NI (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 $6.17-%1, AN I -Lich is a decrease of $0.63'NI in comparison with the prior year. Approximately '16J -7N / i I of this amount is available for spending at the Agency's discretion for the purposes of redevelopment (reserved fund balance). Of this amount, S4.4-l),I has been restricted and SI.42M has been committed for capital projects. 11. Over -view of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Agency's basic financial statements. The Redevelopment Agenc\ basic financial statements comprise of three components: 1) ,covefinancial nancial 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. I Gm,urnment-vvide Financial Statements: The Government -Mole Financial Statements are designed to Provide readers vvith a broad overviecv of the Agency's finances, in a mamier 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 tin -Ling of related cash flows. Thus, revei�--ies 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. In February 2009, the Government Accounting Standards Board (GASB) issued Statement No. 54, "Fund Balance Reporting and Goverrunental Fund Type Definitions" that is applicable to the financial statements issued by governmental entities for the reporting period ended June 30, 2011. The objective of GASB statement No. 54 is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. Before G, -,\SB 54, fund balances for the governmental funds were classified in three categories: reserved, unreserved designated and unreserved undesignated. Under GASB 54, fund balances are classified in five categories: nonspenclable, restricted, committed, assigned, and unassigned based on hierarchy of constraint. Further details on fund balance classifications can be found in Note 1G. 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 0 account for the 20"'r 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. . I - Notes to the Basic Financial Statements: The notes provide additional information that is essential to a fuH understanding, of the data provided in the Government -Wide and Fund Financial Statements. Other h-iformation: In addition to the basic financial statements and accompanying notes, this report 0 also presents certain re=quired supplementan information relating to the Agencv's budgetary principles. 111. 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. I he following table shows the components of the net assets. 4 Redevelopment Agency Net Assets At June 30, 2011 Current assets $6.4M Noncurrent assets O.tM Total assets 6.51 Current liabilities 2.914t Noncurrent liabilities 31.1141 Total liabilities 34.0 L1 Net assets: $ 4,500,046 Restricted 6.21NI Unrestricted (33.7)M Total net assets ($27/5)XI There was an increase of $1.4-M in the Agency's net assets during the fiscal year due to repayment of debt service. 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 2010-11 General revenues: Property tax (tax increments) $ 4,500,046 Use of money and property 60,587 Miscellaneous 135,644 Transfers in from the city 141,379 Total, general revenues and transfers 4,837,656 Net Expenses 3,393,213 Change in net assets (increase) 1,4441443 Net assets (Deficits) - begiru,-ing of year, as restated (28,97178,679) Net assets (Deficits) - end of year $ (27,534,236' ) IV. Financial Analysis of the Agency's Funds !\s noted earlier, the Auenc- uses fund accounting to ensure and de-moristrate compliance with finance_ related legal requirement-,. Governmental Funds: The focus of the Ao-encv's Governmental Funds is to provide information on near-term infloiks, outffim.s. and balances of expendable resources. Such information is useful in assessing the Agency's financing requirements. In particular, un=assigned fund balance may serve as a useful measure of aaencv's net resources available for spenciing at the end of the fiscal N ear, It should, however, be noted that all the fund balance amounts have been either restricted or conunitted by the Agency for specific uses. 5 The debt service fund accounts for the principal and interests payments on all bonds. The Agency's capital projects fund had total revenue of $1.1M and expenditures of $1.9M and a transfer for debt service payment of $03M. The ending fund balance decreased $630K from the prior year balance of $6.7M. The Agency is required by State law to set aside 20% of the tax incremen revenue in a separate fund for low and moderate -income housing purposes. The expenditure includes $264K for subsidies to Low and Moderate Income Housing. 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 $48K. The expenditures amounted to $1.011. The fund balance decreased by $0.511 to $3.4M at the year-end. V. Budgetary Highlights The tax increment revenue was on target with the budgeted amount. The operating, expenditures overall remained within the budget. 0 V1. Capital Asset and Debt Administration Capital Assets: As of June 30, 2011, the Agency's capital assets were $58K. 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. Longi -term Debt: At the end of the current fiscal year, the Agency had total bonded debt outstanding of $33.5_1J. The tax increments revenue of the Agency secures all bonded debt of the Agency. The Agency's debt decreased by S2,01:i due to the annual debt payments for the 2002 and 2009 Agency bonds. Additional information on the Agency long-term debt can be found in Note 6 of this report. V11. 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 2010-2011. 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 hwid, has not seen the drastic decline in market value. In an effort to balance its budget, the Mate of California adopted ABx1 26 on June 28, 2011, which suspends all nev,• redevelopment agencies effective October 1, 2011. 'Ile State simultaneously adopted ABxl 27 which allows redevelopment agencies to avoid dissolution by 0 opting into an "alternative voluntary redevelopment program" requiring substantial annual contributions to local school and special districts. On July 18, the California Redevelopment Association, the league of California Cities and others cbat]enged the validity and constit-utionalit-x- of ABxI 26 and 27 to the California Supreme Court. On August 11, 2011, as modified on august U, 2011, the California Supreme Court agreed to hear the case and issued a partial stay of ABxl 26 and a full stat of ABxI 27, but the stay did not include the section of ABx1 26 that suspends all new redevelopment activities. It is anticipated that the Court will render its decision before January 15, 2012, the date the first voluntary program payment is due. San Rafael Redevelopment Agency Board has chosen to participate in the Voluntary Alternative Redevelopment Program pursuant to Part 1.9 of the California Community Redevelopment Law. The City Council's intention was verified by the passage of Ordinance 1899 on September 19, 2011. Please refer to Note 11 for further discussion on the potential consequences to the Agency from the decision of the Supreme Court. 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 RFDE-vTLOPNLWNT AGENCY STATENIENT OF NET ASSETS AND STATEMENT OF ACTRITIES The Statement of Net Assets reports the difference between the Agency's total assets and the Agency's total liabilities, including all the Agency'sI 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 (if Net Assets summarizes the financial position of all the Agency's Governmental Activities in a Single COILImn. 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 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 ot)l,v 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 pro LI gram. 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 X 2011 ASSETS Cash rind investment-, (Note 2-) Restricted cash and investments (NNote 2) Receivables: Accounts Taxes Crants fntc,-est Loans (Note 4) Capital assets (Note 5), Nondepreciable assets Depreciable assets, net Total Assets LLA,BLL I PIES Accounts payable Interest payable Developer bonds payable Arbitrage payable Long-term debt (Note 6)7 Due in one year Due in more than one vear 'Total liabilities NE,F ASSETS (DEFICIT) (Note IF) Restricted for: Debt service Capital projects Unrestricted Total net assets (deficit) Governmental Activities 5.5,520.068 43L582 95,576 2,024 26,624 4,686 314.322) 19,000 18,914 0,4-52,796 149,042 320364 )5,000 25,127 2.31�,000 31,142,499 33,98 71,032 44,83 1 6.124.2-58 (33,703,325) S27.534-136) See accompan}ing notes to financial statements 10 SAN RATAEL REDEtiELOPMENI AGENCY STA TEi4IENT OF ACTIVITIES FOR THE YEAR ENDED JUNt E 30, 201 1 General revenues: Taxes 4,500,046 Investment earnings 60,58' Miscellaneous 135,644 Transfer from City (Note 313) 141,379 Total general revenues and transfers 4,837,656 Chance in Net Assets 1.44.1.44= Net Assets (Deficit) -Beginning (28.978,679) Net Assets (Deficit) -Ending ($27,53.1,236) See accompanying notes to financial statements I1 Governmental Activities Net Program Revenues (Expenses) Revenues Charges for Governmental Functions/Programs Expenses Services Activities Primary Government Governmental Activities: General government $40,481 ($40,481) Public works and parks 106,39; (106.8931 Community development!redevelopment 1,762,200 $29,525 (1.732,675) Interest on long-term debt 1,513,164 (1,513,164) "Total Primary Government $3,422,738 529,525 (13,393 213) General revenues: Taxes 4,500,046 Investment earnings 60,58' Miscellaneous 135,644 Transfer from City (Note 313) 141,379 Total general revenues and transfers 4,837,656 Chance in Net Assets 1.44.1.44= Net Assets (Deficit) -Beginning (28.978,679) Net Assets (Deficit) -Ending ($27,53.1,236) See accompanying notes to financial statements I1 ]'his Page Left Intentionally Blank FUND FINANCIAL STATENTENTS Major funds are defined generally as having significant activities or balance,; in the current year. All Agency Funds were determined to be Major Funds in fiscal 2011. 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 PaVTnents, and related costs of the 2002Tax Allocation Refunding Bonds. 1 -1 The 2009 AGENCYtT BONDS DEBT SERVICE F JND is the debt service fund for the principle payments, interest payments, and related costs of the 200() Tax Allocation Refunding Bonds. The CAPITAL IMPROVEMENT PROJECTS CAPITAL PROJECTS FUND is the capital projects fund for the neA 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. g The LOW AND MODERATE INCOME HOUSING CAPITAL PROJECTS FUND accounts for the 20°,'o set-aside required by the State for low and moderate -income housing projects. The 1999 BONDS CAPITAL PROJECTS VUNID is the capital projects fund of the Agency for the 1999 Project Tax Allocation Bonds. The1985 CAPITAL PROJECTS AND AD-NUNISTRATION CAPITAL PROJECTS IIJIND 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 l,k)-,N and Moderate Income Housing Fund and the debt service ffinds. The 2009 CAPITAL PROJECTS FUNDS is the capital projects fund established to account for the capital projects activities funded by the 2009 'Fax Allocation Refunding Bonds of San Rafael Redevelopment Agency, 13 SAN RAFAEL REDEVELOPPOENT AGENCY GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2011 DEBT SERVICE FUNDS 1999 Agency 2002 Agency 2009 Agency Bonds Bonds Bonds ASSETS Cash and investments availabte for operations (Note 2) $33,213 Restricted cash and investments (Note 2) 1,837 58,753 Receivables: Accounts Taxes Grants Interest ?8 t oans (Vote 4) Total Assets $36,078 $8,753 LIABILITIES Accounts payable Developer bonds parable Arbitrage payable Deferred revenue Total Liabilities FUND BALIVNCBS (Note IG): Nonspendabie Restricted 36.078 8,753 Committed Assigned Total Fund Balances 36,078 8,753 Total Liabilities and Fund Balances $36,078 $8.753 See accompanying notes to fipancial statements 14 15 CAPITA.. PROJECT FUNI}S 1 ow and Capital Moderate 1984 Capital total Improvement Income Projects and 2009 Governmental Projects Ilousing 1999 Bonds Administration Capital Projects Funds $1.414,37-1 $2,391,577 $1,096-174 $583.730 $5,120.068 $420,992 431.582 71,576 11,000 10,000 95.576 2,024 2.021 26.624 26,624 i,>9x 1,679 906 475 4,686 314,322 314,322 $1,415,972 $2.784.178 $458,616 $1,107080 $.59-1,205 $6.:44.882 $98.494 $50.548 $1 19.042 25.04)0 25,000 $25.127 25.127 26,624 2t),624 98,19-1 51,751 75,5:18 225.793 314,322 314,322 1.251.362 406.861 1.0213,'32 59.9.205 3.313.795 1,41;1472 5,000 5.000 1;4151972 2,685,6&I 406,865 1,031.532 584?01 6,169.089 $1.415,972 $' x -1,1'x $418.610 $1,10 1}80 $584.201 S6.391.882 15 This Page Left Intentionally Blank SAN RAFAEL REDEVELOP -HENT AGENCY RECONCILIATION OF GOVERMAENNTAL FUNDS - FUND BALANCES WITH THE ASSETS Of GOVERNMENTAL ACTIVITIES JUNE 30, 2011 Total Fund Balances reported on the governmental funds balance sheet S6. 169-089 Arnounts, reported for Governmental Activities in the Statement of Net Assets are dhTercrtt from those reported in the Governmental Funds above hecax,,e of the following: CAPITAL ASSETS Capital assets wed in Governmental Activities are not current as.cts or financial resources and therefore are not reported in the Governmental Funds 5-1,914 LONG-TERM ASSETS.-8,ND LL-kBILITIES 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 (33,467,499) Interest payable (320,364) Deferred revenue 26,624 NET ASSETS {DEFICITS} OF GOVERNMENTAL ACTT ITIES ($27.534236) See accompanying notes to financial statement, - m SAN RAFI!,,EL REDEVELOPMENT AGENCY GO— ERNAIENTAL FLTNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES FN FL7NID BALANCES FOR THE YEAR ENDED JUNE 30, 2011 REVFNUES: Taxes and special assessments Use of money and properties Intergovernmental Charge-, for services Other revenue J otal Revenues EXPENiDD'URFS- Current: C ,Teneral government Public works, and parks Community devcllopmentrede-,elopment Capital improvement special prqjecLs Debt ser-, ices Principal Interest and fiscal charges Total Expenditures EXCESS (DFFICIFNCY) OF REN,-I-.j\7LT-S OVER EXPENDITURES OTHER HN.A-NCTNG SOT -RCES (USES,) Transfers in (Note 3A) Transfers (out) (,Note 3A) Tninsfers in from the Citv (Note 3B1 Toral othe:, financing sou-ces (uses} Net Change in Fund Balances FUND BALANCE, BEGTNNT,G OF RIF YFAR FUND BALANCE, END OF TIE YF AR DEBT SERVICE FUNDS 1999 Agency 2002 Agency 2009 Agency Bonds, Bonds Bonds $2,068,938 $1,494,725 123 21069,061 1,494.723 1350,000 875,000 718,938 619,7125 2,068.938 1,494,725 123 123 35.95-9 8,753 $36,078 58,753 See accompanying -totes to th�, fin:-ncial statement. 18 19 CAPITAL. PROJECI FUNDS Low and Capital Moderate 1985 Capital Total Improvement lni:Orne Projects and 2009 Governmental Projects Housing 1999 Bonds Administration Capital Projects Funds $936,383 $4,500.046 58.473 11,050 $14 $37,785 S2.14? 60,587 29,523 29,525 109,020 109,02() 8.473 1,057.453 14 67.310 2,142 4;699,178 5,595 34,886 10,481 106.893 106.893 909.667 543.787 1,452.454 179,0()0 26,624 78.55.1 22.944 301.118 2,225,000 1.338.663 179,000 914,262 26,624 764.120 22,946 5.470,609 (170;927)143,191 (7.6,610) (696,810) (20798] {'11,4311 291,930 291,930 (291.930) (291,9:0) 141,379 141.3?9 (201.930) 141,379 291,930 141.3"9 (,170,527) (;48,739) 11.1.769 (404,880) (20,198) (630,052) 1,586,499 1,834,4_'3 291,096 1,436,412 60,,003 6.799,141 51,415,972 52,685,684 5406,865 $1.031.532 5584,20' $6,169;Q89 19 SAN RAYAEL REDEVELOPINIENT AGENCY Reconciliation of the NET CHANGES IN FUND BALANCES - TOTAL GOVERNINIENTAL FT—',NDS with the STATENIENT OF ACTIVITIES FOR THE YEAR ENT -DED JUNE 30, 2011 The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Re -venues, Expenditures and Charges in Fund Balances, which measures ontv change, 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 M accrual basis. NTT CfWNIGE IN FUND BALAINCES - TOTAL GOVERNAMNIAL FU\DS (S630,052) .'up ounLs reported for gm cramental activities in the Statement of Activities are different because of the following: CAPITAL ASSETS TRANSACTION'S 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 is therefore added back to fund balance 307,118 Non -capitalized capital outlay expenditures were reclassified to various governmental activities {307,1 I8) Depreciation expense is deducted from the fund balance (27628) ACCRUAL OF NON-CURRENT ITFMS The amounts below included in the Statement of Activities do not provide or (require) the use of current financial rusour,:es and ,herefore are not reported as revenue or expenditures in governmental funds (net change): Interest payable (6,990) Deferred revenue 26.624 LONG-TERM DEBT PAYMENTS Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Assets, Rcpa;rrtent of bond principal is an expenditure in the governmental funds, but in the Statement of' -Net Assets the repayment reduces long-term liabilities. Principal debt service payments are added back to fund balance 2.225.000 Bond intcres* acerction is deducted from fund balance (2477,371) Bond prcrmn-n amortization is added back to fund balance 79,860 CR,kNCjE IN- _NEi ASSETS OF GOVER2N.`v1.HNT.AL ACTIVITIES S1.4,14.41'3 MM SAN RAFAIM REDEV(ELCIPINIEN-F AGENCY Notes to Basic Component Unit Financial Statements I NOTF 1- SIGNIFicAN'r ACCOUNTLNG POLICIES I A. Description of San Rafael RedevelopmentAgencyand Redevelopment Plan The San Rafael Redevelopment Agency (Agency) was established under the provisions of the Community Redevelopment I aw (California Health and Safety Code, commencing with Section 73000) 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 1999. The Agency receives incremental tax revenues on the developed property due to increases in assessed value. The Agency functions as an independent entity. The (--'.ity Council serves as the governing board of the Agency. The Agency is authorized to finance the Redevelopment Plan ftom 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 Cit-, 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. B. 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 actio ities. C, The Statement of Actin ities presents a comparison between direct expenses and program revenues for each function of the A,-,enc)*s go%emmental actMtics. Direct expenses are those that are specifically associated vvitb a program or function and, therefore_ are clearl-, identifiable to a particular function. Program revenues include charges paid b% 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. 21 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE I - SIGN-IFICANT ACCOUNTING POLICIES (Continued) I 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 nortmajor funds. 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 200."rax Allocation Refunding Bonds. The 2009 Agency Bonds Debt Set -vice Fund is the debt service fund for the principle payments, interest payments, and related costs of the 2009 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 ageement. The Low and Moderate Income Housing Capital Projects Fund accounts for the 20% set-aside Z, required by the State for low and moderate-iticome 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 Project-, and Administrative Capital Projects Fund is the general operating fundZ__ of the Agency- It is used to account for all financial resources except those required to be accounted for in the Fovv and :Moderate Income Housing Fund and debt service funds. The 2009 Capital Projects Fund is the capital projects fund established to account for the capital projeev activities funded by the 2009 Tax Allocation Refunding Bonds of San Rafael Redevelopment AgCTIC'y, D. Bash ofAccounting The government -wide financial statements are reported using the economic resources measurement Z) tl focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are Z:� recorded at the time liabilities are incurred, regardless of -,Nben the related cash flows take place. 0 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE I - SIGNIFICANT ACCOUNTING POLICIES (Continued) I Go,,ernmental 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 sixt-.N, days after year-end. E�:penditurcs 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 governfr-mtal 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. Other revenues susceptible to accrual include interest and charges for services. Under the terms of grant agreements, the Agency ma-, fund certain programs with a combination of Z__ e - 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. 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. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount I Z� charged to depreciation expense each year represents that year's pro rata share of the cost 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 fulls depreciated. The Agencyhas assianed the useful li�es listed belm, �to, capital assets. Buildings and structures 50 years Machinery and equipment 5-15 sears SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 1- SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Net Assets Net Assets is the excess of all the Agenev'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. As of June 30, 2011, the Agency reported an unrestricted deficit of $33,703.,325 representing debt used to finance the acquisition and construction of assets maintained by the City These capital assets were constructed or acquired in prior years and transferred to the City upon completion. G. Fund Balance The Agency's fund balances are classified in accordance with Governmental Accounting Standards Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which requires the Agency to classify its fund balances based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the Agency prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each categol} in the following hierarchy is ranked according to the degree of spending constraint: Nonspendables represents balances set aside to indicate items do not represent available. spendable J resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds. and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for resale are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then -,Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Encumbrances and nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraiDtS unposed by e y formal action of the Agency Board which may he altered oulN b-, formal action of the; A2enc-, Bnard. Encumbrances and nonspendable co amounts ul ounts subiect to icil commitments are included along with spendable resources, 24 4 SA.'ti RAFAEL R.EDEN,"ELOPiNIENT AGENCY Notes to Basic Component Unit Financial Statements NOTE I - SIGNIFIC..AN'T ACCOUNTING POLICIES (Continued) Assigned fund balances are amounts constrained by the Agency's intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the Agency Board or its designee and may be changed at the discretion of the Agency Board or its designee. This category includes encumbrances; Nonspendables when it is the Agency's intent to use proceeds or collections for a specific purpose, and residual fund balances, if any. of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. Unassigned fund balance represents residual amounts that have not been restricted, committed. or assigned. This includes the residual fund deficits, if any, of Debt Service or Capital Projects funds. Detailed classifications of the Agency's Fund Balances, as of June 30; 2411, are below: Fund balances: 'donspendable: Loan rc nv2bie Total 1orspc-',te Restricted for. 29t;2 agency bcacs -nl T service ^q agency bonds det: strvi- Lcw and m4c::r to m,or- 11cusing 1994 agency boni caniz.1 pm,ecw 1985 capital prcjecs 2000 sten.• bond caps` 1 prgir t- i�tzi Res+sicted Con+ dt:ed to' Capital imp "em—, -s„ae: is To,A Comp, med A=,ir-e>; to C=apita'. irtpr�vcn.ent F: cjec tr Total A,,,ipcd `.'tall `ne' c�I�n.cs ;b,075 8.15. $406,865 406,F65 1.��_..ic;2 4t:b.8C5 1(26.532 58-4.2ti5 x,313,;G5 51,4'.5.;,< 1,EZG.044 2.535,-72 1,415.97,'. i 12'C,000 7,535,971 H. Budgets and Budgetary Accounting The Agenc- 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 kear. From the effectDc, date of the budget. Nzhich is adopted and controlled at the fund 1 1e', the amounts stated therein as proposed expenditures, become appropriations 1 -Ile Board maN anie~ld the budget b4 resclutlon durine the t~r=~o fiscal rears. All unencumbered appropriations lapse at } ear -end. v 2s Stajct Capita? Fllolezt Maj,- Low and Funds Pcc. Sec, i.^c Fsd Cap:ttal Moderate 1985 Cap2tal 1Y09 Agmm 200- APen.e 2010_' :lganc} L:s€;xrn�e:nmt income Projects and 200 Bonds Benda Bent?, Privet ; au>iag 114S9 Bonds Adrnivstration Cap€tal l`r .jests Trtai 5314,322 5-114,322 3A322 3i4.32. ;b,075 8.15. $406,865 406,F65 1.��_..ic;2 4t:b.8C5 1(26.532 58-4.2ti5 x,313,;G5 51,4'.5.;,< 1,EZG.044 2.535,-72 1,415.97,'. i 12'C,000 7,535,971 H. Budgets and Budgetary Accounting The Agenc- 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 kear. From the effectDc, date of the budget. Nzhich is adopted and controlled at the fund 1 1e', the amounts stated therein as proposed expenditures, become appropriations 1 -Ile Board maN anie~ld the budget b4 resclutlon durine the t~r=~o fiscal rears. All unencumbered appropriations lapse at } ear -end. v 2s SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements I NOTE 1- SIGNIFICANT ACCO1,WM� G POLICIES (Continued) I Bi -annual budgets are adopted for the debt service funds on a basis consistent with generally Z, 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 capital projects funds. Such budgets are based on a project time frame rather than a fiscal year "operating" time zs 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 budg ary process. get L Properpi, Tax 1herement 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. Ml property taxes are levied and collected by the County Auditor of the Count-, of Marin and paid to the various taxing entities including the Agency. Secured taxes are due on November I and February I and become delinquent on December 10 and April 10. respectively. Unsecured taxes are due on July I and become delinquent on August 31. The lien date for secured and unsecured propertv, taxes is January I of the preceding fiscal year. J. Use of Fstimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts ( -)f assets and liabilities and disclosure of contim.,ent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, W, SAN RAFAEL REDEWLOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 2 - CASH AND EIVESTMENTS 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. 2011. were 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 $5;520,068 Restricted cash and investments 431,582 Total cash and investments $5,951,650 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 2 - CASH AND 1NVESTMENTS (Continued) I B. Investments Authorized by Debt Agreements The Agency must maintain required amounts of cash and investments with trustees or fiscal agents tinder 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 vible also identifies certain provision-, of these debt agreements: Authorized Investment Maximum Minimum Credit Maximum Percentage Type Maturity Quality of Portfolio 5 years to U.S. Treasury Obligations no N/A No Limit maximum L.S. Agency Securities 3- 5 years N/A No Limit U.S. Agency Instruments 5 years AAA No Limit Repurchase Agreements I year A -I No limit Bankers' Acceptances 360 days highest Category No Limit Rating Money Market Funds %.'A Category No Limit Rating Rating Commercial Paper 270 days highest I lighest Category Na Limit Rating Guaranteed Investment Hi6cst Catevory Contracts (fall-, I N;A bNo Rating Limit collateralized) (A) Municipal Obligations NUA Two Highest No Limit Category Ratings Medium -Term corporate 5 Years A No Limit Notes Non --Negotiable 180 Days /A No Limit Certificates of Deposit \e,—,�,-)tiable Certificates of 5 Y ears No limit Deposit -\;A Local A(yenev Im, estment NIA N>A A Fund -N, (A-) Guaranteed hmcstrncnt Contracts must be fully collateralized "ith U.S. Treasury Obligations or 1--.S. A2eDCI . Obligations. Z- 28 SAN RAFAEL RFI)EVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements ,NOTE 2 - CASH AND INVESTMENTS (Continued) C. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an in -vestment. 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 N-Tutual Funds $431,582 Local Agency Investment Fund 4,656,598 Total Investments 5;088,180 Cash in bankx and on hand 863,470 Total Cash and Investments $5,951,650 The Agency is a -voluntary participant in the Local Agency Investment Fund (LA -11) that is regulated Agency bN California Government Code Section 16429 tinder the oversight of the Treasurer of the State of California. The Agency reports its investment in LALF at the fair value amount provided by LAEF, 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 LAJF, GNbich are recorded on an amortized cost basis. Included in LAIT'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, goN ernment-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2011, these investments matured in an average of 237 days. Money llylarket Mutual Funds are available for withdrawal on demand and at June 30, 2011, matured in an aver -age of 19 days. D. Credit Risk Credit risk is the risk that an issuer of an in -vestment will not fulfill its obligation to the holder of the investment. This is measured bv the assignment of a rating by a nationally recognized statistical rating organization. According to the Agenc\'s investment policy. no more than 51,000.000 of the total portfolio may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentalities, and LAT. If a security is dog mgraded bN either Moodv's or Standard and Poor's to a level below the minimum quality required by the Agency, it shall be the Agency's polio to sell that security as soon as practical. The actual rating as of June 30, 2011, for the money market mutual bunds vias A,,\i\m as provided by Standard and Poor's Investment Rating System. As an external investment pool. the Local Ayenc-, Investment Fund was not rated as of June 30. 2011. 29 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Lnit Financial Statements NOTE 3 — INTER -WIND TRANSACTIONS A. Transfers Transfers between funds during the fiscal year ended June 30, 2011 were as follows: From Fund T o Fund Amount 2002 Agency Bond-, 1995 Capital Projects andAdministratiou Capital Projects Fund $291,930 (A) Debt Service Fund Low and Moderate Income Housiry Capital Projects Fund 2002 Agency Bonds Deb-, Service Fund 291,930 (R) $583,860 (A) I ransfor is for admimstrative support (B) Transfer is for the housing portion of debt service B. Transfers From the Cht}y During the fiscal Near ended June 30, 20111 the City made cash transfers of $141.379 to reimburse the Agency for ongoing Agency projects. INOTE 4 - LOANS RECEIVABLE A. Centertown Associates The Agency loaned Centertown Associates, Ltd. $303,000 at 3% interest due semiannually. The loan was made for the construction of a 60 -unit affordable Centertown apartment complex and is fully secured by a deed of trust. The final payment is due on July 31, 2065. As of June 30, 2011. the balance of the loan was $314,322- 1H SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 5 — CAPITAL. ASSETS Capital assets at June 30 comprise: Depreciation expense has been allocated to the Community- development/redevelopment activity on the statement of activities. NOTE b — LONG TERM DEBT A summary of goremmcntal activities long-term debt changes for the fiscal year ended June 30, 2011, follow: Balance at Balance Balance at June 30, 2010 Additions June 30, 2011 Governmental Activities Jrme 30. 2010 Additions Rct rerncnts Capital assets not being depreciated: Portion Covernmental -' ctivities: Land $39,000 $_49,000 total capital assets not being, depreciated 39,000 39,000 Capital assets being depreciated. Buildings and structures 80,000 S-1.362.803 80,000 Nfachinery, and equipment 14.809 14,809 Total capital asset, being, depreciated 94,809 94.809 Less accumulated depreciation for: ? 00"o-5.25°10. due 12.1,4021 2.5.020.000 Buildin._s and structures (60,000) ($100) (61,600) Machinery and equipment (13,267) (1,028) (1.1,295) Total accumulated depreciation (73;267) (2,628) (75,8951 1 utal net capital assets being depreciated 21,542 (2,628) 18,914 `total govertimc:ntal activity capital assets $60,542 ($2,628) $57,914 Depreciation expense has been allocated to the Community- development/redevelopment activity on the statement of activities. NOTE b — LONG TERM DEBT A summary of goremmcntal activities long-term debt changes for the fiscal year ended June 30, 2011, follow: Authorized Balance Balance Current and Issued Jrme 30. 2010 Additions Rct rerncnts June 30, 2011 Portion Covernmental -' ctivities: Capital -Appreciation Bong's 5.5P'x5 69 o, due 111,2022 2.?89.004 S-1.362.803 S'47.371 $-1,610.171 2002 Tax Allegation Bondr- ? 00"o-5.25°10. due 12.1,4021 2.5.020.000 15.295.900 51.350.000 13 945.0U0 $1,421,,000 2009 I -at Allocatxm Refunding Bonu4 3.001.x5.00%� due 1.`_ L2022 1.1.660 000 14.6t,(1,106 t 875,(100 I _,?85,000 905.000 Add: deferred bond prerniu-ncost IJ)28,1;i5 71),$60+ 9544-3'S Iotallax AllucationBc-ids 35,3,55.988 247,371 2.301.860 33.298.-1{g,9 2,315.000 1vtc: Ila -,able- 8.00"o. due 11, L202-1 169,()00, 169,0100 1614.060 oLaiGo, ce nmen.alLcng-ter-r Dent 535.5211-1)83 $247.71 fit -,(;4,86,) (,33.167,(x)9 S2 3}5.000 SAN RAFAEL REDEVELOPIME NT AGENCY Notes to Basic Component Unit Financial Statements NOTE 6 - LONG-TERM DEBT (Continued) A. 1999 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 I from 2000 to 2022, in amounts ranging from $560,000 to $1,460,000 and bear interest at rates ranging from 4.50% to 5.00%. Interest is payable semiannually on June I and December 1. The Current Interest Bonds maturine, 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 rata 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 z:1 0.001N to 2.00%. In December 2009, the Agency exercised the redemption option. The outstanding balance of the Bonds were refunded- on a current basis. through the issuance of the 2009 Tax Allocation Refunding Bondi as discussed on Note 6C below. The Capital Appreciation Bonds mature annually after December I from 2018 to 2022, in amounts ranging from $1,440,000 to $2.070,000 and bear interest at rates 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 (refunded in 2002), by a pledge and a lien on tax revenues and amounts on deposit in certain funds and accounts held by the fiscal agent. B. 2002 Tar 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 I from 2002 to 2022, in amounts ranging from $5,10,000 to $1,920,000 and bear interest at rates ranging from 2.00% to 5,25%. Interest is payable semiannually on June I 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 re -venues to be derived from the redevelopment activities of the Agency related to the Central San Rafael Redevelopment Project Area. C 2009 Tax Allocation Refunding Bonds On December 14. 2009. the Agency issued 2009 Fax Allocation Rctundin!2 Bonds in the amount of S11,660,000 bcarinQ intere,,t at rates from 100'`o to 5.000'(), 1 he proceeds of the Series 2009 Bonds were used to refund the Agency's 1999 Tax Allocation Current Interest Bonds, and to advance funds to the CitN to finance street and parking improvements for the benefit of the Agency's Central San Rafael Redevelopment PrQiect. Principal payments are due annually on December 30 and interest payable semiannually on June 30 and December -3 10. 32 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component L`nit nit Financial Statements NOTE 6 - LONG-TERM DEBT (Continued) The Series 2009 Bonds maturing on or before December L 2019, are not subject to optional redemption prior to their respective stated maturities. The Series 2009 Bonds maturing on or after December 1, 2020, are subject to optional redemption as a whole or in part either on a pro rata basis among maturities or in inverse order of maturity, and by lot within any one maturity. prior to their respective maturity dates, at the option of the Agency, on any date on or after December 1, 2019, at a price equal to the principal amount of such Series 2009 Bonds called for redemption, together with interest accrued on the date fixed for redemption, w Uthout premium. The d Agency has pledged all future tax increment revenues, less amounts required to be set aside in the t� 9 l.ow and Moderate Income I lousing Fund. for the repayment of the 1999 Capital Appreciation Bonds. and the 2002 and 2009 Tax Allocation Refunding Bonds. The pledge of all future tax increment revenues Z� ends upon repayment of $43 million in remaining debt service on the Bonds, which is scheduled to occur C in 2023. For fiscal v -car 2011 tax increment revenues amounted to $4.5 million and debt service also amounted to $3.6 million. D. JIVote Pqvable At June 30, 2011, Note Payable consisted of a $169.000 promissory note bearing interest at 8% with n principal and accrued interest due and payable in November 2024, The Note was assumed to finance the purchase of certain property by the Agency. E. Future Debt Service As of June 30, 2011. future debt service is as follows: For the Year Ended June 30 '1012 2013 201.1 2015 2016 2017-20'_1 ,022-2026 Total Reconciliation oftonif-tertn debt: Les,, unaccreted discount Add deferred bond premium cost, tier Iona -terns debt 33 Governmental Activities Principal Interest $2,325.000 $1,24-1312 2,425.000 1.140.269 2,540.000 1,023,576 2.675.1)00 893,201 2'800.000 766,926 15M0-000 21000,172 7,144,000 157,319 15�729.000 3$",225,;'757 _" 11).826'1 958.125 $33.46".199 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements I NOTE 7 — NON -AGENCY OBLIGATIONS I The following bond issues are not reported in the Agency's finaricial 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 taxing power of the City, the Redevelopment Agency. the State of California or any political subdivision thereof, is pledged for payment of these bonds. Original Outstanding Amount June 30, 2011 San Rafael Redevelopment Agency Multifamily ROUSiDg Revenue Bonds $3,590,529 $1,290,988 San Rafael Redevelopment Agency Variable Rate Demand Multifamily Housing Revenue Bonds 3,000,000 2,600,000 San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds -2001 A 3.220,000 2.820,000 Multifamily Housing Revenue Bonds -2001B 1,025,000 955,000 Multitarmly Housing Revenue Bonds -2001 C 1,855,000 1,785,000 Multifamily Housing Revenue Bonds -2007A 6,000,000 2.179,699 Multifamily Housing Revenue Bonds -200713 1,000,000 278.704 NOTE 8 — PASS-THROUGH PAYNiTENTS AND TAX INCREMENT SHIFT TO EDUCATIONAL REVEN tl E ALGNIFNTATION FUND (FRAF) 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 I I , 1984, by and between the Agency and the following taring 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 Nlarin entitled Section 33401 Agreement ((-0L1utN) dated September 11. 198-1. providing for the annual payment to the Countv of tax increment in ar, amount equal to the County's share of uLxes that are attributable to the Agencv'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 3-3 1-134-2. 33' 134.3. and 33334.6 of the Rede-, elopment I-.avy to meet the Agency's low and moderate income housing obligation. On October 1, 2002. the Agenc-, entered into a second amendment to the Section 33401 Tax Sharing Agreement kNith the San Rafael High School District. This agreement provides for additional payments in the amount of 5179,000 each Fiscal year beginning N%ith fiscal near' -002-033 through fiscal year.2021-2.1. 34 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 9 - TAX INCRENIENT SHIFT TO SU?PLET'V11ENTAL EDUCATIONAL REVENUE AUGINTENTATION FUND (SERAF) The State of California adopted AB26 4X in July 2009 which directs that a portion of the incremental property taxes received by redevelopment agencies, based on the property taxes received in fiscal year 2006- 07, be paid instead to the County supplemental educational revenue augmentation fund (SERAF) in fiscal years 2009-10 and 2010-11. The State Department of Finance determines each agency's SERAF payment by November 15 of each year, and payments are due by May 10 of the applicable year. The Agency made its second SERAF payment of $282,450 in fiscal year 2010-11. NOTE 10 - COW-virrvuENTS 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 vvitli the Agency Attorney, that these cases, in the aggregate. are not expected to result in a material adverse financial impact on the Aaenc4. Additionally, Agency management believes that the Agency's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. NOTE I — SUBSEQUENT VVE'NT In an effort to balance its budget, the State of California adopted ABxl 26 on June 28, 2011, which suspends all new redevelopment activities except for limited specified activities as of that date and dissolves redevelopment agencies effective October 1. 2011. The State simultaneously adopted AJ3xI 27 which allows redevelopment agencies to avoid dissolution by the City opting into an ``alternative voluntary redevelopment program" requiring specified substantial annual contributions to local schools and special districts. Concurrently with these two measures, the State passed various budget and trailer s that are related and gn le bills collectively constitute the Redevelopment Restructuring Acts, If all sponsoring communities were to opt -in Z__ to the voluntary program. these contributions amount to an estimated $1.11 billion for fiscal year 2012 and an estimated $400 million in each succeeding year. If the City fails to make the voluntary program payment. the Agency would become subject to the dissolution provisions of ABx 1 26, On July 18. 2011, the California Redevelopment Association, the League of California Cities and others challenged the validity and constitutionality of ABxI 26 and 27 to, the California Supreme Court on g P numerous grounds. including that the acts violate certain provisions of the California Constitution, On August 11. 2011.. as modified on August 1'i', 2011. the California Supreme Court agreed to hear the case and issued a partial sta-, of ABxI 26 and a full stay of ABxI 27, but the stay did not include the section of ABx I 26 that suspends all new redevelopment activities. It is anticipated that the Court will render its decision before January 15, 2012, the date the first voluntary program payment is due. The suspension provisions of ABxl 26 prohibit all redevelopment agencies from a wide range of activities_ includingiuctirria,, ne%,, indebtedness or obligations. entering into or nwd6ing rri agreeentz, or contracts. C, t: --a acquiring Or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions. except actioii:, required by lase or to carry out existine enforceable obligations, as defined in AI3xl 26. During the suspension period. an agency is required to prepare an Enforceable OblWation Payment Schedule no later than August 20, 2011. that allows it to continue to pay certain obligations. The Agency Board adopted its Enforceable Obligation Payment Schedule (EOPS) on September 6.. 2011 . The San Rafael Cit-,. Council and San Rafael Redevelopment Agency Board hate chosen to participate in the Voluntary Alternative Rcdevelopment Program pursuant to Part 1.9 of the California Community Redevelopment Law. The City Council's intention was verified by the Passage of Ordinance 1809 on September 19. 2011 35 SAN RAFAEL REDEVELOPMENT AGENCY Notes to Basic Component Unit Financial Statements NOTE 11— SU`BSEQL_ENT EVENT (Continued) In addition, the suspension provisions require the State Controller to review the activities of all redevelopment agencies to determine whether an asset transfer between an agency and any public agency occurred on or after January L 2011. If an asset transfer did occur and the public agency that received the asset is not contractually committed to a third party for the expenditure or encumbrance of the asset. the State Controller is required to order the asset returned to the redevelopment agency. The State Controller's Office has not -yet provided any information about the timing or the process for this statewide asset transfer review. The Agency is currently subject to the suspension provisions as described above. These facts indicate that there is more than a remote possibility the Agency may not continue as a going concern beyond October 1, 2011. The continuation of the Agency beyond October 1, 2011 will initially depend upon whether the Supreme Court rules in favor of the petitioners. There are three possible consequences to the Agency from a decision of the Supreme Court, when it is rendered: 1, If the Supreme Court determines that both ABxl 26 and ABx 1 27 are valid, then the City will consider whether it will enact an ordinance to opt -in to the alternative voluntary redevelopment program. If enacted, the Citv would be required to make annual payments to the County Auditor -Controller and the Agency Would no longer be subject to the suspension provisions. The State Department of Finance calculated the City's Voluntary Program payment for fiscal year 2012 to be $299,490. 2. If the Supreme Court determines that both Mix] 26 and ABO 27 are valid and the City decides not to participate in the alternative voluntary redevelopment program, or if the Supreme Court determines that Al3xI 26 is valid, but ABxl 27 is not valid, the Agency will continue to be subject to the suspension provisions and would be dissolved in accordance with certain provisions of ABxl 26, Prior to dissolution, any transfers of Agency assets subsequent to January 1. 2011 to the City, that were not obligated to third parties or encumbered may be subject to the State Controller's review discussed above and required to be returned to the Agency. U'POD dissolution, all assets and obligations of the Agency would be transferred to a successor agency. If the Supreme Court determine;, that both ABx 1 26 and ABx 1 27 are invalid. the Agency would no longer be subject to the suspension provisions and would continue in existence under California Redevelopment 1,a -,v as it existed prior to the enactment of A13xI 26 and Al3xI 27. As of November 23, 2011. the Supreme Court has not ruled on the case and the Agency is subject to the suspension provisions as discussed above. 36 SAN RAFAEL REDEVELOPMENT AGENCY 2002 AGENCY BONDS DEBT SERVICE FL --ND SCHEDULE OF REVENUES. EXPENDITURES ANI? CHANGE IN FLINT D BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED TUNE 30. 2011 V ariance vv'ith Final Budget Actual Positive Budgct Amounts (Negative) RF V"FM'71� S: Taxes and special assessments $2,068.940 $2,068938 ($'_) Use of money and properties 329 123 (206) Total Revenues 2.069269 2,069,061 (208) F XPE_NDITTiRrS: Debt service: Principal 1,3 50,000 1.350,000 interest and fiscal charges 718,940 718,938 2 Total Expenditures 2,068,940 1068.938 2 EXCESS (DEFICIENCY) OF RF,VFNLTS OVER EXPE\DITURLS 329 123 (206) OTHER FI'N.LNCLNG SOURCES (I'SFSI Transfers in 291.930 (291,930) Transfers (out) (291,930) 291,930 Total oLhcr fu acing sources (uses) Net Chan—,,e in Fund Balances $329 12 ($206) FUND BAIANCE. BFGINNING OF ITiE YEAR 35,955 FL. till BALANCE. END OF ME'. YEAR 536,078 37 SAN RAFAEL RE-DEVELOPIMENT AGENCY 2009 AGENCY BONDS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL FOR TI IE YEAR ENDED JUNTE 30, 2011 REVENUES: Taxes and special assessments Total Revenues EXPENDITURES: Debt service: Principal Interest and fiscal charges Total Expenditures FXCESS (T)EFICTENCY) OF REVENUES OVER EXPENDTTURE-1; Net Change in Fund Balances FUND BALANCE, BECXNNM\fG OF Tl IF YEAR FUND BALANCE. END OF THE YEAR 38 Variance with Final Budget Actual Positive Budget Amounts (Negative) $1-495,000 $1,494,725 ($275) 1.495.000 1,494.725 (275) 875,000 8;5,000 620,000 619,7725 275 1,495,000 1,494,725 275 SAN RAFAEL REDEVELOPMENT AGEi CY CAPITAL IMPROVENIEE r PROJECTS CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGE EN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENTDFD JUNE 30, 2011 Variance with Final Budget Actual Positive Budget Amounts (Negative) REVENUES: Use of money and properties $24,62$ $8,473 ($16.I55 ) Total Revenucs 24_628 8,473 (16.155) E YPEND111IRES: Capital impro-,er,Eent/special projects 179,000 179,000 Total f xpenditures 179.000 179,000 EXCESS (DEFICJENCY) OF REVENGES OVER EXPE\DIfURES (154,372) (170,527) (16,155) Net Chanee in Fund Balances ($154,372) (1M.5-27) (S 16.155) RIND BALANIC, BEGIN -N -I G OITHE YEAR 1,586,499 F1JND BAL VNCE. END OF 1111. YLAR $1,415,972 39 SAN RAFAEL REDEVELOPMENT AGENCY LOW AND MODERATE INCOME HOUSI G CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITUT ES AND CHANGE Lei FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2011 Variance with Final Budget Actual Positive Budget Amounts (Negative) REVE\'UFS: Taxes and special assessments $900,000 $936,383 $36.383 Use of money and propertics 27,512 12.050 (15,462) Other revenue 109,020 109.020 Total Revenues 927,512 1.057,453 129,941 EXPENDITURES: Current: General goveniment 5595 5.595 Community devclopment'r,deveiopment 9.13,454 908,667 34,787 Total Expenditures 949,0.19 914,262 3=1,787 EXCESS (DEFICIENCY) OF REVF.N'UES OVEREXPENDITURFS (21,53.-7) 141191 164,728 OTHER FLNANCENG SOUIR( ES (USES): Transfers (out) (291,930) (291,930) Total other tuiancing sources (uses) (2913930) (291,930) Net Change in Fund Balances 0313,467) (148,739) $164,728 FUND B.IVLAC CF.. BEGINNLNG OF THE YEAR 2,834,423 FUND BALANCE, E1vD OF THE YEAR $2,6851684 40 SAN RAFAEL REDEVFl,OPMFNT AGENCY 1999 BONDS CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURESAND CHANGE IN FUnND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 201 1 Variance with Final Budget Actual Positive Bud -let Amounts ('Negative) REVENUES, t se of moue} and properties $250 S14 ($236) Total Revenues 250 14 (236) EXPENDITURES: Capital improvement special projects 250.000 26,04 221,376 Total Expenditures 250,000 26,624 223,376 EXCESS (DEFICIENCY) OF REVENUES OVER EXPE'NDrF iRES (249,750) (26.610) 223,140 OTHER FLNANCING SOLRCES (USES) Transfers in from the Cit;. 141.379 141.379 Total other Financing sources (uses) 1.11.379 141,379 Net Chang: in Fund Balances ($391°129) 114,7169 $223,110 FL ND BALANCE, BFCI\NING OF TFiF YEAR 292,096 Ft:'ND BAIANC. E. END OF THE YE,kR S.I06.865 41 SAN RAFAEL REDEVELOPMENT AGENCY 1985 CAPITAL PROJECTS ANDAD-'IvITNISTRATION CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CI-Lk`NGE IN FUND BALANCE BUDGET AND ACTUAL FOR 'ME YEAR ENDED JUNE 30, 2011 42 Variance with Final Budget Aetna] Positive Budget Amounts (Negative) REVENUES: Use of mone} and properties $47,213 $37,785 ($9,428) Charges for services 13,250 29,525 16,275 *Total Revenues 60,463 67,310 6,847 EXPEND17fURFS: Current: General government 29,078 34,886 (5,808 Public works and parks 108,324 106,893 1,431 Community de-,clopmentredevelopment 698,248 543.787 154,461 Capital irnprovement'special projects 120.620 78,554 42,066 Total Expenditures 950,270 764,120 192-150 EXCESS (DEFICIENCY) OF REVI-NUFS OVER EXPENDIT'U'RES (895,807) (696.810) 198,997 OTHER FF\ANCING SOURCES (USES): I ransfitrs in 291,930 291.930 Total other finmcing sources (uses) 291,930 291-930 Net Change in Fund Balances ($603,877) (104,880) $199,99-11 NET ASSETS, BEGINNING OF YEAR 1.436,412 MIND BAI..,'vNCF, END OF THE YEAR $1,031,532 42 SAIN RAFAEL REDEVELOPNIENTAGENCY 2009 CAPITAL PROJECTS FUNDS SCHEDULE OF REVENIJES, EXPENDITURES XND CHANGE IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2011 REVENVUES: Use of money and properties Intergovernmental Total Revenues EXPEXT)TI-L-RIS: Capital iuTrovemenuspecial projects I otall Expenditures Net Change in Fund Balances NET ASSETS, BEGLN-NTNG OF YEAR FU NE) BALANCE END OF THL YEAR 43 Variance with Final Budget Actual Positive Budget Amounts (Negative) S2 -182 52,142 20,000 22,782 2,142 20.000 22,940 20,000 22.910 (20.798) 605,003 S584,20-5 ($640 - ) (20,000) (20,640) (2,940) (2.940) SAN RAFAEL REDEVELOPMENT AGENCY EXCESS SURPLUS CALCULATION Excess surplus is defined in Health and Safety Code Section 33334.12(b) as any unexpended and unencumbered amount in an Agency's Low and Moderate Income Housing Fund that exceeds the greater of $1,000,000 or the aggregate amount deposited into the Low and Moderate Income Housing Fund during the preceding four fiscal years, as of the beginning of the fiscal year. If excess surplus exists, the Agency must lawfully spend the excess or transfer it to a housing authorit} or other public agency in the following fis<il year, expend or encumber in the next two fiscal years or face sanctions. Essentially, agencies halve a three-year window to expend, encumber. or transfer the excess surplus. Low and Moderate Income Housing Funds — All Project Areas July 1, 2010 Opening Fund Balance -- July 1, 2010 $2.834.423 Less L navailable Amounts: Encumbrances (Section 33334,12(g)(2)) ($235,000) Housing loans (307,555) (542,555) Available Low and Moderate Income Housing Funds 1291-868 Limitation (greater of $1,000,000 or four years set-aside) Set -Aside for last four years - fiscal years ended: June 30, 2010 953,833 June 30- 2009 973.704 June 30. 2008 964,526 June 30. 200'' 97.1,408 Total $3,966,471 Base limitation $1.000,000 Greater amount 3,866,471 Computed Excess Surplus - July 1, 2010 Nione 44 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATVVIENTS PERFORIVIED IN ACCORDANCE WITH GOVEkVVE-tVTAI-IDITINGSTA-VDARDS Members of the Board of the San Rafael Redevelopment Agency San Rafael, California We have audited the financial statements of San Rafael Redevelopment Agency (Agency)as of and for the year ended June 30. 2011. and hake issued out report thereon dated November 23, 2011. The report included a special emphasis paragraph concerning proposed redevelopment dissolution and paragraph discussing the implementation of Governmental Accounting Standards Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions. 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 veer Financial Reporting Management of the Agency is responsible for establishing and maintaining effective 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 designim, 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 deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions. to pre -vent, or detect and correct misstatement,, on a timck basis- A material weakness is a deficiency, or combination of deficiencies, in internal control. such that there is a reasonable possibility that a material misstatement of the Agency's financial statements wili not be prevented. or detected and corrected on a timely basis, sianificant d,-fit-i-2jicN is a deficicncv, or a combination of deficiencies, in internal control that is less severe than a material weakness. yet important enotiah to merit attention by those charged v�ith governance. 45 Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other platters As part of obtaining reasonable assurance about whether the Agency's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 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. As part of our audit, we prepared and issued our separate Memorandum on Internal Control dated November 23, 2011. which is an integral part of our audit and should be read in conjunction with this report. This report is intended solely for the information and use of management, Agency Board, others within the Agency, the State Controller's Office, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. November 23. 2011 I L,4 INDEPENDENT AUDITORS REPORT ON CO-MPLIANCE AiND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH TRE CA,LIFORNM HEALTU AND SALFETY CODE AS REQUIRED BY SECTION 33080.1 IN/lembers of the Board of the San Rafael Redev-elopment Agency San Rafael, California Compliance e have audited the San Rafael Redevelopment Agency -s (Agency's) compliance with the California Health and Safety Code as required by Section 33080.1 for the year ended June 30. 2011. Compliance with the requirements referred to above is the responsibility of the Agency's management. Our responsibility is to express an opinion on the Agency's compliance based on our audit. VA'c conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of A-rncrica.- the standards applicable to financial audits contained in Government Auditing Standards. issued by the Comptroller General of the United States, and Guidelines for Compliance Audits oj'(.'1111ifi)rniti Redevelopment Agencies, June 2011. issued b3 the State Controller, Jhose standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance sAith the compliance requirements referred to above that could have a material effect on the Agency has occurred. An audit includes examining, on a test basis, evidence about the Agency's compliance with those requirements and performing such other procedures considered necessary in the circumstances. NA -v believe that our audit provides a reasonable basis for our opinion. Our audit does not pro--, ide a legal determination of the Aocncy's cornipliance with those requirements. In our opinion. the Agency complied. in all material respects. with the compliance requirements referred to above that are applicable for the -vear ended June 30, 201 L 1wernal Confrol Over Compliance Nlafla!acrnerr! of 01c. Aucnc� is responsible for establi-shin-, and maintaining efft:civc: internal control o-Er compli-ance vitb the compliance requirements refer ed to ah( ,,t. In planning and performing our audit- NAe considered the Agencs's internal control oyer coinplian(:e to determine: the auditing procedures for the purpose of expressing f.ur opinion on compliance, but not for the purpose oflex prcssijia an opinion on the effectiecness of internal control o�cr compliance. Accordmah- -we do not express an opinion on the effectiveness of the AILency's internal control of er compliance. 47 A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses in internal control over compliance. )7v'c did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, Agency Board, others within the Agency, the State Controller's Off -ice, federal awarding agencies and pass-through entities and is not intended to be and should not be used by any one other than these specified parties. -'4-- q��A?_ 4 ' 1><I00_VX2A November 23, 2011 48 SAN RA-FAEL REDEVELOPMENT AGENCY CURRENT STATUS OF PRIOR YEAR FINDING Finding 2010-01 Compliance on Procedure of Sale of Agency Property Criteria: California Health & Safety Code (HSC) Sections 33,131 and 33433 (c) (1) states that , "the agency may sell or lease a small housing project pursuant to this subdivision if. prior to the sale or lease, the agency holds a public hearing pursuant to Section 33431. Any agency that has sold or -1 z1_ leased a small housing project pursuant to this subdivision shall, within 30 days after the end of the agency's fiscal year in which the sale or lease occurred, file a report with the legislative body which discloses the name of the buyer, the legal description or street address of the property, the date of the sale or lease, the consideration for which the property was sold or ]eased by the agency to the buyer or lessee, and the date on which the agency held its public hearing for the sale or lease, pursuant to Section 3' )43) 1. Condition: On May 9. 2010, the Agency sold a Below Market Rate unit. However, the Agency did not conduct a public hearing prior to the sale of the property nor file a report with the Agency Board after the sale Occurred. Effect: The Agency did not comply with the above requirement stated. C, Cause: HSC 33-133 (c) (1) was set up to address the sale of a small housing project. Agenco, staff was not aware of its applicability to the sale of one condominium unit which was encumbered by a Resale Restriction. The Agency believes that it complied with the significant provisions in HSC 33433 (c) (1) but did not hold a public hearing when the unit was resold to a buyer, who was chosen and qualified by Marin Housing and subject to the Resale Restrictions previously approved by the Agency. This oversight was due to the Agency's belief that the terms and conditions of the Resale Restriction had been pLiblically discussed and approved by the Agency Board. I lie unit in question is a condominium unit that was provided pursuant to the City's inclusionary housing requirement. The initial buyer notified Marin H011SiDg of their desire to sell. pursuant to the C., - Resale Restriction recorded on the property. Marin Housing could not find another income -qualified buyer within the time period allowed in the Resale Restriction and requested the Agency to take possession of the unit until another income -qualified buyer could be identified and the unit resold. Had the Agency, not purchased the unit, the owner could have sold the unit at the current unencumbered market price.- reducing the City's stock of a&rdable ownership housing HSC 33433 (c) (1) pro% ides for public notification regarding the terms of the sale and the description of the property. The Agency staff reports OD the purchase of the unit clearly stated that the Agency's acquisition of the unit and its subsequent sale was subject to Resale Restrictions that limited both the price and the potential purchaser. The Agency believes that the terms of the sale were well known to the public as Marin Housing, the Agency's contractor for the affordable ownership pro t� - gram, conducted substantial public outreach to notifi, potential eligible purchasers. The 1009 Agency staff reports and Board Resolutions also contained the asscssors parcel number. which provided public n 'f ot] teation of the unit location. The terms of the Resale Restrictions severely limited the pool of potential purchasers and it took over a \ear for Marin Housing te, final a qualified purchaser. The Aaciic\ belic\es that it also complied with the provision in HSC 33433 (Vi (1) that requires disclosure of the name of the purchaser through the recordation of a Notice of Affordability Restrictions. This Notice include,,, the buyers name, assessors parcel number, street address and the date of the sale. Information regarding the NVotice of Affordability Restrictions was posted on the Aa -enc -Cs vN cbsite as required bs HS{. 3) 1 - - 13 343. 3, 49 SAN RAFAFL REDEVELOPMENT AGENCY CURRENT STATUS OF PRIOR YEAR FINDING Recommendation: We recommend that the Agency follow the applicable compliance requirements in the future. Corrective Action Plan: The Agency will comply with the provision of HSC 33431 and 313433 (c) (1) if the Agency is ever again in the position of purchasing an of unit and reselling it to an income qualified purchaser. Name of Contact Peron: Stephanie Lovette, ED Coordinator Current Year Status The Agcjic,, did not purchase or sell any affordable units in fiscal year 2010-11. af] EXHIBIT E Dco v � o 0 i cc M 07 C\ t!} N >- ti 00 co ,. 0 ch C c ca c LL (i CD 0 N N 3 0 Z 000 N C\F V y :3 GG 0 r 00 O LO LO CO LO 0 0 0 0 Q D tov Ld V td o `n N� ur . N Z 0 ©M N � cQv N ~ co 0 ( :° `? 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V V Cl) C6 C ll IOU E C14 J3 rn 'E C"� df cl� (Y) ID 0 6 05 (0 0 0 a Lo L 0 Co a) co Ct Nl� Co co OCL co 0"a o Z c —C U' E B 0 C, rYIt 4, a 2 2 E V) 00 m d, rs I, (U OC J3 I-- 0: — < 0 LL E W E o � Cfj C- C: 2 1.- w C: >I m 0 m 0) 0 m (I) -6 0 fi O to 0 -a m N, 0 C. C a T- 0 0 rsi co (N LO N C-0 IM .6 0 0 00 0 0 E 0 E (D w F - 0 Q- u-, z C'. C. -j 0- 0.C'- �s C'L n- (D 8- 0 M tmo M LU LL 2: to < < z E w 0 a C F- EC E x 0. m C a. j m Z (L m CL L C (L :3 C M a CL 0- 0 m z z m F. - Ci c CALCULATION OF AVAILABLE REVENUES AGENCYNAME San Rafael PROJECT AREA Central TAX YEAR 2011-2012 RECONCILIATION DATES: JULY 1.2O1OTOJUNE 3O.2011 Beginning Balance, Available Revenues (See Instructions) Tax Increment Received 'Gross All Tax Increment Revenues, toinclude and Tax Increment passed through to other local taxing agencies All other Available Revenues Receved (Gee Instructions) Revenues from any other source, included ioColumn Ecfthe Reconciliation Statement, but not included in (1-3) above Sum ofLines 1through 4 Total amounts paid against indebtedness |nprevious year. (D+EonReconciliation Statement) Available Revenues, End of Year (5'6) FORWARD THIS AMOUNT n]STATEMENT DFINDEBTEDNESS COVER PAGE, LINE 4. i. O 2. 6,578,983 3. O 4� 179,000 5. 6,757,983 6, 6,757,983 7. 0 Tax Increment Revenues: The only umount(a) k/beexcluded as Tax Increment Revenue are any amounts passed through Wother local taxing agencies pursuant hoHealth and Safety code Section 33G7O. Tax Increment Revenue set-aside in the Low and Moderate income Housing Fund will be washed in the about calculation, and therefore omitted form Available Revenues otyear end. Item 4above: This represents any payments from any source other than Tax Increment 0Ravailable revenues, For instance, an agency funds a project with a bond issue. The previous SOI included u Disposition Development Agreement (DDA) as fully repaid under the ^othe/` column (Col E), but with funds that were neither Tax |noenhont. or "Available Raxonuaa~ as defined. The amounts used to satisfy this DDA would be included on line above in order tnaccurately determine ending "Available Rev*nuen" (Revised 09m2/05) W:xmanaAcmantServices- Work Foe\Finanuo vvomF|lexDemt*ummmtrquonvAoenoy-no^xSmmn,Indebtedness Template zo11-1o.us EXHIBIT F (SAN RAFAEL RDA BLIGHT REPORT i This report includes expenditures front all sources including Agency, City, State and Federal funds and bond proceeds. Fiscal Year Ending 2011 A1,JGICCING CONDITION - Stagnant & Depressed Property Values 'PROGRAM: Traffic Circulation (Sonoma Marin Area Rapid Transit Coordination $18,590 Subtotal $18,590 BLIGHTING CONDITION - $76,3731 Downtown Substandard Design, Incompatible Uses i Depreciated Values, High Vacancies & Low Lease Rates 1 PROGRAM: Downtown Revitalization ! Plaza $26.277 ' i Downtown Promotions and Events (net) $241,1581 Business Improvement District Support $13.000 'Downtown Beautification $34,023 Subtotal $288.181 --- --- PROGRAM: Economic Development Coordination ------ Economic Development Activities (l) $385,671 Chamber of Commerce Support $36.000 Subtotal $421,671 ------------ Subtotalnon capital $728.442 BLIGHTINGCONDITION- Reduction or Lack of Proper Utilization of Property — _ �- Constituting Economic Burden on Community PROGRAM: Public Facility Improvements _ High School Projects $179,000, Agency Storage Facility Subtotal $179,000 Sub -total Non -Housing Programs $907,442 j BLIGHTING CONDITION' - $76,3731 Lack of Affordable Housing - - i PROGRAM: Housing 1 Housing Support -Ritter Center _ _ $40,000 Housing Support -Rental BMR $26.277 ' i 'Operation of Acquired Property BMR unit)_ $0 __ _ (Administration & Professional Services _ $244,858 lRehabilitation Grants $76,3731 lFirstTimet Program Expenses i -- 1BondP vment (Transfers out 5383361 (Housing Inspections - - $1211.587 - - EPurchase of Affordability Coo, onants $0 -- Rental subsidies 1Preservation S30,0 3(} OSO of at Risk Units (Technical Assistance -specific proiects 535,530 SMART Station Area Plans$66.636 Subtotal $1,206,193 Total Expenditures for 2010-11 (1) $2.113,635 0) Includes personnel and project expenses W:'Redevetopment- WorkFitel_RDA DEV SPECIM_IST4annual repor02011\Exh I' blight report 2011.xls EXHIBIT F SAN RAFAEL REDEVELOPMENT AGENCY PROPERTIES (This Report was prepared pursuant to a requirement of the Community Redevelopment Law. The CRL requires an Agency's annual Report to include a list of properties owned by the Agency The Agency is also required to report on any change in property ownership. A P # I #P ( Property Street ;Description 1009 I j 032 061 50 Canal Street Pickleweed 2 009 032 071 SO;Canal Street Pickleweed 3 009 032 08 %Canal Street Pickleweed 4011 20.5 01 I 1317iFifth Avenue 5th & D Parking Lot 5011 205 15 ,D Street iSessi Alley Parkin g 6011 ,224 05 813jFifth Avenue ]Parking Lot 7 011 j224 06 8091Fifth Avenue Parking Lot 8011 252 10 14121 Second Street Parking Lot I j 9011 254 19 �C Street Centertown 10011 255 10 255 1216IThird Street 'Parking Structure (Parking Transferred to City per RDA Reso. 2005-22-9/6!05 111011 13 121011 255 14 912IC 9181C Street Street Lot Parking Structure Transferred to City per RDA Reso. 2005-22-9!6!05 Transferred to City per RDA Reso. 2005-22-9{6/05 13 011 2.55 118 90210 Street !Parking Lot Transferred to City per RDA Reso. 2005-22-9!6105 14011 256116 1218'Second Street Lone Palm 15 011 1256 121 Lone Palm I j ( I 16011 256 125 C Street Lone Palm 17011 256 27 !C Street ;Lone Palm i 181011 256 28 1221 IThird Street !Lone Palm j 20 011 256 29 I Lone Palm 211011 256 31 12901 Second Street jLone Palm 22 011 261 26 Part of A Street Structure !Parking Structure Transferred to City per RDA Reso. 2005-22-916!05 231011 261 30 !Part of A Street Structure iParking Lot (Transferred to City per RDA Reso. 2005-22-916105 241011 263 05 941'Fourth Street ]Alley to Parking 25011 271 12 !Third Street jWalgreen's Parking Lot 26011 271 113 8401Third Street IWalgreen's Parking Lot 27 011 271 14 1 844 Third Street j Walgreen's Parking Lot 28011 271 16 91411-ootens Place Parking Lot 1 29 013 041 44 Rice Drive Leased parking lot I j 30014 123 061 519 Fourth Street Garage j 3110181180 i 521 1 1 1 Andersen Drive Hillside next to PG&E i SSIJannualrep,irl/RDAandCit}�ownedPmperties Rei. 121t 12011 P6 U r - Cd E 0 U 12E C/) C/) C/) V) 0000 z z z z c z = z ct m ct tt U z E z O cd rn rX u C/) C/) C/) V) 0000 z z z z c z = z ct m ct tt EXHIBIT G City of San Rafael Affordable Housing Report 2010-11 This Affordable Housing Report is intended to provide information on the City and Redevelopment Agency's affordable housing programs. This information is intended to supplement the reporting required by the California Community Redevelopment Law. The Report covers Agency housing activities in between July 1, 2010 and December 1, 2011. Affordable Housing Inventory June 30, 2011 Total restricted units* 1,679 Rental (Inc. Senior) 1,563 Ownership 1 115 ❖ Restricted units include all known units with affordability restrictions including BMR units (H-19), RDA restrictions, CDBG & HOME or tax credits. Location of Affordable Units Downtown ( 50% East San Rafael 12% North San Rafael ( 38% 2010-11 Affordable Housing Activities During the reporting period, Agency staff spent a great deal of time working the Community Development staff on the update to our 2005 Housing Element. The 2009 Housing Element was initially submitted to the CA Housing and Community Development Department ("HCD") in May 2010. City staff completed several revisions as requested by HCD staff. The updated Housing Element received final approval from HCD in November 2011. The next housing element update will be due in 2014. It should be noted that all previous San Rafael housing elements have also been certified by the State. This continual certification has enabled the City to apply for MTC planning grants and other State funding. The majority of State housing and infrastructure funding programs require a locality to maintain a certified housing element. Agency staff continues to update the economic development website to be more useful to housing developers and to persons seeking affordable housing. The website now includes a listing of housing sites that have been approved for development but are not under construction. In addition to the information on the website, Agency staff also spends a considerable amount of time explaining the City requirements to potential developers. Agency staff provides predevelopment assistance on many of the sites that have major issues or site development costs that can preclude housing development and/or redevelopment. Examples of pedevelopment activities include the Salute site, and the industrial areas in East and North San Rafael. In 2010 and 2011, Agency staff has also been providing technical assistance for developments that are under construction but have not been completed due to the economy. The Downtown SMART station is located within the Redevelopment Project Area. The Citizens Advisory Committee has been acting as the public advisory committee for the SMART Station Area Plan ("SAP") for Downtown. Agency staff had been assisting Community Development staff with the Downtown SAP. In November 2011, Agency staff assumed project management responsibility of both the Downtown and the Civic Center SAP. Requirement for Below Market Rate Units ("11-19") One of the City's main affordable housing programs is General Plan Policy H-19, first adopted in 1986. General Plan 2020 increased the number of housing developments subject to H-19 and increased the number of affordable units required. New housing developments are now required to provide between 10%-20% of the total units affordable to very low, low and moderate -income persons. There are exemptions for 1-4 unit developments and single-family homes under 1,800 square feet. The General Plan policy requires BMR units in both rental and ownership developments. However, a subsequent court decision has voided the ability of the City to require below market rate units in new rental developments. H-19 Inventory as of June 2011: Total H-19 units Rental H-19 units Ownership H-19 Units 305 189(62%) 115(38%) Below Market Rate Ownership Housing Program The Below Market Rate ("BMR"') housing program is administered by Marin Housing Authority ("MHA") with assistance and policy direction from Agency staff. San Rafael has 115 homes in the program. Since the inception of the program, over 150 households have participated in the program. There have been no sales of new units this year because there have not been any new subdivisions. The program continues to have BMR resales. The Agency spent $157,000 this year on the ownership BMR program. These costs include $77,000 to Marin Housing for program administration, Agency staff time, attorney's fees to respond to issues at 33 North, and legal fees to address situations where owners are behind on their mortgage payments or homeowners' dues. We anticipate continuing to expend legal fees to protect the BMR resources as homeowners struggle in the current recession. The majority of these legal fees will eventually be recouped when the unit is resold to another income eligible purchaser. There were four BMR resales during the reporting period. Two units in Redwood Village are currently in the marketing phase. BMR resales are challenging due to: a) the continuing decline of sales prices of market rate homes. b) the continuing instability in the lending market, and c) new Federal regulations affecting mortgage lending. San Rafael BMR units continue to be priced under current market value but the spread between BMR units and market rate units is narrowing. The decreasing gap between market rate housing and the BMR units is reducing the number of moderate -income buyers interested in the program. Moderate -income buyers would rather pay more and purchase a non -restricted unit. Lower income buyers continue to be interested in the program but have trouble obtaining financing due to their lower income, potential credit issues, and the reluctance of banks to lend on resale restricted units. FHA is the preferred financing for first time homebuyers due to lower down payment requirements and broader underwriting guidelines. FHA has recently changed their underwriting standards for attached housing and most Marin County condominium developments are unable or unwilling to undertake the daunting FHA certification process. MHA is exploring other lending programs to address the loss of FHA financing as discussed below. Ownership Assistance Many low-income households are unable to enjoy the advantages of homeownership due to financial constraints. These families often pay monthly rent that exceeds the monthly cost for a BMR unit. MHA has three Federal programs to assist low income households with home ownership; the mortgage credit certificate program ("MCC"), the American Dream Downpayment Initiative ("ADDI") program and the WISH program of the Federal Home Loan Bank. The funding for all of these programs is competitive, with a lengthy application process and a requirement to show a track record of fully utilizing the funding. MHA has an excellent record of accomplishment on the MCC program. Every eligible BMR buyer for the past 10 years has received a MCC. MHA has also fully utilized their ADDI allocation. MRA's first ADDI loan was completed in 2008 on a unit in San Rafael. MHA is currently preparing an application for the California Housing Finance Authority for CalHome funding. MHA would use CalHome funds to provide second mortgages to BMR buyers. These seconds would assist in filling the 20% gap between conventional 80% financing and the purchase price. The CalHome mortgage program would provide a strong alternative to FHA financing. CalHome financing can be combined with other programs such as WISH, to allow as many eligible buyers as possible be eligible to purchase BMR units. The San Rafael Redevelopment Agency also provides funding for an ownership assistance program for low income buyers whose incomes do not exceed 80% of County median income. The grants range in size from $2,500 to $7,500. The Agency has not made any grants under this program since 2009. In 2010-11, the majority of BMR buyers received ADDI or WISH funds instead of the Agency's program. Since the inception of the program in 2002, the Agency has assisted thirty-one low-income households including City, County and County Court employees and people working in retail establishments in Marin County. Below Market Rate Rental Housing Program Agency staff is responsible for administering the rental properties subject to General Plan Policy H- 19. Thirty-six properties are required to provide annual tenant income and rent certifications to the City or Agency. Agency staff provides annual notification to the property owners regarding the allowable rent levels, receives and verifies the annual certification and responds to property owner and tenant questions. The administration of the program has been difficult due to decreased Agency staff and changes in property management at several large properties. 3 Community Development Block Grants ("CDBG") and HOME CDBG funds are allocated on a population basis. Agency staff works with the County Federal Grants division to allocate housing funds in the San Rafael Planning Area pursuant to the cooperative agreement. In Fiscal Year 2010-11, CDBG funds were allocated to the housing rehabilitation program at Marin Housing and to Fair Housing of Marin. Other San Rafael recipients of CDBG funds were Buckelew and Lifehouse for the Sunrise II and Monticello properties. Federal HOME funds are allocated by the County Federal Grants staff for specific developments. San Rafael has successfully utilized HOME funds on several affordable housing acquisitions. Potential changes to the County's priorities for Federal housing funds may negatively affect San Rafael's ability to compete for future HOME funding. At the request of the Federal Department of Housing and Community Development ("HUD"), the County recently completed an Analysis of Impediments to Fair Housing Choice (Al). This comprehensive planning document was commissioned by the County as part of its mandate to affirmatively further fair housing. The Al identifies barriers to fair housing choices in Marin County and provides recommendations for addressing those barriers. Some of the recommendations in the Al may result in Federal housing funds being shifted from areas of the County with a larger proportion of minority inhabitants to areas of the County with a less diverse populace. This shift may negatively affect San Rafael's ability to use Federal funds to address affordable housing needs in our community. Non -Profits Grants for Acquisition and Rehabilitation The Agency continues to assist non-profit organizations to acquire existing properties. All buildings receiving Agency assistance have a Regulatory Agreement for property management and long-term rental restrictions. There were no acquisitions in 2010-11 due to the cost of units and the lack of public funding. Rental developments are commanding premium prices in the current real estate market, making it difficult for non-profit housing managers to acquire units due to their restricted rental revenue. Federal, State and local funding is usually required to assist non-profit groups to acquire units. The main programs are CDBG, HOME and tax credits. Marin County is not competitive for many Federal and State affordable housing funds due to our high cost of living and smaller buildings. Local funding from the SRRDA is not adequate to close the funding gap. In 2010, the Agency made a $50,000 grant to Habitat for Humanity for the acquisition and rehabilitation of 21 Stephens Place. The unit was rehabilitated with community assistance and sold to a low-income family. Rehabilitation Grants The Agency continued to provide funds for low interest loans and grants to low income homeowners for rehabilitation and handicapped accessibility improvements. The program is administered by Marin Housing and is only available to single family homeowners. The majority of the loans are made to low-income seniors. 4 Canal Area Housing Improvement Program ("CAHIP") BRIDGE Housing owns and manages .55 Fairfax (40 units) and 162-172 Belvedere (28 units). These buildings were acquired and rehabilitated with assistance from the Agency, Marin Community Foundation, Cowell Foundation and Federal HOME funds. All of the units will remain affordable for sixty years. BRIDGE continues to pursue acquisition of additional properties and the Agency has designated $1,250,000 for this program. The CAHIP program may be negatively affected by the potential change in the priorities for HOME funding discussed above. Code Enforcement " The City's apartment inspection program is funded by apartment inspections fees. In 2010-11, the Agency provided additional funding for a housing inspector position in the Code Enforcement division assigned to inspect buildings with a large number of low-income residents, in keeping with the requirement under State Law to use housing funds to increase improve or preserve affordable housing and the Agency's mission to improve housing conditions for low-income residents of the City. The Agency's contribution to the code enforcement program has been reduced to one-quarter of a position in Fiscal Year 2011-12. The apartment inspection program will continue utilizing the apartment inspection fee revenue and the Agency will reallocate those funds to other low-income housing initiatives. Housing Support Services The Agency continues to provide funding to Ritter Center for housing support programs serving very low and low-income persons. Use of Affordable Housing Funds (CRL 33334.3 (d) and 33334.4) Agency housing funds have not been used to fund offsite improvements. Agency funds are not used for land acquisition, construction or rehabilitation of developments for moderate -income households; funding is targeted to assist very low and low-income persons. The Agency does expend some funds on the Below Market Rate ownership program that serves both low and moderate -income households. In 2010-2011, planning and administrative expenses of $242,348 represented approximately 27% of the annual housing expenditures, excluding the $291,840 of bond debt service paid by the housing fund. These expenses are not disproportionate to the amount spent on housing activities and are necessary for the production, improvement, and preservation of affordable housing and the required reporting on housing activities. EXHIBIT H lo!o , o o'd d of ojG ojo pi �i- _ I I _ •• T 0. �R old olN Bio of alsi, � s c''o N X16 of j j I I al L; � ,r'N of ;� plod � ��II� olo IN l,,; v •� rniN to lh m i , E. o olo o o I�I'oIo o S �IoP KI 7;6 J 6 ZO o�oio o!a co oolc�N oloja � N cP„lo� c o I N N to n! N N! I NIN nliNl" _ .-. i PIP o�C I ! I y _ d ,I jq e;G�ye��w�€--°-_ a J„!cs`c� _: meq' ';;� ° wo:c'n'vccamla:n vc:»uw mea` :c c c ! I z z z � I i ro 4 I I ! I I I! ! I i I o W (I i II I j i i I is mi N I� NIP Pj 1- jAi I I i i oi� �i� � �j� � n' � e'`" _ PIP , I-• ,-;� I ,A, ��" N :I ��, alb ° iai 7'