FY 09/10 Report - City of Santa Rosa

Transcription

Redevelopment Agency Annual Financial Report
For the Fiscal Year Ended June 30, 2010
REDEVELOPMENT AGENCY
OF THE CITY OF SANTA ROSA
(A Component Unit of the City of Santa Rosa)
Annual Financial Report
This Page Intentionally Left Blank
INTRODUCTORY SECTION
Table of Contents
Page(s)
Introductory Section:
Table of Contents ..................................................................................................................................................................... i
Letter of Transmittal .............................................................................................................................................................. iii
Members ............................................................................................................................................................................... vii
Financial Section:
Independent Auditor’s Report ................................................................................................................................................. 1
Management’s Discussion and Analysis (Required Supplementary Information) .................................................................. 3
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets – Governmental Activities..........................................................................................................10
Statement of Activities – Governmental Activities ...........................................................................................................11
Governmental Funds Financial Statements:
Balance Sheet ....................................................................................................................................................................12
Statement of Revenues, Expenditures and Changes in Fund Balances..............................................................................14
Notes to the Basic Financial Statements..............................................................................................................................16
Other Required Supplementary Information:
Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual – General Fund ...................................................................................................................................29
Other Supplementary Information:
Nonmajor Funds Financial Statements:
Nonmajor Governmental Funds ..........................................................................................................................................33
Combining Balance Sheet .................................................................................................................................................34
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ..............................................................................................................................................38
Compliance Section:
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 Standards........................................................................................43
i
ECONOMIC DEVELOPMENT AND HOUSING
90 Santa Rosa Avenue - Santa Rosa, CA 95404
Phone: 707-543-3300 - Fax: 707-543-3317
www.srcity.org
iii
iv
v
A COMPONENT UNIT OF THE CITY OF SANTA ROSA
MEMBERS
JUNE 30, 2010
Jake Ours
Chair
William J. Arnone, Jr.
Vice Chair
Charles Evans
Member
Philip Olsen
Member
Helga Lemke
Member
vii
vi
FINANCIAL SECTION
Members of the Redevelopment Agency
of the City of Santa Rosa, California
Independent Auditor’s Report
We have audited the accompanying financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the Redevelopment Agency of the City of Santa Rosa (Agency), a
component unit of the City of Santa Rosa, California, as of and for the fiscal year ended June 30, 2010, which
collectively comprise the Agency’s basic financial statements as listed in the table of contents. These financial
statements are the responsibility of the Agency’s management. Our responsibility is to express opinions on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Agency’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
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 opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund, and the aggregate remaining fund information of
the Agency as of June 30, 2010, and the respective changes in financial position thereof for the fiscal year then
ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October 11, 2010, on our
consideration of the 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.
The Management’s Discussion and Analysis and the Schedule of Revenues, Expenditures and Changes in Fund
Balance – Budget and Actual – General Fund, as listed in the accompanying table of contents, are not a required part
of the basic financial statements but are supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which consisted principally
of inquiries of management regarding the methods of measurement and presentation of the required supplementary
information. However, we did not audit the information and express no opinion on it.
1
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
the Agency’s basic financial statements. The introductory section and combining nonmajor fund financial
statements are presented for purposes of additional analysis and are not required parts of the basic financial
statements. The combining nonmajor fund financial statements have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole. The introductory section has not been subjected to the
auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on
it.
Certified Public Accountants
Sacramento, California
October 11, 2010
2
Redevelopment Agency of the City of Santa Rosa
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2010
As management of the Redevelopment Agency of the City of Santa Rosa (the Agency), a component unit of the City
of Santa Rosa (the City), we offer readers of the Agency’s basic financial statements this narrative overview and
analysis of the financial activities of the Agency for the fiscal year ended June 30, 2010. Readers are encouraged to
consider the following information in conjunction with the Agency’s basic financial statements.
FINANCIAL HIGHLIGHTS
•
•
•
•
•
•
•
•
•
•
There have been declines in residential property values in the Redevelopment Project Areas during the real
estate downturn.
There was a $3,003,833 Supplemental Educational Revenue Augmentation Funds payment by the
Redevelopment Agency for the State’s revenue shift of local funds.
Multiple public improvement projects in the Southwest Redevelopment Project Area have progressed from the
design and right-of-way acquisition phases to the construction phase.
Multiple public improvement projects in the Gateways Redevelopment Project Area are in various phases of
design and development.
Participation rent declined in the Grace Brothers Redevelopment Project Area for the 55-year lease of the hotel,
conference center and parking parcels at the Hyatt Vineyard Creek Hotel and Conference Center.
The Gateways lawsuit was resolved when the appellate court decided in favor of the Agency and the decision
became final on August 26, 2009. Implementation of the Redevelopment Plan began with budget approval in
September 2009.
A Disposition and Development Agreement was approved for the Museum on the Square Project (the former
AT&T building acquired by the Agency in fiscal year 06/07).
Agency liabilities exceed assets by $5,304,446. The unrestricted portion of these net assets is ($11,915,513);
the restricted portion is $7,034,124; the net assets invested in capital assets, net of related debt, are ($423,057).
The Agency’s governmental funds reported ending fund balances of $37,672,575, a decrease of $7,088,195
from the prior year.
The Agency had general revenues of $12,521,632 and expenses of $18,869,125.
OVERVIEW OF THE FINANCIAL STATEMENTS
The Agency’s annual report consists of four parts – management’s discussion and analysis (this section), the basic
financial statements, other required supplementary information and a supplementary section that presents combining
statements for nonmajor governmental funds.
The Agency’s basic financial statements are comprised of three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to the financial statements.
Government-wide financial statements. The government-wide financial statements are designed to provide readers
with a broad overview of the Agency’s finances, in a manner similar to a private-sector business.
The statement of net assets presents information on all of the Agency’s assets and liabilities, with the difference
between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful
indicator of whether the financial position of the Agency is improving or declining.
The statement of activities presents information showing how the Agency’s net assets changed during the most
recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change
occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for
some items that will only result in cash flows in future fiscal periods.
The government-wide financial statements report on the function of the Agency that is principally supported by
intergovernmental revenues. The Agency’s function is to revitalize blighted and economically disadvantaged
sections of the City and provide affordable housing assistance. This function is funded primarily with incremental
property tax revenue.
3
JUNE 30, 2010
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.
Governmental funds are used to account for essentially the same function reported as governmental activities in the
government-wide financial statements. However, unlike the government-wide financial statements, governmental
fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a
government’s near-term financing requirements.
The Agency maintains major governmental funds for the General Fund, 2005B Certificates of Participation Debt
Service Fund, 2002A Southwest Area Debt Service Fund, City Cooperation Agreement Debt Service Fund,
Gateways City Loan Debt Service Fund, 2002A Southwest Project Capital Projects Fund and the 2005A Southwest
Area Tax Exempt Capital Projects Fund in the governmental funds balance sheet and the governmental funds
statement of revenues, expenditures, and changes in fund balances.
The focus of governmental funds is narrower than that of the government-wide financial statements; therefore it is
useful to compare the information presented in the governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, readers may better understand the
long-term impact of the government’s near-term financial decisions. The governmental funds balance sheet and the
governmental funds statement of revenues, expenditures, and changes in fund balances each provide a reconciliation
to facilitate this comparison between the governmental funds and governmental activities.
Notes to the financial statements. The notes provide additional information that is essential to a full understanding
of the data provided in the government-wide and fund financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government’s improving or declining
financial position. In the case of the Agency, liabilities exceeded assets by $5,304,446 at the close of the current
fiscal year. This decline in financial position is primarily attributable to an increase in spending on projects in the
Southwest Project Area and Santa Rosa Center/Grace Brothers Merged Project Area as well as a full year of debt
service on the Exchange Bank loan, which was obtained mid-fiscal year 2008/09 for housing-related projects in
these same project areas.
Net Assets
Assets:
Current and other assets
Capital assets, net
Total assets
Liabilities:
Accounts payable and other accrued liabilities
Long-term debt
Total liabilities
Net assets:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
Total
Percentage
Change
2010
2009
Total Dollar
Change
$ 39,232,374
14,711,787
53,944,161
$ 46,247,250
15,169,514
61,416,764
$ (7,014,876)
(457,727)
(7,472,603)
-15%
-3%
-12%
1,050,422
58,198,185
59,248,607
925,786
59,447,931
60,373,717
124,636
(1,249,746)
(1,125,110)
13%
-2%
-2%
(1,132,713)
4,904,847
(10,119,627)
$ (6,347,493)
-160%
230%
-563%
-609%
(423,057)
7,034,124
(11,915,513)
$ (5,304,446)
4
709,656
2,129,277
(1,795,886)
$ 1,043,047
JUNE 30, 2010
Analysis of Net Assets
The Agency’s restricted net assets represent resources that are subject to external restrictions for low and moderate
income housing restrictions, debt service requirements and anticipated capital improvements. Restricted assets
increased 230% primarily due to start up of the Gateways Project Area, for which funds held in escrow until
resolution of the lawsuit were released and restricted for housing and other projects. The 563% decrease in
unrestricted net assets is due to a significant increase in unrestricted long-term debt (i.e., not capital asset related)
due to the spending down of restricted funds for Southwest housing and capital projects and Santa Rosa
Center/Grace Brothers housing projects. The 160% decline in net assets invested in capital assets, net of related
debt is due in part to a reduction in capital assets, and in part to an increase in capital asset related debt due to the
spending down of proceeds of the 2005B Certificates of Participation that were restricted for debt service and 2005
Santa Rosa Center Loan that were restricted for capital projects.
Changes in Net Assets
Revenues:
General revenues:
Incremental property taxes
Investment income
Other
Total revenues
Expenses:
Community Development
Interest
Total expenses
Change in net assets
Net assets, beginning of year
Net assets, end of year
Total
Percentage
Change
2010
2009
Total Dollar
Change
$ 11,899,056
522,530
100,046
12,521,632
$ 7,674,811
1,107,735
395,092
9,177,638
$ 4,224,245
(585,205)
(295,046)
3,343,994
55%
-53%
-75%
36%
15,136,470
3,732,655
18,869,125
(6,347,493)
1,043,047
$ (5,304,446)
12,633,659
3,172,540
15,806,199
(6,628,561)
7,671,608
$ 1,043,047
2,502,811
560,115
3,062,926
281,068
(6,628,561)
$ (6,347,493)
20%
18%
19%
-4%
-86%
-609%
The net assets of the Agency decreased $6,347,493 during the current fiscal year. This reduction is the combined
result of a 36% increase in total revenues and a 19% increase in total expenses. Other revenues decreased 75% due
to a lack of Hotel and Conference Center participation rent, which was $292,807 in the prior year. Investment
income decreased 53% due to a decline in the average return on investments from 2.76% to 1.56%. Expenses were
up primarily due to a significant increase in housing and capital project activities in the Southwest Project Area and
the Santa Rosa Center/Grace Brothers Merged Project Area.
FUND FINANCIAL ANALYSIS
As noted earlier, the Agency uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. The Agency’s governmental funds are discussed below:
Governmental funds. The focus of the Agency’s governmental funds is to provide information on near-term
inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Agency’s
financing requirements. In particular, fund balance may serve as a useful measure of a government’s net resources
available for spending for program purposes in future years.
The Agency’s governmental funds reported an ending fund balance of $37,672,575, a decrease of $7,088,195 in
comparison with the prior year. This decrease is primarily attributable to reduced cash balances due to project and
debt service expenditures in the Southwest Santa Rosa Center/Grace Brothers Project Areas. Unreserved fund
balance represents 58.3% of total fund balance and is designated primarily to construct housing and other
improvements that eliminate slums and blight within each project area. The remaining fund balance is reserved for
assets not available, for future debt service or to liquidate contracts and purchase orders of the prior year.
5
JUNE 30, 2010
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets. The Agency’s investment in capital assets for its governmental activities was $14,711,787 (net of
accumulated depreciation). This investment in capital assets includes land, construction in progress, building and
improvements, and equipment. Additional information on the Agency’s capital assets can be found in Note 4 to the
Financial Statements.
Long-Term Debt. The Agency issued no additional bonds during the year, but it did obtain loans in the amount of
$5,646,156 from the City of Santa Rosa. Additional information on the Agency’s Long-Term Debt can be found in
Note 5 to the Financial Statements.
Plan Time Limits. Redevelopment Agencies are bound by time limits related to when new debt issuances may be
incurred, when debt proceeds must be expended, and when all debt needs to be repaid.
The Agency plan time limits are as follows:
Plan time limits
Plan Adoption Date
Time Limit on Incurring Debt
Time Limit on Effectiveness of Plan
Time Limit on Repayment of Debt
Phase I
Phase II
Phase III
Grace
Brothers
Southwest
Gateways
12/05/1961
01/01/2004
01/01/2012
01/01/2022
3/10/1970
01/1/2004
3/10/2013
3/10/2023
10/29/1974
01/01/2004
10/29/2017
10/29/2027
08/06/1985
08/06/2005
08/06/2027
08/06/2037
7/18/2000
7/18/2020
7/18/2030
7/18/2040
06/20/2006
06/20/2026
06/20/2036
06/20/2051
BUDGETARY HIGHLIGHTS
Variances between actual results and budget for the General Fund can be briefly summarized as follows:
•
Actual revenues exceeded budgetary estimates by $86,017. These additional revenues are primarily the result
of investment income on funds accumulating as various projects related to the Santa Rosa Center and Southwest
Redevelopment Districts move through the implementation process carrying forward remaining funds from year
to year. Expenditures were $9,181,425 below budget for this same reason.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS
The following factors were considered in preparing the Agency’s budget for the 2011 fiscal year:
•
Due to the downward trend and continued uncertainties in the residential real estate market, base and
supplemental tax increment revenue may continue to decline in the Southwest Project Area.
•
Due to continued uncertainties in the commercial real estate market, base and supplemental tax increment
revenue may decline in the merged Santa Rosa Center/Grace Brothers Redevelopment Project Areas.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Agency’s finances for all those with an
interest. Questions concerning any of the information provided in this report or requests for additional financial
information should be addressed to the Chief Financial Officer, 90 Santa Rosa Ave., 2nd Floor, Santa Rosa, CA
95404.
6
BASIC FINANCIAL STATEMENTS
REDEVELOPMENT AGENCY OF THE CITY OF SANTA ROSA
Statement of Net Assets
Governmental Activities
June 30, 2010
ASSETS
Cash and investments
Accounts receivable
Interest receivable
Loan receivable
Deferred charges
Capital assets:
Depreciable
Nondepreciable
$
35,760,797
25,000
178,211
1,974,000
1,294,366
10,320,177
4,391,610
Total assets
53,944,161
LIABILITIES
Accounts payable
Interest payable
Long-term debt:
Due within one year
Due beyond one year
265,433
784,989
1,516,744
56,681,441
Total liabilities
59,248,607
NET ASSETS (DEFICIT)
Invested in capital assets, net of related debt
Restricted for:
Debt service
Housing programs
Capital projects
Unrestricted (deficit)
(423,057)
698,720
2,497,409
3,837,995
(11,915,513)
Total net assets (deficit)
$
The notes to the basic financial statements are an integral part of this statement.
10
(5,304,446)
Statement of Activities
Governmental Activities
Functions
Community
Debt Service
Development
Interest
Total
EXPENSES
$
GENERAL REVENUES
Investment income
Other
18,869,125
11,899,056
522,530
100,046
Total general revenues
12,521,632
Change in net assets
Net assets, beginning of year
(6,347,493)
1,043,047
Net assets (deficit), end of year
$
(5,304,446)
11
$
15,136,470
$
3,732,655
Balance Sheet
Governmental Funds
June 30, 2010
General
Fund
ASSETS
Accounts receivable
Interest receivable
Loan receivable
Total assets
LIABILITIES
Accounts payable
Gateways
City Loan
$ 11,690,460
25,000
53,802
1,974,000
$
1,089,481
10,101
-
$
419,865
4,446
-
$
-
$
273,454
14,496
-
$ 13,743,262
$
1,099,582
$
424,311
$
-
$
287,950
$
$
34,211
$
179,716
$
-
$
3,349
48,157
FUND BALANCES
Reserved for:
Encumbrances
Debt service
Loan receivable
Unreserved:
Reported in:
General fund
Capital projects funds
11,156,364
-
Total fund balances
13,695,105
Total liabilities and fund balances
Debt Service
2002A
City
Southwest
Cooperation
Area
Agreement
2005B
Certificates of
Participation
564,741
1,974,000
$ 13,743,262
1,065,371
-
244,595
-
-
-
1,065,371
$
1,099,582
-
-
244,595
$
424,311
284,601
-
-
$
-
284,601
$
287,950
(Continued)
12
Capital Projects
2002A
2005A
Southwest
Southwest
Project
Tax Exempt
Nonmajor
Funds
Total
$
4,540,320
65,647
-
$
5,499,217
1,298
-
$
12,248,000
28,421
-
$
35,760,797
25,000
178,211
1,974,000
$
4,605,967
$
5,500,515
$
12,276,421
$
37,938,008
$
265,433
$
$
-
$
-
$
-
4,461,628
-
4,656,986
-
100,000
2,366,473
-
9,783,355
3,961,040
1,974,000
144,339
843,529
9,809,948
11,156,364
10,797,816
4,605,967
5,500,515
12,276,421
37,672,575
4,605,967
$
5,500,515
$
12,276,421
Amounts reported for governmental activities in the statement of
net assets are different because:
Capital assets used in governmental activities are not financial
resources and therefore are not reported in the governmental
funds.
14,711,787
Bond issuance costs are expended in governmental funds when
paid, however, are capitalized and amortized over the life of
the corresponding bonds for purposes of the statement of
net assets.
Deferred charges, net of amortization
1,294,366
Long-term liabilities, including bonds payable, are not due and
payable in the current period and therefore are not reported
in the governmental funds. Those liabilities consist of:
Certificates of participation
$ (14,270,000)
Bonds payable, net of premium/discount (23,846,162)
Loan payable to bank
(14,443,284)
Loans payable to the City
(5,558,739)
Pollution remediation
(80,000)
Accrued interest payable
(784,989)
Net assets of governmental activities
(58,983,174)
$
(5,304,446)
(Concluded)
13
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
General
Fund
REVENUES
$
Interest
224,301
Net change in the fair value of investments
(48,330)
Other, including sale of property, plant & equip.
100,046
Total revenues
276,017
EXPENDITURES
Community development
5,402,985
Debt service:
Principal retirements
Interest and fiscal charges
Total expenditures
5,402,985
Excess (deficiency) of revenues over
(under) expenditures
(5,126,968)
OTHER FINANCING SOURCES (USES)
Long-term debt issued
2,310,856
Transfers in
3,833,715
Transfers out
(1,975,406)
Total other financing sources (uses)
4,169,165
Net change in fund balances
(957,803)
Fund balances, beginning of year
14,652,908
Fund balances, end of year
$ 13,695,105
Debt Service
2002A
City
Southwest
Cooperation
Area
Agreement
2005B
Certificates of
Participation
$
2,445,999
43,608
(3,910)
2,485,697
-
$
3,621,287
21,314
(9,176)
3,633,425
-
275,000
730,725
1,005,725
185,000
509,871
694,871
1,479,972
2,938,554
(2,145,616)
(2,145,616)
(665,644)
1,731,015
$ 1,065,371
$
(3,715,294)
(3,715,294)
(776,740)
1,021,335
$
244,595
-
Gateways
City Loan
$
-
-
5,646,156
300,717
5,946,873
$
5,698,950
125,037
22,553
5,846,540
103,738
103,738
(5,946,873)
5,742,802
5,946,873
5,946,873
-
(5,458,201)
(5,458,201)
284,601
284,601
$
(Continued)
14
Capital Projects
2002A
2005A
Southwest
Southwest
Project
Tax Exempt
$
$
9,335
(2,081)
7,254
$
16,909
(3,854)
13,055
Nonmajor
Funds
$
132,820
124,918
1,906
259,644
Total
$
11,899,056
565,422
(42,892)
100,046
12,521,632
21,301
3,799,412
5,455,045
14,678,743
21,301
3,799,412
785,318
2,040,715
8,281,078
6,891,474
3,685,766
25,255,983
(14,047)
(3,786,357)
(8,021,434)
(12,734,351)
(14,047)
4,620,014
4,605,967
(3,786,357)
9,286,872
5,500,515
3,335,300
5,265,774
(1,751,845)
6,849,229
(1,172,205)
13,448,626
12,276,421
5,646,156
15,046,362
(15,046,362)
5,646,156
(7,088,195)
$
$
Amounts reported for governmental activities in the statement of
activities are different because:
Governmental funds report capital outlay as expenditures. However,
in the statement of activities, the costs of those assets are allocated
over their estimated useful lives and reported as depreciation
expense.
(457,727)
Long-term debt proceeds provide current financial resources to
governmental funds, but issuing debt increases long-term liabilities
in the statement of net assets. Repayment of bond principal is an
expenditure in the governmental funds, but the repayment reduces
long-term liabilities in the statement of net assets.
$
(5,646,156)
Principal repayments
6,891,474
Accrued interest on long-term debt is reported in the government-wide
statement of activities, but does not require the use of current
financial resources. Amortization of bond premiums, discounts and
costs of issuance are expensed as a component of interest expense on
the statement of activities. This amount represents the net accrued
interest expense and the amortization of bond premiums, discounts
and costs of issuance not reported in governmental funds.
Change in interest payable
$
13,799
Amortization of bond issuance costs
(65,116)
Amortization of discount
(395)
Amortization of premium
4,823
Changes in net assets of governmental activities
$
1,245,318
(46,889)
(6,347,493)
(Concluded)
15
Notes to the Basic Financial Statements
June 30, 2010
NOTE 1 – REPORTING ENTITY
The Redevelopment Agency of the City of Santa Rosa (Agency) is a Community Redevelopment Agency formed, organized and
existing pursuant to the provisions of part 1 of Division 24 (commencing with Section 33000) of the California Health and Safety
Code. Pursuant to said law, the Agency is vested with the responsibility for carrying out a duly adopted redevelopment plan.
These basic financial statements contain the financial data of the Agency. The Agency is governed by five board members who
are appointed by the City of Santa Rosa’s City Council. The City of Santa Rosa (the City) exercises significant financial and
management control over the Agency. Therefore, the financial data of the Agency has also been included as a discretely
presented component unit within the City’s basic financial statements for the fiscal year ended June 30, 2010.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Agency conform to accounting principles generally accepted in the United States of America as
applicable to governments. The following is a summary of the more significant policies:
(a)
Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report
information on all of the Agency’s activities. For the most part, the effect of interfund activity has been removed from
these statements. All of the activities of the Agency are governmental activities.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are
offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from goods,
services or privileges provided by a given function or segment and (2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Incremental property taxes and
unrestricted investment income properly not included among program revenues are reported instead as general
revenues.
(b)
Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of cash flows. Grants and similar items are recognized as revenue as soon as all
eligibility requirements have been met. Incremental property taxes are recognized in the fiscal year levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. The Agency considers intergovernmental revenues, property tax and interest to be
available if they are collected within 60 days after the end of the current fiscal year. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting, except for principal and interest on long-term debt,
which is recognized when due.
When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted
resources first, then unrestricted resources as they are needed.
The Agency reports the following major governmental funds:

The General Fund is used to account for all financial resources except those required to be accounted for in
another fund.

The 2005B Certificates of Participation Debt Service Fund is used to account for the accumulation of resources
for, and the payment of, the 2005B Certificates of Participation.

The 2002A Southwest Area Debt Service Fund accounts for the accumulation of resources for, and the payment of,
the 2002A Southwest Area Bonds.

The City Cooperation Agreement Debt Service Fund accounts for debt service receipts and expenditures related to
annual loan from the City to the Redevelopment Agency.

The Gateways City Loan Debt Service Fund accounts for debt service receipts and expenditures related to
$1,728,962 loan from the City to the Redevelopment Agency.
16
Notes to the Basic Financial Statements (Continued)
June 30, 2010
(c)

The 2002A Southwest Project Capital Projects Fund accounts for the accumulation of resources for, and the
expenditures in, the Southwest Project area.

The 2005A Southwest Tax Exempt Capital Projects Fund accounts for the accumulation of resources for, and the
expenditures in, the Southwest Project area.
Investments
Investments are stated at fair value. Valuations are obtained by using actual quotations provided by published indices.
(d)
Capital Assets
Capital assets are recorded at historical cost or at 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. The Agency defines
capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one
year. The estimated useful lives of the Agency’s equipment is 10 years, improvements are 20 years, and buildings are
30 years.
(e)
Accumulated Unpaid Vacation, Sick Pay, and Other Employee Benefits
The Agency contracts with the City for all personnel services and, therefore, does not directly incur related employee
costs.
(f)
Property Taxes
All property taxes are assessed, collected and allocated by the County of Sonoma’s (County) Auditor-Controller to the
various taxing entities. The method of allocation used by the County is subject to review by the State of California.
Property taxes attach as an enforceable lien on property as of the first day in January and are levied on July 1. Secured
property taxes are payable in two installments on November 1 and February 1 and are delinquent after December 10
and April 10, respectively, and are recognized in the year levied. Unsecured property taxes are payable on August 31
and are recognized in the year to which they relate.
(g)
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
(h)
New Pronouncements
The Agency is currently analyzing its accounting practices to determine the potential impact on the financial statements
for the following Governmental Accounting Standards Board (GASB) Statements:
In February 2009 GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions,
which establishes a hierarchy of fund balance classifications based on relative strength of the constraints imposed on
the use of the resources reported in governmental funds. The intent of this Statement is to improve the usefulness of
fund balance information by clearly defining the classifications for more consistent application and by clarifying the
definitions of the types of governmental funds. This Statement is effective for the Agency’s fiscal year ending June 30,
2011.
17
June 30, 2010
NOTE 3 – CASH AND INVESTMENTS
The Agency participates in a cash and investment pool with the City, and as such is subject to the investment policies of the City.
The City pool invests Agency funds in the amount of $22,210,294 at June 30, 2010, in accordance with statutes limiting the
Agency to investments in obligations of the U.S. government and its agencies and instrumentalities, commercial paper rated A-1
by Standard and Poor’s Corporation or P-1 by Moody’s Commercial Paper Record, bankers’ acceptances, repurchase agreements,
reverse repurchase agreements, medium term corporate notes, mutual funds as permitted by the California Government Code,
small business administration loans, certificates of deposit, negotiable certificates of deposit, passbook savings demand deposits,
Joint Powers Agency pools and the State Local Agency Investment Fund.
Custodial credit risk is the risk that in the event of a bank failure, the Agency’s deposits may not be returned to it. The Agency
does not have a deposit policy for custodial credit risk. As of June 30, 2010, the Agency's bank balance was $1,092,956, of that
$839,205 was collateralized with securities held by the pledging financial institutions at 110% of the Agency’s deposits in
accordance with the State of California Government Code.
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally,
the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a
means of limiting its exposure to fair value losses resulting from rising interest rates, the City’s investment portfolio, in which the
Agency is a participant, is structured such that securities mature to meet the cash requirements for ongoing operations, thereby
avoiding the need to sell securities on the open market prior to maturity. Operating funds are invested primarily in shorter-term
securities, money market mutual funds, or similar investment pools. At June 30, 2010, the weighted average maturity of the
City’s investment pool is 300 days.
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This
is measured by the assignment of a rating by a nationally recognized statistical rating organization. At June 30, 2010, the City’s
investment pool is unrated. As a participant in the City’s investment pool, Agency investments are made in accordance with the
City’s investment policy as described in the City’s basic financial statements. Information regarding deposit, custodial credit,
interest rate and credit risks of the City’s pooled cash and investments is presented in Note 3 to the City’s basic financial
statements.
The Agency also has cash and investments held by trustees made in accordance with bond covenants and are pledged for
payment of principal, interest, and specified capital improvements or in accordance with trust agreements. At June 30, 2010, the
Agency’s investments at fair value held by trustees are as follows:
Type
Maturity Date
Cash
Amount
N/A
Federal Home Loan Bank
$
8/11/2010
Total Cash and Investments held by trustees
$
Credit Ratings
1,092,956
N/A
12,457,547
AAA
13,550,503
NOTE 4 – CAPITAL ASSETS
Capital asset activity for year ended June 30, 2010 was as follows:
Balance
July 1, 2009
Capital assets, not being depreciated:
Land
Capital assets, being depreciated:
Buildings and improvements
Equipment
Total capital assets, being depreciated
Less accumulated depreciation for :
Buildings and improvements
Equipment
Total accumulated depreciation
Total capital assets, being depreciated, net
Total capital assets, net
$
4,391,610
13,337,721
125,607
13,463,328
$
(2,583,698)
(101,726)
(2,685,424)
10,777,904
15,169,514
Additions &
Transfers
Retirements
& Transfers
Balance
June 30, 2010
$
$
$
-
(454,395)
(3,332)
(457,727)
(457,727)
$ (457,727)
-
$
Depreciation expense in the amount of $457,727 was charged to the Community Development function.
18
-
-
4,391,610
13,337,721
125,607
13,463,328
(3,038,093)
(105,058)
(3,143,151)
10,320,177
$ 14,711,787
June 30, 2010
NOTE 5 – LONG-TERM LIABILITES
The following is a summary of long-term liabilities transactions for the year ended June 30, 2010:
Balance
July 1, 2009
Additions
Retirements
Balance June
30, 2010
Amounts Due
Within One
Year
$
$
$
Loans with the City:
Gateways Project City Loan (a)
TORPA City Loan (b)
SR Center City Loan (c)
Cooperative Agreement
Loan from Exchange Bank (d)
2005A Certificates of Participation (e)
2005B Certificates of Participation (f)
2002A Southwest Area Bonds (g)
2002A Southwest Area Bond Premium
2005A Southwest Area Bonds (h)
2005A Southwest Area Bond Premium
2005B Southwest Area Bonds (i)
2005B Southwest Area Bond Discount
Pollution Remediation (j)
Total long-term liabilities
a)
b)
c)
d)
e)
f)
g)
$
1,728,962
401,632
$
3,690,411
14,601,336
1,425,000
13,150,000
8,955,000
2,718
13,735,000
117,620
1,565,000
(4,748)
80,000
$ 59,447,931
5,646,156
-
$
5,646,156
262,266
5,646,156
158,052
30,000
275,000
185,000
118
165,000
4,705
170,000
(395)
-
$ 6,895,902
1,728,962
401,632
3,428,145
14,443,284
1,395,000
12,875,000
8,770,000
2,600
13,570,000
112,915
1,395,000
(4,353)
80,000
$ 58,198,185
277,739
169,577
55,000
475,000
190,000
118
160,000
4,705
185,000
(395)
-
$ 1,516,744
The Gateways Project City loan bears interest at 6% per annum. Annual payments are payable from 2012 to 2039.
The City made a loan to the Agency to finance preparation and implementation of a redevelopment plan for the
Gateways Redevelopment Project. Please refer to Note 7 Related Party Transactions for additional details.
The TORPA City loan bears interest at 6.00% per annum. The Agency has the option to make annual interest only
payments until 2013 at which time annual principal and interest payments will be required each June 30 until 2034. The
City made a loan to the Agency to finance the administration of the TORPA Redevelopment Project. Please refer to
Note 7 Related Party Transactions for additional details.
The SR Center City loan bears interest at 5.90% per annum. Principal and interest in the amount of $480,000 is due on
June 1 of each year. Proceeds are used to provide funds for public improvements and administration in the SR Center
Project Area. The loan matures in 2020. Please refer to Note 7 Related Party Transactions for additional details.
The Exchange Bank loan bears interest at the rate of 6.375% - 7.75% with the current rate being 6.95%. The rate
adjustment dates are June 1, 2013 and June 1, 2018. The maturity date of the loan is June, 1, 2023. The loan is
amortized over 360 monthly payments with a balloon payment due in 15-years on the maturity date. The Agency has
pledged a portion of the housing tax increment revenues to repay the original loan of $14.7 million. The loan proceeds
are used to finance affordable housing projects approved by the Santa Rosa Housing Authority. Housing tax increment
revenues were projected to produce 142% of the debt service requirements. Total principal and interest remaining on
the bonds is $26.34 million. For the current year, principal and interest paid and housing tax increment revenues were
$1,182,002 and $2,445,999, respectively.
The 2005A Certificates of Participation bear interest at 3.50% to 4.75% and mature October 1, 2027. Interest is payable
April 1 and October 1. Annual principal payments ranging from $20,000 to $140,000 are payable each year on October
1 until bonds mature. Proceeds were used to refund prior debt.
The 2005B Certificates of Participation bear interest at 4.93% to 5.81% and mature October 1, 2027. Interest is payable
April 1 and October 1. Annual principal payments ranging from $175,000 to $1,315,000 are payable each year on
October 1 until bonds mature. Proceeds were used to refund prior debt.
The 2002A Southwest Area Bonds bear interest at 4.00% to 6.00% payable on February 1 and August 1 of each year in
installments ranging from $160,000 to $640,000 through 2033, commencing August 1, 2003. The Agency has pledged
a portion of the tax increment revenues from the Southwest Redevelopment Project Area to repay the original issue of
$9.69 million in tax allocation bonds to finance various redevelopment projects in the Southwest Redevelopment Area.
Tax increment revenues were projected to produce 265% of the debt service requirements over the life of the bonds.
19
June 30, 2010
h)
i)
j)
The 2005A Southwest Area Bonds bear interest at 3.00% to 5.00% and mature August 1, 2033. Interest is payable
February 1 and August 1. Annual principal payments ranging from $110,000 to $1,370,000 are payable each year on
August 1 until bonds mature. The Agency has pledged a portion of the tax increment revenues from the Southwest
Redevelopment Project Area to repay the original issue of $14.09 million in tax allocation bonds to finance various
redevelopment projects in the Southwest Redevelopment Area. Tax increment revenues were projected to produce
343% of the debt service requirements over the life of the bonds.
The 2005B Southwest Area Bonds bear interest at 3.89% to 5.5% and mature August 1, 2020. Interest is payable
February 1 and August 1. Annual principal payments ranging from $105,000 to $195,000 are payable each year on
August 1 until bonds mature. The Agency has pledged a portion of the tax increment revenues from the Southwest
Redevelopment Project Area to repay the original issue of $2.12 million in tax allocation bonds to finance various
redevelopment projects in the Southwest Redevelopment Area. Tax increment revenues were projected to produce
3,124% of the debt service requirements over the life of the bonds. The 2002A, 2005A, and 2005B Southwest Area
Bonds are all pledged by the same tax increment revenues. Total combined principal and interest remaining on those
three bonds is $41.33 million. For the current year, principal and interest paid on those three bonds and tax increment
revenues were $1,743,386 and $3,621,287, respectively.
The Agency’s Pollution Remediation obligation of $80,000 reflects the estimated remaining costs to comply with
groundwater monitoring requirements since completing soil remediation of a polluted site in the Grace Brothers Project
Area. During a required assessment for the Project Area, the site was found to be polluted with industrial use
petroleum hydrocarbons from a leaking underground tank. The Agency committed to this remediation and began
appropriating funds for this purpose in the early 1990’s. The estimated remaining costs are based on State
Underground Tank Fund project cost guidelines.
As of June 30, 2010, annual debt service requirements of loans payable to the City of Santa Rosa and Exchange Bank, and the
Southwest Area Bonds to maturity are as follows:
Year ending June 30:
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
2031-2035
2036-2039
Total
SR Center City Loan
Principal
Interest
$
277,739 $
202,261
294,126
185,874
311,479
168,521
329,857
150,143
349,318
130,682
1,865,626
318,841
$
3,428,145
$
1,156,322
2011
2012
2013
2014
2015
2016-2020
2021-2023
Total
Gateways Project City Loan
Principal
Interest
25,230
119,678
26,744
118,164
28,348
116,560
30,049
114,859
179,554
544,986
240,284
484,256
321,554
402,986
430,312
294,228
446,887
132,746
$
1,728,962
$
2,328,463
Exchange Bank Loan
Principal
Interest
$ 169,577
$ 1,012,405
179,138
1,002,844
194,959
987,023
209,149
972,833
224,372
957,610
1,386,076
4,523,833
12,080,013
2,444,744
$14,443,284
20
$11,901,292
TORPA City Loan
Principal
Interest
$
24,098
24,098
9,256
24,098
9,811
23,543
10,400
22,954
62,142
104,626
83,161
83,608
111,288
55,481
115,574
17,841
$
401,632
$
380,347
June 30, 2010
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
2031-2035
Total
Southwest Area Bonds – 2002A
Principal
Interest
$
190,000 $
500,364
200,000
490,366
210,000
479,719
225,000
468,291
235,000
456,071
1,375,000
2,068,789
1,815,000
1,619,518
2,415,000
1,005,053
2,105,000
228,450
Southwest Area Bonds – 2005A
Principal
Interest
$
160,000 $
631,200
255,000
623,938
265,000
614,838
265,000
604,900
280,000
594,000
1,700,000
2,762,075
2,815,000
2,224,875
3,755,000
1,402,541
4,075,000
413,359
$
$ 13,570,000
8,770,000
$
7,316,621
$
9,871,726
Southwest Area Bonds – 2005B
Principal
Interest
$
185,000
$
68,824
105,000
61,764
110,000
56,228
120,000
50,305
125,000
43,996
610,000
122,139
140,000
3,850
$
1,395,000
$
407,106
As of June 30, 2010 annual debt service requirements of the Agency for Certificates of Participation to maturity are as follows:
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
Total
2005 A
Principal
Interest
$
55,000
$
59,930
70,000
57,708
80,000
54,998
85,000
51,954
90,000
48,605
545,000
178,575
395,000
48,094
75,000
5,344
$
1,395,000
$
505,208
2005 B
Principal
Interest
$
475,000
$
711,805
640,000
682,956
690,000
647,977
745,000
610,236
810,000
569,340
5,025,000
2,072,794
3,755,000
575,626
735,000
66,379
$ 12,875,000
$ 5,937,113
The source of funding for payment of annual debt service is from incremental property taxes and redeveloper incentive payments.
21
June 30, 2010
NOTE 6 – INTERFUND TRANSACTIONS
Transfers
Transfers are indicative of funding for capital projects, debt service, subsidies of various Agency operations, and re-allocations of
special revenues.
The following schedule briefly summarizes the Agency’s transfer activity for the fiscal year ended June 30, 2010.
Transfer From
General Fund
Transfer To
Amount
City Cooperation Agreement Debt
Service Funds
Nonmajor Governmental Funds
2005B Certificates of Participation Debt
Service Fund
2002A Southwest Area Debt Service Fund
Gateways City Loan Debt Service Fund
General Fund
$
Purpose
1,951,308
To pay for debt service
24,098
996,349
1,149,267
To pay for debt service and housing setaside requirement
General Fund
1,105,521
To pay for administrative costs
2,609,773
City Cooperation Agreement Debt
Service Funds
3,995,565
To pay for debt service and housing setaside requirement
1,462,636
To pay for housing set-aside requirement
General Fund
1,731,845
Total
20,000
To provide for SERAF payment
To fund project
$ 15,046,362
NOTE 7 – RELATED PARTY TRANSACTIONS
Cooperation Agreement Between the Agency and the City
Under a Cooperation Agreement between the Agency and the City, the City has agreed to advance funds to the Agency for
redevelopment purposes. The Agency has agreed to pay 6% interest per annum on such advances. During fiscal year 2010, the
Agency repaid the City $5,946,873, which includes principal of $5,646,156 and interest of $300,717.
Santa Rosa Center City Loan
The City made a loan in the amount of $4,500,000 to the Agency in fiscal year 2006. This loan was for the consolidation and
refinancing of three loans related to the Hotel and Conference Center in the Santa Rosa Center/Grace Brothers Merged Project
Area. The SR Center City loan bears interest at 5.90% per annum. Principal and interest in the amount of $480,000 is due on
June 1 of each year. Proceeds are used to provide funds for public improvements and administration in the SR Center Project
Area. The loan matures in 2020.
Gateways Project City Loan
The City made a loan to the Agency of $1,200,000 in fiscal year 2005 related to the preparation and implementation of a
redevelopment plan for the Gateways Redevelopment Project. An additional draw of $150,000 in fiscal year 2008, plus
accumulated deferred interest, increased the balance to $1,728,962 as of June 30, 2010. The Agency is required to make annual
payments to the City of $144,908 from June 30, 2012 through June 30, 2039. Principal and interest payments had been deferred
due to lack of activity in the project area; however, a lawsuit challenging the validity of the project area was successfully resolved
on appeal in August 2009. This allowed the Agency to make an interest only payment on the loan in fiscal year 2010 and another
is scheduled in fiscal year 2011.
22
June 30, 2010
TORPA City Loan
The City made a loan to the Agency of $100,000 in fiscal year 2005 related primarily to the administration of the TORPA
Redevelopment Project. The City made additional advances of $128,898 and $150,000 in fiscal years 2007 and 2008,
respectively. Due to insufficient activity in the TORPA Project Area, the Agency has the option to make annual interest only
payments until 2013. The Agency did not make an interest payment in fiscal year 2009 and $22,734 of deferred interest was
added to the previous principal balance of $378,898, bringing the loan balance to $401,632. The Agency resumed the interest
payments in fiscal year 2010 and plans to continue making them. Combined principal and interest payments of $33,354 are
scheduled to commence on June 30, 2013 and are required to be paid annually through June 30, 2034.
Contribution to the City of Santa Rosa
The Agency contributed $3,820,713 to the City of Santa Rosa in fiscal year 2010 from the General Fund, 2002A Southwest
Project Capital Projects Fund and the 2005A Southwest Tax Exempt Capital Projects Fund for capital projects to provide a
portion of the funding for public improvement projects administered by the City. In fiscal year 2010 the Agency began
establishing contracts (funding agreements) with the City for its contributions to City programs and capital projects and funds are
being encumbered accordingly.
Contribution to the Santa Rosa Housing Authority
The Agency contributed $5,140,360 to the Santa Rosa Housing Authority from the Southwest Housing Loan Capital Projects
Fund, the Santa Rosa Center Housing Capital Projects Fund, the Roseland Housing Capital Projects Fund, and the Southwest
Housing Capital Projects Fund in the amounts of $2,481,859, $1,909,745, $33,730 and $715,026, respectively, towards the Santa
Rosa Housing Authority’s Affordable Housing Development Assistance and Homeless Programs.
Administrative Costs
The Agency pays the City for various administrative costs, including personnel costs, incurred by the City on behalf of the
Agency. The amount paid for salaries and benefits of the City employees in fiscal year 2010 was $1,176,775.
NOTE 8 – NET ASSETS/FUND BALANCES
The government-wide financial statements utilize a net assets presentation. Net assets are categorized as invested in capital
assets (net of related debt), restricted and unrestricted.

Invested In Capital Assets, Net of Related Debt – This category groups all capital assets, including infrastructure, into one
component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the
acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Assets – This category presents external restrictions imposed by creditors, grantors, contributors or laws or
regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Assets – This category represents net assets of the Agency, not restricted for any project or other purpose.
In the fund financial statements, reserves and designations segregate portions of fund balance that are either not available or have
been earmarked for specific purposes. The various reserves and designations are established by actions of the Members of the
Agency Board of Directors and management and can be increased, reduced or eliminated by similar actions. As of June 30,
2010, reservations of fund balance are described below:

Encumbrances – to reflect the outstanding contractual obligations for which goods and services have not been received.

Debt service – to reflect the funds held by trustees or fiscal agents and the City for future payment of bond principal and
interest. These funds are not available for general operations.

Loan receivable – to reflect the portion of assets, which do not represent available spendable resources.
Portions of unreserved fund balance may be designated to indicate tentative plans for financial resource utilization in a future
period, such as for general contingencies or capital projects. Such plans or intent are subject to change and have not been legally
authorized or may not result in expenditures. Fund balance designations include:

Contingencies – to reflect management’s intent to expend certain funds for unanticipated needs.

Appropriations – to reflect management’s intent to expend certain funds approved for capital projects in prior years but not
yet completed.
23
June 30, 2010
The unreserved governmental fund balance designations at June 30, 2010 are composed of the following:
2002A
Southwest
Project
General
Fund
2005 A
Southwest Tax
Exempt
Nonmajor Funds
$
$
Total
Designated for:
Contingencies
$
3,026,673
Appropriations
$
8,129,691
$
11,156,364
50,967
93,372
$
14,538
828,991
144,339
$
843,529
6,838,760
$
2,971,188
$
9,809,948
9,930,938
12,023,242
$
21,954,180
NOTE 9 – RISK MANAGEMENT
The Agency is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and
omissions, and natural disasters. The Agency carries commercial insurance for the following:
Automotive Liability
Limits
Deductible
$500,000
$500
The commercial insurance policy is written in the name of the Agency. In addition, the Agency is a named insured on the City's
excess policies and gets primary liability coverage from the Risk Management department. Settled claims resulting from these
risks have not exceeded commercial coverage in any of the past three fiscal years.
NOTE 10 – COMMITMENTS
Hotel/Conference Center Agreements
In November 2000, the Agency entered into an Amended Agreement and Restated Predevelopment Agreement (the
Predevelopment Agreements) with a developer regarding the development of a hotel, a conference center and public space (the
Hotel/Conference Center Project). The Agency completed construction of this project during fiscal year 2003, concluding the
requirements of the Predevelopment Agreements.
Lease Agreements became effective in June 2003, including the lease of the Hotel Parcel, Conference Center Parcel and the
Parking Parcel to the developer for an initial 55-year term with two 10-year options, and a profit sharing agreement in the form of
participation rent based on annual performance of the hotel. The lease agreement provides for base rent of $100,000 each fiscal
year starting in the fourth year, and allows for increases over time. The Agency received the first participation rent in the amount
of $421,362 in fiscal year 2008. The amount of participation rent received in fiscal year 2009 was $292,807. The Agency
received no participation rent in fiscal year 2010.
Housing Set-Aside Requirements
The California Health and Safety Code requires Agency project areas to deposit 20% of allocated tax increment revenues into a
low- and moderate-income housing fund. Twenty percent of tax increment revenues are set aside for the Housing Authority
annually. This money is restricted for the purpose of increasing or improving the community’s supply of low- and moderateincome housing.
Project Area Pass-Through Requirements
Pursuant to the California Health and Safety Code 33607.5 (5)(b), the Agency committed to pay 25% of the annual tax increment
revenue received by the Agency’s Project Areas to affected taxing agencies in the County. The amount is subject to the 20%
low- and moderate-income housing requirement. The amount paid to the County’s taxing agencies in fiscal year 2010 was
$1,234,061, which included the first year of the Gateways Project Area.
24
June 30, 2010
NOTE 11 – CONTINGENCIES
On July 24, 2009, the State Legislature passed Assembly Bill (AB) 26 4x, which requires redevelopment agencies statewide to
deposit a total of $2.05 billion of property tax increment in county “Supplemental” Educational Revenue Augmentation Funds
(SERAF) to be distributed to meet the State’s Proposition 98 obligations to schools. The SERAF revenue shift of $2.05 billion is
to be made over two years, $1.7 billion in fiscal year 2010 and $350 million in fiscal year 2011. The California Redevelopment
Association (CRA) filed a lawsuit on October 20, 2009 to invalidate AB 26 4x. The lawsuit asserts that the transfer of property
tax increment to the SERAF is not permitted under Article XVI, Section 16 of the California Constitution. The complaint also
asserts the transfer to SERAF is invalid on a number of other grounds, including impairment of contract and gift of public funds.
While the language in AB 26 4x tries to address the constitutional defects found by the Superior Court in last year’s lawsuit
challenging AB 1389, the Agency, along with the CRA and other California redevelopment agencies, believe that AB 26 4x
suffers from the same and additional constitutional defects as existed in AB 1389. On August 30, 2010, CRA submitted its
opening brief on appeal of a May 2010 Court decision which upheld the legality of AB 26 4x. The first $1.7 billion payment was
paid by redevelopment agencies to county auditors on May 10, 2010. The Agency’s portion of the May 2010 payment was
$3,000,934. The appeal seeks repayment of those funds by the State and a prohibition of the second payment of $350 million due
in 2011. The Agency’s portion of the 2011 payment is $617,839. CRA hopes the Court of Appeal will rule by May, 2011 before
the next payments are due.
25
OTHER REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual
General Fund
Original
Budget
REVENUES
Interest
Net change in the fair value of investments
Other
$
Total revenues
EXPENDITURES
Current:
General government
DEFICIENCY OF REVENUES
UNDER EXPENDITURES
Proceeds from City cooperation agreement
Transfers in
Transfers out
NET CHANGE IN FUND BALANCE
$
90,000
100,000
Final
Budget
$
90,000
100,000
Actual
$
224,301
(48,330)
100,046
Variance With
Final Budget
Positive
(Negative)
$
134,301
(48,330)
46
190,000
190,000
276,017
86,017
13,033,657
14,584,410
5,402,985
9,181,425
(12,843,657)
(14,394,410)
(5,126,968)
9,267,442
2,310,856
3,833,715
(1,975,406)
2,310,856
3,833,715
(1,975,406)
2,310,856
3,833,715
(1,975,406)
-
4,169,165
4,169,165
4,169,165
-
(8,674,492)
$
(10,225,245)
(957,803)
Fund balance, beginning of year
14,652,908
Fund balance, end of year
$
29
13,695,105
$
9,267,442
OTHER SUPPLEMENTARY INFORMATION
June 30, 2010
NONMAJOR DEBT SERVICE FUNDS
The Debt Service Funds account for the accumulation of resources for, and the payment of, general long-term debt principal and
interest and related costs. The various funds and sources are:
(a)
2005 SR Center City Loan Debt Service Fund accounts for debt service receipts and expenditures related to $4,500,000
loan from the City to the Redevelopment Agency under the existing City Cooperation Agreement. Loan matures in 2020.
(b)
2005A Certificates of Participation Debt Service Fund accounts for debt service receipts and expenditures related to these
bonds maturing October 2027.
(c)
2005A Southwest Tax Exempt Debt Service Fund accounts for debt service receipts and expenditures related to these
bonds maturing August 1, 2033.
(d)
2005B Southwest Taxable Debt Service Fund accounts for debt service receipts and expenditures related to these bonds
maturing August 1, 2020.
(e)
TORPA City Loan Debt Service Fund accounts for debt service receipts and expenditures related to $401,632 loan from
the City to the Redevelopment Agency. Loan matures in 2034.
(f)
2008 Southwest Housing Loan Taxable Debt Service Fund accounts for debt service receipts and expenditures related to
the bank loan scheduled to mature in 2023.
(g)
2008 Santa Rosa Center/Grace Brothers Housing Loan Taxable Debt Service Fund accounts for debt service receipts and
expenditures related to the bank loan scheduled to mature in 2023.
NONMAJOR CAPITAL PROJECTS FUNDS
The Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major
capital facilities.
(a)
2005 SR Center City Loan Capital Projects Fund accounts for the loan proceeds of $4,500,000 from the City used on
project expenditures in the Santa Rosa Center project area.
(b)
Santa Rosa Center Capital Projects Fund accounts for excess incremental property tax revenue after debt service
obligations are paid. These funds are used in the Santa Rosa Center project area.
(c)
Santa Rosa Center Housing Capital Projects Fund - 20% of the incremental property tax revenue from the Santa Rosa
Center project is set aside to provide low cost housing.
(d)
Gateways Project Capital Projects Fund accounts for the accumulation of resources for and the expenditures in the
Gateways Project area.
(e)
Gateways Housing Capital Projects Fund - 20% of the incremental property tax revenue from the Gateways project is set
aside to provide low cost housing.
(f)
TORPA Housing Capital Projects Fund - 20% of the incremental property tax revenue from the Sonoma County TORPA
Redevelopment project is set aside to provide low cost housing.
(g)
Roseland Housing Capital Projects Fund - 20% of the incremental property tax revenue from the Sonoma County
Roseland Redevelopment project is set aside to provide low cost housing.
(h)
1996B Certificates of Participation Capital Projects Fund accounts for bond proceeds of $10,065,000 used to offset
expenditures from the Santa Rosa Center Project and Grace Brothers Project.
(i)
Southwest Housing Capital Projects Fund accounts for 20% of the incremental property tax revenue from the Southwest
Project Area that is set aside to provide low-cost housing.
(j)
Southwest Housing Loan Capital Projects Fund accounts for projects funded with proceeds from a bank loan that is being
repaid with housing set-aside tax allocation revenues.
(k)
2005B Southwest Taxable Capital Projects Fund accounts for bond proceeds of $2,120,000 used to offset expenditures
from the Southwest Project Area.
(l)
Grace Brothers Capital Projects Fund accounts for the Grace Brothers Site expenditures funded by the $2,000,000 loan
from the City.
33
Combining Balance Sheet
June 30, 2010
ASSETS
Interest receivable
Total assets
FUND BALANCES
Reserved for:
Debt service
Encumbrances
Unreserved:
Reported in:
Capital projects funds
2005
SR Center
City Loan
Debt Service Funds
2005 A
2005 A
2005 B
2008
2008
Certificates
Southwest
Southwest
TORPA
SW Housing SRC/GB Housing
of Participation Tax Exempt
Taxable
City Loan Loan Taxable Loan Taxable
$
-
$
113,202
453
$ 439,347
-
$ 131,551
-
$
-
$ 1,159,254
142
$
522,068
456
$
-
$
113,655
$ 439,347
$ 131,551
$
-
$ 1,159,396
$
522,524
$
-
$
113,655
-
$ 439,347
-
$ 131,551
-
$
-
$ 1,159,396
-
$
522,524
-
-
Total fund balances
Total liabilities and
fund balances
-
-
$
-
$
-
-
113,655
439,347
131,551
113,655
$ 439,347
$ 131,551
-
$
-
-
1,159,396
-
$ 1,159,396
522,524
$
522,524
(Continued)
34
Capital Projects Funds
Santa Rosa
Center
Gateways
Housing
Project
2005
SR Center
City Loan
Santa Rosa
Center
$ 1,311,656
7,529
$ 280,024
1,297
$ 1,246,339
10,029
$ 3,335,271
-
$
1,462,636
-
$ 440
-
$ 1,319,185
$ 281,321
$ 1,256,368
$ 3,335,271
$
1,462,636
$ 440
$
$
$
$
$
-
100,000
-
-
Gateways
Housing
-
TORPA
Housing
$ -
1,319,185
181,321
1,256,368
3,335,271
1,462,636
440
1,319,185
281,321
1,256,368
3,335,271
1,462,636
440
$ 1,319,185
$ 281,321
$ 1,256,368
$ 3,335,271
1,462,636
$ 440
$
(Continued)
35
Roseland
Housing
1996B
Certificates
Southwest
Southwest
of Participation Housing
Housing Loan
2005 B
Southwest
Taxable
Total
Nonmajor
Funds
Grace
Brothers
$ 314,426
772
$
73,072
-
$ 702,436
1,745
$
23,268
4,925
$
987,154
546
$ 145,856
527
$
12,248,000
28,421
$ 315,198
$
73,072
$ 704,181
$
28,193
$
987,700
$ 146,383
$
12,276,421
$
$
-
$
$
-
$
$
$
2,366,473
100,000
-
-
-
-
315,198
73,072
704,181
28,193
987,700
146,383
9,809,948
315,198
73,072
704,181
28,193
987,700
146,383
12,276,421
73,072
$ 704,181
987,700
$ 146,383
$ 315,198
$
$
28,193
$
$
12,276,421
(Concluded)
36
34
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
2005
SR Center
City Loan
REVENUES
Interest
Net change in the fair value of
investments
$
-
Total revenues
2005 A
2005 A
Certificates of Southwest
Participation Tax Exempt
$
1,888
$
(266)
Debt Service Funds
2005 B
Southwest
TORPA
Taxable
City Loan
-
$
-
$
-
2008
2008
SW Housing SRC/GB Housing
Loan Taxable Loan Taxable
$
3,504
$
2,959
-
-
-
221
708
-
1,622
-
-
-
3,725
3,667
-
-
-
-
-
-
-
EXPENDITURES
Current:
Community development
Debt service:
Principal retirements
Interest and fiscal charges
262,266
217,734
30,000
61,418
165,000
636,475
170,000
77,040
24,098
116,045
750,636
42,007
273,314
Total expenditures
480,000
91,418
801,475
247,040
24,098
866,681
315,321
(480,000)
(89,796)
(801,475)
(247,040)
(24,098)
(862,956)
(311,654)
91,418
-
801,475
-
147,040
-
24,098
-
866,666
-
315,310
-
91,418
801,475
866,666
315,310
Excess (deficiency) of revenues
over (under) expenditures
Transfers in
480,000
Transfers out
480,000
Net change in fund balances
-
1,622
Fund balances, beginning of year
-
112,033
-
$ 113,655
Fund balances, end of year
$
147,040
24,098
(100,000)
-
3,710
3,656
439,347
231,551
-
1,155,686
518,868
439,347
$ 131,551
-
$ 1,159,396
$
$
$
522,524
(Continued)
38
2005
SR Center
City Loan
$
31,391
Santa Rosa
Center
$
5,409
Santa Rosa
Center
Gateways
Housing
Project
$
41,811
$
-
Gateways
Housing
$
-
TORPA
Housing
$
-
(5,949)
(1,482)
4,191
-
-
-
25,442
3,927
46,002
-
-
-
208,192
96,042
1,909,745
-
-
-
-
-
-
29
-
-
208,192
96,042
1,909,745
29
-
-
(182,750)
(92,115)
(1,863,743)
(29)
-
-
(380,903)
-
262,539
-
3,335,300
-
1,462,636
-
-
262,539
3,335,300
1,462,636
-
3,335,271
1,462,636
(380,903)
-
(563,653)
(92,115)
(1,601,204)
1,882,838
373,436
2,857,572
$ 1,319,185
$ 281,321
$ 1,256,368
$ 3,335,271
-
-
440
$ 1,462,636
$
440
(Continued)
39
Roseland
Housing
$ 132,820
3,218
1996B
Certificates
of Participation
$
-
Southwest
Housing
$
7,277
2005 B
Southwest
Taxable
Southwest
Housing Loan
$
20,533
$
4,729
Total
Nonmajor
Funds
Grace
Brothers
$
2,199
132,820
124,918
239
-
(1,952)
7,663
(1,021)
136,277
-
5,325
28,196
3,708
1,753
259,644
33,730
-
715,026
2,481,859
-
10,422
5,455,045
-
-
-
-
785,318
2,040,715
33,730
-
715,026
2,481,859
-
10,422
8,281,078
102,547
-
(709,701)
(2,453,663)
3,708
(8,669)
(8,021,434)
(20,000)
794,592
-
3,335,300
5,265,774
(1,751,845)
(20,000)
794,592
(20,000)
84,891
102,547
212,651
$ 315,198
$
-
93,072
619,290
73,072
$ 704,181
-
1,906
-
(1,350,942)
20,000
-
-
(1,350,942)
20,000
6,849,229
(1,347,234)
11,331
(1,172,205)
(2,453,663)
2,481,856
$
(446)
$
28,193
$
2,334,934
135,052
13,448,626
987,700
$ 146,383
$ 12,276,421
(Concluded)
40
COMPLIANCE SECTION
35
Members of the Redevelopment Agency
of the City of Santa Rosa, California
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 Standards
We have audited the financial statements of the governmental activities, each major fund, and the aggregate
remaining fund information of the Redevelopment Agency of the City of Santa Rosa (Agency), a component unit of
the City of Santa Rosa, California, as of and for the fiscal year ended June 30, 2010, which collectively comprise the
Agency’s basic financial statements and have issued our report thereon dated October 11, 2010. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Agency’s internal control over financial reporting as a basis
for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the Agency’s internal control over financial
reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control over
financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the Agency’s financial statements
will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the first
paragraph of this section and would not necessarily identify all deficiencies in internal control that might be
deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control
over financial reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Agency’s financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements, noncompliance with which could have a direct and material effect on the determination of financial
statement amounts. Such provisions include those provisions of laws and regulations identified in the Guidelines for
Compliance Audits of California Redevelopment Agencies issued by the State Controller’s Office and as interpreted
in the Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies,
issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public
Accountants. However, providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance or other matters that are required to be reported under Government Auditing Standards.
43
This report is intended solely for the information and use of the Members of the Board of Directors, management of
the Agency, and the State Controller’s Office and is not intended to be and should not be used by anyone other than
these specified parties.
Certified Public Accountants
Sacramento, California
October 11, 2010
44