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RPVCCA_RDA_2010_02_02_C_20090630_Final RDA StatementsCITY OF TO: FROM: DATE: SUBJECT: MEMORANDUM HONORABLE CHAIR &BOARD MEMBERS ~ DENNIS McLEAN,DIRECTOR OF FINANCE &~ INFORMATION TECHNOLOGY FEBRUARY 2,2010 FY08-09 REDEVELOPMENT AGENCY AUDITED FINANCIAL REPORT REVIEWED:CAROLYN LEHR,CITY MANAGER oSl- Project Manager:Kathryn Downs,Deputy Director of Finance &Information Technology RECOMMENDATION Receive and file the FY08-09 audited financial report of the Rancho Palos Verdes Redevelopment Agency. DISCUSSION Redevelopment law requires that all Redevelopment Agencies undergo an annual audit.The Agency's auditors,Diehl,Evans &Company,LLP,have recently completed their audit for FY08-09.The Agency Chair and Members of the Board have received a copy of the FY08-09 audited financial report of the Redevelopment Agency (RDA).The financial report includes an unqualified (clean)opinion issued by Diehl,Evans & Company,LLP. A copy of the report is available for public review at the front counter located in the reception area of City Hall.Additionally,the City Clerk's office has a copy of the report on file for permanent retention. The RDA financial report also contains the Independent Auditors'Report on Internal Control over Financial Reporting and on Compliance and Other Matters ("Internal Control Report").The Internal Control Report noted that the results of the auditors' tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. RDA C-1 FY08·09 Redevelopment Agency Audited Financial Report February 2,2010 Page 2 of2 The Agency is required to submit an annual report to both the State Controller and its Board by December 31 st each year.The annual report includes the State Controller's Report,the Housing Activities Report,Blight Progress Report,and Property Report. The FY08-09 annual report,including all the required elements,was submitted to both the State Controller and its Board by the December 31 ,2009 deadline. RDA C-2 RANCHO PALOS VERDES REDEVELOPMENT AGENCY COMPONENT UNIT FINANCIAL STATEMENTS WITH REPORT ON AUDIT BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS JUNE 30, 2009 RANCHO PALOS VERDES REDEVELOPMENT AGENCY TABLE OF CONTENTS June 30, 2009 Page Number Independent Auditors’ Report 1 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 3 Statement of Activities 5 Fund Financial Statements: Balance Sheet - Governmental Funds 6 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 9 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 10 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 12 Notes to Financial Statements 13 Required Supplementary Information: Description of Major Fund Budgetary Comparison Schedules 27 Budgetary Comparison Schedule: Housing Set-Aside Special Revenue Fund 28 Note to Required Supplementary Information 29 Supplementary Information: Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Debt Service Fund 31 Abalone Cove Capital Projects Fund 32 Portuguese Bend Capital Projects Fund 33 Independent Auditors’ 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 35 OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330 CARLSBAD, CALIFORNIA 92008-2389 ESCONDIDO, CALIFORNIA 92025-2598 (760) 729-2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890 A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS 5 CORPORATE PARK, SUITE 100 IRVINE, CALIFORNIA 92606-5165 (949) 399-0600 • FAX (949) 399-0610 www.diehlevans.com December 21, 2009 INDEPENDENT AUDITORS’ REPORT Agency Board Members Rancho Palos Verdes Redevelopment Agency Rancho Palos Verdes, California We have audited the accompanying financial statements of the governmental activities and each major fund of the Rancho Palos Verdes Redevelopment Agency (the Agency), (a component unit of the City of Rancho Palos Verdes, California), as of and for the year ended June 30, 2009, which collectively comprise the Agency’s basic financial statements as listed in the table of contents. These basic financial statements are the responsibility of the Agency’s management. Our responsibility is to express opinions on these basic 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 basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Rancho Palos Verdes Redevelopment Agency as of June 30, 2009, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 1 MICHAEL R. LUDIN, CPA CRAIG W. SPRAKER, CPA NITIN P. PATEL, CPA ROBERT J. CALLANAN, CPA *PHILIP H. HOLTKAMP, CPA *THOMAS M. PERLOWSKI, CPA *HARVEY J. SCHROEDER, CPA KENNETH R. AMES, CPA WILLIAM C. PENTZ, CPA *A PROFESSIONAL CORPORATION 2 In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2009 on our consideration of the Rancho Palos Verdes Redevelopment Agency’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The information identified in the accompanying table of contents as budgetary comparison schedule is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. The budgetary comparison schedule and related note 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. Management of the Agency has not presented the Management’s Discussion and Analysis information that is a required supplement to, although not required to be a part of, the basic financial statements prepared in accordance with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Rancho Palos Verdes Redevelopment Agency’s basic financial statements. The supplementary information, as listed in the table of contents, is presented for additional analysis and is not a required part of the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. BASIC FINANCIAL STATEMENTS This page left blank intentionally. RANCHO PALOS VERDES REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS June 30, 2009 Governmental Activities ASSETS: Cash and investments 1,932,880$ Receivables: Taxes 19,807 Interest 6,187 Notes 354,962 Prepaid items 558,423 Land held for development 702,392 TOTAL ASSETS 3,574,651 LIABILITIES: Accounts payable 1,050 Interest payable 20,825 Long-term liabilities: Due within one year 65,000 Due beyond one year 23,627,879 TOTAL LIABILITIES 23,714,754 NET ASSETS (DEFICIT): Restricted for: Low and moderate income housing 2,067,749 Unrestricted (22,207,852) TOTAL NET ASSETS (DEFICIT) (20,140,103)$ See independent auditors' report and notes to financial statements. 3 4 This page left blank intentionally. RANCHO PALOS VERDES REDEVELOPMENT AGENCY STATEMENT OF ACTIVITIES For the year ended June 30, 2009 Net (Expenses) Revenues and Changes in Net Assets Charges Operating Capital for Grants and Grants and Governmental Expenses Services Contributions Contributions Activities Governmental Activities: Administration 18,509$ -$ -$ -$ (18,509)$ Public works 17,934 - - - (17,934) Planning, building and code enforcement 740,900 - - - (740,900) Pass through to other agencies 187,211 - - - (187,211) Interest on long-term debt 1,100,508 - - - (1,100,508) Total governmental activities 2,065,062$ -$ -$ -$ (2,065,062) General revenues: Property tax increment 1,121,041 Investment income 37,444 Total general revenues 1,158,485 Change in net assets (906,577) Net assets (deficit) - beginning of year (19,233,526) Net assets (deficit) - end of year (20,140,103)$ See independent auditors' report and notes to financial statements. Program Revenues Functions/programs 5 RANCHO PALOS VERDES REDEVELOPMENT AGENCY BALANCE SHEET - GOVERNMENTAL FUNDS June 30, 2009 Special Revenue Housing Debt Set-Aside Service Cash and investments 1,357,928$ 46,672$ Receivables: Taxes 3,922 15,885 Interest 4,454 4 Prepaid items - 541,115 Land held for development 702,392 - TOTAL ASSETS 2,068,696$ 603,676$ LIABILITIES: Accounts payable and accrued liabilities 945$ -$ FUND BALANCES: Reserved for: Housing set-aside 1,365,359 - Prepaid items - 541,115 Land held for development 702,392 - Unreserved: Undesignated and reported in: Debt service fund - 62,561 Capital projects funds - - TOTAL FUND BALANCES 2,067,751 603,676 TOTAL LIABILITIES AND FUND BALANCES 2,068,696$ 603,676$ See independent auditors' report and notes to financial statements. 6 ASSETS LIABILITIES AND FUND BALANCES Total Abalone Portuguese Governmental Cove Bend Funds 6,149$ 522,131$ 1,932,880$ - - 19,807 22 1,707 6,187 - 17,308 558,423 - - 702,392 6,171$ 541,146$ 3,219,689$ -$ 105$ 1,050$ - - 1,365,359 - 17,308 558,423 - - 702,392 - - 62,561 6,171 523,733 529,904 6,171 541,041 3,218,639 6,171$ 541,146$ 3,219,689$ 7 Capital Projects 8 This page left blank intentionally. RANCHO PALOS VERDES REDEVELOPMENT AGENCY RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 2009 Fund balances - total governmental funds 3,218,639$ Amounts reported for governmental activities in the Statement of Net Assets are different because: Interest expenditures are recognized when due, and therefore, interest payable is not recorded in the governmental funds.(20,825) Long-term notes receivable are not current available resources and, therefore, are not reported in the governmental funds.354,962 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds.(23,692,879) Net assets (deficit) of governmental activities (20,140,103)$ See independent auditors' report and notes to financial statements. 9 RANCHO PALOS VERDES REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the year ended June 30, 2009 Special Revenue Housing Debt Set-Aside Service REVENUES: Tax increment 220,201$ 900,840$ Investment income 27,391 222 Other revenues - - TOTAL REVENUES 247,592 901,062 EXPENDITURES: Current: Administration - 18,509 Public works - - Planning, building and code enforcement 740,900 - Pass through to other agencies - 187,211 Debt service: Principal - 349,627 Interest and fiscal charges - 1,100,566 TOTAL EXPENDITURES 740,900 1,655,913 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (493,308) (754,851) OTHER FINANCING SOURCES: Advances received from the City of Rancho Palos Verdes - 876,926 TOTAL OTHER FINANCING SOURCES - 876,926 NET CHANGE IN FUND BALANCES (493,308) 122,075 FUND BALANCES - BEGINNING OF YEAR 2,561,059 481,601 FUND BALANCES - END OF YEAR 2,067,751$ 603,676$ See independent auditors' report and notes to financial statements. 10 Total Abalone Portuguese Governmental Cove Bend Funds -$ -$ 1,121,041$ 119 9,712 37,444 - 50,004 50,004 119 59,716 1,208,489 - - 18,509 - 17,934 17,934 - - 740,900 - - 187,211 - - 349,627 - - 1,100,566 - 17,934 2,414,747 119 41,782 (1,206,258) - - 876,926 - - 876,926 119 41,782 (329,332) 6,052 499,259 3,547,971 6,171$ 541,041$ 3,218,639$ 11 Capital Projects RANCHO PALOS VERDES REDEVELOPMENT AGENCY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the year ended June 30, 2009 Net change in fund balances - total governmental funds (329,332)$ Amounts reported for governmental activities in the Statement of Activities are different because: Increases in long-term liabilities provide current financial resources to governmental funds as other financing sources. Conversely, repayments of long-term liabilities are reported as expenditures. This activity is not reflected in the Statement of Activities: Advances received from the City of Rancho Palos Verdes (876,926) Repayments of long-term liabilities 349,627 Interest expenditures are recognized when paid in governmental funds. Interest expense on the Statement of Activities is reported based on interest incurred. This amount represents the change in interest payable.58 Repayments of long-term notes receivable provide current financial resources and are included in the revenues of governmental funds. This change in notes receivable is not reflected in the revenues of the Statement of Activities. This amount represents the total payments received on the long-term notes receivable.(50,004) Change in net assets of governmental activities (906,577)$ See independent auditors' report and notes to financial statements. 12 NOTES TO FINANCIAL STATEMENTS This page left blank intentionally. See independent auditors’ report. 13 RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS June 30, 2009 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The accounting policies of the Rancho Palos Verdes Redevelopment Agency (the Agency) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the significant policies. Reporting Entity: The Agency is a separate legal governmental entity created on July 31, 1984, pursuant to the Community Redevelopment Law of the State of California Health and Safety Code; however, it has been included as a component unit of the City of Rancho Palos Verdes (the City) for purposes of the City’s annual financial report. The Agency has responsibility for elimination of blight within the limits of the project areas by preparing and carrying out redevelopment plans for area improvements and rehabilitation. The Agency’s primary source of revenue comes from property taxes, referred to in the accompanying financial statements as “tax increment revenue”. The assessed valuation of all property within the project area is determined on the date of adoption of the Redevelopment Plan. 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 Agency and other districts. The Agency has no power to levy and collect taxes and any legislative property tax de-emphasis might reduce the amount of tax revenues that would otherwise be available to pay the principal and interest on debt. Broadened property tax exemptions could have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any reduction or elimination of present exemptions would increase the amount of tax revenues that would be available to pay principal and interest on debt. Measurement Focus, Basis of Accounting and Financial Statement Presentation: The basic financial statements of the Agency are composed of the following: • Government-wide financial statements • Fund financial statements • Notes to financial statements RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 14 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Government-wide 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 activities of the Agency. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Rancho Palos Verdes Redevelopment Agency has no business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Other items not properly included among program revenues are reported, instead, as general revenues. Fund Financial Statements: Fund financial statements for the Agency’s governmental funds are presented after the government - wide financial statements. These statements display information about major funds individually for governmental funds. The accounting system of the Agency is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self - balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditures. The Agency reports the following major governmental funds: The Housing Set-Aside Special Revenue Fund is used to account for the receipt of 20 percent of the gross tax increment allocation, which is restricted for use on projects that increase or preserve the supply of low and moderate income housing in accordance with Health and Safety Code Section 33334. The Debt Service Fund is used to account for the accumulation of resources for and the payment of principal and interest on the Agency’s debt and other long-term obligations. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 15 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Fund Financial Statements (Continued): Major Funds (Continued) The Abalone Cove Capital Projects Fund is used to account for all project expenditures, including acquisition of properties, cost of site improvements, and other costs within the Abalone Cove project area. The Portuguese Bend Capital Projects Fund is used to account for all project expenditures, including acquisition of properties, cost of site improvements, and other costs within the Portuguese Bend project area. Measurement Focus: Measurement focus is a term used to describe “which” transactions are recorded within the various financial statements. Basis of accounting refers to “when” transactions are recorded, regardless of the measurement focus applied. In the government-wide statement of net assets and the statement of activities, activities are presented using the economic resources measurement focus. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the government are reported. In the fund financial statements, all governmental funds are accounted for on a spending or “financial flow” measurement focus. This means that only current assets and current liabilities are generally included on the balance sheets. The reported fund balances (net current assets) are considered a measure of “available spendable resources”. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of available spendable resources during a period. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange transactions are recognized in accordance with the requirements of GASB Statement No. 33. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 16 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Measurement Focus (Continued): Because of the spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as other financing sources rather than as a fund liability. Amounts paid to reduce long-term debt are reported as fund expenditures. When both restricted and unrestricted resources are available for use, it is the Agency’s policy to use restricted resources first, then unrestricted resources as they are needed. Basis of Accounting: In the government-wide statement of net assets and statement of activities, the governmental activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned, and expenses are recorded when the liability is incurred or economic asset used, regardless of the timing of related cash flows. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. For government-wide financial reporting, the Agency has elected to apply all applicable GASB pronouncements, as well as any applicable pronouncements of the Financial Accounting Standards Board (FASB), the Accounting Principles Board (APB), or any Accounting Research Bulletins (ARB) issued on or before November 30, 1989, unless they contradict or conflict with GASB pronouncements. In the fund financial statements, governmental funds are presented using the modified-accrual basis of accounting. Revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. Revenue recognition is subject to the measurable and available criteria for the governmental funds in the fund financial statements. The Agency considers tax increment revenue and investment earnings to be available if they are collected within 60 days of the end of the current fiscal period. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 17 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Basis of Accounting (Continued): Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally-imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed nonexchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary nonexchange transactions are recognized as revenues when all applicable eligibility requirements have been met. Investments: The Agency has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 31, “Accounting and Financial Reporting for Certain Investments and External Pools”, which require governmental entities to report certain investments at fair value in the balance sheet and recognize the corresponding change in the fair value of investments in the year in which the change occurred. In accordance with GASB Statement No. 31, the Agency has adjusted certain investments to fair value (when material). Use of Estimates: The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the basic financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 18 2. CASH AND INVESTMENTS: Cash and Investments: Cash and investments at June 30, 2009, consisted of the following: Cash and investments pooled with the City of Rancho Palos Verdes $ 1,932,880 The Agency pools its cash and investments with the City. More information on the City’s cash and investments can be found in the City’s Comprehensive Annual Financial Report. Investments Authorized by the California Government Code and the Agency’s Investment Policy: The table below identifies the investment types that are authorized for the Agency by the California Government Code (or the Agency’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the Agency’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the Agency, rather than the general provisions of the California Government Code or the Agency’s investment policy. Maximum Amount or Maximum Maximum Percentage Investment Authorized Investment Type Maturity of Portfolio in One Issuer United States (U.S.) Treasury Obligations 3 years None None Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 7 days 15% None Money Market Mutual Funds N/A 15% 15% Local Agency Investment Fund (LAIF) N/A None None Money Market Savings/Demand Deposits N/A $ 5 million 15% N/A Not Applicable RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 19 2. CASH AND INVESTMENTS (CONTINUED): Disclosures Relating to Interest Rate Risk: Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value 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. Disclosures Relating to Credit Risk: Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Concentration of Credit Risk: The investment policy of the Agency contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 20 2. CASH AND INVESTMENTS (CONTINUED): Custodial Credit Risk: Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Agency’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the Agency’s deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Additional Information: Information regarding the exposure of the City’s investment pool to interest rate risk, credit risk, concentration of credit risk and custodial risk is available in the City of Rancho Palos Verdes, California’s Comprehensive Annual Financial Report. Allocation of Interest Income Among Funds: Interest income from pooled investments is allocated to those funds which are required by law or administrative section to receive interest. Interest is allocated on a quarterly basis based on the monthly ending cash balances in each fund receiving interest. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 21 3. NOTE RECEIVABLE: In August 1999, the Agency entered into an agreement with a Homeowners Association (the Association), whereby the Agency agreed to advance the Association up to $750,000 in connection with a capital project undertaken by the Association. The terms of the agreement specify that the association is to repay the Agency in equal monthly installments of $4,167 beginning twelve months after completion of the project. The project was completed during the 2001-02 fiscal year. The balance is to be repaid over a 15-year period without interest. During the 2008-09 fiscal year, the Agency received principal repayments of $50,004. The balance of the note receivable at June 30, 2009, was $354,962. 4. LAND HELD FOR DEVELOPMENT: On March 21, 2000, the Agency purchased approximately 20 acres of land to be used for an affordable housing project. The total cost of the land was $702,392. The Agency has recorded the cost of the land as an asset in the RDA Housing Set-Aside special revenue fund that purchased the property. A developer submitted an application for a senior condominium housing project with an affordable housing component. The project was planned to utilize a parcel owned by the Agency and a neighboring private parcel. The developer withdrew the application, and currently the property owner of the neighboring private parcel is moving forward with a senior condominium project on only that parcel. In September 2007, the City/Agency made a decision to move forward with development of only the Agency parcel with a senior affordable housing project. In September 2008, the Agency entered into an Exclusive Negotiating Agreement with AMCAL: Multi-Housing Inc. On March 3, 2009, the City Council/Agency Board approved AMCAL’s proposed 34-unit senior affordable housing project, which includes 33 rental units of affordable housing and 1 market rate rental unit for an on-site manager. On March 17, 2009, the Agency approved a Disposition and Development Agreement (DDA) with AMCAL. In September 2009, the project was awarded Tax Credits from the California Tax Credit Allocation Committee, which will be an important funding source for the project. Per the DDA, the Agency anticipates transferring the Agency’s land to the developer for construction of the proposed senior affordable housing project in December 2009. The fund balance in the RDA Housing Set-Aside fund has been reserved for an amount equal to the purchase price of the land. Remaining funds in the RDA Housing Set-Aside fund will be used towards the development of this project, as well as other affordable housing. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 22 5. LONG-TERM LIABILITIES: A summary of changes in long-term liabilities for the year ended June 30, 2009, is as follows: Balance at Balance at Due within July 1, 2008 Additions Deletions June 30, 2009 One Year Advances from the City of Rancho Palos Verdes $ 16,010,044 $ 876,926 $ - $ 16,886,970 $ - Tax increment bond 5,370,000 - 55,000 5,315,000 65,000 Deferred interest payable 1,785,536 - 294,627 1,490,909 - Total Long-Term Liabilities $ 23,165,580 $ 876,926 $ 349,627 $ 23,692,879 $ 65,000 Advances from the City of Rancho Palos Verdes: The Agency has entered into an agreement with the City of Rancho Palos Verdes, whereby the City has agreed to provide the Agency operating funds and staff assistance, supplies, technical and other services and facilities of the City as the Agency may require in carrying out its function under the community redevelopment law. The Agency will repay the resulting indebtedness, plus interest, from incremental property tax revenues arising from the project area, as such revenue becomes available. Variable interest was accrued at a rate of approximately 5.185% during the fiscal year ended June 30, 2009. Of the $16,886,970 remaining indebtedness, $13,082,972 relates to the Portuguese Bend portion of the Agency, while $3,803,998 relates to the Abalone Cove portion. During the year ended June 30, 2009 accrued interest of $644,923 was added to the balance of the advance to the Portuguese Bend Fund, while principal of $44,485 and accrued interest of $187,518 was advanced to the Abalone Cove Fund. As of June 30, 2009, no revenue was available to the Agency to repay the advances due to the City, nor are sufficient revenues expected to be available to repay advances in the immediate future. Accordingly, there is no fixed payment schedule for this indebtedness. Tax Increment Bond and Deferred Interest Payable: In July 1991, the Agency received $10,000,000 in loan proceeds (the Loan) from the County of Los Angeles (the County) upon the County’s issue of Abalone Cove Improvement Bonds 2651-M pursuant to a Reimbursement and Settlement Agreement (the Agreement), dated October 27, 1987, in connection with the Horan Lawsuit. The Loan was made for the purpose of abating the Abalone Cove landslide. The settlement loan was secured by property assessment liens in the Abalone Cove project area. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 23 5. LONG-TERM LIABILITIES (CONTINUED): Tax Increment Bond and Deferred Interest Payable (Continued): As stipulated by the parties to the Agreement, a portion of the Loan proceeds was used to repay a tax allocation and revenue anticipation promissory note issued to the County in the principal amount of $1,450,000, plus accrued interest equal to $179,244. A second portion of the proceeds was used to repay expenses advanced by the County in the amount of $135,614. A third portion was used to repay certain loans from the City to the Agency in the amount of $787,340. Per the terms of the Agreement, $1,000,000 of the proceeds was deposited in the Abalone Cove Maintenance Permanent Fund of the Joint Powers Improvement Authority (the JPIA). The remainder of the proceeds were accounted for in the Agency’s Abalone Cove Capital Projects Fund. Concurrent with the execution of the Agreement, the County deeded its title in the Abalone Cove Beach Park to the Agency. As part of the Agreement, the Agency is required to transfer 17% of tax increment revenue to the Consolidated Fire Protection District of the County and 50.9% of tax increment revenue for debt repayment to the County. In accordance with the Agreement, the Agency was to pay the loan principal plus interest at 7.7654% over a 30-year period that began in 1992. However, these debt payments were to be deferred 10 years until the fiscal year ended June 30, 2002. As part of the deferral arrangement, the accrued interest from the inception of the loan through June 30, 2002, in the amount of $7,314,944, was scheduled to be paid over a 20-year period beginning in the fiscal year ended June 30, 2003, with no additional interest. The remaining balance of $10,274,119 was scheduled to be paid to the County over a 20-year period beginning in the fiscal year ended June 30, 2002, with interest at 7.7654%. On November 1, 1997, the City, the Agency and the County entered into a Memorandum of Understanding (MOU) agreeing to restructure the repayment schedule of the debt owed the County by the Agency. In accordance with the terms of the MOU, the $10,000,000 loan principal owed the County was cancelled. As consideration for the loan cancellation, the Agency made a lump sum payment to the County in the amount of $4,545,000 and issued a $5,455,000 tax increment bond to the County (the Agency bond). Of the $4,545,000 lump sum payment, $2,000,000 was paid from tax increment revenue and interest earnings accumulated in the Debt Service Fund. The remaining $2,545,000 was funded by a combination of a loan from the General Fund of the City to the Agency for $1,545,000 and a net operating transfer from the Agency’s Abalone Cove Capital Projects Fund to the Debt Service Fund of $1,000,000. The private property liens resulting from the formation of the bond assessment district in connection with the Agreement in 1987 were discharged in accordance with the terms of the MOU. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 24 5. LONG-TERM LIABILITIES (CONTINUED): Tax Increment Bond and Deferred Interest Payable (Continued): The Agency bond was issued as a conduit through the JPIA to the County. No issuance costs were incurred. One hundred percent (100%) of net future tax increment revenue will fund the payment of the Agency bond debt and the deferred interest from the original Loan until paid in full. In December 1997, the County began withholding payment of the Agency’s net tax increment revenue (net of the 17% payment to the Consolidated Fire Protection District of the County and the 20% housing set-aside amount) to offset the annual principal and interest charges. The principal of the Agency bond will mature in installments each December 2nd, commencing December 2, 2004. Interest accrues at a rate of 5% per annum and is payable in arrears each June 2nd and December 2nd. Additionally, both the accrued interest and deferred interest on the $10,000,000 Loan previously owed the County was retroactively recalculated from the Loan origination date at a rate of approximately 5% compared to 7.7654% per the original Agreement. The recalculated deferred interest is $3,111,400. In accordance with the MOU, the recalculated deferred interest does not accrue additional interest. As of June 30, 2009, a total of $1,620,491 in accumulated tax increment has been applied against this balance, including $294,627 applied during fiscal year 2008-09. The remaining balance at June 30, 2009, was $1,490,909. The accumulated amount of tax increment withheld over the scheduled principal and interest payment made during the life of the Agency bond is recorded in the Debt Service Fund as a prepaid item at June 30, 2009. After payment of the deferred interest, the Agency may elect to further defer payment to the County for the 50.9% of tax increment revenue in order to extinguish any other indebtedness of the Agency. This deferral would allow the tax increment to be available for the repayment of advances made to the Agency by the City. In the event the deferral is elected, and the debt owed the City is fully extinguished and no other Agency indebtedness exists, the Agency will transfer all subsequent tax increment revenue to the County to fund prior deferrals and current payments of the 50.9% of tax increment revenue required to be paid per the Agreement. The debt service schedule below summarizes all fixed principal and interest payments for the term of the Agency bond. Because the payback period for the deferred interest amount will fluctuate depending on the availability of excess tax increment revenues, no amounts have been included in the following schedule for repayment of the deferred interest. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 25 5. LONG-TERM LIABILITIES (CONTINUED): Tax Increment Bond and Deferred Interest Payable (Continued): Year Ending June 30, Principal Interest Total 2010 $ 65,000 $ 265,125 $ 330,125 2011 85,000 260,375 345,375 2012 100,000 255,750 355,750 2013 120,000 250,250 370,250 2014 135,000 243,875 378,875 2015 - 2019 1,020,000 1,087,500 2,107,500 2020 - 2024 1,730,000 748,250 2,478,250 2025 - 2028 2,060,000 216,750 2,276,750 Totals $ 5,315,000 $ 3,327,875 $ 8,642,875 6. CONTINGENCIES: There are certain legal actions currently pending against the Agency arising in the normal course of the Agency’s operations. In the opinion of management and the Agency’s attorney, the ultimate resolution of such actions is not expected to have a significant effect upon the component unit financial statements of the Agency. Excess Surplus The Agency’s Housing Set-Aside Fund has accumulated excess surplus fund balance as defined by the California Health and Safety Code. The Agency is required to develop a plan to eliminate the excess surplus within the time frame allowed by the Health and Safety Code. If the Agency does not eliminate the excess surplus in the required time frame, significant penalties could be assessed, including transferring such excess surplus to the County Housing Authority and/or the California Department of Housing and Community Development. In an effort to eliminate the accumulated excess surplus, the Agency plans to acquire condominium units for resale through its First Time Homebuyers program. The occupancy of these condominiums will be restricted by the Health and Safety Code affordability requirements. RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2009 See independent auditors’ report. 26 6. CONTINGENCIES (CONTINUED): SERAF Contributions for the Fiscal Years 2009-2010 and 2010-2011 Pursuant to AB 26 4x, a budget trailer bill, California redevelopment agencies will be required to make Supplemental Education Revenue Augmentation Fund (SERAF) contributions totaling $1.7 billion for the fiscal year 2009-2010 and $350 million for the fiscal year 2010-2011. Under AB 26 4x, agencies may borrow a portion of the required contributions from their low and moderate income housing fund. Alternatively, sponsoring governmental agencies (the cities or counties) may elect to pay the SERAF contributions on behalf of their redevelopment agencies. On October 20, 2009, the California Redevelopment Association filed a class action lawsuit on behalf of all California redevelopment agencies, challenging the SERAF obligations as unconstitutional. The Agency’s proposed SERAF contributions under AB 26 4x are $330,125 for the fiscal year 2009-2010 and approximately $68,000 for the fiscal year 2010-2011. It is the position of Agency officials that the SERAF contributions required by AB 26 4x are unconstitutional, and that the Agency is not obligated to make these contributions. However, if the class action lawsuit is unsuccessful, and if the Agency were required to make these SERAF contributions, Agency officials have estimated that the Agency would have sufficient funds to make the required contributions. REQUIRED SUPPLEMENTARY INFORMATION This page left blank intentionally. See independent auditors’ report. 27 RANCHO PALOS VERDES REDEVELOPMENT AGENCY DESCRIPTION OF MAJOR FUND BUDGETARY COMPARISON SCHEDULES June 30, 2009 Budgetary comparison schedules are presented as part of the required supplementary information for the Major Special Revenue Funds as provided for by GASB Statement No. 34. The Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual for the remaining major funds are presented to aid in additional analysis and are not a required part of the basic financial statements. RANCHO PALOS VERDES VERDES REDEVELOPMENT AGENCY BUDGETARY COMPARISON SCHEDULE HOUSING SET-ASIDE SPECIAL REVENUE FUND For the year ended June 30, 2009 Variance with Final Budget Positive Original Final Actual (Negative) REVENUES: Tax increment 204,600$ 204,600$ 220,201$ 15,601$ Investment income 31,400 31,400 27,391 (4,009) TOTAL REVENUES 236,000 236,000 247,592 11,592 EXPENDITURES: Current: Planning, building and code enforcement 25,000 1,387,307 740,900 (646,407) TOTAL EXPENDITURES 25,000 1,387,307 740,900 (646,407) NET CHANGE IN FUND BALANCE 211,000 (1,151,307) (493,308) 657,999 FUND BALANCE - BEGINNING OF YEAR 2,561,059 2,561,059 2,561,059 - FUND BALANCE - END OF YEAR 2,772,059$ 1,409,752$ 2,067,751$ 657,999$ See independent auditors' report and note to required supplementary information Budgeted Amounts 28 See independent auditors’ report. 29 RANCHO PALOS VERDES REDEVELOPMENT AGENCY NOTE TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2009 The Agency adopts an annual budget using the modified-accrual basis of accounting consistent with accounting principles generally accepted in the United States of America. Budgetary controls are established at the department level. At year-end, unexpended appropriations lapse. The Agency’s Executive Director may transfer budget appropriations between major categories within a fund in conformance with the policies set by the Agency’s Board. Any major changes or amendments must be approved by the Agency’s Board. Adopted budget and budget amendments made during the year are reflected in the Budgetary Comparison Schedule and the Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual. 30 This page left blank intentionally. SUPPLEMENTARY INFORMATION This page left blank intentionally. RANCHO PALOS VERDES REDEVELOPMENT AGENCY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL DEBT SERVICE FUND For the year ended June 30, 2009 Variance with Final Budget Positive Original Final Actual (Negative) REVENUES: Tax increment 826,800$ 826,800$ 900,840$ 74,040$ Investment income - - 222 222 TOTAL REVENUES 826,800 826,800 901,062 74,262 EXPENDITURES: Current: Administration 13,900 13,900 18,509 (4,609) Pass through to other agencies 175,700 175,700 187,211 (11,511) Debt service: Principal 382,975 382,975 349,627 33,348 Interest and fiscal charges 1,153,084 1,153,084 1,100,566 52,518 TOTAL EXPENDITURES 1,725,659 1,725,659 1,655,913 69,746 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (898,859) (898,859) (754,851) 144,008 OTHER FINANCING SOURCES: Advances received from the City of Rancho Palos Verdes 901,459 901,459 876,926 (24,533) TOTAL OTHER FINANCING SOURCES 901,459 901,459 876,926 (24,533) NET CHANGE IN FUND BALANCE 2,600 2,600 122,075 119,475 FUND BALANCE - BEGINNING OF YEAR 481,601 481,601 481,601 - FUND BALANCE - END OF YEAR 484,201$ 484,201$ 603,676$ 119,475$ See independent auditors' report. Budgeted Amounts 31 RANCHO PALOS VERDES REDEVELOPMENT AGENCY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ABALONE COVE CAPITAL PROJECTS FUND For the year ended June 30, 2009 Variance with Final Budget Positive Original Final Actual (Negative) REVENUES: Investment income 150$ 150$ 119$ (31)$ NET CHANGE IN FUND BALANCE 150 150 119 (31) FUND BALANCE - BEGINNING OF YEAR 6,052 6,052 6,052 - FUND BALANCE - END OF YEAR 6,202$ 6,202$ 6,171$ (31)$ See independent auditors' report. 32 Budgeted Amounts RANCHO PALOS VERDES REDEVELOPMENT AGENCY SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL PORTUGUESE BEND CAPITAL PROJECTS FUND For the year ended June 30, 2009 Variance with Final Budget Positive Original Final Actual (Negative) REVENUES: Investment income 10,900$ 10,900$ 9,712$ (1,188)$ Other revenues - - 50,004 50,004 TOTAL REVENUES 10,900 10,900 59,716 48,816 EXPENDITURES: Current: Public works 26,300 26,300 17,934 8,366 TOTAL EXPENDITURES 26,300 26,300 17,934 8,366 NET CHANGE IN FUND BALANCE (15,400) (15,400) 41,782 57,182 FUND BALANCE - BEGINNING OF YEAR 499,259 499,259 499,259 - FUND BALANCE - END OF YEAR 483,859$ 483,859$ 541,041$ 57,182$ See independent auditors' report. Budgeted Amounts 33 34 This page left blank intentionally. OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330 CARLSBAD, CALIFORNIA 92008-2389 ESCONDIDO, CALIFORNIA 92025-2598 (760) 729-2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890 A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS 5 CORPORATE PARK, SUITE 100 IRVINE, CALIFORNIA 92606-5165 (949) 399-0600 • FAX (949) 399-0610 www.diehlevans.com December 21, 2009 INDEPENDENT AUDITORS’ 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 Agency Board Members Rancho Palos Verdes Redevelopment Agency Rancho Palos Verdes, California We have audited the financial statements of the governmental activities and each major fund of the Rancho Palos Verdes Redevelopment Agency (the Agency), (a component unit of the City of Rancho Palos Verdes, California) as of and for the year ended June 30, 2009, which collectively comprise the Rancho Palos Verdes Redevelopment Agency’s basic financial statements and have issued our report thereon dated December 21, 2009. 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 opinion 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. 35 MICHAEL R. LUDIN, CPA CRAIG W. SPRAKER, CPA NITIN P. PATEL, CPA ROBERT J. CALLANAN, CPA *PHILIP H. HOLTKAMP, CPA *THOMAS M. PERLOWSKI, CPA *HARVEY J. SCHROEDER, CPA KENNETH R. AMES, CPA WILLIAM C. PENTZ, CPA *A PROFESSIONAL CORPORATION 36 Internal Control Over Financial Reporting (Continued) 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 Matters As part of obtaining reasonable assurance about whether the basic financial statements of the Agency are free of material misstatements, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Such provisions included those provisions of laws and regulations identified in the Guidelines For Compliance Audits of California Redevelopment Agencies, issued by the State Controller 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. This report is intended for the information and use of the Agency’s Board Members, management, others within the entity, and the State Controller’s Office, Division of Accounting and Reporting and is not intended to be and should not be used by anyone other than these specified parties.