HomeMy WebLinkAboutStaff Report 3.D 12/19/2011 Ag&,vt&aiItww#3 .D
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1859
DATE: December 19,2011
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Bill Mushallo, Finance Director
SUBJECT: Resolution Accepting the Petaluma Community;Development Commission
Audited Financial Statements for the Fiscal Year Ending June 30, 2011
RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution Accepting the Petaluma
Community Development Commission (PCDC) audited financial statements for the fiscal year
ending June 30, 2011.
BACKGROUND
The California Community Redevelopment Law (CRL) contains a number of Health and Safety
Code Sections detailing procedures to which redevelopment agencies must adhere. CRL Section
33080.1 outlines the required reports that must be presented to the City Council by December
31. One of the reports to be presented is the PCDC audited financial statements for the prior
fiscal year.
DISCUSSION
The PCDC financial statements for the year ending June 30, 2011 are complete and have been
audited by an independent auditor, Maze and Associates. The auditors have concluded that the
financial statements present fairly in all material respects the financial position of the
governmental.activities and each major fund of the Commission as of June 30, 2011, and the
respective‘changes in the-financial position thereof for the year then ended in conformity with
accounting principles generally accepted in the United States of America. The statements are
attached.
FINANCIAL IMPACTS
None
ATTACHMENTS
1. Resolution
2. Audited Financial'Statements
0
Agenda Review:
City Attorney Finance Dire tor _ ityMan
ATTACHMENT#1
RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA
ACCEPTING THE PETALUMA COMMUNITY DEVELOPMENT
COMMISSION AUDITED FINANCIAL STATEMENTS FOR THE FISCAL
YEAR ENDING JUNE 30, 2011.
WHEREAS, California Community Redevelopment Law ("CRL") requires that certain annual
reports be presented by a redevelopment agency to its legislative body within six months of the
end of the fiscal year; and
WHEREAS, those reports must contain certain financial information for the fiscal year ending
June 30, 2011; and
WHEREAS, one of the reports required to be submitted to the legislative body is the audited
financial statements; and
WHEREAS, the audited financial statements of the Petaluma Community Development
Commission ("PCDC") were distributed to the City Council on December 15, 2011 for review in
preparation for the City Council's December 19, 2011 meeting; and
WHEREAS, Section 33080.2(b) of the CRL states the "the.legislative body shall review [the]
report and take any action it deems appropriate on that report no later than the first meeting of
the legislative body occurring more than 21 days from the receipt of the report."
NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Petaluma
hereby accepts the FY.2010-11 PCDC audited financial statements in accordance with the
California Community Redevelopment Law.
1754811.1
2
A tt-adutteint 2
PETALUMA COMMUNITY
DEVELOPMENT COMMISSION
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
JUNE 30,2011
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Component Unit Financial Statements
For The Year Ended JUNE 30,2011
TABLE OF CONTENTS
Independent Auditor's Report
Basic Financial Statements:
Commission-wide Financial Statements:
Statement of Net Assets 4
Statement of Activities 5
Fund Financial Statements:
Balance Sheet 8
Reconciliation of the Governmental Funds—Fund Balances
With the Statement of Net Assets 9
Statement of Revenues,Expenditures,and Changes in Fund Balance 10
Reconciliation of the Net Change in Fund Balances—Total Government Funds
With the Change in Net Assets of Governmental Activities 11
Notes to Basic Financial Statements 13
Required Supplemental Information:
Schedule of Revenues,Expenditures,and Changes in Fund Balance-Budget and Actual:
Redevelopment Special Revenue Fund 32
Supplemental Information:
Major Funds Except for Special Revenue Fund:
Schedules of Revenues, Expenditures;and Changes in Fund Balance-Budget and Actual:
Redevelopment Debt Service Fund 36i
Redevelopment Capital Projects Fund 37
Excess Surplus Calculation 38
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 39
Independent Auditor's Report on Compliance and on Internal Control over Compliance in
Accordance with the California Health and Safety Code as Required by Section 33080.1 41
Schedule of Current Year.Findings 43
I '
MAZE &
ASSOCIATES
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. - Suite 215
Pleasant Hill, California 94523
(925)930-0902 •FAX(925)930-0135
maze @ mazeassocia tes.com •
INDEPENDENT AUDITOR'S REPORT www.mazeassociates.com
Members of the Governing Board of the
Petaluma Community Development Commission
Petaluma,California
We have audited the basic financial statements of the governmental activities and each major fund of the
Petaluma Community Development Commission, a component unit of the City of Petaluma, California, as
of and for the year ended June 30, 2011, as listed in the table of contents. These basic-financial statements
are the responsibility of the Commission's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United States of
America and the standards for financial audits contained in Government Audit Standards, issued by the
Comptroller General of the United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement.
An audit includes examining on attest 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 financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the basic financial statements referred to above present fairly in all material respects the
financial position of the governmental activities and each major fund of the Commission as of June 30,
2011,and the respective changes in the financial position thereof for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
•
Management's Discussion and Analysis is not a required part of the basic financial statements but is
supplementary information required by the Governmental Accounting Standards Board. The Commission
has not presented the Management Discussion and Analysis that the Governmental Accounting Standards
Board has determined is necessary to supplement, although not required to be part of, the basic financial
• statements.
As disclosed in Note 10,the State of California adopted ABx1 26 on June 28,2011,which suspends all new
redevelopment activities except for limited specified activities as of that date and dissolves redevelopment
agencies effective October 1, 2011. - The State simultaneously adopted ABx1 27 which allows
redevelopment agencies to avoid dissolution by opting into an `alternative voluntary redevelopment
program" requiring specified substantial annual contributions to local schools and special districts. These
conditions raise substantial doubt about the Commission's ability to continue as a going concern. However,
on,August 11,2011,the California Supreme Court issued a partial stay of ABx1 26 and a full stay of ABxl
27, but the partial stay did not include the section of ABx1 26 that suspends all new redevelopment
activities. As a result, the accompanying financial statements have been prepared assuming that the
Commission will continue as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
•
A Professional Corporation
As of July 1, 2010, the Commission adopted the provisions of Governmental Accounting.Standards Board
Statement Number 54 (GASB 54),Fund Balance Reporting and Governmental Fund Type Definitions. As
discussed in Note 7 to the financial statements, the.provisions of this statement affect the classification of
fund balances reported in'the financial statements.
In accordance with Government Auditing Standards,we have also issued (Mr report dated.November 18,
2011, on our consideration of the Petaluma Community Development Commission 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 reportnis 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.Thatreport is
an integral part of an audit performed in accordance with Government Auditing Standards and should be
considered,in assessing the results of our audit.
Management's.Discussion and Analysis and.Required Supplemental Information are not required parts of
the Basic Financial Statements but are supplementary information required by the Government Accounting
Standards Board. We have applied certain limited procedures, which consisted principally of inquiries-of
management regarding the methods of measurement and presentation of the required supplemental
information.However;we did not audit this information and we express no opinion on it.
Our audit was made for the purpose of forming an opinion on the financial statements takenas a whole.
The supplemental information listed in the Table of Contents is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the Petaluma Community
Development Commission: Such information has been subjected to the auditing procedures applied in;our
audit of the financial statements, and in our opinion is fairly stated in all material respects in relation,to the
component unit financial statements taken as a whole.
` �Ib t ( -/Sao
November 18,2011 111
2
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
STATEMENT.OF NET ASSETS
AND STATEMENT OF ACTIVITIES
The Statement of Net Assets reports the ,difference.between the Commission's total assets and the
Commission's total liabilities, including all the Commission's capital assets and all its long-term debt.
The Statement of Net Assets focuses the reader on the composition of the Commission's net assets, by
subtracting total liabilities from total.assets.
The Statement of Net Assets summarizes the financial position of all the Commission's financial position
in a single column.
The Statement of Activities reports increases and decreases in the Commission's net assets. It is also
prepared on the full accrual basis, which means it includes all the Commission's revenues and all its
expenses, regardless of when cash changes hands. This differs from;the modified accrual basis used in
the Fund Financial Statements, which reflect only current assets, current liabilities, available revenues
and measurable expenditures.
3
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
STATEMENT OF NET ASSETS
JUNE 30,2011
Governmental
Activities
ASSETS
Cash and investments(Note 2) $11,742,783
Restricted cash and investments-(Note 2) 28,329,760
Accounts receivable-net. 25,426
Intergovernmental 104896
Loans receivable(Note 4) 23,443,634
Interest receivable related to loans(Note 4) 3,380,195:
Deferred charges,net 1,262,264
.Deposits,and prepaids 671,000
Total Assets 68,957;958
LIABILITIES
Accounts payable . 541,467
Wages payable 23,846
Deposits payable 189;750.
Unearned revenue 500
Advances:from the City of Petaluma(Note 3) 1,300,000
Interest payable 623,454
Compensated absences(Note IF):
Due within one year 29,191.
Due in more than one year 118,619
Long-term debt(Note 6):
Due within one year 2;005,000
Due in more than one year 79,051,574
Total.Liabilities 83,883,401
NET ASSETS(DEFICITS)(Note 7):
Restricted for:
Debt service and operations 415,569
Capital projects 39,017,993
Special projects 22,826,373
Total Restricted Net Assets 62,259,935
Unrestricted (77,185,378)
Total Net Assets(Deficit) ($14,925,443)
See accompanying notes to financial statements
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•
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
STATEMENT OF,ACTIVITIES
FOR THE YEAR'ENDED JUNE 30,2011
Net(Expense)
Revenue and Changes
Program Revenues in Net Assets
Operating
Charges for • Grants and Governmental
Functions/Programs Expenses Services Contributions Activities
Governmental Activities: '
Community development $8,897,760 $15,366 $38,709 ($8,843,685)
Tax increment pass through agreement 4,796,826 (4,796,826)
Interest on long-term debt 3,501,214 (3,501,214)
Total Governmental Activities 17,195,800 15,366 38,709 (17,141,725)
General revenues:
Incremental property taxes 16,166,274
Other 673,895
Use of money and property 185,517
Contributions from the City 36,097
•
Transfers to the City,of Petaluma,net(Notes 3 and 5) (11,164,172)
Total general revenues and transfers 5,897,611
Change in Net Assets (11,244,114)
Net Assets(Deficit)-Beginning (3,681,329)
Net Assets(Deficit)-Ending ($14,925,443)
See accompanying notes to financial statements
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— Ae
E
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
MAJOR GOVERNMENTAL FUNDS
The Redevelopment Special Revenue Fund is used to account for the redevelopment Commission's 20%
set-aside, as required by law,of tax increment for Low and Moderate Income Housing. The activity of this
fund consists of supporting development of affordable housing in the community. Also included in this
fund are redevelopment agency donations and grant revenues.
The Redevelopment Debt Service Fund is used to account for the accumulation of resources, and the
payment of principal and interest of the Commission's long-term debt
The Redevelopment Capital Projects;Fund is used to account for the administration of programs and the
capital projects undertaken in the Commission.
. 7
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30,2011
Redevelopment Redevelopment Redevelopment Total
Special Capital Debt Governmental
Revenue Projects. Service Funds
ASSETS
Cash andinvestments(Note2) $1,238,447 $10,089,355 $414,981 $11,742,783
Restricted cash and investments(Note 2) 28,329,172 588 28,329,760
Receivables
Accounts receivable,net 25,426 '25;426
Intergovernmental receivable 14,027 88,869 102,896
Deposits and prepaids 671,000 671,000
Loans receivable(Note 4) 23,202,529 241,105 23,443,634
Interest receivable related to notes receivable(Note 4) 3,380,195. 3,380,195
Total Assets $27,835,198 $39,444,927 .$415;569 $67,695,694
LIABILITIES
Accounts-payable $264,137 $277,330 $541,467
Wages:payable 4,492 19,354 23,846
Deferred revenue 3,380,196 500 3,380,696
Refundable deposits -60,000 129,750 189;750
Advance from-the City of Petaluma(Note 3) 1,300,000. 1,300;000
Total.Liabilities 5,008,825. 426,934 5,435,759
FUND BALANCES
Fund balance(Note 7):
Restricted for redevelopment projects 22,826,373 39,017,993 415;569 62259,935
Total Fund Balances(Deficit) 22,826,373 39,017,993 415,569 62,259,935
Total Liabilities and Fund Balances $27,835,198 $39,444,927 $415,569 :$67,695;694
See accompanying notes to financial statements
•
8
PETALUMA,COMMUNITY DEVELOPMENT COMMISSION
Reconciliation()Lille
GOVERNMENTAL FUNDS—BALANCE^SHEET
with the'
STATEMENT OF NET ASSETS
JUNE30;,2011
Total fund balances reported on the governmental funds balance sheet $62,259,935
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following:
ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities. 3,380,196
Deferred charges,such as bond issuance costs,were an expenditure in the governmental funds but
were capitalized and amortized over the life of the bonds in the Government-Wide Financial
Statements. 1,262,264
Interest payable on long-term debt did nof require current financial resources. Therefore, interest
payable was not recorded on the Governmental Fund Balance Sheet. (623,454)
LONG-TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Compensated absences=due in one year (29,191)
Compensated absences-due-inmore than one year (118,619)
Long-term debt-due in one year (2,005,000)
Long-term debt-due in more than one year (79,051,574)
NET ASSETS OF GOVERNMENTAL ACTIVITIES ($14,925,443)
See accompanying notes to financial statements
•
9
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30,2011
Redevelopment Redevelopment Redevelopment Total
Special Capital Debt Governmental
Revenue Projects Service Funds
REVENUES
Taxes $3,074,827 $13,091,447 $16,166,274
Licenses,permits and fees 91 91
Use of money and property 41,744 143,773 185,517
Intergovernmental 38,709 38;709
Charges for services 15;275 15;275
Other 673,895 673;895
Total Revenues 3,805,741. 13,274,020 • . 17,079,761
EXPENDITURES
Current:
Community.development 2,391,461 2,444,395 21,900 4,857,756
Tax increment pass through agreement 4,796,826 4,796;826
Capital outlay 2,410,926 1,962,732 4;373,658
Debt service:
Principal 1,519;000 1;519,000
Interest and fiscal charges 3,305,360 3,305360
Total Expenditures 4,802,387 9,203,953 4,846,260' 18;852,600
EXCESS(DEFICIENCY)OF REVENUES
OVER EXPENDITURES (996,646) 4,070,067 (4;846,260). (1,772,839)
OTHER FINANCING SOURCES(USES)
Proceeds from,debt 11,369,000 11,369,000
Contributions from the City 11,700 24,397 36,097
Transfers in(Note 3) 11,935,020 4,733,000 16,668,020
Transfers(out)(Note 3) (772,570) (4,733,000) (11,16Z450) (16,668,020)
Transfers in from the City(Note 3) ' 20,000 318,906 338,906
Total Other Financing Sources(Uses) (740,870) 7,545,323 4,939,550 11,744;003
NET CHANGE IN FUND BALANCES (1,737,516) 11,615,390 93,290 9,971,164
BEGINNING.FUND BALANCES(DEFICIT) 24,563,889 27,402,603 322,279 52,288,771
ENDING FUND BALANCES(DEFICIT) $22,826;373 $39,017,993 $415,569 $62;259;935
See accompanying notes to financial statements -
•
10
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Reconciliation of the
NET CHANGE IN FUND BALANCES-TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2011'
The schedule below reconciles the Net Changes in Fund Balances reported on the,Governmental Funds Statement of
Revenues,Expenditures and Changes in Fund Balance,which measures only changes in current assets and current
liabilities on the modified accrual basis,with the Change in Net Assets of Governmental Activities reported in the
Statement of Activities,which is prepared on the fill accrual basis.
NET CHANGE IN FUND BALANCES-TOTAL GOVERNMENTAL FUNDS $9,971,164
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Capital assets transferred to the City is deducted from the fund balance (11,619,166)
Capitalized expenditures are added back to fund balance 116,088
LONG-TERM DEBT PROCEEDS AND PAYMENTS
Bond 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
in the Statement of Net Assets the repayment reduces long-term liabilities. (11,369,000)
Repayment of debt principal is added back to fund balance 1,519,000
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or(require)the use of
current financial resources and therefore are not reported as revenue or expenditures in
governmental funds(net change):
Deferred revenue 348,988
Interest payable (138,863)
Amortization on deferred charges (56,991)
Compensated absences (15,334)
CHANGE IN NET'ASSETS OF GOVERNMENTAL ACTIVITIES ($11,244,114)
See accompanying notes to financial statements
II
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of the Petaluma Community Development Commission and Redevelopment Plan
The Commission, a component unit of the City of Petaluma, California (City), is a community
redevelopment:agency formed.in September 1976, pursuant to the provisions of Part 1 of Division 24
(commencing with Section 33000) of the California Health and Safety Code. Pursuant to this the
Commission is vested with the responsibility of carrying out a duly adopted redevelopment plan. The
Commission defined the Central Business District Project.Area, encompassing approximately 225 acres,
on September 27, 1976, amended in April 2001. The Petaluma Community Development ProjectlArea was
defined as encompassing approximately 2,740 acres on July 18, 1994 and 2001.
The Commission's primary source of revenue, other than loans, advances from the City, and bond
proceeds, is an allocation of a portion of current property 'taxes. Property taxes allocated to the
Commission from other agencies are computed in the following manner:
a. The assessed valuation of all property within the project area is determined on the date of
adoption of the redevelopment plan,and identified as thebase year valuation.
b. Property taxes based on the incremental increase in assessed values above the base year'valuation
are allocated to the Commission. Property taxes based on the base year assessed valuation are
allocated to the City,county and other districts.
The Commission has no power to levy and collect taxes.
On October 18, 2006, an ordinance approving and adopting an amendment to the redevelopment plan,
fiscally merging the Central Business District Project Area with the Petaluma Community Development
Project Area, was approved •by the City Council/The Commission Governing Board. The amendment
provides for the fiscal merger of the project areas in order to pool tax increment revenue and establish a
unified bonded indebtedness limit for the two project areas, while retaining the separate identity of each
project area for other purposes. The amendment increases the outstanding bonded indebtedness limit to the
sum of$250,000,000, but does not alter the limitationop the amount of tax increment revenue that may be
allocated to the Commission over the life of the redevelopment plan.
B. Basis of Presentation
The Commission's Basic Financial Statements are prepared in, conformity with accounting principles
generally accepted in the United States of America. The Government Accounting Standards Board%is the
acknowledged standard setting body for establishing accounting and financial reporting standards followed by
governmental entities in the U.S.A.
These Standards require that the financial statements described below be presented.
Commission-wide Statements: The Statement of Net Assets and the Statement of Activities display the
financial activities of the overall Commission. Eliminations have been made to minimize the double
counting of internal activities.
13
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING-POLICIES(Continued) I
The Statement of Activities presents;a comparison between direct,expenses and program revenues for each
function of the Commission's governmental activities. Direct expenses are those that are specifically
associated with a program or function and, therefore, are clearly identifiable to a particular function.
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs,
(b) grants and contributions that are restricted to meeting the operational needs of a particular program and
(c) fees,-:grants and contributions that are.restricted to'fmancing the acquisition or construction of capital
assets. Revenues that are not classified.as program revenues, including all taxes, are presented as general
revenues.
Fund Financial Statements: The fund financial statements provide information about'the.Commission's
funds. The emphasis of fund,financial statements is on major,individual funds,each of which is displayed m a
separate column. The Commission considers all its,funds:to be major funds.
C. Major Funds
The Commission's major funds are required to be identified and presented separately in the fund financial
statements.
Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal
to ten percent of their fund-type total and five percent of the grand total.
The Commission reported all its governmental funds in the accompanying fmancial statements as major
funds.
The Redevelopment Special Revenue Fund accounts for the redevelopment agency's 20% set-aside, as
required by law,of tax increment for Low and Moderate Income Housing.The activity of this fund consists of
supporting development of affordable housing in the community. Also included in this fund are
redevelopment agency donations and grant revenues.
The Redevelopment Debt Service Fund accounts for the accumulation of resources, and the payment of
principal and interest of the Commission's'long-term debt.
The Redevelopment Capital.Projects Fund accounts for the administration of-programs and the capital
projects undertaken in the Commission.
D. Basis of Accounting
The Commission wide financial statements are reported using the economic resources,measurement focus
and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at
the time liabilities are incurred, regardless:of when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement,focus and the
modified accrual basis of accounting. Under this method,-revenues are recognized when measurable and
available.'The.Commission considers all revenues reported in the governmental funds to be available if the
revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund
liability is incurred, except for principal and interest on long-term debt, claims and judgments, and
compensated absences, which are recognized as expenditures to, the extent they have matured.
Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of
governmental long-term debt and acquisitions under,capital leases are reported as other financing sources.
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PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit'Financial,Statements
NOTE 1-SUMMARY;OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
The Commission may fund programs with a combination of cost-reimbursement grants, categorical block
grants, and general revenues: Thus, both restricted and unrestricted net assets may be available to finance
program expenditures. The Commission's policy is to first apply restricted grant resources to such programs,
followed by general revenues:if necessary.
Certain indirect costs are included in program expenses reported for individual functions and activities.
Non-exchange transactions, in which the Commission gives or receives value without directly receiving or
giving equal value in exchange, include taxes; grants,,entitlements, and donations. On an accrual basis,
revenue from taxes is recognized,in the fiscal year for which the taxes are levied. Revenue from grants,
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been
satisfied.
•
E. Budgets and Budgetary Accounting
An annual budget is adopted:by the Commissioners prior to the first day of the fiscal year. The budget
process includes a detailed review of proposed budget by the Executive Director, and a final review by the
Finance Director. The recommended budget is then transmitted to the Commissioners for their review before
the required date of adoption. Once transmitted to the Commissioners,the proposed budget is made available
for public inspection. A public:hearing is held to give:the public the opportunity to comment upon the
proposed budget. Notice of such public,hearing is given in a newspaper of general circulation.
The adoption of the budget is accomplished by the approval of a Budget Resolution. The legal level of
budgetary control is at the department level. My budget modification,which would result in an appropriation
increase,requires Commissioners' approval. The Finance Director and City Manager are jointly authorized to
transfer appropriations within a departmental budget.
Reported budget figures are as originally adopted or subsequently amended and include prior year
encumbrances. Such budget amendments during the year, including those related to supplemental
appropriations, did not cause these reported budget amounts to be significantly different than the originally
adopted budget amounts. All appropriations which are not obligated,,encumbered,or expended at the end of
the fiscal year lapse and become a part of the unreserved fund balance which may be appropriated for the next
fiscal year.
An annual!budget for the year ended Jun •30,2011, was adopted and approved by the Commissioners for the
.special revenue, debt serviceand capital projects funds. These budgets are prepared on the modified accrual
basis of accounting. The budgets of the capital projects funds are primarily long-term budgets, which
emphasize major programs and capital outlay plans extending over a number of years. However, the budget
for the capital projects funds is approved by the Commissioners annually.
Budget amounts are reported as originally adopted and as further amended by the Commissioners.
15
PETALUMA.COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
F. Leave Benefits
Commission employees may accumulate earned vacation time according to certain limits. Management
employees are limited to the amount, which may be earned, in.a three year period. All other employees are
limited to the amount,which may be earned,in a two year period.
A liability is calculated for all of the cost of compensated absences based on benefits earned,by'employees
in the current period, for which there is a probability of payment at termination. 'The salary:and related
payroll costs are those in effect as of June 30, 2011. Compensated absences:are recorded as current and
non-current liabilities only on the government-wide financial statements.
Changes in compensated absences for the year ended June30,2011,were as follows:
Beginning Balance $132;476
Additions 260,918
Payments (245,584)
Fnding Balance $147,810
Current Portion $29,191
G. Use.of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting principals
requires management to make estimates and assumptions: "Thew estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and.liabilities: In addition,
estimates affect the reported,amount of expenses. Actual results could differ from estimates and assumptions.
H. Property Tax
Under CalifomiaTaw, property taxes are assessed and collected by Sonoma County (County) up to 1% of
assessed value, plus'other increases approved by the voters. The property taxes'go into a pool, and are then
•
allocated to cities and,agencies based on complex formulas. The County assesses,bills,and collects property
taxes as follows:
Lien Date January 1
Levy Date July 1
Due Date Secured: November 1 and February I
Unsecured: July 1
Collection Date Secured: December 10 and April 10
Unsecured: August 31
16
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial.Statements
NOTE 2-CASH AND INVESTMENTS
A. Classification
Cash and investments are classified in the financial statements as shown below, based on whether or not
their use is restricted under the terms of the debt instruments or Commission agreements. Cash and
investments as of June 30,2011, are as follows:
Cash and investments:
Cash and investments $11,742,783
Restricted cash and investments 28,329,760
Total cash and investments $40,072,543
Cash and investments as of June 30,2011,consist of the following:
City.of Petaluma pooled investments $11,742,783
Cash and investments with fiscal agents 28,329,760
Total Cash and Investments $40,072,543
B. Investments Authorized by' he California Government Code and the City's Investment Policy
The Commission's dependence on property tax receipts, which.are received semi-annually, requires it to
maintain significant cash reserves to finance operations during the remainder of the year The Commission
pools cash from all and all funds, except Cash and Investments with Fiscal Agents,with the City of
Petaluma so that it can be invested at the maximum yield, consistent with safety and liquidity, while
individual funds can make expenditures at any time.
The City's Investment Policy and the California Government Code allow the City to invest in the following,
provided the credit ratings of the issuers are acceptable to the City and approved percentages and maturities
are not exceeded. The table-below also identifies certain'provisions'of the California Government Code or
the City's Investment Policy where it is more restrictive that addresses interest rate risk, credit risk and
concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees
that are governed_by the provisions of debt agreements of the City, rather than the general provisions of the
California Government Code or the City's investment policy.
17
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to.Component Unit Financial Statements
NOTE 2-CASH AND:INVESTMENTS(Continued)
The City's investment policy and the California Government Code allow the Commission to invest in the
following: .
Minimum Maximum Maximum
Maximum Credit -Percentage. Investment
Authorized Investment Type Maturity Quality of Portfolio In One Issuer
State of California Local Agency Investment Fund(LAIF) No Limit N/A N/A N/A
Securities of the State or Local Agencies of the State No Limit t_ N/A N/A N/A
California Asset Management Program No Limit N/A N/A N/A
Certificates of Deposit 2 years N/A 30% N/A
Bankers Acceptances 180 days N/A 40% 30%
Securities of the U.S'Treasury or Other Federal Agencies 5 years * N/A. N/A N/A
Repurchase Agreements - 30 days A-1/P-1 N/A N/A
Money Market Funds No Limit Two highest ratings 20% N/A
Medium-Term Notes(as currently.owned) 397 days N/A N/A N/A
t-May be changed if approved by Council
C. Investments Autkorized by Debt Agreements
The Cash and Investments with Fiscal Agents in the amount of$28,329,760 include certain amounts
which are held by fiscal agents to be used only for specific capital outlay,payments of certain long-term
debt and maintaining required reserves. The City invests funds only as permitted by specific State
statutes governing their investment or applicable City ordinance, resolution, or bond indenture.
D. 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 Cornmissionthanagesiits 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.
Information about the sensitivity of-the fair values of the Commission's investments (including
investments held by bond trustees)to market'interest rate fluctuations is provided by the following table
that shows the distribution of the'Cormnission's investments by maturity or earliest Call date:
12 Months
Investment Type or less Total
Held by.Trusteesi
California Asset Management Program $17,165,537 $17,165,537
Money market 11,164,223 11,164,223
Total Investments 28,329,760 28,329,760
City of Petaluma pooled investments 11,742;783
Total Cash and Investments $40,072,543
18
PETALUMA COMMUNITY,DEVELOPMENT COMMISSION
Notes to'Component Unit Financial Statements
NOTE 2-CASH AND INVESTMENTS(Continued)
The Commission is a participant in the Local Agency Investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the, Treasurer of the State of
California. The Commission reports its investment in LAIF at,the fair value amount provided by LAIF,
which is the same as the value of the pool share. The.balance is available for withdrawal on demand,and
is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.
Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed
securities, other asset-backed securities, loans to certain state funds, United States Treasury Notes and
Bills and floating rate securities issued by federal agencies, government-sponsored enterprises, and
corporations. At June 30,2011,these investments have an average maturity of 237 days.
The Commission is a voluntary participant in the California Asset Management Program (CAMP).
CAMP is an investment pool offered by the California Asset.Management Trust(the Trust). The Trust is
a joint powers authority and public agency created by the Declaration of Trust and established under the
provisions of the California.Joint:Exercise of Powers Act(California Government Code Sections 6500 et
seq., or the "Act") for the purpose of exercising the,common power of its Participants to invest certain
proceeds of debt issues and surplus funds. The Pool's investments are limited to investments permitted
by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The
Commission reports its investments in CAMP at the fair market value amounts provided by CAMP,
which is the same as the'value•of:the pool share. At June 30,2011,,the fair market value approximated is
the Commission's cost.At June 30,2011,these investments have an average maturity of 52 days.
Money market mutual funds.are available for withdrawal on demand and at June 30, 2011, have an
average maturity ranging from 35 -44 days.
E. 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 ofa'rating by a nationally recognized statistical
rating organization. The actual ratings as of June 30,2011,are as follows:
Investment Type AAA AA+ AAAm Total
FI-ILB $1,013,159 $0 $1,013,159
FHLMC 4,236,153 0 4,236,153
FNMA 4,371,072 0 4,371,072
U.S.Government Supported Corporate Debt 1,440,987 0 1,440,987
Corporate Notes $1,287,745 1,287,745
Local Agency Investment Fund $39,339,944 39,339,944
Califotnia'Asset Management Program 1,127,994 1,127,994
Held by Trustees:
California Asset Management Program 18;285,365 18,285;365
Totals $11,061,371 $1,287,745 $58,753,303 71,102,419
Not rated:
Certificate of Deposit 249,714
Investment in Assessment District Bonds 697,873
Certificate of Deposit Account Registry.Service 2,000,000
Cash on hand and in banks 4,427,904
Money market 11,165,638
Cash with fiscal agents 2,262,093
Exemptfrom credit rate disclosure:
U.S.Treasury's 11,859,419
Total Investments $103,765,060
19
PETALUMA,COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 2-CASH AND INVESTMENTS(Continued)
On August 8, .2011, S&P lowered its issuer credit ratings and related issue,ratings on ten of twelve
Federal Home Loan Banks(FHLBs)and the senior debt issued by the System from AAA to AA+.
S&P also lowered the ratings on the senior debt issued by the Federal Farm Credit Banks'(FFCB)from
AAA to AA+,and lowered the senior issue ratings on Fannie Mae(FNMA)and Freddie:Mac(FHLMC)
from AAA to AA+. The A subordinated debt rating,and the C rating on the preferred stock of these
entities remained unchanged. Finally,,S&P.affirmed the short-term issue ratings for these entities at A-
1+. It should be noted that Standard and Poor's is one iof the three main credit rating agencies. The
rating agencies of Fitch and Moody's re-affirmed their respective AAA ratings for the United States of
America.
NOTE 3 INTERFUND TRANSACTIONS 1
A. Long-Term Advances
During fiscal 2009, the City's_Housing In-Lieu-Impact Fee Fund advanced $2.5 million to the Low and
Moderate Housing;Fund to finance the site acquisition of the Vintage Chateau property for which it has
secured a promissory note: The advance,is non-interest bearing. As of June 30, 2011, the outstanding
amount of the advance is $1,300,000.
B. Transfers Between Commission Funds
With Board,approval, resources may bearansferred from one Commission fund to another. The purpose of
the majority of these transfers was to provide funding-for capital projects, debt:service, and general and
specific operational expenditures. Less often,a transfer maybe made to open or close a fund:
Transfers between Commission funds during the fiscal year ended June 30,2011,are as follows:
Amount
Fund Receiving Transfers Fund Making Transfers Transferred
Redevelopment Capital Projects Fund Redevelopment Debt Service Fund $11,162,450
Redevelopment Special Revenue Fund 772;570
Redevelopment Debt Service Fund Redevelopment Capital Projects Fund 4,733,000
'$16,668,020
C. Transfers Between the City and the Commission Funds
Transfers between the City and the Commission funds during the fiscal year ended June 30,2011,are as
follows:
Amount
Fund Receiving Transfers Fund Making Transfers Transferred
Redevelopment Special Revenue Fund City CDBG Fund $20,000
Redevelopment Capital Projects Fund City Impact Fee Fund 30,000'
City Capital Projects Fund 288,906
$338,906
20
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 4-LOANS RECEIVABLE
Loans receivable; including accrued interest and related deferred revenue, comprised balances from the
following programs,all of which are discussed below:
At June 30,2011,the Commission had the following notes receivable:
Housing Loans to Not-For Profit Agencies
Old Elm Partners $1,305,961
Roundwalk Village Partners 933,400
Boulevard(Buckelew)Project 480,200
Downtown River Associate LP 3,662,836
Edith Street Apartments,Inc. 889,964
Lieb Senior Apartments,Inc. 810,241
Parklane Apartments Corp 164,486
575 Vallejo'S.Street Association 851,184
579 Vallejo Street Association 990,000
Casa Grande 198,445
Wood Sorrel 1,347,513
• Logan Place 2,943,219
Salishan°Apartments Inc. 388,380
Vintage Chateau. 4,499,825
Total Housing Loans to Not-For Profit Agencies 19,465,654
First-Time Home Buyers Loans 3,736,875
Storefront Loan Program 241,105
Total $23,443,634
The City and the Commission:have loaned funds to not-for-profit agencies to finance construction of low
and moderate income.housing. The terms range from 13 to 60 years, and the interest rates range from
zero to 6.56%. Payment is deferred until a variety of events occur, such as: sale or transfer of property,
failure to adhere to low and moderate housing provisions of the promissory note, to the extent of residual
receipts, or at the maturity date of the note. Management evaluated these loans and they are expected to
be collected,therefore,no`allowance for doubtful accounts was set up.
At June 30,2011,the Commission held outstanding balance of the Housing Loans of$19,465,654.
A. First-Time Home Buyers Loans
The Commission offers qualified low and moderate income first time home buyers silent second
mortgages on home, purchases. Accrued interest and principal are due when the primary loan is
refinanced or on sale of the property.The interest rate is the'lower of the principal amount plus interest at
a rate of 10% per annum, or 28.6% to 33% net of sales.price. At June 30, 2011, the outstanding balance
of the loans was$3,736,875.
B. Storefront Loan Program
The Commission offers low interest loans to property owners with buildings located in the Central
Business District(Downtown) as an incentive to make improvements to the exterior storefronts. At June
30,2011,the outstanding balance of the loans was$241,105.
21
PETALUMACOMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 5-CAPITAL ASSETS
The Commission transfers its capital assets to therCity as projects are completed since ithe City is required to
maintain all assets. The Commission retains its construction in process until the.projectsare completed. At
that time, the assets will be contributed to the. City. The Commission cannot use tax increment for
maintenance, thus, the City is required to maintain all Commission assets. Consequently, all completed
capital assets are transferred and recorded as City`assets.
The Commission generally incurs long-term debt to finance projects or purchase assets, which will have
useful lives equal to or greater than the related debt.
NOTE 6-CONG'TERM DEBT
A. The Commission's Long-Term Debt
The Commision's long-term debt activities for the year ended June 30,2011,is as follows:
Original Amount
Issue Balance Balance due within
Governmental-Activity Debt: Amount June 30,2010 Additions Retirements, .June 30,2011: one year
Tar Allocation Bonds:
2001A Refunding Tax Allocation Bonds
3.50-4.50%,due 5/1/2014' $4,025,000 $1,460,000 $340000 $1,120,000 $355,000
• 2003A Tax Allocation Bonds
225-5.00%,due 5/1/2033 23,630000 21,865,000 475,000 21,390000 495,000
Unamortized Discount (14,217) (10,899) (474) (10,425)
2005A Tax Allocation Bonds
5.00-5.75%,due 5/12030 18,355,000 17,695,000 270,000 17;425,000 275,000
Deferred amount refunding 1,248,420 (998,735) (49,937) (948,798)
Unamortized Premium 161,953 '131,182 6,478 124,704
2007 Tax'Allocation Bonds
400-4.50%,due 5/1/2039 31;825,000 31,300,000 220,000 31,080,000 230,000
Unamortized d Discount (568,396) (510,669) (17,762) (492,907)
2011A Tax Allocations Bonds
4.79%,due 5/1/2024 11,369,000 511,369,000 11,369,000 650,000
Cost of issuance 151,680 151,680 2,917 148,763
Total Tax Allocation Bonds 70,930,879 11,520,680 1246,222 Si 205,337 2,005,000
Assessment District Bond:
Auto Piazza DDA-AD 19
5.65-7.75%,due 322012 1,080,000 214,000 214,000
Total Assessment DisMct Bond 214,000 . 214,000
Total Government Activity Debt $71,144,879 $11,520,680 $1,460,222. . $81,205,337 $2,005,000
22
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 6-LONG TERM DEBT(Continued)
B. Debt Service Requirements
Future principal and interest payments on all Governmental and Business-type long-term debt were as
follows at June 30,2011:
For The Year Tax Allocation Bonds
Ending June 30 Principal Interest
2012 $2,005,000 $3,740,729
2013 2,087,000 3,658;726
2014 2,174;000, 3,572,034
2015 2,269,000 3,479,634
2016 2,359,000 3,385,769
2017-2021 13,413;000 15,316,240
2022-2026 14,247;000 12,092,961
2027-2031 13,825,000 8,933,556
2032-2036 17,495,000 5,257,188
2037-2039 12,510;000 1,142,326
Total payments due $82,384,000 $60,579,163
Less:Original.Issuance
Premium(Discount) (1,178,663)
$81,205;337
C. Description of the Long-Term Debt Issues
2001A Refunding Tax Allocation Bonds - On June 4; 2001; the Commission issued Refunding Tax
Allocation Bonds,•.Series 200IA in the amount of$4,025,000. The proceeds of the bonds were used to
refund the 1992 Tax Allocation Bonds and to fund the development of the auto plaza located in the
Petaluma Community Development Project Area. The Boods?niatufe;annually each May 1 from 2002 to
2014, in amounts ranging from $250,000 to $390,000 and bear interest at rates ranging from 3.50% to
4.50%. Interest is payableisemiannually on May 1 and November 1.The Bonds maturing on or after May
I, 2010, are subject to optional redemption prior to maturity, in whole or in part, either in inverse order
of maturity or:by lot within any one maturity date,on any date on or after May 1,2009,at a price equal to
the:principal amount,plus accrued interest on the redemption date.The outstanding balance of the bonds
was$1,1,20,000 as of June.30,2011.
2003A Tax Allocation Bonds - On October 28, 2003, The Commission issued Tax Allocation.Bonds,
Series 2003A in the amount of $23,630,000. The proceeds,of the bonds will be used to finance the
Commission projects within the Petaluma Community Development Project area The Bonds mature
annually each May 1 from 2007 to 2033, in amounts ranging from $430,000 to $8,215,000 and bear
interest at rates ranging,from-2.25%to 5.00%. Interestsis payable semiannually on May 1 and November
1. The Bonds maturing on or after May 1, 2014, are subject to optional redemption prior to maturity, in
whole or in part,eithefin inverse order of maturity or by lot within any one maturity date, on any date on
or after May 1, 2013, at-a price equal to the principal amount, plus accrued interest on the redemption
date.The bonds are payable from and secured by tax revenues.The outstanding balance of the bonds was
$21,390,000 as of June 30,2011.
The bonds were issued at a discount of$14,217 which is being amortized over the 30 year life of the
bonds resulting in an annual amortization of$474.
23 •
PETALUMA COMMUNITY DEVELOPMENT COMNIISSION
Notes to Component Unit Statements
NOTE 6-LONG TERM DEBT(Continued)
2005A Tax Allocation Bonds — On September 21, 2005, the Commission issued Refunding Tax
Allocation'Bonds, Series 2005A Tax Allocation Bonds in the amount of$18;355,000. The proceeds of
the bonds will,be used to refund the 2000A Tax Allocation Bonds and,finance;the issuance costs of the
2005A Refunding Tax Allocation Bonds. The Bonds mature annually each.May-1' from 2006 to 2030, in
amounts ranging from $90,000 to $1,420,000 and bear interest at rates ranging from 5.00% to 5.75%.
Interest is payable semiannually on May 1 and November 1. The Bonds maturing on or before May 1,
2016, are subject to optional redemption prior to,maturity, in whole or in part, either in inverse order of
maturity or in inverse order of maturity and by lot within any one maturity date,on any date on or after
May 1,'2015, at a price equal to the principal amount, plus accrued interest on the redemption date. The
bonds are payable solely from secured tax revenues. The outstanding balance of the bonds was
$17,425,000 as of June 30,2011.
The bonds were-issued,at a premium of$161,953,which is being amortized over the 25 year life of the
bonds resulting inan annual amortization of$6,478.
In:connection with the issuance ofthe bonds, the City recorded a deferral onrefunding of debt;which is
reported as part of long-term debt.This deferral was in connection with interest payments made to the
escrow agent for future payments of interest.,The total amount deferred was;$1,248,420 which will be
amortized over-the 25 year life of the bends resulting in an annual amortization of$49,937.
2007 Tax Allocation Bonds - On April 10,2007,'the rCommission issued Subordinate Tax Allocation.
Bonds, Series 2007 in the amountof$31,825,000: The proceeds of the bonds were used to refund the
2000B Tax Allocation Bonds and provide$30,000,000 in project funds.'The Bonds mature'annuallyeach
May 1 from 2008 to 2039, in amounts ranging from $115,000 to $4,355,000 and bear interest at rates
ranging from 4.00% to 4.50%: Interest is payable semiannually on May 1 and'.November 1,'The.Bonds
maturing:on or before May 1, 2016, are subjecttoioptional redemption prior to;maturity, in whole or in
part, either in inverse order of maturity or in-inverseorder of maturity and-by lot within any:one maturity
date,,on any,date on or after May 1,-2015, at a,pricemqual to the principal/amount, plus accrued interest
on the redemption date. The bonds are•payable:solely from secured tax revenues. The outstanding
balance of the bonds was$31,080,000 as of June 30,2011.
The bonds were issued at a discount,of$568,396 which is being amortized overthe• 2-year life of the
bonds resulting in an annual amortization of$17,762.
2011 Tax Allocation.Bonds - On March 17, 2011, the.Cotnniission issued Subordinate Tax,Allocation
Bonds, Series 2011 in the amount of $11,369,000.'The proceeds of the bonds will:,be,-used to fund
Transportation improvement around the City of Petaluma. The Bonds mature annually each May 1 from
2012 to 2024„ in amounts.ranging from $650,000 to $1,140,000 and bear interest at rate of 4:79%.
Interest is payable semiannually oq May 1 and November.The,bonds are payable solely from secured tax
revenues. The,outstandingbalance,of.the bonds was$11,369,000 as of June 30,2011.
Auto Plaza DDA - AD 19 - In 1992, the Commission has an obligation under the Auto Center
Disposition and Development.Agreement to refund 50% Of assessments paid by property owners in
relation to the Assessment District 19 Bonds. On February 3, 1992, the Assessment District 19 Bonds
were issued in the amount of $1,080,000. The proceeds of the bonds were to finance public.
improvements at the Auto Plaza. The Bonds mature annually each September 2 from 1997 to 2010, in
amounts ranging from $45,000 to $111,000 and bear, interest at rates ranging from 5:60% to 7:75%:
Interest is payable semiannually,on.March 2 and September 2. The bonds are„payablefrom.and secured
by assessments paid by the property owners. These bonds have been repaid as•of June 30,2011.
•
24
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 6-LONG TERM DEBT(Continued)
Multi-Family Housing Revenue Bonds-The Redevelopment Agency issued$4,750,000 in Multifamily
Housing Revenue Bonds, with a variable rate of interest, not to exceed 12%,with the variable rate to be
determined by the marketing agent. The proceeds from the bonds were used to make a loan to Oakmont
Retirement Investors, LLC for the purpose of financing the acquisition and construction of a 76-unit
assisted living care/multi-family rental facility known as Oakmont at Petaluma. The bonds are special
obligation of THE COMMISSION, payable solely from the rental revenue and other assets pledged or
assigned to Payment of the bonds by Windchime of Walnut Creek, LP. These bonds are not recorded as
liabilities on the City's financial statements.
On September 15, 2003, the Commission issued Multi-Family Housing Revenue Bonds and Taxable
Multi-Family Housing Revenue Bonds in the amount of$6,197,000. The proceeds of the bonds were
used to finance the construction and equipping of an 81 unit,multi-family, rental housing development in
the City of Petaluma, known as the "Downtown River Apartments:" The bonds are special obligation of
the Commission payable solely from rental revenue and other assets pledged or assigned to payment of
the bonds by the obligator.
Pledged Revenues —The Commission has pledged tax revenues to the repayment of the Commission's
debts through the final maturity of the Bonds,or early retirement of the Bonds,whichever comes first.
Tax revenues consist of tax increment revenues allocated to the Commission's project areas pursuant to
Section 33670 of the Redevelopment Law excluding that portion of sssuch tax increment revenues required
to be paid under Tax-Sharing Agreements unless the payment of such amounts has been subordinated to
payment of debt services on the Bonds. Tax increment received in 2010-2011 was $16,166,274 and total
debt service of all Tax Allocation Bonds paid was $4,616,105. The Bonds required 29%of net revenues.
In future years, annual principal and interest payments on the Tax Allocation Bonds are expected to
require 29% of tax incrementrevenues. The total principal and interest remaining to be paid on the
Bonds is$142,963,163 at June 30,2011.
NOTE 7—NET ASSETS AND FUND BALANCE
GASB Statement 34 adds the concept of Net Assets, which is measured on the full accrual basis, to the
concept of Fund Balance,which is measured on the modified accrual basis.
A. Net Assets
Net Assets is the excess of all the Commission's assets over all its liabilities, regardless of fund. Net
Assets are divided into three captions. These captions apply only to Net Assets, which is determined only
at the Agency-wide level,and are described below:
Invested in Capital Assets, describes the portion of Net Assets which is represented by the current net book
value of the Commission's capital assets.
Restricted describes the portion of Net Assets which is restricted as to use by the terms and conditions of
agreements with outside parties, governmental regulations, laws, or other restrictions which the Commission
cannot unilaterally alter. These principally include developer fees received for use on capital projects, debt
service requirements,and redevelopment funds restricted to low and moderate income purposes.
Unrestricted describes the portion of Net Assets which is not restricted to use.
25
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Componen •Unit Financial Statements
NOTE 7—NET ASSETS AND FUND BALANCE(Continued)
B. Fund Balances
Governmental fund balances represent the:net current assets of each fund. Net current assets generally
represent a:fund's'cash and receivables, less its liabilities.
The Commission's fund balances are classified in accordance with Governmental Accounting_Standards
Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund. Type
Definitions, which requires the Agency to classify its fund balances based on spending constraints imposed
on the use of resources: For programs with multiple funding sources, the Agency prioritizes and expends
funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the
following hierarchy is ranked according to the degree of spending constraint:
Nonspendable represents balances. set aside to indicate items do not represent available, spendable
resources even though,they are a component of assets. Fund balances required to be maintained intact,
such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes
receivable,;and landheld for redevelopment are included. However, if proceeds realized from the sale or
collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are
required to be presented as a component of the applicable category.
Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws,
regulations, or enabling legislation which requires the resources to be used only:£or a_specific purpose.
Encumbrances and nonspendable amounts subject to restrictions are included along with spendable
resources.
Committed fund balances:have constraints'imposed by formal action of the.Commission Board which may
be altered only by formal action of the Commission Board. Encumbrances and nonspendable amounts
subject to council commitments are included along with spendable resources.
Assigned fund balances are amounts constrained by the Commission's intent to be used for a specific
purpose, but are neither restricted nor committed. Intent is expressed by the Commission Board or its
designee and may be changed at the discretion of the,Commission Board or'its,designee. This category
includes encumbrances, Nonspendables;,when it is the Commission's intent to use proceeds or collections
for a specific purpose, and residual fund balances, if any of Special Revenue, Capital Projects and Debt
Service Funds which have not been restricted or committed.
Unassigned fund balance represents residual amounts that have not been restricted;committed,or assigned.
This includes the residual general fund balance and residual fund deficits, if any, of other governmental
funds.
At June 30, 201.1, the Commission had An unrestricted deficit of $77,147,615 as the Commission's
investment in assets is primarily in City owned property, The Commission does not hold property in its
own name. The Commission, under State Law, is required to show indebtedness in order to be eligible to
receive tax increment. Future tax increment revenue will beused to pay the defiCit.
C. Encumbrances
The Redevelopment_Capital Projects Fund had outstanding encumbrances of;$275,372 as of June 30,2011.
26
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes to Component Unit Financial Statements
NOTE 8-CONTINGENT LIABILITY I
The Commission participates in several federal and State grant programs. These programs have been
audited by the Commission's independent accountants in accordance with the provisions of the federal
Single Audit Act amendments of 1996.and applicable State requirements. No cost disallowances were
proposed as a result of these audits. However,these programs are still subject to further examination by the
grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot
be determined at this time. The Commission expects such amounts, if any,to be immaterial.
The Commission is subject to litigation arising in the normal course of business. In the opinion of the
Commission Attorney there,is no other pending litigation, which is likely to have a material adverse effect
on the financial position of the Commission.
NOTE 9-TAX INCREMENT SHIFT TO SUPPLEMENTAL EDUCATIONAL REVENUE
AUGMENTATION FUND(SERAF)
The State of California adopted AB26 4X in July 2009 which directs that a portion of the incremental
property taxes received by redevelopment agencies be paid instead to the County supplemental educational
revenue augmentation fund (SERAF) in fiscal years 2009-10 and .2010-11. The State Department of
Finance determines each agency's;SERAF payment by November 15 of each year, and payments are due by
May 10 of the applicable year. The Commission' made its second SERAF payment in the amount of
$1,044,706 in fiscal year 2010L11.
NOTE 10-SUBSEQUENT EVENT
In an effort to balance its'budget,the State of California adopted ABx1 26 on June 28, 2011,which suspends
all new redevelopment activities except for limited specified activities as of that date and dissolves
redevelopment agencies effective October 1, 2011. The State simultaneously adopted ABxI 27 which allows
redevelopment agencies to avoid dissolution by the City opting into an "alternative voluntary redevelopment
program" requiring specified substantial annual contributions to local schools and special districts.
Concurrently with these two measures, the State passed various budget and trailer bills that are related and
collectively constitute the Redevelopment Restructuring Acts. If all sponsoring communities were to opt-in
to the voluntary program, these contributions amount to an estimated $1.7 billion for fiscal year 2012 and an
estimated $400 million in each succeeding year If the City fails'to make the voluntary program payment,the
Commission would become subject to the dissolution provisions of ABxl 26.
On July 18, 2011, the California Redevelopment Association, the League of California Cities and others
challenged the validity and constitutionality of ABxI 26,and 27 to the California Supreme Court onnumerous
grounds,'including that the acts violate certain provisions of the California Constitution. On August 11,2011,
as modified on August 17,2011,the California Supreme Court agreed to hear the case and issued a partial stay
of ABxI 26 and a full stay of ABxI 27, but the stay did not include the section of ABx1 26 that suspends all
new redevelopment activities. It is anticipated that the Court will render its decision before January 15, 2012,
the date the first voluntary program payment is due.
27
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Notes 10 Component Unit Financial.Statements
NOTE 10—SUBSEQUENT EVENT(Continued)
The suspension provisions of ABxI 26-;prohibit all redevelopment agencies from a wide range of activities,
including incurring new indebtedness or obligations, entering into or modifying agreements or contracts,
acquiring or disposing,-of real,property,•taking actions to adopt or amend redevelopment plans and other similar
actions,except actions required by law or to carry out existing enforceable obligations,asdefined in ABxI 26.
During-the suspension period, an agency is required to•preparefanEnforceable Obligation Payment Schedule
no later than August 29,2011,that allows it to continue to•pay`certain"obligations. The Commission adopted
its Enforceable Obligation Payment Schedule on August24,2011.
•
Included in the Schedule were obligations due Who-City as follows:
Project Name/Debt Obligation
Statutory Payments $1,758;380
Brownsfield Program 400;000
Economic Development/Site Development 6,000,000
$8,158;380
In addition,the suspension provisions require the State:Controller to review the activities of all redevelopment
agencies to determine whether an asset transfer between an'agencyand any public agency occurred on or after
January 1,2011. If an asset-transfer did occur and the public agency that received the;assetis notcontractually
committed to a third party for the expenditure or encumbrance of the asset,the'State Controller,is required to
order the asset returned to the redevelopment agency. The State Controller's Office:ha`s:notyet provided;any
information about the timing or the process for this statewide asset transfer review.
The Commission is currently-subject to the-suspension provisions as described above These facts•indicate that
there is more than a remote possibility the Commission may not continue as a going concern beyond October 1,
2011. The continuation of the Commission beyond•October 1, 2011 will initiall •depend upon whether the
Supreme Court rules in,favor of the petitioners. There are three possible consequences to the Commission
from a decision of the Supreme Court,when itis rendered:
1. If the Supreme•.Court determines that both ABxl 26 and ABx1 27 are valid,thence City will consider
whether it will enacts an ordinance to opt-in to the=alternative.:voluntary redevelopment program. If
enacted, the City would be required to.make•annual payments to the County Auditor-Controller and the
Commission would no longer be subject to the suspension provisions. The'State Department of Finance
calculated the City's Voluntary Program payment for fiscal year 2012 to be $5,150,819, which was
adjusted to$4,908,155 afteran appeal made by the City.
2. If the Supreme Court determines that both ABx1 26 and•ABxI'27 are valid and the City decides not to
participate in the alternative voluntary redevelopment program, or if the Supreme Court determines that
ABx1 26 is valid,but-ABx1 27 is not.valid,the"Commission will continue to be subject to,the suspension
provisions and would be dissolved in accordance with certain provisions of ABxI 26. Prior to
dissolution, anytransfers.of:Commission assets subsequent to January 1, 2011 to the City that were not.
obligated to third parties or encumbered may be subject to•the State Controller's review discussed above
and',required to be returned to the Commission. Upon dissolution, all assets and obligations of the
Commission would be transferred to a successor agency.
28
PETALUMA.COMMUNITY DEVELOPMENT COMMISSION
Notes to Component;Unit-Financial Statements
NOTE 10—SUBSEQUENT EVENT(Continued)
3. If the Supreme Court determines that both ABx1 26 and ABxI 27 are invalid,the Commission would no
longer be subject to the suspension provisions and would continue in existence under California
Redevelopment Law as it existed prior to the enactment of ABx] 26 and ABx1 27.
As of November 18, 2011, the-Supreme Court has not ruled on the case and the Commission is subject to the
suspension provisions as discussed above.
29
•
REQUIRED SUPPLEMENTALINFORMATION
Redevelopment;Special Revenue Fund -used to account',for the redevelopment agency's 20% set-aside,
as required by law, of tax increment for Low and Moderate Income Housing. The activity of this fund
consists of supporting development of affordable housing in the community. Also included in this fund are
redevelopment agency donations and grant revenues.
31
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
REDEVELOPMENT SPECIAL REVENUE FUND
SCHEDULE OF REVENUES;EXPENDITURES
AND.CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2011
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual Amounts (Negative)
REVENUES:
Taxes 53;260,000 $3,260,000 $3,074;827 ($185,173)
Use of money and property 1,600 1,600 41,744 40,144
Charges for services 15,275 15,275
Other 1;525,000 ' . 475,000 673,895. 198,895
Total Revenues 4:786,600 3,736,600 3,805,741 69;141
EXPENDITURES:
Community,Development 5,163;050 6,648,800 4,802;387 :1,846,413
Total Expenditures 5,163,050 6,648,800 4,802387 1,846,413
EXCESS(DEFICIENCY)OF REVENUES
OVER EXPENDITURES (376,450) (2,912,200) (996,646) 1,915,554
OTHER FINANCING SOURCES(USES)
Contributions froth the City 11,700 11,700
Transfers(out) (925,000) (45,000) (772,570) (727,570)
Transfers in from the City 20,000 20;000 20;000
Total other financing sources(uses) (905;000) (13,300) (740,870) (727,570)
EXCESS(DEFICIENCY),OF.REVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES ($1,281,450). ($2,925,500) (4,737;516): $1,187,984
BEGINNING FUND BALANCE 24;563;889,
ENDING FUND BALANCE $22826;373_
See accompanying notes to financial statements
32
. -
SUPPLEMENTAL
SUPPLEMENTAL INFORMATION
•
The Redevelopment Debt Service Fund is used to account for the accumulation of resources, and the
payment of principal and interest of the Commission's long-term debt.
The Redevelopment Capital'Projects Fund is used to account for the administration of programs and
the capital projects undertaken in the Redevelopment Agency.
35
PETALUMA.COMMUNITY DEVELOPMENT COMMISSION
REDEVELOPMENT..DEBT SERVICE FUND
SCHEDULE OF,REVENUES;EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE30,2011
Variance
Positive
Budget Actual (Negative)
REVENUES
Use of money and property $500 ($500)
Total.Revenues 500 (500)
EXPENDITURES
Community development 25,950 $21,900 4;050
Debt service:
Principal 1,408,000 1,519,000 _, (111,000)
Interest and fiscal charges 3;474,450 3,305360 169;090
Total Expenditures 4;908,400 4,846;260. . 62,140..
EXCESS(DEFICIENCY)OF REVENUES
OVER EXPENDITURES (4,907,900) (4,846,260) 61,640
OTHER FINANCING.SOURCES(USES)
Proceeds from debt 11,369,000 11,369,000,
Transfers'in 4,733,000 4,733,000
Transfers(out) (.11,162,450) (11,162,450)
Total Other Financing Sources(Uses) 4;939550 4,939,550
.
EXCESS OF(DEFICIENCY)OREVENIJES AND
OTHER SOURCES OVER EXPENDITURES
AND OTHERUSES $31,650 93,290 $61,640
BEGINNING:FUND BALANCE 322,279
ENDING FUND BALANCE $415,569
36
PETALUMACOMMUNITY DEVELOPMENT COMMISSION
REDEVELOPMENT,CAPITAL PROJECTS FUND
SCHEDULE OF REVENUES,EXPENDITURES
AND'CHANGES+IN FUND BALANCE
BUDGET-AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2011
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual Amounts (Negative)
REVENUES:
Taxes $13,000;000 $13;000,000 $13,091,447 $91,447
Licenses,permits and fees 91 $91
Use of money and property 10,000 10,000 143,773 133,773
Intergovernmental 126;000 143,500 38,709 (104,791)
Total Revenues 13,136;000 13,153,500 13,274,020 120,520
EXPENDITURES:
Community development 6,877,150 6,835,150 3,991,214 (2,843,936)
Tax increment pass through agreement 5,140,000 5,140,000 4,796,826 (343,174)
Capital outlay 415,913 415,913
Total Expenditures 12,017,150 11,975,150. 9,203,953 (2,771,197)
EXCESS(DEFICIENCY)OF REVENUES
OVER EXPENDITURES 1,118,850 1,178,350 4,070,067 2,891,717
OTHER FINANCING SOURCES(USES)
Contributions from the City 139,000 163,400 24,397 (139,003)
Transfers in 4,329,000 31,349,200 11,935,020 (19,414,180)
Transfers(out) (4,733;000) (24;911,250) (4,733,000) 20,178,250
Transfers in from the City 318,906 318,906
Total other financing sources(uses) (265,000) 6,601,350 7,545,323 943,973
EXCESS(DEFICIENCY)OF REVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES 853;850 7,779,700 11,615,390 $3,835,690
BEGINNING FUND BALANCE 27,402,603
ENDING FUND BALANCE $39,017,993
See accompanying notes to financial statements
37
Petaluma Community Development Commission
EXCESS SURPLUS CALCULATION
Excess surplus is defined in Health and Safety Code Section 33334.12(b) as any unexpended and unencumbered
amount in an Agency's Low:and Moderate Income Housing Fund that exceeds the greater of$1,000,000 or the
aggregate amount deposited into the Low and Moderate Income Housing Fund during tile-preceding four fiscal
years,as of the beginning of the fiscal year.
If excess surplus exists,the Agency must lawfully spend,the excess or transfer it to a housing authority or other
public agency in'the-following fiscal year,expend or encumber:in the next two fiscal yearsbt face sanctions.
Essentially,agencies have a'three-year window to expend,encumber,or transfer the excess surplus.
Low-and.-Moderate Income
Housing Funds--'All Project Areas
July 1,2010'
Opening Fund Balance—July 1,2010 $24,563,889
Less Unavailable Amounts:
Deposits andprepaiditems ($548)
Notes receivable (22,494,553)
(22;495,101)
Available Low and Moderate Income Housing Funds 2,068;788
Limitation(greater of$1,000,000 or four years set-aside)
Set-Aside-for last four years-fiscal years ended:
June 30,2010 3,797;596
June 30, 2009 3,297,916
June 30, 2008 3,277;878
June 30,2007 3,035,021
Total $13,408,411.
Base limitation $1;000,000
Greater amount 13,408,411
Computed Excess Surplus-July 1,2010 None
38
ASSOCIATES
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. - Suite 215
Pleasant Hill, California 94523
INDEPENDENT AUDITOR'S REPORT (925)930-0902 •FAX(925)930-0135
mazeCmazeassociates.com
ON INTERNAL CONTROL OVER www.mazeassociates.com
FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER-MATTERS
' BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Members of the Petaluma Community
Development Commission
Petaluma, California
We have audited the financial statements of the Petaluma Community.Redevelopment Commission as of and for
the year ended lune 30,2011, and have-issued our report thereon dated November 18,2011. The report included
a special emphasis paragraph concerning proposed redevelopment dissolution and the implementation of
Governmental Accounting Standards Board Statement Number.54 (GASH 54), Fund Balance Reporting and
Governmental Fund Type Definitions: We conducted our audit,in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial audits contained in
Government Auditing Standards,,issued bathe Comptroller General of the United States.
Internal Control over Financial Reporting
Management of the.Commission:is responsible for establishing and maintaining effective internal control over
financial reporting. In planning and performing our audit, we considered the Commission'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
Commission's internal control over financial reporting: Accordingly, we do not express an opinion on the
effectiveness of the Commission'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 thereis a reasonable possibility that a material misstatement of the Commission's financial
statements will not be•prevented, or detected and corrected on a timely basis. A significant deficiency is a
deficiency,;or,a combination of deficiencies, in internal control,that is less severe than a material weakness,yet
important enough to merit attention by those charged with governance.
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.
A Profes ioonal Corporation
Compliance and,Other Matters
As part of obtaining reasonable assurance about whether the Commission's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of
our tests disclosed no instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.
As part of our audit, we prepared and issued our separate Memorandum on Internal Control dated November 18,
2011,which is an integral part of our audit and should be read in conjunction with this report.
This report is intended solely for the information-and use of management Commission Board, others within the
Commission the State Controller's Office, federal •awarding agencies and pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
a�e_ a-44 0 6
November 18,2011
40
�,.: - __ : .; � �.__�:•— � :...__�rte:•.._ _ - -- - " --_.
c
AZE 8.
ASSOCIATES
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. - Suite 215
• Pleasant Hill, California 94523
(925) 930-0902 •FAX(925) 930-0135
maze@mazeassociates.com
www.mazeassociates.com
INDEPENDENT.AUDITOR'S REPORT ON.COMPLIANCE AND
ON INTERNAL CONTROL OVER COMPLIANCE
IN ACCORDANCE WITH THE CALIFORNIA HEALTH AND SAFETY CODE
AS REQUIRED BY SECTION 33080.1
Members of the
of the Petaluma Community Development Commission
Petaluma,California
Compliance
We have audited the Petaluma Community Development Commission's compliance with the California Health
and Safety Code as required by Section 33080.1 for the year ended June 30, 2011. Compliance with the
requirements referred to above is the'responsibility of the Commission's management. Our responsibility is to
express an opinion on the Commission's compliance based on odr audit.
We conducted our audit of compliance in accordance with auditing;standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and Guidelines for Compliance Audits of California
Redevelopment Agencies June 2011, issued by the State Controller.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the compliance requirements referred to above that could have a material effect on the
Commission has occurred: An audit includes examining, on a test basis, evidence about the Commission's
compliance with those requirements and performing'such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide
a legal determination of the Commission's compliance with those requirements.
Inour•opinion, the Commission complied, in all material respects, with the compliance requirements referred to •
above that are applicable for the year ended June, 30, 2011. However, the results of our audit procedures
disclosed instances of noncompliance that are required to be reported under the Guidelines for Compliance
Audits of California Redevelopment Agencies, June 2011, which are described in the accompanying Schedule of
Current Year Findings.
Internal.Control Over Compliance
Management of the Commission is responsible for establishing and maintaining effective internal control over
compliance with the compliance requirements referred to above. In planning and performing our audit, we
considered the Commission's internal control over compliance to determine the auditing procedures for the
purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the
effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the
effectiveness of the Commission's internal control over compliance.
A Profess 1o1 al Corporation.
A deficiency in internal control over compliance exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their.assigned functions;to prevent,or detect and
correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a
deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable
possibility that material noncompliance with a compliance requirement will not be prevented, or detected and
corrected, on a timely basis: A significant deficiency•in'internal control over compliance is a deficiency, or a.
combination of deficiencies, in internal control over compliance that is less severe than a material weakness in
internal control over compliance,yet important enough to merit attention by those charged with governance.'
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be deficiencies,
significant deficiencies, or material weaknesses in internal control over compliance.
We did not identify any deficiencies in internal control over compliance that we consider to be material
weaknesses, asdefined above.
This report is intended,solely for the information and use of management, Commission Boards,others within the
Commission, the State' Controller's Office, federal awarding agencies and pass through entities and is not
intended to be and should not be used by anyone other thaii these specified parties.
f*yaf
November 18,2011.
•
•
42
SCHEDULE OF CURRENT YEAR FINDINGS
Major Compliance Violations,as defined in Health and Safety Code Section 33080.8(j):
None
Other Compliance Violations:
Criteria: California Health and Safety Code Section 33606(d) requires redevelopment agencies to
adopt an annual.budget containing a work program for the coming year, including goals.
Condition: The Commission's adopted budget for fiscal 2010-11 does not appear to contain a work
program or goals for the coming year.
Effect: This causes the Commission to be out of compliance with the requirements above.
Cause: Because this specific information has been included in the Implementation Plan and
Redevelopment Plan, management and City Commission Board did not see the necessity to include
duplicate information in the annual budget. The narrative in the Commission budget references the
Implementation Plan and mid-term review which states the.goals and plan for the Commission. The
working plan and goals are also included in the section of the budget for Capital Improvement Projects,
which is part of the annual budget.
Recommendation: We recommend the Commission include the above required information in
their future adopted budgets.
Manaeement response: The Commission win include the recommended information in their narrative
of the Petaluma Community Development Commission!in future budgets to ensure that the Commission's
goals and working plan are articulated in that document.
43