HomeMy WebLinkAboutChico Urban Area Joint Powers - Ann Finc ReportCHICO URBAN AREA JOINT POWERS
FINANCING AUTHORITY
County of Butte
City of Chico, Successor Agency
to the
Chico Redevelopment Agency
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Annual Financial Report
Year Ended June 30, 2012
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico)
Independent Auditors' Report,
Financial Statements and
Required Supplementary Information
Year Ended 3une 30, 2012
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico)
Year Ended June 30, 20I2
Table of Contents
Pages}
Independent Auditors' Report ....................................................................................................•---.......-... 1
Financial Statements:
Statement of Net Assets and Governmental Funds Balance Sheet ......................................................... 2
Statement of Activities and Governmental Fund Revenues, Expenditures, and
Changes in Fund Balance .......................................................................................................................3
Notes to Financial Statements ................................•..........................................................................4-10
Richardson & Company
INDEPENDENT AUDITORS' REPORT
Board of Directors
Chico Urban Area Joint Powers Financing Authority
Chico, California
850 Howe Avenue, Suite 210
Sacramento, California 98828
Telephone: (916) 564-8727
FAX: (916) 564-8728
We have audited the accompanying financial statements of the governmental activities and each major
fund of the Chico Urban Area Joint Powers Financing Authority (the Authority), a component unit of the
City of Chico, California, as of and for the year ended June 30, 2012, which collectively comprise the
Authority's basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the Authority's management. Our responsibility is to express opinions on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform our audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the fmancial 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 far our opinions.
In our opinion, the basic fmancial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities and each major fund of the Authority as of
June 30, 2012, 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.
The Authority has not presented Management's Discussion and Analysis that accounting principles
generally accepted in the United States of America has determined is necessary to supplement, although
not required to be, part of the basic financial statements.
R.;~..r_.~ C~..~
January S, 2013
CffiCO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico, California)
Statement of Net Assets and
Governmental Funds Balance Sheet
June 30, 2012
Assets
Current assets:
Cash and investments
Interest receivable
Total assets
Liabilities
Noncurrent liabilities:
Loans payable
Fund SalancelNet Assets
Fund balances:
Restricted for sewer projects
Total fund balance
Net Assets:
Restricted
Total net assets
Statement
Capital Frojects Adjustments of Net
Fund {Note II C} Assets
$ 6,883,550
8,583
$ 6,892,133
$
- $ 6,883,550
- 8,583
- 6,892,133
- 6,824,844 6,824,844
6,892,133 (6,892,133) _
$ 6,892,133 {6,892,133) _
6,892,133 67,289
$ 6,892,133 $ 67,289
See accompanying notes to financial statements.
2
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico, California)
Statement of Activities and
Governmental Fund Revenues, Expenditures, and
Changes in Fund Balance
' Year Ended June 30, 2fl12
Expenditures:
Administrative expenses
Construction expenses
Total expenditures
Program revenues:
Intergovernmental revenue
Capital grants and contributions
Total program. revenue
Net program (expense) revenue
General revenues:
Investment earnings
Excess (deficiency} of revenues
over expenditures
Other financing sources {uses):
Proceeds oflonb term debt
Total other financing souses
Change in fund balance/net assets
Fund balancelnet assets:
$eginning of the year (as restated)
End of the year
Capital Projects
Fund
Adjustments Staterent
(Note II D) of Activities
$ 9,845 $ - $ 9,845
7,362,571 - 7,362,571
7,372,416 - 7,372,416
1,900,029 {1,900,029) -
- 1,900,029 1,900,029
1,900,029 - 1,900,029
(5,472,387) - (5,472,387)
36,270 - 36,270
(5,436,117) - (5,436,117}
4,275,034 (4,275,034) -
4,275,034 (4,275,034) -
(1,161,083) (4,275,034} (5,436,117}
8,053,216 1,842,931 5, 503,406
$ 6,892,133 $ (2,432,103} $ 67,289
See accompanying notes to financial statements.
3
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended June 30, 201.2
...-. I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. THE FINANCIAL REPORTING ENTITY
In August 2405, the governing boards of the Chico Redevelopment Agency, which due to State Assembly
Bill 1X 2b is now known as the City of Chico, Successor Agency to the Chico Redevelopment Agency
{Agency} and the County of Butte established a joint powers agency known as the Chico Urban Area
Joint Powers Financing Authority (JPFA) to facilitate the financing, construction and installation of sewer
facilities and improvements in the greater Chico urban area. The JPFA was farmed pursuant to the
provisions of the joint powers laws of the State of California, as set forth in Article 1, Chapter 5, Division
7, Title 1 of the California Government Code {commencing with Government Code Section 6500). The
JPFA is authorized to obtain state or federal loans for the purpose of financing the construction and
installation of sewer facilities and improvements. The construction activity of the JPFA is included in the
City of Chico's Financial statements as a discretely presented component unit as the infrastructure will
belong to the City's Sewer Enterprise Fund as each phase of the project is completed.
B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The government-wide financial statements (i.e. the statement of net assets and the statement of activities)
report information on all of the activities of the JPFA. Governmental activities are normally supported by
taxes and intergovernmental revenues.
The statement of activities demonstrates the degree to which the direct expenses are offset by program
revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include: (1} charges to customers who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or segment and (2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or segment.
Investment earnings and other items which are excluded from program revenues are reported instead as
general revenues.
Separate financial statements are provided for the JPFA's major governmental fund and are reported as a
separate column in the fund financial statements.
C. BASIS OF PRESENTATION, BASIS OF ACCOUNTING, AND MEASUREMENT FOCUS
The government-wide financial statements are reported using the economic resources measurement focus
and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when
a liability is incurred, regardless of the timing of the relaked cash flows.
Governmental fund financial statements are reported using the current financial resources measurement
focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when collectible within the current
period or soon enough thereafter to pay liabilities of the current period. For this purpose, the JPFA
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
{A Component Unit of the City of Chico, California)
Notes to Financial Statements (Continued}
Year Ended June 30, 2[112
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. BASIS OF PRESENTATION, BASIS OF ACCOUNTING, AND MEASUREMENT FOCUS
(Continued)
considers revenues to be available if they are collected within 60 days of the end of the current fiscal
period. '
Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
Inveshuent earnings are considered to be susceptible to accrual and have been recognized as revenue of
the current period. Other revenues are considered to be measurable and available only when cash is
received by the 7PFA.
The activities of the 3PFA are accounted for in a capital projects fund.
When both restricted and unrestricted resources are available for use, it is the JPFA's policy to use
restricted resources first, then unrestricted resources as they are needed.
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY
CaAital Assets
Although the JPFA's sole purpose is to construct infrastructure to facilitate the installation of sewer
connections for residents located in the benefited area, the infrastructure is not owned by the )PFA, and as
a result, the construction costs of the sewer infrastructure are shown as construction expenditures (nat
capital assets) in these financial statements. As the project is completed, the infrastructure will be
received by the City of Chico's Sewer Enterprise Fund as capital assets.
Long-Term Liabilities
In the government-wide financial statements, long-term debt and other long-term obligations are reported
as liabilities and in the fund fmancial statements; the face amount of debt issued is reported as other
financing sources.
Fund Equity
Restricted fund balances include amounts that can he spent only for the specific proposes stipulated by
constitution, external resource providers, or through enabling legislation.
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended June 30, 2012
L SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Assets -
Net assets are classified as restricted net assets. This category presents external restrictions imposed by
creditors, grantors, contributors or laws and regulations of other governments and restrictions imposed by
law through constitutional provisions or enabling legislation.
II. DETAILED NOTES
A. CASH AND INVESTMENTS
L Authorized 1'nvestments
The amounts shown as the JPFA's cash and investments represent its pro rata share of the City's cash and
investments held in the City Treasury. The JPFA follows the City's investment policy with respect to the
management of cash and investments. The table below identifies the investment types that are authorized
by California Government Cade Section 53601. The investment policy limits the amount of funds
invested in instruments with maturities over one year to 1 S%, unless adequate liquidity is available, yield
appears favorable and the Executive Director approves the investment in advance.
Authorized Investment Type
U.S. Treasury Securities
U.S. Agency Securities
Money Market Mutual Funds
Collateralized Bank Deposits
State of California and California
Local Agency Bonds
Repurchase Agreements
Local Agency Investment Fund
(LAIF)
XZ Custodial Credit Risk
Maximum Maximum
Maximum Percentage of Investment Minimum
Maturity Portfolio in One Rating
Issuer
5 years None None None
5 years None None None
5 years 20% 10% AAA
5 years None None None
5 years 15% 5% None
5 years None S% None
NIA None None None
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty 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 custodian of the investments is not the counterparry for the
investments held for the Agency and hence these investments are not exposed to custodial credit risk.
CHICO URBAN AREA .IOINT POWERS FINANCING AUTHORITY
{A Component Unit of the City of Chico, California}
Notes to Financial Statements (Continued)
Year Ended .Tune 34, 2012
II. DETAILED NOTES (Continued)
A. CASH AND INVESTMENTS {Continued)
II. Custodial Credit Risk (Cantntued)
Custodial credit risk far 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 countezparty to a transaction, a government will not be able to
recover fine value of its investment or collateral securities that are in the possession of another party. The
California Government Code and the 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 and securities lending transactions: 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 depository regulated under stated law. 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.
As of lone 30, 2012, the JPFA had $9,691,522 in LAIF and a negative cash balance {draw} of the City's
cash pool in the amount ~$2,807,972> for a net cash balance th these statements totaling $6,$83,550.
III. Cancentratipn of Credit Risk
The investment policy contains no limitations on the amount that can be invested in any one issuer
beyond that stated above.
IV Interest Rate mrd Credit 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 its fair value is
to changes in market interest rates. As a means of limiting its exposure to fair value Losses arising from
rising interest rates, the 1PFA manages its exposure to interest rate risk by investing in the Local Agency
Investment Fund (I.AIF), which provides the necessary cash. flow and liquidity needed for operations, as
well as purchasing a combination of shorter term and longer term investments so that a portion of the
portfolio is maturing or coming close to maturing evenly over time. The segmented time distribution
method is used for reporting interest rate 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. It is the City's policy to purchase investments with the minimum ratings required by
the California Government Code.
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Connponent Unit of the City of Chico, California)
Notes to Financial Statements (Continued}
Year Ended .tune 30, 2012
II. DETAILED NOTES (Continued)
A. CASH AND INVESTMENTS (Continued)
IY! Interest Rate and Credit Risk (Continued)
As of 3une 30, 2012, the JPFA's investments and credit ratings are as follows:
Maturiiy
Credit
rating
(S&l'! Under30 31-365
Maady's) Days Days
Lpcal Agency lnveslment Fund Not Rated S 9,691,522
Negative cash drawn from City of Chico cash and investment pool
Tota! cash and investments
- S 9,69],522
(2,807,972)
S 6.883.550
The JPFA is a voluntary participant in the Local Agency Investment Fund (LATE) that is regulated by
California Government Code Section 16429 under the oversight of tkle State of California Treasurer. The
fair value of the investment in this pool is reported in the accompanying financial statements at amounts
based upon the pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio {in relation
to the amortized cost of that portfolio, as calculated monthly). The balance available for withdrawal is
based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.
The cash and investments as of June 30, 2012, are displayed on the JPFA's Statement of Net Assets as
follows:
Total Cash anal Investments: $ 6,883,550
B. CONSTRUCTION EXPENDITURES
During the current period, the 1PFA constructed infrastructure totaling $7,362,571. Of that amount,
$6,255,740 was transferred to the City's Sewer Enterprise Fund in addition to $4,392,741 that was
constructed in prior years. As of 3une 30, 2012, the JPFA had $1,106,831 in infrastructure expenditures
that is not complete and will be transferred to the City's Sewer Enterprise Fund upon completion.
1-5 avcr 5 Fair
Years Years Value
CHICO URBAN AREA JOINT POV4'ERS FINANCING AUTHORITY
(A Component Unit of the City of Chico, CaEifornia)
Notes to Financial Statements {Continued)
Year Ended June 30, 20I2
II. DETAILED NOTES (Continued)
C. RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE
STATEMENT OF NET ASSETS
Total governmental fund balance $ 6,842,133
Amounts reported for governmental activities in the statement of net assets are
different because:
Loans payable are not due and payable in the current period and, therefore
are not reported in the funds. (6,824,844)
Net assets of governmental activities $ 67,289
D. RECONCILIATION OF THE GOVERNEMNETAL FUND STATEMENT OF REVENUES,
EXFENDITURES, AND CHANGES IN FUND BALANCE TO THE GOVERNMENT-WIDE
STATEMENT OF ACTIVITIES
Net change in fund balances -total governmental fund $ (1,161,083}
Amounts reported for governmental activities in the statement of activities are
different because:
The issuance of Song-term debt (e.g. loans} provides current financial resources
to governmental funds, however, the transaction does not affect net assets. (4,275,034}
Change in net assets of governmental activities $ (5,436,117}
E. LONG-TERM DEBT
Loans Payable
A loan of $31,666,540, interest a# 0%, has been approved by the State Revolving Fund Loan Program for
the JPFA's Nitrate Compliance Program. 2012 construction draws on the loan were $4,275,034. No
payments are due on the loan until project completion.
Changes to the 7FFA's long-term debt for the year ended 3une 30, 2412 were as follows:
July 1, 2011
Due within
Additions Tune 30, 2012 One Year
Loans Payable:
State Revolving Fund Loan $ 2,549,810 $ 4,275,034 $ 6,824,844 $ -
Total $ 2,549,810 $ 4,275,034 $ 6,824,844 $ -
9
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
{A Component Unit of the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended June 30, 2012
II. DETAILED NOTES (Continued)
F. RESTATEMENT OF BEGINNING NET ASSETS
At 3uly 1, 2011, the 7PFA restated beginning net assets to adjust for the deletion of Construction in
Prob ess (CIP) that should have been expensed because these are not assets of the JPFA, but were
included in the 3PFA's Statement of Net Assets. This restatement will allow for the proper reporting of
past construction expenses in the JPFA's financial statements.
The restatement of beginning net assets as previously reported is presented below:
Statement of
Activities
Beginning
Net Assets
Net Assets,
Tune 30, 2011, as
previously reported
9,896,14'7
Add:
Adjustment for prior year construction in progress
that should have been expensed (4,392,741)
Net Assets,
June 30, 2011, as restated $ 5,503,406
10