HomeMy WebLinkAboutChico Urban Area Joint Powers Financing Auth CHICO URBAN AREA JOINT POWERS
FINANCING AUTHORITY
County of Butte
Chico Redevelopment Agency
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Annual Financial Report
Year Ended June 30, 2010
CHICO URBAN AREA.JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico, California)
Independent Auditors'Report,
Financial Statements and
Required Supplementary Information
Year Ended June 30,2010
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Year Ended June 30,2010
Table of Contents
Page(s)
IndependentAuditors' Report................................................................................................................... 1
Financial Statements:
Statement of Net Assets and Governmental Funds Balance Sheet.........................................................2
Statement of Activities and Governmental Fund Revenues,Expenditures, and
Changesin Fund Balance.......................................................................................................................3
Notesto Financial Statements...........................................................................................................4-10
Richardson & Company 550 Howe Avenue,Suite 210
Sacramento,California 95825
Telephone:(916)564-8727
FAX:(916)564-8728
INDEPENDENT AUDITORS' REPORT
Board of Directors
Chico Urban Area Joint Powers Financing Authority
Chico,California
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, 2010, 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 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 opinions.
In our opinion, the basic financial statements referred to above present fairly, in all material respects,the
respective financial position of the governmental activities and each major fund of the Authority as of
June 30, 2010, 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.
November 1,2010
1
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Statement of Net Assets and
Governmental Funds Balance Sheet
June 30,2010
Statement
Capital Projects Adjustments of Net
Fund (Note 11 C) Assets
Assets
Current assets:
Cash and investments $ 6,249,295 $ - $ 6,249,295
Interest receivable 8,071 - 8,071
Total current assets 6,257,366 - 6,257,366
Noncurrent assets:
Construction in Progress - 4,055,843 4,055,843
Total assets $ 6,257,366 4,055,843 10,313,209
Liabilities
Noncurrent liabilities:
Loans payable - 2,345,047 2,345,047
Fund Balance/Net Assets
Fund balances:
Unreserved 6,257,366 (6,257,366) -
Total fund balance $ 6,257,366 (6,257,366) -
Net Assets:
Invested in capital assets,net of related debt 1,710,796 1,710,796
Unrestricted 6,257,366 6,257,366
Total net assets $ 7,968,162 $ 7,968,162
See accompanying notes to financial statements.
2
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Statement of Activities and
Governmental Fund Revenues,Expenditures,and
Changes in Fund Balance
Year Ended June 30,2010
Capital Projects Adjustments Statement
Fund (Note II D) of Activities
Expenditures:
Administrative expenses $ 7,170 $ - $ 7,174
Capital Outlay 1,923,348 (1,923,348) -
Total expenditures 1,930,518 (1,923,348) 7,170
Program revenues:
Intergovernmental revenue 1,900,000 (1,900,400) -
Capital grants and contributions - 1,900,000 1,900,000
Total program revenue 1,900,000 - 1,900,000
Net program(expense)revenue (30,518) 1,923,348 1,892,830
General revenues:
Investment earnings 37,432 - 37,432
Excess(deficiency)of revenues
over expenditures 6,914 1,923,348 1,930,262
Other financing sources:
Proceeds of long-term debt 2,345,047 (2,345,047) -
Change in fund balance/net assets 2,351,961 (421,699) 1,930,262
Fund balance/net assets:
Beginning of the year 3,905,405 2,132,495 6,037,900
End of the year $ 6,257,366 $ 1,710,796 $ 7,968,162
See accompanying notes to financial statements.
3
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Notes to Financial Statements (Continued)
Year Ended June 30,2010
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. THE FINANCIAL REPORTING ENTITY
In August 2005,the governing boards of the Chico Redevelopment Agency (the 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 formed 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 Agency is financially accountable for the JPFA as a result of
fiscal dependency and as such the JPFA is considered a component unit of the Agency. The construction
activity of the JPFA is included in the Agency's financial statements as a capital projects fund.
The JPFA is considered to be a component unit of the City of Chico (City). The City is a legally separate
entity from the JPFA,however,the JPFA provides services exclusively to the City and thus is reported as
a blended component unit in the City's financial statements.
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 related 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
4
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Notes to Financial Statements (Continued)
Year Ended June 30,2010
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.
Investment 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 JPFA.
The activities of the JPFA 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
Capital Assets
Capital assets represent JPFA construction in progress that is reported in the financial statements. The
JPFA defines capital assets as assets with an initial, individual cost of more than $100,000 and an
estimated useful life in excess of one year. Capital assets are valued at historical cost or estimated
historical cost if actual historical cost is not available.
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 financial statements; the face amount of debt issued is reported as other
financing sources.
Net Assets
Net assets are classified in the following categories:
Invested in ca ital assets net of related debt -- This category groups all capital assets, including
infrastructure, into one component of net assets. Accumulated depreciation and the outstanding
balances of debt that are attributable to the acquisition, construction or improvement of these assets
reduces this category.
Unrestricted net assets — This category represents the net assets of the JPFA, which are not
restricted or invested in capital assets net of related debt for any project or other purpose.
5
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Notes to Financial Statements (Continued)
Year Ended June 30,2010
11.DETAILED NOTES
A. CASH AND INVESTMENTS
L Authorized Investments
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 Code Section 53601. The investment policy limits the amount of funds
invested in instruments with maturities over one year to 15%,unless adequate liquidity is available,yield
appears favorable and the Executive Director approves the investment in advance.
Maximum Maximum
Maximum Percentage of Investment Minimum
Authorized Investment Type Maturity Portfolio in One Rating
Issuer
U.S. Treasury Securities 5 years None None None
U.S. Agency Securities 5 years None None None
Money Market Mutual Funds 5 years 20% 10% AAA
Collateralized Bank Deposits 5 years None None None
State of California and California
Local Agency Bonds 5 years 15% 5% None
Repurchase Agreements 5 years None 5% None
Local Agency Investment Fund NIA None None None
IL Custodial Credit Risk
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 counterparty for the
investments held for the Agency and hence these investments are not exposed to custodial credit risk.
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial
institution, a government will not be able to recover its deposits or will not be able to recover collateral
securities that are in the possession of an outside party. The custodial credit risk for investments is the
risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to
recover the value of its investment or collateral securities that are in the possession of another party. The
California Government Code and the 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.
6
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico,California)
Notes to Financial Statements(Continued)
Year Ended June 30,2010
II.DETAILED NOTES (Continued)
A. CASH AND INVESTMENTS (Continued)
II. Custodial Credit Risk(Conintued)
As of rune 30, 2010,the City's balance in financial institutions was $2,752,887, of that amount, $250,000
was covered by Federal depository insurance, and $2,502,887 was covered by collateral held in the
pledging bank's trust department, but such collateral was not held in the City's name. Of the $2,752,887,
the JPFA reports $26,400 as its pro rata share. The custodian of the investments is not the counterparty
for the investments held and hence these investments are not exposed to custodial credit risk.
,III. Concentration 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 and 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 JPFA manages its exposure to interest rate risk by investing in the Local Agency
Investment Fund (LAIF), 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.
7
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended June 30,2010
II.DETAILED NOTES (Continued)
A. CASH AND INVESTMENTS (Continued)
IV .Interest Rate and Credit Risk(Continued)
As of June 30,2010,the JPFA's investments and credit ratings are as follows:
Maturity
Credit
rating
(S&P/ Lander 30 31-365 1-5 Fair
Moody's)_ Days Days Years Value
Cash in bank and petty cash - - - $ 26,400
Investments held in City treasury:
Local Agency Investment Fund Not Rated $ 6,104,861 - - 6,104,861
Money Market Mutual Funds AAA/Aaa $ 27,451 - - 27,451
Federal Home Loan Bank AAA/Aaa - - $ 28,327 28,327
Federal Home Loan Mortgage Corp. AAA/Aaa - - $ 16,996 16,996
Federal National Mortgage Assn AAA/Aaa - - $ 33,929 33,929
Federal Farm Credit Bank AAa - $ 11,331 11,331
Total investments held in City treasury 6,222,895
Total cash and investments $ 6,249,295
The JPFA is a voluntary participant in the Local Agency investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the 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, 2010, are displayed on the JPFA's Statement of Net Assets as
follows:
Total Cash and Investments: $ 6,249,295
8
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended June 30,2010
II.DETAILED NOTES (Continued)
B. CAPITAL ASSETS
Capital asset activity for the year ended June 30,2010,was as follows:
July 1,2009 Additions Deletions June 30,2010
Capital assets not being depreciated:
Construction in progress $ 2,132,495 $ 1,923,348 $ - $ 4,055,843
Capital assets will be transferred to the City of Chico upon completion of each phase of the sewer project.
C.RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE
STATEMENT OF NET ASSETS
Total governmental fund balance $ 6,257,366
Amounts reported for governmental activities in the statement of net assets are
different because:
Capital assets used in governmental activities are not financial resources and, 4,055,843
therefore,are not reported in the governmental funds.
Loans payable are not due and payable in the current period and,therefore
are not reported in the funds. (2,345,047)
Net assets of governmental activities $ 7,968,162
9
CHICO URBAN AREA JOINT POWERS FINANCING AUTHORITY
(A Component Unit of the Chico Redevelopment Agency and the City of Chico, California)
Notes to Financial Statements (Continued)
Year Ended Jane 30,2010
II.DETAILED NOTES (Continued)
D. RECONCILIATION OF THE GOVERNEMNETAL FUND STATEMENT OF REVENUES,
EXPENDITURES, AND CHANGES IN FUND BALANCE TO THE GOVERNMENT-WIDE
STATEMENT OF ACTIVITIES
Net change in fund balances-total governmental fund $ 2,351,961
Amounts reported for governmental activities in the statement of activities are
different because:
Governmental funds report capital outlay as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense.
Capital outlay 1,923,34$
The issuance of long-term debt(e.g. loans)provides current financial resources
to governmental funds, however,the transaction does not affect net assets. (2,345,047)
Change in net assets of governmental activities $ 1,930,262
E. LONG-TERM DEBT
Loans Payable
A loan of$31,666,540, interest at 0%, has been approved by the State Revolving Fund Loan Program for
the JPFA's Nitrate Compliance Program. 2010 construction draws on the loan were $2,345,047. No
payments are due on the loan until project completion.
Changes to the JPFA's long-term debt for the year ended June 30,2010 were as follows:
Due within
July 1,2009 Additions June 30,2010 One Year
Loans Payable:
State Revolving Fund Loan $ - $ 2,345,047 $ 2,345,047 $ -
Total $ - $ 2,345,047 $ 2,345,047 $ -
10