HomeMy WebLinkAboutFiscal Year 2006/2007 Redevelopment Agency Component Unit Fi CITY OF HUNTINGTON BEACH!
INTER-DEPARTMENTAL COMMUNICATION
FINANCE DEPARTMENT
TO: Honorable Mayor and City Council Members
VIA: Paul Emery, Interim City Administrator
FROM: Dan T. Villella, CPA, Finance Director
DATE: March 11, 2008
SUBJECT: REDEVELOPMENT AGENCY COMPONENT UNIT FINANCIAL
REPORT 2006/07
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We are submitting to you the Redevelopment Agency Component Unit Financial
Report (RDA CUFR) for the fiscal year 2006/07. The City received an unqualified
or "clean" opinion from Diehl, Evans and Company, CPAs. This is the highest
opinion possible. The RDA CUFR shows the financial operations for all funds of
the Redevelopment Agency on a stand-alone basis. The financial information
presented in the RDA CUFR is also presented in the Comprehensive Annual
Financial Report (CAFR) as a part of the primary government. If you have
questions concerning this, please do not hesitate to contact me.
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Cc: Executive Team
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REDEVELOP AGENCY
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CITY ® ® BEACH, CALIFORNIA
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CITY OF HUNTINGTON BEACH, CALIFORNIA
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COMPONENT UNIT FINANCIAL REPORT
WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
FOR THE YEAR ENDED E TE E 30, 2007
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Prepared by the Finance Department
TABLE OF CONTENTS
Tableof Contents ...............................................................................................................1
Independent Auditors' Report......................................................................................... 2-3
Management's Discussion and Analysis .......................................................................4-10
Basic Financial Statements:
Government-wide Financial Statements:
Statementof Net Assets...........................................................................................11
Statement of Activities and Changes in Net Assets..................................................12
Fund Financial Statements:
Balance Sheet— Governmental Funds................................................................13-14
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of
NetAssets ............................................................................................................15
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds ........................................................................................16-17
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances of Governmental Funds to the Statement of Activities............................18
Notes to Financial Statements.....................................................................................19-34
Calculation of Low-Moderate Income Housing Funds — Excess Surplus..........................35
Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of the Financial Statements Performed in Accordance
with Government Auditing Standards .................................................................................. 36-37
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DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS&CONSULTANTS
MICHAEL R.LUDEN,CPA
A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS CRAIG W.SPRAKER CPA
NITIN P.PATEL,CPA
ROBERTI'CALLANAN,CPA
2121 AL TON PARKWAY,SUITE]00 *PHILIP H.HOLTKAMP,CPA
*THOMAS M.PERLOWSKI,CPA
IRVINE,CALIFORNIA 92606-4956 *xARVEY J.sCxuoEDEROEDER,,CPA
(949)399-0600•FAX(949)399-0610 KENNETH R.AMES,CPA
www.diehlevans.com
"A PROFESSIONAL CORPORATION
February 21, 2008
INDEPENDENT AUDITORS' REPORT
Board of Directors
Redevelopment Agency of the
City of Huntington Beach
Huntington Beach, California
We have audited the accompanying financial statements of the governmental activities and each major
1 fund of the Redevelopment Agency of the City of Huntington Beach, a component unit of the City of
Huntington Beach, California as of and for the year ended September 30, 2007, which collectively
comprise the Agency's basic financial statements, as listed in the table of contents. These basic
financial statements are the responsibility of the Agency's management. Our responsibility is to
express opinions on these basic financial statements based on our audit.
1 We conducted our audit in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards issued by the Controller General of the United States. Those standards require that we plan
1 and perform the audit to obtain reasonable assurance about whether the basic financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall basic
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinions.
In our opinion, the basic financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities and each major fund of the Agency as of
September 30, 2007, 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.
OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W.VALLEY PARKWAY,SUITE 330
CARLSBAD,CALIFORNIA 92008-2389 ESCONDIDO,CALIFORNIA 92025-2598
(760)729-2343•FAX(760)729-2234 (760)741-3141 e FAX(760)741-9890
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In accordance with Government Auditing Standards, we have also issued our report dated
February 21, 2008 on our consideration of the Agency's internal control over financial reporting and
our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements
and other matters. The purpose of that report is to describe the scope of our testing of internal control
over financial reporting and compliance and the results of that testing, and not to provide an opinion on
the internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards and should be read in conjunction
with this report in considering the results of our audit.
The information identified in the accompanying table of contents as management's discussion and
analysis is not a required part of the basic financial statements, but is supplementary information
required by accounting principles generally accepted in the United States of America. We have applied
certain limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the supplementary information. However, we did not
audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Agency's basic financial statements. The calculation of the excess surplus of
the Low-Moderate Income Housing Fund is presented for additional analysis and is not a required part
of the basic financial statements. This information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole
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Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
1 For the Year Ended September 30, 2007
This discussion and analysis of the Redevelopment Agency of the City of Huntington Beach's
(the Agency) financial performance provides an overview of the Agency's financial activities
for the fiscal year ended September 30, 2007. Please read it in conjunction with the
accompanying basic financial statements and the notes to those financial statements.
THE FINANCIAL STATEMENTS
The financial statements presented include activities of the Agency using the integrated
approach as prescribed by the Governmental Accounting Standards Board (GASB)
Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis -
for State and Local Governments.
The financial statements include a Statement of Net Assets and a Statement of Activities and
Changes in Net Assets. Notes to the financial statements, required supplementary
information, including this section support these statements. All sections must be considered
together to obtain a complete understanding of the financial position of the Agency.
1 Statement of Net Assets — The Statement of Net Assets includes all assets and liabilities of
the Agency, with the difference between the two reported as net assets. Assets and
Liabilities are reported at their book value on an accrual basis, as of the statement date. It
also identifies major categories of restrictions on the net assets of the Agency.
Statement of Activities and Changes in Net Assets — The Statement of Activities and
Changes in Net Assets presents the revenues earned and expenses incurred during the year
on an accrual basis.
These two statements report the Agency's net assets and changes in them. Net assets are
the difference between assets and liabilities, which is one way to measure the financial
health, or financial position.
1 FUND FINANCIAL STATEMENTS
The Agency uses fund accounting. A fund is defined as an independent fiscal and
accounting entity with a self-balancing set of accounts recording cash and other financial
resources, together with all related liabilities and residual equities or balances, and changes
therein. Funds are established in order to comply with State law; bond covenants; other
special regulations, restrictions, limitations or legal responsibilities; or simply as a tool for
management to control and manage the Agency's resources.
The fund financial statements provide detailed information about the most significant funds —
not the Agency as a whole. These funds are reported using the modified accrual basis of
accounting, rather than on the full accrual basis. In the modified accrual basis, revenues are
recognized in the period in which they become both measurable and available to finance
expenditures of the current period. Revenues are recorded when received in cash, except
that revenues subject to accrual (generally 60 days after year-end) are recognized when due.
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Redevelopment Agency of the City of Huntington Beach
v y + Management's Discussion and Analysis
For the Year Ended September 30, 2007
The primary revenue sources, which have been treated as susceptible to accrual by the
Agency are, property tax, other taxes, investment income, and other income. Expenditures
are recorded in the accounting period in which the related fund liability is incurred.
The differences of results in the Governmental Fund financial statements to those in the
Government-Wide financial statements are explained in a reconciliation following each
Governmental Fund financial statement.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
The Agency's combined net assets for the year ended September 30, 2007 were a negative
$(81,594,000). Under state law, Redevelopment Agencies' primary source of revenue is
from tax increments that are derived from the increase in public and private investments due
to the improvements in the properties that fall with in the boundaries of a redevelopment
project. These tax increment revenues are not sufficient to finance the activities of the
Agency therefore the Agency issues bonds. These bonds are to be repaid over time solely
from tax increments revenues. Redevelopment Agencies can only collect property tax
increments to the extent it has debt on its books. Below is a summary of key items in the
Government-Wide financial analysis (in thousands):
Percent
Increase
2007 Amount 2006 Amount Increase (Decrease) (Decrease)
Assets
Current and Other Assets $ 47,870 $ 44,701 $ 3,169 7.1
Capital Assets 19,835 17,153 2,682 15.6%
Total Assets 67,705 61,854 5,851 9.5%
Liabilities
Current Liabilities 12,072 12,238 (166) -1.4
Debt Payable to City of Huntington Beach 85,369 85,103 266 0.3%
Long-Term Liabilities Payable within one year 1,480 1,415 65 4.6%
Long-Term Liabilities 50,378 53,079 (2,701) -5.1%
Total Liabilities 149,299 151,835 (2,536) -1.7%
Net Assets
Invested in Capital Assets Net of Related Debt 17,153 17,153 - 0.0%
Restricted 10,135 18,513 (8,378) -45.3%
Unrestricted (108,882) (125,647) 16,765 -13.3%
Total Net Assets (81,594) (89,981) 8,387 -9.3%
Expenses
Economic Development 5,182 6,340 (1,158) -18.3%
City Attorney 88 41 47 114.6%
Public Works 179 - 179 N/A
Non-departmental and Transfers 198 1,134 (936) -82.5%
Interest 7,739 4,982 2,757 55.3%
Total Expenses 13,386 12,497 889 7.1
Revenues
Property Taxes 17,510 12,236 5,274 43.1
Use of Money and Property 2,690 1,940 750 38.7%
Participation Payments 1,564 6,260 (4,696) -75.0%
Other 9 2 7 350.0%
Total Revenue 21,773 20,438 1,335 6.5%
Excess of Revenue over Expense 8,387 7,941 446 5.6%
Transfers - (15,520) 15,520 -100.0%
Net Assets-Beginning of Year (89,981) (82,402) (7,579) 9.2%
Net Assets-End of Year $ (81,594) $ (89,981) $ 8,387 .9.3%
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Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2007
FUND FINANCIAL ANALYSIS
Below is an analysis of the Agency's various fund financial activities (in thousands):
Percent
Increase
2007 Amount 2006 Amount Increase(Decrease) (Decrease)
Huntington Beach Project Area#1
Total Assets $ 24,384 $ 24,274 $ 110 0.5%
Total Liabilities 2,437 3,830 (1,393) -36.4%
Net Assets 21,947 20,444 1,503 7.4%
Revenues 3,390 7,795 (4,405) -56.5%
Expenditures 1,886 4,333 (2,447) -56.5%
1 Southeast Coastal Project Area
Total Assets N/A
Total Liabilities 190 179 11 6.1%
Net Assets (190) (179) (11) 6.1%
® Revenues - - - N/A
® Expenditures 11 46 (35) -76.1%
Low-Income Housing Fund
Total Assets 24,119 20,703 3,416 16.5%
Total Liabilities 11,453 10,201 1,252 12.3%
Net Assets 12,666 10,502 2,164 20.6%
Revenues 641 385 256 66.5%
Expenditures 1,539 871 668 76.7%
Debt Service Fund-Huntington Beach Project Area#1
Total Assets 6,511 5,100 1,411 27.7%
Total Liabilities 5,972 3,985 1,987 49.9%
Net Assets 539 1,115 (576) -51.7%
Revenues 15,204 13,732 1,472 10.7%
Expenditures 12,270 17,270 (5,000) -29.0%
Debt Service Fund-Southeast Coastal Project Area
Total Assets 1,147 919 228 24.8%
Total Liabilities 305 808 (503) -62.3%
Net Assets 842 111 731 658.6%
1 Revenues 337 187 150 80.2%
Expenditures 56 50 6 12.0%
DEBT ADMINISTRATION
A summary of the Agency's debt at year-end is (in thousands):
Percent
Increase
2007 Amount 2006 Amount Increase(Decrease) (Decrease)
Debt Payable to City of Huntington Beach $ 85,369 $ 85,103 $ 266 0.3%
Bonds Payable 39,740 41,065 (1,325) -3.2%
Notes Payable 4,980 5,215 (235) -4.5%
Disposition and Development Agreement 7,101 8,197 (1,096) -13.4%
Other Debt 37 17 20 117.6%
Total Debt $ 137,227 $ 139,597 $ (2,370) -1.7%
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�{ Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2007
CAPITAL ASSETS
The Agency's capital assets consist of land of $17,153,000. This amount is recorded as part
of the net capital assets of the Agency in the Government-Wide financial statements.
OTHER INFORMATION
Below is a description of the some of the Agency's activities during the year.
Huntington Beach (Merged Project Area)
The Strand is a multi-use project developed by CIM Group on a 3-acre site in the
downtown core. With views of Huntington Beach and the pier it is located on Pacific
Coast Highway, north of Main Street. A Sixth Implementation Agreement and the
33433 Report are scheduled to be presented to the Redevelopment Agency in spring
2008. The Strand's four distinct buildings will be linked by open-air pedestrian
walkways. The Strand will offer approximately 110,000 square feet of retail and office
space. The Shorebreak Hotel is a 157 room luxury boutique hotel operated by Joie de
Vivre Hospitality. Ample parking will be provided in a subterranean structure. Retail
tenants include Forever 21/Forever Love, CVS, and Active Ride Shop. Dining options
include Johnny Rockets, RA Sushi, New Zealand Natural Ice Cream, and Coffee Bean
& Tea Leaf. The development is scheduled to open in the fall of 2008.
Pacific City is being developed by Makar Properties on a 31 acre site at Pacific Coast
Highway and First Street. A Community Facilities District is proposed to fund the
majority of the street enhancements and Regional Urban Runoff Treatment System for
the residential portion of the project. There will be 516 upscale residential housing
units built in four phases, ranging from 969 to 2,500 square feet. The residential
village, totaling 17.2 acres and consisting of four distinct styles, will act as the
cornerstone of Pacific City, allowing residents close access to shops, restaurants with
48,900 square feet of restaurant space and 30,000 square feet of office space. This
community will encompass 191,000 square feet of the retail center featuring luxurious
retail brands, prime office space, dining and entertainment. Pacific City is expected to
open in late 2009. The "W" is the hotel operator for the boutique hotel that will feature
157 rooms and is expected to open by 2010.
Surf City Nights is a street fair/farmer's market that takes place from 5-9 p.m. on
Tuesday nights in the first three blocks of downtown Main Street between Pacific
Coast Highway and Orange Avenue. Surf City Nights began as a three-month trial
street closure of Main Street and developed into a weekly, year-round event. The fair
was created and maintained in partnership between the City of Huntington Beach and
the Downtown Business Improvement District. Historically, Tuesdays had been the
slowest evening in the downtown. Due to the success of the event, residents and
visitors regularly take an evening stroll and dine at local restaurants. The street fair
includes a farmer's market, live entertainment, children's activities, retail sales, food,
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Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2007
arts and crafts. Surf City Nights headlined as the second biggest story of the year in
the Orange County Register and local LA Times December issue.
Bella Terra, formerly known as Huntington Center which was an outdated 56.5-acre retail
property, has been transformed into an entertainment/life style center. In 2005, while
the mall was still under construction, Bella Terra Associates LLC, a partnership
between DJM Capital and Jh Snyder, purchased the property. The Redevelopment
Agency approved Bella Terra Associates LLC to assume the rights and
responsibilities of the Owner Participation Agreement in order to complete the project.
The First Implementation Agreement to the OPA terminated the vacant Montgomery
Wards parcel from the OPA and provided for a $1.5 million implementation fee to the
Agency. With the approval of the Second Implementation Agreement on September
17, 2007, the Agency was required to commence payment of its obligation of $15
million to the developer. The Redevelopment Agency has paid $2,207,000 towards its
obligation to the developer leaving an estimated balance of $14,855,000 as of
September 30, 2007. The approximate 1,532 space public parking garage, funded by
the Community Facilities District 2003-1 (Huntington Center), opened on October 1,
2005. Bella Terra Associates LLC also purchased the former Montgomery Wards
13.5 acre portion of the site that has been left vacant for a number of years.
Negotiations are commencing to develop the parcel within the next three years. The
environmental review process has begun for the proposed mix-use project that will
consist of 156,000 square feet of retail and 503-700 residential units.
Specific and Economic Revitalization Plan for Beach Boulevard and Edinger
Corridor -- On December 18, 2006 the Agency approved a professional services
agreement with Tierra West Advisors, LLC for the preparation of an Economic
Revitalization Strategic Plan to enhance and maximize the potential of these major
thoroughfares. A real estate market analysis of existing conditions along the cooridors
has begun. This analysis will support the rationale for possible land-use changes that
are based upon economic trends and community goals. In support of long range
1 planning efforts, the work is being conducted in conjunction with planning firm
Freedman, Tung and Bottomley (FTB) for the Specific Plan and Land Use/Planning
aspects. Four community meetings have been held. The preliminary results of those
meetings were presented at a City Council Study Session on January 7, 2008. The
Revitalization Strategic Plan and Specific Plans for the corridors are expected to be
completed in late 2008.
Downtown Specific Plan (DTSP) and Downtown Parking Master Plan -- On July 16,
2007 the Agency approved professional services contracts with RRM Design Group
and Kimley-Horn and Associates, Inc. (KHA) to provide consulting services for the
update to the Downtown Specific Plan (DTSP) and Downtown Parking Master Plan
(DPMP). RRM Design Group is responsible for developing land use provisions and
urban design guidelines that support and encourage a mixed-use development
community. The planning consultant is working with KHA, a traffic/parking consultant
that specializes in the analysis of parking in a downtown setting, who has the
responsibility of amending the DPMP. To accomplish this, KHA will utilize "shared
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Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2007
use" parking strategies and other innovative approaches used in regulating downtown
parking. The first community work shop was held on November 27, 2007.
The Hyatt Regency Huntington Beach Resort and Spa -- The 517-room Hyatt
Regency Huntington Beach Resort & Spa and its Conference Center opened for
business on January 19, 2003. Developer's Advance Loan Balance is estimated at
$7,215,729 as of December 2007. The hotel paid its second Participation Payment to
the Agency during this past year. The project also pays lease payments to the
Agency on an annual basis.
Capital Improvements/Facilities -- The one time revenue of $19 Million from the
Redevelopment Agency's participation payments from the Waterfront Residential
project is funding various public improvements within the City's Merged
Redevelopment Project Area. The revenue received during 2004-2006 will be
expended over several years through the City's Capital Improvement Program (CIP).
Through the CIP, approximately $16 Million has been allocated for capital projects that
include the Civic Center seismic retrofit (matched with FEMA funds), drainage
improvements, concrete and asphalt replacement, streetlight replacements, restrooms
north of the pier, permanent buildings on the pier and a visitor's kiosk at the Pier
Plaza, internal building modifications for the Main Street Library, and fire station
renovations. The Surf City Nights project is also funded through this revenue source.
Southeast Coastal Project Area
Utility Undergrounding -- Southern California Edison is taking the lead in doing the
design work for under-grounding the Edison utilities along PCH and is working with
City staff, CalTrans, and the California State Beaches Department.
Seawater Desalination Facility -- The Redevelopment Agency approved an Owner
Participation Agreement (OPA), dated February 27, 2006, with Poseidon Resources
Corporation to provide for the development of a seawater desalination plant on
property leased from the AES Corporation. The Agreement containing the covenants
affecting the real property was recorded on June 8, 2006. AES is in the process of
removing storage tanks on this property.
Magnolia Street Sidewalk & Lighting -- The construction of a sidewalk and installation
of pedestrian lighting on both sides of Magnolia Street was included in the Capital
Improvement Program (CIP) budget for $500,000.
Housing Activities
Habitat for Humanity (Patterson Delaware site) -- The Redevelopment Agency has
acquired a vacant parcel at 1854 Patterson Lane for $522,500 using Housing Set
Aside funds for a Habitat for Humanity project. Two single family homes will be built
on the site. The original plan was to install two manufactured homes on the site
however the company offering the homes withdrew their offer due to economic
reasons. The homes will now be conventional built homes following the Habitat for
Humanity model of the homeowners contributing sweat equity.
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Redevelopment Agency of the City of Huntington Beach
Management's Discussion and Analysis
For the Year Ended September 30, 2007
Jamboree Housing I, II, and III -- The Agency and City of Huntington Beach assisted
Jamboree Housing Corporation, an Orange County based non-profit housing
developer and designated CHDO (Community Housing Development Organization), to
acquire and rehabilitate two five-plex apartment buildings in the Oakview sub-area.
This represents the first acquisition/rehab projects developed in the City of Huntington
Beach by Jamboree and one of several housing projects planned for the Oakview
sub-area using HOME and redevelopment housing set-aside funds. The City and
Agency are also in the process of assisting Jamboree with the acquisition of a third
property, a four-unit building that will close escrow after the 2006-07 fiscal year.
Jamboree will provide on-site management and tenant services for the tenants they
serve as more properties are acquired and rehabilitated.
Garfield and Delaware Affordable Housing Project -- The City of Huntington Beach
acquired property at the northeast corner of Delaware St. and Garfield Ave. as part of
a street widening project. It is expected that the Agency will purchase the property
from the City and thereafter develop affordable housing on the parcel. It is anticipated
that the project will be presented to the Agency and City Council sometime during
fiscal year 2008/2009.
CONTACTING THE AGENCY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors
and creditors with a general overview of the Agency's finances and to show the Agency's
accountability for the money it receives. If you have questions about this report or need any
additional financial information, please contact the Finance Department: at 2000 Main Street,
Huntington Beach, California, 92648, phone (714) 536-5360, or e-mail cgonzales@surfcity-
hb.org. You can also visit the City's website at www.surfcity-hb.org for additional copies of this
report.
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REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTON BEACH
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2007
(In Thousands)
Governmental
Activities
ASSETS
Current Assets:
Cash and Investments $ 28,612
Restricted Cash with Fiscal Agent 2,462
Taxes Receivable 4,065
Other Receivables 12,731
Total Current Assets 47,870
Non-Current Assets:
Land Held for Resale 2,682
Capital Assets(non-depreciable) 17,153
Total Non-Current Assets 19,835
TOTAL ASSETS 67,705
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Liabilities 207
Accrued Interest Payable 276
Accrued Payroll 24
Deposits 130
Unearned Revenue 11,435
Long-Term Debt- Due Within One Year 1,480
Total Current Liabilities 13,552
Non-Current Liabilities:
Long-Term Debt to the City of Huntington Beach and Component Units 85,369
Other Long-Term Debt 50,378
TOTAL LONG-TERM LIABILITIES 135,747
TOTAL LIABILITIES 149,299
NET ASSETS
Investment in Capital Assets 17,153
Restricted for:
Low-Income Housing 10,135
Unrestricted (108,882)
TOTAL NET ASSETS(DEFICIT) $ (81,594)
11 See Accompanying Notes to Basic Financial Statements
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
(In Thousands)
Net(Expense)
Revenue and
Changesin
Program Revenues Net Assets
Charges for Operating Capital Grants Total
Current Grants and and Governmental
Expenses Service Contributions Contributions Activities
Functions/Programs
Governmental Activities:
Economic Development $ 5,182 $ - $ _ $ _ $ (5,182)
City Attorney 88 (88)
Public Works 179 - - - (179)
Non-departmental 198 - _ _ (198)
Interest 7,739 (7,732)
Total Governmental Activities 13,386 - - - (13,386)
General Revenues:
Taxes:
® Property Taxes 17,510
® Other Revenue:
Use of Money and Property 2,690
Participation Payments 1,564
Other 9
Total Other Revenue 4,263
Total General Revenue 21,773
Change in Net Assets 8,387
Net Deficit-October 1,2006 (89,981)
Net Deficit-September 30,2007 $ (81,594)
See Accompanying Notes to Basic Financial Statements 12
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
BALANCE SHEET - GOVERNMENTAL FUNDS
September 30, 2007
(In Thousands)
Capital Projects Funds
Huntington Southeast Total Capital
Beach Project Coastal Low-Income Projects
ASSETS: Area#1 Project Area Housing Fund Funds
Cash and investments $ 17,019 $ - $ 10,471 $ 27,490
Restricted cash with fiscal agent - - - -
Due from other funds 3,213 - - 3,213
Taxes receivable - - - -
Other receivables 1,168 - 11,554 12,722
Advances to other funds 302 2,094 2,396
Land held for resale,net 2,682 - 2,682
TOTAL ASSETS 24,384 - 24,119 48,503
LIABILITIES AND FUND BALANCE
LIABILITIES:
Accounts payable and accrued liabilities $ 193 $ - $ 14 $ 207
Accrued payroll 20 - 4 24
Due to Other Funds - 190 - 190
Deposits 130 - - 130
Deferred property taxes - - - -
Deferred revenue - - 11,435 11,435
Advances from other funds 2,094 - - 2,094
TOTAL LIABILITIES 2,437 190 11,453 14,080
FUND BALANCE:
Fund balances:
Reserved for long-term receivables 1,228 - - 1,228
Reserved for encumbrances 3,342 - 437 3,779
Reserved for advances to other funds - - 2,094 2,094
Reserved for land held for resale 2,682 - - 2,682
Reserved for low-income housing - - 10,135 10,135
Reserved for future expenditures 60 - - 60
Total Reserved 7,312 - 12,666 19,978
Unreserved 14,635 (190) - 14,445
TOTAL FUND BALANCE 21,947 (190) 12,666 34,423
TOTAL LIABILITIES AND FUND BALANCE $ 24,384 24,119 48,503
13 See Accompanying Notes to Basic Financial Statements
Debt Service Funds
Huntington Southeast Total Debt
Beach Project Coastal Service Total All
Area#1 Project Area Funds Funds
$ - $ 1,122 $ 1,122 $ 28,612
2,462 2,462 2,462
- - - 3,213
4,049 16 4,065 4,065
9 9 12,731
2,396
- - - 2,682
6,511 1,147 7,658 56,161
24
3,020 3 3,023 3,213
- - - 130
2,952 - 2,952 2,952
11,435
- 302 302 2,396
5,972 305 6,277 20,357
- - - 1,228
779
- - 3,
2,09494
- - 2,682
- - - 10,135
539 842 1,381 1,441
539 842 1,381 21,359
- 14,445
539 842 1,381 35,804
6,511 1,147 7,658 56,161
See Accompanying Notes to Basic Financial Statements 14
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i
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF NET ASSETS
SEPTEMBER 30, 2007
(In Thousands)
Total Fund Equity Governmental Funds $ 35,804
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets used in governmental activities are not current financial resources and, therefore, are not
reported in the funds 17,153
Property tax revenues collected more than 60 days after fiscal year are not current financial resources
and, therefore are deferred in the funds 2,952
Accrued interest payable on Long-term Debt (276)
Long-term Liabilities, including bonds and certificates of participation payable are not due and payable in
the current period and therefore are not reported in the funds (137,227)
Net Assets(Deficit)of Governmental Activities $ (81,594)
i
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1
See Accompanying Notes to Basic Financial Statements 15
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES — GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007
(In Thousands)
Capital Projects Funds
Huntington Southeast Total Capital
Beach Project Coastal Low-Income Projects
REVENUES: Area#1 Project Area Housin Fund Funds
Tax increment(Note 4) $ - $ - $ -Use of money and property 1,817 - 641 2,458
Participation payments 1,564 - - 1,564
Other revenue 9 - - 9
TOTAL REVENUES 3,390 - 641 4,031
EXPENDITURES:
Current:
Economic Development 1,209 - 679 1,888
City Attorney 88 - - 88
Public Works 179 - - 179
Non-departmental 20 11 2 33
Capital outlay 390 - 858 1,248
Debt service:
Bond&Other Debt:
Principal - - - -
Interest - -
TOTAL EXPENDITURES 1,886 11 1,539 3,436
EXCESS OF REVENUES OVER(UNDER) EXPENDITURES 1,504 (11) (898) 595
OTHER FINANCING SOURCES(USES):
Transfers in - - 3,062 3,062
Transfers out - - -
TOTAL OTHER FINANCING SOURCES(USES) - - 3,062 3,062
NET CHANGES IN TOTAL FUND BALANCE 1,504 (11) 2,164 3,657
FUND BALANCES-BEGINNING OF YEAR 20,443 (179) 10,502 30,766
Prior Period Adjustments
FUND BALANCES-BEGINNING OF YEAR AS RESTATED 20,443 (179) 10,502 30,766
FUND BALANCES-END OF YEAR $ 21,947 $ (190) $ 12,666 $ 34,423
i
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16 See Accompanying Notes to Basic Financial Statements
1
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1 Debt Service Funds
Huntington Southeast Total Debt
Beach Project Coastal Service Total All
Area#1 Project Area Funds Funds
1 $ 15,013 $ 296 $ 15,309 $ 15,309
191 41 232 2,690
1,564
- - 9
I15,204 337 15,541 19,572
1 1,991 55 2,046 3,934
88
- - - 179
164 1 165 198
1 - - - 1,248
8,574 - 8,574 8,574
1,541 1,541 1,541
12,270 56 12,326 15,762
2,934 281 3,215 3,810
1 - - - 3,062
(3,003) (59) (3,062) (3,062)
(3,003) (59) (3,062) -
1 (69) 222 153 3,810
(83,988) 111 (83,877) (53,111)
84,596 509 85,105 85,105
608 620 1,228 31,994
1 $ 539 $ 842 $ 1,381 $ 35,804
1
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1 See Accompanying Notes to Basic Financial Statements 17
!
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES !
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
September 30, 2007 !
Net Changes in Fund Balances-Total Governmental funds $ 3,810 !
Amounts reported for governmental activities in the Statement of Activities are different because:
Accrual of Revenues - Certain revenues in the Statement of Activities do not meet the "availability"
criteria for revenue recognition in the governmental funds and are not reported in the governmental
funds as revenue
Current Year Property Tax Accrual 2,952
Prior Year Property Tax Accrual (751)
Accrual of Revenues-Certain revenues in the Statement of Activities do not meet the "availability"
criteria for revenue recognition in the governmental funds and are not reported in the governmental
funds as revenue.
Current Year Property Tax Accrual 282
Prior Year Property Tax Accrual (276)
Long-term debt- Issuances and changes in long-term debt (bonds, leases, certificates of participation,
compensated absences, etc) provide current financial resources to governmental funds, while a
repayment of this debt consumes the current financial resources of governmental funds. Neither
transaction, however, has any effect on net assets. Also, governmental funds report the effect of !
issuance costs, premiums, discounts, etc.when debt is first issued. These amounts are deferred and
amortized in the Statement of Activities. This amount is the net effect of the differences in the
treatment of long-term debt and related items (6,204)
Payments of Long-Term Debt-Principal payments on long-term debt are recorded as an expenditure in !
the governmental funds and a reduction of liability in the government-wide statements. 8,574
Change in Net Assets of Governmental Activities $ 8,387 !
!
18 See Accompanying Notes to Basic Financial Statements !
v
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
1. ORGANIZATION
The Redevelopment Agency of the City of Huntington Beach (the Agency) is a
blended component unit of the City of Huntington Beach (the City). The City Council is
the governing board of the Agency. The Agency was formed by ordinance in 1967 to
encourage private development of areas that are considered blighted. The Agency
adopts project areas, by public votes, which qualify under the California Health and
Safety Code.
The following project areas have been adopted:
Project Area Year Adopted Status
Main/Pier 1982 (amended in 1983) Merged into Huntington
Beach Project Area #1
Talbert/Beach 1982 Merged into Huntington
Beach Project Area #1
Oakview 1982 (amended in 1989) Merged into Huntington
Beach Project Area #1
Yorktown/Lake 1982 Merged into Huntington
Beach Project Area #1
Huntington Center 1984 Merged into Huntington
Beach Project Area #1
Huntington Beach 1997 Created from five existing
Project Area #1 project areas
Southeast Coastal 2002 Began operations in 2002
Project Area
The Agency's project area requires that 20% of tax increment revenue be used to
promote affordable housing citywide.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
® a. Government —Wide Financial Statements
The Agency's Government-Wide Financial Statements include a Statement of Net
Assets and a Statement of Activities and Changes in Net Assets. These statements
present summaries of Governmental activities for the Agency accompanied by a total
column. Fiduciary activities of the Agency are not included in these statements.
These statements are presented on an "economic resources" measurement focus and
the accrual basis of accounting. Accordingly, all of the Agency's assets and liabilities,
including capital assets, and long-term liabilities, are included in the accompanying
Statement of Net Assets. The Statement of Activities presents changes in net assets.
Under the accrual basis of accounting, revenues are recognized in the period in which
they are earned while expenses are recognized in the period in which the liability is
incurred.
19
Redevelopment Agency of the City of Huntington beach
Notes to Financial Statements
fy For the Year Ended September 30, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
a. Government —Wide Financial Statements (Continued)
The statement of activities demonstrates the degree with which the direct expenses of
a given function or segment are offset by program revenues. Direct expenses are
those that are clearly identifiable with a specific function or segment. Indirect 1
expenses are allocated to the various functions based on a proportionate use of
services. The types of transactions reported as program revenues for the Agency are
reported in three categories: 1) charges for services, 2) operating grants and other
contributions, 3) capital grants and other contributions. Taxes and other items not
properly included among program revenues are reported as general revenues.
Government-Wide financial statements do not provide information by fund or account
group. They simply distinguish between governmental and business activities. All of
the Agency's activities are governmental activities. The Agency's Statement of Net
Assets includes both current and non-current assets and liabilities.
Financial Statement Classification
In the Government-Wide financial statements net assets are classified in the following
categories:
Invested In Capital Assets, Net of Related Debt — This category groups all capital
assets, including infrastructure, into one component of net assets. Accumulated
depreciation and the outstanding balances of debt that are attributable to the
acquisition, construction or improvement of these assets reduce this category.
Restricted Net Assets — This category presents external restrictions imposed by
creditors, grantors, contributors or laws or regulations of other governments and
restrictions imposed by law through constitutional provisions or enabling legislation.
This category presents restrictions placed on the categories of Capital Projects, Debt
Service, and Specific Projects and Programs as established by the City Council.
Unrestricted Net Assets — represent the net assets of the Agency, not restricted for
any project or other purpose.
When both restricted and unrestricted resources are available for use, it is the
government's policy to use restricted resources first, then unrestricted resources as
they are needed.
20
r
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
I t For the Year Ended September 30, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
b. Fund Financial Statements
In the Funds financial statements reserves and p
designations segregate ortions of
9
fund balance that are either not available or have been earmarked for specific
purposes. The various designations are established by actions of the City Council and
Management and can be increased, reduced or eliminated by similar actions.
r
Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
r All governmental funds are accounted for on a spending or "current financial
resources" measurement focus and the modified accrual basis of accounting. Only
current assets and current liabilities are included on the Balance Sheets. The
Statement of Revenues, Expenditures and Changes in Fund Balances present
increases (revenues and other financing sources) and decreases (expenditures and
other financing uses) in net current assets. Under modified accrual basis of
accounting, revenues are recognized in the accounting period in which they become
both measurable and available to finance expenditures of the current period.
Revenues are recorded when received in cash, except that revenues subject to
accrual (generally 60 days after year-end) are recognized when due. The primary
revenue sources, which have been treated as susceptible to accrual by the Agency,
r are property taxes. Expenditures are recorded in the accounting period in which the
related fund liability is incurred.
rAll Agency funds are reported as major funds:
Capital Project Funds:
r ® Huntington Beach Project Area #1
® Southeast Coastal Project Area
® Low-Income Housing Fund
Debt Service Funds:
1 ® Huntington Beach Project Area #1
® Southeast Coastal Project Area
1
1
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21
r
Redevelopment Agency of the City of Huntington beach
-� Notes to Financial Statements
For the Year Ended September 30, 2007
r
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUE®)
b. Fund Financial Statements (Continued)
Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement
of Revenues, Expenditures and Changes in Fund Balances. An accompanying
schedule is presented to reconcile and explain the differences in fund balances as
presented in these statements to the net assets presented in the Government-Wide
Financial Statements.
c. Investment Income Allocation
The City of Huntington Beach allocates investment income to funds based on month-
end cash balances. Since the Agency pools its cash with the City (see Note 3), the
Agency receives monthly allocations of investment income. r
d. Special Agency Accounting
The Agency follows the special accounting procedures required by the California
Health and Safety Code. These procedures comply with generally accepted
accounting principles for governmental agencies.
e. Self-Insurance
The Agency is self-insured through the City of Huntington Beach. All required r
information is included in the City of Huntington Beach Comprehensive Annual
Financial Report for the year ended September 30, 2007.
f. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure, are r
reported in the governmental activities column in the government-wide financial
statements. Capital assets have an acquisition cost of $10,000 or greater and a
useful life of two years or more. The Agency records all purchased capital assets at
historical cost (where historical records are available) and at estimated historical cost
where no historical records exist. The Agency's only capital asset is land.
g. Interfund Transactions
As a general rule, interfund transactions have been eliminated from the government-
wide financial statements. These interfund transactions would distort the direct costs
and program revenues for the various functions
22
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Long Terra Obligations
In the government-wide financial statements, long-term obligations are recorded as
liabilities in the governmental activities. Bond premiums and discounts, as well as
issuance costs, are deferred and amortized over the life of the debt. In the
governmental fund financial statements, bond discounts and premiums are recognized
as an other financing source or use. Issuance costs are recorded as current year
expenditure.
i. Employee Compensated Absences
tThe City records the cost of all accumulated and unused leave time (vacation, sick,
comp) as a liability when earned in the Government-Wide financial statements.
Liabilities for these amounts in the governmental funds are only recorded if they have
matured (employee resignations or retirements).
j. Property Tax Revenue
Property tax in California is levied according to Article 13-A of the California
Constitution. The basic levy is a countywide-levy of one percent of total assessed
valuation and is allocated to county governments, school districts, cities and special
districts. Additional levies require two-thirds approval by voters and are allocated
directly to the specific government.
In the Government-Wide financial statements, property tax is recorded when earned,
regardless of when levied, due, or received. In the fund financial statements, property
tax revenue is recognized in the fiscal year levied provided that revenue is collected in
time to pay current year liabilities. Deferred property tax revenue represents property
taxes related to the current fiscal year that are collected more than 60 days after the
fiscal year end. Since the Agency's fiscal year differs from the County's property tax
year, there is a difference between the property tax revenue recorded on the fund
financial statements and the Government-Wide financial statements which is noted as
a reconciling item in both the Reconciliation of the Statement of Revenues,
Expenditures, and Changes in Fund Balances of Governmental Funds to the
Statement of Activities and the Reconciliation of the Balance Sheet of Governmental
Funds to the Statement of Net Assets.
The County acts as a collection agent for property tax for all of the local governmental
units. Property taxes are normally collected twice per year. The property tax calendar
is as follows.
23
r. :
Redevelopment Agency of the City of Huntington beach
v Notes to Financial Statements
For the Year Ended September 30, 2007
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j. Property Tax Revenue (Continued)
• Lien Date-January 1 - Prior Fiscal Year
• Levy Date-July 1 - Prior Fiscal Year
• Due Date, First Installment - November 10 1
• Due Date, Second Installment - February 10
• Delinquent Date, First Installment - December 10
• Delinquent Date, Second Installment - April 10
The taxes are paid to the local governments periodically during the year. Below are
the dates of the payments from the County:
• Payments of First Installment November to December
• Balance of First Installment February 1
• Payments of Second Installment March to April
• Balance of Second Installment July 26
k. Estimates
The accompanying financial statements require management to make estimates and
assumptions that effect certain report amounts and disclosures. Actual results could
differ from those estimates.
3. CASH AND INVESTMENTS
The Agency's cash and investments are pooled with the City. The Agency holds a
proportionate interest in the amount of $28,612,000. The Restricted Cash with Fiscal
Agent, totaling $2,462,000 is made up of GIC and money market accounts. The GIC
providers are rated by Standard and Poor's at AAA and AA and Aaa or Aa respectively.
Standard and Poor's and Moody's have rated the money market funds in our portfolio
as AAA. The Restricted Cash with Fiscal Agent that is in LAIF or money market
accounts is due upon demand while the amount with GIC has a maturity of over five
years. For further information such as credit risk and categorization of the cash and
investments, see the City's Comprehensive Annual Financial Report for the fiscal year
ended September 30, 2007.
24
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
r4. TAX INCREMENT REVENUE AND FINANCING
The Agency's primary source of revenue is tax increment. Tax increment revenue is
computed as follows:
• When a project area is adopted, the County of Orange Auditor/Controller freezes
all of the existing property's assessed value. The County distributes taxes received
from this frozen valuation to the various governmental agencies as if the project
area did not exist.
• The Agency receives 100% of taxes (not including certain pass-through
agreements) received from increases in assessed valuation due to new
construction, resale of existing property and annual increases allowed under Article
13-A of the California Constitution.
rThe increment is used to repay the debt of the Agency (see Note 6).
5. CAPITAL ASSETS
The changes in capital assets (land) during the year were (in thousands):
Balance, October 1, 2006 $ 17,153
Additions/Retirements -
Balance, September 30, 2007 $ 17,153
25
Redevelopment Agency of the City of Huntington Beach i
Notes to Financial Statements
For the Year Ended September 30, 2007
6. LONG-TERM DEBT
The changes in Agency long-term debt during the year were (in thousands):
Balance Balance Amount Due
October 1, September 30, within One
2006 Additions Retirements 2007 Year
DEBT TO CITY OF HUNTINGTON
BEACH:
Advances from General Fund $ 11,165 $ 476 $ (432) $ 11,209 $ -
Advances from Sewer Fund 229 10 - 239 -
Advances from Drainage Fund 552 24 - 576 -
Advances from Water Fund 3,420 146 - 3,566 -
Deferred Development Fees:
Park Acquisition and Development
Fund 337 14 - 351 -
SewerFund 143 6 - 149 -
Drainage Fund 152 6 - 158 -
Deferred Payment on Land
Purchases from City:
General Fund 64,560 2,750 (2,928) 64,382 -
Park Acquisition and Development
Fund 4,545 194 - 4,739 -
Total Debt-City of Huntington
Beach 85,103 3,626 (3,360) 85,369 -
OTHER DEBT t
Help Loan 500 - - 500 -
Mayer Disposition and Development
Agreement 8,197 496 (1,592) 7,101
1999 Refunding Tax Allocation Bonds 8,155 - (365) 7,790 380
2002 Tax Allocation Refunding Bonds 17,910 - (815) 17,095 845
Bella Terra Parking 15,000 2,062 (2,207) 14,855 -
Section 108 Loan 4,715 - (235) 4,480 255
Employee Compensated Absences 17 20 - 37 -
Total Other Debt 54,494 2,578 (5,214) 51,858 1,480
Total Agency Debt $ 139,597 $ 6,204 $ (8,57D $ 137,227 $ 1,480
26
` L4
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
J For the Year Ended September 30, 2007
6. LONG-TERM DEBT (CONTINUED)
a. Advances from General Fund
Years debt incurred 1985 to 1996
Interest rate 4.26%
Principal amount $10,802,000
Accrued interest $ 407,000
Purpose of debt Operating,
administrative and
capital ex enditures
Security for debt Operative Agreement
1 with City
Repayment terms None
b. Advances from City's Sewer Fund
Years debt incurred 1989
Interest rate 4.26%
Principal amount $130,560
Accrued interest $108,156
Purpose of debt Sewer Construction
Security for debt Operative Agreement
with City
Repayment terms None
c. Advances from City's Drainage Fund
Years debt incurred 1987
I Interest rate 4.26%
Principal amount $250,000
Accrued interest $325,305
Purpose of debt Drainage
Construction
Security for debt Operative Agreement
I with City
tRe�a7yment terms None
27
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
6. LONG-TERM DEBT (CONTINUED)
d. Advances from City's Water Fund
Years debt incurred 1986 and 1987
Interest rate 4.26%
Principal amount $1,138,000
Accrued interest $2,428,000
Purpose of debt Water Construction
Security for debt Operative Agreement
with City
Repayment terms None
e. Deferred Development Fees
Years debt incurred 1984
Interest rate 4.26%
Principal amount $339,202
Accrued interest $319,241
Purpose of debt Developer Incentive
Security for debt Operative Agreement
with City
Repayment terms None
f. Deferred Payment on Land Purchases from Cit 's General Fund
y y
Years debt incurred 1983 to 1992 t
Interest rate 4.261/6 (current fiscal
ear
Principal amount $32,833,417
Accrued interest $31,548,249
Purpose of debt Parcel consolidation
and development
Security for debt Operative Agreement
with City
Repayment terms None
28
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
6. LONG-TERM DEBT (CONTINUED)
h. Deferred Payment on Land Purchases from City's Park Acquisition
and Development Fund
Years debt incurred 1984
Interest rate 4.26%
Principal amount $1,740,834
Accrued interest $2,998,237
Purpose of debt Emerald Cove Land
Security for debt Operative Agreement
with City
Repayment terms None
i. Notes Payable
Years debt incurred 2003
Interest rate 3.00%
Principal amount $500,000
Purpose of debt Affordable housing
Security for debt Note with developer
1I Repayment terms Deferred for 10 yrs
j. Mayer Disposition and Development Agreement
In fiscal year 1996-97, the Agency entered into a disposition and development
agreement with Robert Mayer Corporation (Corporation) concerning additional
development adjacent to the Waterfront Hotel. Under the agreement, the Corporation
would advance payments for the project costs with the Agency reimbursing up to
$16,750,000 of the costs. As of September 30, 2007, the Agency obligation under the
agreement amounted to $7,101,000. Project-generated revenues as available will
repay these amounts over the time needed to fully amortize the advance.
k. 1999 Tax Allocation Refunding Bonds
Years debt incurred 1999
Interest rate 3.00% to 5.05%
Original principal amount $10,835,000
Purpose of debt Prepay Agency's 1992 Loans to
Public Financing Authority
Security for debt Redevelopment Agency Tax
Increment, excluding Low- Income
Housing Amounts
Repayment terms Principal, August 1s, Interest,
February 1st and August 1st
29
Redevelopment Agency of the City of Huntington Beach
-` Notes to Financial Statements
For the Year Ended September 30, 2007
6. LONG-TERM DEBT (CONTINUED)
Debt service requirements to maturity are as follows (in thousands):
Year Ending
September 30, Principal Interest Total
2008 380 365 745
2009 390 350 740
2010 410 334 744
2011 430 317 747
2012 450 298 748
2013-2017 2,575 1,165 3,740
2018-2022 2,370 520 2,890
2023-2024 785 57 842
Total $ 7,790 $ 3,406 $ 11,196
I. 2002 Tax Allocation Refunding Bonds
Year of Issuance 2002
Type of Debt Tax Allocation Refunding Bonds
Original Principal Amount $20,900,000
Security Tax Increment
Interest Rates 2.00% to 5.00%
Interest Payment Dates February 1S and August 1S
Principal Payment Dates August 1s
Purpose of Debt Prepay Agency's 1992 Loans to
Public Financing Authority and
fully decease 1992 Public
Financin Authority bonds
Debt service requirements to maturity are (in thousands):
Year Ending
September 30, Principal Interest Total
2008 845 771 1,616
2009 870 742 1,612
2010 910 712 1,622
2011 945 678 1,623
2012 995 641 1,636
2013-2017 5,650 2,540 8,190
2018-2022 5,180 1,134 6,314
2023-2024 1,700 124 1,824
Total $ 17,095 $ 7,342 $ 24,437
30
Redevelopment Agency of the City of Huntington Beach
r� Notes to Financial Statements
For the Year Ended September 30, 2007
1 6. LONG-TERM DEBT (CONTINUED)
m. Bella Terra Parking Structure
In fiscal year 2005-06, the agency entered into an owner participation agreement with
Bella Terra Associates, LLC (formerly Huntington Center Associates, LLC). Under the
agreement the Corporation would construct various public improvements, including a
parking structure, which would then be deeded to the City. The Agency would
reimburse $15,000,000 of the costs of the public improvements. As of September 30,
2007, the Agency obligation under the agreement amounted to $14,855,000. Project-
generated revenues as available will repay these amounts over the time needed to
fully amortize the advance.
n. Section 108 Loan
Year of Issuance 2000
Type of Debt Loan from Federal Government
1 Original Principal Amount $6,000,000
Security Loan Agreement with Federal
Government
Interest Rates 7.7%
Interest Payment Dates February 1 S and August 1 s
Principal Payment Dates August 1S
Purpose of Debt I Capital Improvements
Debt service requirements to maturity are (in thousands):
Year Ending
September 30, Principal Interest Total
2008 255 346 601
2009 270 327 597
2010 290 308 598
2011 310 286 596
2012 330 263 593
2013-2017 2,015 897 2,912
2018-2019 1,010 122 1,132
Total 4,480 2,549 7,029
' o. Employee Compensated Balances
There is no fixed repayment to pay the compensated absences liability totaling
$37,000 at year-end.
31
- Redevelopment Agency of the City of Huntington Beach
- Notes to Financial Statements
For the Year Ended September 30, 2007
7. RETIREMENT PLAN INFORMATION
The Agency is a component unit of the City. For retirement purposes, all Agency
employees are considered to be employees of the City. No separate valuations are made
for the Agency. All retirement information for the City as a whole is included in the City's
Comprehensive Annual Financial Report.
8. AGENCY AGREEMENTS
a. Pass-Through Agreements
The Agency entered into various "pass-through" agreements with local governmental
agencies where a portion of tax increment is paid to the individual agencies. There
was no amount payable at year-end.
b. Pacific City
On October 16, 2006 the Redevelopment Agency approved an Owner Participation
Agreement with Makallon Atlanta Huntington Beach, LLC (also know as Makar) to
develop a 31-acre site in the Main-Pier sub-area of the Huntington Beach
Redevelopment Project (Pacific City). Makar will advance $5,500,000 to the
Redevelopment Agency to fund the Agency's obligation for the Regional Urban Runoff
Treatment System and the Pacific View Drive Extension. The advance will be repaid
over 20 years from tax increment generated from the site. As of September 30, 2007
no amount has been advanced to the City.
c. CIM Group, LLC — Disposition and Development Agreement
In June 1999, the Redevelopment Agency entered into a disposition and development
agreement with the CIM Group, LLC to allow development of a hotel, retail and
restaurant improvements and a public parking facility. The project costs are to be paid
initially by the developer with the Agency reimbursing the developer a maximum of
$7.9 million pursuant to a Third Implementation Agreement approved on October 21,
2002. The Fourth Implementation Agreement provided a maximum Agency cost for
additional parking spaces $1,500,000. The Fifth Implementation Agreement, dated
July 19, 2004, clarified certain provisions in the DDA relating to the Agency
Participation Payment, Acquisition costs and indemnification obligations. A Sixth
Implementation Agreement and the 33433 Report are scheduled to be presented to
the Redevelopment Agency in spring 2008. As of September 30, 2007 no amount has
been advanced to the City.
32
�
Redevelopment Agency of the City of Huntington Beach
Notes to Financial Statements
For the Year Ended September 30, 2007
8. AGENCY AGREEMENTS (Continued)
d. Southeast Coastal Redevelopment Project
On September 2 2003, the Redevelopment Agency Approved a Cooperation
Agreement Regarding Capital Improvements in the Southeast Coastal
Redevelopment Project within the City. This agreement commits the Redevelopment
Agency to reimburse the City for a number of capital improvement projects to be
undertaken as part of the Five Year Capital Improvement Program in the Southeast
Redevelopment project area. The status of the major Southeast Costal
Redevelopment projects is as follows:
Utility Undergrounding -- Southern California Edison is taking the lead in doing the
design work for under grounding the Edison utilities along PCH and is working with
City staff, CalTrans, and the California State Beaches Department.
Seawater Desalination Facility -- The Redevelopment Agency approved an Owner
Participation Agreement (OPA), dated February 27, 2006, with Poseidon Resources
Corporation to provide for the development of a; seawater desalination plant on
property leased from the AES Corporation. The Agreement containing the covenants
affecting the real property was recorded on June 8, 2006. AES is in the process of
removing storage tanks on this property. As of September 30, 2007 no amount has
been advanced to the City.
Magnolia Street Sidewalk & Lighting -- The construction of a sidewalk and
pedestrian lighting on both sides of Magnolia Street was included in the Capital
Improvement Program.
9. NOTES RECEIVABLE
a. Owner Participation Agreement —Abdelmuti
1 In 1991, the Agency agreed to assist a private business in the demolition and the
construction of a new building. The Agency agreed to make public improvements
totaling $500,000 and to loan the business $3,126,000 for 15 years at 7% interest to
make building improvements. At year-end, the balance of the loan was $728,000. The
note was refinanced and the City was paid in full for the remaining amount owed in
December of 2007.
b. Deferred Loans — Developers
The Agency has made loans available to developers to construct or rehabilitate certain
facilities under deferred loan agreements. These loans are deferred until a future
event occurs, such as a sale of the property by the developer. At year-end, the
amounts of these loans were $11,435,000.
33
Redevelopment Agency of the City of Huntington Beach t
= Notes to Financial Statements
For the Year Ended September 30, 2007
9. NOTES RECEIVABLE (Continued)
c. Notes Receivable
A summary of Notes Receivable as of September 30, 2007 is as follows:
Descripton Amount
OPA-Abdelmuti Receivable $ 728,000
Deferred Loans Receivable $ 11,435,000
Other Receivables $ 569,000
Total $ 12,732,000
10. PENDING LITIGATION
There are legal actions pending against the Agency resulting from normal operations.
The Agency's Counsel feels these actions will not have a significant impact on these
financial statements.
11. OTHER
The Agency's combined net assets for the year ended September 30, 2007 were a
negative $(81,594,000). This is mainly because of how Redevelopment Agencies are
required to operate under state law. Redevelopment Agencies incur debt in order to
make expenditures, which result in increased public and private investment in a
redevelopment area, which in turn generate property tax increment to repay the debt
over time. Redevelopment Agencies can only collect property tax increment to the
extent it has debt on the books.
12. PRIOR PERIOD ADJUSTMENT
In prior years the Agency recorded loans from the City as a debt in the fund
statements. This should only be recorded in the Government wide statement. Below
is a schedule (in 000's) showing the restatement of beginning fund balance to show
this change.
Debt Service Fund- Debt Service Fund -
Combined Statement of Revenues, Expenditures Huntington Beach Southeast Coastal
and Changes in Fund Balance Project Area#1 Project Area 1
Fund Balance- Beginning of the Year $ (83,988) $ 111
Prior Period Adjustment 84,596 509
Fund Balance- Beginning of year as restated $ 608 $ 620
34
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH
CALCULATION OF LOW/MODERATE INCOME HOUSING FUNDS - EXCESS SURPLUS
October 1, 2006
(IN THOUSANDS)
ENDING FUND BALANCE-OCTOBER 1,2006 $ 10,502
Less Unavailable Amounts:
Advances to Other Funds (2,199)
AVAILABLE FUND BALANCE-OCTOBER 1,2006 $ 8,303
tAVAILABLE LOW/MODERATE INCOME HOUSING FUNDS
LIMITATION(GREATER OF$1,000,000 OR FOUR YEARS SET-ASIDE):
Set-aside for fiscal years 2002-03 to 2005-06
2002-2003 1,820
2003-2004 1,909
2004-2005 2,301
2005-2006 2,780
TOTAL SET-ASIDE FOR LAST FOUR YEARS 8,810
COMPUTED EXCESS/SURPLUS-OCTOBER 1,2006 $
t
35
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS S CONSULTANTS
MICHAEL R.LUDIN,CPA
A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS CRAIG W.SPRAKER,CPA
NITN P.PATEL,CPA
ROBERT J.CALLANAN,CPA
2121 ALTON PARKWAY,SUITE 100 * HI RAMP,CPA
*THOM AS M M..PERLOWSKI,CPA
IRV INE,CALIFORNIA 92606-4956 *HARVEY J.SCHROEDER,CPA
(949)399-0600•FAX(949)399-0610 KEN NETH R.AMES,CPA
www.diehleyans.com *A PROFESSIONAL CORPORATION
February 21, 2008
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Board of Directors
Redevelopment Agency of the
City of Huntington Beach
Huntington Beach, California 1
We have audited the financial statements of the governmental activities and each major fund for the
Redevelopment Agency of the City of Huntington Beach (the Agency) as of and for the year ended
September 30, 2007, which collectively comprise the Agency's basic financial statements and have
issued our report thereon dated February 21, 2008. We conducted our audit 1n accordance with
auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the Agency's internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
Agency's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Agency's internal control over financial reporting.
A control deficiency 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
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the Agency's ability to initiate, authorize, record, process, or
report financial data reliably in accordance with generally accepted accounting principles such that
there is more than a remote likelihood that a misstatement of the Agency's financial statements that is
more than inconsequential will not be prevented or detected by the Agency's internal control.
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OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W.VALLEY PARKWAY,SUITE 330
CARLSBAD,CALIFORNIA 92008-2389 ESCONDIDO,CALIFORNIA 92025-2598
(760)729-2343•FAX(760)729-2234 (760)741-3141 e FAX(760)741-9890
Internal Control Over Financial Reporting(Continued)
A material weakness is a significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the Agency's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described
in the first paragraph of this section and would not necessarily identify all deficiencies in internal
control that might be significant deficiencies over material weaknesses. We did not identify any
deficiencies in internal control over financial reporting that we consider to be material weaknesses, as
defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the financial statements of the Agency are
free of material misstatements, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. Such provisions included those
provisions of laws and regulations identified in the Guidelines For Compliance Audits of California
Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing
Procedures for Accomplishing Compliance Audits of California Redevelopment A eg ncies, issued by
the Governmental Accounting and Auditing Committee of the California Society of Certified Public
Accountants. However, providing an opinion on compliance with those provisions was not an objective
of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed two
instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards:
a. Pursuant to California Health and Safety Code Section 33080.4, a blight progress report, a loan
report and a property report must be provided and submitted to the Agency's legislative body
within six months following the Agency's fiscal year end date of September 30, 2006. The
Agency submitted the reports on June 6, 2007.
tb. Health and Safety Code Section 33080.1 requires Redevelopment Agencies to submit
independent auditor's reports on financial statements and legal compliance, the Annual Report
of Financial Transactions of Community Redevelopment Agencies and the Housing Activities
Report to the Board of Directors within six months following the Agency's fiscal year end date
of September 30, 2006. The Agency submitted the reports on June 6, 2007.
This report is intended solely for the information and use of the Redevelopment Agency of the City of
Huntington Beach's Board of Directors and management and the State Controller's Office, Division of
Accounting and Reporting and is not intended to be and should not be used by anyone other than these
specific parties.
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