2009122115MEETING DATE: 12/21/09
ITEM NO:
COUNCIL/AGENCY AGENDA REPORT
DATE: DECEMBER 11, 2009
TO: MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR
SUBJECT: ADOPT RESOLUTION APPROVING THE FY 2008/09 LOS GATOS
REDEVELOPMENT AGENCY ANNUAL REPORT
RECOMMENDATION:
Adopt resolution approving the FY 2008/09 Los Gatos Redevelopment Agency Annual
Report.
DISCUSSION:
Pursuant to the State of California Health and Safety Code 33080.1, a Redevelopment
Agency shall present an annual report to its reporting body within six months of the end
of the fiscal year. The report shall contain: (1) an independent financial audit report for
the previous fiscal year; (2) a fiscal statement for the previous fiscal year including the
Agency's revenues, debts, the amounts of tax increment to be allocated to other districts;
(3) a description of the Agency's activities in the previous fiscal year affecting housing;
(4) a description of the Agency's progress in alleviating blight during the previous fiscal
year; (5) information about loans made by the Agency at or exceeding $50,000 that were
in default or otherwise not in compliance with the terms of the loan; (6) a description of
the total number and nature of properties owned by the Agency and those acquired during
the prior fiscal year; and (7) any other useful information to explain the Agency's
programs.
The required FY 2008/09 financial audit was completed by C.G. Uhlenberg, LLP
(Exhibit A). It includes the auditor's opinion of the Agency's operations and financial
position, and the Agency's compliance with laws, regulations, and administrative
requirements governing the agency, including all financial activities involving low and
moderate income housing funds. Also attached are the Statement of Housing Activity,
PREPARED BY: Stephen D. Conway Wendie ney
Fiscal Officer Deputy Executive Director
Reviewed by: Q4) ) Assistant Town Manager/Deputy Director Town
Attrney/General Counsel Clerk Administrator/Secretary / >Finance
Community Development
PAGE 2
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING THE FY 2008/09 LOS GATOS
REDEVELOPMENT AGENCY ANNUAL REPORT
December 11, 2009
Financial Transactions, and Statement of Indebtedness (Exhibits B, C and D) provided by
the State Department of Housing and Community Development.
During FY 2008/09, the Los Gatos Redevelopment Agency completed several successful
projects that resulted in the elimination of blight:
• Completed in Summer 2008, the University Avenue Resurfacing Project (from
Mullen to Main Street) used contingency funding to rehabilitate remaining downtown
business district streets in extremely poor condition. A similar project, called the
Almond Grove Concrete Rehabilitation Pilot Project was started in FY 2007/08.
• The Santa Cruz Avenue/Wood Road Gateway project is in the final design stage.
Once design work is completed and approved, additional grant funding will be
pursued and programmed into a future Capital Improvement Program.
• The Los Gatos Redevelopment Agency provided funding toward the purchase of an
existing 9,020 building on Los Gatos Boulevard for police operations services. The
building was expanded to 12,260 square feet to include a new Emergency Operations
Center and Sally Port. The renovations to the building were completed in Fall 2009.
STATE ACTIONS
Supplemental Educational Revenue Augmentation Fund (SERAF)
The FY 2009/10 State of California budget includes a proposal to take $2.7 million ($2.2
million in FY 2009/10 and $500,000 in FY 2010/11) from the Town Redevelopment
Agency. However, the California Redevelopment Association (CRA) believes that the
State proposal is unenforceable given that a prior attempt by the State in FY 2008/09 was
deemed unconstitutional.
The Town will continue to monitor redevelopment activities and developments to
discourage additional State takes from Redevelopment Agency Tax Increment. It is
essential to preserve the Agency's tax increment revenue, as any "take" from this source
will reduce the annual revenue stream. If a larger revenue "take" is enacted, the lowered
revenue stream will reduce the total amount of bonds the Agency can issue in the future.
Fund Balances and Excess Surplus
As of June 30, 2009, the RDA Debt Service Fund balance was approximately $8 million.
This fund consists of monies dedicated for current and future debt service and represents
tax increments received by the Agency, which is then reduced by tax sharing payments
PAGE 3
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING THE FY 2008/09 LOS GATOS
REDEVELOPMENT AGENCY ANNUAL REPORT
December 11, 2009
and debt service payment made each year. The cash flow assumes that the annual excess
tax increments collected beyond the amounts needed to pay annual debt service payments
would be used for future bonding capacity. The future bonding capacity of the
Redevelopment Agency is dependent upon available excess tax. Use of the debt service
fund balance would lower future bonding capacity of the Agency. A recent estimate
prepared by Emily Wagner and Associates (the RDA/Town Financial Advisor on debt
issues) assumes there will be capacity for a new debt issue of approximately $14 million,
which could be issued on or before December 25, 2011. The Council has identified these
funds as a source of funding for the future construction of the new Library.
As of June 30, 2009, the Redevelopment (RDA) Capital Projects fund balance was
approximately $2 million. This fund is used for administrative costs, including staff
charges and legal fees, which average about $1 million per year. The fund also holds
approximately $150,000 of the remaining 2002 Certificates of Participation (COP)
unspent proceeds to be used for eligible capital projects. The remaining will be dedicated
to pay for the final downtown street reconstruction projects, including the Almond Grove
Reconstruction ($78,080) and the Santa Cruz Avenue/Wood Road Gateway ($65,000)
which are currently in the design phase. It is anticipated that construction of these
projects could be in the range of $2 million. Additionally, the new Police Operations
building, which was completed in Fall 2009, was partially funded with the RDA Capital
Projects fund.
The RDA Debt Service Fund balance amounts are also derived from interest earnings and
remaining cash from the Town's operating loans to the Agency. Technically, the RDA
spends funds by issuing debt and receives an annual cash loan (approximately $500,000-
$600,000) from the Town General Fund. The loan from the Town is then paid back
annually from the RDA Debt Service Fund cash balance.
As of June 30, 2009, the Housing Set Aside (Low and Moderate Housing) fund balance
was approximately $8.6 million, which may only be used for low and moderate housing
purposes. As presented in the attached report, the Agency currently has an "excess
surplus" amount of $2.7 million. The excess surplus is cumulative from year-to-year and
according to State law, must be eliminated within 3 fiscal years. If the Town does not
address the excess surplus within the required timeframe, the Redevelopment Agency
could be penalized, limiting its ability to spend and encumber funds. The Redevelopment
Agency could also be charged up to 50% of the excess surplus amount, which would then
be deposited into the Low and Moderate Housing Fund.
On June 1, 2009, the Town Redevelopment Agency Board committed an additional loan
to Senior Housing Solutions in the amount of $90,000 for a very low-income senior
PAGE 4
MAYOR AND TOWN COUNCIL/CHAIR AND.MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING THE FY 2008/09 LOS GATOS
REDEVELOPMENT AGENCY ANNUAL REPORT
December 11, 2009
housing project. To date, the total loan amount is $922,700. In addition, the RDA also
purchased 224 West Main for a mixed use development, which will include low and
moderate income housing. Lastly, negotiations continue regarding the purchase of 20
Dittos Lane for low and moderate income housing. Staff is working with Seifel
Consulting, the Agency's real estate and housing specialist to develop investment
strategies for the Housing Fund.
CONCLUSION:
Upon approval by the Council, the Los Gatos Redevelopment Agency Annual Report
will be forwarded to the State Controller and the State Department of Housing and
Community Development as required by State law.
ENVIRONMENTAL ASSESSMENT:
Annual Report is not a project subject to CEQ
A.
Approval of the Redevelopment Agency p p � Q
FISCAL IMPACT: None
ATTACHMENTS:
Attachment 1 - Resolution approving the 2008/09 Annual Report for the Los Gatos
Redevelopment Agency
• Exhibit A - Redevelopment Audit for Fiscal Year 2008/09
• Exhibit B - Statement of Housing Activity for Fiscal Year 2008/09
• Exhibit C - Annual Report of Financial Transactions for Fiscal Year 2008/09
• Exhibit D - Statement of Indebtedness
N:\FINANCE\RDA\Council Reports\2008-09 RDA Annual Reportdoc
RESOLUTION 2009 -
RESOLUTION OF THE TOWN COUNCIL/REDEVELOPMENT AGENCY OF THE
TOWN OF LOS GATOS
APPROVING THE 2008/09 ANNUAL REPORT FOR
THE LOS GATOS REDEVELOPMENT AGENCY
WHEREAS:
1. The California Community Redevelopment Law (§33080.1) requires every
redevelopment agency to present a report on fmancial and housing activity to its legislative body
within six months of the end of the agency's fiscal year.
2. The Annual Report for the Redevelopment Agency consists of an independent
fmancial audit report for the previous fiscal year, a fiscal statement for the previous fiscal year,
and a description of the agency's activities affecting housing and displacement.
3. The audit to by issued by C.G. Uhlenberg, LLP, attached hereto as Exhibit A, gives
an unqualified opinion of the Redevelopment Agency's financial activities includes the auditor's
opinion of the agency's operations and fmancial position, and the agency's compliance with laws,
regulations and administrative requirements governing activities of the agency, including all
financial activities involving low and moderate income housing funds.
4. The Statement of Housing Activity, Annual Report of Financial Transactions, and
Statement of Indebtedness are attached hereto as Exhibits B, C and D, consist of forms provided
by the State Department of Housing and Community Development.
5. Approval of the 2008/09 Annual Report for the Los Gatos Redevelopment Agency
does not constitute a project for purposes of the California Environmental Quality Act
("CEQA").
RESOLVED, that the Town Council/Redevelopment Agency hereby approves and adopts
the 2008/09 Annual Report for the Los Gatos Redevelopment Agency, attached hereto as
Exhibits A, B, C and D.
ATTACHMENT 1
FURTHER RESOLVED, that the Town Council determines the planning and
administrative expenses from the Low and Moderate Income Housing Fund is necessary for the
production, improvement, or preservation of low and moderate -income housing.
PASSED AND ADOPTED at•a regular meeting of the Town Council of the Town of Los
Gatos, California, held on the 21 st day of December 2009 by the following. vote:
COUNCIL/AGENCY BOARD MEMBERS:
AYES:
NAYS:
ABSENT:
ABSTAIN:
SIGNED: /s/
MAYOR/CHAIRPERSON OF THE
TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
ATTEST:
CLERK ADMINISTRATOR
TOWN OF LOS GATOS
LOS GATOS, CALIFORNIA
TOWN OF LOS GATOS
REDEVELOPMENT AGENCY
BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2009
WITH INDEPENDENT AUDITORS' REPORTS
THEREON
ffiIBIT A
TOWN OF LOS GATOS
REDEVELOPMENT AGENCY
TABLE OF CONTENTS
FOR THE YEAR ENDED JUNE 30, 2009
PAGE
Independent Auditors' Report 1 - 2
Management's Discussion and Analysis 3 - 10
Basic Financial Statements:
Government -wide Financial Statements:
Statement of Net Assets 11
Statement of Activities 12
Fund Financial Statements:
Governmental Funds:
Balance Sheet 13
Reconciliation of the Balance Sheet — Statement of Net Assets 14
Statement of Revenues, Expenditures, and Changes in Fund Balances 15
Reconciliation of Statement of Revenues, Expenditures, and Changes
in Fund Balances — Statement of Activities 16
Notes to the Financial Statements 17 - 25
Supplementary Information:
Budgetary Comparison Schedules:
Schedule of Revenues, Expenditures, and Changes in
Fund Balance - Budget to Actual - Redevelopment Fund 26
Schedule of Revenues, Expenditures, and Changes in
Fund Balance - Budget to Actual - Housing Fund 27
Schedule of Revenues, Expenditures, and Changes in
Fund Balance - Budget to Actual - Certificates of Participation Fund 28
Independent Auditor's Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards 29 - 30
Summary of Compliance Findings 31
Summary of Prior Year Compliance Findings 32
C. G. UHLENBERG LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
PEGGY H. CHEN, C.P.A. JEFFREY J. IRA, C.P.A. KATHERINE CHAO, C.P.A. JUUE T. LIN, C.P.A.
INDEPENDENT AUDITORS' REPORT
Members of the Board of the
Town of Los Gatos Redevelopment Agency
Los Gatos, California
We have audited the accompanying financial statements of the governmental activities, each
major fund and the aggregate remaining fund information of the Town of Los Gatos
Redevelopment Agency (the "Agency"), a component unit of the Town of Los Gatos, California,
as of and for the year ended June 30, 2009, which collectively comprise the Agency's basic
financial statements, as listed in the table of contents. These financial statements are the
responsibility of the Agency's management. Our responsibility is to express an opinion 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 and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perfouul the 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 opinion.
In our opinion, the financial statements referred to, above present fairly, in all material respects,
the financial position of the governmental activities, each major fund and the aggregate
remaining fiend information of the Town of Los Gatos Redevelopment Agency as of June 30,
2009, and the respective changes in financial position for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
In accordance with Goverment Auditing Standards, we have also issued a report dated
December 10, 2009 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 the 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.
333 Twin Dolphin Drive, Suite 230 • Redwood City, CA 94065 • Phone (650) 802-8668 • Fax (650) 802-0866
4117 Clipper Court • Fremont, CA 94538 • Phone (510) 770-8680 • Fax (510) 770-8685
1230 Midas Way, Suite 250 • Sunnyvale, CA 94085 • Phone (408) 331-6242 • Fax (408) 331-6243
)-Mail - info@cgucpa.com • www.cgucpa.com
The Management's Discussion and Analysis is not a required part of the basic financial
statements, but is supplementary information required by the Governmental Accounting
Standards Board. 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 an opinion the financial statements that
collectively comprise the Agency's basic financial statements. The budgetary schedules listed in
the table of contents are presented for purposes of additional analysis and are not a required part
of the basic financial statements of the Agency. Such 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.
December 10, 2009
Redwood City, California
Management's Discussion and Analysis
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
As a component unit of the Town of Los Gatos, the Redevelopment Agency ("Agency") was
established in response to the need to rebuild existing infrastructure damaged in the 1989 Loma
Prieta Earthquake. The Redevelopment Agency area encompasses approximately 440 acres in
and around Downtown Los Gatos, which includes retail and residential areas, lodging, schools,
and main traffic thoroughfares. Projects such as street and utility reconstruction, parking,
streetscape and civic improvements were called out in the Redevelopment Plan. The Agency has
the power to condemn properties for this purpose and to issue debt payable out of the
incremental property taxes expected to be realized because of its redevelopment activities. The
Agency may enter into development agreements with developers and others to further its
purposes.
FISCAL 2009 FINANCIAL HIGHLIGHTS
Agency revenues experienced continued growth in the project area as compared to the prior year.
Property tax increments, the Agency's primary revenue source, increased $502,074 from the
amounts received the prior year.
• The assets of the Agency exceeded its liabilities at June 30, 2009 by $11,106,137 (net assets).
Included in the determination of net assets is a negative (deficit) balance of ($2,044,484) in
unrestricted net assets. The deficit in unrestricted net assets is normal in California
redevelopment agencies. All redevelopment agencies leverage current tax increment
revenues by issuing long-term debt to raise capital to eliminate blight and promote economic
growth within the Agency's project area.
• The Agency's total net assets increased by $2.68 million from the prior year.
• As of June 30, 2009, the Agency's governmental funds reported combined ending fund
balances of $18,684,862; an increase of $2,196,910 in comparison from the prior year's
combined fund balance of $16,487,952. The increase is due primarily to an increase in fund
balances in the Town's Low and Moderate Housing Fund and Debt Service Fund.
• At June 30, 2009 total unreserved fund balance in the Town's governmental funds of
$7,526,558 increased $1,980,410 in comparison with the prior year's balances of $5,546,144.
OVERVIEW OF THE BASIC FINANCIAL STATEMENTS
This Report is in three parts:
1) Management's Discussion and Analysis (this part),
2) The Basic Financial Statements, which include the Agency -wide and the Fund financial
statements, along with the Notes to these financial statements, and
3) Budget/Actual Statements for budgeted Capital Projects Funds.
The Basic Financial Statements
The Basic Financial Statements comprise the Agency -wide Financial Statements and the Fund
Financial Statements. These two sets of financial statements provide two different views of the
Agency's financial activities and financial position long-term and short-term.
3
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS.
The Agency -wide Financial Statements provide a longer -term view of the Agency's activities as
a whole, and comprise the Statement of Net Assets and the Statement of Activities. The
Statement. of Net Assets provides information about the financial position of the Agency as a
whole, including all its capital assets and long-term liabilities on the full accrual basis, similar to
that used by corporations. The Statement of Activities provides information about all the
Agency's revenues and all its expenses, also on the full accrual basis, with the emphasis on
measuring net revenues or expenses of each of the Agency's programs. The Statement of
Activities explains in detail the change in Net Assets for the year.
The Fund Financial Statements report the Agency's operations in more detail than the Agency -
wide statements and focus primarily on the short-term activities of the Agency's Major Funds.
The Fund Financial Statements measure only current revenues and expenditures, current assets,
liabilities and fund balances; they exclude capital assets, long-term debt, and other long-term
amounts.
Major Funds account for the major financial activities of the Agency and are presented
individually, while the activities of any Non -major Funds would be presented in summary, with
subordinate schedules presenting the detail for each of these other funds. The Agency does not
have any Non -major Funds. Major Funds are explained below.
Together, all these statements are now called the Basic Financial Statements; formerly they were
called the general-purpose financial statements.
The Agency -wide Financial Statements
A11 of the Agency's basic services are considered to be Governmental activities, including;
economic development, pass through agreements, and debt service. General Agency revenues
such as incremental property taxes and investment earnings support these services.
Agency -wide financial statements are prepared on the accrual basis, which. means they measure
the flow of all economic resources of the Agency as a whole.
Fund Financial Statements
Governmental Fund financial statements are prepared on the modified accrual basis, which
means they measure only current financial resources and uses. Capital assets and other long-
lived assets, along with long-term liabilities, are presented only in the Agency -wide financial
statements.
The Fund financial statements provide detailed information about each of the Agency's most
significant funds, called Major Funds. The concept of Major Funds, and the determination of
which are Major Funds, was established by GASB Statement 34 and replaces the concept of
combining like funds and presenting them in total. Instead, each Major Fund is presented
individually, with all Non -major Funds summarized and presented only in a single column.
Subordinate schedules present the detail of these Non -major funds. Major Funds present the
4
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
major activities of the Agency for the year. The Agency's Major Funds may change from year to
year as a result of changes in the pattern of Agency's activities.
The Agency has three Major Governmental Funds in 2009. These are the Redevelopment Fund,
the Housing Set -Aside Fund, and the Certificate of Participation Fund, each of which is
discussed in detail below.
FINANCIAL ACTIVITIES OF `THE AGENCY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the Agency as a whole.
Tables 1, 2 and 3 focus on the Agency's Governmental Statement of Net Assets and Statement of
Activities.
Governmental Activities
Governmental Net Assets presents total program assets and liabilities and the resulting allocation
of the Agency's net assets.
Table 1
Governmental Net Assets at June 30, 2009
(In Millions)
June 30, 2009 June 30, 2008
Cash and Investments $ 24.05 $ 20.95
Other Assets 0.52 0.53
Capital Assets 2.68 2.64
Total Assets 27.25 24.12
Long Term Debt Outstanding 10.06 10.50
Other Liabilities 6.09 5.19
Total Liabilities 16.14 15.69
Net Assets:
Invested in Net Assets 1.99 1.75
Restricted 11.16 10.74
Unrestricted (2.04) (4.06)
Total Net Assets:
$ 11.11 $ 8.43
The Agency's governmental net assets amounted to $11.11 million at June 30, 2009. The
Agency's net assets at June 30, 2009 are comprised of the following:
5
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
• Unrestricted cash and investments comprised $24.05 million of pooled cash and investments
available for operations. Substantially all of these amounts were held in the Town's cash and
investment pool as described in Note 3 to the financial statements. Restricted cash and
investments of $1.29 million are funds held by trustees as prescribed under the Certificate of
Participation issuances.
• Capital Assets of $2.68 million largely represents the value of the Parking Lot #'I parking
structure, which is considered an infrastructure capital asset under the provisions of GASB
34.
• Short-term payables and pass -through obligations comprise $4.39 million of Agency
liabilities. As part of the Redevelopment Plan, the Agency entered into agreements with
other taxing agencies to pass -through portions of incremental property taxes and amounts due
are reflected at June 30, 2009.
• As of June 30, 2009 the Town of Los Gatos had advanced the Agency a total of $1.5 million
to partially fund ongoing Agency operations. This advance is repayable on demand.
• Long-term debt of $10.06 million, of which $9.59 million is due in future years and $.47
million, is due currently.
• The $1.99 million of `Investments in Capital Assets, Net of Related Debt' describes the
portion of Net Assets that represents the current net book value of the Agency's capital
assets, less the outstanding balance of any debt issued to finance these assets.
• Restricted net assets total $11.16 million, of which $2.07 million may be used only for
capital projects, $8.63 million is restricted for low and moderate income housing purposes,
and $.46 million may be used only for debt service. The restrictions on these funds were
placed there by outsiders and cannot be changed by the Agency.
• Unrestricted net assets are the part of net assets that can be used to finance day-to-day
operations without constraints established by debt covenants or other legal requirements or
restrictions. The Agency had $(2.04) million of unrestricted net assets at June 30, 2009. This
deficit is a result of the $11.75 million in long-term debt proceeds, which are deducted from
fund balance.
6
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Changes in Governmental Net Assets
The Statement of Activities presents program revenues and expenses and general revenues in
detail. All these are elements in the Changes in Governmental Net Assets summarized below:
Table 2
Changes in Governmental Net Assets
(In Millions)
Revenues 2009 2008
General Revenues
Property Tax Increments $ 8.57 $ 8.07
Interest 0.70 0.90
Total Revenues 9.27 8.97
Expenses
Functions /Programs
Redevelopment Projects 1.22 2.07
Pass -through payments 3.79 3.21
Interest and Fees 0.63 0.64
Total Expenses 5.65 5.92
Increase (Decrease) in Net Assets Before Transfers 3.63 3.05
Transfers (0.95) (4.98)
Increase (Decrease) in Net Assets 2.68 (1.93)
Net Assets -Beginning 8.43 10.36
Net Assets - Ending $ 11.11 $ 8.43
As Table 2 above shows, $9.27 million of the Agency's 2009 Governmental revenue is general
revenues such as taxes and interest. General revenues are not allocable to programs. General
revenues are used to pay for the net cost of governmental programs.
7
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Net Revenue (Expense) of Governmental Activities
Table 3 presents the net (expense) or revenueof each of the Agency's governmental activities,
including interest on .long-term debt. Net expense is defined. as total program cost less the
revenues generated by those specific activities.
Table 3
Net Revenue (Expense) of Governmental Activities
(In Millions)
2009 2008
Redevelopment Projects $ (1.22) $ (2.07)
Property Tax Increments (3.79) (3.21)
Interest (0.63) (0.64)
Totals
$ _ (5.65) $ . (5.92)
THE AGENCY'S FUND FINANCIAL STATEMENTS
Table 4 below summarizes Governmental Activity and balances at the fund level:
Table 4
Financial Highlights at Fund Level
(In Millions)
Governmental Fund 2009 2008
Total Assets $ 24.57 $ 21.48
Total Liabilities 5.88 . 4.99
Total Fund Balances 18.68 16.49
Total Revenues 9.27 8.97
Total Expenditures 7.08 7.66
Analyses of Major Governmental Funds
Redevelopment Fund
Accounts for activities of the Redevelopment Agency of the Town and the related program tax
revenues. This fund encompasses three core functions: Redevelopment Agency administration,
Capital Project development and implementation, and the implementation of the Economic
Vitality Program.
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Housing Set Aside Fund
Accounts for administering the housing component of the Redevelopment plan. The revenue
source for this program comes from the 20% State -mandated housing set -aside deducted from
incremental property taxes.
Certificates of Participation Fund
This Fund accounts for financial resources to be used for the payment of principal and interest in
long-term obligations. Each of the Agency's debt issues is discussed in detail in Note 6 to the
financial statements. Certificates of Participation are used to fund the key infrastructure projects
in the Downtown redevelopment area. At June 30, 2009, the Agency's debt comprised:
June 30, 2009 June 30, 2008
Balance Balance
Government Activity Debt (In Millions) (In Millions)
1992 Certificates of Participation $ 0.69 $ 0.89
2002 Certificates of Participation 9.37 9.61
Total Long Term Debt
$ 10.06 $ 10.50
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the Agency and its major initiatives are discussed in detail in the Letter of
Transmittal in the Town of Los Gatos' Comprehensive Annual Financial Report for the Fiscal
Year Ended June 30, 2009.
BUDGETARY HIGHLIGHTS
Comparing the FY 2008/09 original budget (or adopted) amount of $8,959,1.46 to the final
budget amount of $8,244,191 reflects a net decrease of $714,955. This decrease is a result of
RDA Capital Improvement projects appropriations which were lower than the adopted budget
estimates and were carried forward to the FY 2009/10. Also included was a budget adjustment
to the University Avenue Repaving project.
Carry Forwards
Police Facility $ (585,125)
Almond Grove Concrete Rehabilitatior (78,080)
S Santa Cruz Gateway (65,000)
Budget Adjustment
University Ave Repaving
13,250
Total Decrease $ (714,955)
9
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONTACTING THE AGENCY'S FINANCIAL MANAGEMENT
These Financial Statements are .intended to provide citizens, taxpayers, investors, and creditors
with a general overview of the Agency's finances. Questions about this Report should be
directed to the Finance Department, at 110 East Main Street, Los Gatos, CA 95030.
10
Basic Financial Statements
TOWN OF LOS GATOS R.EDEVELOPMENT AGENCY
STATEMENT OF NET ASSETS
JUNE 30, 2009
Governmental
Activities
ASSETS
Cash and investments $ 22,756,318
Restricted cash and investments 1,292,743
Accounts receivable 519,898
Capital assets (net) 2,677,317
Total Assets $ 27,246,276
LIABILITIES
Accounts payable $ 394,821
Interest payable 201,042
Unearned revenue 196,785
Passthrough obligations 3,792,491
Advance from Town of Los Gatos General Fund 1,500,000
Noncurrent liabilities:
Due within one year 465,000
Due in more than one year 9,590,000
Total Liabilities $ 16,140,139
NET ASSETS
Invested in capital assets (net of related debt) $ (6,546,495)
Restricted for:
Redevelopment projects 2,065,624
Low income housing 8,631,126
Debt service 461,554
Unrestricted 6,494,328
Total Net Assets $ 11,106,137
See accompanying notes to financial statements
11
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2009
Governmental
Activities
Program Expenses:
Redevelopment $ 1,220,475
Passthrough payment 3,792,492
Interest and fees 634,242
Total Program Expenses 5,647,209
Net Program Income (Expense) (5,647,209)
General Revenues and Transfers:
General Revenues:
Tax allocation increment 8,574,250
Interest income 700,010
Transfers to the Town of Los Gatos (951,833)
Total General Revenues and Transfers
Change in Net Assets
8,322,427
2,675,218
Net Assets - Beginning 8,229, 876
Prior period adjustments 201,043
Net Assets - Beginning - As Restated 8,430,919
Net Assets - Ending $ 11,106,137
See accompanying notes to financial statements
12
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2009
ASSETS
Cash and investments available for operations
Restricted cash and investments
Accounts receivable
TOTAL ASSETS
CAPITAL PROJECT FUNDS
DEBT
SERVICE
FUND
Housing Certificates of
Redevelopment Set -Aside Participation
Total
Government
Funds
$ 1,463,840 $ 8,452,030 $ 12,840,448 $ 22,756,318
831,189 - 461,554 1,292,743
471,008 48,890 519,898
$ 2,295,029 $ 8,923,038 $ 13,350,892 $ 24,568,959
LIABILITIES
Accounts payable $ 229,405
Deferred revenue -
Advances from Town of Los Gatos General Fund
Passthrough obligations
95,127 $
196,785
1,500,000
3,792,491
70,289 $
394,821
196,785
1,500,000
3,792,491
TOTAL LIABILITIES 229,405
FUND BALANCES
Reserved for
Debt service
Redevelopment projects
Low and moderate income housing
Unreserved, designated for:
Debt service
TOTAL FUND BALANCES
TOTAL LIABILITIES & FUND BALANCES
291,912 5,362,780 5,884,097
2,065,624
8,631,126
461,554 461,554
2,065,624
8,631,126
7,526,558 7,526,558
2,065,624 8,631,126 7,988,112 18,684,862
$ 2,295,029
8,923,038 $ 13,350,892 $ 24,568,959
See accompanying notes to financial statements
13
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
RECONCILIATION OF THE BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 20.09
Fund Balances - Governmental Funds $ 18,684,862
Amounts reported for governmental activities in the Statement of Net Assets are
different from those reported in the Governmental Funds because of the following:
Capital assets (net) used in governmental activities are not current assets or financial
resources and therefore, are not reported in the Governmental Funds Balance Sheet.
Capital assets $ 4,202,708
Accumulated depreciation (1,525,391) 2,677,317
Interest payable on long-term debt does not require the use of current financial
resources and, therefore, are not reported in the Governmental Funds Balance Sheet. (201,042)
Long-term liabilities, including bonds payable, are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds Balance Sheet
Certificates of participation (10,055,000)
Net Assets of Governmental Activities $ 11,106,137
See accompanying notes to financial statements
14
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND? BALANCES
GOVERNMENTAL FUNDS
FOR TRL FISCAL YEAR ENDED JUNE 30, 2009
DEBT
SERVICE
CAPITAL PROJECT FUNDS FUND
Total
Housing Certificates of Government
Redevelopment Set -Aside Participation Funds
REVENUES
Tax allocation increment $ $ - $ 8,574,250 $ 8,574,250
Interest income 66,908 276,319 356,783 700,010
Total Revenues 66,908 276,319 8,931,033 9,274,260
EXPENDITURES
Community development 622,226 423,543 73,013 1,118,782
Capital outlay 951,833 135,000. 1,086,833
Passthrough payment - - 3,792,492 3,792,492
Debt service:
Principal payments - - 445,000 445,000
Interest and fiscal charges 634,242 634,242
Total Expenditures 1,574,059 558,543 4,944,747 7,077,349
Excess (Deficiency) of Revenues
over Expenditures (1,507,151) (282,224) 3,986,286 2,196,911
OTHER FINANCING SOURCES (USES)
Transfers in 575,000 1,714,850 2,289,850
Transfers out - (2,289,850) (2,289,850)
Total Other Financing Sources (Uses) 575,000 1,714,850 (2,289,850)
Change in Fund Balances (932,151) 1,432,626 .1,696,436 2,196,911
Beginning fund balances 2,997,775 7,198,500 6,090,633 16,286,908
Prior period adjustments - - 201,043 201,043
Beginning fund balances - As Restated
2,997,775 7,198,500 • 6,291,676 16,487,951
Ending fund balances $ 2,065,624 $ 8,631,126 $ 7,988,112 $ 18,684,862
See accompanying notes to financial statements
15
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES_
- AND CHANGES IN FUND BALANCES
TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUKE 30, 2009
The schedule below reconciles the Net Changes in Fund Balances reported on the
Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund
Balances, which measures only changes in current assets and current liabilities on
the modified accrual basis, with the Change in Net Assets of Governmental
Activities reported in the Statement of Activities, which is reported on the full
accrual basis.
Net Changes in Fund Balances - Total Governmental Funds • $ 2,196,911
Amounts reported for governmental activities in the Statement of Activities are
different from those reported in the Statement of Revenues, Expenditures, and
Changes in Fund Balances because of the following:
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense. This is the
amount by which capital outlays exceeded depreciation in the current period.
Depreciation expense is deducted from the fund balance (101,693)
Capital assets to the Agency are reported in the Statement of Revenues,
Expenditures, and Changes in Fund Balances, however, they have no impact on
the Statement of Activities. 135,000
The issuance of long-term debt provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt
consumes the current financial resources of governmental funds. This amount
is the net effect of these differences in the treatment of long-term debt.
Repayment of debt principle is added back to fund balance 445,000
Government Wide Changes in Net Assets $ 2,675,218
See accompanying notes to financial statements
16
Notes to Financial Statements
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE AGENCY AND .REDEVELOPIVIENT PROJECTS
The Town of Los Gatos Redevelopment Agency (the "Agency") is a public body
established and authorized to transact business under the provisions of the Community
Redevelopment Law of the State of California, including the power to issue bonds for any
of its corporate purposes. Its purposes are to stimulate and attract private investment and
eliminate physical, social, and/or economic blight.
The Redevelopment plan was established as a result of the Loma Prieta Earthquake in 1989
and the need to rebuild existing infrastructure. The Redevelopment Agency area
encompasses approximately 440 acres in and around Downtown Los Gatos, which includes
retail and residential areas, lodging, schools, and main traffic thoroughfares. Projects such
as street and utility reconstruction, parking, streetscape and civic improvements were called
out in the Plan.
As part of the Redevelopment Plan, the Agency entered into agreements with various
taxing authorities, which required the Agency to pass through portions of incremental
property taxes to each taxing authorities. Expenditures for these pass -through agreements
amounted to $3,792,492 for the year ended June 30, 2009.
As the Town of Los Gatos (the "Town") is financially accountable for the Agency, the
Agency is considered a component unit of the Town. As such, the Agency is reported as
part of the Town in the basic financial statements of the Town.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Agency's Basic Component Unit Financial Statements are prepared in conformity with
accounting principles generally accepted in the United States of America. The Government
Accounting Standard Board (GASB) is the acknowledged standard setting body for
establishing accounting and financial reporting standards followed by governmental entities
in the U.S.A.
GASB requires that the financial statements described below be presented.
Government -wide Statements - The Statement of Net Assets and the Statement of Activities
include the financial activities of the overall Agency. Eliminations have been made to
minimize the effect of interfund of activities. Governmental activities are generally
fmanced through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program
revenues for each function of the Agency's activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to
a particular function. Program revenues include (a) charges paid by the recipients of goods
17
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STA l'EMENTS
or services offered by the programs, (b) grants and contributions that are restricted to
meeting the operational needs of a particular program and (c) fees, grants and contributions
that are restricted to financing the acquisition or construction of capital assets. Revenues
that are not classified as program revenues, including all taxes, are presented as general
revenues.
Fund Financial Statements - The fund financial statements provide information about the
Agency's funds. The emphasis of fund financial statements is on major individual
governmental funds, each of which is displayed in a separate column. All remaining
governmental funds are aggregated and reported as nonmajor funds.
Major Funds
GASB Statement 34 defines major funds and requires the Agency's major governmental
funds to be identified and presented separately in the fund financial statements. All other
funds,called nonmajor funds, are combined, and reported in a single column, regardless of
their fund -type.
Major funds are definedas funds that have assets, liabilities, revenues or
expenditures/expenses equal to ten percent of their fund -type total and five percent of the,
grand total. The General Fund is always a major fund. The Agency may also select other
funds it believes should be presented as major funds.
The Agency reported the following major governmental funds in the accompanying
financial statements:
Redevelopment Fund — This fund is used to account for financial resources used for the
acquisition or construction of major capital facilities.
Housing Set Aside Fund — This fund is used to account for twenty percent housing set aside
from the tax increment proceeds.
Certificates of Participation Fund — This fund is used to account for the accumulation of
financial resources and the payment of general long-term obligation principal, interest, and
related costs.
Basis of Accounting
The government -wide financial statements are reported using the economic resources
measurement focus and the full accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded at the time liabilities are incurred, regardless of when the
related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Under this method, revenues are recognized
18
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
when measurable and available. The Agency considers all revenues reported in the
governmental funds to be available if the revenues are collected within sixty days after
year-end. Expenditures are recorded when the related fund liability is incurred, except for
principal and interest on general long-term debt, which is recognized upon becoming due
and payable; and except for claims, judgments and compensated absences, which are
recognized when estimable and probable. Governmental capital asset acquisitions are
reported as expenditures in governmental funds. Proceeds of governmental long-term debt
and acquisitions under capital leases are reported as other financing sources.
Non -exchange transactions, in which the Agency gives or receives value without directly,
receiving or giving equal value in exchange, include taxes, grants, entitlements, and
donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for
which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is
recognized in the fiscal year in which all eligibility requirements have been satisfied. Other
revenues susceptible to accrual include other taxes, intergovernmental revenue, interest,
and charges for services.
The Agency may fund programs with a combination of cost -reimbursement grants,
categorical block grants, and general revenues. Thus, both restricted and unrestricted net
assets may be available to finance program expenditures. The Agency's policy is to first
apply restricted grant resources to such programs followed by general revenues as
necessary.
Cash and Investments
The Agency's cash and cash equivalents are considered to be cash on hand, demand
deposits, and short-term investments if they are liquid.
The Town's investment policy and California Government Code permit investments in
obligations of U.S. Treasury and its agencies, commercial paper, banker's acceptances,
repurchase agreements, certificates of deposit, medium term notes, passbook savings
account demand deposits, mutual funds and the State of California Local Agency
Investment Fund.
Investments for the Agency are reported at fair value. The value is determined based upon
market closing prices.
Interfund Receivables and Payables
Balances representing lending/borrowing transactions between funds outstanding at the end
of the fiscal year are reported as either "due to/due from other funds" (amounts due within
one year), "advances to/from other funds" (non -current portions of interfund
lending/borrowing transactions), or "loans to/from other funds" (long-term
lending/borrowing transactions as evidenced by loan agreements). Advances and loans to
other funds are offset by a fund balance reserve in applicable Governmental Funds to
19
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
indicate they are not available for appropriation, and are not expendable available financial
resources.
Long -Term Obligations
In the government -wide financial statements long-term debt and other long-term
obligations are reported as liabilities in the Statement of Net Assets.
Tax Increment
The Agency has no direct taxing power and does not have the power to pledge the general
credit or taxing power of the Town, the State of California or any political subdivision
thereof. However, California's Health and Safety Code allows redevelopment agencies
with appropriate approvals of the local legislative bodies to recover costs of financing
public improvements from increased tax revenues (tax increment) associated with increased
property values of individual project areas. Property tax increment is recorded as revenue
when it becomes both measurable and available to finance expenditures.
Property Held for Resale .
Property held for resale is acquired as part of the Agency's redevelopment program. All of
these properties are residential. Costs of developing and administering Agency projects are
charged to capital outlay expenditures as incurred.
The Agency does not maintain cost records by parcel, as there is no relationship between
costs incurred and the final disposition value, which is significantly affected by various use
restrictions. For financial statement presentation, this property is stated at the lower of
estimated cost or net realizable value.
Budgets and Budgetary Accounting
Prior to June 1, the Town Manager submits to the Town Council a proposed operating
budget for the upcoming fiscal year. The proposed budget includes a summary of proposed
expenditures and forecasted revenues of the Agency's governmental funds.
The Town Council adopts the budget by June 30 through passage of an adopting ordinance.
All appropriated amounts, as originally adopted or as amended by the Town, lapse at year-
end or are subject to reappropriation in the following fiscal year. The budget is adopted on
a cash basis, which is not consistent with generally accepted accounting principles.
The actual results of operations are presented in the combined statement of revenues and
expenditures — budget and actual in accordance with the budget basis to provide a
meaningful comparison of actual results to the budget.
20
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Expenditures over Appropriation
For the current fiscal year, actual expenditures exceeded budgeted amounts are as follows:
Excess
Fund
Expenditure Category
Expenditure
Explanation
Housing Set -Aside
Community
$ 154,913
The additional
Fund
development
expenditures amount had
been approved by the
Council but no amended
budget was proposed.
Certificates of
Community
$ 253,804
Under budgeted pass
Participation Fund
development, Pass
through payment, and
interest and fiscal
charges
through payments due to
increment in pass
through receipts.
Under budgeted interest
payment due to interest
expenses being budgeted
on cash basis.
Use of Estimates
The Agency's management has made certain estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
3. CASH AND INVESTMENTS
Cash and Investment
The Agency has pooled its cash investments with the Town in order to achieve a higher
return on investment. Certain restricted funds, which are held and invested by independent
outside custodians through contractual agreements, are not pooled. These restricted funds
include cash with fiscal agents.
21
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
The investments made by the Town are limited to those allowable under State statutes and
include the following types of investments:
■ Bankers Acceptances
■ State of California Local Agency Investment Fund (LAIF)
• Certificate of Deposit
■ Commercial Paper
• Government Agency Securities
• Money Market Certificates
• U.S. Treasury Obligations
• Repurchase Agreements
• Revise Repurchase Agreements
All cash and investment are stated at fair value. Pooled investment earnings are allocated
monthly based on the average cash and investment balances of the various funds and
related entities of the Town. Cash and investments available for operations amounted to
$22,756,318 as of June 30, 2009. Restricted cash and investments at June 30, 2009
amounted to $1,292,743.
See The Town's Comprehensive Annual Financial Report for disclosures related to cash
and investments and the related custodial risk categorization.
4. CAPITAL ASSETS
The following is a summary of the Agency's capital assets:
Balance Deletions/ Balance
Capital Assets June 30, 2008 Additions Adjustments June 30, 2009
Capital Assets not being depreicated:
Land $ $ 135,000 $ $ 135,000
Capital Assets being depreicated:
Buildings 4,067,708 - 4,067,708
Total capital assets 4,067,708 135,000 4,202,708
Less accumulated depreciation:
Buildings 1,423,698 101,693 1,525,391
Total capital assets- net depreciation
$ - 2,644,010 $ 33,307 $ $ 2,677,317
Depreciation expense was $101,693 for the fiscal year ended June 30, 2009.
5. INTERFUND TRANSACTIONS
Advances from the Town - The Town advanced $1,500,000 to the Agency to partially fund
operations. The advance bears interest at 10% and is repayable on demand, provided that
sufficient tax increment funds are available. For the fiscal year ended June 30, 2009, the
Agency paid the Town $150,000 in interest on the advance.
22
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
6. LONG-TERM OBLIGATIONS
1992 Certificates of Participation .(1992 COPs)
The Town issued 1992 COPs in the original principal amount of $2,960,000 dated August
1, 1992. The Town's Motor Vehicle License Fee Revenues were pledged as security for
the 1992 COPs, and the guarantee was registered with the State Controllers Office. The
1992 COPs were issued to finance certain construction costs of the Town's Parking Lot 4
Project, which was constructed on land located in the Los Gatos Central Redevelopment
Project Area. The 1992 COPs are similar to bond debt, and they allow investors to
participate in a share of guaranteed payments. Because they are similar to debt, the present
value of the total of the payments to be made is recorded as long-term debt. Principal
payments are due annually on August 1, which interest payments payable semi-annually on
February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of the Parking Lot 4
Project, the Town and its Redevelopment Agency entered into a Reimbursement
Agreement. Under this agreement, the Agency will use available net tax increment
revenues resulting from the Project's effect on land values to repay the Town for all lease
payments made by the Town to the Agency under the lease agreement for the Project. Net
tax increment revenues are all taxes allocated to and paid into the Redevelopment Agency
Capital Projects Fund for the Project Area. Reimbursements under this agreement
commenced in fiscal 1995-1996. Accordingly, the 1992 COPs have been recorded in the
Agency's General Long -Term Debt Account Group. In addition, the Parking Lot 4 Project,
which was constructed with proceeds of the 1992 COPs, has been included in the Agency's
financial statements.
For the fiscal year ended June 30, 2009, lease income and reimbursements in the amount of
$929,239 offsets in the Certificates of Participation Fund and is eliminated from the
Government -Wide Statement of Activities.
2002 Certificates of Participation (2002 COPs)
The 2002 COPs financing parallels the 1992 issue. On August 1, 2002, the Town and the
Agency issued $10,725,000 in 2002 COPs to finance infrastructure improvements in the
downtown redevelopment area. The Town has pledged lease payments of real property and
facilities comprised of the Parks and Public Works Service Center and Baseball Field, as
well as Parking Lot No. 1, 2, and 3, as collateral for the repayment of the Certificates.
The 2002 COPs principal payments are due annually on August 1, with interest payments
payable semi-annually on February 1 and August 1.
23
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
A summary of general long-term obligations account group transactions for the year ended
June 30, 2009 follows:
original
Issue Balance Balance . Current
Amount June 30, 2008 Additions Retirements June 30, 2009 Portion
1992 C0PS, 5-9%, due 8/12012 $ 2,960,003 $ 890,000 $ - $ 205,000 $ 685,000 $ 215,000
2002 COP5, 2.5-5%, due 8/1/2031 10,725,000 9,610,000 - 240,000 $ 9,370,000 250,000
TotalLong-TennDebt $ 13,685,003 . $ 10,500,000 $ . $ 445,000 $ .10,055,000 $ 465,000
Interest expense was $484,242 for the fiscal year ended June 30, 2009.
Future debt service requirements for general long-term debt with stated maturities are as
follows at June 30, 2009:
For the Year Ending Governmental Activities
June 30, 2009 Principal Interest
2010 465,000 460,975
2011 485,000 441,325
2012 505,000 420,276
2013 275,000 404,146
2014 285,000 393,152
2015-2019 1,610,000 1,772,143
2020-2024 2,010,000 1,357,607
2025-2029 2,560,000 797,500
2030-2032 1,860,000 142,500
Total $ 10,055,000 $ 6,189,624
The Agency must maintain required amount of cash and investments with the trustee under
the terms of the 1992 COPs and 2002 COPs issue (collectively, the "COPs"). These funds
are pledged as reserves to be used if the Town fails to meet its obligations under the COPs
issue. These reserves totaled $941,288 at June 30, 2009.
The California Government Code requires these funds to be invested in accordance with
Town ordinance, bond indentures, or State statues. All these funds have been invested as
permitted under the Code.
7. NET ASSETS AND FUND BALANCES
Net Assets are the excess of all the Agency's assets over all its liabilities, regardless of
fund. Net Assets are divided into three captions under GASB Statement 34. These
captions apply only to Net Assets, which is determined at the Government -wide level, and
are described below:
24
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Invested in Capital Assets, net of related debt describes the portion of Net Assets which is
represented by the current net book value of the Agency's capital assets, less the
outstanding balance of any debt issued to finance these assets.
Restricted describes the portion of Net Assets which are restricted as to use by the terms
and conditions of agreements with outside parties, governmental regulations, laws, or other
restrictions which the Agency cannot unilaterally alter. These principally include debt
service requirements, and redevelopment funds restricted to low and moderate income
purposes.
Unrestricted describes the portion of Net Assets which is not restricted to use.
Reservations of Fund Balances - Fund balance consists of reserved and unreserved
amounts. Reserved fund balance represents that portion of fund balance that has been
appropriated for expenditure or is legally segregated for a specific future use. As of June
30, 2009, portions of fund balance had been reserved because of the following:
Capital Outlay and Redevelopment Projects reserves are funded from storm drain fees,
construction taxes and debt proceeds that are legally restricted for major capital projects.
Debt Service reserves reflect the cash balances in the debt service funds that are restricted
for debt service payments.
Low and Moderate Income Housing reserves reflect the cash balances restricted for low
and moderate housing activities.
8. PRIOR PERIOD ADJUSTMENT
During the current year, it was determined that prior year interest expenses totaling
$201,043 were incorrectly recorded in the Debt Service Fund. To correct this error, the
beginning fund balance of the Debt Service Fund of $6,090,633, as originally reported, has
been increased to $6,291,676. In conjunction, beginning net assets for governmental
activities of $8,229,876, as originally reported, have been increased to $8,430,919.
25
Supplementary Information
TOWN OFLOS GATOS REDEVELOPMENT AGENCY
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
REDEVELOPMENT FUND CAPITAL PROJECTS FUND
FOR THE FISCAL YEAR ENDED DUNE 30, 2009
REVENUES
Interests
Variance
Budgeted Amounts Favorable
Original Final Actual (Unfavorable)
$ 97 850 $ 97,850 $. 66,908 $ (30,942)
Total Revenues 97,850 97,850 66,908 (30,942)
EXPENDITURES
Current:
Community development 693,420 693,420 622,226 71,194
Capital outlay 1,567,129 952,251 951,833 418
Total Expenditures 2,260,549 1,645,671 1,574,059 71,612
Excess (Deficiency) of Revenues Over Expenditures (2,162,699) (1,547,821) (1,507,151) 40,670
OTHER FINANCING SOURCES (USES)
Transfers in 575,000 575,000 575,000
Total Other Financing Sources (Uses) 575,000 575,000 575,000
Net Change in Fund Balance $ (1,587,699) $ (972,821) (932,151) $ 40,670
Fund Balance - Beginning 2,997,775
Fund Balance - Ending $ 2,065,624
26
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (GAAP)
HOUSING SET -ASIDE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2009
Variance
Budgeted Amounts Favorable
Original Final Actual (Unfavorable)
REVENUES
Interest $ 206,000 $ 206,000 $ 276,319 $ 70,319
Total Revenues
206,000 206,000 276,319 70,319
EXPENDITURES
Current:
Community development 403,630 403,630 423,543 (19,913)
Capital outlay - - _ 135,000 . (135,000)
Total Expenditures
Excess (Deficiency) of Revenues Over Expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
403,630 403,630 558,543 (154,913)
(197,630) (197,630) (282,224) (84,594)
1,537,660 1,537,660 1,714,850 177,190
Total Other Financing Sources (Uses) 1,537,660 1,537,660 1,714,850. 177,190
Net Change in Fund Balance $ 1,340,030 $ 1,340,030 1,432,626 $ 92,596
Fund Balance - Beginning 7,198,500
Fund Balance - Ending $ 8,631,126
27
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE - BUDGET AND ACTUAL (GAAP)
CERTIFICATES OF PARTICIPATION FUND
FOR THE FISCAL YEAR ENDED SONE 30, 2009
Variance
Budgeted Amounts Favorable
Original Final Actual (Unfavorable)
REVENUES
Property tax $ 7,074,770 $ 7,231,370. $ 8,574,250 $ 1,342,880
Interest 335,200 335,200. 356,783 21,583
Total Revenues 7,409,970 7,566,570 8,931,033 1,364,463
EXPENDITURES
Community development 77,810 77,810 73,013 4,797
Pass through payment 3,543,780 3,543,780 3,792,492 (248,712)
Debt service:
Principal 445,000 445,000 445,000
Interest and fiscal charges 629,150 629,150 634,242 (5,092)
Total Expenditures 4,695,740 4,695,740 4,944,747 (253,804)
Excess (Deficiency) of Revenues Over Expenditures 2,714,230 2,870,830 3,986,286 1,110,659
OTHER FINANCING SOURCES (USES)
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
Prior Period Adjustments
(575,000) (2,112,660) (2,289,850) (177,190)
(575,000) (2,112,660) (2,289,850) (177,190)
$ 2,139,230 $ 758,170 1,696,436 $ 933,469
6,090,633
201,043
Fund Balance - Beginning as Restated 6,291,676
Fund Balance - Ending $ 7,988,112
28
Other Independent Auditor's Reports
C. G. UHLENBERG LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
PEGGY H. CHEN, C.P.A. JEFFREY J. IRA, C.P.A. KATHERINE CHAO, C.PA JULIE T. UN, C.P.A.
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
Members of the Board of the
Town of Los Gatos Redevelopment Agency
Los Gatos, California
We have audited the basic financial statements of the Town of Los Gatos Redevelopment Agency (the
"Agency") as of and for the year ended June 30, 2009, and have issued our report thereon dated
December 10, 2009. We conducted our audit in accordance with auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the Agency's internal control over financial
reporting as a basis for designing out auditing procedures for the purpose of expressing our opinion on the
basic 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.
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 or material weaknesses. We did not identify any deficiencies in
internal control over financial reporting that we consider to be material weaknesses, as defined above.
333 Twin Dolphin Drive, Suite 230 • Redwood City, CA 94065 • Phone (650) 802-8668 • Fax (650) 802-0866
4117 Clipper Court • Fremont, CA 94538 • Phone (510) 770-8680 • Fax (510) 770-8685
1230 Midas Way, Suite 250 • Sunnyvale, CA 94085 • Phone (408) 331-6242 ■ Fax (408) 331-6243
E-Mail - info@cgucpa.com • www.cgucpa.com
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Agency's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and- grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards and which are described in the accompanying schedule of findings
and questioned costs as items 09-01.
The Agency's response to the findings identified in our audit is described in the accompanying schedule
of findings and questioned costs. We did not audit Agency's response and, accordingly, we express no
opinion on it.
This report is intended solely for the information and use of the Mayor, members of the Agency board
members, and the State Controller's office, is not intended to be, and should not be used by anyone other
than these specified parties.
December 10, 2009
Redwood City, California
30
FINDINGS AND RECOMMENDATIONS
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF COMPLIANCE FINDINGS
YEAR ENDED JUNE 30., 2009
09-01 Pursuant to Health and Safety Code Section 33334.12(g), "excess surplus" means any
unexpended and unencumbered amount in an agency's . Low and Moderate Income
Housing Fund that exceeds the greater of: one million dollars ($1,000,000), or the
aggregate amount of tax increment deposited into the Low and Moderate Income
Housing Fund during the agency's preceding four fiscal years (pursuant to Sections
33334.2 and 33334.6). It was determined that the Los Gatos Redevelopment Agency
retained an excess surplus of approximately $1,830,971 for the fiscal year ended June 30,
2009, based on the aggregate amount of tax increment deposited in the Low and
Moderate Income Housing Fund.
Recommendation: Pursuant to Health and Safety Code Section 33334.12(a) (1) (B), we
recommend that the Los Gatos Redevelopment Agency encumbers or expends the excess
surplus. The funds should be encumbered to carry out activities consistent with a
redevelopment agency as defined in Health and Safety Code Sections 33334.2 and
33334.3.
Client's response: The agency is in the process of carrying out activities to encumber the
funds.
31
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF PRIOR YEAR COMPLIANCE FINDINGS
YEAR ENDED JUNE 30, 2008
08-01 Pursuant to Health and Safety Code Section 33334.12(g), "excess surplus" means any
unexpended and unencumbered amount in an agency's Low and Moderate Income
Housing Fund that exceeds the greater of: one million dollars ($1,000,000), or the
aggregate amount of tax increment deposited into the Low and Moderate Income
Housing Fund during the agency's preceding four fiscal years (pursuant to Sections
33334.2 and 33334.6). It was determined that the Los Gatos Redevelopment Agency
retained an excess surplus of approximately $1,795,145 for the fiscal year ended June 30,
2008, based on the aggregate amount of tax increment deposited in the Low and
Moderate Income Housing Fund.
Recommendation: Pursuant to Health and Safety Code Section 33334.12(a) (1) (B), we
recommend that the Los Gatos Redevelopment Agency encumbers or expends the excess
surplus. The funds should be encumbered to carry out activities consistent with a
redevelopment agency as defined in Health and Safety Code Sections 33334.2 and
33334.3.
Client's response: The agency is still in the process of carrying out activities to
encumber the funds, see current year findings 09-01.
32
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EXHIBIT B
California Redevelopment Agencies - Fiscal Year 2008/2009
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS
Total Tax Increment From PA(s) $1,714,850
Other Revenues not reported on Schedule A
Sum of Beginning Balance and Revenues
Beginning Balance $7,198,501
Adjustment to Beginning Balance $0
Adjusted Beginning Balance $7,198,501
Total Receipts from PA(s) $1,991,169
$0
$9,189,670
Expenditure
Item
Planning and Administration Costs
Administration Costs
Professional Services
Property Acquisition
Acquisition Expense
Land Purchases
Relocation Costs
Subsidies from the LMIHF
Other
Subitem
Subtotal of Planning and Administration Costs
Subtotal of Property Acquisition
Subtotal of Subsidies from the LMIHF
Total Expenditures
Amount Remark
$308,336
$14,233
$322,569
$7,600
$135,000
$3,375
$145,975
$90,000 Senior Housing
Solutions
$90,000
$558,544
Net Resources Available
Indebtedness For Setasides Deferred
$8,631,126
$0
Other Housing Fund Assets
Category
Total Other Housing Fund Assets
Amount
Remark
Total Fund Equity
Page 1 of 3
$8,631,126
12/15/09
California Redevelopment Agencies - Fiscal Year 2008/2009
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS
2004/2005 $1163323
2005/2006 $1073315 sum of 4 Previous Years' Prior Year Ending Excess Surplus for
2006/2007 $1516456 Tax Increment for 2008/2009 Unencumbered Balance 2008/2009
2007/2008 $1614435 $5367529 $7,198,500 $1,830,971
Sum of Current and 3 Previous Years' Tax Increments $5,919,056
Adjusted Balance $8,631,126
Excess Surplus for next year $2,712,070
Net Resources Available $8,631,126
Unencumbered Designated
Unencumbered Undesignated
Total Encumbrances
Unencumbered Balance
Unencumbered Balance Adjusted for Debt Proceeds
Unencumbered Balance Adjusted for Land Sales
Excess Surplus Expenditure Plan
Excess Surplus Plan Adoption Date
$7,609,139
$1,021,987
$0
$8,631,126
$0
$0
No
Site Improvement Activities Benefiting Households
Income Level Low
Very Low
Moderate
Total
Land Held for Future Development
Site Name Num Of Zoning Purchase Estimated
Acres Date Start Date
224 W Main Street .25 C-2 07/27/2009
Remark
Use of the Housing Fund to Assist Mortgagors
Income Adjustment Factors
Home
Non Housing Redevelopment
Funds Usage
Requirements Completed
Hope
Page 2 of 3
12/15/09
California Redevelopment Agencies - Fiscal Year 2008/2009
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS
Resource Needs
LMIHF Deposits/Withdrawls
Document
Name
Document Custodian
Date Name
Custodian
Phone
Copy
Source
Achievements
Description
Page 3 of
12/15/09
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Note: Print this report in Landscape Orientation (Use the Print Icon just above, then Properties then Landscape)
California Redevelopment Agencies- Fiscal Year 2008/2009
Project Area Contributions to Low and Moderate Income Housing Fund
Sch A Project Area Financial Information
Agency
Address
LOS GATOS
110 E. Main Street
PO Box 949
Los Gatos
CA 95031
Project Area CENTRAL LOS GATOS PROJECT
Type: Inside Project Area Status: Active
Plan Adoption: 1991 Plan Expiration Year: 2031
Gross Tax
Increment
$8,574,251
Calculated Amount Amount Amount
Deposit Allocated Exempted Deferred
$1,714,850 $1,714,850 $0 $0
Total
Deposited
$1,714,850 20.00% $0
Repayment $0
Category
Interest Income
Total Additional Revenue $276,319
$276,319
Total Housing Fund Deposits for Project Area $1,991,169
Cumulative
Def.
Agency Totals
For All Project Areas:
Gross Tax
Increment
$8,574,251
Calculated Amount Amount
Deposit Allocated Exempted
$1,714,850.2 $1,714,850 $0
Amount
Deferred
$0
Total Additional Revenue from Project Areas:
Total Deferral Repayments:
Total Deposit to Housing Fund from Project Areas:
Page 1 of 1
Total
Deposited
$1,714,850 20%
12/15/09
$276,319
$0
$1,991,169
Cumulative
Def.
$0
California Redevelopment Agencies - Fiscal Year 2008/2009
Sch A/B Project Area Program Information
LOS GATOS
Project Area: CENTRAL LOS GATOS PROJECT
FUTURE UNIT CONSTRUCTION------------------
Estimated
Execution Completion
Contract Name Date Date Very Low Low Moderate Total
20 Dittos Lane 12/31/09 03/31/12 16 16 0 32
Page 1 of 1 12/15/09
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venues and
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Debt Identification
Annual Pass Through -Short Term Debt
County Office of Education
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Los Gatos -Saratoga High School District
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Totals, Fiscal Year Indebtedness
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STATEMENT OF INDEBTEDNESS -FISCAL YEAR INDEBTEDNESS ONLY
FILED FOR THE 2009-10 TAX YEAR
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
CENTRAL PROJECT AREA
For Indebtedness entered into post June 30, 2009
Debt Identification
FORM B
(Optional)
Original Data Current
Total Principal / Interest
Interest Total Outstanding Due During Tax
Date Principal Term Rate Interest Debt Year
SERAF 2009/10 2;219,276
SERAF 2010/11 456,910
2,219,276
Totals, Fiscal Year Indebtedness
Purpose of Indebtedness:
2,676,186 2,219,276
RECONCILIATION STATEMENT - CHANGES IN INDEBTEDNESS
From July 1, 2008 to June 30, 2009
Reconciliation Dates:
Remaining Balance
(A+B-C-D-E)
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riedness to the current one being filed. However, since the reconciliation period is limited by law to a July 1 - June 30 fiscal y,
:o be included on this document. To assist in following each item of indebtedness from one SOl to the next, use page and line
edness is listed on. If the indebtedness is new to this fiscal year, enter "new" in the Prior Yr" page and line columns. Column
)ebt column.
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Amounts Paid
Indebtednes:
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RECONCILIATION STATEMENT - CHANGES IN INDEBTEDNESS
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Reconciliation Dates:
Remaining
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(A+B-C-D-E)
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Amounts Pak
Indebtednes
Tax Increment
439,762
240,000
694,785
725,000
86,292 I
4,049,774
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Adjustments
Decreases (Attach
Explanation)
1,937,042
3,200,834
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Explanation)
725,000
86,292 I
2,439,850
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Outstanding Debt All Beginning
Indebtedness
6,576,759
9,610,000
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I2002 Certificate of Participation Interest Due
2002 Certificate of Participation
Election -Future Amounts Owed
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Obligation to Low & Mod -Current Yr
Obligation to Low & Mod -Future Years
Administrative costs paid to County
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CALCULATION OF AVAILABLE REVENUES
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
CENTRAL PROJECT AREA
TAX YEAR 2009-10
RECONCILIATION DATES: July 1, 2008 to June 30 , 2009
1. Beginning Balance, Available Revenues
2. Tax Increment Received -Gross
All Tax Increment Revenues , to include any Tax Increment
pass through to other local taxing agencies
$ 10,984,318
9,269,035
3. All Other Available Revenues Received 309,358
4. Revenues from any other source, included
in column E of the Reconciliation
Statement, but not included in (1-3) above
5. Sum of lines 1 through 4 20,562,712
6. Total amounts paid against indebtedness
in previous year. (D + E on Reconciliation Statement) 7,260,709
7. Available Revenues, End of Year (5-6)
FORWARD THIS AMOUNT TO STATEMENT OF INDEBTEDNESS,
COVER PAGE, LINE 4
NOTES
13,302,003
Tax Increment Revenues:
The only amount(s) to be excluded as Tax Increment Revenue are any amounts pass through to other local taxing
agencies pursuant to Health and Safety Code Section 33676. Tax Increment Revenue set -aside in the Low and
Moderate Income Housing Fund will be washed in the above calculation, and therefore omitted from Available
Revenues at year end.
Item 4 above:
This represents any payments form any source other than Tax Increment OR available revenues. For instance, an
agency funds a project with a bond issue. The previous SOI included a Disposition and Development Agreement (DDA)
which was fully satisfied with these bond proceeds. The DDA would be shown on the Reconciliation Statement
as fully repaid under the "other" column (Col E), but with funds that were neither Tax Increment, nor "Available Revenues"
as defined. The amounts used to satisfy this DDA would be included on line 4 above in order to accurately
determine ending "Available Revenues".
i