CR 12-20-04 16
DATE: TO: MEETINGDATE: 12120/04 ITEM NO. J \0 COUNCIL/AGENCY AGENDA REPORT DECEMBER 10, 2004 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: DEBRA 1.
TOWN MANAGER/EX CTOR SUBJECT: CONSIDER ADOPTING RESOLUTION APPROVING THE 2003/04 ANNUAL REPORT FOR THE LOS GATOS REDEVELOPMENT AGENCY. RECOMMENDATION: Adopt resolution
approving the 2003104 Annual Report for the Los Gatos Redevelopment Agency. DISCUSSION: Pursuant to Califomia Health and Safety Code §33080.l, the Redevelopment Agency shall present
an annual report to Council within six months ofthe end ofthe 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 ofthe Agency's progress in alleviating blight during the previous fiscal year; (5) infomlation 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 2003/04 audit was completed by C.G. Uhlenberg,
LLP (Attachment 1, Exhibit A). It includes the auditor's opinion ofthe Agency's operations and financial position, and the Agency's compliance with laws, regulations and administrative
requirements goveming the agency, including all financial activities involving low and moderate income housing funds. The Statement of Housing Activity and the Annual Report of Financial
Transactions (Exhibits B and C) consist of fomls provided by PREPARED BY: Reviewed by: Assistant Town Mana er __Community Development Reformatted: 5/30102 BudN. Deputy Executive Director
Town Attomey __Clerk {t% Finance Revised: 12/1 0/04 11:19 am
PAGE 2 MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE REDEVELOPMENT AGENCY SUBJECT: ADOPT RESOLUTION APPROVING 2003/04 ANNUAL REPORT December 10, 2004 the State Department of Housing
and Community Development. A number of major accomplishments were made by the Los Gatos Redevelopment Agency during the 2003/04 fiscal year. The downtown streetscape improvement project
was continued with sidewalk, streetscape and storm drain improvements being made to Santa Cruz Ave. between Main St. and Highway 9. Four alleys located in the Redevelopment Project Area
were completely reconstructed. An affordable senior group residence with Project Match was opened. Staff negotiated the replacement of banners for the downtown and Los Gatos Boulevard.
Trader Joe's was opened in the former McWhorter's space in the Los Gatos Village Square Shopping Center. The Agency's eminent domain authority was extended for another 12 years. Bentley
of Silicon Valley opened a new showroom across the street in the fom1er "Move It" space. The implementation ofthe Town's Economic Vitality Plan continued with business retention and
attraction efforts. The Town continued to work closely with the Chamber of Commerce. With financial assistance from the Redevelopment Agency, the swimming pool at Los Gatos High School
was opened. The State continues to look to redevelopment agencies statewide to help balance the State budget. For fiscal year 2003/04, the State took $135 million from redevelopment
agencies statewide as part of the ERAF shift. The Los Gatos Redevelopment Agency's portion amounted to about $209,975 from its general (non-housing set-aside) account. For fiscal year
2004/05, the ERAF shift will once again increase with the Los Gatos Redevelopment Agency owing approximately $303,000. Given the State's budget problems, we may expect continued ERAF
payments in the future. CONCLUSION: Upon approval by the Council, the Annual Report will be sent to the State Controller and the State Department of Housing and Community Development
as required by State law. ENVIRONMENTAL ASSESSMENT: Approval of the Redevelopment Agency Annual Report is not a project subject to CEQA. FISCAL IMPACT: None ATTACHMENTS: 1. Resolution
approving the 2003/04 Annual Report for the Los Gatos Redevelopment Agency Exhibit A -Redevelopment Audit for Fiscal Year 2003/04 Exhibit B Statement of Housing Activity for Fiscal Year
2003/04 Exhibit C -Annual Report of Financial Transactions for Fiscal Year 2003104 BNL:ld N:IFINANCEIRDAICouncil Rcports12003-04 RDA Annual Report.wpd
RESOLUTION 2004-RESOLUTION OF THE TOWN COUNCIL/REDEVELOPMENT AGENCY OF THE TOWN OF LOS GATOS APPROVING THE 2003/04 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 financial 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 financial 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 financial 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 and the Annual Report of Financial Transactions, attached hereto as Exhibits Band C, consist of forms provided by the State Department of Housing
and Community Development. 5. Approval of the 2003/04 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 2003/04 Annual Report for the Los Gatos Redevelopment Agency, attached hereto
as Exhibits A, Band C.
FURTHER RESOLVED, that the Town Council determines the planning and administrative expenses from the Low and Moderate Income Housing Fund are necessary for the production, improvement,
or preservation oflow 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 20th day of December,
2004 by the following vote: COUNCIL!AGENCY BOARD MEMBERS: AYES: NAYS: ABSENT: ABSTAIN: ATTEST: CLERK ADMINISTRATOR TOWN OF LOS GATOS LOS GATOS, CALIFORNIA SIGNED: /s/MAYOR/CHAIRPERSON
OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA
TOWN OF LOS GATOS REDEVELOPMENT AGENCY BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2004 WITH INDEPENDENT AUDITORS' REPORTS THEREON * * * EXHIBIT A
TOWN OF LOS GATOS REDEVELOPMENT AGENCY TABLE OF CONTENTS FOR THE YEAR ENDED JUNE 2004 PAGE Independent Auditors' RepOli................................................................................
.......... 1 2 Management's Discussion and Analysis 3 -8 Basic Financial Statements: Government-wide Financial Statements: Statelnent of Net Assets 9 Statelnent of Activities.........................
................................................................ 10 Fund Financial Statements: Governmental Funds: Balance Sheet.......................................................................
.......................... 11 Reconciliation of the Balance Sheet Statement of Net Assets............... 12 Statement of Revenues, Expenditures and Changes in Fund Balances .........
Reconciliation of Statement of Revenues, Expenditures and Changes In Fund Balances Statement of Activities . Notes to the Financial Statements . Required Supplementary Infornlation:
Budgetary Comparison Schedules: 13 14 15 -23 Redevelopnlent Fund........................................................................................... 24 I-lousing Set-Aside Fund
25 Certificate of Participation Fund.......................................................................... 26
TOWN OF LOS GATOS REDEVELOPMENT AGENCY TABLE OF CONTENTS FOR THE YEAR ENDED JUNE 30, 2004 Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting
Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards . Summary of Compliance Findings . Summary of Prior Year Compliance Findings . PAGE
27 -28 29 30
c. G. UHLENBERG LLP CERTIFIED PUBLIC ACCOUNTANTS ROBERT E. BARSANTI (RETIRED) • PEGGY H. CHEN, CPA • JEFFREY J. IRA, CPA. KATHERINE CHAO, C.PA • JULIE LIN, CPA 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 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, 2004, 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 perform 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 fund infornlation of the Los Gatos Redevelopment Agency as of June 30, 2004, and the respective changes in financial position for the year then ended in confornlity with accounting
principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated November 11, 2004 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 grants. The purpose of that report
is to describe the scope of our testing of internal control over financial reporting and compliance and the results pf 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.
c. G. UHLENBERG LLP CERTIFIED PUBLIC ACCOUNTANTS ROBERT E. BARSANTI (RETIRED) • PEGGY H. CHEN, C.PA • JEFFREY J. IRA, CPA. KATHERINE CHAO, CPA .• JULIE LIN, CPA 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 inforn1ation 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 combining financial statements 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. November 11, 2004 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 Lorna 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 as a result of its redevelopment activities. The Agency may enter into development agreements with developers and others to further its purposes. FISCAL 2004
FINANCIAL HIGHLIGHTS Agency operations were not significantly affected by the declines experienced in the local economy last year. The Agency's primary revenue source, property tax increments
of $4.38 million in fiscal year 2004 reflects an increase of $339,454 from the prior year. Agency-wide: • The Agency's total assets were $19,414,465 at June 30, 2004 • Total liabilities
were $15,561,779 • Agency-wide revenues in fiscal 2004 were $4,439,021 • Agency-wide expenses were $3,413,932 Fund Level: • Govemmental Fund balances were $11,000,914 • Govemmental Fund
revenues were $4,439,021 • Govemmental Fund expenditures were $5,848,023 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, 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.
Statements. These two sets of financial statements provide two different views of the Agency's financial activities and financial position-long-tenn and short-tenn. The Agency-wide Financial
Statements provide a 10nger-tem1 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
infonnation 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 infonnation 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. 3
TOWN OF lOS GATOS REDEVElOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS The Fund Financial Statements report the Agency's operations in more detail than the Agencywide 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-ternl debt and other long-tenn 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; fonnerly they were called the general purpose financial
statements. The Agency-wide Financial Statements All of the Agency's basic services are considered to be Governmental actIvItIes, including; economic development, pass through agreements,
and debt service. These services are supported by general Agency revenues such as incremental property taxes and investment earnings. 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 longlived assets, along with long-tenn liabilities, are presented
only in the Agency-wide financial statements. The Fund financial statements provide detailed infonnation about each of the Agency's most significant funds, called Major Funds. The concept
of major funds, and the detennination 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 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 2004. These are the Redevelopment Fund, the Housing Set-Aside Fund, and the Certificate of Participation Fund, each of which is discussed
in detail below. 4
TOWN OF LOS GATOS REDEVELOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS 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. Table 1 Governmental Net Assets at June 30, 2004 (In
Millions) Governrnental Activities Governmental Net Assets presents total program assets and liabilities and the resulting allocation of the Agency's net assets. Cash and Investments
Other Assets Total Assets Long Term Debt Outstanding Other Liabilities Total Liabilities $ 14.20 $ 5.21 $ 19.41 $ 12.13 $ 3.43 $ 15.56 Net Assets: Invested in Net Assets Restricted Unrestricted
Total Net Assets: $$$$ 3.59 7.30 (7.04) 3.85 The Agency's governmental net assets amounted to $3.85 million at June 30, 2004. The Agency's net assets at June 30,2004 are comprised of
the following: • Unrestricted cash and investments comprised $10.01 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 $3.75 million are funds held by trustees as prescribed under the
Certificate of Participation issuances. • Other Assets of $5.21 million represents the value of the Parking Lot #4 parking structure, which was considered infrastructure and not presented
in the prior year's financial report. Upon implementation of GASB 34, this infrastructure asset is now included as Other Assets in the Agency-wide financial statements. • Short term
payables and pass-through obligations comprise $2.22 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, 2004. • As of June 30, 2004 the Town of Los Gatos had advanced the Agency a total of $.98
million to partially fund ongoing Agency operations. This advance is repayable on demand. 5
TOWN OF lOS GATOS REDEVelOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS • Long-term debt of $12.13 million, of which $11.74 million is due in future years and $.39 million, is due
currently. • The $3.60million 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 $7.30 million, of which $3.50 million may be used only for capital projects,
$3.36million is restricted for low and moderate income housing purposes, and $.44 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 $(7.04) million of unrestricted net assets at June 30, 2004. This deficit is a result of the $12.13 million in long-term debt
proceeds, which are deducted from fund balance. 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 Program Revenues Redevelopment Projects
General Revenues: Property Tax Increments Interest Total Revenues 2004 $ 0.00 $ 4.38 $ 0.06 $ 4.44 Activities: Functions /Programs Redevelopment Projects Pass-through payments Interest
and Fees Total Government Activities Change in Net Assets $$$$$ 0.98 1.77 0.66 3.41 1.03 As Table 2 above shows, $0.00 million (0'%) of the Agency's 2004 Governmental revenue is program
revenue and $4.44 million (100'%) came from general revenues such as taxes and interest. Program revenues were comprised of charges for services, which include reimbursements for for
expenses incurred in providing services. General revenues are not allocable to programs. General revenues are used to pay for the net cost of governmental programs. 6
TOWN OF lOS GATOS REDEVelOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS Net Revenue (Expense) ofGovernmental Activities Table 3 presents the net (expense) or revenue of 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) 2004 Redevelopment Projects Property Tax Increments Interest Totals $ (0.98) $ (1.77) $ (0.66) $ (3.41) 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 Funds Total
Assets Total Liabilities Total Fund Balances Total Revenues Total Expenditures Total Other Financing Sources (Uses) 2004 $ 19.41 $ 15.56 $ 11.00 $ 4.44 $ 5.85 $ Analyses ojMajor Governmental
Funds Redeveloprnent 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. Housing Set Aside Fund Accounts for administering the
housing component of the Redevelopment plan. This year an additional amount of $38,116 went to Habitat for Humanity to develop a low-income housing 7
TOWN OF lOS GATOS REDEVElOPMENT AGENCY MANAGEMENT'S DISCUSSION AND ANALYSIS project. The revenue source for this program comes from the 20% State-mandated housing set-aside deducted
from incremental property taxes. B. Certificates ofParticipation 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, 2004 the Agency's debt comprised: Government Activity Debt 1992 Certificates of Participation 2002 Certificates of Participation Total Long Term Debt
June 30, 2004 Balance $ 1.62 $ 10.52 $ 12.13 ECONOMIC OUTLOOK AND MAJOR INITIATIVES The economy of the Agency and its major initiatives for the coming year are discussed in detail in
the Letter of Transmittal in the Town of Los Gatos' Comprehensive Annual Financial Report for for the Fiscal Year Ended June 30, 2004. 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. 8
Basic Financial Statements
TOWN OF LOS GATOS REDEVELOPMENT AGENCY STATEMENT OF NET ASSETS JUNE 30, 2004 ASSETS Cash and investments Restricted cash and investments Accounts receivable Intergovernmental receivable
Capital assets -net Total Assets $$ Governmental Activities 10,011,849 3,750,742 398,640 42,523 5,210,712 19,414,465 LIABILITIES Accounts payable Accrued payroll and benefits Interest
payable Advances limn Town of Los Gatos Deferred Revenue Pass through obligations Long-term liabilities: Due within one year Due more than one year Total Liabilities NET ASSETS Invested
in capital assets, net of related debt Restricted for: Redevelopment projects Low income housing Debt service Total Restricted Net Assets Unrestricted Total Net Assets 9 $ 322,681 2,376
228,939 984,250 126,801 1,766,732 385,000 11,745,000 $ 15,561,779 $ 3,595,712 3,500,385 3,356,099 439,586 7,296,070 (7,039,096) $ 3,852,686
TOWN OF LOS GATOS REDEVELOPMENT AGENCY STATEMENT OF ACTIVITIES JUNE 30, 2004 Governmental Activities Program expenses: Redevelopment Pass-through payment Interest and fees Total program
expenses Program revenues: Charges for services Total program revenues General revenues: Tax allocation increment Interest Total general revenues Change in net assets Net assets, June
30, 2003 Net assets, June 30, 2004 10 $ 984,195 1,773,889 655,848 3,413,932 274 274 4,376,897 61,850 4,438,747 1,025,088 2,827,598 $ 3,852,686
TOWN OF LOS GATOS REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 20004 ASSETS: Cash and investments available for operations Restricted cash and investmcnts Accounts
receivable Intergovernmental receivable TOTAL ASSETS LIABILITIES AND FUND EQUITY: Accounts payable Aecrucd payroll and bcnefits Advances from Town of Los Gatos DefclTed revenuc Pass
through obligations (Note) Total Liabilities FUND EQUITY Encumbrances Redcvclopment projects Low and moderate incomc housing Debt services Unrcserved, designated for: Debt scrvice Total
Fund Balance TOTAL LIABILITIES AND FUND BALANCE DEBT SERVICE CAPITAL PROJECT FUNDS FUND Certificates Total Housing of Governmental Redevelopment Set-Aside Participation Funds $ 460,052
$ 3,091,078 $ 6,460,719 $ 10,011,849 3,311,156 439,586 3,750,742 388,801 9,839 398,640 8,505 34,018 42,523 3,771,208 3,488,384 6,944,162 14,203,753 268,837 5,094 48,750 322,681 1,986
390 2,376 984,250 984,250 126,801 126,801 1,766,732 270,823 132,285 2,799,732 3,202,840 385,615 3,114,770 3,356,099 439,586 11,000,914 11
TOWN OF LOS GATOS REDEVELOPMENT AGENCY RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2004 Fund balance /net assets ofgovernmental activities Amounts reported
for governmental aetivities in the statement ofnet assets different because: Capital assets used in governmental aetivities are not financial resources and, therefore, are not reported
in the funds. Interest payable onlong-tenn debt does not require the use ofcurrent financial resources and, therefore, are not reported in the Governmental Funds. Long-tern1liabilities,
including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds.
Net Assets ofGovernmental Activities 12 $$ 11,000,914 5,210,712 (228,940) (12,130,000) 3,852,686
TOWN OF LOS GATOS REDEVELOPMENT AGENCY GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2004 DEBT SERVICE CAPITAL PROJECT
FUNDS FUND Certificates Total Housing of Governmental Set-Aside Funds Revenues: Tax allocation increment $ $ $ 4,586,872 $ 4,586,872 Less: ERAF* (209,975) (209,975) Interest income (loss)
93,216 (62,657) 31,291 6],850 Other 274 274 Total Revenues 93,490 (62,657) 4,408,188 4,439,02] Expenditures: Capital outlay 2,800,516 241,916 3,042,432 Pass through payment 1,773,889
1,773,889 Debt service: Principal retirement 370,000 370,000 Interest and fees 66] ,702 66],702 Total expenditures 2,800,516 241,9]6 2,805,59] 5,848,023 Excess (deficiency) of revenues
over expenditures (2,707,026) (304,573 ) 1,602,597 (1,409,002) Other financing sources (uses): Transfers in 1,008,739 1,008,739 Transfers out (1,008,739) (1,008,739) Other financing
use (930,] 77) Other financing source 930,] 77 Total other flnancing sources (uses) 1,008,739 (] ,008,739) Net change in fund balances (2,707,026) 704,166 593,858 (1,409,002) Fund Balance,
June 30, 2003 6,207,411 2,651,933 3,550,572 12,409,916 Fund Balance, June 30, 2004 $ 3,500,385 $ 3,356,099 $ 4,144,430 $ 1],000,914 * Educational Revenue Augmentation 13
TOWN OF LOS GATOS REDEVELOPMENT AGENCY RECONCILIATION OF THE STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2004 The
schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenue, Expenditures and Change in Fund Balance, which measures only changes
in current assets and current liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the Statement of Activities, which is reported
on the full accrual basis. Net changes in fund balances -total governmental funds Amounts reported for governmental activities in the statement of net assets different because: Governmental
funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation
expense. This is the amount by which capital outlays exceeded depreciation in the current period. Expenditure for capital assets Depreciation expense is deducted from the fund balance
The issuance oflong-term debt provides current financial resources to governmental funds, while the repayment of the principal oflong-term debt consumes the current financial resources
of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of longterm debt. Repayment of
debt principle is added back to fund balance The amounts below included in the Statement of Activities do not provide or (require) the usc of current financial resources and therefore
are not reported as revenue or expenditures in governmental funds (net change): Interest payable $ 2,159,931 (101,693) $ (l,409,002) 2,058,238 370,000 5,852 Change in Net Assets -Governmental
Activities 14
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF THE AGENCY AND REDEVELOPMENT 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 $1,776,288 for the year ended June 30, 2004. In
addition, as of June 30, 2004 the Agency owed $1,776,288 in pass-through amounts to other agencies. As 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 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 is the acknowledged
standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the U.S.A. A. Basis of Accounting and Measurement Focus The basic
financial statements of the Agency are composed of the following: • Government-wide financial statements • Fund Financial statements • Notes to the financial statements 15
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Government-wide Financial Statements These statements are designed to display infornlation about the Agency as a
whole and include separate columns for the governmental and business-type activities of the primary government. The Town of Los Gatos Redevelopment Agency has no businesstype activity.
Government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus,
all (both current and long-term) economic resources and obligations of the reporting government are reported the government-wide financial statements. Basis of accounting refers to when
revenues and expenses are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities
resulting from exchange and exchange-like transactions are recognized when the exchange takes takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange
transaction are recognized in accordance with requirements of GASB Statement No. 33. Program revenues include charges for services, special assessments, and payments made by parties
outside of the reporting Agency's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present
the net cost of each program. Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather reported as an expenditure. Proceeds
of long-ternl debt are recorded as a liability in the government-wide financial statements, rather than as another financing source. Amounts paid to reduce long-tenn indebtedness of
the reporting government are reported as a reduction of the related liability, rather than as an expenditure. Fund Financial Statements The accounts of the Agency are organized on the
basis of funds or account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts
that comprise its assets, liabilities, fund equity, revenues and expenditures. The modified accrual basis of accounting is used for governmental fund types. Under the modified accrual
basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter
to be used to pay liabilities of the current period. Expenditures, other than interest on long-tenn obligations, which is recorded when due, are recorded when the liability is expected
to be liquidated with expendable available resources. 16
TOWN OF LOS GATOS REDEVEI..OPMENT AGENCY NOTES TO FINANCIAL STATEMENTS Rental income is accrued to the extent that rents are considered collectible. Investment earnings are accrued,
as they become measurable and available. Fund types are as follows: Governmental Fund Types 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. C.
Reconciliation of government-wide and fund financials Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets.
Total fund balance of the Agency's governmental funds of$II,000,914 differs from the amount reported as as the net assets of governmental activities of $3,852,686 results primarily from
the long-term economic focus of the statement of net assets versus the CUlTent financial resources focus of the governmental fund balance sheet. The details of the difference are as
follows Capital Related Items When capital assets that are to be used in governmental activities are purchased or constructed, the cost of those assets is reported as expenditures in
governmental funds. However, the statement of net assets includes those capital assets among the assets of the Agency as a whole. Cost of capital assets Less: accumulated depreciation
Net capital assets $ 6,227,639 (1,016,927) Long-term liabilities applicable to the Agency's governmental activities are not due and payable in the current period and accordingly are
not reported as fund liabilities. 17
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS All liabilities (both current and long-term) are reported in the statement of net assets. Balances as of June 30,
2004 were: 1992 Certificates of Participation 2002 Certificates of Participation $ 1,615,000 10,515,000 Total Long-Term Debt Explanation of certain differences between the governmental
fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities The govemmental fund statements of revenues, expenditures, and
changes in fund balances includes a reconciliation between net changes in fund balances total govemmental funds and changes in net assets of govemmental activities as reported in the
govemment-wide statement of activities. One element of the reconciliation explains that "Govemmental funds report capital outlays as expenditures. However, in the statement of activities
the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." Capital Related Items When capital assets that are to be used in govemment
actIvItIes are purchased or constructed, the resources expended for those assets are reported as expenditures in govemmental funds. However in the statement of activities, the cost of
those assets is allocated over their estimated useful lives and reported as depreciation expenses: Cost of current year asset additions Less: depreciation expense $ 2,159,931 001,693)
Net total Long-tenn Debt Transactions Some expenses reported in the statement of activities do not require the use current financial resources and therefore are not reported as expenditures
in govemmental funds. Repayment of bond principal is reported as an expenditure in govemmental funds and thus has the effect of reducing fund balance because current financial resources
have been used. For the Agency as a whole, however, the principal payments reduce the liabilities in the Statement of Net Assets and do not result in an expense in the statement of activities.
Principal payments made 18
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS C. 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 Califomia or any political subdivision thereof. However, Califomia'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. D. 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. E. 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 govemmental 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 City Council, 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. F. 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 confomlity with generally accepted accounting
principles. Actual results could differ from those estimates. 19
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS 3. CASH AND INVESTMENTS The Agency holds its cash in the Town of Los Gatos. The Town maintains a cash and investment
pool and allocates interest to the various funds based upon the average quarterly cash balances. Information regarding categorization of investments can be found in the Town of Los Gatos
financial statements. 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
to Fair Value (GASB 31) Under GASB 31, the Town must adjust the carrying value of its investments to reflect their fair value at each fiscal year end, and it must include the effects
of these adjustments in income for that fiscal year. GASB 31 applies to all the Agency's investments, even if they are held to maturity and redeemed at full face value. By following
the requirements of GASB 31, the Agency is reporting the amount of resources that would actually have been available if it had been required to liquidate all its investments at any fiscal
year end. 4. CAPITAL ASSETS The following is a summary of the Agency's capital assets: Balance Balance July 1, 2003 Additions Deletions June 30, 2004 Infiastructure: Parking Lot # 4
Project $ 4,067,708 $ 287,622 $ $ 4,355,330 Alleys 229,709 229,709 Streets 1,642,600 1,642,600 Total capital assets 4,067,708 2,159,931 6,227,639 Less accumulated depreciation: Parking
Lot #4 Project 915,234 101,693 1,016,927 Total capital assets -net depreciation $ 3,152,474 $ 2,058,238 $ $ 5,210,712 20
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS 5. ADVANCES FROM THE TOWN The Town advanced $984,250 to the Agency to partially fund operations. The advance bears
interest at 10% and is repayable on demand, provided that sufficient tax increment revenue funds are available. For the fiscal year ended June 30, 2004 the Agency paid the Town $98,425
in interest on this advance. 6. LONG-TERM OBLIGATIONS 1992 Certificates of Participation (COPs) The Town issued Certificates of Participation (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 COPs, and the guarantee was registered with the State Controllers Office.
The 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 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 1st, which interest payments payable semiannually on February 1st and August 1st. 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 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 COPs, has been included in the Agency's financial statements. 2002 Certificates of Participation (COPs) The 2002 Certificates
of Participation financing parallels the 1992 issue. On August I, 2002, the Town and the Los Gatos Redevelopment Agency issued $10,725,000 in 2002 Certificates of Participation 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 COPs principal payments are due annually on August 1st, with interest
payments payable semi-annually on February 1st and August 1st. 21
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS A summary of general long-tenn obligations account group transactions for the year ended June 30, 2004 follows: Original
Balance Balance Issue June, 30 June, 30 Current Amount 2003 Additions Retirements 2004 Portion 1992 Certificates of Participation, 5-9%, due 8/1/2012 $ 2,960,000 $ 1,775,000 $ $ 160,000
$ 1,615,000 $ 170,000 2002 Certificates of Participation, Series A, 2.5-5%, due 8/l/2031 10,725,000 10,725,000 210,000 $ 10,515,000 215,000 Total Long-Term Debt $ 13,685,000 $ 12,500,000
$ $ 370,000 $ 12,130,000 $ 385,000 Future debt service requirements for general long-ternl debt with stated maturities are as follows at June 30, 2004: Governmental Activities For the
Year Ending June 30 Principal Interest 2005 $ 385,000 $ 542,006 2006 400,000 526,758 2007 415,000 511 ,458 2008 430,000 495,910 2009 445,000 479,137 2010-2014 2,015,000 2,119,874 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 $ 12,130,000 $ 8,744,893 The Agency must maintain required amount of cash
and investments with the trustee under the terms of the COPs issue. These funds are pledged as reserves to be used if the Town fails to meet its obligations under the COPs issue. These
reserves totaled $254,518 at June 30,2004. 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. 22
TOWN OF LOS GATOS REDEVELOPMENT AGENCY NOTES TO FINANCIAL STATEMENTS 7. NET ASSETS AND FUND BALANCES GASB 34 Statement adds the concept of Net Assets, which is measured on the full accrual
basis, to the concept of Fund Balance, which is measured on the modified basis. 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: Invested
in Capital Assets, net ofrelated 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. 8. TAX INCREMENT SHIFT TO EDUCATIONAL REVENUE AUGMENTATION FUND
(ERAF) In fiscal year 2003 the state of California directed that a portion of the incremental property taxes, which had been received in prior years by redevelopment agencies be paid
instead to local educational agencies. During the fiscal year ended June 30, 2004, the Agency paid $209,975 as a result of the State directive.23
REQUIRED SUPPLEMENTARY INFORMATION
TOWN OF LOS GATOS REDEVELOPMENT AGENCY REDEVELOPMENT FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (GAAP) FOR THE YEAR ENDED JUNE 30, 2004 Variance
Favorable Budget Actual (Unfavorable) Revenues: Interest $ 147,885 $ 93,216 $ (54,669) Other 274 274 Total revenues 147,885 93,490 (54,396) Expenditures: Capital outlay 2,881,035 2,800,516
(80,519) Total expenditures 2,881,035 2,800,516 (80,519) Excess (deficiency) 0 f revenues over expenditures (2,733,150) (2,707,026) 26,123 Net change in fund balances $ (2,733,150) (2,707,026)
$ 123 Fund Balance, June 30, 2003 6,207,411 Fund Balance, June 30, 2004 $ 3,500,385 24
TOWN OF LOS GATOS REDEVELOPMENT AGENCY HOUSING SET-ASIDE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (GAAP) FOR THE YEAR ENDED JUNE 30, 2004
Variance Favorable Budget Actual (Unfavorable) Revenues: Interest $ 65,000 $ (62,657) $ (127,657) Total revenues 65,000 (62,657) (127,657) Expenditures: Capital outlay 287,320 241,916
(45,404) Total expenditures 287,320 241,916 (45,404) Excess (deficiency) of revenues (222,320) (304,573) (173,061) over expenditures Other financing sources (uses) Transfers in 793,070
1,008,739 215,669 Total other financing sources (uses) 793,070 1,008,739 215,669 Net change in fund balances $ 570,750 704,166 $ 42,608 Fund Balance, June 30, 2003 2,651,933 Fund Balance,
June 30, 2004 $ 3,356,099 25
TOWN OF LOS GATOS REDEVELOPMENT AGENCY CAPITAL PROJECTS FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL (GAAP) FOR THE YEAR ENDED JUNE 30, 2004
Revenues: Property Tax Less: ERAF* Interest Total revenues Expenditures: Redevelopment Debt Service: Principal Interest and fees Total expenditures Excess (deficiency) of revenues over
expenditures Other financing sources (uses) Transfers out Budget $ 3,965,350 169,500 4,134,850 1,475,604 370,000 1,590,181 3,435,785 699,065 (793,070) Actual $ 4,586,872 (209,975) 31,291
4,408,188 1,773,889 370,000 661,702 2,805,591 1,602,597 (1,008,739) Variance Favorable (Unfavorable) $ 621,522 (209,975) (138,209) 273,338 135,129 (928,479) (793,350) 1,066,688 (215,669)
Total other financing sources (uses) Net change in fund balances Fund Balance, June 30, 2003 Fund Balance, June 30, 2004 26 $ (793,070) (1,008,739) 593,858 3,550,572 $ 4,144,430 (215,669)
$ 851 19
INDEPENDENT AUDITOR'S REPORTS
c. G. UHLENBERG LLP CERTIFIED PUBLIC ACCOUNTANTS ROBERT E. BARSANTI (RETIRED) • PEGGY H. CHEN, CPA • JEFFREY J IRA, C.PA. KATHERINE CHAO, CPA • JULIE LIN, C.PA INDEPENDENT AUDITOR'S
REPORT ON COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING 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 Los Gatos Redevelopment Agency ("the Agency") as of and
for the year end June 30, 2004, and have issued our report thereon dated November 11, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Agency's
basic financial statements are free of material misstatement, we performed tests of its compliance compliance with certain provisions of laws, regulations and contracts, noncompliance
with which could have a direct and material effect on the determination of financial statement amounts. Such provisions include those provisions of laws and regulations identified in
the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller. 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 Internal Control Over Financial Reporting In planning and perfornling our audit, we considered the Agency's
internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance
on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control
over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or caused by error or fraud of the internal control
components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal course of perfonning their assigned functions. We noted no matters involving the internal control over financial reporting
and its operation that we consider to be material weaknesses.
c. G. UHLENBERG LLP CERTIFIED PUBLIC ACCOUNTANTS ROBERT E BARSANTI (RETIRED) • PEGGY H. CHEN, CPA • JEFFREY J IRA, CPA. KATHERINE CHAO, CP.A • JULIE LIN, CPA This report is intended
for the infonnation of the Mayor, members of the Town Council, and the State Controller's office, and is not intended to be and should not be used by anyone other than these speci tied
parties. November 11, 2004 Redwood City, California
FINDINGS AND RECOMMENDATIONS 31
TOWN OF LOS GATOS REDEVELOPMENT AGENCY SUMMARY OF COMPLIANCE FINDINGS YEAR ENDED JUNE 30, 2004 No current year findings. 29
TOWN OF LOS GATOS REDEVELOPMENT AGENCY SUMMARY OF PRIOR YEAR COMPLIANCE FINDINGS YEAR ENDED JUNE 30, 2004 No prior year findings. 30
California Redevelopment Agencies -Fiscal Year 2003/2004 Status of Low and Moderate Income Housing Funds Sch C Agency Financial Summary LOS GATOS RDA
Adjusted Beginning Balance $2,651,933 Project Area Receipts $946,082 Agency Other Revenue $0 Total Expenses $241,916 Net Resources Available $3,356,099 Other Housing Fund Assets $0 Total
Housing Fund Assets $3,356,099 Encumbrances $0 * Unencumbered Balance $3,356,099 Unencumbered Designated $0 Unencumbered Not Dsgntd $3,356,099 Expenses! Planning and Administration Costs
2003/2004i $203,800 $38,116 *The Unencumbered Balance is equal to Net Resources Available minus Encumbrances Note: Print this report in Landscape
Orientation (Use the Print Icon just above, then Properties then Landscape) Page 1 of 1 11/17104
Total Tax Increment From PAis) $1,008,739 California Redevelopment Agencies· Fiscal Year 2003/2004 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program
Detail LOS GATOS RDABeginning Balance Adjustment to Beginning Balance Adjusted Beginning Balance Total Receipts from PA(s) Other Revenues not reported on Schedule A Sum of Beginning
Balance and Revenues $2,651,933 $0 $2,651,933 $946,082 $0 $3,598,015 i Expenditure 1:Item Subitem Amount Remark imherHousing-FurlcrAs
sets "" I Category Amount Remark 1 Total Other
Housing Fund Assets I"" iII" Planning and Administration Costs Administration Costs I Subtotal of Planning and Administration Costs Subsidies from the LMIHF Subtotal of Subsidies from
the LMIHF Total Expenditures Net Resources Available Indebtedness For Setasides Deferred Total Fund Equity $203,800 $203,800 $38,116 $38,116 $241,916 $3,356,099 $0 $3,356,099 Habititat
for Humanity Grant ..._,---_.-...'---------------- ...... ... -1999/2000
$424612 2000/2001 $714223 sum of 4 Previous Years' Prior Year Ending Excess Surplus for 2001/2002 $815920 Tax Increment for 2003/2004 Unencumbered Balance 2003/2004 2002/2003 $828408
$2783163 $2,651,933 $0 Page 1 of 3 11/17/04
California Redevelopment Agencies -Fiscal Year 2003/2004 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program Detail LOS GATOS RDA Sum of Current and 3
Previous Years' Tax Increments Adjusted Balance Excess Surplus for next year Net Resources Available 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 $3,367,290 $3,356,099
$0 $3,356,099 $0 $3,356,099 $0 $3,356,099 $0 $0 i-Sitelmprove.-ment Activiife-sBenefitingHou. s.eholds l Income Level Low m, " '" , _ Very Low Land Held for Future Development Site
Name Num Of Acres Zoning Purchase Date Estimated Start Date Remark Use of the Housing Fund to Assist Mortgagors Income Adjustment Factor Home Requirements Completed Hope Non Housing
Redevelopment Funds Usage IN/A Resource Needs I LMIHF Deposits/Withdrawls Document Name Pentamation Financial System Transaction ___ _ _ Document Date 30-JUN-04
Custodian Name Stephen Conway, Finance Director Custodian Phone (408) 354-6828 110 E. Main Street, Los Gatos, CA 95030 Page 2 of 3 11/17/04
California Redevelopment Agencies -Fiscal Year 2003/2004 Status of Low and Moderate Income Housing Funds Sch C Agency Financial and Program Detail LOS GATOS RDA Achievements Description
Other -RDA Contribution for Affordable Senior Housing Project. Redevelopment Agency of the Town of Los Gatos. Contact: Bud N. Lortz (408)354-6867. Project Name: Project Match Affordable
Senior Housing Project. Description: An Agreement was negotiated with Project Match to provide five units of very low income senior housing. Project Match is a non-profit housing developer
that operates a Senior Group Residence Program. Project Match purchased a home in a community, rehabilitated it and then rented out units (bedrooms) to very low income seniors. Project
Match also provides case management services. Los Gatos RDA Affordable Housing Fund contributed a loan of $388,801 towards the project. Other agencies also contributed to bring the j'
total contribution up to $900,000. Conclusion: Project Match was completed in early December, 2003 with a five-unit very low income �
� __ _ Page 3 of 3 11/17/04
California Redevelopment Agencies-Fiscal Year 2003/2004 Project Area Contributions to Low and Moderate Income Housing Funds Sch A Project Area Summary Report LOS GATOS RDA Taxlncr. Percent
Total Project Area 100% of Tax 20% Set Aside Tax Increment Amount Deferral Deposited to of Tax Repayment Other Deposited to Increment Requirement Allocated Exempted Repayment Hsng Fund
Incr Dep Deferrals Income Housing " . ...... CENTRAL LOS GATOS $5,043,693 $1,008,739 $1,008,739 $0
$0 $1,008,739 20.00% $0 -$62,657 $946,082 PROJECT _______ -_.__ Agency Totals: $5,043,693 $1,008,739 $1,008,739 $0 $0 $1,008,739 20.00% $0 -$62,657
$946,082 Note: Print this report in Landscape Orientation (Use the Print Icon just above, then Properties then Landscape) Page 1 of 11/17/04
Redevelopment Agency Of Th n Of Los Gatos Redevelopment Agencies Financial Transactions Report General Information Fiscal Year 2004 (650) 802-8668 Independent Auditor C.G. Uhlenberg,
LLP Ira Jeffrey J333 Twin Dolphin Drive, Suite 230 Redwood City CA 94065-First Name Middle Phone Initial Debra (408) 354-6832 Stephen D (408) 354-6828 Marian (408) 354-6830 Agency Officials
Middle Last Name Initial Executive Director Figone Fiscal Officer Conway Secretary Cosgrove Report Prepared By Firm Name Last de Bar First Linda Middle Initial Street 110 E. Main Street
City Los Gatos State CA Zip Code 95030- -----------Phone (408) 399-5766 Sandy Joe First Name Steve Mike Diane Street 1 P.O. Box 949 Chairperson Glickman Member Wasserman Member McNutt
Member Decker Member Pirzynski Member Member Member Member Member Mailing Address Members of the Governing Body Last Name Street 2 City Los Gatos State CA Zip 95031-Phone (408) 354-6832
[J Is Address Changed? General Information Page 1 12/10/2004
Fiscal Year Achievement Information (Unaudited) 2004 Indicate Only Those Achievements Completed During the Fiscal Year of this Report as a Direct Result of the Activities of the Redevelopment
Agency. Please provide a description of the agency's Square Footage Completed activities/accomplishments during the past year. (Please be specific, as this information will be the basis
for possible inclusion in the publication.) Activity Report Completed Streetscape Improvements Project, Fairview Pedestrian Path Project, and the Los Gatos High School Community Pool
Project. Enter the amount of square footage completed this year by building type and segregated by new or rehabilitated construction. Commercial Buildings Industrial Buildings Public
Buildings Other Buildings Total Square Footage Enter the Number of Jobs Created from the Activities of the Agency Types Completed New Construction o Rehabilitated o A=Utilities B=Recreation
C=Landscaping D=Sewerl Storm E=Streetsl Roads F=BuslTransit Achievement Information (Unaudited) Page 1 12/10/2004
Fiscal Year 2004 Audit Information Was the Report Prepared from Audited Financial Data, and Did You Submit a Copy of the Audit? Indicate Financial Audit Opinion If Financial Audit is
not yet Completed, What is the Expected Completion Date? If the Audit Opinion was Other than Unqualified, State Briefly the Reason Given Was a Compliance Audit Performed in Accordance
with Health and Safety Code Section 33080.1 and the State Controller's Guidelines for Compliance Audits, and Did You Submit a Copy of the Audit? Indicate Compliance Audit Opinion If
Compliance Audit is not yet Completed, What is the Expected Completion Date? Audit Information Yes Unqualified Yes Page 1 If compliance opinion includes exceptions, state the areas of
non-compliance, and describe the agency's efforts to correct. 12/10/2004
Project Area Report Fiscal Year 2004 Project Area Name Gatos Project Area Most Recent Date Project Area was Amended Did this Amendment Add New Territory? Most Recent Date Project Area
was Merged Enter Code for Type of Project Area Report P = Standard Project Area Report L =Low and Moderate Income Housing Fund o =Other Miscellaneous Funds or Programs Does the Plan
Include Tax Increment Provisions? Please Provide a Brief Description of the Activities for this Project Area During the Reporting Year. Activity Report Completed Streetscape Improvements
Project, Fairview Pedestrian Path Project, and the Los Gatos High School Community Pool Project. Continuation of Street Repair and Resurfacing Project, Downtown Parking Improvements
Project and Alley Reconstruction Forwarded from Prior Year? Date Project Area was Established (MM-DD-YY) P A = Administrative Fund M =Mortgage Revenue Bond Program S = Proposed (Survey)
Project Area Yes Project Area Report Will this Project Area be Carried Forward to Next Year? Established Time Limit: Repayment of Indebtedness (Year Only) Effectiveness of Plan (Year
Only) New Indebtedness (Year Only) Size of Project Area in Acres Percentage of Land Vacant at the Inception of the Project Area Health and Safety Code Section 33320.1 (xx.x%) Percentage
of Land Developed at the Inception of the Project Area Health and Safety Code Section 33320.1 (xx.x%) Objectives of the Project Area as Set Forth in the Project Area Plan (Enter the
Appropriate Coders) in Sequence as Shown) R = Residential I = Industrial C = Commercial P = Public 0 = Other Page 1 Yes 2041 2031 2011 441P 12/10/2004
Fiscal Year Project Area Name 2004 Assessed Valuation Data Frozen Base Assessed Valuation Increment Assessed Valuation Total Assessed Valuation Assessed Valuation Data Page 1 273,858,339
67,203,435 341,061,774 12/10/2004
Redevelop Redevelopme Pass-Through I School District Assistance Fiscal Year Project Area Name 2004 Los Gatos Project Area Tax Increment Pass Through Detail Other Payments Amounts Paid
To Taxing Agencies Pursuant To: H & S Code Section 33401 H & S Code Section 33676 H & S Code Section 33607 Total H & S Code H & S Code Section 33445 Section 33445.5 County Cities School
Districts Community College District Special Districts Total Paid to Taxing Agencies Net Amount to Agency Gross Tax Increment Generated 147,075 336,344 84,970 122,515 1,309,519 $1,432,034
----------------------68,589 $68,589 102,261 52,280 $154,541 --------- $456,821 I $1,766,732 I $0 $2,223,553 $0 $0 Pass-Through /School District Assistance Page 1 12/10/2004
Fiscal Year Project Area Name Summary of the Statement of Indebtedness -Project Area 2004 Tax Allocation Bond Debt Revenue Bonds Other Long Term Debt City/County Debt Low and Moderate
Income Housing Fund Other Total Available Revenues Net Tax Increment Requirements Summary of the Statement of Indebtedness -Project Area 148,671,087 42,227,493 20,916,386 $211,814,966
6,900,305 $204,914,661 Page 1 12/10/2004
Agency Long-Term Debt Fiscal Year Project Area Name taken out in prior year 2,960,000 160,000 2,960,000 $1,775,000 160,000 Bond Type Year of Authorization Principal Amount Authorized
Principal Amount Issued Purpose of Issue Maturity Date Beginning Year Maturity Date Ending Year Principal Amount Unmatured Beginning of Fiscal Year Adjustment Made During Year Adjustment
Explanation Interest Added to Principal Principal Amount Issued During Fiscal Year Principal Amount Matured During Fiscal Year Principal Amount Defeased During Fiscal Year Forward from
Prior Year Principal Amount Unmatured End of Fiscal Year Principal Amount In Default Interest In Default $1,775,000 Bond Types Allowed: Tax Allocation Bonds; Revenue Bonds; Certificates
of Participation; Tax Allocation Notes; Financing Authority Bonds; City/County Debt; US;State; Loans; Lease Obligations; Notes; Deferred Pass-Throughs; Deferred Compensation; Other Agency
Long-Term Debt Page 1 12/10/2004
Agency Long-Term Debt Fiscal Year Project Area Name Forward from Prior Year Bond Type Year of Authorization Principal Amount Authorized Principal Amount Issued Purpose of Issue Maturity
Date Beginning Year Maturity Date Ending Year Principal Amount Unmatured Beginning of Fiscal Year Adjustment Made During Year Adjustment Explanation Interest Added to Principal Principal
Amount Issued During Fiscal Year Principal Amount Matured During Fiscal Year Principal Amount Defeased During Fiscal Year Principal Amount Unmatured End of Fiscal Year Principal Amount
In Default Interest In Default $10,725,000 210,000 $10,515,000 Bond Types Allowed: Tax Allocation Bonds; Revenue Bonds; Certificates of Participation; Tax Allocation Notes; Financing
Authority Bonds; City/County Debt; US;State; Loans; Lease Obligations; Notes; Deferred Pass-Throughs; Deferred Compensation; Other Agency Long-Term Debt Page 2 12/10/2004
Agency Long-Term Debt Fiscal Year Project Area Name 2001 984,250 $1,968,500 2001 1,968,500 1,968,500 Debt Bond Type Year of Authorization Principal Amount Authorized Principal Amount
Issued Purpose of Issue Maturity Date Beginning Year Maturity Date Ending Year Principal Amount Unmatured Beginning of Fiscal Year Adjustment Made During Year Adjustment Explanation
Interest Added to Principal Principal Amount Issued During Fiscal Year Principal Amount Matured During Fiscal Year Principal Amount Defeased During Fiscal Year Forward from Prior Year
Principal Amount Unmatured End of Fiscal Year Principal Amount In Default Interest In Default $984,250 Bond Types Allowed: Tax Allocation Bonds; Revenue Bonds; Certificates of Participation;
Tax Allocation Notes; Financing Authority Bonds; City/County Debt; US;State; Loans; Lease Obligations; Notes; Deferred Pass-Throughs; Deferred Compensation; Other Agency Long-Term Debt
Page 3 12/10/2004
Statement of Income and Expenditures -Revenues Fiscal Year Proiect Area Name 2004 Capital Project Funds Debt Service Funds Low/Moderate Income Housing Funds Special Revenue/Other Funds
Total $93.4901 $5,338,365 I ($62,657) I $0 I $5,369,198 Tax Increment Gross (Include All Apportionments) Special Supplemental Subvention Property Assessments Sales and Use Tax Transient
Occupancy Tax Interest Income Rental Income Lease Income Sale of Real Estate Gain on Land Held for Resale Federal Grants Grants from Other Agencies Bond Administrative Fees Other Revenues
Total Revenues Statement of Income and Expenditures -Revenues Page 1 12/10/2004
Statement of Income and Expenditures -Expenditures Fiscal Year Project Area Name Capital Project Funds Debt Service Funds Low/M oderate Income Housing Special Revenue/Other Total Administration
Costs Professional Services Planning, Survey, and Design Real Estate Purchases Acquisition Expense Operation of Acquired Property Relocation Costs Relocation Payments Site Clearance
Costs Project Improvement I Construction Costs Disposal Costs Loss on Disposition of Land Held for Resale Statement of Income and Expenditures -Expenditures Page 1 12/10/2004
Statement of Income and Expenditures· Expenditures Fiscal Year Project Area Name Capital Project Funds Debt Service Funds Low/Moderate Income Housing Special Revenue/Other Total Decline
in Value of Land Held for Resale Rehabilitation Costs Rehabilitation Grants Interest Expense Fixed Asset Acquisitions Subsidies to Low and Moderate Income Housing 16 Debt Issuance Costs
Other Expenditures Including PassThrough Payment(s) Debt Principal Payments: Tax Allocation Bonds and Notes Revenue Bonds, Certificates of Participation, Financing Authority Bonds City/County
Advances and Loans All Other Long-Term Debt Total Expenditures Excess (Deficiency) Revenues over (under) Expenditures $2,800,516 ($2,707,026) $4,720,018 $618,347 $241,916 ($304,573)
$0 $0 $7,762,450 ($2,393,252) Statement of Income and Expenditures -Expenditures Page 2 12/10/2004
Statement of Income and Expenditures· Other Financing Sources Fiscal Year Project Area Name Capital Project Debt Service Low/Moderate Special Funds Funds Income Housing Revenue/Other
Total Proceeds of Long-Term Debt Proceeds of Refunding Bonds Payment to Refunded Bond Escrow Agent Advances from City/County Sale of Fixed Assets Miscellaneous Financing Sources (Uses)
Operating Transfers In Tax Increment Transfers In $1,008,739 Operating Transfers Out Tax Increment Transfers Out $1,008,739 (To the Low and Moderate Income Housing Fund) Total Other
Financing Sources (Uses) $0 ($1,008,739)1 $1,008,739 $0 $0 Statement of Income and Expenditures -Other Financing Sources Page 1 12/10/2004
Statement of Income and Expenditures· Other Financing Sources Fiscal Year Project Area Name Capital Project Funds Debt Service Funds Low/Moderate Special Income Housing Revenue/Other
Total Excess (Deficiency) of Revenues and Other Financing Sources over Expenditures and Other Financing Uses Equity, Beginning of Period Prior Period Adjustments Residual Equity Transfers
Other(Specify) Total Other Total Equity, End of Period ($2,707,026)1 $6,207,412 A $3,500,3861 ($390,392) $5,519,072 B $5,128,6801 $704,166 $2,651,933 C $3,356,099 I $0 $0 D I ----__..
-I $0 1 ($2,393,252) $14,378,417 E $11,985,165 Refresh I Statement of Income and Expenditures -Other Financing Sources Page 2 12/10/2004
Balance Sheet -Assets and Other Debits Fiscal Year 2004 Capital Projects Funds Debt Service Funds Low/Moderate Income Housing Funds Special Revenue/Other Funds General LongTerm Debt
General Fixed Assets Total Assets and Other Debits 3,091,078 .._----.. -- .. --::
9,839 34,018 6,460,719 439,586 451,852 3,319,356 .... _. Due from Low/Moderate Income Housing Fund Due from Special Revenue/Other Funds Accrued Interest Receivable Lease Payments
Receivable Unearned Finance Charge Due from Capital Projects Fund Due from Debt Service Fund Contracts Receivable Loans Receivable Tax Increments Receivable Cash and Imprest Cash Cash
with Fiscal Agent Balance Sheet -Assets and Other Debits Page 1 12/10/2004
Balance Sheet -Assets and Other Debits Fiscal Year 2004 Capital Projects Funds Debt Service Funds Low/Moderate Income Housing Funds Special Revenue/Other Funds General LongTerm Debt
General Fixed Assets Total Investments Other Assets Investments: Land Held for Resale Allowance for Decline In Value of Land Held for Resale Fixed Assets: Land, Structures, and Improvements
Equipment Amount Available In Debt Service Fund Amount to be Provided for Payment of Long-Term Debt I _ $0 $0 $0 $13,274,250 Total Assets and Other Debits (Must
Equal Total Liabilities, Other Credits, and Equities) $3,771,208 $6,944,162 $3,488,384 $0 I $13,274,250 I $0 I $27,478,004 Balance Sheet -Assets and Other Debits Page 2 12/10/2004
Redevelopme edevelopmlen1 ncies Fi Balance Sheet· Liabilities and Other Credits Fiscal Year 2004 Capital Projects Funds Debt Service Funds Low/Moderate Income Housing Funds Special Revenue/Other
Funds General LongTerm Debt General Fixed Assets Total $0 $12,290,000 i 1 -:__ --_ _ .
5,094 -..-_. '-----", ' .. .. . .. --·-.cc···._
1,986 _:-.. . 127,191 Accounts Payable Interest Payable Tax Anticipation Notes Payable Loans Payable Other Liabilities Due to Capital Projects Fund Due to Debt
Service Fund Due to Low/Moderate Income Housing Fund Due to Special Revenue/Other Funds Tax Allocation Bonds Payable Lease Revenue, Certificates of Participation Payable, Financing Authority
Bonds Liabilities and Other Credits All Other Long-Term Debt Total Liabilities and Other Credits .."
.. -_.._---------r-...-:.:_.-::-:.;::::::::-:;rl.
----J_....,.-_$_98_4_,2_50_
$270,823 I $1,815,482 $132,285 I $0 I $13,274,250 r-u _==! $15,492,840 Balance Sheet -Liabilities and Other Credits Page 1 12/10/2004
Balance Sheet -Liabilities and Other Credits Fiscal Year Equities 2004 Capital Projects Funds Debt Service Funds Low/Moderate Income Housing Funds Special RevenuelOther Funds General
LongTerm Debt General Fixed Assets Total Investment In General Fixed Assets Fund Balance Reserved Fund Balance Unreserved-Designated Fund Balance Unreserved-Undesignated �
�
Total Equities Total Liabilities, Other Credits, and Equities S3,771,208 S6,944,162 S3,488,384 so S13,274,250 so S27,478,004 Balance
Sheet -Liabilities and Other Credits Page 2 12/10/2004
Statement of Income and Expenditures -Summary, Combined Transfers In/Out Fiscal Year 2004 Operating Transfers In $0 Tax Increment Transfers In $1,008,739 Operating Transfers Out $0 Tax
Increment Transfers Out Statement of Income and Expenditures -Summary, Combined Transfers In/Out $1,008,739 Page 1 12/10/2004