03 Staff Report - 2005/06 Annual Report for Redevelopment AgencyIoW hoc MEETING DATE: 12/04/06
1 ITEM NO:
M,i
Al s COUNCIL/AGENCY AGENDA REPORT
~g G4
DATE: NOVEMBER 20, 2006
TO: MAYOR AND TOWN COUNCIL/
CHAIR AND MEMBERS OF THE REDEVELOPMENT AG Y
FROM: DEBRA J. FIGONE, TOWN MANAGEWEXECUTIVE DIR
SUBJECT: CONSIDER ADOPTING RESOLUTION APPROVING THE 2005/06
ANNUAL REPORT FOR THE LOS GATOS REDEVELOPMENT
AGENCY.
RECOMMENDATION:
Adopt resolution approving the 2005/06 Aimual Report for the Los Gatos Redevelopment
Agency ,
DISCUSSION:
Pursuant to California Health and Safety Code §33080.1, the Redevelopment Agency
shall present an annual report to Council 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 inforamation to explain the Agency's programs.
The 2005/06 audit was completed by C.G. Uhlenberg, LLP (Attachment 1, 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. The Statement of Housing Activity and the Annual Report of Financial
PREPARED BY: Steve Conway A N. Loi
Fiscal Officer J, I Assistant Executive Dire for 11 Reviewed by: = Assistant Town`Manager/E+cputy Director Town
Atiey/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 2005/06 ANNUAL REPORT
NOVEMBER 20. 2006
Transactions (Attachment 1, Exhibits B and C) consist of forms provided by the State
Department of Housing and Community Development.
A number of major accomplishments were made by the Los Gatos Redevelopment
Agency during the 2005/06 fiscal year to eliminate blight. Reconstruction of five alleys
in the Johnson Avenue/Loma Alta Avenue area was completed in the summer of 2005.
Under the Parking Improvements program, Parking Lot 5 was repaired and resurfaced in
May 2006. The resurfacing of Santa Cruz Avenue took place in July 2005 and the plan to
begin repairing and resurfacing Main Street occurred at the end of fiscal year 2005/06
with the completion of the project during the summer of fiscal year 2006/07. The Town's
Economic Vitality Plan is in its fourth year and continues its involvement in business
retention, development, and attraction activities and continues to work closely with the
Chamber of Commerce.
State Takes
Since 1992 redevelopment agencies across the state have been required to make
Educational Revenue Augmentation Fund (ERAF) payments to the State. In accordance
with the State budget agreement, the ERAF payment was increased $303,000 for FY
2004/05 & FY 2005/06. The FY 2006/07 budget bill eliminated the approximately
$303,000 increased ERAF payment, allowing the Agency to retain this amount of tax
increments to be used for important future Agency projects.
Proposition 1 A approved in 2004 does not contain specific protections for redevelopment
agencies. They were not included because there are existing legal opinions that conclude
that redevelopment agency tax increment revenue is constitutionally protected from state
revenue takes.
It is important that the Town continue to monitor developments regarding
Redevelopment Agencies to discourage the legislature from further State takes from
Redevelopment Agency Tax Increment. Protecting Redevelopment Agency funds for all
cities is also a strategic priority for the League of California cities. 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 Housiny Excess Surplus
The RDA Debt Service Fund balances at June 30, 2006 of approximately $5.4 million
consist of monies dedicated for current and future debt service. This amount represents
tax increments received by the Agency reduced by tax sharing payments and debt service
payment made each year. The cash flow assumes annual excess tax increments collected
beyond the amounts needed to pay annual debt service payments would be utilized for
future bonding capacity. The future bonding capacity of the RDA is dependent upon the
Agency's excess tax increment availability. As such, any use of the Debt Service fund
PAGE 3
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING 2005/06 ANNUAL REPORT
NOVEMBER 20, 2006
balance would lower future bonding capacity of the Agency. One recent estimate
prepared by Emily Wagner and Associates (the RDA & Town's financial advisor on debt
issues) assumes there will be capacity for a new debt issue of approximately $9.0 million
which could be issued on or before December 25, 2011. Staff will initiate a discussion
with Council in the next 12 to 18 months regarding the interest in a new debt issue and
the use of any new funds generated for facilities and infrastructure.
The Redevelopment Capital Projects fund balance at June 30, 2006 of approximately $2.4
million is utilized year to year for RDA administrative costs such as staff charges, legal
fees, etc. This fund also holds approximately $1.5 million of the remaining 2002
Certificates of Participation (COP) unspent proceeds to be used for eligible capital
projects. Approximately $1.2 million of the remaining proceeds at June 30, 2006 were
dedicated to pay for the final phase of the Downtown Street Reconstruction project (Main
Street phase). The remaining funds of approximately $300K are available for their
planned purpose including eligible capital projects in the downtown project area such as
the Santa Cruz Avenue/Wood Road Gateway ($65K) and the Downtown Parking
Management Plan ($25K). The other fund balance amounts are derived from interest
earnings and remaining cash from the Town's operating loans to the Agency.
Technically the RDA spends funds through issuing debt and so typically the Town lends
this fund an annual cash loan (approximately $5004600K) from the Town's General
Fund. The loan from the Town is then paid back annually from the RDA Debt Service
Fund cash balance.
The Housing Set Aside (Low and Moderate Housing) fund balance is approximately $5.1
million at June 30, 2006. It is restricted for use for low and moderate housing purposes.
As presented in the attached report, the Agency currently has an "excess surplus" amount
of $518,803. When an excess surplus condition exists, state law requires the Agency to
eliminate this condition within three fiscal years. If this does not happen, the Agency
could face penalties including limiting the Agency abilities to spend and encumber funds
or the possibility that the Agency's other funds may be charged up to 50% of the excess
surplus amount which would then be deposited into the Low and Moderate Housing
Fund. Staff is continuing to explore opportunities for utilizing these funds to assist in the
development of low and moderate income housing.
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.
PAGE 4
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING 2005/06 ANNUAL REPORT
NOVEMBER 20, 2006
FISCAL IMPACT: None
ATTACHMENTS:
Resolution approving the 2005/06 Annual Report for the Los Gatos Redevelopment
Agency
Exhibit A - Redevelopment Audit for Fiscal Year 2005/06
Exhibit B - Statement of Housing Activity for Fiscal Year 2005/06
Exhibit C - Annual Report of Financial Transactions for Fiscal Year 2005/06
Exhibit D - Statement of Indebtedness
BNL/SDC:li
N:AFINANCE\RDA\Council Reports\2005-06 RDA Annual Council Report.doc
RESOLUTION 2006 -
RESOLUTION OF THE TOWN COUNCIL/REDEVELOPMENT AGENCY OF THE
TOWN OF LOS GATOS
APPROVING THE 2005/06 ANNUAL REPORT FOR
THE LOS GATOS REDEVELOPMENT AGENCY
WHEREAS:
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, Aimual 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.
Approval of the 2005/06 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 2005/06 Annual Report for the Los Gatos Redevelopment Agency, attached hereto as
Exhibits A, B, C and D.
ATTACHMENT t
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 5`h day of December 2005 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, 2006
WITH INDEPENDENT AUDITORS' REPORTS
THEREON
EXHIBIT A
TOWN OF LOS GATOS
REDEVELOPMENT AGENCY
TABLE OF CONTENTS
FOR THE YEAR ENDED JUNE 30, 2006
PAGE
Independent Auditors' Report
1 - 2
Management's Discussion and Analysis
3-9
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
1.0
Statement of Activities
11
Fund Financial Statements:
Governmental Funds:
Balance Sheet
12
Reconciliation of the Balance Sheet - Statement of Net Assets
13
Statement of Revenues, Expenditures and Changes in Fund Balances
14
Reconciliation of Statement of Revenues, Expenditures and Changes
in Fund Balances - Statement of Activities
15
Notes to the Financial Statements
16 - 24
Supplementary Information:
Budgetary Comparison Schedules:
Schedule of Revenues, Expenditures and Changes in
Fund Balance - Budget to Actual - Redevelopment Fund
25
Schedule of Revenues, Expenditures and Changes in
Fund Balance - Budget to Actual - Housing Fund
26
Schedule of Revenues, Expenditures and Changes in
Fund Balance - Budget to Actual - Certificates of Participation Fund..........
27
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
28
Summary of Compliance Findings
29
Summary of Prior Year Compliance Findings
30
C. G. UHLENERG LLP
CERTIFIED PUBLIC ACCOUNTANTS
ROBERT E. BARSANTI (RETIRED) • PEGGY H, CHEN, C.P.A.. JEFFREY J. IRA, C.P.A. • KATHERINE CHAO, C.P.A. • JULIE LIN, C.P.A. • SHELDON D. CHAVAN, 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 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, 2006, 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 information of the Los Gatos Redevelopment Agency as of June 30, 2006, 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 Govermment Auditing Standards, we have also issued a report dated
September 23, 2006 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 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. UHLENERG LLP
CERTIFIED PUBLIC ACCOUNTANTS
ROBERT E. BARSANTI (RETIRED) . PEGGY H. CHEN, C.P.A. • JEFFREY J. IRA, C.P.A. • KATHERINE CHAO, C RA, • JULIE LIN, C.P.A.. SHELDCN D. CHAVAN, C.P.A.
The Management's Discussion and Analysis is not a required part of the basic financial
statements, but is supplementary information required by the Govermnental 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 infonnation 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.
wll-~~ Z, I,--, F
September 22, 2006
Redwood City, California
2
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 2006 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 $962,711 from the
amounts received the prior year.
• The assets of the Agency exceeded its liabilities at June 30, 2006 by $6,942,890 (net assets).
Included in the determination of net assets is a negative (deficit) balance of ($5,335,662) 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 $1,984,426 from the prior year. The increase is
largely due to an increase in property tax increment growth and a $776,067 growth in net
assets in the Agency's Low and Moderate Income Housing Fund.
• As of June 30, 2006 the Agency's governmental funds reported combined ending fund
balances of $12,959,093, an increase of $821,782 in comparison from the prior year's
combined fund balance of $12,137,311. The increase is due primarily to an increase in fund
balances in the Town's Low and Moderate Housing Fund.
• At June 30, 2006 total unreserved fund balance in the Town's governmental funds of
$4,959,728 increased $926,958 in comparison with the prior year's balances of $4,032,770.
• The Agency's total outstanding debt increased by $165,499 during the current fiscal year.
The increase is due chiefly to an increase in the amounts of property tax increments due to
tax agencies at year end related to increased tax increments amounts received by the Agency
compared to the amounts received the prior year.
3
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
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. These two sets of financial statements provide two different views of the
Agency's financial activities and financial position long-term and short-term.
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
All 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.
4
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
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
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 2006. 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, 2006
(In Millions)
June 30, 2006 June 30, 2005
Cash and Investments $ 16.57 $ 15.45
Other Assets 6.01 5.25
Total Assets $ 22.58 $ 20.70
Long Term Debt Outstanding 11.35 $ 11.75
Other Liabilities 4.56 3.99
Total Liabilities $ 15.91 $ 15.74
Net Assets:
Invested in Net Assets $ 4.28 $ 3.35
Restricted 8 8.10
Unrestricted -5.34 (6.49)
Total Net Assets: $ 6.94 $ 4.96
5
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Agency's governmental net assets amounted to $6.94 million at June 30, 2006. The
Agency's net assets at June 30, 2006 are comprised of the following:
• Unrestricted cash and investments comprised $13.96 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 $2.88 million are funds held by trustees as prescribed under the Certificate of
Participation issuances.
• Other Assets of $6.01 million largely represents the value of the Parking Lot #4 parking
structure, which is considered an infrastructure capital asset under the provisions of GASB
34.
• Short term payables and pass-through obligations comprise $3.07 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, 2006.
• As of June 30, 2006 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 $11.35 million, of which $10.93 million is due in future years and $.42
million, is due currently.
• The $4.28 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 $8.00 million, of which $2.43 million may be used only for capital
projects, $5.11 million is restricted for low and moderate income housing purposes, and $.45
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 $(5.34) million of unrestricted net assets at June 30, 2006. 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 2006 2005
Program Revenues
Redevelopment Projects $ 0.01 S -
General Revenues:
Property Tax Increments 5.97 S 5.01
Interest 0.36 0.26
Total Revenues $ 6.34 $ 5.27
Activities:
Functions /Programs
Redevelopment Projects
$ 1.11 S
0.88
Pass-through payments
2.57
2.08
Interest and Fees
0.68
0.68
Total Government Activities
$ 4.36 $
3.64
Change in Net Assets
$ 1.98 $
1.63
As Table 2 above shows, $0.01 million (0%) of the Agency's 2006 Governmental revenue is
program revenue and $6.33 million (100%) came from general revenues such as taxes and
interest. Program revenues were comprised of charges for services, which include
reimbursements 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.
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 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)
2006
2005
Redevelopment Projects
$
(1.11) $
(0.88)
Property Tax Increments
$
(2.57) $
(2.08)
Interest
$
(0.68) $
(0.68)
Totals
$
(4.36) S
(3.64)
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
2006 2005
Total Assets
$
17.30
$
15.91
Total Liabilities
$
4.34
$
3.77
Total Fund Balances
$
12.96
$
12.14
Total Revenues
$
6.34
$
5.27
Total Expenditures
$
5.52
$
4.13
Total Other Financing Sources (Uses)
$
-
$
-
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.
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.
8
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2006, the Agency's debt comprised:
June 30, 2006 June 30, 2005
Balance Balance
Government Activity Debt (In Millions) (In Millions)
1992 Certificates of Participation $ 1.27 $ 1.45
2002 Certificates of Participation 10.08 10.30
Total Long Term Debt $ 11.35 $ 11.75
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,
2006.
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.
Basic Financial Statements
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF NET ASSETS
JUNE 30, 2006
ASSETS
Cash and investments
Restricted cash and investments
Accounts receivable
Intergovernmental receivable
Capital assets - net
Total Assets
LIABILITIES
Accounts payable
Accrued payroll and benefits
Interest payable
Advances from 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
Unrestricted
Total Net Assets
Governmental
Activities
$ 13,960,041
2,878,315
388,801
76,874
5,549,187
$ 22,853,218
$ 130,670
13,953
220,390
1,500,000
126,801
2,573,514
415,000
10,930,000
$ 15,910,328
$ 4,279,187
2,432,911
5,111,260
455,194
(5,335,662)
$ 6,942,890
10
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Governmental
Activities
Program Expenses:
Redevelopment
Pass-through payment
Interest and fees
Total Program Expenses
Program Revenues:
Charges for services
Total Program Revenues
Net Program Income (Expense)
General Revenues:
Tax allocation increment
Interest
$ 1,106,842
2,573,514
680,183
4,360,539
10,140
10,140
(4,350,399)
5,976,062
358,763
Total General Revenues
Change in Net Assets
Net Assets - Beginning
Net Assets - Ending
6,334,825
1,984,426
4,958,464
$ 6,942,890
11
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
GOVERNMENTAL FUNDS
BALANCE SHEET
June 30, 2006
DEBT
SERVICE
CAPITAL PROJECT FUNDS
FUND
Certificates
Total
Housing
of
Governmental
Redevelopment
Set-Aside
Participation
Funds
ASSETS:
Cash and investments available for operations
$ 97,061
4,836,371
$ 9,026,609
$ 13,960,041
Restricted cash and investments
2,423,121
-
455,194
2,878,315
Accounts receivable
-
388,801
-
388,801
Intergovernmental receivable
-
15,375
61,499
76,874
TOTAL ASSETS
2,520,182
5,240,547
9,543,302
17,304,031
LIABILITIES AND FUND EQUITY
Accounts payable
75,804
-
54,866
130,670
Accrued payroll and benefits
11,467
2,486
-
13,953
Advances from Town of Los Gatos
-
-
1,500,000
1,500,000
Deferred revenue
126,801
-
126,801
Pass through obligations (Note)
-
-
2,573,514
2,573,514
Total Liabilities
87,271
129,287
4,128,380
4,344,938
FUND EQUITY
Reserved for:
Encumbrances
1,137,370
-
-
1,137,370
Debt service
-
-
455,194
455,194
Redevelopment projects
1,295,541
-
-
1,295,541
Low and moderate income housing
-
5,111,260
-
5,111,260
Unreserved, designated for:
Debt service
-
-
4,959,728
4,959,728
Total Fund Balance
2,432,911
5,111,260
5,414,922
12,959,093
TOTAL LIABILITIES AND
FUND BALANCE
S 2,520,182
$ 5,240,547
S 9,543,302
$ 17,304,031
The notes to the financial statements are an integral part of this statement.
12
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
RECONCILIATION OF THE BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2006
Fund Balance of Governmental Fund Statements
Amounts reported for governmental activities in the statement of net assets
different because:
Capital assets used in governmental activities are not financial resources and,
therefore, are not reported in the funds.
Capital assets $ 7,423,015
Accumulated depreciation (1,873,828)
Interest payable on long-term debt does not require the use of current financial
resources and, therefore, are not reported in the Governmental Funds.
Long-term liabilities, including bonds payable, are not due and payable in the
current period and, therefore, are not reported in the funds.
Certificates of participation
Government Wide Net Assets
$ 12,959,093
5,549,187
(220,390)
(11,345,000)
$ 6,942,890
13
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2006
DEBT
SERVICE
CAPITAL PROJ
ECT FUNDS
FUND
Certificates
Total
Housing
of
Governmental
Redevelopment
Set-Aside
Participation
Funds
Revenues:
Tax allocation increment
$
$ -
$ 6,323,502
$ 6,323,502
Less: ERAF(l) Allocations
-
(347,440)
(347,440)
Interest income
85,448
83,377
189,938
358,763
Other
10,140
-
-
10,140
Total Revenues
95,588
83,377
6,166,000
6,344,965
Expenditures:
Community Development
547,283
380,625
-
927,908
Capital outlay
935,667
-
-
935,667
Pass through payment
-
-
2,573,514
2,573,514
Debt service:
Principal retirement
-
-
400,000
400,000
Interest and fees
-
-
686,094
686,094
Total Expenditures
1,482,950
380,625
3,659,608
5,523,183
Excess (Deficiency) of Revenues
over Expenditures
(1,387,362)
(297,248)
2,506,392
821,782
Other Financing Sources (Uses)
Transfers in
500,000
1,073,315
-
1,573,315
Transfers out
-
-
(1,573,315)
(1,573,315)
Total Other Financing Sources (Uses)
500,000
1,073,315
(1,573,315)
-
Net Change in Fund Balances
(887,362)
776,067
933,077
821,782
Fund Balances - Beginning
3,320,273
4,335,193
4,481,845
12,137,311
Fund Balances - Ending
$ 2,432,911
$ 5,111,260
$ 5,414,922
$ 12,959,093
Educational Revenue Augmentation Fund
14
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 JUNE 30. 2006
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 S 821,782
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 $ 935,667
Depreciation expense is deducted from the fund balance (178,934) 756,733
The issuance of long-tern 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.
Neither transaction, however, has any effect on net assets. 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 400,000
The amounts below included in the Statement of Activities do not provide
or (require) the use of current financial resources and therefore are not
reported as revenue or expenditures in governmental funds (net change):
Interest payable
Government Wide Changes in Net Assets
5,911
S 1,984,426
15
Notes to Financial Statements
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 52,573,514 for the year ended June 30, 2006. In addition, as of June 30, 2006
the Agency owed 52,573,514 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
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
financed 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
16
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
a particular function. Program revenues include (a) charges paid by the recipients of goods
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
govennnental funds are aggregated and reported as nonmajor funds.
Major Funds
GASB Statement 34 defines major fields 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 defined as 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.
17
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Governmental funds are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Under this method, revenues are recognized
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 fiends. Proceeds of governmental long-tern 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-tern investments if they are liquid.
The Town's investment policy and California Government Code pen-nit 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 Pavables
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
is
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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
indicate they are not available for appropriation, and are not expendable available financial
resources.
Long-Term Obligations
In the govenmlent-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 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.
19
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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.
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
The Agency holds its cash in the Town of Los Gatos (the "Town"). The Town maintains a
cash and investment pool and allocates interest to the various funds based upon the average
quarterly cash balances. Information regarding credit risk and collateral requirements, as
applicable, can be found in the Town's financial statements.
In VPCtmPn tc
The Agency voluntarily participates in LAIF, regulated under Section 16429 of the State
Government Code. LAIF allows local governments such as the Agency to participate in a
Pooled Money Investment Account managed by the State Treasurer Office and overseen by
the Pooled Money Investment Board and State Treasurer investment committee. A Local
Agency Investment Advisory Board oversees LAIF. As of June 30, 2006, the Agency's
investment in LAIF was $1,288,093.
Information regarding investment risks related to credit risk, concentration of credit risk
and interest rate risk can be found in the Town's financial statements.
Under GASB 31, the Agency 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.
20
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
4. CAPITAL ASSETS
The following is a summary of the Agency's capital assets:
Balance Balance
Capital Assets July 1, 2005 Additions Deletions June 30, 2006
Buildings
Infrastructure:
Parking Lots
Alleys
Streets
Total capital assets
Less accumulated depreciation:
Buildings
Parking Lots
Alleys
Streets
$ 4,067,708 $ - $ - $ 4,067,708
391,977
268,415
- 660,392
245,378
154,894
- 400,272
1,782,285
512,358
- 2,294,643
6,487,348 935,667 - 7,423,015
1,118,620 101,693
- 1,220,313
- 2,701
- 2,701
8,091 5,497
- 13,588
568,183 69,043
- 637,226
Total accumulated depreciation 1,694,894 178,934 - 1,873,828
Total capital assets - net depreciation $ 4,792,454 $ 756,733 $ - $ 5,549,187
Depreciation expense was $178,934 for the fiscal year ended June 30, 2006.
5. 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
revenue funds are available. For the fiscal year ended June 30, 2006 the Agency paid the
Town $150,000 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,
21
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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 semi-
annually 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.
For the fiscal year ended June 30, 2006, lease income and reimbursements in the amount of
$932,122 offsets in the Certificates of Participation Fund and is eliminated from the
Government-Wide Statement of Activities.
2002 Certificates of Participation (COPS)
The 2002 Certificates of Participation financing parallels the 1992 issue. On August 1,
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 COP principal payments are due annually on August 1 st, with interest payments
payable semi-annually on February 1st and August Ist.
A summary of general long-term obligations account group transactions for the year ended
June 30, 2006 follows:
Original
Balance
Balance
Issue
June, 30
June, 30
Current
Debt Issued
Amount
2005 Additions
Retirements 2006
Portion
1992 Certificates of Participation,
5-9%, due 8/1(2012
$ 2,960,000
$ 1,445,000 $
$ 175,000 1,270,000
$ 185,000
2002 Certificates of Participation,
Series A, 2.5-5%, due 8/1/2031
10,725,000
10,300,000
225,000 10,075,000
230,000
Total Long-Term Debt $ 13,685,000 $ 11,745,000 $ - $ 400,000 $ 11,345,000 $ 415,000
22
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Future debt service requirements for general long-term debt with stated maturities are as
follows at June 30, 2006:
Fiscal Year Ended
Principal
Interest
2007
$ 415,000.0
$ 521,071.0
2008
430,000
505,410
2009
445,000
489,137
2010
465,000
471,475
2011
485,000
452,450
2012-2016
1,670,000
1,985,577
2017-2021
1,755,000
1,622,458
2020-2026
2,210,000
1,152,039
2026-2031
2,820,000
528,750
2032
650,000
16,250
Total Debt Service $ 11,345,000 $ 7,744,617
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 5994,489 at June
30, 2006.
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:
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.
23
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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, 2006, portions of fund balance had been reserved because of the following:
Encumbrances are reserved to encumber fund balance for purchase order commitments
made before fiscal year end.
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.
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, 2006, the
Agency paid $347,440 as a result of the State directive.
24
Supplementary Information
TOWN OF LOS 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 JUNE 30, 2006
Variance
Favorable
Budget Actual (Unfavorable)
Revenues:
Interest 50,000 $ 85,448 $ 35,448
Other - 10.140 10.140
Total Revenues
Expenditures:
Community Development
Capital outlay
Total Expenditures
Excess (Deficiency) of Revenues
over Expenditures
OTHER FINANCING SOURCES (USES)
Operating transfers in
Operating transfers (out)
50,000
95,588
45,588
618,410
547,283
(71,127)
949,327
935,667
13,660
1,567,737
1,482,950
(57,467)
(1,517,737) (1,387,362) 130,375
- 500,000 500,000
Total Other Financing Sources (Uses) -
Net Change in Fund Balance $ (1,517,737)
Fund Balance - Beginning
Fund Balance - Ending
25
500,000 500,000
(887,362) $ 130,375
3,320,273
$ 2,432,911
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, 2006
Revenues:
Interest
Total Revenues
Expenditures:
Community Development
Total Expenditures
Excess (Deficiency) of Revenues
over Expenditures
Other Financing Sources (Uses)
Transfers in
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending
Variance
Favorable
Budget
Actual
(Unfavorable)
60,000
$ 83,377
$ 23,377
60,000
83,377
23,377
408,420
380,625
27,795
408,420
380,625
27,795
(348,420)
(297,248)
51,172
1,043,460
1,073,315
29,855
1,043,460
1,073,315
29,855
$ 695,040
776,067
$ 81,027
4,335,193
$ 5,111,260
26
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE - BUDGET AND ACTUAL (GAAP)
CERTIFICATES OF PARTICPATION FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Revenues:
Property Tax
Less: ERAF(') Allocations
Interest
Total Revenues
Expenditures:
Pass through payment
Debt Service:
Principal
Interest and fees
Total Expenditures
Excess (Deficiency) of Revenues
over Expenditures
Other Financing Sources (Uses)
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending
(1) Educational Revenue Augmentation Fund
Variance
Favorable
Budget
Actual
(Unfavorable)
$ 5,358,700
$ 6,323,502
$ 964,802
(347,440)
(347,440)
-
78,000
189,938
111,938
5,089,260 6,166,000 1,076,740
2,127,540
2,573,514 (445,974)
400,000
400,000 -
635,900
686,094 (50,194)
3,163,440
3,659,608 (496,168)
1,925,820 2,506,392
580,572
(1,043,460) (1,573,315) (529,855)
(1,043,460) (1,573,315) (529,855)
$ 882,360 933,077 $ 50,717
4,481,845
$ 5,414,922
27
Other Independent Auditor's Reports
C. G. UHLENBERG LLP
CERTIFIED PUBLIC ACCOUNTANTS
ROBERT E. BARSANTI (RETIREC) . PEGGY H. CHEN, C.P.A.. JEFFREY J. IRA, C.P.A. • KATHERINE CHAO, C,P A JULIE LIN, C.P.A. • SHELDON D. CHAVAN, C.P.A.
INDEPENDENT AUDITOR'S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING AND 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 end June 30, 2006, and have issued our report thereon dated September 22, 2006. 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.
Internal Control over Financial Reporting
In planning and performing 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 an opinion 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 that might be material
weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the
internal control components does not reduce to a relatively low level the risk that misstatements caused by error or
fraud 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 performing their assigned functions. We noted
no matters involving the internal control over financial reporting and its operation that we consider to be material
weaknesses.
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 deterniination 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 no instances of
noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we reported to management of the Agency in a separate letter.
This report is intended for the information of the Mayor, members of the Agency board members, and the
State Controller's office, and is not intended to be and should not be used by anyone other than these
specified parties.
September 22, 2006
Redwood City, California
FINDINGS AND RECOMMENDATIONS
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF COMPLIANCE FINDINGS
YEAR ENDED JUNE 30, 2006
No current year findings.
29
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF PRIOR YEAR COMPLIANCE FINDINGS
YEAR ENDED JUNE 30, 2006
No prior year findings.
30
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California Redevelopment Agencies - Fiscal Year 200512006
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS RDA
Beginning Balance
Adjustment to Beginning Balance
Adjusted Beginning Balance
Total Tax Increment From PA(s) $1,073,315 Total Receipts from PA(s)
Other Revenues not reported on Schedule A
Sum of Beginning Balance and Revenues
ZAJJC/ fW LU/ C
Item
Planning and Administration Costs
Administration Costs
Subitem
Subtotal of Planning and Administration Costs
Total Expenditures
$4,335,193
$0
$4,335,193
$1,156,692
$0
$5,491,885
Amount Remark
$380,626
$380,626
$380,626
Net Resources Available $5,111,259
Indebtedness For Setasides Deferred $0
Other Housing Fund Assets
Category Amount Remark
Total Other Housing Fund Assets
Total Fund Equity $5,111,259
200112002 $815920
200212003 $828408 sum of 4 Previous Years' Tax 'rior Year Ending Unencum Excess Surplus for
200312004 $1008739 Increment for 200512006 200512006
200412005 $1163323 $3816390 $4,335,193 $518,803
- - - - -
Sum of Current and 3 Previous Years' Tax Increments
Adjusted Balance
Excess Surplus for next year
Net Resources Available
Unencumbered Designated
Page 1 of 2 11127106
$4,073,785
$5,111,259
$1,037,474
$5,111,259
$0
California Redevelopment Agencies - Fiscal Year 200512006
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS RDA
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
$5,111,259
$0
$5,111,259
$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 Remark
Use of the Housing Fund to Assist Mortgagors
Income Adjustment Factors Requirements Completed
Home $ Hope $
Non Housing Redevelopment
Funds Usage
Resource Needs
LMIHF Deposits/Withdrawls
Document Document Custodian Custodian Copy
Name Date Name Phone Source
Achievements
Description
Page 2 of 2 11127106
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California Redevelopment Agencies- Fiscal Year 200512006
Project Area Contributions to Low and Moderate Income Housing Fund
Sch A Project Area Financial Information
Agency LOS GATOS RDA
Address 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 Calculated Amount Amount Amount Total % Cumulative
Increment Deposit Allocated Exempted Deferred Deposited Def.
$6,323,502 $1,264,700 $1,073,315 $0 $0 $1,073,315 16.97% $0
Repayment $0
Category
Interest Income $83,377
Total Additional Revenue $83,377
Total Housing Fund Deposits for Project Area $1,156,692
Agency Totals For All Project Areas:
Gross Tax Calculated Amount
Increment Deposit Allocated
$6,323,502 $1,264,700.4 $1,073,315
Amount Amount Total % Cumulative
Exempted Deferred Deposited Def.
$0 $0 $1,073,315 17% $0
Total Additional Revenue from Project Areas
Total Deferral Repayments.
Total Deposit to Housing Fund from Project Areas.
$83,377
$0
$1,156,692
Page 1 of 1 11127106
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For Indebtedness Entered Into post June 30, 2006
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Interest Total Outstanding During Tax
Debt Identification Date Principal Term Rate Interest Debt Year
[Totals, Fiscal Year Indebtedness
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611
CALCULATION OF AVAILABLE REVENUES
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
CENTRAL PROJECT AREA
TAX YEAR 2005-06
RECONCILIATION DATES: July 1, 2005 to June 30, 2006
1. Beginning Balance, Available Revenues $ 8,046,821
2. Tax Increment Received-Gross 6,870,842
All Tax Increment Revenues , to include any Tax Increment
pass through to other local taxing agencies
3. All Other Available Revenues Received (65,630)
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 14,852,033
6. Total amounts paid against indebtedness
in previous year. (D + E on Reconciliation Statement) 5,372,319
7. Available Revenues, End of Year (5-6) 9,479,714
FORWARD THIS AMOUNT TO STATEMENT OF INDEBTEDNESS,
COVER PAGE, LINE 4
NOTES
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".