16 Staff Report - Approving 2007/08 Annual Report for Redevelopment Agency,~p~N H DF
MEETING DATE: 12/15/08
~OS`aAtas
ITEM NO: 1 r _
COUNCILIAGENCY AGENDA REPORT
DATE: December 11, 2008
TO: MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
FROM: GREG LARSON, TOWN MANAGER/EXECUTIVE DIRECTOR
SUBJECT: CONSIDER ADOPTING RESOLUTION APPROVING THE 2007108
ANNUAL REPORT FOR THE LOS GATOS REDEVELOPMENT
AGENCY.
RECOMMENDATION:
Adopt resolution approving the 2007/08 Annual 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 information to explain the Agency's programs.
The 2007/08 audit was completed by C.G. Uhlenberg, LLP (Exhibit A). It includes the
auditor's opinion of the Agency's operations and financial position, and the Agency's
compliance with laws, regulations, and administrative requirements governing the
agency, including all financial activities involving low and moderate income housing
funds.
PREPARED BY: QWa Bud N. Lortz
Deputy Executive Director
Reviewed by: ~ Assistant Town Manager/Deputy Director own
Attorney/General Counsel Clerk Administrator/Secretary _,<C--Finance
Community Development
PAGE 2
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING 2007/08 ANNUAL REPORT
December 11, 2008
The Statement of Housing Activity, the Annual Report of Financial
Transactions and Statement of Indebtedness (Exhibits B, C and D) 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 2007/08 fiscal year to eliminate blight:
• As part of Phase III of the Downtown Street Reconstruction Project, Ehn Street
Reconstruction between N. Santa Cruz and University Ave was finished ill FY
2007/08. The University Avenue Resurfacing Project (from Mullen to Main Street)
used contingency funding and was completed in the summer of 2008. These streets
were the only remaining streets in the downtown business core that were in extremely
poor condition. Almond Grove Concrete Rehabilitation Pilot Project was started in
FY 2007/08 and will continue in FY 2008/09.
• The Santa Cruz Avenue/Wood Road Gateway project is in the final design stage.
Once design work is completed and approved, additional grant funding will be
pursued and programmed into a future year's Capital Improvement Program.
• The Los Gatos Redevelopment Agency contributed toward the purchase of an
existing building on Los Gatos Boulevard for use for police services. The existing
9,020 square foot building may also be expanded to 12,260 square feet to include a
new Emergency Operations Center and Sally Port. The building will house patrol,
detectives, and evidence storage. In FY 2007/08 plans were developed and the
estimated completion of the building modifications should be in Fall 2009.
State Actions
The FY 2007/08 budget eliminated the ERAF payment, allowing the Agency to retail tax
increments to be used for important fuuture Agency projects. Proposition IA approved in
2004 does not contain specific protections for Redevelopment Agencies. They were not
included because there are existing legal opiiuons 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 fiom further State takes from
Redevelopment Agency Tax Increment. Protecting Redevelopment Agency funds for all
cities is 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
amlual 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.
PAGE 3
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING 2007/08 ANNUAL REPORT
December 11, 2008
Fund Balances and Excess Surnlus
The RDA Debt Service Fund balances at June 30, 2008 of approximately $6.1 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
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 $14.0
million, which could be issued on or before December 25, 2011. The Council has
identified these fiends as a source of funding for the future construction of a new library.
The Redevelopment Capital Projects fund balance at June 30, 2008 of approximately $3.0
million is utilized year to year for RDA administrative costs such as staff charges, legal
fees etc, which average about $1M per year. At June 30, 2008, this fiord holds
approximately $240K of the remaining 2002 Certificates of Participation (COP) unspent
proceeds to be used for eligible capital projects. The remaining proceeds at June 30,
2008 will be dedicated to pay for the final Downtown Street Reconstruction projects:
Almond Grove Reconstruction ($78K), N. Santa Cruz Lighting ($SK), Santa Cruz
Avenue/Wood Road Gateway ($65K) and University Avenue Repaving project ($92K).
Some of the projects listed above are in the design stage and construction is estimated to
be in the range of $2M. 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 $500-$600K) 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 $7.2
million at June 30, 2008. 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 for FY 2005/06, $1,037,474 for FY 2006/07 and $1,795,145 for FY 2007/08.
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.
PAGE 4
MAYOR AND TOWN COUNCIL/CHAIR AND MEMBERS OF THE
REDEVELOPMENT AGENCY
SUBJECT: ADOPT RESOLUTION APPROVING 2007/08 ANNUAL REPORT
December 11, 2008
On December 3, 2007, the Agency Board committed to loan Senior Housing Solutions
roughly $832,700 for a very low-income senior housing project. Staff is working with
Seifel Consulting, the Agency's real estate and housing specialist, to develop strategies to
invest the monies in the Housing Fund,
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 :
Attachment 1 - Resolution approving the 2007108 Annual Report for the Los Gatos
Redevelopment Agency
Exhibit A - Redevelopment Audit for Fiscal Year 2007108
Exhibit B - Statement of Housing Activity for Fiscal Year 2007108
Exhibit C - Annual Report of Financial Transactions for Fiscal Year 2007108
Exhibit D - Statement of Indebtedness
BNL/SDC: li
NA NANCE RMCouncil Repoiu\2007-08 RDA Annual Report. docc
RESOLUTION 2008 -
RESOLUTION OF THE TOWN COUNCIL/REDEVELOPMENT AGENCY OF THE
TOWN OF LOS GATOS
APPROVING THE 2007108 ANNUAL REPORT FOR
THE LOS GATOS REDEVELOPMENT AGENCY
WHEREAS:
The California Corninunity 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.
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 fiends.
4. The Statement of Housing Activity, Aiulual Report of Financial Transactions, and
Statement of indebtedness are attached hereto as Exhibits B, C and D, consist of forms provided
by the State Department of Housing and Community Development.
5. Approval of the 2007108 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 2007/08 Annual Report for the Los Gatos Redevelopment Agency, attached hereto as
Exhibits A, B, C and D.
ATTACFR4KNT I
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 15th day of December 2008 by the following vote:
COUNCIL/AGENCY BOARD MEMBERS:
AYES:
NAYS:
ABSENT:
AB STAIN:
SIGNED: Isl
MAYOR/CHAIRPERSON OF TH. E
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 TIE YEAR ENDED JUNE 30, 2008
WITH INDEPENDENT AUDITORS' REPORTS
THEREON
EXHIBIT A
TOWN OF LOS GATOS
REDEVELOPMENT AGENCY
TABLE OF CONTENTS
FOR THE YEAR ENDED JUNE 30, 2008
PAGE
Independent Auditors' Report l - 2
Management's Discussion and Analysis 3 -9
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets 10
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
Govern mernt A uditing Standards 28-29
Summary of Compliance Findings
Summary of Prior Year Compliance Findings 31
W
C. G. UHLENBERG LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
PEGGY H. CH£N, C.P.A. JEFFREY J. IRA, C.P.A. KATHERINE CHAO, C.P.A, JULIE T. UN. 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, 2008, 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, 2008, 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 Government Auditinj; Standards, we have also issued a report dated
November 28, 2008 on our consideration of the Agency's internal control over financial reporting
and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results 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.
333 Twin Dolphin Drive, Suite 230 • Redwood City, CA 94065 • Phone (650) 802-8668 • Pax (650) 802-0866
4117 Clipper Caurt • Fremont, CA 94538 • Phone (510) 770-8680 • Pax (510) 770-8685
1230 Midas Way, Suite 250 • Sunnyvale, CA 94085 * Phone (408) 331-6242 + Fax (408) 331-6243
,Mail - info@cgucpa.com • www.cgucpa.com
The Management's Discussion and Analysis is not a required part of the basic financial
statements, but is supplementary information required by the Governmental Accounting
Standards Board. We have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the
supplementary information. However, we did not audit the information and express no opinion
on it.
Our audit was conducted for the purpose of forming an opinion the financial statements that
collectively comprise the Agency's basic financial statements. The budgetary schedules listed in
the table of contents are presented for purposes of additional analysis and are not a required part
of the basic financial statements of the Agency. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and, in our opinion, is
fairly stated, in all material respects, in relation to the basic financial statements taken as a
whole.
e. C-7-. MA&4gg- I-Ze
December 5, 2008
Redwood City, California
Management's Discussion and Analysis
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
As a component unit of the Town of Los Gatos, the Redevelopment Agency ("Agency") was
established in response to the need to rebuild existing infrastructure damaged in the 1989 Loma
Prieta Earthquake. The Redevelopment Agency area encompasses approximately 440 acres in
and around Downtown Los Gatos, which includes retail and residential areas, lodging, schools,
and main traffic thoroughfares. Projects such as street and utility reconstruction, parking,
streetscape and civic improvements were called out in the Redevelopment Plan. The Agency has
the power to condemn properties for this purpose and to issue debt payable out of the
incremental property taxes expected to be realized because of its redevelopment activities. The
Agency may enter into development agreements with developers and others to further its
purposes.
FISCAL 2008 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 $1,449,864 from the
amounts received the prior year.
• The assets of the Agency exceeded its liabilities at June 30, 2008 by $8,412,581 (net assets).
Included in the determination of net assets is a negative (deficit) balance of ($4,082,194) 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 decreased by $1.95 million from the prior year. `1'he decrease
is largely due to a transfer of capital assets to the Town.
• As of June 30, 2008, the Agency's governmental funds reported combined ending fund
balances of $16,469,613; an increase of $1,288,664 in comparison from the prior year's
combined find balance of $15,180,949. The. increase is due primarily to an increase in fund
balances in the Town's Low and Moderate Housing Fund and Debt Service Fund.
• At June 30, 2008 total unreserved fund balance in the Town's governmental funds of
$5,728,848 increased $1,879,465 in comparison with the prior year's balances of $3,849,383.
OVERVIEW OF THE BASIC FINANCIAL S'T'A'T'EMENTS
This Report is in three parts:
1) Management's Discussion and Analysis (this part),
2) The Basic Financial Statements, which include the Agency-wide and the Fund financial
statements, along with the Notes to these financial statements, and
3) Budget/Actual Statements for budgeted Capital Projects Funds.
The Basic Financial Statements
The Basic Financial Statements comprise the Agency-wide Financial Statements and the Fund
Financial Statements. These two sets of financial statements provide two different views of the
Agency's financial activities and financial position long-tern and short-term.
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Agency-wide Financial Statements provide a longer-terns 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 fiend 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-ivide 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,
Fiend Financial Statements
Governmental Fund financial statements are prepared on the modified accrual basis, which
means they measure only current financial resources and uses. Capital assets and other long-
lived assets, along with long-term liabilities, are presented only in the Agency-wide financial
statements.
The Fund financial statements provide detailed information about each of the Agency's most
significant funds, called Major Funds. The concept of Major Funds, and the determination of
which are Major Funds, was established by GASB Statement 34 and replaces the concept of
combining like funds and presenting them in total. Instead, each Major fund is presented
individually, with all Non-major Funds summarized and presented only in a single column.
Subordinate schedules present the detail of these Non-major fiends. Major Funds present the
4
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
major activities of the Agency for the year. The Agency's Major Funds may change from year to
year as a result of changes in the pattern of Agency's activities.
The Agency has three Major Governmental Funds in 2008. 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, 2008
(In Millions)
June 30, 2008 Junc 30, 2007
Cash and Investments
Other Assets
Total Assets
Long Term Debt Outstanding
Other Liabilities
Total Liabilities
Net Assets:
Invested in Net Assets
Restricted
Unrestricted
$
20.95
$
22.11
3.17
6.79
$
24.12
$
28.90
$
10.50
$
10.93
5.39
7.60
$
15.89
$
1.8.53
$
1.75
$
5.24
10.74
11.33
(4.26)
(6.21)
Total Net Assets: $ 8.23 $ 10.36
The Agency's governmental net assets amounted to $8.23 million at June 30, 2008. The
Agency's net assets at June 30, 2008 are comprised of the following:
• Unrestricted cash and investments comprised $20.95 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
5
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
investments of $1.49 million are fields held by trustees as prescribed under the Certificate of
Participation issuances.
• Other Assets of $3.17 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 $3.71 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, 2008.
• As of June 30, 2008 the Town of Los Gatos had advanced the Agency a total of $1.5 million
to partially fiend ongoing Agency operations. This advance is repayable on demand.
• Long-term debt of $10.50 million, of which $1.0.05 million is due in future years and $.45
million, is due currently.
• The $1.74 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 $10.74 million, of which $3.00 million may be used only for
capital projects, $7.20 million is restricted for low and moderate income housing purposes,
and $.54 million may be used only for debt service. 'rhe restrictions on these fiends 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 $(4.26) million of unrestricted net assets at June 30, 2008. This
deficit is a result of the $11.75 million in long-term debt proceeds, which are deducted from
fiord 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 2008 2007
General Revenues and Transfers:
Property Tax Increments $ 8.07 $ 7.42
Interest 0.90 0.81
Transfers to Town of Los Gatos (4.98) -
Total Revenues $ 3.99 $ 8.23
Activities:
Functions l Programs
Redevelopment Projects
$ 2.07 $
1.18
Pass-through payments
3.21
2.90
Interest and Fees
0.84
0.73
Total Government Activities
$ 6.12 $
4.81
Change in Net Assets
$ (2.13) $
3.42
As Table 2 above shows, $8.97 million (100%) of the Agency's 2008 Governmental revenue is
general revenues such as taxes and interest. General revenues are not allocable to programs.
General revenues are used to pay for the net cost of governmental programs.
During the year the Agency transferred $3.58 million, net of accumulated depreciation, in
infrastructure assets to the Town that were purchased using redevelopment resources since will
be owned and maintained by the Town. The total transfer of $4.98 million includes current year
capital outlay reported in the Agency's redevelopment fund.
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)
2008 2007
Redevelopment Projects $ (2.07) $ (1.18)
Property Tax Increments (3,21) (2.90)
Interest (0.94) (0.73)
Totals
$ (6.12) $ (4.81)
THE AGENCY'S FUND FINANCIAL STATEMENTS
Table 4 below summarizes Governmental Activity and balances at the Rind level:
Table 4
Financial Highlights at Fund Level
(In Millions)
Governmental Fund
Total Assets
Total Liabilities
`total Fund Balances
Total Revenues
Total Expenditures
Total Other Financing Sources (Uses)
2008
$ 21.48
5.19
16.29
8.97
7.86
2007
$ 22.60
7.42
15.18
8.24
6.01
Analyses of Major Governmental Funds
Redevelopment Fund
Accounts for activities of the Redevelopment Agency of the Town and the related program tax
revenues. This fiend encompasses three core functions: Redevelopment Agency administration,
Capital Project development and implementation, and the implementation of the Economic
Vitality Program.
9
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
MANAGEMENT'S DISCUSSION AND ANALYSIS
Housing Set Aside Fund
Accounts for administering the housing component of the Redevelopment plan. The revenue
source for this program comes from the 20% State-mandated housing set-aside deducted from
incremental property taxes.
Certificates of Participation Fund
This Fund accounts for financial resources to be used for the payment of principal and interest in
long-term obligations. Each of the Agency's debt issues is discussed in detail in Note 6 to the
financial statements. Certificates of Participation are used to field the key infrastructure projects
in the Downtown redevelopment area. At June 30, 2008, the Agency's debt comprised:
June 30, 2008 June 30, 2007
Balance Balance
GovernmentActivity Debt (In Millions) (In Millions)
1992 Certificates of Participation $ 0.89 $ 1.08
2002 Certificates of Participation 9.61 9.85
Total Long Term Debt $ 10.50 $ 10.93
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, 2008.
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, 2008
ASSETS
Cash and investments
Restricted cash and investments
Accounts receivable
Capital assets (net)
Total Assets
LIABILITIES
Accounts payable
Interest payable
Unearned revenue
Passthrough obligations
Advance firm Town of Los Gatos General Fund
Noncurrent liabilities:
Due within one year
Due in 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
See accompanying notes to financial statements
Governmental
Activities
$ 19,456,682
1,494,916
52 6,2 66
2.644.010
$ 24,121,874
$ 294,900
201,042
185,121
3,210,934
1,500,000
44 5,0 00
10,05 5,0 00
S 15.891.997
$ 1,754,010
2,99 7,776
7,198,500
544,489
(4,26 4,898)
$ 8,229,877
10
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JANE 30, 2008
Program Expenses:
Redevelopment
Passthrough payment
Interest and fees
Total Program Expenses
Net Program Incom a (Expense)
General Revenues and Transfers:
Genera{ Revenues:
Tax allocation increment
Interest income
Transfersto the Townof Los Gatos
Total General Revenues and Transfers
Change in Net Assets
Net Assets _ Beginning
Net Assets - Ending
See accompanying notes to financial statements
Governmental
Activities
$ 2,069,275
3,210, 934
838,967
6,119,176
(6,119,176)
8,072,176
897,968
(4, 984, 824)
3,985,320
(2,133,856)
10,363,733
$ 8,229,877
11
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
GOVERNMENTAL FUNDS
BALANCE. SHEET
JUNE 30,2008
ASSETS
Cash and investments available for operations
Restricted cash and investments
Accounts receivable
TOTAL ASSETS
LIABILITIES
Accounts payable
Deferred revenue
Advances from Town of Los Gatos General Fund
Passthrough obligations
TOTAL LIABILITIES
FUND BALANCES
Reserved for
Debt service
Redevelopment projects
Low and moderate income housing
Unreserved, designated for:
Debt servi cc
TOTAL FUND BALANCES
TOTAL LIABILIT 1F,S & FUND BALANCES
DEBT
SERVICE
CAP ITAL PROJECT FUNDS FUNDS
Total
Housing
Certificates of
Government
Redevelopment
Set-Aside
Participation
Funds
$ 2,090,100
$ 6,926,752
$ 10,439,830
$ 19,456,682
950,427
-
544,489
1,494,916
-
462,950
63,316
526,266
$ 32040,527
$ 7,389,702
$ 11,047,635
$ 21,477,864
$ 42,751 $ 6,081 $ 246,068 $ 294,900
- 185,121 - 185,121
- - 1,500,000 1,500,000
- 3,210,934 3,210,934
42,751 191202 4,957,002 5,190,955
- - 544,489 544,489
2,997,776 - - 2,997,776
- 7,198,500 - 7,198,500
- - 5,546,144 5,546,144
2,997,776 7,198,500 6,090,633 16,286,909
$ 3,040,527 $ 7,389,702 $ 11,047,635 $ 21,477,864
See accompanying notes to financial statements
12
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
RECONCILIATION OF THE BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2008
Fund Balances - Governmental Funds $ 16,286,909
Amounts reported for governmental activities in the Statement of Net Assets are
different from those reported in the Governmental Funds because of the
Capital assets (net) used in governmental activities are not current assets or financial
resources and therefore, are not reported in the Governmental Funds Balance Sheet.
Capital assets
Accumulated depreciation
$ 4,067,708
(1,423,698) 2,644,010
Interest payable on long-term debt does not require the use of current financial
resources and, therefore, are not reported in the Governmental Funds Balance Sheet.
Long-term liabilities, including bonds payable, are not due and payable in the current
period and, therefore, are not reported in the Governmental Funds Balance Sheet
Certificates of participation
Net Assets of Governmental Activities
See accompanying notes to financial statements
(201,042)
(10,500,000)
$ 8,229,877
U
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2008
DEBT
SERVICE
CAPITAL PROJECT FUNDS FUNDS
REVENUES
Tax allocation increment
lntelust income
Total Revenues
EXPENDITURES
Community Development
Capital Outlay
Passthrough payment
Debt service:
Principal payments
Interest and fiscal charges
Total Expenditures
Excess (Deficiency) of Revenues
over Expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Changes in Fund Balances
Beginning find balances
End ing fund balances
Total
Housing Certificates of Government
Redevelopment Set-Aside Participation Funds
$ $ - $ 8,072,176 $ 8,072,176
138,569 312,963 446,436 897,968
138,569 312,963 8,51.8,612 8,970,144
603,811 1,285,877 77,894 1,967,582
1,403,903 - - 1,403,903
3,210,934 3,210,934
- - 430,000 430,000
- - 851,765 851,765
2,007,714 1,285,877 4,570,593 7,864,184
(1,869,145) (972,914) 3,948,019 1,105,960
550,000
1,614,435
-
2,164,435
-
-
(2,164,435)
(2,164,435)
550,000
1,614,435
(2,164,435)
-
(1,319,145)
641,521
1,783,584
1,105,960
4,316,921
6,556,979
4,307,049
15,180,949
$ 2,997,776 $
7,198,500
$ 6,090,633
$ 16,286,909
See accompanying notes to financial statements
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, 2008
The schedule below reconciles the Net Changes in Fund Balances reported on the
Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund
Balances, which measures only changes in current assets and current liabilities on
the modified accrual basis, with the Change in Net Assets of Govermnental
Activities reported in the Statement of Activities, which is reported on tine full
accrual basis.
Net Changes in Fund Balances - Total Governmental Funds $ 1,105,960
Amounts reported for governmental activities in the Statement of Activities are
different from those reported in the Statement of Revenues, Expenditures, and
Changes in Fund Balances because of the following:
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense. This is the
amount by which capital outlays exceeded depreciation in the current period.
Depreciation expense is deducted from the fund balance (101,693)
Transfer of capital asset from the Agency to the Town are reported in the
Statement of Activities, however, they have no impact on the Statement of
Revenues, Expenditures, and Changes in Fund Balances. (3,580,921)
The issuance of long-term debt provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt
consumes the current financial resources of governmental funds. This amount
is the net effect of these differences in the treatment of long-term debt.
Repayment of debt principle is added back to fund balance 430,000
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 govennmental funds (net change):
Interest payable 12,798
Government Wide Changes in Net Assets $ (2,133,856)
Sec accompanying notes to financial statements
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 $3,210,934 for the year ended June 30, 2008.
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 't'own.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis our 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-wicle, 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 Rinction of the Agency's activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to
a particular function. Program revenues include (a) charges paid by the recipients of goods
16
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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 fiend financial statements provide information about the
Agency's fiends. The emphasis of fund financial statements is on major individual
governmental fiends, each of which is displayed in a separate column. All remaining
governmental fiends are aggregated and reported as nonmajor funds.
Major Funds
GASB Statement 34 defines major funds and requires the Agency's major governmental
funds to be identified and presented separately in the fund financial statements. All other
funds, called nonmajor funds, are combined, and reported in a single column, regardless of
their fund-type.
Major fiends are defined as finds 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 fiends.
The Agency reported the following major governmental fiends in the accompanying
financial statements:
Redevelopment Fund - This Aind 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 P' ind -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 Accountin
The government-wide financial statements are reported using the economic resources
ineasurernent focus and the Rill accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded at the time liabilities are incurred, regardless of when the
related cash flows take place.
Governmental fiends are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Under this method, revenues are recognized
17
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
when measurable and available. The Agency considers all revenues reported in the
governmental funds to be available if the revenues are collected within sixty days after
year-end. Expenditures are recorded when the related fund liability is incurred, except for
principal and interest on general long-term debt, which is recognized upon becoming due
and payable; and except for claims, judgments and compensated absences, which are
recognized when estimable and probable. Governmental capital asset acquisitions are
reported as expenditures in governmental fiends. Proceeds of governmental long-term debt
and acquisitions under capital leases are reported as other financing sources.
Non-exchange transactions, in which the Agency gives or receives value without directly,
receiving or giving equal value in exchange, include taxes, grants, entitlements, and
donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for
which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is
recognized in the fiscal year in which all eligibility requirements have been satisfied. Other
revenues susceptible to accrual include other taxes, intergovernmental revenue, interest,
and charges for services.
The Agency may find programs with a combination of cost-reimbursement grants,
categorical block grants, and general revenues. Thus, both restricted and unrestricted net
assets may be available to finance program expenditures. The Agency's policy is to first
apply restricted grant resources to such programs followed by general revenues as
necessary.
Cash and Investments
The Agency's cash and cash equivalents are considered to be cash on hand, demand
deposits, and short-term investments if they are liquid.
The Town's investment policy and California Government Code permit investments in
obligations of U.S. Treasury and its agencies, commercial paper, banker's acceptances,
repurchase agreements, certificates of deposit, medium term notes, passbook savings
account demand deposits, nnitual 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 Payable
Balances representing lending/borrowing transactions between funds outstanding at the end
of the fiscal year are reported as either "due to/duc fi•orn other funds" (amounts due within
one year), "advances to/from other funds" (non-current portions of interfund
lending/borrowing transactions), or "loans to/fi-om other funds" (long-term
lending/borrowing transactions as evidenced by loan agreements). Advances and loans to
other funds are offset by a fund balance reserve in applicable Governmental Funds to
18
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
indicate they are not available for appropriation, and are not expendable available financial
resources.
Lontl-Term OblilZations
In the government-wide financial statements long-terns 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.
Budp,ets and BudLyetarv Accountinu
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 fiends.
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.
19
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Expenditures over Appropriation
For the current fiscal year, actual expenditures exceeded budgeted amounts are as follows:
Fund
Expenditure Category
Excess
Expenditure
Explanation
Housing Set-Aside
Community
$ 809,457
The additional
Fund
development
expenditures amount had
been approved by the
Council but no amended
budget was proposed.
Certificates of
Community
$ 470,279
Under budgeted pass
Participation Fund
development, Pass
through payments due to
through payment, and
increment in pass
interest and fiscal
through receipts.
charges
Under budgeted interest
payment due to interest
expenses being budgeted
on cash basis.
Use of Estimates
The Agency's management has made certain estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
3. CASH AND INVESTMENTS
Cash
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.
20
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
During the year, the Town determined that the infrastructure assets reported by the Agency
will be owned and maintained solely by the Town. Accordingly, the Agency has
transferred infrastructure assets in the amount of $3,580,921, net accumulated depreciation
of $757,775, to the Town. The total transfer of $4,984,824 includes current year capital
outlay reported in the Agency's redevelopment Rind.
Depreciation expense was $101,693 for the fiscal year ended June 30, 2008.
5. INTERFUND TRANSACTIONS
Advances from the Town - The Town advanced $1,500,000 to the Agency to partially fiend
operations. The advance bears interest at 10% and is repayable on demand, provided that
sufficient tax increment funds are available. For the fiscal year ended June 30, 2008, the
Agency paid the Town $150,000 in interest on the 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 1, which interest payments payable
semi-annually on February 1 and August 1.
To assist the Town in paying the cost of acquisition and construction of the Parking Lot 4
Project, the Town and its Redevelopment Agency entered into a Reimbursement
Agreement. Under this agreement, the Agency will use available net tax increment
revenues resulting from the Project's effect on land values to repay the Town for all lease
payments made by the `town to the Agency under the lease agreement for the Project. Net
tax increment revenues are all taxes allocated to and paid into the Redevelopment Agency
Capital Projects Fund for the Project Area. Reimbursements under this agreement
commenced in fiscal 1995-1996. Accordingly, the COPS have been recorded in the
Agency's General Long-Terre 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, 2008, lease income and reimbursements in the amount of
$930,717 offsets in the Certificates of Participation Fund and is eliminated from the
Government-Wide Statement of Activities.
22
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
Investments
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. The fair value of the Agency's position
in the pool is the same as the value of its pool shares. The total amount invested by all public
agencies in LAIF, as of June 30, 2008, was approximately $70 billion. Of that amount, 85.3%
is invested in non-derivative financial products and 14.7% in structured notes and asset-
backed securities. The average maturity for the investment in LAIF is 212 days. As of June
30, 2008, the Agency's investment in LAIF was $262,918,
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.
4. CAPITAL ASSETS
The following is a summary of the Agency's capital assets:
Buildings
Infrastructure:
Parking Lots
Alleys
Streets
Total capital asset
Less accumulated depreciation:
Buildings
Parking Lots
Alleys
Streets
Total accumulated depreciation
Total net capital assets
Balance at Deletion 1 Balance at
June 30. 2007 Additions Transfer June 30. 2008
$ 4,092,474 $ - $ 24,766 $ 4,067,708
660,392 - 660,392
400,272 - 400,272 -
3,253,266 - 3,253,266
8,406,404
4,338,696 4,067,708
1,322,005 101,693 - 1,423,698
5,196 - 5,196 -
19,085 1.9,085 -
733,494 - 733,494 -
2,079,780 101,693 757,775 1,423,698
$ 6,326,624 $ (101,693) $ 3,580,921 $ 2,644,010
21
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
The California Government Code requires these fields to be invested in accordance with
Town ordinance, bond indentures, or State statues. All these finds 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 finds restricted to low and moderate income
purposes.
Unrestricted describes the portion of Net Assets which is not restricted to use.
Reservations of Fund Balances - Fund balance consists of reserved and unreserved
amounts. Reserved fund balance represents that portion of Rind balance that has been
appropriated for expenditure or is legally segregated for a specific future use. As of June
30, 2008, portions of Rind balance had been reserved because of the following:
Capital Outlay and Redevelopment Projects reserves are funded from storm drain foes,
construction taxes and debt proceeds that are legally restricted for major capital projects.
Debt Service reserves reflect the cash balances in the debt service Hinds that are restricted
for debt service payments.
Loy and Moderate Income Dousing reserves reflect the cash balances restricted for low
and moderate housing activities.
24
Supplementary Information
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
NOTES TO FINANCIAL STATEMENTS
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, with interest payments
payable semi-annually on February 1 and August 1.
A summary of general long-term obligations account group transactions for the year ended
June 30, 2008 follows:
Original Balance Balance
Issuc June, 30 June, 30 Current
Amount 2007 Additions Retirements 2008 Portion
1992 Certificates ofParticipalion,
5-9°/q due 8/1/2012 $ 2,960,000 $ 1,085,000 $ $ 195,000 $ 890,000 $ 205,000
2002 Certificates of Participation,
Series A, 2.5-5%, due 811/2031 10,725,000 9,845,000 235,000 $ 9,610,000 240,000
Total Long-Tenn Debt $ 13,685,000 $ 10,930,000 $ - $ 430,000 $ 10,500,000 $ 445,000
Future debt service requirements for general long-term debt with stated maturities are as
follows at June 30,2008:
For the Year
Governmental Activities
Ending June 30, 2008
Principal
Interest
2009
$ 445,000
$ 479,137
2010
465,000
460,975
2011
485,000
441,325
2012
505,000
420,276
2013-2017
1,485,000
1,902,929
2018-2022
1,835,000
1,539,706
2023-2027
2,320,000
1,040,163
2028-2032
2,960,000
384,250
Total
$ 10,500,000
$ 6,668,761
The Agency must maintain required amount of cash and investments with the trustee under
the terms of the COPS issue. These fluids are pledged as reserves to be used if the Town
fails to meet its obligations under the COPs issue. These reserves totaled $944,342 at June
30, 2008.
23
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, 2008
Variance
Favorable
Budget Actual (Unfavorable)
REVENUES
Interests $ 50,000 $ 138,569 $ 88,569
Total Revenues 50,000 138,569 88,569
EXPENDITURES
Current:
Community development
661,480
603,811
57,669
Capital outlay
1,409,405
1,403,903
5,502
Total Expenditures
2,070,885
2,007,714
63,171
Excess (Deficiency) of Revenues Over Expenditures
(2,020,885)
(1,869,145)
151,740
OTHER FINANCING SOURCES (USES)
Trwisfers in
550,000 550,000 -
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
550,000 550,000 -
$ (1,470,885) (1,319,145) $ 151,740
4,316,921
Fund Baiance - Ending $ 2,997,776
25
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 TUNE 30, 2.008
Variance
Favorable
Budget Actual (Unfavorable)
REVENUES
Interest 200,000 312,963 112,963
Total Revenues 200,000 312,963 112,963
EXPENDITURES
Current:
Community development 476,420 1,285,877 (809,457)
Total Expenditures 476,420 1,285,877 (809,457
Excess (Deficiency) of Revenues Over Expenditures (276,420) (972,914) (696,494)
OTHER FINANCING SOURCES (USES)
Transfers in
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending
1,476,800 1,614,435 137,635
1,476,800 1,614,435 137,635
$ 1,200,380 641,521 $ (558,859)
6,556,979
$ 7,198,500
26
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE - BUDGET AND ACTUAL (GAAP)
CERTIFICATES OF PARTICIPATION FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2008
REVENUES
Prop city Tax
Interest
Total Revenues
EXPENDITURES
Community development
Pass thro ugh payment
Debt service:
Variance
Favorable
Budget
Actual
(Unfavorable)
$ 7,384,010
$ 8,072,176
$ 688,166
309,000
446,436
137,436
7,693,010
8,518,612
825,602
72,200 77,894 (5,694)
2,941,640 3,210,934 (269,294)
Principal
430,000
430,000
-
Interest and fiscal charges
650,780
851,765
(200,985)
Total Expendituirs
4,094,620
4,570,593
(470,279)
Excess (Deficiency) of Revenues Over Expenditures
3,598,390
3,948,019
355,323
OTHER FINANCING SOURCES (USES)
Transfers out
2,026,800
(2,164,435)
(137,635)
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance - Beginning
Fund Balance - Ending
(2,026,800) (2,164,435) (137,635)
$ 1,571,590 1,783,584 $ 217,688
4,3 07,049
$ 6,090,633
27
Other Independent Auditor's Reports
W
C. G. UHLENBERG LLP
CERTIFIED PUBLIC ACCOUNTANTS 8r CONSULTANTS
PEGGY H. CHEN, C.P.A. JEFFREY J. IRA, C.P.A. KATHERINE CHAO. C.P.A. JULIE T. LIN, C.P.A.
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNBIENT A UDITING 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, 2008, and have issued our report thereon dated November
28, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the Agency's internal control over financial
reporting as a basis for designing out auditing procedures for the purpose of expressing our opinion on the
basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
Agency's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Agency's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the Agency's ability to initiate, authorize, record, process, or
report financial data reliably in accordance with generally accepted accounting principles such that there
is more than a remote likelihood that a misstatement of the Agency's financial statements that is more
than inconsequential will not be prevented or detected by the Agency's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the Agency's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose described in
the first paragraph of this section and would not necessarily identify all deficiencies in internal control
that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in
internal control over financial reporting that we consider to be material weaknesses, as defined above,
333 Twin Dolphin Drive, Suite 230 • Redwood City, CA 94065 • Phone (650) 802-8668 • Fax (650) 802-0866
4117 Clipper Court , Fremont, CA 94538 • Phone (510) 770-8680 • Fax (510) 770-8685
1230 Minas Way, Suite 250 • Sunnyvale, CA 94085 • Phone (408) 331-6242 • Fax (408) 331-6243
E-Mail - infoftucpa.com • www.cgucpa.com
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Agency's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards and which are described in the accompanying schedule of findings
and questioned costs as items 08-01.
The Agency's response to the findings identified in our audit is described in the accompanying schedule
of findings and questioned costs. We did not audit Agency's response and, accordingly, we express no
opinion on it
This report is intended solely for the information and use of the Mayor, members of the Agency board
members, and the State Controller's office, is not intended to be, and should not be used by anyone other
than these specified parties.
December 5, 2008
Redwood City, California
29
FINDINGS AND RECOMMENDATIONS
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF COMPLIANCE FINDINGS
YEAR ENDED JUNE 30, 2008
08-01 Pursuant to Health and Safety Code Section 33334.12(g), "excess surplus" means any
unexpended and unencumbered amount in an agency's Low and Moderate Income
Housing Fund that exceeds the greater of, one million dollars ($1,000,000), or the
aggregate amount of tax increment deposited into the Low and Moderate Income
Housing Fund during the agency's preceding four fiscal years (pursuant to Sections
33334.2 and 33334.6). It was determined that the Los Gatos Redevelopment Agency
retained an excess surplus of approximately $1,795,145 for the fiscal year ended June 30,
2008, based on the aggregate amount of tax increment deposited in the Low and
Moderate Income Housing Fund.
Recommendation: Pursuant to Health and Safety Code Section 33334.12(a)(1)(B), we
recommend that the Los Gatos Redevelopment Agency encumbers or expends the excess
surplus. The funds should be encumbered to carry out activities consistent with a
redevelopment agency as defined in Health and Safety Code Sections 33334.2 and
33334.3.
Client's response: The agency is in the process of carrying out activities to encumber the
funds.
30
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
SUMMARY OF PRIOR YEAR COMPLIANCE FINDINGS
YEAR ENDED JUNE 30, 2007
07-01 Pursuant to Health and Safety Code Section 33334.12(g), "excess surplus" means any
unexpended and unencumbered amount in an agency's Low and Moderate Income
Housing Fund that exceeds the greater of. one million dollars ($1,000,000), or the
aggregate amount of tax increment deposited into the Low and Moderate Income
Housing Fund during the agency's preceding four fiscal years (pursuant to Sections
33334.2 and 33334.6). It was determined that the Los Gatos Redevelopment Agency
retained an excess surplus of approximately $1,037,474 for the fiscal year ended June 30,
2007, based on the aggregate amount of tax increment deposited in the Low and
Moderate Income Housing Fund.
Recommendation; Pursuant to Health and Safety Code Section 33334.12(a)(1)(B), we
recommend that the Los Gatos Redevelopment Agency encumber the excess surplus
within two years. The funds should be encumbered to carry out activities consistent with
a redevelopment agency as defined in Health and Safety Code Sections 33334.2 and
33334.3.
Current Status; The agency is still in the process of carrying out activities to encumber
the fluids, see current year findings 08-01.
31
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EXHIBIT B
California Redevelopment Agencies - Fiscal Year 200712008
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS
Beginning Balance $6,556,978
Adjustment to Beginning Balance $0
Adjusted Beginning Balance $6,556,978
Total Tax Increment From PAW $1,614,435 Total Receipts from PA(s) $1,927,398
Other Revenues not reported on Schedule A $0
Sum of Beginning Balance and Revenues $8,484,376
Expenditure
Item Subitem Amount Remark
i
Planning and Administration Costs
Administration Costs $353,176
Subtotal of Planning and Administration Costs $353,176
Subsidies from the LMIHF
Other
$932,700
Need to input
Subtotal of Subsidies from the LMIHF $932,700
Total Expenditures $1,285,876
Net Resources Available $7,198,500
Indebtedness For Setasides Deferred $0
Other Housing Fund Assets
Category
Amount
Remark
Total Other Housing Fund Assets
Total Fund Equity $7,198,500
200312004
$1008739
200412005
$1163323
sum of 4 Previous Years' Prior Year Ending
Excess Surplus for
200512006
$1073315
Tax Increment for 200712008 Unencumbered Balance
200712008
2906/2007
$1516456
$4761833 $6,556,978
$1,795,145
Sum of Current and 3 Previous Years' Tax Increments
$5,367,529
Page
1 of 2 12102108
California Redevelopment Agencies - Fiscal Year 2007/2008
Status of Low and Moderate Income Housing Funds
Sch C Agency Financial and Program Detail
LOS GATOS
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
Site Improvement Activities Benefiting Households
Income Level Low Very Law
Land Held for Future Development
Site Name Num Of Zoning Purchase Estimated
Acres Date Start Date
Use of the Housing Fund to Assist Mortgagors
Income Adjustment Factors Requirements Completed
Home Hope
Non Housing Redevelopment ,
Funds Usage
Resource Needs
LMIHF Dep ositstWith drawls
Document Document
Name Date
Achievements
Description
Page 2 of 2
Remark
Custodian Custodian COPY
Name Phone Source
12!02108
$7,198,500
$5,830,971
$7,198,500
$0
$7,198,500
$0
$7,198,500
$0
$0
No
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California Redevelopment Agencies- Fiscal Year 2007/2008
Project Area Contributions to Low and Moderate Income Housing Fund
Sch A Project Area Financial Information
Agency LOS GATOS
Address 110 E. Main Street
PO Box 949
Los Gatos CA 95031
Project Area CENTRAL LAS 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.
$8,072,176 $1,614,435
$1,614,435 $0
$0
$1,614,435 20.00% $0
Repayment
$0
Category
E
Interest Income
Total Additional Revenue
Total Housing Fund Deposits for Project Area
Agency Totals For All Project Areas:
Gross Tax Calculated Amount Amount Amount
Increment Deposit Allocated Exempted Deferred
$8,072,176 $1,614,435.2 $1,614,435 $0 $0
Total Additional Revenue from Project Areas:
Total Deferral Repayments:
Total Deposit to Housing Fund from Project Areas;
$312,963
$312,963
$1,927,398
Total % Cumulative
Deposited Def.
$1,614,435 20% $0
$312,963
$0
$1,927,398
Page 1 of 1 12I02I08
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For Indebtedness entered into post June 30, 2007
Purpose of Indebtedness:
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CALCULATION OF AVAILABLE REVENUES
TOWN OF LOS GATOS REDEVELOPMENT AGENCY
CENTRAL PROJECT AREA
TAX YEAR 2008-09
RECONCILIATION DATES: July 1, 2007 to June 30, 2008
1. Beginning Balance, Available Revenues
$ 11,533,539
2. Tax Increment Received-Gross
8,716,836
All Tax Increment Revenues , to include any Tax Increment
pass through to other local taxing agencies
3. All Other Available Revenues Received
(2,726,370)
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
17,524,005
6. Total amounts paid against indebtedness
in previous year. (D + E on Reconciliation Statement)
6,539,687
7. Available Revenues, End of Year (5-6)
10,984,318
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 SO[ 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".