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Combining Balance Sheet - Governmental Funds
from City of Downey Annual Comprehensive Financial Report For Fiscal Year Ended June 30, 2021
by downeyca
NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2021
Note 19: Restatements of Fund Balance and Net Position
Beginning balance of the General Fund and Art in Public Places Fund have been restated by ($562,894) and $562,890, respectively, due to the opening of the Art in Public Places fund. CIP Grant Fund and Measure S 2017 LRB funds have been restated by ($1,507,712) and $1,507,712 due to adjustments related to prior year capital project expenditures.
The General fund was restated by $ 62,850 due to implementation of GASB 84, to properly reclassify agency fund balance of the special deposits fund, under the General fund.
Beginning net position of fiduciary activities on the Statement of Changes in Fiduciary Net Position has been restated by $5,360,946 to implement GASB 84 Fiduciary Activities and properly restate the previous agency funds, which had no ending net position, as custodial funds.
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Downey that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.
The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. The City Council elected to become the Successor Agency for the former redevelopment agency. The assets and liabilities of the former redevelopment agency were transferred to the Successor Agency to the Community Development Commission of the City of Downey on February 1, 2012, as a result of the dissolution of the former redevelopment agency.
After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).
In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.
Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2021
The City is acting in a fiduciary capacity for the assets and liabilities. Disclosures related to these transactions are as follows:
a. Cash and investments
Cash and investments reported in the accompanying financial statements consisted of the following:
Cash and investments pooled with the City Cash and investments with fiscal agent 1,583,287$ 662,929 2,246,216$
b. Long-Term Debt
The following long-term debts were transferred from the Redevelopment Agency to the Successor Agency on February 1, 2012, as a result of the dissolution. A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 2021, follows:
Balance Balance Due Within June 30, 2020 Addition Deletion June 30, 2021 One Year
Bonds payable Advances from City Advances from County $ 4,530,000 $ 410,000 $ 4,120,000$ $
430,000 10,107,543 66,566 1,231,941 8,942,168 33,351,866 2,334,631 - 35,686,497 Total long-term liabilities 47,989,409 $ 2,401,197$ 1,641,941$ 48,748,665$ 430,000$
Bonds Payable
1997 Tax Allocation Bonds Payable
In 1997 the Community Development Commission issued $9,925,000 in Tax Allocation Bonds, partially to advance refund the existing 1990 Tax Allocation bond issue, which had a balance outstanding of $4,470,000, and to repay the City for advances of $3,970,508 plus interest. The bonds have an average interest rate of 5.1%. U.S. Bank serves as trustee for payment of principal and interest. The balance outstanding at June 30, 2021, is $4,120,000.
The future debt service requirements on these bonds are as follows:
Year Ending June 30, Principal Interest Total 2022 430,000$ 200,131$ 630,131 $ 2023 450,000 177,581 627,581 2024 475,000 153,878 628,878 2025 500,000 128,894 628,894 2026 525,000 102,628 627,628 2027-2031 1,740,000 136,838 1,876,838
Total 4,120,000 $ $ 899,950 5,019,950$
The outstanding bonds contain a provision that if any event of default should occur or continue to occur, the Trustee may, with the prior written consent of the Bond Insurer, and if request by the Bond Insurer and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time outstanding shall, (a) upon notice in writing to the Commission,
NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2021
declare the principal of all of the Bonds then outstanding, and the interest accrued thereon, to be due and payable immediately, of (b) enforce any rights of the Trustee under or with respect to the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture and applicable provisions of any law.
Pledged Revenue
The City pledged, as a security for bonds issued through the Community Development Commission, a portion of tax increment revenue that it receives. Assembly Bill 1X26 provided that upon dissolution of the Redevelopment Agencies (known as the Community Development Commission), property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $5,019,950 with annual debt service requirements indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred by the dissolved redevelopment agency was $1,152,625 and the debt obligation on the bonds was $631,656.
Advances from City
The DOF issued a Finding of Completion on May 15, 2013, in which DOF concurred that the Successor Agency has made full payments of any payments required as a result of the due diligence reviews. The Finding of Completion allows the placement of loan agreements between the former redevelopment agency and the City on the ROPS, as an enforceable obligation, provided the oversight board makes a finding that the loan was for legitimate redevelopment purposes. Loan repayments could begin in the 2015-16, fiscal year as governed by the criteria in the health and code safety section. When the repayments begin, 20% of the repayments of the loan agreement amounts are to be allocated to the Housing Successor Agency. As of June 30, 2021, the long-term advances totaled $8,942,167. As of June 30, 2021, $6,101,726 is reported in the General Fund, $1,375,922 is reported in Employee Benefit Internal Service Fund and $1,464,519 is reported in the Housing Authority Special Revenue Fund.
Advances from County
As part of the City’s redevelopment program, the City and County of Los Angeles have entered into a tax increment pass-through deferral agreement. This agreement specifies that the City will defer the payment of all current tax increment pass-through due to the County, until some future date, when certain conditions are met. Until that time, the County will charge 7% interest on the outstanding deferral amount. During the year, there were no pass-through agreement amounts owed to the County that were deferred. Interest of $2,334,631 was also accrued during the year on the outstanding deferral amount still owing. The amount owed the County, including accrued interest, at June 30, 2021, was $35,686,497.
Note 21: Subsequent Event
On October 5, 2021 the Downey Public Financing Authority issued the Measure M Sales Tax Revenue Bonds Series 2021A for $15,275,000 and Measure R Sales Tax Revenue Bonds Series 2021B for $11,385,000. Bonds were issued to finance the design, acquisition and construction of certain local roadway and street improvement projects in the City of Downey.
