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HomeMy WebLinkAboutRDA - FY Ending 06/30/05 PALM DESERT REDEVELOPMENT AGENCY PALM DESERT, CALIFORNIA FINANCIAL STATEMENTS JUNE 30, 2005 PALM DESERT REDEVELOPMENT AGENCY JUNE 30, 2005 TABLE OF CONTENTS Page Number INDEPENDENT AUDITORS' REPORT Financial Audit 1 Compliance Audit 3 MANAGEMENT DISCUSSION AND ANALYSIS 5 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Exhibit A - Statement of Net Assets 12 Exhibit B - Statement of Activities 13 Fund Financial Statements: Exhibit C - Balance Sheet-Governmental Funds 14 Exhibit D - Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Assets 16 Exhibit E - Statement of Revenues, Expenditures and Changes in Fund Balances-Governmental Fund Types 18 Exhibit F - Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 20 Notes to Basic Financial Statements 21 SUPPLEMENTARY INFORMATION Schedule 1 - Combining Balance Sheet- Other Governmental Funds 43 Schedule 2 - Combining Statement of Revenues, Expenditures and Changes in Fund Balances-Other Governmental Funds 44 Schedule 3 - Combining Balance Sheet- Housing Authority Special Revenue Fund 46 Schedule 4 - Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Housing Authority Special Revenue Fund 48 Schedule 5 - Combining Balance Sheet-Other Governmental Funds - 50 Debt Service Schedule 6 - Combining Statement of Revenues, Expenditures and Changes in Fund Balances-Other Governmental Funds - Debt Service 51 PALM DESERT REDEVELOPMENT AGENCY JUNE 30, 2005 TABLE OF CONTENTS Page Number SUPPLEMENTARY INFORMATION (Continued) Schedule 7 - Combining Balance Sheet- Other Governmental Funds- Capital Projects 52 Schedule 8 - Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Other Governmental Funds- Capital Projects 53 Schedule 9 - Computation of Low and Moderate Housing Excess Surplus Funds 54 Brandon W.Burrows Lance Donald L.Parker SO' Sc Michael K.Chu David E.Hale ISLE A Professional Corporation Donald G.Slater LLP Richard K.Kikuchi Certified Public Accountants Retired Robert C.Lance 1914-1994 Richard C.Soll Fred J.Lunghard,Jr. 1928-I999 INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council Palm Desert Redevelopment Agency We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Palm Desert Redevelopment Agency, a component unit of the City of Palm Desert, California, as of and for the year ended June 30, 2005, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Palm Desert Redevelopment Agency's management. Our responsibility is to express opinions 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of the Palm Desert Redevelopment Agency, as of June 30, 2005, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, issued by the Comptroller General of the United States, we have also issued our report dated September 9, 2005 on our consideration of the Palm Desert Redevelopment Agency's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. The accompanying 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 required supplementary information. However, we did not audit the information and express no opinion on it. 75 YEARS 1929 2004 0� F%�CS.liesce 203 N.Brea Blvd.,Suite 203•Brea,CA 92821-4056• (714)672-0022•Fax(714)672-0331 •www.Islcpas.com Lance SoII & Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS To the Honorable Chair and Members of the Governing Board Palm Desert Redevelopment Agency Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The combining and individual nonmajor fund financial statements and Computation of Low and Moderate Housing Excess/Surplus Funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. 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. oe..„ Jet ..rte° September 9, 2005 Brandon W.Burrows Lance Donald L.Parker Soil & Michael K.Chu David E.Hale Lunghard A Professional Corporation Donald G.Slater LLP Richard K.Kikuchi Certified Public Accountants Retired Robert C.Lance 1914-1994 Richard C.Soli Fred J.Lunghard,Jr. 1928-1999 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 We have audited the financial statements of Palm Desert Redevelopment Agency as of and for the year ended June 30, 2005 and have issued our report thereon dated September 9, 2005. 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 Palm Desert Redevelopment 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 over financial reporting 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 financial statements of the Palm Desert Redevelopment Agency are free of material misstatements, 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. Such provisions included those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller and as interpreted in the Suggested Auditing Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies, issued by the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants. 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 that are required to be reported under Government Auditing Standards issued by the Comptroller General of the United States of America. 75 YEARS 1929"1\I,1P/2004 on ExCiffaiee 203 N.Brea Blvd.,Suite 203 •Brea,CA 92821-4056•(714)672-0022• Fax(714)672-0331 •www.lslcpas.com IISILance Soil & Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS To the Honorable Mayor and Members of the City Council Palm Desert Redevelopment Agency This report is intended solely for the information of the audit committee, management and the State Controller. However, this report is a matter of public record and its distribution is not limited. oelde, Jee ..rfee) September 9, 2005 CITY OF PALM DESERT MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of the Palm Desert Redevelopment Agency's (Agency) financial performance for the fiscal year ended June 30, 2005 provides a comparison of current year to prior year ending results based on the government-wide statements, an analysis on the Agency's overall financial position and results of operations to assist users in evaluating the Agency's financial position, and a discussion of significant changes that occurred in funds. In addition, it describes the activities during the year for capital assets and long-term debt. We end our discussion and analysis with a description of currently known facts, decisions and conditions that are expected to have a significant effect on the financial position or results of operations. Please read it in conjunction with the Agency's financial statements. FINANCIAL HIGHLIGHTS • The Agency's governmental activities net assets deficit decreased $6.45 million, or 11.59 percent. • During the year, the Agency had revenues that were $7.37 million more than the $64.20 million in expenses recorded by the Agency in its governmental activities. • The Agency's governmental activities program revenues and general revenues increased $6.04 million, or 9.22 percent from the prior year, and program expenses increased $12.07 million, or 23.15 percent. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and Statement of Activities (on pages 12 and 13) provide information about the activities of the Agency as a whole and present a long- term view of the Agency's finances. Fund financial statements start on page 14. For governmental activities, these fund statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the Agency's operation in more detail than the government-wide statements by providing information about the Agency's most significant funds as well as the other funds. REPORTING THE AGENCY AS A WHOLE The Statement of Net Assets and the Statement of Activities: Our analysis of the Agency as a whole begins on page 12. One of the most important questions asked about the Agency's finances is, "Is the Agency as a whole better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the Agency as a whole and about its activities in a way to answer this question. These statements include all assets and liabilities of the Agency using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Agency's net assets and changes in them. Net assets are the difference between assets and liabilities, which is one way to measure the Agency's financial health, or financial position. Over time, increases or decreases in the Agency's net assets are an indication of whether its financial health is improving or deteriorating. In the Statement of Net Assets and the Statement of Activities, we separate the Agency into general government, apartment complexes, public works, payments to other agencies and interest on long-term debt. REPORTING THE AGENCY'S MOST SIGNIFICANT FUNDS Fund Financial Statements: The fund financial statements provide detailed information about the most significant funds and other funds - not the Agency as a whole. Some funds are required to be established by State law and by bond covenants. However, management established many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants and other resources. The Agency only has governmental type funds. 5 Governmental Funds - Most of the Agency's basic services are reported in governmental funds, which focus on how money flows in and out of those funds and the balances left at year-end that are available for spending. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Agency's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Agency's programs. The differences of results in the Governmental Fund financial statements to those in the Government-Wide financial statements are explained in a reconciliation following each Governmental Fund financial statement. THE AGENCY AS A WHOLE The Agency's net assets deficit decreased $6.45 million from $(55.62) million to $(49.17) million. Our analysis below focuses on the net deficit (Table 1)and changes in net deficit (Table 2) of the Agency's governmental activities. TABLE 1 NET ASSETS (IN MILLIONS) As of June 30, 2005 and 2004 Government Activities 2005 2004 Current and restricted assets $ 157.99 $ 166.65 Capital assets 108.79 98.54 TOTAL ASSETS 266.78 265.19 Long-term liabilities outstanding 284.99 256.98 Other liabilities 30.96 63.85 TOTAL LIABILITIES 315.95 320.83 Net assets (deficit): Invested in capital assets, net of related debt 12.47 27.16 Restricted 41.19 36.81 Unrestricted (102.83) (119.59) TOTAL NET ASSETS (DEFICIT) $ (49.17) $ (55.62) Compared to the prior year, net assets deficit of the Agency's governmental activities decreased by$6.45 million. The Agency's Net Assets is made up of three components: Investment in Capital Assets, Net of Related Debt, Restricted Net Assets and Unrestricted Net Deficit. Unrestricted deficit, the part of net deficit that can be used to finance day-to- day operations, decreased from $(119.59) million to $(102.83) million, or 14.01 percent. The Agency currently has an unrestricted net deficit because of the debt it has issued. Proceeds from the debt were used for capital improvements on behalf of the City or contributed to developers and is not offset by investments in capital assets. The major change in the Agency's governmental activities total assets was from capital assets, which increased due to the purchase of land and buildings, and construction of various projects. Total liabilities decreased by$4.88 million, the major contributor to the decrease is the payment of bond principal. 6 TABLE 2 CHANGES IN NET ASSETS (IN MILLIONS) As of June 30, 2005 and 2004 Government Activities 2005 2004 REVENUES: Program Revenues: Charges for services $ 4.68 $ 4.77 General Revenues: Tax increment 62.01 55.99 Other income 2.14 2.75 Investment earnings 2.74 2.02 TOTAL REVENUES 71.57 65.53 EXPENSES: General government 8.09 6.09 Apartment complexes 6.95 6.13 Public works 5.09 0.78 Payments to other agencies 30.19 24.05 Interest on long-term debt 13.88 15.08 TOTAL EXPENSES 64.20 52.13 INCREASE (DECREASE) IN NET ASSETS 7.37 13.40 BEGINNING NET ASSETS (55.62) (68.46) RESTATEMENT OF NET ASSETS (0.92) (0.56) ENDING NET ASSETS $ (49.17) $ (55.62) Governmental Activities Total revenues increased from $65.53 million to $71.57 million, an 8.44 percent increase. The major factor that contributed to the increase was the following: • Increase in property values provided additional tax increment. 7 The following schedule represents the net cost of providing services: Government Activities Net (Expense) Revenue (In Millions) 2005 2004 General Government $ (8.09) $ (6.08) Apartment Complexes (2.27) (1.36) Public Works (5.09) (0.79) Payment to Other Agencies (30.19) (24.05) Interest on Long-Term Debt (13.88) (15.08) TOTAL $ (59.52) $ (47.36) THE AGENCY'S FUNDS On pages 14 and 15, the governmental funds balance sheet is shown. The combined fund balance of$125.21 million increased from $100.71 million, or 24.33 percent. The Agency has reserved $ 64.72 million for encumbrances, continuing appropriations, loans and notes, debt service, etc. More detailed information about the combined fund balance reserves is presented in Note 10 to the financial statements. Major funds balance changes are noted below: • For the Low and Moderate Income Housing Fund, fund balance increased due to the increase in tax increment received by the Redevelopment Agency. • For the Redevelopment Agency Financing Authority Debt Service Fund, fund balance decreased due to the interest and principal payment of debt. • For the Redevelopment Agency Project Area 1, and 4 Debt Service Funds, fund balance decreased as a result of transfers to the Financing Authority for interest and principal payments. This decrease in Project Area 1 was offset by a restatement which increased fund balance moving advances from the City to long- term debt. • For the Redevelopment Agency Project Area 2 Debt Service Fund, fund balance increased as a result of an increase in tax increment and as a result of a fund balance restatement moving advances from the City to long-term debt. • For the Redevelopment Agency Capital Project Areas 1, and 4 Funds, fund balances decreased as the results of capital projects expenditures. In addition to the major funds, fund balances of other governmental funds had significant changes. The Housing Authority Special Revenue fund had a decrease of $.87 million from the prior year. This was due to capital expenditures for the improvement of the apartment complexes. Project Area 3 debt service fund balance increased due to the increase in tax increment. Project Area 2 and 3 capital project fund balances decreased due to capital projects expenditures. More detailed information on the fund financial statements balances is presented in the notes to the financial statements. Budgetary Highlights During the year, with the recommendation from the Agency's staff, the Agency's Board revised the Agency budget several times. Adjustments were made on a monthly basis as the Agency's staff requested additional appropriations to cover the cost of projects that either had change orders for additional work, or the estimated cost at the beginning of the project was under estimated. At mid-year, adjustments were made as department heads requested increases or decreases to their budgets to maintain their current level of services. At year-end, budgets were adjusted for unanticipated expenditures. The Agency's Board approves all amendments that either increase or decrease appropriations. Formal budgetary integration is employed as a management control device during the year for the special revenue and capital project funds. Budgetary data for the special revenue and capital projects funds are not presented herein, as the budgets for these funds are long-term in nature. More detailed information about the Agency's budget is 8 presented in Note 1 (g)to the financial statements. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of 2005, the Agency had $108.79 million invested in a broad range of capital assets, including land, buildings and improvements, apartment complexes, vehicles and equipment (See Table 3). This amount represents a net increase (including additions and deductions) of$10.25 million, or 10.40 percent over last year. TABLE 3 CAPITAL ASSETS AT YEAR-END (NET OF DEPRECIATION, IN MILLIONS) For the Years Ended June 30, 2005 and 2004 Governmental Activities 2005 2004 Land $ 49.89 $ 46.81 Construction in progress 16.73 7.81 Buildings and improvements 42.13 43.87 Equipment 0.04 0.05 TOTAL $ 108.79 $ 98.54 This year's major additions included (in millions): Land acquisition for open space and for development of low income housing, $ 2.51 Purchase of Child Care Center, and 0.90 Construction in progress of Entrada Del Paseo 3.22 $ 6.63 The Agency's fiscal year 2006 capital budget calls for it to spend $24.76 million plus continuing projects of $45.22 million. The majority being the reimbursement to other governments for capital projects, land development, construction of a regional park, construction of low-income family housing, construction of storm drain, and the undergrounding of utilities. More detailed information about the Agency's capital assets is presented in Note 1(d) and Note 6 to the financial statements. 9 Debt At year-end, the Agency's governmental activities had $284.99 million in bonds and notes versus $256.98 million last year, an increase of$28.01 million, or 10.90 percent as shown in Table 4. TABLE 4 OUTSTANDING DEBT AT YEAR END (IN MILLIONS) For the Years Ended June 30, 2005 and 2004 Governmental Activities 2005 2004 Notes payable $ 0.86 $ 0.98 Advances 32.79 Revenue bonds and notes (backed by specific tax and fee revenues) 251.34 256.00 TOTALS $ 284.99 $ 256.98 Increase in debt is due to the reclassification of advances made by the City to the Agency for capital projects. In prior years these advances were not recorded under long-term debt. The Agency was able to meet its current year debt obligation in a timely manner. Debts issued in the prior year have been used to finance various capital projects. An example of this would be the purchase of land, and construction of the City's golf course. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS In preparing the budget for 2006, management looked at the following economic factors: • In prior years, the City had unallocated reserves in its capital projects and special revenue funds that could be used to start and complete Agency's projects in an effort to maximize the Agency's cash flow. In the five-year capital improvement program, all restricted capital funds for the City have been allocated to various projects. Any additional projects would require that the Agency fund their own projects. • Issue of new bonds for capital projects. The City of Palm Desert continues to grow with new hotels, commercial and residential development, construction of a four-year university, street improvements, park construction, and various other improvement projects. The 2006 capital improvement project budget is a reflection of the Agency's commitment to the residents of Palm Desert. A copy of the City's 2005-2006 financial plan can be obtained by contacting the City Finance Department (See below). CONTACTING THE AGENCY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the Agency's finances and to show the Agency's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City's Finance Department at the City of Palm Desert, 73-510 Fred Waring Drive, Palm Desert, California 92260-2578, or(760) 346-0611. 10 THIS PAGE INTENTIONALLY LEFT BLANK 11 PALM DESERT REDEVELOPMENT AGENCY Exhibit A STATEMENT OF NET ASSETS JUNE 30, 2005 Governmental Activities Assets: Cash and investments $ 98,643,285 Receivables 13,895,405 Property held for resale 574,933 Prepaid items and deposits 593,256 Deferred charges 5,047,746 Restricted assets: Cash with fiscal agent 39,236,260 Capital assets (net of accumulated depreciation) 108,790,401 Total Assets $ 266,781,286 Liabilities: Accounts payable $ 3,123,723 Accrued liabilities 124,792 Interest Payable 3,355,393 Deposits payable 311,916 Unearned revenue 24,906 Amounts due under pass-through agreements 24,022,594 Noncurrent liabilities: Due within one year 5,607,707 Due in more than one year 279,377,800 Total Liabilities $ 315,948,831 Net Assets: Invested in capital assets, net of related debt $ 12,471,244 Restricted for: Special Projects 41,186,288 Unrestricted (deficit) (102,825,077) Total Net Assets $ (49,167,545) See Notes to Financial Statements 12 PALM DESERT REDEVELOPMENT AGENCY Exhibit B STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005 Net(Expense) Revenue and Changes in Program Revenues Net Assets Operating Capital Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities Primary Government: Governmental Activities: General administration $ 8,096,216 $ - $ - $ - $ (8,096,216) Apartment complexes 6,948,618 4,682,390 - - (2,266,228) Public works 5,088,705 - - - (5,088,705) Payments to other agencies 30,187,272 - - - (30,187,272) Interest on long-term debt $13,881,735 - - - (13,881,735) Total Primary Government $64,202,546 $ 4,682,390 $ - $ - (59,520,156) General Revenues: Taxes: Tax increment 62,013,998 Rental income 12,725 Gain (loss)on sale of land 526,000 Other revenues 1,605,272 Investment earnings 2,739,273 Total General Revenues 66,897,268 Change in Net Assets $ 7,377,112 Net Assets- Beginning of Year, as Originally Reported $(55,628,884) Restatement (915,773) Net Assets- Beginning of Year, as Restated (56,544,657) Change in Net Assets 7,377,112 Net Assets -End of Year $(49,167,545) See Notes to Financial Statements 13 PALM DESERT REDEVELOPMENT AGENCY BALANCE SHEET-GOVERNMENTAL FUNDS JUNE 30,2005 Debt Service Funds Low and Moderate Income Project Project Project Housing Area 1 Area 2 Area 4 Assets: Cash and investments $ 20,938,839 $ 39,501,668 $ 11,165,552 $ 10,566,076 Cash with fiscal agent-restricted 4,405,872 - - - Receivables 8,508,778 441,323 99,846 184,484 Property held for resale 574,933 - - - Prepaid items and deposits 2,768 - - - Due from other apartment - - - - Total Assets $ 34,431,190 $ 39,942,991 $ 11,265,398 $ 10,750,560 Liabilities and Fund Balances: Liabilities: Accounts payable $ 286,268 $ 7,071 $ 1,908 $ 1,909 Accrued liabilities 7,750 - - - Deposits payable - - - - Deferred revenue 128,374 - - - Unearned revenue - - - - Due to other apartment - - - - Amounts due-pass-through agreement - 12,697,088 1,752,585 9,235,143 Total Liabilities 422,392 12,704,159 1,754,493 9,237,052 Fund Balances (Deficit): Reserved 30,155,363 - - - Unreserved 3,853,435 27,238,832 9,510,905 1,513,508 Total Fund Balances (Deficit) 34,008,798 27,238,832 9,510,905 1,513,508 Total Liabilities and Fund Balances $ 34,431,190 $ 39,942,991 $ 11,265,398 $ 10,750,560 See Notes to Financial Statements 14 Exhibit C Debt Service Capital Funds Projects Funds Other Total Financing Project Project Governmental Governmental Authority Area 1 Area 4 Funds Funds $ - $ 2,660,627 $ - $ 13,810,523 $ 98,643,285 1,674,987 11,887,481 14,929,485 6,338,435 39,236,260 4,532 2,397,373 2,105,930 153,139 13,895,405 - - - - 574,933 - 590,488 - - 593,256 - - - 1,560,296 1,560,296 $ 1,679,519 $ 17,535,969 $ 17,035,415 $ 21,862,393 $ 154,503,435 $ - $ 1,265,270 $ 1,148,552 $ 412,745 $ 3,123,723 6,591 18,156 - 92,295 124,792 - - - 311,916 311,916 - - - - 128,374 - - - 24,906 24,906 - - - 1,560,296 1,560,296 - - - 337,778 24,022,594 6,591 1,283,426 1,148,552 2,739,936 29,296,601 720,390 9,465,581 14,264,451 10,116,471 64,722,256 952,538 6,786,962 1,622,412 9,005,986 60,484,578 1,672,928 16,252,543 15,886,863 19,122,457 125,206,834 $ 1,679,519 $ 17,535,969 $ 17,035,415 $ 21,862,393 $ 154,503,435 See Notes to Financial Statements 15 PALM DESERT REDEVELOPMENT AGENCY Exhibit D RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30,2005 Total fund balance for governmental funds 125,206,834 Amounts reported for govenrmental activities in the statement of net assets are different because: When capital assets(land, buildings,equipment)that are to be used in governmental activities are purchased or constructed,the costs of those assets are reported as expenditures in governmental funds. However,the statement of net assets includes those capital assets among the assets of the Agency as a whole: Beginning Balance, net depreciation 98,544,774 Current year additions 12,474,283 Current year deletions (469,767) Current year depreciation (1,758,889) Ending Balance, net depreciation 108,790,401 108,790,401 Long-term liabilities applicable to the Agency's governmental activities are not due and payable in the current period and,accordingly,are not reported as fund liabilities. All liabilities, both current and long-term,are reported in the statement of net assets. (284,985,507) Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. (3,355,393) Interest earned but not received within the availability period 128,374 The cost of issuing bonds is recognized as an expenditure in the period paid,however, in the statement of net assets,it is amortized over the life of the bonds. 5,047,746 Net assets of governmental activities $ (49,167,545) See Notes to Financial Statements 16 THIS PAGE INTENTIONALLY LEFT BLANK 17 PALM DESERT REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUND TYPES FOR THE YEAR ENDED JUNE 30,2005 Special Revenue Fund Debt Service Funds Low and Moderate Income Project Project Project Housing Area 1 Area 2 Area 4 Revenues: Taxes $ - $ 36,861,769 $ 13,184,843 $ 9,595,403 Investment income 553,392 712,883 192,194 85,344 Rental income 12,725 - - - Other revenues 827,382 515,347 - - Total Revenues 1,393,499 38,089,999 13,377,037 9,680,747 Expenditures: Current: General government 1,724,327 19,029 12,818 5,750 Payments to other agencies - 16,070,486 6,248,299 6,549,327 Public works - - - - Capital outlay 2,984,518 - - - Debt Service: Interest and fiscal charges - 624,031 468,713 - Principal retirement - - 122,707 - Total Expenditures 4,708,845 16,713,546 6,852,537 6,555,077 Excess of Revenues Over(Under) Expenditures (3,315,346) 21,376,453 6,524,500 3,125,670 Other Financing Sources (Uses): Transfers in from the City of Palm Desert 146,669 - - - Transfers out to the City of Palm Desert - - - - Sale of property 526,000 - - - Transfers in 12,402,801 - 669 - Transfers out (4,620,527) (21,472,653) (5,467,659) (3,740,603) Total Other Financing Sources(Uses) 8,454,943 (21,472,653) (5,466,990) (3,740,603) Net Change in Fund Balances $ 5,139,597 $ (96,200) $ 1,057,510 $ (614,933) Fund Balances(Deficit)- Beginning of Year $ 28,869,201 $ 17,323,175 $(12,537,665) $ 2,128,441 Restatements - 10,011,857 20,991,060 - Fund Balances(Deficit)-Beginning of Year, as Restated 28,869,201 27,335,032 8,453,395 2,128,441 Net Change in Fund Balances 5,139,597 (96,200) 1,057,510 (614,933) Fund Balances(Deficit)-End of Year $ 34,008,798 $ 27,238,832 $ 9,510,905 $ 1,513,508 See Notes to Financial Statements 18 Exhibit E Debt Service Funds Capital Projects Funds Other Total Financing Project Project Governmental Governmental Authority Area 1 Area 4 Funds Funds $ - $ - $ - $ 2,371,983 $ 62,013,998 133,950 380,753 288,719 390,763 2,737,998 - - 4,418,190 4,430,915 454 115,420 - 137,101 1,595,704 134,404 496,173 288,719 7,318,037 70,778,615 117 2,760,233 1,369,859 7,393,811 13,285,944 - - 1,319,160 30,187,272 5,584,211 3,040,896 864,658 12,474,283 12,404,672 - - 39,803 13,537,219 5,515,000 - - - 5,637,707 17,919,789 8,344,444 4,410,755 9,617,432 75,122,425 (17,785,385) (7,848,271) (4,122,036) (2,299,395) (4,343,810) - - - - 146,669 (15,004) (4,603,934) - (4,618,938) - - - 526,000 17,827,739 5,548,543 5,210,617 767,049 41,757,418 (5,028,940) - (81,081) (1,345,955) (41,757,418) 12,798,799 5,533,539 525,602 (578,906) (3,946,269) $ (4,986,586) $ (2,314,732) $ (3,596,434) $ (2,878,301) $ (8,290,079) $ 6,659,514 $18,567,275 $ 19,483,297 $ 20,218,195 $100,711,433 - - 1,782,563 32,785,480 6,659,514 18,567,275 19,483,297 22,000,758 133,496,913 (4,986,586) (2,314,732) (3,596,434) (2,878,301) (8,290,079) $ 1,672,928 $16,252,543 $ 15,886,863 $ 19,122,457 $125,206,834 19 PALM DESERT REDEVELOPMENT AGENCY Exhibit F RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVIES June 30,2005 Net change in fund balances -total governmental funds Amounts reported for governmental activities in the statement of activities are different because: $ (8,290,079) When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. 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 additions/deletions($12,004,516)exceeded depreciation ($1,758,890)in the current period. 10,245,626 Repayment of long-term debt is reported as expenditures in governmental funds and, thus, has the effect of reducing fund balance because current financial resources have been used. For the Agency as a whole, however, the principal payments reduce the liabilities in the statement of net assets and do not result in an expense in the statement of activities. 5,637,707 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Net change in accrued interest for the current period. (140,374) The cost of issuing bonds is recognized as an expenditure in the period paid, however, in the statement of net assets, it is amortized over the life of the bonds. (204,142) Revenue will not be collected within 60 days of the City's fiscal year end and, therefore, are not considered available in the governmental funds: Interest not received on development disposition agreement 128,374 Change in net assets of governmental activities $ 7,377,112 See Notes to Financial Statements 20 PALM DESERT REDEVELOPMENT AGENCY NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2005 I. SIGNIFICANT ACCOUNTING POLICIES Note 1: Summary of Significant Accounting Policies a. Basis of Presentation Government-Wide Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the Agency. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovern-mental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Palm Desert Redevelopment Agency has no business-type activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. Fund Financial Statements The accounting system of the Agency is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues and expenditures. An emphasis is placed on major funds within the governmental category. A fund is considered major if total assets, liabilities, revenues or expenditures of that individual governmental fund are at least 10% of the corresponding total for all funds of that category or type. The funds of the Agency are described below: Governmental Fund Types Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of specific revenue resources (other than major capital projects) that are legally restricted to expenditures for specified purposes. 21 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Debt Service Funds - Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term obligation principal, interest and related costs. Capital Projects Funds - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. The Agency's major governmental funds are as follows: The Low and Moderate Income Housing Special Revenue Fund is used to account for the tax increment set-aside to be spent on projects that benefit low and moderate income families. Project Area 1 Debt Service Fund is used to account for the tax increment revenues and expenditures of Project Area 1. Project Area 2 Debt Service Fund is used to account for tax increment revenues and expenditures of Project Area 2. Project Area 4 Debt Service Fund is used to account for tax increment revenues and expenditures of Project Area 4. The Financing Authority Debt Service Fund is used to account for the resources and payment of the debt issued by the Palm Desert Financing Authority and loaned to the Redevelopment Agency. Project Area 1 Capital Projects Fund is used to account for the fiscal activities of Project Area 1 of the Palm Desert Redevelopment Agency. Project Area 4 Capital Projects Fund is used to account for the fiscal activities of Project Area 4 of the Palm Desert Redevelopment Agency. b. Measurement Focus and Basis of Accounting Measurement Focus Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded regardless of the measurement focus applied. On the government-wide statement of net assets and the statement of activities, activities are presented using the economic resources measurement focus. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the government are reported. In the fund financial statements, all governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balances (net current assets) are considered a measure of "available spendable resources". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. 22 Palm Desert Redevelopment Agency Notes to Financial Statements(Continued) Note 1: Summary of Significant Accounting Policies(Continued) Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets, in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources" since they do not represent net current assets. Noncurrent portions of long-term receivables are offset by fund balance reserve accounts. Basis of Accounting In the government-wide statement of net assets and statement of activities, the governmental activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when "measurable and available". Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or soon enough thereafter to pay current liabilities. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. Property taxes, rents and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. 23 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) c. Differences between Government-Wide Financial Statements and Fund Financial Statements: Explanation of differences between Governmental Funds Balance Sheets and the Statement of Net Assets: Long-Term Debt Reclassifi- Total Capital Transactions/ cations Statement Governmental Related Interest and of Net Funds Items Payable Eliminations Assets Assets: Cash and investments $ 98,643,285 $ - $ - $ - $ 98,643,285 Cash with fiscal agent 39,236,260 - - - 39,236,260 Receivables 13,895,405 - - - 13,895,405 Property held for resale 574,933 - - - 574,933 Due from other apartment 1,560,296 - - (1,560,296) - Prepaid items and deposits 593,256 - - - 593,256 Deferred charges - - 5,047,746 - 5,047,746 Capital assets - 108,790,401 - - 108,790,401 Total Assets 154,503,435 108,790,401 5,047,746 (1,560,296) 266,781,286 Liabilities: Accounts payable 3,123,723 - - - 3,123,723 Accrued liabilities 124,792 - - - 124,792 Interest payable - - 3,355,393 - 3,355,393 Deposits payable 311,916 - - - 311,916 Deferred revenue 128,374 - - (128,374) - Unearned revenue 24,906 24,906 Due to other apartment 1,560,296 - - (1,560,296) - Amounts due under pass-through agreements 24,022,594 - - - 24,022,594 Long-term liabilities-current - - 5,607,707 - 5,607,707 Long-term liabilities- noncurrent - - 279,377,800 - 279,377,800 Total Liabilities 29,296,601 - 288,340,900 (1,688,670) 315,948,831 Net Assets(Deficit) $ 125,206,834 $ 108,790,401 $ (283,293,154) $ 128,374 $ (49,167,545) 24 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies(Continued) Explanation of differences between Governmental Funds Operating Statements and the Statement of Activities: Debt Reclass- Total Capital Transactions/ Other ifications Statement Governmental Related Interest Revenues and of Funds Items Payable Expenses Eliminations Activities Revenues: Taxes $ 62,013,998 $ - $ - $ - $ - $ 62,013,998 Use of money and property 2,737,998 - - 128,374 (127,099) 2,739,273 Rental income 4,430,915 - - - (4,418,190) 12,725 Apartment complexes - - - - 4,682,390 4,682,390 Other income 1,595,704 - - - 9,568 1,605,272 Total Revenues 70,778,615 - - 128,374 146,669 71,053,658 Expenditures: Current: General government 13,285,944 379,427 - - (5,569,155) 8,096,216 Payment to other agencies 30,187,272 - - - - 30,187,272 Apartment complexes - 1,379,463 - - 5,569,155 6,948,618 Public works - 469,767 - - 4,618,938 5,088,705 Capital outlay 12,474,283 (12,474,283) - - - - Debt service: Interest and fiscal charges 13,537,219 - 344,516 - - 13,881,735 Principal retirement 5,637,707 - (5,637,707) - - - Total Expenditures 75,122,425 (10,245,626) (5,293,191) _ - 4,618,938 64,202,546 Other Financing Sources(Uses): Sale of property 526,000 - - - - 526,000 Transfers in from City 146,669 - - - (146,669) - Transfers out to City (4,618,938) - - - 4,618,938 - Transfers in 41,757,418 - - - (41,757,418) - Transfers out (41,757,418) - - - 41,757,418 - Total Other Financing (3,946,269) - - - 4,472,269 526,000 Net Change in Fund Balance $ (8,290,079) $ 10,245,626 $ 5,293,191 $ 128,374 $ - $ 7,377,112 d. Capital Assets and Depreciation Capital assets are reported in the government-wide financial statements. Capital assets are defined by the Agency as assets with an initial cost of more than $500 and an estimated life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The Agency had no infrastructure assets. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 40 Improvements other than buildings 20 Machinery and equipment 5 -8 25 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) e. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. f. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. g. Budgetary Accounting The Agency uses the following procedures in establishing its budgetary data reported in the financial statements: 1. Before the beginning of the fiscal year, the Executive Director submits to the Board of Directors a proposed budget for the year commencing the following July 1. 2. Public hearings are conducted to obtain taxpayer comments. 3. The Budget is subsequently adopted through passage of a resolution. 4. Original appropriations are modified by supplementary appropriations and transfers among budget categories. The Board approves all significant changes. Annual appropriations lapse at year-end. 5. Encumbrances and Continuing Appropriations are rebudgeted as of July 1 by Board action. They are reported as reservations of fund balance in the fund-level financial statements. 6. Formal budgetary integration is employed as a management control device during the year for the Special Revenue and Capital Projects Funds. Formal budgetary integration is not employed for Debt Service Funds because effective budgetary control is alternatively achieved through debt indenture provisions. 7. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Budgetary data for the Special Revenue Funds and Capital Projects Funds are not presented herein, as the budgets for these funds are long-term in nature. h. Investments Investments are stated at fair value (quoted market price or the best available estimate thereof). 26 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) i. Property Held for Resale The Agency purchased land within the Agency's project area. The land held for resale is recorded in the Redevelopment Agency Special Revenue Fund as property held for resale, at the lower of acquisition cost or net realizable value. At June 30, 2005, the cost of the property held for resale for various housing properties in Palm Desert totaled $574,933. j. Prepaid Items and Deposits Certain payments to vendors reflect costs applicable to future accounting periods are recorded as prepaid items in the government-wide and fund financial statements. The Agency has deposited $571,281 with Coachella Valley Water District for future sewer connection charges at the Indian Springs Mobile Home Park, and $1,025 in escrow to purchase various properties. An additional $20,950 of miscellaneous prepaid items is included in this account. k. Property Tax Calendar Property taxes are assessed and collected each fiscal year according to the following property tax calendar: Lien Date January 1 Levy Date July 1 to June 30 Due Date November 1 - 1st Installment March 1 -2nd Installment Delinquent Date December 10- 1st Installment April 10- 2nd Installment Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the agencies based on complex formulas prescribed by the state statutes. I. Relationship to the City of Palm Desert The Palm Desert Redevelopment Agency is an integral part of the reporting entity of the City of Palm Desert, California. The funds and account groups of the Agency have been included within the scope of the basic financial statements of the City because the City Council of the City of Palm Desert exercises oversight responsibility over the operations of the Agency. Only the funds and account groups of the Agency are included herein and these financial statements, therefore, do not purport to represent the financial position or results of operations of the City of Palm Desert. Note 2: Organization and Tax Increment Financing The Agency is a separate governmental entity as prescribed in the California Community Redevelopment law and as set forth in the Health and Safety Code of the State of California. The Agency consists of Project Area 1, Project Area 2, Project Area 3 and Project Area 4. In addition, the Agency and the City of Palm Desert (the City) have established the Palm Desert Financing Authority as a joint power of authority between the Agency and the City for purposes of financing and funding capital improvements. Transactions related to the joint power for the Agency are recorded in a debt service fund. The Palm Desert Housing Authority was established in January 1998 as a component unit of the Agency and is partly responsible for the administration of providing affordable housing in the City of Palm Desert. The apartment complexes owned by the Housing Authority are operated by a management company. The transactions related to the Housing Authority are reported in a Special Revenue Fund. 27 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 2: Organization and Tax Increment Financing (Continued) Agency expenses include capital improvement projects and operating costs which include required staff support and consultant services. The Agency's primary source of revenue comes from property taxes, referred to in the accompanying financial statements as "tax increment revenue". The assessed valuation of all property within each project area was determined on the date of adoption of the Project Area. Except for certain amounts provided by specific agreement (see Note 7), property taxes related to the incremental increase in assessed values after the adoption of the Project Area have been allocated to the Agency, while all property taxes on the "frozen" assessed valuation as of the adoption date have been allocated to the City and other districts. Note 3: Cash and Investments Cash and investments reported in the accompanying financial statements consisted of the following: Cash and investments pooled with the City $ 98,463,285 Cash and investments with fiscal agent 39,236,260 $ 137,699,545 The Agency's funds are pooled with the City of Palm Desert's cash and investments in order to generate optimum interest income. The City has implemented GASB Statement No. 40, Deposit and Investment Risk Disclosures. GASB No. 40 establishes and modifies disclosure requirements related to deposit and investment risks. The information required by GASB Statement No. 40 related to authorized investments, credit risk, etc., is available in the annual report of the City. Note 4: Loans, Notes Receivable and Due from Other Governmental Agencies Receivables consisted of the following at June 30, 2005: Low and Other Moderate Debt Service Capital Projects Govern- Total Income Project Project Project Financing Project Project mental Governmental Housing Area 1 Area 2 Area 4 Authority Area 1 Area 4 Funds Receivables Accounts $ 528,939 $ 441,323 $ 99,846 $184,484 $ - $ 99,265 $ 1,353,857 Interest 138,253 - - - 4,532 870,490 105,930 53,874 1,173,079 Loans 182,149 - - - - - - - 182,149 Notes 7,659,437 - - - - 1,526,883 2,000,000 - 11,186,320 $ 8,508,778 $ 441,323 $ 99,846 $184,484 $ 4,532 $ 2,397,373 $2,105,930 $153,139 $ 13,895,405 Loans Receivable a. The Agency has loaned $105,763 in below market loans, secured by deeds of trust, to eligible low- income households. Monthly payments of interest and principal are due over a period of 30 years unless the homes are sold, in which case the entire loan balance is due and payable. b. The Agency has $76,386 in home improvement loans. Payments of interest and principal are due monthly on these loans. c. The Agency has issued loans for several other projects, all of which are secured by a deed of trust. A valuation allowance equal to the loan balance has been recognized as there is a significant possibility that these loans either become uncollectible or forgiven by the Agency at a future date if all the terms of the loans have been met. 28 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 4: Loans, Notes Receivable and Due from Other Governmental Agencies (Continued) Detailed information for these loans is as follows: Loan Balance Interest Maturity Project Name Outstanding Rate Date Secured By Special Provisions of Loan Self-Help $ 429,000 7.25% 30 years Deed of Trust Loan balance and interest Housing Program or 2024 due upon maturity, unpaid balance of loan or interest will bear an interest rate of 12%. Home Improvement 70,000 N/A N/A Deed of Trust Loan is payable upon Loans change or transfer of title, refinancing or upon the death of the borrower. Portola Palms 249,208 3.00% 30 years Deed of Trust Loan balance and interest Mobilehome Park from date will be forgiven at maturity of loan if debtor does not breach the terms and conditions of either the unit regulatory agreement or note. Desert Rose 2,051,403 3.00% 30 years Deed of Trust Loan will be forgiven at from date maturity unless the debtor of loan is in violation of the unit regulatory agreement or the deed of trust. Acquisition, 52,000 3.00% 30 years Deed of Trust Loan balance and interest Rehabilitation, from date Assignment will be forgiven at maturity Resale of loan of Rent if debtor does not breach the terms and conditions of either the unit regulatory agreement or note. Notes Receivable A loan receivable for the construction of a multi-family affordable housing development dated June 14, 2001 with a balance of$7,659,437 is due from the Palm Desert Development Company. The loan is secured by a Deed of Trust, with assignment to property, rent and fixtures on the housing development located in Palm Desert. Interest is earned and due annually at a rate of 1% per annum from the date on which the final certificate of occupancy is issued. Principal on the loan is based on the applicable agency's percentage of positive net cash flow derived from the operations of the Development. Due From Other Governmental Agencies The Agency entered into a cooperative agreement with the County of Riverside (County) and Desert Community College District (District) to construct and operate a regional library. On behalf of the County and District, the Agency advanced payments on this project, which are to be repaid from certain County Library and District pass-through funds (see Note 7). The advances earn interest at 6.44% until paid. At June 30, 2005, amounts due from the County and District were $ 0 and $1,526,883, respectively. 29 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 4: Loans, Notes Receivable and Due from Other Governmental Agencies(Continued) On April 21, 2003, the Agency entered into a loan agreement with The Regents of the University of California, on behalf of its Riverside Campus, to loan various amounts over a period of time, not to exceed an aggregate amount of $2,000,000. Proceeds of the loan are to be used for capital improvements at the University's Riverside Campus. The outstanding principal balance and interest on the note is due in five annual payments beginning on a future date yet to be determined. As of June 30, 2005, the amount outstanding on the loan was $2,000,000. Note 5: Interfund Receivable, Payable and Transfers The composition of interfund balances as of June 30, 2005 is as follows: Interfund Transfers Transfers To Spedal Debt Capital Revenue Service Projects Low and tvbderate Other Income Financing Project Project Project Governmental Housing Authority Area 2 Area 1 Area 4 Funds Total Transfers From: Low and tvbderate Income Housing $ - $ 4,234,431 $ - $ 386,096 $ - $ - $ 4,620,527 Debt Service Project Area 1 7,372,354 9,273,008 - 4,827,291 - - 21,472,653 Debt Service Project Area 2 2,636,969 2,410,670 - - 420,020 5,467,659 Debt Service Project Area 4 1,919,081 1,612,667 - 208,855 - 3,740,603 Debt Service Financing Authority - - 669 6,838 5,001,762 19,671 5,028,940 Capital Projects ProjcetArea4 - - - 81,081 - - 81,081 Other Govemmental Funds 474,397 296,963 - 247,237 - 327,358 1,345,955 Totals $ 12,402,801 $ 17,827,739 $ 669 $ 5,548,543 $ 5,210,617 $ 767,049 $ 41,757,418 Transfers are used to: 1. move receipts restricted to debt service from the funds collecting the receipts to the debt service funds as debt service payments become due, 2. transfer 20% of tax increments received by RDA Debt Service Funds to the Low and Moderate Income Housing Special Revenue Fund, 3. transfer allocation of administrative expenses, 4. transfer revenues to provide for capital projects, and 5. reimburse the Low and Moderate Income Housing Special Revenue Fund from RDA Capital Project Area 1 for expenditures related to general redevelopment projects. 30 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 6: Capital Assets A summary of changes in capital assets for the year ended June 30, 2005 is as follows: Balance at Balance at Primary Government: July 1, 2004 Additions Deletions June 30, 2005 Capital assets, not being depreciated: Land $ 46,813,216 $ 3,077,272 $ 49,890,488 Construction-in-progress 7,809,459 9,391,382 469,767 16,731,074 Total Capital Assets Not Being Depreciated 54,622,675 12,468,654 469,767 66,621,562 Capital assets, being depreciated: Buildings 56,845,247 - - 56,845,247 Improvements other than buildings 7,232,558 - - 7,232,558 Machinery and equipment 132,630 5,629 - 138,259 Total Capital Assets Being Depreciated 64,210,435 5,629 - 64,216,064 Less accumulated depreciation for: Buildings (18,574,121) (1,379,463) - (19,953,584) Improvements other than buildings (1,634,127) (361,628) - (1,995,755) Machinery and equipment (80,088) (17,798) - (97,886) Total Accumulated Depreciation (20,288,336) (1,758,889) - (22,047,225) Net Capital Assets Being Depreciated 43,922,099 (1,753,260) - 42,168,839 Net Capital Assets Governmental Activities $ 98,544,774 $ 10,715,394 $ 469,767 $ 108,790,401 Note 7: Amounts Due Under Pass-Through Agreements Property taxes related to the incremental increase in assessed values after the adoption of the Redevelopment Plan are, except where otherwise provided by specific agreement, allocated to the Agency. The Agency has entered into various pass-through agreements with other agencies to allocate its tax increment revenue. 31 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 7: Amounts Due Under Pass-Through Agreements (Continued) At June 30, 2005, the Agency has an obligation of$24,022,594 to other agencies and entities related to specific pass-through agreements as follows: Balance at Balance at Entity July 1,2004 Additions Payments June 30,2005 Riverside County- Capital Improvement $ 15,097,832 * $ 11,188,713 $ 17,227,264 $ 9,059,281 Riverside County-Schools 406,182 480,673 406,181 480,674 Riverside County- Library 974,364 * 1,304,446 8,638 2,270,172 Riverside County- Fire 1,809,932 2,145,213 1,809,932 2,145,213 Coachella Valley Mosquito Abatement District 340,399 442,567 340,401 442,565 Coachella Valley Water District 3,255,399 842,427 2,198 4,095,628 Desert Community College District 258,335 * 821,536 779,092 300,779 Desert Sands Unified School District 3,135,870 * 3,692,447 3,135,871 3,692,446 Coachella Valley Recreation and Park District 216,496 348,261 216,495 348,262 Coachella Valley Resources District 12,469 2,977 12,469 2,977 Palm Springs Unified School District 88,682 134,641 88,682 134,641 County Juvenile Health District 693,307 1,174,312 1,304,738 562,881 Other Deposits 600,242 68,201 181,368 487,075 $ 26,889,509 $ 22,646,414 $ 25,513,329 $ 24,022,594 *The Redevelopment Agency has used bond proceeds for the construction of capital improvements, which benefit these entities. These entities have agreements with the Redevelopment Agency, which will allow it to use a portion of these amounts to offset debt service costs. Note 8: Long-Term Liabilities The changes in long-term liabilities for the year ended June 30,2005 were as follows Due Balance at Payments/ Balance at Within July 1,2004 Adjustments(*) Additions Defeasance June 30,2005 One Year Tax Allocation Bonds $ 256,000,000 $ - $ - $ 5,515,000 $ 250,485,000 $ 5,485,000 Advances 32,785,480 - - - 32,785,480 Notes Payable 981,656 - - 122,707 858,949 122,707 Subtotal 289,767,136 - - 5,637,707 284,129,429 Add: Unamortized bond premium - 915,773 - 59,695 856,078 Total $ 289,767,136 $ 915,773 $ - $ 5,697,402 $ 284,985,507 $ 5,607,707 *Adjustments relate to unamortized bond premium which was not reported in the prior year. 32 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities (Continued) A description of long-term liabilities outstanding (excluding defeased debt) of the Agency as of June 30, 2005 follows: a. Tax Allocation Bonds Tax Allocation bonds are special obligations of the Agency and the Financing Authority, (a component unit of the Agency) and are secured by an irrevocable pledge of tax revenues and other funds as provided under the Bond Resolution. The bonds, and any interest thereon, are not a debt of the City, the State of California or any of its political subdivisions and neither the City, the State of California nor any of its political subdivisions is liable on the bonds, nor in any event shall the bonds, and interest thereon, be payable out of any funds or properties other than those provided under the Bond Resolution. 1995 Series Tax Allocation Revenue Bonds (Protect Area No. 1) In June 1995, the Palm Desert Financing Authority issued $24,025,000 of Tax Allocation Bonds (Project Area No. 1) Series 1995. The Palm Desert Financing Authority loaned the bond proceeds to the Palm Desert Redevelopment Agency to finance certain redevelopment activities of the Agency in Project Area No. 1. Interest rates on the bonds vary from 4.40% to 5.95% per annum payable semi-annually on April 1 and October 1 with principal maturing annually. In June 2004, $22,195,000 of these bonds were advance refunded. The remaining balance of $255,000 which was not advance refunded was currently repaid during fiscal 2004-2005. 1995 Series Tax Allocation Revenue Bonds (Protect Area No. 2) In June 1995, the Palm Desert Financing Authority issued $4,090,000 of Tax Allocation Bonds (Project Area No. 2) Series 1995. The Palm Desert Financing Authority loaned the bond proceeds to the Palm Desert Redevelopment Agency to finance certain redevelopment activities of the Agency in Project Area No. 2. Interest rates on the bonds vary from 4.40% to 5.95% per annum payable semi-annually on February 1 and August 1 with principal maturing annually on August 1. 1995 Series A-Tax Allocation Revenue Refunding Bonds In August 1995, the Palm Desert Financing Authority issued $6,305,000 in Tax Allocation Revenue Refunding Bonds 1995 Series A. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to provide funds to refund in advance $6,430,000 of the 1988 Tax Allocation Bonds. Interest rates on the bonds vary from 3.80% to 5.55% with interest payable semi-annually on March 1 and September 1 with principal maturing annually on September 1. 1997 Series Tax Allocation Refunding Revenue Bonds On July 24, 1997, the Palm Desert Financing Authority issued $71,955,000 in Tax Allocation Refunding Revenue Bonds (Project Area No. 1 as Amended) 1997 Series. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to provide funds to refund in advance a portion of the 1992 Series A Tax Allocation Revenue Bonds. Interest rates on the bonds vary from 4.100% to 5.625% with interest payable semi-annually on April 1 and October 1 with principal maturing annually on April 1. 33 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities(Continued) 1998 Series Tax Allocation (Housing Set-Aside) Revenue Bonds In January 1998, the Palm Desert Financing Authority issued $48,760,000 in Tax Allocation (Housing Set-Aside) Revenue Bonds. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to finance the acquisition of seven apartment complexes consisting of 725 rental units from the Housing Authority of the County of Riverside. Interest rates on the bonds vary from 4.0% to 5.1% per annum payable semi-annually on April 1 and October 1 with principal maturing annually on October 1. 1998 Series Tax Allocation Revenue Bonds (Project Area No. 4) On March 1, 1998, the Palm Desert Financing Authority issued $11,020,000 of Tax Allocation Revenue Bonds (Project Area No. 4) Series 1998. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to finance certain redevelopment activities of the Agency in Project Area No. 4. Interest rates on the bonds vary from 4.0% to 5.2% per annum payable semi-annually on April 1 and October 1 with principal maturing annually on October 1. 2001 Series Tax Allocation Revenue Bonds (Project Area No.4) In November 2001, the Palm Desert Financing Authority issued $15,695,000 of Tax Allocation Revenue Bonds (Project Area No. 4) Series 2001. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to finance certain redevelopment activities of the Agency in Project Area No. 4. Interest rates on the bonds vary from 3.5% to 4.9% per annum payable semi-annually on April 1 and October 1 with principal maturing annually on October 1. 2002 Series A Tax Allocation Refunding Revenue Bonds (Project Area No. 1 as Amended) In March 2002, the Palm Desert Financing Authority issued $22,070,000 of Tax Allocation Refunding Revenue Bonds (Project Area No. 1 as Amended) 2002 Series A. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency. A portion of the proceeds of the loan was used to prepay the prior loan, which effected the current refunding of a like portion of the prior bonds. The remainder was used to finance certain redevelopment activities of the Agency in Project Area No. 4. The bonds consist of serial bonds of $10,905,000 at 5.00% due April 1, 2025 and $11,165,000 in term bonds at 5.10% due April 1, 2030. Interest is payable semi-annually on April 1 and October 1. Mandatory sinking fund redemptions begin April 1, 2024. 2002 Series A Tax Allocation Refunding Revenue Bonds (Project Area No. 2) In July 2002, the Palm Desert Financing Authority issued $17,310,000 of Tax Allocation Refunding Revenue Bonds (Project Area No. 2). The Palm Desert Financing Authority loaned the bond proceeds to the Palm Desert Redevelopment Agency to prepay outstanding indebtedness and to finance certain redevelopment activities within or of benefit to the project area. Interest rates on the bonds vary from 3.0% to 5.0% per annum payable semi-annually on February 1 and August 1. Principal payments will be made annually beginning August 1, 2003. 34 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities(Continued) Series 2002 Tax Allocation (Housing Set-Aside) Revenue Bonds In August 2002, the Palm Desert Financing Authority issued $12,100,000 of Tax Allocation (Housing Set-Aside) Revenue Bonds Series 2002. The Palm Desert Financing Authority loaned the bond proceeds to the Palm Desert Redevelopment Agency to finance certain low and moderate housing activities of the Agency and to finance costs of issuance of the bonds. Interest rates on the $6,555,000 serial bonds vary from 2.0% to 4.9% per annum payable semi-annually on March 1 and October 1. Annual principal payments begin October 1, 2003. The $5,545,000 term bonds bear an interest rate of 5.0% per annum and mature October 1, 2031. Series 2003 Tax Allocation Revenue Bonds (Project Area No. 2) In March 2003, the Palm Desert Financing Authority issued $15,745,000 of Tax Allocation Revenue Bonds (Project Area No. 2) Series 2003. The Palm Desert Financing Authority loaned the bond proceeds to the Palm Desert Redevelopment Agency to finance certain redevelopment activities of the Agency in Project Area No. 2. Interest rates on the bonds vary from 4.5% to 5.0% per annum payable semi-annually on February 1 and August 1 with principal maturing as follows: $ 875,000 Serial Bonds August 1, 2023 910,000 Serial Bonds August 1, 2024 2,485,000 Term Bonds August 1, 2026 11,475,000 Term Bonds August 1, 2033 Series 2003 Tax Allocation Revenue Bonds (Project Area No. 1) In July 2003, the Financing Authority issued $19,000,000 Tax Allocation Revenue Bonds (Project Area No. 1 as Amended)Series 2003. The proceeds of the bonds were disbursed to make a loan to the Redevelopment Agency. The Agency will use the proceeds of the loan to finance certain redevelopment activities of the Agency and to finance costs of issuance of the bonds. The bonds bear interest at 5.0%. They consist of $7,050,000 serial bonds with principal payments due in 2026 and 2027 and $11,950,000 term bonds due in 2030. Interest will be payable on April 1 and October 1 of each year, beginning April 1, 2004. Principal payments will be on April 1 of the years stated above. Series 2003 Tax Allocation Revenue Bonds (Project Area No. 3) In July 2003, the Financing Authority issued Tax Allocation Revenue Bonds (Project Area No. 3) Series 2003 in the amount of$4,745,000. The proceeds of the bonds were disbursed to make a loan to the Redevelopment Agency. The Agency will use the proceeds of the loan to finance redevelopment activities within or of benefit to the project area and to finance costs of issuance of the bonds. The bonds bear interest at rates ranging from 3.000% to 5.125%. Principal maturities for the serial bonds of $2,475,000 began April 1, 2004 and continue through October 1, 2031. The term bonds in the amount of$2,270,000 are due in 2033. 35 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities (Continued) 2004 Series A Tax Allocation Refunding Revenue Bonds (Protect Area No. 1 as Amended) In June 2004, the Palm Desert Financing Authority issued $24,945,000 of Tax Allocation Refunding Revenue Bonds (Project Area No. 1 as Amended)2004 Series A. The proceeds from the bonds were loaned to the Palm Desert Redevelopment Agency to refinance a portion of the Agency's obligations from 1995 and to finance certain redevelopment activities within or of benefit to the project area. Interest rates on the bonds vary from 3.0% to 5.0% per annum payable semi-annually on April 1 and October 1. Principal payments will be made annually beginning April 1, 2005. b. Advances from City The City of Palm Desert has made advances to the Agency to finance capital projects in the following amounts: Project Area #1 $10,011,857, Project Area #2 $20,991,060, and Project Area #3 $1,782,563, for a total of$32,785,480. These advances do not have a fixed repayment schedule. c. Notes Payable The Agency entered into a cooperation agreement with the County of Riverside (the County) on December 15, 1987 regarding the adoption of the Agency's Project Area No. 2. The agreement states that the Agency was to retain 50% of the County's share of tax increment. This was based on the County's share of tax increment being what would be allocated to the County in the absence of a redevelopment project area being adopted. This agreement called for the Agency to retain 50% of the County's share until the gross increment reached $3,500,000. The agreement further states that when gross increment reaches $10,000,000 that the Agency would repay the 50% of the retained County's share of increment in equal payments over a 10-year period. The gross increment reached the $3,500,000 limit in fiscal year 1991-1992. The Agency reached the $10,000,000 limit in fiscal year 2002-2003. The total amount owed to the County at June 30, 2005 was $858,949. Annual payments on the note are$122,707. The note is non-interest bearing. Future debt service payments are as follows: Year Ending June 30, Principal Interest Total 2006 $ 122,707 $ - $ 122,707 2007 122,707 - 122,707 2008 122,707 - 122,707 2009 122,707 - 122,707 2010 122,707 - 122,707 2011-2012 245,414 - 245,414 $ 858,949 $ - $ 858,949 36 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities (Continued) d. Schedule of Changes The following is a schedule of changes in long-term liabilities of the Agency for the fiscal year ended June 30, 2005: Balance Balance Due Within July 1,2004 Repayments June 30,2005 One Year Project Area No. 1 Advances from City $ 10,011,857 $ - $ 10,011,857 $ - 1995 Series TARBs,$24,025,000 255,000 255,000 - - 2002A TARRBs,$22,070,000 22,070,000 - 22,070,000 - 1997 Series TARRBS,$71,955,000 61,800,000 2,260,000 59,540,000 2,025,000 2003A TARBs,$19,000,000 19,000,000 - 19,000,000 - 2004A TARRBs,$24,945,000 24,945,000 495,000 24,450,000 855,000 Total $ 138,081,857 $ 3,010,000 $ 135,071,857 $ 2,880,000 Project Area No.2 Advances from City $ 20,991,060 $ - $ 20,991,060 $ - County Note Payable 981,656 122,707 858,949 122,707 1995 Series TARBs,$4,090,000 3,940,000 35,000 3,905,000 35,000 2002 Series A TARRBs,$17,310,000 16,665,000 665,000 16,000,000 690,000 2003 Series TARBs,$15,745,000 15,745,000 - 15,745,000 - Total $ 58,322,716 $ 822,707 $ 57,500,009 $ 847,707 Project Area No.4 1998 Series TARBs,$11,020,000 $ 10,595,000 $ 225,000 $ 10,370,000 $ 230,000 2001 Series TARBs,$15,695,000 15,395,000 160,000 15,235,000 170,000 Total $ 25,990,000 $ 385,000 $ 25,605,000 $ 400,000 Project Area No.3 Advances from City $ 1,782,563 $ - $ 1,782,563 $ - 2003 Series TARBs,$4,745,000 4,590,000 90,000 4,500,000 90,000 Total $ 6,372,563 $ 90,000 $ 6,282,563 $ 90,000 Combined Low and Moderate Housing 1998 Series TARBs $ 46,235,000 $ 565,000 $ 45,670,000 $ 590,000 2002 Series TARBs 11,865,000 240,000 11,625,000 245,000 1995 Series A TARRBs,$6,305,000 2,900,000 525,000 2,375,000 555,000 Total $ 61,000,000 $ 1,330,000 $ 59,670,000 $ 1,390,000 Total-All Project Areas Advances from City $ 32,785,480 $ - $ 32,785,480 $ - Notes 981,656 122,707 858,949 122,707 Bonds 256,000,000 5,515,000 250,485,000 5,485,000 Total $ 289,767,136 $ 5,637,707 $ 284,129,429 $ 5,607,707 37 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities(Continued) e. The following schedule illustrates the debt service requirements to maturity for bonds outstanding as of June 30, 2005: Area No.1 -Tax Allocation Area No.1 -Tax Allocation Refunding Bonds,Series 1997- Refunding Bonds,2002 Series A- Area No. 1 -Tax Allocation Revenue $71.955M $22.07M Bonds,Series 2003-$19M Principal Interest Principal Interest Principal Interest 2005-2006 $ 2,025,000 $ 3,205,898 $ - $ 1,114,666 $ - $ 950,000 2006-2007 2,065,000 3,110,724 - 1,114,666 - 950,000 2007-2008 2,290,000 3,011,604 - 1,114,666 - 950,000 2008-2009 2,255,000 2,899,394 - 1,114,666 - 950,000 2009-2010 2,505,000 2,786,644 - 1,114,666 - 950,000 2011 -2015 14,250,000 11,886,848 - 5,573,330 - 4,750,000 2016-2020 18,700,000 7,580,164 - 5,573,330 - 4,750,000 2021 -2025 15,450,000 1,855,124 10,905,000 5,334,330 - 4,750,000 2026-2030 - - 11,165,000 1,764,856 19,000,000 2,942,500 2031 -2035 - - - - - - Totals $ 59,540,000 $ 36,336,400 $ 22,070,000 $ 23,819,176 $ 19,000,000 $ 21,942,500 Area No.1 -Tax Allocation Area No.2-Tax Allocation Refunding Bonds,2004 Series A- Revenue Bonds,Series 1995- Area No.2-Tax Allocation Refunding $24.945M $4.09M Bonds,2002 Series A-$17.31 M Principal Interest Principal Interest Principal Interest 2005-2006 $ 855,000 $ 1,123,063 $ 35,000 $ 229,796 $ 690,000 $ 690,188 2006-2007 940,000 1,097,413 115,000 225,482 630,000 671,333 2007-2008 850,000 1,059,813 120,000 218,528 650,000 653,078 2008-2009 1,030,000 1,025,813 125,000 211,279 675,000 631,853 2009-2010 945,000 974,313 135,000 203,586 695,000 607,868 2011 -2015 5,780,000 4,137,813 805,000 884,252 3,980,000 2,548,365 2016-2020 7,015,000 2,763,825 1,070,000 608,966 5,010,000 1,533,736 2021 -2025 7,035,000 1,043,200 1,370,000 249,147 3,670,000 281,250 2026-2030 - - 130,000 3,803 - - 2031 -2035 - - - - - - Totals $ 24,450,000 $ 13,225,253 $ 3,905,000 $ 2,834,839 $ 16,000,000 $ 7,617,671 Area No.2-Tax Allocation Area No.3-Tax Allocation Revenue Bonds,Series 2003- Revenue Bonds,Series 2003- Area No.4-Tax Allocation Bonds, $15.745M $4.745M Series 1998-$11.02M Principal Interest Principal Interest Principal Interest 2005-2006 $ - $ 769,006 $ 90,000 $ 204,298 $ 230,000 $ 520,415 2006-2007 - 769,006 95,000 201,598 250,000 508,759 2007-2008 - 769,006 95,000 198,748 260,000 496,378 2008-2009 - 769,006 100,000 195,898 265,000 483,628 2009-2010 - 769,006 100,000 193,048 290,000 470,490 2011 -2015 - 3,845,030 570,000 909,562 1,630,000 2,134,320 2016-2020 - 3,845,030 690,000 787,135 2,070,000 1,674,729 2021 -2025 1,785,000 3,765,493 860,000 618,410 2,680,000 1,063,140 2026-2030 6,915,000 2,663,191 1,100,000 379,250 2,695,000 288,990 2031 -2035 7,045,000 726,625 800,000 83,281 - - Totals $ 15,745,000 $ 18,690,399 $ 4,500,000 $ 3,771,228 $ 10,370,000 $ 7,640,849 38 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 8: Long-Term Liabilities (Continued) Area No.4-Tax Allocation Bonds, Housing Set-Aside Revenue Bonds, Housing Set-Aside Revenue Bonds, Series 2001 -$15.695M 1995 Series A-$6.305M Series 1998-$48.76M Principal Interest Principal Interest Principal Interest 2005-2006 $ 170,000 $ 690,825 $ 555,000 $ 113,378 $ 590,000 $ 2,277,410 2006-2007 270,000 682,994 585,000 83,445 615,000 2,251,804 2007-2008 285,000 673,013 600,000 51,592 655,000 2,224,817 2008-2009 310,000 662,313 635,000 17,621 685,000 2,196,342 2009-2010 305,000 651,250 - - 1,390,000 2,147,036 2011 -2015 1,730,000 3,066,671 - - 8,095,000 9,590,305 2016-2020 2,150,000 2,648,851 - - 10,400,000 7,288,782 2021 -2025 2,670,000 2,091,529 - - 13,395,000 4,287,702 2026-2030 4,125,000 1,357,320 - - 9,845,000 770,228 2031 -2035 3,220,000 156,480 - - - - Totals $ 15,235,000 $ 12,681,246 $ 2,375,000 $ 266,036 $ 45,670,000 $ 33,034,426 Housing Set-Aside Revenue Bonds,Series 2002-$12.1M Total Principal Interest Principal Interest 2005-2006 $ 245,000 $ 521,025 $ 5,485,000 $ 12,409,968 2006-2007 250,000 515,143 5,815,000 12,182,367 2007-2008 255,000 508,448 6,060,000 11,929,691 2008-2009 265,000 500,572 6,345,000 11,658,385 2009-2010 275,000 491,454 6,640,000 11,359,361 2011 -2015 1,535,000 2,288,543 38,375,000 51,615,039 2016-2020 1,890,000 1,934,347 48,995,000 40,988,895 2021 -2025 2,390,000 1,436,797 62,210,000 26,776,122 2026-2030 3,065,000 762,125 58,040,000 10,932,263 2031 -2035 1,455,000 73,625 12,520,000 1,040,011 Totals $ 11,625,000 $ 9,032,079 $ 250,485,000 $ 190,892,102 Note 9: Bond Reserve Requirements At June 30, 2005, the reserve balance requirements and actual balances were as follows: Issue Requirement Actual 1995 Refunding Tax Allocation Bonds $ 237,500 $ 761,299 2001 Tax Allocation Revenue Bonds 482,890 910,991 These actual amounts are included in the Fund Balance reserved or designated for Debt Service (see Note 10). 39 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 10: Reserves of Fund Balances Special Revenue Fund Capital Project Funds Low and Moderate Other Income Financing Project Project Governmental Housing Authority Area 1 Area 4 Funds Total Loans and notes receivable $ 7,841,586 $ - 1,526,883 2,000,000 $ 11,368,469 Property held for resale 574,933 - - - - 574,933 Prepaid items and deposits 2,768 - 590,488 - - 593,256 Encumbrances 6,257,859 - 1,824,524 63,391 991,872 9,137,646 Continuing appropriations 15,478,217 - 5,523,686 12,201,060 2,384,048 35,587,011 Advances to other funds - - - - - - Debt service - 720,390 - - - 720,390 Low income purposes - - - - 6,740,551 6,740,551 $ 30,155,363 $ 720,390 $ 9,465,581 $ 14,264,451 $10,116,471 $ 64,722,256 Reserved for Loans and Notes Receivables - These reserves are set up to reflect the noncurrent portion receivables so that they will not be considered as current funds available. Reserved for Property Held for Resale - This reserve for property held for resale has been set aside to indicate that it will not be considered as current funds available. Reserved for Prepaid Items and Deposits - These reserves are set up to reflect the noncurrent portion of the deposits so that they will not be considered as current funds available. Reserved for Encumbrances - These reserves represent the portion of purchase orders awarded for which the goods or services had not yet been received at June 30, 2005. Although all appropriations lapse at year-end, even if encumbered, the City intends either to honor the contracts in progress or to cancel them. Reserve for encumbrances are rebudgeted on July 1, by Board action. Reserved for Continuing Appropriations - This reserve is for appropriations for capital projects that are unexpended as of June 30, 2005 and are carried forward as continuing appropriations to be expended in 2005-2006. Reserved for Debt Service - These reserves for Debt Service represent reserves accumulated by the Agency that are legally restricted to the payment of long-term debt principal and interest amounts that mature in future years. Reserved for Low Income Purposes - These reserves represent fund balances related to low income housing which are not considered as current funds available. 40 Palm Desert Redevelopment Agency Notes to Financial Statements (Continued) Note 11: Fund Balance/Net Assets Restatements The beginning fund balance has been restated due to recent guidance from the Governmental Accounting Standards Board which calls for moving liabilities for loans from the City from fund-level reporting to reporting only at the government-wide level as long-term debt. This change did not affect the government-wide financial statements. Fund balance has been restated as follows: Debt Service Funds: Project Area 1 $ 10,011,857 Project Area 2 20,991,060 Project Area 3 1,782,563 Totals $ 32,785,480 The beginning balance of net assets has been increased by$915,773 due to a prior period adjustment to tax allocation bond original issue premium. Note 12: Conduit Debt Obligation 2003 Series A-$22,310,000 Lease Revenue Bonds In December 2003, the Palm Desert Financing Authority (Authority) issued $22,310,000 in Lease Revenue Bonds. The proceeds of the Bonds were used to: i) finance the construction of a County animal shelter and related facilities located in the unincorporated area of Thousand Palms, California; ii) finance construction of certain County medical clinic facilities located in Mecca, California; iii) refund the Palm Desert Financing Authority Lease Revenue Bonds Series 1996; iv) acquire a debt service reserve insurance policy; v) fund capitalized interest on the bonds; and vi) pay costs of issuance of the bonds. The Authority will lease sites relating to each project from the County of Riverside (County)pursuant to a Site Lease dated as of December 1, 2003 and will lease back to the County the Sites and the Facilities pursuant to a Facilities Lease dated December 1, 2003. Under the Lease, the County will pay to the Trustee Base Rental Payments in the amount equal to the scheduled debt service of the Bonds. The Authority will assign its right to receive the Base Rental Payments to the Trustee for the benefit of the owners of the bonds. The debt service on the bonds is to be paid solely from lease payments made by the County. The Authority has no obligation to make the debt service payments in the event that the County is not able to make the required base rental payments. As of June 30, 2005, the outstanding amount was$22,045,000. Note 13: Insurance The Agency is covered under the City of Palm Desert's insurance. For additional information, see the City's financial statements. 41 THIS PAGE INTENTIONALLY LEFT BLANK 42 PALM DESERT REDEVELOPMENT AGENCY Schedule 1 COMBINING BALANCE SHEET-OTHER GOVERNMENTAL FUNDS JUNE 30, 2005 Housing Authority Special Debt Capital Revenue Service Projects Fund Fund Funds Totals Assets: Cash and investments $ 7,465,070 $ 2,243,184 $ 4,102,269 $ 13,810,523 Cash with fiscal agent-restricted 311,919 - 6,026,516 6,338,435 Accounts receivable 3,850 95,415 - 99,265 Interest receivable 40,870 - 13,004 53,874 Due from other apartment 1,560,296 - - 1,560,296 Total Assets $ 9,382,005 $ 2,338,599 $ 10,141,789 $ 21,862,393 Liabilities and Fund Balances: Liabilities: Accounts payable $ 343,476 $ 954 $ 68,315 $ 412,745 Accrued liabilities 92,295 - - 92,295 Deposits payable 311,916 - - 311,916 Unearned revenue 24,906 - - 24,906 Due to other apartment 1,560,296 - - 1,560,296 Amount due -pass-through agreements - 337,778 - 337,778 Total Liabilities 2,332,889 338,732 68,315 2,739,936 Fund Balances: Reserved: Encumbrances 308,565 - 683,307 991,872 Continuing appropriations - - 2,384,048 2,384,048 Low income purposes 6,740,551 - - 6,740,551 Unreserved: Debt service - 1,999,867 - 1,999,867 Capital outlay - - 7,006,119 7,006,119 Total Fund Balances 7,049,116 1,999,867 10,073,474 19,122,457 Total Liabilities and Fund Balances $ 9,382,005 $ 2,338,599 $ 10,141,789 $ 21,862,393 43 PALM DESERT REDEVELOPMENT AGENCY Schedule 2 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Housing Authority Special Debt Capital Revenue Service Project Fund Fund Fund Totals Revenues: Taxes $ - $ 2,371,983 $ - $ 2,371,983 Other revenue 137,101 - - 137,101 Rental income 4,418,190 - - 4,418,190 Investment income 127,099 48,712 214,952 390,763 Total Revenues 4,682,390 2,420,695 214,952 7,318,037 Expenditures: Current: General government 5,569,155 - 1,824,656 7,393,811 Capital outlay - - 864,658 864,658 Payment to other agencies - 1,319,160 - 1,319,160 Debt Service: Interest and fiscal charges - 39,803 - 39,803 Total Expenditures 5,569,155 1,358,963 2,689,314 9,617,432 Excess of Revenues Over (Under) Expenditures (886,765) 1,061,732 (2,474,362) (2,299,395) Other Financing Sources (Uses): Transfers in 327,358 - 439,691 767,049 Transfers out (327,358) (771,359) (247,238) (1,345,9551 Total Other Financing Sources (Uses) - (771,359L 192,453 (578,906) Fund Balances-Beginning of Year 7,935,881 (73,069) 12,355,383 20,218,195 Restatements - 1,782,563 - 1,782,563 7,935,881 1,709,494 12,355,383 22,000,758 Net Change in Fund Balances (886,765) 290,373 (2,281,909) (2,878,301) Fund Balances -End of Year $ 7,049,116 $ 1,999,867 $ 10,073,474 $ 19,122,457 44 THIS PAGE INTENTIONALLY LEFT BLANK 45 PALM DESERT REDEVELOPMENT AGENCY COMBINING BALANCE SHEET HOUSING AUTHORITY SPECIAL REVENUE FUND June 30,2005 Complexes Laguna Catalina Desert Las Capital Palms Gardens Pointe Serenas ASSETS: Cash-checking $ 5,930,721 $ - $ 120,515 $ 100,756 $ 740,746 Cash-trust 3 11,604 23,537 21,078 44,250 Cash-petty - 200 150 150 350 Accounts receivable 1,000 26 - - - Due from other apartment - - - - Interest receivable 40,870 - - - TOTAL ASSETS $ 5,972,594 $ 11,830 $ 144,202 $ 121,984 $ 785,346 LIABILITIES AND FUND BALANCES LIABILITIES: Accounts payable $ 13,426 $ 5,207 $ 7,252 $ 17,413 $ 21,897 Due to other apartment - 424,174 Security deposits - 11,604 23,537 21,078 44,250 Accrued management fees - 1,488 2,232 1,984 4,619 Accrued payroll - 3,241 2,513 2,479 5,478 Unearned revenue - 269 235 2,343 1,115 TOTAL LIABILITIES 13,426 445,983 35,769 45,297 77,359 FUND BALANCES: Reserved: Encumbrances 308,565 - - - - Low income purposes 5,650,603 (434,153) 108,433 76,687 707,987 TOTAL FUND BALANCES 5,959,168 (434,153) 108,433 76,687 707,987 TOTAL LIABILITIES AND FUND BALANCES $ 5,972,594 $ 11,830 $ 144,202 $ 121,984 $ 785,346 46 Schedule 3 Complexes(Continued) One California Total Combined Neighbors Quail Pueblos Villas Taos Complexes Total $ 49,490 $ 521,292 $ - $ - $ - $ 1,532,799 $ 7,463,520 7,275 160,489 4,755 32,138 6,790 311,916 311,919 50 350 - 250 50 1,550 1,550 2,495 329 - - 2,850 3,850 1,560,296 - - - 1,560,296 1,560,296 - - - - - - 40,870 $ 56,815 $ 2,244,922 $ 5,084 $ 32,388 $ 6,840 $ 3,409,411 $ 9,382,005 $ 3,374 $ 138,465 $ 1,995 $ 128,141 $ 6,306 $ 330,050 $ 343,476 65,479 1,032,375 38,268 1,560,296 1,560,296 7,275 160,489 4,755 32,138 6,790 311,916 311,916 713 11,873 465 4,371 496 28,241 28,241 430 23,520 447 25,510 436 64,054 64,054 98 20,375 6 465 - 24,906 24,906 11,890 354,722 73,147 1,223,000 52,296 2,319,463 2,332,889 - - - - - - 308,565 44,925 1,890,200 (68,063) (1,190,612) (45,456) 1,089,948 6,740,551 44,925 1,890,200 (68,063) (1,190,612) (45,456) 1,089,948 7,049,116 $ 56,815 $ 2,244,922 $ 5,084 $ 32,388 $ 6,840 $ 3,409,411 $ 9,382,005 47 PALM DESERT REDEVELOPMENT AGENCY COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-HOUSING AUTHORITY SPECIAL REVENUE FUND For the year ended June 30,2005 Complexes Laguna Catalina Desert Las Capital Palms Gardens Pointe Serenas REVENUES: Rental income $ - $ 168,669 $ 256,466 $ 268,598 $ 661,684 Other revenues 10,000 6,812 3,183 9,777 6,576 Interest income 127,099 TOTAL REVENUES 137,099 175,481 259,649 278,375 668,260 EXPENDITURES: Current: Payroll - 96,212 60,668 62,498 141,998 Administrative 15,546 142,231 148,574 217,749 304,497 Management - 16,274 26,682 23,529 55,005 Capital outlay 112,348 21,475 187,018 4,801 TOTAL EXPENDITURES 15,546 367,065 257,399 490,794 506,301 EXCESS OF REVENUES OVER (UNDER)EXPENDITURES 121,553 (191,584) 2,250 (212,419) 161,959 OTHER FINANCING SOURCES: Transfers in 1,543 38,095 - 156,637 - Transfers out (325,815) - - - EXCESS OF REVENUES AND OTHER FINANCING SOURCES OVER(UNDER)EXPENDITURES (202,719) (153,489) 2,250 (55,782) 161,959 FUND BALANCES-BEGINNING OF YEAR 6,161,887 (280,664) 106,183 132,469 546,028 FUND BALANCES-END OF YEAR $ 5,959,168 $ (434,153) $ 108,433 $ 76,687 $ 707,987 48 Schedule 4 Complexes One California Total Combined Neighbors Quail Pueblos Villas Taos Complexes Total $ 111,208 $ 2,381,341 $ 50,071 $ 442,158 $ 77,995 $ 4,418,190 $ 4,418,190 5,238 81,656 115 9,679 4,065 127,101 137,101 - 127,099 116,446 2,462,997 50,186 451,837 82,060 4,545,291 4,682,390 10,475 602,792 11,259 154,001 11,250 1,151,153 1,151,153 77,904 1,355,694 64,247 533,720 95,347 2,939,963 2,955,509 8,658 142,134 5,565 46,935 5,907 330,689 330,689 3,047 22,487 3,254 773,652 3,722 1,131,804 1,131,804 100,084 2,123,107 84,325 1,508,308 116,226 5,553,609 5,569,155 16,362 339,890 (34,139) (1,056,471) (34,166) (1,008,318) (886,765) - 1,391 - 129,692 - 325,815 327,358 - - - (1,543) - (1,543) (327,358) 16,362 341,281 (34,139) (928,322) (34,166) (684,046) (886,765) 28,563 1,548,919 (33,924) (262,290) (11,290) 1,773,994 7,935,881 $ 44,925 $ 1,890,200 $ (68,063) $ (1,190,612) $ (45,456) $ 1,089,948 $ 7,049,116 49 PALM DESERT REDEVELOPMENT AGENCY Schedule 5 COMBINING BALANCE SHEET -OTHER GOVERNMENTAL FUNDS DEBT SERVICE JUNE 30, 2005 Project Area 3 Totals Assets: Cash and investments $ 2,243,184 $ 2,243,184 Accounts receivable 95,415 95,415 Total Assets $ 2,338,599 $ 2,338,599 Liabilities and Fund Balances: Liabilities: Accounts payable $ 954 $ 954 Amount due- pass-through agreements 337,778 337,778 Total Liabilities 338,732 338,732 Fund Balances: Unreserved: Debt service 1,999,867 1,999,867 Total Fund Balances 1,999,867 1,999,867 Total Liabilities and Fund Balances $ 2,338,599 $ 2,338,599 50 PALM DESERT REDEVELOPMENT AGENCY Schedule 6 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS - DEBT SERVICE FOR THE YEAR ENDED JUNE 30, 2005 Project Area 3 Totals Revenues: Taxes $ 2,371,983 $ 2,371,983 Investment income 48,712 48,712 Total Revenues 2,420,695 2,420,695 Expenditures: Payment to other agencies 1,319,160 1,319,160 Debt Service: Interest and fiscal charges 39,803 39,803 Total Expenditures 1,358,963 1,358,963 Excess of Revenues Over (Under) Expenditures 1,061,732 1,061,732 Other Financing Sources (Uses): Transfers out (771,359) (771,359) Net Change in Fund Balances 290,373 290,373 Fund Balances- Beginning of Year (73,069) (73,069) Restatements 1,782,563 1,782,563 1,709,494 1,709,494 Net Change in Fund Balances 290,373 290,373 Fund Balances -End of Year $ 1,999,867 $ 1,999,867 51 PALM DESERT REDEVELOPMENT AGENCY Schedule 7 COMBINING BALANCE SHEET -OTHER GOVERNMENTAL FUNDS CAPITAL PROJECTS JUNE 30,2005 Project Project Area 2 Area 3 Totals Assets: Cash and investments $ 3,934,593 $ 167,676 $ 4,102,269 Cash with fiscal agent- restricted 2,940,220 3,086,296 6,026,516 Interest receivable 5,723 7,281 13,004 Total Assets $ 6,880,536 $ 3,261,253 $ 10,141,789 Liabilities and Fund Balances: Liabilities: Accounts payable $ 67,494 $ 821 $ 68,315 Total Liabilities 67,494 821 68,315 Fund Balances: Reserved: Encumbrances 683,307 - 683,307 Continuing appropriations 2,324,142 59,906 2,384,048 Unreserved: Capital projects 3,805,593 3,200,526 7,006,119 Total Fund Balances 6,813,042 3,260,432 10,073,474 Total Liabilities and Fund Balances $ 6,880,536 $ 3,261,253 $ 10,141,789 52 PALM DESERT REDEVELOPMENT AGENCY Schedule 8 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -OTHER GOVERNMENTAL FUNDS -CAPITAL PROJECTS FOR THE YEAR ENDED JUNE 30,2005 Project Project Area 2 Area 3 Totals Revenues: Investment income $ 146,105 $ 68,847 $ 214,952 Total Revenues 146,105 68,847 214,952 Expenditures: Current: General government 666,005 1,158,651 1,824,656 Capital outlay 811,135 53,523 864,658 Total Expenditures 1,477,140 1,212,174 2,689,314 Excess of Revenues Over (Under) Expenditures (1,331,035) (1,143,327) (2,474,362) Other Financing Sources(Uses): Transfers in 435,368 4,323 439,691 Transfers out (215,362) (31,876) (247,238) Total Other Financing Sources (Uses) 220,006 (27,553) 192,453 Net Change in Fund Balances (1,111,029) (1,170,880) (2,281,909) Fund Balances- Beginning of Year 7,924,071 4,431,312 12,355,383 Fund Balances -End of Year $ 6,813,042 $ 3,260,432 $ 10,073,474 53 PALM DESERT REDEVELOPMENT AGENCY Schedule 9 COMPUTATION OF LOW AND MODERATE HOUSING EXCESS SURPLUS FUNDS AS OF JUNE 30, 2005 Excess Surplus in the Low and Moderate Income Housing Fund is any unexpended or unencumbered amount that exceeds the greater of either $1,000,000 or the aggregate amount deposited in the Low and Moderate Income Housing Fund during the preceding four fiscal years. It is computed at the beginning of the fiscal year to which it relates. Tax Increment Fiscal Deposits to Year Housing Fund 2000-2001 $ 7,768,705 2001-2002 9,057,701 2002-2003 10,049,970 2003-2004 11,198,956 Total $ 38,075,332 Base Limitation $ 1,000,000 Greater Amount $ 38,075,332 Fund Balance of the Low and Moderate Income Housing Fund -July 1, 2004 36,805,082 Less: Unavailable amounts Encumbrances 994,487 Loans and notes receivable 7,882,339 Property held for resale 865,335 Prepaid items and deposits 2,646 Advances to other funds 94,524 Available Fund Balance of the Low and Moderate Income Housing Fund -July 1, 2004 $ 26,965,751 Computed Excess Surplus -July 1, 2004 $ - 54