HomeMy WebLinkAbout2019-03-04 City Council Agenda Packet (2) BOARD OF DIRECTORS
PALO ALTO PUBLIC
IMPROVEMENT CORPORATION
Special Meeting
Council Chambers
March 4, 2019
5:00 PM
Agenda posted according to PAMC Section 2.04.070. A binder containing supporting materials is
available in the Council Chambers on the Friday preceding the meeting.
1 March 4, 2019
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA
PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE.
DURING NORMAL BUSINESS HOURS.
Call to Order
Oral Communications Members of the public may speak to any item NOT on the agenda. The Board reserves the right to limit the
duration of Oral Communications.
Action Items
1.Approval of the Fiscal Year 2018 Public Improvement Corporation
Annual Financial Report
Adjournment
Council Member Tanaka will be participating remotely from the Linq Hotel/
Casino Lobby Check-in area, 3535 Las Vegas Blvd. South, Las Vegas, NV
89109-Areas 5 and 6 on the facilities map
REVISED
City of Palo Alto (ID # 10023)
Palo Alto Public Improvement Corporation Staff Report
Report Type: Action Items Meeting Date: 3/4/2019
City of Palo Alto Page 1
Summary Title: PIC FY 2018 Annual Financial Report
Title: Approval of Fiscal Year 2018 Public Improvement Corporation Annual
Financial Report
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Board of Directors of the Public Improvement Corporation (PIC)
approve the Fiscal Year 2018 Annual Financial Report for the Public Improvement Corporation.
Background
The PIC is a nonprofit corporation formed by the City in 1983, allowing the City to issue
Certificates of Participation (COPs) to fund capital improvements. The PIC, through a lease
structure, finances the acquisition, improvement, and construction of City facilities. The PIC
uses the lease payments by the City’s General Fund to pay the debt service on the COPs. On July
13, 1998, Council adopted a resolution establishing itself as the Board of Directors of the PIC.
The bylaws of the PIC require the Board of Directors of the Corporation to meet at least
annually and approve the annual financial report for the Corporation. Therefore, the City
Council is required to meet annually as the Board of the PIC.
In 1983 and 1998, the City of Palo Alto issued COPs to fund improvements to the Civic Center
and the Golf Course, respectively. In 2002, the Civic Center bonds were refinanced due to a
lower interest rate environment and COPs were issued to finance the construction of
commercial space adjacent to the new parking structure on Bryant/Florence Street.
The Downtown Parking Improvement bonds were used to build a two story above-ground
structure of approximately 7,638 square feet which was leased to a commercial tenant. The
2018 Capital Improvement COPs were issued to refund the remaining balance of the 2002
Downtown Parking Improvement bonds ($0.595 million) and to finance renovations for the Palo
Alto Municipal Golf Course ($8.375 million).
City of Palo Alto Page 2
Discussion
The attached financial statement shows the financial condition of the PIC. The debt service
payments have been made on time and all financial requirements, such as the maintenance of a
reserve, have been met. At June 30, 2018, total outstanding debt principal on the COPs
equaled $8.97 million.
COP Description
Principal
Outstanding
(millions)
Year Debt will
be Retired
2018 Capital Improvement Projects $8.97 2048
Total COP $8.97
Resource Impact
Approval of the Public Improvement Corporation’s financial statements will have no resource
impact.
Policy Implications
Approval of the Public Improvement Corporation’s financial statements is consistent with prior
Council policy direction and resolutions.
Environmental Review
This is not a project, as defined in Section 21065 of the California Environmental Quality Act
(CEQA).
Attachments:
• Attachment A: City of Palo Alto Public Improvement Corp FY 2018 Annual Financial
Report
PALO ALTO PUBLIC IMPROVEMENT
CORPORATION
(A Component Unit of the City of Palo Alto)
Annual Financial Report
For the Year Ended June 30, 2018
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
For the Year Ended June 30, 2018
Table of Contents
Page
Independent Auditor’s Report ................................................................................................................... 1
Management’s Discussion and Analysis (Unaudited) .............................................................................. 3
Basic Financial Statements
Government-wide Financial Statements:
Statement of Net Position ................................................................................................................... 5
Statement of Activities ....................................................................................................................... 6
Debt Service Fund Financial Statements:
Balance Sheet ..................................................................................................................................... 7
Statement of Revenues, Expenditures and Changes in Fund Balance ................................................ 8
Notes to the Basic Financial Statements .................................................................................................. 9
www.mgocpa.com
Macias Gini & O’Connell LLP 2121 N. California Boulevard, Suite 750 Walnut Creek, CA 94596
1
Independent Auditor’s Report
The Honorable Mayor and
Members of the City Council of the
City of Palo Alto, California
We have audited the accompanying financial statements of the governmental activities and the major fund
of Palo Alto Public Improvement Corporation (Corporation), a component unit of the City of Palo Alto,
California (City), as of and for the year ended June 30, 2018, and the related notes to the financial
statements, which collectively comprise the Corporation’s basic financial statements as listed in the table
of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
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. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities and the major fund of the Corporation as of
June 30, 2018, and the respective changes in financial position thereof for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
2
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis on pages 3 through 4 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Walnut Creek, California
November 19, 2018
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Management’s Discussion & Analysis (Unaudited)
For the Year Ended June 30, 2018
3
The Palo Alto Public Improvement Corporation (Corporation), a component unit of the City of Palo Alto
(City), follows the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34
(GASB 34), Basic Financial Statements - and Management’s Discussion and Analysis - for State and
Local Governments. The Corporation is controlled by the City and was organized to assist the City in
financing public improvements. The Corporation issues debt and turns the proceeds of the debt over to
the City under lease agreements that provide a revenue source for the repayment of this debt. The
Corporation has one debt issue outstanding and has turned the proceeds over to the City, which pledged
certain lease payments as collateral for this debt as discussed in Note 4 to the financial statements.
FISCAL YEAR 2018 FINANCIAL HIGHLIGHTS
GASB 34 requires the issuance of government-wide financial statements as well as fund financial
statements. The government-wide financial statements report the balance of the Corporation’s long-term
debt while the individual fund statements do not.
In fiscal year 2002, the Corporation issued its 2002B Downtown Parking Improvements Certificates of
Participation (2002B COPs) in the amount of $3.6 million. On June 1, 2018, the City issued 2018 Capital
Improvement Project Certificates of Participation; 2002B Refinancing (2018 COPs) in the amount of $9.0
million to refinance the remaining balance of the 2002B COPs, in the amount of $805,000, and to provide
new funding for the costs of the Palo Alto Municipal Golf Course renovations.
As of June 30, 2018, the 2018 COPs comprise the Corporation’s outstanding debt.
At the government-wide level, interest and fiscal agent charges were $308 thousand for fiscal year 2018,
an increase of $237 thousand from the prior year. The increase is primarily due to $223 thousand in
issuance costs in connection with the issuance of the 2018 COPs. The interest on leases on the assets
securing this COP issue was $91 thousand, an increase of $17 thousand from the prior year. Interest and
fiscal agent charges exceeded the interest on leases from the City by $215 thousand, thereby resulting in a
decrease in net position of $215 thousand over the prior year.
The Corporation ended fiscal year 2018 with total assets of $9.0 million, an increase of $7.8 million from
the prior year. The increase in assets result primarily from the issuance of the 2018 COPs of $9.0 million
offset by the reduction in cash held by trustee of $237 thousand that was used for the refunding of 2002B
COPs. Total assets consist of $15 thousand in cash and investments and $9.0 million of leases receivable
from the City of Palo Alto. Total liabilities were $9.0 million, an increase of $8.0 million from the prior
year due to the issuance of 2018 COPs.
At the fund level, the Corporation’s expenditures exceeded revenues by $8.4 million due to lease
proceeds to the City of Palo Alto relating to the issuance of 2018 COPs. As of June 30, 2018, the
Corporation had one fund, the Debt Service Fund, which reported a $16 thousand restricted fund balance.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Management’s Discussion & Analysis (Unaudited)
For the Year Ended June 30, 2018
4
OVERVIEW OF THE CORPORATION’S BASIC FINANCIAL STATEMENTS
The annual financial report is comprised of two parts:
1) Management’s discussion and analysis (this part),
2) The basic financial statements, which include the government-wide and the fund financial statements,
along with the notes to these financial statements.
The basic financial statements comprise the government-wide financial statements and the fund financial
statements. These two sets of financial statements provide two different views of the Corporation’s
financial activities and financial positions, both short-term and long-term.
The government-wide financial statements provide a long-term view of the Corporation’s activities as a
whole, and comprise the statement of net position and the statement of activities. The statement of net
position provides information about the financial position of the Corporation as a whole, including all its
long-term liabilities on the full accrual basis, similar to that used by corporations. The statement of
activities provides information about all the Corporation’s revenues and expenses on the full accrual
basis, with the emphasis on measuring net revenues or expenses of the Corporation’s program. The
statement of activities explains in detail the change in net position for the year.
The fund financial statements report the Corporation’s operations in more detail than the corporate-wide
statements and focus primarily on the short-term activities of the debt service fund. Fund financial
statements measure only current revenues and expenditures; current assets, liabilities and fund balances;
and they exclude capital assets and long-term debt.
Together, these statements along with the notes to the financial statements are called the basic financial
statements.
DEBT ADMINISTRATION
The Corporation issues debt in the form of COPs for future lease receipts from the City of Palo Alto.
Legally, these COPs issues are the Corporation’s debt only; the City is liable only for the payment of the
amounts set forth in the lease securing each COPs issue.
As of June 30, 2018, the Corporation has one outstanding debt related to the 2018 Capital Improvement
Project with an outstanding balance of $9.0 million.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the City and its major initiatives for the coming year are discussed in detail in the City’s
Comprehensive Annual Financial Report.
CONTACTING THE CORPORATION’S FINANCIAL MANAGEMENT
These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and creditors with
a general overview of the Corporation’s finances. Questions about these financial statements should be
directed to the Finance Department of the City of Palo Alto, 250 Hamilton Avenue, Palo Alto, CA 94301.
Assets
Cash and investments held for operations 15,210$
Cash and investments held by trustee 297
Interest receivable 84
Lease interest receivable 28,661
Investment in leases to the City of Palo Alto 8,970,000
Total assets 9,014,252
Liabilities
Interest payable 28,661
Long-term debt:
Due in one year 35,000
Due in more than one year 8,935,000
Total liabilities 8,998,661
Net Position
Restricted for debt service 15,591$
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Statement of Net Position
June 30, 2018
See accompanying notes to financial statements.
5
Expenses
Interest and fiscal agent charges 307,737$
Program revenues
Interest on leases from the City of Palo Alto 90,983
Net program revenues (216,754)
General revenues
Investment earnings 1,945
Change in net position (214,809)
Net position, beginning of the year 230,400
Net position, end of the year 15,591$
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Statement of Activities
For the Year Ended June 30, 2018
See accompanying notes to financial statements.
6
Assets
Cash and investments held for operations 15,210$
Cash and investments held by trustee 297
Interest receivable 84
Lease interest receivable 28,661
Investment in leases to City of Palo Alto 8,970,000
Total assets 9,014,252$
Deferred Inflows of Resources
Unavailable lease receipts from the City of Palo Alto 8,998,661$
Fund balance
Restricted for debt service 15,591
Total deferred inflows of resources and fund balance 9,014,252$
Reconciliation of fund balance to net position
Fund balance restricted for debt service 15,591$
Long-term receivables are not available to pay for current period expenditures
and are considered unavailable on the governmental fund balance sheet 8,998,661
Some liabilities, including bonds payable, are not due and payable in
the current period and therefore are not reported in the Fund:
Interest payable (28,661)
Long-term debt due within one year (35,000)
Long-term debt due in more than one year (8,935,000)
Net position of governmental activities 15,591$
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Balance Sheet
June 30, 2018
Debt Service Fund
See accompanying notes to financial statements.
7
Revenues:
Lease receipts from the City of Palo Alto:
Principal 170,000$
Interest 63,375
Investment earnings 1,945
Total revenues 235,320
Expenditures:
Lease proceeds to the City of Palo Alto 8,166,053
Debt service:
Principal repayment 170,000
Interest and fiscal agent charges 77,038
Costs of issuance 223,163
Total expenditures 8,636,254
Excess of Revenues over Expenditures (8,400,934)
Other Financing Sources (Uses):
Issuance of Debt 8,970,000
Deposit with escrow agent (805,000)
Total other financing sources (uses) 8,165,000
Net change in fund balance (235,934)
Fund balance, beginning of the year 251,525
Fund balance, end of the year 15,591$
Reconciliation of net change in fund balance to change in net position
Net change in fund balance - debt service fund (235,934)$
Amounts reported for governmental activities in the statement of activities are
different because:
Repayment of bond principal is an expenditure in the governmental funds,
but in the statement of net position the repayment reduces long-term liabilities. 170,000
Amounts related to 2018 COPs refunding of 2002B COPs
Lease proceeds to the City of Palo Alto 8,166,053
Proceeds from issuance of 2018 COPs (8,970,000)
Deposit with escrow agent for refunding of 2002B COPs 805,000
Some amounts reported in the statement of revenues, expenditures and changes
in fund balances reflect the collection of an asset which are not includable
as revenues and expenses on the statement of activities.
Lease principal paid related to 2002B COPs prior to refunding (170,000)
Change in lease interest receivable 27,608
Change in interest payable (7,536)
Change in net position of governmental activities (214,809)$
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Statement of Revenues, Expenditures and Changes in Fund Balance
For the Year Ended June 30, 2018
Debt Service Fund
See accompanying notes to financial statements.
8
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2018
9
NOTE 1 – DESCRIPTION OF REPORTING ENTITY
The Palo Alto Public Improvement Corporation (the Corporation) was incorporated in September 1983
under the General Nonprofit Corporation Law of the State of California to acquire, construct and lease
capital improvement projects. The Corporation is exempt from federal income taxes under
Section 501(c)(4) of the Internal Revenue Code. The Corporation provides financing of public capital
improvements for the City through the issuance of Certificates of Participation (COPs), a form of debt
which allows investors to participate in a stream of future lease payments. Proceeds from the COPs are
used to construct projects which are leased to the City for lease payments which are sufficient in timing
and amount to meet the debt service requirements of the COPs.
The Corporation is an integral part of the City of Palo Alto (City). It primarily services the City and its
governing body is composed of the City Council. Therefore, the financial data of the Corporation has also
been included as a blended component unit within the City’s comprehensive annual financial report for
the year ended June 30, 2018.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
Government-wide Statements: The statement of net position and the statement of activities include the
financial activities of the Corporation. Eliminations have been made to minimize the double counting of
internal activities.
The statement of activities presents a comparison between direct expenses and program revenues for each
function of the Corporation’s activities. Direct expenses are those that are specifically associated with a
program or function and, therefore, are clearly identifiable to a particular function. Program revenues
include (a) charges paid by the recipients of goods or services offered by the programs, and (b) grants and
contributions that are restricted to meeting the operational or capital requirements of a particular program.
Revenues that are not classified as program revenues, including investment earnings, are presented as
general revenues.
Fund Financial Statements: The fund financial statements provide information about the Corporation’s
funds. The emphasis of fund financial statements is on major individual funds, of which the Corporation
only reports one debt service fund.
(b) Major Fund
Major funds are defined as funds that have either assets, liabilities, revenues or expenditures equal to ten
percent of their fund-type total and five percent of the grand total. The Corporation has one fund which is
reported as a major governmental fund in the accompanying financial statements:
Debt Service Fund – This fund accounts for debt service payments on the Corporation’s long-term debt.
(c) Investment in Leases
Improvements financed by the Corporation are leased to the City for their entire estimated useful life and
will become the City property at the conclusion of the lease on November 1, 2047. The Corporation
therefore records the present value of the lease and considers the leased improvement to have been sold
for this amount when leased.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2018
10
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Net Position
The government-wide financial statements utilize a net position presentation. Net position is further
categorized as net investment in capital assets, restricted and/or unrestricted. As of June 30, 2018, the
entire net position was considered restricted.
Restricted Net Position – This category presents external restrictions imposed by creditors, grantors,
contributors or laws or regulations of other governments and restrictions imposed by law through
constitutional provisions or enabling legislation.
(e) Deferred Inflows of Resources
A deferred inflow of resources is defined as an acquisition of net position or fund balances applicable to a
future reporting period and will not be recognized as an inflow of resources (revenue) until that time. On
the governmental fund balance sheet, the lease receipts from the City corresponding to the debt are
recorded as deferred inflows of resources since the balances are not current financial resources. The City
considers revenues susceptible to accrual to be available if the revenues are collected within ninety days
after year-end, except for property taxes, which are available if collected within sixty days after year-end.
(f) Fund Balances
At June 30, 2018, the Corporation’s governmental fund’s fund balances include the following
classification:
Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated by
external resource providers, constitutionally or through enabling legislation. Restrictions may effectively
be changed or lifted only with the consent of resource providers.
(g) Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2018
11
NOTE 3 – CASH AND INVESTMENTS HELD BY TRUSTEE
(a) Interest Rate Risk
Interest rate risk is the risk that a change in market interest rates will adversely affect the fair value of an
investment. Normally, the longer it takes an investment to reach maturity, the greater will be that
investment’s sensitivity to changes in market rates. Information about the sensitivity of the fair values of
the Corporation’s investments to market interest rate fluctuations is provided by the following table that
shows the distribution of the Corporation’s investments by maturity:
Investment Type Amount Maturity Date
Money Market Mutual Fund 297$ 34 days
(b) Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder
of the investment. This is measured by the assignment of a rating by a nationally recognized statistical
rating organization. As of June 30, 2018, the Corporation’s investments in money market mutual funds
are rated AAAm by Standard & Poor’s.
(c) Fair Value Hierarchy
The City categorizes its fair value measurements within the fair value hierarchy established by generally
accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value
of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are
significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The
Corporation’s investments in money market mutual funds are not subject to the fair value hierarchy.
(d) Investment Policy
The Corporation must maintain required amounts of cash and investments by trustee under the terms of
certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the
Corporation fails to meet its obligation under these debt issues. The California Government Code (Code)
requires these funds to be invested in accordance with bond indentures or State statutes. All these funds
have been invested as permitted under the Code. The Investment Policy is described in detail in the City’s
Comprehensive Annual Financial Report.
The table below identifies the investment types that are authorized by the City’s Investment Policy. The
table also identifies certain provisions of the City’s Investment Policy that address interest rate risk, credit
risk and concentration of credit risk.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2018
12
NOTE 3 – CASH AND INVESTMENTS HELD BY TRUSTEE (continued)
Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
Portfolio
Maximum
Investment in
One Issuer
U.S. Government Securities 10 years (*) N/A No Limit No Limit
U.S. Government Agency Securities 10 years (*) N/A No Limit (A) No Limit
Certificates of Deposit 10 years (*) N/A 20% 10% of the par
value of
portfolio
Bankers Acceptances 180 days N/A 30% $5 million
Commercial Paper 270 days P-1/A-1+ 15% $3 million (B)
Local Agency Investment Fund N/A N/A No Limit $50 million per
account
Short-Term Repurchase Agreements 1 year N/A No Limit No Limit
City of Palo Alto Bonds N/A N/A No Limit No Limit
Money Market Deposit Accounts N/A N/A No Limit No Limit
Mutual Funds N/A N/A 20% 10%
Negotiable Certificates of Deposit 10 years (*) N/A 10% $5 million
Medium-Term Corporate Notes 5 years AA 10% $5 million
10 years (*) AA/AA2 20% No Limit
(A)
(B) The lesser of $3 million or 10% of outstanding commercial paper of any one institution.
(*) The maximum maturity is based on the Investment Policy that is approved by the City Council
and is less restrictive than the California Governmental Code.
Authorized Investment Type
Bonds of State of California Municipal
Agencies
Callable and multi-step securities are limited to no more than 25% of the par value of the portfolio, provided
that: 1) the potential call dates are known at the time of purchase, 2) the interest rates at which they "step-up" are
known at the time of purchase, 3) the entire face value of the security is redeemed at the call date.
NOTE 4 – CERTIFICATES OF PARTICIPATION
The Corporation’s changes in long-term debt are presented below:
Balance Balance Amount due
June 30, 2017 Additions Retirements June 30, 2018 in one year
Certificates of Participation
2018 Capital Improvement Projects
2.20-4.22%, due 11/1/2047 -$ 8,970,000$ -$ 8,970,000$ 35,000$
2002B Downtown Parking
6.50%; due 03/01/2022 975,000 975,000 - -
Total 975,000$ 8,970,000$ 975,000$ 8,970,000$ 35,000$
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2018
13
NOTE 4 – CERTIFICATES OF PARTICIPATION (Continued)
On January 16, 2002, the Corporation issued the 2002B Downtown Parking Improvements Certificates of
Participation (2002B COPs) in the amount of $3.6 million to finance the construction of certain
improvements to the non-parking area contained in the City’s Bryant/Florence Garage complex. Principal
payments were due annually on March 1 and interest payments were due semi-annually on March 1 and
September 1 and are payable from lease revenues received from the City.
On June 1, 2018, the City issued the 2018 Capital Improvement Projects and Refunding Certificates of
Participation (2018 COPs) in the amount of $9.0 million to fully refinance the 2002B COPs and provide
new funding to finance the costs for the renovation of the Palo Alto Municipal Golf Course. Principal
payments are due annually on November 1 and interest payments semi-annually at various rates on May 1
and November 1. The 2018 COPs are secured by lease revenues received by the Corporation from any
City of Palo Alto General Fund revenue source.
Future annual debt service on the 2002B COPs is shown below:
For the Year Interest Total
Ending June 30, Principal Payment Payment
2019 35,000$ 319,602$ 354,602$
2020 180,000 350,205 530,205
2021 185,000 345,165 530,165
2022 190,000 339,651 529,651
2023 195,000 333,749 528,749
2024-2028 1,070,000 1,565,383 2,635,383
2029-2033 1,285,000 1,345,453 2,630,453
2034-2038 1,565,000 1,060,046 2,625,046
2039-2043 1,915,000 702,749 2,617,749
2044-2048 2,350,000 256,365 2,606,365
8,970,000$ 6,618,368$ 15,588,368$