HomeMy WebLinkAboutStaff Report 162-08City of Palo Alto
City Manager’s Report
TO:
FROM:
:HONORABLE CITY COUNCIL
CITY MANAGER
PIC-I
DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
MARCH 17, 2008
APPROVAL OF 2006-07 PUBLIC
FINANCIAL STATEMENTS
IMPROVEMENT
CMR: 162:08
CORPORATION
RECOMMENDATION
Staff recommends that the Board of Directors of the Public Improvement Corporation (PIC) approve
the 2006-07 financial statements for the Public Improvement Corporation.
BACKGROUND
The Public Improvement Corporation (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 certain City
properties (described below). 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.
In 1983 and 1998, the City of Palo Alto issued Certificates of Participation (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 office space adjacent to the new parking structure on Bryant/Florence Street. The
bylaws of the PIC require the Board of Directors of the Corporation to meet at least annually and
approve the financial statements for the Corporation. Therefore, the City Council is required to meet
annually as the Board of the PIC. The Board has no substantive oversight responsibilities, as it
assigns all rights to receive lease payments to the Trustee (U.S. Bank Trust) for the benefit of the
investors.
DISCUSSION
The attached financial statements show the financial condition of the PIC. All debt service payments
have been made on time and all financial requirements, such as the maintenance of reserves, have
CMR:162:08 Page 1 of 2
been met. At year-end, June 30, 2007, total outstanding debt (principal) on the COPs equaled $9.2
million as follows:
COP Description
1998 Golf Course
2002A Civic Center Refinancing
2002B Downtown Parking Improvements
Total COPs
Principal
Outstanding
(millions)
$5.1
$1.9
$2.2
$9.2
Year Debt will be
Retired
2018
2012
2022
RESOURCE IMPACT
Approval of the Public hnprovement 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.
ENVIRONMENTALREVIEW
This is not a project under Section 21065 of the Public Resources code for purposes of the California
Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: City of Palo Alto Public Improvement Corporation Financial Statements for the Year
Ended June 30, 2007.
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
Senior Financial ~
LAL0 PEREZ
Director, AdM.ni~atiqe_S ervice s
EMILY
Assistant City Manager
CMR:162:08 Page 2 of 2
ATTACHMENT A
CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
COMPONENT UNIT FINANCIAL STATEMENTS
FOR THE YEAR ENDED
JUNE 30, 2007
This Page Left Intentionally Blank
CITY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
COMPONENT UNIT FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2007
Table of Contents
Independent .4 ttditor’s Report ................................................................................................................1
3lanagement’s Discussion and A nal),sis ................................................................................................3
Financial Statements:
Government-wide Financial Statements
Statement of Net Assets . .............................................................................................................8
Statement of Activities ...............................................................................................................9
Fund Financial Statements
Balance Sheet ...........................................................................................................................12
Statement of Revenues, Expenditures and Changes in Fund Balances .....................................13
Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds to the Statement of Activities ...............................................................14
Notes to Financial Statements .............................................................................................................15
This Page Left Intentionally Blank
INDEPENDENT AUDITOR’S REPORT
The Honorable Mayor and
Members of the City Oouncil of the
Cib’ of Palo Alto, California
We have audited the accompanying component unit financial statements of the governmental
activities and the major fund of the Palo Alto Public Improvement Corporation, a component unit
of the City of Palo Alto, as of and for the year ended June 30, 2007 as listed in the Table of
Contents. These financial statements are the responsibiliU, of the CiU"s management. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance as to 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all material respects the
financial position of the governmental activities and the major fund of the Palo Alto Public
improvement Corporation as of June 30, 2007, and the results of its operations for the year then
ended, in conformity with generally accepted accounting principles in the United States of
America.
Management’s Discussion and Analysis is not a required part of the basic component unit financial
statements but is supplementao, 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 required supplementao,
information. However we did not audit the information and we express no opinion on it.
October 12, 2007
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[VIANAGEMENT’S DISCUSSION AND ANALYSIS
The Pa!e ,~tto Public Improvement Corporation. a component unit of the City of Palo Alto, follows
the provisions of C:’,e.rnme:,L ,~ ...... rang btandards Board ~tat;ii.,~i~ 23’ (GASB 34), "Basic
Financial Statements-and Management’s Discussion & Analysis-for State and Local Goverrm~ents’.
The Corporation is controlled by the City of Palo Alto 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 four debt issues and has turned the proceeds of these issues over to the
City, which pledged certain lease payments as collateral for this debt,, as discussed in Note 4 to the
financial statements.
FISCAL 2007 FINANCIAL HIGHLIGHTS-CORPORATON-WIDE BASIS AND FUND
BASIS
GASB 34 requires the issuance of Corporation-wide financial statements as well as fund financial
statements. The Corporation-wide financial statements report the balance of the Corporation"s long-
term debt issue, while the individual fund statement does not.
In fiscal year 2002, the Corporation issued its 2002A Civic Center Refinancing COPs in the amount
of $3.5 million to refund its 1992 Civic Center Project COPs, reducing debt service requirements by
$372 thousand and producing an accounting gain of $I37 thousand. It also issued its 2002B
Downtown Parking Improvements COPs in the amount of $3.6 million. In fiscal year 2005 a partial
redemption was done by placing excess construction and debt service reserve funds into an escrow
account to defease $900 thousand of 2002B Downtown Parking Improvements COP’s. These issues
plus the 1998 Golf Course Capital Improvements COPs issue comprise all its outstanding debt.
Interest expense on these COPs issues was $464 thousand in fiscal year 2007, a decrease of $19
thousand from prior year. The interest on leases on the assets securing these COPs issues was $430
thousand, a decrease of $23 thousand from prior year; the net program and $28 thousand in interest
income resulted in a loss of $6 thousand in fiscal year 2007, a decrease of $18 thousand from prior
year.
The Corporation ended fiscal year 2007 with total assets of $9.3 million, a decrease of $0.8 million
from prior year. Total assets included $1.3 million in cash, a decrease of $0.1 million from prior
.’,’ear, and $8.0 million in present value of leases receivable from the City of Palo Alto, a decrease of
$0.7 million from prior year. It had liabilities of $9.3 million a decrease of $0.8 miliion from prior
year, including $9.2 million in long-term debt.
At the Fund level, the Corporation reported a negative $49 thousand in revenues over expenditures.
Prior year was a negative $61 thousand for a difference of $12 thousand.
As of June 30, 2007, the Corporation has one fund, Debt Ser~,ice Fund, which reported a $1.3
million fund balance, a decrease of $0. ! million from prior year.
OVERVIEW OF THE AGENCY’S BASIC FINANCIAL STATEMENTS
The Basic Financial statements are in two parts:
1)Management’s Discussion and Analysis (this part),
2)The Basic Financial Statements, which include the Agency-wide and the Fund financial
statements, along with the Notes to these financial statements.
The Basic Financial Statements
The Basic Financial Statements comprise the Corporation-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 position-long-term and short-term.
The Corporation-wide Financial Statements provide a longer-term view of the Corporation’s
activities as a whole, and comprise the statements of Net Assets and the Statement of Activities.
The statement of Net Assets 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 all its expenses, also 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 Assets for the year.
The Fund Financial Statements report the Corporation’s operations in more detail than the
.Corporation-wide statements and focus primarily on the short-term activities of the Debt Service
and Capital Projects Funds. The Fund Financial Statements measure only current revenues and
expenditures, current assets, liabilities and fund balances; they exclude capital assets, long-term
debt and other long-term amounts.
Together, all these statements are now called the Basic Financial Statements.
DEBT ADMINISTRATION
The Corporation issues debt in the form of Certificates of Participation (termed COPs) in 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.
The Corporation’s COPs issues are discussed in detail in Note 4 to the financial statements. The
Corporation issued two COPs issued in fiscal 2002, one of which refunded an earlier issue.
ECONOMIC OUTLOOK AND MAJOR INITIATES
The economy of the City of Palo Alto and its major initiatives for the coming year are discussed in
detail in the City’s Comprehensive Annual Financial Report.
CONTACTING THE AGENCY’S FINANCIAL MANAGEMENT
These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and
creditors with a general over%ew of the Agency’s finances. Questions about these Statements
should be directed to the Finance Department of the City of Palo Alto, 250 Hamilton Avenue, CA
94301.
This Page LeA Intentionally Blank
CITY OF PALe ALTO - PUBLIC IMPROVEMENT CORPORATION
STATEMENT OF NET ASSETS
AND STATEMENT OF
ACTIVITIES
T’~,_ ~t2~o, ment of Net Assets and the Statement of Activities summarize the entire Corporation’s
financial activ~;~~ ~4 ~,~,o~al _ ~i~io~, They are prepared on the same basis as ; ..... ~ ’
businesses, which means they include all th~ ’~qrporation’s assets 21ld all ItS liabilities, as well as
all its revenues and expenses. This is known a< .so f~,ii accrual basis-the effect of all the
Corporation’s transactions is taken into account, regardless of whether or when cash changes
hands, but all material internal transactions between Corporation ~nds have been eliminated.
The Statement of Net Assets reports the difference between the Corporation’s total assets and the
Corporation’s total liabilities, including all the Corporation’s capital assets and all its long-term
debt. The Statement of Net Assets presents similar information to the old balance sheet format,
but presents it in a way that focuses the reader on the composition of the Corporation’s net assets,
by subtracting total liabilities from total assets.
The Statement of Net Assets summarizes the financial position of all the Corporation’s
Governmental Activities in a single column that presents the financial position of the entire
Corporation.
The Corporation’s Governmental Activities include the activities of its Debt Service Fund.
The Statement of Activities reports increases and decreases in the Corporation’s net assets. It is
also prepared on the full accrual basis, which means it includes all the Corporation’s revenues and
all its expenses, regardless of when cash changes hands. This differs from the "modified accrual"
basis used in the Fund financial statements, which reflect only current assets, current liabilities,
available revenues and measurable expenditures.
The Statement of Activities presents the Corporation’s expenses and follows with prepare
revenues. Revenues which are generated directly by these programs are deducted from program
expenses to arrive at the net expense of the governmental program. The Corporation’s general
revenues are then listed in the Governmental Activities column, and the Change in Net Assets is
computed and reconciled with the Statement of Net Assets.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
STATEMENT OF NET ASSETS
JUNE 30, 2007
.ASSETS
Cash and investments held by trustee (Note 3)
Interest receivable
Investment in leases to City of Palo Alto (Note 2C)
Total Assets
LIABILITIES
Interest payable
Long-term debt (Note ’4):
Due in one year
Due in more than one year
Total Liabilities
NET ASSETS
$1,320,171
20,650
8,008,676
9,349,497
153,847
770,000
8,405,000
9,328,847
Restricted (Note 5A)
Total Net Assets
See accompanying notes to financial statements
20,650
$20,650
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007
EXPENSES
Interest and fiscal agent charges
Total Program Expenses
REVENUES
Interest on leases from City, of Palo Alto
Net Program Expenses
GENERAL REVENUES
Interest from cash and investments
Change in Net Assets
Net assets at the beginning of year
Net assets at the end of year
See accompanying notes to financial statements
$463,930
463,930
429,939
(33,99])
27,762
(,6,229)
26,879
$20,650
This Pa~e Left Imentionally Blank
FUND FINANCIAL STATEMENTS ,I
Major funds are defined generally as having significant activities or balances in the current year.
All of the Corporation’s Funds were determined to be Major Funds in fiscal 2007.
Debt Service Fund - This fund accounts for debt service payments on the Corporation’s
long-term debt issues.
PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
DEBT SERVICE FUND BALANCE SHEET
JUNE 30, 2007
ASSETS
Cash and investments held b) trustee (Note 3)
Interest receivable
Investment in leases to City of Palo Alto (Note 2C)
Total Assets
Deferred revenue
Total Liabilities
Reserved for:
Debt service
LIABILITIES
FUND BALANCE (Note 5B)
Total Fund Balance
$1,320,171
20,650
8,008,676
$9,349,497
$8,008,676
8,008,676
1,340,821
1,340,821
RECONCILIATION OF FUND BALANCE TO NET ASSETS:
Accrual adjustment to remove deferred revenue from the balance sheet
Deferred revenue
Some liabilities, including bonds payable, are not due and payable in the
current period and therefore are not reported in the funds
Long-term debt
Interest payable
Due within one year
Due in more than-one year
8,008,676
(I53,847)
(770,000)
(8,405,000)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $20,650
See accompanying notes to financial statements
PALO ALTO PUBLIC IMPROVEMENT COP-,_PORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
DEBT SERVICE FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES FN FUND BALANCE
FOR THE YEAR ENDED JUNE 30, 2007
REVENUES
Lease receipts from City of Palo Alto:
Principal
Interest
Interest from cash and investments
$740,000
399,539
27,762
Total Revenues 1,167,301
EXPENDITURES
Debt service:
Principal repayment
Interest and fiscal agent charges
740,000
476,327
Total Expenditures t,216,327
(49,026)
1,389,847
$1,340,821
NET CHANGE IN FUND BALANCE
Fund balance at beginning of year
Fund balance at end of year
See accompanying notes to financial statements
PALO ALTO PUBL1C IMPROVEMENT COP,_PORATION
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES 1N FUND BALANCES
GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES - FOR THE YEAR ENDED JUNE 30, 2007
Net change in fund balances-total governmental funds
Amounts reported for governmental activities in the statement of activities
are different because:
Bond proceeds provide current financial resources to governmental funds, but
issuing debt increases long-term liabilities in the Statement of Net Assets.
Repaymen~ of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long-term liabilities.
Fund balance is increased by the amount of debt repayment
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 on the Statement of Activities
Change in deferred revenue
Change in interest payable
Change in net assets of governmental activities
($49,026)
740,000
(709,600)
12,397
($6,229)
See accompanying notes to financial statements
C!TY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
Notes to Financial Statements
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 50l(c)(4) of the Internal Revenue Code. The Corporation provides financing of
public capital improvements for the CiD’ 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. 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, 2007.
I NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Government-wide Statements: The Statement of Net Assets 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 pro~am 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 all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the
Corporation’s funds. Separate statements for each governmental fund are presented. The emphasis
of fund financial statements is on major individual funds, each of which is displayed in a separate
column.
B.:~lajor Funds
The Corporation’s major governmental type funds be identified and presented separately in the
Fund financial statements. 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:
CITY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
Notes to Financial Statements
INOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Debt Service Fund - This fund accounts for debt service payments on the Corporation’s long-term
debt issues.
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. The Corporation therefore records
the present value of the lease and considers the leased improvements to have been sold for this
amount when leased.
NOTE 3 -CASH AND INWESTMENTS HELD BY TRUSTEE
A Trustee under the provisions of the Corporation’s COP issues holds and invests all the
Corporation’s cash.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value.
of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of
its fair value to changes in market interest 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 Maturit)’ Date
CAMP $17,588 N/A
U.S. Agency Obligations:
FNMA 584,724 JanuaD’ 28, 2008
FNMA 699,136 Februa~’ 15,201 l
Money Market Mutual Funds 18,723 N/A
Total Investments held by Trustee $1,320,171
Bo
Money Market Mutual Funds are available for withdrawal on demand and at June 30, 2007 and
have an average maturity of 1 day.
Credit Risk
Generally, credit risk is the risk that an issuer of an investment wil! not full! its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally recognized
statistical rating organization. The actual ratings as of June 30, 2007 for all U.S. Agency
Obligations and Mutua! funds are Aaa as provided by Moody’s investment Rating system. As an
external investment pool, the California Asset Management Program was not rated as of June 30,
2007.
CITY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
Notes to Financial Statements
I NOTE 3 - CASH AND INVESTMENTS HELD BY TRUSTEE (Continued)
C.Investment Policy
The Corporation must maintain required amounts of cash and investments with trustees 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 obligations under these debt issues. The California
Government Code requires these funds to be invested in accordance with bond indentures or State
statute. All these funds have been invested as permitted under the Code. The Investment Policy is
described in detail in the City. of Palo Alto Comprehensive 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. The table addresses investments of debt proceeds
held by bond trustee that are governed by the provisions of debt agreements of the City, rather than
the general provisions of the Cit?"s investment policy.
Maximum Minimum Credit
Authorized Investment Type Maturity Quality
U S Government Securities 10 years N/A
US Government Agency Securities (C)10 years N/A
Maximum Maximum
Percentage of investment In One
Portfolio Issuer
No Limit No Limit
No Limil (A)No Limit
10% of the par value
20%of portfolio
30%$5 million
15%$3 million (B)
$’40 million per
No Limit account
No Limit No Limit
No L~m~l No Limit
No Limit 10%
20%10%
10%$5 million
10%$5 million
Certificates of Deposit I0 },ears N/A
Bankers Acceptances ! 80 days D)N/A (D)
Commercial Paper 270 days AAA
Local Agency Investment Fund
Short-Term Repurchase Agreements
City of Palo Alto Bonds
Money Market Deposit Accounts
Mutual Funds (F)
Negotiable Certificates of Deposit
Medium Term Corporate Notes
N/A NIA
year NIA
NiA N/A
NiA N/A (El
NiA N/A
0 years N/A
years AA
(A)Callable and multi-step securines are limited to no more than t~venty percent 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 knov#n at the time of purchase
3) the entire face value of the security’ is redeemed at the call date.
(B) The lesser of $3 million or 10% of outstanding commercial paper of any one instituuon.
Debt Agreements:
(C) Utility Revenue Bonds 2002 Series A and 1999 Series A allow General Obligations of states with
a Minimum Credit Quality Rating of A2/A by Moody’s and S&P.
(D) Utilits, Revenue Bonds 2002 Series A and I999 Series A require a Minimum Credit Quality’ Rating of A-!/P-] by’
Moody’s and S&P and maturing no more than 360 days
Utility Revenue Bonds 1995 limit the maximum maturity, to 365 days.
(El Utility Revenue Bonds 2002 Series A and 1999 Series A require a Minimum Credit Quality Rating of AA.Am or
AAAm-G by S&P.
" (F) Utility Revenue Bonds 2002 Stoles A, Golf PIC COP 1998, University Avenue Parking Bond 2001 and University,
Avenue Parking Bond 2002 are allowed to invesl in the California Asset Management Program.
CITY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
Notes to Financial Statements
NOTE 4 -CERTIFICATES OF PARTICIPATION
The Corporation’s changes in long term debt are presented below:
Governmental Activity Debe
Certificates of participation
1998 Golf Course
4.00-5 00%, due 09/01/2018
2002A Civic Center Refinancing
2.00-4 00%, due 03/0 !/2012
2002B Downlown Parking
Improvements
4 55-603%, due03/01/2022
Balance Balance Currenl
June 30, 2006 Retiremenl5 June 30, 2007 Portion
$5,385,000 $310,000 $5,075,000 $325,000
2,230,000 340,000 1,890,000 350,000
2,300,000 90,000 2210,000 95,000
$9,915,000 $740,000 $9,175,000 $770,000
In August 1998, the Corporation issued the Golf Course Capital Improvements and
Refinancing Project Certificates of Participation, Series 1998 in the amount of$7.8 million to
refund and subsequently retire the 1978 Golf Course Lease Revenue Bonds issued by the City
through the Palo Alto Golf Course Corporation, and to finance various improvements at the Palo
Alto Public Golf Course, including upgrading five fairways and various traps, trees and greens,
constructing new storm drain facilities, replacing the existing irrigation system, upgrading the
driving range, and installing new cart paths. Under the terms of the 1998 COPs, the Corporation
transferred $473 thousand to an agent for the Golf Course Corporation which used the funds to
retire the 1978 Bonds.
On Januar5’ 16, 2002 the Corporation issued the 2002A Civic Center Refinancing Certificates
of Participation in the amount of $3.5 million to refund the City’s 1992 Civic Center Project
Certificates of Participation. Principal payments for the 2002A COPs are due annually on March
1 and interest payments semi-annually on March 1 and September 1 and are payable from lease
revenues from the City from available funds. During the year ended June 30, 2002 the 1992
Civic Center COPs were retired.
On January. 16, 2002 the Corporation issued the 2002B Downtown Parking Improvements
Certificates of Participation 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 are due annually on March 1 and interest payments semi-annually on March 1
and September 1 and are payable from lease revenue received from the City from available funds.
CITY OF PALO ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF THE CITY OF PALO ALTO
Notes to Financial Statements
NOTE 4 - CERTIFICATES OF PARTICIPATION (Continued)
On January 25, 2005 tile City defeased $900 thousand of the 2002B Downtown Parking
Improvements Certificates of Participation. The City placed $1.0 million in surplus cash from the
Civic Center Refinancing and Downtown Parking Improvement Project Construction account in
an irrevocable trust to provide for future debt payments. Accordingly, the trust account assets
and the liability for the defeased Bonds are not included on the financial statements. The
outstanding amount of the defeased debt at June 30, 2007 is $810 thousand. The defeasance
resulted in an overall debt service savings of $1.5 million and an economic gain of $462
thousand.
The COPs are payable and secured by lease revenues received by the Public Improvement
Corporation from any City General Fund revenue source. Principal and interest are payable semi-
annually each March 1 and September 1.
Future annual debt service on the COPs is expected to be provided by the lease receipts discussed
above, and equaled the following:
Governmental Activities
For the Year
Ending June 30 Principal Interest
2008 $770,000 $446,000
2009 800,000 415,000
2010 840,000 381,000
2011 870,000 345,000
2012 905,000 305,000
2013-2017 2,950,000 1,0!8,000
2018-2022 2,040,000 251,000
Total $9,175,000 $3,161,000
INOTE 5 -NET ASSETS AND FUND BALANCES
A. :Vet Assets
Net Assets are divided into three captions at the Government-wide level, and are described below:
Restricted describes the portion of Net Assets which is restricted as to use by the terms and
conditions of agreements with outside parties, governmental regulations, laws, or other restrictions
which the Corporation cannot unilaterally alter. These principally include debt proceeds received
for debt service requirements.
&)v’estricted describes the portion of Net Assets which is not restricted as to use.
B.Fund Balances
Fund balances consist of reserved and unreserved amounts. Resewed fund balances represent that
portion of fund balance which is legally se~egated for debt service and capital projects.
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