HomeMy WebLinkAbout2003-03-17 City Council (6)TO:BOARD OF DIRECTORS
PUBLIC IMPROVEMENT CORPORATION
ol
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
DATE:
SUBJECT:
MARCH 17, 2003
APPROVAL OF PUBLIC
FINANCIAL STATEMENTS
CMR: 183:03
IMPROVEMENT CORPORATION
RECOMMENDATION
Staff recommends that the City Council, acting as the Board of Directors of the Public
Improvement Corporation (PIC) approve the 2001-2002 financial statements for the Public
Improvement Corporation.
BACKGROUND
On July 13, 1998 Council adopted a resolution establishing itself as the Board of Directors of
the Palo Alto Public Improvement Corporation (PIC). The PIC is a nonprofit corporation
that allows the City to issue Certificates of Participation (COPs) to fund capital
improvements. 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
Downtown Parking Improvements bonds were issued to finance the construction of office
space adjacent to the new parking structure on Bryant/Florence Street. The Board of
Directors of the Corporation is required to meet at least annually and approve the financial
statements for the Corporation. 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 over to the Trustee (U. S. Bank Trust) for the benefit of the investors.
DISCUSSION
The attached financial statements show the financial condition of the Palo Alto Public
Improvement Corporation. All debt service payments have been made on time and all
financial requirements, such as the maintenance of reserves, have been met. At year-end,
June 30, 2002, total outstanding debt (principal) on the COPs equaled $13.7 million. Debt
service payments on the Civic Center will be retired in 2012, the Downtown Parking
Improvements in 2022, and on the Golf Course in 2018.
CMR:183:03 Page 1 of 2
RESOURCE IMPACT
Approval of the Public Improvement
resource impact.
Corporation’s financial statements will have no
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 the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A:City of Palo Alto Public Improvement Corporation Financial
Statements for the Years Ended June 30, 2002.
PREPARED BY:
TARUN NARAYAN
Senior Financial Analyst
DEPARTMENT APPROVAL:
CARL
Director, A(Services
CITY MANAGER APPROVAL:
Y HARRISON
Assistant City Manager
CMR: 183:03 Page 2 of 2
CITY OF P.&LO ALTO
PUBLIC ~IPROVENIENT CORPORATIO_N
CO~’IPONENT I~_-NIT FL-N’AzNCL~, STATES~.NTS
FOR TIlE YE.&R E.’NI)ED
JUNE 30, 2002
CITY OF PA_LO ALTO PUBLIC ~-~IPRO¥~E3’IENT CORPORATION
COM~ONrENI’ UNIT Fh-NAaNCIAL STATEM~ENTS
FOR THE ¥-EA_R ENDED J-LrNE 30, 2002
Table of Contents
Paffe
Independent Auditor’s Report ............................................................................................................
Management’s Discussion and Analysis ..............................................................................................2
Financial Statements:
Government-wide Financial Statements
Statement of Net Assets .........................................................................................................5
Statement of Activities ...........................................................................................................6
Fund Financial Statements
Balance Sheet .............................................................................................................................8
Statements of Revenues, Expendi~es and Changes in F~d Balances .....................................9
Notes to Financial Statements .............................................................................................................1 t
&
A$$OCL4
IINI)EPENDENT AUDITOR’S REPORT
ACCOUNTANCY CORPORATION
1931 San Miguel Drive - Suite 100
Walnut Creek, California 94596
(925) 930-0902 o FAX (925) 930.0i35
E-Mail: maze @ mazeassociates.com
Webs#e: www.mazeassociates.com
The Honorable Mayor and
Members of the City Council of the
City. of Palo .Alto, California
We have audited the accompanying component unit financial statements 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, 2002 as listed in the Table of Contents. These financial statements are the responsibilit7 of the
City’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits m accordance with generally accepted auditing standards in the United States of
America. Those standards require that we plan and perform the audits to obtain reasonable assurance as to
whether the financial statements are flee of material misstatement. _am audit includes examining on a test
basis evidence supporting the amounts and disclosures in the financial statements..am audit also includes
assessing the accounting principles used and sig-nificant 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 Palo Alto Public Improvement Corporation as of June 30, 2002, and the results of its
operations for the year then ended, in conformity ~dth generally accepted accounting principles in the
United States of America.
The basic financial statements referred to above follow the requirements of Government Accounting
Standards Board Statements No. 34, Basic Financial Sratemenrs-and Managemen~’s Discussion a~zd
Analysis-for State and Local Governments, No.36, Recipient Reporting for Certain Non-exchange
Rm, enues, an Amendment or" GASB S~atement No. 33, No. 37, Basic Financial Staremenrs-and
Management’s Discussion and Analysis-for S~ate and Local Governme~zrs; Omnibus, and No. 38, Certain
Financial Statement Note Disclosures, as discussed in Note 1 to the Basic Financial Statements.
Mana~.ement’s Discussion and Analysis and Required Supplemental Information is supplememary
im~orn~ation required by the Government Accounting Standards Board, but is not part of the basic financial
statements. We have applied certain limited procedures to this information, principally inquiries of
management regarding the methods of measurement and presentation of tNs imOormation, but we did not
audit this information and we express no opinion on it.
1
A Professional Corporation
~&_NAGEM-E,.N’I"S DISCUSSION _~LNTI) .~_~J, YSIS
This year the Palo Alto Public Improvement Corporation, a component unit of the City of Palo,
implemented the provisions of Government Accounting Standards Board Statement 34, "Basic Financial
Statements--and Management’s Discussion & .&nalysis--for State and Local Governments", tmown as
GASB 34. GASB 34 represents a profound and far-reaching change in accounting and reporting for
municipalities; it is an effort to make these statements clearer and more understandable to readers.
GASB 34 requires the Corporation to make substantial changes to its financial statement format; one of
these requirements is that the Corporation provide this discussion and analysis of its financial activities
for the fiscal 5’ear. Other changes will be described in the financial statements themselves. Please read
this document in conjunction with the accompanying Basic Financial Statements (fiscal 2001 amounts
referred to below have been recast in the GASB 34 format for comparison purposes, when practical).
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 ageements 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.
The Corporation’s revenues are primarily determined by the debt service requirements of its Certificates
of Participation (COPs) issues, and are not directly affected by the local economy.
FISCA_L 2002 F12N.a2qCL4.L ltlGIILIGHTS--CORPORATIO. -WIDE BASIS AND FD_V~VD 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 2002, the Corporation issued its 2002A Civic Center Refinancing COPs in the amount of
million to refund its 1992 Ci~4c Center Project COPs, reducing debt service requirements by $372
thousand and producing an accounting gain of $137 thousand. It also issued its 2002B D0wnto~’n
Parking Improvements COPs in the amount of 3.55 million. These issues plus the 1998 Golf course
Capital Improvements COPs issue comprise all its outstanding debt.
Interest expense on these COPs issues was $’443 thousand in fiscal 2002. The interest on leases on the
" 9assets securing these COPS issues was $~,4, thousand; these revenues together with the accounting gain
above and $88 thousand in interest income resulted in an income of $123 thousand in fiscal 2002.
The Corporation ended fiscal 2002 ;~ith total assets of $13.9 million, including $5.0 million in cash and
$8.7 miliion in present value of leases receivable from the Cit3~ of Palo Alto. It had liabilities of $13.9
million, including $13.7 million in long-term debt.
At the Fund level, the Corporation reported a $2.9 million excess of revenues over expenditures, which
was principally the excess of the net proceeds from new COPs issues over the amounts paid to refund the
earlier issue.
The Corooration has t~vo funds, the Debt Sezadce Fund, which reported a $!.4 million fund balance at
June 30.’2002. and the Capitai Projects Fund, which reported a $3.5 miiiion fund baiance at that date.
OVERVIEW OF TIlE CORPOtL~kTION’S BASIC FINANCL&L STATEMENTS
The Basic Financial.statements are in ~vo parts:
1) Mana_.ement~ ’ s Discussion" " and .~aalysis (this part),
~ wr,~ ~o~i~ r~,,~,~i,1 Rr~*ements. which ~clude the Co~oration-~de and the F~d financial
statements, along ~th 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 fmancia! 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 Statement 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
lone-term liabilities on the full accrual basis, similar to that used by corporations. The Statement of
Ac~vities 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 progam.
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-
x~dde 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 ADMEVISTRATION
The Corporation issues debt in the form of Certificates of Participation (termed COPs) in future lease
receipts from the City of Palo .Alt0. Legally, these COPs issues are the Corporation’s debt only; the Civy
is liable only for the pa}znent 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 financi!l statements. There were
avo new COPs issues in fiscal 2002, one of which refunded an earlier issue.
ECONOg’FIC OUTLOOK ANrD Mx,-kJOR £NrITLa-TI%rES
The economy of the City. of Palo Alto and its major initiatives for the coming year are discussed in detail
in the Cits,’s Comprehensive .Annual Financial Report.
CONTACT12qG TI~ COILPORATION’S FL-NMNCLA_L lVLA_NAGENEENT
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 Statements should be directed to
the FMance~epa~mcm
ICITY OF PALO ALTO PUBLIC ,~CORPOtL~TION
STATEMENT OF NET ASSETS
AND STATEMENT OF
ACTW’-ITIES
The Statement of Net Assets and the Statement of Activities are entirely new statements
required by Government Accounting Standards Board Statement 34. Their purpose is to
summarize the entire Corporation’s financial activities and financial position. They are
prepared on the same basis as is used by most businesses, wkich means they include a!l
the Corporation’s assets and all its liabilities, as well as all its revenues and expenses.
This is tmown as the fu!l accrual basis-the effect of all the Corporation’s transactions is
taken into account, regardless of whether or when cash changes hands, but all materia!
internal transactions between Corporation funds 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 tlie Corporation’s net assets, by subtracting total liabilities fi’om total assets.
The Statement of Net Assets summarizes the financial position of all the Corporation’s
Governmental Activities in a singte colunm, and the financial position of all the
Corporation’s Business-Type Activities in a single column; these columns are followed
by a Total column that presents the financial position of the entire Corporation.
The Corporation’s Governmental Activities include the activities of its Capital Projects
and Debt Service Funds.
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 fomaat of the Statement of Activities differs considerably from those used in the past.
It presents the Corporation’s expenses first, !isted by pro~am, and fo!!ows these with the
expenses of its business-Uqge activities. Progam revenues-that is, revenues which are
generated directly by these programs-are then deducted from pro~am expenses to arrive
at the net expense of each governmental and business-t)~pe pro~am. The Corporation’s
general revenues are then listed in the Governmental Activities or Business-type
Activities colurnn, as appropriate, and the Change in Net Assets is computed and
reconciled with the Statement of Net Assets.
4
PALO .ALTO PUBLIC IMPROVEMENT CORPOR_ATION
A COM~PONENT UNIT OF THE CITY OF PALO .AL.TO
STATEM2ENT OF NET ASSETS
~-N--E 30, 2002
ASSETS
Cash and investments held by trustee [.Note 3)
Interest receivable
Construction in pro~ess
Investment in leases to City. of Palo Alto (_,~ote 2E)
Total Assets
LL&BILITYES
Interest payable
Long-term debt ,~ote 4):
Due in one year
Due in more tSan one year
Total Liabilities
ASSETS
$4,959,112
15,505
166,054
8,735,888
!3,876,559
231,023
790,000
12,905,000
13.926,023
Unrestricted
Total Net Assets
See accompan)q-ng notes to financial statements
(49,464)
($49,464)
EX2ENSES
Interest and fiscal agent charges
Total Progam Expenses
Interest on leases from CiD’ of Palo Alto
Net Progam Expenses
G ENEP,_hL REVENUES
Interest from cash and investments
Change in Net Assets, before extraordinary.’ item
Extraordinary Item - Gains on refunding of debt
Change in Net Assets
Net assets at the beginning of year
Net assets at the end of year
See accompany~g notes to financial statements
$443,923
443,923
34! ,912
(102,011)
87,902
(14,109)
136,612
t22,503
(171,967)
($49,464)
CITY OF PALO ALTO PUBLIC IMPRO~rEMENT CORPORATION
A CO1VIPON-ENT UNIT OF TI]]~ CITY OF PALO ALTO
Notes to Financial Statements
FUND FI!~A_NCL&L STATEMEN~FS ,, [
GASB 34 revises the format of the Fund Financial Statements so that only indixddual maj or funds
are presented, while non-major funds are combined in a single column. Major funds are defined
generally as having si~ificant acti-~ities or balances in the current year. No distinction is made
ber~een Fund .types and the practice of combining like funds and presenting their totals in
separate columns (Combined Financial Statements) has been discontinued, along with the use of
the General Fixed :a_ssets and General Long-term Debt Groups of Accounts.
All of the Corporation’s Funds were determined to be Major Funds fiscal 2002.
Capital Projects Fund - This fund accounts for the Corporations project capital outlays.
Debt Service Fund - This fund accounts for debt service payments on the Corporation’s
tong-term debt issues.
A COMPONENT UNIT OF THE CITY OF PALO ALTO
IUNE 30, 2002
ASSETS
Cash and im, estments held by wastee (Note 3)
Interest receivable
Investment in leases to City. of Palo Alto (Note 2E)
Total Assets
Deferred revenue
Total Liabilities
Reserved for:
Debt service
Capita! projects
LL&BILITIES
F -U~-D B A_L.QNCES
Total Fund Balances
Total Liabilities and Fund Balances
Debt Service
Capital
Projects Totals
$1,435,435 $3,523,677 $4,959,112
11,47t 4,034 !5,505
$735,888 8,735,888
$10,182,794
$8.735,888
888
1,446,906
1,446,906
St0,182,794
$13,7!0,505
$8,735 888
8,735,888
$~ ~vv 711
3,527.7!1
1 aa6 906
3.527,7!!
4,974.617
Accrual adjustmem to remove deferred revenue from the balance sheet
Deferred revenue
Construction in Pro~ess used in governmental acti~,ities is not a financi!l resource
and therefore not reported in funds
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
NET ASSETS OF GOVERN~IENT.a-L ACTI%qTIES
See accompanying notes to financial statements
8,,~>,888
166,054
(2.’1,0,--’)
(790,000)
(12,905,000)
P.~LO A_LTO PUBLIC LM~ROVEMENT CORPOP,~_TION
A CO~O~ ~T OF ~ C~Y OF P~.O .~TO
STATE~S OF ~~S, E~E~~S
~ C~GES ~ ~ B~-CES
FOR T~. FISC~ ~ E~ED ~ 30, 2002
Debt Ser~4ce Capital Projects
RE\~NU-ES
Lease receipts from City ofPalo .~tto:
Principal
Interest
Interest from cash and investments
Total Revenues
EX~EN-DITU-RE S
Debt service:
Principal repayment
Interest and fiscal agent charges
Capitol projects
Total Expenditures
EXCESS OF R£X’~EN-UES O\’~R
EX.~ END 17-U-P,.E S
OTHER FIN~%NCING SOURCES (USES)
Proceeds from long term debt (Note 4)
Payment to refunded bond escrow agent 0N’ote 4)
$390,000
341,912
54,955
786,867
390,000
639,053
!,029,053
(242,186]
3,953,701
(3,819,965]
133,736
$~_.947
047
t21,909
121,909
(88,962)
3,!01,299
3,101,299
EXCESS OF REVE.,N~-ES .~_N-D OTHER
FINANCING SOURCES O\"ER (U’NDER)
EX2ENDITUlZES AND OTHER USES
Fund balances at beginning of year
Fund balances at end of year
(108,450)
~6
$1.446.906
3,012,337
515,374
S3,527,7tl
See accompanying notes to financial statements
Totals
$390,000
34t,912
87,902
819,814
390,000
6a9,0~
12!.909
1,!50,962
(33!,!48)
7,055,000
a.819.96~)
3,235,035
2,903,887
2,070,730
$4,974,6!7
P.~LO ALTO PUBLIC IMPROVEMENT CORPORATION
STATEMEIx~f OF P,_EVENUES, EX~ENDITUI~’-ES .AND
CI-L~’,~GES IN FUND BALANCES
OO~ER_NMENTAL FUNDS TO THE
STATEI~CENT OF ACTI~r~IES - FOR TI-IE YEAR ENDED JIFNE 30, 2002
Net change in fund baiances-totml governme~,,d
A_mounts reported for governmental activities in the statement of acfi~dfies
are different because:
Bond proceeds provide current financial resources to governmenta! funds, but
issuing debt increases long-term liabilities in the Statement of Net Assets.
Repayment of bond principal is an ex]~endimre in the governmenta! funds, but
in the Statement of Net Assets the repayment reduces long-term liabilities.
Proceeds of issuance of long term debt
Net assets increased for refunded debt recorded against loss on refunding
Fund balance is increased by the amount of debt repayment
Capita! outlay and capitalJzed interest costs are treated as an expedimres in governmental funds,
but recorded as Construction in ProFess on the Statement of Net Assets
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 Investment in leases
Change in Interest payable
Change in net assets of governmental activities
See accompanying notes to financial statements
$2,903,887
(7,055,000)
~,670.00
390,000
166,054
104,353
10
--]
CITY OF PALO ALTO PL~LIC IMPROVEMENT CORPORATION
A COMPONENT UNIT OF TlZIE CITY OF PALO ALTO
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF REPORTING ENTITY
Ao General Description
The Palo Alto Public Improvement Corporation (the Corporation) was incorporated in
Septemb.er 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 integal part of the City of Palo Alto. It primarily services the CiW
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 w-ithin the
comprehensive annual financial report for the year ended June 30, 2002.
NOTE 2- SIGNIFICAhW ACCOUNTE~’G POLICIES
Basis of Presentation
The accompanying financial statements are presented on the basis set forth in Government
Accounting Standards Board Statement 34, Basic Financial Statements-and Management’s
Discussion and Analysis-for State and Local Governments, which the Corporation
implemented in fiscal 2002. GASB Statement 34 requires that the financial statements
described below be presented.
The accohapan3dng financial statements are presented on the basis set forth in Government
Accounting Standards Board Statements No. 34, Basic Financial Statements-and
Management’s Discussion and Analysis-for &ate and Local Governments, No.36,
Recipient Reporting for Certain Non-exchange Revenues, an Amendment of GASB
Statement No. 33, No. 37, Basic Financial Statements-and Management’s Discussion and
Analysis-for &ate and Local Gove~,zmenrs; Omnibus, and No. 38, Certain Financial
Statement Note Disclosures,
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.
11
CITY"OF P~4J~O ALTO PUBLIC IMPROVEMENT CORPORATION
A COMPONENT UNiT OF THE CITY OF PALO .ALTO
Notes to Financial Statements
tNOTE 2- SIGNIFICANT ACCOUNTING POLICIES (Continued) ]
The Statement of Activities presents a comparison between direct expenses and pr0~am
revenues for each function of the Corporation’ s activities. Direct expenses are those that are
specifically associated with a program or ~ancfion 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 Co) ~ants 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 fmanciat statements is on major indi~ddual funds, each of which is
displayed in a separate column.
Ylajor Funds
GASB Statement 34 defines major funds and requires that the Corporation’s m~or
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 determined that all its funds are major funds.
The Corporation reported the following major governmental funds in the accompanying
financial statements:
Capital Projects Fund - This fund accounts for the Corporations project capital outlays.
Debt Service Fund - This fund accounts for debt service payments on the Corporation’s
long-term debt issues.
C.Non-e_’cchange Transactions
In connection wdth its adoption of GASB Statement 34, the Corp.oration has adopted GASB
Statement 33, Accounting and Financial Reporting for ]~ronexchange Transactions.
Consn’uction in Progress .Net Financing Costs
Interest incurred on debt used to finance projects are netted w-ith interest earned on unspent
-~roceeds of the debt. These ’.~et Financing Costs" are capitalized and added to construction
in prom’ess during the construction period to reflect the true project costs, including financing
costs. During fiscal 2001-2002, interest costs amounting $44, !45 were added to construction
in pro~
CITY OF P.&LO .<O PUBLIC IMPRO~,’~lVI~ENT CORPO1L~_TION
A COMPONENT UNIT OF TIlE CITY OF PALO ALTO
Notes to Financial Statements
NOTE 2- SIGNIFIC.~NT ACCOUNTING POLICIES (Continued) ]
E.Investment in Leases
Improvements financed by the Corporation are leased to the City for their entire estimated
useful life and vdll 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.
.ks a result of adopting GASB 34 the Corporation changed its method of measuring
Investment in Leases from recording such receivables at .the par value of the lease to
recording them at par value net of cash and investments held by the Corporations and trustee.
The reason for this change in accounting is that GASB 34 required ful! accrual accounting to
be used and that assets should be reflected at their net realizable value. The underlying lease
ageements provide that any remaining cash on hand after repayrnent of each lease is to
refunded to the City. This in effect means the Corporations would only receive the net lease
obiigation after deducting cash on hand from the City. The amount reported in prior year
financial statements as Investment in Leases have been reduced by $2,068,465 representing
cash on hand to reflect *d-As change in accounting method as of July 1,2001.
t NOTE 3 -CASH .k~Nq) ENd’S. ST.ME.NTS IKELD BY TRUSTEE
A Trustee under the provisions of the Corporation’s COP issues holds and invests all the
Corporation’s cash. The Corporation’s investments are categorized below to rye an
indication of the level of credit risk assumed by the Corporation at June 30, 2002.
Category 1 includes investments that are insured or reNstered or for which the securities
are held by the Corporation or its agent in the Corporation’s name. Category 2 includes
uninsured and unreNstered investments for which the securities are held by the
counterparry’s trust department or agent in the Corporation’s name. Category. 3 includes
uninsured and unreNstered investments for which the securities are held by the
counterparty, or are held by the counterparty’s trust department or agent but not in the
Corporation’s name. Pooled investments are not categorized because of their pooled,
rather than individual, nature.
At June 30, 2002 the Corporation’s investments were recorded at market value and
comprised the following:
Categoo: 7 Investments:
U.S. Agency Obligations
Pooled Investments O~on Categorized):
California A.rbitrage Managemen~ Prog-r~
Mutual funds
$719,097
~ a35
4,237,580
Total cash and investments held by mastee $4,959,112
13
CITY OF PA_LO ALTO PUBLIC IM-PRO~EMENT CORPORATION
A COMPONENT U~T OF THE CITY OF PALO ALTO
Notes to Financial Statements
The Trustee is only permitted to invest in US Corporation securities, US dollar
denominated deposit accounts, federal funds, banker’s acceptances, mutual funds, money
market accounts, pre-funded municipal obligations, written repro-chase a~eement, and
the California Azbitvage Management Pro~am. Lnvesmaents are poxc.=~e~ and he!d in
the name of the Trustee on behalf of the Corporation and are held to maturity to match
with payments required under the COP issue.
The Cocporation’ s investments are carried at fair value, as required by generally accepted
accounting principles. The Corporation adjusts the carry4ng value of its investments to
reflect their fair value at each fiscal year end, and it includes the effects of these
adjustments in income for that fiscal year.
I NOTE 4 -CERTIFICATES OF PA_RTICIPATION
The Corporation’ s changes in long term debt are presented below:
Balance Balance Current
June 30, 2001 Additions Retirements"June 30, 2002 Portion
Governmental Activity Debt:
Certificates of Participation
1992 Civic Center,
3.60-6.70%, due 03/0!/20! 2
1998 Golf Course
4.004.00%, due 09/01/2018
2002A Civic Center Refinancing
2.00~.00%, due 03/01/20!2
2002B Downtown Parking
Improvements
4.55-6.00%, due 03/01/2022
$3,670,000 $3,670,000
7,030,000 390,000
$3,500,000
$6.640,000 $405,000
3,500,000 300,000
3,555,000 3,555.000 85,000
$10,700,000 $7.055.000 $4.060.000 S13,695.000 $790,00~.... ~~~~
On JanuaW 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 Proiect Certificates of Participation. The refunding resulted in an overall-" 9 economic gain of $191savin~s of future debt se~ce payments of $~7_ thousand and an ~
thousand. Principal payments for the 2002A COPs are due annually on March ! and
interest pa?q-nents semi-annually on March t and September 1 and are payable from lease
revenues from the City from available funds.
On January 16, 2002 the Corporation issued the 2002B Downtown ParMng
Improvements Certificates of Participation in the amount of $3.555 million to finance
the construction of certain improvements to the non-parking area contained in the CiD,’s
Bryant~!orence Garage complex. Principal !~abq-nents are due annually on March 1 and
interest pavrnents semi-armually on March ! ~nd September 1 and are payable from lease
revenue received from the City from available funds.
!4
CITY OF PA_LO ALTO PUBLIC IM-PROVEME~Y CORPORATIONA COMPO~ENT UNIT OF TttE CITY OF PALO ALTO
Notes to Financial Statements
INOTE 4 -CERTIFICATES OF PAI~TICI]PATION (Contin~
’. .......¯ _ ; .....n ,’~ ~nlf Course Capital Improvements andIn Au_o-ust t99b. me t~orpoTaLlotx ...............1998 in the amount of $7.750Refinancing Proiect Certificates of Participation, Series
million to refund and subsequently retire the 1978 Golf Course Lease Revenue Bondsissued by the Ci~, through the Palo ?alto Golf Course Corporation, and to finance various
fairways and
improvements at the Palo Alto Public Golf Course. including,, upzradin~ five
various traps, trees and greens, constructing new storm drain facilities, replacing the
-’ " ~, irri~ation swstem, upgTadin-~ the dri~q_ng range, and ins_.t.@ing new cart paths.exlsnn= _- : ~ ,,~,o c-r-,~. ~ C’ornoration transferred $47: thousand to an agent
Under the terms o~ttae t~o ~,-,~, ~ .....*-
for the Golf Course Corporation which used the funds to retire 1978 Bonds.
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-armually each March 1 and September 1 begirming in 1999.
Future annual debt ser~4ce on the COPs is expected to be provided by the lease receipts
discussed above, and equaled the follow-ing (in thousands):
Governmental Activities
For the Year
Endin~ June 30 Principal Interest
$405 $2972003984
2004 270 -
2005 285 272
2006 295 260
2007 310 248
2008-2012 1,770 !,024
~ ~40 556
20!3-2017 ~’"
2018-2022 2,130 t08
Tota!$7,705 $3,049_
The Bond documents require a Trustee to hold a portion of proceeds in a reserve fund for
.:9. million reserved, asdebt service purposes only’. At June 30, 2002, the Trustee hetd $1 ~ g
discussed in Note 3.
~5
CITY OF PALO .<O PUBLIC IMPROVEMENT CORPOtL&TION
A COMPONEINT UNIT OF TttE CITY OF PALO .ALTO
Notes to Financial Statements
. ss :rs
GASB Statement 34 adds the concept of Net Assets, which ~s measured on the full accrual
basis, to the concept ofF,and Balance, which is measured on the modified accrua! basis.
Net Assets
Net Assets are di~dded into three captions under GASB Statement 34. These captions apply
only to Net Assets as determined 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 a~eements with outside parties, governmental regulations, laws, or other
restrictions which the Corporation carmot unilaterally alter. These principally include debt
proceeds received for use debt ser~.’ice requirements.
U~restricted describes the portion of Net Assets which is not restricted as to use.
No Fund Balances
l~und balances consist of reserved and unreserved amounts. Reserved fund balances
represent that portion of fund balance which is legally segegated for debt service and
capital projects.
16