HomeMy WebLinkAboutStaff Report 2769
City of Palo Alto (ID # 2769)
City Council Staff Report
Report Type: Meeting Date: 4/23/2012
April 23, 2012 Page 1 of 3
(ID # 2769)
Summary Title: Public Improvement Corporation Board
Title: Approval of 2010-11 Public Improvement Corporation Financial Statement
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Board of Directors of the Public Improvement Corporation (PIC)
approve the 2010-11 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 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 financial statements for the Corporation. Therefore, the City
Council is required to meet annually as the Board of the PIC. The City has three outstanding
COPs through the PIC. In 1983 and 1998, the City of Palo Alto issued Certificates of Participation
(COPs) to fund improvements to the Center Civic and the Golf Course, respectively. In 2002,
thee Center Civic bonds were refinanced to obtain a lower interest rate. Also in 2002, a third
series of COPs known as the Downtown Parking Improvement bonds were issued to finance the
construction of commercial space adjacent to the new parking structure on Bryant/Florence
Street.
The Golf Course bond proceeds were used 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. The Civic Center bonds were issued to undertake
various improvements to the City’s existing Center Civic. These improvements included a third
elevator assembly and its installation in a pre-existing elevator shaft and strengthening of
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April 23, 2012 Page 2 of 3
(ID # 2769)
certain structural and decorative elements of the building for seismic purposes. In addition,
funds were used for structural remodeling of the police headquarters and retrofitting of a
portion of the Center Civic for a fire sprinkler system. 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.
Subsequent to the issuance of the 2010-11 financial statements, the City refinanced the
outstanding $3.7 million of the Golf Course bonds, saving the City’s General Fund (over 8 years)
$961,500 or $135,700 annually. The savings was 6.8 percent of the refunded bonds. The bonds
were refinanced utilizing what is called a “private placement” with JP Morgan Chase Bank, who
was selected through requests of proposals that were sent out to 23 banks. A private
placement was chosen because the issue was too small to elicit attention and competitive bids
from the bond market, it saved the City a variety of fees or costs associated with selling bonds
on the open market (e.g. Disclosure Counsel and rating agency fees), the time frame to sell the
City’s debt in a private placement is shorter and subject to less uncertainty, and the lack of a
reserve requirement through the private placement allowed the City to reduce the amount of
principal outstanding. For the 1998 COPs, the Golf Course was pledged. Because the Golf
Course has value far in excess of the now remaining debt, staff used the City’s fleet of 21 Fire
apparatus as collateral for the refinancing.
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 been met. At year-end, June 30, 2011, total outstanding debt principal on the
COPs equaled $5.9 million as follows:
COP Description
Principal
Outstanding
(millions)
Year Debt will
be Retired
1998 Golf Course $3.7 2018
2002A Civic Center Refinancing $0.4 2012
2002B Downtown Parking
Improvements
$1.8 2022
Total COPs $5.9
Staff recommends that the Board of Directors of the Public Improvement Corporation (PIC)
approve the 2010-11 financial statements for the Public Improvement Corporation.
Resource Impact
Approval of the Public Improvement Corporation’s financial statements will have no resource
impact.
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(ID # 2769)
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: Public Improvement Corporation Fiscal Year 2011 Financial Statement
(PDF)
Prepared By: Julia Pollard, Administrative Assistant
Department Head: Lalo Perez, Director
City Manager Approval: ____________________________________
James Keene, City Manager
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Annual Financial Report
For the Year Ended June 30, 2011
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
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 Assets ...................................................................................................................... 5
Statelnent of Activities ...................................................................................................... '" .............. 6
Fund Financial Statements:
Balance Sheet ..................................................................................................................................... 7
Statement of Revenues, Expenditures, and Changes in Fund Balance ............................................... 8
Notes to Basic Financial Statements ........................................................................................................ 9
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The Honorable Mayor and
Members of the City Council of the
City of Palo Alto, California
Independent Auditor's Report
We have audited the accompanying basic financial statements of the govenunental activities and the
major fund of the Palo Alto Public Improvement Corporation (Corporation), a component unit of the City
of Palo Alto, as of and for the year ended June 30, 2011, as listed in the table of contents. These financial
statements are the responsibility of the City's management. Our responsibility is to express opinions on
these financial statements based on our audit.
We conducted our audit in accordance with the 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 of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Corporation's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence suppOlting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, the financial statements refelTed 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, 2011, and the results of its operations for the year then ended, in conforn1ity
with generally accepted accounting principles in the United States of America.
As discussed in Note 2(e) to the basic financial statements, effective July I, 2010, the Corporation
adopted the provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions.
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis as listed in the table of contents 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 infOlmation 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 infOlmation 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 infonnation because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
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December 1,2011
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Management's Discussion & Analysis (Unaudited)
The Palo Alto Public Improvement Corporation (Corporation), a component unit of the City of Palo Alto
(City), follows the provisions of Government 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 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 agreement~ that provide a revenue source for the repayment of this debt. The Corporation has
tlu'ee 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 2011 FINANCIAL HIGHLIGHTS
GASB 34 requires the issuance of government-wide financial statements as well as fund financial
statements. The government-wide financial statements repmt the balance of the Corporation's long-term
debt issues while the individual fund statements do not.
In fIscal year 2002, the Corporation issued its 2002A Civic Center Refinancing Certificates of
Participation (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 $l37
thousand. The Corporation also issued its 2002B Downtown Parking Improvements COPs in the amount
of $3.6 million. In fiscal year 2005, a partial redemption was completed by placing excess construction
and debt service reserve funds into an escrow account to defease $900 thousand of the 2002B Downtown
Parking Improvements COPs. These issues, including the 1998 Golf Course Capital Improvements COPs,
comprise the Corporation's outstanding debt.
Interest expense and other fiscal agent charges on these COP issues was $332 thousand for fiscal year
2011, a decrease of $37 thousand over the prior year. The interest for leases on the assets securing these
COP issues was $297 thousand, a decrease of $78 thousand from the prior year. Program expenses
exceeded lease revenues by $36 thousand, thereby resulting in a decrease in net assets of $19 thousand
over the prior year.
The Corporation ended fiscal year 2011 with total assets of $6.1 million, a decrease of $0.9 million from
the prior year. Total assets consist of $1.2 million in cash and $4.9 million ofleases receivable (recorded
at net present value) from the City of Palo Alto. Total liabilities were $6.0 million, a decrease of $0.9
million from the plior year, and included $1.0 million of current liabilities as well as $5.0 million oflong
term debt.
At the fund level, the Corporation's expenditures exceed its revenues by $18 thousand.
As of June 30,2011, the Corporation had one fund, the Debt Service Fund, which repOlted a $1.3 million
fund balance, reflecting an $18 thousand decrease over the prior year.
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CITY OF PALO AL TO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Management's Discussion & Analysis (Unaudited)
OVERVIEW OF THE CORPORATION'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 government-wide and the fund financial statements,
along with the notes to these financial statements.
The basic financial statemenL'l 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 assets and the statement of activities. The statement of net
assets provides infonnation 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 infonnation 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 assets for the year.
The fund financial statements rep ott 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 cunent revenues and expenditures; cunent assets, liabilities and fund balances;
and they exclude capital assets and long-tenn debt.
Together, these statements are called the basie finaneial statements.
DEBT ADMINISTRATION
The Corporation issues debt in the form of Certificates of Pmticipation (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.
The Corporation issued two COPs for the fiscal year ending June 30,2002, one of which was refunded by
an earlier issue.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the City of Palo Alto and its major initiatives for the coming yem' 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 overview of the Agency's finances. Questions about these Statements should be directed to the
Finance Depaltment of the City of Palo Alto, 250 Hamilton Avenue, CA 94301.
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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Statement of Net Assets
June 30, 2011
Assets:
Cash and investments held by trustee
Investment in leases to City of Palo Alto
Total assets
Liabilities:
Interest payable
Long-term debt:
Due in one year
Due in more than one year
Total liabilities
Net Assets:
Restricted for debt service
See accompanying notes to financial statements.
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$ 1,267,828
4,866,132
6,l33,960
104,805
905,000
4,990,000
5,999,805
$ l34,155
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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component U nit of the City of Palo Alto)
Statement of Activities
For the Year Ended June 30, 2011
Expenses:
Interest and fiscal agent charges
Program revenues:
Interest on leases from City of Palo Alto
Net program expenses
General Revenues:
Investment income
Miscellaneous revenue
Change in net assets
Net assets, beginning of the year
Net assets, end of the year
See aecompanying notes to financial statements.
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$ 332,375
296,670
(35,705)
3,062
14,086
(18,557)
152,712
$ 134,155
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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Balance Sheet
Debt Service Fund
June 30,2011
Assets:
Cash and investments held by trustee
Investment in leases to City of Palo Alto
Total assets
Liabilities and Fund Balance:
Liabilities:
Deferred revenue
Total liabilities
Fund balance restricted for debt service
Total liabilities and fund balance
Reconciliation of fund balance to net assets:
Fund balance restricted for debt service
Accrual adjustment to remove deferred revenue from the balance sheet
Some liabilities, including bonds payable, are not due and payable in the
the current period and therefore are not reported in the funds:
Interest payable
Long-term debt due within one year
Long-term debt in more than one year
Net assets of governmental activities
See accompanying notes to financial statements.
7
$
$
$
1,267,828
32
4,866,132
1,267,828
4,866,132
(104,805)
(905,000)
(4,990,000)
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PALO ALTO PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Statement of Revenues, Expenditures and Changes in Fund Balance
Debt Service Fund
For the Year Ended June 30, 2011
Revenues:
Lease receipts from City of Palo Alto:
Principal
Interest
Investment income from cash and investments
Miscellaneous revenue
Total revenues
Expenditures:
Debt service:
Principal repayment
Interest and fiscal agent charges
Total expenditures
Net change in fund balance
Fund balance, beginning of the year
Fund balance, end of the year
Reconciliation of net change in fund balance to net change in net assets:
Net change in fund balances-total governmental funds
$
$
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 assets the repayment reduces long-tenn liabilities,
Some amounts reported in the statement of revenues, expenditures and changes
in fund balances reflect the collection of an asset which arc not includable as
as revenues on the statemcnt of activities_
Change in defen'ed revenue
Change in interest payable
Change in net assets of govemmental activities
See accompanying notes to financial statements.
8
$
882,426
296,670
3,062
14,086
1,196,244
870,000
(18,326)
(18,326)
870,000
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended June 30, 2011
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(e)(4) of the Intemal Revenue Code. The Corporation provides financing of public capital
improvements for the City through the issuance of Certificates of Paliicipation (COPs), a form of debt
which allows investors to paliicipate 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
goveming 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, 2011.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
(a) 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
intemal activities.
The statement of activities presents a comparison between direct expenses and program revenues for each
function of the Corporation's activities. Direct expenses al'e those that are specifically associated with a
prograln or function and, therefore, are clearly identifiable to a paliicular 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 restrieted 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 infOlmation about the Corporation's
funds. Separate statements for each govemmental fund are presented. The emphasis of fund financial
statements is on major individual funds, each of which is displayed in a sepal'ate column.
(b) Major Funds
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 govemmental fund in the accompanying financial statements:
Debt Service Fund -This fund accounts for debt service payments on the Corporation's long-term debt
issues,
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended June 30, 2011
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES (continued)
(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 improvement to have been sold for this amount when
leased.
(d) Net Assets
The government-wide financial statements utilize a net assets presentation. Net assets are categorized as
restricted and unrestricted.
Restricted Net Assets This category presents extemal restrictions imposed by creditors, grantors,
contributors or laws or regulations of other govemments and restrictions imposed by law through
constitutional provisions or enabling legislation.
(e) Fund Balances
During the year ended June 30, 2011, the Corporation implemented GASB Statement No. 54, Fund
Balance Reporting and Governmental Fund Type Definitions. The objective of this Statement is to
enhance the usefulness of fund balance information by providing clearer fund balance classifications that
can be more consistently applied and by clarifYing the existing governmental fund type definitions. This
Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent
to which a govermnent is bound to observe constraints imposed upon the use of the resources reported in
governmental funds.
At June 30, 2011, the Corporation's governmental funds' fund balances include the following
classifications:
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.
(f) Estimates
The preparation of basic financial statcments 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.
10
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended Junc 30, 2011
NOTE 3 -CASH AND INVESTMENTS HELD BY TRUSTEE
Under the provisions of the Corporation's COP issues, a Tmstec holds and invests the Corporation's cash.
(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 T:!:l~e Amount Matnri!l: Date
California Asset Management Program $ 624,261 57 Days *
U.S. Agency obligations:
Federal National Mortgage Association 586,653 10/30/2012
Money Market Mutual Funds 13,914 28 Days *
Total Investments held by Tmstee $ 1,224,828
* Maturity dates listed in number of days represents the weigllted avemge
maturity of the investment.
California Asset Management Program -The City is a voluntary participant in the California Asset
Management Program (CAMP). CAMP is an investment pool offered by the California Asset
Management Tmst (the Trust). The Trust is a joint powers authority and public agency created by the
Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act
(California Govemrnent Code Sections 6500 et seq., or the "Act") for the purpose of exercising the
common power of its Participants to invest certain proceeds of debt issues and surplus funds. CAMP's
investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of
the Califomia Govenilllent Code. The City reports its investments in CAMP at the fair value amounts
provided by CAMP, which is the same as the value of the pool share. At June 30, 2011, fair value
approximated cost. At June 30, 2011, these investments have an average maturity of 57 days.
Money Market Mutual Funds are available for withdrawal on demand at June 30, 2011, and have an
average maturity of 28 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. The actual ratings as of June 30, 2011, for all U.S. Agency Obligations and Money
Market Mutual Funds are Aaa as provided by Moody's Investment Rating system. As an external
investment pool, the Califomia Asset Management Program was rated Aaam as of June 30, 2011.
On August 5, 2011, Standard & Poor's lowered its long-term credit rating on debt of the U.S. govenunent from
"AAA" to "AA+." This action affected Standard & Poor's view of U.S. public finance debt instruments that
are directly or indirectly backed by the U.S. As a result, on August 8, 2011, Standard & Poor's lowered its
long-term credit ratings of U.S. government-sponsored enterprises and public debt issues that have credit
enhancement guaranteed by those government-sponsored enterprises to "AA+." The credit downgrades relate
to the credit risk associated with the City's investments in U.S. Treasuries and U.S. Agency Securities.
11
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CITY OF PALO ALTO
PUBLIC IMIJROVEMENT CORPORA nON
(A Component Unit ofthe City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended June 30, 2011
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 telIDS of
certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to bc used if the
Corporation fails to meet its obligation under these debt issues. The California Government Code requires
these funds to be invested in accordance with bond indentures or State statue. 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 Annual Financial RepOlt.
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 by the general
provisions of the City's investment policy.
Maximum Maximum
Maximum Minimum Credit Percentage of Investment In One
Authorized Investment Type Quality Portfolio Issuer
U.S. Govemment Securities N/A No No Limit
U.S. Government Agencies N/A No Limit (A) No Limit
10% of the par value
Certificates of Deposit 10 years N/A 20% of portfolio
Bankers Acceptances 180 days N/A 30% $5 million
Commercial Paper 270 days AAA 15% $3 million (B)
$50 million per
Local Agency Investment Fund N/A N/A No Limit account
Short-Term Repurchase Agreements I 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 Limi! 10%
Mutual Funds (C) 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
(A) Callable and multi-step securities are limited to no more than twenty percent of the par value of the portfolio,
provided that:
I) 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 or 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 commereial paper of anyone institution.
Debt Agreements:
(C) Golf PIC COP 1998, University Avenue Parking Bond 2001 and University
Avenue Parking Bond 2002 are allowed to invest in the California Asset Management Program.
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit of the City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended June 30, 2011
NOTE 4 CERTIFICATES OF PARTICIPATION
The Corporation's changes in long-tenn debt are presented below:
Balance Balance
June 30, 2010 Retirements June 30, 2011
Governmental Activity Debt:
Certificates of Participation
1998 Golf Course
4.00 -5.00%, due 09/01/2018 $ 4,060,000 $ 370,000 $ 3,690,000
2002A Civic Center Refinancing
2.00 -4.00%, due 03/OJ/2012 795,000 390,000 405,000
20028 Downtown Parking
Improvemnts
4.55 -6.50%, due 03/01/2022 1,910,000 110,000
S 6,765,000 $ 870,000
Current Portion
$ 385,000
405,000
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, constlllcting new stonn drains
facilities, replacing the existing irrigation system, upgrading the driving range, and installing new cart
paths. Under the tenns of the 1998 COPs, the Corporation transferred $473 thousand to an agent for the
Golf Course Corporation which used the funds to retire the] 978 Bonds.
On January 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
Patticipation. 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 BryantlFlorence Garage complex. Principal payments are due
annually on March I and interest payments semi-annually on March 1 and September 1 and are payable
from lease revenues received from the City from available funds.
On January 25, 2005, the 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 total defeased amount was paid off on March 1,
2011.
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CITY OF PALO ALTO
PUBLIC IMPROVEMENT CORPORATION
(A Component Unit ofthe City of Palo Alto)
Notes to Basic Financial Statements
For the Year Ended June 30, 2011
NOTE 4 -CERTIFICATES OF PARTICIPATION (continued)
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 on March 1
and September 1.
Future annual debt service on the COPs is expected to be provided by the lease receipts discussed above,
and is shown below:
For the Year
Ending June 30 Principal Interest Total
2012 $ 905,000 $ 305,559 $ 1,210,559
2013 530,000 263,511 793,511
2014 555,000 235,509 790,509
2015 590,000 205,575 795,575
2016 620,000 173,275 793,275
2017-2021 2,475,000 376,900 2,851,900
2022 220,000 14,300 234,300
Total $ 5,895,000 $ 1,574,629 $ 7,469,629
NOTE 5 -SUBSEQUENT EVENT
Refinancing of the 2002A Golf Course Certificate of Participation
On August 2, 2011, the City entered into a master lease-purchase agreement (the Agreement) with
JPMorgan Chase Bank N.A., whereby the proceeds together with the bond reserve fund were used to
refund the Certificates of Participation, Series 1998 (Golf Course Improvements and Refinancing
Project). The principal amount financed by the Agreement was $3.2 million and will be repaid at an
interest rate of 2.49%. Semi-annual payments will be made through September 1,2018. The City used its
Fire Department rolling stock as the collateral in this Agreement.
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