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FA Financial Statements 07.01.1999 - 06.30.2000LA QUINTA FINANCING AUTHORITY Financial Statements and Supplemental Data Year ended June 30, 2000 (With Independent Auditors' Report Thereon) CONRADAND ASSOCIATES, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS LA QUINTA FINANCING AUTHORITY Financial Statements and Supplemental Data Year ended June 30, 2000 (With Independent Auditors' Report Thereon) LA QUINTA FINANCING AUTHORITY Financial Statements and Supplemental Data Year ended June 30, 2000 TABLE OF CONTENTS Independent Auditors' Report Page Combined Balance Sheet - All Fund Types and Account Groups 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Notes to the Financial Statements 4 CONRADAND ASSOCIATES, L.L.P Board of Directors La Quinta Financing Authority La Quinta, California CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT 1100 MAIN STREET, SUITE C IRVINE, CALIFORNIA 92614 (949) 474-2020 Fax (949) 263-5520 We have audited the financial statements of the La Quinta Financing Authority (a component unit of the City of La Quinta) as of and for the year ended .lune 30, 2000, as listed in the table of contents. These financial statements are the responsibility of the management of the City of La Quinta, California. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the La Quinta Financing Authority (a component unit of the City of La Quinta) at June 30, 2000, and the results of its operations for the year then ended, in conformity with generally accepted accounting principles. August 9, 2000 MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION LA QUINTA FINANCING AUTHORITY Combined Balance Sheet - All Fund Types and Account Groups June 30, 2000 Assets Cash and investments (note 3) $ Investments with fiscal agent (note 3) Accounts receivable Lease receivable (note 4) Amount to be provided for retirement of general long-term debt Governmental Fund Types Account Group Totals Debt Capital General Long Memorandum Only) Service Projects Term Debt 2000 1999 - 6 - 6 711 29 587,689 - 587,718 594,237 - - - - 504 8,010,000 - - 8,010,000 8,260,000 Total assets $8.010.029 587,695 Liabilities and Fund Balances Liabilities: Due to City of La Quinta Revenue bonds payable (note 5) Deferred revenue Total liabilities Fund balances (deficit): Reserved for: Construction projects Unreserved Total fund balances Total liabilities and fund balances 8,010,000 8,010,000 8,260,000 8_010,000 16,607,724 17,115,452 $ 10,116 - - 10,116 22,969 - - 8,010,000 8,010,000 8,260,000 8,010,000 - - 8,010,000 8,260,000 8,020,116 - 8,910,000 16,030,116 16,542,969 587,695 - 587,695 581,255 (10,087) - - (10,087) (8,772) (10,087) 587,695 - 577,608 572,483 8 0 T 0 029 587,695 8.010 0.00 16,607.724 17.115.452 See accompanying notes to the financial statements. 2 LA QUINTA FINANCING AUTHORITY Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types Year ended June 30, 2000 Revenues: Investment income Lease payments received Total revenues Expenditures: Current: Planning and development Debt service: Principal Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Operating transfers in Operating transfers out Transfer to City of La Quinta Total other financing sources Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing uses Fund balances at beginning of year Fund balances at end of year 8,333- - (8,333) (8,333) - - - (48,770) 8,333 (8,333) - (48,770} (1,315) 6,440 Totals (16,821) Debt Capital (Memorandum Only) Service Projects 2000 1999 - 14,773 14,773 40,985 679,670 - 679,670 684,573 679,670 14,773 694,443 725,558 9,648 - 9,648 9,036 250,000 - 250,000 245,000 429,670 - 429,670 439,573 689,318 - 689,318 693,609 (9,648) 14,773 5,125 31,949 8,333- - (8,333) (8,333) - - - (48,770) 8,333 (8,333) - (48,770} (1,315) 6,440 5,125 (16,821) (8,772) 581,255 572,483 589,304 10 087) 587.695 577,608 572,483 See accompanying notes to the financial statements. 3 LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements Year ended June 30, 2000 (1) Summary of Significant Accounting Policies (a) Basis of Accounting The financial statements of the La Quinta Financing Authority ("Authority") have been prepared on the modified accrual basis. Revenues are recognized when they become measurable and available. Expenditures are recorded when a related liability is incurred, except that prepaid expenses are not recorded, and interest and principal on revenue bonds and transfers to the City of La Quinta are recorded as expenditures when due. (b) Fund Accountin The accounts of the Authority are organized on the basis of funds and account groups as follows: Debt Service Fund - used to account for the accumulation and holding of resources for, and the payment of, principal and interest when due. Revenue sources are lease repayments and bond proceeds. Capital Projects Fund - accounts for all expenditures during constriction of remaining improvements to streets and public facilities at the La Quinta Civic Center site. Revenue sources are the moneys released from the 1991 Revenue Bond reserve and a portion of the 1996 Refunding Revenue bond proceeds. General Long -Term Debt Account Group - used to account for the outstanding principal of long-term debt. (c) Budgetary Data Annual budgets of revenues and expenditures are not applicable to the Authority. This is due to the legal structure of the bond indentures, which specifically directs the timing and amounts of receipts and disbursements. (d) Investments For financial reporting purposes, investments are adjusted to their fair value whenever the difference between fair value and the carrying amount is immaterial. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation or sale of investments. 4 LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements (Continued) 1 Surnm4a of Significant Accounting Policies Continued (e) (f) Lease Revenue Amounts presented as lease revenue in the accompanying financial statements include cash payments from the City of La Quinta as well as any credits toward the City's payment due to capitalized interest or interest earnings on reserve accounts held by the City. Memorandum Only Totals Columns in the accompanying financial statements captioned "Totals (Memorandum Only)" are not necessary for a fair presentation of the financial statements in accordance with generally accepted accounting principles, but are presented as additional analytical data. Interfund balances and transactions have not been eliminated. Therefore, the data in this column does not represent consolidated financial information. (2) Description of Reporting Entity The La Quinta Financing Authority is a joint exercise of powers authority created by a joint powers agreement between the City of La Quinta and the La Quinta Redevelopment Agency, dated November 19, 1991. The purpose of the Authority is to provide, through the issuance of debt, financing necessary for the construction of various public improvements. The Authority is an integral part of the City of La Quinta and the financial transactions of the Authority are also included in the general purpose financial statements of the City of La Quinta. Cash and Investments Cash and investments held by the Authority at June 30, 2000 consisted of the following: Equity in City cash and investment pool $ 6 Investments with fiscal agent 587,718 587 724 LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements (Continued) (3) Cash and Investments, (Continued) The City and its component units are authorized by its investment policy to invest in the following types of investments: Investment Type Maximum % Savings/operating accounts 85% Governmental pools 35% U.S. government and agency securities 75% Commercial paper 30% Mutual Funds 20% Certificates of Deposit 60% Investments of cities (including component units) in securities are classified in three categories to give an indication of the level of custodial risk assumed by the entity. Category 1 - includes investments that are insured or registered, in the Authority's name, or for which the securities are held by the Authority or the Authority's custodial agent (which must be a different institution other than the party through which the Authority purchased the securities) in the Authority's name. Investments held "in the Authority's name" include securities held in a separate custodial or fiduciary account and identified as owned by the Authority in the custodian's internal accounting records. Category 2 - includes uninsured and unregistered investments for which the securities are held in the Authority's name by the dealer's agent (or by the trust department of the dealer if the dealer was a financial institution and another department of the institution purchased the securities for the Authority). Category 3 - includes uninsured and unregistered investments for which the securities are held by the dealer's trust department or agent, but not in the Authority's name. Category 3 also includes all securities held by the broker-dealer agent of the Authority (the party that purchased the securities for the Authority) regardless of whether or not the securities are being held in the Authority's name. LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements (Continued) (3) Cash and Investments, (Continued) Market Value Investments held by Authority not subject to categorization: Equity in City cash and investment pool $ 6 Investments held by fiscal agent not subject to categorization: Investment in mutual funds: First American Treasury Obligation Fund 587,718 $587,724 (4) Lease Receivable On November 19, 1991, the Authority leased from the City the land that was to be used as the site for the future City Hall facility. Under the terms of the operating lease, an advance rent of one dollar was paid at the inception of the lease as full consideration for the Authority's use of the land for the term of the operating lease which ends on October 8, 2028, unless terminated earlier as provided in the lease agreement. The City retains title to the land during the term of the lease. On November 19, 1991, the Authority entered into a sublease agreement to lease the land along with the City Hall improvements ("the Project") back to the City. The lease payments to be received by the Authority from the City are equal to the Authority's semi- annual debt service payment required on the $8,515,000 of 1991 Local Agency Revenue Bonds until fiscal year 1997. The Authority defeased the 1991 Local Agency Revenue Bonds with the issuance of $8,790,000 of 1996 Lease Revenue Refunding Bonds during fiscal year 1997. As a result of this refunding, the sublease agreement was amended on October 1, 1996 to provide that the Authority shall receive from the City lease payments which are equal to the Authority's semi-annual debt service required on the 1996 Lease Revenue Refunding Bonds and the term of the sublease agreement ends September 30, 2028, unless terminated earlier as provided in the first amendment to the sublease agreement. The sublease provides that upon payment by the City of all required lease payments, title to the City Hall improvements is transferred to the City. Accordingly, the Authority's sublease of the Project to the City is accounted for as a capital lease and the project assets have been transferred to the City. Upon transfer of the Project to the City, the Authority recorded a lease receivable and related deferred revenue to account for its interest in lease payments to be received from the City. At June 30, 2000, the balance of the lease receivable was $8,010,000. LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements (Continued) (5) General Long -Term Debt Changes in general long-term debt for the year ended June 30, 2000 were as follows: Lease revenue refunding bonds, series 1996 Lease Revenue Refunding. Bonds Balance at Balance at July 1, 1999 Additions Repayments June 30, 2000 $8,260,000 8 260 000 - (15-0, 000) 25( 0000) 8,010,000 &010,000 On November 15, 1996, the Authority issued $8,790,000 of 1996 Lease Revenue Refunding Bonds to defease the remaining 1991 Local Agency Revenue Bonds in the amount of $8,200,000 and to provide funds for construction of remaining improvements to the La Quinta Civic Center site. The bonds consist of $3,630,000 of serial bonds and $5,160,000 of term bonds. The serial bonds will accrue interest at rates between 3.70% to 5.30%v and principal amounts mature between October 1, 1997 to October 1, 2008 in amounts ranging from $285,000 to $380,000. The term bonds accrue interest at a rate of 5.55% and mature on October 1, 2018. A surety agreement has been purchased to satisfy the bond reserve requirement. The amount of principal outstanding on the 1996 Lease Revenue Refunding Bonds at June 30, 2000 was $8,010,000. A portion of the $8,790,000 bond proceeds, along with the remaining reserve from the 1991 Local Agency Revenue Bonds were used to purchase state and local government securities that were deposited in a trust with an escrow bank to provide for all future debt service payments on $8,200,000 of the outstanding 1991 Local Agency Revenue Bonds. As a result, these certain bonds are considered to be defeased and the liability has been removed from the long term debt account group of the Authority. At June 30, 2000, the amount of defeased bonds outstanding is $7,205,000. LA QUINTA FINANCING AUTHORITY Notes to the Financial Statements (Continued) () General Long -Term Debt, (Continued) The following is a schedule of future debt service payments for the bonds: Year Ending June 30 Principal Interest Total 2000-01 $260,000 418,955 678,955 2001-02 275,000 407,178 682,178 2002-03 285,000 394,435 679,435 2003-04 300,000 380,830 680,830 2004-05 315,000 366,220 681,220 2005-06 330,000 350,575 680,575 2006-07 345,000 333,865 678,865 2007-08 360,000 315,880 675,880 2008-09 380,000 296,450 676,450 2009-10 400,000 275,280 675,280 2010-11 420,000 252,525 672,525 2011-12 445,000 228,521 673,521 2012-13 470,000 203,130 673,130 2013-14 495,000 176,351 671,351 2014-15 525,000 148,046 673,046 2015-16 555,000 118,076 673,076 2016-17 585,000 86,441 671,441 2017-18 615,000 53,141 668,141 2018-19 650,000 18,038 668,038 $8,010,000 4,823,93712,833'937