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2012 11 28 OBOversight Board agendas and staff reports are now available on the City's web page. www.la-guinta.org OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY AGENDA CITY HALL STUDY SESSION ROOM 78-495 Calle Tampico, La Quinta SPECIAL MEETING on WEDNESDAY, NOVMEBER 28, 2012 AT 2:00 P.M. CALL TO ORDER 1. Roll Call 2. Pledge of Allegiance PUBLIC COMMENT At this time members of the public may address the Board on any matter not listed on the agenda. Please complete a "Request to Speak" form and limit your comments to three minutes. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1. Approval of the minutes of October 10, 2012 PUBLIC COMMENT SESSION 1. Receive Public Comments Regarding Non -Housing Fund Due Diligence Review Pursuant to AB 1484 ADJOURNMENT The next regular meeting of the Oversight Board will be a held on December 5, 2012 at 2:00 p.m. at the City Hall Council Chambers, 78-495 Calle Tampico, La Quinta, CA 92253 DECLARATION OF POSTING I, Lori Lafond, Oversight Board Secretary, of the City of La Quinta, do hereby declare that the foregoing Agenda for the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency special meeting was posted on the outside entry to the Council Chambers at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 1 1 1, and the La Quinta Cove Post Office at 51-321 Avenida Bermudas, on November 21, 2012. DATED: November 21, 2012 LORI LAFOND, Ova i ht Board Secretary City of La Quinta, California Public Notices The La Quinta City Study Session Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk's office at 777-7123, twenty-four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the Oversight Board, arrangements should be made in advance by contacting the City Clerk's office at 777- 7123. A one (1) week notice is required. If background material is to be presented to the Board during an Oversight Board meeting, please be advised that ten (10) copies of all documents, exhibits, etc., must be supplied to the Oversight Board Secretary for distribution. It is requested that this take place prior to the beginning of the meeting. Any writings or documents provided to a majority of the Oversight Board regarding any item(s) on this agenda will be made available for public inspection at the City Clerk's counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during normal business hours. OVERSIGHT BOARD AGENDA 2 NOVEMBER 28, 2012 OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY MINUTES WEDNESDAY, OCTOBER 10, 2012 CALL TO ORDER A special meeting of the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency was called to order at 2:00 p.m. by Chairperson Pena. PRESENT: Board Members Ellis, Marshall, Maysels, McDaniel, Osborne and Chairperson Pena. ABSENT: Board Member Nelson STAFF PRESENT: Frank Spevacek, Executive Director of the Successor Agency Debbie Powell, Economic Development/Housing Manager PUBLIC COMMENT - None CONFIRMATION OF AGENDA - Confirmed as submitted. APPROVAL OF MINUTES Motion - A motion was made by Board Members Maysels/Marshall to approve the Oversight Board Minutes of October 3, 2012, as submitted. Motion passed unanimously. CONSENT CALENDAR 1. Adoption of a Resolution Approving the Low -Moderate Income Housing Fund Due Diligence Review Pursuant to AB 1484 MOTION - A motion was made by Board Members Ellis/Marshall to adopt Resolution No. OB 2012-016. Motion passed 6 ayes, 0 noes,1 absent. RESOLUTION NO. OB 2012-016 A RESOLUTION OF THE OVERSIGHT BOARD OF THE CITY AS SUCCESSOR AGENCY TO THE LA QUINTA REDEVELOPMENT AGENCY REVIEWING, APPROVING, AND TRANSMITTING THE DETERMINATION OF LOW AND MODERATE INCOME HOUSING FUND CASH AND CASH EQUIVALENTS AVAILABLE FOR DISBURSEMENT PURSUANT TO HEALTH AND SAFETY CODE SECTION 34179.5 ADJOURNMENT There being no further business, it was moved by Board Members Maysels/Ellis to adjourn this meeting at 2:03 p.m. Motion passed unanimously. Respectfully submitted, LORI LAFOND, Oversight Board Secretary City of La Quinta, California OVERSIGHT BOARD 2 OCTOBER 10, 2012 PUBLIC NOTICE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA O,UINTA REDEVELOPMENT AGENCY NON -HOUSING FUND DUE DILIGENCE REVIEW PURSUANT TO AB 1484 NOTICE IS HEREBY GIVEN that the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency will meet on Wednesday, November 28, 2012 at 2:00 p.m. to hear public comments and input regarding the Non -Housing Fund Due Diligence Review pursuant to Health & Safety Code Section 34179.5. The Board will then be requested to convene on Wednesday, December 5, 2012 at 2:00 p.m. to consider and approve the Non -Housing Fund Due Diligence Review. All interested parties are invited to attend said meetings. Additional information relative to the above may be obtained from the Oversight Board Secretary at (760) 777-7108 or visit the City's website at www.la-guinta.org. Lori Lafond Oversight Board Secretary Dated this 215L day of November 2012 POSTED: November 21, 2012 / > r OVERSIGHT BOARD MEETING DATE: November 28, 2012 AGENDA CATEGORY: BUSINESS SESSION: PCI ITEM TITLE: Receive Public Comments Regarding the Non -Housing Fund Due Diligence Report Pursuant to CONSENT CALENDAR: AB 1484 STUDY SESSION: PUBLIC HEARING: RECOMMENDED ACTION: Receive comments and input from the public regarding the Non -Housing Fund due diligence review. EXECUTIVE SUMMARY: AB 1484, the 2012 State Budget Trailer Bill, amended the Health & Safety Code relative to redevelopment dissolution. Section 34179.5 was added requiring each successor agency ("SA") to employ a licensed accountant to conduct a due diligence review (i.e., audit) of the housing and non -housing funds to determine the amount of unobligated funds available for distribution to taxing agencies. The housing fund review was completed prior to October 1, 2012 and approved by the Department of Finance ("DOF") on November 6, 2012. The non -housing fund review must be completed by December 1, 2012. Successor agencies must transmit completed reviews to the oversight board, the county administrative officer, the county auditor -controller, and the DOF. Oversight boards are then required to convene a public comment session at least five business days prior to formally approving the reviews. At the November 28, 2012 meeting, the Oversight Board will be conducting the public review and comment meeting. The Board will then be requested to convene on December 5, 2012 to consider and adopt the Non -Housing Fund due diligence review (Attachment 1). FISCAL IMPACT: None for this action. Based on the due diligence review, there are no unobligated non -housing funds available for distribution to taxing agencies. However, this could change based upon any input from the County Auditor -Controller's office and the Department of Finance. BACKGROUND/ANALYSIS: The State is reviewing all successor agencies' housing and non -housing assets and cash balances to determine if there are unobligated funds available for transfer to taxing agencies. AB 1484 requires the review be transmitted to the County Auditor -Controller, the State Controller's Office, and the DOF at the same time it is transmitted to the Oversight Board. This review was submitted to all parties on November 20, 2012. A summary of Attachment 1 is as follows: • Pages 2-6 list the agreed -upon procedures from the State Controller's Office and DOF. ■ The financial information begins on Attachment B1, which identifies the total amount of cash and investments ($19,946,767) that was transferred from the La Quinta Redevelopment Agency ("LQRDA") to the Successor Agency upon redevelopment dissolution. This is for information purposes only, and is not factored into the final calculation. ■ Attachment B2 lists transfers of cash and assets from the former redevelopment agency to the city from January 1, 2011 through January 31, 2012. These include: Repayment of loans made by City to the Agency in accordance with 1983 Cooperative Agreement From the inception of the LQRDA in 1983 through 2009, the City provided loans from the general fund the LQRDA to finance a variety of public improvement projects, land acquisition for public improvements, infrastructure projects, and mandated state payments. These loans implemented a 1983 Cooperative Agreement between the City and LQRDA, and were permitted under redevelopment law. Improvements such as the La Quinta Cove drainage improvements, Village improvements, the La Quinta Library, numerous parks, and street and circulation improvements are just a few examples of projects completed under this funding structure. Had it not been for these loans, the projects would have taken many additional years to complete, as it would have taken numerous years to collect sufficient tax i. increment funds. The largest advance of $10,000,000 occurred in 2009 to fund a State -mandated payment from redevelopment agencies to local schools. The loans were repaid in February and April 2011, prior to the effective date of AB 26 (redevelopment dissolution). The auditor has identified the repayments as being pursuant to enforceable obligations. Specifically, Attachment B2 to the Report lists "EO" next to the item, which is the abbreviation for "enforceable obligation." As stated in footnote a on Attachment B2, the provisions of AB 26 that do not recognize certain city - agency agreements did not go into effect until February 1, 2012, nearly a year after the debt had been extinguished by repayment. Therefore, the City concluded that the loan repayments were made pursuant to enforceable obligations and the auditor identified the repayment as such. Sale of Future Development Parcels to City for Appraised Fair Market Value The future development properties, including 86 acres at SilverRock Resort, and the 9.89 acre commercial pad at Highway 111 east of Dune Palms Road were sold by the LQRDA to the City for fair market value based on formal appraisals. Therefore, the City and the Successor Agency have concluded the transactions should not be reversed. Moreover, the reversal of the transaction would require a refund of the purchase price and property maintenance costs are refunded to the City. Transfer of Government Use Properties Finally, the government use properties, which have zero value, were initially transferred to the City in March 2011. However, in October 2012, the City and Successor Agency adopted resolutions and recorded deeds to reflect the Successor Agency's ownership of the properties to fully comply with AB 26. A deed reflecting this was recorded on October 19, 2012. The Oversight Board will be asked at a future meeting to approve the transfer of these properties to the City. ■ Attachment B3 shows no transfers were made between the LQRDA and other public agencies or private parties, and no transfers were made between the Successor Agency to other public agencies or private parties. ■ Attachment B4 summarizes the total (housing and non -housing) financial transactions of the LQRDA at June 30, 2010; June 30, 201 1; January 31, 2012 (end of redevelopment); and of the Successor Agency as of June 30, 2012. This is simply for comparison purposes, to see the change in the overall financial status of the LQRDA through dissolution and establishment of the Successor Agency. 3 ■ Attachment B5 lists the assets remaining at June 30, 2012. The "Due from Other Government' list includes a loan from LQRDA Project Area 1 Capital Fund to the Library Development Impact Fee fund in the amount of $3,044,146 to facilitate the completion of the La Quinta Library, and a loan from LQRDA Project Area 2 Capital Fund to the Transportation Development Impact Fee in the amount of $502,775 to fund Highway 111 median island landscape improvements. "Cash with Fiscal Agent' includes set asides for bond reserve funds, certain capital improvement projects listed and approved on the Recognized Obligation Schedule, and long term investments in US Treasury Bills. The "Notes Receivable" include long term loans made to facilitate expansion of the Garff Chevrolet/Cadillac and Torre Nissan auto dealerships. Those loans are subject to being forgiven if the dealers perform as required. ■ Attachment B6 provides additional detail for the "Cash with fiscal Agent." ■ Attachment B7 lists the non -liquid assets that are not available for distribution to taxing agencies. ■ Attachments B8a and BBb, lists assets and resources dedicated to, or needed for enforceable obligations — there are none. ■ Attachment 68c and B9 lists assets needed to fund bond debt payments due to projected insufficient property tax revenues — there are none. ■ Attachment B10 summarizes the assets held by the successor agency at June 30, 2012, less the legally restricted and non -liquid assets. The bottom line is that no non -housing funds are available for distribution to taxing agencies. Per AB 1484, an oversight board may request additional information and documentation from the successor agency to assist in its review and approval. An oversight board is empowered to authorize the successor agency to retain assets or funds that are: -Legally restricted, such as bond proceeds and grant funds; -Physical assets, land, records, and equipment; -Funds that are legally or contractually dedicated or restricted for the funding of an enforceable obligation , 4 If the oversight board determines that these funds/assets are to be retained, it shall identify to the DOF the amount of funds authorized for retention, the source of those funds, and the purposes for which those funds are retained. Staff will prepare this information, and will incorporate public comment and county auditor - controller input for the oversight board's December 5, 2012 meeting. Respectfully submitted, �OZ,L-3 e_� Debbie Powell Economic Development/Housing Manager Attachment: 1 . Non -Housing Fund Due Diligence Review 5 ATTACHMENT 1 Successor Agency of the Former La Quinta Redevelopment Agency Due Diligence Review of the Other Redevelopment Agencies Funds Pursuant to Sections 34179.5(c)(1) through 34179.5(c)(6) of Assembly Bill No. 1484 of 2012 Successor Agency of the Former La Quinta Redevelopment Agency Due Diligence Review of the Other Redevelopment Agency Funds Pursuant to Sections 34179.5(c)(1) through 34179.5(c)(6) of Assembly Bill No. 1484 of 2012 a CERTIFIED PUBLIC ACCOUNTANTS • Brandon W. Burrows, CPA • David E. Hale, CPA, CFP A Professional Corporation • Donald G. Slater, CPA • Richard K. Kikuchi, CPA • Susan F Matz, CPA • Shelly K. Jackley, CPA • Bryan S. Gruber, CPA • Deborah A. Harper, CPA INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED -UPON PROCEDURES To the Successor Agency of the Former La Quinta Redevelopment Agency City of La Quints, California We have performed the procedures enumerated in Attachment A for the Other Redevelopment Agency Funds, which were agreed to by the California State Controller's Office and the State of California Department of Finance (State Agencies) solely to assist you in ensuring that the dissolved redevelopment agency is complying with Assembly Bill 1484, Chapter 26, Section 17's amendment to health and safety code 34179.5. This agreed -upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Management of the successor agency is responsible for providing all the information obtained in performing these procedures. The sufficiency of these procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representations regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. As stated above, the scope of this engagement was limited to performing the procedures identified in Attachment A, which specified the "List of Procedures for the Due Diligence Review" obtained from the California Department of Finance Website. The results of the procedures performed are identified in Attachment B1 through B11. We were not engaged to and did not conduct an audit, the objective of which would be the expression of a certified opinion as to the appropriateness of the results of the procedures performed. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to the Successor Agency. This report is intended solely for the information and use of the Successor Agency Oversight Board, the Successor Agency and the applicable State Agencies, and is not intended to be, and should not be used by anyone other than these specified parties. This restriction is not intended to limit distribution of this report, which is a matter of public record. Brea, California November 20, 2012 Lance, Soil 8 Longhand, LLP 203 North Brea Boulevard • Suite 203 • Brea, CA 92821 TEL: 714.672.0022 Fax: 714.672.0331 WWWASlepaS.com Orange County • Temecula Valley Silicon Valley ATTACHMENTA List of Procedures for Due Diligence Review of the Other Redevelooment Agency Funds 1. Obtain from the Successor Agency a listing of all assets that were transferred from the former redevelopment agency to the SuccessorAgency on February 1, 2012. Agree the amounts on this listing to account balances established in the accounting records of the Successor Agency. Identify in the Agreed - Upon Procedures (AUP) report the amount of the assets transferred to the Successor Agency as of that date. 2. If the State Controller's Office has completed its review of transfers required under both sections 34167.5 and 34178.8 and issued its report regarding such review, attach a copy of that report as an exhibit to the AUP report. If this has not yet occurred, perform the following procedures: a. Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods and services) from the former redevelopment agency to the city, county, or city and county that formed the redevelopment agency for the period from January 1, 2011 through January 31, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. b. Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods and services) from the Successor Agency to the city, county, or city and county that formed the redevelopment agency for the period from February 1, 2012 through June 30, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. c. For each transfer, obtain the legal document that formed the basis for the enforceable obligation that required any transfer. Note in the AUP report the absence of any such legal document or the absence of language in the document that required the transfer. 3. If the State Controller's Office has completed its review of transfers required under both Sections 34167.5 and 34178.8 and issued its report regarding such review, attach a copy of that report as an exhibit to the AUP report. If this has not yet occurred, perform the following procedures: a. Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods and services) from the former redevelopment agency to any other public agency or to private parties for the period from January 1, 2011 through January 31, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. b. Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods and services) from the Successor Agency to any other public agency or private parties for the period from February 1, 2012 through June 30, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. c. For each transfer, obtain the legal document that formed the basis for the enforceable obligation that required any transfer. Note in the AUP report the absence of any such legal document or the absence of language in the document that required the transfer. ATTACHMENT A (Continued) List of Procedures for Due Diligence Review for the Other Redevelopment Aaencv Funds (Continued) 4. Perform the following procedures: a. Obtain from the Successor Agency a summary of the financial transactions of the Redevelopment Agency and the Successor Agency in the format set forth in the attached schedule for the fiscal periods indicated in the schedule. For purposes of this summary, the financial transactions should be presented using the modified accrual basis of accounting. End of year balances for capital assets (in total) and long-term liabilities (in total) should be presented at the bottom of this summary schedule for information purposes. b. Ascertain that for each period presented, the total of revenues, expenditures, and transfers accounts fully for the changes in equity from the previous fiscal period. c. Compare amounts in the schedule relevant to the fiscal year ended June 30, 2010 to the state controller's report filed for the Redevelopment Agency for that period. d. Compare amounts in the schedule for the other fiscal periods presented to account balances in the accounting records or other supporting schedules. Describe in the report the type of support provided for each fiscal period. 5. Obtain from the Successor Agency a listing of all assets of the Low and Moderate Income Housing Fund as of June 30, 2012 for the report that is due October 1, 2012 and a listing of all assets of all other funds of the Successor Agency as of June 30, 2012 (excluding the previously reported assets of the Low and Moderate Income Housing Fund) for the report that is due December 15, 2012. When this procedure is applied to the Low and Moderate Income Housing Fund, the schedule attached as an exhibit will include only those assets of the Low and Moderate Income Housing Fund that were held by the Successor Agency as of June 30, 2012 and will exclude all assets held by the entity that assumed the housing function previously performed by the former redevelopment agency. Agree the assets so listed to recorded balances reflected in the accounting records of the Successor Agency. The listing should be attached as an exhibit to the appropriate AUP report. 6. Obtain from the Successor Agency a listing of asset balances held on June 30, 2012 that are restricted for the following purposes: a. Unspent bond proceeds: i. Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures, amounts set aside for debt service payments, etc.). ii. Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). iii. Obtain from the Successor Agency a copy of the legal document that sets forth the restriction pertaining to these balances. Note in the AUP report the absence of language restricting the use of the balances that were identified by the Successor Agency as restricted. b. Grant proceeds and program income that are restricted by third parties: i. Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures). ii. Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). ATTACHMENT A (Continued) List of Procedures for Due Diligence Review for the Other Redevelopment Agency Funds (Continued) iii. Obtain from the Successor Agency a copy of the grant agreement that sets forth the restriction pertaining to these balances. Note in the AUP report the absence of language restricting the use of the balances that were identified by the Successor Agency as restricted. c. Other assets considered to be legally restricted: Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures). Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). iii. Obtain from the Successor Agency a copy of the legal document that sets forth the restriction pertaining to these balances. Note in the AUP report the absence of language restricting the use of the balances that were identified by Successor the Agency as restricted. d. Attach the above mentioned Successor Agency prepared schedule(s) as an exhibit to the AUP report. For each restriction identified on these schedules, indicate in the report the period of time for which the restrictions are in effect. If the restrictions are in effect until the related assets are expended for their intended purpose, this should be indicated in the report. 7. Perform the following: a. Obtain from the Successor Agency a listing of assets as of June 30, 2012 that are not liquid or otherwise available for distribution (such as capital assets, land held for resale, long-term receivables, etc.) and ascertain if the values are listed at either purchase cost (based on book value reflected in the accounting records of the Successor Agency) or market value as recently estimated by the Successor Agency. b. If the assets listed at 7(A) are listed at purchase cost, trace the amounts to a previously audited financial statement (or to the accounting records of the Successor Agency) and note any differences. c. For any differences noted in 7(B), inspect evidence of disposal of the asset and ascertain that the proceeds were deposited into the SuccessorAgency trust fund. If the differences are due to additions (this generally is not expected to occur), inspect the supporting documentation and note the circumstances. d. If the assets listed at 7(A) are listed at recently estimated market value, inspect the evidence (if any) supporting the value and note the methodology used. If no evidence is available to support the value and\or methodology, note the lack of evidence. 8. Perform the following: a. If the Successor Agency believes that asset balances need to be retained to satisfy enforceable obligations, obtain from the Successor Agency an itemized schedule of asset balances (resources) as of June 30, 2012 that are dedicated or restricted for the funding of enforceable obligations and perform the following procedures. The schedule should identify the amount dedicated or restricted, the nature of the dedication or restriction, the specific enforceable obligation to which the dedication or restriction relates, and the language in the legal document that is associated with the enforceable obligation that specifies the dedication of existing asset balances toward payment of that obligation. i. Compare all information on the schedule to the legal documents that form the basis for the dedication or restriction of the resource balance in question. ATTACHMENT A (Continued) List of Procedures for Due Diligence Review for the Other Redevelopment Agency Funds (Continued) Compare all current balances to the amounts reported in the accounting records of the Successor Agency or to an alternative computation. iii. Compare the specified enforceable obligations to those that were included in the final Recognized Obligation Payment Schedule approved by the California Department of Finance. iv. Attach as an exhibit to the report the listing obtained from the Successor Agency. Identify in the report any listed balances for which the Successor Agency was unable to provide appropriate restricting language in the legal document associated with the enforceable obligation. b. If the Successor Agency believes that future revenues together with balances dedicated or restricted to an enforceable obligation are insufficient to fund future obligation payments and thus retention of current balances is required, obtain from the Successor Agency a schedule of approved enforceable obligations that includes a projection of the annual spending requirements to satisfy each obligation and a projection of the annual revenues available to fund those requirements and perform the following procedures: i. Compare the enforceable obligations to those that were approved by the California Department of Finance. Procedures to accomplish this may include reviewing the letter from the California Department of Finance approving the Recognized Enforceable Obligation Payment Schedules for the six month period from January 1, 2012 through June 30, 2012 and for the six month period July 1, 2012 through December 31, 2012. ii. Compare the forecasted annual spending requirements to the legal document supporting each enforceable obligation. a. Obtain from the Successor Agency its assumptions relating to the forecasted annual spending requirements and disclose in the report major assumptions associated with the projections. iii. For the forecasted annual revenues: a. Obtain from the Successor Agency its assumptions for the forecasted annual revenues and disclose in the report major assumptions associated with the projections. c. If the Successor Agency believes that projected property tax revenues and other general purpose revenues to be received by the SuccessorAgency are insufficient to pay bond debt service payments (considering both the timing and amount ofthe related cash flows), obtain from the Successor Agency a schedule demonstrating this insufficiency and apply the following procedures to the information reflected in that schedule. Compare the timing and amounts of bond debt service payments to the related bond debt service schedules in the bond agreement. ii. Obtain the assumptions for the forecasted property tax revenues and disclose major assumptions associated with the projections. iii. Obtain the assumptions for the forecasted other general purpose revenues and disclose major assumptions associated with the projections. d. If procedures A, B, or C were performed, calculate the amount of current unrestricted balances necessary for retention in order to meet the enforceable obligations by performing the following procedures. ATTACHMENT A (Continued) List of Procedures for Due Diligence Review for the Other Redevelopment Agency Funds (Continued) Combine the amount of identified current dedicated or restricted balances and the amount of forecasted annual revenues to arrive at the amount of total resources available to fund enforceable obligations. ii. Reducethe amount of total resources available by the amount forecasted forthe annual spending requirements. A negative result indicates the amount of current unrestricted balances that needs to be retained. Include the calculation in the AUP report 9. If the Successor Agency believes that cash balances as of June 30, 2012 need to be retained to satisfy obligations on the Recognized Obligation Payment Schedule (ROPS) for the period of July 1, 2012 through June 30, 2013, obtain a copy of the final ROPS for the period of July 1, 2012 through December 31, 2012 and a copy of the final ROPS for the period January 1, 2013 through June 30, 2013. For each obligation listed on the ROPS, the Successor Agency should add columns identifying (1) any dollar amounts of existing cash that are needed to satisfy that obligation and (2) the Successor Agency's explanation as to why the Successor Agency believes that such balances are needed to satisfy the obligation. Include this schedule as an attachment to the AUP report. 10. Include (or present) a schedule detailing the computation of the Balance Available for Allocation to Affected Taxing Entities. Amounts included in the calculation should agree to the results of the procedures performed in each section above. The schedule should also include a deduction to recognize amounts already paid to the County Auditor -Controller on July 12, 2012 as directed by the California Department of Finance. The amount of this deduction presented should be agreed to evidence of payment. The attached example summary schedule may be considered for this purpose. Separate schedules should be completed for the Low and Moderate Income Housing Fund and for all other funds combined (excluding the Low and Moderate Income Housing Fund). 11. Obtain a representation letter from SuccessorAgency management acknowledging their responsibility for the data provided to the practitioner and the data presented in the report or in any attachments to the report. 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BOX 1504 LA QUINTA, CALIFORNIA 92247-1504 78-495 CALLE TAMPICO LA QUINTA, CALIFORNIA 92253 November 20, 2012 Lance, Soll R Lunghard, LLP Certified Public Accountants 203 North Brea Boulevard, Suite 203 Brea, CA 92821-4056 (760) 777-7000 FAX (760) 777-7101 We are providing this letter in connection with your performance of the Due Diligence Review of the Other Redevelopment Agency Funds in accordance with Assembly Bill 1404 for the Successor Agency of the former La Quinta Redevelopment Agency, We confirm that we are responsible for the complete and fair presentation of the previously mentioned review in conformity with the listed procedures of the Assembly Bill 1484 Due Diligence Review as published by the State Department of Finance on August 27. 2012. We are also responsible for adopting sound accounting policies, establishing and maintaining effective internal control over financial reporting, and preventing and detecting fraud. We confirm, to the best of our knowledge and belief, as of the date of this letter, the following representations made to you during your review: 1. We have made available to you: a. In accordance with 34179.5(c)(1), the dollar value of all assets transferred from the former redevelopment agency to the successor agency on or about February 1, 2012. b. In accordance with 34179.5(c)(2), the dollar value of all assets and cash and cash equivalents transferred after January 1, 2011, through June 30, 2012. by the redevelopment agency or the successor agency to the city, county, or city and county that formed the redevelopment agency and the purpose of each transfer. We have also provided the documentation of any enforceable obligation that required the transfer. c. In accordance with 34179.5(c)(3), the dollar value of any cash or cash equivalents transferred after January 1, 2011, through June 30. 2012, by the redevelopment agency or the successor agency to any other public agency or private party and the purpose of each transfer. We have also provided documentation of any enforceable obligation that required the transfer. d. In accordance with 34179.5(c)(4), the expenditure and revenue accounting information and have identified transfers and funding sources for the 2010-11 and 2011-12 fiscal years that reconciles balances, assets, and liabilities of the successor agency on June 30, 2012 to those reported to the Controller for the 2009-10 fiscal year. e. in accordance with 34179.5(c)(5), a listing of all assets of the Low and Moderate Income Housing Fund as of June 30, 2012 for the report that is due October 1, 2012 and a listing of all assets of all other funds of the Successor Agency as of June 30, 2012 (excluding the previously reported assets of the Low and Moderate Income Housing Fund) for the report that is due December 15, 2012. 20 November 20, 2012 Page f. In accordance with 34179.5(c)(5)(13), an itemized statement listing any amounts that are legally restricted as to purpose and cannot be provided to taxing entities. This could include the proceeds of any bonds, grant funds, or funds provided by other governmental entities that place conditions on their use. g. In accordance with 34179.5(c)(5)(C), an itemized statement of the values of any assets that are not cash or cash equivalents. This may include physical assets, land, records, and equipment. For the purpose of this accounting, physical assets may be valued at purchase cost or at any recently estimated market value. h. In accordance with 34179.5(c)(5)(D),an itemized listing of any current balances that are legally or contractually dedicated or restricted for the funding of an enforceable obligation that identifies the nature of the dedication or restriction and the specific enforceable obligation. In addition, we have provided a listing of all approved enforceable obligations that includes a projection of annual spending requirements to satisfy each obligation and a projection of annual revenues available to fund those requirements. I. In accordance with 34179.5(c)(5)(E), an itemized list and analysis of any amounts of current balances that are needed to satisfy obligations that will be placed on the Recognized Obligation Payment Schedules for the current fiscal year. 2. There are no material transactions that have not been properly recorded in the accounting records underlying this Due Diligence Review. 3. Management is not aware of any transfers (as defined by Section 34179.5) from either the former Redevelopment Agency or the Successor Agency to the City, other agencies or private parties for the period January 1, 2011 through June 30, 2012 that have not been identified in this report and related exhibits. 4. We acknowledge our responsibility for the design and implementation of programs and controls to prevent and detect fraud. 5. We have no knowledge of any fraud or suspected fraud affecting this Due Diligence Review involving: a. Management, b. Employees who have significant roles in internal control, or c. Others where the fraud could have a material effect on this Due Diligence Review. 6. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, or others. 7. When applicable, we have taken timely and appropriate steps to remedy fraud, illegal acts, violations of provisions of contracts or grant agreements, or abuse that you have reported to us. 8. We have identified to you any previous audits, attestation engagements, performance audits, state controller reports or other studies related to the objectives of this Due Diligence Review and whether related recommendations have been implemented. 9. The Successor Agency of the former La Quints Redevelopment Agency has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, or fund equity. 10. We are responsible for compliance with the laws, regulations, provisions of contracts and grant agreements applicable to us, and all provisions related to the dissolution of the Redevelopment Agency in accordance with AB 1 X 26 and AB 1484. 21 November 20, 2012 Page 3 11. There are no known violations of: a. Laws and regulations, b. Provisions of contracts and grant agreements, C. Provisions related to the dissolution of the Redevelopment Agency in AB 1X 26 and AB 1484 whose effects should be considered for disclosure in this Due Diligence Review, 12. All bank accounts and investments associated with this review have been properly reflected in the general ledger accounting records. 13. No events, including instances of noncompliance, have occurred subsequent to the performance of this Due Diligence Review and through the date of this letter that would require adjustment to or disclosure in the aforementioned Due Dilicence Review. Title: F#kecu>� Director 22