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FY 2004-2005 RDA Financial StatementsLA QUINTA REDEVELOPMENT AGENCY Financial Statements and Supplemental Data Year ended June 30, 2005 (with Independent Auditors' Report Thereon) (This page intentionally left blank) LA QUINTA REDEVELOPMENT AGENCY Financial Statements and Supplemental Data Year ended June 30, 2005 TABLE OF CONTENTS Page Independent Auditors' Report I Basic Financial Statements: Government -wide Financial Statements: Statement of Net Assets 4 Statement of Activities 5 Fund Financial Statements: Governmental Funds: Balance Sheet 6 Reconciliation of the Balance Sheets of Governmental Funds to the Statement of Net Assets 9 Statement of Revenues, Expenditures and Changes in Fund Balances 10 Reconciliation of the Statement of Revenues, Expenditures and Changes 12 Notes to the Basic Financial Statements 13 Required Supplementary Information: Notes to Required Supplementary Information 38 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual: Low/Moderate Income Housing Fund — PA No. 1 39 Low/Moderate Income Housing Fund — PA No. 2 40 Supplementary Information: Non -Major Governmental Funds: Balance Sheet 42 Statement of Revenues, Expenditures and Changes in Fund Balances 43 Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 44 (This page intentionally left blank) CONRADAND ASSOCIATES, L.L.P Board of Directors La Quinta Redevelopment Agency La Quinta, California CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT 2301 DUPONT DRIVE, SUITE 200 IRVINE, CALIFORNIA 92612 (949) 474-2020 Fax (949) 263-5520 We have audited the accompanying financial statements of the governmental activities and each major fund of the La Quinta Redevelopment Agency, a component unit of the City of La Quinta, California as of and for the year ended June 30, 2005, which collectively comprise the Agency's basic financial statements as listed in the table of contents. These basic financial statements are the responsibility of the management of the La Quinta Redevelopment Agency. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic 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 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 governmental activities and each major fund of the La Quinta Redevelopment Agency at June 30, 2005, and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The La Quinta Redevelopment Agency has not presented Management's Discussion and Analysis that the Govenuu-rental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. The information identified in the accompanying table of contents as required supplementary information is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information However, we did not audit the information and express no opinion on it. 1 MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION Board of Directors La Quinta Redevelopment Agency Page Two Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The combining fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated August 18, 2005 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. ci / z , /— . T . August 18, 2005 (This page intentionally left blank) LA QUINTA REDEVELOPMENT AGENCY Statement of Net Assets June 30, 2005 Assets: Cash and investments (note 2) Accounts receivable Interest receivable Notes receivable (note 3) Deposits Due from other governments Advances to the City of La Quinta (note 4) Restricted assets: Cash and investments with fiscal agent (note 2) Capital assets (note 5): Land Other capital assets, net Total assets Liabilities: Accounts payable Interest payable Deposits payable Due to the City of La Quinta Noncurrent liabilities (notes 7 to 12): Due within one year Due in more than one year Total liabilities Net assets: Invested in capital assets, net of related debt Restricted for: Low moderate housing Capital projects Unrestricted Total net assets Governmental Activities 2005 2004 $ 44,543,631 44,248,109 143,649 141,113 270,174 166,135 12,858,098 12,741,527 1,110 - 637,129 530,820 7,061,027 5,336,158 85,970,211 95,419,807 52,283,520 68,488,416 440,000 560,000 204,208,549 227,632,085 134,918 2,732,639 46,499 3,394,775 72,677 2,756,408 46,499 2,746,630 4,175,636 4,051,114 269,587,349 270,025,317 280,071,816 86,949,361 32,074,429 (194,887,057) 279,698,645 56,551,121 56,275,681 (164,893,362) $_(75,863,267) (52,066,560) See accompanying notes to the basic financial statements. 4 Governmental activities: Planning and development Low and moderate housing Interest expense LA QUINTA REDEVELOPMENT AGENCY Statement of Activities Year ended June 30, 2005 Program Revenues Operating Capital Charges for Contributions Contributions Expenses Services and Grants and Grants Governmental Activities 2005 2004 $ 37,334,379 - - - (37,334,379) (3,009,321) 6,964,980 - 4,339,970 - (2,625,010) (17,830,532) 10,878,054 - - - (10,878,054) (12,279,953) Total governmental activities $ 55,177,413 - 4,339,970 - (50,837,443) (33,119,806) General revenues: Taxes: Property taxes Investment income Rental income Gain (loss) on sale of capital assets Miscellaneous revenues Total general revenues Change in net assets Net assets (deficit) at beginning of year Net assets (deficit) at end of year 25,656,998 23,668,885 851,103 893,828 520,243 437,972 - (56,763) 12,392 978,895 27,040,736 25,922,817 (23,796,707) (7,196,989) (52,066,560) _44,869,571) $ (75,863,267) (52,066,560) See accompanying notes to the basic financial statements. 5 LA QUINTA REDEVELOPMENT AGENCY Governmental Funds - Balance Sheet June 30, 2005 Assets Cash and investments Cash and investments with fiscal agent Accounts receivable Interest receivable Notes receivable Deposits Due from other governments Advances to the City of La Quinta Total assets Liabilities and Fund Balances Liabilities: Accounts payable Deferred revenue Deposits payable Due to the City of La Quinta Advances from the City of La Quinta Total liabilities Fund balances: Reserved for: Bond projects Debt service Notes receivable Deposits Advances to the City of La Quinta Unreserved, reported in: Special revenue funds Debt service funds Capital projects funds Total fund balances (deficit) Total liabilities and fund balances Special Revenue Funds Debt Service Funds Low/Moderate Low/Moderate Redevelopment Redevelopment Income Housing - Income Housing - Agency - Agency - PA No. 1 PA No. 2 PA No. 1 PA No. 2 $ 6,758,136 9,059,259 17,912,730 10,328,387 - - 100 - 74,249 8,500 - - 30,346 44,826 81,147 57,230 3,358,098 9,500,000 - - 1,110 - - - 84,625 42,801 338,499 171,204 $10,306,564 18,655,386 18,332,476 10,556,821 $ 11,120 77,506 3,395 855 1,240,225 9,500,000 - - 18,664 - - - 1,270,009 9,577,506 3,395 2,117,873 - - 1,110 - - 6,917,572 9,036,555 $10,306,564 9,077,880 9,077,880 18,655,386 18,329,081 18,329,081 18,332,476 See accompanying notes to the basic financial statements. 6 855 10,555,966 10,555,966 10,556,821 Capital Projects Funds 72,677 - - - 10,740,225 10,618,102 Redevelopment 2004 Other 2,746,630 - - - - Agency - Low/Mod Governmental Totals 2,117,873 PA No. 1 Bond Funds 2005 2004 - - 485,119 44,543,631 44,248,109 27,809,770 58,160,341 - 85,970,211 95,419,807 - - 60,900 143,649 141,113 19 55,935 671 270,174 166,135 - - - 12,858,098 12,741,527 - - - 1,110 - - - - 637,129 530,820 5,938,879 - 1,122,148 7,061,027 5,336,158 33,748,668 58,216,276 1,668,838 151,485,029 158,583,669 33,872 - 8,170 134,918 72,677 - - - 10,740,225 10,618,102 - - 27,835 46,499 46,499 3,273,200 121,575 - 3,394,775 2,746,630 - - - - 28,671,083 - 3,307,072 121,575 36,005 14,316,417 42,154,991 27,809,770 58,160,341 _ 85,970,111 95,419,487 - - - - 4,088,071 - - - 2,117,873 2,123,425 - - - 1,110 - 5,938,879 - 1,122,148 7,061,027 5,336,158 - - - 15,995,452 7,388,816 - - - 28,885,047 (11,104,297) (3,307,053) (65,640) 510,685 2,862,008) 13,177,018 30,441,596 58,094,701 1,632,833 137,168,612 116,428,678 33,748,668 58,216,276 1,668,838 151,485,029 158,583,669 7 (This page intentionally left blank) LA QUINTA REDEVELOPMENT AGENCY Governmental Funds Reconcilation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2005 Fund balances of governmental funds $ 137,168,612 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, net of depreciation, have not been included as financial resources in governmental fund activity. Capital assets 52,943,520 Accumulated depreciation (220,000) Long term debt has not been included in the governmental fund activity. (273,762,985) Accrued interest payable for the current portion of interest due on long term debt has not been reported in the governmental funds. (2,732,639) Revenues that are measurable but not available. Amounts are recorded as deferred revenue under the modified accrual basis of accounting. 10,740,225 Net assets of governmental activities $ (75,863,267) See accompanying notes to the basic financial statements. LA QUINTA REDEVELOPMENT AGENCY Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year ended June 30, 2005 Revenues: Taxes Developer fees Investment income Rental income Loan repayments Miscellaneous revenues Total revenues Expenditures: Current: Planning and development Debt service: Principal Interest and fiscal charges Payments under pass- through obligations Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Issuance of tax allocation bonds Proceeds from advances Proceeds from loans Proceeds from sale of capital assets Payment to bond escrow Transfers in (note 14) Transfers out (note 14) Transfers from (to) the City of La Quinta Total other financing sources (uses) Net change in fund balances Fund balances (deficit) at beginning of year, as restated (note 16) Fund balances (deficit) at end of year Special Revenue Funds Low/Moderate Low/Moderate Income Housing - Income Housing - PA No. 1 PA No. 2 $ 6,773,423 80,270 310,574 2,048,855 12,392 9,225,514 2,189,402 Debt Service Funds Redevelopment Agency - PA No. 1 Redevelopment Agency - n n wr- 3,509,241 27,093,693 14,036,962 140,742 255,628 174,272 209,669 - - 332,747 - - 4,192,399 27,349,321 14,211,234 1,350,908 365,810 3,209,964 8,967,948 180,374 195,000 1,782,844 - - 14,421,097 11,335,224 2,189,402 1,350,908 26,964,819 13,493,442 7,036,112 2,841,491 384,502 717,792 - - 1,037,979 1,459,580 668,642 7,897,653 - - - - 2,478,347 4,142,039 (2,478,347) (4,142,039) - - - (3,221,318) (1,995,101) (994,948) (1,809,705) 534,296 1,521,225 4,606,671 5,226,407 3,375,787 1,905,727 5,324,463 3,810,148 5,702,093 16,423,354 5,231,503 $ 9,036,555 9,077,880 18,329,081 10,555,966 See accompanying notes to the basic financial statements. 10 Capital Projects Funds _A753,613) (7,124,455 (20,195,602) Redevelopment 2004 Other (7,239,475) (7,931,149) Agency - Low/Mod Governmental Totals 145,099,761 PA No. 1 Bond Funds 2005 2004 116,428,678 - - - 51,413,319 45,117,032 - - - - 642,580 767,036 1,191,332 78,068 2,687,348 1,145,871 - - - 520,243 437,972 - - - 2,381,602 612,820 - - - 12,392 366,075 767,036 1,191,332 78,068 57,014,904 48,322,350 558,792 - 193,088 4,838,374 6,707,386 - - - 3,404,964 3,196,877 - - - 10,750,792 11,505,230 - - - 25,756,321 21,448,147 558,792 - 193,088 44,750,451 42,857,640 208,244 1,191,332 (115,020) 12,264,453 5,464,710 26,400,000 442,928 - - 2,940,487 - - - - - 87,869,343 - 8,566,295 108,570 - (21,546,107) - 6,620,386 7,869,439 - - - (6,620,386) (7,869,439) (17,612,949) 753,613 (7,124,455) X31,702,384) (32,296,656) (17,170,021) _A753,613) (7,124,455 (20,195,602) 60,535,150 (16,961,777) 437,719 (7,239,475) (7,931,149) 65,999,860 47,403,373 57,656,982 8,872,308 145,099,761 50,428,818 30,441,596 58,094,701 1,632,833 137,168,612 116,428,678 11 LA QUINTA REDEVELOPMENT AGENCY Reconcilation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year ended June 30, 2005 Net changes in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities is different because: Governmental funds report capital outlay as expenditures. However, in the $ (7,931,149) statement of activities, th cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. (16,324,896) Proceeds from the issuance of debt is reported as other financing sources in the governmental funds. The issuance of debt increases liabilities in the statement of net assets, but does not result in an increase in the statement of activities. (2,940,487) Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Principal repayment 3,404,964 Bond issuance costs are recorded as an expenditure in the governmental funds while full accrual requires the amortization of these costs over the life of the debt. (151,031) The statement of net assets includes accrued interest on long term debt. 23,769 Revenues that are measurable but not available. Amounts are not recorded as revenues under the modified accrual basis of accounting. Changes in net assets of governmental activities See accompanying notes to the basic financial statements. 12 122,123 $ (23,796,707) LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements Year ended June 30, 2005 (1) SuiningH of 5imnificant Accounting Policies The following is a summary of the significant accounting policies of the La Quinta Redevelopment Agency: (a) Organization and Tax Increment Financing Redevelopment Goals and Objectives The general objective of the Redevelopment Plan adopted by the Agency is to encourage investment in the Redevelopment Project Areas by the private sector. The Redevelopment Plan provides for the demolition of buildings and improvements, the relocation of any displaced occupants, and the construction of streets, parking facilities, utilities and other public improvements. The Redevelopment Plan also includes the ability to redevelop land by private enterprise or public agencies, the rehabilitation of structures, the rehabilitation or construction of single family and low and moderate income housing, and participation by owners and tenants of properties in the Redevelopment Project. Redevelopment Project Areas The Agency has established two redevelopment project areas. On November 29, 1983 the City Council approved and adopted the Redevelopment Plan for the La Quinta Redevelopment Project Area No. 1. On May 16, 1989 the City Council approved and adopted the Redevelopment Plan for the La Quinta Redevelopment Project Area No. 2. These plans provide for the elimination of blight and deterioration that was found to exist in the project areas. Tax Increment Financing The Law provides a means for financing redevelopment projects based upon an allocation of taxes collected within a redevelopment project. The assessed valuation of a redevelopment project last equalized prior to adoption of a redevelopment plan or amendment to such redevelopment plan, or "base roll", is established and, except for any period during which the assessed valuation drops below the base year level, the taxing bodies, thereafter, receive the taxes produced by the levy of the current tax rate upon the base roll. Taxes collected upon any increase in assessed valuation over the base roll C tax increment"} are paid and may be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing or refinancing a redevelopment project. Redevelopment agencies themselves have no authority to levy property taxes. 13 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) (b) Basis of Accounting and Measurement Focus The basic financial statements of the Agency are composed of the following: • Government -wide financial statements Fund financial statements • Notes to the basic financial statements Government -wide Financial Statements Government -wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business -type activities of the primary government (including its blended component units), as well as its discreetly presented component units. The La Quinta Redevelopment Agency has no business - type activities or discretely presented component units. Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the Agency. The accompanying government -wide financial statements for the Agency present negative net assets because the primary activity of the Agency is to issue debt to construct infrastructure that will be owned and maintained by the City. Government -wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government -wide financial statements. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange transaction are recognized in accordance with the requirements of GASB Statement No. 33. Program revenues include charges for services and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. 14 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) Amounts paid to acquire capital assets are capitalized as assets in the government - wide financial statements, rather than reported as an expenditure. Proceeds of long- term debt are recorded as a liability in the government -wide financial statements, rather than as an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure. Fund Financial Statements The underlying accounting system of the Agency is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self - balancing accounts that comprise ;its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements. These statements display information about major funds individually and nomnajor funds in the aggregate for governmental and enterprise funds. Fiduciary statements include financial information for fiduciary funds and similar component units. Fiduciary funds primarily represent assets held by the Agency in a custodial capacity for other individuals or organizations. The Agency has no nonmajor funds, enterprise funds, or fiduciary funds. Governmental Funds In the fund financial statements, governmental funds and agency funds are presented using the modified -accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The Agency uses a sixty day availability period. 15 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) Revenue recognition is subject to the measurable and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government - mandated and voluntary non-exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Non-current portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources," since they do not represent net current assets. Recognition of governmental fund type revenues represented by noncurrent receivables are deferred until they become current receivables. Noncurrent portions of other long-term receivables are offset by fund balance reserve accounts. Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing source rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures. When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources. 16 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (1) SurnlmM of Significant Accounting Policies, (Continued) (c) Magor Funds The following funds are presented as major funds in the accompanying basic financial statements: ^{JV1�1G111\V V\+11U1�, LVVV [111LL lY1VLL\.•1 Q14111VV111N 11V U.7111r'.i l_.Cl. 1V V. 1 Q11LL 1VV. z 1 U11LLD- To account for the required 20% set aside of property tax increments that is legally restricted for increasing or improving housing for low and moderate income households. Debt Service Funds, P.A. No. 1 and No. 2 — To account for the accumulation of resources for the payment of debt service for bond principal, interest and trustee fees. Capital Projects Funds, P.A. No. 1 — To account for the bond proceeds, interest and other funding that will be used for development, planning, construction and land acquisition. 2004 Low and Moderate Income Housing Fund — To account for the bond proceeds, interest and other funding that will be used for development, planning, construction, and land acquisition for low and moderate income housing projects. (d) Cash and Investments For financial reporting purposes, investments are adjusted to their fair value whenever the difference between fair value and the carrying amount is material. 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. (e) Capital Assets Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated historical cost where no historical records exist. Contributed fixed assets are valued at their estimated fair market value at the date of the contribution. Generally, fixed asset purchases in excess of $5,000 are capitalized if they have an expected useful life of three years or more. Buildings are depreciated over a useful life of thirty years. 17 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (1) Summary of Significant Accounting Policies, (Continued) Capital assets include public domain (infrastructure) general fixed assets consisting of certain improvements including roads, streets, sidewalks, medians, and storm drains. (f) Comparative Data Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the Agency's financial position and operations. However, comparative (i.e., presentation of prior year totals by fund type) data have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. Certain minor reclassifications of prior year data have been made in order to enhance their comparability with current year figures. (2) Cash and Investments Cash and investments held by the Agency at June 30, 2005 consisted of the following: Equity in State of California Local Agency Investment Fund $ 3,612,974 Equity in City cash and investment pool 40,930,657 Total cash and investments held by the Agency $A4,543,631 Cash and investments held by fiscal agent at June 30, 2005 consisted of the following: U.S. Treasury bills $82,419,111 Money market mutual funds — First American Treasury Obligations 3,551 100 Total cash and investments held by fiscal agent $85.970.211 Investments Authorized by the California GovernmentCode and the Agency's Investment Policy The table below identifies the investment types that are authorized for the Agency by the California Government Code and the Agency's investment policy. The table also identifies certain provisions of the California Government Code (or the Agency's investment policy, if more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the Agency, rather than the general provisions of the California Government Code or the Agency's investment policy. is LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (2) Cash and Investments, (Continued) Investment Types Authorized by State Law (Continued) Authorized By Investment *Maximum Policy Maturity Local Agency Bonds Yes 5 years U.S. Treasury Obligations Yes 5 years U.S. Agency Securities Yes 5 years Banker's Acceptances Yes 180 days Commercial Paper Yes 270 days Negotiable Certificates of Deposit Yes 5 years Repurchase Agreements Yes 1 year Reverse Repurchase Agreements Yes 92 days Medium -Term Notes Yes 5 years Mutual Funds Yes N/A Money Market Mutual Funds Yes N/A Mortgage Pass -Through Securities Yes 5 years County Pooled Investment Funds Yes N/A Local Agency Investment Fund Yes N/A (LAIF) JPA Pools (other investment pools) Yes N/A * Based on state law requirements or investment policy requirements, whichever is more restrictive. Investments Authorized by Debt Agreements *Maximum Percentage Of Portfolio None None None 40% 25% 30% None 20% of base value 30% 20% 20% 20% None 25% None *Maximum Investment In One Issuer None None None 30% 10% None None None None 10% 10% None None None None Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Agency's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. 19 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (2) Cash and Investments, (Continued) Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Agency manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as, necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Agency's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Agency's investments by maturity: Total Maximum Maximum Authorized Maximum Percentage Investment Investment Tme Maturity Allowed in One Issuer U.S. Treasury Obligations None None None U.S. Agency Securities None None None Banker's Acceptances 360 days None None Commercial Paper 270 days None None Money Market Mutual Funds N/A None None Negotiable Certificates of Deposit 360 days None None Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Agency manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as, necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Agency's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Agency's investments by maturity: 20 Remaining Maturity Lin months 3 Months 4 to 6 Or Less Months 3,612,974 - 3,551,100 - 52,680,607 29,738,504 Total Investment Type Amount State investment pool $ 3,612,974 Held by bond trustee: Money market funds 3,551,100 U.S. Treasury bills 82,419,111 Total 83, 185 20 Remaining Maturity Lin months 3 Months 4 to 6 Or Less Months 3,612,974 - 3,551,100 - 52,680,607 29,738,504 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (2) Gash and. Investments, (Continued) Disclosures Relating to 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. Presented below is the minimum rating required by (where applicable) the California Government Code, the Agency's investment policy, or debt agreements, and the actual rating as of year end for each investment type. Minimum Exempt Rating as of Year End Total Legal From Not Investment Type Amount Rating Disclosure Aa Rated State investment pool 3,612,974 N/A - - 3,612,974 Held by bond trustee: Money market funds 3,551,100 A - 3,551,100 - U. S. Treasury bills 82,419,111 N/A 82,419,111 - - Total $$5.83,185 419111 a.551.100 3_x_4_ Investments in any one issuer that represent 5% or more of total investments by reporting unit (major fund, nonmajor funds in the aggregate, etc.) are as follows: $27,805,721 and 54,613,390 of the cash and investments (held by bond trustee) reported in Capital Projects Redevelopment Agency — PA No. 1 fund and 2064 Low/Mod Bond fund, respectively, are held in the form of U.S. Treasury bills maturing between September 22 and December 31, 2005. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Agency's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental 21 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (2) Cash and Investments, (Continued) unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure Agency deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits Investment in State Investment Pool The Agency is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the Agency's investment in this pool is reported in the accompanying financial statements at amounts based upon the Agency's pro -rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. (3) Notes Receivable In September 1994, the Agency sold certain real property to LINC Housing for $2,112,847. The property was used to construct single- family homes and rental units to increase the City's supply of low and moderate income housing. The note bears interest at 6% per annum and is due in full on June 15, 2029. In December 2000, the Agency entered into an agreement with LILAC Housing to receive $9,500,000 as a reimbursement for Agency costs incurred for the construction of infrastructure related to the development of senior apartments. Payments are due to the Agency in the amount of annual positive cash flow generated by the rental of the units. All unpaid principal and interest on the note are due fifty-five years after the completion of the project. Interest on the note accrues at 3% per annum. Other notes receivable Total notes receivable 22 Outstanding Balance at June 30, 2005 $ 3,275,614 9,500,000 82,484 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) 4) Advances to the Citv of La Ouinta The Redevelopment Agency advanced funds to the City of La Quinta to help the City meet the cost of developing the public -owned improvements to the La Quinta Community Park and Civic Center Campus. There is no stipulated repayment date established for the Agency advances. Interest accrues at the earning rate of the City's Investment Pool funds, and shall be adjusted quarterly. At June 30, 2005, outstanding Project Area No. 1 advances were $5,938,879 and Project Area No. 2 advances were $1,122,148. (5) Capital Assets Capital asset activity for the year ended June 30, 2005 was as follows: 23 Balances at Balances at June 30, 2004 Additions Deletions .lune 30 2005 Buildings $ 800,000 120,000 (260,000) _ 660,000 Total cost of depreciable assets 800,000 120,000 (260,000) 660,000 Less accumulated depreciation for: Buildings (240,000) _125,992) 45 99L2 Net depreciable assets 560,000 94,008 (214,008) 440,000 Capital assets not depreciated: Land 68,488,416 5,433,978 (21,638,874) 52,283, 20 Capital assets, net 69.048.416 5 27.986 (ZLJU $ j 52,723,520 23 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (6) Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes are recorded initially in a pool, and are then allocated to the cities based on complex formulas. Accordingly, the City of La Quinta accrues only those taxes that are received from the County within sixty days after year-end. Lien date January 1 Levy date July 1 Due dates November 1 and February 1 Collection dates December 10 and April 10 The La Quinta Redevelopment Agency's primary source of revenue comes from property taxes. Property taxes allocated to the Agency are computed in the following manner: (a) The assessed valuation of all property within the project area is determined on the date of adoption of the Redevelopment Plan. (b) Property taxes related to the incremental increase in assessed values after the adoption of the Redevelopment Plan are allocated to the Agency; all taxes on the "frozen" assessed valuation of the property are allocated to the City and other districts. The Agency has no power to levy and collect taxes and any legislative property tax shift might reduce the amount of tax revenues that would otherwise be available to pay the principal of, and interest on, debt. Broadened property tax exemptions could have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any reduction or elimination of present exemptions would increase the amount of tax revenues that would be available to pay principal and interest on debt. 24 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) 7) Lone -Term Liabilities Long-term liability activity for the year ended June 30, 2005 was as follows: Amounts Balance at Balance at due within June 30, 2004 Additions Deletions June 30, 2005 one year Loans payable to City of La Quinta Financing Authority $66,323,236 - - 66,323,236 554,773 Project Area No. 1: 1994 Tax Allocation Bonds 17,085,000 (1,430,000) 15,655,000 1,510,000 1998 Tax Allocation Bonds 15,760,000 - 15,760,000 2001 Tax Allocation Bonds 46,254,248 64,658 - 46,318,906 - 2002 Tax Allocation Bonds 37,932,244 53,670 (575,000) 37,410,914 585,000 2003 Tax Allocation Bonds 25,476,136 32,703 (390,000) 25,118,839 405,000 Pass-through agreement payable: Coachella Valley Unified School District 6,653,377 - (726,114) 5,927,263 740,636 Advances from City of La Quinta 12,335,283 1,480,907 (88,850) 13,727,340 - Loans payable to City of La Quinta Financing Authority 16,961,867 - - 16,961,867 141,881 Project Area No. 2: 1998 Tax Allocation Bonds 6,325,000 - (95,000) 6,230,000 100,000 Due to County of Riverside 2,050,000 - (100,000) 1,950,000 100,000 Advances from City of La Quinta 16,335,800 1,459,580 - 17,795,380 - Loans payable to City of La Quinta Financing Authority 4,584,240 - - 4,584,240 38,346 Total long-term liabilities 274.076.431 0 (3.404.964) 73.762.985 4 25 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) 8) 'Tax Allocation Bonds Tax Allocation Refundine Bonds. Series 1994 Tax allocation refunding bonds, Series 1994, in the amount of $26,665,000 were issued by the Agency to refund the outstanding aggregate principal amount of the Agency's Tax Allocation Bonds, Series 1989 and 1990. The remaining proceeds were used to finance certain capital improvements within the La Quinta Redevelopment Project Area No. 1. Interest rates on the bonds range from 3.80% to 8% and are payable semi-annually on March 1 and September 1 of each year until maturity. The interest and principal of the bonds are payable solely from pledged tax increment revenues. The bonds are not subject to redemption prior to maturity. There are certain limitations regarding the issuance of parity debt as further described in the official statement. A portion of the proceeds was used to obtain a surety agreement to satisfy the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2005 is $15,655,000. Tax Allocation Refunding Bonds, Series 1998 - Project Area No. 1 Tax allocation refunding bonds, Series 1998, in the amount of $15,760,000 were issued by the Agency to refund the outstanding aggregate principal amount of the Agency's Tax Allocation Bonds, Series 1991. The remaining proceeds were used to finance certain capital improvements within the La Quinta Redevelopment Project Area No. 1. Interest rates on the bonds range from 5.20% to 5.25% and are payable semi-annually on March 1 and September 1 of each year until maturity. The interest and principal of the bonds are payable from pledged tax increment revenues. There are certain limitations regarding the issuance of parity debt as further described in the official statement. Term Bonds maturing September 1, 2028 are subject to mandatory sinking fund redemption, in part by lot, on September 1, 2013 and on each September 1 thereafter, through September 1, 2028, at a price equal to the principal amount thereof plus accrued interest. A portion of the proceeds was used to obtain a surety agreement to satisfy the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2005 is $15,760,000. Tax Allocation Refunding Bonds, Series 1998 - Project Area No. 2 Tax allocation refunding bonds, Series 1998, in the amount of $6,750,O00 were issued by the Agency to refund the outstanding aggregate principal amount of the Agency's Tax Allocation Bonds, Series 1992. The remaining proceeds were used to finance certain capital improvements within the La Quinta Redevelopment Project Area No. 2. 26 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) 8) Tax Allocation Bonds. [Continued Interest rates on the bonds range from 3.75% to 5.25% and are payable semi-annually on March 1 and September 1 of each year until maturity. The interest and principal of the bonds are payable solely from pledged tax increment revenues of Project Area No. 2. Term Bonds maturing September 1, 2028 and September 1, 2033 are subject to mandatory sinking fund redemption, in part by lot, on September 1, 2009 and September 1, 2419, respectively, and on each September 1 thereafter at a price equal to the principal amount thereof plus accrued interest. There are certain limitations regarding the issuance of parity debt as further described in the official statement. A portion of the proceeds was used to obtain a surety agreement to satisfy the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2005 is $6,230,000. Tax Allocation Bonds,.Series 2001 --- Project Area No. I On August 15, 2001, the Agency issued tax allocation bonds in the amount of $48,000,000 to finance capital projects benefiting the La Quinta Redevelopment Project Area No. 1. The 2001 tax allocation bonds were issued at a discount of $422,400 and issuance costs of $1,517,325. The bonds consist of $17,280,000 of term bonds that accrue interest at 5.00% and mature on September 1, 2021 and $30,720,000 of term bonds that accrue interest at 5.18% and mature on September 1, 2031. The interest and principal on the bonds are payable from pledged tax increment revenues. A portion of the proceeds were used to obtain a surety agreement to satisfy the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2005 is $46,318,906 ($48,000,000 net of unamortized discount and issuance costs of $1,681,094). Tax Allocation Bonds, Series 2002 — Project Area No. 1 On June 12, 2002, the Agency issued tax allocation bonds in the amount of $40,000,000 to finance capital projects benefiting the La Quinta Redevelopment Project Area No. 1. The 2002 tax allocation bonds were issued at a discount of $360,000 and issuance costs of $1,250,096. The bonds consist of $6,355,000 of serial bonds and $33,645,000 of term bonds. Interest rates on serial bonds range from 1.75% and 4.00% and are payable semi-annually on March 1 and September 1 of each year until maturity. Term bonds accrue interest at 5.00% and 5.125% and mature on September 1, 2022 and September 1, 2023. The interest and principal on the bonds are payable from pledged tax increment revenues. 27 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (5) Tax AIlocation Bonds, (Continued) A portion of the proceeds were used to obtain a surety agreement to satisfy the bond reserve requirement. The principal balance of outstanding bonds at June 30, 2005 is $37,410,914 ($38,860,000 net of unamortized discount and issuance costs of $1,449,086). Tax_ Allocation Bonds, Series 2003 — Project Area No. 1 On September 1, 2003, the Agency issued tax allocation bonds in the amount of $26,400,000 to finance capital projects benefiting the La Quinta Redevelopment Project Area No. 1. The 2003 tax allocation bonds were issued at a discount of $277,200 issuance costs of $629,191. Interest is payable semi-annually on March 1 and September 1 of each year, commencing March 1, 2004. Interest payments range from 4.24% to 6.44% per annum. The interest and principal on the bonds are payable from pledged tax increment revenues. Term bonds maturing on September 1, 2013 through September 1, 2032 are subject to mandatory redemption from minimum sinking fund payments, in part by lot, on September 1, 2004, September 1, 2014, and September 1, 2024, respectively, and on each September 1 thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. A portion of the proceeds was used to obtain a surety agreement to satisfy the bond reserve requirement. There are certain limitations regarding the issuance of parity debt as further described in the official statement. The principal balance of outstanding bonds at June 30, 2005 is $25,118,839 ($26,010,000 net of unamortized discount and issuance costs of $891,161). 28 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (3) Tax Allocation Bonds, (Continued) The minimum annual requirements (including sinking fund requirements) to amortize the Project Area No. 1 and No. 2 tax allocation bonds as of June 30, 2005 are as follows: 29 Project Area No. 1 Project Area No. 2 Tax Allocation. Bends Tax Allocation Bonds June 30: Principal Interest Principal Interest 2006 $ 2,500,000 7,805,905 100,000 319,168 2007 2,640,000 7,658,900 105,000 314,785 2008 2,795,000 7,500,554 110,000 310,135 2009 2,960,000 7,330,189 115,000 305,184 2010 3,135,000 7,144,063 120,000 299,550 2011 3,330,000 6,941,435 125,000 293,272 2012 3,540,000 6,724,311 130,000 286,737 2013 3,765,000 6,491,872 140,000 279,819 2014 3,515,000 6,281,899 145,000 272,516 2015 3,690,000 6,095,257 150,000 264,956 2016 3,885,000 5,896,531 160,000 257,013 2017 4,090,000 5,687,234 170,000 248,556 2018 4,305,000 5,466,835 175,000 239,716 2019 4,530,000 5,234,798 185,000 230,491 2020 4,770,000 4,990,457 195,000 220,631 2021 5,020,000 4,733,125 205,000 210,131 2022 5,285,000 4,462,141 215,000 199,106 2023 5,565,000 4,175,504 230,000 187,425 2024 5,860,000 3,871,622 240,000 175,087 2025 6,170,000 3,549,682 255,000 162,094 2026 6,505,000 3,209,208 265,000 148,444 2027 6,850,000 2,850,313 280,000 134,138 2028 7,220,000 2,472,033 295,000 119,044 2029 7,610,000 2,073,117 310,000 103,163 2030 8,015,000 1,653,186 325,000 86,494 2031 8,445,000 1,211,175 345,000 68,906 2032 8,905,000 745,023 360,000 50,400 2033 9,385,000 252,852 380,000 30,975 2034 - _ 400,000 10,500 $ 144,285,000 132,509,221 6,230,000 5,828,436 29 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (9) Loans Payable to the City of La Quinta Financing Authority On June 29, 2004, the La Quinta Financing Authority issued revenue bonds in the amount of $90,000,000 to finance projects benefiting low and moderate income housing in La Quinta Redevelopment Project Area No. 1 and La Quinta Redevelopment Project Area No. 2 and to advance refund the Agency's Redevelopment Project Areas No. 1 and 2, 1995 Housing Tax Allocation Bonds. The La Quinta Financing Authority loaned $87,869,343 of the proceeds of the bonds to the La Quinta Redevelopment Agency. Interest is payable semi-annually on March 1 and September 1 of each year, commencing September 1, 2004. Interest payments range from 3% to 5.25% per annum. The interest and principal on the bonds are payable from pledged tax increment revenues. Term bonds maturing on September 1, 2024, September 1, 2029 and September 1, 2034 are subject to mandatory redemption from minimum sinking fund payments, in part by lot, on September 1, 2017, September 1, 2025, and September 1, 2030, respectively, and on each September 1 thereafter at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date. A portion of the proceeds was used to obtain a surety agreement to satisfy the bond reserve requirement. There are certain limitations regarding the issuance of parity debt as further described in the official statement. The principal balance of outstanding loans payable to the Financing Authority at June 30, 2005 is $87,869,343. 30 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (9) Loans Payable to the City of La Ouinta Financing -Authority, (Continued) The minimum annual requirements to repay the loan to the Financing Authority as of June 30, 2005 are as follows: 31 2004 Series A Revenue Bonds June 30 Principal Interest 2006 $ 735,000 2,990,049 2007 1,520,000 4,436,981 2008 1,570,000 4,403,156 2009 1,615,000 4,356,806 2010 1,670,000 4,304,994 2011 1,740,000 4,243,332 2012 1,805,000 4,175,132 2013 1,890,000 4,099,719 2014 1,975,000 4,016,581 2015 2,075,000 3,924,681 2016 2,175,000 3,823,431 2017 2,290,000 3,714,462 2018 2,410,000 3,597,256 2019 2,535,000 3,473,881 2020 2,670,000 3,344,075 2021 2,810,000 3,207,444 2022 2,960,000 3,063,594 2023 3,115,000 2,912,132 2024 3,275,000 2,752,663 2025 3,450,000 2,584,925 2026 3,630,000 2,408,394 2027 3,810,000 2,227,082 2028 4,000,000 2,041,082 2029 4,200,000 1,845,832 2030 4,410,000 1,640,832 2031 4,635,000 1,425,582 2032 4,870,000 1,196,560 2033 5,120,000 952,994 2034 5,380,000 697,000 2035 3,529,343 572,969 $87,869,343 88,433,621 31 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (10) Due to County of Riverside Project Area No. 2 Based on an agreement dated July 5, 1989 between the Agency and the County, until the tax increment reaches $5,000,000 annually in Project Area No. 2, the Agency will pay to the County 50% of the County portion of tax increment. At the County's option, the County's pass-through portion can be retained by the Agency to finance new County facilities or land costs that benefit the County and serve the La Quinta population. Per the agreement, the Agency must repay all amounts withheld from the County. The tax increment is to be paid to the County in amounts ranging from $100,000 to $250,000 over a payment schedule through June 30, 2015. Interest does not accrue on this obligation. The balance at June 30, 2005 is $1,950,000. The minimum annual requirement to amortize Due to County of Riverside as of June 30, 2005 is as follows: June 30 Principal 2006 $ 100,000 2007 100,000 2008 150,000 2009 200,000 2010 200,000 2011 200,000 2012 250,000 2013 250,000 2014 250,000 2015 2� 5 32 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (11 ) Pass-through Agreement Payable to Coachella Valley Unified School District An agreement was entered into in 1991 between the Agency, the City of La Quinta and the Coachella Valley Unified School District (District), which provides for the payment to the District a portion of tax increment revenue associated with properties within District confines. Such payments are subordinate to other indebtedness of the Agency incurred in furtherance of the Redevelopment Plan for Project Area No. 1. This tax increment is paid to the District over a payment schedule through August 1, 2012 in amounts ranging from $474,517 to $834,076 for a total amount of $15,284,042. Tax increment payments outstanding at June 30, 2005 totaled $5,927,263. The District agrees to use such funds to provide classroom and other construction costs, site acquisition, school buses, expansion or rehabilitation of current facilities. The minimum annual requirements to amortize Payable to Coachella Valley Unified School District as of June 30, 2005 are as follows: June 30 Principal 2006 $ 740,636 2007 755,449 2008 770,558 2009 785,968 2010 801,688 2011 817,722 2012 834,076 2013 421.166 (12) Advances from the City of La Quinta The City of La Quinta advances money to the Redevelopment Agency to cover operating and capital shortfalls. There is no stipulated repayment date established for the City advance. Interest accrues at 10% per annum. The City of La Quinta advanced money to Project Area No. 1 in the amount of $6,397,129 with interest accruing at 7% per anzzum. The maturity date for this advance is November 29, 2033. At June 30, 2005, the outstanding balances for Project Area No. 1 and Project Area No. 2 are $13,727,344 and $17,795,380, respectively. 33 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (13) Pledged Tax Revenues All tax revenues received by the Agency other than the amount required by law to be deposited in a low and moderate income housing fund, are required to be used to meet debt service requirements of the bond indentures before any payments may be made on other obligations of the Agency. (14) Transfers In and Out The following transfers were made during the year ended June 30, 2005: Transfer Tn Debt Service — RDA PA No. 1 Debt Service — RDA PA No. 2 Total transfers Transfer Out Low/Mod Income Housing — PA No. 1 Low/Mod Income Housing — PA No. 2 Amount $2,478,347 (A) 4,142,039 (B) 620 386 (A) $2,478,347 was transferred from the Low/Moderate Housing Project Area No. 1 Fund to the RDA Debt Service Project Area No. 1 Fund to pay a portion of the 2004 Series A Local Agency Revenue Bond debt service. (B) $4,142,039 was transferred to the Capital Improvement Fund from the Low/Moderate Housing Project Area No. 2 Fund to provide funding for the production of low and moderate income housing units. (L5j_— Educational Revenue Aumentation Fund (ERAF) Payment During fiscal year ended June 30, 2005, Chapter 1127 of the 2002 Statutes of the State of California requires redevelopment agencies to shift $250,000,000 in property tax revenue to kindergarten through twelfth grade schools and community colleges. The State Department of Finance has determined that the La Quinta Redevelopment Agency amount is $2,780,728 of the $250,000,000, which was forwarded to the Riverside County Auditor in accordance with the statute. 34 LA QUINTA REDEVELOPMENT AGENCY Notes to the Basic Financial Statements (Continued) (15) Restatement of Beginning Fund Balances During the year ended June 30, 2005, the Agency restated the beginning fund balance of its debt service fund to exclude advances payable to the City. Within the context of the separately issued financial statements of the Agency, these amounts are considered to be long-term debt due to an external party (the City). Governmental funds are presented using the current financial resources measurement focus. Since long-term advances due to the City are not due and payable in the current period, they are not reported as governmental fund liabilities. The following summarizes the effect of a restatement to beginning fund balances as of July 1, 2004: Fund balance (deficit) at beginning of year, as previously reported To properly exclude advances from the City from the Agency's governmental funds Fund balance at beginning of year, as restated 35 RDA Debt Service PA No. 1 $ 4,088,071 12,335,283 $1 b:42-.354 RDA Debt Service PA No. 2 (11,104,297) 16,335,800 5231,503 (This page intentionally left blank) 36 REQUIRED SUPPLEMENTARY INFORMATION 37 LA QUINTA REDEVELOPMENT AGENCY Notes to Required Supplementary Information Year ended June 30, 2005 ( 1 ) Budgets and Budgetary Accounting The Agency adopts an annual budget prepared on the modified accrual basis of accounting for its governmental funds. The City Manager or his designee is authorized to transfer budgeted amounts between the accounts of any department. Revisions that alter the total appropriations of any department or fund are approved by City Council. Appropriations were $1,236,481 during the year. Prior year appropriations lapse unless they are approved for carryover into the following fiscal year. Expenditures may not legally exceed appropriations at the department level. Reserves for encumbrances are not recorded by the City of La Quinta. 38 LA QUINTA REDEVELOPMENT AGENCY Low/Moderate Income Housing Fund - PA No. 1 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Revenues: Taxes Developer fees Investment income Rental income Loan repayments Miscellaneous Total revenues Year ended June 30, 2005 Budget Original Final Actual $ 6,246,300 6,480,979 6,773,423 20,800 20,800 80,270 341,000 341,000 310,574 - - 2,048,855 12,392 6,608,100 6,842,779 9,225,514 Variance with Prior Final Budget Year Positive (negative) Actual 292,444 5,991,739 - 20,275 59,470 - (30,426) 367,598 2,048,855 490,398 12,392 366,076 2,382,735 7,236,086 Expenditures: Current: Planning and development 3,786,329 5,620,980 2,189,402 3,431,578 3,591,028 Total expenditures 3,786,329 5,620,980 2,189,402 3,431,578 3,591,028 Excess (deficiency) of revenues over (under) expenditures 2,821,771 1,221,799 7,036,112 5,814,313 3,645,058 Other financing sources (uses): Transfers out (1,733,369) (2,478,347) (2,478,347) - (1,731,455) Transfers to the City of La Quinta - - - - (2,216,625) Proceeds from sale of capital assets 150,000 990,000 668,642 (321,358) - Total other financing sources (uses) 1,583,369) (1,488,347 (1,809,705) (321,358) (3,948,080 Net change in fund balances 1,238,402 (266,548) 5,226,407 5,492,955 (303,022) Fund balances at beginning of year 3,810,148 3,810,148 3,810,148 - 4,113,170 Fund balances at end of year $ 5,048,550 3,543,600 9,036,555 5,492,955 3,810,148 39 LA QUINTA REDEVELOPMENT AGENCY Low/Moderate Income Housing Fund - PA No. 2 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Revenues: Taxes Developer fees Investment income Rental income Repayment of loans Miscellaneous Total revenues Expenditures: Current: Planning and development Total expenditures Excess (deficiency) of revenues over (under) expenditures Year ended June 30, 2005 Budizet Original Final $ 3,115,000 3,345,543 7,054,074 7,054,074 24,100 24,100 108,569 10,193,174 10,423,717 4,192,399 (6,231,318 4,058,048 5,363,759 Variance with Prior 4,696,794 Final Budget Year Actual Positive (negative] Actual 3,509,241 163,698 3,031,668 - (7,054,074) 622,305 140,742 116,642 109,504 209,669 209,669 63,580 332,747 332,747 122,422 108,569 10,193,174 10,423,717 4,192,399 (6,231,318 4,058,048 5,363,759 6,047,702 1,350,908 4,696,794 562,895 5,363,759 6,047,702 1,350,908 4,696,794 562,895 4,829,415 4,376,015 2,841,491 (1,534,524) 3,495,153 Other financing sources (uses): Proceeds from sale of capital asset - 8,637,300 7,897,653 (739,647) - Transfers out (337,867) (4,128,726) (4,142,039) (13,313) (337,984) Transfers to the City of La Quinta - (3,221,318 (3,221,318 _ 3,437,986 Total other financing sources (uses) (337,867) 1,287,256 534,296 (752,960) (3,775,970) Net change in fund balances 4,491,548 5,663,271 3,375,787 (2,287,484) (280,817) Fund balances at beginning of year 5,702,093 5,702,093 5,702,093 - 5,982,910 Fund balances at end of year $ 10,193,641 11,365,364 9,077,880 (2,287,484) 5,702,093 EAW SUPPLEMENTARY INFORMATION 41 LA QUINTA REDEVELOPMENT AGENCY Non -Major Governmental Funds - Balance Sheet June 30, 2005 Capital Projects Funds Redevelopment Redevelopment Agency - Agency - Taxable PA No. 2 Bond PA No.1 Assets Cash and investments $ 485,119 Cash and investments 8,170 with fiscal agent - Accounts receivable 60,900 Interest receivable 671 Advances to the City of La Quinta 1,122,148 Total assets 1,668,838 Liabilities and Fund Balances Totals 2005 2004 - 485,119 1,845,134 - 8,490,446 - 60,900 60,900 671 1,682 _ 1,122,148 1,260,695 - 1,668,838 11,658,857 Liabilities: Accounts payable 8,170 - 8,170 12,084 Deposits payable 27,835 - 27,835 27,835 Due to the City of La Quinta - - - 2,746,630 Total liabilities 36,005 - 36,005 2,786,549 Fund balances: Reserved for: Advances to the City of La Quinta 1,122,148 - 1,122,148 1,260,695 Unreserved, reported in: Capital projects funds 510,685 - 510,685 7,611,613 Total fund balances 1,632,833 - 1,632,833 8,872,308 Total liabilities and fund balances $ 1,668,838 - 1,668,838 11,658,857 42 LA QUINTA REDEVELOPMENT AGENCY Non -Major Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year ended June 30, 2005 Revenues: Investment income Total revenues Expenditures: Current: Planning and development Debt service: Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Capital Projects Funds Redevelopment Redevelopment Agency - Agency - Taxable PA No. 2 Bond PA No. l $ 38,475 39,593 38,475 39,593 Totals 2005 2004 78,068 120,417 78,068 120,417 193,088 - 193,088 174,152 - - - 949,968 193,088 - 193,088 1,124,120 (154,613) 39,593 (115,020) (1,003,703) Issuance of tax allocation bonds - - - 26,400,000 Transfers in - - 5,800,000 Transfers from (to) the City of La Quinta (1,341,046) (5,783,409) (7,124,455) (25,475,641) Total other financing sources (uses) (1,341,046) (5,783,409) (7,124,455) 6,724,359 Net change in fund balances (1,495,659) (5,743,816) (7,239,475) 5,720,656 Fund balances at beginning of year 3,128,492 5,743,816 8,872,308 3,151,652 Fund balances at end of year $ 1,632,833 - 1,632,833 8,872,308 43 CONRADAND ASSOCIATES, L.L.P. Board of Directors La Quinta Redevelopment Agency La Quinta, California CERTIFIED PUBLIC ACCOUNTANTS 2301 DUPONT DRIVE, SUITE 200 IRVINE, CALIFORNIA 92612 (949) 474-2020 Fax (949) 263-5520 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS We have audited the financial statements of the La Quinta Redevelopment Agency as of and for the year ended June 30, 2005, and have issued our report thereon dated August 18, 2005. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance and Other Matters As part of obtaining reasonable assurance about whether the financial statements of the La Quinta Redevelopment Agency are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Such provisions include those provisions of laws and regulations identified in the Guidelines for Compliance Audits of California Redevelopment Agencies, issued by the State Controller. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards, except as follows: During our review of the City's Redevelopment Agency we noted that the five year implementation plan was not filed within the required time frame. The previous plan was filed in July 1999. The Health and Safety Code Section 33490(a)(1)(A) states than a five year implementation plan "shall be adopted every five years ... in conjunction with the implementation plan cycle." Internal Control Over Financial Reporting In planning and performing our audit, we considered the La Quinta Redevelopment Agency's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. 44 MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION Board of Directors La Quinta Redevelopment Agency La Quinta, Califomia Page 2 This report is intended solely for the information and use of the Audit committee, management, and the State Controller and is not intended to be and should not be used by anyone other than those specified parties. August 18, 2005 45 (This page intentionally left blank) 46