2000 02 01 FALa�� •c'
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La Quinta
Financing Authority
Agenda
City Council Chamber
78-495 Calle Tampico
La Quinta, California 92253
CALL TO ORDER
a. Roll Call
Board Members:
PUBLIC COMMENT
CONFIRMATION OF AGENDA
APPROVAL OF MINUTES
February 1, 2000
2:00 PM
Beginning Res. No. FA 2000-01
Adolph, Henderson, Perkins, Sniff, Chairman Pena
1 . APPROVAL OF THE MINUTES OF JANUARY 18, 2000.
CONSENT CALENDAR -None
BUSINESS SESSION
1. CONSIDERATION OF THE ANNUAL AUDITED FINANCE STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1999.
A. MINUTE ORDER ACTION.
DEPARTMENT REPORTS - None
CHAIR AND BOARD MEMBERS' ITEMS - None
PUBLIC HEARINGS - None
ADJOURNMENT
DECLARATION OF POSTING
I, June S. Greek, Secretary of the La Quinta Financing Authority, do hereby declare that the foregoing
agenda for the La Quinta Financing Authority meeting of February 1, 2000, was posted on the outside
entry to the Council Chamber, 78-495 Calle Tampico and on the bulletin board at the La Quinta
Chamber of Commerce on Friday, January 28, 2000.
Dated: January 28, 2000
June S. Greek, CMC/AAE
Secretary, La Quinta Financing Authority
Page 2
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COUNCIL/RDA MEETING DATE: February 1, 2000
ITEM TITLE:
Consideration of the Annual Audited
Financial Statements for the year ended June 30, 1999
RECOMMENDATION:
AGENDA CATEGORY: r
BUSINESS SESSION:
CONSENT CALENDAR:
STUDY SESSION:
PUBLIC HEARING:
Approve, receive and file the Annual Audited Financial Statement for the year ended
June 30, 1999 (Attachment 1).
FISCAL IMPLICATIONS:
None
CHARTER CITY IMPLICATIONS:
None
BACKGROUND AND OVERVIEW:
At the end of every fiscal year, the Financing Authority prepares an audited financial
report.
FINDINGS AND ALTERNATIVES:
The alternatives available to the Board include:
1. Approve, receive and file the Annual Audited Financial Statement for the year
ended June 30, 1999; or
2. Do not approve, receive and file the Annual Audited Financial Statement for the
year ended June 30, 1999; or
3. Provide staff with alternative direction.
Respectfully submitted,
Approved for submission by:
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Thomas P. Genovese
City Manager
Attachment: 1. Annual Audited Financial Statement for the year ended
June 30, 1999
ATTACHMENT 1
LA QUINTA
FINANCING AUTHORITY
Financial Statements and Supplemental Data
Year ended June 30, 1999
(With Independent Auditors' Report Thereon)
LA QUINTA FINANCING AUTHORITY
Financial Statements and Supplemental Data
Year ended June 30, 1999
TABLE OF CONTENTS
Independent Auditors' Report
Combined Balance Sheet - All Fund Types and Account Groups
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances - All Governmental Fund Types
Notes to the Financial Statements
Page
2
2
Required Supplementary Information 10
005
CONRADAND
ASSOCIATES, L.L.P.
Board of Directors
La Quinta Financing Authority
La Quinta, California
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92614
(949) 474-2020
Fax (949) 263-5520
We have audited the financial statements of the La Quinta Financing Authority (a component
unit of the City of La Quinta) as of and for the year ended June 30, 1999, as listed in the table of
contents. These financial statements are the responsibility of the management of the City of
La Quinta, California. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the La Quinta Financing Authority (a component unit of the City of
La Quinta) at June 30, 1999, and the results of its operations for the year then ended, in
conformity with generally accepted accounting principles.
The supplementary information regarding the year 2000 issue presented on page 10 is not a
required part of the basic financial statements, but is supplementary information required by the
Governmental Accounting Standards Board. We did not audit and do not express an opinion on
such information. Further, we did not apply to this information the procedures prescribed by
professional standards because of the difficulty in ascertaining whether the information presented
includes a sufficiently complete description of the year 2000 issue as it relates to the reporting
government. In addition, we do not provide assurance that the La Quinta Financing Authority is
or will become year 2000 compliant, that the Authority's year 2000 remediation efforts will be
successful in whole or in part, or that parties with which the Authority does business are or will
become year 2000 compliant.
August 13, 1999
003
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
LA QUINTA FINANCING AUTHORITY
Combined Balance Sheet - All Fund Types and Account Groups
June 30, 1999
Assets
Cash and investments (note 3)
Investments with fiscal agent (note 3)
Accounts receivable
Lease receivable (note 4)
Amount to be provided for
retirement of general
Governmental Fund Types Account Grout/Totals
Debt Capital General Long (Memorandum Only)
Service Projects Term Debt 1999 1998
$ - 711 - 711 -
29 594,208 - 594,237 601,119
504 - - 504 -
8,260,000 - - 8,260,000 8,505,000
long-term debt -
Total assets 8 260 533
- 8,260,000
8.260,000
8,505,000
594,919 8,260,000
17.115,452
17,611.119
Liabilities and Fund Balances
Liabilities:
Due to City of La Quinta
$ 9,305
13,664
- 22,969
11,815
Revenue bonds payable (note 5)
-
-
8,260,000 8,260,000
8,505,000
Deferred revenue
8,260,000
-
- 8,260,000
8.505,000
Total liabilities
8,269,305
13,664
8,260,000 16,542,969
17.021,815
Fund balances (deficit):
Reserved for:
Construction projects
-
581,255
- 581,255
589,304
Unreserved
(8,772)
-
- (8.772)
-
Total fund balances
(8,772)
581,255
- 572,483
589,304
Total liabilities and
fund balances
$8,260,533
594,919
8,260,000 17.115,452
17.611,119
See accompanying notes to the financial statements.
2 007
LA QUINTA FINANCING AUTHORITY
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances - All Governmental Fund Types
Year ended June 30, 1999
Revenues:
Investment income
Lease payments received
Total revenues
Expenditures:
Current:
Planning and development
Debt service:
Principal
Interest
Total expenditures
Excess (deficiency) of
revenues over (under)
expenditures
Other financing sources (uses):
Operating transfers in
Operating transfers out
Transfer from City of La Quinta
Transfer to City of La Quinta
Total other financing sources
Excess (deficiency) of revenues
and other financing sources
over (under) expenditures
and other financing uses
Fund balances at beginning of year
Fund balances at end of year
Totals
Debt
Capital
(Memorandum Only)
Service
Proiects
1999
1998
$ 264
40,721
40,985
27,277
684,573
-
684,573
734,623
684,837
40,721
725.558
761,900
9,036
-
9,036
6,427
245,000
-
245,000
285,000
439,573
-
439,573
449.623
693,609
-
693,609
741,050
(8,772) 40,721 31,949 20,850
1,470
(1,470)
- 6,427
(48,770) (48,770 (174.737)
48 770 (48.770 (168.310)
(8,772) (8,049)
(16,821)
(147,460)
- 589,304
589,304
736,764
8 772) 581,255
572,483
589,304
See accompanying notes to the financial statements.
3 03 ,.�
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
Year ended June 30, 1999
(1) Summary of Significant Accounting Policies
(a) Basis of Accounting
The financial statements of the La Quinta Financing Authority ("Authority") have
been prepared on the modified accrual basis. Revenues are recognized when they
become measurable and available. Expenditures are recorded when a related
liability is incurred, except that prepaid expenses are not recorded, and interest
and principal on revenue bonds and transfers to the City of La Quinta are recorded
as expenditures when due.
(b) Fund Accounting
The accounts of the Authority are organized on the basis of funds and account
groups as follows:
Debt Service Fund - used to account for the accumulation and holding of
resources for, and the payment of, principal and interest when due. Revenue
sources are lease repayments and bond proceeds.
Capital Projects Fund - accounts for all expenditures during constriction of
remaining improvements to streets and public facilities at the La Quinta Civic
Center site. Revenue sources are the moneys released from the 1991 Revenue
Bond reserve and a portion of the 1996 Refunding Revenue bond proceeds.
General Long -Term Debt Account Group - used to account for the outstanding
principal of long-term debt.
(c) Budgetary Data
Annual budgets of revenues and expenditures are not applicable to the Authority.
This is due to the legal structure of the bond indentures, which specifically directs
the timing and amounts of receipts and disbursements.
(d) Investments
Investments are reported in the accompanying balance sheet at fair value.
Changes in fair value that occur during a fiscal year are recognized as investment
income reported for that fiscal year. Investment income includes interest earnings,
changes in fair value, and any gains or losses realized upon the liquidation or sale
of investments.
4 0 U1 9
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
(Continued)
(1) Summary of Significant Accounting Policies, (Continued)
(e) Lease Revenue
Amounts presented as lease revenue in the accompanying financial statements
include cash payments from the City of La Quinta as well as any credits toward
the City's payment due to capitalized interest or interest earnings on reserve
accounts held by the City.
(f) Memorandum Only Totals
Columns in the accompanying financial statements captioned "Totals
(Memorandum Only)" are not necessary for a fair presentation of the financial
statements in accordance with generally accepted accounting principles, but are
presented as additional analytical data. Interfund balances and transactions have
not been eliminated. Therefore, the data in this column does not represent
consolidated financial information.
(2) Description of Reporting Entity
The La Quinta Financing Authority is a joint exercise of powers authority created by a
joint powers agreement between the City of La Quinta and the La Quinta Redevelopment
Agency, dated November 19, 1991. The purpose of the Authority is to provide, through
the issuance of debt, financing necessary for the construction of various public
improvements. The Authority is an integral part of the City of La Quinta and the
financial transactions of the Authority are also included in the general purpose financial
statements of the City of La Quinta.
(3) Cash and Investments
Cash and investments held by the Authority at June 30, 1999 consisted of the following:
Equity in City cash and investment pool $ 711
Investments with fiscal agent 594,237
$594.948
0i
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
(Continued)
(3) Cash and Investments, (Continued)
The City and its component units are authorized by its investment policy to invest in the
following types of investments:
Investment Tyne
Maximum %
Savings/operating accounts
85%
Governmental pools
35%
U.S. government and agency securities
75%
Commercial paper
30%
Mutual Funds
20%
Certificates of Deposit
60%
Investments of cities (including component units) in securities are classified in three
categories to give an indication of the level of custodial risk assumed by the entity.
Category 1 - includes investments that are insured or registered, in the Authority's
name, or for which the securities are held by the Authority or the
Authority's custodial agent (which must be a different institution other
than the party through which the Authority purchased the securities) in
the Authority's name. Investments held "in the Authority's name"
include securities held in a separate custodial or fiduciary account and
identified as owned by the Authority in the custodian's internal
accounting records.
Category 2 - includes uninsured and unregistered investments for which the securities
are held in the Authority's name by the dealer's agent (or by the trust
department of the dealer if the dealer was a financial institution and
another department of the institution purchased the securities for the
Authority).
Category 3 - includes uninsured and unregistered investments for which the securities
are held by the dealer's trust department or agent, but not in the
Authority's name. Category 3 also includes all securities held by the
broker -dealer agent of the Authority (the party that purchased the
securities for the Authority) regardless of whether or not the securities
are being held in the Authority's name.
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
(Continued)
(3) Cash and Investments. (Continued)
Market Value
Investments held by Authority not subject to categorization:
Equity in City cash and investment pool $ 711
Investments held by fiscal agent not subject to categorization:
Investment in mutual funds:
First American Treasury Obligation Fund 594,237
$594.948
(4) Lease Receivable
On November 19, 1991, the Authority leased from the City the land that was to be used
as the site for the future City Hall facility. Under the terms of the operating lease, an
advance rent of one dollar was paid at the inception of the lease as full consideration for
the Authority's use of the land for the term of the operating lease which ends on
October 8, 2028, unless terminated earlier as provided in the lease agreement. The City
retains title to the land during the term of the lease.
On November 19, 1991, the Authority entered into a sublease agreement to lease the land
along with the City Hall improvements ("the Project") back to the City. The lease
payments to be received by the Authority from the City are equal to the Authority's semi-
annual debt service payment required on the $8,515,000 of 1991 Local Agency Revenue
Bonds until fiscal year 1997. The Authority defeased the 1991 Local Agency Revenue
Bonds with the issuance of $8,790,000 of 1996 Lease Revenue Refunding Bonds during
fiscal year 1997. As a result of this refunding, the sublease agreement was amended on
October 1, 1996 to provide that the Authority shall receive from the City lease payments
which are equal to the Authority's semi-annual debt service required on the 1996 Lease
Revenue Refunding Bonds and the term of the sublease agreement ends September 30,
2028, unless terminated earlier as provided in the first amendment to the sublease
agreement.
The sublease provides that upon payment by the City of all required lease payments, title
to the City Hall improvements is transferred to the City. Accordingly, the Authority's
sublease of the Project to the City is accounted for as a capital lease and the project assets
have been transferred to the City. Upon transfer of the Project to the City, the Authority
recorded a lease receivable and related deferred revenue to account for its interest in lease
payments to be received from the City. At June 30, 1999, the balance of the lease
receivable was $8,260,000.
�l�
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
(Continued)
(5) General Long -Term Debt
Changes in general long-term debt for the year ended June 30, 1999 were as follows:
Lease revenue refunding bonds,
series 1996
Lease Revenue Refundiny, Bonds
Balance at
July 1, 1998 Additions Repayments
8 505 000 - (245,000)
8 505 000 - (245,000)
Balance at
June 30, 1999
8,260,000
8,260,000
On November 15, 1996, the Authority issued $8,790,000 of 1996 Lease Revenue
Refunding Bonds to defease the remaining 1991 Local Agency Revenue Bonds in the
amount of $8,200,000 and to provide funds for construction of remaining improvements
to the La Quinta Civic Center site.
The bonds consist of $3,630,000 of serial bonds and $5,160,000 of term bonds. The
serial bonds will accrue interest at rates between 3.70% to 5.30% and principal amounts
mature between October 1, 1997 to October 1, 2008 in amounts ranging from $285,000 to
$380,000. The term bonds accrue interest at a rate of 5.55% and mature on October 1,
2018.
A surety agreement has been purchased to satisfy the bond reserve requirement. The
amount of principal outstanding on the 1996 Lease Revenue Refunding Bonds at June 30,
1999 was $8,260,000.
A portion of the $8,790,000 bond proceeds, along with the remaining reserve from the
1991 Local Agency Revenue Bonds were used to purchase state and local government
securities that were deposited in a trust with an escrow bank to provide for all fixture debt
service payments on $8,200,000 of the outstanding 1991 Local Agency Revenue Bonds.
As a result, these certain bonds are considered to be defeased and the liability has been
removed from the long term debt account group of the Authority. This advance
refunding resulted in a debt service savings in the amount of $338,148 and an economic
gain (difference between the present values of the debt service payments on the old and
new debt) of $211,318. At June 30, 1999, the amount of defeased bonds outstanding is
$6,640,000.
0413
LA QUINTA FINANCING AUTHORITY
Notes to the Financial Statements
(Continued)
(5) General Long -Term Debt, (Continued)
The following is a schedule of future debt service payments for the bonds:
Year Ending
June 30
Principal
Interest
Total
1999-00
$ 250,000
429,670
679,670
2000-01
260,000
418,955
678,955
2001-02
275,000
407,178
682,178
2002-03
285,000
394,435
679,435
2003-04
300,000
380,830
680,830
2004-05
315,000
366,220
681,220
2005-06
330,000
350,575
680,575
2006-07
345,000
333,865
678,865
2007-08
360,000
315,880
675,880
2008-09
380,000
296,450
676,450
2009-10
400,000
275,280
675,280
2010-11
420,000
252,525
672,525
2011-12
445,000
228,521
673,521
2012-13
470,000
203,130
673,130
2013-14
495,000
176,351
671,351
2014-15
525,000
148,046
673,046
2015-16
555,000
118,076
673,076
2016-17
585,000
86,441
671,441
2017-18
615,000
53,141
668,141
2018-19
650,000
18,038
668.038
8 260 000
5,253,607
13,513,607
0L4
LA QUINTA FINANCING AUTHORITY
Required Supplementary Information
Year ended June 30, 1999
Risk Mitigation for the Year 2000 Issue
As of June 30, 1999, the City of La Quinta (of which the La Quinta Financing Authority is a
component unit) was in the process of evaluating its computer systems and other equipment that
may contain embedded chips to ascertain which of these might be impacted by a failure to
properly recognize and process transactions dated on or after the year 2000. The unexpended
portion of contracts entered into by the City with various vendors to replace or upgrade its
computer systems and other equipment to reduce the risk of year 2000 difficulties was
approximately $30,950. Additional amounts may be expended for the City's year 2000
assessment, remediation, and testing activities, as well as amounts that may need to be expended
after January 1, 2000 to correct problems not previously detected and corrected by the City.
Because of the unprecedented nature of the year 2000 issue, it is not possible to provide
assurances that the City has or will achieve complete year 2000 compliance, even after
completing all planned year 2000 corrective actions and related testing. Nor can the City
determine the effect, if any, on City operations should entities external to the City (other
governments, significant vendors, suppliers, service providers, customers, taxpayers, businesses,
etc.) fail to achieve year 2000 compliance in a timely manner. An audit is not designed to
substantiate the assertions of management with respect to this issue or to evaluate the adequacy
of management's plans with respect to this issue. Equipment and systems considered by
management to be critical to conducting operations include the following:
Data Processing Systems - The data processing systems under evaluation include
Accounting Systems, Animal License Software, Builders Square Program, Questas City
Clerk Program, and the Code Track Program. As of June 30, 1999, the City has assessed
one hundred percent of their data processing systems and identified options for replacing
obsolete systems or locating new vendors to correct non -compliant systems. Ninety
percent of data processing hardware and software systems have been tested for year 2000
compliance. Roughly ninety-five percent of upgrades have been implemented for non-
compliant data processing systems, with the remaining five percent to be completed by
July 1999.
Non -Data Processing Systems - The non -data processing systems under evaluation
include Heating and Air Conditioning, Phone Systems, Mobile Phones, Street Lights,
Traffic Signals, Irrigation Software, Stadium Lights, Drainage Pumps, and the Civic
Center Alarm System. As of June 30, 1999, the City has assessed ninety percent of non -
data processing systems for year 2000 compliance. The systems still to be assessed for
year 2000 compliance include mobile phones, traffic signals and the Civic Center alarm
system. Assessment of non -data processing systems will continue through July 1999.
The City has identified options for replacing systems or locating new vendors to correct
non -compliant systems for ninety percent of non -data processing systems. Seventy
percent of non -data processing systems have been tested for year 2000 compliance, with
the exception of traffic signals, Civic Center alarms, and mobile phones. As of June 30,
1999, fifteen percent of non -data processing systems have been upgraded, and the
remaining eighty-five percent will be upgraded by September 1999.
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