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CCDA Report FY Ending June 30, 2011City Center Development Agency Annual Financial Report For the fiscal year ended June 30, 2011 TIGARD CITY CENTER DEVELOPMENT AGENCY ANNUAL FINANCIAL REPORT For the fiscal year ended June 30, 2011 Prepared by: City of Tigard – Financial and Information Services Department 2 City Center Development Agency Table of Contents List of Officials ................................................................................................................................................... 3 Independent Auditor’s Report ......................................................................................................................... 4 Management’s Discussion and Analysis ......................................................................................................... 6 Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets ............................................................................................................................. 11 Statement of Activities ................................................................................................................................ 12 Fund Financial Statements – Governmental Funds Balance Sheet ................................................................................................................................................ 13 Statement of Revenues and Expenditures ............................................................................................... 14 Notes to Basic Financial Statements ............................................................................................................. 15 Required Supplementary Information Schedules of Revenues and Expenditures – Budget and Actual: Urban Renewal Agency Capital Projects Fund ....................................................................................... 22 Other Supplementary Information Schedules of Revenues and Expenditures – Budget and Actual: Urban Renewal Agency Debt Service Fund ............................................................................................ 2 Schedule of Property Tax Transactions and Outstanding Balances: Urban Renewal Agency Debt Service Fund ............................................................................................ 2 Independent Auditor’s Report on Internal Control Over Financial Reporting And on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ........................................................... 2 Independent Auditor’s Report Required by Oregon State Regulations .................................................. 2 3 Tigard City Center Development Agency Fiscal Year 2010–2011 CITY CENTER DEVELOPMENT AGENCY BUDGET COMMITTEE Dan Goodrich Rick Parker Craig Dirksen Gretchen Buehner John Bailey Dena Struck Cameron James Mona Moghimian (Alternate) Mark Woodard Marland Henderson Nick Wilson CITY CENTER DEVELOPMENT AGENCY BOARD Craig Dirksen, Chair Gretchen Buehner Mark Woodard Nick Wilson Marland Henderson EXECUTIVE DIRECTOR Craig Prosser COMMUNITY DEVELOPMENT DIRECTOR Ron Bunch REDEVELOPMENT PROJECT MANAGER for DOWNTOWN Sean Farrelly FINANCE and INFORMATION SERVICES DIRECTOR Toby LaFrance CITY CENTER DEVELOPMENT AGENCY City of Tigard | 13125 Hall Blvd. | Tigard, OR 97223 | 503-639-4171 6 Management's Discussion and Analysis As part of this Annual Financial Report, the Tigard City Center Development Agency (Agency) offers readers this narrative overview and analysis of the financial activities of the Agency for the fiscal year ended June 30, 2011. It focuses on significant financial issues, major financial activities, and resulting changes in financial positions, as well as economic factors affecting the Agency. This Management’s Discussion and Analysis (MD&A) is based on currently known facts, decisions, and conditions that existed as of the date of the report. Financial Highlights • The assets of the Agency exceeded its liabilities at the close of the most recent fiscal year by $576,575. Of this amount, $503,466 is restricted for the repayment of debt, $42,445 is restricted for the purchase of capital assets, and $30,664 is invested in capital assets, net of related debt. • The Agency’s net assets increased $251,002 over the course of the year, primarily due to property tax revenue exceeding expenses. • In the fund financial statements, there were expenditures of $280,818 for FY 2010-11. The payments were for development and design of the downtown area as well as road and sidewalk construction per the Urban Renewal Plan. • Also in the fund financial statements, the Agency recognized $330,039 in revenue from property taxes and interest earnings. Overview of the Financial Statements The following discussion and analysis is intended to serve as an introduction to the Agency’s basic financial statements. The Agency’s basic financial statements include three components: 1. Government-wide financial statements, 2. Fund financial statements, and 3. Notes to the financial statements. Government-wide financial statements Government-wide financial statements are designed to provide readers with a broad overview of the Agency’s finances, in a manner that is similar to a private-sector business. The Statement of Net Assets presents information on all of the Agency’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Agency is improving or deteriorating. The Statement of Activities presents information on how the Agency’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in the statement for some items that will result in cash flows in a future period, such as earned but uncollected property taxes. The government-wide financial statements indicate that the functions of the Agency are principally supported by property taxes and are considered governmental activities. The Agency does not have business activities in which costs are covered through user fees or charges. 7 Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or functions. The Agency uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Agency are considered governmental funds. Governmental funds are used to account for Agency functions that are supported primarily by taxes and intergovernmental revenues. These are essentially the same functions that are reported as governmental activities in the government-wide financial statements. Unlike government-wide financial statements, governmental fund financial statements focus on the acquisition and use of spendable resources, as well as balances of available spendable resources at the end of the fiscal year. Such information may be useful in evaluating the Agency’s near-term requirements. The Agency maintains two separate governmental funds consisting of the Urban Renewal Debt Service Fund and the Urban Renewal Capital Projects Fund. The Capital Projects Fund functions as the Agency’s general operations fund. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues and expenditures. Notes to the basic Financial Statements The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. They are an integral part of the financial statements and should be read in conjunction with them. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of the Agency's financial position. In the case of the Agency, assets increased as revenues, primarily property taxes, exceeded expenses and resulted in an increase in cash and receivables. Tigard City Center Development Agency Statement of Net Assets 2011 2010 ASSETS: Current and other assets 544,504$ 455,382$ Receivables 13,237 8,775 Capital assets 456,046 256,046 Total assets 1,013,787 720,203 LIABILITIES: Other liabilities 11,830 943 Long-term debt 425,382 393,687 Total liabilities 437,212 394,630 NET ASSETS: Investment in capital assets 456,046 (95,196) Restricted for debt service 47,420 420,769 Restricted for capital projects 42,445 - Total net assets 576,575$ 325,573$ Governmental Activities June 30, 8 Tigard City Center Development Agency Governmental Activities Change Net Assets REVENUES:2011 2010 General revenues: Property taxes 330,630$ 259,570$ Intergovernmental - 17,020 Interest earnings 1,190 895 Total revenues 331,820 277,485 EXPENSES: Capital projects 80,818 72,613 Excess of revenues over expenses 251,002 204,872 Change in net assets 251,002 204,872 Net assets - beginning 325,573 120,701 Net assets - ending 576,575$ 325,573$ For the Year Ended June 30, Capital Assets and Debt Administration Capital Assets As of June 30, 2011 the Agency had invested $456,046 in capital assets as reflected in the following table: 2011 2010 Land 256,046$ 256,046$ Construction in progress 200,000 - Total 456,046$ 256,046$ Capital Assets at June 30 Governmental Activities The Agency invested in land right-of-way purchases in order to construct improvements, such as expanded sidewalks, signage and road design in the Downtown Tigard area per the Urban Renewal Plan. 9 Debt Under the Intergovernmental Agreement (IGA) between the Agency and the City of Tigard, loans from Tigard to the Agency are repaid in ten equal payments on the principle starting ten years after the loan; however, interest payments start in the second year after the loan. In FY 2010-11, the Agency took its third loan from Tigard General Fund in the amount of $80,695 and its first loan from the Gas Tax Fund in the amount of $200,000. The Debt Service Fund repaid Tigard’s General Fund $249,000 of the $393,687 that was outstanding at the beginning of the fiscal year. Budgetary Highlights The Tigard City Center Development Agency budget consists of two funds: The Capital Projects Fund, which functions as the Agency’s general operations fund, and the Debt Service Fund. The Capital Projects Fund is supported by loans from the City of Tigard. These loans will be repaid with interest once the Agency begins generating enough tax increment revenue. The focus of the fiscal year 2010-11 budget was street improvements to provide better vehicle, bicycle and pedestrian accessibility. These projects were largely completed by the end of the fiscal year. No budget adjustments were necessary during the year. The budget for fiscal year 2011-12 includes continuation of the Main Street Improvements that are being partially funded with a Green Street grant from Metro. In addition, various marketing and development opportunities will be pursued. Economic Factors The Tigard City Center Development Agency is a relatively young urban renewal agency. Approved by voters in 2006, the Agency started at the beginning of the recession that has contributed to very slow growth in property values. Urban renewal agencies always start slow since revenue is generated by incremental increases in property values, and the timing of the recession is causing CCDA to grow at an even slower pace than originally anticipated. Despite the slow growth, CCDA has been able to leverage state, county and local funds to make major improvements to streets, bicycle and pedestrian paths in the district. In addition, up to $1.7 million of the parks levy approved by voters in November 2010 can be used to purchase property for parks and make improvements to that property in downtown. In addition to funding from outside sources, CCDA is approaching a funding base that will allow it to secure private financing. In fiscal year 2011-12 staff will pursue outside funding for any large projects that are planned in the area. Requests for Information This financial report is designed to provide a general overview of the Agency’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Financial and Information Services Director, City of Tigard, 13125 SW Hall Blvd., Tigard, Oregon 97223. 10 Basic Financial Statements 11 Tigard City Center Development Agency Statement of Net Assets Governmental Activities ASSETS: Current and other assets 544,504$ Receivables 13,237 Capital assets 456,046 Total assets 1,013,787 LIABILITIES: Other liabilities 11,830 Long-term debt 425,382 Total liabilities 437,212 NET ASSETS: Investment in capital assets 30,664 Restricted for debt service 503,466 Restricted for capital outlay 42,445 Total net assets 576,575$ June 30, 2011 The accompanying notes are an integral part of the basic financial statements. 12 Tigard City Center Development Agency Statement of Activities Net (Expense)/Revenue and Change in Net Program Revenues Assets Total Charges Governmental Functions/Programs Expenses for Services Activities Governmental activities: Community development 80,818$ -$ (80,818)$ General revenues: Property taxes 330,630 Interest earnings 1,190 Total general revenues 331,820 Change in net assets 251,002 Net assets - beginning 325,573 Net assets - ending 576,575$ Year Ended June 30, 2011 The accompanying notes are an integral part of the basic financial statements. 13 Tigard City Center Development Agency Balance Sheet - Governmental Funds Total Capital Debt Governmental Projects Service Funds ASSETS: Cash and investments 54,273$ 490,231$ 544,504$ Property taxes receivable - 11,357 11,357 Other receivables 2 1,878 1,880 Total assets 54,275$ 503,466$ 557,741$ LIABILITIES AND FUND BALANCES: LIABILITIES: Accounts payable and accrued liabilities 11,830$ -$ 11,830$ Deferred revenues: Property taxes - 8,475 8,475 Total liabilities 11,830 8,475 20,305 FUND BALANCES: Restricted for downtown urban renewal 42,445 494,991 537,436 Total fund balances 42,445 494,991 537,436 Total liabilities and fund balances 54,275$ 503,466$ Capital assets used in governmental activities are not financial resources and are not reported in the funds.456,046 Long-term assets not available to pay for current-period expenditures and, therefore, are deferred in the funds: Property taxes earned but not available 8,475 Long-term liabilities - not reported in funds: Loan from City of Tigard, not due and payable in the current period (425,382) Net Assets of Governmental Activities 576,575$ June 30, 2011 The accompanying notes are an integral part of the basic financial statements. 14 The accompanying notes are an integral part of the basic financial statements. Tigard City Center Development Agency Statement of Revenues and Expenditures - Governmental Funds Total Capital Debt Governmental Projects Service Funds REVENUES: Taxes -$ 328,849$ 328,849$ Interest earnings 123 1,067 1,190 Total revenues 123 329,916 330,039 EXPENDITURES: Capital projects 280,818 - 280,818 Principal payments on long-term borrowing - 249,000 249,000 Total expenditures 280,818 249,000 529,818 Change in fund balance before other financing sources (uses): (280,695) 80,916 (199,779) Other financing sources (uses): Proceeds from borrowing 280,695 - 280,695 Change in fund balance - 80,916 80,916 FUND BALANCE, BEGINNING OF YEAR 42,445 414,075 456,520 FUND BALANCE, END OF YEAR 42,445$ 494,991$ 537,436$ Net change in fund balances - total governmental funds 80,916$ Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Expenditures for capitalized assets 200,000 Property taxes that do not provide current financial resources 1,781 Net debt transactions reported in the government- wide statements as a liability (31,695) Change in Net Assets of Governmental Activities 251,002$ Year Ended June 30, 2011 15 Notes to Basic Financial Statements 16 1. Summary of Significant Accounting Policies: Year Ended June 30, 2011 The financial statements of the Tigard City Center Development Agency (Agency) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. GAAP statements include all relevant Governmental Accounting Standards Board (GASB) pronouncements. The Agency The Tigard City Center Development Agency was approved on May 16, 2006 with plans to commence operations during fiscal year 2009 under the provisions of Oregon Revised Statutes, Chapter 457 (ORS 457), to provide improvements in the downtown area so that it will be economically healthy while maintaining its “uniquely Tigard” character. The Tigard City Center Development Agency is a legally separate entity, which is governed by a board comprised of the City Council, as stipulated in the bylaws. The Council has the ability to impose its will on the Agency as determined on the basis of budget adoption, taxing authority, and funding. The purpose of the Agency is to undertake urban renewal projects and activities pursuant to the City’s downtown redevelopment plan. The financial results of the Agency are reported herein as a debt service fund and a capital projects fund. The Agency is a blended component unit of the City of Tigard and its financial activities are included in the basic financial statements of the City. The Agency boundaries include primarily the City’s central business district, general commercial district and professional commercial district. Basic Financial Statements The Agency’s financial operations are presented at both the government-wide and fund financial levels. All activities of the Agency are categorized as governmental activities. Government-wide financial statements The statement of net assets and the statement of activities display information about the Agency as a whole. These statements include all the financial activities of the Agency. The statement of activities presents a comparison between direct expenses and program revenues for each function of the Agency’s governmental activities. Direct expenses are clearly identifiable with a specific function. All costs are supported by general revenues which include property taxes and interest earnings. Fund financial statements These statements display information at the individual fund level. Each fund is considered to be a separate accounting entity. Funds are classified and summarized as governmental, proprietary and fiduciary. Currently the Agency has only governmental fund types. Basis of Presentation The financial transactions of the Agency are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, fund equity, revenues and expenditures/expenses. 17 1. Summary of Significant Accounting Policies Cont’d: Professional standards set forth minimum criteria (percentage of the assets liabilities, revenues or expenditures/expenses or either fund category or the governmental and enterprise combined) for the determination of major funds. For purposes of presentation, each of the Agency’s funds is presented as a major fund. The Urban Renewal Debt Service Fund accounts for the accumulation of resources and payments for long-term borrowings related to the Tigard City Center Development Agency. The Urban Renewal Capital Projects Fund accounts for the acquisition and development of capital assets related to the Tigard City Center Development Agency and serves as the agency’s general operations fund. Measurement Focus and Basis of Accounting Measurement focus is a term used to describe which transactions are recorded with the various financial statements. Basis of accounting refers to when transactions are recorded, regardless of the measurement focus. The government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Agency considers revenues to be available if they are collectible within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, long-term debt is recorded only when payment is due. Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements, reconciliation is necessary to explain the adjustments needed to transform the fund-based financial statements into the government-wide presentation. These reconciliations are presented with the governmental fund statements. Cash and Investments The Agency considers cash equivalents as all highly liquid debt instruments purchased with maturity of three months or less. Investments included in cash and cash equivalents are reported at fair value. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g. roads, pathways, street lights, etc.) are reported in the government-wide financial statements. Capital assets are charged to expenditures as purchased or constructed in the governmental fund statements, and capitalized in the government-wide financial statements. Capital assets are recorded at historical cost or estimated historical cost. 18 1. Summary of Significant Accounting Policies Cont’d: Capital assets are defined for the Agency as assets with an initial, individual cost of $5,000 or more, and an estimated useful life of greater than one year. Additions or improvements and other capital outlays that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Other costs for repairs and maintenance are expensed as incurred. Depreciation on exhaustible assets is provided for on the straight-line basis over the following estimated useful lives: Asset Years Buildings and improvements 25-40 Improvements other than buildings 10-20 Infrastructure 20-40 Fund Equity In the fund financial statements, the fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balance is reported as restricted when the constraints placed on the use of resources are either: (a) externally imposed by creditors (such as through debt covenants), grantors, contributors or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. All of the Agency’s fund balance is restricted under state law. Use of Estimates In preparing the Agency’s financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. 2. Stewardship, Compliance, and Accountability: Budgets The Agency’s budget is prepared in accordance with Oregon local budget law. All annual appropriations lapse at fiscal year-end. During the month of February each year, the Agency submits requests for appropriations to the City Manager so that a budget may be prepared. In June, the proposed budget is presented to the City Council for approval. The Council holds public hearings and a final budget must be prepared and adopted no later than June 30. The adopted budget is prepared by fund and function. The legal level of budgetary control, (i.e., the level at which expenditures may not legally exceed appropriations) is the fund and function level. 3. Cash and Investments: The Agency’s cash and investments reported on the statement of net assets represent the Agency’s share of the City’s cash and investment pool. The Agency’s participation in the cash and investment pool is involuntary. Interest earnings from this pool are allocated to the Agency on a monthly basis. At June 30, 2011 the Agency’s share of the City’s cash and investment pool totaled $544,504. Information about the pooled investments is included in the City’s annual financial report and may be obtained by contacting the City’s Finance Department at 13125 SW Hall Blvd., Tigard, OR 97223. 19 4. Risk Management: As a component unit of the City, the Agency is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. The City has established risk management programs for liability insurance coverage. The Agency is covered under policies and programs insuring the City. There were no insurance claims attributable to the Agency as of June 30, 2011. 5. Receivables and Payables: Property taxes are levied and become a lien on July 1. Collection dates are November 15, February 15, and May 15 following the lien date. Discounts are allowed if the amount due is received by November 15 or February 15. Taxes unpaid and outstanding on May 16 are considered delinquent. 6. Capital Assets: Capital assets include land right-of-way purchases for the Burnham Street reconstruction, which includes wider sidewalks, landscaped medians, pedestrian crossings and on-street parking. Balance Balance July 1, 2010 Additions Deletions June 30, 2011 Land 256,046$ - -$ 256,046$ Construction in progress - 200,000 - 200,000 Total 256,046$ 200,000$ -$ 456,046$ 7. Long-term Borrowing: The Agency received an additional amount of $280,695 in the current year under an existing loan agreement from the City of Tigard for urban renewal projects approved in the Urban Renewal Plan. The interest rate calculated for the loan is based on the same average rate as that earned on other funds invested by the City, which is currently .5%. Tigard City Center Development Agency Schedule of Long-Term Borrowing Transactions For the fiscal year ended June 30, 2011 Interest Outstanding June 30, 2010 Additions Paid Outstanding June 30, 2011 Paid Loan from City of Tigard for urban renewal projects. Annual interest only payments starting June 30, 2011. Annual principal payments starting June 30, 2019.393,687$ 280,695$ 249,000$ 425,382$ -$ Borrowing Transactions 20 Long Term Borrowing Cont’d: Future requirements related to long-term borrowing are as follows: Fiscal Year Ending June 30 Principal Interest Total 2012 -$ 2,481$ 2,481$ 2013 - 2,481 2,481 2014 - 2,481 2,481 2015 - 2,481 2,481 2016 - 2,481 2,481 2017-2021 62,818 12,166 74,984 2022-2026 211,698 7,880 219,578 2027-2031 150,866 1,880 152,746 425,382$ 34,331$ 459,713$ 21 Required Supplementary Information 22 Tigard City Center Development Agency Urban Renewal Agency Capital Projects Fund Schedule of Revenues and Expenditures - Budget and Actual For the fiscal year ended June 30, 2011 Variance Actual Over Original Final Amounts (Under) REVENUES: Interest earnings -$ -$ 123$ 123$ EXPENDITURES: Capital projects 491,500 491,500 280,818 210,682 Change in fund balance before other financing sources (uses)(491,500) (491,500) (280,695) 210,805 Other financing sources (uses): Loan from City of Tigard 449,000 449,000 280,695 (168,305) Change in fund balance (42,500) (42,500) - 42,500 FUND BALANCE BEGINNING OF YEAR 42,500 42,500 42,445 (55) FUND BALANCE END OF YEAR -$ -$ 42,445$ 42,445$ Budgeted Amounts 23 Other Supplementary Information 24 Tigard City Center Development Agency Urban Renewal Agency Debt Service Fund Schedule of Revenues and Expenditures - Budget and Actual For the fiscal year ended June 30, 2011 Variance Actual Over Original Final Amounts (Under) REVENUES: Property taxes 212,600$ 212,600$ 328,849$ 116,249$ Interest earnings 6,225 6,225 1,067 (5,158) Total revenues 218,825 218,825 329,916 111,091 EXPENDITURES: Debt service payment (249,000) (249,000) (249,000) - Change in fund balance (30,175) (30,175) 80,916 111,091 FUND BALANCE BEGINNING OF YEAR 414,993 414,993 414,075 (918) FUND BALANCE END OF YEAR 384,818$ 384,818$ 494,991$ 110,173$ Budgeted Amounts 25 Tigard City Center Development Agency Urban Renewal Agency Debt Service Fund Schedule of Property Tax Transactions and Outstanding Balances For the fiscal year ended June 30, 2011 Property Levy as Interest,Property Taxes Extended Discounts Taxes Year of Receivable by and Receivable Levy July 1, 2010 Assessor Adjustments Turnovers June 30, 2011 2010-11 -$ 339,379$ (10,068)$ (321,289)$ 8,022$ 2009-10 7,445 - 174 (4,917) 2,702 2008-09 1,330 - 62 (759) 633 8,775$ 339,379$ (9,832)$ (326,965)$ 11,357$ Levy as extended 339,379$ Discounts (9,832) Revenue 329,547 Included as interest (698) Recorded as property tax revenue 328,849$ 2 2 2