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TCDA Report FY Ending June 30, 2018 II iii TCDA Town Center Development Agency (A Component Unit of the City of Tigard,Oregon) nnuaIF . FOR THE FISCAL YEAR ENDED JUNE 30, 2018 1101 - T W1 , ._,1��� � �,iii --14' :�� � � -_ e� lir _ L LI II aw I A " s r N - I_.,._ __- y -�Ay `--... =mssIL NI i IIS1T' Prepared by: City of Tigard - Financial & Information Services Dept. Town Center Development Agency Table of Contents Introductory Section: List of Officials 1 Financial Section: Report of Independent Auditors 2 Management's Discussion and Analysis 5 Basic Financial Statements: Government-Wide Financial Statements Statement of Net Position 10 Statement of Activities 11 Fund Financial Statements—Governmental Funds Balance Sheet and Reconciliation 12 Statement of Revenues and Expenditures and Reconciliation 13 Notes to the Basic Financial Statements 14 Required Supplementary Information: Schedule of Revenues and Expenditures—Budget and Actual: Urban Renewal Agency Capital Projects Fund 20 Other Supplementary Information: Schedule of Revenues and Expenditures—Budget and Actual: Urban Renewal Agency Debt Service Fund 21 Audit Comments and Disclosure Requirements: Report of Independent Auditors Required by Oregon State Regulations 22 Town Center Development Agency Fiscal Year 2017-2018 TOWN CENTER DEVELOPMENT AGENCY BUDGET COMMITTEE Bill Ludwig Mayor John L. Cook Nathan Rix Councilor John Goodhouse Thomas Schweizer Councilor Tom Anderson Stephanie Veal Councilor Jason Snider Clifford Rone Councilor Marc Woodard Rajendra Patel,Alternate TOWN CENTER DEVELOPMENT AGENCY BOARD John L. Cook, Chair John Goodhouse Jason Snider Marc Woodard Tom Anderson EXECUTIVE DIRECTOR Marty Wine COMMUNITY DEVELOPMENT DIRECTOR Kenny Asher REDEVELOPMENT PROJECT MANAGER for DOWNTOWN Sean Farrelly FINANCE and INFORMATION SERVICES DIRECTOR Toby LaFrance TOWN CENTER DEVELOPMENT AGENCY City of Tigard I 13125 Hall Blvd. I Tigard, OR 97223 I 503-639-4171 1 INDEPENDENT AUDITOR'S REPORT 0 MOSSADAMS Report of Independent Auditors Board Members Town Center Development Agency(A component unit of the City of Tigard, Oregon) Tigard, Oregon Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Town Center Development Agency (the Agency), a component unit of the City of Tigard, Oregon, as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Agency's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Agency as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 5 through 9 and the budgetary schedules for the Capital Projects Fund on page 20, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the management's discussion and analysis in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on this information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The budgetary schedule for the Capital Projects Fund described above is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the basic financial statements. The budgetary schedule for the Capital Projects Fund has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the budgetary schedule for the Capital Projects Fund are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The budgetary schedule on page 21 is presented for purposes of additional analysis and are not a required part of the basic financial statements. 3 This supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the budgetary schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Agency's basic financial statements. The introductory section is presented for purposes of additional analysis and is not a required part of the basic financial statements. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Report on Other Legal and Regulatory Requirements In accordance with the Minimum Standards of Audits of Oregon Municipal Corporations, we have issued our report dated December 13, 2018 on our consideration of the Agency's compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance. C For Moss Adams LLP Portland, Oregon December 13, 2018 4 No content appears on this page by design. Town Center Development Agency Management's Discussion and Analysis As part of this Annual Financial Report, the Town Center Development Agency (agency), a component unit of the City of Tigard, Oregon, offers readers this narrative overview and analysis of the financial activities of the agency for the fiscal year ended June 30, 2018. It focuses on significant financial issues, major financial activities, and resulting changes in financial position, 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$2,577,507. Of this amount, $456,914 is restricted for the repayment of debt, $2,087,638 is for net investment in capital assets and the remaining$32,955 is unrestricted and may be used to meet the agency's ongoing obligations to citizens and creditors. • The agency's net position (assets less liabilities) increased $755,645 over the course of the year, primarily due to intergovernmental revenues from Brownfield Grants for the Saxony properties on Tigard's Main Street. These grants enabled the demolition and cleanup of these properties for redevelopment on Main Street near Fanno Creek. • In the fund financial statements for fiscal year 2017-18 expenditures in the Capital Projects Fund ($425,721) were for capital outlay in the amount of$381,678, most of which was for the demolition and pollution remediation project to the city for the purchase of the Saxony properties.The payments in the Debt Service Fund ($162,943) were for principal and interest payments on a commercial bank loan and to the City of Tigard. • Also in the fund financial statements,the agency recognized$903,964 in revenue from property taxes, rental revenues,intergovernmental revenues 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 Position presents information on all of the agency's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position 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-type activities in which costs are covered through user fees or charges. 5 Town Center Development Agency Management's Discussion and Analysis 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 for each fund 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 position may serve over time as a useful indicator of the agency's financial position. In the case of the agency, assets exceeded liabilities by$2,577,507 in fiscal year 2018 compared to a net position of$1,821,862 in fiscal year 2017. A significant portion of the agency's net position(81 percent)reflects its investment in capital assets,consisting mostly of infrastructure and land. The agency uses these capital assets in the redevelopment of the designated Urban Renewal downtown area and, as such, are not available for future spending. In fiscal year 2018 the capital assets increased by 9 percent, primarily due to the grant funded Saxony properties demolition and remediation project. $456,914 or 17.7 percent is restricted for the payment of debt incurred by the agency andthe remaining net position of$32,955 or 1.3 percent is unrestricted. 6 Town Center Development Agency Management's Discussion and Analysis Tigard City Center Development Agency Statement of Net Position June 30, 2018 2017 ASSETS: Cash and restricted cash $ 448,592 $ 128,150 Receivables 50,815 75,415 Capital assets,net of accumulated depredation 3,755,070 3,444,857 Total assets 4,254,477 3,648,422 LIABILITIES: Accounts payable and other short-term liabilities 139,538 159,128 Long-term liabilities 1,537,432 1,667,432 Total liabilities 1,676,970 1,826,560 NET POSITION: Net investment in capital assets 2,087,638 1,647,425 Restricted for debt service 456,914 142,301 Unrestricted 32,955 32,136 Total net position S 2,577,507 S 1,821,862 Tigard City Center Development Agency Change in Net Position For the Year Ended June 30, REVENUES: 2018 2017 Program revenues $ 116,739 $ 84,425 General revenues 787,357 587,513 Total revenues 904,096 671,938 EXPENSES: Community development 115,508 441,264 Interest on long-term debt 32,943 36,754 Total expenses 148,451 478,018 Change in net position 755,645 193,920 Net position-beginning 1,821,862 1,627,942 Net position-ending $ 2,577,507 $ 1,821,862 7 Town Center Development Agency Management's Discussion and Analysis Capital Assets and Debt Administration Capital Assets As of June 30,2018 the agency had invested$3,755,070 in capital assets as reflected in the following table: Governmental Activities 2018 2017 Land $ 985,504 $ 985,504 Construction in progress 1,230,265 878,318 Infrastructure 1,669,087 1,669,087 Acaxmulated depredation (129,786) (88,052) Total $ 3,755,070 $ 3,444,857 On November 24,2015 the agency acquired two property lots(Main Street Saxony properties)in the downtown area from the city. Per the Purchase and Sale Agreement between the city and the agency, the purchase price for these properties was $515,000 (representing the original purchase price for the property paid by the city) or the amount established by an independent MAI appraisal,whichever is greater,with $1.00 due at closing and the balance due on June 30, 2017. The agency received two Brownfield grants to demolish buildings and perform pollution remediation in order to facilitate future development of the properties.The majority of the project was completed by June 30,2018,with final approval by Department of Environmental Quality pending in FY 2019. Additional information on the agency's capital assets can be found on page 18 of this report. Debt Under the Intergovernmental Agreement(IGA) between the agency and the City of Tigard,loans from the city to the agency are repaid in ten equal payments on the principal starting ten years after the loan;however,interest payments start in the second year after the loan. In fiscal year 2017-18,the agency did not receive any additional loans from the city. In fiscal year 2015 the agency borrowed$1,300,000 from a financial institution to purchase property located in the downtown area. Payments of principal and interest are due in March and September annually until the final payment in September of 2019. Total debt decreased by $130,000 during the current fiscal year. Additional information on the agency's debt can be found on pages 18-19 of this report. Budgetary Highlights The Town 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 activity is supported by loans from the City of Tigard and a bank loan.The city loans will be repaid with interest once the agency begins generating enough tax increment revenue.The focus of the fiscal year 2017-18 budget included continuation of the façade improvements and strolling street programs, development of the Main Street and Fanno Creek public spaces, clean up and site demolition of the Saxony properties,paid for with an Environmental Protection Agency grant and redevelopment planning for the transit center.These projects are on-going and have been carried over into the fiscal year 2018-19 budget. 8 Town Center Development Agency Management's Discussion and Analysis The budget for fiscal year 2018-19 includes the voter approved Tigard Triangle Urban Renewal Plan in addition to the City Center Urban Renewal Plan. The Tigard Triangle Urban Renewal budget will include plan administration and partnering with Metro to develop affordable housing in the district. The City Center Urban Renewal budget will include construction of public restrooms in the Tigard Rotary Plaza and developing plans for a larger Downtown plaza.The agency will also provide a small amount in an Opportunity Fund for Strolling Street projects, Targeted Improvement, Facade Improvement and Skyline Improvements. The agency will further engage the District's merchants and business owners together with the Tigard Downtown Alliance to promote new businesses in the district. Economic Factors The Town Center Development Agency is an urban renewal agency approved by voters in 2006.The primary funding source for the agency is property tax increment financing, which generally means that the property taxes resulting from growth in property value within the Urban Renewal area can be used to finance improvement projects and programs. In order to facilitate the redevelopment of the Urban Renewal area, the agency adopted a City Center Urban Renewal Plan that allows the agency to incur a maximum amount of indebtedness (amount of tax increment financing for projects and programs) of$22,000,000 for a duration of 20 years. In May 2017 the voters approved the creation of a second urban renewal area, the Tigard Triangle Urban Renewal Area,for 35 years with maximum principal indebtedness of$188 million.No new debt will be incurred after the fiscal year 2052-53 as part of this plan. The agency's ability to borrow additional funds will remain constrained for several more years as tax increment revenue is based on property tax increases over time and growth was fairly slow at the time the agency was created. Despite the slow growth, the agency has been able to leverage state, county and local funds to make major improvements to streets, bicycle and pedestrian paths in the district. The agency will continue to seek additional funding from outside sources for redevelopment opportunities. 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 Finance and Information Services Director,City of Tigard, 13125 SW Hall Blvd.,Tigard,Oregon 97223. 9 No content appears on this page by design. Basic Financial Statements Tigard City Center Development Agency Statement of Net Position June 30,2018 Governmental Activities ASSETS: Property taxes receivable $ 19,923 Accounts receivable 29,636 Interest receivable 1,256 Restricted cash and cash equivalents 448,592 Land and construction in progress 2,215,769 Other capital assets,net of accumulated depreciation 1,539,301 Total assets 4,254,477 LIABILITIES: Accounts payable and other accrued liabilities 9,538 Due within one year: Bank loan payable 130,000 Due within more than one year: Advances from city 757,432 Bank loan payable 780,000 Total liabilities 1,676,970 NET POSITION: Net investment in capital assets 2,087,638 Restricted for debt service 456,914 Unrestricted 32,955 Total net position $ 2,577,507 The accompanying notes are an integral part of the basic financial statements. 10 Tigard City Center Development Agency Statement of Activities Year Ended June 30,2018 Net (Expense)/Revenue Program and Change in Net Revenues Position Rental Income and Total Charges for Governmental Functions/Programs Expenses Services Activities Governmental activities: Community development $ 115,508 $ 116,739 $ 1,231 Interest on long-term debt 32,943 - (32,943) Total governmental activities $ 148,451 $ 116,739 (31,712) General revenues: Property taxes 469,285 Interest earnings 8,271 Miscellaneous 309,801 Total revenues 787,357 Change in net position 755,645 Net position-beginning 1,821,862 Net position-ending $ 2,577,507 The accompanying notes are an integral part of the basic financial statements. 11 Tigard City Center Development Agency Balance Sheet- Governmental Funds and Reconciliation to the Statement of Net Position June 30,2018 Total Capital Debt Governmental Projects Service Funds ASSETS: Property taxes receivable $ - $ 19,923 $ 19,923 Accounts receivable 29,636 - 29,636 Interest receivable - 1,256 1,256 Restricted cash and cash equivalents 12,857 435,735 448,592 Total assets $ 42,493 $ 456,914 $ 499,407 LIABILITIES: Accounts payable and accrued liabilities $ 9,538 $ - $ 9,538 Total liabilities 9,538 - 9,538 DEFERRED INFLOWS OF RESOURCES: Unavailable revenues-property taxes - 18,091 18,091 FUND BALANCES: Restricted for debt service - 438,823 438,823 Unassigned 32,955 - 32,955 Total fund balances 32,955 438,823 471,778 Total liabilities,deferred inflows of resources and fund balances $ 42,493 $ 456,914 Capital assets used in governmental activities are not financial resources and are not reported in the funds. 3,755,070 Long-term assets are not available to pay for current period expenditures and, 18,091 Long-term liabilities-not reported in the funds: Loan from City of Tigard,not due and payable in the current period (757,432) Loan from financial institution,not due and payable in the current period (910,000) Net Position of Governmental Activities $ 2,577,507 The accompanying notes are an integral part of the basic financial statements. 12 Tigard City Center Development Agency Statement of Revenues and Expenditures-Governmental Funds and Reconciliation to the Statement of Activities Year Ended June 30,2018 Total Capital Debt Governmental Projects Service Funds REVENUES: Taxes $ - $ 469,153 $ 469,153 Rental revenues 116,739 - 116,739 Interest earnings - 8,271 8,271 Intergovernmental revenues 309,733 - 309,733 Miscellaneous revenues 68 - 68 Total revenues 426,540 477,424 903,964 EXPENDITURES: Community Development 44,043 - 44,043 Capital projects 381,678 - 381,678 Debt service Principal - 130,000 130,000 Interest - 32,943 32,943 Total expenditures 425,721 162,943 588,664 Change in fund balance 819 314,481 315,300 Fund balance-beginning 32,136 124,342 156,478 Fund balance-ending $ 32,955 $ 438,823 $ 471,778 Net change in fund balances -total governmental funds $ 315,300 Governmental funds report capital outlays as expenditures while govermental activities report depreciation expense to allocate thoses expenditures over the life of the assets. Expenditures for capitalized assets 351,947 Depreciation reported in the government-wide statements (41,734) Property taxes that do not provide current financial resources 132 Principal payments expensed on the fund financial statements 130,000 Change in Net Position of Governmental Activities $ 755,645 The accompanying notes are an integral part of the basic financial statements. 13 Notes to Basic Financial Statements Town Center Development Agency Notes to the Basic Financial Statements 1. Summary of Significant Accounting Policies: The financial statements of the Town Center Development Agency (agency), previously Tigard City Center Development 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 Town 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 Town 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 boundaries include primarily the city's central business district, general commercial district and professional commercial district. 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,which can be viewed on the city's website at http://www.tigard-or.gov. 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 Position 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, deferred outflows of resources, liabilities,deferred inflows of resources,fund balance,revenues and expenditures. 14 Town Center Development Agency Notes to the Basic Financial Statements GASB Statement No. 34 sets forth criteria (percentage of the assets,deferred outflows of resources,liabilities, deferred inflows of resources,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 Town 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 within 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. The agency considers property taxes subject to accrual. Expenditures generally are recorded when a liability is incurred,as under accrual accounting. However,payment on long-term borrowing 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 city maintains a common cash and cash equivalents pool for all city funds,including funds of the agency. Interest is earned and allocated monthly on pooled cash and cash equivalents based on each fund's cash balances as a proportion of the city's total pooled cash and equivalents. The agency considers cash and equivalents to include the pooled cash, since the pool has the general characteristics of a demand deposit account,in that any participating fund may deposit additional cash at any time and also may withdraw cash at any time without prior notice or penalty. The agency reports certain cash and equivalents as restricted because their use is limited by parties external to the agency. Restrictions may be imposed by creditors,other governments,laws and/or enabling legislation. 15 Town Center Development Agency Notes to the Basic Financial Statements 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. The majority of the agency's receivables are property taxes,which are deemed to be substantially collectible. 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. Upon disposal of an asset, cost and accumulated depreciation (if applicable) is removed from the accounts and,if appropriate,a gain or loss on the disposal is recognized. 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. Donated capital assets are recorded at their estimated acquisition value at the time of donation. Other costs for repairs and maintenance are expensed as incurred. Depreciation on exhaustible assets is calculated 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 Deferred Inflows of Resources In addition to liabilities,the governmental fund balance sheet reports a separate section for deferred inflows of resources. Deferred inflows of resources represent unavailable revenue that will be recognized in a future period. The agency reports delinquent property tax revenue in this section under the modified accrual basis of accounting. These revenues are deferred and recognized as an inflow of resources in the period that the revenues become available. Net Position and Fund Balance Net position is reported on the Statement of Net Position. Within net position,the net investment in capital assets represents total capital assets less accumulated depreciation,less any debt related to the acquisition of the assets. Of the total net position, the majority is net investment in capital assets and the remaining amount is restricted for debt service. 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. 16 Town Center Development Agency Notes to the Basic Financial Statements 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. 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 executive director so that a budget may be prepared. In June,the proposed budget is presented to the agency's board of directors for approval. The board 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 Position and Balance Sheet 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 based on the cash and investment balance of the agency to the total investments in the pool. At June 30, 2018 the agency's share of the city's cash and investment pool,including restricted and unrestricted, totaled $448,592 all of which is restricted by the requirements of the agency's property tax levy. It is not practical to determine the investment risk, collateral risk or insurance coverage for the agency's share of its pooled investments. Investments for the city as well as its component unit are reported at fair value. 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 or found online at: http://www.tigard-or.gov/city hall/finance and information services.php 4. 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. The agency's receivables, including property taxes and assessments are deemed to be substantially collectible. Tax and assessments receivable can be recovered through foreclosure on the subject property. Accounts payable to vendors and contractors include general accounts payable not included in short-term or long-term liabilities. 17 Town Center Development Agency Notes to the Basic Financial Statements 5. Capital Assets: Capital assets include a property purchase for redevelopment projects on Main Street,the completion of two projects for the Strolling Street landscaping program,Main Street gateway improvements and public artwork. Balance Balance June 30, 2017 Additions Deletions Transfers June 30,2018 Land $ 985,504 $ - $ - $ - $ 985,504 Construction in Progress 878,318 351,947 - - 1,230,265 Infrastructure 1,669,087 - - - 1,669,087 Total cost 3,532,909 351,947 - - 3,884,856 Depreciation Infrastructure (88,052) (41,734) - - (129,786) Capital assets,net $ 3,444,857 $ 310,213 $ - $ - $ 3,755,070 6. Leased Property In connection with acquiring property and a building in the downtown area, the agency assumed a lease agreement as the lessor that extends through July 31, 2021. The lease has the option of one additional extension of three years. The property and building are recorded at$1,360,929 less the related accumulated depreciation of$47,405 for a net book value of$1,313,524. Minimum future rental income under the lease agreement is as follows: Year ending June 30 2019 86,400 2020 95,040 2021 95,040 $ 276,480 7. Long-term Borrowing: The agency and the city entered into an intergovernmental agreement (IGA) that states the city will loan the agency resources as needed to cover project costs related to the Town Center Urban Renewal Plan. The terms of the IGA state that the agency agrees to repay the principal and accrued interest on all loan amounts solely from tax increment revenues. The interest rate calculated for the loans is based on the same average rate as that earned on other funds invested by the city at the time of the loan,which currently ranges from 0.50%to 0.54%. Interest-only payments are scheduled to be paid to the city prior to July 1,each fiscal year. During the fiscal year ending June 30, 2025 the agency will begin making principal payments to the city on outstanding loans. Payments are to be made as tax increment revenue or other funding sources are available. In no case shall the repayment timeline exceed the life of the agency. Under the terms of the IGA, the city may forgive or reduce the interest and/or principal due from the agency. The agency may also repay the debt early. In fiscal year 2018 the agency elected to repay none of the outstanding principal on the loans. In fiscal year 2018 the agency did not enter into any new loans from the city. 18 Town Center Development Agency Notes to the Basic Financial Statements In fiscal year 2015 the city received a$1,300,000 loan from a financial institution borrowed at 3.00%to finance a property purchase within the TCDA. At the time of the bank loan,the city and the agency entered into an Intergovernmental Agreement(IGA)for TCDA to be obligated for the payments on the loan. This agreement states the agency will make the payments on the bank loan to the financial institution from the tax increment revenues. The IGA constitutes indebtedness of the agency in the amount of the financing or$1,300,000. As of June 30,2018,the bank loan principal outstanding was $910,000. Future principal and interest payments on the bank loan and the city loans are as follows: Borrowing Transactions Interest Outstanding Outstanding Due in Outstanding Loans June 30,2017 Additions Paid June 30,2018 Paid one year Loans from City of Tigard for urban renewal projects: Loan#5 June 30,2013 $ 102,320 $ - $ - $ 102,320 $ 512 $ - Loan#5 June 30,2013 40,112 - - 40,112 201 - Loan#6 June 30,2014 361,000 - - 361,000 1,949 - Loan#7 June 30,2015 254,000 - - 254,000 1,270 - Bank loan payable 1,040,000 - (130,000) 910,000 29,012 130,000 Total $ 1,797,432 $ - $ (130,000) $ 1,667,432 $ 32,943 $ 130,000 Future requirements related to long-term borrowing are as follows: Fiscal Year Ending Loans from the City Bank Loan Totals June 30 Principal Interest Principal Interest Principal Interest 2019 - 4,443 130,000 25,118 130,000 29,561 2020 - 4,443 780,000 11,681 780,000 16,124 2021 - 4,443 - - - 4,443 2022 - 4,443 - - - 4,443 2023 - 4,443 - - - 4,443 2024-2028 212,180 20,800 - - 212,180 20,800 2029-2033 379,389 11,260 - - 379,389 11,260 2034-2037 165,863 1,500 - - 165,863 1,500 $ 757,432 $ 55,775 $ 910,000 $ 36,799 $ 1,667,432 $ 92,572 8. 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 30,2018. 19 Required Supplementary Information 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 30,2018 Variance with Budgeted Amounts Actual Final Budget Original Final Amounts Over(Under) REVENUES: Intergovernmental revenues $ 300,000 $ 340,000 $ 309,733 $ (30,267) Rental revenues 78,000 78,000 116,739 38,739 Miscellaneous revenues - - 68 68 Total revenues 378,000 418,000 426,540 8,540 EXPENDITURES: Capital projects* 715,000 805,000 425,721 379,279 Change in fund balance before other financing sources (uses) (337,000) (387,000) 819 387,819 OTHER FINANCING SOURCES: Transfers in 337,000 355,000 - (355,000) Total other financing sources 337,000 355,000 - (355,000) Change in fund balance - (32,000) 819 32,819 Fund balance-Beginning of the year - 32,000 32,136 136 Fund balance-End of the year $ - $ - $ 32,955 $ 32,955 * For budgetary purposes expenditures are appropriated as capital projects,however on the GAAP statements non-capital transactions are recorded as program expenditures. 20 No content appears on this page by design. Other Supplementary Information 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 30,2018 Variance with Budgeted Amounts Actual Final Budget Original Final Amounts Over(Under) REVENUES: Property taxes $ 536,723 $ 536,723 $ 469,153 $ (67,570) Interest earnings 1,500 1,500 8,271 6,771 Total revenues 538,223 538,223 477,424 (60,799) EXPENDITURES: Debt service:* Principal 130,000 130,000 130,000 - Interest 32,500 32,500 32,943 443 Total expenditures 162,500 162,500 162,943 443 Change in fund balance before other financing sources (uses) 375,723 375,723 314,481 (61,242) OTHER FINANCING USES Reserve for future expenditure (143,213) (143,213) - 143,213 Transfers out (337,000) (355,000) - 355,000 Total other financing sources (uses) (480,213) (498,213) - 498,213 Change in fund balance (104,490) (122,490) 314,481 436,971 Fund balance-Beginning of the year 104,490 122,490 124,342 1,852 Fund balance-End of the year $ - $ - $ 438,823 $ 438,823 * Budget appropriation for the Urban Renewal Agency is made at the debt service program level. 21 No content appears on this page by design. INDEPENDENT AUDITOR'S REPORT REQUIRED BY OREGON STATE REGULATIONS MOSSADAMS Report of Independent Auditors on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Oregon Minimum Audit Standards Board Members Town Center Development Agency(A component unit of the City of Tigard, Oregon) Tigard, Oregon We have audited the basic financial statements of the Town Center Development Agency, a component unit of the City of Tigard, Oregon (the Agency) as of and for the year ended June 30, 2018 and have issued our report thereon dated December 13, 2018. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. Compliance As part of obtaining reasonable assurance about whether the Agency's basic financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, grants, including provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules OAR 162-010-0000 to 162-010-0330, as set forth below, noncompliance with which could have a direct and material effect on the determination of financial statement amounts: Instances of Non- Compliance OAR Section Identified? 162-010-0000 Preface None Noted 162-010-0010 Definitions None Noted 162-010-0020 Introduction None Noted 162-010-0030 General Requirements None Noted 162-010-0050 Financial Statements None Noted 162-010-0115 Required Supplementary Information(RSI) None Noted 162-010-0120 Other Supplementary Information None Noted 162-010-0130 Schedule of Revenues,Expenditures/Expenses,and Changes in Fund Balances,/Net Assets,Budget None Noted and Actual(Each Fund) 162-010-0150 Schedule of Property Tax Transactions or Acreage Assessments None Noted 162-010-0160 Schedule of Bonded or Long-Term Debt Transactions None Noted 162-010-0170 Schedule of Future Requirements for Retirement of Bonded or Long-Term Debt None Noted 162-010-0190 Other Financial or Statistical Information None Noted 162-010-0200 Required Disclosures and Independent Auditors Comments None Noted 162-010-0230 Accounting Records and Internal Control None Noted 162-010-0240 Public Fund Deposits None Noted 162-010-0250 Indebtedness None Noted 162-010-0260 Budget Yes 162-010-0270 Insurance and Fidelity Bonds None Noted 162-010-0280 Programs Funded from Outside Sources None Noted 162-010-0300 Investments None Noted 162-010-0310 Public Contracts and Purchasing None Noted 162-010-0320 Other Comments and Disclosures None Noted 22 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 test disclosed no instances of noncompliance that are required to be reported under Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State, except those noted below. • The Agency failed to post the notice of its Budget Committee meeting on its website for at least 10 days prior to the meeting, which is required per ORS 294.426 • The Agency had over-expenditures of$443 in the Debt Service Fund for the year ended June 30, 2018. • The Agency had a deficit fund balance of$724,477 in the Capital Projects Fund as of June 30, 2018. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency's internal control over financial reporting (internal control)to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies or material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and do not provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State, in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. C For Moss Adams LLP Portland, Oregon December 13, 2018 23