December 2, 2003

SUBJECT: Fiscal Year 2002/2003 Budgetary Year-End Financial Report and Basic Financial Statements of the Redevelopment Agency of the City of Sunnyvale 

REPORT IN BRIEF

The Redevelopment Agency of the City of Sunnyvale (Agency) was established by provisions of the community redevelopment laws of the State of California by a resolution of the City Council on November 19, 1957.  The Agency is a component unit of the City of Sunnyvale and the City Council acts as the Agency’s Board.

This report is intended to present the Budgetary Year-end Financial Report and the audited Basic Financial Statements of the Agency for the fiscal year ended June 30, 2003.

The Budgetary Year-end Financial Report summarizes the financial activities of the Agency for the fiscal year ended June 30, 2003. The Agency’s activities consist of accounting for repayments of long-term debt, capital projects, low-and-moderate-income housing, and general administrative functions.  The Agency is financially dependent on the City for its operations. The City makes advances to the Agency for new projects and current cash flow requirements for operating activities. 

The Basic Financial Statements of the Agency were audited by our independent auditors, Caporicci and Larson, who have issued an unqualified opinion on the report.  

BACKGROUND

Each year as part of the year-end closing process, staff presents the audited Basic Financial Statements of the Redevelopment Agency and the year-end financial condition and results of operations on a budgetary basis for the preceding fiscal year using audited financial results.

EXISTING POLICY

Action Statement 7.1D.1g of the Fiscal Sun-Element of the General Plan states that staff shall “prepare and provide the City Council with periodic summary financial reports by fund, comparing actual revenues and expenditures to budgeted amounts.”  This report is in accordance with this action statement.

In addition, the City Charter Section 1318 requires that “At the end of each fiscal year, a final audit and report shall be submitted by [a Certified Public Accountant] to the City Council.”  The Agency’s Basic Financial Statements are in accordance with this section. 

DISCUSSION

BUDGETARY YEAR-END FINANCIAL REPORT

Staff has reviewed the Agency’s financial results and hereby provides an analysis of the changes between last May’s projected revenues and expenditures and the actual year-end results. 

Revenues

The Agency’s revenues for the fiscal year ended June 30, 2003 were as follows: 

Description		May Estimate		Actual Revenues		Variance Favorable (Unfavorable)		Percent Variance
Property Taxes		$  2,151,565		$       2,684,509		$     532,944		24.77 %
Rents & Concessions		1,215,678		1,215,678		-		0.00%
Interest Income		118,046		85,684		(32,362)		(27.41)%
Total Revenues		$  3,485,289		$       3,985,871		$     500,582		14.36 %

The Agency’s property taxes consist of tax increment revenues generated from the project area (the downtown area).  Due to the passage of Proposition 13, the Agency’s tax increment revenues were significantly reduced.  In addition, since that time, the State has enacted several laws that placed further restrictions on redevelopment agencies.   

Tax increment revenues were higher this fiscal year than what was estimated in May and they were higher than amounts collected last fiscal year.  Currently, the owners of the Town Center Mall are in a dispute with the County of Santa Clara over alleged over collection of property tax revenues.  Because all taxes from the Mall come to the Redevelopment Agency, we have a potential liability for repayment of the over collection.  Last year we made a correction and recorded a liability as soon as we became aware of the situation.  We will be making a similar correction this current fiscal year as soon as we know the amount of the over collection.  Therefore, the current level of property tax revenue may be too high.

Rents and concessions are amounts paid to the Agency by the City pursuant to a lease agreement for use of a two-level parking structure at the Town Center Mall.

Interest income is generated from monies in trust with fiscal agents, which are reserved for debt service payments.  This revenue source was lower due to the lower interest rates and the general condition of the stock market.

Expenditures

The Agency’s expenditures for the fiscal year ended June 30, 2003 were as follows:

Description		Amended Budget		Actual Expenditures		Variance Favorable (Unfavorable)		Percent Variance
Debt Service		$         1,900,611		$       1,926,706		$      (26,095)		(1.37)%
Operations		735,117		734,427		690		0.09 %
Projects		2,226,549		291,224		1,935,325		86.92 %
Total Expenditures		4,862,277		2,952,357		1,909,920		39.28 %
Transfers Out
To City General Fund for Loan Repayment		1,115,683		1,272,930		(157,247)		(14.09)%
Total Transfers Out		1,115,683		1,272,930		(157,247)		(14.09)%
Expenditures Grand Total		$         5,977,960		$       4,225,287		$   1,752,673		29.32 %
Project Carryovers		-		1,935,325		1,935,325		0.00%
Total		$         5,977,960		$       6,160,612		$    (182,652)		(3.06)%

The Agency’s activities consist of repayment of long-term debt, capital projects, general redevelopment operations, and repayment of advances made to the Agency by the City’s General Fund.  

The Agency’s bonded debt consists of two debt issues: the 1992 Central Core Redevelopment Project Tax Allocation Bonds and the 1998 Parking Facility Certificates of Participation.  At June 30, 2003 the 1992 Tax Allocation Bonds had a balance of $7,440,000 with annual debt service payments at approximately $665,000 per year.  The 1998 Certificates of Participation had a balance of $15,450,000 with annual debt service payments at approximately $1.2 million per year.

Projects appropriated for the Agency are long-term in nature and require several years for completion.  At the end of fiscal year 2002/2003, the Agency’s projects that were not completed were as follows: the Town Center Parking Structure Maintenance, which had unexpended appropriations of $419,934; the Redevelopment Plan Project Area Economic Analysis, which had unexpended appropriations of $15,562, and the Downtown Public Improvements, which had unexpended appropriations of $1,499,829.  As a result, a total of $1,935,325 was carried over to the next fiscal year.

The Agency’s operations are accounted for in the City’s Economic Prosperity program.  Expenditures for this program were within budgeted amounts.

The Agency is also indebted to the City for advances made for improvements and operations under the terms of the first repayment agreement signed in 1977.  At June 30, 2003, the Agency’s debt to the City was $45,906,759.  Payments are made to the City as tax increment revenues become available after the payments of bonded indebtedness have been satisfied.

Fiscal Impact

The fiscal impact of the Agency’s results of operations is discussed in the body of the report. 

PUBLIC CONTACT

Public contact was made through posting of the Agency Board’s agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page and the availability of the report in the Library and City Clerk’s office. 

ATTACHMENTS

RECOMMENDATION

Staff recommends that the Agency Board receive and file the Basic Financial Statements of the Redevelopment Agency of the City of Sunnyvale.

Prepared by:

Nasi Raissian
Finance Manager, Accounting

Reviewed by:

Mary Bradley
Director, Department of Finance

Approved by:

Robert S. LaSala
City Manager