Antioch Area Public Facilities Financing Agency

Transcription

1 Antioch Area Public Facilities Financing Agency Antioch, California Basic Financial Statements and Independent Auditors Reports

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3 Table of Contents Independent Auditors Report... 1 Management s Discussion and Analysis (Required Supplementary Information)... 5 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position Statement of Activities and Changes in Net Position Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statements of Activities and Changes in Net Position Notes to Basic Financial Statements Supplemental Information: Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual: Redemption Fund Reserve Fund Construction Fund Administration Fund Independent Auditors 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 Page

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5 INDEPENDENT AUDITORS REPORT To the Board of Directors of the Antioch Area Public Facilities Financing Agency Antioch, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund information of Antioch Area Public Facilities Financing Agency (Agency), California as of and for the year ended June 30, 2014, 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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.

6 To the Board of Directors of the Antioch Area Public Facilities Financing Agency Page 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 information of the Agency, as of June 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof 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 the management s discussion and analysis on pages 5-10 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 required supplementary information 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 the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 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 budgetary comparison information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The budgetary comparison information is the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such 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 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 information is fairly stated in all material respects in relation to the basic financial statements as a whole. 2

7 To the Board of Directors of the Antioch Area Public Facilities Financing Agency Page 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2014, on our consideration of the Agency s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Agency s internal control over financial reporting and compliance. Badawi and Associates Certified Public Accountants Oakland, California December 8,

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9 Management s Discussion and Analysis As management of the Antioch Area Public Facilities Financing Agency (Agency) of the Antioch Unified School District (School District) and the City of Antioch (City), we offer readers of the Agency s basic financial statements this narrative overview and analysis of the financial activities of the Agency for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with the Agency s financial statements, which begin on page 13. Financial Highlights The assets of the Agency were less than its liabilities at the close of the most recent fiscal year by $14,301,780 (negative net position). As of the close of the current fiscal year, the Agency s governmental funds reported ending fund balances of $24,045,778. The Agency had general revenues of $16,412,515 and program expenses of $2,218,077 for the year ended June 30, The Agency s reimbursements to the City for public facilities for the year were $5,138. Overview of the Basic Financial Statements The discussion and analysis is intended to serve as an introduction to the Agency s basic financial statements. The Agency s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the Agency s finances, in a manner 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 and changes in net position presents information showing 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 giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements report on the function of the Agency that is principally supported by special tax revenues. The Agency s function is to finance the construction of five elementary schools, two middle schools, one high school and one City park. These facilities are needed to maintain the quality of public services as Antioch expands. The government-wide financial statements can be found on pages 14 and 15 of this report. 5

10 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 objectives. The Agency, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The debt service and capital projects funds are governmental funds used to account for essentially the same function reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. The Agency maintains major governmental funds for: Redemption Fund, Reserve Fund, Community Facilities District Fund, Construction Fund and Administration Fund in the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances. Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented in the governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financial decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between the governmental funds and governmental activities. The governmental fund financial statements can be found on pages 18 through 22 of this report. NOTES TO THE BASIC FINANCIAL STATEMENTS The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 23 through 30 of this report. Other Information The individual fund schedules of revenues, expenditures, and changes in fund balance-budget and actualare presented immediately following the notes to the basic financial statements and can be found on pages 31 through 35 of this report. 6

11 Management s Discussion and Analysis Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the Agency, assets were less than liabilities by $14,301,780 at the close of fiscal year Statement of Net Position June 30, 2014 and Assets: Current and other assets $ 24,070,908 $ 39,485,621 Deferred Outflows of Resources: Deferred outflows 175, ,202 Liabilities: Current and other liabilities 685,278 1,217,763 Long-term liabilities 37,862,548 65,455,787 Total liabilities 38,547,826 66,673,550 Net position: Restricted 23,375,662 36,706,330 Unrestricted (37,677,442) (63,655,057) Total net position $ (14,301,780) $ (26,948,727) Analysis of Net Position The largest portion of the Agency s net position reflects its funds available for project construction. In the past, the Agency sold construction bonds to help finance the construction of the facilities mentioned earlier. The special taxes collected are used to make bond payments or pay directly for the facilities. These taxes are not used for operating expenses or salaries of either the School District or the City, except for the direct costs of administering the Community Facilities District. The Agency has an unrestricted deficit of $37,677,442 resulting from the recording of long-term debt on the statement of net position. Current and other assets decreased approximately $15.4 million from the prior year primarily due to scheduled debt payments and bond calls which reduced restricted cash and investments. Total liabilities decreased by approximately $28.1 million also due to scheduled debt service payments and bond calls. 7

12 Management s Discussion and Analysis Statement of Activities and Changes in Net Position For the Years Ended June 30, 2014 and Revenues: General revenues: Special tax $ 15,704,362 $ 15,566,664 Investment earnings 708, ,372 Total revenues 16,412,515 15,845,036 Expenses: General government 149, ,085 Public facilities 5, ,715 Interest 2,063,408 3,072,789 Total expenses 2,218,077 3,817,589 Change in net position 14,194,438 12,027,447 Net position, beginning of year as restated (28,496,218) (38,976,174) Net position, end of year $ (14,301,780) $ (26,948,727) Analysis of Changes in Net Position Agency revenues increased $567,479 over the prior fiscal year. This can be attributed to the increase in special taxes collected and increase in investment earnings. The Agency s total expenditures decreased $1,599,512 over the prior fiscal year. This is primarily due to the net of decrease in facility construction expenditures and a reduction in interest payments. Beginning net position has been restated from $26,948,727 (deficit) to $28,496,218 (deficit) due to the implementation of GASB 65, Items Previously Reported as Assets and Liabilities. As a result, net position was reduced by $1,547,491 as a result of removing deferred charges for bond issuance costs. Fund Financial Analysis As noted earlier, the Agency uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. The Agency s governmental funds are discussed below: 8

13 Management s Discussion and Analysis Governmental Funds The focus of the Agency s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Agency s financing requirements. In particular, fund balance may serve as a useful measure of a government s net resources available for spending for program purposes at the end of the fiscal year. As of the end of the current fiscal year, the Agency s governmental funds reported ending fund balances of $24,045,778. The fund balance primarily represents unspent debt proceeds and special tax revenues. The fund balance is restricted for facilities construction and debt service. Statement of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2014 and 2013 Total Total Dollar Percentage Change Change Revenues: Special tax $ 15,704,362 $ 15,566,664 $ 137, % Investment income 708, , , % Total revenues 16,412,515 15,845, , % Expenditures: General government: Administration 149, ,085 18, % Capital outlay: City projects 5,138 43,921 (38,783) % School district projects - 569,794 (569,794) % Debt service: Principal retirements 27,620,000 8,125,000 19,495, % Interest and fiscal charges 2,437,833 2,862,809 (424,976) % Total expenditures 30,212,502 11,732,609 18,479, % Excess (deficiency) of revenues over (under) expenditures (13,799,987) 4,112,427 (9,687,560) % Other Financing Sources (Uses): Transfers in 5,095, ,000 4,960, % Transfers out (5,095,679) (135,000) (4,960,679) % Total other financing sources (uses) % Change in fund balances $ (13,799,987) $ 4,112,427 $ (9,687,560) % 9

14 Management s Discussion and Analysis The Agency s total revenues increased $567,479 over the prior fiscal year. The primary reason for this is due to an increase in special taxes collected and increased investment income. The Agency s total expenditures increased $18,479,893 over the prior fiscal year. This is primarily due to increased debt service payments for bond calls which took place during the fiscal year. Capital Asset and Debt Administration CAPITAL ASSETS The Agency accounts for the costs of facilities as capital expenditures but does not record these capital assets, as they become capital assets of the School District or the City. LONG-TERM DEBT The Agency has $37,905,000 in Special Tax Bonds outstanding as of June 30, Total long term liabilities decreased by $27,620,000 due to debt service payments. For additional information, see Note 5 in the notes to the basic financial statements. Economic Factors and Next Year s Budgets and Rates The following factors were considered in preparing the Agency s budget for the fiscal year: Special taxes are collected by the County. The amount of the special taxes that may be levied in any year is limited to the maximum rates approved by the qualified electors within the District. The District has been and is continuing to perform bond calls with excess special tax revenues collected in order to fully call all bonds outstanding by August Construction expenditures for the School District are complete and all of the schools authorized under by the Agency have been opened and are operating. Construction expenditures for the City are expected to be up to $2.038 million in the coming years. This is the remaining amount of funds available to complete Prewett Community Park. Contacting the Agency s Financial Management This financial report is designed to provide a general overview of the Agency s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Treasurer/Comptroller of the Antioch Area Public Facilities Financing Agency, P.O. Box 5007, Antioch, California

15 BASIC FINANCIAL STATEMENTS 11

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17 GOVERNMENT-WIDE FINANCIAL STATEMENTS 13

18 Statement of Net Position June 30, 2014 ASSETS Governmental Activities Restricted investments with fiscal agent (Note 2) $ 23,308,243 Interest receivable 289 Taxes receivable 762,376 Total assets 24,070,908 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on refunding 175,138 LIABILITIES Accounts payable 25,130 Interest payable 660,148 Long-term debt (Note 5): Due within one year 15,155,000 Due in more than one year 22,707,548 Total liabilities 38,547,826 NET POSITION Restricted for: Facilities acquisition and construction 2,039,045 Debt service 21,336,617 Unrestricted deficit (37,677,442) Total net position (deficit) $ (14,301,780) See accompanying Notes to Basic Financial Statements. 14

19 Statement of Activities and Changes in Net Position Governmental Activities Expenses: General government $ 149,531 Public Facilities 5,138 Interest and fiscal charges 2,063,408 Total Expenses 2,218,077 General revenues: Taxes: Special tax 15,704,362 Total taxes 15,704,362 Investment earnings 708,153 Total general revenues 16,412,515 Change in net position 14,194,438 Net position - beginning of year, as restated (28,496,218) Net position - end of year $ (14,301,780) See accompanying Notes to Basic Financial Statements. 15

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21 FUND FINANCIAL STATEMENTS 17

22 Balance Sheet Governmental Funds June 30, 2014 Debt Service Capital Projects Fund Redemption Reserve Construction Administration Fund Fund Fund Fund Total ASSETS Restricted investments with fiscal agent $ 15,616,697 $ 5,617,944 $ 2,039,185 $ 34,417 $ 23,308,243 Taxes receivable 762, ,376 Interest receivable Total assets $ 16,379,202 $ 5,618,085 $ 2,039,204 $ 34,417 $ 24,070,908 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 522 $ - $ 159 $ 24,449 $ 25,130 Total liabilities ,449 25,130 Fund balances: Restricted for: Facilities acquisition and construction - - 2,039,045-2,039,045 Debt service 16,378,680 5,618, ,996,765 Administration ,968 9,968 Total fund balances 16,378,680 5,618,085 2,039,045 9,968 24,045,778 Total liabilities and fund balances $ 16,379,202 $ 5,618,085 $ 2,039,204 $ 34,417 $ 24,070,908 See accompanying Notes to Basic Financial Statements. 18

23 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position June 30, 2014 Total Fund Balances - Total Governmental Funds $ 24,045,778 Amounts reported for governmental activities in the Statement of Net Position were reported differently because: Deferred loss on refunding does not require the use of current financial resources and therefore is not reported as an expenditure in governmental funds. 175,138 Interest payable on long-term debt does not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet. (660,148) Long-term liabilities are not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. The long-term liabilities were adjusted as follows: Long-term debt - current portion (15,155,000) Long-term debt - non-current portion (22,707,548) Total long-term liabilities (37,862,548) Net Position of Governmental Activities $ (14,301,780) - See accompanying Notes to Basic Financial Statements. 19

24 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Debt Service Capital Projects Fund Redemption Reserve Construction Administration Fund Fund Fund Fund Total REVENUES: Special tax $ 15,704,362 $ - $ - $ - $ 15,704,362 Investment income 672,894 34, ,153 Total revenues 16,377,256 34, ,412,515 EXPENDITURES: General government: Administration 10, , ,531 Public facilities: City projects - - 5,138-5,138 Debt service: Principal retirements 27,620, ,620,000 Interest and fiscal charges 2,437, ,437,833 Total expenditures 30,068,286-5, ,078 30,212,502 REVENUES OVER (UNDER) EXPENDITURES (13,691,030) 34,976 (4,864) (139,069) (13,799,987) OTHER FINANCING SOURCES (USES): Transfers in 4,960, ,000 5,095,679 Transfers out (135,000) (4,960,679) - - (5,095,679) Total other financing sources (uses) 4,825,679 (4,960,679) - 135,000 - Net change in fund balances (8,865,351) (4,925,703) (4,864) (4,069) (13,799,987) FUND BALANCES: Beginning of year 25,244,031 10,543,788 2,043,909 14,037 37,845,765 End of year $ 16,378,680 $ 5,618,085 $ 2,039,045 $ 9,968 $ 24,045,778 See accompanying Notes to Basic Financial Statements. 20

25 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position Net Change in Fund Balances - Total Governmental Funds $ (13,799,987) Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces longterm liabilities in the Government -Wide Statement of Net Position. 27,620,000 Bond discounts and premiums are expensed or recognized as revenue on the fund statements. However, in the government-wide statement of activities and changes in net position, the bond discounts and premiums are allocated over the life of the bonds. Current year amortization (26,761) Losses on refunding of bonds are expenditures on the fund statements. However, in the governmentwide statement of activities, the losses on refunding of bonds are allocated over the life of the bonds. Current year amortization (64,064) Accrued interest expense on long-term debt is reported in the government-wide wtatement of activities and changes in net position, but does not require the use of current financial resources. Therefore, accrued interest expense was not reported as expenditures in governmental funds. The following amount represents the increase in accrued interest from the prior year. 465,250 Change in Net Position of Governmental Activities $ 14,194,438 See accompanying Notes to Basic Financial Statements. 21

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27 Notes to the Basic Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. The Reporting Entity The Antioch Area Public Financing Agency (Agency) is a jointly governed organization between the City of Antioch, California (City) and the Antioch Unified School District (District). The financial statements are intended to present the financial position and results of operations of the Agency and not those transactions of the City or District. B. Basis of Accounting and Measurement Focus The accounts of the Agency are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues and expenditures. Agency resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. Government-Wide Financial Statements - The Agency Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of Governmental Activities for the Agency. The Agency has no Business Type Activities. The Government-Wide financial statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the Agency s assets and liabilities, including longterm liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities and Changes in Net Position presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as revenues for the Agency are operating grants and contributions and general revenues such as special tax assessments and investment earnings. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated. In the Statement of Activities and Changes in Net Position, interfund transfers have been eliminated. The Agency applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) to the governmental activities. Governmental Fund Financial Statements - Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the Government- Wide financial statements. The Agency has presented all funds as major funds. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to 23

28 Notes to the Basic Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the Agency, are special tax assessments and earnings on investments. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. C. Use of Restricted/Unrestricted Net Position When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the Agency s policy is to apply restricted net position first. D. Cash and Investments Restricted investments with fiscal agent are carried at fair value. The fair value of investments is determined annually and is based on current market prices. E. Long-Term Liabilities Government-Wide Financial Statements Long-term debt and other financial obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable premium or discount. Fund Financial Statements The Governmental Fund Financial Statements do not present long-term debt, which are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. Governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuance are reported as other financing sources while discounts on debt issuance reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. F. Special Tax Revenue Special tax revenue is recognized, subject to availability, in the fiscal year for which the special tax is levied. The special tax is levied against developed property after issuance of a building permit and is based upon the square footage of the unit. The County of Contra Costa bills and collects special taxes for the Agency under the County s Teeter Plan (with the exception of supplemental taxes which are billed directly to 24

29 Notes to the Basic Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued F. Special Revenue Tax, Continued developers by the Agency). The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Special taxes are levied on July 1. Special taxes are due in two installments, on November 1 and February 1. The special taxes become delinquent after December 10 and April 10, respectively. G. Deferred Outflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents consumption of net position that applies to a future period (s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Agency only has one item that qualifies for reporting in this category. It is the deferred charge on refunding debt reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and it reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. H. Net Position and Fund Equity Government-Wide Financial Statements In the Government-Wide Financial Statements, net position is classified in the following categories: Restricted Net Position This amount is restricted by external creditors, grantors, contributors, or laws or regulations of governments. Unrestricted Net Position This amount is all net position that does not meet the definition of net investment in capital assets or restricted net position as defined above. Fund Financial Statements Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund s cash and receivables, less its liabilities. In fiscal year 2014, the Agency continued to implement the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). GASB 54 establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds. Fund balances are classified into categories based upon the type of restrictions imposed on the use of funds. 25

30 Notes to the Basic Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued H. Net Position and Fund Equity, continued As of June 30, 2014 Agency components of fund balance are described below: Restricted portion of net resources that are limited in use by grantors, laws or enabling legislation. In the case of the Agency, funds are restricted to the use prescribed by the special tax enacted debt service, facility construction and administration. The Agency cannot modify or remove these restrictions. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, and then unassigned. I. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. J. New Pronouncements In fiscal year 2014, the Agency adopted the following Governmental Accounting Standards Board Statements: GASB Statement No. 65, Items Previously Reported as Assets and Liabilities This statement establishes financial and reporting accounting standards that reclassify, as deferred of resources and deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The Agency restated beginning net position as a part of implementation of this standard. GASB Statement No. 66, Technical Corrections 2012 an amendment of GASB no. 10 and No. 62 This statement was issued to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of GASB Statement No. 54 and No. 62. There was no effect on net position as a part of implementation of this standard GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees This statement establishes improved accounting and financial reporting by state and local governments that extend and receive nonexchange financial guarantees. There was no net effect on net position as part of implementation of this standard. GASB Statement No. 67, Financial Reporting for Pension Plans an amendment of GASB Statement No. 25 There was no effect on net position as part of implementation of this standard. 26

31 Notes to the Basic Financial Statements 2. RESTRICTED INVESTMENTS WITH FISCAL AGENT A. Investment with Fiscal Agent All of the Agency s investments at June 30, 2014 were held by trustees or fiscal agents. These funds have been invested only as permitted by specific state statutes governing their investment or applicable Agency ordinance, resolution or bond indenture. These investments have been classified as restricted on the statement of net assets/balance sheet because their use is limited by bond covenants. 3. SPECIAL TAX REVENUES A special tax is levied on developed property to the extent necessary to repay Agency indebtedness and to pay for all other authorized costs and expenditures of Community Facilities District (CFD) All developed property is subject to a maximum special tax for each fiscal year up to and including 30 years from the date of issuance of the final series of bonds of CFD All of the maximum tax rates increased by 2% annually through the fiscal year , after which they were no longer subject to increase. Except as provided in the bond resolution, the special tax is subject to the same penalties and the same procedures, sale and lien priority in the case of delinquency as is provided for ad valorem property taxes. Any delinquent special taxes levied by the Agency for supplemental tax levies will be collected by Contra Costa County when the parcels are included on the tax rolls. All tax receipts received by the Agency are forwarded to the fiscal agent for deposit into the trust account as required by the bond resolution. The special tax applicable to each parcel in CFD is levied and collected according to the tax liability determined by the Agency Board, through the application of the appropriated amount or rate for all parcels in CFD for which a building permit has been issued as of June 30 of the prior fiscal year. Different rates of special tax are designated for developed property, depending on whether the developed property is classified as Single Family-Detached or Attached Residential and depending on residence size in square feet. 4. INTERFUND TRANSFERS Transfers between individual funds during the fiscal year ended June 30, 2014 are presented below: Transfers Out Transfers In Administration Redemption Fund Fund Total Redemption Fund $ 135,000 $ - $ 135,000 Reserve Fund - 4,960,679 4,960,679 $ 135,000 $ 4,960,679 $ 5,095,679 Transfers from the Redemption Fund were to pay for administration costs of the district. 27

32 Notes to the Basic Financial Statements 5. LONG-TERM DEBT A. Special Tax Bonds The Agency is authorized to issue special tax bonds in the amount of $250,000,000 to finance the construction and acquisition of facilities specified in the Resolution of Formation. The bonds are special obligations of the Agency secured by an irrevocable first pledge of the special tax. B. Current Year Activity The following summarizes the special tax bond activity for the fiscal year ended June 30, Special Original Amounts Tax Bond Interest Maturity Issue Due Within Series Rate Date Amount June 30, 2013 Retirements June 30, 2014 One Year % 8/1/18 $ 18,545,000 $ 15,040,000 $ 15,040,000 $ - $ % 8/1/22 61,985,000 30,140,000 11,040,000 19,100,000 13,620, % 8/1/25 24,830,000 20,345,000 1,540,000 18,805,000 1,535,000 Total special tax bonds payable $ 175,655,000 65,525,000 27,620,000 37,905,000 15,155,000 Less unamortized original issue discounts (619,795) 164,407 (455,388) - Plus unamortized origninal issue premium 550,582 (137,646) 412,936 - Total bonds payable $ 65,455,787 $ 27,646,761 $ 37,862,548 $ 15,155, LONG-TERM DEBT, Continued C. Repayment Requirements Future debt service requirements for the special tax bonds, including sinking fund payments are as follows: Fiscal Year Ending June 30 Principal Interest Total 2015 $ 15,155,000 $ 1,275,605 $ 16,430, ,785, ,454 3,690, ,840, ,679 3,620, ,060, ,334 3,708, ,100, ,183 3,618, ,295,000 1,151,683 10,446, ,670,000 70,674 1,740,674 Total $ 37,905,000 $ 5,350,612 $ 43,255,612 Although the final maturity extends to 2026, the Agency has been performing bond calls in order to fully redeem all bonds in August

33 Notes to the Basic Financial Statements 6. CAPITAL OUTLAY The Agency is required by its bond resolution to expend the proceeds of the Special Tax Bonds on facilities, which become the property of the City and the District. The Agency is authorized to acquire or construct facilities costing up to $250,000,000. In fiscal year 2005/06, the Agency adopted a revised estimate for its portion of the cost of these facilities in the amount of $261,592,560 (including State reimbursement). The Agency accounts for the costs of these facilities as capital expenditures but does not record these capital assets, as they become capital assets of the District or the City. At June 30, 2014, the Agency had the following projects under construction: Actual Expended Remaining Budget Total Portion Portion by the Agency to Complete Estimated Funded by Funded by through Projects as of Project Cost(1) the State the Agency June 30, 2014(2) June 30, 2014 Antioch Unified School District Projects: Jack London Elementary School(2) $ 10,817,099 $ 3,788,420 $ 7,028,679 $ 7,028,679 $ - Deer Valley High School(2) 73,254,620 46,423,960 26,830,660 26,830,660 - Black Diamond Middle School(2) 20,469,162 7,906,310 12,562,852 12,562,852 - Dallas Ranch Middle School(2) 31,858,117 9,923,101 21,935,016 21,935,016 - Mno Grant Elementary School(2) 18,187,379 6,300,910 11,886,469 11,886,469 - Diablo Vista Elementary School(2) 16,060,656 5,182,532 10,878,124 10,878,124 - Lone Tree Elementary School(2) 17,248,795 5,192,256 12,056,539 12,056,539 - Carmen Dragon Elementary School 17,983,340 5,234,600 12,748,740 12,748,740 - Administrative Services Facility 1,000,000-1,000,000 1,000,000 - Support Services Facility 1,459,065-1,459,065 1,459,065 - Interim Housing Lease 2,372,000-2,372,000 2,372,000 - School Technology Project 882, , ,327 - Total School Projects 211,592,560 89,952, ,640, ,640,471 - City of Antioch Projects: Prewett Park 50,000,000-50,000,000 47,961,290 2,038,710 Total Project Costs $ 261,592,560 $ 89,952,089 $ 171,640,471 $ 169,601,761 $ 2,038,710 An inflationary factor based on one or more construction price indexes has been factored into those projects that are incomplete or not yet under construction. (1) Total estimated project costs for the Dallas Ranch Middle School, Lone Tree Elementary School, and Carmen Dragon Elementary School include a provision for inflation through the estimated date of completion. The provision for inflation was based upon construction price indexes and approximates four percent. The project costs include all assessments. (2) The column above titled Actual Expended by the Agency Through June 30, 2014 is net of the amounts reimbursed by the state. All State reimbursements are shown in the column labeled Portion Funded by the State. 29

34 Notes to the Basic Financial Statements 7. RELATED PARTY ADMINISTRATION EXPENDITURES The City and District provide administration services to the Agency. the Agency incurred charges of $41,200 and $38,000 for current year administration services provided by the City and the District, respectively. 8. RISK MANAGEMENT The Agency no longer carries any professional liability or general liability insurance for its board members. There is no legal actions pending nor have there ever been any legal actions against the Agency. Since the Agency is only a financing agency, it has no involvement in the operations of any of the financed projects. The board members from the District and the City are covered under those entity s insurance policies or programs. 9. RESTATEMENT OF BEGINNING NET POSITION The Agency restated beginning net position due to the implementation of GASB 65, Items Previously Reported as Assets and Liabilities. Net position was reduced by $1,547,491 as a result of removing deferred charges for bond issuance costs. Deferred Original Bond Charges Restated Net Position ($26,948,727) ($1,547,491) ($28,496,218) 30

35 SUPPLEMENTAL INFORMATION 31

36 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Redemption Fund REVENUES: Variance With Final Budget Original Final Positive Budget Budget Actual (Negative) Special tax $ 15,100 $ 15,704,361 $ 15,704,362 $ 1 Investment income 2, , , Total revenues 17,100 16,377,111 16,377, EXPENDITURES: General government Administration 10,500 10,453 10,453 - Debt service: Principal retirement 23,015,000 27,620,000 27,620,000 - Interest and fiscal charges 2,716,865 2,437,833 2,437,833 - Total expenditures 25,742,365 30,068,286 30,068,286 - REVENUES OVER (UNDER) EXPENDITURES (25,725,265) (13,691,175) (13,691,030) 145 OTHER FINANCING SOURCES (USES): Transfers in - 4,960,679 4,960,679 - Transfers out (135,000) (135,000) (135,000) - Total other financing sources (uses) (135,000) 4,825,679 4,825,679 - Net change in fund balance $ (25,860,265) $ (8,865,496) (8,865,351) $ 145 FUND BALANCE: Beginning of year 25,244,031 End of year $ 16,378,680 32

37 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Reserve Fund REVENUES: Variance With Final Budget Original Final Positive Budget Budget Actual (Negative) Investment income $ 155,000 $ 40,000 $ 34,976 $ (5,024) OTHER FINANCING (USES): Transfers out - (4,960,679) (4,960,679) - Total other financing (uses) - (4,960,679) (4,960,679) - REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES $ 155,000 $ (4,920,679) (4,925,703) $ (5,024) FUND BALANCE: Beginning of year 10,543,788 End of year $ 5,618,085 33

38 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Construction Fund REVENUES: Variance With Final Budget Original Final Positive Budget Budget Actual (Negative) Investment income $ 350 $ 300 $ 274 $ (26) Total revenues (26) EXPENDITURES: Public facilities: City projects 2,043,848 51,390 5,138 46,252 Total expenditures 2,043,848 51,390 5,138 46,252 REVENUES OVER (UNDER) EXPENDITURES (2,043,498) (51,090) (4,864) 46,278 Net change in fund balance $ (2,043,498) $ (51,090) (4,864) $ 46,278 FUND BALANCE: Beginning of year 2,043,909 End of year $ 2,039,045 34

39 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Administration Fund REVENUES: Variance With Final Budget Original Final Positive Budget Budget Actual (Negative) Investment income $ 10 $ 12 $ 9 $ (3) EXPENDITURES: General government: Administration 139, , , REVENUES OVER (UNDER) EXPENDITURES (139,190) (139,188) (139,069) 119 OTHER FINANCING SOURCES: Transfers in 135, , ,000 - Total other financing sources 135, , ,000 - Net change in fund balance $ (4,190) $ (4,188) (4,069) $ 119 FUND BALANCE: Beginning of year 14,037 End of year $ 9,968 35

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41 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors of the Antioch Area Public Facilities Financing Agency Antioch, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund information of Antioch Area Public Facilities Financing Agency (Agency), California as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise Agency s basic financial statements, and have issued our report thereon dated December 8, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, 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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency s internal control. 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 a 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 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 material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.