14-B
TO: Honorable Chairman and Directors of the Bellflower Financing Authority ATTENTION: Jeffrey L. Stewart, Executive Director
FROM: Tae Rhee, Director of Finance/Treasurer
SUBJECT: Consideration and possible action to receive and file Bellflower Financing Authority’s audited financial statements for the fiscal year ended June 30, 2021.
DATE: February 14, 2022
EXECUTIVE SUMMARY
The Bellflower Financing Authority (“BFA”) is a component unit of the City of Bellflower organized on June 26, 2006, pursuant to the California Joint Exercise of Powers Act to provide the financing of public capital improvements and other projects for the revitalization of the City. BFA functions as a separate entity and the Board of Directors are comprised solely of the Members of the City Council. The independent CPA firm, Moss, Levy & Hartzheim, LLP, audited BFA’s financial statements for fiscal year 2020-21, and there were no audit findings.
RECOMMENDATION TO BELLFLOWER FINANCING AUTHORITY
1) Receive and file Bellflower Financing Authority’s audited financial statements; or 2) Alternatively, discuss and take other action related to this item.
FISCAL IMPACT
None
KEY FINANCIAL SUMMARY
The following amounts have been rounded to the nearest 1,000. Total cash and investments $20,000
2021 COPs payable – transportation portion $8,685,000
(Maturity: October 1, 2032)
FY 2021-22 debt service (principal and interest)$923,000 Repayment sources: Propositions A/C funds and, if necessary, Measure M/R funds - 1 -
Staff Report – BFA audited financial statements for the FY ended June 30, 2021 February 14, 2022
KEY FINANCIAL SUMMARY – Continued
In January 2018, the City and BFA issued the 2018 Transportation Certificates of Participation (COPs) in the amount of $10,000,000 to provide funds for the construction of the four level Regional Transit Center and Parking Structure to add 278 parking spaces. The total project cost was $13.4 million including the site acquisition cost of $1.4 million.
In February 2021, the 2018 Transportation COPs were refinanced with 2021 COPs to realize interest cost savings of $274,000 in net present value. The 2021 COPs are secured by the Civic Center Property (City Hall).
2021 COPs payable – water system portion, at June 30, 2021 $6,075,000 (Maturity: October 1, 2038)
FY 2021-22 debt service (principal and interest) $476,000 Repayment source: Water system revenues
In July 2008, the City and BFA issued the 2008 Water System COPs in the amount of $8,230,000 (32-year debt) to provide funds to the City for the reimbursement of costs incurred in connection with the acquisition of MWS ($6,212,000) and to make certain improvements to the water system ($965,000).
In February 2021, the 2008 Water System COPs were refinanced with 2021 COPs to realize interest cost savings of $1.7 million in net present value. The 2021 COPs are secured by the Civic Center Property (City Hall).
Note payable to MTB Enterprises, LLC, at June 30, 2021 $820,000 (Maturity: January 15, 2036, approximate)
Related Capital Assets-Butterfly Garden, net of accumulated depreciation $994,000 FY 2021-22 debt service (principal and interest, approximate) $69,000 Repayment source: Lease revenue generated by Butterfly Garden property
In March 2015, BFA purchased a portion of the land to be developed as the Butterfly Garden in the amount of $995,000 (plus escrow closing costs), financed with a note payable to MTB Enterprises, LLC. In connection with the purchase, BFA acquired ground leases for a billboard and an oil booster pumping station. These lease revenues with annual CPI adjustments (and when necessary, the City’s general funds) are used to make the debt service payments on the note.
The other remaining portion of the Butterfly Garden was purchased by the City in the amount of $700,000 using $650,000 in State Urban Greening Grant and $50,000 in general funds.
ATTACHMENT
BFA audited financial statements for the fiscal year ended June 30, 2021………………...3
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BELLFLOWER FINANCING AUTHORITY
(COMPONENT UNIT OF THE CITY OF BELLFLOWER)
BASIC FINANCIAL STATEMENTS
WITH REPORT ON AUDIT
BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2021
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BELLFLOWER FINANCING AUTHORITY
TABLE OF CONTENTS
June 30, 2021
Independent Auditor’s Report ....................................................................................................... 1
Management’s Discussion and Analysis (Required Supplementary Information)......................... 4
Basic Financial Statements:
Government – wide Financial Statements:
Statement of Net Position ....................................................................................................... 9 Statement of Activities ........................................................................................................... 10
Fund Financial Statements:
Balance Sheet – Governmental Fund .................................................................................. 11 Reconciliation of the Governmental Fund Balance Sheet
to the Statement of Net Position ......................................................................................... 12 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund ........................................................................................... 13 Reconciliation of the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities ...................... 14
Notes to Basic Financial Statements ....................................................................................... 15
Required Supplementary Information:
Schedule of Revenues, Expenditures, and Changes in
Fund Balance – Budget and Actual – General Fund .......................................................... 31
Supplemental Information:
Transportation Bonds Project Supplemental Schedule ......................................................... 32
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .................................................................................................................... 33
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1 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALD A LEVY, CPA 9465 WILSHIRE BLVD., 3RD FLOOR 5800 HANNUM AVE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA 90212 CULVER CITY, CA 90230 HADLEY Y HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C. HOM, CPA www.mlhcpas.com FAX: 310.670.1689
ADAM V GUISE, CPA
TRAVIS J HOLE, CPA www.mlhcpas.com
INDEPENDENT AUDITOR’S REPORT
The Honorable Board of Directors of the
Bellflower Financing Authority
Bellflower, California
Report on the Financial Statement
We have audited the accompanying financial statements of the governmental activities and the major fund of the Bellflower Financing Authority (the Authority), a component unit of the City of Bellflower, California as of and for the fiscal year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Authority’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 auditors consider internal control relevant to the Authority’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 Authority’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
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2 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
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.
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 the major fund of the Authority as of June 30, 2021 and the respective changes in its financial position for the fiscal 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 and the schedule of revenues, expenditures, and changes in fund balance – budget and actual – general fund, identified as Required Supplementary Information (RSI) in the accompanying table of contents, 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 RSI 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 RSI 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 Authority’s basic financial statements. The Transportation Bonds Project Supplemental Schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The Transportation Bonds Project Supplemental Schedule is the responsibility of management and was derived from and relates 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 Transportation Bonds Project Supplemental Schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
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3 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2022 on our consideration of the Authority’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 the 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 Authority’s internal control over financial reporting and compliance.
Moss, Levy & Hartzheim, LLP
Culver City, California
January 24, 2022
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4 MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the Bellflower Financing Authority (Authority), we offer readers of the Authority’s financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, 2021. We encourage the readers to consider the information presented here in conjunction with additional information furnished in the accompanying basic financial statements.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the Authority’s basic financial statements. The basic financial statements are comprised of three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements and 3) Notes to the Financial Statements.
Government-Wide Financial Statements
These statements are designed to provide information about the activities of the Authority as a whole and present a longer-term view of the Authority’s finances. They are prepared using the accrual basis of accounting, which is similar to the accounting used by most private sector companies.
The Statement of Net Position presents information on all of the Authority’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference between the assets and deferred outflows of resources less liabilities and deferred inflows of resources reported as net position. In time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating.
The Statement of Activities presents information on how the Authority’s net position changed during the 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.
In both the Statement of Net Position and Statement of Activities, only the Authority’s basic governmental activities, such as principal and interest payments on certificates of participation and a note payable, are reported. The lease payments received from the City of Bellflower (City), a billboard and an oil booster pumping station are generally sufficient to finance the activities.
The Authority does not have any other business-type activities or separate component units. As referred to in Note 1 of the notes to the basic financial statements, the Authority conforms to accounting principles generally accepted in the United States of America as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles.
Fund Financial Statements
The Fund Financial Statements, in general, provide detailed information about the most significant individual funds – not the Authority as a whole. A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives.
The Authority, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. While funds can be divided into three categories (governmental, proprietary, and fiduciary), the Authority’s activities only require the maintenance of a debt service fund (a governmental fund). - 8 -
5 Governmental funds are used to account for essentially the same functions 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.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for 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 Authority’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Authority only maintains one governmental fund (debt service fund). This fund reports financial transactions using an accounting method called modified accrual accounting. This information is presented in the Governmental Fund – Balance Sheet and in the Governmental Fund – Statement of Revenues, Expenditures, and Changes in Fund Balance. On behalf of the Authority, the City Council adopts an annual appropriated budget for the debt service fund. A budgetary comparison statement has been provided for the fund to demonstrate compliance with this budget.
Proprietary funds are primarily used to account for when a reporting entity charges for the services it provides, whether to outside customers or to other units of the entity. These funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities, using an accrual basis of accounting. Fiduciary funds are used to account for resources held for the benefit of parties outside the reporting entity. In these cases, the entity has a fiduciary responsibility and is acting as a trustee. The Statement of Fiduciary Net Position separately reports all of the entity’s fiduciary activities. These activities are excluded from the entity’s other financial statements because the entity cannot use these assets to finance its operations. However, the entity is responsible for ensuring that the assets reported in these funds are used for their intended purposes.
The Authority does not maintain any proprietary or fiduciary funds.
Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
Net Position
Governmental
Activities /
Government-Wide
2021
Governmental
Activities /
Government-Wide
2020
Current and other assets $ 1,200,589 $ 1,484,535 Long-term assets 14,703,366 15,327,983
Total assets 15,903,955 16,812,518
Current liabilities 1,228,570 979,882
Long-term liabilities 14,512,460 15,707,038
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6 Net Position
Governmental
Activities /
Government-Wide
2021
Governmental
Activities /
Government-Wide
2020
Total liabilities 15,741,030 16,686,920
Net position:
Net investment in capital assets 173,928 141,665
Unrestricted (11,003) (16,067)
Total net position $ 162,925 $ 125,598
The Authority’s Government-Wide total net position at June 30, 2021 was $162,925. Of this amount, $173,928 was for net investment in capital assets and $11,003 was an unrestricted deficit. The net position for net investment in capital assets represents the net book value of the Authority’s capital assets less the outstanding balance of the debt issued to finance the assets.
On the other hand, the deficit in unrestricted net position represents a shortage in assets needed to cover the accrued interest on a note payable. Funding for any shortage at the time of a debt service payment due date will be provided by the City’s General Fund. The Authority’s assets totaled $15.9 million, comprised of $20 thousand in cash and investments, $1.2 million in current lease and accrued interest receivables, $13.7 million in long-term lease receivable, and $994 thousand in capital assets. The Authority’s liabilities totaled $15.7 million, comprised of the 2021 Certificates of Participation of $14.8 million (transportation portion of $8.7 million and water system portion of $6.1 million), a note payable of $820 thousand, and the related accrued interest payable of $161 thousand.
Changes in Net Position
Governmental
Activities/
Government-Wide
Totals
2021
Governmental
Activities/
Government-Wide
Totals
2020
Revenues:
General Revenues:
Lease interest revenue $ 580,119 $ 684,389 Investment earnings 109 2,195
Total General Revenues 580,228 686,584
Expenses:
Interest and fiscal charges 541,879 660,478
Depreciation expense 1,022 1,022
Total Expenses 542,901 661,500
Increase (decrease) in net position 37,327 25,084
Net position – beginning 125,598 100,514
Net position – ending $ 162,925 $ 125,598
The Authority’s net position increased $37,327. The general revenues totaled $580 thousand comprised of lease interest revenue and investment earnings. The expenses totaled $543 thousand comprised of interest expense, fiscal charges, and depreciation expense.
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7 FINANCIAL ANALYSIS OF THE AUTHORITY’S FUND
As noted earlier, the Authority uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental Fund. The focus of the Authority’s governmental fund is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Authority’s financing requirements. Under Governmental Accounting Standards Board Statement No. 54 (GASB 54), any available fund balance is classified as restricted to reflect its constraint for a specific purpose, namely capital assets and debt service.
At the end of the fiscal year, the Authority’s fund balance reserved for debt service was $17 thousand comprised of cash and investments held by the City of Bellflower and trustee.
Governmental Revenues – The following table presents a summary of governmental fund revenues for the fiscal year ended June 30, 2021, compared to the prior year revenues.
Comparison of Governmental Revenues
Fiscal Years 2020-21 and 2019-20
Amount
2020-21
% of Total
Revenues
Amount
2019-20
% of Total
Revenues
Variance
% increase
(decrease)
Lease revenue $ 952,568 99.99% $ 1,444,537 99.4% $ (491,969) (34)% Investment earnings 109 0.01% 8,579 0.6% (8,470) (99)% Total $ 952,677 100.0% $ 1,453,116 100.0% $ (500,439) (34)%
The total revenues of the governmental fund for fiscal year 2020-21 were $953 thousand, a decrease of $500 thousand, or 34%, from the preceding fiscal year. The lease revenue included amounts received from the City’s Municipal Water System, Propositions A and C local return funds, and two ground leases. The lease revenue decreased $492 thousand and investment earnings decreased $8 thousand compared to the preceding fiscal year.
Governmental Expenditures – The following table presents a summary of governmental fund expenditures for the fiscal year ended June 30, 2021, compared to the prior year expenditures.
Governmental Expenditures
Fiscal Years 2020-21 and 2019-20
Amount
2020-21
% of Total
Expenditures
Amount
2019-20
% of Total
Expenditures
Variance
% increase
(decrease)
Debt service $ 1,672,415 100.0% $ 1,453,272 100.0% $ 219,143 15% Total $ 1,672,415 100.0% $ 1,453,272 100.0% $ 219,143 15%
The total expenditures of the governmental fund for fiscal year 2020-21 were $1.7 million for debt service on the 2021 Certificates of Participation and a note payable to MTB Enterprises, LLC (note executed in connection with the Butterfly Garden property acquisition), and payment of trustee fees. The total expenditures increased $219 thousand, or 15%, from the preceding fiscal year.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets. At June 30, 2021, the Authority’s investment in capital assets was $994 thousand.
The only capital asset activity for the fiscal year was the depreciation expense on the Butterfly Garden’s building and improvements in the amount of $1,022. For additional information, please refer to the notes to the basic financial statements – Note 4, Capital Assets.
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8 Capital Assets
2021
2020
Variance
% increase
(decrease)
Land $ 948,941 $ 948,941 $ - - Buildings and improvements 44,775 45,797 (1,022) (2.2)% Total $ 993,716 $ 994,738 $ (1,022) (0.1)%
Long-Term Debt. At June 30, 2021, the Authority had $15.6 million in outstanding long-term debt for governmental activities. During the fiscal year in February 2021, the Authority refinanced both 2008 and 2018 COPs to reduce the debt service payments at the net present value savings of $1.7 million. For additional information, please refer to the notes to the basic financial statements – Note 5, Long-Term Debt.
Long-Term Debt
2021
2020
Variance
% increase
(decrease)
2008 Water System COPs $ - $ 6,610,000 $ (6,610,000) (100)% 2018 Transportation COPs - 9,055,000 (9,055,000) (100)% 2021 COPs – Water System 6,075,000 - 6,075,000 100%
2021 COPs – Transportation 8,685,000 - 8,685,000 100% Total COPs 14,760,000 15,665,000 (905,000) (5.8)%
Note payable 819,788 853,073 (33,285) (3.9)% Total $ 15,579,788 $ 16,518,073 $ (938,285) (5.7)%
ECONOMIC OUTLOOK
The Authority was organized in 2006 to undertake the financing of public capital improvements and other projects for revitalization of the City. The source of repayment for the water system portion of the Certificates of Participation is water system revenues. We believe the water system revenues generated by the Municipal Water System will continue to be sufficient to make the semi-annual debt service payments. The sources of repayment for the transportation portion of the Certificates of Participation are Proposition A and Proposition C local return funds and, if necessary, Measure M and Measure R local return funds (Proposition A/C and Measure M/R are Los Angeles Countywide sale taxes). We believe the local return funds will continue to be sufficient to make the semi-annual debt service payments. The sources of repayment for the note payable to MTB Enterprises, LLC are ground lease revenues for a billboard and an oil booster pumping station and, if necessary, the City’s General Fund revenue. We believe these revenues will continue to be sufficient to make the semi-annual debt service payments.
On November 8, 2016, Measure W was approved by the Bellflower residents to authorize the sale of the City’s water system to California American Water for $17 million. The net proceeds after paying off the existing debts, including the water system portion of the Certificates of Participation, will be placed in the Public Projects Fund to be used to fund capital projects designed to attract new businesses, retain existing businesses, and create new community recreation facilities. The sale of the water system has been challenged by the Office of Ratepayer Advocates of the California Public Utilities Commission (CPUC) and an administrative law judge will issue a ruling on this case. If the sale of the water system is ultimately approved by CPUC, it is expected that the Municipal Water System will dissolve soon thereafter.
CONTACTING THE AUTHORITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide a general overview of the Authority’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 Director of Finance, Bellflower Financing Authority, 16600 Civic Center Drive, Bellflower, CA 90706. - 12 -
BASIC FINANCIAL STATEMENTS
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2021 2020
Assets:
Current Assets
Cash held by the City of Bellflower $ 4,480 $ - Investments with fiscal agents 15,350 551,755 Leases receivable 1,035,000 780,000
Accrued lease interest receivable 145,759 152,780 Total Current Assets 1,200,589 1,484,535
Long-term Assets
Lease receivable 13,709,650 14,333,245
Capital assets:
Not being depreciated 948,941 948,941
Being depreciated (net of accumulated depreciation)44,775 45,797 Total Assets 15,903,955 16,812,518
Liabilities:
Current Liabilities
Interest payable 161,242 168,847
Note payable 32,328 31,035
Certificates of participation 1,035,000 780,000
Total Current Liabilities 1,228,570 979,882
Long-term Liabilities
Note payable 787,460 822,038
Certificates of participation 13,725,000 14,885,000
Total Long-Term Liabilities 14,512,460 15,707,038
Total Liabilities 15,741,030 16,686,920
NET POSITION:
Net investment in capital assets 173,928 141,665
Unrestricted (11,003) (16,067)
Total Net Position 162,925$ 125,598$
9 BELLFLOWER FINANCING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30, 2021
(With comparative totals at June 30, 2020)
Governmental Activities
See accompanying notes to basic financial statements.
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Program
Expenses Revenues 2021 2020
Governmental Activities:
Unallocated depreciation expense 1,022$ -$ (1,022)$ (1,022)$ Interest and fiscal charges 541,879 - (541,879) (660,478) Total Governmental Activities 542,901$ -$ (542,901) (661,500) General Revenues:
Lease interest revenue 580,119 684,389
Investment earnings 109 2,195
Total General Revenues 580,228 686,584
Change in Net Position 37,327 25,084
Net Position, Beginning of Fiscal Year 125,598 100,514 Net Position, End of Fiscal Year 162,925$ 125,598$ Function/Program
10 Net (Expense) Revenue and
Changes in Net Position
Governmental Activities
See accompanying notes to basic financial statements.
BELLFLOWER FINANCING AUTHORITY
STATEMENT OF ACTIVITIES
For the fiscal year ended June 30, 2021
(With comparative totals for the fiscal year ended June 30, 2020) - 15 -
2021 2020
Assets:
Cash held by the City of Bellflower 4,480$ -$
Investments with fiscal agents 15,350 551,755
Lease receivable 6,068,129 6,070,181
Total Assets 6,087,959$ 6,621,936$
Deferred Inflows of Resources:
Unavailable revenue - lease 6,068,129$ 6,070,181$
Unavailable revenue - rental payments 3,167 - Total Deferred Inflows of Resources 6,071,296 6,070,181 Fund Balance:
Restricted for debt service 16,663 551,755
Total Fund Balance 16,663 551,755
Total Deferred Inflows of Resources and Fund Balance 6,087,959$ 6,621,936$ 11 General Fund
BELLFLOWER FINANCING AUTHORITY
BALANCE SHEET - GOVERNMENTAL FUND
June 30, 2021
(With comparative totals at June 30, 2020)
See accompanying notes to basic financial statements.
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Fund balance of governmental Fund 16,663$
Amounts reported for governmental activities in the Statement of Net Position are different because:
Unavailable lease revenue is not available to pay for current period expenditures and, therefore, is not reported in the fund financial statements:
Unavailable revenue - lease 14,744,650
Accrued lease interest receivable is not available to pay for current period expenditures and, therefore, is not reported in the fund financial statements 145,759 Unavailable rental revenue is not available to pay for current period expenditures but is recognized as revenue on the Statement of Activities 3,167 Long-term liabilities are not due and payable in the current period and are not reported as fund liabilities. Interest on long-term liabilities is not accrued in the governmental fund, but rather is recognized as an expenditure when due.
All liabilities, both current and long-term are reported in the Statement of Net Position. Balances at June 30, 2020 are:
Certificates of Participation (14,760,000)
Note payable (819,788)
Interest payable (161,242)
Capital assets, net of accumulated depreciation, used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds.993,716
Net Position of governmental activities 162,925$
12 BELLFLOWER FINANCING AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND
BALANCE SHEET TO THE STATEMENT OF NET POSITION
June 30, 2021
See accompanying notes to basic financial statements.
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2021 2020
Revenues:
Lease revenue 952,568$ 1,444,537$
Investment earnings 109 8,579
Total Revenues 952,677 1,453,116
Expenditures:
Debt Service:
Principal payments 1,122,931 785,828
Interest and fiscal charges 549,484 667,444
Total Expenditures 1,672,415 1,453,272
Excess (Deficiency) of Revenues Over Expenditures (719,738) (156) Other Financing Sources (Uses):
Debt proceeds 14,760,000 -
Payment to refunded debt escrow (14,575,354) -
Total Other Financing Sources (Uses)184,646 -
Net Change in Fund Balance (535,092) (156)
Fund Balance, Beginning of Fiscal Year 551,755 551,911 Fund Balance, End of Fiscal Year 16,663$ 551,755$ 13 (With comparative totals for the fiscal year ended June 30, 2020) General Fund
BELLFLOWER FINANCING AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUND
For the fiscal year ended June 30, 2021
See accompanying notes to basic financial statements.
- 18 -
Net change in fund balances of governmental fund (535,092)$ Amounts reported for governmental activities in the Statement of Activities are different because:
The issuance of long-term debt provides current financial resources to the governmental fund, while the repayment of the principal of long-term debt consumes the current financial resources of the governmental fund. Neither transaction, however, has any effect on net position. The amounts are the net effect of these differences in the treatment of long-term debt:
Debt proceeds (14,760,000)
Payment to refunded debt escrow 14,575,354
Debt issuance costs 184,646
Repayment of certificates of participation 905,000
Repayment of note payable 33,285
The governmental fund reports capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. (1,022) Revenues in the Statement of Activities do not provide current financial resources and are not reported as revenues in the governmental fund:
Receipt of lease payment and earned finance charge (372,449) Under the modified accrual basis of accounting used in the governmental fund, revenues are recognized when the resources are measurable and become available, and interest on long-term debt is not recognized until it is due.
However, in the Statement of Activities revenues and changes in interest revenue and interest expenses are recognized in the current year:
Accrued lease interest receivable under the accrual method versus the modified accrual method (7,021)
Interest expense recorded under the accrual method versus the modified accrual method 7,605
Change in net position of governmental activities 30,306$ 14 BELLFLOWER FINANCING AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF
REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
TO THE STATEMENT OF ACTIVITIES
For the fiscal year ended June 30, 2021
See accompanying notes to basic financial statements.
- 19 -
NOTES TO BASIC FINANCIAL STATEMENTS
- 20 -
15 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES:
Financial Reporting Entity:
The Bellflower Financing Authority (Authority) was organized on June 26, 2006 by the City of Bellflower (the City) and the Bellflower Redevelopment Agency pursuant to the Joint Exercise of Powers Act (California Government Code Sections 6500, et seq.) to provide the financing of public capital improvements and other projects for revitalization of the City. The Authority is a component unit of the City and is accounted for in the Public Facilities Corporation Debt Service Fund and the Transportation Bond Project Debt Service Fund in the City’s financial statements.
The Authority functions as a separate entity and its policies are determined by the Board of Directors comprised solely of the members of the City Council. All staff work is performed by the officials and staff of the City or by consultants.
Basis of Presentation:
The accounting policies of the Authority conform to accounting principles generally accepted the United States of America as they are applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles.
Government-Wide Financial Statements:
The government-wide financial statements (i.e. the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government (the Authority). Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Authority’s activities are governmental; no business-type activities are reported in the statements.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are expenses that are clearly identifiable with a specific program, project, function or segment. The Authority does not allocate indirect expenses to functions in the Statement of Activities. Program revenues of the Authority include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment.
Lease revenues and investment income and other items that are properly not included among program revenues are reported instead as general revenues.
- 21 -
16 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Fund Financial Statements:
The accounts of the Authority are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, deferred inflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate. Authority 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. The Authority’s accounts are organized into one major fund as follows:
Major Governmental Fund:
The General Fund is used to account for the accumulation of resources for, and the payment of long-term debt principal, interest, and related costs.
The accounting and financial treatment applied to a fund is determined by its measurement focus.
All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds, present increases (i.e. revenues and other financing sources) and decreases (i.e. expenditures and other financing uses) in net current assets.
Measurement Focus and Basis of Accounting:
The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements.
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources’ measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government-wide financial statements. Under the 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.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources’ measurement focus only current assets, deferred outflows of resources, current liabilities, and deferred inflows of resources are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of “available spendable resources”. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance. - 22 -
17 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Noncurrent portions of long-term receivables in governmental funds are reported on their balance sheets in spite of their spending measurement focus.
Recognition of governmental fund type revenues represented by noncurrent receivables are deferred inflows of resources until they become available.
Under the modified accrual basis of accounting, 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Lease revenue and investment earnings are susceptible to accrual. Expenditures generally are recorded when a liability is incurred, except for principal and interest on long-term liabilities which are recognized as expenditures to the extent they have matured. Proceeds of long-term liabilities are reported as other financing sources. General capital asset acquisitions are reported as expenditures in governmental funds.
Deferred Outflows/Inflows of Resources:
In addition to assets, the Statement of Net Position and the Governmental Fund Balance Sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Authority does not have any deferred outflows of resources to report.
In addition to liabilities, the Statement of Net Position and the Governmental Fund Balance Sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future periods and will not be recognized as an inflow of resources (revenue) until that time. The Authority has two items that qualifies for reporting in this category on the Governmental Fund Balance Sheet consisting of unavailable revenue on lease financing and unavailable revenue on lease payments.
Budgets and Budgetary Accounting:
Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds.
These budgets are revised by the Authority’s governing board and the Executive Director during the fiscal year, to give consideration to unanticipated income and expenditures.
- 23 -
18 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Prior Year Data:
Selected information regarding the prior year has been included in the accompanying financial statements. This information has been included for comparison purposes only and does not represent a complete presentation in accordance with generally accepted accounting principles in the United States of America. Accordingly, such information should be read in conjunction with the Authority’s prior year financial statements, from which this selected financial data was derived.
Use of Estimates:
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect certain reported amounts and disclosures. Accordingly, actual results could differ from the estimates.
Assets, Liabilities, and Equity:
Cash and Investments:
Cash includes all demand accounts, savings accounts, and certificates of deposits of the Authority. The Authority’s cash and investments, with the exception of cash and investments with fiscal agent, are pooled with the City to maximize the yield. Investments are reported in the accompanying financial statements at fair value which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Receivables:
In the government-wide statements, receivables consist of all revenues earned at fiscal year-end.
Major receivable balances for the governmental activities include lease charges. Under the financing method of accounting for the lease with the City, the minimum lease payable for the remaining term of the lease has been included in the assets of the Authority.
Capital Assets:
Capital assets, which include land and buildings and improvements, follow the City’s policy and are reported in the governmental activities column in the government-wide financial statements.
Capital assets are defined by the Authority as assets with a cost of $2,300 or more and an estimated useful life in excess of one year. Such capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the capital asset or materially extend capital asset lives are not capitalized. - 24 -
19 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Capital assets of the Authority are depreciated using the straight-line method over their estimated useful lives: The Authority only has Buildings and improvements which have a useful life of 20 to 50 years.
Long-term Liabilities:
The accounting treatment of long-term liabilities depends on whether it is reported in the government-wide or fund financial statements.
All long-term liabilities to be repaid from governmental resources are reported as liabilities in the government-wide statements. The long-term liabilities consist of Certificates of Participation and a Note Payable.
Long-term liabilities for governmental funds are not reported as liabilities in the fund financial statements. The debt proceeds are reported as other financing sources and payment of principal, interest and issuance costs are reported as expenditures.
Equity Classifications:
Government-wide Statements:
Equity is classified as net position which can be further classified as net investment in capital assets, restricted, or unrestricted.
Net investment in capital assets - consists of net position represented by the current net book value of the Authority’s capital assets, less the outstanding balance of any debt issued to finance these assets.
Restricted net position - consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation.
Unrestricted - consists of net position which is not restricted or invested in capital assets.
Sometimes the Authority will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the government-wide financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Authority’s practice to consider restricted - net position to have been depleted before unrestricted - net position is applied.
- 25 -
20 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Fund Statements:
Governmental fund equity is classified as fund balance. Fund balance is further classified as follows:
Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.
Committed - amounts that can be used only for specific purposes determined by a formal action of the governing board as the highest level of decision-making authority for the Authority.
Commitments may be established, modified, or rescinded only through resolutions approved by the governing board.
Assigned - .amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the Authority’s adopted policy, only the governing board or director may assign amounts for specific purposes.
Unassigned - all other spendable amounts.
When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the Authority considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balance are available, the Authority considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions.
Future Accounting Pronouncements:
The provisions of Statement Number 87 “Leases” are effective for fiscal years beginning after June 15, 2021.
The provisions for Statement Number 89 “Accounting for Interest Cost Incurred before the End of a Construction Period” are effective for fiscal years beginning after December 15, 2020.
The provisions of Statement Number 92 “Omnibus 2020” are effective for reporting periods beginning after June 15, 2021.
- 26 -
21 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 1 REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (Continued):
Future Accounting Pronouncements:
The provisions of Statement Number 93 “Replacement of Interbank Offered Rates” are effective for reporting periods beginning after December 15, 2021.
The provisions of Statement Number 94 “Public-Private and Public-Public Partnerships and Availability Payment Arrangements” are effective for reporting periods beginning after June 15, 2022.
The provisions of Statement Number 96 “Subscription-Based Information Technology Arrangements” are effective for reporting periods beginning after June 15, 2022.
The provisions of Statement Number 97 “Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans” are effective for reporting periods beginning after June 15, 2022.
The provisions of Statement Number 98 “The Annual Comprehensive Financial Report” are effective for fiscal years ending after December 15, 2021.
NOTE 2 CASH AND INVESTMENTS:
The Authority’s cash and investments are pooled with the City with the exception of cash and investments with fiscal agents. Investment income earned on pooled cash and investments is allocated based on the average monthly cash balance in each fund.
Cash and investments as of June 30, 2021 are classified in the accompanying financial statements as follows:
Statement of Net Position:
Cash and cash equivalents held by the
City of Bellflower 4,480$
Investments with fiscal agents 15,350
Total cash and investments 19,830$
Cash and investments as of June 30, 2020 consist of the following:
Statement of Net Position:
Investments with fiscal agents 551,755$
Total cash and investments 551,755$
- 27 -
22 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 2 CASH AND INVESTMENTS (Continued):
Investments Authorized by the California Government Code and the Authority’s Investment Policy:
The table below identifies the investment types that are authorized for the Authority by the California Government Code (or the Authority’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the Authority’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the Authority, rather than the general provisions of the California Government Code or the Authority’s investment policy.
Note: N/A – Not Applicable.
Investments Authorized by Debt Agreements:
Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Authority’s investment policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio in One Issuer Bankers Acceptances 180 days 40%30%
CalTRUST None None None
Certificates of Deposit 5 years None None
Commercial Paper 270 days 25%None
LAIF N/A None 75,000,000$
Los Angeles County Treasury Pool None None None
Medium Term Notes, Prime Quality 5 years 30%None
Money Market Mutual Funds N/A None None
Mutual Funds, Prime Quality N/A 20%None
Negotiable Certificates of Deposit 5 years 30%10%
Broker-assisted, Private Sector
Entity-Assisted, Certificates of Deposit 5 years 30%None Passbook Savings and Money Market
Accounts (Insured)None None None
State and Local Agency Obligations 5 years None None
United States Treasury Obligations 5 years None None
United States Government Sponsored
Agency Securities 5 years None None
- 28 -
23 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 2 CASH AND INVESTMENTS (Continued):
Disclosures Relating to Interest Rate Risk:
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Authority manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flows and liquidity needed for operations.
Information about the sensitivity of the fair values of the Authority’s investments and those held by bond trustees to market interest rate fluctuations is provided by the following table that shows the distribution of the Authority’s investments by maturity:
Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations:
The Authority has no investments (including investments held by bond trustees) that are highly sensitive to interest rate fluctuations.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity of Portfolio in One Issuer
Certificates of Deposit with Banks or Savings
& Loans None None None
U.S. Treasury Obligations None None None
U.S. Agency Securities None None None
Municipal Obligations None None None
Banker's Acceptances, Prime Quality 360 days None None
Commercial Paper, Prime Quality 270 days None None
Money Market Mutual Funds N/A None None
Investment Contracts None None None
Local Agency Investment Fund (State Pool) None None None Remaining
Maturity
12 Months
Totals or Less
Investments with fiscal agents
Money Market Mutual Funds 15,350$ 15,350$
15,350$ 15,350$
Investment Type
- 29 -
24 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 2 CASH AND INVESTMENTS (Continued):
Disclosures Relating to Credit Risk:
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Authority’s investment policy, or debt agreements, and the actual rating as of fiscal year end for each investment type.
Concentration of Credit Risk:
The investment policy of the Authority contains limitations on the amount that can be invested in any one issuer. None of investments in any one issuer (other than Money Market Funds) represents 5% or more of total Authority investments.
Custodial Credit Risk:
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Authority’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits. The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure Authority deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The Authority pools its cash with the City of Bellflower.
Fiscal
Year
Minimum End
Legal Rating
Rating Total AAA
Investments with fiscal agents
Money Market Mutual Funds A 15,350$ 15,350$
Investment Type
- 30 -
25 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 2 CASH AND INVESTMENTS (Continued):
Fair Value Measurements:
The Authority categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are significant other observable inputs, and Level 3 inputs are significant unobservable inputs.
The Authority’s investment in money market mutual funds are not subject to the fair value hierarchy.
NOTE 3 LEASE RECEIVABLE:
The 2021 Certificates of Participation (COPs) issued by the Authority and outstanding at June 30, 2021 bear interest at 2.30% per annum and mature on October 1, 2038. The Certificates represent undivided proportionate interests of the Owners in certain lease payments, to be made by the City to the Authority. The City shall sublease from the Authority a leasehold interest in the Civic Center Property and Thompson Park. The balance outstanding as of June 30, 2021 was $14,744,650.
Future estimated minimum lease payments to be received are as follows:
Fiscal years
Ending
June 30, Total
2022 1,399,355$
2023 1,230,038
2024 1,228,533
2025 1,226,568
2026 1,229,085
2027-2031 6,153,638
2032-2036 3,678,415
2037-2039 1,210,990
Total investment in lease 17,356,622
Less amount representing interest (2,611,972)
Net investment in lease 14,744,650$
- 31 -
26 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 4 CAPITAL ASSETS:
A summary of changes in the Governmental Activities capital assets at June 30, 2021 is as follows:
Governmental Activities:
NOTE 5 LONG-TERM LIABILITIES:
The following is a summary of changes in the long-term debt for the fiscal year ended June 30, 2021:
Balance Balance
July 1, 2020 June 30, 2021
Capital assets, not being depreciated:
Land $ 948,941 $ - $ - $ 948,941 Total capital assets, not
being depreciated 948,941 - - 948,941 Capital assets, being depreciated:
Buildings and improvements $ 51,075 $ - $ - $ 51,075 Total capital assets,
being depreciated 51,075 - - 51,075 Less accumulated depreciation for:
Buildings and improvements (5,278) (1,022) - (6,300) Total accumulated depreciation (5,278) (1,022) - (6,300) Total capital assets,
being depreciated, net $ 45,797 $ (1,022) $ - $ 44,775 Total government activities
capital assets, net $ 994,738 $ (1,022) $ - $ 993,716 Additions Deletions
Balance at Balance at Due Within
Governmental Activities July 1, 2020 Increase Decrease June 30, 2021 One Year 2008 Certificates of Participation 6,610,000$ -$ (6,610,000)$ -$ -$ 2018 Certificates of Participation 9,055,000 - (9,055,000) - - 2021 Certificates of Participation - 14,760,000 - 14,760,000 1,035,000 Subtotal 15,665,000 14,760,000 (15,665,000) 14,760,000 1,035,000 Note Payable - Direct Borrowing 853,073 - (33,285) 819,788 32,328 Total long-term liabilities 16,518,073$ 14,760,000$ (15,698,285)$ 15,579,788$ 1,067,328$ - 32 -
27 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 5 LONG TERM DEBT (Continued):
Debt service requirements on long-term debt at June 30, 2021, are as follows:
2008 Certificates of Participation:
On June 9, 2008, the Bellflower Financing Authority issued 2008 Certificates of Participation (Water System) in the amount of $8,230,000 to (1) provide funds to reimburse the City’s General Fund for costs incurred in acquiring certain assets constituting the City’s municipal water system, (2) provide funds to make certain improvements to the Water System, (3) fund a debt service reserve fund for the Certificates of $539,819, and (4) pay for the costs incurred in connection with the sale and issuance of the Certificates. The COPS represent undivided proportionate interests of the owners in certain lease payments, to be made by the City to the Financing Authority. The City subleases from the Financing Authority a leasehold interest in the Civic Center Property and Thompson Park. The 2008 COPS issued by the Bellflower Financing Authority bore interest at
4.00% to 5.25% a year and matured serially in increasing amounts on each October 1 through 2040. On February 22, 2021, the 2008 COPs were refinanced as part of the 2021 COPS. The 2008 COPS balance outstanding as of June 30, 2021 was $0.
2018 Certificates of Participation:
On January 18, 2018, the Bellflower Financing Authority (Authority) issued the 2018 Certificates of Participation (Regional Transit Center and Parking Structure) in the amount of $10,000,000 in order to finance (i) construction of the Regional Transit Center and Parking Structure, (ii) a surety bond for the Reserve Fund, and (iii) costs of issuing the 2018 Certificates. On January 1, 2018 the City and the Authority entered into the “First Supplement to the Site Lease” entered into as part of the issuance of the 2008 Certificates of Participation in which the City has agreed to lease the real property consisting of the land and building comprising the City’s Civic Center and Thompson Park to the Corporation. The Certificates issued by the Authority bore interest at 3.07% a year and matured on October 1, 2018 through 2032. On February 22, 2021, the 2018 COPs were refinanced as part of the 2021 COPs. As of June 30, 2021, the outstanding balance of the 2018 COPs was $0.
Fiscal years Fiscal years
Ending June 30, Principal Interest Total Ending June 30, Principal Interest Total 2022 1,035,000$ 364,355$ 1,399,355$ 2022 32,328$ 33,646$ 65,974$ 2023 925,000 305,038 1,230,038 2023 33,675 32,299 65,974 2024 945,000 283,533 1,228,533 2024 35,079 30,895 65,974 2025 965,000 261,568 1,226,568 2025 36,541 29,433 65,974 2026 990,000 239,085 1,229,085 2026 38,064 27,910 65,974 2027-2031 5,315,000 838,638 6,153,638 2027-2031 215,477 114,393 329,870 2032-2036 3,400,000 278,415 3,678,415 2031-2035 264,279 65,591 329,870 2037-2038 1,185,000 41,340 1,226,340 2036-2040 164,345 13,817 178,162 14,760,000$ 2,611,972$ 17,371,972$ 819,788$ 347,984$ 1,167,772$ Note Direct Borrowing2021 Certificates of Participation - 33 -
28 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 5 LONG TERM DEBT (Continued):
2021 Certificates of Participation:
On February 22, 2021 the Bellflower Financing Authority (Authority) issued the 2021 Certificates of Participation in the amount of $14,760,000 to pay off the 2008 Certificates of Participation, the 2018 Certificates of Participation, and to pay the costs of issuance of the 2021 Refunding Certificates of Participation.
The Authority assisted the City to (a) finance the costs of acquiring the City’s water system through the execution and delivery of the City of Bellflower 2008 Certificates of Participation (Water System) and (b) finance the Regional Transit Center and Parking Structure through the execution and delivery of the City of Bellflower 2018 Certificates of Participation (Regional Transit and Parking Structure) and the Authority and the City have entered into a lease agreement dated February 1, 2021 to lease certain property consisting of the City’s Civic Center and Thompson Park to the Authority. The City has agreed to lease the real property consisting of the land and building comprising the City’s Civic Center.
The 2021 Refunding Certificates of Participation shall mature on October 1, 2038 and shall bear interest at the rate of 2.30% per annum. The certificates maturing on October 1, 2038 shall be subject to mandatory sinking fund prepayment prior to maturity at a prepayment price equal to the principal amount to be repaid plus accrued interest with respect thereto to the prepayment date, on October 1 of each year, commencing October 1, 2021.
The 2021 Refunding Certificates of Participation may be prepaid before maturity on any date on and after April 1, 2031, at the option of the City exercised by notification at least 30 days prior to the scheduled prepayment date. In addition, an amount not exceeding 90% of then outstanding principal amount may be prepaid in whole or in part before the maturity on any date, at the option of the City, from moneys obtained by the City from the full or any partial sale of the City’s water system with at least 30 days prior notification.
In the event of a default of the principal and interest due, the COP owners may request that the trustee may re-let the leased premises.
- 34 -
29 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 5 LONG TERM DEBT (Continued):
The annual requirements to amortize the 2021 Certificates of Participation outstanding at June 30, 2021 are as follows:
Note Payable:
On March 31, 2015, the City executed into a promissory note with MTB Enterprises, LLC for $995,000 to purchase real property for the Butterfly Garden. The note is secured by a deed of trust on the purchased property. Interest accrues at the annual rate of 4.125% with a principal and interest payments due on July 15, and January 15 of each fiscal year. In the event that during the term of the loan that the total rental income received by the City from the sign lease and the pumping station lease on the property exceed the predetermined principal and interest payments owed for any calendar year then the amount of excess rent will be paid by the City to MTB Enterprises, LLC to apply to the principal of the loan on or before February 15th of the year following the receipt of the excess rent. The City’s last one or more payments will be reduced to reflect that reduction in principal. The excess rent collected in fiscal year 2019-2020 that was paid in addition to the pre-determined principal amount was $4,562. The loan balance as of June 30, 2021 was $819,788.
Fiscal years
Ending June 30, Principal Interest Total
2022 1,035,000$ 364,355$ 1,399,355$
2023 925,000 305,038 1,230,038
2024 945,000 283,533 1,228,533
2025 965,000 261,568 1,226,568
2026 990,000 239,085 1,229,085
2027-2031 5,315,000 838,638 6,153,638
2032-2036 3,400,000 278,415 3,678,415
2037-2038 1,185,000 41,340 1,226,340
14,760,000$ 2,611,972$ 17,371,972$
2021 Certificates of Participation
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30 BELLFLOWER FINANCING AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2021
NOTE 5 LONG TERM DEBT (Continued):
Annual minimum debt service requirements are as follows:
Fiscal years
Ending June 30, Principal Interest Total
2022 32,328$ 33,646$ 65,974$
2023 33,675 32,299 65,974
2024 35,079 30,895 65,974
2025 36,541 29,433 65,974
2026 38,064 27,910 65,974
2027-2031 215,477 114,393 329,870
2031-2035 264,279 65,591 329,870
2036-2040 164,345 13,817 178,162
819,788$ 347,984$ 1,167,772$
Note Direct Borrowing
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REQUIRED SUPPLEMENTARY INFORMATION
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Original Final
REVENUES
Lease revenue 917,286$ 1,253,938$ 952,568$ (301,370)$ Investment earnings - 2,700 109 (2,591) Total Revenues 917,286 1,256,638 952,677 (303,961)
EXPENDITURES
Debt service:
Principal payments 815,233 1,122,931 1,122,931 - Interest and fiscal charges 640,769 406,598 549,484 (142,886) Total Expenditures 1,456,002 1,529,529 1,672,415 (142,886) Excess (Deficiency) of Revenues
Over Expenditures (538,716) (272,891) (719,738) (446,847) Other Financing Sources (Uses)
Proceeds from issuance of debt - 14,760,000 14,760,000 - Payment to refunded debt escrow - (14,577,183) (14,575,354) 1,829 Total other financing sources (uses)- 182,817 184,646 1,829 Net Change in Fund Balance (538,716) (90,074) (535,092) (445,018)
Fund Balance, Beginning of Fiscal year 551,755 551,755 551,755 - Fund Balance, End of the Fiscal Year 13,039$ 461,681$ 16,663$ (445,018)$ For the fiscal year ended June 30, 2021
31 BELLFLOWER FINANCING AUTHORITY
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Variance
with Final
Budget
Positive
(Negative)
Budgeted Amounts Actual
Amounts
GENERAL FUND
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OTHER SUPPLEMENTAL INFORMATION
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Transportation
Bond
Project
REVENUES
Lease revenue 721,069$
Total revenues 721,069
EXPENDITURES
Principal retirement 478,095
Interest and other charges 342,590
Total expenditures 820,685
Excess (deficiency) of revenues over expenditures (99,616)
OTHER FINANCING SOURCES (USES)
Bond proceeds 8,685,000
Payment to refunded debt escrow (8,576,905)
Total other financing sources (uses) 108,095
Net change in activity 8,479
For the fiscal year ended June 30, 2021
BELLFLOWER FINANCING AUTHORITY
TRANSPORTATION BONDS PROJECT SUPPLEMENTAL SCHEDULE
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33 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES RONALD A LEVY, CPA 9465 WILSHIRE BLVD., 3RD FLOOR 5800 HANNUM, AVE, SUITE E CRAIG A HARTZHEIM, CPA BEVERLY HILLS, CA 90212 CULVER CITY, CA 90230 HADLEY Y HUI, CPA TEL: 310.273.2745 TEL: 310.670.2745 ALEXANDER C. HOM, CPA www.mlhcpas.com FAX: 310.670.1689
ADAM V GUISE, CPA
TRAVIS J HOLE, CPA www.mlhcpas.com
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED
ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
The Honorable Board of Directors of the
Bellflower Financing Authority
Bellflower, 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 the major fund of the Bellflower Financing Authority (the Authority), as of and for the fiscal year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated January 24, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority'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 Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority'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 Authority’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 a material weakness.
However, material weaknesses may exist that have not been identified.
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34 Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. 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 tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
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 not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Moss, Levy & Hartzheim, LLP
Culver City, California
January 24, 2022
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