We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-7 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the Park’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 solely 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 effectiveness of the Park’s 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 City of the Park’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 1998-1 (Enterprise Business Park) (the Park) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the Park to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE PARK
The Park is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the Park’s governing body. City employees perform most of the duties and functions required of the Park, but certain tasks are provided by third parties under contract.
The Park’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the Park. The Park is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the Park can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
On April 7, 1997, the City’s Planning Commission approved a vesting tentative map for the Enterprise Business Park subdivision. The project area included two assessor’s parcels and more than 80 acres of property located in the southwestern section of the City. Upon recordation of the final map, the property was subdivided into eight parcels ranging in size from 1.12 to 24.17 acres. The parcels are zoned M-2, a heavy industrial designation allowing for development of warehouse, distribution, processing, manufacturing, and other related uses.
In July 1998, the City Council formed the Park and authorized the Park to issue up to $2.05 million in bonds to fund certain street improvements, water and sewer main extensions, and other water, sewer, and storm drainage improvements required to serve the Park. The Bonds were called in full in 2002 and all Park-funded improvements have been completed.
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• Special Revenue Fund revenues decreased from ($18) in the prior year to ($428) for fiscal year 2022 and expenditures increased from $14,481 in the prior year to $17,962 for fiscal year 2022. The decrease in revenues is attributed to a decrease in interest income and change in fair market value of investments, and the increase in expenditures is attributed to an increase in activity in community development. The Special Revenue Fund balance decreased by $18,390 to an ending balance of $10,561.
Funds Basis:
• Special Revenue Fund revenues of $(428) were $410 less than the prior year due to increase in investment losses, and expenditures of $17,962 were $3,481 more than the prior year due to an increase in service city forces interfund expenditures. The Special Revenue Fund balance decreased by $18,390 to an ending fund balance of $10,561.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the Park’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the Park’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the Park as a whole, including all its capital assets and long-term liabilities.
The Statement of Activities provides information about the Park’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the Park’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the Park as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE PARK AS A WHOLE
This analysis focuses on the net position and changes in net position of the Park’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $10,947 were offset by liabilities of $386. The Park’s net position from governmental activities decreased to $10,561 in 2022 from $28,951 in 2021. The Park’s net position is restricted as follows: $10,561 for acquisition or maintenance of infrastructure The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 10,926 $ 29,303 $ (18,377)
Interest receivable 21 53 (32)
Total assets 10,947 29,356 (18,409)
Current and other liabilities 386 405 (19)
Net position:
Restricted for:
Park maintenance 10,561 28,951 (18,390)
Total net position $ 10,561 $ 28,951 $ (18,390)
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The Park’s fiscal year 2022 revenue came primarily from investment losses of ($428). No Facilities special tax was collected in fiscal years 2022 and 2021 . Park expenses of $17,962 were primarily for community development.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Investment earnings (loss) $ (428) $ (18) $ (410)
Total revenues (428) (18) (410)
Expenses:
Community development 17,962 14,481 3,481
Change in net position (18,390) (14,499) $ (3,891)
Net position, beginning of year 28,951 43,450
Net position, end of year $ 10,561 $ 28,951
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the Park’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the Park’s special revenue fund. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, longterm debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the Park’s most significant funds, called major funds. Major funds present the major activities of the Park for the year and may change from year to year as a result of changes in the pattern of the Park’s activities. The Park’s one fund is presented here as a major fund; its purpose is explained in Note 1 to the financial statements. The Park’s Special Revenue Fund is a governmental fund; financial statements for this fund are prepared on the modified accrual basis of accounting, which means it measures only current financial resources and uses.
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ (428) $ (18) $ (410)
Expenditures 17,962 14,481 3,481
Changes in fund balances (18,390) (14,499) $ (3,891)
Fund balances, beginning of year 28,951 43,450
Fund balances, end of year $ 10,561 $ 28,951
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE PARK’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the Park’s governmental fund reported a fund balance of $10,561, a decrease of $18,390 compared with last year. This decrease was primarily due to increased community development expenditures.
CAPITAL ASSETS
Under GASB Statement No. 34, the Park is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the Park is turned over to the City upon completion and acceptance. Accordingly, capital outlay expenditures are reported in both the Park’s fund and government-wide financial statements.
Therefore, the Park reports no long-term capital assets.
CONTACTING THE PARK’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the Park’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire Park’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the Park’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the Park’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between Park funds have been eliminated.
The Statement of Net Position reports the difference between the Park’s total assets and deferred outflows of resources and the Park’s total liabilities and deferred inflows of resources, including all the Park’s capital assets and all of its long-term debt. The Statement of Net Position focuses the reader on the composition of the Park’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the Park in a single column.
The Statement of Activities reports increases and decreases in the Park’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the Park’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the Park’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 9 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 10,926
Interest receivable 21
Total Assets 10,947
LIABILITIES
Accounts payable 386
Total Liabilties 386
NET POSITION
Restricted for:
Park maintenance 10,561
Total Net Position $ 10,561
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 17,962 $ - $ (17,962)
$ 17,962 $ - (17,962)
General Revenues:
Investment earnings (loss) (428)
Total General Revenues (428)
(18,390)
Net Position, Beginning of Year 28,951
Net Position, End of Year $ 10,561
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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11 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The Park determined its fund to be a major fund. That is:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the Park.
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2022
Special
Revenue
Fund
ASSETS
Cash and investments $ 10,926
Interest receivable 21
Total Assets $ 10,947
LIABILITIES
Accounts payable $ 386
Total Liabilities 386
FUND BALANCE
Restricted for:
Park maintenance 10,561
Total Fund Balance 10,561
Total Liabilities and Fund Balance $ 10,947
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUND TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position:
Total Fund Balance - Governmental Fund $ 10,561
Adjustments to the Balance Sheet of the Governmental Fund to reconcile with the Statement of Net Position: -
Total Net Position - Governmental Activities $ 10,561
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE – GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2022
Special
Revenue
Fund
REVENUES
Interest income $ 134
Change in fair value of investments (562)
Total Revenues (428)
EXPENDITURES
Services - professional and other 17,962
Total Expenditures 17,962
Changes in Fund Balance (18,390)
Fund Balance, Beginning of Year 28,951
Fund Balance, End of Year $ 10,561
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUND TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities:
Changes in Fund Balance - Governmental Fund $ (18,390)
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balance of the Governmental Fund to reconcile with the Statement of Activities: -
Change in Net Position - Governmental Activities $ (18,390) #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Interest income $ - $ - $ 134 $ 134
Change in fair value
of investments - - (562) (562)
Total Revenues - - (428) (428)
EXPENDITURES
Services - professional
and other 18,699 18,699 17,962 737
Utilities 500 500 - 500
Total Expenditures 19,199 19,199 17,962 1,237
Changes in Fund Balance $ (19,199) $ (19,199) (18,390) $ 809 Fund Balance, Beginning of Year 28,951
Fund Balance, End of Year $ 10,561
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
17 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 1998-1 (Enterprise Business Park) (the Park) was formed in July of 1998 by a vote of the property owners within the proposed Park. The Park, a separate legal entity, was formed to provide a financing mechanism for the purchase, construction, expansion, or rehabilitation of any real or tangible property, including public facilities and infrastructure improvements, necessary to meet increased demands placed upon local agencies as a result of development occurring within the Park. In addition, the Park can fund a variety of public services including maintenance of parks, parkways, and open space.
The Park is the vehicle that will be used to ensure that all landowners within the Park pay their share of the public improvements and services needed. The Park includes two assessor’s parcels and more than 80 acres of property located in the southwestern section of the City of Modesto, California (the City). The property is subdivided into eight parcels ranging in size from 1.12 to 24.17 acres. The parcels have been zoned M-2, which is a heavy industrial designation allowing for development of warehouse, distribution, processing, manufacturing, and other related uses.
The Park is an integral part of the City and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the Park. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Park considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the Park.
The Park reports the following major governmental fund:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the Park.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the Park is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed – Amounts constrained to specific purposes by the Park itself, using the Park’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the Park takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. • Assigned – Amounts the Park intends to use for a specific purpose. Intent can be expressed by the Park at either the highest level of decision-making or by an official or body to which the Park delegates the authority.
• Unassigned – The residual classification for the Park that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.
The Park establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the Park through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the Park’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the Park recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the Park that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the Park that is applicable to a future reporting period. Deferred inflows reported by the Park consist of unearned deferred assessments that have been billed as of year-end, but not yet collected. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Position: Net position represents the residual interest in the Park’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ending June 30, 2021, the Park implemented the following standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022 which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the Park are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance.
Credit quality ratings are not available for the Park’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The Park does not have any deposits with financial institutions as of June 30, 2022.
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 10,926
Total cash and investments $ 10,926
Deposits with City of Modesto
Cash and investment pool $ 10,926
Total cash and investments $ 10,926
Concentration of Credit Risk
The Park is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the Park in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 2 – CASH AND INVESTMENTS (continued)
Fair Value Hierarchy
The Park categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The Park’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the Park’s position in the pool is the same as the value of its pool shares.
NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Park Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the Park.
NOTE 4 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the Novel Coronavirus (COVID-19). The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the Park’s service area. The ultimate impact of COVID-19 on the operations and finances of the Park remains unknown #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 major fund of the City of Modesto Community Facilities District Number 1998-1 (Enterprise Business Park) (the Park), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the Park’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Park’s internal control over financial reporting (internal control) as a basis for designing 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 Park’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Park’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Park’s financial statements are free from 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 financial statements.
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. #1..
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23 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 Park’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 4 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 12 Statement of Activities – Governmental Activities ............................................................................. 13 Balance Sheet – Governmental Funds ................................................................................................ 15 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities....................................................................... 16 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds.............................................................................................. 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of
Governmental Activities.................................................................................................................... 18 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual.............................................................. 19 Notes to Basic Financial Statements.................................................................................................................. 20 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...................................................................................................................... 27 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2003-1 (Fairview Village) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4–10 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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. #1..
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3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’sinternal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2003-1 (Fairview Village) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
In 1989, the City adopted the Urban Growth Management Strategy, which requires that any future development within the “Urban Reserve” be planned and annexed as “villages” under the auspices of Specific Plans. This action was seen as necessary to prevent new development from occurring in undeveloped areas prior to there being adequate consideration for public facilities such as roadways, parks, schools, and utility improvements.
Fairview Village is a proposed planned community with an expected population of 5,000 people living in approximately 2,250 homes. The project is to be developed on a 364-acre site located just outside the southwest edge of the City in Stanislaus County. The Fairview Village Plan Area is essentially square with each edge approximately three-quarters of a mile in length. It is contiguous to the Bret Harte neighborhood on the east, and is bounded by the expanded Hatch Road to the north, Carpenter Road to the west, and Whitmore Avenue to the south.
The District is designed around a large central neighborhood park and new elementary school that forms the center of the new community. Fairview Village will also include a secondary elementary school and a commercial center with shops, offices, and apartments.
In December 2003, the City Council formed the District and authorized the District to issue up to $25 million in bonded indebtedness to acquire or construct certain water, storm drain, and sewer system improvements and a bike trail and all appurtenances and appurtenant work in connection therewith. The only qualified voter eligible to vote during the formation of the District was Del Valle Corporation (the Developer), the owner of approximately
81.66 acres. A final map was recorded subdividing the Developer’s 81.66 acres into 382 single-family residential lots.
In September 2005, the District issued Special Tax Bonds, Series 2005 in the principal amount of $5 million. The majority of the net construction proceeds were used to reimburse the Developer for the District-funded infrastructure it will install pursuant to the Acquisition & Shortfall Agreements entered into with the District. In October 2005, supplemental information concerning the bond issue was distributed to the repositories. This supplemental information advised the bond holders and market of the amendments to the Acquisition & Shortfall Agreement that allow the issuance of certain occupancy permits prior to the completion of the infrastructure projects specified in the Acquisition & Shortfall Agreement. #1..
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
Matters related to the Developer’s subdivision located in the District were first memorialized in an Acquisition & Shortfall Agreement between the City and Norman Galas, etc. in December 1997. On January 9, 2003, the Acquisition & Shortfall Agreement was amended and named Del Valle Capital Corporation, Inc., as a party to the Acquisition & Shortfall Agreement. Since that time, two subsequent amendments have occurred, and additional agreements have between executed between the City and the District. The chronology of the agreements related to the Developer’s subdivision follows:
• The Acquisition & Shortfall Agreement between the City and Norman Galas, June Galas, Stanley Galas, and Bonnie K. Galas dated as of September 16, 1997, as amended by the First Amendment to the Acquisition & Shortfall Agreement between the City and Norman Galas, June Galas, Stanley Galas, Bonnie K. Galas, and Del Valle Capital Corporation, Inc., dated as of January 9, 2003, and as further amended by the Second Amendment to the Acquisition & Shortfall Agreement between the City and Norman Galas, June Galas, Stanley Galas, Bonnie K. Galas, and Del Valle Capital Corporation, Inc., dated as of June 10, 2003, and as finally amended by the Third Amendment to the Acquisition & Shortfall Agreement between the City and Norman Galas, June Galas, Stanley Galas, Bonnie K. Galas, Del Valle Capital Corporation, Inc., dated as of June 22, 2004.
• Advanced Funding Agreement for the District dated as of October 28, 2003, Subdivision Agreement, dated as of December 23, 2003, pertaining to Galas Brothers Subdivision Unit No. 1. • Subdivision Agreement, dated as of December 23, 2003, pertaining to Galas Brothers Subdivision Unit No.
2. • Agreement to Complete Necessary Infrastructure Prior to Final Inspection or Occupancy, dated as of December 23, 2003, as amended by the Amendment to Agreement dated as of January 25, 2005, and as further amended by the Second Amendment to Agreement dated as of November 9, 2005, and as further amended by the Third Amendment to Agreement dated as of December 14, 2005, and as finally amended by the Fourth Amendment to Agreement, dated as of June 27, 2006. • Two Acquisition & Shortfall Agreements between the District and Del Valle Homes, each dated as of June 22, 2004.
• Agreement by and between the City, Del Valle Capital Corporation, Inc., D.R. Horton, Inc., and Pulte Home Corporation Regarding the Funding and Construction of Certain Interim Water Improvements in Return for City’s Issuance of Certain Permits, dated as of September 30, 2005. • Letter of Agreement between City and Del Valle Homes dated as of February 2, 2007. • Agreement for the Acceptance of Completed Public Improvements and Partial Release of Security, dated as of June 12, 2007.
On November 25, 2008, the City Council approved a Settlement Agreement and Mutual Release with the Developer.
The City agreed to accept the infrastructure improvements remaining to be accepted such as the well, storage, booster pumps, wellhead treatment system, and some in-tract subdivision improvements. In return, the Developer received a gross payment of $1.3 million minus $452,365 that was withheld pursuant to the terms of the Settlement Agreement, of which approximately $99,000 will be utilized by City crews to complete repairs to the accepted infrastructure. The Developer received a net payment of $847,635. #1..
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s net position decreased to $915,175 for fiscal year 2022. • Total District revenues were $502,356.
• Total District expenses were $510,668.
Funds Basis:
• Special Revenue Fund revenues of $187,836 were $10,694 less than the prior year which was primarily due to a decrease in investment income and expenditures of $187,330 were $11,789 more than the prior year due to an increase in professional service expenditures. The Special Revenue Fund balance increased by $506 to an ending fund balance of $397,612.
• Debt Service Fund revenues of $311,751 were $5,582 lower than the prior year primarily due to a decrease in investment income and expenditures of $317,259 were $11,982 higher than the prior year due to an increase in professional service expenditures and principal payment expenditures. The Debt Service Fund balance decreased by $5,508 to an ending fund balance of $452,054.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $4,419,396 and deferred outflows of resources of $105,230 were offset by liabilities of $3,609,451. The District’s net position from governmental activities decreased to $915,175 in 2022 from $923,487 in 2021. All of the District’s net position is restricted as follows: $400,996 for District maintenance and $514,179 for debt service.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 662,143 $ 659,655 $ 2,488
Cash and investments with fiscal agent 195,219 195,193 26 Taxes receivable 10,310 6,027 4,283
Assessments receivable 3,550,000 3,694,254 (144,254)
Prepaid expenses - 636 (636)
Interest receivable 1,724 1,530 194
Total assets 4,419,396 4,557,295 (137,899)
Deferred loss on refunding 105,230 113,222 (7,992)
Current and other liabilities 59,451 57,030 2,421
Long-term debt 3,550,000 3,690,000 (140,000)
Total liabilities 3,609,451 3,747,030 (137,579)
Net position:
Restricted for:
District maintenance 400,996 399,442 1,554
Debt service 514,179 524,045 (9,866)
Total net position $ 915,175 $ 923,487 $ (8,312)
Statement of Net Position - Governmental Activities
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came from facilities and maintenance special tax of $523,774 and investment earnings (loss) of ($21,418). District expenses of $510,668 were for professional services, utilities, and interest.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Facilities and maintenance special tax $ 523,774 $ 522,640 $ 1,134 Investment earnings (loss) (21,418) (750) (20,668)
Total revenues 502,356 521,890 (19,534)
Expenses:
Community development 354,021 325,356 28,665
Interest on long-term debt 156,647 161,677 (5,030)
Total expenses 510,668 487,033 23,635
Change in net position (8,312) 34,857 $ (43,169)
Net position, Beginning of Year 923,487 888,630
Net position, End of Year $ 915,175 $ 923,487
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year, and may change from year to year as a result of changes in the pattern of District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for both the Special Revenue Fund and the Debt Service Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ 187,836 $ 198,530 $ (10,694)
Expenditures 187,330 175,541 11,789
Changes in fund balance 506 22,989 $ (22,483)
Fund balance, Beginning of Year 397,106 374,117
Fund balance, End of Year $ 397,612 $ 397,106
2022 2021 Change
Revenues $ 311,751 $ 317,333 $ (5,582)
Expenditures 317,259 305,277 11,982
Changes in fund balance (5,508) 12,056 $ (17,564)
Fund balance, Beginning of Year 457,562 445,506
Fund balance, End of Year $ 452,054 $ 457,562
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Debt Service Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $849,666, which was a $5,002 decrease from fiscal year 2021. The Special Revenue Fund realized a $506 increase and the Debt Service Fund realized a decrease of $5,508 due to increase in investment loss and increase in service expenditures. #1..
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10 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
DEBT ADMINISTRATION
The District issued Special Tax Bonds, Series 2005 in the principal amount of $5 million in September 2005. Except for approximately $20,000 that was used to reimburse the City’s water fund for work performed by its crews, the proceeds were used to reimburse the Developer for infrastructure it installed pursuant to the Acquisition & Shortfall Agreements entered into between Developer and the District.
The District issued Refunding Special Tax Bonds, Series 2014 in the principal amount of $4.4 million in December 2014 to refund the outstanding Special Tax Bonds, Series 2005.
The balance of the long-term debt at June 30, 2022, is $3.55 million. Additional details can be found in Note 3 to the financial statements.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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11 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting as that used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 662,143
Cash and investments with fiscal agent 195,219
Taxes receivable 10,310
Assessments receivable 3,550,000
Interest receivable 1,724
Total Assets 4,419,396
DEFERRED OUTFLOWS OF RESOURCES
Loss on refunding 105,230
Total Deferred Outflows of Resources 105,230
LIABILITIES
Accounts payable 10,934
Interest payable 48,517
Long-term debt:
Due within one year 155,000
Due in more than one year 3,395,000
Total Liabilities 3,609,451
NET POSITION
Restricted for:
District maintenance 400,996
Debt service 514,179
Total Net Position $ 915,175
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community development $ 354,021 $ - $ (354,021)
Interest on long-term debt 156,647 - (156,647)
$ 510,668 $ - (510,668)
General Revenues:
Facilities and maintenance special tax 523,774
Investment earnings (loss) (21,418)
Total General Revenues 502,356
(8,312)
Net Position, Beginning of Year 923,487
Net Position, End of Year $ 915,175
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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14 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
The Debt Service Fund accounts for the payment of principal and interest on the 2014 Refunding Special Tax Bonds. #1..
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Special Debt
Revenue Service
Fund Fund Total
ASSETS
Cash and investments $ 404,613 $ 257,530 $ 662,143
Cash and investments with fiscal agent - 195,219 195,219 Taxes receivable 3,960 6,350 10,310
Assessments receivable - 3,550,000 3,550,000
Interest receivable 857 867 1,724
Total Assets $ 409,430 $ 4,009,966 $ 4,419,396
LIABILITIES
Accounts payable $ 8,434 $ 2,500 $ 10,934
Total Liabilities 8,434 2,500 10,934
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 3,384 3,555,412 3,558,796
Total Deferred Inflows of Resources 3,384 3,555,412 3,558,796
FUND BALANCES
Restricted:
District maintenance 397,612 - 397,612
Debt service - 452,054 452,054
Total Fund Balances 397,612 452,054 849,666
Total Liabilities, Deferred Inflows of
Resources, and Fund Balances $ 409,430 $ 4,009,966 $ 4,419,396 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 849,666
Other long-term assets are not available to pay for the current period expenditures and therefore are deferred in the funds. 3,550,000 Revenues not available for current-period expenditues are deferred in governmental funds, but are considered earned in the Statement 8,796 of Net Position.
Long term liabilities, and the related deferred loss on refunding, are not due and payable in the current period and therefore are not reported in the funds.
Long-term debt (3,550,000)
Deferred loss on refunding 105,230
Interest payable (48,517)
Total Net Position - Governmental Activities $ 915,175
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Special Debt
Revenue Service
Fund Fund Total
REVENUES
Facilities and maintenance special tax $ 198,460 $ 322,545 $ 521,005 Interest income 3,463 2,964 6,427
Change in fair value of investments (14,087) (13,758) (27,845) Total Revenues 187,836 311,751 499,587
EXPENDITURES
Services - professional and other 152,285 22,437 174,722 Utilities 35,045 - 35,045
Debt service:
Principal payments - 140,000 140,000
Interest and fiscal charges - 150,568 150,568
Miscellaneous - 4,254 4,254
Total Expenditures 187,330 317,259 504,589
Changes in Fund Balances 506 (5,508) (5,002)
Fund Balances, Beginning of Year 397,106 457,562 854,668 Fund Balances, End of Year $ 397,612 $ 452,054 $ 849,666 #1..
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The accompanying notes are an integral part of the financial statements. 18 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES CHANGE IN NET
POSITION OF GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ (5,002) Revenues previously recognized in the Statement of Activities that did not provide current financial resources and therefore were not reported as revenues in the funds are reported as revenues in the funds this year when received. (140,000)
Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds. 2,769 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal long-term debt and the payment to refunding escrow consumes current financial resources of governmental funds. Neither transaction, however, has any effect on net position:
Repayment of the principal of long-term debt 140,000
Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds:
Amortization of deferred loss on refunding (7,992)
Interest payable 1,913
Change in Net Position - Governmental Activities $ (8,312) #1..
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The accompanying notes are an integral part of the financial statements. 19 COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 200,000 $ 200,000 $ 198,460 $ (1,540) Interest income - - 3,463 3,463
Change in fair value
of investments - - (14,087) (14,087)
Total Revenues 200,000 200,000 187,836 (12,164)
EXPENDITURES
Services - professional
and other 149,098 149,098 152,285 (3,187)
Utilities 45,100 45,100 35,045 10,055
Total Expenditures 194,198 194,198 187,330 6,868
Changes in Fund Balance $ 5,802 $ 5,802 506 $ (5,296)
Fund Balance, Beginning of Year 397,106
Fund Balance, End of Year $ 397,612
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2003-1 (Fairview Village) (the District) was formed in December 2003 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plan. The District encompasses approximately 359 gross acres of land located in the southwest area of the City of Modesto, California (the City), the south side of Hatch Road and east of Carpenter Road. The District is expected to yield 383 single-family residential lots, a water well, storm drainage basin, water tank, sewer outfall line, and a portion of the central neighborhood park site and related infrastructure on 81.66 acres located in the northeast portion of the District. The remaining properties with the 359 acres are expected to annex to the District in the future, as the area develops.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of infrastructure within the District.
The Debt Service Fund accounts for the payment of principal and interest on the 2014 Refunding Special Tax Bonds. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1st and February 1st and are delinquent if not paid by December 10th and April 10th, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued): The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District, with the exception of cash and investments with fiscal agents, are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
24 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 662,143
Cash and investments with fiscal agent 195,219
Total cash and investments $ 857,362
Deposits with City of Modesto
Cash and investment pool $ 662,143
Money market fund 195,219
Total cash and investments $ 857,362
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, the Debt Service Fund did not hold any other investments.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
NOTE 3 – LONG TERM DEBT
On December 16, 2014, the District issued Refunding Special Tax Bonds (refunding bonds) with a par amount of $4,420,000 to refund the District’s $4,660,000 outstanding Special Tax Bonds (refunded bonds) issued on September 1, 2005, which were issued primarily to finance various public improvements needed to develop property located within the District. Interest on the refunding bonds is payable semiannually on each March 1st and September 1st through September 1, 2035. The refunding bonds were issued with an interest rate of 4.1% and are payable solely from revenues derived from the assessment of annual special taxes to be levied on the taxable property within the District and from certain other funds pledged under the Trust Indenture. The principal of these bonds are not subject to acceleration.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
25 NOTE 3 – LONG TERM DEBT (continued)
Any one or more of the following events shall constitute an “event of default” for these bonds:
(a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any bond when and as the same shall become due and payable, whether at maturity as there in expressed, by declaration or otherwise.
(b) Default in the due and punctual payment of the interest on any bond when and as the same shall become due and payable.
(c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions, or covenants for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the owners of twenty-five percent (25%) in aggregate principal amount of the outstanding bonds.
The long-term debt activity for the year ended June 30, 2022 was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Refunding Special Tax Bonds 3,690,000 $ -$ (140,000) $ $ 3,550,000 $ 155,000 Annual debt service requirements for the refunding bonds are shown below:
Year Ended June 30, Principal Interest
2023 $ 155,000 $ 142,373
2024 165,000 135,813
2025 180,000 128,740
2026 195,000 121,053
2027 205,000 112,853
2028-2032 1,285,000 418,303
2033-2037 1,365,000 116,338
$ 3,550,000 $ 1,175,473
Interest expense for the year ended June 30, 2022 was $156,647.
NOTE 4 - RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
Restricted for Debt Service - the portion of fund balance legally restricted to the payment of principal and interest on long-term liabilities.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2003-1 FAIRVIEW VILLAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
26 NOTE 5 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1 following the end of the fiscal year.
At June 30, 2022, the District had five parcels that were delinquent for a total of $8,796, three of which were delinquent for more than three consecutive payments.
The District received 104.3% of the Special Revenue Fund and Debt Service Fund facilities and maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $4,810 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.
NOTE 6 – DEFICIENCY OF EXPENDITURES OVER APPROPRIATIONS Deficiency of expenditures over appropriations for the year ended June 30, 2022 was as follows:
Expenditures Amount
Special Revenue Fund:
Services - professional and other $ (3,187)
NOTE 7 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the State, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2003-1 (Fairview Village) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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28 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 10 Statement of Activities – Governmental Activities ............................................................................. 11 Balance Sheet – Governmental Funds ................................................................................................ 13 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 14 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................ 16 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Special Revenue Fund – Budget and Actual............................................................... 17 Notes to Basic Financial Statements.................................................................................................................. 18 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...................................................................................................................... 23 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2007-2 (Kiernan Business Park West) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance, but is not absolute assurance, and therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. #1..
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-8 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2007-2 (Kiernan Business Park West) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
On April 1, 1997, the City Council approved the Kiernan Business Park Specific Plan that set forth a plan of development for approximately 614 acres that were, at that time, located adjacent to the City’s northern border, east of Highway 99 and south of Kiernan Avenue in a portion of unincorporated Stanislaus County. To date approximately 250 acres within the Kiernan Business Park Specific Plan have been annexed into the City.
Approximately 88 of the City annexed acres will ultimately be included within the District. The Kiernan Business Park Specific Plan is intended to provide for the development of a new business park, commercial and industrial uses that will assist in implementing the City’s long-range objectives to enhance its local economy, generate jobs for residents and create a better job housing balance.
The District was formed by the City Council in September 2007 to generate funding for construction of certain roadway improvements and the ongoing maintenance of landscaped medians, a bike path, well site, storm drainage pump and basin and related facilities.
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s total net position in fiscal year 2022 was $195,176. • At June 30, 2022, total assets were $200,157 while total liabilities were $4,981. • Total District revenues were $102,567 and expenses were $52,783.
Funds Basis:
• Capital Projects Fund revenues decreased from $42,335 in the prior year to $30,449 for fiscal year 2022 and expenditures of $0 were the same as in the previous year. The decrease in revenues is attributed to a decrease in annual facilities special tax.
• Special Revenue Fund revenues increased from $49,790 in the prior year to $86,724 for fiscal year 2022 and expenditures increased from $43,110 in the prior year to $52,783 for fiscal year 2022. The increase in revenue is due to an increase in the annual maintenance special tax, and the increase in expenditures is due primarily to an increase in services and utilities expenditures. Special Revenue Fund ending fund balance increased from $88,451 in prior year to $122,392 in current year.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities – All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $200,157 were offset by liabilities of $4,981. The District’s net position from governmental activities increased to $195,176 in 2022 from $145,392 in 2021. The District’s net position has restrictions as follows: $72,784 for acquisition or construction of infrastructure, $122,392 for District maintenance.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 192,641 $ 133,872 $ 58,769
Taxes receivable 7,095 14,606 (7,511)
Interest receivable 421 269 152
Total assets 200,157 148,747 51,410
Current and other liabilities 4,981 3,355 1,626
Net position:
Restricted for:
Capital projects 72,784 42,335 30,449
District maintenance 122,392 103,057 19,335
Total net position $ 195,176 $ 145,392 $ 49,784
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from annual facilities and maintenance special taxes, which amounted to $30,449 and $76,391, respectively, along with a reduction of investments loss of ($4,273). District expenses of $52,783 were for professional services and utilities.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Facilities special tax $ 30,449 $ 42,335 $ (11,886)
Maintenance special tax 76,391 58,412 17,979
Investment earnings (loss) (4,273) 80 (4,353)
Total revenues 102,567 100,827 1,740
Expenses:
Community development 52,783 43,110 9,673
Change in net position 49,784 57,717 $ (7,933)
Net position, beginning of year 145,392 87,675
Net position, end of year $ 195,176 $ 145,392
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s funds. The fund financial statements measure only current revenues and expenditures and fund balance; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All of the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balances for both Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ 30,449 $ 42,335 $ (11,886)
Expenditures - - -
Changes in fund balances 30,449 42,335 $ (11,886)
Fund balances, beginning of year 42,335 -
Fund balances, end of year $ 72,784 $ 42,335
2022 2021 Change
Revenues $ 86,724 $ 49,790 $ 36,934
Expenditures 52,783 43,110 9,673
Changes in fund balances 33,941 6,680 $ 27,261
Fund balances, beginning of year 88,451 81,771
Fund balances, end of year $ 122,392 $ 88,451
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $195,176, an increase of $64,390 from the fiscal year 2021. The Capital Projects Fund realized a $30,449 increase primarily due to an increased annual facilities special tax. While the Special Revenue Fund realized a $33,941 increase due to an annual maintenance special tax revenues exceeding professional services and utilities expenditures.
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 192,641
Taxes receivable 7,095
Interest receivable 421
Total Assets 200,157
LIABILITIES
Accounts payable 4,981
Total Liabilties 4,981
NET POSITION
Restricted for:
Capital projects 72,784
District maintenance 122,392
Total Net Position $ 195,176
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 52,783 $ - $ (52,783)
$ 52,783 $ - (52,783)
General Revenues:
Facilities special tax 30,449
Maintenance special tax 76,391
Investment earnings (loss) (4,273)
Total General Revenues 102,567
49,784
Net Position, Beginning of Year 145,392
Net Position, End of Year $ 195,176
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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12 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined its funds to both be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 72,784 $ 119,857 $ 192,641
Taxes receivable - 7,095 7,095
Interest receivable - 421 421
Total Assets $ 72,784 $ 127,373 $ 200,157
LIABILITIES
Accounts payable $ - $ 4,981 $ 4,981
Total Liabilities - 4,981 4,981
FUND BALANCES
Restricted for:
District maintenance 72,784 122,392 195,176
Total Fund Balances 72,784 122,392 195,176
Total Liabilities
and Fund Balances $ 72,784 $ 127,373 $ 200,157
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 195,176
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position:
None noted. -
Total Net Position - Governmental Activities $ 195,176
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Facilities special tax $ 30,449 $ - $ 30,449
Maintenance special tax - 90,997 90,997
Interest income - 1,499 1,499
Change in fair value of investments - (5,772) (5,772)
Total Revenues 30,449 86,724 117,173
EXPENDITURES
Services - professional and other - 49,863 49,863
Utilities - 2,920 2,920
Total Expenditures - 52,783 52,783
Changes in Fund Balances 30,449 33,941 64,390
Fund Balances, Beginning of Year 42,335 88,451 130,786
Fund Balances, End of Year $ 72,784 $ 122,392 $ 195,176 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 64,390
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities:
Revenues that are considered earned in the Statement of Actvities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds. (14,606) Change in Net Position - Governmental Activities $ 49,784 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 60,000 $ 60,000 $ 90,997 $ 30,997 Interest income - - 1,499 1,499
Change in fair value
of investments - - (5,772) (5,772)
Total Revenues 60,000 60,000 86,724 26,724
EXPENDITURES
Services - professional
and other 47,629 50,629 49,863 766
Utilities 5,100 5,100 2,920 2,180
Total Expenditures 52,729 55,729 52,783 2,946
Changes in Fund Balance $ 7,271 $ 4,271 33,941 $ 29,670 Fund Balance, Beginning of Year 88,451
Fund Balance, End of Year $ 122,392
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2007-2 (Kiernan Business Park West) (the District) was formed in October 2007 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plans. The District is the vehicle that will be used to ensure that all landowners in the District pay their share of the public improvements. The District is a proposed 88-acre project, a portion of the Kiernan-Carver Comprehensive Planning District, and bounded on the North by Kiernan Avenue, on the East by Dale Road, on the South by Bangs Avenue, and on the West by Modesto’s City Limits.
The District is an integral part of the City and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings and other items which are not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Facilities and Maintenance Special Taxes: The facilities and maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due October 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed – Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned – Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned – The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued): The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 192,641
Total cash and investments $ 192,641
Deposits with City of Modesto
Cash and investment pool $ 192,641
Total cash and investments $ 192,641
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-2 KIERNAN BUSINESS PARK WEST
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 2 – CASH AND INVESTMENTS (continued)
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects – the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
Restricted for District Maintenance – the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
NOTE 4 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2007-2 (Kiernan Business Park West) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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24 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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 4 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 11 Statement of Activities – Governmental Activities ............................................................................. 12 Balance Sheet - Governmental Funds................................................................................................. 14 Statement of Revenues, Expenditures, and Changes in
Fund Balances - Governmental Funds................................................................................................. 15 Statement of Revenues, Expenditures, and Changes in -
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 16 Notes to Basic Financial Statements.................................................................................................................. 17 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...................................................................................................................... 22 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 1997-1 (North Beyer Park) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4–9 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s internal control over financial reporting or on compliance.
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3 That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 1997-1 (North Beyer Park) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
On November 26, 1996, the City Council of the City approved the North Beyer Park Specific Plan, allowing for a maximum of 1,200 residential units to be developed on 160 acres within the Specific Plan area. In addition, three areas within the Specific Plan were designated “Mixed Use,” two of which were expected to develop as neighborhood commercial shopping centers and the third which was expected to develop as office space. At the same meeting at which the City Council approved the Specific Plan, a residential subdivision was approved for 263 dwelling units to be built on 55 acres within the Specific Plan. One condition of the tentative map of this subdivision required formation of or annexation into a Mello-Roos Community Facilities District (CFD) to fund maintenance of parkways and open space within the development.
In order to comply with the condition of the tentative map, in June 1997 the District was formed and authorized to levy a special tax to pay for capital improvements (medians on Coffee and Oakdale Roads) and ongoing maintenance costs. Subsequent development has annexed to this CFD.
To date, the CFD has been unable to construct the medians. This is because (1) insufficient tax monies have been collected for the construction projects and (2) the medians cannot be installed until the property owners on both sides of Coffee and Oakdale Roads dedicate the necessary right-of-way to construct the full street width. However, the CFD has levied and collected taxes sufficient for the ongoing maintenance expenses. In fact, the CFD has built sufficient reserves that the levy of the annual maintenance tax ceased as of fiscal year 2003-2004 and is not expected to be reinstated until the authorized improvements have been installed. #1..
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s net position decreased $14,823 in fiscal year 2022. • At June 30, 2022, net position was $54,266.
• Total general revenues were an investment loss of $1,627.
Funds Basis:
• Capital Projects Fund revenues were ($1,297). This is a decrease of $1,303 from the prior year. The revenues are attributed to interest earnings and investment loss. • Capital Projects Fund ending fund balance decreased $1,297 to $44,136. • Special Revenue Fund revenues of ($330) were $318 less than last year. Revenues are attributed to a decrease in interest earnings and investment loss. Expenditures of $13,196 were $3,319 more than the prior year.
• Special Revenue Fund ending fund balance decreased $13,526 to $10,130.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. Formation deposits, special facilities taxes, and annual maintenance assessments support these services. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets were $54,266. The District’s net position from governmental activities decreased to $54,266 in 2022 from $69,089 in 2021. All of the District’s net position is restricted as follows: $44,136 for capital projects and $10,130 for District maintenance.
Following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 54,152 $ 68,959 $ (14,807)
Interest receivable 114 130 (16)
Total assets 54,266 69,089 (14,823)
Net position:
Restricted for:
Capital projects 44,136 45,433 (1,297)
District maintenance 10,130 23,656 (13,526)
Total net position $ 54,266 $ 69,089 $ (14,823)
Statement of Net Position - Governmental Activities
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 recognized an investment loss of $1,627. Community Development expensesincreased by $3,319 due to an increase in salaries and benefits by City employees providing administrative and program services charged to the District.
Following is a condensed Statement of Activities:
2022 2021 Change
Revenues:
General revenues:
Investment earnings (loss) $ (1,627) $ (6) $ (1,621)
Expenses:
Community development 13,196 9,877 3,319
Change in net position (14,823) (9,883) $ (4,940)
Net position, beginning of year 69,089 78,972
Net position, end of year $ 54,266 $ 69,089
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purposes are explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
Following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balances for the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021:
2022 2021 Change
Revenues $ (1,297) $ 6 $ (1,303)
Expenditures - - -
Changes in fund balances (1,297) 6 $ (1,303)
Fund balances, beginning of year 45,433 45,427
Fund balances, end of year $ 44,136 $ 45,433
2022 2021 Change
Revenues $ (330) $ (12) $ (318)
Expenditures 13,196 9,877 3,319
Changes in fund balances (13,526) (9,889) $ (3,637)
Fund balances, beginning of year 23,656 33,545
Fund balances, end of year $ 10,130 $ 23,656
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $54,266, which is a decrease of $14,823 compared with last year. The Capital Projects Fund realized a $1,297 decrease due to investment loss, while the Special Revenue Fund realized a $13,526 decrease due to professional services expenditures and investment loss.
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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10 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 54,152
Interest receivable 114
Total Assets 54,266
NET POSITION
Restricted for:
Capital projects 44,136
District maintenance 10,130
Total Net Position $ 54,266
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 13,196 $ - $ (13,196)
$ 13,196 $ - (13,196)
General Revenues:
Investment earnings (loss) (1,627)
Total General Revenues (1,627)
(14,823)
Net Position, Beginning of Year 69,089
Net Position, End of Year $ 54,266
Revenues
Change in Net Position
Program
Net (Expenses)
Revenues and
Changes in Net
Position
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13 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 44,038 $ 10,114 $ 54,152
Interest receivable 98 16 114
Total Assets $ 44,136 $ 10,130 $ 54,266
FUND BALANCES
Restricted for:
Capital projects $ 44,136 $ - $ 44,136
District maintenance - 10,130 10,130
Total Fund Balances $ 44,136 $ 10,130 $ 54,266
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 54,266
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position: -
Total Net Position - Governmental Activities $ 54,266
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Interest income $ 430 $ 101 $ 531
Change in fair value of investments (1,727) (431) (2,158) Total Revenues (1,297) (330) (1,627)
EXPENDITURES
Services - professional and other - 13,196 13,196
Total Expenditures - 13,196 13,196
Changes in Fund Balances (1,297) (13,526) (14,823)
Fund Balances, Beginning of Year 45,433 23,656 69,089
Fund Balances, End of Year $ 44,136 $ 10,130 $ 54,266
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ (14,823) Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities: -
Change in Net Position - Governmental Activities $ (14,823) #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Interest income $ - $ - $ 101 $ 101
Change in fair value
of investments - - (431) (431)
Total Revenues - - (330) (330)
EXPENDITURES
Services - professional
and other 13,105 16,105 13,196 2,909
Total Expenditures 13,105 16,105 13,196 2,909
Changes in Fund Balance $ (13,105) $ (16,105) (13,526) $ 2,579 Fund Balance, Beginning of Year 23,656
Fund Balance, End of Year $ 10,130
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
17 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 1997-1 (North Beyer Park) (the District) was formed in June 1997 by a vote of the property owners within the proposed District. The District, a separate legal entity, was formed to provide a funding mechanism for public facilities and services as required by the District Specific Plan. The District is a 160-acre project, the boundaries of which are recorded in Book 2, page 80 of the Book of Assessment District Maps in the Stanislaus County Recorder’s Office.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest-level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.
The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.
This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts.
Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Position (continued):
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 54,152
Total cash and investments $ 54,152
Deposits with City of Modesto
Cash and investment pool $ 54,152
Total cash and investments $ 54,152
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1997-1 NORTH BEYER PARK
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 4 – CONTINGENCIES
Coronavirus Pandemic: Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area The ultimate impact of COVID-19 on the operations and finances of the District is unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
To the Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 1997-1 (North Beyer Park) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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23 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 4 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 11 Statement of Activities – Governmental Activities ............................................................................. 12 Balance Sheet – Governmental Funds ................................................................................................ 14 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 15 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement Of Activities Change in Net Position of Governmental Activities........................................................ 17 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 18 Notes to Basic Financial Statements.................................................................................................................. 19 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...................................................................................................................... 27 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2002-1 (Northpointe) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Change in Accounting Principle
As described in Note 10 to the financial statements, in 2022, the District adopted new accounting guidance, GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4-9 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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. #1..
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3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2002-1 (Northpointe) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
On April 1, 1997, the City Council approved the Kiernan Business Park Specific Plan that set forth a plan of development for approximately 614 acres that were, at that time, located adjacent to the City’s northern border, east of Highway 99 and south of Kiernan Avenue in a portion of unincorporated Stanislaus County. To date, approximately 250 acres within the Kiernan Business Park Specific Plan have been annexed into the City.
Approximately 55 of the City-annexed acres are included within the District. The Kiernan Business Park Specific Plan is intended to provide for the development of a new business park, commercial and industrial uses that will assist in implementing the City’s long-range objectives to enhance its local economy, generate jobs for residents, and create a better jobs/housing balance.
The District was formed by the City Council in February 2002 in order to generate funding for landscaping improvements, a variety of maintenance responsibilities (weed control, litter removal, landscape maintenance, and general maintenance and replacement of storm drainage facilities), and improvement and replacement costs necessitated by development of the projects within the District. The Capital Projects Fund, earmarked to fund the storm drain basin landscape improvements, will be utilized once the final configuration of the storm drain basin has been determined.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s net position increased to $459,572 for fiscal year 2022. • Total District revenues were $63,169.
• Total District expenses were $38,452.
Funds Basis:
• Capital Projects Fund revenues of ($1,297) were $1,301 lower than the prior year due to decrease in interest income and increase in investment loss. Expenditures of $0 were the same as the previous year. The Capital Projects Fund ending fund balance decreased by $1,297, with an ending fund balance of $44,170. • Special Revenue Fund revenues of $64,466 were $3,560 lower than the prior year primarily due to there being a decrease in interest income and increase in investment loss in the current year. Expenditures of $41,259 were $5,248 higher than the prior year due to an increase in services expenditures. The special revenue fund balance increased by $25,703 to an ending fund balance of $415,091.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental Activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $712,524 were offset by liabilities of $2,443 and deferred inflows of resources of $250,509. The District’s net position from governmental activities increased to $459,572 in 2022 from $434,855 in 2021. All of the District’s net position is restricted as follows: $311 for right-to-use asset net of lease liability, $44,170 for acquisition or construction of infrastructure and $415,091 for maintaining that infrastructure.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 452,502 $ 434,123 $ 18,379
Assessments receivable 293 323 (30)
Interest receivable 979 842 137
Right-to-use asset, net of accumulated amortization 1,560 - 1,560 Lease receivable, current 7,957 - 7,957
Lease receivable, noncurrent 249,233 - 249,233
Total assets 712,524 435,288 277,236
Current and other liabilities 1,194 433 761
Lease liability 1,249 - 1,249
Total liabilities 2,443 433 2,010
Unavailable assessments 293 - 293
Leases 250,216 - 250,216
Total deferred inflows of resources 250,509 - 250,509
Net position:
Net investment in capital assets 311 - 311
Restricted for:
Capital projects 44,170 45,467 (1,297)
District maintenance 415,091 389,388 25,703
Total net position $ 459,572 $ 434,855 $ 24,717
Statement of Net Position - Governmental Activities
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from maintenance special tax of $59,722 and lease revenue of $11,962. District expenses of $38,452 were for professional services and utilities expenses.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Maintenance special tax $ 59,722 $ 60,074 $ (352)
Investment earnings (12,487) 36 (12,523)
Interest revenue - leases 3,972 - 3,972
Lease revenue 11,962 - 11,962
Miscellaneous - 7,920 (7,920)
Total revenues 63,169 68,030 (4,861)
Expenses:
Community development 38,452 36,011 2,441
Change in net position 24,717 32,019 $ (7,302)
Net position, beginning of year 434,855 402,836
Net position, end of year $ 459,572 $ 434,855
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balances for both the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ (1,297) $ 4 $ (1,301)
Expenditures - - -
Changes in fund balances (1,297) 4 $ (1,301)
Fund balances, beginning of year 45,467 45,463
Fund balances, end of year $ 44,170 $ 45,467
2022 2021 Change
Revenues $ 64,466 $ 68,026 $ (3,560)
Expenditures (41,259) (36,011) (5,248)
Other financing sources (uses) 2,496 - 2,496
Changes in fund balances 25,703 32,015 $ 4,184
Fund balances, beginning of year 389,388 357,373
Fund balances, end of year $ 415,091 $ 389,388
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $459,261, which was a $24,406 increase from fiscal year 2021. The Capital Projects Fund realized a $1,297 decrease, due to investment loss, while the Special Revenue Fund realized a $25,703 increase due to maintenance special tax and investment revenues exceeding professional services and utilities.
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets besides the intangible right-to-use asset.
LEASES
Under GASB Statement No. 87, the District is required to record all leases that meets the definition of a lease as defined in GASB Statement No. 87. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. Accordingly, the lease liability of $1,249 and the right-to-use asset, net of accumulated amortization of $1,560 is reported on the government-wide financial statements. The District recognized a lease receivable of $257,190 and deferred inflow of resources of $250,216 in both the District’s fund and government-wide financial statements.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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10 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 452,502
Assessments receivable 293
Interest receivable 979
Right-to-use asset, net of accumulated amortization 1,560 Lease receivable, current 7,957
Lease receivable, noncurrent 249,233
Total Assets 712,524
LIABILITIES
Accounts payable 1,194
Lease liability 1,249
Total Liabilities 2,443
DEFERRED INFLOWS OF RESOURCES
Unavailable assessments 293
Leases 250,216
Total Deferred Inflows of Resources 250,509
NET POSITION
Net investment in capital assets 311
Restricted for:
Capital projects 44,170
District maintenance 415,091
Total Net Position $ 459,572
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 38,452 $ - $ (38,452)
$ 38,452 $ - (38,452)
General Revenues:
Maintenance special tax 59,722
Investment earnings (12,487)
Interest revenue - leases 3,972
Lease revenue 11,962
Total General Revenues 63,169
24,717
Net Position, Beginning of Year 434,855
Net Position, End of Year $ 459,572
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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13 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 44,072 $ 408,430 $ 452,502
Assessments receivable - 293 293
Interest receivable 98 881 979
Lease receivable - 257,190 257,190
Total Assets $ 44,170 $ 666,794 $ 710,964
LIABILITIES
Accounts payable $ - $ 1,194 $ 1,194
Total Liabilities - 1,194 1,194
DEFERRED INFLOWS OF RESOURCES
Unavailable assessments - 293 293
Leases, net of accumulated amortization - 250,216 250,216 Total Deferred Inflows of Resources - 250,509 250,509
FUND BALANCES
Restricted for:
Capital projects 44,170 - 44,170
District maintenance - 415,091 415,091
Total Fund Balances 44,170 415,091 459,261
Total Liabilities, Deferred Inflows of
Resources, and Fund Balances $ 44,170 $ 666,794 $ 710,964 #1..
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 459,261
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position: -
Right-of-use assets used in governmental activities not financial resources and, therefore, are not reported in the funds (net of accumulated amortization of $936) 1,560
Long-term liabilities are not due in the current period and, therefore are not included in the governmental fund (1,249)
Total Net Position - Governmental Activities $ 459,572
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Maintenance special tax $ - $ 59,722 $ 59,722
Interest income 431 3,735 4,166
Change in fair value of investments (1,728) (14,925) (16,653) Interest revenue - leases - 3,972 3,972
Lease revenue - 11,962 11,962
Total Revenues (1,297) 64,466 63,169
EXPENDITURES
Services - professional and other - 31,710 31,710
Utilities - 5,802 5,802
Capital outlay - 2,496 2,496
Debt service:
Principal retirement - 1,247 1,247
Interest - 4 4
Total Expenditures - 41,259 41,259
Excess (Deficiency) of Revenues
Over (Under) Expenditures (1,297) 23,207 21,910
OTHER FINANCING SOURCES (USES)
Other financing sources - leases - 2,496 2,496
Total Other Financing Sources (Uses) - 2,496 2,496
Changes in Fund Balances (1,297) 25,703 24,406
Fund Balances, Beginning of Year 45,467 389,388 434,855 Fund Balances, End of Year $ 44,170 $ 415,091 $ 459,261 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 24,406
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities: -
(936)
1,247
Change in Net Position - Governmental Activities $ 24,717 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the lease is capitalized as a right of use asset along with a corresponding lease liability to reflect the future obligation. The cost of these right-of-use asset are amortized ($936) over the life of the lease including implied interest ($4) which exceeded the lease payment ($1,251) in the current period.
Long-term liabilities are not due during the current year and, therefore, the change is not recorded in the governemental fund.
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The accompanying notes are an integral part of the financial statements. 18 COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 60,000 $ 60,000 $ 59,722 $ (278) Interest income - - 3,735 3,735
Change in fair value
of investments - - (14,925) (14,925)
Interest revenue - leases - - 3,972 3,972
Lease revenue - - 11,962 11,962
Total Revenues 60,000 60,000 64,466 4,466
EXPENDITURES
Services - professional
and other 27,607 32,007 31,710 297
Utilities 6,000 6,000 5,802 198
Capital outlay - - 2,496 (2,496)
Debt service:
Principal retirement 2,810 2,810 1,247 1,563
Interest - - 4 (4)
Total Expenditures 36,417 40,817 41,259 (442)
Excess (Deficiency) of Revenues
Over (Under) Expenditures 23,583 19,183 23,207 4,024
OTHER FINANCING SOURCES (USES)
Other financing sources - leases - - 2,496 2,496
Total Other Financing Sources (Uses) - - 2,496 2,496
Changes in Fund Balance $ 23,583 $ 19,183 25,703 $ 6,520 Fund Balance, Beginning of Year 389,388
Fund Balance, End of Year $ 415,091
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2002-1 (Northpointe) (the District) was formed in February 2002 by a vote of the property owners within the proposed District. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plans. The District is the vehicle used to ensure that all landowners in the Specific Plans pay their fair share of the public improvements. The District is a 55-acre project bounded on the East by Highway 99, and by Pelandale Avenue on the South. The District will provide for the development of new business park and industrial uses and includes such tenants as Costco, Lowe’s, and Union Safe Deposit Bank.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1st and February 1st and are delinquent if not paid by December 10th and April 10th, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Lease Receivable: The District’s lease receivable is measured at the present value of lease payments expected to be received during the lease term. There are no variable components under the lease agreement. A deferred inflow of resources is recorded for the lease. The deferred inflow of resources is recorded at the initiation of the lease in an amount equal to the initial recording of the lease receivable. The deferred inflow of resources is amortized on a straight-line basis over the term of the lease.
Right-to-Use Asset: The District has recorded right to use lease assets as a result of implementing GASB 87. The right to use assets are initially measured at an amount equal to the initial measurement of the related lease liability plus any lease payments made prior to the lease term, less lease incentives, and plus ancillary charges necessary to place the lease into service. The right to use assets are intangible capital assets and are amortized on a straight-line basis over the life of the related lease.
Lease Liability: The District’s lease liability is measured at the present value of payments expected to be made by the District during the lease term. As lease payments are made, the District will reduce the liability (principal portion of payment) and recognize interest expense.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed – Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned – Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned – The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued):
The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.
This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts.
Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure and right-touse asset, net of accumulated depreciation, accumulated amortization and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. • Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Governmental Accounting Standards Update: During the year ending June 30, 2022, the District implemented the following standards:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 452,502
Total cash and investments $ 452,502
Deposits with City of Modesto
Cash and investment pool $ 452,502
Total cash and investments $ 452,502
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
NOTE 3 – LEASE RECEIVABLE
On May 28, 2013 the District, lessor, and Horizon Towers LLC, lessee, entered into a land lease agreement for the purpose of installing, operating, and maintaining a communications facility and other improvements. The initial lease term will be for five years with a monthly rental payment of $750 for the first subtenant and $400 for each subsequent subtenant that occupies the premises. The lease agreement will automatically renew for five additional five-year terms (extension term). Monthly rent will increase by 10% at year one of each extension terms. Lease revenue recognized under the lease agreement was $11,962 for the year ended June 30, 2022. Interest revenue recognized under the lease agreement was $3,972 for the year ended June 30, 2022.
Future minimum lease and interest payments to be received are as follows:
Year Ending
June 30 Principal Interest Total
2023 7,957$ 3,803$ 11,760$
2024 8,077 3,683 11,760
2025 8,983 3,558 12,541
2026 9,514 3,417 12,931
2027 9,657 3,274 12,931
2028-2032 54,018 14,069 68,087
2033-2037 65,262 9,614 74,876
2038-2042 78,080 4,259 82,339
2043 15,642 118 15,760
257,190$ 45,795$ 302,985$
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
24 NOTE 4 – RIGHT-TO-USE ASSET
The District has recorded one right-to-use leased asset. The asset is a right-to-use asset for leased land. The related lease is discussed in Note 5. The right-to-use lease asset is amortized on a straight-line basis over the terms of the related lease.
Right-to-use assets activity related to governmental activities for the year ended June 30, 2022 was as follows:
Beginning
Balance Additions
Deletions/
Adjustments
Ending
Balance
Intangible Assets
Right-to-use land -$ 2,496$ -$ 2,496$
Total intangible assets - 2,496 - 2,496
Less: Accumulated Amortization - (936) - (936)
Total -$ 1,560$ -$ 1,560$
Amortization expense charged to the governmental activities for the year ended June 30, 2022 was $936.
NOTE 5 – LEASE LIABILITY
The District entered into a land lease agreement for the purpose of preventing damage to and stabilizing the east side of the Northpointe Basin by controlling the rodent population in and on the lease area. The lease commenced on February 25, 2014 and terminates on February 28, 2024. The District has the option to renew this lease for two additional five year terms from the expiration of the initial term. At this time, it is not likely the District will exercise the option to extend the lease. Lease expense for the year ending June 30, 2022 was $1,247. Lease interest expense for the year ending June 30, 2022 was $4. Lease liability was recognized as part of the implementation of GASB 87, Leases. Future minimum lease and interest payments for the lease liability are as follow:
Year Ending
June 30
Principal
Payments
Interest
Payments Total
2023 $ 1,249 $ 2 $ 1,251
$ 1,249 $ 2 $ 1,251
NOTE 6 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
25 NOTE 7 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS
Excess of expenditures over appropriations for the year ended June 30, 2022 were:
Expenditures Amount
Special Revenue Fund:
Capital outlay (2,496)
Interest (4)
NOTE 8 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosures proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within the 120 days after the third delinquency. b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1 following the end of the fiscal year.
At June 30, 2022, the District had one parcel that were delinquent for a total of $293, none of which were delinquent for more than three consecutive payments.
The District received 92.6% of the Special Revenue Fund maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $293 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.
NOTE 9 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the State, including the District’s service area.
The ultimate impact of COVID-19 on the operations and finances of the District remains unknown.
NOTE 10 – CHANGE IN ACCOUNTING PRINCIPLE
GASB Statement No. 87, Leases, establishes specific criteria used to account for contracts that meets the definition of a lease. Implementation of GASB Statement No. 87 requires lessee to recognize a lease liability and an intangible right-to-use asset, and lessor to recognize a lease receivable and a deferred inflow of resources. The Statement is to enhance the relevance and consistency of information about governments’ leasing activities. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2002-1 NORTHPOINTE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
26 NOTE 10 – CHANGE IN ACCOUNTING PRINCIPLE (continued) As of June 30, 2022, the District had two leases that meets the criteria of GASB Statement No. 87 and the District has implemented the Statement accordingly. The Statement is applied retroactively and the financial statements are restated for all prior periods presented. As of June 30, 2022, the District recognized a right-to-use asset of $1,560 and lease liability of $1,249 for the lease in which the District is a lessee. The District also recognized a lease receivable of $257,190 and deferred inflow of resources of $250,216 as of June 30, 2022 for the lease in which the District is a lessor.
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2002-1 (Northpointe) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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28 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 4 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 11 Statement of Activities – Governmental Activities ............................................................................. 12 Balance Sheet – Governmental Funds ................................................................................................ 14 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 15 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................ 17 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Special Revenue Fund – Budget and Actual............................................................... 18 Notes to Basic Financial Statements.................................................................................................................. 19 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...................................................................................................................... 28 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2004-1 (Village One #2) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Change in Accounting Principle
As described in Note 8 to the financial statements, in 2022, the District adopted new accounting guidance, GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4-9 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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. #1..
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3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’sinternal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2004-1 (Village One #2) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
The Village One #2 Specific Plan encompasses approximately 1,840 gross acres of land within the City, on which a pedestrian-oriented, mixed-use, planned community is anticipated to be developed. In 1996 the City Council formed City of Modesto Community Facilities District (CFD) No. 1996-1 to provide funding for the acquisition or construction of certain road, storm drainage, and park improvements. In 2004 it was determined that the tax rates set forth in CFD No. 1996-1 would be insufficient to fund the required infrastructure; therefore, in early 2004, the City Council formed the District to assist in the financing of the remaining required infrastructure. The District includes a onetime facilities special tax, an annual facilities special tax, and an annual maintenance special tax. The District, in conjunction with CFD No. 1996-1, will provide the funding needed to complete the District funded core infrastructure needed for the Village One #2 area.
In fiscal year 2021-2022, the District did not have funded infrastructure that was under design, construction or constructed/acquired for the Village One #2 area using tax monies and bond proceeds from the District.
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s total net position in fiscal year 2022 was $17.9 million. • At June 30, 2022, total assets were $44.0 million while total liabilities were $25.7 million. • Total District revenues were $3.0 million and expenses were $1.9 million. #1..
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
Funds Basis:
• Capital Projects Fund revenues decreased from $877k in the prior year to $725k for fiscal year 2022 and expenditures decreased from $857 in the prior year to $0 for fiscal year 2022. The decrease in revenues is attributed to a decrease in interest income and change in fair value of investments, and the decrease in expenditures is attributed to a decrease in activity in development of capital projects. • Capital Projects Fund ending fund balance for fiscal year 2022 increased from $14.3 million to $15 million.
This increase is primarily attributed to a decrease in activity in development of capital projects and a decrease in other financing uses.
• Special Revenue Fund revenues increased from $988k in the prior year to $1.1 million for fiscal year 2022 and expenditures increased from $694k in the prior year to $780k for fiscal year 2022. The increase in revenue is due to an increase in the maintenance special tax, and the increase in expenditures is due primarily to an increase in services and utilities expenditures. • Special Revenue Fund ending fund balance increased from $243k in prior year to $517k in current year. • Debt Service Fund revenues decreased by $766 to $1.95 million in fiscal year 2022 and expenditures increased from $1.88 million in the prior year to $1.93 million for fiscal year 2022. The increase in expenditures is attributed to the increase in debt service payments compared to the prior year. • Debt Service Fund ending fund balance increased for fiscal year 2022 from $2.79 million to $2.81 million.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and comprise the statement of net position and the statement of activities. The statement of net position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The statement of activities provides information about the District’s revenues and all its expenses. The statement of activities explains in detail the change in net position for the year.
The Statement of Net position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments.
Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector. #1..
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets and deferred outflows of resources of $44.8 million were offset by total liabilities and deferred inflows of resources of $26.9 million. The District’s net position from governmental activities increased to $17.9 million in 2022 from $16.9 million in 2021. This increase was due to an increase in facilities special tax revenue. The District’s net position has restrictions as follows: $15 million for acquisition or construction of infrastructure, $2.4 million for debt service, and $519k for District maintenance.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 16,306,146 $ 15,340,681 $ 965,465 Cash and investments with fiscal agent 2,743,305 2,738,621 4,684 Taxes receivable 102,206 91,770 10,436
Assessments receivable 24,345,000 25,124,693 (779,693)
Interest receivable 37,894 31,813 6,081
Lease receivable, current 9,576 - 9,576
Lease receivable, noncurrent 407,626 - 407,626
Prepaid assets - 154 (154)
Total assets 43,951,753 43,327,732 624,021
Deferred loss on refunding 869,025 930,368 (61,343)
Current and other liabilities 423,009 427,219 (4,210)
Long-term debt 25,289,337 26,130,996 (841,659)
Total liabilities 25,712,346 26,558,215 (845,869)
Deferred assessments 759,098 812,681 (53,583)
Leases 413,114 - 413,114
Total deferred inflows of resources 1,172,212 812,681 359,531 Net position:
Restricted for:
Capital projects 14,981,914 14,256,980 724,934
Debt service 2,435,149 2,368,004 67,145
District maintenance 519,157 262,220 256,937
Total net position $ 17,936,220 $ 16,887,204 $ 1,049,016 Statement of Net Position - Governmental Activities
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from annual facilities and maintenance special taxes, which amounted to $3,435,209 along with investments losses of ($484,961). District expenses of $1,912,448 were primarily for district maintenance including professional services and utilities, and interest on long term debt. The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021:
2022 2021 Change
Revenues:
Program revenues:
Capital grants and contributions $ - $ 14,629 $ (14,629) General revenues:
Facilities special tax 2,386,135 2,167,643 218,492
Maintenance special tax 1,049,074 968,498 80,576
Investment earnings (losses) (484,961) (1,002) (483,959) Interest income from leases 3,888 - 3,888
Lease revenue 7,328 - 7,328
Other - 29,824 (29,824)
Total revenues 2,961,464 3,179,592 (218,128)
Expenses:
Community development 804,402 750,173 54,229
Interest on long-term debt 1,108,046 1,146,200 (38,154) Total expenses 1,912,448 1,896,373 16,075
Change in net position 1,049,016 1,283,219 $ (234,203)
Net position, beginning of year 16,887,204 15,603,985
Net position, end of year $ 17,936,220 $ 16,887,204
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s three funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, longterm debt, and other long-term amounts. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses.
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balances for the Capital Projects Fund, the Special Revenue Fund, and the Debt Service Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ 724,934 $ 876,661 $ (151,727)
Expenditures - (857) 857
Other financing sources (uses) - (38,783) 38,783
Changes in fund balances 724,934 837,021 $ (113,801)
Fund balances, beginning of year 14,256,980 13,419,959
Fund balances, end of year $ 14,981,914 $ 14,256,980
2022 2021 Change
Revenues $ 1,053,215 $ 987,781 $ 65,434
Expenditures (779,702) (693,539) (86,163)
Changes in fund balances 273,513 294,242 $ 151,597
Fund balances, beginning of year 243,398 (50,844)
Fund balances, end of year $ 516,911 $ 243,398
2022 2021 Change
Revenues $ 1,952,693 $ 1,953,459 $ (766)
Expenditures (1,925,979) (1,880,175) (45,804)
Changes in fund balances 26,714 73,284 $ (46,570)
Fund balances, beginning of year 2,786,930 2,713,646
Fund balances, end of year $ 2,813,644 $ 2,786,930
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Debt Service Fund
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
THE DISTRICT’S FUND FINANCIAL STATEMENTS
The District’s fiscal year 2022 revenues primarily came from facilities special taxes in the amount of $3.2 million and maintenance special taxes in the amount of $1 million.
District expenditures of $2.7 million in fiscal year 2022 consisted of $800k in Special Revenue Fund expenditures for maintenance of District facilities and ongoing administrative expenditures, and $1.9 million in Debt Service Fund expenditures.
At June 30, 2022, the District’s governmental funds reported combined fund balances of $18.3 million, an increase of $1 million compared with last year. This increase was primarily due to a combination of increased facilities special tax and maintenance special tax revenues and decreased capital outlay expenditures for the decrease in activity in development of capital projects.
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
LEASES
Under GASB Statement No. 87, the District is required to record all leases that meets the definition of a lease as defined in GASB Statement No. 87. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The District recognized a lease receivable of $417,202 and deferred inflow of resources of $413,114 in both the District’s fund and government-wide financial statements.
DEBT ADMINISTRATION
The District issued Special Tax Bonds, Series 2006 in the principal amount of $31.1 million in March 2006. The proceeds have been and will continue to be used to reimburse developers for infrastructure they install pursuant to the Acquisition & Shortfall Agreements entered into between developers and the District as well as to fund authorized facilities installed by the District.
The District issued Refunding Special Tax Bonds, Series 2014 in the principal amount of $29.3 million with a premium of $1.5 million in July 2014 to refund the outstanding Special Tax Bonds, Series 2006.
The balance of the long-term debt at June 30, 2022, is $25.3 million. Additional details can be found in Note 4 to the financial statements.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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10 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting as that used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the change in net position and reconciled with the Statement of Net Position. #1..
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 16,306,146
Cash and investments with fiscal agent 2,743,305
Taxes receivable 102,206
Assessments receivable 24,345,000
Interest receivable 37,894
Lease receivable, current 9,576
Lease receivable, noncurrent 407,626
Total Assets 43,951,753
DEFERRED OUTFLOWS OF RESOURCES
Loss on refunding 869,025
Total Deferred Outflows of Resources 869,025
LIABILITIES
Accounts payable 54,759
Interest payable 368,250
Long-term debt:
Due in one year 926,659
Due in more than one year 24,362,678
Total Liabilities 25,712,346
DEFERRED INFLOWS OF RESOURCES
Unavailable assessments 759,098
Leases 413,114
Total Deferred Inflows of Resources 1,172,212
NET POSITION
Restricted for:
Capital projects 14,981,914
Debt service 2,435,149
District maintenance 519,157
Total Net Position $ 17,936,220
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Capital Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community development $ 804,402 $ - $ (804,402)
Interest on long-term debt 1,108,046 - (1,108,046)
$ 1,912,448 $ - (1,912,448)
General Revenues:
Facilities special tax 2,386,135
Maintenance special tax 1,049,074
Investment earnings (losses) (484,961)
Interest income from leases 3,888
Lease revenue 7,328
Total General Revenues 2,961,464
1,049,016
Net Position, Beginning of Year 16,887,204
Net Position, End of Year $ 17,936,220
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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13 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
The Debt Service Fund accounts for the payment of principal and interest on the 2014 Refunding Special Tax bonds. #1..
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special Debt
Projects Revenue Service
Fund Fund Fund Total
ASSETS
Cash and investments $ 14,948,636 $ 555,931 $ 801,579 $ 16,306,146 Cash and investments with
fiscal agent - - 2,743,305 2,743,305
Taxes receivable - 31,943 70,263 102,206
Assessments receivable - - 24,345,000 24,345,000
Interest receivable 33,278 776 3,840 37,894
Lease receivable - 417,202 - 417,202
Total Assets $ 14,981,914 $ 1,005,852 $ 27,963,987 $ 43,951,753
LIABILITIES
Accounts payable $ - $ 54,759 $ - $ 54,759
Total Liabilities - 54,759 - 54,759
DEFERRED INFLOWS OF RESOURCES
Unavailable assessments - - 759,098 759,098
Leases - 413,114 - 413,114
Unavailable revenues - 21,068 24,391,245 24,412,313
Total Deferred Inflows
of Resources - 434,182 25,150,343 25,584,525
FUND BALANCES
Restricted:
Capital projects 14,981,914 - - 14,981,914
District maintenance - 516,911 - 516,911
Debt service - - 2,813,644 2,813,644
Total Fund Balances 14,981,914 516,911 2,813,644 18,312,469 Total Liabilities, Deferred
Inflows of Resources,
and Fund Balances $ 14,981,914 $ 1,005,852 $ 27,963,987 $ 43,951,753 #1..
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 18,312,469
Other long-term assets are not available to pay for the current-period expenditures and therefore are deferred in the funds. 24,345,000 Revenues not available for current-period expenditures are deferred in the governmental funds, but are considered earned in the Statement of Net Position. 67,313 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds:
Long-term debt (25,289,337)
Deferred loss on refunding 869,025
Interest payable (368,250)
Total Net Position - Governmental Activities $ 17,936,220 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special Debt
Projects Revenue Service
Fund Fund Fund Total
REVENUES
Facilities special tax $ 1,161,784 -$ 1,995,975 $ $ 3,157,759 Maintenance special tax 1,046,828 - - 1,046,828
Interest income 144,368 1,428 16,407 162,203
Interest income from leases - 3,888 - 3,888
Change in fair value of investments (581,218) (6,257) (59,689) (647,164) Lease revenue - 7,328 - 7,328
Total Revenues 724,934 1,053,215 1,952,693 3,730,842
EXPENDITURES
Services - professional and other 559,383 - 20,007 579,390 Utilities 220,319 - - 220,319
Debt service:
Principal - - 775,000 775,000
Interest and fiscal charges - - 1,126,279 1,126,279
Miscellaneous - - 4,693 4,693
Total Expenditures 779,702 - 1,925,979 2,705,681
Changes in Fund Balances 724,934 273,513 26,714 1,025,161 Fund Balances, Beginning of Year 14,256,980 243,398 2,786,930 17,287,308 Fund Balances, End of Year $ 14,981,914 $ 516,911 $ 2,813,644 $ 18,312,469 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 1,025,161 (775,000)
5,622
775,000
Amortization of bond premium 66,659
Amortization of deferred loss on refunding (61,343)
Interest payable 12,917
Change in Net Position - Governmental Activities $ 1,049,016 Revenues previously recognized in the Statement of Activities that did not provide current financial resources and therefore were not reported as revenues in the funds are reported as revenues in the funds when received.
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt and the payment to refunding escrow consumes current financial resources of governmental funds. Neither transactions, however, has any effect on net position:
Repayment of the principal of long-term debt.
Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds:
Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds.
#1..
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The accompanying notes are an integral part of the financial statements. 18 COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 950,000 $ 950,000 $ 1,046,828 $ 96,828 Interest income - - 1,428 1,428
Interest income - leases - - 3,888 3,888
Change in fair value
of investments - - (6,257) (6,257)
Lease revenue - - 7,328 7,328
Total Revenues 950,000 950,000 1,053,215 103,215
EXPENDITURES
Services - professional
and other 560,563 560,563 559,383 1,180
Utilities 283,100 283,100 220,319 62,781
Total Expenditures 843,663 843,663 779,702 63,961
Changes in Fund Balance $ 106,337 $ 106,337 273,513 $ 167,176 Fund Balance, Beginning of Year 243,398
Fund Balance, End of Year $ 516,911
Budgeted Amounts
#1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2004-1 (Village One #2) (the District) was formed in April 2004 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plan. The District is the vehicle used to ensure that all landowners in the Specific Plan area contribute to the cost of public improvements. The District encompasses approximately 1,840 gross acres of land on which a pedestrian-oriented, mixed-use, planned community is anticipated to be developed. The District is located in the North Eastern portion of the City of Modesto, California (the City), bordered by Sylvan Avenue to the North, Claus Road to the East, Briggsmore to the South, and Oakdale Road to the West. The District is expected to yield 6,186 residential dwelling units at buildout; in addition to 15 acres of commercial property and 220 acres of industrial property.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities to the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. However, principal and interest expenditures are recorded as fund liabilities when due or when amounts have been accumulated in the Debt Service Fund for payments early in the following year.
Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period.
Miscellaneous revenues are considered to be measurable and available only when cash is received by the District. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of infrastructure within the District.
The Debt Service Fund accounts for the payment of principal and interest on the 2014 Refunding Special Tax Bonds.
Facilities and Maintenance Special Taxes: The facilities and maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1st and February 1st and are delinquent if not paid by December 10th and April 10th, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the special taxes will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued): The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through the adoption or the amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the District through the adoption or the amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the City’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure and right-touse asset, net of accumulated depreciation, accumulated amortization, and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. • Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Lease Receivable: The District’s lease receivable is measured at the present value of lease payments expected to be received during the lease term. There are no variable components under the lease agreement. A deferred inflow of resources is recorded for the lease. The deferred inflow of resources is recorded at the initiation of the lease in an amount equal to the initial recording of the lease receivable. The deferred inflow of resources is amortized on a straight-line basis over the term of the lease.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
#1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District, with the exception of cash and investments with fiscal agents, are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.
The District is a voluntary participant in the California Asset Management Program (CAMP), a California Joint Powers Authority that falls under California Government Code Section 53601(p), which is directed by a Board of Trustees that is made up of experienced local government finance directors and treasurers. The District reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share.
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 16,306,146
Cash and investments with fiscal agent 2,743,305
Total cash and investments $ 19,049,451
Deposits with City of Modesto
Cash and investment pool $ 16,306,146
Deposits with fiscal agents
California Asset Management Program (CAMP) 2,743,305
Total cash and investments $ 19,049,451
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
24 NOTE 2 – CASH AND INVESTMENTS (continued)
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
NOTE 3 - LEASE RECEIVABLE
On December 16, 2021, the District, lessor, and New Cingular Wireless PSC, LLC, lessee, entered into a land lease agreement for the purpose of installing, operating, and maintaining a communication facility and other improvements. The initial term lease will be for five years and will automatically renew for four additional five year terms. The lessee will pay the District a base rent of $1,600 with an increase of 3% each year on the anniversary of the rent commencement date, including throughout the extension terms. Upon execution of the agreement, a onetime fee of $10,000 was paid in full by the lessee for the Camera Fee to enable the District to purchase and install a live-feed security camera. Lease revenue recognized under the lease agreement was $0 for the year ended June 30, 2022. Interest revenue recognized under the lease agreement was $1,555 for the year ended June 30, 2022.
On July 8, 2014, the District, lessor, and Sacramento-Valley Limited Partnership d/b/a Verizon Wireless, lessee, entered into a land lease agreement in which the lessee is granted the right and option to lease the premises, including a right-of-way for access. The initial term of the lease will be for five years with a total annual rent of $14,000 to be paid by the lessee in equal monthly installments on the first day of the month. The lease will be automatically extended for five additional five year terms. Annual rent for each additional five year terms will increase 10% at the beginning of each five year term. Lease revenue recognized under the lease agreement was $7,328 for the year ended June 30, 2022. Interest revenue recognized under the lease agreement was $2,333 for the year ended June 30, 2022.
Future minimum lease and interest payments to be received are as follows:
Year Ending
June 30 Principal Interest Total
2023 9,576$ 6,192$ 15,768$
2024 9,981 6,046 16,027
2025 10,756 5,892 16,648
2026 11,550 5,724 17,274
2027 12,008 5,548 17,556
2028-2032 69,421 24,806 94,227
2033-2037 87,775 18,942 106,717
2038-2042 109,378 11,585 120,963
2043-2047 96,757 3,027 99,784
417,202$ 87,762$ 504,964$
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
25 NOTE 4 – LONG-TERM DEBT
On July 30, 2014, the District issued Refunding Special Tax Bonds (refunding bonds) with a par amount of $29,320,000 to refund the District’s $29,925,000 outstanding Special Tax Bonds (refunded bonds) issued on March 8, 2006, which were issued primarily to finance various public improvements needed to develop property located within the District. Interest on the refunding bonds is payable semiannually on each March 1st and September 1st through September 1, 2036. The refunding bonds were issued with interest rates varying from 2% to 5% and are payable solely from revenues derived from the assessment of annual special taxes to be levied on the taxable property within the District and from certain other funds pledged under the Trust Indenture. The principal of these bonds is not subject to acceleration.
Any one or more of the following events shall constitute an “event of default” for these bonds:
(a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any bond when and as the same shall become due and payable, whether at maturity as there in expressed, by declaration or otherwise.
(b) Default in the due and punctual payment of the interest on any bond when and as the same shall become due and payable.
(c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions, or covenants for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the owners of twenty-five percent (25%) in aggregate principal amount of the outstanding bonds.
The long-term debt activity for the year ended June 30, 2022 was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Refunding Special Tax Bonds 25,120,000 $ -$ (775,000) $ $ 24,345,000 $ 860,000 Premium on Refunding Bonds 1,010,996 - (66,659) 944,337 66,659 Total $ 26,130,996 -$ (841,659) $ $ 25,289,337 $ 926,659 Annual debt service requirements for the bonds are shown below:
Year Ended June 30, Principal Interest
2023 $ 860,000 $ 1,083,250
2024 945,000 1,038,125
2025 1,035,000 988,625
2026 1,130,000 934,500
2027 1,230,000 875,500
2028-2032 7,895,000 3,299,125
2033-2037 11,250,000 2,025,000
$ 24,345,000 $ 10,244,125
Interest expense for the year ended June 30, 2020 was $1,108,046. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
26 NOTE 5 – RESTRICTED FUND BALANCES
Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
• Restricted for Capital Projects – the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
• Restricted for District Maintenance – the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
• Restricted for Debt Service – the portion of fund balance legally restricted to the payment of principal and interest on long-term liabilities.
NOTE 6 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds discussed in Note 3 that it will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30th when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1st following the end of the fiscal year.
At June 30, 2022, the District had 15 parcels that were delinquent for a total of $67,313, one of which was delinquent for more than three consecutive payments.
The District received 101.2% of the Special Revenue Fund and Debt Service Fund facilities and maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $17,478 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.
NOTE 7 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the State, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2004-1 VILLAGE ONE #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
27 NOTE 8 – CHANGE IN ACCOUNTING PRINCIPLE
GASB Statement No. 87, Leases, establishes specific criteria used to account for contracts that meets the definition of a lease. Implementation of GASB Statement No. 87 requires lessee to recognize a lease liability and an intangible right-to-use asset, and lessor to recognize a lease receivable and a deferred inflow of resources. The Statement is to enhance the relevance and consistency of information about governments’ leasing activities.
As of June 30, 2022, the District had two leases that meets the criteria of GASB Statement No. 87 and the District has implemented the Statement accordingly. The Statement is applied retroactively and the financial statements are restated for all prior periods presented. As of June 30, 2022, the District also recognized a lease receivable of $417,202 and deferred inflow of resources of $413,114 as of June 30, 2022 for the lease in which the District is a lessor.
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2004-1 (Village One #2) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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29 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 4 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 11 Statement of Activities – Governmental Activities ............................................................................. 12 Balance Sheet – Governmental Funds ................................................................................................ 14 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 15 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement Of Activities Change in Net Position of Governmental Activities........................................................ 17 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 18 Notes to Basic Financial Statements.................................................................................................................. 19 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...................................................................................................................... 26 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 1996-1 (Village One) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Change in Accounting Principle
As described in Note 8 to the financial statements, in 2022, the District adopted new accounting guidance, GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4-9 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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. #1..
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3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 1996-1 (Village One) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
In 1989-1990, the City initiated planning of the area now known as Village One. The original Village One plan contemplated a pedestrian oriented, self-contained neighborhood concept that offered housing to accommodate various income levels. In addition, the original plan called for a number of landscaped areas as well as other amenities. Over the years, substantial revisions to the original plan occurred, including a reconfiguration of streets, a reduction of landscaped areas, and modification of the financing strategy. At the close of fiscal year 2003-2004, the Village One area was based on the Specific Plan, the Infrastructure Financing Plan, and the Facilities Master Plan adopted in April 2003. The 2003 Infrastructure Financing Plan calls for a combination of funding sources, including the City’s Capital Facilities Fees (CFF) program and a Mello-Roos Community Facilities District (CFD). #1..
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s net position increased to $1,464,813 for fiscal year 2022. • Total District revenues were $1,046,806.
• Total District expenses were $720,318.
Funds Basis:
• Capital Projects Fund revenues of $17,160 were $41,102 lower than the prior year due to a decrease in investment income from the City of Modesto. The Capital Projects Fund ending fund balance increased by $17,160, with an ending fund balance of $176,453.
• Special Revenue Fund revenues and other financing sources of $1,029,747 was $74,674 greater than the prior year due to increased maintenance special tax collections and expenditures of $720,318 were $88,557 more than the prior year due to an increase in services and utilities expenditures. The Special Revenue Fund balance increased by $309,429 to an ending fund balance of $1,278,883.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental Activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $1,933,061 were offset by liabilities of $55,134 and deferred inflows of resources of $413,114. The District’s net position from governmental activities increased to $1,464,813 in 2022 from $1,138,325 in 2021. All of the District’s net position is restricted as follows: $176,453 for acquisition of infrastructure and $1,288,360 for maintaining that infrastructure.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 1,490,559 $ 1,159,117 $ 331,442
Assessments receivable 22,305 22,062 243
Interest receivable 2,995 2,022 973
Lease receivable, current 9,576 - 9,576
Lease receivable, noncurrent 407,626 - 407,626
Total assets 1,933,061 1,183,201 749,860
Current and other liabilities 55,134 44,876 10,258
Deferred inflows - leases 413,114 - 413,114
Net position:
Restricted for:
Capital projects 176,453 159,293 17,160
District maintenance 1,288,360 979,032 309,328
Total net position $ 1,464,813 $ 1,138,325 $ 326,488
Statement of Net Position - Governmental Activities
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenues came primarily from maintenance special tax of $1,047,613. District expenses of $720,318 were for professional services and utilities.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Facilities special tax $ 22,041 $ 57,729 $ (35,688)
Maintenance special tax 1,047,613 957,984 89,629
Investment earnings (losses) (33,738) 72 (33,810)
Interest revenue - leases 3,888 - 3,888
Lease revenue 7,328 - 7,328
Miscellaneous revenue - 7,128 (7,128)
Transfers, net (326) - (326)
Total revenues 1,046,806 1,022,913 23,893
Expenses:
Community development 720,318 631,761 88,557
Change in net position 326,488 391,152 $ (64,664)
Net position, Beginning of Year 1,138,325 747,173
Net position, End of Year $ 1,464,813 $ 1,138,325
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balances for both the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ 17,160 $ 58,262 $ (41,102)
Expenditures - - -
Changes in fund balances 17,160 58,262 $ (41,102)
Fund balances, Beginning of Year 159,293 101,031
Fund balances, End of Year $ 176,453 $ 159,293
2022 2021 Change
Revenues $ 1,030,073 $ 955,073 $ 75,000
Expenditures (720,318) (631,761) (88,557)
Other financing sources (uses) (326) - (326)
Changes in fund balances 309,429 323,312 $ (13,883)
Fund balances, Beginning of Year 969,454 646,142
Fund balances, End of Year $ 1,278,883 $ 969,454
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $1,455,336, which was a $326,589 increase from fiscal year 2021. The Capital Projects Fund realized a $17,160 increase during 2022, while the Special Revenue Fund realized a $309,429 increase due to maintenance special tax and investment revenues being more than professional services and utilities.
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
LEASES
Under GASB Statement No. 87, the District is required to record all leases that meets the definition of a lease as defined in GASB Statement No. 87. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. Accordingly, the District recognized a lease receivable of $417,202 and deferred inflow of resources of $413,114 in both the District’s fund and government-wide financial statements.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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10 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting as that used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 1,490,559
Assessments receivable 22,305
Interest receivable 2,995
Lease receivable, current 9,576
Lease receivable, noncurrent 407,626
Total Assets 1,933,061
LIABILITIES
Accounts payable 55,134
Total Liabilities 55,134
DEFERRED INFLOWS OF RESOURCES
Leases 413,114
Total Deferred Inflows of Resources 413,114
NET POSITION
Restricted for:
Capital projects 176,453
District maintenance 1,288,360
Total Net Position $ 1,464,813
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Net (Expense) Revenue
and Changes in Net
Position
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 720,318 $ - $ (720,318)
$ 720,318 $ - (720,318)
General Revenues:
Facilities special tax 22,041
Maintenance special tax 1,047,613
Investment earnings (losses) (33,738)
Interest revenue - leases 3,888
Lease revenue 7,328
Transfers out to City funds (326)
Total General Revenues 1,046,806
326,488
1,138,325
Net Position, End of Year $ 1,464,813
Program
Revenues
Change in Net Position
Net Position, Beginning of Year
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13 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 176,053 $ 1,314,506 $ 1,490,559
Assessments receivable - 22,305 22,305
Interest receivable 400 2,595 2,995
Lease receivable - 417,202 417,202
Total Assets $ 176,453 $ 1,756,608 $ 1,933,061
LIABILITIES
Accounts payable $ - $ 55,134 $ 55,134
Total Liabilities - 55,134 55,134
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - 9,477 9,477
Leases - 413,114 413,114
Total Deferred Inflows of Resources - 422,591 422,591
FUND BALANCES
Restricted for:
District maintenance - 1,278,883 1,278,883
Capital projects 176,453 - 176,453
Total Fund Balances 176,453 1,278,883 1,455,336
Total Liabilities, Deferred Inflows of
Resources and Fund Balances $ 176,453 $ 1,756,608 $ 1,933,061 #1..
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 1,455,336
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position:
Revenues not available for current-period expenditures are deferred in the governmental funds, but are considered earned in the Statement of Net Position. 9,477 Total Net Position - Governmental Activities $ 1,464,813 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Facilities special tax $ 22,041 $ - $ 22,041
Maintenance special tax - 1,047,714 1,047,714
Interest income 1,646 9,366 11,012
Change in fair value
of investments (6,527) (38,223) (44,750)
Interest revenue - leases - 3,888 3,888
Lease revenue - 7,328 7,328
Total Revenues 17,160 1,030,073 1,047,233
EXPENDITURES
Services - professional and other - 518,586 518,586
Utilities - 201,732 201,732
Total Expenditures - 720,318 720,318
Excess (Deficiency) of Revenues
Over (Under) Expenditures 17,160 309,755 326,915
OTHER FINANCING SOURCES (USES)
Transfers out to City funds - (326) (326)
Total Other Financing Sources (Uses) - (326) (326)
Changes in Fund Balances 17,160 309,429 326,589
Fund Balances, Beginning of Year 159,293 969,454 1,128,747 Fund Balances, End of Year $ 176,453 $ 1,278,883 $ 1,455,336 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 326,589 Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities:
Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds. (101)
Change in Net Position - Governmental Activities $ 326,488 #1..
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The accompanying notes are an integral part of the financial statements. 18 COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 950,000 $ 950,000 $ 1,047,714 $ 97,714 Interest income - - 9,366 9,366
Change in fair value
of investments - - (38,223) (38,223)
Interest revenue - leases - - 3,888 3,888
Lease revenue - - 7,328 7,328
Total Revenues 950,000 950,000 1,030,073 80,073
EXPENDITURES
Services - professional
and other 512,449 512,449 518,586 (6,137)
Utilities 271,150 271,150 201,732 69,418
Total Expenditures 783,599 783,599 720,318 63,281
Excess (Deficiency) of Revenues
Over (Under) Expenditures 166,401 166,401 309,755 143,354
OTHER FINANCING SOURCES (USES)
Transfers out to City funds - (354) (326) 28
Total Other Financing Sources (Uses) - (354) (326) 28
Changes in Fund Balance $ 166,401 $ 166,047 309,429 $ 143,382 Fund Balance, Beginning of Year 969,454
Fund Balance, End of Year $ 1,278,883
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 1996-1 (Village One) (the District) was formed in October 1996 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plan. The District is the vehicle used to ensure that all landowners in the Specific Plan area contribute to the cost of public improvements. The District encompasses approximately 1,840 gross acres of land.
The District is located in the North Eastern portion of the City of Modesto, California (the City), bordered by Sylvan Avenue to the North, Claus Road to the East, Briggsmore to the South, and Oakdale Road to the West. The District is expected to yield 6,186 residential dwelling units at buildout, in addition to 15 acres of commercial property and 220 acres of industrial property.
The District is an integral part of the City and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1st and February 1st and are delinquent if not paid by December 10th and April 10th, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Lease Receivable: The District’s lease receivable is measured at the present value of lease payments expected to be received during the lease term. There are no variable components under the lease agreement. A deferred inflow of resources is recorded for the lease. The deferred inflow of resources is recorded at the initiation of the lease in an amount equal to the initial recording of the lease receivable. The deferred inflow of resources is amortized on a straight-line basis over the term of the lease.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest-level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued):
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.
The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.
This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts.
Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ending June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 1,490,559
Total cash and investments $ 1,490,559
Deposits with City of Modesto
Cash and investment pool $ 1,490,559
Total cash and investments $ 1,490,559
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
NOTE 3 – LEASE RECEIVABLE
On December 16, 2021, the District, lessor, and New Cingular Wireless PSC, LLC, lessee, entered into a land lease agreement for the purpose of installing, operating, and maintaining a communication facility and other improvements. The initial term lease will be for five years and will automatically renew for four additional five year terms. The lessee will pay the District a base rent of $1,600 with an increase of 3% each year on the anniversary of the rent commencement date, including throughout the extension terms. Upon execution of the agreement, a onetime fee of $10,000 was paid in full by the lessee for the Camera Fee to enable the District to purchase and install a live-feed security camera. Lease revenue recognized under the lease agreement was $0 for the year ended June 30, 2022. Interest revenue recognized under the lease agreement was $1,555 for the year ended June 30, 2022.
One July 8, 2014, the District, lessor, and Sacramento-Valley Limited Partnership d/b/a Verizon Wireless, lessee, entered into a land lease agreement in which the lessee is granted the right and option to lease the premises, including a right-of-way for access. The initial term of the lease will be for five years with a total annual rent of $14,000 to be paid by the lessee in equal monthly installments on the first day of the month. The lease will be automatically extended for five additional five year terms. Annual rent for each additional five year terms will increase 10% at the beginning of each five year term. Lease revenue recognized under the lease agreement was $7,328 for the year ended June 30, 2022. Interest revenue recognized under the lease agreement was $2,333 for the year ended June 30, 2022.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
24 NOTE 3 – LEASE RECEIVABLE (continued)
Future minimum lease and interest payments to be received are as follows:
Year Ending
June 30 Total
2023 9,576$ 6,192$ $ 15,768
2024 9,981 6,046 16,027
2025 10,756 5,892 16,648
2026 11,550 5,724 17,274
2027 12,008 5,548 17,556
2028-2032 69,421 24,806 94,227
2033-2037 87,775 18,942 106,717
2038-2042 109,378 11,585 120,963
2043-2047 96,757 3,027 99,784
417,202$ 87,762$ $ 504,964
Principal Interest
NOTE 4 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
NOTE 5 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that it will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30th when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1st following the end of the fiscal year.
At June 30, 2022, the District had 23 parcels that were delinquent for a total of $9,477, nine of which were delinquent for more than three consecutive payments.
The District received 101.7% of the Special Revenue Fund maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $4,564 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1996-1 VILLAGE ONE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
25 NOTE 6 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS
Excess of expenditures over appropriations for the year ended June 30, 2022 was as follows:
Expenditures Amount
Special Revenue Fund:
Services - professional and other $ (6,137)
NOTE 7 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the State, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District remains unknown.
NOTE 8 – CHANGE IN ACCOUNTING PRINCIPLE
GASB Statement No. 87, Leases, establishes specific criteria used to account for contracts that meets the definition of a lease. Implementation of GASB Statement No. 87 requires lessee to recognize a lease liability and an intangible right-to-use asset, and lessor to recognize a lease receivable and a deferred inflow of resources. The Statement is to enhance the relevance and consistency of information about governments’ leasing activities.
As of June 30, 2022, the District had two leases that meet the criteria of GASB Statement No. 87 and the District has implemented the Statement accordingly. The Statement is applied retroactively and the financial statements are restated for all prior periods presented. As of June 30, 2022, the District also recognized a lease receivable of $417,202 and deferred inflow of resources of $413,114 in which the District is a lessor. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 1996-1 (Village One) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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27 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 District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 10 Statement of Activities – Governmental Activities ............................................................................. 11 Balance Sheet – Governmental Funds ................................................................................................ 13 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 14 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................ 16 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 17 Notes to Basic Financial Statements.................................................................................................................. 18 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...................................................................................................................... 24 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2016-1 (Kiernan Business Park East #2) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-8 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2016-1 Kiernan Business Park East #2 (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
The Kiernan Business Park Specific Plan Area encompasses approximately 614 acres and is comprised of regional commercial, office, medical campus, mixed use, and medium high density residential and business park land uses.
Within this specific plan area, there are three distinct sub-areas: Kiernan Business Park West, Kiernan Business Park South and Kiernan Business Park East #2 (KBP East). KBP East covers approximately 160 acres and is bound by Kiernan Avenue to the North, Pelandale Avenue to the South, Dale Road to the West, and American Avenue to the East.
On January 26, 2016, the City of Modesto formed the City of Modesto Community Facilities District No. 2016-1 (CFD No. 2016-1). The authorized services to be funded by special tax revenues include repair and replacement of parkways, landscaped medians, storm drainage pump and basin facilities, catch basins, manholes, underground infiltration trenches and pipes, landscaped bioswale lots and medians, storm water treatment devices and filters, shrubs, vines, ground cover, and irrigation systems. The services to be provided include, but are not limited to, litter and debris removal, pruning, staking, fertilizing, mowing, plant replacement and restoration, fire and weed control, erosion control, trimming of vegetation, and storm drain system and bioswale maintenance. #1..
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s total net position in fiscal year 2022 was $679,775. • Total District’s revenues were $118,183.
• At June 30, 2022, total assets were $683,889 while total liabilities were $4,114.
Funds Basis:
• Capital Projects Fund revenues of ($9,267) were ($16,446) lower than in the prior year due to a decrease in change in fair value of investments for fiscal year 2022 and expenditures of $0 were the same as the previous year. The Capital Projects ending fund balance was $318,957. • Special Revenue Fund revenues decreased from $127,444 in the prior year to $117,913 for fiscal year 2022 and expenditures decreased from $79,871 in the prior year to $44,627 for fiscal year 2022. The decrease in revenue is due to a decrease in the maintenance special tax and change in fair value of investments, and the decrease in expenditures is due primarily to a decrease in community development expenditures.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $683,889 were offset by liabilities of $4,114. The District’s net position from governmental activities increased to $679,775 in 2022 from $606,219 in 2021. The District’s net position has restrictions as follows: $318,957 for acquisition or construction of infrastructure, and $360,818 for District maintenance.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 666,114 $ 642,266 $ 23,848
Assessments receivable 16,327 6,789 9,538
Interest receivable 1,448 1,251 197
Total assets 683,889 650,306 33,583
Current and other liabilities 4,114 44,087 (39,973)
Net position:
Restricted for:
Capital projects 318,957 328,224 (9,267)
District maintenance 360,818 277,995 82,823
Total net position $ 679,775 $ 606,219 $ 73,556
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenues of $118,183 came primarily from maintenance special taxes, which amounted to $136,345 along with a reduction of investments earnings (loss) of ($18,162). District expenses of $44,627 were primarily for professional services and utilities expenses.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Facilities special tax $ - $ 7,148 $ (7,148)
Maintenance special tax 136,345 134,196 2,149
Investment earnings (loss) (18,162) 69 (18,231)
Total revenues 118,183 141,413 (23,230)
Expenses:
Community development 44,627 79,871 (35,244)
Change in net position 73,556 61,542 $ 12,014
Net position, beginning of year 606,219 544,677
Net position, end of year $ 679,775 $ 606,219
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All of the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means it measures only current financial resources and uses.
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for both the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ (9,267) $ 7,179 $ (16,446)
Expenditures - - -
Changes in fund balances (9,267) 7,179 $ (16,446)
Fund balances, beginning of year 328,224 321,045
Fund balances, end of year $ 318,957 $ 328,224
2022 2021 Change
Revenues $ 117,913 $ 127,444 $ (9,531)
Expenditures 44,627 79,871 (35,244)
Changes in fund balances 73,286 47,573 $ 25,713
Fund balances, beginning of year 271,205 223,632
Fund balances, end of year $ 344,491 $ 271,205
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $663,448, an increase of $64,019 compared with last year. This increase was primarily due to an increased maintenance special tax revenues and decreased capital outlay expenditures for the decrease in activity in development of capital projects. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 666,114
Assessments receivable 16,327
Interest receivable 1,448
Total Assets 683,889
LIABILITIES
Accounts payable 4,114
Total Liabilties 4,114
NET POSITION
Restricted for:
Capital projects 318,957
District maintenance 360,818
Total Net Position $ 679,775
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 44,627 $ - $ (44,627)
$ 44,627 $ - (44,627)
General Revenues:
Maintenance special tax 136,345
Investment earnings (loss) (18,162)
Total General Revenues 118,183
73,556
Net Position, Beginning of Year 606,219
Net Position, End of Year $ 679,775
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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12 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
• The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
• The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 318,256 $ 347,858 $ 666,114
Assessments receivable - 16,327 16,327
Interest receivable 701 747 1,448
Total Assets $ 318,957 $ 364,932 $ 683,889
LIABILITIES
Accounts payable $ - $ 4,114 $ 4,114
Total Liabilities - 4,114 4,114
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - 16,327 16,327
Total Deferred Inflows of Resources - 16,327 16,327
FUND BALANCES
Restricted for:
Capital projects 318,957 - 318,957
District maintenance - 344,491 344,491
Total Fund Balances 318,957 344,491 663,448
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 318,957 $ 364,932 $ 683,889
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 663,448
Adjustments to the Balance Sheet of the Governmental
Funds to reconcile with the Statement of Net Position:
Revenues not available for current-period expenditures are deferred in the governmental funds, but are considered
earned in the Statement of Net Position. 16,327
Total Net Position - Governmental Activities $ 679,775
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Maintenance special tax $ - $ 126,808 $ 126,808
Interest income 3,077 2,862 5,939
Change in fair value of investments (12,344) (11,757) (24,101) Total Revenues (9,267) 117,913 108,646
EXPENDITURES
Services - professional and other - 42,692 42,692
Utilities - 1,935 1,935
Total Expenditures - 44,627 44,627
Changes in Fund Balances (9,267) 73,286 64,019
Fund Balances, Beginning of Year 328,224 271,205 599,429 Fund Balances, End of Year $ 318,957 $ 344,491 $ 663,448 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 64,019
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities:
Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds. 9,537 Change in Net Position - Governmental Activities $ 73,556 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 131,722 $ 131,722 $ 126,808 $ (4,914) Interest income - - 2,862 2,862
Change in fair value
of investments - - (11,757) (11,757)
Total Revenues 131,722 131,722 117,913 (13,809)
EXPENDITURES
Services - professional
and other 85,861 85,861 42,692 43,169
Utilities 1,500 1,500 1,935 (435)
Total Expenditures 87,361 87,361 44,627 42,734
Changes in Fund Balance $ 44,361 $ 44,361 73,286 $ 28,925 Fund Balance, Beginning of Year 271,205
Fund Balance, End of Year $ 344,491
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2016-1 (Kiernan Business Park East #2) (the District) was formed in January 2016 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plans. The District is the vehicle that will be used to ensure that all landowners in the District pay their share of the public improvements. The District covers approximately 160 acres and is bound by Kiernan Avenue to the North, Pelandale Avenue to the South, Dale Road to the West, and American Avenue to the East.
The District is an integral part of the City and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statements of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District.
The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.
The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.
This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued):
Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.
The District is a voluntary participant in the California Asset Management Program (CAMP), a California Joint Powers Authority that falls under California Government Code Section 53601(p), which is directed by a Board of Trustees that is made up of experienced local government finance directors and treasurers. The District reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 666,114
Total cash and investments $ 666,114
Deposits with City of Modesto
Cash and investment pool $ 666,114
Total cash and investments $ 666,114
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
NOTE 3 – RESTRICTED FUND BALANCE
Restrictions of Fund Balance: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-1 KIERNAN BUSINESS PARK EAST #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 4 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1 following the end of the fiscal year.
At June 30, 2022, the District had 4 parcels that were delinquent for a total of $16,327, one of which were delinquent for more than three consecutive payments.
The District received 93.00% of the Special Revenue Fund and maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $9,538 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.
NOTE 5 – DEFICIENCY OF EXPENDITURES OVER APPROPRIATIONS Deficiency of expenditures over appropriations for the year ended June 30, 2022 was as follows:
Expenditures Amount
Special Revenue Fund:
Utilities $ (435)
NOTE 6 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the Novel Coronavirus (COVID-19). The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area.
The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2016-1 (Kiernan Business Park East #2) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the Special Revenue Fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 or significant deficiencies may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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25 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 District’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report........................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ........................................................................................ 3 Basic Financial Statements:
Statement of Net Position – Governmental Activities ......................................................................... 10 Statement of Activities – Governmental Activities .............................................................................. 11 Balance Sheet – Governmental Funds ................................................................................................. 13 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ......................................................................... 14 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................. 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................. 16 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................. 17 Notes to Basic Financial Statements................................................................................................................... 18 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...................................................................................................................... 24 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 2007-1 (North Beyer #2) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-8 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2007-1 (North Beyer #2) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
The North Beyer Specific Plan Area encompasses approximately 160 gross acres of land and is comprised of a variety of residential, commercial, and office land uses. On June 24, 1997, Community Facilities District No. 1997-1 (North Beyer Park) (“CFD 1997-1”) was formed and the levy of special taxes was authorized. At this time, approximately 124+/- acres of residential property, representing 464 residential units or lots have already been developed and 15 +/- commercial acres and 26+/- residential acres remain to be developed. CFD 1997-1 was previously formed to fund and maintain the construction and maintenance of the street and landscape medians on Coffee and Oakdale Roads between Claratina and Mable Avenues.
On May 8, 2007, the City of Modesto formed City of Modesto Community Facilities District No. 2007-1 (CFD No. 2007-1). The authorized services to be funded by special tax revenues include maintenance and repair of parks, landscaped medians, storm drainage basins, and related facilities, including but not limited to, concrete curbs and walks, trees, shrubs, vines, ground cover, turf, lights and irrigation systems. The services to be provided include, but are not limited to, litter and debris removal, graffiti abatement, painting repairs to landscape structures, building maintenance and repairs, pruning, staking, fertilizing, plant replacement and restoration, fire and weed control, erosion control, mowing of lawns, trimming of vegetation, and maintenance, repair and replacement of lighting systems within the parks.
The facilities authorized to be funded by special tax revenues include installation of the landscaped medians on Oakdale and Coffee Roads, which may but will not necessarily include, concrete curbs and walks, trees, shrubs, ground cover, lights, and irrigation systems.
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s total net position in fiscal year 2022 was $627,363. • At June 30, 2022, total revenues were $77,275 and expenses were $75,805.
Funds Basis:
• Capital Projects Fund revenues of ($14,588) were $14,629 lower than in the prior year due to an increase in investment loss for fiscal year 2022 and expenditures of $0 were the same as the previous year. • Special Revenue Fund revenues increased from $90,073 in the prior year to $91,863 for fiscal year 2022 and expenditures increased from $73,146 in the prior year to $75,805 for fiscal year 2022. The increase in revenues is due to an increase in the maintenance special tax, and the increase in expenditures is due primarily to an increase in community development expenditures.
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $635,524 were offset by liabilities of $8,161. The District’s net position from governmental activities increased to $627,363 in 2022 from $625,893 in 2021. The District’s net position has restrictions as follows: $500,285 for acquisition or construction of infrastructure, and $127,078 for District maintenance.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 633,390 $ 630,973 $ 2,417
Assessments receivable 744 1,154 (410)
Interest receivable 1,390 1,238 152
Total assets 635,524 633,365 2,159
Current and other liabilities 8,161 7,472 689
Net position:
Restricted for:
Capital projects 500,285 514,873 (14,588)
District maintenance 127,078 111,020 16,058
Total net position $ 627,363 $ 625,893 $ 1,470
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue of $77,275 came primarily from maintenance special taxes, which amounted to $95,172 along with a reduction of investments earnings of ($17,897). District expenses of $75,805 were primarily for professional services and utilities expenses.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Maintenance special tax $ 95,172 $ 90,870 $ 4,302
Investment earnings (loss) (17,897) (12) (17,885)
Total revenues 77,275 90,858 (13,583)
Expenses:
Community development 75,805 73,146 2,659
Change in net position 1,470 17,712 $ (16,242)
Net position, beginning of year 625,893 608,181
Net position, end of year $ 627,363 $ 625,893
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses. #1..
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for both the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ (14,588) $ 41 $ (14,629)
Expenditures - - -
Changes in fund balances (14,588) 41 $ (14,629)
Fund balances, beginning of year 514,873 514,832
Fund balances, end of year $ 500,285 $ 514,873
2022 2021 Change
Revenues $ 91,863 $ 90,073 $ 1,790
Expenditures 75,805 73,146 2,659
Changes in fund balances 16,058 16,927 $ (869)
Fund balances, beginning of year 110,276 93,349
Fund balances, end of year $ 126,334 $ 110,276
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported combined fund balances of $626,619, an increase of $1,470 compared with last year. This increase was primarily due to an increased maintenance special tax revenues and decreased capital outlay expenditures for the decrease in activity in development of capital projects. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 633,390
Assessments receivable 744
Interest receivable 1,390
Total Assets 635,524
LIABILITIES
Accounts payable 8,161
Total Liabilities 8,161
NET POSITION
Restricted for:
Capital projects 500,285
District maintenance 127,078
Total Net Position $ 627,363
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 75,805 $ - $ (75,805)
$ 75,805 $ - (75,805)
General Revenues:
Maintenance special tax 95,172
Investment earnings (loss) (17,897)
Total General Revenues 77,275
1,470
Net Position, Beginning of Year 625,893
Net Position, End of Year $ 627,363
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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12 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined all its funds to be major funds. They are:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 499,181 $ 134,209 $ 633,390
Assessments receivable - 744 744
Interest receivable 1,104 286 1,390
Total Assets $ 500,285 $ 135,239 $ 635,524
LIABILITIES
Accounts payable $ - $ 8,161 $ 8,161
Total Liabilities - 8,161 8,161
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - 744 744
Total Deferred Inflows of Resources - 744 744
FUND BALANCES
Restricted for:
Capital projects 500,285 - 500,285
District maintenance - 126,334 126,334
Total Fund Balances 500,285 126,334 626,619
Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 500,285 $ 135,239 $ 635,524 #1..
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:
Total Fund Balances - Governmental Funds $ 626,619
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position:
Revenues not available for current-period expenditures are deferred in governmental funds, but are considered earned in the Statement of Net Position. 744
Total Net Position - Governmental Activities $ 627,363
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
REVENUES
Maintenance special tax $ - $ 95,172 $ 95,172
Interest income 4,844 1,085 5,929
Change in fair value of investments (19,432) (4,394) (23,826) Total Revenues (14,588) 91,863 77,275
EXPENDITURES
Services - professional and other - 61,544 61,544
Utilities - 14,261 14,261
Total Expenditures - 75,805 75,805
Changes in Fund Balances (14,588) 16,058 1,470
Fund Balances, Beginning of Year 514,873 110,276 625,149 Fund Balances, End of Year $ 500,285 $ 126,334 $ 626,619 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:
Changes in Fund Balances - Governmental Funds $ 1,470
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities:
None noted. -
Change in Net Position - Governmental Activities $ 1,470 #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 90,000 $ 90,000 $ 95,172 $ 5,172 Interest income - - 1,085 1,085
Change in fair value
of investments - - (4,394) (4,394)
Total Revenues 90,000 90,000 91,863 1,863
EXPENDITURES
Services - professional
and other 66,972 66,972 61,544 5,428
Utilities 21,000 21,000 14,261 6,739
Total Expenditures 87,972 87,972 75,805 12,167
Changes in Fund Balance $ 2,028 $ 2,028 16,058 $ 14,030 Fund Balance, Beginning of Year 110,276
Fund Balance, End of Year $ 126,334
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2007-1 (North Beyer Park #2) (the District) was formed in May 2007 by a vote of the property owners within the proposed District. The District, a separate legal entity, was formed to provide a funding mechanism for public facilities and services as required by the District Specific Plan. The District is a 160-acre project, the boundaries of which are recorded in Book 2, page 80 of the Book of Assessment District Maps in the Stanislaus County Recorder’s Office.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental funds:
The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District.
The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued): The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy. This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.
Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 633,390
Total cash and investments $ 633,390
Deposits with City of Modesto
Cash and investment pool $ 633,390
Total cash and investments $ 633,390
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.
Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
#1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2007-1 NORTH BEYER PARK #2
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 4 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30 when the District received Special Taxes totaling less that 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be imitated by September 1 following the end of the fiscal year.
At June 30, 2022, the District had 1 parcels that were delinquent for a total of $744, none of which were delinquent for more than three consecutive payments.
The District received 100% of the Special Revenue Fund maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $0 at June 30, 2022 is included in assessments receivable in the Statement of Net Position and Balance Sheet.
NOTE 5 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 of the City of Modesto Community Facilities District Number 2007-1 (North Beyer #2) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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25 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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:
Statement of Net Position – Governmental Activities ........................................................................ 9 Statement of Activities – Governmental Activities ............................................................................. 10 Balance Sheet – Governmental Fund.................................................................................................. 12 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 13 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Governmental Fund ................................................................................................... 14 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................ 15 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Special Revenue Fund – Budget and Actual............................................................... 16 Notes to Basic Financial Statements.................................................................................................................. 17 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...................................................................................................................... 23 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and major fund of the City of Modesto Community Facilities District Number 2016-2 (The Vintage) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-7 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’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 solely 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 effectiveness of the District’s 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 District’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2016-2 (The Vintage) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.
Please read this overview in conjunction with your reading of the accompanying basic financial statements.
THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.
The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.
BACKGROUND AND MANAGEMENT’S DISCUSSION
On January 26, 2016, the City Council approved the Vintage Specific Plan that set forth a plan of development for approximately 45 acres that were, at that time, located west of Dale Road and north of Vintage Faire Mall. The Vintage Specific Plan is intended to provide for the development of 170 single-family residential lots, 6.05 acres of multi-family residential development, and approximately 10 acres for commercial development that will assist in implementing the City’s long-range objectives to enhance its local economy, generate jobs for residents, and create a better jobs housing balance.
The District was formed by the City Council in January 2016 to generate funding for construction of certain roadway improvements and the ongoing maintenance of landscaped medians, a bike path, well site, storm drainage pump and basin, and related facilities.
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
Government-Wide:
• The District’s total net position in fiscal year 2022 was $198,920. • Total District revenues were $135,890 and expenses were $47,226.
Funds Basis:
• Special Revenue Fund revenues increased from the $134,959 in the prior year to $136,048 for fiscal year 2022 and expenditures increased from $41,250 in the prior year to $47,226 for fiscal year 2022. The increase in revenues is attributed to an increase in maintenance special tax and the increase in expenditures is attributed to an increase in activity in community development. The Special Revenue Fund balance increased by $88,822 to an ending balance of $198,189.
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.
Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.
The Statement of Net Position and the Statement of Activities present information about the following:
Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.
As of June 30, 2022, total assets of $203,356 were offset by liabilities of $4,436. The District’s net position from governmental activities increased to $198,920 in 2022 from $110,256 in 2021. This increase was due to maintenance special tax revenue. The District’s net position has restrictions as follows: $198,920 for District maintenance.
The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 201,196 $ 111,967 $ 89,229
Interest receivable 411 204 207
Taxes receivable 1,749 2,439 (690)
Total assets 203,356 114,610 88,746
Current and other liabilities 4,436 4,354 82
Net position
Restricted for:
District maintenance 198,920 110,256 88,664
Total net position $ 198,920 $ 110,256 $ 88,664
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from annual facilities and maintenance special taxes of $140,221 offset by investment earnings (loss) of ($4,331). District expenses of $47,226 were primarily for community development.
The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:
General revenues:
Maintenance special tax $ 140,221 $ 135,839 $ 4,382
Investment earnings (loss) (4,331) 9 (4,340)
Total revenues 135,890 135,848 42
Expenses:
Community development 47,226 41,250 5,976
Change in net position 88,664 94,598 $ (5,934)
Net position, beginning of year 110,256 15,658
Net position, end of year $ 198,920 $ 110,256
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s fund. The fund financial statements measure only current revenues and expenditures and fund balance; they exclude capital assets, long-term debt, and other long-term amounts.
The fund financial statements provide detailed information about the District’s significant funds, called major funds.
Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. The District’s one fund is presented here as a major fund; its purpose is explained in Note 1 to the financial statements. The District’s Special Revenue Fund is a governmental fund; financial statements for this fund are prepared on the modified accrual basis of accounting, which means it measures only current financial resources and uses.
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues 136,048 134,959 $ 1,089
Expenditures 47,226 41,250 5,976
Changes in fund balances 88,822 93,709 $ (4,887)
Fund balance, beginning of year 109,367 15,658
Fund balance, end of year $ 198,189 $ 109,367
Statement of Revenues, Expenditures, and
Change in Fund Balance - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental fund reported a fund balance of $198,189, an increase of $88,822 compared with last year. This increase was primarily due to increased maintenance special tax revenues and increased activity in community development.
CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.
Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION
AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.
The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.
The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.
The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 9 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 201,196
Interest receivable 411
Taxes receivable 1,749
Total Assets 203,356
LIABILITIES
Accounts payable 4,436
Total Liabilities 4,436
NET POSITION
Restricted for:
District maintenance 198,920
Total Net Position $ 198,920
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 47,226 $ - $ (47,226)
$ 47,226 $ - (47,226)
General Revenues:
Maintenance special tax 140,221
Investment earnings (loss) (4,331)
Total General Revenues 135,890
88,664
Net Position, Beginning of Year 110,256
Net Position, End of Year $ 198,920
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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11 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.
The District determined its fund to be a major fund. That is:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2022
Special
Revenue
Fund
ASSETS
Cash and investments $ 201,196
Interest receivable 411
Taxes receivable 1,749
Total Assets $ 203,356
LIABILITIES
Accounts payable $ 4,436
Total Liabilities 4,436
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 731
Total Deferred Inflows of Resources 731
FUND BALANCE
Restricted for:
District maintenance 198,189
Total Fund Balance 198,189
Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 203,356 #1..
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position:
Total Fund Balance - Governmental Fund $ 198,189
Adjustments to the Balance Sheet of the Governmental Fund to reconcile with the Statement of Net Position:
Revenues not available for current-period expenditures are deferred in the governmental fund, but are considered earned in the Statement of Net Position. 731
Total Net Position - Governmental Activities $ 198,920
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE – GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2022
Special
Revenue
Fund
REVENUES
Maintenance special tax $ 140,379
Interest income 1,439
Change in fair value of investments (5,770)
Total Revenues 136,048
EXPENDITURES
Services - professional and other 46,573
Utilities 653
Total Expenditures 47,226
Change in Fund Balance 88,822
Fund Balance, Beginning of year 109,367
Fund Balance, End of year $ 198,189
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT
OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities:
Change in Fund Balance - Governmental Fund $ 88,822
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balance of the Governmental Fund to reconcile with the Statement of Activities:
Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental fund. (158) Change in Net Position - Governmental Activities $ 88,664 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget
REVENUES
Maintenance special tax $ 135,375 $ 135,375 $ 140,379 $ 5,004 Interest income - - 1,439 1,439
Change in fair value
of investments - - (5,770) (5,770)
Total Revenues 135,375 135,375 136,048 673
EXPENDITURES
Services - professional
and other 60,607 60,607 46,573 14,034
Utilities 3,000.00 3,000 653 2,347
Total Expenditures 63,607 63,607 47,226 16,381
Change in Fund Balance $ 71,768 $ 71,768 88,822 $ 17,054 Fund Balance, Beginning of Year 109,367
Fund Balance, End of Year $ 198,189
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS
17 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2016-2 (The Vintage) (the District) was formed in January 2016 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plans. The District is the vehicle that will be used to ensure that all landowners in the District pay their share of the public improvements. The District is a proposed 45-acre project, west of Dale Road and north of Vintage Faire Mall.
The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.
Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.
The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.
Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.
Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and 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. Taxes are recognized as revenues in the year for which they are levied.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.
The District reports the following major governmental fund:
The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.
In addition to liabilities, the Statements of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.
Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District.
The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.
Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed – Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned – Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned – The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.
The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.
This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts.
Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net Investment in Capital Assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.
When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.
Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:
GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.
GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.
GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.
GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.
Released GASB Statements to be implemented in future financial statements are as follows:
GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.
GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.
GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):
GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.
GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.
GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.
NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.
Cash in the City pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:
Statement of Net Position- Governmental Activities:
Cash and investments $ 201,196
Total cash and investments $ 201,196
Deposits with City of Modesto
Cash and investment pool $ 201,196
Total cash and investments $ 201,196
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 2 – CASH AND INVESTMENTS (continued)
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.
Fair Value Hierarchy
The District categorizes its fair value measurements 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 an active market for identical assets; level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.
NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:
Restricted for District Maintenance – the portion of fund balance legally restricted for maintenance of parkways and open space within the District.
NOTE 4 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that it will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1 following the end of the fiscal year.
At June 30, 2022, the District had 1 parcels that were delinquent for a total of $731, none of which were delinquent for more than three consecutive payments.
The District received 99.48% of the Special Revenue Fund and Debt Service Fund facilities and maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $731 at June 30, 2022 is included in taxes receivable on the Statement of Net Position and Balance Sheet. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2016-2 THE VINTAGE
CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 5 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the Novel Coronavirus (COVID-19). The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area.
The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
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
The Honorable City Council
of the City of Modesto, 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 major fund of the City of Modesto Community Facilities District Number 2016-2 (The Vintage) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing 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 District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’s financial statements are free from 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 financial statements.
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. #1..
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24 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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
November 7, 2022
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CITY OF MODESTO, CALIFORNIA
ABANDONED VEHICLE ABATEMENT PROGRAM
INDEPENDENT AUDITORS’ REPORT
AND
FINANCIAL STATEMENT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report ........................................................................................................................... 1 Financial Statement:
Statement of Receipts and Costs ................................................................................................................ 3 Notes to the Financial Statement ................................................................................................................ 4 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 and the AVA Program Handbook ................................................................ 5 #1..
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM INDEPENDENT AUDITORS’ REPORT
To the Honorable City Council
City of Modesto, California
Opinion
We have audited the accompanying statement of receipts and costs of the City of Modesto, California, Abandoned Vehicle Abatement Program (the Program) for the year ended June 30, 2022, and the related notes to the financial statement, as listed in the table of contents.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the receipts and costs of the Program for the year ended June 30, 2022, in accordance with the cash basis of accounting described in Note 1.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and certain provisions of the Abandoned Vehicle Abatement (AVA) Program Handbook, issued by the California Highway Patrol. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statement section of our report. We are required to be independent of the City of Modesto, California, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter – Basis of Accounting
We draw attention to Note 1 of the financial statement, which describes the basis of accounting. The financial statement is prepared on the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. As discussed in Note 1, the Program is intended to present the statement of receipts and costs of the Program. It does not purport to and does not present fairly the financial position of the City of Modesto, California as of June 30, 2022, the changes in its financial position, or, where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with the cash basis of accounting described in Note 1, and for determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statement in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of a financial statement that is free from material misstatement, whether due to fraud or error. #1..
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2 Auditors’ Responsibilities for the Audit of the Financial Statement Our objectives are to obtain reasonable assurance about whether the financial statement as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and certain provisions of the Abandoned Vehicle Abatement (AVA) Program Handbook will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statement.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and certain provisions of the Abandoned Vehicle Abatement (AVA) Program Handbook we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statement, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. • Obtain an understanding of internal control relevant to the audit 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 Program’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statement. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Program’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Other Reporting Required by Government Auditing Standards and the AVA Program Handbook In accordance with Government Auditing Standards and the AVA Program Handbook, we have also issued our report dated October 7, 2022, on our consideration of the Program’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 and the AVA Program Handbook in considering the Program’s internal control over financial reporting and compliance.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
October 7, 2022
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The accompanying notes are an integral part of this financial statement. 3 CITY OF MODESTO, CALIFORNIA
ABANDONED VEHICLE ABATEMENT PROGRAM
STATEMENT OF RECEIPTS AND COSTS
FOR THE YEAR ENDED JUNE 30, 2022
Receipts received
Registration fees $ 221,297
Costs disbursed
Personnel 131,681
Services and supplies 19,384
Total costs disbursed 151,065
Excess of receipts received over costs disbursed 70,232 Surplus, beginning of year 568,029
Surplus, end of year $ 638,261
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CITY OF MODESTO, CALIFORNIA
ABANDONED VEHICLE ABATEMENT PROGRAM
NOTES TO THE FINANCIAL STATEMENT
4 NOTE 1 – BASIS OF PRESENTATION
The Abandoned Vehicle Abatement Program (the Program) is a statewide program administered by the California Highway Patrol (CHP). The City of Modesto (the City) administers and operates the local vehicle abatement program pursuant to Section 22710 of the Vehicle Code, Modesto Municipal City Code Section 3-2.1002 et seq., and the Stanislaus Council of Governments (StanCOG) Abandoned Vehicle Program and Plan. Section 9250.7 of the Vehicle Code establishes the funding source for the abatement of abandoned vehicles by a county-based Service Authority (the Authority), pursuant to the provisions of Section 22710 of the Vehicle Code. The Vehicle Code imposes a service fee of one dollar ($1) on vehicles registered to an owner with an address in the County of Stanislaus that established the Authority. This fee is paid to the Department of Motor Vehicles (DMV) at the time of registration or renewal of registration. The DMV, after deducting its administrative costs, at least quarterly transmits the net amount collected to the State Controller’s Office (SCO) for deposit in the Abandoned Vehicle Trust Fund. All money in the fund is continuously appropriated to the SCO for allocation to an Authority that has an approved Program pursuant to Section 22710 of the Vehicle Code, and for payment of the administrative costs of the SCO. StanCOG, the Authority established pursuant to Vehicle Code Section 22710, distributes Program funds to participating entities based on the allocations determined in the Vehicle Abatement Services Agreement. The receipts and costs of the Program are included in the General Fund of the City’s basic financial statements. The financial statement presents the Statement of Receipts and Costs of the Program. It does not purport to, and does not present fairly the financial position of the City of Modesto, California as of June 30, 2022, the changes in its financial position, or, where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Financial Statement Presentation: The financial statement is prepared on the method of accounting prescribed by the California Highway Patrol (CHP) and the Abandoned Vehicle Abatement (AVA) Program Handbook. The financial statement presents the information requested by the CHP and, therefore, does not purport to reflect results of operations in accordance with accounting principles generally accepted in the United States of America.
Basis of Accounting: The financial statement for the Program is prepared on the cash basis of accounting in which revenue is recognized when distributions are received and costs are recognized as disbursed and claimed in accordance with the AVA Program Handbook Guidelines.
Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statement.
Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through October 7, 2022, which is the date the financial statement was available to be issued.
NOTE 2 – CONTINGENCY
Coronavirus Pandemic
On March 4, 2020 Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the Program’s service area. The ultimate impact of COVID-19 on the operations and finances of the Program remains unknown.
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM 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 AND THE AVA PROGRAM HANDBOOK. To the Honorable City Council City of Modesto, 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; and certain provisions of the Abandoned Vehicle Abatement (AVA) Program Handbook, issued by the California Highway Patrol, the statement of receipts and costs of the City of Modesto, California, Abandoned Vehicle Abatement Program (the Program) for the year ended June 30, 2022, and the related notes to the financial statement, and have issued our report thereon dated October 7, 2022.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statement, we considered the Program’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statement, but not for the purpose of expressing an opinion on the effectiveness of the Program’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Program’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 statement 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 or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Program’s financial statement is free from 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 financial statement. #1..
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6 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 or the AVA Program Handbook. 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 Program’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards and the AVA Program Handbook in considering the Program’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
October 7, 2022
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MODESTO-CERES FIRE PROTECTION AGENCY
ANNUAL FINANCIAL REPORT
WITH
INDEPENDENT AUDITORS’ REPORT
FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ................................................................................................................... 4 Statement of Activities ........................................................................................................................ 5 Fund Financial Statements:
Balance Sheet - Governmental Fund ................................................................................................... 6 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Governmental Fund .................................................................................................. 7 Statement of Revenues, Expenditures, and Changes in Fund Balance- Budget to Actual - General Fund ....................................................................................................... 8 Notes to Financial Statements ........................................................................................................................... 9 Other Information:
Schedule of Officers ...................................................................................................................................... 15 Other Report:
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...................................................................................................................... 16 #1..
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
Modesto–Ceres Fire Protection Agency
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the governmental activities and major fund of the Modesto-Ceres Fire Protection Agency (the Agency) as of and for the year ended June 30, 2022, the budgetary comparison statement for the general fund, and the related notes to the financial statements, which collectively comprise the Agency’s basic financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and major fund of the Agency, as of June 30, 2022, and the respective changes in financial position and the budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Agency and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Agency’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. #1..
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2 The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 Agency’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Agency’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements. Management has omitted such information.
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. Our opinion on the basic financial statements is not affected by this missing information.
Other Information
Management is responsible for the other information included with the basic financial statements. The other information comprises the schedule of officers but does not include the basic financial statements and our auditors’ report thereon. The schedule of officers is presented for purposes of additional analysis and is not a required part of the basic financial statements. Our opinion on the basic financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 11, 2022, 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 solely 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 effectiveness of the Agency’s internal control over financial reporting or on compliance.
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3 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.
HUDSON HENDERSON & COMPANY, INC.
Fresno, California
October 11, 2022
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The accompanying notes are an integral part of the financial statements. 4 MODESTO–CERES FIRE PROTECTION AGENCY
STATEMENT OF NET POSITION
JUNE 30, 2022
Governmental
Activities
ASSETS
Cash and investments $ 260,056
Taxes receivable 25,137
Total Assets 285,193
LIABILITIES
Accounts payable 285,193
Total Liabilities 285,193
NET POSITION
Restricted - Total Net Position $ -
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The accompanying notes are an integral part of the financial statements. 5 MODESTO–CERES FIRE PROTECTION AGENCY
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Net (Expenses)
and Revenues
Program and Changes
in Net Position
Charges for Governmental
Functions/Programs Expenses Services Activities
Governmental Activities:
Fire and ambulance services $ 653,219 $ - $ (653,219)
Totals $ 653,219 $ - (653,219)
General Revenues:
Taxes 663,707
Interest 1,295
Change in fair value of investments (12,916)
Total General Revenues 652,086
(1,133)
Net Position, Beginning of Year - Prior Period Adjustment 1,133 Net Position, End of Year $ -
Revenues
Change in Net Position
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The accompanying notes are an integral part of the financial statements. 6 MODESTO–CERES FIRE PROTECTION AGENCY
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2022
ASSETS
Cash and investments $ 260,056
Taxes receivable 25,137
Total Assets $ 285,193
LIABILITIES AND FUND BALANCE
Liabilities
Accounts payable $ 285,193
Total Liabilities 285,193
Fund Balance
Restricted - Total Fund Balance - Total Liabilities and Fund Balance $ 285,193 Reconciliation of the Balance Sheet of the General Fund to the Statement of Net Position:
Total Fund Balance - General Fund $ - Adjustments to the Balance Sheet of the General Fund to reconcile with the Statement of Net Position: - Total Net Position - Governmental Activities $ - #1..
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The accompanying notes are an integral part of the financial statements. 7 MODESTO–CERES FIRE PROTECTION AGENCY
STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE – GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2022
REVENUES
Taxes $ 663,707
Interest 1,295
Change in fair value of investments (12,916)
Total Revenues 652,086
EXPENDITURES
Professional services 5,602
Liability insurance 1,133
City of Modesto - administrative fee 2,969
Other 2,586
Total Expenditures 12,290
Excess (Deficiency) of Revenues Over
(Under) Expenditures 639,796
OTHER FINANCING SOURCES (USES)
Distributions to Member Agencies:
City of Modesto (356,036)
City of Ceres (284,893)
Total Other Financing Sources (Uses) (640,929)
Net Change in Fund Balance (1,133)
Fund Balance, Beginning of Year - Prior Period Adjustment 1,133 Fund Balance, End of Year $ - Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the General Fund to the Statement of Activities:
Net change in Fund Balance - General Fund $ (1,133)
Adjustments to the Statement of Revenues, Expenditures, and Changes in Fund Balance of the General Fund to reconcile with the Statement of Activities: - Change in Net Position - Governmental Activities $ (1,133) #1..
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The accompanying notes are an integral part of the financial statements. 8 MODESTO–CERES FIRE PROTECTION AGENCY
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – BUDGET TO ACTUAL - GENERAL FUND
FOR THE YEAR ENDED JUNE 30, 2022
Original Final
REVENUE
Taxes $ 658,425 $ 658,425 $ 663,707
Interest 3,422 3,422 1,295
Change in fair value of investments - (12,916) - Total Revenue 661,847 661,847 652,086
EXPENDITURES
Professional services 5,500 5,500 5,602
Liability insurance 1,300 1,300 1,133
City of Modesto - administrative fee 4,500 4,500 2,969
Other 3,300 3,300 2,586
Total Expenditures 14,600 14,600 12,290
Excess (Deficiency) of Revenues
Over (Under) Expenditures 647,247 647,247 639,796
OTHER FINANCING SOURCES (USES)
Distributions to Member Agencies:
City of Modesto (359,546) (359,546) (356,036)
City of Ceres (287,701) (287,701) (284,893)
Total Other Financing
Sources (Uses) (647,247) (647,247) (640,929)
Changes in Fund Balance $ - $ - (1,133)
Fund Balance, Beginning of Year - Prior Period Adjustment 1,133 Fund Balance, End of Year $ -
3,510
2,808
6,318
$ (1,133)
(102)
167
1,531
714
2,310
(7,451)
(9,761)
Budgeted Amounts Actual
Amounts
Variance With
Final Budget
(12,916)
(2,127)
$ 5,282
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MODESTO – CERES FIRE PROTECTION AGENCY
NOTES TO FINANCIAL STATEMENTS
9 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The Modesto-Ceres Fire Protection Agency (the Agency) was formed on March 13, 2007 by a joint powers agreement made in accordance with Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (commencing with Section 6500) between the Industrial Fire District (the District), the City of Modesto, and the City of Ceres, for the cities to provide fire protection and administrative services within the District. The Agency operates under the Fire Protection District Law of 1987 and the Health and Safety Code, Sections 13801- 13999.
Revenue to finance the Agency's operation is derived from the County of Stanislaus property tax rolls.
Reporting Entity: The Agency’s financial statements include the accounts of all Agency operations. The criteria for including organizations as component units within the Agency’s reporting entity, as set forth in Section 2100 of the Governmental Accounting Standards Board’s (GASB) Codification of Government Accounting and Financial Reporting Standards, include whether: • The organization is legally separate (can sue and be sued in their own name) • The Agency holds the corporate powers of the organization • The Agency appoints a voting majority of the organization’s board • The Agency can impose its will on the organization • The organization has the potential to impose a financial benefit/burden on the Agency • There is fiscal dependency by the organization on the Agency. Based on the criteria, the Agency has no component units.
Measurement Focus, Basis of Accounting, and Financial Statement Presentation: The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the Agency’s activities. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
The government-wide financial statements are reported using the economic resources measurement focus and 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. Property taxes are recognized as revenues in the year for which they are levied.
Governmental Fund Financial Statements: Governmental fund financial statements (i.e., Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance) are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Revenues susceptible to accrual are property taxes, interest on investments, and intergovernmental revenues.