Pasadena City Council
April 24, 2023

PASADENA CENTER OPERATING COMPANY
(A COMPONENT UNIT OF THE

CITY OF PASADENA, CALIFORNIA)

FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2022

ATTACHMENT C
PASADENA CENTER OPERATING COMPANY TABLE OF CONTENTS YEAR ENDED JUNE 30, 2022 INDEPENDENT AUDITORS’ REPORT 1MANAGEMENT’S DISCUSSION AND ANALYSIS 4BASIC FINANCIAL STATEMENTSSTATEMENT OF NET POSITION 9STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION 10STATEMENT OF CASH FLOWS 11NOTES TO FINANCIAL STATEMENTS 13INDEPENDENT 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 30 (1)
INDEPENDENT AUDITORS’ REPORT Board of Directors Pasadena Center Operating Company Pasadena, California Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of Pasadena Center Operating Company (the Company), a component unit of the City of Pasadena, California, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Company’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 financial position of the Pasadena Center Operating Company, as of June 30, 2022, and the changes in its financial position and its cash flows 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 (GAAS) 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 Company 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 opinion. Emphasis of Matter As discussed in Note 1 to the financial statements, effective July 1, 2021, the Company adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. The guidance requires lessees to recognize a right-to-use asset and corresponding lease liability and lessors to recognize a lease receivable and corresponding deferred inflow of resources for all leases with lease terms greater than twelve months. Our opinion is not modified with respect to this matter. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. SeeCLAglobal.com/disclaimer.

CliftonLarsonAllen LLPCLAconnect.com
Board of Directors Pasadena Center Operating Company
(2)
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 Company’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 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 GAAS 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 GAAS 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 dueto fraud or error, and design and perform audit procedures responsive to those risks. Suchprocedures include examining, on a test basis, evidence regarding the amounts and disclosuresin the financial statements.Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion isexpressed.Evaluate the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluate the overall presentation of thefinancial statements.Conclude whether, in our judgment, there are conditions or events, considered in the aggregate,that raise substantial doubt about the Company’s ability to continue as a going concern for areasonable 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.

Board of Directors Pasadena Center Operating Company
(3)
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. 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 GAAS, 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 March 22, 2023, on our consideration of the Company’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 Company’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 Company’s internal control over financial reporting and compliance.

CliftonLarsonAllen LLP Irvine, California March 22, 2023 PASADENA CENTER OPERATING COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2022 (4)
As the Pasadena Center Operating Company (the PCOC) management, we offer readers of the PCOC’s financial statements, this narrative overview, and an analysis of the financial activities for the year ended June 30, 2022. The PCOC’s financial statements consist of management’s discussion and analysis (MD&A), statement of net position; statement of revenues, expenses, and changes in net position; statement of cash flows; and notes to the basic financial statements. We encourage readers to consider the information presented herein in conjunction with the accompanying basic financial statements and the accompanying notes. BACKGROUND The PCOC is a nonprofit 501(c) (4) corporation incorporated in 1973 to manage the Pasadena Convention Center, the Pasadena Civic Auditorium, the Pasadena Convention and Visitors Bureau, and the Pasadena Ice Skating Center. The PCOC was one of the first independent nonprofit organizations in the United States to combine its facility operations and destination marketing efforts. The PCOC is funded by revenue from its facilities, proceeds from a Tourism Business Improvement District (2.9 percent), a self-imposed hotel assessment, and a 60 percent portion of the Transient Occupancy Tax (12.1 percent). In FY 2017, The City of Pasadena and the PCOC amended their operating agreement establishing a maximum amount of Transient Occupancy Tax revenue to be transferred to the PCOC annually. In FY 2018, the Pasadena Convention and Visitors Bureau converted the Pasadena TBID from the Parking and Business Area Law 1989 (’89 Law) to the Property and Business Improvement District Law of 1994 (’94 Law). The district assessment remained the same (2.89 percent) and was approved for a five-year term through June 30, 2023. ABOUT OUR BUSINESS The PCOC operates a world-class state of the art public assembly facilities that generate significant regional economic activity by attracting conventions, tradeshows, entertainment, and other events to Pasadena. Our facilities include a 55,000 square feet Exhibition Hall, 25,000 square feet Ballroom, 18 meeting rooms of varying sizes, the Historic Civic Auditorium that seats 3,000, the Gold Room, and a 17,000 square feet Exhibit Hall. The PCOC also manages a regulation-size skating rink onsite. The Pasadena Convention and Visitor’s Bureau (PCVB) attracts hundreds of thousands of people to the City annually, enriching the local economy with hotel and retail spending and other direct spending on goods and services. PCVB promotes economic development, provides marketing support to the City’s art, culture, innovation, and special events, including operating a Visitor Information Center opened year-round. MANAGEMENT OBJECTIVE AND STRATEGY The Company’s mission is to promote Pasadena as a meeting and travel destination by attracting conventions, tradeshows, entertainment events, and tourism to its professionally managed facilities and first-class service. The Company’s management operates the business consistent with strategic business principles for success in both the short term and over more extended periods. PCOC focuses on unifying the management team, dedicated employees, and third-party contractors to achieve its priority and remain competitive in the meeting industry.

PASADENA CENTER OPERATING COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2022 (5)
OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as the introduction to PCOC’s basic financial statements. The annual financial report comprises three components: management’s discussion and analysis, the financial statements, and the notes to the financial statements. The Statement of Net Position presents all PCOC’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources as of June 30, 2022. The difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources is reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial position of PCOC is improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Position presents information showing PCOC’s net position changes during the most recent fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the related cash flow timing. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The Statement of Cash Flows presents information showing cash receipts and cash payments during the fiscal year, a reconciliation of operating income to net cash provided by operating activities, and detail of noncash investing, capital, and financing activities. SUMMARY OF FINANCIAL PERFORMANCE In fiscal year 2022, the Pasadena Center experienced a sharp recovery across all of its operating segments, driven primarily from the lift of restrictions on large gatherings at the late stages of 2021. In the fiscal year 2022, the Company’s cash and cash equivalents increased by $950,000 related to the company’s operation. Capital assets decreased by $2.1 million, mostly from depreciation expense of $4.0 million. Deferred outflows of resources for PCOC are related to the accumulated decrease in fair value of hedging derivatives and amortization of deferred refunding charge. Deferred outflows of resources decreased $14.4 million from 2021 to 2022, mainly due to the change in the derivatives’ fair value at year-end. The Company’s current liabilities, including accounts payable, other accrued liabilities, accrued salaries and benefits, deposits increased by $1.1 million compared to the fiscal year 2021. The current portion of long-term debt increased by $253,000. Deferred inflows of resources for PCOC are related to the deferred refunding charges and an upfront amount received as part of a service concession agreement with Centerplate. Deferred inflows of resources decreased by $515,000 from 2021 to 2022 due to recognizing these revenues due to the passage of time. In the fiscal year 2022, the amortization of capital investments by Centerplate resumed in July 2021.

PASADENA CENTER OPERATING COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2022 (6)
The net position represents the residual interest in PCOC’s assets, and deferred outflows of resources after all liabilities and deferred inflows of resources are deducted. PCOC’s net position at the end of FY 2022 is a deficit totaling $3,392,046, decreased by $3,632,570 during the year. Net position is reported in three major categories: net investment in capital assets, restricted, and unrestricted. A full explanation is in Note 7 to the basic financial statements. The portion of net position classified as net investment in capital assets, represents capital assets net of accumulated depreciation/amortization and net of related outstanding liabilities is $2.4 million at year-end. Although PCOC’s net investment in capital assets is net of related liabilities, the resources used to repay the debt must be from other sources; the capital assets cannot be used to liquidate these liabilities. The restricted net position remained the same at $870 thousand in the fiscal year 2022. $867 thousand of this amount represents funds restricted for public art. 2022 2021Cash and Cash Equivalents 19,315,503$ 18,365,214$ Receivables and Other Assets 124,510,339 126,635,522 Total Assets 143,825,842 145,000,736 Deferred Outflows of Resources 11,674,693 26,057,346 Current Liabilities 9,136,456 8,040,154 Noncurrent Liabilities 145,388,632 165,159,755 Total Liabilities 154,525,088 173,199,909 Deferred Inflows of Resources 4,367,493 4,882,789 Net Position (Deficit)Net Investment in Capital Assets 2,432,565 1,302,747 Restricted 870,240 870,240 Unrestricted (6,694,851) (9,197,603) Net Position (Deficit) (3,392,046)$ (7,024,616)$ RESULTS OF OPERATIONS Operating Revenues The fiscal year 2022 operating revenue equaled $8.5 million, representing a 530% increase from the previous fiscal year. Please note: the annual growth rate is dramatically greater than what would be considered a normal operating result due to the equally dramatic decline in revenue during fiscal year 2021.

PASADENA CENTER OPERATING COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2022 (7)
During the year, revenues for the PCOC were recognized through space rental and all ancillary services (such as food & beverage, parking, etc.). Key revenue drivers were: • Television production, Conferences, and Conventions• Pasadena Ice Skating Center skating classes and hockey league games• Parking for short-term leases for nearby projectsOperating Expenses In the fiscal year 2022, total operating expenses increased to $12.5 million from $8.6 million, an increase of 45.0%. The increase was driven by the return to hosting events including re-staffing for business needs, increase in occupancy related expenses, and resuming contractual obligations that were temporarily suspended in fiscal year 2021. Depreciation expense, primarily for the convention center building, amounted to $4.0 million. PCVB contracted and direct expenses in the fiscal year 2022 totaled $2.2 million, an increase of 106.6% compared to $1.1 million in 2021. The increase in PCVB spending is a direct effort to refocus on maximizing the return of the tourism, meeting and conventions industry. Nonoperating Revenues (Expenses), Net Non-operating revenues, mainly, Transient Occupancy Tax and Tourism Business Improvement Tax revenue, totaled $12.9 million; an increase of 133.2% mostly as a result of the significant decline in the prior year. Interest income also decreased by $145,000 or 55.6% compared to the fiscal year 2021. Capital Contributions Capital contributions include $76,055, which is recognized as revenue from the $1.6 million contribution paid by Boston Culinary Group, now Centerplate. The remainder of the $193,519 unamortized amount paid by Centerplate will be recognized in equal monthly installments over the life of the agreement with PCOC. 2022 2021Operating Revenues 8,494,453$ 1,347,177$ Operating Expenses 12,518,091 8,594,402 Operating Loss (4,023,638) (7,247,225) Nonoperating Revenues and Expenses, Net 7,580,153 (246,131) Income Before Capital Contributions 3,556,515 (7,493,356) Capital Contributions 76,055 12,676 Change in Net Position 3,632,570 (7,480,680) Net Position (Deficit), Beginning of Year(7,024,616) 456,064 Net Position (Deficit), End of Year(3,392,046)$ (7,024,616)$ PASADENA CENTER OPERATING COMPANY MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2022 (8)
CAPITAL ASSETS PCOC’s investment in capital assets as of June 30, 2022, and 2021, amounts to $121,573,130 and $125,521,118, respectively (net of accumulated depreciation/amortization). This investment in capital assets includes building and improvements, machinery and equipment, furniture and fixtures, right-to-use lease assets, land, and construction in progress. The net decrease in PCOC’s investment in capital assets, net of depreciation, for the current fiscal year was $3.9 million. Additional information on PCOC’s capital assets can be found in Note 5 of the financial statements. June 30, 2022 June 30, 2021Buildings and Improvements 118,307,556$ 122,081,486$ Machinery and Equipment 683,623 747,998 Furniture and Fixtures 53,246 66,371 Right-to-Use Leased Assets 54,403 81,274 Land 2,423,473 2,423,473 Construction in Progress 50,829 120,516 Total 121,573,130$ 125,521,118$ DEBT ADMINISTRATION As of June 30, 2022, PCOC had long-term debt outstanding balance is $140,527,175, a decrease of $5.3 million from 2021 due to current year principal payments. There were no major debt events during the current fiscal year. For additional information on PCOC’s long-term debt activity, refer to Note 6 of the financial statements’ notes. June 30, 2022 June 30, 2021COP 2006 Series A Capital Appreciation Bonds 5,578,439$ 10,556,151$ COP 2008 Series A Capital Appreciation Bonds 134,720,000 134,720,000 Energy Conservation Loan 175,197 480,759Leases Payable 53,539 81,274 Total 140,527,175$ 145,838,184$ REQUEST FOR INFORMATION This financial report is designed to provide a general overview of PCOC’s finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Director of Finance, Pasadena Center Operating Company, 300 E. Green Street, Pasadena, California 91101.

PASADENA CENTER OPERATING COMPANY STATEMENT OF NET POSITION JUNE 30, 2022 See accompanying Notes to Financial Statements. (9)
ASSETSCURRENT ASSETSCash and Cash Equivalents 10,572,001$ Accounts Receivables 943,736 Lease Receivable 7,495Due from the City of Pasadena 1,869,378 Prepaid Items 116,600 Total Current Assets 13,509,210 RESTRICTED CASH AND CASH EQUIVALENTS8,743,502 NONCURRENT ASSETSCapital Assets, Not Depreciated or Amortized 2,474,302 Capital Assets, Being Depreciated or Amortized 119,098,828Total Noncurrent Assets 121,573,130 Total Assets 143,825,842 DEFERRED OUTFLOWS OF RESOURCESAccumulated Decrease in Fair Value of Hedging Derivatives 10,763,362 Deferred Charges on Refunding 911,331 Total Deferred Outflows of Resources 11,674,693 LIABILITIESCURRENT LIABILITIESAccounts Payable and Other Liabilities 765,219 Accrued Salaries and Benefits 357,887 Interest Payable 565,433Advance Deposits Payable 1,399,386 Long-Term Liabilities - Due Within One Year 6,048,531 Total Current Liabilities 9,136,456 NONCURRENT LIABILITIESDerivative Instruments Liability 10,763,362 Accrued Salaries and Benefits 146,626 Long-Term Liabilities - Due in More than One Year 134,478,644Total Noncurrent Liabilities 145,388,632 Total Liabilities 154,525,088 DEFERRED INFLOWS OF RESOURCESLeases 7,488Deferred Charges on Refunding 4,166,486 Service Concession Arrangement 193,519 Total Deferred Inflows of Resources 4,367,493 NET POSITIONNet Investment in Capital Assets 2,432,565 Restricted for Public Art 867,377Restricted for Organ Repairs and Maintenance Project 2,863Unrestricted (6,694,851) Total Net Position (3,392,046)$ PASADENA CENTER OPERATING COMPANY STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2022 See accompanying Notes to Financial Statements. (10)
OPERATING REVENUESOccupancy Fees 3,255,890$ Ice Skating Center 2,797,351Parking 1,232,355Commissions 1,208,857 Total Operating Revenues 8,494,453OPERATING EXPENSESPasadena Center 4,999,675 Ice Skating Center 1,311,835 Pasadena Convention and Visitors Bureau 2,231,027 Depreciation and Amortization Expense 3,975,554 Total Operating Expenses 12,518,091 OPERATING LOSS(4,023,638) NONOPERATING REVENUES (EXPENSES)Contributions from City of Pasadena (Transient Occupancy Taxes)9,750,623 Tourism Business Improvement District Taxes 3,189,250 Grant Income 2,552,274Facility Restoration Fee 65,872 Investment Income (Loss) (2,486,935) Interest Expense and Fiscal Agent Fees(5,490,931) Total Nonoperating Revenues (Expenses) 7,580,153 INCOME BEFORE CAPITAL CONTRIBUTIONS3,556,515 CAPITAL CONTRIBUTIONS76,055 CHANGES IN NET POSITION3,632,570 Net Position - Beginning of Year(7,024,616) NET POSITION - END OF YEAR(3,392,046)$ PASADENA CENTER OPERATING COMPANY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2022 See accompanying Notes to Financial Statements. (11)
CASH FLOWS FROM OPERATING ACTIVITIESCash Received from Customers 7,997,567$ Cash Payments to Suppliers for Goods and Services(4,276,326)Cash Payments to Employees for Services(3,677,783)Net Cash Provided by Operating Activities 43,458CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESReceipt of Grants 2,552,274 Contributions from the City of Pasadena (Transient Occupancy Taxes)9,026,618 Receipt of Tourism Business Improvement District Taxes 3,011,627 Net Cash Provided by Noncapital Financing Activities 14,590,519 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESAcquisition and Construction of Capital Assets(135,581) Principal Paid on Long-Term Liabilities(5,823,297) Interest Paid on Long-Term Liabilities(4,856,010) Facility Restoration Fee for Capital Improvements 65,872 Net Cash Used by Capital and Related Financing Activities(10,749,016) CASH FLOWS FROM INVESTING ACTIVITIESInvestment Income Received(331,861) Change in Fair Value of Cash Equivalents(2,602,811) Net Cash Used by Investing Activities(2,934,672) NET INCREASE IN CASH AND CASH EQUIVALENTS950,289 Cash and Cash Equivalents - Beginning of Year 18,365,214 CASH AND CASH EQUIVALENTS - END OF YEAR19,315,503$ RECONCILIATION TO STATEMENT OF NET POSITIONCash and Cash Equivalents10,572,001$ Restricted Cash and Cash Equivalents8,743,502 Total Reconciliation to Statement of Net Position19,315,503$ PASADENA CENTER OPERATING COMPANY STATEMENT OF CASH FLOWS (CONTINUED) YEAR ENDED JUNE 30, 2022 See accompanying Notes to Financial Statements. (12)
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:Operating Loss(4,023,638)$ Adjustments to Reconcile Operating Loss to Net Cash Provided by Operating Activities:Depreciation and Amortization 3,975,554Amortization of Deferred Inflows Related to Lease(14,977)Loss on Disposal of Capital Assets 108,017 (Increase) Decrease in Assets:Accounts Receivable(818,302) Lease Receivable 14,970 Prepaid Items(13,099) Increase (Decrease) in Liabilities:Accounts Payable and Other Liabilities 469,707 Accrued Salaries and Benefits 23,803 Advance Deposits Payable 321,423 Net Cash Provided by Operating Activities 43,458$ SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITYAmortization of Deferred Refunding Charges 369,169$ Accretion of Interest on Long-Term Debt 512,288$ Amortization of Service Concession Arrangement 76,055$ PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (13)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity Pasadena Center Operating Company (the Company) was formed in 1973 as a nonprofit corporation under Section 501(c)(4) of the Internal Revenue Code for the purpose of managing and operating the Pasadena Center and the Pasadena Convention and Visitors Bureau. The Pasadena Center is comprised of the Civic Auditorium, which includes the auditorium and adjacent land, and the Conference Center, which includes the Conference Center, Exhibition Hall, and related parking facilities. The Company operates under an agreement with the City of Pasadena (the City) whereby the Company maintains and operates the Pasadena Center and the Pasadena Convention and Visitors Bureau. The Pasadena City Council appoints the members of the Company’s board of directors. The Company’s operations constitute part of the overall financial reporting entity of the City and are accounted for as a discretely presented component unit in the City’s Annual Comprehensive Financial Report consistent with accounting principles generally accepted in the United States of America (U.S. GAAP). Basis of Presentation The Company’s financial statements are presented in conformance with Governmental Accounting Standards Board (GASB) Statement No. 34, which established standards for external financial reporting for all state and local governmental entities. The basic financial statements include the statement of net position, statement of revenues, expenses, and changes in net position, and statement of cash flows. Basis of Accounting The Company is accounted for as an enterprise fund (proprietary fund type). A fund is an accounting entity with a self-balancing set of accounts established to record the financial position and results of operations of a specific governmental activity. The activities of enterprise funds closely resemble those of ongoing businesses in which the purpose is to conserve and add to basic resources while meeting operating expenses from current revenues. Enterprise funds account for operations that provide services on a continuous basis and are substantially financed by revenues derived from user charges. The Company utilizes the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred. Classification of Revenues and Expenses The Company classifies its revenues and expenses into the following classifications: operating revenues, operating expenses, nonoperating revenues, and nonoperating expenses. Operating revenues consist of charges to customers for sales and use of the facilities, with the relating costs considered operating expenses. Nonoperating revenues consist of contributions from the City of Pasadena of their transient occupancy taxes, tourism business improvement district taxes, investment income, and other nonoperating income. Capital contributions consist of contributed capital assets.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (14)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Implementation of New Accounting Pronouncement In June 2017, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 87, Leases. This standard requires the recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and as inflows of resources or outflows of resources recognized based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this standard, 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 City adopted the requirements of the guidance effective July 1, 2021 and has applied the provisions of this standard to the beginning of the period of adoption. Cash and Cash Equivalents For the purpose of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates and have an original maturity date of three months or less. Investments Investments are reported in the accompanying statements at fair value, except for certain certificates of deposit and investment contracts that are reported at cost because they are not transferable, and they have terms that are not affected by changes in market interest rates. Investment earnings (loss) includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation or sale of investments. Prepaid Assets Certain payments to vendors, which reflect costs applicable to future accounting periods are recorded as prepaid assets. Leases The Company is a lessee for noncancellable leases of equipment. The Company recognizes a lease liability and an intangible right-to-use asset (lease asset) in the statement of net position. At the commencement of a lease, the Company initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date. Subsequently, the lease asset is amortized on a straight-line basis over its useful life. The Company monitors changes in circumstances that would require a remeasurement of its leases and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (15)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Leases (Continued) The Company is a lessor for a noncancellable lease of office space in a building. The Company recognizes a lease receivable and a deferred inflow of resources in the statement of net position. At the commencement of a lease, the Company initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term. The Company monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. Capital Assets Capital assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated assets are valued at their estimated acquisition value on the date received. The Company capitalizes all assets with a historical cost of at least $10,000 consistent with City practice. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Depreciation is computed utilizing the straight-line method over the following estimated useful lives: Buildings 50 Years Building Improvements 3 to 30 Years Machinery and Equipment 3 to 30 Years Furniture and Fixtures 10 Years Right-to-Use Leased Equipment 2 to 5 Years Compensated Absences The Company has a paid time off (PTO) policy in effect. It is the Company’s policy to permit employees to accumulate earned but unused PTO benefits. PTO hours can accrue up to a maximum of one and one-half times the annual allowable amount (maximum of 27 to 42 days, 216 to 336 hours). The Company pays all earned PTO benefits upon termination. All accumulated PTO is recorded as an expense and a liability at the time the benefit is earned. This is included in accrued salaries and benefits on the statements of net position.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (16)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Position Net position represents the difference between assets and liabilities on the statement of net position. Net positions were classified in the following categories: net investment in capital assets, restricted, and unrestricted. Net investment in capital assets consists of the cost of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets, as applicable. Net position is reported as restricted when there are limitations imposed on the use either through the enabling legislation adopted by the Company’s board of directors, or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. All other net position is reported as unrestricted. When both restricted and unrestricted resources are available for use, it is the Company’s policy to use unrestricted resources first, and then restricted resources as they are needed. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent 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 those estimates.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (17)
NOTE 2 CASH AND INVESTMENTS Summary of Cash and Investments Cash and investments as of June 30, 2022, are classified in the accompanying financial statements as follows: Cash and Cash Equivalents 10,572,001$ Restricted Cash and Cash Equivalents 8,743,502 Total Cash and Investments 19,315,503$ Cash and investments as of June 30, 2022, consist of the following: Cash on Hand 15,305$ Deposits With Financial Institutions 5,829,380 City of Pasadena Investment Pool 4,727,316Cash and Investments With Fiscal Agent:Money Market Mutual Funds 8,743,502 Total Cash and Investments 19,315,503$ Deposits At June 30, 2022, the carrying amount of the Company’s deposits was $5,829,380 and the bank balance was $6,409,001. The $579,621 difference represents outstanding checks and other reconciling items. All of the Company’s cash and cash equivalents as of June 30, 2022 were collateralized or insured with securities held by pledging financial institutions in the Company’s name. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the Company’s deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (18)
NOTE 2 CASH AND INVESTMENTS (CONTINUED) Investments Authorized by the California Government Code The table below identifies the investment types that are authorized for the Company by the California Government Code. Other than what is in the Government Code, the Company has no other investment policy. Investment Types Authorized by *Maximum *MaximumAuthorized by the Investment *Maximum Percentage Investment inCalifornia Government Code Policy Maturity of Portfolio One IssuerLocal Agency Bonds Yes 5 Years None NoneU.S. Treasury Obligations Yes 5 Years None NoneU.S. Agency Securities Yes 5 Years None NoneBankers’ AcceptancesYes 180 Days 40% 30%Commercial Paper Yes 270 Days 15% 10%Negotiable Certificates of Deposit Yes 5 Years 30% NoneRepurchase Agreements Yes 1 Year None NoneReverse Repurchase Agreements Yes 92 Days 20% NoneMedium-Term Notes Yes 5 Years 30% 5%Mutual Funds Yes N/A 20% 10%Money Market Mutual Funds Yes N/A 20% 10%Mortgage Pass-Through Securities Yes 5 Years 20% NoneCounty Pooled Investment Funds Yes N/A None NoneLocal Agency Investment Fund Yes N/A None NoneJoint Power Agency Pools(Other Investment Pools) Yes N/A None None* Based on state law requirements or investment policy requirements, whichever is more restrictive.Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Company’s investment policy. The table below identifies the investment types that are authorized for investments held by the bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Maximum Minimum Authorized Investment Type MaturityRatingU.S. Treasury Obligations None N/AU.S. Agency Securities None N/AState and Local Agency Bonds None AaBankers’ Acceptances 360 days AaCommercial Paper 270 days AaNegotiable Certificates of Deposit None AaRepurchase Agreements None AaMoney Market Mutual Funds N/AAaaInvestments Contracts None Aa PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (19)
NOTE 2 CASH AND INVESTMENTS (CONTINUED) Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Company manages its exposure to interest rate risk is by purchasing a combination of short-term and long-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the Company’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the Company’s investments by maturity: 12 Months 12 to 60Investment Type Fair Value or Less MonthsCity of Pasadena Investment Pool 4,727,316$ 4,727,316$ -$ Fiscal Agent:Money Market Mutual Funds 8,743,502 8,743,502 - Total 13,470,818$ 13,470,818$ -$ Remaining MaturityDisclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Company’s investment policy, or debt agreements, and the actual rating as of year-end for each investment type. MinimumLegalInvestment Type Fair Value Rating Aaa Not RatedCity of Pasadena Investment Pool 4,727,316$ N/A -$ 4,727,316$ Fiscal Agent:Money Market Mutual Funds 8,743,502 Aaa 8,743,502 - Total 13,470,818$ 8,743,502$ 4,727,316$ Ratings at End of YearConcentration of Credit Risk The investment policy of the Company contains no limitations on the amount that can be invested in anyone issuer beyond that stipulated by the California Government Code.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (20)
NOTE 2 CASH AND INVESTMENTS (CONTINUED) Fair Value Hierarchy The Company categorizes its fair value measurements within the fair value hierarchy established by U.S. GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are quoted prices for similar assets in active markets; Level 3 inputs are significant unobservable inputs. The Company’s investments in the City investment pool and the fiscal agent money market mutual funds are not subject to the fair value hierarchy. Further details on the City’s investment pool fair value hierarchy can be found in the City’s Annual Comprehensive Financial Report for the year ended June 30, 2022. NOTE 3 TOURISM BUSINESS IMPROVEMENT DISTRICT TAXES AND CONTRIBUTIONS OF CITY TRANSIENT OCCUPANCY TAXES Tourism Business Improvement District (TBID) Taxes The TBID was established in March 2003. The TBID is an assessment levied against each hotel and motel business in the City. The assessment is calculated as a percentage of each day’s Gross Occupancy Revenue and is passed through to guests. The rate of assessment is set annually by resolution of the City Council but cannot exceed 2.89%. For the fiscal year ended June 30, 2022, the rate was set at 2.89%. The purpose of the TBID is to market Pasadena as a destination by funding activities, programs, expenses, and services of the Pasadena Convention & Visitors Bureau. Marketing activities of the Pasadena Convention & Visitors Bureau and the Pasadena Conference Center are financed by the TBID. For the year ended June 30, 2022, TBID taxes were $3,189,250, of which $380,198 was due from the City at June 30, 2022. Contributions of City Transient Occupancy Taxes (TOT) The Company receives support from the City equal to the sum of the annual debt service payments on the 2006A and 2008A expansion project bonds and an allowance of $500,000 to be used by the Company for maintenance, repairs, capital improvements and or debt service. A portion of this support is retained by the City to pay for the Company’s insurance. Annual capital improvements to the Convention Center, Civic Auditorium and Ice Skating Center are approved by the City. For the year ended June 30, 2022, net TOT revenue was $9,750,623, of which $1,465,941 was due from the City at June 30, 2022.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (21)
NOTE 4 LEASE RECEIVABLE The Company leases office space under a three-year, noncancellable, lease agreement. The net present value of the lease receivable was determined using an estimated discount rate of 0.218%. The lessee is required to make monthly fixed payments of $1,250. The Company recognized lease revenue of $14,977 during the current fiscal year. Future minimum lease payments to be received are as follows: Principal Interest TotalYear Ending June 30,Payment Payment Payments2023 7,495$ 5$ 7,500$ NOTE 5 CAPITAL ASSETS Capital asset activity for the year ended June 30, 2022, is as follows: June 30, 2021 Transfers Balance atas Restated (1) Additions and Deletions June 30, 2022Capital Assets, Not Depreciatedor Amortized:Land 2,423,473$ -$ -$ 2,423,473$ Construction in Progress 120,516 135,581 (205,268) 50,829Total Capital Assets, Not Depreciatedor Amortized: 2,543,989 135,581 (205,268) 2,474,302 Capital Assets Being Depreciated/AmortizedBuildings and Improvements 184,227,898 97,253 184,325,151 Machinery and Equipment 1,881,441 - - 1,881,441 Furniture and Fixtures 366,934 - - 366,934 Right-to-Use Leased Equipment 81,274 - - 81,274Total Capital Assets BeingDepreciated/Amortized 186,557,547 97,253 - 186,654,800 Less Accumulated Depreciation/Amortization:Buildings and Improvements (62,146,412) (3,871,183) - (66,017,595)Machinery and Equipment (1,133,443) (64,375) - (1,197,818)Furniture and Fixtures (300,563) (13,125) - (313,688)Right-to-Use Leased Equipment - (26,871) - (26,871)Total Accumulated Depreciation/Amortization (63,580,418) (3,975,554) - (67,555,972)Total Capital Assets Being Depreciated/Amortized, Net 122,977,129 (3,878,301) - 119,098,828 Total Capital Assets, Net 125,521,118$ (3,742,720)$ (205,268)$ 121,573,130$ (1) The beginning balance was restated to add right-to-use lease assets due to theimplementation of GASB Statement No. 87, Leases. See Note 1.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (22)
NOTE 6 LONG-TERM DEBT Long-term debt for the year ended June 30, 2022, is as follows: Balance at PrincipalJune 30, 2021 Additions/ Payments/ Balance at Due inas Restated (1) Accretion Prepayments June 30, 2022 One YearCertificates of Participation 2006 Series A 11,340,000$ -$ (5,490,000)$ 5,850,000$ 5,850,000$ Accreted Interest (783,849) 512,288 - (271,561) - Certificates of Participation 2008 Series A 134,720,000 - - 134,720,000 - Energy Conservation Loan 480,759 - (305,562) 175,197 175,197 Leases Payable 81,274 - (27,735) 53,539 23,334 Total 145,838,184$ 512,288$ (5,823,297)$ 140,527,175$ 6,048,531$ (1) The beginning balance was restated to add leases payable due to the implementation ofGASB Statement No. 87, Leases. See Note 1.2006 Certificates of Participation On August 23, 2006, the City issued the 2006 Certificates of Participation, 2006 Series A and B in the amount of $162,639,972. The Certificates of Participation were issued to finance the cost of improvements to the Pasadena Conference Center and related facilities, establish a reserve fund per the Trust Agreement, and finance the cost of execution and delivery of the Certificates of Participation. 2006 Series A of the Certificates of Participation were issued as Capital Appreciation Certificates. These certificates of participation appreciate in value based on annual accretion of the initial amount at a rate of interest that will result in each such capital appreciation certificate of participation appreciating to its maturity value on its final maturity date. Accretion will commence on August 23, 2006. Interest accretes at a yield ranging from 3.85% to 4.81%. By their nature, there are no regular interest payments associated with capital appreciation certificates of participation; interest on the debt results from the difference between the amounts paid by the investors when the debt was issued and the significantly larger value at maturity. Each year, the outstanding balance is increased by the accreted value associated with the certificates of participation. Principal on the 2006 Series A Certificates of Participation is payable in annual installments ranging from $415,000 to $5,850,000 commencing February 2010 and ending February 2023. 2006 Series B of the Certificates of Participation was refunded by the 2008 Series A Certificates of Participation (see note below). The annual requirements to repay the outstanding Certificates of Participation 2006 Series A at June 30, 2022, are as follows: PrincipalYear Ending June 30,Payment Accretion2023 5,850,000$ (271,561)$ PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (23)
NOTE 6 LONG-TERM DEBT (CONTINUED) 2008 Certificates of Participation On April 15, 2008, the City issued the 2008 Refunding Certificates of Participation, 2008 Series A in the amount of $134,720,000. These certificates of participation were issued to refund the City’s Certificates of Participation (Conference Center Project), 2006 Series B Certificates of Participation and finance the costs of execution of the 2008 Series A Certificates of Participation. The refunded certificates of participation were repaid in April 2008 and the liability has been removed from the statement of net position. Interest on 2008 Series A Certificates of Participation were issued at a variable rate with the reassignment of the synthetic fixed rate swap of 3.536%. Principal is payable in annual installments ranging from $6,775,000 to $11,445,000 commencing February 1, 2024, and ending February 1, 2035. The annual requirements to repay the outstanding Certificates of Participation 2008 Series A at June 30, 2022, are as follows: Principal Interest HedgingYear Ending June 30,Payment Payment Derivative, Net Total2023 -$ 1,077,760$ 3,625,120$ 4,702,880$ 2024 6,775,000 1,055,177 3,547,885 11,378,062 2025 7,480,000 998,627 3,354,557 11,833,184 2026 8,260,000 936,187 3,141,263 12,337,450 2027 9,045,000 867,490 2,906,822 12,819,312 2028-2032 59,265,000 3,061,370 10,186,990 72,513,360 2033-2035 43,895,000 532,764 1,363,712 45,791,476 Total 134,720,000$ 8,529,375$ 28,126,349$ 171,375,724$ The above table incorporates the net receipts/payments of the hedging derivative instrument associated with this debt issue. These amounts assume that current interest rates on variable rate bonds and the current reference rates of hedging derivative instruments will remain the same for their term. As these rates vary, interest payments on variable-rate bonds and net receipts/payments on the hedging derivative instruments will vary. Refer to Note 7 for additional information regarding the derivative instruments associated with the debt of the Company. Energy Conservation Loan The Company received approval from the City in June 2008 to commence a project designed to conserve energy through use of more efficient air conditioning systems and energy efficient lighting. The project budget cost was $4,581,071; $1,560,000 was pledged by Pasadena Water and Power (PWP) as a rebate based on energy savings and $3,000,000 was covered by a loan from the California Energy Commission with an interest rate of 3.95% for 13 years. The annual requirements to repay the outstanding loan from the State of California Energy Conservation Commission at June 30, 2022, are as follows: Principal Interest Total DebtYear Ending June 30,Payment Payment Service2023 175,197$ 3,822$ 179,019$ PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (24)
NOTE 6 LONG-TERM DEBT (CONTINUED) Leases Payable The Company leases equipment for terms of 24 to 60 months under four noncancelable lease agreements. The net present values of the leases payable were determined using estimated discount rates that range from 0.185% to 0.577%. One agreement requires fixed quarterly payments of $1,117 and the other three agreements require fixed monthly payments of $341, $628, and $990. Total future minimum lease payments under lease agreements are as follows: Principal Interest TotalYear Ending June 30,Payment Payment Payments2023 23,334$ 172$ 23,506$ 2024 21,437 89 21,526 2025 4,686 36 4,722 20264,082 13 4,095 Total 53,539$ 310$ 53,849$ NOTE 7 DERIVATIVE INSTRUMENT LIABILITY The Company has entered into a floating to fixed interest rate swap in order to hedge the change in cash flows with respect to certain variable debt as described below. This structure results in a lower borrowing cost by accessing interest rate markets more attractive than traditional fixed rate debt structures of the time. The greater liquidity and flexibility of the swap market has offered the Company significant cost savings opportunities in the swap the Company has engaged in. Conference Center Variable Rate Demand Refunding Certificates of Participation (COP) On September 18, 2006, the Company entered into an interest rate swap agreement with DEPFA Bank related to the $135,500,000 Conference Center Auction Rate Certificates Series 2006B. The objective was to effectively change the Company’s variable interest rate to a synthetic fixed rate of 3.536%. Under the terms of the swap, the Company pays the counterparty the fixed rate of 3.536% and receives a floating rate equal to 64% of the one-month LIBOR rate. The swap has a notional amount of $133,000,000 representing a hedge ratio of 98.7% and declines according to the schedule set forth in the contract until the final principal payment on the certificates in 2034. Objective and Terms Notional Effective Maturity CounterpartyType Objective Amount Date Date Terms Credit RatingPay Fixed Interest Hedge of Changes 133,000,000$ 4/1/2011 2/1/2034 Pay 3.536% A1/AA- Rate Swap in Cash Flows on Receives 64%the 2008A COPs LIBOR Index PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (25)
NOTE 7 DERIVATIVE INSTRUMENT LIABILITY (CONTINUED) Objective and Terms (Continued) In 2011, due to its declining credit ratings, DEPFA Bank was replaced by RBC as the counterparty for the swap. Pursuant to GASB Statement No. 64, the replacement did not require any change in accounting treatment. On April 15, 2008, the Company issued the 2008 Refunding COPs, Series 2008A in the amount of $134,720,000. These certificates were issued to refund the Company’s Certificates of Participation (Conference Center Project), Series 2006B and finance the cost of execution of the 2008A Certificates of Participation backed by a letter of credit from Bank of America. The final maturity on the 2008A COPs was extended by one year to 2035 in order to reduce the reserve requirement and consequently, reduce the size of the issue by approximately $800,000. The refunded certificates are considered to be defeased, and the liability has been removed from the Company’s statement of net position and recorded as a deferred amount upon refunding. During the fiscal year ended June 30, 2011, the Company entered into a new agreement to take advantage of a more advantageous interest rate adjustment mode than the 2008 Series Bonds previously had. As a result, the former derivative instrument terminated, and the new instrument has off-market terms. As a result, an up-front payment was received. The up-front payment is reported as a borrowing. The borrowing is amortized over the life of the swap and amortizes using the effective interest method for the life of the swap with adjustments to interest expense during each fiscal year. The original balance of the borrowing was $8,935,613. As of the year ended June 30, 2022, the balance was $4,166,486. The deferred amount is amortized over the life of the swap using the effective interest method for the life of the swap with adjustments to interest expense during each fiscal year as follows: Beginning Accrued EndingYear Ending June 30,Balance Interest Payment Balance2023 4,166,486$ 179,003$ (646,380)$ 3,699,109$ 2024 3,699,109 157,461 (635,404) 3,221,166 2025 3,221,166 136,068 (601,344) 2,755,890 2026 2,755,890 115,332 (563,760) 2,307,462 2027 2,307,462 95,454 (522,409) 1,880,507 2028 1,880,507 76,649 (477,171) 1,479,985 2029 1,479,985 59,154 (427,721) 1,111,418 2030 1,111,418 43,226 (373,774) 780,870 2031 780,870 29,157 (315,009) 495,018 2032 495,018 17,258 (251,140) 261,136 2033 261,136 7,877 (181,805) 87,2082034 87,208 1,487 (88,695) - Total 918,126$ (5,084,612)$ The Company categorizes its fair value measurements within the fair value hierarchy established by U.S. GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset or liability. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are quoted prices in active markets for similar assets; Level 3 inputs are significant unobservable inputs.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (26)
NOTE 7 DERIVATIVE INSTRUMENT LIABILITY (CONTINUED) Objective and Terms (Continued) The Company has the following recurring fair value measurements as of June 30, 2022: Measurements by Fair Value Level Total Level 1 Level 2 Level 3Derivative Instrument Liability 10,763,362$ -$ 10,763,362$ -$ The fair value balance and notional amount of the derivative instrument outstanding at June 30, 2022, classified by type, and the changes in fair value of such derivative instruments for the year then ended are as follows: Classification Amount Classification Amount NotionalCash Flow Hedge:Pay-Fixed Interest Rate Deferred Swaps Outflow (14,305,093)$ Liability 10,763,362$ 133,000,000$ Changes in Fair Value Fair Value at June 30, 2022The fair values of the interest rate swaps were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bonds due on the date of each future net settlement on the swaps. Credit Risk The Company is exposed to credit risk on hedging derivative instruments to the extent the value of the swap is positive from the Company’s perspective. The aggregate fair value of hedging derivative instruments was negative as of June 30, 2022, and therefore the Company had no credit risk exposure. Interest Rate Risk The purpose of the swap is to eliminate interest rate risk on the associated hedged bonds and therefore the swap, in combination with related bonds does not create interest rate risk for the Company. Basis Risk The Company is exposed to basis risk on its pay-fixed interest rate swap because the variable-rate payments received by the Company on these hedging derivative instruments are based on a rate or index other than interest rates the Company pays on its hedged variable-rate debt, which is typically remarketed every seven days. As of June 30, 2022, the weighted-average interest rate on the Company’s hedged variable-rate debt is 0.69900%, while the variable rate payments received are 64% of LIBOR, or 0.6739%.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (27)
NOTE 7 DERIVATIVE INSTRUMENT LIABILITY (CONTINUED) Termination Risk The Company or its counterparty may terminate a derivative instrument if the other party fails to perform under the terms of the contract. The derivative contract uses the International Swap Dealers Association Master Agreement which includes standard termination events such as failure to pay and bankruptcy. In addition, the Company may optionally terminate the agreement on any date. If at the time of a termination, the Company may be required to make a termination payment to its counterparty. If the Company had to terminate the Swap for any reason on June 30, 2022, the maximum exposure/loss would have been $15,484,274. Rollover Risk The Company is exposed to rollover risk on hedging derivative instruments that are hedges of debt that mature or may be terminated prior to the maturity of the hedged debt. When these hedging derivative instruments terminate prior to the maturity of the related debt, the Company will be re-exposed to the risks being hedged by the hedging derivative instrument. NOTE 8 NET POSITION Net position at June 30, 2022, consisted of the following: Net Investment in Capital Assets:Property, Plant, and Equipment, Net 121,573,130$ Less: Net Carrying Value of Capital-Related Debt(116,455,092) Less: Net Deferred Charges on Refunding(2,685,473) Total Net Investment in Capital Assets 2,432,565 Restricted Net Position:Public Art 867,377 Organ Repair and Maintenance 2,863Total Restricted Net Position 870,240 Unrestricted Net Position(6,694,851) Total Net Position(3,392,046)$ Net position restrictions are as follows: Public Art – The $1.2 million capital public art project was originally appropriated for the development of onsite public art. The funds, less monies spent on artist selection, were reallocated for permanent public art in the Civic Center area through the 2013 Public Art Master Plan, which also established the Civic Center Public Art Advisory Group comprised of arts and historic preservation professionals.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (28)
NOTE 8 NET POSITION (CONTINUED) Organ Repair and Maintenance – This is the remaining balance of a $15,000 grant which was received for the repair and maintenance of the Moller organ located in the Pasadena Civic Auditorium. NOTE 9 SERVICE CONCESSION ARRANGEMENTS Centerplate In the fiscal year ended June 30, 2009, the Company entered into an agreement with Boston Culinary Group, which then changed to Distinctive Gourmet Services, but is now called Centerplate (CP), that allows CP the exclusive right to operate the food services concession for the Company. The agreement covered the period March 1, 2009, through June 30, 2014. In exchange for this exclusive right, CP agreed to contribute up to $1,000,000 for capital asset purchases at the new kitchen in the Conference Center Expansion Project. An amendment to the agreement was made and entered into on January 6, 2012 to extend the term of the agreement for five years, expiring on June 30, 2021 with an additional five-year extension that is eligible, contingent upon mutual agreement between CP and the Company. With the amended agreement, CP was additionally granted the exclusive right to operate a Starbucks Café at the Pasadena Center in the space formerly leased by Lovebirds Café & Bakery. CP’s ability to operate the Starbucks Café runs concurrently with the initial agreement entered into on March 1, 2009 and covers the period through June 30, 2021. A second amendment to the agreement was entered into on June 28, 2019 to extend the agreement an additional five years expiring on June 30, 2024. Prior to July 1, 2019, CP provided $975,000 for Kitchen space and $399,960 for Café space. As of June 30, 2022, CP has contributed a total of $1,580,184. This has been recorded as advances on contracts and is being amortized over the lease period including extensions. The sum of $1,386,665 has been recognized as capital contributions to date. The remaining $193,519 is recorded as a deferred inflow of resources. NOTE 10 DEFINED CONTRIBUTION RETIREMENT PLAN Plan Description Eligible employees of the Company participate in the Pasadena Center Operating Company 401(k) Profit Sharing Plan (the Plan), which is a defined contribution retirement plan covering all employees except those whose employment is governed by a collective bargaining agreement. To be eligible to participate in the Plan, an employee must be age 21 and have completed 90 consecutive days of employment. To be eligible for the employer’s match, an employee must be age 21 and have completed one full year of employment and must have 1,000 hours of service in a twelve-month period.

PASADENA CENTER OPERATING COMPANY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2022 (29)
NOTE 10 DEFINED CONTRIBUTION RETIREMENT PLAN (CONTINUED) Funding Policy An employee may either defer an amount of their salary on a pre-tax basis, or contribute after tax dollars to a Roth 401k account up to the maximums allowed by federal law. The Company will make a contribution equal to 5% of eligible employees’ pay regardless of whether an employee contributes to the Plan. Employee contributions are vested immediately. Employer match contributions prior to July 1, 2004, are subject to vesting on a graduating basis, beginning at two years and becoming fully vested after five years of service. Employer match contributions after July 1, 2004, are vested immediately. The Company matched $245,280 for the fiscal year ended June 30, 2022. NOTE 11 RELATED PARTY TRANSACTIONS During the current year, the Company incurred charges for the use of the City’s building maintenance, electricians, plumbers, locksmiths, printing, and mailing services and insurance. Nonevent expenses totaled $1,370,804 and event expenses totaled $91,014, for a grand total of $1,461,817. The expenses are included within general and administrative expenses. At June 30, 2022, there were no amounts payable to the City. In addition to the revenues and receivables described in Note 3, the Company has $23,239 due from the City related to interest earned on cash and investments pooled with the City at June 30, 2022. NOTE 12 RISK MANAGEMENT The Company is entitled to indemnity from the City; however, the Company purchases a Special Liability Insurance Program (SLIP) for general liability and employment practice coverage. The City manages the Company’s claims and tenders to the insurance carrier third-party administrator. The Company carries statutory workers’ compensation insurance with no retention. The company requires licensees to provide insurance or purchase Special Events Liability Insurance from the Company. The City buys liability insurance on the parking structures at the Convention Center. The Company buys separate liability insurance on the ice rink. There are lawsuits pending that are being defended by an insurance company without a reservation of rights. During the past three fiscal years, no settlements or judgements exceeded insurance coverage. (30)
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 Board of Directors Pasadena Center Operating Company Pasadena, 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 Pasadena Center Operating Company (the Company), a component unit of the City of Pasadena, California, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the Company’s basic financial statements, and have issued our report thereon dated March 22, 2023. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Company’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 Company’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Company’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 Company’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. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. SeeCLAglobal.com/disclaimer.

CliftonLarsonAllen LLPCLAconnect.com
Board of Directors Pasadena Center Operating Company
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Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Company’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. 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.

CliftonLarsonAllen LLP Irvine, California March 22, 2023