Patterson Public
Financing Authority
(A Component Unit of the City of Patterson)
Patterson, California
Basic Financial Statements
and Independent Auditors' Report
For the Year Ended June 30, 2021
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Basic Financial Statements
For the Year Ended June 30, 2021
Table of Contents
Page
FINANCIAL SECTION
Independent Auditors’ Report on Financial Statements ......................................................................................... 1 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 ........................................................................ 3 Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position ................................................................................................................................. 9 Statement of Activities ................................................................................................................................... 10 Fund Financial Statements:
Governmental Fund Financial Statements:
Balance Sheet ................................................................................................................................................. 15 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ............................................................................... 16 Statement of Revenues, Expenditures and Changes in Fund Balances .......................................................... 17 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position .............................................................................. 18 Notes to the Basic Financial Statements .................................................................................................................. 23 Required Supplementary Information (Unaudited):
Budgetary Information ................................................................................................................................... 35 Budgetary Comparison Schedule:
PPFA 2013 Heartland Ranch Revenue Bonds ......................................................................................... 36 PPFA 2013 Authority Bonds ................................................................................................................... 37 This page intentionally left blank.
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors
of the Patterson Public Financing Authority
Patterson, California
Report on Financial Statements
We have audited the accompanying financial statements of the governmental activities and each major fund of the Patterson Public Financing Authority (the “Authority”), a component unit of the City of Patterson, California (the “City”) as of and for the year ended June 30, 2021 and the related notes to the basic financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, and each major fund of the Authority, as of June 30, 2021, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
2121 North California Blvd., Suite 290,Walnut Creek, California 94596 Tel: 925-974-3394 • Fax: 949-777-8850
www.pungroup.cpa
To the Board of Directors
of the Patterson Public Financing Authority
Patterson, California
2 Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Budgetary Information, and the Budgetary Comparison Schedules be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Management has omitted the Management’s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 11, 2022, on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 Authority’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 Authority’s internal control over financial reporting and compliance.
Walnut Creek, California
January 11, 2022
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
Independent Auditors’ Report
To the Board of Directors
of the Patterson Public Financing Authority
Patterson, 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 Patterson Public Financing Authority (the “Authority”), a component unit of the City of Patterson, California (the “City”), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise Authority’s basic financial statements, as listed in the table of contents, and have issued our report thereon dated January 11, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal control over financial reporting (“internal control”) 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 Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Authority’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies.
Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’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. 2121 North California Blvd., Suite 290,Walnut Creek, California 94596 Tel: 925-974-3394 • Fax: 949-777-8850
www.pungroup.cpa
To the Board of Directors
of the Patterson Public Financing Authority
Patterson, California
4 Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Authority’s internal control or on compliance.
This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Walnut Creek, California
January 11, 2022
BASIC FINANCIAL STATEMENTS
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6 GOVERNMENT-WIDE FINANCIAL STATEMENTS
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8 Governmental
Activities
ASSETS
Current assets:
Cash and investments $ 502,551
Interest receivable 41
Total current assets 502,592
Noncurrent assets:
Restricted cash and investments 938,185
Investments held in trust 62,736,310
Total noncurrent assets 63,674,495
Total assets 64,177,087
LIABILITIES
Current liabilities:
Accrued interest payable 1,185,003
Due to City of Patterson 1,127,813
Due within one year:
Long-term debt 2,243,630
Total current liabilities 4,556,446
Noncurrent liabilities:
Due in more than one year:
Long-term debt 62,042,654
Total noncurrent liabilities 62,042,654
Total liabilities 66,599,100
NET POSITION
Unrestricted (deficit) (Note 6) (2,422,013)
Total net position $ (2,422,013)
(A Component Unit of the City of Patterson)
Patterson Public Financing Authority
Statement of Net Position
June 30, 2021
See accompanying Notes to the Basic Financial Statements. 9 Net (Expense)
Revenue and
Changes in
Net Position
Governmental
Functions/Programs Expenses Activities
Governmental activities:
Interest and fiscal charges $ (4,123,250) 4,123,250 $
Total governmental activities (4,123,250) 4,123,250
Total primary government $ (4,123,250) 4,123,250
General revenues and capital contributions:
General revenues:
Intergovernmental revenue 527,556
Investment earnings 3,799,496
Total general revenues and capital contributions 4,327,052 Changes in net position 203,802
Net Position:
Beginning of year (2,625,815)
End of year $ (2,422,013)
For the Year Ended June 30, 2021
Patterson Public Financing Authority
Statement of Activities
(A Component Unit of the City of Patterson)
See accompanying Notes to the Basic Financial Statements. 10 FUND FINANCIAL STATEMENTS
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12 GOVERNMENTAL FUND FINANCIAL STATEMENTS
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14 PPFA 2013 PPFA Total
Heartland Ranch 2013 Authority Governmental
Revenue Bonds Bonds Funds
ASSETS
Cash and investments 502,551 $ - $ 502,551 $
Cash and investments with fiscal agents (183,147) 1,121,332 938,185 Investments held in trust 2,143,651 60,592,659 62,736,310 Interest receivable - 41 41
Total assets $ 61,713,991 2,463,096 $ 64,177,087 $
LIABILITIES AND FUND BALANCES
LIABILITIES:
Due to City of Patterson - $ 1,127,813 $ 1,127,813 $
Total liabilities 1,127,813 - 1,127,813
FUND BALANCES
Restricted for debt service 2,463,096 60,586,178 63,049,274 Total Fund Balances 60,586,178 2,463,096 63,049,274
Total Liabilities and Fund Balances $ 61,713,991 2,463,096 $ 64,177,087 $ Patterson Public Financing Authority
Balance Sheet
Governmental Funds
June 30, 2021
(A Component Unit of the City of Patterson)
See accompanying Notes to the Basic Financial Statements. 15 Total fund balances of governmental funds $ 63,049,274 Amounts reported for governmental activities in the Statement of Net Position are different because:
Interest payable on long-term debt does not require current financial resources. Therefore, interest payable is not reported as a liability in the Governmental Funds Balance Sheet. (1,185,003) Long-term liabilities are not due and payable in the current period and therefore are not reported in the Governmental Funds Balance Sheet.
Long-term debt (64,286,284)
Net position of governmental activities $ (2,422,013)
Patterson Public Financing Authority
Reconciliation of the Governmental Funds
Balance Sheet to the Government-Wide Statement of Net Position June 30, 2021
(A Component Unit of the City of Patterson)
See accompanying Notes to the Basic Financial Statements. 16 PPFA 2013 PPFA Total
Heartland Ranch 2013 Authority Governmental
Revenue Bonds Bonds Funds
REVENUES:
Intergovernmental revenue 527,556 $ - $ 527,556 $
Interest 3,654,152 145,344 3,799,496
Total revenues 3,654,152 672,900 4,327,052
EXPENDITURES:
Debt service:
Principal 1,825,000 433,971 2,258,971
Interest and fiscal charges 615,977 3,510,188 4,126,165 Total expenditures 5,335,188 1,049,948 6,385,136
REVENUES OVER (UNDER)
EXPENDITURES (1,681,036) (377,048) (2,058,084)
Net change in fund balances (1,681,036) (377,048) (2,058,084) FUND BALANCES:
Beginning of year 2,840,144 62,267,214 65,107,358
End of year $ 60,586,178 2,463,096 $ 63,049,274 $
Patterson Public Financing Authority
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2021
(A Component Unit of the City of Patterson)
See accompanying Notes to the Basic Financial Statements. 17 Net change in fund balances - total governmental funds: $ (2,058,084) Amounts reported for governmental activities in the Statement of Activities are different because:
Repayment of long-term liabilities was an expenditures in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position Principal payment of long-term debt 2,258,971
Amortization of bond discount (28,466)
Interest expenses on long-term debt was reported in the Government-Wide Statement of Activities, but it did not require the use of current financial resources. This amount represented the changes in accrued interest from prior year 31,381 Change in net position of governmental activities $ 203,802 Patterson Public Financing Authority
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position For the Year Ended June 30, 2021
(A Component Unit of the City of Patterson)
See accompanying Notes to the Basic Financial Statements. 18 19
NOTES TO THE BASIC FINANCIAL STATEMENTS
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Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
21 Note 1 – Summary of Significant Accounting Policies ............................................................................................. 23 A. Financial Reporting Entity .......................................................................................................................... 23 B. Basis of Accounting and Measurement Focus ............................................................................................ 23 C. Cash and Investments ................................................................................................................................. 24 D. Restricted Cash and Investments ................................................................................................................ 25 E. Long-Term Debt ......................................................................................................................................... 25 F. Net Position ................................................................................................................................................ 25 G. Fund Balances ............................................................................................................................................. 26 H. Use of Estimates ......................................................................................................................................... 26 Note 2 – Cash and Investments .................................................................................................................................. 26 A. Cash Deposits ............................................................................................................................................. 27 B. Investments ................................................................................................................................................. 28 C. Risk Disclosures ......................................................................................................................................... 29 Note 3 – Due to City of Patterson ............................................................................................................................... 30 Note 4 – Long-Term Obligations................................................................................................................................. 30 A. Governmental Activities ............................................................................................................................. 30 Note 5 – Other Required Disclosures .......................................................................................................................... 32 A. Unrestricted Net Position (Deficit) ............................................................................................................. 32 B. Expenditures in Excess of Appropriations .................................................................................................. 32 22 This page intentionally left blank.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
23 Note 1 – Summary of Significant Accounting Policies
The basic financial statements of the Patterson Public Financing Authority (the “Authority” or “PPFA”), a component unit of the City of Patterson, California (the “City), have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the Authority’s accounting policies are described below.
A. Financial Reporting Entity
The Authority was formed in 2001 pursuant to a joint exercise of powers agreement between the City of Patterson and the former Redevelopment Agency of the City of Patterson. The Authority is authorized to borrow money for the purpose of financing the acquisition of bonds, notes, and other obligations of, or for the purpose of making loans to, public entities, including the Authority and to provide financing for public capital improvements for lease to public entities, including the Authority. The members of the City Council also sit as the Board of Directors of the Authority.
B. Basis of Accounting and Measurement Focus
Fund Accounting
The accounts of the Authority are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled.
Government–Wide Financial Statements
The Authority’s government-wide financial statements include a statement of net position and a statement of activities. These statements present summaries of governmental activities for the Authority.
These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the Authority’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying statement of net position. The statement of activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.
Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the statement of net position have been eliminated.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
24 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements
Governmental fund financial statements include a balance sheet and a statement of revenues, expenditures and changes in fund balances for all major governmental funds. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements to the net position presented in the government-wide financial statements. The Authority has presented all major funds that met the applicable criteria.
All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances present increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in fund balances.
Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.
The primary revenue sources, which have been treated as susceptible to accrual by the Authority is interest income. Certain indirect costs are included in program expenses reported for individual functions and activities.
Expenditures are recorded in the accounting period in which the related fund liability is incurred.
The reconciliation of the fund financial statements to the government-wide financial statements is provided to explain the differences.
Governmental funds of the Authority are outlined below:
PPFA 2013 Heartland Ranch Revenue Bonds – This fund is used to account for the debt service payments, investment income, and projects related to the 2013 Heartland Ranch Revenue Bonds (“HR”).
PPFA 2013 Authority Bonds – This fund is used to account for the debt service payments, investment income, and projects related to the 2013 Authority Bonds.
C. Cash and Investments
The Authority’s cash and investments considered to be cash equivalents, consist of cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Cash and cash equivalents are combined with investments and reported as cash and investments. The Authority's cash and investments are held by the City in its pooled cash and investments, except for funds required to be held by fiscal agents under the provisions of bond indentures.
Highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available.
Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
25 Note 1 – Summary of Significant Accounting Policies (Continued) C. Cash and Investments (Continued)
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the Statements of Net Position, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Levels of inputs are as follows:
Level 1 – Inputs are unadjusted, quoted prices for identical assets and liabilities in active markets at the measurement date.
Level 2 – Inputs other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.
D. Restricted Cash and Investments
Certain restricted cash and investments are held by a fiscal agent for the redemption of bonded debt and for acquisition and construction of capital projects.
E. Long-Term Debt
In the government-wide financial statements, long-term liabilities and other long-term obligations are reported as liabilities in the applicable governmental activities Statement of Net Position. Initial issue bond premiums and discounts, are deferred and amortized over the life of the bonds using the straight-line method. The difference between the reacquisition price of refunding bonds and the net carrying amount of refunded debt (deferred amount on refunding) is amortized over the shorter of the lives of the refunding debt or remaining life of the refunded debt.
Bond issuance costs except for insurance, are expenses in the period incurred. Amortization of bond premiums or discounts, issuance costs, and deferred amounts on refunding is included in interest expense.
In the fund financial statements, governmental fund types recognize bond premiums, discounts, and issuance costs during the period issued. The face amount of debt issued is reported as other financing sources. Premiums received are reported as other financing sources, while discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
F. Net Position
For government-wide financial statements, net position is categorized as follows:
Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets. There is no net investment in capital assets as of June 30, 2021.
Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. There is no restricted net position as of June 30, 2021.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
26 Note 1 – Summary of Significant Accounting Policies (Continued) F. Net Position (Continued)
Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.
When expenses are incurred for purposes for which both restricted and unrestricted net position is available, the Authority’s policy is to apply restricted net position first.
G. Fund Balances
The City reports the fund balances for governmental funds in specific classifications (nonspendable, restricted, committed, assigned, and unassigned), which creates a hierarchy primarily based on the extent to which the City is bound to the constraints on the specific purpose for which funds can be spent. The Authority only receives restricted revenues, therefore any remaining fund balances are restricted by nature of the revenue received.
H. Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosure. Accordingly, actual results could differ from those estimates.
Note 2 – Cash and Investments
The following is a summary of pooled cash and investments and restricted cash and investments at June 30, 2021:
Governmental
Activities
Cash and investments 502,551 $
Restricted cash and investments 938,185
Investments held in trust 62,736,310
Total cash and investments $ 64,177,046
Cash, cash equivalents, and investments, consisted of the following at June 30, 2021:
Cash and cash equivalents:
Pooled cash with City of Patterson 502,551 $
Total cash and cash equivalents 502,551
Investments:
Local obligation bonds 62,736,310
Money market mutual funds 938,185
Total investments 63,674,495
Total cash and investments $ 64,177,046
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
27 Note 2 – Cash and Investments (Continued)
At June 30, 2021, investments, are reported at fair value based on quoted market prices. The following table represents the fair value measurements of investments recognized in the accompanying Statement of Net Position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021:
Measurement
Fair Value Input
Investments:
Local obligation bonds 62,736,310 $ Level 2
Money market mutual funds 938,185 Uncategorized
Total investments $ 63,674,495
Valuation
Technique
Present Value of Expected
Future Cash Flows
Not applicable
A. Cash Deposits
The carrying amounts of the Authority’s pooled cash and investment with the City was $502,551 at June 30, 2021.
The Authority pools its cash and investments of all funds with the City of Patterson, California to facilitate the management of cash and achieve the goal of obtaining the highest yield with the greatest safety and least risk. The pool is managed by the City Treasurer for investing, except for certain restricted funds and investments held in trust, which are held and invested by outside custodians through contractual agreements. These restricted funds include cash with fiscal agents. The total amount of which was collateralized or insured with securities held by the pledging financial institutions in the City’s name is discussed below.
Investments held in the City of Patterson's cash and investments pool are available on demand. Information regarding the City's cash and investment pools is described in the City's Comprehensive Annual Financial Report.
The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.
The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits; however, the City has not waived the collateralization requirements.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
28 Note 2 – Cash and Investments (Continued)
B. Investments
Investments Authorized by the California Code and the Authority’s Investments Policy The table below identifies the investment types that are authorized by the Authority's investment policy. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the Authority, rather than the general provisions of the California Government Code or the Authority's investment policy.
Maximum Maximum
Maximum Percentage of Investment in
Maturity Portfolio one Issuer
U.S. Treasury Obligation 5 years None None
U.S. Agency Securities 5 years None None
Certificates of Deposit 2 years None None
Local Agency Investment Fund (LAIF) N/A None None
Money Market Funds N/A None None
Annuities N/A None None
Mutual Funds N/A 5% None
Corporate Notes (Minimum rating of "AAA") 5 years 5% None Local Agency Bonds (Local obligation bonds) 5 years None None Authorized Investment Type
* The table is based on state law requirements or investment policy requirements, whichever is more restrictive.
Investments Authorized by Debt Agreements
Investment of debt issuances held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the Authority's investment policy. The table below identifies the investment types that are authorized by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage of Investment in
Maturity Portfolio one Issuer
U.S. Treasury Obligation 5 years None None
U.S. Agency Securities 5 years None None
Certificates of Deposit 2 years None None
Local Agency Investment Fund (LAIF) None None None
Money Market Funds None None None
Annuities None None None
Mutual Funds None 5% None
Corporate Notes (Minimum rating of "AAA") 5 years 5% None Local Agency Bonds (Local obligation bonds) 5 years None None Authorized Investment Type
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
29 Note 2 – Cash and Investments (Continued)
C. Risk Disclosures
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the Authority's interest rate risk is mitigated is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the Authority's investments to market rate fluctuations is provided by the following table that shows the distribution of the Authority's investments by maturity as of June 30, 2021:
12 Months
Fair Value or Less 1-5 Years 6-10 Years Thereafter
Investments:
Local obligation bonds $ 398,640 62,736,310 $ 1,574,202 $ 170,809 $ 60,592,659 $ Money market mutual funds 938,185 938,185 - - -
Total investments $ 1,336,825 63,674,495 $ 1,574,202 $ 170,809 $ 60,592,659 $ Maturity
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or debt agreements, and the actual rating as of the fiscal year for each investment type.
Minimum
Legal
Fair Value Rating S&P Moody's
Investments:
Local obligation bonds $ N/A Not rated Not rated 62,736,310 Money market mutual funds 938,185 N/A AAAm Aaa-mf
Total investments $ 63,674,495
Credit Rating
Disclosures Relating to Concentration of Credit Risk
The Authority held the following investments in a single issuer (other than U.S. Treasury securities, external investment pools and mutual funds) that represented 5% or more of total Authority investment as of June 30, 2021:
Issuer Amount
West Patterson Financing Authority 62,736,310 $
Investment Type
Local obligation bonds
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
30 Note 2 – Cash and Investments (Continued)
C. Risk Disclosures (Continued)
Disclosures Relating to Custodial Credit Risk
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. brokerdealer) 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. None of the Authority’s investments was subject to custodial credit risk.
Note 3 – Due to City of Patterson
At June 30, 2021, the Authority owes the City in the amount of $1,127,813 to cover the cash overdrawn.
Note 4 – Long-Term Obligations
A. Governmental Activities
Summary of changes in long-term liabilities for the governmental activities for the year ended June 30, 2021 is as follows:
Original Balance Balance Due Within Due In More
Issuance July 1, 2020 Additions Deletions June 30, 2021 One Year Than One Year Private Placement:
PPFA 2013 Heartland Ranch Revenue Bonds 4,963,568 $ 2,725,976 $ - $ (433,971) $ 2,292,005 $ 443,630 $ 1,848,375 $ PPFA 2013 Series A Revenue Bonds 67,190,000 58,705,000 - (1,660,000) 57,045,000 1,650,000 55,395,000 Less: Bond Discount (853,389) (654,187) - 28,466 (625,721) - (625,721) PPFA 2013 Series B Revenue Bonds 6,465,000 5,740,000 - (165,000) 5,575,000 150,000 5,425,000 Total long-term debt $ 66,516,789 77,765,179 $ - $ (2,230,505) $ 64,286,284 $ 2,243,630 $ 62,042,654 $ 2013 Heartland Ranch Revenue Bonds
On July 30, 2013, the Authority issued $4,963,568 of revenue refunding bonds (Series 2013 Heartland Ranch Revenue Bonds) to repay, in part, the principal of the Authority's 2002 Heartland Ranch Revenue Bonds. Interest on the bonds is payable semi-annually on March 2 and September 2 of each year through September 2, 2027, beginning on March 2, 2014. The interest rate on the bonds is 3.73 percent. Principal payments are due annually beginning on September 2, 2014. At June 30, 2021, the outstanding balance of the 2013 Heartland Ranch Revenue bonds was $2,292,005.
The annual debt service requirements are as follows:
Year Ending
June 30, Principal Interest Total
2022 443,630 $ 77,218 $ 520,848 $
2023 462,628 60,316 522,944
2024 470,959 42,905 513,864
2025 273,775 29,016 302,791
2026 284,557 18,603 303,160
2027 356,456 13,425 369,881
Total 2,292,005 $ 241,483 $ 2,533,488 $
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
31 Note 4 – Long-Term Obligations (Continued)
A. Governmental Activities (Continued)
2013 PPFA Series A Bonds
On August 14, 2013, the PPFA issued $67,190,000 of special tax refunding bonds (Senior Series 2013A) to purchase, in part, the 2013-A1, 2013-A2, and 2013-B special tax bonds issued by the WPFA. Interest on the bonds is payable semi-annually on March 1 and September 1 of each year through September 1, 2039, beginning on March 1, 2014. The interest rates on the bonds is 3.00 percent. Principal payments are due annually beginning on September 1, 2014. The bonds are secured by a first pledge of the investment revenues and funds on deposit in the Bond Fund, Reserve Fund, and Special Tax Fund. At June 30, 2021, the outstanding balance of the 2013 PPFA Series A bonds was $57,045,000.
The annual debt service requirements are as follows:
Year Ending
June 30, Principal Interest Total
2022 $ 3,108,988 1,650,000 $ 4,758,988 $
2023 3,031,738 1,770,000 4,801,738
2024 2,938,400 1,870,000 4,808,400
2025 2,836,025 2,030,000 4,866,025
2026 2,724,856 2,205,000 4,929,856
2027-2031 13,085,000 11,687,556 24,772,556
2032-2036 16,465,000 7,599,344 24,064,344
2037-2040 17,970,000 2,168,325 20,138,325
Total 57,045,000 $ 36,095,232 $ 93,140,232 $
2013 PPFA Series B Bonds
On August 14, 2013, the PPFA issued $6,465,000 of special tax refunding bonds (Subordinate Series 2013B) to purchase, in part, the 2013-A1, 2013-A2, and 2013-B special tax bonds issued by the West Patterson Financing Authority. Interest on the bonds is payable semi-annually on March 1 and September 1 of each year through September 1, 2039, beginning on March 1, 2014. The interest rate on the bonds is 5.875%.
Principal payments are due annually beginning on September 1, 2014. The bonds are secured by a first pledge of the investment revenues and funds on deposit in the Bond Fund, Reserve Fund, and Special Tax Fund. At June 30, 2021, the outstanding balance of the 2013 PPFA Series B bonds was $5,575,000.
The annual debt service requirements are as follows:
Year Ending
June 30, Principal Interest Total
2022 $ 323,125 150,000 $ 473,125 $
2023 313,872 165,000 478,872
2024 303,884 175,000 478,884
2025 293,016 195,000 488,016
2026 281,119 210,000 491,119
2027-2031 1,275,000 1,196,297 2,471,297
2032-2036 1,625,000 768,597 2,393,597
2037-2040 1,780,000 218,844 1,998,844
Total 5,575,000 $ 3,698,754 $ 9,273,754 $
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2021
32 Note 5 – Other Required Disclosures
A. Unrestricted Net Position (Deficit)
At June 30, 2021, the Governmental Activities of the Authority had an unrestricted net deficit of $(2,422,013).
The deficit will be eliminated through future secured revenues which will be used to pay outstanding debt.
B. Expenditures in Excess of Appropriations
For the year ended June 30, 2021, the PPFA 2013 HR Revenue Bonds Fund and the PPFA 2013 Authority Bonds Fund incurred expenditures in excess of budgets by $108,610 and $129,909, respectively. Sufficient resources were available in the fund balance of the funds to cover the excess of expenditures. 33 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
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Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Required Supplementary Information (Unaudited)
For the Year Ended June 30, 2021
35 Note 1 – Budgetary Information
The Authority maintains budgetary controls in order to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. The Authority maintains an encumbrance accounting system to provide management with information regarding obligations against appropriations. Budgetary compliance is based on expenditures during the period (U.S.GAAP), rather than expenditures and encumbrances (non-GAAP).
Because appropriations lapse at June 30, encumbrances outstanding at June 30, 2021 are disclosed in the notes to the financial statements. Appropriations for fiscal year 2021 will provide authority to complete those transactions.
The Authority is required by its municipal code to adopt an annual budget on or before June 30 for the ensuing fiscal year. From the effective date of the budget, the amounts become the "annual appropriated budget".
The following procedures are performed by the Authority in establishing the budgetary data reflected in the financial statements:
1. The Finance Director submits a preliminary budget by June 30 of each year to Board of Directors. This allows the Authority to continue normal operations until the final budget is adopted in July. The operating budget includes proposed expenditures and the means of financing them.
2. Public hearings are conducted to obtain taxpayers' comments.
3. The appropriated budget is prepared by fund, department, and division. The government department heads may make transfers of appropriation within a department. Transfers of appropriations between departments requires approval of the City Manager. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level.
4. The budget is legally adopted through the passage of a council resolution.
5. The Board of Directors may amend the budget by resolution during the fiscal year. The City Manager may transfer appropriations from one program, activity, or object to another within the same fund. All appropriations lapse at the end of the fiscal year to the extent they have not been expended. Capital project funds are based on a project time frame, rather than a fiscal year "operating" time frame reappropriating unused appropriations from year to year until project completion.
6. A budget review is presented to the City Council by the City Manager mid-year and approved additions or changes are legally adopted through Council resolution.
7. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, and the Capital Project Funds.
8. Budgets for the General, Special Revenue, and Capital Project Funds are adopted on a basis consistent with United States generally accepted accounting principles.
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Required Supplementary Information (Unaudited) (Continued) For the Year Ended June 30, 2021
36 Note 1 – Budgetary Information (Continued)
Budgetary Comparison Schedule – PPFA 2013 HR Revenue Bonds Variance with
Final Budget
Favorable
Original Final Actual (Unfavorable)
REVENUES:
Intergovernmental revenue 527,556 $ 527,556 $ 527,556 $ - $ Interest 1,000 1,000 145,344 144,344
Total revenues 528,556 528,556 672,900 144,344
EXPENDITURES:
Debt service:
Principal 433,791 812,926 433,971 378,955
Interest and fiscal charges 93,585 128,412 615,977 (487,565) Total expenditures 941,338 527,376 1,049,948 (108,610)
REVENUES OVER (UNDER)
EXPENDITURES (412,782) 1,180 (377,048) 35,734
Net change in fund balances $ (412,782) 1,180 $ (377,048) 35,734 $ FUND BALANCE:
Beginning of year 2,840,144
End of year $ 2,463,096
Budgeted Amounts
Patterson Public Financing Authority
(A Component Unit of the City of Patterson)
Required Supplementary Information (Unaudited) (Continued) For the Year Ended June 30, 2021
37 Note 1 – Budgetary Information (Continued)
Budgetary Comparison Schedule – PPFA 2013 Authority Bonds Variance with
Final Budget
Favorable
Original Final Actual (Unfavorable)
REVENUES:
Interest 3,206,093 $ 3,206,093 $ 3,654,152 $ 448,059 $
Total revenues 3,206,093 3,206,093 3,654,152 448,059
EXPENDITURES:
Debt service:
Principal 1,436,543 1,436,543 1,825,000 (388,457)
Interest and fiscal charges 3,768,736 3,768,736 3,510,188 258,548 Total expenditures 5,205,279 5,205,279 5,335,188 (129,909) Net change in fund balances $ (1,999,186) (1,999,186) $ (1,681,036) 318,150 $ FUND BALANCE:
Beginning of year 62,267,214
End of year $ 60,586,178
Budgeted Amounts
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