Richmond Joint
Powers Financing
Authority
Richmond, California
Basic Financial Statements
and Independent Auditor’s Report
For the year ended June 30, 2021
Component Unit Financial Statements
For the year ended June 30, 2021
Table of Contents
i
Independent Auditor’s Report ................................................................................................................................... 1 Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position ................................................................................................... .................................... 8 Statement of Activities ..................................................................................................... ....................................... 9 Governmental Funds:
Balance Sheet ............................................................................................................... ........................................... 12 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ........................................................................... ......... 13 Statement of Revenues, Expenditures and Changes in Fund Balances ......................................................... 14 Reconciliation of the Statement of Revenues, Expendit ures and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities .................................................... 15 Fiduciary Funds:
Statement of Fiduciary Net Position ......................................................................................... .......................... 18 Statement of Changes in Fiduciary Net Position .............................................................................................. 19 Notes to the Component Unit Basic Financial Statements ....................................................................... .......... 23 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 ................................................................ 39 ii
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
of the City of Richmond Joint Powers Financing Authority Richmond, California
Report on the Financial Statements
We have audited the accompanying financial statements of the City of Richmond Joint Powers Financing Authority (Authority), a component unit of the City of Richmond, California, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion 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 standa rds require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expres sing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority, June 30, 2021, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 2 Emphasis of a Matter
As discussed in Note 1, the financial statements present only the Authority and do not purport to, and do not, present fairly the financial position of the City of Richmond, California, as of June 30, 2021, and the changes in its financial position, or, where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
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 supple ment 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 co nsiders 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 May 6, 2022 on our consideration of the Authority’s internal contro l over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.
Badawi and Associates
Berkeley, California
May 9, 2022
BASIC
FINANCIAL STATEMENTS
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4 GOVERNMENT-WIDE
FINANCIAL STATEMENTS
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6 GOVERNMENT-WIDE FINANCIAL STATEMENTS
The Statement of Net Position reports the difference between the Authority's total assets and deferred outflows of resources and the Authority's total liabilities and deferred inflows of resources, including all the Authority's capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the Authority's net position, by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources. The Statement of Net Position summarizes the financial position of all the Authority's activities in a single column.
The Statement of Activities reports increases and decreases in the Authority's net position. It is prepared on the full accrual basis, which means it includes all the Authority's revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund financial statements, which reflect only current assets and deferred outflows of resources, current liabilities and deferred inflows of resources, available revenues and measurable expenditures.
The Statement of Activities presents the Authority's expenses that are listed by program first. Program revenues that is, revenues which are generated directly by these programs, are then deducted from program expenses to arrive at the net expense of each program. The Authority's general revenues are then listed and the Change in Net Position is computed and reconciled with the Statement of Net Position.
These financial statements along with the fund financial statements and footnotes are called Basic Financial Statements .
7 Richmond Joint Powers Financing Authority
Statement of Net Position
June 30, 2021
Governmental
Activities
ASSETS
Restricted cash and investments 3,882,544 $
Receivables:
Leases 112,572,601
Total assets 116,455,145
LIABILITIES
Interest payable 1,108,836
Long-term debt:
Due within one year 9,088,096
Due in more than one year 123,219,918
Total liabilities 133,416,850
NET POSITION
Unrestricted (16,961,705)
(16,961,705)$ Total net position
See accompanying Notes to Basic Financial Statements
8 Richmond Joint Powers Financing Authority
Statement of Activities
For the year ended June 30, 2021
Governmental
Activities
Program expense:
Interest on long-term debt 4,800,066 $
Total program expense 4,800,066
Program revenue:
Lease revenue 6,114,849
Investment earnings 32,474
Total program revenue 6,147,323
Net program revenue (expense) 1,347,257
Changes in Net Position 1,347,257
(18,308,962)
(16,961,705)$ Net Position - Ending
Net Position - Beginning, as restated
See accompanying Notes to Basic Financial Statements
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10 FUND FINANCIAL STATEMENTS
Major funds are defined as having significant activities or balances in the current year. All of the Authority's funds are major funds.
11 Richmond Joint Powers Financing Authority
Balance Sheet
Governmental Funds
June 30, 2021
Redevelopment
Agency Total
Port (Successor Agency) City Governmental
Related Debt Related Debt Related Debt Funds
ASSETS
Restricted cash and investments 214$ 3,882,321$ 9$ 3,882,544$ Total assets 214 3,882,321 9 3,882,544
FUND BALANCES
Restricted 214 3,882,321 9 3,882,544 Total fund balances 214 3,882,321 9 3,882,544 Total deferred inflows of resources
and fund balances 214$ 3,882,321$ 9$ 3,882,544$ See accompanying Notes to Basic Financial Statements
12 Total Fund Balances - Total Governmental Funds 3,882,544$ The assets and liabilities below are not due and payable in the current year period and therefore are not reported in the Funds:
Lease receivables 112,572,601
Long-term debt (132,308,014)
Interest payable (1,108,836)
Net Position of Governmental Activities (16,961,705)$
Richmond Joint Powers Financing Authority
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2021
See accompanying Notes to Basic Financial Statements
13 Richmond Joint Powers Financing Authority
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the year ended June 30, 2021
Redevelopment
Agency Total
Port (Successor Agency) City Governmental
Related Debt Related Debt Related Debt Funds
REVENUES:
Use of money and property -$ 32,409$ 65 $ 32,474$ Total revenues - 32,409 65 32,474
EXPENDITURES:
Debt service:
Principal 3,945,000 2,185,000 3,354,681 9,484,681 Interest and fiscal charges 742,106 935,227 4,470,757 6,148,090 Total expenditures 4,687,106 3,120,227 7,825,438 15,632,771
REVENUES OVER (UNDER)
EXPENDITURES (4,687,106) (3,087,818) (7,825,373) (15,600,297) OTHER FINANCING SOURCES (USES):
Transfer from the City 4,687,204 2,749,190 7,824,731 15,261,125 Total other financing sources (uses) 4,687,204 2,749,190 7,824,731 15,261,125 Net change in fund balances 98 (338,628) (642) (339,172) FUND BALANCES:
Beginning of year 116 4,220,949 651 4,221,716 End of year 214$ 3,882,32 1$ 9$ 3,882,544$ See accompanying Notes to Basic Financial Statements
14 Richmond Joint Powers Financing Authority
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities For the year ended June 30, 2021
Net Change in Fund Balances - Total Governmental Funds (339,172)$ Debt proceeds provide current financial resource s to governmental funds , but issuing debt increased long- term liabilities in the Government-Wide Statement of Net Position. Repayment of debt was an expenditure in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position.
Long-term debt repayment
s 9,484,681
Amortization of bonds premium 1,254,911
Repayment of the lease receivable was recognized as transfers in governmental funds, but it reduced the lease receivable in the Government-Wide Statement of Net Position (9,146,276) Th
e amounts below included in th e Statement of Activitie s do not provid e (or require) the use of current financial resources and therefore are not reported as revenue or expenditures in the governmental funds (net change):
Bond interest payabl
e 93,113
Change in Net Position of Governmental Activities 1,347,257$ Amounts reported for governmental activities in the Government-Wide Statement of Activities were different because:
See accompanying Notes to Basic Financial Statements
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16 FIDUCIARY FUND FINANCIAL STATEMENTS
Fiduciary funds are presented separately from the Government-Wide and Fund financial statements.
Custodial funds are used to account for assets held by the Authority as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the Authority-wide financial statements, but are presented in separate Fiduciary Fund financial statements. 17 Richmond Joint Powers Financing Authority
Statement of Fiduciary Net Position
Custodial Funds
For the year ended June 30, 2021
2016 Reassessment
District
ASSETS
Cash and investments 1,845,567$
Interest receivable 576
Total assets 1,846,143
NET POSITION
Restricted for:
Individuals, organizations, and
other governments 1,846,143
Total net position 1,846,143$
See accompanying Notes to Basic Financial Statements
18 Richmond Joint Powers Financing Authority
Statement of Changes in Fiduciary Net Position
Custodial Funds
For the year ended June 30, 2021
2016 Reassessment
District
ADDITIONS:
Interest income 7,912$
Total additions 7,912
Change in net position 7,912
NET POSITION:
Beginning of year -
Restatements 1,838,231
Beginning of year, as restated 1,838,231
End of year 1,846,143$
See accompanying Notes to Basic Financial Statements
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20 NOTES TO BASIC
FINANCIAL STATEMENTS
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22 Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
23 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the Richmond Joint Powers Financing Authority (Authority) have been prepared in conformity with generally accepted accoun ting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles.
The more significant of the Authority policies are described below.
A. Financial Reporting Entity
The Authority is a joint exercise of powers authorit y formed on December 1, 1989, by and between the City of Richmond and the former Richmond Community Redevelopment Agency to assist the City, the Community Redevelopment Agency, and other local public agencies in financing and refinancing capital improvements and working capital pursuant to the Marks-Roos Local Bond Pooling Act of 1985.
The Authority is authorized to purchase obligatio ns of the City, Community Redevelopment Agency, and other local public agencies. The former Richmond Community Redevelopment Agency was dissolved and its assets turned over to and liabilit ies assumed by Successor Agencies effective January 31, 2012, including the liabilities payable to the Authority.
Although the Authority is a separate legal entity, it is an integral part of th e City. The City exercises significant financial and management control ov er the Authority and members of the Board of Directors are appointed by City Council. The operations of the Authority are included in the City’s basic financial statements as a debt service fund.
B. Basis of Accounting and Measurement Focus
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 which comprise its assets, deferred outflows/inflows of resources, liabilities, fund equity, revenues and expenditures. Authority re sources are allocated to and accounted for in individual funds based upon the purpose for whic h they are to be spent and the means by which spending activities are controlled.
Authority-Wide Financial Statements – Authority-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statem ents present summaries of Governmental Activities for the Authority. The Authority has no Business-Type Activities.
The Authority-wide financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordin gly, all of the Authority’s assets, deferred outflows/inflows of resources, and liabilities, includin g capital assets as well as infrastructure assets and long-term liabilities, are included in the Statem ent of Net Position. The Statement of Activities presents all the Authority’s revenues, expenses and other 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.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
24 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 fund balances as presented in these statements to the net position presented in the Authority-Wide financial statements.
All governmental funds are accounted for on the “current financial resources” measurement focus and the modified accrual basis of accounting. Accordin gly, only current assets, deferred outflows of resources and current liabilities and deferred inflows of resources are included on the Balance Sheets.
The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.
Under the modified accrual basis of accounting, reve nues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.
Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally ninety days after the fiscal year-end) are recognized when due. The primary revenue sources which have been treated as susceptible to accrual by the Authority are leases and earnings on investments. Expenditures are recorded in the accoun ting period in which the related fund liability is incurred also generally ninety days after the fiscal year end.
Reconciliations of the Fund Financial Statements to the Authority-Wide Financial Statements are provided to explain the differences between the two approaches.
Fiduciary Fund Financial Statements – The Authority’s Fiduciary Funds represent Custodial Funds.
Custodial Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
C. Cash and Investments
All investments are stated at fair value. Market value is used as fair value for all securities. Investments are carried at market value and investment income is generally allocated among funds on the basis of average cash and investment balances in these funds. Interest income on certain investments is allocated based on the source of the investment and legal requirements which apply.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market partic ipants at the measurement date. The Authority categorizes its fair value measurements within th e fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
25 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Cash and Investments, Continued
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability.
If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.
D. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of net position or balance sheet report a separate section for deferred inflows of resources. This separate financia l statement element, deferred inflows of resources, represents an acquisition of net position or fund ba lance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.
E. Net Position and Fund Balance
In the Authority-Wide Financial Statements, net position is the excess of all the Authority’s assets and deferred outflows of resources, over all its liabilit ies and deferred inflows of resources, regardless of fund.
When an expense is incurred for purposes for which both restricted and unrestricted net position is available, the Authority’s policy is to apply restricted net position first.
In the Fund-Level Financial Statements, fund balance represents the net current assets of each fund.
Net current assets generally represent a fund’s cash and receivables, less its liabilities. The Authority’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple fu nding sources, the Authority prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassi gned. Each category is ranked according to the degree of spending constraint.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
26 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued E. Net Position and Fund Balance, Continued
Restricted fund balances have external restrictions impo sed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires th e resources to be used only for a specific purpose.
Encumbrances and nonspendable amounts subject to restrictions are included along with spendable resources. All of the Authority’s fund balance is rest ricted for debt service and is legally restricted for the payment of principal and interest on long-term liabilities.
F. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (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.
2. CASH AND INVESTMENTS
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of debt instruments or Authority agreements:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
27 2. CASH AND INVESTMENTS, Continued
A. Investments
Under the terms of the Authority’s debt issues and lease agreements, it is subject to various restrictions in the type, maturity and credit ratings of investments of the unspent proceeds of these issues. Under the provisions of the Authority’s bond indentures, and in accordance with California Government Code, the following investments are authorized:
B. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, 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 the Authority manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portio n 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.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
28 2. CASH AND INVESTMENTS, Continued
B. Interest Rate Risk, Continued
Information about the sensitivity of the fair values of the Authority’s investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Authority’s investments by maturity or earliest call date:
Money market mutual funds are available for withdrawal on demand and at June 30, 2021, matured in an average of 40 to 49 days.
C. Fair Value Hierarchy
The Authority categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting prin ciples. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inpu ts; and Level 3 inputs are significant unobservable inputs.
Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by our cust odian bank. The Authority’s investments including money market mutual funds, guaranteed investment contracts and reassessment bonds are measured at amortized cost.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
29 2. CASH AND INVESTMENTS, Continued
D. Credit Risk
Credit risk is the risk that an issuer of an investme nt 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 actual rating as of June 30, 2021 for each investment type:
E. Concentration of Credit Risk
Investments in the securities of any individual issuer, other than U.S. Treasury securities, mutual funds, and external investment pools that represent more than 5% or more of total Redevelopment Agency Related Fund investments were as follows at June 30, 2021:
3. NON-CANCELABLE LEASES RECEIVABLE
The Authority has entered into several non-cancelable lease agreements with the City and former Community Redevelopment Agency as part of its issuan ces of debt on their behalf. These Agreements call for the Authority to receive lease amounts that are struct ured to be sufficient in timing and amount to meet the Authority’s related debt service payments. Pursuant to ABx1 26 adopted by the State of California which was validated by the California Supreme Court on December 28, 2011, the Richmond Community Redevelopment Agency was dissolved and its assets tu rned over to and liabilities assumed by Successor Agencies effective January 31, 2012, including the leases payable to the Authority.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
30 3. NON-CANCELABLE LEASES RECEIVABLE, Continued
At June 30, 2021, the balances of these receivables, less an adjustment factor for debt service reserve accounts held by the Authority, were as follows:
4. LONG-TERM DEBT
Authority-Wide Financial Statements - Long-term debt is reported as liabilities of the appropriate governmental activity.
Fund Financial Statements – Governmental fund financial statem ents do not present long-term debt.
Governmental funds report bond premiums, discounts and issuance costs in the ye ar the debt is issued.
Bond proceeds are reported as other financing sources, net of premium or discount. Issuance costs are reported as debt service expenditures.
Custodial Fund Financial Statements – These funds are used to account for assets held by the Authority as an agent for special assessment districts within the City. The financial activities of these funds are excluded from the Authority-Wide Financial Statements, but ar e presented in separate Fiduciary Fund Financial Statements.
The following is a summary of long-term debt transactions and balances during the fiscal year ended June 30, 2021:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
31 4. LONG-TERM DEBT, Continued
2003 Tax Allocation Revenue Bonds Series A and Series B – Original Issue Series A $16,080,000, Series B $12,500,000
The Bonds were issued on August 27, 2003 by the Authority. The proceeds of the Series A Bonds were used to finance certain capital improvements for the Richmond Redevelopment Agency and pay $13,000,000 to the City in partial payment of Prior Obligations. The proceeds of the Series B Bonds were used to finance certain capital improvements for the Agency and pay $5 ,000,000 to the City in partial payment of Prior Obligations. Interest rates range from 3.00% to 6.30% and are payable semiannually on March 1 and September 1. The bonds are secured by a pledge of certain tax increment revenues derived from taxable property within certain Redevelopment Agency project areas.
On March 27, 2014, the Successor Agency issued the Successor Agency to the Richmond Community Redevelopment Agency Refunding Bonds 2014 Seri es A & B which resulted in the refunding and defeasance of the outstanding balance of the 2003 Series A Bonds in the amount of $13,290,000.
At issuance, the Bonds were insured by MBIA Insurance Corporation (which was reinsured by National Public Finance Guarantee Corporation (“NPFGC”)). On December 5, 2017, Kro ll Bond Rating Agency downgraded its insurance financial strength rating for NPFGC from ‘AA+’ to ‘AA’ and subsequently withdrew the rating citing business reasons. On Ja nuary 17, 2018, Moody’s Inve stors Service (“Moody’s”) downgraded its insurance financial strength rating on NPFGC from ‘A3’ to ‘Baa2’. As a result of the foregoing, Moody’s downgraded its Insured Rating on the Bonds from ‘A3’ to ‘Baa2’. On February 13, 2019, S&P Global Ratings (formerly Standard and Poor’s Ratings Services) upgraded its Local Currency Long- Term and Underlying Ratings on the Bonds from ‘A+’ to ‘AA-’.
The annual debt service requirements on the 2003 Series B Bonds are as follows:
For the Years
Ending June 30, Principal Interest Total
2022 835,000 349,493 1,184,493
2023 885,000 295,313 1,180,313
2024 940,000 237,825 1,177,825
2025 1,600,000 157,815 1,757,815
2026 1,705,000 53,708 1,758,708
Total 5,965,000$ 1,094,154 $ 7,059,154 $
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
32 4. LONG-TERM DEBT, Continued
2004 Tax Allocation Revenue Bonds Series A and Series B – Original Issue Series A $15,000,000, Series B $2,000,000
The Bonds were issued on October 28, 2004 by the Authority. The proceeds from the Series A Bonds were used to repay advances from the City and finance certain working capital requirements and low and moderate income housing activities of the Redevelopment Agency. The proceeds of the Series B Bonds were used to finance certain low and moderate income housing activities of the Redevelopment Agency. Interest rates range from 2.00% to 5.44% and payments are due semiannually on March 1 and September 1. The Bonds are secured by certain amounts payable by the Redevelopment Agency to the Authority and certain tax increment revenues derived from the taxable property within the Merged Project Area.
The annual debt service requirements on the bonds are as follows:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
33 4. LONG-TERM DEBT, Continued
Lease Revenue Refunding Bonds, Series 2016 – Original Issue - $28,390,000 On February 1, 2016, the Authority issued Series 2016 Lease Revenue Refunding Bonds in the amount of $28,390,000. The proceeds from the Bonds were used to pay the obligations for the termination of the interest swap agreement and the option on swaption agreement (swaption) related to the Authority’s Series 2009 Lease Revenue Refunding Bonds and to pay the costs associated with the issuance of the Series 2016 Bonds. On February 3, 2016 the interest rate swap agreement and the swaption related to the Series 2009 Bonds were terminated with a swap termination payment of $28,554,000.
The Bonds bear interest rates of 4.00% to 5.50%. Principal payments are due annually on November 1 through 2037 and semi-annual interest payments are due May 1 and November 1 commencing on May 1, 2016.
At June 30, 2021 the 2016 Bonds consisted of the following:
The annual debt service requirements are as follows:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
34 4. LONG-TERM DEBT, Continued
Richmond Joint Powers Financing Authority Lease Revenue Bonds, Series 2019A – Original Issue - $63,970,000
The Series 2019A Bonds are being issued to: redeem $77,315,000 outstanding principal amount of the Authority’s Lease Revenue Refunding Bonds (Civic Center Project) Series 2009, purchase a reserve facility for deposit into the reserve account established for the Series 2019A Bonds, fund a deposit into the Interest Account within the Revenue Fund to capitalize a portion of the interest due on May 1, 2020, and pay costs associated with the issuance of the Series 2019A Bo nds. The Bonds are payable solely from, and secured solely by, Revenues of the Authority, consisting primar ily of Base Rental Payments to be received by the Authority from the City of Richmond under a Facility Lease, dated as of August 1, 2019, by and between the City and the Authority, for the right to use and the occupancy of certain real property and facilities. The Series 2019A Bonds will mature on November 1 annually commencing November 1, 2020. Interest on the Series 2019A Bonds is payable at the rate of 5% on November 1 and May 1 of each year, commencing May 1, 2020. The refunding resulted in an overall debt service savings of $29,893,316. The net present value of the debt service savings is called an economic gain and amounted to $25,000,596.
At June 30, 2021 the 2019A Bonds consisted of the following:
The annual debt service requirements are as follows:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
35 4. LONG-TERM DEBT, Continued
Richmond Joint Powers Financing Authority Point Potrero Lease Revenue Bonds, Series 2019B – Original Issue ($20,580,000)
The Series 2019B Bonds are being issued to: (i) defease and redeem on a current basis all of the Authority’s $26,830,000 outstanding Point Potrero Lease Revenue Bonds, Series 2009A and (ii) pay certain costs associated with the issuance of the Series 2019B Bonds. The Series 2019B Bonds are payable solely from, a n d s e c u r e d s o l e l y b y , R e v e n u e s o f t h e A u t h o r i t y , c o n s i s t i n g p r i m a r i l y o f B a s e R e n t a l P a y m e n t s t o b e received by the Authority from the City under a Facility Lease, dated as of August 1, 2019, by and between the City of Richmond and the Authority, for the right to use and the possession of certain real property and facilities, consisting of Wharves No. 7 and 8 at the Point Potrero Marine Terminal of the Port of Richmond.
The amount of the Base Rental Payments is calculated to be sufficient to pay principal of and interest on the Series 2019B Bonds when due. Interest on the Series 2019B Bonds is payable on May 1 and November 1 of each year, commencing November 1, 2019. The refundin g resulted in an overall debt service savings of $4,351,195. The net present value of the debt service savings is called an economic gain and amounted to $4,177,680.
At June 30, 2021 the 2019B Bonds consisted of the following:
The annual debt service requirements on the 2019B Bonds are as follows:
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
36 4. LONG-TERM DEBT, Continued
Recovery Zone Economic Development Lease – Original Amount $1,316,000 On December 1, 2010 the Authority entered into a capi tal lease with Bank of America in the amount of $1,316,000 to finance the improvements to three of the City’s fire stations and a senior center. The City agreed to lease the three fire stations to the Authority in exchange for lease payments in the amount of the debt. The Authority received the lease proceeds under an allocation of the National Recovery Zone Economic Development Bonds under the American Recovery and Reinvestment Act of 2009 which includes a direct subsidy from the United States Treasury for the interest payable on the bonds. The lease subsidy will be payable on or about the date that the Authority makes its debt service payments and is equal to 45% of the interest payable on the lease upon filing of a request by the Authority. The total subsidy received in fiscal year 2021 was $14,932. The lease bears interest at a rate of 6.50% and principal and interest payments on the lease are due semi-annually on June 15 and December 15 commencing on June 15, 2011 through 2026.
The annual debt service requirements on the capital lease are as follows:
For the Years
Ending June 30, Principal Interest Total
2022 98,096 28,979 127,075
2023 101,634 22,546 124,180
2024 105,300 15,881 121,181
2025 109,098 8,975 118,073
2026 56,017 1,821 57,838
Total 470,145 $ 78,202 $ 548,347 $
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
37 4. LONG-TERM DEBT, Continued
Events of Default, Termination Events and Subjective Acceleration Clauses Below is a summary of certain events of default and termination events with finance related consequences, along with the subjective acceleration clauses, as applicable, for all of the City’s outstanding long-term debt obligations. Each agreement may contain additional events of default, termination events or other subjective acceleration clauses.
A. If the Successor Agency fails to pay rental payable when due or the Authority fails to pay debt service when due, the delinquent principal and in terest is due and payable immediately. If the Successor Agency files for reorganization unde r bankruptcy laws, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property.
B. If the City fails to pay rental payable when due or the Authority fails to pay debt service when due, the delinquent principal and interest is due and pa yable immediately. In the event of default, the Authority has the option to exercise the right of entry and re-entry upon the leased property, including the right to re-lease the property if the City does not pay the delinquent rent.
C. If the City fails to pay lease payments when due or observe other covenants in the lease agreement within thirty days of the written notice of the failure, the outstanding balances are due and payable immediately. If the City files for reorganization under bankruptcy laws, the aggregate outstanding principal balance and accrued interest are immediately due and payable. In the event of default, the Authority has the option to exercise the right of entry and re-entry upon the leased property, including the right to re-lease the property if the City does not pay the delinquent lease payments.
Richmond Joint Powers Financing Authority
Notes to the Component Unit Basic Financial Statements
For the year ended June 30, 2021
38 4. LONG-TERM DEBT, Continued
Debt Without City or Authority Commitment
Special assessment districts have been established in various parts of the City to provide improvements to properties located in those districts. Properties in these districts are assessed for the cost of improvements; these assessments are payable solely by property owners over the term of the debt issued to finance these improvements. The City or Authority are not legally or morally obligated to pay these debts or be the purchaser of last resort of any foreclosed properties in these special assessment districts, nor are they obligated to advance City or Authority funds to repay these debts in the event of default by any of these districts. At June 30, 2021, the balances of these Districts’ outstanding debt were as follows:
2016 Reassessment Revenue Refunding Bonds
On August 8, 2016 the Authority issued $7,895,000 in Reassessment Revenue Refunding Bonds. The proceeds were used to refund the outstanding 2006 Reassessment Revenue Bonds Series A and B and pay c e r t a i n c o s t s o f i s s u a n c e o f t h e B o n d s . T h e b o n d s b e a r a n i n t e r e s t r a t e o f 2 . 5 6 % w h i c h i s p a y a b l e semiannually on March 2 and September 2. The interest on and principal of the Reassessment Bonds are payable from the annual Reassessment installments co llected on the regular property tax bills sent to owners of property within the District having unpaid special Reassessments levies against them.
5. PRIOR PERIOD ADJUSTMENT
During 2021, prior period adjustments were made to correct the premium amount of 2016 Lease Revenue Refunding Bonds:
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 Auditor’s Report
To the Board of Directors
of the City of Richmond Joint Powers Financing Authority Richmond, California
We have audited, in accordance with the auditing st andards 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 City of Richmond Joint Powers Financing Authority (Authority), a component unit of the City of Richmond, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated May 9, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financia l statements, we considered the Authority’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limi ted 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 thes e limitations, during our audit we di d not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
40 To the Board of Directors
of the City of Richmond Joint Powers Financing Authority Richmond, California
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 determination of financial statem ent amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the 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.
Badawi and Associates
Berkeley, California
May 9, 2022