Riverside Public Financing Authority
Financial and Compliance Report
June 30, 2021
Prepared by the Finance Department
Edward Enriquez, Chief Financial Officer/Treasurer
3900 Main Street, Riverside, California 92522 (951) 826-5660
Riverside Public Financing Authority
Contents
Independent Auditor’s Report ....................................................................................................................... 1
Financial Statements
Statement of N et Position .......................................................................................................................... 4 Statement of Revenues, Expenses and Changes in Net Position ............................................................ 5 Statement of Cash Flows ........................................................................................................................... 6 Notes to Financial Statements ................................................................................................................... 7
Independent Auditor’s Report on Internal Control Over
Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards .................................................................................. 11
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
Riverside Public Financing Authority
City of Riverside, California
Report on the Financial Statements
Opinions
We have audited the accompanying financial statements of the Ri verside Public Financing Authority (the Authority), a component unit of the City of Riverside, California (the City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Authority’s financial statements as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Riverside Public Financing Authority, a component unit of the City of Riverside, California as of June 30, 2021, and the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matters
As discussed in Note 1, the financial statements present only the Riverside Public Financing Authority of the City of Riverside and do not purport to, and do not pres ent fairly the financial position of the City as of June 30, 2021 or the changes in its financial position for t he year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Basis for Opinions
We conducted our audit in accordance with auditing standards ge nerally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our r esponsibilities under those standards are further described in the Auditor’s Responsibiliti es for the Audit of the Financial Statements section of our report. We are required to be independent of th e Riverside Public Financing Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presenta tion of these financial statements in accordance with accounting prin ciples generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control rel evant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for twelve months beyond the date of the financial statements.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022 1 To the Honorable Mayor and Members of the City Council Riverside Public Financing Authority
City of Riverside, California
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with t he GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusi on, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skept icism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures respons ible to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the au dit 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, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and t he reasonableness of significant accounting estimates made by management, as well as evaluate th e overall presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or eve nts, considered in the aggregate, that raise substantial doubt about the Authority’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Other Reporting Responsibilities
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 presente d to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standar ds 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. 2 To the Honorable Mayor and Members of the City Council Riverside Public Financing Authority
City of Riverside, California
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards , we have also issued our report dated November 9, 2021 on our consideration of the City’s internal co ntrol over financial reporting and on our tests of its compliance with certain provisions of laws, regula tions, 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 City’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 City’s internal control over financial reporting and compliance.
Brea, California
November 9, 2021
3 4
Riverside Public Financing Authority
Statement of Net Position
June 30, 2021
The notes to financial statements are an integral part of this statement.
Assets
Current Assets
Interest receivable 914,932 $
Current portion of loans receivable 9,785,000
Total current assets 10,699,932
Non-Current Assets
Loans Receivable, net of current portion 189,235,364
Total assets 199,935,296 $
Liabilities and Net Position
Current Liabilities
Interest payable 914,932 $
Current portion of long-term obligations 9,785,000
Total current liabilities 10,699,932
Non-Current Liabilities
Long-term Obligations, net of current portion 189,235,364 Total liabilities 199,935,296
Net Position -
Total liabilities and net position 199,935,296 $
5 Riverside Public Financing Authority
Statement of Revenues, Expenses and Changes in Net Position Year Ended June 30, 2021
The notes to financial statements are an integral part of this statement.
Revenues
Interest revenue 7,881,526 $
Expenses
Long-term obligations interest expense (7,881,526)
-
Changes in net position
Net assets at beginning of year -
Net assets at end of year -$
6 Riverside Public Financing Authority
Statement of Cash Flows
Year Ended June 30, 2021
The notes to financial statements are an integral part of this statement.
Cash Flows from Capital and Related Financin g Activities Principal reduction on lon g-term obligations (9,465,000) $ Interest paid on long-term obligations (7,920,800)
Net cash used in capital and related financin g activities (17,385,800) Cash Flows from Investing Activities
Principal received on loans receivable 9,465,000
Interest received on loans receivable 7,920,800
Net cash provided by investing activities 17,385,800
Net increase in cash and cash equivalents -
Cash and Cash Equivalents
Beginning -
Ending -$
Riverside Public Financing Authority
Notes to Financial Statements
For the Year Ended June 30, 2021
7 Note 1. Nature of Operations, Description of Reporting Entity a nd Summary of Significant Accounting Policies
Nature of operations: The Riverside Public Financing Authority (Authority), a non-pro fit corporation, serves as a conduit for the issuance of debt which provides financing for public capital improvements to the City of Riverside California, the Successor Agency to the Redev elopment Agency of the City of Riverside (Agency) and the Parking Authority of the City of Riverside (Pa rking Authority). The Authority has issued tax allocation bonds secured by loan agreements between the Age ncy, the City and the Authority. These loan agreements are secured by a first pledge of and lien on a portion of property tax revenues within the respective project areas.
Reporting entity: The Riverside Public Financing Authority was organized under an d pursuant to a Joint Exercise of Powers Agreement dated December 15, 1987 by and bet ween the former Redevelopment Agency of the City of Riverside, the City and under the Government Code of the State of California, for the primary purpose of making loans to the Agency or the City to pr ovide financing for public capital improvements. The Parking Authority was added as an additional member of the Authority on August 14, 2012. All trustee fees and other administrative expenses are p aid by the City, the Agency, or the Parking Authority, as applicable.
On December 29, 2011, the California Supreme Court upheld Assem bly Bill X1 26 that provided for the dissolution of all redevelopment agencies in the State of California. The bill provided that upon dissolution of the Redevelopment Agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government.
On March 15, 2011, the City Council elected to become the Succe ssor Agency for the former Redevelopment Agency in accordance with the bill as part of Cit y resolution number 22184. In 2018, the oversight was transferred to the Riverside Countywide Oversight Board, as a result of state legislation that consolidated all oversight boards to successor agencies. Successor agencies are allocated revenue in the amount that is necessary to pay the estimated annual installmen t payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.
The Authority is reported as a blended component unit of the Ci ty, and the financial transactions of the Authority are included with governmental activities in the government-wide financial statements of the City and the Agency. Separate financial statements may be obtained from the City's Finance Department. 3900 Main Street, Riverside, California 92522.
Basis of accounting: The activities of the Authority are accounted for as an enterpr ise fund using the economic resources measurement focus and the accrual basis of accounting. Under this method, interest revenues are recorded when earned and interest expenses are recorded at the time liabilities are incurred, regardless of when the related cash flow occurs.
Reserve funds: Restricted cash in the amount of $7,422,802 as of June 30, 2021 is available in reserve funds of the various debt issuance s. These reserves are not rec orded in the financial statements of the Authority but are maintained in the Agency’s and the City’s fin ancial statements. In the event that loan receivable payments are not rece ived from the Agency and the Ci ty to pay debt service, these reserve funds would be available and used. These reserve funds are main tained by fiscal agents and are considered restricted by and are pledged by the Agency and the City as collateral for payment of principal and interest on bonds.
Statement of cash flows: For the purpose of cash flows, and since there is usually no ca sh or cash equivalents on hand, the Authority considers all cash received and paid out to be highly liquid (maturities
of three months or less for cash equivalents).
Loans and interest receivable: Activities between the Authority, the Agency and City that are representative of lending/borrowi ng arrangements outstanding at the end of the fiscal year that are Riverside Public Financing Authority
Notes to Financial Statements (Continued)
For the Year Ended June 30, 2021
8 expected to be paid back in future years are referred to as Loa ns and Interest Receivable. There is no allowance for loan losses, as the Authority expects full repayment based on historical experience.
Long-term obligations: Long-term obligations are reported as liabilities in the financial statements of the Authority. Long-term obligations used to finance the Authority’s lending activities and payable from interest revenues generated by the Agency and the City are recorded in t he Authority’s financial statements as interest revenue. The debt issued on behalf of the former Rede velopment Agency is secured by pledged tax increment revenues of the Agency. The debt issued on behal f of the City is secured by a lease agreement between the City and the Authority.
Net position: Net position represents the difference between assets and liabi lities. Net position is not reported by the Authority, since by its very nature, the Authority acts as a conduit entity.
Estimated amounts reported in the financial statements: The preparation of financial statements in conformity with accounting princi ples generally accepted in the United States of America requires management to make estimates and assumptions that can affect certain reported amounts and disclosures.
Actual results could differ from those estimates.
Note 2. Loans Receivable
Loans receivable at June 30, 2021 are as follows: Outstanding Balance
$128,300,000 loan to the City for capital improvements, receiva ble in annual installments from $2,900,000 to $7,200,000 through March 1, 203 7; interest at
3.40%.
$90,000,000
$41,240,000 loan to the City for capital improvements, receivab le in annual installments from $1,295,000 to $2,840,000 through November 1, 2033; interest
2.00% to 5.00%.
29,415,000
$35,235,000 loan to the City for capital improvements, receivab le in annual installments from $1,285,000 to $2,855,000 through June 1, 2033 ; interest
4.00% to 5.00%.
$15,980,000 loan to the City for capital improvements, receivab le in annual installments from $605,000 to $1,180,000 through November 1, 20 36; interest
2.75% to 4.00%.
$33,505,000 loan to the City for capital improvements, receivab le in annual installments from $1,245,000 to $2,645,000 through November 1, 2036; interest
3.00% to 5.00%.
Subtotal
Add: Unamortized net bond premium
Total Loans receivable
Less: Current portion
Non-current portion of Loans receivable
26,660,000
14,675,000
30,095,000
190,845,000
8,175,364
199,020,364
(9,785,000)
$189,235,364
The payments to be received from the City in future years are e qual to the future annual requirements to amortize the related debt (see Note 3).
Riverside Public Financing Authority
Notes to Financial Statements (Continued)
For the Year Ended June 30, 2021
9 Note 3. Long-Term Obligations
Changes in Long-Term Obligations: Below is a summary of changes in long-term obligations during the fiscal year:
To fund the loans receivable described in Note 2, the Authority issued, or facilitated the issuance of, the following debt, which are limited obligations of the Authority.
Outstanding
Principal
$128,300,000 2008 Riverside Public Financing Authority Renaissa nce Certificates of Participation are secured with collateral of th e Adulka Park, Fairmount Park and Golf Course, A rlington Heights Sports Park, Orange Terrace Park, Orange Terrace Community Center and Orange Terrace Library; issued at a variable rate; however, the City entered into an agreement to convert to a fixed rate of 3.4%. Due in annual installments from $2,900 ,000 to $7,200,000 through March 1, 2037.
$90,000,000
$41,240,000 2012 Riverside Public Financing Authority Lease Rev enue Refunding Bonds, Series A are secured by lease payments on a po rtion of the City Hall Complex and the Lincoln Police Patrol Center. The bonds were issued to refinance the 2003 Certificates of Participation. Interest o n the bonds is payable semi-annually on May 1 and November 1 of each year, commencing on May 1, 2013. The rate of interest varies from 2.00% to 5.00% pe r annum depending on maturity date. Principal is payable in annual installments ranging from $1,295,000 to $2,840,000 commencing on November 1, 2013 an d ending November 1, 2033. In the event of default, the Trustee may reta in the Lease Agreement and hold the City liable for all Base Rental Payments on an annual basis. The rental payments may not be accelerated.
29,415,000
$35,235,000 2013 Riverside Public Financing Authority Pavement Rehab Certificates of Participation are secured by Measure A Sales Ta x receipts; interest from 4.0% to 5.0 %, due in annual installments from $1 ,285,000 to $2,855,000 through June 1, 2033.
26,660,000
$15,980,000 2019 Riverside Public Financing Authority Lease Rev enue Refunding Bonds, Series A (Galleria at Tyler Public Improvements) are secured by lease payments on the two level 912 space parking structure located near Tyler Street and Nordstrom stor e, the Tyler Mall North Plaza, t he North Plaza parking, storm drains related to those improvements, and portions of two arterial streets. The bonds were issued to refinance all but $5,000 of t he outstanding 2006
Lease Revenue Certificates of Participation (Galleria at Tyler Public Improvements) interest from 2.75% to 4.00% due in annual instal lments from $605,000 to $1,180,000 through November 1, 2036. The refunding transaction resulted in a total net present value savings of $1,140,000. In the event of default, the Trustee may retain the Lease Agreement and hold the City liable for
Beginning
Balance Additions Reductions Ending Balance
Due Within One
Year
2008 RPFA COP $ 94,200,000 $ - $ 4,2 00,000 $ 90,000,000 $ 4,300,000 2012A RPFA Refunding 32,800, 016 - 1,848,169 30,951,847 1,810,000 2013 RPFA COP 29,080, 235 - 1,658,468 27,421,767 1,675,000 RPFA 2019A 15,018,946 - 678,891 14,340,055 715,000 RPFA 2019B 37,808,666 - 1,501,971 36,306,695 1,285,000 $ 208,907,863 $ - $ 9,887,499 $ 1 99,020,364 $ 9,785,000 Riverside Public Financing Authority
Notes to Financial Statements (Continued)
For the Year Ended June 30, 2021
10 all Base Rental Payments on an annual basis. The rental payments may not be accelerated.
14,675,000
$33,505,000 2019 Riverside Public Financing Authority Lease Rev enue Refunding Bonds, Series B (Main Library Project) are secured by an amendment to the Ground Lease entered into by the City upon issuance of the 2012A Lease Revenue Bonds. It adds the remainder of the City Hall Complex, the Corporation Yard Administration Building and annex, Bobby Bonds Park, and t he Main Library site; interest from 3.00% to 5.00% due in annual instal lments from $1,245,000 to $2,645,000 through November 1, 2036. In the event of default, the Trustee may retain the Lease Agreement and hold the City liable for all Base Rental Payments on an annual basis. The rental payments may not be accelerated.
Subtotal
Add: Unamortized net bond premium
Total Lon
g-Term Obligations
30,095,000
190,845,000
8,175,364
$199,020,364
Annual debt service requirements to maturity are as follows:
Years Ending June 30, Principal Interest Total
2022 9,785,000 7,546,470 17,331,470 2023 10,135,000 7,144,458 17,279,458 2024 10,605,000 6,718,718 17,323,718 2025 10,835,000 6,287,563 17,122,563 2026 11,300,000 5,857,568 17,157,568 2027-2031 64,045,000 21,860,748 85,905,748 2032-2036 63,115,000 8,149,742 71,264,742 2037-2041 11,025,000 271,273 11,296,273 Premium 8,175,364 - 8,175,364 199,020,364$ 63,836,540 $ 262,856,904 $
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the City Council
Riverside Public Financing Authority
City of Riverside, 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 fin ancial statements of the Riverside Public Financing Authority (the Authority), a component unit of the Ci ty of Riverside, California, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Riverside Public Financing Authority’s financial statements, and have issued our report thereon dated November 9, 2021.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Riverside Public Financing Authority’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the pu rpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Riverside Public Financing Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Riverside Public Financing 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 ther e is a reasonable possibility t hat a material misstatement of the entity’s financial statements will not be pr evented, or detected and cor rected on a timely basis. A significant deficiency is a deficiency, or a combinati on 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 c ontrol was for the limited purpo se described in the first paragraph of this section and was not designed to i dentify all deficiencies in internal control that might be material weaknesses or, significant defic iencies. Given these limitation s, 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 Riv erside Public Financing Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreement s, noncompliance with which could have a direct and material effect on t he 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 noncomplianc e or other matters that are required to be reported under Government Auditing Standards.
203 N. Brea Blvd., Suite 203
Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022 11 To the Honorable Mayor and Members of the City Council Riverside Public Financing Authority
City of Riverside, California
Purpose of this Report
The purpose of this report is solely to describe the scope of o ur testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Riverside Public Financing 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 Riverside Public Financing Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Brea, California
November 9, 2021
12