Riverside Public Financing Authority
Financial and Compliance Report
June 30, 2023
Prepared by the Finance Department
Kristie Thomas, Finance Director/Assistant Chief Financial Officer
3900 Main Street, Riverside, California 92522 (951) 826-5660
RIVERSIDE PUBLIC FINANCING AUTHORITY
YEAR ENDED JUNE 30, 2023
TABLE OF CONTENTS
I
ndependent Auditors’ Report ....................................................................................................................... 1 F
inancial Statements
Statement of Net Position .......................................................................................................................... 4 Statement of Revenues, Expenses and Changes in Net Position ............................................................ 5 Statement of Cash Flows ........................................................................................................................... 6 Notes to the Financial Statements ............................................................................................................. 7 I
ndependent 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 .................................................................................. 11
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDE
NT AUDITORS’ REPORT
To the Honorable Mayor and Members of the Authority Council Riverside Public Financing Authority
City of Riverside, California
Report on the Financial Statements
Opinion
We have audited the accompanying financial statements of the Riverside 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, 2023, 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 o f the City of Riverside, California as of June 30, 2023, and the changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial State ments section of our report. We are required to be independent of the Authority and to meet our other ethical resp onsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As discussed in Note 1, the fi nancial statements present only t he Riverside Public Financing Authority of the City of Riverside and do not purport to, and do not present fai rly the financial position of the City as of June 30, 2023, or the changes in its financial position for the 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.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 1 To the Hon
orable Mayor and Members of the Authority Council
Riverside Public Financing Authority
City of Riverside, California
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 financial statement date, includin g any currently known information that may raise substantial doubt shortly thereafter.
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 is sue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted a uditing standards and Government Auditing Standards will always detect a material m isstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted au diting standards and Government Auditing Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
and design and perform audit procedures responsive to th ose risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are approp
riate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness o f the Authority’
s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
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 stateme nts, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of fi nancial reporting for placing the basic financial statements in an appropriate operational, economic, or historic al context. Our opinion on the basic financial statements is not affected by this missing information. 2 To the Honorable Mayor and Members of the Authority 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 8, 2023, on our consideration of the Authority’s internal control over fina ncial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant a greements and other matters. The purpose of that report is solely to describe the scope of our testing of intern al 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 integra l part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal control over financial reporting and compliance.
Brea, California
November 8, 2023
3 4
RIVERSIDE PUBLIC FINANCING AUTHORITY
STATEMENT OF NET POSITION
JUNE 30, 2023
The notes to financial statements are an integral part of this statement.
Assets
Current Assets
Interest receivable 818,627 $
Current portion of loans receivable 10,605,000
Total current assets 11,423,627
Non-Current Assets
Loans Receivable, net of current portion 167,623,503
Total assets 179,047,130 $
Liabilities and Net Position
Current Liabilities
Interest payable 818,627 $
Current portion of long-term obligations 10,605,000
Total current liabilities 11,423,627
Non-Current Liabilities
Long-term Obligations, net of current portion 167,623,503 Total liabilities 179,047,130
Net Position -$
5 RIVERSIDE PUBLIC FINANCING AUTHORITY
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2023
The notes to financial statements are an integral part of this statement.
Revenues
Interest revenue 6,653,066 $
Expenses
Long-term obligations interest expense (6,653,066)
-
Changes in net position
Net position, beginning of year -
Net position, end of year -$
6 RIVERSIDE PUBLIC FINANCING AUTHORITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
The notes to financial statements are an integral part of this statement.
Cash Flows from Capital and Related Financing Activities Principal reduction on long-term obligations (10,135,000) $ Interest paid on long-term obligations (7,144,458)
Net cash used in capital and related financing activities (17,279,458) Cash Flows from Investing Activities
Principal received on loans receivable 10,135,000
Interest received on loans receivable 7,144,458
Net cash provided by investing activities 17,279,458
Net increase in cash and cash equivalents -
Cash and Cash Equivalents
Beginning of year -
End of year -$
RIVERSIDE PUBLIC FINANCING AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
7 Note 1. Nature of Operations, Descr iption of Reporting Entity and S ummary of Significant Accounting Policies
Nature of operations: The Riverside Public Financing Authority (Authority), a non- profit 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 Redevelopment Agency of the City of Riverside (Agency) and the Parking Authority of the City of Riverside (Parking Authority). The Authority has issued tax allocation bonds secured by loan agreements between the Agency , 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 and pursuant to a Joint Exercise of Powers Agreement dated December 15, 1987 by and between 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 provide 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 paid by the City, the Agency, or the Parking Authority, as applicable.
On December 29, 2011, the California Supreme Court upheld Assembly 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 Successor Agency for the former Redevelopment Agency in accordance with the bill as part of City 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 installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior red evelopment agency have been paid in full and all assets have been liquidated.
The Authority is reported as a blended component unit of the City, 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 enterprise 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 $7,503,690 as of June 30, 2023 is available in reserve funds of the various debt issuances. These reserves are not recorded in the financial statements of the Authority but are maintained in the Agency’s and the City’s financial statements. In the event that loan receivable payments are not received from the Agency and the City to pay debt service, these reserve funds would be available and used. These reserve funds are maintained 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 cash 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/borrowing arrangements outstanding at the end of the fiscal year that are
RIVERSIDE PUBLIC FINANCING AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
8 expected to be paid back in future years are referred to as Loans and Interest Receivable. There is no allowance for loan losses, as the Authority expects full repayment based on historic al 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 the Authority’s financial statements as interest revenue. The debt issued on behalf of the former Redevelopment Agency is secured by pledged tax increment revenues of the Agency. The debt issued on behalf 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 liabilities. 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 principles 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, 2023 are as follows: Outstanding Balance
$128,300,000 loan to the City for capital improvements, receivable in annual installments from $2,900,000 to $7,200,000 through March 1, 2037; interest at
3.40%.
$81,300,000
$41,240,000 loan to the City for capital improvements, receivable in annual installments from $1,295,000 to $2,840,000 through November 1, 2033; interest
2.00% to 5.00%.
25,700,000
$35,235,000 loan to the City for capital improvements, receivable in annual installments from $1,285,000 to $2,855,000 through June 1, 203 3; interest
4.00% to 5.00%.
$15,980,000 loan to the City for capital improvements, receivable in annual installments from $605,000 to $1,180,000 through November 1, 203 6; interest
2.75% to 4.00%.
$33,505,000 loan to the City for capital improvements, receivable 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
23,225,000
13,225,000
27,475,000
170,925,000
7,303,503
178,228,503
(10,605,000)
$167,623,503
The payments to be received from the City in future years are equal to the future annual requirements to amortize the related debt (see Note 3).
RIVERSIDE PUBLIC FINANCING AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
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 Renaissance Certificates of Participation are secured with collateral of the Adulka Park, Fairmount Park and Golf Course, Arlington 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.
$81,300,000
$41,240,000 2012 Riverside Public Financing Authority Lease Revenue Refunding Bonds, Series A are secured by lease payments on a portion of the City Hall Complex and the Lincoln Police Patrol Center. The bonds were issued to refinance the 2003 Certificates of Participation.
Interest on 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% per 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 and ending November 1, 2033. 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.
25,700,000
$35,235,000 2013 Riverside Public Financing Authority Pavement Rehab Certificates of Participation are secured by Measure A Sales Tax receipts; interest from 4.0% to 5. 0 %, due in annual installments from $1,285,000 to $2,855,000 through June 1, 2033.
23,225,000
$15,980,000 2019 Riverside Public Financing Authority Lease Revenue 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 store, the Tyler Mall North Plaza, the 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 the outstanding 2006
Lease Revenue Certificates of Participation (Galleria at Tyler Public Improvements) interest from 2.75% to 4.00% due in annual installments 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 th e 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 Certificates of Participation $ 85,700,000 $ - $ 4,400,000 $ 81,300,000 $ 4,600,000 2012A RPFA Lease Revenue Refunding Bond 29,018,815 - 2,028,118 26,990,697 2,000,000 2013 RPFA Certificates of Participation 25,683,294 - 1,823,500 23,859,794 1,845,000 2019A RPFA Lease Revenue Refunding Bond 13,646,082 - 713,989 12,932,093 760,000 2019B RPFA Lease Revenue Refunding Bond 34,756,467 - 1,610,548 33,145,919 1,400,000 Total $188,804,657 $ - $ 10,576,154 $178,228,503 $ 10,605,000
RIVERSIDE PUBLIC FINANCING AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
10 all Base Rental Payments on an annual basis. The rental payments may not be accelerated. $13,225,000
$33,505,000 2019 Riverside Public Financing Authority Lease Revenue 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 Bu
ilding and annex, Bobby Bonds Park, and the Main
Library site; interest from 3.00% to 5.00% due in annual installments 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.
S
ubtotal
Add: Unamortized net bond premium
Total Long-Term Obligations
27,475,000
170,
925,000
7,303,503
$178,228,503
A
nnual debt service requirements to maturity are as follows:
Years Ending June 30, Principal Interest Total
2024 10,605,000$ 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 11,800,000 5,392,674 17,192,674
2028 12,305,000 4,906,372 17,211,372
2029-2033 69,515,000 16,432,126 85,947,126 2034-2038 44,565,000 3,550,592 48,115,592 Premium 7,303,503 - 7,303,503
Total 178,228,503$ 49,145,612$ 227,374,115$
1611 E. Fourth Street, Suite 200
Santa Ana, CA 92701
(714) 569-1000
203 N. Brea Blvd, Suite 203
Brea, CA 92821
(714) 672-0022
21 Waterway Avenue, Suite 30089
The Woodlands, TX 77380
(936) 828-4587
2151 River Plaza Dr., Suite 150
Sacramento, CA 95833
(916) 503-9691
24422 Avenida de la Carlota, Suite 275
Laguna Hills, CA 92653
(949) 829-8299
www.lslcpas.com
INDEPENDENT AUDITORS’ REPORT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Hono
rable 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 financial stateme nts of the Riverside Public Financing Authority (the Authority), a component unit of the City of Riverside, Cal ifornia as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements, and have issued our report thereon dated November 8, 2023.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority’s internal control over the Authority’s financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the 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 allo w 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 b asis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less s evere 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 contr ol that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the 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 ma terial 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. 11 To the Hono
rable 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 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.
Brea, California
November 8, 2023
12