Item 2 - Poway Housing Successor Annual Housing Report FY 2018-19AGENDA REPORT CityofPoway DATE: TO: FROM: CONTACT: SUBJECT: Summary: April 7, 2020 Honorable Chairman and Members of the Housing Authority Robert Manis, Director of Development Services Marie Sanders, Senior Management Analyst (858) 668-4637 or msanders@poway.org Poway Housing Successor Annual Report FY2018-19 CITY COUNCIL Pursuant to California Health and Safety Code Sections 34176 and 34176.1 (f) (Dissolution Law), the Poway Housing Authority, in its capacity as Housing Successor to the dissolved Poway Redevelopment Agency, must prepare an annual report detailing its activities during each fiscal year. The Poway Housing Successor Annual Report for Fiscal Year 2018-19 (Attachment A), and the Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ended June 30, 2019 (Attachment B), are included with this agenda report for review by the Poway Housing Authority. Recommended Action: It is recommended that the Poway Housing Authority Board receive and file this report. Discussion: Part 1.85, Division 24 of the California Health and Safety Code, particularly Sections 34176 and 34176.1 (f), require that the Housing Successor provide an annual report of the Successor's activities during the prior fiscal year. The purpose of the report is to provide the governing body of the Housing Successor with an annual report on the housing assets and activities of the Housing Successor. The report is to be provided to the Poway Housing Authority Board, along with an independent financial audit of the Low-and Moderate-Income Housing Asset Fund within six months after the end of each fiscal year. Due to Poway's annual timing for completion of the Housing Authority audit, it is not possible for this report to be completed within the six-month period. However, there is no penalty for delayed submission of the report. Environmental Review: This item is not subject to California Environmental Quality Act (CEQA) review. 1 of 35 April 7, 2020, Item #2
Fiscal Impact: There is no fiscal impact associated with this item. Public Notification: None. Attachments: A. Poway Housing Successor Annual Report for Fiscal Year 2018-19 B. Poway Housing Authority Basic Financial Statements and Independent Auditors Report for the year ended June 30, 2019 Reviewed/ Approved By: Assistant City Manager 2 of35 Reviewed By: Alan Fenstermacher City Attorney Approved By: City Manager April 7, 2020, Item #2
POWAY HOUSING SUCCESSOR ANNUAL REPORT REGARDING THE LOW-AND MODERATE-INCOME HOUSING ASSET FUND FOR FISCAL YEAR 2018-2019 PURSUANT TO CALIFORNIA HEALTH AND SAFETY CODE SECTION 34176.1(f) FOR THE POWAY HOUSING AUTHORITY This Housing Successor Annual Report (Report) regarding the Low-and Moderate-Income Housing Asset Fund (LMIHAF) has been prepared pursuant to California Health and Safety Code Section 34176.1 (f) and is dated as of April 7, 2020. This Report sets forth certain details of the Poway Housing Authority, in its capacity as Housing Successor to the dissolved Poway Redevelopment Agency, activities during Fiscal Year 2018-19 (Fiscal Year). The purpose of this Report is to provide the governing body of the Housing Successor an annual report on the housing assets and activities of the Housing Successor under Part 1.85, Division 24 of the California Health and Safety Code, in particular sections 34176 and 34176.1 (Dissolution Law). The following Report is based upon information prepared by Housing Successor staff and information contained within the Poway Housing Authority Basic Financial Statements and Independent Auditor's Report for Fiscal Year 2018-19 as prepared by Davis Farr, LLP, which Audit is separate from this annual summary Report; further, this Report conforms with and is organized into sections I. through XI I., inclusive, pursuant to the Dissolution Law: I. Amount Deposited into LMIHAF: This section provides the total amount of funds deposited into the LMIHAF during the Fiscal Year. Any amounts deposited for items listed on the Recognized Obligation Payment Schedule (ROPS) must be distinguished from the other amounts deposited. II. Ending Balance of LMIHAF: This section provides a statement of the balance in the LMIHAF as of the close of the Fiscal Year. Any amounts deposited for items listed on the ROPS must be distinguished from the other amounts deposited. Ill. Description of Expenditures from LMIHAF: This section provides a categorized description of the expenditures made from the LMIHAF during the Fiscal Year. IV. Statutory Value of Assets Owned by Housing Successor: This section provides the statutory value of real property owned by the Housing Successor, the value of loans and grants receivables, and the sum of these two amounts. V. Description of Transfers: This section describes transfers pursuant to Health and Safety Code Section 34176.1 (c)(2), if any, to another housing successor agency made in previous Fiscal Year(s), including whether the funds are unencumbered and the status of projects, if any, for which the transferred LMIHAF will be used. The sole purpose of the transfers must be for the development of transit priority projects, permanent supportive housing, housing for agricultural employees or special needs housing. POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
VI. Project Descriptions: This section describes any project for which the Housing Successor receives or holds property tax revenue pursuant to the ROPS and the status of that project. VII. Status of Compliance with Section 33334.16: This section provides a status update on compliance with Section 33334.16 for interests in real property acquired by the former redevelopment agency prior to February 1, 2012. For interests in real property acquired on or after February 1, 2012, the Housing Successor must provide a status update on the project. The Poway Housing Successor has acquired two properties since February 1, 2012. VIII. Description of Outstanding Obligations under Section 33413: This section describes the outstanding inclusionary and replacement housing obligations, if any, under Section 33413 that remained outstanding prior to dissolution of the former redevelopment agency as of February 1, 2012, along with the Housing Successor's progress in meeting those prior obligations, if any, of the former redevelopment agency and how the Housing Successor's plans to meet unmet obligations, if any. IX. Income Test: This section provides the information required by Section 34176.1 (a)(3)(B), or a description of expenditures by income restriction for five-year period, with the time period beginning January 1, 2014, and whether the statutory thresholds have been met. X. Senior Housing Test: This section provides the percentage of units of deed-restricted rental housing restricted to seniors and assisted individually or jointly by the Housing Successor, its former redevelopment Agency, and its host jurisdiction within the previous 10 years in relation to the aggregate number of units of deed-restricted rental housing assisted individually or jointly by the Housing Successor, its former Redevelopment Agency and its host jurisdiction within the same time period. For this Report the ten-year period reviewed is January 1, 2009 to December 31, 2018. XI. Excess Surplus Test: This section provides the amount of excess surplus in the LMIHAF, if any, and the length of time that the Housing Successor has had excess surplus, and the Housing Successor's plan for eliminating the excess surplus. XII. Inventory of Homeownership Units: This section provides a summary of covenanted homeownership units assisted by the former redevelopment agency or the housing successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of monies from the Low-and Moderate-Income Housing Fund pursuant to subdivision (f) of Section 33334.3. Inventory shall include the following: a) the number of those units; b) in the first report pursuant to this subdivision, the number of units lost to the portfolio after February 1, 2012, and the reason or reasons for those losses. For all subsequent reports, the number of the units lost to the portfolio in the last fiscal year and the reason for those losses; c) any funds returned to the housing successor as part of an adopted program that protects the former redevelopment agency's investment of moneys from the Low-and Moderate-Income Housing Fund; and d) whether the housing successor has contracted with any outside entity for the management of the units and, if so, the identity of the entity. POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
I. AMOUNT DEPOSITED INTO LMIHAF A total of $200,480 was deposited into the LMIHAF during the Fiscal Year, as detailed on page 9 of the Audit. II. ENDING BALANCE OF LMIHAF At the close of the Fiscal Year, the ending balance in the LMIHAF was $2,199,704 none of which is being held for items listed on the ROPS. This includes $1,601,381 in cash and investments, and $610,976 in housing loans receivable, less $40,252 in liabilities. The $610,976 is due from the Successor Agency and represents the Housing Authority's 20% of the former Redevelopment Agency's loan balance, and repayment is subject to approval by the California Department of Finance. Ill. DESCRIPTION OF EXPENDITURES FROM LMIHAF The following is a description of expenditures from the LMIHAF by category: Fiscal Year 2018/19 Monitoring & Administration Expenditures $8,161 Homeless Prevention & Rapid Rehousing Expenditures $0 Housing Development Expenditures $764,063 Total LMIHAF Expenditures in Fiscal Year $772,224 IV. STATUTORY VALUE OF ASSETS OWNED BY HOUSING SUCCESSOR Under the Dissolution Law and for purposes of this Report, the "statutory value of real property" means the value of properties formerly held by the former redevelopment agency as listed on the housing asset transfer schedule approved by the Department of Finance as listed in such schedule under Section 34176(a)(2), the value of the properties transferred to the Housing Successor pursuant to Section 34181 {f), and the purchase price of properties purchased by the Housing Successor. Further, the value of loans and grants receivable are included in these reported assets held in the LMIHAF. The following provides the statutory value of assets owned by the Housing Successor: End of FY2019 Cash and Cash Equivalents $1,601,381 Statutory Value of Real Property Owned by Housing Authority $18,582,674 Value of Loans and Grants Receivable $610,976 Total Value of Housing Successor Assets $20,822,630 V. DESCRIPTION OF TRANSFERS The Housing Successor did not make any LMIHAF transfers to other Housing Successor(s) under Section 34176.1 ( c)(2) during the Fiscal Year. POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
VI. PROJECT DESCRIPTIONS The Housing Successor did not receive and did not hold property tax revenue pursuant to the ROPS. VII. STATUS OF COMPLIANCE WITH SECTION 33334.16 Section 34176.1 provides that Section 33334.16 does not apply to interests in real property acquired by the Housing Successor on or after February 1, 2012. With respect to interests in real property acquired by the former redevelopment agency prior to February 1, 2012, and transferred to the Successor Agency pursuant to Health and Safety Code Section 34176, the time periods described in Section 33334.16 shall be deemed to have commenced on the date that the Department of Finance approved the property as a housing asset on the Housing Asset Transfer Form; thus, as to real property acquired by the former redevelopment agency now held by the Housing Successor, the Housing Successor must initiate activities consistent with the development of the real property for the purpose for which it was acquired within five years of the date the DOF approved such property as a housing asset. Poway's Housing Assets Transfer Form was approved by the DOF on August 31, 2012. The following provides a status update on the real property housing assets that were acquired by the former redevelopment agency prior to February 1, 2012, and transferred to the Housing Successor on February 1, 2012, and compliance with the five-year period to commence development activities. APN Street Address Date of Size Status Purchase 27546061 1267 4 Monte Vista Rd 02/22/2000 2.06 Acres Leased Land. Leased to local company for non-housing use. 31747201 13021-13023 Poway Rd 03/26/2002 2.6 Acres On 3/19/19 City Council adopted a DDLA which includes the eventual transfer 31747206 13031 Poway Rd 03/30/2010 .24 Acres and sale of these two properties to the city and a developer as part of a mixed-use development. The transfer will result in building a new senior affordable housing development on a smaller city-owned property, with 44 units; the same density as the two parcels. 32119028 Twin Peaks Rd 11/03/2004 2.15 Acres Vacant land. Occasionally leased for non-housing use. 31715214 12341 Oak Knoll Rd 03/23/2011 3.18Acres On 4/19/19 the land was sold to a developer to build a 53-unit low-income (30-60% AMI) complex for developmentally disabled adults, pursuant to a DDLA approved on 10/4/2016. The project is currently under construction and is expected to POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
be complete by December 2020. 31423026 13424 Scots Way 08/27/2002 0.70 Acres Vacant land. Due to access issues, development options are actively beinQ evaluated. 31421418 14048 Sycamore Ave 06/30/2005 0.32 Acres Vacant land. Development options are being evaluated. 31710151 Floodway adjacent to 08/27/2004 2.15 Acres Vacant land (remnant parcel & 52 the Sciara Affordable from development of adjacent Housing Development Sciara affordable housing development). Property is in the floodway and cannot be developed. The following provides a status update on real property housing assets that were acquired by the Housing Successor after February 1, 2012. APN Street Address PDateh of Size Status urc ase 31723222 12207 & 12237 Old 01/9/2018 1.07 Acres Future affordable housing site. & 36 Pomerado Road Demolition of site to be completed in FY21. VIII. DESCRIPTION OF OUTSTANDING OBLIGATIONS PURSUANT TO SECTION 33413 Replacement Housing: According to the 2010-2014 Implementation Plan for the former redevelopment agency, no Section 33413(a) replacement housing obligations were transferred to the Housing Successor. Furthermore, the Housing Successor has not caused the demolition of any units and no new replacement housing obligations have been created. lnclusionary/Production Housing. According to the 2010-2014 Implementation Plan for the former redevelopment agency, no Section 33413(b) inclusionary/production housing obligations were transferred to the Housing Successor. The former redevelopment agency's Implementation Plans are posted on the City's website at http://poway.org/207 /Affordable-Housing. IX. EXTREMELY LOW-INCOME TEST This section provides the information required by Section 34176.1 (a)(3)(B), or a description of expenditures by income restriction for five-year period, with the time period beginning January 1, 2014 and whether the statutory thresholds have been met. Section 34176.1 (a)(3)(B) requires that the Housing Successor must require at least 30% of the LMIHAF, after expenditures allowed pursuant to Code section 34176.1 (a)(1) and (2,) to be expended for development of housing affordable to, and occupied by, households earning 30% or less of the AMI. If the housing successor fails to comply with the extremely low income requirement in any five year report beginning with the five year report to be issued in 2019, then the housing successor shall ensure that at least 50% of these remaining LMIHAF funds expended in each fiscal POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
year following the latest fiscal year following the five year report are expended for the development of rental housing affordable to, and occupied by, households earning 30% or less of the area AMI until the housing successor demonstrates compliance with the extremely low-income requirement in an annual report. This information is not required to be reported until 2019 for the 2014 -2019 reporting period. The following provides the Housing Successor's Extremely Low-Income Housing Test for the five (5) year period of July 1, 2014 through June 30, 2019. Housing Development Low-Very Low-Extremely Total Expenditure from the LMIHAF Income Income Low-Income LMIHAF By Income Level (80% or Less AMI) (60% or Less AMI) (30% or Less AMI) Spent FY 2014/2015 0 0 0 0 FY 2015/2016 0 0 0 0 FY 2016/2017 0 0 0 0 FY 2017/2018 0 0 0 0 FY 2018/2019 0 $350,000 $350,000 $700,000 Total 0 $350,000 $350,000 $700,000 % Spent by Income Level 0% 50% 50% 100% X. SENIOR HOUSING TEST The Housing Successor is required to calculate the percentage of units of deed-restricted rental housing restricted to seniors and assisted by the Housing Successor, the former redevelopment agency and/or the City within the previous 10 years in relation to the aggregate number of units of deed-restricted rental housing assisted by the Housing Successor, the former redevelopment agency, and/or City within the same time period. If this percentage exceeds 50%, then the Housing Successor cannot expend future funds in the LMIHAF to assist additional senior housing units until the Housing Successor or City assists and construction has commenced on a number of restricted rental units that is equal to 50% of the total amount of deed-restricted rental units. The following provides the Housing Successor's Senior Housing Test for the 10-year period of January 1, 2009 through December 31, 2018: Housing Test 2009-2018 # of Assisted Senior Rental Units 0 # of Total Assisted Rental Units 182 Senior Housing Percentage 0% XI. EXCESS SURPLUS TEST Excess Surplus is defined in Section 34176.1 (d) as an unencumbered amount in the LMIHAF account that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount deposited into the LMIHAF account during the Housing Successor's preceding four Fiscal Years, whichever is greater. A total of $1,036,719 has been deposited into the account in the four previous fiscal years with the 2018-19 Fiscal Year-end cash balance in the account being $1,508,765. The LMIHAF, therefore, POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
has an excess surplus of $472,046. The Housing Successor plans to eliminate the $472,046 of excess surplus (in addition to the $299,805 excess surplus from FY17-18) by distributing approximately $1,500,000 of an approved development loan for APN 31710106 in FY 2021, for the construction of the project site. The following provides the Excess Surplus test for the preceding four Fiscal Years: FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 Total FY14-18 Beginning Balance $1,576,008 $1,687,392 $1,463,129 $2,117,450 Add: Deposits $224,682 $386,580 $184,553 $240,904 $1,036,719 Transfers In --$820,000 -(Less) Expenditures $(113,298) $(86,524) $(54,552) $(772,223) Transfers Out --($820,000) -(Less) Commitments -$(524,319) $(289,794) $(77,366) Uncommitted $1,687,392 $1,463,129 $1,303,336 $1,508,765 Balance XII. HOMEOWNERSHIP UNITS The Housing Successor is to provide an inventory of homeownership units assisted by the former redevelopment agency or the Housing Successor that are subject to covenants or restrictions or to an adopted program that protects the former redevelopment agency's investment of monies from the LMIHAF pursuant to Section 33334.3(f). The inventory for the Housing Successor is as follows: Current Inventory Number of Units Restricted Homeownership Units as of 12/31/2019 30 Add: Restricted Homeowner Units Added by Housing Successor (January 0 1, 2019 through December 31, 2019) (Less): Restricted Homeowner Units Lost to Portfolio (January 1, 2019 0 through December 31, 2019) Additionally, no inventory was lost in 2019. A total of $0 was returned to the Housing Successor as a result of the restrictions adopted to protect the former redevelopment agency's investment in LMIHAF monies and the Housing Successor did not contract with an outside entity for the management of the ownership portfolio. POWAY HOUSING SUCCESSOR ANNUAL REPORT FISCAL YEAR 2018 -2019 April 7, 2020, Item #2
10 of 35 POWAY HOUSING AUTHORITY (A Component Unit of the City of Poway) Financial Statements Year Ended June 30, 2019 ATTACHMENT B April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Table of Contents Year Ended June 30, 2019 Independent Auditor's Report . ........ ... .. ... . ... .... ...... ... ...... . .. ... .. .. .. ... . ... . ... ... .. ..... .... .. .. .. ... . ....... .... .. .. . .. 1 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position ......................................................................................................... 5 Statement of Activities ............................................................................................................... 6 Fund Financial Statements Balance Sheet ............................................................................................................................ 7 Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position ................................................................................................... 8 . Statement of Revenues, Expenditures and Changes in Fund Balance ..................................... 9 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities ....................... 10 Notes to the Basic Financial Statements.................................................................................... 11 Required Supplementary Information (Unaudited) Budgetary Comparison Schedule ................................................................................................. 20 Note to Budgetary.Comparison Schedule .................................................................................... 21 Report on Internal Control Over.Financial Reporting and on Compliance and Other Matters based on Audit of Financial Statements Performed in Accordance with Government Auditing Standards ············································~···············.. 23 11 of 35 April 7, 2020, Item #2
Davis Farr LLP 2301 Dupont Ori e I Suite 200 I Irvine, CA 92612 Main: 949.474.2020 I Fox: 949.26.3.5520 INDEPENDENT AUDITOR'S REPORT Poway Housing Authority City of Poway Poway, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the major fund of the Poway Housing Authority (the Authority), a component unit of the City of Poway, California, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements as li_sted 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 opinions onthese financial.statements ~ased, on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of Amerka and the standards applicable to financial audits contained in Govern,nent Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasona_ble assurance about whether the financial statements are free from material misstatement. An audit involves performing proced(fres to obtain audit eviden~e a_boutthe amountsand disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Authority's preparati_on ~nd fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly, we express no such opinion'. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, arid each major fund the Authority, as of June 30, 2019, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 12 of 35 1 April 7, 2020, Item #2
Emphasis of a Matter As described more fully in Note 1, the basic component unit financial statements present only the Authority and are not intended to present fairly the financial position and results of operations of the City of Poway, California in conformity with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Management has omitted management's discussion and analysis that accounting principles generally accepted_ in the Ur1ited States of America require to be presented to supplement the basic financial statements.· . Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an esser:,tiaJ,part 9f th~ finan~i_al reporting for placing the basic. fin~ncial statements in an appropriate" operati?nal, economic, or,hi~toric_ai context. Our opi.nion on the basic fin,iincial statements is not affected by this" ~issing informa_ tion. . ' , !-:
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• • i .• . . . . . . . . ·',; Other Reporting.Required by ·c;o~ernment Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 31, ~019 on our considerc:1tion of the Authority's internal control over financial reporting and on our tests of its compliance with certain· provisions of laws, regulations, contracts, and grant agreements and other ry1.at~ers. The purpose of _thctt rep9rt is to describe the scopeof our t~sting of _internal cgntrol over financial reporting and compliance and the results of that testing, and not to provide a·n opinion on internal control over financial reporting or on compliance. T~_at report is an integral part_ of an audit performed in accord~nce with Government Auditing Standards in considering the· Authqrity's internal control over financial reporting and compliance. · -frvine, California December 31, 2019 13 of 35 April 7, 2020, Item #2
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BASIC FINANOAL STATEMENTS 15 of 35 4 April 7, 2020, Item #2
16 of 35 ASSETS Poway Housing Authority Statement of Net Position June 30, 2019 Cash and investments (Note 2) Accounts receivable Due from other governments Capital assets (Note 3) Total assets LIABILITIES Accounts payable Unearned revenue Total liabilities ··-· NET POSITION Investment in capital assets Unrestricted Total net position $ ··$ See accompanying notes to financial statements 5 1,601,381 27,599 610,976 18,582,674 20,822,630 10,616 29,636 40,~52 18,582,674 2,199,704 20,782;378 April 7, 2020, Item #2
Functions/Programs Governmental activities: General government Development services Total governmental activities 17 of 35 $ $ Poway Housing Authority Statement of Activities Year Ended June 30, 2019 Expenses 8,161 764,063 772,224 Program Revenues Charges for Services 48,259 48,259 General Revenues Investment income Other Operating Contributions and Grants Total general revenues and transfers Change in net position Net position, beginning Net position, ending See accompanying notes to financial statements 6 Capital Contributions and Grants Totals 2019 40,098 (764,063) (723,965) 84,350 67,871 152,221 (571,744) 21,354,122 $20,782,378 April 7, 2020, Item #2
18 of 35 ASSETS Cash and investments Accounts receivable Poway Housing Authority Balance Sheet Governmental Fund June 30, 2019 Due from other governments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Unearned revenue Total liabilities FUND BALANCE Un restricted Total fund balances Total liabilities and fund balance $ $ $ $ See accompanying notes to financial statements 7 1,601,381 27,599 610,976 2,239,956 10,616 29,636 40,252 2,199,704 2,19!3,704 2,239,956 April 7, 2020, Item #2
Poway Housing Authority Reconciliation of the Balance Sheet of Governmental Fund to the Statement of Net Position June 30, 2019 Total Governmental Fund Balance Amounts reported for governmental activities in the Statement of Net Position were different because: Capital assets used in governmental activities were not current financial resources and, therefore, were not reported in the funds. Net position of governmental activities See accompanying notes to financial statements 19 of 35 8 $ 2,199,704 18,582,674 $ 20,782,378 April 7, 2020, Item #2
20 of 35 Poway Housing Authority Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Fund Year Ended June 30, 2019 REVENUES Lease revenue $ 48,259 Investment income 84,350 Reimbursement agreement fees 67,871 Total revenues 200,480 EXPENDITURES Current: General government 8,161 Development services 764,063 Total expenditures 772,224 Net chang·e in fund balance (571,744) Fund balances,-beginning of year 2,771,448 Fund balances, end of year $ 2,199,704 See accompanying notes to financial statements 9 April 7, 2020, Item #2
Poway Housing Authority Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Fund to the Statement of Activities VearEndedJune3~2019 Net change in fund balance -total governmental fund Amounts reported for governmental activities in the Statement of Activities were different because: Governmental funds report ~apital outlay as expenditures. However, in the Government-Wide_ State111ent of Activities, -the cost -~f .those ass'~ts will, be allocated over their estim·ated useful lives as -d~preciation expense. Capital asset expenditures Change in net position of governmental activities See accompanying notes to financial statements 21 of 35 10 $ {571,744) $ {571,744) April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Year Ended June 30, 2019 Note 1-Reporting Entity and Summary of Significant Accounting Policies The accounting policies of the Poway Housing Authority (Authority) conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting and financial reporting principles. The following is a summary of the Authority's significant accounting policies: A. Description of Reporting Entity On March 1, 2011, the City Council of the City of Poway declared a need for a housing authority in the City of Poway and adopted a resolution forming the Poway Housing Authority. The creation of the Housing Authority provides the City legal authority to continue monitoring ongoing rent and income compliance at affordable housing developments. The former Poway Redevelopment Agency (Agency) arid the Authority prepared a Cooperation Agreem·ent to provide for implementation of certain low and moderate .income housing projects and to make payments by:the Agency to the Authority for the costs to the. Authority for performing its obligations. The Agency was dissolved due to the passage of Assembly Bill_ Xl 26 which became effective on October 1, 2011. In accordance with Health and Safety code 3417S(b), on February 1, 2012, all housing assets, liabilities and fund balance of the Agency were transferred to the Authority as the Successor Ag~ncy to the_ Poway Redevelopment Agency. The Authority meets the criteria set forth in U.S. GAAP for;inclus.ion as a blended ~omponent unit withi~ the City reporting entity based on the City's oversight responsibHity in selection of the governing board. In addition, all of the Authority's activities are conducted within t~e geographic bounda_ries ofthe City. Blended component units, although legally separate entities, are, in . substance, part of the City's operations; therefore, data from these units are combined with data of the primary government in the financial. statement presentation of the City. Only the funds of the -Authority are indude9 herein; therefore, these financial statements do not purport to represent the-. financial position or, results of operations of the City. 8. Basis of Accounting/Measurement Focus The accounts of the.Authority are organized on the basis ofJunds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred_ inflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are a-llocated to and accounted for in individual funds based up_on the purposes for which they are to be spent and the means bywhich spending activities are controlled. 22 of 35 11 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Vear Ended June 30, 2019 Note 1-Summary of Significant Accounting Policies (Continued) Government-Wide Financial Statements The Authority's Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of governmental activities for the Authority. These basic financial statements are presented on an /;economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the Authority's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses·.are recognized in the,period inwhich the liability is incurred. Certain types of transactio_ns are reported as program revenues for the Authority in three categories: • Charges for services • Operating grants and contributions • Capital grants and contributions Governmental Fund Financial Statements Governmental fund financial-,statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for the governmental fund; An accompanying schedule is presented to· reconcile and explain the differences in fund balance as presented in these statements to the net position presented in the Government-Wide Financial Statements. All governmental funds are accounted for on a spending or "current financial resources/I.measurement focus and the modified accrual basis ofaccounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balance presents increases (revenues and other financing sources} and decreases (expenditures and other financing uses} in net current assets. Under modified accrual basis of accounting, revenues are recognized in ttie accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end} are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the Authority, are property tax, and intergovernmental revenues. Expenditures are recorded in the accounting period inwhich the related fund liability is incurred. 23 of 35 12 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements YearEndedJune30,2019 Note 1-Summary of Significant Accounting Policies (Continued) Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unearned revenue is removed from the balance sheet and revenue is recognized. The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of generally accepted accounting principles. · · -Fund Accounting The Authority uses funds to maintain its fjnancial records during -~he year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. The Authority only has one governmental fund. Govern"?ental Fund Housing Authority Fund -The Housing Authority Fund is the Authority's operating fund. It accounts for all financial resources of the general government. C. Cash and lnves(ments The Authority's cash and investment balances are included in the City's investment pool. The City pools cash resources from all City funds in order to facilitate the management of cash and achieve the goal of obtaining the highest yield with the greatest safety and least risk. The balance in the pooled cash account is available to meet current operating requirements. Cash in excess of current requirements is invested in various interest-bearing accounts and other investments for varying terms. Investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The City participates in an investment pool managed by the State. of California titled Local Agency Investment Fund ("LAIF")which has invested a portion of the. pool funds in structured notes and asset-backed securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. LAIF investme-nts are subject to credit risk with t~e foll faith and credit of the State of California collateralizing these investments. In addition, these investments are subject to market risk and changes in interest rates. Cash equivalents_ are considered amounts in demand deposits and short-term investments with a maturity date within_ three months of the date acquired by the Authority and are presented as "Cash and investments" in the accompanying basic financial statements. 24 of 35 13 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Vear Ended June 30, 2019 Note 1-Reporting Entity and Summary of Significant Accounting Policies (Continued) D. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, streets, sidewalks, medians and storm drains) are reported in the Government-Wide Financial Statements. Authority policy has set the capitalization threshold for reporting capital assets at $5,000. Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated assets are valued at their estimated acquisition value on the date donated. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Buildings Building imp-rovements Furniture and equipment Infrastructure 10-50 years -· 10-100 yea rs 5-20 years 20-50 years E. Deferred Outflows/In/lows of Resources In addition to assets, the·balance sheet will sometimes report a separate section for-deferred outflows of resources. This separate. finandal statement element, deferred outflows of resources, .represents a consumption offund balance that applies to future periods and so will not be recognized as an outflow of resources (expenditure) until then. The Authority currently has no items that qualify for reporting in this catego_ry. In addition to liabilities, the balance sheet will sometimes report a separc1te section for deferred inflows of _resources. This separate financial element, deferred inflows of resources, represents an acquisition of fund balance that applies to-future periods and so will not be recognized as an inflow of resources (revenue) until that time. The Authority currently has no items that quaJify for reporting in this category. F. Net Position Net position is comprised of the various net earnings from operating income, non-operating revenues and expenses. Netposition is classified in the following categories: Net Investment in Capital Assets -This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted -This component of net position consists of restricted assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted -This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the Authority's policy is to apply restricted net position first. 25 of 35 14 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Vear Ended June 30, 2019 Note 1-Summary of Significant Accounting Policies (Continued) G. Fund Balances In the governmental fund financial statements, fund balances are classified in the following categories: Nonspendable -Nonspendable fund balances are items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds. Restricted -Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributions, laws or regulations of other governments, as well as restrictions imposed by law t~rough constitutional provisions or enabling legislation. Committed---, Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body through council resolutions, etc., and that remain binding unless removed in the same manner. The Board of Commissioners is considered-the highest authority for the Authority. Assigned -Assigned fund balances encompass the portion of net fund resources reflecting the government's intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The Board of Commissioners has authorized the Executive Dir_ector for that purpose. Unassigned -This category is for any remaining balances that are not classified as nonspendable, restricted, committed or assigned. When expenditures are incurre_d for purposes for which both restricted and unrestricted fund balances are available, the Authority's policy is to apply restricted fund balances first, then unrestricted fund balances as they are needed. When expenditures are incurred for purposes where only unrestricted fund balances are available, the Authority uses the unrestricted resources in the following order: committed, assigned, and unassigned. H. Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 26 of 35 15 April 7, 2020, Item #2
Note 2 -Cash and Investments POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Year Ended June 30, 2019 Equity in Cash and Investment Pool of the City of Poway The Authority does not have a separate bank account; however, the Authority's cash and investments are maintained in an investment pool managed by the City. The Authority is a voluntary participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Authority has not adopted an investment policy separate from that of the City. The fair value of the Authority's:-investme11t in this pool is reported in the accompanying financial statements at amounts based upon the. Authority's pro-rata share of the fair value calculated by the City for the entire City portfolio. The balance available for withdrawal is based on the accounting records maintained by the City, which are recorded on an original cost basis. At June 30, 2019, the Authority had a cash balance of $1,601,381. Note 3 -Capital Assets The summary of changes in capital assets for the year ended June 30, 2019 is as follows: Capital assets, not being ·depreciated: Land Total capital assets, not being depreciated. Governmental activities -capital · assets Note 4 -Related Party Transactions. Balance. Balance June 30, 2018 Additions Deletions June 30, 2019 $18,582,674 18,582,674 18,582,674 18,582,674 $18,582,674 18,582,674 In an effort to ensure that the objectives of Poway's Redevelopment Plan and the Poway Redevelopment Agency's (Agency) 5-Year Implementation Plan are fulfilled, on March 11, 2011, the Agency transferred all housing-related assets to the Authority through a Cooperation. Agreement between the Agency and the Authority. Under the terms of this agreement, the Authority agreed to respectively carry out the projects and activities of the Agency in accordance with the objectives and purposes included in -the Redevelopment and Implementation Plans. Projects included in the Cooperation Agreement between the Agency and the Authority further the goals of the Redevelopment Plan. It was initially anticipated that these projects would be funded based on available tax increment to be received through 2037, but because of the dissolution of the Agency under AB Xl 26, tax increment revenue has been eliminated, and therefore, no funding for these projects from that source is available. Future project funding will come from the management of the Authority's assets and may include interest revenue, lease revenue, residual receipt revenue and the sale of assets. 27 of 35 16 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Notes to Basic Financial Statements Year Ended June 30, 2019 Note 5 -Rehabilitation Loan Program Housing Rehabilitation Loan Program Non-forgivable loans are due upon the sale, transfer or foreclosure of the property. Due to the contingent repayment schedule of these loans, an expenditure is recorded when the loan is made, and no receivable is included in the accompanying basic financial statements. The balance of the non-forgivable rehabilitation loans at June 30, 2019 is $7,870. Affordable Housing Loans These loans are made to aid in the purchase of affordable housing in the City of Poway. They are for a 45 year term with no interest and if there is a sale, transfer, or foreclosure before the end of the term, the loan must be assumed by an income-qualified buyer and the 45 year term starts over. Due to the contingent nature of the repayment schedule of these loans, an expenditure is recorded when the loan is made, and no receivable is included in the accompanying basic financial statements. The balance of these Affordable Housing loans at June 30, 2019 is $2,690,132. Development Loans The City, through the Housing Authority, has development loans primarily for affordable rental housing projects and for one group home for the developmentally disabled. The affordable rental housing loans have 55 year terms with three percent simple interest. Loan payments are made from residual receipts and generally do not cover the annual accrued interest. Therefore, due to the contingent nature of the repayment schedule of these loans, an expenditure is recorded when the loan is made, and no receivable is included in the accompanying basic financial statements. The balance of the development loans, including accrued interest, at June 30, 2019 is $37,352,834. 28 of 35 17 April 7, 2020, Item #2
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Required Supplementary Information 30 of 35 19 April 7, 2020, Item #2
REVENUES Charges for services $ Investment income Other revenues Total revenues EXPENDITURES Current: General government Development services Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balance $ Fund balance, beginning of year Fund balance, end of year 31 of 35 POWAY HOUSING AUTHORITY Budgetary Comparison Schedule Year Ended June 30, 2019 Budget Amounts Original Final 61,640 61,640 40,070 40,070 40,000 40,000 141,710 141,710 7,700 17,704 130,000 943,110 . 137,700 960,814 4,010 (819,104) 4,010 (819,104) 20 Actual Variance with Amounts Final Budget 48,259 (13,381) 84,350 44,280 67,871 27,871 200,480 58,770 8,161 9,543 764,063 179,047 .· 772,224 188,590 (571,744) 247,360 (571,744) 247,360 2,771,448 $ 2,199,704 April 7, 2020, Item #2
POWAY HOUSING AUTHORITY Note to Budgetary Comparison Schedule YearEndedJune3~2019 Note 1-Budgetary Information The Authority adopts an annual budget prepared on the modified accrual basis for its major fund. The Executive Director is required to prepare and submit to the Authority's Board of Directors the annual budget of the Authority and administer it after adoption. Any revisions that alter the total appropriations of any fund must be approved by the Board of Directors. Prior year appropriations lapse unless they are encumbered at year-end or re-appropriated through the formal budget process. For the major fund, total expenditures may not legally exceed total appropriations. Budget information is presented for the major fund on a basis consistent with generally accepted accounting principles. Budgeted revenue and expenditure amounts represent the original budget modified for adj~stments .during the year. 32 of 35 21 April 7, 2020, Item #2
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Poway Housing Authority City of Poway Poway, California INDEPENDENT AUDITOR'S REPORT Davis Farr LLP 2301 Dupont Ori e I Suite 200 I Irvine. CA 92612 Main: 949.474.2020 I Fox: 949.263.5520 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 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 finc1ncial statements of the governmental activities, and the major fund of the Housing Authority of the City of Poway (Authority), a component unit of the City of Poway (City) as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Authority's basic financial statements, and have issued our report tbereon dated December 31, 2019. Internal Control pver Financial Reporting In planning and performing our aud_it of the financial 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 materialweakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts; and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement 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. 34 of 35 23 April 7, 2020, Item #2
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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Irvine, California December 31, 2019 35 of 35 April 7, 2020, Item #2