Summa ry of Comme nts Inte r fund L oans E xplaine d Se we r F - PowerPoint PPT Presentation

Summa ry of Comme nts • Inte r fund L oans E xplaine d • Se we r F und Inte r fund L oans • 2009 Se we r Re ve nue Bonds Rive r side Ca.gov

Inte rfund L oa ns E xpla ine d Rive r side Ca.gov

Purpose of Inte rfund L oa ns T he City ha s ma de inte rfund lo a ns fo r de c a de s • – L o a ns in a ntic ipa tio n o f upc o ming b o nd issue s in o rde r to sta rt pro je c ts – L o a ns fo r pro je c ts o f a sma ll size T he se lo a ns a re a c o mmo n pra c tic e in munic ipa l g o ve rnme nt • T ypic a l lo a n te rms a re sho rte r tha n tra ditio na l fina nc ing s a nd in • the ra ng e o f 5-10 ye a rs o r le ss, ve rsus 20-30 ye a rs fo r b o nd fina nc ing s L o a ns a re ma de fro m a va rie ty o f funds, b ut prima rily fro m the • City’ s utility funds a nd inte rna l se rvic e insura nc e trust funds L oa ns a re only ma de from a va ila ble c a sh re se rve s • Rive r side Ca.gov

Ca sh Re se rve s a nd Ra te s T he City’ s utility funds a nd inte rna l se rvic e funds ha ve histo ric a lly • he ld siza b le c a sh re se rve s Ca sh re se rve s a re a n impo rta nt pa rt o f the se funds’ so und • fina nc ia l ma na g e me nt a nd lo ng -te rm fisc a l he a lth Ca sh re se rve s a re a c c umula te d fo r purpo se s o the r tha n to fund • o ng o ing o pe ra tio ns – Utility c a sh re se rve s pro te c t a g a inst a se rio us na tura l disa ste r o r o the r una ntic ipa te d e ve nt Utilizing c a sh re se rve s to ma ke inte rfund loa ns in no wa y • inc re a se s utility ra te s or e nc umbe rs funds tha t c ould othe rwise be use d for ope ra tions Rive r side Ca.gov

Inte rfund L oa n Inte re st E a rning s • T he inte re st ra te c ha rg e d fo r inte rfund lo a ns is se t a nnua lly b a se d o n the a ve ra g e e a rning s o f the City’ s inve stme nt po rtfo lio during the pre vio us 12 mo nths • L e nding funds the re fo re re c e ive the sa me inte re st the y wo uld ha ve re c e ive d if the ir re se rve c a sh ha d b e e n inve ste d in the City’ s inve stme nt po o l • I nte rfund lo a ns pro vide a c o st-e ffe c tive me a ns o f b o rro wing tha t sa ve s the City mo ne y (the c urre nt inte rfund lo a n ra te is le ss tha n 1% ve rsus ra te s in the ra ng e o f 2% - 4% fo r e xte rna l fina nc ing ) • F le xib ility is ma inta ine d to mo ve lo a ns b e twe e n funds if the le nding fund ne e ds a c c e ss to its c a sh re se rve s Rive r side Ca.gov

Inte rfund L oa n T e rminolog y T he re ha s b e e n c o nfusio n re g a rding inte rfund lo a n-re la te d • te rmino lo g y I nte rfund lo a ns a nd inte rfund a dva nc e s ha ve b e e n de sc rib e d b y • me mb e rs o f the pub lic a s two diffe re nt thing s a nd it ha s b e e n implie d tha t a dva nc e s re ma in o utsta nding tha t the City is no t disc ussing T he r e is no diffe r e nc e be twe e n a n a dva nc e a nd a loa n – – Ac c o unting rule s re q uire sta nda rdize d la ng ua g e fo r a mo unts due to o r fro m o the r funds (“Adva nc e s T o ” o r “Adva nc e s F ro m”) in the City’ s fina nc ia l sta te me nts – “I nte rfund lo a n” is the F ina nc e De pa rtme nt’ s te rmino lo g y to re fe r to the se a dva nc e s a s it is a mo re de sc riptive te rm E ve r y loan/ advanc e e ve r made by the Se we r F und has be e n paid in full, – with inte r e st, othe r than thr e e outstanding loans still r e fle c te d in the City’s financ ial state me nts (de tails to follow) Rive r side Ca.gov

Inte r fund L oan T e r minology and Doc ume nts T he re ha s b e e n a dditio na l c o nfusio n re g a rding “inte rfund” • ve rsus “inte ra g e nc y” lo a ns – Ac c o unting rule s re q uire inte rfund lo a ns b e twe e n the City a nd se pa ra te le g a l e ntitie s suc h a s the Suc c e sso r Ag e nc y to b e c la ssifie d diffe re ntly – Ho we ve r, the a c c o unting e ntrie s a re ide ntic a l a nd e ithe r type o f lo a n is re fe rre d to a s a n “inte rfund lo a n” T he re ha s a lso b e e n c o nfusio n re g a rding why so me lo a ns ha ve • e xe c ute d lo a n do c ume nts a nd o the rs do no t – T he City e xe c ute s lo a n do c ume nts fo r lo a ns fro m the City to se pa ra te le g a l e ntitie s suc h a s the Suc c e sso r Ag e nc y – T he City do e s no t e xe c ute lo a n do c ume nts fo r lo a ns b e twe e n two City funds b e c a use b o th funds a re within the sa me le g a l e ntity – A lo a n a g re e me nt is the re fo re unne c e ssa ry Rive r side Ca.gov

Inte rfund L oa n Ac c ounting • De ta ile d re c o rds a re ke pt in the City’ s fina nc ia l syste m o f a ll inte rfund lo a ns • I nte rfund lo a ns a re fully disc lo se d to a nd disc usse d with the b o nd ra ting a g e nc ie s • L o a n tra nsa c tio ns a re a udite d b y the City’ s e xte rna l a udito rs a nnua lly • T he City ha s a writte n inte rfund lo a n po lic y Rive r side Ca.gov

Inte r fund L oan Inte r e st Capitalization • A fe w inte rfund lo a ns ha ve b e e n ma de re q uiring no pa yme nts until the lo a n is due • Whe n lo a ns ha ve this pro visio n, a c c o unting rule s re q uire tha t inte re st b e “c a pita lize d” a nnua lly, me a ning tha t the inte re st due e a c h June 30 th is a dde d to the princ ipa l b a la nc e o f the lo a n • T he a c c o unting e ntrie s re c o rding the se tra nsa c tio ns a re c o mplic a te d a nd c a n g ive the a ppe a ra nc e o f the fund pa ying itse lf inte re st, b ut the y a re o nly re c o rding the la rg e r b a la nc e due fro m the b o rro wing fund Rive r side Ca.gov

Se we r F und Inte rfund L oa ns Rive r side Ca.gov

Se we r F und L e nding Ca pa c ity Re fe re nc e ha s b e e n ma de to “$200 millio n o f a dva nc e s” b e ing ma de • fro m the Se we r F und a nd no t re pa id – T he Se we r F und ha s ne ve r ha d the re so urc e s to ma ke lo a ns in tha t ma g nitude , a nd ha s o nly b e e n a b le to ma ke the to ta l a mo unt o f lo a ns it ha s b e c a use e a rlie r lo a ns we re re pa id – T he Se we r F und c a sh re se rve is c urre ntly a ppro xima te ly $42 millio n a nd ha s no t e xc e e de d $77 millio n in the pa st de c a de I t ha s a lso b e e n sug g e ste d tha t b o nd pro c e e ds we re “a dva nc e d” to • o the r funds fo r unre la te d pro je c ts – Bo nd pro c e e ds a re he ld b y a truste e a nd c a n no t b e lo a ne d to a no the r fund o r spe nt o n pro je c ts o utside the Se we r F und – Bo nd pro c e e ds a re re le a se d to the City upo n the City pro viding de ta ile d re c o rds to the truste e de mo nstra ting tha t the City ha s e xpe nde d funds fo r e lig ib le Se we r F und pro je c ts Rive r side Ca.gov

Histor ic al Se we r F und Inte r fund L oans Ove r the past 10 ye ars, the Se we r F und has loane d a • total of $87,351,434, of whic h $11,973,136 is outstanding • T he o utsta nding b a la nc e o f inte rfund lo a ns ha s ne ve r e xc e e de d $54 millio n a nd ha s ne ve r e xc e e de d $33 millio n o the r tha n b rie fly during fisc a l ye a r 2006/ 07 • T he o utsta nding lo a n b a la nc e wa s $0 in 2008, whe n the Se we r F und’ s c a sh wa s re q uire d to pa y o ff the 1993 Se we r Re ve nue Bo nds a nd fund pro je c ts in a ntic ipa tio n o f issuing the 2009 Se we r Re ve nue Bo nds • As o f June 30, 2013, the Se we r F und he ld a b a la nc e o f $11,973,136 o f inte rfund lo a ns, a n a mo unt tha t ha s de c line d ste a dily sinc e 2010 Rive r side Ca.gov

Histor ic al Se we r F und Cash Balanc e s • T he ta b le b e lo w illustra te s a nnua l inte rfund lo a n b a la nc e s a s c o mpa re d to to ta l c a sh re se rve s a va ila b le in the Se we r F und Fiscal Year Ending Total Cash Less: Loans Cash Not Loaned 6/30/2004 $ 76,790,000 $ 7,731,000 $ 69,059,000 6/30/2005 69,522,000 10,728,000 58,794,000 6/30/2006 65,224,000 32,810,000 32,414,000 6/30/2007 56,106,000 22,104,000 34,002,000 6/30/2008 43,603,000 -- 43,603,000 6/30/2009 12,056,000 10,018,000 2,038,000 6/30/2010 28,265,000 20,554,000 7,711,000 6/30/2011 36,159,000 18,439,000 17,720,000 6/30/2012 36,093,000 12,196,000 23,897,000 6/30/2013 42,141,000 11,973,000 30,168,000 Rive r side Ca.gov

Spe c ific Se we r F und L oan T r ansac tions Ove r the pa st 10 ye a rs, the Se we r F und ha s e nte re d into 28 • inte rfund lo a n tra nsa c tio ns – 10 sho rt-te rm lo a ns to the Re de ve lo pme nt Ag e nc y in a ntic ipa tio n o f issua nc e o f the 2007 RDA ta x a llo c a tio n b o nds tha t we re ma de a nd pa id within fisc a l ye a r 2006/ 07 • L o a ns we re pa id in full b e fo re the e nd o f the fisc a l ye a r a nd a s a re sult we re ne ve r a ssig ne d a lo a n numb e r o r re c o rde d in the City’ s inte rfund lo a n re c o rds • I nte re st wa s pa id in full – 18 tra ditio na l, multi-ye a r inte rfund lo a ns • 9 lo a ns to the Re de ve lo pme nt Ag e nc y (8 pa id in full) • 5 lo a ns to the Ge ne ra l F und (4 pa id in full) • 4 lo a ns to o the r City funds (3 pa id in full) All but 3 loa ns ha ve be e n pa id in full with inte re st • Rive r side Ca.gov