FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION New York City Industrial Development Agency _part2 ppt

9 New York City Industrial Development Agency (a component unit of The City of New York) Statements of Cash Flows Year Ended June 30 2010 2009 Cash flows from operating activities Financing and other fees $ 3,251,538 $ 4,376,860 Other income 4,786,139 879,680 Management fees paid (6,052,117) (6,052,117) Consulting fees paid (530) (25,000) Accounting fees paid (19,000) _ Public hearing fees paid (68,385) (85,838) Marketing fees paid (36,701) – Legal fees paid – (168,605) Other 2,382,739 – Miscellaneous expenses paid (4,897) (275) N et cash provided by (used in) operating activities 4,238,786 (1,075,295) Cash flows from investing activities Sale of investments 616,755,225 271,163,853 Purchase of investments (403,163,987) (59,275,215) Investment income 3,968,505 13,415,226 Interest income 392,363 1,542,146 N et cash provided by investing activities 217,952,106 226,846,010 Cash flows from capital and related financing activities Interest payments on outstanding bonds (84,749,919) (70,419,743) Payments for construction in progress and other (192,307,851) (488,612,445) Bond principal redemption (25,790,000) – Swap payments received 2,712,678 7,034,870 Swap payments made (8,100,758) (7,951,271) Proceeds from issuances of bonds – 371,346,893 Payments for bond issuance costs – (39,465,052) Bond fees (1,860,887) – PILOT revenue 107,363,057 13,000,000 N et cash used in capital and related financing activities (202,733,680) (215,066,748) Cash flows from noncapital financing activities Special projects (3,813,957) (5,860,172) N et cash used in noncapital financing activities (3,813,957) (5,860,172) N et increase in cash and cash equivalents 15,643,255 4,843,795 Cash and cash equivalents at beginning of year 11,485,252 6,641,457 Cash and cash equivalents at end of year $ 27,128,507 $ 11,485,252 This is trial version www.adultpdf.com 10 New York City Industrial Development Agency (a component unit of The City of New York) Statements of Cash Flows (continued) Year Ended June 30 2010 2009 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities Operating income (loss) $ 1,706,434 $ (1,668,578) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Provision for bad debts – 47,417 Changes in operating assets and liabilities: Fees receivable 115,544 (165,927) Accounts payable and accrued expenses 100,370 745,642 Other liabilities 2,382,739 Deferred revenue (66,301) (33,849) N et cash provided by (used in) operating activities $ 4,238,786 $ (1,075,295) See accompanying notes. This is trial version www.adultpdf.com 11 New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements June 30, 2010 1. Background and Organization The New York City Industrial Development Agency (IDA or the Agency) is considered a component unit of The City of New York (the City) for financial reporting purposes of the City, and a public benefit corporation of the State of New York (the State). IDA was established in 1974 to actively promote, retain, attract, encourage and develop an economically sound commerce and industry base to prevent unemployment and economic deterioration in the City. The Agency assists industrial, commercial and not-for-profit organizations in obtaining long- term, low-cost financing for fixed assets through a financing transaction (the Financing Transaction), which includes the issuance of double and triple tax-exempt industrial development bonds (IDBs). The participating organizations (the Beneficiaries), in addition to satisfying legal requirements under the Agency’s governing laws, must meet certain economic development criteria, the most important of which is job creation and/or retention. In addition, the Agency assists participants who do not qualify for IDBs through a “straight lease” structure. The straight lease also provides tax benefits to the participants without having to issue IDBs or otherwise participate in the Beneficiary’s financing. Whether the Agency issues IDBs or merely enters into a straight lease, the Agency may provide one or more of the following tax benefits: exemption from mortgage recording tax; payments in lieu of real property taxes (PILOT) that are less than full taxes; and exemption from City and State sales and use taxes as applied to construction materials and machinery and equipment. When the Agency issues IDBs, the proceeds of the IDB financing are conveyed to an independent bond trustee for disbursement to the Beneficiary. The Beneficiary concurrently conveys the project or other collateral to the Agency for a nominal sum and the Agency in turn leases the property or other collateral back to the Beneficiary for a period concurrent with the maturity of the related IDB. Rental payments are calculated to be sufficient to meet the debt service obligation on the IDB (the Financing Lease). The Financing Lease includes a bargain purchase option, which allows the Beneficiary to repurchase the property for a nominal sum upon expiration of the Financing Lease and after satisfaction of all terms thereof. The IDBs are special nonrecourse conduit debt obligations of the Agency which are payable solely from the rents and revenues provided for in the Financing Lease to the Beneficiary. The IDBs are secured by a collateral interest in the Financing Lease, the Beneficiary’s project This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 12 1. Background and Organization (continued) property and leases and, in certain circumstances, by guarantees from the Beneficiary or from its principals or affiliates or other forms of additional security. Both the IDBs and certain provisions of the Financing Lease are administered by an independent bond trustee appointed by the Agency. Due to the fact that (1) the IDBs are nonrecourse conduit debt obligations to the Agency, (2) the Agency assigns its interest in the Financing Lease as collateral, and (3) since the Agency has no substantive obligations under the Financing Lease (other than to convey back the project property at the end of the IDB term, and to issue IDBs in those projects where subsequent issuance is contemplated), the Agency has, in effect, none of the risks and rewards of the Financing Lease and related IDB financing. Accordingly, with the exception of certain fees generated as a result of the Financing Transaction, the Financing Transaction is given no accounting recognition in the accompanying financial statements. In addition to IDB financing, the Agency also issued Tax Exempt PILOT Revenue Bonds, Taxable Rental Revenue Bonds, Taxable Installment Purchase Bonds and Taxable Lease Revenue Bonds in connection with the construction of the new Yankee Stadium and Citi Field (the “Stadium Projects”). Yankee Stadium, LLC, a Delaware limited liability company, and Queens Ballpark, LLC, a New York limited liability company, undertook the design, development, acquisition and construction of the Stadium Projects. The Taxable Bonds are special limited obligations of the Agency and are payable solely from revenues derived from a Lease Agreement with Yankee Stadium, LLC and a Lease Agreement and Installment Sales Agreement with Queens Ballpark Company, LLC and, accordingly, are given no accounting recognition in the accompanying financial statements. The Tax Exempt PILOT Bonds are special limited obligations of the Agency payable solely from PILOT Revenues derived from PILOTs made by Yankee Stadium, LLC and Queens Ballpark Company, LLC. However, since the Tax Exempt PILOT Bonds were issued to finance the construction of the Stadiums and because the Agency is the legal owner of the Stadiums, the Tax Exempt PILOT Bonds have been recorded in the Agency’s books and records. The Agency is governed by a Board of Directors, which establishes official policies and reviews and approves requests for financing assistance. Its membership is prescribed by statute and includes public officials and private business leaders. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 13 2. Summary of Significant Accounting Policies Basis of Presentation IDA is classified as an “enterprise fund,” as defined by the Governmental Accounting Standards Board (GASB), and, as such, the financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. In its accounting and financial reporting, the IDA follows the pronouncements of the GASB. In addition, IDA follows only the pronouncements of all applicable Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedure issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. The Agency uses financial derivative instruments to reduce financing costs in connection with the issuance of the Series 2006 Tax Exempt PILOT Bonds outstanding under the Yankee Stadium project. In June 2008, the GASB issued Government Accounting Standards (GAS) No. 53, Accounting and Financial Reporting for Derivative Instruments, which establishes accounting and reporting requirements for derivative instruments. The Agency adopted GAS 53 as of July 1, 2009. The adoption of GAS No. 53 did not have a significant impact on the Agency’s financial results as discussed further in Note 7. Cash Equivalents The Agency considers all highly liquid investments purchased with original maturities of 90 days or less to be cash equivalents. Revenue and Expense Classification Operating revenues consists of fee income from application fees, financing fees and compliance monitoring fees. Fees are recognized as earned. Compliance monitoring fees are received annually, in advance, and deferred and amortized into income as earned. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 14 2. Summary of Significant Accounting Policies (continued) Other operating income represents administrative fees and penalties associated with the recapture of IDA benefits remitted by certain beneficiaries. Recaptured IDA benefits represent the difference between the full tax amount and the PILOT amount remitted by the beneficiaries and result from a beneficiary’s violation of an IDA agreement covenant. Recaptured benefits are recorded as other liabilities until such time as they are disbursed to the City. IDA’s operating expenses include management fees and other administrative expenses. All other revenues and expenses not described above are considered nonoperating. Debt Issuance Costs, Bond Discount and Other Bond Related Costs Debt issuance costs are deferred and amortized over the life of the related bonds using a method approximating the effective interest method. Discount and premium on bonds are deferred and amortized to interest expense using a method approximating the effective interest method. Reclassifications Certain prior year amounts shown in the accompanying financial statements have been reclassed to conform to current year presentation. 3. Cash and Investments Cash At year-end, IDA’s bank balance was $4,229,092, $346,587 of which was covered by federal depository insurance (FDIC) and $3,882,505 was collateralized with securities held by the pledging financial institution in IDA’s name. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 15 3. Cash and Investments (continued) Investments As of June 30, 2010 and 2009, the Agency had the following investments. Investments maturities are shown for June 30, 2010 only ($ in thousands). 2010 Investment Maturities Fair Value (In Years) 2010 2009 Less Than 1 1 to 5 US Guaranteed Corporate Bonds $ 25,704 $ 23,278 $ 25,704 $ – Municipal Bonds 10,528 7,449 10,528 – Money Market & Mutual Funds – 7,158 – – Federal National Mort. Assn. Notes – 1,550 – – Federal Home Loan Mort. Corp Notes – 970 – – Certificates of Deposit 100 195 100 – Federal Home Loan Bank Notes 2,200 – 2,200 – Federal Farm Credit Bank Notes 464 – – 464 Portfolio Manager for Stadiums (Restricted) 102,216 323,882 36,253 65,963 Total 141,212 364,482 $ 74,785 $ 66,427 Less investments classified as cash equivalents and restricted investments (102,216) (333,560) Total investments $ 38,996 $ 30,922 IDA’s investment policy permits the Agency to invest in obligations of the United States of America or in obligations guaranteed by agencies of the United States of America where the payment of principal and interest are guaranteed by the United States of America as well as obligations of the State. FDIC created a Temporary Liquidity Guarantee Program (TLGP) to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured debt of banks, thrifts, and certain holdings companies, and by providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount. IDA’s investment in corporate bonds is 100% guaranteed under this program. All investments are carried at fair value based on quoted market prices. All investments are either insured or registered and held by the Agency or its agent in the Agency’s name. Interest Rate Risk: The Agency does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 16 3. Cash and Investments (continued) Credit Risk: It is the Agency’s policy to limit its investments in debt securities to obligations of the United States of America and obligations of the State of New York. As of June 30, 2010, the Agency’s investments in corporate bonds carry the explicit guarantee of the United States of America. The Agency’s investments in municipal bonds are obligations of New York State and were rated in the highest short-term category by at least two major rating agencies (A-1+ by Standard & Poor’s or MIG 1 by Moody’s). Money market and mutual funds are not rated. Custodial Credit Risk: For investments, custodial credit risk is the risk that in the event of the failure of the counterparty, the Agency will not be able to recover the value of its investments or collateral securities that are in the possession of the outside party. Investment securities are exposed to custodial credit risk if the securities are uninsured and are not registered in the name of the Agency. The Agency manages custodial credit risk by limiting its investments to highly rated institutions and/or requiring high quality collateral be held by the counterparty in the name of the Agency. Concentration of Credit Risk: The Agency places no limit on the amount the Agency may invest in any one issuer. The following table shows investments that represent 5% or more of total investments (dollars in thousands). Dollar Amount and Percentage of Total Investments Issuer June 30, 2010 June 30, 2009 Morgan Stanley $ 15,152 38.86% $ 15,421 49.87% General Electric 8,523 21.85% 5,797 18.75% Metropolitan Transit Authority 3,943 10.11% 4,093 13.23% Binghamton NY School District 2,367 6.07% – – Federal Home Loan Bank 2,200 5.64% – – Poughkeepsie City NY 2,187 5.61% – – JP Morgan Chase 2,029 5.20% 2,059 6.65% N YC Transitional Finance Authority – – 2,118 6.85% This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 17 3. Cash and Investments (continued) Restricted Cash and Investments- Stadium Projects Restricted cash and investments primarily represent bond proceeds specifically segregated and designated for the construction of the Stadium Projects. These investments are managed by an external investment portfolio manager. Under the Bond Agreements, the Agency does not have any obligation to make further contributions to the Stadium Construction Funds. Accordingly, the Agency’s financial responsibility will not exceed the amounts originally deposited in the managed investment portfolio. Therefore, the Agency’s obligation is not affected by various risks which include credit risk, interest rate risk and concentration of credit risk. In addition, the restricted investments are not required to be administered in accordance with the Agency’s or New York State investment guidelines. 4. Management Fees To support the activities of the Board of Directors, the Agency annually enters into a contract with the New York City Economic Development Corporation (EDC), a not-for-profit local development corporation and a component unit of The City of New York, organized to administer government financing programs which foster business expansion in the City. Under the terms set forth in the EDC and IDA Agreement, EDC is to provide IDA with all the professional, clerical and technical assistance it needs to accomplish its objectives. These services include comprehensive financial analyses, processing and presentation of projects to the Board of Directors, and project compliance monitoring. The fixed annual fee for these services is based on an agreement between EDC and the Agency. Such fees amounted to $6,052,117 for the each of the years ended June 30, 2010 and 2009. 5. Deferred Revenues Deferred revenues consisted of the following: June 30 2010 2009 Compliance monitoring fees and other $ 529,336 $ 595,637 This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 18 6. Bonds Payable The changes in outstanding Series 2006 and Series 2009 Tax Exempt PILOT Bonds are summarized as follows (in thousands): Description Bonds Outstanding June 30, 2009 New Bond Issuances Matured/ Called/ Redeemed Bonds Outstanding June 30, 2010 Amount Due Within One Year Series 2006 PILOT Bonds, 3.6% to 5%, due 2046 $ 547,355 $ – $ 5,325 $ 542,030 $ 5,530 Series 2006 PILOT Revenue Bonds, 3.6% to 5%, due 2046 744,435 – 19,905 724,530 11,195 Series 2006 CPI Bonds, 3.2% to 3.5%, due 2027 198,120 – – 198,120 – Series 2009 PILOT Bonds, 4.0% to 6.50%, due 2046 82,280 – 560 81,720 680 Series 2009 Capital Appreciation Bonds, 4.03% to 7.90%, due 2047 67,040 – – 67,040 1,589 Series 2009 Current Interest Term Bonds, 7.00%, due 2049 191,960 – – 191,960 – Total 1,831,190 – $ 25,790 1,805,400 $ 18,994 N et premium (discount) 69,105 – 66,377 Bonds payable, net $ 1,900,295 $ – $ 1,871,777 Description Bonds Outstanding June 30, 2008 New Bond Issuances Matured/ Called/ Redeemed Bonds Outstanding June 30, 2009 Amount Due Within One Year Series 2006 PILOT Bonds, 3.6% to 5%, due 2046 $ 547,355 $ – $ – $ 547,355 $ 5,325 Series 2006 PILOT Revenue Bonds, 3.6% to 5%, due 2046 744,435 – – 744,435 19,905 Series 2006 CPI Bonds, 3.2% to 3.5%, due 2027 198,120 – – 198,120 – Series 2009 PILOT Bonds, 4.0% to 6.50%, due 2046 – 82,280 – 82,280 560 Series 2009 Capital Appreciation Bonds, 4.03% to 7.90%, due 2047 – 67,040 – 67,040 – Series 2009 Current Interest Term Bonds, 7.00%, due 2049 – 191,960 – 191,960 – Total 1,489,910 341,280 $ – 1,831,190 $ 25,790 N et premium (discount) 41,143 30,067 69,105 Bonds payable, net $ 1,531,053 $ 371,347 $ 1,900,295 This is trial version www.adultpdf.com . 11 New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements June 30, 2010 1. Background and Organization The New York City Industrial. version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 12 1. Background and Organization. advance, and deferred and amortized into income as earned. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial