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<br /> <br />Review Draft 6/18/2013 5:11:57 PM <br /> <br />As of June 30, 2012, the Successor Agency reported a $2 million advance to the City for Joint <br />Project Area General Fund Loan approved by the Redevelopment Agency prior to dissolution. The <br />State Department of Finance (DOF) has objected to this advance and stated it does not believe the <br />Loan is an enforceable obligation. AB 1484 states that such liabilities are to be reamortized at an <br />interest rate equivalent to that earned on Local Agency Investment Fund assets. Management has <br />not reamoritzed this loan as it believes the Loan is a valid enforceable obligation. Management has <br />requested a meet and confer process with the DOF to settle the matter. <br /> <br />Pursuant to AB 1484, a Due Diligence Review was conducted on the former Redevelopment <br />Agency’s Low and Moderate Income Housing Assets. The DOF has objected to the treatment of an <br />Owner Participation Agreement as an enforceable obligation and requested that the City remit <br />approximately $3.9 million currently held in the Affordable Housing Asset Fund to the Alameda <br />County Auditor Controller. Management has requested a meet and confer process with the DOF to <br />settle the matter. <br /> <br />The City’s position on these matters is not a position of settled law and there is considerable legal <br />uncertainty regarding these matters. It is possible that a legal determination may be made at a later <br />date by an appropriate judicial authority that would resolve this issue favorably or unfavorably to <br />the City. No provision for liabilities resulting from the outcome of these uncertain matters has been <br />recorded in the accompanying financial statements. <br /> <br />Estimates: Accounting estimates are an integral part of the financial statements prepared by <br />management and are based on management’s current judgments. Those judgments are normally <br />based on knowledge and experience about past and current events and assumptions about future <br />events. Certain accounting estimates are particularly sensitive because of their significance to the <br />financial statements and because of the possibility that future events affecting them may differ <br />markedly from management’s current judgments. The most sensitive accounting estimates <br />affecting the financial statements are fair values of investments and depreciation of capital assets. <br /> <br />• Estimated Fair Value of Investments (Note 2 to the financial statements) -As of June 30, <br />2012, the City, held approximately $96.6 million of cash and investments as measured by <br />fair value. Fair value is essentially market pricing in effect as of June 30, 2012. These <br />fair values are not required to be adjusted for changes in general market conditions <br />occurring subsequent to June 30, 2012. <br /> <br />Management’s estimate of depreciation is based on useful lives determined by management. <br />These lives have been determined by management based on the expected useful life of assets as <br />disclosed in Note 1H to the financial statements. We evaluated the key factors and assumptions <br />used to develop the depreciation estimate and determined that it is reasonable in relation to the <br />basic financial statements taken as a whole. <br /> <br />Disagreements with Management: For purposes of this letter, professional standards define a <br />disagreement with management as a matter, whether or not resolved to our satisfaction, <br />concerning a financial accounting, reporting, or auditing matter that could be significant to the <br />City’s financial statements or the auditor’s report. No such disagreements arose during the course <br />of the audit. <br /> <br />Management informed us that, and to our knowledge, there were no consultations with other <br />accountants regarding auditing and accounting matters. <br />