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City of San Leandro <br />Notes to Basic Financial Statements <br />For the year ended June 30, 2013 <br />NOTE 17 — SUCCESSOR AGENCY ACTIVITIES (Continued) <br />LMIHF Balance / Housing Due Diligence Review: <br />Pursuant to Health and Safety Code Section 34179.6 (c), the San Leandro Successor Agency submitted an <br />Oversight Board approved Low and Moderate Income Housing Fund (LMIHF) Due Diligence Review <br />(DDR) to the California Department of Finance (DOF) on October 12, 2012. The DDR found that the <br />City, in its capacity as Housing Successor maintains a LMIHF balance of $3,923,774 and that those funds <br />are fully encumbered through an Owner Participation Loan Agreement with Alameda Housing <br />Associates. That Agreement, executed in April 2009, pledged $9.1million in former Redevelopment <br />Agency funds to the completion of The Alameda, an affordable housing project in Downtown San <br />Leandro. The DOF indicated in a November 7, 2012 letter that the Housing Successor is required to remit <br />the entirety of the LMIHF balance to the Alameda County Auditor -Controller for redistribution to the <br />taxing entities. This finding was based on a DOF determination from October 19, 2012 that the Alameda <br />Housing Associates agreement does not constitute an enforceable obligation of the former Redevelopment <br />Agency. The Successor Agency disagrees with this determination and has requested a meet -and -confer <br />process with the DOF. No funds are required to be remitted pending the results of the meet and confer <br />process. The Successor Agency initiated litigation to challenge the DOF determination and ultimately <br />reached a favorable settlement. The DOF ultimately issued a letter on July 11, 2013 which recognized the <br />validity of this obligation and allowing the Successor Agency to use the $3.9 million balance for its <br />intended purpose of supporting the loan agreement. The Successor Agency will need to fund the <br />remainder of the loan agreement using approximately $3 million for the Redevelopment Property Tax <br />Trust Fund (RPTTF). Those expenditures have been approved by the DOF on the most recent Successor <br />Agency ROPS submittals and all funds are expected to be on hand by January 2014. <br />C. Capital Assets <br />The Successor Agency assumed the capital assets of the former Redevelopment Agency as of February <br />1, 2012. All capital assets are valued at historical cost or estimated historical cost if actual historical <br />cost is not available. Contributed capital assets are valued at their estimated fair market value on the <br />date contributed. The Successor Agency's policy is to capitalize all assets with costs exceeding certain <br />minimum thresholds and with useful lives exceeding two years. <br />All capital assets with limited useful lives are depreciated over their estimated useful lives. The <br />purpose of depreciation is to spread the cost of capital assets equitably among all users over the life <br />of these assets. The amount charged to depreciation expense each year represents that year's pro rata <br />share of the cost of capital assets. <br />Depreciation of all capital assets is charged as an expense against operations each year and the total <br />amount of depreciation taken over the years, called accumulated depreciation, is reported on the <br />balance sheet as a reduction in the book value of capital assets. <br />81 <br />