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CITY OF SAN LEANDRO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />For The Year Ended June 30, 2016 <br /> <br /> <br />NOTE 16 – SUCCESSOR AGENCY ACTIVITIES (Continued) <br /> <br />Joint Project Area General Fund Loan: <br />On February 1, 2012, the date the former San Leandro Redevelopment Agency was dissolved, the Agency <br />owed the City of San Leandro a balance of $2,040,767 on a loan made to the City of San Leandro – <br />Alameda County (Joint) Redevelopment Project Area. The loan had an initial balance of $4,372,774 and <br />was secured by a Promissory Note executed on April 8, 2004. The balance due was included as an <br />enforceable obligation on the Successor Agency’s Enforceable Obligation Payment Schedule (EOPS) and <br />each subsequent Recognized Obligation Payment Schedule (ROPS). On April 11, 2012 the California <br />Department of Finance (DOF) informed the Successor Agency of its objection to this item, citing a <br />prohibition on agreements between RDA’s and their sponsoring cities. On May 10, 2012 the Successor <br />Agency Oversight Board approved, by resolution, an Amended and Restated Promissory Note under the <br />authority provided under California Health and Safety Code Section 34781 (a). Nevertheless, the <br />DOF subsequently denied this loan. <br /> <br />The Successor Agency pursued litigation and a ruling issued by the Superior Court of California on <br />September 23, 2014 sided with the City on this issue, agreeing that the amount owed constitutes a <br />legitimate enforceable obligation that can be listed on the ROPS. While an appeal was pending, the City <br />and the Department of Finance agreed to abide by the initial court ruling. In a May 14, 2015 letter, the <br />Department of Finance stated that it will no longer deny this loan on the ROPS. All but one of the loan <br />payments are already due and payable, therefore the Successor Agency requested $1,782,444 in funding <br />for payments due under this loan on the ROPS for January through June 2016, which was then remitted to <br />the City. The remaining balance of $432,632 was requested on the ROPS for July 2016 through June <br />2017. <br /> <br />C. Capital Assets <br /> <br />The Successor Agency assumed the capital assets of the former Redevelopment Agency as of February 1, <br />2012. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is <br />not available. Contributed capital assets are valued at their estimated fair market value on the date <br />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 /> <br />All capital assets with limited useful lives are depreciated over their estimated useful lives. The purpose <br />of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. <br />The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of <br />capital assets. <br /> <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 balance <br />sheet as a reduction in the book value of capital assets. <br /> <br />84