Washington State Auditor’s Office

Financial Statements Audit Report

Downtown Redevelopment Authority
Clark County
Audit Period January 1, 2008 through December 31, 2008 Report No. 1001890

Issue Date August 10, 2009

Washington State Auditor Brian Sonntag

August 10, 2009 Board of Directors Downtown Redevelopment Authority Vancouver, Washington

Report on Financial Statements
Please find attached our report on the Downtown Redevelopment Authority’s financial statements. We are issuing this report in order to provide information on the Authority’s financial condition. Sincerely,

BRIAN SONNTAG, CGFM STATE AUDITOR

........................................... 2008 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ........ 2008 through December 31................................................................................................................................................................. 3 Financial Section.......................................... 1 Independent Auditor’s Report on Financial Statements ............... 5 ........................Table of Contents Downtown Redevelopment Authority Clark County January 1..............

Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards Downtown Redevelopment Authority Clark County January 1. Washington. authorize. to prevent or detect misstatements on a timely basis. Our report was modified to include a reference to other auditors. Accordingly. issued by the Comptroller General of the United States. 2008. as of and for the year ended December 31. in the normal course of performing their assigned functions. 2008 through December 31. Clark County. Those financial statements were not audited in accordance with Government Auditing Standards. but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over financial reporting. we do not express an opinion on the effectiveness of the Authority’s internal control over financial reporting. and have issued our report thereon dated July 16. process or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Authority's financial statements that is more than inconsequential will not be prevented or detected by the Authority's internal control. as described in our report on the Authority’s financial statements. record. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in Government Auditing Standards. 2009. _________________________________________________________________________________________________________ Washington State Auditor's Office 1 . we considered the Authority’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements. Other auditors audited the financial statements of the Vancouver Hotel and Convention Center Project. 2008 Board of Directors Downtown Redevelopment Authority Vancouver. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit. Washington We have audited the basic financial statements of the Downtown Redevelopment Authority. that adversely affects the Authority's ability to initiate. A significant deficiency is a control deficiency. A control deficiency exists when the design or operation of a control does not allow management or employees. a component unit of the City of Vancouver. or combination of control deficiencies.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However. contracts and grant agreements. regulations. 2009 _________________________________________________________________________________________________________ Washington State Auditor's Office 2 . BRIAN SONNTAG. This report is intended for the information and use of management and the Board of Directors. that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control. or combination of significant deficiencies. we do not express such an opinion. and accordingly. this report is a matter of public record and its distribution is not limited.A material weakness is a significant deficiency. providing an opinion on compliance with those provisions was not an objective of our audit. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. as defined above. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the Authority’s financial statements are free of material misstatement. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However. we performed tests of the Authority’s compliance with certain provisions of laws. CGFM STATE AUDITOR July 16. noncompliance with which could have a direct and material effect on the determination of financial statement amounts.

of the assets. Those financial statements were audited by other auditors whose report thereon has been furnished to us. we have also issued our report on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws. and our opinion. evidence supporting the amounts and disclosures in the financial statements. Washington We have audited the accompanying basic financial statements of the Downtown Redevelopment Authority. contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing. issued by the Comptroller General of the United States. a component unit of the City of Vancouver. An audit also includes assessing the accounting principles used and significant estimates made by management. Clark County. operating revenue and operating expenses of the Authority. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Vancouver Hotel and Convention Center Project were not audited in accordance with Government Auditing Standards. as listed on page 5. and 86 percent respectively. is based on the report of the other auditors. 2008. as well as evaluating the overall financial statement presentation. Washington. as of and for the year ended December 31. 2. the financial statements referred to above present fairly.Independent Auditor’s Report on Financial Statements Downtown Redevelopment Authority Clark County January 1. as of December 31.6 percent. An audit includes examining. based on our audit and the report of the other auditors. These financial statements are the responsibility of the Authority’s management. insofar as it relates to the amounts included for the Vancouver Hotel and Convention Center Project. We did not audit the financial statements of the Vancouver Hotel and Convention Center Project which is included in the Authority’s financial information and which represents 1 percent. and not to provide _________________________________________________________________________________________________________ Washington State Auditor's Office 3 . the financial position of the Downtown Redevelopment Authority. 2008 Board of Directors Downtown Redevelopment Authority Vancouver. In our opinion. regulations. 2008. net assets. in all material respects. 2008 through December 31. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. on a test basis. 100 percent. In accordance with Government Auditing Standards. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinion. and the changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

we did not audit the information and express no opinion on it. 2009 _________________________________________________________________________________________________________ Washington State Auditor's Office 4 . CGFM STATE AUDITOR July 16. We and the other auditors have applied certain limited procedures. BRIAN SONNTAG. The management’s discussion and analysis on pages 6 through 10 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. However. which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information.an opinion on the internal control over financial reporting or on compliance.

2008 REQUIRED SUPPLEMENTAL INFORMATION Management’s Discussion and Analysis – 2008 BASIC FINANCIAL STATEMENTS Statement of Net Assets – 2008 Statement of Revenues. 2008 through December 31.Financial Section Downtown Redevelopment Authority Clark County January 1. and Changes in Net Assets – 2008 Statement of Cash Flows – 2008 Notes to Financial Statements – 2008 _________________________________________________________________________________________________________ Washington State Auditor's Office 5 . Expenses.

uses fund accounting for compliance with finance-related legal requirements.649. which is a 137% increase over last year. and a statement of cash flows. The Authority. the liabilities of the DRA exceeded its assets by $4. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the financial statements and notes to the financial statements (which immediately follow this discussion). Because the Authority is a specialpurpose government engaged only in business-type activities. The government's total net assets decreased by $1. This information will assist users in interpreting the basic financial statements. We will also provide other financial discussion and analysis of certain plans. Washington State Auditor's Office 6 . and trends necessary for understanding the full context of the financial condition of the Authority. expenses and changes in fund net assets. Basic Financial Statements The basic financial statements are comprised of two components: 1) enterprise fund financial statements. 2008. like other state and local governments. The purpose of the Authority is to provide oversight on the activities and operations of the Hotel/Convention Center and to approve its budget. only fund financial statements are presented as the basic financial statements. constructed and owned by the DRA.MANAGEMENT’S DISCUSSION AND ANALYSIS VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY (DRA) (A Component Unit of the City of Vancouver) For the Year Ended December 31. 2005. and 2) notes to the financial statements. Capital assets and related bond liabilities account for the bulk of total assets and total liabilities of the Authority. The majority of the Authority’s net assets are restricted by the bond indenture for capital purposes. a statement of revenues. Enterprise Fund Financial Statements A fund is a grouping of related accounts that are used to maintain control over resources that are segregated for specific activities or objectives.835 during 2008. opened its doors and commenced operations on June 15. FINANCIAL HIGHLIGHTS The Hotel/Convention Center. At December 31. 2008 Vancouver Downtown Redevelopment Authority’s (the “Authority” or “DRA”) discussion and analysis offers readers of the DRA’s financial statements a narrative overview and analysis of the Authority’s financial activities for the fiscal year ended December 31. The single fund of the DRA is reported as an enterprise fund. The Fiscal Year 2008 represents the third full year of operations of the Hotel/Convention Center.486 in 2008. projects. primarily as a result of depreciation of assets. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis provides an introduction and overview to the DRA’s basic financial statements.931.973. The results of the facility’s operations are presented in the DRA’s financial statements. The DRA is a special purpose business-type government. _________________________________________________________________________________________________________ . 2008. The Authority reported net operating income of $816. The financial statements consist of a statement of net assets.

with the difference between the two reported as net assets. similar to the method used by most privatesector companies. All changes in net assets are reported using the accrual basis of accounting. This statement serves a purpose similar to that of the balance sheet of a private-sector business. Washington State Auditor's Office 7 . Items such as unpaid vendor invoices for items received in 2008 and earned but unused vacation leave will be included in the statement of revenues. It classifies cash flows into four activities: 1) operating activities. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the fund statements. The principal operating revenues of the DRA are charges to customers for lodging. The statement of cash flows presents the cash and cash equivalent activity of the Authority. The notes to the financial statements can be found following the statement of cash flows. expenses and changes in fund net assets presents information showing how the Authority’s net assets changed during 2008. Over time. 2) non-capital financing activities. meals and banquet services.The statement of net assets presents information on all of the Authority’s assets and liabilities. The statement of revenues. Operating revenues and expenses result from providing services and producing and delivering goods in connection with the Authority’s principal ongoing operations. _________________________________________________________________________________________________________ . The DRA distinguishes between operating revenues and expenses from nonoperating ones. even though the cash associated with these items was not distributed in 2008. 3) capital and related financing activities and 4) investing activities. increases or decreases in net assets may serve as one indicator of whether the financial position of the DRA is improving or deteriorating. expenses and changes in net assets as an expense. The accrual basis of accounting requires that revenues are reported when they are earned and expenses are reported as soon as liabilities are incurred.

changes in net assets over time may serve as a useful indicator of a government's financial position.721.656 68.551. The following table reflects the condensed and comparative version of the Statement of Net Assets.476 (3.484.731 58.739.931. _________________________________________________________________________________________________________ .760 69. Expenses and Changes in Net Assets Key elements in the changes in net assets are discussed below.387 2.931. 2008 $ 10.314 Current and other assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Net assets Invested in capital assets.835. 2008.907 4.360 December 31. Expenses and Changes in Net Assets for the past two years is shown in the following table.965) 612.616.FINANCIAL ANALYSIS Statement of Net Assets As noted earlier. In 2008. A condensed version of the Statement of Revenues.266) 852.973) $ (8. Vancouver Downtown Redevelopment Authority Statement of Net Assets December 31.973 at December 31.518 73. net of related debt Restricted for capital purposes Restricted for debt service Unrestricted Total net assets $ $ (6.894.539.684.282.860.138) Noncurrent assets and liabilities account for the majority of the Authority’s total assets and liabilities. The majority of the Authority’s assets are subject to restrictions imposed by the bond indenture.095. The Authority's total net assets are negative $4.430 (4. the total net assets decreased by $1.863 699.256.275.366 70.444 117.835 primarily due to depreciation of the Hotel/Convention Center asset. Washington State Auditor's Office 8 .416 59.994 73.176 2. 2007 10.796 70.117.408. Statement of Revenues.649.

998 $ $ 12/31/2007 539.245 962.998.720.433 52.216.523.457. and cons tractual s ervices Depreciation Nonoperating expens es Interes t and fis cal charges Intergovernm ental paym ents Total expens es Change in net as s ets Net as s ets .Vancouver Downtown Redevelopment Authority Summary of Changes in Net Assets Comparative 2007-2008 2008 Revenues Operating revenues Charges for s ervices Mis cellaneous Nonoperating revenues Interes t earned Intergovernm ental contributions Total revenues Expens es Operating expens es Supplies .500.962.676 10. the Authority’s net assets decreased in 2008 by $1.486 the non-operating expenses exceeded nonoperating revenues in the current year.043 54. Overall.431 1. depreciation.259. which includes land and the buildings for the Hotel/Convention Center. While operating revenues exceed operating expenses by $816.431.050 during 2008.838.138) (155. total revenues decreased by $415.835.377 1. primarily due to the noncash expense.820) (1.053.Beginning Prior Period Adjus tm ents Net as s ets .765.040 2.Ending 2007 $ 13.973) $ 11.282 $ 0 254.318) 0 (3.931.490.180. pers onnel.365 4.462) (3.373) (4. Washington State Auditor's Office 9 . CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At December 31.787.282.917.282.899 2.432.845 16.480 due to a decline in both travel and entertainment related primarily to the weakened economy during the last half of 2008. 2008. totaled $53.658 (1. This is made up of decreases in supplies.259.565 53. Total Activities 12/31/2008 Land and improvements Buildings and Equipment (net of depreciation) Total $ $ 539.874 15.476 _________________________________________________________________________________________________________ .196 13.138) $ In 2008.188.494. The reduction in buildings since 2007 reflects depreciation of $1.449.279 913.583 17. DRA’s total expenses decreased by $240.984.277 3.259. and intergovernmental payments along with increased expenses related to bond interest payments and depreciation of the Hotel/Convention Center assets. the Authority’s investment in capital assets.597 17.109.319.649.932 0 472.496 (1.433 53. personnel and contractual services.

Both installments of the 2003 Series B Bonds were fully accreted to their face value during 2008. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The Authority opened and began operations of the Hotel/Convention Center in June of 2005. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Vancouver. the DRA had total revenue bonds outstanding of $68 million. Financial & Management Services. Until September of 2008. this industry in Vancouver was experiencing an increase in demand and market growth that provided higher revenues and profits to lodging establishments.000 relates to the two installments of the 2003B Subordinate Revenue Bonds. Requests for Information This financial report is designed to provide a general overview of DRA finances. which is having a negative impact on the Hotel/Convention Center. The $2. The priority of the DRA Management will continue to be to increase demand and market growth as well as ensuring increased cash flow to meet debt service requirements and operating needs. Of this amount. WA. in October and November of 2008. which is common for the hospitality industry. _________________________________________________________________________________________________________ . $65. Budgeted spending and revenues are expected to increase slightly during the next biennium. 2008.Long-Term Debt At December 31.3 million Due to Other Governmental Units reflects the DRA’s liability to the County PFD for the construction and operation of the Hotel/Convention Center. Vancouver. PO Box 1995. Local consumer spending declined and companies began curtailing business travel. the global economic markets began to show significant weakness.000 relates to the 2003A Revenue Bonds and $2. 98668-1995. Washington State Auditor's Office 10 .420. However.855. The operations are said to remain in start up phase for 36 months after opening.

640 2.806 $ 73.567 113.894.715 1.266) 852.785 10.973) 68.275.004 154.039 64.863 699.282 2.656 68.677 299.421.484.366 539.994 73.433 57.658 540.788.034 408.408.709) 58.015.703 (4. notes and loans payable Total current liabilities Noncurrent liabilities Bonds.133 50. 2008 ASSETS Current assets Cash and cash equivalents Restricted assets Cash with fiscal/escrow agent Investments Receivables (net) Taxes Accounts Interest Inventory Prepaid expenses Total current assets Noncurrent assets Deferred charges Capital assets Land and improvements Buildings Machinery and equipment Construction in progress Less accumulated depreciation Total noncurrent assets TOTAL ASSETS LIABILITIES Current liabilities Accounts payable Accrued interest payable Accrued liabilities Unearned revenue Bonds.300.661 The accompanying notes are an integral part of this financial statement.288 4.430 (4.205. _________________________________________________________________________________________________________ Washington State Auditor's Office 11 . notes and loans payable from restricted assets Due to other governmental units Total noncurrent liabilities TOTAL LIABILITIES NET ASSETS Invested in capital assets.712 70. net of related debt Restricted for capital purposes Restricted for debt service Unrestricted TOTAL NET ASSETS $ (6.VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY STATEMENT OF NET ASSETS December 31.789.721.684.360 146.242.342 105.069.594 514.616.383 36.931.387 5.731 5.

486 $ 13.279) (2.931.040 2.ENDING $ 254. 2008 OPERATING REVENUES Rent and royalties Total operating revenues OPERATING EXPENSES Supplies and contractual services Depreciation Total operating expenses Operating income (loss) NONOPERATING REVENUES (EXPENSES) Interest earnings Intergovernmental contributions Intergovernmental payments Interest and fiscal charges Total nonoperating revenues (expenses) Income (loss) before contributions and transfers TOTAL NET ASSETS .365 12.457. _________________________________________________________________________________________________________ Washington State Auditor's Office 12 .282 The accompanying notes are an integral part of this financial statement.VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY STATEMENT OF REVENUES.796 816.494.787.109. EXPENSES.373) (4.053.282 13.282.138) (155.973) 10.BEGINNING Prior year adjustments TOTAL NET ASSETS .462) (3.310. AND CHANGES IN FUND NET ASSETS For the Year Ended December 31.449.053.583) (4.948) (1.874 (913.431 1.236.

2008 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from other operating activities Cash payments for goods and services Net cash provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipts from other governments Payments to other governments Net cash provided (used) by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Interest paid on capital debt Purchase of capital assets Proceeds from capital debt Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Receipt of interest Purchase of investments Net cash provided (used) by investing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS .486 (33.457.689 2.056.VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY STATEMENT OF CASH FLOWS For the Fiscal Year Ended December 31.878 (355.565 (11.175 $ 816.938) 1.661 149.056.517) 2.365 107.165 17.653) (185.175 The accompanying notes are an integral part of this financial statement.124.041) 20.610) (343.827.922) (3.800) (205.239.BEGINNING CASH AND CASH EQUIVALENTS .188 $ 73.ENDING Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense (Increase) Decrease in receivables (Increase) Decrease in inventories (Increase) Decrease in prepaid assets Increase (Decrease) in current payables Increase (Decrease) in unearned revenues Total adjustments Net cash provided (used) by operating activities $ 1.936 $ 13.716) (3.245 1.887) 382.180. _________________________________________________________________________________________________________ Washington State Auditor's Office 13 .692 (11.908.874 (629.824 2.449.527) 107.711.

Financial statements for the Hotel/Convention Center project can be obtained from the City of Vancouver. design. Operating expenses for this enterprise fund include the cost of personnel and _________________________________________________________________________________________________________ Washington State Auditor's Office 14 . operate. The City is able to impose its will on the Authority. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. the primary government. contributions. regardless of the timing of related cash flows. finance. subject to this same limitation. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds. and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. A. construct. REPORTING ENTITY The Downtown Redevelopment Authority (DRA) is a special purpose government established in 1997 to plan. Vancouver. own. MEASUREMENT FOCUS. financial statements are discretely presented in the City of Vancouver’s annual financial report. B. The Authority distinguishes operating revenues and expenses from nonoperating items. BASIS OF ACCOUNTING. remodel. which constitutes most of the Authority’s ongoing operations. The City of Vancouver’s financial statements can be obtained from the City of Vancouver. Therefore. repair. AND FINANCIAL STATEMENT PRESENTATION The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Vancouver Downtown Redevelopment Authority (the Authority or DRA) conform to generally accepted accounting principles as applied to local governmental units. 2008 NOTE I. The DRA Board is composed of seven (7) members who are appointed by the City Council of Vancouver to four year terms. WA 98668-1995. PO Box 1995. Finance Department. maintain.1989.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. acquire. Private-sector standards of accounting and financial reporting issued prior to December 1. The Downtown Redevelopment Authority retains the Hilton Hotels Corporation as a Manager for its Hotel/Convention Center project. The government has elected not to follow subsequent private-sector guidance. Washington. Vancouver. The principal operating revenues of the Authority are room rents and meal revenues from hotel and restaurant usage. The more significant accounting polices are described below. WA 98668-1995. The DRA is a component unit of the City of Vancouver. Revenues are recorded when earned and expenses are recorded when a liability is incurred. expand and promote the Vancouver Convention Center and Hotel Project. the DRA’s services do not exclusively or almost exclusively benefit the City of Vancouver. Finance Department. Grants. generally are followed to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). however. PO Box 1995. equip.

demand deposits. 3. Treasury. china. silver. plant. Deposits and investments The DRA’s cash and cash equivalents are considered to be cash on hand. Such assets are recorded at historical cost or estimated historical cost if the actual cost is not available and are reported in the statement of net assets. It is the government’s policy to use restricted resources for their intended uses. and having an estimated useful life of more than three years. 2008 contractual services and supplies. and short-term investments. AND NET ASSETS OR EQUITY 1. The City of Vancouver Investment Pool operates in accordance with appropriate state laws and regulations. commercial paper. and unrestricted resources for other uses. Capital assets Capital assets are generally considered property. but not received at the end of the year.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. 4. Statutes authorize the Authority to invest in obligations of the U. Restricted assets These accounts contain resources being held by the trustee for debt service and operation of the Hotel/Convention Center. 2. _________________________________________________________________________________________________________ Washington State Auditor's Office 15 . S. LIABILITIES. The use of these assets is limited by applicable bond covenants. ASSETS. The reported value of the pool is the same as the fair value of the pool shares. Accrued interest receivable consists of amounts earned on investments. 6. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses in the DRA financial statements. Investments for the Authority are reported at fair value. 5. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. glass. Donated capital assets are recorded at estimated fair market value at the date of donation. repurchase agreements. Deferred charges Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. and linens used in the operation of the Hotel/Convention Center and are stated at the lower of cost or market using a first-in first-out valuation method. and equipment owned by the Authority costing $5. The inventories consist primarily of food. beverage. C. Local Government Investment Pools and the State Treasurer’s Investment Pool. Inventories and prepaid items. Receivables and payables All trade receivables are shown net of an allowance for uncollectible accounts.000 or more.

_________________________________________________________________________________________________________ Washington State Auditor's Office 16 . require management to make estimates and assumptions that affect the amounts reported in the financial statements. 8.764. Generally accepted accounting principals (GAAP). the recorded liability for vacation leave amounted to $229. Assets are depreciated using the straight-line method over the following estimated useful lives: Asset Category Buildings Structures Leasehold Improvements Other Improvements Equipment Useful Life 40 20 5 5-20 5-15 7. Major outlays for capital assets and improvements are recorded in Construction in progress as they are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. Actual results could differ from those estimates and assumptions. Use of estimates These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. This amount is recorded as a part of accrued liabilities in the statement of net assets. 2008 The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 10. Bonds payable are reported net of the applicable bond premium or discount. Each employee starts to accrue vacation on their 91st day of employment on a bi-weekly basis. as well as issuance costs.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. are deferred and amortized over the life of the bonds. Accumulated amounts of vacation leave are accrued when earned and a liability is reported. Long-term obligations Long-term debt and other long-term obligations are reported as liabilities in the statement of net assets. Compensated absences The Hotel/Convention Center employees can accumulate a certain amount of earned but unused vacation benefits. Bond premiums and discounts. and capitalized upon completion. 9. Leave accruals vary depending on employee status and at December 31. Unearned revenue This includes amounts available but not yet earned and Hotel/Convention Center guest advance deposits. 2008.

. which is stated at fair value. DETAILED NOTES A.806 at December 31.S.069. Lehman Brothers Holdings. 2008. DEPOSITS AND INVESTMENTS Deposits The City of Vancouver Treasurer acts in a fiduciary capacity for the Authority and administers an investment pool in which the Authority participates. to meet delivery requirements of qualified securities on each debt service payment date. Inc.. in the United States Bankruptcy Court for the Sourthern District of New York. Inc. all investments of the Authority’s funds are obligations of the U. The fair value of the Authority’s position in the pool is the same as the fair value of the pool shares. The Federal Deposit Insurance Corporation (FDIC) insures the Authority’s deposit and investments up to $250. and Lehman Brothers Special Finance. with Lehman Brothers Special Finance Inc. the Authority’s restricted assets are deposited with a trustee. The Forward Purchase Agreement with the Authority requires Lehman Brothers Special Finance Inc.036. the State Treasurer’s Investment Pool. the Authority entered into a forward purchase agreement. filed petitions for relief under Chapter 11 of the Bankruptcy Code. In December 2003. which had a rate of 5. Per the Forward Purchase Agreement.05%.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. All deposits and bank and investment pools not covered by FDIC are covered under the State of Washington Public Deposit Protection Commission Act of 1969.000. 2008 was $73. Investments in the City’s pool are not subject to categorization because specific instruments cannot be distinguished between those participating in the pool. Investments As required by state law. Total public deposits may not exceed one and one-half times its net worth or 30% of the total public funds on deposit statewide in each qualified public depository.. among other Lehman related entities. If public deposits exceed either of these limitations. On September 19. All of the Authority’s unrestricted funds are invested in the City of Vancouver Investment Pool. bankers’ acceptances. money market accounts.661.05%.806 4. overnight repurchase agreements. agency issues.806 _________________________________________________________________________________________________________ Washington State Auditor's Office 17 . the City of Vancouver Investment Pool. or certificates of deposit with Washington State banks and savings and loan institutions.S. commercial paper. as Guarantor. U. Lehman Brothers Inc. 2008 was invested as follows: Investment Type General Electric Capital Corp C P Crimson Commercial C P Total Fair Value $ $ 2008 Fair Value 33. with Lehman Brothers Inc.000 4. The Authority’s interest in the pool at December 31.069.. The $4. Government. so that the value of the Debt Service Reserve Fund is earning 5. it must collateralize the excess at 100%. 2008 NOTE II.

136 Ending Balance 12/31/08 Increases Decreases C.449.324.365 (955. The minimum capital lease payments reflect the remaining capital obligation on this asset.184 72.770. therefore.344 54.117 1.709 53. The land is leased from Vancouver Public Facilities District for 50 years. has been recorded at the present value of its future minimum lease payments as of the inception date. for a one time rental payment of $10. being depreciated: Buildings Machinery and equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings Machinery and equipment Total accumulated depreciation Capital assets.315 1.433 113. Capital Lease The Authority has entered into a lease agreement as lessee for land near the Hotel/Convention Center.004 82. net $ 3.703 653. 2003 that grants early termination rights.433 0 $ 421. not being depreciated: Land and improvements Construction in progress Total capital assets.167 19.242.242.409) $ 0 0 0 308.184 0 0 0 57. CAPITAL ASSETS A summary of capital asset activity for the year ended December 31. The leased asset and related obligation is accounted for in the statement of net assets. not being depreciated Capital assets. The implied interest rate of the lease is 5.772 421. LEASE AGREEMENTS Operating Lease The Authority leases land and premises under an operating lease entered into on December.069 539.431.387 0 72.069 308. 2008 was as follows: Begining Balance 1/1/08 Capital assets.789. 2008 B.383 57.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31.227 3.433 0 539.772 0 $ 308.542 4.259.340. This lease agreement qualifies as a capital lease for accounting purposes and.53%.523.571 $ 539.396.339.476 $ 1.998 57. _________________________________________________________________________________________________________ Washington State Auditor's Office 18 .069 $ 4.004 154.050 18.567 57.

855. On December 31.0% to 6. a component unit of the City. The first installment was issued in the amount of $155. 2008 is $65. and financed from operating revenues.321 (58. The second installment $2.000 in December 2003.652. The amount of outstanding principal at December 31. Interest rates on this issue range from 4. 2008 Ne t Capital Le as e As s e ts Land Total Capital Lease Assets Minim um Capital Le as e Paym e nts Total Mimimum Lease Payments Less Current Principal Present Value of Minimum Lease Payments $ 168. LONG-TERM DEBT Revenue Bonds In 2003.433 539.796 difference was accreted to the face value over the last three and one-half years. The authorized amount of these revenue bonds is $2. The 2003B Subordinate Revenue Bonds are a capital appreciation revenue bond received in two installments.000 was issued on June 1. 2005.855.420.000 to $9. 2008.433 D.000.265.510. issued bonds in which it pledged income derived from the acquired or constructed assets to pay debt service.420. 2009. The interest rate on this issue is 9. the Downtown Redevelopment Authority (DRA). DRA received $1.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. 2034.0%.000 in December 2003.784 was received and accreted to the face value of $155. Revenue bonds outstanding at year-end are as follows: The 2003A Revenue Bonds were issued in the amount of $65.000. $2. The revenue bonds were issued to finance construction of the Conference Center and Hotel capital project.000 is outstanding.000.681 $ $ 2008 539.00% beginning January 1. Revenue bonds are created by ordinance.640) 109. Annual principal installments range from $350. One principal installment is required on January 1.000 over the last five years.204 and the $612. _________________________________________________________________________________________________________ Washington State Auditor's Office 19 . adopted by the Council. of which $99.

000 $ Interest 217.000 22.050 190.069.000 30.544 6.088 4.676.275.000 645.000 9.855.500 26.906 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 2029-2033 2034 $ DRA 2003B Revenue bond debt service requirements to maturity are as follows: Revenue Bonds Principal 225.20:1. the occurrence of the debt service coverage ratio being less than required is not considered an event of default.606 14.000 750.124.000 345.481. 2008 DRA 2003A Revenue bond debt service requirements to maturity are as follows: Revenue Bonds Principal 350.000 15.155.98 to 1. _________________________________________________________________________________________________________ Washington State Auditor's Office 20 .027.533.250 779.350 $ Total Requirements 442.350 1.350 902.088 3.850 597. There are a number of other limitations and restrictions contained in the bond indenture and agreements.550 220.570.000 2.188 3.561. No formal communication was deemed necessary by the bond insurer.800 222.610. 2008.550 195.920. The calculation shown below is based on provisions set forth in the Indenture and the ratio must not be less than 1.510.112.100.000 30.350 2009 2010 2011 2012 2013 2014-2018 2019-2023 2024-2028 2029-2033 2034 $ Principal payment dates are on January 1 in the calendar year immediately following.450 6.000 65.250 1.244 267.777.030.850 1.000 550.600 318.988 3.20:1.500 11.000 205.413 66.000 25.088 3. The debt service coverage ratio for 2008 is .009.510.244 9.188 4.000 455.806 is available in the reserve and redemption accounts to service revenue debt.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31.000 5. As of December 31.300 193. A total of $4.231.000 225.050 220.000 515. The bond Trust Indenture (the “Indenture”) provides for the debt service coverage ratio (the “ratio”) that is calculated on the DRA’s cash flow basis.800 197.554.000 $ Interest 3.00. If the ratio is less than 1.000 795.600 1.000 10.906 $ Total Requirements 3.292.088 4. Hilton Management has not received any communications from the DRA or the bond insurer regarding required additional action as of the date of this report.748.515.300 223.083. the DRA or the bond insurer may communicate to the Hilton Vancouver Washington Management that additional action is required as stipulated in the Indenture.127.416. DRA is in compliance with all remaining significant limitations and restrictions.413 132.542.567.00 for the years shown.648. Specific action was taken by the DRA in late 2008 to approve a budget for 2009 that would meet the debt service coverage ratio for that year.606 24.113.705.988 4.544 28.420.250 22.450 3.381.150 223.150 18.250 16.000 25.

Vancouver PFD. funds exceeded the 2008 Tax Related Revenue Cap of $1.910. ACA continues to work with the DRA and the Trustee per requirements of the bond indenture.714 $ 118 721 839 53 892 $ 387 2.131 $ 0 0 350 59 409 $ 68. A third method is.275 $ 350 Ending Balance 12/31/08 Due Within One Year Additions Reductions _________________________________________________________________________________________________________ Washington State Auditor's Office 21 . if the City of Vancouver makes payments to the Clark County PFD. Standard & Poor’s downgraded ACA from an “A” rating to a “CCC” rating.088 221 70. On December 19. when the revenue bonds were issued. The provisions of the bond insurance are described in the bond indenture and specifically in the insurer documents which discuss the commitment of the bond insurer. which is represented in the financial statements as due to other governments. 2008 The City of Vancouver. 2008 the DRA liability to Clark County PFD is $2. for Clark County PFD. This creates a liability for the DRA to repay these funds via three methods.017 70. The monies available in the end are returned to Clark County PFD.301 70.023. Component Units Changes in Long-Term Liabilities The following is a summary of long-term debt changes of the authority for the year (in thousands): Beginning Balance 1/1/08 Bonds payable: Revenue bonds Less deferred amounts For issuance premiums (discounts) Due to other governments Total bonds payable Capital leases Component units long term liabilities $ (204) 2.541 was paid to the County PFD. On December 31. DRA is liable to the Clark County PFD for state sales and use tax credit monies received by the DRA. Payments under this agreement are received by Clark County PFD monthly and forwarded to the DRA. By purchasing this insurance.714 0 1.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. 2007. One such payment was made during 2008 amounting to $79. The first is a predetermined tax cap in the 2003A Bond indenture which changes each year through 2034. these amounts decrease the DRA liability to Clark County PFD after each payment. Intergovernmental Obligations Under an inter-local agreement with the Clark County Public Facilities District (PFD). Washington Downtown Redevelopment Authority Conference Center Project Senior Revenue Bonds Series 2003A financing included purchasing bond insurance from ACA Financial Guaranty Corporation (ACA) in December 2003.$ .309 $ 709 1. The second method occurs after funds flow through the 2003A bond indenture distribution requirements. The DRA did not take any further action in 2008 to purchase bond insurance from another insurer. During 2008. There have been no such monies available to return since the start of the convention center.300.005 1.963 168 71.712.275 $ .$ 68. and City of Vancouver lodging taxes. the bonds were rated “A” by Standard & Poor’s.000 and $555. the funds in excess of the tax cap are returned to the Clark County PFD.

NOTE III. and City Lodging Taxes for each calendar year to a minimum amount. and DRA entered into interlocal agreements which detail their support for the project. During 2008. The tax related revenue refers to the aggregate amount of City Sales and Use taxes. Under this agreement the City has pledged Guaranteed Revenues and Guaranteed Reserve amounts.218 of lodging tax.596 in 2008. E. as follows: _________________________________________________________________________________________________________ Washington State Auditor's Office 22 . The beginning discount balance on the Series B Bond at December 31. construct.777. consisting of the Convention Center Project and the Exposition Center at the Clark County Fairgrounds. using tourism funds. the City of Vancouver. and operate the Convention Center Project. COMPLIANCE AND ACCOUNTABILITY At December 31. the Downtown Redevelopment Authority recognized receipt of $997. RELATED PARTY TRANSACTIONS The Authority constructed and operates the Hotel Conference/Convention Center.442 in sales tax credit monies from the Vancouver PFD for the bond servicing of the Hotel and Conference/Convention Center project.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. The Vancouver Public Facility District (PFD) was created to acquire. 2003 to participate in the construction and operation of the Vancouver Conference/Convention Center. The Clark County PFD contributed $785. the Authority reported a deficit in fund net assets. The balance shown above relates to the Series A Bond. This deficit is primarily due to the depreciation of the asset and amortization of the bond costs which totaled $5. 2008 to $ zero. OTHER DISCLOSURES A. 2008. The Vancouver PFD. and the City of Vancouver contributed $682. the County PFD.H Prior Period Adjustments. which is managed by Hilton Hotels Corporation. 2007 was reported at $605. own. STEWARDSHIP. The Clark County Public Facility District was created for the purpose of participating in the development of regional centers. The City signed an agreement on December 1. 2008 The beginning balances of the component unit were restated as described in Note V.635 and restated at January 1. finance. County Sales and Use taxes.881 of sales tax credits.

000 650.000 Guaranteed Am ount $ 440.000 1.400.000 800.900.000 1.854 reduction in revenues based on estimates in lieu of actuals.400.400.000 1.000 2.200.000 650.000 1.000 650. Schedule of Guaranteed Reserve Am ounts Guaranteed Am ount $ 650.000.000 Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Guaranteed Am t $ 2.000 2.000 1.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31.400.000 440.000 550.000 650.000 550.000 440.200.000 2.100.700.400.000.400.000 550. The previous entry was offset by a $246.000 2.000 650.000 2.200.000 1.000 2.000 1.000 550.373) was recorded as prior period adjustments during 2008.000 2. in accordance with APB 21.000 1.200.000 2.100.000 2. This includes a negative $402.000 The Guaranteed Reserve is an amount the City agrees to pay if the DRA has not accumulated enough funds to pay debt service up to the limits noted below.000.000 550.227 to properly record effective interest on the Series B Bond for the Hotel/Conference Center Project.000 1.000 2.000 1. PRIOR PERIOD ADJUSTMENT A net total of ($155.000 1.000 1.200.000.900.000 2.000.000 440.000.000 2.000 2.000 1.000 2.200.800.200.000 Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 B.000 440.000 1.000 1. 2008 Schedule of Guaranteed Revenue Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Guaranteed Am t $ 1.000 1.200.200.400. The City has made no payment related to this guarantee thus far.200. _________________________________________________________________________________________________________ Washington State Auditor's Office 23 .000 440.000.200.000.

the Authority will be pursuing termination of the FPA with Lehman Brothers Special Finance Inc. 2009. As part of this agreement. Washington reached an agreement. As soon as adequate cash flows are generated.Vancouver Downtown Redevelopment Authority (A component unit of the City of Vancouver) NOTES TO FINANCIAL STATEMENTS December 31. and the outcome is unknown at this time. and did not correct the issue in the Cure Period. The Hilton Vancouver. for the difference between the fixed rate of 5. On January 2. Inc. _________________________________________________________________________________________________________ Washington State Auditor's Office 24 . Based on this. 2009. The Authority is pursuing a claim with the Bankruptcy Court against Lehman Brothers Inc. which will mature on July 1. On January 1. 2008 C. Excess cash flows were not available to meet the debt service payments of the Subordinate B bonds. 2009. payments on these bonds will be made. Approximately 63% of the Hilton Vancouver Washington’s employee base is subject to the collective bargaining agreement as of December 31. so that a new Forward Purchase Agreement can be entered into with a different party. Negotiations are underway. Pursuant to the indenture. failed to tender for sale Qualified Securities pursuant to the terms of the Forward Purchase Agreement (FPA). By June 1. effective July 1. 2008. 2009. The Subordinate B bonds continue to accrue the amount due on the unpaid balance. the union had the right to reopen the contract in 2009.05%. if sufficient cash flows are available after meeting the debt service requirements of the Series 2003A bonds. In addition. SUBSEQUENT EVENTS The Public Deposit Protection Commission (PDPC) statutes were updated in early 2009. for a collective bargaining agreement with the HERE Local #9. Lehman Brothers Special Finance Inc. the Authority reinvested the investment balance held with the Trustee for 6-months in qualified investments.05% and the rate that a new Forward Purchase Agreement will generate. 2008.. The rate of return on the reinvestment was substantially below the 5. this does not constitute an event of default under the indenture while any senior bonds are outstanding. the first installment on the Subordinate B bonds was due to Faulkner USA. Final approval occurred on July 29. all financial institutions that are approved by the State Treasurer to accept public funds are required to collateralize public fund deposits at 100%. 2007. the Hotel Employees and Restaurant Employees Union. and Lehman Brothers Special Finance Inc.

The State Auditor's Office employees are located around the state to deliver our services effectively and efficiently. CPA. CPA Jim Brittain.DOC . and all state agencies. we conduct performance audits of state agencies and local governments and fraud. Our audits look at financial information and compliance with state.wa. The State Auditor is elected by the citizens of Washington and serves four-year terms. and local laws. electronic subscription service. whistleblower and citizen hotline investigations. As an elected agency. including institutions of higher education. State Auditor Chief of Staff Deputy Chief of Staff Chief Policy Advisor Director of Audit Director of Special Investigations Director for Legal Affairs Director of Quality Assurance Local Government Liaison Communications Director Public Records Officer Main number Toll-free Citizen Hotline Web Site Subscription Service Brian Sonntag. which are available on our Web site and through our free. We continue to refine our reporting efforts to ensure the results of our audits are useful and understandable. Our mission is to work in cooperation with our audit clients and citizens as an advocate for government accountability. including schools.gov https://www. Our audits are designed to comply with professional standards as well as to satisfy the requirements of federal. The results of our work are widely distributed through a variety of reports. In addition. CGFM Ivan Dansereau Mike Murphy Mindy Chambers Mary Leider (360) 902-0370 (866) 902-3900 www. state. We take our role as partners in accountability seriously. We provide training and technical assistance to governments and have an extensive quality assurance program.Rev. CGFM Ted Rutt Doug Cochran Jerry Pugnetti Chuck Pfeil. federal and local laws on the part of all local governments. CPA Jan Jutte.gov/EN/News/Subscriptions/ (SAO FACTS.sao. 06/09) . the State Auditor's Office has the independence necessary to objectively perform audits and investigations.ABOUT THE STATE AUDITOR'S OFFICE The State Auditor's Office is established in the state's Constitution and is part of the executive branch of state government.wa.sao.

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