OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY AUDITED FINANCIAL STATEMENTS JUNE 30, 2007

Transcription

1 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY AUDITED FINANCIAL STATEMENTS JUNE 30, 2007

2 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY JUNE 30, 2007 TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT 1-2 MANAGEMENT S DISCUSSION AND ANALYSIS 3-11 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets 12 Statement of Activities 13 Fund Financial Statements Balance Sheet Governmental Funds 14 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 15 Statement of Revenues and Expenditures (Budgetary Basis) Budget and Actual Notes to the Financial Statements INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS FINDINGS AND RECOMMENDATIONS 38 STATUS OF PRIOR YEAR FINDINGS 39

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5 MANAGEMENT S DISCUSSION AND ANALYSIS As management of the Oakland-Alameda County Coliseum Authority (Authority), we offer readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, All amounts in this discussion and analysis, unless otherwise indicated, are expressed in thousands of dollars. Financial Highlights The assets of the Authority exceeded its liabilities at the close of the most recent fiscal year by $43,097. Of this amount, $20,893 represent assets associated with long-term debt that are subject to external restrictions as to how they may be used, $25,703 needs to be raised in order to meet excess of debt related to capital assets over the amount invested in those capital assets and $47,908 may be used to meet the Authority s ongoing obligations to citizens and creditors. The total net assets increased by $2,826 during the fiscal year. This is attributable to revenues exceeding expenditures. Current year operating revenue increased because of certain new components in the Authority's revenue including the Arena naming rights, the Golden State Warriors (Warriors) rent, the concession revenue from Warriors games and the net parking revenue from football games. The increased interest earnings produced sufficient savings to offset the decreased football revenues. Expenditures increased primarily due to higher interest rates on the Authority's variable rate bonds and the additional operating subsidy to the Oakland Coliseum Joint Venture (OCJV). A decrease in legal costs offset the playoff expenses for the Oakland Athletics (Athletics) and the Warriors. As of June 30, 2007, the Authority s governmental funds reported an ending fund balance of $113,781. This fund balance is available to pay the Authority s long-term debt in future periods. At the close of the fiscal year, unreserved fund balance for the general fund was a negative $174,966, as this amount will be used to pay existing debt. The total net fund balance in the General Fund as of June 30, 2007 was $28,988 or 130 percent of total general fund expenditures of $22,218. The Authority s long-term debt decreased by $8,500 or 3 percent during the fiscal year ended June 30, The change was due to pay down of existing debt without issuing any new debt. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the basic financial statements. The Authority s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the finances, in a manner similar to private-sector business. 3

6 The statement of net assets presents information on all of the assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Authority is improving or deteriorating. The statement of activities presents information showing how the Authority s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues related to uncollected interest earnings and incurred but unpaid legal cost. Both of the government-wide statements reflect the Authority s intent to generate revenues to recover a significant portion of their related costs through user fees and charges, similar to a business-type activity. The government-wide financial statements are located on pages 12 through 13 of this report. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Authority, like state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Authority are considered governmental funds. Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. These statements, however, focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at yearend that are available for spending. Such information may be useful in evaluating a government s nearterm financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Authority maintains several individual funds organized according to their type (special revenue, debt service and general fund). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, special revenue fund, and debt service fund, all of which are considered major funds. The basic governmental fund financial statements can be found on pages 14 through 15 of this report. 4

7 Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 18 through 35 of this report. Analysis of net assets Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the Authority, assets exceed liabilities by $43,097 at June 30, The Authority's outstanding debt related to its capital assets (e.g. property, building improvements, equipment and infrastructure), is greater than the net value of those assets by $25,703. The Authority uses these capital assets to provide facilities for sports activities for local citizens at the Coliseum Complex. These assets are not available for future spending. Although the Authority s investments in its capital assets are reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Statement of Net Assets Governmental Activities Assets: Current and other assets $ 155,974 $ 154,008 Capital assets 174, ,084 Total assets 330, ,093 Liabilities: Long-term liabilities 277, ,863 Other liabilities 10,610 9,959 Total liabilities 287, ,822 Net assets: Invested in capital assets, net of related debt (deficit) (25,703) (23,590) Assets associated with bonded debt 20,893 32,302 Unrestricted 47,907 31,559 Total net assets $ 43,097 $ 40,271 5

8 Approximately $47,907 of these net assets may be used to meet the ongoing obligations of the Authority. An additional portion of the Authority s net assets, $20,893, represents resources that are subject to external restrictions as to how they may be used. Approximately $25,703 of the net assets is consumed by an unrestricted net deficit. This means that the value of the Authority s net assets is less than the debt used to acquire those assets. Analysis of changes in net assets The Authority s net assets increased by $2,826 during the fiscal year ended June 30, This increase is explained in the governmental activities discussion below and is primarily a result of current year revenues exceeding expenses. Authority s Changes in Net Assets Governmental Activities Revenues: Program revenues: Charges for services: PSL, Club fees & Suite deposits $ $ 21 Club Dues 898 Parking & Concession 1,360 Arena facility fees 2,757 2,663 Premium Seating Revenue 7,428 7,428 Location Premium Fees $ 12,443 1,138 $ 11,250 Operating subsidy 22,300 22,300 Lease revenue 2, Interest income 8,885 7,602 Other revenue 2,859 2,267 Total revenues 48,562 43,999 Expenses: Administrative and operating expenses 29,295 26,239 Debt financing cost 16,441 13,485 Total expenses 45,736 39,724 Increase/(decrease) in net assets 2,826 4,275 Net assets beginning 40,271 35,996 Net assets ending $ 43,097 $ 40,271 6

9 Governmental Activities: The activities of the Authority increased its net assets by $2,826. Key elements of this increase are as follows: Football revenues from the sales of personal seat licenses (PSLs), club fees, suite deposits and location premium fees decreased $1,159 or 100 percent during the year. This decrease is the result of no remarketing of PSLs, no other charges incident to the ownership of PSLs and no location premium fee after the 2005 football season. This change resulted from the settlement agreement between the East Bay Entities and the Oakland Raiders (Raiders). However, beginning in 2006, the Authority is entitled to receive one half of the club dues, one half of the concession revenues and all of the parking revenues from football games. During the fiscal year , the Authority received $898 club dues, $176 net football concession revenues and $227 net football parking revenues. The Authority retained the Arena concession and parking revenues from Warriors games during the fiscal year After the deduction of the related expenses, the Authority received $1,046 Arena concession revenue. Conversely, the Arena parking expenses from Warriors games were $89 over the Authority's share of revenue. Revenue from Arena Facility Fees increased $94 or 4 percent over the previous year. This increase is the result of ticket sales from the Warriors basketball playoff games during the 2006 season; however, the facility fee from other events decreased $247 or 40 percent. Lease revenue increased by $1,495 or 258 percent because the $1,500 Warriors rent was paid directly to the Authority. There was a slight decrease of $5 or 1 percent in Athletics rent due to no revenue from excess paid attendance in the 2006 regular season. Interest income increased by $1,283 or 15 percent. This increase was due to the increasing trend in market interest yields and the interest earnings on past due receivables from the Warriors. Of the $8,885 interest income, $6,078 represents interest on loans to the Raiders. The interest on the original loans totaling $63,900 is calculated at a fixed rate of 6.07 percent, and is compounded on an annual basis on September 12 and added to the principal. Other revenue increased $592 or 26 percent. The increase primarily comes from the first time revenue of Oracle Arena naming rights. Administrative and operating expenses increased by $3,056 or 12 percent. The major reason for this increase is the additional operating subsidy to OCJV. As the result of the termination agreement between the Coliseum, Inc. and the Authority, certain revenues that OCJV formerly collected, now directly collected by the Authority. This requires the Authority to increase the subsidy to cover the reduced operating revenues that in the past had been directly paid to OCJV. During the fiscal year , the Authority subsidized additional $3,309 to OCJV as a result of the transfer of this revenue which includes $525 Raiders rent, $1,500 Warriors rent, $1,046 Arena Concession revenue and $238 Warriors parking revenue. The most significant operating expense increases include the Warriors and Athletics playoff expenses of $843, which were offset by the decreases of $322 or 77 percent legal costs and marketing expenses of $657 or 93 percent. Total debt service financing costs increased $2,956 or 22 percent due to current year interest rates on the Authority s variable rate bonds being higher than the prior year. 7

10 Financial Analysis of the Authority s Funds As noted earlier, the Authority uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental funds The focus of the Authority s governmental funds is to provide information on near-term inflows, outflows, and balances of resources that are available for spending. Such information is useful in assessing the Authority s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the Authority include the general fund, special revenue funds, and debt service funds. At the end of the fiscal year, the Authority s governmental funds reported combined ending fund balances of $113,781, a decrease of $2,455 or 2 percent in comparison with the beginning fund balances. This fund balance will be applied 1) to liquidate existing contracts and commitments ($147); and 2) to reduce the bonded indebtedness of the Authority ($113,634). Revenues for governmental funds overall totaled approximately $44,392 in the fiscal year ended June 30, 2007, which represents an increase of 12 percent from the fiscal year ended June 30, Expenditures for governmental funds, totaling $46,847, increased by $5,672 or 14 percent from the fiscal year ended June 30, In the fiscal year ended June 30, 2007, expenditures for governmental funds exceeded revenues by approximately $2,455, or about 6 percent. The general fund is the chief operating fund of the Authority. At the end of the current fiscal year, the fund balance of the general fund was $28,988. As a measure of the general fund's liquidity, it may be useful to compare total fund balance to total fund expenditures. Total fund balance represents 130 percent of general fund expenditures. The fund balance in the Authority s general fund increased by $8,954 during the fiscal year, this was mainly due to a decrease in funds transferred to the Trustee. The Authority reserved excess funds in the Trustee's account for debt payments. General fund budgetary highlights The Authority's final budget differs from the original budget in that it contains supplemental adjustments approved during the fiscal year. The Authority adjusted appropriations in the amount of $112 by moving funds from budgeted legal costs to cover capital expenditures not specifically planned at the start of the fiscal year. Overall, the Authority's actual general fund revenues exceeded its budgeted fiscal year revenues by $1,822 or 5 percent. Similarly, actual general fund expenditures exceeded the adjusted budget by $3,048 or 16 percent. In general, the increased revenue primarily reflects a large increase in interest earning due to the increasing trend in market interest yields and the past-due interest from the Warriors receivable. The increased expenditures reflect additional operating subsidy to OCJV as well as the unbudgeted playoff expenses. 8

11 Capital assets and debt administration Capital Assets The Authority s capital assets as of June 30, 2007 amount to $174,872 (net of accumulated depreciation) as shown in the table below. This investment in capital assets includes property, building improvements, machinery and equipment. The total decrease in the Authority s capital assets for the current fiscal year, net of depreciation, was 4 percent. The decrease in capital assets is due to the depreciation on current assets being greater than capital additions. Capital Assets, Net of Accumulated Depreciation Governmental Activities Construction in progress $ $ 398 Arena improvement 78,908 82,096 Stadium improvement 88,604 92,401 Property improvement 1,573 1,230 Machinery and equipment 3,985 4,091 Furniture and fixtures 1,601 1,643 Vehicles Total $ 174,872 $ 182,084 Major capital asset events during the current fiscal year included the following: During the year, the Authority added $1,369 to its capital assets, through purchase and construction. Major acquisitions are as follows: 500 Ton Chiller $ Chiller Compressor $85 Parking Lot Improvement and signage $507 Video Control Room Equipment $150 Other machinery and equipment $168 Other furniture and fixtures $116 For government-wide statement of net assets presentation, the Authority depreciated all depreciable capital assets from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. Additional information about the Authority s capital assets can be found in Note 6 to the financial statements. 9

12 Debt Administration At the end of the current fiscal year, the Authority had total long-term obligations outstanding of $288,600. This entire amount is secured by letters of credit and is payable from revenues of the Authority. The unamortized bond issuance costs are $2,561 as of June 30, Outstanding Long-term Obligations Governmental Activities Revenue Bonds: Stadium variable rate refunding lease revenue refunding bonds $ 170,700 $ 176,200 Arena variable rate lease revenue bonds 117, ,900 Total $ 288,600 $ 297,100 During the fiscal year , the Authority s total bonded debt decreased by $8,500. The decrease was due to the pay down of existing debt. The Authority did not add any additional debt issues during the year. Additional information about the Authority's long-term obligations is located in Note 9 to the financial statements. Economic factors and next year's budget and rates The federal fund interest rates stayed at approximately 5.25 percent throughout the fiscal year At the start of fiscal year , interest rates remained at the same level as at June On September , The Federal Reserve policymakers lowered the interest rates from 5.25 percent to 4.75 percent and signaled that they are in no hurry to reduce interest rates again because they are not convinced the U.S. economic expansion is ending. Economic activity appears poised to expand at a moderate rate in the second half of 2007, and it should strengthen gradually into The ongoing correction in the housing market seems likely to continue and will influence the rate of economic expansion over the near term. Core inflation is expected to moderate a bit further over the next year. Long-run inflation expectations are contained, pressures on resource utilization should ease slightly in an environment of economic expansion at or just below the rate of increase in the nation's potential to produce, and some of the other factors that boosted inflation in recent years have already receded or seem likely to do so. The unemployment rate of Alameda County was 4.7 percent in June This is favorable as compared to the statewide unemployment rate of 5.2 percent. The unemployment rates of Alameda County were 4.5 percent and 4.9 percent as in June 2006 and 2005 respectively. 10

13 Job growth in the first half of 2007 was driven by sizable increases in service-producing industries, growth in labor productivity appears to have remained modest. The residential construction will likely restrain overall activity for a while longer, but as stocks of unsold new homes are brought down to more comfortable levels, that restraint should begin to abate. Employment and real wages are on track to rise further, and, although the difficulties in the sub prime-mortgage market have created severe financial problems for some individuals and families, the household sector is in good financial shape overall. Consumer spending should also keep moving up. The County average salaries adjusted for inflation is currently well above the California average, and will remain so over the near future. This may have an impact on discretionary spending income for individuals who buy tickets for concerts and sports events. All of the above factors were considered in preparing the Authority's budget for fiscal year Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the Authority's finances and to demonstrate the Authority's accountability for the money it receives. Below is the contact for questions about this report or requests for additional financial information. Oakland-Alameda County Coliseum Authority Office of the Auditor-Controller 1221 Oak Street, Room 249 Oakland, CA

14 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY STATEMENT OF NET ASSETS JUNE 30, 2007 ASSETS Current assets: GOVERNMENTAL ACTIVITIES Cash and investments (Note 3) $ 27,074,993 Cash and investments - restricted (Note 3) 20,892,717 Accounts receivable (Note 4) 1,768,174 Raiders loans receivable (Note 5) 104,383,463 Prepaid expenses 367,157 Due from OCJV - Stadium 1,487,816 Total current assets 155,974,320 Noncurrent assets: Capital assets (net of accumulated depreciation) (Note 6) 174,871,784 Total noncurrent assets 174,871,784 Total assets $ 330,846,104 LIABILITIES Current liabilities: Accounts payable (Note 7) $ 1,142,145 Due to OCJV - Arena 567,538 Bonds payable - current (Note 9) 8,900,000 Total current liabilities 10,609,683 Noncurrent liabilities Bonds payable (net of unamortized bond issuance cost) (Note 9) 277,139,167 Total noncurrent liabilities 277,139,167 Total liabilities 287,748,850 NET ASSETS Investment in capital assets, net of related debt (25,703,342) Restricted for debt service 20,892,717 Unrestricted 47,907,879 Total net assets 43,097,254 Total liabilities and net assets $ 330,846,104 The net assets total reported in this statement differs from the governmental funds balance sheet due to the following reconciling items Total net assets $ 43,097,254 As the focus of governmental fund is on short-term financing, some assets will not be available to pay current expenditures. Those assets (receivables) are offset by deferred revenue in the governmental funds and they are not included in fund balances (40,483,463) Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds (174,871,784) Bond issuance cost are reported as deferred charges in government wide statement of net assets while these expenditures were recognized as expenditures in the year of issuance in the governmental funds. These bond issuance costs are amortized over the life of the bonds (2,560,833) Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore, are not reported in the funds 288,600,000 Fund balance per governmental funds balance sheet $ 113,781,174 The accompanying notes are an integral part of these financial statements 12

15 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2007 JPA Revenues Total Charges Operating Lease Interest Other Changes in Functions/Programs Expenses for Services Subsidy Revenue Income Revenue Net Assets Governmental activities: General government $ 29,295,641 $ 12,443,330 $ 22,300,000 $ 2,075,000 $ $ 2,859,149 $ 10,381,838 Interest on long-term debt 16,440,729 8,885,144 (7,555,585) Total Governmental activities $ 45,736,370 $ 12,443,330 $ 22,300,000 $ 2,075,000 $ 8,885,144 $ 2,859,149 2,826,253 Net Assets - Beginning 40,271,001 Net Assets Ending $ 43,097,254 The changes to net assets reported in this statement differ from the governmental funds statement of revenues, expenditures and changes in fund balances due to the following reconciling items: Net change in net assets per statement of activities $ 2,826,253 Debt service expenditures for principal payments - recognized as an expenditure in the governmental funds statement of revenues, expenditures and changes in fund balances (8,500,000) Acquisition of capital assets - recognized as an expenditure in the governmental fund statement of revenues, expenditures and changes in fund balances (971,882) Amortization of bond issuance cost - recognized as an expense in the government-wide statement of activities 176,491 Depreciation of capital assets - recognized as an expense in the government-wide statement of activities 8,184,400 Interest on Raiders loans which was not received within the available period established for the governmental funds is not reported as revenue in the funds. (4,170,580) Total revenues over expenditures per statement of revenues, expenditures and changes in fund balances $ (2,455,318) The accompanying notes are an integral part of these financial statements 13

16 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 TOTALS SPECIAL DEBT (MEMORANDUM GENERAL REVENUE SERVICE ONLY) ASSETS Cash and investments (Note 3) $ 27,074,993 $ $ $ 27,074,993 Cash and investments - restricted (Note 3) 20,892,717 20,892,717 Accounts receivable (Note 4) 1,768,174 1,768,174 Raiders loans receivable (Note 5) 104,383, ,383,463 Prepaid expenses 367, ,157 Due from OCJV - Stadium 1,487,816 1,487,816 Total assets $ 30,698,140 $ 104,383,463 $ 20,892,717 $ 155,974,320 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable (Note 7) $ 1,142,145 $ $ $ 1,142,145 Due to OCJV - Arena 567, ,538 Deferred revenue (Note 8) 40,483,463 40,483,463 Total liabilities 1,709,683 40,483,463 42,193,146 FUND BALANCES Reserved for: Debt service 203,807,283 63,900,000 20,892, ,600,000 Encumbrances (Note 10) 147, ,313 Unreserved (174,966,139) (174,966,139) Total fund balances 28,988,457 63,900,000 20,892, ,781,174 Total liabilities and fund balances $ 30,698,140 $ 104,383,463 $ 20,892,717 $ 155,974,320 The accompanying notes are an integral part of these financial statements. 14

17 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2007 TOTALS SPECIAL DEBT (MEMORANDUM) GENERAL REVENUE SERVICE ONLY) REVENUES: Club dues $ 898,359 $ $ $ 898,359 Parking & concessions 1,360,120 1,360,120 Arena facility fees 2,756,851 2,756,851 Premium seating revenue 7,428,000 7,428,000 Unrealized gain/(loss) on investment 119, ,841 Interest earned Arena 777, ,739 1,253,946 Stadium 561,602 1,878, ,071 3,340,777 Naming rights 1,335,679 1,335,679 Subsidy to authority 22,300,000 22,300,000 Athletics rent 575, ,000 Warriors rent 1,500,000 1,500,000 CBS/Viacom revenue 1,516,592 1,516,592 Miscellaneous revenue 6,878 6,878 Total revenues 41,016,288 1,878,104 1,497,651 44,392,043 EXPENDITURES: Administrative expenses: Legal and accounting fees 157, ,888 OACC Inc. expenses 260, ,597 Miscellaneous admin. expenses 448, ,746 Total administrative expenses 867, ,231 Operating expenses: Day of game 3,206,750 3,206,750 Marketing expense - OFMA and others (Note 11a) 47,710 47,710 Marketing expense - Warriors 675, ,000 Playoff expenses - Athletics and Warriors 842, ,595 Commercial property insurance 427, ,058 Incentive fee - SMG/OCJV 656, ,894 Coliseum JV. - subsidy - operations 12,667,259 12,667,259 Coliseum JV. - capital 2,692,626 2,692,626 Total operating expenses 21,215,892 21,215,892 Financing expenses: Debt Service - Arena Principal 3,000,000 3,000,000 Interest and other financing costs 106,217 7,775,595 7,881,812 Debt Service - Stadium Principal 5,500,000 5,500,000 Interest and other financing costs 28,700 8,353,726 8,382,426 Total financing expenses 134,917 24,629,321 24,764,238 Total expenditures 22,218,040 24,629,321 46,847,361 Excess (deficiency) of revenues over (under) expenditures 18,798,248 1,878,104 (23,131,670) (2,455,318) Other financing sources (uses) (Note 13) Arena concessions 3,764,866 3,764,866 Concessionaire settlement (3,764,866) (3,764,866) Transfer from OCJV 750, ,000 Transfer to OCJV (750,000) (750,000) Operating transfers in 1,878,104 11,722,587 13,600,691 Operating transfers out (11,722,587) (1,878,104) (13,600,691) Total other financing sources (uses) (9,844,483) (1,878,104) 11,722,587 Net change in fund balances 8,953,765 (11,409,083) (2,455,318) Fund balances - beginning 20,034,692 63,900,000 32,301, ,236,492 Fund balances - ending $ 28,988,457 $ 63,900,000 $ 20,892,717 $ 113,781,174 The accompanying notes are an integral part of these financial statements 15

18 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY STATEMENT OF REVENUES AND EXPENDITURES (BUDGETARY BASIS) BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2007 GENERAL FUND SPECIAL REVENUE FUND Variance Variance with Final with Final Budget - Budget - Budgeted Amounts Actual Positive Budgeted Amounts Actual Positive Original Final Amounts (Negative) Original Final Amounts (Negative) REVENUES: Club dues $ 750,000 $ 750,000 $ 898,359 $ 148,359 $ $ $ $ Parking & concessions 2,602,000 2,602,000 1,360,120 (1,241,880) Arena facility fees 2,050,000 2,050,000 2,756, ,851 Premium seating revenue 7,428,000 7,428,000 7,428,000 Unrealized gain/(loss) on investment 1,878,104 1,878,104 Interest earned 1,338,809 1,338,809 Naming rights 664, ,000 1,335, ,679 Subsidy to authority 22,300,000 22,300,000 22,300,000 Athletics rent 600, , ,000 (25,000) Warriors rent 1,500,000 1,500,000 1,500,000 CBS/Viacom revenue 1,300,000 1,300,000 1,516, ,592 Miscellaneous revenue 6,878 6,878 Total revenues 39,194,000 39,194,000 41,016,288 1,822,288 1,878,104 1,878,104 EXPENDITURES: Administrative expenses: Legal and accounting fees 1,034, , , ,112 OACC Inc. expenses 100, , ,597 (160,597) Miscellaneous 500, , ,746 51,254 Total administrative expenses 1,634,000 1,522, , ,769 Operating expenses: Day of game 3,206,750 3,206,750 3,206,750 Marketing expense - OFMA and others 47,710 (47,710) Warrior marketing expense 675, , ,000 Playoff expenses - Athletics and Warriors 842,595 (842,595) Commercial property insurance 750, , , ,942 Incentive fee - SMG/OCJV 550, , ,894 (106,894) Coliseum JV. - subsidy - operations 9,834,000 9,834,000 12,667,259 (2,833,259) Coliseum JV. - subsidy - capital 2,520,000 2,632,000 2,692,626 (60,626) Total operating expenses 17,535,750 17,647,750 21,215,892 (3,568,142) Financing expenses: Principal Interest and other financing costs 134,917 (134,917) Total financing expenses 134,917 (134,917) Total expenditures 19,169,750 19,169,750 22,218,040 (3,048,290) Revenues over/(under) expenditures 20,024,250 20,024,250 18,798,248 (1,226,002) 1,878,104 1,878,104 Other financing sources (uses) Arena concessions 3,764,866 3,764,866 Concessionaire settlement (3,764,866) (3,764,866) Transfer from OCJV 750, ,000 Transfer to OCJV (750,000) (750,000) Operating transfers in 1,878,104 1,878,104 Operating transfers out (11,722,587) (11,722,587) (1,878,104) (1,878,104) Total other financing sources (uses) (9,844,483) (9,844,483) (1,878,104) (1,878,104) Net change in fund balances 20,024,250 20,024,250 8,953,765 (11,070,485) Fund balances - beginning 20,034,692 20,034,692 20,034,692 63,900,000 63,900,000 63,900,000 Fund balances - ending $ 40,058,942 $ 40,058,942 $ 28,988,457 $ (11,070,485) $ 63,900,000 $ 63,900,000 $ 63,900,000 $ "continued" The accompanying notes are an integral part of these financial statements 16

19 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY STATEMENT OF REVENUES AND EXPENDITURES (BUDGETARY BASIS) BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2007 DEBT SERVICE FUND TOTAL MEMORANDUM (ONLY) Variance Variance with Final with Final Budget - Budget - Budgeted Amounts Actual Positive Budgeted Amounts Actual Positive Original Final Amounts (Negative) Original Final Amounts (Negative) REVENUES: Club dues Parking & concessions Arena facility fees Premium seating revenue Unrealized gain/(loss) on investment Interest earned Naming rights Subsidy to authority Athletics rent Warriors rent CBS/Viacom revenue Miscellaneous revenue Total revenues EXPENDITURES: Administrative expenses: Legal and accounting fees OACC Inc. expenses Miscellaneous Total administrative expenses Operating expenses: Day of game Marketing expense - OFMA and others Warrior marketing expense Playoff expenses - Athletics and Warriors Commercial property insurance Incentive fee - SMG/OCJV Coliseum JV. - subsidy - operations Coliseum JV. - subsidy - capital Total operating expenses Financing expenses: Principal Interest and other financing costs Total financing expenses Total expenditures Revenues over/(under) expenditures Other financing sources (uses) Arena concessions Concessionaire settlement Transfer from OCJV Transfer to OCJV Operating transfers in Operating transfers out Total other financing sources (uses) Net change in fund balances Fund balances - beginning Fund balances - ending $ $ $ $ $ 750,000 $ 750,000 $ 898,359 $ 148,359 2,602,000 2,602,000 1,360,120 (1,241,880) 2,050,000 2,050,000 2,756, ,851 7,428,000 7,428,000 7,428, , ,841 1,997,945 1,997, , ,750 1,377, , , ,750 2,716,619 2,040, , ,000 1,335, ,679 22,300,000 22,300,000 22,300, , , ,000 (25,000) 1,500,000 1,500,000 1,500,000 1,300,000 1,300,000 1,516, ,592 6,878 6,878 1,497, ,901 39,869,750 39,869,750 44,392,043 4,522,293 1,034, , , , , , ,597 (160,597) 500, , ,746 51,254 1,634,000 1,522, , ,769 3,206,750 3,206,750 3,206,750 47,710 (47,710) 675, , , ,595 (842,595) 750, , , , , , ,894 (106,894) 9,834,000 9,834,000 12,667,259 (2,833,259) 2,520,000 2,632,000 2,692,626 (60,626) 17,535,750 17,647,750 21,215,892 (3,568,142) 8,500,000 8,500,000 8,500,000 8,500,000 8,500,000 8,500,000 12,200,000 12,200,000 16,129,321 (3,929,321) 12,200,000 12,200,000 16,264,238 (4,064,238) 20,700,000 20,700,000 24,629,321 (3,929,321) 20,700,000 20,700,000 24,764,238 (4,064,238) 20,700,000 20,700,000 24,629,321 (3,929,321) 39,869,750 39,869,750 46,847,361 (6,977,611) (20,700,000) (20,700,000) (23,131,670) (3,107,420) (2,455,318) (2,455,318) 3,764,866 3,764,866 (3,764,866) (3,764,866) 750, ,000 (750,000) (750,000) 11,722,587 11,722,587 13,600,691 13,600,691 (13,600,691) (13,600,691) 11,722,587 11,722,587 (20,700,000) (20,700,000) (11,409,083) 8,615,167 (2,455,318) (2,455,318) 32,301,800 32,301,800 32,301, ,236, ,236, ,236,492 $ 11,601,800 $ 11,601,800 $ 20,892,717 $ 8,615,167 $ 116,236,492 $ 116,236,492 $ 113,781,174 $ (2,455,318) "concluded" The accompanying notes are an integral part of these financial statements 17

20 OAKLAND-ALAMEDA COUNTY COLISEUM AUTHORITY NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of Reporting Entity - Oakland-Alameda County Coliseum Authority (the Authority) is a joint exercise of powers authority formed on July 1, 1995 by and between the City of Oakland, California (the City) and the County of Alameda, California (the County). The Authority was created to assist the City and the County in financing the public capital improvements, pursuant to the Marks-Roos Local Bond Pooling Act of Stadium Bonds - In August 1995, the Authority issued 1995 Series A and B Lease Revenue Bonds. The Series A bond proceeds were used to defease the bonds issued earlier by Oakland-Alameda County Coliseum, Inc. (the Coliseum, Inc.) to construct the original Coliseum Complex (the Complex). Following the defeasance of the Coliseum s bonds, the title to the Coliseum, its structure, and improvements reverted to the City and the County from the Coliseum, Inc. To provide funds to defease the bonds, to fund certain payments to Raiders in consideration of their relocation to Oakland, and to finance the construction of the improvements to the Stadium at the Complex, the following financial structure was implemented. In February 2004, The 1995 Series A Lease Revenue Bond were fully repaid from the escrow established in 1995 at the time the Coliseum Authority issued the Stadium Bonds. The City and the County executed a Ground Lease which leased the Complex to the Oakland-Alameda County Coliseum Financing Corporation (the Financing Corporation), a California non-profit corporation, in return for certain lease payments paid in advance from proceeds of the Series A and B bonds. The Financing Corporation assigned the Ground Lease to the Authority in return for an amount of bond proceeds sufficient to make the payments under the Ground Lease to the City and the County and to fund certain loans to Raiders, including an Operations Loan, a Training Facility Loan and a Stadium Improvement Loan. Under the Assignment Agreement, the Financing Corporation also assigned to the Authority all its rights to receive repayments on the loans made by the Financing Corporation to the Oakland Raiders (the Raiders) formerly, the Los Angeles Raiders, a California limited partnership under the Raiders Loan Agreement. The Authority leased the Complex to the City and the County under a Master Lease. The lease payments under the Master Lease are designed to be sufficient in amount and timing to pay the debt service on the bonds (see Note 9). The Authority, the City and the County entered into a Management Agreement whereby the City and the County licensed the Complex to the Authority to manage, and the Authority agreed to use any revenue it received from the Complex to offset lease payments under the Master Lease. The Authority originally engaged the Coliseum, Inc. as the operator of the Complex and licensed to the Coliseum, Inc. the Complex for the purposes of operations. The Coliseum, Inc. (see Note 11b) licensed to Raiders the stadium in which to play football 18

21 and licensed the existing stadium to Raiders for the purposes of building and owning the improvements. The Raiders subsequently deeded all the ownership rights to the improvements to the City and County. On May 25, 2000, the Authority issued $201,300,000 in series 2000 C and D Refunding Bonds to retire $181,900,000 of the 1995 Series B-1 and B-2 Variable Rate Lease Revenue Stadium Bonds ($188,500,000 less $6,600,000 principal payment). Net bond proceeds related to this refunding, is $18,567,232 as indicated below: Issuance of Refunding Bond $ 201,300,000 Payment to BNY to redeem 95 bond (181,900,000) Gross Proceeds 9,400,000 Less: Underwriter's Discount (412,020) Less: Letter of Credit Fees (420,748) Net Bond Proceeds $ 18,567,232 The Refunding Bonds currently are secured by a direct-pay letter of credit issued by Bank of New York and California State Teachers Retirement System pursuant to the Reimbursement Agreement. Arena Bonds - On August 12, 1996, the Authority issued $70,000,000 Series A-1 and $70,000,000 Series A-2 Variable Rate Lease Revenue Bond (Variable Rate Bonds), pursuant to the Marks-Roos Local Bond Pooling Act of 1985, to finance the costs of remodeling the Coliseum Arena (Arena) located at the Oakland-Alameda County Complex, as well as other costs associated with the retention of CC Partners, a California general partnership, d.b.a. Golden State Warriors (the Warriors), to satisfy certain obligations of the Authority, the City, the County and Coliseum, Inc. in connection with the retention of the Warriors to play professional basketball at the Arena for at least 20 basketball seasons, beginning with the season. These obligations are evidenced in a series of agreements (Warrior Agreements) among the Warriors, the City, the County, Coliseum, Inc. and the Authority, to pay interest and related expenses on the Variable Rate Bonds during construction, to provide a reserve fund for the Bonds and to pay the issuance cost of the Bonds. Under the original Warriors Agreements, the Arena Bonds are limited obligations of the Authority payable solely from revenues of the Authority received by the Authority on behalf of the City and County. These revenues consist of payments from the Warriors up to $7,428,000 annually from premium seating revenues, the sale of personal seat licenses by the Authority, concessionaire payments and Arena naming rights. If necessary to prevent default, additional premium seating revenues up to $10,000,000 may be pledged to service Arena debt. If the above revenues are not sufficient to cover the debt service requirements in any fiscal year, the City and County are obligated to make up the shortfall in the base rental payment from their respective General Funds. The Arena Bonds are currently secured by a direct-pay letter of credit issued by Bank of New York, California State Teachers Retirement System and Allied Irish Bank pursuant to the Reimbursement Agreement. 19

22 B. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the Authority. The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the proprietary fund and fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the Authority's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The Authority does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the Authority, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the Authority. Fund Financial Statements: Fund financial statements report detailed information about the Authority. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e. revenues and other financing sources) and decreases (i.e. expenditures and other financing uses) in net current assets. Description of Funds - The accounts of the Authority are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for within a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance (or retained earnings), revenues and expenditures or expenses, as appropriate. 20

23 The Authority s resources are allocated to, and accounted for in, the individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The Authority's activities are organized into major governmental funds as follows: Major Governmental Funds: The General Fund is the primary operating fund of the Authority. It is used to account for all financial resources except those required to be accounted for in another fund. The Special Revenue Fund is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The Authority maintains one special revenue fund. The Debt Service Fund is used to account for the accumulation of financial resources and payment of general long-term debt principal, interest and related costs. The Authority maintains one debt service fund for the stadium and one debt service fund for the arena. C. Basis of Accounting: Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the general-purpose financial statements. Basis of accounting relates to the timing of measurement made, regardless of the measurement focus applied. Governmental funds are generally accounted for using the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current fiscal period. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the Authority, available means collectible within the current period or within 60 days after year-end. Expenditures are recognized in the accounting period in which the liability is incurred (when goods are received or services rendered) except for un-matured interest on general long-term debt, which is recognized when due. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Authority has elected not to follow subsequent private-sector guidance. D. Budgets and Budgetary Accounting The Authority adopts an annual operation budget on or before June 30 for the ensuing fiscal year for the General Fund and Debt Service Fund. The Board of Commissioners of the Authority must approve the annual budget and any amendments to the budget. 21

24 E. Totals (Memorandum Only) Columns in the accompanying combined financial statements captioned "Totals (Memorandum Only)" do not present consolidated financial information. They are presented for purposes of additional analysis and are not necessary for a fair presentation of the financial statements. These data are not comparable to a consolidation and do not present financial position or results of operations in conformity with generally accepted accounting principles. F. Deposits and Investments Investments are reported at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for certain investments and for External Investment Pools. G. Restricted Assets Assets that are restricted for specified uses by debt requirements are classified as restricted because they are maintained in a separate bank account or by fiscal agents and their use is limited by applicable bond covenants or agreements. Liabilities payable from such restricted assets are separately classified on the statement of net assets. H. Issuance Costs In the government-wide financial statement, issuance costs are deferred and amortized over the life of the bonds. Long-term debt is reported as net of the unamortized issuance costs. In the fund financial statements, governmental fund types recognize issuance costs at the time bonds are issued. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures and all other amount is reported as other financing sources or uses. I. Use of Estimates The preparation of the basic financial statement in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities at the date of the basic financial statements, and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets. 22