Finance & Asset Management Committee Meeting Agenda

Transcription

1 Finance & Asset Management Committee Meeting Agenda Date: Tuesday, June 17 th, 2014 Time: 4:00 p.m. 6:00 p.m. Location: The Elliott Bay Room Committee Members: Gloria Skouge (Chair), Betty Halfon, Ann Magnano, Patrice Barrentine, David Ghoddousi, Jim Savitt, Patrick Kerr 4:00pm I. Administrative: A. Approval of Agenda B. Approval of the Finance & Asset Management May 20 th, 2014 Committee Meeting Minutes Chair 4:05pm II. Announcements and/or Community Comments 4:15pm III. Presentation Items A. Presentation of the PDA Annual Audit Report for year 2013 B. Presentation of Security Review & Recommendations Peterson Sullivan LLP Randy Stegmeier 4:45pm IV. Reports & Discussion Items A. Review of the Financial Statements for May 2014 I. Checking Account activity Report Sabina Proto 5:00pm 5:15pm V. Reports and Action Items A. Action Item: Proposed Resolution 14-44: Authorization for Investment of Pike Place Market PDA monies in Local Governmental Investment Pool B. Action Item: Proposed Resolution 14-45: Approval of 2013 PDA Audited Financial Statements C. Action Item: Proposed Resolution 14-40: Authorization for Contract Authority Replacement of Deteriorated Panels above Main Entry into the Market - Leland Building D. Action Item: Proposed Resolution 14-42: Authorization for Contract Authority - Repair & Paint Western Facing Wall Façade and Windows of the LaSalle VI. Property Management Report A. Residential Property Management Report Sabina Proto Sabina Proto Steve Nelson Andre Zita John Turnbull 5:20pm VII. Public Comment Chair 5:25pm VIII. Closed Session I. Property Management Report - Closed Session (RCW Jennifer Maietta Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

2 5:45pm [c]) II. Review of Lease Proposals New Lease - Chin Music Press Pike Place #312 New Lease - Rummage Around Pike Place #329 III. Review of Delinquency Report a. Vacancy Report b. Current Lease Negotiations IX. Open Session A. Action Item: Proposed Resolution 14-46: Lease Proposals - May 2014 Jennifer Maietta 5:50pm X. Resolutions to be added to the Consent Agenda Chair 5:55pm XI. Concerns of Committee Members Chair 6:00pm XII. Adjournment Chair Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

3 Finance & Asset Management Committee Meeting Minutes Tuesday, May 20 th, :00 p.m. to 6:00 p.m. Elliott Bay Room Committee Members Present: Gloria Skouge, David Ghoddousi, Patrick Kerr, Ann Magnano, Jim Savitt, Betty Halfon, Patrice Barrentine Other Council Members Present: Staff Present: Ben Franz-Knight, Sabina Proto, Jay Schalow, John Turnbull, Jennifer Maietta, Matt Holland, Brady Morrison, Jeff Jarvis, Bob Beckstrom, Dianna Goodsell Others Present: Howard Aller, Mark Brady, Ruby Francisco, Gail Elliott, Brian Stueland The meeting was called to order at 4:04 p.m. by Gloria Skouge, Chair. I. Administration A. Approval of the Agenda The agenda was approved by Acclamation B. Approval of the Market Programs April 15 th, 2014 Meeting Minutes. The minutes were approved by Acclamation II. Announcements and Community Comments Mark Brady, Market Rummage hall tenant provided a written letter and petition the committee to submit into the meeting records. III. Brian Stueland noted that he has been coming to the rummage for a few years. He added that the most interesting store in the Market is Mark s rummage space, which hosts incredible prices. He hopes that Mark Brady could get permission to continue operating what he has been doing in his current space. Ruby Francisco stated that she has been in the market 35 years. She thinks that another rummage space is a good idea. She stated that it brings people to the Market. She added that she herself checks the rummage hall frequently for what s new. Presentation and Discussion Items A. Review of the Financial Statements for April 2014 Sabina Proto, Director of Finance presented a brief overview of the Financial Statements for April The following content was included under the Financial Statements for April Current Assets increased by $184,739. Designated Cash showed a decrease due to capital expenditures. Fixed Assets increased because of the work performed in different capital projects. Current Liabilities showed a slight decrease from the prior month in Accounts Payable, Other Liabilities and Deferred Revenue. Long Term Debt Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

4 Page 2 decreased due to the payments on our long term obligations and our Net Position for the current year operating result was $1,311,879. Under the Accounts Receivable Report, the accounts receivable increased slightly in commercial and daystall categories. Under the PDA Operating Statement, the Total Revenue for the end of April 2014 was $5,169,057 or over budget by $239,751. The Total Operating Expense YTD was $3,660,791 or $219,000 under budget. The Net Operating Result YTD for the end April was $1,568,534 or $458,841 over budget. Under the Net Result after Debt Service & Reserves, the Annual Budget was $ 1,745,408; for the end of April the actual amount was $568,534. Footnotes on the Operating Expenses noted the following: Commercial Revenue was over budget mainly in Base Rent and Percent Rent and Direct Utilities; Percent Rent was $48,852 over budget and $85,448 over the actuals of the same period last year. Residential Revenue was over budget overall by $ 13,699. Surface Revenue was over budget by $13,699; there had been consideration during the 2014 budget process in closing the Desimone lot, but this was postponed for this year. Garage Revenue was over budget by $82,126 because on Early Bird customers and increases in the number of construction workers parking in our garage. Miscellaneous Revenue was slightly under budget overall. Under Operating Expenses, expenses were under budget in most departments. l. Checking Account Activity Report The Checking Account Activity Report was distributed to Dianna Goodsell, Administrative Services Coordinator. B. Rummage Hall Update John Turnbull presented the Rummage Hall Update with the Finance and Asset Management Committee. He reported that the There was a brief discussion that followed. C. Update on Seattle City Light Rates Ben Franz-Knight provided an update on the Seattle City Lights (SCL) rates with the committee. He noted that we had our first meeting with several Constituency representatives and the Energy Committee Chair Sawant, to discuss the SCL rate issues on May 13 th. He stated that we are working diligently with the Energy Committee toward resolution of the rate issue. D. Report on Summer Security Planning Randy Stegmeier, PDA Security Manager reported on the summer security planning for the Market. A copy of the summer security planning report was included with the meeting minute s record. Randy stated that the summer months have a tendency to be the busiest time for the Market and Market security, especially weekend days. He reported that there are frequent closures on Pike Place due to vehicular traffic on weekend; this common scenario occupies two to three security officers on detail, removing them from

5 Page 3 their regular patrol. Randy discussed a proposal for security staffing during the summer months. The summary of the Summer Security Proposal was noted as follows: The Western Washington University Department of Public Safety employs approximately 20 students during the academic year as Public Safety Assistants. These students are back-grounded, trained and experienced in radio usage and accustomed to wearing a jacket or shirt identifying them as Public Safety Assistants. They also have experience patrolling parking lots, locking and unlocking buildings and doing some traffic control details. Many of the PSAs from Western are residents of the Seattle area and would possibly be available for temporary work at the Market during their summer break. Western Washington University s summer break begins after Spring Commencement on June 14 th and extends through September 20 th, 2014; a fourteen week period. This time period is under 100 days, so does not approach the 120 day maximum for temporary employees. As an additional benefit, the temporary employment of these students could become a source of recruitment for fulltime security officers, when vacancies or expansion occur. Proposals for summer Public Safety Assistants for Market Security: Hire three students as temporary Public Safety or Security Assistants on or about June 16 th and employ them until approximately September 21 st, Two of the three would work forty hours per week on a 4-10 schedule, working from 9:00 AM until 7:00 PM. One employee would work Friday through Monday and the other would work Thursday through Sunday. There would be no temporary staff on Tuesdays or Wednesdays. The third Security Assistant would work Saturdays and Sundays only from 9:00 AM until 7:00 PM, or twenty hours per week. This proposal amounts to 100 hours worked each week at $13.65/hour or $ Multiplying that total of $1365 by the fourteen week period yields an expenditure of $19, 110 for the summer. There was a discussion that followed with the committee. David Ghoddousi motioned to approve the Summer Security proposal as noted as Action Item: Proposed Resolution 14-39: Authorization for Budget Allocation for Temporary Summer Staffing - PDA Security, Exhibit A. The proposals would include the authorization of an additional annual expense not to exceed $19,110 to the 2014 PDA Annual Operating Budget to allow for salary, taxes and benefits for the temporary Summer Staffing for PDA Security as seen in the attachment Exhibit A, Summer Staffing for PDA Security. David Ghoddousi moved, Ann Magnano seconded For: Gloria Skouge, David Ghoddousi, Ann Magnano, Patrice Barrentine, Jim Savitt, Betty Halfon, Patrick Kerr Against: 0 Abstained: 0

6 Page 4 IV. There was a brief discussion that followed. Resolution 14-39: Authorization for Budget Allocation for Temporary Summer Staffing - PDA Security passed unanimously Reports and Action Items A. Action Item: Proposed Resolution 14-36: Management fee payable to Market Foundation for their services during Arcade Lights Event Sabin Proto introduced the resolution which states that the PDA Council hereby approves to pay Market Foundation a Management Fee in the amount of $13,390 for their services provided during the Arcade Lights event in April The calculation of the Management Fee is done based on the Management Agreement between PDA and Market Foundation for this event which states: For the services provided PDA will pay Market Foundation a Management Fee which will be calculated $1 for each token collected by the vendors less applicable taxes. Tokens from vendors 14,767 $14,767 Less taxes ($ 1,377) Total Due to Market Foundation $13,390 Patrice Barrentine moved, Betty Ann Magnano seconded For: Gloria Skouge, David Ghoddousi, Ann Magnano, Patrice Barrentine, Jim Savitt, Betty Halfon, Patrick Kerr Against: 0 Abstained: 0 Resolution 14-36: Management fee payable to Market Foundation for their services during Arcade Lights Event passed unanimously B. Action Item: Proposed Resolution 14-35: Authorization for Contract Authority - Pressure Wash All Garage Interior Floors Jeff Jarvis introduced the resolution which states that the Pike Place Market Preservation and Development Authority (PPMPDA) was chartered by the City of Seattle pursuant to RCW et. Seq with the mission of promoting enterprises essential to the functioning of the Pike Place Market, including the preservation and expansion of the low-income residential community, the promotion and survival of small businesses, and the expansion of services to the public market and community; and, WHEREAS, in order to maintain the viability of the Pike Place Market buildings the PPMPDA has determined that each year, the garage floors require extensive cleaning, WHEREAS, the PPMPDA has executed a competitive bid to pressure wash all interior floor levels of the

7 Page 5 garage. Therefore, BE IT RESOLVED that the PPMPDA Council authorizes the PPMPDA Executive Director or his designee to enter into a contract with Mr. PressureWash, in an amount not to exceed $11, for the execution of work necessary to accomplish scope. The funds for this project will be drawn from the Garage Operations Budget, COMGAR Garage Yearly Operational Budget David Ghoddousi moved, Betty Halfon seconded For: Gloria Skouge, David Ghoddousi, Ann Magnano, Patrice Barrentine, Jim Savitt, Betty Halfon, Patrick Kerr Against: 0 Abstained: 0 There was a brief discussion that followed. Resolution 14-35: Authorization for Contract Authority - Pressure Wash All Garage Interior Floors passed unanimously.. C. Action Item: Proposed Resolution 14-37: Authorization for Contract Authority - Upgrade Metasys Server Software Brady Morrison introduced the resolution which states that the Pike Place Market Preservation and Development Authority (PPMPDA) was chartered by the City of Seattle pursuant to RCW et. Seq with the mission of promoting enterprises essential to the functioning of the Pike Place Market, including the preservation and expansion of the low-income residential community, the promotion and survival of small businesses, and the expansion of services to the public market and community; and, WHEREAS, in order to maintain the viability of the Pike Place Market buildings the PPMPDA has determined that the current Metasys software system is out of date, and needs to be updated. WHEREAS, the PPMPDA has executed a bid to upgrade the current Metasys System. BE IT RESOLVED that the PPMPDA Council authorizes the PPMPDA Executive Director or his designee to enter into a contract with Johnson Controls, Inc., in an amount not to exceed $26, for the execution of work necessary to accomplish scope. The funds for this project will be drawn from the Capital Inventory Budget, PDA Capital Inventory HVAC David Ghoddousi moved, Patrice Barrentine seconded For: Gloria Skouge, David Ghoddousi, Ann Magnano, Patrice Barrentine, Jim Savitt, Betty Halfon, Patrick Kerr Against: 0 Abstained: 0 There was a brief discussion that followed.

8 Page 6 Resolution 14-37: Authorization for Contract Authority - Upgrade Metasys Server Software passed unanimously V. Property Management A. Residential Property Management Report John Turnbull presented the Residential Property Management Report for the month of April 2014; a copy of the report was included with the meeting minute s record. VI. Public Comment None VII. Closed Session The Committee entered into Closed Session at 5:30p.m I. Property Management Report - Closed Session (RCW [c]) II. III. Review of Lease Proposals New Lease - Lamplight Books Pike Place #14 New Lease - Maria s - 97B Pike Street Review of Delinquency Report a. Vacancy Report b. Current Lease Negotiations The Committee entered into Open Session at 6:10p.m IV. Open Session Action Item: Proposed Resolution 14-38: Lease Proposals - May 2014 Jennifer Maietta introduced the resolution which states the lease proposals for April 2014 as follows: Tenant Term Start Date Lamplight Books Three (3) Years June 1, 2014 Joseph Fridlund Maria s One (1) Year June 1, 2014 Maria Cristina Estrada Villa David Ghoddousi moved, Patrick Kerr seconded For: Gloria Skouge, David Ghoddousi, Ann Magnano, Patrice Barrentine, Jim Savitt, Betty Halfon, Patrick Kerr Against: 0

9 Page 7 Abstained: 0 Resolution 14-38: Lease Proposals - May 2014 passed unanimously VIII. IX. Resolutions to be added to the Consent Agenda Resolutions 14-35, 14-36, and were added to the Consent Agenda. Concerns of Committee Members None X. Adjournment The meeting was adjourned at 6:16 pm by Gloria Skouge, Chair Meeting minutes submitted by: Dianna Goodsell, Administrative Services Coordinator

10 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY FINANCIAL REPORT WITH SUPPLEMENTARY REPORTS AND SCHEDULES IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 DECEMBER 31, fs Revised: 6/12/2014 1:00 PM csk

11 C O N T E N T S Page MANAGEMENT'S DISCUSSION AND ANALYSIS INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS STATEMENT OF NET POSITION STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION STATEMENT OF CASH FLOWS and 13 NOTES TO FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION COMBINING STATEMENT OF REVENUES AND EXPENSES INDEPENDENT AUDITORS 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 and 36 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A and 38 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS SCHEDULE OF FINDINGS AND QUESTIONED COSTS fs Revised: 6/12/2014 1:00 PM csk

12 MANAGEMENT'S DISCUSSION AND ANALYSIS We are pleased to present the Pike Place Market Preservation and Development Authority ("the PDA") financial reports for the year ended December 31, This report was prepared by the PDA's finance staff. The 2013 financial statements were audited by the public accounting firm of Peterson Sullivan LLP. The information presented in this report is the responsibility of the management of the PDA. To the best of our knowledge, the information presented is accurate in all material respects and is presented in a manner designated to fairly state the financial position and results of operations of the PDA and includes all necessary disclosures to present a complete understanding of the PDA's financial affairs. Profile The PDA is an independent public corporation created and chartered by the City of Seattle ("the City") in 1973 to own and operate the buildings and open spaces in the Pike Place Market Historic District ("the District"). After a citizen's initiative in 1971 directed the City to create a Historic District in and around the Pike Place Market ("the Market") and to rehabilitate the properties therein, the City purchased the majority of properties in the District, rehabilitated these buildings, and transferred them to the PDA to operate in accordance with the initiative directive and City charter. The PDA owns approximately 80% of the property in the District. The PDA is not a component of the City and the City is not financially accountable for the operations of the PDA. The PDA is an independent public corporation and its governance rests in a twelve member Council. This Council appoints an Executive Director to administer the affairs of the PDA as prescribed by its charter. The charter of the PDA directs the PDA to manage the buildings and open space in the Market so that the properties and traditional uses of the Market are preserved and maintained. The charter also directs the PDA to ensure that a place for farmers to sell their goods directly to consumers is maintained, to ensure that services to low and moderate income persons continue to be provided, and that opportunities for small, owner operated businesses continue to be available in the Market. To that end, the PDA provides property management services to over 220 small commercial tenants within its properties in the nine-acre District. It offers space to four social service agencies at lower-than-market rates and provides over 300 residential units to the low and moderate income population. The PDA also offers year-round sales space on a daily basis to farmers wishing to sell direct to the public in a farmer's market venue. Daily rental spaces (daystalls) that are not rented to farmers are rented to craft vendors selling their original arts and crafts. As an independent public agency, the PDA operations are supported entirely from its tenants' rents, commercial, residential, and daystall, plus minor amounts from investment and miscellaneous sources. The PDA, as a real estate owner and development entity, has some properties held in separate entities that it reports as discretely presented component units in these financial statements, and the PDA itself is referred to as the primary government, as required by the Government Accounting Standards Board fs Revised: 6/12/2014 1:00 PM csk

13 Major Initiatives The PDA is currently involved in the development of the Pike Place Market Waterfront Entrance ( PPMWE ) project. The PPMWE will encompass a low-rise, mixed-use development that will provide parking for the Market and waterfront, low-income housing for the seniors, expanded social services, and added Market retail space. The site will also provide generous accessible public open space and expansive views of Elliot Bay while providing a critical new connection between Pike Place Market and the City of Seattle s central waterfront project ( Central Waterfront ) that will emerge after the demolition of the Alaskan Way Viaduct. Construction is planned to commence within the next year with a scheduled completion in The total cost of the project is estimated to be approximately $66 million. Funding for this amount will come from various sources including PDA reserves, the City, the State of Washington, low-income housing tax credit investors, and a capital fundraising campaign led by the Pike Place Market Foundation. Capitalized expenditures related to the PPMWE project as of December 31, 2013, totaled approximately $2.0 million, and consist primarily of architectural design costs. The project faced no significant cost overruns or schedule setbacks in 2013 and none are foreseen in the completion of the project. Overview of the Financial Statements Assets of the PDA exceeded liabilities at December 31, 2013, by $100.2 million (net position). Of this, $25.6 million is unrestricted and may be used to meet the PDA's ongoing operating obligations. Net position increased by $0.7 million in 2013, primarily due to a $1.6 million grant received from Pike Place Market QB2, and other non-operating revenues offset by losses from operations. Net capital assets, increased by $1.8 million, and was financed primarily through capital grants and non-capital financing activities fs Revised: 6/12/2014 1:00 PM csk

14 Financial Position (or Net Position) Assets Current assets $ 3,642,134 $ 4,600,441 Non-current assets 53,196,467 53,821,303 Capital assets, net 85,257,686 83,503,186 Total assets $ 142,096,287 $ 141,924,930 Liabilities Accounts payable and accrued expenses $ 3,737,471 $ 3,525,459 Current portion of master lease revenue advance 466, ,332 Current portion of non-capital grant advance 333,333 Current portion of loans payable 80,229 76,021 Current portion of bonds payable 1,108,184 1,065,727 Total current liabilities 5,725,549 5,133,539 Master lease revenue advance, net of current portion 23,860,655 24,326,987 Non-capital grant advance, net of current portion 500,000 Loans payable, net of current portion 3,847,280 3,927,509 Bonds payable, net of current portion 7,274,248 8,390,284 Long-term obligation 680, ,692 Total long-term liabilities 36,162,875 37,325,472 Total liabilities 41,888,424 42,459,011 Net Position Net investment in capital assets 72,267,053 69,362,953 Restricted for required reserves 2,292,453 2,997,523 Unrestricted 25,648,357 27,105,443 Total net position 100,207,863 99,465,919 Total liabilities and net position $ 142,096,287 $ 141,924,930 The statement of net position presents the assets, liabilities, and net position of the PDA at the end of the fiscal year. The purpose is to give a snapshot of the financial condition of the PDA at a certain point in time. Total assets of the PDA amounted to $142.1 million and $141.9 million at December 31, 2013 and 2012, respectively. Investments in Market properties are reflected in both the PDA (primary government) and the component units as some of the properties have been master leased to two entities controlled by the PDA and capital spending has occurred in these properties. The complete financial statements indicate the full amount of the increase in capital assets. The PDA's primary asset base is its real property in the Market Historic District and these properties make up $85.3 million of the total $142.1 million or 60 percent of total assets as of December 31, The remainder of the PDA's total assets is comprised, for the most part, of cash, cash reserves, and two loans receivable, representing 37 percent of the total assets fs Revised: 6/12/2014 1:00 PM csk

15 Total liabilities of the PDA were $41.9 million and $42.5 million at December 31, 2013 and 2012, respectively. The PDA's major liabilities consist of real estate loans, PDA bond issues, and advanced master lease revenue. Net position represents the PDA's equity and represents a strong financial position relative to the PDA's debt. Net position is divided into three categories. The first category is net investment in capital assets and represents the PDA's land, buildings, structures, equipment, and construction in progress, less any outstanding debt related to these assets. The second category is restricted for required reserves and represents assets, generally cash that has external limitations on the way it may be used. The last category of net position is unrestricted and these are available for use in the PDA's normal operations. Certain amounts of unrestricted net position are designated by the PDA Council for particular uses and those are described in more detail in the notes to the financial statements. Statement of Revenues, Expenses, and Changes in Fund Net Position Operating revenue $ 10,372,276 $ 9,530,695 Operating expenses (12,590,711) (11,665,487) Operating loss (2,218,435) (2,134,792) Non-operating revenue 3,640,259 10,625,948 Non-operating expenses (679,880) (942,161) Net non-operating income 2,960,379 9,683,787 Change in net position 741,944 7,548,995 Net position, beginning of year 99,465,919 91,916,924 Net position, end of year $ 100,207,863 $ 99,465,919 The purpose of this statement is to present the PDA's operations and net revenue earned from those operations. The PDA's operations are primarily real estate development and management. The PDA's real estate holdings consist of commercial and residential properties and its primary revenue source is rent from these holdings. The PDA's purpose is to operate the Pike Place Market in accordance with its charter mandates, not necessarily to maximize income from operations. Residential rentals are made primarily to low and moderate income persons, and commercial spaces are leased to small and unique owner operated businesses at rates not generally available in downtown Seattle. The PDA's objective is to be financially strong while preserving the traditional character of this unique commercial and residential community. With that in mind, operating loss was greater in 2013 compared to Non-operating revenue and income reflect the Levy revenue, capital and other grants revenue, and related party grant revenue. This revenue is classified as non-operating as it is nonrecurring and it is not a part of the PDA's normal operations. Non-operating revenue also includes interest income from reserves and investments. Non-operating expenses consist primarily of interest expense on bonds and loans payable fs Revised: 6/12/2014 1:00 PM csk

16 Economic and Other Factors Affecting the PDA's Future During 2014, the PDA will continue to invest in maintaining, managing, and supporting the Market s core infrastructure, mission, and programs. In addition to ensuring prudent levels of staffing and resources for basic services in facilities, security, maintenance and capital program, additional support will be allocated to the following key goals: Investment in Capital Projects and management of reserves to support a strong and well-maintained Market based on our 30 Year Capital Needs Assessment. Continued development of plans and funding for the PPMWE project. Support for Farm and Food programs including a new staff position and increased healthcare outreach for our community and low-income residents. Continued investment in Market safety and security. Continued management resources to support quality analysis and research of strategic issues. Marketing programs designed to strengthen regular patronage by Seattle residents with increased emphasis on spring and fall promotional efforts was a very good year in the Pike Place Market with an average sales increase of 7% and low vacancies in both commercial and residential. This correlates directly with an increased number of visitors to the Market and use of public facilities. This can be attributed to several factors. First, the Market is a well-known destination in addition to serving as a beloved local resource for daily produce and goods. As a destination, the Market is generally perceived as having great value with no cost of entry beyond parking or public transit fare. Further, the Market serves as a food center including produce, prepared meals, and full service restaurants. We continue to see growth in employment and housing. This is reinforced by strong local and regional signs including projections for increased revenue from the City, King County, and State of Washington. Our planning and design efforts for the new PPMWE project continue to progress on a schedule that has construction commencing during A majority of the project costs are tracked under a separate project budget; however some revenue impacts specifically in parking are reflected in our 2014 projections based on the loss of parking on the Desimone lot once construction commences. We have secured funding to support work through fall of 2014 at which time we anticipate approval of a Development Agreement with the City of Seattle that will outline the timing, source, and amounts of remaining funding required for the project. With the completion of the 30 Year Capital Needs Assessment, we will continue to make significant investments in annual capital improvements to buildings and infrastructure in the Market. The 2014 capital projects program includes just over $2 million in work. Roughly half the work is remaining levyfunded projects, including the windows on Western. The other half is covered 100% by net operating proceeds. Finally, Pike Place Market PDA will continue to support the Social Service efforts. Additional funding is dedicated to increase staffing to ensure a successful PPMWE Capital Campaign lead by the Market Foundation. Funding is also allocated to build on work established in 2013 with AmeriCorps staff and establish a new full time position dedicated to Food Access, support of aggregation, and value added production with our Market farmers and making fresh Market produce more accessible to our low-income residents. Additional funding is also included for more direct healthcare outreach from the Clinic directly to residents, Daystall tenants, and farmers fs Revised: 6/12/2014 1:00 PM csk

17 Requests for Information This financial report is designed to provide users with a general overview of the PDA's finances and to demonstrate the PDA's accountability for the money it receives. If you have any questions about this report or need additional financial information, a request should be addressed to the Pike Place Market Preservation and Development Authority, 85 Pike Street, Room 500, Seattle, WA or please call (206) The PDA's component units issue their own separate audited financial statements. These statements may also be obtained by contacting the Pike Place Market Preservation and Development Authority at the address or phone number indicated above fs Revised: 6/12/2014 1:00 PM csk

18 INDEPENDENT AUDITORS' REPORT To the Council Pike Place Market Preservation and Development Authority Seattle, Washington We have audited the accompanying financial statements and the aggregate discretely presented component units of the Pike Place Market Preservation and Development Authority ("the PDA"), a public governmental corporation, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the PDA's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the PDA's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the PDA's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

19 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the PDA and the aggregate discretely presented component units as of December 31, 2013, and the respective changes in their net position and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States require that the management's discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted principally of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our 2013 audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary information on page 32 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 8

20 Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 Our audit was conducted for the purpose of forming an opinion on the financial statements that comprise the PDA's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated, on our consideration of the PDA's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, 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, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the PDA's internal control over financial reporting and compliance. 9

21 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY ASSETS STATEMENT OF NET POSITION December 31, 2013 See Notes to Financial Statements PDA Discrete Component Units Current Assets Cash and cash equivalents $ 1,920,454 $ 882,341 Accounts receivable, tenants 222,209 5,573 Accounts receivable, levy 255,922 Accounts receivable, other 433,879 Accounts receivable, related parties 584, ,475 Prepaid master lease expense, current portion 466,332 Other prepaid expenses 224,935 Total current assets 3,642,134 1,895,721 Long-Term Assets Designated cash and cash equivalents 11,545,005 Restricted cash and cash equivalents 2,292,453 1,782,094 Restricted investments 108,700 Financing lease receivable 2,453,834 Prepaid master lease expense, less current portion 23,860,654 Loans receivable 36,828,649 Loan fees, net of accumulated amortization 1,543,825 Other long-term assets 76,526 Capital assets, net 85,257,686 30,837,912 Total assets $ 142,096,287 $ 60,028,906 LIABILITIES AND NET POSITION Current Liabilities Accounts payable $ 2,024,452 $ 18,356 Accounts payable, related party 541, ,932 Accrued expenses and deposits payable 1,171,070 20,917 Interest payable 920,760 Current portion of master lease revenue advance 466,332 Current portion of non-capital grant advance 333,333 Current portion of loans payable 80,229 18,826 Current portion of bonds payable 1,108,184 Total current liabilities 5,725,549 1,531,791 Long-Term Liabilities Master lease revenue advance, net of current portion 23,860,655 Non-capital grant advance, net of current portion 500,000 Loans payable, net of current portion 3,847,280 51,342,490 Bonds payable, net of current portion 7,274,248 Long-term obligation 680,692 Total long-term liabilities 36,162,875 51,342,490 Total liabilities 41,888,424 52,874,281 Net Position Net investment in capital assets 72,267,053 Restricted for required reserves 2,292,453 Unrestricted 25,648,357 7,154,625 Total net position 100,207,863 7,154,625 Total liabilities and net position $ 142,096,287 $ 60,028, fs Revised: 6/12/2014 1:00 PM csk

22 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION For the Year Ended December 31, 2013 PDA Discrete Component Units Operating revenue Rent $ 6,369,206 $ 8,198,393 Parking 2,821,766 Management fees 935,364 Security 52,434 Contributions and grants 25, ,309 Miscellaneous 168,506 Total operating revenue 10,372,276 8,532,702 Operating expenses Property management 6,967,516 4,200,541 Depreciation and amortization 3,074, ,115 Parking 1,418,079 Security 1,041,226 Professional fees 89, ,136 Total operating expenses 12,590,711 6,051,792 Operating income (loss) (2,218,435) 2,480,910 Non-operating revenue (expenses) Interest income 951,652 1,656 Forgiveness of interest 22,750 Related party grant revenue (expense) 1,565,981 (1,565,981) Capital grants 687,287 Levy revenue 245,922 Non-capital grant revenue 166,667 Interest expense (649,945) (850,049) Amortization of bond issuance costs and loan fees (29,935) (52,836) Net non-operating revenue (expenses) 2,960,379 (2,467,210) Change in net position 741,944 13,700 Net position, beginning of year 99,465,919 7,140,925 Net position, end of year $ 100,207,863 $ 7,154,625 See Notes to Financial Statements fs Revised: 6/12/2014 1:00 PM csk

23 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY STATEMENT OF CASH FLOWS For the Year Ended December 31, 2013 PDA Discrete Component Units Cash Flows from Operating Activities Cash received from tenants for rent $ 6,314,406 $ 8,213,750 Cash received from parking 2,821,766 Cash received from management fees and other customers 693, ,309 Cash paid to employees (5,297,427) (62,197) Cash paid to suppliers and others (4,263,472) (4,549,339) Net cash flows from operating activities 269,230 3,936,523 Cash Flows from Non-Capital Financing Activities Advances from related parties 1,075, ,195 Related party grant funds received (paid) 1,565,981 (1,565,981) Non-capital grant funds received 1,000,000 Net cash flows from non-capital financing activities 3,641,334 (1,233,786) Cash Flows from Capital and Related Financing Activities Purchases of capital assets (4,435,628) (1,409,564) Change in restricted cash 705,070 80,216 Levy funds received 230,223 Capital grant funds received 719,152 Interest paid (642,723) (711,566) Repayment of loans payable (76,021) (18,639) Repayment of bonds payable (1,063,163) Net cash flows from capital and related financing activities (4,563,090) (2,059,553) Cash Flows from Investing Activities Interest received 661,303 1,656 Proceeds from sales of restricted investments 52,992 Net cash flows from investing activities 661,303 54,648 Net change in cash and cash equivalents 8, ,832 Cash and cash equivalents, beginning of year 13,456, ,509 Cash and cash equivalents, end of year $ 13,465,459 $ 882,341 Included in the statement of net position as follows: Cash and cash equivalents $ 1,920,454 $ 882,341 Designated cash and cash equivalents 11,545,005 - $ 13,465,459 $ 882,341 See Notes to Financial Statements fs Revised: 6/12/2014 1:00 PM csk

24 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY STATEMENT OF CASH FLOWS For the Year Ended December 31, 2013 (Continued) PDA Discrete Component Units Reconciliation of Operating Income (Loss) to Net Cash Flows from Operating Activities Operating income (loss) $ (2,218,435) $ 2,480,910 Adjustments to reconcile operating income (loss) to net cash flows from operating activities Depreciation 3,074, ,115 Change in operating assets and liabilities Accounts receivable, tenants and other (75,815) 15,356 Master lease revenue advance/prepaid lease (466,332) 466,332 Other prepaid expenses (2,225) Accounts payable and accrued expenses (42,281) 1,810 Cash flows from operating activities $ 269,230 $ 3,936,523 See Notes to Financial Statements fs Revised: 6/12/2014 1:00 PM csk

25 NOTES TO FINANCIAL STATEMENTS Note 1. Organization and Summary of Significant Accounting Policies Organization and Nature of Operations Pike Place Market Preservation and Development Authority ("the PDA"), is a public governmental corporation established by charter issued by the City of Seattle ("the City") in The charter obligates the PDA to preserve, redevelop, and manage the Pike Place Market ("the Market") which resides in a nine-acre historical district in downtown Seattle. According to the charter, the PDA is required to preserve these historical properties, assure the Market's economic viability, provide opportunities and services to low and moderate income people, maintain the tradition of a farmers market for direct sale of fresh produce by the farmer to the consumer, and enhance the economic health of small owner-operated businesses, farmers, and craftspeople. The market properties were renovated using a combination of private and federal funds during the 1970s and early 1980s. In addition, the State of Washington ( the State ) Department of Community Development has a historic preservation easement on the property. Some of the market buildings are approximately 100 years old, and the last major renovation was completed in the late 1970s. At that time, most Market buildings were purchased by the City and transferred to the PDA. However, during 2013 the PDA substantially completed a major renovation to the market that had been ongoing since 2009 and was financed through a City approved $73 million property tax levy ("the Levy"). These improvements included seismic retrofitting, mechanical and electrical upgrades, major plumbing and building repairs and replacements, as well as public amenities such as new public restrooms and elevators. With the Levy renovation project substantially completed, the PDA began to focus on a new project, the development of the Pike Place Market Waterfront Entrance ( PPMWE ). The PPMWE will encompass a low-rise, mixed-use development that will provide parking for the Market and waterfront, low-income housing for the seniors, expanded social services, and added Market retail space. The site will also provide generous accessible public open space and expansive views of Elliot Bay while providing a critical new connection between the Market and the City of Seattle s central waterfront project ( Central Waterfront ) that will emerge after the demolition of the Alaskan Way Viaduct. Construction is planned to commence during the fall of 2014 with a scheduled completion date in early The total cost of the project is estimated to be approximately $65 million. Funding for this amount will come from various sources including PDA reserves, the City, the State, low-income housing tax credit investors, and a capital fundraising campaign led by the Pike Place Market Foundation ( the Market Foundation ). Capitalized expenditures related to the PPMWE project as of December 31, 2013, totaled approximately $2.0 million, and consist primarily of architectural design costs fs Revised: 6/12/2014 1:00 PM mrb

26 Discretely Presented Component Units LaSalle Senior Housing LLC ("LASLLC"), Pike Place Market QALICB ("PPMQB"), and Pike Place Market QB2 ("PPMQB2") are considered component units of the PDA, discretely presented in a separate column on the face of PDA's basic financial statements. As the managing member of LASLLC, and the managing agent of PPMQB and PPMQB2, the PDA is financially accountable for and oversees the day-to-day operations of these three separate legal entities. LASLLC, PPMQB, and PPMQB2 report on a fiscal year-end consistent with the PDA primary government. They issue their own financial statements. The financial statements of LASLLC, PPMQB, and PPMQB2 are presented in accordance with accounting principles (as opposed to governmental accounting principles) generally accepted in the United States, and were audited separately. Copies of these financial statements may be obtained by contacting the PDA. Discretely presented component units are also discussed in Note 12. Financial Statement Presentation The financial statements of the PDA are presented in accordance with governmental accounting principles generally accepted in the United States. Basis of Accounting Due to its business-like operations, the PDA is considered as a stand-alone proprietary entity. The financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities (whether current or noncurrent) associated with its activities are included on the statement of net position. Revenue is recognized when earned and expenses are recorded when an obligation has been incurred. Capital asset purchases are capitalized. Cash and Cash Equivalents For cash flow purposes, highly liquid investments with an original maturity of less than three months that are not restricted are considered cash equivalents. Designated and restricted cash and cash equivalents are described in Notes 2 and 3. The PDA places cash and cash equivalents with banks, and the State of Washington Local Government Investment Pool ("the LGIP"). The LGIP is an un-rated 2a-7 like pool, as defined by Governmental Accounting Standard No. 31. Accordingly, participants' balances in the LGIP are not subject to interest rate risk, as the weighted average maturity of the portfolio will not exceed 90 days. According to Government Accounting Standards guidelines, the balances are also not subject to custodial credit risk. The credit risk of the LGIP is limited as most investments are either obligations of the United States government, government sponsored enterprises, or insured demand deposit accounts and certificates of deposit. Investments or deposits held by the LGIP are all classified as Category 1 risk level investments. They are either insured or held by a third party custody provider in the LGIP's name. At December 31, 2013, the PDA had other cash and cash equivalents in excess of federally insured limits fs Revised: 6/12/2014 1:00 PM mrb

27 Accounts Receivable Accounts receivable from tenants are due for rent and related expenses and are generally unsecured. Accounts receivable from the levy consist of unreimbursed capital expenditures from the City under the Levy. Accounts receivable from others are due for the reimbursement of expenses. Related party receivables are discussed in Note 4. The PDA considers all accounts greater than 30 days old to be past due and uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is generally written off against the allowance. Management determined no allowance was necessary at December 31, Capital Assets The capitalization policy for building improvements includes all items with a unit cost of $2,500 or more, and an estimated useful life of more than ten years. The capitalization policy for equipment includes all items with a unit cost of $500 or more, and an estimated useful life of more than five years. The costs of normal maintenance and repairs which do not increase the value of the assets or materially extend asset lives are charged to operating expenses in the year the expense is incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Buildings (excluding the garage) are depreciated over periods up to 70 years. Building improvements and the garage are amortized/depreciated over periods up to 40 years. Other property and equipment are depreciated over five years. Capital assets are also discussed in Note 6. Net Position Net position is comprised of various net earnings from operating revenue, non-operating revenue, and expenses. Net position is classified in the following three components: Net investment in capital assets This component of net position consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, loans, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. As of December 31, 2013, the total invested in capital assets, net of accumulated depreciation, was $85,257,686 and related debt was $12,990,633. Restricted for required reserves This component of net position consists of external constraints imposed by creditors (through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation, that restrict the use of net position. The PDA had restricted net position of $2,292,453 as of December 31, 2013 (see Note 3). Unrestricted This component of net position consists of net position that does not meet the definition of "restricted for required reserves" or "net investment in capital assets." Classification of Revenue and Expenses The PDA distinguishes operating revenue and expenses from non-operating items in the preparation of its financial statements according to the following criteria: fs Revised: 6/12/2014 1:00 PM mrb

28 Operating Operating revenue and expenses generally result from providing rental, parking, and security services in connection with the PDA's principal ongoing operations. Principal operating revenue includes rent, parking, property management, and security fees. Operating expenses include property management, parking, security, professional fees and other expenses related to delivery of rental, parking, and security services. Non-operating All revenue and expenses not meeting this definition are reported as non-operating revenue and expenses. Levy revenue and capital grants revenue are considered non-operating given the non-recurring nature of the projects they relate to. Revenue is recognized when capital expenditures are incurred and determined to be qualified as reimbursable. Related party grant revenue (expense) is considered non-operating given it is non-recurring in nature and calculated based on a non-operating measure. Rent Revenue The PDA receives regular monthly income from residential and commercial tenants under operating leases. Revenue is recognized at the face value of the lease agreement rather than on the straight-line method over the lease term as management believes the difference would be immaterial. Residential leases are stated at a fixed monthly rate, and commercial leases are stated at a base rate or a percentage of monthly sales, whichever is greater. Most commercial tenants pay rent based on a percentage of monthly sales. Generally, residential lease contracts are for a one-year term, and are always cancelable with a 30-day notice by either party. Commercial lease contracts have terms up to five years and are noncancelable (see Note 10). Master Lease Revenue Advance On March 2, 2011, the PDA entered into a 55-year lease agreement allowing PPMQB2 to lease six buildings within the Pike Place Market Historic District. The PDA received $25,648,261 from PPMQB2 for the lease of the six buildings for the 55-year period from March 2, 2011 to February 28, The master lease revenue advance is being recognized over the life of the lease. Lease revenue in 2013 was $466,332, and lease revenue over the next five years is expected to be $466,332 each year. The current and noncurrent portions of the prepaid master lease payment are presented as follows in the statement of net position at December 31, 2013: Current portion of master lease revenue advance $ 466,332 Master lease revenue advance, net of current portion 23,860,655 $ 24,326,987 These amounts are considered assets of PPMQB2 (the discretely presented component unit) as they represent lease payments made in advance. The amounts have been collected in advance by the PDA, so they are considered liabilities. Income Taxes As a public governmental corporation, the PDA is exempt from income taxes fs Revised: 6/12/2014 1:00 PM mrb

29 Use of Estimates The preparation of financial statements in conformity with governmental accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Note 2. Cash and Cash Equivalents The PDA's cash and cash equivalents are categorized to give an indication of the level of custodial risk assumed by the PDA. Category 1 includes cash and cash equivalents that are insured or registered and are held by the PDA or its agent in the PDA's name. All cash and cash equivalents at December 31, 2013, are Category 1. On December 31, 2013, the cost basis of cash and cash equivalents was as follows: Cost Category Investment in State of Washington LGIP $ 12,309,251 1 Money market and checking accounts 3,448,661 1 $ 15,757,912 These amounts are presented in the statement of net position as follows: Cash and cash equivalents $ 1,920,454 Designated cash and cash equivalents 11,545,005 Restricted cash and cash equivalents 2,292,453 $ 15,757,912 The composition of designated cash and cash equivalents is as follows: Capital equipment and capital budget carryovers $ 8,098,070 Minimum operating reserve 1,357,064 PC-1 North waterfront capital project reserve 652,571 PC-1 garage 494,973 Low income housing reserve 383,995 Reserve for contingencies 304,711 Non-levy projects reserves 253,621 $ 11,545,005 The composition of restricted cash and cash equivalents is discussed in Note fs Revised: 6/12/2014 1:00 PM mrb

30 Note 3. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents consist of the following: PC-1 garage reserves Funds restricted for debt service to provide funds for the Special Obligation Refunding Bonds. Low-income housing reserves Funds restricted for supporting and maintaining the affordability of certain low-income housing units. Security deposits Funds held as tenant security deposits. Senior Center reserves Funds reserved for Pike Market Senior Center capital maintenance and replacement. PDA refunded bond reserves Debt service reserves funds for bonds refunded in Replacement reserves Funds restricted for Sanitary Market capital replacement. Pine residential revenue fund Funds set aside for Pine Residential Revenue Fund to be used to pay operating costs, maintenance costs, and interest and principal payments on outstanding bonds. The composition of restricted cash and cash equivalents is as follows: PC-1 garage reserves $ 661,730 Low income housing reserves 511,718 Security deposits 351,824 Senior Center reserves 346,305 PDA refunded bond reserves 301,859 Replacement reserves 77,842 Pine residential revenue fund 41,175 $ 2,292,453 Note 4. Related Party Transactions LaSalle Senior Housing LLC LASLLC is a limited liability company formed by the PDA and the Market Foundation (described below) to develop and operate low-income residential housing in the LaSalle Building. The LaSalle Building is one of the buildings located in the Market. The PDA is the managing member of LASLLC and holds a 0.01% interest. The Market Foundation owned the other 99.99% interest, and in 2005, the Market Foundation transferred its interest in LASLLC to an investment company called National Equity Fund Partners ("the NEFP"). In addition, NEFP obtained the right to receive low-income housing tax credits resulting from this low-income residential housing project. In exchange, the NEFP committed to invest over $8,000,000 into LASLLC fs Revised: 6/12/2014 1:00 PM mrb

31 In April 2005, the PDA leased property to LASLLC for $2,020,000 under a financing lease agreement which terminates on December 31, Upon execution of this lease, LASLLC paid an initial rent payment of $240,000 to the PDA. Interest at the rate of 4.68% compounded annually accrues on the unpaid balance of $1,780,000. Interest earned from LASLLC was $109,705 in Interest receivable from LASLLC (included in the financing lease receivable on the statement of net position) was $673,834 at December 31, The financing lease receivable is unsecured. LASLLC is liable to make annual payments (considered principal and interest) at a maximum of $92,723, based on available net cash flows subjected to payment priority according to the agreement between the PDA and LASLLC that describes how the property is to be managed ("the Operating Agreement"). Beginning 2058, annual payments will increase by $100 through As of December 31, 2013, there were no available net cash flows, and no interest or principal has been paid to date. Additionally, under this financing lease, the PDA was granted first right of refusal to purchase the residential portion of the LaSalle Building, or the NEFP's interest in LASLLC, after April 2021 (the end of the tax credit period). The PDA also acts as the managing member of LASLLC. Certain administrative expenses are initially paid by the PDA and subsequently reimbursed by LASLLC. Total expenses paid by the PDA on behalf of LASLLC were $363,339 in Additionally, the PDA earned management fees (including accounting fees) of $84,407 in Accounts receivable related to unreimbursed expenditures and unpaid management fees at December 31, 2013, was $49,520. Under the Operating Agreement, the PDA has agreed to advance funds to cover operating deficits not funded from the operating reserve. Any such advances may be repaid from project cash flow in subsequent years or from proceeds of sale or refinance of the property, if that were to occur. LASLLC is included in these financial statements as a discretely presented component unit. The determination of discrete instead of blended presentation was made given that the governing body of the PDA and its component unit are not substantively the same. Market Foundation The Market Foundation is a nonprofit corporation incorporated under the laws of the State of Washington. The Market Foundation raises money to help pay for the services for the needy within the Market's historical district and contributes to the PDA's food subsidy and capital programs. Under the terms of a service agreement, the PDA subsidizes certain Market Foundation employees' salary and benefits, and subsidizes a portion of its administrative office expenses. The total subsidized expenses incurred during 2013 were $275,949. Other related administrative expenses of the Market Foundation are initially paid by the PDA and subsequently reimbursed by the Market Foundation. Total reimbursable other administrative expenses paid by the PDA on behalf of the Market Foundation were $251,472 in Accounts receivable from the Market Foundation on December 31, 2013, was $31,474. Certain miscellaneous amounts totaling $474 were owed to the Market Foundation on December 31, 2013, and are included in accounts payable, related party. Although the Market Foundation is a related party, due to lack of control, it is not included in these financial statements fs Revised: 6/12/2014 1:00 PM mrb

32 Pike Place Market QALlCB (PPMQB) PPMQB is a Washington state nonprofit corporation formed in 2009 to obtain funds under the New Markets Tax Credit ("NMTC") program. This program, developed by the US Department of Treasury, was created to encourage investments in low-income neighborhoods and community facilities, by offering tax credits to a private investor. PPMQB board members are members of the PDA Council, and the PDA is the managing agent of PPMQB. During 2013, the PDA leased the Fairley and Leland buildings and the Hillclimb area to PPMQB under a long-term agreement that incorporates the benefits of the NMTC financing program ("the PPMQB Agreement"). All rent revenue is collected by the PDA and distributed to PPMQB. Certain administration expenses paid by the PDA on behalf of PPMQB are reimbursed by PPMQB. During 2013, the following transactions occurred between the PDA and PPMQB: The PDA collected $2,573,149 in rent revenue from the tenants and owes PPMQB $200,115 related to these collections at December 31, 2013, presented as accounts payable, related party. The PDA earned and received $419,800 in rent revenue relating to the leasing of the two buildings to PPMQB mentioned above. The PDA earned a management fee of $463,896. As of December 31, 2013, $162,381 was receivable for such management fees. Certain administrative and operating expenses were initially paid by PDA on behalf of PPMQB, and totaled $1,558,573 in 2013, all of which were reimbursed. The PPMQB Agreement with the PDA expires in 2049, and under terms of the PPMQB Agreement, PPMQB is to pay the PDA lease expenses and management fees. No management fees are due during the years ended December 31, 2016 through Management fees are recognized as revenue when paid based on materiality and based on uncertainties associated with future collections. Additionally, under the Agreement, the PDA has guaranteed any future operating deficits PPMQB may incur through February Future revenue to be earned under the PPMQB Agreement for the years ending December 31 are as follows: Operating Lease Expenses Management Fee Total 2014 $ 433,144 $ 153,020 $ 586, , , , , , , , , ,776 Thereafter 13,447,250 6,354,793 19,802,043 $ 15,287,190 $ 6,667,311 $ 21,954,501 PPMQB is included in these financial statements as a discretely presented component unit. The determination of discrete instead of blended presentation was made given that the governing body of the PDA and its component unit are not substantively the same fs Revised: 6/12/2014 1:00 PM mrb

33 Pike Place Market QB2 (PPMQB2) PPMQB2 is a Washington state nonprofit corporation formed in 2010 to obtain funds under the NMTC program. PPMQB2 board members are members of the PDA Council, and the PDA is the managing agent of PPMQB2. During 2013, the PDA leased six buildings, Corner, Economy, Sanitary, Soames-Dunn, Stewart, and Triangle, to PPMQB2 for purposes of renovating and rehabilitating them through the NMTC financing program ("the PPMQB2 Agreement"). All rent revenue is collected by the PDA and distributed to PPMQB2. Certain administration expenses paid by the PDA on behalf of PPMQB2 are reimbursed by PPMQB2. During 2013, the following transactions occurred between the PDA and PPMQB2: The PDA collected $5,333,751 in rent revenue from the tenants and owes PPMQB2 $341,360 related to these collections at December 31, 2013, presented as accounts payable, related party. The PDA earned $466,332 in rent revenue relating to the leasing of the six buildings to PPMQB2 mentioned above. The PDA earned and received a management fee of $387,061. During the year ended December 31, 2013, under a transfer agreement ( the Transfer Agreement ) with the PDA, PPMQB2 is required to maintain 4% of the unadjusted bases in property in nonqualified financial property ( NQFP ), as defined by the Treasury Regulation Section (d)(i)(E) (effectively cash and cash equivalents), and NQFP held in excess of this threshold is to be granted to the PDA. During 2013, $1,565,981 was granted and paid to the PDA under the terms of the Transfer Agreement. Certain administrative and operating expenses were initially paid by PDA on behalf of PPMQB2, and totaled $1,033,077 in As of December 31, 2013, $341,360 was receivable for such unreimbursed expenditures. Under terms of the PPMQB2 Agreement, the PDA earns rent revenue for the six buildings, and an annual management fee through Future revenue to be earned under the PPMQB2 Agreement are variable based on future rentals. Additionally, under the Agreement, the PDA has guaranteed any future operating deficits PPMQB2 may incur through March Related party receivables (excluding the financing lease receivable from LASLLC) as of December 31, 2013, are as follows: Due from LASLLC $ 49,520 Due from the Market Foundation 31,474 Due from PPMQB 162,381 Due from PPMQB2 341,360 Accounts receivable, related parties $ 584,735 PPMQB2 is included in these financial statements as a discretely presented component unit. The determination of discrete instead of blended presentation was made given that the governing body of the PDA and its component unit are not substantively the same fs Revised: 6/12/2014 1:00 PM mrb

34 Note 5. Loans Receivable In 2009, the PDA loaned $10,557,782 to Facilitators Investment Fund VII, LLC ("the Fund"). The Fund used the loan proceeds, through other intermediary entities, to make NMTC loans to PPMQB. The loan bears interest at 1.711%, although through February 24, 2016, interest-only payments are required at 0.50%. Beginning February 24, 2016 (end of the tax credit earn-out period), annual principal and interest payments are due in the amount necessary to repay the outstanding principal and unpaid interest of the loan on February 24, 2049 (maturity). The loan is effectively secured by the capital investments of PPMQB. At December 31, 2013, the loan had accrued interest of $666,596, of which $622,606 has been included in the loan receivable balance. The remainder is included in accounts receivable, other, as it represents the current portion of the interest to be received. In 2011, the PDA loaned $25,648,261 to Pike Place Market Investment Fund, LLC ("PPM"). PPM used the loan proceeds, through other intermediary entities, to make NMTC loans to PPMQB2. The loan bears interest at 2.5%. Beginning February 28, 2018 (end of the tax credit earn-out period), annual principal and interest payments are due in the amount necessary to repay the outstanding principal and unpaid interest of the loan on March 2, 2041 (maturity). The loan is effectively secured by the capital investments of PPMQB2. During 2013, the PDA earned and received $641,207 of interest on this loan receivable. The loans receivable balance can be summarized as: Loan related to PPMQB $ 10,557,782 Related interest accrued 622,606 Loan related to PPMQB2 25,648,261 Loans receivable $ 36,828, fs Revised: 6/12/2014 1:00 PM mrb

35 Note 6. Capital Assets The following is a summary of capital assets at cost for 2013: Description Balance December 31, 2012 Additions Retirements Transfers Balance December 31, 2013 Land $ 3,698,718 $ - $ - $ - $ 3,698,718 Construction in progress 1,221,253 2,337,414 (676,905) 2,881,762 Building 36,684,164-36,684,164 Building improvements 66,907,889 2,315,198 (6,447) 676,905 69,893,545 Equipment 967,630 50,132 (175,067) 842,695 Capital improvement plan 404, , ,883 Total cost 109,884,463 4,828,818 (181,514) - 114,531,767 Accumulated Depreciation Buildings 12,072, ,904 12,784,898 Building improvements 13,141,277 2,277,997 (6,447) 15,412,827 Equipment 768,001 71,269 (175,067) 664,203 Capital improvement plan 399,005 13, ,153 Total accumulated depreciation 26,381,277 3,074,318 (181,514) - 29,274,081 Capital assets, net $ 83,503,186 $ 1,754,500 $ - $ - $ 85,257,686 Construction in progress consists primarily of costs related to the PPMWE project, with construction expected to commence in Note 7. Long-Term Liabilities Loans Payable In December 2004, the PDA acquired land (referred to as the Creamery lot) from the City in exchange for a loan due to the City in the amount of $455,000 (all of which was outstanding on December 31, 2013). The loan accrues interest at 5% per annum. According to the terms of the loan agreement, the principal and accrued interest become due in December 2023, at which time the City has agreed to forgive these amounts as long as the PDA used the land for the intended use outlined in the sales agreement. The PDA will begin recognizing forgiveness of principal when compliance with terms of the loan has been significantly met. Interest of $22,750 was forgiven by the City for the year ended December 31, In 2006, the PDA borrowed $180,000 from the City through a promissory note for the purpose of financing a portion of the costs of development of the Community Facility to be used to serve primarily low-to-moderate income persons through programs performed by LASLLC. The promissory note matures on July 1, 2016, and is interest-free. A contingent interest becomes due if conditions as defined in the agreement occur. According to the terms of the agreement, if the PDA complies with all terms and conditions in the agreement through maturity, all amounts owing on this note, including any contingent interest, shall be forgiven. The City has a lien on the facility for which the loan was made fs Revised: 6/12/2014 1:00 PM mrb

36 In December 2005, the PDA borrowed $3,800,000 under a commercial loan for the purpose of purchasing a commercial condominium at the corner of First and Pine streets. This loan is secured by the real property purchased at First and Pine. Interest accrues at the rate of 5.4% and payments of principal and interest in the amount of $21,338 are due monthly through maturity on December 31, 2015, when all outstanding principal and interest are due. No interest was outstanding at December 31, The principal balance outstanding at December 31, 2013, was $3,292,509. Following are the changes in loans payable for the year ended December 31, Loans Payable Balance December 31, 2012 Additions Repayments / Retirements Balance December 31, 2013 Current Portion City of Seattle loan $ 455,000 $ - $ - $ 455,000 $ - City of Seattle loan 2 180, ,000 First and Pine loan 3,368,530 - (76,021) 3,292,509 80,229 Total loans payable $ 4,003,530 $ - $ (76,021) $ 3,927,509 $ 80,229 The scheduled principal and interest maturities of the loans for years ending December 31 are as follows: Principal Interest Total 2014 $ 80,229 $ 175,829 $ 256, ,212, ,388 3,383, , , , ,000 $ 3,927,509 $ 347,217 $ 4,274, fs Revised: 6/12/2014 1:00 PM mrb

37 Bonds Payable Summary Bonds payable for the year ended December 31, 2013, are as follows: Refunding Bonds - Garage Series 2002 PDA Special Obligation Revenue Refunding Bonds, with remaining interest ranging from 4.1% to 4.8% and principal payments due in annual amounts ranging from $735,000 to $840,000 through November 1, 2017, for the garage. $ 3,145,000 Refunding Bonds - Revenue 2009 PDA Refunding Bonds, with remaining interest ranging from 4.0% to 5.0%, interest payments made semi-annually, and remaining annual principal payments ranging from $315,509 (including prepaid interest of $4,491) to $435,000 through May 1, ,022,176 Revenue Bond - Pine Residential Building Series 2005 PDA Special Obligation Revenue Bond, with interest at 5.12% and monthly principal and interest payments of $14,149 due through July 1, 2015, for the Pine Residential Building (a building located in the Market). 2,215,256 8,382,432 Current portion (1,108,184) $ 7,274,248 The PDA is required to maintain certain debt service reserve levels for each of the outstanding bond series. All reserve requirements were met in Bonds Payable Details Refunding Bonds Garage On November 24, 1987, the PDA issued $8,400,000 in Special Obligation Revenue Bonds for the purpose of constructing a parking garage near the Market, which was substantially completed in the fall of On March 7, 1991, the PDA refunded these 1987 bonds in advance with proceeds from the issuance of $10,381,671 in Special Obligation Refunding Bonds, Series 1991, dated February 1, Bank of America was contracted as the refunding agent and received $9,629,100 in refunding bond proceeds to service the debt on the 1987 Special Obligation Revenue Bonds. These monies are held in trust by the refunding agent and are used solely to repay principal and interest on the 1987 bonds. These bonds are limited obligations of the PDA. The PDA has pledged net parking revenue from PC-1 garage to pay bond principal and interest. In addition, the City has unconditionally obligated itself to levy an ad valorem tax, not requiring a consenting vote of the taxpayers, in order to fund debt service payments on the bonds if revenue pledged by the PDA is insufficient to meet scheduled principal and interest payments. The PDA reserves the right to redeem the outstanding serial bonds maturing after November 1, 2002, in whole, or in part, on any interest payment date thereafter at a price of par plus accrued interest to date of redemption. The serial bonds bear interest, from their issue date until the bonds bearing such interest have been paid or their payment duly provided for, payable semiannually on May 1 and November 1 of each year fs Revised: 6/12/2014 1:00 PM mrb

38 The series 2002 PDA Special Obligation Revenue Refunding Bonds were issued to partially refund the Series 1991 PDA Special Revenue Refunding Bonds. This resulted in cash flow savings of $876,754 and an economic gain of $814,756 at December 31, In accordance with governmental accounting standards, this gain was not recorded in these financial statements. Refunding Bonds Revenue The PDA has issued and refunded various series of tax-exempt Special Obligation Revenue Bonds, beginning in The bonds were issued in order to refinance certain private bank mortgages. The final refunding occurred in 2009 when the bonds were refinanced with the City with a face value of $4,390,000. Revenue Bond Pine Residential Building On June 17, 2005, the PDA issued $2,600,000 in a Special Obligation Revenue Bond for the purpose of acquiring a residential condominium known as the Pine Residential Building. This bond is a limited obligation of the PDA. The PDA has pledged the Pine Residential Building Housing gross revenue to pay bond principal and interest. The bond is secured by a deed of trust on the building. Following are the changes in bonds payable for the year ended December 31, Bonds Payable Balance December 31, 2012 Additions Repayments Balance December 31, 2013 Current Portion Series 2002 Revenue Refunding Bonds $ 3,850,000 $ - $ (705,000) $ 3,145,000 $ 735, Refunding Bonds 3,335,925 (313,749) * 3,022, ,509 Series 2005 Revenue Bond 2,270,086 (54,830) 2,215,256 57,675 Total bonds payable $ 9,456,011 $ - $ (1,073,579) $ 8,382,432 $ 1,108,184 * Includes payment of deferred interest of $10,416. The principal and interest maturities of bonds payable for the following years ending December 31 are as follows: Principal Interest Total 2014 $ 1,108,184 $ 402,710 $ 1,510, ,257, ,568 3,554, ,160, ,707 1,349, ,210, ,150 1,344, ,000 75, , ,251,667 99,875 1,351,542 $ 8,382,432 $ 1,198,135 $ 9,580, fs Revised: 6/12/2014 1:00 PM mrb

39 Long-Term Obligation In conjunction with the PC-1 garage construction, the PDA entered into a contract with the City for the purchase of the land upon which the PC-1 garage was built. As stated in the contract, beginning in 2003, the PDA is required to pay the City 30% of Resulting Revenue, defined as gross revenue, less operating and bond expenses, as principal payments. However, since there was no Resulting Revenue in 2013, the full amount of this debt continues to be classified as long-term in these financial statements. Once the Resulting Revenue exceeds zero, payments will be made until the later of (a) the life of the Series 1991 PDA Special Obligation Revenue Refunding Bonds described above, or (b) the City has been reimbursed for the 1990 present value of the purchase price of the land plus the Additional Consideration. The Additional Consideration is defined as the 1990 present value of the City's share of annual revenue for 1990 through 1998 from three surface lots currently managed by the PDA plus $62,500. The liability recorded at December 31, 2013, of $680,692 represents the 1990 present value of the purchase price of the land plus Additional Consideration. Note 8. Shared Parking Revenue Agreement with City of Seattle In 1987, the PDA purchased the PC-1 South land from the City and built the Pike Place Market Garage with bond funds. As part of the purchase agreement, the City engaged the PDA to manage surface parking lots within the vicinity of the Market. Three of these lots were still in operation in 2013, and management of the lots has been outsourced to a lot management company. These lots are the Desimone (or PC-1 North) lot, the Lenora lot, and the Blanchard lot. Under the current revenue sharing agreement, effective January 1, 2008 (as amended), and expiring December 31, 2014, 35% of the gross revenue (less all applicable tax) of the Desimone lot and 45% of the gross revenue (less all applicable tax) of the Lenora and Blanchard lots are paid to the City. Parking revenue in these financial statements is shown net of the City's share totaling $273,676 in Note 9. Employee Benefit Plan The PDA has a defined contribution retirement plan covering substantially all employees. The plan provides for voluntary, after-tax contributions by employees and contributions by the PDA at the discretion of the PDA's governing Council. The PDA incurred approximately $345,000 in pension expense in fs Revised: 6/12/2014 1:00 PM mrb

40 Note 10. Future Rental Revenue The PDA leases space to commercial tenants under noncancelable agreements. Terms of leases are generally up to five years with options to extend up to two years. Most commercial leases include percentage rent (based on a percentage of the tenant's sales) and fixed or variable escalation clauses. Future minimum rentals to be received excluding options to extend, percentage rent, and variable escalation clauses for the years ending December 31 are approximately as follows: 2014 $ 953, , , , ,723 Thereafter 426,966 $ 3,480,557 Note 11. Contingencies The PDA is subject to claims and litigation incidental to its business. Management believes the ultimate resolution of these routine matters will not have a material adverse effect on the PDA's statement of net position, operations, or cash flows fs Revised: 6/12/2014 1:00 PM mrb

41 Note 12. Discretely Presented Component Units As discussed in Note 1, LASLLC, PPMQB, and PPMQB2 are considered component units of the PDA, discretely presented in a separate column on the face of the PDA's basic financial statements. Summarized discretely presented component unit statement of net position information as of December 31, 2013, is as follows: LaSalle Senior Housing LLC Pike Place Market Pike Place Market QB2 Total Assets Current assets Cash $ 36,725 $ 170,598 $ 675,018 $ 882,341 Accounts receivable, tenants 5,573 5,573 Accounts receivable, related parties 200, , ,475 Prepaid master lease, current portion 466, ,332 Total current assets 42, ,713 1,482,710 1,895,721 Restricted cash 1,026, ,925 1,782,094 Restricted investments 108, ,699 Prepaid master lease, less current portion 23,860,655 23,860,655 Loan fees, net of amortization 354, , ,204 1,543,825 Capital assets, net 8,107,826 12,249,431 10,480,655 30,837,912 Total assets $ 9,530,872 $ 12,948,885 $ 37,549,149 $ 60,028,906 Liabilities and Net Position Current liabilities Accounts payable $ 10,856 $ 6,000 $ 1,500 $ 18,356 Accounts payable, related party 49, , , ,932 Deposits payable 20,917 20,917 Interest payable 867,924 52, ,760 Current portion of loans payable 18,826 18,826 Total current liabilities 967, , ,860 1,531,791 Long-term Liabilities Loans payable, net of current portion 3,648,054 14,111,436 33,583,000 51,342,490 Total liabilities 4,615,768 14,332,653 33,925,860 52,874,281 Net Position Unrestricted 4,915,104 (1,383,769) 3,623,290 7,154,625 Total liabilities and net position $ 9,530,872 $ 12,948,884 $ 37,549,150 $ 60,028, fs Revised: 6/12/2014 1:00 PM mrb

42 Summarized discretely presented component unit statement of revenues, expenses, and changes in fund net position information for the year ended December 31, 2013, is as follows: LaSalle Senior Housing LLC Pike Place Market QALICB Pike Place Market QB2 Operating revenue Rent $ 291,493 $ 2,573,149 $ 5,333,751 $ 8,198,393 Contributions and grants 334, ,309 Total Total operating revenue 625,802 2,573,149 5,333,751 8,532,702 Operating expenses Property management 430,932 2,080,981 1,688,628 4,200,541 Depreciation and amortization 359, , , ,115 Professional fees 28, , , ,136 Total operating expenses 818,298 2,880,478 2,353,016 6,051,792 Operating income (loss) (192,496) (307,329) 2,980,735 2,480,910 Non-operating revenue (expenses) Interest income 116 1,540 1,656 Related party grant expense (1,565,981) (1,565,981) Interest expense (145,939) (52,836) (651,274) (850,049) Amortization of bond issuance costs and loan fees (10,873) (6,287) (35,676) (52,836) Net non-operating revenue (expenses) (156,812) (59,007) (2,251,391) (2,467,210) Change in net position (349,308) (366,336) 729,344 13,700 Net position, beginning of year 5,264,412 (1,017,433) 2,893,946 7,140,925 Net position, end of year $ 4,915,104 $ (1,383,769) $ 3,623,290 $ 7,154, fs Revised: 6/12/2014 1:00 PM mrb

43 S U P P L E M E N T A R Y I N F O R M A T I O N fs Revised: 6/12/2014 1:00 PM csk

44 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY COMBINING STATEMENT OF REVENUES AND EXPENSES For the Year Ended December 31, 2013 PC-1 PDA Total Operating revenue Rent $ 50,317 $ 6,318,889 $ 6,369,206 Parking 2,280, ,458 2,821,766 Management fees 935, ,364 Security 52,434 52,434 Contributions and grants 25,000 25,000 Miscellaneous 168, ,506 Total operating revenue 2,330,625 8,041,651 10,372,276 Operating expenses Property management 6,967,516 6,967,516 Depreciation and amortization 302,407 2,771,911 3,074,318 Parking 1,143, ,354 1,418,079 Security 1,041,226 1,041,226 Professional fees 89,572 89,572 Total operating expenses 1,446,132 11,144,579 12,590,711 Operating income (loss) 884,493 (3,102,928) (2,218,435) Non-operating revenue (expenses) Interest income , ,652 Forgiveness of interest 22,750 22,750 Related party grant 1,565,981 1,565,981 Capital grants 687, ,287 Levy revenue 245, ,922 Non-capital grant revenue 166, ,667 Interest expense (173,204) (476,741) (649,945) Amortization of bond issuance costs and loan fees (4,646) (25,289) (29,935) Net non-operating revenue (177,150) 3,137,529 2,960,379 Change in net position $ 707,343 $ 34,601 $ 741, fs Revised: 6/12/2014 1:00 PM mrb

45 S U P P L E M E N T A R Y R E P O R T S A N D S C H E D U L E S I N A C C O R D A N C E W I T H G O V E R N M E N T A U D I T I N G S T A N D A R D S A N D O M B C I R C U L A R A fs Revised: 6/12/2014 1:00 PM csk

46 INDEPENDENT AUDITORS 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 To the Council Pike Place Market Preservation and Development Authority Seattle, Washington We have audited, in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements and the aggregate discretely presented component units of the Pike Place Market Preservation and Development Authority ("the PDA"), a public governmental corporation, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the PDA's basic financial statements, and have issued our report thereon dated. Internal Control Over Financial Reporting In planning and performing our audit, we considered the PDA's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the PDA's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the PDA's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the organization's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified.

47 Compliance and Other Matters As part of obtaining reasonable assurance about whether the PDA's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the PDA's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 36

48 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 To the Council Pike Place Market Preservation and Development Authority Seattle, Washington Report on Compliance for Each Major Federal Program We have audited Pike Place Market Preservation and Development Authority's ("the PDA"), a public governmental corporation, compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the PDA s major federal programs for the year ended December 31, The PDA s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the PDA s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the PDA s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the PDA s compliance.

49 Opinion on Each Major Federal Program In our opinion, the PDA complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended. Report on Internal Control over Compliance Management of the PDA is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the PDA s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the PDA s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. 38

50 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2013 Federal Grantor/Program Title CFDA Number Other ID Number Current Year Expenditures Department of Housing and Urban Deveopment Office of Housing - Federal Housing Commissioner Passed through the Bremerton Housing Authority - Contract Management Services Section 8 Housing Assistance Payments Program - Special Allocations** WA $ 424,228 Section 8 Housing Assistance Payments Program - Special Allocations** WA , ,501 Passed through the Seattle Housing Authority Section 8 - Tenant Based Assistance Housing Choice Voucher Program WA001VO ,997 Section 8 - Tenant Based Assistance Housing Choice Voucher Program WA001VO , ,609 **Major program tested. $ 1,041, fs Revised: 6/12/2014 1:00 PM csk

51 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards ("the Schedule") includes the federal grant activity of the PDA under programs of the federal government for the year ended December 31, The information in this Schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of the PDA, it is not intended to and does not present the financial position, changes in net position, or cash flows of the PDA. Note 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-122, Cost Principles for Non-Profit Organizations, wherein certain types of expenditures are not allowed or are limited as to reimbursement fs Revised: 6/12/2014 1:00 PM csk

52 PIKE PLACE MARKET PRESERVATION AND DEVELOPMENT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended December 31, 2013 A. Summary of Audit Results Financial Statements: Type of auditors' report issued: Internal Control Over Financial Reporting: Material weaknesses identified: Significant deficiencies identified not considered to be material weaknesses: Noncompliance material to financial statements noted: Federal Awards: Material weaknesses identified: Significant deficiencies identified not considered to be material weaknesses: Type of auditors' report issued on compliance for major programs: Any audit findings disclosed that are required to be reported: Unmodified No No No No No Unmodified No Identification of major programs: CFDA Number Name of Federal Program Section 8 Housing Assistance Payments Program - Special Allocations Dollar threshold used to distinguish between Type A and B programs: $ 300,000 Auditee qualified as low-risk auditee: Yes B. Findings - Financial Statement Audit No C. Findings and Questioned Costs - Major Federal Awards Program Audit No fs Revised: 6/12/2014 1:00 PM csk

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74 PROPOSED RESOLUTION Authorization for Investment of Pike Place Market PDA monies in Local Governmental Investment Pool June 2014 WHEREAS, the Pike Place Market PDA has opened a new account for the Farm Program (SNAP Program and Credit/Debit Cards) with Bank of America and Merrill Lynch. BE IT RESOLVED, that the following banks be, and hereby are, authorized to honor and pay checks or other appropriate orders for the payment or withdrawal of money drawn in the name of Pike Place Market Preservation and Development Authority (PPMPDA) in this new account, and all accounts set forth below: Bank of America: Operating Account Payroll Account PC1 General Reserve Fund Basic Account PC1 Revenue Fund PC 1 Revenue Fund II Parking Trust Account HUD Depository Account (Checking and Saving) Sanitary Market Replacement Reserves In Trust for Residents Low Income Housing Reserve PC1 South Condominium Association Pine Residential Revenue Fund LaSalle Commercial Revenue Fund Pike Place Market PDA Levy Funds Farm Program Account (SNAP and Credit/Debit Cards) US Bank - Bond Accounts: Refunding Bonds Series 2002 Debt Service Fund Refunding Bonds Series 2002 Debt Service Reserve 2002 Refunding Bonds Sinking Funds Columbia Bank: Construction Escrow Account-TURNER Retainage State of Washington Local Government Investment Pool: L.G.I.P. - PPMPDA NOW, THEREFORE, BE IT FURTHER RESOLVED, That the following persons are duly designated to authorize deposits and withdrawals of funds for the above listed accounts: (a) Checks up to $250.00: Any one of the following: Ben Franz-Knight (Executive Director) alone; Sabina Proto (Director of Finance) alone, John Turnbull (Director of Asset Management) alone. (b) Checks over $250.00: Ben Franz-Knight, Sabina Proto, John Turnbull Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

75 Page 2 All signatories are reminded, especially those who are co-signing checks, to verify that the check is completely filled out and the purpose of the check is clearly known before signing, including, and not limited to: Against what invoice is the check being drawn? To satisfy what obligation is the check being written? Is the amount of the check appropriate to its purpose? For what reason are monies being transferred between accounts? The Market relies on the diligence of its check signatories. These public funds are deposited in accordance with laws of the State of Washington. This authority revokes all previous authorities for these accounts, and shall continue in force until notice in writing of its revocation shall have been received by said bank. Gloria Skouge, Secretary/Treasurer Date Date Approved by Council: For: Against: Abstained:

76 PROPOSED RESOLUTION Approval of 2013 PDA Audited Financial Statements June 2014 BE IT RESOLVED that the PDA Council hereby approves the 2013 PDA financial statements, audited by Peterson Sullivan LLP, Certified Public Accountants, covering the period beginning January 1, 2013 through December 31, Gloria Skouge, Secretary/Treasurer Date Date Approved by Council: For: Against: Abstained: Pike Place Market Preservation & Development Authority (PDA) pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

77 PROPOSED RESOLUTION Authorization for Contract Authority Replacement of Deteriorated Panels above Main Entry into the Market - Leland Building June 2014 WHEREAS, WHEREAS, WHEREAS, the Pike Place Market Preservation and Development Authority (PPMPDA) was chartered by the City of Seattle pursuant to RCW et. Seq with the mission of promoting enterprises essential to the functioning of the Pike Place Market, including the preservation and expansion of the low-income residential community, the promotion and survival of small businesses, and the expansion of services to the public market and community; and, in order to maintain the viability of the Pike Place Market buildings the PPMPDA has determined that four metal panel s right above the main Market entrance at the clock, are in need of replacement. the PPMPDA has executed a bid to replace the badly deteriorated panels. NOW, THEREFORE, BE IT RESOLVED that the PPMPDA Council authorizes the PPMPDA Executive Director or his designee to enter into a contract with Miller SheetMetal, in an amount not to exceed $14, for the execution of work necessary to accomplish scope. The funds for this project will be drawn from the Capital Inventory Budget, Gloria Skouge, Secretary/Treasurer Date Date Approved by Council: For: Against: Abstained: Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

78 Page 2 Proposed Resolution Authorization for Contract Authority Replacement of Deteriorated Panels above Main Entry into the Market - Leland Building June 2014 Proposed Resolution Costs: $14, Project: Account: Replacement of Deteriorated Panels above Main Entry into the Market - Leland Building Capital Projects Accounting Code: Project Description: Replace four badly deteriorated panels above main entry into the Market Scope: The purpose of this project is to replace four of the panels along the lower roof into the Leland Building Area Bid Process: Solicited and received two bids o Miller Sheetmetal $13, ($14, with 10% contingency) o Ballard Sheet metal $24,500

79 PROPOSED RESOLUTION Authorization for Contract Authority Repair & Paint Western Facing Wall Facade and Windows of the LaSalle June 2014 WHEREAS, WHEREAS, WHEREAS, the Pike Place Market Preservation and Development Authority (PPMPDA) was chartered by the City of Seattle pursuant to RCW et. Seq with the mission of promoting enterprises essential to the functioning of the Pike Place Market, including the preservation and expansion of the low-income residential community, the promotion and survival of small businesses, and the expansion of services to the public market and community; and, in order to maintain the viability of the Pike Place Market buildings the PPMPDA has determined that the western facing wall façade and windows of the LaSalle Building are in need of repairs and paint. the PPMPDA has executed a competitive bid process to repaint and repair windows and wall façade facing westward only. BE IT RESOLVED that the PPMPDA Council authorizes the PPMPDA Executive Director or his designee to enter into a contract with Experienced Construction, Inc. in an amount not to exceed $178,665 for repairing and repainting west facing windows and wall façade. The funds for this project will be drawn from the Capital Projects Budget, COMLAS - Paint/Repair - Windows & Facade on Western Ave Gloria Skouge, Secretary/Treasurer Date Date Approved by Council: For: Against: Abstained: Pike Place Market Preservation & Development Authority (PDA) info@pikeplacemarket.org pikeplacemarket.org P: F: Pike Street, Room 500 Seattle, WA 98101

80 Page 2 Proposed Resolution Authorization for Contract Authority Repair & Paint Western Facing Wall Facade and Windows of the LaSalle June 2014 Proposed Resolution Costs: $178,665 Project: Account: Repair & Paint Western Facing Wall Façade and Windows of the LaSalle Capital Projects Accounting Code: Project Description: The Westward facing wall has experienced severe weathering which has led to ongoing water intrusion through windows. The Project precedes the Western Avenue Windows levy project scheduled to start in September Project Schedule: July - September Scope: An exterior project limited to the west facing windows and façade of the OLD LaSalle Building. The work consists of: Repaint and selectively repair exterior window members. The work includes field repairs of surfaces, rails, stiles, sashes, panes and associated hardware. Remove and re-apply new joint sealants at all window-to-wall penetrations, trim and flashing details. Repaint and surface repair targeted envelope concrete façade areas. Match existing color and style. Bid Process: Solicited five contractors and received two qualified bids. o Experienced Construction: $122,260 ($178, 665 with all taxes and 30% Contingency due to severe deterioration detected in some targeted concealed areas) o Grund & Co Painting: $194,135 o Long Painting: Non-Responsive o Novo Painting: Non-Responsive o Jergens Painting: Non-Responsive