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6.1. B. - Page 163 The Agency's Fund Financial Statements At June 30, 2011, the Agency's governmental funds reported combined fund balances of $18.3 million, which is a decrease of $.5 million from last year. This decrease resulted primarily from the aforementioned negative impact on redevelopment agency funds by the State of California. The Agency has loaned a total of $4.7 million to developers to assist them in constructing low and moderate income housing. Interest on these loans is at below market rates. Additionally, the Agency has established First Time Homebuyer and Housing Rehabilitation loan programs under which low-interest rate loans in the amount of $1 million have been made to qualified homebuyers and homeowners. These loans are explained in detail in Notes 3 and 9 to the financial statements. CAPITAL ASSETS Under GASB 34, the Agency is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. At June 30, 2011, the Agency had $16.4 million of capital assets net of depreciation. DEBT ADMINISTRATION Each of the Agency's debt issued is discussed in detail in Note 7 to the financial statements. In October 2003 the Agency issued $33,997,448 of Tax Allocation Bonds that bear interest at 3.5% to 5.8% and are due in 2032. The proceeds of the bonds were used to finance various downtown improvements. At June 30, the Agency's debt comprised the 2003 Tax Allocation Bond issue and a loan from the Redwood City School District used to finance a real property purchase, all of which are secured by property tax increment revenues. ECONOMIC OUTLOOK AND MAJOR INITIATIVES The State of California continues to negatively impact the financial position of the Agency. At this point it remains to be seen what affect, if any, the State's attempt to extract significant funds from redevelopment agencies will have. Under legislation signed into law by Governor Brown, the Agency will be required to pay the State $4.9 million in FY 2011/12 and $1.2 million annually thereafter should the Agency desire to continue operations. Failure to pay these amounts will result in the dissolution of the Agency. The California Redevelopment Association has challenged the State's action with a lawsuit filed in the California Supreme Court, and a decision is expected in January 2012. Should the laws survive legal challenge the Agency Board will need to decide how to reduce Agency activities. 7