dra audit doc ep309115-ep21013-ep643025

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Washington State Auditors Office

Financial Statements Audit Report

Downtown Redevelopment AuthorityClark County

Audit PeriodJanuary 1, 2008 through December 31, 2008

Report No. 1001890

Issue DateAugust 10, 2009


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August 10, 2009

Board of DirectorsDowntown Redevelopment AuthorityVancouver, Washington

Report on Financial Statements Please find attached our report on the Downtown Redevelopment Authority s financialstatements.

We are issuing this report in order to provide information on the Authority s financial condition.

Sincerely,

BRIAN SONNTAG, CGFMSTATE AUDITOR

Washington State AuditorBrian Sonntag


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Table of Contents


January 1, 2008 through December 31, 2008

Independent Auditors Report on Internal Control over Financial Reporting and onCompliance and Other Matters in Accordance with Government Auditing Standards ........................................................................................................................ 1

Independent Auditors Report on Financial Statements ............................................................... 3

Financial Section ......................................................................................................................... 5


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Independent Auditors Report on InternalControl over Financial Reporting and on

Compliance and Other Matters in Accordancewith Government Auditing Standards




We have audited the basic financial statements of the Downtown Redevelopment Authority, acomponent unit of the City of Vancouver, Clark County, Washington, as of and for the year ended December 31, 2008, and have issued our report thereon dated July 16, 2009. Our reportwas modified to include a reference to other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to the financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Other auditorsaudited the financial statements of the Vancouver Hotel and Convention Center Project, asdescribed in our report on the Authoritys financial statements. Those financial statements were

not audited in accordance with Government Auditing Standards .

INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audit, we considered the Authority s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing anopinion on the effectiveness of the Authority s internal control over financial reporting.Accordingly, we do not express an opinion on the effectiveness of the Authority s internal controlover financial reporting.

A control deficiency exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, toprevent or detect misstatements on a timely basis. A significant deficiency is a controldeficiency, or combination of control deficiencies, that adversely affects the Authority's ability toinitiate, authorize, record, process or report financial data reliably in accordance with generallyaccepted accounting principles such that there is more than a remote likelihood that amisstatement of the Authority's financial statements that is more than inconsequential will not beprevented or detected by the Authority's internal control.

_________________________________________________________________________________________________________ Washington State Auditor's Office

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A material weakness is a significant deficiency, or combination of significant deficiencies, thatresults in more than a remote likelihood that a material misstatement of the financial statementswill not be prevented or detected by the entitys internal control.

Our consideration of internal control over financial reporting was for the limited purposedescribed in the first paragraph of this section and would not necessarily identify all deficienciesin internal control that might be significant deficiencies or material weaknesses. We did notidentify any deficiencies in internal control over financial reporting that we consider to bematerial weaknesses, as defined above.

COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the Authority s financial statementsare free of material misstatement, we performed tests of the Authority s compliance with certainprovisions of laws, regulations, contracts and grant agreements, noncompliance with whichcould 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 or other matters that arerequired to be reported under Government Auditing Standards .

This report is intended for the information and use of management and the Board of Directors.However, this report is a matter of public record and its distribution is not limited. It also servesto disseminate information to the public as a reporting tool to help citizens assess governmentoperations.


July 16, 2009


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Independent Auditors Report on FinancialStatements

Downtown Redevelopment AuthorityClark CountyJanuary 1, 2008 through December 31, 2008


We have audited the accompanying basic financial statements of the DowntownRedevelopment Authority, a component unit of the City of Vancouver, Clark County,

Washington, as of and for the year ended December 31, 2008, as listed on page 5. Thesefinancial statements are the responsibility of the Authority s management. Our responsibility isto express an opinion on these financial statements based on our audit. We did not audit thefinancial statements of the Vancouver Hotel and Convention Center Project which is included inthe Authoritys financial information and which represents 1 percent, 2.6 percent, 100 percent,and 86 percent respectively, of the assets, net assets, operating revenue and operatingexpenses of the Authority. Those financial statements were audited by other auditors whosereport thereon has been furnished to us, and our opinion, insofar as it relates to the amountsincluded for the Vancouver Hotel and Convention Center Project, is based on the report of theother auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United

States of America and the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The financial statements of theVancouver Hotel and Convention Center Project were not audited in accordance withGovernment Auditing Standards . An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believe that our audit andthe report of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the report of the other auditors, the financial statements

referred to above present fairly, in all material respects, the financial position of the DowntownRedevelopment Authority, as of December 31, 2008, and the changes in financial position andcash flows thereof for the year then ended in conformity with accounting principles generallyaccepted in the United States of America.

In accordance with Government Auditing Standards , we have also issued our report on our consideration of the Authority s internal control over financial reporting and on our tests of itscompliance with certain provisions of laws, regulations, contracts and grant agreements andother matters. The purpose of that report is to describe the scope of our testing of internalcontrol over financial reporting and compliance and the results of that testing, and not to provide


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an opinion on the internal control over financial reporting or on compliance. That report is anintegral part of an audit performed in accordance with Government Auditing Standards andshould be considered in assessing the results of our audit.

The managements discussion and analysis on pages 6 through 10 is not a required part of thebasic financial statements but is supplementary information required by the GovernmentalAccounting Standards Board. We and the other auditors have applied certain limitedprocedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did notaudit the information and express no opinion on it.


July 16, 2009


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Financial Section



REQUIRED SUPPLEMENTAL INFORMATION

Managements Discussion and Analysis 2008

BASIC FINANCIAL STATEMENTS

Statement of Net Assets 2008Statement of Revenues, Expenses, and Changes in Net Assets 2008Statement of Cash Flows 2008Notes to Financial Statements 2008


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MANAGEMENTS DISCUSSION AND ANALYSIS VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY (DRA )

(A Component Unit of the City of Vancouver)For the Year Ended December 31, 2008

Vancouver Downtown Redevelopment Authority s (the Authority or DRA) discussion andanalysis offers readers of the DRA s financial statements a narrative overview and analysis of

the Authority s financial activities for the fiscal year ended December 31, 2008. We encouragereaders to consider the information presented here in conjunction with additional informationthat we have furnished in the financial statements and notes to the financial statements (whichimmediately follow this discussion).

FINANCIAL HIGHLIGHTS

The Hotel/Convention Center, constructed and owned by the DRA, opened its doors andcommenced operations on June 15, 2005. The Fiscal Year 2008 represents the third full year of operations of the Hotel/Convention Center. The results of the facilitys operations are presentedin the DRA s f inancial statements.

The Authority reported net operating income of $816,486 in 2008, which is a 137% increaseover last year.

Capital assets and related bond liabilities account for the bulk of total assets and total liabilitiesof the Authority. The majority of the Authoritys net assets are restricted by the bond indenturefor capital purposes. The government's total net assets decreased by $1,649,835 during 2008,primarily as a result of depreciation of assets. At December 31, 2008, the liabilities of the DRAexceeded its assets by $4,931,973.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis provides an introduction and overview to the DRA s basic financial

statements. This information will assist users in interpreting the basic financial statements. Wewill also provide other financial discussion and analysis of certain plans, projects, and trendsnecessary for understanding the full context of the financial condition of the Authority. The DRAis a special purpose business-type government. The purpose of the Authority is to provideoversight on the activities and operations of the Hotel/Convention Center and to approve itsbudget.

Basic Financial StatementsThe basic financial statements are comprised of two components: 1) enterprise fund financialstatements, and 2) notes to the financial statements. Because the Authority is a special-purpose government engaged only in business-type activities, only fund financial statements arepresented as the basic financial statements.

Enterprise Fund Financial StatementsA fund is a grouping of related accounts that are used to maintain control over resources thatare segregated for specific activities or objectives. The Authority, like other state and localgovernments, uses fund accounting for compliance with finance-related legal requirements.The single fund of the DRA is reported as an enterprise fund. The financial statements consistof a statement of net assets, a statement of revenues, expenses and changes in fund netassets, and a statement of cash flows.


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The statement of net assets presents information on all of the Authority s assets and liabilities,with the difference between the two reported as net assets . This statement serves a purposesimilar to that of the balance sheet of a private-sector business. Over time, increases or decreases in net assets may serve as one indicator of whether the financial position of the DRAis improving or deteriorating.

The statement of revenues, expenses and changes in fund net assets presents information

showing how the Authority s net assets changed during 2008. The DRA distinguishes betweenoperating revenues and expenses from nonoperating ones. Operating revenues and expensesresult from providing services and producing and delivering goods in connection with theAuthoritys principal ongoing operations. The principal operating revenues of the DRA arecharges to customers for lodging, meals and banquet services. All changes in net assets arereported using the accrual basis of accounting, similar to the method used by most private-sector companies . The accrual basis of accounting requires that revenues are reported whenthey are earned and expenses are reported as soon as liabilities are incurred. Items such asunpaid vendor invoices for items received in 2008 and earned but unused vacation leave will beincluded in the statement of revenues, expenses and changes in net assets as an expense,even though the cash associated with these items was not distributed in 2008.

The statement of cash flows presents the cash and cash equivalent activity of the Authority. Itclassifies cash flows into four activities: 1) operating activities, 2) non-capital financingactivities, 3) capital and related financing activities and 4) investing activities.

Notes to the Financial StatementsThe notes provide additional information that is essential to a full understanding of the dataprovided in the fund statements. The notes to the financial statements can be found followingthe statement of cash flows.


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FINANCIAL ANALYSIS

Statement of Net AssetsAs noted earlier, changes in net assets over time may serve as a useful indicator of agovernment's financial position. The Authority's total net assets are negative $4,931,973 atDecember 31, 2008. The following table reflects the condensed and comparative version of theStatement of Net Assets.

December 31,2008

December 31,2007

Current and other assets $ 10,408,731 $ 10,095,416 Noncurrent assets 58,275,656 59,739,760

Total assets 68,684,387 69,835,176

Current liabilities 2,894,366 2,860,796 Noncurrent liabilities 70,721,994 70,256,518

Total liabilities 73,616,360 73,117,314

Net assetsInvested in capital assets,

net of related debt (6,484,266) (8,551,965) Res tric ted f or c apital purposes 852,863 612,907 Restricted for debt service - 4,539,444 Unrestricted 699,430 117,476

Total net assets $ (4,931,973) $ (3,282,138)

Vancouver Downtown Redevelopme nt AuthorityStatement of Net Assets

Noncurrent assets and liabilities account for the majority of the Authoritys total assets andliabilities. In 2008, the total net assets decreased by $1,649,835 primarily due to depreciation of the Hotel/Convention Center asset.

The majority of the Authoritys assets are subject to restrictions imposed by the bond indenture.

Statement of Revenues, Expenses and Changes in Net AssetsKey elements in the changes in net assets are discussed below. A condensed version of theStatement of Revenues, Expenses and Changes in Net Assets for the past two years is shownin the following table.


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2008 2007Revenues

Operating revenuesCha rg es fo r s e rvi ce s $ 13,053 ,282 $ 13,216 ,932Miscellaneous 0 0

Nonoperating revenuesInteres t earned 254,040 472,899Intergovernm ental contributions 2,457,874 2,490,845Total revenues 15,765,196 16,180,676

ExpensesOperating expens es

Supplies, personnel, andconstractual s ervices 10,787,431 11,188,377Depreciation 1,449,365 1,432,277

Nonoperating expens esInteres t and fis cal charges 4,109,279 3,917,245Intergovernm ental payments 913,583 962,597Total expenses 17,259,658 17,500,496

(1 ,4 94 ,4 62 ) (1 ,3 19 ,8 20 )

Net as sets - Beginning (3,282,138) (1,962,318)Prior Period Adjus tm ents (155,373) 0Net as sets - Ending $ (4,931,973) $ (3,282,138)

Comparative 2007-2008

Change in net assets

Vancouver Downtown Rede velopme nt AuthoritySummary of Changes in Net Assets

In 2008, total revenues decreased by $415,480 due to a decline in both travel andentertainment related primarily to the weakened economy during the last half of 2008.

DRAs total expenses decreased by $240,838. This is made up of decreases in supplies,personnel and contractual services, and intergovernmental payments along with increasedexpenses related to bond interest payments and depreciation of the Hotel/Convention Center assets.

Overall, the Authority s net assets decreased in 2008 by $1,649,835, primarily due to the non-cash expense, depreciation. While operating revenues exceed operating expenses by$816,486 the non-operating expenses exceeded nonoperating revenues in the current year.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets At December 31, 2008 , the Authority s investment in capital assets, which includes land and thebuildings for the Hotel/Convention Center, totaled $53,259,998. The reduction in buildings since2007 reflects depreciation of $1,431,050 during 2008.

12/31/2008 12/31/2007

Land and improvements $ 539,433 $ 539,433Buildings and Equipment (net of depreciation) 52,720,565 53,984,043

Total $ 53,259,998 $ 54,523,476

Total Activities


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Long-Term Debt

At December 31, 2008, the DRA had total revenue bonds outstanding of $68 million. Of thisamount, $65,855,000 relates to the 2003A Revenue Bonds and $2,420,000 relates to the twoinstallments of the 2003B Subordinate Revenue Bonds. Both installments of the 2003 Series BBonds were fully accreted to their face value during 2008. The $2.3 million Due to Other Governmental Units reflects the DRAs liability to the County PFD for the construction and

operation of the Hotel/Convention Center.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

The Authority opened and began operations of the Hotel/Convention Center in June of 2005.The operations are said to remain in start up phase for 36 months after opening, which iscommon for the hospitality industry. Until September of 2008, this industry in Vancouver wasexperiencing an increase in demand and market growth that provided higher revenues andprofits to lodging establishments.

However, in October and November of 2008, the global economic markets began to showsignificant weakness. Local consumer spending declined and companies began curtailing

business travel, which is having a negative impact on the Hotel/Convention Center.

Budgeted spending and revenues are expected to increase slightly during the next biennium.The priority of the DRA Management will continue to be to increase demand and market growthas well as ensuring increased cash flow to meet debt service requirements and operatingneeds.

Requests for InformationThis financial report is designed to provide a general overview of DRA finances. Questionsconcerning any of the information provided in this report or requests for additional financialinformation should be addressed to the City of Vancouver, Financial & Management Services,PO Box 1995, Vancouver, WA, 98668-1995.


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VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITYSTATEMENT OF NET ASSETSDecember 31, 2008

ASSETSCurrent assets

Cash and cash equivalents $ 73,661

Restricted assetsCash with fiscal/escrow agent 5,205,288 Investments 4,069,806

Receivables (net)Taxes 540,677 Accounts 299,342 Interest 105,039

Inventory 64,133 Prepaid expenses 50,785

Total current assets 10,408,731

Noncurrent assetsDeferred charges 5,015,658 Capital assets

Land and improvements 539,433 Buildings 57,242,004 Machinery and equipment 154,567 Construction in progress 113,703

Less accumulated depreciation (4,789,709) Total noncurrent assets 58,275,656

TOTAL ASSETS 68,684,387

LIABILITIESCurrent liabilities

Accounts payable 146,715

Accrued interest payable 1,788,594 Accrued liabilities 514,383 Unearned revenue 36,034 Bonds, notes and loans payable 408,640

Total current liabilities 2,894,366

Noncurrent liabilitiesBonds, notes and loans payable from restricted assets 68,421,282 Due to other governmental units 2,300,712

Total noncurrent liabilities 70,721,994 TOTAL LIABILITIES 73,616,360

NET ASSETSInvested in capital assets, net of related debt (6,484,266) Restricted for capital purposes 852,863 Restricted for debt service - Unrestricted 699,430

TOTAL NET ASSETS $ (4,931,973)

The accompanying notes are an integral part of this financial statement


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VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITYSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETSFor the Year Ended December 31, 2008

OPERATING REVENUESRent and royalties $ 13,053,282

Total operating revenues 13,053,282

OPERATING EXPENSESSupplies and contractual services 10,787,431 Depreciation 1,449,365

Total operating expenses 12,236,796

Operating income (loss) 816,486

NONOPERATING REVENUES (EXPENSES)Interest earnings 254,040 Intergovernmental contributions 2,457,874 Intergovernmental payments (913,583) Interest and fiscal charges (4,109,279)

Total nonoperating revenues (expenses) (2,310,948)

Income (loss) before contributions and transfers (1,494,462)

TOTAL NET ASSETS - BEGINNING (3,282,138) Prior year adjustments (155,373)

TOTAL NET ASSETS - ENDING $ (4,931,973)

The accompanying notes are an integral part of this financial statement.


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VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITYSTATEMENT OF CASH FLOWSFor the Fiscal Year Ended December 31, 2008

CASH FLOWS FROM OPERATING ACTIVITIESCash received from other operating activities $ 13,180,692Cash payments for goods and services (11,124,517)

Net cash provided (used) by operating activities 2,056,175

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESReceipts from other governments 2,457,874Payments to other governments (629,938)

Net cash provided (used) by noncapital financing activities 1,827,936

CASH FLOWS FROM CAPITAL ANDRELATED FINANCING ACTIVITIES

Interest paid on capital debt (3,908,653)Purchase of capital assets (185,887)Proceeds from capital debt 382,824

Net cash provided (used) by capital andrelated financing activities (3,711,716)

CASH FLOWS FROM INVESTING ACTIVITIESReceipt of interest 149,878Purchase of investments (355,800)

Net cash provided (used) by investing activities (205,922)

NET INCREASE (DECREASE) INCASH AND CASH EQUIVALENTS (33,527)

107,188$ 73,661

Reconciliation of operating income (loss) to netcash provided (used) by operating activities:

Operating income (loss) $ 816,486

Adjustments to reconcile operating income (loss)to net cash provided (used) by operating act ivities:

Depreciation expense 1,449,365 (Increase) Decrease in receivables 107,165 (Increase) Decrease in inventories 17,565 (Increase) Decrease in prepaid assets (11,610) Increase (Decrease) in current payables (343,041)

Increase (Decrease) in unearned revenues 20,245 Total adjustments 1,239,689

Net cash provided (used) by operating activities $ 2,056,175

The accompanying notes are an integral part of this financial statement.

CASH AND CASH EQUIVALENTS - BEGINNINGCASH AND CASH EQUIVALENTS - ENDING


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Vancouver Downtown Redevelopment Authority

(A component unit of the City of Vancouver)NOTES TO FINANCIAL STATEMENTS

December 31, 2008

NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the Vancouver Downtown Redevelopment Authority (the Authority or DRA) conform to generally accepted accounting principles as applied to local governmentalunits. The more significant accounting polices are described below.

A. REPORTING ENTITY

The Downtown Redevelopment Authority (DRA) is a special purpose government established in1997 to plan, design, finance, acquire, construct, equip, own, maintain, operate, repair, remodel,expand and promote the Vancouver Convention Center and Hotel Project. The DRA is acomponent unit of the City of Vancouver, Washington, the primary government. The DRABoard is composed of seven (7) members who are appointed by the City Council of Vancouver

to four year terms. The City is able to impose its will on the Authority ; however, the DRAsservices do not exclusively or almost exclusively benefit the City of Vancouver. Therefore,financial statements are discretely presented in the City of Vancouver s annual financial report.The City of Vancouvers financial statements can be obtained from the City of Vancouver,Finance Department, PO Box 1995, Vancouver, WA 98668-1995.

The Downtown Redevelopment Authority retains the Hilton Hotels Corporation as a Manager for its Hotel/Convention Center p roject, which constitutes most of the Authoritys ongoingoperations. Financial statements for the Hotel/Convention Center project can be obtained fromthe City of Vancouver, Finance Department, PO Box 1995, Vancouver, WA 98668-1995.

B. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

The financial statements are reported using the economic resources measurement focus andthe accrual basis of accounting. Revenues are recorded when earned and expenses arerecorded when a liability is incurred, regardless of the timing of related cash flows. Grants,contributions, and similar items are recognized as revenues as soon as all eligibilityrequirements imposed by the provider have been met.

Private-sector standards of accounting and financial reporting issued prior to December 1,1989,generally are followed to the extent that those standards do not conflict with or contradictguidance of the Governmental Accounting Standards Board (GASB). Governments also have

the option of following subsequent private-sector guidance for their business-type activities andenterprise funds, subject to this same limitation. The government has elected not to followsubsequent private-sector guidance.

The Authority distinguishes operating revenues and expenses from nonoperating items.Operating revenues and expenses generally result from providing services and producing anddelivering goods in connection with a proprietary funds principal ongoi ng operations. Theprincipal operating revenues of the Authority are room rents and meal revenues from hotel andrestaurant usage. Operating expenses for this enterprise fund include the cost of personnel and


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December 31, 2008

contractual services and supplies. All revenues and expenses not meeting this definition arereported as nonoperating revenues and expenses.

It is the governments policy to use restricted resources for their intended uses, and unrestrictedresources for other uses.

C. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY

1. Deposits and investments

The DRAs cash and cash equivalents are considered to be cash on hand, demand deposits,and short-term investments. Statutes authorize the Authority to invest in obligations of the U. S.Treasury, commercial paper, repurchase agreements, Local Government Investment Pools andthe State Treasurers Investment Pool. The City of Vancouver Investment Pool operates inaccordance with appropriate state laws and regulations. The reported value of the pool is thesame as the fair value of the pool shares.

Investments for the Authority are reported at fair value.

2. Receivables and payables

All trade receivables are shown net of an allowance for uncollectible accounts. Accruedinterest receivable consists of amounts earned on investments, but not received at the end of the year.

3. Inventories and prepaid items.

The inventories consist primarily of food, beverage, china, glass, silver, and linens used in theoperation of the Hotel/Convention Center and are stated at the lower of cost or market using afirst-in first-out valuation method. Certain payments to vendors reflect costs applicable to futureaccounting periods and are recorded as prepaid expenses in the DRA financial statements.

4. Restricted assets

These accounts contain resources being held by the trustee for debt service and operation of the Hotel/Convention Center. The use of these assets is limited by applicable bond covenants.

5. Deferred charges

Bond issuance costs are reported as deferred charges and amortized over the term of therelated debt.

6. Capital assets

Capital assets are generally considered property, plant, and equipment owned by the Authoritycosting $5,000 or more, and having an estimated useful life of more than three years. Suchassets are recorded at historical cost or estimated historical cost if the actual cost is notavailable and are reported in the statement of net assets. Donated capital assets are recordedat estimated fair market value at the date of donation.


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December 31, 2008

NOTE II. DETAILED NOTES

A. DEPOSITS AND INVESTMENTS

Deposits

The City of Vancouver Treasurer acts in a fiduciary capacity for the Authority and administers aninvestment pool in which the Authority participates. The Federal Deposit Insurance Corporation(FDIC) insures the Authority s deposit and investments up to $250,000. All deposits and bankand investment pools not covered by FDIC are covered under the State of Washington PublicDeposit Protection Commission Act of 1969. Total public deposits may not exceed one andone-half times its net worth or 30% of the total public funds on deposit statewide in eachqualified public depository. If public deposits exceed either of these limitations, it mustcollateralize the excess at 100%.

Investments

As required by state law, all investments of the Authority s funds are obligations of the U.S.Government, U.S. agency issues, the State Treasurers Investment Pool, bankers acceptances,overnight repurchase agreements, commercial paper, the City of Vancouver Investment Pool,money market accounts, or certificates of deposit with Washington State banks and savings andloan institutions.

All of the Authority s unrestricted funds are invested in the City of Vancouver Investment Pool.The Authority s interest in the pool at December 31, 2008 was $73,661, which is stated at fair value. Investments in the Citys pool are not subject to categorization because specificinstruments cannot be distinguished between those participating in the pool. The fair value of the Authority s position in the pool is the same as the fair value of the pool shares.

In December 2003, the Authority entered into a forward purchase agreement, which had a rateof 5.05%, with Lehman Brothers Special Finance Inc., with Lehman Brothers Inc. as Guarantor.On September 19, 2008, Lehman Brothers Inc., Lehman Brothers Holdings, Inc., and LehmanBrothers Special Finance, Inc., among other Lehman related entities, filed petitions for relief under Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court for theSourthern District of New York. The Forward Purchase Agreement with the Authority requiresLehman Brothers Special Finance Inc. to meet delivery requirements of qualified securities oneach debt service payment date, so that the value of the Debt Service Reserve Fund is earning5.05%.

Per the Forward Purchase Agreement, the Authority s restricted assets are deposited with atrustee. The $4,069,806 at December 31, 2008 was invested as follows:

Investment Type 2008 Fair Value

General Electric Capital Corp C P $ 33,000 Crimson Commercial C P 4,036,806

Total Fair Value $ 4,069,806


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December 31, 2008

B. CAPITAL ASSETS

A summary of capital asset activity for the year ended December 31, 2008 was as follows:

BeginingBalance1/1/08 Increases Decreases

EndingBalance12/31/08

Capital assets, not being depreciated:Land and improvements $ 539,433 0 $ 0 $ 539,433Construction in progress 0 421,772 308,069 113,703

Total capital assets, not being depreciated 539,433 421,772 308,069 653,136

Capital assets, being depreciated:Buildings 57,242,004 0 0 57,242,004Machinery and equipment 82,383 72,184 0 154,567Total capital assets being depreciated 57,324,387 72,184 0 57,396,571

Less accumulated depreciation for:Buildings 3,339,117 1,431,050 0 4,770,167Machinery and equipment 1,227 18,315 0 19,542Total accumulated depreciation 3,340,344 1,449,365 0 4,789,709

Capital assets, net $ 54,523,476 $ (955,409) $ 308,069 $ 53,259,998

C. LEASE AGREEMENTS

Operating Lease

The Authority leases land and premises under an operating lease entered into on December,2003 that grants early termination rights. The land is leased from Vancouver Public FacilitiesDistrict for 50 years, for a one time rental payment of $10.

Capital Lease

The Authority has entered into a lease agreement as lessee for land near the Hotel/ConventionCenter. The implied interest rate of the lease is 5.53%. The leased asset and related obligationis accounted for in the statement of net assets. This lease agreement qualifies as a capitallease for accounting purposes and, therefore, has been recorded at the present value of itsfuture minimum lease payments as of the inception date. The minimum capital lease payments

reflect the remaining capital obligation on this asset.


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December 31, 2008

Net Capital Lease Ass ets 2008Land $ 539,433 Total Capital Lease Assets $ 539,433

Minimum Capital Lease Payme nts

Total Mimimum Lease Payments 168,321Less Current Principal (58,640)

Present Value of Minimum Lease Payments $ 109,681

D. LONG-TERM DEBT

Revenue Bonds

In 2003, the Downtown Redevelopment Authority (DRA), a component unit of the City, issuedbonds in which it pledged income derived from the acquired or constructed assets to pay debtservice. Revenue bonds are created by ordinance, adopted by the Council, and financed fromoperating revenues. The revenue bonds were issued to finance construction of the ConferenceCenter and Hotel capital project. Revenue bonds outstanding at year-end are as follows:

The 2003A Revenue Bonds were issued in the amount of $65,855,000 in December 2003. Annual principal installments range from $350,000 to $9,510,000. Interest rateson this issue range from 4.0% to 6.0%. The amount of outstanding principal atDecember 31, 2008 is $65,855,000.

The 2003B Subordinate Revenue Bonds are a capital appreciation revenue bondreceived in two installments. The authorized amount of these revenue bonds is$2,420,000. The first installment was issued in the amount of $155,000 in December 2003, of which $99,784 was received and accreted to the face value of $155,000 over the last five years. The second installment $2,265,000 was issued on June 1, 2005.DRA received $1,652,204 and the $612,796 difference was accreted to the face valueover the last three and one-half years. The interest rate on this issue is 9.00% beginningJanuary 1, 2009. One principal installment is required on January 1, 2034. OnDecember 31, 2008, $2,420,000 is outstanding.


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December 31, 2008

DRA 2003A Revenue bond debt service requirements to maturity are as follows:

TotalPrincipal Interest Requirements

2009 350,000 3,570,188 3,920,1882010 455,000 3,554,088 4,009,0882011 550,000 3,533,988 4,083,9882012 645,000 3,510,088 4,155,0882013 750,000 3,481,250 4,231,250

2014-2018 5,705,000 16,676,606 22,381,6062019-2023 10,100,000 14,648,500 24,748,5002024-2028 15,275,000 11,292,544 26,567,5442029-2033 22,515,000 6,027,244 28,542,244

2034 9,510,000 267,413 9,777,413$ 65,855,000 $ 66,561,906 $ 132,416,906

Revenue Bonds

DRA 2003B Revenue bond debt service requirements to maturity are as follows:

TotalPrincipal Interest Requirements

2009 225,000 217,800 442,8002010 25,000 197,550 222,5502011 25,000 195,300 220,3002012 30,000 193,050 223,0502013 30,000 190,350 220,350

2014-2018 225,000 902,250 1,127,2502019-2023 345,000 779,850 1,124,8502024-2028 515,000 597,600 1,112,6002029-2033 795,000 318,150 1,113,150

2034 205,000 18,450 223,450$ 2,420,000 $ 3,610,350 $ 6,030,350

Revenue Bonds

Principal payment dates are on January 1 in the calendar year immediately following.

A total of $4,069,806 is available in the reserve and redemption accounts to service revenuedebt.

The bond Trust Indenture (the Indenture) provides for the debt service coverage ratio (theratio) that is calculated on the DRAs cash flow basis. The calculation shown below is basedon provisions set forth in the Indenture and the ratio must not be less than 1.20:1.00 for theyears shown. If the ratio is less than 1.20:1.00, the DRA or the bond insurer may communicateto the Hilton Vancouver Washington Management that additional action is required as stipulatedin the Indenture. Hilton Management has not received any communications from the DRA or the bond insurer regarding required additional action as of the date of this report. The debtservice coverage ratio for 2008 is .98 to 1. No formal communication was deemed necessary bythe bond insurer. Specific action was taken by the DRA in late 2008 to approve a budget for 2009 that would meet the debt service coverage ratio for that year. As of December 31, 2008,the occurrence of the debt service coverage ratio being less than required is not considered anevent of default. There are a number of other limitations and restrictions contained in the bondindenture and agreements. DRA is in compliance with all remaining significant limitations andrestrictions.


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December 31, 2008

The City of Vancouver, Washington Downtown Redevelopment Authority Conference Center Project Senior Revenue Bonds Series 2003A financing included purchasing bond insurance

from ACA Financial Guaranty Corporation (ACA) in December 2003, when the revenue bondswere issued. By purchasing this insurance, the bonds were rated A by Standard & Poors.The provisions of the bond insurance are described in the bond indenture and specifically in theinsurer documents which discuss the commitment of the bond insurer.

On Decembe r 19, 2007, Standard & Poors downgraded ACA from an A rating to a CCCrating. The DRA did not take any further action in 2008 to purchase bond insurance fromanother insurer. ACA continues to work with the DRA and the Trustee per requirements of thebond indenture.

Intergovernmental Obligations

Under an inter-local agreement with the Clark County Public Facilities District (PFD), DRA isliable to the Clark County PFD for state sales and use tax credit monies received by the DRA.Payments under this agreement are received by Clark County PFD monthly and forwarded tothe DRA. This creates a liability for the DRA to repay these funds via three methods. The firstis a predetermined tax cap in the 2003A Bond indenture which changes each year through2034, for Clark County PFD, Vancouver PFD, and City of Vancouver lodging taxes, the funds inexcess of the tax cap are returned to the Clark County PFD. During 2008, funds exceeded the2008 Tax Related Revenue Cap of $1,910,000 and $555,541 was paid to the County PFD. Thesecond method occurs after funds flow through the 2003A bond indenture distributionrequirements. The monies available in the end are returned to Clark County PFD. There havebeen no such monies available to return since the start of the convention center. A third methodis, if the City of Vancouver makes payments to the Clark County PFD, these amounts decrease

the DRA liability to Clark County PFD after each payment. One such payment was made during2008 amounting to $79,023. On December 31, 2008 the DRA liability to Clark County PFD is$2,300,712, which is represented in the financial statements as due to other governments.

Component Units Changes in Long-Term Liabilities

The following is a summary of long-term debt changes of the authority for the year (inthousands):

BeginningBalance

1/1/08 Additions Reductions

EndingBalance12/31/08

Due WithinOne Year

Bonds payable:

Revenue bonds $ 68,275 $ - - $ 68,275 $ 350Less deferred amounts

For issuance premiums (discounts) (204) 709 118 387 0Due to other governments 2,017 1,005 721 2,301 0

Total bonds payable 70,088 1,714 839 70,963 350Capital leases 221 0 53 168 59

Component units long term liabilities $ 70,309 $ 1,714 $ 892 $ 71,131 $ 409


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December 31, 2008

The beginning balances of the component unit were restated as described in Note V.H Prior Period Adjustments. The beginning discount balance on the Series B Bond at December 31,2007 was reported at $605,635 and restated at January 1, 2008 to $ zero. The balance shown

above relates to the Series A Bond.

E. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

At December 31, 2008, the Authority reported a deficit in fund net assets. This deficit isprimarily due to the depreciation of the asset and amortization of the bond costs which totaled$5,777,596 in 2008.

NOTE III. OTHER DISCLOSURES

A. RELATED PARTY TRANSACTIONS

The Authority constructed and operates the Hotel Conference/Convention Center, which ismanaged by Hilton Hotels Corporation.

The Vancouver Public Facility District (PFD) was created to acquire, construct, own, finance,and operate the Convention Center Project. The Clark County Public Facility District wascreated for the purpose of participating in the development of regional centers, consisting of theConvention Center Project and the Exposition Center at the Clark County Fairgrounds. TheVancouver PFD, the County PFD, the City of Vancouver, and DRA entered into interlocalagreements which detail their support for the project.

During 2008, the Downtown Redevelopment Authority recognized receipt of $997,442 in salestax credit monies from the Vancouver PFD for the bond servicing of the Hotel andConference/Convention Center project. The Clark County PFD contributed $785,881 of salestax credits, and the City of Vancouver contributed $682,218 of lodging tax.

The City signed an agreement on December 1, 2003 to participate in the construction andoperation of the Vancouver Conference/Convention Center, using tourism funds. Under thisagreement the City has pledged Guaranteed Revenues and Guaranteed Reserve amounts.The tax related revenue refers to the aggregate amount of City Sales and Use taxes, CountySales and Use taxes, and City Lodging Taxes for each calendar year to a minimum amount, asfollows:


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December 31, 2008

Year Guaranteed Am t Year Guaranteed Am t

2009 1,800,000$ 2021 2,200,000$2010 1,900,000 2022 2,200,000 2011 1,900,000 2023 2,200,000 2012 2,000,000 2024 2,200,000 2013 2,000,000 2025 2,200,000 2014 2,000,000 2026 2,200,000 2015 2,100,000 2027 1,700,000 2016 2,100,000 2028 1,200,000 2017 2,200,000 2029 1,000,000 2018 2,200,000 2030 1,000,000 2019 2,200,000 2031 1,000,000 2020 2,200,000 2032 1,000,000

2033 1,000,000

Schedule of Guarantee d Revenue

The Guaranteed Reserve is an amount the City agrees to pay if the DRA has not accumulatedenough funds to pay debt service up to the limits noted below. The City has made no paymentrelated to this guarantee thus far.

Year

Guaranteed

Am ount Year

Guaranteed

Amount

2009 650,000$ 2021 440,000$2010 650,000 2022 440,000 2011 650,000 2023 440,000

2012 650,000 2024 440,000 2013 650,000 2025 440,000 2014 650,000 2026 800,000 2015 550,000 2027 1,400,000 2016 550,000 2028 1,400,000 2017 550,000 2029 1,400,000 2018 550,000 2030 1,400,000 2019 550,000 2031 1,400,000 2020 440,000 2032 1,400,000

2033 1,400,000

Schedule of Guaranteed Reserve Amounts

B. PRIOR PERIOD ADJUSTMENT

A net total of ($155,373) was recorded as prior period adjustments during 2008. This includes anegative $402,227 to properly record effective interest on the Series B Bond for theHotel/Conference Center Project, in accordance with APB 21. The previous entry was offset bya $246,854 reduction in revenues based on estimates in lieu of actuals.


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dra audit doc ep309115-ep21013-ep643025

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