19D - EXHIBIT FY 10-11 RDA Annual Report

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COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Notes to the Basic Financial Statements Year Ended June 30, 2011 (1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization and Tax Increment Financing The Community Redevelopment Agency of the City of Santa Ana (Agency) was established in January 1973 pursuant to the California Community Redevelopment Law. Financial activity of the Agency commenced in mid -1974. The Agency's redevelopment activity involves one merged redevelopment project area encompassing about 5,105 acres. This project area includes residential, commercial, industrial, and public areas. The general objectives of the Agency's redevelopment activities are to eliminate and arrest further establishment of blighted conditions in the project areas, to eliminate mixed and incompatible land uses, and to develop residential, residential /professional and commercial /industrial areas. The Agency is an integral part of the reporting entity of the City of Santa Ana (City) and is a blended component unit of the City. The Agency's primary source of revenue comes from property taxes, referred to in the accompanying fund financial statements as "tax increment revenue ". Property taxes allocated to the Agency are computed in the following manner: The assessed valuation of all property within the project area is determined on the date of adoption of the Agency's redevelopment plan for such areas. Property taxes related to the incremental increase in assessed values after the adoption of the Agency's redevelopment plan are allocated to the Agency, while all taxes on the "frozen" assessed valuation of the property are allocated to the City and other districts. The Agency has no power to levy and collect taxes, and any legitimate property tax reduction might correspondingly reduce the amount of tax revenues that would otherwise be available to pay the principal of, and interest on, bonds or loans. Broadened property tax exemptions could have a similar effect. Conversely, any increase in the tax rate or assessed valuation, or any reduction or elimination of present exemptions, would not necessarily increase the amount of tax revenues that would be available to pay principal and interest on bonds or loans. (b) Basis of Accounting and Measurement Focus The basic financial statements of the Agency are composed of the following: • Government -wide financial statements • Fund financial statements • Notes to the basic financial statements 21