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 (Continued) Year Ended June 30, 2011 (c) Disposition and Development Agreements On October 9, 2009, the Agency released a Request for Qualifications (RFQ) for the selection of qualified developers for Agency -owned parcels. On December 21, 2009, the Agency selected Habitat for Humanity of Orange County (Habitat) as developer for seven sites where single family homes are to be developed. The Agency entered into a disposition and development agreement with Habitat for Humanity of Orange County, Inc., to redevelop Agency owned sites at various locations. The Agency disposes sites to the developer at no cost. Under the terms of the disposition and development agreement, the Agency shall distribute to the developer a developer fee in an amount equal to $50,000 per affordable unit payable to the developer upon close of escrow with a qualified homebuyer. The Agency entered into a disposition and development agreement with the partnership of Santa Ana WBBB, LP. Santa Ana WBBB, LP was selected as the developer for multi - family housing at sites identified as 217, 2191 435, and 437 South Birch Street, and 2034 -2038 Bush Street. Plans have been approved and all necessary financing obtained for the Birch, Birch and Bush Street sites. A total of twenty rental units will be developed, and all will be rented to very low - income households. They anticipate construction to start by the middle of November 2011, and completed within a year. The Agency entered into a disposition and development agreement with Santa Ana Station District LLC. Construction on the first phase of the Station District affordable housing project (74 podium apartment units, including retail and child care components) is anticipated to commence in late November 2011. Plans for the second phase of the rental project include an anticipated construction start date of February 2012, and the 24 for -sale unit project is anticipated to commence construction in 2011 as well, and be completed within 18 months. The Agency is to establish a $200,000 Lacy Neighborhood Housing fund to encourage home owners in the Lacy Neighborhood to make exterior home improvements by providing grants for qualifying eligible property owners on the state or local historic register. (13) UNRESTRICTED NET DEFICIT GASB Statement No. 34 requires that local governments record in the statement of net assets the local government's liability for debt issued to finance the construction of infrastructure and other assets owned by other parties. This is an integral part of normal operations of a redevelopment agency and is necessary to produce the redevelopment benefits for which the Agency was established. GASB Statements No. 33 and 34 do not permit the recognition of assets for future tax increment revenues that are pledged for the annual retirement of bonded debt issuances. The net deficit results from the Agency's liability for this debt. (14) SUBSEQUENT EVENT On August 5, 2011, Standard & Poor's lowered its long -term credit rating on debt of the U.S. government from AAA to AA +. That action affected Standard & Poor's view of U.S. public finance debt instruments that are directly or indirectly backed by the U.S. government. As a result, on August 8, 2011, Standard & Poor's lowered its long -term credit ratings of U.S. government - sponsored enterprises and public debt issues that have credit enhancement guarantees by those government- sponsored enterprises to AA +. These credit downgrades relate to the credit risk associated with the Agency's investment in the City's investment pool which includes U.S. treasury securities, federal home loan bank, federal national mortgage association, federal home loan mortgage corporation, and federal farm credit bank. 42