New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 29 9. PILOT Lease Receivable, Net (continued) Beginning Balance 5/01/09 Additions Reductions Beginning Balance 7/01/09 Gross receivable $ 4,026,783,246 $ 51,799,295 $ (301,094) $ 4,078,281,447 Less: Deferred interest 2,563,744,454 464,934 (18,267,698) 2,545,941,690 N et receivable $ 1,463,038,792 $ 51,334,361 $ 17,966,064 $ 1,532,339,757 10. Commitments and Contingencies Pursuant to various approved agreements between IDA and EDC, IDA was committed to fund thirty-six projects being performed by EDC related to the City’s Commerce and Industrial Development (the Project Commitments). Total project commitments under these agreements amounted to approximately $21.2 million with an outstanding obligation at June 30, 2010 of $7.9 million. The Project Commitments, related approval dates, original and outstanding commitment balances are as follows: Project Approval Date Total Commitment Total Expenditures Total De-Obligate Outstanding Commitment Downtown Brooklyn Relocation Services 06/10/03 $ 650,000 $ 78,207 $ – $ 571,793 Hunts Point Peninsula/Vision Plan 07/29/03 795,000 496,933 146,084 151,983 Hudson Yards Engineering Consulting 09/30/03 625,000 618,881 6,119 – City-wide Environmental and Traffic Study 12/09/03 1,750,000 1,744,141 5,859 – Hudson Yard/Cornerstone 07/13/04 350,000 243,427 106,573 – Industrial Business Zone 06/14/05 400,000 353,872 46,128 – Hunts Point Produce Market 10/11/05 350,000 301,576 – 48,424 Pier 7-12 Development Policy 03/14/06 1,979,611 1,406,416 – 573,195 Maritime Support Services Location Study 05/09/06 275,000 275,000 – – Downtown Far Rockaway Development Plan 05/09/06 150,000 129,888 – 20,112 Downtown Jamaica Rendering 08/08/06 35,000 – 35,000 – Community Development Finance Research Study 09/12/06 300,000 229,125 70,875 – This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 30 10. Commitments and Contingencies (continued) Project Approval Date Total Commitment Total Expenditures Total De-Obligate Outstanding Commitment Transportation Use Feasibility Study 11/14/06 $ 180,000 $ 125,241 $ 54,759 $ – Participant Tracking Study 12/12/06 200,000 200,000 – – Willets Point Development Strategy 03/13/07 3,300,000 1,421,765 – 1,878,235 Staten Island West Shore Study – Land and Transportation 04/11/07 900,000 842,984 – 57,016 On Call Environmental Planning Services 07/23/07 150,000 127,795 22,205 – On Call Services Contract/Traffic Impact Study 09/11/07 75,000 35,764 39,236 – On Call Services Contract/Strategic Port Plan 09/11/07 1,200,000 1,199,488 – 512 Fordham Plaza Conceptual Design Study 12/11/07 650,000 590,480 59,520 – Hunts Point Food Distribution Center, Development Feasibility Studies 12/11/07 700,000 166,140 – 533,860 Fashion Industry Support Study 03/11/08 300,000 278,898 21,102 – Sunset Park Vision Plan 03/11/08 550,000 452,743 97,257 – Harlem Business Assistance Fund/UMEZ 05/13/08 1,000,000 – – 1,000,000 Staten Island North Shore Study – Land and Transportation 05/13/08 700,000 577,933 – 122,067 N YC Media Scenario Series 01/16/09 500,000 360,000 – 140,000 Harbor District Ferry Service Feasibility and Branding Initiative 03/11/09 590,058 – – 590,058 Environmental Consulting Services 04/14/09 5,000 4,300 700 – Harlem River Waterfront/Sherman Creek 07/28/09 300,000 – – 300,000 Hunts Point Food Distribution 09/15/09 500,000 69,072 – 430,928 City-wide Ferry Service Feasibility Study 09/15/09 175,000 159,589 – 15,411 Teleport Planning Services 09/15/09 100,000 98,808 – 1,192 Hunts Point Freight Rail and Anaerobic Digestion Study 12/15/09 131,705 – – 131,705 Industry NYC Survey 03/09/10 65,000 55,000 – 10,000 Industrial Subsector and Cost Comparison Analysis 05/11/10 300,000 – – 300,000 Wage Study 06/08/10 1,000,000 – – 1,000,000 $ 21,231,374 $ 12,643,466 $ 711,417 $ 7,876,491 For the years ended June 30, 2010 and 2009, $1,762,427 and $6,561,338, respectively, have been incurred by the IDA related to the above projects and are included in special project costs on the accompanying statements of revenue, expenses and changes in fund net assets. Of such amounts, $924,873 and $2,901,662 remained unpaid as of June 30, 2010 and 2009, respectively, and are included in Due to New York City Economic Development Corporation on the accompanying balance sheets. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 31 10. Commitments and Contingencies (continued) The Agency has entered into certain financing transactions in which it has committed to provide for the issuance of IDBs up to a specified maximum amount and over a specified number of years. During the year ended June 30, 2010, IDA did not issue any IDBs. IDA issued approximately $5.0 million in IDBs during the year ended June 30, 2009. As of June 30, 2010, IDA has not committed to issue any additional IDBs to approved beneficiaries. As of June 30, 2010, the total conduit debt obligations outstanding totaled $10.1 billion. IDA, and in certain situations as co-defendant with the City and/or New York City Economic Development Corporation, is involved in personal injury, environmental claims, property damage, breach of contract and other miscellaneous claims and lawsuits. In many of these matters there is liability coverage insuring the IDA and the IDA’s clients are, in any case, obligated to indemnify IDA. IDA is unable to predict the outcome of each of these matters, but believes that the IDA has meritorious defenses or positions with respect thereto. It is management’s opinion that, except for the matters noted below, the ultimate resolution of these matters will not be material to the Agency. Management believes that the following matters could have a material adverse effect on IDA's operations: (a) The New York State Department of Environmental Conservation ("DEC") has notified IDA that DEC will most likely seek contribution from IDA in connection with the remediation of four sites in Brooklyn and Queens that are or were used by clients to which IDA has provided financial assistance. These clients are obligated to indemnify IDA; however, IDA believes that the remediation costs will be substantial and will exceed the clients' ability to meet their indemnity obligations. (b) If IDA is found to have liability in the case of three particular claims of serious personal injury brought by individuals employed at sites of IDA's clients or a number of personal injury claims brought by persons involved in the clean-up of IDA's clients' sites following 9/11, IDA's liability may exceed any available insurance and the financial resources of its clients who are obligated to indemnify the IDA. IDA is unable to predict the outcome of the matters described in (a) and (b) above, but believes it has meritorious defenses with respect thereto. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 32 11. Risk Management IDA is exposed to various risks of loss-related torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. IDA requires all beneficiaries to purchase and maintain commercial insurance coverage for these risks and name the IDA as additional insured. Settled claims resulting from these risks have not exceeded commercial insurance coverage provided by the beneficiaries in any of the past fiscal years. This is trial version www.adultpdf.com Supplemental Information This is trial version www.adultpdf.com 33 New York City Industrial Development Agency (a component unit of The City of New York) Combining Balance Sheets Restricted Queens Baseball Yankee Baseball Total Year Ended June 30 Unrestricted Stadium Project Stadium Project Restricted 2010 2009 Assets Current assets: Cash and cash equivalents $ 4,228,097 $ – $ – $ – $ 4,228,097 $ 11,485,252 Investments 36,613,294 – – – 36,613,294 30,921,686 Fees receivable, net of allowance for doubtful accounts of $91,718 and $107,114, respectively 198,347 – – – 198,347 313,891 PILOT lease receivable – 6,210,000 12,783,558 18,993,558 18,993,558 25,790,000 Total current assets 41,039,738 6,210,000 12,783,558 18,993,558 60,033,296 68,510,829 N oncurrent assets: Restricted cash- stadium projects – 22,898,498 1,912 22,900,410 22,900,410 – Restricted investments 2,382,739 – – – 2,382,739 – Restricted investments- stadium projects – 33,472 102,182,659 102,216,131 102,216,131 323,881,716 PILOT lease receivable – 603,453,995 1,097,948,426 1,701,402,421 1,701,402,421 1,506,549,757 Deferred bond issuance costs – 23,566,954 59,034,259 82,601,213 82,601,213 86,045,984 Deferred outflow of resources – – 19,835,517 19,835,517 19,835,517 18,353,388 Total noncurrent assets 2,382,739 649,952,919 1,279,002,773 1,928,955,692 1,931,338,431 1,934,830,845 Total assets $ 43,422,477 $ 656,162,919 $ 1,291,786,331 $ 1,947,949,250 $ 1,991,371,727 $ 2,003,341,674 Liabilities and net assets Current liabilities: Accounts payable and accrued expenses $ 67,467 $ – $ – $ – $ 67,467 $ 62,048 Due to New York City Economic Development Corporation 945,083 – – – 945,083 2,901,662 Bonds payable current – 6,210,000 12,783,558 18,993,558 18,993,558 25,790,000 Interest payable on bonds – 15,893,831 40,442,632 56,336,463 56,336,463 41,972,279 Deferred revenue 529,336 – – – 529,336 595,637 Other liabilities 2,382,739 – – – 2,382,739 – Total current liabilities 3,924,625 22,103,831 53,226,190 75,330,021 79,254,646 71,321,626 N oncurrent liabilities: Bonds payable, net – 634,059,088 1,218,724,624 1,852,783,712 1,852,783,712 1,874,505,178 Derivative instruments- interest rate swap – – 19,835,517 19,835,517 19,835,517 18,353,388 Total noncurrent liabilities – 634,059,088 1,238,560,141 1,872,619,229 1,872,619,229 1,892,858,566 Total liabilities 3,924,625 656,162,919 1,291,786,331 1,947,949,250 1,951,873,875 1,964,180,192 N et assets: Unrestricted 39,497,852 – – – 39,497,852 39,161,482 Total net assets 39,497,852 – – – 39,497,852 39,161,482 Total liabilities and net assets $ 43,422,477 $ 656,162,919 $ 1,291,786,331 $ 1,947,949,250 $ 1,991,371,727 $ 2,003,341,674 This is trial version www.adultpdf.com 34 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards The Board of Directors New York City Industrial Development Agency We have audited the balance sheet of New York City Industrial Development Agency (the Agency), a component unit of the City of New York, and the related statements of revenues, expenses and changes in fund net assets and cash flows as of June 30, 2010 and for the year then ended, and have issued our report thereon dated September 21, 2010. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency’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 an opinion on the effectiveness of the Agency’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control over financial reporting. 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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting 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. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. A member firm of Ernst & Young Global Limited Ernst & Young LLP Five Times Square New York, NY 10036-6530 Tel: +1 212 773 3000 Fax: +1 212 773 6350 www.ey.com This is trial version www.adultpdf.com 35 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Agency’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 or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management, Board of Directors, others within the entity and the City of New York and is not intended to be and should not be used by anyone other than these specified parties. EY September 21, 2010 A member firm of Ernst & Young Global Limited This is trial version www.adultpdf.com . Industrial Development Agency We have audited the balance sheet of New York City Industrial Development Agency (the Agency) , a component unit of the City of New York, and the related statements. version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 31 10. Commitments and Contingencies. thereto. This is trial version www.adultpdf.com New York City Industrial Development Agency (a component unit of The City of New York) Notes to Financial Statements (continued) 32 11. Risk