Audit Report
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Audit Report

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Washington State Auditor’s Office Financial Statements Audit Report Greater Wenatchee Regional Events Center Public Facilities District (Town Toyota Center) Chelan County Audit Period January 1, 2009 through December 31, 2009 Report No. 1004560 Issue Date November 15, 2010 Washington State Auditor Brian Sonntag November 15, 2010 Board of Directors Town Toyota Center Wenatchee, Washington Report on Financial Statements Please find attached our report on the Town Toyota Center’s financial statements. We are issuing this report in order to provide information on the District’s financial condition. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (360) 902-0370  TDD Relay (800) 833-6388 FAX (360) 753-0646  http://www.sao.wa.gov Table of Contents Town Toyota Center Chelan County January 1, 2009 through December 31, 2009 Schedule of Audit Findings and Responses ............................................................................... 1 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ................. 3 Independent Auditor’s Report on Financial Statements .............................................................. 5 Financial Section ........................ ...

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Washington State Auditor’s Office

Financial Statements Audit Report






Greater Wenatchee Regional Events
Center Public Facilities District
(Town Toyota Center)
Chelan County



Audit Period
January 1, 2009 through December 31, 2009


Report No. 1004560



















Issue Date
November 15, 2010




Washington State Auditor
Brian Sonntag



November 15, 2010


Board of Directors
Town Toyota Center
Wenatchee, Washington


Report on Financial Statements

Please find attached our report on the Town Toyota Center’s financial statements.

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

Sincerely,

BRIAN SONNTAG, CGFM
STATE AUDITOR

Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (360) 902-0370  TDD Relay (800) 833-6388
FAX (360) 753-0646  http://www.sao.wa.gov
Table of Contents

Town Toyota Center
Chelan County
January 1, 2009 through December 31, 2009


Schedule of Audit Findings and Responses ............................................................................... 1
Independent Auditor’s Report on Internal Control over Financial Reporting and on
Compliance and Other Matters in Accordance with Government Auditing Standards ................. 3
Independent Auditor’s Report on Financial Statements .............................................................. 5
Financial Section ........................................................................................ 7

Schedule of Audit Findings and Responses

Town Toyota Center
Chelan County
January 1, 2009 through December 31, 2009


1. The District has insufficient funds to pay for its current operations and
long-term debt obligations.

Description of Condition

The District has operated at a loss for the past two years, resulting in an inability to cover
its obligations. We noted:

Operating losses of approximately $1.6 million in 2008 and $2.5 million in 2009.

Unrestricted net assets decreased from $1,281,661 in 2008 to $592,152 in 2009.

In addition, the District has long-term debt of approximately $42 million in the form of
three bond anticipation notes. These notes require annual interest payments of
$2,191,681 until they mature in December 2011. Based on the District’s financial
position, it can only pay approximately $580,000 a year using sales tax revenue.

The District entered into a contingent loan agreement with the city of Wenatchee that
commits the city to lend the District funds for the remaining bond interest due. To date,
the city has paid $230,000 of the December 2009 interest payment and anticipates it will
be obligated to loan an additional $1,591,682 for the 2010 payment.

Cause of Condition

The District entered into a contract with Global Entertainment Corporation (Global) in
September 2006 to manage and market the District. Global projected future revenue to
be significantly higher than what the District actually generated, resulting in insufficient
funds to cover both operating expenses and debt obligations.

Effect of Condition

The District is unable to meet its current debt obligations. Based on current revenue
streams and operating losses, it is unknown if the District will be able to refinance the
three bond anticipation notes by their due date.

Recommendation

We recommend the District establish a written comprehensive plan to address cash-flow
issues. The plan should address the District’s financial condition, including future
operating income and cash flow. We further recommend the plan be approved by the
District’s governing body and the District closely monitor and evaluate actual results to
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Washington State Auditor's Office
1ensure the District’s financial condition improves. The plan should be revised if
expected improvements are not achieved.

District’s Response

As stated by the State Auditor, the cause of the condition is the Town Toyota Center
(TTC) earning insufficient revenue to cover operating expenses and debt service. Also
stated by the auditor, the estimates of revenues and expenses that were the basis for
constructing the Center were provided by Global Entertainment Corporation (GEC).
GEC’s estimates were reviewed by an independent third party consultant C. H. Johnson
and deemed by the consultant to be reasonable.

GEC operated the TTC for approximately one year with financial results that were much
worse than they had estimated. In September of 2009, the Greater Wenatchee Regional
Events Center Public Facilities District (PFD) terminated their contract with GEC as
contract operator of the TTC.

In October of 2009, a General Manager was hired and the PFD began to operate the
TTC. Financial results for 2010 have improved over 2009 but are still insufficient to
cover debt service payments. Research by the staff of the TTC has concluded that other
facilities similar to the TTC often do not earn sufficient revenue from operations to pay all
operating expenses and debt service. The PFD relies on sales tax rebates from the
State of approximately $600,000 per year and a contingent loan agreement with the City
of Wenatchee wherein the City is committed to pay any debt service shortfall.

Currently, the PFD and City of Wenatchee are reviewing options to address the shortfall.
The PFD intends to deliberate and take action on appropriate identified alternatives at
Open Public Meetings of the PFD Board. Approved plans of the PFD will be stated in
writing and monitored by the PFD Board and staff.

Auditor’s Remarks

We appreciated the District’s commitment to resolve the issues. We will follow up on
these issues during the next audit.


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Washington State Auditor's Office
2Independent Auditor’s Report on Internal
Control over Financial Ring and on
Compliance and Other Matters in Accordance
with Government Auditing Standards

Town Toyota Center
Chelan County
January 1, 2009 through December 31, 2009


Board of Directors
Town Toyota Center
Wenatchee, Washington


We have audited the basic financial statements of the Town Toyota Center, Chelan County,
Washington, as of and for the year ended December 31, 2009, and have issued our report
thereon dated June 25, 2010.

We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to the 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 District’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 District’s internal control over financial reporting. Accordingly, we do not
express an opinion on the effectiveness of the District’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 a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the District'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 would not necessarily 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.

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Washington State Auditor's Office
3COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the District’s financial statements are
free of material misstatement, we performed tests of the District’s 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 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 serves
to disseminate information to the public as a reporting tool to help citizens assess government
operations.


BRIAN SONNTAG, CGFM
STATE AUDITOR

June 25, 2010

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Washington State Auditor's Office
4Independent Auditor’s Report on Financial
Statements

Town Toyota Center
Chelan County
January 1, 2009 through December 31, 2009


Board of Directors
Town Toyota Center
Wenatchee, Washington


We have audited the accompanying basic financial statements of the Town Toyota Center,
Chelan County, Washington, as of and for the year ended December 31, 2009, as listed on
page 7. These financial statements are the responsibility of the District’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.

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 standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Town Toyota Center, as of December 31, 2009, and the changes in
financial position and cash flows thereof for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

As disclosed in Note 8, the Public Facility District’s long-term debt as of December 31, 2009,
included three bond anticipation notes (BANs) with a balance of nearly $41.8 million that mature
no later than December 2011. The District has entered into a loan agreement with the city of
Wenatchee in which the city has agreed to make loans to the District, when necessary, to cover
part or all of the annual debt service payments. The District’s operating revenue has been
inadequate to cover both operating expenses and the debt service payments and, as a result,
the District borrowed money under this agreement to cover the payment due on December 1,
2009. It also does not anticipate having sufficient funds to cover its entire debt payment amount
of $2,191,681 due for 2010, or the bond maturity in 2011. The Note discloses various options
being considered by the District related to raising the money needed to make its debt service
payments. We have also discussed these issues in Finding 1 on the Schedule of Audit Findings
and Responses.

In accordance with Government Auditing Standards, we have also issued our report on our
consideration of the District’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts and grant agreements and
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Washington State Auditor's Office
5other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.

The management’s discussion and analysis on pages 8 through 10 is not a required part of the
basic financial statements but is supplementary information required by the Governmental
Accounting Standards Board. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation
of the required supplementary information. However, we did not audit the information and
express no opinion on it.


BRIAN SONNTAG, CGFM
STATE AUDITOR

June 25, 2010

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Washington State Auditor's Office
6Financial Section

Town Toyota Center
Chelan County
January 1, 2009 through December 31, 2009


REQUIRED SUPPLEMENTAL INFORMATION

Management’s Discussion and Analysis – 2009


BASICFINANCIAL STATEMENTS

Statement of Net Assets – 2009
Statement of Revenues, Expenses and Changes in Fund Net Assets – 2009
Statement of Cash Flows – 2009
Notes to the Financial Statements – 2009
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Washington State Auditor's Office
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