FY 2023-24 Los Angeles County Capital Asset Leasing Corporation

LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION (A Not-for-Profit Public Benefit Corporation) Basic Financial Statements June 30, 2024 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation June 30, 2024 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor’s Report ..................................................................................... 1 Management’s Discussion and Analysis (Required Supplementary Information - Unaudited) ......................................................................................... 4 Basic Financial Statements: Statement of Net Position ..................................................................................... 7 Statement of Activities ........................................................................................... 8 Statement of Cash Flows ..................................................................................... 9 Notes to the Basic Financial Statements ............................................................ 10 PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES CRAIG A HARTZHEIM, CPA 8383 WILSHIRE BLVD., SUITE 800 5800 HANNUM AVE., SUITE E HADLEY Y HUI, CPA BEVERLY HILLS, CA 90211 CULVER CITY, CA 90230 ADAM V GUISE, CPA TEL: 310.670.2745 TEL: 310.670.2745 TRAVIS J HOLE, CPA FAX: 310.670.1689 FAX: 310.670.1689 WILSON LAM, CPA www.mlhcpas.com www.mlhcpas.com Independent Auditor’s Report To the Board of Directors Los Angeles County Capital Asset Leasing Corporation Los Angeles, California Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the Los Angeles County Capital Asset Leasing Corporation (LACCAL), a blended component unit of the County of Los Angeles, California, as of and for the fiscal year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the LACCAL’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the LACCAL as of June 30, 2024, and the changes in financial position and cash flows for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of LACCAL and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about LACCAL’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 OFFICES: CULVER CITY ∙ SANTA MARIA BEVERLY HILLS MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of LACCAL’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about LACCAL’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 4 through 6, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 12, 2025, on our consideration of LACCAL’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other 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 in considering LACCAL’s internal control over financial reporting and compliance. Moss, Levy & Hartzheim, LLP Culver City, California March 12, 2025 3 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Management's Discussion and Analysis (Unaudited) For the Fiscal Year Ended June 30, 2024 This management’s discussion and analysis of the Los Angeles County Capital Asset Leasing Corporation (LACCAL) provides an overview of LACCAL’s financial activities for the fiscal year ended June 30, 2024. We recommend that this information be used in conjunction with LACCAL’s audited financial statements. LACCAL is a blended component of a larger governmental unit, the County of Los Angeles (County). Assets, Liabilities, and Net Position Total assets increased by $11.2 million (127%) from the prior fiscal year. Total pooled cash and investments increased by $2 million and net investment in direct financing leases increased by $9.2 million, increasing the total assets to $20 million. Total liabilities increased by $10.5 million (193%) due in part to an increase of $10 million in bond anticipation notes (BANs) and increases in accounts payable and interest payable totaling $0.5 million. Table 1 Summary of Net Position As of June 30, 2024 and 2023 (In thousands) June 30, 2024 June 30, 2023 Assets Total assets $ 19,979 $ 8,795 Liabilities Current liabilities 5,996 455 Long-term debt and bonds payable 10,000 5,000 Total liabilities 15,996 5,455 Net Position Total net position $ 3,983 $ 3,340 4 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Management's Discussion and Analysis (Unaudited), continued For the Fiscal Year Ended June 30, 2024 Revenues, Expenses, and Change in Net Position The revenues increased by $0.8 million (196%) from the prior fiscal year due to an increase in interest income received from investing activities. The expenses increased by $0.3 million (186%) from the prior fiscal year due to an increase in interest expense from financing activities. Table 2 Summary of Changes in Net Position For the Fiscal Years Ending June 30, 2024 and 2023 (In thousands) June 30, 2024 June 30, 2023 Revenues Interest $ 1,139 $ 385 Total revenues 1,139 385 Expenses Interest 488 158 Other expenses 9 16 Total expenses 497 174 Change in net position Operating income 642 211 Transfer to County 0 (3,608) Changes in net position $ 642 $ (3,397) 5 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Management's Discussion and Analysis (Unaudited), continued For the Fiscal Year Ended June 30, 2024 Debt Management During the fiscal year, BANs payable increased by $10 million. The balance at fiscal year-end was $15 million. LACCAL uses the notes to purchase equipment, machinery, vehicles, and other tangible personal property for lease to the County. The equipment is used as collateral to issue bonds. The proceeds from the bonds are used to retire the BANs. The lease payments received are used to service the debt payments on the bonds. For a more complete discussion, please refer to the accompanying “Notes to the Basic Financial Statements.” Table 3 Debt Management As of June 30, 2024 and 2023 (In thousands) June 30, 2024 June 30, 2023 Bond anticipation notes $ 15,000 $ 5,000 Lease revenue bonds 0 0 Subtotal 15,000 5,000 Unamortized Premium 0 0 Total $ 15,000 $ 5,000 Contacting LACCAL's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of LACCAL's finances and to demonstrate LACCAL's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the County of Los Angeles, Department of Auditor-Controller, 500 West Temple Street, Room 525, Los Angeles, CA 90012. 6 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Statement of Net Position As of June 30, 2024 Assets Current Assets Pooled Cash and Investments (Note 2) $ 6,130,484 Interest Receivable 51,095 Installment Sales Receivable (Note 3) Current Portion 3,916,049 Total Current Assets 10,097,628 Non-Current Assets Installment Sales Receivable (Note 3) 9,881,632 Total Non-Current Assets 9,881,632 Total Assets 19,979,260 Liabilities Current Liabilities Accounts Payable and Other Liabilities 655,573 Interest Payable 340,445 Bond Anticipation Note Payable (Note 4) 5,000,000 Total Current Liabilities 5,996,018 Non-Current Liabilities BANS - Due in More Than One Year (Note 4) 10,000,000 Total Non-Current Liabilities 10,000,000 Total Liabilities 15,996,018 Net Position Unrestricted 3,983,242 Total Net Position $ 3,983,242 See accompanying notes to the basic financial statements 7 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Statement of Activities For the Fiscal Year Ended June 30, 2024 Operating Revenue Interest Income $ 1,139,472 Total Operating Revenue 1,139,472 Operating Expenses Interest Expense 488,100 Administrative 8,577 Total Operating Expenses 496,677 Operating income 642,795 Change in Net Position 642,795 Total Net Position, Beginning 3,340,447 Total Net Position, Ending $ 3,983,242 See accompanying notes to the basic financial statements 8 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Statement of Cash Flows For the Fiscal Year Ended June 30, 2024 Cash Flows from Operating Activities: Cash Paid for Services and Supplies $ (8,577) Cash Used by Operating Activities (8,577) Cash Flows from Capital and Related Financing Activities: Proceeds from the Sale of BANS 10,000,000 Principal Collections on Direct Financing Lease 2,592,107 Interest Paid on Bonds, Certificates and Notes (163,024) Acquisition of Capital Assets (11,532,374) Cash Provided by Capital and Related Financing Activities 8 96,709 Cash Flows from Investing Activities: Interest Income Received 1,153,149 Cash Provided by Investing Activities 1,153,149 Net Increase in Cash and Cash Equivalents 2,041,281 Cash and Cash Equivalents, Beginning 4,089,203 Cash and Cash Equivalents, Ending $ 6,130,484 Reconciliation of Cash and Cash Equivalents: Current Assets - Pooled Cash and Investments $ 6,130,484 Total Cash and Investments $ 6,130,484 Reconciliation of Operating Income to Net Cash Used by Operating Activities: Operating Income $ 642,795 Adjustments to Reconcile Operating Income to Net Cash Used by Operating Activities: Interest Revenue Classified as Investment Activities (1,139,472) Interest Expense Classified as Capital and related Financing Activities 4 88,100 Cash Used by Operating Activities $ (8,577) See accompanying notes to the basic financial statements 9 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization The Los Angeles County Capital Asset Leasing Corporation (LACCAL) was organized as a not- for-profit public benefit corporation in February 1983. The purpose was to purchase equipment, machinery, vehicles, and other tangible personal property for lease to the County of Los Angeles (County). LACCAL is governed by a five-member Board of Directors (Board) designated by the Board of Supervisors of the County. LACCAL is included in the County’s financial reporting entity and is included as a blended component unit in the County’s Annual Comprehensive Financial Report for the fiscal year ended June 30, 2024. LACCAL is exempt from the payment of Federal income and California franchise taxes. However, LACCAL is subject to the arbitrage restrictions under the U.S. Treasury Regulation Section 1.103, which may result in rebates of excess earnings to the U.S. Treasury Department. The accompanying financial statements reflect the financial activities of LACCAL. LACCAL has no component units. Significant Accounting Policies Basis of Presentation and Accounting The basic financial statements of LACCAL are prepared in accordance with generally accepted accounting principles in the United States (GAAP). LACCAL is accounted for as an enterprise fund (proprietary fund type) using the accrual basis of accounting. A fund is an accounting entity with a self-balancing set of accounts established to record the financial position and results of operations of a specific governmental activity. LACCAL utilizes the accrual basis of accounting. Revenues are recognized when they are earned and become measurable, and expenses are recorded when the liability is incurred. Leases are classified as direct financing leases for accounting purposes. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable premium or discount. Bond issuance costs are recognized in the period issued. LACCAL’s financial statements are presented in accordance with the provisions of Governmental Standards Board (GASB) Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments, GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of resources, and Net Position. GASB Statement No. 34 established standards for external financial reporting for all state and local governmental entities and GASB Statement No. 63 established standards for reporting deferred outflows of resources, deferred inflows of resources, and net position in a statement of financial position. The net position is required to be classified into three components – net investment in capital assets, restricted, and unrestricted. These classifications are defined as follows: Net investment in capital assets – This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and is reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent 10 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Significant Accounting Policies (Continued) Basis of Presentation and Accounting (Continued) related debt proceeds at fiscal year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of net investment in capital assets. Rather, that portion of the debt is included in the same net position component as the unspent proceeds. As of June 30, 2024, LACCAL had no capital assets. Restricted net position – This component of net position represents restricted assets net of liabilities that relate to those specific restricted assets. A restricted asset is an asset for which constraints have been placed on the asset’s use by creditors, contributors, laws, or regulations of other governments, or as a consequence of a restriction established by the reporting government’s own governing body at the time a particular fee, charge, levy, or assessment was approved. These restrictions must be narrower than the general purposes for which the reporting government can use its resources. As of June 30, 2024, LACCAL had no restricted net position. Unrestricted net position – This component of net position consists of net position that does not meet the definition of “restricted” or “net investment in capital assets.” As of June 30, 2024, LACCAL had a balance of $3,983,242 of unrestricted net position. When both restricted and unrestricted resources are available for use, it is LACCAL’s policy to use restricted resources first, then unrestricted resources as they are needed. Cash and Investments Investments are reported at fair value in accordance with the provisions of GASB Statement No. 72, Fair Value Measurement and Application. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value and any gains or losses realized upon the liquidation or sale of investments. For the purpose of the Statement of Cash Flows, cash and cash equivalents include all highly liquid investments (including restricted assets) with maturity of three months or less when purchased. Revenues and Expenses Operating revenues consist of interest received from direct financing leases. This interest revenue is an integral part of the programs of LACCAL and is the primary source for paying the expenses of LACCAL. Operating expenses consist of interest expense on lease revenue bonds and bond anticipation notes (BANs) as well as administrative expenses to operate LACCAL. All LACCAL expenses are related to operating the programs. 11 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Significant Accounting Policies (Continued) Taxation LACCAL is not subject to income taxation or franchise taxation by federal or state authorities. LACCAL is recognized by the Internal Revenue Service (IRS) as a tax-exempt organization under Section 501(c)(3) of the U.S. Internal Revenue Code. LACCAL has no uncertain tax positions. LACCAL’s tax returns for the fiscal years ending June 30, 2024, June 30, 2023, and June 30, 2022 are subject to IRS examination. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 CASH AND INVESTMENTS California Government Code Sections 53601 and 53635 authorize LACCAL to invest in obligations of the United States Treasury, federal agencies and municipalities commercial paper rated A-1 by Standard & Poor’s Global Rating Services, P-1 by Moody’s Commercial Paper Record, or F-1 by Fitch Ratings, bankers’ acceptances, repurchase agreements, reverse repurchase agreements, and the County Treasurer’s Investment Pool. As provided by the State of California Government Code, substantially all cash balances of LACCAL are pooled and invested by the County Treasurer and are subjected to withdrawal from the pool upon demand. LACCAL’s share of the total pooled cash and investments of the County Treasurer is included in the accompanying balance sheet under “Pooled Cash and Investments.” The difference between LACCAL’s carrying value in the investment pool and their proportional share of the fair value of the underlining securities is not material to the financial statements of LACCAL. Included in the Pooled Surplus Investments portfolio are United States government and agency obligations, bankers’ acceptances, commercial paper, municipal obligations, corporate and deposit notes, repurchase agreements, and negotiable certificates of deposit. Fair Value Measurements Investments are stated at fair value and are valued on a monthly basis. The County Treasurer categorizes its fair value measurements within the fair value hierarchy established by GAAP. Securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Securities classified in Level 2 of the fair value hierarchy are valued using other observable inputs such as matrix pricing techniques or based on quoted prices for assets in markets that are not active. Matrix Pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. Level 3 inputs are significant unobservable inputs. Securities classified in Level 3 are valued using the income approach such as discounted cash flow techniques. Investments in an external government investment pool are not subject to reporting within the level hierarchy. 12 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 2 CASH AND INVESTMENTS (Continued) Custodial Credit Risk The custodial credit risk for investments is the risk that, in the event of the failure of a counterparty to a transaction, LACCAL will not be able to recover the value of its investment or collateral securities that are in the possession of another party. As of June 30, 2024, LACCAL’s investments consisted of investments pooled with the County Treasurer in the amount of $6,130,484 which represents less than 0.1% of the total County pooled investments. The deposits pooled with the County are not exposed to custodial credit risk since all of its deposits are either covered by the federal depository insurance or collateralized with securities held by the County or its agent in the County’s name, in accordance with California Government Code Section 53652. Concentration of Credit Risk Concentration of credit risk is the risk associated with the amount of investments LACCAL has with any one issuer that exceeds 5% or more of its total investments. Investments in money market mutual funds are excluded from this requirement. Furthermore, investments with the County Treasurer are subject to a policy that establishes minimum acceptable credit ratings for investments from any two nationally recognized statistical rating organizations. Also, the County Treasurer mitigated the risks by holding a diversified portfolio of high-quality investments. As of June 30, 2024, LACCAL was not exposed to concentration of credit risk. Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The County pooled investments are not subject to rating. The Investment Policy, approved annually by the Board of Supervisors, limits the maximum total par value of each permissible security type (e.g., commercial paper and certificates of deposit) to a certain percentage of the Pool portfolio. Exceptions to this are obligations of the United States government, and the United States government agencies or government-sponsored enterprises, which do not have a limit. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. In general, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. LACCAL does not have a formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates, except for bills of exchange or time drafts, and commercial paper, with maturity dates not to exceed 270 days. The County Treasurer mitigates exposure to declines in fair value by investing in short-term investments with maturities of six months or less and by holding asset investments to maturity. The investment guidelines limit the weighted average maturity target to a range between one and three years. At June 30, 2024, 60.03% of the County Investment Pool has a maturity of six months or less. Of the remainder, 36.07% has a maturity of more than one year. The weighted average maturity in years for the Pool was 1.68. 13 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 3 INSTALLMENT SALE RECEIVABLE The main purpose of LACCAL is to lease equipment, vehicles and other tangible personal properties to the County. Lease terms generally range from three to five years and are close to the useful life of leased assets. The installment sales receivable at June 30, 2024 is as follows: Total Minimum Lease Payments Receivable $ 16,574,247 Less: Unearned Interest Income (2,776,566) Installment Sale Receivable $ 13,797,681 Minimum lease payments to be received under the lease provisions are as follows: Fiscal Year Ending June 30 Principal Interest 2025 $ 3,916,049 $ 731,919 2026 3,888,850 730,908 2027 2,990,106 619,213 2028 2,282,465 524,384 2029 720,211 170,142 Total $ 13,797,681 $ 2,776,566 NOTE 4 LONG-TERM DEBT Bond premiums and discounts are amortized over the life of the bonds using the effective interest rate method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are recognized in the period issued. Balance Balance Amounts at Principal Principal at Due Within June 30, 2023 Additions Repayments June 30, 2024 One Year Bond Anticipation Notes Note Payable #34 $ 5,000,000 $ 10,000,000 $ - $ 15,000,000 $ 5,000,000 Total $ 5,000,000 $ 10,000,000 $ - $ 15,000,000 $ 5,000,000 Bond Anticipation Notes (BANs) LACCAL BANs are purchased as an investment by the County Treasury Pool in accordance with the terms of the “Resolution of the Board of Directors of the LACCAL Corporation” adopted on June 24, 1986. Later, the resolution was revised to the “Resolution of the LACCAL Reauthorization A Program for the Issuance of Bond Anticipation Notes to Finance Equipment, Increase the Amount Thereof and Providing Additional Security for the Repayment Thereof” which was adopted by the County on February 10, 1995. 14 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 4 LONG-TERM DEBT (Continued) Proceeds from these notes are used to purchase equipment, machinery, vehicles, and other tangible personal property. The interest rate is based upon the pricing of the six-month U.S. Treasury Bill plus 0.50% at the time of the draw, and then adjusted to changes in that rate on a reset date. The reset date is January 2 and July 1 of each fiscal year. Adjustments will be made to the Treasury Rate on two reset dates following the initial draw. The interest rate for draws which remain unpaid on the third reset date will convert on that date to the Bank of America prime rate and will be reset quarterly thereafter. Interest on these notes is payable to the Treasury Pool on January 2 and July 1. The principal and remaining interest on the notes are payable upon issuance of leasehold revenue bonds prior to maturity of the notes. Authorized BANs remaining in a fiscal year may be carried over to a subsequent fiscal year to fund equipment acquisition received in the fiscal year following the one in which they were initiated. The maximum aggregate principal amount of these notes authorized by the Board during the fiscal years ended June 30, 2024, and 2023 were $36,000,000 and $33,000,000, respectively. BANS outstanding at June 30, 2024 mature on the following dates: Maturity Date Amount June 30, 2025 $ 5,000,000 June 30, 2026 10,000,000 Total $ 15,000,000 BANs are secured by annual base rental payments from various County departments for use of the equipment or facilities constructed or purchased from the note proceeds. The BANS are expected to be refinanced with the proceeds from long term lease revenue bonds so LACCAL is reporting all of the BANS as long term debt. NOTE 5 CONDUIT DEBT OBLIGATIONS The County utilizes LACCAL to periodically issue Lease Revenue Obligation Notes (LRON) to provide the County with a flexible and cost-effective source of financing to provide interim funding during the initial construction phase of a capital project and fund tenant improvements costs on certain leases, which may be refinanced with the issuance of long-term bonds upon completion. Repayment of LRON is secured by four irrevocable direct-pay Letters of Credit (LOC) from separate banks supporting the issuance of LRON. This program is secured by fifteen County- owned properties pledged as collateral in a lease revenue financing structure with LACCAL. The LOCs were issued for a five-year period with the option to extend the LOCS for an additional one-year period or to some other term mutually agreed to with the participating banks. The LOCS had an original termination date of April 30, 2024, but were extended to July 18, 2024. The aggregate maximum principal amount of the four LOCs is $600,000,000, which consists of $100,000,000 of Series A (BMO Bank, as successor by merger to Bank of the West), $200,000,000 of Series B (U.S. Bank), $200,000,000 of Series C (Wells Fargo Bank), and $100,000,000 of Series D (State Street Bank). The County is responsible for the payment of a non-refundable letter of credit fee for each LOC on a quarterly basis in an amount equal to the rate per annum corresponding to the lowest long-term unenhanced debt ratings assigned by 15 LOS ANGELES COUNTY CAPITAL ASSET LEASING CORPORATION A Not-for-Profit Public Benefit Corporation Notes to Basic Financial Statements June 30, 2024 NOTE 5 CONDUIT DEBT OBLIGATIONS (Continued) Moody’s, S&P, or Fitch to any Lease Obligation Debt of the County. The letter of credit fee for all four series of LOCs equal to 0.35% of the maximum principal amount of the LOC. As of June 30, 2024, $459,976,000 of LRON issued under the program were outstanding, including $80,000,000 of Series A, $112,130,000 of Series B, $167,846,000 of Series C, and $100,000,000 of Series D. LRON does not constitute an indebtedness of LACCAL and is payable solely by the County. LRON is not payable from any revenues or assets of LACCAL and LACCAL is not obligated to the payment of the principal or interest on LRON. Accordingly, no liability has been recorded in the accompanying basic financial statements. On July 1, 2024, four LOCs were entered into between LACCAL and four separate banks to replace the four LOCs that were extended to July 18, 2024. The aggregate maximum principal amount of the four Letters is $750,000,000, which consists of $200,000,000 of Series A (Bank of Montreal), $100,000,000 of Series B (U.S. Bank), $350,000,000 of Series C (Bank of America), and $100,000,000 of Series D (Sumitomo Mitsui Banking Corporation). The LOCs were established for a 5-year term with an initial expiration date of July 31, 2029. NOTE 6 RELATED PARTY TRANSACTIONS The County maintains the books and records of LACCAL, including the investment with the County Treasurer. Transactions with the County The County is responsible for performing all administrative and operational functions for LACCAL. Costs related to these functions are absorbed by the County’s General Fund. Accordingly, LACCAL has no salaries and employee benefit expenditures or supplies inventory. Any surplus gained from lease revenues collected from County departments are transferred back to the County after bond maturation. 16