The City Building Authority (CBA) was created by the city and organized as a separate legal entity

QUESTION

The City Building Authority (CBA) was created by the city and organized as a separate legal entity. The CBA was created for the purpose of obtaining financing for the construction of buildings, parking lots, and recreational facilities for use solely by the city, along with acquiring the necessary sites to go with such facilities, constructing, improving, furnishing, maintaining, acquiring, and operating the public properties for the use of the city and its citizens. Financing for the projects is provided through the issuance of tax-exempt bonds by the CBA.The CBA is governed by a five-person board appointed for six-year terms by the mayor, subject to city council approval. The CBA uses the proceeds of its tax-exempt bonds to finance the construction or acquisition of general capital assets for the city only. The bonds are secured by the capital lease agreement between the CBA and the city and will be retired through lease payments from the city. Given the facts provided, should CBA be considered a component unit of the City? Why or why not? How should the City present the financial activities of the CRA in its financial statements? If considered to be a component unit, would blended or discrete presentation be more appropriate? Explain your analysis and document your conclusion fully, including specific references for relevant technical literature section(s) within the GASB Codification that were utilized in reaching your decisions.

ANSWER:

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