Some component units are presented ‘‘discretely’’; others are ‘‘blended.’’ Elba City’s reporting entity includes the following component units.

a. A capital projects financing authority purchases capital assets and leases them exclusively to the city. It finances the acquisitions by issuing revenue bonds, which are payable out of the lease payments collected from the city.

b. A housing finance authority is governed by a board, of which the majority of members are appointed by the city council. The authority purchases houses and leases them to low-income city residents. It finances the acquisitions by issuing revenue bonds, which are payable out of the lease payments collected from the residents.

c. A housing finance authority is governed by a board, the members of which are also members of the city council. The authority purchases houses and leases them to low-income city residents. It finances the acquisitions by issuing revenue bonds, which are payable out of the lease payments collected from the residents.

d. A sanitation authority is governed by a board, of which the majority of members are appointed by the city council. The authority provides trash collection services exclusively to city residents. It finances its capital assets with bonds that are guaranteed by the city. It obtains all of its revenues from user charges.

1. Based on the limited information provided, indicate whether each of the component units previously described should be presented discretely or should be blended. Justify your responses.

2. Explain what is meant by blending. How is the general fund of a blended component unit reported on the primary government’s financial statements?