Full Text
147 SECTION 10: SUCCESSOR AGENCY Pursuant to AB1x26, which dissolved redevelopment agencies in California, the City of El Cerrito elected to serve as the Successor Agency to the El Cerrito Redevelopment Agency. The Successor Agency assumed all of the Redevelopment Agency’s assets, liabilities and obligations. The City’s role is to serve as a fiduciary agent for the Successor Agency, administering payments and performance of its obligations. INTRODUCTION In June 2011, the State of California enacted AB1x26 (Dissolution Act) to dissolve all redevelopment agencies in the State of California and establish successor agencies to wind down the former redevelopment agencies’ affairs. The El Cerrito Redevelopment Agency (RDA) suspended activities on July 1, 2011 and the City elected to serve as the Successor Agency on August 15, 2011. On December 29, 2011, the State Supreme Court ruled that dissolution of redevelopment agencies constitutional and the RDA was dissolved on February 1, 2012. The City’s role as the Successor Agency is limited to taking actions necessary to facilitate completion and/or payment of the Successor Agency’s obligations, as permitted by an oversight board and the California Department of Finance (DOF). The Successor Agency does not have budget discretion and therefore a budget is not being proposed. For informational purposes, this section includes financial information regarding the Successor Agency. The City also elected to serve as the Successor Housing Agency, assumed the RDA’s affordable housing assets, and established the Housing Asset Fund. The City’s Housing Asset Fund and affordable housing functions are separate from the Successor Agency. All funds, assets and liabilities remaining in the RDA’s accounts as of dissolution and after transfer of Housing Assets to the Successor Housing Agency were transferred to a Fiduciary Fund called the Redevelopment Obligation Retirement Fund (RORF) established for the purpose of administering the Successor Agency. The Successor Agency is not a component unit of the City of El Cerrito and the City did not assume the Successor Agency’s assets and liabilities. Rather, the Successor Agency is charged with disposing of the assets and using any revenues that would have gone to the former RDA to pay enforceable obligations, and the City has simply elected to serve as the administrator. In El Cerrito’s case, the non-cash assets transferred were of nominal value and cash transferred was sufficient to meet the Successor Agency’s short-term obligations. The Dissolution Act provides a process for authorization of payments to be made on the Successor Agency’s recognized obligations. Each spring and fall, the Successor Agency prepares a Recognized Obligation Payment Schedule (ROPS) for an upcoming six-month period, which is subject to approval of an oversight board and DOF. Once approved, a ROPS serves as the spending plan during its operative period and the County Auditor-Controller (CAC) disburses funds sufficient for the Successor Agency to make payments on the approved ROPS. Expenditure or transfer of funds from the RORF is only permitted after consideration and approval of the payments on a ROPS by the Oversight Board, DOF and CAC. ---PAGE BREAK--- 148 In 2012, the state enacted amendments to the Dissolution Act, which included a provision for cash flow advances by the City to the Successor Agency, including litigation expenses related to dissolution as enforceable obligations, a requirement for a due diligence review of the former RDA’s funds, and a formula for repayment of loans to the Housing Asset Fund, detailed later in this section. SUCCESSOR AGENCY FINANCES The RDA was funded through tax increment generated from the City of El Cerrito Redevelopment Project Area, which was established and its Redevelopment Plan adopted in 1977. The Redevelopment Plan was amended and restated in 1993 and does not expire until 2025. Each year’s tax increment was the incremental difference in property tax revenue generated within the Project Area between that year and the base year of 1977. The Dissolution Act re-characterizes tax increment as Redevelopment Property Tax (RPT), but it is calculated in the same manner. Other than an insignificant amount of proceeds from loan receivables or asset sales, RPT is the only source of funding available to the Successor Agency to retire the former RDA’s enforceable obligations, which continue throughout the life of the Redevelopment Plan. Upon expiration of the Redevelopment Plan, property taxes collected in the Redevelopment Project Area will be distributed according to the allocations that existed prior to the adoption of the Redevelopment Plan. The Successor Agency’s obligations include all debts and costs to perform on obligations of the former RDA. Prior to distributing RPT to the Successor Agency, the CAC withholds administrative costs and pass-through payments paid to the taxing entities, which are calculated in the same manner as before dissolution. Any RPT not needed to make payments on the Successor Agency’s obligations is considered “residual” and is distributed to taxing entities that would have otherwise received the tax increment or property tax revenues in the Redevelopment Project Area. Table 10-1 is a summary of tax increment received by the RDA in suspension, RPT disbursed through the end of ROPS III, and a projection of RPT that may be disbursed to the Successor Agency for its obligations through expiration of the City of El Cerrito Redevelopment Plan in FY 2024-25. It is based on a constant three percent annual growth in assessed value in the Redevelopment Project Area. ---PAGE BREAK--- 149 Table 10-1 Tax Increment and Redevelopment Property Tax through FY2024-25 City of El Cerrito Redevelopment Project Area Fiscal Year ROPS period TI or RPT Available County Admin Pass- Thru Payments Projected RPT Disbursement 2011-12 EOPS 1,756,795 - - 1,756,795 2011-12 ROPS I 953,988 - - 953,988 2012-13 ROPS II 2,221,333 (48,673) (223,412) 1,949,248 ROPS III 2,606,039 (48,009) (482,915) 2,075,115 2013-14 13-14A 2,606,039 (31,011) (1,189,548) 1,385,480 13-14B 2,642,031 (31,011) (488,776) 2,122,244 2014-15 14-15A 2,642,031 (31,941) (488,776) 2,121,314 14-15B 2,734,567 (31,941) (505,895) 2,196,731 2015-16 15-16A 2,734,567 (32,899) (505,895) 2,195,773 15-16B 2,829,880 (32,899) (523,528) 2,273,453 2016-17 16-17A 2,829,880 (33,886) (523,528) 2,272,466 16-17B 2,928,053 (33,886) (541,690) 2,352,477 2017-18 17-18A 2,928,053 (34,903) (541,690) 2,351,460 17-18B 3,029,170 (34,903) (560,396) 2,433,871 2018-19 18-19A 3,029,170 (35,950) (560,396) 2,432,824 18-19B 3,133,321 (35,950) (579,664) 2,517,707 2019-20 19-20A 3,133,321 (37,029) (579,664) 2,516,628 19-20B 3,240,597 (37,029) (599,510) 2,604,058 2020-21 20-21A 3,240,597 (38,140) (599,510) 2,602,947 20-21B 3,351,090 (38,140) (619,952) 2,692,998 2021-22 21-22A 3,351,090 (39,284) (619,952) 2,691,854 21-22B 3,464,899 (39,284) (641,006) 2,784,609 2022-23 22-23A 3,464,899 (40,463) (641,006) 2,783,430 22-23B 3,582,122 (40,463) (662,693) 2,878,966 2023-24 23-24A 3,582,122 (41,677) (662,693) 2,877,752 23-24B 3,702,861 (41,677) (685,029) 2,976,155 2024-25 24-25A 3,702,861 (42,927) (685,029) 2,974,905 24-25B 3,827,223 (42,927) (708,036) 3,076,260 OBLIGATIONS The Successor Agency is responsible for the former RDA’s debts and obligations, which are as follows: Tax Allocation Bond Payments. The RDA had four tax allocation bonds issuances. All taxing entities had subordinated their pass-through payments to payments on the RDA’s bond debt, so if insufficient RPT is available to make bond debt service payments, pass-through payments are deferred to a future ROPS. This occurred in ROPS II and deferred pass-through payments will be made from ROPS 13-14A. Valente Note. Payments of $288,215 are due in March each year. The purpose of the note was seller financing of land acquisition for a key transit-oriented development, revitalization site in the Del Norte BART area. The note is secured by a third-party deed of trust on the property, now owned by the El Cerrito Municipal Services Corporation (MSC). The MSC recorded a performance deed of trust against the property, which is an asset of the Successor Agency, ---PAGE BREAK--- 150 agreeing to develop the property pursuant to Health & Safety Code 33433 and return any proceeds from future development to the RDA. The current value of the property is less than the balance due on the note. The Successor Agency will need to coordinate with both the note holder and the MSC on future transactions involving development of the property and/or repayment or the note. Cooperation Agreement with the El Cerrito Municipal Services Corporation. In February 2011, the RDA entered into a Public Improvements and Cooperation Agreement for the City of El Cerrito Redevelopment Project Area with the City of El Cerrito. The City partially assigned the Cooperation Agreement to the MSC, which is a separate nonprofit, public benefit corporation. The RDA made payments under the agreement to the MSC prior to dissolution, which were listed on the RDA’s Enforceable Obligations Payment Schedule prepared during suspension and not disputed by DOF. Despite Oversight Board approval of the Cooperation Agreement, DOF has not approved payments on the Cooperation Agreement by the Successor Agency. Projects being funded by the MSC include economic development activities, development of MSC-owned land, and coordination with City and other transit agencies on sustainable transit-oriented development efforts. The Cooperation Agreement is key to increasing the property tax base and will benefit all taxing entities serving the Redevelopment Project Area over the long term. The Successor Agency is continuing to pursue payments towards the Cooperation Agreement obligation. Housing Loan Commitments. On January 31, 2012, the RDA had contracts with two affordable housing developers to make predevelopment loans on housing projects already underway. Eden Housing is pursuing an affordable senior housing/mixed-use project adjacent to City Hall on City- owned property. Ohlone Gardens LP has already entitled an affordable multi-family/special needs project on Portola Drive on property purchased in part with a loan from the RDA. Ohlone Gardens LP is relying upon the remaining predevelopment loan commitment to secure other funding sources. Note that due to insufficient RPT in the initial ROPS periods, payments on these housing loan commitments have been delayed. ERAF and SERAF Loan Payments. The RDA borrowed housing funds from the Low & Moderate Income Housing Fund to make payments to the State for the Educational Revenue Augmentation Fund (ERAF) in 2005 and 2006 and to the Supplemental ERAF in 2010. A payment was made to the City Housing Asset Fund during the ROPS I period, but subsequent payments are determined as a percentage of the incremental change in residual RPT after all other obligations are paid. Other Obligations. The Successor Agency has several small obligations, such as a vacation accrual liability from the former RDA, required completion of a Due Diligence Review, and litigation expenses. The City advanced the cost of the Successor Agency’s litigation, which the Successor Agency listed as a cash flow loan for payment with RPT on ROPS 13-14A. Administrative cost allowance. The Successor Agency is entitled to an administrative cost allowance of $250,000 per fiscal year. Cash Flow Loan. Due to insufficient RPT during ROPS III, the City advanced a portion of the FY2012-13 administrative allowance to the Successor Agency. The Department of Finance approved the cash flow loan. Table 10-2 is a summary of the Successor Agency’s projected obligations through FY 2024-25 including the Successor Agency’s Administrative Allowance, but excluding pass-through payments, pending determination of their calculation method. Any residual amount between the RPT collected and paid on the Successor Agency’s obligations will be distributed to the ---PAGE BREAK--- 151 taxing entities. Recognized Obligations Payment Schedules submitted for Jan-Jun 2012 and Jul- Dec 2012 were based on these initial amounts. Table 10-2 Summary of Draft Recognized Obligation Payment Schedule Through FY2024-25 City of El Cerrito Redevelopment Project Area Period Debt Service Valente Note Housing Loans SERAF/ ERAF Loans Other Coop Agmt Admin Allowance Cash Flow Loan EOPS 433,109 46,669 245,677 1,031,340 ROPS I 288,215 415,773 250,000 ROPS II 1,949,248 ROPS III 1,591,140 288,215 29,392 166,368 13-14A 389,243 531,152 239,136 225,949 13-14B 1,694,705 288,215 10,864 14-15A 1,063,616 250,000 348,375 125,000 14-15B 1,063,616 288,215 348,375 125,000 15-16A 1,084,561 348,375 125,000 15-16B 1,084,561 288,215 348,375 125,000 16-17A 1,148,109 348,375 125,000 16-17B 1,148,109 288,215 348,375 125,000 17-18A 972,242 348,375 125,000 17-18B 972,242 288,215 348,375 125,000 18-19A 1,041,192 125,000 18-19B 1,041,192 288,215 125,000 19-20A 860,586 125,000 19-20B 860,586 288,215 125,000 20-21A 1,078,851 125,000 20-21B 1,078,851 288,215 125,000 21-22A 1,104,200 125,000 21-22B 1,104,200 288,215 125,000 22-23A 1,126,251 125,000 22-23B 1,126,251 288,215 125,000 23-24A 125,000 23-24B 288,215 125,000 24-25A 125,000 24-25B 125,000 After all obligations of RPT are paid, up to half of the incremental residual RPT (over any residual RPT distributed to taxing entities in FY2012-13) can be used to repay the Successor Agency’s SERAF/ERAF Loan obligation to the City’s Housing Asset Fund. Any remaining residual is then paid to the taxing entities serving the Redevelopment Project Area according to their standard tax allocations. The City of El Cerrito will receive about 22% of RPT residual. Table 10-3 summarizes the projected residual RPT based on what has been projected to be available and obligated for each ROPS period, a SERAF/ERAF loan repayment scenario with one third of residual being paid starting in FY 2014-15, and the resulting City share. ---PAGE BREAK--- 152 Table 10-3 Projected Residual RPT and Possible SERAF/ERAF Loan Repayment Scenario City of El Cerrito Redevelopment Project Area Fiscal Year ROPS period Projected Residual SERAF/ERAF Loan Balance SERAF/ERAF Payment City Share 2011-12 EOPS 2011-12 ROPS I 2012-13 ROPS II ROPS III 2013-14 13-14A 1,247,318 13-14B 128,460 1,247,318 - 28,557 2014-15 14-15A 334,323 74,320 14-15B 371,525 1,012,035 235,283 30,287 2015-16 15-16A 637,837 141,791 15-16B 427,302 656,989 355,046 16,063 2016-17 16-17A 650,982 144,713 16-17B 442,778 292,402 364,587 17,382 2017-18 17-18A 905,843 201,369 17-18B 700,039 - 292,402 90,618 2018-19 18-19A 1,266,632 281,572 18-19B 1,063,300 - - 236,372 2019-20 19-20A 1,531,042 340,351 19-20B 1,330,257 - - 295,716 2020-21 20-21A 1,399,096 311,019 20-21B 1,200,932 - - 266,967 2021-22 21-22A 1,462,654 325,148 21-22B 1,267,194 - - 281,697 2022-23 22-23A 1,532,179 340,603 22-23B 1,339,500 - - 297,771 2023-24 23-24A 2,752,752 611,937 23-24B 2,562,940 - - 569,742 2024-25 24-25A 2,849,905 633,534 24-25B 2,951,260 - - 656,065 ---PAGE BREAK--- 153 ADMINISTRATIVE BUDGET The Dissolution Act requires the Successor Agency to prepare a budget for approval by the Oversight Board. Table 10-4 is the FY 2013-14 Administrative Budget approved by the Successor Agency on February 19, 2013 and by the Oversight Board on February 26, 2013. Table 10-4 Approved FY 2013-14 Administrative Budget Successor Agency to the El Cerrito Redevelopment Agency Entity/Activity Successor Agency Oversight Board Staffing Functions (Total Compensation plus Overhead for Indirect Costs) City Management $50,000 $30,000 Finance $50,000 $30,000 Risk Management $4,000 $2,000 Economic Development $25,000 $10,000 City Clerk $15,000 $10,000 Information Systems $4,000 $4,000 Legal Services $50,000 Financial & Audit Services $10,000 Bond-related Costs $10,000 Supplies $1,000 $500 Postage $250 $250 Copies $200 $200 Website $1,500 $1,500 Advertising/Legal Notices $1,000 $1,000 Property Management $1,000 Total $222,950 $89,450 Combined Total $312,400 Funding Source Redevelopment Property Tax Trust Fund $250,000 Unfunded $62,400 The amounts in Table 10-4 are included within the City’s Operating Budget and are displayed here for informational purposes. Actual expenses of administering the Successor Agency will be charged to the City’s General Fund and the Administrative Allowance will be reflected as revenue in the City’s General Fund when it is reimbursed by the Successor Agency. The City is entitled to an administrative allowance of $250,000 annually, regardless of its actual expenses. As such, City staff will minimize expenses to the greatest degree possible, but the budget was prepared recognizing the high cost of administering dissolution. . ---PAGE BREAK--- 154 ---PAGE BREAK--- 155 SECTION 11: OTHER ENTITIES The City Council of the City of El Cerrito serves as members of the governing body of two other entities: the Employee’s Pension Board and the Public Financing Authority, These entities are separate agencies from the City and the Redevelopment Agency and are accounted for separately. EMPLOYEES’ PENSION FUND The City of El Cerrito Employees’ Pension Fund is a component unit of the City of El Cerrito and a separate fund is maintained by the City to account for the Plan assets. The City Council serves as the Pension Board. The Pension Board has exclusive control over the pension plan and accordingly, the City is financially accountable for the Plan and its operation. This Fund provides a pension system for those former employees of the City who, on February 6, 1959, chose not to be covered by Social Security or by the California Public Employees’ Retirement System. The Plan is a single-employer defined pension plan. There are three participants in this pension system—all retired. This Fund provides for the: • Disbursement of appropriate pension payments; • Maintenance of true and correct records of all contributions to and payments from the Pension Fund; and • Services of actuaries who render a report every three years, or as needed, as to the costs of maintaining properly funded reserves for this pension fund. The most recent report was prepared as of July 1, 2009. Payments into this Fund are based upon actuarial studies of the estimated costs of meeting the City’s obligations under the retirement contract with the members of this system. The goal is to have the reserve fund balances decrease as the pension liability decreases. No new members may join this plan. The revenues and expenditures of the Employees’ Pension Board are shown in Tables 11-1 and 11-2: ---PAGE BREAK--- 156 Table 11-1 Pension Fund Revenues Revenue Source Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Contribution-General Fund $141,770 $112,500 $112,500 Total $141,770 $112,500 $112,500 Table 11-2 Pension Fund Expenditures Accounts Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Other Charges $823 $1,500 $1,500 Pension Payments 140,947 111,000 111,000 Total $141,770 $112,500 $112,500 PUBLIC FINANCING AUTHORITY The City of El Cerrito Public Financing Authority (PFA) has been utilized since FY 2002-03 to account for the debt service for Measure A Lease Revenue Bonds used to fund the swim center reconstruction. In FY 2006-07 the PFA issued Lease Revenue Bonds needed to finance construction of the new City Hall and in FY 2007-08 issued Sales Tax Revenue Bonds to fund the Street Improvement Project. The Board of Directors of the Authority consists of members of the elected City Council of El Cerrito, the El Cerrito City Manager and the El Cerrito Finance Director. In FY 2012-13 the Measure A Lease Revenue Bonds were refinanced which allowed the reserve requirement to be reduced by half. Revenues and expenditures for the Authority are shown in Tables 11-3 through 11-8. Table 11-3 Measure A Finance Authority Revenues Revenue Source Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Interest Earnings $37 $300 $100 Xfr in-Measure A Parcel Tax 365,053 362,305 359,058 Total $365,090 $362,605 $359,158 Table 11-4 Measure A Finance Authority Expenditures Accounts Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Other Charges $2,398 $6,250 $6,250 Transfer to Reduce Reserve 185,000 Principal Payments 245,000 255,000 312,800 Interest Payments 120,055 110,800 46,258 Total $367,453 $371,305 $365,308 ---PAGE BREAK--- 157 Table 11-5 City Hall Finance Authority Revenues Revenue Source Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Interest Earnings $30 $300 $100 Xfr in- General Fund 597,368 599,000 596,308 Total $597,398 $599,300 $596,408 Table 11-6 City Hall Finance Authority Expenditures Accounts Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Other Charges $2,580 $1,000 $1,000 Principal Payments 205,000 215,000 220,000 Interest Payments 392,408 384,000 375,308 Total $599,988 $600,000 $596,308 Table 11-7 Street Improvement Finance Authority Revenues Revenue Source Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Interest Earnings $76 $1,000 $100 Xfr in- Street Imp Fund 737,583 740,000 740,000 Total $737,659 $741,000 $740,100 Table 11-8 Street Improvement Finance Authority Expenditures Accounts Actual FY 2011-12 Amended FY 2012-13 Proposed FY 2013-14 Other Charges $1,080 $1,000 $1,000 Principal Payments 245,000 245,000 265,000 Interest Payments 492,653 492,653 470,780 Total $738,733 $738,653 $736,780 ---PAGE BREAK--- 158