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Date: To: From: Subject: AGENDA BILL Agenda Item No. 5(8) February 26, 2013 Oversight Board of the El Cerrito Redevelopment Agency Successor Agency Lori Trevifio, Economic Development Manager El Cerrito Redevelopment Successor Agency's Fiscal Year 2013-14 Administrative Budget, Cash Flow Loan Agreement Between the City and Successor Agency, and the draft Recognized Obligations Payment Schedule 13-14A (July-December 2013) ACTION REQUESTED Adopt Oversight Board resolutions approving the Successor Agency's FY 2013-14 administrative budget; a cash flow loan agreement between the City and Successor Agency; and submittal of the draft Recognized Obligations Payment Schedule 13-14A covering the period July-December, 2013, as previously reviewed and authorized by the governing board of the Successor Agency. BACKGROUND ABx1 26 ("Dissolution Act") dissolved the El Cerrito Redevelopment Agency ("RDA") and established the El Cerrito Redevelopment Agency Successor Agency ("Successor Agency") on February 1, 2012. At that time, the County Auditor-Controller established a Redevelopment Property Tax Trust Fund and the Successor Agency established a Redevelopment Obligation Retirement Fund ("RORF"). Under the Dissolution Act, the portion of property tax revenues collected from the City of El Cerrito Redevelopment Project Area ("Project Area") that was considered Tax Increment prior to the RDA's dissolution are deposited into the The A-C distributes the funds in the to the Successor Agency to retire the former RDA's obligations and to taxing entities that were affected by the Redevelopment Plan for the Project Area. The Dissolution Act also provided for creation of an Oversight Board to the Successor Agency ("Oversight Board"), representing those taxing entities, which was formed on Apri14, 2012. The Successor Agency must review and authorize submittal of a Recognized Obligation Schedule ("ROPS") for each six-month period. Each ROPS must then be approved by the Oversight Board and the California Department of Finance ("DOF") before funding is disbursed from the by the A-C for payments on the approved ROPS. Starting with the upcoming ROPS period, the DOF has adopted a new naming convention for ROPS schedule, using the fiscal year. Each fiscal year is broken into two ROPS periods A and B, so the schedule being reviewed this evening is the draft ROPS 13-14A. The Successor Agency must submit ROPS 13-14A approved by the Oversight Board to DOF no later than March 1, 2013. After submittal, DOF then has 45 days to review the ROPS and approve or disapprove of any items. The Successor Agency can request ---PAGE BREAK--- Agenda Item No. 5(8) additional review by DOF and an opportunity to meet and confer on disputed items, and must make that request within five business days of receiving a DOF initial determination. The DOF is required to notify the Successor Agency and A-C of its further review at least 15 days prior to the date of distributions from the For ROPS 13-14A, the notification date is May 17, 2013 for the June 1, 2013 disbursement. Pursuant to the Dissolution Act, the Successor Agency must prepare a budget for administrative expenses each fiscal year to be approved by the Oversight Board. The Successor Agency is entitled to an administrative allowance of $250,000 annually, regardless of its actual expenses. The State enacted Assembly Bill 1484 ("Trailer Bill") in June 2012 amending the Dissolution Act, including Health & Safety Code Section 34173 that allows loans by the City to the Successor Agency for administrative costs, enforceable obligations, or project-related expenses as reported on a ROPS and approved by the Oversight Board. SUCCESSOR AGENCY FY 2013-14 ADMINISTRATIVE BUDGET The Successor Agency's FY 2013-14 Administrative Budget, approved by the City Council acting in its role as governing board of the Successor Agency, is included as Exhibit A to the Oversight Board Resolution (Attachment 1 Staff related expenses have been kept flat from the FY 2012-13 Administrative Budget and other expenses have been reduced to reflect decreased costs expected after the first year of redevelopment dissolution. Note that this budget does not include litigation costs or the cost of the Due Diligence Review, as provided in the Dissolution Act. This budget will be included within the City's overall FY 2013-14 Operating Budget and the City will be reimbursed once the Successor Agency receives its allowance. Regardless of the Successor Agency's actual administrative expenses, the administrative allowance is capped at $250,000 annually. CASH FLOW LOAN AGREEMENT Due to the Successor Agency having insufficient for approved payments on ROPS III, the City utilized its cash reserves to fund Successor Agency expenses, anticipating approval of a loan agreement pursuant to Health & Safety Code Section 34173 for reimbursement from future distributions. The estimated amount to be advanced for approved ROPS III expenses is $78,740 for administrative expenses that are subject to the Successor Agency's FY 2012-13 Administrative Allowance and $30,000 for the Due Diligence Review being performed by MGO CPAs. Per discussions with Department of Finance legal counsel, the cost of the Successor Agency's True Up litigation is an enforceable obligation of The City advanced to the Successor Agency its litigation costs anticipating reimbursement from on ROPS 13-14A, pursuant to a cash flow loan agreement. The cost of the True Up Payment litigation was $127,824. The Dissolution Act allows the City and Successor Agency to enter into a loan agreement pursuant to Health & Safety Code Section 34173 for reimbursement of these expenses out of future if approved by the Oversight Board. The Loan Page2 ---PAGE BREAK--- Agenda Item No. 5(8) Agreement approved by the City and the Successor Agency, contingent on Oversight Board approval, is included as Exhibit A to the attached Oversight Board resolution (Attachments To allow for interest payments, the combined amount of the obligations funded by City advances has been rounded up to $238,000 in the proposed Loan Agreement. The Agreement's inclusion on ROPS 13-14A is also contingent on its approval by the Oversight Board. ROPS13-14A The ROPS 13-14A authorized by the Successor Agency is Exhibit A to the attached Oversight Board resolution (Attachment It includes a summary of funds available and total obligations for the period, an itemized listing of obligations, and a reconciliation of ROPS II payments. Obligations included on ROPS 13-14A are as follows: • Tax Allocation Bond Debt Service. Payments are due to the trustee Union Bank by December 27, 2013. • ERAF and SERAF Loans. While the Trailer Bill clarified the enforceability of SERAF and ERAF loans, it also delayed their repayment until FY 2013-14. The annual payment listed for FY 2013-14 is estimated. However, actual payment cannot be determined without knowing if there is any residual available for the ROPS period. Any actual payment will be based on calculations in Health & Safety Code Section 34176, once the amount of residual is known. • Accrued Vacation Liability. Due to insufficient funding in the ROPS III period for this approved item, funding is being requested on ROPS 13-14A. • Valente Note. No payment is due during the ROPS 13-14A period. • Ohlone Gardens Loan Agreement. This obligation in the amount of $471,152 was approved by DOF on ROPS III. Due to insufficient funding in the ROPS III period for this approved item, it is being funded on ROPS 13-14A. • Eden Housing Loan Agreement. This item was initially an obligation of $350,000 when included on the Redevelopment Agency's Enforceable Obligation Schedule approved in August 2011. The Loan Agreement included a $100,000 pre-development commitment and a $250,000 payable after negotiation of a Disposition and Development Agreement ("DDA") for the project. The Redevelopment Agency funded $40,000 of the pre-DDA obligation prior to dissolution. The combined remaining balance of $310,000 was initially disapproved by DOF on ROPS I and ROPS II, but then appeared to have been approved on an amended ROPS I to be paid from the Low & Moderate Income Housing Fund ("LMIHF"), although the Successor Agency never received an approval letter for its amended ROPS I and ROPS II from DOF and the LMIHF no longer existed. Due to lack of clarity about the appropriate funding source and insufficient funds, the $310,000 combined balance was not paid to Eden from ROPS I funds, but was placed on ROPS III requested to be paid with Page 3 ---PAGE BREAK--- Agenda Item No. 5(8) Based on the terms of the Agreement with Eden Housing, DOF broke apart the pre-DDA and post-DDA obligations on ROPS III, initially approving the pre- DDA obligation for $100,000 to be funded with (although the correct pre-DDA balance was actually $60,000) and disapproving the post-DDA obligation of $250,000. The Successor Agency held a meet and confer with DOF on the item to appeal the disapproval of the remaining $250,000 obligation due to Eden Housing once a DDA is negotiated with the Housing Functions Successor. Following the meet and confer, DOF disapproved the entire $310,000 combined balance. Unclear DOF ROPS I approval of this item was one of several subjects of the Successor Agency's True Up Payment litigation against the A-C and DOF and was addressed in discussions with DOF legal counsel leading up to the stipulated judgment issued by Sacramento County Superior Court on December 21, 2012. Although this item was not directly addressed in the stipulated judgment, the Successor Agency relied upon discussions with DOF legal counsel to clarify that the Successor Agency did not have any LMIHF, determine its use of ROPS I and ROPS III relative to this item, and request to amend the Housing Due Diligence Review that had been completed in October 2012, prior to settlement of the litigation, to reflect this clarification regarding LMIHF. The $60,000 balance of the pre-DDA obligation is being re-listed on ROPS 13-14A for funding with consistent with the stipulated jud~ent discussions and DOF's initial ROPS III approvals. • Eden Housing Loan Agreement Post-DDA. The full $310,000 obligation to Eden Housing had been placed on ROPS III and initially DOF disapproved $250,000 of the obligation that was contingent on negotiation of a DDA with Eden Housing, stating that the Successor Agency did not have the authority to negotiate a DDA. However, the Housing Functions Successor does have the authority to negotiate a DDA with Eden Housing on a property that was listed on the DOF -approved Housing Asset Transfer List and the Successor Agency retained the obligation to fund the loan agreement. DOF stated that the Successor Agency can terminate the agreement due to dissolution, but the Successor Agency is ·not required to terminate under the Dissolution Act and the DOF cannot require the Successor Agency to do so. Eden Housing and the Housing Functions Successor are in the process of negotiating a DDA, but do not anticipate requiring funding of this obligation during FY 2013-14. • Cooperation Agreement with the E1 Cerrito Municipal Services Corporation. After a meet and confer on this disputed item, DOF ·disapproved this item on ROPS III. However, no payment had been requested on ROPS III due to insufficient The Successor Agency intends to continue pursuing funding of this item ·with on ROPS 13-14A. The total outstanding obligation has been revised from prior ROPS based on estimated funding requirements under the terms of the agreement. Page4 ---PAGE BREAK--- Agenda Item No. 5(8) • FY 2012-13 Administrative Allowance. Funding was approved on ROPS III. However, due to insufficient funds, the Successor Agency was unable to pay the City the entire amount. The City advanced funds anticipating approval of a loan agreement pursuant to Health & Safety Code Section 34173 This advance is included in the loan agreement being considered by Oversight Board. • Due Diligence Review. Funding was approved on ROPS III. However, due to insufficient funds, the Successor Agency was unable to pay the selected accounting firm. The City advanced funds anticipating approval of a loan agreement pursuant to Health & Safety Code Section 34173 This advance is included in the loan agreement being considered by the Oversight Board. • FY 2011-12 Administrative Allowance. This item was disapproved on ROPS III because it was required to be funded from ROPS I per original DOF approvals and as discussed with DOF legal counsel during meetings regarding True Up Payment litigation. Subsequent to resolution of the litigation, the Successor Agency used ROPS I to pay its Administrative Allowance to the City for its FY 2011-12 expenses administering the Successor Agency. • Cash Flow Loan Agreement. As previously discussed in this report, due to the Successor Agency having insufficient for approved payments on ROPS Ill, the City advanced funds anticipating approval of a loan agreement pursuant to Health & Safety Code Section 34173 for reimbursement from future distributions. Per discussions with Department of Finance legal counsel, cost of the Successor Agency's True Up litigation is an enforceable obligation of The City of El Cerrito advanced to the Successor Agency its litigation costs anticipating reimbursement from on ROPS 13-14A. The City and Successor Agency approved a Cash Flow Loan Agreement on February 19, 2013, contingent on the Oversight Board's approval. Inclusion of this item on the ROPS 13-14A submitted to DOF is contingent on Oversight Board approval of the Loan Agreement. • FY 2013-14 Administrative Allowance. Due to the uneven nature of the Successor Agency's FY 2013-14 obligations the entire administrative allowance is being included on ROPS 13-14A. The total amount of funding required for ROPS 13-14A is estimated to be $2,290,857. However, the amount of expected to be distributed is estimated by the A-Cto be $1,368,492. This is based on estimates received from the A-C, which are included in the following table, which summarizes distributions and payments for FY 2011-12 and FY 2013-14. Page5 ---PAGE BREAK--- Agenda Item No. 5(8) El Cerrito Redevelopment Successor Agency Distributions and Payments of Redevelopment Property Tax FY 2011-12 Actual and FY 2013-14 Projected FY 2012-13 FY 2013-14 ROPS2 ROPS3 13-14A 13-14B Projected Available 2,221,333 2,606,039 2,606,039 2,684,220 County Admin 48,673 48,009 48,009 49,449 County Deducted Pass-Thrus 223,412 482,915 482,915 497,402 Prior Subordinated Pass-Thrus - 706,623 - Distribution 1,949,248 2,075,115 1,368,492 2,137,368 Payments Debt Service 1,949,248 1,591,140 389,243 1,694,705 OtherROPS 1,949,248 483,975 1,901,614 288,215 Remainder - - (922,189) 154,448 Based on current projections, there is insufficient for all obligations due during the ROPS 13-14A period, should they be approved by the Oversight Board and DOF. Note that once prior subordinated pass-through payments are paid during the upcoming ROPS period, there should no longer be an issue of insufficient funds for ROPS periods going forward. To smooth cash flow, the Successor Agency will likely request a debt service reserve during the first ROPS period of each fiscal year to account for the uneven principal and interest payments in its debt service schedules. LEGAL CONSIDERATIONS Consideration of the Successor Agency's FY 2013-14 Administrative Budget, the Cash Flow Loan Agreement between the City and Successor Agency, and ROPS 13-14A is consistent with the Dissolution Act and Trailer Bill. Reviewed by: Scott Han1n City Manager Attachments: 1. Oversight Board Resolution 2013-XX:, approving the Successor Agency's FY 2013-14 administrative budget 2. Oversight Board Resolution 2013-XX:, approving a cash flow loan agreement between the City and Successor Agency 3. Oversight Board Resolution 2013-XX:, approving submittal of the draft Recognized Obligations Payment Schedule 13-14A covering the period July- December, 2013, as reviewed and authorized by the governing board of the Successor Agency Page6 ---PAGE BREAK--- Agenda Item No. 5 Attachment 1 OVERSIGHT BOARD TO THEEL CERRITO REDEVELOPMENT AGENCY SUCCESSOR AGENCY RESOLUTION 2013-:XX RESOLUTION OF THE OVERSIGHT BOARD OF THE EL CERRITO REDEVELOPMENT AGENCY SUCCESSOR AGENCY APPROVING THE SUCCESSOR AGENCY FY 2013-14 ADMINISTRATIVE BUDGET, AS REQUIRED UNDER AB1X26 WHEREAS, as part of the 2011-12 State budget bill, ABx1 26 ("Dissolution Act") was enacted significantly modifying the Redevelopment Law to require the dissolution of redevelopment agencies throughout California and the establishment of successor agencies to wind down the former redevelopment agencies' affairs; and WHEREAS, on August 15, 2011, pursuant to the Dissolution Act, the City elected to serve as the El Cerrito Redevelopment Agency Successor Agency ("Successor Agency"); and WHEREAS, Section 34179(a) of the Health and Safety Code provided for the establishment of the Oversight Board of the Successor Agency ("Oversight Board"), which was formed on April4, 2012; and WHEREAS, the Dissolution Act requires the Successor Agency to prepare a proposed administrative budget for each fiscal year and submit it to the Oversight Board for approval; and WHEREAS, the Successor Agency approved the proposed administrative budget for the 2013-14 Fiscal Year on February 19, 2013 and is hereby submitting it to the Oversight Board for consideration as Exhibit A to this Resolution. NOW THEREFORE, BE IT RESOLVED that the Oversight Board of the El Cerrito Redevelopment Agency Successor Agency hereby approves the Successor Agency Administrative Budget for the Fiscal Year 2013-14, attached hereto as Exhibit A. BE IT FURTHER RESOLVED that this Resolution shall become effective in accordance with Health and Safety Code Section 34179(h). ---PAGE BREAK--- Exhibit A Successor Agency Administrative Budget Fiscal Year 2013-14 Agenda Item No. 5(8) Attachment 1, Exh. A Entity I Activity Successor Agency Oversight Board Staffing Functions (Total Compensation plus Overhead for Indirect Costs) City Management Finance Risk Management Economic Development City Clerk Information Systems Legal Services Financial & Audit Services Bond-related Costs Supplies Postage Copies Website Advertising/Legal Notices Property Management Total Combined Total Funding Source Redevelopment Property Tax Trust Fund Unfunded $501000 $501000 $41000 $251000 $151000 $41000 $501000 $101000 $101000 $11000 $250 $200 $11500 $11000 $11000 $222,950 $301000 $301000 $21000 $101000 $101000 $41000 $500 $250 $200 $11500 $11000 $89,450 $312,400 $250,000 $62,400 ---PAGE BREAK--- Agenda Item No. S(B) Attachment 2 OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO THEEL CERRITO REDEVELOPMENT AGENCY RESOLUTION 2013-XX RESOLUTION OF THE OVERSIGHT BOARD OF THE EL CERRITO REDEVELOPMENT AGENCY SUCCESSOR AGENCY APPROVING A CASH FLOW LOAN FROM THE CITY OF EL CERRITO TO THE EL CERRITO REDEVELOPMENT AGENCY SUCCESSOR AGENCY TO COVER PAYMENTS OF ENFORCEABLE OBLGIATIONS APPROVED ON THE ROPS III AND THE ROPS 13-14A WHEREAS, as part of the 2011-12 State bud~et bill, ABx1 26 ("Dissolution Act") was enacted significantly modifying the Redevelopment Law to require the dissolution of redevelopment agencies throughout California and the establishment of successor agencies to wind down the former redevelopment agencies' affairs; and WHEREAS, on August 15, 2011, pursuant to the Dissolution Act, the City elected to serve as the El Cerrito Redevelopment Agency Successor Agency ("Successor Agency"); and WHEREAS, Section 34179(a) of the Health and Safety Code provided for the establishment of the Oversight Board of the Successor Agency ("Oversight Board"), which was formed on April4, 2012; and WHEREAS, Assembly Bill 1484 ("Trailer Bill"), adopted in June 2012, amending the Dissolution Act, made clear that the Successor Agency is a separate public entity from the City and is not a component unit of the City, but the City is providing administrative services for the Successor Agency; and WHEREAS, pursuant to the Dissolution Act, the Contra Costa County Auditor Controller (the "Auditor-Controller") established the Redevelopment Property Tax Trust Fund (the to hold Redevelopment Property Tax collected from the City of El Cerrito Redevelopment Project Area to be disbursed to the Successor Agency for payment of its enforceable obligations and to taxing entities affected by the Redevelopment Plan; and WHEREAS, the Dissolution Act requires the Successor Agency to prepare a Recognized Obligations Payment Schedule ("ROPS") for each six-month period setting forth its enforceable obligations, including an administrative cost allowance of $250,000 per fiscal year; and WHEREAS, Health & Safety Code Section 34173 allows the City to loan funds to the Successor Agency for administrative costs, enforceable obligations and project-related expenses reported on a ROPS and approved by the Oversight Board; and WHEREAS, the Successor Agency prepared ROPS III for obligations payable during the period January through June, 2013 and the Department of Finance ("DOF") approved the ---PAGE BREAK--- Agenda Item No. 5(B) Attachment 2 enforceable obligations listed on ROPS III but there were insufficient funds in the to fund all of the obligations approved by DOF; and WHEREAS, the Successor Agency has incurred litigation expenses related to the litigation against the Auditor-Controller and DOF over the True Up Payment, the cost of which is an enforceable obligation of that was included on the ROPS for July through December, 2013 ("ROPS 13-14A"), so that the Successor Agency can repay the advance from the City for the Successor Agency's litigation costs; and WHEREAS, there were insufficient funds available in the to pay all approved enforceable obligations and administrative expenses approved by the DOF during the ROPS III period and based on projections there is an expectation that there will be insufficient funds in the for the litigation costs on ROPS 13-14A; and WHEREAS, the estimated cash flow advance to the Successor Agency required during the ROPS III period will be $238,000; and WHEREAS, to enable the Successor Agency to meet its fiduciary responsibilities to holders of enforceable obligations and for the Successor Agency to have adequate funds for administrative costs and other obligations, the City desires to loan to the Successor Agency an amount not to exceed $238,000; and WHEREAS, Exhibit A to this Resolution is a proposed Cash Flow Loan Agreement ("Loan Agreement") pursuant to the authority granted by Health and Safety Code Section 34173(h); and WHEREAS, the City and Successor Agency determined that entering into the proposed Loan Agreement is in the best interests of the City and the Successor Agency, and approved execution of the Loan Agreement on February 19, 2012, contingent on approval of the Oversight Board. NOW THEREFORE, BE IT RESOLVED that the Oversight Board of the El Cerrito Redevelopment Agency Successor Agency hereby approves the Cash Flow Loan Agreement between the City ofEl Cerrito and the El Cerrito Redevelopment Agency Successor Agency, as provided for in Health & Safety Code Section 34173 and attached hereto as Exhibit A. BE IT FURTHER RESOLVED that this Resolution shall become effective as set forth in Health and Safety Code Section 34179(h). ---PAGE BREAK--- Name of Successor Agency: EL CERRITO (CONTRA COSTA) SUMMARY OF RECOGNIZED OBLIGATION PAYMENT SCHEDULE Filed for the July 1, 2013 to December 31, 2013 Period Agenda Item No. 5(8) Attachment 2, Exhibit A Outstanding Debt or Obligation Total Total Outstanding Debt or Obligation Current Period Outstanding Debt or Obligation A Available Revenues Other Than Anticipated Funding B Enforceable Obligations Funded with C Administrative Allowance Funded with D Total Funded (B + C E Total Current Period Outstanding Debt or Obligation B + C = E) Should be same amount as ROPS form six-month total F Enter Total Six-Month Anticipated Funding G Variance D = G) Maximum Allowable should not exceed Total Anticipated Funding Prior Period (July 1, 2012 through December 31, 2012) Estimated vs. Actual Payments (as required in HSC section 34186 H Enter Estimated Obligations Funded by (lesser of Finance's approved amount including ad min allowance or the actual amount distributed) Enter Actual Obligations Paid with Enter Actual Administrative Expenses Paid with K Adjustment to Redevelopment Obligation Retirement Fund (H - (I + J) = K) L Adjustment to K = L) Certification of Oversight Board Chairman: Pursuant to Section 34177(m) of the Health and Safety code, I hereby certify that the above is a true and accurate Recognized Obligation Payment Schedule for the above named agency. Name N $27,435,253 Six-Month Total Title $0 $2,040,857 $250,000 $2,290,857 $2,290,857 $1,368,492 {$922,365) $1,949,250 $1,949,250 $0 $0 $2,290,857 Signature Date ---PAGE BREAK--- Contract/Agreement Contract/Agreement a CERRito (CONlRA COSTA) RECOGNIZED OBUGAllON PAYMENT SCHEDULE (RDPS J3..14A) July 1. 2013 throup Dec:embor 31. 2013 Total Due During Total Outstanding I Fiscal Year Oversight Board Approval Date: _ ---PAGE BREAK--- Item II I Project Name I Debt Obliptlon Payee Description/Project Scope ProiectArra 11Tax Allocation Bonds 1997 A Union Bank Rrfundin&: of prior TAB far Redev Projs CityofEICerTito 11Tax Allocation Bonds 1996 B Union Bank Rr:fundin1 of prior TAB for L&M Hsr; Pro}s OtyofEICerrlto 11Tax Allocation Bonds 2004 A I Union Bank Tax-exempt TAB for lnfrastrudure Projs CityofEICerrito liT ax Allocation Bonds 2004 B Non-~ I Union Bank Taxable TAB for Redev Projs Oty of El Cerrito liT ax Allocation Bonds 2004 B Hsg I Union Bank Taxable TAB for L&M Hss: Projs CltyofBCerrlto 2 I Valente Promissory Note__ Valente I.Danforlandacqulstion Oty of El Cerrito 3 I Cooperation Agreement lEI Cenilo MSC Redeve-lopment Plan Implementation (non-houslnc) CltyofEICerrlto 4 !Cooperation Agreement jCity of El Cenilo Redevelopment Plan Implementation (houslnl) CltyofEICerTito 5 I2!J09.2010 SERAF Loan IL&M Housino Fund Funds advanced for SERAF payment OtyofEICerrito 6 1200>2006 ERAF Loan IL&M Housing Fund Funds advanced for ERAF payment OtyofEICerrlto 7IFY12-13 Allowance l<: