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Date: To: From: February 21, 2012 City Council of the City ofEl Cerrito Lori Trevifi.o, Redevelopment Manager Hilde Myall, Senior Project Manager, Housing Mary Dodge, Administrative Services Director AGENDA BILL Agenda Item No. 7(A)(2) Subject: Financial review of dissolution of the El Cerrito Redevelopment Agency ACTION REQUESTED Review a staff report on the dissolution of the El Cerrito Redevelopment Agency. BACKGROUND The El Cerrito Redevelopment Agency ("RDA") was dissolved on February 1, 2012, pursuant to AB 1 x26, and remaining RDA funds are being held for transfer to a new fund for payment of its obligations by the Successor Agency to the Redevelopment Agency This report is a financial review of the RDA covering the fiscal year through the end of January and the transactions involved in dissolving the RDA, establishing the SA, and the City assuming the RDA's Housing functions. The RDA's budget was adopted prior to the State's enactment of AB1x26 in June 2011, which resulted in suspension of its activities on July 1, 2011. Pursuant to the legislation, the RDA adopted an Enforceable Obligations Payment Schedule ("EOPS") and only made payments allowed under that schedule through December 31, 2011. The RDA maintained sufficient cash to pay any obligations due prior to the next tax increment revenue payment due from the County. Because redevelopment agencies remained in suspension during the CRA v. Matosantos litigation, the RDA received its usual tax increment payment on December 16, 2011, rather than the County's distribution of revenue being subject to review by an oversight board, which would have been required under AB1x26, had dissolution occurred on October 1, 2011. Upon the State Supreme Court's decision that redevelopment agencies would be dissolved under a new timeline, the RDA amended its EOPS to include obligations due through the end ofFY 2011-12. This enabled the RDA to utilize its December 15, 2011 tax increment receipts to make payments on obligations due during the month of January, leading up to dissolution on February 1, 2012. The RDA again maintained sufficient cash to make payments on obligations due prior to the next scheduled revenue payment from the County. REVENUE AND CASH FLOW The RDA's adopted revenue budget for FY 2011-12 had been based on a slight increase in the assessed value of the Redevelopment Project Area. While the actual assessed value for the fiscal year determined by the County was lower than this projection, it did not include the value of the Target/Safeway transaction, which should result in a significant supplemental property tax payment by Safeway, thereby available ---PAGE BREAK--- Agenda Item No. 7(A)(2) for distribution by the County Auditor in the spring. Given the lack of clarity of the process for requesting and receiving funds under dissolution and not knowing the amount of revenue that may be available for the SA to request, it is difficult to predict cash flow needs through the end of the fiscal year. CAPITAL FUND Eighty percent of tax increment was revenue to the Capital Fund. The FY11-12 budgeted expenses included personnel, a limited amount for legal expenses, debt payments, estimated pass-through payments, overhead paid to the City, and a grant to the El Cerrito Municipal Services Corporation ("MSC") for implementation of redevelopment projects and programs pursuant to the Cooperation Agreement between the RDA and the MSC. Those budgeted amounts were included on the EOPS and the RDA's expenditures were limited to obligations on the EOPS that were due prior to dissolution on December 31, 2011. Upon amendment of the EOPS, the RDA made payments in January on obligations due out of the December 15, 2011 tax increment receipts. Redevelopment Capital Fund FY11-12 Budget v. Actual YTD through January 31, 2012 Budget- YTD Account Number Amended Budget YTD Transactions Transactions Property and Other Taxes $4,082,000 $2,168,626 $1,913,374 Use of Money and Property $1,000 $0 $1,000 Total Revenue $4,083,000 $2,168,626 $1,914,374 Personnel Services $305,701 $176,309 $129,392 Professional Services $35,000 $4,664 $30,336 Principal Payments $123,292 $0 $123,292 Interest Payments $164,924 $0 $164,924 Fiscal Agent/Trustee Fees $4,000 $0 $4,000 Pass Through Payments $981,000 $0 $981,000 Mise Finance Expense $49,000 $0 $49,000 Loans & Grants $1,031,340 $1,031,340 $0 General Fund Transfer $498,000 $498,000 $0 Debt Service $1,364,356 $293,502 $1,070,854 Total Expense $4,556,613 $2,003,815 $2,552,798 With the exception of budgets for personnel costs and any professional services not already encumbered with a contract, the remaining budgeted amounts in the table above will be the obligations of the SA. Remaining budgets and expenditures personnel costs were transferred to the City's General Fund as of February 1, 2012. Costs related to administration of the SA will be assumed by the City as well and covered through the annual administrative cost allowance of $250,000 provided under AB 1x26. HOUSING FUND Twenty percent of tax increment was revenue to the Low and Moderate Income Housing Fund ("LMIHF"). The FY11-12 budgeted expenses included personnel, legal and Page 2 ---PAGE BREAK--- Agenda Item No. 7(A)(2) project-related consultant expenses, debt payments, overhead paid to the City, and loan disbursements to Eden Housing, Inc and Ohlone Gardens, LP for development costs for those two affordable housing projects. Those budgeted amounts were included on the EOPS, along with the RDA's obligation to fund the City's implementation of affordable housing projects and programs, pursuant to the Cooperation Agreement between the City and RDA. The RDA's expenditures were limited to obligations on the EOPS that were due prior to dissolution on December 31, 2011. Upon amendment of the EOPS, the RDA made payments in January on obligations due out of the December 15, 2011 tax increment receipts. In January, pursuant to the RDA's Cooperation Agreement with the City, the RDA transferred encumbered LMIHF funds to a newly created City Housing Fund to allow the City to continue to implement affordable housing activities on behalf of the RDA. The remaining budget in the LMIHF Fund for operational expenses was transferred to the City Housing Fund. When the RDA dissolved on February 1, 2012, as a matter of law, any housing assets and functions that remained with the RDA, less any unencumbered amounts in the LMIHF, were transferred to the City, which had elected to assume housing functions, pursuant to AB1x26. Redevelopment Agency Low and Moderate Income Housing Fund FY 11-12 Budget v. Actual thru 1/31/12 and Transfer of Housing Budget Amended YTD Budget- YTD City Housing Account Budget Transactions Transactions Fund Budget Property and Other Taxes $1,020,500 $542,157 $478,343 $0 Use of Money and Property $1,000 $0.00 $1,000 $0 Total Revenues $1,021,500 $542,157 $479,343 $0 Personnel Services $142,260 $43,744 $98,516 $98,516 Professional Services $87,000 $2,908 $84,093 $84,093 Property Services $26,500 $15,070 $11,430 $11,430 Supplies & Other Services $5,920 $826 $5,094 $5,094 Interest Payments $39,800 $0 $39,800 $0 Fiscal Agent Fees $2,000 $0 $2,000 $0 County Admin Fee $12,250 $0 $12,250 $0 Loan Disbursements $350,000 $46,669 $303,331 $0 General Fund Transfer $214,069 $214,069 $0.00 $0 Debt Service $600,512 $139,605 $460,907 $0 Total Expense $1,480,311 $462,890 $1,017,421 $199,133 The RDA's Amended EOPS included $1,196,125 of payments due to the City Housing Fund in FY 11-12 for SERAF and ERAF repayments and to fund loan commitments to Eden Housing and Ohlone Gardens, LP. The likelihood of receiving these payments in this fiscal year is not known at this time. To be conservative, staff did not budget for receipt of these payments in the current fiscal year. However, the enforceable obligations due to the City Housing Fund are reflected on the fund balance sheet and Page 3 ---PAGE BREAK--- Agenda Item No. 7(A)(2) will be included on the Recognized Obligation Payment Schedule ("ROPS") to be prepared by the SA. SUCCESSOR AGENCY In the adjusted timeline for AB1x26, all funds remaining in the RDA's accounts as of February 1, 2012 must be transferred to the SA. The RDA's budget cannot be amended and the necessary transfers will occur as a matter of law. A Fiduciary Fund is being established to receive the RDA's assets and liabilities. The SA does not have budget discretion, as the City is serving only in a fiduciary role, and therefore a budget is not being proposed at this time. The SA is to prepare an initial draft ROPS by March 1, 2012, which will serve as the spending plan for the SA. LEGAL CONSIDERATIONS The SA will not be a component unit of the City and the City will not assume the SA's assets and liabilities. The City Council's role as the SA is limited to taking actions necessary to facilitate completion and/or payment of the SA's obligations. The SA will review the initial draft of its ROPS at this evening's meeting in a separate item. As the need for City, SA or administrative actions becomes clear, staff and counsel will bring forward the necessary items for consideration by the appropriate body. Reviewed by: City Manager Page4