Title
Staff Report for Resolutions of the City Council and the Successor Agency to the Redevelopment Agency of the City of San Leandro Re-Entering Into a Loan Agreement for the Plaza Project Loan with the City of San Leandro
Staffreport
SUMMARY AND RECOMMENDATIONS
Staff recommends that the City Council and the Governing Body of the Successor Agency to the former Redevelopment Agency of the City of San Leandro approve the Resolutions Reinstating the Loan Agreement and Amending and Restating the Promissory Note for the Plaza Project Loan, with an outstanding balance of $2,299,315, plus interest.
BACKGROUND
In 2002, the City of San Leandro loaned the Redevelopment Agency of the City of San Leandro $2,887,617.44 for the purposes of carrying out redevelopment activities in the Plaza Project Area (“Plaza Project Loan”). On December 5, 2002, a Promissory Note was executed to acknowledge the loan. On June 21, 2004, Resolution 2004-011 RDA confirmed and codified the loan, which had a remaining balance at the time of $2,569,400.00.
On March 7, 2011, in response to a proposal by the State Legislature to eliminate all redevelopment agencies state-wide, the Redevelopment Agency passed Resolution No. 2011-006 RDA, which authorized full repayment of the Plaza Project Loan in the amount of $2,137,273.49. Earlier that year, the Redevelopment Agency also made a regularly scheduled debt service payment on the loan of $300,000. Total payments made in 2011 were $2,437,273.
In June of 2011, the State Legislature adopted Assembly Bill AB x1 26 (“AB 26”), which caused the dissolution of all redevelopment agencies. AB 26 included a “claw back” provision that retroactively invalidated payments made on City-Agency loan agreements after January 1, 2011. On December 12, 2013, the Successor Agency initiated litigation challenging the “claw back” of payments made toward Redevelopment Agency loans after January 2011, as well as the California Department of Finance’s (DOF) denial of approximately $11.1 million in enforceable obligations for the Joint Project Loan ($2.0 million) and capital projects ($9.1 million).
On September 23, 2014, the Superior Court of California issued an order for the Successor Agency on the issue of the $11.1 million in enforceable obligations, predominantly siding with the DOF on the issue of the “claw back”. The court determined that the Successor Agency was obligated to remit $2,437,273 reversing the two payments made on the Plaza Project Loan in 2011.
On October 19, 2015, the City Council approved Resolution 2015-177 appropriating $2,437,273 from the General Fund Economic Uncertainty Reserve Fund to reverse the Plaza Project Loan payments made in 2011. The funds were then remitted to the Alameda County Auditor-Controller and subsequently redistributed to the local taxing entities. The City, as a taxing entity itself, received $321,305.46 from the redistribution.
On October 28, 2015, the Successor Agency received a Finding of Completion from the DOF certifying that all payments that were required pursuant to the dissolution of the Redevelopment Agency were made. With the approval of the Oversight Board, the Successor Agency may now reinstate the Plaza Project Loan and repay the remaining amount owed to the City. Approval from the Oversight Board will be requested at its January 27, 2016 meeting.
In order for the loan to become an enforceable obligation, the Oversight Board must make a finding that the loan was made for legitimate redevelopment purposes. In keeping with the goals of the Plaza Project Area, improvements resulted in significant revitalization of the area, and have been of benefit to all taxing entities that share in the property tax revenue, removing impediments to development, eliminating adverse conditions in the project area, and catalyzing private development, thus resulting in an increase in assessed valuation and property tax revenue that accrues to the taxing entities. This includes projects such as the West Estudillo pedestrian connection, downtown pedestrian and light improvements, the downtown history walk, and the acquisition and assembly of properties within development opportunity sites.
If approved, the Successor Agency’s debts under the loan to the City may be restored as an enforceable obligation and listed on the Recognized Obligation Payment Schedule (ROPS). Funds to pay the obligation to the City will be provided to the Successor Agency by the Alameda County Auditor-Controller via the Redevelopment Property Tax Trust Fund and then the Successor Agency can pay the City consistent with the terms of the re-entered Agreement.
Repayment of the loan will be subject to several amended terms, per Health and Safety Code, Section 34191.4:
• Interest rate will be recalculated from 6% to 3% from the point of inception.
• Payments will be made to principal first, then interest.
• For each ROPS period, the loan will be repaid after other enforceable obligations are paid (such as capital projects on the ROPS).
• Maximum payment per year will be 50% of the increase between the amount distributed to the taxing entities in the Plaza Project Area from the Redevelopment Property Tax Trust Fund during that year and the amount distributed to the taxing entities during the base year of 2012-13 (the increment).
• 20% of yearly payments received by the City must be transferred to the City’s Low and Moderate Income Housing Asset Fund.
The current outstanding balance on the loan is $2,299,315. Including interest, the City will receive approximately $3,369,000 in payments towards the loan by fiscal year 2022-23. Of this, approximately $2,695,000 will be remitted to the General Fund and $674,000 (20%) will be remitted to the Low and Moderate Income Housing Asset Fund and used to support the development of affordable housing.
In keeping with State law, a defined repayment schedule was developed with annual payments of $574,829. Payments will be made based upon availability of funds after payment of other enforceable obligations on the ROPS and the yearly cap. Based upon this requirement, sufficient funds are projected to be available to begin payments in fiscal year 2017-18 and complete loan payoff by fiscal year 2022-23. The total amount of the payments will also vary based on the availability of funds because a longer payment period will result in increased interest.
Previous Actions
• On June 21, 2004 the Redevelopment Agency passed Resolution No. 2004-011 RDA confirming the loan from the City General Fund to the Plaza Project Area.
• On March 7, 2011 the Redevelopment Agency passed Resolution No. 2011-006 RDA appropriating funding to pay the full remaining balance on the Plaza Project Loan of $2,137,273.49 to the City.
• On October 19, 2015 the City Council passed Resolution No. 2015-177 appropriating $2,437,273 to be paid to the Alameda County Auditor-Controller to reverse the payments made to the City towards the Plaza Project Loan in 2011.
Fiscal Impacts
If this action is approved by the City Council and the Oversight Board, the City will receive approximately $3,369,000 in loan payments by fiscal year 2022-23. Of this, approximately $2,695,000 will be remitted to the General Fund and approximately $674,000 (20%) will be remitted to the Low and Moderate Income Housing Asset Fund and used to support the development of affordable housing. The amount paid each year may vary, based upon availability of funds after payment of other enforceable obligations and the yearly cap.
ATTACHMENTS
Attachments to Resolutions
• Plaza Loan Restated Loan Agreement, Payment Schedule and Promissory Note
PREPARED BY: Katie Bowman, Business Development Specialist, Community Development Department