Title
Staff Report for a Resolution of the Successor Agency to the Redevelopment Agency of the City of San Leandro Adopting a Recognized Obligation Payment Schedule (ROPS) for the Period July 1, 2016 - June 30, 2017, Pursuant to Health and Safety Code Section 34177(l)
Staffreport
RECOMMENDATIONS
Staff recommends that the governing board of the Successor Agency to the Redevelopment Agency of the City of San Leandro adopt a Resolution approving a Recognized Obligation Payment Schedule for the period from July 1, 2016 through June 30, 2017.
BACKGROUND
Pursuant to Assembly Bill x1 26, on January 9, 2012, the City Council affirmed its decision to have the City serve as the Successor Agency to the former Redevelopment Agency (Agency). Assembly Bill 1484, passed by the State Legislature on June 27, 2012, modified AB x1 26 to clarify that successor agencies are separate legal entities from the city that formed the redevelopment agency. Under Senate Bill 107, introduced and passed by the State Legislature on September 11, 2015, the Successor Agency is obligated to prepare a Recognized Obligation Payment Schedule (ROPS) every fiscal year that lists all enforceable obligations payable during that twelve month period. This differs from the previous requirement to prepare a ROPS for every six-month period. Approval of the ROPS by the Successor Agency Oversight Board is also required prior to submission to the California Department of Finance (DOF). The Successor Agency can only pay obligations that are listed on the ROPS and approved by the DOF.
Analysis
A primary responsibility of the Successor Agency is to oversee the payment of Enforceable Obligations. Enforceable Obligations are defined as:
• Bonds including debt service reserve set asides and any other required payments;
• Loans borrowed by the Agency;
• Payments required by the federal or state governments;
• Pension and unemployment payments for Agency employees;
• Judgments, settlements or binding arbitration decisions; and
• Any legally binding and enforceable contract that does not violate the debt limit or public policy.
City-Agency Agreements
After the submittal of earlier versions of the San Leandro ROPS, the DOF informed the Successor Agency that it did not consider some items to be enforceable, arguing that AB x1 26 does not recognize agreements between a redevelopment agency and the city that created it. This determination related to a loan from the City General Fund to the Joint Redevelopment Project Area with a balance of $2.1 million (ROPS Obligation #9) and four Cooperative Agreements to fund $9.1 million in capital improvement projects (ROPS Obligations #27-30).
A lawsuit to challenge the DOF’s interpretation was filed in December 2013 and a decision published on September 25, 2014 found that the Successor Agency actions to re-enter into these agreements were valid and that the DOF had abused its discretion in rejecting these items on the ROPS. In a letter received on May 14, 2015, the DOF informed the Successor Agency that it would no longer dispute these items and they will be approved on future ROPS.
Consequently, items #9 and 27-30 are now deemed approved enforceable obligations. Therefore, ROPS 15-16B included a request for the majority of funding due under the $2.1 million General Fund loan and the full $1.5 million due for the Eden Road construction project. The current ROPS requests funding for the remaining payment due under the Joint Project Loan, the full funding required for the MacArthur Boulevard streetscape project ($1,274,134), and the first installment of $400,000 to complete design of the Doolittle Drive streetscape project. Future ROPS submittals will include the obligated funding for the remaining phase of the Doolittle Drive streetscape project ($4.2m) and the Hays Street (Dan Niemi Way) reconfiguration ($2.0m).
City Advance for and Re-Listed Payments Related to Funding Shortfall
As part of the previous ROPS submittal (ROPS 15-16B), the Successor Agency requested approval of a “City Advance” of $779,051 to remedy a shortfall in the Successor Agency’s fund balance. The shortfall resulted from an adjustment the DOF made to an earlier distribution of funds. In its review of an earlier ROPS, the DOF determined that the Successor Agency had a substantial amount of funding on hand to pay enforceable obligations. Therefore, the DOF made a significant reduction to the amount of funding remitted to the Successor Agency to pay those obligations. The Successor Agency believes that the DOF determination was erroneous and submitted documentation to justify this assertion. The City Advance was intended to remedy the shortfall temporarily and would have been paid back using funds distributed under ROPS 15-16B. Unfortunately, the DOF denied this advance as an enforceable obligation and the City Advance was not executed. Therefore, the Successor Agency continues to have a negative fund balance.
Although the Successor Agency continues to disagree with the DOF determination, the Agency is following DOF guidance and attempting to remedy the shortfall through a different approach on the current ROPS. The current approach involves re-listing certain expenditures that exceeded the Agency’s funding distributions on past ROPS. Specifically, the following payments have been re-listed on ROPS 2016-17:
• Ford Store Sales Tax Rebate Agreement. On ROPS 14-15A, the Successor Agency requested and received $185,000 for this obligation. However, due to a strong spike in sales volume, the actual payment was $207,546. The difference of $22,546 is included on the current ROPS along with the estimated payment for the upcoming year.
• 2014 Tax Allocation Bonds. In 2014, the Agency issued refunding bonds to refinance earlier 2002 and 2004 bond issuances by the Redevelopment Agency. As part of the refunding, the Agency paid accrued interest of $142,421 at the time of the refunding. This payment was not previously listed on a ROPS and will therefore be listed on ROPS 2016-17.
• Casa Verde Operating Agreement. The Successor Agency requested and received $111,254 for a required payment under this agreement on ROPS 14-15B covering the period from January-June 2014. However, the payment was made a month early in December 2014. Because the funding was not expended in the period it was requested the DOF applied a later funding adjustment, reducing a distribution to the Agency.
The Agency is hopeful that the DOF will disburse funds for these past payments, thereby significantly reducing the Agency’s funding shortfall. Should this approach not be successful, the Agency will explore alternative options to remedy this shortfall, which may include revisiting action related to the DOF’s denial of the City Advance on ROPS 15-16B. The Agency will also continue to work with the DOF in the hopes of reaching an agreement that will remedy the remainder of the shortfall.
Plaza Loan
One new item, a reinstated loan owed by the Plaza Project Area to the City General Fund, is included in ROPS 16-17 for the first time. An amended loan agreement and promissory note is also scheduled for approval at the January 19, 2016 City Council meeting. In 2004, the City and the Redevelopment Agency approved a promissory note and a loan of $2.6 million from the City to the Plaza Redevelopment Project Area. In 2011, the Agency made payments of $2.4 million to retire that obligation prior to the elimination of the Redevelopment Agency, however those payments were ultimately reversed when a court ruling determined that the dissolution law retroactively reversed all payments made after January 1, 2011 on City-Agency funding agreements.
When the dissolution law was amended by SB 107 in 2015, the Agency gained the ability to reinstate the loan subject to several conditions outlined in the staff report for that item. Assuming that action is approved by the Oversight Board and the DOF, it will become an enforceable obligation on the ROPS. Over the next seven years, the Agency anticipates making approximately $3m in payments to the City General Fund to retire this obligation. The Plaza Project Loan is included on the current ROPS, however payments are not scheduled to begin until the next fiscal year.
Administrative Budget
The ROPS also contains an administrative budget for the Successor Agency. Based on direction from the DOF, the amount of the administrative allowance is the greater of 3% of funds received from the Redevelopment Property Tax Trust Fund or $250,000 annually. For the 2016-2017 ROPS period, the $250,000 minimum will apply.
The Oversight Board is scheduled to approve this ROPS on January 27, 2016 and it will be forwarded to the DOF, the State Controller’s Office and the Alameda County Auditor Controller after that action is finalized.
Previous Actions
• On January 9, 2012, the City Council affirmed its decision to have the City serve as the Successor Agency for the former Redevelopment Agency and to retain the Agency’s housing assets and functions.
Fiscal Impacts
As noted above, the Enforceable Obligations listed on the ROPS are paid using funds disbursed by the County Auditor-Controller through property tax revenue deposited into the Redevelopment Property Tax Trust Fund (RPTTF). The General Fund (or any other City fund) does not bear any responsibility for the payment of approved enforceable obligations of the former Redevelopment Agency.
ATTACHMENT
Attachment to Resolution
• ROPS
PREPARED BY: Jeff Kay, Business Development Manager, Community Development Department