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HomeMy WebLinkAbout04 WORKING CAPITAL LOAN• ~~~ ~ AGENDA REPORT Ree ewed m 4 City Manager Finance Director MEETING DATE: September 7, 2010 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: PAMELA ARENDS-KING, FINANCE DIRECTOR SUBJECT: WORKING CAPITAL LOAN AND ADMINISTRATIVE SERVICES AGREEMENT BETWEEN THE CITY OF TUSTIN AND THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY SUMMARY: The approval of this loan and administrative services agreement between the City of Tustin and the Tustin Community Redevelopment Agency will comply with Section 33675 of the California Health and Safety Code regarding the allocation and payment of tax increment to Redevelopment Agencies, and provide the resources necessary to carry out the Agency's programs. RECOMMENDATION: 1. It is recommended that the City Council approve working Capital loan of $4,650,000 to the South Central Project Area through August 31, 2011. 2. It is recommended that the Agency approve Working Capital loan of $4,650,000 to the South Central Project Area through August 31, 2011. 3. Authorize the Mayor and the Chairperson of the Agency to execute the attached agreement for fiscal year 2010-2011, offering and accepting a loan and various services from the City to the Agency totaling $6,885,200. FISCAL IMPACT: The administrative services costs have been appropriated in the adopted fiscal year 2010- 2011 Redevelopment Agency budget. BACKGROUND: Section 33670 et seq. of the California Health and Safety Code stipulates that tax increment can only be distributed to Redevelopment Agencies for the sole purpose of repaying debt. Any tax increment collected in excess of outstanding debt will be Page 2 returned to the County to be redistributed to the original taxing agencies. This loan from the General Fund will permit the Agency to complete the goals and objectives of the South Central Project Area for Fiscal Year 2010-2011. The General Fund will continue to provide administrative and management services to the Agency, the cost of which will be recovered from tax increment generated by the various Project Areas. When a Redevelopment Agency Project Area is formed, the assessed valuation for the area is frozen and becomes the base year value. All property tax generated by the "incremental" growth in assessed valuation as measured against the base year is allocated directly to the Agency. This "tax increment" and, to a much lesser degree, interest earned on the increment, is the only source of income made available to Redevelopment Agencies. Section 33610 of the Health and Safety Code restricts the distribution of tax increment to Redevelopment Agencies to the extent it is equal to or less than outstanding debt. The loan between the City and the Agency qualifies as debt per the Code. Until such time that a long term financing plan is completed for the South Central Project Area, the policy of making annual loans between the City and the Agency will assure the full receipt of tax increment to the Agency and maximize the Agency's ability to meet its adopted goals and objectives in this area. ~~ ~ -~ Pamela Arends-King Finance Director ~~ ~ _~ Se n Tran ~ Senior Financial Analyst Attachment AGREEMENT THIS AGREEMENT is made and entered into this 7th day of September, 2010, by and between the CITY OF TUSTIN, a municipal corporation of the County of Orange, State of California, hereinafter referred to as "City", and the TUSTIN COMMUNITY REDEVELOPMENT AGENCY, a California Redevelopment Agency, hereinafter referred to as "Agency". RECITALS WHEREAS, the City Council of the City, pursuant to Health and Safety Code section 33610, has deemed it necessary to continue to loan the Agency $6,885,200 to assist with carrying out programs budgeted for 2010-2011; and WHEREAS, the City Council of the City offered said loan to the Agency; and WHEREAS, the City has offered to provide administrative, planning, engineering, design, accounting and other services as required, including direct and indirect overhead charges to the Agency; and WHEREAS, the Agency, pursuant to Health and Safety Code section 33334.3, has determined that the planning and administrative expenses are necessary for the production, improvement, or preservation of low- and moderate-income housing; WHEREAS, the Agency, pursuant to Health and Safety Code section 33601, has accepted said offers; and WHEREAS, the parties intend to further memorialize their agreement as to said loan and to set forth the terms and conditions thereof as agreed to at the time of offer and acceptance; NOW, THEREFORE, in consideration of the mutual covenants, agreements and considerations contained herein, City and Agency hereby agree as follows: 1. The City will loan $4,650,000 to the South Central Project Area through August 31, 2011 at the same terms and conditions as the current loan. 2. The sum loaned to the Agency is to be repaid to the City as follows: a. Interest on said sum shall accrue at the monthly rate as reported by the Local Agency Investment Fund (LAIF) from the date of transfer of said sum until such time as said sum is repaid to the City. b. The sum loaned to the Agency, as well as accrued interest thereon shall be repaid to the City by the Agency from tax increment revenues received pursuant to Health and Safety Code sections 33670 et seq. c. The sum loaned to the Agency, as well as accrued interest thereon, shall be due and payable to the City by the Agency, unless otherwise renewed by both parties, by August 31, 2011. d. If no funds become available to the Agency to repay said sum, the money loaned and accrued interest thereon may be forgiven and need not be repaid to the City. 3. The sum agreed upon for other services, without interest thereon, shall be paid to the City by the Agency from tax increment revenues received pursuant to Health and Safety Code sections 33670 et seq., based on the formula approved by the City Council and actual time as recorded in the City's Payroll system. The estimated cost of services for 2010-2011 is $374,200 for the Town Center Project Area, $312,200 for the South Central Project Area, and $1,548,800 for the MCAS Tustin Project Area. a. If no funds become available to the Agency to pay said sum, it may be forgiven and need not be paid to the City. Executed this 7th day of September, 2010. "CITY"CITY OF TUSTIN BY: "AGENCY" TUSTIN COMMUNITY REDEVELOPMENT AGENCY BY: ATTEST: Pamela Stoker City Clerk Pamela Stoker Redevelopment Agency Secretary