HomeMy WebLinkAbout03 FIRST AMENDED SECOND ROPSAgenda Item 3
AGENDA REPORT
Oversight Board of the Successor Agency to the
Tustin Community Redevelopment Agency
MEETING DATE: MAY 29, 2012
SUBJECT/ACTION: FIRST AMENDED SECOND RECOGNIZED OBLIGATION PAYMENT
SCHEDULE (JULY — DECEMBER 2012) AND AMENDED
ADMINISTRATIVE BUDGET
1. Reaffirm modifications to the ROPS made by the Successor Agency and transmitted
to the Department of Finance ("DoF") on May 10, 2012 as authorized previously by
the Oversight Board, certified by the Oversight Board Chair and as requested by
DoF, subject to the following:
A. All modifications to the Recognized Obligation Payment Schedules ("ROPS")
requested by DoF were made under protest with the Oversight Board and
Successor Agency reserving all rights to seek payment for any obligations
removed from the ROPS under protest;
B. Review and certification by the County Auditor-Controller selected independent
auditor, and;
C. Should any subsequent modifications be required to the First Amended Second
ROPS by the Successor Agency, independent auditor, or DOF, the City Manager
and/or Finance Director, or their authorized designee, shall be authorized to
make augmentation, modification, additions, or revisions as may be necessary
subject to certification by the Oversight Board Chair.
2. Approve proposed Successor Agency action to amend its Administrative Budget for
the period of July-December 2012, adjusted to reflect the Second Amended ROPS,
pending Successor Agency approval.
3. Approve any subsequent Successor Agency action, if necessary, to enter into a
Second Amended Agreement for reimbursement of costs incurred by the City to
support Successor Agency operations and obligations for Fiscal Year 2012-13, to
reflect the modifications to the Administrative Cost Allowance and Administrative
Budget for Fiscal Year 2012-13 requested by DoF, including the period of July-
December 2012 as noted in recommendation #2 above.
(Note: the above actions by the Oversight Board do not become effective for 3
business days, pending any request for review by the DoF. If DoF requests review of
these Oversight Board actions, it shall have 10 days from the date of its request to
First Amended Second ROPS
May 29, 2012
Page 2
approve the Board action, or return it to the Board for reconsideration and the action, if
subject to review by DoF, shall not be effective until approved by DoF).
BACKGROUND
In a May 3, 2012 letter from DoF which is attached, the DoF identified line items on the
Second ROPS submitted on April 18, 2012 for the period of July - December 2012 that,
in "their opinion ", did not qualify as enforceable obligations. Their determination impacts
tax increment and bond funding for Tustin Ranch Road Phase 1 and Phase 2
Construction and project- specific legal services. DoF identified the following items as
not qualifying as enforceable obligations:
Tax Increment Funded
• Auditing services (project support) for $12,000
• Legal services (project support) for $492,000
• Developer selection process for $4,500
• Tustin Ranch Road Phase 1 Construction for $500,000
• Capital Projects — Tustin Ranch Road Phase 2 for $24,000,000
• Tustin Ranch Road Phase 2 Construction Contract for $8,000,000
• Engineering Construction Support for $300,000
• Direct Project Costs (Salary and Benefits) for $577,538
• Archeological and Paleontological Services for $13,130
On April 10, 2012, the Oversight Board delegated authority to the City Manager and /or
Director of Finance to make any augmentation, modifications, additions, or revisions as
may be necessary to the ROPS based on review by DoF. Under that authority, the
Successor Agency made the revisions and the City Manager submitted the Second
Amended ROPS to the State on May 10, 2012 under protest in order to receive the
anticipated June 1 release of tax increment from the County and with a reservation of all
rights (see City's response letter and First Amended Second ROPS attached as
Attachment 2). The Successor Agency, the City of Tustin ( "City "), and the Oversight
Board reserved all of their rights to seek a writ, declaratory relief, and to receive monies
from the Trust Fund to pay each obligation removed from the ROPS. Each item
removed is considered and deemed "subject to dispute ". To the extent the Successor
Agency or the City incurs damages, actual and /or consequential, or there are other
financial or legal impacts to Tustin or a third party as a result of removal of these
protested ROPS items, or their removal affects the ability of the Successor Agency later
to receive adequate monies from the Trust Fund to meet legal obligations and to pay
debt service, the Successor Agency and the Oversight Board have reserved the right to
seek redress in the courts and avail themselves of any and all remedies at law and
equity against the State.
First Amended Second ROPS
May 29, 2012
Page 3
In addition to amending the ROPS, DoF's comments of April 26 necessitate that the
Successor Agency amend the Successor Agency's Administrative Cost Allowance and
Administrative Budget to reflect DoF's revised calculation of projected tax increment.
Pursuant to Health and Safety Code Section 34171, the Administrative Budget is for
administrative costs of the Successor Agency which are permitted in an amount up to
three percent (3 %) of property tax allocated to the Redevelopment Obligation
Retirement Fund during fiscal year 2012 -13. Removal of certain enforceable obligations
from the Second ROPS as required by DoF, causes the Administrative Cost Allowance
to be reduced and the Administrative Budget modified as required by DoF The original
Administrative Budget projected $444,196 as the Administrative Cost Allowance for
Fiscal Year 2012 -13. The changes to the First Amended Second ROPS requested by
DoF necessitate reduction of this amount for Fiscal Year 2012 -13 to $393,095 which
also reduces the eligible Administrative Cost Allowance for the period of July through
December 2012 to an amount of $292,125. Attached is the proposed revised
Administrative Budget to be approved by the Successor Agency, also under protest.
In the event it is necessary to amend the First Amended Agreement between the City
and Successor Agency for reimbursement of costs originally approved on April 10, 2012
to reflect the revised Administrative Budget for Fiscal Year 2012 -13, including for the
period of July through December 2012, the Successor Agency also requests approval
from the Oversight Board to enter into the required amended agreement.
Staff is available to answer any questions
j
zx.
Pamela Arends -King r fi
Finance Director
Successor Agency for the Tustin
Community Redevelopment Agency
Attachments: 1. May 3, 2012 California Department of Finance letter
2. May 10, 2012 letter to California Department of Finance which includes the
First Amended Second BOPS (July — December 2012)
3. Amended Administrative Budget (July 1, 2012 — December 31, 2012)
Attachment 1
tAT OA,
•
t AT Z
0
DEPARTMENT OF
%a-pro-Ft N A N OE EDMUND G. BROWN JR. • GOVERNOR
915 L STREET • SACRAMENTO CA • 95e14-9705 •WWW.00r.CA.00V
May 3, 2012
Jeffrey C. Parker, City Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Dear Mr. Parker:
Pursuant to Health and Safety Code (HSC) section 34177(I) (2) (C), the City of Tustin
Successor Agency submitted a Recognized Obligation Payment Schedule(ROPS) to the
California Department of Finance (Finance) on April 18, 2012 for the period July through
December 2012. Finance staff contacted you for clarification of items listed in the ROPS.
HSC section 34171 (d) lists enforceable obligation (EO) characteristics. Based on a sample of
line items reviewed and application of the law, the following do not qualify as EOs:
• Various contracts totaling $517,630. HSC section 34163 (b)prohibits the Agency from
entering into a contract with any entity after June 27, 2011. The contracts for the
following line items were awarded after June 27, 2011:
o Line item 65, page 5, Developer Selection Process for$4,500
o Line item 4, page 6, Tustin Ranch Road Construction Phase 1 for $500,000
o Line item 10, page 6, Archeological and Paleontological Services for $13,130
• No contracts have been executed for the anticipated Tustin Ranch Road Phase 2
project. HSC section 34163 (b) prohibits a redevelopment agency from entering into a
contract with any entity after June 27, 2011. Additionally, HSC section 34177 (i) states
that bonds shall be used for the purpose for which the bonds were sold unless the
purposes can no longer be achieved, in which case, the proceeds may be used to
defease the bonds. Therefore, the unexpended funds may not be used to enter into new
obligations and do not qualify as EOs:
o Line 5, page 6, Capital Projects— TA Bond—Tustin Ranch Road Phase 2 for $24
million
o Line 7, page 6, Tustin Ranch Road Construction Phase 2 for$8 million
o Line 8, page 6, Engineering Construction Support for$300,000
• Line item 6, page 6—Direct project costs (salary and benefits)for Tustin Tax Allocation
Bonds, series 2010 for$577,538. The administrative costs claimed appear to be related
to the above projects(4, 5 and 7, page 6)which do not qualify as enforceable
Obligations.
• Page 7, item 1 -Administrative cost allowance $519,120. HSC section 34171 (b) limits
the 2012-13 administrative cost allowance to three percent of the property tax allocated
to the successor agency or$250,000, whichever is greater. Three percent of the
• Mr. Parker
• May 3, 2012
Page 2
property tax allocated in 2011-13 is $292,260. Therefore, $519,120 of the $811,380 in
administrative costs is not an EO. See the attached schedule for calculation of
administrative costs.
As authorized by HSC section 34179 (h), Finance is returning your ROPS for your
reconsideration. This action will cause the specific ROPS items noted above to be ineffective
until Finance approval. Furthermore, items listed on future ROPS will be subject to review and
may be denied as EOs.
If you believe we have reached this conclusion in error, please provide further evidence that the
items questioned above meet the definition of an EC and submit to the following email address: '
Redevelopment_Administration @dof.ca.gov
Finance may continue to review items on the ROPS in addition to those mentioned above and
identify additional issues. We will provide separate notice if we are requesting further
modifications to the ROPS. It is our intent to provide an approval notice with regard to each
ROPS prior to the June 1 property tax distribution date.
Please direct inquiries to Evelyn Suess, Supervisor or Doug Evans, Lead Analyst at (916) 322-
2985.
Sincerely,
/Zug /f'jI(
MARK HILL
Program Budget Manager
Attachment
cc: Ms. Christine Shingleton, Assistant Executive Director, City of Tustin
Ms. Pamela Arends-King, Finance Director, City of Tustin
Mr. John Buchanan, Program Manager, City of Tustin
Mr. Frank Davies, Administrative Manager, Orange County
Attachment A
Administrative Cost Calculation
For the Period January—June 2012
Total RPTTF Claimed (Page 1) $10,246,015
(Less admin lines items 5 and 9 504,000
Subtotal: 9,742,015
3% Tax Allocation : 292,260
Administrative Cost Allowance (Greater of 3% or$250,000): $292,260
Line Items Considered Administrative Costs
Page Line item Description Amount
2 5 Auditing Services $12,000.00 _
2 9 Legal Services 492,000.00
7 1 Administrative budget 307,380.00
Total Claimed: 811,380.00
Administrative Allowance: 292,260
Total Disallowed Administrative Cost: $519,120
Attachment 2
Office of the City Manager
May 10, 2012 -; '
Mark Hill, Program Budget Manager
es_ rits.
California Department of Finance
915 L Street
Sacramento,CA 95814
Re: First Amended Second ROPS Submittal
In response to May 3, 2012 DoF Letter
Dear Mr. Hill:
Pursuant to Health and Safety Code (H&S) Section 34179 (h), the City of Tustin Acting as the
Successor Agency to the Tustin Community Redevelopment Agency("Successor Agency") has
made the changes requested by the State Department of Finance ("DoF") to the Second
Recognized Obligation Payment Schedule for the period of July through December 2012
("Second ROPS") and is resubmitting the modified action ("First Amended Second ROPS") for
DoF approval. On April 10, 2012, the Oversight Board of the Successor Agency approved the
Second ROPS and authorized the City Manager and/or Finance Director to make revisions
subject to certification by the Oversight Board Chair. The City Manager has made revisions
as requested by DoF and the Oversight Board Chair has certified the revisions as reflected on
the First Amended Second ROPS. The Successor Agency has removed the following items
from the ROPS submittal:
• Line Item 5,page 2,Auditing Services for$12,000
• Line Item 9,page 2, Legal Services for$492,000
• Line Item 65,page 5, Developer Selection Process for$4,500
• Line Item 4,page 6,Tustin Ranch Road Construction Phase 1 for$500,000
• Line Item 5, page 6, Capital Projects - TA Bond 2010 - Tustin Ranch Road Phase 2 for
$24,000,000
• Line Item 6, page 6, Direct Project Costs (salary & benefits) for Tustin Tax Allocation
Bonds for$577,538
• Line Item 7, page 6,Tustin Ranch Road Construction Phase 2 for$8,000,000
• Line Item 8,page 6, Engineering Construction Support for$300,000
• Line Item 10,page 6,Archeological and Paleontological Services for$13,130
• In addition, the Administrative Cost allowance, as calculated by DoF, has been
reduced to $292,260.
300 Centennial Way, Tustin, CA 92780 • P: (714) 573-3010 • F. (714) 838-1602 • www:tustinca.org
Mark Hill, Program Budget Manager
May 10, 2012
Page 2
Based on DoF's objections and directive in its May 3, 2012 letter and discussion between
Tustin and DoF representatives, the Successor Agency removed the above-referenced items
from the Second ROPS; however, Tustin notifies the DoF that the First Amended Second
ROPS is submitted under protest and with a reservation of rights. The Successor Agency, the
City, and the Oversight Board hereby reserve all of their rights to seek a writ, declaratory
relief, and to receive monies from the Trust Fund to pay each obligation removed from the
ROPS. Each item should be considered and deemed "subject to dispute". To the extent the
Successor Agency or the City incurs damages, actual and/or consequential, or there are other
financial or legal impacts to Tustin or a third party as a result of removal of these protested
ROPS items, or their removal affects the ability of the Successor Agency later to receive
adequate monies from the Trust Fund to meet legal obligations and to pay debt service,
Tustin will seek redress in the courts and avail itself of any and all remedies at law and equity
against the State.
Tustin believes DoF's removal of the items is in error. Attachment 1 to this letter outlines the
reasons as to why each item should be considered an enforceable obligation and why DoF's
disallowance of these items is "subject to dispute". Tustin requests that DOF reconsider such
items and confirm that they are valid Enforceable Obligations under the Dissolution Act,
either payable from the Trust Fund or the MCAS Tustin Tax Allocation Bonds,Series 2010.
As requested in our April 10, 2012 letter, should any issues remain of concern to DoF, we
would request that DoF at least approve the First Amended Second ROPS, with certain items
subject to dispute so there are no delays in allocation of monies to the Successor Agency by
the County from the Trust Fund. The DoF is notified that if there are delays in payment, the
Successor Agency may not have adequate available funds to meet outstanding bonds. Late
payment and/or non-payment by Tustin will be as a result of and be proximately caused by
the DoF's actions and determinations regarding the ROPS.
The Successor Agency in the first tax increment distribution in December was not allocated
adequate monies to fully fund bond reserves and make debt service payments, which will
necessitate that the next payments be made out of reserves. This is not an intended
consequence of the Dissolution Act and is an alleged violation thereof.
Tustin has taken every reasonable step to explain certain unique facts applicable to Tustin
and to discuss the issues in dispute, all toward a mutual resolution; but to date Tustin and
DoF have been unable to reach consensus on the ROPS. Tustin is ready to continue to meet
and confer with the DoF and/or the County Auditor-Controller or State Controller's Office
about the disputed items in the ROPS, but this letter confirms the Second Amended ROPS was
revised and is submitted to the DoF"under protest". In this regard, Tustin reserves all rights
to pursue any remedies it has at law or equity.
Mark Hill, Program Budget Manager
May 10, 2012
Page 3
Please direct any questions or requests for information to Christine Shingleton, Assistant
Executive Director, at (714) 573-3107 or Pamela Arends-King, Finance Director, at (714)
573-3160.
Since •ly, e //�/�1)j�
J• ' - C. Parker
City Manager
Executive Director of Successor Agency
Tustin Community Redevelopment Agency
Oversight Board Chair Certification
I certify that the amendments made under protest to the First Amended Second ROPS as
attached were required by the Department of Finance, and approve the First Amended
Second ROPS, subject to the protest and reservation of rights as amended.
l �
Dou avert
Oversight Board Chair
Attachment: Attachment 1
First Amended Second ROPS
cc: Christine Shingleton
Pamela Arends-King
Sean Tran
John Buchanan
Jerry Craig
David Kendig,Woodruff, Spradlin&Smart
Members of the Oversight Board
I
•
ATTACHMENT 1
Line Item 5.page 2.Auditing Services for $12.000
As stated in Tustin's April 19, 2011 letter, the estimates provided for audit services are
necessary for specific project support in the Second ROPS. The Audit Contract, executed
June 1, 2011, was for a total amount of $146,505 with 25% being the Tustin Community
Redevelopment Agency's ("Agency" and now "Successor Agency") responsibility for a total
encumbrance of $36,626 for the Agency over a three year period. The contract did not
define the maximum amount of dollars to be expended or applied to audit services for the
Agency by fiscal year, but only over the entire three year contract period. Line Item #5,
under Form A estimates that $12,000 will be necessary to support auditing of specific
project activity over the period covered by the Second ROPS. Projected expenditures are
estimates provided by the Successor Agency's finance operation and actual charging of
expenses will be based on the items specifically being reviewed by the auditors at that time
of review.
Line Item 9.page 2. Legal Services for$492.000
Legal services have been separated into those for specific project related costs and those
for administrative support costs. The #9 Line item in Form A is not a repeat of dollars for
Legal Services under Item #1, Form C, which includes an Administrative Expense
Reimbursement Agreement and approved Administrative Budget for the period of July
through December 31, 2012. There is no duplication and definitely no double counting in
either line item in the Second ROPS. Line Item #9, Form A, identifies an estimate of
$492,000 for project related legal services for a number of law firms based on current
contracts and billing rates. This #9 Line Item specifically states that it supports specific
"project activities" and it includes an allocation of costs to Woodruff, Spradlin and Smart,
Armbruster, Goldsmith & Delvac, Cappello and Noel LLP and Kutak Rock. It is specifically
stated under the description that while Woodruff, Spradlin & Smart provides legal services
under the Administrative Budget, that those costs identified are specifically administrative
budget related and are not double counted with those identified under this line item for
project related expenses.
The following table more clearly defines the project-specific legal services associated with
the existing enforceable obligations. The Line Items coincide with the ROPS referenced in
the May 3, 2012 letter.
4
Second Recognized Obligation Payment Schedule(lulu-Dec 2012)
•
Successor Agency to the Tustin Community Redevelopment Agency
Analysis of Contracts for Legal Services
•
Project Name/Debt Obligation- ' Payments by Month-
Line.. • - July. Aug., Sept_ Oct Nov Dec Total.
Item:
1 Housing Tax Allocation Bonds, 10,000 10,000 10,000 10,000 5,000 5,000 50,000
Series 2010
14 Payment In Lieu of Taxes - 1,500 1,000 2,500
Agreement-Flanders Pointe
15 Payment in Lieu of Taxes - - 1,500 1,000 2,500
agreement-Orange Gardens
16 Olson DDA/Arbor Walk 10,000 5,000 2,500 2,500 5,000 25,000
17 Arbor Walk Promissory Notes - 2,500 2,500 2,500 2,500 - 10,000
18 Heritage Place DDA - 4,000 4,000 4,000 4,000 4,000 20,000
19 Heritage Place Loan Agreement - - - 5,000 5,000 5,000 15,000
20 Single and Multi-Family - - 2,500 2,500 2,500 2,500 10,000
Rehabilitation Loans
21 Town Center Housing Deficit - - 5,000 2,500 2,500 10,000
Reduction Plan
22 Tax Allocation Refunding Bonds 10,000 10,000 10,000 5,000 10,000 5,000 50,000
1998(Town Center)
26 Stevens Square Parking Garage 5,000 10,000 5,000 5,000 5,000 5,000 35,000
Declaration of Covenants,
Conditions,Restrictions and
Reservations
27 Ambrose Lane/First Time - - 5,000 5,000 5,000 15,000
Homebuyer
28 First Time Homebuyer - - - 5,000 5,000 5,000 15,000
Promissory Note
51 Tustin Grove Promissory Notes - - - - 5,000 5,000 10,000
and Affordable Housing
Covenants
52 Tustin Grove Affordable Housing 2,500 2,500 - 2,500 2,500 10,000
DDA
53 Tax Allocation Bonds-MCAS 10,000 10,000 10,000 5,000 5,000 10,000 50,000
Tustin,Series 2010
56 Lease in Furtherance of 10,000 10,000 5,000 5,000 10,000 10,000 50,000
Conveyance(L1FOC)executed
May 13,2002
57 Lease in Furtherance of 5,000 10,000 10,000 15,000 5,000 5,000 50,000
Conveyance(LIFOC)executed
June 16,2004
58 Economic Development 5,000 5,000 15,000 15,000 - 10,000 50,000
Conveyance Application for
Marine Corps Air Station(MCAS)
Tustin as Amended
70 Coventry Court Regulatory - 3,000 3,000 3,000 3,000 - 12,000
Agreement&Declaration of
Restrictive Covenants and
Supplemental Regulatory
Agreement
TOTAL 492,000
Projected expenditures under each line item are estimates provided by the Successor
Agency based on current billable rates of each firm under current contracts which do not
include a"not to exceed amount" and are on an as needed basis. These estimates are based
on recent history and reduced responsibilities as Enforceable Obligations and project
obligations are reduced over time.
Line Item #1, Form C, includes an amount of$100,000 for the services for administrative
support from the City Attorney's Office (Woodruff, Spradlin and Smart). The Administrative
Budget specifically states under Object Code 6017 that this amount in the Administrative
Budget does not include the legal services of this firm and certain other firms associated
with direct project costs, including those firms identified in the previous paragraph.
Line Item 65.page 5. Developer Selection Process for$4.500
On July 19, 2011, the City Council approved the Developer Selection Process and the
funding for this process. It is the City's position that this is an Enforceable Obligation that
was entered into during the period of time between the initial passage of AB1X 26 and
AB1X 27 on June 29, 2011 and the point in time when the State Supreme Court stayed the
provisions of AB1X 26 and AB 1X 27 on August 11, 2011. Before the stay, Redevelopment
Agencies were allowed to "opt-in" and the City of Tustin chose to do so with the passage of
Urgency Ordinance #1404 on July 19, 2011. As such, the Tustin Community
Redevelopment Agency entered into an obligation at that time in good faith. While DoF
continues to assert the position that all agreements after June 29, 2011 are invalid,
obligations entered into between June 29th and August 11th as allowed under the law at that
time should be considered enforceable. The December 2011 State Supreme Court ruling on
the unconstitutionality of AB1X 27 does not invalidate obligations entered into by the City
while AB1X 27 was in effect and DoF's attempts to invalidate contracts during this period
violates contract law.
BOND-FUNDED PROJECTS - FORM B
• Line Item 4.page 6. Tustin Ranch Road Construction Phase 1 for$500.000
• Line Item 5,..uage 6. Cauital Projects - TA Bond 2010 - Tustin Ranch Road
Phase 2 for$24.000.000
• Line Item 7.page 6. Tustin Ranch Road Construction Phase 2 for$8.000.000
• Line Item 8.page 6. Engineering Construction Support for$300.000
• Line Item 10.page 6.Archeological and Paleontological Services for$13.130
INTENT
The MCAS Tax Allocation Bonds 2010 were sold prior to calendar year 2011 with the clear
intent of the bonds to fund infrastructure at an abandoned military base plagued with
numerous environmental issues and lacking infrastructure. On September 7, 2010, the
Redevelopment Agency Board adopted Resolution RDA No. 10-08 in connection with the
proposed issuance of tax allocation bonds relating to the Agency's MCAS-Tustin
Redevelopment Project Area. In the report to the Agency, it clearly states the bonds would
finance various Tustin Legacy Backbone Infrastructure Program Improvements with the
initial priority project being the extension of Tustin Ranch Road. The bond proceeds, as
delineated in the Official Statement, on page 6, last paragraph under"Financing Plan" states
as follows:
"The initial priority project will be the extension of Tustin Ranch Road from Warner
Avenue on the south to Walnut Avenue on the north, including the Tustin Ranch
Road bridge and interchange at Edinger Avenue along with the integrated
improvements associated with the roadway improvement including necessary and
integrated utility backbone systems."
This bond is intended to fund includes all phases of Tustin Ranch Road. The improvements
under which the bond proceeds are to be expended include staff overseeing the project(s)
associated with bond implementation. The trust indentures and similar regulatory
documents which governed the issuance of the MCAS Tustin 2010 Bonds require the bond
proceeds to be used for their intended purposes and no other purposes. Further, Federal
tax law covenants and governs the use of tax-exempt bonds and the issuer of the Bonds
(Agency) is covenanted to comply with such rules. In our view and view of our legal
counsel, the bonds issued in November of 2010 and the trust indentures and similar
regulatory documents are all Enforceable Obligations, and all of the corresponding
documents for implementation of the bond measure are Enforceable Obligations. More
specifically, the bond proceeds deposited in the bond proceeds fund and held by the
Successor Agency are required by the Bond Indentures to be used to finance
redevelopment activities (the "2010 Project") of benefit to the MCAS Tustin Redevelopment
Project Area and no other purpose. It is only upon completion of the 2010 Project that any
remaining amounts in the bond proceeds fund shall be applied to credit against the debt
service requirements of the Bonds. The Official Statement for the bonds provided
specificity with regards to the intended use of the bond proceeds.
Each and every project that is identified in Form B, is an implementation measure under
the original bond measure which bond measure itself is an Enforceable Obligation placed
on the Agency in November 2010, and as such, any bond proceeds are "encumbered" under
the bond measure for their intended purposes (a pre-June 28, 2011 contractual obligation
in any event). All MCAS Tustin 2010 bond documents have been forwarded to DOF
previously.
IMPACT
In DoF's denial of these bond-funded projects, the May 3, 2012 letter mentions the
proceeds may be used to defease the bonds. It appears DoF believes that by simply denying
the use of bond proceeds, the bonds can be defeased. In accordance with the issuance of
the MCAS-Tustin Tax Allocation Bonds, the earliest call date to defease the bonds without
penalty is September 1, 2020 (page 8 of the Official Statement). The Bonds could be
defeased as early as September 1, 2018, but there is a redemption price expressed as a
percentage of the principal amount of Bonds called for redemption. As demonstrated in the
table below and in order to defease the Bonds at the earliest date (September 1, 2018),
$58,315,351 will have been spent with no project or infrastructure to account for the
expenditure:
Date Paid to Date Remaining Total
(Principal &Interest) Principal
Sept. 1, 2018 $19,228,951 $39,086,400 $58,315,351
Sept. 1, 2019 $22,052,276 $37,723,500 $59,775,776
Sept. 1, 2020 $24,876,801 $36,340,000 $61,216,801
In addition, there will be the loss of property taxes and high-paying jobs that would have
resulted from the development associated with the Tustin Ranch Road and ancillary
infrastructure improvements.
IMPLEMENTATION
The contract awarded with Sandoval Pipeline Engineering for Tustin Ranch Road - Phase I
is an implementation action under the encumbered MCAS Tustin 2010 bond proceeds. The
contract is allocated to several separate funding sources under the action taken by the
Agency and City on July 19, 2011, and subsequent contract executed on August 2, 2011,
based on the previously approved Agency/City Capital Improvement Budget. The City and
Agency Fiscal Year 2010-11 Budget made a financial encumbrance of this project, including
reserving and appropriating initial capital improvement funds necessary for the project on
June 15, 2011 (as was amended with the 2011-12 Budget appropriations on July 19, 2012).
As shown on the ROPS, $500,000 has been allocated to Bond Proceeds (the MCAS Tustin
2010 Tax Allocation Bonds). In addition, it is the City's position that the Sandoval contract
is also an Enforceable Obligation that was entered into during the period of time between
the initial passage of AB1X 26 and AB1X 27 on June 29, 2011 and the point in time when
the State Supreme Court stayed the provisions of AB1X 26 and AB 1X 27 later in August of
2011. During this time, Redevelopment Agencies were allowed to "opt-in" and the City of
Tustin chose to do so with the passage of Urgency Ordinance #1404 on July 19, 2011. As
such, the Tustin Community Redevelopment Agency entered into a valid contract at the
time in good faith and would not have proceeded if we thought it was not within the intent
of the bonds or the statutes governing the use of such bonds. Any effort by DoF to disallow
this contract after the fact as an eligible Enforceable Obligation will be considered a
contract impairment matter.
Recognizing the previous discussion the City had with DoF earlier in March on this matter,
the Successor Agency asked the Oversight Board to review the Sandoval contract (which
both the City and Agency were a party to) and provide authorization and reaffirmation as
to the contract being an Enforceable Obligation and the use of bond funds as originally
intended under the bond measure. Upon creation of the Oversight Board for the Successor
Agency to the Tustin Community Redevelopment Agency, as required by AB 1X 26, the
Successor Agency made its case to the Oversight Board that the expenditure of bond
proceeds on deposit in the bond fund was needed for the intended purposes of the bonds,
including completion of the Tustin Ranch Road Project - Phase I, and completion of other
projects intended to be financed. The Oversight Board at its regular meeting on March 13,
2012 reaffirmed with Agenda Item #6 the Agency's previous July 19, 2011 award of the
construction contract for Tustin Ranch Road Grading and Storm Drain Project (CIP No.
7011 and 7026) pursuant to the adopted EOPS and draft Recognized ROPS as an Oversight
Board approved contract with the City and Agency as parties. This is consistent with the
statutory provisions of AB 1X 26, specifically the following: Health and Safety ("H&S")
Section 34177 (i) which states ...'Bond proceeds shall be used for the purposes for which
bonds were sold unless the purposes can no longer be achieved, in which case, the
proceeds may be used to defease the bonds". In addition, H&S Section 34180 (h) permits
the Oversight Board to review a request by the Successor Agency to enter into an
agreement with the city, county, and county that formed the redevelopment agency that it
is succeeding. In the case of the Sandoval contract, both the City and Agency are parties to
the agreement.
BOND-FUNDED STAFFING - FORM B
• Line Item 6, page 6, Direct Project Staffing Costs (salary & benefits) for Tustin Tax
Allocation Bonds for$577,538
The City Council, on September 7, 2010, adopted Resolution No. 10-90, establishing a new
classification titled "Tustin Legacy Development Services Manager", 3 years from the initial
date of employment. The Agenda item references the position being funded by bond
proceeds once they were issued (November 2010).
In addition to the justifications stated above under bond-funded projects which address
why the bond-funded Line Items are enforceable obligations and, as such, Direct Project
Staffing Costs are necessary and are an enforceable obligation. Tustin further believes
Direct Project Staffing Costs (salary & benefits) is an enforceable obligation for the
following reasons:
The May 3, 2012 DoF letter states, ..."The 'administrative costs' claimed appear to be
related to the above projects (4, 5 and 7, page 6) which do not qualify as enforceable
obligations." The staffing costs are project related, not administrative.
DoF has approved enforceable obligations Line Items 1-3 under Bond funding. These
contracts require direct project staff support. The Bonds were issued for the purpose of
constructing Tustin Ranch Road and that construction, though delayed, is proceeding. The
Bonds allow for bond proceeds to be used for staffing. Beyond broadly ensuring Bond
proceeds are used for their intended purposes, it appears DoF is going beyond the standard
procedure of determining whether or not an obligation is enforceable by confirming the
obligation date. The Oversight Board and Successor Agency City Council have determined
the use of these funds for direct staffing support is in accordance with the Bond issuance
and are enforceable obligations. Is there a section in AB1X 26 guiding DoF that provides
DoF authority in determining the Bonds intended purpose beyond the MCAS Tustin's
Official Bond Statement? It is Tustin's position the use of Bonds for project staff support is
in accordance with the purpose for which the Bonds were issued and the project is still
moving forward.
In addition. the Administrative Cost allowance. as calculated by DoF. has been
reduced to $242.260,
As stated above, it is Tustin's position Auditing and Legal Services are project-specific
enforceable obligations and, as such, should not be factored in DoF's Administrative Cost
Calculation on Attachment A. In reconsidering and recognizing these as enforceable
obligations, DoF should restore Tustin's Administrative Allowance to the amount
submitted in the Second ROPS, $307,380.
a m o T
7 N C m a 5 a n b. 0 c d
o co , g m m 3 3
� ,G 7 d o m 0 OO. 3 C
O 3 0 = 0 m 03 w ^d' y fll D > > r
- (n o 3 2 . < 0 0. 7 < as m Cl)
�y<d `G 01 " 8 'm m m + d ° a c
3 w 0 < C 05 c O _� ti - 0 d a c n
m = •m E A n a O ? y to a w 0 ID
m 5wy. o < O Q Qm O� O0 N
S38 $ d cd z O O N
n d _7 m a o^ 7 10 C. 0 01 O
N o,�. � m< g m S < 0 < a a ' T
c a• ) -- d a 5 0 C OO •< 0 m C d d
m a u� 1 § o 3 w X m 0 0 O Co
o m g. 0 0 o . u Ol .° O O 7 3 . 1
-,- m o � � aoa gd m w O
m m3 " = am § so d ' co m
01 •m .. d c z
».
O = 7 ' m N2 a 0. y
m 0 7 _ oam F. z f. 'm n m
a m °o2a S � Cr 7 CD
co• c 33 g) 'e` ° g -8 z -I zn t0 G
�. no am -0 -11 O
a m d w 0 , d 1 m
co 73 > > 9a 4 4m D C)
r0 � ° � a,� x ii ma O
CD 8• � m 32 - 0 c 3 ry
A 2 Li' a c) O z
<< - a s o m G T n
0 -I 0 0
a � a8 3 � Z
d m8 ;
e,' 8. 5 a - p p
i i = O p Y i .. >f. 3 'I R R' 1 i i i C i 1
I i ai pa 11, _ s _ rS
, a E a 3 S gi I F i G 1 3 1 I r I I : 1 P !
d t 1 F C C y S � � • g O 3Y
A
i g F I a , 1 i 1 1 F I la° . 9
g
t a 7 ! 2 i i
8
6
Y
IQi m 4' s I 3. 1)
Q i 1 I Y iga g I 8 !S g 4l ^o PA
E A ! a 7
s a S S S S � � S � 2 11_ lo° E
' Sp/ I 7� � ! 3 4
! •Q ; F. 3'_
q F it a 1 i
F
a S P I 1
1 iIIIJ1UJll'iifflsurJi'lj WJI}J!EMIWWm !:uiu 'ulm:a a 1 a a/ i9 p ;IIg,
I i P t Sg rII i !�Sfa.§ i 41 1 § fag 3!1" d I ii c.0 a Pass o
P�` and 1ga iIPU�3 e s .1819/?!iae @. g i h 1, „� , t °i 6 i i 1;H + a Fill I 't @ P4' kit E I� a i Sa is Lga iiii 9 g1� t':'iMJ e [ C !i FP ill pia a $}
1 i i a
fn f n t - t _'- tt t - .. a
t f _ = i
SP'
g
P. g Q -(63 1 i i 1 Ling € a g gg iii g II
r I I I II I 2 P
n n P
- _ 3g E i g gg ;g it. ' a
a a n a n
vav a °
a
£ 1 �
a'
E 9 i ` 's
r
i 1
E a ” I
o i
bdI
F G Y a
3
f C P
i
8 8
'a Z
B g § i
a _$ g . g og
% 88 8 8 8 8 n Y. 8 x
of cc V ° 8 = C
Ei y a �r i e i ` i • ii i' i•I
a ��t QfQ S t i 1 " i i 4 0 i Q' is S 'la
-s 3 3 i S sS g t 3 • o d F
P 1 III 1 `E f 5 a ' $ j I t I .'� r 8
e a id° I ;3
> o fla
ii lit 5 Q I ¢ �9 a
ti
9 i
3 gg
! i S !
t c II —
2 A S
I d a
IT iEl
e -s r
I ii i i j i i i i i e@ i @
$ ii ! WHIM i $ i $ }F M 4 I Il b a
i aU 1111111111 3 5 ixg
4 {S yS yS {S S S yS {S yS S iS E • i•
°0 9 9 9 9 1 9 3 9 1 1 I ? R
i da i ii
S
d i M
a i
p 3
1a61in'' tias1'ni to fi E Qii l ° flo ! to .R=
i aL11t[-Iidi1Jta _3i Elamp�j fiUtiiI4111111 UU11. 1l 11THi WI €Jfipilipa! H
€ i '! La i- h ii�iiis 7ngti7�" twee La is9 [ Lab a 1 fa l. f0a }°11p>a r iJ5 a d
C v 44;801 ➢iip in9 t P • Y• la ate a is de &a a do L i A S ii 114 gg
� do�e 2i � i- �.3� � " �i��� i9 @a
14ilia iglii 1 ad$ lli' b - a 31! iu' a 101 #is 1 H1h 1 PPa '1 I
tS € ihar T jh&UUiUJJi`° a° g° g" 7jj° • jj + Y -5! i a ai �1t? � io�-tIf s 1 i ! i f1 = HF �a" �€�� �� s 333fe g SS y ! � n°� L1 � ➢{i '312 a{i � !g ; _ . s a •°'I - ,. M F a;Y'7 ?H�j�j�4aW ilil.Sy i i p i9t� 5 i $ 1, I S5sg83 Q. ! [ p i !�f f� {J i q n( aS Fn a iJIii !a agii d !df ifKii 13 b 1081"1 Y a P Y P 1ffJi}llltiili i d 11fflt I'jii hI . !bb-S=ag i .i ski# i i i i i i i i f $g ieQ i i 'IQ it l a i e ; ii i 1 i i i
i . sg ai
i 1t gififi fiii i f ai ia.
i id ; e
i3 i I i i t i i I i I I i i i i't
d6
3 3 33 33 7 3 33 7 gg 4 0
° °g 8 1 P 1 3 F E F@ E F F i a a 1
i i i i i i i i i i w�I d
Hi
: - g g §'i
- 3
-
a
a
i
" 4
b
N c•8 6
. c
i g8
°
ai
0 1°1
; la
° " jj
2 e
4 s
i"
A i
4 3
I.
. . i
i S
ilhli8 4 Y S y C p ppp aaec •z 731 Lg"@' ¢[ F b z z1z iS, fl t 333 4 E g pi°Milli ;
si877 GR4
111111 t E; fa ° 9 9 I ` ` � ` a ''i Ilip
F?i8 g [ ;9S a A 6a° Ear $ 5 $ a Mai
;af' ; i I 8 h y8 I - g a
e r7 ¢¢ 3 ¢a ¢a 5
6
-an
Ni
d 3 of a f
ji;g
WIa5 V V g B
p'I IT !WI 1 I
n ill 3 @a _ _
fif
• Y G 7 ! f I 9
i l 0 I i I � i e 9 i 9 a
i a i a
I ; t
fig; 5FfJf jfl qqji;n' s �3 iiilifi 3s a litbililai }gitu:IiIiiiii!11iliI0 pIz 1 a�S pp ¢i1g'aSpp19ala it9$ i[`i�ii;1v. q [$ SIrTE Ili SiE* SiI F ` ta7FF as a s [ [3 � iigl a a R�a3ta 1r¢� a- i aaiing2S itlaRStt it at yi @alaa tt;((uf(a�s� a4( g ; al. ¢ ��`�SF '�a°1 7 9 3!S`; S a 3i ; 1 7 1 t
1 Wq! t'l iij'3 i11011 n & l i ti t g e a W'i!ll i Faa a I a " ! `l g I ti! ;
p d d Y o
Ulf E wctccc cc cc F tt 1 g MUM
a
�' � �` fi z z iaiiaii
j fin-
i €n: - . _ • sY - a 0°
3 ax Edo i st$@ $ i ff has
II a _.. aAai
a iC - a r x €
s° s° f ;::'- . - - = • x - a i i dE •
iaogo 3agg - $ gm§ ° ° ° 05 s $
I f, - ;sea'vaziI
a 'vv 9 a a
> � o TT v
a �i r i r v a ;913M -74, ' T
rnw:rr ?. .
4:-.
fiArll $90 i 5$ $$$ $
Vg v 6 '
$;$$ $a5 $ $$ $ $ $a $agg2
a @aa $$@ @ E $#$ 22
/:.....
{ 22 pax $ § x ; 8 hi gni
' L a v - p
58 $a° $aa 8 $« _I
#ILasa W 9
i °
is °ge _ $ « « ..
e $ a
IA
= use _
€a� • s ' Mali a ° fa $ §§§
e§/ 1 •f iii [ 1 • ! !
! |e •7; | | ! `
14111 | | \ 3f
|!'!|| | i | ` !
/)/ ' 3
II, It
( ii
! !! m
| f/ \ | ) I i
'
. \ � I
I H ! A i |
| § , = ` 0§ !
I 1 a | P| 4 !
I | f 4>
|| |
; �
)§ I | h§i
ft !IIH
| I |i|!!
- ;| |! !!f
! ` I !`|!l §
I I pill 1 z
1
8 ! |
I
! § g
i | | | 2K
i | , 11 I
| I - : : !�
I - - = ; | § d
' ! : : _ :!|
; § ; ( ; ; • a
I
f ƒ H. | | | | if
, !
I! ; 5's
f§ s $ 4
|
I§ § |" i 2
ii i
t , -
§ mil 1
1} \ - ` �
| ' ! ! r
. - |
i | / | !
|. j
i ; .. f z4 _. ;
r. r. ; ,
'=9 ' t- v .. s. . .,.. 8 .15..4 . : ❑ . _ a == .. o .. _ .. g z _
ddC n11(1111141f°
114}�4 131]
�i �ei i Y i ilidi�i3iQ n 1 i
d
f o r a a i
9�
131111 =11;111 '0 I 1
WI j- a •
, ltd Q
1111111 sw,y v 3
Fill 1 `Ilig :--:44 s
air!
91.2. -11y ' 1
!IJ1 Pa i'ill1killifi Wii i 1 '06 -,1
I; p a -01: ' Pffi� iiiiiishill t
E d �i t 3 / } gaal_m
§ F� r P n r ani q
a s i IN ��Pi 1 1H S ii Wt a I ' JJ 2.
I
i it s{y ills ill; ilel 8 it
i w §a
-I e
pi 02 PI 84
WIWI gi is
�� !I.l zR?
S l40 � 3 �Tj a
4 _ ; 9
Ell s 5 5- W$ ;a
i -W
0
7
U.
5 e
a 3K a
Y9 '
s .
'�- -0
o 8 w b
s
7
31 i
. 3 _
' ` ° iI
7= ill
i � °s S 3
9 e
v w I i
t.
'a
P -
Attachment 3
i
BUDGET FOR ADMINISTRATIVE EXPENSES(JULY THRU DEC 2012)
SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
ESTIMATED REVENUES
Object Position Percent to Total FY-Admin July thru Dec 2012
Code Admin Costs
1 Enforceable Obligations Paid with Redevelopment Property
Tax Trust Fund $ 12,769,835 10,246,015
(LESS)Disallowed Items:5,9,65 508,500
Estimated Property Tax allocated to
Successory Agency less disallowed
items 9,737,515
1 Administrative Cost Allowance for FY 12/13 3% $ 383,095 292,125
ESTIMATED EXPENSES
EMPLOYEE DETAILS
Object Position Fiscal Year-Total Percent to Total FY-Admin July thru Dec 2012
Code Wages,Benefits and Admin Costs,
Sub-Total Wages,Benefits and WC: $ - $ - $ -
OTHER ADMINISTRATIVE DIRECT COSTS
Object Item Total Durin g Fiscal Percent to Total FY-Admin July thru Dec 2012
Code Year 2012/13 Admin Costs
1 6147 Bank Service Charges 3,000 100% 3,000 1,500
2 6355 Telephone 4,800 100% 4,800 2,400
3 6400 Office Supplies 5,200 100% 5,200 2,600
4 6415 Mail and Postage Service 1,600 100% 1,600 800
5 6420 Printing 9,000 100% 9,000 4,500
6 6710 Meetings(staff) 0 100% 0 0
7 6715 Training Expense 0 100% 0 0
8 6730 Membership/Subscriptions 0 100% 0 0
9 6840 Vehicle Mileage 200 100% 200 100
10 6845 Vehicle Lease Equipment 6,800 100% 6,800 3,400
11 6848 IT Support Services 36,500 100% 36,500 18,250
Sub-Total Admin Cost Allowances: $ 67,100 $ 67,100 $ 33,550
CITY ADMINISTRATIVE SUPPORT COSTS BASED ON COST ALLOCATION(ATTACHED)
Object Item Total During Fiscal Total FY-Admin July thru Dec 2012
Code Year 2012/13 Costs
1 City Administrative Support Costs 836,000 8.6% 72,095 $ 66,598
based on Cost Allocation
CITY ATTORNEY(contract services)
Object Description of Services Total During Fiscal Percent to Total FY-Admin July thru Dec 2012
Code Year 2012/13 Admin Costs
6017 City Attorney's Office-Woodruff, $ 200,000 ]00% $ 200,000 $ 170,027
Spradlin&Smart(Including: Stradling
Yocca Carlson&Rauth;Remy,Thomas,
Moose&Manley,Waters&Company,
Jeanette Justus). This does not include
legal services from the following firms
that are associated with project costs:
1)Armbruster Goldsmith&Delvac LLP;
2)Cappello and Noel LLP,and 3)Kutak
Rock.
Sub-Total City Attorney: $ 200,000 $ 200,000 $ 170,027
SPECIFIC SERVICES(3rd Revised EOPS and Draft ROPS)
Object Description Total During Fiscal Percent to Total FY-Admin July thru Dec 2012
Code Year 2012/13 Admin Costs
1 6315 Lease of Office Space `)J°:. ` 43,900 21,950
Sub-Total Specific Services: $ 43,900 $ 43,900 $ 21,950
TOTAL ADMINISTRATIVE SERVICE COSTS Percent to Total FY-Admin July thru Dec 2012
Admin Costs
TOTAL ADMINISTRATIVE SERVICE COSTS $ 383,095 $ 292,125
BUDGET-REVENUES(SURPLUS)/EXPENSES(DEFICIT) 0 $ -
c.4 T
U ,n o
G R y
c ,,, .$ °c a X
N C 00 L G c 4. 01.'". 0
o n
A E ° U o .o c 3 ' L'
s 6. •,n 'a F c c 3
4-0 c � a, O 03 -0 U 0 p
O 0 0 U >p ie 7.)
.0 O V• c o o E c = a y u•E N
cU
U U z
' c N .T A� c L co H
O
h, O 3
T'o+ y G ti 0U- 0 • M c c N O N °D c % Oi
w y E A >O ti oo W
U N a y E U 4. on Q
a) R O W O f
.0 ..a- � c U N v .0 ^ O
Hv ° N
E -c-0 U °A c, o 0 o f L O a) U c R
O o ri0 X
a) 0
N a) el .E
z, 2 T .E F ct
L L p U U in N
T d a y c t L c , ch
z o ` m U to o 0 V
° .o
+ . o Q U u`• > co 0 0 F o � o a O y o .
U ❑ O V N E 9 O R
U U O M 0 7 an M 7\
O
'~ U d > .E a at' o b y .0 G V Obi v, 1� - 00 O
R a69696v6969 �< 3 d or ° > R. o.- '
c N `° O o C7 o
w U
p iLi-
0 p c c C
U p 0
Q
V] > °
L' ° cy U O H V °o 0 a" c
0 a p
cle V > N ti 'o ° •• E o c ° fl
i▪ S y v O c �V.. .O 3 > 0 7 R
0 v ct Q. d > L
i. c `o ° a o o o `m o O O O o 0 0 V)
y •° E N ' t {'" ''> '� R .0 c O OOi ° 0O° 0 O ° C O
▪C c m CL C7 a y o c E o O `�I °_ ,r N m — r
•^ N U H T `" 7 3 A 7 ttl v 69 69 59 69 5M9 CO b°9 93
p �' eC �_ y byp y U U d y
E c c V O td .D > V.
ti .c p W CL "0010 ° ;-) °q C 4 .E
O p O ' ° ° P. o O O c o a9, E
U v ti a T N 0 0 E 0 R y
c U > N a O T Q t > at .T. .E 0 0 0 p a o 0 u
w. a) _ ' c v o °' +r. 0 0 0
U y ,t6 p' •• =, 0 co ,n E r v V W 9 m N I n o �p N M 0
o• E _ 0° c
V c '' II..G c0 W 'O bOA 0 ° 'O 'O M. y N °0o V tO 0- In O
O -o a A > Y U 0 Q. U N K b9 69 69 69 699 �' 6�9 d
O N e c, 8 0 L, p O W
P. ° 4 3 ca V 'O a. o
V] A ,Un C . •E' R V t6 L c V
P •Enn = n. 0 NO E Y 0 s.. n. >, . 7, .. C
E 3 Z.O cE U U •o rn 4. a ti E
.1- r a> c -o o ro ° c p `o aVi a * u F Q
N O .0 LU U 0- cC a) c N y co L
•E a N 0 7 G N 0 ' ., O t
'• c a 3 ° ,n 0 .0 an ad b a - 3 m
'� ai 'O d oA y 0 . y °p F W
Q > e T T ? c >O 5 c ., s y L
T
0 m co,n 0 L. 'p t 0 a) E m o c E C
.�. c o .' O 0 U'2 75
t.0 cUQ aci ° aU v im°° ` y E a QO
to
a y . ° N as
ix c0
U 0 'O O to i 'D 1 c 0 a) E „ E 9 i td O O
`' a' , E we m .,,' E z < ° o ° vs a, 3 U