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Home My WebLink About04 REVIEW OF ROPSAgenda Item AGENDA REPORT Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency A 9 11! 1' I a a I SUBJECT/ACTION: DEPARTMENT OF FINANCE REVIEW RESULTS OF THE THIRD RECOGNIZED OBLIGATION PAYMENT SCHEDULE AND THE DUE DILIGENCE REVIEW OF THE LOW AND MODERATE INCOME HOUSING FUND Receive and file. BACKGROUND On August 29, 2012, the Oversight Board adopted Resolution No. 12-06, approving the Third Recognized Obligation Payment Schedule - Janua7 1, 2013 through June 20, 2013 (3rd ROPS). The Successor Agency submitted the T ROPS to the Department of Finance ("DoF") on August 29, 2012. On October 13, 2012, the Department of Finance issued the results of their review, determining over thirty million dollars in agreements were not enforceable obligations and were being disallowed. On October 18, 2012, the Successor Agency requested a "Meet and Confer" conference call, specifically to challenge the DoF's disallowance of the Successor Agency's use of bond funds as a match for the Tustin Ranch Road Project, as identified in Health and Safety Code (HSC) Section 34180(e). The DoF scheduled the "Meet and Confer" call on November 20, 2012, at which time, the Successor Agency presented our case for the continued use of bond funds as a match requirement. In addition, the Agency submitted supporting documentation. The DoF has until December 15, 2012 to issue their ruling. On October 9, 2012, the Oversight Board adopted Resolution No. 12-10, approving the Due Diligence Review of the Low and Moderate Income Housing Fund and authorizing the Agency to transmit their determination to the DoF. On November 9, 2012, the DoF issued the results of the review, determining the Fund Balance of $7,858,315 was not encumbered and is to be distributed to taxing entities. In addition, the DoF determined that $6,459,484 in payments previously made by the Successor Agency to the City in accordance with the Affordable Housing Reimbursement Agreement were disallowed. The DoF is requiring these funds, which are now part of the City's General Fund, to be transferred to the County Auditor-Controller ("CAC") for distribution to taxing entities. On November 16, 2012, the Successor Agency requested an in-person "Meet and Confer" session with the DoF. The DoF scheduled the "Meet and Confer" for December 6, 2012. The City Manager, City Attorney, Special Counsel to the Successor Agency and the Program Manager met with DoF staff and presented their case and supporting documentation for retaining $6.4 million dollars. The DoF has 30 days from the "Meet Agenda Report December 11, 2012 Page 2 and Confer" to either confirm or modify their determination. In regards to the Housing Fund Balance of $7,858,315, the City has transferred these funds to the CAC. Successor Agency staff is available to answer any questions the Oversight Board may have. Attachments: October 13, 2012 Department of Finance Letter — Recognized Obligation Payment Schedule November 9, 2012 Department of Finance Letter — Low and Moderate Income Housing Fund Due Diligence Review AS ILI Z 0 DEPARTMENT OF EDMUND G. BROWN JR. - GOVERNOR t4q, _'Fnfvrk'p. F1 NAN C 91 5 L STREET N SACRAMENTO CA ■ 93814.3706 ■ WWW.DOr.CA.r.OV 1 lrdna�vs City of Tustin 300 Centennial Way Tustin, CA 92780 N�f Subject* Recognized Obligation Payment Schedule oil Item No. 17 — Asset Transfer Obligations in the amount of $50,000. HSC section 34163 (b) prohibits the Agency from entering into a contract with any entity after June 27, 2011. It is our understanding that no contract has been awarded for this line item. Therefore, the debt obligation is not an enforceable obligation. Mr. Jerry Craig,, Octobar�l :2012 I.,•. A.* MEANS W FMWINIIRIEIRIW-IWE-M�� Approved RPTTF Distribution Amount For the period of Janua!y through June 2013 Total RPTTF funding requested for obligations $ 7,927,889 Less: Six-month total for items denied Item. No. 9 30,000 Item No. 17. 50,000 Item No. 62 35,604 Item No. 71 2,888,941 Item No. 72 1,172,981 Item No. 88 214,610 Total approved, RPTTF for enforceable obligations $ 3,535,753 Plus, Allowable RPTTF distribution for administrative cost for BOPS 111 267,837 Total RPTTF approved: $ - 3,803,590 Hill"11111 1111!!1111: IIIII'll!!q I'll'ill!Ir HURMIT-M hftp.:/A,vw.w.dpf.ca,.gov/redevelopment/ROPS/ROPS III Forms by Successor Agen . W1 I OW17-3 **-jr1TwR*7w# cc: Mr. Jeffery Parker, City Manager, City of Tustin Mr. Frank Davies, Administrative Manager, Orange County Ms. Pamela Arends-King, Finance Director City of Tustin 300 Centennial Way Tustin, CA 92780 Dear Ms. Arends-King: Subject: Low and Moderate Income Housing Fund Due Diligence Review Sam- N a=1 ME Finance (Finance) on October 11, 201Z The purpose of the review was to determine the amount • cash and cash equivalents available for distribution • the affected taxing entities. Pursuant to HSC section 34179.6 (d), Finance has completed its review of your DDR, which may have included obtaining clarification for various items. AM • The Reimbursement Agreement with the City of Tustin relating to affordable housing responsibilities in the amount of $6.4 million. HSC 34171 (d) (2) states that loans between the former redevelopment agency (RDA) and the city that created the RDA are not enforceable obligations. Therefore, this transfer is disallowed. Request to restrict LMIHF funds in the amount of $7.9 million. Our review of your DDR indicates the Agency has not adequately proven there will be insufficient property tax revenues to pay future obligations. HSC section 34179.5 (c) (5) (D) states that a successor agency shall provide a listing of all approved enforceable obligations that includes a projection of annual spending requirements to satisfy each obligation and a projection of annual revenues available to fund those requirements. If a DDR review finds that future revenues together with dedicated or restricted balances are insufficient to fund future obligations and thus retention of current balances is required, it shall identify the amount of current balances necessary for retention. The review shall also detail the projected property tax revenues and other general purpose revenues to be received by the successor agency, together with both the amount and timing of the bond debt service payments of the successor agency, for the period in which the oversight board anticipates the successor agency will have insufficient property tax revenue to pay the specified obligations. It is not evident the thorough November • 2012 ?�age 2 analysis required by HSC section 34179.5 (c) (5) (D) was conducted. Further, it is not evident that future property tax revenues will be insufficient. Therefore, the request to retain current LMIHF balances for future obligations is denied and the LMIHF available for distribution to the affected taxing entities will be adjusted by $7.9 million. If you disagree with Finance's adjusted amount of LMIHF balances available for distribution to the taxing entities, you may request a Meet and Confer within five business days of the date of this letter. The Meet and Confer process and guidelines are available at Finance's website below: http:/Iwww.dof.ca.ciov/redevelopmentlmeet and confer/ The Agency's LMIHF balance available for distribution to the affected taxing entities is $14,317,799 (see table below). Pursuant to HSC 34179.6 (h) (1) (B), any remittance related to unallowable transfers to a private party may also be subject to a 10 percent penalty if not remitted within 60 days. LMIHF Balances Available For Distribution To Taxing Entities Available Balance per DDR: $0 Finance Adjustments Add: Disallowed transfers $ 6,459,484 Requested retained balance not supported 7,858,315 Total LMIHF available to be distributed: $ 14,317,799 Absent a Meet and Confer request, HSC section 34179.6 (f) requires successor agencies to transmit to the county auditor-controller the amount of funds identified in the above table within five working days, plus any interest those sums accumulated while in the possession of the recipient. If funds identified for transmission are in the possession of the successor agency, and if the successor agency is operated by the city or county that created the former redevelopment agency, then failure to transmit the identified funds may result in offsets to the city's ' or the county's sales and use tax allocation, as well as its property tax allocation. If funds identified for transmission are in the possession of another taxing entity, that taxing entity's failure to remit those funds may result in offsets to its sales and use tax allocation or to its property tax allocation. Failure to transmit the identified funds will also prevent the Agency from being able to receive a finding of completion from Finance. Without a finding of completion, the Agency will be unable to take advantage of the provisions detailed in HSC section 34191.4. Specifically, these , provisions allow certain loan agreements between the former redevelopment agency (RDA) and the city, county, or city and county that created the RDA to be considered enforceable obligations. These provisions also allow certain bond proceeds to be used for the purposes in which they were sold and allows for the transfer of real property and interests into the Community Redevelopment Property Trust Fund once Finance approves the Agency's long- range property management plan. Ms. Pamela Arends-King November 9, 2012 Page 3 In addition to the consequences above, willful failure to return assets that were deemed an unallowable transfer or failure to remit the funds identified above could expose certain individuals to criminal penalties under existing law. Pursuant to HSC section 34167.5 and 34178.8, the California State Controller's Office (Controller) has the authority to claw back assets that were inappropriately transferred to the city, county, or any other public agency. Determinations outlined in this letter and Finance's Housing Assets Transfer letter dated September 13, 2012 do not in any way eliminate the Controllers authority. Please direct inquiries to Nichelle Thomas, Supervisor or Wendy Griffe, Lead Analyst at (916) 445-1546. Sincerely, STEVE SZALAY Local Government Consultant cc: Mr. Jeffrey C. Parker, City Manager, City of Tustin Mr. Jerry Craig, Program Manager, City of Tustin Mr. Frank Davies, Property Tax Manager, Orange County