The URL can be used to link to this page

Home My WebLink About07 AMEND AND REINSTATE WORKING CAPITAL LOAN BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCYAgenda Item i Reviewed: AGENDA REPORT City Manager Finance Director MEETING DATE: JANUARY 20, 2015 TO: JEFFREY C. PARKER, CITY MANAGER AND EXECUTIVE DIRECTOR FROM: SUCCESSOR AGENCY AND FINANCE DEPARTMENT SUBJECT: AMEND AND REINSTATE THE WORKING CAPITAL LOAN AND ADMINISTRATIVE SERVICES AGREEMENT BETWEEN THE CITY OF TUSTIN AND THE SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY SUMMARY: In accordance with Health and Safety Code ( "HSC") Section 34191.4(b), the City of Tustin ( "City') and the Successor Agency to the Tustin Community Redevelopment Agency ( "Successor Agency ") are seeking to amend and reinstate the Working Capital Loan and Administrative Services Agreement ( "Working Capital Loan ") entered into on September 7, 2010. RECOMMENDATION: It is recommended the City Council adopt Resolution No. 15 -03, amending and reinstating the Working Capital Loan and Administrative Services Agreement between the City of Tustin and the Successor Agency to the Tustin Community Redevelopment Agency, and authorize the Mayor to execute the First Amendment to the Working Capital Loan. 2. It is recommended the City Council, acting as the Successor Agency, adopt Successor Agency Resolution No. 15 -01, amending and reinstating the Working Capital Loan and Administrative Services Agreement between the City of Tustin and the Successor Agency to the Tustin Community Redevelopment Agency and authorize the Agency Chair to execute the First Amendment to the Working Capital Loan. FISCAL IMPACT: The Working Capital Loan currently has a balance of $4,650,000 due to the City from the Successor Agency. Upon approval by the State of California Department of Finance ( "DoF "), the Successor Agency will include the Working Capital Loan on the next Recognized Obligation Payment Schedule ('BOPS'), allowing the Orange County Auditor - Controller to issue Redevelopment Property Tax Trust Funds ('Trust Funds ") for 977579.1 Agenda Report January 20, 2015 Page 2 payment. The interest rate in the Working Capital Loan has been amended to comply with HSC Section 34191.4(b)(2) and the payment schedule will reflect the revised interest rate. CORRELATION TO THE STRATEGIC PLAN: Amending the Working Capital Loan addresses Goal C — Financial Strength, sustaining long -term financial strength with adequate reserves and enhanced capacity to provide a sustainable level of City Services. BACKGROUND: On September 7, 2010, the Tustin City Council and Tustin Community Redevelopment Agency approved the $4,650,000 Working Capital Loan to the South Central Project Area. The Original Working Capital Loan of $2,400,000 was issued June 12, 1996 for the purposes of permitting the Agency to complete the goals and objectives of the South Central Project Area. The Working Capital Loan carried over each year and the principal balance increased until the final issuance in 2010. On June 29, 2011, Assembly Bill X1 26 became effective, causing the dissolution and wind down of all redevelopment agencies ( "Dissolution Act "). All redevelopment agencies in California were dissolved as of February 1, 2012, and the Successor Agency to the Tustin Community Redevelopment Agency became responsible for winding down redevelopment activities in the City of Tustin. In compliance with Health and Safety Code ( "HSC ") Section 34177, the Successor Agency submitted a Recognized Obligation Payment Schedule ('BOPS ") on March 15, 2012 to the State of California Department of Finance ( "DoF ") for approval. The ROPS included a request for Trust Funds to reimburse the City in accordance with the Working Capital Loan. On March 29, 2012, DoF denied the City's request for reimbursement, stating it was not an enforceable obligation. On April 10, 2012, the City protested DoF's denial but did not have any other recourse under the existing statute at that time. As a result of the passage of Assembly Bill 1484 in June of 2012, a provision was added to the Dissolution Act providing successor agencies with an opportunity to reinstate "loan agreements" through a Finding of Completion ( "Finding ") provision. On May 10, 2013, the Successor Agency remitted what it believed to be its last remaining unencumbered funds to the Orange County Auditor - Controller and on May 13, 2013, requested a Finding from DoF. On July 3, 2013, DoF informed the Successor Agency that a Finding would not be issued until after the Successor Agency remitted the principal and interest due on December 1, 2013 for the December 31, 2008 Promissory Note between the City and Successor Agency . DoF's failure to issue the required finding of completion is contrary to the requirements under HSC Section 34179.7, including their failure to provide a L11201 m] Agenda Report January 20, 2015 Page 3 response within five business days of the Successor Agency's May 13th request. In response, the City, the Successor Agency and the Tustin Housing Authority filed a "Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief' with the Superior Court in Sacramento County. On April 24, 2014, the Superior Court issued its ruling in the Petition under which a Writ mandated DoF issue the Successor Agency its Finding, nunc pro tunc as of May 15, 2013. On May 1, 2014, pursuant to the Writ issued by the Court, DoF issued the Finding, effective May 15, 2013. Upon issuance of the Finding, staff and the City Attorney initiated discussions with DoF regarding the Promissory Note. On June 19, 2014, the City, the Successor Agency and the Tustin Housing Authority filed a notice of appeal in response to other findings in the Petition. On July 8, 2014, DoF filed a notice of cross - appeal to challenge the judgment that DoF had abused its discretion in refusing to issue a Finding until the amount due under the Promissory Note had been remitted. Since May 2014, both parties have continued to work towards reaching an agreement on the Promissory Note. On December 9, 2014, the City and DoF executed a Promissory Note Settlement Agreement outlining the payment schedule for the City to pay off the Note and DoF's promise to abandon or dismiss the cross - appeal. On December 12, 2014, DoF filed an abandonment of the cross - appeal and on December 15, 2014 the abandonment became official. With all matters regarding the issuance of the Finding completely resolved, the Successor Agency and City desire to reinstate the Working Capital Loan. In compliance with HSC Section 34191.4(b)(2), the amended Working Capital Loan provides a payment schedule at the Local Agency Investment Fund interest rate. Upon City Council and Successor Agency approval, the First Amendment to the Working Capital Loan will be submitted to the Oversight Board of the Successor Agency to the Tustin Community Redevelopment Agency on January 27, 2015 for their consideration. Pursuant to HSC Section 34180(a) and 34191.4(b), the Oversight Board has the authority to reinstate loan agreements between the City and the Successor Agency as long as the Oversight Board finds the loan was for legitimate redevelopment purposes and deems it to be an enforceable obligation. Should the Oversight Board approve the amended Working Capital Loan as an enforceable obligation, it will be submitted to DoF for final approval. Staff will be available to respond to any questions the City Council may have. 977579.1 Agenda Report January 20, 2015 Page 4 9¢m ,& Housing Ma nager icy to the Tustin Community Agency Attachments: 1. City Council Resolution No. 15 -03 2. Successor Agency Resolution No. 15 -01 3. First Amendment to the Working Capital Loan and Administrative Services Agreement – "Working Capital Loan" 977579.1 aig Pamela Arends -King —� Finance Director ic I rRe Finance Department soy =1 9¢m ,& Housing Ma nager icy to the Tustin Community Agency Attachments: 1. City Council Resolution No. 15 -03 2. Successor Agency Resolution No. 15 -01 3. First Amendment to the Working Capital Loan and Administrative Services Agreement – "Working Capital Loan" 977579.1