HomeMy WebLinkAboutSA1 SUCCESSOR AGENCY RESOLUTION NO 16-02 APPROPRIATING FUNDS FOR THE SUCCESSOR AGENCY FISCAL YEAR 2016/2017MEETING DATE:
TO:
FROM:
SUBJECT:
SUMMARY:
AGENDA REPORI
JULY 5, 2016
JEFFREY C. PARKER, CITY MANAGER
Agenda Item SA1
Reviewed.
City Manager
Finance Director
JENNIFER LEISZ, ACTING FINANCE DIRECTO
SUCCESSOR AGENCY RESOLUTION NO. 16-02 APPROPRIATING
FUNDS FOR THE SUCCESSOR AGENCY FOR FISCAL YEAR
2016/2017
The City Council acting as the Successor Agency to the Tustin Community
Redevelopment Agency is requested to approve the attached resolution adopting the
budget for the Successor Agency for Fiscal Year 2016/2017.
RECOMMENDATION:
1. Adopt Successor Agency Resolution No. 16-02, adopting the Successor Agency
budget and appropriating $4,905,507 from the anticipated revenues of the Agency
for fiscal year 2016/2017.
FISCAL IMPACT:
The adoption of Successor Agency Resolution No. 16-02 will establish the anticipated
expenditures for the Agency for fiscal year 2016/2017 at $4,905,507. The Successor
Agency will not receive funds from the Redevelopment Property Tax Trust Fund (RPTTF)
as the expenditures for the obligations will come from the reserves of the Successor Agency
funds.
BACKGROUND:
The Proposed Biennial Budget for the 2015-2017 fiscal years was presented to the City
Council at the Council Meeting held on May 20, 2015. At the meeting, the City Council
reviewed key elements of the proposed budget for both Fiscal Year 2015/2016 and
2016/2017. Staff reviewed and updated projections for Fiscal Year 2015/2016 since the
Agenda Report
July 5, 2016
Successor Agency Budget FY 2016/17
Page 2 of 2
Mid -Year update that was presented to City Council on February 16, 2016. Staff reviewed
and updated projections for the 2nd year of the Biennial Budget, Fiscal Year 2016/2017.
The proposed budget for FY 2016/2017 included a section for the Successor Agency to
the Tustin Community Redevelopment Agency that was formed on February 1, 2012 with
the dissolution of Tustin Community Redevelopment Agency (RDA) by AB X1 26. The
Successor Agency can only pay enforceable obligations that are on the Recognized
Obligation Payment Schedule (ROPS) that have been approved by the Oversight Board
and State Department of Finance (DoF). Previously, the ROPS was approved by the
Successor Agency every six months, but the new process allows for an annual ROPS
that encompasses the entire fiscal year.
" �2&
Sean Tran
Administrative Services Manager
Attachment: Successor Agency Resolution No. 16-02
SUCCESSOR AGENCY
TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY
RESOLUTION NO. 16-02
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUSTIN, CALIFORNIA, ACTING AS SUCCESSOR AGENCY
TO THE TUSTIN COMMUNITY REDEVELOPMENT
AGENCY, ADOPTING THE BUDGET AND
APPROPRIATING FROM THE ANTICIPATED REVENUES
OF THE SUCCESSOR AGENCY FOR THE FISCAL YEAR
2016-2017
WHEREAS, in accordance with Section 1415 of the Tustin City code, the City
Manager has prepared and submitted to the City Council a Proposed Annual Budget for
the 2016-2017 fiscal year, beginning July 1, 2016; and
WHEREAS, the City Council, as the legislative body of the Successor Agency to
the Tustin Community Redevelopment Agency, has reviewed this proposed budget;
WHEREAS, the Successor Agency is limited to paying enforceable obligations that
have been approved by the Oversight Board and State Department of Finance on the
Recognized Obligation Payment Schedule;
NOW, THEREFORE, the City Council of the City of Tustin acting as the Successor
Agency to the Tustin Community Redevelopment Agency hereby resolves, determines,
and orders as follows:
SECTION 1. A certain document is on file in the office of the City Clerk of the City
of Tustin, being marked and designated "City of Tustin Proposed Biennial Budget 2015-
2017". Said document, as prepared by the City Manager and reviewed and adjusted by
the Council, is hereby adopted for the fiscal year commencing July 1, 2016;
SECTION 2. The Recognized Obligation Payment Schedule for Fiscal Year
2016/2017 has been approved by the Oversight Board and State Department of Finance
and posted on the City of Tustin website (www.tustinca.org);
SECTION 3. The following sums of money are hereby appropriated from the
anticipated revenues of the Successor Agency to the Tustin Community Redevelopment
Agency for the 2016-2017 fiscal year.
Successor Agency Resolution 16-02
Page 1 of 3
SUCCESSOR AGENCY
Approved Recognized Obligation Payment Schedule for Fiscal Year 2016/2017 paid
from Redevelopment Property Tax Trust Fund:
Administrative Cost Allocation
Personnel
Operations
Debt Service
TOTAL
Successor Agency Resolution 16-02
Page 2 of 3
$ 250,000
0
3$,100
4,617,407
PASSED AND ADOPTED at a regular meeting of the Successor Agency to the Tustin
Community Redevelopment Agency held on the 5th day of July, 2016.
JOHN NIELSEN,
Mayor on behalf of the Successor Agency
ATTEST:
ERICA N. RABE,
City Clerk on behalf of the Successor Agency
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) SS
CITY OF TUSTIN )
1, Erica N. Rabe, City Clerk of the City of Tustin, California, acting as the Successor
Agency for the Tustin Community Redevelopment Agency, do hereby certify that the
whole number of the members of the Successor Agency is five; that the above and
foregoing Resolution No. 16-02 was duly assessed and adopted at a regular meeting
held on the 5th day of July, 2016, by the following vote:
AGENCYMEMBER AYES:
AGENCYMEMBER NOES:
AGENCYMEMBER ABSTAINED:
AGENCYMEMBER ABSENT:
ERICA N. RABE,
City Clerk on behalf of the Successor Agency
Successor Agency Resolution 16-02
Page 3 of 3
m
E
E
m
N
r O
� 'L
c0 N
T LL
N
CLCD
O N
CO
d a)
— c
7 �
a�
L
D
U o
N�
c �
Co
G N
Q.-5
c")
N
w
cm O
.� N
O LL
d
N
'c
O
U
d
cn U
1 1 ^
CD
a0
It
Lo
w
M
r
r to
LO
00
N
N
ac
L(
Ln
I'*
CO
(D
4a
1 1 N
LhM
'
It
O
O M
M
r
r to
LO
0
M
to
LO 01
(3)
r
1-7 Lii
Ln
1 1 N
LhM
'
It
M
�
C
cli
Ln
LI)
P-
C
C
7
LL
LL
F—
a
¢
.a
c
3
LL
U)
3
H
x
Lo
�%
w
r
d
CL
o
a
O
n'
¢
c
y
E
C
O
CL
Im
O
C
Ld
C
IM
>
GL
7
.0
M
LL
is
O
LL
W
O
a
d
Z
¢
c
U
L
w
O
3
3
LU
O
w
3
0)cn
C
LL
C
°D
LL
c
C
a
s
c
°
U
m
w
LL
w
>
N
0
LL
eo
LL
°
ca
—
.c
°
1°
a
v->::
c
I
c
�+
ca
c
Q
ti
W
f�A
O U
v
m
O
is
o
41
m m
o
LL
Z
LL
U
c
i
¢
y
c
tea
E
Ll
a
0
0
L
O
O L
m
m
O
O
Z
Q
i
4
W NCl)
LU
V
C
LN
a
co
U
0
W
LL
0
Z
V
Z
W III n
P /q
DEPARTMENT OF EDMUND G. BROWN JR. . GOVERNOR
Qq<«RN`' FINANCE 91 S L STREET ■ SACRAMENTO CA ■ 9381 4`3706 Of WWW.POF.CA.00V
April 13, 2016
Mr. Jeffrey Parker, City Manager
City of Tustin
300 Centennial Way
Tustin, CA 92780
Dear Mr. Parker:
Subject: 2016-17 Annual Recognized Obligation Payment Schedule
Pursuant to Health and Safety Code (HSC) section 34177 (o) (1), the City of Tustin Successor
Agency (Agency) submitted a Recognized Obligation Payment Schedule for the period
July 1, 2016 through June 30, 2017 (ROPS 16-17) to the California Department of Finance
(Finance) on January 27, 2016. Finance has completed its review of the ROPS 16-17.
Based on a sample of line items reviewed and application of the law, Finance made the following
determinations:
Item No. 35 — Public Works Agreement/South Central Redevelopment Project in the total
outstanding amount of $25,934,993 is not allowed. Finance continues to deny this item.
Pursuant to HSC section 34191.4 (b), loan agreements between the .former
redevelopment agency (RDA) and sponsoring entlty may be placed on the ROPS if the
following requirements are met: (1) the Agency has received a Finding of Completion; and
(2) the Agency's Oversight Board approves the loan as an enforceable obligation by
finding the loan was for legitimate redevelopment purposes.
The Agency received a Finding of Completion on May 15, 2013. However, Finance
denied OB Resolution Nos. 14-03, 14-08, and 14-12 as an enforceable obligation
(reconsidering, affirming and ratifying the Amended and Restated Public Works
Agreement (Agreement) between the City of Tustin (City) and the Tustin Community
Redevelopment (Agency) in the letters dated February 20, 2014, May 14, 2014,
August 5, 2014, and December 7, 2015.
HSC section 34191.4 (b) (1) states that loan agreements between the Agency and the City
shall be deemed enforceable obligations provided the oversight board makes a finding the
loan was for legitimate redevelopment purposes. Although the Agency provided RDA and
City Council meeting agendas and minutes which make certain findings regarding the
Agreement, and authorizes the execution of the Agreement, the Agency was unable to
provide the original executed Agreement. Without the original executed Agreement, it is
unclear whether an agreement was ever made. Of note is the fact that the authorization to
execute the agreement was subject to a final language review by the City Attorney's
Mr. Jeffrey Parker
April 13, 2016
Page 2
Office. Based on the above it is unclear how the OB could make the required findings
under HSC section 34191.4 or determine that an agreement exists.
Additionally, the Agreement contemplates the RDA paying the City for undertaking various
public improvements. There was no transfer of money or real property from the City to the
RDA, and as a result, the Agreement does not constitute a loan agreement under
HSC section 34191.4 (b) (2) (A) or (B). Pursuant to HSC section 34191.4 (b) (2) (C), an
agreement between the City and RDA can constitute a "loan agreement' if under that
agreement the City contracted with a third party on behalf of the former RDA for the
development of infrastructure" and the RDA was obligated to reimburse the city for the
payments made by the city to the third party.
Here, the Agreement does not provide that the City would contract with a third party on
behalf of the RDA. In fact, the language of the Agreement suggests that the City would
complete the work. For example, when discussing the costs of improvements that the
RDA would pay for, the Agreement provides, "...it is understood that said amounts are
estimates only and that the actual costs of any of the improvements will be determined at
the time said Improvement is completed and closed out by the City." Therefore, as the
Agreement does not meet the definition of "loan agreement" under
HSC section 34191.4 (b) (2) (C), this item is not an enforceable obligation and is not
eligible for Redevelopment Property Tax Trust Fund (RPTTF) funding in the amount of
$5,190,371.
Item No. 72 — South Central Project Area Loan in the total outstanding obligation amount
of $4,650,000 is not allowed. Finance continues to deny this item. Pursuant to
HSC section 34191.4 (b), loan agreements between the former RDA and sponsoring entity
may be placed on the ROPS if the following requirements are met. (1) the Agency has
received a Finding of Completion; and (2) the Agency's Oversight Board approves the loan
as an enforceable obligation by finding the loan was for legitimate redevelopment
purposes.
The Agency received a Finding of Completion on May 15, 2013. However, Finance
denied OB Resolution Nos. 15-01 and 1506 as an enforceable obligation (reconsidering,
affirming and ratifying the Amended and Restated Working Capital Loan and
Administrative Services Agreement between the City and .the Agency to the Tustin
Community RDA) in the letters dated March 19, 2015, July 14, 2015, and
December 7, 2015.
Pursuant to HSC section 34191.4 (b) (2) (A), loan agreement means loans for money
entered into between the former RDA under which the city, county, or city and county that
created the former RDA transferred money to the former RDA for use by the former RDA
for a lawful purposes, where the former RDA was obligated to repay the money it received
pursuant to a required payment schedule.
Under the original Agreement dated June 17, 1996, the City was to provide the RDA funds
to assist with carrying out programs budgeted for the 1996-97 fiscal year, and to provide
administrative, planning, engineering, design, accounting and other services required,
including direct and indirect overhead charges, to the RDA. It is our understanding this
Agreement was renewed annually. On September 7, 2010, the Agreement was renewed
Mr. Jeffrey Parker
April 13, 2016
Page 3
(Renewed Agreement) and identified a loan balance of $6,885,200, of which $4,650,000
was posted as a 'Claim on Cash' in the Agency's accounting records.
However, the Agency was unable to provide adequate documentation to support the
receipt of funds from the City or the required payment schedule, and both the Agreement
and subsequent Renewed Agreement appear to simply be reimbursement agreements for
services provided by the City to the Agency, and not a transfer of money. As a result, the
Agreement does not meet the definition of "loan agreement" under
HSC section 34191.4 (b) (2) (A). Additionally, the Agreement does not meet the definition
of "loan agreement' under HSC section 34191.4 (b) (2) (B) or (C), since there was no
transfer of real property to the RDA and the City did not contract with a third party for the
development of infrastructure under the Agreement.
In addition to seeking to repay the City under the Agreement pursuant to
HSC section 34191.4, the Agency and oversight board attempted to amend the
Agreement on January 27, 2015 (Amended Agreement) in order to affirm and document
the on-going cooperative agreement regarding administrative and operational services and
payment for services. The Agency and OB do not have authority to take this action, which
is contrary to the express directives of Dissolution Law. As agreements between a former
RDA and the city that created the RDA, the Amended Agreement is not an enforceable
obligation under HSC section 34171 (d) (2). Pursuant to HSC section 34181 (b), the
oversight board is required to direct the Agency to "cease performance in connection with
and terminate all existing agreements that do not qualify as enforceable obligations".
Finance also notes the OB attempts to approve the Amended Agreement to allow interest
from the effective date of the amendment, and to allow the compounding of interest at the
Local Agency Investment Fund rate, compounded daily. However, even if the Agreement or
its amendment were a "loan agreement" under HSC section 34191.4,
HSC section 34191.4 (b) (3) (A) specifies the interest on the outstanding principal amount
after the original effective date of the loan shall be recalculated from the date of origination as
approved by the former RDA at a simple interest rate of three percent, and contains no
provisions that would allow for daily compounding. Additionally, the OB does not have the
authority to approve a different interest rate.
Finally, Finance notes that Section 2c of the Renewed Agreement, dated
September 7, 2010, states the loan was to be repaid to the City, unless otherwise renewed
by both parties, by August 31, 2011. Furthermore, Sections 2d and 3a state if no funds
are available to the Agency to repay the sum of the loans, the money loaned and any
accrued interest may be forgiven and need not be repaid to the City. For these reasons,
neither the Agreement nor the Amended Agreement, as the South Central Project Area
Loan, is an enforceable obligation. Therefore, the requested amount of $1,169,327 is not
eligible for RPTTF funding.
Item No. 90 — Housing Entity Administrative Cost Allowance in the total outstanding
obligation amount of $600,000 is not allowed. Finance continues to deny this
item. Finance denies this item because pursuant to HSC section 34171 (p), the housing
entity administrative cost allowance is applicable only in cases where the city, county, or
city and county that authorized the creation of the redevelopment agency (RDA) elected
to not assume the housing functions. Because the housing entity to the former RDA of
the City is the City -formed Housing Authority (Authority) and the Authority operates under
Mr. Jeffrey Parker
April 13, 2016
Page 4
the control of the City, the Authority is considered the City under Dissolution Law (ABx1
26 and AB 1484).
The Agency contends that the City elected not to retain the housing.functions, but the
Authority, as a separate legal entity from the City, did retain the housing functions
pursuant to HSC section 34176 (b) (3) and should therefore be eligible for the housing
entity administrative allowance. However, pursuant to HSC section 34167.10 (a), the
definition of "city* includes, but is not limited to, any reporting entity of the city for
purposes of its comprehensive annual financial report (CAFR), any component unit of the
city, or any entity controlled by the city or for which the city is financially responsible or
accountable. HSC section 34167.10 (a) defines "city" for purposes of all of Dissolution
Law, which includes HSC section 34171, as amended by AB 471, and
HSC section 34176. The Authority is included in the City's CAFR, which identifies the
Authority as a component unit of the City and states that the City is financially
accountable for the component units.
Although the Authority is a separate legal entity from the City, HSC section 34167.10 (c)
states that it shall not be relevant that the entity is formed as a separate legal entity. It
should also be noted that HSC section 34167.10 (c) goes on to state that "the provisions
of this section are declarative of existing law as the entities described herein are and were
intended to be included within the requirements of this part [Part 1.8] and Part 1.85—and
any attempt to determine otherwise would thwart the intent of these two parts." Therefore,
based on our review, the City, by way of the Authority, elected to retain the housing
functions pursuant to HSC section 34176 (a) and is not eligible for $150,000 of housing
entity administrative allowance on the ROPS.
On the ROPS 16-17 form, the Agency reported cash balances and activity for the period of
July 1, 2015 through June 30, 2016. Pursuant to HSC section 34177 (1) (1) (E), agencies
are required to use all available funding sources prior to RPTTF for payment of
enforceable obligations. During our review, which may have included obtaining financial
records, Finance determined the Agency possesses funds that should be used prior to
requesting RPTTF. Therefore, with the Agency's consent, the funding source for the
following items has been reclassified to Other Funds, and in the amounts specified below:
o Item Nos. 73 and 82 — Various Bond Legal Services totaling $20,000. The Agency
requested $10,000 from RPTTF; however, Finance is reclassifying the entire
amount to Other Funds. Pursuant to HSC section 34177 (1) (1) (E), Other Funds
must be applied towards enforceable obligations prior to RPTTF. Therefore,
Finance is only approving Other Funds for these items, in the amount of $20,000
($10,000 + $10,000).
Except for the items denied in whole or in part or for the items that have been adjusted, Finance is
not objecting to the remaining items listed on your ROPS 16-17. If you disagree with Finance's
determination with respect to any items on your ROPS 1617, except for those items which are
the subject of litigation disputing Finance's previous or related determinations, 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:
httr)://www.dof.ca.gov/redevelopment/meet and __confer/
Mr. Jeffrey Parker
April 13, 2016
Page 5
The Agency's maximum approved RPTTF distribution for the reporting period is zero as
summarized in the Approved RPTTF Distribution Table on Page 5 (See Attachment).
ROPS distributions will occur twice annually, one distribution for the July 1, 2016 through
December 31, 2016 (ROPS A period), and one distribution for the January 1, 2017 through
June 30, 2017 (ROPS B period) based on Finance's approved amounts. Since Finance's
determination is for the entire ROPS 16-17 period, the Agency is authorized to receive up to the
maximum approved RPTTF through the combined ROPS A and B period distributions.
On the ROPS 16-17 form, the Agency was not required to report the estimated obligations versus
actual payments (prior period adjustment) associated with the July 1, 2015 through December 31,
2015 period (ROPS 15-16A). The Agency will report actual payments for ROPS 15-16A and
ROPS 15-16B on the ROPS 18-19 form pursuant to HSC section 34186 (a) (1). A prior period
adjustment will be applied to the Agency's future RPTTF distribution. Therefore, the Agency
should retain any difference in unexpended RPTTF.
Please refer to the ROPS 16-17 schedule used to calculate the total RPTTF approved for
distribution:
http://www.dof.ca.gov/redevelopment/ROPS
Absent a Meet and Confer, this is Finance's determination related to the enforceable obligations
reported on your ROPS for the period July 1, 2016 through June 30, 2017. This determination
only applies to items when funding was requested for the 12 -month period. Finance's
determination is effective for this time period only and should not be conclusively relied upon for
future ROPS periods. All items listed on a future ROPS are subject to review and may be denied
even if it was not denied on this ROPS or a preceding ROPS. The only exception is for items that
have received a Final and Conclusive determination from Finance pursuant to
HSC section 34177.5 (i). Finance's review of Final and Conclusive items is limited to confirming
the scheduled payments as required by the obligation.
The amount available from the RPTTF is the same as the amount of property tax increment
available prior to the enactment of the redevelopment dissolution statutes. Therefore, as a
practical matter, the ability to fund the items on the ROPS with property tax is limited to the
amount of funding available to the Agency in the RPTTF.
Please direct inquiries to Nichelle Thomas, Supervisor, or Alexander Watt, Lead Analyst at
(916) 445-1546.
Sincerely,
JUS Y H WARD
gra B dget Manager
cc: Mr. Jerry Craig, Economic Development & Housing Manager, City of Tustin
Mr. Frank Davies, Property Tax Manager, Orange County
Mr. Jeffrey Parker
April 13, 2016
Page 6
Attachment
Approve RPTTF Distribution
For the period of July 2016 through June 2017
ROPS A Period ROPS B Period Total
Requested RPTTF (excluding administrative obligations) $ 594,393 $ 5,935,305 $ 6,529,698
Requested Administrative RPTTF 0 0 0
Total RPTTF requested for obligatlons on ROPS 16-17 594,393 5,935,305 $ 6,529,698
Total RPTTF requested
Denied Items
Item No. 35
Item No. 72
Item No. 90
Reclassified Items
Item No. 73
Item No. 82
Total RPTTF authorized
594,393 5,935,305 6,529,698 1
0 (5,190,371) (5,190,371)
(584,393) (584,934) (1,169,327)
0 (150,000) (150,000)
(584,393) (5,925,305) (6,509,698)
(5,000) (5,000) (10,000)
(5,000) (5,000) (10,000)
(10,000) (10,000) (20,000)
0 0 0
Total Administrative RPTTF authorized 0 0
Total RPTTF approved for distribution
0 0