RPVCCA_CC_SR_2014_03_04_06_RDA_Loan_Reestablishment_AgreementCITY OF RANCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
DATE: ·
SUBJECT:
REVIEWED:
Staff Coordinator:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
DENNIS McLEAN, DEPUTY DIRECTOR OF FINANCE & INFORMAT~
TECHNOLOGY \§
MARCH 4, 2014
REESTABLISHMENT AGREEMENT FOR CITY'S CONSOLIDATED
LOAN TO THE FORMER REDEVELOPMENT AGENCY
CAROLYNN PETRU, ACTING CITY MANAGER~
Kathryn Downs, Deputy Director of Finance & Information
Technology \CD
RECOMMENDATION
Adopt Resolution No. 2014-, A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF RANCHO PALOS VERDES APPROVING THE EXECUTION OF A
REESTABLISHMENT AGREEMENT BETWEEN THE SUCCESSOR AGENCY TO THE
RANCHO PALOS VERDES REDEVELOPMENT AGENCY AND THE CITY.
BACKGROUND AND DISCUSSION
Recommended Action
The City Attorney's Office has recommended that the City and the Successor Agency enter
into a Loan Reestablishment Agreement expressly stating that the City's Consolidated
Loan (Loan) is to be repaid under the requirements of redevelopment dissolution law. The
Agreement would memorialize the reestablishment of the Loan in accordance with the
repayment formula set forth in Health and Safety Code Section 34191.4, as described
below. This same recommended action has been placed on the Successor Agency
Board's March 4, 2014 agenda.
A status of redevelopment dissolution was presented to the Successor Agency Board on
December 3, 2013. As reported at that time, one of the next steps in the dissolution
process is to obtain approval from both the Oversight Board and California Department of
Finance (DOF) for the Loan, and begin receiving repayments to the City's General Fund.
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REESTABLISHMENT AGREEMENT FOR CITY'S CONSOLIDATED
LOAN TO THE FORMER REDEVELOPMENT AGENCY
March 4, 2014
Page 2 of 3
Balance of the Loan
The outstanding principal balance of the Loan is $6,742,776. As of June 30, 2012, the
Loan balance was $19.3 million, which included accrued interest of $12.5 million. Per the
Loan agreement between the City and former Rancho Palos Verdes Redevelopment
Agency (RDA), the Loan accrued interest at the Local Agency Investment Fund (LAIF) rate
plus three percent.
Dissolution law limits the accrued interest on the Loan to the LAIF rate. As of June 30,
2012, the Loan balance was $12.1 million including accrued interest of $5.3 million (at the
reduced rate). As reported previously on December 3, 2013, the balance has been
calculated using Staff's interpretation of dissolution law, which differs from the DOF
interpretation of the law. Staff's interpretation is shared by many peers and follows the
logic of General Accepted Accounting Principles. Both Staff and Successor Agency legal
counsel agree that this difference of opinion may be litigated by other agencies in the
future.
Loan repayment is subject to the availability of revenue from the Redevelopment Property
Tax Trust Fund (RPTTF). It is uncertain when and how much RPTTF will be available in
the future. Therefore, the City's independent financial statement auditor recommended
establishment of an allowance for the full amount of the Loan on the City's June 30, 2013
Balance Sheet. The result is that the City's General Fund balance does not include the
Loan. This is not a substantive change from prior reporting where the principal balance of
the Loan was offset with a reservation of General Fund balance, and the accrued interest
of the Loan was offset with a deferred revenue liability; whereby the City's spendable
General Fund balance (the General Fund Reserve) did not include the Loan. Repayment
of the Loan has never been included in the City's budget or Five-Year Financial Model.
Approval of the Loan
On December 11, 2013, the Oversight Board made a finding that the Loan was made for
legitimate redevelopment purposes. On January 27, 2014, Staff received notification that
the DOF approved the Oversight Board's finding, and that the Loan may be added to the
Recognized Obligation Payment Schedule (ROPS).
Repayment of the Loan
On February 26, 2014, the Oversight Board approved repayment of the Loan in
accordance with dissolution law that provides for a repayment formula whereby the City
may receive 50% of the residual distribution of RPTTF to taxing entities in the
redevelopment area. Of this 50% distribution, 20% must be deposited into the City's low
and moderate income housing fund and 80% may be deposited into the City's General
Fund.
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REESTABLISHMENT AGREEMENT FOR CITY'S CONSOLIDATED
LOAN TO THE FORMER REDEVELOPMENT AGENCY
March 4, 2014
Page 3 of 3
On February 26, 2014, the Oversight Board also approved ROPS 14-15A for the six-month
period of July through December 2014. The ROPS was approved with a maximum
repayment of the Loan in the amount of $36,458, of which $7,292 would be deposited into
the City's low and moderate income housing fund and $29, 166 would be deposited into the
City's General Fund.
Attachment:
Resolution No. 2014-, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
RANCHO PALOS VERDES APPROVING THE EXECUTION OF A REESTABLISHMENT
AGREEMENT BETWEEN THE SUCCESSOR AGENCY TO THE RANCHO PALOS
VERDES REDEVELOPMENT AGENCY AND THE CITY
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RESOLUTION NO. 2014-__
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO
PALOS VERDES APPROVING THE EXECUTION OF A
REESTABLISHMENT AGREEMENT BETWEEN THE SUCCESSOR
AGENCY TO THE RANCHO PALOS VERDES REDEVELOPMENT
AGENCY AND THE CITY
RECITALS:
A. Pursuant to AB X1 26 (enacted in June 2011 ), as modified by the
California Supreme Court's decision in California Redevelopment Association, et al. v.
Ana Mato~antos, et al., 53 Cal.4th 231(2011), the Rancho Palos Verdes
Redevelopment Agency (the "Former Agency") was dissolved as of February 1, 2012,
the Successor Agency was established, and an oversight board to the Successor
Agency (the "Oversight Board") was established.
B. Pursuant to Health and Safety Code Section 34171(d)(2), enforceable
obligations of the Former Agency do not include the Consolidated Loan Agreement
between the City of Rancho Palos Verdes and the Former Agency, on file in the office of
the Successor Agency Secretary (the "Original Loan Agreement" or "Original Loan").
C. Pursuant to the Health and Safety Code Section 34191.4(b)(1 ),
notwithstanding Health and Safety Code Section 34171 (d)(2), the Original Loan
Agreement shall be deemed to be an enforceable obligation provided the State
Department of Finance (the "DOF") has issued a finding of completion to the Successor
Agency pursuant to Health and Safety Code Section 34179.7 (the "Finding of
Completion") and the Oversight Board makes a finding that the Original Loan
Agreement was for legitimate redevelopment purposes.
D. The DOF issued a Finding of Completion to the Successor Agency on
April 26, 2013.
E. By its Resolution No. OB 2013-09, the Oversight Board found that the
Original Loan Agreement was for legitimate redevelopment purposes.
F. By its letter dated January 27, 2014, the DOF approved Oversight Board
Resolution No. 2013-09, and stated that the Successor Agency may now place the
Original Loan Agreement on a Recognized Obligation Payment Schedule (''ROPS")
commencing with ROPS 14-15A, provided that the repayment of the Loan Agreement is
subject to the repayment formula outlined in Health and Safety Code Section 34191.4.
G. Pursuant to Health and Safety Code Section 34191.4(b )(2), the
accumulated interest on the remaining principal amount of the Original Loan shall be
recalculated from origination at the interest rate earned by funds deposited in the Local
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Agency Investment Fund ("LAIF"). The Original Loan shall be repaid to the City in
accordance with a defined schedule over a reasonable term of years at an interest rate
not to exceed the interest rate earned by funds deposited into the LAIF; the maximum
repayment amount authorized each fiscal year shall be equal to one-half of the increase
between the amount distributed to taxing entities pursuant to Health and Safety Code
Section 34183(a)(4) in that fiscal year and the amount distributed to taxing entities
pursuant to Section 34183(a)(4) in the 2012-13 base year; and twenty percent of each
Original Loan Agreement repayment shall be deducted and transferred to the Low and
Moderate Income Housing Asset Fund established by the City as the successor to the
housing functions and assets of the Former Agency.
H. By its Resolution No. OB 2014-01, the Oversight Board (i) found that the
Original Loan Agreement, as modified in accordance with the provisions of Health and
Safety Gode Section 34191.4, is reestablished and constitutes an enforceable
obligation; (ii) approved the repayment of the Original Loan Agreement in accordance
with a repayment schedule which meets the requirements of Health and Safety Code
Section 34191.4 and which provides for the inclusion on each ROPS, commencing with
ROPS 14-15A, of up to the maximum repayment amount, calculated in accordance with
Health and Safety Code Section 34191.4, until the Original Loan Agreement has been
paid in full, including all accumulated and accrued interest thereon; and (iii) found that
repayment of the Original Loan Agreement in accordance with such repayment
schedule provides for repayment over a reasonable term of years.
I. The Successor Agency and the City desire to enter into an agreement to
evidence the reestablishment of the Original Loan in accordance with the requirements
of Health and Safety Code Section 34191.4.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS
FOLLOWS:
Section 1. The above recitals are true and correct and are a substantive part
of this Resolution.
Section 2. The Reestablishment Agreement, in the form attached hereto as
Exhibit A, is hereby approved. Each of the Mayor (or, in the Mayor's absence, the
Mayor Pro Tern) and the City Manager (each, an "Authorized Officer"), acting
individually, is hereby authorized to execute and deliver, for and in the name of the City,
the Reestablishment Agreement, in substantially such form, with changes therein as the
Authorized Officer executing the Agreement may approve (such approval to be
conclusively evidenced by the Authorized Officer's execution and delivery thereof).
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Section 3. The Authorized Officers and all other officers of the City are hereby
authorized, jointly and severally, to execute and deliver any and all necessary
documents and instruments and to do all things which they may deem necessary or
proper to effectuate the purposes of this Resolution and the Reestablishment
Agreement.
PASSED AND ADOPTED this 4th day of March 2014.
MAYOR
ATTEST:
CITY CLERK
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EXHIBIT A
(see attached)
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REESTABLISHMENT AGREEMENT
This REESTABLISHMENT AGREEMENT (this "Reestablishment Agreement"),
dated as of , 2014, is entered into by and between the CITY OF
RANCHO PALOS VERDES (the "City") and the SUCCESSOR AGENCY TO THE
RANCHO PALOS VERDES REDEVELOPMENT AGENCY (the "Successor Agency," and
together with the City, the "Parties," with each being a "Party").
RECITALS:
A. Pursuant to AB X1 26 (enacted in June 2011 ), as modified by the California
Supreme Court's decision in California Redevelopment Association, et al. v. Ana
Matosantos, et al., 53 Cal.4th 231(2011), the Rancho Palos Verdes Redevelopment
Agency .(the "Former Agency") was dissolved as of February 1, 2012, the Successor
Agency was established, and an oversight board to the Successor Agency (the "Oversight
Board") was established.
B. Pursuant to Health and Safety Code Section 34171 (d)(2), enforceable
obligations of the Former Agency do not include the Consolidated Loan Agreement
between the City of Rancho Palos Verdes and the Former Agency, on file in the office of
the Successor Agency Secretary (the "Original Loan Agreement" or "Original Loan").
C. Pursuant to the Health and Safety Code Section 34191.4(b)(1),
notwithstanding Health and Safety Code Section 34171 (d)(2), the Original Loan
Agreement shall be deemed to be an enforceable obligation provided the State
Department of Finance (the "DOF") has issued a finding of completion to the Successor
Agency pursuant to Health and Safety Code Section 34179.7 (the "Finding of
Completion") and the Oversight Board makes a finding that the Original Loan Agreement
was for legitimate redevelopment purposes.
D.
26, 2013.
The DOF issued a Finding of Completion to the Successor Agency on April
E. By its Resolution No. OB 2013-09, the Oversight Board found that the
Original Loan Agreement was for legitimate redevelopment purposes.
F. By its letter dated January 27, 2014, the DOF approved Oversight Board
Resolution No. 2013-09, and stated that the Successor Agency may now place the
Original Loan Agreement on a Recognized Obligation Payment Schedule ("ROPS")
commencing with ROPS 14-1 SA, provided that the repayment of the Loan Agreement is
subject to the repayment formula outlined in Health and Safety Code Section 34191.4.
G. Pursuant to Health and Safety Code Section 34191.4(b)(2), the
accumulated interest on the remaining principal amount of the Original Loan shall be
recalculated from origination at the interest rate earned by funds deposited in the Local
Agency Investment Fund ("LAIF"). The Original Loan shall be repaid to the City in
accordance with a defined schedule over a reasonable term of years at an interest rate
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not to exceed the interest rate earned by funds deposited into the LAIF; the maximum
repayment amount authorized each fiscal year shall be equal to one-half of the increase
between the amount distributed to taxing entities pursuant to Health and Safety Code
Section 34183(a)(4) in that fiscal year and the amount distributed to taxing entities
pursuant to Section 34183(a)(4) in the 2012-13 base year; and twenty percent of each
Original Loan Agreement repayment shall be deducted and transferred to the Low and
Moderate Income Housing Asset Fund established by the City as the successor to the
housing functions and assets of the Former Agency.
H. As of the dated date of this Reestablishment Agreement, the remaining
principal amount of the Original Loan is $6,742,776.
I. By its Resolution No. OB 2014-01, the Oversight Board (i) found that the
Original Loan Agreement, as modified in accordance with the provisions of Health and
Safety Code Section 34191.4, is reestablished and constitutes an enforceable obligation;
(ii) approved the repayment of the Original Loan Agreement in accordance with a
repayment schedule which meets the requirements of Health and Safety Code Section
34191.4 and which provides for the inclusion on each ROPS, commencing with ROPS
14-15A, of up to the maximum repayment amount, calculated in accordance with Health
and Safety Code Section 34191.4, until the Original Loan Agreement has been paid in
full, including all accumulated and accrued interest thereon; and (iii) found that repayment
of the Original Loan Agreement in accordance with such repayment schedule provides
for repayment over a reasonable term of years.
J. The Successor Agency and the City are entering into this Reestablishment
Agreement to evidence the reestablishment of the Original Loan in accordance with the
requirements of Health and Safety Code Section 34191.4.
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
Section 1. The above recitals are true and correct and are a substantive part of
this Reestablishment Agreement.
Section 2. This Reestablishment Agreement shall not become effective until it
has been approved by the Oversight Board by resolution and the Department of Finance
has approved such resolution or the resolution is deemed approved by the Department
of Finance pursuant to Health and Safety Code Section 34179(h).
Section 3. The Parties acknowledge and agree that the Original Loan is
reestablished in accordance with the requirements of Health and Safety Code Section
34191.4 and the provisions of this Reestablishment Agreement.
Section 4. The Successor Agency agrees to repay the Original Loan in
accordance with the requirements of Health and Safety Code Section 34191.4, and as
described herein, until the Original Loan has been paid in full, including all accumulated
and accrued interest on the Original Loan. The Successor Agency agrees to include up
to the maximum authorized repayment amount, as described herein for the repayment of
the Original Loan on each Recognized Obligation Payment Schedule ("ROPS"),
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commencing with ROPS 14-15A, and to remit to the City such amounts within a
reasonable time after each distribution of moneys to the Successor Agency from the
Redevelopment Property Tax Trust Fund.
Section 5. The Parties agree to take all appropriate steps and execute any
documents which may reasonably be necessary or convenient to implement the intent of
this Reestablishment Agreement.
Section 6. The Parties shall maintain records of all the repayments of the
Original Loan made by the Successor Agency to the City and the City shall maintain
records of all deductions from the City Loan repayments transferred to the Low and
Moderate Income Housing Asset Fund. Such records will be available for inspection by
the Parties at all reasonable times.
Section 7. This Reestablishment Agreement may be amended at any time, and
from time to time, in writing by the Parties.
Section 8. This Reestablishment Agreement shall terminate when the Original
Loan has been paid in full, including all accumulated and accrued interest thereon.
Section 9. Except as expressly set forth herein or as required by Health and
Safety Code Section 34191.4, the provisions of the Original Loan Agreement remain in
full force and effect. In the event of a conflict between the provisions of the Original Loan
Agreement and Health and Safety Code Section 34191.4, the provisions of Section
34191.4 shall prevail.
Section 10. If any one or more of the covenants or agreements provided in this
Reestablishment Agreement on the part of the City or the Successor Agency to be
performed should be determined by a court of competent jurisdiction to be contrary to
law, such covenant or agreement shall be deemed and construed to be severable from
the remaining covenants and agreements herein contained and shall in no way affect the
validity of the remaining provisions of this Reestablishment Agreement.
Section 11. All the covenants, promises and agreements in this Reestablishment
Agreement contained by or on behalf of the Successor Agency or the City shall bind and
inure to the benefit of their respective successors and assigns, whether so expressed or
not.
Section 12. This Reestablishment Agreement is made in the State of California
under the Constitution and laws of the State of California, and is to be so construed.
IN WITNESS WHEREOF, the Parties have caused this Reestablishment
Agreement to be executed by their duly authorized representatives.
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Attest:
By:~----------
City Clerk
Attest:
By:~----------
Secretary
APPROVED:
OVERSIGHT BOARD OF THE
SUCCESSOR AGENCY TO THE
RANCHO PALOS VERDES
REDEVELOPMENT AGENCY
By ------------Chair
CITY OF RANCHO PALOS VERDES
By: __________ _
Mayor
SUCCESSOR AGENCY TO THE
RANCHO PALOS VERDES
REDEVELOPMENT AGENCY
By: __________ _
Chair
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