RPVCCA_SA_SR_2012_06_05_C_Status_Update_RDA_Dissolution_ActivitiesCITY OF
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
Staff Coordinator:
HONORABLE CHAIR AND MEMBERS OF THE BOARD OF
DIRECTORS OF THE SUCCESSOR AGENCY TO THE RANCHO
PALOS VERDES REDEVELOPMENT Ai,Y
DENNIS McLEAN,FINANCE OFFICER
JUNE 5,2012
STATUS UPDATE OF REDEVELOPMENT DISSOLUTION ACTIVITIES
CAROLYN LEHR,EXECUTIVE DIRECTOR09--
Kathryn Downs,Deputy Director of Finance &Information
Technology
RECOMMENDATION
Receive and file.
DISCUSSION
Critical Issue -City's Consolidated Loan
The Recognized Obligation Payment Schedules (ROPS)include the City's Consolidated
Loan to the Redevelopment Agency (RDA).The City began making loans to the RDA in
1990,6 years after formation of the RDA.AB X1 26 currently allows for loans from cities to
RDA's to be recognized if they were made within 2 years of the formation of the RDA.
Although no written notice has been received,a representative from the California
Department of Finance (DOF)orally indicated on May 23,2012 that the Consolidated Loan
from the City would be questioned as a valid obligation of the Successor Agency.
As of June 30,2012,the loan balance is estimated to be $19.3 million,which includes
$12.5 million of accrued interest.If state legislation such as AB 1585 is not enacted,the
City may not receive any repayment of its Consolidated Loan to the RDA.The City's
Budget and Five-Year Financial Model have never included an assumption that the
Consolidated Loan would be repaid.In fact,the loan receivable asset on the General Fund
balance sheet has always been offset by a deferred revenue liability for the accrued
interest and a reservation of fund balance for the principal amount (net effect of $0 on the
balance sheet).
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STATUS UPDATE OF REDEVELOPMENT DISSOLUTION ACTIVITIES
June 5,2012
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On April 9,2012,Mayor Misetich signed a letter of support for AB 1585.Notwithstanding
Staff's continued concern regarding collectability of the Consolidated Loan,we will continue
to monitor state legislation and prudently pursue recognition of the debt.
Oversight Board
The Oversight Board for the Successor Agency (OB)was created pursuant to the
dissolution law,and is directly accountable to the DOF.Although the City (as Successor
Agency)provides Staff support to the OB,decisions of the OB are not under direction of
the City or the County.Members of the OB were appointed by various agencies,as
follows:
~Ken Dyda -City of Rancho Palos Verdes;
~Kit Fox -City of Rancho Palos Verdes;
~Larry Clark -Los Angeles County;
~Steve Wolowicz -Los Angeles County;
~Lydia Cano -Palos Verdes Peninsula Unified School District;
~Michael Schneider -Los Angeles County Fire District;and
~No Member (appointee did not accept)-California Community Colleges District.
The OB has conducted two meetings to date (May 1st and May 15th ).The next meeting is
scheduled for June 6th at 1:OOpm in the Community Room at City Hall.Regular meetings
are currently scheduled for the 1st and 3rd Wednesdays of each month.
The OB has conducted the following business:
1.Elected Member Clark as Chair,and Member Wolowicz as Vice-Chair;
2.Adopted Rules &Procedures;
3.Received reports of unencumbered low and moderate housing funds,as well as
estimated Successor Agency cash flow for 2012;
4.Approved the Cooperative Agreement between the Successor Agency and the City;
5.Approved the Successor Agency's administrative budgets for 2012;
6.Discussed retention of legal counsel,and obtaining of Public Officials Errors &
Omissions insurance;and
7.Approved the Recognized Obligation Payment Schedules (ROPS)for 2012.
Although the dissolution law indemnifies OB Members for their actions in the course of
dissolution business,OB Members are interested in securing outside counsel to provide
legal advice in the event of a conflict between the taxing entities,the Successor Agency,
and the 08.Many Successor Agencies and OB's are asking questions about legal
counsel for Oversight Boards,and the answers are not clear at this time.
1.Who will pay for legal counsel?
2.Is there a conflict for a Successor Agency to pay for legal counsel of the OB,when it
is conceivable that the Successor Agency and OB may be in direct conflict in the
future?
3.Which firms are offering legal counsel to OB's,as many legal firms advising
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STATUS UPDATE OF REDEVELOPMENT DISSOLUTION ACTIVITIES
June 5,2012
Page 3 of 4
successor agencies have decided not to advise OB's due to potential future conflicts
of interest?
The Successor Agency took action to secure Public Officials Errors &Omissions insurance
for OB Members for a total cost of $1 ,413 per year.OB Members have expressed their
gratitude for this insurance coverage,as well as the Staff support they have received.
Future agenda items will likely include consideration for the disposition of former
redevelopment agency assets,such as:
~Land,including Abalone Cove Shoreline Park and vacant parcels on Cherry Hill;
~The note receivable from AMCAL totaling $6.6 million (including about $355,000 of
accrued interest);
~The note receivable from Mantilla in the amount of $126,320;
~The note receivable from the Portuguese Bend Club Homeowners Association of
about $230,000;and
~Cash of about $454,000.
Agreed Upon Procedures
As part of dissolution business,the DOF developed agreed-upon procedures for the "audit"
of redevelopment agencies as of the January 31,2012 dissolution date.The County
retained the services of Moss,Levy,Hartzheim,LLP to perform the RPV audit.The
auditors were at City Hall the week of April 30th and have completed their fieldwork.Staff
expects a draft report in the near future.
June 1st Property Tax Distribution
On May 26,2012,Staff received notification from the DOF that the Rancho Palos Verdes
ROPS has been approved.Staff received an estimate from the County for the June 1st
distribution from the Redevelopment Property Tax Trust Fund (RPTTF).Based on this
information,Staff expects the following distribution.
RPTTF (for July through December 2012)
Less:
County Admin Fees
Fire District Pass-Thru (17%)
1997 Bond Payment to County
Deferred Interest Debt P::l\J'mF!nt
Administrative Allowance
$598,806
(1,420)
(101,797)
(246,625)
The dissolution law allows for a minimum annual administrative allowance of $250,000 of
property tax to be available to the Successor Agency for its costs.As noted above,there is
not enough RPTTF available for the administrative allowance from the June 1st distribution
(for the period July through December 2012).Staff expects that RPTTF will be sufficient
for the administrative allowance from the January 16,2013 distribution (for the period
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STATUS UPDATE OF REDEVELOPMENT DISSOLUTION ACTIVITIES
June 5,2012
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January through June 2013).This half-year allocation of $125,000 will only be available for
actual costs incurred.Based on current estimates of staff time,insurance,and other costs,
it appears that the City may have enough administrative costs to support nearly if not all of
the $125,000 allowance for the last 6 months of FY12-13;which has been included in the
draft FY12-13 Budget.
Staff Time and Other Expenses
Since the date of dissolution on January 31,2012,more than 200 hours of Staff time has
been dedicated to dissolution business (extrapolated to about 0.35 FTE).Satisfying
requests for information from outside agencies,auditors,and the Oversight Board has
been demanding;and does not appear to be diminishing.Other expenses include legal
counsel,the cost of insurance and minor office expenses.
By enacting dissolution law,the State of California has placed a large burden on many
agencies,and created a plethora of uncertainties that will take time to sort out and may
ultimately be litigated.
Staff will continue to keep the City Council (as Successor Agency Board)apprised of the
status of dissolution.
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