RPVCCA_SR_2011_06_07_L_Consolidated_LoansCITY OF
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
Project Manager:
HONORABLE MAYOR &CITY COUNCIL MEM~S
DENNIS McLEAN,DIRECTOR OF FINANCE &C4
INFORMATION TECHNOLOGY
JUNE 7,2011
ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN
THE CITY AND REDEVELOPMENT AGENCY FOR
EXPENSES INCURRED DURING FY09·10
CAROLYN LEHR,CITY MANAGER~
Kathryn Downs,Deputy Director of Finance &Information
Technology
RECOMMENDATION
Receive and file this staff report,which provides information regarding FY1 0-11 loan
additions to the Rancho Palos Verdes Redevelopment Agency in the amount of
$346,483 for expenses incurred by the City during FY09-1 O.The Consolidated Loan
Agreement dated December 1,2003 authorizes the loan additions.
EXECUTIVE SUMMARY
On December 1,2003,the loan agreement between the City and the Rancho Palos
Verdes Redevelopment Agency (Agency)was revised to include the annual cost of
resources provided by the City.The City Attorney's Office has recommended the
preparation of an annual staff report to inform the City Council of loan additions
authorized by the Consolidated Loan Agreement.Staff recommends FY10-11
additions to the consolidated loan balance for expenses incurred by the City during
FY09-10 in the amount of $346,483,which includes the following:
~The state mandated Supplemental Education Revenue Augmentation Fund
(SERAF)payment of $330,125;and
~The County of Los Angeles property tax increment administration fee of $16,358.
The FY1 0-11 additions to the consolidated loan balance are for expenditures made
L-1
ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY09·10
June 7,2011
Page 2 of 4
from the General fund of the City and will accrue interest as of July 1,2010.
Because the advances are loans,rather than expenditures,no budget appropriation
is necessary.
The Governor's revised proposal for the FY11-12 state budget still includes
elimination of redevelopment agencies;however,the California Legislative Counsel's
office has issued an opinion that the Governor's proposal is illegal.If elimination of
redevelopment agencies were to occur,it is unclear at this time how repayment of
the Agency's debt to the City may be affected.
BACKGROUND
The Agency was formed in 1984 with the purpose of financing long-term capital
improvements (Le.de-watering wells,Abalone Cove sewer system)designed to
eliminate physical and economic blight in Project Area NO.1 through stabilization of
hazardous landslides.The Agency's Project Area No.1 was divided into two
geographical areas:Abalone Cove and Portuguese Bend.The geographical areas
are accounted for in separate funds of the Agency.
Abalone Cove Fund Financing
The Abalone Cove landslide abatement project of the Agency was initially financed
by the issuance of $1 0 million of County Improvement District Bonds (the "Bonds")in
1991.The Bonds were issued as part of the Reimbursement and Settlement
("Horan")Agreement entered into between the County,City,Agency and the Horan
litigants in 1987.After payment of amounts previously owed the County and the
City,approximately $6.7 million of net bond proceeds were transferred to the
Agency's Abalone Cove fund in 1991 to finance landslide abatement projects.
Under the terms of the bond restructuring in 1997,the Bonds were repaid through
the Agency's issuance of $5,455,000 of tax allocation bonds (the "1997 RDA Bonds")
and a lump sum payment of $4,545,000 to the County.The lump sum payment was
funded with $2 million of accumulated tax increment,$1 million offund reserves from
the Abalone Cove fund and a loan to the Abalone Cove fund by the City in the
amount of $1 ,545,000.
As part of the 1997 bond restructuring,accrued interest on the original $10 million
County Bonds was recalculated at a lower interest rate (5 percent vs.7.77 percent
per the original Bonds)and deferred by the County.The deferred interest debt
totaling $3,111,400 is non-interest bearing and is subordinate to the payment of the
1997 RDA Bonds.Per the terms of the 1997 bond restructuring,the County began
impounding all Agency tax increment in November 1997 for repayment of the
$5,455,000 1997 RDA Bonds and the $3,111,400 deferred interest debt.As of
June 30,2010,$1,975,097 of tax increment has been impounded and applied to the
deferred interest debt.
L-2
ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY09·10
June 7,2011
Page 3 of 4
The City and the Abalone Cove fund of the Agency entered into a Loan Agreement,
dated November 30,1997,when the City advanced $1,545,000 to the Abalone Cove
fund as a part of the 1997 bond restructuring.An additional $12,000 loan was made
from the City to the Abalone Cove fund in FY02-03 to perform miscellaneous
Abalone Cove Sewer site restoration activities.On December 1,2003,the loan
agreement was revised to capture the annual cost of resources provided by the City;
and to define the maturity date as November 27,2034,which is the legal limit date
for the repayment of indebtedness by the Agency.Principal owed the City by the
Abalone Cove fund was $1 ,985,823 as of June 30,2010.Including accrued interest
of $2,047,326,the total amount owed to the City by the Abalone Cove fund was
$4,033,149 as of June 30,2010.The Consolidated Loan Agreement between the
City and the Agency continues to be subordinate to the payment of the 1997 RDA
Bonds and deferred interest debt.
The Abalone Cove sewer project was completed during FY02-03 and the system is
operational.With the completion of the sewer project,the Abalone Cove fund was
depleted.Any future Abalone Cove Agency projects will require funding by the City.
Portuguese Bend Fund Financing
While the Abalone Cove fund of the Agency has primarily relied upon bond proceeds
to finance landslide abatement projects,the Portuguese Bend fund of the Agency
relies on the City to finance its landslide projects.The City and the Portuguese Bend
fund of the Agency first entered into a Loan Agreement,dated July 1,1990,when
the City began making advances to fund landslide projects in the Portuguese Bend
area of the Agency.Between 1990 and 2000,a total of $4,320,552 was advanced
from the City to the Portuguese Bend fund.As noted above,on December 1,2003,
the loan agreement was revised to capture the annual cost of resources provided by
the City;and to define the maturity date as November 27,2034,which is the legal
limit date for the repayment of indebtedness by the Agency.
Principal owed the City by the Portuguese Bend fund was $4,320,552 as of June 30,
2010.Including accrued interest of $9,240,974,the total amount owed to the City by
the Portuguese Bend fund was $13,561,526 as of June 30,2010.
Purpose of the Consolidated Loan Agreement between the City and Agency
Property values,and therefore tax increment growth,have increased significantly
over the last ten years.If property values continue to grow,there may be sufficient
tax increment to repay a portion of the Agency's debt to the City after the Agency's
debt to the County is repaid in full.
Staff has prepared an analysis titled FY10-11 Tax Increment Projections &Debt
Service Schedule (see Exhibit A).The analysis includes the Agency's debt service
schedule,as well as estimated Agency tax increment projections.The analysis
indicates that if tax increment were to grow by 6.5%each year,as much as $33
L-3
ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY09-10
June 7,2011
Page 4 of 4
million may become available to repay the Agency's debt to the City before the
Agency's ability to collect tax increment expires in 2034.The Governor's revised
proposal for the FY11-12 state budget still includes elimination of redevelopment
agencies;however,the California Legislative Counsel's office has issued an opinion
that the Governor's proposal is illegal.If elimination of redevelopment agencies
were to occur,it is unclear at this time how repayment of the Agency's debt to the
City may be affected.
DISCUSSION
In the event that sufficient tax increment becomes available to repay the City a
portion,or all of the loan amount,the Consolidated Loan Agreement between the
City and the Agency captures the cost of resources provided by the City,including:
1)Annual County administrative fees paid from the City's General fund;3)State
mandated SERAF payments;and 3)Administrative services and facilities (e.g.staff
time,equipment usage,insurance,facilities,and incidental administrative expenses
such as printing costs).
The County continues to charge an annual fee to administer the Agency's tax
increment.The Agency's Debt Service fund has no cash to pay the annual fee;
therefore,the City's General fund must pay for it on behalf of the Agency.The same
is true for the FY09-10 SERAF payment required by state law.The Consolidated
Loan Agreement provides a mechanism to add both the annual fee and the SERAF
payment to the loan balance between the City and Agency;
The FY09-1 0 cost of services to be added to the consolidated loan balance in FY1 0-
11 is $346,483,which includes:
~The state mandated Supplemental Educational Revenue Augmentation Fund
payment of $330,125;and
~The County of Los Angeles property tax increment administration fee of $16,358.
Interest on the advance between the City and Agency continues to be based upon
the interest rate earned by the City's Local Agency Investment Fund (LAIF)deposits
plus three percent.The consolidated loan balance is subordinate to the 1997 RDA
Bonds and the deferred interest debt owed to the County.
FISCAL IMPACT
The advance of $346,483 is a balance sheet transaction and will not affect General
fund reserve.No budget adjustment is required.
Attachments:
Exhibit A -FY1 0-11 Tax Increment Projections &Debt Service Schedule
L-4
CITY OF RANCHO PALOS VERDES REDEVELOPMENT AGENCY
FY10-11 TAX INCREMENT PROJECTIONS &DEBT SERVICE SCHEDULE
EXHIBIT A
Tax 1997 RDA Bonds Deferred City City
Increment Gross Housing Fire Net Debt Service Interest Excess Loans Loans City
Actuall Plan Fiscal Growth Tax Set-Aside District Tax Principal Debt to Tax Principal Interest Loans
Proj.Year Year Assumption Increment 20%17%Increment &Interest County Increment {AI (S)Total
A B I C D E F G E-F-G-H I J H-I-J=K L N •int.rate = M L+M=N
Actual 1 1985-86 N/A 34,228 6,846 5,636 21,746 >- -
Actual 2 1986-87 N/A 67,514 13,503 11,477 42,534 />-
Actual 3 1987-88 N/A 51,341 10,268 8,728 32,345 -- -
Actual 4 1988-89 N/A 122,895 24,579 20,892 77,424 >-- -
Actual 5 1989-90 N/A 188,410 37,682 32,030 118,698 1,279,152 1,279,152
Actual 6 1990-91 N/A 245,084 49,017 41,664 154,403 318,400 148,229 1,745,781
Actual 7 1991-92 N/A 253,462 50,692 41,766 161,004 165,000 180,901 2,091,682
Actual 8 1992-93 N/A 345,490 69,098 57,830 218,562 133,000 215,264 2,439,946
Actual 9 1993-94 N/A 310,438 62,088 52,138 196,212 133,000 181,315 2,754,261
Actual 10 1994-95 N/A 278,238 55,648 46,653 175,937 457,000 252,805 3,464,066
Actual 11 11995-96 N/A 352,457 70,491 59,120 222,846 435,000 319,086 4,218,152
Actual 12 11996-97 N/A 399,428 79,886 67,079 252,463 250,000 366,703 4,834,855
I
Actual 13 1997-98 N/A 472,432 94,486 79,135 298,811 136,375 162,436 1,745,000 501,191 7,081,046
I
Actual 14 1998-99 N/A 463,104 92,621 77,768 292,715 272,750 19,424 541 700,000 600,818 8,381,864
Actual 15 1999-00 N/A 507,473 101,495 85,249 320,729 272,750 17,514 30,465 250,000 731,788 9,363,652
Actual 16 2000-01 N/A 550,417 110,083 92,494 347,839 272,750 47,979 27,110 -855,268 10,218,920
Actual 17 2001-02 N/A 625,243 125,049 103,740 396,454 272,750 85,775 37,929 657,077 10,875,997
Actual 18 2002-03 N/A 699,867 139,973 117,835 442,058 272.750 130,209 39,099 12,000 563,485 11,451,482
Actual 19 2003-04 N/A 727,541 145,508 122,718 459,315 272,750 162,743 23,822 40,355 532,287 12,024,124
Actual 20 2004-05 N/A 741,086 148,217 125,114 467,755 277,625 178,850 11,280 60,907 632,400 12,717,431
Actual 21 2005-06 N/A 843,039 168,608 142,449 531,982 287,125 184,695 60,162 93,540 877,509 13,688,480
Actual 22 2006-07 N/A 916,845 183,369 155,023 578,454 296,125 222,882 59,447 80,498 1,118,488 14,887,466
Actual 23 2007-08 N/A 989,765 197,953 167,503 624,309 309,500 275,793 39,016 22,207 1,100,371 16,010,044
Actual 24 2008-09 N/A 1,092,420 218,484 184,923 689,013 323,125 294,627 71,261 44,485 832,441 16,886,970
Actual 25 2009-10 N/A 1,078,261 215,652 183,625 678,984 330,125 354,606 (5,747)86,831 620,873 17,594,674
BUdget 26 2010-11 6.61%1,149,500 229,900 195,415 724,185 345,375 337,701 41,109 346,483 615,900 18,557,057
Estimated 27 2011-12 6.50%1,224,218 244,844 208,117 771,257 355,750 350,000 65,507 88,967 649,497 19,295,521
Estimated 28 2012-13 ,6.50%1,303,792 260,758 221,645 821,389 370,250 350,000 101,139 21,400 723,582 20,040,503
Estimated 29 2013-14 '6.50%1,388,538 277,708 236,051 874,779 378,875 98,602 397,302 22,000 801,620 20,864,123
Estimated 30 2014-15 6.50%1,478,793 295,759 251,395 931,640 391,625 540,015 22,700 886,725 21,773,548
Estimated 31 2015-16 6.50%1,574,915 314,983 267,735 992,196 408,250 583,946 23,500 979,810 22,776,858
Estimated 32 2016-17 6.50%1,677,284 335,457 285,138 1,056,689 418,750 -637,939 25,028 1,024,959 23,826,844
Estimated 33 '2017-18 6.50%1,786,308 357,262 303,672 1,125,374 438,000 687,374 26,654 1,072,208 24,925,706
Estimated 34 :2018-19 6.50%1,902,418 380,484 323,411 1,198,523 450,875 747,648 28,387 1,121,657 26,075,750
Estimated 35 12019-20 6.50%2,026,075 405,215 344,433 1,276,427 462,500 813,927 30,232 1,173,409 27,279,391
Estimated 36 '2020-21 6.50%2,157,770 431,554 366,821 1,359,395 477,750 881,645 32,197 1,227,573 28,539,160
Estimated 37 '2021-22 6.50%2,298,025 459,605 390,664 1,447,755 496,375 951,380 34,290 1,284,262 29,857,712
Estimated 38 ,2022-23 6.50%2,447,396 489,479 416,057 1,541,860 513,250 1,028,610 36,519 1,343,597 31,237,828
Estimated 39 2023-24 6.50%2,606,477 521,295 443,101 1,642,080 528,375 1,113,705 38,892 1,405,702 32,682,423
Estimated 40"2024-25 6.50%2,775,898 555,180 471,903 1,748,816 541,750 1,207,066 41,420 1,470,709 34,194,552
Estimated 41 2025-26 6.50%2,956,331 591,266 502,576 1,862,489 563,125 1,299,364 44,113 1,538,755 35,777,420
Estimated 42 2026-27 6.50%3,148,493 629,699 535,244 1,983,550 577,375 1,406,175 46,980 1,609,984 37,434,384
Estimated 43 2027-28 6.50%3,353,145 670,629 570,035 2,112,481 594,500 1,517,981 50,034 1,684,547 39,168,965
Estimated 44 2028-29 6.50%3,571,099 714,220 607,087 2,249,793 2,249,793 53,286 1,762,603 40,984,854
Estimated 45 2029-30 6.50%3,803,221 760,644 646,548 2,396,029 2,396,029 56,750 1,844,318 42,885,922
Estimated 46 2030-31 6.50%4,050,430 810,086 688,573 2,551,771 2,551,771 60,438 1,929,867 44,876,227
Estimated 47 2031-32 6.50%4,313,708 862,742 733,330 2,717.636 2,717.636 64,367 2,019,430 46,960,024
Estimated 48 2032-33 6.50%4,594,099 918,820 780,997 2,894,282 -2,894,282 68,551 2,113,201 49,141,776
Estimated 49 2033-34 6.50%4,892,715 978,543 831,762 3,082,411 3,082,411 73,006 2,211,380 51,426.162
Estimated 50'"2034-35 6.50%5,210,742 1,042,148 885,826 3,282,767 3,282,767 77,752 2,314,177 53,818,091
TOTALS 80,047,864 16,009,573 13,590,125 50,448,167 11,909,250 3,111,400 33,753,342 7,720,320 46,097,771
Notes:
•The Agency's ability to issue debt expired on November 27.2004 (based on AB 1290).
..The Redevelopment Plan expires in 2024 .
•••The Agency's ability to collect tax increment expires in 2034
(AJ Includes the total loans made to both the Portuguese Bend fund and the Abalone Cove fund,which also includes annual costs associated with ERAF shifts,County property tax administration,L-5