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RPVCCA_CC_SR_2011_12_20_05_Voluntary_Alt_Redevel_PgmCITY OF MEMORANDUM RANCHO PALOS VERDES TO: FROM: DATE:. SUBJECT: REVIEWED: HONORABLE MAYOR AND MEMBERS OF THE CITY COUN~~ DENNIS McLEAN,DIRECTOR OF FINANCE &INFORMATIO~ TECHNOLOGY DECEMBER 20,2011 VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM- FUNDING OF FY11·12 PAYMENT _() CAROLYN LEHR,CITY MANAGER (]X-- Staff Coordinator:Kathryn Downs,Deputy Director of Finance &Information Technology ~ RECOMMENDATION 1)Adopt Resolution No.2011-__, A RESOLUTION OF CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES,CALIFORNIA,AMENDING RESOLUTION NO.2011-44,THE BUDGET APPROPRIATION FOR FY11-12,TO AMEND THE GENERAL FUND BUDGET. 2)Authorize disbursement of the FY11-12 Voluntary Alternative Redevelopment Program payment when it becomes due. EXECUTIVE SUMMARY The new California redevelopment law enacted in June 2011 dissolves redevelopment agencies,but provides a voluntary program to continue operation of an agency.If the Rancho Palos Verdes Redevelopment Agency (Agency)continues to operate,an estimated $40 million of tax increment may be available through 2034 to repay the Agency's debt to the City's General Fund (currently $18.6 million).Therefore,on August 16th ,the City Council adopted an Ordinance to to participate in the voluntary program, which requires an annual payment. Although the new redevelopment law has been challenged and the California Supreme Court has issued a stay on portions of the new law,Staff recommends the City Council approve an appropriation to make the FY11-12 voluntary program payment if and when it becomes due. 5-1 VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM - FUNDING OF FY11·12 PAYMENT December 20,2011 Page 2 of 3 BACKGROUND &DISCUSSION AS X1 26,which was signed by the Governor of California on June,29,2011,added Parts 1.8 and 1.85 to the Community Redevelopment Law.Part 1.8 immediately suspends most redevelopment agency activities and,among other things,prohibits redevelopment agencies from incurring indebtedness or entering into or modifying contracts.Part 1.85 provides that on October 1,2011,all existing redevelopment agencies and redevelopment agency components of community development agencies are dissolved,and successor agencies are designated as successor entities to the former redevelopment agencies.Part 1.85 imposes numerous requirements on the successor agencies and subjects successor agency actions to the review of oversight boards established under Part 1.85. AS X1 27 was signed by the Governor concurrently with AS X1 26 and added Part 1.9 to the Community Redevelopment Law.Part 1.9 establishes a Voluntary Alternative Redevelopment Program (VARP)whereby a redevelopment agency will,notwithstanding Parts 1.8 and 1.85,be authorized to continue to exist and carry out the provisions of the Community Redevelopment Law. On August 16,2011,the City adopted Ordinance No.524 to participate in the VARP, thereby agreeing to make specified annual payments to the County Auditor-Controller for allocation to special districts and educational entities and authorizing the Agency to continue to exist pursuant to Part 1.9.The Agency owes $6.0 million of debt to the County and $18.6 million of debt to the City (including $11.9 million of accrued interest).If the Agency continues to operate,Staff estimates that perhaps $40 million of tax increment may be available through 2034 to repay the Agency's debt.When the City Council elected to participate in the VARP,it considered that the potential repayment to the General Fund appears to far exceed the annual VARP payments. The City received notification from the California Department of Finance that the City's FY11-12 VARP payment is $91 ,320.Part 1.9 provides that half of the firstVARP payment will be due January 15,2012 with the balance payable by May 15,2012.However,this provision has been stayed and the Supreme Court has indicated that it will consider establishing new payment dates in the event it upholds AS X1 26 and AS X1 27.Future annual payments beginning in FY12-13 are estimated to begin at about $23,000 and grow at the same rate as tax increment growth.However,the state legislature has not yet acted to finalize the basis for the FY12-13 payment,and the amount could be larger than originally estimated.If a payment is missed,the Agency becomes subject to the dissolution law and the City assigns its rights to the State for any payments owed from the Agency,including payments from loan agreements. The exception law (Part 1.9 of state redevelopment law)provides that a participating city and redevelopment agency may enter into an agreement whereby the agency will transfer a portion of its tax increment revenue to the participating city in an amount not to exceed the annual remittance required that year.For FY11-12 only,the tax increment transferred may come from the 20%Set-Aside that would normally be deposited into the Agency's affordable housing fund.On September 20,2011,the City Council adopted Resolution No. 5-2 VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM- FUNDING OF FY11·12 PAYMENT December 20,2011 Page 3 of3 2011-68,which authorized and approved the execution and delivery of a tax increment transfer agreement. Any tax increment funds transferred from the Agency to the City are required to be spent only "for the purpose of financing activities within the redevelopment area that are related to accomplishing the redevelopment agency project goals."The transferred tax increment cannot directly be used to make the VARP payment.In addition,a tax increment transfer can only be made after the stay is lifted,at which time Staff may propose a landslide mitigation project to utilize the funds. The VARP payment must be funded by the City,and cannot be funded by the Redevelopment Agency;therefore,Staff recommends adopting the proposed resolution to appropriate General Fund money for the FY11-12 payment of $91 ,320. FISCAL IMPACT The estimated June 30,2012 General Fund Reserve in excess of the policy threshold is $1,052,715 (see Attachment A,FY11-12 Statement of Estimated General Fund Reserves). If the City Council adopts the proposed resolution,the revised estimate will be $915,735. 5-3 RESOLUTION NO.2011- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES,CALIFORNIA,AMENDING RESOLUTION NO.2011-44,THE BUDGET APPROPRIATON FOR FY11-12,TO AMEND THE GENERAL FUND BUDGET. WHEREAS,on June 21,2011,the City Council of the City of Rancho Palos Verdes adopted Resolution No.2011-44,approving the City's budget for FY 11-12;and WHEREAS,on August 16,2011,the City Council of the City of Rancho Palos Verdes adopted Ordinance No.524 to participate in the Voluntary Alternative Redevelopment Program (VARP)established by Part 1.9 of Community Redevelopment Law;and WHEREAS,the City is required to make an annual payment to the state to participate in the VARP;and WHEREAS,the California Department of Finance has notified the City that its fiscal year 2011-12 VARP payment is $91,320;and WHEREAS,one-half of the 2011-12 VARP payment ($45,660)is due on January 15, 2012,and the final payment of $45,660 is due on May 15,2012. NOW,THEREFORE,THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES DOES HEREBY FIND,DETERMINE,AND RESOLVE AS FOLLOWS: The following adjustment be made to the FY11-12 budget: Increase the General Fund Budget as follows: City Manager #101-1002-411-69-00 Miscellaneous Expenditures $91,320 PASSED,APPROVED,AND ADOPTED THIS 20TH DAY OF DECEMBER 2011. Mayor Attest: City Clerk State of California ) Cou nty of Los Angeles )ss City of Rancho Palos Verdes ) 5-4 I,Carla Morreale,City Clerk of the City of Rancho Palos Verdes,hereby certify that the above Resolution No.2011-was duly and regularly passed and adopted by the said City Council at regular meeting thereof held on December 20,2011. City Clerk Resolution No.2011-73 Page 2 of 25-5 FY11·12 Statement of Estimated General Fund Reserves Adjustments: Beginning Reserves Revenues Expenditures Attachment A Ending Net Transfers Reserves ..:i:;,'::::i::::::::;"..•.4t:::;i>;?:S'''f.~O:'llit:ri 9,641 Unclaimed Deposits Skate &Dog Park Analysis Year-End Adjustments Continuing Appropriations FY10-11 Final Results 81212011 9120/2011 9/20/2011 9/20/2011 NIA 629,431 1,593,188 (629,431) 33,317 (24,400) Net Transfers include both operating transfers from and to the General fund.Originally budgeted Net Transfers are adjusted when staff becomes aware that an additional 0 eratin transfer is needed to satis an unantici ated shortfall within another fund;and that shortfall must be funded with General fund monies. Ending Reserves are the estimated 6/30/12 General fund reserves at the time of budget adoption,Adjusted Ending Reserves is a calculation based on subse uent ad'ustments to Be innin Reserves,Revenues Ex enditures and Net Transfers. 5-6