RPVCCA_SR_2010_03_02_05_Consolidate_Load_with_RDACITY OF
MEMORANDUM
RANCHO PALOS VERDES
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
Project Manager:
HONORABLE CHAIR &BOARD MEMBERS
DENNIS McLEAN,DIRECTOR OF FINANCE &~
INFORMATION TECHNOLOGY ~
MARCH 2,2010
ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN
THE CITY AND REDEVELOPMENT AGENCY FOR
EXPENSES INCURRED DURING FY08·09
CAROLYN LEHR,EXECUTIVE DIRECTOR ~
Kathryn Downs,Deputy Director of Finance &Information
Technology
RECOMMENDATION
Receive and file this staff report,which provides information regarding FY09-1 0 loan
additions to the Rancho Palos Verdes Redevelopment Agency in the amount of
$86,831 for expenses incurred by the City during FY08-09.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 FY09-10
additions to the consolidated loan balance for expenses incurred by the City during
FY08-09 in the amount of $86,831,which includes the following:
~The County of Los Angeles property tax increment administration fee of $18,571 ;
and
~The cost of administrative services provided by the City to the Agency of
$68,260,which includes only staff time.
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ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY08·09
March 2,2010
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Administrative staff time for FY08-09 includes management of the affordable
housing condominium acquisitions and the Mirandela Senior Affordable Housing
project.
The FY09-1 0 additions to the consolidated loan balance are for expenditures made
from the General fund of the City and will accrue interest as of July 1,2009.The
FY09-10 budget included the expectation that the General fund would advance an
additional $45,800 during FY09-10.Because the advances are loans,rather than
expenditures,no budget appropriation is necessary.
BACKGROUND
The Agency was formed in 1984 with the purpose of financing long-term capital
improvements (i.e.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 ofttie 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 ofthe
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 30,2009,$1,620,491 of tax increment has been impounded and applied to the
deferred interest debt.
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ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY08-09
March 2,2010
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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 $1,898,992 as of June 30,2009.Including accrued interest
of $1,905,005,the total amount owed to the City by the Abalone Cove fund was
$3,803,997 as of June 30,2009.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,
2009.Including accrued interest of $8,762,421,the total amount owed to the City by
the Portuguese Bend fund was $13,082,973 as of June 30,2009.
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 FY09-10 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 first five years
of the analysis use the same property value growth rates and interest rates as
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ADDITIONS TO THE CONSOLIDATED LOAN BETWEEN THE CITY AND
REDEVELOPMENT AGENCY FOR EXPENSES INCURRED DURING FY08-09
March 2,2010
Page 4 of 4
presented in the 2009 Financial Model.The analysis indicates that as much as
$24.7 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.
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;and 2)
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
Consolidated Loan Agreement provides a mechanism to add the annual fee to the
loan balance between the City and Agency.
Per the Consolidated Loan Agreement,each July 1st,the City's department heads
confirm the level of service provided to the Agency during the fiscal year just ended.
Staff calculates the total cost of services provided to the Agency and amounts
remitted on behalf of the Agency for addition to the consolidated loan balance.It
would not have been appropriate to charge the cost of administrative services
provided by the City before the Agency's capital improvement projects were
complete.
The FY08-09 cost of services to be added to the consolidated loan balance in FY09-
10 is $86,831,which includes:
1.The County fee of $18,571 for administering the Agency's property tax
increment;and
2.The cost of administrative services provided by the City to the Agency of
$68,260,which includes only staff time.
Interest on the advance between the City and Agency continues to be based upon
the interest rate earned by theCity'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 $86,831 is a balance sheet transaction and will not affect General
fund reserve.No budget adjustment is required.
Attachments:
Exhibit A -FY09-10 Tax Increment Projections &Debt Service Schedule 5-4
CITY OF RANCHO PALOS VERDES REDEVELOPMENT AGENCY
FY09-10 TAX INCREMENT PROJECTIONS &DEBT SERVICE SCHEDULE
EXHIBIT A
Tax Tax Increment City City
Increment Net of 1997 RDA Fire Deferred Excess Loans Loans City
Actuall Plan Fiscal Growth 20%Housing Bonds Debt Authority Interest Total Tax Increment Principal Interest Loans
Proj.Year Year Rate Set-Aside Service (P&I)Pass-Thru Debt Outflows Available (A)(B)Total
A B C D E F G H F+G+H=I E-I=J L N •into rate = M L+M=N
Cumulative 85-86 to 07-08 1,325,864 6,175,060 9,834,985 16,010,045
Actual 24 2008-09 900,840 309,500 187,211 294,627 791,338 109,502 44,485 832,441 16,886,971
Budget 25 2009-10 6.70%961,196 323,125 204,254 354,606 881,985 79,211 86,831 759,914 17,733,716
Proj.26 2010-11 3.00%990,032 330,125 210,382 371,560 912,067 77,965 375,925 886,686 18,996,326
Proj.27 2011-12 3.50%1,024,683 345,375 217,745 380,869 943,989 80,694 115,200 1,139,780 20,251,306
Proj.28 2012-13 4.00%1,065,671 355,750 226,455 383,873 966,078 99,592 48,100 1,518,848 21,818,254
Proj.29 2013-14 4.50%1,113,626 370,250 236,645 606,895 506,730 49,100 1,745,460 23,612,814
Proj.30 2014-15 4.50%1,163,739 378,875 247,295 626,170 537,569 50,100 1,889,025 25,551,939
Proj.31 2015-16 4.50%1,216,107 391,625 258,423 650,048 566,059 52,355 2,044,155 27,648,449
Proj.32 2016·17 4.50%1,270,832 408,250 270,052 678,302 592,530 54,710 2,211,876 29,915,036
Proj.33 2017-18 4.50%1,328,019 418,750 282,204 700,954 627,065 57,172 2,393,203 32,365,411
Proj.34 2018-19 4.50%1,387,780 438,000 294,903 732,903 654,877 59,745 2,589,233 35,014,389
Proj.35 2019-20 4.50%1,450,230 450,875 308,174 759,049 691,182 62,434 2,801,151 37,877,974
Proj.36 2020-21 4.50%1,515,491 462,500 322,042 784,542 730,949 65,243 3,030,238 40,973,455
Proj.37 2021-22 4.50%1,583,688 477,750 336,534 814,284 769,404 68,179 3,277,876 44,319,510
Proj.38 2022-23 4.50%1,654,954 496,375 351,678 848,053 806,901 71,247 3,545,561 47,936,318
Proj.39 2023·24 4.50%1,729,427 513,250 367,503 880,753 848,674 74,453 3,834,905 51,845,677
Proj.40··2024-25 4.50%1,807,251 528,375 384,041 912,416 894,835 77,804 4,147,654 56,071,135
Proj.41 2025-26 4.50%1,888,577 541,750 401,323 943,073 945,505 81,305 4,485,691 60,638,131
Proj.42 2026-27 4.50%1,973,563 563,125 419,382 982,507 991,056 84,964 4,851,050 65,574,145
Proj.43 2027-28 4.50%2,062,374 577,375 438,254 1,015,629 1,046,744 88,787 5,245,932 70,908,864
Proj.44 2028-29 4.50%2,155,180 594,500 457,976 1,052,476 1,102,705 92,782 5,672,709 76,674,355
Proj.45 2029-30 4.50%2,252,164 -478,585 478,585 1,773,579 96,958 6,133,948 82,905,261
Proj.46 2030-31 4.50%2,353,511 -500,121 500,121 1,853,390 101,321 6,632,421 89,639,003
Proj.47 2031-32 4.50%2,459,419 -522,627 522,627 1,936,792 105,880 7,171,120 96,916,003
Proj.48 2032-33 4.50%2,570,093 -546,145 546,145 2,023,948 110,645 7,753,280 104,779,928
Proj.49 2033-34 4.50%2,685,747 -570,721 570,721 2,115,026 115,624 8,382,394 113,277,947
Proj.50***2034-35 4.50%2,806,606 -596,404 596,404 2,210,202 120,827 9,062,236 122,461,009
TOTALS 45,370,801 9,275,500 9,637,078 3,111,400 20,698,114 24,672,687 8,587,236 113,873,773
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.
(A)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 administratiol
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