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REDEVELOPMENT AGENCY STAFF REPORT
DATE: January 18, 2012 CONSENT CALENDAR
SUBJECT: REPAYMENT OF COMMUNITY REDEVELOPMENT AGENCY LOANS
FROM: David H. Ready, City Manager
BY: Department of Finance and Treasury
SUMMARY
On December 29, 2011, the California Supreme Court upheld AB1X 26, which dissolves
all of the redevelopment agencies in the State of California. The law required that all
agency activities be terminated, except for the implementation of existing obligations.
The unwinding of a redevelopment agency would be overseen by a successor entity
designed to liquidate the Agency's assets as rapidly as possible.
The Agency has incurred obligations to the City over a number of years and
established, documented and recorded the repayment schedule for such obligations.
These loan repayments are those the City and Agency undertake annually to transfer
working capital to the Merged Area #1 and #2 Capital Project Funds from the Merged
Area #1 and #2 Debt Service Funds. The legal and appropriate way to accomplish this
is via the annual repayment of loans to and relending of funds from the General Fund.
AB1X 26 (Section 34169(g)(1)) also requires Agencies to submit an Enforceable
Obligation Payments Schedule (EOPS). Section 34167(h) provides that after the EOPS
is adopted, the Agency shall not make a payment unless the obligation is listed on the
EOPS (other than payments required to meet obligations with respect to bonded
indebtedness). These debts are listed on the EOPS and eligible to be paid.
RECOMMENDATION:
CITY COUNCIL RECOMMENDATION:
1) The City Council accept repayments of loans from the Merged Area #1
and Merged Area #2 Debt Service Funds in the amount of $1,505,000 and
$100,000, respectively; and
ITEM NO.
City Council/Community Redevelopment Agency Staff Report
January 18, 2012 -- Page 2
Repayment of CRA Loans
2) The City Council accept the acceleration and repayments of loans made
to the Agency from the Wastewater Treatment Plant Fund and the former
Recycling Facility Fee Fund (now Sustainability Fund) in the amount of
$413,500 and $1,095,759, plus interest, respectively; and
COMMUNITY REDEVELOPMENT AGENCY RECOMMENDATION:
1) The Community Redevelopment Agency approve repayment of loans to
the City of Palm Springs by the Merged Area #1 and Merged Area #2 Debt
Service Funds in the amount of $1,505,000 and $100,000, respectively;
and
2) Adopt Resolution No. "A RESOLUTION OF THE
COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM
SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2011-
2012 FISCAL YEAR, APPROPRIATING AN ADDITIONAL $38,215 IN
FUND 851 FOR THE PURPOSE OF REPAYING THE ANNUAL
ADMINISTRATION LOAN.
3) The Community Redevelopment Agency approve the acceleration and
repayment of loans to the City of Palm Springs Wastewater Treatment
Plant Fund and the former Recycling Facility Fee Fund (now Sustainability
Fund) in the amount of $413,500 and $1,095,759, plus interest,
respectively by the Merged Area #2 Debt Service Fund; and
4) Adopt Resolution No. "A RESOLUTION OF THE
COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM
SPRINGS, CALIFORNIA, AMENDING THE BUDGET FOR THE 2011-
2012 FISCAL YEAR, TRANSFERRING $1,021,794.46 IN
UNENCUMBERED 2007 TAX ALLOCATION BOND PROCEEDS FROM
MERGED AREA #2 CAPITAL PROJECT FUND (FUND 812) TO
MERGED AREA #2 DEBT SERVICE FUND FOR THE PURPOSE OF
REPAYING THE SUSTAINABILITY FUND LOAN.
BACKGROUND:
In January, 2011, the Governor proposed ending the 425 local redevelopment agencies
in California, in a move to secure $1.7 billion in local property taxes to be used to patch
the State's $25 billion budget deficit. The Legislature passed AB1X 26, which was
intended to abolish redevelopment agencies by October 1, 2011: it required that all
agency activities be terminated, except for the implementation of existing obligations.
The unwinding of a redevelopment agency would be overseen by a successor entity
designed to liquidate the Agency's assets as rapidly as possible.
02
City Council/Community Redevelopment Agency Staff Report
January 18, 2012 -- Page 3
Repayment of CRA Loans
On December 29, 2011, the California Supreme Court upheld AB1X 26, which dissolves
all of the redevelopment agencies in the State of California, and struck down AB1X 27,
which allowed redevelopment agencies to remain in existence if such agency opted to
the "Voluntary Alternative Redevelopment Program" (WARP").
In the California Supreme Court decision, the Court also extended certain deadlines,
including the deadline for making the election to become the Successor Agency and
Successor Housing Agency, to January 13, 2012. The date of dissolution was moved
from October 1, 2011 to February 1, 2012 and certain other deadlines were moved
forward by four months.
Additionally, AB1X 26 (Section 34169(g)(1)) requires Agencies to submit an
Enforceable Obligation Payments Schedule (EOPS). Section 34167(h) provides that
after the EOPS is adopted, the Agency shall not make a payment unless the obligation
is listed on the EOPS (other than payments required to meet obligations with respect to
bonded indebtedness).
The Agency has incurred obligations to the City over a number of years and
established, documented and recorded the repayment schedule for such obligations in
January, 2011. Furthermore, the Agency currently contracts with the City to provide
staff services to administer its programs and activities and provide for the
reimbursement to the City for such services. Pursuant to the Agreement, the Agency
shall have access to the services and facilities of the planning department, the planning
commission, the city engineer and the other departments and offices of the City. Each
year, these costs exceed $1,000,000, a portion of which is allocable to each project
area. Pursuant to the Agreement, the Agency shall pay the City for such costs.
In January, 2011, the Agency and City Council approved resolutions authorizing the
execution of two agreements between the City and the Agency relating to these
transactions. One agreement formalized certain existing obligations the Agency had to
the City, which were approved in accordance with the California Redevelopment Law,
such as the contribution to Convention Center debt and certain inter-fund loans. The
other agreement provided for long-term staffing costs relating to the administration of
the Agency, in-lieu of the Agency's current year-to-year contract.
State rules governing redevelopment accounting require that tax increment received by
an Agency be deposited in the Debt Service Fund of the Agency, and do not allow the
use of tax increment for the "working capital" of the Agency, including administrative
costs or even capital projects.
The correct and legal way to fund these activities is for the General Fund of the City to
lend the Agency's Capital Projects Funds the amount necessary to cover administrative
and capital project costs. The loans are then annually repaid to the City by the
Agency's Debt Service Fund. This is similar to how a bond issue works, where the
proceeds of the issue are deposit are placed in the Capital Projects Funds to be utilized,
while the repayment of the bonds comes from the Debt Service Fund.
03
City Council/Community Redevelopment Agency Staff Report
January 18, 2012 -- Page 4
Repayment of CRA Loans
This is the accepted and established mechanism for funding the Capital Projects Fund,
practiced by more than 90% of the redevelopment agencies statewide.
As the amounts of the loans are generally the same from year to year, the net
indebtedness of the CRA project areas typically remains the same and the net effect on
the General Fund is zero. While tax increment in the Agency has increased
dramatically, administrative costs have been stable over the past several years.
There are four budget resolutions attached amending the 2011-2012 budget, two of
which amend the General Fund budget and one each for Merged Project Area #1 and
#2. These are necessary to comply with the accounting rules.
Included in this series of actions are:
Project Repayment
Action Area to... Amount
Repayment of City Merged General Fund Budgeted appropriation was
Administration Loan, Budget Area #1 $1,466,785. Loan amount was
Amendment to conform $1,505,000. Amendment is for
appropriation the $38,215 difference.
Acceleration and repayment of Merged Sustainability Principal amount of$1,095,759,
Sustainability Fund loan for PSL Area #2 Fund plus interest.
236 acquisition (2006); plus,
Budget Amendment authorizing
the transfer of$1,021,794.46 in
unused 2007 Tax Allocation
Bonds for repayment of loan.
Acceleration and repayment of Merged Wastewater Principal amount of$413,500,
Wastewater Treatment Plant Area#2 Treatment plus interest.
Fund loan for Plaza Theatre Plant Fund
renovation (1991).
These include a repayment by the Agency for the annual administration loan (in Merged
Area #1 and Merged Area #2), approved in the 2011-2012 budget; approving the 1991
loans to the Agency from the Wastewater Treatment Plant; approving the 2006 Loan
from the Recycling (now Sustainability) Fund for the acquisition of the Jackie Lee
Houston Plaza Leasehold (PSL 236). Also, the Agency has adopted a resolution
making the findings that the repayment of a portion of the 2004 Convention Center
Lease Revenue Bonds benefit the project areas, and makes a contribution of $1.6
million toward those bonds from Merged Project Area #1 and Merged Project Area #2.
04
City Council/Community Redevelopment Agency Staff Report
January 18, 2012 -- Page 5
Repayment of CRA Loans
Finally, the Agency has been making the annual lease payment on PSL 236 related to
the Jackie Lee Houston Plaza.
These are not new obligations to the Agency, but have been documented and adopted
over many years. For example, the finding related to the Agency's participation in the
Convention Center financing go back to 1995. In that year, the City and the Agency
made certain findings relating to the payment by the Agency of all or part of the costs of
the installation and construction of the Convention Center improvements, located within
the Tahquitz Andreas Project Area (now part of Merged Project Area #2). Pursuant to
Resolution 976, the Agency approved the payments to the City of approximately 6.64%
of the debt service on the City's Lease Revenue Bonds, 1991 Series A (Convention
Center Project).
After issuance of the 2004 Bonds for the Convention Center expansion, the City's debt
service obligation increased by approximately $2.7 million annually to an average of
$5.8 million. The City was relying on the increase in transient occupancy tax that would
result from an expansion of the Facility to pay the increased lease payments. However,
the construction of the Convention Center itself was more costly than projected due to
soaring construction prices relating to the cost of steel, and the estimated increase in
transient occupancy taxes did not materialize. When additional hotel rooms are built,
transient occupancy taxes should increase significantly. On the other hand, the
property tax increment from the project areas surrounding the Facility did increase
substantially as a direct and indirect result of the expansion of the Facility.
The Agency increased the amount of its payments as a result of the expansion of the
Convention Center undertaken in 2004 and expected to make payments with tax
increment funds, which it has done in subsequent years.
In addition, in September, 2006 the City Council approved an amended sublease of
Business Lease PSL-236 ("Agreement") for a 1.77 acre parcel at the southwest corner
of Amado Road and Calle Alvarado with United Condominium Corporation, in the
amount of$110,000 per year. The Agency intended to cover the annual lease payment
to United Condominium Corporation, to be paid from Merged Redevelopment Project
Area No. 2. In addition, the City borrowed $1,260,000 from the Recycling Facility Fee
Fund to acquire the lease; the debt service on that loan is $100,000 per year. Both
were to be and have been paid from Merged Project Area No. 2.
The acquisition gave the City control over the parcel immediately across the street from
the new front door of the Convention Center and was acquired for the benefit of the
Convention Center; the City felt that the opportunity to ever have a dramatic front plaza
at the Convention Center, with the potential for outdoor, park-like seating areas and/or
drop-off areas was necessary for the success of the Convention Center.
The Agency assisted the City in the development of the parcel, now developed as the
Jackie Lee Houston Plaza, which forms part of the linkage between the Mondrian and
05
City Council/Community Redevelopment Agency Staff Report
January 18, 2012 -- Page 6
Repayment of CRA Loans
other Convention Center hotel and be essential in the Section 14 Streetscape Plan.
Section 33679 of the California Community Redevelopment Law (CRL) states that
before a redevelopment agency commits to use the portion of tax increment revenues to
be allocated and paid to an agency pursuant to subdivision (b) of Section 33670 of the
CRL (tax increment financing) for the purpose of paying all or part of the value of land
for, and the cost of the installation and construction of, any publicly owned building,
other than parking facilities, the legislative body shall hold a public hearing.
Summary Reports describing these transactions were prepared pursuant to Sections
33445 and 33679 of the CRL.
These lease obligations and the Convention Center debt obligations were budgeted in
the 2011-2012 fiscal year, so there is no additional Agency action required to make
those payments.
The Wastewater Treatment Plant loan dates to 1991, when the Agency borrowed
$827,000 from the fund for expenses related to the renovation and rehabilitation of the
Plaza Theatre. In October, 1991, the Agency found that the Baristo Farrell Project Area
and Project Area No. 9 benefited from the project and had the capacity to make the
payments to the fund. Only Merged Area #2 (which includes the former Baristo Farrell)
has sufficient cash to repay the loan at this time, in the amount of $413,500 plus
interest.
Staff recommends, however, that the City reserve these funds pending the outcome of
any cleanup legislation or other litigation that may occur over the next several months.
Geoffrey S. Kiehl ohn S Ra nd
Director of Finance and Treasurer Qirec r o ommunity & Economic
Development
Thomas J. Wil n David H. Ready
Assistant City Manager City Manager
/4
Dougl s C. Holland
City Attorney
Attachments: Budget Resolutions
06
RESOLUTION NO.
A RESOLUTION OF THE COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA,
AMENDING THE BUDGET FOR FISCAL YEAR 2011-12.
WHEREAS, Resolution No. 1420 approving the Budget for the Fiscal Year 2011-
2012 was adopted on June 1, 2011; and
WHEREAS the City Manager has recommended, and the City Council desires to
approve, certain amendments to the budget for Fiscal Year 2011-12.
NOW THEREFORE THE CITY COUNCIL DETERMINES, RESOLVES AND
APPROVES AS FOLLOWS:
SECTION 1. The Director of Finance is authorized to record inter-fund cash
transfers as required in accordance with this Resolution, and Resolution No. 1420,
adopting the Budget for Fiscal Year 2011-12 is hereby amended as follows:
SOURCE(S):
Fund Activity Account Amount
852 29301 $1,021,794.46
Merged Area #2 Fund Balance
ADDITION(S):
Fund Activity Account Amount
852 8202 49625 $1,021,794.46
Merged Area #2 Tahquitz Andreas City Loan Principal
PURPOSE: Repayment of loans to the Redevelopment Agency.
ADOPTED THIS 18TH DAY OF JANUARY, 2012.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
07
Resolution No.
Page 2
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
08
RESOLUTION NO.
A RESOLUTION OF THE COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA,
AMENDING THE BUDGET FOR FISCAL YEAR 2011-12.
WHEREAS, Resolution No. 1420 approving the Budget for the Fiscal Year 2011-
2012 was adopted on June 1, 2011; and
WHEREAS the City Manager has recommended, and the City Council desires to
approve, certain amendments to the budget for Fiscal Year 2011-12.
NOW THEREFORE THE CITY COUNCIL DETERMINES, RESOLVES AND
APPROVES AS FOLLOWS:
SECTION 1. The Director of Finance is authorized to record inter-fund cash
transfers as required in accordance with this Resolution, and Resolution No. 1420,
adopting the Budget for Fiscal Year 2011-12 is hereby amended as follows:
SOURCE(S):
Fund Activity Account Amount
851 29301 $38,215
Merged Area #1 Fund Balance
ADDITION(S):
Fund Activity Account Amount
851 8201 49625 $38,215
Merged Area #1 Central Business City Loan Principal
District
PURPOSE: Repayment of loans to the Redevelopment Agency.
ADOPTED THIS 18TH DAY OF JANUARY, 2012.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
09
Resolution No.
Page 2
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a regular
meeting of the City Council of the City of Palm Springs on by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
to