Loading...
HomeMy WebLinkAbout10/16/2002 - STAFF REPORTS (2) DATE: October 16, 2002 TO: Community Redevelopment Agency and City Council FROM: Director of Community & Economic Development and Director of Finance &Treasurer APPROVAL OF AMENDMENT TO THE APRIL 18, 1989 PASS-THROUGH AGREEMENT BY & BETWEEN THE COUNTY OF RIVERSIDE (THE "COUNTY"), THE CITY OF PALM SPRINGS (THE "CITY") AND PALM SPRINGS REDEVELOPMENT AGENCY (THE "AGENCY"). RECOMMENDATION: It is recommended that the Agency and City Council approve the attached Amendment to the Agreement for Cooperation (or Pass-Through Agreement), dated April 18, 1989 by and between the County of Riverside, the City of Palm Springs and the Palm Springs Community Redevelopment Agency. The Amendment provides for a clarification in the methodology to be used in future calculations of annual tax revenue allocation payments and subsequent reimbursements to the County for deferred property tax revenue pass-through payments for the Agency's Project Area #9, now part of Merged Project Area No. 1. SUMMARY: The Amendment clarifies the formula and timing by which the County receives a portion of the property tax increment of Agency Project Area No. 9. As a result of the Amendment, the Agency s cash flow is projected to be enhanced by approximately$157,000 in Fiscal Year 2002-03, and, based on a 4% growth rate, by an average of $288,000 per year for the next twelve years thereafter. These additional funds, as well as all other pass-through amounts due to the County but deferred under the terms of the Agreement, would eventually be paid to the County over a seven-year period once the annual increment for Project Area No. 9 reaches $3 million, or the total of deferred pass-through amounts to the County equals $4.2 million, whichever occurs first. BACKGROUND: On an annual basis, the property tax increment for Project Area No. 9 is determined by subtracting the base year property taxes from the current year's tax level. The County is due a portion of the property tax increment for each year based upon its then current tax percentage (currently approximately 27%). To allow for the Agency to benefit from much-needed additional cash flow during the early years of the Project Area's existence, the Agency, City and County agreed in 1989 that the Agency would retain certain amounts otherwise due to the County until such time as specified tax increment levels, or thresholds, were reached. This "up-front capital" is to be reimbursed to the County over a seven- year period once the tax increment level reaches $3 million, or the total amount of deferred payments to the County reaches $4.2 million, whichever occurs first. In effect, the County agreed to defer its receipt of a portion of its share of the tax increment until such time as the Project Area would be receiving a significantly larger amount of annual tax increment. C m County Pass-Through Agreement October 16, 2002 Page 2 The original Cooperation Agreement dated April 18, 1989 outlined the terms of the payment deferrals and the eventual 100% reimbursement or pass-through to the County, over time. The initial annual pass-through payments to the County were to be determined by a schedule of tiered percentages tied to the level of tax increment revenues received annually. For example, during those years in which the total tax increment was less than $1 million, the Agency would retain 90% of the amount due to the County, and the County would receive the remaining 10%. The 90% retained by the Agency would be scheduled for payment to the County over a future seven-year period once the previously described trigger thresholds of $3 million and $4.2 million were achieved. During fiscal year 1990-91, the County's share of the total annual tax increment of $445,284 was $120,747. Under the terms of the Agreement, the County received 10% of that amount, or $12,075, and the Agency retained the remaining 90%, or $108,672. The percentage amount to be initially paid to the County would increase (and the percentage amount initially retained by the Agency would decrease) as total tax increment collections for the Project Area increased. The County would continue to receive initial payments of 10% of the tax increment due the County until such time that the tax increment reached $1 million, increasing to 25% for the second million dollars ($1 million to $2 million), 50% for the third million dollars ($2 million to $3 million) and 100% thereafter. The amounts retained by the Agency, along with future similar amounts, would be repaid to the County once the previously described trigger thresholds of$3 million or$4.2 million were achieved. Unfortunately, as time passed, it was discovered that the Agreement as currently worded is ambiguous and does not properly represent the original intent of the parties. The Agreement uses the terms "cumulative" and "annual" interchangeably to describe how the property tax increment is to be split between the Agency and County. The County interpreted the agreement to mean that the percentage share of property tax increment that it would receive annually would be based on a cumulative threshold (i.e., each year's total tax increment added to the total of all previous years' tax increment). Under the County's interpretation the percentage thresholds of $1-$3 million would be reached much more quickly than under the Agency's interpretation whereby the percentage split should be based on annual thresholds (i.e., each year's percentage split is calculated on that individual year's tax collections). In the early years of the Agreement, the difference of opinion was irrelevant because the thresholds that required higher rates of pass-throughs to the County were not reached under either measure. However, over the last few years, the County has received a total of approximately $349,000 more ($491,000 versus $142,000) in pass-through payments under the "cumulative" measure than it would have received under an annual calculation. Almost 2/3 of the $349,000 difference is attributable to fiscal years 2000-01 and 2001-02. To correct the current situation and avoid litigation, staff from both the Agency and County have drafted a minor modification of the Agreement's wording. Beginning with Fiscal Year 2002-03, the Amendment provides for an annual, rather than cumulative, pass-through threshold for determining annual payments. The overall effect of the revised wording will be a reduction in future annual County Pass-Through Agreement October 16, 2002 Page 3 payments to the County of the initial pass-through payments. Essentially, the amendment adjusts the annual cash flow to the Agency from the project area. All amounts due to the County that are not initially passed through to the County (both in past and future years), will eventually be repaid to the County over a seven-year period once the tax increment level reaches $3 million, or the total amount of deferred payments to the County reaches $4.2 million, whichever occurs first. Under the terms of the amended Agreement, there would be no retroactive adjustment of prior years' payments, which were calculated under the language of the Agreement as originally executed. There also would be no revision in the dollar value of the thresholds that trigger reimbursement of previously deferred payments as provided for in the original Agreement. These repayments would begin in the third year after the trigger threshold has been reached and would occur over a seven-year period. At the time the original Agreement was executed in 1989, the repayment was projected to begin in 2011, Current projections under the terms of the amended Agreement indicate that this repayment would begin in 2017, the third year after the trigger of $4.2 million in total deferred payments to the County is projected to be reached. The required repayments to the County would be made in equal installments of $600,000 per year over seven years beginning in fiscal year 2017-18. At that time, the tax increment from Project Area No. 9 is currently projected to be in excess of$2.3 million per year. The proposed Amendment was presented to the County Board of Supervisors for its approval on October 8, 2002. Submitted by: o (.. John S ymond Thomas M. Kanarr Director of Community Director of Finance & Treasurer & Economic Development Approved: Executive Director Attachments: 1. Agency Resolution 2. City Council Minute Order 3. Amendment AMENDMENT TO AGREEMENT FOR COOPERATION THIS AMENDMENT TO AGREEMENT ("Amendment") is entered into on the_day Of , 2002 by and between the COUNTY OF RIVERSIDE (the "County") and the CITY OF PALM SPRINGS, (the "City") and the COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA (the"Agency"). RECITALS A. On April 18, 1989, County, City and Agency entered into that certain Agreement for Cooperation ("Agreement") to provide that the County shall receive a portion of the tax revenues generated within the Redevelopment Project No. 9 Area to alleviate any financial burden or detriment caused to the County by the implementation of the Redevelopment Plans. B. The parties have a disagreement regarding the methodology used in the annual calculation of tax revenues to be retained by the County under the terms of the Agreement. Based upon the County's interpretation of the methodology to be used, the revenues retained by the County for the period beginning with the effective date of the Agreement through fiscal year 2001-02 are approximately $349,000 greater than under the City's interpretation for the same period. C. The parties wish to resolve this disagreement by amending the Agreement to clarify the methodology to be used in future calculations of the allocation of tax revenues and allowing the County to retain those tax revenues previously reserved by the County and thereby alleviate all ambiguities related to future allocations. COVENANTS NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto now amend the following sections of the Agreement as follows: Section 2.01. Allocation of Tax Revenues shall be amended as follows: 1) Effective July 1, 2002 (i.e. the start of Fiscal Year 2002-03), the word "cumulative" shall be changed to "annual" in each instance in which it appears in Sub-Sections 2.01.a., 2.01.b., and 2.01.c. 2) The following paragraph shall be inserted immediately following Sub-Section 2.01.d.: For example, in Fiscal Year 2002-03 or any subsequent Fiscal Year, subject to the repayment provisions and limitation provided in subsequent paragraphs of this Section 2.01, if the annual Total Tax Increment were $3,200,000 and the County's general tax levy were 27.62 the appropriate calculation and payment to the County would be: $1,000,000 X 0.2762 X 10% _ $ 27,620 $1,000,000 X 0.2762 X 25% _ $ 69,050 $1,000,000 X 0,2762 X 50% _ $138,100 $ 200,000 X 0.2762 X 100% = 55,240 $290,010 Section 2.04. Agreement on Prior Payments to County shall be added to read as follows: The parties hereto agree that the attached Schedule A accurately reflects prior payments received by the County from the Agency under the terms of this Agreement c ira ., - V beginning with Fiscal Year 1990-91 and continuing through Fiscal Year 2001-02 and furthermore, that the County will be keeping the funds it has already reserved in accordance with this Schedule. THIS AMENDMENT fully resolves the previous disagreement between the parties regarding the methodology used in the annual calculation of tax revenues to be retained by the County and the amounts previously reserved by the County. While the City and Agency do not agree with the County's prior methodology, the City and Agency are willing to release any claim for reimbursement in exchange for the County's approval of this Amendment and future application of the provisions hereof. FULL FORCE AND EFFECT. Except as specifically provided in this Amendment, all terms and conditions in the Agreement shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed the Amendment the day and year first written above. COUNTY OF RIVERSIDE ATTEST: By: Chairman, Board of Supervisors By: APPROVED AS TO FORM: By: County Counsel CITY OF PALM SPRINGS, a municipal corporation ATTEST: By: David H. Ready By: City Manager City Clerk APPROVED AS TO FORM: By: City Attorney COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA ATTEST: By: Chairman By: Assistant Secretary APPROVED AS TO FORM: By: C Ca W- qw Agency Counsel [END OF SIGNATURES] SCHEDULE A PALM SPRINGS REDEVELOPMENT PROJECT NO. 9 Annual Pass Cumulative Fiscal Total Cumulative County's County Thru Share Year Tax Total Tax Pass Thru Share of Payment Retained by Increment Increment Percent Increment to A enc County 1990-91 445,284 445,284 10% 120,747 12,075 108,672 1991-92 444,482 889,766 10% 118,728 12,053 215,347 1992-93 485,438 1,375,204 10%-25% 129,684 28,081 316,950 1993-94 427,046 1,802,250 25% 114,102 28,525 402,527 1994-95 262,656 2,064,906 25%-50% 70,177 22,112 450,592 1995-96 192,927 2,257,833 50% 51,564 25,782 476,374 1996-97 158,289 2,416,122 50% 42,291 21,145 497,520 1997-98 217,211 2,633,333 50% 58,033 29,017 526,536 1998-99 134,487 2,767,820 50% 35,914 17,957 544,493 1999-00 275,238 3,043,058 50%-100% 73,516 42,528 575,481 2000-01 389,523 3,432,581 100% 104,046 104,046 575,481 2001-02 553,080 3,985;661 100% 147,766 1 147,766 575,481 RESOLUTION NO. OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS APPROVING AMENDMENT TO APRIL 18, 1989 AGREEMENT FOR COOPERATION BY & BETWEEN THE COUNTY OF RIVERSIDE, THE CITY OF PALM SPRINGS AND PALM SPRINGS REDEVELOPMENT AGENCY, PROVIDING FOR A CLARIFICATION IN THE METHODOLOGY TO BE USED IN FUTURE CALCULATIONS OF ANNUAL TAX REVENUE ALLOCATION PAYMENTS, IN A FORM ACCEPTABLE TO AGENCY COUNSEL. WHEREAS, the Community Redevelopment Agency of the City of Palm Springs ("Agency") and the City of Palm Springs ("City") entered into an Agreement for Cooperation dated April 18, 1989 ("Agreement") with the County of Riverside ("County") to provide mutual aid and assistance in the redevelopment of the Agency's Redevelopment Project Area No. 9; and WHEREAS, the parties have a disagreement regarding the methodology used in the annual calculation of tax revenues to be retained by the County under the terms of the Agreement; and WHEREAS, the parties wish to resolve this disagreement by amending the Agreement to clarify the methodology to be used in future calculations of the allocation of tax revenues. NOW, THEREFORE, BE IT RESOLVED by the Community Redevelopment Agency of the City of Palm Springs, as follows: SECTION 1. The Amendment to the April 18, 1989 Agreement for Cooperation by & between the County of Riverside, the City of Palm Springs and Palm Springs Redevelopment Agency, providing for a clarification in the methodology to be used in future calculations of annual tax revenue allocation payments, in a form acceptable to the Agency Counsel, is hereby approved. SECTION 2. The Chairman, or his designee, is hereby authorized to execute on behalf of the Agency the Amendment and other documents necessary to the Amendment, and make minor changes as may be deemed necessary, in a form acceptable to the Agency Counsel. ADOPTED this day of 2002. AYES: NOES: ABSENT: ATTEST: COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS, CALIFORNIA By Assistant Secretary Executive Director ,fir REVIEWED &APPROVED AS TO FORM , ra 'aw