RECOMMENDATION(S): (CONT'D)
3. AUTHORIZE the RDA's Executive Director, or the Executive Director's designee, to post the amended Enforceable Obligation Payment Schedule on the RDA and the County's websites and to take such other actions and execute such other documents as are appropriate to effectuate the intent of this Resolution and to implement the Enforceable Obligation Payment Schedule on behalf of the RDA.
FISCAL IMPACT:
No General Fund revenues are involved.
BACKGROUND:
On September 27, 2011 your Board, acting as the Contra Costa County Redevelopment Agency (RDA), requested County staff to report to the Finance Committee on actions needed to continue redevelopment activities under the Voluntary Alternative Redevelopment Program. On December 12, 2011 County staff reported to the Finance Committee on a budget for the RDA which would enable it to continue operation under the Voluntary Alternative Redevelopment Program. The Finance Committee recommended that the budget be approved by the RDA. The annual Continuation Payment to the County Auditor was subject to the California Supreme Court lifting the stay on the RDA’s powers and finding both the Dissolution Act and the Voluntary Alternative Redevelopment Program to be constitutional.
On December 29, 2011, the California Supreme Court only found the Dissolution Act constitutional. The statute authorizing the Voluntary Alternative Redevelopment Program was found to be unconstitutional. All redevelopment agencies will cease to exist as of February 1, 2012. At that time, the County Board of Supervisors will become the Successor Agency with the responsibility to wind down the activities of the County RDA, under the direction of an Oversight Board. The Board of Supervisors will also become the Successor Housing Agency and assume the housing functions of the former RDA and receive all housing-related assets of the RDA. Please be aware that a companion Board Order is on the January 17, 2012 agenda to reaffirm the Board’s desire to become the Successor Agency.
The budget proposed by Resolution No. 2012/22 has been revised from what was approved by the Finance Committee in order to respond to the Supreme Court decision to dissolve redevelopment agencies. The Resolution will accomplish the following:
1. Funds administration of the RDA for Fiscal Year 2011/12. Expenses shown in the budget are for the full 12-month period. The revenue that remains after the RDA dissolves will be transferred to the Successor Agency. The RDA staffing is provided by the Department of Conservation and Development and involves about 4.5 full-time equivalent permanent employees plus 1.3 full-time equivalent contract staff. The impact of the RDA’s dissolution on Department staffing will be evaluated in February.
The Department will provide support to the Successor Agency. The annual budget for administrative costs of the Successor Agency can be an amount up to five percent of the property tax allocated to the Successor Agency for FY 2011/12 and up to three percent of the property tax allocated to the Successor Agency each succeeding fiscal year; provided, however, that the annual amount is not less than $250,000 for any fiscal year. The Board will receive a more complete report on the finances for the Successor Agency at a future Board meeting.
2. Funds payment of enforceable obligations of the RDA. Until February 1, 2012 (when the RDA is dissolved), a RDA is authorized to make scheduled payments on and perform obligations required under its Enforceable Obligations Payment Schedule (EOPS). “Enforceable Obligations” include:
- Bonds;
- Loans borrowed by a RDA;
- Payments required by federal or state government or for employee pensions;
- Judgments or settlements;
- Legally binding agreements or contracts; and
- Contracts for administration or operation of the RDA.
On August 9, the RDA adopted its EOPS for the period from September 1 to December 31, 2011. The budget will require an amendment to the EOPS to include the month of January 2012, to enable (among other things) the RDA to make its February 1, 2012 debt service payment prior to dissolution. That action is included with this Board Order. This budget includes debt service payments due August 1, 2011, February 1, 2012, and August 2012. Even though August 2012 is after the end of Fiscal Year 2011/12, it was included in the budget to help plan for this future debt service payment as the RDA’s obligations are transferred to the Successor Agency.
5. Authorizes use of excess bond proceeds to pay debt service on bonds. Last year, the RDA authorized use of excess bond proceeds to pay a portion of debt service in four of the five project areas due to declining tax increment revenue. Tax increment revenue has not changed significantly for these project areas. This budget recommends use of excess bond proceeds to help pay debt service on bonds for FY 2011/12.
6. Funds the debt reduction program. On October 4, 2011 your Board, acting as the RDA, authorized implementation of a debt reduction program. This program involves the purchase, redemption or defeasance of approximately $21 million in unspent bond proceeds. The budget implements this program and should result in lower debt service payments in future years.
7. Conditionally authorizes a loan to pay debt service costs. The Project Area budgets for Bay Point and Montalvin Manor show that available revenues are inadequate to fully cover debt service for capital bonds scheduled for payment on August 1, 2012. This cash flow problem is a result of declining tax increment and the desire to retire outstanding loans for these project areas before the RDA dissolves. The budget proposes that the County loan the Successor Agency funds from the County Special Revenue Accounts (non-General Fund revenue) to cover these deficits. The resolution requires that these loans be approved by a separate action of the Board of Supervisors. This provides an opportunity for the Successor Agency and the Oversight Board to confer on how best to resolve the projected deficit. An alternative solution for the deficit would be to defer pass-through payments to other taxing entities. Pass-through payments are subordinate to debt service payments.
Please be aware that County staff is still evaluating the applicability of the Dissolution Act on the status of contracts and agreements the RDA has with various parties. This work may result in the need for a further amendment to the EOPS. Also, the RDA must prepare a preliminary draft of the initial Recognized Obligation Payment Schedule and deliver such a schedule to the Successor Agency for use in identifying tax increment needed for the former RDA obligations after February 1, 2012. County staff will report on these activities at a future Board meeting.
Finally, the California Redevelopment Association and the Non-Profit Housing Association are working with Senate President Pro Tempore Steinberg on Senate Bill 654 which includes language to clarify the process for the unwinding of redevelopment agencies and the transfer of their assets to successor agencies. This legislation is intended to preserve for affordable housing the roughly $2 billion in outstanding balances in the Low and Moderate Income Housing funds maintained by redevelopment agencies throughout the state. The Senate Transportation and Housing Committee will hold a hearing on January 10th to review this draft legislation. Other redevelopment advocates are seeking to pass legislation to delay the February 1st dissolution date by one month. County staff will provide an update to the Board at the next Board meeting.
CONSEQUENCE OF NEGATIVE ACTION:
If the budget is not adopted, the RDA will not be in compliance with California law, and among other things, would not be authorized to fund the financial obligations of the RDA in FY12.
CHILDREN'S IMPACT STATEMENT:
There are no expenditures directed specifically to children.
CLERK'S ADDENDUM
ADOPTED the recommendations as presented; and DIRECTED the Finance Director to provide the Board with regular updates.