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Home My WebLink AboutRDA Packet 1996/02/20 Notice is hereby given that the Mayor/Chairman of the City Council/Redevelopment Agency has called and will convene a special joint workshop/meeting of the Redevelopment Agency/City Council on February 20, 1996 at 6:00 p.m., in the Council Conference Room, located in lhe City Hall Building, 276 Fourth Avenue, Chula Vista, California to consider, deliberate and act upon the following: ~::: 'll .. '" o Q. - Gl ~-E ~G):5-c: .r::. ""0 C"l 0 :;;+-'c"2== co c en '" >,0 .c. .-- ...." ~', .:1: ... .r~: f c.c~ ~..~; '" :3~ .~ r'!' - (.,-. \J , . Agency/Council Members Alevy _' Moot _' Padilla _, 't . c Rindone _' and Chair/Mayor Horton _ _ .' .., 0 , c: LLl f" l.-,~ ',) Z ~., 0 ~ Q None Submitted. .~ : .:; ~: '148~ ~ BUSINESS ~ ~ ~ .~ ~ co. ~'tI.O ooE<t.~ LLI The items listed in this section of the agenda are expected to elicit substantial discussions and deliberations II~. E .!!l:O !;c the Agency, staff, or members of the general public. The items will be considered individually by the AgenlJ> .. 8 ;; it. Q and staff recommendations may in certain cases be presented in the alternative. Those who wish to speak, please fill out a "Request to Speak" form available in the lobby and submit it to the Secretary to the Redevelopment Agency or the City Clerk prior to the meeting. Public comments are limited to five minutes. Tuesday, February 20, 1996 6:00 p.m. (following the City Council and Housing Authority mec:tings) Council Conference Room City Hall Building ; Special Joint Workshop/Meeting of the Redevelopment Agencv/Citv Council pf the City of Chula Vista CALL TO ORDER 1. ROLL CALL: 2. APPROVAL OF MINUTES: 3.A AGENCY REPORT REPORT OF fiNDINGS RELATIVE TO THE APPROPRIATE LEVEL OF FUNDING FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FROM REDEVELOPMENT AGENCY TAX INCREMENT REVENlJE--As part of the Mid-Year Budget Report, a necessary task was determining the appropriate level of funding for the City's Economic Development Program from Redevelopment Agency tax increment revenue. Staff r<:commends the Agency accept the report and approve the Joint Agency/Council resolution directing staff to make appropriate budgetary and financial adjustments associated with the current year and retroactive reduction back to FY 1989/90. (Community Development Director) B. AGENCY RESOLlJTION 14841 COUNCIL RESOLUTION 18196 ESTABLISIDNG THE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENlJE AT 31.63 PERCENT FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FOR FISCAL YEAR 1995- 96, AND EST ABLISIDNG A RETROACTIVE FUNDING LEVEL FROM REDEVELOPMENTT AXINCREMENTREVENlJE A T38.53 PERCENT FOR FISCAL YEARS 1989-90 THROUGH 1994-95 Agenda -2- February 20, 1996 4. AGENCY REPORT FISCAL YEAR 1995-96 MID-YEAR AGENCY BUDGET REPORT --The Redevelopment Agency Board adopted the FY 95-96 Agency budget on 6/27/95. As part of the budget, staff was directed to return with a Mid-Year Budget Report in order to update Ihe Agency Board On the progress made toward the goal of restoring the Agency's depleted fund balances. Staff recommends the Agency review and accept the report. (Community Development Director) ORAL COMMUNICATIONS This is an opportunity for the general public to address the Redevelopment Agency on any subject matter within the Agency's jurisdiction that is not an item on this agenda. (State law, however, generally prohibits the Redevelopment Agency from taking action on any issues not included on the posted agenda.) If you wish to address the Council on such a subject, please complete the yellow "Request to Speak Under Oral Communications Form" available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Clerk prior to the meeting. Those who wish to speak, pl/!Use give your name and address for record purposes and follow up action. Your time is limited to three minutes per speaker. OTHER BUSINESS 5. DIRECTOR'S/CITY MANAGER'S REPORTlSl 6. CHAIR'S/MAYOR'S REPORT(Sl 7. AGENCY/COUNCIL MEMBER COMMENTS ADJOURNMENT The meeting will adjourn to the Regular Redevelopment Agency Meeting on March 5, 1996 at 4:00 p.m., immediately following the City Council meeting, in the City Council Chambers. ****** COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT The City of Chula Vista, in complying with the Americans With Disabilities Act (ADA), request individuals who require special accommodations to access, attend, and/or participate in a City meeting, activity. or service request such accommodation at least forty-eight hours in advance for meetings and five days for scheduled services and activities. Please contact the Secretary to the Redevelopment Agency for specific information at 619.691.5047 or Telecommunications Devices for the Deaf (TDD) at 619.585.5647. California Relay Service is also available for the hearing impaired. [C:I WP51 IAGENCYIAGENDASI02-20-96.AG2] JOINT CITY COUNCIl/REDEVELOPMENT AGENCY AGENDA STATEMENT ~ J J...th . Meeting Dat~te:;'1 /23/36 ..rfr;[tt FINDINGS RELATIVE TO THE APPROPRIATE lEVEL OF FUNDING ~/:1Dlf('. FOR THE CITY'S ECONOMIC DEVElOPMENT PROGRAM FROM REDEVELOPMENT AGENCY TAX INCRE~ENT REVYN),lE ~- /'If'l. J ~ /'i1/9& RESOLUTION 0 r Establlshmg the Funding level from Redevelopment Tax Increment Revenue at 31.63 Percent for the City's Economic Development Program for Fiscal Year 1995-96, and Establishing a Retroactive Funding level from Redevelop- ment Tax Increment Revenue at 38.53 Percent for Fiscal Years 1989-90 Through 1994-95 Community Devel pment Director[ 7 . 1 City Manager I (4/5ths Vote: Yes No 2...1 Council Referral Number:' ITEM TITLE: REPORT: SUBMITTED BY: REVIEWED BY: / BACKGROUND: As part of the 1994-95 Mid-Year Budget Report, staff identified a necessary task of re-evaluating the appropriate level of funding for the City's Economic Development Program from Redevelopment Agency tax increment revenue. This re-evaluation was necessary in light of the passage of "AB 1290" (Health and Safety Code Section 33490, effective on January 1, 1994) which strengthened and clarified existing law relative to establishing a nexus between "extra-territorial" spending of tax increment revenue and the elimination of blight within the respective project areas. Additionally the law required, for the first time, "Project Area Implementation Plans" to be adopted every five years in order to demonstrate and document the nexus between redevelopment project area expenditures and the elimination of blight within the respective project areas. The Redevelopment Agency has been reimbursing the City's General Fund for 85% of the cost for the Economic Development program from FY 1991-92 through FY 1994-95. Immediately prior to that, the reimbursement was set at 75% and earlier it was set at 50%. However, in the current budget year the amount of reimbursement was set at 65 % until the results of a more in-depth re-evaluation could be completed. This report presents the results of that analysis. (Please refer to Attachment 3 for a complete listing of the current Economic Development activities) RECOMMENDATION: It is recommended that the Redevelopment Agency Board accept the report and adopt the resolution to make the appropriate budgetary and financial adjustments as follows: Current Year 1. For budgetary purposes, establish the funding level from redevelopment tax increment revenue at 31.63% (down from 65%) thereby resulting in an Agency budgetary reduction of $214,447 (see Attachment 4). 3 -} Retroactive Years - FY 1989-90 throuqh FY 1994-95 ja.+b Page 2, Item Meeting Date {)112m6 ~ ~/:l#I'l' 2. Establish a retroactive funding level from redevelopment tax increment revenue at 38.53% (down from 7~l% and 85%1 thereby resulting in an Agency "credit" toward the retirement of long-term debt owed to the General Fund in the amount of $1.162,278 (see Attachment 5). Included at the end of the Fiscal Impact section is an explanation for each of the five spreadsheet attachments which form the "back up" to the recommended funding percentages and financial adjustments. It should also be noted that the retroactive reimbursement could be adjusted upward in the future in the event additional data is obtained which suggests that the proposed retroactive factor is too low. BOARDS/COMMISSIONS RECOMMENDATION: Not applicable DISCUSSION: As a result of the Agency budget adoption for the 1995-96 fiscal year, staff was directed to return with a report analyzing the City's Economic Development activities and identifying those activities that can be funded by redevelopment monies. Additionally, Council directed that the same analysis be applied to prior year expenditures and provide any recommended financial adjustments. Given that direction, the City Attorney issued a legal opinion dated July 14, 1995, which addressed the overall question of the lawfulness to spend tax increment funds generated from within a specific project area on activities that are not primarily focused or specifically directed toward individual project areas. A copy of his report is attached to the City Attorney's Risk Analysis memorandum delivered concurrently herewith. His previous memorandum included the first legislative definition of "blight" that was also a product of the AS 1290 reforms. In summary, the City Attorney indicated that the California Community Redevelopment Law establishes a direct requirement that any "extra-territorial" spending has to be specifically directed toward the elimination of blight within the project area generating the tax increment. Additionally, tax increment funds may be spent outside of a project area as long as the extra- territorial expenditure is necessary in order to remove blight or a blighting influence within the project area. RedeveloDment Proiect Area ImDlementation Plans Pursuant to the passage of AS 1290 all California Community Redevelopment Agencies were required to adopt Implementation Plans for each redevelopment project area in order to document the nexus between Agency expenditures and the elimination of blight within the project areas. The plans provide: 1) Goals and objectives; 2) Planned projects and expenditures; 3) Explanation of the nexus between Agency activities and the elimination of blight; and 4) Explanation of the nexus between Agency activities and meeting State housing requirements for the five year period from January 1995 through December 1999. The law requires that each plan be updated (and progress reported which documents the elimination of blight) between years 2 and 3, or by December 31, 1997. .3 ~ ?-- -- $4....10 Page 3, Item_ Meeting Date Gl/Z3/9G ~ :Ljlt/.". The Agency Board reviewed and adopted each of the respective project area Implementation Plans on December 13, 1994. It needs to be noted that none of the current Economic Development activities were included in any of the Implementation Plans because of the uncertainty, at that time, in establishing the nexus between those expenditures and the elimination of blight within the project areas. Therefore, it is advisable that each Implementation Plan be amended to include the justified Economic Development activities during the "update" period sometime in 1997. Nexus FindinQs The City's Economic Development Program has been geared toward a City-wide and regional effort to promote Chula Vista as a balanced, well-planned, and pro-business community worthy of continued private investment. Obviously, the focused goal of the program is to retain and attract businesses and jobs to the community in order to help sustain and expand the economic base of the City, and therefore, avoid the continuation of blighting influences that already exist in the City. These efforts therefore derive benefits to the City as a whole, which include the redevelopment project areas. Additionally, within the last two years or so, there has also been a concerted and focused effort on specific high-profile programs and projects (High-Tech/BioTech Zone and BECA) that differ from the more general outreach and retention activities from prior years. Given the general description of the nature and scope of the City's Economic Development Program as provided above, staff believes that it is not necessary to go through each individual activity to determine the individual nexus between that activity and the elimination of blight within each individual project area. To undertake that level of detailed analysis for each economic development activity and for each redevelopment project area would be a very large administrative burden, which, to remain valid, would have to be undertaken on an annual basis. It would not be practical to undertake that burdensome and repetitive task. Instead, staff believes that an appropriate nexus can be based on the principle that the Economic Development activities have a realistic expectation of continuing to bring business, industry, and jobs to the community, and therefore, a reasonable conclusion can be drawn that these activities will also derive positive benefits toward the goal of eliminating blight within the project areas. This conclusion is based upon the clarification of what constitutes "blight" under the California Community Redevelopment Law (CRL). AB 1290, among other things, organized blight factors into two distinct categories; physical and economic. (Please refer to the City Attorney's July 14,1995 memorandum for a listing of the specific conditions that cause blight) Although arguments could be made that some of the Economic Development activities could help eliminate physical blight. a much stronger and more direct case can be made that the activities have. as their primary purpose, the elimination of economic blight, that again, have a realistic expectation to derive benefits to the redevelopment areas as they do to the City as a whole. .3-3 Fundina Option #1 (Recommended) :5 4.~1> ' Page 4, Item Meeting Date Q1:2~' ~ -'-/A-hI. Gross Industrial and Commercial Land-Use Acreage Staff therefore, proposes to simply apply a gross land-use acreage "pro-rata" share funding criteria in order to make the nexus as succinct and simple as possible. That is, staff is recommending that the funding level be based upon the amount of commercial and industrial acreage within the redevelopment project areas as a percentage of the total commercial and industrial acreage in the City as a whole. The argument is that the Economic Development activities are expected to derive tangible benefits to the entire City in the forms of retaining existing businesses, and bringing new business and industry to the community that will help eliminate economic blight. Those benefits then, would or should derive an equal or "pro-rata" share of benefit to commercial and industrial properties located within redevelopment project areas. As a note, only the commercial and industrially zoned acreage (including the "planned community" designations) is being recommended to be used since the current Economic Development activities would only have a direct benefit to those types of properties, whether developed or not. To the extent that a specific activity applies to only an industrial use, then that individual activity "share" is based on the pro-rata percentage of industrial properties only etc.,. To the extent particular activities have a specific focus on a specific geographical area (i.e., High-Tech/BioTech in EastLakel then the activity would be funded 100% by the General Fund (for a non-RDA area) or by the Agency if the activity is specific to the project areas only. Fundina Option #2 Net Industrial and Commercial Land-Use Acreage During the course of arriving at this simplified "pro-rata" share funding criteria recommendation, legitimate concerns and issues were raised internally with respect to whether to include the acreage of certain types of properties within the overall "pro-rata" share calculation. After severai meetings, it became apparent that legitimate arguments could be made on both sides (RDA or non-RDA) concerning whether to include or not include certain types of properties, whether developed or not. However, it was recognized that this type of specific property by property or area by area analysis would be extremely subjective and speculative. As an example, concerns were raised about the inclusion of property not yet necessarily available for development in the eastern portion of the City, as well as concerns about general activities that would not be reasonably expected to derive benefits to fully built-out, non- blighted commercial and industrial areas. Although these concerns are legitimate, they really apply to both sides of the equation. That is, significant large portions of redevelopment area properties are also included which are either being reserved/held for a particular development (Mid-Bayfront, SDG&E and portions of properties to the east of the Auto Park, to name a few) as well as properties that have recently been redeveloped such as the Chula Vista Center, South Bay Marketplace, and the Palomar Trolley Center. Therefore although the concerns are legitimate, that approach is not being recommended since it will require a tremendous amount of staff time initially and annually (see "Monitorinq" below) with no real sense that there will ,- 3-i - 3.......b ) Page 5, Item. Meeting Date .Q1:2~..P- be a materially different result since there will be deletions from the applicable land acreage from both non-RDA and RDA areas. Proqram Adiustments Additionally, in order to establish even more of a reasonable nexus and be further protected from any legal challenge pursuant to the intent and spirit of the law (as an additional adjustment above the "pro-rata" share percentage), the specific Economic Development program activities could allow for a smaller "program within the larger program" to be established specifically for the redevelopment project areas. As an example, the City-wide marketing efforts should include a component which directly markets the redevelopment areas; and any business loan and/or assistance programs should include a specific component that "tailors" a portion of the program toward the specific needs of the project areas. Staff is not suggesting that Economic Development staff needs to embark upon an administrative exercise of separate program management and/or compliance reporting as is necessary for funding from federal funds like CDBG. To the contrary, it is suggested that staff merely document in the program materials that there is a network or framework of tangible program resources in place that would be marketed and made available for businesses located within the project area, and specifically tailored for their needs where possible. Economic Development staff is currently evaluating to what extent that these "programs within programs" can be established and will ensure that to the extent they can, this practice will be implemented. Proiect Accountinq Adiustments During the course of evaluating the specific Economic Development activities, it was found that three of the current year activities can and should be paid from the City's CDBG Administrative and Planning account. The three activities are: 1) Section 108 Loan Guarantee Program, 2) Micro-Enterprise Loan Program, and 3) the Community Reinvestment Act Task Force activities. Historically, the City has not spent near the capacity allowed for under the CDBG program guidelines for administrative and planning staff costs. This fact, coupled with the expectation that CDBG funds will be recommended to be used to "seed" these programs, makes it an appropriate recommendation that the staff costs associated with planning, developing and implementing these programs should be absorbed by CDBG funds. Since CDBG is a separate program, the staff time costs will be accounted for separately from the other activities. The Finance Department is also recommending thatthe BECA and High-Tech/BioTech program staff costs be accounted for separately as well. This is because they, as previously explained, differ from the more general activities by having a specific focus and also represent significant portions of the projected staff time for the current year. As you are aware, the BECA program is geared toward environmentally friendly businesses and technologies which, as its' currently defined, is geared toward an industrial land-use benefit only. The High-Tech/BioTech Zone is solely and specifically designed to benefit businesses in the Eastlake area and therefore has no blight elimination nexus to the redevelopment project areas. (Please refer to Table 2 of Attachment 2 for a breakdown of how the activities will be accounted.) 3-5 I Monitorino ,1q+J Page 6, Item Meeting Date 91/23/9C ~ -o/..t if" Two forms of periodic evaluation are recommended to assure that the methodology that is adopted provides an appropriate measure of the economic development/project area blight elimination nexus. The first evaluation would be part of the annual City and Agency budget process. The planned activities will be evaluated in terms of their focus (City-wide, RDA only, City-area only, etc.) and the land use acreage analysis will be updated (to account for any zoning changes etc.) to then determine the appropriate percentages of funding sources. Note: since it is planned for the cost apportionment to be evaluated annually, the "net acreage" approach (Option #2) would not only be a staff obligation for this year, but also for future years as well. The second evaluation, which is consistent with the recommendation in the Attorney's memorandum, will be a monitoring of the tangible results of the economic development funding in the project areas. This analysis will occur as part of the already- required Implementation Plan process set up by AB 1290 and discussed above ("-Redevelooment Proiect Area Imolementation Plans"). As stated above, the Implementation Plans for each project area will be revised to include the economic development activities. The Implementation Plan process requires that those five-year plans be updated and progress evaluated mid-plan (second to third year). The already-required progress evaluation will constitute a monitoring of the tangible results in the project areas of economic development activities without creating a new administrative burden and will give us clear feedback on the efficacy of using those funds. Conseauences Because Redevelopment law is not specific regarding the mechanisms for demonstrating a nexus of economic development activities with project area blight elimination, and because there is very little case law on the topic, it should be recognized that the recommended methodology for determining a nexus is not definitive and may be subject to adjustment, either by Council discretionary action or by legal requirements once such requirements become more defined. Staff and the Attorney (as indicated in his accompanying memorandum), however, feel that there is little likelihood of legal challenge, given the lack of identifiable opponent constituencies or "watchdog" entities opposed to economic development funding by redevelopment agencies. As has been noted above in reference to retroactive adjustments recommended at this time, the consequences of any future adjustments applied retroactively really constitute "paper" transactions, not potential short-term cash flow impacts on the General Fund. If the City were required by an unfavorable legal decision invalidating the recommended methodology to retroactively assume a larger portion of the economic development funding from General Fund and other sources, the adjustment would be in the form of a credit against long-term Agency debt owed to the General Fund. That debt credit would be quite small in relation to the total debt owed to the General Fund by the Agency as a result of booking the General Fund participation in the COPs payments as loans to the Agency. The servicing of that debt to the General Fund by the Agency will only be realistic as the project areas complete the redevelopment process a significant number of years in the future. The Agency is able to collect tax increment for up to ten years after the expiration of a project area for the sole purpose of repaying debt obligations. 3 -G, FISCAL IMPACT: S<>.+b Page 7, Item Meeting Date g1/2~ ~ ~~/"t. Provided at the end of this Fiscal Impact section is an explanation for each of the five spreadsheet attachments that were used to arrive at the impacts listed below. FY 1995-96 As indicated in Attachment 4, for the current year the Redevelopment Agency share (65%) of the Economic Development Program staff costs totals $417,712. Given the recommended adjustment down to 31.63% (factor arrived at from Attachment 3), the Agency's budget obligations should be reduced by $214,447 to a total of $203,265. Therefore, with respect to the General Fund, the fiscal impact will be that the General Fund (or a combination of the General Fund/CDBG or other fundsl will be required to pick up the additional $ 214,447. However, another option for the Agency to consider is the "phasing in" of this adjustment over a two year period. That is, make the adjustment to 50% for the current year, with the expectation that the next phase reduction down to 31.63% next fiscal year. This would be with the requirement that the Agency would be "credited" (reduction of long-term debt to the General Fund) for the amount of overpayment that they would carry this year, plus interest. If this phased approach is accepted, the result would be that the Agency's obligation would be reduced by only $96,395 to a total of $321,317. The Agency would be "credited" in the amount of $118,052. Prior Years If the staff recommendation is accepted the Agency is entitled to a "reimbursement" of $1,162,278 (not including interest) for the years of FY 89-90 through FY 94-95 as provided in Attachment 5. However, the Agency also owes the General Fund (as of July 1, 1995), a total amount of $2,188,415 (not including any General Fund contributions as required by the financial structure of the Bayfront/Town Centre I and Town Centre II Certificates of Participation [COPs)). The vast majority of that non-COPS related debt is owed by Otay Valley Road; therefore, the recommendation is, in essence, to reduce the debt owed by Otay Valley Road to the General Fund and shift it so that Otay Valley Road will owe to BayfrontfTown Centre I. The "Adjustments" column in Table 2 of Attachment 5 is the basis for the individual adjustments outlined below which were arrived at by allocating each individual project area's pro-rata share of the RDA share. The project area adjustments are as follows: 1. Record a loan from the General Fund to Southwest in the amount of $229,353. 2. Retire long-term debt owed by Otay Valley Road (OVR) to the General Fund paid on behalf of Otay Valley by Town Centre I (TC I) in the amount of $415,476. Result is "shifting" debt that currently is owed by OVR to the General Fund, and shifting it so that OVR will owe it to Bayfront/TC I. 3. Retire long-term debt owed by OVR to the General Fund as paid on behalf of OVR by Bayfront in the amount of $818,912. Result is the same "shifting" as described above. 3-7 4. 3...+b Page 8, (tem v ~ Meeting Dat~/~/~:6 ;k~ Retirement of long-term debt from Town Centre /I to the General Fund in the amount of $117,808. I 1 r I , 5. Retirement of long-term debt from OVR to the General Fund in the amount of $39,434. Concerns About Retroactive Adiustment However, during the course of this lengthy analysis, there were concerns raised about the historical project staff cost accounting practices for those non-Community Development employees that worked on what were labeled as "Economic Development" projects. There are concerns that while working on such redevelopment projects as the Bayfront, Chula Vista Center expansion, and the Auto Park during those years, that some staff time was actually charged to the "Economic Development" activity. In the event that this practice was widespread, the overall effect could be that the amount of actual retroactive reimbursement due to the Agency would be reduced. Therefore, in the event that staff is able to recover di'ftii'ffOrrl_prior ye_ars-that-suggests that the retroactive reimbursement-adjustment is too _ much, then staff would bring back a recommendation for an appropriate adjustment. Another important aspect to the question of whether or not to apply the reduced factor retroactively, is the overall interpretation of the impact of AB 1290. That is, if one interprets AB 1290 as being a landmark legislative event that explicitly required (for the first timel that RDA tax increment expenditures be linked to the elimination of blight within the project areas, then the argument would be made that the retroactivity should only apply back to January 1, 1994 (effective date of legislation). However if on the other hand, one interprets that AB 1290 merely clarified an alre<;l(jy existino requirement about linking expenditures to blight elimination, then the argument would be made that the requirement was always there and that only the perceived abuses by redevelopment agencies over the years forced the State legislature to clarify the language and provide specific factors of what .constitutes blight under the CRl. Therefore, with the requirement always there, then the retroactive factor should go all the way back to 19B9-90 which was the first year that significant expenditures Occurred. It is therefore, staff's recommendation to use the most conservative approach and apply the retroactive factor all the way back to 1989-90. Since the retroactive adjustment is really merely a "paper" adjustment with no current year financial ramifications, it seems to make the most sense to go ahead and apply a stricter interpretation. Also, in comparison to the amount of long-term debt that will be owed by the Agency to the General Fund as a result of bOOking the required General Fund participation for the debt service on the Town Centre II Certificates of Participation as loans to the Agency, this retroactive credit is really quite a minimal amount. EXDlanationof Attachments Provided below is an explanationJor each of -the five attachments to this report. In summary however, the. analysis,Consluded th~tthe apprppriate. amount of RDA ftjndingfor the City! s current year "general"EconomicDevelopment Program activities (ED001) 'is 38.53%, with .3-~ \ ? ja.-+ob Page 9, Item Meeting Date..2/:~~ the Agency also responsible for 46.4% of the BECA activity costs. The General Fund, with some other funds, then would be responsible for 61.47% of the' general" activities (ED001), 53.6% of the BECA activities, and 100% of the High-Tech/BioTech costs. Again, as explained above, CDBG would then pick up 100% of the staff costs associated with the Section 108, Micro Enterprise, and CRA programs (see Table 2 of Attachment 2). The net effect is that the Agency tax increment will fund 31.63% of the costs (see Attachment 3). Attachment 1 includes two tables: Table 1) provides the RDA industrial and commercial acreage as a percentage of the City's commercial and industrial acreage as a whole; and Table 2) provides the amount of RDA industrial and commercial acreage within each project area. The tables indicate that 21.05 % of commercial acreage and 46.4% of the industrial acreage is located within a redevelopment project area, with a corresponding "combined" percentage of 35.78%. Additionally in Table 2, staff is recommending that the adjusted RDA "share" of the Economic Development Program costs be split as follows: Bayfront 22.61 %, Town Centre I 4.75%, Town Centre II 6..35%, Otay Valley Road 25.3%, and Southwest 41%. Again, on the basis of the percentage of industrial and commercial acreage within the respective project areas. Attachment 2 also includes two tables. Table 1) provides a listing of onlv those activities that will be accounted for under the "general" Economic Development activity account (ED001). Table 2) then shows the recommended breakdown of how each accounting component of the Economic Development activities will be funded as discussed in the "Project Accounting" section. It is recommended that for any retroactive adjustment, the "general" activity cost apportionment (38.53%) be applied. Attachment 3 is a spreadsheet which applies the redevelopment land use factors identified in Attachment 1, to each of the current year Economic Development activities as expressed by the estimated aggregate percentage of staff time to be spent on those activities. Application of this "pro-rata" share funding criteria, results in an overall recommended funding level, for budgetary purposes, of 31,63% from Redevelopment with 68.37% remaining to be paid from the General Fund and CDBG (about 7%). It's noteworthy that the only activity deemed not to have some "pro-rata" share benefit/nexus, is the activity associated with the High-Tech/BioTech Zone. Attachment 4 provides the amount of current year budget adjustment shift recommended from Redevelopment funding to the General Fund and CDBG associated with the recommended reduction in Redevelopment reimbursement from 65% to 31.63%. This reduction would result in a total current year budgetary shift of $214,447. However, it is also noteworthy to see that Southwest and Otay Valley will actually have a budgetary increase because of the change in the recommended percentage splits for each of the project areas. Attachment 5 includes two tables which calculates the amount of financial adjustment necessary to be made based upon a retroactive adjustment from the historical spending of 85% (and when applicable, 75%) to the recommended level of 38.53% for the years of 1989- 90 through 1994-95. Table 2 then arrives at how the overpayment should be spread back to each of the project areas under the corrected project area percentage splits calculated in Attachment 1, Table 2. In other words, Table 1 documents the amount of overpayment by the Agency and Table 2, then, determines the amount that the Agency should have been J~r J,# Page 10, Item . Meeting Date :;;~ reimbursing by project area at the 38.53% rate (given the updated percentage splits) and the corresponding amount, by project area, that is to be reimbursed to the Agency. The total retroactive "reimbursement" is $1,162,278, however, the majority of the reimbursement would go to Bayfront ($818,912). Conversely, Southwest should have been paying more along the way and therefore an additional long-term debt of $229,353 should be recorded to Southwest. Conclusion In these difficult financial times, it is recommended that the most prudent way to take care of this retroactive adjustment is to merely write off debt owed to the General Fund. Recognizing that a significant portion of the $1.16 million adjustment is merely shifting the debt from being owed to the General Fund to being owned to Bayfront/TCI, it is also recognized that Otay Valley also has the ability to repay Bayfront/TCI since Otay Valley does not have bonded indebtedness to which future tax increment is pledged. rn;\""""'leornmdevllwI\'All"'rellOnsle<lI""""O.,,... !J - 10 '0 .. dI' dI' dI' dI' dI' dI' ri " " ri Ul Ul 0 0 0 'tl I< 11 '" .... M M 0 0 ~ 11 0< 0 '" ... '" Ul ri 0 " .... '" ~ +I +I dI' '" '" ... 0 ffi u .. ri 0 " U ri U U 'n 0 .. ~ " 0.... +I l>: I< .... 0 ~ ,~ '" 0< I-< .Q Ul '" ri .... 0 '" M '" ri ... 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Priority Projects ,- strengths /Weakneilses Program Development On-going On-going On-going On-going On-going On-going On-going On-going In production Economic Development Activities Aggregrate Percentages of Funding Sources Activitv BEeA -Hi-Tech / Bio-Tech Section 108 Loan Program Micro Enterprise Loan Program Community Reinvestment Act E0001 - General ED C:'qJro\haynes\ccondcvledfund3.wql ATTACHMENT 2 WEIGHTED AGENCY TOTAL TARGETED/ TARGETED , STAFF LAND-USE PERCENTAGE BENEFIT AREA LAND-USE ACTIVITY FACTOR RDA SHARE City-wide Indust/Comm 15.52' 35.781 5.551 Regional Industrial 6.90' 46.4.0' 3.20' Regional Industrial 5.17' 46.40' 2.40' City-wide Industrial 3.45' 46.40' 1. 60' City-wide Indust/Conun 13.19' 35.78' 4.94' City-wide Indust/Comm 5.111 35.78' 1.85' City-wide Industrial 10.34' 46.40' 4.80' City-wide Indust/Cornm 12.011 35.78' 4.32' City-wide Indust/Comm 5.17' 35.78' 1.85' City-wide Indust/Cornm 10.341 35.78' 3.70' City-wide Indust/Comm 1.721 35.18' 0.62' city-wide Indust/conun 6.90' 35.78' 2.411 City-wide Indust/Cornm 3.45' 35.78' 1.23' (Retroactive Pactor 100.00' 38.53' Sources: Percentaqes: RPA 46.40' General Fund 53.60' General Pund 100.00' CDSG 100.00t CDSG 100.00' COSG 100.00t RDA 38.53' General Fund 61.41' 3-11-- FISCAL YEAR 1995-96 COMBINED LIST OF ECONOMIC DEVELOPMENT ACTIVITIES AND NET RDA FUNDING LEVEL PROGRAM BECA High-Tech/" Bio-Tech Zone Section 10a/ Loan Guarantee Micro Enterprise Loan Community Reinvestment Task Force Economic Oev. Comm. Recycling Market Development Zone Workforce Dev. Team Business Retention/ Expansion Program Business Inquiry Response and Prospect Assistance Liaison to Other Regional Econ. Dev. Agencies Trade shows Advertising Special Events Collateral Materials Speaking Engagemente Press Release/Media ReI Business Attraction/ Retention Video Total RnA Land-Use Ratio Industrial Combined c:\qp"ro\haynes\coonde~fund3.wql ATTACHl>'.ENT 3 (A) (AXB) (B) (D) AGENCY TOTAL LAND-USE PERCEN'l'AGE FACTOR RDA SHARE 46.40% 9.28% ACTIVITY/PHASE Program Development TARGETED/ BENEFIT AREA Regional/ International % STAFF ACTIVITY 20% TARGETED LAND-USE Industrial Program Implementation Eastlake Industrial 12. 0.00% 0.00% (City-only) Consultant Contrac't City-wide Industrial 5% 0.00% 0.00% Project (CDBG Paid) Program Developmen"t/ Regional/ Industrial 3% O.OOt 0.001 Implementation City-wide (COBG Paid) Local Implementaticm City-wide Indust/Comm 2. 0.001 0.001 Bank Relations (COBG Paid) Priority Projects City-wide Indust/Comrn .. 35.78' 3.22t App. to State Bd. Regional Industrial .. 46.40t 1.861 Priority Projects - Regional Industrial 3% 46.401 1. 391 Strengths/Weaknesses Program Development City-wide Industrial 2. 46.40t 0.93\ On-going City-wide Indust/Comrn .. 35.78t 2.86t On-going City-wide Indust/Comm 3% 35.78t 1.07t On-going City-wide Industrial 6. 46.40t 2.781 On-going City-wide Indust/Cornm 7. 35.78t 2.501 On-going City-wide Indust/Comm 3% 35.781 1.071 on-going City-wide Indust/Comm 6. 35.78' 2.151 On-going City-wide Indust/Comrn " 35.781 0.361 On-going City-wide Indust/Comrn .. 35.781 1.431 In production City-wide Indust/Cornm 2. 35.781 0.72t 100.00' 31.6"/ -16.40% :35.781 3.)3 FY 95-96 RDA BUDGET ADJUSTMENT FOR ED STAFF cos~rs BY PROJECT AREA IMPLEMENTING REDUCED RDA 1; SHARE AND RECOMMENDED RDA SHARE PROJECT AREA % SPLIT AD~~STMENT Staff Costs Only 95-96 ED Budget @ 100% cost Southwest Town Centre I Bayfront Town Centre II Otay Valley TOTAL (Current RDA Share) 95-96 ED Budget @ 651 cost Southwest Town Centre I Bayfront Town Centre I I Otay Valley TOTAL (proposed RDA Share) 95-96 ED Budget @ 31.631 cost Southwest (411) Town Centre I (4.751) Bayfront (22.61) Town Centre II (6.351) Otay Valley (25.31> TOTAL (FY 95-96) ED Staff Cost savings Southwest Town Centre I Bayfront Town Centre II Otay Valley TOTAL c:\qpro\haynes\ccondev\cdfund4. wq I $66,288 $129,577 $316,411 $64,908 $65,451 $642,634 $43,087 $84,225 $205,667 $42,190 $42,543 $417,712 $83,339 $9,655 $45,938 $12,907 $51,426 $203,265 (Proposed RDA Share) phased Approach 95-96 ED Budget @ SOl cost Southwest (411) Town Centre I (4.751> Bayfront (22.61) Town Centre II (6.351) Otay Valley (25.31> TOTAL ($40,252) $74,570 $159,729 $29,283 ($8,883) $214,447 Phased Approach 95-96 ED Staff Cost Savings Southwest (411) Town Centre I (4.751> Bayfront (22.61) Town Centre II (6.351) Otay valley (25.31) TOTAL J-PI- ATTACHMENT -4 $131,740 $15,263 $72,618 $20,404 $81,293 $321,317 ($88,653) $68,962 $133,049 $21,786 ($38,750) $96,395 Amount to be Credited $48,401 $5,607 $26,680 $7,496 $29,867 $118,052 ~ ~ . ~ < . ~ " E " ~ I s ~ . o o ~ . 8 . ~ o ~ ~ i E ~ ~ ~ I ~ ~ . ~ . < " o ~ .w" ~ . < 00 I ~ g ~ ~L ~ ~ :: f ~ . i ~ . ~ ~ " . ~ ~ ~ :i ~ L i ~ ~ E P o ~ . ~ h ~ ~ !; ~ E . . . 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" ~ ~ I' 3.-15 I This page blank. 3-J(" AGENCY RESOLUTION /L/g-p COUNCIL RESOLUTION /$"/9 h JOINT RESOLUTION OF THE REDEVELOPMENT AGENCY/CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 31.63 PERCENT FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FOR FISCAL YEAR 1995-96, AND ESTABLISHING A RETROACTIVE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 38.53 PERCENT FOR FISCAL YEARS 1989-90 TH!iOUGH 1994-95 WHEREAS, as part of the 1994-95 Mid-Year Budget Report, staff identified a necessary task of re-evaluating the appropriate level of funding for the City's Economic Development Program from Redevelopment Agency tax increment revenue; and WHEREAS, this re-evaluation was necessary in light of the passage of AB 1 290 (Health and Safety Code Section 33490, effective January 1, 1994) which strengthened and clarified existing law relative to establishing a nexus between "extra-territorial" spending of tax increment revenue and the elimination of blight within the respective project areas; and WHEREAS, AB 1290 required, for the first time, Project Area Implementation Plans to be adopted every five years in order to demonstrate and document the nexus between redevelopment project areas' expenditures and the elimination of blight within the respective project areas; and WHEREAS, the Redevelopment Agency is reimbursing the City's General Fund for 65 percent of the cost for the Economic Development program for Fiscal Year 1995-96; and WHEREAS, the Redevelopment Agency reimbursed the City's General Fund for 85 percent of the cost for the Economic: Development program for Fiscal Year 1991-92 through Fiscal Year 1994-95; and WHEREAS, the Redevelopment Agency reimbursed the City's General Fund for 75 percent of the cost for the Economic Development program for Fiscal Year 1989-90. NOW THEREFORE, THE REDEVELOPMENT AGENCY {CITY COUNCIL OF THE CITY OF CHULA VISTA does hereby find, order, determine and resolve as follows: 1. To establish the funding level from redevelopment tax increment revenue at 31.63 percent for the current fiscal year (FY95~96). 2. To establish the funding level from redevelopment tax increment revenue, retroactively, at 38.53 percent for Fiscal Year 1989-90 through Fiscal Year 1994-95. 3. To Authorize City and Agency staff to take all necessary and appropriate steps to reduce the Agency's Economic Development,program budget obligation for Fiscal Year 1995-96 to the General Fund by $214,447 to a total of $203,265; 4. To authorize City and Agency staff to take all necessary and appropriate steps to reduce the Agency's Economic Development program budget obligation for Fiscal Year 1989-90 through Fiscal Year 1994-95 to the General Fund by $1,162,278 (not including interest) by making the below listed five adjustments: ..... 3-'7 Agency Resolution Council Resolution Page 2 [1] Record a loan from the General Fund to Southwest in the amount of $229,353. [2] Retire long-term debt owed by Otay Valley Road (OVR) to the General Fund paid on behalf of Otay Valley by Town Centre I ITC I) in the amount of $415,476 (which will result in shiftin~l debt that currently is owed by OVR to the General Fund and shifting it so that OVR will owe it to BayfrontlTC I. [3] Retire long-term debt owed by OVR to the General Fund as paid on behalf of OVR by Bayfront in the amount of $818,912. Result is the same "shifting" as described in [2] above. [4] Retire long-term debt from Town Centre II to the General Fund in the amount of $117,808. [5] Retire long-term debt from OVR to the General Fund in the amount of $39,434. PRESENTED BY: APPROVED AS TO FORM BY: &s-~ ~:'~. ~~-7_-::~~_ Bruce I\il/Boogaard . ./ I ~ 'c I Agency ounsel________' Chris Salomone Community Development Director IBB:IC:I WP5 1 IAGENCYIRESOSIEO-FUND.RESI 3~/~ REDEVELOPMENT AGENCY AGENDA STATEMENT Meeting Date Item 1- e1:~ . ~/~/'f(. ITEM TITLE: Fiscal Year 1995-96 Mid-Year Agency Budget Report Director of commrnity velopment C.7' Executive Director (4/5ths Vote: Yes_ No..2U Council Referral Number:_ SUBMITTED BY: REVIEWED BY: BACKGROUND: The Redevelopment Agency Board adopted the Fiscal Year 1995-96 Agency budget on June 27, 1995. As part of the budget approval, staff was directed to return with a Mid-Year Budget Report in order to update the Agency Board on the progress made toward: 1) the goal of restoring the Agency's depleted fund balances, and 2) bringing the on-going Agency operating budget into balance. RECOMMENDATION: It is recommended that the Redevelopment Agency Board review and accept the Fiscal Year 1995-96 Mid-Year Budget Report. BOARDS/COMMISSIONS RECOMMENDATION: Not applicable. DISCUSSION: It has been well documented and acknowledged that the Redevelopment Agency has experienced several difficult budget years in succession characterized by declining property values, State "take-aways", and major property reassessments, all primarily fueled by the State's overall economic recession. The result has been that the Agency has not received the tax increment revenue necessary in" order to protect the General Fund from exposure. Staff and the Agency Board have accepted and confronted this reality by embarking upon a three-pronged strategy centered around: 1) selling non-essential assets, 2) prudent budget cuts, and 3) seeking alternative and/or more appropriate funding sources for items and activities (including the Agency CIP) funded by the Redevelopment Agency. The strategy to sell non-essential assets is the intended remedy to restore the Agency's currently negative fund balances, whereas the overall budget cuts and identification of alternative funding sources are being pursued as long-term on-going remedies to balance the Agency's annual budget. As will be discussed in detail later in this report, the result is expected to be that the Agency's general project accounts (non-restricted) will increase from $-3,345,810 to $-399,554. Recent Agency Accomplishments - Development Projects However, before discussing the specific actions taken to implement the overall strategy, it is beneficial to look at these actions in context of recent major Agency accomplishments that will derive significant financial and economic benefits to the City and Agency in terms of sales tax revenue, property tax revenue and job creation. .1-1 I Page 2, ltem2 Meeting Date 01/23/96 ~ a. MCA Amphitheatre - Entitlements and lease agreements approved. :v~c /'1 (. b. South Bav Marketplace - Wal-Mart opened. Best Stores to begin construction in early 1996. c. Broadwav Business Homes - Entitlements and Disposition and Development Agreement Approved. d. Palomar Trollev Center - Phase I completed. Phase /I to be completed in February 1996. e. Veterans Horne - Governor's Commission designated Chula Vista as priority site. Agreement with School District approved for land swap to make an appropriate site available for development of the project. f. Hiah-Tech/Bio-Tech Zone - NYPRO San Diego agreement executed allowing for expansion and relocation of an existing manufacturing busines.s into the zone. g. BECA - Grand Opening and Open House held on November 15, 1995. h. U.S. Postal Encodina Center - Opened in October 1995 in the former Allied Signal building in the Bayfront Project Area. Within this background and context, the remainder of the report identifies the progress made toward achieving the stated goals on both the revenue and expenditure side of the Agency's budget, as well as the subsequent effect on the current year budget projections. Included as Attachment 1 is a spreadsheet which updates the Agency's current year fund balance projections. REVENUE Property Sales Crucial to the revenue side of the budget are the proposed non-essential property/asset sales for the purpose of restoring the Agency's negative fund balances. Included as attachments to the June 27 report were budget balance sheets for the 1994-95 and 1995-96 fiscal years which identified the following prospective property sale proceeds totaling $5,126,000: 1) EI Dorado Building ($1,300,000); 2) Fuller Ford ($550,000); 3) South Bay Chevrolet ($1,183,000); 4) RDA share of Marina View Park ($343,000); 5) Cappos ($750,000); 6) Marina Motor Motel ($1,000,000). Listed below is an update for each of the identified property sales. EI Dorado Building As a result of a Joint Public Hearing on September 5, 1995, action was taken to approve the sale of the EI Dorado Building to the City for $1,175,000 utilizing the Development Impact Fee , ~-]...- ~ Page 3, Item If Meeting Date (')1/23~ (DIF) funds from the Civic Center Expansion Fund. As a result of that action, the ~gency .., J ./, received revenue of $1,064,550 with the remaining balance of $110,450 applied as debt"':2. " retirement from Bayfront/T own Centre I to the General Fund. Fuller Ford On July 25, 1995, action was taken to approve the "Broadway Business Homes" project which contemplated the sale of the former Fuller Ford site for $550,000 in two phases of $275,000 each. The Agency is responsible for the remaining demolition costs estimated to be $93,000. Additionally, as part of the re-evaluation of the Agency CIP (presented in a separate report) staff recommended that an additional $79,083 be appropriated from the Fuller Ford sale proceeds for the RD 133 (Auto Park) project which was established for the clean-up, clearance and sale of Agency-owned property for the Broadway Business Homes project. In the event that staff's recommendation is accepted, the net proceeds from the Phase I sale would be reduced to $102,917. Phase 1/ is conservatively expected to be received in the 1996-97 fiscal year. The net proceeds would then be $377,917. South Bay Chevrolet The sale of the former South Bay Chevrolet site to Courtney Tire had been delayed pending resolution of some site/soils condition issues which was necessary in order for the purchaser to finance the project. However, staff recently received clearance from the County of San Diego which cleared the way for the transaction to be completed. This sale resulted in net proceeds of $1,288,623 to the Agency. The property was agreed to be sold for $1,350,000 with the Agency absorbing related escrow costs. Port District Properties The remaining four identified property sales are all reliant on actions to be taken by the Port District. Recently, the Port District took action to include $2,540,000 for the acquisition of "Chula Vista City Properties" in the 1996 Port District Capital Improvement Progr"am. Of the four properties, two have been appraised so far by the Port. The other two are less certain as to the timing of their disposition, although Port staff indicate they will have these property appraisals completed within thirty (30) days. a. Appraised Properties The Port District has appraised both the Marina View Park and Shangri~La properties. With respect to Marina View Park, the appraised value was determined to be $762,000 with the expected proceeds to be split 50/50 between the City and Agency. This split was deemed necessary since the City purchased the land, and the Agency paid for the improvements. It is unclear at this time with respect to the actual timing, although Community Development staff has taken the appropriate action to remove Marina View Park as a security asset for the Town Centre II parking structure Certificates of Participation, which needed to be accomplished before the Port District could acquire the property. The Shangri-La property was appraised for $950,000. However, it is currently estimated that there will be up to $500,000 in "clean-up" costs for contaminated soils on the property that . would have to be deducted from the purchase price or paid by the Agency before the sale. .., '1-j , Page 4, Item-.f . . Meeting Date 01:23/~C~ Again the timing of this acquisition is contingent upon Port District action which has been -,J !. requested. 7~/'I(., !h Non-appraised properties With the recent adoption of the Port CIP, the Port District has not, to date. appraised the Cappos and Marina Motor Motel properties. Staff is hopeful that substantial progress will be made since Port District staff has been directed to pursue these property dispositions immediately and expect to have property appraisals completed within thirty (30) days. The Cappos site recently received environmental clearance from the State which now clears the way for the property to be appraised. Additionally, no contamination issues are anticipated on the Marina Motor Motel site. ~ Propertv Sales SummMY, So far this fiscal year the Agency has received $2,353,173 in its effort to liquidate assets in order to eliminate the Agency's negative fund balances. If the remaining property sales are achieved, it is probable that in 1995-96 the Agency will derive $3,287,090 in - one-time revenue as follows: EI Dorado Fuller Ford South Bay Chevrolet Marina View Park Shangri-La TOTAL $1,064,550 102,917 1,288,623 381,000 450.000 $3,287,090 Of the above property sales, the only one that appears to be uncertain at this time is the net $450,000 sale of the Shangri-La property. Therefore absent the Shangri-La sale, the Agency would receive an estimated $2,837,090 in net reVenue from property sales. However, if the Agency is able to sell the Cappos and Marina Motor Motel properties (currently estimated, but not appraised, at $1,750,000) either this fiscal year or next, the total property sales could be as much as $5,037,090 or $4,587,090 if the Shangri-La property is not sold. Tax Increment Revenue Included in the June 27, 1995 report, staff had projected a total of $5,341,100 in tax increment revenue to be divided $4,483,167 for the RDA Project Area funds and $857,933 for the Housing Fund. However, the Finance Department has updated their projections to $4,254,595 for the Project Area funds and $1,024,254 for Low/Mod thereby totalling $5,278,849. The net effect is a projection decrease of $62,251. It needs to be noted that the reason for the decrease in the projection for the general Project Area funds with an increase in the Housing Fund, is due to the necessity to now make set- aside deposits from Town Centre II. Due to changes in redevelopment law, staff and the City Attorney are currently evaluating the degree to which the Agency may also have a retroactive obligation to make Low/Mod Housing contributions to Town Centre II for FY 93-94 and 94-95. Staff will seek to minimize such obligations in light of the Agency's fiscal constraints. '- "I-If t. Page 5, Item~ Meeting Date 01/23:~ EXPENDITURES .J./,24y;' As previously identified. the current year Agency operational budget has been pared down to the "bare bones" after several successive years of budget cutting. The following-two items 1) Funding of the City's Economic Development Program and 2) Re-evaluation of the Agency CIP, are actions taken to bring the on-going annual Agency budget into balance. For the purposes of this report, we've assumed that the actual "operational" expenditures this year will be the same as the amounts budgeted. It is too early to project with any accuracy the actual amount of expenditures for the current fiscal year. The only changes from the June 27th report on the expenditures side are relative to the CIP and the shifting of additional costs for the City's Economic Development Program from the Agency to the General Fund. Fundina of the Citv'sEconomic Development Proaram As part of the budget approval process, staff was directed to determine the appropriate amount of funding from the RDA's tax in!:rement revenue for the City's Economic. Development Program, and bring back any necessary adjustments for the current year and the prior years. Pursuant to this analysis staff has made the recommendation under a separate report that the Agency should be responsible, in the current year, for 31.63% of the program costs (currently set at 65%). Therefore, if the Council/Agency concurs with the recommendation the following adjustments will be made: .!h Current Vear A total budgetary amount of $214,447 to be shifted from the Agency budget to the General Fund which represents the aggregate reduction of the Agency's obligation from 65% to 31.63%. .!:h Prior Vears Application of the 38.53% retroactive factor will result in an "adjustment" of $1,162,278 to be cleared through the retirement of long-term deferred debt owed to the General Fund. Aaencv CfP As also provided under a separate report, staff took action to completely re-evaluate the Agency's CIP in another effort to help limit Agency expenditures and/or identify alternative funding sources as part of the aforementioned "three-pronged" strategy. The result of the re- evaluation is that ofthe previously approved, but unfunded projects total of $3,047,141; staff is recommending that $1,381,235 be cancelled; $238,809 be deferred; and $1,427,097 be retained. Of the $1,427,097 to be retained, alternative (non-RDA tax increment) funding sources were identified in the amount of $1,015,350. The balance of $411,747 are housing-related projects and therefore are coming from the restricted Low/Mod Housing Fund. In order to simplify matters, staff has assumed that the housing CIP obligations ($411,747) will be actually expended this year. 1..j -5 Page 6, Item~ Meeting Date 01 IZ3196 .~ . -'i~'If(. The Agency's three-pronged strateny outlined at the beninninn of this report, has resulted in one-time revenues from property sales (EI Dorado Building and South Bay Chevrolet) to date of $2,353,173 with additional sales totallinn $2,683.917 in the pipeline to be completed later this fiscal year or next year. Again, this one-time revenue from property sales are intended specifically for restoring the Agency's negative fund balances. SUMMARY OF ACTIONS Prudent budget cuts was identified as the second prong of the strategy. In essence, this has been occurring for the last several years in incremental fashion to bring the Anency's operational expenditures more in-line with its operational revenues. As an example of this trend, in FY 1993-94 the Agency actual operational expenditures (not inCluding CIP) was $5,573,060. This expenditure level dropped dramatically the next year to $3,601,011. In the current year, the Agency's operations budget was reduced to $3,070,610. The final portion of the strategy relative to seeking alternative and/or more appropriate funding. sources is illustrated by the Agency's actions on the Capital Improvement Program and the shifting of some of the funding obligations for the City's Economic Development Program. Both of these actions were the subject of separate but related reports and summarized previously in this report. The overall result is that the Agency has taken a previously unfunded CIP liability of $3,047,141 and whittled it down by a combination of cancelling projects ($1,381,235), deferring a little ($238,809), and finding alternative sources ($1,015,350). With respect to the Economic Development Program,. the Agency will now be funding the program based upon a "pro-rata" share funding criteria. The current year result is to save the Agency $ 214,447 in operational costs. As long as the Economic Development Program continues to have a "city-wide" emphasis, then the Agency will continue to be responsible for a reduced pro-rata share percentage of the costs down significantly from the 85% in prior years, and 65% budgeted in the current year. FISCAL IMPACT The review and acceptance of this report does not in and of itself have a fiscal impact. However, inCluded as Attachment 1 is an updated projected fund balance cash flow statement for the current fiscal year. The table has been updated from the spreadsheets provided in the June 27, 1995 staff report to reflect all of the adjustments on both the revenue and expenditure sides as discussed in this report. As indicated in the table, the Agency (non- Housing) project fund is expected to rebound sharply from the current combined fund balance of $-3,345,810 to $-399,554. As an expressed total with the restricted funds, the current $-1,534,645 fund balances should turn into a positive fund balance of $1,878,495. It is also helpful to look at the Agency budget by comparing on-going operational revenues with on-going operational expenditures. Therefore, included in Attachment 1 are line items identified as Operational Revenues, Operational Expenditures and Operational Surplus/(Deficit). The operational revenues are absent one-time revenues such as the property sales and other "reimbursements" whereas the operational expenditures are net of CIP expenditures. As the If -d, Page 7, Item~ Meeting Date G1/23/~ table indicates, the; Agency Project Fund currently has an on-going operational deficit of % $340,834. When accounting for the restricted funds, the combined operational deficit is ~;;,,, $35.352. M:\HQME\COMMOEV\HA YNES\REPORTS\MIDYRBUO.RPT , ;.f-7 ' This page blank. , 1-R ' CHULA VISTA REDEVELOPMENT AGENCY FY 1995-96 PROJECTED FUND BALANCES BEG. FUND BALANCE PROJECTED REVENUES Property Taxes Property Sales (2) Interest/Lease COP - GF Transfer In - Pkng Fund Loan Proceeds - Fine Arts Reimbursements Miscellaneous TOTAL REVENUES OPERATIONAL REVENUES (3) ESTIMATED EXPENDITURES Staff Reimbursement Operations Capital Costs capital Projects (4) Transfers Out Debt Service (+ COPS) Loan to RDA TOTAL EXPENDITURES OPERATIONAL EXPENDITURES YR. SURPLUS/(DEFICIT) OPERATIONAL SURPLUS/ (DEFICIT) RDA ($3,345,810) $4,254,595 $3,459,173 $73,154 $2,055,090 $288,200 $95,151 $20,000 ,0 $10,245,363 $6,382,839 $1,337,879 $376,836 $296,272 $575,434 $211,466 $4,501,220 ,0 $7,299,107 $6,723,673 $2,946,256 ($340;834) HOUSING $1,527,824 $1,024,254 SO $155,200 ,0 ,0 SO $654,600 $13,700 $1,847,754 $1,179,454 $467,383 $90,606 $23,683 $411,747 $300,000 $0 ,0 $1,293,419, $881,672 $554,335 $297,782 FINE ARTS $283,341 ,0 ,0 $15,700 ,0 ,0 SO ,0 ,0 $15,700 $15,700 $8,000 ,0 ,0 ,0 ,0 $0 $95,151 $103,151 $8,000 ($87,451) $7,700 ENDING BALANCE NOTES: (1) For Memorandum Purposes only. Not to be used for evaluating the Agency's financial position. ($399,554) (2) Property sales include as follows: Property Sales: EI Dorado Building South Bay Chevrolet Fuller Ford site Marina View Park cappos Marina Motor Hotel Shangri-La Total FY 95-96 $1,064,550 $1,288,623 $275,000 $381,000 $450,000 $3,459,173 $2,082,159 FY 96-97 $275,000 ~;1, 000,000 $750,000 $2,025,000 $195,890 ATTACHMENT 1 TOTAL (1) ($1,534,645) $5,278,849 $3,459,173 $244,054 $2,055,090 $288,200 $95,151 $674,600 $13,700 $12,108,817 $7,577,993 $1,813,262 $467,442 $319,955 $987,181 $511,466 $4,501,220 $95,151 $8,695,677 $7,613,345 $3,413,140 ($35,352) $1,878,495 Notes Bal. of $110,450 - Debt retirement $1,350,DOO - $62,000 costs Less Agency eIP costs totalling $172,083 $762,000 split 50/50 with City To be appraised by Port To be appraised by Port $1 mil - $500,000.clean-up costs (3) .Operational- revenues identified to be compared with .operational. expenditures. This comparison nets out one-time revenues end eIP expenditures. (4) Assumes all of the RDA funded elP is actually expended this current year. CIP expenditures are offset by: Transfer In ($288,200), Fine Arts Loan ($95,151) and proceeds from Fuller Ford sale ($192,083). c:\qpro\haynes\budget\96cub..wql 1-/--,1 This page blank. Jf - It) MEMORANDUM January 15, 1996 TO: FROM: The Honorable Shirley Horton, Chairman - Re~re,lopment Agency John D. Goss. Executive Director J(~ Pv~~~\ c.5 ' Chris Salomone, Community Developmen irector VIA: SUBJECT: Request to Call a Special Worksession/Meeting of the Redevelopment Agency/City Council for Tuesday, February 20, 1996 Staff is requesting the two items from the Worksession/Meeting of February 6, 1996 be agendized to a Special Worksession/Meeting of the Redevelopment Agency/City Council on Tuesday, February 20, 1996. The following items require consideration, deliberation, and action: . AGENCY REPORT REPORT OF FINDINGS RELATIVE TO THE APPROPRIATE LEVEL OF FUNDING FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FROM REDEVELOPMENT AGENCY TAX INCREMENT REVENUE AGENCY/ COUNCIL ESTABLISHING THE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 31.63 PERCENT FOR THE CITY'S ECONOMIC DEVELOPMENT PROGRAM FOR FISCAL YEAR 1995-96, AND ESTABLISHING A RETROACTIVE FUNDING LEVEL FROM REDEVELOPMENT TAX INCREMENT REVENUE AT 38.53 PERCENT FOR FISCAL YEARS 1989-90 THROUGH 1994-95 . AGENCY REPORT FISCAL YEAR 1995-96 MID-YEAR AGENCY BUDGET REPORT I hereby call a Special Worksession/Meeting of the Redevelopment Agency/City Council for Tuesday, February 20, 1996: A~ Shirley Ho on, airman I IBBIC:IWP51IAGENCYIMEMOSIINF09603.MEMI ,