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Home My WebLink About2009/01/20 Item 5 CHULA VISTA REDEVELOPMENT AGENCY AGENDA STATEMENT J,"'-'-'WARY 20, 2009, Item S SUBMITTED BY: RESOLUTION OF THE CffiJLA VISTA REDEVELOPMENT AGENCY [A] AUTHORIZING At'! INTERFUND LOAN UP TO $855,797 FROM THE LOW M'D MODERATE INCOME HOUSING FUND TO THE REDEVELOPMENT FUNDS FOR THE STATE REQUIRED ERAF PAYMENT; At"u [B] AUTHORIZING NECESSARY BUDGET ADJUSTMENTS TO APPROPRlATE THE INTERFUNu LOAN OF $855,797 At'JD THE BALANCE OF $977,307 REQUIRED BY AB l~~VORA TOTAL OF $1,833,104. DEPUTY CITY. MANAGERtit'1 . DEVELOPMENT SERVICES DIRECTOR CITY NIANAGE~ ITEM TITLE: REVIEWED BY: 4/5THS VOTE: YES ~ NO D SUMMARY Assembly Bill (AB) 1389 of 2008 added Section 33684 to the Health and Safety Code (H&S). This new section of the"H&S code requires redevelopment agencies to remit a prescribed share of a cumulative contribution to the Educational Revenue Augmentation Fund (ERAF) by May 10 2009. In addition, ABI389 required all agencies to review pass-through payments made from fiscal years 2003 through 2008 and remit any outstanding payments by February 1,2009. The current calculation issued by the County of San Diego (County) on outstanding pass through payments is $977,307 together with the ERAF payment of $855,797 brings the total outstanding obligation of the Chula Vista Redevelopment Agency (Agency) to over $1.8 million: ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Section 15378(b)(4) of the State CEQA Guidelines because it involves a governmental fiscal action which will not result in direct or indirect physical changes or impacts to the environment; therefore, pursuant to Section l5060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary. 5-1 J~NUARY20, 2009 Item2 Page 2 of 4 RECOMJVIENDATION Adopt the resolution BOARDS/COMMISSION RECOlYltvIENDATION Not Applicable DISCUSSION Assemblv Bill 1389 AJ31389 added a new Section to the Health and Safety Code requiring redevelopment agencies to remit a prescribed ERAF share ($855,797). Additionally, each redevelopment agency underwent a review of pass-through requirements from fiscal years 2003 through 2008. As a result of this review, the County has opined that the Agency is subject to pass-through requirements on "Unitary Tax" revenue, which includes proportionate tax revenue on the countywide taxable value for public utilities. This new interpretation creates an outstanding pass-through obligation of almost a million dollars. The current County calculation ($977,307) together with the ERAF payment ($855,757) brings the total outstanding obligation of the Agency to over $1.8 million. Staff identified budget savings in the current year by keeping vacant positions frozen and postponing Capital Improvement Projects (CIP) and other projects until next year in order to make a portion of the payments. The Agency does not have the full amount outstanding without either borrowing from California Statewide Communities Development Authority (CSCDA) or from the Low and Moderate Income Housing Fund. At this time, staff recommends a loan from the Low and Moderate Income Housing Fund to help the Agency make the ERAF payment. AB 13 89 brings a significant financial impact and aggressive deadlines. Below is a time line to show the short turn around time for these impacts: 9130/08 AB1389 approved 10/31108. Chula Vista reports were submitted to the County to meet the 11/1108 deadline 11112/08 State of California sends all redevelopment agencies a notice . of their respective ERAF payment ($855,797 for CVRA) 12/01108 County transmits results of pass-through audit with a new outstanding obligation of $977,307 on Unitary Tax Revenue 12/22/08 Agency submits dispute letter to the County Auditor & Controller' 1/08/09 Agency and County staff meet to discuss dispute. No resolution is found. County will bring up the matter when they meet with the State Controller's Office and other counties. In the meantime, they will try to obtain a legal opinion regarding their position. 1/30/09 Deadline for agencies to remit payment of any outstanding pass-through payments to the taxing.entities 5/1 0/09 Deadline for agencies to make the mandated ER.A.f payment 5-2 JANUARY 20, 2009 Item5 Page 3 of 4 As these regulations were approved after the Agency's budget was adopted, the Agency Board will have to approve budget adjustments in order to make the required payments. Proposed Dispute Actions On December 22, 2008, the Agency submitted its statement of dispute regarding the inclusion of unitary tax revenue as part of tax increment revenue in determining pass-through payments. This dispute is not isolated to Chula Vista and is being addressed individually by other local jurisdictions as well as at the State level by the California Redevelopment Association with the State Controller's Office. The Agency continues to discuss the matter with the County Auditor. Should this dispute not be resolved immediately the Agency must remit payment prior to February 1, 2009, or face sanctions and late payment penalties. The Agency would remit the payment with a statement of protest and a request for a refund of this payment should the matter be resolved in the Agency's favor. The Agency would continue to work on resolving this issue at both the County and State level. Low and Moderate Income Housing Fund Loan State regulations allow agencies to borrow up to 50% of the current year revenues to the Low and Moderate Income Housing Fund in order to make the ERAF payment. This loan must be repaid within 10 years. In accordance with standard practice, this loan will assess interest at the interest pool rate. Loan repayments will be budgeted through the normal budget process, based on available revenue. Budget Savings The full pass-through payment will have to be budgeted in the current year. In order to come up with enough budget savings mid-year, Redevelopment Agency staff is working closely with the Finance Department to identify $977,307 in budget savings through this fiscal year. Salary Savings-There are several positions that have been frozen and are expected to be eliminated in the 2009-2010 budget. These frozen positions will result in $249,378 in salary savings in the current year. ClP-There are two capital projects (Bayfront Master Plan and 99/Palomar St.) that are complete and can be closed out, which bring a budget savings of $ 1 55,386. There are also two capital projects that will have funding reduced by $115,OQO (Storefront Renovation and SW Planning & Civic Engagement). Supplies & Services-A number of projects are being postponed until next fiscal year, or work anticipated by outside consultants will be done in-house. Together with reductions in any line item that can be reduced, we anticipate a savings in the Services and Supplies category by $385,479. General Fund Staff Time Reimbursement-At this point staff anticipates a reduction in budget available for General Fund Staff Time Reimbursement by $72,064. This translates to a General Fund impact, as those revenues have already b;en budgeted in the General Fund. If additional budget savings can be realized in the RDA budget, then the impact to the General Fund can be minimized. 5-3 JAc'<1J.A.RY 20,2009 Item 5 Page 4 of4 DECISION MAKER CONFLICT Staff has determined that the action contemplated by this item is ministerial, secretarial, manual, or clerical in nature and does not require the City Council members to make or participate in making a governmental decision, pursuant to California Code of Regulations section 18702.4(a). Consequently, this item does not present a conflict under the Political Reform Act (CaL Gov't Code S 87100, et seq.). FISCAL IMP ACT The outstanding pass-through payments, together with the ER.A.F payment, brings the total outstanding obligation of the Agency to over $ 1.8 million. As the Agency does not have these additional funds available, staff recommends a loan from the Low and Moderate Income Housing Fund. The Agency can only borrow from the Low and Moderate Income Housing Fund for the amount of the ER.AF payment The loan of $855,797 from Low and Moderate Income Housing Fund must be repaid within 10 years and would carry interest. The amount of outstanding pass-through payments ($977,307) is still under dispute, but must be paid by February I, 2009. The Agency will have to remit payment and request a refund if this amount decreases. Staff identified budget savings in the current year by keeping vacant positions frozen and postponing projects until next year in order to make a portion of the payments. At this point staff anticipates a reduction in budget available for General Fund Staff Time Reimbursement by approximately $72,000. This translates to a General Fund impact, as those . revenues have already been budgeted in the General Fund. If additional budget savings can be realized in the RDA budget, then the impact to the General Fund can be minimized. ATTACHMENTS None Prepared by: Amanda lVli!ls, Redevelopment & Housing Manager, Development Services Department 5-4 RDA RESOLUTION NO. 2009" RESOLUTION OF THE CHULA VISTA REDEVELOPMENT AGENCY [A] AUTHORlZING AN INTERFUND LOAN UP TO $855,797 FROM THE LOW AND MODERATE INCOME HOUSING FUND. TO THE REDEVELOPMENT FUNDS FOR THE STATE REQUIRED ERAF PAYMENT; AL'\fD [B) AUTHORlZING NECESSARY BUDGET ADJUSTMENTS TO APPROPRlATE THE INTERFUND LOAN OF $855,797 AND THE BALANCE OF $977,307 REQUIRED BY AB 1389 FORA TOTAL OF $1,833,104 WHEREAS, Assembly Bill (AB) 1389 of 2008 added Section 33684 to the Health and Safety Code (H&S) requiring redevelopment agencies to remit a prescribed share to the Educational Revenue Augmentation Fund (ERAF); and WHEREAS, the Redevelopment Agency of the City of Chula Vista (the Agency) has a prescribed ERAF share of $855,797 due by May 10, 2009; and WHEREAS, AB 1389 also required each redevelopment agency to go through a County review of pass-through requirements from fiscal years 2003 through 2008; and WHEREAS, the County of San Diego has opined that the Agency is subject to pass-through requirements on "Unitary Tax" revenue. This new interpretation creates an outstanding pass-through obligation of $977,307, due by February 1, 2009; and WHEREAS, the Agency continues to discuss the matter with the County Auditor. Should this dispute not be resolved immediately the Agency would remit the payment with a statement of protest and a request for a refund of this payment should the matter be resolved in the Agency's favor; and WHEREAS, State regulations allow agencies to borrow up to 50% of the current year revenues to the Low and Moderate Income Housing Fund in order to make the ERAF payment; and WHEREAS, Staff identified budget savings in the current year by keeping vacant positions frozen and postponing projects until next year in order to make a portion of the payments; and WHEREAS, the Agency has insufficient funds to make the ERAF payment and must borrow from the Low and Moderate Income Housing Fund; and WHEREAS, the funds borrowed from the Low and Moderate Income Housing Fund will be repaid within lO years from the date the funds are remitted to the County Auditor; and 5-5 WHEREAS, the Agency desires to borrow the amount of the ERAF payment ($855,797) from the Low and Moderate Income Housing Fund; and NOW, THEREFORE, BE IT RESOLVED that the Redevelopment Agency of the City of Chula Vista does hereby declare as follows: [A] The Chula Vista Redevelopment Agency does hereby authorize an interfund loan. up to $855,797 from the low and moderate income housing fund to the Redevelopment funds for the state required ERAF payment; and [B] The Chula Vista Redevelopment Agency does hereby amend the FY 2009 Redevelopment Agency Budget to appropriate the interfund loan of $855,797 and the balance of $977,307 required by ABI389 for a total of $1,833,104. {\~/ i W~tt{ 1/ Bart Miesreld 'Agency Counsel Presented by: Gary Halbert Deputy City Manager/ Development Services Director 5-6