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HomeMy WebLinkAbout2010/03/02 Item 8CITY COUNCIL & REDEVELOPMENT AGENCY AGENDA STATEMENT - „s, ~tvi __ .~'~) ~ ~~ CITY OF z-~ CHULA VISTA MARCH 2, 2010, Item ITEM TITLE: JOINT RESOLUTION OF THE CHULA VISTA REDEVELOPMENT AGENCY AND CITY COUNCIL AUTHORIZING THE EXECUTIVE DIRECTOR TO SELL FROM THE REDEVELOPMENT AGENCY AND THE CITY MANAGER TO PURCHASE FOR THE CITY OF CHULA VISTA THE 14.41 ACRE SITE (APN 563-350-1300 AND 566- 131-0100) LOCATED IN THE LOWER SWEETWATER VALLEY FOR THE APPRAISED VALUE OF APPROXIMATELY $9.6 MILLION AND APPROVING AN INTERFUND LOAN FROM THE EASTERN PARKLAND ACQUISITION AND DEVELOPMENT FEE FUND TO THE WESTERN PARKLAND ACQUISITION AND DEVELOPMENT FEE FUND TO ACQUIRE THE SITE AND AUTHORIZING THE EXECUTIVE DIRECTOR/CITY MANAGER OR HIS DESIGNEE TO EXECUTE ALL NECESSARY DOCUMENTS TO CONVEY THE SITE TO THE CITY AND AUTHORIZING THAT THE PROCEEDS OF THE SALE BE APPLIED TO THE OUTSTANDING LOAN BALANCE OWED TO THE CITY'S GENERAL FUND FOR FISCAL YEAR 2010/11. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AGREEING TO REDUCE THE REDEVELOPMENT AGENCY'S OUTSTANDING LOAN BALANCE OWED TO THE GENERAL FUND BY $4.6 MILLION FOR PREVIOUS LOANS OWED TO THE AGENCY BY THE CHULA VISTA NATURE CENTER. SUBMITTED BY: DEPUTY C~MANAGER / DEVELOPMENT SERVICES The Chula Vista Redevelopment Agency previously owed the City of Chula Vista approximately $31 million from loans made to the Agency for Redevelopment Project Area start up costs and payments made on behalf of the Agency towards Certificates of Participation (COPS) issued to build the pazking facility at the Chula Vista Shopping Center in 1987. Over the past two years, the Agency has made significant efforts to reduce the debt owed to the City, anticipating that by DIRECTOR REVIEWED BY: CITY MANAGER 4/STHS VOTE: YES ~ NO SUMMARY 8-1 MARCH 2, 2010, Item Page 2 the end of fiscal year 2009/10 the Redevelopment Agency will have repaid, over the last two years, approximately $9.3 million, reducing the remaining debt to the City to approximately $21.7 million. To continue to reduce the debt obligations of the Agency, staff recommends that the Agency sell anAgency-owned 14.41 acre site located in the lower Sweetwater Valley to the City and that the Agency and be credited for a previous outstanding loan, owed to the Agency, that was forgiven by the City in 2002. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed action for compliance with the California Environmental Quality Act (CEQA) and has determined that the project qualifies for a Class 25 (f) (Acquisition, sale, or other transfer to preserve open space or lands for park purposes) categorical exemption pursuant to Section 15325 [Transfer of Ownership of Interest in Land to Preserve Existing Natural Conditions] of the State CEQA Guidelines. Thus, no further environmental review is required. RECOMMENDATION That the Chula Vista City Council and Redevelopment Agency approves: A. Joint Resolution of the Chula Vista Redevelopment Agency and City Council authorizing the Executive Director to sell the 14.41 acre site (APN 563-350-1300 and 566-131-0100) located in the lower Sweetwater Valley to the City of Chula Vista for the appraised value of approximately $9.6 million and authorizing the Executive Director/City Manager or his designee to execute all necessary documents to convey the site to the City and authorizing that the proceeds of the sale will be applied to the outstanding loan balance owed to the City's General Fund for Fiscal Yeaz 2010/11. B. Resolution of the City Council of the City of Chula Vista agreeing to reduce the outstanding loan balance owed to the General Fund by $4.6 million for previous loans owed to the Agency by the Chula Vista Nature Center. BOARDS/COMMISSION RECOMMENDATION The Chula Vista Redevelopment Corporation voted 6-0-0-1 at their February 25, 2010 Boazd meeting, unanimously supporting resolution A and 5-0-1-1 in support of resolution B. DISCUSSION Loan Repayment Efforts by the Agency At the close of fiscal year 2007/08 the Redevelopment Agency had an outstanding loan balance owed to the City of Chula Vista of approximately $31 million. Approximately $11 million of the outstanding loan balance was from loans made to the Agency for new project area start up costs and interest accrued over the past thirty years. The remaining $20 million has accrued as a result of the City making annual debt service payments on behalf of the Agency toward Certificates of Participation (COPS) that were issued to build a pazking structure for the expansion of the Chula Vista Shopping Center in 1987. During the 1992 to 2007 period, the Agency was unable to cover all of its outstanding debt obligations and continued borrowing a million dollazs each yeaz from the City. Fiscal yeaz 2007/08 was the first time in over fifteen yeazs that the Agency was able to meet all of its annual debt service obligations. S-2 MARCH 2, 2010, Item g Page 3 During fiscal year 2008/09, the Agency was able to repay the City $3.7 million from a 2008 Tax Allocation Bond issuance, $900,000 from unanticipated additional tax increment revenues and approximately $500,000 in budgetary savings. The total loan repayment for fiscal yeaz 2008/09 was approximately $5.1 million. By the close of fiscal yeaz 2008/09 the Redevelopment Agency had an outstanding loan balance owed to the City's General Fund of approximately $26 million. During the current fiscal year 2009/10 the Agency will repay the General Fund $1.4 million in bond proceeds for project expenditures and $2.8 million in projected tax increment revenues. The total anticipated loan repayment for fiscal yeaz 2009/10 is projected to be $4.2 million. By the end of fiscal year 2009/10 the Agency, over the last two fiscal years, will have reduced the outstanding loan balance owed to the City by approximately $9.3 million, resulting in a remaining balance of $21.7 million. Sale of A¢ency Owned Land To continue the effort of reducing the remaining debt obligations owed to the City, staff recommends the Agency sell two Agency owned parcels (APN 563-350-1300 and 566-131- 0100) to the City. These pazcels have little opportunity for redevelopment and are better suited for long term public use as a pazk. The site is 14.41 acres located in the lower Sweetwater Valley. The lower Sweetwater Valley site is a vacant site and has a General Plan designation of Open Space Recreation. The site is well suited, and supported by the General Plan and the community, to be a future park and not a redevelopment project. The sale of this land to the City based on an independent appraisal is estimated to be worth $9.6 million. The sale of this site would leave a remaining outstanding loan balance to the City of approximately $12.1 million. Parkland in Western Chula Vista The 2005 General Plan Update set the City's standazd for parks and recreation at 3 acres of public parkland per 1,000 residents. New development is required to provide this additional parkland via the Parkland Acquisition and Development (PAD) in-lieu fee program. The majority of residential development in the eastern portion of the City is greenfield development. As a result, most developers in the east opt to dedicate on-site land to the City for park uses instead of paying the in-lieu fee. In contrast, the majority of residential development in westem Chula Vista is infill. Dedication of on-site park acreage is not practical for these projects. Instead, the City collects fees from these projects to apply in the acquisition of parkland to serve the new development. The same infill character which makes dedication of on-site pazklands impractical creates challenges for the City in the acquisition of park sites. In the westem portion of the City, the park standard is not currently being met. This is the result of a number of factors including the annexation of the Montgomery Area without parklands sufficient to maintain the park ratio and the use of PAD fees for the reconstruction/rehabilitation of existing pazks. Acquisition and development of the subject site into a park, serving western Chula Vista residents, is a large step towazd meeting the City's goal of providing 3 acres of parkland per 1,000 residents citywide. The City has worked to identify potential suitable pazk sites in western Chula Vista, generally identified in the 2005 General Plan Update and the 2007 Draft Park and Recreation Master Plan. The property proposed for sale by the Agency is one of the places identified as being a suitable S-3 MARCH 2, 2010, Item 8 Page 4 park site. Upon transfer of the property to the City, the Development Services Department would return at a later Council meeting for the Council to consider rezoning the property from single family residential (Rl) and unclassified (iJNZ) to Public/ quasi public zoning (PQ) designating the site for pazk purposes. The proposed park site to be acquired from the Agency will serve and be funded by future western Chula Vista residents, including residents of the Urban Core Specific Planning Area. As a result, the PAD fund has not yet collected sufficient funds from development in western Chula Vista to finance this purchase. It will therefore be necessary to internally borrow the funds within the PAD fund, using funds that have been collected for the purpose of constructing a community pazk in eastern Chula Vista. The internal loan within the PAD fund will be repaid as funds become available, either as a result of credit acquisitions by the Agency or the payment of PAD fees by developers in western Chula Vista. The Agency will ensure that PAD funds aze repaid to fully fund the development of the park for which they were originally collected. A~ency Investment Credits At the May 2009 CVRC meeting Director Desrochers requested that staff return with a report on what projects, funded by the Agency, could be considered by the City Council as a credit towazd the outstanding loan. In reviewing the list of Agency funded projects, the CVRC considered the list and voted 5-0, with one abstention and one absence, to request the City Council reduce the Agency debt owed to the City equal to the Agency investment made as a loan towazd the Chula Vista Nature Center that was forgiven in 2002 when the Nature Center was transferred to the City. This debt forgiveness will coincide with the transition of the Nature Center to anon-profit organization. The Redevelopment Agency funded $1.6 million of the $2.5 million in construction cost for the Nature Center, provided monies for exhibits, start up costs and annual operations of the Center. By December 2001, the Nature Center had an outstanding obligation to the Agency, including principal and interest, of approximately $4.6 million. However, in 2002, the Nature Center, owned and operated by the Bayfront Conservancy Trust, was no longer able to adequately fund its operation and it was decided that the ownership of the Nature Center would be transferred to the City. As part of this transfer the City Council and the Agency each approved resolutions that eliminated the $4.6 million owed to the Agency without consideration on reducing the debt the Agency owed to the City. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the Chula Vista City Council and Redevelopment Agency members and has found no property holdings within 500 feet of the boundaries of the properties that are subject to this action. CURRENT YEAR FISCAL IMPACT There is no current fiscal yeaz impact, all transfers and loan will be part of the fiscal year 2010/11 budget. ONGOING FISCAL IMPACT •8-4 MARCH 2, 2010, Item S Page 5 Resolution A Resolution A, if approved by the Redevelopment Agency and the City Council, would generate approximately $9.6 million in revenue to the Agency that could be utilized to repay the General Fund and reduce the outstanding debt owed to the City. This transaction would result in no net impact to the Agency's fund balance, but would reduce outstanding debt obligations to approximately $12.1 million. The purchase of the property from the Agency would be funded by the City using PAD fee monies. The PAD fee program is the City's primary financing mechanism for parkland facilities. All new residential development (including hotels/motels) is subject to the PAD fee, which the City collects and uses to construct new parkland facilities or rehabilitate existing facilities. The following cash flow reflects the impacts of the proposed property sale on the available fund balances of the Agency and PAD funds for fiscal years 2009/10 through 2014/15. The Agency's fund balance would be available to purchase PAD fee credits to incentivize redevelopment activity in western Chula Vista. Actual property sale amount and credit acquisition schedule will be subject to Council approval. III I REDEVELOPMENT AGENCY FUNDS Est. Available Fund Balance 1,042,000 41,000 943,000 1,590,000 2,402,000 4,303,000 Estimated Revenues Tax Increment 14,755,000 15,020,000 15,320,000 15,627,000 15,939,000 16,258,000 Interest Earnings 25,000 25,000 25,000 25,000 25,000 25,000 Sale ofPro e - 9,600,000 - - - - Total Estimated Revenues 14,780,000 24,645,000 15,345,000 15,652,000 15,964,000 16,283,000 Estimated Expenditures Low/Mod and Passthroughs (5,565,000) (5,760,000) (5,852,000) (5,946,000) (6,042,000) (6,144,000) Debt Pmnt -Ciry (Park $)~ - (9,600,000) - - - - Debt Pmnt -Ciry (Non Park)Z (1,400,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) (1,500,000) Debt Pmnt -Other (6,524,000) (4,285,000) (4,798,000) (5,796,000) (4,963,000) (5,308,000) Agency Personnel Costs (708,000) (708,000) (708,000) (708,000) (708,000) (708,000) Pro'ectEx enditures (1,584,000 (1,890,000) (1,840,000) (890,000) (850,000) (850,000) Total Estimated Ex enditures 15,781,000 23,743,000 14,698,000 14,840,000 14,063,000 14,510,000 Est. Available Fund Balance 41,000 943,000 1,590,000 2,402,000 4,303,000 6,076,000 PAD FUND Est. Available Fund Balance 35,500,000 29,410,000 20,750,000 21,410,000 22,090,000 22,790,000 Estimated Revenues Interest Earnin s 910,000 940,000 660,000 680,000 700,000 730,000 Total Estimated Revenues 910,000 940,000 660,000 680,000 700,000 730,000 Estimated Expenditures Purchase of Property - (9,600,000) - - - - Park Pro'ect Ex enditures (7,000,000) - - - - - 8-5 MARCH 2, 2010, Item g Pose 6 '~ The $9.6 million deb[ repayment from the Agency to the Ciry is for an existing debt obligation of the Agency. This lump-sum payment shortens the repayment period for the Agency and makes one-time funds available [o the City [o balance [he FY 2010-11 operating budget. '~ Annual debt payment amounts are shown for cash flow forecasting purposes only. The actual payment schedule will be discussed in conjunction with the regular budge[ process, including potential use of funds for project expenditures. Total Debt Reduction Implementation of both recommendations would reduce the outstanding loan balance from the City to the Agency to approximately $7.5 million, as detailed below. For forecasting purposes, staff anticipates the repayment of the $7.5 million via annual payments of $1.5 million each over a five yeaz period. Loan repayments from the Agency to the General Fund over the next five yeazs will be critical to avoid additional staffing cuts and service level impacts. Repayment of the debt will be discussed in conjunction with the regulaz annual budget process. ~ r ~ Outstanding debt to City (June 3Q 2008) $31.0 Less payments FY 2009-2010 FY 2009 repayments (actual) (5.1) FY 2010 re a ments (bud et) 4.2) Subtotal 9.3 Updated outstanding debt to City 21.7 Less recommended actions Sale of Property (9.6) Forgiveness of Nature Center Loan (4.6) Subtotal 141 Updated outstanding debt to City 7.5 The reduction of Agency debt to the City would allow greater resources to be available for reinvestment in the redevelopment project azeas. Resolution B Resolution B, if approved by the City Council, would reduce the debt owed to the City by the Agency by approximately $4.6 million. This reduction in debt owed to the City would reduce the future repayments from the Agency to the City, forgoing potential future General Fund revenues. Prepared by: Eric C. Crockett, Redevelopment Manager, Development Services Department 8-6 COUNCIL RESOLUTION NO. AGENCY RESOLUTION NO. JOINT RESOLUTION OF THE CHULA VISTA REDEVELOPMENT AGENCY AND CITY COUNCIL AUTHORIZING THE EXECUTIVE DIRECTOR TO SELL FROM THE REDEVELOPMENT AGENCY AND THE CITY MANAGER TO PURCHASE FOR THE CITY OF CHULA VISTA THE 14.41 ACRE SITE (APN 563-350-1300 AND 566- 131-0100) LOCATED IN THE LOWER SWEETWATER VALLEY FOR THE APPRAISED VALUE OF APPROXIMATELY $9.6 MILLION AND APPROVING AN INTERFUND LOAN FROM THE EASTERN PARKLAND ACQUISITION AND DEVELOPMENT FEE FUND TO THE WESTERN PARKLAND ACQUISITION AND DEVELOPMENT FEE FUND TO ACQUIRE THE SITE AND AUTHORIZING THE EXECUTIVE DIRECTOR/CITY MANAGER OR HIS DESIGNEE TO EXECUTE ALL NECESSARY DOCUMENTS TO CONVEY THE SITE TO THE CITY AND AUTHORIZING THAT THE PROCEEDS OF THE SALE BE APPLIED TO THE OUTSTANDING LOAN BALANCE OWED TO THE CITY'S GENERAL FUND FOR FISCAL YEAR 2010/11 WHEREAS, the Redevelopment Agency has a $26 million outstanding loan balance owed to the City of Chula Vista; and WHEREAS, the Redevelopment Agency over the past two fiscal years has diligently pursued efforts to reduce the outstanding loan balance; and WHEREAS, the Redevelopment Agency anticipates that by the end of fiscal year 2009/10 it will have reduced the outstanding debt owed to the City to approximately $21.7 million; and WHEREAS, the Redevelopment Agency owns a 14.41 acre site located in the lower Sweetwater Valley (APN 563-350-1300 and 566-131-0100); and WHEREAS, the subject 14.41 acre site is designated by the City's General Plan as Open Space Recreation; and WHEREAS, the community supports the subject 14.41 acre site as a future public park; and WHEREAS, the sale of the subject 14.41 acre site to the City for a future park could generate approximately $9.6 million dollars in Agency proceeds that could further reduce the debt owed to the City; and 8-7 WHEREAS, the Chula Vista Redevelopment Corporation recommended at their January 14, 2010 Board meeting that the Redevelopment Agency sell the subject 14.41 acre site to the City of Chula Vista for use as a future public park for an amount equal to the current park acquisition fee collected by the City on development projects in Western Chula Vista; and WHEREAS, the City will use Parkland Acquisition and Development (PAD) funds to purchase the subject 14.41 acre site from the Redevelopment Agency; and WHEREAS, the City's Western PAD fund has insufficient funds to purchase the subject 14.41 acre site from the Agency; and WHEREAS, the City's Eastern PAD fund has sufficient funds to purchase the subject 14.41 acre site; and WHEREAS, funds from the Eastern PAD fund, in the amount of approximately $9.6 million, will be loaned to the Western PAD fund to fund the acquisition of the subject 14.41 acre site; and WHEREAS, if there are insufficient funds in the Eastern PAD fund to construct the pazk for which they were collected the Redevelopment Agency agrees to purchase credits or loan, up to a maximum amount of $9.6, to the City's Eastern PAD fund to construct the park; and WHEREAS, The Environmental Review Coordinator has reviewed the proposed action for compliance with the California Environmental Quality Act (CEQA) and has determined that the project qualifies for a Class 25 (f) (Acquisition, sale, or other transfer to preserve open space or lands for park purposes) categorical exemption pursuant to Section 15325 [Transfer of Ownership of Interest in Land to Preserve Existing Natural Conditions] of the State CEQA Guidelines. Thus, no further environmental review is required. NOW, THEREFORE, BE IT RESOLVED that the Chula Vista Redevelopment Agency hereby authorizes the Executive Director to sell the 14.41 acre site (APN 563-350-1300 and 566- 131-0100) located in the lower Sweetwater Valley to the City of Chula Vista for an amount equal to the current park acquisition fee collected by the City on development projects in Western Chula Vista; and BE IT FURTHER RESOLVED that the Chula Vista Redevelopment Agency and City Council authorize the Executive Director/City Manager or his designee to execute all necessazy documents to convey the subject 14.41 acre site to the City of Chula Vista; and BE IT FURTHER RESOLVED that the City Council approves an interfund loan from the Eastern Parkland Acquisition and Development fund to the Western Parkland Acquisition and Development fund to acquire the site; and BE IT FURTHER RESOLVED that the Chula Vista Redevelopment Agency hereby authorizes the Executive Director to apply the proceeds of the sale of the subject 14.41.acre site toward the Redevelopment Agency's outstanding loan balance owed to the City of Chula Vista's General Fund for fiscal yeaz 2010/11. 8-8 Presented by Approved as to Form Gary Halbert, AICP, PE / Bart Deputy City Manager/Director of 'mil City Development Services 8-9 COUNCIL RESOLUTION NO RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AGREEING TO REDUCE THE REDEVELOPMENT AGENCY'S OUTSTANDING LOAN BALANCE OWED TO THE GENERAL FUND BY $4.6 MILLION FOR PREVIOUS LOANS OWED TO THE AGENCY BY THE CHULA VISTA NATURE CENTER WHEREAS, the Redevelopment Agency has a $26 million outstanding loan balance owed to the City of Chula Vista; and WHEREAS, the Redevelopment Agency over the past two fiscal years has diligently pursued efforts to reduce the outstanding loan balance; and WHEREAS, the Redevelopment Agency anticipates that by the end of fiscal year 2009/10 to have reduced the outstanding debt owed to the City of Chula Vista to approximately $21.7 million; and WHEREAS, the Redevelopment Agency funded approximately $1.6 million of the $2.5 million in construction costs for the Nature Center; and WHEREAS, the Redevelopment Agency also provided monies for start up costs and annual operations of the Nature Center; and WHEREAS, when the Nature Center in 2002 was transferred from the Bayfront Conservancy Trust to the City of Chula Vista, the City Council and Redevelopment Agency forgave $4.6 million dollars in loans owed to the Agency; and WHEREAS, the Chula Vista Redevelopment Corporation recommended that the City Council reconsider this forgiveness of debt and credit the amount towards the outstanding loan balance of the Agency; and WHEREAS, staff has reviewed the proposed activity for compliance with the State of California Enduonrnental Quality Act ("CEQA"), California Public Resources Code Section 21000 et seq., and has determined that the activity is not a "Project" as defined under Section 15378(b)(4) of the State CEQA Guidelines, therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista hereby finds that the forgiveness of this debt will provide greater financial resources necessary to accomplish the goals consistent with Community Redevelopment Law and the Bayfront Redevelopment Plan by alleviating and preventing the spread of blight and deterioration of the project areas and shall further protect the health, safety and welfare of the citizens of Chula Vista. 8-10 BE IT FURTHER RESOLVED that the City Council of the City of Chula Vista hereby forgives $4.6 million in an outstanding loan balance owed to the General Fund for previous loans owed to the Redevelopment Agency by the Chula Vista Nature Center. Presented by Gary Halbert, AICP, PE Deputy City Manager/Director of Development Services Approved as to form by B iesfeld ~"~ ~~"Cit 5-11 l@Procopio. ,4c1dd-;o.r>cef l Vlh,-rYl-1Gr.:-~h f-km 8 - 3/'7-;' 0 Procopio, Cory, Hargreaves & Savitch LLP Walter E. Rusinck Direct Dial: (6] <I) 525-3~] 2 E-mail: wCI@procopio.com March 2, 2010 City Council and Redevelopment Agency City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Re: Proposal for the City of Chula Vista to Forgive Debt Owed to it by the Chula Vista Redevelopment Agency Dear City Council and Members of the Redevelopment Agency: This letter is submitted on behalf of Mr. Earl Jentz to urge you to not approve the proposed resolutions identified in Action Item 8 to reduce the approximately $21.7 million dollar debt owed to the City by the Chula Vista Redevelopment Agency (CVRA). Proposed Resolution A would require the City to purchase 14.41 acres of vacant park land trom CVRA for the sum of $9.6 million, and then reduce CVRA's obligation to the City by that sum. In addition, Resolution B would require the City to reduce CVRA's debt by another $4.6 million. That apparently is the amount which the fonner owner and operator of the Chula Vista Nature Center owed CR V A as of 2002. However, when the Nature Center was transferred to the City in 2002, both the City Council and the CVRA approved resolutions that eliminated the debt. Resolution B seeks to rescind those eight-year old decisions, and force the City to now bear that $4.6 million expense. We are concerned that neither of these Resolutions as proposed protects the interests of the residents and taxpayers of the City during this time of serious tinaneial hardship. For those reasons, both Resolutions should be rejected. A. The Proposed Price For the 14.41-Acre Property Seems High Given its Allowahle Uses. At the January 2010 meeting of the Chula Vista Redevelopment Corporation ("CVRC"), we requested that the CVRe delay action on the sale of these 14.41 acres until the value of the properties had been properly appraised and those appraisals had been reviewed by the CVRA and the City Council. CRVC Statfhad detennined that these 14.41 acres were wroth $6.8 million "based on the current park acquisition fee collected by the City on development projects in Western Chula Vista" using the Park Acquisition and Development ("PAD") of$474,443/acre to 530 B Street, Suite 2100' San Diego, CA 92101-4469. T. 619.238.1900 F.619.235.0398 North County Office: 1917 Palomar Oaks Way, Suite 300 . Carlsbad. CA 92008-6511 . 1. 760.931.9700 F. 7605131.1155 www.procopio.com OOOOOOOOOOOOOOOOOOOOOOOoOOOOOrJUOCi 'r.: .,~i~LJ::: 000050/000()()U/I1692 [2,03 i@Procopio. Board of Directors March 2, 2010 Page 2 calculate the value of the property. We pointed out using the PAD fee to detennine the value of the 14.41 acres was not a proper way to value the property. Subsequently, CRVC apparently had the property appraised at a value 01'$9.6 million or approximately $666,000/aere. That is the amount that the City would pay ifit approves Resolution A. Unfortunately, we have not seen any information regarding the basis for the appraisal, and we arc concerned that the $666,000/acre value is too high given the status of the property. Specifically, as the attached CVRC Staff Report acknowledged, the property is designated "Open Space Recreation" in the General Plan and is "well suited, and supported by the General Plan and the community, to be a future park and not a redevelopment project." In faet, the CRVC Staff Report concluded that the transfer of the property to the City would be exempt from environmental review under California Environmental Quality Act CCEQA") Guidelines Section 15325 because it would constitute the "Transfer of Ownership Interest in Land to Preserve Existing Natural Conditions" If the 14.41 aeres could be used only for open space or park purposes, a value of $666,000/aere seems higher than fair market value. No doubt the City Council takes seriously its duty to taxpayers to ensure that it is paying fair market value for the land. But it is not clear without reviewing the assumptions in the appraisal ifpaying $9.6 million for the property meets that obligation. Moreover, paying above fair market value could violate Article XVI, Section 6 of the California Constitution, as incorporated in the City ofChula Vista Charter, because it would be an impermissible gift of public funds, and Proposition C's prohibition on the City's "partieipation" in CRY A's activities, which Section 305.5 of the City Charter defines broadly to include "eontributing, lending, providing, pledging, or foregoing, any funds, property, credit, in- kind services, or incurring any debt or lease obligation, or providing any other thing of value to any ageney, organization, or projeet" Finally, if the City bclieves that S660,000/aere represents the fair markct value of this property for park land, and it deeides to approve Resolution A, the City should seriously consider raising the PAD it currently charges to reflect the higher valuation. If the PAD fee is not reconsidered in light of this aetion, the City may be underfunding the PAD program. B. Assuming a Debt That the CRY A Agreed to Bear Does Not Appear to be in the City's Interest. As to Resolution B, the CRVC Staff Report stated that the $4.6 million debt was owed to the CRY A because it provided $ 1.6 million to fund eonstruetion of the Nature Center, which was owned and operated by the Bayfront Conservancy Trust, and "provided monies for exhibits, start up costs and annual operations of the Center." Although that was the amount of the debt in December of 200 I, when the Nature Center was transferred to the City in 2002, both the City 000050/00UOOO/I169212.03 I@Procopio' Board of Directors March 2, 2010 Page 3 and the CVRA each approved resolutions that eliminated the debt. If Resolution B is passed, the City would reverse its position and effeetively assume that $4.6 million expense. Because the debt was simply eliminated in 2002, there is no evidenee that the City made any determination as to whether the $4.6 million debt included only reasonable and legitimate expenditures by CVRA. The reason for the City to assume a $4.6 million debt that both parties agreed the City would not bear has not been made clear. The faets show that the aetion involves the caneellation of the CRY A's debt with no consideration provided to the City. Simply relieving debt without any consideration constitutes an improper gift of pub lie funds, Westley v. u.s. Bancolp (2003) 114 Cal.App.41h 577, 582, and the fact that the City and the CR VA are public agencies does not change that faet. City of Ojai v. Chaffee (1943) 60 Cal.App.2d 54, 59. We are coneerned that the City's apparent rush to reduce the CR V A's $21.7 million debt to the City will result in it paying too high a price for park lands and relieving the CRY A's debt without any consideration. If so, the proposed transaetions would not serve the interests of the taxpaying residents of the City. Again, we urge that the Resolutions as proposed be rejeeted at this time. Very truly yours, 6~_) L Walter E. Rusinek WER Enclosure OOU05ll!()OO()(){)illuLJ212,O] till .11 Rf:DEVELOPl'v1ENT CORPORATION CH U lA VISTA CVRC Board Staff Report - Page 1 Item No.1 DATE: February 25, 2010 TO: CVRC Board Directors VIA: Gary Halbert, Deputy City Manager/Development Services Director FROM: Eric Crockett, Redevelopment Manager SUBJECT: loan Repayment to the General Fund EXECUTIVE SUMMARY: The Chula Vista Redevelopment Agency currently owes the City of Chula Vista approximately $26 million from loans made to the Agency for Redevelopment Project Area start up costs and payments made on behalf of the Agency towards Certificates of Participation (COP) issued to build the parking facility at the Chula Vista Center in 1987. Over the past two years, the Agency has made significant efforts to reduce the debt owed to the City, anticipating that by the end of fiscal year 2009/10 the Redevelopment Agency will have repaid, over the last two years, approximately $9.3 million, reducing the remaining debt to the City to approximately $21.7 million. To continue to reduce the debt obligations of the Agency, staff recommends that the Chula Vista Redevelopment Corporation (CVRC) recommend to the Agency that it sell an Agency-owned 14.41 acre site located in the lower Sweetwater Valley to the City and that the Agency be credited for an outstanding loan owed to the Agency that was forgiven by the City in 2002. ENVIRONMENTAL REVIEW: The Environmental Review Coordinator has reviewed the proposed action for compliance with the California Environmental Quality Act (CEQA) and has determined that the project qualifies for a Class 25 (I) (Acquisition, sale, or other transfer to preserve open space or lands for park purposes) categorical exemption pursuant to Section 15325 [Transfer of Ownership of Interest in land to Preserve Existing Natural Conditions] of the State CEQA Guidelines. Thus, no further environmental review is required. RECOMMENDATION: That the Chula Vista Redevelopment Corporation approves: Staff Report - Item No.1 Page 2 A. Resolution of the Chula Vista Redevelopment Corporation recommending that the Redevelopment Agency sell the 14.41 acre site (APN 563-350-1300 and 566-131- 0100) located in the lower Sweetwater Valley to the City of Chula Vista for an amount equal to the appraised value of $9.3 million. B. Resolution of the Chula Vista Rc>uevelopment Corporation recommending that the City Council forgive $4.6 million in outstanding loan balance owed to the General fund for previous loans owed to the Agency by the Chula Vista Nature Center. DISCUSSION: Loan Repayment Efforts by the Agency . At the close of fiscal year 2007/08 the Redevelopment Agency had an outstanding loan balance owed to the City of Chula Vista of approximately $31 million. Approximately $11 million of the outstanding loan balance was from loans made to the Agency for new project area start up costs and interest accrued over the past thirty years. The remaining $20 million has accrued as a result of the City making annual debt service payments on behalf of the Agency toward Certificates of Participation (COPs) that were issued to build a parking structure for the expansion on the Chula Vista Shopping Center in 1987. During the 1992 to 2007 period, the Agency was unable to cover all of its outstanding debt obligations and continued borrowing a million dollars each year from the City. Fiscal year 2007/08 was the first time in over fifteen years that the Agency was able to meet all of its annual debt service obligations. By the close of fiscal year 2008/09 the Redevelopment Agency had an outstanding loan balance owed to the City's General Fund of approximately $26 million. During fiscal year 2008/09, the Agency was able to repay the City $3.7 million from a 2008 Tax Allocation Bond issuance, $900,000 from unanticipated additional tax increment revenues and about $500,000 i,n budgetary savings. The total loan repayment for fiscal year 2008/09 was approximately $5.1 million. During the current fiscal year 2009/10 the Agency will repay the General Fund $1.4 million in hond proceeds for project expenditures and $2.8 million in projected tax increment revenues. The total anticipated loan repayment for FY 2009/10 is projected to be $4.2 million. By the end of fiscal year 2009/10 the Agency, over the last two fiscal years, will have reduced the outstanding loan balance owed to the City by approximately $9.3 million, resulting in a remaining balance of $21.7 million. Sale of Agency Owned Land To continue the effort of reducing the remaining debt obligations owed to the City, staff recommends the Agency sell two Agency owned parcels (APN 563-350-1300 and 566- Staff Report - Item No.1 Page 3 131-0100) to the City. These parcels have little opportunity for redevelopment and are better suited for long term public use as a park. The site is 14.41 acres located in the lower Sweetwater Valley. The lower Sweetwater Valley site is a vacant site and has a General Plan designation of Open Space Recreation. The site is well suited, and supported by the General Plan and the community, to be a future park and not a redevelopment project. The sale of this land to the City has an appraised value of $9.3. The sale of this site would leave a remaining outstanding loan balance to the City of approximately $12.4 million. Agency Investment Credits In addition, at the May CVRC meeting Director Desrochers requested that staff return with a report on what projects, funded by the Agency, could be considered by the City Council as a credit toward the outstanding loan. In reviewing the list of Agency funded projects, the CVRC should consider requesting the City Council reduce the Agency debt owed to the City equal to the Agency investment made as a loan toward the Chula Vista Nature Center that was forgiven in 2002 when the Nature Center was transferred to the City. This debt forgiveness will coincide with the transition of the Nature Center to a non-profit organization. The Redevelopment Agency funded $1.6 million of the $2.5 million in construction cost for the Nature Center, provided monies for exhibits, start up costs and annual operations of the Center. By December 2001, the Nature Center had an outstanding obligation to the Agency, including principal and interest, of approximately $4.6 million. However, in 2002, the Nature Center, owned and operated by the Bayfront Conservancy Trust, was no longer able to adequately fund its operation and it was decided that the ownership of the Nature Center would be transferred to the City. As part of this transfer the City Council and the Agency each approved resolutions that eliminated the $4.6 million owed to the Agency without consideration on reducing the debt the Agency owed to the City. The CVRC could request the City Council and Redevelopment Agency reconsider the forgiveness of this debt and credit the amount toward the outstanding obligations owed to the City. .;' DECISION-MAKER CONFLICT: Staff has reviewed the property holdings of the Chula Vista Redevelopment Corporation members and has found no property holdings within 500 feet of the boundaries of the properties that are subject to th is action. FISCAL IMPACT: The resolutions before you tonight consist of recommendations for action on the part of the Chula Vista City Council and/or Redevelopment Agency. As such, approval of the Staff Report - Item No.1 Page 4 resolutions does not have a direct fiscal impact on the Chula Vista Redevelopment Corporation, the Chula Vista Redevelopment Agency, or the City's General Fund. To follow is a discussion of the fiscal impacts if the recommendations are implemented by the City Council and/or Redevelopment Agency. Resolution ^ Resolution A, if afJproved by the Redevelopment Agency and the City Council, would generate approximately $9.3 million in revenue to the Agency that would be utilized to repay the General Fund and reduce the outstanding debt owed to the City. This transaction would result in no net impact to the Agency's fund balance, but would reduce outstanding debt obligations to approximately $12.4 million. The purchase of the property from the Agency would be funded by the City using Park Acquisition and Development (PAD) fee monies. The PAD fee program is the City's primary financing mechanism for parkland facilities. All new residential development (including hotels/motels) is subject to the PAD fee, which the City collects and uses to construct new parkland facilities or rehabilitate existing facilities. The proposed park site to be acquired from the Agency will serve and be funded by future western Chula Vista residents, including residents of the Urban Core Specific Planning Area. As a result, the PAD fund has not yet collected sufficient funds from development in western Chula Vista to finance this purchase. It will therefore be necessary to internally borrow the funds within the PAD fund, using funds that have been collected for the purpose of constructing a community park in eastern Chula Vista. The internal loan within the PAD fund will be repaid as funds become available, either as a result of credit acquisitions by the Agency or the payment of PAD fees by developers in western Chula Vista. The Agency will ensure that PAD funds are repaid to fully fund the developmcnt of the park for which they were originally collected. , It is anticipated that the Agency will purchase PAD fund credits to help incentivize redevelopment activity in wcstern Chula Vista. Actual property sale amount and credit acquisition schedule will be subject to Council approval. The following cash flow reflects the impacts of the proposed property sale and credit acquisitions for the Agency and PAD funds for fiscal years 2009/10 through 2014/1 5. . REDEVELOPMENT AGENCY FUNDS Est. Available Fund Balance 1,042,000 6,841,000 443,000 590,000 902,000 803,000 Estimated Revenues Tax Increment 14.755,000 15,020,000 15,320,000 15,627.000 15,939,000 16,266,000 Interest Eamin s 25,000 25,000 25,000 25 000 25,000 25,000 Staff Report - Item No.1 Page 5 Sale of Pro ert 6,800,000 Total Estimated Revenues 24,080,000 15,045,000 15,345,000 15,652,000 15,964,000 16,283,000 Estimated Expenditures Low/Mod and Passthroughs (5,565,000) (5,760,000) (5,852,000) (5,946,000) (6,042,000) (6,144,000) Debt Pmnt - City (Park $) 1 (6,800,000) Debt Pmnt - City (Non Park)' (1,400,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,300,000) Debt Pmnt - Other (6,524,000) (4,285,000) (4,798,000) (5,796,000) (4,963,000) (5,308,000) Agency Personnel Costs (708,000) (708, (00) (708,000) (708,000) (708,000) (708,000) Project Expenditures (1,584,000) (1,890,000) (1,840,000) (890,000) (850,000) (850,000) Total Estimated Ex endltures (15,781,000 16,063,000 16,B10,000 . Est. Available Fund Balance 8,299,000 443,000 590,000 902,000 803,000 276 000 PAD FUND Est. Available Fund Balance 35,500,000 22,390,000 23,100,000 23,840,000 24,600,000 26,930,000 Estimated Revenues Sale of Fee Credits 1,500,000 1,500,000 Interest Earnin s 690,000 710,000 740,000 760,000 830,000 910,000 Total Estimated Revenues 690,000 710,000 740,000 760,000 2,330,000 2,410,000 Est. Available Fund Balance 19,200,000 19,910,000 20,650,000 21,410,000 23,740,000 26,150,000 1: The $9.3 million debt rcp~ymcnt from the Agency to the City IS for an existing debt obligation of the Agency. This lump-sum payment shortens the repayment period for Ihe Agency and mJkes one-time funds available to the City to balance the FY 2010-11 operating budget. 2: Annual debt payment amounts are shown for cash flow forecasting purposes unly. The actual payment scherlule will be discussed in conjunction with the regular budget process, including potential use of funds for project expenditures. , Resolution';B Resolution B, if approved by the City Council, would rc'Cluce the debt owed to the City by the Agency by approximately $4.6 million. This reduction in debt owed to the City would reduce the future repayments from the Agency to the City, forgoing potential future General Fund revenues, Total Debt Reduction Implementation of both recommendations would reduce the outstanding loan balance from the City to the Agency to approximately $7.8 million, as detailed below. For forecasting purposes, staff anticipates thf~ repayment of the $7.8 million via annual payments of $1.5 million each over a five year period (year 5 payment of $1.8 million), Loan repayments Staff Report - Item No.1 Page 6 from the Agency to the General Fund over the next five years will be critical to avoid additional staffing cuts and service level impacts. Repayment of the debt will be discussed in conjunction with the regular annual budget process. Outstanding debt to City (June 30, 2008) less payments FY 2009-2010 FY 2009 repayments (actual) FY 2010 re a menls (bud et) Subtotal Updated outstanding debt to City less recommended actions Forgiveness of Nature Center Loan Sale of Pro erty Subtotal Updated outstanding debt to City (5.1) (4.2) (9.3) 21.7 (4.6) (9.3) (13.9) 7.8 The reduction of Agency debt to the City would allow greater resources to be available for reinvestment in the redevelopment project areas. PREPARED BY: Eric Crockett, Redevelopment Manager , .1) ~Procopio@ /lc1cL,'f/o nee/ I Vlr:;,-rV}-tU.~n l./un 8 - 3/'1-/r c> Procopio, Co,y, Hargreaves & Savitch LLP Walter E. Rusinek Direct Dial: (61Y) 525-3RP E-mail: wcr@.procopio.com March 2, 2010 City Council and Redevelopment Agency City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Re: Proposal for the City of Chula Vista to Forgive Debt Owed to it by the Chula Vista Redevelopment Agency Dear City Council and Members of the Redevelopment Agency: This letter is submitted on behalf of Mr. Earl Jentz to urge you to not approve the proposed resolutions identified in Action Item 8 to reduce the approximately $21.7 million dollar debt owed to the City by the Chula Vista Redevelopment Agency (CYRA). Proposed Resolution A would require the City to purchase 14.41 acres of vacant park land from CVRA for the sum of $9.6 million, and then reduce CYRA's obligation to the City by that sum. In addition, Resolution B would require the City to reduce CVRA's debt by another $4.6 million. That apparently is the amount which the former owner and operator of the Chula Vista Nature Center owed CRV A as of 2002. However, when the Nature Center was transferred to the City in 2002, both the City Council and the CVRA approved resolutions that eliminated the debt. Resolution B seeks to rescind those eight-year old decisions, and force the City to now bear that $4.6 million expense. We are concerned that neither of these Resolutions as proposed protects the interests of the residents and taxpayers of the City during this time of serious financial hardship. For those reasons, both Resolutions should be rejected. A. The Proposed Price For the 14.41-Acre Property Seems High Given its Allowable Uses. At the January 2010 meeting of the Chula Vista Redevelopment Corporation ("CYRC"), we requested that the CVRC delay action on the sale of these 14.41 acres until the value of the properties had been properly appraised and those appraisals had been reviewed by the CYRA and the City Council. CRYC Staff had determined that these 14.41 acres were wroth $6.8 million "based on the current park acquisition fee collected by the City on development projects in Western Chula Yista" using the Park Acquisition and Development ("PAD") of$474,443/acre to 530 B Street, Suite 2100. San iliego, CA 92101-4469' T. 619.238.1900 F. 619.235.0398 North COUliiji uii'ice: 1917 F,iiJilldl Oaks Way, ,t: 300 . Carlsbd'i, CA 92008.6511 l. /60.931.9700 f /60.931.1155 WWW.procopio.com DODOODDDOOODOOODDDDOOOCODODe]ULJDO[] [,r .:lJLii= OOUU50/UOUOOO/116LJ212,03 , . '.l, l@Procopio. Board of Directors March 2, 2010 Page 2 calculate the valuc of the property. Wc pointcd out using the PAD fcc to determine the value of thc 14.41 acres was not a proper way to value the property. Subsequently, CRVC apparently had the property appraised at a value of $9.6 million or approximately $666,000/acre. That is the amount that the City would pay ifit approves Resolution A. Unfortunately, we have not seen any information regarding the basis for the appraisal, and we are concerned that the $666,000/acre value is too high given the status of the property. Specifically, as the attached CVRC Staff Report acknowledged, the propcrty is designatcd "Open Space Recreation" in the Gcneral Plan and is "wcll suited, and supported by the General Plan and the community, to be a future park and not a redevelopment project" In fact, the CRVC Staff Report concluded that the transfer of the property to the City would be exempt from environmental review under California Environmental Quality Act ("CEQA") Guidelines Section 15325 because it would constitute thc "Transfcr of Owncrship Intercst in Land to Prescrve Existing Natural Conditions." If the 14.41 acres could be used only for open space or park purposes, a value of $666,000/acre seems higher than fair market value. No doubt the City Council takes seriously its duty to taxpayers to ensurc that it is paying fair market value for the land. But it is not clear without reviewing the assumptions in the appraisal if paying $9.6 million for the property meets that obligation. Moreover, paying above fair market value could violate Article XVI, Section 6 ofthe California Constitution, as incorporatcd in the City of Chula Vista Charter, because it would be an impennissible gift of public funds, and Proposition C's prohibition on the City's "participation" in CRY A's activities, which Section 305.5 ofthe City Charter defines broadly to include "contributing, lending, providing, plcdging, or foregoing, any funds, property, credit, in- kind serviccs, or incurring any debt or lease obligation, or providing any other thing of value to any agency, organization, or project." Finally, if the City believes that $660,000/acre represcnts the fair market value of this property for park land, and it decides to approve Rcsolution A, the City should seriously considcr raising the PAD it currently charges to reflect thc higher valuation. Ifthc PAD fee is not reconsidered in light of this action, the City may be underfunding thc PAD program. B. Assuming a Debt That the CRY A Agreed to Bear Does Not Appear to be in the City's Interest. As to Rcsolution B, the CRVC Staff Rcport stated that the $4.6 million dcbt was owcd to the CRV A becausc it providcd $1.6 million to fund construction of the Nature Center, which was owned and operated by the Bayfront Conscrvancy Trust, and "provided monics for exhibits, start up costs and annual operations of the Center." Although that was the amount ofthe debt in Deccmber 01'2001, when the Nature Center was transfcrred to the City in 2002, both the City OU0050/0UlHlO{)!11692] 2,03 ~Procopio' Board of Directors March 2, 20 I 0 Page 3 and the CYRA each approved resolutions that eliminated the debt. 11' Resolution B is passed, the City would reverse its position and effectively assume that $4.6 million expense. Because the debt was simply eliminated in 2002, there is no evidence that the City made any detennination as to whether the $4.6 million debt included only reasonable and legitimate expenditures by CVRA. The reason for the City to assume a $4.6 million debt that both parties agreed the City would not bear has not been made clear. The facts show that the action involves the cancellation of the CRY A's debt with no consideration provided to the City. Simply rclieving debt without any consideration constitutes an improper gift of publie funds, Westley v. us. Bancarp (2003) 114 Cal.App,41h 577, 582, and the fact that the City and the CRY A are public agencies does not change that fact. Citv a/Ojai v. Chaffee (1943) 60 Cal.App.2d 54, 59. We are concerned that the City's apparent rush to reduce the CRY A's $21.7 million debt to the City will result in it paying too high a price for park lands and relieving the CRY A's debt without any consideration. If'so, the proposed transactions would not serve the interests of the taxpaying residents of the City. Again, we urge that the Resolutions as proposed be rejected at this time. Yery truly yours, ~)L Walter E. Rusinek WER Enclosure ()()00511/000000/1169212.03 Inl mm REDEVELOP/\1ENT CORPORATION (HULA VISTA CVRC Board Staff Report - Page 1 Item No.1 DATE: February 25, 2010 TO: CVRC Board Directors VIA: Gary Halbert, Deputy City Manager/Development Services Director FROM: Eric Crockett, Redevelopment Manager SUBJECT: Loan Repayment to the General Fund EXECUTIVE SUMMARY: The Chula Vista Redevelopment Agency currently owes the City of Chula Vista approximately $26 million from loans made to the Agency for Redevelopment Project Area start up costs and payments made on behalf of the Agency towards Certificates of Participation (COP) issued to build the parking facility at the Chula Vista Center in 1987. Over the past two years, the Agency has made significant efforts to reduce the debt owed to the City, anticipating that by the end of fiscal year 2009/10 the Redevelopment Agency will have repaid, over the last two years, approximately $9.3 million, reducing the remaining debt to the City to approximately $21.7 million. To continue to reduce the debt obligations of the Agency, staff recommends that the Chula Vista Redevelopment Corporation (CVRC) recommend to the Agency that it sell an Agency-owned 14.41 acre site located in the lower Sweetwater Valley to the City and that the Agency be credited for an outstanding loan owed to the Agency that was forgiven by the City in 2002. ENVIRON,yIENTAl REVIEW: The Environmental Review Coordinator has reviewed the proposed action for compliance with the California Environmental Quality Act (CEQAl and has determined that the project qualifies for a Class 25 (I) (Acquisition, sale, or other transfer to preserve open space or lands for park purposes) categorical exemption pursuant to Section 15325 [Transfer of Ownership of Interest in Land to Preserve Existing Natural Conditions] of the State CEQA Guidelines. Thus, no further environmental review is required. RECOMMENDATION: That the Chula Vista Redevelopment Corporation approves: Staff Report - Item No.1 Page 2 A. Resolution of the Chula Vista Redevelopment Corporation recommending that the Redevelopment Agency sell the 14.41 acre site (APN 563-350-1300 and 566-131- 0100) located in the lower Sweetwater Valley to the City of Chula Vista for an amount equal to the appraised value of $9.3 million. B. Resolution of the Chula Vista Redevelopment Corporation recommending that the City Council forgive $4.6 million in outstanding loan balance owed to the General fund for previous loans owed to the Agency by the Chula Vista Nature Center. DISCUSSION: Loan Repayment Efforts by the Agency At the close of fiscal year 2007/08 the Redevelopment Agency had an outstanding loan balance owed to the City of Chula Vista of approximately $31 million. Approximately $11 million of the outstanding loan balance was {rom loans made to the Agency for new project area start up costs and interest accrued over the past thirty years. The remaining $20 million has accrued as a result of the City making annual debt service payments on behalf of the Agency toward Certificates of Participation (COPs) that were issued to build a parking structure for the expansion on the Chula Vista Shopping Center in 1987. During the 1992 to 2007 period, the Agency was unable to cover all of its outstanding debt obligations and continued borrowing a million dollars each year from the City. Fiscal year 2007/08 was the first time in over fifteen years that the Agency was able to meet all of its annual debt service obligations. By the close of fiscal year 2008/09 the Redevelopment Agency had an outstanding loan balance owed to the City's General Fund of approximately $26 million. During fiscal year 2008/09, the Agency was able to repay the City $3.7 million from a 2008 Tax Allocation Bond issuance, $900,000 from unanticipated additional tax increment revenues and about $500,000 iJ1 budgetary savings. The total loan repayment for fiscal year 2008/09 was approximately $5.1 million. During the current fiscal year 2009/10 the Agency will repay the General Fund $1.4 million in bond proceeds for project expenditures and $2.8 million in projected tax increment revenues. The total anticipated loan repayment for FY 2009/10 is projected to be $4.2 million. By the end of fiscal year 2009/10 the Agency, over the last two fiscal years, will have reduced the outstanding loan balance owed to the City by approximately $9.3 million, resulting in a remaining balance of $21.7 million. Sale of Agency Owned Land To continue the effort of reducing the remaining debt obligations owed to the City, staff recommends the Agency sell two Agency owned parcels (APN 563-350-1300 and 566- Staff Report - Item No.1 Page 3 131-0100) to the City. These parcels have little opportunity for redevelopment and are better suited for long term public use as a park. The site is 14.41 acres located in the lower Sweetwater Valley. The lower Sweetwater Valley site is a vacant site and has a General Plan designation of Open Space Recreation. The site is well suited, and supported by the General Plan and the community, to be a future park and not a redevelopment project. The sale of this land to the City has an appraised value of $9.3. The sale of this site would leave a remaining outstanding loan balance to the City of approximately $12.4 million. ~gency Investment Credits In addition, at the May CVRC meeting Director Desrochers requested that staff return with a report on what projects, funded by the Agency, could be considered by the City Council as a credit toward the outstanding loan. In reviewing the list of Agency funded projects, the CVRC should consider requesting the City Council reduce the Agency debt owed to the City equal to the Agency investment made as a loan toward the Chula Vista Nature Center that was forgiven in 2002 when the Nature Center was transferred to the City. This debt forgiveness will coincide with the transition of the Nature Center to a non-profit organization. The Redevelopment Agency funded $1.6 million of the $2.5 million in construction cost for the Nature Center, provided monies for exhibits, start up costs and annual operations of the Center. By December 2001, the Nature Center had an outstanding obligation to the Agency, including principal and interest, of approximately $4.G million. However, in 2002, the Nature Center, owned and operated by the Bayfront Conservancy Trust, was no longer able to adequately fund its operation and it was decided that the ownership of the Nature Center would be transferred to the City. As part of this transfer the City Council and the Agency each approved resolutions that eliminated the $4.6 million owed to the Agency without consideration on reducing the debt the Agency owed to the City. The CVRC could request the City Council and Redevelopment Agency reconsider the forgiveness, of this debt and credit the amount toward the outstanding obligations owed Lo the City. ,; DECISION-MAKER CONFLICT: Staff has reviewed the property holdings of the Chula Vista Redevelopment Corporation members and has found no property holdings within 500 feet of the boundaries of the properties that are subject to this action. FISCAL IMPACT: The resolutions before you tonight consist of recommendations for action on the part of the Chula Vista City Council and/or Redevelopment Agency. As such, approval of the Staff Report - Item No.1 Page 4 resolutions does not have a direct fiscal impact on the Chula Vista Redevelopment Corporation, the Chula Vista Redevelopment Agency, or the City's General Fund. To follow is a discussion of the fiscal impacts if the recommendations are implemented by the City Council and/or Redevelopment Agency. Resolution A Re~;;lution A, if approved by the Redevelopment Agency and the City Council, would generate approximately $9.3 million in revenue to the Agency that would be utilized to repay the General J-und and reduce the outstanding debt owed to the City. This transaction would result in no net impact to the Agency's fund balance, but would reduce outstanding debt obligations to approximately $12.4 million. The purchase of the property from the Agency would be funded by the City using Park Acquisition and Development (PAD) fee monies. The PAD fee program is the City's primary financing mechanism for parkland facilities. All new residential development (including hotels/motels) is subject to the PAD fee, which the City collects and uses to construct new parkland facilities or rehabilitate existing facilities. The proposed park site to be acquired from the Agency will serve and be funded by future western Chula Vista residents, including residents of the Urban Core Specific Planning Area. As a result, the PAD fund has not yet collected sufficient funds from development in western Chula Vista to finance this purchase. It will therefore be necessary to internally borrow the funds within the PAD fund, using funds that have been collected for the purpose of constructing a community park in eastern Chula Vista. The internal loan within the PAD fund will be repaid as funds become available, either as a result of credit acquisitions by the Agency or the payment of PAD fees by developers in western Chula Vista. The Agency will ensure that PAD funds are repaid to fully fund the development of the park for which they were originally collected. , It is antidpated that the Agency will purchase PAD fund credits to help incentivize redevelopment activity in western Chula Vista. Actual property sale amount and credit acquisition schedule will be subject to Council approval. The following cash flow reflects the impacts of the proposed property sale and credit acquisitions for the Agency and PAD funds for fiscal years 2009/10 through 2014/1 5. REDEVELOPMENT AGENCY FUNDS Est. Available Fund Balance 1,042,000 6,B41,OOO 443,000 590,000 902,000 803,000 Estimated Reveflues Tax Increment 14,755,000 15,020,000 15,320,000 15,627,000 15,939,000 16,258,000 Interest Eamin s 25.000 25,000 25,000 25 000 25,000 25,000 Staff Report - Item No.1 Page 5 Sale of Pro e Total Estimated Revenues 15,045.000 15,345,000 15,652,000 15,964,000 16,283,000 Estimated Expenditures Low/Mod and Passthroughs (5,565,000) (5,760,000) (5,852,000) (5,946,000) (6,042,000) (6,144,000) Debt Pmn! - City (Park $) 1 (6,800,000) Debt Pmnt - City (Non Park)' (1,400,000) (2,000,000) (2,000,000) (2,000,000) (2,000,000) (2,300,000) Debt Pmnt - Other (6,524,000) (4,285,000) (4,798,000) (5,796,000) (4,963,000) (5,308,000) Agency Personnel Costs (708,000) (708,000) (708,000) (708,000) (708,000) (708,000) Project Expenditures (1,584,000) (1,890,000) (1,840,000) (890,000) (850,000) (850,000) Total Estimated Ex enditures (15,781,000) (21,443,000 . Est. Available Fund Balance 8,299,000 443,000 590,000 902,000 803,000 276,000 PAD FUND Est. Available Fund Balance 35,500,000 22,390,000 23,100,000 23,840,000 24,600,000 26,930,000 Estimated Revenues Sale of Fee Credits 1,500,000 1,500,000 Interest Eamin 5 690,000 710,000 740,000 760,000 830,000 910,000 Total Estimated Revenues 690,000 710,000 740,000 760,000 2,330,000 2,410,000 Estimated Expenditures Purchase of Property Park Pro'ect Ex enditures Total Estimated Ex enditures Est. Available Fund Balance 19,200,000 19,910,000 20,650,000 21,410,000 23,740,000 26,150,000 ': The $9.3 million debt repayment from the Agency to the City js for im existing debt obligation of the Agency. This lump-sum payment shortens the repayment period for the Agency and makes one-time funds available to the City to balance the FY 201011 operating budget. 2: Annual debt pdyrnent amounts are shown for cash flow forecasting purposes only. The actual payment schedule will be discussed in conjunction with the regular budget process, including potential u~e of funds for project expenditures. I Resolution'iB Resolution B, if approved by the City Council, would reduce the debt owed to the City by the Agency by approximately $4.6 million. This reduction in debt owed to the City would reduce the futurf' repayments from the Agency to the City, forgoing potential future General Fund revenues. Total Debt Reduction Implementation of both recommendations would reduce the outstanding loan balance from the City to the Agency to approximately $7.8 million, as detailed below. For forecasting purposes, staff anticipates the repayment of the $7.8 million via annual payments of $1.5 million each over a five year period (year 5 payment of $1.8 million). Loan repayments Staff Report - Item No.1 Page 6 from the Agency to the General Fund over the next five years will be critical to avoid additional staffing cuts and service level impacts. Repayment of the debt will be discussed in conjunction with the regular annual budget process. . Outstanding debt to City (June 30, 2008) Less payments FY 2009-2010 FY 2009 repayments (actual) FY 2010 repa ments (bud et) Subtotal Updated outstanding debt to City Less recommended actions Forgiveness of Nature Center Loan Sale of Pro ert Subtotal Updated outstanding debt to City $31.0 (5.1) (4.2) (9.3) 21.7 (4.6) (9.3) (13.9) 7.8 The reduction of Agency debt to the City would allow greater resources to be available for reinvestment in the redevelopment project areas. PREPARED BY, Eric Crockett, Redevelopment Manager , ,;