TITLE
Recommendation to adopt resolution finding that certain agreements between the City of Long Beach and the former Redevelopment Agency of the City of Long Beach were for legitimate redevelopment purposes; and
Approve a repayment schedule for those agreements.
DISCUSSION
Cities with redevelopment agencies commonly loaned funds to those agencies to carry out the purposes of their adopted redevelopment plans, especially during the early years of a redevelopment project when the amount of tax increment generated annually was not sufficient to initiate redevelopment activities. Furthermore, redevelopment agencies needed to have established debt as a requirement to receive tax increment. Cities made loans to their redevelopment agencies to initiate redevelopment activities, expecting the loans to be repaid with interest.
AB1x26, the “Dissolution Act”, voided loan agreements between cities and redevelopment agencies. AB 1484, legislation adopted to clean up earlier provisions of the Dissolution Act, provided that City/Agency loans could be deemed enforceable obligations under certain circumstances:
• A successor agency had received a finding of completion.
• A successor agency had repaid the former redevelopment agency’s debt to the Low- and Moderate-Income Housing Set-Aside Fund.
• A successor agency’s oversight board made a finding that the City and Agency loan agreements were for legitimate redevelopment purposes.
On April 26, 2013, the Successor Agency to the Redevelopment Agency of the City of Long Beach (Successor Agency) received its Finding of Completion. In July 2016, the Successor Agency will repay the remaining debt of the former Redevelopment Agency of the City of Long Beach (Agency) to the Low- and Moderate-Income Housing Set-Aside Fund (Housing Fund). With this final payment, the Successor Agency may begin repaying loans the City of Long Beach made to the Agency if the Oversight Board to the Successor Agency of the City of Long Beach (Oversight Board) finds that those loans were for legitimate redevelopment purposes.
During 2015, the State of California passed SB 107, which restricts the type of City and Agency loan agreements that may be reinstated as enforceable obligations. The new law defined City/Agency loans to be those that were: (1) loans for money pursuant to a repayment schedule, (2) loans that involved the transfer to real property interest, and (3) documented agreements that involved third parties that will only be reimbursed to an amount not to exceed $5 million. This new definition significantly deviated from the previously accepted definition of City/Agency loans and invalidated many loans on which Long Beach and other California cities expected to receive repayments. Through the lens of the new City/Agency loan definition per SB 107, City staff reviewed each of the former City/Agency loan agreements. The table below identifies agreements that the City and the Agency entered into to accomplish the goals of the redevelopment plans and that meet the requirements of SB 107. The total amount owing is $41,784,350.
|
Contract |
|
Number |
Date |
Purpose |
|
CT85 |
08/03/2007 |
Park development in underserved areas of the Central Project Area |
|
NB65 |
08/08/2007 |
Park development in underserved areas of the North Long Beach Project Area |
|
CT05 |
12/18/1993 |
Site assembly for the MTA Blue Line and surrounding commercial development |
Similar to the repayment of the Agency’s debt to the Housing Fund, the repayment of loans from the City is subject to the annual formula described in Section 34191.4(b)(3)(A) of the Health and Safety Code.
The formula for the repayment amount in Fiscal Year 2016 (FY 16) is as follows:
(ROPS 15-16A&B residual proceeds - ROPS 12-13A&B residual proceeds) x 50%
or
($75,691,179 - $45,018,614) x 50% = $15,336,283
As mentioned previously, the Successor Agency must repay funds borrowed from the Housing Fund before it may begin the repayment of City/Agency loans. Prior to making a repayment on the City/Agency loans, the Successor Agency will make the final payment to the Housing Fund, which totals $10,842,868. The amount of residual revenue available exceeds the amount needed to pay the remaining balance owed to the Housing Fund by $4,493,415. This excess may be applied to the City/Agency debt repayment.
The proposed repayment schedule is as follows:
City's Fiscal Year/ Payments Payment Payment Based Balance
ROPS Period Completed Request Based on Estimated
on Actual Residuals*
Residuals
Beginning
Balance $41,784,350
2015-16/
ROPS 16-17 $0 $4,493,415 $37,290,936
2016-17/
ROPS 17-18 $6,500,000
2017-18/
ROPS 18-19 $14,200,000
2018-19/
ROPS 19-20 $12,900,000
2019-20/
ROPS 20-21 $3,690,936
*Actual repayment amounts will be less than or equal to the maximum amount allowed pursuant to Health and Safety Code Section 34176(e)(6)(B).
Payments after the Recognized Obligation Payment Schedule (ROPS) 16-17 period are estimates. The repayment amounts will be updated annually when the actual fiscal year residual amount is available. Actual repayment amounts will not exceed the maximum amount allowed pursuant to Health and Safety Code Section 34176(e)(6)(B).
SUGGESTED ACTION
Approve recommendation.
BODY
[Enter Body Here]
Respectfully Submitted,
AMY J. BODEK, AICP
DIRECTOR OF DEVELOPMENT SERVICES
APPROVED:
PATRICK H. WEST
CITY MANAGER