HomeMy WebLinkAbout14-08 - Re-establish Loan between City and the Successor AgencyRESOLUTION NO. 14-08
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA,
APPROVING AN AGREEMENT TO RE-ESTABLISH LOAN PURSUANT TO SECTION
34191.4 BY AND BETWEEN THE CITY OF COSTA MESA AND THE SUCCESSOR
AGENCY TO THE COSTA MESA REDEVELOPMENT AGENCY
WHEREAS, the former Costa Mesa Redevelopment Agency ("former Agency") was
established as a redevelopment agency that was previously organized and existing under the
California Community Redevelopment Law, Health and Safety Code Section 33000, et seq.
("CRL"), and previously authorized to transact business and exercise powers of a
redevelopment agency pursuant to action of the City Council of the City of Costa Mesa
("City"); and
WHEREAS, Assembly Bill x1 26 added Parts 1.8 and 1.85 to Division 24 of the
California Health and Safety Code, which caused the dissolution of all redevelopment
agencies and wind down of the affairs of former agencies, including as such laws were
amended by Assembly Bill 1484 (together, the "Dissolution Laws"); and
WHEREAS, as of February 1, 2012 the former Agency was dissolved pursuant to the
Dissolution Laws and as a separate public entity, corporate and politic the Successor Agency
to the Costa Mesa Redevelopment Agency ("Successor Agency") administers the
enforceable obligations of the former Agency and otherwise unwinds the former Agency's
affairs, all subject to the review and approval by a seven -member oversight board ("Oversight
Board"); and
WHEREAS, the City of Costa Mesa is a California municipal corporation and the
sponsoring community of the Successor Agency under the Dissolution Laws; and
WHEREAS, Section 34179 provides that the Oversight Board has fiduciary
responsibilities to holders of enforceable obligations and the affected taxing entities that
benefit from distributions of property tax and other revenues pursuant to Section 34188 of
Part 1.85 of the Dissolution Laws; and
WHEREAS, the City and Successor Agency desire to enter into that certain
Agreement to Re -Establish Loan Pursuant to Section 34991.4 pursuant to the Dissolution
Laws.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
COSTA MESA:
Section 1. The foregoing recitals are incorporated into this Resolution by this reference,
and constitute a material part of this Resolution and such Recitals evidence the intent of the
parties regarding the Agreement and loan thereunder.
Section 2. Pursuant to the Dissolution Laws, the City approves the Agreement to
Re -Establish Loan Pursuant to Section 34991.4 submitted herewith as Attachment 1., which
Agreement is incorporated herein by this reference.
Resolution No. 14-08 Page 1 of 3
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Section 3. The City Clerk shall certify to the adoption of this Resolution.
APPROVED AND ADOPTED this 18th day of February 2014.
James
ATTEST:
"heimer, Mayor
Mesa
px-"O�& - -
kt
Brenda Green, y Clerk
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.
CITY OF COSTA MESA )
I, Brenda Green, City Clerk of the City of Costa Mesa, hereby certifies that the
foregoing resolution was duly adopted by the City Council at a regular meeting held on the
181h day of February 2014, and that it was so adopted by the following vote:
AYES: COUNCIL MEMBERS: Genis, Leece, Monahan, Mensinger and
Righeimer
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of
Costa Mesa this 191h day of February, 2014.
baka—aj�
_Brenda Greeri,: City Clerk
Resolution No. 14-08 Page 2 of 3
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APPROVED TO FORM:
Thomas uarte ' it Attorney
Resolution No. 14-08 Page 3 of 3
AGREEMENT TO RE-ESTABLISH LOAN PURSUANT TO SECTION 34191.4
This AGREEMENT TO RE-ESTABLISH LOAN PURSUANT TO SECTION 34191.4
("Agreement") is entered into as of February 20, 2014 ("Date of Agreement") between the CITY OF
COSTA MESA, a municipal corporation, ("City") and the SUCCESSOR AGENCY TO THE
COSTA MESA REDEVELOPMENT AGENCY, a public body corporate and politic pursuant to
Parts 1.8 and 1.85 of Division 24 of the California Health & Safety Code ("Successor Agency").
RECITALS
A. The City is a municipal corporation organized and operating under the laws of the
State of California.
B. The Successor Agency is a public body corporate and politic, organized and
operating under Parts 1.8 and 1.85 of Division 24 of the California Health and Safety Code, and the
successor the former Community Development Agency of the City of Costa Mesa
("former Agency") that was previously a community redevelopment agency organized and existing
pursuant to the Community Redevelopment Law, Health and Safety Code Section 33000, et seq.
("CRL").
C. Assembly Bill xl 26 ("AB xl 26") added Parts 1.8 and 1.85 to Division 24 of the
California Health & Safety Code and which laws were modified, in part, and determined
constitutional by the California Supreme Court in the petition California Redevelopment Association,
et al. v. Ana Matosantos, et al., Case No. S194861 ("Matosantos Decision"), which laws and court
opinion caused the dissolution of all redevelopment agencies and winding down of the affairs of
former redevelopment agencies; thereafter, such laws were amended further by Assembly Bill 1484
("AB 1484") (together AB xl 26, the Matosantos Decision, and AB 1484 are referred to as the
"Dissolution Laws"). All statutory references herein are to the Health and Safety Code of the
Dissolution Laws unless otherwise stated.
D. As of February 1, 2012 the former Agency was dissolved pursuant to the Dissolution
Laws and as a separate public entity, corporate and politic the Successor Agency administers the
enforceable obligations of the former Agency and otherwise unwinds the former Agency's affairs, all
subject to the review and approval by a seven -member oversight board ("Oversight Board").
E. Section 34179 provides that the Oversight Board has fiduciary responsibilities to
holders of enforceable obligations and the affected taxing entities that benefit from distributions of
property tax and other revenues pursuant to Section 34188 of Part 1.85 of the Dissolution Act.
F. Section 34177(a) permits the Successor Agency to make payments due for
enforceable obligations.
G. Section 34177(1) requires the Successor Agency to prepare a Recognized Obligation
Payment Schedule ("ROPS") before each six-month fiscal period that lists its Enforceable
Obligations.
H. Section 34191.4(b) authorizes the City and Successor Agency to re-establish prior
loan agreement(s) between the City and the former Agency as follows:
"(1) Notwithstanding subdivision (d) of Section 34171, upon application by the successor
agency and approval by the oversight board, loan agreements entered into between the
redevelopment agency and the city, county, or city and county that created by the
redevelopment', agency shall be deemed to be enforceable obligations provided that the
oversight board makes a finding that the loan was for legitimate redevelopment purposes.
(2) If the oversight board finds that the loan is an enforceable obligation, the accumulated
interest on the remaining principal amount of the loan shall be -recalculated from origination
at the interest rate earned by funds deposited into the Local Agency Investment Fund [LAIF].
The loan shall be repaid to the city, county, or city and county in accordance with a defined
schedule over a reasonable term of years at an interest rate not to exceed the interest rate
earned by funds deposited into the Local Agency Investment Fund. The annual loan
repayments provided for in the recognized obligations payment schedules shall be subject to
all of the following limitations:
(A) Loan repayments shall not be made prior to the 2013-14 fiscal year.
Beginning in the 2013-14 fiscal year, the maximum repayment amount authorized
each fiscal year for repayments made pursuant to this subdivision and paragraph (7)
of subdivision (e) of Section 34176 combined shall be equal to one-half of the
increase between the amount distributed to the taxing entities pursuant to paragraph
(4) of subdivision (a) of Section 34183 in that fiscal year and the amount distributed
to taxing entities pursuant to that paragraph in the 2012-13 base year. Loan or
deferral repayments made pursuant to this subdivision shall be second in priority to
amounts to be repaid pursuant to paragraph (7) of subdivision (e) of Section 34176.
(B) Repayments received by the city, county or city and county that formed
the redevelopment agency shall first be used to retire any outstanding amounts
borrowed and owed to the Low and Moderate Income Housing Fund [LMIHF] of the
former redevelopment agency for purposes of the Supplemental Educational Revenue
Augmentation Fund [SERAF] and shall be distributed to the Low and Moderate
Income Housing Asset Fund established by subdivision (d) of Section 34176.
(C) Twenty percent of any loan repayment shall be deducted from the loan
repayment amount and shall be transferred to the'Low and Moderate Income Housing
Asset Fund, after all outstanding loans from the Low and Moderate Income Housing
Fund for purposes of the Supplemental Educational Revenue Augmentation Fund
have been paid."
I. The Successor Agency received its Finding of Completion from the State Department
of Finance ("DOF") by letter dated May 24, 2013.
J. Pursuant to authority granted to both the City and the former Agency in the
Redevelopment Plan for the Downtown Project Area the City made a series of cash advances to the
former Agency from April 16, 1973 and advances continued pursuant to such original borrowing to
March 16, 1981. Each advance was .documented by a promissory note, and both the former Agency
and City booked and accounted for this series of advances as a single loan with a revolving balance
(together, "City/Agency Loan").
K. The cash advances were to fund redevelopment activities of the start-up of the former
Agency (commencing more . than 40 years ago) and then for implementation of the original
Redevelopment Plan, acquisition of properties, public improvements related to and benefiting the
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Project Area, and development projects all of which were authorized by the Community
Redevelopment Law and were made for legitimate redevelopment purposes.
L. On July 7, 1982, the cumulative total of monies loaned, including accrued interest,
was consolidated and evidenced in -a single promissory note in the principal amount of $6,747,050.00
bearing interest with such City/Agency Loan continuing to be booked and accounted for by the
former Agency and City as a single loan.
M. From 1982 to 1993, this promissory note was refinanced via another promissory note
each year (or less than a year), and the interest rate was changed to 8% to reflect then -current market
conditions. Each such consolidated promissory note was payable "upon demand."
N. The last consolidated promissory note dated July 1, 1993, which note was not
refinanced or replaced and the balance remains due and owing from the Successor Agency to the
City.
O. The City and former Agency since inception and continuing through dissolution had,
and have, always booked the City/Agency Loan as one, single loan both on the official financial
records and as reported each year in the City of Costa Mesa Comprehensive Annual Financial Report
(CAFR).
P. From approximately 1978 through 1992, as the community's Redevelopment Plan
progressed, the former Agency made sporadic repayments of interest due to the City on the
City/Agency Loan when cash was available. In 1992, the City requested more regular loan
repayments from the former Agency according to payment schedule. In response, the former Agency
began making more regular loan repayments. In 2004, the City required that the former Agency
change its loan repayment schedule to require regular amortized loan repayments so as to reduce the
loan balance to zero ($0) after 20 years. The loan repayment and amortization schedule required the
former Agency to make loan repayments once per fiscal year in a fixed amount of $1,299,705. The
former Agency began making these scheduled annual loan repayments to the City in 2004, which
continued to 2011-2012 fiscal year.
Q. Then, in 2012 as an approved line item in ROPS II for the fiscal period July 1, 2012
to December 31, 2012 the DOF approved as an enforceable obligation the monies necessary to make
the loan payment for fiscal year 2012-2013.
R. However, as a result of the DOF's review of the Successor Agency's Other Funds
and Accounts Due Diligence Review submitted pursuant to Section 34179.6, in April 2013 the DOF
disallowed the loan repayments made to the City allocable to fiscal years 2010-2011 and 2011-2012
and demanded repayment and clawed back $2,492,747.
S. Further, in 2013 the DOF reversed its position from ROPS II and determined in
several decision letters that the City/Agency Loan is not an enforceable obligation. These DOF
decisions are the subject of a pending lawsuit filed by the City and Successor Agency against the
State, the County of Orange, Auditor -Controller ("CAC") and other interested parties filed in
Sacramento Superior Court.
T. Even though the City and Successor Agency disagree with the DOF's determinations,
Section 34191.4 of the Dissolution Laws authorizes .the Successor Agency (and City) to re-establish
the City/Agency Loan after the issuance of a finding of completion.
C
U. On May 24, 2013, the Successor Agency received a letter from the DOF that issued
the Finding of Completion; therefore, the City and Successor Agency desire by this Agreement to
reinstate and re-establish and set forth the terms of the City/Agency Loan pursuant to the Dissolution
Law, in particular Section 34191.4. .
V. This Agreement sets forth the terms of the reinstated loan with a remaining principal
balance of $12,596,073.58 with repayments to the City in accordance with a new, defined repayment
schedule over a reasonable term of years, which is set forth in Exhibit A attached hereto and fully
incorporated by this reference, and the interest rate accruing on such principal shall be at the rate
earned by funds deposited into the Local Agency Investment Fund ("LAIF") pursuant to Section
34191.4, and establishing other terms as set forth hereinafter.
W. The former Agency did not borrow any monies from the from the low to moderate
income housing fund (LMIHF) to make State -mandated ERAF/SERAF payments.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth, the City and Successor Agency agree as follows:
Section 1. Recitals. The City and Successor Agency represent and warrant to each other that
each and all of the respective recitals are true and correct, are a material part hereof, and are hereby
incorporated into this Agreement by reference as if fully set forth and such Recitals evidence the
intent of the parties regarding the Loan.
Section 2. Loan Amount. The City/Agency Loan is reinstated and affirmed; the City has
loaned to the Successor Agency the principal sum of $12,596,073.58 ("Loan Amount").
Section 3. Interest. From the Date of Agreement, the Loan Amount shall accrue interest at the
LAIF rate of interest, which is the rate earned by the City on other short-term investments of the
City, compounded daily, and as computed by the City's Assistant Finance Director.
Section 4. Payment. The Successor Agency agrees to repay the principal and all accrued
interest bi-annually corresponding to the time that is within ten (10) days of the date that the
Successor Agency receives monies allocated from the Redevelopment Property Tax Trust Fund
("RPTTF") for this Agreement and reinstated City/Agency Loan as an enforceable obligation as
listed on the applicable ROPS for each six-month fiscal period until repaid in full pursuant to the
provisions of the Dissolution Laws.
Section 5. Penalty. In the event the Successor Agency fails to make payment in full as required
under this Agreement, the Successor Agency shall pay to the City a late charge of one percent (1%)
of the overdue amount and an additional one percent (1%) of the overdue amount for each calendar
month such amount remains unpaid. Any unpaid portion of the loan will continue to accrue interest
at the rate provided in Section 3 until paid in full.
Section 6. Loan for Legitimate Redevelopment Purpose; Submittal of Agreement to
Oversight Board and DOF. The Successor Agency agrees to submit this Agreement to the
Oversight Board for its review, approval and determination that the City/Agency Loan monies
advanced by the City to the Successor Agency were loaned for a legitimate redevelopment purpose,
that this Agreement is an enforceable obligation and certain other findings. Thereafter, if approved
by the Oversight Board, this Agreement shall be submitted to the DOF for its review and approval
pursuant to the Dissolution Laws.
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Section 7. Successor Agency to List Agreement as an Enforceable Obligation on Each
ROPS until the Loan is Repaid. The Successor Agency agrees to list this Agreement as an
enforceable obligation on each ROPS during each six-month fiscal period until repaid in full
pursuant to the provisions of the Dissolution Laws, with the amount of that listed enforceable
obligation to be the Loan Amount (or such lesser amount as remains outstanding.) This first ROPS
to so list this Agreement will be ROPS 14-15A for the six-month fiscal period of July 1, 2014 to
December 31, 2014.
Section 8. Term. This Agreement shall be in full force and effect from the Date of Agreement
until such time as the entire Loan Amount of the Loan has been repaid in full.
Section 9. Entire Agreement. This Agreement constitutes the entire agreement by and between
the parties with respect to the subject matter of this Agreement, and may be amended only in writing.
Section 10. Remedies. In the event of a default, the parties hereto shall be entitled to pursue any
and all remedies available at law or equity under California law for purposes of enforcing the terms
and conditions of this Agreement.
[Signature blocks on next page]
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[Continued from previous page]
IN WITNESS WHEREOF, said parties have caused this Agreement to Re -Establish Loan
Pursuant to Section 34191.4 to be executed by their officers duly authorized on the Date of
Agreement.
ATTEST:
&ffld& 0 .,eM
Brenda Green, dity Clerk
APPRO D A O RM:
JONE YE
TtomA P. Du e, Ci Attorney
ATTEST:
&Uj9*--2M -
Brenda Green,%ecretary
APPROVED AS TO FORM:
STRADL G O CA CARLSON & RAUTH
Celeste to 1Effiay, Spe al Counsel
municipal
SUCCESSOR AGENCY TO THE
COMMUNITY DEVELOPMENT
AGENCY, a is ecqWate and
politic
Costa Mesa Successor Agency City/Housing Loan Repayment Model HdL-'
Downtown Redevelopment Project - Combined
PROJECTION OF INCREMENTAL VALUE AND TAX INCREMENT REVENUE 05!26/2013
(1) The Successor Agency must insert the projected ROPS for each fiscal year as a negative number.
Please be aware that the July -December ROPS cycle overlaps the prior fiscal year to some degree.
Tax revenues and pass through amounts are based on the full fiscal year.
Aha 12e and AllxI R1udc1. 5-7.4111.1
Repayments from
Rosiduel Revenue
1,342,996
1,524,005
1,566,077
1,609,115
1,589,771
1,226,273
1,273,578
1,321,828
1,371,044
1,421245
1,472,449
1524.677
Real
Property Value
Personal
Properly Value
Taxable Value
Over Base
26,377,415
Gross Tax
Revenue
1.0035%
SB 2557
Chor9e (6)
Tax
Revenues
Property Tax
RPTTF
Installment
Dale
Projected
ROPS Amount nl
(.161V -December)
Property Tax
RPTTF
Installment
Date
Projected
ROPS Amount 01
(January• -June)
Successor Agency
Admin. Allowance
Estimated
Residual
Revenue
1 2012-13
428,370,779
17,759,485
419,752,849
4,212,220
(47.1991
4,165,021
, ~ - X
t3ii!
I _:�
1,939,405
2 2013-14
436,938,195
17,455,906
428,016,686
4,295,147
(48,128)
4,247,019
June 2013
466,689
January 2014
19006
(250,000)
4,625,397
3 2014.15
445,676,958
17,455,906
436,755,449
4,382,841
(49,111)
4,333,730
June 2014
775,887
January2015
179,825
(250,000)
4,987,415
4 2015-16
454,590,498
17,455,906
445,668,989
4,472,288
(50,1,131
4,422,175
June.2015
784,825
January2016
167,625
(250,000)
5,071,558
5 2016.17
463,682,308
17,455,906
454,760,799
4,563,525
(51,136)
4,512,389
June 2016
797,625
January 2017
151,750
(250.000)
5,157,636
6 2017-18
472,955,954
17,455,906
464,034,445
4,656,586
(52,176)
4,6D4,407
June 2017
819,750
January 2018
(250,000)
5.118,946
7 2018-19
482,415,073
17,455,906
473,493,564
4,751,508
(53,242)
4,698,266
June 2016
January 2019
(250,000)
4,391,951
8 2019-20
492,063,374
17,455,905
483,141,865
4,848,329
(54,327)
4,794,002
June 2019
January 2020
(250,000)
4,486,560
9 2020.21
501,904,642
17,455,906
492.983,133
4,947,086
(55.433)
4,691,652
June 2020
January 2021
_
(250,000)
4,583,062
10 2021-22
511,942,735
17,455,906
503,021,226
5,047,818
(56,562)
4,991,256
June 2021
January 2022
(250,000)
4,681.494
11 2022.23
522,181,589
17,455,906
513,260,080
5,150,565
(57,714)
5,092,851
June 2022
January 2023 •
(250.000)
4,781,694
12 2023-24
532,625,221
17,455,906
523,703,712
5,255,367
(58,888)
5,196,479
June 2023
January 2024
(250,000)
4,884,302
13 2024-25
543,277,725
17,455,906
534,356,216
5,362,265
(60,086)
5,302,179
June 2024
January 2025
(250,000)
4,988,759
14 2025-26
554,143,280
17,455,906
545,221.771
5.471.300
j61301
5.409.993
1 June 2025
1
January 2026
(250,000)
5,095,305
67,416,644
(755,424)
66,661,419
(1) The Successor Agency must insert the projected ROPS for each fiscal year as a negative number.
Please be aware that the July -December ROPS cycle overlaps the prior fiscal year to some degree.
Tax revenues and pass through amounts are based on the full fiscal year.
Aha 12e and AllxI R1udc1. 5-7.4111.1
Repayments from
Rosiduel Revenue
1,342,996
1,524,005
1,566,077
1,609,115
1,589,771
1,226,273
1,273,578
1,321,828
1,371,044
1,421245
1,472,449
1524.677