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ADOPTION OF A RECOGNIZED OBLIGATION PAYMENT SCHEDULE
RECOMMENDATION
It is recommended that the Successor Agency to the former Redevelopment Agency of the City of Stockton ("Successor Agency") approve a resolution adopting the Recognized Obligation Payment Schedule for the period of July 1 through December 31, 2014, (Exhibit 1 to the Resolution) as required under Health and Safety Code Section 34177 (m).
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Summary
The Successor Agency is required to submit a Recognized Obligation Payment Schedule ("ROPS") before each six-month fiscal period. The ROPS for July 1 through December 31, 2014 (ROPS 14-15A), is due by March 1, 2014.
The ROPS continues to include all enforceable obligations of the former Redevelopment Agency of the City of Stockton. The ROPS template is provided by the State Department of Finance ("DOF"), and is subject to a DOF review prior to the disbursement of property tax revenues (former tax increment) to the Successor Agency. The property tax revenues can only be used to pay approved obligations on the ROPS.
DISCUSSION
Background
On June 28, 2011 and June 27, 2012, Governor Brown signed into law, AB x1 26 and AB 1484. AB x1 26 dissolved all existing California redevelopment agencies and replaced them with Successor Agencies. On August 23, 2011, the City elected to become the Successor Agency (Attachment A - Resolution No. 11-0251). The Successor Agency became operative on February 1, 2012.
AB 1484 imposed new tasks, deadlines, and penalties on successor agencies and their sponsoring city or county. To avoid penalties, the ROPS must be submitted at least ninety (90) days before the January 2 and June 1 distribution of property tax revenues.
AB x1 26 required the establishment of an Oversight Board. The Board is responsible for approving and/or directing the actions of the Successor Agency, and has a fiduciary responsibility to the holders of enforceable obligations and the taxing entities that benefit from distributions of property tax. The Board is composed of seven members representing the City, County, and taxing entities. This Board will remain in operation until July 1, 2016. On that date, only one Oversight Board will be appointed to oversee all successor agencies within the County. Oversight Board actions are subject to the approval of the DOF.
Present Situation
The ROPS must be provided to County Administrative Officer, County Auditor Controller ("CAC"), and the DOF when it is submitted to the Board for approval. The ROPS must be approved by March 1, 2014. After Board approval, it must be submitted to the CAC, DOF, State Controller, and posted online. If an approved ROPS is not submitted by the due date, the City is subject to a civil penalty of $10,000 per day. In addition, the maximum administrative cost allowance of the Successor Agency may be reduced by 25 percent.
The administrative cost allowance is up to three percent (3%) of the property tax revenues allocated to the Successor Agency each year. The minimum allowance is $250,000. The Board will be asked to formally approve the Successor Agency's annual administrative budget for Fiscal Year 2014-15 in June 2014. At this time, the Successor Agency proposes an estimated annual administrative budget of $750,000 which is the same as Fiscal Year 2013-14. The ROPS 14-15A administrative budget for the six-month period is $375,000. Of that amount, the Successor Agency is requesting $125,000 to be paid from the administrative cost allowance. After the annual budget is adopted, staff will revise the administrative and operating estimates on the following ROPS.
ROPS 14-15A lists enforceable obligations payable July 1 through December 31, 2014. Enforceable obligations include items such as:
· Bonds. A reserve may be held when required by the bond indenture or when the next property tax allocation will be insufficient for the next payment due in the following half of the calendar year.
· Loans that are legally required to be repaid pursuant to a repayment schedule or other mandatory loan terms.
· Judgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency.
· Contracts or agreements necessary for the administration or operation of the successor agency, including agreements concerning litigation expenses related to assets or obligations, judgments and settlements, and costs of maintaining assets prior to disposition.
· Agreements or contracts between the City and the former Redevelopment Agency are not enforceable obligations unless they were written for the purpose of securing or repaying obligations, and entered into at the time of issuance of indebtedness, prior to December 31, 2010.
AB 1484 authorizes the City to loan funds to its Successor Agency for administrative costs (up to the admin allowance), enforceable obligations, or project-related expenses at the City's discretion, and creates an enforceable obligation for the repayment of the loan. If RPTTF funds are not sufficient, the Successor Agency may request a loan from the City to cover these costs. Any such loan will be brought to the Successor Agency, then the Oversight Board for approval before placing it on the ROPS.
For Fiscal Year 2012-13, the City approved a general fund subsidy of $1,069,248. The Successor Agency only required general fund assistance in the amount of $530,842 (unaudited). The Successor Agency included a loan from the City for the general fund assistance on the previous ROPS. However, since the Successor Agency received its approved administrative cost allowance, the DOF only approved $41,200 as a loan for asset-related legal and maintenance costs. The loan will be repaid when RPTTF is sufficient. The approved subsidy for Fiscal Year 2013-14 is $750,000. The Successor Agency estimates it may require a subsidy in an amount not to exceed $750,000 for the 2014-15 Fiscal Year. The subsidy is subject to the approval of City's annual budget, which will not occur until May or June 2014.
Redevelopment Property Tax Trust Fund (RPTTF)
The ROPS template requires a prior period comparison of estimated payments and actual payments made with RPTTF. The upcoming disbursement of RPTTF would be adjusted to account for any difference. The County Auditor Controller must provide an estimate of RPTTF available for allocation at least sixty (60) days prior to the distribution date. If the Successor Agency determines that funds are insufficient to meet all obligations on the ROPS, it must report its findings by December 1 for the January 2 disbursement of RPTTF, and by May 1 for the June 1 disbursement.
RPTTF received on January 2, 2014 was sufficient to cover March 2014 interest-only debt service payments and allowed the Successor Agency to reserve RPTTF for September 2014 debt service. As a result, staff projects RPTTF in June 2014 will cover all enforceable obligations. If the County estimate is less than expected, staff will determine if it is necessary to file a notice of insufficient funds. Deficiencies are deducted first from the taxing entities that would have received any remaining property tax revenues, then from the Successor Agency's administrative cost allowance, and finally from any pass through agreements that were subordinate to debt service payments.
The recommendation is to adopt the ROPS 14-15A, for the period of July 1 through December 31, 2014. Staff will return in September 2014 with a recommendation to adopt a ROPS for the next six-month fiscal period.
FINANCIAL SUMMARY
The ROPS must be filed in order for the Successor Agency to receive the June 1, 2014, distribution of RPTTF dollars to pay obligations listed on the ROPS.
Attachment A - Resolution No. 11-0251