title
APPROVAL OF AN AGREEMENT REGARDING THE TRANSFER AND EXPENDITURE OF EXCESS LOAN PROCEEDS BETWEEN THE SUCCESSOR AGENCY AND THE CITY OF STOCKTON
recommended action
RECOMMENDATION
It is recommended that the Oversight Board to the Stockton Successor Agency (“Oversight Board”) adopt a resolution:
1. Approving an Agreement Regarding the Transfer and Expenditure of Excess Loan Proceeds between the Successor Agency and the City of Stockton (Exhibit 1 to the Resolution); and
2. Amending the Fiscal Year 2014-15 Annual Budget for the Successor Agency Strong Neighborhood Initiative Fund to reflect the transfer out of funds from available fund balance; and
3. Authorizing the Executive Director or his designee to take whatever actions are necessary and appropriate to carry out the purpose and intent of this resolution.
body
Summary
Legislation that dissolved redevelopment agencies, Assembly Bills AB x1 26 and 1484 (collectively, the “Dissolution Law”), prescribes the procedures to be followed for winding down the former redevelopment agency’s affairs. The Dissolution Law provides that after the successor agency receives a Finding of Completion from the State Department of Finance (“DOF”), the successor agency may enter into an agreement to transfer unspent loan proceeds, so long as the expenditures are consistent with the bond covenants related to those loans. The unspent loan proceeds were listed on the Successor Agency’s Recognized Obligation Payment Schedule for the period of July - December 2015 (“ROPS 15/16A”). Entering into the agreement with the City to expend the loan proceeds will expedite the process for committing and approving funds for public Improvements, capital or affordable housing projects. With the proposed action the funds will be transferred to the City from the Successor Agency. A plan for the appropriation and expenditure of the funds will be developed and presented to the City Council for approval.
The proposed agreement would authorize the Successor Agency to transfer excess loan proceeds of approximately $8.5 million, available from the 2006 Revenue Bonds Series A and Series C, issued by the Stockton Public Financing Authority for Redevelopment and Housing projects, to the City to be used in accordance with the bond covenants. The DOF has approved similar agreements transferring loan proceeds from a successor agency to its city.
DISCUSSION
Background
In 2006, the Strong Neighborhoods Initiative Redevelopment Revenue Bond program provided $116 million in gap financing for numerous City capital projects within, or of benefit to, the Midtown Merged, North Stockton, and South Stockton Merged Project areas, and for affordable housing projects within the City (Attachment A - Resolution 06-0317). Funds were used to complete projects that improved neighborhood conditions, enhanced community safety, expanded community services, or provided affordable housing. Projects included 42 miles of street resurfacing, traffic calming and street beautification, newly constructed or rehabilitated community centers, and several affordable housing developments.
As part of the bond issuance, loan agreements were entered into which pledged revenues from the three project areas and the low and moderate income set aside funds for debt service payments. In May 2010, due to declines in property tax revenues the Council and Redevelopment Agency approved a reallocation of the remaining proceeds and authorized the purchase and cancellation of up to $20 million in outstanding bonds in an effort to reduce the debt service burden on the project areas. In 2011, additional unspent proceeds were identified, but were not used due to the Dissolution Law which prevented redevelopment agencies from entering into new contracts.
As allowed by the Dissolution Law, the City elected to become the Successor Agency (Attachment B - Resolution 11-0251) which took effect on February 1, 2012. The Successor Agency is responsible for winding down the affairs and paying obligations of the former Redevelopment Agency. The Successor Agency was unable to use the loan proceeds until the DOF issued a Finding of Completion. The Successor Agency submitted Due Diligence Reviews of the Redevelopment Agency funds and the Low-Moderate Income Housing fund financials, and the DOF issued a Finding of Completion to the Successor Agency on October 30, 2014.
The Oversight Board was established and is responsible for approving or directing the actions of the Successor Agency. Oversight Board actions are subject to a review by the DOF. The Oversight Board consists of seven members representing the City, County, and taxing entities. Board members and their appointing agency are listed below:
• Paul Sensibaugh - San Joaquin County Board of Supervisors
• Shabbir Khan - San Joaquin County Board of Supervisors
• Elbert Holman, Jr. - Mayor of the City of Stockton
• Erin Mettler - Mayor of the City of Stockton
• Gary Lambdin - San Joaquin County Mosquito and Vector Control District
• James Thomas - San Joaquin County Office of Education
• Raquel Puentes-Griffith - Chancellor of the California Community Colleges
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.
Present Situation
Health and Safety Code section 34191.4(c) authorizes the successor agency to enter into an agreement, subject to the approval of its Oversight Board, to expend excess loan proceeds. The proposed Agreement Regarding Expenditure of Excess Loan Proceeds from these bonds would permit the excess loan proceeds to be transferred to the City, and requires the City to use the proceeds in accordance with the bond covenants. The DOF has approved similar agreements. If the Successor Agency approves the agreement, it will be presented to the Oversight Board, and then the Department of Finance as required by the Dissolution Law.
The Oversight Board has a fiduciary responsibility to the holders of enforceable obligations, which includes creditors and bond holders, as well as the taxing entities that benefit from the distribution of property tax revenues. This agreement will ensure that the excess loan proceeds from these bonds will be used for the purposes for which they were issued. The use of these proceeds will benefit the community and the City as a whole by addressing goals of the 2006 Strong Neighborhoods Initiative and the Economic Development Strategic Plan. New development will aid in the increase of property tax values and property tax revenue which is used to pay enforceable obligations and flows to the taxing entities. A plan for the appropriation and expenditure of the funds will be developed and presented to the City Council for approval at a future meeting.
FINANCIAL SUMMARY
There is approximately $5.2 million in tax exempt excess loan proceeds (Series A). Series A proceeds must be used within, or of benefit to, the North Stockton and Merged Midtown project areas. Excess proceeds in the amount of $518,315 remain for the North Stockton Project area, and $4,719,499 for the Merged Midtown Project area. These proceeds can be used for public improvements or capital projects.
There is approximately $3.3 million in excess housing loan proceeds (Series C). Series C proceeds are taxable and may be carried out by private entities that are subject to property tax and sales tax. The housing bond proceeds may be used Citywide for affordable housing projects.
The excess loan proceeds will be transferred to the City to carry out the work of the former Redevelopment Agency. The transfer will allow the City to use remaining loan proceeds for public improvements, capital projects, and affordable housing projects in accordance with the bond covenants. The excess loan proceeds may also be used to reduce the debt obligation, as previously done in 2010. A plan for the appropriation and expenditure of the funds will be developed and presented to the City Council for approval at a future meeting.
The excess loan proceeds were listed on ROPS 15/16A which is currently under review by the DOF. The DOF requires an agreement to transfer the funds for future use. There is no cost associated with the agreement.
The proposed agreement authorizing the transfer of these funds to the City would amend the FY 2014-15 Successor Agency Budget and the FY 2014-15 Annual City Budget in the following accounts to facilitate the transfer only from the Successor Agency to the City.
Transfer from:
Successor Agency Strong Neighborhood Initiative
Fund balance (638-0000-992) $8,513,119
Transfer to:
City Project Area Capital Improvement Fund 305-0000-492 $5,237,814
City Low-Moderate Income Housing Fund 329-0000-492 $3,275,305
$8,513,119
Attachment A - Resolution 06-0317
Attachment B - Resolution 11-0251