CC 2013-05-28_08.h. Resolution RDA Loan Repayment ScheduleDATE: MAY 28, 2013
RECOMMENDATION:
It is recommended the Successor Agency to the Dissolved Redevelopment Agency
adopt a Resolution finding, pursuant to Health and Safety Code Section
34191.4(b)(1), that the loan by the City of Arroyo Grande to the Redevelopment
Agency of the City of Arroyo Grande, dated July 25, 2006 as amended February 23,
2010, was for legitimate redevelopment purposes and approving a repayment
schedule for the City loan.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The balance of the loan with interest is approximately $836,257. The loan will be
repaid with tax increment funds, which will be deposited in the City's Housing In Lieu
Fee Fund and can be used for affordable housing purposes.
BACKGROUND:
On July 25, 2006, the Redevelopment Agency entered into an agreement (see
attached) with the City to borrow up to $830,000 for the purchase of the vacant
property at the corner of El Camino Real and Faeh Street. The actual purchase price
was $820,130. The purpose of purchasing the property was to facilitate a hotel or
other project. It was part of overall plans to revitalize the El Camino Real corridor.
The agreement was amended on February 23, 2010 to adjust the interest rate.
Item 8.h. - Page 1
At the June 26, 2013 meeting, the Successor Agency to the Dissolved
Redevelopment Agency approved a Public Conveyance Agreement to transfer
ownership of the vacant property at Faeh Street and El Camino Real to the City.
However, that was rejected by the California Department of Finance when it was
submitted on its Housing Assets Transfer Form. Therefore, staff instead
recommends that the funds be returned for their original purpose through repayment
of the loan.
ANALYSIS OF ISSUES:
The Department of Finance continues to refuse to recognize loans from cities to
redevelopment agencies as "enforceable obligations" eligible for repayment under
the provisions of the loan agreements. However, pursuant to provisions included in
Assembly Bill 1484 that became law on June 17, 2012, once the Successor Agency
receives a "Finding of Completion" from the Department of Finance, loan agreements
entered into between the Redevelopment Agency and the City shall be deemed to be
enforceable obligations provided that the Oversight Board makes a finding that the
loan was for legitimate redevelopment purposes. The Resolution making this finding
was approved by the Oversight Board at its May 14, 2013 meeting. The City's
Special Counsel has recommended it also be adopted by the Successor Agency. If
the Resolution is adopted, the Successor Agency will then be able to place the loan
with a modified interest rate on future Recognized Obligation Payment Schedules.
The Resolution will also approve the proposed repayment schedule. Under the
provisions of AB 1484 as interpreted by the Department of Finance, the interest rate
applicable to the City loan is the rate paid by the Local Agency Investment Fund
(LAIF) at the time the Oversight Board makes the required finding, as set forth in the
attached Resolution. The current LAIF rate of interest is 0.2850 %. The applicable
AB 1484 provisions require the City loan to be recalculated from its date of origination
(July 25, 2006) with interest at the current LAIF rate added to the principal.
The repayment schedule was designed to ensure that sufficient tax increment
revenue is available to meet all other obligations. The loan is proposed to be repaid
in a 5 -year period beginning in FY 2014 -15. Because the source of the loan was the
City's Affordable Housing In -lieu Fund, the repayment amounts received will be
deposited back into the City's Affordable Housing In -Lieu fund for use by the City for
affordable housing projects.
Item 8.h. - Page 2
I A"WRATICIM
ALTERNATIVES:
The following alternatives are presented for consideration:
1. Adopt the Resolution.
2. The City Council could request the Oversight Board to consider modifying the
interest rate on the Loan to be 4.849% instead of .2850% because it was the
LAIF rate at the time the loan was made. This would increase the balance of
the loan. There are some cities submitting city loan repayments using the LAIF
interest rate in existence when the loan was made rather than the current LAIF
rate and making the argument the LAIF rate in existence when the loan was
made should be used. The provisions of AB 1484 are not clear about which
LAIF rate to use. However, according to Special Counsel, using the LAIF rate in
existence when the loan was made rather than following DOF's directive to use
the current LAIF rate, likely will result in rejection of the City loan repayment by
DOF when the repayment amount is placed on a future Recognized Obligation
Payment Schedule. Therefore, staff would prefer to move forward with a course
of action that will be approved by DOF so the repayment amounts can be
received in a timely manner and thus utilized for future affordable housing
projects.
3. Do not adopt the Resolution.
4. Provide staff other direction.
ADVANTAGES:
The Resolution will enable the City to recoup Affordable Housing In -Lieu Fee revenue
that will be helpful in addressing affordable housing goals. The recommendations
present the highest likelihood of obtaining these funds in the most expeditious
manner.
DISADVANTAGES:
The loan repayment could be increased if the original interest rate was used, but this
is likely to delay the process and be unsuccessful.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The agenda was posted in front of the City Hall on Thursday, May 23, 2013 and on
the City's website on Friday, May 24, 2013.
Attachments:
1. Financing Agreement and Amendment
Item 8.h. - Page 3
WHEREAS, the City of Arroyo Grande ( "City ") and the Redevelopment Agency of the
City of Arroyo Grande, also known as the Arroyo Grande Redevelopment Agency
( "RDA ") entered into that certain Financing Agreement dated July 25, 2006 ( "Original
Financing Agreement ") pursuant to which the City provided a loan to the RDA in the
principal amount of Eight Hundred Thirty Thousand Dollars ($830,000.00) with interest
accruing at the rate earned on deposits of City funds in the Local Agency Investment
Fund ( "LAIF ") with interest compounded annually; and
WHEREAS, the City and RDA entered into that certain Amendment No. 1 to Financing
Agreement dated February 23, 2010 ( "Amendment No. 1 ") to provide that from February
23, 2010 going forward no interest shall accrue on the outstanding principal and interest
accrued to February 23, 2010; and
WHEREAS, the Original Financing Agreement as amended by Amendment No. 1 is
hereinafter referred to as the "Financing Agreement;" and
WHEREAS, as part of the 2011 -12 State budget bill, the California Legislature enacted
and the Governor signed, from the 2011 -12 First Extraordinary Session, Assembly Bill
1X 26 ( "AB 1X 26 "), requiring that each redevelopment agency be dissolved; and
WHEREAS, on December 29, 2011, the California Supreme Court in the case California
Redevelopment Agency v. Matosantos, upheld the validity of AB 1X 26 and modified
certain of the dates pertaining to actions related to the dissolution of redevelopment
agencies; and
WHEREAS, as of February 1, 2012, the RDA was dissolved pursuant to the provision of
AB 1X 26 as modified by the California Supreme Court; and
WHEREAS, the City Council of the City of Arroyo Grande by operation of law and by
action duly and regularly taken, all pursuant to AB 1X 26, became the successor agency
to the dissolved RDA ( "Successor Agency "); and
WHEREAS, pursuant to the requirements of AB 1X 26 and Assembly Bill 1484 effective
June 27, 2012, an independent auditor approved by the San Luis Obispo County
Auditor - Controller and engaged by the Successor Agency prepared, and the Successor
Item 8.h. - Page 4
RESOLUTION NO. SA 2013 -xxx
PAGE 2
Agency obtained approval of, the Due Diligence Review for the RDA's Low and
Moderate Income Housing Fund and the Due Diligence Review for the RDA's Other
Funds and Accounts, and pursuant to those Due Diligence Reviews, and in accordance
with final determination letters from the State of California Department of Finance
( "Department of Finance "), paid to the San Luis Obispo County Auditor - Controller all
funds required to be transferred to the County Auditor - Controller; and
WHEREAS, on April 26, 2013, the Successor Agency received a "Finding of
Completion" from the Department of Finance pursuant to Health and Safety Code
Section 34179.7 in which the Department of Finance found and determined that the
Successor Agency made full payment of the amounts determined under Health and
Safety Code Section 34179.6(d) or (e) and Health and Safety Code Section 34183.5;
and
WHEREAS, the Oversight Board to the Successor Agency has been appointed
pursuant to Health and Safety Code Section 34179; and
WHEREAS, the Successor Agency has presented the Finding of Completion and the
Financing Agreement to the Oversight Board and the Oversight Board has found that
the loan provided by the City to the RDA pursuant to the Financing Agreement was for
legitimate redevelopment purposes so that the City loan may be placed on future
Recognized Obligation Payment Schedules for repayment in accordance with Health
and Safety Code Section 34191.4(b), and the Oversight Board approved the repayment
schedule for the repayment of the City loan identified in the Financing Agreement as set
forth in Exhibit B;
NOW, THEREFORE, the Successor Agency resolves as follows:
Section 1. The foregoing Recitals are incorporated herein and made a part hereof.
Section 2. The Successor Agency hereby finds and determines as follows:
A. That the Successor Agency has reviewed the Finding of
Completion issued to the Successor Agency by the Department of Finance, dated April
26, 2013, a copy of which is attached to this Resolution as Exhibit A.
B. That the Successor Agency finds, pursuant to Health and Safety
Code Section 34191.4(b)(1), the City's loan to the RDA as set forth in the Financing
Agreement was for legitimate redevelopment purposes, in that (1) the loan was to assist
the RDA to fund cost of the RDA's acquisition of 0.84 acres of real property located on
the north side Faeh Street adjacent to El Camino Real (101 Freeway) and identified as
Assessor Parcel No. 006 - 151 -027; and (2) acquisition of property by the RDA was an
action expressly authorized by the Community Redevelopment Law, Health and Safety
Code Section 33391(a). Consistent with the foregoing, the Successor Agency finds the
City loan to be an enforceable obligation in accordance with Health and Safety Code
Section 34191.4(b)(1).
Item 8.h. - Page 5
0 i it
WITICIMM 0
C. That the Successor Agency approves the City loan repayment
schedule set forth as Exhibit B to this Resolution ( "Loan Repayment Schedule ") to place
repayment of the City loan on future Recognized Obligation Payment Schedules
consistent with the Loan Repayment Schedule; provided that should any individual
repayment amount not be paid in full, the amount not paid may be added to one or more
subsequent repayment amounts in the discretion of the Successor Agency.
Section 3. A true and correct copy of this Resolution shall be submitted to the
Department of Finance in accordance with Health and Safety Code Section 34179(h).
Section 4. The Secretary shall certify to the adoption of this Resolution.
PASSED AND ADOPTED by the Successor Agency at a meeting held on the 28th day
of May, 2013.
. -A
KELLY WETMORE, SECRETARY
Item 8.h. - Page 6
E*�T o,..
4, o i a Z
W h
M
DEPARTMENT OF
C4lwCRN1P
FINANCE
April 26, 2013
Exhibit A
EDMUND G. BROWN JR. - GOVERNOR
91 5 L STREET ® BACRAMENTO CA ® 9581 43706 ® WWW.COF.CA.00V
Ryan Cornell, Interim Director of Administrative Services
City of Arroyo Grande
300 East Branch Street
Arroyo Grande, CA 93420
Dear Mr. Cornell:
Subject: Request for a Finding of Completion
The California Department of Finance (Finance) has completed the Finding of Completion for the City of
Arroyo Grande Successor Agency.
Finance has completed its review of your documentation, which may have included reviewing supporting
documentation submitted to substantiate payment or obtaining confirmation from the county auditor -
controller. Pursuant to Health and Safety Code (HSC) section 34179.7, we are pleased to inform you
that Finance has verified that the Agency has made full payment of the amounts determined under HSC
section 34179.6, subdivisions (d) or (e) and HSC section 34183.5.
This letter serves as notification that a Finding of Completion has been granted. The Agency may now
do the following:
Place loan agreements between the former redevelopment agency and sponsoring entity on the
ROPS, as an enforceable obligation, provided the oversight board makes a finding that the loan
was for legitimate redevelopment purposes per HSC section 34191.4 (b) (1). Loan repayments
will be governed by criteria in HSC section 34191.4 (a) (2).
• Utilize proceeds derived from bonds issued prior to January 1, 2011 in a manner consistent with
the original bond covenants per HSC section 34191.4 (c).
Additionally, the Agency is required to submit a Long -Range Property Management Plan to Finance for
review and approval, per HSC section 34191.5 (b), within six months from the date of this letter.
Please direct inquiries to Andrea Scharffer, Staff Finance Budget Analyst, or Chris Hill, Principal Program
Budget Analyst, at (9 16) 445 -1546.
Sincerely,
�r
l
STEVE SZAL.AY
Local Government Consultant
cc: Mr. Steve Adams, City Manager, City of Arroyo Grande
Ms. Barbara Godwin, Property Tax Manager, County of San Luis Obispo
California State Controller's Office
Item 8.h. - Page 7
CITY OF ARROYO GRANDE
REPAYMENT SCHEDULE
RDA Loan with In -Lieu Housing Fund
Transaction
Disbursement
Accrued Interest
Payment #1
Payment #2
Payment #3
Payment #4
Payment #5
Payment #6
Payment #7
Payment #8
Payment
Date
07/25/06
05/25/13
07/25/14
01/25/15
07/25/15
01/25/16
07/25/16
01/25/17
07/25/17
01/25/18
Payment Amount
$ (820,130)
50,000
160,885
50,000
160,885
50,000
160,885
50,000
160,885
Interest Rate:
Payment Amt:
Accrued Interest
16,127
2,784
1,126
897
827
599
529
300
221
41
0.2850%
160,885
Principal Balance
$ 820,130
836,257
789,041
629,282
580,179
420,121
370,720
210,364
160,664
Item 8.h. - Page 8
ATTACHMENT 1
AMENDMENT NO. 1 TO FINANCING AGREEMENT
THIS AMENDMENT NO. 1 TO FINANCING AGREEMENT ( "Amendment No. 1 ") is
made and entered into as of February 23, 2010, by and between the ARROYO GRANDE
REDEVELOPMENT AGENCY, a public body corporate and politic ( "Agency "), and the CITY
OF ARROYO GRANDE, a municipal corporation ( "City ").
A. Agency is a public body, corporate and politic, organized under the California
Community Redevelopment Law (Health & Safety Code § 33000 et seq.).
B. City is a municipal corporation and a general law city of the State of California.
C. City and Agency are authorized by Health & Safety Code Section 33601 to enter
in an agreement providing for a loan by the City of the Agency.
D. City and Agency entered into that certain Financing Agreement dated on or about
June 13, 2006 ( "Financing Agreement "), which set forth the terms of a loan appropriation by
City, from its affordable housing in -lieu fund, to Agency, in an amount not to exceed of Eight
Hundred Thirty Thousand Dollars ($830,000) for the purpose of assisting Agency to fund the
cost for Agency's acquisition of certain real property consisting of a vacant lot of approximately
0.84 acres on the north side of Faeh Street adjacent to El Camino Real (101 Freeway), and
identified as Assessor Parcel No. 006 -151 -027 (the "Property ").
E. City and Agency desire to modify the terms of the Financing Agreement to
eliminate the requirement for Agency to pay interest on the outstanding principal balance from
and after the date of this Amendment No. 1.
F. All defined terms used in this Amendment No. 1 that are not defined herein shall
have the meanings set forth in the Financing Agreement.
AMENDMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter
contained, Agency and City agree as follows:
Section 1. Recitals Incorporated. The foregoing Recitals are true and correct and are
incorporated herein and made a part hereof.
Section 2. Amendment to Financing Agreement. Section 2 of the Financing
Agreement, titled "Interest," is hereby amended in its entirety to read as follows: "No interest
shall accrue on the outstanding Loan Principal."
Section 3. No Other Amendment. Except for the amendment to the Financing
Agreement set forth in Section 2 of this Amendment No. 1, the Financing Agreement shall
remain in full force and effect.
1065411.03 a02117/10
Item 8.h. - Page 9
OR
IN WITNESS W11FREOF, the parties have caused this Amendment No. I to be executed
by their authorized representatives, as of the date first above written.
ATTE5',T:
Setretary
L 311W WED AS TO FORM:
—11
Agency Counsel
AT'TT"ST:
Wetmore,
Kelly 'ity Clerk
APPROVED AS TO FORM:
Tin ;thy ,1. Carmel, City Attorney
J06541 1.0.1 a0'2))16:-'J(3
"AGENCY-
ARROYO GRANDE REDEVELOPMENT
AGENCY
Bv:
Tony FeW-Tiair
"Cyl'Y*l
CITY OF AVROYOJ ,ANDE
By',�
TonZ-
.t&4ra, Mayor
-2-
Item 8.h. - Page 10
THIS FINANCING AGREEMENT ( "Agreement ") is made and entered into as of July
2006, by and between the ARROYO GRANDE REDEVELOPMENT AGENCY, a
public body corporate and politic ( "Agency "), and the CITY OF ARROYO GRANDE, a
municipal corporation ( "City ").
WHEREAS, Agency is a public body, corporate and politic, organized under the
California Community Redevelopment Law (Health & Safety Code § 33000 et seq.); and
WHEREAS, City is a municipal corporation and a general law city of the State of
California; and
WHEREAS, City and Agency are authorized by Health & Safety Code Section 33601 to
enter in an agreement providing for a loan by the City of the Agency; and
WHEREAS, City and Agency mutually desire to enter into this Agreement to set forth
their respective obligations with respect to a loan appropriation by City, from its affordable
housing in -lieu fund, to Agency in an amount not to exceed of Eight Hundred Thirty Thousand
Dollars ($830,000) for the purpose of assisting Agency to fund the cost for Agency's acquisition
of certain real property consisting of a vacant lot of approximately 0.84 acres on the north side of
Faeh Street adjacent to El Camino Real (101 Freeway), and identified as Assessor Parcel No.
006 - 151 -027 (the "Property "); and
WHEREAS, this Agreement has been approved by the Agency and City Council
concurrent with the date hereof.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter
contained, Agency and City agree as follows:
Section 1. City Loan.
City hereby loans to Agency a principal amount not to exceed Eight Hundred Thirty -
Thousand Dollars And No Cents ($830,000.00) ( "Loan Principal "), from any legally available
source, including the City's affordable housing in -lieu fund, for the purposes set forth in the
Recitals to this Agreement which are incorporated herein and made a part hereof.
Section 2. Interest.
Interest shall accrue on the outstanding Loan Principal at rate earned on deposits of City
funds in the Local Agency Investment Fund during such time as the Loan Principal is
outstanding. Interest shall be compounded annually.
394/024600 -0001
728467.01 x07/14106
Item 8.h. - Page 11
Section 3. Agency Repayment.
The Loan Principal and any accrued interest shall be repaid in full by Agency from any
legally available source. Agency shall make such repayment as and when funds are available but
shall be repaid in full not later than June 30, 2007, unless such outside repayment date is
extended by City. Agency shall be entitled to repay all or part of the Loan Principal and all
accrued interest at any time with no other charges, fees, or penalties. All amounts due under this
Agreement shall be payable at the offices of City.
Section 4. Indebtedness of Agency!.
The Loan Principal and accrued interest described in this Agreement shall constitute an
indebtedness of Agency within the meaning set forth in applicable law including the California
Community Redevelopment Law (Health & Safety Code § 33000 et seq.).
Section S. Subordination.
The repayment of the Loan Principal and accrued interest by Agency shall be junior and
subordinate to (i) all Agency tax allocation bonds or other direct long -term indebtedness of
Agency, (ii) all pledges by Agency of tax increments for tax allocation bonds or other direct
long -term indebtedness of Agency, (iii) Agency financial agreements and other contractual
obligations of Agency, and (iv) any contingent obligations of Agency.
Section 6. Non - Recourse Obligation.
No officer, official, employee, agent, or representatives of Agency shall be liable for any
amounts due hereunder, and no judgment or execution thereon entered in any action hereon shall
be personally enforced against any such officer, official, employee, agent, or representative.
Section 7. Entire Agreement; Amendment.
This Agreement shall constitute the entire agreement of the parties. This Agreement may
be amended or modified only by an agreement in writing signed by the parties.
394/024600 -0001
728467.01 a07/14/06
[end — signature page follows]
IM
Item 8.h. - Page 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their authorized representatives, as of the date first above written.
ATTEST:
Kelly Wetrno , Cit Clerk
APPROVED AS TO FORM:
qTithy J. C , ity A omey
3941024600 -0001
729467.01 a07/14/06
-3-
"AGENCY"
ARROYO GRANDE REDEVELOPMENT
AGENCY
By:
Tony ara, Chair
"CITY"
CITY OF ARRO O G E
By:
Tony M. a, Mayor
Item 8.h. - Page 13
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Item 8.h. - Page 14