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* JULY 10, 1911 * MEMORANDUM
1(!FORce'
TO: CITY COUNCIL AND THE CITY COUNCIL, AS SUCCESSOR
AGENCY TO THE DISSOLVED ARROYO GRANDE
REDEVELOPMENT AGENCY (RDA)
FROM: ANGELA KRAETSCH, DIRECTOR OF ADMINISTRATIVE SERVICES
SUBJECT: CONSIDERATION OF COMPLIANCE WITH THE STATE
DEPARTMENT OF FINANCE'S (DOF) INTERPRETATION OF THE
SUCCESSOR AGENCY PAYMENT OBLIGATION UNDER AB 1484
AND APPROPRIATE FUNDING FOR POTENTIAL LEGAL ACTION
DATE: JULY 10, 2012
RECOMMENDATION:
1. It is recommended the City Council, acting as the Successor Agency to the
dissolved Redevelopment Agency approve (under protest) the payment
obligation required by the Department of Finance (DOF) of $472,895 be paid
as follows:
• $132,835 from the Low/Mod Housing Fund reserves
• $340,060 from the June 1st ROPS distribution that was to be used for
July through December debt payments.
2. It is recommended the City Council approve the appropriation of $30,000 from
the General Fund for initiating legal action.
Considerable staff time can be expected if litigation is pursued.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Staff is requesting an appropriation of $472,985. The amount of $132,835 will be
paid from the Low/Mod Housing reserve funds and the remaining $340,060 will be
paid from the Successor Agency to the Former RDA Fund.
In addition, staff is requesting an appropriation from the General Fund of $30,000 to
pursue legal action.
CITY COUNCIL
APPROVAL OF COMPLIANCE WITH AB 1484
JULY 10, 2012
PAGE 2
BACKGROUND:
On December 29, 2011, the California Supreme Court upheld the validity of AB 1x26,
the bill that dissolved all redevelopment agencies in the State. On June 27, 2012,
the Governor signed AB 1484, which clarified that property tax distributed to
redevelopment agencies in December 2011 should have been subject to distribution
through the AB x1 26 mechanism.
To accomplish the correct distribution of funds anticipated in AB x1 26 and as
clarified in AB 1484 the DOF has stated that no later than July 9, 2012, county
auditor-controllers are required to notify each successor agency of the "residual"
amount it still owes to affected taxing entities (ATEs), if anything, pursuant to HSC
section 34183 (a) (4) for the period covered by the January 2012 to June 2012
ROPS, after the payment of property tax-funded enforceable obligations and agency
administrative costs that were approved by the DOF.
ANALYSIS OF ISSUES:
The County of San Luis Obispo Auditor Controller's office was under the assumption
that while ABX1 26 was still before the Supreme Court and could potentially be
overturned, to make the December distribution under the old Health & Safety Code
since the RDA was still in existence. This distribution was made directly to the
Arroyo Grande RDA and did not go through the Redevelopment Property Tax Trust
Fund (RPTTF) since it did not exist at the time. The Arroyo Grande Redevelopment
Agency (RDA) received the tax increment payment on December 20, 2011. The
money was then put into the RDA's reserves and the RDA's debt was paid from that
fund as per usual. The Successor Agency filled out the January through June 2012
ROPS to show the "source of payment" as coming from reserves to reflect what
actually occurred. Staff was never advised by anyone reviewing the ROPS that this
needed to be changed to reflect what should have happened according to the statute
(to deposit into the RPTTF, which had not yet been created) rather than what
mechanically took place with the transfer of the funds.
The DOF has now determined that because the ROPS stated that the payment for
the debt was coming from reserves and not the RPTTF that all of the tax increment
that the RDA received in December must be returned to the County for redistribution.
The County notified the Successor Agency that the true up amount is $472,895 and
is due by Thursday, July 12, 2012. Health & Safety Code 34183.5(b)(2)(C) states
that failure to make this payment will subject the successor agency to a civil penalty
of 10 percent of the amount owed plus one and one-half percent of the amount owed
for each month that the payment is not made. Additionally, the City that created the
RDA is also subject to the same penalties.
CITY COUNCIL
APPROVAL OF COMPLIANCE WITH AB 1484
JULY 10, 2012
PAGE 3
ALTERNATIVES:
The following alternatives are presented for consideration:
- The City Council, as the Successor Agency to the dissolved Redevelopment
Agency, approve (under protest) the payment obligation of$472,895 be made to
the County on July 12, 2012 from a combination of Low/Mod Housing reserve
funds and Successor Agency to the former RDA funds, and the City Council
approve the appropriation of$30,000 for litigation costs from the General Fund;
- The City Council approve (under protest) the payment obligation of $340,060 be
made to the County on July 12, 2012 from the General Fund, approve a loan
agreement between the City and the Successor Agency to the former RDA and
appropriate $30,000 for litigation costs from the General Fund and the City
Council as the Successor Agency to the former RDA approve the appropriation
from the Low/Mod Housing reserves of $132,835 be paid to the County on July
12, 2012;
- Do not approve any payment and be subject to the penalties described by the
DOF; or
- Provide staff other direction.
ADVANTAGES:
Approval of the true up payment will protect both the City and the Successor Agency
from penalties imposed by the DOF.
DISADVANTAGES:
Using the June 1st tax distribution •for the payment obligation may cause the
Successor Agency to go into default on the bond payment that is due on August 15,
2012.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
This item was not posted as it came to City staff's attention after the agenda was
posted.