HomeMy WebLinkAboutRDA AG PKT 2002-09-23 #A AGENDA REPORT
DATE: September 23, 2002 .
TO: Chairperson and Members of the Redevelopment Agency
THRU: John B. Bahorski, Executive Director
FROM: Lee Whittenberg, Director of Development Services
SUBJECT: CONSIDERATION OF CONSULTANT REPORT —
DISSOLUTION OF REDEVELOPMENT AGENCY
SUMMARY OF REQUEST:
Consider report from Keyser Marston Associates, Inc., and Murphy & Davis LLP
regarding "Analysis of Redevelopment Agency Dissolution ", and provide direction to
staff or receive and file staff report.
BACKGROUND:
On April 22, 2002, the Agency directed staff to request proposals for potential dissolution
of the Redevelopment Agency. On May 28, 2002, the Agency retained Keyser Marston
Associates, Inc., and Murphy & Davis LLP to provide the requested analysis. The
analysis of Keyser Marston Associates, Inc., and Murphy & Davis LLP has been received
by the City and is presented to the Agency for consideration.
As indicated in the transmittal letter from Greg Soo -Hoo and C. Nichole Murphy, "The
analysis does not make a recommendation to dissolve or to retain the Agency. Such a
decision will have to be based upon the Agency addressing the broader questions
governing redevelopment activities in the City." The transmittal letter also indicates "The
City Council was also interested in knowing whether or not the County of Orange would
consider assuming the administrative oversight of the Agency's outstanding Tax
Allocation Bonds 2000 Series A and B. Various conversations and a letter to the County
Executive Office have yielded no official consensus or decision on the County Executive
Officer's part to- date. "
• The document includes an "Executive Summary", • that highlights the following major
areas of discussion within the full report:
❑ Introduction
❑ Surfside Project Area Obligations
Transmittal Letter re: Analysis of Redevelopment Agency Dissolution, prepared by Keyser Marston Associates, Inc.,
datcd September 18, 2002
g ph Agenda Item _A_
C.\My Documents \RDA \Dissolution of Agency Report.RDA Staff Report.doc \LW\09 -18 -02
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
❑ Riverfront Project Area Obligations
❑ Tax Allocation Bonds 2000 Series A and B
❑ Mobile Home Park Revenue Bonds, Series 2000A
❑ Zoeter Place Promissory Note (Purchase of Zoeter "Parcel A ")
❑ Zoeter Daycare Facilities Lease /Purchase Payments (Zoeter "Parcels B and
D ")
❑ City General Fund Loan
❑ Loan and Grant Agreement for Seal Beach Trailer Park
❑ Regulatory Agreements for Seal Beach Trailer Park
❑ Funding of Excess Surplus Penalties
❑ County Executive Office Conversations
Greg Soo -Hoo and C. Nichole Murphy of Keyser Marston Associates, Inc., and Murphy
& Davis LLP, respectively, will be present to provide an overview of the report findings
and respond to questions of the Agencymembers.
Impacts of Potential Agency Dissolution on Current City Projects:
If the Redevelopment Agency were to consider a dissolution process, the following
current City projects should be halted immediately, as the funding for these projects is
provided by the Agency funds:
❑ West End Pump Station Project: The West End Pump Station does not have capacity
adequate for the current standards and it lacks proper controls. In early 2001, the City
retained AKM Consulting Engineers to prepare a Preliminary Design Report (PDR)
for construction of a new Pump Station to replace the existing. The PDR evaluated
the hydrology of the drainage site among other things and found that the existing
pumps are not of sufficient capacity to handle the standard 25 -year storm -flow
criteria. Actually, according to the PDR, the existing pumps can handle only 71
percent of 5 -year storm flow. Therefore, the PDR recommended replacement of the
existing station with a brand new station.
Funds in the amount of $2,300,000 were budgeted in the City's Capital Improvement
Program from the City's Redevelopment Agency. To date the City has expended
$150,000 for the engine repairs and station improvements including engineering and
the Preliminary Design Report. A low flow diversion system, and reconditioning of
the existing engine and existing pumps is anticipated to cost up to $200,000. The
remaining balance will fund the environmental review process, design, construction
and inspection of the new pump station.
This project is to be funded with Redevelopment Agency tax increment funds, and
will not be able to proceed if this funding source is removed. If the City were to
determine to proceed with the project, it would be necessary to allocate the necessary
funds, currently estimated at approximately $2,300,000, from the undesignated fund
Dissolution of Agency Report RDA Staff Report 2
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
balance of $4,819,793; resulting in a 47.7% reduction in the undesignated fund
balance, leaving an undesignated fund balance of $2,519,793.
❑ City Yard Project: The Seal Beach Municipal Corporation Yard was built in the late
1960's. It consists mostly of concrete tilt -up offices, maintenance shops and
equipment and material storage areas. In the 2001/2002 budget process, it was
identified as a needed project to bring the Corporation Yard into compliance with
current National Pollution Discharge Elimination System (NPDES), storm water
pollution prevention, and best management practices. This may include the
construction or modification of storm drains, wash racks, material bins, transfer
stations, pavement, and storage areas. Funds are available from the Redevelopment
Agency in the Capital Improvement Program in Project No. 50057 from fiscal year
2001 /2002. The total project budget including design, inspection, administration, and
construction is $350,000.
This project is to be funded with Redevelopment Agency tax increment funds, and
will not be able to proceed if this funding source is removed. If the City were to
determine to proceed with the project, it would be necessary to allocate the necessary
funds, currently estimated at approximately $350,000, from the undesignated fund
balance of $4,819,793; resulting in a total reduction of approximately 55% (including
the West End Pump Station project discussed above) in the undesignated fund
balance, leaving an undesignated fund balance of $2,169,793.
❑ Lease negotiations on Zoeter day care properties: This property would need to be
considered for possible sale to generate revenues to offset the Agency debts that
would be incurred by the City if the Agency dissolution proceeds. This would also
result in the loss of lease revenues to the Agency from the current day care providers
located on the property.
If this potential sale occurs, it is highly unlikely that the current day care providers
could remain on the property, as the existing lease rates are far below a general
market rate. This would result in the probable loss of long -term day care service
providers within the community.
❑ Potential Sale of Zoeter Place: This property would need to be considered for
possible sale to generate revenues to offset the Agency debts that would be incurred
by the City if the Agency dissolution proceeds. This would also result in the loss of
lease revenues to the Agency from the current master lease holder for the commercial
uses located on the property. There is a "option to purchase" period available to the
• master lease holder between July 1, 2004 and December 31, 2004. At this time, it is
uncertain as to the legal ramifications of a potential sale of Zoeter Place prior to the
"option to purchase" period available to the master lease holder.
❑ Potential Sale of Police /Maintenance Yard/Animal Shelter Facility: This property
would need to be considered for possible sale to generate revenues to offset the
Dissolution of Agency Report.RDA Staff Report 3
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
Agency debts that would be incurred by the City if the Agency dissolution proceeds.
This would also result in the loss of critical operating facilities of the City, i.e., the
Police Department and jail facilities, the City maintenance yard facilities, and the
Animal Shelter facilities. If these properties were to be sold, the costs of acquiring
additional land somewhere within the City to locate these facilities, and to construct
the new facilities would be costs to the City general fund.
As discussed above, there would only be approximately $2,170,000 in the
undesignated fund balance. It is uncertain, and highly unlikely, that the necessary
property acquisitions and new construction of these facilities could be accomplished
with that amount of funds. If it could be accomplished with that amount of money,
the City would then have no undesignated fund reserves for emergency situations or
unanticipated costs that might arise in the future.
A sale of this public property would probably result in the elimination of an Animal
Care Facility - within the community, as the costs to rebuild a new facility is
anticipated to be beyond the means of the support groups that currently operate and
maintain this important facility within the community.
The above discussion regarding potential sales of Agency -owned properties and assets
could possibly be different depending on whether the County responds to our inquiries.
FISCAL IMPACT:
The study indicates a forfeiture of $27 million of revenue to the Agency between now
and Fiscal Year 2023 -2024. This loss of Agency revenue could also result in significant
impacts to the City General Fund if the Agency were to be dissolved, in addition to the
possible selling of current Agency -owned properties, as discussed above. This would
occur as a result of the potential City assumption of various debts of the Agency as
discussed in the "Executive Summary" and within the body of the full Keyser Marston
Report.
RECOMMENDATION:
Consider report from Keyser Marston Associates, Inc., and Murphy & Davis LLP
regarding "Analysis of Redevelopment Agency Dissolution ", and provide direction to
staff or receive and file staff report.
NO ' e N • PROVED
_ /
% / I
se Whittenberg John '!: ahorski
Director of Development Service - E . 1 tive Director,
Dissolution of Agency Report. RDA Staff Report 4
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
Attachments: (2)
Attachment 1: Letter, Executive Summary, and Report regarding
"Analysis of Redevelopment Agency Dissolution ", Keyser
Marston Associates, Inc. and Murphy & Davis LLP, dated
September 18, 2002
Attachment 2: Redevelopment Agency Minutes, May 28, 2002
Dissolution of Agency Report. RDA Staff Report 5
•
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
ATTACHMENT 1
LETTER, EXECUTIVE SUMMARY, AND REPORT
REGARDING "ANALYSIS OF REDEVELOPMENT
AGENCY DISSOLUTION ", KEYSER MARSTON
ASSOCIATES, INC. AND MURPHY & DAVIS LLP,
DATED SEPTEMBER 18, 2002
Dissolution of Agency Report.RDA Staff Report 6
K E Y S E R M A R S T O N ASSOCIATES INC. ADVISORS IN
REAL ESTATE
500 SOUTH GRAND AVENUE, SUITE 1480 REDEVELOPMENT
LOS ANGELES, CALIFORNIA 90071 AFFORDABLE HOUSING
PHONE 213/622 -8095 ECONOMIC DEVELOPMENT
FAX 213/622 -5204 FISCAL IMPACT
INFRASTRUCTURE FINANCE
VALUATION AND
LITIGATION SUPPORT
Los Angeles
Calvin E Hollis, 11
Kathleen H Head
James A. Rabe
Paul C. Anderson
September 18, 2002 Gregory D Soo -Hoo
San Diego
Gerald M. Trimble
Paul C Marra
Mr. Lee Whittenberg SAN FRANCISCO
A Jerry Keyser
Director of Development Services Timothy C. Kelly
City of Seal Beach Kate Earle Funk
y Robert J. Wetmore
City Hall - 211 Eighth Street Debbie M. Kern
Seal Beach, California 90740 -6279
Re: Analysis of Redevelopment Agency Dissolution
Dear Mr. Whittenberg:
Keyser Marston Associates, Inc. and Murphy and Davis LLP have been retained by the City of
Seal Beach to analyze the dissolution of the Redevelopment Agency. The intent of the
analysis is to provide the City with an objective review of the legal parameters, set forth under
the California Redevelopment Law, that must be satisfied before any such dissolution can
occur, as well as a summary of the Agency's existing financial obligations that must be
transferred over to the City if such a dissolution were to occur.
This analysis does not make a recommendation to dissolve or to retain the Agency. Such a
decision will have to be based upon the Agency addressing the broader questions governing
redevelopment activities in the City. These questions may include the following:
❑ Has the Agency achieved the stated goals and objectives set forth in the
Redevelopment Plans?
o Are there additional redevelopment projects, programs or activities of benefit to the
community that will not be realized if dissolution were to occur?
❑ Are there other alternate funding sources available for these activities?
❑ To what degree is the City General Fund willing and able to absorb the Agency's fiscal
obligations in the future?
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Mr. Lee Whittenburg September 18, 2002
City of Seal Beach Page 2
❑ Has the Agency adopted a financing plan to fully satisfy all of its mandatory fiscal
obligations imposed upon it? (e.g. excess surplus penalty, outstanding indebtedness
and other legally binding contractual obligations).
❑ If the County Housing Authority was to assume oversight of the Agency's Housing Set
Aside moneys, then to what degree is the City willing to give up its decision making
ability in deciding where and how these Housing Funds will be spent within the City?
The City Council was also interested in knowing whether or not the County of Orange would
consider assuming the administrative oversight of the Agency's outstanding Tax Allocation
Bonds 2000 Series A and B. Various conversations and a letter to the County Executive
Office have yielded no official consensus or decision on the County Executive Officer's part to-
date.
Enclosed you will find an Executive Summary highlighting the key considerations discussed
more fully in the attached analysis.
Sincerely,
KEYSER MARSTON ASSOCIATES, INC. MURPHY & DAVIS LLP
....... 7,6 4.;
Greg Soo -Hoo C. Nicole Murphy
Principal Attorney at Law
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ANALYSIS OF REDEVELOPMENT AGENCY DISSOLUTION
CITY OF SEAL BEACH
September 18, 2002
EXECUTIVE SUMMARY
I. INTRODUCTION
Keyser Marston Associates, Inc. (KMA) and Murphy and Davis LLP (M &D) have been retained
by the City of Seal Beach to analyze the potential dissolution of the Seal Beach Redevelopment
Agency. Dissolution of the Agency would require the termination of the Redevelopment Plans
for both the Riverfront and the Surfside Redevelopment Project Areas, i.e., by amending both
Redevelopment Plans to shorten their duration.
Pursuant to Health and Safety Code Section 33141, the City Council may, by ordinance,
deactivate the Agency if the Agency has no outstanding bonded indebtedness, no other unpaid
loans, indebtedness, or advances, and no legally binding contractual obligations with persons or
entities other than the City, unless the City assumes the bonded indebtedness, unpaid loans,
indebtedness, and advances, and legally binding contractual obligations.
Under Section 33333.8, the Redevelopment Plans cannot be terminated if the Agency has not
complied with its obligations pertaining to replacement housing (Section 33413(a)), inclusionary
housing (Section 33413(b)), or excess surplus housing funds (Section 33334.12).
II. SURFSIDE PROJECT AREA OBLIGATIONS
A. The Redevelopment Plan of the presently inactive Surfside Redevelopment
Project may formally be terminated at the City's discretion.
B. Tax increment revenues are not allocated to the Agency from the Surfside
Project.
C. The balance of funds in the Surfside Housing Fund could be transferred to the
City or to the County Housing Authority for use as required by Section 33334.2.
In either instance, the Redevelopment Law requires that these funds be spent on
low and moderate income housing activities within the City.
Executive Summary Keyser Marston Associates, Inc.
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III. RIVERFRONT PROJECT AREA OBLIGATIONS
A. The Riverfront Project Area generates gross tax increment revenues of
approximately $1.1 million per year. Twenty percent is deposited into the
Riverfront Housing Fund and the remaining balance is used to pay debt service
on tax allocation bonds, administrative costs and other on -going redevelopment
projects, programs and activities of the Project Area.
B. The termination of the Riverfront Project Area would result in the Agency's
forfeiture of $27 million in cumulative gross tax increment revenues projected
through FY 2023 -24.
1) The affected taxing agency distribution of this $27 million gross revenue
aggregation (based upon the 1% tax levy allocations) can be expressed
as follows:
School Districts $13,153,000
State (Educational Revenue Augmentation Fund) 5,045,000
County Taxing Entities 4,571,000
City 4,240,000
Total (Gross Tax Increment before debt repayment) $27,009,000
2) However, if the Agency were to be dissolved a portion of this cumulative
revenue would likely be required to service outstanding indebtedness
obligations of the Agency. The exact amount would be dependent upon
the amount of other alternate funding sources available (i.e. unspent bond
proceeds and /or land sale proceeds). These obligations are summarized
below.
C. Tax Allocation Bonds 2000 Series A and B
1) Outstanding obligations total $8,795,000 in principal and $5,165,499 in
interest payments (as of June 30, 2002)
2) If the Agency were to dissolve, the Agency would have to assign to the
City it's right to receive tax increments for the purpose of paying the
bonds.
1 FY 2023 -24 represents the last fiscal year in which the Agency is permitted to receive tax increment revenues to
repay indebtedness of the Riverfront Project (the Riverfront Annexation Redevelopment Plan will terminate March 3,
2014 and tax increments may be allocated for an additional 10 years to repay debt until March 3, 2024).
Executive Summary Keyser Marston Associates, Inc.
City of Seal Beach Page 2
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3) The bond debt may be repaid from a combination of accumulated tax
increment revenues, unspent bond proceeds and land sale proceeds of
Agency -owned real estate which would be deposited into a special debt
retirement fund administered by a bond trustee.
4) Tax increment revenues could continue to be allocated up to 10 years
after the Project Area dissolution (per Health and Safety Code Section
33333.6).
5) During the period in which tax increment revenues are annually received
to meet debt service, 20% of the tax increment receipts will continue to be
required to be deposited in the Housing Fund.
6) Unspent bond proceeds amount to approximately $3.3 million, although
these proceeds are slated to be used to fund the West End Pump Station
Replacement project and other capital improvements in the Project Area.
If these proceeds are used to repay bonds and if no other funding
sources from the City are available, these capital improvement projects
will not be funded.
7) Land sale proceeds could be generated from the sale of Zoeter Place, the
Police /Maintenance Yard /Animal Center Facility and proceeds from the
purchase and sale of Zoeter Daycare Facilities (assuming the value
exceeds the purchase price balance and requiring Agency or City option
exercise).
8) It will be necessary to retain legal bond counsel to opine on matters
pertaining to early redemption and retirement of the bonds and arbitrage
issues if the City pursues an Agency dissolution.
D. Mobile Home Park Revenue Bonds, Series 2000A
1) The Revenue Bonds are secured by revenues from the Seal Beach
Trailer Park.
• 1 FY 2023 -24 represents the last fiscal year in which the Agency is permitted to receive tax increment revenues to •
repay indebtedness of the Riverfront Project (the Riverfront Annexation Redevelopment Plan will terminate March 3,
2014 and tax increments may be allocated for an additional 10 years to repay debt until March 3, 2024).
Executive Summary Keyser Marston Associates, Inc.
City of Seal Beach Page 3
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E. Zoeter Place Promissory Note (Purchase of Zoeter "Parcel A ")
1) Repayment of the Note relies upon lease payments made on the
property. If the Agency were to dissolve, the City would have to assume
the Agency's liability in the event of a shortfall between lease income and
debt service.
2) The outstanding principal totals $763,350 and outstanding interest totals
$245,191, fora combined total of $1,008,541.
3) The lessee may exercise its purchase option to acquire the property,
commencing from July 1, 2004 to December 31, 2004. The purchase
price shall be the greater of either fair market value or the then - unpaid
principal balance of the Note, whichever is greater. The balance of the
outstanding principal on the Note could then be repaid from the land sale
proceeds.
4) If the property is acquired by the lessee, the Agency or City would forfeit
$5,864,000 in future lease payments (i.e. the sum of payments between
FY 2004 -05 through FY 2023 -24).
F. Zoeter Daycare Facilities Lease /Purchase Payments (Zoeter "Parcels B and D ")
' 1) If the Agency were to dissolve, the City General Fund would have to re-
assume the lease /purchase obligation of the lease of the site from the Los
Alamitos Unified School District.
2) The amount of base rent payable to the School District totals $988,000
and additional interest totals $473,693, for a combined total of
$1,461,693. The annual payments required through FY 2011 -12 are
approximately $146,000 per year.
3) Alternatively, the Agency could exercise a purchase option, pay the
purchase price and the lease would terminate. The property could then
be sold by the Agency. The purchase price would be $1,590,000 Tess all
amounts paid as Base Rent through the closing date. As of June 30,
2001, the purchase price obligation would have been $1,052,000.
2 Third Amendment to the Master Lease entered into between the Agency and the Karl and Tina Rodi Family Trust..
Executive Summary Keyser Marston Associates, Inc.
City of Seal Beach Page 4
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G. City General Fund Loan
1) The Agency owes to the City General Fund to -date approximately
$363,238 in principal and interest from a loan incurred July 1, 1993 for
administrative services rendered by the City for the Agency.
2) If the Agency dissolves or if the City forgives this debt, the impact to the
City General Fund will be $363,238.
H. Loan and Grant Agreement for Seal Beach Trailer Park
1) Agency annually provides a grant for rental assistance to the Seal Beach
Trailer Park for a period of 20 years, to a maximum of $180,000 per year
(a total commitment of $3.6 million). '
2) If the City were to assume this obligation, the impact to the City General
Fund would be a maximum $180,000 per year through the term of the
obligation.
3) Repayment of a $1 million Housing Fund loan to LINC will be repaid over
30 years. As this loan is repaid, the payments received will be deposited
into the Housing Fund and must be used for low and moderate income
housing purposes within the City.
•
4) Repayment of a $1 million Housing Fund "bridge" loan to LINC will be
repaid from a matching State loan or from residual receipts to be
collected over a 30 -year period. As this bridge loan is repaid, the
payments received will be deposited into the Housing Fund and must be
used for low and moderate income housing purposes within the City.
I. Regulatory Agreements for Seal Beach Trailer Park
1) The Agency has continuing non - monetary obligations under two (2)
Regulatory Agreements applicable to the Seal Beach Trailer Park for a
period of 30 years, one in connection with the Revenue Bonds and one in
connection with the Loan and Grant Agreement.
2) These obligations can be assumed by the City.
Executive Summary Keyser Marston Associates, Inc.
City of Seal Beach Page 5
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IV. FUNDING OF EXCESS SURPLUS PENALTIES
A. The Agency has been penalized $668,000 for having an excess surplus in its
Housing Fund as of June 2001.
B. As additional monies are deposited into the Housing Fund (receipt of tax
increment, Housing Fund loan repayments), future excess surplus penalties may
be imposed if the excess surplus is not expended on low and moderate income
housing uses in the City.
C. Housing set aside monies cannot be used to fund the excess surplus penalty.
The penalty must be paid from non - housing revenues.
D. The excess surplus penalty will be paid from net tax increment revenues on a
pay -as- you -go basis (i.e., net of the 20% housing set - aside, bond debt service
and Agency administration).
E. This liability would extend to the City General Fund if the City were to assume the
Agency's obligations under an Agency dissolution.
F. Once the excess surplus and excess surplus penalty are adequately funded, any
remaining balance in the Housing Fund could be transferred to the City or to the
County Housing Authority for use within the City as required by Section 33334.2.
V. COUNTY EXECUTIVE OFFICE CONVERSATIONS
A. The Executive Office of the County of Orange has been asked to consider
whether the County would be willing and able to assume responsibility for
payment of annual debt service on the Agency's Tax Allocation Bonds, 2000
Series A and B.
B. No decision or response have been received as of this date.
C. Housing set aside monies transferred to the County Housing Authority are
required to be expended within the City per the requirements set forth in the
Redevelopment Law. •
Executive Summary Keyser Marston Associates, Inc.
City of Seal Beach Page 6
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ANALYSIS OF REDEVELOPMENT AGENCY DISSOLUTION
SEAL BEACH REDEVELOPMENT AGENCY
Prepared
for the
CITY OF SEAL BEACH
211 Eighth Street
Seal Beach, California 90740
Prepared by:
Keyser Marston Associates, Inc.
500 South Grand Avenue, Suite 1480
Los Angeles, California 90071
And
Murphy & Davis, LLP
300 Capitol Mall, Suite 1110
Sacramento, California 95814
September 18, 2002
Analysis of Redevelopment Agency Dissolution
City of Seal Beach
Table of Contents
I. OVERVIEW 1
II. TAX INCREMENT REVENUE PROJECTION (TASK 1) 3
III. AGENCY OBLIGATIONS AND FUNDING OPTIONS (TASKS 2, 3 AND 4) 4
1. TAX ALLOCATION REFUNDING BONDS, 2000 SERIES A
SUBORDINATE TAX ALLOCATION BONDS, 2000 SERIES B 5
2. MOBILE HOME PARK REVENUE BONDS, SERIES 2000A 6
3. ZOETER PLACE PROMISSORY NOTE (PURCHASE OF PARCEL A) 6
4. LEASE OF ZOETER PLACE 7
5. ZOETER DAYCARE FACILITIES LEASE/PURCHASE (PARCELS B AND D) 8
6. CITY GENERAL FUND LOAN 8
7. LOAN AND GRANT AGREEMENT FOR SEAL BEACH TRAILER PARK 9
8. REGULATORY AGREEMENTS FOR SEAL BEACH TRAILER PARK 10
IV. FUNDING OF EXCESS SURPLUS PENALTIES (TASK 5) 10
V. OTHER HOUSING REQUIREMENTS 11
1. REPLACEMENT HOUSING 11
2. INCLUSIONARY HOUSING 11
VI. DISPOSITION OF AGENCY OWNED PROPERTIES (TASK 6) 11
1. ZOETER PLACE 11
2. POLICE MAINTENANCE YARD FACILITY 11
VII. COUNTY EXECUTIVE OFFICE CONVERSATIONS 12
Analysis of Redevelopment Agency Dissolution Keyser Marston Associates, Inc.
City of Seal Beach Page i
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Analysis of Redevelopment Agency Dissolution
City of Seal Beach
September 18, 2002
I. OVERVIEW
Keyser Marston Associates, Inc. (KMA) and Murphy and Davis LLP (M &D) have been retained
by the City of Seal Beach to analyze the potential dissolution of the Seal Beach
Redevelopment Agency. The Agency was established in 1967 and has been vested with the
responsibility for carrying out redevelopment in two adopted redevelopment project areas —
Riverfront and Surfside. The Redevelopment Plan for the Riverfront Redevelopment Project
was adopted in 1969 and territory was added to that Project in 1975. The Redevelopment
Plan for the Surfside Redevelopment Project was adopted in 1982; that Project is currently
inactive. Dissolution of the Agency would require the termination of both Redevelopment
Plans, i.e., by amending both Redevelopment Plans to shorten their duration.
Pursuant to Health and Safety Code Section 33141, the City Council of the City of Seal Beach
may, by ordinance, deactivate the Seal Beach Redevelopment Agency (the "Agency ") if the
Agency has no outstanding bonded indebtedness, no other unpaid loans, indebtedness, or
advances, and no legally binding contractual obligations with persons or entities other than the
City, unless the City assumes the bonded indebtedness, unpaid loans, indebtedness, and
advances, and legally binding contractual obligations. Under Section 33333.8, the
Redevelopment Plans cannot be terminated if the Agency has not complied with its obligations
pertaining to replacement housing (Section 33413(a)), inclusionary housing (Section
33413(b)), or excess surplus housing funds (Section 33334.12).
A. The currently inactive Surfside Redevelopment Project may be formally
terminated now. The balance of funds in the Surfside Low /Moderate Income
Housing Funds could be transferred to the City or to the County Housing
Authority for use as required by Section 33334.2. In either instance, the
Redevelopment Law requires that these funds be spent on low and moderate
income housing activities within the City.
B. The Riverfront Project cannot be terminated unless and until amounts sufficient
to pay the 2000 Series A and Series B Tax Allocation Bonds when due can be
deposited and combined with tax increments payable for the next 10 years after
dissolution (per Health and Safety Code Section 33333.6). During this period in
which annual tax increment revenues are collected to meet debt service, 20%
of the tax increment allocations received will be required to be deposited in the
1 All references are to the Health and Safety Code unless otherwise specified.
2 Excerpt from a letter dated August 2, 2002 from M &D.
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Housing Fund. As of June 30, 2002, $8,795,000 in principal and $5,165,499 in
interest payments remain outstanding on the 2000 Bonds.
C. Outstanding Agency tax allocation bonds and other debt obligations that could
not be serviced from unspent bond proceeds or uncommitted cash balances of
the Agency, would have to be serviced from land sale proceeds. These may
include the sale of the properties owned by the Agency (Zoeter Place and the
Police /Maintenance Yard /Animal Center Facility) and proceeds from the
purchase and sale of Zoeter Daycare Facilities (assuming the value exceeds
the purchase price balance and requiring Agency or City option exercise).
D. The Riverfront Project cannot be terminated unless and until the issue
regarding excess surplus funds and the $668,000 penalty is resolved. If the
penalty amount is adequately funded from net tax increment revenues (i.e. net
of the 20% housing set aside, debt service payments and Agency
administrative costs), as is the current plan per Agency staff, and all existing
excess surplus is expended or encumbered, then any balance in the Riverfront
Low and Moderate Income Housing Fund could be transferred to the City or to
the County Housing Authority for use as required by Section 33334.2. Housing
set aside monies cannot be used to fund the $668,000 penalty and would
become a liability of the City General Fund under an Agency dissolution. Any
excess surplus Housing funds would also have to be spent in the City.
The following tasks outlined below were conducted by KMA and M &D, to determine what
would be required to allow such a termination to occur:
1. Prepare a Tax Increment Revenue Projection
Based upon a review of the Redevelopment Plan, the Implementation Plan and the
Agency's audited financial statement, a projection of the potential tax increment
revenue "loss" that would be re- allocated to the affected taxing entities was determined
under a dissolution scenario.
2. Identify Outstanding Agency Obligations
A review of existing Agency obligations and contracts was conducted, including a
review of bonded indebtedness obligations and repayments of other Agency- identified
financing mechanisms incurred by the Agency.
•
2 Excerpt from a letter dated August 2, 2002 from M&D.
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3. Identify How the Outstanding Agency Obligations will be Funded
A determination of the fiscal requirements to fund outstanding Agency obligations was
prepared so as to estimate the amount of monies that would be required from existing
Agency and /or City resources.
4. Describe How the Unspent Bond Proceeds can be Spent
M &D will review bond resolutions and provide a description of limitations imposed upon
the $3.3 million in unspent tax - exempt net bond proceeds currently on deposit with the
Agency. Note that further research with legal bond counsel will be required to review
potential arbitrage issues if bond proceeds are held in reserve beyond the allowable
time period under an Agency dissolution.
5. Describe How Existing Housing Penalties can be Funded
City staff has indicated that there is a $668,000 affordable housing penalty imposed
upon the Agency. KMA & M &D will state how this obligation will need to be funded
from existing Agency and /or City resources.
6. Disposition of Existing Agency -Owned Properties
M &D will state what will be required to dispose of existing Agency -owned properties if
the Projects are terminated and the Agency is dissolved. Specific properties will be
provided by City staff.
II. TAX INCREMENT REVENUE PROJECTION (Task 1)
Property tax revenues in excess of the amount resulting from the valuation shown on the
assessment roll for the base year of each Project Area is referred to as tax increment. The
base year for the Project Area represents the fiscal year in which taxable property was last
equalized prior to the effective date of the ordinance approving the Project Area's
Redevelopment Plan. Under an immediate dissolution scenario summarized on Appendix
Table 1.1, the cumulative amount of future tax increment revenues the Agency would forfeit
amounts to approximately $27 million if the dissolution were to occur immediately.
3 This projected amount is gross tax increment and does not reflect existing Agency obligations for repayment of
outstanding debt.
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The projection of tax increment revenue for the Riverfront Project Area (as shown on
Appendix Table 1.2) is based upon the FY 2001 -02 assessed values reported by the Orange
County Auditor - Controller. The application of a 2% inflationary increase to Real Property (i.e.
land and improvement) values results in a relatively conservative estimate of future tax
increment revenues up to the existing time limitations allowed under the California
Redevelopment Law.
The affected taxing agency distribution of this $27 million gross revenue forfeiture (based upon
the 1% tax levy allocations) can be expressed as follows:
Re- Distribution of
Future Tax Increment % of
Taxing Entity (cumulative to FY 2023 -24) Total
City of Seal Beach $4,240,000 16%
County of Orange 1,724,000 6%
County Library 466,000 2%
County Flood Control District 553,000 2%
County Beaches, Harbors & Parks 428,000 2%
County Vector Control 31,000 0.1%
County Sanitation 1,043,000 4%
County Water 248,000 1%
County Transit Authority 78,000 0.3%
Los Alamitos Unified School Dist 9,520,000 35%
Coast Community College Dist 2,696,000 10%
County Education 937,000 3%
Education Revenue Augmentation Fund 5,045,000 19%
Projected Total Forfeited Tax Increment $27,009,000 100%
It is important to note that under a dissolution scenario, a portion of this cumulative revenue
would likely be required to service outstanding indebtedness obligations of the Agency. The
exact amount would be dependent upon the amount of other alternate funding sources
available (i.e. unspent bond proceeds and /or land sale proceeds).
III. AGENCY OBLIGATIONS AND FUNDING OPTIONS (Tasks 2, 3 and 4)
The following represents a listing of the outstanding obligations the Agency is responsible for
funding from tax increment revenues and the potential funding options, if any, available if the
Agency is dissolved. The listing was the result of M &D's and KMA's review of Agency finance
documents and consultation with bond counsel for the Tax Allocation Bonds. A complete
review as prepared in a draft letter by M &D is attached as Appendix Letter A.
4 The Agency has elected to no longer receive tax increment revenues from the Surfside Project Area. Therefore,
no revenue projection was prepared for Surfside.
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1. Tax Allocation Refunding Bonds, 2000 Series A
Subordinate Tax Allocation Bonds, 2000 Series B
Background: On December 20, 2000, the Agency issued the Series A and Series B
Bonds secured by tax increment revenues generated by the Riverfront Project. The
Agency used the proceeds of the Series A Bonds to purchase U.S. Government
Securities in order to defease the 1986 Tax Allocation Bonds ($1,380,000) and the
1991 Tax Allocation Bonds ($3,715,000). The Series A Bonds have a maturity date
through FY 2023 -24.
The Agency used the proceeds of the Series B Bonds to finance various
redevelopment activities of the Agency. The Series B Bonds have a maturity date
through FY 2018 -19.
At the present time, there are approximately $3.3 million in unspent bond proceeds,
largely budgeted to be spent on the West End Pump Station Replacement and, to a
lesser degree, to other capital improvement projects in the Project Area.
Outstanding Obligation: $12,912,867 (Series A) + $1,047,632 (Series B) -- Based upon
the Agency's financial statement as of June 30, 2001, and commencing with FY 2002-
03, the amount of Series A principal and interest outstanding is $12,912,866 and the
amount of Series B principal and interest outstanding is $1,047,633 (see Appendix
Tables 2 and 3).
Funding Options: The bonds mature as late as FY 2023 -24, but can only be redeemed
as early as 2004 (Series B Term Bonds) and 2008 (Series A Term Bonds). An early
termination of the Riverfront Redevelopment Plan (say in 2003) would mean that tax
increment revenues could continue to be received for an additional 10 years thereafter
(say 2013) to meet debt service (as permitted under Health and Safety Code Section
33333.6). This is not long enough to pay debt service as required by the bonds.
Under this scenario, over the 10- year period the Agency would have to assign to the
City it's right to receive tax increments through 2013 for the purpose of paying the
bonds. The County would then continue to allocate the maximum amount of tax
increment revenues each year and these amounts would accumulate in a special debt
retirement fund administered by a bond trustee (as was done with the 2000 Series A
bond proceeds which were used to purchase U. S. Government securities and
deposited with the Bond Trustee to defease the 1986 and 1991 Bonds). Twenty
percent of these allocations would continue to be required for deposit into the Housing
Fund.
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In addition, if the Agency had sufficient revenue from other sources, such as unspent
bond proceeds and land sale proceeds, which, when combined with the tax increment
allocations made through 2013, was sufficient to assure payment of the bonds as
required, it could be conceivable to have these additional funds deposited with the
Bond Trustee.
The $3.3 million in unspent bond proceeds could be an additional funding source for
the deposit with a Bond Trustee. In doing so, however, the City and Agency would
then have to abandon its plans for the funding of the pump station replacement project
and any other capital improvement projects under consideration.
Without such deposits being made with a Bond Trustee, the Riverfront Project Area
• cannot be terminated and the Agency cannot be dissolved. The City is not permitted,
under the Bond indentures, to pledge any other on -going alternative revenue streams it
receives as an in -lieu funding source of tax increment to retire these bonds. If the
Agency pursues dissolution, it will be necessary to retain legal bond counsel to further
opine on any early redemption and retirement matters and other arbitrage issues.
2. Mobile Home Park Revenue Bonds, Series 2000A
Background: These bonds are secured by the revenues from the Seal Beach Trailer
Park, and all of the Agency's rights in and to those revenues have been assigned to
the Bond Trustee. The Agency has certain continuing non - monetary rights and
obligations under the bonds which could be assigned to the City. The Agency does not
have any fiduciary responsibilities.
Outstanding Obligation: The Agency has no outstanding fiscal obligation.
Funding Options: Not Applicable
3. Zoeter Place Promissory Note (Purchase of Parcel A)
Background: On September 1, 1987, the Agency executed a promissory note in favor
of the Los Alamitos School District for the purchase of "Parcel A" or more commonly
referred to as Zoeter Place. After a down payment of $76,334, the principal amount of
the note was $1,832,052.60. The note is payable in annual installment of $76,334 plus
interest at an annual rate to be determined from the average daily interest rate earned
by funds in the General Fund of the Orange County Treasurer for the preceding
calendar year, but shall not be less than 5.84 %.
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Outstanding Obligation: $1,008,541 -- Based upon the Agency's financial statement as
of June 30, 2001, and commencing with FY 2002 -03, the projected amount of principal
outstanding totals $763,350 and interest outstanding totals $245,191, for a combined
total of $1,008,541. The annual payments through FY 2011 -12 range from $80,792 to
$120,914 (as shown on Appendix 5).
Funding Options: The note is paid from lease payments made under the terms of the
Third Amendment to the Master Lease entered into between the Agency and the Karl
and Tina Rodi Family Trust (see Appendix Table 4). Projected lease payments could
amount to $6,288,365 over the remaining 35 -year term of the Third Amendment.
Section 5 of the Third Amendment to the Master Lease provides for a purchase option,
commencing from July 1, 2004 to December 31, 2004, enabling the lessee to exercise
it's option to acquire the parcel at fair market value or the then - unpaid principal balance
of the Promissory Note, whichever is greater. The balance of the outstanding principal
could then be repaid with available land sale proceeds.
However, if the lessee were to exercise its purchase option, the Agency would forfeit
$5,864,000 in future lease income commencing from FY 2004 -05 through FY 2023 -24
(see Appendix 4).
4. Lease of Zoeter Place
Background: The Agency entered into a Master Lease for Parcel A (Zoeter Place) on
November 30, 1987. That Master Lease was subsequently amended, the latest of
which was the Third Amendment to Master Lease, dated March 28, 1996, between the
Agency and Trust "A" of the Karl and Tina Rodi Family Trust (Tenant). Projected rental
income could amount to $6,288,365 over the remaining 35 -year term of the Third
Amendment (as shown on Appendix Table 4). Section 5 of the Third Amendment to
the Master Lease also provides for a purchase option, commencing from July 1, 2004
to December 31, 2004, enabling the lessee to exercise it's option to acquire the parcel
at fair market value or the then - unpaid principal balance of the Promissory Note,
whichever is greater. The balance of the outstanding principal could then be repaid
with available land sale proceeds. As stated in the previous section, if the lessee were
to exercise its purchase option, the Agency would forfeit $5,864,000 in future lease
income commencing from FY 2004 -05 through FY 2023 -24.
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5. Zoeter Daycare Facilities Lease /Purchase (Parcels B and D)
Background: The City of Seal Beach entered into a Lease with the Los Alamitos
Unified School District on January 1, 1987, leasing "Parcels B and D ", more commonly
referred to as the Zoeter Daycare Facilities. The lease provided for a purchase option
to be exercised at any time during the term of the lease (the lease expires December
31, 2011). The purchase price for Parcels B and D would be $1,590,000 Tess all
amounts paid as Base Rent through the closing date. As of June 30, 2001, the
purchase price obligation would have been $1,052,000.
The Agency's audited financial statements as of June 30, 2001, indicate that the City's
rights and obligations under the Lease were assigned to the Agency 5 commencing
with the twelfth year's payment. The lease /purchase payments are made in annual
installments comprising a base rental payment plus inflationary interest.
Outstanding Obligation: $1,461,693 -- Based upon the annual base rental payment
schedule plus an assumed inflationary interest payment assumed at 7.84 %, the
amount of remaining base rent due and payable to the School District as of July 1,
2002 totals $988,000 and the additional interest totals $473,693, for a combined total
of $1,461,693. The annual payments through FY 2011 -12 are approximately $146,000
per year (as shown on Appendix 6).
Funding Options: The lease /purchase payments on behalf of the City's obligation may
be paid from any and all funds legally available to the Agency (e.g. tax increment
revenue, land sale proceeds). The City may also elect to re- assume responsibility for
making future lease /purchase payments (such an assignment would require the School
District's consent). Alternatively, the Agency could exercise the purchase option, pay
the purchase price and the lease would terminate. The property could then be sold by
the Agency.
6. City General Fund Loan
Background: Commencing on July 1, 1993, the Agency received a loan from the City in
an amount totaling $215,000 for administrative services rendered by the City for the
Agency. The loan bears an interest rate of 6% per year.
5 Other than what has been noted in the Agency's financial audit, M &D and KMA have not received or reviewed
other information or documents evidencing such assignment between the City and Agency or the School District's
consent to the same.
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Outstanding Obligation: $363,238 -- based upon an assumed compounded interest
rate of 6 %, the amount of principal and interest due and payable to the City as of July
1, 2002 is calculated to be $363,238 (refer to Appendix 7).
Funding Options: The loan may be repaid from any and all funds legally available to
the Agency (e.g. tax increment revenue, land sale proceeds) or the City may elect to
forgive this outstanding debt. If the Agency does not have any funds available to repay
this debt and /or the City forgives this debt, the impact to the City General Fund will be
$363,238.
7. Loan and Grant Agreement for Seal Beach Trailer Park
Background: This Agreement obligates the Agency to make continuing grants of funds
for rental assistance to the Seal Beach Trailer Park. The amounts committed for rental
assistance are a maximum of $180,000 per year for 20 years after the recording of the
loan. This obligation could be assumed by the City, but the impact to the City General
Fund would be a maximum of $180,000 per year through the term of the obligation.
In connection with the acquisition and rehabilitation of the Seal Beach Trailer Park, the
Agency made a $1,000,000 loan to LINC to be repaid over a 30 -year period from
residual receipts from the Trailer Park (i.e., Net Operating Revenues less required debt
service on the Revenue Bond Loan of $6,750,000 and the State Loan of $1,000,000).
This loan was made from the Agency's Riverfront Low and Moderate Income Housing
Fund, and funds repaid will therefore retain their character as housing funds that must
be used in accordance with Section 33334.2.
Also in connection with the Seal Beach Trailer Park project, the Agency made a
$1,000,000 bridge loan to LINC to be repaid either from the proceeds of a $1,000,000
State Loan or from residual receipts over a 30 -year period. As of June 30, 2001, LINC
had been approved to receive the $1,000,000 State Loan, and it is assumed that all or
a majority of the Agency's bridge loan has since been repaid. To the extent that all of a
part of the bridge loan was made from the Riverfront Low and Moderate Income
Housing Fund, the repayment was required to be deposited back into the Housing
Fund for future use in accordance with Section 33334.2.
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8. Regulatory Agreements for Seal Beach Trailer Park
Background: Two Regulatory Agreements applicable to the Seal Beach Trailer Park
were entered into by the Agency, one in connection with the Revenue Bonds and one
in connection with the Loan and Grant Agreement. The Agency has continuing non -
monetary obligations under these Regulatory Agreements for a period of 30 years;
however, those obligations could be assumed by the City. (In fact, the Regulatory
Agreement pursuant to the Loan and Grant Agreement specifically contemplates
enforcement by the City if the Agency is terminated or dissolved — Section 6.4 thereof.)
These obligations pertain to the monitoring of the management and occupancy of the
trailer park and enforcement of the borrower's obligations under these agreements.
IV. FUNDING OF EXCESS SURPLUS PENALTIES (Task 5)
Health and Safety Code Section 33334.12 requires that redevelopment agencies expend or
encumber the amount in the Low and Moderate Income Housing Fund that exceeds the
greater of $1 million or the aggregate amount deposited into the Housing Fund during the
Agency's preceding four (4) fiscal years. If the Agency, after three (3) years have elapsed
from the date that the moneys became excess surplus, has not expended or encumbered the
excess surplus, the Agency shall also be required to pay an excess surplus penalty. The
excess surplus penalty is equal to 50% of the amount of the excess surplus that remains at the
end of the three -year period. The penalty may not be funded from the 20% set aside, but must
be used for low and moderate income housing purposes. _
The Agency has been penalized an excess surplus penalty in the amount of $668,000 as the
result of excess surplus over three years old in the Housing Fund on June 30, 2001.
According to Agency finance staff, it is anticipated that the excess surplus penalty will be paid
from net tax increment revenues on a pay -as- you -go basis (i.e., net of the 20% housing set -
aside, bond debt service and Agency administration). The Agency will also be required to
expend or to encumber the excess surplus within the three year time requirement. The
Surfside Project Housing Fund has a balance of $176,844 and no excess surplus exists.
Consequently, the Riverfront Project cannot be terminated until the excess surplus in the
Housing Fund and the excess surplus penalty are expended or encumbered as required by
Redevelopment Law. However, as additional monies are deposited into the Housing Fund (as
a result of continued receipt of tax increment revenues or Housing Fund loan repayments),
future excess surplus penalties may be imposed if the excess surplus is not expended on low
and moderate income housing uses in the City. Funding of future excess surplus penalties will
have to come from non - housing funds of the Agency or City as a result.
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V. OTHER HOUSING REQUIREMENTS
1. Replacement Housing
This obligation requires that the Agency replace, on a one - for -one basis, low and moderate
income dwelling units destroyed or removed from the Project Areas. Because the Riverfront
Project was adopted prior to 1976, this requirement became applicable only as to dwelling
units destroyed or removed from the Project Area on or after January 1, 1996. According to
the Agency's Implementation Plan for 2000 -2005, no housing unit has been destroyed or
removed from the Riverfront or Surfside Project Areas. Consequently, this requirement is
satisfied for both Project Areas.
2. Inclusionary Housing
This obligation requires that certain percentages of housing newly constructed or substantially
rehabilitated by the Agency or within the Project Areas by others be restricted for occupancy
by low and moderate income households. It is applicable only to project areas adopted or
areas added to an existing project area on or after January 1, 1976. The original Riverfront
Project Area was adopted in 1969 and territory was added in 1975. Consequently, this
requirement is not applicable to the Riverfront Project.
According to the Agency's Implementation Plan for 2000 -2005, only limited residential
construction has occurred in the Surfside Project Area and no housing unit has been
substantially rehabilitated; the small affordable housing requirement is stated to be met by the
100 deed restricted units in the Seal Beach Trailer Park (located in the Riverfront Project Area)
which can be counted on a two- for -one basis, for a total of 50 units. Consequently, this
requirement is satisfied for the Surfside Project.
VI. DISPOSITION OF AGENCY OWNED PROPERTIES (Task 6)
1. Zoeter Place
As described above, this property is leased to a tenant and that tenant has an option to
purchase, exercisable from July 1, 2004, through December 31, 2004. The Agency could sell
the land or convey the property to the City subject to the terms of the Master Lease.
2. Police /Maintenance Yard /Animal Center Facility
This property was acquired by the Agency in 1976. It appears that subsequent to the
Agency's purchase, the roadway for Adolfo Lopez Drive was constructed through a portion of
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the property, reducing its size from 7.113 acres to 5.791 acres. The Agency could sell or
convey the property to the City or others.
VII. COUNTY EXECUTIVE OFFICE CONVERSATIONS
In addition to the aforementioned work scope, the Agency has requested that KMA investigate
the possibility of having the County of Orange assume responsibility for payment of annual
debt service on the Agency's Tax Allocation Refunding Bonds, 2000 Series A and the
Subordinate Tax Allocation Bonds, 2000 Series B. A letter was prepared on behalf of the
Agency and transmitted to the Orange County Executive Office (see Appendix Letter B).
Although telephone conversations have taken place between KMA and various
representatives of the County Executive Office, no decisions have been made by the County
and as of this writing no response has been received.
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Appendix 1
Tax Increment Allocation
From Affected Taxing Entities
Appendix Table 1.1 — Tax Allocation Diversion from Taxing Entities
Appendix Table 1.2 — Gross Tax Increment Projection (Riverfront Project)
Appendix Table 1.3 — Weighted Average of 1% Levy (by Taxing Entity)
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Appendices 2 & 3
Long Term Debt
Debt Service Schedules
Appendix Table 2 -- $8,520,000 Tax Allocation Refunding Bonds, 2000 Series A
Appendix Table 3 -- $685,000 Subordinate Tax Allocation Bonds, 2000 Series B
•
Appendix 2
Long Term Debt - Tax Allocation Bonds
$8,520,000 Tax Allocation Refunding Bonds, 2000 Series A
Riverfront Redevelopment Project Area
Seal Beach Redevelopment Agency
Bond Series A
FY Year Principal Interest Total
2001 -02 1 390,000 282,666 672,666
2002 -03 2 275,000 401,448 676,448
2003 -04 3 285,000 389,760 674,760
2004 -05 4 295,000 377,363 672,363
2005 -06 5 310,000 364,530 674,530
2006 -07 6 325,000 351,045 676,045
2007 -08 7 340,000 336,583 676,583
2008 -09 8 355,000 321,283 676,283
2009 -10 9 370,000 302,645 672,645
2010 -11 10 390,000 283,220 673,220
2011 -12 11 410,000 262,745 672,745
2012 -13 12 430,000 243,885 673,885
2013 -14 13 450,000 223,675 673,675
2014 -15 14 470,000 202,075 672,075
2015 -16 15 495,000 178,575 673,575
2016 -17 16 520,000 153,825 673,825
2017 -18 17 545,000 127,305 672,305
2018 -19 18 575,000 99,238 674,238
2019 -20 19 605,000 69,338 674,338
2020 -21 20 160,000 36,819 196,819
2021 -22 21 165,000 28,219 193,219
2022 -23 22 175,000 19,350 194,350
2023 -24 23 185,000 9,944 194,944
Total 8,520,000 5,065,532 13,585,532
Outstanding after FY
2001 -02 8,130,000 4,782,866 12,912,866
Prepared by Keyser Marston Associates, Inc.
Filename: TI_Proj_06 -25 -2002: TAB A: 9/18/2002: GSH
Appendix 3
Long Term Debt - Tax Allocation Bonds
$685,000 Subordinate Tax Allocation Bonds, 2000 Series B
Riverfront Redevelopment Project Area
Seal Beach Redevelopment Agency
Bond Series B .
FY Year Principal Interest Total
2001 -02 1 20,000 28,093 48,093
2002 -03 2 25,000 36,010 61,010
2003 -04 3 30,000 34,860 64,860
2004 -05 4 25,000 33,450 58,450
2005 -06 5 25,000 32,169 57,169
2006 -07 6 30,000 30,888 60,888
2007 -08 7 30,000 29,350 59,350
2008 -09 8 35,000 27,813 62,813
2009 -10 9 35,000 26,019 61,019
2010 -11 10 40,000 24,225 64,225
2011 -12 11 40,000 22,175 62,175
2012 -13 12 40,000 20,125 60,125
2013 -14 13 45,000 17,825 62,825
2014 -15 14 45,000 15,238 60,238
2015 -16 15 50,000 12,650 62,650
2016 -17 16 55,000 9,775 64,775
2017 -18 17 55,000 6,613 61,613
2018 -19 18 60,000 3,450 63,450
2019 -20 19 0 0 0
a 2020 -21 20 0 0 0
2021 -22 21 0 0 0
2022 -23 22 0 0 0
2023 -24 23 0 0 0
Total 685,000 410,725 1,095,725
Outstanding after FY
2001 -02 665,000 382,633 1,047,633
Prepared by Keyser Marston Associates, Inc.
Filename: TI_Proj_06 -25 -2002: TAB_B: 9/18/2002: GSH
Appendices 4 & 5
Zoeter Place ( "Zoeter Parcel A ")
Receivable and Payable Schedules
Appendix Table 4 — Lease Payments Receivable, Zoeter Place
Appendix 5 — Promissory Note Payable, Zoeter Place
f
Appendix 4
Lease Payments Receivable Under Operating Lease
(Income used to Pay $1,832,026 Promissory Note - Parcel A)
Riverfront Redevelopment Project Area
Seal Beach Redevelopment Agency
Annual
FY Year Lease
1988 -89 0 60,000
1989 -90 1 180,000
1990 -91 2 180,000
1991 -92 3 180,000
•
1992 -93 4 180,000
1993 -94 5 180,000
1994 -95 6 180,000
1995 -96 7 180,000
1996 -97 8 180,000
1997 -98 9 180,000
1998 -99 10 189,000
1999 -00 11 207,000
2000 -01 12 207,000
2001 -02 13 207,000
2002 -03 14 207,000
2003 -04 15 217,350
2004 -05 16 238,050
2005 -06 17 238,050
2006 -07 18 238,050
2007 -08 19 238,050
2008 -09 20 249,953
2009 -10 21 273,758
2010 -11 22 273,758
2011 -12 23 273,758
2012 -13 24 273,758
2013 -14 25 287,445
2014 -15 26 314,821
2015 -16 27 314,821
2016 -17 28 314,821
2017 -18 29 314,821
2018 -19 30 330,562
2019 -20 31 362,044
2020 -21 32 362,044
2021 -22 33 362,044
2022 -23 34 362,044
2023 -24 35 241,363
Total 8,778,365
Outstanding after FY 2001 -02 6,288,365 I
Forfeiture if Acquired by Lessee
(FY 2004 -05 to FY 2023 -24) 5,864,015
Prepared by Keyser Marston Associates, Inc.
Filename: TI_Proj_06 -25 -2002: ZoeterA Income: 9/18/2002: GSH
Appendix 5
Promissory Note Payable $1,908,360 Parcel A Acquisition
Riverfront Redevelopment Project Area
Seal Beach Redevelopment Agency
Interest at Total Debt
FY Year Principal 5.84% Service
1987 -88 0 76,334 111,448 187,782
1988 -89 1 76,334 106,990 183,324
1989 -90 2 76,334 102,532 178,866
1990 -91 3 76,334 98,075 174,409
1991 -92 4 76,334 93,617 169,951
1992 -93 5 76,334 89,159 165,493
1993 -94 6 76,334 84,701 161,035
1994 -95 7 76,334 80,243 156,577
1995 -96 8 76,334 75,785 152,119
1996 -97 9 76,334 71,327 147,661
1997 -98 10 76,334 66,869 143,203
1998 -99 91 76,334 62,411 138,745
1999 -00 12 76,334 57,953 134,287
2000 -01 13 76,334 53,495 129,829
2001 -02 14 76,334 49,038 125,372
2002 -03 15 76,334 44,580 120,914
2003 -04 16 76,334 40,122 116,456
2004 -05 17 76,334 35,664 111,998
2005 -06 18 76,334 31,206 107,540
2006 -07 19 76,334 26,748 103,082
' 2007 -08 20 76,334 22,290 98,624
2008 -09 21 76,334 17,832 94,166
2009 -10 22 76,334 13,374 89,708
2010 -11 23 76,334 8,916 85,250
2011 -12 24 76,334 4,458 80,792
2012 -13 25 10 1 11
Total 1,832,026 1,337,386 3,169,412
Outstanding after FY
2001 -02 763,350 245,191 1,008,541
Prepared by Keyser Marston Associates, Inc.
Filename: TI_Proj_06 -25 -2002: ZoeterA_Expense: 9/18/2002: GSH
Appendix 6
Zoeter Daycare Facilities ( "Zoeter Parcels B & D ")
Payable Schedule
Appendix Table 6 — City Base Rent Payable
Appendix 6
City Base Rent Payment Schedule - RDA Assumes City's Obligation
Used to Acquire Parcels B & D from Los Alamitos USD $1,590,000
Riverfront Redevelopment Project Area
Seal Beach Redevelopment Agency
Total Payment
Annual Interest at Base Rent
FY Year Base Rent 7.84% + Interest
12/31/1987 0 23,000 124,656 147,656
12/31/1988 1 24,000 122,853 146,853
12/31/1989 2 26,000 120,971 146,971
12/31/1990 3 28,000 118,933 146,933
12/31/1991 4 30,000 116,738 146,738
12/31/1992 5 33,000 114,386 147,386
12/31/1993 6 35,000 111,798 146,798
12/31/1994 7 38,000 109,054 147,054
12/31/1995 8 41,000 106,075 147,075
12/31/1996 9 44,000 102,861 146,861
12/31/1997 10 48,000 99,411 147,411
12/31/1998 11 52,000 95,648 147,648
12/31/1999 12 56,000 91,571 147,571
12/31/2000 13 60,000 87,181 147,181
12/31/2001 14 64,000 82,477 146,477
12/31/2002 15 69,000 77,459 146,459
12/31/2003 16 74,000 72,050 146,050
12/31/2004 17 80,000 66,248 146,248
12/31/2005 18 86,000 59,976 145,976
12/31/2006 19 93,000 53,234 146,234
12/31/2007 20 100,000 45,942 145,942
12/31/2008 21 108,000 38,102 146,102
12/31/2009 22 117,000 29,635 146,635
12/31/2010 23 126,000 20,462 146,462
12/31/2011 24 135,000 10,584 145,584
Total 1,590,000 1,953,650 3,668,306
Outstanding after FY
2001 -02 988,000 473,693 1,461,693
Prepared by Keyser Marston Associates, Inc.
Filename: TI_Proj_06 -25 -2002: Zoeter B &D: 9/18/2002: GSH
Appendix 7
Loan Payable to the City
Loan Amount Outstanding
Appendix Table 7 - Loan Payable to the City of Seal Beach
MURPHY & DAVIS, LLP
Attorneys At Law
C. NICOLE MURPHY 30o Capitol Mall, Suite 1110 Telephone (916) 446 -6462
MADELINE K. DAVIS Sacramento, California 95814 Facsimile (916) 446 -6489
www.m- mlaw.com
August 2, 2002
VIA EMAIL
Greg Soo -Hoo DRAFT
Keyser Marston Associates, Inc.
500 South Grand Avenue, Suite 1480
Los Angeles, CA 90071
RE: Seal Beach Redevelopment Agency — Dissolution Analysis
(Phase 1)
Dear Greg:
In accordance with our Phase 1 Scope of Services for the Seal Beach Redevelopment
Agency dissolution analysis, I am providing the information set forth in this letter for
incorporation in your report to the Agency, as necessary and appropriate.
Pursuant to Health and Safety Code Section 33141, the City Council of the City of
Seal Beach may, by ordinance, deactivate the Seal Beach Redevelopment Agency (the
"Agency ") if the Agency has no outstanding bonded indebtedness, no other unpaid loans,
indebtedness, or advances, and no legally binding contractual obligations with persons or
entities other than the City, unless the City assumes the bonded indebtedness, unpaid loans,
indebtedness, and advances, and legally binding contractual obligations.
The Agency was established in 1967 and has been vested with the responsibility for
carrying out redevelopment in two adopted redevelopment project areas — Riverfront and
Surfside. The Redevelopment Plan for the Riverfront Redevelopment Project was adopted in
1969 and territory was added to that Project in 1975. The Redevelopment Plan for the
Surfside Redevelopment Project was adopted in 1982; that Project is currently inactive.
Dissolution of the Agency would require the termination of both Redevelopment Plans, i.e., by
amending both Redevelopment Plans to shorten their duration.
Under Section 33333.8, the City Council cannot terminate the Redevelopment Plans if
the Agency has not complied with its obligations pertaining to replacement housing (Section
6 All references are to the Health and Safety Code unless otherwise specified.
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 2
33413(a)), inclusionary housing (Section 33413(b)), or excess surplus housing funds (Section
33334.12). These obligations are discussed below as they relate to each Redevelopment
Project.
Riverfront Redevelopment Project
1. Replacement Housing: This obligation requires that the Agency replace, on a
one - for -one basis, low and moderate income dwelling units destroyed or removed from the
Project Area. Because the Riverfront Project was adopted prior to 1976, this requirement
became applicable only as to dwelling units destroyed or removed from the Project Area on or
after January 1, 1996. According to the Agency's Implementation Plan for 2000 -2005, no
housing unit has been destroyed or removed from the Riverfront Project Area. Consequently,
this requirement is satisfied.
2. Inclusionary Housing: This obligation requires that certain percentages of
housing newly constructed or substantially rehabilitated by the Agency or within the Project
Area by others be restricted for occupancy by low and moderate income households. It is
applicable only to project areas adopted or areas added to an existing project area on or after
January 1, 1976. The original Riverfront Project Area was adopted in 1969 and territory was
added in 1975. Consequently, this requirement is not applicable to the Riverfront Project.
3. Excess Surplus: According to the Agency's audited financial statements as of
June 30, 2001, an excess surplus of $2,178,345 existed on June 30, 2001, and $1,546,312 of
that amount was over three years old resulting in the imposition of a penalty of 50% of that
amount to be expended from non - housing funds. (See Note 18 of audited financial statements
as of June 30, 2001.) Consequently, the Riverfront Project cannot be terminated until the
excess surplus housing funds and penalty amount are expended as required. However, in
December 2000, the Agency made loans and grants to LINC Community Development
Corporation in connection with the acquisition and rehabilitation of the Seal Beach Trailer Park
— a loan of $1,000,000 from housing funds to be repaid from residual receipts; a grant of
$294,531.58 for rental assistance, with a continuing obligation for 20 years thereafter to
provide additional grants of up to $180,000 per year for rental assistance; and a bridge loan of
$1,000,000 from housing funds, to be repaid by a State Loan or from residual receipts. The
audited financial statements as of June 30, 2001, do not reflect the expenditure/ encumbrance
of the housing fund for these amounts against excess surplus. This issue needs further
clarification.
Surfside Redevelopment Project
1. Replacement Housing: This obligation requires that the Agency replace, on a
one - for -one basis, low and moderate income dwelling units destroyed or removed from the
market in the Project Area. According to the Agency's Implementation Plan for 2000 -2005, no
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 3
housing unit has been destroyed or removed from the Surfside Project Area. Consequently,
this requirement is satisfied.
2. Inclusionary Housing: This obligation requires that certain percentages of
housing newly constructed or substantially rehabilitated by the Agency or within the Project
Area by others be restricted for low and moderate income households. According to the
Agency's Implementation Plan for 2000 -2005, only limited residential construction has
occurred in the Surfside Project Area and no housing unit has been substantially rehabilitated;
the small affordable housing requirement is stated to be met by the 100 deed restricted units in
the Seal Beach Trailer Park (located in the Riverfront Project Area) which can be counted on a
two- for -one basis, for a total of 50 units. Consequently, this requirement is satisfied.
3. Excess Surplus: According to the Agency's audited financial statements as of
June 30, 2001, the Surfside Project Housing Fund has a balance of $176,844 and, therefore,
no excess surplus exists.
Outstanding Bonded Indebtedness
1. Tax Allocation Bonds, 2000 Series A and B
These bonds mature as late as 2023, but may be redeemed as early as 2004 (Series B Term
Bonds) and 2008 (Series A Term Bonds). The pledged revenues are tax increments from the
Riverfront Redevelopment Project.
An early termination of the Redevelopment Plan for the Riverfront Redevelopment Project in
2002 would mean that tax increment revenues could continue to be received only until 2012
(Health and Safety Code Section 33333.6), not long enough to pay debt service as required by
the bonds.
If the Agency had sufficient revenue from other sources which when combined with tax
increment receipts through 2012 was sufficient to assure payment of the bonds as required, I
believe it would be possible to deposit those funds with the bond trustee and assign to the City
the Agency's right to receive tax increments through 2012 for the purpose of paying the bonds,
in which case the Redevelopment Plan could be terminated in 2002 and the Agency dissolved.
(For example, proceeds of the 2000 bonds were used to purchase U. S. Government
securities which were deposited with the bond trustees to defease the 1986 and 1991 bonds;
see Note 8 of the audited financial statements as of June 30, 2001.)
Without such a deposit, the Riverfront Project Area cannot be terminated and the Agency
cannot be dissolved. No alternative revenue stream may be substituted in place of tax
increments to retire the bonds.
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 4
The remaining bond proceeds available to the Agency may be used to repay the bonds or to
finance other public facilities /redevelopment activities in the Project Area. The 2002 -03 budget
for the Agency indicates that the majority of the remaining bond proceeds are proposed to be
spent on the West End Pump Station Replacement.
2. Mobile Home Park Revenue Bonds, Series 2000A
These bonds are secured by the revenues from the Seal Beach Trailer Park, and all of the
Agency's rights in and to those revenues have been assigned to the bond trustee. The
Agency has certain continuing non - monetary rights and obligations under the bonds which
could be assigned to the City.
Other Unpaid Loans, Indebtedness and Advances
According to the Agency's Statement of Indebtedness for the 2001 -2002 Fiscal Year,
the Agency has the following unpaid indebtedness in addition to the outstanding bonded
indebtedness identified above:
1. Lease /Purchase, Zoeter Parcels B &D
The City of Seal Beach entered into a Lease with the Los Alamitos Unified
• School District (the "School District ") on January 1, 1987, leasing Zoeter Parcels B &D. The
Lease provides a purchase option to be exercised at any time during the term of the Lease
(the Lease expires December 31, 2011); the purchase price for Parcels B &D is $1,590,000
less all amounts paid as Base Rent through the closing date. As of June 30, 2001, the
purchase price obligation would have been $1,052,000. The Agency's audited financial
statements as of June 30, 2001, indicate that the City's rights and obligations under the Lease
were assigned to the Agency, but I have no other information or documents evidencing that
formal assignment or the School District's consent (required). Assuming the Agency did
assume the City's obligations under the Lease, it would be necessary to make an assignment
back to the City or some other party; such an assignment would again require the School
District's consent. Alternatively, the Agency could exercise the option to purchase, pay the
purchase price and the Lease would terminate. The property could then be sold by the
Agency.
2. Promissory Note /Purchase Zoeter Place
On September 1, 1987, the Agency executed a promissory note in favor of the
School District for the purchase of Zoeter Parcel A. After a down payment of $76,334, the
principal amount of the note was $1,832,052.60. Annual payments of the principal amount of
$76,334 plus interest are due until September 1, 2011. The outstanding principal balance of
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 5
the note as of June 30, 2001, was $839,682. (See Note 9 of audited financial statements as of
June 30, 2001.)
3. Advance from City
According to the Agency's audited financial statements as of June 30, 2001, the
Agency is indebted to the City in the amount of $215,000 plus interest at the rate of 6% per
annum commencing July 1, 1993.
Legally Binding Contractual Obligations
1. Lease of Zoeter Parcel A
The Agency entered into a Master Lease for Zoeter Parcel A on November 30,
1987. That Master Lease was subsequently amended, the latest of which was the Third
Amendment to Master Lease, dated March 28, 1996, between the Agency ( "Landlord ") and
Trust "A" of the Karl and Tina Rodi Family Trust ( "Tenant "). Under the Master Lease, the
Tenant has an option to purchase Zoeter Parcel A for a purchase price equal to the greater of
the fair market value of the property or the then - unpaid balance of the Agency's promissory
note to the School District ($839,682). It is believed that the fair market value of the property
exceeds the balance due under the Agency's note, although I have insufficient information
regarding the potential value of the property. The initial term of the Master Lease is 35 years
(ending November 30, 2022), with four extension terms of 5 years each.
2. Loan and Grant Agreement for Seal Beach Trailer Park
This Agreement obligates the Agency to make continuing grants of funds for
rental assistance to the Seal Beach Trailer Park. The amounts committed for rental
assistance are a maximum of $180,000 per year for 20 years after the recording of the loan.
This obligation could be assumed by the City.
3. Regulatory Agreements for Seal Beach Trailer Park
Two Regulatory Agreements applicable to the Seal Beach Trailer Park were
entered into by the Agency, one in connection with the Revenue Bonds and one in connection
with the Loan and Grant Agreement. The Agency has continuing non - monetary obligations
under these Regulatory Agreements for a period of 30 years; however, those obligations could
be assumed by the City. (In fact, the Regulatory Agreement pursuant to the Loan and Grant
Agreement specifically contemplates enforcement by the City if the Agency is terminated or
dissolved — Section 6.4 thereof.)
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 6
Disposition of Land Owned by the Agency
From a review of the documents provided by the Agency, it appears that the Agency
continues to own the following real property:
1. Zoeter Parcel A
As described above, this property is leased to a tenant and that tenant has an
option to purchase, exercisable from July 1, 2004, through December 31, 2004. Although I do
not have the complete Master Lease (I received only pages 9 through 15), the Agency should
be able to sell or convey the property to the City or others, subject to the terms of the Master
Lease.
2. Police /Maintenance Yard Facility
This property was acquired by the Agency in 1976. It appears that subsequent
to the Agency's purchase, the roadway for Adolfo Lopez Drive was constructed through a
portion of the property, reducing its size from 7.113 acres to 5.791 acres. The Agency could
sell or convey the property to the City or others.
Receivables to the Agency (Other than Tax Increments)
1. Lease Income, Zoeter Parcel A
As indicated in the Agency's audited financial statements as of June 30, 2001,
over the 35 -year initial term of the Master Lease of this property, the Agency can expect to
receive approximately $6,495,365 in rental income, annually $200,000 plus. (See Note 12 of
the audited financial statements as of June 30, 2001.)
2. Loans to LINC Community Development Corporation
In connection with the acquisition and rehabilitation of the Seal Beach Trailer
Park, the Agency made a $1,000,000 loan to LINC to be repaid over a 30 -year period from
residual receipts from the Trailer Park (i.e., Net Operating Revenues less required debt service
on the Revenue Bond Loan of $6,750,000 and the State Loan of $1,000,000). This loan was
made from the Agency's Riverfront Low and Moderate Income Housing Fund, and funds
repaid will therefore retain their character as housing funds that must be used in accordance
with Section 33334.2.
Also in connection with the Seal Beach Trailer Park project, the Agency made a
$1,000,000 bridge loan to LINC to be repaid either from the proceeds of a $1,000,000 State
Greg Soo -Hoo August 2, 2002
Keyser Marston Associates, Inc. Page 7
Loan or from residual receipts over a 30 -year period. As of June 30, 2001, LINC had been
approved to receive the $1,000,000 State Loan, and it is assumed that all or a majority of the
Agency's bridge loan has since been repaid. To the extent that all of a part of the bridge loan
was made from the Riverfront Low and Moderate Income Housing Fund, the repayment was
required to be deposited back into the Housing Fund for future use in accordance with Section
33334.2.
Conclusion
The Surfside Redevelopment Project may be terminated now. The balance of funds in
the Surfside Low /Moderate Income Housing Funds could be transferred to the City or to the
County Housing Authority for use as required by Section 33334.2.
The Riverfront Redevelopment Project cannot be terminated unless and until: (1) the
issue regarding excess surplus funds and penalty amounts is resolved; and (2) amounts
sufficient to pay the Tax Allocation Bonds when due can be deposited and combined with tax
increments payable for the next 10 years. Amounts available to pay the Tax Allocation Bonds
could include the proceeds of the sale of the properties owned by the Agency (Zoeter Place
and the Police /Maintenance Yard Facility), excess proceeds from the purchase and sale of
Zoeter Parcels B &D (assuming the value exceeds the purchase price balance of
approximately $1,052,000 and requiring Agency or City option exercise), as well as unspent
bond proceeds and available /uncommitted cash balance of tax increments. If the excess
surplus and penalty amount were adequately funded in December 2000 in connection with the
Seal Beach Trailer Park, any balance in the Riverfront Low and Moderate Income Housing
Fund could be transferred to the City or to the County Housing Authority for use as required by
Section 33334.2.
Lastly, until both Redevelopment Projects can be terminated, the Agency cannot be
dissolved.
If you have any questions, please do not hesitate to call me.
Very truly yours,
C. Nicole Murphy
Appendix Letter B
June 28, 2002
Letter to the Orange County Executive Office
K E Y S E R M A R S T O N ASSOCIATES INC. ADVISORS IN'
REAL ESTATE
500 SOUTH GRAND AVENUE, SUITE 1480 REDEVELOPMENT
LOS ANGELES, CALIFORNIA 90071 AFFORDABLE HOUSING
PHONE 213/622 -8095 ECONOMIC DEVELOPMENT
FAX. 213/622 -5204 FISCAL IMPACT
INFRASTRUCTURE FINANCE
VALUATION AND
LITIGATION SUPPORT
Los Angeles
Calvin E. Hollis, 11
Kathleen H. Head
James A. Rabe
Paul C Anderson
Gregory D Soo -Hoo
San Diego
Gerald M Trimble
Paul C. Marra
June 28, 2002
SAN FRANCISCO
A Jerry Keyser
Timothy C Kelly
Kate Earle Funk
Mr. Paul Lanning Robert J Wetmore
Strategic Affairs Officer Debbie M. Kern
County of Orange Executive Office
10 Civic Center Plaza, 3 Floor
Santa Ana, California 92701
Re: Seal Beach Redevelopment Agency
Dear Mr. Lanning:
Keyser Marston Associates, Inc. (KMA) has been retained by the Redevelopment
Agency of the City of Seal Beach to independently assess the financial feasibility of
dissolving the Agency. The Agency was established in 1967 and administers two
redevelopment project areas: the Riverfront Project adopted on March 3, 1969 and the
Surfside Project adopted December 13, 1982 (the latter Project Area is now inactive and
the Agency does not receive tax increment revenues from this Project).
Under the dissolution scenario, a plan for the ongoing repayment of all of the Agency's
existing and outstanding indebtedness would have to be created. At the
recommendation of the Agency Board, KMA has been instructed to direct the following
question to your office for your consideration and response:
If the Agency were dissolved, would the County's Redevelopment Agency (or its
equivalent) be able to take over receipt of all future Riverfront tax increment
revenues so as to ensure that debt service on the outstanding 2000 Series A and
Mr. Paul Lanning June 28, 2002
County of Orange Executive Office Page 2
Series B Tax Allocation Bonds is paid each year until such time that the Bonds
are fully repaid?
On December 20, 2000, the Agency issued the following Tax Allocation Bonds secured
by tax increment revenues generated by the Riverfront Project:
❖ $8,520,000 Tax Allocation Refunding Bonds, 2000 Series A
❖ $685,000 Subordinate Tax Allocation Bonds, 2000 Series B
According to the Agency's FY 2000 -01 audited financial statement, the Agency used the
proceeds of Series A Bonds to finance the refunding and defeasance of $1,380,000 of
1986 Tax Allocation Bonds and $3,715,000 of 1991 Tax Allocation Bonds previously
issued by the Agency. The Agency used the proceeds of Series B Bonds to finance
various redevelopment activities of the Agency.
Under such a dissolution scenario, future year housing set aside monies would likely be
transferred to the County Housing Authority and Riverfront tax increment revenues in
excess of annual Bond debt service and housing set aside would be reallocated to the
affected taxing entities. KMA knows of no historic precedent regarding this question.
It is not presently known to KMA whether such an idea is permissible under existing
redevelopment law or the 2000 Tax Allocation Bond covenants. This question has not
yet been put forth to bond counsel or to the County Counsel's office. While KMA
acknowledges that such an idea remains untested, we are nevertheless submitting this
question to the County for your due diligence consideration and reply.
I can be reached at (213) 622 -8095 to discuss the matter with you. Your attention to this
matter is greatly appreciated.
Sincerely,
KEYSER MARSTON ASSOCIATES, INC.
Greg Soo -Hoo
cc: Bill Mahoney
Consideration of Consultant Report —
Potential Dissolution of Redevelopment Agency
Redevelopment Agency Staff Report
September 23, 2002
ATTACHMENT 2
REDEVELOPMENT AGENCY MINUTES, MAY 28, 2002
•
Dissolution of Agency Report.RDA Staff Report 7
SELECTION OF VICE CHAIRMAN
Agencymember Doane nominated Mr. Antos as the Vice Chairman
for year 2002/2003. Agencymember Yost seconded the motion.
AYES: Antos, Campbell, Doane, Larson, Yost
NOES: Nona Motion carried
RESOLUTION NUMBER 02 -2 - CONSULTANT SERVICES - DISSOLUTION
OF REDEVELOPMENT AGENCY
The Director of Development Services noted that the report
presented by staff is the result of a request to bring back
to the Agency suggestions as to how to look at dissolving
the Redevelopment Agency. He reported that Requests for
Proposals were distributed, two proposals were submitted,
also a letter from a firm that received a proposal
indicating that unless the City was willing to take on the
obligations of the Agency they did not see any reason for
the City to even consider such an action therefore did not
submit a proposal, that letter and both proposals provided
with the agenda report. The Director mentioned that
interviews were conducted with both firms, based thereon
they were requested to submit a revised letter proposal
that focused more on issues of getting to the point of
whether or not the City wanted to proceed to formal
hearings to consider dissolving the Agency, should that be
the determination a number of additional, more detailed
studies will be required to take such action, both firms
have sent back proposals for the limited scope of work that
outlines what basic actions would be necessary to dissolve
the Agency, the obligations of the Agency and how those
obligations would be resolved, as well as the issue of what
will happen to the assets that are owned by the Agency,
properties, leases, etc. The Director noted that
representatives of both firms were present, it is the
opinion of staff that either firm is qualified to do the
work, both have a clear understanding of Redevelopment Law,
and although both indicated this type of action is not one
that they have a number of requests to consider it is
something that they feel they can deal with. The cost of
the first phase of services are $11,500.00 for the firm of
Keyser Marston Associates, Inc., and $17,500.00 for A. C.
Lazzaretto & Associates, should the Agency determine to
retain one of these firms a Resolution has also been
prepared to amend the Agency consultant budget to reflect a
cost amount of up to $25,000.00, and noted that the
interview panel consisted of the City Manager, City
Attorney, and Director of Development Services.
In response to a question of Agency, staff confirmed that
it is felt that both firms have the expertise to handle
this type of request. Agencymember Antos noted that a -
suggestion was heard earlier that the City check with the
County to see if they would be willing to assume the
obligation of debt of the Agency, and should the Agency
take an action to hire one of the consulting firms, he
asked if it would be possible for the City Manager or City
Attorney to check on that with the County as an
alternative. Agencymember Yost said he too thought that
was an interesting suggestion, it could be looked into.
The Director said he felt certain those issues could be
addressed with the County, it needs to be kept in mind
however that Redevelopment Agency actions are governed by
State law and there needs to be certainty that those
provisions are complied with. Chairman Campbell mentioned
that prior to the last meeting she met with the Finance
Administrator to obtain some bottom line facts, the City
has an assessed valuation of $2.6 billion, it receives a
little over $2.8 million in regular property taxes, that
could be higher however there is a large percentage of pre -
Proposition 13 residences, about thirty to thirty -five
percent, which are not going away, the situation is that
the second generation is moving back to the parents home,
living there and taking advantage of the property tax
benefits by being placed on the deed and the parents have
moved to Leisure World with the second generation paying
for the new residence. The City also received $1.38
million from the Riverfront Project Area, that is twenty-
seven percent of the property tax received, the City can
not afford to lose that money, the key issue is that those
properties are in the Redevelopment Agency and it takes
about $740,000 to $750,000 per year to service the debt,
the remainder of the tax increment is money that can be
used on other projects, given that this is a City that is
in need of recurring revenues that is important. She noted
that Redevelopment funds in past have gone to build the
Mary Wilson Library, bought land for the Public Works Yard,
and about to build a pump station behind the Trailer Park
which will keep Old Town from flooding. As a point of
information, there are three libraries in the City, one in
Leisure World where when the library system was in
financial difficulty Leisure World purchased it from the
County, there is the Mary Wilson Library in Old Town and
the Rossmoor /Los Alamitos Library in the Rossmoor Shopping
Center yet technically in Seal Beach, the people of College
Park East use the Rossmoor /Los Alamitos Library yet the CPE
property taxes do not go to service that library rather the
Mary Wilson Library, to that she inquired of the Orange
County librarian what would happen if the CPE taxes were to
go to the library they use, the response was that the Mary
Wilson Library would need to be closed, that she did not
pursue further. Chairman Campbell said it is likely there
are some cities that may abuse the Redevelopment Agency
however Seal Beach is not one of them, the letter from the
Davis Company basically states that the Agency could be
dissolved if the Agency has no outstanding bonded-
indebtedness or unpaid loans, indebtedness or
advances....if the City agrees to assume "all outstanding
bonded indebtedness, unpaid loans and advances and legally
binding contractual obligations it could be dissolved,"
however there is no way the City could take on $750,000 in
loan services, and if the Agency were given to the County
the City would then be giving up all of the additional
money that is received, no additional land is being placed
into the Redevelopment Agency. Given the information she
received from the Finance Administrator she could see no
reason to spend $17,000 or $20,000 to hire a consultant to
tell the City and Agency the same facts, the firm that did
not submit a proposal has set forth what the guidelines
are, which is what the others will also say, she can not
support spending that kind of money for something that is
already known, her feeling is that that money can be put to
better use by helping the residents of this community.
Yost moved, second by Antos, to allow the public to
comment. There was no objection voiced.
Mr. Jim Caviola, Seal Beach, said Chairman Campbell just
provided the answer to this whole issue, it was mentioned
that the Agency brings in $1 million in increment, the debt
service is $750,000, that is a net of up to $300,000
remaining, the Agency needs to spend twenty percent on low
income housing, that is the problem, that is $200,000 per
year, that leaves $100,000, if the Agency were dissolved
then the City would receive the regular property tax, about
$150,000. Mr. Caviola claimed that in any debt situation
there is always an end user that will assume the debt
because the cash flow will always pay for the debt, this
whole thing deprives the County of the incremental tax,
that is why the County of Los Angeles is getting ready to
sue the City of Los Angeles because the cities can not keep
depriving the counties of this money, at present Long Beach
can not pay its minimum debt, in the case of Seal Beach it
is paying $750,000 out of $1 million, that is a misuse.
The people who come into town are taking the cities, Mr.
Johnson as an example owned Seal Beach Affordable Housing
fifteen months before Mr. Hall closed escrow. By the
numbers stated this community would receive more money if
they would assume the debt based upon the cash flow, this
would not require lawyers or consultant's, and he personally
intends to go to the County and talk to the Tax Assessor,
it is common for people to assume debt, this City will net
more money without the Agency. Agencymember Larson
countered that the a previously stated that the City spends
so much money on consultants why not hire a firm to find
out if this is a good idea or not, now the argument is that
the City should not spend the money, it is not understood.
Mr. Caviola stated that he agreed with Agencymember Larson,
said he is learning as he goes, he was pushed into this
because the proposal was to put the low /moderate income
housing next to his home, during the last month he took -his
personal time to get more educated so he is willing to
change, he is witnessing what -is going on, from the budget
it is clear that the money is going out the door to
lawyers. An unnamed member of the audience noted the
$750,000 annual debt, and'if the Agency is dissolved, is it
known how much the Agency assets will bring, would those
resources then cure the debt. The response of Chairman
Campbell was that the assets are not going to be sold. Ms.
Reva Olson, Seal Beach, stated that the problem with the
Redevelopment Agency is that the monies do not go into the
City revenues, it is a slush fund for developers, the
Agency continues to go into debt, it owes $9 million, the
Agency and City are making the decisions as to how to spend
the tax increment, it is not with a vote of the people, it
also diverts money from schools, roads, and services. Ms.
Joyce Parque, Seal Beach, noted the continued reference to
the pump station keeping Old Town from flooding, yet her
recollection was that the last flood was of the Bridgeport
homes not Old Town, the flood of 1983 however flooded the
areas of 14th to 17th Street, the pump station by the
Trailer Park has nothing to do with keeping Old Town dry.
Her feeling is that the talk about the libraries is
dividing the City, the beachfront properties likely funds
the majority of the City employees, the utility tax is
about $4 million, the property taxes are only about $3
million. Ms. Sue Corbin, Seal Beach, said Old Town does
not need a cure, it is not blighted, and continued with
comments relating to recurring debt. Ms. Corbin said she
took this issue to a constitutional researcher /scholar and
that person took a cursary look at the issue, commerce is
the overriding reason for the Constitution, redevelopment
violates that even though it has not been tested, whenever
the flow of commerce is stopped it is a violation of the
Constitution, that is what redevelopment does. She said
people have a right to petition their government, they have
been prevented from gaining documents for year's, this City
government has not been properly managed, the City needs
proper representation and protection. Chairman Campbell
requested that the speakers address the issues under
consideration. Ms. Karen Tarascio, Trailer Park, said if
the payment for the Trailer Park was overpaid by $2
million, if that money could be recovered the low- income
residents of the Park would not need subsidies.
Agencymember Antos noted that the Agency owns the ballfield
at Zoeter Place, he was uncertain whether it is the Agency
or the City that owns the commercial parcel, and one of the
items mentioned in the letter from the firm that did not
submit a proposal was the selling of Agency assets, if
however it is the Agency rather than the City that owns the
commercial then that should be determined before retaining
a consultant, evaluate what it might be worth, also
determine whether any of the bonds that have been sold in
the past have prepayment penalties, in some instances they
may not, if those questions were answered then the Agency
would be in a better position to determine whether to
retain a consultant, that would provide information to
balance out the Agency's books, and if a request is going
to be proposed to the County as to their interest, if the
Agency could sell something that is not a park or a library
as an example, that could be used to pay down the bonds
without a prepayment penalty, that could possibly put the
Agency in a different position in talking with the County,
suggesting that possibly this could be held over until the
next Agency meeting. The'Executive Director confirmed that
it is the Agency that owns Zoeter field, there are notes in
the audit that reflects the Zoeter debt, there is typically
a prepayment penalty on all bonds, there is a leasehold on
Zoeter by Rodi properties that comes due about 2004, the
property is split between commercial and the two daycare
centers, one of the things that the consultant would be
requested to look at is Agency assets as well as the issues
raised by the public and Council. Agencymember Yost asked
if the consultants would possibly consider looking into
whether the County would be willing to assume the Agency
obligations as part of the RFP. An indication of the
consultants from the audience was that that could likely be
done. Chairman Campbell expressed her opinion that much of
this the City could do in -house therefore save the proposed
expenditure, which in turn could be used to assist
residents. With regard to Zoeter she noted that at the
time that Seal Beach joined the Los Alamitos School
District the residents of the Hill and Old Town pushed for
the City to acquire that entire property in that the Los
Alamitos School District was going to sell the site, the
City did purchase it, it will be of interest to see if the
feelings remain the same.
Mr. Caviola made the statement that his thought was to'not
get rid of any property. He proceeded with his explanation
that the Redevelopment Agency incremental tax goes to the
Agency, not the City General Fund, and if it is given to
the County it will be in perpetuity, to that he would
suggest going directly to the tax assessor and explain that
the Agency wants to keep its property, have the County
assume the Agency debt whatever it may be, and show the
cash flow in perpetuity that the County will receive, the
debt will be paid in about ten years, then the County will
be collecting the increment forever. Mr. Caviola said
redevelopment agencies are not a favorite subject with the
County, Seal Beach could be could be a pioneer in such a
transfer if the County can be shown that they will receive
the cashflow forever, this has nothing to do with giving up
property. Councilman Yost pointed out that at present only
$.13 on the dollar of sales tax comes back to this
community, with the State budget coming up things may not
look well for the counties as well, the State could look at
attacking their property tax too, the County gets a much
larger share than does the City, and it is obvious that
there is a positive cashflow although is subject to the
whims of State law as well, however he would be willing to
look at the concept. Mr. Caviola stated again that the
incremental tax goes to the Agency, if the Agency is
disbanded then the money that comes to the City will go to
the General Fund, there will no longer be the obligation of
the twenty percent setaside and the City will net more
money long term, members of the Council merely need to go
to the assessor, not staff as that is a conflict, the City
should go back to natural progression. Ms.. Sue Corbin
spoke to the Zoeter Place frontage lease, said the lessor
will have the ability to buy the frontage in 2004 for very
little money, this agreement never should have been signed.
Agencymember Larson said he did not know if any of the
speakers are knowledgable of the law, he dislikes spending
money for things that could be used for something else, yet
these people will not believe the Agency if on its own
brings forth an answer tolthis situation, the only way this
can be done is to have independent experts prepare answers
to these questions, if the response were to be that there
is no way to disband the Agency then the people would be as
unhappy as they are at this meeting so he could not see
that delaying this issue for a couple of weeks or even
months is going to make any difference, the people do not
believe the Agency .or the staff so let the experts advise
as to what can and can not be done. Agencymember Larson
said the next issue that he would raise is that if the
people do not have title to the Trailer Park, and if
someone else owned it, sold it, the Agency helped the
residents buy it by putting in $1 million, it did not work
out, therefore he would speak for selling the property,
getting the $1 million back, and if the Park residents want
to buy it that would be fine, why should the Agency put up
$1 million, treat it like a public debt when it is not.
Larson moved, second by Yost, to select the consulting firm
of Keyser Marston•Associates, Inc., authorize the Executive
Director to negotiate and execute the contract in
accordance with the proposal of the selected consultant,
and adopt Resolution Number 02 -2 entitled "A RESOLUTION OF
THE REDEVELOPMENT AGENCY OF THE CITY OF SEAL BEACH
AUTHORIZING BUDGET AMENDMENT NUMBER 28 FOR THE 2001/2002
FISCAL YEAR." By unanimous consent, full reading of
Resolution Number 02 -2 was waived.
AYES: Antos, Doane, Larson, Yost
NOES: Campbell Motion carried
SEAL BEACH TRAILER PARK - RESPONSE TO ISSUES RAISED
The Director of Development Services stated the staff
report has tried to respond to various issues raised at
previous Agency and City Council meetings, also offered to
respond to questions from the Agency. The Director noted
the one issue heard during public comments was who owns the
Trailer Park, to that it is clear that the Trailer Park was
acquired by LINC Housing, the terms of the agreements are
that once the bonds are paid then the property reverts to
ownership by the residents of the Park, yet until the bonds
are paid it is LINC that owns the Park, and pointed out
that certain language that was quoted from the AB 1290 Plan
was somewhat different and incorrect. With regard to the
question as to where the twenty houses have gone, Chairman
Campbell explained that initially there were one hundred
twenty -five units in the Park, one hundred twenty were low
to moderate housing, five were not, under the new bonding
the requirement was for eighty percent to be low to
moderate income housing, that is one hundred units, the
units did not go away merely reclassified, that was twenty
units. With regard to her understanding of the way the
ownership of the Trailer Park is structured, LINC Housing
bought the property and put it into one of their 501C -3
corporations, that was necessary because of the tax exempt
status of the bonds, the issue was for municipal bonds,
typically municipal bonds pay less than regular bonds,
about 4.5 percent, regular bonds pay 5 percent and up, the
reason is that the interest is tax free, in discussions
with the bond consultants, and they looked over the income
of the residents, the maximum they could qualify for
bonding was about $6.5 million, the City with the MPROP
loan brought the amount to $7.5 million, $7.4 million was
the purchase price, the City also paid the closing costs
which was in the range of $900,000, that was all that could
be done with the financing. Chairman Campbell mentioned
that application has also been made for tax exempt status
for the Seal Beach Affordable Housing Corporation, which
takes some time, however once the tax exempt status is
realized then title will be transferred from LINC Housing
to the Seal Beach Affordable Housing Corporation. She used
as an example the purchase of a condominium unit which
allows a vote for that condominium for the Board of
Directors, that is somewhat the same manner in which the
Trailer Park has been structured, there will be a seven
member Board, according to the Corporation and the MPROP
loan it is necessary that two members be from the Trailer
Park, two are from the community at large, and three are
from the LINC Housing Board, once the bonds are paid, which
LINC has said and it is in writing, LINC will be gone, then
the remaining four members will vote on those they want to