HomeMy WebLinkAboutCC AG PKT 2011-08-08 #IAGENDA STAFF REPORT
DATE: August 8, 2011
TO: Honorable Mayor and City Council
THRU: Jill R. Ingram, City Manager
FROM: Mark Persico, AICP, Director of Development Services
SUBJECT: CONSIDER ADOPTION OF ORDINANCE NO. 1612 TO
PARTICIPATE IN THE "ALTERNATIVE VOLUNTARY
REDEVELOPMENT PROGRAM" UNDER AB 27 AND
AUTHORIZE APPEAL OF THE CALIFORNIA
DEPARTMENT OF FINANCE FEE PAYMENT AMOUNT
SUMMARY OF REQUEST:
That the City Council consider adopting Ordinance No. 1612 ( "Opt -in Ordinance ")
authorizing: (1) participation in the "Alternative Voluntary Redevelopment
Program" and (2) payments to the State of California to continue redevelopment
activities under AB XI 27 ( "AB 27 ").
BACKGROUND:
The City and Seal Beach Redevelopment Agency have successfully executed
redevelopment projects and activities beginning in 1969. However, the
continuing ability of the Agency to eliminate blight and create economic
development opportunities has been threatened by the Legislature's adoption of
the recent budget package which, in part, solves State budget problems by
taking revenue from redevelopment agencies. AB XI 26 ( "AB 26 "), which was
signed by Governor Brown on June, 29, 2011, immediately suspends most
redevelopment agency activities and, among other things, prohibits
redevelopment agencies from incurring indebtedness or entering into or
modifying contracts. Further, on October 1, 2011, AB 26 dissolves all existing
redevelopment agencies and designates successor agencies to carry out agency
activities, while imposing numerous requirements on the successor agencies and
subjecting successor agency actions to the review of oversight boards
established under the new law.
Agenda Item
Page 2
AB 27 was signed by the Governor concurrently with AB 26. This companion law
establishes an Alternative Voluntary Redevelopment Program whereby a
redevelopment agency will, notwithstanding AB 26, be authorized to continue to
exist and carry out the provisions of the Redevelopment Law. To "opt into" this
"voluntary" alternative program, the City must adopt an ordinance signifying the
City's compliance with the onerous exactions imposed by the Legislature. To
restore the ability to continue redevelopment activities, the City must make
specified annual payments to the County Auditor - Controller on a schedule, and
the Auditor - Controller will then allocate the payments to special districts and
educational entities. The amount to be paid in FY 2011 -12 is the Agency's
proportionate share of $1.7 billion, as determined by the California Department of
Finance pursuant to a formula specified in AB 27. That determination, made on
August 1, 2011 is $937,868. We recommend that the City appeal such
determination no later than August 15, 2011. This payment obligation is an
ongoing obligation of the City in subsequent years. For FY 2012 -13 and
thereafter, the City is required to calculate its own payment amount, subject to
audit by the California Department of Finance, with the payments based on the
Agency's proportionate share of $400 million (with adjustments based on
growth /decline of tax increment revenues, and with additional payments triggered
if the Agency incurs new debt).
Thus, the Legislature has created a system where a city is liable for making
continuing annual payments out of city funds in order for the agency to be able to
continue its activities. AB 27 provides that a participating city and the
redevelopment agency in that participating city may enter into an agreement
whereby the agency will transfer a portion of its tax increment to the participating
city in an amount not to exceed the annual remittance required that year. Any
tax increment funds transferred from the agency to the city are required to be
spent only "for the purpose of financing activities within the redevelopment area
that are related to accomplishing the redevelopment agency project goals."
If the City Council determines that it will not opt into the AB 27 Alternative
Voluntary Redevelopment Program, the activities of the Agency will continue to
be severely curtailed. Ultimately, the Agency will be dissolved as of October 1,
2011 and a number of "wind -up" activities must be undertaken by a successor
entity. No further redevelopment activities could be undertaken and the
successor agency would be required to dispose all Agency assets. The State
Controller would have the authority to review, and potentially unwind, asset
transfer transactions between the City and the Agency which occurred after
January 1, 2011. In addition, AB 26 provides that except in very limited
circumstances, the Agency could not repay amounts currently owed to the City.
The "wind -up" activities of the Agency would be subject to the supervision of a
new "Oversight Board" with the authority to give direction to City and Agency
staff, and to usurp the existing authority of the City Council and Agency Board.
Page 3
ANALYSIS:
At a threshold level, the City Council must determine whether to take the steps
necessary to continue the activities of the Redevelopment Agency or allow the
Agency to be dissolved.
This determination requires answers to the following questions:
1. Do the benefits of keeping the Agency in operation outweigh the costs and
risks to the City of opting into the "voluntary" program?
a. The benefits of keeping the Agency in operation include:
• Completion of storm drain improvements;
• Acquisition and improvement of parkland and open space;
and
• Continuation of the accessibility of improvement program in
Leisure World.
b. The cost to the City of making the payments are:
• For FY 2011 -2012: $937,868;
• For FY 2012 -2013: $222,468 (estimated); and
• Annual payments continuing thereafter.
c. There are some significant risks to the City if it chooses to "opt into"
the "voluntary" program. Those risks include:
• The risk that the City will not have sufficient available funds
in subsequent years to continue making the required
payments, or that at some future time, the net benefits of
making the payments will not exceed the actual cost of
making those payments. If the City stops making the
payments in future years, the provisions of Part 1.8
(prohibitions on Agency activities) and 1.85 (dissolution of
the Agency) will be applicable to the Agency. In addition,
Part 1.9 provides that the State will be entitled to an
assignment of any rights the City has to any payment from
the Agency to which the City is entitled for purposes of
mitigating the fiscal impact to the State related to the failure
of the City to make the annual payments.
• The risk that the Legislature makes changes to the program,
or requires additional payments, in future years. For
example, if the total amount paid by agencies in FY 2011 -12
does not equal the $1.7 billion anticipated by the State
budget, this could trigger the need for additional exactions.
Page 4
• The risk that the City will be unable to recover its payments
to the State if AB 26 and AB 27 are ultimately invalidated by
the courts.
2. Before it "opts into," the "voluntary" program, the City Council should
consider whether the City will have the resources to make the annual
payments required under AB 27. There are three important questions:
Does the City have funds to make the payments to the state? If so, what
will be the source of those payments? Does (or will) the Agency have
sufficient funds to "reimburse" the City the amounts paid to the state? The
answers to the foregoing questions will help the City Council determine
whether to "opt into" the "voluntary" program established by AB 27.
a. Funds for and source of City payment in fiscal year 2011 -2012.
Staff has identified funds in the City's FY 2011 -2012 budget
designated for a storm drain project located in the project area as a
potential funding source for the initial payment of $937,868.
b. The Agency has sufficient funds to make transfers to the City "to
reimburse" the City for its payments to the state. Based upon the
recently adopted 5 year implementation plan, it appears the Agency
has sufficient funds to reimburse the City for payments to the state.
According to the 2009 -10 — 2013 -14 Five Year Implementation
Plan, the Agency will have an ending balance of $4,486,073 for FY
2012 -13.
If the City Council determines that the City will "opt into" the program, the City
Council will need to adopt Ordinance No. 1612 (attached). In addition, the City
Council should direct staff to take all necessary steps to facilitate the required
payment for FY 2011 -12 and prepare a transfer agreement between the Agency
and City.
If the City Council determines not to participate in the AB 27 voluntary program,
the City Council should direct staff to start the actions necessary to comply with
AB 26, and to bring those actions before the Agency Board and City Council as
necessary.
FINANCIAL IMPACT:
If the City Council adopts the proposed ordinance, the City will be obligated to
pay the state $937,868 in two equal installments in January and May 2012. The
transfer agreement will require amendments to the City and Redevelopment
Agency budgets.
Page 5
ENVIRONMENTAL IMPACT:
This action is not a "project" for purposes of CEQA, as that term is defined by
Guidelines Section 15378. Specifically, this Ordinance constitutes the creation of
government funding mechanisms or other government fiscal activities which do
not involve any commitment to any specific project which may result in a
potentially significant physical impact on the environment. (Guidelines Section
15378(b)(4).)
RECOMMENDATION:
Staff recommends that the City Council consider the foregoing facts and analysis
and determine that the City and Agency will participate in the Alternative
Voluntary Redevelopment Program established by AB 27.
If the City Council concurs, the appropriate motion would be to:
1. Adopt Ordinance No.
2. Direct staff to take al
for FY 2011 -12 and
and City; and
3. Direct staff to appeal
amount.
SUBMITTED BY:
1612;
1 necessary steps to facilitate the required payment
prepare a transfer agreement between the Agency
the California Department of Finance's remittance
ark H. Persico, AICP
Director of Development Services
Attachment:
NOTED AND APPROVED:
M
A. Ordinance No. 1612
ORDINANCE NUMBER 1612
AN ORDINANCE OF THE CITY OF SEAL BEACH TO COMPLY
WITH PART 1.9 OF DIVISION 24 OF THE CALIFORNIA HEALTH
AND SAFETY CODE AND TAKING CERTAIN ACTIONS IN
CONNECTION THEREWITH
RECITALS
A. The Redevelopment Agency of the City of Seal Beach (the
"Agency ") is a redevelopment agency in the City of Seal Beach (the "City "),
created pursuant to the Community Redevelopment Law (Part 1 (commencing
with Section 33000) of Division 24 of the California Health and Safety Code) (the
"Redevelopment Law ").
B. The City Council of the City (the "City Council ") adopted Ordinance
No. 708, approving and adopting the redevelopment plan for the Riverfront
Project Area, and from time to time, the City Council has amended such
redevelopment plan. The Agency is undertaking a program to redevelop the
Project Area.
C. AB X1 26 was signed by the Governor of California on June 29,
2011, making certain changes to the Redevelopment Law, including adding Part
1.8 (commencing with Section 34161) and Part 1.85 (commencing with Section
34170) to Division 24 of the California Health and Safety Code. Commencing
upon the effectiveness of AB X1 26, AB X1 26 suspends most redevelopment
agency activities and, among other things, prohibits redevelopment agencies
from incurring indebtedness or entering into or modifying contracts. Effective
October 1, 2011, AB X1 26 dissolves all existing redevelopment agencies and
redevelopment agency components of community development agencies,
designates successor agencies to the former redevelopment agencies, and
imposes numerous requirements on the successor agencies and subjects
successor agency actions to the review of oversight boards established pursuant
to the provisions of Part 1.85.
D. AB X1 27 was signed by the Governor of California on June 29,
2011, adding Part 1.9 (commencing with Section 34192) to Division 24 of the
California Health and Safety Code. Part 1.9 establishes an Alternative Voluntary
Redevelopment Program whereby, notwithstanding the provisions of Part 1.8 and
Part 1.85, a redevelopment agency will be authorized to continue to exist and
carry out the provisions of the Redevelopment Law upon the enactment, prior to
the applicable deadline established in Part 1.9, by the city council of the city
which includes that redevelopment agency (the "participating city ") of an
ordinance to comply with Part 1.9.
E. Part 1.9 requires a participating city to make specified annual
remittances to the applicable county auditor - controller, who shall allocate the
remittances for deposit into a Special District Allocation Fund, for allocation to
specified special districts, and into the county Educational Revenue
Augmentation Fund, for allocation to educational entities.
F. To participate in the Alternative Voluntary Redevelopment Program,
in addition to adopting the ordinance described in Recital D, above, the
participating city must, by November 1, 2011, notify the applicable county
auditor - controller, the State Controller, and the State of California Department of
Finance (the "Department of Finance ") that the participating city agrees to comply
with the provisions of Part 1.9. The participating city's agreement to make the
remittances provided for under Part 1.9 is a precondition to continue
redevelopment pursuant to Part 1.9.
G. Part 1.9 provides that for fiscal year 2011 -12, a participating city
shall remit to the applicable county auditor - controller an amount equal to the
amount determined by the State of California Director of Finance (the "Director of
Finance ") for the redevelopment agency pursuant to a formula set forth in Part
1.9, which formula utilizes information contained in the State Controller's
redevelopment agency 2008 -09 annual report. The amount represents the
redevelopment agency's proportionate share of the sum of $1,700,000,000. The
initial amount determined by the Director of Finance is subject to recalculation
and reduction in the event the participating city timely files an appeal in
accordance with Health and Safety Code Section 34194(b)(2)(L).
H. For fiscal year 2012 -13 and each fiscal year thereafter, a
participating city's remittance amount shall equal the amount determined
pursuant to calculations performed by the participating city in accordance with
the requirements of Part 1.9, subject to adjustment based on audit and
verification by the Director of Finance, the State Controller and the applicable
county auditor - controller. On or before November 1 of each year, commencing
November 1, 2012, a participating city shall notify the Department of Finance, the
State Controller, and the applicable county auditor - controller of the remittance
amount calculated by the participating city.
I. Pursuant to the provisions of Part 1.9, a participating city shall pay
one -half of the total remittance amount for a fiscal year on or before January 15
of that year and shall pay the remaining one -half of the remittance amount on or
before May 15 of that year.
J. A participating city making remittances pursuant to Part 1.9 may
use any available funds not otherwise obligated for other uses.
K. A participating city and the redevelopment agency in that
participating city may enter into an agreement pursuant to Part 1.9 whereby the
agency will transfer a portion of its tax increment to the participating city in an
amount not to exceed the annual remittance required that year pursuant to Part
1.9.
L. Pursuant to the provisions of Part 1.9, if a participating city fails to
make a remittance payment, as calculated in accordance with the applicable
provisions of Part 1.9 and according to the schedule set forth in Recital I, above,
the applicable county auditor - controller shall notify the Director of Finance of the
failure to make the payment within 30 days. Upon receipt of the notification, the
Director of Finance may determine that the redevelopment agency in the
participating city shall be subject to the requirements of Part 1.8 and Part 1.85.
M. On August 1, 2001, the California Director of Finance has indicated
that the amount of the City's 2011 -12 remittance is $937,868. The City may
appeal the amount of remittance to the Director of Finance on or before August
15, 2011.
N. The City desires to participate in the Alternative Voluntary
Redevelopment Program so that the Agency may continue to exist and carry out
the provisions of the Redevelopment Law.
0. The City has, or will have, available funds not otherwise obligated
for other uses with which to make the fiscal year 2011 -12 remittance in an
amount not to exceed $937,868, or such lesser amount recalculated by the
Director of Finance, payable one -half by January 15, 2012, with the remaining
one -half payable by May 15, 2012.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SEAL
BEACH DOES ORDAIN AS FOLLOWS:
Section 1 . The above recitals are true and correct and are a
substantive part of this Ordinance.
Section 2 . This Ordinance is adopted as required by Health and Safety
Code Section 34193.
Section 3 . So that the Agency may continue to exist and carry out the
provisions of the Redevelopment Law notwithstanding the provisions of Part 1.8
and Part 1.85, the City Council hereby determines and declares that it shall
comply with the requirements and obligations contained in Part 1.9, as Part 1.9
exists on the date of adoption of this Ordinance. In adopting this Ordinance or
agreeing to comply with the provisions of Part 1.9, the City does not intend to
incur an indebtedness or liability within the meaning of any constitutional or
statutory debt limitation or restriction.
Section 4 . Performance of actions under or pursuant to this Ordinance,
including the making of payments by the City to the Orange County Auditor -
Controller (the "Audito -Controller), is made under protest. Neither the adoption
of this Ordinance norl the performance of actions under or pursuant to this
Ordinance is intended by the City or Agency to waive any right either may have
to challenge the legality of all or any portion of AB X1 26 or AB X1 27 through
administrative or judicial proceedings, or to appeal the City's fiscal year 2011 -12
remittance amount pursuant to Health and Safety Code Section 34194(b)(2)(L),
or to otherwise conteit the remittance amount for any year. Any payments
hereunder are intended to be made without prejudice to the City's right to seek to
recover reimbursement of such payments, plus interest, should the requirement
of making such payme T is be stayed, enjoined, repealed, or held unconstitutional
or unenforceable by any court of competent jurisdiction. This Ordinance shall be
null and void and of nol further force and effect in the event that AB X1 26 or AB
X1 27 is repealed, orl held unconstitutional or unenforceable by any court of
competent jurisdiction.
Section 5 . The City Manager, or the City Manager's designee, is hereby
authorized and directed to notify the Auditor - Controller, the State Controller, and
the Department of Finance, on or before November 1, 2011, that the City agrees
to comply with the provisions of Part 1.9, as Part 1.9 exists on the date of
adoption of this Ordinance, with such notification to be accompanied by a
certified copy of this Ordinance.
Section 6 . This Ordinance has been reviewed with respect to
applicability of the California Environmental Quality Act ( "CEQA"), the State
CEQA Guidelines (California Code of Regulations, Title 14, Sections 15000 et
seq., hereafter the "Guidelines "), and the City's environmental guidelines. The
City has determined that this Ordinance is not a "project" for purposes of CEQA,
as that term is defined by Guidelines Section 15378. Specifically, this Ordinance
constitutes the creation of government funding mechanisms or other government
fiscal activities which do not involve any commitment to any specific project
which may result in a potentially significant physical impact on the environment.
(Guidelines Section 15378(b)(4).) In addition, this Ordinance is an organizational
or administrative activity that will not result in a direct or indirect physical change
in the environment. (Guidelines Section 15378(b)(5).) Therefore, because it is
not a "project," this Ordinance is not subject to CEQA's requirements. Further,
even if this Ordinance were deemed a "project" and therefore subject to CEQA,
the Ordinance would be covered by the general rule that CEQA applies only to
projects that have the potential to cause a significant effect on the environment.
(Guidelines Section 15061 (b)(3).) As an organizational or administrative activity
or the creation of government funding mechanisms or other government fiscal
activities which do not involve any commitment to any specific project which may
result in a potentially significant physical impact on the environment, this
Ordinance does not have the potential to cause a significant effect on the
environment and is therefore exempt under this general rule. Further, it can be
seen with certainty that there is no possibility that the activity in question may
have a significant effect on the environment, and thus this Ordinance is not
subject to CEQA. (Guidelines Section 15061(b)(3).)
Section 7 . The City Clerk shall certify to the passage of this Ordinance
and is hereby directed to publish or post this Ordinance, or a summary of this
Ordinance, in accordance with law.
Section 8 . The City Clerk is hereby directed to send a certified copy of
this Ordinance to the Agency.
Section 9 . The City Clerk is hereby directed to file a Notice of
Exemption with the County Clerk pursuant to Section 15062 of the Guidelines
within five days of the adoption of this Ordinance.
Section 10 . The officers and staff of the City are hereby authorized and
directed, jointly and severally, to do any and all things which they may deem
necessary or advisable to effectuate this Ordinance and any such actions
previously taken by such officers are hereby ratified and confirmed.
Section 11 . If any part of this Ordinance is held to be invalid or
unconstitutional by the decision of any court of competent jurisdiction, for any
reason, such decision shall not affect the validity of the remaining portions of this
Ordinance and this City Council hereby declares that it would have passed the
remainder of this Ordinance if such invalid or unconstitutional portion thereof had
been deleted.
Section 12 . This Ordinance shall take effect 30 days from adoption.
PASSED, APPROVED AND ADOPTED by the City Council of the City of
Seal Beach at a regular meeting held on the 8th day of August 2011.
Mayor
ATTEST:
City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of
the City of Seal Beach, do hereby certify that the foregoing Ordinance was
introduced for first reading at a regular meeting held on the 2nd day of
August , 2011 and was passed, approved and adopted by the City Council at a
regular meeting held on the 8th day of August , 2011 by the following vote:
AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members
And do hereby further certify that Ordinance Number 1612 has been published
pursuant to the Seal Beach City Charter and Resolution Number 2836.
City Clerk