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HomeMy WebLinkAboutRDA Min 1990-10-31 10-31-90 I Seal Beach, California October 31, 1990 The Redevelopment Agency of the City of Seal Beach met in regular adjourned session at 10:00 a.m. with Chairman Forsythe calling the meeting to order with the Salute to the Flag. ROLL CIo. ToT. Present: Chairman Forsythe Agencymembers Hastings, Hunt, Laszlo Agencymember Wilson Absent: Hunt moved, second by Forsythe, to excuse the absence of Agencymember Wilson from this meeting. AYES: NOES: ABSENT: Forsythe, Hastings, Hunt, Laszlo None Wilson Motion carried Also present: Mr. Archibold, Acting city Manager Mr. Barrow, Assistant City Attorney Mr. strausz, Assistant to the city Attorney Mr. Whittenberg, Director of Development Services Mrs. Yeo, Secretary I REDEVELOPMENT LAW WORKSHOP Mr. Strausz commenced an overview of various aspects of redevelopment and redevelopment law. He noted a Constitutional Amendment approved in the early 1950's provided for redevelopment, subsequent to which the legislature enacted a number of statutory provisions to effectuate that Amendment. Mr. Strausz explained that an economic motivation for redevelopment agencies is that in a redevelopment project area, having specifically defined boundaries, any taxes levied by a taxing agency on incremental increases of assessed evaluation of taxable property in the project area following the date of adoption of a redevelopment plan for the project area are to be allocated to the redevelopment agency. He noted that in this State there is presently a one percent limit on the total aggregate amount of tax that can be levied on taxable real property, and cited as an example that prior to adoption of a redevelopment plan the taxes generated from certain property would be allocated to and divided between the various taxing entities, from and after the date of adoption of a redevelopment plan for the same property however, it is likely that the assessed value of the property will increase, reassessment taking place as a result of sale of the property, new construction or remodeling, or the inflation factor of not greater than two percent per year, therefore the taxes resulting from the increased value, over and above the combined tax rate of all of the taxing entities, is then allocated to the redevelopment agency where the project area exists. That being the general basis of how taxes are allocated to a redevelopment agency, he said there are also certain exceptions, recent amendments to redevelopment law provide that taxing agencies, when a redevelopment plan is adopted, can elect to keep the taxes that are generated from the inflationary factor, which is consistent with the theory of redevelopment, where the reason for allocating taxes to an agency is to service debt that is incurred by the agency to redevelop the project area thus making the property more valuable by doing so, a second exception as a result of I 10-31-90 amendment to redevelopment law relates to general obligation bonded indebtedness approved after 1989, where the taxes produced by the added levy to service the bonds in redevelopment project areas would be specifically for that purpose rather than accruing to the agency, which is not a significant consequence to an agency where the typical tax I' rate in a project area may be 1.1 percent, the .1 percent being an exception under the Gann limit for voter approved tax override. Mr. strausz explained that typically the largest property tax leviers in any jurisdiction are the county and the school district, often up to half of the one percent, then follow other agencies with property tax levying powers, that the tax revenues allocated to redevelopment that are derived from the levy on the county or school district, are a reduction of taxes to their general funds, yet under state law school districts are reimbursed an amount equal to what is allocated to redevelopment. He offered that he did not necessarily agree with comments often made that redevelopment takes monies away from the county and other special districts, and in his experience was not aware of any instance where a county had agreed to an arrangement to provide a city with part of their general fund, however there have been occasions where cities have shared their general fund with a local school district. Mr. strausz stated that a taxing agency would continue to realize the taxe~ received prior to a redevelopment project area being implemented, that the percentage of property tax would also continue to come to the city from the county, however the tax increment flow to the agency as a result of redevelopment activities in the area that cause property values to rise and when the term of a redevelopment plan expires, the tax revenues to the taxing I agencies will have increased significantly based upon the increased property values. with regard to what tax increment funds can be used for in the case where a property is improved by private funds, Mr. strausz advised that redevelopment agencies have the power to pay for land and associated costs for public improvements that are located outside a project area provided the improvements are deemed to benefit the project area and the city does not have the resources to pay for such improvements, an example could be an arterial street that bisects a project area that would be in need of widening to facilitate the flow of traffic yet the widening would occur outside the project area, in that case redevelopment law would allow the agency to pay for the cost of the widening provided that the widening would facilitate ingress and egress to the project area and that the city did not have sufficient funds to cover the costs thereof, and noted the same test for use of tax increment would apply inside the project area. Again with regard to payment of the debt service on bonds, Mr. strausz explained it is customary that before bonds of a redevelopment agency are issued, that tax increment revenues be one hundred twenty-five percent or a percentage thereabouts of the annual debt service requirements that are projected at that time, which is an assurance to the ultimate bond holder that 1- there is adequate money to repay the bond debt. He again noted that the sole purpose of the taxes allocated to a redevelopment agency is to pay the debt of the agency, technically a redevelopment agency is not entitled to tax increment unless it has incurred debt for redevelopment of a project area, pointing out also that incurring debt is broadly defined and could include issuance of bonds, public improvements in connection with a project, etc., that redevelopment can be utilized as an incentive to a developer however that is not the essence of redevelopment. Mr. strausz explained that eminent domain is within the powers 10-31-90 I of a redevelopment agency and in some cases that power has been exercised to acquire property and in turn sell the property to a developer at below market value or at a lesser cost than it was acquired, or even at no cost if the developer were to agree to construct a project that the city desired to be placed on the particular property, which in turn triggers reassessment, increased value of the property, thus greater tax revenues, yet there is no provision of redevelopment law that exempts a developer from the normal procedural process, including a development agreement where certain benefits to the city are all negotiable. with regard a claim that cities are enacting special districts to cover the cost of services paid from general funds as a result of redevelopment agencies, Mr. strausz offered his opinion that rather than redevelopment being the cause of assessment districts, the reason is the result of Proposition 13 which does not allow a city to raise taxes to cover the increased cost of providing services and maintenance, and confirmed that tax increment can not be used to supplement a general fund to cover the cost of services such as police and fire, yet a subsidy could be realized as a result of improvements that may have otherwise been funded through a public works budget as an example. He confirmed that there is provision in redevelopment law that authorizes a city to be reimbursed for staff and administrative costs associated with the redevelopment agency. Councilmember Hastings requested that the Development Services Department staff hours be computed for time spent on the Mola development project over the past four years, as well as the legal fees associated with that project, in order to determine the amount that has been charged to the Redevelopment Agency. Staff explained that the computations requested would be difficult to determine as they would relate only to the portion of the Hellman site that lies within the redevelopment project area, however offered that it may be possible to do an estimate. Mr. strausz again explained that redevelopment law does not permit tax increment to be used for normal maintenance, that the use of tax increment is allowed for capital improvements or extraordinary maintenance, an example of which would be sand replacement on the beach, a significant reconstruction or unusual repair of a public improvement, the previous example of widening of a public street, however can not be used for private streets, or maintenance of public or private streets. He stated that since the time Seal Beach established its Redevelopment Agency redevelopment law has changed with respect to the necessary elements that are to exist in a redevelopment project area, the law provides that the area must be blighted, which is a broadly defined term under redevelopment law and includes anything from parcels that have been subdivided in unusual ways which prevent large development to lack of public improvements, all to the extent that private enterprise acting alone could not provide redevelopment without the agency, and should such an area exist a further requirement is now that at least eighty percent of the parcels within the project area either are or have at one time been developed for urban use, and explained the reason for the eighty percent urbanization requirement is that a number of agencies included undeveloped, vacant land in their project areas, sometimes appropriately and sometimes not, where, upon improvement of that land all of the taxes then flowed to the redevelopment agency. Mr. Strausz suggested that assuming there is a blighted, urbanized proposed redevelopment project area, the process for forming a redevelopment project area takes between nine I I 10-31-90 to twelve months and during that time the Council designates a survey area for study as to its feasibility for selection as a project area, the planning commission is then charged with the responsibility of selecting the appropriate project area in cooperation with the Redevelopment Agency who typically then approves the selected location, the Agency I' then prepares a preliminary report setting forth the conditions in the area, the blight conditions, urbanization requirements, a statement as to the type of improvements proposed to alleviate the conditions of blight, and statistical data with regard to any projected loss to the taxing agencies. He added that it is then customary to prepare a draft redevelopment plan for the area, the report and plan is then transmitted to the taxing agencies which commences the fiscal review process, the taxing agencies empowered to form a fiscal review committee and the redevelopment agency is required to meet with that committee and disclose all proposed development for the project area, building permit data, and any other data that may assist in evaluating any burden or detriment to the taxing agencies, the fiscal review committee then charged with the responsibility of preparing a report describing the financial burden or detriment to the redevelopment agency, and based upon that report and possibly private discussions with the taxing agencies, the redevelopment agency may decide to enter into agreements with the taxing agencies for reimbursement of tax increment revenue that would otherwise be lost. He reported that such pass-through agreements came into existence only after the Jarvis/Gann Initiative in 1978 when the taxing agencies realized they would no longer have the ability to raise tax rates to compensate for the revenue loss to redevelopment agencies, and the greatest challenge I to a new redevelopment project area would be from the taxing agencies demanding a pass-through or potential litigation. He explained that the fiscal review process concludes at approximately the same time as the notice of City Council and Redevelopment Agency public hearing is required, the notice to be published once a week for four successive weeks and mailed to every property owner in the project area by certified mail with return receipt, the Agency required to make all documents relating to the redevelopment process available to all interested persons, and following the public hearing, assuming the Council and Agency approve the redevelopment plan, the final step is adoption of the plan by the ordinance of the City Council, the ordinance freezing the property values at the existing level and subsequent increases would then flow to the redevelopment agency. He noted that during the process an environmental impact report is required since adoption of a redevelopment plan is considered a project under CEQA. with regard to obligations in the case of a pass-through agreement with a taxing agency, Mr. strausz explained that the Agency is not required to give any amount to a taxing agency, that decision being totally at the discretion of the Redevelopment Agency, yet the reason pass-throughs are sometimes agreed to is because it may be a small special I district with limited revenues and prohibited from increasing their tax rate due to Proposition 13, this being . a judgment as a result of the fiscal review process, also a finding that the Council must make in adopting a redevelopment plan is that there is no financial burden or detriment to the taxing agencies, however a pass-through agreement may alleviate such burden or detriment, and if there are no pass-through agreements it is ass1J.med the Redevelopment Agency concluded during the fiscal review process that there is no financial burden or detriment from redevelopment. Mr. strausz confirmed that a city is not 10-31-90 I responsible for payment of a bonded indebtedness if the income from a development is not sufficient or a project is not completed, etc., that a statute exists that provides that a City is not responsible, that provision of law required to be cited in each bond, thus the bond holders sole source of repayment of the bonds is tax increment, also the Agency has the ~ption to purchase insurance to quarantee repayment of the bonds. Staff advised that this City has never loaned the Redevelopment Agency money for the purpose of paying the bonded indebtedness, however there have been loans for other purposes, and it was noted that the first obligation of tax increment is to pay the bonded indebtedness, it was also recalled that of the 1985 or 1986 Agency bond issue a substantial amount of the proceeds were used to repay advances made by the city to the Agency. A question was posed as to whether Redevelopment Agency monies could be used to payoff the loan on the commercial portion of the Zoeter site, that parcel qualifying under provisions similar to those used for the adjacent preschools, and if that were so, could the lease payments realized from the commercial property then be placed in the General Fund. Mr. Strausz responded that there would be nothing to preclude the Agency from acquiring that property, noted that with regard to the preschools there is a specific provision of redevelopment law that authorizes the acquisition of property under those specific circumstances, and offered to review the provisions of the law as to acquisition of commercial property in this particular case. Also in response to Agency members, Mr. Strausz said he believed that the bonds issued in the mid-70's were a thirty year term, those issued in the mid-80's were most likely between a twenty to thirty year term, also that the Trailer Park, as an example, is within a project area which will remain as such until a point in the future when the Agency is no longer receiving tax increment from that area, also that once the bonds are fully paid and no further indebtedness is incurred the increment would revert to the taxing agencies. He explained that the significance of an area being within the redevelopment agency is that the taxes levied on that property are paid to the redevelopment agency to the extent of the increase above the assessed valuation at the time of formation of the project, that the effect of taking property out of a project area would be reduction of tax revenues to the agency, and that from a property owners standpoint there is no difference whether the property is or is not in the redevelopment agency. Councilmember Hastings asked that an item regarding the Department of Water and Power property be placed on the next Agency agenda for discussion of the advantages and disadvantages of removing that property from the Redevelopment Agency. I ADJOURNMENT With unanimous consent of the Agency, Chairman Forsythe adjourned the meeting at 11:16 a.m. I ~(4 ?),AA~~ a1rman I I '/ -~ 7~'ci;'TI,~. ~VT/ '{..;'\ Ii ~ "'9- f '" 0. ~... 10. J ~ ~ 1907 /,-'" ~o . ...... f'I:;''' .......... +T . "\I\\"...~~;S'