City Council and Redevelopment Agency Meeting: January 17, 2011
Agenda Item: _____
To: Mayor and City Council
Chairperson and Redevelopment Agency
From: Andy Agle, Director of Housing and Economic Development
Carol Swindell, Director of Finance
Subject: Implementing Agreement for City/Agency Cooperation Agreement No. 9267, Amendments to four Agency Promissory Notes, and Amendment to Cooperation Agreement No. 8180
Staff recommends that the City Council (Council):
1) Authorize the City Manager to execute the Implementing Agreement between the City and the Redevelopment Agency for payment of costs associated with Cooperation Agreement No. 9267;
2) Authorize the Mayor to execute Amendments to four Agency Promissory Notes converting them from demand to installment payment notes; and,
3) Authorize the City Manager to execute an Amendment to Cooperation Agreement No. 8180.
Staff recommends that the Redevelopment Agency (Agency):
1) Authorize the Executive Director to execute the Implementing Agreement between the Redevelopment Agency and the City for payment of costs associated with Cooperation Agreement No. 9267;
2) Authorize the Agency Chairperson to execute Amendments to four Agency Promissory Notes converting them from demand to installment payment notes; and,
3) Authorize the Executive Director to execute the Amendment to Cooperation Agreement No. 8180 to restate the obligation to pay for permitted affordable housing activities.
Staff recommends that the Council and Agency authorize the City Manager and Executive Director to enter into an Implementing Agreement which sets forth the schedule of payments from the Agency to the City for the City’s implementation of the projects contained in Agency/City Cooperation Agreement No. 9267. Additionally, it is recommended that the Council and Agency authorize amendments to four existing Agency promissory notes and Cooperation Agreement No. 8180.
On November 17, 2009, the Agency adopted its Five-Year Implementation Plan (the “Plan”) for the period of FY 2009-10 through FY 2013-14, with established goals to support affordable housing, disaster prevention and mitigation, community revitalization, commercial revitalization, and institutional revitalization. To implement the programs and activities (the “Projects”) associated with each goal, the Agency made redevelopment fund allocations totaling approximately $283 million, based on a variety of assumptions regarding growth in tax increment, borrowing costs, timing of borrowing, State grabs of local funds, leveraging opportunities and State law.
On August 10, 2010, the Agency and City authorized the execution of Cooperation Agreement No. 9267 (CCS/RAS) and adopted Resolutions 10519 (CCS) and 527 (RAS) to ensure timely implementation and completion of the Agency’s Five-Year Implementation Plan Projects. Following this meeting, staff moved forward with an analysis to update the inventory of the Agency’s obligations, including review of existing notes and agreements. In doing this study, staff recommends that the Council and Agency convert the four promissory notes previously amended on June 21, 2005 from demand to installment payment notes as these four notes are to repay the City, who funded improvements to the Agency’s Downtown and Ocean Park Redevelopment projects areas and because the work has since been completed. Additionally, an amendment to Cooperation Agreement No. 8180 is necessary to update the required payments to support affordable housing activities. On January 9, 2003, the Agency committed $30 million of redevelopment funds for the purpose of increasing, preserving and improving affordable housing within the City. The existing Cooperation Agreement provided for a minimum payment of $2 million per year over a fifteen-year period, commencing in fiscal year 2002-03.
Implementing Agreement to Cooperation Agreement No. 9267
In accordance with the Cooperation Agreement, staff has completed analysis regarding the Agency’s payments required to carry out the Agency obligations to the City for the Projects outlined in the adopted resolutions and agreement. The Implementing Agreement identifies the Agency’s obligations to the City, including a schedule of payments from Fiscal Year 2010-11 through 2041-42. Calculation of the payments is based on the costs associated with implementation of the Projects identified in the resolutions, agreement and plan, as well as updated tax increment projections. The first scheduled payment to the City is due on June 29, 2011. The Agency will make its payments to the City on an annual basis in accordance with the terms of the Implementing Agreement.
Downtown and Ocean Park Promissory Notes
The Agency is obligated to reimburse the City for the loans to the Agency’s Downtown and Ocean Park redevelopment project areas. Combined, the four notes equal $27,070,240 at June 30, 2010. The General Fund is due $20,334,950 from the Agency’s Downtown project area and CDBG is due $6,735,290 from the Ocean Park project area. Currently, the notes are structured as demand notes payable upon demand by the City. The recommended amendments will include converting the notes into payable installment notes, with a fixed schedule of payments to the City showing principal and interest due. The Agency will make its first payment on the notes due to the General Fund by June 29, 2011. And to allow the City sufficient time to development a strategy for the program income, the Agency’s first payment on the notes due to CDBG will be on June 29, 2015.
Amendment to Cooperation Agreement No. 8180
Since its effective date, the Agency has paid nearly $5.8 million from 80% non-housing funds towards fulfilling the affordable housing obligation in Cooperation Agreement No. 8180. Given the remaining balance of $24.2 million, coupled with the Agency’s existing obligations for the non-housing funds, an amendment to extend the term through Fiscal Year 2034-35 is recommended to provide the Agency sufficient time to satisfy the terms of Cooperation Agreement No. 8180. The amendment will specify yearly payments, paid with available funds in each fiscal year through 2034-2035, or until the remaining balance is paid in full.
This action does not create any additional projects, nor does it increase the amount of debt owed by the Agency. Any budget action required as a result of this Amendment will be brought forward at a later date.