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HomeMy WebLinkAbout2015-09-08 - AGENDA REPORTS - EXCESS BOND PROCEEDS (2)Agenda Item: 7 CITY OF SANTA CLARITA AGENDA REPORT CONSENT CALENDAR fill APPROVAL: DATE: September 8, 2015 SUBJECT: EXCESS BOND PROCEEDS EXPENDITURE AGREEMENT BETWEEN THE CITY AND THE REDEVELOPMENT SUCCESSOR AGENCY DEPARTMENT: Administrative Services PRESENTER: Carmen Magana RECOMMENDED ACTION City Council and Successor Agency approve the Excess Bond Proceeds Expenditure Agreement (Agreement) transferring $6,104,268 in "excess bond proceeds" from the Successor Agency to the City and requiring the City to utilize the "excess bond proceeds" to reimburse other funds currently allocated to the long -completed Newhall Library. BACKGROUND On March 18, 2014, the Successor Agency's statutory Oversight Board approved Resolution No. 14-02, committing $6,104,268 in Series 2008 Tax Allocation bond proceeds to the construction of the Old Town Newhall Library project (Project). The Project was long since completed and found to be consistent with the California Redevelopment Law (CRL) and Assembly Bills 26 and 1484 (collectively the Dissolution Act). The Oversight Board accomplished these actions by adopting Oversight Board Resolution No. 14-02 (Exhibit A attached). In March 2011, the former Redevelopment Agency transferred to the City $16,603,312 of Series 2008 Tax Allocation bond proceeds for use in the Project. As of June 28, 2011, $6,104,268 of the total amount transferred to the City had not been contractually obligated to third parties constructing the Project. The City continued to utilize the bond proceeds for the Project notwithstanding the adoption of the first bill in the Dissolution Act on June 28, 2011, so as not to incur delay claims or other contractual claims arising from the Project. �h Page I Packet5;��7 On June 20, 2013, the Successor Agency received a "finding of completion" from the Department of Finance. Health and Safety Code Section 34191.4(c) provides that a successor agency that has been issued a finding of completion by the California Department of Finance may use proceeds of bonds issued before December 3 1, 20 10, for the purposes for which the bonds were sold. Further, the Successor Agency may designate the use of and commit indebtedness obligation proceeds that were derived from bonds issued for redevelopment purposes on or before December 3 1, 2010, and that remain available after the satisfaction of enforceable obligations that have been approved on a Recognized Obligation Payment Schedule (ROPS) and that are consistent with the bond obligation covenants. Health and Safety Code Section 34191.4(c) further provides that the expenditure of excess bond proceeds must be listed separately on the ROPS. Resolution 14-02 recognized that, rather than requiring the City to transfer $6,104,268 to the Successor Agency and then have the Successor Agency re -transfer that amount to the City, administrative ease and the reality of the completed Project would simply allow the "ratification" of the prior transfer and the recognition that the Project was a legal and proper use of the excess bond proceeds under the Dissolution Act. The California Department of Finance agreed, approving Resolution 14-02, but recognizing that a secondary review of the former Redevelopment Agency's and current Successor Agency's finances were being undertaken by the State Controller's Office (SCO). The Controller's Office had issued a preliminary finding that the $6,104,268 that had been uncommitted on June 28, 2011, had to be transferred back to the Successor Agency. In approving Resolution 14-02, the Department of Finance stated: "In the event the SCO makes this preliminary determination final; the Agency will execute an Excess Bond Proceeds Expenditure Agreement with the City. The expenditure of these bondproceeds should then be placed on afuture ROPS." (A copy of the Department of Finance letter approving Resolution 14-02 and giving this direction is attached hereto as Exhibit B.) On February 24, 2015, the SCO did issue a final determination that the $6,104,268 had to be returned to the Successor Agency. Therefore, in order to complete the transfer of the funds to the City so that the City's Finance Division can close the books on the Project, the Agreement (Exhibit C attached) is required. ALTERNATIVE ACTION Other actions as determined by the City Council. FISCAL IMPACT There is no fiscal impact as a result of this item. The $6,104,268 in bond funds has already been spent on the completion of the Library Project. This is simply an administrative step required by the manner in which the State Controller's Office has interpreted the Dissolution Acts and by the Department of Finance's previous instructions to the City on implementing that Controller's Office interpretation. Page 2 Packet ATTACHMENTS Exhibit A - Oversight Board Resolution 14-02 Exhibit B - Department of Finance Letter 5-1-14 Exhibit C - Excess Bond Proceeds Expenditure Agreement F�-� Page 3 1 Packet Pg. 38 EXHIBIT A RESOLUTION NO. 14-02 RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO THE CITY OF SANTA CLARITA REDEVELOPMENT AGENCY RATIFYING EXPENDITURE OF BOND PROCEEDS AND DETERMINING A PORTION AS DETERMINED BY THE STATE CONTROLLERS OFFICE AS "EXCESS BOND PROCEEDS" WHEREAS, the Redevelopment Dissolution Law (ABIx 26, enacted June 28, 2011, as amended by AB 1484, enacted June 26, 2012) provided for creation of the Successor Agency ("Successor Agency") to the former City of Santa Clarita Redevelopment Agency ("RDA") and required the Successor Agency to expeditiously wind -down the affairs of the former RDA as directed by the oversight board created pursuant to Section 34179 of the California Health and Safety Code ("Oversight Board"); and WHEREAS, following the successful completion of certain statutory prerequisites, the Successor Agency received a Finding of Completion from the State of California Department of Finance by letter dated June 20, 2013; and WHEREAS, Health and Safety Code Section 34191.4(c) provides that once the finding of completion has been issued by the Department of Finance, the successor agency is authorized to use bond proceeds for the purposes for which the bonds were sold; and WHEREAS, the Successor Agency may designate the use of and commit indebtedness obligation proceeds that were derived from indebtedness issued for redevelopment purposes on or before December 3 1, 2010, and that remain available after the satisfaction of enforceable obligations that have been approved on a Recognized Obligation Payment Schedule ("ROPS") and that are consistent with the indebtedness obligation covenants (hereafter, "Excess Bond Proceeds"); and WHEREAS, pursuant to an Indentute of Trust dated as of June 1, 2008', and executed by and between the RDA and The Bank of New York MellonTrust Company, N.A., as successor Trustee ( "Indenture"), the RDA issued Tax Allocation Bonds, Series 2008, in the original principal amount of $29,860,000 ( "Bonds"); and WHEREAS, pursuant to the Indentures the Bonds proceeds were deposited into the Project Funds and are required to be used solely in the manner provided by the California Redevelopment Law to provide financing for certain redevelopment activities within the RDA's former project area; and LA #4821-2721-2825 v1 I Packet �g7.397] WHEREAS, The "Financing Plan" section of the Indenture provides that "Proceeds from the sale of the Bonds will be used to fund certain redevelopment projects within the Newhall Redevelopment Project Area (the "Project Area");" and WHEREAS, prior to the adoption of the Redevelopment Dissolution Law, the RD,k had transferred to the City of Santa Clarita ("City") a portion of the redevelopment bond proceeds, totalling $16,603,312, for use in completin g the construction of and outfitting of a new public library in the former redevelopment project area; and WHEREAS, the bond proceeds were used for the library project and that library is now open to the public; and WHEREAS, on February 26, 2014, the California State Controller's Office completed the field audit of the Successor Agency finances required by Sections 34167.5 and 34178.8 of the California Health & Safety Code and made a preliminary finding that the $6,104,268 in bond proceeds were uncommitted as of June 28, 2011 and thereafter expended on the library project constitute funds available for "Clawback" under the Redevelopment Dissolution Law; and WHEREAS, the State Controller's Office could order a "clawbaX' of less or more than the currently -anticipated $6,104,268; and WHERAS, if the "olawback" that the State Controller's Office has preliminarily found to be necessary were to take place, it would require the City to transfer the "clawed back" amount to the Successor Agency, at which time that amount would constitute Excess Bond Proceeds; and WHEREAS, the Oversight Board, having received a report on the use of the costs related to the construction and related outfitting of the public library in the former project area of the RDA can make a determination that such use is consistent with the Indenture and can approve the use as a proper use of Excess Bond Proceeds. NOW, THEREFORE, BE IT HEREBY RESOLVED by the Oversight Board of the Successor Agency to the City of Santa Clarita Redevelopment Agency as follows: 1 Based on the foregoing recitals, the Oversight Board hereby finds that the use of the entire $16,603,312 in bond proceeds transferred to the City by the former RDA and spent by the City on the library project in the RDA's former project area is a valid use of the bond proceeds. 2. The Oversight Board hereby finds that should the State Controller's Office determine an amount deemed to be "clawed back," this amount would constitute "Excess Bond Proceeds" for purposes of Health and Safety Code Section 34191.4(c). LA #4821-2721-2825 v1 2 Packet Pg. 40 3. The Oversight Board approves and ratifies the use of the entire $16,603,312 in bond proceeds, or such lesser portion as is "clawed back7 E by the State Controller's Office, as a proper use of "Excess Bond Proceeds" under the Redevelopment Dissolution Law. 4. Should the State Controller's Office issue a final finding that the an amount of non -housing bond proceeds related to the Old Town Newhall Library must be "clawed back" or otherwise returned to the Successor Agency, the Oversight Board will authorize no -use of those funds except X W for the execution of an Agreement Regarding Expenditure of Excess Bond U) Proceeds between the Successor Agency and the City, which agreement shall authorize only the reimbursement of the City for library project costs 2 for which the funds were previously expended. 0 5. The staff of the Successor Agency is hereby directed to advise the State Controller's Office and California Department of Finance of these determinations and to take such other and further actions as are deemed X necessary to carry out the purposes and intent of this Resolution. L.0 00 M M V- LA #4821-2721-2825 vI IPacket 01 PASSED, APPROVED, AND ADOPTED this 18th day of March 2014 Ken Striplin Chairman ATTEST: evuhalk. Te�aea'SuN6� Oversight Board Meeting Clerk STATE OF CALIFORNIA COUNTY OF LOS ANGELES )ss. CITY OF SANTA CLARITA 1, Terasa Sullivan, Oversight Board Meeting Clerk, do hereby certify that the foregoing Resolution was duly adopted by the, Oversight Board of the Successor Agency to the Former Redevelopment Agency of the City of Santa Clarita at a regular meeting thereof, held on the 18th day of March 2014, by the fol -lowing vote: AYES!CHALLINOR, COLEAL, DORTCH, HERNANDEZ, KOEGLE, STRIPLINt NOES: NONE ABSENT: NONE LA #4821-2721-2825 v1 ) rVI Ad 1A OversigYit BdaYd Meeting Clerk 4 Q E Q SD 0 (L 0 Q 0 x co N 9 0 0 0 V E r M SWART.i 0 M T 0 x W E M I Packet Pg. 42 1 A a. W DEPARTMENT OF F I N A N C E May 1, 2014 EXHIBIT B EDMUND G. BROWN JR. - GOVERNOR 9 1 S L STREET 0 SACRAMENTO CA 0 95e 1 4-3706 E Www.Di3r.VA.G0V Ms. Armine Chaparyan, Redevelopment Manager City of Santa Clarita 23920 Valencia Boulevard, Suite 300 Santa Clarita, CA 91355 Dear Ms. Chaparyan: Subject: Approval of Oversight Board Action The City of Santa Clarita Successor Agency (Agency) notified the California Department of Finance (Finance) of its March 18, 2014 Oversight Board (OB) resolution on March 19, 2014. Pursuant to Health and Safety Code (HSC) section 34179 (h), Finance has completed its review of the OB action. Based on our review and application of the law, OB Resolution No. 14-02 is approved. It is our understanding; the former redevelopment agency transferred $16,603,312 of 2008 Tax Allocation bond proceeds to the City of Santa Clarita (City) for completion of the Old Town Newhall Library project. On February 26, 2014, the SCO made a preliminary finding that $6,104,268 of the bond proceeds that was expended on the Library project were uncommitted as of June 28, 2011 and constitute funds available for claw -back. The Agency received a Finding of Completion on June 20, 2013. In the event, the SCO makes this preliminary determination final; the Agency will execute an Excess Bond Proceeds Expenditure Agreement with the City. The expenditure of these bond proceeds should then be placed on a future ROPS. This is our determination with respect to the OB action taken. Please direct inquiries to Kylle Oltmann, Supervisor or Hugo Lopez, Lead Analyst at (916) 445-1546. Sincerely, JUSTYN HOWARD Assistant Program Budget Manager cc: on the following page Ms. Carmen Magana, Finance Manager, City of Santa Clarita Ms. Kristina Burns, Manager, Department of Auditor -Controller, Los Angeles County California State Controller's Office I Packet Pg. 43 1 EXHIBIT C EXCESS BOND PROCEEDS EXPENDITURE AGREEMENT This Agreement Regarding Expenditure of Excess Bond Proceeds (this "Agreement") is entered into effective as of September _, 2015 ("Effective Date") by and between the Successor Agency to the Redevelopment Agency of the City of Santa Clarita ("Successor Agency") and the City of Santa Clarita, a general law city and municipal corporation (IlcitY19). The Successor Agency and the City are hereinafter collectively referred to as the "Parties." I RECITALS A. Pursuant to authority granted under Community Redevelopment Law (California Health and Safety Code Section 33000 et seq.) ("CRIL"), the former Redevelopment Agency of the City of Santa Clarita ("Redevelopment Agency") had responsibility to implement the Redevelopment Plan for the Newhall Redevelopment Project (the "Project Area"), originally approved by Ordinance No. 89.27 enacted by the City Council of the City of Santa Clarita (the "City Council") on November 28, 1989 and subsequently amended. B. By operation of law, the City assumed the role of Successor Agency to the Redevelopment Agency commencing upon dissolution of the Redevelopment Agency on February 1, 2012 pursuant to Assembly Bill xl 26 ("AB 26"). C. On June 20, 2013 the Successor Agency received its finding of completion from the Department of Finance. D. Health and Safety Code Section 34191.4(c) provides that a successor agency that has been issued a finding of completion by the California Department of Finance may use proceeds of bonds issued before December 31, 2010 for the purposes for which the bonds were sold. Further, the Successor Agency may designate the use of and commit indebtedness obligation proceeds that were derived from bonds issued for redevelopment purposes on or before December 3 1, 2010, and that remain available after the satisfaction of enforceable obligations that have been approved on a Recognized Obligation Payment Schedule ("ROPS") and that are consistent with the bond obligation covenants ("Excess Bond Proceeds"). E. Health and Safety Code Section 34191.4(c) further provides that the expenditure of Excess Bond Proceeds must be listed separately on the ROPS. F. On March 18, 2014, the Successor Agency's statutory Oversight Board approved Resolution No. 14-02, committing the amount of $6,104,268 in Series 2008 Tax Allocation bond proceeds to the construction of the Old. Town Newhall Library project ("Project"), notwithstanding the completion of that Project, as the Project was found to be consistent with the CRI, and AB 26 and Assembly Bill 1484 (collectively with AB 26 the "Dissolution Act"). G. The amount of $16,603,312 of the Series 2008 Tax Allocation bond proceeds had, in March of 2011, been transferred from the Redevelopment Agency to the City for use in the Project; as of June 28, 2011, the amount of $6,104,268 had not been contractually obligated to third parties. The City continued to utilize the bond proceeds for the Project notwithstanding the I Packet Pg. 44 1 adoption of AB 26 so as not to incur delay claims or other contractual claims arising from the Project. H. On February 26, 2014 the California State Controller's Office ("SCO") made a preliminary finding that the $6,104,268 of the bond proceeds that was uncommitted as of June 28, 2011 but that was used for the Project constituted funds available for "claw -back" under the Dissolution Act. 1. On May 1, 2014, the California Department of Finance approved Oversight Board Resolution No. 14-02. In approving the resolution, the Department of Finance stated: "In the event the SCO makes this preliminaty determinationfinal; the Agency will execute an Excess Bond Proceeds Expenditure Agreement with the City. The expenditure of these bondproceeds should then be placed on a future R OPS. " J. On February 24, 2015, the SCO issued a final determination that the $6,104,268, having been uncommitted on June 28, 2011, must be returned to the Successor Agency for disposition pursuant to the Dissolution Act. K. Upon return of the $6,104,268 from the City to the Successor Agency, that amount became Excess Bond Proceeds ("Series 2008 Excess Bond Proceeds") pursuant to Health and Safety Code Section 34191.4(c) and must be disposed of by the Successor Agency. L. Based upon Oversight Board Resolution No. 14-02 and the Department of Finance's letter of May 1, 2014, the Parties are obligated to enter into this Agreement to transfer the Series 2008 Excess Bond Proceeds back to the City, at which time the City may close its financial books on the Project. M. The execution of this Agreement was approved by the City Council acting in its capacity as the legislative body of the City and in its capacity as the governing board of the Successor Agency on September 8, 2015. NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises herein contained, the Parties hereby agree as follows. I . Incorporation of Recitals. The Parties acknowledge the truth of the foregoing Recitals which by this reference are incorporated into this Agreement. 2. Tenn. The term of this Agreement shall commence on the Effective Date, and shall continue in effect until the date that all Series 2008 Excess Bond Proceeds are expended in accordance with the requirements of this Agreement. 3. Use of Series 2008 Excess Bond Proceeds. The City agrees that it shall use the Series 2008 Excess Bond Proceeds solely for the Project. 4. Transfer of Excess Bond Proceeds. Within 120 days of the execution of this Agreement, subject to DOF approval of the inclusion of this Agreement on the ROPS 15-16A, the Successor 2 I Packet Pg. 45 1 Agency shall transfer the remaining Series 2008 Excess Bond Proceeds to the City, and the City shall utilize such fimds to reimburse those accounts from which the City drew the amount of $6,104,268 to pay the Successor Agency pursuant to the State Controller's Office's February 24, 2015 demand for those funds. 5. Project Approvals; Environmental Review. This Agreement is not intended to limit in any manner the discretion of City in connection with the issuance of approvals and entitlements for the projects described in this Agreement, including without limitation, the undertaking and completion of any required environmental review pursuant to CEQA and NEPA, as applicable, and the review and approval of plans and specifications. 6. Severability. If any term, provision, covenant, or condition set forth in this Agreement is held by the final judgment of a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions, covenants, and conditions shall continue in full force and effect to the extent that the basic intent of the Parties as expressed herein can be accomplished. In addition, the Parties shall cooperate in good faith in an effort to amend or modify this Agreement in a manner such that the purpose of any invalidated or voided provision, covenant, or condition can be accomplished to the maximum extent legally permissible. 7. No Third -Party Beneficiaries; Assignments. Nothing in this Agreement is intended to create any third -party beneficiaries to this Agreement, and no person or entity other than the Successor Agency and the County, and the permitted successors and assigns of either of them, shall be authorized to enforce the provisions of this Agreement. 8. Further Assurances. Each Party agrees to execute, acknowledge and deliver all additional documents and instruments, and to take such other actions as may be reasonably necessary to carry out the intent of the transactions contemplated by this Agreement. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 10. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute but one and the same instrument. 11. Amendments. This Agreement may be modified or amended, in whole or in part, only by an instrument in writing, executed by the Parties. H ***REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK*** 3 I Packet Pg IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first written above. CITY: City of Santa Clarita M Mayor Dated: APPROVED AS TO LEGAL FORM 0 Joseph M. Montes City Attorney S SUCCESSOR AGENCY: Successor Agency to the Redevelopment Agency of the City of Santa Clarita 0 , Executive Director Dated: APPROVED AS TO LEGAL FORM L-2 Joseph M. Montes Successor Agency Counsel I Packet Pg. 47 1