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HomeMy WebLinkAbout2013-08-27 - AGENDA REPORTS - RDA TRNSFR BONDS $5,056,509 (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT: Agenda Item: 7 CITY OF SANTA CLARIT." AGENDA REPORT City Manager Approval: Item to be presented by: August 27, 2013 APPROVAL OF THE TRANSFER OF $5,056,509 IN HOUSING BOND PROCEEDS FROM THE SUCCESSOR AGENCY TO THE CITY AS THE HOUSING SUCCESSOR Community Development RECOMMENDED ACTION City Council, acting as the Governing Board of the Successor Agency to the former Santa Clarita Redevelopment Agency, approve the Transfer Agreement, and direct Successor Agency staff to include the $5,056,509 in housing bond proceeds as a line item on the next Recognized Obligation Payment Schedule. BACKGROUND The Redevelopment Agency of the City of Santa Clarita (Agency) was created in 1997. As required by California Redevelopment Law (CRL), 20% of the tax increment collected by the Agency was set aside in a Low- and Moderate -Income Housing Fund (LMHF) to "increase, improve, and preserve" the supply of affordable housing for the low- and moderate -income community: The remaining 80% of the tax increment collected (non -housing funds) was available to be used for a variety of allowable economic development and community develop- ment activities benefitting the Newhall Redevelopment Project Area. Agencies were also authorized to issue bonds to fund future activities. In 2008, the Agency issued $8.85 million dollars in housing bonds and $29.8 million dollars in non -housing bonds. On June 29, 2011, the Governor signed into law ABX1 26 (Dissolution Act) and ABX1 27 (Voluntary Alternative Redevelopment Program or VARP). A lawsuit against the two bills was filed by the California Redevelopment Agency, the League of California Cities, and the cities of San Jose and Union City. In December 2011, the Supreme Court struck down ABXI 27, and upheld ABXI 26, thereby dissolving Redevelopment Agencies in California and implementing a APPROWED variety of processes and timelines by which the affairs of the Agency would wind down. As part of the dissolution process, Agencies were required to assign responsibility for various parts of the wind -down process. The City opted to take on the responsibility to wind down all the activities of the Agency by becoming both the Successor Agency and the Housing Successor as shown below. The Successor Agency is a separate legal entity, with the City Council functioning as its governing board. The actions of the Successor Agency are subject to oversight by the seven -member Oversight Board, and is charged with all the wind -down activities of the former Redevelopment Agency. The Housing Successor activities are a function of the City, and it is not a separate legal entity. The Housing Successor is charged with carrying out housing -related activities and functions, as allowed by California Redevelopment Law (CRL). However, ABX1 26 did not give the Housing Successor the authority to use any of the LMHF (tax increment or bond proceeds) except to pay for limited administrative costs as approved by the Successor Agency and Oversight Board. As it was originally written, ABX 1 26 required that all Agency tax increment funds and bond proceeds (housing and non -housing) be deposited into the Redevelopment Obligation Retirement Fund (RORF) to pay back the related bond debt and other Agency obligations, and to pay for a limited amount of the administrative costs of the wind -down. The RORF is managed by the Successor Agency, and all actions related to the RORF are subject to the approval of the Oversight Board. On June 27, 2012, the legislature passed additional legislation, AB 1484, clarifying the processes and procedures of the wind -down. AB 1484 also provided a new process by which the Housing Successor might regain only the housing bond proceeds in order to carry out housing -related activities and functions, as allowed by CRL. There is $5,056,509 in housing bond proceeds in the RORF, currently under the control of the Successor Agency. Upon completion of the steps required by AB 1484, these funds may be transferred from the Successor Agency to the Housing Successor to be used to undertake activities designed to increase, improve, and preserve affordable housing in the City, as allowed by CRL. The three steps required by AB 1484 to regain the housing bond proceeds have been completed as shown below: 1. Due Diligence Review (DDR) of the non -housing funds (non -housing DDR) — COMPLETE. This review was approved by Department of Finance (DOF) on January 11, 2013. 2. Due Diligence Review of the LMHF (housing DDR) — COMPLETE. This review was approved by DOF on March 8, 2013. 3. Finding of Completion — COMPLETE. The City received the Finding of Completion from DOF on June 20, 2013. N The completion of these three steps clears the way for the housing bond proceeds to be trans- ferred from the Successor Agency to the Housing Successor, to be used to carry out housing - related activities and functions as allowed under CRL. In order to complete the transfer of the housing bond proceeds to the Housing Successor, the City Council, acting in their capacity as the Successor Agency, must approve the transfer and direct that the funds be listed on the Recognized Obligation Payment Schedule (ROPS). The ROPS will be brought to the Oversight Board for approval at their next meeting on September 17, 2013. The ROPS will then be sent to DOF for its approval. Once the ROPS is approved by DOF, the housing bond proceeds would be available to the Housing Successor beginning January 1, 2014. These funds are anticipated to be used toward an affordable housing development in the previous Redevelopment Project Area. ALTERNATIVE ACTIONS Actions as determined by the Successor Agency or City Council. FISCAL IMPACT There is no immediate fiscal impact. If the Transfer Agreement and ROPS containing the housing bond proceeds are approved by DOF, $5,056,509 in housing bond proceeds will become available to be used by the Housing Successor for activities allowed under California Redevelop- ment Law. At that time, staff will return to the City Council with recommendations for the related budget and appropriaton actions. ATTACHMENTS Agreement Regarding Transfer of Bond Funds Bond Counsel Opinion Letter 3 AGREEMENT REGARDING EXPENDITURE OF HOUSING BOND PROCEEDS This Agreement Regarding Expenditure of Housing Bond Proceeds (this "Agreement") is entered into effective as of August 27, 2013 ("Effective Date") by and between the Successor Agency to the City of Santa Clarita Redevelopment Agency ("Successor Agency") and the City of Santa Clarita, a general law city and municipal corporation ("City"). The Successor Agency and the City are hereinafter collectively referred to as the "Parties." RECITALS A. Pursuant to authority granted under Community Redevelopment Law (California Health and Safety Code Section 33000 et seq.) ("CRL"), the former City of Santa Clarita Redevelopment Agency ("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. Pursuant to an Indenture of Trust dated as of June 1, 2008, and executed by and between the Redevelopment Agency and The Bank of New York Mellon Trust Company, N.A., as successor Trustee (the "Indenture"), the Agency issued Housing Set -Aside Tax Allocation Bonds, Series 2008, in the original principal amount of $8,850,000 (the "Bonds"). C. Section 3.02(a)(3) of the Indenture required the Trustee to transfer the sum of $8,143,744.51 for deposit into the Series 2008 Account of the Housing Project Fund (the "Housing Bond Fund"), a bond account within the Redevelopment Agency's Low and Moderate Income Housing Fund established by the Redevelopment Agency pursuant to Health and Safety Code Section 33334.3 (the "Low and Moderate Income Housing Fund"). D. Pursuant to Section 5.04of the Indenture, the Housing Bond Fund is deemed to constitute a part of the Low and Moderate Income Housing Fund, and the funds deposited into the Housing Bond Fund of the Low and Moderate Income Housing Fund are required to be used solely in the manner provided by the CRL to provide financing for low and moderate income housing purposes within or benefiting the Project Area, as well as comply with certain covenants in the Indenture relating to the maintenance of the tax -exemption of the interest on the 2008 Bonds (the `Bond Covenants"). E. 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 x 1 26 ("AB 26"). F. Pursuant to Resolution No. 12-3, adopted by the City Council on January 24, 2012, in accordance with Health and Safety Code Section 34176, the City elected to retain the housing assets and housing functions of the former Redevelopment Agency commencing upon dissolution of the Redevelopment Agency. S:\CD\RedeveI opment\Successor Agency\Housing Successor Agency\Low-Mod Bond Proceeds Tmnsfer\Transfer Agreement - fnal.docx G. Health and Safety Code Section 34176(g) provides that the entity assuming the housing functions of a former redevelopment agency (the "Housing Successor") may designate the use of and commit indebtedness obligation proceeds that were derived from indebtedness issued for the purpose of affordable housing prior to January 1, 2011 and that remain available after the satisfaction of enforceable obligations that have been approved on a Recognized Obligation Payment Schedule (`BOPS") and that are consistent with the indebtedness obligation covenants (hereafter, "Available Housing Bond Proceeds"). H. Health and Safety Code Section 34176(g) further provides that the Housing Successor shall provide notice to the successor agency of any designations of use or commitments of Available Housing Bond Proceeds that the Housing Successor wishes to make at least 20 days before the deadline for submission of the ROPS to the oversight board. f. Health and Safety Code Section 34176(g) further provides that the review of such designations and commitments by the successor agency, the oversight board, and the Department of Finance ("Department") shall be limited to a determination that the designations and commitments are consistent with bond covenants and that there are sufficient funds available. J. Health and Safety Code Section 34176 (g) further provides that the expenditure of Available Housing Bond Proceeds must be listed separately on the ROPS. K. Health and Safety Code Section 34176 (d) provides that funds transferred to the Housing Successor shall be held in a separate Low and Moderate Income Housing Asset Fund and used in accordance with applicable housing -related provision of the CRL. L. By letter dated August 12, 2013 (the "Bond Proceeds Transfer, 2013 Letter"), the City acting as the Housing Successor, notified the Successor Agency that the City wished to designate Available Housing Bond Proceeds for the purpose of funding any or all of the following: (i) agreements with nonprofit and for-profit housing developers for the production of affordable housing consistent with the CRL, supporting the satisfaction of the Redevelopment Agency's replacement housing obligations, (ii) purchase and rehabilitation/remodeling of existing multi- unit residential developments that are currently leased at market -rates to make units available to low and moderate -income households, (iii) purchase of real property for construction of affordable housing, and (iv) other projects as defined, referenced or allowed pursuant to the Bond Covenants. M. The Successor Agency has obtained an opinion of bond counsel that the proposed use of Available Housing Bond Proceeds is consistent with the Bond Covenants and the Successor Agency's financial records indicate that there are sufficient funds available for such purposes. N. The Parties desire to enter into this Agreement to reaffirm the agreement of the City, as the Housing Successor, to use the Available Housing Bond Proceeds for the purposes identified in the Bond Proceeds Transfer, 2013 letter consistent with the Bond Covenants and the requirements of the CRL, and to provide for the Successor Agency to transfer the Available Housing Bond Proceeds to the City for deposit into the City's Low and Moderate Income Housing Asset Fund to be used for such purposes. 2 S:\MTedevelopmerASuccessor Agency\Housing Successor Agency\Low-Mod Bond Proceeds Transfer\Transfer Agreement - flnal.docx 5 O. 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 by motion as reflected in the minutes of the meeting on 2013. 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. Term. The term of this Agreement shall commence on the Effective Date, and shall continue in effect until the date that all Available Housing Bond Proceeds are expended in accordance with the requirements of this Agreement. 3. Use of Available Housing Bond Proceeds. The City agrees that it shall use the Available Housing Bond Proceeds solely for the purposes identified in Recital L above or for other low and moderate -income housing purposes consistent with the Bond Covenants and the provisions of the CRL that apply to the expenditure of Low and Moderate Income Housing Funds, The City further agrees that it shall report to the Successor Agency and the Successor Agency's Oversight Board on an annual basis the expenditure of any Available Housing Bond Proceeds until the term of this Agreement has expired pursuant to Section 2. 4. Transfer of Available Housing Bond Proceeds. The Successor Agency shall transfer the remaining balance of Available Housing Bond Proceeds to the City, and the City shall deposit such funds into the County's Low and Moderate Income Housing Asset Fund for City's use in accordance with the terms, conditions, and purposes set forth in this Agreement, and shall be segregated from other funds of the City in such Fund so as to allow the City to account for and trace use of and investment earnings of the Available Housing Bond Proceeds. As of the Effective Date, the amount of Available Housing Bond Proceeds equals the sum of Five Million, Fifty Six Thousand, Five Hundred and Nine Dollars ($5,056,509). 5. Proiect 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 tern, 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. 3 S:\CMIZedevelopireni\Successor Agency\Housing Successor Agency\Low-Mod Bond Proceeds Transfer\Transfer Agreement- final.docx I 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. ***REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK*** 0 S:\CD\Redevelopment\Successor Agency\Housing Successor Agency\Low-Mod Bond Proceeds Tra nsfeffransfer Agreement - rmal.docx 9 IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first written above. CITY: City of Santa Clarita IC Mayor Dated: APPROVED AS TO LEGAL FORM 0 Joseph M. Montes City Attorney Successor Agency Counsel 5 SUCCESSOR AGENCY: Successor Agency to the Redevelopment Agency of the City of Santa Clarita By: Executive Director S:1CDlRerlevelopment\Successor Agcncy\Housing Successor Agency\Low-Mat Bond Proceeds Trans(er\Trans(er Agreement- fmal.docx August 9, 2013 Via E -Mail Armine Chaparyan, Redevelopment Manager Successor Agency to the Former City of Santa Clarita Redevelopment Agency 23920 Valencia Boulevard Santa Clarita California 91355 A NORTON ROSE FULBRIGHT Fulbright & Jaworski LLP 555 South Flower Street Forty -First Floor Los Angeles, California 90071 United States Direct line +1 213 892 9328 maryann.goodkind@nortonrosefulbright.com Tel +1 213 892 9200 Fax +1 213 892 9494 nortonroseful bright. Com Re: $8,850,000 City of Santa Clarita Redevelopment Agency Housing Set -Aside Tax Allocation Bonds, Series 2008 Dear Ms. Chaparyan: I have acted as bond counsel for the City of Santa Clarita and for the former City of Santa Clarita Redevelopment Agency (the "Agency") for the past 20 years and am familiar with the matter referenced herein. Fulbright & Jaworski LLP ("Bond Counsel") acted as bond counsel for the Agency in connection with the issuance and sale of the its 8,850,000 City of Santa Clarita Redevelopment Agency Housing Set -Aside Tax Allocation Bonds, Series 2008 the "2008 Bonds'), pursuant to the Indenture of Trust, dated as of June 1, 2008 (the "Indenture") by and between the Agency and The Bank of New York Mellon Trust Company, N.A. as successor trustee. Pursuant to the Indenture and as confirmed by the Official Statement dated June 3, 2008, the 2008 Bonds were issued to fund low and moderate income housing projects and programs in accordance with the Community Redevelopment Law of the State of California (being Part 1 of Division 24 of the Health and Safety Code of the State of California, as amended) (the "CRL"). You have notified us that the amount of $5,056,509 is on deposit in the Housing Project Fund (the "Available Housing Bond Proceeds") and are considered unspent proceeds of the 2008 Bonds., This letter is to provide guidance to the Successor Agency and the City, as the Housing Successor, as to the qualifying eligible uses of the Available Housing Bond Proceeds. You have requested advice as to the following uses of the Available Housing Bond Proceeds: agreements with nonprofit and for-profit housing developers for the production of affordable housing consistent with the CRL, supporting the satisfaction of the Redevelopment Agency's replacement housing obligations; Fulbright & Jaworski LLP is a limited liability partnership registered under the laws of Texas. 55979755.2 Fulbright & Jaworski LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Dismays Reitz, Inc.), each of which is a separate legal entity, are members of Norton Rose Fulbright Verein, a Swiss Verein. Details of each entity, with certain regulatory information, are at nortonroseful brig ht.com. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. Armine Chaparyan, Redevelopment Manager August 9, 2013 Page 2 purchase and rehabilitation/remodeling of that are currently leased at market -rates to income households; NORTON ROSE FUL6RIGHT existing multi -unit residential developments make units available to low and moderate - purchase of real property for construction of affordable housing, and • other projects as defined, referenced or allowed pursuant to the bond covenants. The above uses are consistent with the purposes for which the 2008 Bonds were issued and are qualifying eligible uses as long as they are consistent with the bond covenants for the 2008 Bonds which is to essentially refrain from taking any action that would make the 2008 Bonds "private activity bonds'.' For example, Available Housing Bond Proceeds may be used for publicly -owned housing, land acquisition (to the extent of a write-down in case on nonpublic housing), low and moderate income housing or rehabilitation assistance (in the form of grants or subsidies), relocation assistance, and public capital improvements relating to the low and moderate income housing projects. The Available Housing Bond Proceeds will always be deemed to be part of the "Housing Project Fund" created by the Indenture until expended in the manner provided by the CRL for the purpose of funding low and moderate income housing projects and programs in accordance with the provisions of section 1.148-6 and 1.150-2 of the Treasury Regulations of the Internal Revenue Service. The $5,056,509 is deemed "unexpended" for purposes of the Internal Revenue Code and is required to be traced as "unspent bond proceeds." Bond proceeds are considered "Proceeds" of an issue and amounts cease to be allocated to an issue as Proceeds only when those amounts (i) are allocated to a qualifying cost, (ii) are allocated to transferred proceeds of another issue of obligations (refunding bonds); (iii) are used to redeem bonds, or (iv) cease to be allocated to that issue at retirement of the issue. Appropriate tracing and replenishment, if necessary, of deemed "unexpended" bond proceeds is vital in order to maintain the tax-exempt status of the interest on the 2008 Bonds under section 103(a) of the Internal Revenue Code, and to maintain the covenant to take all actions necessary to not cause any of the bonds to become a "private activity bond" within the meaning of section 141 of the Internal Revenue Code. The transfer of the Available Housing Bond Proceeds to the City is appropriate and consistent with the Indenture and the bond covenants therein since the City, as Housing Successor, is assuming the obligations and responsibilities of the issuer under Indenture and related documents. For example, all qualifying projects financed or to be financed with proceeds of the 2008 Bonds are subject to the bond covenants, and the City, as Housing Successor, has inherited the responsibility for maintaining such covenants and protecting bond owner ' A tax-exempt bond issue will comprise private activity bonds if one or more of the following tests is satisfied: (i) both (a) more than 10% of the proceeds of that issue are to be subject to private business use, and (b) more than 10% of the debt service payments on the issue are to be made out of private payments or are secured by any interest in property subject to private business use; or (ii) both (a) more than 5% of the proceeds of that issue are to be subject to private business use, and (b) more than 5% of the debt service payments on the issue are to be made out of private payments or are secured by any interest in property subject to private business use, where only private business use that is unrelated to or disproportionate to the principal governmental use of the property is considered; or (iii) more than 5% of the proceeds of the issue are to be provided to nongovernmental persons under arrangements that, for federal income tax purposes, are treated as loans ("private loans"), 559797552 ID Armine Chaparyan, Redevelopment Manager NORTON ROSE FULBRIGHT August 9, 2013 Page 3 expectations and rights, including the duty to monitor the use or transfer of such bond -financed projects or programs. If you have any questions regarding the matters relating to the use of unspent proceeds of the 2008 Bonds, please do not hesitate to contact the undersigned. Very truly yours, �GY�Lt,� Maryann Go dkind 55979755.2