City of Culver City, California
Redevelopment Agency Agenda Item Report
RECOMMENDATION:
Staff recommends the Culver City Redevelopment Agency (“The Agency”): (1)
approve the attached Resolution 2009 A___ making a finding pursuant to Health and
Safety Code Section 33685 in connection with the 2008-2009 payment to the
Educational Revenue Augmentation Fund required by State Law; and, (2) approve a
related budget amendment.
BACKGROUND:
Last Fall, the Governor signed into law AB 1389 as part of the resolution of the
California budget crisis. Assembly Bill 1389 required redevelopment agencies to
make a payment from their tax increment income to the Educational Revenue
Augmentation Fund (commonly known as “ERAF”). The State has established
ERAF as a mechanism to meet its obligation towards school funding by
appropriating tax increment funds intended for redevelopment agencies. Statewide,
the amount of money to be shifted to ERAF this year is $350 million. The Agency’s
share of this total is $2,251,463. Payment must be made by May 10, 2009.
Pursuant to Section 33685(b) of the California Health and Safety Code, an agency
may borrow up to fifty percent (50%) of its annual revenue to its Low- and Moderate-
Income Housing Set Aside Fund to make the payment required by AB 1389 if it finds
that there are insufficient funds to meet the requirements of subdivision (a) of Health
and Safety Code Section 33685 (i.e. the payment to the ERAF) from the Agency’s
general tax increment revenues.
Meeting Date: 05/04/09 Item Number: A-1
AGENDA ITEM: (1) Adoption of a Resolution Making a Finding Pursuant to Health
and Safety Code Section 33685 in Connection with the 2008-2009 Payment to the
Educational Revenue Augmentation Fund required by State Law and (2) Approval
of a Related Budget Amendment.
Contact Person/Dept.: John Fisanotti Phone Number: (310) 253-5767
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [X] Attachments: [X]
Public Notification: Master E-Mail Notification List (04/29/09)
Department Approval:
Sol Blumenfeld (04/23/09)
Executive Director Approval:
Jerry B. Fulwood (04/29/09)
Chief Financial Officer Approval:
Jeff Muir (04/29/09)
City of Culver City, California
Redevelopment Agency Agenda Item Report
Section 33685 (b) reads:
(1) Notwithstanding any other provision of law, to make the full allocation
required by this section, an agency may borrow up to 50 percent of the
amount required to be allocated to the Low and Moderate Income Housing
Fund, pursuant to Sections 33334.2, 33334.3, and 33334.6, unless, in a given
fiscal year, executed contracts exist that would be impaired if the agency
reduced the amount allocated to the Low and Moderate Income Housing
Fund pursuant to the authority of this subdivision.
(2) As a condition of borrowing pursuant to this subdivision, an agency shall
make a finding that there are insufficient other moneys to meet the
requirements of subdivision (a). Funds borrowed pursuant to this subdivision
shall be repaid in full within 10 years following the date on which moneys are
remitted to the county auditor for deposit in the county Educational Revenue
Augmentation Fund pursuant to subdivision (a).
The California Redevelopment Association and the City of Moreno Valley
(collectively the Plaintiffs) filed suit in Sacramento County Superior Court against the
State of California Department of Finance and the County Auditors on behalf of all
redevelopment agencies in California in regards to this year’s ERAF payment. It is
Plaintiffs’ contention that the ERAF payment violates Article XVI, Section 16 of the
California Constitution on a variety of counts. The scheduled payment to ERAF by
May 10, 2009 may not be needed if the court rules in favor of the Plaintiffs before
May 10, 2009, or if the Plaintiffs seek and are granted an injunction to stay the
payments until the court can resolve the matter.
Since this matter may not be conclusively resolved prior to the May 10, 2009
deadline, the California Redevelopment Association recommends redevelopment
agencies pay the required ERAF payment under protest in order to avoid the
onerous penalties for non-payment. In order to maximize interest earnings and
allow sufficient time for the lawsuit to potentially be resolved, it is staff’s intention to
wire the Agency’s ERAF payment on the last possible date (i.e., Friday, May 8,
2009).
DISCUSSION:
Staff has examined the Agency’s financial position and concludes that the Agency
can meet its pending ERAF payment obligation if it borrows the payment from the
Agency’s Low- and Moderate-Income Housing Set Aside Fund. As previously
stated, the Agency may borrow up to fifty percent (50%) of its annual revenue to its
Low- and Moderate-Income Housing Set Aside Fund to make the payment required
by AB 1389. The projected Low - and Moderate-Income Housing Set Aside
Revenue for FY 2008-09 is $6,892,000. Consequently, the Agency may borrow up
to $3,446,000 to pay the ERAF obligation. Staff is, therefore, recommending the City of Culver City, California
Redevelopment Agency Agenda Item Report
Agency borrow the entire required amount of $2,251,463 from the Low- and
Moderate-Income Housing Set Aside Fund. In order to do so, the Agency must find
that there are insufficient other funds available to make the required payment. Given
the current state of the Agency’s finances, staff recommends the necessary finding
can be made.
The recommended action will allow the Agency to make a timely ERAF payment
should the pending court case not be resolved prior to May 10, 2009. To reserve the
Agency’s rights to recover funds should the lawsuit be conclusively resolved in favor
of plaintiffs, such a payment would be accompanied by a letter from the Executive
Director indicating such payment is made under protest.
FISCAL ANALYSIS:
In the event the Agency must make the ERAF payment by May 10, 2009, with the
Agency’s approval, the payment may be made by borrowing $2,251,463 from the
Low- and Moderate-Income Housing Set Aside Fund (Account No.
55492000.517500). The borrowed funds will have to be repaid from future tax
increment revenues within 10 years of the payment. Subject to availability of funds,
the Agency will pay $225,000 per year to the Low- and Moderate-Income Housing
Set Aside Fund until this debt is repaid in 2018-19.
Funds for the necessary payment were appropriated by the Agency Board during the
mid-year budget presentation on February 9, 2009. At that time the Agency Board
approved a budget amendment to allocate $1.125 million of the $2.25 million ERAF
payment from unrestricted Tax Increment funds and $1.125 million from
Low/Moderate Income Housing Set Aside Funds. The obligation was split 50/50 to
be consistent with previous instances when the Agency needed to borrow from
Housing Set Aside Funds to pay an ERAF obligation and because staff believed that
the Agency could pay 50% of the obligation at that time. Since then, the economy
has continued to worsen and one time revenues that the Agency had originally
expected to receive prior to the end of this fiscal year (e.g. land sale proceeds from
Parcel B) are now expected to be delayed. Therefore, due to a deteriorated financial
position from mid-year, staff recommends that the entire ERAF obligation is
borrowed from the Housing Set Aside Fund. A budget amendment is required to
increase the amount currently allocated in the Housing Set Aside Fund
(55492000.517500) by $1,126,000 and decrease the amount currently allocated in
the Redevelopment Agency Unrestricted Tax Increment Fund (54292000.517500)
by $1,126,000. There are sufficient funds available in the Housing Set Aside fund
balance to cover this payment.
ATTACHMENTS:
Resolution No. 2009 A-___ City of Culver City, California
Redevelopment Agency Agenda Item Report
MOTION:
That the Culver City Redevelopment Agency:
1. Adopt Resolution No. making the finding that there are insufficient other
moneys to meet the requirements of Health and Safety Code Section 33685(a);
and,
2. Approve a budget amendment to increase the amount currently allocated in
the Housing Set Aside Fund (55492000.517500) by $1,126,000, for a total
allocation of $2,252,000 and decrease the amount currently allocated in the
Redevelopment Agency Unrestricted Tax Increment Fund (54292000.517500) by
$1,126,000.
MEETING DATE: 05/04/09
AGENDA ITEM: Consideration of a Resolution Making A Finding Pursuant to Health and Safety
Code Section 33685 in Connection with the 2008-2009 Payment to the
Educational Revenue Augmentation Fund
ATTACHMENTS
Pages
1. Resolution No. 2009 R-00 1
RESOLUTION NO. 2009 - R___
A RESOLUTION OF THE CULVER CITY REDEVELOPMENT AGENCY OF CULVER CITY,
CALIFORNIA MAKING A FINDING PURSUANT TO HEALTH AND SAFETY CODE SECTION 33685 IN
CONNECTION WITH THE 2008-2009 PAYMENT TO THE EDUCATIONAL REVENUE AUGMENTATION
FUND (ERAF)
WHEREAS, the Culver City Redevelopment Agency (“Agency") is required to make a payment
pursuant to Health and Safety Code Section 33685; and
WHEREAS, pursuant to Health and Safety Code Section 33685(b), in order to make the full
allocation required by Health and Safety Code Section 33685, the Agency desires to borrow up to fifty
(50) percent of the amount allocated to the Agency’s Low- and Moderate-Income Housing Fund pursuant
to Health and Safety Code Sections 33334.2, 33334.3, and 33334.6 during the 2008-2009 fiscal year.
NOW THEREFORE, THE CULVER CITY REDEVELOPMENT AGENCY HEREBY RESOLVES AS
FOLLOWS:
Section 1. The Agency hereby finds that there are insufficient other moneys to meet the
requirements of subdivision (a) of Health and Safety Code Section 33685.
APPROVED and ADOPTED this ______ day of May, 2009 by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
______________________________
_____________, Chair
Culver City Redevelopment Agency
ATTEST:
_______________________________
ALICE PRASAD, Secretary
APPROVED AS TO FORM:
______________________________
MURRAY O. KANE, Agency General Counsel