City of Culver City, California
Agenda Item Report
Meeting Date: _02/04/2013_ Item Number: JC-1
JOINT CITY COUNCIL/SUCCESSOR AGENCY BOARD AGENDA ITEM: Adoption of
Respective Resolutions Approving a Loan Agreement between the City of Culver
City and the Successor Agency to the Culver City Redevelopment Agency to
Address Temporary Cash Flow Needs.
Contact Person/Dept.: Jeff Muir/Finance Phone Number: 310-253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (Email) Meetings and Agendas – City Council (01/30/13); Meetings
and Agendas – Successor Agency (01/30/13)
Department Approval:
Jeff Muir (01/30/13)
City Attorney/Successor Agency General
Counsel Approval:
Carol Schwab (by H. Baker) (01/30/13)
City/Successor Agency Special Counsel:
Murray Kane (01/30/13)
Chief Financial Officer Approval:
Jeff Muir (by N. Kimball) (01/30/13)
City Manager/Executive Director Approval:
John M. Nachbar (01/30/13)
RECOMMENDATION:
Staff recommends the City Council and Successor Agency Board adopt respective
resolutions approving a Loan Agreement for a loan of up to $1.5 million from the
City to the Successor Agency (Loan) to address temporary cash flow needs of the
Successor Agency. (Note: Should the City Council and Successor Agency Board
approve this evening’s item, the Successor Agency Board’s approval is subject to
the approval of the Oversight Board and the State Department of Finance).
BACKGROUND/DISCUSSION:
The Successor Agency is currently responsible for making payments of “enforceable
obligations” of the former Culver City Redevelopment Agency, including payments
for six outstanding bond issues (1993, 1999, 2002, 2004, 2005, and 2011). Principal
and interest payments, commonly known as debt service payments, on those bonds
are due by November 1 and May 1 of each year. The total debt service due in Fiscal
Year 2012/2013 is $16.6 million of which, approximately $4.4 million is due by May
1, 2013. Those debt service payments are secured by the former tax increment
revenues received by the former CCRA (now known as Redevelopment Property
Tax Trust Fund, or RPTTF, revenues).
Prior to the dissolution of redevelopment agencies by the State of California, former
tax increment revenues were received in November through August of each year, City of Culver City, California
Agenda Item Report
with the largest receipts in December and May (coinciding with property tax
payments, which are due in November and April). Receipt of funds consistent with
this schedule allowed redevelopment agencies to meet the debt service payment
schedules included in applicable bond indentures and other similar agreements.
As a result of the implementation of the State’s elimination of redevelopment
agencies throughout the State, the distribution of RPTTF has changed to a twice-
yearly distribution based upon a Recognized Obligation Payment Schedule (ROPS)
as approved by the Oversight Board and State Department of Finance.
With respect to the ROPS approved by the Oversight Board on August 27, 2012 and
the State Department of Finance on October 9, 2012, the Successor Agency had
expected a payment of $14.7 million in RPTTF on January 2, 2013. However, the
Los Angeles County Auditor/Controller determined to reduce that payment by $11.6
million based on their disallowing certain payments in a prior ROPS period.
Consequently, the County Auditor/Controller disbursed only $3.1 million to the
Successor Agency. This has created a cash shortfall for the Successor Agency
which may not allow the Successor Agency to perform its duty under state law to
make payments on enforceable obligations (specifically, but not limited to, debt
service payments due May 1, 2013).
To allow the Successor Agency to perform its duty under state law, the Successor
Agency may determine to take legal action against the State Department of Finance
and the Los Angeles County Auditor/Controller to compel the Los Angeles County
Auditor/Controller to disburse the full amount under ROPS III as originally approved
by the State Department of Finance, which would allow the Successor Agency to
make the payments of all enforceable obligations listed on ROPS III. In the
meantime, the City Council and the Successor Agency Board are asked to approve
the proposed loan agreement attached hereto as Exhibit A (Loan Agreement) which,
if ultimately approved by the Oversight Board and the State Department of Finance,
would be an enforceable obligation and be repaid from future RPTTF received by
the Successor Agency in accordance with the Redevelopment Dissolution Act.
FISCAL ANALYSIS:
As previously mentioned, the Successor Agency has a debt service payment of
approximately $4.4 million due by May 1, 2013. However, the Successor Agency is
not expected to have sufficient cash on hand to meet these enforceable obligations
for the reasons explained above. To meet this need, staff is recommending the City
provide the Successor Agency with a short-term loan under the following terms:
Principal:
Up to $1,500,000
Interest:
Equal to the Local Agency Investment Fund (LAIF) rate,
compounded annually City of Culver City, California
Agenda Item Report
Terms: Principal and interest due and payable in full following the June 1,
2013 payment to the Successor Agency. However, should the
Successor Agency receive insufficient funds from the RPTTF to pay
all costs shown on ROPS 13-14A, then the balance of any principal
and interest due on the Loan shall be due and payable in full on the
next ROPS.
Repayment of the Loan to the City will be secured by future RPTTF receipts by the
Successor Agency.
ATTACHMENTS:
1. Proposed City Resolution
2. Proposed Successor Agency Resolution
3. Exhibit A – Loan Agreement
MOTION:
That the City Council:
1. Adopt a Resolution approving an Agreement for a loan from the City to the
Successor Agency to the Culver City Redevelopment Agency in a
principal amount up to $1,500,00 with interest equal to the Local Agency
Investment Fund, with principal and interest due and payable in full
following the June 1, 2013 payment to the Successor Agency; and,
2. Authorize the City Attorney and City Special Counsel to review/prepare
the necessary documents;; and,
3. Authorize the City Manager to execute such documents on behalf of the
City; and,
4. Authorize the Chief Financial Officer to draw down funds from the Loan as
necessary.
That the Successor Agency Board:
1. Adopt a Resolution approving a Loan Agreement between the City and the
Successor Agency to the Culver City Redevelopment Agency in a
principal amount up to $1,500,000 with interest equal to the Local Agency
Investment Fund due and payable in full following the June 1, 2013
payment to the Successor Agency (with such approval being subject to
the approval of the Oversight Board and the State Department of
Finance); and, City of Culver City, California
Agenda Item Report
2. Authorize the Successor Agency General Counsel and Successor Agency
Special Counsel to review/prepare the necessary documents; and,
3. Authorize the Executive Director to execute such documents on behalf of
the Agency; and,
4. Authorize the Chief Financial Officer to draw down and repay funds from
the Loan as necessary.
MEETING DATE: February 4, 2013
AGENDA ITEM: Approval of a Loan Agreement between the City of Culver City
and the Successor Agency to the Culver City Redevelopment
Agency to Address Temporary Cash Flow Needs.
ATTACHMENTS
Pages
1. Proposed City Resolution .................................................................. 1 – 6
2. Proposed Successor Agency Resolution ............................................. 7 – 12
3. Exhibit A – Loan Agreement .............................................................. 13 – 19
1 2 3 4 5 6 7 8 9 10 11 12 EXHIBIT A
LOAN AGREEMENT
[BEHIND THIS PAGE]
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Loan Agreement
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LOAN AGREEMENT
(City Advance to Successor Agency)
This Loan Agreement (the "Loan Agreement") is made and entered into as of
February 14, 2013, by and between the City of Culver City, a charter city of the State of
California (the "City"), and the Successor Agency to the Culver City Redevelopment
Agency ("Successor Agency").
RECITALS
WHEREAS, on February 1, 2012, pursuant to Assembly Bill No. 1x 26 ("AB 26"),
the Culver City Redevelopment Agency (the "Former Agency"), along with all
redevelopment agencies in the State of California, was dissolved, and all assets and
obligations of the Former Agency were transferred by operation of law to the Successor
Agency; and
WHEREAS, on January 9, 2012, the City Council (the "City Council") of the City
of Culver City adopted a resolution accepting for the City the role of Successor Agency
to the Former Agency; and
WHEREAS, AB 26, as amended by Assembly Bill No. 1484 (collectively referred
to hereinafter as the “Dissolution Act”) requires that the Successor Agency prepare a
Recognized Obligation Payment Schedule (“ROPS”) for each six-month period setting
forth all enforceable obligations (as defined in the Dissolution Act) of the Successor
Agency; and
WHEREAS, the Dissolution Act creates an oversight board for each
redevelopment agency to oversee the wind down of the Former Agency (the "Oversight
Board"), including approval of a ROPS; and
WHEREAS, the Successor Agency prepared a ROPS for the period between
January 1, 2013 and June 30, 2013 and approved by the Oversight Board on August
27, 2012 pursuant to Resolution No. 2012-OB005 (the “Third ROPS”); and
WHEREAS, the Third ROPS as approved by the Oversight Board and
subsequently approved by the Department of Finance on October 9, 2012 pursuant to
the Dissolution Act showed that the payment of all enforceable obligations of the
Successor Agency would require the allocation of $17,401,343 from the Redevelopment
Property Tax Trust Fund (the "RPTTF"), containing all property tax increment previously
allocated to the Former Agency, to the Successor Agency, and the Successor Agency's
administrative cost allowance would require the allocation of $521,710 from the RPTTF
to the Successor Agency, for a total allocation to the Successor Agency’s
Redevelopment Obligation Retirement Fund (the “RORF”) of $17,923,053; and
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Loan Agreement
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WHEREAS, on October 12, 2012, the Successor Agency received from the Los
Angeles County Auditor-Controller a document entitled “Estimated Redevelopment
Property Tax Trust Fund Allocations & Distributions for October 1, 2012 Covering the
Period 1/1/2013 through 6/30/2013_Revised 10/12/2012”, which document estimated
that the Successor Agency's RORF would receive only $13,458,255 from the RPTTF on
January 2, 2013 to pay enforceable obligations and administrative costs shown on the
Third ROPS; and
WHEREAS, on November 30, 2012 the Los Angeles County Auditor-Controller
proposed further reduction in RPTTF to be distributed to the Successor Agency on
January 2, 2013 due to the County’s review and modifications to the portion of the Third
ROPS that consists of a reconciliation of the estimated versus actual payments made
on approved enforceable obligations listed in the ROPS for the period January 1, 2012
through June 30, 2012 (the “First ROPS”); and
WHEREAS, in this regard, the Los Angeles County Auditor-Controller attached to
its email addressed to the Department of Finance and dated November 30, 2012, a
copy of the Third ROPS approved by the Successor Agency and Oversight Board and
submitted to the Department of Finance for review, together with the County’s inserted
adjustments and modifications to certain line item amounts listed therein in connection
with the reconciliation of First ROPS items; and
WHEREAS, on December 17, 2012, the Successor Agency received a copy of a
letter dated December 17, 2012, prepared by Mr. Szalay on behalf of the Department of
Finance and addressed to the County Auditor-Controller, authorizing the
adjustment/reduction by the total amount of $11,559,393 to the RPTTF distribution to
the Successor Agency on January 2, 2013, as proposed by the County Auditor-
Controller; and
WHEREAS, on January 2, 2013, the Successor Agency received from the
RPTTF $3,106,429.37 and not the original estimated $13,458,255 of the County-Auditor
Controller; and
WHEREAS, to enable the Successor Agency to meet its fiduciary responsibilities
to holders of enforceable obligations and for the Successor Agency to have adequate
funds for administration costs and other obligations, the City desires to loan to the
Successor Agency an amount not to exceed One Million Five Hundred Thousand
Dollars ($1,500,000); and
WHEREAS, at its February 14, 2013 meeting, the Oversight Board for the
Successor Agency did authorize the Successor Agency to enter into this Loan
Agreement with the City pursuant to the authority granted by California Health & Safety
Code Sections 33220, 34173(h), 34178(a) and 34180(h); and
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Loan Agreement
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WHEREAS, the City and the Successor Agency have determined that entering
into this Loan Agreement is in the best interests of the City and the Successor Agency.
NOW, THEREFORE, the parties hereto do mutually agree as follows:
ARTICLE I.
Section 1.01 Recitals. The recitals above are an integral part of this
Loan Agreement and set forth the intentions of the parties and premises on which the
parties have decided to enter into this Loan Agreement.
ARTICLE II.
LOAN PROVISIONS
Section 2.01 Loan. The City hereby agrees to lend to the Successor
Agency the principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) (the “Loan”) for the purposes set forth in Section 2.03.
Section 2.02 Interest.
(a) Interest. Interest on the Loan shall accrue as of the Effective Date,
continuing until such time as the Loan is repaid in full, at a rate equal to the interest rate
applicable to funds on deposit in the Local Agency Investment Fund, compounded
annually.
(b) Default Interest. In the event of a Default, interest on the Loan
shall begin to accrue as of the date of Default and continuing until such time as the
Loan is repaid in full or the Default is cured, at the default rate of the lesser of eight
percent (8%) per annum, compounded annually (the "Default Rate") or the highest rate
permitted by law.
Section 2.03 Use of Loan Funds. The Successor Agency shall use the
Loan for the purpose of paying administrative costs and a portion of the debt service
due for the enforceable obligations as set forth in Items 1 through 9 and 14 through 18
on the Third ROPS.
Section 2.04 Condition to Disbursement. The City shall have no
obligation to disburse the Loan funds to the Successor Agency until the California
Department of Finance approves this Loan Agreement or is otherwise deemed
approved pursuant to the Dissolution Act or State law.
Section 2.05 Repayment of Loan.
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Loan Agreement
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(a) The Loan is an enforceable obligation of the Successor Agency
and is payable on June 1 and January 2 of each year from the Redevelopment Property
Trust Fund (“RPTTF”) maintained by the Los Angeles County Auditor-Controller for the
purpose of paying enforceable obligations of the Successor Agency. The obligation of
the Successor Agency to repay the Loan shall be payable solely from the RPTTF, and
is not and shall not be a pledge of or obligation payable through the City’s general fund.
(b) The Loan shall be set forth in full as an enforceable obligation of
the Successor Agency on the Fourth ROPS for the period from July 1, 2013 through
December 31, 2013 (the "Fourth ROPS"). It shall be due and payable in full from the
Successor Agency’s Redevelopment Obligation Retirement Fund (“RORF”) following
the June 1, 2013 payment to the RORF by the Los Angeles County Auditor-Controller.
However, should the Successor Agency receive insufficient funds from the RPTTF to
pay all costs shown on the Fourth ROPS, then the amount due and payable on the
Loan shall equal the amount deposited into the RORF less all other costs shown on the
Fourth ROPS, and the balance of any principal and interest due on the Loan shall be
due and payable in full on the next ROPS.
(c) The procedure described in subsection (b) of this Section shall
continue to be followed for each ROPS until the principal and interest due on the Loan
are paid in full. Any remaining principal and interest due on the Loan shall continue to
be shown as an enforceable obligation on each ROPS until the Successor Agency has
received sufficient funds to pay all principal and interest due on the Loan.
(d) All Loan payments shall first be used to pay all accrued interest
and then to reduce the principal balance.
Section 2.06 Optional Prepayment of the Loan. The Successor
Agency shall have the right to prepay the unpaid principal and interest of the Loan at
any time.
Section 2.07 Books and Accounts; Financial Statements. The
Successor Agency will keep, or cause to be kept, proper books of record and accounts
showing the use of the Loan funds, interest due on the Loan, Loan repayments, and
principal and interest outstanding.
ARTICLE III.
DEFAULT AND REMEDIES
Section 3.01 Event of Default. Failure by the Successor Agency to pay
the principal or interest on the Loan when due and payable shall constitute a default
(referred to herein as a “Default”).
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Loan Agreement
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Section 3.02 No Waiver. A waiver of any Default by the City shall not
affect any subsequent Default or impair any rights or remedies on the subsequent
default.
Section 3.03 Remedies Not Exclusive. No remedy herein conferred
upon or reserved to the City is intended to be exclusive of any other remedy. Every
such remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing, at law or in equity or by statute or otherwise.
ARTICLE IV.
MISCELLANEOUS
Section 4.01 No Merger. In entering into this Loan Agreement, the City
is acting in its capacity as a charter city, while the Successor Agency is acting in its
capacity as the successor to the Former Agency; and both the City and the Successor
Agency are acting pursuant to the specific authority granted by the Oversight Board and
by California Health & Safety Code Sections 33220, 34173(h), 34178(a) and 34180(h)
authorizing agreements between the City and the Successor Agency. In consequence,
the parties to this Loan Agreement are not merged.
Section 4.02 Successor is Deemed Included in All References to
Predecessor. Whenever in this Loan Agreement either the Successor Agency or the
City is named or referred to, such reference shall be deemed to include the successors
or assigns thereof, and all the covenants and agreements in this Loan Agreement
contained by or on behalf of the Successor Agency or the City shall bind and inure to
the benefit of the respective successors and assigns thereof whether so expressed or
not.
Section 4.03 Amendment. This Loan Agreement may be amended by
the parties hereto but only by a written instrument signed by both parties and with the
approval of the Oversight Board.
Section 4.04 Effective Date. This Loan Agreement shall take effect
upon approval by the Oversight Board and, following that approval, at the time and in
the manner prescribed in California Health & Safety Code Section 34179(h) (the
"Effective Date").
Section 4.05 Severability. If any Section, paragraph, sentence, clause
or phrase of this Loan Agreement shall for any reason be held illegal, invalid or
unenforceable, such holding shall not affect the validity of the remaining portions of this
Loan Agreement. The City and the Successor Agency hereby declare that they would
have adopted this Loan Agreement and each and every other Section, paragraph,
sentence, clause or phrase hereof and authorized the Loan irrespective of the fact that
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Loan Agreement
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any one or more Sections, paragraphs, sentences, clauses, or phrases of this Loan
Agreement may be held illegal, invalid or unenforceable.
IN WITNESS WHEREOF, the City of Culver City and the Successor Agency to
the Culver City Redevelopment Agency have caused this Loan Agreement to be signed
by their respective officers all as of the day and year first above written.
“CITY”
THE CITY OF CULVER CITY,
CALIFORNIA
By:
Michael O’Leary
Mayor
ATTEST:
By:
Martin R. Cole
City Clerk
APPROVED AS TO FORM:
By:
Carol Schwab
City Attorney
“SUCCESSOR AGENCY”
SUCCESSOR AGENCY TO THE
CULVER CITY REDEVELOPMENT
AGENCY
By:
Michael O’Leary
Chair
ATTEST:
By:
Martin R. Cole
Secretary
APPROVED AS TO FORM:
By:
Carol Schwab
Agency Counsel
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