SR 08-09-2011 7ACity of
Santa Monica
City ouncil and
eclevelopent ncy
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City Council and Redevelopment Agency Meeting: August 9. 2011
Agenda Item: '~--1~
To: Mayor and City Council
Chairperson and Redevelopment Agency
From: Andy Agle, Director of Housing and Economic Development
Subject: Continuation of the Santa Monica Redevelopment Agency
Recommended Action
Staff recommends that the Council:
1. Introduce an ordinance (Attachment A) for first reading to authorize the City of
Santa Monica to participate in the Alternative Voluntary Redevelopment Program
allowed under AB1X 27; and,
2. Authorize the City Manager to enter into a Remittance Agreement with the
Agency to transfer funds to the City for the City's payment of an annual
remittance to the County Auditor-Controller required under AB1X 27, as codified
in Part 1.9 of the California Health and Safety Code.
Staff recommends that the Agency:
1. Authorize the Executive Director to enter into a Remittance Agreement with the
City to transfer funds to the City for the City's payment of an annual remittance to
the County Auditor-Controller required under AB1X 27, as codified in Part 1.9 of
the California Health and Safety Code.
Executive Summary
This report recommends that the Council introduce an ordinance, under protest and
subject to reservation, to authorize the City of Santa Monica to participate in the
Alternative Voluntary Redevelopment Program, with certain conditions and reservations.
Given the Governor's signing of AB1X 26 and AB1X 27 on June 29, 2011, the City's
participation in the Alternative Voluntary Redevelopment Program will provide for the
continued existence of the Santa Monica Redevelopment Agency and the City's ability
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to carry out the program and projects associated with the Agency's Priority Projects and
Five-Year Implementation Plan.
This report also recommends that the Agency and Council authorize execution of a
Remittance Agreement pursuant to which the Agency will transfer funds to the City in an
amount sufficient for the City to make the remittance payments to the County Auditor-
Controller required under AB1X 27, as codified in Part 1.9 of the California Health and
Safety Code.
Background
As part of the State's budget bills, the California Legislature has adopted, and the
Governor has signed, ABX1 26 (AB 26) and ABX1 27 (AB 27) into law. AB 26 purports
to suspend all activities (except enforceable obligations) of the Santa Monica
Redevelopment Agency as of June 29, 2011, dissolve the Agency as of October 1,
2011, and liquidate the assets of the Agency subsequent to dissolution, unless the City
timely adopts an Ordinance, authorized under AB 27, under which it agrees to pay the
remittance amount determined due by the State Department of Finance to the County
Auditor-Controller. At this time, AB 27 will require the City to make payments of
$26,830,703 in FY 11-12, as published by the State Department of Finance on August
1, 2011, and an estimated $6,400,000 in FY 12-13. Staff is planning to appeal the
payment amounts provided by the State per Section 34194 (b) (L) of AB 27 to more
accurately reflect available tax increment; the appeal must be submitted to the State by
August 15,2011.
AB 27 adds a new Part 1.9 to the Community Redevelopment Law. Part 1.9 requires
the City to adopt an "opt-in" ordinance declaring that the City will make the payments
required by AB 27 in order to become exempt from the current suspension of Agency
powers and the imminent Agency dissolution. If the City fails to adopt an "opt-in"
ordinance and make the payments required by AB 27, the Agency will be subject AB 26,
which, in addition to dissolving the Agency on October 1, 2011, provides for a successor
agency to take control of the Agency's assets and obligations under the direction of an
Oversight Board comprised primarily of members appointed by the County, School
District and Community College District.
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Discussion
The California League of Cities, the California Redevelopment Association, and special
counsel for the City have respectively opined that certain or all provisions of AB 26 and
AB 27, including but not limited to the effectiveness date, violate the State Constitution
and other laws (collectively, "Laws"), and are invalid and unenforceable. However,
given the severe implications associated with AB 26, staff and Agency counsel
recommend that the City enact the attached ordinance, under protest and subject to
reservation, and that the City and Agency authorize execution of a remittance
agreement between the City and Agency, by which the Agency will transfer sufficient tax
increment funds to the City to make the remittance payments required under AB 27.
Staff and counsel also recommend that the City make the AB 27 payments to ensure
continued implementation of the Agency's programs and projects identified in
Cooperation Agreement Number 9267 (CCS/RAS) authorized on August 10. 2010 and
the Agency's Five-Year Implementation Plan adopted on November 17, 2009.
The first and second AB 27 installment payments for FY 11-12, are due on January 15
and May 15, 2012, respectively. The attached Ordinance limits the City's commitment
to make these payments to net tax increment funds and other funds or assets that the
Agency transfers to the City for this purpose. The City's general fund would not be
pledged to make these payments. Staff has studied the financial impacts- and has
determined that the City will have sufficient funds from the Agency's tax increment
revenues to cover the payments for FY 11-12 and FY 12-13. However, to make the
payments, the City may be required to access, in the short term, tax increment funds
that the Agency has allocated to projects but-that have not yet been committed to
contracts. Specifically, the diversion of funds could impact the precise timing of
construction funding for projects that are currently in design and will not require
commitment of construction funds before the FY 2011-12 AB 27 payment is due. As a
result, staff will carefully monitor the Redevelopment Agency's cash flow as additional
tax increment is received. If and when necessary, staff will return to Council with
recommendations regarding adjustments #o project timing, additional financing
approaches, and opportunities to refinance existing debt and obligations.
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Staff believes enacting the attached ordinance is in the best interest of the City. The
ordinance enables the redevelopment program to continue to exist in Santa Monica
while retaining specific reservations, including the right to recover any amounts remitted
under AB 27 Part 1.9, the right to challenge the validity of the legislation, and the right of
the City Council to repeal the ordinance at any time in the future, in the City's sole
discretion.
The remittance agreement, as contemplated by the State legislation, provides the
Agency the ability to transfer funds to the City for the AB 27 payments made on behalf
of the Agency. In addition, AB 27 authorizes the Agency to reduce its allocation of Tax
Increment to the Low and Moderate Income Housing Fund for the 2011-2012 Fiscal
Year to make the remittance payment if the City determines to comply with .the
provisions of Part 1.9. However, staff believes that utilizing those funds to make the
payments required by Part 1.9 would be inconsistent with the City's strong commitment
to maximizing affordable housing production. If the Agency wishes to reduce its
allocation to the Low and Moderate Income Housing Fund in order to fund the
remittance payment, then staff requests Agency direction to return with the appropriate
resolution making the requisite finding that there are insufficient other moneys to meet
Agency debt and other obligations, current priority program needs, or its obligations
under the. Remittance Agreement.
A petition for writ of mandate filed by the California Redevelopment Association, the
League of California Cities, the cities of San Jose and Union City, and John Shirey,
challenging the legality of AB 26 and AB 27 and requesting a stay of .the legislation, is
currently pending before the California Supreme Court. Staff will continue to closely
monitor the litigation and legislative developments and work with legal counsel and
fiscal consultants to take appropriate measures to protect funding to further the
community goals set forth in the Agency's Implementation Plan..
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Next Steps
The City Clerk's office will assist in the publication of the ordinance and efforts
associated with enacting the ordinance in accordance to the City's Charter, Article Xl.
Financial Impacts & Budget Actions.
Payment of the FY 11-12 obligation will be made from account number 01274.556210
(AB 27 Payment). Once funds are transferred to the City pursuant to the Remittance
Agreement, staff will return to the City Council for approval of a budget appropriation for
payment of the FY 11-12 obligation.
Prepared by: Nia Tang, Senior Development Analyst
Approved: Forwarded to Council:
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Andy Agle, Direct Rod Gould
Housing and Ec~or~-iic Development City Manager
.Attachments:
Attachment A: Ordinance
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City Council Meeting: 8-9-11
Santa Monica, California
ORDINANCE NUMBER (CCS)
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA
MONICA AUTHORIZING THE CITY OF SANTA MONICA TO
PARTICIPATE IN THE ALTERNATIVE VOLUNTARY REDEVELOPMENT
PROGRAM, SUBJECT TO CERTAIN CONDITIONS AND
RESERVATIONS
WHEREAS, Assembly Bill x1 27 ("AB 27") is to be codified as Part 1.9 of the
California Health and Safety Code ("Part 1.9"); and
WHEREAS, AB 27 establishes a voluntary alternative redevelopment program
whereby the Redevelopment Agency of the City of Santa Monica ("Agency') would be
authorized to continue to exist upon the enactment of an ordinance by the City to
comply with the provisions of Part 1.9; and
WHEREAS, AB 27 requires the City to notify the County Auditor-Controller
("County"), the State Controller, and the State Department of Finance on or before
November 1, 2011, that the City will comply with Part 1.9; and
WHEREAS, AB 27 requires the City to make specified remittances to the
County in order to continue the existence of the Agency, as prescribed in Part 1.9; and
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WHEREAS, AB 27 authorizes the City to enter into an agreement with the
Agency, whereby the Agency would transfer a portion of its tax increment to the City for
the purpose of financing certain activities within the City's redevelopment areas (the
Earthquake Recovery Redevelopment Project, Downtown Project, and Ocean Park 1A
and 1 B Project Areas) as specified in Part 1.9; and
WHEREAS, AB 27 imposes specified sanctions on the City in the event that
the City fails to make the required remittances, as determined by the Director of
Finance; and
WHEREAS, AB 27 authorizes the County to charge a fee that does not exceed
the reasonable costs to the County auditor-controller to implement the provisions of Part
1.9; and
WHEREAS, AB 27 authorizes the City to establish a new redevelopment
agency if its former agency has been dissolved only after the debt obligations of the
Agency have been retired and the City satisfies the provisions of Part 1.9; and
WHEREAS, it is hereby acknowledged by the City Council that the California
League of Cities, the California Redevelopment Association, and special counsel for the
City have respectively opined that certain or all provisions of AB 26 and AB 27,
including but not limited to the effectiveness date, violate the State Constitution and
other laws (collectively, "Laws"), and are invalid and unenforceable; and
WHEREAS, the City Council does not intend, by enactment of this Ordinance, to
waive any constitutional and/or legal rights by virtue of the enactment of this Ordinance
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and, therefore, reserves all of its rights under Laws to challenge the validity of any or all
provisions of AB 26 and AB 27 in any administrative or judicial proceeding and/or repeal
this ordinance, without prejudice to the City's right to recover any amounts remitted
under Part 1.9; and
WHEREAS, the City Council does not intend, by enactment of this Ordinance, to
pledge any of its general fund revenues or other assets, to make the remittance
payments contemplated by Part 1.9, it being understood by the City Council that any
remittance payments will be funded solely from Agency funds and/or assets transferred
to the City in accordance with Part 1.9; and
WHEREAS, the City Council does not intend, by enactment of this Ordinance to
waive any rights of appeal regarding the amount of any remittance established by the
Department of Finance, as provided in Part 1.9;
NOW, THEREFORE, the City Council of the City of Santa Monica does ordain as
follows:
SECTION 1. Authorization to Continue Agency. Subject to Sections 3 and 4,
herein, the City hereby commits to comply with and make the remittances required by
Part 1.9, and authorizes the continuation of the Agency in accordance with the
provisions of AB 27. Any remittance payments required to be paid by the City by Part
1.9 shall be paid solely from Agency funds and/or assets transferred to the City in
accordance with Part 1.9.
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SECTION 2. Application. If any provisions of this Ordinance or the application
thereof is held to be invalid for any reason, the remainder of this Ordinance and the
application of provisions thereof shall not be affected thereby.
SECTION 3. Reservation of Rights. It is the position of the City that certain or all
provisions of AB 26 and AB 27 violate the Laws, as referenced in the recitals, above,
and are invalid and unenforceable. Neither the adoption of this Ordinance, nor the
acknowledgment of or references to any provisions of AB 26 and AB 27, nor the City's
payment of any remittances contemplated by AB 27 shall be deemed to be, nor are they
intended as, an acknowledgment of the validity of AB 26 and AB 27, and the City
reserves all rights in its sole discretion to challenge the validity of any or all provisions of
AB 26 and AB 27 in any administrative or judicial proceeding and/or repeal this
ordinance, without prejudice to the City's right to recover any amounts remitted under
Part 1.9.
SECTION 4. Enactment. This Ordinance shall only be deemed as "enacted" within
the meaning of Part 1.9 upon (i) adoption of this Ordinance and (ii) the legally effective
date of AB 26 and AB 27.
SECTION 5. Authorization of Implementing Actions. The City Manager is hereby
authorized to take any actions necessary to implement this Ordinance and comply with
Part 1.9, including without limitation, providing required notices to the Auditor Controller,
the State Controller, and the Department of Finance; entering into any agreements with
the Agency to make the remittance payments; or making any remittance payments.
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SECTION 6. Effective Date. The Mayor shall sign and the City Clerk shall attest
to the passage of this Ordinance. The City Clerk shall cause the same to be published
once in the official newspaper within 15 days after its adoption. This ordinance shall be
effective thirty days after its adoption.
APPROVED AS TO FORM:
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