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sr-011012-3jCity Of City Council Report Sauta Mouioa City Council Meeting: January 10, 209 Agenda Item: 3'J To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Gigi Decavalles- Hughes, Acting Director of Finance Subject: Redevelopment: Successor Agency and Housing Functions Recommended Action Staff recommends that the City Council (Council): 1. Adopt the attached resolution electing the City to serve as the successor agency to the redevelopment agency, subject to full reservation of rights; and, 2. Adopt the attached resolution electing to retain the housing assets and functions previously performed by the redevelopment agency, subject to full reservation of rights. Executive Summary This report is prepared in response to the recent California Supreme Court (Court) decision affecting redevelopment in this state. Specifically, to comply with AB 1X 26 (AB 26), staff recommends that the Council, subject to reservation, adopt the attached resolution for the purpose of becoming the designated successor entity to the redevelopment agency, and retain the redevelopment agency's housing assets and functions. Background On December 29, 2011, the Court issued its final opinion in California Redevelopment Association v. Matosantos. The decision upheld AB 26, which dissolves redevelopment agencies, as a proper exercise of the legislative power vested in the Legislature, and struck down AB 1X 27 (AB 27), which created a voluntary alternative redevelopment program, as violating Proposition 22. This result, unfortunately, was the worst possible outcome of the litigation for redevelopment and local agencies, as the bifurcated decision means that all redevelopment agencies will be dissolved under AB 26 and none will have the opportunity to continue existence under AB 27. The net effect of the 1 decision is that redevelopment agencies are to be dissolved and replaced with successor agencies responsible, among other things, for administering the payment and performance of obligations listed in required Enforceable Obligation Payment Schedules (EOPS), subject to oversight boards created to oversee the liquidation of the agency's assets (to distribute proceeds similar to normal property tax proceeds) and the winding down of each agency's affairs. On August 23, 2011, Council, under protest and subject to reservation, adopted Resolution No. 533 (RAS), approving its EOPS for the purpose of preserving all rights to make payments and perform enforceable obligations associated with the Agency's Redevelopment Plans and Five -Year Implementation Plan. On August 24, 2011, in accordance with AB 26, the EOPS was posted on the Agency's website and transmitted to the County Auditor - Controller and the State Department of Finance (DOF). The EOPS was deemed approved on September 8, 2011, following no objections by the DOF. Additionally, the .Agency filed its preliminary draft of the Initial Recognized Obligation Payment Schedule (IROPS) with the DOF on September 30, 2011, subsequent to adoption of Resolution No. 534 (RAS) approved on September 27, 2011. The TROP was deemed approved on October 11, 2011, following no objections by the DOF. Discussion Based on the Court's decision, redevelopment agencies will be dissolved, effective February 1, 2012. As a result, certain actions need to be taken immediately to ensure the important work of the Agency continues as permitted under AB 26. First, to clearly state the City's election to serve as the successor agency, adoption of a resolution to expressly agree to servo as the successor agency by the Council is recommended. As the successor agency, the City will be responsible to make payments and perform existing obligations of the former RDA, which include: ® Bonds; ® Loans borrowed by the RDA (including amounts borrowed in past years from the Housing Fund); 2 • Payments required by the federal or state government or for employee pension obligations; • Judgments or settlements; and • Legally binding and enforceable agreements or contracts that are "not otherwise void as violating the debt limit or public policy "; and • Contracts or agreements necessary for the administration or operation of the successor agency. On or after February 1, 2012, and until a Recognized Obligation Payment Schedule (BOPS) becomes operative, the City, as the Successor Agency, is permitted to make payments only as listed on the EOPS. In addition, as reformed by the Court, §34177(1) (3) of AB 26 requires the Successor Agency to prepare a ROPS similar to Exhibit 1 in adopted Resolution No. 534, for submittal to the State Controller's Office and Department of Finance on April 15, 2012, to set forth the scheduled payments of enforceable obligations, for the six -month period, commencing May 1, 2012. Given the importance of the Agency's obligations, and the necessity of ensuring that they are properly paid and performed, staff recommends that the City serve as the successor agency. Second, given the importance of affordable housing in Santa Monica, staff recommends that Council elect the City to retain the former RDA housing assets and functions, subject to reservation of rights. In this role, the City will be able retain the responsibility for performing housing functions previously performed by the redevelopment agency, with all rights, powers, duties and obligations. The housing functions include monitoring all housing loans and other housing commitments to ensure compliance with loan and commitment requirements. While the legislation does not provide a dedicated funding source for such functions, staff recommends that the City retain the function and enter into an assignment agreement with the City's Housing Authority in order to ensure that affordable housing in Santa Monica continues to be available to the neediest members of the community. 3 Alternatives Under AB 26, if the City does not elect to become the Successor Agency, a "designated local authority" shall be immediately formed and vested with the powers of the Successor Agency, and the Governor is required to appoint three residents of the county to serve as its governing board. In addition, if the City declines to retain the responsibility for performing housing functions previously performed by the redevelopment agency, the housing function and related encumbered assets will be transferred to the City's Housing Authority. Given the importance of ensuring that the Agency's obligations are properly paid and performed, staff recommends that another local authority should not be given responsibility to serve as Santa Monica's successor agency. Next Steps Following review and certification for accuracy by an external auditor, staff will return to Council before March 1, 2012 to adopt the ROPS. The certified ROPS must be submitted and approved by the Oversight Board by April 15, 2012. Commencing on May 1, 2012, the Successor Agency may pay only those payments listed in the approved ROPS. In addition to the ROPS, following due diligence, staff will return to Council, before March 1, 2012, with recommendations concerning the appointment of two members to serve on the Oversight Board, one of which must be from the ATA bargaining unit, the largest recognized employee organization representing the employees of the former redevelopment agency. The other members of the Oversight Board consist of: ® Two members appointed by the LA County Board of Supervisors (one of which must be a member of the public) ® One member appointed by the LA County Board of Education (which is appointed by the Board of Supervisors) ® One member appointed by the Santa Monica Malibu Unified School District (SMMUSD) board; and ® One member appointed by the Chancellor of California Community Colleges. M Staff intends to continue moving forward on existing agency obligations that are not impeded by the Court's decision. Nonetheless, the Supreme Court's decision is expected to have devastating impacts on communities throughout the state by stripping California of its primary tool to produce affordable housing, generate jobs, refurbish critical infrastructure, remediate brownfields, and support smart growth and transit - oriented development. As a result, a coalition of cities and redevelopment agencies is approaching state leaders to discuss clean -up legislation that would allow affordable housing and economic development initiatives in California to continue. Staff will closely monitor these efforts and the potential benefits and impacts to Santa Monica. Financial Impacts & Budget Actions There are no budgetary impacts associated with the adoption of the resolutions. Funds to make scheduled payments associated with the EOPS adopted on August 23, 2011, the IROPS adopted on September 27, 2011 and the Implementing Agreement No. 9318 to Cooperation Agreement No. 9267 are included in the City's FY 11 -13 Adopted Budget. Prepared by: Nia Tang, Acting Administrative Services Officer Andy Agle, Director` - -' Housing and Economic Development or rinance Attachments: Forwarded to Council: Rod Gould City Manager Attachment A: Resolution — Successor Agency Attachment B: Resolution — Retention of Housing Functions and Assets 5 Reference Resolution Nos. 10647 (CCS) and 10648 (CCS).