EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: September 6, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Tomohito Oku, Finance Director
SUBJECT: Approval of San Mateo County Community College District Obligation Recommendation
1. Approving the maximum of $134,834 contractual pass-through obligation payment to the San Mateo County Community College District for FY 2022-23 pursuant to a former Agency Agreement approved by Resolution No. 34 on November 28, 1988, and
2. Approving the San Mateo County Controller’s Office’s inclusion of such amount in the calculation of contractual pass-through obligations due to San Mateo County Community College District for FY 2022-23.
Background
Redevelopment agencies in California were dissolved effective February 1, 2012 under ABx1 26 enacted June 2011 and held by the California Supreme Court to be largely constitutional (“Dissolution Statutes”). The Dissolution Statutes were further amended by AB 1484 enacted June 2012, AB 471 enacted February 2014, and SB 107 enacted September 2015. Under the Dissolution Statutes, on January 10, 2012 the City Council elected to serve as the Successor Agency to the Former Redevelopment Agency of the City of East Palo Alto (the “Successor Agency.”)
Prior to Dissolution, redevelopment agencies often entered into tax sharing contractual agreements with various taxing agencies residing within the redevelopment project areas. The table on the following page summarizes the East Palo Alto’s former Agency contractual agreements for each project area:
Pass Through
Type
University Circle Ravenswood Gateway 101
Contractual Pass
Through
Agreements
Six Agreements
with each of the
four schools, Fire
Five Agreements
with College District,
High School District,
Six Agreements with
Fire District, County,
Community College,
District and Sanitary
District
Fire District,
Mosquito District,
Open Space District
High School District,
Elementary School
District, Open Space
District
Under current Dissolution Statutes, the San Mateo County Controller’s Office collects property tax revenues of the former Redevelopment Agency of the City of East Palo Alto (the “Former Agency”) and accounts for, and distributes, to related taxing agencies the residual property tax available after the payment of contractual and statutory pass through payments to the taxing entities and payment to the successor agency of funds sufficient to pay the enforceable obligations approved on the recognized obligation payments (i.e. ROPS).
After all administrative costs, statutory and contractual pass throughs to the taxing entities and enforceable obligations are paid, the remaining property tax is allocated and distributed to the taxing agencies, including the City, in accordance with the Dissolution Statutes. The excess, distributed revenue is often referred to by staff as “excess RPTTF” and is deposited in the respective general revenue funds of the various agencies. Since Dissolution, the obligation accounting and payment process has occurred entirely at the County level; with cursory review of residual distribution calculations performed by Successor Agency staff. Formally, City of East Palo Alto Finance staff determined and paid the obligations, and all residual amounts were retained in Redevelopment Funds for capital and development purposes.
On May 2, 2022, the San Mateo County Community College District (“SMCCCD”) provided the City with a “claim for make whole payments from the East Palo Alto Successor Agency regarding the East Palo Alto University Circle project area”. A brief description of the former Agency contractual agreement (Attachment 1) terms under which the letter was submitted is as follows:
The San Mateo County Community College District (SMCCCD) pass through agreement requires payments equivalent to a taxing agency election under former H&S 33676 (i.e. an amount equal to the District’s share of the inflationary increase in property taxes). In addition, the agreement provides for additional “hold harmless” payments “in the event that the state funding formula for local school districts is changed” such that districts are no longer made “whole” for their respective shares of revenue that would have been received absent the allocation of property taxes to the former redevelopment agency. To receive payment under the hold harmless provisions, districts must submit a written claim prior to the start of the fiscal year for which payment is requested.
SMCCCD school funding changed in 2016 when SMCCD reached the State revenue limit and no longer receives State funding allocations. SMCCD executive staff confirmed they remain in an excess tax funding status for FY 2022-23.
Analysis
Successor Agency staff are aware of the potential for invocation of agreement provisions, but no claims were made until SMCCCD submitted the first claim in FY 2019-20. Section 2.02 of the Agreement states, “The (former) Agency shall approve…those respective amounts due pursuant to this Agreement during each fiscal year”.
SMCCD FY 2022-23 claim is based upon FY 2021-22 UCI assessed valuation in the amount of $305,670. Agency staff calculated and estimated the amounts as follows:
Calculated Estimated TOTAL
UCI CLAIM FY 2021-22 FY 2022-23 FY 2022-23
Per Successor:
Total Increment, net $ 5,096,895 $ 6,928,780
SMCCCD District Share 4.4116%
Calculated Make Whole $ 224,850 $ 305,670
Tax Revenues Distributed as:
Pass Through Payments $ (29,080) $ -
Residual Tax Payments $ (197,291) $ (169,315)
SA Claim Approval $ (1,521) $ 136,355 $134,834
Per SMCCCD:
Total Tax Increment $ 5,304,947 $ 5,304,947
SMCCCD District Share 4.0400%
Make Whole Claim¹ $ 214,320 $ 214,320
SMCCCD Claim $ 214,320 $ 214,320
As in the prior year, the County Controller requires that the Successor Agency approve the claim before paying SMCCCD the amounts owed under the Agreement. Although postdissolution the Successor Agency no longer administers the payment of amounts owed to the taxing entities, because of the language of the Agreement, the County requires the Successor Agency approve the claim before the County Controller will pay the obligation.
Agency staff recommend the Successor Board approve a SMCCD Claim through negotiated agreement in the amount of $134,834 in accordance with agreement provisions.
Fiscal Impact
There is no direct fiscal impact to the Successor Agency, as the Successor Agency is only entitled to receive the amounts needed to pay enforceable obligations and administrative expenses and the payment to SMCCD does not impact the payment of those amounts.
The payment of the obligation affects available property tax distributions paid to all taxing entities within the University Circle tax rate areas; however the extent of such is dependent upon a series of calculations comprised of University Circle property tax increment, total former Redevelopment tax increment, total enforceable obligation payments during each six-month ROPS calculation period, total other agency pass through obligation amounts, and County fees. Each year, Agency staff shall perform an “estimated to actual” calculation and adjust any amounts owed or due to SMCCCD based upon actual distribution results.
Public Notice
The public was provided notice of this agenda item by publishing a notice of the hearing dates in “The Daily News” and, also, posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo County Library located at 2415 University Avenue, East Palo Alto.
Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) as it is a fiscal and budget activity which does not involve commitment to any specific project which may result in a potentially significant impact on the environment.
Attachments
A. 09-06-2022 Successor Agency Make-whole Claim Resolution B. Attachment 1 - Former RDA Resolution No. 34