Finance and Management Committee
April 11, 2023
TO: Steven Falk FROM: Erin Roseman
Interim City Administrator Finance Director
SUBJECT: Oakland Redevelopment Successor
Agency (ORSA) Audit Report,
FY 2021-22
DATE: March 13, 2023
City Administrator Approval Date:
RECOMMENDATION
Staff Recommends That The City Council Receive The Oakland Redevelopment Successor Agency (ORSA) Audit Report For The Year Ended June 30, 2022.
EXECUTIVE SUMMARY
The Finance Department, Controller’s Bureau is pleased to present to the City Council the attached Oakland Redevelopment Successor Agency (ORSA) Audit Report for Fiscal Year 2021-22.
Macias, Gini & O’Connell, the City’s external auditor, performed the Oakland Redevelopment Successor Agency financial audit for the year ending June 30, 2022 (Attachment A). The audit report incorporates the basic financial statements, notes to the basic financial statements, and the independent auditor’s report on internal controls over financial reporting and on compliance and other matters based in accordance with Government Auditing Standards.
The auditor issued an unmodified opinion that the basic financial statements fairly present the financial condition of ORSA as of June 30, 2022 and are in accordance with accounting principles generally accepted in the United States.
BACKGROUND / LEGISLATIVE HISTORY
The Oakland Redevelopment Agency (ORA) was established on October 11, 1956 for the purpose of redeveloping certain areas of the City designated as project areas. Its principal activities were acquiring real property for the purpose of removing or preventing blight, constructing improvements thereon, and rehabilitating and restoring existing properties. The Oakland City Council served as the Redevelopment Agency’s Board of Directors.
AGENDA REPORT
Mar 29, 2023
Steven Falk, Interim City Administrator
Subject: Oakland Redevelopment Successor Agency (ORSA) Audit Report, FY 2021-22 Date: March 13, 2023 Page 2
Finance and Management Committee
April 11, 2023
On June 28, 2011 Assembly Bill X1 26 (AB X1 26) was enacted. This legislation is referred to as the Redevelopment Dissolution Law. On December 29, 2011, the California Supreme Court upheld the constitutionality of AB X1 26 and all redevelopment agencies in California were dissolved by operation of law effective February 1, 2012. The legislation provides for successor agencies and oversight boards that are responsible for overseeing the dissolution process and the wind-down of redevelopment activity. On January 10, 2012, the City Council passed Resolution No. 83679 C.M.S., electing for the City of Oakland to serve as the Successor Agency to the Redevelopment Agency of the City of Oakland, effective February 1, 2012. Also, at the same meeting, the City Council elected to retain the housing assets, functions, and powers previously performed by the former Agency.
Assembly Bill 1484 (AB 1484) was enacted on June 27, 2012. AB 1484 provided that successor agencies must be organized as separate public entities from the sponsoring city.
Therefore, on July 17, 2012, per Resolution No. 84107 C.M.S., the Oakland Redevelopment Successor Agency (ORSA) was created to serve as successor agency to the ORA to wind down the affairs of the former Redevelopment Agency. The ORSA is a separate public entity from the City. Prior to July 1, 2018 ORSA was subject to the direction of the Oakland Oversight Board, which was comprised of seven representatives from local government bodies. Subsequent to this date, and pursuant to Senate Bill 107, oversight responsibilities have been transferred to a new Countywide Oversight Board.
In general, ORSA’s assets can only be used to pay enforceable obligations in existence at the date of dissolution, including the completion of any unfinished projects that were subject to legally enforceable contractual commitments. In future years, ORSA will only be allocated property tax revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former Agency, until all these enforceable obligations have been paid in full and all assets have been liquidated. Based upon the nature of its custodial role, ORSA is reported as a fiduciary fund (private-purpose trust fund).
The Fiscal Year 2021-22 ORSA Audit Report provides information on the Successor Agency’s financial activities for the year ended June 30, 2022, and is divided into the following sections:
• Financial Section: This section contains the Successor Agency’s basic financial statements, notes to basic financial statements, the Independent Auditor’s Report and the Management’s Discussion and Analysis (MD&A);
• Compliance Section: This section provides the independent auditor’s report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards.
The auditor considered the Successor Agency’s internal controls over financial reporting as a basis for designing their auditing procedures. In addition, the auditor performed tests of compliance with certain provision of laws, regulations, and grant agreements, non-compliance with which could have a direct and material effect on the financial statement.
Steven Falk, Interim City Administrator
Subject: Oakland Redevelopment Successor Agency (ORSA) Audit Report, FY 2021-22 Date: March 13, 2023 Page 3
Finance and Management Committee
April 11, 2023
ANALYSIS AND POLICY ALTERNATIVES
The FY 2021-22 ORSA Audit Report provides a comprehensive review of the ORSA’s financial operations. This document includes an opinion from the external auditor that ORSA’s financial statements for FY 2021-22 are fairly stated in conformity with accounting principles generally accepted in the United States. This is the most favorable conclusion and is commonly known as an "unmodified" or "clean" opinion. In addition, the audit report did not identify any deficiencies in internal controls over financial reporting considered to be a material weakness.
Financial Highlights
For the Fiscal Year ended June 30, 2022, the Successor Agency achieved the following key financial results:
• ORSA received $14.5 million in profit-sharing revenues from the sale of the Rotunda Building.
The Rotunda Building was sold by the Redevelopment Agency in 1999 for a nominal amount and with a $12 million below-market loan, in anticipation of its redevelopment. In exchange the Redevelopment Agency received a right to 50% of the proceeds from any future sale of the property in excess of $38 million, which was the basis for these revenues. The Rotunda Building was sold and ORSA received $14.5 million in profit sharing revenues.
• Total liabilities and deferred inflows of resources exceeded total assets and deferred outflow of resources by $174.4 million – deficit net position held in trust. This represents a $15.0 million deficit reduction from the prior year and is primarily due to debt service payments made in Fiscal Year 2021-22, offset by reduction in cash caused by the use of existing cash balances to pay obligations in the Recognized Obligation Payment Schedule.
• Total assets were $62.8 million, a decrease of $16.7 million compared to prior fiscal year and total long-term liabilities were $228.4 million, a decrease of $29.8 million compared to prior fiscal year.
The presentation of this report supports the Citywide priority of responsive, trustworthy government. It communicates ORSA’s financial position and obligations to the public, policy makers, and investors and the audit of this information provides assurance of the accuracy of information contained therein. The report also fulfills commitments to ORSA’s bondholders for annual updates on the City’s financial position.
FISCAL IMPACT
This item is for informational purposes only and does not have a direct fiscal impact or cost.
Steven Falk, Interim City Administrator
Subject: Oakland Redevelopment Successor Agency (ORSA) Audit Report, FY 2021-22 Date: March 13, 2023 Page 4
Finance and Management Committee
April 11, 2023
PUBLIC OUTREACH / INTEREST
This item did not require any additional outreach other than the required posting on the City’s website.
COORDINATION
This report was prepared in coordination and with input from the Finance Department and City Attorney’s Office.
SUSTAINABLE OPPORTUNITIES
Economic: There are no direct economic opportunities associated with this informational report.
Environmental: There are no direct environmental opportunities associated with this informational report.
Race and Equity: This informational report documents changes in ORSA’s financial position and provides assurance to policymakers, investors, and residents that ORSA’s finances are accurately reported. While there are no direct race or equity opportunities associated with this informational report, it provides a foundation upon which policymakers may take further actions to advance racial equity.
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Steven Falk, Interim City Administrator
Subject: Oakland Redevelopment Successor Agency (ORSA) Audit Report, FY 2021-22 Date: March 13, 2023 Page 5
Finance and Management Committee
April 11, 2023
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Receive The Oakland Redevelopment Successor Agency (ORSA) Audit Report For The Year Ended June 30, 2022.
For questions regarding this report, please contact Pooja Shrestha, Assistant Controller at (510) 238-6776.
Respectfully submitted,
ERIN ROSEMAN
Finance Director
Finance Department
Prepared by:
Pooja Shrestha, Assistant Controller
Attachment (1):
A: Oakland Redevelopment Successor Agency (ORSA) Audit Report For The Year Ended June 30, 2022