Special Finance and Management Committee
November 27, 2023
AGENDA REPORT
TO: Jestin D. Johnson
Oakland Redevelopment Successor
Agency (ORSA) Administrator
FROM: Erin Roseman
Director of Finance
SUBJECT:
Recognized Obligation Payment
Schedule Fiscal Year 2024-25
DATE: November 15, 2023
ORSA Administrator Date
Approval
RECOMMENDATION
Staff Recommends That The Oakland Redevelopment Successor Agency Adopt A Resolution Approving The Submission Of A Recognized Obligation Payment Schedule And Administrative Budget For July 1, 2024, Through June 30, 2025, And Transmission Of Both To The Countywide Oversight Board, The Alameda County Auditor-Controller And The State Department Of Finance For Approval
EXECUTIVE SUMMARY
Pursuant to Assembly Bill (AB) X1 26, the State legislation dissolving redevelopment agencies, the Oakland Redevelopment Successor Agency (ORSA) is required to prepare a Recognized Obligation Payment Schedule (ROPS) every year. The ROPS includes the remaining former Redevelopment Agency’s enforceable obligations and associated costs of managing the obligations, such as project staff costs and debt service. Exhibit A to the attached resolution provides a detailed list of the remaining and anticipated payments for the July 1, 2024 through June 30, 2025 period.
The attached legislation also approves the ORSA administrative budget for submittal to the Alameda Countywide Oversight Board (Oversight Board) for July 1, 2024 through June 30, 2025. The administrative budget is limited to three percent of the amount claimed from the Redevelopment Property Tax Trust Fund (RPTTF) from the previous ROPS period. See Exhibit B to the attached resolution adopting the administrative budget. The Oversight Board also has the power to approve the administrative budget for submission to the state Department of Finance (DOF).
Jestin Johnson (Nov 16, 2023 16:25 PST)
Nov 16, 2023
Special Finance and Management Committee
November 27, 2023
Jestin D. Johnson, Oakland Redevelopment Successor Agency (ORSA) Administrator Subject: Recognized Obligation Payment Schedule Fiscal Year 2024-25 Date: November 15, 2023 Page 2
BACKGROUND/LEGISLATIVE HISTORY
Historical Background
The State of California passed AB X1 26 to dissolve all redevelopment agencies effective October 1, 2011. Subsequently, there has been substantial legislation related to the dissolution of redevelopment agencies, including the preparation and approval of the ROPS.
The ROPS is a list of enforceable obligations from the former Redevelopment Agency. The ROPS contains the estimated payments of such obligations and the source of funds for the specified ROPS period. Under AB X1 26, ORSA can only make payments to satisfy the enforceable obligations listed and approved on the adopted ROPS.
Enforceable obligations that may be listed on the ROPS include:
1. Bond repayments;
2. Loan funds borrowed by the Redevelopment Agency;
3. Obligations to the State or Federal governments, or obligations imposed by State law;
4. Payments required in connection with employees;
5. Judgments or settlements;
6. Contracts necessary for the continued administration or operation of the successor agency; and,
7. Any other legally binding and enforceable agreement. These can include consultant contracts or other professional services contracts, construction contracts, commercial and affordable housing loans, and grant contracts under the City’s Façade, Tenant Improvement, and Neighborhood Project Initiative programs.
Once developed, the ROPS must be approved by the Oversight Board, subject to review by the County Auditor-Controller (County) and submitted to the California Department of Finance (DOF) for approval before any eligible payments can be made.
In May of 2013, ORSA received its Finding of Completion. The dissolution law entitles ORSA to certain benefits upon receiving its Finding of Completion, including:
1. The use of pre-2011 excess bond proceeds. A Bond Expenditure Agreement between ORSA and the City was approved by DOF and executed by the City and ORSA in November 2013. ORSA made a payment of approximately $88 million in excess bond proceeds to the City pursuant to the Agreement and as authorized by ROPS FY 2013-14B in February 2014 and June 2014. Excess bond proceeds continue to be transferred to the City as they become available through projects being completed under budget, restricted land sales, and/or loan repayments.
2. The repayment of outstanding loan indebtedness from the former Redevelopment Agency to the City. In July 2013, the Oversight Board approved a resolution finding that approximately $2.7 million in outstanding loan indebtedness from the Redevelopment Agency to the City for certain West Oakland projects was for legitimate redevelopment purposes and thus authorized placement of that obligation on the ROPS. Under the dissolution law, 20 percent of loan repayments must be deposited into the Low- and Moderate-Income Housing Asset Fund for affordable housing (Fund 1880).
Special Finance and Management Committee
November 27, 2023
Jestin D. Johnson, Oakland Redevelopment Successor Agency (ORSA) Administrator Subject: Recognized Obligation Payment Schedule Fiscal Year 2024-25 Date: November 15, 2023 Page 3
Despite strong arguments for its inclusion in a meet and confer process, DOF disallowed the loan repayment on ROPS FY 2016-17. This item was appealed by the Oakland City Attorney’s office and the petition was denied by the Court of Appeals. After seeking further review, the California Supreme Court denied reviewing the case.
3. The submittal of a Long-Range Property Management Plan (LRPMP). ORSA received approval for its LRPMP on May 29, 2014. The LRPMP governs the disposition of real property formerly owned by the Redevelopment Agency.
Litigation History
On December 5, 2018, the City of Oakland (City) and ORSA, collectively, brought a Writ of Mandate against the DOF in the Superior Court of California. The writ challenged DOF's:
Denial of payments pursuant to validly reinstated loans between the City and ORSA (ROPS line 426);
Denial of reimbursements for staff costs associated with ORSA housing assets (ROPS line 370);
Refusal to authorize repayment of monies to the low- and moderate-income housing fund (ROPS line 207); and,
Denial of payments to cover ORSA pension and OPEB liabilities (ROPS lines 7, 8, and 10).
On July 8, 2019, the Honorable James P. Arguelles ruled in favor of previous DOF’s determinations. The City appealed the ruling and continued challenging the DOF’s denials of payments and reimbursements of these ROPS line-items. After many appeals, the City Attorney did not proceed with further litigation on the DOF’s disallowance of ROPS lines 7,8,10, and 207.
In the FY 2023-24 ROPS, these line items were retired pushing ORSA closer to dissolution.
Additionally, at the direction of the City Council, acting as the legislative body for both the City and ORSA, the City Attorney’s Office proceeded with an appeal of the denied ROPS items 370 and 426. The petition was denied by the Court of Appeals. Staff petitioned for further review by the California Supreme Court; however, the review request was denied. Therefore, litigation matters for ROPS items 370 and 426 have concluded. During the FY 2023-34 ROPS, staff recommended retiring these line items and charging these costs off as bad debt. The proposed resolution includes the request to charge off the unpaid outstanding obligations for the West Oakland Loan Indebtedness (Line 426- $2,749,243) reflected on the City of Oakland’s general ledger, which will result in a decrease of the net position of the General-Purpose Fund (1010) by $2,749,243. The total outstanding obligations for the Construction Monitoring Services (Line 370 -$3,395,096 will not be reimbursed by RPTTF and will continue to be covered by the 1885 – Subordinated Housing Fund.
Special Finance and Management Committee
November 27, 2023
Jestin D. Johnson, Oakland Redevelopment Successor Agency (ORSA) Administrator Subject: Recognized Obligation Payment Schedule Fiscal Year 2024-25 Date: November 15, 2023 Page 4
ANALYSIS AND POLICY ALTERNATIVES
The dissolution law requires a successor agency to submit a ROPS approved by its oversight board to DOF by February 1st of each year prior to the ROPS period. DOF must provide its determination by April 15th of each year. Most recently, the ROPS fiscal year (FY) 2023-24 was approved by the ORSA Board and the Oversight Board in January 2022 via ORSA Resolution 2022-004. ORSA received a determination from the DOF for the ROPS FY 2023-24 in April 2023.
The ROPS FY 2024-25 (current ROPS) includes approximately 40 remaining obligations, including operations and staffing, bonds and other debt, grants, and Disposition and Development Agreements.
ORSA will pay the obligations listed in the ROPS from several former Redevelopment Agency sources, including bond proceeds, reserve balances, administrative cost allowances, Redevelopment Property Tax Trust Fund (RPTTF), and others. The RPTTF is a fund administered by the County that holds property tax funds that formerly would have been the tax increment funds of the Redevelopment Agency. Money from this fund would be available to cover ROPS enforceable obligations only if other funding sources are not available or if payment from property tax revenues is required.
As of November 1, 2023, the total outstanding obligations on the ROPS are approximately $309.8 million. ORSA anticipates approximately $34.1 million in payments for the ROPS period of July 1, 2024 through June 30, 2025, which will be used towards agency-wide administrative items, debt service, projects, and programs from eight redevelopment areas, as well as execution of the Bond Expenditure Agreement. The estimated administrative allowance for FY 2024-25 is approximately $784,028. The administrative budget only includes the general administrative costs of the successor agency. It does not include project staffing or other project costs, which are instead included in the ROPS as separate enforceable obligations.
In September 2013, the bond rating agencies and bond counsel informed staff that because the bond covenants require all bond debt service for a calendar year to be funded prior to any other obligations. Thus, debt service obligations must be “front-loaded” on the first ROPS of the year, (ROPS “B” period) to show payment of the full annual debt service amount, available from RPTTF funds, to cover those obligations. Therefore, the ROPS “B” request for January-June 2024 includes the full 2024 bond debt service amounts for bond issuances, apart from the 2015 Tax Exempt Refunding bonds (ROPS line 644) and the 2018 Tax Exempt Refunding bonds (ROPS line 650), which are requested on a semi-annual basis. All other debt service payment amounts due during the ROPS “A” period are shown as coming from ‘Reserve Balances’ since those amounts were received with the ROPS FY 2023-24.
Adopting this resolution will advance the Citywide priority of being a responsive, trustworthy government by dwindling the business of ORSA pursuant to AB X1 26.
Special Finance and Management Committee
November 27, 2023
Jestin D. Johnson, Oakland Redevelopment Successor Agency (ORSA) Administrator Subject: Recognized Obligation Payment Schedule Fiscal Year 2024-25 Date: November 15, 2023 Page 5
FISCAL IMPACT
To the extent that the requests on the ROPS are approved by DOF, the City will not be obligated to use its General-Purpose Fund (GPF) to pay for any of the obligations listed in the FY 24-25 ROPS including the administrative budget that is approved by the Countywide Oversight Board and DOF. The approved obligations will be paid from existing or future funding sources of ORSA, including RPTTF. However, if the requests on the ROPS are denied by DOF, other funding sources would need to be identified as part of the FY 24-25 budget, including both GPF and non-GPF sources.
PUBLIC OUTREACH / INTEREST
No outreach was deemed necessary for this informational report beyond the standard City Council agenda noticing procedures.
COORDINATION
Staff in the Finance Department worked with the Department of Housing and Community Development, the Economic and Workforce Development Department, and the City Attorney’s Office in preparing the attached ROPS and resolution. The report and resolution were submitted to the City Attorney’s Office and City Administrator’s Office for review and approval.
SUSTAINABLE OPPORTUNITIES
Economic: The various projects and programs have numerous economic opportunities for Oakland businesses, including contracts for construction and professional services, grants for property owners and businesses, and the development of key sites to grow existing and attract new businesses.
Environmental: The City’s goal to develop a “Sustainable and Healthy Environment” is applied to each project. Each of the projects will incorporate as many “environmental sustainability” features into the design and construction of the project as are practical and financially feasible.
Race and Equity: A racial equity analysis has not been conducted. However, all public works and infrastructure projects, i.e., parks, public facilities, and streetscapes, will need to comply with the City’s contracting requirements, including the Small/Local Business Construction Program, the Local/Small Local Business Enterprise Program (L/SLBE) and the Local Employment Program.
Special Finance and Management Committee
November 27, 2023
Erin Roseman (Nov 15, 2023 19:43 PST)
Jestin D. Johnson, Oakland Redevelopment Successor Agency (ORSA) Administrator Subject: Recognized Obligation Payment Schedule Fiscal Year 2024-25 Date: November 15, 2023 Page 6
ACTION REQUESTED OF THE CITY COUNCIL
Staff Recommends That The Oakland Redevelopment Successor Agency Adopt A Resolution Approving The Submission Of A Recognized Obligation Payment Schedule And Administrative Budget For July 1, 2024, Through June 30, 2025, And Transmission Of Both To The Countywide Oversight Board, The Alameda County Auditor-Controller And The State Department Of Finance For Approval
For questions regarding this report, please contact Brittany Hines, Assistant to the Director, at (510) 238-7078.
Respectfully submitted,
ERIN ROSEMAN
Director of Finance
Prepared By:
Brittany Hines, Assistant to the Director
Finance Department