CITY OF POMONA
JOINT REPORT OF THE
CITY COUNCIL AND THE SUCCESSOR AGENCY
May 15, 2023
To: Honorable Mayor and Members of the City Council, Sitting as the City Council and the Successor Agency to the Redevelopment Agency From: James Makshanoff, City Manager & Executive Director Submitted By: Kirk Pelser, Deputy City Manager
SUBJECT: APPROVAL OF A SETTLEMENT AGREEMENT AND MUTUAL RELEASE BETWEEN THE CITY OF POMONA AND THE COUNTY OF LOS ANGELES RECOMMENDATION:
It is recommended that the City Council and the Successor Agency to the Former Redevelopment Agency adopt the following joint resolution (Attachment No. 1):
RESOLUTION NO. 2023-77 & SA RESOLUTION NO. 2023-01 – A JOINT RESOLUTION OF THE CITY COUNCIL OF THE CITY POMONA AND THE SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF POMONA, CALIFORNIA, APPROVING THE EXECUTION OF A SETTLEMENT AGREEMENT AND MUTUAL RELEASE BY AND AMONG THE CITY OF POMONA, THE SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF POMONA, THE COUNTY OF LOS ANGELES, THE COUNTY LIBRARY, THE COUNTY FLOOD CONTROL DISTRICT, AND THE CONSOLIDATED FIRE PROTECTION DISTRICT (COLLECTIVELY, THE “COUNTY”) EXECUTIVE SUMMARY:
Prior to the State’s 2012 action to dissolve all Redevelopment Agencies (RDA), an RDA received a portion of property tax increment and used these funds to address blight through property acquisition, public improvements, affordable housing and economic development activities. RDA’s often had “pass-through” or tax sharing agreements with taxing entities (such as Los Angeles County). Two of these types of tax sharing agreements are the subject of this recommended action. Approval of the Agreement and Mutual Release will reduce the total amounts due by the Successor Agency to the former Redevelopment Agency of Pomona by approximately $103.2 million in interest payments, by shortening the life of the loan from 2041 to 2029. This will be accomplished by agreeing to a lower interest rate that is applied to the amounts of property tax that the City owes the County based upon prior agreement for the City to defer said payments.
FISCAL IMPACT:
Approval of the Agreement will result in savings by reducing the amounts due by the Successor Agency to the Former Redevelopment Agency of Pomona by approximately $103.2 million in interest payments, by shortening the life of the loan from 2041 to 2029. It is anticipated that around FY 2027-28, the savings could potentially increase the City’s share of the Redevelopment Property Tax Trust Fund (RPTTF). City of Pomona’s share of the RPTTF is approximately 33%. The Successor Agency has two separate Pass-Through agreements that will be addressed with approval of this action. The “Southwest Agreement” will remain outstanding, while the South Garey Agreement” will be settled via final payment in June 2023.
BACKGROUND & DISCUSSION:
Redevelopment in California
Prior to their dissolution, RDA’s:
Received a portion of property taxes (tax increment)
Addressed “blight” through property acquisition, public improvements, affordable housing and economic development Paid “pass-through” or tax-sharing payments to taxing entities such as Los Angeles County - These were negotiated payments based upon agreements or statutory formulas Dissolution of Redevelopment
All RDA’s were dissolved by State of California in February 2012 Successor Agencies were formed to wind down RDA’s
Host jurisdiction (city) serves as Successor Agency
Tax increment deposited into the Redevelopment Property Tax Trust Fund (RPTTF) pays pass-through and remaining RDA obligations with the remainder flowing to taxing entities as property taxes County Pass-Through Agreements
Former Pomona RDA entered into two pass-through agreements with Los Angeles County 1988 Agreement (“Southwest Agreement”) relating to Southwest, Downtown I & II, Holt Avenue/Indian Hill, Reservoir Street Industrial and Mountain Meadow Project Areas 1991 Agreement (“South Garey Agreement”) relating to South Garey Avenue/Freeway Corridor Project Area Both Agreements provide for a portion of the RDA/Successor Agency’s tax increment to be paid annually to the County Both Agreements allowed the RDA/Successor Agency to defer payment of the portion of the County share These deferred amounts are treated as loans and accrue interest of 7% per year, compounded annually In early 2017, the City Council directed staff to explore the possible refinancing of RDA/Successor Agency bonds. During that process, it became apparent that these historic pass-through agreements constituted an arguably unfair burden to Pomona due to the 7% accrued interest rate that compounded annually. During the 1980’s and 1990’s era in which these types of agreements were commonly entered into, there was wide variety in the interest rates negotiated, with many cities achieving rates significantly lower than the 7% rate used for the Pomona agreements. Therefore, in 2017, the City then began discussions with the County with the hope of negotiating a lower interest rate for Pomona that would 1) significantly reduce the remaining amounts owed to the County and 2) shorten the payment schedule, which otherwise would continue until FY 2040-41. Initial efforts were not fruitful. To avoid the possibility of complicated litigation, the City and County entered into a Tolling Agreement in May 2019 whereby the parties preserved their respective rights and agreed to continue earnest negotiations to seek a resolution.
After several years of discussions and with the delays that the Covid-19 Pandemic caused for both parties, we have now achieved a negotiated settlement that reduces the 7% interest rate to 3.39% for the 1988 “Southwest Agreement” and to 2.32% for the “South Garey Agreement”, to be applied retroactively and prospectively. This will result in savings to the City of Pomona of approximately $103.2 million, and will result in a final payment made in FY 2028-29. Essentially, this means that Pomona will have use of Pomona based property tax revenues in a greater amount and much earlier than the current agreements provide for.
Approvals Needed
In addition to the approval by the City and the Los Angeles County Board of Supervisors, the Agreement will need to be approved by the First District Oversight Board and the California Department of Finance (DOF). The Agreement shall be void in the event either the Oversight Board or DOF fails to approve the Agreement, or raises any objections that create a legitimate question as to the legality of the form or substance of the Agreement, or would put the County in legal jeopardy, in the reasonable determination of the County ENVIRONMENTAL ANALYSIS:
Approval of the Agreement is not a project under CEQA pursuant to State CEQA Guidelines section 15378(b)(4), which provides that governmental fiscal activities which do not involve a commitment to a specific project which may result in a significant environmental impact is not a project. Specifically, approving the Settlement Agreement is not a project under CEQA because it is a fiscal activities unrelated to any actual project.
Prepared by:
_____________________________
Kirk Pelser
Deputy City Manager
ATTACHMENTS:
Attachment No. 1 – Joint Resolution No. 2023-77 & SA Resolution No. 2023-01 with Exhibit A 65318.00014\41253609.1
65318.00014\41253609.1
65318.00014\41253609.1
65318.00014\41253609.1
Approval of Settlement Agreement and Mutual Release