December 20, 2022
Community Development
DATE: December 20, 2022
TO: Mayor Butt and Members of the City Council
FROM:
Delmy Cuellar, Director of Finance
Lina Velasco, Director of Community Development
Rita Martinez, Senior Accountant
Subject:
Approval of Recognized Obligation Payment Schedule
(ROPS 23-24) and Administrative Budget
FINANCIAL IMPACT: Adoption of the Recognized Obligation Payment Schedule (ROPS) including the administrative budget is a necessary action for the Successor Agency to expend
former Richmond Community Redevelopment Agency
funds on certain financial obligations of the Successor Agency. Residual tax revenues not obligated on ROPS
23-24 are distributed to local taxing entities.
PREVIOUS COUNCIL
ACTION:
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STATEMENT OF THE
ISSUE:
The Successor Agency to the Richmond Community
Redevelopment Agency (Agency) is required to approve
a recognized obligation payment schedule (“ROPS”) and
an administrative budget annually pursuant to California Health and Safety Code Sections 34177(o) and
34171(a), (b), and 34177(j), respectively.
AGENDA
REPORT
December 20, 2022
RECOMMENDED ACTION: ADOPT a resolution approving the Successor Agency to the Richmond Community Redevelopment Agency’s
Recognized Obligation Payment Schedule and an
administrative budget, for the period of July 1, 2023
through June 30, 2024 (“ROPS 23-24”), pursuant to
California Health and Safety Code Sections 34177(o) and 34171(a), (b), and 34177(j), respectively – Community
Development (Lina Velasco 510-620-6841/Rita Martinez
510-621-1546).
DISCUSSION:
Background
ABx1 26 (“Dissolution Act”) suspended all new redevelopment activities and incurrence of indebtedness by terminating virtually all otherwise legal functions of redevelopment agencies and mandating a liquidation of any assets for the benefit of local taxing agencies. Some debts are allowed to be repaid, but any such remittances are to be managed by a successor agency that functions primarily as a debt repayment administrator. The successor agency cannot initiate any new redevelopment projects or programs. The activities of the successor agency are overseen by a countywide oversight board, comprised primarily of representatives of other taxing agencies throughout the county, until such time as the remaining debts of the former redevelopment agency are paid off, all former agency assets are liquidated, and all property taxes redirected to local taxing agencies.
Under the Dissolution Act, the portion of property tax revenues collected in the Redevelopment Agency (“RDA”) Project Areas, which were considered Tax Increment prior to RDA dissolution, are now called Redevelopment Property Tax and are deposited by the County Auditor-Controller into the Redevelopment Property Tax Trust Fund (“RPTTF”). The County Auditor-Controller distributes the funds in the RPTTF with the following priority:
1. County Auditor-Controller’s administrative costs;
2. Pass-through payments to the taxing entities affected by the Redevelopment Plan for the Project Area, calculated the same as prior to RDA dissolution;
3. Distribution to the Successor Agency to retire the former RDA’s obligations; and
4. Distribution of residual funds to taxing entities.
A budget trailer bill drafted by the State Department of Finance (“DOF”) purportedly to “clean up” certain conflicting and confusing provisions of ABx1 26 was signed by Governor Jerry Brown on June 27, 2012. This bill, AB 1484, made several substantive changes to ABx1 26 including a provision that successor agencies that do not submit an approved Recognized Obligation Payment Schedule (“ROPS”) by the statutory deadlines will be assessed a $10,000 per day penalty for lateness.
December 20, 2022
On September 22, 2015, Governor Jerry Brown signed SB 107, which made several significant changes to the redevelopment dissolution process, including modification of the ROPS submittal cycle from six month to 12-month intervals.
Under Health and Safety Code Section 34177(o), a ROPS must be prepared and submitted on February 1st of every year and list all of the “enforceable obligations” of the former agency. The ROPS is subject to approval by the Countywide Oversight Board and DOF before the County Auditor-Controller disburses funding for payments on the approved ROPS. “Enforceable obligations” include: bond payments; loans legally required to be repaid pursuant to a payment schedule with mandatory repayment terms; payments required by the federal government; preexisting obligations to the state or obligations imposed by state law; judgments, settlements or binding arbitration decisions that bind the agency; legally binding and enforceable agreements or contracts; and contracts or agreements necessary for the continued administration or operation of the successor agency, including agreements to purchase or rent office space, equipment, and supplies.
After submittal, DOF has until April 15th to review the ROPS and approve or disapprove of any items. The Successor Agency can request additional review by DOF and an opportunity to meet and confer on disputed items. The Successor Agency must make a request within five business days of receiving a DOF determination. DOF is required to notify the Successor Agency and County Auditor-Controller of its final determination of the approved payments at least 15 days prior to the first distribution date of RPTTF for the ROPS, which is June 1st. RPTTF is distributed twice annually, on June 1st and January 2nd of each year. The annual ROPS can be amended once per year as long as the amendment is received by DOF before October 1st of the applicable fiscal year.
Summary
Recognized Obligation Payment Schedule (ROPS 23-24)
ROPS 23-24 is Exhibit A to the draft resolution in Attachment 1. It includes: 1) summary of the funding request; 2) itemized listing of obligations (“ROPS Detail”); and 3) report of cash balances. This ROPS covers payments due during the period of July 1, 2023 through June 30, 2024.
The table below is a summary of the ROPS 23-24 Obligations submitted for approval.
December 20, 2022
Successor Agency Administrative Budget July 1, 2023 through June 30, 2024 Pursuant to Health and Safety Code Sections 34171(a), (b), and 34177(j), the Successor Agency must prepare a budget for administrative expenses each fiscal year (“Administrative Budget”). In accordance with the Dissolution Act, the Successor Agency’s RPTTF administrative cost allowance cap is the greater of three percent (3%) of the prior year RPTTF distribution or $250,000 annually. For the period July 1, 2023 through June 30, 2024, the RPTTF administrative cost allowance cap is $250,000.
Upon the Successor Agency Board’s approval, City staff will submit ROPS 23-24 and the Administrative Budget to the Oversight Board for their consideration and approval.
Upon receiving the Oversight Board’s approval, Citystaff will submit ROPS 23-24 to the County Auditor-Controller, the State Controller, and the DOF. The approved ROPS 23- 24 is required to be submitted to DOF by February 1, 2023, to avoid daily penalties.
DOCUMENTS ATTACHED:
December 20, 2022
Attachment 1 – Resolution
Attachment 2 – Exhibit A to Resolution (ROPS 23-24)
Attachment 3 – Exhibit B to Resolution (Administrative Budget)