Redevelopment Successor
Agency Report
City Council Meeting: December 13, 2022
Agenda Item: 5.Q
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To: Redevelopment Successor Agency
From: David Martin, Director, Administration
Subject: Adoption of Resolutions Approving the Annual Recognized Obligation Payment Schedule (ROPS)
Recommended Action
Staff recommends that the Redevelopment Successor Agency:
1. Adopt a finding that the adoption of a recognized obligation payment schedule and administrative budget is not a project within the meaning of the California Environmental Quality Act (CEQA); or, alternatively, is subject to the commonsense exemption under CEQA Guideline 15061(b)(3).
2. Adopt resolutions approving the Agency’s recognized obligation payment schedule and administrative budget for July 1, 2023 through June 30, 2024.
Summary
The City of Santa Monica established the Santa Monica Redevelopment Successor Agency (Successor Agency) to assume responsibility for all Redevelopment Agency funds when the State eliminated Redevelopment Agencies in 2012. As the Successor Agency, the City must prepare and adopt an annual Recognized Obligation Payment Schedule (ROPS) and Administrative Budget and submit it to the California Department of Finance (DOF) and the Los Angeles County Auditor-Controller no later than February 1 st of each year. The DOF-approved ROPS and Administrative Budget for fiscal year 2023-24 provides the basis for the County Auditor-Controller to remit Redevelopment Property Tax Trust Funds (RPTTF) to the Successor Agency and authorize the Successor Agency to make scheduled payments for enforceable obligations for the period July 1, 2023 through June 30, 2024.
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Background
Following the elimination of Redevelopment Agencies in 2012, under California Health and Safety Code (HSC) Section 34177, the City became the Successor Agency to administer outstanding enforceable obligations and comply with necessary state regulations, and designated the City Council as the Governing Board of the Successor Agency. Additionally, Per ABX1 26, the Santa Monica Redevelopment Successor Agency Oversight Board was established to oversee certain fiscal management matters and assets of the former redevelopment agency, except for affordable housing. Per SB 107, on July 1, 2018, each of the 71 Oversight Boards in Los Angeles County were consolidated into five Consolidated Oversight Boards organized by supervisorial district.
The Third Supervisorial District Consolidated Oversight Board has jurisdiction over the Santa Monica Successor Agency. The City must submit its approved ROPS and Administrative Budget to the Third Supervisorial District Consolidated Oversight Board for approval prior to submitting it to DOF and the LA County Auditor-Controller for approval.
The ROPS identifies the former redevelopment agency’s enforceable obligations and the agency’s administrative costs. The ROPS also identifies the sources of payment for the obligations, including bond proceeds, interest income, and distributions of tax increment revenue from the State’s Redevelopment Property Tax Trust Fund (RPTTF).
Discussion
The ROPS 2023-24 includes Successor Agency enforceable obligations of $17,944,699, including an Administrative Budget of $188,500 covering July 1, 2023 to June 30, 2024. All proposed enforceable obligations have been previously listed and approved for payment on a previous ROPS. In addition, all enforceable obligations have received final and conclusive determinations from the DOF. Staff recommends that the Successor Agency adopt the proposed resolutions (Attachments A and B) authorizing the submission of the ROPS 2023-24 and Administrative Budget to both the DOF and the County Auditor-Controller.
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One of the enforceable obligations included in the ROPS, the Bank of America Term Loan, is subject to semi-annual payments based on floating interest rates. On November 21, 2014 DOF issued a letter notifying the Successor Agency of its final and conclusive approval of the Bank of America Term Loan as an enforceable obligation (Attachment C). Pursuant to an April 26, 2022 letter from Bank of America (Attachment E), the 6-month LIBOR Rate currently used to set interest payments will cease publication after June 30, 2023. Thereafter, in accordance with the Credit Agreement (Attachment D), interest will be reset at the Fed Funds rate plus 1.70%. Payments will continue to be due on January 15 and July 15 of each year. As interest rates are continuing to rise, the payments are estimated based on the actual Fed Funds rate published November 30, 2022 plus a 2 percent escalation in order to ensure sufficient funding is available to make the next payments. Should the final interest payment be less than forecasted, any excess RPTTF would be recovered through the prior period adjustment process.
Under AB 26 and SB 107, the Agency may receive an administrative cost allowance (ACA) of up to three percent of the property tax allocated to the Agency the prior fiscal year less the prior year administrative cost allowance. Furthermore, the ACA shall not exceed fifty percent of the RPTTF distributed to pay enforceable obligations in the preceding year and shall be based upon an approved Administrative Budget which justifies the ACA. Based on the estimated property tax allocation to the Successor Agency, the ACA of $188,500 is within the cap of $390,593 for fiscal year 2023-24 and is included as an enforceable obligation on the ROPS 2023-24 (see Attachment A, Exhibit 1, Item 30).
Environmental Review
The adoption of a recognized obligation payment schedule (ROPS) and administrative budget is not a project within the meaning of the California Environmental Quality Act (CEQA)(Public Resources Code section 21000 et seq.) because adoption will not cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment; or, alternatively, adoption is subject to the common 4 of 5
sense exemption under CEQA Guideline 15061(b)(3), in that it can be seen with certainty that there is no possibility that the FY 2023-24 ROPS or administrative budget will have any significant effect on the environment.
Next Steps
The Third Supervisorial District Consolidated Oversight Board (Consolidated Oversight Board), which has jurisdiction over the Santa Monica Successor Agency, is meeting on January 10, 2023 and will be asked to approve the Successor Agency’s ROPS 2023-24 and administrative budget, for the period July 1, 2023 through June 30, 2024, and authorize the transmittal to the Department of Finance for approval. The ROPS 2023- 24, as approved by the Consolidated Oversight Board, must be sent to the State Controller’s Office and the Department of Finance and posted on the Successor Agency’s website no later than February 1, 2023. The Department of Finance must make its determination regarding the ROPS 2023-24 no later than April 15, 2023.
Financial Impacts and Budget Actions
On June 1, 2023 and January 3, 2024, the Los Angeles County Auditor-Controller will transfer property taxes into the Successor Agency’s cash account from which the Agency will pay enforceable obligations listed on the approved ROPS 2023-24. Before the distributions take place, the DOF must issue a determination letter with the total RPTTF revenues to be disbursed for enforceable obligations along with a final administrative cost allowance cap amount.
Prepared By: Melissa Lindley, Principal Administrative Analyst Approved Forwarded to Council
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Attachments:
A. SA Attachment A - ROPS 23-24
B. SA Attachment B - ROPS 23-24
C. SA Attachment C - Letter from DOF
D. SA Attachment D - Credit Agreement
E. SA Attachment E - BofA Letter