Redevelopment Successor
Agency Report
City Council Meeting: December 17, 2024
Agenda Item: 5.Y
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To: Redevelopment Successor Agency
From: David Martin, Director, Administration
Subject: Approval of Annual Recognized Obligation Payment Schedule (ROPS) Recommended Action
Staff recommends that the Redevelopment Successor Agency:
1. Adopt resolutions approving the Agency’s recognized obligation payment schedule and administrative budget for July 1, 2025 through June 30, 2026.
2. Adopt a finding that the recognized obligation payment schedule is not a “project” subject to the California Environmental Quality Act (CEQA).
Summary
The Santa Monica Redevelopment Successor Agency (Successor Agency) is required to prepare and adopt an annual Recognized Obligation Payment Schedule (ROPS) and Administrative Budget, which is subject to approval by the Third Supervisorial District Consolidated Oversight Board prior to being submitted to the California Department of Finance (DOF) and the Los Angeles County Auditor-Controller no later than February 1 of each year. The DOF-approved ROPS and Administrative Budget for fiscal year 2025- 26 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, 2025 through June 30, 2026.
Discussion
Following the elimination of Redevelopment Agencies in 2012, under California Health and Safety Code (HSC) Section 34177, the City of Santa Monica elected to serve as the Successor Agency to the Redevelopment Agency, established the Santa Monica 2 of 5
Redevelopment Successor Agency (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.
In compliance with the statewide elimination of all Redevelopment Agencies in 2012, the Successor Agency is required to prepare a ROPS and corresponding administrative budget on a yearly basis. 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). Before submission to the California Department of Finance (DOF) and the Los Angeles County Auditor-Controller, no later than February 1 of each year, both the Successor Agency and the Third Supervisorial District Consolidated Oversight Board must approve the ROPS and Administrative Budget.
The ROPS 2025-26 includes Successor Agency enforceable obligations of $17,004,737 and an Administrative Budget of $64,416 covering July 1, 2025 to June 30, 2026. 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 2025-26 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 a November 7, 2024 letter from Bank of America (Attachment F), the 6-month LIBOR Rate previously used to set interest payments is no longer available. Therefore, interest will be reset at a fluctuating rate of interest equal to the Federal Funds Rate plus 1.7% per annum. Payments will continue to be due on January 15 and July 15 of each year. As interest rates are uncertain, the payments are estimated based on the actual Federal Funds Rate published on November 20, 2024 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 $64,416 is within the cap of $414,143 for fiscal year 2025-26 and is included as an enforceable obligation on the ROPS 2025-26 (see Attachment A, Exhibit 1, Item 30).
Environmental Review
The approval of the ROPS 2025-26 is not a “project” subject to CEQA, as it is administrative in nature. Pursuant to CEQA Section 21065, the project does not meet the definition of a “project” subject to CEQA as it will not “cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment”. Additionally, per Section 15378(b) of the CEQA Guidelines, a “project” does not include organizational or administrative activities of governments that will not 4 of 5
result in direct or indirect physical changes in the environment. Therefore, the adoption of the ROPS is not subject to CEQA.
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 7, 2025 and will be asked to approve the Successor Agency’s ROPS 2025-26 and administrative budget, for the period July 1, 2025 through June 30, 2026, and authorize the transmittal to the Department of Finance for approval. The ROPS 2025- 26, 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, 2025. The Department of Finance must make its determination regarding the ROPS 2025-26 no later than April 15, 2025.
Financial Impacts and Budget Actions
On June 1, 2025 and January 2, 2026, 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 2025-26. 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: Denise Smith, Principal Administrative Analyst Approved Forwarded to Council
Attachments:
A. SA Attachment A - ROPS 25-26
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B. SA Attachment B - ROPS 25-26 - Admin Budget
C. SA Attachment C - Letter from DOF
D. SA Attachment D - Credit Agreement
E. SA Attachment E - BofA Letter
F. SA Attachment F - BofA letter (2024)