2013-12 RESOLUTION NO. OB 2013- 12
A RESOLUTION OF THE OVERSIGHT BOARD TO THE SUCCESSOR
AGENCY OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE
CITY OF GRAND TERRACE APPROVING THE REMITTANCE OF
SUCCESSOR AGENCY FUNDS TO THE COUNTY AUDITOR-
CONTROLLER'S OFFICE FOR IMMEDIATE DISTRIBUTION TO THE
TAXING ENTITIES
WHEREAS, the Successor Agency and Oversight Board approved the Due
Diligence Review for Other Funds ("Other Funds DDR") for submittal to the California
Department of Finance ("DOF") ; and
WHEREAS, the DOF issued its Final Determination Letter on the Other Funds
DDR on May 1, 2013 and attached as Attachment 1" ("Letter"); and
WHEREAS, the City of Grand Terrace entered into a loan agreement with the
Redevelopment Agency (now Successor Agency) which is attached as Attachment "2"
("Loan Agreement"); and
WHEREAS, the Final Determination Letter directed the City of Grand Terrace to
increase the amount of Loan Agreement to the Redevelopment Agency (now Successor
Agency) by $1,086,857 due to disallowed credits in the amounts of $819,235 and
$267,622 that were previously applied to the loan balance; and
WHEREAS, the Grand Terrace City Council and Successor Agency Board of
Directors have authorized immediate payment of the disallowed credits totaling
$1,086,857 in lieu of increasing the loan balance under the Loan Agreement; and
WHEREAS, the Grand Terrace City Council and Successor Agency Board of
Directors have also authorized accelerated repayment of $2,000,000 of the existing
balance of $3,240,785 owed on the Loan Agreement where the $2,000,000 represents
approximately 13'/2 years of annual installment payments per the terms of the Loan
Agreement; and
WHEREAS, the Grand Terrace City Council and Successor Agency Board of
Directors' authorization to pay the disallowed credits totaling $1,086,857 and to
accelerate repayment of $2 million of the existing loan balance is contingent on DOF
approval to authorize the San Bernardino County Auditor-Controller's Office to
immediately disburse these funds totaling $3,086,857 to the taxing entities.
NOW THEREFORE, BE IT RESOLVED by the Oversight Board to the Successor
Agency of the Grand Terrace Community Redevelopment Agency, as follows:
SECTION 1. The Oversight Board finds and determines that $1,086,857,
representing the credits which were disallowed by the DOF in the Letter and relating to
the Loan Agreement, shall be remitted by the Successor Agency to the San Bernardino
County Auditor-Controller's Office for immediate distribution to the taxing entities as
required by the Health & Safety Code and applicable law.
SECTION 2. The Oversight Board finds and determines that an additional
amount of $2,000,000, representing accelerated repayment of the amounts owed under
the Loan Agreement, shall be remitted by the Successor Agency to the San Bernardino
County Auditor-Controller's Office for immediate distribution to the taxing entities as
required by the Health & Safety Code and applicable law.
SECTION 3. The Oversight Board finds and determines that the payments
identified in SECTION 1 and SECTION 2 above shall be paid contingent upon the
DOF's authorization to the San Bernardino County Auditor-Controller's Office to
immediately disburse the funds to the taxing entities that are entitled to receive the
property tax increment funds.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Oversight Board to
the Successor Agency of the Community Redevelopment Agency of the City of Grand
Terrace, held on this the 171" day of July, 2013, by the following vote:
AYES: Board Members Forbes, Morga, Ferracone and Shields; Vice-Chairman
Saks
NOES: None
ABSENT: Board Member Miranda and Chairman Stanckiewitz
ABSTAIN: None
---------------
C ir, Successor Agency to the Community Redevelopment
Agency of the City of Grand Terrace
Secretary, ucce sor Agency o he Community Redevelopment
Agency of the City of Grand T race
Attachment 1
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DEPARTMENT OF EOMUND c3. BROWN JR. - GOVERNOR
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May 1, 2013
Ms. Cynthia A. Fortune, Finance Manager
City of Grand Terrace
22795 Barton Road
Grand Terrace, CA 92313-5295
Dear Cynthia A. Fortune:
Subject: Other Funds and Accounts Due Diligence Review
This letter supersedes the California Department of Finance's (Finance) original Other Funds and
Accounts (OFA) Due Diligence Review(DDR) determination letter dated March 25, 2013. Pursuant
to Health and Safety Code (HSC) section 34179.6 (c), the City of Grand Terrace Successor
Agency (Agency) submitted an oversight board approved OFA DDR to Finance on January 14,
2013. The purpose of the review was to determine the amount of cash and cash equivalents
avaiiablo for distribution to the affected taxing entities. Finance issued an OFA DDR determination
letter on March 25, 2013. Subsequently, the Agency requested a Meet and Confer session on one
or more items adjusted by Finance. The Meet and Confer session was held on Apol 16, 2013,
Based on a review of additional information and documentation provided to Finance during the
Meet and Confer process, Finance has completed its review of those specific items being
disputed_ Specifically, the following adjustments were made:
Transfers totaling $1,519,590 ($651,875 + $867,71 5)were previously not allowed.
During the Meet and Confer process, the Agency provided additional information
showing $700,355 ($651,875 + $48,480) of the adjustment should he reversed and the
$819,235 adjustment should be equally offset with an increase to nor-cash or cash
equivalent assets, as further discussed below. Additionally, during the Meet and Confer
process, another$267,622 transfer was identified that should be adjusted and restricted
as a non-cash or cash equivalent asset. Therefore, there is no affect to the OFA
balance available.
During the initial review, it appeared that the Agency transferred funds in the amount of
$1,207,500 to Stater Bros. Markets. However, during the Meet and Confer process, the
Agency provided additional information showing that only $163,125 has been paid to
Stater Bros. Markets and $1,207,500 remains outstanding. Therefore, Finance is
reversing its adjustment of $651,875.
Additionally, the Agency recorded transfers totaling $867,715 to the City of Grand
Terrace (City). The transfers consisted of a reduction to a loan receivable from the City
to the former Redevelopment Agency(RDA) in the amount of$819,235 and two
payments on a project totaling $48,480.
Ms. Cynthia A. Fortune
May 1, 2013
Page 2
The$819,235 reduction to a loan receivable was to retroactively give credit to the City
for completing projects that may have been eligible to be paid using redevelopment
funds. Furthermore, another credit of$267,622 related to a 2003 property acquisition
was made to the loan in February 2011. However, all of the projects had already been
approved for funding from other funding sources, not RDA funds, and the expenditures
had already been incurred and paid for many years ago, Therefore, the Agency should
reverse the credits and increase the receivable from the City as a non-cash or cash
equivalent asset.
Per HSC section 34179.5 (c) (2), the dollar value of assets and cash transferred by the
former redevelopment agency or successor agency to the city, county, or city and county
that formed the former RDA between January 1, 2011 through June 30, 2012 must be
evidenced by documentation of the enforceable obligation that required the transfer.
HSC section 34179.5 states "enforceable obligation" includes any of the items listed in
subdivision (d) of section 34171, contracts detailing specific warts that were entered into
by the former redeveiopment agency prior to June 28, 2011 with a third party other than
the city, county, or city and county that created the former RDA, and indebtedness
obligations as defined in subdivision (e) of Section 34171. Therefore, the transfer was
not made pursuant to an enforceable obligation and is not permitted.
The $48,480 consisted of payments for a public improvements project. The Agency
provided a resolution from the former RDA's Board cornmitting up to $266,040 in funding
and a corresponding City Council resolution awarding a construction contract for the
project on July 13, 2010, Therefore, Finance is reversing its adjustment of$48,480.
• The request to restrict assets in the amount of$2,022,528 was previously not allowed.
During the Meet and Confer process, the Agency provided clarification that some of the
bond proceeds had been transferred out of the investment account into the cash account
because they had planned to begin a project. However, the project was denied by
Finance and the Agency subsequently transferred the funds back to the investment
account in December 2012. Therefore, Finance is reversing its adjustment of
$2,022,528,
s The request to restrict non-cash assets totaling $3,230,823 (53,219,889 +$10,934)was
previously not allowed. During the Meet and Confer process, the Agency provided the
loan agreement between the City and the RDA, which included the repayment terms.
However, based on the adjustments made in the first bullet above, the loan receivable
should be $4,306,746 ($3,219,889 + $819,235 + $267,622). Additionally, the Agency
provided supporting documentation showing the accrued investment earnings should be
$5,865, rather than the $10,934 that was estimated. Therefore, Finance is reversing its
adjustment of$3,230,823 and increasing the OFA balance available by $5,865.
The Agency requested to retain $5,278,709 to cover enforceable obligations. Based
upon further review during the Meet and Confer process, the Agency may retain
$5,285,380 ($2,288,572 + $1,437,405 + $1,559,403) and the OFA balance available will
be decreased by $6,671 ($5,278,709 W $5,285,380), as further discussed below.
o For the Recognized Obligation Payment Schedule (ROPS) period of January
through June 2012 (ROPS 1), the Agency incurred $195,488 in expenditures that
were not paid until the July through December 2012 ROPS period (RODS 11).
Ms. Cynthia A. Fortune
May 1, 2013
Page 3
During the Meet and Confer process, the Agency provided supporting documents
showing $194,960 of the accruals were paid during the ROPS 11 period.
Additionally, the Agency reported and provided supporting documents for another
S2,093,612 in RODS 1 approved expenditures. Therefore, the Agency may retain
S2,288,572 (S194,960 + $2,093,612) to cover the BOPS I expenditures that were
paid during the ROPS 11 period.
Finance notes that amounts requested and approved in a ROPS are effective
only for the six-month period covered. To the extent the Agency does not
expend funds approved and received on a ROPS until a subsequent period, the
Agency should relist the unexpended amounts that need to be retained for those
enforceable obligations on the subsequent ROPS with the funding source as
"Reserves" or"Other' and an entry in the Notes section indicating the funds were
received in a prior ROPE period.
o For the ROPS 11 period, Finance approved $4,051,8W and the County Auditor
Controller(CAC) distributed $1,437,405 from the Redevelopment Property Tax
Trust Fund (RPTTF). On the July through December 2013 ROPS form (RODS
13-14A), the Agency reported and the CAC verified expenditures totaling
$1,290,403 Funded by the RPTTF. Therefore, sufficient RPTTF was received to
cover the expenditures during the ROPS II period and the Agency may retain
$1,437,405 for the ROPS II period.
o For the January through June 2013 RODS period (ROPS III), Finance approved
$1,196,536 and the CAC distributed $920,548 from the RPTTF_ The CAC made
a $275,988 adjustment for the ROPS I period on the January 2, 2013 ROPS III
distribution pursuant to HSC section 34186 (a), Additionally, Finance approved
$1,283,415 for enforceable obligations to be paid out of OFA balances. As such,
the Agency may retain $1,559,403 ($275,988 + $1,283,415) to cover approved
enforceable obligations during the ROPS III period.
Should deficits occur in the future, HSC provides successor agencies with
various methods to address short term cash flow issues_ These may include
requesting a loan from the city pursuant to MSC section 34173 (h), requesting the
accumulation of reserves on the RODS when a future balloon or uneven payment
is expected pursuant to HSC section 34177 (d) (1) (A), or subordinating pass-
through payments pursuant to HSC section 34183 (b). The Agency should seek
counsel from their oversight board to determine the solution most appropriate for
their situation if a deficiency were to occur.
• An increase to the OFA balance available in the amount of $220,024 was made for the
July 12, 2012 payment to the San Bernardino County Auditor-Controller. However,
during the Meet and Confer process, the Agency provided additional information
showing that this amount was not related to the July 12, 2012 payment, but pass through
payments for the January through June 2012 period. Therefore, Finance is reversing its
adjustment of$220,024.
The Agency's OFA balance available for distribution to the affected taxing entities is $1,650,496
(see table below).
Ms. Cynthia A. Fortune
May 1, 2013
Page 4
OFABalances Available For Distrlbutlon To Taxing Entitles
Available Balance per DDR: 1,651,302
Finance Adjustments
Acid:
Balances need for fiscal year 2012-13 obligations (6,671)
Requested restricted balances not supported 5,865
Total OFAavallable to be distributed: $ 1,650,496
This is Finance's final determination of the OFA balances available for distribution to the taxing
entities. HSC section 34179.6 (f) requires successor agencies to transmit to the county auditor-
controller the amount of funds identified in the above table within five working days, plus any
interest those sums accumulated while in the possession of the recipient. Upon submission of
payment, it is requested you provide proof of payment to Finance within five business days.
If funds identified for transmission are in the possession of the successor agency, and if the
successor agency is operated by the city or county that created the former redevelopment
agency, then failure to transmit the identified funds may result in offsets to the city's or the
county's sales and use tax allocation, as well as its property tax allocation. If funds identified for
transmission are in the possession of another taxing entity, the successor agency is required to
take diligent efforts to recover such funds. A failure to recover and remit those funds may result
in offsets to the other taxing entity's sales and use tax allocation or to its property tax allocation.
If funds identified for transmission are in the possession of a private entity, HSC 34179,E (h) (1)
(B) states that any remittance related to unallowable transfers to a private party may also be
subject to a 10 percent penalty if not remitted within 60 days.
Failure to transmit the identified funds will aiso prevent the Agency from being able to receive a
finding of completion from Finance. Without a finding of completion, the Agency will be unable
to take advantage of the provisions detailed in HSC section 34191.4. Specifically, these
provisions allow certain loan agreements between the former redevelopment agency(RDA) and
the city, county, or city and county that created the RDA to be considered enforceable
obligations. These provisions also allow certain Mond proceeds to be used for the purposes in
which they were sold and allows for the transfer of real property and interests into the
Community Redevelopment Property Trust Fund once Finance approves the Agency's long-
range property management plan.
In addition to the consequences above, willful failure to return assets that were deemed an
unallowable transfer or failure to remit the funds identified above could expose certain
individuals to criminal penalties under existing law.
Pursuant to HSC sections 34167.5 and 34178.8, the California State Controlier's Office
(Controller) has the authority to claw back assets that were inappropriately transferred to the
city, county, or any other public agency. Determinations outlined in this letter do not in any way
eliminate the Controller's authority.
Ms. Cynthia A_ Fortune
May 1, 2013
Page 5
Please direct inquiries to Evelyn Suess, Supervisor, or Mary Halterrnan, Analyst, at
(916)445-1546.
Sincerely,
h
S AY
Local Government Consultant
cc: Ms. Betsy Adams, City Manager
Ms. Vanessa Doyle, Auditor Controller Manager, San Bernardino County
California State Controller's Office
Attachment 2
LOAN AGREEMENT
(CITY I CRA)
This Loan Agreement is hereby entered into by and between the City of Grand Terrace, a
municipal corporation, duly organized and existing under the laws of the State of California (the
"City") and the Community Redevelopment Agency of the City of Grand Terrace, a California
Redevelopment Agency(the "Agency"), as follows:
RECITALS
WHEREAS, the boundaries of the City and Agency are caterminous with the
consequence that the projects and expenditures of each entity respectively have a positive impact
on the other entity; and
WHEREAS, in furtherance of the mutual goals and objectives of the City and Agency,
the Agency has heretofore loaned to the City certain sums of money, which funds have been or
will be spent in funding operations, programs and projects of mutual benefit; and
WHEREAS, said loans, while a matter of public record through the budgeting process,
have heretofore not been memorialized in a formal loan agreement; and
WHEREAS, the Parties now desire to enter into a formal loan agreement setting forth
the Parties respective rights, duties and obligations.
NOW,THEREFORE, THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. The foregoing recitals are true and correct and incorporated herein as if set forth
in full_
2. The Parties acknowledge that the Agency has loaned to the City $3,388,091.00
(the"Loan").
3. Subject to the restrictions contained in paragraph 2 above, the City hereby agrees
to repay the Agency the amount of the Loan by making annual installment payments of
$147,308.30, beginning on July 1, 2012. The payment of said amount is contingent upon a
determination by the City Council that it has sufficient funds therefore, on an annual basis. The
Parties acknowledge that should such funds not be available in any fiscal year, the City shall
make a payment in the amount the City is able to pay as determined by the City Council. The
Loan shall be repaid in full on or before July 1, 2034. The Parties further agree that it is to the
Parties' mutual benefit that interest shall not accrue on any remaining Loan balance.
4. This Loan shall be subordinate to any and all obligations established under any
trust agreement, indenture of trust, bonds, loans or other indebtedness of the City incurred prior
or subsequent to the date of this Loan Agreement. This Loan Agreement shall also be
subordinate to any obligation to provide mandated City services as determined by the City
Council.
l
IN WITNESS WHEREOF, the City and Agency have executed this Loan Agreement as
set forth below.
Dated: 2—
CITY OF GRAND TERRACE
By:
Wait St ewitz,Mayor
Dated: . L' 1 Z `"�� "AGENCY"
COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF GRAND
TERRACE
By:
Walt Stanclriewitz,Chairman
Ap roved as to Form:
By:
John R. Harpekjity Attorney
and Agency Counsel
2