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HomeMy WebLinkAboutRDA Item No. 4CITY OF LADE ,?LSIR0RJE % DREAM EXTREME- REPORT TO REDEVELOPMENT AGENCY TO: HONORABLE CHAIRMAN AND MEMBERS OF THE REDEVELOPMENT AGENCY FROM: ROBERT A. BRADY EXECUTIVE DIRECTOR DATE: APRIL 26, 2011 SUBJECT: CONSIDERATION OF THE CALIFORNIA REDEVELOPMENT AGENCY ASSOCIATION'S ALTERNATIVE PROPOSAL TO GOVERNOR'S PROPOSED ELIMINATION OF REDEVELOPMENT AGENCIES Background The Redevelopment Agency of the City of Lake Elsinore ("Agency") is a member of the California Redevelopment Association ("CRA"), -a not-for-profit trade organization comprised of over 350 redevelopment agencies. The organization's purpose is to provide legislative advocacy, professional development, public education, and member services such as responding to legislative proposals, administrative regulations and providing member training regarding redevelopment law. In light of Governor Brown's budget proposal to eliminate redevelopment agencies and to realign and redirect the tax increment generated within redevelopment project areas to a successor agency, the CRA has developed an alternative proposal for voluntary redevelopment contributions to schools. A summary of the CRA proposal is attached (Attachment 1). The intent of the alternative proposal is to help close the state's budget deficit, while maintaining the constitutional protections of Proposition 22 which prohibits the State from borrowing or taking local funds used for transportation, redevelopment or local government projects and services. Discussion The League of California Cities Board of Directors has voted in support of CRA'S alternative proposal. CRA and the League have been meeting with Legislators asking them to consider the alternative proposal, as opposed to the wholesale elimination of redevelopment agencies. The CRA proposal is summarized below: Alternative 1 Local redevelopment agencies can voluntarily suspend their housing set-aside for FY 2011-12. An equivalent amount of funds from any source must then be contributed to AGENDA ITEM NO. 4 Page 1 of 8 CRA Alternative Budget Proposal April 26, 2011 Page 2 local school districts in project areas. In exchange for this contribution of funds for FY 2011-12 to local schools, the agency will be allowed to extend the project area's life by two years. Alternative 2 In addition, or alternatively, redevelopment agencies could voluntarily contribute up to 10 percent of their non-housing tax increment revenue stream each year to local school districts for 10 years, beginning in FY 2011-12. The tax increment revenue stream the agency could contribute would be calculated as a percentage of the gross tax increment minus the existing pass-through payments to local taxing entities. For each percentage of tax increment paid to schools, an additional year could be added to the project area life, up to a maximum of 10 years. For example, if five percent of tax increment was dedicated to schools, the project area live could be extended for five years. The CRA conservatively estimates the alternative could raise more than $2.7 billion over the 10-year life of the proposal, exceeding the $1.7 billion in the Governor's estimates that could be gained for the State by eliminating redevelopment. In order to substantiate their estimates of the contributions to schools from their proposal, CRA is requesting 100% participation from all member agencies in a survey (Attachment 2). The survey is non-binding. The CRA has informed member agencies that if the proposals are enacted by the Legislature, redevelopment agencies would potentially have 60 days from the date of enactment of the legislation to decide whether or not to participate. Much of the funds resulting from the alternatives would be a one-time up-front payment to help bridge the FY 2011-12 budget gap. The measure is viewed as less contentious and less costly than the legal battles likely to follow enactment of the Governor's proposal and avoids the uncertainty inherent in protracted litigation. The proposal keeps the protections of Proposition 22 in place, and permits local agencies to continue to keep redevelopment funds locally. The contribution would not count against the Agency's tax increment cap. Attachment 3 provides a question and answer summary from the CRA. The purpose of presenting this item is to receive direction from the Agency Board of Directors on whether participation in any of the alternatives is warranted, and if so, to direct staff to submit a preferred non-binding alternative(s) to the CRA survey. Fiscal Impact Alternative 1 In consideration of the CRA's proposal, Alternative 1 would permit the Agency to voluntarily suspend housing set-aside funds for FY 2011-12 and an equivalent of those funds must be contributed to local schools, including the Lake Elsinore Unified School District and the Mt. San Jacinto Community College District. The projected cost of this alternative to the Agency is estimated to be approximately $3.8 million in housing set- Page 2 of 8 CRA Alternative Budget Proposal April 26, 2011 Page 3 aside funds, and the term of the Agency's Redevelopment Plans would each be extended by two years. Alternative 2 Alternative 2 would permit the Agency to voluntarily contribute up to 10 percent of non- housing tax increment revenue for a minimum of 10 years beginning in FY 2011-2012. The Agency's projected non-housing tax increment revenue is roughly equivalent to $7.5 million in 2011-12 after subtracting pass-through payments. Based on the Board's preference and depending on the contribution percentage, in year one, the Agency would contribute between $75,000 (based on a 1% contribution) and $750,000 (based on a 10% contribution) in tax-increment revenue to local schools. The 1% contribution for 10 years would qualify for a one-year extension to each of the Redevelopment Plans. A 10% contribution for 10 years would allow for a 10-year extension to each Redevelopment Plan. Given the Agency's existing obligations and looking at projected revenues less projected expenditures, it is anticipated that the Agency will have insufficient unencumbered non-housing funds available over the next 10 years to commit to Alternative 2. Recommendation It is recommended that the Redevelopment Agency support the CRA proposal, select Alternative 1 as the preferred alternative and direct staff to complete and submit the California Redevelopment Association Alternative Proposal Survey accordingly. Prepared by: Barbara Leibold, Agency Counsel Approved by: Robert A. Brady Executive Directo Attachments: 1. Summary of CRA Proposal 2. CRA Survey 3. Questions & Answers Page 3 of 8 Page 4 of 8 TIE CALIFORNIA REDEVELOPMENT ASSOCIATION'S ALTERNATIVE PROPOSAL FOR VOLUNTARY REDEVELOPMENT CONTRIBUTIONS TO SCHOOLS CRA has crafted an aftemative to the Governor's proposed elimination of redevelopment agencies which provides significant funding to schools that could also help close the state's budget deficit, avoids the unconstitutional provisions of the Governor's proposal that would lead to contentious and costly legal battles, and continues local redevelopment's contributions to reviving the state's economy and supporting hundreds of thousands of jobs. A summary of our proposal is as follows: 1. Local redevelopment agencies can voluntarily suspend their housing set-aside for FY 2011-12. Ar equivalent amount of funds from any source must then be contributed to local school districts in project areas. (a) In exchange for this contribution of funds for FY 2011-12 to local schools, the agency will be allowed to extend the project area's life by TWO YEARS. 2. In addition, or alternatively, redevelopment agencies could voluntarily contribute up to 10 percent of their non-housing tax increment revenue stream each year to local school districts for 10 years, beginning in FY 2011-12. (a) The tax increment revenue stream they could contribute would be calculated as a percentage of the gross tax increment minus the existing pass-through payments to local taxing entities. (b) For each percentage of tax increment paid to schools, an additional year could be added to the project area life, up to a maximum of 10 years. For example, if five percent of tax increment was dedicated to schools, the project area life could be extended for five years. The amount of money contributed to local schools, and thus the amount of money the state can save in its budget, is dependent on the participation of agencies. Agencies will have 60 days from the date of enactment of the legislation to decide whether or not to participate. BENEFITS: • CRA conservatively estimates that the alternative could raise more than $2.7 billion over the 10- year life of the proposal, far exceeding the $1.7 billion in the Governor estimates that could be gained by eliminating redevelopment. • Much of these funds (estimates range from $700 million to $1 billion) would be a one-time upfront payment that could help bridge the FY 2011-12 budget gap. • This measure replaces the draconian and short-sighted proposal to abolish redevelopment. Local communities would continue to have redevelopment as a tool to createjobs, build affordable housing, and revive local economic growth. • Because it is a voluntary program, it does not violate the States Constitution or the will of the voters when they passed Proposition 22. There will be no expensive, time-consuming lawsuits, and no bonding or borrowing. • The contributions to local schools could be used for discretionary purposes, and the State could choose to score all or part of it towards Proposition 98 guarantees to school districts. • The contribution would not count against an agency's tax increment cap. If you have any questions or need further explanation on this alternative proposal, please contact the California Redevelopment Association at (916) 448-8760. Cast updated: 3124110112:47 AM hvrac~r► -of6 CRA Alternative Proposal Survey Page] of 3 CRA Alternative Proposal Exit this survey 1. CRA Alternative Proposal - Survey Questions The California Redevelopment Association has crafted an alternative to the Governor's proposed elimination of redevelopment agencies which provides significant funding to schools that could also help close the state's budget deficit. CRA conservatively estimates that the alternative could raise more than $2.7 billion over the 10-year life of the proposal, far exceeding the $1.7 billion in the Governor's estimates that could be gained for the State by eliminating redevelopment. Copy and paste this link to read the CRA Alternative Proposal. hftp:l/www. calredevelop.org/external/wopages/wGwebGOntenttwebcon tentpage, aspx? contentid=708 Understandably, we have been asked by State officials to substantiate our estimates of the contributions to schools from our proposal. We need your help and 100% participation in the following survey to do that! We are asking these questions in order to gather data to support the CRA Alternative Proposal when we are discussing it with Legislators. IMPORTANT - Your answers DO NOT bind your agency to any agreement to contribute these funds, but we need your best estimate: PLEASE COMPLETE THIS SURVEY BY FRIDAY, 3118. We need 100% participation! ~k Please fill In the Information. Name Agency: Number of Active Project Areas: 1) CRA PROPOSAL OPTION # 1: DESCRIPTION OF OPTION # 1 Local redevelopment; agencies can voluntarily suspend their housing set- aside for FY 2011-12: An equivalent amount of funds must then be contributed to local school districts in project areas. i. In exchange for this contribution of funds for FY 2011`-12 to local schools, the agency will be allowed to extend the project area's life by TWO YEARS. ~k QUESTION: Would your agency voluntarily contribute the equivalent of your housing set-aside funds for FY 2011.12 to local school districts in your project area(s)? Yes No 4. If Yes-, how much money does that amount to? (no comma or $ signs) 2) CRA PROPOSAL OPTION# 2: ~ft6)MeAf 7- http://www.surveymonkey.com/s/YS2KQQS Page 6 of 8 CRA Alternative Proposal Survey Page 2 of 3 DESCRIPTION OF OPTION #`2t In addition to, or alternatively, redevelopment agencies could voluntarily contribute up to 10 percent of their tax increment revenue stream from non-housing funds to local school districts for 10 years, beginning in FY 2011-12. a. The tax increment revenue stream contributed would be calculated as a percentage of the gross tax increment minus the existing pass-through payments to local taxing entities. b. For each percentage of tax increment paid to schools, an additional year could be added to the project area life, up to a maximum of 10 years. For example, if five percent of tax increment was dedicated to schools, the project area life could be extended for five years. c. Contributions to schools will not count toward caps. *QUESTION: specifically looking at your Project Area(s); Would your agency participate in Option 2 of the CRA Alternative Proposal? Yes No * f Yes, beginning in FY 2011-12, what would be the average percentage contributed from your project area(s) over a 10-year period? (in exchange, for each percentage of tax increment paid to schools, an additional year can be added to your project area life, for a maximum of 10 years.) INDICATE AVERAGE PERCENTAGE *Based on this percentage, how much money does this amount to annually? INDICATE ANNUAL DOLLAR AMOUNT:$(no comma or $ signs) Thank you for your participation in this important survey. We appreciate your efforts to protect the future of redevelopment in California. PLEASE COMPLETE THIS SURVEY BY FRIDAY; 3118. John F. Shirey Executive Director California Redevelopment Association (-Done http:llwww.surveymonkey.rom/s[YS2KQQS Page 7 of 8 THE CALIFORNIA REDEVELOPMENT ASS C TIOWS ALTERNATIVE PROPOSAL FOR VOLUNTARY REDEVELOPMENT CONTRIBUTIONS TO SCHOOLS QUESTIONS ANSWERS CRA has crafted an alternative to the Governor's proposed elimination of redevelopment agencies which provides significant funding to schools that could also help close the state's budget deficit, avoids the unconstitutional provisions of the Governor's proposal that would lead to contentious and costly legal battles, and continues local redevelopment's contributions to reviving the state's economy and supporting hundreds of thousands of jobs. QUESTION: Which time limits can be extended? ANSWER: The agency may extend the time limits on: 1. Incurring indebtedness; 2. The effectiveness of the redevelopment plan; and 3. Repayment of indebtedness with tax increment. QUESTION: Does the agency need to follow the regular procedures for amending the redevelopment plan? ANSWER: No. An ordinance can be adopted by the City Council extending the time limits without following the regular procedures for amending the redevelopment plan. QUESTION: What about the dollar cap? ANSWER: Amounts paid to schools under CRA's proposal would not count towards a limitation in the redevelopment plan on the number of dollars of tax increment that can be allocated to the agency. If an agency will reach its dollar cap even without counting the additional payments to schools, it will need to either limit the payments to schools to comply with the dollar cap or amend the dollar cap. An agency's ability to increase its dollar cap is unaffected by CRA's proposal. QUESTION: Are payments to schools under CRA's proposal offset by amounts required to be paid to schools under existing law or pass-through agreements? ANSWER: No. The payments to schools under CRA's voluntary contributions to schools proposal are in addition to any other payments that must be made. QUESTION: If an agency amends a pre-AB 1290 redevelopment plan to increase the time limit on incurring indebtedness or the effectiveness of the redevelopment plan, would that amendment trigger the payment of pass-through payments to taxing agencies pursuant to Section 33607.7 of the Health and Safety Code? ANSWER: Yes. An amendment extending time limits pursuant to CRA's proposal would trigger pass-through payments to taxing agencies for pre-AB 1290 projects not already making such payments. NTao - age 8 of