HomeMy WebLinkAbout2012-05-08 OB Agenda Item No. 2OVERSIGHT BOARD TO THE
SUCCESSOR AGENCY OF THE REDEVELOPMENT
AGENCY OF THE CITY OF LAKE ELSINORE
TO: MEMBERS OF THE OVERSIGHT BOARD
FROM: BARBARA LEIBOLD, SUCCESSOR AGENCY COUNSEL
DATE: MAY 8, 2012
SUBJECT: CORRESPONDENCE FROM DEPARTMENT OF FINANCE
Discussion:
On Thursday, April 19, 2012, the Director of Administrative Services received an email
from the Department of Finance (DOF) indicating it is reviewing certain items listed on
the Successor Agency's Recognized Obligation Payment Schedule (ROPS), as
approved by the Oversight Board on April 10, 2012. As a result, the Successor
Agency's ROPS is not considered effective. The email which was provided to the
Oversight Board at its April 24, 2012 meeting states that the Department of Finance will
be in contact with the Successor Agency.
On April 27, 2012, the Director of Administrative Services received a letter from the
Department of Finance indicating that DOF determined the administrative cost budget
for fiscal 2012 to exceed that permitted by statute and denying the excess
administrative costs as enforceable obligations on the First Amended ROPS for January
through June 2012.
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Staff has been unable to recalculate the real property tax trust fund monies used by
DOF for fiscal 2012 to calculate the Successor Agency's administrative budget. When
responding to DOF's letter, staff will request clarification as to how the total real property
tax funds for fiscal 2012 were calculated.
In addition, there has been confusion in the former redevelopment community as to the
period to which the administrative cost budget applies. Many stakeholders, including
the County of Riverside, had originally stated that the greater of 5 %/$250,000 limit
applied to the four months of fiscal 2012 (i.e. February — June) in which the Successor
Agency will have been in existence. DOF has instead taken a very conservative view
and applied that limit to all twelve months of fiscal 2012, including the period in which
the redevelopment agency still existed (i.e. July — January).
AGENDA ITEM 2 Page 1
Correspondence from Department of Finance
May 8, 2012
Page 2
Additionally, DOF's approach differs from guidance previously published by the League
of California Cities, which was followed in the initial preparation of the ROPS. For
example, staff believes DOF has mischaracterized certain project costs as
administrative costs. These include certain legal fees and financial consultant and audit
fees required for implementation of specific agreements and bond disclosure
compliance. Nonetheless, staff agrees that some of the fees previously reflected as
project costs on page 1 of the ROPS can appropriately be argued to be administrative in
nature.
The ROPS for July through December 2012 has been prepared with reduced amounts
of project related legal fees on page 1 of the ROPS and revised descriptions for other
project costs. The legal fees remaining are required for ongoing compliance with bond
requirements, continuing administration of the Summerly DDA and the Stadium
Agreement. A response to DOF will be submitted with the July through December
ROPS in an effort to address DOF's comments. Once DOF's concerns are resolved, it
is likely that the Initial ROPS covering January - June 2012 will require amendment and,
possibly, that the July - December ROPS presented for consideration today may also
need to be amended.
Recommendation:
That the Oversight Board receive and file the correspondence from the Department of
Finance.
Prepared and approved by: Barbara Leibold,
City Attorney /Successor Agency Counsel
Attachment:
1. Copy of Letter from Department of Finance
AGENDA ITEM 2 Page 2
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DEPARTMENT OF
«.aN."F1 N A N C E
April 27, 2012
James R. Riley, CPA
Director of Administrative Services
City of Lake Elsinore
130 S. Main Street
Lake Elsinore, CA 92530
Dear Mr. Riley:
EDMUND G. BROWN JR. ■ GOVERNOR
91 S L STREET A BACRAMENTO CA ■ 958 1 4 -3706 ■ WWW.013F.CA.00V
Pursuant to Health and Safety Code (HSC) section 34177 (1) (2) (C), the City of Lake Elsinore
Successor Agency submitted a Recognized Obligation Payment Schedule (ROPS) to the
California Department of Finance (Finance) on April 112, 2012 for the period January through
June 2012. Finance staff contacted you for clarification of items listed in the ROPS.
HSC section 34171 (d) lists enforceable obligation (EO) characteristics. Based on a sample of
line items reviewed and application of the law, the following do not qualify as EOs:
• Administrative cost claimed exceeds allowance by $45,927 (see table below for
calculation). HSC section 34171 (b) limits administrative expenses to five percent of
property tax allocated to the successor agency or $250,000, whichever is greater.
Administrative Cost Calculation
Pn
Line item
Payment
Project Name /Debt Obligation_ Source
Amount
1
1 -19
All RPTTF I RPTTF
$5,086,748
2
2
All RPTTF RPTTF_
14,683,006
1
_
21
- -- Total RPTTF Claimed:
$19,769,753
19,625
1
Admin Allowance Greater of 5% or $250,000:
$988,488_
Line Items Considered Administrative
Costs
Page
Line item
Description
Payment
Source
Amount
1
20
Legal Services
RPTTF
$125,000
1
_
21
Consultant fees for tax projections
RPTTF
19,625
1
23
Auditing Services
RPTTF
9,000
2
21
Legal Services
RPTTF
55,000
2
22
Consultant fees for tax projections
RPTTF
19,625
2_
23
Tax sharing calculations
RPTTF
800
2
24
Auditing Services
RPTTF
8,665
3
1 -3
Admin allowance
RPTTF
796,700
Total:
$1,034,415
Less Admin Allowance:
988,488
Total Disallowed Administrative Cost:
$45,927
Mr. Riley
April 27, 2012
Page 2
As authorized by HSC section 34179 (h), Finance is returning your ROPS for your
reconsideration. This action will cause the specific ROPS items noted above to be ineffective
until Finance approval. Furthermore, items listed on future ROPS will be subject to review and
may be denied as EOs.
If you believe we have reached this conclusion in error, please provide further evidence that the
items questioned above meet the definition of an EO.
Please direct inquiries to Evelyn Suess, Supervisor or Mindy Patterson, Lead Analyst at
(916) 322 -2985.
Sincerely,
MARK HILL
Program Budget Manager
cc: Ms. Pam Elias, Chief Accountant Property Tax Division, Riverside County
Auditor - Controller
Ms. April Nash, Supervising Accountant, Riverside County Auditor - Controller
Ms. Jennifer Baechel, Business Process Analyst It, Riverside County Auditor - Controller