HomeMy WebLinkAbout3 - RECOGNIZED OBLIGATION PAYMENT SCHEDULE
REQUEST FOR
SUCCESSOR AGENCY
ACTION'
MEETING DATE: CLERK OF THE COUNCIL USE ONLY:
AUGUST 20, 2012
TITLE: APPROVED 13 ` z
[3'As Recommended
RESOLUTION - RECOGNIZED OBLIGATION O As Amended
PAYMENT SCHEDULE (ROPS) AND Q Othermenting Resolution
ADMINISTRATIVE BUDGET FOR THE
PERIOD OF JANUARY 1, 2013 THROUGH
JUNE 30, 2013
CONTINUED TO
FILE NUMBER
CITY MANAGER
RECOMMENDED ACTION
It is recommended that the City Council acting as the Successor Agency to the former Agency:
1 . Adopt a Resolution approving the Third Recognized Obligation Payment Schedule ("ROPS")
and Successor Agency Administrative Budget ("Budget") for the period of January 1, 2013
through June 30, 2013 and certain other actions pursuant to Part 1.85 of Division 24 of the
California Health & Safety Code ("Dissolution Act").
2. Direct the City Manager and/or Director of Finance or their designees, as delegated officials
of the Successor Agency, to make or accept any augmentation, modification, additions, or
revisions to the BOPS and/or Administrative Budget as the City Manager and/or Director of
Finance or their designees may deem necessary and appropriate in their reasonable
discretion, based on review by and comments received from the Oversight Board, the State
Department of Finance (DOF), or the County of Orange's selected independent auditor, as
applicable.
DISCUSSION
Pursuant to the Dissolution Act, the City Council on January 9, 2012, elected for the City to act as
the "Successor Agency" to the dissolved Community Redevelopment Agency ("Agency") and
selected the Housing Authority of the City of Santa Ana to act as "Successor Housing Agency" to
the dissolved Agency_ On February 1, 2012, pursuant to the Dissolution Act and the California
Supreme Court's decision in California Redevelopment Association v. Matosantos, Case No.
S194861, the Agency was dissolved and the City began to serve as the "Successor Agency_"
The City Council serves as the governing body of the Successor Agency under the Dissolution
Act as recently amended by AB 1484, to administer the enforceable obligations of the Agency
3-1
Third BOPS and Administrative Budget
August 20, 2012
Page 2
and otherwise unwind the Agency's affairs. Many actions of the Successor Agency are subject to
the review and approval by a seven-member Oversight Board_
The first and second BOPS and associated administrative budgets were approved by the
Successor Agency on April 2, 2012 and May 7, 2012, respectively, and subsequently by the
Oversight Board on April 10, 2012 and May 8, 2012, respectively. The documents were made
available to the appropriate entities (the State Controller's Office, DOF, and County-Auditor
Controller as required by law. The DOF approved both ROPS on May 24, 2012; however, several
items deemed enforceable obligations by the Successor Agency and Oversight Board were
disapproved by DOF, which the Agency is disputing. To date, the DOF and Agency have not
reached a resolution on these matters. Additionally, there is pending litigation (Gerald Peebler, et
a/., v_ State of California Department of Finance, et a/_, Case No. 34-2012-80001172) regarding
the South Main Settlement Agreement, one of the enforceable obligations on the prior ROPS
which was approved by the Successor Agency and Oversight Board, but denied by DOF. On
July 12, 2012, DOF sent a letter to all redevelopment agencies stating that no further revised
ROPS for periods prior to January 1, 2013 would be accepted and no further requests for
reconsideration of such prior BOPS items would be considered- However, based on the DOF
instructions for the third BOPS, the DOF is allowing the Agency/Oversight Board to include
previously disputed items to be listed in the "Notes" section of the ROPS form provided by DOF.
The ROPS (Exhibit A of Exhibit 1) and Budget (Exhibit B of Exhibit 1) for the January 1, 2013
through June 30, 2013 period is now being presented for Successor Agency approval. Following
action by the Successor Agency, the BOPS and Budget will be forwarded to the Oversight Board,
DOF, County and other appropriate entities as required by AB 1484. The Oversight Board will
consider the BOPS and Budget at a special meeting anticipated to be held August 28, 2012.
Pursuant to AB 1484 and DOF directive, the approved ROPS must be submitted to the DOF no
later than September 4, 2012, or the Successor Agency/City will be subject to severe financial
penalties.
FISCAL IMPACT
The Successor Agency is limited to making only payments listed on the approved ROPS for each
six month period and the administrative expenditures of the Successor Agency are limited to
items listed in the approved Administrative Budget for each six month period.
California Health and Safety Code Section 34173(e) stipulates that "the liability of any successor
agency, acting pursuant to the powers granted under the act adding this part, shall be limited to
the extent of the total sum of property tax revenues it receives pursuant to this part and the value
of assets transferred to it as a successor agency for a dissolved redevelopment agency." Thus,
the City's obligations as Successor Agency are limited by the amount of property taxes and the
value of assets it receives in its role as the Successor Agency. Despite this language, the
Dissolution Act (as amended by AB 1484) also provides for the withholding and diversion of sales
tax and property tax revenues otherwise due to the City in order to recover certain expenditures
deemed to have been improperly made by the former Agency; however this offset is inapplicable
to the present recommended actions.
3-2
Third BOPS and Administrative Budget
August 20, 2012
Page 3
`fi't c(~- r
Nancy T. E ards
Interim Exe tive Director
Community Development Agency
NTE/SG/kg
Exhibits: 1. BOPS & Administrative Budget Resolution
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N, I~/1? LES
SUCCESSOR AGENCY RESOLUTION NO. 2012-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA
ANA ACTING AS SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY APPROVING THE THIRD
RECOGNIZED OBLIGATION PAYMENT SCHEDULE (BOPS) AND
ADOPTING AND APPROVING THE SUCCESSOR AGENCY'S
ADMINISTRATIVE BUDGET FOR THE PERIOD OF JANUARY 1, 2013
THROUGH JUNE 30, 2013 PURSUANT TO HEALTH AND SAFETY
CODE SECTIONS 34177(1)(1) AND 34177(m), AND CERTAIN OTHER
ACTIONS PURSUANT TO PART 1.85 OF DIVISION 24 OF THE
CALIFORNIA HEALTH AND SAFETY CODE ("DISSOLUTION ACT")
BE IT RESOLVED BY THE MEMBERS OF THE SUCCESSOR AGENCY OF THE CITY OF
SANTA ANA, AS FOLLOWS:
Section 1. The City Council of Santa Ana, acting as Successor Agency to the former
Agency, hereby finds, determines and declares as follows:
A. Pursuant to the Dissolution Act, on January 9, 2012, pursuant to section
34173 of the California Health & Safety Code, the City of Santa Ana ("City") elected to
serve as the Successor Agency for the dissolved Community Redevelopment Agency
("Agency") of the City of Santa Ana and selected the Housing Authority of the City of
Santa Ana to act as "Successor Housing Agency".
B. The City Council serves as the governing body of the Successor Agency
under the Dissolution Act, as recently amended by AB 1484, to administer the
enforceable obligations of the Agency and otherwise unwind the Agency's affairs. Many
actions of the Successor Agency are subject to the review and approval of a seven
member Oversight Board.
C. The first and second BOPS and associated administrative budgets were
approved by the Successor Agency on April 2, 2012 and May 7, 2012, respectively, and
subsequently by the Oversight Board on April 10, 2012 and May 8, 2012, respectively.
The documents were made available to the appropriate entities [State Controller's Office,
State Department of Finance (DOF), and County-Auditor Controller] as required by law.
The DOF approved both ROPS on May 24, 2012, however, several items deemed
enforceable obligations by the Successor Agency and Oversight Board were
disapproved by DOF, which disapproval was and is disputed by the Agency. To date,
the DOF and Agency have not reached a resolution of these matters.
D. Additionally, there is pending litigation (Gerald Peebler; et al., v. State of
California Department of Finance, et al., Case No_ 34-2012-80001172), regarding the
South Main Settlement Agreement, one of the enforceable obligations on the prior BOPS
which was approved by the Successor Agency and Oversight Board, but denied by DOF_
1
3-5
h/15/12 LES
E. On July 12, 2012, DOF sent a letter to all redevelopment agencies stating
that no further revised BOPS for periods prior to January 1, 2013 would be accepted and
no further requests for reconsideration of such prior BOPS (or items on such BOPS)
would be considered.
F. The ROPS (Exhibit A of Exhibit 1) and Budget (Exhibit B of Exhibit 1) for
the January 1, 2013 through June 30, 2013 period is now being presented for Successor
Agency approval- Based on the DOF instructions for the third BOPS, the DOF is allowing
the Agency/Oversight Board to include previously disputed items on this third BOPS.
These disputed items are included as directed in the "Notes" section of the form provided
by DOF.
G. Following action by the Successor Agency, the BOPS and Budget will be
forwarded to the Oversight Board, DOF, County and other appropriate entities as
required by AB 1484. The Oversight Board will consider the ROPS and Budget at a
special meeting anticipated to be held August 28, 2012.
H. Pursuant to AB 1484 and DOF directive, the approved BOPS must be
submitted to the DOF no later than September 4, 2012, or the Successor Agency/City
will be subject to severe financial penalties.
I. Health and Safety Code Section 34173(e) provides that "the liability of any
successor agency, acting pursuant to the powers granted under the act adding this part,
shall be limited to the extent of the total sum of property tax revenues it receives
pursuant to this part and the value of assets transferred to it as a successor agency for a
dissolved redevelopment agency." Thus, the City's obligations as Successor Agency
are limited by the amount of property taxes and the value of assets it receives in its role
as the Successor Agency. Despite this language, the Dissolution Act (as amended by
AB 1484) also provides for the withholding and diversion of sales tax and property tax
revenues otherwise due to the City in order to recover certain expenditures deemed to
have been improperly made by the former Agency; however this offset is inapplicable to
the present actions.
Section 2. The attached Recognized Obligation Payment Schedule (Exhibit A), which
is hereby approved by the Successor Agency, establishes those obligations which the
Community Redevelopment Agency of the City of Santa Ana has binding commitments that it
has entered into and includes legal commitments that it is obligated to perform from January 1,
2013 through June 30, 2013, in order to meet the pre-existing commitments of contracts and
obligations that were established prior to the effective date of the Dissolution Act. Such approval
is conditional upon approval of the Oversight Board.
Section 3_ Pursuant to the Dissolution Act, the Successor Agency approves the
proposed Administrative Budget, attached hereto as Exhibit B and incorporated by this
reference- Such approval is conditional upon approval of the Oversight Board. Following action
by the Successor Agency, the BOPS and Budget will be forwarded to the Oversight Board,
DOF, County and other appropriate entities as required by AB 1484.
2
3-6
S/ 1 / 1, LES
Section 4. The City Manager, or his/her designee ("City Manager"), is directed to file
the Recognized Obligation Payment Schedule and the Administrative Budget in the manner
required by law.
Section 5. The City Manager and/or the Director of Finance, or their respective
designees, as delegated officials of the City acting as Successor Agency, are authorized to
make any augmentations, modifications, additions, or revisions as may be necessary to the
BOPS or Administrative Budget, and as may be amended from time to time, based upon review
by the State Department of Finance or the independent auditor selected by the County of
Orange.
Section 6. This Clerk of the Council shall attest to and certify the vote adopting this
Resolution.
ADOPTED this day of 2012.
Miguel A. Pulido
Mayor
APPROVED AS TO FORM:
Sonia R. Carvalho, City Attorney
By:
Lisa E. Storck
Assistant City Attorney
AYES: Councilmembers:
NOES: Councilmembers:
ABSTAIN: Councilmembers:
NOT PRESENT: Councilmembers:
CERTIFICATION OF ATTESTATION AND ORIGINALITY
I, Maria D. Huizar, Clerk of the Council, do hereby attest to and certify the attached Resolution
No. 2012- to be the original resolution adopted by the City Council acting as the
Successor Agency on August , 2012.
Date:
Maria D. Huizar, Clerk of the Council
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BOND DEBT SLR DICE
Community Redevelopment Agency of the City of Santa Ana
(Santa Ana Merged Project Area)
'F- Allocation Bonds
2011 Series A
Final Numbers - January 2S, 2011
Dated Date 02/04/2011
Delivery Date 02/04/2011
Period
Annual
Ending - Principal coupon Interest DcUt Service Debt Service
09/01/2011 2,420,663.76 2,420,663.76 2,420,663.76
03/01/2012 2,104,925.00 2,104,925.00
09/01/2012 2,104,925.00 2,104,925.00 4,209,850.00
03/01/2013 2,104,925.00 2,104,925.00
09/01/2013 2,104,925.00 2,104,925.00 4,209,850.00
03/01/2014 2,104,925.00 2,104,925.00
_ 09/01/2014 2,104,925.00 2,104,925.00 4,209,850.00
03/01/2015 2,104,925.00 2,104,925.00
09/01/2015 2,104,925.00 2,104,925.00 4,209,850.00
03/01/2016 2,104,925.00 2,104,925.00
09/01/2016 2,104,925.00 2,104,925.00 4,209,850.00
03/01/2017 2,104,925.00 2,104,925.00
_09/01/2017 805,000 5.000% 2,104,925.00 2,909,925.00 5,014,850.00
03/01/2018 2,084,800.00 2,084,800.00
09/01/2018 1,145,000 5.000% 2,084,800.00 3,229,800.00 5,314,600.00
03/01/2019 2,056,175.00 2,056,175.00
_09/01/2019 2,735,000 5.250% 2,056,175.00 4,791,175.00. 6,847,350.00
03/01/2020 1,984,381.25 1,984,381.25
_09/01/2020 5,475,000 1,984,381.25 7,459,381.25 9,443,762.50
03/01/2021 1, 825,4 43.75 1,82 5,443.75
_09/01/2021_ 6,105,000 6.000% 1,825,443.75 7,930,443.75- 9,755,887.50
03/01/2022 1,642,293.75 1,642,293.75
_09/01/2022 6,810,000 6.000% 1,642,293.75 8,452,293.75 10,094,587.50
03/01/2023 1,437,993.75 1,437,993.75
09/01/2023 7,545,000 1,437,993.75 8,982,993.75 10,420,987.50
03/01/2024 1,201,075.00 1,201,075.00
_09/01/2024 _ 8,360,000 1,201,075.00 9,561,075.00 10,762,150.00
03/01/2025 938,587.50 938,587.50
09,/01/2025 _ 9,230,000 6.750% 938,587.50 10,168,587.50 11,107,175.00
03/01/2026 627,075.00 627,075.00
09/0.1/2026 _10,820,00Q 6.750% 627,075.00 11,447,075.00 12,074,150.00
03/01/2027 261,900.00 261,900.00
_ 09101/2027 4,055,000 6.750% _ 261,900.00 4,316,900.00 4,578,800.00
03/01/2028 125,043.75 125,043.75
09/01/2028 3,705,000 6.750% 125,043.75 3,830,043.75 3,955,087.50
66,790,000 56,049,3 01.26 122, 83 9,301.26 122, 839,301.26
F', ` Jan 25. 2011 I-52 pm 1-pareel h y St Y-- h-, LLC (!,Mb) _ _ (l inun<<_ 6.019) Page 6
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d BOND DEBT SERVICE
~C - Community RDA of the City of Santa Ana
-s-:• - New Money TAB-S.64,2003 A-"
i
Period Annual
Ending Principal Coupon Interest Debt Service Debt Service
06/03/2003
03101/2004 601,267:31 607,267.37 _
0970T/200 475,000 ---900°Te--403,83625 878,836.25 1,480,103.56
03/01/2005 401,223.75 401 223_7_5_
09101/2005 480,000 1250% 407,223.75 881,223.75 1,282,447.50 c~
03101/2006 393,223.75 398,223.75
09 2066 - - - 45-0;0U0 1:500% -398,223.75--__ 878,223.75 1,276,447.50
03101/2007 394,623.75 394,623.75 _
07/011200/ 490,000 2000x1 394,623.75 884,623.75 1,279,247.50
03/01/2008. _ 389,723.75 389,72375.
0910112008 500,000 2..?50 369,723.75 889,723.75 1,279,447.50
03/01/2009 364,098.75 384 09875 k,
09/0112009 510,000 2.750% 384,098.75 894,098.75 1,278,197.50
_03101/2010 377,086.25 377.086.25
09101/2010 -525,000 3.000% 377,086.25 902,086.25 1,279,172.50 ?
03101/2011_ 369 211.25 369,211.25
09101/2011 545,000 3.250% 369,21125 914,211.25 1,283,422.50
03107/29]_2 360,355.00 360,355.00 "
09/011/2012 - 560,000 3.375% 3G0,355.00 920,355.00 1,280,710.00
03101/2013 350,905.00 350,905.00
09101/2013 580,OOD 3.500% 350,905.00 930,905.00 1,281,810.00
• 03/01/2014 34 Q755.00 340755.00 a
09/01/2014 605,000 3.600% 340,755.00 945,755.00 1,286,510.00
03/07/2075 329,865.00 329,865.00
09101/2075 625,000 3.700% 329,865.00 -954,86500 1,284,730.003/07/2076 318.302.50 '318,302.50 _ _ ~
0910112016 650,000 3.800% 318,307_.50 968,302.50 1,286,605.00
9_314.11?017 305,952.50 305,952.50 _
09101/2017 _ 675,000 4.000% 305,95250 980,952.50 - 1,286,905.00
03101/2018 292_,45250 29245250
09/07/2078 700,000 4.000% 292,452.50 992,452.50 1,284,905.00
03/01 /201 ° -----Z78_452 .50 278 45250 _
09/01/2019 730,000 4.100% 278,452.50 1,008,452.50 1,286,905.00 -
03/07/2020 2.63,487.50 263,487.50 I
09/01/2020 760,000 4.200% 263,487.50 1,023,487.50 1,286,975.00
03L0172021 247,527.50 247,527.50
09/01/2021 795,000 4.300 % 247,527.50 1,042,527.50 1,290,055.UO I
03/09/2022 230,435.00 230,435.00
09/0112022 830,000 4.400% 230.435.00 1.060,435.00 1,290,870.UO L
_03101/2023 27275.00 212,175.00
0910712023 670,000 4.500% 212,175.90 1,082,175.00 1,294,350.00
- 03/01/2024 _ 192,600.00 _ 192,600.00 _
09101/2024 910,000 4.500% 192,600.00 7,102,600.00 1,295,20000
03110112025 172,125.00 772,125.00__ _ I
09/01/2025 950,000 4.500% 172_,12500 1,122,12500 1,294,250.00 - '
03/0112026 150,750.00 150 750.00
09101/2026 995,000 4.5007 150,750 00 7 145 750 00 7 296 560.00
03/01/2027 - _ ____128.36250 128.3G2.50 09/01/2027
1,040,000 - 4.500 / 128 361 50 7 16862 50 -1 ,296,725.00
_03/01/2028 104,962.50 104:936262
04,3 962 50 `
0910112028 1,090,000 . 4.500% _ .104,96250 _7,794,96250 1,299,925.00i s
03/01/2029 80,437050 80,437.50 -
09,01/2029 1,140,000 4.500% 80,437-50 1,220.437.50 1,300,875.00
_43107720,30 J4 -8750 54 787.50
09107/2030 7,190,000 4.500% 54,787.50 1,244,787.50 1,299,575.00
,.0.312102031 28,01250 2801250
09/01/2031 1,245,000 4
- .500% 28.:012.50 1,273,012.50 1,301,025.00 i
20,945,000 15,318,891.06 36,263,891.06 36,263,691.06 i
e
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3-22
Jun 11, 2003 11:46 am Prepared by Cilig roup Global Markets Inc. Pages 12
BOND DEBT SERVICE
Community RDA of the city of Santa
Tax Allocation Ref. Bonds-S6FIi 20038
Period l Annual
Ending / Principal Coupon Interest Debt Service Debt Service
06/03/2003 '
09/01/2003 1,820,000 2.000% 357,622.22 2,177.622.22 2,777,622.22
03/01/2004 _ 713,300.00 713,300.170
09W[72004 7,485,000 2.500% 773,300.00 2_,198,300.00 2,917,600.00
03101/2005 694,737.50 694,737.50
09/01/2005 1,520,000 ?_.500% 694,737.50 2,214,737.50 2,909,475.00
03/01/2006 675,737-50 675,737.50 _ _
09/01/2006 1,560,000 2.500% 675,737.50 2,235,737.50 2,917,475.00 '
03/07/2007 656,237.50 656,237:50__~__ -
09/0L2007 1,E 00,000 3.000% 656,237.50 2,256,237.50 2,972,475.00
03/01/2006 632,237.50 632,237.50
5".1, 2.OOII 1,660,000 4..250% 632,237.50 -2,292,237.50 - 2,924,476.00 -
03/01/2009 596,962.50 596,962.50
0910112009 T-130.000 4.250% 596,96T.-S("T- 3'S6?32.',T 2,923,925.00
03/01/2010 560,200.00 _ 560,200.00
09/O 1%?_010 1,81 -0004.1500%.
560,200_00-~370'1CRTOU--'T,93lT4UD:0U-'-~'
0310112011 524,000.00 524,000.00
09/01/2011 1,890,000 5.000% 524,000.00 2T~'fd-0b 0:~~`-""5-539TRJ0'0(T~f`
03101/2012 476,750-00 476,750.00
6910112012 11990,000 5.000% 476,750.00 2,466,750-00 2,943,500.00
03/01/2013 427,000.00 427,000.00 -
09/0112013 2,085,000 5.0001/6 427,000.00 2,512,000.00 2,939,000,00
03/01/2014 374,875.00 374875.00
09/01/2014 2,200,000 5.000% 374,875.00 2,574,,875.00 2,949,750.00 -
03/01/2015 319,875.00 319,875.00
09/0112015 2,310,000 5.000% 319,875.00 2,629,875.00 2,949,750.00
03/01/2016 262,125 00 262,125.00
0910112016 2,430,000 5.000% 262,125.00 2,692,125.00 2,954,250.00
03101/2017 201,375.00 201,375-00 _
09/01/2017 2,550,000 5.000% 201,375.00 2,751,375.00 2,952,750.00
03/0112018 137,62500 137,625.00
0910112018 2,685,000 5.600% 137,625-00 2,622,625.00 2,960,250.00
03101/2019 70,500.00 70,500.00
09/01/2019 2,620,000 5.000% 70,500.00 2,890,500.00 2,961,000-00
34,145,000 15,004,69722 49,149,697.22 49,149,697.22
r:
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3-23
i
LF',ASIE PAVA4MNT SCIM, DUI E
Following is the schedule of Lease Payments due with respect to the Certificates.
Lease
Payment 'Priuacipal Z"terest
date C'onaporaent (Comporsent Annual7otal
06/01/03 $ 1,420,000 $ 68,084.65 $ 1,488,084.65
12/01/03 304,756.25
06101104 1,210,000 304,756.25 1,819,512.50
12/01/04 289,631.25
06/01/05 1,270,000 289,63125 1,849,262.50
12/01/05 273,756.25
06/01/06 1,340,000 273,756.25 1,887,512.50
12/01/06 253,65625
06/01/07 1,425,000 253,656.25 1,932,312.50
12/01/07 232, 2 81.25
06/01/08 835,000 232,281.25 1,299,562.50
12/01/08 219,75 6.25
06101109 805,000 219,756.25 1,244,512.50
12/01/09 203,656.25
06/01/10 925,000 203,656.25 1,332,312.50
12/01/10 180,531.25
06101111 1 060,000 _-ISO
531.25_ 1421,062; 50
12/01/11 159,331.25
06/01112,
12/01/12 128,956.25 OG/nl/13 _.1,405,000 12£x,956.25_ 1 662 912,50,_
12/01/13 99,100.00
_ 06/01/14 1,,625,000 99 100.00 1,823,200.00
12/01 / 14 58,475.00
06101115 2011,950.00_
12/01/15 11,100.00
06101/16 555.000 11.100.00 577.200.00
I
Total $16,985.000 $ 4,898,059.65 %27883,059.65
I
S1000ILUTX AND SOUILZCRS OF PA$'1b1CENT 1[ Olk THE C1EnTFF'FCAY ES
i
Nature of the Certificates
Each Certificate evidences and represents a direct, undivided fractional interest in the principal ~
component of the Lease Payments due under the Lease Agreement on the payment date or prepayment date of
such Certificate, and the interest component of all Lease Payments (based on the stated interest rate with
respect to such Certificate) to accrue front its date of delivery to its payment date or prepayment date, as the
case may be_
The Agency, pursuant to the Assigmnent Agreement, has assigned to the Trustee for the benefit of the
Owners of the Certificates, substantially all of the Agency's right, title and interest in and to the Lease
7
3-24
Santa Ana Successor Agency General
Dispute Issue:
DOF Waiver of Obiections to RODS
Pursuant to Section 34179, as it read prior to June 27, 2012, the DOF had three business
days to request review of the BOPS and, Wit requested review within that three clay tine period,
the DOF had ten days to approve or reject enforceable obligations included on tile ROIIS-'
The ROPS for January-June 2012 was submitted to the DOF Oil April 16, 2012_ DOF did
not submit a request to review the January-June 2012 RODS until April 23, 2012 at 5:22 p.m.,
via e-mail; thus, DOF's request to review the January-June 2012 BOPS was received more than
three business days (in fact, a full week) following submission ofthiS RODS to the DOF_ The
Successor Agency did not receive a letter from the DOF rejecting items included on the January-
June 2012 RODS until May 3, 2012 at 7:33 p.tn_, after close of business on the tenth day
following DOF's request to review this BOPS.
Further, the Successor Agency submitted the July-December 2012 ROPS to the DOF on
May 9, 2012. The DOF requested review of this RODS on May 14, 2012, but did not provide a
response rejecting itetrts on the July-December 2012 BOPS until alter close OfbuSit7ess (at 9:34
p.m.) on May 24, 2012.
We hereby reserve our right to challenge the DOF's requests for review and rejections of
the RODS as untimely and to assert that the DOIP waived its right to obiect to the inclusion of
enforceable obligations on the RODS.
Santa Ana Successor Agency Dispute on
Overall Project Costs Items:
In our III-St two RODS, DOF moved legitimate project costs into "Administrative" costs- This
was contrary to DOF's own position (set forth in -Exhibit 4" on the DOF webpage devoted to
A13X 1 26 issues) which treaILS such costs as --specific project implementation activities such as
construction inspection, project management or actual COnstruCtion j Which I would not be viewed
by finance as `administrative.- Recently enacted AB 1484 further reinforces this position.
I All 1484 extended these time periods to tive business clays for the DUI' to request review and 45 days to
respond with approvals and/or disapprovals of specified items on the RODS: however no part ol'AB 1484 was made
retroactive: therefore the DOF was required to act within the time periods in effect at the time the RODS was
submitted, and resubmitted, to the DOF.
Pl'I v I ,1 `7
3-25
Thus, project costs front our prior two BOPS need to backed out of the "AdminisLative Cost
Allowance," and our BOPS allocations and Administrative BUdgets recalculated accordingly-
Santa Ana Successor Agency Dispute on
ROPS #'s 14 - 18 (Settlement
Agreements) :
The Scttlcment Agreements consist of legal settlement agreements between the Former
Agency and third parties ("Contractual Settlement Agreements"), and judgments entered against
the Dormer Ag=ency by the California Superior Court for the County of Orange ("Judgment
Settlement Agreements"). "These are not pass through agreements with atficctcd taxing entities,
but are similarly structured, in that the terms ofthese agreemcnts required the Former Agency to
apply a specified percentage oftax increment from specified component project areas to
specified improvements and other purposes.
We have provided all documentation requested by the DOF relating to the Settlement
Agreements and we have explained more than once already why the Settlement Agreements are
enl'orccable obligations ofthe Successor Agency that were properly included on the ROPS_ In
the May 24 F_ctter. the DOF rejected the Settlement Agreenicnts, stating (without statutory
reference or legal support) that "SettlCnlCntS awarding a percentage oftax increment are not
considered F"Os." The DOF went on to explain, again without SpccifiC statutory Or other legal
authority- that "pursuant to ABx 1 26, tax increment is no longer payable to redevelopment
agencies and is therefore not an EO.'"
The DOF"s position is contrary to the plain language of the Dissolution Act and applies
the Dissolution Act in an unconstitutional manner.
Section 34171 (d) clef ines "enforceable obligation"" for purpOSeS of Part 1-85 of the
Dissolution Act; Section 341 71 (d)( I )(F_) provides that "enforceable obligations" include '-[a Illy
legally binding and ent-orceable agreement or contract that is not otherwise void as violating the
debt limit or public policy" The Contractual Settlement Agreements are legally bincling and
enforceable a-rcements which were executed long before _fune 28. 2012, when the Dissolution
Act became effective.
Section 3417 1 (d)( 1 )(D) provides that "enforceable obligations" include "LiJudgments or
settlements entered by a competent court of law or binding arbitration decisions against Lhe
former redevelopment agency, other than passthrough payments that are made by the county
Identical language is found in subparagraph (5) of Section 34167(d), which defines "enforceable
obligation" IOr purposes of Part 1.8 of the Dissolution Act.
3-26
auditor-controller pursuant to Section 341 83. As noted above, the Judgment Settlement
Agreements are binding and enforceable judgments isSUcd by California courts in favor of third
party private entities, not affected taxing entities- The Judgment SCUlement Agreements are not
paSSthrOUgh agreements. As with the Contractual Settlement Agreements. tile _11-Idgincrit
Settlement Agreements were issued and became binding and enforceable long before the
effective date 01-the Dissolution Act.
In addition to the plain language of Section 341 71 , subdivisions (d)( I )(D) and (d)( I )(E),
the DOF's statement that payments of tax increment are not permitted by A131 x 26 is patently
false. Section 34183 specifically requires county auditor-controllers to make payments under
pass through agreements to taxing agencies. Many such agreements required 161-Iller
redevelopment agencies to pay a specified percentage of-tax increment to taxing agencies.
Section 34171 (d)( I)(D) specifically refers to such pass through payments, and excludes
payments made by county auditor-controllers under Section 341 83 Crone the purview of Section
341 71 (d)( 1 )(D), presumably to avoid double payments to taxing entities. This indicates that the
California Iegislaturc intended judgments and settlements, like the Judgment Settlement
Agreements, that are similar in structure to pass through agreements, to be considered
enforceable obligations and included ora the ROPS_ Further, Section 341 75(a) makes clear that
the legislature intended to honor all pledges made by the Dormer Agency; that section
specifically protects the "stream of revenues available to elect the requirements" ofsUCh
protected pledges_ The structure ofthe Settlement Agreements pledging.; a percentage (-W tax
increment to a specific person. entity or- purpose, was typical of many redevelopment
transactions, and there is no indication in the Dissolution Act that the Legislature intended to
invalidate these types of agreements (nor could they, without violating the constitutional
prohibition against impairing contracts4).
In the May 24 letter, the DOF also challenges the Successor Agency's obligation to enter
into agreements For improvements as required by the Settlement Agreements, staling "ABx 1 26
does not allow successor agencies to enter into new contracts; any unencUrnbered balances
should be remitted to the County Auditor Controller." The DOF cites language in Section 34176
that excludes low and moderate income housing lands 11-0111 the housing assets to be transferred
to the successor housing agency- This section does not purport to invalidate enforceable
obli<ations or prevent payment ofenforceable obligations using housing funds. In Fact,
Section 341 77(I) expressly lists the Low and Moderate Income I IOlaSin" Funds as one source of
payment Ibr enforceable obligations listed on the BOPS. Thus, the DOF's apparent position that
otherwise legal and binding obligations payable Using housing funds are not enforceable
obligations is contrary to the intent Ofthe legislature
To the extent DOI-s determination that the Settlement Agreements are not enforceable
obligations rests on an interpretation oflhe Dissolution Act to prohibit successor agencies Front
entering into new agreements for any purpose, even if required to do so by an enforceable
obligation- Ala 1484 clarified the legislature's intent to permit successor agencies to enter into
' Identical language is tOllnd in subparagraph (4) ofSection 34167(d), which defines "enforceable
obligation" for purposes of Part 18 of the Dissolution Act-
4 4ee Article 1, Section 10, Clause I of the United States Constitution ("No State shall _ pass any Law
impairing the Obligation of Contracts and Article 1, Section 9 ofthe C'alilornia Constitution ("A law
impairing the obligation ofcontracts may not be passed.")
3-27
such "new" obligations in Section 341 77.3(x). which states: "Successor agencies shall lack the
authority to, and shall not, create new enforceable obligations under the authority of tile
Community RedevelopnlCnt Law or begin new redevelopment wort:- excels in conllliemce
With c117 e17ji11cec1h1C Obligc11i01-1 lhCti CXISIC4111101• to .lane 28, 201
In response to the DOF's position that the Settlement Agreements are not enforceable
obligations, a lawsuit has been tiled in the Superior Court ofthe State of- Calilornia. County of
Sacramento (Gerald Peebler, et al, v. State of California Department of Finance et al, Case No-
34-201 2-8000 1 172)-
Santa Ana Successor Agency Dispute on
ROPS #s 68 - 8S (Housing Project
Implementation Items):
Items 68. 69. c& 74-85 - These obligations are partially fulfilled, ongoing projects. The Former
RDA entered into these obligations prior to June 28, 201 1 to be paid from the LM IFIF to increase
and improve the project area's supply ofaffordahlc housing. The Successor Agency has
continued obligations pursuant to the project agreements, and is requesting the necessary funding
to Complete the projects, including Successor Agency's direct project expenses associated with
staffing and processional costs. We are requesting these expenses be paid from RPTTF as the
I.M1HF no longer exists under the law.
Items 70 - 73 These are approved Fos that have financial obligations, and require project costs
be funded- including project management, COnstrUCtiOn management and other project
implementation and oversight services. DOF disallowed the source of'payment on the last
POPS, thus a difrerent source of payment has been identified, as applicable.
Santa Ana Successor Agency Dispute on
RO PS #3S & 36 (SA Venture Agmnts.) :
'['Ile BOPS includes the outstanding.; obligation of the Former Agency (and therefore the
Successor Agency) under the S.A. Venture Agreement to pay certain transportation impact fees
("Fees") in the event Santa Ana Venture (tile third party oblige under the S.A. Venture
Agreement referred to in this letter as the "Developer") constructs additional retail and/or office
I?nlpha,i5 addled.
I'~iec .I o10
3-28
improvements pursuant to the a-rcement. Specifically, in the event the Successor Agency"s
obligation to pay the Dees is triggered, the Successor Agency will be required to pay one percent
( 1%) of the estimated cost of construction of-the development for which the Dees are charged
directly to the City and the Developer will make a loan to the Successor Agency equal to the
remaining amount ofthe Fees ("Iec Loan"). The Fee Loan is required to be paid from and is
secured by a pledge o1- lorlmer tax increment accruing front the Site (defined in the S.A. Venture
Agreement).
Although the specific development to which the Dees and the Fee Loan relate has not yet
commenced, the Successor Agency"s obligation to pay the Fees and to borrow and repay the Fee
Loan constitute one component ()fa broader, n-tultifaceted contractual arrangement between the
Former Agency (now the Successor Agency) and the Developer. The Developer has expended
significant moneys and taken substantial actions in reliance on the Former Agency's/Successor
Agency"s obligation to perform its obligations under the S.A. Venture Agreement, including
payment ol'the fees and repayment of the Fee Loan.
The DOF has taken the position that'-Section 34163 (b) prohibits a redevelopment
agency from incurring any obligations or making commitments after June 27, 201 1," The DOF
further states, in the May 24 Letter, that the DOF believes "that commitments have not been
(made for the $ 1.6 million JFees/Fee Loam and that this is an estimated amount for possible
future projects."
As an initial matter, Section 34163 is not applicable to the Successor Agency.
Section 34163, cited by the DOI'_ does not mention successor agencies at all; instead, this section
lists actions that former redevelopment agencies were prohibited from taking during the period
between the passage of A13 I x 26 and February 1, 2012, the date all redevelopment agencies were
dissolved." More fundamentally, the S.A. Venture Agreement and the Former Agency's
obligation to pay the Fees in connection with specified future development pursuant to that
agreement d0 not constitute new obligations or commitments of"the Former Agency or the
Successor Agency. This obligation was set forth in the original Participation Apt reement,
executed in 1984, and was amended in the Third Amendment to the Participation Agreement,
executed in 1992 Long before the passage ofthC Dissolution Act and All 1484.
Fvcn if- Part L8 governed the obligations and authority of Successor agencies,
Section 34167, subdivisions (d)(5) and (1) clarify the California legislature's intent that
obligations such as the S.A. Venture Agreement were intended to be honored in the dissolution
process. Section 34167(d)(5) defines "cnlorceable obligation" to include 'JaIny legally binding
and cnlorceable agreement pr contract that is not otherwise void as violating the debt limit or
public policy." Section 34167(1) provides that "In]othing in this part shall he construed to
interfere with a redevelopment agency's authority, pursuant to enforceable obligations as defined
in this chapter. to ( I ) make payments due, (2) enforce existing covenants and obligations, or
" Specilically_ Section 34163 states'-Notwithstanding Part I (commencin-, with Section 33000), Part 1.5
(conmmencin- with Section 34000), Part 1.6 (commencing with Section 34050)p, and Part 1.7 (commencing with
Section 34100), or any other law, conrmencing on the eftective date of [Part 1 .8], un agcn<_y shall not have the
authority to. and shall not, do any of the following: (b) linter into contracts with, incur obligations, or make
commitments to, any entity for any purpose--_. ' Emphasis added.
3-29
(3) i~erjorni irv ohlicz uUtiizv.-7 DOF is reading Section 341 63 out OFCOntcxt and is therclore
mistaken in its conclusion that the S.A. Venture Agreement is not an ongoing enforceable
obligation. The obligation to pay the fees was a legally binding and enforceable agreement of
the Dormer Agency and is now a legally binding and enforceable agreement, and thcrclore an
enforceable obligation, of the Successor Agency.
As discussed above, if the DOF rejected the S.A. Venture Agreement ciLle to the potential
need to enter into future implementing agreements. At3 1484 (specifically Section 34177.3(a))
clarifies that Successor Agencies may enter into new obligations to the extent required by
crllorceable obli<-ations. We dispute DOF's characterization ofthe S.A. Venture Agreements as
requirin"
the Successor Agency to enter into new obligations; however, even if-this was the case,
AB 1484 clarifies that this is permitted when required by an enforceable obligation-
The S.A. Venture Agreement is a legally binding agrecirient, enlorceable in accordance
with its terms. The fact that the Developer must perform future obligations to trigger the
Successor Agency's obligation to pay the Pecs or that future additional agreements may he
required to implement the S.A. Venture Agreement does not render the agreement
unenforceable. Contracts with cXCCUtoI"y provisions are nonetheless binding and enforceable
under California law, as explained in more detail below.
California Law Upholds Enforceability of EXeCUtory Contracts. On December 22, 2008,
in a landmark decision emphasizing California"s public policy favoring liberal enforecrrtent of-
contracts, in Peael v. Liehet-mei7sch, (2008) 45 Cal Ath 344, the California Supreme Court held
that in enlorceable contract to sell real estate arises whenever the contract identifies the parties,
the price, and a reasonably certain description o('the property. 11-the parties do not agree on
other so-called "non-essential" terms that might typically be included in a real estate transaction
- such aS closing date. title insurance, financing terms, due diligence periods and the like
Cali(brnia courts will supply such terms as are reasonable. PCIIC4 is thus sonICtimes known as the
"Essential 3-P's'" decision. In thus clarifying, the law relative to the enforcement of real estate
contracts, our Supreme Court emphasized the parties" intent controls.
Under California law. where terms are SUffiCiently definite for a court to ascertain the
parties" obligations and to determine whether those obligations have been performed or
breached, a contract will be enforced. An obligation is enforceable where its provisions are
sufficiently certain to make ascertainable the precise act that is to be done." A binding contract is
created wherever its essential terms are clearly enough stated to allow the parties to understand
what each is required to do, the contract is supported by consideration",) and the parties agreed to
Emphasis added-
I n It'edciin~f,ll Prodv_. I'l- r. !-lick ( 1998) 60 Ca I .App.4th 793. S I I: B,vd v. Bevilucyrau ( 1966) 247 Cal,App?d 272.
287: /lennc~Jcv r. liuicher (1986) 182 Cal-App-3d 492, 500-501: Ruhirs,, i V It ilsos., lric_ v. RYuitr ( 1973) 35
Ca I _App.3d 396, 407.
„ Cal. (iv- Code, § 3390, subd. (5) (requirin- that specific performance is only available where the agreement has
terms sufficiently certain to make the precise act to be done clearly ascertainable).
1° Cat. Civ. Code § 1614 provides that -[a] written instrument is presumptive evidence of consideration." The S.A.
Venture Agreement is, naturally, a written instrument, and provides presumptive evidence of-consideration-
Moreover, "[c]onsideration may be an act, forbearance, change in legal relations, or a promise." I Witkin, Summary
of California Law (10th ed.2005) CON-IRACIS, § 202
3-30
the terns of-the contract." Accordingly, California law is generally predisposed to uphold
contracts as cnforceable.12
For instance, in Erscr Uiwe C'or7~. v. F7rror C e p_ ( 1991) 1 Cal.AppAth 613, 623, Division
1 of the Second District Court of Appeal (Los Angeles) found the terms of large scale real estate
development contract sufticicntly definite to cnlorce where the contract stated one party, Frsa
Grae, agreed to provide funding within a defined period after the satisfaction ofcertain
conditions; the other, Fluor, agreed to select and pay for the services of all third-parties needed to
supervise and carry out the necessary construction work; and, upon completion, FIUOr agreed to
transfer its interests in the completed project and nnderlyin" land lease to a consortium in
cxchan-c for £1 million.; In rejectinp Flnor-s claim that the contract was unenforceable
because it contemplated the parties' negotiation and execution Oh ILrture agreements necessary to
carry out their intent the parties' required negotiation and execution of their contemplated
future agreement to convey the fully developed property snhject to a long-term land lease), 14
L'r•.vcr Grcee explained:
The tact that an aOrcelnent contemplates subsequent
documentation does not invalidate the agreement if the parties
have a5;reed to its existing terms. (See CIOrk v- 1~zecller (1941) 44
Cal.App.2d 838, 847 ["'Any other rule would always permit a
party who has entered a contract like this to violate it, whenever
the understanding was that it should be rednceCI to another written
torus- by simply suggesting other- and additional terms and
conditions. ]('this were the rule the contract would never be
completed in cases where, by chan-es in the market, or other
events occurring- subsequent to the written nellotiations, it became
the interest of-cither party to adopt that course in order to escape or
evade Obligations incurred in the ordinary COL-Se of commercial
business."' Sec also, .S;Mi.v.vcierl Y. C'17i1c10 ( 1958) 1 63 Cal.App.2d
827, 830.'5
The legally enforceable contract in Er.vcl C;rcre is very similar to the S.A. Venture
Agreement. Here, the Former Agency agreed to pay certain Fees in connection with certain
types o suture development performed by the Developer at the Site.
EI-Ntl Cirue is just one of dozens of published cases holding contracts of this type fully
enforceable. See, e.g., Bleeeher v- Crowe ( 198 1) 29 Cal.3d 345, 354-55 [the law does not bar
specific performance Ufa land sales contract in which a city's future approval of-certain
development plans is made a condition precedent to completion of the agreenicnt]; Liw-win-
Scrrrthersa C'crlijbrniu. Inc. v_ .1(;B Inveslmenl Co- (1979) 10 1 Cal-App.3d 626, 638 1the mere
Judicial Council of CaIiIO[-Ilia Advisory Committee Oil Civil Jury Instructions 302, Contract Formation - Essential
Factual Elements.
See, e.g., !'tier! v. Lieb","' nsrh (2008) 45 Cal -4th 344, 369-70 (quoting and citing A/c!!/moil v. brcnrlc•t AR>hu
C•U. (1923) 190 ('al. 546).
39 (1991 ) t C'al.App.4th 613, 623.
Er.tu C;,we Corp-, I Cal-App-4th at 623.
i5 Id. at n. 3 (citations in original).
I';mv 7 <,1 1)
3-31
presence of 'a satisfaction clause in a ContraCt does not result in that contract's nullity]:, Afewei v.
Hop,pvr (1958) 51 Cal.2d 1 19 [land sale contracts containing satisfaction clauses are generally
enforceable, except where such clauses render a party's obligation to pertbrm illusory]. Here.
130 does not advance the unsustainable claim that anything in the S.A. Venture Ag-ccnicnt
renders either party's duty to perform illusory.
Black letter law further holds that "[a] contract's material terms (such as subject matter,
price, payment terms, and duration) must be `sUfticicntly Clefinite" so that each party can be
-reasonably certain' about what it is promising to do or how it is to perform,""" I lei-C. tile SUblCCt
matter ofthe S.A. Venture Agreement is unambiguous and includes a detailed description ofthe
Former Agency's obligations to the Developer with respect to payment ofthe Fees and
repayment ofthe Fee L.oan.17 The dollar amount Ofthe Dormer Agency's payment obligation is
ascertainable throu-h the tbrmula set forth in Section 6 of Attachment No. 4 of the Participation
Agreement, as aincnded by the Third Amendmcnt. That same provision sets forth a clear
formula [or the principal amount of the Fee Loan. as well as the interest rate, the source of
payments, and a pledge ol'site specific tax increment securing repayment ofthe Fee Loan. The
Former Agency's (and now the Successor Agency's) future obligations unCler the S.A. Venture
Agreement are therCforC sufficiently Ciefined in the agrecnnent to enable the parties to perform
their obligations.
Finally- the 1-301"s May 24 Letter ignores the dif'lerence bco'Neen the parties' execution of
CIOCUtlICnlS needed to carry out pre-existing contractual commilments and the negotiation of
entirely new agreements. An "agreement to agree i.e., an agreement to negotiate and sign
fUtUrC agreements or legal documents regUired to effectnate the purpose and intent ofa pre-
existing contractual obligation is fully enforceable in California. C tOj7elcmcl v. Bciskin Robhms
U.S.A. (2002) 96 Cal.App.4th 1251, 1260 ["[W]hen the parties are under a contractual
compulsion to negotiate the covenant of good faith and ftir dealing attach[es], as it does in
every contract. In the latter Sitnation the implied covenant of-good faith and lair dealing has the
salutary effect of creating a disincentive for acting in bad faith in contract negotiations."I Hence,
DOF's su<.;gestion that there is no enforceable Ciuly to negotiate the terms of legal documents
needed to carry out the parties' otherwise clearly stated deal in good faith is simply contrary to
law.
Even if'-detail"' terms are omitted, contracts are enforceable under C:afilornia law.
California courts have specifically enforced agreements that have not expressly contained all of
the terms agreed upon. For instance, in Ciooc/uvesi Rzzbber C'oz-p,, v. Mzti-7o_ ( 1985) 1 70
Cal-App-3d 919. 921. reversing a judgment denying specific performance when the contract
called for payment at "market value," the court stated:
The modern trend of the law is to favor the enforcement of
contracts, to lean against their unenlorceability because Of
uncertainty, and to carry out the intentions ofthe parties if-this can
feasibly be done. Neither law nor equity requires that every term
and condition of an agreement be set forth in the contract.
I_)ver v_ Biiuul (D.C. 2009) 983 A2d 349, 356.
n See Section 6 of Attachment No. 4 of the Participation A-greement, as amended by the "Third Amendment-
P; 9 (d
3-32
Case law holds that where "detail"' or non-essential terms ofa
contract are to be agreed in the futUre. the contract remains
enforceable-', While certain ministerial arrangements may remain
outstanding. the material terms of the S.A. Venture Agreement are
in place; hence, the S_A. Venture Agreement is enforceable.
Pledges of Tax Increment are I lonored by the Dissolution Act. The Successor Agency's
obligation to repay the Fee Loan under the S_A. Venture Agreement is supported by a pledg=e of
tax revenues I'r0111 the Site_ Section 34175(a) specifically protects pled-cs of lax revenues made
by the former Agency, as follows:
It is the intent of this part that pledges Of-revenues associated with
enforceable obligations of-the former redevelopment agencies are
to be honored. It is intended that the cessation of any
redevelopment a-ency shall not affect either the pledge, the legal
existence of that pledge, or the stream of revenues available to
meet the rcquirenlcnts of the pledge.
Section 34174(a) provides lurther support Ior the conclusion that the obligation to pay the
Dees is an enforceable obligation protected by the Dissolution Act:
JN]othin- herein is intended to absolve the successor agency of
payment or other obligations due or imposed pursuant to the
enforceable obligations; and provided further, that nothing in the
act adding this part is intended to be construed as an action or
circumstance that may give rise to an event ofdelault under any of
the documents governing the enforceable obligations.
The legislature was clearly mindful that the Dissolution Act would be unconstitutional if
it impaired existing contractual obligations ofthe Former Agency.19
C it t' u/ Lu.ti : t ngc/es v. Superior C'our? (1 959) 51 Ca I 2d 423. 43".
See footnote [5], above.
I'u~•c v ~~-o
3-33
IAIA', ok CIIY MANA(71!IZ
Migncl A. I'ulido .y,»~4'r%' David N. R--
MAYOR PRO 'I'I-:M C'1 'I Y A'II'OKNEY
Claudia C'_ AM-, - ,Inseph W rlclcher
COUNC'1LMUM13F_RS r.
rn CLERK OF 1 HE COUNCIL
P- David Bcnavidos Man., D. Humor
Carlos llustanrm lc
M ichclc Martinez I
S
Sid t pan"`""°
Sal 'r inajero CITY OF SANTA ANA
20 CIVIC CI-NTFR PLAZA - P.O. I30X 1988
SANTA ANA, CALIFORNIA 92702
May 18, 2012 Note: Attachments referenced in this
letter previously e-mailed to DOF on
5/18/12.
California Department of Finance
Redevelopment Adii-iiiiisti-atioti(u),ciof.ca-,-ov
SUBJECT: ROPS FOR JANUARY THROUGH JUNE 2012
Dear Sir/Madam:
We are responding to the Department of Finance ("DOF") letter dated May 3, 2012 ("DOF Letter")
regarding Santa Ana's Recognized Obligation Payment Schedule for the period of January 1 through June
30, 2012 (ROPS). As background, our ROPS was approved by the Oversight Board on April 10, 2012
and a courtesy copy was e-mailed to DOF, the State Controller's Office and the County Auditor-
Controller on April 16, 2012. We offer the following responses on the DOF Letter, and will be following
up with a telephone call in an effort to hopefully resolve any outstanding issues. We believe that the
information we are providing should assist DOF in confirming these items as enforceable obligations.
Please note that our Oversight Board agreed to certain modifications to the RODS, but for others we are
providing additional details and clarification for your consideration. The Oversight Board took action on
this item at its May 15, 2012 meeting, and approved an Amended ROPS (Attachment 1).
• Page 2, item 23, Santa Ana Venture contract totaling $1-6 million- The DOF Letter states that
it is your understanding that conlmit3ments have not been made and this item is an estimated
amount for possible future projects, and cites health and Safety Code (IISC) Section 34163(b) as
prohibiting redevelopment agencies from incurring any obligations or nzalcing commitments after
June 27, 2011.
Response: To the contrary, this commitment was made over 20 years ago. In this regard, the
Santa Ana Venture Participation Agreement was entered into in April 1984, and the amendment
pertaining to the subject obligation was entered into in March 1992. Therefore, this agreement
does fall well within the time limits specified by ABXI 26.
Furthermore, Section 1, page 3 of the agreement as amended in 1992 (see excerpt, Attachment 2)
obligates the Agcncy to pay for a certain portion of the transportation fces haled on expansion per
3-34
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 2
the contract as it occurs, creating an enforceable obligation ("EO") of the Agency. Please note
that we previously provided DOF with a copy of said agreement and amendment. As a general
principal, DOF's own guidance (set forth in "Exhibit 3" on the DOF webpage devoted to ABX1
26 issues) states that "ABXI 26 specifically states that revenue pledges are to be honored," and
reiterates HSC Section 34175(x) which states "it is the intent of this part that pledges of revenues
associated with enforceable obligations of the former redevelopment agencies are to be honored. It
is intended that the cessation of any redevelopment agency shall not affect either the pledge, the
legal existence of that pledge, or the stream of revenues available to meet the requirements of the
pledge." Pursuant to 1ISC Section 34167(4)(5), this agreement as amended is an enforccable
obligation of the Agency; and pursuant to HSC Section 34167(f), nothing in ABXI 26 shall be
construed to interfere with the Agency's authority with respect to enforceable obligations to make
payments due, enforce existing covenants and obligations or perform its obligations. Furthermore,
DOF's own guidance reiterates I-ISC Section 34174(a) which states nothing herein is intended
to absolve the successor agency of payment or other obligations due or imposed pursuant to the
enforceable obligations; and provided further, that nothing in the act adding this part is intended to
be construed as an action or circumstance that may give rise to an event of default under any of the
documents governing the enforceable obligations."
The challenged Santa Ana Venture contract is an enforceable third party agreement entered into
long before the effective date of ABXI 26, and is therefore an EO pursuant to I-ISC Section
34171(d)(1)(E) with which the Agency is required to comply pursuant to HSC Section 34177,
subdivisions (a) and (c). The Successor Agency is therefore obligated to not only pay the permit
fees, but to ensure compliance with performance obligations, which will require project costs for
project management, etc. as intended by ABXI 26 [as set forth in IISC Section 34174(a)] and
permitted according to the DOF directive (set forth in "Exhibit 4" on the DOF webpage devoted to
ABXI 26 issues) which treats such costs as "specific. project implementation activities such as
construction inspection, project management or actual construction [which] would not be viewed
by Finance as `administrative."' Pursuant to 1ISC: Section 34172(c), the Redevelopment
Property Tax Trust Fund (12PTTF) is a "special f rind of the dissolved redevelopment agency to pay
the principal of and interest on loans, moneys advanced to, or indebtedness, whether funded,
refunded, assumed, or otherwise incurred by the redevelopment agency to finance or refinance, in
whole or in part, the redevelopment projects of each redevelopment agency dissolved pursuant to
this part." The subject obligation is an enforceable obligation and indebtedness of the Agency;
therefore, the RPTTF is required to fund this obligation.
• Page 3, items 24, 27 and 28; Page 4, items 29-32 (notes payable for various housing projects,
including all associated project management and enforcement costs totaling $21.5 million). The
DOF Letter states that these items are previously funded by the Agency and do not represent
continuing obligations; therefore they are not considered EOs.
Response: DOF is correct that the promissory notes for these enforceable obligations were
landed; accordingly, the note aniounts have been removed from the BOPS. 1lo%vCVCr, aS
3-35
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 3
Enforceable Obligations entered into with third parties prior to the June 28, 2011 date, the
Successor Agency has a continuing obligation to ensure compliance with development and
performance obligations, which will cause the Successor Agency to incur project costs for prOjcct
management, construction management, etc. Such costs are properly payable from the RPTTF, as
intended by ABXI 26 [e.g., HSC Section 34174(a)] and permitted by the DOF directive (set forth
in "Exhibit 4" on the DOF webpage devoted to ABXI 26 issues) which states "specific project
implementation activities such as construction inspection, project management or actual
construction [which] would not be viewed by Finance as `administrative."'
Additionally, pursuant to HSC Section 34167(f), "...nothing shall be construed to interfere with
the Agency's authority with respect to enforceable obligations to make payments due, enforce
existing covenants and obligations or perform its obligations." Further, HSC Section 34177(x),
(c), and (f) require the Successor Agency to make payments required by enforceable obligations,
perform obligations required by enforceable obligations, and enforce rights of the termer Agency
and covenants imposed by the Agency. DOF's own guidance (set forth in "Exhibit 3" or1 the DOF
webpage devoted to ABXI 26 issues) acknowledges and reiterates HSC Section 34174(a) which
states ` ....nothing herein is intended to absolve the successor agency of payment or other
obligations due or imposed pursuant to the enforceable obligations; and provided further, that
nothing in the act adding this part is intended to be construed as an action or circumstance that
may give rise to an event of default under any of the documents governing the enforceable
obligations."
• Page 5, item 41, Engineering services totaling $4000. The DOF Letter states the Agency
claimed $10,000 on the ROPS, however the contract states the amount should not exceed $6,000.
Therefore, $4000 of the $10,000 claimed is not an EO.
Response: The ROPS has been amended to reflect the outstanding contract balance at that point
in time.
• Page 7, line items 86, 98, and 99, various projects totaling $8.7 million using unexpended
bond funds- The DOF Letter cites HSC Section 34177(i) which states "...Bond proceeds shall be
used for the purposes for which bonds were sold unless the purposes can no longer be achieved, in
which case, the proceeds may be used to defease the bonds." The DOF Letter also makes an
assumption that "it is not the intent of ABXI 26 to allow successor agencies to enter into new
contracts, unless those contracts are specifically required pursuant to the terms of another pre-
existing contract that meets the requirements of ABXI 26, or are specifically required by bond
indentures" and "the unexpended funds may not be used to enter into new obligations."
1esponse: We respectfully disagree and find that the DOF assumption stated above is incorrect
and does not reflect either the letter or spirit of ABXI 26. Pursuant to HSC Section 34177(i), the
Successor Agency is required to utilize bond proceeds for the pUrpOSes for which bonds were sold
3-36
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 4
unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease
the bonds.
The use of the bond proceeds in question is governed by an enforceable obligation and the bond
proceeds can be used for the purposes for which the bonds were sold as evidenced by the Official
Statement, Certificate of Use of Proceeds, and other documentation (excerpts of documents
attached as Attachment 3) and other documents presented to the City Council and Agency Board
at the tune the bonds were issued. Specifically, bond proceeds described in item #86 on the BOPS
are being used to finance improvements (repairs and security) to the public parking structures in
the city's Downtown area as specified in the bond documents. Additionally, bond proceeds
described in items #98 & 99 on the ROPS were and will continue to be used for improvements to
the Santa Ana Auto Mall, other public improvements and infrastructure, and other redevelopment
purposes as specified in the bond documents. The Successor Agency has a continuing obligation
to ensure compliance with the bond documents and their intended purpose, which will also require
project costs for project management, etc. as intended by ABX1 26 and permitted by the DOF
directive (set forth in "Exhibit 4" on the DOF webpage devoted to ABX1 26 issues) which treats
such costs as "specific project implementation activities such as construction inspection, project
management or actual construction [which] would not he viewed by Finance as `administrative.'
Additionally, there are other third party contractual obligations utilizing bond proceeds that
constitute enforceable obligations in their own right. These EOs include items, such as: item #10
(Erickson Lease Agreement Honda) and item #21 (Penske DDA), for which project costs are an
eligible use of the South Main bond proceeds and are required for project management, and legal,
design review, and/or financial services to ensure compliance with the financial and performance
obligations of the agreements; as well as project costs (design, project management, etc.)
associated with development of improvements to the Downtown parking structures (item #86)
which are an eligible use of the Downtown bond proceeds, and were contracted for and underway
prior to the June 28, 2011 date (See AECOM contract, Attachment 4).
Pursuant to I-tSC Section 34167(f), "...nothing shall be construed to interfere with the Agency's
authority with respect to enforceable obligations to make payments due, enforce existing
covenants and obligations or perform its obligations." Further, I ISC: Section 34177(x), (c), and (f)
require the Successor Agency to make payments required by enforceable obligations, perform
obligations required by enforceable obligations, and enforce rights of the former Agency and
covenants imposed by the Agency . DOF's own guidance acknowledges and reiterates IISC
Section 34174(x) (set forth in "Exhibit 3" on the DOF webpage devoted to ABX1 26 issues)
which states "....nothing herein is intended to absolve the successor agency of payment or other
obligations due or imposed pursuant to the enforccable obligations; and provided further, that
nothing in the act adding this part is intended to be construed as an action or circumstance that
may give rise to an event of default under any of the documents governing the enforceable
obligations." Additionally, 13OF's guidance cites HSC Section 341 77 (set forth in "Exhibit 3" on
the DOF vvbpage devoted to ABX1 26 issues) stating successor FlgenciCS arc required to
3-37
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 5
"Maintain reserves in the amount required by indentures, trust indentures, or similar documents
governing the issuance of outstanding redevelopment agency bonds" [HSC Section 34177(b)1; and
"to perform obligations required pursuant to any enforceable obligation" [HSC Section 34177(c)].
• Page 1, item 9; page 7, item 85, legal settlements totaling $500 million requiring Low/Mod
set-aside from tax increment within the project areas- The DOF better states that settlements
awarding a percentage of tax increment are not considered EOs, and pursuant to ABX1 26 tax
increment is no longer payable to the redevelopment agencies and therefore there is not an
obligation.
i
Response: We believe the DOF is confusing these Settlement Agreements with the more typical
settlement agreements with taxing entities which are, in essence, contractual pass through
agreements, and therefore not considered EOs under ABX1 26. The Settlement Agreements at
issue here were entered into with third parties, not other taxing agencies, and are, therefore, no
different than a contract with a developer pledging tax increment over time; thus, the Settlement
Agreements are EOs pursuant to ABX1 26, specifically HSC Sections 34171(d)(1)(D) and
34171 (d)(1)(E). I ISC Section 34171 (d)(1)(D) provides that "Judgments or settlements entered by
a competent court of law or binding arbitration decisions against the former redevelopment
agency" constitute enforceable obligations. 1ISC Section 34171(d)(1)(E) can also be construed to
mean that the Settlement Agreements are enforceable obligations, as these agreements constitute
"legally binding and enforceable agreement[s] or contract[s] that [are not otherwise void as
violating the debt limit or public policy."
The Successor Agency is required to comply with the enforceable obligation to set-aside/utilize
former tax increment as dictated by the Settlement Agreements. Specifically, item #9 South Main
Corridor Settlement Agreement requires a portion of the tax increment (20%) to be utilized for
public improvements, including parking and financial incentives in a particular section of the
project area. Additionally, this settlement agreement, along with settlement agreements for four of
the other project areas (item #85), require specific percentages of tax increment be set aside
exclusively for low and moderate income housing and related activities.
With respect to item 9 9, the Judgment on Stipulation for Entry of.ludgment and Resolution No.
84-2 (collectively "Settlement") adopted by the Redevelopment Agency ("RDA") was entered into
by the RDA in response to and in order to settle a lawsuit, Gerald Peebler, et. a/. vs. C ily ofSanta
Ana, filed in 1982. It is important to note that the Legal Clinic of the University of California,
Irvine School of Law ("UC I-), recently filed a lawsuit against the City of Santa Ana, on behalf of
the beneficiaries of this Settlement (including Oerald Peebler) to enforce the terms of the
Settlement as an enforceable obligation. The filing was rejected by the court due to procedural
issues. In ongoing discussions between the City and UCI, UCI has stated that they plan to re-file
the lawsuit upon any adverse response by the State Department of Finance or City in failing to
treat the terms of the Settlement as an enforceable obligation.
3-38
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 6
The Successor Agency is required to perform the obligations of the former agency pursuant to the
Settlement and Settlement Agreements, as described above, pursuant to HSC Section 34177(c)
and the DOF's own guidance documents. Thus, contracts/services necessary to implement these
enforceable obligations are allowable project cost expenditures, as intended by ABXI 26 and are
recognized and permitted per DOF directive (set forth in "Exhibit 4" on the DOF webpage
devoted to ABXI 26 issues) which treats such costs as "specific project implementation activities
such as construction inspection, project management or actual construction [which) would not be
viewed by Finance as `administrative."' Additionally, pursuant to HSC Section 34172(c), the
Redevelopment Property Tax Trust Fund (RPTTF) is a "special fund of the dissolved
redevelopment agency to pay the principal of and interest on loans, moneys advanced to, or
indebtedness, whether funded, refunded, assumed, or otherwise incurred by the redevelopment
I
agency to finance or refinance, in whole or in part, the redevelopment projects of each
redevelopment agency dissolved pursuant to this part." The RPTTF is therefore required to fund
this obligation.
• Page 7, items 88 &c 89, cash balances from settlement agreements totaling $26.8 million. The
DOF Letter states that ABXI 26 does not allow successor agencies to enter into new contracts,
and any unencumbered balances should be remitted to the County Auditor Controller.
1esponse: Please refer to our comments noted for items 99 and #85 above regarding these
Settlement Agreements constituting enforceable obligations. Additionally, the existing cash
balances are not based on "tax increment no longer payable," as DOF states for items H9 & 85, but
instead are based on the enforceable obligation found in the third party settlement agreements.
• Administrative costs claimed exceed allowance by $2,422,796. The OOF Letter cites 11SC:
Section 34171(b) as limiting administrative costs for fiscal year 2011-12 to five percent of
property tax allocated to the successor agency or $250,000, whichever is greater, and states the
Agency's allocation is $846,644. DOF attached a schedule showing its calculation of
administrative costs.
Response: We find the allocation to be incorrectly calculated for several reasons. It is not based
on the total of all obligations for the time period. Additionally, project costs were incorrectly
moved into "administrative costs"- By DOF's own directive (set Forth in "Exhibit 4" on the DOF
webpage devoted to ABX 1 26 issues), "specific project implementation activities such as
construction inspection, project nianagetnent or actual construction would not be viewed by
Finance as `administrative."' Additionally, many items listed on the schedule attached to the DOF
Letter are enforceable obligations in their own right, not "administrative costs." We, therefore,
request a re-calculation of Administrative Costs based on the following; and are attaching a
schedule (Attachment 5) which we believe demonstrates is the corrected calculation of the
administrative costs that the City of Santa Ana, acting as the Successor Agency, is eligible tor.
3-39
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 7
i
o Line items 1, 2, 3 & 91 - These amounts are all EOs related to the two outstanding bonds. The
bond indentures require reasonable compensation to be made to the trustees for services
rendered, and the Continuing Disclosure Certificates require
annual audited financial
statements as part of the annual reports for compliance. As these expenses are contractually
stipulated as part of the overall bond covenants, fiends are necessary to fulfill the obligations
and should not be considered administrative costs. Please also see response above for Line
items 86, 98, and 99.
o Line items 4, 5, 6, 9, 10, 11, 16, 18, 19, 83, 87, 90 These amounts for project costs such as
management, consultants, legal, financial, appraisal, fees, etc. are not administrative costs. For
each enforceable obligation, there are contractual obligations that the former redevelopment
agency was required to manage, monitor, and enforce. For instance, item ##87 is the EO for the
required Agency Property Maintenance & Disposition pursuant to HSC Section 34181, which
necessitates it be "done expeditiously and in a manner aimed at maximizing value." To
accomplish this, the properties need to be properly maintained, and project costs need to be
provided for staffing/services to aptly evaluate and market the sites. Another example is Line
item 10 (Erickson Lease Agreement - Honda) that requires projects costs for project
managen-ient, and legal and financial services to ensure compliance with the financial and
performance obligations of the agreement. i
As stated previously, pursuant to HSC Section 34167(1), nothing in ABX1 26 shall be
construed to interfere with the Agency's authority with respect to enforceable obligations to
make payments due, enforce existing covenants and obligations or perform its obligations.
Furthermore, DOT's own guidance reiterates HSC Section 34174(a) which states nothing
herein is intended to absolve the successor agency of payment or other obligations due or
imposed pursuant to the enforceable obligations; and provided further, that nothing in the act
adding this part is intended to be construed as an action or circumstance that may give rise to
an event of default under any of the documents governing the enforceable obligations." Thus,
contracts/services necessary to irnpleinent and comply with these enforceable obligations are
allowable project cost expenditures, as intended by ABX1 26.
o Line items 12, 13, 94, 95 Se 96 These items, as listed for the subject RODS, can remain under
"administrative costs."
o Line items 24, 25, 26, 27, 28, 29, 30, 31, 32, 33 & 36 These amounts for project
management, legal, title, escrow, construction monitoring, loan management, etc. costs are not
administrative costs and should not be factored into the calculation of the 5% administrative
cost allowance. Many of the promissory notes for these housing projects were encumbered in
the Low and Moderate Income Housing Fund (LMIHF). However, the amounts contractually
obligated in the third-party agreements do not include funding to pay for project management,
monitoring, and enforcement of the contracts by the former redevelopment agency nor the
3-40
Response to DOF May 3, 2012 Letter
May 18, 2012
Page 8
Successor Agency. Therefore, these expenditures are EOs which require funding from the
RPTTF_
o Line items 49 through 79 -These pass-through payments totaling $5,330,156-61 were made
by the Successor Agency as required for tax increment received by the former redevelopment
agency through January 31, 2012. The former redevelopment agency had numerous
contractual agreements with taxing entities for pass-throughs in five of the component project
areas. These agreements are enforceable obligations as defined in ABX1 26 and as such, the
Successor Agency is eligible for 5% of the total obligation during this ROPS period for the
administrative cost allowance.
o Line items 9 & 85 - As required by the settlement agreements for five of the component
project areas, $415,852.45 was set aside and deposited into the LMIHF in January 2012
exclusively for low and moderate income housing and related activities. This amount is the
total of the specified percentages of the tax increment received by the former redevelopment
agency in January2012. Twenty percent of the tax increment (net) received from the South
Main project area in the amount of $1,482,119 is also an EO as required by the settlement
agreement. Based on the fact that these settlement agreements are enforceable obligations, 5%
of the obligations during this POPS period should be allocated for administrative costs- See
our response to this item on pages 5-6 for additional information.
(D Line items 92, 93 & 97 - These public employee benefit liability amounts are liabilities that
transferred to the Successor Agency and constitute enforceable obligations and not
"administrative costs", as recognized by DOF (set forth in "Exhibit 5" on the DOF webpage
devoted to ABX1 26 issues), as well as pursuant to I-ISC Section 34171 (d)(1)(C), Section
34167(d) (3) and Section 34167(6)(g). The medical retiree subsidy for the FY 201 1-2012 was
paid in January 2012, as agreed upon by the City and the three employee unions and
associations representing the City employees assigned to the former redevelopment agency.
The accrued leave balances amount represents the estimated value of the leave benefits that
will be paid out to the City employees assigned to the former redevelopment agency upon
separation from employment, some of which has already occurred. In addition, one particular
Memorandum of Understanding (MOU) between the City and SEIU Local 721 prohibited the
layoff of any employees in the union prior to March 31, 2012. Therefore, City employees that
were assigned to the former redevelopment agency could not be laid off for two months after
the dissolution of the Agency, thus the estimated cost of the salaries and benefits for those
employees is an EO.
We would appreciate the opportunity to further discuss the outstanding items with I.)OF. As
specified in the DOF Letter, my staff will be following up with a telephone call to Supervisor
Evelyn Suess or Lead Analyst Doug Evans to schedule a time. "Thank you for your time and
consideration. We look forward to working with you to resolve these outstanding issues.
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Response to DOF May 3, 2012 Letter
May 18, 2012
Page 9
Please note since our ROPS was submitted to DOF on April 16, 2012, but we did not receive a
request for review until April 23, 2012 at 5:22 p.m. via e-mail, and did not receive a letter from
DOF until May 3, 2012 at 7:33 p.m. ("DOF Letter"), we are hereby submitting this response
without waiving our right to assert that the ROPS was approved by operation of law pursuant to
Health and Safety Code (HSC) Section 34169(i) or any other law.
Sincerely,
Paul Walters
Interim City Manager
City of Santa Ana, acting as Successor Agency
I
c: Oversight Board of the Successor Agency to the former Community Redevelopment
Agency of the City of Santa Ana
Nancy Edwards, Interim Executive Director, Community Development Agency
Francisco Gutierrez, Executive Director, Finance and Management Services Agency
Sandi Gottlieb, Program Manager, Community Development Agency
Susan Gorospe, Senior Management Analyst, Community Development Agency
Doug Evans, Lead Analyst, State Department of Finance
Paula Greene, Analyst, State Department of Finance
Frank Davies, Administrative Manager, County of Orange
John Chiang, State Controller
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