PURPOSE

The purpose of this report is to receive authorization from the City Council to extend the Plan Effectiveness Date, and the Debt Repayment and Receipt of Tax Increment Date for the Golden State, City Centre, South San Fernando and West Olive Redevelopment Project Areas as authorized under SB 1045; affirm existing indebtedness for the Golden State, City Centre, and West Olive Project Areas; and approve a new public improvement debt obligation.

BACKGROUND

Existing law required a redevelopment agency, during the 2002-03 Fiscal Year, to make an Educational Revenue Augmentation Fund (ERAF) payment to the County Auditor.  This allocation was determined in accordance with the State mandate.  SB 1045 requires all redevelopment agencies in the state to make similar ERAF allocations in the 2003-04 Fiscal Year based on a statewide aggregate allocation of $135 million.  Individual agency payments are determined as a proportion of that agency�s share of total tax increment collected state-wide as in ERAF shifts of previous years.  Each agency�s payment is calculated based on 50% from gross tax increment received and 50% from net tax increment received after pass-throughs to other taxing entities.  Each agency must allocate the specified amount to the county auditor for deposit into the ERAF on or before May 10, 2004.

If an agency has insufficient funds to make its payment, it may borrow up to 50% of the current year housing set-aside funds to make its payment.  That amount borrowed must be repaid within 10 years.  If an agency is unable to make, or fails to make its required ERAF payment in full, that portion unpaid will be taken from property taxes of the host city or county government.  In addition, local governments may make all or a portion of their redevelopment agency payment from other local government funds if they so elect.  The bill looks at the ERAF payment as an obligation of the agency.  Therefore, if an agency has more than one Plan, thereby more than one fund, the bill does not require each fund to pay its proportionate share of the agency payment.  Finally, ERAF payments made this fiscal year and last fiscal year can be subtracted from revenues that count against a redevelopment plan�s tax increment ceiling.  For the Burbank Redevelopment Agency, this would only apply to the West Olive Redevelopment Project Area that has a tax increment cap of $60 million. 

ANALYSIS

Based on the formula described above, the payment to be made by the Burbank Redevelopment Agency is calculated to be $1,343,094.  The ERAF payment will not reduce the 20% housing set-aside fund and the fund will still be calculated as a percent of gross tax increment received.  A loan from the 20% housing fund will not be required.  SB 1045 authorizes agencies having to make an ERAF payment the authority to amend its Redevelopment Plan(s) to extend the time limit on the effectiveness of the plan by one year.  The City Council has the authority to extend the plan effectiveness of its four redevelopment plans as follow:                                   

The bill further authorizes an agency having to make an ERAF payment to amend their Redevelopment Plan(s) to extend the time limit on use of tax increment to repay indebtedness by one year.  The following is a summary of the existing and proposed new dates:

AFFIRMATION OF EXISTING INDEBTEDNESS

Each year the Agency files a Statement of Indebtedness with the State outlining all of the Agency�s debt obligations.    Recently, staff has undertaken a review of the various debt obligations, to try to ensure that the Agency maintains sufficient debt obligations in order to obtain all of the tax increment over the course of the term of each project area.  This is particularly important for the Golden State and City Centre Project Area, which currently cannot incur additional debt beyond 2003 without amending the Plans for the Project Areas.  It was noted that a number of the documents had minor deficiencies such as not having a stated termination date, and in the case of the Youth Endowment Services Fund (YES Fund) the debt obligation was in the form of a resolution rather than a promissory note.   Also, an additional debt obligation is recommended to fund public infrastructure projects, if and when tax increment funds become available beyond the debt obligations already identified.  The following summarizes the various obligations being affirmed by project area as well as the new public improvement debt instrument:

1.                  YES Fund Promissory Note  � The Agency is currently obligated to dedicate 5 % of its funds toward capital improvements for youth-oriented programs.  This obligation is now proposed to be in the form of a promissory note.

2.                  Contractual Agreements with the City � Each year the City bills the Agency for City administrative expenses related to redevelopment activities.  The agreements have been modified to establish a specific termination date based on the life of each project area.

3.                  New Public Improvement Debt Obligation � As a general policy, the Agency expends a significant amount of its funds towards various public improvements such as funding for the construction of the Police/Fire Headquarters as well as various transportation improvements.  This new debt obligation is to account for the possibility that future tax increment may become available that has not already been accounted for in any of the other existing debt obligations.     

CONCLUSION

SB 1045 requires the Burbank Redevelopment Agency to make an ERAF payment for the 2003-04 Fiscal Year.  However, the bill gives authority to the City to extend its Redevelopment Plan limits to help minimize the impact that the ERAF payment pay have on the agency�s ability to do projects and repay debt by allowing agencies to extend the plan effectiveness date, and the date to use tax increment to repay debt.  SB 1045 makes no mention of timeframes for passing the appropriate ordinance to make these amendments, however, the California Redevelopment Association (CRA) recommends that agencies complete these amendments as soon as possible.  As of this report, there are a number of cities that are looking into plan amendments.  The Cities of Bell and Glendale have recently adopted similar ordinances.

FISCAL IMPACT

By extending the plan effectiveness date and the date for debt repayment and receipt of tax increment by one year for the Golden State, City Centre, West Olive and South San Fernando Redevelopment Project Areas, the Agency will have another year to complete projects, receive tax increment and repay debt.  The Agency will receive an estimated $47,840,630 in net tax increment during that year[1].  The estimated present value equivalent of this amount is $13,590,277.   The affirmation of the existing debt obligations and approval of the Public Improvement Debt Obligation will not have a fiscal impact.

RECOMMENDATION

Staff recommends that: 1) The City Council introduce the ordinance extending the plan effectiveness and date to debt repayment and receipt of tax increment by one year for the Golden State, City Centre, West Olive and South San Fernando Redevelopment Project Areas; and 2) The Agency approve the resolutions affirming the existing debt obligations of the Golden State, City Centre and West Olive Project Areas and approve the new Public Improvement Debt Obligation.

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