PURPOSE

The purpose of this report is to introduce three ordinances extending the Redevelopment Plan (�Plan�) effectiveness dates and the debt repayment and receipt of tax increment dates by one year for the Golden State, City Centre, and West Olive Redevelopment Project Areas in accordance with Senate Bill 1096 (�SB 1096�). [Health & Safety Code �33333.2 (d)(4) and 33333.6(e)(2)(D)]

BACKGROUND

In 1992, the State Legislature for the first time enacted Educational Revenue Augmentation Funds (�ERAF�) to reduce the State�s obligations to fund education and reduce a portion of the State�s budget shortfall. ERAF reallocates a portion of property tax revenues due to local governments (counties, cities, special districts, and redevelopment agencies) to fund education, thereby reducing the State General Fund allocations to school districts. 

In 2003, the Legislature passed a bill known as SB 1045 which authorized redevelopment agencies to amend their redevelopment plans to extend the effectiveness dates of the plans by one year for payment of the 2003-2004 Fiscal Year ERAF payment.  Pursuant to SB 1045, the City Council adopted an Ordinance, on January 6, 2004, to extend the plan effectiveness dates, and the dates for debt repayment and receipt of tax increment dates by one year for the Golden State, City Centre, West Olive, and South San Fernando Redevelopment Project Areas. 

As a component of the FY 2004-2005 State budget, the Legislature adopted SB 1096, which required every redevelopment agency to make an ERAF payment to the County Auditor for the 2004-2005 and 2005-2006 Fiscal Years.

In an effort to offset the financial burden caused by the ERAF payments, SB 1096 authorizes redevelopment agencies to amend their redevelopment plans to extend the time limits of effectiveness of their plans and to extend the dates for debt repayment and receipt of tax increment.  Under SB 1096, redevelopment agencies may amend their redevelopment plans, depending upon the time remaining in the lives of these plans, by one year if the agency was required to make an ERAF payment for FY 04-05 and an additional year if the agency was required to make an ERAF payment for FY 05‑06. 

On August 30, 2005, the City Council adopted an Ordinance to extend the effectiveness dates of the plans by one year for payment of the 2004-2005 Fiscal Year ERAF payment.  At that time, staff recommended that after the 2005-2006 payment had been made, staff would return for a second one year time extension for the City Council�s consideration. 

The ERAF allocations are determined based on a statewide aggregate allocation.  Individual agency payments are determined as a proportion of that agency�s share of total tax increment collected state-wide.  Each agency must allocate the specified amount established by the county auditor for deposit into the ERAF for each year.  The following summarizes Burbank�s ERAF contribution for the past three years: 

 ANALYSIS

In order to qualify for the extensions, in addition to making the required ERAF payments and meeting certain public hearing notice requirements, the legislative body must make certain findings.  Redevelopment plans with more than 20 years remaining on plan effectiveness (South San Fernando), do not qualify for a time extension under SB 1096.  For redevelopment plans with 10 years or fewer remaining on plan effectiveness (Golden State & City Centre), only one finding must be made.  That finding is that the funds used to make the ERAF payment would otherwise have been used to pay the costs of the projects and activities necessary to carry out the goals and objectives of the redevelopment plan.  For redevelopment plans with 10 years to 20 years remaining on plan effectiveness (West Olive), the legislative body must make the following findings: 

1. Funds used to make the ERAF payments would otherwise have been used to pay the costs of the projects and activities necessary to carry out the goals and objectives of the redevelopment plan;
2. The Agency is in compliance with statutory Housing Fund requirements pursuant to Health & Safety Code �33334.3;
3. The Agency has an adopted Five-Year Implementation Plan;
4. The Agency is in compliance with applicable inclusionary and replacement housing production requirements pursuant to Health & Safety Code �33413; and
5. The Agency is not subject to sanctions for Housing Fund excess surplus.

Staff finds that funds used to make the ERAF payment would otherwise have been used to pay the costs of the projects and activities necessary to carry out the goals and objectives of the Golden State, City Centre, and West Olive Redevelopment Project Areas. 

The West Olive Redevelopment Project Area has complied with the requirements for redevelopment plans with 10 years to 20 years remaining on plan effectiveness.  Since its inception of the Housing Fund, the West Olive Redevelopment Project Area has deposited its required 20% of its tax increment to fund housing activities for households of very low, low and moderate income and has complied with the statutory requirements pursuant to Health & Safety Code �33334.3. 

On December 14, 2004, the Redevelopment Agency Board approved the 2004-2009 Five-Year Implementation Plan for the Golden State, City Centre, West Olive, and South San Fernando Redevelopment Project Areas.   The Five-Year Implementation Plan contains the specific goals and objectives of the agency for the project area, the specific programs, including potential projects, and estimated expenditures proposed to be made during the next five years, and an explanation of how the goals and objectives, programs, and expenditures will eliminate blight within the project area. 

In addition, the Agency must comply with the Replacement and Inclusionary Housing Requirements, as stated in Health & Safety Code Section 33413.  The Inclusionary Housing requirement requires an Agency to replace dwelling units that have been destroyed or removed from the low- and moderate-income housing market as part of a redevelopment project at the an affordable housing cost. With previously funded affordable housing projects, the Agency has a surplus number of units for future housing obligations. 

On December 13, 2005, the Agency prepared the 2004/2005 Fiscal Annual Report for approval and authorization to transmit to the State Controller�s Office.  Pursuant to Health & Safety Code �33080, the Annual Report includes information about the amount of tax increment generated, Agency indebtedness and activities that affect affordable households. In addition, if applicable, the report identifies any amount that has accrued in excess surplus of Housing Fund, therefore requiring an agency to adopt a plan for expenditure of all money in the Housing Fund within five years from the end of that fiscal year.  The Agency did not have an excess surplus of housing funds and is not subject to excess surplus requirements.        

NOTICING REQUIREMENTS

The City Council is required to hold a public hearing before adopting the ordinances. Notice of the hearing must be mailed to affected taxing entities at least 30 days prior to the hearing and must be published in a local newspaper at least 10 days prior to the hearing.  The notice was mailed to each affected taxing agency, on July 28, 2006 and the public hearing notice was published in the Burbank Leader, on Saturday, August 19, 2006 and Wednesday, August 23, 2006.

Since the Agency remitted ERAF payments totaling $2,498,676.73 for FY 2005-06 and because the Golden State, City Centre, and West Olive Redevelopment Plans satisfy the SB 1096 requirements and notice of the public hearing has been given, the time limits for plan effectiveness and the time limit to repay indebtedness and receive tax increment for each plan may be extended by an additional year.  The following table summarizes the proposed extensions:

The proposed time extension for the plan effectiveness date and the debt repayment and receipt of tax increment date does not alter any of the other time limits, specifically the expiration of the Agency�s powers of eminent domain.[1]

 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, and West Olive Redevelopment Project Areas, the Agency will have another year to complete projects, receive tax increment and repay debt. 

CONCLUSION

SB 1096 required the Burbank Redevelopment Agency to make an ERAF payment for the 2004-2005 and 2005-2006 fiscal years. Furthermore, the Bill gave authority to the City to extend its Redevelopment Plan limits to help minimize the impact that the ERAF payment may 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 1096 made 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 after the ERAF payment for the appropriate fiscal year has been made.  On August 30, 2005, the City Council adopted Ordinance (No. 3679, 3680, & 3681) to extend the effectiveness dates of the plans by one year for payment of the 2004-2005 Fiscal Year ERAF payment.  Likewise, staff recommends extending the time limits for the Golden State, City Centre, and West Olive Redevelopment Plans by one year for the 2005-2006 ERAF payment. 

FISCAL IMPACT

While the ERAF contribution creates a financial burden on the Burbank Redevelopment Agency by reducing the number and type of projects that can be carried out in the short term, the ability to extend the life of each project area by one year offsets this burden in the long term.

By extending the Plan effectiveness date and the date for debt repayment and receipt of tax increment by one year, the Agency will receive an estimated total of $49,230,884 in net tax increment.  The aggregate present value equivalent of this amount is $16,696,068.   The table below summarizes the estimated value of the additional year in each of the project areas based on a 2% increase in assessed value per year, by project area: 

FISCAL IMPACT OF ADDITIONAL YEAR OF TAX INCREMENT

These additional funds will be used to pay the costs of projects and activities necessary to carry out the goals and objectives of the Redevelopment Plan, and the repayment of debt. 

 RECOMMENDATION

Staff recommends that the City Council introduce the ordinance extending the Plan effectiveness date, and the debt repayment and receipt of tax increment date by one year for the Golden State, City Centre, and West Olive Redevelopment Project Areas. 

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