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2012 08 08 OB MinutesOVERSIGHT BOARD OF THE SUCCESSOR AGENCY TO LA QUINTA REDEVELOPMENT AGENCY MINUTES Regular Meeting WEDNESDAY, AUGUST 8, 2012 at 2:00 P.M. ROLL CALL - Present: Board Members Ellis, Marshall, Maysels, McDaniel, Nelson, Osborne and Chairperson Pena Absent: Board Member McDaniel A Motion was made by Board Members Osborne /Maysels to excuse Board Member McDaniel; Motion carried unanimously CONFIRMATION OF AGENDA - Confirmed PUBLIC COMMENT Don Adolph, Mayor of the City of La Quinta, thanked the Board for their service and support on the Oversight Board. He said that the City is fortunate to have such a wonderful Board and he is proud of how the Board stepped up to the plate and is helping the City of La Quinta through the tough times we are currently facing. APPROVAL OF MINUTES 1. A motion was made by Board Members Maysels /Ellis to approve the minutes from the June 6, 2012 Oversight Board meeting as submitted. Motion carried 6 ayes, 0 nays, 1 absent. BUSINESS ITEMS 1. Adoption of a Resolution Approving a Recognized Obligation Payment Schedule of the Former La Quinta Redevelopment Agency for the Period of January 2013 through June 2013. Staff presented staff report. Chairperson Pena suggested commas in the amounts on the ROPS to make sure there is no question regarding dollar amounts. Staff indicated that $100,000 estimated for administrative allowance in the ROPS was not spent. Chairperson Pena asked if that $100,000 goes to the State. Staff indicated the County would make the disbursement minus the $ 100,000. Board Member Osborne asked if, in the future, the $100,000 is a negative figure, would that amount be added to our property tax disbursement. Attorney Bill Ihrke, Rutan & Tucker, for Kathy Jenson, Counsel for Successor Agency, indicated that the provisions in the law that govern the reconciliation process regarding the BOPS, seems to indicate that it could be a situation where you would be able to get more from the redevelopment property tax trust fund if you were short in the prior six month period. The statute reads as though that would be the case — whether or not the Department of Finance ( "DOF ") actually allows it or that the County Auditor - Controller actually has the funds to do it is another question. Therefore, the implementation may end up being different than what the statute seems to allow. The DOF may allow you to hold on to the money to pay future obligations when they become due in that next six month period. It remains to be seen but most likely the money will not be forwarded or will be directed by the Auditor - Controllers to be distributed to the other taxing entities. Board Member Maysels asked staff when the $6,900,000 would be distributed. Attorney Ihrke indicated January 2, 2013 is the day the Successor Agency will physically receive the distribution. Board Member Maysels asked if the money for July to December, 2012 has been received. Staff indicated that the money was received in June and the amount required to be paid for debt service has been transmitted to US Bank to make the September 1, 2012 debt service payment. Frank Spevacek, City Manager, informed the Board that the debt service payments are due on September 1, 2012. When the former La Quinta Redevelopment Agency ( "LQRDA ") was active, it kept a debt service reserve fund — not bond funds but cash at the City because property taxes are distributed in January and April and are not distributed again until January of the following year. When there was supplemental property tax income coming in, it allowed for better flow through the year but as the recession hit and building and property sales stopped, monies were put in the debt service reserve fund to make sure the September debt service payments would be covered. The question is will there be enough property tax revenue left over from the disbursement in June 2013 to have funds available to make the September 2013 bond payments. Now that fund balances are being swept away, if there is not enough cash coming in, then Oversight Boards are being faced with the challenge of what to pay and what to default on. OVERSIGHT BOARD ACTION MINUTES 2 AUGUST 8, 2012 Board Member Osborne asked if the insurance policies were still in place on all the bonds. City Manager Spevacek stated that the insurance policies are in place provided that the insurance companies are still in place. Some of the companies that went bankrupt, if that occurred prior to the dissolution of redevelopment, redevelopment agencies were required to replace the policy with a debt service reserve. In the City's situation, our insurance policies are still all in place and the only bonds that are not insured of the LQRDA are those that were issued in 2011 — the housing bond as well as the Project Area No. 2 bond. Those were not insured because at that point in time, the bond insurance did not exist. All other bonds listed are insured and the policies are valid. Chairperson Pena wanted to know if the City has set up a priority of what to pay and not to pay in case obligations cannot be met. City Manager Spevacek stated that has not been done yet, however, guidance from the law states the first thing that gets cut would be administrative allocations, second would be any third party obligations that may be less easy to enforce, third would be any taxing agency payments and the fourth would be bond payments. Currently, we are not fully expending the bond proceeds so those bond proceeds that are taxable may be used if necessary to back fill any shortfall. Chairperson Pena asked what agency would be responsible to collect if there is a default on debt service payments. Attorney Ihrke indicated most likely it would be the State. Board Member Osborne asked if the 2011 bonds were issued in respect to Coral Mountain project and is the remainder still in the bank. City Manager Spevacek stated that the bonds were not issued in relationship to Coral Mountain but for Washington Street Apartments ( "WSA "). The bond proceeds that are being pledged over time are for the rehabilitation and improvements at WSA. The issue before the Board today are the tax - exempt bond proceeds left from 2004, there are severe limits on what those proceeds can be used for, visa via they need to be used on affordable housing. A portion of the 2011 taxable bonds are being pledged for WSA but funding will not occur until after June 2013. Board Member Maysels asked if the DOF will accept an amended ROPS since the January 2013 through June 2013 is being done so many months in advance. Attorney Ihrke indicated that the statute provides for amending the BOPS however, the DOF stated in correspondence in June 2012 that they were done reviewing any further requested revisions to BOPS 1 and 2. If there are remaining disputes, it can be taken care of during the process on ROPS 3. The answer is yes, you can amend BOPS 3 but it comes down to how the law is administered by the State. OVERSIGHT BOARD ACTION MINUTES 3 AUGUST 8, 2012 A motion was made by Marshall /Nelson to adopt Resolution No. OB 2012- 014 adopting a Resolution of the Oversight Board of the Successor Agency to La Quinta Redevelopment Agency Adopting a Recognized Obligation Payment Schedule for the Period January 2013 through June 2013 RESOLUTION NO. OB 2012 -014 A RESOLUTION OF THE OVERSIGHT BOARD OF THE SUCCESSOR AGENGY TO LA QUINTA REDEVELOPMENT AGENCY 1) ADOPTING A RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR THE PERIOD OF JANUARY 2013 THROUGH JUNE 2013; 2) APPROVING THE CONTINUED IMPLEMENTATION OF THE WASHINGTON STREET APARTMENTS REHA BILITATION PROJECT, 3) APPROVING THE EXPENDITURE OF $3,006,360 IN 2004 TAX - EXEMPT HOUSING BOND PROCEEDS AND $15,523,220 OVER THE COURSE OF IMPLEMENTATION, AND $2,450,250 IN 2004 TAX - EXEMPT HOUSING BOND PROCEEDS DURING THE JANUARY — JUNE 2013 ROPS PERIOD, 4) CONFIRMING THAT THE HOUSING BOND PROCEEDS ARE HOUSING ASSETS THAT ARE TO BE TRANSFERRED TO THE LA QUINTA HOUSING AUTHORITY PURSUANT TO HEALTH & SAFETY CODE SECTION 34176(b) IN ACCORDANCE WITH THE ROPS SCHEDULE Motion carried 6 ayes, 0 nays, 1 absent. REPORTS AND INFORMATIONAL ITEMS 1 . Summary of Redevelopment Agency Dissolution Budget Trailer Bill Staff presented staff report. Attorney lhrke explained the following revisions to the law under AB 1484 as follows: For purposes of the Oversight Board, it is important to remember the general role remains the same where the Board has a fiduciary responsibility to the holders of enforceable obligations and to the taxing entities. Immunities to the Board have been slightly changed Substantive changes to the law that will be brought before the Board will be how housing assets are going to be dealt with on a going forward basis. OVERSIGHT BOARD ACTION MINUTES 4 AUGUST 8, 2012 AB 1484 provides the Housing Authority to submit a list of housing assets to the DOF pursuant to the law, and if the DOF approves that housing list, then all those assets essentially get handed over to the Housing Authority for affordable housing purposes. The non - housing LQRDA real property was originally governed by a provision in AB 26 that would have required expedited liquidation. Those provisions have been suspended under AB 1484 for the purposes of dealing with a finding of completion - meaning due diligence review audits, which is an inventory of all assets of the LQRDA including housing and non - housing. The accountants are still waiting for further clarification on what they are supposed to be auditing. Once the audits are completed, the Successor Agency will review those for approval. The DOF will decide what remittance needs to be made by the Successor Agency to do a "true -up payment." If everything balances out and everyone agrees and that payment is made, the DOF will issue a finding of completion. Once there is a finding of completion, this allows the Successor Agency, along with the approval of the Oversight Board, to put together a property management plan. Property management plans will be a governing document as to how all non - housing redevelopment real property is to be dealt with in the future. Assets will be covered in the audit as well. Attorney Ihrke further explained that the due diligence audits have been broken down into an audit of the low and moderate income housing fund and an audit of everything else of the LQRDA. The audit of the housing fund needs to be done soon — supposed to be completed by October 1, 2012. The Oversight Board needs to have two public meetings to address that audit; one needs to be for public hearing and the second for actual approval, which can be no more than five business days after the first hearing. Once the audit is approved, it must be forwarded to the DOF by October 15, 2012. For all other assets subject to the later due diligence audit, which needs to be done in December, is the same concept. Concerning the BOPS, there have been significant changes by AB 1484 to codify the process that was used in previous BOPS. The deadlines have been moved up for approval process and the DOF has more time for review. The law allows a meet and confer process, meaning that the Successor Agency and DOF may need to have a meet and confer and depending on any disputes or anything that the DOF wishes to have modified, an amended ROPS may need to come back to the Board. Another change the BOPS procedure is that the County Auditor - Controller has a much more expanded role to the extent of being able to dispute what a particular item may be on a BOPS. Ultimately, the DOF would review that as well. OVERSIGHT BOARD ACTION MINUTES 5 AUGUST 8, 2012 Board Member Maysels inquired about the issue with CPAs /audit and timing of finalizing the audit by October 1, 2012 and how likely is that to happen on time. Board Member Osborne indicated that on August 7, 2012, he received notification from the State Board of Accountancy that the CPAs are asked not to sign any agreements yet because they are trying to work out the scope and procedures of the audits. City Manager Spevacek explained that in terms of land assets, the LQRDA land assets were primarily, if not almost exclusively, housing assets. The schedule that was put together by staff was sent to the DOF and that schedule can be used as the basis for the audit relating to what is needed to be delivered on October 1,2012 In terms of financial assets, on the housing side of the ledger, there are the bond proceeds, cash that is being dedicated to the Coral Mountain development and that cash has moved from the Successor Agency to the Housing Authority and by the end of this month, will be sitting in an escrow account with the financing group that put together the 4% tax credits for the Coral Mountain development. The only assets on the non - housing ledger that the LQRDA held were the museum for the City, the parking lot relating to the library and some odd landscape parcels associated with the Washington and Miles development with Homewood Suites. The LQRDA did not have any other land assets in its possession. In terms of non -land assets that the LQRDA had, those included roughly $9,000,000 of 2002 bond proceeds that were being reserved for SilverRock until the economy collapsed and then about $5,000,000 of cash that may have already been disbursed because it was used to pay for prior obligations that the LQRDA had. When talking about "land assets" La Quinta is different than other communities in that when redevelopment was eliminated, the only assets the LQRDA held were relating to housing and if the housing asset list is blessed by DOF, those will be removed and moved to the Housing Authority and what's left is the parking lot, a museum and some landscape parcels. Board Member Nelson asked if there are any assets that would be subject to the claw back. City Manager Spevacek stated that in 2011, prior to the adoption of AB 26 and prior to the subsequent legal challenges, the LQRDA repaid $40,000,000 of loans outstanding to the City general fund — those funds could be subject to claw back per AB 1484. The second aspect is that in 2011, prior to AB 26, the City obtained appraisals and purchased from the LQRDA at the market value in 2011, the public and private parcels at SilverRock, 9 acres of property on Hwy. 111 and a few other parcels. Then, in June of 2011, the City purchased properties in the Village area, about six or seven acres around La Quinta Park, between City Hall and Old Town as well as another property northwest of Old Town using LQRDA funds. So, those transactions could be subject to review. OVERSIGHT BOARD ACTION MINUTES 6 AUGUST 8, 2012 Chairperson Pena asked if there have been any other cities affected by the claw back provisions. Attorney Ihrke said he has not heard of any yet - he believes the State Controller's office has been holding back to see what the results are of the audits. He is not aware of any claw back prior to AB 1484 becoming law. ADJOURNMENT - 2:53 p.m. A motion was made by Board Members Maysels /Osborne to adjourn. Motion passed unanimously. Respectfully submitted, , Lori Lafond Oversight Board Secretary OVERSIGHT BOARD ACTION MINUTES 7 AUGUST 8, 2012