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HomeMy WebLinkAboutItem 3b: Ordinance 2286: Continued Existence and Operation of Arcadia Redevelopment Agency A Of AR I , 1111 z n 1 in rim o j � of v. STAFF REPORT Development Services Department DATE: July 19, 2011 TO: Mayor and City Council FROM: Jason Kruckeberg, Deputy City Manager /Development Services Director 7-- - By: Jerry Schwartz, Economic Development Manager S _s SUBJECT: AUTHORIZE ORDINANCE NO. 2286, AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DETERMINING IT WILL COMPLY WITH THE VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM PURSUANT TO PART 1.9 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE IN ORDER TO PERMIT THE CONTINUED EXISTENCE AND OPERATION OF THE ARCADIA REDEVELOPMENT AGENCY Recommendation: Introduce SUMMARY As part of the approval of the California State budget for FY 2011 -2012, the State Legislature approved, and the Governor signed, trailer bills AB X1 26 and AB X1 27 which impact redevelopment in Arcadia and throughout the State. AB X1 26 eliminates redevelopment agencies as of October 1, 2011. AB X1 27 allows a redevelopment agency to be reestablished if the City Council approves an Ordinance agreeing to make payments each year that would be distributed to schools and special districts. The recommended action would introduce an ordinance on first reading to have Arcadia make the required payments and allow the continuation of normal operations of the Arcadia Redevelopment Agency. BACKGROUND The Arcadia Redevelopment Agency (Agency) undertakes a variety of projects, programs, and activities each fiscal year. There are commercial activities including working with Rusnak Mercedes Benz on potential expansion, the fagade improvement program, providing support to the Arcadia Downtown Business Association (ADBA), and various marketing activities. Currently, the Agency has a consultant working with the ADBA on planning for the future, including potentially establishing a Business Improvement District. The Agency has also hired a consultant that is preparing a comprehensive study of parking in the downtown. In addition, there are affordable housing activities, including the current construction of the 43 -unit Campus Commons senior apartments on Campus Drive, and the nine -unit Lucile Court low income apartment project for families that will be located at 15 & 19 Lucile Street. Lastly, the Ordinance No. 2286 July 19, 2011 Page 2 of 5 Agency funds public improvements in the Central Redevelopment Project Area, including streets, sidewalks, and intersections. These various Agency activities help our businesses, increase the supply of low and moderate income housing, and upgrade our infrastructure. DISCUSSION AB 1X 26 dissolves all redevelopment agencies, including the Agency, as of October 1, 2011. It calls into question, and will potentially invalidate, any Agency agreements that were made after January 1, 2011. This could include the Cooperation Agreements between the City Council and Arcadia Redevelopment Agency by which the Agency transferred funds to the City for priority public improvements in the project area. The State Controller's Office would review these transactions and could force them to be undone. The bill prohibits the Agency from any new financial obligations or contracts, modifying any existing agreements or obligations, buying or selling property, or engaging in most regular redevelopment activities unless required to enforce existing obligations. If the City does not adopt an Ordinance and the Agency dissolves per AB 1X 26, after October 1, 2011, when its authority to transact business is withdrawn, a successor agency is established. The City could be the successor agency. Its primary obligation is to make debt payments (such as principal and interest on Agency bonds) of the Agency based on a schedule of payments called a Recognized Obligation Payment Schedule. This schedule must be updated for each six month period, and must be forwarded to the Los Angeles County Auditor - Controller, the State Controller, and the State Department of Finance. It must also be posted on the City's website. The successor agency (potentially the City) is required to establish an Oversight Board which will be composed of seven members. Two members of this Board are selected by the mayor, one of which does not need to meet specific qualifications, and one must represent the employees of the Agency from the recognized bargaining unit that represents the most Agency employees who are part of the successor organization. One member is selected by the largest non - enterprise special district (by property tax share), one member is selected by the county superintendent of education to represent schools, one member selected by the Chancellor of the California Community Colleges, and the Los Angeles County Board of Supervisors appoints two members with one to represent the public. If any position is not filled by January 15, 2012 or remains vacant for more than 60 days, it is filled by the Governor. The purpose of the Oversight Board is to review the actions of the successor agency. The Oversight Board may direct staff of the successor agency in furtherance of their responsibilities under AB X1 26. The successor agency must pay all of the costs of meetings of the Oversight Board; costs may be included in the administrative budget. The Oversight Board's actions are reviewed by the State Department of Finance. On July 1, 2016, individual oversight boards are replaced by one Countywide oversight board. Ordinance No. 2286 July 19, 2011 Page 3 of 5 The City can also elect to retain the affordable housing assets of the Agency. If it chooses not to do this, the assets, funds, and functions would most likely be taken over by the Los Angeles County Housing Authority. The second Bill, AB X1 27 allows the City Council to choose to avoid the dissolution of the Agency by passing an Ordinance that commits it to making specific payments each year that would be distributed to the schools and special districts. These payments are in addition to any Agency funds that are already routinely paid each year to these same schools and special districts. Under the Ordinance, the City would agree to make these payments, and could then work out an agreement with the Agency to provide the funding for the payments. An Ordinance agreeing to the Alternative Voluntary Redevelopment Program should be adopted prior to the October 1, 2011 date that AB 1X 26 takes effect. Until the Ordinance is adopted, the Agency is unable to enter into new agreements, issue any new debt, modify any deal terms, and start any new projects. It can continue existing activities and meet ongoing obligations, including agreements that were already in place. Once the City adopts the Ordinance, it must notify the LA County Auditor - Controller, the State Controller, and the Department of Finance that the City agrees to comply with the requirements of the additional payment provisions of AB X1 27. Once the ordinance is adopted, the City would be exempt from the provisions of AB X1 26. It is important to recognize that, if after passing an Ordinance and notifying the appropriate County and State agencies, the City misses one of these voluntary payments at any time, the provisions of AB X1 26 would immediately take effect, ending the activities of the Agency. If the City adopts the Ordinance agreeing to the Alternative Voluntary Redevelopment Program, it must make one -half of the total payment for each year on or before January 15 of the fiscal year, and the remaining one -half must be paid on or before May 15. The actual amount due for fiscal year 2011 -2012 will be provided by the Department of Finance by August 1, 2011. It will be based on the proportionate share of the total $1.7 billion that the State is attempting to collect during that year. Based on the formula, the California Redevelopment Association (CRA) has estimated Arcadia's payment to be $1,482,920 in 2011 -2012. AB X1 27 also allows redevelopment agencies that participate in the Alternative Voluntary Redevelopment Program to be exempt from making the full transfer to the low and moderate income housing fund during 2011 -2012 if the City is requiring payment from the Agency for the payments and the Agency makes a finding that there are insufficient other funds to meet debt obligations and current priorities. In fiscal year 2012 -2013, the State is taking $400 million from cities for redevelopment. The Arcadia share for 2012 -2013 is estimated by the CRA to be $348,922. For future years, there is a complex formula in the legislation to determine the payment. The State may provide clearer information each year on the amount owed. Also, worth noting, AB 1X 27 does not allow the Agency to extend the life of the project area as a trade off for making the payments. In some years, legislation that shifted redevelopment revenues to the State allowed time extensions. That is not the case here. Ordinance No. 2286 July 19, 2011 Page 4 of 5 . As discussed above, for the Arcadia Redevelopment Agency to remain operating as it currently does, the City Council must pass an Ordinance agreeing to the Alternative Voluntary Redevelopment Program under AB X1 27. The proposed Ordinance no. 2286 would accomplish that step. Since the Ordinance is being introduced before the Department of Finance (DOF) provides the Arcadia share on August 1, 2011, the Ordinance preserves the right to appeal the share that the DOF assigns to Arcadia. In addition, the CRA is filing a lawsuit to stop the implementation of AB X1 26 and AB X1 27 on constitutional grounds. As such, the Ordinance is being introduced under protest, and language of the Ordinance indicates as much. If CRA is successful in its lawsuit, it is possible that the Ordinance might not need to be implemented. It is important that the City Council not wait for a Court decision before starting any action based on these two bills. The process for this Ordinance is the same as any other that is not introduced as an urgency action. If this is introduced on first reading, it would be brought back for the second reading and adoption at the August 2 meeting. At that time, the actual amount of the payment will have been released by the DOF. After allowing for the 30 -day period before the Ordinance is enacted, the Arcadia Redevelopment Agency would be able to proceed with new activities beginning with the September 6 Council meeting. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) The introduction of the proposed Ordinance is not a project per the CEQA guidelines Section 15378 (b)(4). Any new projects of the Arcadia Redevelopment Agency would be subject to the appropriate review under CEQA. FISCAL IMPACT The fiscal impact of introducing Ordinance No. 2286 is that if it is ultimately adopted, the City would be committing to making special payments each year to schools and special " districts per AB X1 27. In 2011 -2012, the payment is estimated to be $1,482,920. The City can enter into an agreement with the Arcadia Redevelopment Agency to have it make payments to the City to cover the cost of these special payments. Under AB X1 27, the Arcadia Redevelopment Agency would continue its normal operations, which could include projects that would generate new revenues to the City's General Fund. If the City does not proceed with the Ordinance, then per AB 1X 26, the Arcadia Redevelopment Agency would be dissolved as of October 1, 2011. The impact would be the immediate and permanent suspension of any activity by the Arcadia Redevelopment Agency and the beginning of the process to unwind the Agency. The elimination of ARA would impact future General Fund revenues that could be generated from redevelopment projects. Ordinance No. 2286 July 19, 2011 Page 5 of 5 RECOMMENDATION Introduce Ordinance No. 2286 on first reading. By: . 1 Donald Penman, City Manager Attachment: Ordinance No. 2286 ORDINANCE NO. 2286 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DETERMINING IT WILL COMPLY WITH THE VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM PURSUANT TO PART 1.9 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE IN ORDER TO PERMIT THE CONTINUED EXISTENCE AND OPERATION OF THE ARCADIA REDEVELOPMENT AGENCY WHEREAS, the City Council of the City of Arcadia ( "City ") approved and adopted the Redevelopment Plan for the Central Redevelopment Project ( "Redevelopment Plan ") covering certain properties within the City (the "Project Area "); and WHEREAS, the Arcadia Redevelopment Agency ( "Agency ") is engaged in activities to execute and implement the Redevelopment Plan pursuant to the provisions of the California Community Redevelopment Law (Health and Safety Code § 33000, et seq.) ( "CRL "); and WHEREAS, since adoption of the Redevelopment Plan, the Agency has undertaken redevelopment projects in the Project Area to eliminate blight, to improve public facilities and infrastructure, to renovate and construct affordable housing, and to enter into partnerships with private industries to create jobs and expand the local economy; and WHEREAS, over the next few years, the Agency hopes to implement a variety of redevelopment projects and programs to continue to eliminate and prevent blight, stimulate and expand the Project Area's economic growth, create and develop local job opportunities and alleviate deficiencies in public infrastructure, to name a few; and 1 WHEREAS, as part of the 2011 -2012 State budget bill, the California Legislature has recently enacted, and the Governor has signed, companion bills AB 1X 26 and AB 1X 27, requiring that each redevelopment agency be dissolved unless the community that created it enacts an ordinance committing it to making certain payments; and WHEREAS, specifically, AB 1X 26 prohibits agencies from taking numerous actions, effective immediately and purportedly retroactively, and additionally provides that agencies are deemed to be dissolved as of October 1, 2011; and WHEREAS, AB 1X 27 provides that a community may participate in an "Alternative Voluntary Redevelopment Program," in order to enable a redevelopment agency within that community to remain in existence and carry out the provisions of the CRL, by enacting an ordinance agreeing to comply with Part 1.9 of Division 24 of the Health and Safety Code; and WHEREAS, the Alternative Voluntary Redevelopment Program requires that the community agree by ordinance to remit specified annual amounts to the county auditor - controller; and WHEREAS, under the threat of dissolution pursuant to AB 1X 26, and upon the contingencies and reservations set forth herein, the City shall make the Fiscal Year 2011- 2012 community remittance, currently estimated to be One Million Four Hundred Eighty - Two Thousand Nine Hundred Twenty Dollars ($1,482,920), as well as the subsequent annual community remittances as set forth in the CRL; and 2 WHEREAS, the City reserves the right to appeal the California Director of Finance's determination of the Fiscal Year 2011 -2012 community remittance, as provided in Health and Safety Code Section 34194; and WHEREAS, City understands and believes that an action challenging the constitutionality of AB 1X 26 and AB 1X 27 will be filed on behalf of cities, counties and redevelopment agencies; and WHEREAS, while the City currently intends to make these community remittances, they shall be made under protest and without prejudice to the City's right to recover such amounts and interest thereon, to the extent there is a final determination that AB 1X 26 and AB 1X 27 are unconstitutional; and WHEREAS, the City reserves the right, regardless of any community remittance made pursuant to this Ordinance, to challenge the legality of AB 1X 26 and AB 1X 27; and WHEREAS, to the extent a court of competent jurisdiction enjoins, restrains, or grants a stay on the effectiveness of the Alternative Voluntary Redevelopment Program's payment obligation of AB 1X 26 and AB 1X 27, the City shall not be obligated to make any community remittance for the duration of such injunction, restraint, or stay; and WHEREAS, all other legal prerequisites to the adoption of this Ordinance have occurred. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES ORDAIN AS FOLLOWS: 3 SECTION 1. Recitals. The Recitals set forth above are true and correct and incorporated herein by reference. SECTION 2. Participation in the Alternative Voluntary Redevelopment Program. In accordance with Health and Safety Code Section 34193, and based on the Recitals set forth above, the City Council hereby determines that the City shall comply with the provisions of Part 1.9 of Division 24 of the Health and Safety Code, as enacted by AB 1X 27. SECTION 3. Payment Under Protest. Except as set forth in Section 4, below, the City Council hereby determines that the City shall make the community remittances set forth in Health and Safety Code section 34194 et seq. SECTION 4. Effect of Stay or Determination of Invalidity. City shall not make any community remittance in the event a court of competent jurisdiction either grants a stay on the enforcement of AB 1X 26 or AB 1X 27 or determines that AB 1X 26 or AB 1X 27 are unconstitutional and therefore invalid, and all appeals therefrom are exhausted or unsuccessful, or time for filing an appeal therefrom has lapsed. Any community remittance shall be made under protest and without prejudice to the City's right to recover such amount and interest thereon in the event that there is a final determination that AB 1X 26 and AB 1X 27 are unconstitutional. if there is a final determination that AB 1X 26 and AB 1X 27 are invalid, this Ordinance shall be deemed to be null and void and of no further force or effect. 4 SECTION 5. Implementation. The City Council hereby authorizes and directs the City Manager to take any action and execute any documents necessary to implement this Ordinance, including but not limited to notifying the Los Angeles County Auditor - Controller, the Controller of the State of California, and the California Department of Finance of the adoption of this Ordinance and the City's agreement to comply with the provisions of Part 1.9 of Division 24 of the Health and Safety Code, as set forth in AB 1X 27. SECTION 6. Additional Understandings and Intent. It is the understanding and intent of the City Council that, once the Agency is again authorized to enter into agreements under the CRL, the City will enter into an agreement with the Agency as authorized pursuant to Section 34194.2, whereby the Agency will transfer annual portions of its tax increment to the City in amounts not to exceed the annual community remittance payments to enable the City, directly or indirectly, to make the annual remittance payments. The City Council does not intend, by enactment of this Ordinance, to pledge any of its general fund revenues or assets to make the remittance payments. SECTION 7. CEQA. The City Council finds, under Title 14 of the California Code of Regulations, Section 15378(b)(4), that this Ordinance is exempt from the requirements of the California Environmental Quality Act ( "CEQA ") in that it is not a "project," but instead consists of the creation and continuation of a governmental funding mechanism for potential future projects and programs, and does not commit funds to any specific project or program. The City Council, therefore, directs that a Notice of Exemption be filed with the County Clerk of the County of Los Angeles in accordance with CEQA Guidelines. 5 SECTION 8. Custodian of Records. The documents and materials that constitute the record of proceedings on which these findings are based are located at the City Clerk's office located at 240 West Huntington Drive, P.O. Box 60021, Arcadia, California 91066. The custodian for these records is the City Clerk. SECTION 9. Severability. If any provision of this Ordinance or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable. The City Council hereby declares that it would have adopted this Ordinance irrespective of the invalidity of any particular portion thereof. SECTION 10_ Certification; Publication. The City Clerk shall certify to the adoption of this Ordinance and cause it, or a summary of it, to be published once within 15 days of adoption in a newspaper of general circulation printed and published within the City of Arcadia, and shall post a certified copy of this Ordinance, including the vote for and against the same, in the Office of the City Clerk in accordance with Government Code § 36933. SECTION 11. Effective Date. This Ordinance shall become effective on the thirty first (31 after its adoption. [SIGNATURES ON NEXT PAGE] 6 Passed, approved and adopted this day of , 2011. Mayor of the City of Arcadia ATTEST: City Clerk APPROVED AS TO FORM: e.174,e Steph n P. Deitsch City Attorney 7