HomeMy WebLinkAboutItem 2a: Budget Allocation of ARA Funds for SERAF PaymentDATE: February 16, 2010
TO: Chairman and Redevelopment Agency Board
FROM: Jason Kruckeberg, Assistant City Manager /Development Services Director - 5 1 - 1 &
By: Jerry Schwartz, Economic Development Manager Js
SUBJECT: AUTHORIZE A BUDGET ALLOCATION OF $1,549,203 FROM THE
REDEVELOPMENT AGENCY'S UNPROGRAMMED RESERVES TO
MAKE THE REQUIRED SUPPLEMENTAL EDUCATIONAL REVENUE
AUGMENTATION FUND (SERAF) PAYMENT TO THE STATE OF
CALIFORNIA FOR FY 2009 -2010 AS REQUIRED BY ASSEMBLY BILL
X4 -26
Recommendation: Approve
SUMMARY
Assembly Bill X4 -26, a trailer bill that was part of the 2009 -2010 California State budget,
included another raid of redevelopment funding totaling $2.05 billion over two years.
The money is transferred to the Supplemental Educational Revenue Augmentation
Fund (SERAF) to offset some of the State's costs for education. The amount that will
be taken from the Arcadia Redevelopment Agency for 2009 -2010 is $1,549,203. It is
due to the State by May 10, but the Agency must report how it will pay its share by
March 1.
DISCUSSION
STAFF REPORT
Arcadia Redevelopment Agency
The Supplemental Educational Revenue Augmentation Fund (SERAF) is a budget
balancing mechanism that has been used by State lawmakers several times in the past.
It was last used in FY 2008 -2009 when the State attempted to take $318,643 from the
ARA. However the California Redevelopment Association filed a lawsuit claiming that
the taking was unconstitutional, and the judge agreed. The FY 2008 -2009 taking of
ARA funds never occurred.
During FY 2009 -2010, despite CRA's legal victory, the Governor and State Legislators
have again voted to use redevelopment to help balance the next two years of state
budgets. AB X4 -26, one of the bills approved along with the budget, requires
redevelopment agencies to transfer $2.05 billion to the state over two years to offset
some of the cost to fund education. This was done despite two important facts; one,
CRA already prevailed in court on a similar effort to take redevelopment funds in 2008-
2009, and two, redevelopment is one of the only tools available for local governments to
support business and preserve and create jobs, important capabilities in this continued
period of economic uncertainty. AB X4 -26 allows the ability to extend the project area
time limits by one year if the 2009 -2010 payment is made on -time.
The Arcadia Redevelopment Agency's share of this taking is $1,549,203 for FY 2009-
2010. It is due to the State by May 10. However, all redevelopment agencies are
required to inform the State of their method of payment by March 1. Agencies that
cannot afford to pay have the option to borrow the entire SERAF amount from their
low /mod housing fund. Staff is recommending that the entire payment come from the
general redevelopment fund, not from low /mod housing.
The California Redevelopment Association (CRA) has filed a lawsuit claiming that the
taking of redevelopment funds required in AB X4 -26 is unconstitutional. A hearing on
the merits of the lawsuit is scheduled for February 5 in Sacramento Superior Court.
CRA is hopeful of having the Court render a decision prior to the May 10 deadline, as
was accomplished for FY 2008 -2009. While we are monitoring this case, we are
nonetheless proceeding as if the payment deadline will remain unchanged.
As mentioned in the recently adopted Five Year Implementation Plan 2010 -2015, this
SERAF shift will have consequences. The Agency identified several priority projects in
the Implementation Plan. Given the high land prices in Arcadia and without the power
of eminent domain, the loss of $1,549,203 will limit the ability to achieve redevelopment
agency goals. The AB X4 -26 includes a provision for taking another approximately
$318,000 from the ARA for 2010 -2011. Unless the CRA prevails in its lawsuit, the
Agency will lose over $1.85 million from its project fund in the next two years.
FISCAL IMPACT
The impact on the Redevelopment Agency for FY 2009 -2010 is $1,549,203. The
transfer of these funds to the State significantly reduces the tax increment available to
meet the goals for the Central Project Area. There is no impact on the General Fund.
RECOMMENDATION
That the Redevelopment Agency Board authorizes a budget allocation of $1,549,203
from unprogrammed Agency funds to make the SERAF payment to the State of
California as required by AB X4 -26.
Approved:
Donald Penman, City Manager /Executive Director
Staff Report
February 16, 2010
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