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HomeMy WebLinkAboutItem 1b: Redevelopment Agency Excess Surplus PlanDATE: January 5, 2010 TO: Redevelopment Agency Board FROM: Jason Kruckeberg, Assistant City Manager /Development Services - Director By: Jerry Schwartz, Economic Development Manager SUBJECT: REDEVELOPMENT AGENCY EXCESS SURPLUS PLAN Recommendation: Approve BACKGROUND The Arcadia Redevelopment Agency is required to set aside 20% of the tax increment received annually to increase and improve the supply of housing that is available to low and moderate income individuals and families. Redevelopment Law (California Health & Safety Code) is focused on redevelopment agencies spending or encumbering affordable housing funds, even though it can take several years to accumulate money rr for a large housing project. Encumbering can occur when the Agency has an approved development agreement that involves a financial obligation in the future. If a redevelopment agency accumulates too large a balance in its housing fund without spending or encumbering the funds, it can have an "excess surplus ". "Excess surplus" occurs when the adjusted unencumbered balance exceeds the greater of 1) $1 million, or 2) the combined amount of tax increment revenue deposited over the preceding four fiscal years. When an agency accumulates an excess surplus, it must create a plan to expend or encumber its low /mod housing funds within three years. It can also choose to turn the excess surplus funds over to the County Housing Authority. The Arcadia Redevelopment Agency had an excess surplus of $1,059,722 at the end of the 2008 -2009 fiscal year. As a result, the Agency must approve a plan to expend these funds for low /mod housing. DISCUSSION STAFF REPORT Arcadia Redevelopment Agency The Redevelopment Agency has completed two affordable housing projects, the 54 -unit Heritage Park low income senior apartment complex that opened in 2004 and the six - unit Alta Street Classics that provided first time homebuyer opportunities for moderate income purchasers that was occupied in 2008. The Agency expended $1.8 million for the Heritage Park project and $2.2 million for the Alta Street Classics. Redevelopment Law (Health and Safety Code Section 33334.12) requires that an Agency with an excess surplus prepare a plan to expend or encumber the funds within three years. The Excess Surplus Plan is attached as Exhibit A. Of the $1,059,722 that is reported as the Agency's excess surplus, $531,000 was expended in July 2009 (after the close of the Fiscal Year) to complete the purchase of 15 Lucille Street as a site for a new affordable housing project, leaving $528,722 unexpended. The cost to demolish the existing structures, grade the site, and develop new housing units will exceed the remaining $528,722. It is anticipated that the entire excess surplus amount will be expended in 2010. The Excess Surplus Plan reflects the funds already spent on 15 Lucille St. and the anticipated expenditures to develop the project. It is important to realize that excess surplus calculations are an ongoing process. Each year the cash flow and spending for housing funds is calculated to determine whether or not an excess surplus situation exists. Staff will continue to monitor these calculations and is continuing to pursue other affordable housing opportunities. Investing in additional affordable housing projects over time is the Agency's goal to avoid any future issues with excess surplus. ENVIRONMENTAL REVIEW The excess surplus plan is exempt from CEQA review because it is general in nature. Specific low and moderate income housing projects would be subject to the appropriate CEQA review. FISCAL IMPACT There is no fiscal impact on the General Fund. The impact of this excess surplus plan would be to expend the Agency's low and moderate income housing funds while avoiding similar findings in future years. RECOMMENDATION Approve the excess surplus plan. Approve: Donald Penman, City Manager Exhibit A — Excess Surplus Plan Staff Report January 5, 2010 Page 2 EXHIBIT A ARCADIA REDEVELOPMENT AGENCY EXCESS SURPLUS PLAN LOW /MOD HOUSING FUND January 5, 2010 Definition of Excess Surplus "Any unexpended and unencumbered amount in an agency's Low and Moderate Income Housing Fund that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount deposited into the Low and Moderate Income Housing Fund pursuant to Sections 33334.2 and 33334.6 during the agency's preceding four fiscal years." (Health and Safety Code Section 33334.12(g)(1). Definition of Encumbered The definition of encumbered, as used above, is "Moneys shall be deemed encumbered if committed pursuant to a legally enforceable contract or agreement for expenditure for purposes specified in Section 33334.2 or 33334.3" (Health and Safety Code Section 33334.12.(g)(2). Excess Surplus — Arcadia Redevelopment Agency At the end of fiscal year 2008 -2009, the Agency had an excess surplus of $1,059,722. Plan to Expend or Encumber Excess Surplus Funds The Health and Safety Code does not require this plan to be specific as to project or levels of affordability. The Agency purchased the site at 15 Lucille Street to develop an affordable housing project. Escrow closed on July 16, 2009. The Agency paid $538,000 for the property, with $531,000 of that expenditure occurring in July 2009, after the close of the 08/09 Fiscal Year. Excess Surplus (as of 6/30/009) - Less purchase of 15 Lucille - $1,059,722 $ 531,000 Remainder to be spent or encumbered - $ 528,722 The completion of an affordable housing project at 15 Lucille, including demolition and site clearance, development of plans, and construction of the housing units, will cost the Agency more than the $528,722 still to be spent or encumbered. It is expected that these remaining funds will be encumbered during calendar year 2010, and possibly by the end of the 2009 -2010 fiscal year. It is also expected that other affordable housing projects will be pursued during the calendar year 2010, providing additional options for the Agency to encumber and spend the affordable housing funds currently shown as excess surplus.