HomeMy WebLinkAbout05. Reso to Approve Due Dilligence ReportOVERSIGHT BOARD MEMORANDUM
DATE: January 10, 2013
TO: CHAIR AND MEMBERS OF THE OVERSIGHT BOARD
FROM: GILBERT A. LIVAS, ON BEHALF OF THE SUCCESSOR AGENCY &�
ITEM: RESOLUTION APPROVING THE NON - HOUSING DUE DILIGENCE
REVIEW REPORT
RECOMMENDATION
Successor Agency staff recommends that the Oversight Board complete its examination
of the Non - Housing Due Diligence Review (DDR); approve the findings in the attached
DDR report; direct Successor Agency staff to transmit the report to the Department of
Finance (DOF) and the Los Angeles County Auditor - Controller, and adopt the following
Resolution:
A RESOLUTION OF THE OVERSIGHT BOARD TO THE DOWNEY
SUCESSOR APPROVING THE NON - HOUSING DUE DILIGENCE
REVIEW REPORT PREPARED PURSUANT TO SECTION 34179.5
SUMMARY
AB 1484 created additional requirements associated with the unwinding process of
redevelopment agencies. This legislation created a new mandate for a Due Diligence
Review (DDR). The DDR is an agreed -upon procedures audit of the former
redevelopment agency's fund balances and transfer transactions between the former
Redevelopment Agency and Successor Agency. The DDR purpose is to identify
unencumbered resources that can be allocated to those taxing entities associated to the
project areas of the former redevelopment agency. Specifically, under section 34179.6,
the Board is required to "review, approve and transmit to the [DOF] and the county
auditor - controller the determination of the amount of cash and cash equivalents that are
available to the taxing entities ...." (Section 34179.6(b)). The Oversight Board must
make a determination on the DDR no later than January 15, 2013.
AB 1484 mandates that the Successor Agency retain the services of an experienced
and independent Certified Public Accountant (CPA) to complete the DDR. Two due
diligence reviews were required, one related to housing assets and obligations and the
second review related to non - housing assets and obligations. Both DDR reports were
prepared by White Nelson Diehl Evans LLP. The Oversight Board approved the first
DDR report on December 11, 2012. The second DDR on the non - housing funds must
be approved by the Oversight Board and submitted to DOF by January 15, 2013.
As required under AB 1484, the non - housing DDR report was electronically transmitted
to the members of the Oversight Board Members, the Los Angeles County Auditor
Controller, the State Controller and the State Department of Finance. Upon completion
of this step, the statute provides that the Oversight Board convene a public comment
session, at least five (5) business days in advance of a meeting, by the Oversight
Board, to approve the findings of the DDR. On December 20, 2012, the Oversight Board
met to commence the 5 -day comment period and adjourned the Oversight Board
meeting to January 10, 2013.
SUMMARY OF FINDINGS
Attached to the proposed resolution is the non - housing due diligence review report,
prepared by White Nelson Diehl Evans LLP, which examined the cash and non - liquid
assets, revenues, expenditures and transfers prior to and following the dissolution of the
redevelopment agency on February 1, 2012. The primary findings reported in the DDR
are noted below:
• There is a net balance of $134,035 in unrestricted cash and cash funds
available for remittance to the County as excess funds,
• The total of value of assets held by the Successor Agency as of June 30, 2012
was $5,201.818;
• The total amount of assets legally restricted for uses specified by debt
covenants, grant restrictions or restrictions imposed by other governments is
$662,708;
• Total assets that are not cash or cash equivalents is $2,861,595;
• Total amount needed to satisfy ROPS obligations for fiscal year 2012 -2013 is
$1,234,989.
Attachment: Resolution
Non - Housing Due Diligence Review Report
OB RESOLUTION NO.
A RESOLUTION OF THE OVERSIGHT BOARD TO THE DOWNEY
SUCCESSOR AGENCY APPROVING THE NON - HOUSING DUE DILIGENCE
REVIEW REPORT PREPARED PURSUANT TO SECTION 34179.5
WHEREAS, as a result of the passage of Assembly Bill 26 from the 2011 -12 First
Extraordinary Session of the California Legislature ( "ABx1 26" or the "Dissolution Act "), the City
of Downey redevelopment agency ( "RDA ") was dissolved on February 1, 2012; and
WHEREAS, pursuant to Assembly Bill 1484 of the 2011 -12 Legislative Session ( "AB
1484 "), the Downey Successor Agency for the former RDA ( "Successor Agency ") is a separate
public agency now charged with winding down the RDA's affairs, including making payments
due for enforceable obligations (as defined in the Dissolution Act), and perform obligations
required pursuant to enforceable obligations; and
WHEREAS, in connection with winding the former RDA, AB 1484 requires each
successor agency to employ a licensed accountant to conduct a due diligence review of the low
and moderate housing fund (the "Due Diligence Review "); and
WHEREAS, pursuant to Health and Safety Code section 34179.6, added by AB 1484,
the Successor Agency electronically transmitted the Due Diligence Review, to the Oversight
Board of the Successor Agency ( "Oversight Board "), the California Department of Finance,
State Controller's Office, County Administrative Officer, and County Auditor - Controller; and
WHEREAS, the Oversight Board has been duly established and operating pursuant to
Health and Safety Code section 34179; and
WHEREAS, pursuant to Health and Safety Code section 34179.6(c), on or before
January 15, 2013, the Oversight Board must review, approve, and transmit to the Department of
Finance and County Auditor - Controller the determination of the amount of cash and cash
equivalents that are available for disbursement to taxing entities from the former RDA's non -low
and moderate income housing fund; and
WHEREAS, a true and correct copy of the Due Diligence Review of all Non - Housing
monies and obligations of the Successor Agency is attached to this Resolution as Exhibit A and
incorporated herein, and
WHEREAS, the Oversight Board held a public comment session on December 20, 2012,
pursuant to Health and Safety Code section 34179.6(b), prior to the approval of the
determination of the amount of cash and cash equivalents that are available for disbursement to
taxing entities from the former RDA's; and
WHEREAS, the Oversight Board has taken into consideration its fiduciary responsibility
to the holders of enforceable obligations and the taxing entities that benefit from distributions of
property tax and other revenues.
OB RESOLUTION NO. 12-
PAGE TWO
NOW, THEREFORE, THE OVERSIGHT BOARD FOR THE DOWNEY SUCCESSOR
AGENCY HEREBY RESOLVES AS FOLLOWS:
SECTION 1. That the above recitals are true and correct and incorporated herein.
SECTION 2. The Oversight Board having taken into consideration the public comments,
if any, received and the hereby approves the findings made in the Non - Housing Due Diligence
Review Report (Attachment 1).
SECTION 3. The Oversight Board finds that the Review has determined the amount of
unobligated cash and cash equivalents that are available for disbursement to taxing entities as
determined according to the method provided in Section 34179.5.
SECTION 4. The Oversight Board directs staff to transmit to the Department of Finance
and County Auditor - Controller the determination of the amount of cash and cash equivalents
that is available for disbursement to taxing entities, in the amount of $134,033 (One hundred
thirty -four thousand thirty -three dollars).
SECTION 5. The Secretary shall certify to the adoption of this resolution.
APPROVED AND ADOPTED THIS 10 DAY OF JANUARY, 2013.
ATTEST:
BRIAN SAEKI, Chairman
ADRIA M. JIMENEZ, Secretary
State of California )
County of Los Angeles )ss.
City of Downey )
I, Adria M. Jimenez, Secretary of the Oversight Board of the Successor Agency to the
former Redevelopment Agency of the City of Downey, California ( "Oversight Board "), do hereby
certify the foreping Resolution was duly adopted by said Oversight Board at a regular meeting
held on the 10 day of January 2013, by the following vote, to wit:
Ayes: Oversight Board Members:
Noes: Oversight Board Members:
Absent: Oversight Board Members:
Abstained: Oversight Board Members:
ADRIA M. JIMENEZ, Secretary
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
Independent Accountants' Report on Applying Agreed -Upon Procedures
On the Downey Redevelopment Agency's
And
The Successor Agency to the Downey Redevelopment Agency's
All Other Funds
Pursuant to California Health and Safety Code Section 34179.5
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
Table of Contents
Page
Independent Accountants' Report on Applying Agreed -Upon Procedures
Related to All Other Funds
Attachment A - Agreed -Upon Procedures and Findings Related to All Other Funds 2-9
SUPPORTING SCHEDULES AND EXHIBIT:
Schedule 1 - Listing of Assets Transferred to Successor Agency
as of February 1, 2012
Schedule 2 - Transfers to the City of Downey
Schedule 3 - Reconciliation of Financial Transactions for the Periods Ended
June 30, 2010, June 30, 2011, January 31, 2012 and June 30, 2012
Schedule 4 - Listing of Assets as of June 30, 2012
Schedule 5 - Listing of Nonliquid Assets
Schedule 6 - Schedule of Cash Balances for Retention to Meet Enforceable
Obligations in Fiscal Year 2012 -2013
Schedule 7 - Summary of Balance Available for Allocation to Affected
Taxing Agencies
Exhibit 1 - Legal Opinion on Loan Repayments
Independent Accountants' Report on Applying
Agreed -Upon Procedures Related to All Other Funds
Oversight Board of the Successor Agency
to the Downey Redevelopment Agency
Downey, California
We have performed the minimum required agreed -upon procedures (AUP) enumerated in
Attachment A, which were agreed to by the California Department of Finance, the California State
Controller's Office, the Los Angeles County Auditor - Controller, and the Successor Agency to the
Downey Redevelopment Agency (Successor Agency), (collectively, the Specified Parties), solely to
assist you in meeting the statutory requirements of Health and Safety Code Section 34179.5 related to
all other funds except for the Low and Moderate Income Housing Fund (All Other Funds) of the
former Downey Redevelopment Agency and the Successor Agency. Management of the Successor
Agency is responsible for meeting the statutory requirements of Health and Safety Code
Section 34179.5 related to All Other Funds. This agreed -upon procedures engagement was conducted
in accordance with attestation standards established by the American Institute of Certified Public
Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified
in the report. Consequently, we make no representation regarding the sufficiency of the procedures
described below, either for the purpose for which this report has been requested or for any other
purpose.
The scope of this engagement was limited to performing the agreed -upon procedures as set forth in
Attachment A. Attachment A also identifies the findings noted as a result of the procedures
performed.
We were not engaged to and did not conduct an audit, the objective of which would be the expression
of an opinion on whether the Successor Agency has met the statutory requirements of Health and
Safety Code Section 34179.5 related to All Other Funds. Accordingly, we do not express such an
opinion. Had we performed additional procedures, other matters might have come to our attention that
would have been reported to you.
This report is intended solely for the information and use of the Oversight Board and management of
the Successor Agency to the Downey Redevelopment Agency, the California Department of Finance,
the California State Controller's Office, and the Los Angeles County Auditor - Controller, and is not
intended to be, and should not be, used by anyone other than these specified parties.
Irvine, California
December 13, 2012
2875 Michelle Drive, Suite 300, Irvine, CA 92606 - Tel: 714.978.1300 - Fax: 714.978.7893
Offices located in Orange and San Diego Counties
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
Procedure:
Obtain from the Successor Agency a listing of all assets that were transferred from All Other
Funds of the former redevelopment agency to the Successor Agency on February 1, 2012. Agree
the amounts on this listing to account balances established in the accounting records of the
Successor Agency. Identify in the Agreed -Upon Procedures (AUP) report the amount of the
assets transferred to the Successor Agency as of that date.
Finding:
We agreed the amounts listed on Schedule 1 to the Successor Agency's accounting records
without exceptions. The former redevelopment agency transferred $1,506,483 in assets from All
Other Funds to the Successor Agency as detailed in Schedule 1.
2A. Procedure:
Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods
and services) from All Other Funds of the former redevelopment agency to the city that formed
the redevelopment agency for the period from January 1, 2011 through January 31, 2012. For
each transfer, the Successor Agency should describe the purpose of the transfer and describe in
what sense the transfer was required by one of the Agency's enforceable obligations or other
legal requirements. Provide this listing as an attachment to the AUP report.
Finding:
The former redevelopment agency made transfers other than payments for goods and services
from All Other Funds to the City of Downey as shown in Schedule 2.
2B. Procedure:
Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods
and services) from All Other Funds of the Successor Agency to the city that formed the
redevelopment agency for the period from February 1, 2012 through June 30, 2012. For each
transfer, the Successor Agency should describe the purpose of the transfer and describe in what
sense the transfer was required by one of the Agency's enforceable obligations or other legal
requirements. Provide this listing as an attachment to the AUP report.
Finding:
This procedure is not applicable as the Successor Agency did not make any transfers other than
payments for goods and services to the City of Downey from All Other Funds during the period
from February 1, 2012 through June 30, 2012.
2
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
2C. Procedure:
For each transfer, obtain the legal document that formed the basis for the enforceable obligation
that required the transfer. Note in the AUP report the absence of any such legal document or the
absence of language in the document that required the transfer.
Finding:
Schedule 2 shows the details of the legal documents or other legal requirements that formed the
basis for the obligation that required the transfer. The transfers reported for the period
January 1, 2011 through January 30, 2012 relate to legal agreements between the City of Downey
and the Downey Redevelopment Agency. The identified legal agreements were not entered into
within the first two years of the date of the creation of the Redevelopment Agency. Pursuant to
Health and Safety Code Section 34171(d)(2), these legal agreements are not considered to be
enforceable obligations. However, the Successor Agency believes that these payments are valid
and lawful. See Exhibit 1 for legal opinion by Successor Agency's legal counsel.
3A. Procedure:
Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods
and services) from All Other Funds of the former redevelopment agency to any other public
agency or to private parties for the period from January 1, 2011 through January 31, 2012. For
each transfer, the Successor Agency should describe the purpose of the transfer and describe in
what sense the transfer was required by one of the Agency's enforceable obligations or other
legal requirements. Provide this listing as an attachment to the AUP report.
Finding:
This procedure is not applicable as the former redevelopment agency did not make any transfers
to other public agencies or private parties other than payments for goods and services from All
Other Funds during the period from January 1, 2011 through January 31, 2012.
3B. Procedure:
Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods
and services) from All Other Funds of the Successor Agency to any other public agency or to
private parties for the period from February 1, 2012 through June 30, 2012. For each transfer, the
Successor Agency should describe the purpose of the transfer and described in what sense the
transfer was required by one of the Agency's enforceable obligations or other legal requirements.
Provide this listing as an attachment to the AUP report.
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
3B. Finding:
This procedure is not applicable as the Successor Agency did not make any transfers to other
public agencies or private parties other than payments for goods and services from All Other
Funds during the period from February 1, 2012 through June 30, 2012.
3C. Procedure:
For each transfer, obtain the legal document that formed the basis for the enforceable obligation
that required the transfer. Note in the AUP report the absence of any such legal document or the
absence of language in the document that required the transfer.
Finding:
This procedure is not applicable since no transfers were identified as a result of Procedures 3A
and 3B.
4. Procedure:
Obtain from the Successor Agency a summary of the financial transactions of the Redevelopment
Agency and the Successor Agency for the fiscal periods ended June 30, 2010, June 30, 2011,
January 31, 2012 and June 30, 2012. Ascertain that for each period presented, the total of
revenues, expenditures and transfers account fully for the changes in equity from the previous
fiscal period. Compare amounts for the fiscal period ended June 30, 2010 to the state controller's
report filed for the Redevelopment Agency for that period. Compare the amounts for the other
fiscal periods presented to the account balances in the accounting records or other supporting
schedules.
Finding:
A reconciliation of the financial transactions of the Redevelopment Agency and the Successor
Agency for the fiscal periods ended June 30, 2010, June 30, 2011, January 31, 2012 and
June 30, 2012 is presented in Schedule 3.
5. Procedure:
Obtain from the Successor Agency a listing of all assets from All Other Funds as of
June 30, 2012. Agree the assets on the listing to the accounting records of the Successor Agency.
Finding:
As of June 30, 2012, the Successor Agency's total assets related to All Other Funds of the former
redevelopment agency amounted to $5,201,818 as shown in Schedule 4.
4
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
6. Procedure:
Obtain from the Successor Agency a listing of asset balances related to All Other Funds on
June 30, 2012 that were restricted for the following purposes:
• unspent bond proceeds,
• grant proceeds and program income restricted by third parties, and
• other assets with legal restrictions.
6A. Procedure - Unspent Bond Proceeds:
Obtain the Successor Agency's computation of the restricted balances and trace individual
components of this computation to related account balances in the accounting records, or to other
supporting documentation. Obtain the legal document that sets forth the restriction pertaining to
these balances.
Finding:
The Successor Agency has $662,708 held by US Bank for the reserve requirements of the 1997
Tax Allocation Refunding Bonds. The bond documents restrict this amount to be retained as a
reserve on the 2007 Tax Allocation Refunding Bonds debt.
6B. Procedure - Grant Proceeds and Program Income Restricted by Third Parties:
Obtain the Successor Agency's computation of the restricted balances and trace individual
components of this computation to related account balances in the accounting records, or to other
supporting documentation. Obtain a copy of the grant agreement that sets forth the restriction
pertaining to these balances.
Finding:
This procedure is not applicable as the Successor Agency's assets related to All Other Funds did
not have grant proceeds and program income restricted by third parties as of June 30, 2012.
6C. Procedure - Other Assets Considered to be Legally Restricted:
Obtain the Successor Agency's computation of the restricted balances and trace individual
components of this computation to related account balances in the accounting records or other
supporting documentation. We obtained the legal document that sets forth the restriction
pertaining to these balances.
Finding:
This procedure is not applicable as the Successor Agency's assets related to All Other Funds did
not have other assets considered to be legally restricted as of June 30, 2012.
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
7. Procedure:
Obtain from the Successor Agency a listing of assets of All Other Funds of the former
redevelopment agency as of June 30, 2012 that are not liquid or otherwise available for
distribution and ascertain if the values are listed at either purchase cost or market value as
recently estimated by the Successor Agency. For assets listed at purchased cost, trace the amount
to a previously audited financial statement or other accounting records of the Successor Agency
and note any differences. For any differences noted, inspect evidence of asset disposal
subsequent to January 31, 2012 and ascertain that the proceeds were deposited into the Successor
Agency's trust fund. For assets listed at recently estimated market value, inspect evidence
supporting the value and note the methodology used.
Finding:
As of June 30, 2012, the Successor Agency's total assets related to All Other Funds of the former
redevelopment agency that are not liquid amounted to $2,861,595 as shown in Schedule 5.
8A. Procedure:
If the Successor Agency identified that existing asset balances were needed to be retained to
satisfy enforceable obligations, obtain an itemized schedule of asset balances (resources) as of
June 30, 2012 that were dedicated or restricted for the funding of enforceable obligations.
Compare the information on the schedule to the legal documents that formed the basis for the
dedication or restriction of the resource balance in question. Compare all current balances which
needed to be retained to satisfy enforceable obligations to the amounts reported in the accounting
records of the Successor Agency or to an alternative computation. Compare the specified
enforceable obligations to those that were included in the final Recognized Obligation Payment
Schedule (ROPS) approved by the California Department of Finance. If applicable, identify any
listed balances for which the Successor Agency was unable to provide appropriate restricting
language in the legal document associated with the enforceable obligation.
Finding:
This procedure is not applicable as the Successor Agency did not identify any assets to be
retained under this procedure.
31
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
8B. Procedure:
If the Successor Agency identified that future revenues together with balances dedicated or
restricted to an enforceable obligation are insufficient to fund future obligation payments and
thus retention of current balances is required, obtain from the Successor Agency a schedule of
approved enforceable obligations that include a projection of the annual spending requirements to
satisfy each obligation and a projection of the annual revenues available to fund those
requirements. Compare the enforceable obligations to those that were approved by the California
Department of Finance for the six month period from January 1, 2012 through June 30, 2012 and
for the six month period July 1, 2012 through December 31, 2012. Compare the forecasted
annual spending requirements to the legal document supporting the enforceable obligation and
obtain the Successor Agency's assumptions relating to the forecasted annual spending
requirements. Obtain the Successor Agency's assumptions for the forecasted annual revenues.
Disclose the major assumptions for the forecasted annual spending requirements and the
forecasted annual revenues in this AUP report.
Finding:
This procedure is not applicable as the Successor Agency did not identify any assets to be
retained under this procedure.
8C. Procedure:
If the Successor Agency identified that projected property tax revenues and other general purpose
revenues to be received by the Successor Agency are insufficient to pay bond debt service
payments (considering both the timing and amount of the related cash flows), obtain a schedule
demonstrating this insufficiency. Compare the timing and amounts of bond debt service
payments to the related bond debt service schedules in the bond agreement. Obtain the
assumptions for the forecasted property tax revenues and other general purpose revenues and
disclose them in this AUP report.
Finding:
This procedure is not applicable as the Successor Agency did not identify any assets to be
retained under this procedure.
8D. Procedure:
If Procedures 8A, 8B and 8C were performed, calculate the amount of unrestricted balances
necessary for retention in order to meet enforceable obligations. Combine the amount identified
as currently restricted balances and the forecasted annual revenues to arrive at the amount of total
resources available to fund enforceable obligations. Reduce the total resources available by the
amount of forecasted annual spending requirements. Include the calculation in this AUP report.
7
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
8D. Finding:
This procedure is not applicable as Procedures 8A, 8B and 8C were not required to be completed.
9. Procedure:
If the Successor Agency identified that cash balances as of June 30, 2012 need to be retained to
satisfy obligations on the Recognized Obligation Payment Schedule (ROPS) for the period of
July 1, 2012 through June 30, 2013, obtain a copy of the final ROPS for the period of
July 1, 2012 through December 31, 2012 and a copy of the final ROPS for the period
January 1, 2013 through June 30, 2013. For each obligation listed on the ROPS, the Successor
Agency should identify (a) any dollar amount of existing cash that was needed to satisfy the
obligation, and (b) the Successor Agency's explanation as to why the Successor Agency believes
that such balances were needed to satisfy the obligation. Include this schedule as an attachment
to this AUP report.
Finding:
The Successor Agency has identified $1,234,989 in cash balances needed be retained to satisfy
obligations on the Recognized Obligation Payment Schedule (ROPS) for the period of
July 1, 2012 to December 31, 2012 as shown in Schedule 6.
10. Procedure:
Present a schedule detailing the computation of the Balance Available for Allocation to Affected
Taxing Agencies. Amounts included in the calculation should agree to the results of the
procedures performed above. Agree any deductions for amounts already paid to the County
Auditor - Controller on July 12, 2012 as directed by the California Department of Finance to
evidence of payment.
Finding:
The schedule detailing the computation of the Balance Available for Allocation to Affected
Taxing Agencies is shown in Schedule 7. The computation shows that the Successor Agency has
a balance of $134,035 available for allocation to affected taxing agencies.
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
ATTACHMENT A - AGREED -UPON PROCEDURES AND FINDINGS
RELATED TO ALL OTHER FUNDS
11. Procedure:
Obtain a representation letter from management of the Successor Agency acknowledging their
responsibility for the data provided and the data presented in the report or in any schedules or
exhibits to the report. Included in the representations is an acknowledgment that management is
not aware of any transfers (as defined by Section 34179.5) from either the former redevelopment
agency or the Successor Agency to other parties for the period from January 1, 2011 through
June 30, 2012 that have not been properly identified in this AUP report and its related schedules
or exhibits. Management's refusal to sign the representation letter should be noted in the AUP
report as required by attestation standards.
Finding:
No exceptions were noted as a result of this Procedure.
0
SCHEDULEI
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
LISTING OF ASSETS TRANSFERRED TO SUCCESSOR AGENCY
As of February I, 2012
Total
as of
February 1, 2012
ASSETS
Cash and investments $ 843,883
Cash and investments with trustee (Bond Reserves) 662,600
$ 1,506,483
SCHEDULE 2
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
TRANSFERS TO THE CITY OF DOWNEY
FOR THE PERIOD JANUARY 1, 2011 THROUGH JANUARY 31,2012:
Enforceable Obligation/
Date of Other Legal Requirement
Transfer Description of Transfer Purpose of Transfer Amount Supporting Transfer
4/28/2011 Transfer of real property Sale of real property in exchange $ 2,858,295 (A) By minute action during April 12, 2011 meeting,
to City of Downey for reduction in note payable the City Council and Agency Board approved
to the City Downey the purchase and sale agreement between
City and Agency. Pursuant to the State
Controllers Request to transfer the assets back
to the Agency under H &S Code Section 34167.5,
the City transferred the assets back to the Agency
Various Transfer for interest paid To pay interest on the advance
on advances payable of payable by Downey Redevelopment
$1,600,000 to the City Agency to the City of Downey
304,000 (B) Operative agreement #25 between the City of
Downey and Downey Redevelopment Agency
dated February 10, 1998. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various Transfer for interest paid To pay interest on the advance 264,000 (B) Operative agreement #26 between the City of
on advances payable of payable by Downey Redevelopment Downey and Downey Redevelopment Agency
$2,200,000 to the City Agency to the City of Downey dated July 13, 1999. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various Transfer for interest paid To pay interest on the advance
on advances payable of payable by Downey Redevelopment
$150,000 to the City Agency to the City of Downey
28,500 (B) Operative agreement #27 between the City of
Downey and Downey Redevelopment Agency
dated June 27, 2000. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various Transfer for interest paid To pay interest on the advance
on advances payable of payable by Downey Redevelopment
$200,000 to the City Agency to the City of Downey
Various Transfer for interest paid To pay interest on the advance
on advances payable of payable by Downey Redevelopment
$300,000 to the City Agency to the City of Downey
Various Transfer for interest paid To pay interest on the advance
on advances payable of payable by Downey Redevelopment
$200,000 to the City Agency to the City of Downey
38,000 (B) Operative agreement #28 between the City of
Downey and Downey Redevelopment Agency
dated May 10, 2001. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
57,000 (B) Operative agreement #30 between the City of
Downey and Downey Redevelopment Agency
dated March 12, 2002. The agreement was
incurred after two years of the formation of the
Redevelopment Agency
24,000 (B) Operative agreement #31 between the City of
Downey and Downey Redevelopment Agency
dated September 23, 2003. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various Transfer for interest paid To pay interest on the advance 38,000 (B) Operative agreement #33 between the City of
on advances payable of payable by Downey Redevelopment Downey and Downey Redevelopment Agency
$200,000 to the City Agency to the City of Downey dated January 25, 2005. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various Transfer for interest paid To pay interest on the advance 38,000 (B) Operative agreement #35 between the City of
on advances payable of payable by Downey Redevelopment Downey and Downey Redevelopment Agency
$200,000 to the City Agency to the City of Downey dated January 10, 2006. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
SCHEDULE2
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
TRANSFERS TO THE CITY OF DOWNEY
FOR THE PERIOD JANUARY 1, 2011 THROUGH JANUARY 31,2012:
NOTES:
(A) For accounting purposes, the City reversed this transfer on June 30, 2012 and the assets are included on Schedule 4. The City Council
took action on November 13, 2012 to reverse the transfer of assets.
(B) All of the above promissory notes between the City of Downey and the Downey Redevelopment Agency were not entered into within the
first two years of the date of the creation of the Downey Redevelopment Agency. Pursuant to Health and Safety Code Section 34171(d)(2),
all of these promissory notes are not considered to be enforceable obligations. However, the Successor Agency's legal counsel has issued an
opinion on the legal basis for the repayments. See Exhibit 1.
Enforceable Obligation/
Date of
Other Legal Requirement
Transfer
Description of Transfer
Purpose of Transfer
Amount
Supporting Transfer
6/30/2011
Transfer for repayment
Repay the advance made by the
$ 1,000,000
(B) Operative agreement #37 between the City of
of advance
City of Downey to the Downey
Downey and Downey Redevelopment Agency
Redevelopment Agency
dated January 23, 2007. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various
Transfer for interest paid
To pay interest on the advance
120,000
(B) Operative agreement #37 between the City of
on advances payable of
payable by Downey Redevelopment
Downey and Downey Redevelopment Agency
$1,000,000 to the City
Agency to the City of Downey
dated January 23, 2007. The agreement was
incurred after two years of the formation of the
Redevelopment Agency
Various
Transfer for interest paid
To pay interest on the advance
28,500
(B) Operative agreement #38 between the City of
on advances payable of
payable by Downey Redevelopment
Downey and Downey Redevelopment Agency
$150,000 to the City
Agency to the City of Downey
dated January 23, 2007. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
6/30/2011
Transfer for repayment
Repay the advance made by the
500,000
(B) Agreement for services between the City of
of advance
City of Downey to the Downey
Downey and Downey Redevelopment Agency
Redevelopment Agency
dated April 10, 2007. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
Various
Transfer for interest paid
To pay interest on the advance
998,662
(B) Agreement for services between the City of
on advances payable to
payable by Downey Redevelopment
Downey and Downey Redevelopment Agency
the City
Agency to the City of Downey
dated April 10, 2007. The agreement was
incurred after two years of the formation of the
Redevelopment Agency.
NOTES:
(A) For accounting purposes, the City reversed this transfer on June 30, 2012 and the assets are included on Schedule 4. The City Council
took action on November 13, 2012 to reverse the transfer of assets.
(B) All of the above promissory notes between the City of Downey and the Downey Redevelopment Agency were not entered into within the
first two years of the date of the creation of the Downey Redevelopment Agency. Pursuant to Health and Safety Code Section 34171(d)(2),
all of these promissory notes are not considered to be enforceable obligations. However, the Successor Agency's legal counsel has issued an
opinion on the legal basis for the repayments. See Exhibit 1.
SCHEDULE 3
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
RECONCILIATION OF FINANCIAL TRANSACTIONS FOR THE PERIODS ENDED
JUNE 30, 2010, JUNE 30, 2011, JANUARY 31, 2012 AND JUNE 30, 2012
(a) Agreed amounts to State Controller's Report.
(b) Agreed amounts to audited financial statements.
(c) Agreed amounts to Successor Agency's accounting records.
(a)
(b)
(c)
(c)
Redevelopment
Redevelopment
Redevelopment
Successor
Agency
Agency
Agency
Agency
12
Months Ended
12
Months Ended
7 Months Ended
5 Months Ended
6/30/2010
6/30/2011
1/31/2012
6/30/2012
Assets (modified accrual basis)
Cash and investments
$
5,738,260
$
4,575,125
$
4,117,438
$
5,027,155
Cash with fiscal agent (bond reserves)
643,466
662,600
662,600
662,708
Accounts receivable
280,851
286,214
-
10,783
Property taxes receivable
976,910
957,814
-
-
Interest receivable
31,029
25,983
-
3,702
Loans receivable
7,534,260
8,424,932
8,417,784
-
Prepaid items
-
3,230
-
-
Due from other funds
-
228,277
-
-
Land held for resale
6,456,628
3,598,332
3,598,332
2,858,295
Total Assets
$
21,661,404
$
18,762,507
$
16,796,154
$
8,562,643
Liabilities (modified accrual basis)
Accounts payable
$
177,747
$
156,697
$
13,129
$
456,972
Deposits payable
5,150
5,150
5,150
2,500
Due to other funds
-
228,277
-
-
Deferred revenue
6,588,605
7,479,277
7,479,277
-
Total Liabilities
6,771,502
7,869,401
7,497,556
459,472
Equity
14,889,902
10,893,106
9,298,598
8,103,171
Total Liabilities and Equity
$
21,661,404
$
18,762,507
$
16,796,154
$
8,562,643
Total Revenues
$
6,888,429
$
8,409,481
$
2,612,392
$
658,163
Total Expenditures
(8,368,969)
(15,121,497)
(4,206,900)
(128,989)
Advances from City
500,000
2,715,220
-
-
Transfer to Housing Authority
-
-
-
(4,582,896)
Net change in equity
(980,540)
(3,996,796)
(1,594,508)
(4,053,722)
Beginning Equity
15,870,442
14,889,902
10,893,106
9,298,598
Restatement
-
-
-
2,858,295
Ending Equity
$
14,889,902
$
10,893,106
$
9,298,598
$
8,103,171
Other Information (show year end
balances for all three years presented):
Capital assets as of end of year
Long -term debt as of end of year
$
34,220,181
$
33,909,692
$
33,899,692
$
36,299,692
(a) Agreed amounts to State Controller's Report.
(b) Agreed amounts to audited financial statements.
(c) Agreed amounts to Successor Agency's accounting records.
SCHEDULE4
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
LISTING OF ASSETS
As of June 30, 2012
ASSETS
Cash and investments $ 1,677,113
Cash and investments with trustee (Bond Reserve) 662,708
Interest receivable 3,702
Land 2,858,295
$ 5,201,818
SCHEDULE 5
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
LISTING OF NONLIQUID ASSETS
As of June 30, 2012
Basis for Balance at
Asset Description Determining Value June 30, 2012
Fair market value change in cash and investments (A) Fair Market Value $ 3,300
Land held for resale Cost 2,858,295
$ 2,861,595
(A) The change in fair value of cash and investments was made at June 30, 2012. This is an accounting entry and
the asset is not available for distribution.
SCHEDULE 6
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
SCHEDULE OF CASH BALANCES FOR RETENTION TO MEET
ENFORCEABLE OBLIGATIONS IN FISCAL YEAR 2012 -2013
Enforceable Obligation/
Other Legal Requirement
Payee Purpose of Transactions Amount Supporting Retention
Cash balances needed to be retained for the funding of future enforceable obligations:
US Bank and Trust
Debt service payment on 1997 Tax
$ 634,989
Bond Document Requirement
Allocation Bonds
Reported on ROPS 2, Line 1
Porto's Bakery of Downey
Business development and job
250,000
Owner Participation Agreement
creation
Reported on ROPS 2, Line 2
Bob's Big Bob
Historic preservation and job
25,000
Owner Participation Agreement
creation
Reported on ROPS 2, line 3
Chrysler - Jeep Dealership
Economic development
100,000
Owner Participation Agreement
Reported on ROPS 2, line 4
City of Downey
Administrative Allowance
125,000
Administrative Cost Allowance
Reported on ROPS 2
Various
(A)
100,000
(A)
$ 1,234,989
(A) Amount that will be deducted from the anticipated RPTTF funding for the ROPS for period January 1, 2013 through
June 30, 2013. This is equal to the amount approved on ROPS for period January 1, 2012 through June 30, 2012 not
expended during the six -month period. This amount needs to be retained to enable the Successor Agency to pay
enforceable obligations on ROPS for period January 1, 2013 through June 30, 2013.
SCHEDULE 7
SUCCESSOR AGENCY TO THE DOWNEY REDEVELOPMENT AGENCY
AGREED -UPON PROCEDURES RELATED TO ALL OTHER FUNDS
SUMMARY OF BALANCE AVAILABLE FOR ALLOCATION TO AFFECTED TAXING AGENCIES
As of June 30, 2012
Total amount of assets held by the Successor Agency as of June 30, 2012 - (Procedure 5)
$ 5,201,818
Less assets legally restricted for uses specified by debt covenants, grant restrictions,
or restrictions imposed by other governments - (Procedure 6)
(662,708)
Less assets that are not cash or cash equivalents (e.g., physical assets) - (Procedure 7)
(2,861,595)
Less balances that are legally restricted for the funding of an enforceable obligation
(net of projected annual revenues available to fund those obligations) - (Procedure 8)
-
Less balances needed to satisfy ROPS for the 2012 -13 fiscal year - (Procedure 9)
(1,234,989)
Less the amount of payments made on July 12, 2012 to the County Auditor - Controller
as directed by the California Department of Finance
(308,491)
Add the amount of any assets transferred to the City for which an enforceable
obligation with a third party requiring such transfer and obligating the use of
the transferred assets did not exist - (Procedures 2 and 3)
-
Amount to be remitted to County for disbursement to affected taxing agencies
$ 134,035
EXHIBIT 1
LEGAL OPINION ON LOAN REPAYMENTS
RUTAN
PUTAN & TUCKER, LLP
December 3, 2012
VIA ELECTRONIC MAIL
Maurina Lee
Finance Department
City of Downey
1 111 I Brookshire Avenue
Downey, CA 90241
Dan Slater
Direct Dial: (714) 641 -3437
E -mail: dsiater(a�,rutan.com
Re: City of Downey As Successor Agency to Community Development Commission
of the City of Downey -- Non - Housing DDR
CDC Interest Payment A Loan Repayment to City Prior to February 1, 2412
Dear Ms. Lee:
On behalf of the Downey Successor Agency ( "Successor Agency ") you requested our
analysis of as to whether (A) interest on loans paid by the Community Development Commission
of the City of Downey ( "CDC ") to the City of Downey ( "City ") during the period January 1,
2011 to June 30, 201.1, and if applicable also prior to February 1, 2012, and (B) repayment by the
CDC to the City of outstanding loans during that same period, are subject to the provision set
forth in AB1X26, codified as Health and Safety Code Section 34167.5, that directs the State
Controller to reverse asset transfers between a redevelopment agency and its city that occurred
after January 1, 2011. (the so-called "Clawback Provision'). Your request derives from an
inquiry from the Successor Agency's auditor, White Nelson Diehl Evans, concerning such
payments. Our analysis is that the interest payments and loan repayments are not subject to the
Clawback Provision.
The Clawback Provision in AB I X26 at issue —Health and Safety Code Section
34167.5 purports to authorize the State Controller to act as follows:
Commencing on the effective date of the act adding this part, the
Controller shall review the activities of redevelopment agencies in the
state to determine whether an asset transfer has occurred after January 1,
2011, between the city or county, or city and county that created a
redevelopment agency or any other public agency, and the redevelopment
agency. If such an asset transfer did occur during that period and the
government agency that received the assets is not contractually committed
to a third party for the expenditure or encumbrance of those assets, to the
1 All further statutory references are to the Health and Safety Code.
Rutan & Tucker, LLP 1 611 Anton Blvd, Suite 1400, Costa Mesa, CA 92626
PO Box 1950, Costa Mesa CA 92628 -1950 1 714 -641 -5100 1 Fax 714 -546 -9035 394/028110.OM
Orange County I Palo Alto I www.rutan corn 473242 a12/03/12
RUTAN
Maurina Lee
December 3, 2012
Page 2
extent not prohibited by state and federal law, the Controller shall order
the available assets to be returned to the redevelopment agency or, on or
after October 1, 2011, to the successor agency, if a successor agency is
established pursuant to Part 1.85 (commencing with Section 34170). Upon
receiving such an order from the Controller, an affected local agency shall,
as soon as practicable, reverse the transfer and return the applicable assets
to the redevelopment agency or, on or after October 1, 2011, to the
successor agency, if a successor agency is established pursuant to Part
1.85 (commencing with Section 34170). The Legislature hereby finds that
a transfer of assets by a redevelopment agency during the period covered
in this section is deemed not to be in the furtherance of the Community
Redevelopment Law and is thereby unauthorized.
This provision of AB1X26 was stayed by the California Supreme Court pending Court's
decision in the CRA v. Matosantos case, which was not resolved until December 29, 2011. The
Court, in its decision, also delayed the date of dissolution of redevelopment agencies until
February 1, 2012.
The language of Section 34167.5 lacks clarity and must be interpreted in light of the
Legislature's apparent intent in including it in AB 1 X26. The terms "asset" and "transfer" are
not defined and so the context is critical to understanding the intent of the Legislature and why
no "asset transfer" occurred when the CDC made interest payments and loan repayments during
the subject time period.
It is important to note that the Governor's initial redevelopment dissolution proposal,
announced in January 2011, subsequently became Senate Bill 77 and an identical companion
bill, Assembly Bill 101. Senate Bill 77 was rejected by the Legislature on March 16, 2010
There was no active redevelopment dissolution bill in the Legislature until mid -June 2011 when
ABX 126 was launched and eventually enacted and signed into law effective June 28, 2011.
ABXI 26 made certain changes to the CRL and added Parts 1.8 and 1.85 to the CRL.
ABXI 26 states, in part, that "[t]he Legislature hereby finds that a transfer of assets by a
redevelopment agency [after January 1, 20111 is deemed not to be in the furtherance of the
` Section 34167.5 was not amended by Assembly Bill 1484 ( "AB 1484 ").
3 SB 77 failed to obtain the required votes for passage and later was amended to address to a
completely different topic. AB 101 was never voted on when it addressed redevelopment
dissolution. Ultimately, AB 101 was amended to address a completely different topic. From
March 16, 2011 until June 14, 2011 when ABX126, previously a placeholder budget bill, was
amended in the Legislature to add redevelopment dissolution provisions, there were no active
bills in the Legislature to dissolve redevelopment agencies.
394102811044
4732422.1 x)71(13/12
RUTAN
Maurina Lee
December 3, 2012
Page 3
[CRL] and is thereby unauthorized." ABXl 26 further states, in part, that "[c]ommencing
[February 1, 20121, ... arrangements between the city ... that created the redevelopment agency
and the redevelopment agency are invalid...;" and that "[a]ll ... properties [and] buildings ... of
the former redevelopment agency are transferred on [February 1, 20121, to the control of the
successor agency."
After the Governor's initial proposal was announced in January 2011 and prior to
enactment of AB 1 X26 on June 28, 2011, some redevelopment agencies in the State made "no
consideration" transfers of property and money to their cities. The Legislature obviously
responded to these "no consideration" transfers of real property by some redevelopment agencies
by including Section 34167.5 in the subsequently enacted AB1X26. By forcing a return of
these transferred assets to the account of the dissolved redevelopment agency, the cash and value
of non -cash assets may be used to help pay the enforceable obligations of the dissolved
redevelopment agency.
By contrast, the interest payments and loan repayments made by the CDC to the City
were not an "asset transfer" as contemplated by Section 34167.5 nor the type of transaction
Section 34167.5 seeks to remedy. The interest payment was for a lawful and valid loan that pre-
dated both ABIX26 and even the Governor's initial announcement in early January 2011 of his
intent to seek legislation to eliminate redevelopment agencies.
Even if Section 34167.5 is used by the State Controller to effect a reversal of the lawful
interest payment, the purported legal basis for doing would not be that the CDC interest and
loan payments were unlawful but rather the State is permitted to effect an "impairment of
contract." But the State may not do so in this cage. Under Article 1, Section 9, of the California
4 The California Attorney General's office itself has stated on the record that it is "far from
clear" that AB 1 X26 invalidates all city - redevelopment loans and that the apparent intent of those
provisions of ABxI 26 was to invalidate only the "last minute" loan agreements and other
arrangements between cities and their redevelopment agencies that took place after January 1,
2011. The statement was made on January 27, 2012, by the Deputy Attorney General Ross
Moody (who also argued before the California Supreme Court on behalf of the State in the CRA
v. Matosantos case) in Sacramento County Superior Court at the hearing for preliminary
injunction in the case City of Cerritos et al. v. State of California, et al., Sacramento County
Superior Court Case No. 34- 2011- 80000952. That hearing was prior to the enactment of AB
1484 but AB 1484 did not amend Health and Safety Code section 34171(d)(1)(B) which
concerns city- redevelopment agency loans as enforceable obligations.
S On or about April 20, 2012, the California State Controller issued a general letter to cities
stating, in part, "[i]f your city ... received any assets from a redevelopment agency after January
1, 2011, your city ... hereby is ordered to ... reverse the transfer and return the applicable assets
to the successor agency of the relevant redevelopment agency."
3"MBI 10.0006
4932422.1 a12/03112
RUTAN
Maurina Lee
December 3, 2012
Page 4
Constitution, the State may not adopt a law impairing the obligations of contracts. There is an
analogous and binding provision set forth in Article 1, Section 10, of the United States
Constitution which prohibits states from enacting laws impairing the obligations of contracts.
Section 34167.5, if sought to be applied here, obviously would result in an impairment of
contract, but presumably the State's theory would be that a redevelopment agency and a city are
subordinate entities of the State Legislature and therefore the State Legislature may lawfully
impair contracts between a redevelopment agency and a city (including impairment to the extent
of voiding and reversing lawful contracts). That theory rests on a number of debatable
assumptions, but that theory is not applicable here where the impairment would effectively result
in a State take of City general funds (the source of the loans to the CDC) in violation of
Proposition IA and also would impermissibly effect a reallocation of local taxes from which
general funds are generated.
Moreover, Section 34179.5, the section requiring the Due Diligence Review ( "DDR ")
added by AB 1484, does not change the conclusion. AB 1484 established the DDR process "in
furtherance of' Section 34177(d). (See, §§ 34179.5, 34179.6.) Section 34177(d) provides in
pertinent part, that successor agencies are required to:
Remit unencumbered balances of redevelopment agency funds to the
county auditor - controller for distribution to the taxing entities, including,
but not limited to, the unencumbered balance of the Low and Moderate
Income Housing Fund of a former redevelopment agency.
The DDR is intended to determine "the unobligated balances" of "cash or cash
equivalents" previously held by the redevelopment agency prior to dissolution available for
distribution to the taxing entities. (§ 34179.5(a).) As part of that determination, AB 1484 has a
very specific definition of "transferred" that is to be applied when an accountant or auditor,
performing the DDR, is to determine whether any specific assets, cash, or cash equivalents
should be included in the calculation of funds available for remittance to the taxing entities.
(See, §§ 34179.5(c)(1 )-(6); 34179.6(c).) Specifically, Section 34179.5(b)(3) defines
"transferred" for purposes of the DDR as:
[T]he transmission of money to another party that is not in payment for
goods or services or an investment or where the payment is de minimus.
Transfer also means where the payments are ultimately merely a
restriction on the use of the money.
Here, the interest payment and loan repayment were payments by the CDC for an
investment in a the form of a loan made by the City in the redevelopment project area.
39410291104)006
47124221 a17103112
RUTAN
Maurina Lee
December 3, 2012
Page 5
Further, Section 34179.5(b)(2) defines "enforceable obligation" as follows as including
three categories:
(1) any of the items listed in Section 34171(d),
(2) contracts detailing specific work to be performed that were entered into by the
former redevelopment agency prior to June 28, 2011, with a third party that is other than the city,
county, or city and county that created the former redevelopment agency, and
(3) indebtedness obligations as defined in Section 34171(e).
The interest payment and loan repayment by the CDC is expressly covered by Category 1
above — Section 34171(d). Specifically, subdivision (d)(1)(13) of Section 34171 covers loans of
moneys borrowed by a redevelopment agency for a lawful purpose to the extent they are required
to be paid back (as was the case here). The CDC interest payment and loan repayment fall
squarely in the first category of enforceable obligations for purposes of the DDR.
To anticipate a possible counter- argument, we note that Section 34171(d)(2) also states
"For purposes of this part, `enforceable obligation' does not include any agreements, contracts,
or arrangements between the city, county, or city and county that created the redevelopment
agency and the former redevelopment agency." Prior to February 1, 2012, city- redevelopment
agency loans were deemed to be enforceable obligations under Part 1.80 of AB 26. What is
critical to note is that the "part" being referred to in Section 34171(d)(2) —Part 1.80--did not
become effective until February 1, 2012 Thus, for sake of argument, even in the worst case for
the CDC and City that as of February 1, 2012, City -CDC loans were no longer enforceable
obligations unless they meet the exceptions listed --- Section 34171(d)(2) does not imply that
prior to February 1, 2012, city loans to a redevelopment agency were not enforceable
obligations.
This analysis is also consistent with the conclusion reached by the State Controller's
Office ( "SCO ") in connection with at least one Asset Transfer Review completed under the
Clawback Provision (Section 34167.5). In its Review Report of the Milpitas Redevelopment
Agency ("Milpitas Report "), covering a review of asset transfers from January 1, 2011, through
January 31, 2012, the SCO does not include as an "unallowable transfer" a $3.6 million
repayment by the Milpitas Redevelopment Agency to the City of Milpitas made in January 2012
(so, as in Novato's case, predating February 1, 2012). The Milpitas Report can be accessed at
6 The phrase "with a party that is other than the city" only modifies the contracts dealing with
specific works – the second category. If the legislature wanted to impose that limitation on the
other two categories of enforceable obligations, it would have done so expressly. That fact that it
did not implies the legislature did not intend to so limit category (1) or (3).
47324n.1 OVUM
� t
Maurina Lee
December 3, 2012
Page 6
the SCO's Website at http:// www. sco. ca. gov/ aud_ rda _asset_transfer_reviews.html >. See page 2
of the Milpitas Report where the SCO identifies a total $175,613,510 in asset transfers, of which
the SCO claims $147,108,600 as "unallowable" transfers, and Attachment 1 in the Milpitas
Report which does not identify, as an "unallowable" transfer," the $3.6 million repayment.
For all of the foregoing reasons the CDC's interest payment to the City and loan
repayment to the City were, and are, lawful and valid payments.
If you have any questions concerning the above, please do not hesitate to contact me.
Very truly yours,
RUTAN & TUCKER, LLP
74; /�W j Z4
Dan Slater
cc: Brian Saeki, Community Development Director
Ed Velasc:o, Housing Manager
Shally Lin, Finance Department
Bill Ihrke, Esq., Rutan & Tucker, LLP
390281104M
4732422.1 s12103112
AGENDA MEMO
DATE: September 6, 2000
TO: Planning Commission
FROM: Planning Division
SUBJECT: Consent Calendar Item No. 1: Street Vacation No. 174 - Vacating the Section
of Margaret Street Between Brookshire Avenue and Patton Road
RECOMMENDATION
That the Planning Commission adopt a Minute Action recommending to the City Council
that Street Vacation No. 174, which relates to vacating that section of Margaret Street
between Brookshire Avenue and Patton Road conforms with the City's General
Plan.
DISCUSSION
On August 22, 2000, the City Council adopted Resolution No. 6394 setting a hearing for
September 26, 2000 to consider vacating the section of the Margaret Street between Brookshire
Avenue and Patton Road (see the attached map for the street's location). A copy of the City
Council Resolution and staff report that accompanied it are attached for your review (memo from
the Public Works Director, dated 8/22/00). Also attached is a copy of the traffic impact study
that the City's Traffic Engineering Division prepared that evaluates the proposed vacation.
The section of Margaret Street under consideration is actually a 20 -foot wide alley. As the
attached map shows, the Downey Regional Medical Center (DRMC) either owns or leases all
the properties on both sides of it. The alley extends in an east/west direction and is 630 feet in
length. It carries about 480 vehicles per day. About 400 of which are vehicle trips destined for
the medical center, while the remaining 80 vehicles use it as a through street to avoid the signal
at the Firestone/Brookshire intersection.
The DRMC asked the City to evaluate the feasibility of vacating the alley so the medical center
can increase their design possibilities for a soon -to -built project. If the City Council decides to
vacate the alley, it would revert to the regional medical center. The alley in turn, about 12,600
square feet, would provide the medical center with more design flexibility in regards to on -site
circulation to better accommodate the 3- level, 72,000 square foot medical office building that's
slated to be built on the parcel on the south side of Margaret Street. The Design Review Board
approved the building's architecture on May 10, 2000.
The Planning Commission's role in the street vacation process is to determine whether the
proposed vacation is consistent with the General Plan. According to Government Code Section
No. 65402. (a):
No street shall be vacated or abandoned, if the adopted General Plan or part
thereof applies thereto, until the location. purpose. and extent of such vacation or
abandonment have been submitted to and reported upon by the Plannina Aaencv
as to conformity with said adopted General Plan or part thereof.
CITY OF DOWNEY, CALIFORNIA
Page 2
This section of Margaret Street is classified as a Local Street, according to the City's Master Plan
of Streets & Highways. And the highway plan is part of the General Plan's Circulation Chapter.
It provides a hierarchy of roadways that are designated to meet circulation needs throughout
Downey. The General Plan states that "since the primary function of local streets is to provide
access to adjacent properties, they should not carry through traffic. " In accordance with this
definition and since the DRMC is the adjacent business owner and property owner, the primary
function of Margaret Street is serve the medical center. As a consequence, through traffic on
Margaret Street should be discouraged. Another reason to discourage traffic is due to the alley's
geometrics. Margaret Street was not constructed to carry a substantial volume of traffic, given its
20 -foot width and present pavement condition. Therefore, vacating the street would eliminate
through traffic, provide access to the medical center and as a consequence, the action would
consistent with the General Plan's Circulation Chapter.
Attachments:
Map
Resolution No. 6394
Memo, dated 8/22/00
Traffic Impact Study
HAPLANNING\PC \vac 174- sr.doc
Vacation No. 174
Margaret St1DRMC
AGENDA MEMO
CITY OF DOWNEY, CALIFORNIA