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HomeMy WebLinkAbout05a. OB Minutes of 09-19-13Minutes of the Oversight Board to the Successor Agency to the Dissolved Downey Community Development Commission September 19, 2013 — Regular Meeting The Oversight Board to the Successor Agency to the Dissolved Downey Community Development Commission held a Regular Meeting at 1:00 p.m., September 19, 2013, in the Council Chamber of the Downey City Hall, 11111 Brookshire Avenue, Downey, California. PRESENT: Brian Saeki, City of Downey — Chair Ali Delawalla, Community Colleges Jessica Flores, Downey Employee Association Frederick W. Latham, LA County Board of Supervisors, District 4 Donald LaPlante, Downey Unified School District — Vice -Chair EXCUSED: Roger C. Brossmer, LA County Sanitation Districts #2 & #18 Stephen W. Helvey, LA County Board of Supervisors, District 4 ALSO PRESENT: Adria M. Jimenez, Oversight Board Secretary Ed Velasco, Housing Manager, City of Downey 3. PLEDGE OF ALLEGIANCE The Flag Salute was led by Oversight Vice -Chair LaPlante. 4. PUBLIC COMMENT Oversight Board Chair Saeki opened up Public Comment. Having no one come forward Public Comment was closed. 5. APPROVE THE MINUTES OF THE OVERSIGHT BOARD FOR THE REGULAR MEETINGS OF FEBRUARY 21, 2013 AND APRIL 18, 2013. Board Member Latham moved approval of the Minutes of February 21, 2013. Vice -Chair LaPlante seconded the motion, which was approved 5 -2, with Board Members Brossmer and Helvey excused. Board Member Latham moved approval of the Minutes of April 18, 2013. Vice -Chair LaPlante seconded the motion, which was approved 4 -3, with Board Members Brossmer, and Helvey excused, and Board Member Latham abstaining. 6. ADOPT A RESOLUTION OF THE OVERSIGHT BOARD OF THE DOWNEY SUCCESSOR AGENCY APPROVING RESTATED AND AMENDED LOAN AGREEMENTS BETWEEN THE CITY OF DOWNEY AND THE DOWNEY SUCCESSOR AGENCY. Housing Manager Velasco stated before the Board is an item pertaining to loan agreements entered into between the City of Downey and the Downey Community Development Commission. There are 12 agreements which predate the Governor's proposal to eliminate Redevelopment Agencies. The agreements are attached to the staff report as well as a resolution pertaining to the action where the Successor Agency staff is requesting the Board consider and approve the format and agreement to enter and approve. The Successor Agency is proposing to reenter into each agreement separately and amend those agreements so that they will pertain to the Healthy and Safety Code Section 34191.4(b). The Oversight Board, under the legislation, has the authority to approve requests by Successor Agencies to reenter into agreements. During the period that the Redevelopment Agency was active, it had received advances from the City to cover both administrative office expenses and obtain additional funds for redevelopment projects. The loans were primarily utilized to offset the shortfall between actual Agency operational and project expenses and the amount of tax increment received at that time. Over the life of the Agency there were 35 separate agreements, but as of February 1, 2012, there were 12 agreements that were open or that had a principal balance owed to the City. Under AB 12126 those loan agreements between Agency and City, in the eyes of the Department of Finance (DOF) were unenforceable obligations. To the benefit of the City under legislation approved under AB 1484, there are provisions which allow Redevelopment Agencies to submit or ask the Oversight Board to approve reentering of these agreements and find that they are enforceable obligations. The Oversight Board must find loans made for legitimate redevelopment purposes under HS 34191.5. At the meeting of May 24, 2013, Successor Agency staff brought an item before the Oversight Board addressing the loan agreements. At that time direction was given to staff to return with an item to consider reentering into the agreements. Successor Agency staff has worked with legal staff to prepare an agreement that is attached to the report. The agreement changes the term of repayment on each of the 12 separate loans to comply with legislation. In the report it discusses that interest rate earned on the obligations do not exceed the Local Agency Investment Rate (LAIF) rate and discussed how the loans will be repaid. The staff report indicates that the interest rate these loans were entered into earned between seven to twelve percent. As of June 2013, the LAIF rate is .24 %. Proposed agreements address how the balance principal interest is calculated for repayment. Further, according to the legislation, the payments cannot begin until FY 2013 -14. The legislation addresses how that maximum payment will be calculated. The payments cannot begin nor can the Oversight Board consider these agreements until the agency has had a Finding of Completion approved by the DOF; that decision was made on May 13, 2013. Twenty percent of any payment derived must go towards the Low and Moderate Income Housing Fund established by the Successor Agency. Part of the report lists the projects and programs that the agency accomplished over the years. Vice Chair LaPlante noted that on the first attachment the second agreement should be number 26, not 25. Vice -Chair LaPlante reviewed the process of Cities loaning funds to the Redevelopment for operations and projects at an interest rate of 12 %, with the interest going back into the City's budget. The State abolishes Redevelopment Agencies and does not recognize the loans as valid. The Cities argue that the loans are valid, the State agrees, but do not approve paying the interest on the loans. He stated he compared the actual loan agreements with the remaining balances and most have remaining balances identical to the loan agreement, but some did have payments made. The Master Agreements were large amounts and most were repaid. Housing Manager Velasco stated the Master Agreements were lines of credit. Vice Chari LaPlante asked if the State has already approved these as valid. Housing Manager Velasco stated no they have not; that is the next step. Board Member Latham clarified stating the State is awaiting the Oversight Board's decision. Vice -Chair LaPlante stated he thought that was approved on May 15, 2013 Housing Manager Velasco stated the approval was the Finding of Completion. There were certain actions the Successor Agency had to follow to have the completion certified. Chair Saeki stated there were a couple of in -depth audits and obtaining the Finding of Completion certified and the Oversight Board could not move forward until that was received. The State is saying we accept your books now you can move forward with legitimizing these loans. Many Cities used Redevelopment to pay for projects in the redevelopment areas and staffing. These were legal loans which is the reason why we want to reinstate them. Board Member Latham stated that he agrees and the frustration is that the State still will not say they accept the Board's decision. They created the Board, and they created neutrality and an independence of the Board, but they are still going to look at the decisions to see if they agree. It is important that if you have to contest a decision of the State, we ought to join in with other Cities in contesting that decision because we were given authority to approve these obligations. Vice -Chair LaPlante confirmed that the State has signed off on the books being accurate. Chair Saeki responded in the affirmative, and noted it is the Finding of Completion. Board Member Delawalla stated he reviewed the audit report on the State Controller's Office website and did not see any loan amount in 1998. He asked if this was an oversight. Mr. Velasco stated the Finance Department was unable to attend today's meeting and asked for clarification on what information Board Member Delawalla was referring to. Chair Saeki stated he will check the information Board Member Latham all the loans approving today occurred after 1998, except for the first loan. The remaining are after 1998. Board Member Delawalla referred to the City's Adopted Budget in 2007 -2008 noting it states $2,900,500 to pay the City for advances. He asked for additional information. Chair Saeki stated there was no set amortization schedule and payments were made at the discretion of the Finance Director. In some instances, the City paid back $2 million, some were $1.25 million. Some of the misinformation between the Controller's website is that they may not have this information; however, we did receive our Finding of Completion from the State. The DDR was an audit of what the assets were and everything the Agency did. Board Member Latham explained that the Successor Agency is advising the Oversight Board that each of the agreements are valid and we have a copy of those agreements before us attesting to the fact they exist. Presumably, the City's Attorney has concurred that these agreements existed. Mr. Velasco stated the balances as of February 1, 2012, per our internal audits that the independent auditor has reviewed. Dale Evans is the audit that did the audit for the Controller's office and the report is sent to the Controller's office. Board Member Latham confirmed that Board Member Delawalla's concern is that he could not locate this information on the Controller's website. Board Member Delawalla responded yes, in some cases. He also stated he did not see the amounts on the City loans. He needs all the information, go back to the year that the loan was paid so the Board can tie those numbers to the remaining balances. The City's Budget states pay back to the City, but does not state which loan it is paying back. Chair Saeki stated many times it was accumulative interest of all the loans, but would need to confirm with the Finance Department. In 2010 it was paying the interest portion of the loans; sometimes that amount would increase and the portion principal would be paid. Board Member Latham asked other than having data here before us, what is the nature of your concern that would call to question, the action the Board is taking is to certify that these are obligations due to the City by the Successor Agency; what portion of the question that we are asked to answer is your concern about the Board not having sufficient information. Board Member Delawalla stated he is concerned about the amount and the payments made. Board Member Latham stated the audit was conducted by State. It is not the City or the Successor Agency contending against the City. If the auditor can prove a lower amount, that is to the benefit of the State. Often the information on the Controller's website is highly inaccurate. Board Member Delawalla stated he does not see the numbers. He stated he would like to see how much interest was calculated, what the amount was, and how much of the loan was paid. Chair Saeki stated there was not a set amortization schedule and he feel comfortable because this is an audited number by the State's auditor. Vice -Chair LaPlante asked if it is possible to postpone this item until next month so the Board can receive additional information. Chair Saeki stated if the Board would like staff to go back and look for additional information it could take a considerable amount of time. Board Member Latham asked Board Member Delawalla if he would move the agenda forward if the Board were to authorize the existence of the loans, take recommended action subject to review and approval by the City Attorney, Director of Finance, and Executive Director of the Successor Agency to validate and submit to the Oversight Board a statement that the numbers are valid with regards to the current status of the agreements and they are consistent with the findings of the auditor; and, transmit to the Oversight Board for review a copy of the auditor's findings verifying the numbers. He stated it would move the agenda item forward, but would give the Board Members the insurance that those 3 individuals have certified to the Oversight Board that these are the correct numbers, based on the status of the agreements but also based on the audit. Board Member Delawalla stated, yes, it would be helpful. Board Member Latham moved to approve the recommendation, subject to a certification to the Oversight Board by the Executive Director of the Successor Agency, Finance Director of Downey, City Attorney of Downey, the amounts stated in this item are an accurate reflection of loan obligations and in transmitting to board members would attach documentation as to the original loan amounts and the current balances, including such documents in the audit that verified the amounts and payments made over the term of the loan; and, that upon receipt of the certification any individual board member can request the Chair of the Oversight Board that the item be brought back for reconsideration; and, within 30 days following the transmittal of documents to the Board Members, if there are no objections raised by board members, the decision is final. The above motion was seconded by Vice Chair LaPlante, and unanimously carried, with Board Members Brossmer and Helvey excused. Chair Saeki stated City staff will do its best to provide the information to the Board within 30 days. 7. APPROVE ROPS 13 -14B AND ADOPT A RESOLUTION APPROVING THE RECOGNIZED OBLIGATION PAYMENT SCHEDULE FOR THE PERIOD JANUARY 1, 2014 THROUGH JUNE 30, 2014. Mr. Velasco explained this item deals with the next ROPS 13 -14B covering six month period from January 1, 2014 through June 30, 2014. The ROPS needs to be reviewed and approved by the Oversight Board by October 1, and send to appropriate agency. In this six month period, Successor Agency staff interprets we need $698,300 to cover enforceable obligations, plus administrative expenses. There are two obligations covered within that period, which are the bond payment to cover $473,300; the balance of $125,000 is the balance that the Successor Agency can draw for the fiscal year. There is a Resolution attached to the report. The items on the ROPS enforceable obligation includes all of the loan agreements, and during that period no amount is requested from the trust fund. Vice Chair LaPlante stated the Oversight Board is paying administrative costs and bond issue at U.S. Bank, which everyone has acknowledge is a real bond and real money borrowed. Mr. Velasco stated the Department of Finance has confirmed this is a real obligation. Board Member Delawalla asked having those items in here does it mean the Oversight Board is approving the agreements by having them in the ROPS. Mr. Velasco stated the reason the Oversight Board took the first action was to include those items in the ROPS. The Successor Agency and the Oversight Board feel these are enforceable obligations. The Department of Finance can challenge an amount anytime once approved by the Oversight Board or submitted in a ROPS. They are included on the advice of our attorney and the Successor Agency feels these are enforceable obligations. Vice Chair LaPlante states these are standard until the Oversight Board assigns a dollar amount to it for payment. Board Member Delawalla asked if including these in the ROPS makes it enforceable. Board Member Latham stated the two items are separate; the item we just acted upon has nothing to do with this current item. There are two pieces, one is administrative costs set forth in statute and pays for staff costs in running the Successor Agency; the other is the repayment of the bond and is an obligation to a bank who created the bond. The bond has nothing to do with any of the obligations acted upon earlier. Chair Saeki stated he believes the confusion may be that Board Member Delawalla is tying the two items together. The agreements have been included in the ROPS in the past in order to move it forward with the Department of Finance. The reason we did that was because the legal advisors recommended we keep the enforceable actions on the ROPS and have the State request to remove them. Today, this ROPS is requesting $698,000 from the trust fund to pay two enforceable obligations, which are our debt service for our bonds and they are completely legitimate tax allocation bonds, and the $125,000 in administrative fees, per the State. Board Member Latham stated by taking this action this board is not taking action with respect to the City loans, only with respect to certifying two obligations: one administrative fees and the other with respect to repayment the bond. Chair Saeki clarified stating by including in the ROPS and the Oversight Board approving the ROPS, the Board is acknowledging this is true debt, although we are not requesting money from the trust fund. Board Member Latham stated the Board is not specifying the amount to the City. We are simply saying they are obligations to the City, but we are not asking anyone to help pay those yet. The Oversight Board is not putting our stamp of approval on an amount that relates to loans, on this action. We are saying we acknowledge our loans, but we are not certifying the amount of those loans. Chair Saeki stated there are numbers tied to the outstanding obligations. He referred Board Members to page nine of the report. This is acknowledging that they exist. Board Member Latham made a motion to take the recommended action with the understanding that the City loan obligation numbers or verification of the amount is on a separate track of consideration by the Oversight Board. It was moved by Board Member Latham, seconded by Vice Chair LaPlante, and carried unanimously, with Board Members Brossmer and Helvey excused, to approve the motion. 8. STAFF COMMENTS Mr. Velasco reminded the Board of the Special Meeting of October 17, 2014. Board Member Latham requested at a future meeting within the next four months, staff return to the Board and review staff's view of what the wind -down of our obligations looks like for the City of Downey. 9. ADJOURNMENT: At 2:02 p.m., Chair Saeki adjourned the Oversight Board Meeting at the call of chair, during the first part of November. ADRIA M. JIMENEZ, CMC DONALD LAPLANTE, Oversight Board Secretary Oversight Board Chair