This report presents the annual Redevelopment Agency finding that all available tax increment funds are required to meet existing debt obligations and, therefore, less than 20% will be deposited in the Agency’s Low and Moderate Income Housing fund for Fiscal Year 2003/2004. In addition, this Report presents the updated Redevelopment Agency’s Low and Moderate Income Housing Fund Deficit Reduction Plan.

The Redevelopment Agency of the City of Sunnyvale, established November 19, 1957, adopted a Redevelopment Plan for the Central Core Redevelopment Project Area by Ordinance No. 1796-75 on November 26, 1975.

In 1976, legislation was passed which provided that, in redevelopment project areas developed after 1976, 20% of the tax increment generated from the project area must be used by the Agency to increase and improve affordable housing for persons of low and moderate income. In 1986, the legislature retroactively applied this basic 20% requirement to project areas established prior to 1977. Starting with the 1985-86 Fiscal Year, agencies are required to use 20% of the tax increments from project areas established before 1977 to improve and increase the supply of housing for persons of low and moderate income.

In recognition of the fact that retroactive application of this requirement would be difficult or impossible for those agencies which had already committed their future stream of tax increments to existing debt or previously adopted projects, the legislature enacted special provisions that enabled agencies to phase in this requirement. In Sunnyvale’s case, annual tax increment was less than annual debt payments and as a result, the Agency has an accruing liability to the General Fund that may be serviced in advance of housing set aside expenditures. In accord with these provisions, the Redevelopment Agency of the City of Sunnyvale adopted Resolution No. 195-86, finding that it would need to deposit less than 20% of the taxes allocated into the Low and Moderate Income Housing Fund because of pre-existing indebtedness.

State Law requires findings to be made to defer the 20% set aside. Goal 7.1B. of the Planning and Management Element states: "Financial Practices: Maintain sound financial practices which meet all applicable standards and direct the City’s financial resources toward meeting the City’s long term goals."

The agency continues to be unable to make any deposits into the Low and Moderate Income Housing Fund because the pre-existing debt service exceeds the Agency’s anticipated tax increment revenue. Specifically, in Fiscal Year 2003/2004, the Agency will require all of its tax increment revenue (estimated at approximately $2.95 million) to service both pre-1986 bonds issued by the Agency and repayment debt owed to the City by the Agency. The amount owing on that pre-existing debt is $66 million. As a result, the Agency will not have any remaining funds available and does not propose to make any deposit into the Housing Fund for Fiscal Year 2003/2004.

Consequently, the Resolution attached to this Report as Exhibit 2 sets forth the required Agency finding that the difference between the amount proposed to be deposited in the Housing Fund and the amount otherwise required to be deposited in the Housing Fund by Health and Safety Code Section 33334.6 is necessary to make payments under pre-existing obligations of amounts due or required to be committed, set aside, or reserved by the Agency during Fiscal Year 2003/2004 and will be used by the Agency for that purpose. The amount that the Agency would otherwise be required to deposit in the Housing Fund will create a deficit in the Housing Fund, which will be repaid at a later date.

The Agency has adopted a plan to repay deficits in the Housing Fund in subsequent years. Exhibit 1 to this Report sets forth the Agency’s Housing Fund Deficit Reduction Plan. The Deficit Reduction Plan provides for the Agency to make equal installment payments to repay the deficit, beginning once tax increment revenue exceeds annual debt service on pre-existing obligations. When a deficit is created for the 2003/2004 Fiscal Year, the deficit will then be subject to repayment under the Housing Fund Deficit Reduction Plan.

The proposed action will result in an additional Housing Fund deficit of approximately $591,156. This will have no immediate fiscal impact since the repayment of the deficit will occur only after the final maturity of all existing obligations.

This Report was published in the Redevelopment Agency Agenda and included in Agenda materials at the Sunnyvale Public Library.

There is no alternate course of action to adopting the findings and Resolution and amending Attachment 1 to the Housing Fund Deficit Reduction Plan as required by redevelopment law of the California Health and Safety Code.

Adopt by Resolution, the annual findings that all tax increment revenues are required to meet current obligations for repayment for the bonded indebtedness of the Agency and pre-existing debt repayment to the City of Sunnyvale and adopt the accompanying Deficit Reduction Plan.

Prepared by:
Brice McQueen
Redevelopment Manager

Reviewed by:
Mary Bradley
Director, Finance Department

Robert Paternoster
Director, Community Development

Approved by:
Robert S. LaSala
Executive Director-Secretary