September 20, 2005
SUBJECT: Ordinance Adopting the Sixth Amendment to the Redevelopment Plan for the Central Core Redevelopment Project Area Amending Certain Time Limitations by Two Years Pursuant to Health and Safety Code Section 33333.6(e)(2)(D).
REPORT IN BRIEF
The State Legislature passed legislation in 2004 that requires redevelopment agencies to contribute to the Educational Revenue Augmentation Fund (ERAF). For Fiscal Years 2004-2005 and 2005-2006, Sunnyvale’s Redevelopment Agency payment to ERAF is a total of $528,284. To assist agencies in covering this unexpected payment, the legislature authorized agencies to extend by two years the Plan Effectiveness date of the Plan and the time limit to collect tax increment.
Staff recommends that the City Council adopt the attached proposed ordinance extending the Plan Effectiveness date from November 26, 2016 to November 26, 2018 and time limit to collect tax increment from November 26, 2026 to November 26, 2028.
BACKGROUND
The State Legislature passed SB1045 in 2003 and SB1096 in 2004 requiring redevelopment agencies to contribute to the Educational Revenue Augmentation Fund (ERAF) for a combined total of three years, FY 2003/2004 – FY 2005/2006. The contribution for Sunnyvale’s Redevelopment Agency was $160,591 for the FY 2003/2004 and $264,142 for FY 2004/2005. The FY 2005/2006 amount is currently estimated at $264,142 per the County. As part of the legislation, under certain conditions, Agencies were authorized to extend their redevelopment plan time limits on plan effectiveness and receipt of tax increment for one year for each year of payment to compensate for the ERAF.
On March 8, 2005 City Council adopted as authorized by SB1045, an ordinance extending by one year the last date to undertake redevelopment activity within a project area and the time limit to collect tax increment as compensation for the FY 2003/2004 payment (RTC 05-071).
For FY 2004/2005 and FY 2005/2006, SB1096 stipulated that agencies making the ERAF contribution at least 10 years prior to the expiration of the effectiveness date of their redevelopment plan but less than 20 years prior to the effectiveness date are authorized to extend their redevelopment plan time limits on plan effectiveness and receipt of tax increment by two years provided that the Agency can make certain required findings.
EXISTING POLICY
The Redevelopment Implementation Plan Goal 1 states: Meet the Agency’s Existing Financial and Administrative Obligations.
DISCUSSION
The Redevelopment Plan effectiveness date for the Central Core Redevelopment Project Area is currently set to expire in November 2016. Because the expiration date is more than 10 years but less than 20 years from the first ERAF payment date, the Agency is entitled to take advantage of a two year extension of the plan effectiveness date (the last date in which the Agency can act on a project other than to meet its housing obligations) and the time limit to collect tax increment provided that required findings can be made. The following are the findings and the basis for making the findings for the Redevelopment Agency:
1. The Agency must be in compliance with the requirements of Health and Safety Code Sections 33334.2 and 33334.6 which require that the Agency deposit twenty percent (20%) of all tax increment collected in the Low and Moderate Income Housing Fund and that such funds be expended in accordance with Section 33334.2.
Although the Redevelopment Agency has not deposited 20% of its tax increment in the Low and Moderate Income Housing Fund, it is deferring such deposits as authorized (Health and Safety Code Section 333334.6(d)) until all debt obligations incurred by the Agency prior to January 1, 1986 are repaid in full. The Agency still has pre-1986 debt obligations and has met all necessary conditions to permit such deferral including adoption of a resolution (Resolution No. 195-86, adopted on August 26, 1986) establishing the pre-1986 debt and adoption of a deficit reduction plan as required by Health and Safety Code Section 33334.6(f) and (g), respectively.
2. The Agency must have adopted an implementation plan in accordance with the requirements of Health and Safety Code Section 33490.
The Redevelopment Agency adopted its current five year Implementation Plan effective for fiscal years 2004/05 through 2008/09 on March 8, 2005 by Resolution No. 104-05-RA.
3. The Agency is in compliance with Health and Safety Code Section 33413 (a) and (b), to the extent applicable, which require that the Agency replace any low and moderate income housing units destroyed as a result of redevelopment activities and that the Agency insure that 15% of all housing built in the Project Area be affordable to low and moderate income households ("housing production requirement").
The Agency has not destroyed any units as a result of redevelopment activities and consequently has no replacement obligation. The Agency is not subject to the housing production requirement as the Redevelopment Plan was initially adopted prior to January 1, 1976 (Health and Safety Code Section 33413(d) (1)). Support for this finding can be found on pages III-2 through III-4 of the Implementation Plan adopted by the Agency on March 8, 2005 and incorporated herein by reference.
4. The Agency is not subject to sanctions for failure to spend an excess surplus in its Low and Moderate Income Housing Fund.
The Agency does not have an excess surplus in the housing fund as it is not yet required to make deposits to the Low and Moderate Income Housing Fund as previously discussed; therefore, the Agency is not subject to sanctions for failure to spend an excess surplus. Support for this finding can be found on pages III-2 through III-3 of the Implementation Plan adopted by the Agency on March 8, 2005 and incorporated herein by reference.
Pursuant to CEQA Guidelines adoption of the Amendment is not a "project," and is therefore exempt from CEQA review.
FISCAL IMPACT
There is no direct cost to the Agency from amending the Redevelopment Plan to extend the time limit for the effectiveness of the plan and the time limit to collect tax increment. The Agency will benefit from two additional years of tax increment receipts.
If the proposed ordinance is adopted, it is estimated that the Agency will realize $22.5 million in additional tax increment revenue over the two additional years, considering only the Mall development, and considerably more if the Town and Country and other projects are redeveloped. Approximately $18 million of the additional tax increment will be available to make debt service payments to the General Fund. $4.5 million (required 20% housing set-aside) will be deposited in the Agency’s Housing Fund for the development of low and moderate income housing. No portion of this additional tax increment will be returned to the developer of the Mall as part of the Disposition, Development and Owner Participation Agreement, which obligates the Agency to return a portion of the tax increment generated by the Town Center Mall redevelopment through FY 2025/2026.
It should be noted that even with the two additional years, the Agency’s outstanding debt obligations to the City General Fund are not expected to be fully repaid at the end of the Plan in 2028. This is due to the compounding of existing debt at 8% interest per year and ongoing debt accumulation to fund operating and other expenditures of the Agency. It is projected that at the close of the Plan in November 2028, The Agency’s outstanding debt to the City’s General Fund will total approximately $214 million considering only the Mall development, and approximately $21 million in debt will remain in the Agency’s Housing Fund. Under state law the Agency is granted special authority to collect tax increment after the date that the Plan expires for the purpose of eliminating the outstanding Housing Fund deficit.
Conclusion
The State Legislature passed legislation that requires Sunnyvale’s Redevelopment agency to make ERAF payments for Fiscal Years 2004-2005 and 2005-2006. Because the expiration date of the Plan Effectiveness date is more than 10 years but less than 20 years from the first ERAF payment date, the Agency is entitled to take advantage of a two year extension based on the findings made in this report. The extension will benefit the Agency with two additional years of tax increment receipts estimated at a total of $22.5 million, of which, approximately $18 million will be available to make debt service payments to the General Fund.
PUBLIC CONTACT
Notice of the public hearing was mailed to all taxing agencies affected by the proposed plan amendment at least thirty days prior to the public hearing and published in The Sun on August 31, 2005. Public contact was also made through the posting of the agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page, and the availability of the report in the Library and the City Clerk's Office.
ALTERNATIVES
1. Adopt the attached proposed ordinance amending the Redevelopment Plan for the Central Core Redevelopment Project Area.
2. Do not adopt the attached proposed ordinance amending the Redevelopment Plan for the Central Core Redevelopment Project.
RECOMMENDATION
Staff recommends Alternative 1. The effect of extending these time limits will benefit the agency by providing two additional years of tax increment receipts within the Redevelopment Project Area. These time limits extensions will also allow for two additional years for conducting redevelopment activity.
Reviewed by:
Robert Paternoster, Director, Community Development
Prepared by: Brice McQueen, Manager, Redevelopment Agency
Reviewed by:
Mary Bradley, Director, Finance
Approved by:
Amy Chan
City Manager
Attachments
A. Ordinance Adopting the Sixth Amendment to the Redevelopment Plan