Presentation on theme: "Financial and Tax Base Credit Approval Victor Valley Union High School District San Bernardino County, CA Association of Chief Business Officials California."— Presentation transcript:
Financial and Tax Base Credit Approval Victor Valley Union High School District San Bernardino County, CA Association of Chief Business Officials California Community Colleges Presented by: Ann Feng-Gagne Dolinka Group, LLC What Does the Future Hold for Redevelopment? 2012 Fall Conference Becky Elam Mt. San Jacinto Community College District Heather Hagopian Dolinka Group, LLC Theresa Tena Community College League of California
Page 1 Table of Contents As Redevelopment Agencies are eliminated, what does this mean for Community College Districts (CCDs)? This presentation will focus on the following items as it relates to the diminishing of Redevelopment funds to CCDs: 1. Assembly Bill (AB) 1484 – How does redevelopment residual and pass-through payments play into your budget? 2. Pass-Through Payment Timing 3. Education Revenue Augmentation Fund 4. RDA Revenue and the Apportionment 5. Advocacy 6. Where Do We Go From Here? – What can CCDs do to infuse dollars into their General Fund?
Page 3 Assembly Bill 1484 Overview »Signed by Governor Brown on June 27, 2012 »Budget Trailer Bill »Provided clarification on: Oversight Board Responsibilities Pass-Through Payment Priority Pass-Through Payment Timing Pass-Through Payment Termination Assembly Bill 1484 – “Clean Up Bill”
Page 4 Assembly Bill 1484 Impacts on Oversight Boards »All actions of the Oversight Board must be adopted by resolution (HSC 34179(e)) »Oversight Board is entitled to their own financial and legal advice (HSC 34179(n)) »Oversight Board decisions supersede Successor Agency decisions (HSC 34179(p)) »An Oversight Board is authorized to contract with public/private agencies for administrative support (HSC 34179(o)) » Establish a Recognized Obligation Payment Schedule (ROPS) (HSC 34177(m)) $10,000 per day penalty for late ROPS »Successor Agency must hire an auditor to determine amounts of unencumbered balances available for transfer to taxing entities. (HSC 34179.5) New changes to the law that affect Oversight Board Members:
Page 5 Important Note: Touch base with all Oversight Board members to understand Successor Agency status and ensure representation Important Note: Touch base with all Oversight Board members to understand Successor Agency status and ensure representation Oversight Board Representation: »Community College District (CCD) representatives need to be aware of the status of their Redevelopment Agency regardless if they are an Oversight Board member With a majority of project areas under the Hemet Redevelopment Agency, Mt. San Jacinto CCD sits on the Hemet Oversight Board Assembly Bill 1484 Impacts on Oversight Boards
Page 6 »On July 16, 2016, in each county, only one Oversight Board shall exist (HSC 34179(j)) Due to this consolidation, attendees who sit on Oversight Boards now, won’t be there long term What does the future hold for Oversight Board Members? Assembly Bill 1484 Impact to Oversight Boards 34179(j) Commencing on and after July 1, 2016, in each county where more than one oversight board was created by operation of the act adding this part, there shall be only one oversight board appointed (l) Commencing on and after July 1, 2016, in each county where only one oversight board was created by operation of the act adding this part, then there will be no change to the composition of that oversight board as a result of the operation of subdivision (b). (m) Any oversight board for a given successor agency shall cease to exist when all of the indebtedness of the dissolved redevelopment agency has been repaid.
Page 7 What does the future hold for Oversight Board Members? » Knowing that in four (4) years Oversight Boards and Successor Agencies will be consolidated, it is important to get past owed payments added to the ROPS » The elimination of RDAs and the creation of Oversight Boards for the Successor Agencies have provided new opportunities for CCD’s to present payment calculation issues to a new forum. Assembly Bill 1484 Impact on Oversight Boards Back pass-though payments due to calculation errors added to ROPS
Page 9 All Pass-Through Payments All Pass-Through Payments Pass-through Payment Timing Securing Future Pass-Through Payments Residual Revenue (if any) distributed to all taxing agencies based on what they would have received without RDV (revenue neutral) Residual Revenue (if any) distributed to all taxing agencies based on what they would have received without RDV (revenue neutral) Successor Agency Admin Costs Successor Agency Admin Costs Recognized Obligations & Debt Service Payments Recognized Obligations & Debt Service Payments All Pass-Through Payments All Pass-Through Payments Former RDA Tax Increment 1 1 2 2 3 3 4 4 Residual Revenue (if any) distributed to all taxing agencies based on what they would have received without RDV (revenue neutral) Residual Revenue (if any) distributed to all taxing agencies based on what they would have received without RDV (revenue neutral) Successor Agency Admin Costs Successor Agency Admin Costs Recognized Obligations & Debt Service Payments Recognized Obligations & Debt Service Payments Former RDA Tax Increment Select Auditor-Controllers; Legislative Analyst’s Office IncorrectConfirmed by AB 1484 Department of Finance; Dolinka Group Distribution Priority
Page 10 »FY 2011/2012 Pass-Through payments should not have been capped. The Pass-Through payment priority was addressed by AB 1484: "SEC. 36. The Legislature finds and declares as follows: (a) Certain provisions of Assembly Bill 26 of the 2011–12 First Extraordinary Session of 2011 (Ch. 5, 2011–12 First Ex. Sess.) are internally inconsistent, or uncertain in their meaning, with regard to the calculation of the amount to be paid by a county auditor-controller from the Redevelopment Property Tax Trust Fund to meet passthrough payment obligations to local agencies and school entities. (b) Consistent with the statement in Section 34183 of the Health and Safety Code, as added by the measure identified in subdivision (a), that the provisions of that section are to apply “[n]ot with standing any other law,” it was the intent of the Legislature in enacting that measure that the amount of the passthrough payments that are addressed by that section be determined in the manner specified by paragraph (1) of subdivision (a) of Section 34183 of the Health and Safety Code, and that the amount so calculated not be reduced or adjusted pursuant to the operation of any other provision of that measure." Confirmed Pass-Through Payments are the first priority to be paid from the Redevelopment Property Tax Trust Fund Pass-Through Payment Timing Securing Future Pass-Through Payments
Page 11 Pass-Through Payment Timing Jan ‘13 1 st half 12/13 Payment ROPS III Paid Jan ‘13 1 st half 12/13 Payment ROPS III Paid Jan ‘14 1 st half 13/14 Payment ROPS V Paid Jan ‘14 1 st half 13/14 Payment ROPS V Paid FY 2009/2010 Pre-Elimination: Post-Elimination: FY 2013/2014 FY 2012/2013 »May create cash-flow issues for Successor Agency Jan ‘12 1 st half 11/12 Payment ROPS I Paid Jan ‘12 1 st half 11/12 Payment ROPS I Paid FY 2011/2012 09/10 Payment FY 2010/2011 10/11 Payment 10/11 Payment FY 2011/2012 Jun ‘12 2 nd half 11/12 Payment ROPS II Paid Jun ‘12 2 nd half 11/12 Payment ROPS II Paid Jun ‘13 2 nd half 12/13 Payment ROPS IV Paid Jun ‘13 2 nd half 12/13 Payment ROPS IV Paid Jun ‘14 2 nd half 13/14 Payment ROPS VI Paid Jun ‘14 2 nd half 13/14 Payment ROPS VI Paid
Page 12 Pass-Through Payment Timing »LEAs should have received the following payments in FY 2011/2012: FY 2010/2011 payment from RDA 1 st half of FY 2011/2012 payment from RDA/SA 2 nd half of FY 2011/2012 payment from Auditor-Controller »Many LEAs did not receive their 1 st half of FY 2011/2012 payment from their RDA »According to AB 1484: "34183.5. (a) The Legislature hereby finds and declares that due to the delayed implementation of this part due to the California Supreme Court’s ruling in the case California Redevelopment Association v. Matosantos et al. (2011) 53 Cal.4th 231, some disruption to the intended application of this part and other law with respect to passthrough payments may have occurred. (1) If a redevelopment agency or successor agency did not pay any portion of an amount owed for the 2011–12 fiscal year to an affected taxing entity pursuant to Section 33401, 33492.140, 33607, 33607.5, 33607.7, or 33676, or pursuant to any passthrough agreement entered into before January 1, 1994, between a redevelopment agency and an affected taxing entity, and to the extent the county auditor-controller did not remit the amounts owed for passthrough payments during the 2011–12 fiscal year, the county auditor-controller shall make the required payments to the taxing entities owed passthrough payments and shall reduce the amounts to which the successor agency would otherwise be entitled pursuant to paragraph (2) of subdivision (a) of Section 34183 at the next allocation of property tax under this part, subject to the provisions of subdivision (b) of Section 34183." "34183.5. (a) The Legislature hereby finds and declares that due to the delayed implementation of this part due to the California Supreme Court’s ruling in the case California Redevelopment Association v. Matosantos et al. (2011) 53 Cal.4th 231, some disruption to the intended application of this part and other law with respect to passthrough payments may have occurred. (1) If a redevelopment agency or successor agency did not pay any portion of an amount owed for the 2011–12 fiscal year to an affected taxing entity pursuant to Section 33401, 33492.140, 33607, 33607.5, 33607.7, or 33676, or pursuant to any passthrough agreement entered into before January 1, 1994, between a redevelopment agency and an affected taxing entity, and to the extent the county auditor-controller did not remit the amounts owed for passthrough payments during the 2011–12 fiscal year, the county auditor-controller shall make the required payments to the taxing entities owed passthrough payments and shall reduce the amounts to which the successor agency would otherwise be entitled pursuant to paragraph (2) of subdivision (a) of Section 34183 at the next allocation of property tax under this part, subject to the provisions of subdivision (b) of Section 34183."
Page 13 Pass-Through Payment Timing Recommendation Redevelopment Elimination Redevelopment Elimination 2010/2011 Payment 2010/2011 Payment 2011/2012 Payment 2 nd Half 2011/2012 Payment 2 nd Half FY 2011/2012 2011/2012 Payment 1 st Half 2011/2012 Payment 1 st Half 1 1 2 2 Confirm receipt of 1 st half of FY 2011/2012 Pass-though Payment from RDA/SA The next Redevelopment payment will be January 2013
Page 14 Pass-Through Payment Timing Pass-Through Payment Subordination » The Redevelopment Agency (RDA) issued $45 million in bonds, and is projecting that the debt service will exceed the tax increment collected » The only way a LEA’s pass-through payment could be reduced is if: 1. The LEA signed a subordination agreement with the RDA 2. The RDA does not have enough money to pay their debt service, so they indicated plans to not pay the LEA’s payment pursuant to the subordination agreement Recommendation for CCD’s: 1. Know the financial landscape of the RDA (skyrocketing debt service in the future?) 2. Know if the LEA has signed any subordination agreements know the terms of the subordination agreements pass-through payments should never be reduced YES NO Dolinka Group reviewed the subordination agreement and found the RDA can only subordinate the LEA’s payment up to $33M of debt – resulting in a maximum subordination amount
Page 15 Pass-Through Payment Timing Termination of Payments »AB 1484 added HSC 34187(b): Important Note: * CCD's Pass-Through Payments will be terminated if the RDA pays off its debt before the project area's time limit to repay debt "When all of the debt of a redevelopment agency has been retired or paid off, the successor agency shall dispose of all remaining assets and terminate its existence within one year of the final debt payment. When the successor agency is terminated, all passthrough payment obligations shall cease and no property tax shall be allocated to the Redevelopment Property Tax Trust Fund for that agency." Why is the termination of payments bad for CCDs?: * The termination of redevelopment payments results in CCDs losing facilities dollars (and in some cases General Fund dollars) from RDA pass-through payments
Page 16 Pass-Through Payment Timing Termination of Payments »RDV statutory payments are structure in tiers. 1. 1 st 10 years the LEA receives tier 1 payments 2. Beginning in the 11 th year, the LEA receives both tier 1 and tier 2 payments 3. Beginning in the 30 th year, the Lea receives tier 1, tier 2, and tier 3 payments »Initially the RDA needed more money to issue debt Once the debt starting being paid off, the RDA was to pay the LEAs more pass-through payments. Tier 1 Tier 2 Tier 3 0 1 Base Year First Year of Tier 1 Payment First Year of Tier 2 Payment 10 11 First Year of Tier 3 Payment 30 31 First Adjusted Base Year Second Adjusted Base Year Early termination would mean the loss of tier 2 and tier 3 payments
Page 17 Determine LEA's Exposure »Analyze how LEA is using redevelopment dollars General Fund infusion Facilities COPs debt service »Analyze RDA debt service Review ROPS for debt outstanding Request information via Successor Agency RDA Official Statements RDA debt vs. Project Area debt »Compare to determine exposure Document Internal Repayment Plan Determine dollar amount exposure (conservative vs. aggressive approach) Pledge Agreement established? Contact local legislators, lobbyists 1 1 2 2 LEA Debt RDA Debt 2020 2022 Project Area #1 Project Area #2 Project Area #3 Certificates of Participation 2035 Project Area #2 2030 2023 Exposure 7 Years Backed by Project # 3 Pass-Through Payment Timing Termination of Payments
Page 18 Pass-Through Payment Timing Early Termination of Payments » The City of Fremont has a very small amount of outstanding debt and remaining financial obligations » As a result, they have estimated that they could “terminate” by the end of this fiscal year » All affected taxing entities may receive their last pass through payment in FY 2012/2013 City of Fremont Early Termination Date Previous Termination of Payment Number of "Lost" Years (Payments) FY 2010/2011 Pass-Through Payment Projected "Loss" Through 2044 Centerville2012/20132042/204330$19,551$586,530 Industrial2012/20132035/203623$387,127$8,903,921 Irvington2012/20132029/203017$16,646$282,986 Irvington 99 Anx2012/20132043/204431$20,920$648,522 Niles2012/20132029/203017$1,902$32,337 Niles 99 Anx2012/20132043/204431$1,385$42,942 TotalNA 149$447,532$10,497,238 Projected Loss of Revenue Through 2044  Represents future dollars; not present value amounts
19 Educational Revenue Augmentation Fund (ERAF)
Page 20 ERAF Fund Revisit ERAF Boost State Aid With ERAF Local Taxes ERAF State Aid Without ERAF Tax Rates Community College District Funding Local Taxes ERAF Redevelopment Revenue Tax Rate30% ERAF Rate 5% Tax Rate30% ERAF Rate 5% Tax Increment $1 million Tax Increment $1 million Redevelopment Payments LAUSD Lawsuit $1 million x 30% = $300,000 $1 million x 35% = $350,000 Tax Increment x Tax Rate = RDV Payment » On August 13, 2012, California State Controller's Office issued a letter requiring all Auditor-Controllers to start calculating redevelopment pass-through payments in accordance with the Los Angeles Unified School District vs. County of Los Angeles lawsuit Superior Court Case BS108180
Page 21 ERAF Latest Court Developments »The judge in the LAUSD Lawsuit is in the process of determining the methodology to calculate the ERAF revenue Dolinka Group has communicated with many Auditor-Controllers to understand which methodology is being used for their ERAF boost Most County Auditor-Controllers are waiting for the outcome in the LAUSD Lawsuit before incorporating a certain methodology Some have already implemented the ERAF boost (e.g. Orange, San Bernardino) since FY 2010/2011 »Once Auditor-Controllers incorporate concepts from the LAUSD Lawsuit, LEAs should see an ERAF boost to their in statutory pass-through redevelopment payments Depending on how your particular County calculates ERAF payments, some methodologies may yield higher ERAF boosts over others Next steps: follow up on demand letters sent, request back-owed payments
Page 22 ERAF Latest Court Developments »The Courts recently determined that the ERAF boost must incorporate the Triple Flip (enacted in 2004 through Proposition 57 – The California Recovery Act) and Vehicle License Fee (VLF) Swap (enacted in 2004) How the Triple Flip works: VLF Swap: Flip 1 Flip 2 Flip 3 ¼ percentage point increase in State sales tax, which is used to guarantee the deficit bonds the State issued through Proposition 57 ¼ percentage point decrease in local sales and use tax rate (consumers saw no overall increase in sales tax rate) Local governments replenished the sales tax revenue that they lost by reimbursing themselves from the ERAF Swap 1 Swap 2 Swap 3 Increased the State’s share of VLF Revenue Decreased the local government’s share of VLF revenue by the same amount (consumers saw no overall increase in the VLF) Local governments could replenish the VLF revenue that they lost by reimbursing themselves from the ERAF
Page 23 ERAF Latest Court Developments »Potential negative effect if CCD has negative ERAF Required shifts in property taxes may exceed the amounts allocated to the ERAF account, resulting in “negative” ERAF Uncertain impact to Redevelopment ERAF boost
Page 25 Apportionment Impacts »2011-12 the State withheld disbursement of $116 million of general fund dollars with the rationale the CCDs would receive a windfall of a “like” amount from the dissolution of redevelopment agencies »SB 1016 (Chapter 38, Statutes of 2012) provided authority for Director of Finance (DOF) to return to the CCDs the amount uncollected from RDAs by June 30, 2012 »While the state ultimately withheld $10.1 million of the original $116 million, the figure was merely a “placeholder” of what was estimated to be received. Chancellor’s Office recalculation will determine whether ANY RDA residual revenue was received by districts in 2011-12 State General Fund Manipulations 11/12
Page 26 Apportionment Impacts »The 2012-13 Budget Act is premised upon the receipt of $341 million $140.3 million RDA tax increment (Residual #1) $200.9 million RDA liquid / cash assets (Residual #2) »PLUS: RDA Hold Harmless language! »SB 1016 reads: RDA Revenue Shortfalls: RDA 12/13
Page 27 Apportionment Impacts »While authority exists to act sooner than the end of the fiscal year hard to imagine that will happen »Only backfill up to $341 million of RDA residual revenue shortfalls; timeline for repayment is unclear »RDA Hold Harmless language does NOT apply to regular property tax increment revenues. RDA Revenue Shortfalls: RDA 12/13
Page 28 Apportionment Impacts »Apportionment Milestones overlaid against Redevelopment Reporting Milestones »While great care was given to “align” apportionment milestones with redevelopment – there is NO expectation the “windfall” of RDA residual revenue projected will materialize in the short term »Not shocking declaration especially for those of you on Oversight Boards gearing up for the “meet and confer” round of your payment schedule fight with the State/DOF »Expectation that once items are outright “disallowed” from the ROPS they will NOT show up again on the payment schedule; in the meantime we need to trudge our way through the process »Going forward the expectation is that 90 days before payment is made (RDA Residual revenue and RDA Pass-Through revenue) the back-up calculations will be completed PRIOR to apportionment milestone reporting: Payment in January/ Report in October – in time for November 15 A-C property tax reporting Payment in June / Reporting in March – in time for April 15 A-C property tax reporting How will this play out in the short term and long term?
Page 29 Apportionment Impacts »As we move through 2012-13, districts will be “waiting” on the outcome of many calculations Unclear whether DOF will have any updated information related to RDA revenues to adjust their 2012-13 projections let alone weave in more refined numbers for the 2013-14 Governor’s Proposed Budget Expect a shortfall of RDA revenues on the P1 apportionment (one of possibly MANY!) Expect a shortfall of RDA revenue on the P2 apportionment (one of possibly MANY!). DOF should have better April RDA revenue information but whether they proactively “make the CCDs whole” at the May Revise is a different story Expect to be made “whole” shortly after the conclusion of the 2012-13 FY – for ONLY the RDA revenue….any other shortfall the CCDs lack statutory recourse In the short term: RDA shortfalls
Page 31 Advocacy »RDA pass-through payments impact K-12 »Feb 2011 K-12 P1 Apportionment »Shared concerns related to RDA Residual Revenue estimate and RDA pass-through impacts – particularly “early termination” – primary leads are the big, K-12 school districts »K-12 & CCD Collective Focus - Hold the State to it’s word – “the elimination of RDA’s will NOT negatively impact local education agencies” New Allies – K-12
Page 32 Advocacy Future Use of Redevelopment Revenue XYZ Redevelopment Agency Project Area A PTA SB 211 AB 1290 2% Project Area B Project Area C Project Area D $100,000 52.5% 47.5% 52.5% Land acquisition, facility construction, reconstruction, remodels, maintenance or deferred maintenance » New language added to Health and Safety code section 33607.5 states that CCDs can spend 52.5% on certain educational facilities for amounts paid during fiscal years 2011-12 through 2015-16.
Page 33 Advocacy »Coordinated Advocacy Increase the CCD percentage that is dedicated to facilities: CCD 52.5% vs. K-12 56.7% Extend the date for increased flexibility related to “facilities” portion from 2015-16 (current law) to LATER! Continue to push for more relief from RDA shortfalls. K-12 Continuous appropriation means K-12 does NOT wait until the end of the fiscal year to be “trued up”. The hold harmless language for the CCD was a big win, but we MUST advocate that a “true up” NOT wait until the conclusion of the fiscal year! Partner with K-12 related to “Early Termination” statutory protections for local education agencies Can we agree on a few things?
Page 35 Where Do We Go From Here? »This is one of many “irons in the fire” Ballot Measure Local revenue shortfalls Funding Formulas threatened re-do »Survey sought to gauge real-time experience with process and “gaps” »Really do not have a good sense of the magnitude at a statewide level – very interested to collect April 15 A-C information to get a better sense of Residual #1 and Residual #2 »Keep the communication lines OPEN – keep your advocates in Sacramento informed Overall Perspective
Page 36 Where Do We Go From Here? General Fund Infusion Alternatives Voter Approved Non Voter Approved Parcel Tax » Provides a mechanism that offers secure, enhanced funding for operational, educational, and capital facilities costs typically paid out of a school district's general fund » Regularly scheduled general election or mailed ballot election » 66% voter approval Recreation Assessment District » Allows local government agencies to finance the costs and expenses for public recreational facilities » Mailed ballot anytime » 50% + 1 voter approval Sales and Use Tax Asset Management » Focus on identifying operational effectiveness within the district to generate general fund savings in addition to opportunities to close facilities and liquidate surplus assets Facilities Usage Fees » Fee charged by districts for use of outdoor and indoor facilities, many districts are not maximizing their fee collection for groups that utilize their facilities (e.g. stadiums, performing arts centers, gymnasiums, recreational fields) during non- school hours »Local sales tax levied on goods and services purchased within a City or County »Long-term funding instrument used to provide supplemental general fund dollars »Regularly scheduled general election »50% + 1 voter approval »As Redevelopment funds are shrinking, CCDs need to look into other options to infuse their General Fund
38 About Dolinka Group, LLC Ann Feng-Gagne 949.250.8307 email@example.com Heather Hagopian 949.250.8376 firstname.lastname@example.org
Page 39 About Dolinka Group Presenter Bios »Ann Feng-Gagne, Executive Director, is one of the key members of Dolinka Group and is responsible for the day-to-day management of the financing and demographic services provided by the firm. These services include Master Plans/Funding Programs, property negotiations, formation and administration of CFDs and Assessment Districts, Redevelopment, OPEB funding, and GO Bond campaigns and issuances. Ms. Feng-Gagne holds a B.S. in Policy Analysis/Management from Cornell University. »Heather Hagopian, Senior Director, has assisted LEAs with redevelopment project area identification, revenue projections, redevelopment revenue reporting, negotiations with various redevelopment agencies to recover underpayments, and the leveraging redevelopment revenues via the issuance of bonds. Ms. Hagopian holds a B.S. in Business Administration (Finance) from San Diego State University.