9 - RDA SectionPROPOSED F - 1 SUCCESSOR AGENCY TO THE TOWN of LOS GATOS REDEVELOPMENT AGENCY FUND 942 AGENCY OVERVIEW T he Los Gatos Town Council activated the Los Gatos Redevelopment Agency on January 22, 1990, pursuant to the provisions of the California Community Redevelopment Law (Health and Safety Code , Section 33000 et seq .) and declared itself to constitute the Agency, by Ordinance No. 1806, adopted on December 4, 1989. The Redevelopment P lan was pursued as a result of the Loma Prieta Earthquake in 1989 and the need to reb uild existing infrastructure. The R edevelopment Agency area encompassed approxi mately 440 acres in and around d o wntown Los Gatos, which included retail and residential areas, lodging, schools, and main traffic thoroughfares. Projects completed in the pla n area, including street and utility reconstruction, parking, streetscape , and civic improvements , were funded through property tax increment revenue. When the Redevelopment Agency was initially formed, the tax based for all properties within the redevelo pment area was “frozen” to form a “base year.” When properties we r e reassessed, the tax base grew and the Agency would receive the majority of the difference in property taxes paid between the base year and the new level. This is what is known as “tax in crement revenue,” the primary funding mechanism for redevelopment agencies in California. Tax increment revenue c ould only be used to debt service to fund projects located within the redevelopment area . BUDGET OVERVIEW On June 15, 2011, the California St ate Legislature adopted two budget “trailer” bills concerning redevelopment, ABx1 26 and ABx1 27 (hereafter AB 26 and AB 27 for simplicity). AB 26 (t he “Dissolution Act”) eliminated redevelopment agencies as of October 1, 2011, and essentially restrict ed r edevelopment agencies from entering into agreements, borrowing or lending funds, or acquiring or disposing of real property prior to dissolution. Whereas , AB 27 (the “Voluntary Program Act”) allowed redevelopment agencies to remain in existence and be exe mpt from AB 26 if certain “voluntar y” payments were made to the S t ate in FY 2012 and in each fiscal year thereafter. These bil ls were signed into law by the g overnor on July 28, 2011. The League of California Cities and the California Redevelopment Assoc iation (CRA ) filed a petition with the California Supreme Court, challenging the constitutionality of AB 26 and AB 27. The California Supreme Court , in its decision in California Redevelopment Association v. Matosantos, issued December 29, 2011 (the “Supr eme Court Decision”), declared the Dissolution Act alone to be constitutional. Under the Dissolution Act, all California redevelopment agencies were dissolved effective February 1, 2012 .
PROPOSED F - 2 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY Follow ing the provisions of the Dissolution Act, the Town Council of the Town of Los Gatos (the “Town Council”) adopted a resolution accepting for the Town the role of successor agency (the “Successor Agency”) to the Redevelopment Agency of the Town of Los Gatos (the “Redevelopment Agency”). An oversight board (the “Oversight Board”), consisting of members representing Santa Clara County, the Town, and various education and special districts was formed to approve and direct certain actions of the Town as Success or Agency. Prior to the dissolution of redevelopment agencies, redevelopment law required that 20 percent of tax increment revenue received by an agency must be set aside for affordable housing activities. Under the Dissolution Act, tax increment revenue received by the successor agency will not include funding for affordable housing. However, tax -sharing agreements negotiated with affected public educational entities, the Mid -Peninsula Open Space District, and Santa Clara County will continue to be reco gnized . Nearly half of all Redevelopment Agency tax increment had been passed thr ough to these taxing entities. Successor a gencies may also receive tax increment revenue to pay for enforceable obligations that were incurred prior to the passage of the Di ssolution Act. Under the Dissolution Act, successor agencies must approve and submit a Recognized Obligation Payment Schedule (ROPS) that reflects enforceable obligations over a sixth month period. Prior to the payment of any enforceable obligation, the ROPS must be certified by the c ounty and subsequently approved by the O versight B oard. Successor agencies must also approve and submit an administrative budget for operational expenses to the O versight B oard for approval. Successor agencies may receive a minimum of up to $250,000 or up to 3 percent of tax increment revenues received by the Successor Agency per fiscal year for ad ministrative expenses , which is significantly lower than the Successor Agency’s current administrative expenses . As a result, e x penses for programs such as Economic Vitality , for example, must now be funded through the General Fund , placing a burden on the Town ’s operating budget. The Town has several e xisting e nforceable obligations that must be paid over the remaining life of th e debt service, or until the Successor Agency reaches the tax increment cap , which is the gross tax increment collected over the life of the Agency. The Town’s tax increment cap, which is anticipated to be reached by FY 2027/28, is approximately $250 mill ion. The Successor Agency currently pays debt service on two Certificates of Participation (COPs): • 2002 COP s P ayments for RDA Capital Projects: In 2002, the Town issued debt for approximately $10.8 million to fund RDA infrastructure projects in the p ro ject a rea. Annual debt service payments of approximately $680,000 will continue through FY 2031/32. • 2010 COP s P ayments for Town Library : In 2010, the Town issued debt for approximately $15.7 million to fund the construction of the new l ibrary building . Annual debt service payments of approximately $1.2 million will continue through FY 2027/28 . • Agency Administration : This pays for the day -to -day operations of the Successor Agency , including staff salary and benefits, supplies and materials, and consultan t assistance. Annual b udgeted expenditures are estimated to be $1 40 ,000.
PROPOSED F - 3 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY 2010/11 2011/12 2012/13 2013/14 2013/14 2014/15 Actuals Actuals Actuals Adopted Estimated Adopted SOURCES OF FUNDS Beginning Fund Balance Designated -$ -$ -$ -$ -$ -$ Undesignated - - 3,397,555 123,857 4,148,242 3,938,783 Total Beginning Fund Balance - - 3,397,555 123,857 4,148,242 3,938,783 Revenues Property Tax - - - - - - Other Taxes - - - - - - Lease Income - COP's - - 5,449,328 4,124,356 4,034,181 3,996,832 County RPTTF Reimbursement - 16,644,334 667 200 100 150 Interest - - - - - - Other Revenues - - - - - - Total Revenues - 16,644,334 5,449,995 4,124,556 4,034,281 3,996,982 Transfers In Transfer from General Fund - - - 70,653 70,653 50,200 Total Transfers In - - - 70,653 70,653 50,200 Total Revenues and Transfer Ins -$ 16,644,334 $ 5,449,995 $ 4,195,209 $ 4,104,934 $ 4,047,182 $ TOTAL SOURCE OF FUNDS -$ 16,644,334 $ 8,847,550 $ 4,319,066 $ 8,253,176 $ 7,985,965 $ USES OF FUNDS Expenditures Salaries and Benefits - - 24,105 13,171 11,858 13,522 Operating Expenditures - 13,246,779 607,457 57,780 268,754 33,100 Grants - - - - - - Debt Service - - 4,064,111 3,871,156 3,871,156 3,856,112 Fixed Assets - - - - - - Internal Service Charges - - 3,635 2,958 2,922 532 Total Expenditures - 13,246,779 4,699,308 3,945,065 4,154,690 3,903,266 Transfers Out Transfer to Capital Projects - - - - - - Transfer to General Funds - - 295,913 250,000 159,703 137,500 Total Transfers Out - - - - 159,703 137,500 Total Expenditures & Transfers Out - 13,246,779 4,699,308 3,945,065 4,314,393 4,040,766 Ending Fund Balance Designated - - - - - - Undesignated - 3,397,555 4,148,242 374,001 3,938,783 3,945,199 Total Ending Fund Balance - 3,397,555 4,148,242 374,001 3,938,783 3,945,199 TOTAL USE OF FUNDS -$ 16,644,334 $ 8,847,550 $ 4,319,066 $ 8,093,473 $ 7,848,465 $ STATEMENT OF SOURCE AND USE OF FUNDS
PROPOSED F - 4 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY Full Time Equivalent (FTE)2010/11 2011/12 2012/13 2013/14 2014/15 Town Staff Funded Funded Funded Funded Funded Community Development Dir.0.20 0.20 - - - Planning Manager 0.10 0.10 - - - Economic Vitality Manager 0.80 0.80 - - - Administrative Analyst 0.20 0.20 0.20 0.10 0.10 Senior Planner 0.25 0.25 - - - Total SA FTEs 1.55 1.55 0.20 0.10 0.10 SUCCESSOR AGENCY TO THE LOS GATOS RDA PROGRAM STAFFING
PROPOSED F - 5 SUCC ESSOR AGENCY TO THE TOWN of LOS GATOS REDEVELOPMENT AGENCY Administration Program 9403 PROGRAM PURPOSE The Successor Agency’s Administration Fund encompasses administrative functions related to operational and fiscal matters of the Successor Agency , in conjunction with the Finance Department. Prior to the dissolution of the R edevelopment Agency , this fund also supported c apital p roject development , management, and construction oversight ; and economic v itality activities to enhance revenues through bu siness promotion and retention . While there will be no future capital projects , with the exception of one street reconstruction project in the former redevelopment area, economic vitali ty efforts will continue and are now supported by t he General Fund. BUDGET OVERVIEW The FY 201 4 /1 5 Administrati on Fund budget reflects $1 40 ,000 of tax increment revenue to cover the operational and fiscal reporting expenses of the Successor Agency. To recei ve this revenue, successor agencies are required to submit an admi nistrative budge t every 6 months to their respective oversight board s for approval. The maximum administrative allowance of up to $250,000 , or up to 3 percent of tax increment revenues received by the Successor Agency per fiscal year , is significantly low er than the Successor Agency’s current administrative expenses , which difference must be absorbed by the General Fund, placing a burden on the Town ’s operating budget. The Administration Fund budget also reflects a small amount of additional funding for t he Almond Grove Concrete Rehabilitation project.
PROPOSED F - 6
PROPOSED F - 7 S UCCESSOR AGENCY TO THE TOWN of LOS GATOS REDEVELOPMENT AGENCY Debt Service Programs 9 404 and 9 405 FUND PURPOSE Tax increment revenue is restricted to the repayment of debt; therefore, a Successor Agency must have indebtedness in order to receive increment revenue . Prior to the Dissolution Act , the Los Gatos Redevelopment Agency assumed the obligation of paying the debt service on the Town’s 2002 , and 2010 Certificates of Participation (COPs) in return for the lease of Town property. The purpose of the COPs was to fund key capital infrastructure projects located in the former redevelopment area. Payments for this indebtedness were and will continue to be made from the Debt Service Fund. BUDGET OVERVIEW As discussed above, the Successor Agency is curren tly paying debt service on the 2002 and 2010 COPs: Program 9 404 2002 Certificates of Participation . T he 2002 Certificates of Participation financing structure parall els the 1992 issue. The Town bears an obligation for the 30 -year Certificates of Participation issued in the original amount of $10,725,000 , dated August 1 , 2002. The COP s were issued to finance infrastructure improvements in the downtown redevelopment a rea , including plaza reconstruction, streetscape improvements , street reconstruction, storm drainage , and alley improvements , as well as partially funding the reconstruction of the pool at Los Gatos High School . The COPs p rincipal payments are due annuall y on August 1 , with interest payments payable semi -annually on February 1 and August 1 . T h e financing structure of the COP s includes two lease agreement s between the Town of Los Gatos and the Successor Agency for the Town of Los Gatos Redevelopment Agen cy dated July 1, 2002 . The first agreement l ease s five T own -owned parcels, commonly known as the Miles Avenue Corporation Yard, to the Successor Agency through August 1, 2031 f or a one -time fee of $1. In the second lease, t he Successor Agency subleases t he land back to the Town , effective the date of the original lease. The a nnual sub -lease payments are equal to the annual debt service for the COPs. A r eimbursement a greement between the Town and the Successor Agency, also dated July 1, 2002 , obligate s the Agency to reimburse the Town in an amount equal to the annual lease payment the Town
PROPOSED F - 8 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY Debt Service pays to the Agency for the sub -lease of the Corporation Yard . This reimbursement is in consideration of the Town’s cost of the acquisition and construction of the yard facilities. While the annual impact of these agreements net s to zero, the lease and reimbursement payments are included in both the Town’s and Successor Agency ’s budget s e ach year to accurately reflect the terms of these agreements. The Agency remains responsible for making the principal and interest payments . The maturity schedule for the Successor Agency’s current Debt Service obligation under the 2002 COPs is as follo ws: Principal Interest Interest Fiscal Maturing Due Due Total Principal Year August 1st August 1st Feburary 1st Debt Service Balance Issue Date: August 1, 2002 10,725,000 $ 2002/03 - - 237,164 $ 237,164 $ 10,725,000 2003/04 210,000 $ 235,854 $ 233,229 679,083 10,515,000 2004/05 215,000 233,229 230,541 678,770 10,300,000 2005/06 225,000 230,541 227,729 683,270 10,075,000 2006/07 230,000 227,729 224,854 682,583 9,845,000 2007/08 235,000 224,854 221,681 681,535 9,610,000 2008/09 240,000 221,681 218,081 679,763 9,370,000 2009/10 250,000 218,081 214,019 682,100 9,120,000 2010/11 255,000 214,019 209,556 678,575 8,865,000 2011/12 265,000 209,556 204,720 679,276 8,600,000 2012/13 275,000 204,720 199,426 679,146 8,325,000 2013/14 285,000 199,426 193,726 678,153 8,040,000 2014/15 295,000 193,726 187,679 676,405 7,745,000 2015/16 310,000 187,679 181,169 678,848 7,435,000 2016/17 320,000 181,169 174,209 675,378 7,115,000 2017/18 335,000 174,209 166,755 675,964 6,780,000 2018/19 350,000 166,755 158,793 675,548 6,430,000 2019/20 365,000 158,793 150,306 674,099 6,065,000 2020/21 385,000 150,306 141,163 676,469 5,680,000 2021/22 400,000 141,163 131,463 672,625 5,280,000 2022/23 420,000 131,463 121,225 672,688 4,860,000 2023/24 440,000 121,225 110,500 671,725 4,420,000 2024/25 465,000 110,500 98,875 674,375 3,955,000 2025/26 485,000 98,875 86,750 670,625 3,470,000 2026/27 510,000 86,750 74,000 670,750 2,960,000 2027/28 535,000 74,000 60,625 669,625 2,425,000 2028/29 565,000 60,625 46,500 672,125 1,860,000 2029/30 590,000 46,500 31,750 668,250 1,270,000 2030/31 620,000 31,750 16,250 668,000 650,000 2031/32 650,000 16,250 - 666,250 - TOTALS:10,725,000 $ +4,551,426 $ +4,552,737 $ =19,829,163 $ 2002 COP DEBT SERVICE
PROPOSED F - 9 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY Debt Service Program 9 405 2010 Certificates of Participation . The 2010 Certificates of Participation financing structure parallels the 1992 and 2002 issue s . The Town bears an obligati on for the 18 -year Certificates of Participation issued in the original amount of $15,675 ,000 , dated June 1, 2010. The COPs were issued to finance the construction of the new Town l ibrary. The COPs principal pay ments are due annually on August 1, with in terest payments p ayable semi -annually on February 1 and August 1. The financing structure of the COP s includes two lease agreements between the Town of Los Gatos and the Successor Agency for the Tow n of Los Gatos Redevelopment Agency dated June 1, 2010. The first agreement leases Town -owned parcels, including the existing library, police a dministration building, and related property located at the Civic Center , to the Successor Agency through August 1, 20 28 for a one -time fee of $1. In the second lease , the Successor Agency subleases the property back to the Town, effective the date of the original lease. The annual sub -lease payments are equal to the annual debt service for the COPs. A reimbursement agreement b etween the Town and Agency, also date d June 1, 2010, obligates the Agency to reimburse the Town in an amount equal to the annual lease payment the Town pays to the Agency for the sub -lease of the existing l ibrary, p olice a dministration building , and related properties . This reimbursement is in consideration of the Town’s cost of the acquisition and construction of the library and police facilities. While the annual impact of these agreements net s to zero, the lease and reimbursement payments are included in both the Town’s and Successor Ag ency ’s budget s each year to accurately reflect the terms of these agreements. The Agency remains responsible for making the principal and interest payments . The maturity schedule for the Successor Agency’s current Debt Service obligatio n under the 2010 COPs is as follows:
PROPOSED F - 10 Interest Principal Interest Fiscal Due Maturing Due Total Principal Year August 1st August 1st February 1st Debt Service Balance Issue Date: June 1, 2010 15,675,000 $ 2010/11 423,161 423,161 15,675,000 2011/12 320,038 530,000 313,413 1,163,450 15,145,000 2012/13 313,413 650,000 300,413 1,263,825 14,495,000 2013/14 300,413 670,000 287,013 1,257,425 13,825,000 2014/15 287,013 695,000 269,638 1,251,650 13,130,000 2015/16 269,638 715,000 258,913 1,243,550 12,415,000 2016/17 258,913 745,000 244,013 1,247,925 11,670,000 2017/18 244,013 770,000 224,763 1,238,775 10,900,000 2018/19 224,763 800,000 208,763 1,233,525 10,100,000 2019/20 208,763 830,000 192,163 1,230,925 9,270,000 2020/21 192,163 865,000 174,863 1,232,025 8,405,000 2021/22 174,863 900,000 152,363 1,227,225 7,505,000 2022/23 152,363 935,000 133,663 1,221,025 6,570,000 2023/24 133,663 975,000 114,163 1,222,825 5,595,000 2024/25 114,163 1,020,000 93,763 1,227,925 4,575,000 2025/26 93,763 1,065,000 72,463 1,231,225 3,510,000 2026/27 72,463 1,115,000 50,163 1,237,625 2,395,000 2027/28 50,163 1,170,000 26,031 1,246,194 1,225,000 2028/29 26,031 1,225,000 1,251,031 - TOTALS:3,436,594 $ +15,675,000 $ +3,539,717 $ =22,651,311 $ 2010 COP DEBT SERVICE
PROPOSED F - 11 SUCCESSOR AGENCY TO THE LOS GATOS REDEVELOPMENT AGENCY Debt Service California Government Code Section 43605 states : “A city shall not incur an indebtedness for public improvements which exceeds in the aggregate 15 percent of the assessed value of all real and personal property of the city. With in the meaning of this section indebtednes s means bonded indebtedness of the city payable from the proceeds of taxes levied upon taxable property in the city.” This schedule calcula tes the Town’s legal debt margin by determining the 15% debt limit and comparing this limit to the Town’s outstanding debt at the end of the fiscal year to determine the differenc e between the two. Only certain types of outstanding debt are subject to the legal debt limit ; therefore , while this schedule recognizes all debt, the total debt is reduced by that debt not subject to the legal debt limit , as well as amounts held in sinking funds for debt repayment . The Town’s debt structure currently includes only Certificates of Participation , which are not subject to the legal debt limit, and are therefore removed from the calculation. LEGAL DEBT MARGIN COMPUTATION FY 2014/15 Assessed Secured Property Valuation for FY 2013/14 $ 9,195,026 ,300 Debt Limitation (15% of assessed value) 15% Bonded Debt Limit $ 1,379,253,945 Outstanding Bonded Debt at 6/30/14 2002 Certificates of Participation 8,040,000 2010 Certificates of Participation 13,825,00 0 TOTAL Outstanding Debt $ 21,865,000 LESS Debt not subject to limit: Special Assessment Bonds - Special Revenue Bonds - Certificate of Participation Debt 21,8 65,000 Amounts held in Sinking Funds - TOTAL Debt not subject to limit: $ 21,865,000 Amount of Debt Subject to Limit: $ - $ - LEGAL DEBT MARGIN $ 1,379,253,945
PROPOSED F - 12