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It should be noted that the proposed Merger does not affect the housing obligations and would not reduce the overall commitment to the Project Areas. The Agency is legally required to set-aside 20 percent of the gross tax increment that is generated within the Project Areas (excluding Central City Project which is a pre-1976 redevelopment plan and by law is exempt for the housing set-aside requirements). However, the Agency exceeds the 20 percent set-aside for four of the five remaining Project Areas including 60 percent for the South Harbor Project and 30 percent for the Inter-City, North Harbor and Bristol Corridor Projects. Agency staff will be preparing a new five-year Implementation Plan for 2005-2009 that will be adopted by the end of this year. This 2005-2009 Implementation Plan will outline the goals, projects and programs, and expenditures for the next five-year period, which is likely to include some of the contemplated housing projects listed above. In addition, the housing component of the Implementation Plan will contain a history of the residential units that were developed, substantially rehabilitated and price restricted within the Project Areas to determine that all very low-, low and moderate income housing requirements have been met. The upcoming 2005-2009 Implementation Plan is anticipated to provide a more extensive list of Agency accomplishments related to affordable and market rate housing within the Project Areas. 5. Comment: Could the merger divert necessary tax increment revenues from a specific Project Area that may already have minimal tax increment revenues generated to implement projects and programs? Response: The merging of redevelopment project areas is to share tax increment revenues among the project areas. For project areas that receive more tax increment than is currently needed to implement projects and programs, this tax increment can assist the "poorer project areas" that do not have sufficient tax increment revenues to fund the desired projects and pay existing obligations. The benefit of merging the Project Areas is to allow the Agency to prioritize projects where needs are the greatest. Currently, most of the tax increment revenues from the Project Areas are committed to existing debt and obligations and, therefore, cannot be used to implement new projects and programs. The decision on how the discretionary increment will be allocated amongst the Project Areas will be decided and identified in the upcoming 2005-2009 Implementation Plan to the degree possible and will be addressed annually in the City/Agency's budgeting process. 6. Comment: How does the proposed Merger relate to the Five-Year Implementation Plan? Response: The proposed Merger will not affect or change the existing Implementation Plan. The upcoming 2005-2009 Implementation Plan will be prepared and adopted in a separate process. It is anticipated that Agency staff will prepare a draft of the 2005-2009 Implementation Plan for presentation to the community in the fall of this year. Subsequently, the 2005-2009 Implementation Plan will be submitted to the Commission Page 55 of 190 Report to the City Council for the Merger of the Santa Ana Redevelopment Projects Keyser Marston Associates, Inc. Page 44 PA0403012.SNT A:CK:gbd 19090.003.004106/28104 75D-65