3 - RECOGNIZED OBLIGATION PAYMENT SCHEDULE

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Third BOPS and Administrative Budget August 20, 2012 Page 2 and otherwise unwind the Agency's affairs. Many actions of the Successor Agency are subject to the review and approval by a seven-member Oversight Board_ The first and second BOPS and associated administrative budgets were approved by the Successor Agency on April 2, 2012 and May 7, 2012, respectively, and subsequently by the Oversight Board on April 10, 2012 and May 8, 2012, respectively. The documents were made available to the appropriate entities (the State Controller's Office, DOF, and County-Auditor Controller as required by law. The DOF approved both ROPS on May 24, 2012; however, several items deemed enforceable obligations by the Successor Agency and Oversight Board were disapproved by DOF, which the Agency is disputing. To date, the DOF and Agency have not reached a resolution on these matters. Additionally, there is pending litigation (Gerald Peebler, et a/., v_ State of California Department of Finance, et a/_, Case No. 34-2012-80001172) regarding the South Main Settlement Agreement, one of the enforceable obligations on the prior ROPS which was approved by the Successor Agency and Oversight Board, but denied by DOF. On July 12, 2012, DOF sent a letter to all redevelopment agencies stating that no further revised ROPS for periods prior to January 1, 2013 would be accepted and no further requests for reconsideration of such prior BOPS items would be considered- However, based on the DOF instructions for the third BOPS, the DOF is allowing the Agency/Oversight Board to include previously disputed items to be listed in the "Notes" section of the ROPS form provided by DOF. The ROPS (Exhibit A of Exhibit 1) and Budget (Exhibit B of Exhibit 1) for the January 1, 2013 through June 30, 2013 period is now being presented for Successor Agency approval. Following action by the Successor Agency, the BOPS and Budget will be forwarded to the Oversight Board, DOF, County and other appropriate entities as required by AB 1484. The Oversight Board will consider the BOPS and Budget at a special meeting anticipated to be held August 28, 2012. Pursuant to AB 1484 and DOF directive, the approved ROPS must be submitted to the DOF no later than September 4, 2012, or the Successor Agency/City will be subject to severe financial penalties. FISCAL IMPACT The Successor Agency is limited to making only payments listed on the approved ROPS for each six month period and the administrative expenditures of the Successor Agency are limited to items listed in the approved Administrative Budget for each six month period. California Health and Safety Code Section 34173(e) stipulates that "the liability of any successor agency, acting pursuant to the powers granted under the act adding this part, shall be limited to the extent of the total sum of property tax revenues it receives pursuant to this part and the value of assets transferred to it as a successor agency for a dissolved redevelopment agency." Thus, the City's obligations as Successor Agency are limited by the amount of property taxes and the value of assets it receives in its role as the Successor Agency. Despite this language, the Dissolution Act (as amended by AB 1484) also provides for the withholding and diversion of sales tax and property tax revenues otherwise due to the City in order to recover certain expenditures deemed to have been improperly made by the former Agency; however this offset is inapplicable to the present recommended actions. 3-2