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<br />
<br /> Response to DOF May 3, 2012 Letter
<br /> May 18, 2012
<br /> Page 7
<br /> i
<br /> o Line items 1, 2, 3 & 91 - These amounts are all EOs related to the two outstanding bonds. The
<br /> bond indentures require reasonable compensation to be made to the trustees for services
<br /> rendered, and the Continuing Disclosure Certificates require
<br /> annual audited financial
<br /> statements as part of the annual reports for compliance. As these expenses are contractually
<br /> stipulated as part of the overall bond covenants, fiends are necessary to fulfill the obligations
<br /> and should not be considered administrative costs. Please also see response above for Line
<br /> items 86, 98, and 99.
<br /> o Line items 4, 5, 6, 9, 10, 11, 16, 18, 19, 83, 87, 90 These amounts for project costs such as
<br /> management, consultants, legal, financial, appraisal, fees, etc. are not administrative costs. For
<br /> each enforceable obligation, there are contractual obligations that the former redevelopment
<br /> agency was required to manage, monitor, and enforce. For instance, item ##87 is the EO for the
<br /> required Agency Property Maintenance & Disposition pursuant to HSC Section 34181, which
<br /> necessitates it be "done expeditiously and in a manner aimed at maximizing value." To
<br /> accomplish this, the properties need to be properly maintained, and project costs need to be
<br /> provided for staffing/services to aptly evaluate and market the sites. Another example is Line
<br /> item 10 (Erickson Lease Agreement - Honda) that requires projects costs for project
<br /> managen-ient, and legal and financial services to ensure compliance with the financial and
<br /> performance obligations of the agreement. i
<br /> As stated previously, pursuant to HSC Section 34167(1), nothing in ABX1 26 shall be
<br /> construed to interfere with the Agency's authority with respect to enforceable obligations to
<br /> make payments due, enforce existing covenants and obligations or perform its obligations.
<br /> Furthermore, DOT's own guidance reiterates HSC Section 34174(a) which states nothing
<br /> herein is intended to absolve the successor agency of payment or other obligations due or
<br /> imposed pursuant to the enforceable obligations; and provided further, that nothing in the act
<br /> adding this part is intended to be construed as an action or circumstance that may give rise to
<br /> an event of default under any of the documents governing the enforceable obligations." Thus,
<br /> contracts/services necessary to irnpleinent and comply with these enforceable obligations are
<br /> allowable project cost expenditures, as intended by ABX1 26.
<br /> o Line items 12, 13, 94, 95 Se 96 These items, as listed for the subject RODS, can remain under
<br /> "administrative costs."
<br /> o Line items 24, 25, 26, 27, 28, 29, 30, 31, 32, 33 & 36 These amounts for project
<br /> management, legal, title, escrow, construction monitoring, loan management, etc. costs are not
<br /> administrative costs and should not be factored into the calculation of the 5% administrative
<br /> cost allowance. Many of the promissory notes for these housing projects were encumbered in
<br /> the Low and Moderate Income Housing Fund (LMIHF). However, the amounts contractually
<br /> obligated in the third-party agreements do not include funding to pay for project management,
<br /> monitoring, and enforcement of the contracts by the former redevelopment agency nor the
<br /> 3-40
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