3 - CERTIFIED ROPS AND ADMIN BUDGET

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Response to DOF May 3, 2012 Letter May 18, 2012 Page 6 The Successor Agency is required to perform the obligations of the former agency pursuant to the Settlement and Settlement Agreements, as described above, pursuant to HSC Section 34177(c) and the DOF's own guidance documents. Thus, contracts/services necessary to implement these enforceable obligations are allowable project cost expenditures, as intended by ABX1 26 and are recognized and permitted per DOF directive (set forth in "Exhibit 4" on the DOF webpage devoted to ABX1 26 issues) which treats such costs as "specific project implementation activities such as construction inspection, project management or actual construction [which] would not be viewed by Finance as `administrative."' Additionally, pursuant to HSC Section 34172(c), the Redevelopment Property Tax Trust Fund (RPTTF) is a "special fund of the dissolved redevelopment agency to pay the principal of and interest on loans, moneys advanced to, or indebtedness, whether funded, refunded, assumed, or otherwise incurred by the redevelopment agency to finance or refinance, in whole or in part, the redevelopment projects of each redevelopment agency dissolved pursuant to this part." The RPTTF is therefore required to fund this obligation. • Page 7, items 88 & 89, cash balances from settlement agreements totaling $26.8 million. The DOF Letter states that ABXI 26 does not allow successor agencies to enter into new contracts, and any unencumbered balances should be remitted to the County Auditor Controller. Response: Please refer to our comments noted for items 49 and #85 above regarding these Settlement Agreements constituting enforceable obligations. Additionally, the existing cash balances are not based on "tax increment no longer payable," as DOF states for items #9 & 85, but instead are based on the enforceable obligation found in the third party settlement agreements. • Administrative costs claimed exceed allowance by $2,422,796. The DOF Letter cites HSC Section 34171(b) as limiting administrative costs for fiscal year 2011-12 to five percent of property tax allocated to the successor agency or $250,000, whichever is greater, and states the Agency's allocation is $846,644. DOF attached a schedule showing its calculation of administrative costs. Response: We find the allocation to be incorrectly calculated for several reasons. It is not based on the total of all obligations for the time period. Additionally, project costs were incorrectly moved into "administrative costs". By DOF's own directive (set forth in "Exhibit 4" on the DOF webpage devoted to ABX1 26 issues), "specific project implementation activities such as construction inspection, project management or actual construction would not be viewed by Finance as 'administrative."' Additionally, many items listed on the schedule attached to the DOF Letter are enforceable obligations in their own right, not "administrative costs." We, therefore, request a re-calculation of Administrative Costs based on the following; and are attaching a schedule (Attachment 5) which we believe demonstrates is the corrected calculation of the administrative costs that the City of Santa Ana, acting as the Successor Agency, is eligible for. 3-33