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HomeMy WebLinkAbout SA_FULL PACKET_2012-10-01MINUTES OF THE SPECIAL MEETING OF THE SUCCESSOR AGENCY OF THE CITY OF SANTA ANA, CALIFORNIA CALL TO ORDER ATTENDANCE PUBLIC COMMENTS AUGUST 20, 2012 Heritage Museum of Orange County 3101 W. Harvard St Santa Ana, California 6:24 P.M. MEMBERS Present: MIGUEL PULIDO, Mayor CLAUDIA ALVAREZ, Mayor Pro Tern P. DAVID BENAVIDES MICHELE MARTINEZ SAL TINAJERO MEMBERS Absent: CAROLS BUSTAMANTE VINCENT F. SARMIENTO None CONSENT CALENDAR MOTION: Approve staff recommendation on the following Consent Calendar item: 1. 1. REGULAR MEETING MINUTES OF JULY 2, 2012 MOTION: Approve Minutes. MOTION: Martinez SECOND: Benavides VOTE: AYES: Alvarez Benavides Martinez Pulido Tinajero (5) NOES: ABSTAIN: ABSENT: I f f 1 None (0) None (0) Bustamante, Sarmiento (2) SUCCESSOR AGENCY MINUTES 1 1-1 AUGUST 20, 2012 **END OF CONSENT CALENDAR** BUSINESS CALENDAR 2. AB 1484 TRUE UP PROCESS MOTION: Receive and file. MOTION: Alvarez SECOND: Martinez VOTE: AYES: Alvarez, Benavides, Martinez, Pulido, Tinajero (5) NOES: None (0) ABSTAIN: None (0) ABSENT: Bustamante, Sarmiento (2) 3. RESOLUTION - RECOGNIZED OBLIGATION PAYMENT SCHEDULE (ROPS) AND ADMINISTRATIVE BUDGET FOR THE PERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2013 MOTIONS: 1. Adopt a resolution. SA RESOLUTION NO. 2012-007 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA ACTING AS SUCCESSOR AGENCY TO THE FORMER COMMUNITY REDEVELOPMENT AGENCY APPROVING THE THIRD RECOGNIZED OBLIGATION PAYMENT SCHEDULE (ROPS) AND ADOPTING AND APPROVING THE SUCCESSOR AGENCY'S ADMINISTRATIVE BUDGET FOR THE PERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2013 PURSUANT TO HEALTH AND SAFETY CODE SECTIONS 34177(1)(1) AND 34177(m), AND CERTAIN OTHER ACTIONS PURSUANT TO PART 1.85 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE ("DISSOLUTION ACT") 2. Direct the City Manager and/or Director of Finance or their designees, as delegated officials of the Successor Agency, to make or accept any augmentation, modification, additions, or revisions to the ROPS and/or Administrative Budget as the City Manager and/or Director of Finance or their designees may deem necessary and appropriate in their reasonable discretion, based SUCCESSOR AGENCY MINUTES 2 1-2 AUGUST 20, 2012 on review by and comments received from the Oversight Board, the State Department of Finance (DOF), or the County of Orange's selected independent auditor, as applicable. MOTION: Martinez SECOND: Tinajero VOTE: AYES: Alvarez, Benavides, Martinez, Pulido, Tinajero (5) NOES: None (0) ABSTAIN: None (0) ABSENT: Bustamante, Sarmiento (2) COMMENTS 4. CITY COUNCIL ACTING AS SUCCESSOR AGENCY COMMENTS - None ADJOURNMENT - 7:11 p.m. Rose Ann Trujillo Senior Deputy Clerk of the Council SUCCESSOR AGENCY MINUTES 3 1-3 AUGUST 20, 2012 1-4 REQUEST FOR SUCCESSOR AGENCY ACTION ?p MEETING DATE: OCTOBER 1, 2012 TITLE: DUE DILIGENCE REVIEW FOR THE LOW AND MODERATE INCOME HOUSING FUND A, )L CLN-CITY MANAGER RECOMMENDED ACTION Receive and file. CLERK OF THE COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Implementing Resolution ? Other CONTINUED TO FILE NUMBER DISCUSSION AB 1484, which was adopted on June 27, 2012, requires that the Successor Agency employ a licensed accountant approved by the County of Orange Auditor-Controller to conduct a Due Diligence Review (Review) to determine the unobligated balances available for transfer to taxing entities. The low and moderate income housing fund is the first of two such reviews to be performed. The Review must be submitted to the Oversight Board for their review and approval. In addition, it must be submitted to the County Auditor-Controller's Office, State Controller's Office and the Department of Finance (DOF). AB 1484 also requires that the Oversight Board hold a public comment session at least five business days prior to holding an approval vote. The request to approve the Review will take place at the Oversight Board meeting on Tuesday, October 9, 2012. which will comply with Health and Safety Code 34179.6(b). At that time, the Oversight Board shall consider any opinions provided by the County Auditor-Controller regarding the Review, if received. After Oversight Board approval of the Review, it will be submitted to the DOF and County Auditor-Controller for the final determination of the amount to be disbursed. DOF must complete its determination by November 9, 2012. If there are any items in dispute, the Successor Agency will have the opportunity to request a Meet and Confer with DOF. FISCAL IMPACT There is no fiscal impact associated with this action. "h " W_ r-'? &&)aZ42 Nancy T. Ed rds Interim Exec ve Director Community Development Agency NTE/SLB/kg Exhibit: 1. Due Diligence Review 2-1 2-2 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Independent Accountant's Report on Applying Agreed-Upon Procedures on the Successor Agency to the Redevelopment Agency of the City of Santa Ana As Prescribed in Section 34179.5 of the California Health and Safety Code 2-3 2-4 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Table of Contents Page Independent Accountant's Report on Applying Agreed-Upon Procedures ............................................... I ATTACHMENT A. Agreed-Upon Procedures and Findings ........................................................................................ 3 EXHIBITS A. Asset Transfers to the City, February 1, 2012 through June 30, 2012 ........................................ 11 B. Asset Other Than Cash and Cash Equivalants Transferred to the Housing Successor ..............13 C. Housing Assets Needed to Satisfy Obligations on the BOPS, July 1 2012 through June 30, 2013 .......................................................................................15 D. Assets Available to Distribute to Taxing Entities .......................................................................17 2-5 This page intentionally left blank. 2-6 Newport Beach wa 4675 MacArthur Court, Suite 600 Certified Public Accotuttants. Newport Beach, CA 92660 949.221.0025 Sacramento Walnut Creek Successor Agency to the Community Redevelopment Agency Oakland of the City of Santa Ana LA/Century City Santa Ana, California San Diego Independent Accountant's Report on Seattle Applying Agreed-Upon Procedures We have performed procedures enumerated in Attachment A, which were agreed to by the Successor Agency to the Community Redevelopment Agency (Successor Agency) of the City of Santa Ana (City), California, the California State Controller's Office and California Department of Finance (collectively referred to as Specified Parties) solely to assist you in determining the balances available for transfer to taxing entities from assets transferred to the Successor Agency from the Low and Moderate Income Housing Funds of the former redevelopment agency, as prescribed in Section 34179.5 of the California Health and Safety Code (Code). The management of the Successor Agency is responsible for the accounting records. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the Specified Parties. Consequently, we make no representation regarding the sufficiency of the procedures described in Attachment A, either for the purpose for which this report has been requested, or for any other purpose. The scope of this engagement was limited to performing the agreed-upon procedures set forth in Attachment A. Attachment A also identifies the findings noted as a result of the procedures performed. We were not engaged to and did not conduct an audit, the objective of which would be the expression of an opinion on the balances available for transfer to taxing entities from assets transferred to the Successor Agency from the Low and Moderate Income Housing Fund of the former redevelopment agency or other financial information presented in the attached exhibits. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the Successor Agency, California State Controller's Office and the California Department of Finance, and is not intended to be, and should not be used by anyone other than these specified parties. )ha,c,.,, ram.,. s o tn?d Z-e-P Newport Beach, California September 26, 2012 www.mgocpa.com 2-71 This page intentionally left blank. 2-8 2 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings Low and Moderate Income Housing Fund Our procedures and findings are as follows: I ) Procedure: Obtain from the Successor Agency a listing of all assets that were transferred from the Low and Moderate Income Housing Funds of the former redevelopment agency to the Successor Agency on or about February 1, 2012. Agree the amounts on this listing to account balances established in the accounting records of the Successor Agency. Identify in the Agreed-Upon Procedures (AUP) report the amount of the assets transferred to the Successor Agency as of that date. Finding: Based on our discussion with management, all of the assets of the Low and Moderate Income Housing Fund of the former redevelopment agency were transferred to the Housing Successor upon dissolution. As such, there were no assets transferred from the Low and Moderate Income Housing Funds to the Successor Agency. We verified the results of our inquiry with management through inspection of the Successor Agency's accounting records. However, in compliance with the intent of Assembly Bill 1484, that is to remit all unencumbered assets from the Low and Moderate Income Housing Fund to the taxing entity, the Successor Agency intends to properly transfer any unencumbered assets from the Housing Successor to the Successor Agency upon conclusion of the due diligence review. 2) Procedures: If the State Controller's Office has completed its review of transfers required under both Sections 34167.5 and 34178.8 and issued its report regarding such review, attach a copy of that report as an exhibit to the AUP report. If this has not yet occurred, perform the following procedures: A. Obtain a listing prepared by the Successor Agency of transfers from the Low and Moderate Income Housing Funds of the former redevelopment agency (excluding payments for goods and services) to the city, county, or city and county that formed the redevelopment agency for the period from January 1, 2011 through January 31, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. B. Obtain a listing prepared by the Successor Agency of transfers (excluding payments for goods and services) from the low and moderate income housing assets held by the Successor Agency to the city, county, or city and county that formed the redevelopment agency for the period from February 1, 2012 through June 30, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report C. For each transfer, obtain the legal document that formed the basis for the enforceable obligation that required any transfer. Note in the AUP report the absence of any such legal document or the absence of language in the document that required the transfer. 2-9 3 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund Findings: We noted that the State Controller's Office has not completed its review of transfers as of the date of this report. Procedure 2A is not applicable to the Successor Agency as there were no transfers from the Low and Moderate Income Housing Funds of the former redevelopment agency to the City for the period from January 1, 2011 through January 31, 2012. For procedures 2B and 2C, we reviewed the Housing Asset Transfer Form submitted to the Department of Finance and noted disallowed transfers of assets (land held for resale: 415 and 423 S. Raitt Street) in the aggregate amount of $1,000,000. All other assets listed on the Housing Asset Transfer Form were approved by the Department of Finance. The Housing Successor does not concur with the findings and has requested a "meet and confer" session with the Department of Finance. As of the date of this report, a "meet and confer" session has not been scheduled. However, for the purposes of this procedure, we have included the items disallowed by the Department of Finance as a finding on Exhibit A. Further, we noted other assets that were transferred from the former Low and Moderate Income Housing Fund to the Housing Succesor that were not included on the Housing Asset Transfer Form submitted and evaluated by the Department of Finance. For those assets in question, there were no legal requirements or enforceable obligations requiring the transfer of such assets. As a result, we have included such transfers as a finding on Exhibit A. Please refer to Exhibit A for the results of procedures 2B and 2C. 3) Procedures: If the State Controller's Office has completed its review of transfers required under both Sections 34167.5 and 34178.8 and issued its report regarding such review, attach a copy of that report as an exhibit to the AUP report. If this has not yet occurred, perform the following procedures: A. Obtain a listing prepared by the Successor Agency of all transfers (excluding payments for goods and services) from the former redevelopment agency's Low and Moderate Income Housing Fund to any other public agency or to private parties for the period from January 1, 2011 through January 31, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. B. Obtain a listing prepared by the Successor Agency of all transfers (excluding payments for goods and services) from the low and moderate income housing assets held by the Successor Agency to any other public agency or private parties for the period from February 1, 2012 through June 30, 2012. For each transfer, the Successor Agency should describe the purpose of the transfer and describe in what sense the transfer was required by one of the Agency's enforceable obligations or other legal requirements. Provide this listing as an attachment to the AUP report. C. For each transfer, obtain the legal document that formed the basis for the enforceable obligation that required any transfer. Note in the AUP report the absence of any such legal document or the absence of language in the document that required the transfer. 2-10 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund Findings: We noted that the State Controller's Office has not completed its review of transfers as of the date of this report. Transfers to other public agencies or private parties, as defined in Health and Safety Code 34179.5 (C) (3), is the "...dollar value of any cash and cash equivalents transferred after January 1, 2011, through June 30, 2012..." There were no transfers of cash and cash equivalents to other public agencies or private parties from the former redevelopment agency's Low and Moderate Income Housing Fund or Successor Agency. As such, procedures 3A through 3C are not applicable. 4) Procedure: Obtain from the Successor Agency a listing of all assets of the Low and Moderate Income Housing Fund as of June 30, 2012 for the report that is due October 1, 2012 and a listing of all assets of all other funds of the Successor Agency as of June 30, 2012 (excluding the previously reported assets of the Low and Moderate Income Housing Fund) for the report that is due December 15, 2012. When this procedure is applied to the Low and Moderate Income Housing Fund, the schedule attached as an exhibit will include only those assets of the Low and Moderate Income Housing Fund that were held by the Successor Agency as of June 30, 2012 and will exclude all assets held by the entity that assumed the housing function previously performed by the former redevelopment agency. Agree the assets so listed to recorded balances reflected in the accounting records of the Successor Agency. The listings should be attached as an exhibit to the appropriate AUP report. Finding: Based on our discussion with management, all of the assets of the Low and Moderate Income Housing Fund of the former redevelopment agency were transferred to the Housing Successor upon dissolution. As such, there were no assets transferred from the Low and Moderate Income Housing Funds to the Successor Agency. We verified the results of our inquiry with management through inspection of the Successor Agency's accounting records. However, in compliance with the intent of Assembly Bill 1484, that is to remit all unencumbered assets from the Low and Moderate Income Housing Fund to the taxing entity, the Successor Agency intends to properly transfer any unencumbered assets from the Housing Successor to the Successor Agency upon conclusion of the due diligence review. 5) Procedures: Obtain from the Successor Agency a listing of asset balances transferred from the Low and Moderate Income Housing Fund held on June 30, 2012, that are restricted for the following purposes: A. Unspent bond proceeds: i. Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures, amounts set aside for debt service payments, etc.) ii. Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). 2-11 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund iii. Obtain from the Successor Agency a copy of the legal document that sets forth the restriction pertaining to these balances. Note in the AUP report the absence of language restricting the use of the balances that were identified by the Successor Agency as restricted. B. Grant proceeds and program income that are restricted by third parties: i. Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures). ii. Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). C. Other assets considered to be legally restricted: i. Obtain the Successor Agency's computation of the restricted balances (e.g., total proceeds less eligible project expenditures). ii. Trace individual components of this computation to related account balances in the accounting records, or to other supporting documentation (specify in the AUP report a description of such documentation). iii. Obtain from the Successor Agency a copy of the legal document that sets forth the restriction pertaining to these balances. Note in the AUP report the absence of language restricting the use of the balances that were identified by Successor the Agency as restricted. D. Attach the above mentioned Successor Agency prepared schedule(s) as an exhibit to the AUP report. For each restriction identified on these schedules, indicate in the report the period of time for which the restrictions are in effect. If the restrictions are in effect until the related assets are expended for their intended purpose, this should be indicated in the report. Findings: Based on our discussion with management, all of the assets of the Low and Moderate Income Housing Fund of the former redevelopment agency were transferred to the Housing Successor upon dissolution. However, of the unencumbered assets identified in the results to Procedure 2 and Exhibit A, management has determined that none are restricted and unavailable for distribution to taxing entities. 6) Procedures: A. Obtain from the Successor Agency a listing of assets transferred from the Low and Moderate Income Housing Fund as of June 30, 2012 that are not liquid or otherwise available for distribution (such as capital assets, land held for resale, long-term receivables, etc.) and ascertain if the values are listed at either purchase cost (based on book value reflected in the accounting records of the Successor Agency) or market value, as recently estimated by the Successor Agency. B. If the assets listed at 6A are listed at purchase cost, trace the amounts to a previously audited financial statement (or to the accounting records of the Successor Agency) and note any differences. 2-12 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund C. For any differences noted in 613, inspect evidence of disposal of the asset and ascertain that the proceeds were deposited into the Successor Agency trust fund. If the differences are due to additions (this generally is not expected to occur), inspect the supporting documentation and note the circumstances. D. If the assets listed at 6A are listed at recently estimated market value, inspect the evidence (if any) supporting the value and note the methodology used. If no evidence is available to support the value and/or methodology, note the lack of evidence. Findings: Of the unencumbered assets identified in the results to Procedure 2 and Exhibit A, we noted assets (land held for resale: 415 and 423 S. Raitt Street) in the aggregate amount of $1,000,000 that are not liquid or otherwise available for distribution to the taxing entities. Please refer to Exhibit B for the results of the procedures performed. 7) Procedures: A. If the Successor Agency believes that asset balances transferred from the Low and Moderate Income Housing Fund need to be retained to satisfy enforceable obligations, obtain from the Successor Agency an itemized schedule of asset balances (resources) as of June 30, 2012, that are dedicated or restricted for the funding of enforceable obligations and perform the following procedures. The schedule should identify the amount dedicated or restricted, the nature of the dedication or restriction, the specific enforceable obligation to which the dedication or restriction relates, and the language in the legal document that is associated with the enforceable obligation that specifies the dedication of existing asset balances toward payment of that obligation. i. Compare all information on the schedule to the legal documents that form the basis for the dedication or restriction of the resource balance in question. ii. Compare all current balances to the amounts reported in the accounting records of the Successor Agency or to an alternative computation. iii. Compare the specified enforceable obligations to those that were included in the final Recognized Obligation Payment Schedule approved by the California Department of Finance. iv. Attach as an exhibit to the report the listing obtained from the Successor Agency. Identify in the report any listed balances for which the Successor Agency was unable to provide appropriate restricting language in the legal document associated with the enforceable obligation. B. If the Successor Agency believes that future revenues, together with balances transferred from the Low and Moderate Income Housing Fund dedicated or restricted to an enforceable obligation, are insufficient to fund future obligation payments, and thus retention of current balances is required, obtain from the Successor Agency a schedule of approved enforceable obligations that includes a projection of the annual spending requirements to satisfy each obligation and a projection of the annual revenues available to fund those requirements and perform the following procedures: i. Compare the enforceable obligations to those that were approved by the California Department of Finance. Procedures to accomplish this may include reviewing the letter from the California Department of Finance approving the Recognized Enforceable 2-13 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund Obligation Payment Schedules for the six month period from April 1, 2012 through June 30, 2012, and for the six month period October 1, 2012 through March 31, 2013. ii. Compare the forecasted annual spending requirements to the legal document supporting each enforceable obligation. a. Obtain from the Successor Agency its assumptions relating to the forecasted annual spending requirements and disclose in the report major assumptions associated with the projections. iii. For the forecasted annual revenues: a. Obtain from the Successor Agency its assumptions for the forecasted annual revenues and disclose in the report major assumptions associated with the projections. C. If the Successor Agency believes that projected property tax revenues and other general purpose revenues to be received by the Successor Agency are insufficient to pay bond debt service payments (considering both the timing and amount of the related cash flows), obtain from the Successor Agency a schedule demonstrating this insufficiency and apply the following procedures to the information reflected in that schedule. i. Compare the timing and amounts of bond debt service payments to the related bond debt service schedules in the bond agreement. ii. Obtain the assumptions for the forecasted property tax revenues and disclose major assumptions associated with the projections. iii. Obtain the assumptions for the forecasted other general purpose revenues and disclose major assumptions associated with the projections. D. If procedures 7A, B, or C were performed, calculate the amount of current unrestricted balances of assets transferred from the Low and Moderate Income Housing Fund necessary for retention in order to meet the enforceable obligations by performing the following procedures. i. Combine the amount of identified current dedicated or restricted balances and the amount of forecasted annual revenues to arrive at the amount of total resources available to fund enforceable obligations. ii. Reduce the amount of total resources available by the amount forecasted for the annual spending requirements. A negative result indicates the amount of current unrestricted balances that needs to be retained. iii. Include the calculation in the AUP report. Findings: We noted that no assets were transferred from the Low and Moderate Income Housing Fund of the former redevelopment agency to the Successor Agency. However, as noted in the results to Procedure 1, the Housing Successor maintained the unencumbered assets of the Low and Moderate Income Housing Fund. Based on our inquiry with Management, the Successor Agency does not believe that the unencumbered asset balances in question are dedicated or restricted to satisfy enforceable obligations and thus need to be transferred to the Successor Agency. 2-14 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Attachment A - Agreed-Upon Procedures and Findings (Continued) Low and Moderate Income Housing Fund 8) Procedure: If the Successor Agency believes that, as of June 30, 2012, cash balances transferred from the Low and Moderate Income Housing Fund need to be retained to satisfy obligations on the Recognized Obligation Payment Schedule (ROPS) for the period of July 1, 2012 through June 30, 2013, obtain a copy of the final ROPS for the period of July 1, 2012 through December 31, 2012, and a copy of the final ROPS for the period January 1, 2013 through June 30, 2013. For each obligation listed on the ROPS, the Successor Agency should add columns identifying (1) any dollar amounts of existing cash transferred from the Low and Moderate Income Housing Fund that are needed to satisfy that obligation and (2) the Successor Agency's explanation as to why the Successor Agency believes that such balances are needed to satisfy the obligation. Include this schedule as an attachment to the AUP report. Findings: Based on our inquiry with management, the Successor Agency believes that $30,593,530 of the unencumbered cash balances as of June 30, 2012, are needed to satisfy obligations on the ROPS. Please refer to Exhibit C for the results of the procedures performed 9) Procedure: Include a schedule detailing the computation of the Balance Available for Allocation to Affected Taxing Entities from assets transferred to the Successor Agency from the Low and Moderate Income Housing Fund. Amounts included in the calculation should agree to the results of the procedures performed in each section above. The schedule should also include a deduction to recognize amounts already paid to the County Auditor-Controller on July 12, 2012, as directed by the California Department of Finance. The amount of this deduction presented should be agreed to evidence of payment. Finding: Please refer to Exhibit D for the results of the procedures performed. 10) Procedure: Obtain a representation letter from Successor Agency management acknowledging their responsibility for the data provided to the practitioner and the data presented in the report or in any attachments to the report. Included in the representations should be an acknowledgment that management is not aware of any transfers (as defined by Section 34179.5) from assets of the Low and Moderate Income Housing Fund from either the former redevelopment agency or the Successor Agency to other parties for the period from January 1, 2011 through June 30, 2012, that have not been properly identified in the AUP report and its related exhibits. Management's refusal to sign the representation letter should be noted in the AUP report as required by attestation standards. Finding: No exceptions were noted as a result of this procedure. 2-15 This page intentionally left blank 2-1® G k G z? Q F r ? F M Nz F Q ti U Z S F G" O w c7 O rn F U ? r W S r a s, z U Q w z o Q F w ,? a w a q o c`e cw F < F G h Q U ua S w F- F a e a? w z oa 11 u F U U U O F W F ? U ? S v 7G w 0 0 0 o o - ? '? E a 'o . o? Ta v ?°, a o E A ?? cn v.o 0 ox'Fp T. .. ? ? o a? ° o °JaEs p w iV ? ° CO t? w a a L? O? C C l% S?? ?CC ? 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Y F c C p ? s O T E •n Z d m 65 v O ° 4p a o oo z _ > A o 4- c d U = u ?? c7 z 3 vii a .° Q .? i 2-1F This page intentionally left blank 2-18 < z a F z Q I} U W 'S F Q U z w C7 a U G U O O F ? y 7 ? ? C O W ? G - W ? 'J U cC ^ .L. N O O O O C > a h 0 c? o ? ? o Y - y X > s a .? E v o? ?w ?o oo° H U a.+ Cq Y G G ? O N o ? a a a=i ? U G U O N C, z a = - c U 'O O ? .0+ G U 'D N " R1 O p T v O O OO 4- Q h C ? Q y b Gt v 7 Y O O cJ m q d 0 z O O OO O 69 2-19 This page intentionally left blank 2-20 M w H Q wz za a? Fw 0 FF v , zN w_ as t Ua ma w w mm F F oa Fo W a w W Z S U F Z F W Q a 92z z0 ? F Z j 5 ? O O S ° ww O z U C7 Z O U ,w w F a Q W w [:. °z O ? O ° z zo ¢ F i ¢ O U L1 Q Fr C7 w X a w v: O M m 0 a 52 5 C u r 5 y N u .? v. O N o ` m a c ai an E vpv H c v$ .o a N -?`? o m e o ? 8 v - gm °? rw. d °' E Ft v° 3 y O ? t ?.. o H ? c `o w o .a _ eo o .c a 5 °' ° w ° o a k. o, a O ? 8 o co tG 2 C> u v m ..1 C .F ? d A d ? C O v' C S v 9 o o .t v S ° c m F? ? v f ?c ?^ o o c$ E v ??` ° _ n ° ' u a c E v o :. _ m `o- s m v w ` v `° u v o `° c w ? o, c i R a v v' v [= 0 3 ? Q .. c Q c h ? ? ? ° `c v F- o ° t= o ? S sm. ¢ o. " c m N o ? _ oco cp O ? L -p ° C N Lal y C O O K F 'C c ? 3 0 Qa ? v ? aw d, S ro 4 y? `c0 Ho a `o ° a o o a 8 F V Q O O 4 Q a 2 v G a G L v o ? 2 E ? ? v ti ? o s E m o O u ? eo ? 4 4 ? 6 to 4 Vi ti mm e m mm n c o ? o £ Q U Q F o c O a °? c n o _ n o [u a .. ?U UU 'JU o O ? k La N \ o `c E u C ? E z. E ° ? A 0 8 o c 3t E ? 0 t c R 0 0 n 2-21 This page intentionally left blank 2-22 SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA EXHIBIT D - LOW AND MODERATE INCOME HOUSING FUND ASSETS TRANSFERRED TO THE SUCCESSOR AGENCY THAT ARE AVAILABLE TO DISTRIBUTE TO AFFECTED TAXING ENTITIES SUMMARY OF BALANCES AVAILABLE FOR ALLOCATION TO AFFECTED TAXING ENTITIES Total amount of assets held by the successor agency as of June 30, 2012 (procedure 5) $ Add the amount of any assets transferred to the city or other parties for which an enforceable obligation with a third party requiring such transfer and obligating the use of the transferred assets did not exist (procedures 2 and 3) 31,593,530 Less assets legally restricted for uses specified by debt covenants, grant restrictions, or restrictions imposed by other governments (procedure 5) - Less assets that are not cash or cash equivalents (e.g., physical assets) - (procedure 6) (1,000,000) Less balances that are legally restricted for the funding of an enforceable obligation (net of projected annual revenues available to fund those obligations) - (procedure 8) - Less balances needed to satisfy ROPS for the 2012-13 fiscal year (procedure 9) Less the amount of payments made on July 12, 2012, to the County Auditor-Controller as directed by the California Department of Finance Amount to be remitted to county for disbursement to taxing entities Note that separate computations are required for the Low and Moderate Income Housing Fund held by the Successor Agency and for all other fiords held by the Successor Agency. (30,593,530) NOTES: For each line shown above, an exhibit should be attached showing the composition of the summarized amount. If the review finds that there are insufficient funds available to provide the full amount due, the cause of the insufficiency should be demonstrated in a separate schedule. 2-23 This page intentionally left blank 2-24 REQUEST FOR SUCCESSOR AGENCY :oyv. ACTION MEETING DATE: CLERK OF THE COUNCIL USE ONLY: OCTOBER 1, 2012 TITLE: APPROVED CERTIFIED RECOGNIZED ? As Recommended OBLIGATION PAYMENT (ROPS) 3 ? As Amended AND ADMINISTRATIVE BUDGET ? Implementing Resolution ? Other CITY MANAGER RECOMMENDED ACTION Receive and file. DISCUSSION CONTINUED TO FILE NUMBER On August 20, 2012, the Successor Agency adopted a resolution approving the Third Recognized Obligation Payment Schedule (ROPS 3) and Administrative Budget for the period of January 1, 2013 through June 30, 2013. The action also directed the City Manager and/or Director of Finance or their designess to make or accept any augmentation, modification, additions, or revisions to the ROPS and/or Administrative Budget as deemed appropriate in their reasonable discretion. On August 28, 2012, the Oversight Board of the Successor Agency to the former Community Redevelopment Agency of the City of Santa Ana also adopted and approved the action above. In finalizing the ROPS 3 and Administrative Budget, certain modifications were made to the forms that were then officially submitted to the Department of Finance by the September 4, 2012 deadline. A copy of the final Certified ROPS 3 and Administrative Budget that was submitted to Department of Finance is attached for your information. FISCAL IMPACT There is no fiscal impact associated with this action. "ho-vi u "14 Nancy T. Ed rds Interim Exec live Director Community Development Agency NTE/kg Exhibit 1. 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M ? m ? ° a l _ m m E q v 1 ¢ E - a` t f E @ @ oo E @ ¢ @ ¢ @ r° @ @ ¢ a O E ( 9 3 E g E v ¦ -5 d I riod Ending BOND DEBT SERVICE Community Redevelopment Agency of the City of Santa Ana (Santa Ana Merged Project Area) Tax Allocation Bonds 2011 Series A Final Numbers - January 25, 2011 Dated Date 02/04/2011 Delivery Date 02/04/2011 4 Principal Coupon Interest Debt Service nual Debt Service 09/01/2011 2,420,663.76 2,420,663.76 2,420,663,76 03/01/2012 2,104,925.00 2,104,925.00 09/01/2012 2,104,925,00 2,104,925.00 4,209,850.00 03/01/2013 2,104,925.00 2,104,925.00 09/01/2013 2,104,925.00 2,104,925.00 4,209,850.00 03/01/2014 2,104,925.00 2,104,925.00 09/01/2014 2,104,925.00 2,104,925.00 4,209,850.00 03/01/2015 2,104,925.00 2,104,925.00 09/01/2015 2,104,925.00 2,104,925.00 4,209,850,00 03/01/2016 2,104,925.00 2,104,925.00 09/01/2016 2,104,925.00 2,104,925.00 4,209,850.00 03/01/2017 2,104,925.00 2,104,925.00 09/01/2017 805,000 5.000% 2,104,925.00 2,909,925.00 5,014,850.00 03/01/2018 2,084,800.00 2,084,800.00 09/01/2018 1,145,000 5.000% 2,084,800.00 3,229,800.00 5,314,600.00 03/01/2019 2,056,175.00 2,056,175.00 09/01/2019 2,735,000 5.250% 2,056,175.00 4,791,175.00. 6,847,350.00 03/01/2020 1,984,381.25 1,984,381.25 _09/01/2020 5,475,000 ** 1,984,381.25 7,459,381.25 9,443,762.50 03/01/2021 1,825,443.75 1,825,443.75 0910112021_ 6,105,000 6.000% 1,825,443.75 7,930,443.75 9,755,887.50 ' 03/01/2022 1,642,293.75 1,642,293.75 09/01/2022 6,810,000 6.000% 1,642,293.75 8,452,293.75 10,094,587.50 03/01/2023 1,437,993.75 1,437,993.75 09/01/2023 7,545,000 ** 1,437,993.75 8,982,993.75 10,420,987.50 03/01/2024 1,201,075.00 1,201,075.00 -19101/2024 8,360,000 ** 1,201,075.00. 9,561,075.00 10,762,150.00 03/01/2025 938,587.50 938,587.50 09/01/2025 _ 9,230,000 6,750% 938,587.50 10,168,587.50 11,107,175.00 03/01/2026 627,075.00 627,075.00 09/0142025 _10,820,000, 6,750% 627,075.00 11,447,075.00 12,074,150.00 03/01/2027 261,900.00 261,900.00 09101J2027._ 4,055,000 6.750% 261,900.00 4,316,900.00 4,578,800.00 03/01/2028 125,043.75 125,043.75 09/01/2028 3,705,000 6.750% 125,043.75 3,830,043,75 3,955,087.50 66,790,000 56,049,301.26 122,839,301.26 122,839,301.26 Jan 25, 2011 1:52 pm Prepared by Stone & Youngberg LLC (SPB) (Finance 6.019) Page 6 i 3-15 V 1:46 am Prepared by Citigroup t Markets Inc. 't Page 11 BOND DEBT SERVICE Community RDA of the City of Santa Ana New Money TAB-Serie*4,?2003`A`- Period Annual Ending Principal Coupon Interest Debt Service Debt Service 0 610 3/2 0 0 3 03/01/2004 601,267:31 601,267.31 b970-T/2-0-X75;000 -- _ --1 f00°- 403 X3€25 878,836.25 1,480,103.56 0310112005 401,223.75 401,223.75 09/01/2005 480,000 1.250% 401,223.75 881,223.75 1,282,447.50 t? 03/01/2006 398,223.75 398,223.75 OJIOTI?OOb`4?OIRTO i':500%- `- 3$8,23.?5? 878,223.75 1,276,447.50 1\ 03/01/2007 - 394,623.75 394,623.75 ^ 000-1707 90,000 2.000% 884,623.75 1,279,247.50 0 310 1/2 0 0 8. 389,723.75 389,723.75._. . 0910112008 5007600 2.250% 389,723.75 889,723.75 -1,279,447.50 0310112009 384,098.75 384,098.75 09101/2009 510,000 2.750% 384,098.75 894,098.75 1,278,197.50 D3/01/2010 377,086.25 377,086.25 09/01/2010 .525,000 3.000% 377,086.25 902,086.25 1,279,172.50 ? 03/01/2011 369 211.25 369 211.25 09/01/2011 545,000 3.250% 369,211.25 914,211.25 1,283,422.50 03/0112012 360,355.00 360,355.00 0910112012 560,000 3.375% 360,355.00 920,355.00 1,280,710.00 03101/2013 350,905.00 350,905.00 09101/2013 580,000 3.500% 350,905.00 930,905.00 1,281,810.00 03/01/2014 340,755.00 340,755.00 09/0112014 605,000 3.600% 340,755.00 945,755.00 1,286,510.00 03101/2015 329 865.00 329 865.00 09/0112015 625,000 3.700% 329,865.00 954,865.00 1,284,730.00 0310112016 318 302.50 '318,302.50 09101/2016 650,000 3.800% 318,302.50 968,302.50 1,286,605.00 03!0112017 305,952.60 305,952.50 09101/2017 675,000 4.000% 305,952.50 980,952.50 - 1,286,905.00 03/01/2018 292,452.50 292,452.50 09101/2018 700,000 4.000% 292,452.50 992,452.50 1,284,905.00 03101/019 278,452.50 278,452.50 09101/2019 730,000 4.100% 278,452.50 1,008,452.50 1,286,905.00 03/01/2020 _ 263,487.50 263487.50 09/0112020 760,000 4.200% 263,487.50 1,023,487.50 1,286,975.00 03101/2021 247 527 50 247 27.50 09/01/2021 795,000 4.300% 247,527.50 1,042,527.50 1,290,055.00 0310112022 230 435.00 230,435.00 0910112022 830,000 4.400% 230,435.00 1,060,435.00 1,290,870.00 03/01/2023 212,175.00 212,175.00 09/0112023 870,000 4.500% 212,175.00 1,082,175.00 1,294,350.00 03/0112Q24 192,600.00 192 600.00 09/01/2024 910,000 4.500% ' 192,600.00 1,102,600.00 1,295,200.00 0310112025 __ 172,125.00 172,1215.00 09101/2025 950,000 4.500% _ _ 172,125.00 1,122,125.00 1,294,250.00 03/01/2026 150,750.00 150,750.00 09101/2026 995,000 4.500% 150,750.00 1,145,750.00 1,296,500.00 03(0112027 128,362.50 128,362.50 09/01/2027 1,040,000 4.500% 128,362.50 1,168,362.50 1,296,725.00 03/0112028 104,962.50 104,962.50 09/01/2028 1,090,000 4.500% .104,962.50 1,194,962.50 1,299,925.00. 0310112029 80,437 50 80,437.50 09/01/2029 1,140,000 4.500% 80,437.50 1,220,437.50 1,300,875.00 r_Q3/01/2.03.0 54,787.50 54,787.50 09101/2030 1,190,000 4.500% 54,787.50 1,244,787,50 _ 1,299,575.00 Tl13LQ_1(2031 _28,012.50 28 012_50 09/01/2031 1,245,000 - 4.500% 28,012.50 1,273,012.50 1,301,025.00 20,945,000 15,318,891.06 36,263,891.06 36,263,891.06 3-16 d Y Jun 11, 2003 1`1-4611 Prepared by Citigroup Global Markets Inc. Page 12 BOND DEBT SERVICE Community RDA of the City of Sanla Ana;?s-." Tax Allocation Ref, Sonds•ad-rrd '2003 B Period / Annual Ending Principal Coupon Interest Debt Service ' Debt Service 06/03/2003 09/01/2003 1,820,000 2.000% 357,622.22 2,177,622.22 2,177,622.22 03101/2004 y 713,300.00 713,300.00 09/01/2004 1,485,000 2.500% 713,300.00 2.198.300A0 2,911,600.00 0310112005 ^ 694,737.50 694,737.50 09/01/2005 1,520,000 2.500% 694,737.50 2,214,737.50 2,909,475.00 03101/2006 _ __ 675,737.50 675,737.50 _ 0910112006 1,560,000 2.500% 675,737.50 2,235,737.50 2,911,475.00 03/01/2007 _ ' 656,237.50 - 656,237.50 ~ 09/01/2047 1,600 ,000 3.000% 656,237.54 2,256,237.50??? 2,912,475.00 03/0112008 T 632,237.50 632,237.50 0910112008 1,660,000 4.250% 632,237.50 '1,29'Z,237.6?924,475.00 03/01/2009 596,962.50 596,962.50 09/01/2009 1,730,000 4.250% 59-97962-.0- `2,, 2,923,925.00 03101/2010 . 560,200.00 560,200.00 0310112011 524,000.00 524,000.00_ 09T 112 0 1 1 ,890,000 5.0 0 524,500.00 -74 , (f- 03/01/2012 476,750.00 476,750,00 09/01/2012 1,990,000 5.000% 476,750.00 2,466,750.00 2,943,500.00 03/01/2013 427,000.00 427,000.00 09101/2013 2,085,000 5,000% 427,000.00 2,512,000.00 2,939,000.00 03101/2014 374,875.00 374,875,00 09/01/2014 2,200,000 5.000% 374,875.00 2,574,875.00 2,949,750.00 03/01/2015 319,875.00 319,875.00 09/0112015 2,310,000 5.000% 319,875.00 2,629,875.00 2,949,750.00 03/01/2016 262,125.00 262,125.00 09101/2016 2,430,000 5.000% 262,125.00 2,692,125.00 2,954,250.00 03101/2017 201,375.00 201,375.00 09/01/2017 2,550,000 5.000% 201,375.00 2,751,375.00 2,952,750.00 .03/0112018 137,625.00 137,625.00 09/0112018 2,685,000 5.000% 137,625.00 2,822,625.00 2,960,250.00 03/01/2019 70,500.00 70,500.00 09101/2019 2,820,000 5.000% 70,500.00 2,890,500,00 2,961,000.00 34,145,000 15,004,697.22 49,149,697.22 49,149,697.22 3-17 LEASE PAYMENT SCHEDULE Following is the schedule of Lease Payments due with respect to the Certificates. Lease Payment Principal Interest Date Component Component Annual Total 06/01/03 $1,420,000 $ 68,084.65 $ 1,488,084.65 12/01/03 304,756.25 06101104 1,210,000 304,756.25 1,819,512.50 12/01/04 289,631.25 06/01/05 1,270,000 289,631.25 1,849,262.50 12/01/05 273,756.25 06101106 1,340,000 273,756.25 1,887,512.50 12/01/06 253,656.25 06/01/07 1,425,000 253,656.25 1,932,312.50 12/01/07 232,281.25 06/01/08 835,000 232,281.25 1,299,562.50 12/01/08 219,756.25 06101109 805,000 219,756.25 1,244,512.50 12/01/09 203,656.25 06/01/10 925,000 203,656.25 1,332,312.50 12/01/10 180,531.25 06101111 1.060,000 180 531.25 1x421 062.50 12/01/11 159,331.25 06/01/12 4 1215 5,9 _159 331.25 n 1 533 662.50 12/01/12 128,956.25 06/01/13 _ ?u ?w 1.,405,000 _? ? u 128,956.25 w. v w. 1 662 912 x50 12/01/13 99,100.00 06/01/14___ ._ 1,625,000 99,100.00 1,823,200.00 12/01/14 58,475.00 06101115 1895,000 _ 5_8., 75.00 2 011,950.00 12/01/15 11,100.00 06101116 555,000 11,100.00 577,200.00 Total 16.985.000 4.898.059.65 $21,883.059.65 SECURITY AND SOURCES OF }PAYMENT FOR THE CERTIFICATES Nature of the Certificates Each Certificate evidences and represents a direct, undivided fractional interest in the principal component of the Lease Payments due under the Lease Agreement on the payment date or prepayment date of such Certificate, and the interest component of all Lease Payments (based on the stated interest rate with respect to such Certificate) to accrue from its date of delivery to its payment date or prepayment date, as the case may be. The Agency, pursuant to the Assignment Agreement, has assigned to -the Trustee for the benefit of the Owners of the Certificates, substantially all of the Agency's right, title and interest in and to the Lease 3-18 Santa Ana Successor Agency General Dispute Issue: DOF Waiver of Obiections to ROPS Pursuant to Section 34179, as it read prior to June 27, 2012, the DOF had three business days to request review of the ROPS and, if it requested review within that three day time period, the DOF had ten days to approve or reject enforceable obligations included on the ROPS.I The ROPS for January-June 2012 was submitted to the DOF on April 16, 2012. DOF did not submit a request to review the January-June 2012 ROPS until April 23, 2012 at 5:22 p.m., via e-mail; thus, DOF's request to review the January-June 2012 ROPS was received more than three business days (in fact, a full week) following submission of this ROPS to the DOF. The Successor Agency did not receive a letter from the DOF rejecting items included on the January- June 2012 ROPS until May 3, 2012 at 7:33 p.m., after close of business on the tenth day following DOF's request to review this ROPS. Further, the Successor Agency submitted the July-December 2012 ROPS to the DOF on May 9, 2012. The DOF requested review of this ROPS on May 14, 2012, but did not provide a response rejecting items on the July-December 2012 ROPS until after close of business (at 9:34 p.m.) on May 24, 2012. We hereby reserve our right to challenge the DOF's requests for review and rejections of the ROPS as untimely and to assert that the DOF waived its right to object to the inclusion of enforceable obligations on the ROPS. Santa Ana Successor Agency Dispute on Overall Project Costs Items: In our first two ROPS, DOF moved legitimate project costs into "Administrative" costs. This was contrary to DOF's own position (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."' Recently enacted AB 1484 further reinforces this position. AB 1484 extended these time periods to five business days for the DOF to request review and 45 days to respond with approvals and/or disapprovals of specified items on the ROPS; however no part of AB 1484 was made retroactive; therefore the DOF was required to act within the time periods in effect at the time the ROPS was submitted, and resubmitted, to the DOF. Page 1 of 9 3-19 Thus, project costs from our prior two ROPS need to backed out of the "Administrative Cost Allowance," and our ROPS allocations and Administrative Budgets recalculated accordingly. Santa Ana Successor Agency Dispute on ROPS #'s 14 - Agreements): 18 (Settlement The Settlement Agreements consist of legal settlement agreements between the Former Agency and third parties ("Contractual Settlement Agreements"), and judgments entered against the Former Agency by the California Superior Court for the County of Orange ("Judgment Settlement Agreements"). These are not pass through agreements with affected taxing entities, but are similarly structured, in that the terms of these agreements required the Former Agency to apply a specified percentage of tax increment from specified component project areas to specified improvements and other purposes. We have provided all documentation requested by the DOF relating to the Settlement Agreements and we have explained more than once already why the Settlement Agreements are enforceable obligations of the Successor Agency that were properly included on the ROPS. In the May 24 Letter, the DOF rejected the Settlement Agreements, stating (without statutory reference or legal support) that "Settlements awarding a percentage of tax increment are not considered EOs." The DOF went on to explain, again without specific statutory or other legal authority, that "pursuant to ABx 1 26, tax increment is no longer payable to redevelopment agencies and is therefore not an EO." The DOF's position is contrary to the plain language of the Dissolution Act and applies the Dissolution Act in an unconstitutional manner. Section 34171(d) defines "enforceable obligation" for purposes of Part 1.85 of the Dissolution Act; Section 34171(d)(1)(E) provides that "enforceable obligations" include "[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy."2 The Contractual Settlement Agreements are legally binding and enforceable agreements which were executed long before June 28, 2012, when the Dissolution Act became effective. Section 34171(d)(1)(D) provides that "enforceable obligations" include "[j]udgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency, other than passthrough payments that are made by the county 2 Identical language is found in subparagraph (5) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. Page 2 of 9 3-20 auditor-controller pursuant to Section 34183." 3 As noted above, the Judgment Settlement Agreements are binding and enforceable judgments issued by California courts in favor of third party private entities, not affected taxing entities. The Judgment Settlement Agreements are not passthrough agreements. As with the Contractual Settlement Agreements, the Judgment Settlement Agreements were issued and became binding and enforceable long before the effective date of the Dissolution Act. In addition to the plain language of Section 34171, subdivisions (d)(1)(D) and (d)(1)(E), the DOF's statement that payments of tax increment are not permitted by AB 1 x 26 is patently false. Section 34183 specifically requires county auditor-controllers to make payments under pass through agreements to taxing agencies. Many such agreements required former redevelopment agencies to pay a specified percentage of tax increment to taxing agencies. Section 34171(d)(1)(D) specifically refers to such pass through payments, and excludes payments made by county auditor-controllers under Section 34183 from the purview of Section 34171 (d)(1)(1)), presumably to avoid double payments to taxing entities. This indicates that the California legislature intended judgments and settlements, like the Judgment Settlement Agreements, that are similar in structure to pass through agreements, to be considered enforceable obligations and included on the ROPS. Further, Section 34175(a) makes clear that the legislature intended to honor all pledges made by the Former Agency; that section specifically protects the "stream of revenues available to meet the requirements" of such protected pledges. The structure of the Settlement Agreements-pledging a percentage of tax increment to a specific person, entity or purpose, was typical of many redevelopment transactions, and there is no indication in the Dissolution Act that the legislature intended to invalidate these types of agreements (nor could they, without violating the constitutional prohibition against impairing contracts 4 )_ In the May 24 letter, the DOF also challenges the Successor Agency's obligation to enter into agreements for improvements as required by the Settlement Agreements, stating "ABx 1 26 does not allow successor agencies to enter into new contracts; any unencumbered balances should be remitted to the County Auditor Controller." The DOF cites language in Section 34176 that excludes low and moderate income housing funds from the housing assets to be transferred to the successor housing agency. This section does not purport to invalidate enforceable obligations or prevent payment of enforceable obligations using housing funds. In fact, Section 34177(1) expressly lists the Low and Moderate Income Housing Funds as one source of payment for enforceable obligations listed on the ROPS. Thus, the DOF's apparent position that otherwise legal and binding obligations payable using housing funds are not enforceable obligations is contrary to the intent of the legislature. To the extent DOF's determination that the Settlement Agreements are not enforceable obligations rests on an interpretation of the Dissolution Act to prohibit successor agencies from entering into new agreements for any purpose, even if required to do so by an enforceable obligation, AB 1484 clarified the legislature's intent to permit successor agencies to enter into ' Identical language is found in subparagraph (4) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. 4 See Article I, Section 10, Clause 1 of the United States Constitution ("No State shall ... pass any ... Law impairing the Obligation of Contracts ...") and Article 1, Section 9 of the California Constitution ("A ... law impairing the obligation of contracts may not be passed.") Page 3 of 9 3-21 such "new" obligations in Section 34177.3(a), which states: "Successor agencies shall lack the authority to, and shall not, create new enforceable obligations under the authority of the Community Redevelopment Law ... or begin new redevelopment work, except in compliance with an enforceable obligation that existed prior to June 28, 2011."5 In response to the DOF's position that the Settlement Agreements are not enforceable obligations, a lawsuit has been filed in the Superior Court of the State of California, County of Sacramento (Gerald Peebler, et al, v. State of California Department of Finance et al, Case No. 34-2012-80001172). Santa Ana Successor Agency Dispute on ROPS #s 68 - 85 (Housing Project Implementation Items): Items 68, 69, & 74-85 - These obligations are partially fulfilled, ongoing projects. The former RDA entered into these obligations prior to June 28, 2011 to be paid from the LMIHF to increase and improve the project area's supply of affordable housing. The Successor Agency has continued obligations pursuant to the project agreements, and is requesting the necessary funding to complete the projects, including Successor Agency's direct project expenses associated with staffing and professional costs. We are requesting these expenses be paid from RPTTF as the LMIHF no longer exists under the law. Items 70 - 73 - These are approved EOs that have financial obligations, and require project costs be funded, including project management, construction management and other project implementation and oversight services. DOF disallowed the source of payment on the last ROPS, thus a different source of payment has been identified, as applicable. Santa Ana Successor Agency Dispute on ROPS #35 & 36 (SA Venture Agmnts.): The ROPS includes the outstanding obligation of the Former Agency (and therefore the Successor Agency) under the S.A. Venture Agreement to pay certain transportation impact fees ("Fees") in the event Santa Ana Venture (the third party oblige under the S.A. Venture Agreement referred to in this letter as the "Developer") constructs additional retail and/or office Emphasis added. Page 4 of 9 3-22 improvements pursuant to the agreement. Specifically, in the event the Successor Agency's obligation to pay the Fees is triggered, the Successor Agency will be required to pay one percent (1 %) of the estimated cost of construction of the development for which the Fees are charged directly to the City and the Developer will make a loan to the Successor Agency equal to the remaining amount of the Fees ("Fee Loan"). The Fee Loan is required to be paid from and is secured by a pledge of former tax increment accruing from the Site (defined in the S.A. Venture Agreement). Although the specific development to which the Fees and the Fee Loan relate has not yet commenced, the Successor Agency's obligation to pay the Fees and to borrow and repay the Fee Loan constitute one component of a broader, multifaceted contractual arrangement between the Former Agency (now the Successor Agency) and the Developer. The Developer has expended significant moneys and taken substantial actions in reliance on the Former Agency's/Successor Agency's obligation to perform its obligations under the S.A. Venture Agreement, including payment of the Fees and repayment of the Fee Loan. The DOF has taken the position that "Section 34163 (b) prohibits a redevelopment agency from incurring any obligations or making commitments after June 27, 2011." The DOF further states, in the May 24 Letter, that the DOF believes "that commitments have not been made for the $1.6 million [Fees/Fee Loan] and that this is an estimated amount for possible future projects." As an initial matter, Section 34163 is not applicable to the Successor Agency. Section 34163, cited by the DOF, does not mention successor agencies at all; instead, this section lists actions that former redevelopment a encies were prohibited from taking during the period between the passage of ABIx 26 and February 1, 2012, the date all redevelopment agencies were dissolved.b More fundamentally, the S.A. Venture Agreement and the Former Agency's obligation to pay the Fees in connection with specified future development pursuant to that agreement do not constitute new obligations or commitments of the Former Agency or the Successor Agency. This obligation was set forth in the original Participation Agreement, executed in 1984, and was amended in the Third Amendment to the Participation Agreement, executed in 1992-Long before the passage of the Dissolution Act and AB 1484. Even if Part 1.8 governed the obligations and authority of successor agencies, Section 34167, subdivisions (d)(5) and (f) clarify the California legislature's intent that obligations such as the S.A. Venture Agreement were intended to be honored in the dissolution process. Section 34167(d)(5) defines "enforceable obligation" to include `[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy." Section 34167(f) provides that "[n]othing in this part shall be construed to interfere with a redevelopment agency's authority, pursuant to enforceable obligations as defined in this chapter, to (1) make payments due, (2) enforce existing covenants and obligations, or 6 Specifically, Section 34163 states "Notwithstanding Part 1 (commencing with Section 33000), Part 1.5 (commencing with Section 34000), Part 1.6 (commencing with Section 34050), and Part 1.7 (commencing with Section 34100), or any other law, commencing on the effective date of [Part 1.8], an agency shall not have the authority to, and shall not, do any of the following: ... (b) Enter into contracts with, incur obligations, or make commitments to, any entity ... for any purpose...." Emphasis added. Page 5 of 9 3-23 (3) perform its obligations."7 DOF is reading Section 34163 out of context and is therefore mistaken in its conclusion that the S.A. Venture Agreement is not an ongoing enforceable obligation. The obligation to pay the Fees was a legally binding and enforceable agreement of the Former Agency and is now a legally binding and enforceable agreement, and therefore an enforceable obligation, of the Successor Agency. As discussed above, if the DOF rejected the S.A. Venture Agreement due to the potential need to enter into future implementing agreements, AB 1484 (specifically Section 34177.3(a)) clarifies that Successor Agencies may enter into new obligations to the extent required by enforceable obligations. We dispute DOF's characterization of the S.A. Venture Agreements as requiring the Successor Agency to enter into new obligations; however, even if this was the case, AB 1484 clarifies that this is permitted when required by an enforceable obligation. The S.A. Venture Agreement is a legally binding agreement, enforceable in accordance with its terms. The fact that the Developer must perform future obligations to trigger the Successor Agency's obligation to pay the Fees or that future additional agreements may be required to implement the S.A. Venture Agreement does not render the agreement unenforceable. Contracts with executory provisions are nonetheless binding and enforceable under California law, as explained in more detail below. California Law Upholds Enforceability of Executory Contracts. On December 22, 2008, in a landmark decision emphasizing California's public policy favoring liberal enforcement of contracts, in Patel v. Liebermensch, (2008) 45 Cal.4th 344, the California Supreme Court held that an enforceable contract to sell real estate arises whenever the contract identifies the parties, the price, and a reasonably certain description of the property. If the parties do not agree on other so-called "non-essential" terms that might typically be included in a real estate transaction - such as closing date, title insurance, financing terms, due diligence periods and the like - California courts will supply such terms as are reasonable. Patel is thus sometimes known as the "Essential 3-P's" decision. In thus clarifying the law relative to the enforcement of real estate contracts, our Supreme Court emphasized the parties' intent controls. Under California law, where terms are sufficiently definite for a court to ascertain the parties' obligations and to determine whether those obligations have been performed or breached, a contract will be enforced! An obligation is enforceable where its provisions are sufficiently certain to make ascertainable the precise act that is to be done.9 A binding contract is created wherever its essential terms are clearly enough stated to allow the parties to understand what each is required to do, the contract is supported by consideration, 10 and the parties agreed to Emphasis added. 8 Weddington Prods., Inc. v. Flick (1998) 60 Cal.AppAth 793, 811; Boyd v. Bevilacgua (1966) 247 Cal,App.2d 272, 287; Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500-501; Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407. 9 Cal. Civ. Code, § 3390, subd. (5) (requiring that specific performance is only available where the agreement has terms sufficiently certain to make the precise act to be done clearly ascertainable). 10 Cal. Civ. Code § 1614 provides that "[a] written instrument is presumptive evidence of consideration." The S.A. Venture Agreement is, naturally, a written instrument, and provides presumptive evidence of consideration. Moreover, "[c]onsideration may be an act, forbearance, change in legal relations, or a promise." 1 Witkin, Summary of California Law (10th ed. 2005) CONTRACTS, § 202. Page 6 of 9 3-24 the terms of the contract." Accordingly, California law is generally predisposed to uphold contracts as enforceable. 12 For instance, in Ersa Grae Corp. v. Fluor Corp., (1991) 1 Cal.App.4th 613, 623, Division 1 of the Second District Court of Appeal (Los Angeles) found the terms of large scale real estate development contract sufficiently definite to enforce where the contract stated one party, Ersa Grae, agreed to provide funding within a defined period after the satisfaction of certain conditions; the other, Fluor, agreed to select and pay for the services of all third-parties needed to supervise and carry out the necessary construction work; and, upon completion, Fluor agreed to transfer its interests in the completed project and underlying land lease to a consortium in exchange for £1 million. 13 In rejecting Fluor's claim that the contract was unenforceable because it contemplated the parties' negotiation and execution of future agreements necessary to carry out their intent (e.g., the parties' required negotiation and execution of their contemplated future agreement to convey the fully developed property subject to a long-term land lease), 14 Ersa Grae explained: The fact that an agreement contemplates subsequent documentation does not invalidate the agreement if the parties have agreed to its existing terms. (See Clark v. Fiedler (1941) 44 Cal.App.2d 838, 847 ["`Any other rule would always permit a party who has entered a contract like this ... to violate it, whenever the understanding was that it should be reduced to another written form, by simply suggesting other and additional terms and conditions. If this were the rule the contract would never be completed in cases where, by changes in the market, or other events occurring subsequent to the written negotiations, it became the interest of either party to adopt that course in order to escape or evade obligations incurred in the ordinary course of commercial business."']. See also, Smissaert v. Chiado (1958) 163 Cal.App.2d 827, 830.1s The legally enforceable contract in Ersa Grae is very similar to the S.A. Venture Agreement. Here, the Former Agency agreed to pay certain Fees in connection with certain types o future development performed by the Developer at the Site. Ersa Grae is just one of dozens of published cases holding contracts of this type fully enforceable. See, e.g., Bleeeher v. Conte (1981) 29 Ca1.3d 345, 354-55 [the law does not bar specific performance of a land sales contract in which a city's future approval of certain development plans is made a condition precedent to completion of the agreement]; Larwin- Southern California, Inc. v. JGB Investment Co. (1979) 101 Cal.App.3d 626, 638 [the mere 11 Judicial Council of California Advisory Committee on Civil Jury Instructions 302, Contract Formation - Essential Factual Elements. 12 See, e.g., Patel v. Liebermensch (2008) 45 Cal.4th 344, 369-70 (quoting and citing Mclllmoil v. Frawley Motor Co. (1923) 190 Cal. 546). 13 39 (1991) 1 Ca1.App.4th 613, 623. 14 Ersa Grae Corp., 1 Cal.App.4th at 623. 15 Id. at n. 3 (citations in original). Page 7 of 9 3-25 presence of a satisfaction clause in a contract does not result in that contract's nullity]; Mattei v, Hopper (1958) 51 Cal.2d 119 [land sale contracts containing satisfaction clauses are generally enforceable, except where such clauses render a party's obligation to perform illusory]. Here, DOF does not advance the unsustainable claim that anything in the S.A. Venture Agreement renders either party's duty to perform illusory. Black letter law further holds that "[a] contract's material terms (such as subject matter, price, payment terms, and duration) must be `sufficiently definite' so that each party can be `reasonably certain' about what it is promising to do or how it is to perform." 16 Here, the subject matter of the S.A. Venture Agreement is unambiguous and includes a detailed description of the Former Agency's obligations to the Developer with respect to payment of the Fees and repayment of the Fee Loan. 17 The dollar amount of the Former Agency's payment obligation is ascertainable through the formula set forth in Section 6 of Attachment No. 4 of the Participation Agreement, as amended by the Third Amendment. That same provision sets forth a clear formula for the principal amount of the Fee Loan, as well as the interest rate, the source of payments, and a pledge of site specific tax increment securing repayment of the Fee Loan. The Former Agency's (and now the Successor Agency's) future obligations under the S.A. Venture Agreement are therefore sufficiently defined in the agreement to enable the parties to perform their obligations. Finally, the DOF's May 24 Letter ignores the difference between the parties' execution of documents needed to carry out pre-existing contractual commitments and the negotiation of entirely new agreements. An "agreement to agree" - i.e., an agreement to negotiate and sign future agreements or legal documents required to effectuate the purpose and intent of a pre- existing contractual obligation - is fully enforceable in California. Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal.AppAth 1251, 1260 ["[W]hen the parties are under a contractual compulsion to negotiate ... the covenant of good faith and fair dealing attach[es], as it does in every contract. In the latter situation the implied covenant of good faith and fair dealing has the salutary effect of creating a disincentive for acting in bad faith in contract negotiations."] Hence, DOF's suggestion that there is no enforceable duty to negotiate the terms of legal documents needed to carry out the parties' otherwise clearly stated deal in good faith is simply contrary to law. Even if "detail" terms are omitted, contracts are enforceable under California law. California courts have specifically enforced agreements that have not expressly contained all of the terms agreed upon. For instance, in Goodwest Rubber Corp, v. Munoz (1985) 170 Cal.App.3d 919, 921, reversing a judgment denying specific performance when the contract called for payment at "market value," the court stated: The modern trend of the law is to favor the enforcement of contracts, to lean against their unenforceability because of uncertainty, and to carry out the intentions of the parties if this can feasibly be done. Neither law nor equity requires that every term and condition of an agreement be set forth in the contract. 16 Dyer v. Bilaal (D.C. 2009) 983 A.2d 349, 356. 17 See Section 6 of Attachment No. 4 of the Participation Agreement, as amended by the Third Amendment. Page 8 of 9 3-26 Case law holds that where "detail" or non-essential terms of a contract are to be agreed in the future, the contract remains enforceable.18 While certain ministerial arrangements may remain outstanding, the material terms of the S.A. Venture Agreement are in place; hence, the S.A. Venture Agreement is enforceable. Pledges of Tax Increment are Honored by the Dissolution Act. The Successor Agency's obligation to repay the Fee Loan under the S.A. Venture Agreement is supported by a pledge of tax revenues from the Site. Section 34175(a) specifically protects pledges of tax revenues made by the Former Agency, as follows: It is the intent of this part that pledges of revenues associated with enforceable obligations of the former redevelopment agencies are to be honored. It is intended that the cessation of any redevelopment agency shall not affect either the pledge, the legal existence of that pledge, or the stream of revenues available to meet the requirements of the pledge. Section 34174(a) provides further support for the conclusion that the obligation to pay the Fees is an enforceable obligation protected by the Dissolution Act: [N]othing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations. The legislature was clearly mindful that the Dissolution Act would be unconstitutional if it impaired existing contractual obligations of the Former Agency. 19 18 City of Los Angeles v. Superior Court (1959) 51 Cal.2d 423, 433. 19 See footnote [5], above. Page 9 of 9 3-27 MAYOR Miguel A. Pulido MAYOR PRO TEM Claudia C. Alvarez COUNCILMEMBERS P. David Benavides Carlos Bustamante Michele Martinez Vincent F. Sarmiento Sal Tinajero May 18, 2012 California Department of Finance Redevelopment_Administrationgdof.ca. gov SUBJECT: ROPS FOR JANUARY THROUGH JUNE 2012 Dear Sir/Madam: Note: Attachments referenced in this letter previously e-mailed to DOF on 5/18/12. We are responding to the Department of Finance ("DOF") letter dated May 3, 2012 ("DOF Letter") regarding Santa Ana's Recognized Obligation Payment Schedule for the period of January 1 through June 30, 2012 (BOPS). As background, our ROPS was approved by the Oversight Board on April 10, 2012 and a courtesy copy was e-mailed to DOF, the State Controller's Office and the County Auditor- Controller on April 16, 2012. We offer the following responses on the DOF Letter, and will be following up with a telephone call in an effort to hopefully resolve any outstanding issues. We believe that the information we are providing should assist DOF in confirming these items as enforceable obligations. Please note that our Oversight Board agreed to certain modifications to the ROPS, but for others we are providing additional details and clarification for your consideration. The Oversight Board tools action on this item at its May 15, 2012 meeting, and approved an Amended ROPS (Attachment 1). • Page 2, item 23, Santa Ana Venture contract totaling $1.6 million. The DOF Letter states that it is your understanding that commitments have not been made and this item is an estimated amount for possible future projects, and cites Health and Safety Code (HSC) Section 34163(b) as prohibiting redevelopment agencies from incurring any obligations or making commitments after June 27, 2011. Response: To the contrary, this commitment was made over 20 years ago. In this regard, the Santa Ana Venture Participation Agreement was entered into in April 1984, and the amendment pertaining to the subject obligation was entered into in March 1992. Therefore, this agreement does fall well within the time limits specified by ABX1 26. Furthermore, Section 1, page 3 of the agreement as amended in 1992 (see excerpt, Attachment 2) obligates the Agency to pay for a certain portion of the transportation fees based on expansion per CITY MANAGER David N. Ream CITY ATTORNEY Joseph W. Fletcher CLERK OF THE COUNCIL Maria D. Huizar CITY OF SANTA ANA 20 CIVIC CENTER PLAZA • P.O. BOX 1988 SANTA ANA, CALIFORNIA 92702 3-28 Response to DOF May 3, 2012 Letter May 18, 2012 Page 2 the contract as it occurs, creating an enforceable obligation (`BO") of the Agency. Please note that we previously provided DOF with a copy of said agreement and amendment. As a general principal, DOF's own guidance (set forth in "Exhibit 3" on the DOF webpage devoted to ABX1 26 issues) states that "ABX1 26 specifically states that revenue pledges are to be honored," and reiterates HSC Section 34175(a) which states "It is the intent of this part that pledges of revenues associated with enforceable obligations of the former redevelopment agencies are to be honored. It is intended that the cessation of any redevelopment agency shall not affect either the pledge, the legal existence of that pledge, or the stream of revenues available to meet the requirements of the pledge." Pursuant to HSC Section 34167(d)(5), this agreement as amended is an enforceable obligation of the Agency; and pursuant to HSC Section 34167(f), nothing in ABXl 26 shall be construed to interfere with the Agency's authority with respect to enforceable obligations to make payments due, enforce existing covenants and obligations or perform its obligations. Furthermore, DOF's own guidance reiterates HSC Section 34174(a) which states "... nothing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations." The challenged Santa Ana Venture contract is an enforceable third party agreement entered into long before the effective date of ABX1 26, and is therefore an EO pursuant to HSC Section 34171(d)(1)(E) with which the Agency is required to comply pursuant to HSC Section 34177, subdivisions (a) and (c). The Successor Agency is therefore obligated to not only pay the permit fees, but to ensure compliance with performance obligations, which will require project costs for project management, etc. as intended by ABX1 26 [as set forth in HSC Section 34174(a)] and permitted according to the 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."' 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 subject obligation is an enforceable obligation and indebtedness of the Agency; therefore, the RPTTF is required to fund this obligation. Page 3, items 24, 27 and 28; Page 4, items 29-32 (notes payable for various housing projects, including all associated project management and enforcement costs totaling $21.5 million). The DOF Letter states that these items are previously funded by the Agency and do not represent continuing obligations; therefore they are not considered EOs. Response: DOF is correct that the promissory notes for these enforceable obligations were funded; accordingly, the note amounts have been removed from the ROPS. However, as 3-29 Response to DOF May 3, 2012 Letter May 18, 2012 Page 3 Enforceable Obligations entered into with third parties prior to the June 28, 2011 date, the Successor Agency has a continuing obligation to ensure compliance with development and performance obligations, which will cause the Successor Agency to incur project costs for project management, construction management, etc. Such costs are properly payable from the RPTTF, as intended by ABX1 26 [e.g., HSC Section 34174(a)] and permitted by the DOF directive (set forth in "Exhibit 4" on the DOF webpage devoted to ABX1 26 issues) which states "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 34167(f), "...nothing shall be construed to interfere with the Agency's authority with respect to enforceable obligations to make payments due, enforce existing covenants and obligations or perform its obligations." Further, HSC Section 34177(a), (c), and (f) require the Successor Agency to make payments required by enforceable obligations, perform obligations required by enforceable obligations, and enforce rights of the former Agency and covenants imposed by the Agency. DOF's own guidance (set forth in "Exhibit 3" on the DOF webpage devoted to ABXl 26 issues) acknowledges and reiterates HSC Section 34174(a) which states "....nothing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations." • Page 5, item 41, Engineering services totaling $4000. The DOF Letter states the Agency claimed $10,000 on the ROPS, however the contract states the amount should not exceed $6,000. Therefore, $4000 of the $10,000 claimed is not an EO. Response: The ROPS has been amended to reflect the outstanding contract balance at that point in time. • Page 7, line items 86, 98, and 99, various projects totaling $8.7 million using unexpended bond funds. The DOF Letter cites HSC Section 34177(i) which states "...Bond proceeds shall be used for the purposes for which bonds were sold unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds." The DOF Letter also makes an assumption that "it is not the intent of ABX1 26 to allow successor agencies to enter into new contracts, unless those contracts are specifically required pursuant to the terms of another pre- existing contract that meets the requirements of ABX1 26, or are specifically required by bond indentures" and "the unexpended funds may not be used to enter into new obligations." Response: We respectfully disagree and find that the DOF assumption stated above is incorrect and does not reflect either the letter or spirit of ABX1 26. Pursuant to HSC Section 34177(i), the Successor Agency is required to utilize bond proceeds for the purposes for which bonds were sold 3-30 Response to DOF May 3, 2012 Letter May 18, 2012 Page 4 unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds. The use of the bond proceeds in question is governed by an enforceable obligation and the bond proceeds can be used for the purposes for which the bonds were sold as evidenced by the Official Statement, Certificate of Use of Proceeds, and other documentation (excerpts of documents attached as Attachment 3) and other documents presented to the City Council and Agency Board at the time the bonds were issued. Specifically, bond proceeds described in item 486 on the ROPS are being used to finance improvements (repairs and security) to the public parking structures in the city's Downtown area as specified in the bond documents. Additionally, bond proceeds described in items #98 & 99 on the ROPS were and will continue to be used for improvements to the Santa Ana Auto Mall, other public improvements and infrastructure, and other redevelopment purposes as specified in the bond documents. The Successor Agency has a continuing obligation to ensure compliance with the bond documents and their intended purpose, which will also require project costs for project management, etc. as intended by ABXI 26 and permitted by the 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, there are other third party contractual obligations utilizing bond proceeds that constitute enforceable obligations in their own right. These EOs include items, such as: item #10 (Erickson Lease Agreement - Honda) and item #21 (Penske DDA), for which project costs are an eligible use of the South Main bond proceeds and are required for project management, and legal, design review, and/or financial services to ensure compliance with the financial and performance obligations of the agreements; as well as project costs (design, project management, etc.) associated with development of improvements to the Downtown parking structures (item #86) which are an eligible use of the Downtown bond proceeds, and were contracted for and underway prior to the June 28, 2011 date (See AECOM contract, Attachment 4). Pursuant to HSC Section 34167(f), "...nothing shall be construed to interfere with the Agency's authority with respect to enforceable obligations to make payments due, enforce existing covenants and obligations or perform its obligations." Further, HSC Section 34177(a), (c), and (f) require the Successor Agency to make payments required by enforceable obligations, perform obligations required by enforceable obligations, and enforce rights of the former Agency and covenants imposed by the Agency . DOF's own guidance acknowledges and reiterates HSC Section 34174(a) (set forth in "Exhibit 3" on the DOF webpage devoted to ABX1 26 issues) which states "....nothing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations." Additionally, DOF's guidance cites HSC Section 34177 (set forth in "Exhibit 3" on the DOF webpage devoted to ABX1 26 issues) stating successor agencies are required to 3-31 Response to DOF May 3, 2012 Letter May 18, 2012 Page 5 "Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds" [HSC Section 34177(b)]; and "to perform obligations required pursuant to any enforceable obligation" [HSC Section 34177(c)]. • Page 1, item 9; page 7, item 85, legal settlements totaling $500 million requiring Low/Mod set-aside from tax increment within the project areas. The DOF Letter states that settlements awarding a percentage of tax increment are not considered EOs, and pursuant to ABX1 26 tax increment is no longer payable to the redevelopment agencies and therefore there is not an obligation. Response: We believe the DOF is confusing these Settlement Agreements with the more typical settlement agreements with taxing entities which are, in essence, contractual pass through agreements, and therefore not considered EOs under ABX1 26. The Settlement Agreements at issue here were entered into with third parties, not other taxing agencies, and are, therefore, no different than a contract with a developer pledging tax increment over time; thus, the Settlement Agreements are EOs pursuant to ABX1 26, specifically HSC Sections 34171(d)(1)(D) and 34171(d)(1)(E). HSC Section 34171(d)(1)(D) provides that "Judgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency" constitute enforceable obligations. HSC Section 34171(d)(1)(E) can also be construed to mean that the Settlement Agreements are enforceable obligations, as these agreements constitute "legally binding and enforceable agreement[s] or contract[s] that [are] not otherwise void as violating the debt limit or public policy." The Successor Agency is required to comply with the enforceable obligation to set-aside/utilize former tax increment as dictated by the Settlement Agreements. Specifically, item #9 South Main Corridor Settlement Agreement requires a portion of the tax increment (20%) to be utilized for public improvements, including parking and financial incentives in a particular section of the project area. Additionally, this settlement agreement, along with settlement agreements for four of the other project areas (item #85), require specific percentages of tax increment be set aside exclusively for low and moderate income housing and related activities. With respect to item # 9, the Judgment on Stipulation for Entry of Judgment and Resolution No. 84-2 (collectively "Settlement") adopted by the Redevelopment Agency ("RDA") was entered into by the RDA in response to and in order to settle a lawsuit, Gerald Peebler, et. al. vs. City of Santa Ana, filed in 1982. It is important to note that the Legal Clinic of the University of California, Irvine School of Law ("UCI"), recently filed a lawsuit against the City of Santa Ana, on behalf of the beneficiaries of this Settlement (including Gerald Peebler) to enforce the terms of the Settlement as an enforceable obligation. The filing was rejected by the court due to procedural issues. In ongoing discussions between the City and UCI, UCI has stated that they plan to re-file the lawsuit upon any adverse response by the State Department of Finance or City in failing to treat the terms of the Settlement as an enforceable obligation. 3-32 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 Response to DOF May 3, 2012 Letter May 18, 2012 Page 7 o Line items 1, 2, 3 & 91 - These amounts are all EOs related to the two outstanding bonds. The bond indentures require reasonable compensation to be made to the trustees for services rendered, and the Continuing Disclosure Certificates require annual audited financial statements as part of the annual reports for compliance. As these expenses are contractually stipulated as part of the overall bond covenants, funds are necessary to fulfill the obligations and should not be considered administrative costs. Please also see response above for Line items 86, 98, and 99. o Line items 4, 5, 6, 9, 10, 11, 16, 18, 19, 83, 87, & 90 - These amounts for project costs such as management, consultants, legal, financial, appraisal, fees, etc. are not administrative costs. For each enforceable obligation, there are contractual obligations that the former redevelopment agency was required to manage, monitor, and enforce. For instance, item #87 is the EO for the required Agency Property Maintenance & Disposition pursuant to HSC Section 34181, which necessitates it be "done expeditiously and in a manner aimed at maximizing value." To accomplish this, the properties need to be properly maintained, and project costs need to be provided for staffing/services to aptly evaluate and market the sites. Another example is Line item 10 (Erickson Lease Agreement - Honda) that requires projects costs for project management, and legal and financial services to ensure compliance with the financial and performance obligations of the agreement. As stated previously, pursuant to HSC Section 34167(f), nothing in ABX1 26 shall be construed to interfere with the Agency's authority with respect to enforceable obligations to make payments due, enforce existing covenants and obligations or perform its obligations. Furthermore, DOF's own guidance reiterates HSC Section 34174(a) which states "... nothing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations." Thus, contracts/services necessary to implement and comply with these enforceable obligations are allowable project cost expenditures, as intended by ABX1 26. o Line items 12, 13, 94, 95 & 96 - These items, as listed for the subject ROPS, can remain under "administrative costs." o Line items 24, 25, 26, 27, 28, 29, 30, 31, 32, 33 & 36 - These amounts for project management, legal, title, escrow, construction monitoring, loan management, etc. costs are not administrative costs and should not be factored into the calculation of the 5% administrative cost allowance. Many of the promissory notes for these housing projects were encumbered in the Low and Moderate Income Housing Fund (LMIHF). However, the amounts contractually obligated in the third-party agreements do not include funding to pay for project management, monitoring, and enforcement of the contracts by the former redevelopment agency nor the 3-34 Response to DOF May 3, 2012 Letter May 18, 2012 Page 8 Successor Agency. Therefore, these expenditures are EOs which require funding from the RPTTF. o Line items 49 through 79 - These pass-through payments totaling $5,330,156.61 were made by the Successor Agency as required for tax increment received by the former redevelopment agency through January 31, 2012. The former redevelopment agency had numerous contractual agreements with taxing entities for pass-throughs in five of the component project areas. These agreements are enforceable obligations as defined in ABXI 26 and as such, the Successor Agency is eligible for 5% of the total obligation during this ROPS period for the administrative cost allowance. o Line items 9 & 85 - As required by the settlement agreements for five of the component project areas, $415,852.45 was set aside and deposited into the LMIHF in January 2012 exclusively for low and moderate income housing and related activities. This amount is the total of the specified percentages of the tax increment received by the former redevelopment agency in January 2012. Twenty percent of the tax increment (net) received from the South Main project area in the amount of $1,482,119 is also an EO as required by the settlement agreement. Based on the fact that these settlement agreements are enforceable obligations, 5% of the obligations during this ROPS period should be allocated for administrative costs. See our response to this item on pages 5-6 for additional information. o Line items 92, 93 & 97 - These public employee benefit liability amounts are liabilities that transferred to the Successor Agency and constitute enforceable obligations and not "administrative costs", as recognized by DOF (set forth in "Exhibit 5" on the DOF webpage devoted to ABXI 26 issues), as well as pursuant to HSC Section 34171 (d)(1)(C), Section 34167(d) (3) and Section 34167(6)(g). The medical retiree subsidy for the FY 2011-2012 was paid in January 2012, as agreed upon by the City and the three employee unions and associations representing the City employees assigned to the former redevelopment agency. The accrued leave balances amount represents the estimated value of the leave benefits that will be paid out to the City employees assigned to the former redevelopment agency upon separation from employment, some of which has already occurred. In addition, one particular Memorandum of Understanding (MOU) between the City and SEIU Local 721 prohibited the layoff of any employees in the union prior to March 31, 2012. Therefore, City employees that were assigned to the former redevelopment agency could not be laid off for two months after the dissolution of the Agency, thus the estimated cost of the salaries and benefits for those employees is an EO. We would appreciate the opportunity to further discuss the outstanding items with DOF. As specified in the DOF Letter, my staff will be following up with a telephone call to Supervisor Evelyn Suess or Lead Analyst Doug Evans to schedule a time. Thank you for your time and consideration. We look forward to working with you to resolve these outstanding issues. 3-35 Response to DOF May 3, 2012 Letter May 18, 2012 Page 9 Please note since our ROPS was submitted to DOF on April 16, 2012, but we did not receive a request for review until April 23, 2012 at 5:22 p.m. via e-mail, and did not receive a letter from DOF until May 3, 2012 at 7:33 p.m. ("DOF Letter"), we are hereby submitting this response without waiving our right to assert that the ROPS was approved by operation of law pursuant to Health and Safety Code (HSC) Section 34169(1) or any other law. Sincerely, Paul Walters Interim City Manager City of Santa Ana, acting as Successor Agency c: Oversight Board of the Successor Agency to the former Community Redevelopment Agency of the City of Santa Ana Nancy Edwards, Interim Executive Director, Community Development Agency Francisco Gutierrez, Executive Director, Finance and Management Services Agency Sandi Gottlieb, Program Manager, Community Development Agency Susan Gorospe, Senior Management Analyst, Community Development Agency Doug Evans, Lead Analyst, State Department of Finance Paula Greene, Analyst, State Department of Finance Frank Davies, Administrative Manager, County of Orange John Chiang, State Controller 3-36 REQUEST FOR SUCCESSOR AGENCY ACTION MEETING DATE: OCTOBER 1, 2012 TITLE: RESOLUTION ADOPTING A CONFLICT OF INTEREST CODE L-CITY MANAGER L RECOMMENDED ACTION CLERK OF THE COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Implementing Resolution ? Other CONTINUED TO FILE NUMBER Adopt a resolution to adopt a Conflict of Interest Code for the Successor Agency. DISCUSSION On January 9, 2012, City Council adopted Resolution No. 2012-002 designating the City of Santa Ana as the Successor Agency for the former Community Redevelopment Agency of the City of Santa Ana (Successor Agency) pursuant to California Health and Safety Code Section 34176. On February 1, 2012, the former redevelopment agency was dissolved and the City Council assumed the role of the Successor Agency. Pursuant to the Political Reform Act of 1974, Government Code Section 87300 et seq., and Section 18730 of Title 2 of the California Code of Regulations, the Successor Agency is required to adopt the model conflict of interest code promulgated by the Fair Political Practices Commission of the State of California as set forth in Section 18730 of Title 2 of the California Code of Regulations pursuant to the attached resolution (Exhibit 1). Nothing in this Resolution shall supersede the independent applicability of Government Code Section 87200. Nancy T. E ards Interim Exec tive Director Community Development Agency NTE/kg Exhibit 1. Resolution 4-1 4-2 9/25/12 SUCCESSOR AGENCY RESOLUTION NO. 2012- A RESOLUTION OF THE SUCCESSOR AGENCY TO THE FORMER COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA ADOPTING A CONFLICT OF INTEREST CODE FOR THE SUCCESSOR AGENCY AND DIRECTING STAFF TO SUBMIT IT TO THE CITY COUNCIL OF THE CITY OF SANTA ANA AS THE CODE REVIEWING BODY PURSUANT TO THE CALIFORNIA POLITICAL REFORM ACT BE IT RESOLVED BY THE MEMBERS OF THE SUCCESSOR AGENCY OF THE CITY OF SANTA ANA, AS FOLLOWS: Section 1. The City Council of Santa Ana, acting as Successor Agency, hereby finds, determines and declares as follows: A. The California state legislature enacted ABx1 26 to dissolve redevelopment agencies. The Redevelopment Agency of the City of Santa Ana was dissolved and the City Council adopted a resolution declaring that the City would act as the Successor Agency for the former Community Redevelopment Agency ("Successor Agency"). B. The Successor Agency is deemed a local entity for purposes of the Political Reform Act. C. Pursuant to the Political Reform Act and regulations promulgated thereunder by the Fair Political Practices Commission ("FPPC"), a newly established entity is required to adopt a conflict of interest code. D. The Successor Agency finds and determines that it is appropriate to adopt as its conflict of interest code the model conflict of interest code promulgated by the FPPC as set forth in this Resolution. NOW, THEREFORE, BE IT RESOLVED BY THE SUCCESSOR AGENCY TO THE FORMER COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA: Section 2. The foregoing recitals are incorporated into this Resolution by this reference, and constitute a material part of this Resolution. Section 3. Pursuant to the Political Reform Act of 1974, Government Code Section 87300 et seq., and Section 18730 of Tibe 2 of the California Code of Regulations, the Successor Agency adopts the model conflict of interest code promulgated by the Fair Political Practices Commission of the State of California as set forth in Section 18730 of Title 2 of the California Code of Regulations, which model conflict of interest code is incorporated herein by reference, and which together with the list of designated positions and the disclosure categories applicable to each designated position as set forth in Sections 5 and 7 of this Resolution, collectively constitutes the Successor Agency Board's conflict of interest code. As the model conflict of interest code set forth in Section 18730 of Title 2 EXHIBIT 1 4-3 of the California Code of Regulations is amended from time to time by State law, regulatory action of the FPPC, or judicial determination, the portion of the Board's conflict of interest code comprising the model conflict of interest code shall be deemed automatically amended without further action to incorporate by reference all such amendments to the model conflict of interest code so as to remain in compliance therewith. Nothing in this Resolution shall supersede the independent applicability of Government Code Section 87200. Section 4. The definitions contained in the Political Reform Act of 1974 and in the regulations of the Fair Political Practices Commission and any amendments to either of the foregoing, are incorporated by reference into this conflict of interest code. Section 5. The following are the designated Successor Agency positions, the holders of which shall be required to file statements of economic interests: Successor Agency Board members. Section 6. The code reviewing body for this conflict of interest code shall be the City Council of the City of Santa Ana. This conflict of interest code shall be promptly submitted after its adoption by the Secretary to the City Council of the City of Santa Ana. Statements of economic interests shall be filed by Successor Agency Board members with the Clerk of the Council. Section 7. The Successor Agency finds and determines that the persons holding the positions set forth in Section 5 make or participate in the making of decisions which may forseeably have a material effect on financial interests. Section 8. Each person holding a designated position set forth in Section 5 shall report in every disclosure category set forth in the statement of economic interests promulgated by the FPPC to the extent such category is applicable to such person pursuant to the rules and regulations of the FPPC. The disclosure categories as promulgated by the FPPC may be amended from time to time and such amendments shall not require an amendment to this code or Resolution. Section 9. Sections 5 and 8 of this Resolution constitute the Appendix referred to in subdivision (b)(2) of Section 18730 of Title 2 of the California Code of Regulations. Section 10. Nothing contained in this Resolution is intended to modify or abridge the provisions of the Political Reform Act of 1974, Government Code Section 87000 et seq., or FPPC Regulations, Title 2 California Code of Regulations including Sections 18700et seq. The provisions of this Resolution are additional to the Political Reform Act and FPPC Regulations. This Resolution shall be interpreted in a manner consistent with the Political Reform Act and FPPC Regulations. In the event of any inconsistency between the provisions of this Resolution, and the Political Reform Act and/or the FPPC Regulations, the provisions of the Political Reform Act and FPPC Regulations shall govern. Section 11. If any section, subsection, sentence, clause, phrase or word of this Resolution is for any reason held to be invalid by a court of competent jurisdiction, 4-4 such decision shall not affect the validity of the remaining portions of this Resolution. The Successor Agency hereby declares that it would have passed and adopted this Resolution, and each and all provisions hereof, irrespective of the fact that one or more section, subsection, sentence, clause, phrase or word may be declared invalid. Section 12. The Clerk of the Council shall certify to the adoption of this Resolution. ADOPTED this day of , 20.7 Miguel A. Pulido Mayor APPROVED AS TO FORM: Sonia R. Carvalho, City Attorney By: Lisa E. Storck Assistant City Attorney AYES: Councilmembers: NOES: Councilmembers: ABSTAIN: Councilmembers: NOT PRESENT: Councilmembers: CERTIFICATION OF ATTESTATION AND ORIGINALITY I, Maria D. Huizar, Clerk of the Council, do hereby attest to and certify the attached Resolution No. 2012- to be the original resolution adopted by the City Council acting as the Successor Agency on October , 2012. Date: Maria D. Huizar, C!crk of the Council 4-5 4-6 °. REQUEST FOR SUCCESSOR AGENCY ACTION` MEETING DATE: OCTOBER 1, 2012 TITLE: AGREEMENT WITH BLX GROUP, LLC FOR TAX EXEMPT BOND IRS COMPLIANCE CLERK OF THE COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Implementing Resolution ? Other CITY MANAGER RECOMMENDED ACTION CONTINUED TO FILE NUMBER Authorize the City Manager and Clerk of the Council, acting as the Successor Agency, to execute the attached agreement with BLX Group, LLC to provide arbitrage tax allocation bond rebate analyses services for tax allocation bonds in an amount not to exceed $7,000, subject to non- substantive changes approved by the City Manager and City Attorney. DISCUSSION On January 9, 2012, City Council adopted Resolution No. 2012-002 and designated the City of Santa Ana as the Successor Agency for the former Community Redevelopment Agency of the City of Santa Ana (RDA), and the Housing Authority of the City of Santa Ana as the Successor Housing Agency pursuant to California Health and Safety Code Section 34176. On February 1, 2012, the former redevelopment agency was dissolved and the City assumed the role of the Successor Agency. One component of the winding down process of the former redevelopment agency's activities includes ensuring compliance with all bond covenants. There are two outstanding bonds of the former RDA: South Main Street Redevelopment Project Tax Allocation Bonds, Series 2003A and Series 200313; Merged Project Area Tax Allocation Bonds, Series A. The bond indenture documents for both bonds require compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any. BLX Group, LLC has the specialized skill and knowledge to provide the service. BLX Group, LLC has provided this service for the former RDA since the issuance of each bond, and therefore has the historical information and experience with these particular bonds. Staff recommends the City, acting as the Successor Agency, enter into this agreement. 5-1 Agreement with BLX Group, LLC October 1, 2012 Page 2 FISCAL IMPACT Funds were included on the Recognized Obligation Payment Schedule (ROPS) and are available in the 2003 Series A, 2003 Series B, and 2011 Series A Bond Debt Service accounts (65218020- 62300, 65818020-62300, 65418020-62300). APPROVED AS TO FUNDS AND ACCOUNTS: "h a/n ado Nancy T. E ards Francisco Gutierrez Interim Exe tive Director Executive Director Community Development Agency Finance & Management Services Agency NTE/SKG/kg Exhibit 1. Agreement 5-2 CONSULTANT AGREEMENT BETWEEN THE SUCCESSOR AGENCY AND BLX GROUP, LLC THIS AGREEMENT, made and entered into this ls` day of October, 2012 by and between BLX Group, LLC, a limited liability corporation `h(-.,:inafter "Consultant"), and the Successor Agency to the former Community Redevelopm mt Agency of the City of Santa Ana, a public body (hereinafter "Successor Agency"). RECITALS A. The Successor Agency desires to retain a consultant having special skill and knowledge in the field of financial analysis and calculations relating to the arbitrage rebate requirements on Tax Allocation Bonds. B. Consultant represents that Consultant is able and willing to provide such services to the Successor Agency. C. In undertaking the performance of this Agreement, Consultant represents that it is knowledgeable in its field and that any services performed by Consultant under this Agreement will be performed in compliance with such standards as may reasonably be expected from a professional consulting firm in the field. NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms and conditions hereinafter set forth, the parties agree as follows: 1. SCOPE OF SERVICES Consultant shall provide financial analyses and calculations relating to the arbitrage rebate requirement on Tax Allocation Refunding Bonds contained in section 148(f) of the Internal Revenue Code, as set forth in Fxhibit A to this Agreement. Consultant has bl;en performing services for the Successor Agency since July 1, 2012 due to reporting deadlines. 2. COMPENSATION a. Successor Agency agrees to pay, and Consultant agrees to accept as total payment for its services, the rates and charges identified in Exhibit A. Payment to Consultant shall cover services performed for the Successor Agency since July 1, 2012. The total sum to be expended under this Agreement shall not exceed $7,000.00 during the term of this Agreement. b. Payment by Successor Agency shall be made within thirty (30) days following receipt of proper invoice evidencing work performed, subject to Successor Agency accounting procedures. Payment need not be made for work which fails to meet the standards of performance set forth in the Recitals which may reasonably be expected by Successor Agency. EXHIBIT I 5-3 3. TERM This Agreement shall commence on the date first written above and terminate on June 30, 2013, unless terminated earlier in accordance with Section 12, below. The term of this Agreement may be extended upon a writing executed by the Executive Director of the Community Development Agency and the City Attorney. 4. INDEPENDENT CONTRACTOR Consultant shall, during the entire term of this Agreement, be construed to be an independent contractor and not an employee of the Successor Agency. This Agreement is not intended nor shall it be construed to create an employer-employee relationship, a joint venture relationship, or to allow the Successor Agency to exercise discretion or control over the professional manner in which Consultant performs the services which are the subject matter of this Agreement; however, the services to be provided by Consultant shall be provided in a manner consistent with all applicable standards and regulations governing such services. Consultant shall pay all salaries and wages, employer's social security taxes, unemployment insurance and similar taxes relating to employees and shall be responsible for all applicable withholding taxes. 5. INSURANCE Prior to undertaking performance of work under this Agreement, Consultant shall maintain and shall require its subcontractors, if any, to obtain and maintain insurance as described below: a. Due to the nature of services, no general liability :-_?_:urance is required. b. Worker's Compensation Insurance. In accordance with the provisions of Section 3300 of the Labor Code, Consultant, if Consultant has any employees, is required to be insured against liability for worker's compensation or to undertake self-insurance. Prior to commencing the performance of the work under this Agreement, Consultant agrees to obtain and maintain any employer's liability insurance with lim:ts not less than $1,000,000 per accident. c. Professional liability (errors and omissions) insurance, with a combined single limit of not less than $1,000,000 per claim. d. The following requirements apply to the insurance to be provided by Consultant pursuant to this section: (i) Consultant shall maintain all insurance required above in full force and effect for the entire period covered by this Agreement. (ii) Certificates of insurance shall be furnished to the Successor Agency upon execution of this Agreement and shall be approved in form by the Successor Agency Counsel. EXHIBIT I 5-4 (iii) Certificates and policies shall state that the policies shall not be cancelled or reduced in cw,erage or changed in any other material aspect without thirty (30) days prior written notice to the Successor Agency. e. If Consultant fails or refuses to produce or maintain the insurance required by this section or fails or refuses to furnish the Successor Agency with required proof that insurance has been procured and is in force and paid for, the Successor Agency shall have the right, at the Successor Agency's election, to forthwith terminate this Agreement. Such termination shall not effect Consultant's right to be paid for its time and materials expended prior to notification of termination. Consultant waives the right to receive compensation and agrees to indemnify the Successor Agency for any work performed prior to approval of insurance by the Successor Agency. 6. INDEMNIFICATION Consultant agrees to and shall indemnify and hold ha; ::Mess the Successor Agency, its officers, agents, employees, consultants, special counsel, and representatives from liability for personal injury, damages, just compensation, restitution, judicial or equitable relief arising out of claims for personal injury, including health, and claims for property damage, which may arise from the direct or indirect operations of the Consultant or its contractors, subcontractors, agents, employees, or other persons acting on their behalf which relates to the services described in section 1 of this Agreement. The Consaltant further agrees to indemnify, hold harmless, and pay all costs for the defense of the Successor Agency, including fees and costs for special counsel to be selected by the Successor Agency, regarding any action by a third party challenging the validity of this Agreement, or asserting that personal injury, damages, just compensation, restitution, judicial or equitable relief due to personal or property rights arises by reason of the terms of, or effects arising from this Agreement. Successor Agency may make all reasonable decisions with respect to its representation in any legal proceeding. 7. CONFIDENTIALITY If Consultant receives from the Successor Agency information which due to the nature of such information is reasonably understood to be confidential and/or proprietary, Consultant agrees that it shall not use or disclose such information except in the performance of this Agreement, and further agrees to exercise the same degree of care it uses to protect its own information of like importance, but in no event less than reasonable care. "Confidential Information" shall include all nonpublic information. Confidential information includes not only written information, but also information transferred orally, visually, electronically, or by other means. Confidential information disclosed to either party by any subsidiary and/or agent of the other party is covered by this Agreement. The foregoing obligations of non-use and nondisclosure shall not apply to any information that (a) has been disclosed in publicly available sources; (b) is, through no fault of the Consultant disclosed in a publicly available source; (c) is in rightful possession of the Consultant without an obligation of confidentiality; (d) is required to be disclosed by operation of law; or (e) is independently developed by the Consultant without reference to information disclosed by the Successor Agency. EXHIBIT l 5-5 8. CONFLICT OF INTEREST CLAUSE Consultant covenants that it presently has no interests and shall not have interests, direct or indirect, which would conflict in any manner with performance of services specified under this Agreement. 9. NOTICE Any notice, tender, demand, delivery, or other communication pursuant to this Agreement shall be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or certified mail, postage prepaid, or sent by telefacsimile or other telegraphic communication in the manner provided in this Section, to the following persons: To Successor Agency: Community Development Agency City of Santa Ana 20 Civic Center Plaza (M-25) P.O. Box 1988 Santa Ana, CA 92702-1988 telefacsimile (714) 647-6549 With courtesy copy to: City Attorney's Office City of Santa Ana 20 Civic Center Plaza (M-29) P.O. Box 1988 Santa Ana, California 92702 telefacsimile (714) 647-6515 To Consultant: BLX, LLC 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017 telefacsimile: 213-612-2499 Attn: A. Craig Underwood A party may change its address by giving notice in writing to the other party. Thereafter, communication shall be addressed and transmitted to the new address. If sent by mail, communication shall be effective or deemed to have been given three (3) days after it has been deposited in the United States mail, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent by telefacsimile, communication shall be effective or deemed to have been given twenty-four (24) hours after the time set Furth on the transmission report issued by the transmitting facsimile machine, addressed as set forth above. For purposes of calculating these time frames, weekends, federal, state, County or City holidays shall be excluded. EXHIBIT I 5-6 10. EXCLUSIVITY AND AMENDMENT This Agreement represents the complete and exclusive statement between the Successor Agency and Consultant, and supersedes any and all other agreements, oral or written, between the parties. In the event of a conflict between the terms of this Agreement and any attachments hereto, the terms of this Agreement shall prevail. This Agreement may not be modified except by written instrument signed by the Successor Agency and by an authorized representative of Consultant. The parties agree that any terms or conditions of any purchase order or other instrument that are inconsistent with, or in addition to, the to,ifis and conditions hereof, shall not bind or obligate Consultant nor the Successor Agency. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party which are not embodied herein. 11. ASSIGNMENT Inasmuch as this Agreement is intended to secure the specialized services of Consultant, Consultant may not assign, transfer, delegate, or subcontract any interest herein without the prior written consent of the Successor Agency and any such assignment, transfer, delegation or subcontract without the Successor Agency's prior written consent shall be considered null and void. Nothing in this Agreement shall be construed to limit the Successor Agency's ability to have any of the services which are the subject to this Agreement performed by Successor Agency personnel or by other consultants retained by Successor Agency. 12. TERMINATION This Agreement may be terminated by the Successor Agency upon thirty (30) days written notice of termination. In such event, Consultant shall he entitled to receive and the Successor Agency shall pay Consultant compensation for all services performed by Consultant prior to receipt of such notice of termination, subject to the following conditions: a. As a condition of such payment, the Executive Director may require Consultant to deliver to the Successor Agency all work product completed as of such date, and in such case such work product shall be the property of the Successor Agency unless prohibited by law, and Consultant consents to the Successor Agency's use thereof for such purposes as the Successor Agency deems appropriate. b. Payment need not be made for work which fails to meet the standard of performance specified in the Recitals of this Agreement. 13. DISCRIMINATION Consultant shall not discriminate because of race, color, creed, religion, sex, marital status, sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited by applicable law, in the recruitment, selection, training, utilization, promotion, termination or EXHIBIT I 5-7 other employment related activities. Consultant affirms that it is an equal opportunity employer and shall comply with all applicable federal, state and local laws and regulations. 14. JURISDICTION - VENUE This Agreement has been executed and delivered in the State of California and the validity, interpretation, performance, and enforcement of any of the clauses of this Agreement shall be determined and governed by the laws of the State of California. Both parties further agree that Orange County, California, shall be the venue for any action or proceeding that may be brought or arise out of, in connection with or by reason of this Agreement. 15. PROFESSIONAL LICENSES Consultant shall, throughout the term of this Agreement, maintain all necessary licenses, permits, approvals, waivers, and exemptions necessary for the provision of the services hereunder and required by the laws and regulations of the United States, the State of California, the City of Santa Ana and all other governmental agencies. Consultant shall notify the Agency immediately and in writing of her inability to obtain or maintain such permits, licenses, approvals, waivers, and exemptions. Said inability shall be cause for termination of this Agreement. 16. MISCELLANEOUS PROVISIONS a. Each undersigned represents and warrants that its signature hereinbelow has the power, authority and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify Successor Agency fully, including reasonable costs and attorney's fees, for any injuries or damages to Successor Agency in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. b. All Exhibits referenced herein and attached hereto shall be incorporated as if fully set forth in the body of this Agreement. EXHIBIT I 5-8 IN WITNESS WHEREOF, the parties hereto have executco ais Agreement the date and year first above written. ATTEST: SUCCESSOR AGENCY OF THE FORMER COMMUNITY REDEVELOPMENT AGENCY Maria D. Huizar Paul Walters Clerk of the Council City Manager APPROVED AS TO FORM: Sonia R. Carvalho City Attorney By: Lisa E. Storck Assistant City Attorney EXHIBIT I BLX Group, LLC A. CRAIG UNDERWOOD President TAX ID: 7 5-9 EXHIBIT A SCOPE OF SERVICES Consultant shall provide financial analyses and calculations relating to the arbitrage rebate requirement on Tax Allocation Refunding Bonds contained in Section 148(f) of the Internal Revenue Code. Consultant shall arrange with Orrick, Herrington & Sutcliffe LLP to provide a legal review and accompanying legal opinion for each analysis prepared by Consultant. Consultant shall provide the required analysis, calculation and opinion at the costs set forth below. The calculations are to be performed with respect to the following, however Consultant is not responsible for performing calculations on each bond series each year: 1. $55,090,000 Community Redevelopment Agency of the City of Santa Ana Tax Allocation Bonds, Series 2003A Tax Allocation Refunding Bonds, Series 2003B Compensation - $2,750.00 2. $66,790,000 Community Redevelopment Agency of the City of Santa Ana Tax Allocation Bonds, 2011 Series A Compensation - $3,250.00 EXHIBIT I 5-10 EXHIBIT B ADDITIONAL INSURED ENDORSEMENT Insurance Company This endorsement modifies such insurance as is afforded by the provisions of Policy relating to the following: 1. The Successor Agency to the former Community Redevelopment Agency of the City of Santa Ana, 20 Civic Center Plaza, Santa Aria, California 92702, and its officers, employees, agents and volunteers are named as additional insureds ("additional insureds") with regard to liability and defense of suits arising from the operations and uses performed by or on behalf of the named insured. 2. With respect to claims arising out of the operations and uses performed by or on behalf of the named insured, such insurance as is afforded by this policy is primary and is not additional to or contributing with any other insurance carried by or for the benefit of the additional insureds. 3. This insurance applies separately to each insured against whom claim is made or suit is brought except with respect to the company's limits of liability. The inclusion of any person or organization as an insured shall not affect any right which such person or organization would have as a claimant if not so included. 4. With respect to the additional insureds, this insurance shall not be canceled, or materially reduced in coverage or limits except after thirty (30) days written notice has been given to the Successor Agency to the former Community Redevelopment Agency of the City of Santa Ana, 20 Civic Center Plaza (M-25), Santa Ana, California 92702. (Completion of the following, including countersignature, is required to make this endorsement effective.) Effective Policy # Issued to _, this endorsement form as a part of Named Insured Countersigned by Authorized Representative EXHIBIT 1 9 5-11 5-12