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ECONOMIC DEVELOPMENT AGENCY � � � � � �� �
OF THE CITY OF SAN BERNARDINO
FROM: Emil A.Marzullo SUBJECT: An Urgency Ordinance providing for the
Interim Executive Director reinstatement and continuation of the powers of
the redevelopment agency and declaring the
Urgency thereof to take effect immediately
DATE: July 7,2011
Synopsis of Previous Commission/Council/Committee Action(s):
None.
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Recommended Motion(s):
An Urgency Ordinance of the City of San Bernardino providing for the reinstatement and continuation of the powers of
the Redevelopment Agency of the City of San Bernardino and declaring the urgency thereof to take effect immediately
Contact Person(s): Emil A. Marzullo Phone: (909)663-1044
Project Area(s): All Ward(s): All
Supporting Data Attached: 9 Staff Report Rl Ordinance(s)Agreement(s)Contract(s) ❑Map(s) ❑Letters
FUNDING REQUIREMENTS: Amount: $ Source: All
Budget Authority: Requested
Signature: Fiscal Review:
Emil A.Marz e Director Lori Pz' Ti
Interim Admim tive ices Director
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Commission/Council Notes:
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PA Agendas\C—Dev Coremi w\CDC 2011\2011-12 Budget dms\7-11-11 BUDGET READOPTION DOGS\7.11.11 Reinstffientent Urgeney Ordinance SRA—COMMISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number:
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ECONOMIC DEVELOPMENT AGENCY
STAFF REPORT
AN URGENCY ORDINANCE PROVIDING FOR THE REINSTATEMENT AND
CONTINUATION OF THE POWERS OF THE REDEVELOPMENT AGENCY AND
DECLARING THE URGENCY THEREOF TO TAKE EFFECT IMMEDIATELY
BACKGROUND AND CURRENT ISSUE:
On or about June 29, 2011, the Governor of the State of California signed ABx1 26 and ABx1 27, adding
certain sections to the Health & Safety Code of the State of California; specifically, Health& Safety Code
Section 34161 provides that all redevelopment agencies and redevelopment agency components of
community development agencies created under 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) that were in existence on the effective date of said Section 34161 shall
not thereafter exercise certain redevelopment powers, including, but not limited to, the ability to incur
debt and to enter into contracts and to amend or merge redevelopment project areas, and are dissolved as
of October 1, 2011, and shall no longer exist as a public body, corporate or politic.
The Redevelopment Agency of the City of San Bernardino (the "Agency") conducts redevelopment
activities which cannot be terminated at this time without substantial personal and financial repercussions
and overall harm to the public health, safety and welfare within the City and the community. The Agency
has in process in excess of$30,000,000 of public capital improvement projects and the Agency is in the
final negotiations with private developers for the development and construction of an additional
$100,000,000 of private development projects within blighted areas of the Redevelopment Project Areas
of the Agency. Furthermore, there are currently in excess of 105 separate properties owned directly or
indirectly by or on behalf of the Agency previously acquired for the purposes of implementing numerous
redevelopment activities for which locally generated tax increment revenues of the Agency were utilized
for the acquisition of such properties.
Pursuant to Sections 31 and 121 of the Charter of the City of San Bernardino, this Urgency Ordinance
takes effect immediately. Adoption of this Urgency Ordinance for the immediate reinstatement and
continuation of the powers of the Agency to undertake all further activities, including redevelopment
activities authorized under the Community Redevelopment Law (Health & Safety Code Section 33000, et
seq.), is necessary for the immediate preservation of the public peace, health, safety and welfare in
accordance with City Charter Sections 31 and 121.
Additionally, because the Agency's FY 2011-12 budget was adopted by the CDC on the same day the
Governor signed ABx1 26 and ABx1 27, it has been determined that it is not valid. Therefore, also on the
agenda is an item rescinding previously adopted budget resolutions and new budget resolutions for CDC
approval.
ENVIRONMENTAL IMPACT:
None.
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PA Agendas TanamDmCommission\CDC2011\2011.12 Budget d=\7-ll-11 BUDGET READOPTION DOCS\7-1 1-11 Reinstatement Urgency Ordinance SR.docx COMMISSION MEETING
AGENDA
Meeting Date: 07/112011
Agenda Item Number: / _
Economic Development Agency Staff Report
Agency FY2011-2012 Budget
Page 2
FISCAL IMPACT:
None by this action.
RECOMMENDATION:
That the Mayor and Common Council adopt the attached Urgency Ordinance.
Emil A. Mar ullo, Interim Exe utive Director
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PA Agendas\Comm Dev Commission\CDC 2011\2011-12 Budget d=\7-1 1-11 BUDGET READOPTION DOGS\7-I1-11 Reinstatement Urgency Ordinance SR.doccCOMM ISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number: R z
I ORDINANCE NO.
2 AN URGENCY ORDINANCE OF THE CITY OF SAN BERNARDINO PROVIDING
3 FOR THE REINSTATEMENT AND CONTINUATION OF THE POWERS OF THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO AND DECLARING
4 THE URGENCY THEREOF TO TAKE EFFECT IMMEDIATELY
5
6 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN, AS FOLLOWS:
7
8 Section 1. Purpose and Findings:
9 A. On or about June 29, 2011, the Governor of the State of California signed ABxl 26 and
10 ABxl 27, adding certain sections to the Health & Safety Code of the State of California;
11 specifically, Health & Safety Code Section 34161 provides that all redevelopment
12 agencies and redevelopment agency components of community development agencies
13 created under Part 1 (commencing with Section 33000), Part 1.5 (commencing with
14 Section 34000), Part 1.6 (commencing with Section 34050), and Part 1.7 (commencing
15
with Section 34100) that were in existence on the effective date of said Section 34161
16 shall not thereafter exercise certain redevelopment powers, including but not limited to,
17 the ability to incur debt and to enter into contracts and to amend or merge redevelopment
18 project areas, and are dissolved as of October 1, 2011, and shall no longer exist as a
19 public body, corporate or politic.
20 B. The Redevelopment Agency of the City of San Bernardino (the "Agency") employs in
21 excess of 40 employees, and conducts redevelopment activities which cannot be
22 terminated at this time without substantial personal and financial repercussions and
23 overall harm to the public health, safety and welfare within the City and the community.
24 The Agency has in process in excess of $30,000,000 of public capital improvement
25 projects and the Agency is in the final negotiations with private developers for the
26 development and construction of an additional $100,000,000 of private development
27 projects within blighted areas of the Redevelopment Project Areas of the Agency.
28 Furthermore, there are currently in excess of 105 separate properties owned directly or
P:\Agendas\Resolutions\Resolutions\2011\07-11-11 Urgency Ordinance MCC-ABx 27.doc 1
I indirectly by or on behalf of the Agency previously acquired for the purposes of
2 implementing numerous redevelopment activities for which locally generated tax
3 increment revenues of the Agency were utilized for the acquisition of such properties.
4 C. This action is taken pursuant to Health& Safety Code Section 34193 which provides that
5 "notwithstanding Part 1.8 (commencing with Section 34161), Part 1.85 (commencing
6 with Section 34170), or any other law, a redevelopment agency may continue to exist
7 and carry out the provisions of the Community Redevelopment Law (Part 1 commencing
8 with Section 33000) only upon the enactment of an ordinance enacted by the community
9 to comply with this part on or before November 1, 2011."
10 D. The continuation without any significant lapse of time of the redevelopment powers of
11 the Agency is necessary at this time for the immediate preservation of the public peace,
12 health, safety and welfare of the City of San Bernardino (the "City") and the surrounding
13 community, and because the City finds no other means at this time to continue said
14 existence of the Agency, this Urgency Ordinance is necessary as an urgency action of the
15 i
C ty.
16 E. This action does not meet the definition of a"project"under Section 15378 of the
17 California Environmental Quality Act("CEQA").
18 Section 2. Based upon the aforementioned findings, the Mayor and Common Council of the
19 City of San Bernardino therefore agrees at this time to take the necessary action to carry out the
20 requirements of Health & Safety Code Section 34193 as those may be amended or determined to be
21 enforceable from time to time in order to provide for the immediate reinstatement and continuation
22 of the powers of the Agency to undertake all further activities, including redevelopment activities
23 authorized under the Community Redevelopment Law (Health & Safety Code Section 33000, et
24 seq.). Pursuant to Health & Safety Code Section 34193.1, the City Manager is hereby authorized to
25 notify the County Auditor-Controller, the Controller and the Department of Finance that the City
26 agrees as of the time of submittal of any such notification to comply with the provisions of Part 1.9
27 commencing with Health & Safety Code Section 34192, et seq.
28
P:\Agendas\Resolutions\Resolutions\2011\07-11-11 Urgency Ordinance MCC-ABx 27.doc 2
1 Section 3. Pursuant to Sections 31 and 121 of the Charter of the City of San Bernardino,
2 this Urgency Ordinance shall take effect immediately. The Mayor and Common Council finds that
3 the adoption of this Urgency Ordinance for the immediate reinstatement and continuation of the
4 powers of the Agency to undertake all further activities, including redevelopment activities
5 authorized under the Community Redevelopment Law (Health & Safety Code Section 33000, et
6 seq.), is necessary for the immediate preservation of the public peace, health, safety and welfare in
7 accordance with City Charter Sections 31 and 121.
8 Section 4. The Mayor and Common Council finds that this Urgency Ordinance is not
9 subject to CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines, California Code of
10 Regulations, Title 14, Chapter 3 (the activity will not result in a direct or reasonably foreseeable
11 indirect physical change in the environment), and Section 15060(c)(3) of the CEQA Guidelines,
12 California Code of Regulations, Title 14, Chapter 3 (the activity is not a project as defined in
13 Section 15378), because it has no potential for resulting in physical change to the environment,
14 directly or indirectly.
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P:\Agendas\Resolutions\Resolutions\2011\07-11-11 Urgency Ordinance MCC-ABx 27.doc
I AN URGENCY ORDINANCE OF THE CITY OF SAN BERNARDINO PROVIDING
FOR THE REINSTATEMENT AND CONTINUATION OF THE POWERS OF THE
l 2 REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO AND DECLARING
3 THE URGENCY THEREOF TO TAKE EFFECT IMMEDIATELY
4 I HEREBY CERTIFY that the foregoing Ordinance was duly adopted by the Mayor and
5 Common Council of the City of San Bernardino at a meeting thereof,
6 held on the day of , 2011, by the following vote,to wit:
7 Council Members: Ayes Nays Abstain Absent
8 MARQUEZ
9 VACANT
10 BRINKER
11 SHORETT
KELLEY
12
JOHNSON
13
MC CAMMACK
14
15
16 Rachel G. Clark, City Clerk
17
18 The foregoing Ordinance is hereby approved this day of , 2011.
19
20
21 Patrick J. Morris, Mayor
City of San Bernardino
22 Approved as to form:
23
By:
24 mes F. Penman, City Attorney
25
26
27
28
4
P:\Agendas\Resolutions\Resolutions\2011\07-11-11 Urgency Ordinance MCC-ABx 27.doc
ECONOMIC DEVELOPMENT AGENCY
SUPPLEMENTAL STAFF REPORT
REINSTATEMENT OF THE POWERS OF THE
REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO
The Staff Report submitted to the Mayor and Common Council for the Joint Special Meeting of the
Mayor and Common Council and the Community Development Commission contains certain
background information on the recent State budget adoption and the impacts upon the Agency and the
City of the trailer bills identified as ABxI 26 and ABxI 27. This Supplemental Staff Report provides
additional information to the Mayor and Common Council for consideration in the adoption of the
proposed Urgency Ordinance.
Several items should be considered by the Mayor and Common Council as outlined below prior to the
adoption of the proposed Urgency Ordinance:
1. The obligation to remit the continuation payment to the State is a City obligation and not that of
the Agency; however, there is a provision in the new legislation for the Agency to remit
payments to the City for this purpose (H&SC Section 34194 and 34194.2).
2. The Agency cannot use the Low and Moderate Income Housing Fund to remit the continuation
payments; however, for the 2011-12 fiscal year, the Agency will be exempt from making any
deposits to the Low and Moderate Income Housing Fund solely for that one year and may use
the additional non-housing funds thus made available to the Agency to enable the Agency to
remit the payment to City for the remittance of the continuation payment to the State (H&SC
Section 34194.3).
3. The redevelopment powers of the Agency were terminated as of June 29, 2011, when the
Governor signed ABxI 26 earlier in the day. Therefore, the Commission acting on behalf of
the Agency did not have the legal authority as of that evening to adopt the Agency budget for
the 2011-12 fiscal year. At this time the Agency is without any budget authority to remit
payments from 2011-12 revenue sources without a budget or a continuing budget resolution in
effect. The most notable adverse issue would be the inability to fund the next Agency payroll
that is due on Friday, July 15. If an Agency budget had been approved prior to June 29, and
notwithstanding the fact that the Agency had its redevelopment powers terminated as of June
29, payment of payroll and other operating expenses on and after June 29 are permitted under
ABxl 26 in addition to continuing payments for previously incurred indebtedness and other
obligations.
4. ABxI 26 addresses cooperative agreements between cities and redevelopment agencies such as
the Master Services Agreement. If the Agency were not reinstated prior to October 1, 2011,
and whether the Agency would be dissolved automatically on October 1, 2011, or at a later date
after reinstatement (e.g., for non-payment of a continuation payment as discussed in section 11.
below), the Master Services Agreement would be terminated as of the date of dissolution of the
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P:\Agendas\CommDevCommission\CDC 2011\07-11-11 Reinstatement ofthe Powers of RDA-Supplemental SR.doc COMMISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number: R2
Economic Development Agency Staff Report
Reinstatement of the Powers of RDA
Page 2
Agency and the City would not have access to the Agency tax increment revenues in the dollar
amounts set forth in the Master Services Agreement as included within this agenda item.
5. The adoption of an ordinance as specified in H&SC Section 34193 reinstates the Agency
whether pursuant to a typical ordinance adopted upon two (2) readings with a 30-day effective
date, or by an urgency ordinance if the legislative body is able to make the determination that
an urgency exists. For the reasons set forth in the Urgency Ordinance as presented to the
Mayor and Common Council, such a situation currently exists requiring the adoption by the
Mayor and Common Council of the reinstatement ordinance as an urgency matter as provided
in the Urgency Ordinance.
6. Upon adoption of the Urgency Ordinance, the Agency will be automatically reinstated with full
powers of a redevelopment agency and the Commission will then have full powers to act on
Agency items (H&SC Section 34193.3).
7. The adoption of the ordinance to reinstate a redevelopment agency is then followed by the
submittal of a written notice to the County Auditor-Controller, the State Controller and to the
State Department of Finance on or before November 1, 2011, stating that the ordinance has
been adopted and the City intends to remit the continuation payment (H&SC Section 34193.1).
8. After the adoption of an ordinance and the timely filing of the notice with the County Auditor-
Controller, the State Controller and to the State Department of Finance, the next critical dates
occur on: (i) August 1, 2011, with the notification from the State Director of Finance as to the
dollar amount of the continuation payment (H&SC Section 34194(b)(J)), and (ii) January 15,
2012, when the initial continuation payment installment is payable to the State (H&SC Section
34194(d)(1)).
9. For a redevelopment agency to avoid being automatically dissolved after the adoption of a
reinstatement ordinance by the legislative body, the continuation payments must be made to the
State on each January 15 and May 15 (H&SC Section 34194(d)). For the 2011-12 fiscal year,
the Agency would be required to make a continuation payment of approximately $7M on each
of said dates for a total payment of$14M in this current fiscal year. This payment is based
upon a formula to allocate $1.7B of additional revenues to the State from all redevelopment
agencies on a State-wide basis (H&SC Section 34194).
10. For the 2012-13 fiscal year and for subsequent fiscal years through the termination date of the
applicable redevelopment plans or until the new law as enacted by ABxl 27 is amended or
deleted, the Agency through the City would be required to remit a continuation payment in an
amount equal to approximately $1.6M on each January 15 and May 15 (H&SC Section
34194(d)(1)). This continuation payment is based upon a similar formula but with the intent to
allocate an additional $400M per year instead of$13B per year of additional revenues to the
State from redevelopment agencies on a State-wide basis (precise formula is set forth in H&SC
Section 34194, 34194.1 and 34194.4).
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P:\Agendas\Comm Dev Commission\CDC 2011\07-I1-11 Reinstatement ofthe Powers of RDA-Supplemental SR.doc COMMISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number: R2
Economic Development Agency Staff Report
Reinstatement of the Powers of RDA
Page 3
11. After the adoption of the required reinstatement ordinance by the legislative body, the city
cannot be forced or required to remit any continuation payments to the State whether one or
more payments were voluntarily made or whether no payments were made. The consequences
of failing to remit any one of the January 15 or May 15 continuation payments (H&SC Section
34194(d)(2)) is the immediate dissolution of the redevelopment agency (H&SC Section 34195).
12. As a part of the current process for the completion of the Merger A (scheduled to occur with
Council and Commission actions on July 18, 2011, and August 1, 2011) and the further
processing of the Merger B currently scheduled for completion in the second quarter of 2012,
the following factors will be considered through updated cash flow projections as to the
financial benefits to the Agency of the two (2) merger actions and the continued funding of the
continuation payments:
(i) analysis of all pass-through payments to taxing entities based upon current agreements
and current and proposed statutory pass-through payments;
(ii) ability to remit ongoing debt service payments on tax allocation bonded indebtedness
and other forms of indebtedness under OPA's and DDA's and other agreements with
third parties;
(iii) requirements for deposits in the Low and Moderate Income Housing Fund except for
fiscal year 2011-12;
(iv) financial impacts of other contractual obligations pursuant to written agreements with
third parties; and
(v) the costs of tax increment revenue administration including fees paid to the County and
to consultants and auditors.
Both the California Redevelopment Association ("CRA") and the California League of Cities are
preparing to file a lawsuit challenging the State Constitutionality of ABxl 26 and ABxl 27. If the
matter is ultimately decided in favor of the CRA and the League, then there would be no requirement
to remit any of the continuation payments as set forth in ABxl 27 and there would be no risk of the
dissolution of the Agency pursuant to ABxl 26. At such time as a favorable decision is rendered in
support of local redevelopment agencies, the Agency will need to then reassess its position as to
whether there are any reasons to continue the Urgency Ordinance in effect or to seek rescission of the
Urgency Ordinance by the Mayor and Common Council at that time. It is certainly the expectation of
all redevelopment staffs and practitioners in the State that a final decision will be rendered
substantially in advance of the first payment date on January 15, 2012.
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P: gendas\CommDevCommission\CDC 2011\07-11-11 Reinstatement of the Powers of RDA-SupplementalSR.doc COMMISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number: R2
Economic Development Agency Staff Report
Reinstatement of the Powers of RDA
Page 4
Based on the FY 2011-12 budget, the Agency is not in a position at this time to make the January and
May 2012 payments to the State. Staff needs more time to evaluate the options and to look at possible
solutions to bring back to the Mayor and Common Council for consideration. However, in order to
meet current obligations of the Agency, staff is recommending that the Mayor and Common Council
adopt the Urgency Ordinance.
Emil A. Marzullo,Interim ecutive Director
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P:\Agendas\CommDev Commission\CDC 2011\07-11-11 ReinstatementofthePowersofRDA-SupplementalSR.doc COMMISSION MEETING AGENDA
Meeting Date: 07/11/2011
Agenda Item Number: R2