Victor Valley Union High School District
San Bernardino County, CA
Association
ofBase
Chief
Business
Officials
Financial
and
Tax
Credit
Approval
California Community Colleges
What Does the Future Hold for Redevelopment?
2012 Fall Conference
Presented by:
Becky Elam
Mt. San Jacinto
Community College District
Ann Feng-Gagne
Dolinka Group, LLC
Theresa Tena
Community College League
of California
Heather Hagopian
Dolinka Group, LLC
Table of Contents
As Redevelopment Agencies are eliminated, what does this mean for Community College
Districts (CCDs)?
This presentation will focus on the following items as it relates to the diminishing of
Redevelopment funds to CCDs:
1. Assembly Bill (AB) 1484 – How does redevelopment residual and pass-through
payments play into your budget?
2. Pass-Through Payment Timing
3. Education Revenue Augmentation Fund
4. RDA Revenue and the Apportionment
5. Advocacy
6. Where Do We Go From Here? – What can CCDs do to infuse dollars into their General
Fund?
Page 1
Assembly Bill 1484
2
Assembly Bill 1484
Overview
Assembly Bill 1484 – “Clean Up Bill”
» Signed by Governor Brown on June 27, 2012
» Budget Trailer Bill
» Provided clarification on:
 Oversight Board Responsibilities
 Pass-Through Payment Priority
 Pass-Through Payment Timing
 Pass-Through Payment Termination
Page 3
Assembly Bill 1484
Impacts on Oversight Boards
New changes to the law that affect Oversight Board Members:
» All actions of the Oversight Board must be adopted by resolution (HSC 34179(e))
» Oversight Board is entitled to their own financial and legal advice (HSC 34179(n))
» Oversight Board decisions supersede Successor Agency decisions (HSC 34179(p))
» An Oversight Board is authorized to contract with public/private agencies for administrative
support (HSC 34179(o))
» Establish a Recognized Obligation Payment Schedule (ROPS) (HSC 34177(m))
• $10,000 per day penalty for late ROPS
» Successor Agency must hire an auditor to determine amounts of unencumbered balances
available for transfer to taxing entities. (HSC 34179.5)
Page 4
Assembly Bill 1484
Impacts on Oversight Boards
Oversight Board Representation:
» Community College District (CCD) representatives need to be aware of the status of their
Redevelopment Agency regardless if they are an Oversight Board member
With a majority of project areas under the Hemet
Redevelopment Agency, Mt. San Jacinto CCD sits
on the Hemet Oversight Board
Important Note: Touch base with all Oversight Board members to
understand Successor Agency status and ensure representation
Page 5
Assembly Bill 1484
Impact to Oversight Boards
What does the future hold for Oversight Board Members?
» On July 16, 2016, in each county, only one Oversight Board shall exist (HSC 34179(j))
 Due to this consolidation, attendees who sit on Oversight Boards now, won’t be there long
term
34179(j) Commencing on and after July 1, 2016, in each county where more
than one oversight board was created by operation of the act adding this
part, there shall be only one oversight board appointed
(l) Commencing on and after July 1, 2016, in each county where only
one oversight board was created by operation of the act adding this part,
then there will be no change to the composition of that oversight board as
a result of the operation of subdivision (b).
(m) Any oversight board for a given successor agency shall cease to exist
when all of the indebtedness of the dissolved redevelopment agency has
been repaid.
Page 6
Assembly Bill 1484
Impact on Oversight Boards
What does the future hold for Oversight Board Members?
» Knowing that in four (4) years Oversight Boards and Successor Agencies will be consolidated, it is
important to get past owed payments added to the ROPS
» The elimination of RDAs and the creation of Oversight Boards for the Successor Agencies have
provided new opportunities for CCD’s to present payment calculation issues to a new forum.
Back pass-though payments due to
calculation errors added to ROPS
Page 7
Pass-Through Payment Timing
8
Pass-through Payment Timing
Securing Future Pass-Through Payments
Confirmed by AB 1484
Incorrect
Department of Finance;
Dolinka Group
Select Auditor-Controllers;
Legislative Analyst’s Office
Distribution
Priority
Former RDA Tax Increment
Former RDA Tax Increment
1
All Pass-Through
Payments
Recognized Obligations
& Debt Service Payments
2
Recognized Obligations
& Debt Service Payments
Successor Agency
Admin Costs
3
Successor Agency
Admin Costs
All Pass-Through
Payments
Residual Revenue
(if any) distributed to all
taxing agencies based on
what they would have
received without RDV
(revenue neutral)
Residual Revenue
(if any) distributed to all
taxing agencies based on
what they would have
received without RDV
(revenue neutral)
4
Page 9
Pass-Through Payment Timing
Securing Future Pass-Through Payments
» FY 2011/2012 Pass-Through payments should not have been capped. The Pass-Through
payment priority was addressed by AB 1484:
"SEC. 36. The Legislature finds and declares as follows:
(a) Certain provisions of Assembly Bill 26 of the 2011–12 First Extraordinary Session of 2011 (Ch.
5, 2011–12 First Ex. Sess.) are internally inconsistent, or uncertain in their meaning, with regard
to the calculation of the amount to be paid by a county auditor-controller from the
Redevelopment Property Tax Trust Fund to meet passthrough payment obligations to local
agencies and school entities.
(b) Consistent with the statement in Section 34183 of the Health and Safety Code, as added by
the measure identified in subdivision (a), that the provisions of that section are to apply “[n]ot
with standing any other law,” it was the intent of the Legislature in enacting that measure that
the amount of the passthrough payments that are addressed by that section be determined in
the manner specified by paragraph (1) of subdivision (a) of Section 34183 of the Health and
Safety Code, and that the amount so calculated not be reduced or adjusted pursuant to the
operation of any other provision of that measure."
Confirmed Pass-Through Payments are the first priority to be paid from the Redevelopment
Property Tax Trust Fund
Page 10
Pass-Through Payment Timing
Pre-Elimination:
09/10
Payment
FY 2009/2010
FY 2010/2011
10/11
Payment
FY 2011/2012
Post-Elimination:
FY 2011/2012
» May create cash-flow issues for
Successor Agency
FY 2012/2013
FY 2013/2014
Jan ‘12
1st half 11/12 Payment
ROPS I Paid
Jan ‘13
1st half 12/13 Payment
ROPS III Paid
Jan ‘14
1st half 13/14 Payment
ROPS V Paid
Jun ‘12
2nd half 11/12 Payment
ROPS II Paid
Jun ‘13
2nd half 12/13 Payment
ROPS IV Paid
Jun ‘14
2nd half 13/14 Payment
ROPS VI Paid
Page 11
Pass-Through Payment Timing
» LEAs should have received the following payments in FY 2011/2012:
 FY 2010/2011 payment from RDA
 1st half of FY 2011/2012 payment from RDA/SA
 2nd half of FY 2011/2012 payment from Auditor-Controller
» Many LEAs did not receive their 1st half of FY 2011/2012 payment from their RDA
» According to AB 1484:
"34183.5. (a) The Legislature hereby finds and declares that due to the delayed implementation of this
part due to the California Supreme Court’s ruling in the case California Redevelopment Association v.
Matosantos et al. (2011) 53 Cal.4th 231, some disruption to the intended application of this part and
other law with respect to passthrough payments may have occurred.
(1) If a redevelopment agency or successor agency did not pay any portion of an amount owed for
the 2011–12 fiscal year to an affected taxing entity pursuant to Section 33401, 33492.140, 33607,
33607.5, 33607.7, or 33676, or pursuant to any passthrough agreement entered into before January
1, 1994, between a redevelopment agency and an affected taxing entity, and to the extent the county
auditor-controller did not remit the amounts owed for passthrough payments during the 2011–12
fiscal year, the county auditor-controller shall make the required payments to the taxing entities
owed passthrough payments and shall reduce the amounts to which the successor agency would
otherwise be entitled pursuant to paragraph (2) of subdivision (a) of Section 34183 at the next
allocation of property tax under this part, subject to the provisions of subdivision (b) of Section
34183."
Page 12
Pass-Through Payment Timing
Recommendation
Redevelopment
Elimination
FY 2011/2012
2010/2011
Payment
2011/2012
Payment
1st Half
2011/2012
Payment
2nd Half
1 Confirm receipt of 1st half of FY 2011/2012 Pass-though Payment from RDA/SA
2
The next Redevelopment payment will be January 2013
Page 13
Pass-Through Payment Timing
Pass-Through Payment Subordination
Case Study:
» The Redevelopment Agency (RDA) issued $45 million in bonds, and is projecting that the debt service will
exceed the tax increment collected
» The only way a LEA’s pass-through payment could be reduced is if:
1. The LEA signed a subordination agreement with the RDA
2. The RDA does not have enough money to pay their debt service, so they indicated plans to not pay the
LEA’s payment pursuant to the subordination agreement
Dolinka Group reviewed the subordination agreement and found the
RDA can only subordinate the LEA’s payment up to $33M of debt –
resulting in a maximum subordination amount
Recommendation for CCD’s:
1. Know the financial landscape of the RDA (skyrocketing debt service in the future?)
2. Know if the LEA has signed any subordination agreements
YES
know the terms of the subordination agreements
NO
pass-through payments should never be reduced
Page 14
Pass-Through Payment Timing
Termination of Payments
» AB 1484 added HSC 34187(b):
"When all of the debt of a redevelopment agency has been retired or paid off, the
successor agency shall dispose of all remaining assets and terminate its existence
within one year of the final debt payment. When the successor agency is
terminated, all passthrough payment obligations shall cease and no property tax
shall be allocated to the Redevelopment Property Tax Trust Fund for that agency."
Important Note:
* CCD's Pass-Through Payments will be terminated if the RDA pays off its
debt before the project area's time limit to repay debt
Why is the termination of payments bad for CCDs?:
* The termination of redevelopment payments results in CCDs losing facilities dollars
(and in some cases General Fund dollars) from RDA pass-through payments
Page 15
Pass-Through Payment Timing
Termination of Payments
» RDV statutory payments are structure in tiers.
1. 1st 10 years the LEA receives tier 1 payments
2. Beginning in the 11th year, the LEA receives both tier 1 and tier 2 payments
3. Beginning in the 30th year, the Lea receives tier 1, tier 2, and tier 3 payments
» Initially the RDA needed more money to issue debt
 Once the debt starting being paid off, the RDA was to pay the LEAs more pass-through payments
.
Early termination would mean the
loss of tier 2 and tier 3 payments
Tier 3
Tier 2
Tier 1
0 1
Base Year
30 31
10 11
First Year of Tier 1
Payment
First Adjusted
Base Year
First Year of Tier 2
Payment
Second Adjusted Base
Year
First Year of Tier 3
Payment
Page 16
Pass-Through Payment Timing
Termination of Payments
1 Determine LEA's Exposure
» Analyze how LEA is using redevelopment dollars
» Compare to determine exposure
2 Document Internal Repayment Plan
2020
2022
2023
 Determine dollar amount exposure
(conservative vs. aggressive approach)
Exposure
7 Years
 Pledge Agreement established?
 Contact local legislators, lobbyists
Certificates of Participation
Review ROPS for debt outstanding
Request information via Successor Agency
RDA Official Statements
RDA debt vs. Project Area debt
LEA Debt
Project Area #3




Project Area
#2
Project
Area#2
» Analyze RDA debt service
RDA Debt
Project Area #1
 General Fund infusion
 Facilities
 COPs debt service
Backed by
Project # 3
2030
2035
Page 17
Pass-Through Payment Timing
Early Termination of Payments
Ohlone Community College District:
» The City of Fremont has a very small amount of outstanding debt and remaining financial obligations
» As a result, they have estimated that they could “terminate” by the end of this fiscal year
» All affected taxing entities may receive their last pass through payment in FY 2012/2013
Projected Loss of Revenue Through 2044
FY
2010/2011
Pass-Through
Payment
Early Termination
Date
Previous
Termination of
Payment
Number of "Lost"
Years (Payments)
Centerville
2012/2013
2042/2043
30
$19,551
$586,530
Industrial
2012/2013
2035/2036
23
$387,127
$8,903,921
Irvington
2012/2013
2029/2030
17
$16,646
$282,986
Irvington 99 Anx
2012/2013
2043/2044
31
$20,920
$648,522
Niles
2012/2013
2029/2030
17
$1,902
$32,337
Niles 99 Anx
2012/2013
2043/2044
31
$1,385
$42,942
NA
NA
149
$447,532
$10,497,238
City of Fremont
Total
Projected "Loss"
Through 2044[1]
[1] Represents future dollars; not present value amounts
Page 18
Educational Revenue Augmentation Fund
(ERAF)
19
ERAF Fund Revisit
ERAF Boost
» On August 13, 2012, California State Controller's Office issued a letter requiring all Auditor-Controllers
to start calculating redevelopment pass-through payments in accordance with the Los Angeles Unified
School District vs. County of Los Angeles lawsuit Superior Court Case BS108180
Without
ERAF
With
ERAF
Community College District
Funding
State Aid
State
Aid
State Aid
State
Aid
Local Taxes
Local Taxes
ERAF
ERAF
Local Taxes
Local Taxes
LAUSD Lawsuit
Redevelopment Payments
$1 million x 30% =
$1 million x 35% =
$300,000
$350,000
Tax Increment x Tax Rate = RDV Payment
Tax Rates
Tax Rate
ERAF Rate
30%
5%
Redevelopment
Revenue
Tax Increment
$1 million
Page 20
ERAF
Latest Court Developments
» The judge in the LAUSD Lawsuit is in the process of determining the methodology to calculate the
ERAF revenue
 Dolinka Group has communicated with many Auditor-Controllers to understand which
methodology is being used for their ERAF boost
 Most County Auditor-Controllers are waiting for the outcome in the LAUSD Lawsuit before
incorporating a certain methodology
 Some have already implemented the ERAF boost (e.g. Orange, San Bernardino) since FY
2010/2011
» Once Auditor-Controllers incorporate concepts from the LAUSD Lawsuit, LEAs should see an ERAF
boost to their in statutory pass-through redevelopment payments
 Depending on how your particular County calculates ERAF payments, some methodologies may
yield higher ERAF boosts over others
 Next steps: follow up on demand letters sent, request back-owed payments
Page 21
ERAF
Latest Court Developments
» The Courts recently determined that the ERAF boost must incorporate the Triple Flip (enacted in
2004 through Proposition 57 – The California Recovery Act) and Vehicle License Fee (VLF) Swap
(enacted in 2004)
How the Triple Flip works:
Flip 1
¼ percentage point increase in State sales tax, which is used to guarantee the deficit
bonds the State issued through Proposition 57
Flip 2
¼ percentage point decrease in local sales and use tax rate (consumers saw no overall
increase in sales tax rate)
Flip 3
Local governments replenished the sales tax revenue that they lost by reimbursing
themselves from the ERAF
VLF Swap:
Swap 1
Increased the State’s share of VLF Revenue
Swap 2
Decreased the local government’s share of VLF revenue by the same amount
(consumers saw no overall increase in the VLF)
Swap 3
Local governments could replenish the VLF revenue that they lost by reimbursing
themselves from the ERAF
Page 22
ERAF
Latest Court Developments
» Potential negative effect if CCD has negative ERAF
 Required shifts in property taxes may exceed the
amounts allocated to the ERAF account, resulting
in “negative” ERAF
 Uncertain impact to Redevelopment ERAF boost
Page 23
RDA Revenue and the Apportionment
24
Apportionment Impacts
State General Fund Manipulations 11/12
» 2011-12 the State withheld disbursement of $116 million of general fund dollars with the rationale
the CCDs would receive a windfall of a “like” amount from the dissolution of redevelopment
agencies
» SB 1016 (Chapter 38, Statutes of 2012) provided authority for Director of Finance (DOF) to return
to the CCDs the amount uncollected from RDAs by June 30, 2012
» While the state ultimately withheld $10.1 million of the original $116 million, the figure was merely a
“placeholder” of what was estimated to be received. Chancellor’s Office recalculation will
determine whether ANY RDA residual revenue was received by districts in 2011-12
“(66) Existing law requires the Board of Governors of the California Community Colleges, in
calculating each community college district’s revenue level for each fiscal year, to subtract,
among other things, the local property tax revenue specified by law for general operating
support, exclusive of bond interest and redemption, from the total revenues owed. This bill
would appropriate an unspecified amount, on or before June 30, 2012, to be determined
by the Director of Finance, up to $116,133,000, from the General Fund to the Board of
Governors of the California Community Colleges…”
Page 25
Apportionment Impacts
RDA Revenue Shortfalls: RDA 12/13
» The 2012-13 Budget Act is premised upon the receipt of $341 million

$140.3 million RDA tax increment (Residual #1)

$200.9 million RDA liquid / cash assets (Residual #2)
» PLUS: RDA Hold Harmless language!
» SB 1016 reads:
SEC. 97. (a) On or before June 30, 2013, an amount to be determined by the
Director of Finance shall be appropriated from the General Fund to the Board of
Governors of the California Community Colleges in augmentation of Schedule (1)
of Item 6870-101-0001 of Section 2.00 of the Budget Act of 2012.
Page 26
Apportionment Impacts
RDA Revenue Shortfalls: RDA 12/13
(e) The Director of Finance shall notify the Chairperson of the Joint Legislative Budget Committee,
or his or her designee, of his or her intent to notify the Controller of the necessity to release funds
appropriated in subdivision (a) or to make the reduction pursuant to subdivision (c), and the
amount needed to address the property tax shortfall determined pursuant to subdivision (b) or
the amount of the reduction made pursuant to subdivision (c). The Controller shall make the
funds available not sooner than five days after this notification and the Office of the Chancellor of
the California Community Colleges shall work with the Controller to allocate these funds to
community college districts as soon as practicable.
» While authority exists to act sooner than the end of the fiscal year hard to imagine that will
happen
» Only backfill up to $341 million of RDA residual revenue shortfalls; timeline for repayment is
unclear
» RDA Hold Harmless language does NOT apply to regular property tax increment revenues.
Page 27
Apportionment Impacts
How will this play out in the short term and long term?
» Apportionment Milestones overlaid against Redevelopment Reporting Milestones
» While great care was given to “align” apportionment milestones with redevelopment – there is
NO expectation the “windfall” of RDA residual revenue projected will materialize in the short
term
» Not shocking declaration especially for those of you on Oversight Boards gearing up for the
“meet and confer” round of your payment schedule fight with the State/DOF
» Expectation that once items are outright “disallowed” from the ROPS they will NOT show up
again on the payment schedule; in the meantime we need to trudge our way through the
process
» Going forward the expectation is that 90 days before payment is made (RDA Residual revenue
and RDA Pass-Through revenue) the back-up calculations will be completed PRIOR to
apportionment milestone reporting:

Payment in January/ Report in October – in time for November 15 A-C property tax
reporting

Payment in June / Reporting in March – in time for April 15 A-C property tax reporting
Page 28
Apportionment Impacts
In the short term: RDA shortfalls
» As we move through 2012-13, districts will be “waiting” on the outcome of many calculations

Unclear whether DOF will have any updated information related to RDA revenues to adjust
their 2012-13 projections let alone weave in more refined numbers for the 2013-14
Governor’s Proposed Budget

Expect a shortfall of RDA revenues on the P1 apportionment (one of possibly MANY!)

Expect a shortfall of RDA revenue on the P2 apportionment (one of possibly MANY!). DOF
should have better April RDA revenue information but whether they proactively “make the
CCDs whole” at the May Revise is a different story

Expect to be made “whole” shortly after the conclusion of the 2012-13 FY – for ONLY the
RDA revenue….any other shortfall the CCDs lack statutory recourse
Page 29
Advocacy
30
Advocacy
New Allies – K-12
» RDA pass-through payments impact K-12
» Feb 2011 K-12 P1 Apportionment
» Shared concerns related to RDA Residual Revenue estimate and RDA pass-through impacts
– particularly “early termination” – primary leads are the big, K-12 school districts
» K-12 & CCD Collective Focus - Hold the State to it’s word – “the elimination of RDA’s will
NOT negatively impact local education agencies”
Page 31
Advocacy
Future Use of Redevelopment Revenue
» New language added to Health and Safety code section 33607.5 states that CCDs can spend 52.5%
on certain educational facilities for amounts paid during fiscal years 2011-12 through 2015-16.
(B) Except as specified in
subparagraph (E), of the total amount
paid each year pursuant to this section
to community college districts, 47.5
percent shall be considered to be
property taxes for the purposes of
Section 84751 of the Education Code,
and 52.5 percent shall not be
considered to be property taxes for
the purposes of that section and
shall be available to be used for
educational facilities, including, in
the case of amounts paid during the
2011-12 fiscal year through the 201516 fiscal year, inclusive, land
acquisition, facility construction,
reconstruction, remodeling,
maintenance, or deferred
maintenance.
XYZ Redevelopment
Agency
Project
Area A
Project
Area B
Project
Area C
Project
Area D
PTA
SB 211
AB 1290
2%
$100,000
$100,000
$100,000
$100,000
52.5%
47.5% 47.5% 52.5%
Land acquisition, facility
construction, reconstruction,
remodels, maintenance or deferred
maintenance
Page 32
Advocacy
Can we agree on a few
things?
» Coordinated Advocacy
 Increase the CCD percentage that is dedicated to facilities: CCD 52.5% vs. K-12
56.7%
 Extend the date for increased flexibility related to “facilities” portion from 2015-16
(current law) to LATER!
 Continue to push for more relief from RDA shortfalls. K-12 Continuous appropriation
means K-12 does NOT wait until the end of the fiscal year to be “trued up”. The hold
harmless language for the CCD was a big win, but we MUST advocate that a “true
up” NOT wait until the conclusion of the fiscal year!
 Partner with K-12 related to “Early Termination” statutory protections for local
education agencies
Page 33
Where Do We Go From Here?
34
Where Do We Go From Here?
Overall Perspective
» This is one of many “irons in the fire”

Ballot Measure

Local revenue shortfalls

Funding Formulas threatened re-do
» Survey sought to gauge real-time experience with process and “gaps”
» Really do not have a good sense of the magnitude at a statewide level – very interested to collect
April 15 A-C information to get a better sense of Residual #1 and Residual #2
» Keep the communication lines OPEN – keep your advocates in Sacramento informed
Page 35
Where Do We Go From Here?
General Fund Infusion Alternatives
» As Redevelopment funds are shrinking, CCDs need to look into other options to infuse
their General Fund
Voter Approved
Parcel Tax
» Provides a mechanism that offers secure, enhanced
funding for operational, educational, and capital
facilities costs typically paid out of a school district's
general fund
» Regularly scheduled general election or mailed
ballot election
» 66% voter approval
Recreation Assessment District
» Allows local government agencies to finance the
costs and expenses for public recreational facilities
» Mailed ballot anytime
» 50% + 1 voter approval
Non Voter Approved
Asset Management
» Focus on identifying operational effectiveness within the
district to generate general fund savings in addition to
opportunities to close facilities and liquidate surplus
assets
Facilities Usage Fees
» Fee charged by districts for use of outdoor and
indoor facilities, many districts are not maximizing their
fee collection for groups that utilize their facilities (e.g.
stadiums, performing arts centers, gymnasiums,
recreational fields) during non- school hours
Sales and Use Tax
» Local sales tax levied on goods and services
purchased within a City or County
» Long-term funding instrument used to provide
supplemental general fund dollars
» Regularly scheduled general election
» 50% + 1 voter approval
Page 36
Questions?
37
About
Dolinka Group, LLC
Ann Feng-Gagne
949.250.8307
afeng@dolinkagroup.com
Heather Hagopian
949.250.8376
hhagopian@dolinkagroup.com
38
About Dolinka Group Presenter Bios
» Ann Feng-Gagne, Executive Director, is one of the key members of Dolinka Group and is
responsible for the day-to-day management of the financing and demographic services
provided by the firm. These services include Master Plans/Funding Programs, property
negotiations, formation and administration of CFDs and Assessment Districts, Redevelopment,
OPEB funding, and GO Bond campaigns and issuances. Ms. Feng-Gagne holds a B.S. in
Policy Analysis/Management from Cornell University.
» Heather Hagopian, Senior Director, has assisted LEAs with redevelopment project area
identification, revenue projections, redevelopment revenue reporting, negotiations with various
redevelopment agencies to recover underpayments, and the leveraging redevelopment
revenues via the issuance of bonds. Ms. Hagopian holds a B.S. in Business Administration
(Finance) from San Diego State University.
Page 39