Miguel A. Santana, City Administrative Office~~ Gerry F. Miller, Chief Legislative Analys~ CITY OF LOS ANGELES INTER-DEPARTMENTAL CORRESPONDENCE

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1 FORM GEN.160 CITY OF LOS ANGELES INTER-DEPARTMENTAL CORRESPONDENCE Date: August 5, To: From: The Council The Mayor Miguel A. Santana, City Administrative Office~~ Gerry F. Miller, Chief Legislative Analys~ Subject: ADOPTION OF AN ORDINANCE AND APPROVAL OF A REMITTANCE FUNDING AGREEMENT AUTHORIZING PARTICIPATION IN THE STATE'S VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM SUMMARY On June 29, 2011, the State Legislature enacted two Redevelopment Trailer Bills - Assembly Bills (AB) 1x-26 and 1x-27 (Blumenfeld), as part of its Fiscal Year State Budget. The two-bill plan eliminates Redevelopment Agencies (RDAs) unless cities and counties elect to participate in the Voluntary Alternative Redevelopment Program (VARP) and provide a $1.7 billion payment in and $400 million annually thereafter. In July 2011, the Community Redevelopment Association estimated the Community Redevelopment Agency of the City of Los Angeles' (CRA!LA) prorata share of the $1.7 billion to be $97.3 million for and of the $400 million continuing remittance obligations to be $22.9 million for On August 1, 2011, the California Director of Finance posted on its website the calculations for each RDA's remittance payment amount for If the City of Los Angeles (City) elects to participate in the VARP and retain the CRA/LA, the City's remittance payment is $96.5 million for For purposes of calculating the payment to the County by project area, the CRAILA has used the original number of $97.3 million estimated by the Community Redevelopment Association as the payment. However, the actual payment will be that required by the State or as determined by any subsequent appeal. The CRAILA is requesting authority to file an appeal to the California Director of Finance of the remittance amount due to the City. The CRAILA states that the additional amount will be a contingency and the funds will be released back to the respective project areas if not needed. AB1x-27 requires two ongoing annual payments starting in The City's remittance payment totals $25.5 million for In addition to the $22.9 million payment mentioned above, there is a second payment of $2.6 million which is based on 80 percent of the school entities' AB1290 pass-through percentage and is calculated on any new debt. Based on a fouryear period ( ), preliminary estimates show that the CRAILA's annual share ranges between $25.5 million and $28.4 million. The amount in subsequent years may be reduced as project areas expire, but could increase as new project areas are adopted or if bonds are issued in the future.

2 -2- On July 1, 2011, Council instructed the Chief Legislative Analyst and the City Administrative Officer (GAO), with the assistance of the City Attorney and CRAILA, to report in 30 days to the Mayor and Council on the following: a) review and analyze the impact of AB1x-26 and AB 1 x-27 on the City and the CRAILA including, but not limited to, specifics on how the CRAILA would meet the City's projected contribution in and potential impacts on each project area's proposed work program and associated staffing levels; and, b) the steps necessary to authorize the CRAILA to exercise the voluntary opt-in provided for in the legislation while preserving all legal rights and remedies of the City. This report provides the requested information. A discussion of the pertinent facts of the legislation is provided in Attachment A, Analysis of Options Available to the City relating to the CRAILA, and the Findings Section. Analysis of Adopted Legislation Our offices reviewed the adopted legislation and met with representatives of the CRAILA, the City Attorney and the Mayor's Office to determine, to the greatest extent possible, the potential risks, benefits and impacts to the City if it chose to either dissolve the CRAILA and become the successor entity or to continue the CRAILA and participate under the VARP. The City Attorney provided advice during this process as to the ramifications to the City under both scenarios. Areas of concern in the preparation of this report included City liability for remittance payments, the impact on personnel/pensions and the continuation of CRA work on a going forward basis given VARP's participatory funding requirements. While it is not possible to determine with certainty all benefits and risks to the City for either option at this time, the information provided does indicate that our risks are best mitigated if the CRA were to continue to exist. The available options and their specific ramifications are discussed further in this report. The proposed Ordinance that would authorize the City to participate in the VARP, along with the Remittance Funding Agreement (Agreement), are also discussed. The proposed Ordinance is attached (Attachment B). It is a policy decision for the Council and Mayor to determine whether to continue the CRAILA under the new legislation. The recommendations included in this report will allow the Council and Mayor, if they choose to continue the CRA, to take the steps necessary to implement that goal. The recommendations include: 1. The adoption of an Ordinance (Attachment B) to retain the CRAILA under AB1x-27; 2. The authorization of the City's participation in the VARP under AB1x-27; 3. Approval through the Ordinance of the payment of annual remittances to the County Auditor-Controller (estimated to be $97.3 million for and $25.5 million for ). Additional instructions are included in the report that would require the CRAILA to submit to the Mayor and Council by August 31, 2011 revised budget schedules and an updated staffing plan for its Proposed Budget and Work program which reflects the reduction in funding available to the CRAILA based on the required annual remittance payment. Further, CRAILA is requested to provide to the Mayor and Council with its Proposed Budget and Work Program a three-year staffing plan ( ) that would address the balancing of resources required to meet the City's work program priorities in light of diminishing resources. 1

3 - 3 - Dissolution or Continuation Options A summary of the options available to the City is provided below: A. Under the Dissolution of CRAILA under AB1x-26, there are two Options 1) The City could choose not to adopt an Ordinance that retains the CRAILA and instead become the successor agency. The ramifications if the City becomes the successor agency include the following: Elimination of CRAILA 11 City responsible to an Oversight Board 11 CRAILA staff would become City employees City is potentially responsible for administrative costs 11 Loss of CRAILA assets- all unencumbered CRAILA property, funds and other assets would need to be liquidated and transferred to the County for deposit into the Redevelopment Property Tax Trust Fund 11 Potential liability for other costs 11 Return of unencumbered grant funds 11 Elimination of CRAILA Funding of the City's Affordable Housing Trust Fund (CAHTF) 11 Termination of City/CRAILA agreements m City obligation to purchase certain CRAILA Property (e.g., acquisition and maintenance of public facilities and public improvements) m City acceptance of CRA!LA Housing functions and assets or responsibility falls on the Housing Authority 11 Potential reduction of property tax payment to the City from the County's Redevelopment Property Tax Trust Fund (County's Trust Fund). CRAILA projects that the City would realize a negative cumulative amount in net resources for a four-year period ( through ) 11 CRAILA analysis projects a positive cumulative amount in net resources of $27.3 million for the City by ) The City could choose to opt out and not become the successor agency. The City must then file a resolution to that effect with the County Auditor-Controller no later than September 1, The successor agency will be the first local agency in the County [i.e. the County or any city or special district in the County] that elects to become the successor agency by submitting to the County Auditor-Controller a duly adopted resolution to this effect. It is not clear what would happen if no other local agency elects to become the successor agency. The ramifications if the City opts out include the following: Elimination of the CRA/LA 11 CRAILA staff would become employees of the successor agency 11 Loss of CRAILA assets - all unencumbered CRAILA property, funds and other assets would need to be liquidated and transferred to the County for deposit into the Redevelopment Property Tax Trust Fund Return of unencumbered grant funds

4 -4- Elimination of CRA/LA Funding of the City's Affordable Housing Trust Fund (CAHTF) 111 Termination of City/CRA/LA agreements 111 City obligation to purchase certain CRA/LA property (e.g., acquisition and maintenance of public facilities and public improvements) City acceptance of CRA/LA Housing functions and assets or responsibility falls on the Housing Authority Property Tax Discussion If the CRA/LA is dissolved, the City would be entitled to an additional payment of property tax (former tax increment); however, that property tax payment could be reduced or eliminated during the first five years ( through ) to pay for any shortfall between the total amount of enforceable obligations and the amount of funds paid to the successor agency. Based on the CRA/LA preliminary analysis, the City would not begin to receive a property tax payment until The CRA/LA estimates that the City could receive a property tax payment of $27.3 million beginning in For , CRA/LA estimates the enforceable obligations and other costs totals $113.3 million if the CRA/LA is dissolved. Please note that these figures are preliminary estimates and are subject to change based on many factors such as interpretation of the adopted legislation relative to enforceable obligations and decisions made by the Oversight Board. Certain costs would be paid from the funds made available to the successor agency and any assets realized by the successor agency from the sale of CRA/LA assets. However, the City would be obligated to pay for any shortfall amounts. The City could then choose which funding sources to use to pay for the shortfall amounts, such as AB1290 revenues, additional property tax payment amounts and/or other General Fund monies. If the City chooses to use its share of future AB 1290 revenues and property tax payments (or other General Fund resources) over a four-year period ( through ), the CRA/LA analysis shows that the City could pay down the obligations and costs by reducing the negative cumulative amount as follows: negative $104.3 million for , negative $89.7 million for , negative $53.2 million for and negative $15 million for These figures are preliminary estimates and are subject to change. B. Continuation of CRA/LA Option under AB1x-27 The City could choose to adopt an Ordinance authorizing participation in the VARP and make the annual remittance payments. The ramifications if the City retains the CRA/LA include the following: Provides the least risk and liability for the City 11 Provides the most protection of the City's General Fund 11 CRA/LA will continue to redevelop blighted communities, create jobs, improve public facilities and infrastructure and provide affordable housing to low and moderate income persons and families CRA/LA employees would remain CRA/LA employees and would not become City employees

5 - 5 - City could continue to have the CRAILA, as a subcontractor, to implement the work program objectives under the Cooperation Agreement executed by the City and CRAILA on March 10, 2011 (C.F ) CRAILA projects a cumulative am<;>unt of $44.1 million in City's share of AB1290 revenues over a five-year period ( through ) In addition to the $44.1 million in City's share of AB1290 revenues, CRAILA projects a total of $946.7 million in net cumulative resources that would be available for its current and future work program and operation, net of debt service obligations, over the same five-year period ( through ) for a total of $990.8 million in net cumulative resources if the CRAILA is continued under AB1x-27. The $946.7 million in CRAILA funds are comprised of grant funds, CRAILA general revenue, net tax allocation bond proceeds and net tax increment funds. These funds are net of debt service obligations, County administration fees, statutory and contractual pass-throughs and the annual remittance payments. CRAILA Employees As noted above, AB 1 x-26 would result in CRAILA staff becoming employees of the City should it choose to assume the role of successor agency. In this capacity, the City could eventually assume responsibility for payment of employee salaries, pension and retirement contributions. If the City chose not to assume this role, the employees would become employees of another successor entity, which would then be responsible for those costs. A significant benefit of approving the Ordinance under AB 1 x-27 is that CRAILA would retain its employees and its existing responsibilities for salaries, pensions and retirement contributions. The City would not be responsible for these costs, mitigating any negative impact on the General Fund. If the Ordinance were adopted, the CRAILA would need to report back to Council with its staffing plan given the VARP's participatory funding requirements. Any necessary staffing adjustments could be made as part of their Proposed Budget consideration, which will be addressed subsequently under separate cover. The Ordinance AB 1 x-27 establishes a VARP whereby a RDA is exempt from the dissolution measures of AB1x-26 if the legislative body (i.e. City Council) enacts an Ordinance on or before October 1, 2011 requiring that the City make annual remittance payments to the County Auditor-Controller for deposit into a Special District Allocation Fund and Educational Revenue Augmentation Fund. The deadline for enactment of the Ordinance can be extended until November 1, 2011 if the legislative body adopts a non-binding resolution expressing its intent to "opt-in" under the VARP prior to October 1, In order to meet this time frame, the City Council must adopt an Ordinance by August 19, The proposed Ordinance includes findings that support adopting this as an urgency Ordinance. If the City approves the Ordinance, the City and the CRAILA will enter into an Agreement for the transfer of funds by the CRAILA to the City in an amount sufficient for the City to make the required annual remittance payments to the County for the purpose of financing certain specified activities within the City's redevelopment area. The annual remittance payment is to be paid in two equal installments by January 15, 2012 and May 15, The CRA/LA agrees

6 -6- to transfer the funds to the City no later than 21 days prior to the due dates of the City's payments to the County. Per the Ordinance, a VARP Fund will be established and administered by the CAO. The CRA/LA funds will be deposited into the VARP Fund. The interest earned will be used for City costs associated with the administration of the VARP Fund. Approval of the Ordinance will subsequently authorize the CAO to execute the Agreement on behalf of the City and to execute all other documents and to take such other actions, including notifying the California Department of Finance, the State Controller and the County Auditor-Controller of the adoption of this Ordinance, as may be necessary for the City to participate in the VARP. The Agreement is subject to the review and approval of the CRA/LA Board of Commissioners (Board). At the time of the writing of this report, the CRA/LA Board has not yet taken an action on the Agreement. The CRA/LA states that the Agreement will be heard at the next CRA/LA Board meeting (expected to be August, 12, 2011). Remittance Funding Agreement The Agreement provides that the City does not intend, by enactment of the Ordinance, to pledge any of its general fund revenues or other assets to make the required annual remittance payments, but the source of funds for the annual remittance payments to the County will be solely from the funds provided to the City from the CRA/LA. Attachment C is a table provided by the CRA/LA with recommended funding amounts by Project Area and Region to pay the $97.3 million payment and the corresponding reductions to their respective Work Programs. The funding amounts allocated by Region and Project Area for the remittance payment, as detailed in Attachment C, are subject to the review and approval of the CRA/LA Board. The VARP enables agencies to be exempt from making the full allocation required to be made to the Low and Moderate Income Housing Fund (LMIHF), in only, based upon findings that there are insufficient other moneys to meet its debt and other obligations, current priority program needs or its obligations under the Agreement. The CRA/LA states that the payment cannot be funded solely with unobligated Tax Increment and the use of approximately $12.1 million of new Housing resources in is necessary to fund the $97.3 million remittance payment to the City under AB1 x-27. The CRA/LA requests that the Council approve a joint Resolution by the Council and the CRA/LA Board (Attachment D) allowing the CRA/LA to use approximately one third ($12.1 million) of its new Housing Funds as part of the remittance payment to the City. The funding amounts for the $12.1 million in new Housing Funds, included in Attachment D, are subject to the review and approval of the CRA/LA Board. The CRA/LA states that approximately $22.2 million in new LMIHF will remain for For , CRA/LA also requests that the Mayor and Council approve a waiver (Attachment E) of its contribution to the CAHTF, which is managed by the Los Angeles Housing Department (LAHD) pursuant to an Amended and Restated Master Cooperation Agreement between the CRA/LA and LAHD (C.F ). The CRA/LA requests to use the anticipated contribution to the CAHTF of approximately $5.7 million toward the $97.3 million remittance payment to the City under AB1x-27. The funding amounts for the $5.7 million in

7 -7- anticipated contribution to the CAHTF allocated by Region and Project Area for the remittance payment, as detailed in Attachment E, are subject to the review and approval of the CRAILA Board. The CRAILA notes that all previous commitments to the CAHTF will be honored and processed upon the City's adoption of the Ordinance. Pending Litigation On July 18, 2011, the California Redevelopment Association (Association) and the League of California Cities (LCC), the Cities of San Jose and Union City filed a lawsuit (Petition for Writ of Mandate) requesting the California Supreme Court to overturn AB1x26 and AB1x27 because the bills violate Proposition 22. The Association and the LCC also filed an Application for Temporary Stay requesting that the Court prevent the legislation from going into effect until the Supreme Court can decide the lawsuit. The Petition requests the Court to make an initial ruling on the request for stay by August 15, On July 27, 2011 the State filed a response to the Association/Lee petition. The State agrees with the request for the Supreme Court to assume original jurisdiction of the case and calls for an expedited briefing schedule. The State opposes the request for a stay claiming that the petitioners have not provided sufficient justification for a stay (did not meet the irreparable damage test) and calls for the petition to be denied on the merits. On Friday, July 29, 2011 the Association/LCC filed an Informal Reply in Support of Petition for Writ of Mandate and Temporary Stay. The Court will determine whether or not to hear the suit and whether a stay will be issued. If the stay is granted, the dates in the legislation are suspended until a ruling is issued. Therefore, we recommend that the City Attorney be requested to monitor this litigation and report to the Council once the court rules on the stay request (or other disposition). RECOMMENDATIONS It is a policy decision as to whether to dissolve or continue the Community Redevelopment Agency (CRAILA). If the Mayor and Council choose to continue the CRAILA, the following recommendations should be approved: That the Council, subject to the approval of the Mayor: 1. Adopt the attached urgency Ordinance (Attachment B), including findings, authorizing participation in the Voluntary Alternative Redevelopment Program (V ARP) pursuant to Parts 1.9 of Division 24 of the California Health & Safety Code thereby allowing the continued existence and operation of the Community Redevelopment Agency of the City of Los Angeles (CRAILA), including the making of the required annual remittance payments to the County Auditor-Controller ($97.3 million for Fiscal Year ). On August 1, 2011, the California Director of Finance calculated the City of Los Angeles' (City) remittance payment to be $96.5 million for The CRAILA states that the additional amount will be a contingency and the funds will be released back to the respective project areas if not needed); 2. Authorize the CRAILA Chief Executive Officer (CEO), or designee, and the City Administrative Officer (CAO), or designee, with the assistance of the Chief Legislative

8 - 8 - Analyst (CLA), to negotiate and execute a Remittance Funding Agreement for the transfer of funds by the CRA/LA to the City in an amount sufficient for the City to make the required annual remittance payments to the County Auditor-Controller under the VARP and for the purpose of financing certain specified activities within the City's redevelopment area, subject to the review and approval of the City Attorney as to form and the CRA/LA Board of Commissioners (Board); 3. Approve the required $97.3 million remittance payment for from the CRA/LA to the City subject to the review and approval of the CRA/LA Board (Attachment C); 4. Approve the CRA/LA's request to waive its five percent contribution (approximately $5.7 million) to the City's Affordable Housing Trust Fund for pursuant to the Amended and Restated Master Cooperation Agreement for the City's Affordable Housing Trust Funds and to use these funds as part of the $97.3 million remittance payment for , subject to the review and approval of the CRAILA Board (C.F , Attachment E); 5. Instruct the CRA/LA to work closely with the Los Angeles Housing Department (LAHD) to ensure that projects that were previously approved and have funds leveraged by LAHD and the CRA/LA can proceed in an expeditious manner; 6. Authorize the Controller to establish a new fund entitled the Voluntary Alternative Redevelopment Program (VARP) Fund to be administered by the CAO to deposit the funds from the CRA/LA and use interest earned thereon for City costs associated with the administration of the VARP Fund. (Upon receipt of funds, separate accounts should be created in accordance with VARP. All expenditures from the VARP Fund should be consistent with existing City policy and expenditure procedure.); and, 7. Authorize the Controller to make annual remittance payments to the County Auditor-Controller pursuant to the Remittance Funding Agreement for participation in the VARP; That the Council: 8. Adopt a Joint Resolution by the Council and the CRA/LA Board making certain findings and determinations in accordance with Assembly Bill (AB) 1 x-27 and authorize the CRA/LA to reduce its allocation to the Low and Moderate Income Housing Fund by the estimated amount of $12.1 million during (Attachment D), subject to the review and approval of the CRA/LA Board and the City Attorney as to form; 9. Instruct the CRA/LA CEO, or designee, to report to the Mayor and Council: a) by August 31, 2011 with revised budget schedules and an updated CRA/LA staffing plan for the CRA/LA's Proposed Budget and Work Program which reflects the reduction in funding available to the CRAILA based on the required annual remittance payment; and, b) by January 1, 2012, with a three-year CRA/LA staffing plan ( ) that would address the balancing of resources required to meet the City's work program priorities in light of diminishing resources;

9 nstruct the Chief Legislative Analyst and the CAO to report on the CRA/LA's Proposed Budget and Work Program and include the impacts on the CRA/LA staff, operations, work program and future implications of the $97.3 million required annual remittance payment to the County Auditor-Controller for ; 11. Request the City Attorney to monitor the Litigation and report to the Council once the Court acts; 12.Authorize an appeal of the determination of the California Director of Finance that City's remittance payment for is $96.5 million; 13.1nstruct the CRA/LA CEO, or designee, to report to the Council if there is a reduction in the FY payment as the result of an appeal to determine how the funds will be used (i.e., as a contribution to the City's Affordable Housing Trust Fund or returned to the project areas); and, 14.1nstruct the City Clerk to publish the Ordinance upon approval. FISCAL IMPACT STATEMENT There is no City General Fund impact if the City opts to continue redevelopment activities under Assembly Bill (AB) 1x-27. Due to the enactment of AB 1x-26 and 1x-27, the Community Redevelopment Association estimates th.e Community Redevelopment Agency's (CRA/LA) prorata share of the $1.7 billion share to be $97.3 million for Fiscal Year (FY) The California Director of Finance has calculated the City's prorata share to be $96.5 million for FY Starting in , AB1x-27 requires two ongoing annual payments. Based on a four-year projection period ( ), preliminary estimates show the CRA/LA's share ranges between $25.5 million and $28.4 million. The amount in subsequent years may be reduced as project areas expire, but could increase as new project areas are adopted or if bonds are issued in the future. There is an unknown negative fiscal impact if the City of Los Angeles is the successor agency under AB 1 x-26. The City's Financial Policies are not applicable to the CRA/LA. The CRA/LA is only bound by the disclosure provisions of the City's Debt Management Policies. Attachments: Attachment A Attachment B Attachment C Attachment D Attachment E Analysis of options available to the City relating to the CRA/LA Ordinance authorizing participation in the VARP Remittance Payment Amount by Region and Project Area Housing Fund Joint Resolution City's Affordable Housing Trust Fund Waiver

10 -10- FINDINGS 1. Request for Report On July 1, 2011, Council instructed the Chief Legislative Analyst (CLA) and City Administrative Officer (CAO), with the assistance of the City Attorney and the Community Redevelopment Agency (CRAILA), to report in 30 days to the Mayor and Council on the following: a) review and analyze the impact of Assembly Bills (AB) 1 x-26 and 1 x-27 on the City of Los Angeles (City) and the CRAILA and the steps necessary to authorize the CRAILA to exercise the voluntary opt-in provided for in the legislation while preserving all legal rights and remedies of the City. This matter was referred to the Housing, Community and Economic Development Committee, which requested a joint report from the CLA and CAO. 2. Redevelopment Trailer Bills When AB1x-26 was enacted on June 29, 2011, most of the authorities of Redevelopment Agencies (RDAs) were immediately suspended. AB1x-26 provides for the dissolution of RDAs as of October 1, 2011 and for the establishment and designation of successor agencies and oversight boards to wind down the affairs of the dissolved RDAs. By November 1, 2011, a successor agency would be constituted to wind down the affairs of the CRAILA by paying and performing existing contractual obligations and then liquidating its remaining money and assets, including selling real property owned by CRAILA. All actions of the oversight boards may be reviewed by the State Department of Finance. 3. Ordinance AB1x-27 establishes a Voluntary Alternative Redevelopment Program (VARP) whereby a RDA is exempt from the dissolution measures of AB1x-26 if the legislative body (i.e. City Council) enacts an Ordinance on or before October 1, 2011 requiring that the City make annual remittance payments to the County Auditor-Controller for deposit into a Special District Allocation Fund and Educational Revenue Augmentation Fund. The deadline for enactment of the Ordinance can.be extended until November 1, 2011 if the legislative body adopts a non-binding resolution expressing its intent to "opt-in" under the VARP prior to October 1, In order to meet the October 1, 2011 deadline, the City Council must adopt an Ordinance by August 19, The proposed Ordinance (Attachment B) includes findings that support adopting this as an urgency Ordinance. 4. Annual Remittance Payments The Ordinance provides the establishment of a separate fund to be known as the VARP Trust Fund for the receipt and deposit of the funds from the CRAILA. The VARP Fund will be administered by the CAO. Payments to the County Auditor-Controller shall only be made to the extent there are sufficient funds in the Fund. If the City fails to make the required remittance payments, then the CRAILA may be dissolved in accordance with AB1x-26. On August 1, 2011, the California Director of Finance posted on its website the calculations for each RDA's remittance payment amount for and the City's remittance payment is $96.5 million. For purposes of calculating the payment to the County by project area, the

11 CRA/LA has used the original number of $97.3 million estimated by the Community Redevelopment Association as the payment. The actual payment will be that required by the State or as determined by any subsequent appeal. The CRA/LA states that the additional amount will be a contingency and the funds will be released back to the respective project areas if not needed. Starting in , AB1x-27 requires two ongoing annual payments. The City (through the CRA/LA) is obligated to transfer approximately $25.5 million to the County Auditor-Controller for its share of the State's $400 million continuing remittance obligations plus the so-called 80 percent school share. Preliminary estimates show the CRA/LA's share ranges between $25.5 million and $28.4 million (the amount in the future years may be reduced as project areas expire, but could increase as new project areas are adopted or if bonds are issued in the future). 5. Housing Funds The California Health and Safety Code sections and require the CRA/LA to use at least 20 percent of property taxes allocated to the CRAILA for the purpose of increasing, improving, and preserving the City's supply of low and moderate income housing and to hold such funds in a separate Low and Moderate Income Housing Fund (Housing Fund/20 percent funds) until expended for the designated purpose. If the City makes a finding that there are insufficient moneys to meet its debt and other obligations, current priority program needs or its obligations under the Agreement, then AB1x-27 authorizes the CRA/LA to reduce its allocation of Tax Increment to the Housing Fund only for and not in future years. The CRA/LA has indicated that its available and uncommitted tax increment funds have been substantially reduced for a variety of reasons: 1) the CRA/LA's $85.5 million payment to the State in prior fiscal years under the Supplemental Educational Revenue Augmentation Fund (SERAF); 2) tax increment receipts have been negatively affected by delayed investments due to the slow recovery from the economic recession; and, 3) the capacity of the CRA/LA's 31 project areas to meet debt service and contractual obligations and implement current priority programs is greatly diminished by the need to fund their respective portions of the remittance obligations under the Agreement. CRA/LA staff has analyzed each of the project area budgets to identify sufficient resources to fund their share of the remittance payments, which has included eliminating or reducing commitments to projects and activities, and unencumbering prior year commitments. Based on such eliminations and reductions to priority redevelopment projects and activities, the CRAILA has determined that there are insufficient moneys to meet its debt and other obligations, current priority program needs, or its obligations under the Agreement without being exempt from making the full allocation required to be made to the Low and Moderate Income Housing Fund for FY The CRA/LA requests Council approval of a waiver of its additional five percent contribution to the City's Affordable Housing Trust Fund (CAHTF). The City's Amended and Restated Affordable Housing Trust Funds Agreement (CAHTF Agreement) was approved by the Council in June 2010 and is for a five-year term ( ). The CAHTF Agreement included a

12 - 12- provision which allows the CRA/LA to request a waiver for any and all project areas of the required five percent contribution to the CAHTF in the event that the State requires Education Revenue Augmentation Fund (ERAF) or similar payments. Pursuant to the CAHTF Agreement, such waivers are subject to Council review and approval. The CRA/LA notes that in the eight fiscal years in which the CAHTF Agreement and the amended and restated CAHTF Agreement have been in effect, the CRA/LA has contributed approximately $57.2 million to the City's CAHTF, which has assisted 60 projects totaling approximately 3,700 units of affordable housing in the City. The CRA/LA contends that the CRA/LA can continue to have a robust housing program even after requesting a waiver of the five percent contribution to the CAHTF in the current fiscal year because of future 20 percent funds for housing and more than 90 active housing projects in the CRA/LA's pipeline. The pipeline projects include more than 5,400 units of affordable to very-low, low- and moderateincome families and another 7,000 units of workforce and market-rate housing. The CRAILA indicates that all of these projects have executed agreements, and do not need additional financing from the CRA/LA to proceed effectively into construction over the next 12 to 18 months. According to Los Angeles Housing Department (LAHD), the majority of affordable housing in Los Angeles is funded by both LAHD and CRA/LA so the loss of redevelopment funds for affordable housing is a serious concern for LAHD and the City as a whole. Our offices recommend approval of the Resolution and the waiver request, however, we also recommend that the CRA/LA continue to work closely with LAHD to ensure that projects that were previously approved and have funds leveraged by LAHD and the CRA/LA can proceed in an expeditious manner. If an appeal is filed, and the FY payment is less than $96.5 million, the CRA/LA is instructed to report to Council to determine if savings could be contributed to the City's Affordable Housing Trust Fund. 6. Litigation On July 18, 2011 the California Redevelopment Association (Association) and the League of California Cities (LCC), the Cities of San Jose and Union City filed a lawsuit (Petition for Writ of Mandate) requesting the California Supreme Court to overturn AB1x26 and AB1x27. The central claim in the lawsuit is that these bills violate Proposition 22, the constitutional amendment passed by 61 percent of California voters in November 2010 which explicitly prohibits the "seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with" revenue dedicated to local governments. The revenues protected by Proposition 22 specifically include the annual increments of property taxes (tax increment) allocated to California's 400 redevelopment agencies. The Court will determine whether or not to hear the suit and/or whether or not a stay will be issued. 7. CRA/LA Proposed Budget On May 5, 2011, the CRA/LA Board of Commissioners approved its Proposed Budget and Work Program which allocates a total amount of $430.3 million in funds primarily from tax increment receipts (C.F ). The CRA/LA's Work Program totals $235.6 million, the operating budget is allocated $49.1 million (salaries, benefits and equipment) and the balance is $145.6 million for finance expense and reserves. The source of funds for the $97.3 million

13 - 13- remittance payment for is a combination of Tax Increment, Low and Moderate Income Housing Funds, Taxable Bond Proceeds and General Revenue. The CRA/LA analyzed project area budgets in order to identify sufficient resources to fund the payment. The process included eliminating or reducing commitments to projects and activities and unencumbering prior year commitments. The CRAILA states that the amounts contributed by individual project areas were subject to constraints imposed by eligible funding sources and certain limitations on available resources (i.e., need to account for encumbrances and contractual obligations). For the ongoing payments beginning in , the CRA/LA anticipates that the constraints will be less, which will allow for a more balanced, fair-share allocation of the remittance amounts among individual project areas. On July 1, 2011, the Council adopted a three-month limited budget authorization (July 1, 2011 to October 1, 2011) for the CRA/LA in order to analyze the impacts of AB1x-26 and AB1x-27. The CRA/LA authorized position count was 270 in and it implemented an Early Retirement Incentive Program (ERIP). On December 16, 2010, 44 employees retired due to ERIP. On July 1, 2011, the Council also limited CRA/LA budgeted staffing levels to 213 authorized positions (its position level as of June 27, 2011) with all new employee hires and back fill authority contingent upon approval of the CLA and CAO. If the City adopts the Ordinance, the CRA/LA will have lower funding levels available to fund projects and pay operating costs and the required annual remittance payments. We recommend that the Mayor and Council instruct the CRAILA to report: a) by August 31, 2011 with revised budget schedules and an updated CRA/LA staffing plan for the CRA/LA's Proposed Budget and Work Program which reflects the reduction in funding available to the CRA/LA based on the required annual remittance payment; and, b) with its Proposed Budget and Work Program a three-year CRA/LA staffing plan ( ) that would address the balancing of resources required to meet the City's work program priorities in light of diminishing resources. ~<aw--- Annemarie Sauer Legislative Analyst Lisa John n Smith Senior Ad istrative Analyst MAS:GFM:LJS:AS: c

14 NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION "A"-- Dissolution of CRA/LA OPTION "B" - Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 BOND MANAGEMENT Successor Entity staffs on-going management Continuation of bonding program allowed, (CRA/LA now manages a $1.9 billion bond portfolio, of current bonds only. Significant staff but fewer resources will reduce including 67 tax allocation bonds, 29 conduit bonds, allocation will be required. No new bonds to be opportunities in future. Issuance of conduit 15 Financing Authority Bonds, and 1 parking system issued for redevelopment or economic bonds could continue without limitation. revenue bond.) development purposes; no conduit bonds for third-party, private investments. GRANTS Oversight Board can order Successor Entity to Continuation of active grant identification, (CRA/LA now manages 75 federal, state, and regional return existing grants if match is more than 5%. application, and management of grant grant awards, many with matching fund requirements No new grant applications or awards. resources. often front-funded by CRA/LA tax increment.) Successful implementation of current grants will be challenged by limits on Successor Entity staff budget. POTENTIAL NEW REDEVELOPMENT PROJECT AREAS All new redevelopment project area studies Ability to create new or revised (CRA/LA now has under study 9 potential new or would be canceled, and no potential in the redevelopment project areas would remain. merged redevelopment project areas) future for creating new projects areas, or Adoption of new areas would further revising existing project areas. redevelopment and provide additional resources in future years to new areas of the City. JOINT POWERS AGREEMENTS Unclear how the Successor Entity can/would CRA/LA can maintain existing relationships {CRA/LA is now a partner in three Joint Powers participate in future, on-going functions of and work program with the JPAs. Agreements: Community Redevelopment Financing these Authorities. The Oversight Board would Authority (CRFA); the Los Angeles Grand Avenue have the power to terminate any agreement Authority; and the Los Angeles State Building between the CRA/LA and any JPA that is a Authority. public entity located in LA County where the ~ ~ CRA/LA is obligated to provide funding if the Oversight Board finds that "early termination would be in the interests of the taxing entities." Page 1 of7 ~ ~..., ;:t>

15 NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION ua" --Dissolution of CRA/LA OPTION ub" - Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 MANAGEMENT SERVICE AGREEMENTS (CRA/LA now The Oversight Board would likely require the CRA/LA could continue to support these has management service agreements with the Los Successor Entity to cancel these Agreements. organizations until such time that they Angeles Development Fund (LADF) and the Los become self-sufficient. Angeles River Revitalization Corporation to provide a wide range of administration, policy development financial, and in-kind resources. EXISTING AND FUTURE REDEVELOPMENT AND The Oversight Board will require that the Existing work program could continue to be ECONOMIC DEVELOPMENT WORK PROGRAM Successor Entity wind down all activities to the implemented, and new projects added in (CRA/LA has 152 individual work program elements in maximum extent possible. The Successor Entity future years, albeit with significant its FY12 proposed budget) is not permitted to proceed with any projects constraints on amount of tax increment (or amended projects) that are not clearly resources available. "enforceable obligations." Even for "enforceable obligations" Oversight Board can determine to terminate or renegotiate in order to reduce liabilities. Staff resources to implement existing work program would be severely limited --to a maximum expenditure of $12 million (5% of $240 million FY12 Gross Tl) in the first year and $7 million (3% per year in following years). No additional projects could be approved upon decision to eliminate the CRA/LA. BROWNFIELDS REMEDIATION Successor Entity mandated to liquidate Existing sites could continue to be (CRA/LA currently has 17 Brownfields sites under property assets, with unclear implications for remediated, and new sites could be active cleanup. CRA/LA owns 9 contaminated sites in on-going liability. No new Brownfields sites accepted into the Brownfields work various stages of environmental remediation.) would be accepted for remediation. program, within constraints of reduced tax increment resources. Page 2 of7

16 NO. 8 9 ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION 11 A" -- Dissolution of CRA/LA OPTION Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 MONITORING AND ENFORCEMENT OF EXISTING Each agreement is subject to analysis of Existing agreements could continue to be DEVELOPMENT AGREEMENTS (CRA/LA currently whether it is an enforceable obligation. The monitored and enforced by the CRA/LA, and manages 208 Owner Participation Agreements and Oversight Board could, in its sole discretion, agreements executed for new projects. 205 other forms of Participation Agreements, determine certain agreements are not enforcing private sector obligations including Project enforceable obligations. Unclear whether the Labor Agreements (PLA), Local Hire, and Prevailing and Successor Entity would be at risk from parties Living Wage requirements, and issues Certifications of to any disavowed agreements. Staffing and Completion and Estoppel Letters to private litigation costs using tax increment would be owners/lenders as required.) subject to the cap on administrative costs. CONSTRUCTION MONITORING AND SUPERVISION OF The Oversight Board will require that the The projects in the development pipeline CONTRACTUAL OBLIGATIONS Successor Entity wind down all activities to the would continue to be actively managed by (CRA/LA has 122 active projects: 68 projects in the maximum extent possible. The Successor Entity the CRA/LA. pipeline (not yet under construction); 36 projects is not permitted to proceed with any projects under construction; 8 projects recently completed and (or amended projects) that are not clearly 10 projects on hold due to economic factors.) enforceable obligations. Even for enforceable obligations, Oversight Board can determine to terminate or renegotiate in order to reduce liabilities. To the extent the Successor Entity may undertake some or all of these contractual obligations, staffing costs using tax increment would be subject to the cap on administrative costs. ~ Page 3 of7

17 NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor' under Oversight Board) and ABlx-27 (Continuation) OPTION 11 A" --Dissolution of CRA/LA OPTION Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 AFFORDABLE HOUSING PRODUCTION & City can agree to retain the housing functions CRA/LA would continue its commitment to REHABILITATION of the CRA/LA as described in the CRL; financing affordable housing because it (Under Community Redevelopment Law (CRL), CRA/LA however, there would be no funds available to would be allowed to collect and deposit into annually allocates 20% of its tax increment to produce fund these activities. All unencumbered its Low and Moderate Income Funds. With and rehabilitate affordable housing for low and balances of CRA/LA Low and Moderate Income CRA/LA funding, the City can better leverage moderate income households. To date, 25,000 homes Funds would be remitted to the County for private investment and tax credits while have been developed or rehabilitated, 90% of which distribution to taxing entities. In addition, maintaining a higher level of production. are low or moderate income. In addition, CRA/LA there would be no funding available to make a contributes tax increment to the City's Affordable contribution to the CAHTF. The impact would Housing Trust Fund (CAHTF). be that production levels in the City will be cut in half. ENFORCEMENT OF HOUSING AFFORDABILITY If the City elects to retain the redevelopment CRA/LA could continue to monitor COVENANTS housing functions, the City would be compliance with the affordability covenants (CRA/LA has 525 affordability covenants recorded responsible for monitoring and enforcement of and record new covenants for new housing representing over 22,000 units throughout the City.) affordability covenants with diminishing developments. administrative resources as described in Item #6 and #10. Staffing costs using tax increment would be subject to the cap on administrative costs. If the City elects not to assume the redevelopment housing responsibilities, the enforcement obligations would transfer to the Housing Authority. Page 4 of7

18 NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION "A"-- Dissolution of CRA/LA OPTION "B" - Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 CAPTURE OF TAX INCREMENT FOR CITY OF LOS The City would continue to receive AB1290 The City would continue to receive AB1290 ANGELES BLIGHTED AREAS pass-through payments. It would also be pass-through payments. Moreover, the (Over the life of a redevelopment project area, and to entitled to approximately 33% of tax increment CRA/LA would continue to collect tax the extent debt is incurred, CRA/LA is entitled to after deducting payments for enforceable increment which, after reserving amounts collect tax increment to service debt and finance obligations and the pass through payments. necessary to transfer to the City to make the activities meeting a redevelopment purpose. For The County's and School's share of property required State Contributions, would allow project areas adopted after 1/1/94, the City and other taxes would not be available for investment by for a smaller albeit highly-focused priority taxing entities receive so-called AB1290 pass-through the City. work program in each project area. The payments. Upon project area expiration, the CRA/LA County's share of property taxes would may collect tax increment solely to service debt, continue to be available for investment by returning the balance to the various taxing entities.) the City. CURRENT EMPLOYEES All current CRA/LA employees would be CRA/LA staff would remain employees of the (CRA/LA is currently staffed at 213 regular, full-time protected (and their current MOU) by CRA/LA. positions. The majority of the employees are becoming employees of the Successor Entity. represented by AFSCME, in four bargaining units. An City required to create separate bargaining existing MOU is in force, and will expire on units for these employees. Staffing costs using 6/30/2012.) tax increment would be subject to the cap on administrative costs. Page 5 of7

19 I I NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as 11 Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION,;A"-- Dissolution of CRA/LA OPTION 11 8" - Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 EMPLOYEE PENSION AND OTHER POST EMPLOYMENT These are enforceable obligations, the Pension and OPES obligations would BENEFITS (OPEB) Successor Entity, subject to approval of the continue to be serviced by CRA/LA over a (The CRA/LA had an unfunded actuarial accrued Oversight Board, would need to address how to longer period of time as resources become liability of $23.5million to CaiPERS as well as a $55.3 pay for or seek to extinguish these obligations available. million actuarial accrued liability for retiree health (via advance funding or other means). care, both as of 6/30/2010.) SITES HELD FOR FUTURE REDEVELOPMENT (CRA/LA Successor Entity would be required to dispose Sites could be conveyed for private acquired or controlled over 300 sites. Of this total, 56 of assets and properties of the CRA/LA as development, with appropriate land use were recently quitclaimed to the City, consistent with directed by the Oversight Board, with controls and community benefits, via a the Cooperation Agreement) significant impact on a number of high-priority disposition and development agreement redevelopment projects. Sales proceeds not (DDA) or other applicable means. required for wind down of CRA/LA would be transferred to the County for distribution to taxing entities. LEASES Leases are agreements that would be CRA/LA could evaluate opportunities to (CRA/LA has operating leases for its Central Office, enforceable obligations to be honored until the consolidate and reduce facility costs, leading Regional Offices, and Maintenance/Warehouse. Successor Entity could terminate or renegotiate to non-renewal or early termination of some Contractual obligations total $26 million over the term these agreements, subject to the Oversight leases. of the leases.) Board. (CRA/LA and the City have a Cooperation Agreement, invalidate the Cooperation Agreement, in order as a subcontractor, to implement the work whereby CRA/LA pledged $930 million of future year to distribute the funds pledged under the program objectives under the Cooperation resources in consideration of the City's assistance to Agreement to the taxing entities. A number of Agreement, or could modify the implement 417 discrete activities. The CRA/LA provisions in AB1x-26 allegedly invalidate Cooperation Agreement, at its option. identified 152 individual work program objectives for certain types of cooperation agreements, such implementation during FY12 under the Cooperation as the one between the CRA/LA and City. Agreement.) Page 6 of7 COOPERATION AGREEMENT The Oversight Board would likely seek to The City could continue to have the CRA/LA,

20 NO ATTACHMENT A: VOLUNTARY ALTERNATIVE REDEVELOPMENT PROGRAM ANALYSIS OF OPTIONS AVAILABLE TO THE CITY OF LOS ANGELES RELATING TO THE CRA/LA Following Enactment of ABlx-26 (Dissolution; City as "Successor" under Oversight Board) and ABlx-27 (Continuation) OPTION 11 A" -- Dissolution of CRA/LA OPTION "B" - Continuation of CRA/LA TOPIC under ABlx-26 under ABlx-27 LEGAL SETILEMENTS The Successor Entity, as directed by the CRA/LA would continue to manage its legal (There are a number of active legal matters in which Oversight Board, could only participate in affairs to a successful outcome. the CRA/LA has been named.) settlements if entered by a court of competent jurisdiction or binding arbitration. The Successor Entity could then make scheduled payments for judgments or settlements entered by a competent court of law or binding arbitration decisions. Some legal settlements entered into prior to ABlx-26 may constitute enforceable obligations and the Successor Entity would be bound by these obligations, subject to Oversight Board review. LAND USE CONTROLS The Successor Entity will be responsible for The CRA/LA continues to be responsible for (The 31 redevelopment plans contain land use implementing the land use controls of the administering the requirements of adopted controls that are often more restrictive than the various redevelopment plans including redevelopment plans regarding land use underlying zoning.) determinations of consistency with the land controls; the CRA/LA may adopt new use designations, conformance with adopted Designs for Development as deemed Designs for Development, and approval of appropriate by the CRA/LA Board of requests for land use variations pursuant to the Commissioners and may modify land use applicable provisions of a particular restrictions through plan amendments in redevelopment plan. l-:lowever, administrative accordance with State law. resources are not provided for this purpose. Page 7 of7

21 ATTACHMENT 8 IN T

22 ORDINANCE NO An urgency ordinance authorizing participation in the voluntary alternative redevelopment program pursuant to Part 1.9 of Division 24 of the California Health & Safety Code thereby allowing the continued existence and operation of the community redevelopment agency of the City of Los Angeles, California. WHEREAS, the California State Legislature, in conjunction with its adoption of the State budget, passed Assembly Bill x1 26 (AB 26) and Assembly Bill x1 27 (AB 27), on June 15, 2011, both of which were signed by the Governor on June 28, 2011;and WHEREAS, AB 26 amended various provisions of the Community Redevelopment Law (Health & Safety Code Section 33000, et seq.) (CRL) and added Parts 1.8 and 1.85 (Parts 1.8/1.85) to the CRL which immediately suspended most of the authorities of redevelopment agencies and which provides for their dissolution as of October 1, 2011; and WHEREAS, AB 27 added Part 1.9 to the CRL (Part 1.9) which establishes a Voluntary Alternative Redevelopment Program (VARP) whereby a redevelopment agency may be exempted from dissolution under Parts 1.8/1.85 and may continue to exist and function under the CRL upon the enactment of an ordinance by the legislative body that created the redevelopment agency thereby committing itself to comply with the provisions of Part 1.9 and make annual remittance payments to the County Auditor Controller (County); and WHEREAS, the City of Los Angeles (City) desires to take the necessary actions under Part 1.9 to participate in the VARP to continue the existence of The Community Redevelopment Agency of the City of Los Angeles, California (CRA/LA) in order for the CRA/LA to continue to redevelop blighted communities, create jobs, improve public facilities and infrastructure and provide affordable housing to low and moderate income persons and families; and WHEREAS, Part 1.9 authorizes the City to enter into an agreement with the CRAILA, whereby the CRA!LA would, on an annual basis, transfer tax increment to the City in an amount equal to but not to exceed the amount of the City's remittance payment to the County for the purpose of financing activities within the City's redevelopment area that are related to accomplishing the redevelopment agency project goals; and WHEREAS, Part 1.9 provides that if the City fails to make the required annual remittance payments, then, among other sanctions, the CRA/LA may be dissolved under Parts 1.8/1.85; and 1

23 WHEREAS, Part 1.9 provides that the California Department of Finance is to calculate the amount of the City's remittance for , pursuant to a formula set forth therein and that such remittance is to be paid in two equal installments on January 15, 2012, and May 15, 2012; and WHEREAS, the City is to make annual remittance payments to the County on January 15, and May 15, each year thereafter in amounts calculated pursuant to a formula set forth in Part 1.9; and WHEREAS, the California Redevelopment Association, the League of California Cities and others filed a Petition for Writ of Mandate in the California Supreme Court that challenges AB 26 and AB 27 on State Constitutional grounds and seeks to invalidate the legislation and to stay its implementation until the Supreme Court issues a decision on the lawsuit; and WHEREAS, the City Council does not intend, by enactment of this Ordinance or by making any remittance payments to the County, to waive any of its constitutional and/or legal rights and, therefore, reserves all of its rights to challenge the validity of any or all provisions of AB 26 and/or AB 27 in any administrative or judicial proceeding and/or to repeal this Ordinance, without prejudice to the. City's right to recover any amounts remitted under Part 1.9; and WHEREAS, the City Council does not intend, by enactment of this Ordinance, to pledge any of its general fund revenues or other assets to make the annual remittance payments required under Part 1.9, but rather that the source of funds for the annual payments to the County be solely from the funds provided to the City from CRA/LA pursuant to the City-CRA/LA agreement authorized hereby and in accordance with Part 1.9; and WHEREAS, the City Council does not intend by enactment of this Ordinance to waive any rights of appeal regarding the amount of any remittance payment calculated by the California Department of Finance, as provided in Part 1.9; and WHEREAS, the City Council intends that the City's making of remittance payments be made under protest and without prejudice to the City's right to recover such amounts and interest thereon, in the event that there is a final determination that AB 26 and AB 27 are unconstitutional or otherwise illegal; and WHEREAS, AB 26 by its express terms "suspend[s] various agency activities and prohibit[s] agencies from incurring indebtedness" and it is the clear intent of AB 26 to "[b]ar existing redevelopment agencies from incurring new obligations, prior to dissolution;" and WHEREAS, under AB 26 until the effective date of this Ordinance, CRA/LA cannot legally incur any new monetary or legal obligations or expand any existing 2

24 monetary or legal obligations or enter into new agreements with any person for any purpose or modify any existing agreements; and WHEREAS, CRA/LA is responsible for the maintenance and operation of a significant number of properties in blighted neighborhoods; and WHEREAS, certain contracts necessary for the proper and safe maintenance and operation of CRA/LA properties have expired, and, in light of AB 26, the CRA/LA is unable to execute contracts to procure a number of critical services that are essential for the immediate preservation of the public peace, health and safety, including property management services for plumbing and other urgent repairs to its properties, fence rentals to secure vacant properties, pest control services, and security services for vacant buildings; and WHEREAS, prior to the effective date of this Ordinance, the CRA/LA is unable to continue its efforts to eliminate and prevent blight, including the remediation of buildings and structures that are unhealthy or unsafe to occupy, or properties with hazardous materials; and WHEREAS, due to the prohibition on new demolition contracts under AB 26, several deteriorated properties threaten the health and well being of surrounding communities in that they are havens for crime and risk squatter occupancy that could result in fires or other incidents leading to injury or loss of life, including properties acquired for the Jefferson/Wellington Project in the Mid-City Redevelopment Project Area, the Slauson/Wall Project in the CD9 Redevelopment Project Area and 303 South Pacific Avenue Project in the Beacon Street Redevelopment Project Area; and WHEREAS, prior to the effective date of this Ordinance, CRA/LA is not able to proceed with certain hazardous materials remediations, including the removal of an underground storage tank at 1500 West Temple Street, or with a property clean-up at 110 South Boyle Avenue, or to correct serious deficiencies in sidewalks and street lighting in the Crenshaw and Mid-City Redevelopment Project Areas, all of which threaten the public health and safety. NOW THEREFORE, Section 1. Recitals. THE PEOPLE OF THE CITY OF LOS ANGELES DO ORDAIN AS FOLLOWS: The Recitals set forth above are true and correct and are incorporated herein by reference. 3

25 Program. Sec. 2. Authorization to Participate in Voluntary Alternative Redevelopment Subject to Sections 7 and 8 herein, and to the terms and conditions of an agreement between the City and CRA/LA as authorized in Section 3 herein, the City hereby commits to participate in the VARP and to comply with the requirements of Part 1.9 of Division 24 of the California Health & Safety Code, including the making of annual remittance payments to the County, for the purpose of continuing the existence of the CRAILA to redevelop blighted communities, create jobs, improve public facilities and infrastructure and provide affordable housing to low and moderate income persons and families. Sec. 3. Authorization to Enter Into Funding Agreement with CRAILA. The City is hereby authorized to enter into a funding agreement with CRA/LA whereby CRA/LA agrees to transfer funds to the City in an amount sufficient for the City to make the annual remittance payments to the County pursuant to the VARP and Part 1.9 and to make such transfer of funds no later than 21 days prior to the due dates of the City's payments to the County. Sec. 4. Creation of the VARP Fund. There is hereby created and established within the Treasury of the City of Los Angeles a separate fund to be known as the VARP Trust Fund (Fund). The Fund shall be for the receipt and deposit of the funds from the CRA/LA pursuant to the funding agreement, along with any interest earned thereon. Money in the Fund shall be used to make the annual remittance payments to the County pursuant to Part 1.9 and this Ordinance. Payments shall only be made to the extent there are sufficient funds in the Fund. The Fund shall be administered by the City Administrative Officer, who shall make all payments authorized by this Ordinance. Sec. 5. Authorization to Take Other Necessary Actions. The City Administrative Officer is hereby authorized to execute the funding agreement with CRA/LA on behalf of the City and to execute any other documents and to take such other actions, including notifying the California Department of Finance, the State Controller and the County Auditor-Controller of the adoption of this Ordinance, as may be necessary for the City to participate in the VARP and to indicate the City's intended compliance with Part 1.9. Sec. 6. Severability. If any provisions of this Ordinance or the application thereof are held by a court of competent jurisdiction to be invalid for any reason, the remainder of this Ordinance and the application of the provisions thereof shall not be affected thereby. 4

26 Sec. 7. Reservation of Rights. It is the position of the City that certain or all provisions of AB 26 and/or AB 27 violate the California Constitution and are invalid and unenforceable and all payments made under Part 1.9 are made under protest with a full reservation of rights to recover such payments. Neither the adoption of this Ordinance, nor the acknowledgment of or references to any provisions of AB 26 and AB 27, nor the City's payment of any remittances contemplated by AB 27 shall be deemed to be, nor are they intended as, an acknowledgment of the legal validity or enforceability of AB 26 and/or AB 27, and the City reserves all rights in its sole discretion to challenge the validity of any or all provisions of AB 26 and/or AB 27 in any administrative or judicial proceeding. The City further reserves the right to appeal the County's determination of the amount of any remittance payments required to by paid by the City by Part 1.9 and further reserves the right to repeal this Ordinance, without prejudice to the City's right to recover any amounts remitted under Part 1.9. Sec. 8. Effect of Stay. In the event that a court of competent jurisdiction grants a stay regarding the implementation and/or enforcement of Parts 1.8/1.85 and/or 1.9, then the City's remittance payments shall be held in abeyance during the period while such stay is in effect. In the event that a court of competent jurisdiction determines that AB 26 and AB 27 are unconstitutional or otherwise illegal and, therefore, invalid and unenforceable, as of the date that judgment, order or decree becomes final and non-appealable, this Ordinance shall be deemed repealed and of no further force or effect. Sec. 9. Urgency. This Ordinance is hereby declared to be urgently required for the immediate preservation of the public peace, health and safety, and shall take effect immediately upon publication. The following is a statement of facts showing its urgency: The continued existence of public nuisances, including undemolished, vacant property, hazardous sidewalks and street lighting, and unremediated hazardous conditions and the continuing inability of the CRA/LA to contract for property maintenance and repair and to address emergency situations, all as described in the Recitals above, constitutes an ever- present fire and health menace and threatens the safety of persons and properties. 5

27 Sec. 10. The City Clerk shall certify to the passage of this ordinance and have it published in accordance with Council policy, either in a daily newspaper circulated in the City of Los Angeles or by posting for ten days in three public places in the City of Los Angeles: one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall; one copy on the bulletin board located at the Main Street entrance to the Los Angeles City Hall East; and one copy on the bulletin board located at the Temple Street entrance to the Los Angeles County Hall of Records. I hereby certify that this ordinance was passed by the Council of the City of Los Angeles, by a vote of not less than three-fourths of all of its members, at its meeting of JUNE LAGMAY, City Clerk By Deputy Approved Approved as to Form and Legality Mayor - CARMEN A. TRUTANICH, City Attorney By ~ CURTIS S. Kl DER Assistant City Attorney Date 1$' tal II File No

28 ATTACHMENT C Estimated State Contributions by Project Area Submitted Work Program Region Project Area 1 Reductions Bunker Hill {52,860) Central Industrial {4,348,538) Chinatown {4,880,600) Downtown Region City Center {1,191,300) Council District 9 {1,159,221) Little Tokyo {3,274,102) Total (14,906,621) Laurel Canyon {2,668,909) East Valley Region North Hollywood {9,954,945) Pacoima/Panorama City {11,652,773) Total (24,276,627) Adelante Eastside {1,826,295) Eastside Region Monterey Hills {1,442,800) Total (3,269,095) Beacon Street* {34,800) Harbor Region Hollywood & Central Region South Los Angeles Region Los Angeles Harbor* {610,171) Pacific Corridor {1,339,564) Total (1,984,535) East Hollywood/Beverly-Normandie {6,138,100) Hollywood {18,153,921) Mid City {508,500) Pico Union 1 {460,300) Pico Union 2 {2,148,200) Westlake {1,588,700) Wilshire Center/l<oreatown {11,150,420) Total (40,148,141) Broadway/Manchester* {68,800) Crenshaw* Crenshaw /Slauson* {247,700) Exposition/University Park {1,764,912) Normandie 5* {983,800) Vermont/Manchester* {43,900) Watts* {245,100) Watts Corridor* {95,500) Western/Siauson* {269,400) Total {3, 719,112) West Valley Region Reseda/Canoga Park (9,010,862) Total Contributions (97,314,993) 1 Resource-Limited Project Areas indicated with"*" 8/1/2011

29 ATTACHMENT D Attachment D: Voluntary Alternative Redevelopment Program Housing Fund Joint Resolution CITY OF LOS ANGELES THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA CITY RESOLUTION NUMBER CRA/LA RESOLUTION NUMBER A JOINT RESOLUTION OF THE CITY OF LOS ANGELES AND THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA MAKING CERTAIN FINDINGS AND DETERMINATIONS IN ACCORDANCE WITH ASSEMBLY BILL 1x- 27 AND REDUCING ITS ALLOCATION TO THE LOW AND MODERATE INCOME HOUSING FUND FOR FISCAL YEAR WHEREAS, the Community Redevelopment Agency of the City of Los Angeles, California (CRAILA) administers the implementation of various redevelopment projects, programs, and activities within 31 designated redevelopment project areas throughout the City of Los Angeles (City); and WHEREAS, on June 15, 2011, the State Legislature passed Assembly Bill 1 x-26 (AB 26) and Assembly Bill1 x-27 (AB 27), and on June 28, 2011, Governor Edmund G. Brown Jr. approved and then on June 29, 2011 the Secretary of State enrolled AB 26 and AB 27; and WHEREAS, AB 26 generally prevents redevelopment agencies from entering into new or amended obligations or contracts, and eliminates redevelopment agencies and winds down their operations; and WHEREAS, AB 27 allows redevelopment agencies to remain in existence, and to gain an exemption from the provisions of AB 26, in exchange for the payment of substantial sums of money on an annual basis to the Los Angeles County Auditor-Controller; and Page 1 of 4

30 Attachment D: Voluntary Alternative Redevelopment Program Housing Fund Joint Resolution WHEREAS, AB 27 is codified in Part 1.9 of Division 24 of the California Health and Safety Code (Part 1.9), which now comprises a portion of the California Community Redevelopment Law; and WHEREAS, AB 27 establishes a voluntary alternative redevelopment program whereby the CRA/LA is authorized to continue to exist upon the City of Los Angeles's enactment of an ordinance in compliance with the provisions of Part 1.9 (Continuation Ordinance); and WHEREAS, AB 27 requires the City of Los Angeles (City) to make specified remittances to the Los Angeles County Auditor-Controller in order to continue the existence of the CRA/LA, as provided in Part 1.9; and WHEREAS, California Health and Safety Code sections and generally require the CRAILA to use at least 20 percent of property taxes allocated to the CRA/LA pursuant to California Health and Safety Code section (Tax Increment) for the purpose of increasing, improving, and preserving the City's supply of low and moderate income housing and to hold such funds in a separate Low and Moderate Income Housing Fund (Housing Fund) until expended for the designated purpose; and WHEREAS, AB 27 authorizes the CRA/LA to enter into an agreement with the City, whereby the CRA/LA will transfer a portion of its Net Available Tax Increment or other funds to the City, in an amount not to exceed the amount of the City's annual remittance to the Los Angeles County Auditor-Controller (Remittance Agreement); and WHEREAS, AB 27 authorizes the CRAILA to reduce its allocation of Tax Increment to the Housing Fund for Fiscal Year (FY12) if the City complies with the provisions of Part 1.9 and the CRA/LA makes a finding that there are insufficient other moneys to meet its debt and other obligations, current priority program needs or its obligations under the Remittance Agreement; and WHEREAS, the CRA/LA's available and uncommitted tax increment funds have been substantially reduced as the result of an $85.5 million payment to the State in prior fiscal years under the Supplemental Educational Revenue Augmentation Fund (SERAF); tax increment Page 2 of 4

31 Attachment D: Voluntary Alternative Redevelopment Program Housing Fund Joint Resolution receipts have been negatively affected by delayed investments due to the sluggish recovery from the economic recession; and the capacity of the CRAILA's 31 project areas to meet debt service and contractual obligations and implement current priority programs is greatly diminished by the need to fund their respective portions of the remittance obligations under the Remittance Agreement; and WHEREAS, CRAILA staff has analyzed project area budgets to identify sufficient resources to fund their required proportional remittance payments and this process has included eliminating or reducing commitments to project and activities and unencumbering prior year commitments; and WHEREAS, based on such eliminations and reductions to such priority redevelopment projects and activities, the remittance payment cannot be funded solely with unobligated tax increment; use of approximately $12.1 million of new Housing resources in FY12 is necessary. WHEREAS, the City Council of the City and CRAILA Board of Commissioners has reviewed and duly considered the information set forth in this Resolution and other evidence regarding reduction of the CRAILA's allocation of Tax Increment to the Housing Fund for FY12 by the aggregate amount of approximately $12.1 million (Allocation Reduction) as identified in Exhibit A; and WHEREAS, the Allocation Reduction is based upon the current estimate of the total Remittance amount of approximately $97,300,000 that will need to be paid qy the City to the County Auditor-Controller during Fiscal Year in order to comply with Part 1.9; and WHEREAS, the CRAILA will need to pay such remittance amount to the City under the Remittance Agreement for the City to pay the Los Angeles County Auditor-Controller; and WHEREAS, if such total remittance amount is increased or decreased for any reason, then the CRAILA may need to consider a corresponding increase or decrease in the appropriate amount of the Allocation Reduction, which would be confirmed in a subsequent resolution adopted by the City and CRAILA; Page 3 of 4

32 Attachment D: Voluntary Alternative Redevelopment Program Housing Fund Joint Resolution NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Los Angeles and the Board of Commissioners of the Community Redevelopment Agency of the City of Los Angeles, California as follows: 1. The City and CRA/LA find and determine that the foregoing recitals are true and correct. 2. Based upon evidence set forth in the CRA/LA Board Memorandum, the City and CRA/LA find that there are insufficient other moneys to meet its debt and other obligations, current priority program needs or its obligations under the Remittance Agreement without being exempt from making the full allocation required to be made to the Low and Moderate Income Housing Fund for FY The City and CRAILA find and determine that it is necessary to implement the Allocation Reduction for FY The CRA/LA's Chief Executive Officer, or designee, is hereby authorized to take such actions as are necessary and appropriate to carry out and implement the Allocation Reduction for FY12 upon the City's enactment of the Continuation Ordinance. ADOPTED BY THE CITY COUNCIL ADOPTED BY THE CRA/LA BOARD: Page 4 of 4

33 FY State Contribution Impact on CRA/lA 20% Housing Funds ATTACHMENT D New20% Contributions Remaining New Agency Housing from Housing 20% Housing Percentage Project Area Resources Work Program Funds Reduction Adelante Eastside 887,000 (440,900) 446,100-50% Beacon Street 90,800 (31,200) 59,600-34% Broadway/Manchester 70,000 (68,800) 1,200-98% Bunker Hill 1,376,000 (52,860) 1,323,140 Central Industrial 909,000 (468,500) 440,500-52% Chinatown 1,261,000 (18,000) 1,243,000-1% City Center 1,034,000 (117,500) 916,500-11% Council District 9 2,133,000 (6,968) 2,126,032 0% Crenshaw 243, ,000 0% Crenshaw/Siauson 247,000 (217,100) 29,900-88% East Hollywood/Beverly-Normandie 1,641,000 (1,334,500) 306,500-81% Exposition/University Park 1,111,000 {337,700) 773,300-30% Hollywood 6,552,000 (4,143,000) 2,409,000-63% Laurel Canyon 741,000 {741,000) -100% Little Tokyo 524,000 (524,000) -100% Los Angeles Harbor 239,000 (112,300) 126,700-47% Mid City 605,000 (400,500) 204,500-66% Monterey Hills 622,000 (171,900) 450,100-28% Normandie 5 415,000 (408,000) 7,000-98% North Hollywood 2,809,000 (200,000) 2,609,000-7% Pacific Corridor* 608,000 (447,650) 160,350-74% Pacoima/Panorama City 3,320, ,320,000 0% Pico Union 1 5,000 (5,000) -100% Pico Union 2 292,000 (238,000) 54,000-82% Reseda/Canoga Park 2,591, ,591,000 0% Vermont/Manchester 127,000 (43,900) 83,100-35% Watts 13,000 (12,900) % Watts Corridor 111,000 {85,600) 25,400-77% Western/Siauson 274,000 (269,400) 4,600-98% Westlake 607,000 (543,600) 63,400-90% Wilshire Center/Koreatown 2,815,000 (656,100) 2,158,900-23% Total 34,272,800 {12,096,878) 22,175,922-35% 7/27/2011

34 Attachment E: Voluntary Alternative Redevelopment Program CRA/LA WAIVER REQUEST The Community Redevelopment Agency of the City of Los Angeles (CRNLA) is requesting a waiver of its contribution towards the City's Affordable Housing Trust Fund (CAHTF) for Fiscal Year The waiver request is being sought pursuant to Article 1 Section 1.3 of the Amended and Restated Master Cooperation Agreement for the City's Affordable Housing Trust Fund, which allows for submission of a waiver in the event that the State requires a payment under the Education Revenue Augmentation Fund ("ERAF") or similar payment. CRA/LA is requesting that the City Council, subject to Mayor's approval and ratification by the Board of Commissioners, be allowed to utilize the anticipated FY 12 9ontribution to the CAHTF of $5,738,000 towards the Initial Payment required under AB 27 (ATTACHMENT A). As is evident in the Attachment, the individual amounts generated in each project area (with the exception of Hollywood) are too small to be able to fully fund a new project. Since the waiver only covers the period of FY12, all previous commitments by CRA/LA to the CAHTF will be honored and processed upon the City's adoption of the Ordinance pursuant to AB 27. CRA/LA exceeds the Redevelopment Law mandate that redevelopment agencies spend a minimum of 20% to expand and maintain the supply of housing for low- and moderate-income households, by providing an additional 5% of its funds to assist the Los Angeles Housing Department with its CAHTF each year. Since 2004, CRAILA has provided over $57 million ($57,165,673) to the LAHD CAHTF. The attached schedule outlines this commitment. Overall, CRA's contribution has assisted 60 projects, totaling 3,698 units of affordable housing for the City of Los Angeles. Based on our analysis, CRA/LA can continue to have a robust housing program even after the waiver request of the FY 12 contribution to the City's Affordable Housing Trust Fund. AB 27 only allows the use of current (FY12) resources from the Low and Moderate Income Housing Funds (20% funds) if an Agency can demonstrate that it is unable to make the first year payment from other resources. The Resolution which will be presented to City Council requests that approximately $12.1 million be utilized for this initial payment; this represents 35% of the Agency's 20% funds for FY12. This use of CRA/LA 20% Housing Funds represents only 12% of the $100 million payment while the use of 5% funds represents 5.7% for a total of 17.7%. The remaining balance of 20% funds totals $54.5 million (FY 12 - $22.1 million; Budgeted Carryover - $32.4 million). This work program is in addition to the already approved pipeline of projects in which CRA/LA has invested more than $47 million in affordable housing projects and over $22 million in affordable housing conduit bond financing. There are 91 active pipeline housing projects. These 91 housing projects represent 12,454 units of housing for the residents of Los Angeles. Of those units, 43 percent (5,415) units are affordable to very low, low and moderate income families and the remaining 57 percent (7,039 units) are workforce and market rate housing. These affordable housing projects all have executed agreements and need no additional financing from the CRNLA to proceed effectively into construction over the next months. 11Page