MEMORANDUM. DATE: May 4, Patrick D. O Keeffe, Executive Director. Economic Development & Housing

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1 MEMORANDUM DATE: TO: FROM: SUBJECT: Patrick D. O Keeffe, Executive Director Economic Development & Housing Resolution of the Emeryville Redevelopment Agency Making Adjustments to the Adopted Budget and Authorizing a Loan from the Agency s Low and Moderate Income Housing Fund to Facilitate the Required Payment to the Alameda County Supplemental Educational Revenue Augmentation Fund (SERAF) for Fiscal Year RECOMMENDATION Staff recommends that the Redevelopment Agency adopt the aforementioned Resolution making adjustments to the adopted budget and authorizing a loan from the Agency s Low and Moderate Income Housing Fund to facilitate the required payment to the Alameda County Supplemental Educational Revenue Augmentation Fund (SERAF) for Fiscal Year BACKGROUND In 2009, the California State Legislature enacted ABX4-26, which added Sections and to the Community Redevelopment Law requiring redevelopment agencies to make certain payments to its county Supplemental Revenue Augmentation Fund (SERAF) in Fiscal Years and totaling $1.7 billion and $350 million respectively. The county "Supplemental" Educational Revenue Augmentation Funds (SERAF) will be distributed to meet the State's Prop 98 obligations to schools. The total State payment obligation is distributed amongst redevelopment agencies throughout the State based on a formula tied to total gross and net tax increment revenues of each agency. Emeryville s obligation will be $11,291,592 in Fiscal Year and $2,300,000 in Fiscal Year The first SERAF payment is due by May 10, The California Redevelopment Association (CRA) has filed a lawsuit challenging the constitutionality of this action. Although it is expected that the court will rule prior to May 10, 2010, it is necessary to appropriate these funds in case the Agency is required to make the first $11.3 million payment. California Health and Safety Code Section 33690(c) provides that if a Redevelopment Agency is unable to make its full SERAF payment for Fiscal Year , the Agency may borrow from its Low and Moderate Income Housing Fund. As a condition of borrowing from the Low and Moderate Income Housing Fund, the Agency must make a finding that there are insufficient other monies to make the required payment. Agencies are allowed to use accumulated balances in their housing fund to make their Fiscal Year SERAF payments. Funds used from the existing balances of Low- and Moderate-Income Housing Funds to make the Fiscal Year 2009-

2 Redevelopment Agency Agenda SERAF Loan Page2 10 payment would be considered loans to be repaid within five years. The Fiscal Year payment can only be made from the current year Low and Moderate Income Housing Set-Aside. DISCUSSION The Emeryville Redevelopment Agency does not have sufficient unencumbered funds to make the required SERAF payment for Fiscal Year The revenue to be received by the Agency in this fiscal year is required for the payment of debt service, administration, and existing programs and projects and is not available to make the SERAF payment. As such, staff is proposing that the Agency s Fiscal Year SERAF payment be made by borrowing 100% from the Low and Moderate Income Housing Fund. The appropriation of $11.3 million from the Low and Moderate Income Housing Fund will significantly deplete the ability of the Redevelopment Agency to pursue and fund affordable housing projects. If the CRA lawsuit is unsuccessful, the fund transfer will have significant negative impacts on the ability of the Agency to provide financial assistance for affordable housing over the coming years. Over the past year, staff has been approached by the following non-profit developers showing interest in developing sites in the City as affordable housing that were previously proposed as market rate ownership or rental housing: BRIDGE Housing presented a proposal for redevelopment of the MAZ site at 3800 San Pablo Avenue as an affordable multi-family rental development, Avalon Residential, LLC with Los Angeles-based New Economics for Women (NEW), presented a proposal for redevelopment of the Golden Gate Key site at 3706 San Pablo Avenue as an affordable multi-family rental development, BayRock Residential proposed selling the Oak Walk project to Ecumenical Association for Housing (EAH), a Bay Area based non-profit developer, to convert the property to an affordable rental development, and Madison Park Financial Corporation proposed the concept of selling their property at 3900 Adeline Street to EAH to develop the site as affordable rental housing. In December, the Agency confirmed its interest in moving forward with the affordable development concept for the 3900 Adeline Street project and directed staff to continue discussions with the developer. This project as currently conceived would provide 82 units of affordable housing and is estimated to cost $34 million. The estimated Agency contribution to the project would be $6 million. If the Agency is obligated to make the SERAF payment, this project would deplete all the Agency s available funds. FINANCIAL CONSIDERATIONS The Low and Moderate Income Housing Funds 290 and 482 currently have a total of $17.1

3 Redevelopment Agency Agenda SERAF Loan Page3 million in funding for current projects ($8.5 million in the 290 operating fund and $8.7 million in 492 capital fund). Staff is proposing that the $8.5 million of the SERAF payment be deduced from Fund 290 and $2.8 million be deducted from Fund 482. After the SERAF payment, approximately $6 million would remain for additional project expenditures from these two funds. The Redevelopment Agency must reimburse its Low and Moderate Income Housing Funds the full $11.3 million on or before June 30, This reimbursement will be included in the Redevelopment Agency s Fiscal Year and Operating Budget. The Low and Moderate Income Housing Fund loan is not proposed to bear any interest. The annual repayment to the Low and Moderate Income Housing Fund would be $2.25 million per year. This payment would reduce our short term bonding capacity by approximately $20 million until the loan was repaid. The repayments will also deplete the Redevelopment Agency s ability to fund smaller Capital Improvement Projects from excess tax increment revenue in the near term. Helen Bean, Director Economic Development and Housing APPROVED AND FORWARDED TO THE EMERYVILLE REDEVELOPMENT AGENCY PATRICK D. O KEEFFE Executive Director

4 RESOLUTION NO. RESOLUTION OF THE EMERYVILLE REDEVELOPMENT AGENCY MAKING ADJUSTMENTS TO THE ADOPTED BUDGET AND AUTHORIZING A LOAN FROM THE AGENCY'S LOW AND MODERATE INCOME HOUSING FUND TO FACILITATE THE REQUIRED PAYMENT TO THE ALAMEDA COUNTY SUPPLEMENTAL EDUCATIONAL REVENUE AUGMENTATION FUND (SERAF) FOR FISCAL YEAR WHEREAS, on June 3, 2008, as part of its two year budget process, the Emeryville Redevelopment Agency approved a resolution adopting its budget for the fiscal year (along with the budget for the fiscal year); and WHEREAS, the Emeryville Redevelopment Agency may amend this budget as required in order to adjust for changing circumstances; and WHEREAS, it is necessary to amend the budget to cover the costs of the Supplemental Educational Revenue Augmentation Fund (SERAF) shift imposed by the State of California; and WHEREAS, the California State Legislature recently enacted ABX4-26, which, among other things, added Sections and to the Community Redevelopment Law (Health and Safety Code Section et seq.) requiring redevelopment agencies to make certain payments to its county Supplemental Educational Revenue Augmentation Fund ("SERAF") in fiscal years and ; and, WHEREAS, the Emeryville Redevelopment Agency has been notified that its payment to the Alameda County SERAF for will be $11.3 million, which payment would be required to be made by May 10, 2010; and, WHEREAS, Health and Safety Code Section 33690(c) provides that if a Redevelopment Agency is unable to make its full SERAF payment for , the Agency may borrow either the amount required to be allocated to the agency's Low and Moderate Income Housing Fund for that fiscal year, or any monies in that fund, or both, in order to make the full SERAF payment; and, WHEREAS, as a condition of borrowing from the Low and Moderate Income Housing Fund, the Agency must make a finding that there are insufficient other monies to make the required payment; now, therefore, be it RESOLVED, the Emeryville Redevelopment Agency hereby finds that it does not have sufficient unencumbered funds to make the required SERAF payment for fiscal year The revenue to be received by the Agency in fiscal year is required for the payment of debt service, administration and existing programs and projects and is not available to make the SERAF payment and be it

5 Resolution Redevelopment Agency Agenda SERAF loan Page 2 of 2 FURTHER RESOLVED, the Emeryville Redevelopment Agency hereby authorizes a loan of $11.3 million (the "LMIHF Loan") from the Agency's Low and Moderate Income Housing Fund to the Agency for the sole purpose of making the SERAF payment for fiscal year The LMIHF Loan shall bear no interest, and the Agency shall repay the LMIHF Loan to the Low and Moderate Income Housing Fund on or before June 30, The LMIHF Loan shall not be made until such time as the Agency is required to pay the SERAF Payment into the Alameda County SERAF; and be it FURTHER RESOLVED, that the Emeryville Redevelopment Agency hereby amends the Adopted Budget appropriating $8,500,000 from Low/Moderate Income Housing Fund (fund 290) and $2,800,000 million from the Low and Moderate Income Housing Capital Fund (Fund 480) to the Emeryville Project Operating Fund in the amount of $7,348,000 (fund ) and to the Shellmound Project Operating Fund in the amount of $3,944,000 (fund ). ADOPTED by the Emeryville Redevelopment Agency at its regular meeting held, by the following vote: AYES: NOES: ABSENT: EXCUSED: ABSTAIN: CHAIR ATTEST: APPROVED AS TO FORM: SECRETARY AGENCY GENERAL COUNSEL