OB - Item 3A - Meet and Confer Regarding the LMIHF Due Diligence Reviews E M f
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AGENCY STAFF REPORT
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TO: THE HONORABLE CHAIR AND BOARD MEMBERS
FROM: MATTHEW HAWKESWORTH. ASSISTANT CITY MANAGER
DATE: NOVEMBER 26, 2012
SUBJECT: MEET AND CONFER REGARDING THE LMIHF DUE DILIGENCE
REVIEW
SUMMARY
On November 8, 2012 the Successor Agency received the findings (Attached) from the
Department of Finance (DOF) regarding the Due Diligence Review of the Low and
Moderate Income Housing Fund (LMIHF). The DOF has made the determination in their
initial finding that the enforceable obligations related to the Senior Housing complexes
should be funded by Real Property Tax Trust Funds ( RPTTF) and not the LMIHF. This
finding is in direct conflict the DOF's approval of the ROPS II for July to December 2012
and the ROPS III for January to June 2013 in which the DOF approved the funding of this
obligation from the LMIHF. While swapping one funding source for another funding
source would normally be very simple, this change creates some unintended
consequences which staff must clarify with the DOF in order to ensure that sufficient
funding is available for the enforceable obligations.
Staff immediately contact the DOF and submitted a request for a Meet and Confer
meeting to have an opportunity to discuss this matter. The DOF has assigned a meeting
date of November 27, 2012 at 10:30 a.m. Staff will be travelling to Sacramento in hopes
of providing clarification and to secure the necessary funding from either RPTTF or LMIHF
for the enforceable obligations.
Staff Recommendation:
No action is necessary. This is an information item only.
BACKGROUND
Funding for the Senior Housing complexes has been included and approved on each
ROPS. The Successor Agency received funding for the ROPS II in June 2012. The
Successor Agency did not receive RPTTF for this obligation as it was approved on the
ROPS to be funded with LMIHF. When the DOF approved the ROPS III, they once again
approved the funding for these agreements from existing LMIHF. Therefore, when the
DOF sent the approved enforceable obligation amounts to the County Auditor - Controller's
Office for the release of RPTTF, funding for these obligations was not included. Now that
the DOF has made their determination regarding the Due Diligence Review and have
stated that the Senior Housing obligations cannot come from LMIHF and should come
ITEM NO. 3P.
Rosemead Successor Agency Oversight Board
November 26, 2012
Page 2 of 2
from RPTTF, the Successor Agency does not have a means to instruct the County to
remit additional funds to cover the obligations. Further complicating the situation is the
fact that the Meet and Confer deadline for the ROPS III has already passed so the
Successor Agency cannot ask the DOF to amend the ROPS III to correct the funding
source. As it stands today, the DOF has determined that the Senior Housing obligations
are enforceable obligations; however, they have not provided a funding source for the
payments.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process in accordance
with the Brown Act.
Prepared by:
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Matthew E. Hawkesworth
Assistant City Manager
Attachments: LMIHF Due Diligence Review Letter
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November 8, 2012
EDMUND G. BROWN JR. • GOVERNOR
91 6 L STREET ■ SACRAMENTO CA ■ 95614.3706 ■ WWW.00F.CA.GOV
Mr. Matthew Hawkesworth, Assistant City Manager
City of Rosemead
8838 E Valley Blvd.
Rosemead, CA 91770
Dear Mr. Hawkesworth:
Subject: Low and Moderate Income Housing Fund Due Diligence Review
The City of Rosemead successor agency (Agency) submitted an oversight board approved Low
and Moderate Income Housing Fund Due Diligence Review (DDR) to the California Department
of Finance (Finance) on October 18, 2012. The purpose of the review was to determine the
amount of cash and cash equivalents available for distribution to the affected taxing entities.
Since the Agency did not meet the October 15, 2012 submittal deadline pursuant to HSC
section 34179.6 (c), Finance is not bound to completing its review and making a determination
by the November 9, 2012 deadline pursuant to HSC section 34179.6 (d). However, Finance
has completed its review of your DDR, which may have included obtaining clarification for
various items.
HSC section 34179.6 (d) authorizes Finance to adjust the DDR's stated balance of Low and
Moderate Income Housing Fund (LMIHF) available for distribution to the taxing entities. Based
on our review of your DDR, the following adjustments were made:
Senior Housing obligations totaling $458,815, procedure 8 of the DDR. Based on our
review of your DDR, the Agency has not adequately proven there will be insufficient
property tax revenues to pay for the $458,815 in obligations. HSC section 34179.5 (c)
(5) (D) states that a successor agency shall provide a listing of all approved enforceable
obligations that includes a projection of annual spending requirements to satisfy each
obligation and a projection of annual revenues available to fund those requirements.
If a DDR review finds that future revenues together with dedicated or restricted balances
are insufficient to fund future obligations and thus retention of current balances is
required, it shall identify the amount of current balances necessary for retention. The
review shall also detail the projected property tax revenues and other general purpose
revenues to be received by the successor agency, together with both the amount and
timing of the bond debt service payments of the successor agency, for the period in
which the oversight board anticipates the successor agency will have insufficient
properly tax revenue to pay the specified obligations. It is not evident the thorough
analysis required by HSC section 34179.5 (c) (5) (D) was conducted. Further, it is not
evident that future property tax revenues will be insufficient. Therefore, your request to
Mr. Hawkesworth
November 8, 2012
Page 2
retain current LMIHF balances for future obligations is denied and the LMIHF available
for distribution to the affected taxing entities will be adjusted by $458,815.
If you disagree with Finance's adjusted amount of LMIHF balances available for distribution to
the taxing entities, you may request a Meet and Confer within five business days of the date of
this letter. The Meet and Confer process and guidelines are available at Finance's website
below:
http://www.dof.ca.goy/redevelopment/meet and confer
The Agency's LMIHF balance available for distribution to the affected taxing entities is
$1,456,968 (see table below). Pursuant to HSC 34179.6 (h) (1) (B), any remittance related to
unallowable transfers to a private party may also be subject to a 10 percent penalty if not
remitted within 60 days.
LMIHF Balances Available For Distribution To Twdng Entities
Available Balance per DDR: $ 998,153
Finance Adjustments
Add:
Requested retained balance not supported: 458,815
Total LMIHF available to be distributed: $ 1,456,968
Absent a Meet and Confer request, HSC section 34179.6 (f) requires successor agencies to
transmit to the county auditor - controller the amount of funds identified in the above table within
five working days, plus any interest those sums accumulated while in the possession of the
recipient.
If funds identified for transmission are in the possession of the successor agency, and if the
successor agency is operated by the city or county that created the former redevelopment
agency, then failure to transmit the identified funds may result in offsets to the city's or the
county's sales and use tax allocation, as well as its property tax allocation. If funds identified for
transmission are in the possession of another taxing entity, that taxing entity's failure to remit
those funds may result in offsets to its sales and use tax allocation or to its property tax
allocation.
Failure to transmit the identified funds will also prevent the Agency from being able to receive a
finding of completion from Finance. Without a finding of completion, the Agency will be unable
to take advantage of the provisions detailed in HSC section 34191.4. Specifically, these
provisions allow certain loan agreements between the former redevelopment agency (RDA) and
the city, county, or city and county that created the RDA to be considered enforceable
obligations. These provisions also allow certain bond proceeds to be used for the purposes, in
which they were sold and allows for the transfer of real property and interests into the
Community Redevelopment Property Trust Fund once Finance approves the Agency's long -
range property management plan.
In addition to the consequences above, willful failure to return assets that were deemed an
unallowable transfer or failure to remit the funds identified above could expose certain
individuals to criminal penalties under existing law.
Mr. Hawkesworth
November 8, 2012
Page 3
Pursuant to HSC section 34167.5 and 34178.8, the California State Controller's Office
(Controller) has the authority to claw back assets that were inappropriately transferred to the
city, county, or any other public agency. Determinations outlined in this letter and Finance's
Housing Assets Transfer letter dated August 22, 2012 do not in any way eliminate the
Controller's authority.
Please direct inquiries to Kylie Le, Supervisor or Michael Barr, Lead Analyst at (916) 445 -1546.
Sincerely,
STEVE SZALAY
Local Government Consultant
cc: Ms. Molleda, City Clerk, City of Rosemead
Ms. Burns, Manager, Los Angeles County Department of Auditor - Controller
California State Controller's Office