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CC - Item 4A - Loan Agreement Between the City and The Rosemead Successor Agency for Capital Improvement Projects to Be Repaid by Excess Bond Proceed of The Rosemead Successor AgencyROSEMEAD CITY COUNCIL STAFF REPORT TO: THE HONORABLE MAYOR AND CITY COUNCIL and CHAIR AND MEMBERS OF THE SUCCESSOR AGENCY OF THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION FROM: JEFF ALLRED, CITY MANAGE DATE: SEPTEMBER 10, 2013 SUBJECT: LOAN AGREEMENT BETWEEN THE CITY AND THE ROSEMEAD SUCCESSOR AGENCY FOR CAPITAL IMPROVEMENT PROJECTS TO BE REPAID BY EXCESS BOND PROCEEDS OF THE ROSEMEAD SUCCESSOR AGENCY SUMMARY The City has been working to obtain approval from the State Department of Finance (DOF) for the completion of the capital improvement projects funded with existing bond proceeds from the former redevelopment commission. On August 9, 2013, the DOF provided a letter (Attachment A) to the City outlining the steps the City must follow in order to expedite the intended bond funded projects. In the letter, the DOF suggests that the City may want to utilize the permitted loan procedures of Health and Safety Code section 34173(h) to permit the City to move forward with the capital improvement projects in a timelier manner. City staff and the City Attorney reviewed the DOF letter and the Health and Safety Code, and agree that executing a loan agreement between the City and the Successor Agency will provide for the most expedited method for moving forward with the intended capital improvement projects. Under the loan agreement, the City will loan the Successor Agency the funds to construct capital improvement projects, and the City will be reimbursed by the Successor Agency every six months with the first reimbursement on January 31, 2014. It is important to note that the Successor Agency has control of all the bond funds in a bank account and will not need to wait for funding through Tax Increment or the DOF. The City will loan the Successor Agency funds, which will allow staff to move forward immediately with some of the capital improvement projects, including the construction of the Public Plaza and the expansion of the Rosemead Community Recreation Center (RCRC). Bids have already been issued for the Public Plaza construction and an award may be made at the September 24, 2013 City Council meeting. Additionally, engineering and planning work necessary for the RCRC expansion will be completed as soon as possible in an effort to meet the previously promised deadline of July 1, 2014 for re- opening of the center. ITEMNUMBER: q 1 City Council Meeting September 10, 2013 Paae 2 of 3 Staff Recommendation for Successor Agency Action Staff recommends that the Rosemead Successor Agency approve the Loan Agreement with the City of Rosemead for the completion of the previously approved capital improvement projects Staff Recommendation for City Council Action Staff recommends that the City Council approve the Loan Agreement with the Rosemead Successor Agency for the completion of the previously approved capital improvement projects. ANALYSIS When the Finding of Completion was received by the DOF, City staff issued a RFP and received bids for the construction of the Public Plaza with an anticipated contract award in July 2013. Due to the delays and procedural approvals necessary to satisfy the requirements of the DOF, an award for the construction was not made; however, the contractor agreed to hold the price for a period to enable the City to pursue additional options with the DOF. Staff anticipates that the Successor Agency Oversight Board will confirm the approval of the Loan Agreement at its September 16, 2013 meeting and staff will present the award of bid to the City Council on September 24, 2013. This will enable to contractor to mobilize and begin construction in October. As the Council is aware, the existing parking lot has serious flooding and drainage problems due to the unfinished project and the completion of the project prior to heavy winter or spring rains will be a great benefit. The RCRC is currently under construction to complete the interior renovations with funding provided by a grant from Los Angeles County. The furniture and equipment along with exterior fagade improvements will be funded with the existing bond proceeds. In addition to the renovations of the building, staff had also been working on plans for a new building immediately to the East in order to expand the RCRC; however, the planning process was halted when the redevelopment funds were frozen. As the Council is aware, the RCRC has been closed for quite some time due to the delays caused by the elimination of redevelopment, but has been scheduled to re -open by July 1, 2014. In order to meet that deadline staff must complete the planning phases of the RCRC facade improvements and expansion within the next few months so that construction of the improvements can be done in the first half of 2014. Through the utilization of the Loan Agreement, work on the RCRC and the Public Plaza can begin immediately. Per the letter from the DOF, the Loan Agreement is the only option the City has to move forward without having to wait until January 2014. Without the loan, the City would be required to wait until the next Recognized Obligation Payment Schedule (ROPS) cycle of January to June 2014 to begin work or expend any funds. The Loan Agreement specifies the entire bond proceeds amount of approximately $7.1 million; however, it is anticipated that less than $2.0 million will be expended before January 2014 on these two projects. The entire loan amount is only being included as a precaution in the event that the DOF does not approve the previously submitted Master Agreement for the remaining bond funded capital improvement projects as part of the next ROPS. City Council Meeting September 10, 2013 Paae 3 of 3 PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification process. Prepared by: MATTHEW E. HAWKESWORTH ASSISTANT CITY MANAGER /FINANCE DIRECTOR Attachments: A — Department of Finance letter dated August 9, 2013 B — Loan Agreement A"- " A E pr p Q % IL Z W IIII D DE O � F I PARTMENT OF EDMUND G. BROWN JR. • GOVERNOR N A N C E 9, 5 L STREET • 5ACRA ... T. CA ■ 95814'39DS 0 WWW.DD .CA.COV August 9, 2013 Mr. Matthew Hawkesworth, Assistant City. Manager City of Rosemead 8838 East Valley Boulevard Rosemead, CA 91770 Dear Mr. Hawkesworth: Subject: Oversight Board Action Determinations The City of Rosemead Successor Agency (Agency) notified the California Department of Finance (Finance) of its June 12, 2013 oversight board (OB) Resolution Nos. 2013 -0005, 2013 -0006, 2013 -0007 and 2013 -0008 on July 1, 2013. Pursuant to Health and Safety Code (HSC) section 34179 (h), Finance has completed its review of the OB actions. Resolution 2013 -0005 This OB resolution confirming the Master Agreement for excess bond proceeds (Master Agreement) between the City of Rosemead and the Agency for the completion of capital improvement projects and approval of the transfer and expenditure of excess bond proceeds to the City of Rosemead in accordance with the Master Agreement is not approved at this time. It is our understanding the Agency is holding approximately $7.1 million in bond proceeds from bonds issued prior to January 1, 2011. It is also our understanding, to alleviate the necessity to report each individual contract on the Recognized Obligation Payment Schedule (BOPS); the Master Agreement will serve as the enforceable obligation related to the proposed bond funded projects. In addition, the OB directed the Agency staff to submit an amended ROPS for the July through December 2013 period to include the Master Agreement. While Finance does not object to the Agency's proposal to use the City as a general contractor to carry out these bond funded projects, pursuant to HSC section 34177 (m), the ROPS for this period was due no later than March 1, 2013 and in compliance with that section, the ROPS 13 -14A was submitted to Finance on February 12, 2013. Finance issued its final determination for this BOPS period on March 28, 2013, prior to the Agency receiving its Finding of Completion on April 18, 2013. Finance is not accepting revised BOPS. Therefore, the Agency will have to wait until ROPS 13 -146 to request funding for these bond funded projects. As an alternative, pursuant to HSC section 34173 (h), the City may loan the Agency funds for enforceable obligations and request repayment on a subsequent ROPS. In this situation, the repayment should be requested with bond proceeds, and would be subject to the OB and Finance approval once placed on a ROPS. This is our determination with respect to the OB action taken. Mr. Hawkesworth August 9, 2013 Page 2 Resolutions 2013 -0006 2013 -0007, 2013 -0008 These OB Resolutions confirming the selection of various contractors to carry out bond funded projects is approved. The Agency received its Finding of Completion.on April 18, 2013, thereby, allowing the Agency to utilize proceeds derived from bonds issued prior to January 1, 2011 in a manner consistent with the original bond covenants per HSC section 34191.4 (c). While the Agency can negotiate contracts with various contractors for bond funded projects, the expenditure authority for these obligations is subject to Finance's approval on a ROPS. This is our determination with respect to the OB action taken. As authorized by HSC section 34179 (h), Finance is returning OB action 2013 -0005 to the board for reconsideration. Please direct inquiries to Kylie Le, Supervisor, or Michael Barr, Lead Analyst at (916) 445 -1546 Sincerely, � E LAY Locai overnment Consultant cc: Mr. Jeffry Allred, City Manager, City of Rosemead Mr. Steven Mar, Bureau Chief, Local Government Audit Bureau, State Controller's Office Ms. Kristine Burns, Manager, California State Controller's Office �1'1'acy�Men�' LOAN AGREEMENT (Short -Term Loan to be Repaid by Excess Bond Proceeds Not Authorized to be Transferred Until January 2014) THIS LOAN AGREEMENT ("Agreement ") is entered into between the Successor Agency to the redevelopment activities of the Rosemead Community Development Commission, a public entity organized and existing under the provisions of ABxl 26 ( "AB 26 "), enacted June 28, 2011, and AB 1484, enacted June 27, 2012, ("Successor Agency ") and the City of Rosemead, a municipal corporation of the State of California ( "City "). RECITALS A. WHEREAS, The City became the Successor Agency to the redevelopment activities Rosemead Community Development Commission Redevelopment Agency on February 1, 2012, by operation of law pursuant to AB 26; and B. WHEREAS, Health and Safety Code Section 34173(h) authorizes the City to loan funds to the Successor Agency for enforceable obligations and project- related expenses, provided that the use of such funds is reflected on a Recognized Obligation Payment Schedule ( "ROPS ") which is approved by the Oversight Board established for the Successor Agency ( "Oversight Board ") and further provides that the repayment of such a loan shall be deemed to be an enforceable obligation of the Successor Agency; and C. WHEREAS, Health & Safety Code Section 34191.4 authorizes the Successor Agency, after receipt from the Department of Finance ( "DOF ") of a finding of completion pursuant to Health & Safety Code section 34179.7, to utilize excess bond proceeds for the purposes for which the bonds were issued; and D. WHEREAS, the Successor Agency currently holds approximately $7.1 million in excess bond proceeds from bonds issued prior to January 1, 2011 for the purpose of funding capital improvement projects in the former redevelopment project area of the City; and E. WHEREAS, on April 25, 2012 the Oversight Board for the Successor Agency approved a list of capital improvement projects to be funded with existing bond proceeds consistent with the issuing documents for the bonds ( "Capital Improvement Projects "); and F. WHEREAS, the DOF issued the Successor Agency a finding of completion on April 18, 2013; and G. WHEREAS, the City and Successor Agency began inviting bids for the Capital Improvement Projects and arranging for the existing bond proceeds to be transferred to the City, which agreed to act as the overseeing body for the Capital Improvement Projects; and H. WHEREAS, on June 12, 2013 the Oversight Board for the Successor Agency confirmed a Master Agreement for Excess Bond Proceeds ( "Master Agreement') entered into by the City and Successor Agency under which the excess bond proceeds would be transferred to the City immediately for use in the Capital Improvement Projects; and I. WHEREAS, on August 9, 2013, the DOF disapproved of the immediate transfer of funds from Successor Agency to City under the Master Agreement and withheld final approval of the Master Agreement, stating that the Recognized Obligation Payment Schedule ( "ROPS ") for the July 1 to December 31, 2013 time frame could not be amended or modified to reflect that transfer; and J. WHEREAS, in its letter of August 9, 2013 denying the immediate approval of the Master Agreement transfer of the bond proceeds, the DOF suggested that the City loan funds to the Successor Agency and have that loan of funds be placed on the succeeding ROPS for repayment, along with the Master Agreement, with the result being that the entirety of the excess bond proceeds would transfer to the City for the Capital Improvement Projects via the ROPS for the January I to June 30, 2014; and K. WHEREAS, absent the provision of the loan provided for in this Agreement (the "Loan"), the Successor Agency will have insufficient funds to timely make payments due for enforceable obligations related to the Capital Improvement Projects; and NOW, THEREFORE, the Successor Agency and the City agree as follows: 1. Loan and Condition Precedent to Making of the Loan The City agrees to loan to the Successor Agency, and the Successor Agency agrees to borrow from and repay to City a sum of up to but no in excess of $7,100,000 upon the terms and conditions and for the purposes set forth in this Agreement. However, City's agreement to make the Loan is conditioned upon the Successor Agency first obtaining approval from the California Department of Finance for the inclusion of the Loan as an enforceable obligation on the Successor Agency's ROPS beginning in the January 1 to June 30, 2014 time period. If the Loan is not allowed as an enforceable obligation to be repaid by the transfer of excess bond proceeds, then the City will not make the Loan and this agreement shall be terminated. 2. Interest Rate No interest shall accrue on the Loan because of the short time periods during which the Loan shall be outstanding and the fact that the Loan shall only be repaid via the transfer of currently captive excess bond proceeds. . 3. Repayment. The loan shall be repaid in full on or before January 31, 2014 via the transfer of excess bond proceeds currently held by the Successor Agency as recited above. No payment shall be made from the redevelopment property tax trust fund or any other sources that would affect the total amount of property tax available to the affected taxing agencies. The parties agree that if the DOF not approve the Master Agreement for placement on future ROPS, the City will continue to loan funds and the repayment of those funds will be continue to be placed on ROPS for payment approval. Those payments will be made no later than January 31 sc or July 31", depending on whether the ROPS period at issue is the first or second for each fiscal year. 4. Use of Loan Proceeds The Loan proceeds shall be paid by City to those contractors working on the Capital Improvement Projects that have been previously approved by the Oversight Board and that have been awarded contracts for the Capital Improvement Projects subsequent to the issuance of the finding of completion by DOF. Such contracts shall be deemed to be "enforceable obligations" as set forth in AB 26 and AB 1484, for which the Successor Agency is qualified to contract due to the issuance of the finding of completion. City shall keep an accounting of the total amount paid and shall provide said accounting to the Successor Agency and the Oversight Board upon request. 5. Subordination As the Loan is to be paid solely by the transfer of excess bond proceeds, the Parties agree that the Successor Agency's obligation to repay the Loan shall be subordinate to the pledge of tax increment revenue for the payment of debt service on tax allocation bonds or other indebtedness issued by the Redevelopment Agency. 6. Amendments No amendment to or modification of this Agreement shall be effective unless and until such amendment or modification is in writing, properly approved in accordance with applicable procedures, and executed by the Parties. 7. No Third Party Beneficiaries There shall be no third party beneficiaries to this Agreement. 8. Governing Law This Agreement shall be construed and enforced in accordance with the laws of the State of California. 9. Severability If any term of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall continue in full force and effect unless the rights and obligations of the Parties are materially altered or abridged by such invalidation, voiding or unenforceability. 10. Notices Notices delivered pursuant to this Agreement shall be delivered personally or by first class mail to the Parties at the addresses set forth below or such other address as a Party may designate in writing by notice delivered to the other Party. Successor Agency: Executive Director 8838 East Valley Boulevard Rosemead, CA 91170 City: City Manager 8838 East Valley Boulevard Rosemead, CA 91170 11. Entire Agreement This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior oral or written agreements between the Parties with respect thereto. SIGNATURES ON FOLLOWING PAGE SUCCESSOR AGENCY IS POLLY LOW, Chair Board of Directors Dated: SIGNED AND CERTIFIED THAT A COPY OF THIS DOCUMENT HAS BEEN DELIVERED TO THE CHAIR OF THE BOARD GLORIA MOLLEDA Secretary By: APPROVED AS TO LEGAL FORM RACHEL RICHMAN, Counsel CITY OF ROSEMEAD POLLY LOW, Mayor SIGNED AND CERTIFIED THAT A COPY OF THIS DOCUMENT HAS BEEN DELIVERED TO THE MAYOR GLORIA MOLLEDA City Clerk By: APPROVED AS TO LEGAL FORM RACHEL RICHMAN, City Attorney Dated: Dated: 4