OB - Item 3B - Resolution 2013-0011 Approving the Loan Agreement between the City and the Successor AgencyROSEMEAD OVERSIGHT
BOARD STAFF REPORT
TO: THE HONORABLE CHAIR AND BOARD MEMBERS
FROM: MATTHEW HAWKESWORTH, ASSISTANT CITY MANAGER
DATE: SEPTEMBER 16, 2013
SUBJECT: RESOLUTION 2013 -0011 APPROVING THE 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
MIA IFir -1 -Y1
As the Board is aware, the Successor Agency 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 Successor Agency 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. 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.
Staff Recommendation for Successor Agency Action
That the Oversight Board approve Resolution 2013 -0011 approving the Loan Agreement
between the City of Rosemead and the Rosemead Successor Agency.
ITEM NUMBER:
City Council Meeting
September 16, 2013
Page 2 of 3
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. The Oversight Board reviewed the contract and confirmed the selection of
the vendor at the July 2013 meeting. Due to the delays and procedural approvals
necessary to satisfy the requirements of the DOF, an award for the construction and
notice to proceeds 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 the
award of bid will be made by the City Council on September 24, 2013. This will enable
to contractor to mobilize and begin construction in October.
The Rosemead Community Recreation Center (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. 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 fagade 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.
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
City Council Meeting
September 16, 2013
Pace 3 of 3
Prepared by:
MATTHEW E. HAWKESWORTH
ASSISTANT CITY MANAGER /FINANCE DIRECTOR
Attachments: A — Department of Finance letter dated August 9, 2013
B — Resolution 2013 -0011
C — Loan Agreement between the Successor Agency and the City
6.NT O,
¢ ,
" i
d
III a
Y. DEPARTMENT OF EoMUNO G. BROWN JR. GOVERNOR
OA QFU%M ,' F I N A N C E 915 L 9TRC6 ■ 5A9RAMCNT0 OA ■ 958 1 4 -3705 ■ WWW.00F.0A.00V
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 (ROPS); 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 ROPS period on March 28, 2013, prior to the Agency receiving its Finding
of Completion on April 18, 2013. Finance is not accepting revised ROPS. Therefore, the
Agency will have to wait until ROPS 13 -14B 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,
0 TE ;overnment Local Consultant
cc: Mr. Jeffry Allred, City Manager, City of Rosemead
Mr. Steven Mar, Bureau Chief, Local Government Audit Bureau, State Controller's Office
Ms. Kristina Burns, Manager, California State Controller's Office
RESOLUTION: 2013 -0011
A RESOLUTION OF THE OVERSIGHT BOARD FOR THE SUCCESSOR AGENCY
TO THE ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION APPROVING
THE LOAN AGREEMENT BETWEEN THE CITY OF ROSEMEAD AND THE
SUCCESSOR AGENCY DATED SEPTEMBER 10, 2013
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
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
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
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
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
WHEREAS, the DOF issued the Successor Agency a finding of completion on April 18,
2013; and
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
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
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 ('BOPS ") for the
July 1 to December 31, 2013 time frame could not be amended or modified to reflect that
transfer; and
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 1 to June 30, 2014; and
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.
NOW THEREFORE, THE OVERSIGHT BOARD FOR THE SUCCESSOR AGENCY
TO ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION HEREBY RESOLVES:
The Loan Agreement between the City of Rosemead and the Successor Agency is a
permitted enforceable obligation under Health and Safety Code section 34173(h).
2. The Loan Agreement is confirmed by the Oversight Board and shall be submitted to
the Department of Finance for review.
3. The Loan Agreement shall be included on the Recognized Obligation Payment
Schedule beginning with the January through June 2014 period.
4. That the Successor Agency staff transmits the Oversight Board's approval to the
Department of Finance for consideration and approval.
PASSED, APPROVED AND ADOPTED this 16th day of September 2013.
Pat Wallach
Chairperson
ATTEST:
Matthew E. Hawkesworth
Successor Agency Staff
Assistant City Manager
ROSEMEAD 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
AGENC
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.
ITEM NUMBER: ! J_
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 1 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'
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
SUCCESSOR AGENCY
POLO
' fO Chair
Board of
•. '
SIGNED AND CERTIFIED THAT A
COPY OF THIS DOCUME14T HAS
BEEN DELIVERED TO THE CHAIR
OF THE BOARD
N
LO RIA MOLLEDA
Secretary
By: A
I
AP ROVED A TO LEGAL FORM
RACHEL RIICHMAN, Counsel
Dated: ( /
CITY OF ROSEMEAD
By: w5t
•• •'
Dated: 01(0 b a:'
SIGNED AND CERTIFIED THAT A
COPY OF THIS DOCUMENT HAS
BEEN DELIVERED TO THE MAYOR
City Clerk
B:
y
APP O D AS TO L GAL FORM
RACHEL RICHMAN, City Attorney
Dated: / ! 0 //