AgdaPkt 2009-10-19 - Laserfiche WebLink

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7C Page 1 REPORT ,To;t~e RedeVe;!~p.~~rifK~m-~c,i~~~~ .' . 'h, From'the Executive Director October 19, 2009 SUBJECT Pending State Takeaway of Redevelopment Tax Increment Revenues RECOMMENDATION Information only - no action required. Receive update on Redevelopment Agency's budget and the potential impacts of pending State takeaway. BACKGROUND On June 22, 2009, the Redevelopment Agency Board C'Board") reviewed the Redevelopment Agency ("Agency") Proposed Budget for Fiscal Year (FY) 2009/10 and adopted it on July 13, 2009. In late July 2009, the Governor signed AS 26 4x into law. The legislation calls for taking $2.05 billion from redevelopment agencies statewide over the next two fiscal years - $1.7 billion in FY 2009/10 and $350 million in FY 2010/11. These funds will be deposited in a Supplemental Educational Revenue Augmentation Fund (SERAF) to meet the State's Proposition 98 obligations to schools. The California Redevelopment Association ("CRA") is preparing to file a lawsuit to challenge the constitutionality of the State's take of redevelopment funds. The proposed property tax increment shift called for under Assembly Bill 26 4x represents the second consecutive year in which the State is attempting to shift local revenues from all redevelopment agencies to purposely benefit the State. As part of the FY 2008/09 State budget, the Governor signed AB 1389 into law, which would have shifted $350 million from all redevelopment agencies to the State. CRA successfully sued the State last year over Assembly Bill 1389, and the subsequent court ruling determined that the shift was unconstitutional. Had the CRA's lawsuit been unsuccessful, the Agency's general fund would have lost $736,300. Although the State will publish the actual SERAF amounts owed by each redevelopment agency by November 15,2009, the CRA has projected Redwood City's amount to be $3.56 million in FY 2009/10 and $733,000 in FY 2010/11 for a total of $4.3 million. Preliminary analyses indicate that the SERAF payment can be made without affecting Redwood City's fixed obligation payments, current programs and services, and current staff positions funded by the Agency, based on two criteria: 1) Higher than expected Agency general and housing fund working capital balances as of June 30, 2009.1 For FY 2009/10, the beginning working capital balance in the general fund is $2.36 million compared to $185,000 that was estimated in the approved FY 2009/10 Agency budget. The increase is due to unanticipated increase in property tax increment by $1.06 million, $736,300 encumbered for AS 1389 during FY 2008/09 that is no longer required for this purpose, and $325,500 in administrative cost savings. The housing fund beginning working 1 The working capital balances are unaudited based on final financial information (June 30, 2009) prepared by the City's Finance Department.