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6.18 Page 1 February 22, 2010 SUBJECT Funding Source for the Pending Supplemental Educational Revenue Augmentation Fund Payment RECOMMENDATION Authorize, by motion, the Executive Director to inform the County Auditor that the Redwood City Redevelopment Agency's ("Agency") Supplemental Educational Revenue Augmentation Fund ("SERAF") payment of $3,562.576 for FY 2009/10, which if required, will be paid from the Agency's housing fund and general fund. BACKGROUND In December 2009, staff presented an update to the Agency Board ("Board") on the proposed State takeaway of $2.05 billion from redevelopment agencies statewide. These funds are to be deposited into a Supplemental Educational Revenue Augmentation Fund ("SERAF") and will not be paid back to the Agency.1 The Agency's share is $3,562,576 in FY 2009/10 and approximately $733,000 in FY 2010/11 for a total of $4.3 million. By March 1, 2010, the legislative body of each redevelopment agency must report to the county auditor-controller how the redevelopment agency intends to fund its SERAF payment for FY 2009/10 should the State prevail in current litigation brought by the California Redevelopment Association. As presented in December 2009 to the Board, staff recommends the borrowing of $2,812,838 from the projected low and moderate income housing (LMIHF) set-aside allocated for FY 09/10. The remaining amount of $749,738 will come from the Agency's general fund (account 807-66415) as debt obligation to finance the pending FY 2009/10 SERAF take. Should the Agency borrow from the LMIHF to pay the SERAF, an agreement and resolution with findings that there are insufficient other monies to meet the SERAF payment will be presented to the Board for approval before the May 10, 2010 payment due date. The borrowing of LMIHF must be paid back from the Agency general fund to the Agency housing fund within five years. ALTERNATIVES There are no appropriate alternatives to the action of informing the County Auditor. This action is a requirement of AS 26 4x. FISCAL IMPACT There is no direct fiscal impact as a result of this recommendation, which is only to define the source of the SERAF payment. The California Redevelopment Association ("CRA") on October 20,2009 filed a lawsuit challenging the constitutionality of AB 26 4x. If the CRA's lawsuit is delayed or unsuccessful, the Agency will be required to make the $3.5 million SERAF payment by May 10, 2010. 1 In late July 2009, the Governor signed AB 26 4x into law requiring the take of redevelopment funds statewide over the next two fiscal years to meet the State's Proposition 98 obligation to schools.