AgdaPkt 2010-04-26 - Laserfiche WebLink

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6.3B Page 2 The borrowing of LMIHF must be repaid to the Agency housing fund on or before June 30, 2015 according to the California Health and Safety Code 33690. No interest is required. If the loan is not paid in full to the LMIHF, the Agency's mandatory 20 percent property tax increment to finance low and moderate income housing increases to 25 percent as long as the Agency receives tax increment. SERAF Take Update While the State asserts that funding schools within a redevelopment project area furthers the purpose of redevelopment, the California Redevelopment Association (CRA) has filed a lawsuit challenging the constitutionality of AS 26 4x. The lawsuit was heard February 5, 2010 in Sacramento Superior Court. The Court asked the attorneys to prepare additional briefing material on cases having to do with use of tax increment funds to pay for regular operating expenses of city or county governments. Neither the Attorney General nor CRAls legal team found any significant cases on that issue, and the judge took the case under submission on March 2. CRA expects the Court will decide the case on or by May 4, 2010. A detailed status of the CRA lawsuit is provided in Attachment 2. ALTERNATIVES If the court rules against CRA, the Agency has two alternatives. 1) The Agency could decide not to borrow from its LMIHF, and instead pay the SERAF amount from the Agency general fund. This action would reduce or eliminate serVices, cut projects and programs, and' potentially reduce staffing. 2) The Agency could refuse to make the SERAF payment. As a result, the Agency may not adopt a new redevelopment plan, further encumber funds or expend any moneys derived from any source except to pay pre-existing indebtedness and contractual obligations. Further, the Agency can only spend 75 percent of the amount expended on agency administration (employee services, supplies and services, internal services, furniture and equipment) from the preceding fiscal year. These penalties would remain until the required SERAF payments are made. FISCAL IMPACT The Agency's LMIHF would be reduced by $2,812,838 in FY 2009/10 to fund the SERAF payment. However, the Agency will pay back the loan by allocating $562,567.60 into the LMIHF before June 30th of each year with no bearing interest. If directed by the Executive Director, the loan may be repaid to the LMIHF in part or in full at anytime within the five year period so long as the total amount borrowed is repaid by the deadline. Because the Agency will have to repay the LMIHF for any borrowed funds for SERAF, future Agency activities and projects that the Agency general fund would otherwise pay for will be affected. JiI as, AICP anning, Housing and Economic Development Director r:/f~ Brian ponty Finance Director Peter Ingra ty Manager and Executive Director, Redevelopment Agency