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6.3.A. - Page 3 As noted above, Health and Safety Code Section 34194.2, authorizes the City and Agency to enter into an agreement whereby the Agency pledges tax increments to the City to fund the annual community remittance payments so that City money is not at risk. Attached hereto is the proposed Remittance Agreement. Health and Safety Code Section 34194.3, as enacted by AB 1X 27, provides that the Agency may reduce its allocation to its Housing Fund for Fiscal Year 2011 -12 only if its finds that it has insufficient other moneys for the Agency to meet its debt and other obligations, current priority program needs, or its obligations under the Remittance Agreement for Fiscal Year 2011 -12. In the August 22, 2011 staff report, a cash flow scenario of the Agency's budget was introduction which identifies the impacts of the Agency operations as a result of the Remittances. Those cash flow scenarios evidence the Agency's need to utilize the 2011 -12 Low and Moderate Income Housing tax allocation for the Remittance. Attached hereto is the proposed Agency resolution setting forth the facts supporting such a finding so that the Agency may reduce its allocation to the Low and Moderate Income Housing Fund for Fiscal Year 2011 -12. It is also worth noting that under AB1x 27, commencing FY 2012/13, the Remittance increases if the Agency enters into new non - housing obligations or indebtedness on or after November 1, 2011. New debt service means new non - housing fund payable debt or obligations that are displayed on the Agency's statement of indebtedness (SOI) for the first time after the SOI is filed on October 1, 2011. ALTERNATIVES The City Council and Agency Board may delay conducting a second reading of the ordinance, approval of the Remittance Agreement and adoption of the Agency resolution. By taking no action, it can make a determination on all of the above at a later time once the stay is lifted and the California Supreme Court has made a determination on the constitutionality of the companion bills. It is unclear, however, whether the Remittance Agreement will be deemed a new obligation or indebtedness that could increase the City's Remittance. FISCAL IMPACT For the Agency, the FY 2011 -12 Remittance is $4,912,646 as provided by the State Department of Finance on August 1, 2011. The Agency will need to forego its allocation of tax increment to its Housing Fund for Fiscal Year 2011 -12 in order to fund the City's payment of the Remittance and meet the Agency's debt and other obligations and current priority program needs for FY 2011 -12 (as provided in the proposed Agency resolution). For the City, the ordinance provides that no City General Fund money is pledged to make this payment. Subsequent annual Remittances will also be due, as 3