HomeMy WebLinkAboutFiscal Year 2011-2012 General Fund and Redevelopment AgencyCouncil/Agency Meeting Held:
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Council Meeting Date
❑ Denied
April 2, 2012
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Department ID Number: FN 12-004
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL. ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Lori Ann Farrell, Director of Finance
SUBJECT: Revise the Fiscal Year 2011/12 General Fund and Redevelopment
Agency Budgets to remove the State Pay -to -Play appropriations
Statement of Issue:
On December 29, 2011, the California State Supreme Court announced its ruling rendering
AB 1X 27, the new alternative Redevelopment Pay -To -Play Program unconstitutional.
Simultaneously, the Court upheld AB 1X 26, which eliminated redevelopment agencies
Statewide. Based on the Court's ruling, the Huntington Beach Redevelopment Agency has
been dissolved as of February 1, 2012, and a new Successor Agency has been created
consistent with the Court's decision.
The budget amendments included herein are necessary to remove the appropriations from
both the former Redevelopment Agency's Budget and from the General Fund Budget which
were originally adopted in the Fiscal Year 2011/12 Budget for the State "Pay -To -Play"
Program to comply with Generally Accepted Accounting Principles and budget requirements.
Financial Impact: These actions will reduce budget appropriations in the Merged Project
Area Debt -Service Fund (407) by $6,795,749; and, in the General Fund (100) by $6,234,136.
Recommended Action: Motion to:
A) Reduce appropriations in the FY 2011/12 Redevelopment Agency Budget by $6,795,749;
and,
B) Reduce appropriations in the FY 2011/12 General Fund Budget by $6,234,136.
Alternative Action(s):
Do not approve the reduction in appropriations in the FY 2011/12 General Fund and
Redevelopment Agency Budgets and provide alternative direction.
Item 3. - I BB -50-
REQUEST FOR COUNCIL ACTION
MEETING DATE: 4/2/2012 DEPARTMENT ID NUMBER: FN 12-004
Analysis: The Fiscal Year 2011/12 Budget which was adopted on September 6, 2011,
included an appropriation of $6.7 million in the Redevelopment Agency Budget to reflect the
Agency's participation, at that time, in the State's new Alternative Pay -to -Play
Redevelopment Program. The $6.7 million payment was tentative at that time, and subject to
further negotiation with and calculation by the State Department of Finance.
On December 19, 2011, the Fiscal Year 2011/12 Budget was amended to include an
additional appropriation of $6.2 million, this time into the General Fund, to comply with State
law under AB 1X 27 that stipulated that the City, and not the Agency, must actually make the
State Pay -To -Play Payment. The $6.2 million appropriation included in the General Fund
reflected a decrease of $561,613 from the original Pay -to -Play amount of $6.7 million as the
City was successful in appealing certain components of the calculation to the State.
In sum, the RDA would receive the Tax Increment revenue, transfer the funds to the General
Fund, and the General Fund would then make the $6.2 million payment to the State. This
budgeting and accounting mechanism was established to: 1) Comply with AB 1X 27; 2)
Create a clear and transparent audit trail of the revenue received by the Agency; 3) Create a
clear and transparent audit trail of the transfer of the funds from the Agency to the General
Fund; and 4) Make the payment to the State from the General Fund as required by law.
The sources of funding for the originally budgeted State Pay -To -Play amount of $6.7 million
and the final disposition of each of those sources is described below.
Utilization of 20% Housing Set -Aside* $3,500,000 Funds were eliminated per AB1 X 26
Completed 9/6/11 and set aside to
offset potential loss of $4.9M transfer
Refinancing of General Fund Bonds $1,200,000 from RDA to General Fund this year
Staffing and Operational Reductions $900,000 Included in Adopted FY 11/12 Budget
Sale of the Westminster Parcel $500,000 Pending and in Escrow
Refinancing of Section 108 Loan $500,000 Com leted
Grant/Loan Repayment from MVB $100,000 Received and deposited into Agency
*Under AB 1X 27, the 20% Housing Set -Aside could be deferred for one year to make the Pay -to -
Play Payment; however, AB 1X 27 was rendered unconstitutional. AB 1X 26, eliminates Housing
Set -Aside funds going forward; hence it appears these funds will no longer be available.
The City Council is asked to reduce appropriations associated with the State Pay -To -Play
Program from the Merged Area Debt -Service Fund (407) and the General Fund (100) as this
program was deemed unconstitutional.
Environmental Status: N/A
Strategic Plan Goal: Improve long-term financial sustainability.
Attachments: None
xB -51- Item 3. - 2