7:35 pm (about):
Call to order of the Committee-of-the-Whole (CotW) by Co-Chair Anne Delehunt.
Agenda Item 1; Report of Financial Review Team (FRT): Concerning Recommendation for Re-imbursement of FRT/CotW members for expenses for research material.
Background: Several members of the FRT acquired copies of budgets of other cities. Each document cost about $20-35. These budgets will be turned over to the City for use as reference material when the FRT is finished with them.
George A. moved (seconded by Linda B.) that the City be requested to re-imburse FRT members for their documented expenses in acquiring copies of other cities' budgets.
The following information came out of the general discussion about this motion.
Anne D. and Steve M. both then seconded the motion, which was passed with 12 Ayes; 0 Nays; 3 abstentions.
M. Selph suggested that, if the City did not re-imburse these expenses, the CotW might.
Concerning the $605K Repayment by the Redevelopment Agency (RDA) to the City. Steve M. summarized the discussions of the FRT that resulted in two motions concerning recommendations to the City Council/RDA about how to make the $605K repayment. He asked Brad C. to discuss his motion.
Brad C.'s first point, in reviewing his motion, is that he believes the RDA should act in Agency's best interest, not the City's, and pay off its highest debts first. He also believes the City Council should act in the City's best interest, not the RDA's, so it should not loan money at below market rates. His second point was that the funds repaid, in excess of the AT&SF loan balance, went into a Capital Account rather than the General Fund because of the City's policy of not using "One-Time-Funds" for operating expenses. However, we could use these AT&SF one-time funds to pay for the one-time-expense of updating the General Plan. Since the funds to pay for the General Plan revision are now being taken out of the General Fund Reserves, this approach would meet policy requirements and provide needed General Fund augmentation.
George A. said the RDA should remember from where the funds came and act the way the lender wants.
Peter L. said, using the advantage of hind sight and since the RDA has not acted responsibly, we should favor the City's needs, so he favors the last paragraph in George A.'s motion.
Rich B. said that a "cash loan" by the City to the RDA was not really made, and the interest rate set is a policy decision on where the money would do the most good, with the City, or with the RDA.
Steve M. (with FRT Chair hat off) stated his support for George A.'s motion since at the time the loan of support was made, it was expected to be a short term loan, so the interest rate was set low. Actually, the loans ended up as long term, so the rate should have been set at higher, market rates.
Rich B. reiterated that the rate is not important except as a method for funneling money to or from the City and RDA. Setting the interest rate was more than a financial action; it was a policy decision designed to flow funds to where they could do the most for the City/RDA.
Steve M. offered that the value of that policy was never explained satisfactorily to the people. As a result, too many people believe that the City has been subsidizing RDA, to the detriment of the City's General Fund. To combat this belief, he believes the Council should keep the high interest rate loan in effect to recover some of the money lost because of the low interest rate set on the staff support loans.
Peter L. supports Steve M.'s position, but added that we must work towards a consensus. Since most people don't understand or believe this "funny money" policy of using interest rates to flow money to where it can do the most good, we must battle the subsidy issue to gain their support.
Brad C. said we can not ask the RDA to abdicate their responsibility for political expediency. Repayment was a decision of the borrower; the RDA did not have to do this. Since they made the decision to pay, they must carry out this decision in the best interest of the RDA, i.e., pay off the highest interest rate loans first.
George A. moved (Peter L. seconded) The following motion:
The City has lent General Fund moneys to the Redevelopment Agency
The Agency acquired $605,000 in the course of re-financing its tax allocation bonds in 1997.
The Council directed at its 22 June meeting that a portion of that money should be used to retire the Agency's AT/SF note to the City.
That portion was placed in the Capital Reserve as being from the sale of an asset.
We are told that it is the General Fund that is in jeopardy,
We, therefore, hereby urge the Council to reconsider its 22 June decision and adopt, instead, a mechanism that will place the entire $605,000 in the General Fund so as to reduce the near term problems in the fund which covers our basic services.
For the Council's consideration, we also recommend that the AT/SF note be kept as an Agency obligation (thereby retaining a modest cash flow to the City) and to use the portion that was applied to that note to reduce, instead, the Agency's debt for borrowings from the General Fund and for unpaid interest on those borrowings."
Brad C. moved (Pat C. seconded) the following motion:
The City has lent General Fund moneys to the Redevelopment Agency
The Agency acquired $605,000 in the course of re-financing its tax allocation bonds in 1997.
The Council directed at its 22 June meeting that a portion of that money should be used to retire the Agency's AT/SF note to the City.
That portion was placed in the Capital Reserve as being from the sale of an asset.
We are told that it is the General Fund that is in jeopardy,
We, therefore, hereby urge the Council to reconsider its 22 June decision and adopt, instead, a mechanism that will place the entire $605,000 in the General Fund so as to reduce the near term problems in the fund which covers our basic services.
Denise F. moved to endorse the Council's action taken at the June 22 meeting. This motion died for the lack of a second.
Someone asked if the AT&SF loan had actually been paid off.
Jane B. responded that it has, but that this action could be reversed.
Linda B. requested that the CotW make the subject of the policy of setting interest rates to flow funds to where they could do the most good an agenda item at a future meeting. She said we need the history and background on this so we can address the distrust this policy has caused one and for all. Then we could accept the decisions made for us by our elected officials and move on.
Al M. stated that we need to work this issue out with our current elected officials, not past ones.
Steve M. advised that the FRT is working on this issue and will be reporting on it soon.
Brad C. said he believes it is inappropriate for the CotW to send recommendations forth with such a slim majority. He moved to table the above motions because of a lack of consensus. Motion died for lack of a second.
Anne D. said that CotW positions should go to the Council whatever the margins are.
Brad C. then suggested we adopt a requirement for at least a 60% Aye vote before any item could be recommended to Council/RDA. No one else supported this idea.
After a general discussion about what message we are sending to the Council/RDA with these dual motions, Jane B. responded that the RDA acted responsibly by paying off its high interest debt first; Also the Council acted responsibly by putting the repaid "one- time-money" into a capital fund, making it available for various capital items need this year such as Canyon Trails Clubhouse and the new soccer field project.
This ended the report from the FRT.
8:40 (about)
Agenda Item 2; Continuation of Redevelopment Agency Presentation by Agency Director Elisa Tierney:
ELT reminded us that at the end of our last meeting, she was addressing staff costs. She continued by saying that the RDA made a conscious decision to Keep the RDA staff small and to pay the City for all City staff support performed for the RDA. She distributed a handout (HO#1, attached) that showed 14 years of RDA payments to the City from 77-78 through(and including) 91-92 After the 91-92 payment, the RDA had no money for making payments, and made none until this year. She stated that the State $400K form the RDA through the Education Relief A??? F???? and that the RDA had low cash flow in early '90's because of the sour state economy. The interest shown on HO#1 is 10% of the operating budget.
John H. asked, "How much money did the City get from RDA and what was the benefit to the City of the RDA?"
ELT said these are not simple questions to answer, because the response is not quantifiable as a single dollar/cents number. She listed job creation, sales tax revenues and blight removal as some benefits.
Gerry R. said that without the RDA, the City would have received about 26% of the $9.2M tax increments received by the RDA, or about $2.4M. But HO#1 shows that the RDA has paid the City $2.4M in loan repayment and interest, so the City hasn't lost any funds. (Now the City would only get 22%.)
Peter L. pointed out that this discussion was ended abruptly in the 1996 Neighbor-to- Neighbor project, and that he is glad to get back to it. He questions listing sales tax revenues as a benefit, since it is not clear that the RDA has actually increased sales tax revenue for the City. Also the "0" amount shown for interest paid in 91-92 on HO#1 is there because the RDA intended to pay $75k in interest but never did.
Steve M. (hat off) stated that while it is true that with no RDA the City would have received only 26% of the $9.2 TIR shown on HO#1, the School District, County, and other Agencies would have received their share. Since they did not receive their share of this $9.2M, they have had to increase their fees, assessments, or rates to make up for this loss. These increases have all taken money out of the pocket of El Cerrito residents, so we need to take a more global look at this issue.
Brad C. said that whatever benefits the RDA, benefits the City and vice-versa, and that a benefit to either one is a benefit to El Cerrito residents, who largely do not differentiate between the two, so really there is no distinction. Thom S. asked that we leave this policy discussion until future meetings and get back to ELT's presentation.
ELT had no more new information to present, but started to answer questions that were raised at our last meeting. She passed out folders to all so we would have a place to keep all the hand out material she was providing (8 in all).
The definition of "blight" in redevelopment law was asked last meeting. HO#2 provides requested definition, 4 pages long!
George A. had asked why a TIR increase of 9% between the 1999-2000 Strategy amount and the 1998-99 Proposed Budget Amount was shown on the Budget Overview Page. ELT said that this was an error and that the correct amount is 3%. HO#3 shows the correction has been made.
At the last meeting some of us were confused by a handout that did not have all the project names listed. HO#4, City of El Cerrito Expenditure Preparation Worksheet, is a corrected version, showing all project names and some previously missing legal expenses.
Steve M. asked if the RDA has its own expenditure account numbers. ELT said yes, "70-" for RDA general and "72-" for affordable housing.
Steve M. asked if any RDA expenses would appear in any other account numbers. ELT said no.
Linda B. noted that the Rubicon/Idaho Motel project is not listed and asked how this project, for which the RDA has promised a sizable loan, is covered.
ELT said it is not covered since we have not had any expenses for this project yet. It will not be covered until we incur expenses.
Linda B. asked if we don't start tracking this project and set money aside, what is the RDA going to do when 2003/4 comes around and Rubicon starts looking for our promised loan?
ELT said that it is expected that the TIR 20% set aside for affordable housing will generate enough money to allow the RDA to make the loan.
Linda B. then asked, "If Rubicon gets a grant for this project, are we still on the hook for the loan?"
Steve M. followed with his question, " Will this loan be forgiven?"
ELT did not have the answers but will research this project and provide them as soon as she can.
Peter L. stated that the next Tax Increment money comes to the City in April, yet expenses are being incurred currently on a month-to-month basis; has the City & RDA made and agreement on how these funds will be advanced?
ELT: Yes, during the budget process. The City agreed to advance $271, 890 plus 10% ($27,189).
Peter L. asked if the RDA expects to be able to repay the City this year for staff support and operating expenses?
ELT said hopefully, yes, for this year and each coming year.
Peter L. asked, regarding the Pet Food Express pending litigation, what happens if judgment goes against RDA for about $500K.
ELT said she could not address that subject, because of the possible law suit.
Steve M. asked why the T. I. F., amounts shown on HO#1 and HO#5 are different.
ELT didn't know, but will check, She suggested that the supplemental TIF payments are not shown on HO#1.
Steve M. stated that HO#5 shows project accounting going back to 95-96, but the EDUNS(?) System , in use since 91-92, doesn't show legal costs for each project before the 95-96 time. Why not?
Jane B. & Julie B. responded that individual project date were not available for the time prior to 95-96. We can look forward, but not backward.
Steve M. commented that if we can not allocate legal costs to the projects in these prior years, how can we be sure that the allocation of all costs were properly made between the City and the RDA?
Jane B. & Julie B. responded that data is available to show that all costs were properly allocated. We just do not have the breakdown into the categories now being use for the earlier times when these categories were not being used.
Grant R. asked if there had been a judgment against the RDA in the Target project.
ELT said no, but we did pay off the loan associated with that project.
Peter L. asked if the project costs shown on p116 (of 1998-99 Budget) were coming out of the TIR.
ELT said yes, as shown on page 3. project 70-615 (of HO#4).
Sewel G., referring to HO#1 and HO#5, asked why the TIR shown are different from 86-87 on.
ELT explained that RDA gets TIR in three (3) categories; One is based on the secured (or property) tax roles; one is based on the unitary tax; and the third, called the supplemental, is generated by any changes property assessments (so could be positive or negative). She believes the difference in dollar amounts shown on HO#1 and HO#5 is because the Unitary and Supplemental figures are not included in the HO#1 totals. She will check to verify this.
Grant R. asked if 1.8 staff is realistic for the RDA.
ELT said that the TIR pays for 1.8 RDA staff directly, but that the rest of the staff support is provided by City staff and repaid by the RDA.
ELT then passed out the following handouts: HO#6 in response to Linda B.'s question from last time about the RDA ability to repay debt. This is the copy of the study done in conjunction with the RDA refinancing.
HO#7 in response to Bea O.'s question from last time concerning trends in assessed values without any RDA.
HO#8 dealing with questions submitted through Anne D. concerning the proposed Lucky Store near Baxter Creek.
Peter L. wants this RDA discussion carried over to another meeting so it can be completed. He has some more comments, questions and motions to offer.
Meeting was adjourned at about 10:05 PM
Note; All of the Handouts mentioned will be attached to the hard copy version of the Final Minutes of this meeting when they are distributed. They were also passed out at the 7/21 meeting and are available from Elisa Tierney at the City Administrative Office.
List of Attendees signed in at 7/21 meeting of the Services for the 21st Century Committee-of-the-Whole: