It is recommended
that the City Council adopt a resolution reporting to the County Auditor that
the Agency intends to fund the Educational Revenue Augmentation Fund payment in
the amount of $5,219,335.00.
It is recommended
that the City Council and Agency Board approve a loan agreement from the City’s
Sewer Service and Use Charge Capital Improvement Fund to the Agency in the
amount of $5,219,335.00 for the purpose of paying the State-mandated
Educational Revenue Augmentation Fund.
During the last
State-wide recession, in September 1992, the State Legislature passed a budget
package which included SB 844. SB 844
required the Agency to pay approximately $10.8 million into a county-wide
Education Revenue Augmentation Fund (ERAF) by May 10, 1993. Similar bills were passed in 1993 and
1994. With the current State Budget
deficit, the Legislature revived the Redevelopment to ERAF shift. The 2002 State Budget includes AB 1768 which
requires the Agency to pay approximately $5.22 million into ERAF by
May 10, 2003. The law further
requires the City Council to report to the County Auditor as to how the Agency
intends to fund this payment. In 1993,
1994 and 1995, the ERAF payment was made by the Agency through a loan from the
City as detailed below.
The law specifically
allows agencies to use bond proceeds to make the ERAF payment. However, federal tax restrictions require
that the Agency’s bond proceeds be used to finance public improvements. Because of these federal restrictions, the
Agency cannot directly pay the ERAF requirement with bond proceeds. The payment can be made, however, from the
proceeds of a loan from the City’s Sewer Service and Use Charge Fund to the
Agency.
The Agency will repay
the City’s Sewer Service and Use Charge Capital Improvement Fund with Bond
proceeds to be used in accordance with federal tax restrictions. The Agency and City entered into a similar
agreement in prior years, which protected the City’s General Fund from risk. This payment method ensures that the use of Agency bond proceeds
meets both state and federal requirements.
Agency and City staff
have identified the 60” Brick Interceptor and the Trimble-Morrill Sewer as
capital projects in the City’s Sewer Service and Use Charge Capital Improvement
Fund for this purpose and request approval from the Board and City Council of
the proposed loan agreement.
This action has been coordinated with the Agency’s General Counsel, City’s Attorney’s Office, City Manager’s Office, and the Department of Public Works.
While this will
impact the Agency in the amount of approximately $5.22 million, there will be
no impact to the City’s General Fund or City Sewer Fund.
Funding for repayment
of the proposed loan is available in the Agency’s Adopted FY 2002-03 Capital
Budget.