TO: Board of Supervisors
FROM: Minh C. Tran, County Executive Officer
REPORT BY: Becky Craig, Assistant County Executive Officer
SUBJECT: Napa Successor Agency Backfill Payments
RECOMMENDATION
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County Executive Officer requests the following actions regarding the dissolution of the Napa Successor Agency subject to State Revenue and Taxation Code requirements:
1. Approval of and authorization for the Chair to sign an agreement with City of Napa to jointly provide Backfill Payments to Napa Valley Unified School District and Napa County Office of Education to allow early dissolution; and
2. Adoption of a resolution authorizing the Auditor-Controller to disseminate the property taxes in accordance with the Agreement.
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EXECUTIVE SUMMARY
The Napa Redevelopment Successor Agency Oversight Board (“Oversight Board”) approved the final Recognized Obligations Payment Schedule (“ROPS”) in January 2021 and directed the Napa Successor Agency to conduct the final steps required to effectuate dissolution of the Napa Successor Agency. By dissolving the Napa Successor Agency early, local taxing agencies would ensure that they will retain the current Five Million Dollar ($5,000,000) of growth shift to the Napa Successor Agency. If the Napa Successor Agency is not dissolved early, the $5,000,000 of RDA distributions would be excluded from the excess Educational Revenue Augmentation Fund (“ERAF”) calculation and be used instead to pay the State’s VLF (vehicle license fee) Swap Obligation. Early dissolution of the Napa Successor Agency would benefit all local taxing jurisdictions. Two school agencies, NVUSD and NCOE would be harmed because they would lose the facilities portion of pass-through payments totaling $1 million.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
Yes |
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Where is it budgeted? |
General Fund Property Taxes |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
Advantageous to retain future year tax payments through early dissolution of successor agency |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
Positive retention of property tax revenues |
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Consequences if not approved: |
Continue distributing portion of property taxes to successor agency |
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County Strategic Plan pillar addressed: |
Effective and Open Government |
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Additional Information |
If today’s action is approved, payments to the entities will be made through the property tax allocation process. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: Not applicable.
BACKGROUND AND DISCUSSION
Redevelopment agencies (“RDAs”) were created in 1945 to address blighted areas within cities and counties. Pursuant to the California Community Redevelopment Law (Health & Safety Code section 33000 et seq.) assessed valuation growth within redevelopment areas was shifted away from taxing agencies, including cities, counties, schools, and special districts to pay indebtedness incurred by the RDAs. In 1993, AB 1290 established statutory pass-through payments to return some of the shifted assessed valuation growth back to the affected taxing entities.
In 2011, AB 1X26 (“Dissolution Act”) put an immediate freeze on the authority of the RDAs, called for their dissolution and outlined the process of how RDAs would be wound down. Pursuant to the Dissolution Act, all California redevelopment agencies, including the Napa Community Redevelopment Agency, were dissolved and successor agencies were created to wind down the business and fiscal affairs of the former RDAs, along with oversight boards charged with overseeing the successor agencies’ work. Since February 1, 2012, the Successor Agency to the Napa Community Redevelopment Agency (“Napa Successor Agency”) has been winding down the affairs of the former Napa Community Redevelopment Agency.
The Dissolution Act specifies that each successor agency must be dissolved once all enforceable obligations of the RDA have been liquidated, all real property of the RDA has been disposed of, and all outstanding litigation of the RDA has been resolved.
At the January 28, 2021, meeting of the Napa Redevelopment Successor Agency Oversight Board (“Oversight Board”), the Oversight Board approved the final Recognized Obligations Payment Schedule (“ROPS”) and directed the Napa Successor Agency to conduct the final steps required to effectuate dissolution of the Napa Successor Agency. As of the date of final ROPS, the only remaining obligation of the Napa Successor Agency was the outstanding balance on a loan from the City’s Water Fund in the amount of $64,651. The loan’s maturity date was March 1, 2022, but the loan could be paid early thereby allowing the Napa Successor Agency to be dissolved sooner.
By dissolving the Napa Successor Agency early, local taxing agencies would ensure that they will retain the current Five Million Dollar ($5,000,000) of growth shift to the Napa Successor Agency. If the Napa Successor Agency is not dissolved early, the $5,000,000 of RDA distributions would be excluded from the excess Educational Revenue Augmentation Fund (“ERAF”) calculation and used instead to pay the State’s VLF (vehicle license fee) Swap Obligation. Early repayment of the City’s Water Fund loan and the early dissolution of the Napa Successor Agency would benefit all local taxing jurisdictions. Two school agencies, NVUSD and NCOE would be harmed because they would lose the facilities portion of pass-through payments in the estimated amounts of $834,713 for NVUSD and $220,230 for NCOE, for a total loss of $1,054,943.
At the January 28, 2021, Oversight Board meeting, the Oversight Board supported a process by which the final debt of the Napa Successor Agency would be paid early, subject to City and County agreeing to make certain “backfill” payments (“Backfill”) to NVUSD and NCOE to compensate NVUSD and NCOE for financial impact they would suffer from early dissolution of the Napa Successor Agency. If the City and County were to agree to make NVUSD and NCOE whole by backfilling their losses, all local taxing jurisdictions, including NVUSD and NCOE, would gain a net benefit from the early dissolution of the Napa Successor Agency.
The City Water Fund debt required payment prior to June 30, 2021, to secure the ERAF increase. On May 26, 2021, the City Manager authorized the use of City General Fund Revenue to pay the fund a “shortfall” of $61,116.53 (“Shortfall Payment”), the amount required for the Napa Successor Agency to retire the City Water Fund debt, thereby paving the way to early dissolution of the Napa Successor Agency and receipt of the increased excess ERAF.
City has requested that the County repay the County’s 86% share of the Shortfall Payment by increasing the County’s Backfill estimated amount from $898,500 to $959,998 thereby decreasing City’s Backfill amount from $142,200 to $94,945, with the total Backfill amount to be paid to the two school agencies remaining $1,054,943. The resulting proportional split on the Backfill amount is 91% from the County and 9% from the City.
SUPPORTING DOCUMENTS
Agreement
Resolution