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THE RDA AND FINANCING LANDSLIDE MITIGATION
The Rancho Palos Verdes Redevelopment Agency was formed in 1984 with the purpose of financing long-term capital improvements (i.e. de-watering wells, Abalone Cove sewer system) designed to eliminate physical and economic blight in Project Area No. 1 through stabilization of hazardous landslides. The Agency’s Project Area No. 1 was divided into two geographical areas: Abalone Cove and Portuguese Bend. The geographical areas are accounted for in separate funds of the Agency.
Abalone Cove Fund Financing
The Abalone Cove landslide abatement project of the Agency was initially financed by the issuance of $10 million of County Improvement District Bonds (the "Bonds") in 1991. The Bonds were issued as part of the Reimbursement and Settlement (“Horan”) Agreement entered into between the County, City, and Redevelopment Agency in 1987 (a copy of the Agreement is attached). The bonds were secured by special assessments that were to be paid by property owners within the assessment district that had been formed by the County. Pursuant to the Horan Agreement, the assessments were deferred for ten years. After payment of amounts previously owed the County and the City, approximately $6.7 million of net bond proceeds were transferred to the Agency's Abalone Cove fund in 1991 to finance landslide abatement projects.
In the late 1990’s, in contemplation of having to start paying the upcoming assessments on their properties, property owners within the County’s Assessment District came to the City and expressed concerns to the City Council about the adverse economic impact to them of having to pay the assessments. In response to those concerns, the then City Manager Paul Bussey and the City Attorney negotiated an agreement with the County whereby the bonds would be restructured so that the assessments would be removed from the properties and would not have to be paid by the property owners.
Under the terms of the bond restructuring, which was completed in 1997, the County Bonds were repaid through the Agency's issuance of $5,455,000 of tax allocation bonds (the “1997 RDA Bonds”) and a lump sum payment of $4,545,000 to the County. The lump sum payment was funded with $2 million of accumulated tax increment, $1 million of fund reserves from the Abalone Cove fund and a loan to the Abalone Cove fund by the City in the amount of $1,545,000.
As part of the 1997 bond restructuring, accrued interest on the original $10 million County Bonds was recalculated at a lower interest rate (5 percent vs. 7.7654 percent per the original Bonds) and deferred by the County. The deferred interest totaling $3,111,400 is non-interest bearing and is subordinate to the payment of the 1997 RDA Bonds. Per the terms of the 1997 bond restructuring, the County began impounding all Agency tax increment in November 1997 for repayment of the $5,455,000 1997 RDA Bonds and the $3,111,400 deferred interest debt. As of June 30, 2006, $1,198,324 of tax increment has been impounded and applied as a reduction of deferred interest.
The City and the Abalone Cove fund of the Agency entered into a Loan Agreement, dated November 30, 1997, when the City advanced $1,545,000 to the Abalone Cove fund as a part of the 1997 bond restructuring. An additional $12,000 loan was made from the City to the Abalone Cove fund in FY02-03 to perform miscellaneous Abalone Cove Sewer site restoration activities. On December 1, 2003, the loan agreement was revised to capture the annual cost of resources provided by the City; and to define the maturity date as November 27, 2034, which is the legal limit date for the repayment of indebtedness by the Agency. Principal owed the City by the Abalone Cove fund was $1,756,833 as of June 30, 2006. Including accrued interest of $1,223,766, the total amount owed to the City by the Abalone Cove fund was $2,980,599 as of June 30, 2006. The Consolidated Loan Agreement between the City and the Agency continues to be subordinate to the payment of the 1997 RDA Bonds and deferred interest debt.
The Abalone Cove sewer project was completed during FY02-03 and the system is operational. With the completion of the sewer project, the Abalone Cove fund was depleted. Any future Abalone Cove Agency projects will require funding by the City. A spreadsheet showing how the bond funds were spent is attached. Also attached is a September 1997 report describing Abalone Cove projects and funding that may be of interest to the City Council.
Portuguese Bend Fund Financing
While the Abalone Cove fund of the Agency has primarily relied upon bond proceeds to finance landslide abatement projects, the Portuguese Bend fund of the Agency relies on the City to finance its landslide projects. The City and the Portuguese Bend fund of the Agency first entered into a Loan Agreement, dated July 1, 1990, when the City began making advances to fund landslide projects in the Portuguese Bend area of the Agency. Between 1990 and 2000, a total of $4,320,552 was advanced from the City to the Portuguese Bend fund. As noted above, on December 1, 2003, the loan agreement was revised to capture the annual cost of resources provided by the City; and to define the maturity date as November 27, 2034, which is the legal limit date for the repayment of indebtedness by the Agency.
Principal owed the City by the Portuguese Bend fund was $4,320,552 as of June 30, 2006. Including accrued interest of $6,392,705, the total amount owed to the City by the Portuguese Bend fund was $10,713,257 as of June 30, 2006.
Purpose of Consolidated Loan Agreement Between the City and Agency
Property values, and therefore tax increment growth, have increased significantly over the last ten years. If property values continue to grow, there may be sufficient tax increment to repay a portion of the Agency’s debt to the City after the Agency’s debt to the County is repaid in full.