SAN BERNARDINO VALLEY MUNICIPAL WATER DISTRICT 380 E. Vanderbilt Way, San Bernardino, CA BOARD OF DIRECTORS WORKSHOP AGENDA

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1 380 E. Vanderbilt Way, San Bernardino, CA BOARD OF DIRECTORS WORKSHOP AGENDA 3:30 p.m. Tuesday, November 13, 2012 CALL TO ORDER 1. PUBLIC COMMENT Any person may address the Board on matters within its jurisdiction. 2. DISCUSSION ITEMS A. Discuss Authorizing Phase 2 ofrsg Pass Through Study (Page 2) B. Discuss Proposals to Prepare Appraisals for Real Prope1iy Needed for the Enhanced Santa Ana River Recharge Project (Page 11) 3. ADJOURNMENT PLEASE NOTE: Materials related to an item on this Agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District's office located at 380 E. Vanderbilt Way, San Bernardino, during normal business hours. Also, such documents are available on the District's website at subject to staff's ability to post the documents before the meeting. The District recognizes its obligation to provide equal access to those individuals with disabilities. Please contact Lillian Jaramillo at (909) two working days prior to the meeting with any special requests for reasonable accommodation. 1/12

2 allsan BERNARDINO MUNICIPIT WATER DISTRICT DATE: November 13, 2012 TO: FROM: SUBJECT: Board of Directors' Workshop Consider Authorizing Phase 2 of RSG Pass Through Study Background In June 2011, as part of the State budget process, the Legislature and the Governor approved AB1X 26 (Dissolution Act) and AB1X 27 dissolving all400 redevelopment agencies and providing an alternative method for them to remain in existence if certain conditions were met, respectively. The Dissolution Act and its clean-up provisions contained in AB 1484, have positive fiscal impacts for Valley District. Property tax revenue will be returned to Valley District, along with all other taxing agencies, as the affairs of the individual former RDAs are wound down. For most of the former RDAs within Valley District, this wind down process will not be complete for nearly 30 years when the last of the bonds are paid off. The $19.5 million in current annual property tax revenue will be returned to the District incrementally as the wind down process is effectuated over the next three decades. On July 17, 2012, Valley District Board approved a contract with Rosenow Spevacek Group, Inc. (RSG) to analyze pass through agreements to provide assurances that the proper amount of property tax revenue is being provided to Valley District. The agreement was separated into two phases. The first phase would focus exclusively on the City of San Bernardino pass through agreements. The second phase would perform the same analytical services on the remaining jurisdictions within the District. RSG has concluded their report on the City of San Bernardino which is being brought back to the Board and is attached. RSG has calculated a significant amount of unpaid pass through payments that is owed to the District by the former City of San Bernardino Redevelopment Agency. The most notable issue discovered by RSG while reviewing the documents and agreements was pass through payment calculations used an adjusted base year from inadvertently. Staff has requested RSG to contact the County to review this finding and discuss the need to correct the adjusted base year with the County for future payments. Staff has also been in contact with the former City of San Bernardino 2/12

3 Redevelopment Agency staff and will be able to provide an update at the workshop. Hitta Mosesman, senior associate from RSG will be in attendance at the workshop. The cost for the RSG contract Phase 1 and Phase 2 is $28,960 and $44,335, respectively. To further provide assurances that the District is receiving the correct amount of property taxes from pass through agreements from the remaining jurisdictions, staff is recommending Phase 2 of the contact with RSG be brought to the full board for consideration at the next board meeting. Further, this request for services is timely as the RDA dissolution process is in full swing. Staff Recommendation It is recommended that Phase 2 of the Pass Through Study agreement with RSG be. brought to the full board for consideration at their next meeting. Attachments Report from RSG on Pass Through Calculations of the Former City of San Bernardino Redevelopment Agency. 3/12

4 SG INTELLIGENT COMMUNITY DEVELOPMENT ROSENOW SPEVACEK GROUP INC. T WEST 4TH STREET SANTA ANA, CA F E INFO@WEBRSG.COM WEBRSG.COM To: From: Via Electronic Mail Felise Acosta, Principal Hitta Mosesman, Senior Associate ROSENOW SPEVACEK GROUP INC. Date: September 21, 2012 SUBJECT: PASS THROUGH CALCULATIONS- FORMER CITY OF SAN BERNARDINO REDEVELOPMENT AGENCY The San Bernardino Valley Municipal Water District ("District") has retained the services of the Rosenow Spevacek Group, Inc. ("RSG") to analyze and calculate the total amount of pass through payments owed to the District from the former City of San Bernardino Redevelopment Agency ("Agency") for the specified time period pursuant to the Scope of Work. 1 This analysis was requested in order to determine if the District has received the correct amount of tax increment pass through payments pursuant to Sections 33676, , and of the California Health and Safety Code ("H&SC"). The analysis presented in this memorandum examines the last 5 years. Review and research of all pass through agreements between the Agency and the District, County data, City of San Bernardino ("City") City Council ordinances adopting and/or amending redevelopment plans, estimated tax increment generated in all City redevelopment project areas, and amounts paid to the District over the last five years has resulted in a preliminary finding that the District is owed approximately $2.6 million in unpaid or insufficient pass through payments from the Agency. A detailed description of all information gathered and the analysis conducted for this study is summarized in this memorandum and attached hereto. 1 The Specified Time Period is a five year period from through COMMUNITY INVESTMENT & IMPROVEMENT LOCAL GOVERNMENT SOLUTIONS FINANCIAL ANALYSIS REAL ESTATE & DEVELOPMENT HOUSING 4/12

5 September 21, 2012 Page 2 Background on Pass Through Agreements The District is an affected taxing entity (i.e., a taxing entity that collects a portion of property taxes) within all of the City's redevelopment project areas which are listed by name below. Central City Central City West Central City East Central City North Central City South Mount Vernon Northwest Uptown Southeast Industrial Tri-City South Valle State College 40 1 h Street As an affected taxing entity, the District may receive tax sharing payments from the Agency, as provided in the H&SC, in all of the City's redevelopment project areas. Based upon RSG's review of County data, formal negotiated pass through agreements, and City ordinances adopting and/or amending redevelopment plans for the above-listed projects, it appears that the District is entitled to the following tax increment pass through payments pursuant to one or more of the three provisions of the H&SC :.L Negotiated Agreement Pass Through Payments ("Type 1 Payment") - Prior to 1994, the H&SC provided for redevelopment agencies and affected taxing entities within redevelopment project areas to enter into negotiated agreements enabling the agency to annually pay, or "pass through," all or a portion of that taxing entity's share of increases in property tax revenues. The District has a combined Type 1 Payment for the Tri-City and South Valle project areas. The terms of both of the agreements provide that the District would begin to receive a combined annual payment of $35,000 for both project areas commencing with the project area's adoption. The Agreement calls for this annual payment to increase annually by the lesser of 2% or the Consumer Price Index, as published by the California State Board of Equalization ("CPI"). 2. 2% Inflationary Pass Through Payments ("Type 2 Payment") - Prior to 1994, Section of the H&SC allowed affected taxing entities within a redevelopment project area to elect, via resolution of the governing board, to receive the share of that entity's share of the increase in property tax revenues after a redevelopment project was adopted based upon a prescribed formula. More specifically, the pass through is calculated by applying an annual inflator of the lessor of 2% or the CPI to the total assessed valuation of the project are in the year the project was adopted (or the "base year value"). The 5/12

6 SAI\I BERNARDINO VALLEY MU1\IICIPAL WATER DISTRICT September 21, 2012 Page 3 pass through payment would be the taxing entity's share of the property taxes paid on the incremental value (i.e., the difference between the current year's estimate with the appropriate inflator minus the base year value). The District is entitled to a Type 2 Payment from the Mount Vernon project area. 3. Statutory Pass Through Payments ("Type 3 Payment"): Sections and of the H&SC requires redevelopment agencies to pay pass throughs to all affected taxing entities within a redevelopment project under the following scenarios: For redevelopment plans adopted after January 1, 1994 (i.e., 40th Street project area); and For all redevelopment plans adopted prior to December 31, 1993 where a redevelopment agency amends the redevelopment plan to eliminate the time limit to incur indebtedness. It is important to note that only those taxing entities that did not have a negotiated agreement with the Agency receive the statutory payments. The Agency eliminated the time limit to incur debt in all project areas exc~pt the 40th Street project area in Statutory payments are calculated annually using the assessed value and each taxing entities share of the tax levy in each redevelopment project area meeting either of the above requirements. For the first 10 years, the statutory payments are equal to 25% of the project area's annual non-housing tax increment revenue collected in excess of the adjusted base year assessed value of a project area (i.e., in most cases fiscal year ). Subsequently, these statutory payments are subject to two increases; in the 11th and 31st year. However, the time limit to receive tax increment expires prior to the 31st year of statutory payments for all of the project areas. The District is entitled to payments under this section of the H&SC (Type 3 Payments) from all project areas except the Tri-City and South Valle project areas. As stated previously, the District has existing negotiated pass through agreements in these two project areas. Table 1 on the following page provides a summary of the pass through agreements/payments for each redevelopment project area. 6/12

7 September 21,2012 Page 4 Table 1 Project Area *Both statutory and inflationary pass throughs. Pass Through 201 In order to determine if the District has received full payment of annual pass throughs from the Agency over the last 5 years, RSG staff obtained information from the San Bernardino County Auditor-Controller's Office order to calculate the annual pass through payments (all types) the District should have received since fiscal year All pass through types were calculated by applying the methodology contained in the pass through agreement document (in the case of Tri-City and South Valle) or by applying the methodology contained in the H&SC. Based upon a review of County data, formal negotiated pass through agreements, and City Council ordinances related to plan adoptions and amendments, RSG estimates that pass through amounts due to the District over the 5 year time period totals approximately $3 million (for all pass through types and all project areas). Table 2 on the following page presents the projected pass through payments amounts for all projects areas. 7/12

8 September 21,2012 PageS Table 2 Total Pass Through Project Area FY to Central City $19,130 Central City West $1,127 Central City East $78,265 Central City North $57,396 Central City South $177,633 Mount Vernon $19,130 Northwest 2 $639,593 Uptown $197,357 Southeast Industrial $439,354 Tri-City/South Valle $257,228 State College $964,990 40th Street $119,545 Total $2,970, Per legal requirements, payments didn't begin until (adjusted base year ). 2 - Only project area with negotiated agreements where the District receives a statutory pass through. According to District records, pass through payments received from the Agency, and recently the County of San Bernardino Auditor-Controller's Office (Assembly Bill ("AB") x1 26 requires the county auditor controller's office to calculate and pay pass throughs as of February 1, 2012) between and total approximately $326,000. Therefore, it appears that over this 5 year period, the District is owed approximately $2.6 million in prior year pass through payments, as shown in Table 3 below. Fiscal Year Total Pass Through Due to District Table 3 Total Pass Through Received ~~ci~tlt5~. stiil $470, $627, $695, $609, $567,891 Total $2,970,748 $73,825 $66,802 $26,012 $0 $159,531 $326,170 8/12

9 September 21, 2012 Page 6 in Base Year" The most notable issue encountered by RSG in conducting our work was the discovery of an apparent discrepancy in the calculation of the Statutory Payments for all project areas except Northwest and 40th Street. More specifically, the Statutory Payment calculations appeared to be flawed due to a misinterpretation of redevelopment plan limitations that were previously amended in 1994 to comply with AB 1290 for the following project areas. Central City Central City West Central City East Central City North Central City South Mount Vernon Uptown Southeast Industrial State College As stated previously, the City amended the redevelopment plans for all of the project areas except 40th Street in 2003 to eliminate the time limit to incur debt. These amendments triggered Statutory Payments (Type 3) to those taxing entities that did not already have a negotiated agreement with the Agency. Thus, the District, as well as many other taxing entities, became entitled to a Type 3 payment. The first tier of this payment is calculated pursuant to the following formula in the H&SC: Total assessed valuation in first fiscal year after fiscal year debt limit expired if there was no amendment "Adjusted base year value," or total assessed value in fiscal year time limit to incur debt would have expired if no amendment = Total Amount Distributed All Entities It appears that the previous calculations (completed by the Agency prior to fiscal year and by the County in ) have assumed an adjusted base year of However, our review of the ordinances adopting and amending the redevelopment plans for these project areas indicates that the adjusted base year for all project areas identified above (with the exception of Mount Vernon) should be The time limit to incur debt in the following project areas was set to expire in fiscal year : Central City Central City West Central City East Central City North Central City South Uptown Southeast Industrial State College 9/12

10 September 21, 2012 Page 7 In the case of the Mount Vernon project area, the established time limit to incur debt was set to expire in July However, it appears that because the City adopted the ordinance eliminating the time limit to incur debt in 2003, at the same meeting that the time limit to incur debt was eliminated for all other project areas (except 40 1 h Street), it was incorrectly assumed that the adjusted base year for the Statutory Payments was fiscal year The H&SC states that the adjusted base year is the fiscal year in which the existing time limit to incur debt would have expired, not the year in which the time limit was eliminated by amendment. It is important to note, that under the H&SC, fiscal year would be the first year that the affected taxing entities would have been entitled to receive statutory pass through payments from Mount Vernon. However, as property values in Mount Vernon in were lower than the values, there were no statutory payments due to the taxing entities in Next Steps As the District is aware, any payment of pass through payments from prior years is subject to the terms and requirements contained in AB x1 26 and We recommend that the District review the terms and requirements contained in these two pieces of legislation with the District's legal counsel to determine an appropriate course of action. RSG is available and would be happy to assist the District in this process. We hope this information proves useful for the District. Please do not hesitate to contact Hitta Mosesman at (714) with any questions or comments. Thank you. 10/12

11 DATE: September 26, 2012 TO: FROM: SUBJECT: Property Committee Bob Tincher, Manager of Engineering & Planning Consider Proposals to Prepare Appraisals for Real Property Needed for the Enhanced Santa Ana River Recharge Project In June of this year, the Board authorized preparation of plats and legal descriptions for the real property needed for the Enhanced Santa Ana River Recharge Project. In September, the Board authorized staff to solicit proposals to appraise each piece of property. The District solicited proposals from qualified firms and received three (3) proposals. The lowest cost proposal is $15,000. BACKGROUND The Enhanced Recharge Project is the first phase of improvements to capture and use Santa Ana River water diverted by Valley District and Western under their Permits. When complete, it is estimated that this first phase will allow the capture of up to 80% of the water available per the terms of the Permits. The design capacity is a 500 cubic feet per second (cfs) diversion and up to 80,000 acre-feet of recharge in a single year. In January 2010, the Board hired Black & Veatch to prepare (1) the environmental documentation and (2) the construction documents (plans, specifications and cost estimate). Compliance with the California Environmental Quality Act (CEQA) is complete and the 60% construction documents are also complete. The final drawings are scheduled to be delivered in the fall. The proposed facilities will be constructed on land that is not owned by Valley District. Construction on property owned by our partner, San Bernardino Valley Water Conservation District (Conservation District), has been granted by the three-way 11/12

12 agreement between Valley District, Conservation District and Western. The rest of the vacant land will need to be acquired. The general steps in the property acquisition process are: 1. Prepare a map and legal description forr t~<:1ch piece o'f pmpertjf (COMPLETE). a. Establishes the 21creEtge b. Will be attacl1ed to the gr21rrt deed 2. Obtain appraisals for each piece of property. 3. Present appraisal, purchase agreement and grant deed to property owners. 4. Complete purchase. In June, the Board authorized preparation of plats and legals for the vacant land which have been completed. In September the Board authorized staff to solicit proposals to appraise each piece of property. A Request for Proposal which included the plats and legals was sent to a group of qualified firms and staff have received the following proposals: Firm Address Amount Schedule Smothers Appraisal San Bernardino $15, days Firm 2 Montrose $28, days Firm 3 Pasadena, Irvine, Riverside $32, days Staff will have copies of the proposals available for review at the workshop. Staff Recommendation Forward the Smothers Appraisal proposal to the Board for approval. 12/12