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City of San Leandro Notes to Basic Financial Statements For the year ended June 30, 2012 93 NOTE 18 – REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES, Continued Joint Project Area General Fund Loan: On February 1, 2012, the date the San Leandro Redevelopment Agency was dissolved, the Agency owed the City of San Leandro a balance of $2,040,767 on a loan made to the City of San Leandro – Alameda County (Joint ) Redevelopment Project Area. The loan had an initial balance of $4,372,77 4 and was secured by a Promissory Note executed on April 8, 2004. The balance due was included as an enforceable obligation on the Successor Agency’s Enforceable Obligation Payment Schedule (EOPS) and Recognized Obligation Payment Schedule (ROPS) for February 1 through June 30, 2012. On April 11, 2012 the California Department of Finance (DOF) informed the Successor Agency of its objection to this item, citing a prohibition on agreements between RDA’s and their sponsoring cities. On May 10, 2012 the Successor Agency Oversight Board approved, by resolution, an Amended and Restated Promissory Note under the authority provided under California Health and Safety Code Section 34781 (a). Notification of this action was provided to the DOF on May 10, 2012. According to Health and Safety Code Section 34179 (h), the DOF had three business day to notify the Successor Agency if it elected to review this action and no such notification was provided. Nevertheless, the DOF subsequently denied this loan on the ROPS for July through December 2012 and the ROPS for January through June 2013. Therefore, it is not clear at this time if the loan obligation can be enforced. The Successor Agency has requested a meet-and-confer process with the DOF and is presently working to resolve this issue. LMIHF Balance / Housing Due Diligence Review: Pursuant to Health and Safety Code Section 34179.6 (c), the San Leandro Successor Agency submitted an Oversight Board approved Low and Moderate Income Housing Fund (LMIHF) Due Diligence Review (DDR) to the California Department of Finance (DOF) on October 12, 2012. The DDR found that the City, in its capacity as Housing Successor maintains a LMIHF balance of $3,923,774 and that those funds are fully encumbered through an Owner Participation Loan Agreement with Alameda Housing Associates. That Agreement, executed in April 2009, pledged $9.1million in Redevelopment Agency funds to the completion of The Alameda, an affordable housing project in Downtown San Leandro. The DOF indicated in a November 7, 2012 letter that the Housing Successor is required to remit the entirety of the LMIHF balance to the Alameda County Auditor -Controller for redistribution to the taxing entities. This finding was based on a DOF determination from October 19, 2012 that the Al ameda Housing Associates agreement does not constitute an enforceable obligation of the former Redevelopment Agency. The Successor Agency disagrees with this determination and has requested a meet -and-confer process with the DOF. No funds are required to be remitted pending the results of the meet and confer process. Due to the State elimination of redevelopment effective February 2012, the City now serves as Successor Agency to the Redevelopment Agency of the City of San Leandro. BRIDGE is expected to app ly for low income rental housing tax credits from the State in 2013 and the Successor Agency to the Redevelopment Agency of the City of San Leandro will then proceed to pay the remaining balance from available funds under the Redevelopment Property Tax Trust Fund and from the remaining housing fund balance from the RDA. The California Department of Finance (DOF) recently denied the 3rd Recognized Obligation Payment Schedule (ROPS) request for July – December 2013 period by the Success Agency for this project asserting that it was not clear that funds are needed at this time. Additionally, DOF demanded the redistribution of the Successor Agency’s Low and Moderate Income Housing Fund balance of approximately $3.9 million which had been reserved for the BRIDGE loan obligation. The Successor Agency is in disagreement with DOF and is exploring options to resolve the matter soon so that the Successor Agency may fulfill the loan obligation to BRIDGE Housing Corporation as the $9.1 million loan was contractually ex ecuted between Agency and BRIDGE well before the passage of ABx1 26 and ABx1 27 in June 2011 and reflects a legitimate enforceable obligation.