AR 041806 Loan agreement - Laserfiche WebLink

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REDEVELOPMENT AGENCY FOR THE CITY OF COLTON For the City Council and Redevelopment Agency Board Meeting of April 4, 2006 TO: Honorable Mayor and Councilmembers Honorable Chairperson and Boardmembers FROM: Candace E. Cassel, Economic Development Director SUBJECT: Consideration and Approval of City Resolution and Agency Resolution No. 851, Approving a Loan Agreement by and between the City of Colton and Redevelopment Agency for the City of Colton. DATE: March 23, 2006 Redevelopment activities are carried out under the provisions of the California Redevelopment Law (CRL). The principal financing tool available under the CRL is tax increment financing. A redevelopment agency may borrow money or sell debt instruments to finance redevelopment activities in a project area, and repay these debts through receipt of taxes generated from the incremental increase in the tax base from new development occurring after final adoption of the redevelopment plan. The Agency's use of tax increment financing is authorized and limited by the California Constitution, Article XVI, Section 16, as expressly enacted in Health and Safety Code Section 33670, as part of the CRL. Health and Safety Code Section 33670 provides for the Agency to receive tax increment from a redevelopment project area, if provided for in the specific redevelopment plan, for the purposes of paying "the principal of and interest on loans, moneys advanced to or indebtedness (whether funded, refunded, assumed, or otherwise) incurred by the redevelopment agency to finance or refinance, in whole or in part, the redevelopment project" As a result, to provide for payment of Agency administrative expenses with tax increment revenues throughout the life of a redevelopment plan, the administrative expenses must be financed through a loan arrangement. DISCUSSION/ANALYSIS Health and Safety Code Sections 33610, et seq., provide for the establishment of an Agency "Administrative Fund" with the City to be funded by the City to pay Agency administrative expenses. Section 33610 provides for money provided to the Agency through such an Administrative Fund to be characterized as either a grant or a loan from the City. Providing for a loan to the Agency from the City allows for the money loaned to the Agency by the City to be repaid by the Agency with tax increment revenues. If the Agency would like to use tax increment revenue to pay its administrative expenses for certain of its project areas, it must approve a debt instrument prior to expiration of the time limit to incur indebtedness in those project areas. The project areas this Loan Agreement would apply to and the last date to incur indebtedness for each is outlined in the table below: