10-07-2014 - Loan Agreement Concerning Litigation Fees Incurred - Item SA2 (2).pdfCity of West Covina
Memorandum
AGENDA
TO: Chair and Board Members of the Successor Agency ITEM NO. SA2
FROM: Christopher J. Chung DATE October 7, 2014
Executive Director
BY: Kimberly Hall Barlow
Successor Agency Counsel
SUBJECT: LOAN AGREEMENT CONCERNING LITIGATION FEES INCURRED
FOR '111E ROPS PERIODS OF FEBRUARY 2012 TO JUNE 2012, JULY
2012 TO DECEMBER 2012, AND JANUARY 2014 TO JUNE 2014 WHICH
EXCEEDED THE LITIGATION COST ESTIMATES FOR THOSE SAME
PERIODS.
RECOMMENDATION:
It is recommended that the City Council, acting as the Successor Agency to the West Covina
Redevelopment Agency, approve the Loan Agreement concerning Litigation Fees incurred for the
ROPS periods of February 2012 to June 2012, July 2012 to December 2012, and January 2014 to
June 2014 which exceeded the litigation cost estimates for those same periods.
DISCUSSION:
The former-West Covina Redevelopment Agency was dissolved pursuant to state law on
February 1, 2012. In the wake of this dissolution, the City elected to perform the functions of the
"Successor Agency" to the former-West Covina Redevelopment Agency as permitted by the
redevelopment dissolution statutes. Because the City elected to perform such functions, Health &
Safety Code section 34173(h) permits the City to loan funds to the Successor Agency for the
purpose covering the Successor Agency's "administrative costs, enforceable obligations, or
project-related expenses at the city's discretion."
Additionally, pursuant to Part 1.85 of the California Health & Safety Code, the Successor
Agency is permitted to engage in activities, including litigation, for the purpose of protecting its
assets and liabilities for the purpose of ensuring that the taxing entities receiving maximum
benefit from the wind down of the former-West Covina Redevelopment Agency's affairs. In
pursuit of those activities for the purpose of protecting its assets and liabilities to ensure that the
taxing entities receive maximum benefit from the wind down of the former-West Covina
Redevelopment Agency's affairs, the Successor Agency was required to engage in litigation to
protect such assets.
As part of the Recognized Obligation Payment Schedule process, the Successor Agency, in
engaging in such litigation, provided estimates for its litigation costs on its Recognized
Obligation Payment Schedules ("ROPS") for the periods February 2012 to June 2012, July 2012
to December 2012, and January 2014 to June 2014. However, such estimates for litigation costs
were not sufficient to cover the actual costs of litigation occurring during the ROPS periods
mentioned above. Thus, in order to continue to protect the assets of the Successor Agency during
the ROPS periods mentioned above to the benefit of the Successor Agency's taxing entities, the
City loaned the Agency funds in the amounts of $821,365.00 and $109,000.00 to cover such
litigation costs discussed above as authorized under Health & Safety Code section 34173(h). To
date, the City has only received $60,000.00 in repayment on the $109,000.00 loan it made to the
Successor Agency.
The purpose of the attached Loan Agreement is to formalize the loan authorized under the
authority of Health & Safety Code section 34173(h) such that the City can be repaid for the costs
it incurred on behalf of the Successor Agency in performing and assisting in the performance of
the Successor Agency's obligations under the redevelopment dissolution statutes. This loan was
recommended by Department of Finance in order to legally effectuate reimbursement to City.
Prepared by: Reviewed and Approved by:
Kimberly Hall Barlow
Successor Agency Counsel
Approved via Email
Mike Lee
Assistant City Manager/Community
Development Commission Director
The Loan Agreement covers a variety of litigation costs incurred by the City on behalf of the
Successor Agency during the ROPS periods of February 2012 to June 2012, July 2012 to
December 2012, and January 2014 to June 2014. They are as follows:
$821,365.00 Loan (February 2012 to June 2012 and July 2012 to December 2012)
Payee ROPS Period Amount
Squire Sanders February 2012 to June 2012 $587,509.00
Alvarez-Glasman Colvin February 2012 to June 2012 $22,204.00
Eminent Domain Law Group February 2012 to June 2012 $7,946.00
Hunsucker Goldstein February 2012 to June 2012 $429.00
Squire Sanders July 2012 to December 2012 $172,343.00
Alvarez-Glasman Colvin July 2012 to December 2012 $17,602.00
Eminent Domain Law Group July 2012 to December 2012 $13,182.00
Hunsucker Goldstein July 2012 to December 2012 $150.00
Total: $821,365.00
$109,000.00 Loan (January 2014 to June 2014)
Payee ROPS Period Amount
Alvarez-Glasman Colvin January 2014 to June 2014 $18,661.00
Alvarez-Glasman Colvin January 2014 to June 2014 $14,447.00
Alvarez-Glasman Colvin January 2014 to June 2014 $67,459.00
Alvarez-Glasman Colvin January 2014 to June 2014 $4,456.00
Alvarez-Glasman Colvin January 2014 to June 2014 $3,977.00
Subtotal: $109,000.00
Payment Received: ($60,000.00)
Total: $49,000.00
If approved by the City Council and Successor Agency Board, this Loan Agreement must then be
approved by the Oversight Board, and then the California Department of Finance.
LEGAL REVIEW:
The City Attorney and Successor Agency Counsel have prepared the proposed loan agreement
and this report.
FISCAL IMPACT:
Upon approval by the California Department of Finance, the loan will be repaid by the Successor
Agency based on available funds distributed to the Successor Agency.
Attachment 1 — Loan Agreement
ATTACHMENT 1
LOAN AGREEMENT
BETWEEN THE CITY OF WEST COVINA
AND
THE SUCCESSOR AGENCY
TO THE WEST COVINA REDEVELOPMENT AGENCY
THIS AGREEMENT ("Agreement") is made this day of , 2014, by and
between the City of West Covina, a Municipal Corporation of the State of California (the "City");
and Successor Agency to the West Covina Redevelopment Agency ("Agency"), a public entity.
RECITALS
WHEREAS, in June of 2011, the California State Legislature enacted legislation which resulted
in the dissolution of all redevelopment agencies in the State of California, including the West
Covina Redevelopment Agency, on February 1,2012 ("Dissolution Law");
WHEREAS, Dissolution Law created successor agencies for the purpose of winding down the
affairs of the dissolved redevelopment agencies;
WHEREAS, the City elected to perform the functions of the Successor Agency to the West
Covina Redevelopment Agency;
WHEREAS, the Agency and the City are distinct legal governmental entities pursuant to Health
& Safety Code section 34173(g);
WHEREAS, pursuant to Part 1.85 of the California Health & Safety Code, the Agency is
permitted to engage in activities, including litigation, for the purpose of protecting its assets and
liabilities for the purpose of ensuring that the taxing entities receiving maximum benefit from
the wind down of the former-West Covina Redevelopment Agency's affairs;
WHEREAS, in pursuit of those activities for the purpose of protecting its assets and liabilities to
ensure that the taxing entities receive maximum benefit from the wind down of the former-West
Covina Redevelopment Agency's affairs, the Agency was required to engage in litigation to
protect such assets;
WHEREAS, the Agency, in engaging in litigation, provided estimates for its litigation costs on
its Recognized Obligation Payment Schedules ("ROPS") for the periods February 2012 to June
2012, July 2012 to December 2012, and January 2014 to June 2014;
WHEREAS, such estimates for litigation costs were not sufficient to cover the actual costs of
litigation occurring during the ROPS periods mentioned above;
WHEREAS, in order to continue to protect the assets of the Agency during the ROPS periods
mentioned above to the benefit of the Agency's taxing entities, the City loaned the Agency
funds in the amounts of $821,365.00 and $109,000.00 to cover those litigation costs discussed
above pursuant to Health & Safety Code section 34173(h) ("Loan");
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WHEREAS, the City has already received $60,000.00 repayment on the $109,000.00 loaned
to the Agency;
WHEREAS, the parties now desire to memorialize the Loan such that the City may be
reimbursed for such litigation costs incurred.
NOW, THEREFORE, for and in consideration of the mutual covenants herein contained the
parties agree as follows:
1. Recitals
The recitals set forth above are true and correct and incorporated herein by this
reference.
2. Loan and Repayment.
(a)
Subject to the terms and conditions of this Agreement, Agency agrees and
promises to pay the City in the amounts of $821,365.00 and $49,000.00.
These amounts represent the following loans made by the City to the
Agency to cover the Agency's litigation costs and constitutes the Loan
discussed above:
$821,365.00 Loan (February 2012 to June 2012 and July 2012 to December 2012)
Payee ROPS Period Amount
Squire Sanders February 2012 to June 2012 $587,509.00
Alvarez-Glasman Colvin February 2012 to June 2012 $22,204.00
Eminent Domain Law Group February 2012 to June 2012 $7,946.00
Hunsucker Goldstein February 2012 to June 2012 $429.00
Squire Sanders July 2012 to December 2012 $172,343.00
Alvarez-Glasman Colvin July 2012 to December 2012 $17,602.00
Eminent Domain Law Group July 2012 to December 2012 $13,182.00
Hunsucker Goldstein July 2012 to December 2012 $150.00
Total: $821,365.00
$109,000.00 Loan (January 2014 to June 2014)
Payee ROPS Period Amount
Alvarez-Glasman Colvin January 2014 to June 2014 $18,661.00
Alvarez-Gfasman Colvin January 2014 to June 2014 $14,447.00
Alvarez-Glasman Colvin January 2014 to June 2014 $67,459.00
Alvarez-Glasman Colvin January 2014 to June 2014 $4,456.00
Alvarez-Glasman Colvin January 2014 to June 2014 $3,977.00
Subtotal: $109,000.00
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Payment Received: ($60,000.00)
Total: $49,000,00
(b) Recognized Obligation Payment Schedule. Agency has listed the Loan on
its Recognized Obligation Payment Schedule ("ROPS") 14-15B (covering
period January 2015 to June 2015) and shall continue to list the Loan on
its future ROPS as an enforceable obligation until the Loan has been fully
repaid.
(c) Payment. Agency shall pay City the amounts due on the Loan immediately
upon allocation of funds to Agency pursuant to the Recognized Obligation
Payment Schedule process under the California Health & Safety Code.
3. General Terms.
(a) Books and Accounts. The Agency will keep or cause to be kept proper
books of record and accounts showing the use of the Loan funds, Loan
repayments and any amount outstanding.
(b) Default. The City understands and agrees that the Agency's ability to
repay the Loan depends upon the California Department of Finance's
approval of the Loan as an enforceable obligation on Agency's relevant
ROPS. Notwithstanding the foregoing, the failure of Agency to repay the
Loan will result in a default of the terms of this Agreement.
(c) Severability. If any section, paragraph, sentence, clause, or phrase of this
Loan Agreement is found for any reason to be illegal, invalid or
unenforceable, the remaining terms of the Loan Agreement will continue in
the same force or effect.
(d) Amendment. This Agreement may be amended at any time in writing,
signed by both parties and with Agency's Oversight Board's approval.
[Signatures on the following page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SUCCESSOR AGENCY TO THE WEST CITY OF WEST COVINA
COVINA REDEVELOPMENT AGENCY
Christopher J. Chung Christopher J. Chung
Executive Director City Manager
APPROVED AS TO FORM: APPROVED AS TO FORM:
Kimberly Hall Barlow Kimberly Hall Barlow
Successor Agency Counsel City Attorney
ATTEST: ATTEST:
Nickolas S. Lewis, Agency Secretary Nickolas S. Lewis, City Clerk
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