Subject Settlement Agreement Berkeley Unified School District and by djh75337



Office of the Executive Officer
                                                                                   CONSENT CALENDAR
                                                                                   June 12, 2007

To:                Honorable Chairperson and
                      Members of the Redevelopment Agency
From:              Phil Kamlarz, Executive Officer
Submitted by: Dan Marks, Director, Planning and Development Department
Subject:           Settlement Agreement: Berkeley Unified School District and City of Berkeley

Adopt a Resolution authorizing the Executive Officer or his designee to commit the Agency’s
participation in a Settlement Agreement and any amendments to provide all statutorily required
pass through payments to Berkeley Unified School District (BUSD) to the repayment of debt
from BUSD to the City and abide by the methodology for pass though payment calculations
under the terms of the Agreement.

No impact on the Agency. The Agency is statutorily required to make pass through payments to
the BUSD starting in FY07 and running through the life of the West Berkeley Redevelopment
Plan. The Settlement Agreement will allow the Agency to make the payment to the City, rather
than to BUSD.

Agency is required to begin pass through payment in the current Fiscal Year and make payment
through the life of the West Berkeley Redevelopment Plan. BUSD and the City owe each other
in excess of $1M each and wish to settle the debts with timely payment and minimal impact to
operating budgets. A settlement agreement has been arrived at to serve this purpose. As
BUSD’s debt to the City exceeds the City’s debt to BUSD, BUSD desires to use funds it would
otherwise receive from the Agency as partial repayment to the City.

The remaining portion of the funds owed by BUSD to the City plus interest accrued on the funds
from the date of the Agreement until full repayment at the rate of 5% per annum, are to be repaid
by the School District by assigning BUSD’s pass through payments received from the Agency
pursuant to the West Berkeley Redevelopment Plan to the City. The pass through payment is an
obligation of the Agency that became effective when the Agency amended the Redevelopment
Plan in 2006 to repeal its debt incurrence limit. Under the California Redevelopment Law,
certain plan amendments, including the elimination of the debt incurrence limit, triggers what are
called statutory pass through payments to the taxing agencies. These payments are designed to
alleviate the fiscal burden of a redevelopment plan on taxing agencies.

        2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099
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BUSD/COB/Agency Settlement Agreement                               CONSENT CALENDAR
                                                                   June 12, 2007

Under a formula proscribed by statute, the Redevelopment Agency will pass through to BUSD
and other taxing agencies, such as BART, the East Bay Regional Park District and the County, a
portion of the tax increment generated by West Berkeley Project Area. The amount of the actual
pass through received by each taxing agency depends upon the taxing agencies’ tax allocation
factor and the growth in tax increment each year. The actual annual payments will depend upon
the increase in assessed valuation each year.

The methods for calculating pass through payments under the statute is the subject of some
disagreement between school districts and redevelopment agencies and is currently the subject of
a lawsuit in Los Angeles County. Based on projections prepared by the Redevelopment
Agency's financial consultant, Seifel and Associates, the projected pass through payments to be
made by the Agency to the District for the remaining life of the West Berkeley Redevelopment
Plan could amount to approximately $255,000 assuming the payments are calculated in
accordance with the Agency interpretation of the statutory language. Pending outcome of the
Los Angeles lawsuit, the Agency may face higher payments to the BUSD under the terms of the
Agreement. This higher payment may both increase the cost to the Agency as well as reduce the
payment level paid directly to the City (that is if BUSD share increases, the City share may
decline even if total payments by Agency are increased). Projections made by BUSD
consultants are as high as $385,000, but all projections are dependent upon the growth rate in tax
increment, which may fluctuate during the term of the agreement.

Based on conservative projections prepared by Seifel and Associates, it appears that the
remaining amount to be repaid by BUSD after payment of six installments as called for in the
Agreement, can be fully repaid by the assignment of the pass through payment. In the event that
the pass through payments are greater than projected and the District's debt is repaid prior to
expiration of the West Berkeley Redevelopment Plan, the Agreement provides that the remaining
pass through payments will accrue to the District or under the terms of the Agreement, the
District can direct the Agency to pay the additional pass through amounts to the City for ongoing
payment obligations owed to the City. Should the payments increase due to court decision the
increased payments will reduce or eliminate the District’s sixth year installment payment to the
City in an amount equal to the increased pass through payment amount.

Agreement between BUSD and City resolves long standing debt in relatively efficient manner
and allows Agency’s pass through payment to be utilized by the City and BUSD for their relative
priority needs. Any risk Agency is exposed to regarding future changes to payment levels are
relatively controlled by Agreement and risk of legal conflict between either Agency and BUSD
or City and BUSD averted.

                                             Page 2
BUSD/COB/Agency Settlement Agreement                             CONSENT CALENDAR
                                                                 June 12, 2007

BUSD staff deemed it infeasible to require full payment of the BUSD debt to the City early in
negotiations between the City and BUSD. Legal suit could be the only alternative in absence of
a successfully negotiated agreement.

Wendy Cosin, AICP, Deputy Director, Planning and Development Department, 981-7402
Amber Evans, Senior Redevelopment Planner, Planning and Development Depart., 981-7418

1: Resolution

                                            Page 3
                                RESOLUTION NO. ##,###-N.S.


WHEREAS, the Berkeley Redevelopment Agency is statutorily required to make pass through
payment of tax revenues generated from the West Berkeley Redevelopment Plan to the BUSD as
of Fiscal Year 2007 for the remainder of the West Berkeley Redevelopment Plan's life; and

WHEREAS, the BUSD and City have negotiated terms that result in the satisfactory resolution
of their mutual debts, assuming the Agency’s consent to abide by the terms of the agreements;

WHEREAS, BUSD has the right and authority to assign its pass though payments owed by the
Agency annually in the manner described by the agreement to the City and the City may make
use of such funds as it sees fit to the benefit of the City and potentially the Project Area in ways
BUSD could not.

NOW THEREFORE, BE IT RESOLVED that the Executive Officer or his designee is
authorized to enter into an agreement applying Agency pass through payments owed to BUSD to
the City.

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