Lots Of Money At Stake As RDA ‘Clean Up’ Bills Move Through The Legislature

Legislation To Resolve RDA Issues Supported By Cities, But Some Counties In Opposition

By Sean Belk - Staff Writer

April 10, 2012 – As counties rapidly assess hundreds of funds and assets from former redevelopment agencies (RDAs), three surviving attempts to resolve ambiguities and unsettled issues over the state’s dissolution act are moving through the legislature.

Urgency bill AB 1585, introduced by Senate Speaker John Perez and other legislators, is an effort to “clean up” disputes over the shutdown of RDA, by defining “enforceable obligations” and cost allowance, determining the distribution of set-aside low- to moderate-income housing funds, and making other modifications.

Other bills include SB 654, by Senate President Pro-Tem Darrell Steinberg, which would determine RDA housing funds, and SB 986 by Senator Bob Dutton, which allows cities and counties to keep bond proceeds.

AB 1585, possibly the most controversial bill, passed the California State Assembly by a vote of 11-3 on March 26 and now heads to the state senate, likely to be heard after the legislature returns from spring recess this week. If passed by a two-thirds vote and signed by Gov. Jerry Brown, the bill would immediately go into effect since it contains an urgency clause.

The legislation, supported by cities, the League of California Cities and the California Redevelopment Association, would modify provisions of the state’s dissolution act, ABX1 26. City officials say the state’s act contains ambiguous language that may cause financial disruptions and uncertainties in determining the future direction of left over RDA assets and third-party contracts during the wind-down process.

But officials from at least two counties, Santa Clara and Los Angeles, have so far publically declared their opposition to the bill as currently written, stating that some aspects go too far.

Although Los Angeles County supports provisions that would allow local housing authorities to retain low- to moderate-income housing funds, the county’s Sacramento chief lobbyist, Alan Fernandes, testified against the portion of the bill that expands the definition of enforceable obligations.

In a February 29 staff report, L.A. County Chief Executive Officer William Fujioka noted that several provisions in the bill would cost taxing agencies and counties tens of millions of dollars and undermine the state’s dissolution act.

The main problem counties have with the bill is deeming RDA loans as enforceable, which would divert tax increment funds back to host cities instead of going to counties and local taxing agencies as required under the state’s act, he said.

Fujioka stated that, if passed, the provision could result in the potential loss of $85 million for taxing agencies within Los Angeles County, while the county’s general fund could lose out on approximately $34 million.

He also stated the bill would “legitimize” last-minute actions that cities took to transfer RDA properties and assets as the governor had announced plans for shutting down redevelopment. AB 1585 would essentially override provisions in the state’s act that prohibits agreements entered into after December 2010 from being considered enforceable.

The three largest RDAs in the county – Los Angeles, Long Beach and Santa Monica – adopted “agreements” that sought to transfer a combined $2 billion from their RDAs to cities, Fujioka stated. He said the provision would come at a “significant cost” assuming an estimated county share of 30 to 40 percent.

L.A. County Supervisor Don Knabe, however, told the Business Journal that he supports AB 1585 despite opposition from other county officials. “I don’t have any problems with the bill,” he said. “That’s not the case with my colleagues . . . I’ve said all along that redevelopment must be dismantled . . . It must be done carefully to make sure that the benefits of the entire redevelopment process can be preserved to the greatest extent possible.”

Knabe, meanwhile, admitted that the definition of enforceable obligations is going to be tough to sort out on a case-by-case basis. He said the most critical element is determining whether the recent bonds that went out for bid and other late contracts should remain enforceable.

“That’s going to be a donnybrook,” he said. “Depending on when it went into the ground and depending how long should not be a problem for most . . . But, someone who has tried to do a deal within the last 90 to 120 days (before RDAs were officially abolished) might have some problems.”

Long Beach city staff is continuing to work on the bill with Speaker Perez’s office, said Tom Modica, the city’s government affairs officer. “We believe there’s still a number of things that need to be worked on that bill,” he said. “Hopefully those discussions are ongoing.”

Amy Bodek, Long Beach’s director of development services, stated via e-mail that the bill would assist the city in moving forward in the dissolution process, as “successor agency” of the former RDA. “AB 1585 would provide significant financial security to the City and affected third party contracts in knowing that these are recognized as obligations that the Successor Agency can continue to honor,” she stated.

One main dispute is whether to enforce loans that were made to cities for starting up project areas. If deemed enforceable under the new bill, cities would get millions in funding, in the case of Long Beach, $119 million for loaning funds for the downtown redevelopment project area, according to city officials. The Port of Long Beach is also owed a total of $41 million from the former RDA.

Successor Agency Actions

The Long Beach successor agency to the RDA, made up of the full city council, is expected to meet on April 17 at 3:30 p.m. at City Hall. Bodek said the agenda is to include several contract amendment requests related to the Fire Station 12 project, a request to adopt a successor agency administrative budget and adopting a recognized obligations payment schedule.

The city is currently only able to proceed with projects that were already underway prior to the dissolution of RDA, she said. Part of the dissolution process is trying to determine the scope of the successor agency’s abilities to be able move forward on projects, particularly those projects scheduled to be completed using bond proceeds, Bodek said.

Projects that were recently completed or that are continuing to move forward with construction, include: the Long Beach Boulevard street improvements in Virginia Village in North Long Beach; Fire Station 12 in North Long Beach; the north block of the Promenade downtown; and design development for the proposed North Library, she said.

Meanwhile, the Los Angeles County auditor controller is currently in the process of auditing financials of the some 71 former RDAs in the county. The audits are in anticipation of the county establishing seven-member “oversight boards” per former RDA that are to be made up of various taxing agencies and city members required to oversee operations and functions of successor agencies. Oversight boards are to be established no later than May 1.