HomeMy WebLinkAboutID# 14-533 SA Oppse Governor's Budget Proposal Affecting Redevelopment Dissolution (RN# 15 09465)CITY OF
LAKE LSIROKE
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REPORT TO SUCCESSOR AGENCY OF THE REDEVELOPMENT AGENCY OF
THE CITY OF LAKE ELSINORE
TO: HONORABLE CHAIR
AND MEMBERS OF THE SUCCESSOR AGENCY
FROM: GRANT YATES, EXECUTIVE DIRECTOR
DATE: APRIL 14, 2015
SUBJECT: Oppose Governor's Budget Proposal Affecting Redevelopment
Dissolution (RN #15 09465)
Recommendation
It is recommended the Successor Agency authorize the Chairman to sign a letter in
substantially the form attached expressing the Successor Agency's opposition to the
Governor's 2015 -16 State Budget proposal affecting redevelopment dissolution.
Background
The Governor's 2015 -16 budget proposal includes a trailer bill to clarify a number of
issues associated with the dissolution of redevelopment agencies. The Bill (known as
(RN #15 09465) contains some positive clarifications to the dissolution process, but
also includes provisions that seek to limit the ability of successor agencies to claim
certain expenditures as enforceable obligations and effectively overturn legal
victories of other successor agencies that we have relied on and that benefit the
Successor Agency of the Redevelopment Agency of the City of Lake Elsinore.
Discussion
The League of California Cities has prepared the attached analysis of the key issues
that negatively impact cities and their successor agencies. While the League
recognizes some of the proposal's benefits, it asserts that the bill seeks to reverse
court decisions, change laws retroactively, undo previous incentives, and limit
transparency, accountability and opportunities for local agencies to protect their legal
rights. The League has also expressed concerns about the Department of Finance's
involvement in drafting the budget trailer bill that could affect ongoing litigation efforts
and would greatly enhance the DOF's already broad authority as it pertains to
dissolution. Consequently, the League has taken a position to oppose the bill unless
Oppose Budget Proposal (RN #15 09465)
April 14, 2015
Page 2
amended to remove or resolve areas of concern. A copy of the League's March 25,
2015 letter is attached. The League has also urged cities and their successor
agencies to oppose RN #15 09465 and has prepared a sample letter for local
agencies to voice our opposition.
Fiscal Impact
No fiscal impact by this action. However, should the budget proposal be approved as
IL is currently written, the Successor Agency of the Keaeveiopment Agency of the City
of Lake Elsinore may be negatively impacted as described in the League's Key Issue
Analysis.
Prepared By: Barbara Leibold, Successor Agency Counsel
Approved By: Grant Yates, Executive Director
Attachments:
League of California Cities Key Issues
League of California Cities March 25, 2015 Opposition Letter
Sample Opposition Letter Prepared by League for City /Successor Agency
Page 1 of 3
League of California Cities
Key Issues with DOF RDA Dissolution Trailer Bill'
The League of California Cities is Opposed to the following provisions due to their many harmful
impacts on existing cities. We are asking legislators to either remove these provisions or reject the
proposal in its entirety.
1) Overturns recent Court of Appeal decision upholding reentered agreements approved by
Oversight Boards. This change seeks to overturn Emeryville v. Cohen and impacts and
retroactively invalidates dozens of agreements validly entered into by cities and successor
agencies around the state and approved by the governing Oversight Board in those jurisdictions
based upon finding that the projects were in the best interests of all impacted taxing entities.
(Section 34178, page 47, 48 and 49; Subdivision (h) page 58). Many other cities are affected by
this provision in addition to Emeryville: Bellflower; Citrus Heights; Coronado; Danville;
Lawndale; Loma Linda; Petaluma; Riverside; San Leandro; Santa Rosa; Sunnyvale; Twenty -Nine
Palms; Ukiah; Union City; and Watsonville.
2) Undoes incentives previously offered to successor agencies to make three required payments
to become eligible for a DOF "finding of completion." This proposal retroactively prohibits the
reinstatement of reimbursement agreements between a city and a redevelopment agency for
public improvements constructed by a third party; also makes these loans subject to RDA plan
time limits that don't apply to full repayment of other debts. (Subparagraph (2), page 67) also
(Section 34189, Page 65)
3) Retroactively undoes the effects of the February 13, 2015, ruling in Glendale v. DOF over the
appropriate method of calculating interest rates on reinstated loans. Judge Chang of the
Sacramento Superior Court recently issued a ruling that holds that the LAIF rate that would
apply to the accumulated balance on a loan was the rate in effect over the life of the loan since
origination. The judge rejected DOF's contention that the rate was the current rate on a fixed
date. The language (Subparagraph (3), on page 68) deletes the pertinent language relied on by
the Court and substitutes a rate "up to" one percent. Such a change would be a major loss of
funds needed by local agencies to provide public safety and other vital services, and also
significantly reduces the 20% set -aside for affordable housing.
4) Undercuts local agency ability to protect legal rights by revoking statutory authority to recover
legal costs outside of existing administrative cost cap. Existing law provides that litigation
costs related to assets, obligations, settlements, and judgments are not part of the
administrative cost allowance. This change would be a complete reversal of previous legislative
authority. (Section 34171 (b), Page 2 and 3). The dispute resolution process established is clear:
(1) oversight board approval; (2) DOF review of the ROPS; (3) an opportunity to "meet and
confer" with DOF on outstanding issues; and (4) an opportunity to appeal any final DOF
decisions in a Court of Law. Successor agencies have also had to respond to lawsuits filed
against the successor agency by other parties. For efficiency, all cases were directed to the
1 Comments based upon 03/09/15 version RN 4 15 094645; there is little difference with the February 18'h version of the
amendments. Thus, most of the changes to this document are simply updating several page numbers to indicate where issues
are within the DOF draft.
Page 2 of 3
Sacramento Superior Court. This proposal restricts any litigation expenses to a limited
administrative cost allowance, which is even further constrained in other areas of this proposal'.
Further limitations (Subdivision (F), page 6) prohibit a city's ability to independently assist with
litigation costs'. The objective of these provisions can have no other purpose but to severely
limit a community's ability to protect its legal rights.
5) Retroactively repeals authority for cities to make loans to successor agencies approved by
oversight boards for "project- related expenses." Imposes interest restrictions on other such
loans and makes repayment subordinate to all other payments and only if funding available.
When redo, Inpment was eliminated, many projects Were L den ay., incomol.t. .. ....uire.4
routine maintenance, continuation of security services, etc. To ensure such public investments
did not languish or deteriorate, AB 26 authorized cities to loan funds to the successor agencies
with the approval of the oversight boards. This provision retroactively reverses such authority
and restricts the ability of the city to recover other such loans which were made in compliance
with existing law and good faith. (Subdivision (h), Page 14)
6) Retroactively exempts all DOF actions from the Administrative Procedures Act.
Redevelopment dissolution law has put DOF in a position of making thousands of quasi - judicial
decisions with enormous financial and other consequences for affecting individual communities,
properties and third parties. The proposed language (Section 34170.1, Page 2) deems such
actions equivalent to "the preparation, development or administration of the state budget."
Should such a change be enacted — especially in combination with other aspects of this proposal
which attempts to reduce an ability of a successor agency to challenge DOF actions in Court—it
would insulate the department's quasi - judicial decisions from needed transparency,
accountability and scrutiny.- This is especially troubling when in over two dozen cases Courts
have ruled that DOF abused its discretion when administering RDA Dissolution Law.
7) Retroactively prohibits previously authorized work associated with "winding down" the work
of a former redevelopment agency. Successor agencies are empowered to hire staff to assist
with the wuik of "winding down" the former redevelopment agency. Ali of this activity is, of
course, subject to review and approval of the oversight board. This proposal (Section 34177.3,
Page 38 and 39) creates a long list of exclusions including "site remediation, removal of graffiti...
and other similar work" to the term "winding down' and makes it retroactive. This change is
puzzling, since successor agencies have an obligation to maintain the assets of the former
redevelopment agency.
z The amount available for the successor agency's administrative cost allowance is further restricted by language (Subparagraph
(3), Page 3) which requires the amounts of loans repaid to a city as well as the amount of a prior administrative cost allowance
to be deducted before applying the 3% factor. Subparagraph (4) on Page 4 further restricts possible funding by imposing a
maximum 50% cap. All of these restrictions ignore the existing authority of an oversight board to review a successor agency's
administrative cost allowance and reduce it where appropriate. This language should also be contrasted with (Subdivision (j)
on Page 54 and 55) which authorizes a county auditor - controller to recover "all associated costs, including those of other
county departments providing related services."
3 Subdivision (h) on Page 14, repeals existing authority for a city to loan or grant funds to a successor agency. This language
also excludes "grants" which appears to work in tandem with other aspects of this proposal designed to limit the ability of the
successor agency to carry out the work of dissolving redevelopment.
Page 3 of 3
Other Issues: Provided the aforementioned harmful provisions are removed, many of the following
provisions are, in isolation, potentially workable. The League is willing to work on these and other
consensus -based changes to the dissolution process.
1. 2011 Refunding Bonds: Agreements between a city and successor agency to refunding or
refinancing of bonds prior to June 27, 2011, is considered an enforceable obligation.
(Subparagraph (2), Page 7)
2. Extension of RDA Time Limits to Repay Bond Debts: An issue that has arisen is how debts will
be repaid if the time limits of a former redevelopment agency have expired. This proposal
waives those limits for bond repayments only, so the question remains what happens to other
enforceable obligations that remain to be paid. (Section 34189, Page 65)
3. Annual ROPS: Changes from 6 -month to annual ROPS process commencing July 1, 2016.
(Subdivision (h), Page 8), Pages 35 -38.
4. Final and Conclusive: Provides DOF with 100 days to render a decision on a final and conclusive
request. (Subdivision (i), Page 46)
5. Long Range Property Management Plans: Provides some helpful clarification that DOF does
not need to review either (1) transfers of governmental property or (2) transfers of property to
be retained for development pursuant to a DOF approved Long Range Property Management
Plans. It appears, however, that transfers to a third party are missing from this list. (Subdivision
(h), Pages 52 and 53)
6. Countywide Oversight Boards: There are a number of issues that are raised with the planned
transition to countywide oversight boards. (Subdivision (j), Page 54 and 55)
7. Public Parking Lots: Adds parking lots to the list of facilities deemed to be for a governmental
purpose, provided they do not generate revenue in excess of reasonable maintenance costs.
(Subparagraph (2), page 59). Agencies with previously approved plans may amend their plans to
incorporate these parking lots. (Subdivision (b), Page 66).
8. Auditor - Controller Audits: Makes revisions to the existing audit process. Section 34186, Page
61 and 62).
9. Process for Dissolving Successor Agency following debt repayment: (Page 62, 63 and 64)
10. Optional Last and Final ROPS Process: Offers a last and final ROPS process to those agencies
where issues are resolved and debt repayment can be placed on autopilot. (Pages 72 -79)
r ��3 7 �0 1400 K Street, Suite 400 • Sacramento, California 95814
L: lJ Phone: 916.658.8200 Fax: 916.658.8240
OF CALIFORNIA www.cacities.org
C, I T I E
DATE: March 25, 2015
TO: Members, Senate Budget Subcommittee on State Administration 44
FROM: Dan Carrigg, League Legislative Director, (916) 658 -8222
RE: Governor's Budget Proposal Affecting Redevelopment Dissolution (RN #15 09465)'
On behalf of the League of California Cities we regret to inform you that the League has taken an
Oppose, Unless Amended position on the language (RN# 15 09465, dated March 9 "') containing
proposed changes to the redevelopment dissolution process. A detailed analysis of the provisions is
attached.
Collectively, the changes seek to reverse court decisions, change laws retroactively, undo previous
incentives, and limit transparency, accountability and opportunities for local agencies to protect their legal
rights; these provisions far overshadow other minor offerings. This proposal is so harmful to the interests
of cities that we urge you to reject the entire proposal if they are not removed.
Over the last three years, while the dissolution process has been very difficult, significant progress has
been made. The Department of Finance (DOF) has issued findings of completion for 329 agencies; these
agencies are now engaged in developing and completing their Long Range Property Management Plans,
of which 177 have been approved. The state budget has also benefited significantly. The Administration
projects that redevelopment dissolution will produce $5.375 billion in Prop. 98 contributions from FY
2011 -12 through FY 2015-16, and $1 billion per year nngoinv.
Naturally, some disputes remain. Per the dissolution statute, all disputes are under the jurisdiction of the
Sacramento Superior Court. While applying the law to specific facts, the courts have often ruled in
support of DOF's decisions; but, in other instances, local agencies have prevailed and DOF is appealing.
In short, the judicial system is working through complex issues and these disputes will rim their course in
due time. Furthermore, DOF had a full hand in drafting the laws the Courts are interpreting. If local
govermnents are expected to comply with and respect these laws, then the state should as well and not
seek to redraft and insert new retroactive provisions in an attempt to avoid Court rulings deemed
unfavorable and stifle the ability of local agencies to protect their legal rights.
The recent trend by the Legislature is to try to help, not hurt local agencies with the dissolution process.
Last year, legislators advanced several bills that included helpful clean -up to dissolution statutes,
supported by local government, to the Governor's desk. While two surgical measures, AB 471 and
' This letter and its attachment have been updated to reflect a slightly modified version of amendments released
by the Department of Finance on March 9, 2015. The League's previous letter to the Assembly Budget
Subcommittee 44 was drafted on the February 18`" version of amendments.
AB 1963, authored by Assembly Speaker Toni Atkins, were signed, other significant proposals including
SB 1129 (Steinberg), AB 2493 (Bloom) and AB 1450 (Garcia) were vetoed. In 2015, the Legislature has
introduced over 10 bills intended to be helpful.
The loss of redevelopment has been devastating for many communities. Cities lost the major tool they
had to address the needs of poorer and blighted neighborhoods. Gone are significant resources that were
used to build affordable housing, transit- oriented development, clean up brownfields and rebuild
infrastructure.
We strongly urge you to reject the harmful aspects of this proposal on cities; enough harm has already
been done. We do recognize, however, that there are some proposals (listed on page 3 of the attached
document) that could be helpful to cities, and, of course, would be willing to work with all stakeholders
on such items and others to explore opportunities for consensus -based clean -up.
Thank you for your attention to this important matter
cc: Mr. Michael Cohen, Director, Department of Finance
Letterhead
Sample Letter
Date
The Honorable Richard Roth, Chair
Senate Budget Subcommittee on State Administration #4
State Capitol Building, Room 4034
Sacramento, CA 95814
FAX: (916) 651 -4931
RE: Governor's Budget Proposal Affecting Redevelopment Dissolution (RN #15 09465)
Notice of Opposition
Dear Chairman Roth:
On behalf of City/Town of I regret to notify you of our opposition to the
Governor's Budget Proposal Affecting Redevelopment Dissolution (RN #15 09465).
Collectively, the changes seek to reverse court decisions, change laws retroactively, undo
previous incentives, and limit transparency, accountability and opportunities for local agencies
to protect their legal rights; these provisions far overshadow other minor offerings. This proposal
is so harmful to the interests of cities that we urge you to reject the entire proposal if they are
not removed.
The Department of Finance had a full hand in drafting the laws the Courts are interpreting. If
local governments are expected to comply with and respect these laws, then the state should as
well and not seek to insert new retroactive provisions in an attempt to avoid Court rulings
deemed unfavorable and stifle the ability of local agencies to protect their legal rights.
Cite any aspects of the proposal that may cause harm to your community...
The City /Town of respectfully urges your opposition to this proposal unless all
provisions harmful to cities are removed.
Name
Title
City /Town of
cc: Your Senator & Assembly Member
Your League Regional Public Affairs Manager
Meg Desmond, League of California Cities, mdesmond @cacities; FAX: (916) 658 -8240