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HomeMy WebLinkAboutID# 15-865 Legislative Update on Redevelopment Dissolution Bill SB 107OVERSIGHT BOARD OF THE SUCCESSOR AGENCY OF THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE TO: VICE CHAIR KELLEY AND MEMBERS OF THE OVERSIGHT BOARD FROM: BARBARA LEIBOLD, SUCCESSOR AGENCY COUNSEL DATE: DECEMBER 15, 2015 SUBJECT: LEGISLATIVE UPDATE ON REDEVELOPMENT DISSOLUTION BILL SB 107 Recommendation: That the Oversight Board receive and file the legislative update report. For additional detail on SB 107, see attached "Summary of SB 107 (Budget and Fiscal Review) Chapter 325, Statutes of 2015" prepared by the League of California Cities. Background: Existing law dissolved redevelopment agencies as of February 1, 2012, and provides for the designation of successor agencies to wind down the affairs of the dissolved redevelopment agencies, including performance of obligations required pursuant to any enforceable obligations. SB 107, signed by Governor Jerry Brown on September 22 and effective immediately, creates additional requirements and deadlines for the dissolution of former redevelopment agencies. This report highlights the most significant of those changes. Discussion: A new provision targets successor agencies that have outstanding payments due under a Due Diligence Review. SB 107 mandates that those successor agencies must either pay the balance in full or enter into a payment plan with Department of Finance (DOF) no later than December 31, 2015. Failure to pay the balance in full or enter into a payment plan by this deadline will prohibit a successor agency from ever receiving a finding of completion. Without a finding of completion, a successor agency cannot adopt a long range property management plan (LRPMP) or re -enter into loan agreements between the former redevelopment agency and city. Note: The Successor Agency of the Redevelopment Agency of the City of Lake Elsinore completed its Housing and Non - Housing DDRs and received a Finding of Completion — this provision does not affect Lake Elsinore. Legislative Update On Redevelopment Dissolution Bill SB 107 December 15, 2015 Page 2 Amended definition of "administrative cost allowance." SB 107 redefines the term to make the successor agency's administrative cost allowance the sole source of funding for the successor agency's legal expenses. A city may loan money to successor agencies for litigation, but if litigation is unsuccessful the money becomes a "grant" rather than an enforceable payment obligation. Additional restrictions on allowable successor agency expenses. The bill expands the definition of "enforceable obligation" to include the repayment of federal grants or loans made to a city or county that loaned those funds to a redevelopment agency. Recognized Obligation Payment Schedules (ROPS) will be submitted only once per year beginning February 1, 2016 for fiscal year July 1, 2016 —June 30, 2017. DOF will issue determinations on the annual ROPS by April 15. Annual ROPS can only be amended once no later than October 1. Countywide oversight board takes effect on July 1, 2018. Local oversight boards will continue to review successor agency actions for an additional two years until July 1, 2018, after which time countywide oversight boards will provide direction and approval to local successor agencies. Definition of "governmental purpose properties" expanded to include public parking garages and lots. If a successor agency has an approved LRPMP, it may be amended to add these governmental use properties, so long as the revenue from these properties does not exceed operation and maintenance costs. Successor agencies with a finding of completion may still re -enter into loan agreements previously entered into between the redevelopment agency and city, but SB 107 narrows the definition of loan agreements. Reimbursement agreements in which the city contracted with a third party on behalf of the former redevelopment agency are now limited to only those agreements for the development of infrastructure in connection with a redevelopment project as identified in a redevelopment project plan, and SB 107 caps reimbursement repayments at $5 million. SB 107 excludes from the definition of "winding down" work associated with design, demolition, construction and site remediation, unless such work is required by a pre - dissolution enforceable obligation. DOF is not subject to the Administrative Procedures Act. As such, DOF is not required to adopt regulations governing its involvement with the wind -down process. Instead, DOF may continue its current practice of adopting informal policies and frequently- asked - questions to provide guidance to successor agencies. Prepared by: Barbara Leibold, Successor Agency Counsel Attachment: Summary of SB 107 (Budget and Fiscal Review) Chapter 325, Statutes of 2015 Brief Analysis of SB 107 Below is a brief summary of SB 107, the redevelopment dissolution bill, compiled by the League's Attorneys, and reflects input from city attorneys representing agencies across the state. Given that this 104 page bill is being placed into print on the last day of session, affected cities and legislators are being given little time to review and understand its full impact. The details and nuances of the language and how they will later be interpreted by DOF matter immensely. Loan Repayment 1. Third -Party or "Reimbursement Agreements" The maximum amount of reimbursement under this type of loan is $5,000,000 per agency for all loan agreements. COMMENT: The $5,000,000 limit applies per agency, even if there was more than one loan agreement. Many cities are owed much more than this. This is the issue that has been most hotly contested, and was the subject of the Watsonville case, where a city contracted with a third party. The language also requires that the city's agreement with a third party was made "on behalf of the RDA." This language will give DOF an opportunity to limit these types of loans to agreements that explicitly provide that they are made "on behalf o_l" the RDA. Many agreements do not include this language. Some city attorneys have commented that the obligation to reimburse was documented with a resolution rather than "an agreement" and that DOF may adopt a narrow definition of "agreement" and limit repaying loans on that basis. 2. Transfers of Real property: City transfers real property to CPA for use by CRA and CRA is required to pay city for real property interest. COMMENT: It is unclear how widely applicable this provision is. City attorneys reviewing the bill this morning identified Santa Monica, Daly City and Hayward as potentially benefitting. The bill requires that there was a transfer of an interest in real property to the redevelopment agency. This type of loan does not include agreements between a city and its redevelopment agency in which the interest in real property remained with the city. Cash: This is DOF's original proposal in AB 113. While cash loans will supposedly be recognized the interpretation of "required repayment schedule" (page 80, line 3) by DOF will make the difference in whether such loans are recognized or must be further litigated. COMMENT.- DOF will have the opportunity to interpret the phrase "repayment schedule." Loans of cash do not include a "repayment schedule" as that phrase is ultimately interpreted by DOF will not qualify for repayment. 4. Interest rate on these loans: Recalculated from origination at 3% simple interest. COMMENT: This interest rate would be less than what local agencies could otherwise recover based on existing law and the Glendale decision. Due Process & Legal costs: DOF is exempted from the Administrative Procedures Act. Local agencies are restricted to the administrative cost allowance as the sole funding source for legal costs. City may loan funds to successor agency but may only recoup funds if litigation is successful. New types of enforceable obligations Two new types of enforceable obligations are created by the bill: 1. "State highway infrastructure improvements" (funded pursuant to Health & Safety Code 33445). 2. Loan from city to CRA of federal grant/loan funds (e.g. CDBG /Section 108 funding) Changes affecting housing successor 1. Increases from 2% of value of property to 5% of value of property amount that can be spent by housing successor on administrative costs. 2. Allows use of 100% of housing bonds. Countywide Oversight Boards do not begin until 2018 (instead of July 2016) Other provisions of the legislation: As previously provided in AB 113 1. Interest rate on loans from cities to successor agencies calculated from date of OB approval at LAIF rate in effect for the previous fiscal quarter. 2. Use of 2010 bond proceeds require Oversight Board approval only. 3. 2011 bonds may be used as previously provided in AB 113. 4. DOF may require compensation agreements for transfer of property from successor agency to city for future development. 5. A public parking facility that produces revenue in excess of "maintenance costs" is not considered a public parking facility. 6. Validation of re- entered agreements prior to AB 1484. 7. May create limited enforceable obligations for "winding down" activities as defined (no maintenance of property included).