HomeMy WebLinkAbout2015-04-14 - AGENDA REPORTS - STATE'S RDA DISSOLUTION PROP (2)Agenda Item: 5
CITY OF SANTA CLARITA
Q) AGENDA REPORT
CONSENTCALENDAR
CITY MANAGER APPROVAL:
DATE: April 14, 2015
SUBJECT: GOVERNOR BROWN'S REDEVELOPMENT DISSOLUTION
PROPOSAL
DEPARTMENT: City Manager's Office
PRESENTER: Matthew Levesque
RECOMMENDED ACTION
City Council adopt the recommendation of the City Council Legislative Subcommittee to oppose
Governor Brown's Redevelopment Dissolution Proposal and transmit letters of opposition to
Governor Brown, Santa Clarita's state legislative delegation, appropriate legislative committees,
and the League of California Cities.
BACKGROUND
Governor Jerry Brown recently released a draft proposal related to the dissolution of
redevelopment agencies, which is anticipated to be included within a budget trailer bill. The
proposed language strengthens the authority and limits the accountability of the Department of
Finance by reversing court decisions regarding the redevelopment dissolution process, changing
laws retroactively, undoing previous incentives, and limiting transparency, accountability, and
opportunities for local agencies to protect their legal rights.
The City of Santa Clarita (City) has been diligent in following all rules and regulations
associated with the dissolution of the Redevelopment Agency, including going through the
rigorous process of obtaining our finding of completion on June 20, 2013, and receiving approval
of our Long Range Property Management Plan, which we are currently in the process of
implementing. Despite our advancement through the redevelopment dissolution process, there
are several areas within the proposed rule changes which stand to negatively impact the City.
A primary area of concern for the City is related to the proposed language that changes the
criteria for which reinstated loans between the City and the former Redevelopment Agency
qualify for repayment. Under the current proposal, loans that reimburse the City for costs of
services or public improvements provided by third parties are not eligible to be repaid. This rule
would likely impact loans provided by the City of Santa Clarita to the former Redevelopment
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Agency, specifically for projects such as both phases of the Old Town Newhall Streetscape
Project along Main Street. Additionally, the proposed language would establish time limits for
the payment of reinstated loans within a redevelopment plan, meaning the City would not receive
full repayment of $13.4 million in loans.
The City's Successor Agency recently received Oversight Board approval to reenter into a loan
repayment agreement between the City and the Successor Agency so that the City may be repaid.
This agreement is currently being reviewed by the Department of Finance; however, the
proposed language seeks to undo reentered agreements between cities and successor agencies. It
is unclear at this point whether this would impact the City loan discussion we are currently
having with the Department of Finance, but the City is concerned that this proposed language
could put the repayment of City loans in jeopardy.
The final area of concern is in regard to the proposed language to exempt the Department of
Finance from the Administrative Procedures Act, which would essentially allow the Department
of Finance to implement rules or guidelines without any input or public comments and provide
no way to challenge their determinations. Pairing this rule with the proposed rule's additional
proposal to make it so that legal costs to challenge the Department of Finance or the State
Controller's Office are no longer separate enforceable obligations, will make it virtually
impossible for cities to challenge the Department of Finance or tile State Controller's Oft -ice on
their rulings and ensure their accountability through the dissolution process.
The City Council Legislative Subcommittee met on March 10, 2015, and recommends an
lwposc" position to the full City Council.
ALTERNATIVE ACTION
1. Adopt a "support" position on the proposed RDA language
2. Take no position on the proposed RDA language
3. Refer the item back to the Legislative Subcommittee
FISCAL IMPACT
No additional resources, beyond those contained withing the adopted FY 2014/15 City budget,
are required for the implementation of the recommended action.
ATTACHMENTS
Key Issues With DOF RDA Dissolution Trailer Bill
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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 46, 47, 48; Subdivision (h) page 57 and 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 64 and 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
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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 67) 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). 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 Sacramento
Superior Court. This proposal restricts any litigation expenses to a limited administrative cost
I Comments Based upon 02/18/15 version RN H 15 08847; this version currently has an urgency clause requiring a 2/3rds vote.
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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 COStS3 . 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 redevelopment was eliminated, many projects were underway, incomplete or required
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 work of "winding down" the former redevelopment agency. All 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.
2 The amount available for the successor agency's administrative costal Iowa nce is further restricted by I a nguage (Subparagraph
(3), Page 3) which requires the amounts of loans repaid to a city as wel I as the amount of a prior ad min i5trative costa I Iowan cc
to be deducted before applying the 3% factor. Subparagraph (4) on Page 3 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 0)
on Page 54) 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 grawt 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.
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Otherlssues: Provided the aforementioned harmful provisions are remove 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 64 and 65)
3. AnnuallROPS: Changes from 6 -month to annual ROPS process commencing July 1, 2016.
(Subdivision (h), Page 8), Pages 34-37.
4. Final and Conclusive: Provides DOF with 100 days to render a decision on a final and conclusive
request. (Subdivision (i), Page 45 and 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)
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-Controlleroudits: Makes revisions to the existing audit process. Section 34186, Page
60 and 61).
9. Process for Dissolving Successor Agency following debt repayment: (Page62,63and64)
10. Optional Last and Final ROP5 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)
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