BILL ANALYSIS Ó
AB 1412
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Date of Hearing: May 20, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1412 (Perea) - As Amended April 30, 2015
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|Policy |Local Government |Vote:|9 - 0 |
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| |Housing and Community | |6 - 0 |
| |Development | | |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY: This bill allows for an expedited repayment schedule
of an outstanding loan agreement entered into between a former
redevelopment agency (RDA) and the City of San Joaquin, in
specified conditions. Specifically, this bill:
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1)Requires, upon application by the successor agency and
approval by the oversight board, loan agreements entered into
between the RDA and the City of San Joaquin, where the
outstanding principal balance of the loan is $1.25 million or
less, to be deemed to be enforceable obligations, if the
oversight board makes all of the following findings:
a) The loan was for legitimate redevelopment purposes, and
was entered into more than two years after the creation of
the former RDA, and prior to January 1, 2011.
b) The loan was related to an indebtedness obligation and
is the only debt of the former RDA remaining to be paid on
the Recognized Obligation Payment Schedule (ROPS).
c) The amount distributed to the taxing entities pursuant
to existing law in the previous fiscal year was less than
$250,000.
2)Prohibits repayments of a loan described above, from being
subject to existing law that specifies the calculation
schedule and maximum repayment amounts of a loan, but
continues to require that 20% of a loan repayment be
transferred to the Low and Moderate Income Housing Asset Fund.
3)Provides that the accumulated interest rate shall be
recalculated from origination at the interested rate of .25
percent.
FISCAL EFFECT:
Annual State costs of approximately $50,000 (GF) for up to ten
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years to backfill schools. Accelerating the loan repayment will
result in a temporary reduction in property tax revenues
distributed to other local taxing entities, including schools.
Under Proposition 98, the General Fund would be required to
backfill the resulting property tax losses to schools.
COMMENTS:
1)Purpose. According to the author, "The City of San Joaquin and
Successor Agency to the former San Joaquin Redevelopment
Agency requested this bill because the City is owed over $1
million from a loan made to the former San Joaquin
Redevelopment Agency. Under existing law, the loan cannot be
repaid until 2050. The City is in dire need of repayment
because the remaining amount due is larger than the City's
annual budget. The loan repayment would fund much needed
public services for the community, which has significantly
lower median wages, higher poverty rates, and higher
unemployment rates compared to the rest of the State and
nation. Because DOF cannot authorize the Successor Agency to
make payments on the outstanding loan in excess of the maximum
amounts set in existing law, special legislation is required."
2)Background. The City of San Joaquin and the Redevelopment
Agency entered into a loan agreement, dated February 11, 2010,
whereby the City and the RDA recognized that the RDA had
borrowed funds from the City for RDA programs and operations.
The outstanding principal amount owed to the City under the
loan agreement, as of February 1, 2012, (the date of
dissolution of the former RDA), was $1,028,723. This loan
agreement formalized loans made by the City to the RDA since
1998 to fund redevelopment programs and operations. In part,
the loan helped the RDA pay off debts after bonds issued in
1997 went into default.
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The Successor Agency was issued a finding of completion by DOF
on March 8, 2013. On April 24, 2013, the Successor Agency
applied for and the Oversight Board approved the loan
agreement, and made a finding that the loan of funds to the
RDA under the loan agreement was for legitimate purposes. The
loan agreement was subsequently amended on February 11, 2014,
and the new loan agreement was approved by DOF on January 28,
2015. The approved terms of the loan agreement allow for the
payment of $1,028,723 bearing an interest rate of 0.249% as
determined by the current Local Agency Investment Fund rate.
Under existing law, the loan is estimated by the City to not
be fully repaid until the year 2050. Under this bill, the
City estimates that the loan will be repaid by fiscal year
2021-22.
The City notes that the Successor Agency sent a letter to and
met with DOF requesting that they consider allowing the
Successor Agency to make payments on the outstanding loan in
excess of the maximum annual amounts set by the formula in
existing law. However, DOF denied the Successor Agency's
request, stating that they do not have the authority to allow
for any other repayment amount outside of what is defined in
the statute.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081
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