BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1412 (Perea) - Redevelopment: successor agencies to
redevelopment agencies
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|Version: April 30, 2015 |Policy Vote: GOV. & F. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: June 29, 2015 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 1412 would authorize the accelerated repayment of a
loan between the City of San Joaquin and the City's former
redevelopment agency (RDA), under specified conditions.
Fiscal
Impact: Relative to current law, this bill would result in
increased General Fund expenditures of approximately $650,535
through the 2022-23 fiscal year (see below), followed by reduced
General Fund expenditures through 2051-52. The net impact of
the bill relative to the current loan repayment schedule would
be a reduction of approximately $2.8 million in overall
expenditures from the General Fund.
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The estimated short-term increased General Fund expenditures
related to the accelerated loan repayment schedule would be as
follows:
$72,254 in 2015-16
$76,129 in 2016-17
$80,081 in 2017-18
$84,112 in 2018-19
$88,224 in 2019-20
$92,418 in 2020-21
$96,695 in 2021-22
$60,626 in 2022-23.
These amounts represent the portion of Redevelopment Property
Tax Trust Fund (RPTTF) revenues dedicated to loan repayment
through 2022-23 that would otherwise be allocated to school
entities, absent the bill. In general, any reductions in
amounts allocated to schools from the RPTTF as a result of
accelerating loan repayments must be backfilled from the state
General Fund, while any increased allocations to schools from
the RPTTF as a result of avoided future loan payments would
reduce General Fund expenditures, pursuant to the Proposition 98
minimum funding guarantees.
Background: Historically, the Community Redevelopment Law has allowed a
local government to establish RDAs and capture all of the
increase in property taxes that is generated within the project
area beyond the base year value (referred to as "tax increment")
over a period of decades. Prior to their dissolution pursuant
to ABx1 26 (Blumenfield) Chap 5/2011, RDAs used tax increment
financing (including the school share), oftentimes issuing
long-term debt in the form of tax allocation bonds, to address
issues of blight, construct affordable housing, rehabilitate
existing buildings, and finance development and infrastructure
projects.
Existing law establishes procedures for winding down RDA
activity, including a requirement that successor agencies
dispose of former RDAs' assets under direction of an oversight
board. Successor agencies are required to make any payments
related to enforceable obligations, as specified in an adopted
biannual recognized obligation payment schedule (ROPS), and
remit unencumbered balances of RDA funds to the county
auditor-controller for distribution to local taxing entities in
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the county. The Department of Finance (DOF) reviews each ROPS
to determine if the listed payments meet the statutory criteria
for repayment, and has the authority to disallow any payments
that do not meet those criteria.
State law generally excludes from the definition of "enforceable
obligation" any agreements, including loan agreements, between
the city, county, or city and county that created a former
redevelopment agency and the former redevelopment agency.
However, if a successor agency complies with state laws
requiring it to remit specified RDA property tax allocations and
cash assets identified through a "due diligence review"
process, it receives a "finding of completion" from the
Department of Finance (AB 1484, Assembly Budget Committee,
2012). A successor agency that receives a finding of completion
can repay loans made to a former redevelopment agency by the
city or county that created it, if the successor agency's
oversight board finds that the loan was for legitimate
redevelopment purposes. State law specifies timelines, maximum
repayment amounts, and interest rate calculations that apply to
these loan repayments
The City of San Joaquin and its 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.
DOF issued a finding of completion for the successor agency on
March 8, 2013. On April 24, 2013, the successor agency's
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 redevelopment 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. San Joaquin city officials
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estimate that, under current law, the loan will not be fully
repaid until 2051-52.
Proposed Law:
AB 1412 allows for an expedited repayment schedule of a loan
agreement between a former RDA and the City of San Joaquin,
subject to specified conditions. Specifically, the bill:
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:
o The loan was for legitimate redevelopment
purposes, and was entered into more than two years
after the creation of the former RDA, and before
January 1, 2011.
o The loan was related to an indebtedness
obligation and is the only debt of the former RDA
remaining to be paid on the ROPS.
o The amount of former tax increment revenues
distributed to the taxing entities pursuant to
existing law in the previous fiscal year was less than
$250,000.
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.
Directs that the accumulated interest rate must be
recalculated from origination at the interest rate of 0.25
percent.
Related
Legislation: AB 113 (Budget Committee), currently pending in
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the Senate Budget and Fiscal Review Committee, is a budget
trailer bill that would make numerous changes to the RDA
dissolution statutes, among other local government provisions.
Recommended
Amendments: This bill and AB 113 both propose to amend Health
and Safety Code §34191.4. Staff recommends that the bill be
amended to avoid chaptering conflicts with the proposed trailer
bill.
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