BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 1412|
          |Office of Senate Floor Analyses   |                              |
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                                   THIRD READING 


          Bill No:  AB 1412
          Author:   Perea (D), et al.
          Amended:  4/30/15 in Assembly
          Vote:     21  

           SENATE GOVERNANCE & FIN. COMMITTEE:  7-0, 6/17/15
           AYES:  Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,  
            Pavley

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 8/27/15
           AYES:  Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

           ASSEMBLY FLOOR:  76-0, 5/26/15 (Consent) - See last page for  
            vote

           SUBJECT:   Redevelopment: successor agencies to redevelopment  
                     agencies


          SOURCE:    City of San Joaquin
          
          DIGEST:   This bill allows the successor agency to the City of  
          San Joaquins former redevelopment agency (RDA) to accelerate the  
          repayment of loan debts owed by the former RDA to the city.
          
          ANALYSIS:   Existing law allows a former RDA's successor agency,  
          upon receiving a finding of completion issued by the Department  
          of Finance, to place loan agreements between the former RDA and  
          its sponsoring entity on its Recognized Obligation Payment  
          Schedule (ROPS), as an enforceable obligation, provided the  
          successor agency's oversight board makes a finding that the loan  
          was for legitimate redevelopment purposes.

          This bill allows for an expedited repayment schedule of a loan  
          agreement between a former RDA and the City of San Joaquin,  








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          subject to specified conditions.  Specifically, this bill:

          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 before 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 ROPS. 


             c)   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.


          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.


          3)Directs that the accumulated interest rate must be  
            recalculated from origination at the interested rate of .25  
            percent.


          Background
          
          Until 2011, the Community Redevelopment Law allowed local  
          officials to set up RDAs, prepare and adopt redevelopment plans,  
          and finance redevelopment activities.  Citing a significant  
          State General Fund deficit, Governor Brown's 2011-12 budget  
          proposed eliminating RDAs and returning billions of dollars of  








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          property tax revenues to schools, cities, and counties to fund  
          core services.  Among the statutory changes that the Legislature  
          adopted to implement the 2011-12 Budget, ABX1 26 (Blumenfield,  
          Chapter 5, Statutes of 2011-12 First Extraordinary Session)  
          dissolved all RDAs.  The California Supreme Court's 2011 ruling  
          in California Redevelopment Association v. Matosantos upheld  
          ABX1 26, but invalidated ABX1 27 (Blumenfield, Chapter 6,  
          Statutes of 2011-12 First Extraordinary Session), which would  
          have allowed most RDAs to avoid dissolution.

          ABX1 26 established successor agencies to manage the process of  
          unwinding former RDAs' affairs.  With limited exceptions, the  
          city or county that created each former RDA now serves as that  
          RDA's successor agency.  Each successor agency has an oversight  
          board that is responsible for supervising it and approving its  
          actions.  One of the successor agencies' primary  
          responsibilities is to make payments for enforceable  
          obligations, which are statutorily-defined legally binding and  
          enforceable commitments entered into by former RDAs.  

          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 RDA  
          and the former RDA.  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,  
          Chapter 26, Statutes of 2012).  A successor agency that receives  
          a finding of completion can repay loans made to a former RDA 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 RDA 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.   








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          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 estimate that, under current law, the  
          loan will not be fully repaid until 2050.  Faced with ongoing  
          economic and fiscal challenges, city officials want the  
          Legislature to allow the successor agency to repay the loan more  
          rapidly.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee, relative to  
          current law, this bill will result in increased General Fund  
          expenditures of approximately $650,535 through the 2022-23  
          fiscal year, followed by reduced General Fund expenditures  
          through 2051-52.  The net impact of this bill relative to the  
          current loan repayment schedule would be a reduction of  
          approximately $2.8 million in overall expenditures from the  
          General Fund.


          SUPPORT:   (Verified8/27/15)


          City of San Joaquin (source)


          OPPOSITION:   (Verified8/27/15)









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          None received

          ASSEMBLY FLOOR:  76-0, 5/26/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla,  
            Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,  
            Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,  
            Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,  
            Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,  
            Grove, Hadley, Roger Hernández, Holden, Irwin, Jones,  
            Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Bloom, Chávez, Harper, Mathis

          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          8/31/15 9:05:46


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