BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1412|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
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,
AB 1412
Page 2
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
AB 1412
Page 3
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.
AB 1412
Page 4
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)
AB 1412
Page 5
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
**** END ****