BILL ANALYSIS Ó
AB 1412
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GOVERNOR'S VETO
AB
1412 (Perea)
As Enrolled September 11, 2015
2/3 vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Local |9-0 |Maienschein, | |
|Government | |Gonzalez, Alejo, | |
| | |Chiu, Cooley, Gordon, | |
| | |Holden, Linder, | |
| | |Waldron | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Housing |6-0 |Chau, Steinorth, | |
| | |Burke, Chiu, Beth | |
| | |Gaines, Lopez | |
| | | | |
|----------------+-----+----------------------+---------------------|
|Appropriations |15-0 |Gomez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Eggman, Gallagher, | |
| | |Eduardo Garcia, | |
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| | |Holden, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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|ASSEMBLY: |76-0 |(May 26, 2015) |SENATE: |39-0 |(September 9, |
| | | | | |2015) |
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| | | | | | |
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SUMMARY: 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:
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;
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b) The loan was entered into more than two years after the
creation of the former RDA, and prior to January 1, 2011;
c) The loan was related to an indebtedness obligation;
d) The loan is the only debt of the former RDA remaining to
be paid on the Recognized Obligation Payment Schedule
(ROPS); and,
e) 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 pursuant to 1) above, from
being subject to the requirements of existing law that
specifies the calculation schedule and maximum repayment
amounts of a loan.
3)Provides that the accumulated interest rate shall be
recalculated from origination at the interested rate of 0.25%.
4)Finds and declares that a special law is necessary and that a
general law cannot be made applicable, as specified, because
of the special circumstances relating to the health and safety
of the residents of the City of San Joaquin.
FISCAL EFFECT: According to the Senate Appropriations
Committee, relative to current law, this bill would 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
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relative to the current loan repayment schedule would be a
reduction of approximately $2.8 million in overall expenditures
from the General Fund.
COMMENTS:
1)Bill Summary. This bill would allow a qualifying loan between
a former RDA and the City of San Joaquin to be recognized as
an enforceable obligation and accelerate repayment of that
loan. In order to qualify, the outstanding balance of the
loan must be $1.25 million or less and the oversight board
must approve the application and make all of the following
findings: a) The loan was for legitimate redevelopment
purposes; b) the loan was entered into more than two years
after the creation of the former RDA, and prior to January 1,
2011; c) the loan was related to a indebtedness obligation; d)
the loan is the only debt of the former RDA remaining to be
paid on the ROPS; and, e) the amount distributed to the taxing
entities in the previous fiscal year was less than $250,000.
The bill specifies that the accumulated interest rate shall be
recalculated from origination at the interest rate of 0.25%
and is sponsored by the City of San Joaquin.
2)City of San Joaquin. According to the author, the City of San
Joaquin has a population of just over 4,000 people, and is
located in Fresno County. The city's projected General Fund
revenues for Fiscal Year 2014-15 are $898,240. Median worker
earnings in San Joaquin are 40% lower than the national
average, and according to recent data, San Joaquin had a
poverty rate of 51.7% and an unemployment rate of 31.3% in
2013.
3)Author's Statement. According to the author, "The City of San
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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.
AB 1412 will permit eligible sponsoring entity loans to be
repaid faster, enabling successor agencies to be terminated
earlier. Taxing entities and the general public will benefit
because tax revenues will no longer be needed to fund the
administrative activities of the successor agency, and instead
will be distributed to affected taxing entities that provide
services to the community, such as schools and local
government agencies."
4)Loan Agreement and Repayment under Existing RDA Dissolution
Law. The City of San Joaquin and the 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. 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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In a subsequent ratification and amendment to the loan
agreement dated February 11, 2014, the parties to the
agreement mutually agreed as follows: a) The parties
acknowledged and agreed that the loan was for legitimate
redevelopment purposes; b) the parties agree that the
conditions precedent in the Dissolution Act for repayment of
the loan have been met and that the loan agreement shall be
deemed to be an "enforceable obligation"; and, c) the parties
acknowledged and agreed that the repayment of amounts owing to
the city under the loan agreement shall be subject to the
limitations and restrictions set forth in Health and Safety
Code 34191.4 (b) [specifies provisions that apply to a
successor agency that has been issued a finding of completion
by the Department of Finance (DOF) and the process for
repayment of loan agreements].
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 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 LAIF rate.
Under existing law, the loan is estimated by the city to not
be fully repaid until the year 2050. If the provisions of
this bill took effect, 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
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request, stating that they do not have the authority to allow
for any other repayment amount outside of what is defined in
the statute.
5)Arguments in Support. The sponsor argues that the bill "is
important to the City and a win-win for all as payment
acceleration of the loan repayment schedule will bring greater
cash flow more quickly to both the City and the affected
taxing entities?..with a General Fund of less than $1 million,
any added revenue to the City is heartily welcome?this
legislation will help complete the wind-down process regarding
the former RDA."
6)Arguments in Opposition. None on file.
GOVERNOR'S VETO MESSAGE:
This bill establishes a separate process to allow the successor
agency to the City of San Joaquin's former redevelopment agency
to repay a specific loan owed by the former redevelopment agency
to the city.
Today, I have signed SB 107, which provides a more general
process to facilitate successor agencies' repayment of loans
which cities and counties made to their former redevelopment
agencies. I believe this latter process is more appropriate and
should be sufficient.
Analysis Prepared by:
Debbie Michel / L. GOV. / (916) 319-3958 FN:
0002448
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