BILL ANALYSIS �
AB 1555
Page 1
Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1555 (Norby) - As Amended: March 6, 2012
SUBJECT : Redevelopment: debt forgiveness agreements
SUMMARY : Prohibits the oversight board responsible for the
wind-down of a redevelopment agency (RDA) to require the
successor agency to forgive a loan, advance, or indebtedness
that is owed to the dissolved RDA by a public body.
Specifically, this bill :
1)Prohibits the oversight board responsible for the wind-down of
an RDA to require the successor agency to forgive a loan,
advance, or indebtedness that is owed to the dissolved RDA by
a public body.
2)Permits the oversight board to set aside any agreements that
relate to the forgiveness of a loan, indebtedness, or advance
owed by the dissolved RDA dating back to January 1, 2011.
EXISTING LAW
1)Dissolves RDAs as of October 1, 2012 (this was extended by the
courts as of February 1, 2012).
2)Requires a successor agency to enforce all former RDA rights
for the benefit of the taxing entities, including, but not
limited to, continuing to collect loans, rents, and other
revenues due to the RDA (Health and Safety Code Section
34177).
3)Requires RDAs to continue to make all scheduled payments for
enforceable obligations, perform obligations established
pursuant to enforceable obligations, set aside required
reserves, preserve assets, cooperate with successor agencies,
and take all measures to avoid triggering a default under an
enforceable obligation.
4)Requires RDAs to prepare an enforceable obligation payments
schedule containing all payments obligated to be made and
provide it to the county auditor-controller within 60 days of
the effective date of ABX1 26 (Blumenfield, 2011).
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5)Requires that unencumbered RDA funds be conveyed to the county
auditor-controller for distribution to the taxing entities in
the county, including cities, counties, a city and county,
school districts, and special districts.
6)Establishes successor agencies to the RDAs that would, except
in certain situations, such as those involving an RDA based on
a joint powers authority, be the entity that created the RDA.
If no local agency elects to be the successor agency, a
designated local authority would be formed, made up of three
members that would be appointed by the Governor.
7)Requires successor agencies to make payments on legally
enforceable obligations using property tax revenues when no
other funding source is available or when payment from
property tax revenues is required by an enforceable
obligation.
8)Defines enforceable obligations for successor agencies to
include, but not be limited to:
a) Bonds, including debt service, reserves, or other
required payments;
b) Loans borrowed by the agency for a lawful purpose,
including loans from the Low and Moderate Income Housing
fund;
c) Payments required by the federal government;
d) Pre-existing obligations to the state or obligations
imposed by state law;
e) Legally enforceable payments to agencies' employees,
including pension obligations and other obligations
conferred through a collective bargaining agreement;
f) Judgments and settlements entered into by a court or
arbitration, retaining appeal rights;
g) Legally binding contracts that do not violate the debt
limit or public policy; and
h) Contracts necessary for the administration of the
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agency, such as for office space, equipment, and supplies,
to the extent permitted.
9)Provides that enforceable obligations do not include any
agreements, contracts, or arrangements between the city,
county, or city and county that created the RDA and the former
RDA.
10)Requires successor agencies to take control of all assets,
properties, contracts, books and records, and buildings and
equipment of the RDAs on October 1, 2011.
11)Requires successor agencies to dispose of RDAs' assets as
directed by the oversight board, with the proceeds transferred
to the county auditor-controller for distribution to taxing
agencies within the county. Governmental facilities, such as
roads, school buildings, and fire or police stations would be
conveyed to the appropriate public jurisdiction.
12)Requires the successor agencies to compensate the taxing
agencies for the value of property and assets retained by the
successor agencies in an amount proportional to the taxing
agencies' share of the property tax.
13)Creates the Redevelopment Obligation Retirement Fund and the
Redevelopment Property Tax Trust Fund (Trust Fund). Property
tax revenues associated with each former RDA in each county
will be deposited in the Trust Fund, which will be
administered by the county auditor-controller.
14)Requires the county auditor-controller to determine the
amount of property tax increment that would have been
allocated to each RDA and to deposit that amount in the Trust
Fund.
15)Requires the county auditor-controller to allocate funds from
the Trust Fund in the following order:
a) Local agencies, school districts, and community college
districts in the amount that would have been received by
such agencies as their share of the property tax base and
that would have been paid pursuant to statutory and
contractual pass-through agreements;
b) Redevelopment Obligation Retirement Fund for successor
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agencies' payments listed in the Recognized Obligation
Payment Schedule and administration; and
c) Cities, the county, schools, community college
districts, and non-enterprise special districts in the
proportional shares of what would have been received absent
redevelopment and adjusted for pass-through agreements.
16)It shall be noted that in the Supreme Court's holding in
California Redevelopment Association v. Matosantos, Case No.
S19486, the Court extended all of the statutory deadlines
contained in Health and Safety Code Division 24, Part 1.85
(Sections 34170-34191) and arising before May 1, 2012, by four
months.
FISCAL EFFECT : None.
COMMENTS :
In 2011, the Legislature approved and the Governor signed two
measures, ABX1 26 (Blumenfield) and ABX1 27 (Blumenfield) that
would together dissolve RDAs as they existed at the time and
create a voluntary redevelopment program on a smaller scale. In
response the California Redevelopment Association (CRA) and the
League of California Cities, along with other parties, filed
suit challenging the two measures. The Supreme Court denied the
petition for peremptory writ of mandate with respect to ABX1 26.
However, the Court did grant CRA's petition with respect to
ABX1 27. As a result, all RDAs were required to dissolve as of
February 1, 2012.
Purpose of this bill : According to the author, when RDAs were
dissolved, certain entities, among them some private developers,
still owed money to the RDA. The author's office provided as
background an article discussing the City of Montebello that
reported that the city council forgave loans to a developer who
made political contributions to the council members. Another
article provided by the author reported that in the City of
Riverbank, the city council was reluctant to become the
successor agency to the former RDA because they did not think
they had enough revenue to cover a multi-million dollar bond the
former RDA had issued for economic development projects. They
voted not to become the successor agency. Under ABX1 26, the
county, school district, or other taxing entities in the county
can opt to become the successor agency. If not, the Governor
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appoints three residents of the county to a "designated local
authority" to oversee the winding down of the RDA.
This bill would prohibit an oversight board from directing a
successor agency to forgive a loan in whole or in part made from
the former RDA to a public body. Additionally, the oversight
board would have authority to set aside any agreements made to
forgive loans owed by the former RDA that date back to January
1, 2011.
ABX1 26 requires a successor agency to enforce all former RDA
rights for the benefit of the taxing entities, including, but
not limited to, collecting loans, rents, and other revenues that
are due to the RDA. This provision would invalidate actions
taken by the city council to forgive a loan made to a private
developer. In addition, forgiveness of a loan to a private
entity by a city council would be unconstitutional as a gift of
public funds.
This bill as drafted would prohibit a successor agency from
forgiving a loan to a "public body" but based on the background
provided by the author's office the intent is to prevent
forgiveness of loans to private entities like developers.
Additionally, it is unclear if the author's intent is for the
oversight board to be able to set aside loans owned "by" or "to"
the RDA dating back to January 1, 2011.
Role of the Oversight Board : The oversight board is made up of
representatives of the taxing entities in the jurisdiction of
the former RDA, one member of the public, and one employee of
the dissolved RDA. The oversight board oversees the successor
agency's disposition of all assets and properties of the former
RDA, payment of enforceable obligations, merging of project
areas, and the termination of any agreements between the former
RDA and public bodies. Under the direction of the oversight
board, the successor agency is responsible for determining
whether any contracts, agreements, or other arrangements between
the dissolved RDA and private parties should be terminated or
renegotiated to reduce liability and increase net revenues to
the taxing entities. The successor agency must present proposals
to terminate or amend agreements to the oversight for approval.
Staff Comments :
The committee may wish to consider if it is appropriate to
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eliminate a negotiating option for the oversight board in
considering how to wind down the affairs of a RDA. There may be
a circumstance in which an oversight board may decide it is in
the best interest of the taxing entities to forgive a loan to a
private body in exchange for some reduction in liability. This
bill would eliminate that option.
Double referred : If AB 1555 passes this committee, the bill
will be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
California Professional Firefighters
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085