BILL ANALYSIS �
AB 1555
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Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1555 (Norby) - As Amended: May 1, 2012
SUBJECT : Redevelopment: debt forgiveness agreements.
SUMMARY : Prohibits an oversight board responsible for the
wind-down of a redevelopment agency (RDA) from requiring the
successor agency to forgive a loan, advance, or indebtedness
that is owed by a private entity to the dissolved redevelopment
agency. Specifically, this bill :
1)Prohibits an oversight board from requiring the successor
agency, in the winding down of an RDA, to take any action that
results in the forgiveness, wholly or partially, or a loan,
advance or indebtedness that is owed by a private entity to
the dissolved RDA.
2)Allows an oversight board to set aside any agreements relating
to the forgiveness of indebtedness, loans, or advances owed by
private entity to the RDA dating back to January 1, 2011, as
specified.
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.
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 to
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provide it to the county auditor-controller within
60 days of the effective date of ABX1 26 (Blumenfield, 2011).
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,
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h) Contracts necessary for the administration of the
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 RDA's 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;
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b) Redevelopment Obligation Retirement Fund for successor
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 :
1)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.
2)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
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net revenues to the taxing entities. The successor agency
must present proposals to terminate or amend agreements to the
oversight for approval.
3)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 appoints three residents of the county to a
"designated local authority" to oversee the winding down of
the RDA.
4)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 private entity. Additionally, the
bill gives an oversight board the authority to set aside any
agreements made to forgive loans owed by a private entity to
the former RDA that date back to January 1, 2011. This bill
is author-sponsored.
5)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 considered a gift of
public funds and would therefore be unconstitutional.
6)The California Professional Firefighters (CPF), in support,
write that "CPF steadfastly supported the Governor's proposal
and the Legislature's action last year through ABX1 26 to
eliminate RDAs, which ended the decades-long practice of the
diversion of what had grown to be more than $6 billion in
property tax revenues away from core services." CPF supports
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the provisions of AB 1555 to prohibit an RDA successor agency
oversight board from taking any action that results in the
forgiveness, wholly or partially, of a loan, advance, or
indebtedness that is owed by a private body to the dissolved
RDA.
CPF also suggests an amendment to AB 1555 to specify that any
and all actions should be subject to oversight board approval,
where the oversight board is bound to make such decisions
based on the best interest of the taxing entities.
7)Support arguments : CPF argues that this bill will ensure a
speedy return of critical tax increment revenue to agencies to
support vital services.
Opposition arguments : The Committee may wish to consider if
it is appropriate to 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.
8)This bill was heard by the Committee on Housing and Community
Development on April 25, 2012 and passed on a 4-2 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
California Professional Firefighters
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
AB 1555
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