BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1582 HEARING: 6/11/14
AUTHOR: Mullin FISCAL: No
VERSION: 6/2/14 TAX LEVY: No
CONSULTANT: Weinberger
RECOGNIZED OBLIGATION PAYMENT SCHEDULES
Allows redevelopment successor agencies' recognized
obligation payment schedules (ROPS) to cover a 12-month
period and allows oversight boards to amend ROPS.
Background and Existing Law
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (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
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, AB X1
26 (Blumenfield, 2011) dissolved all RDAs. The California
Supreme Court's 2011 ruling in California Redevelopment
Association v. Matosantos upheld AB X1 26, but invalidated
AB X1 27 (Blumenfield, 2011), which would have allowed most
RDAs to avoid dissolution.
AB X1 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. The Department
of Finance (DOF) can review and request reconsideration of
an oversight board's decisions.
One of the successor agencies' primary responsibilities is
to make payments for enforceable obligations entered into
by former RDAs. The statutory definition of an enforceable
obligation includes bonds, specified bond-related payments,
some loans, payments required by the federal government,
AB 1582 -- 6/2/14 -- Page 2
obligations to the state, obligations imposed by state law,
legally required payments related to RDA employees,
judgments or settlements, and other legally binding and
enforceable agreements or contracts that are not otherwise
void.
Each successor agency must, every six months, draft a list
of enforceable obligations that are payable during a
subsequent six month period. This recognized obligation
payment schedule (ROPS) must be adopted by the oversight
board and is subject to review by the DOF. Obligations
listed on a ROPS are payable from a Redevelopment Property
Tax Trust Fund (RPTTF), which contains revenues that would
have been allocated as property tax increment to a former
RDA.
Some local officials say that the biannual ROPS preparation
and approval process imposes significant administrative
burdens on local and state entities and creates fiscal
uncertainty that complicates agencies' efforts to fulfill
enforceable obligations for certain development projects.
They want the Legislature to require successor agencies to
prepare their ROPS annually.
Proposed Law
Assembly Bill 1582 lengthens, from six months to 12 months,
the fiscal period covered by a redevelopment successor
agency's recognized obligation payment schedule (ROPS). AB
1582 directs that, for fiscal years beginning on or after
January 1, 2015, a ROPS must cover a 12-month period that
corresponds to the fiscal year of the city, county, or city
and county that created the former RDA. The bill allows an
oversight board to amend a ROPS as long as the amendment is
approved at least 90 days before the date of the next
property tax distribution.
AB 1582 declares that its provisions must not be construed
to alter the semiannual distribution of Redevelopment
Property Tax Trust Fund payments made in accordance with
the projected payment schedule of the approved ROPS.
State Revenue Impact
AB 1582 -- 6/2/14 -- Page 3
No estimate.
Comments
1. Purpose of the bill . The biannual ROPS process is
complex and time-consuming. The preparation and
administration of each ROPS involves significant time by
local agency staff and attorneys, as well as additional
workload for oversight boards and DOF. Biannual ROPS
reviews also create uncertainty that make it difficult for
some successor agencies to ensure that they can make
contractually obligated payments for long-term development
projects. By shifting the ROPS process to an annual cycle,
AB 1582 will save staff time by avoiding repetitive
processing on non-controversial items and improve
predictability for local agencies.
2. Timing is everything, part one . Although AB 1582 is
intended to simplify the administrative burden of winding
down former RDAs' affairs, in some cases it may complicate
the ROPS process. Not all local governments use the same
fiscal year. The State and all 58 counties use a fiscal
year that starts in July. However, state law does not
prescribe a specific fiscal year for cities. Several
cities use the federal fiscal year, which starts in
October. By allowing successor agencies in those cities to
submit a ROPS that doesn't correspond to the state's fiscal
year, AB 1582 may complicate the administrative
responsibilities of the DOF, county auditors, and oversight
boards. Read narrowly, AB 1582 might not allow some cities
to submit a ROPS for payments due in the months of July,
August and September of 2015, which come after the final
ROPS period for the State's 2014-15 fiscal year, but before
the beginning of the federal 2015-16 fiscal year. To avoid
confusion and administrative complications, the Committee
may wish to consider amending AB 1582 to require that the
12-month fiscal year covered by each ROPS must correspond
to the State's July 1 to June 30 fiscal year, unless a
successor agency gets approval from its oversight board and
the Department of Finance to use a different fiscal year.
3. Timing is everything, part two . After a chaotic and
contentious first few cycles, the ROPS process recently has
become more routine for all of the involved stakeholders.
However, state law requires that, beginning on July 1,
AB 1582 -- 6/2/14 -- Page 4
2016, a single countywide oversight board will be
responsible for the oversight of successor agencies in each
county. In some counties with a large number of successor
agencies, the county-wide oversight board will face a
substantial workload. Rather than disrupting the biannual
ROPS process during the last fiscal year in which each
successor agency has its own oversight board, it might make
more sense to transition to an annual ROPS process at the
same time that current law requires counties to transition
to a single oversight board. The Committee may wish to
consider amending AB 1582 to make its provisions effective
for the fiscal year that begins on July 1, 2016.
Assembly Actions
Assembly Local Government Committee: 9-0
Assembly Appropriations Committee:16-1
Assembly Floor: 74-2
Support and Opposition (6/5/14)
Support : Association of California Cities - Orange County;
California Infill Builders Association; Cities of Brea,
Camarillo, Foster City, Glendale, Huntington Beach,
Moorpark, Pasadena, Redwood City, Sacramento, San Clemente,
Salinas, Vista, and West Hollywood; League of California
Cities.
Opposition : Unknown.