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State Offers ROPS Clarification Positive for Cities and Successor Agencies in DOF Litigation

June 1, 2012

Wednesday afternoon, Sacramento Superior Court Judge Timothy M. Frawley denied the temporary restraining order requested by 12 cities to stop the distribution of a portion of property taxes pending resolution of various disputes with the state.

 

The 12 plaintiffs in City of Palmdale et al. v. Matosantos include: Palmdale, Glendale, Culver City, Huntington Beach, Pasadena, Inglewood, National City, Imperial Beach, Hayward, Chula Vista, and Stanton.

Although the cities were not granted the requested temporary restraining order, the cities believe that they substantially achieved their goal in bringing the litigation. The state was forced to retreat from the Department of Finance’s (DOF) interpretation and application of ABx1 26 in a number of important areas, and the cities now believe that most of them will have their Recognized Obligation Payment Schedule (ROPS) fully funded.

Some important clarifications from the state that emerged in the legal proceeding include:

  • DOF comments are not “directives” or “orders” but “non-binding comments” that merely represent DOF’s interpretation of AB 26;
  • Bonds are enforceable obligations if they have increment pledged for its payment; 
  • The possibility that DOF may object to the funding source for the repayment of bonds is not a directive; 
  • DOF has three days to request review of an enforceable obligation, if not review is timely requested, then the oversight board’s approval becomes “effective;”
  • If DOF “acknowledged that if it did not request a review of a ROPS that had been approved by the oversight board within three [3] days of that approval, then the oversight board’s approval of the ROPS becomes effective and RPTTF funds should be distributed in accordance with the ROPS as approved by the oversight boards;”
  • County auditor controllers have no authority to review ROPS; 
  • County auditor controllers administer the Trust Fund for the benefit of holders of enforceable obligations and taxing entities; 
  • County auditor controller distributions are not contingent on a receipt of an approval letter from the DOF, as such letters are issued merely to track effective ROPS; and   
  • There is no requirement that the DOF approve the “entire ROPS for a successor agency to receive property tax revenue but an approved ROPS is required for payment.” 

Successor agencies should be consulting with their legal counsel to determine whether the state’s clarification will be helpful in negotiations with DOF. The League will continue to monitor this lawsuit if it proceeds forward.

To review the court filings case, please visit the League’s redevelopment webpage



 
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