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Department of Finance Issues New Guidance on Post-RDA Issues

League Requests Additional Clarification and Provides Recommendations

May 18, 2012

The California Department of Finance (DOF) just issued three new guidance documents to address the growing list of questions that have arisen concerning the implementation of the redevelopment agency dissolution legislation, AB x1 26. The three guidance documents are marked with a red NEW and can be found on the department’s website.

 

The first guidance document addresses a series of questions the League and others have raised in connection with Recognized Obligation Payment Schedules (ROPS). We would note three answers in particular:

No. 1 (p. 1) Concerning Catch-Up Payments to Taxing Agencies for December 2011 Taxes.  Last December county auditor-controllers distributed tax increment to redevelopment agencies as if AB x1 26 was not in effect because of the Supreme Court’s stay of the bill. The League is still unclear about how DOF suggests these payments will be made June 1 and has asked for further clarification. The last sentence of DOF’s answer says the June 1 payment will cover the “entire allocation of property tax to taxing entities for the 2011-12 fiscal year,” but an earlier sentence suggests that this amount is in addition to the amount deducted for the ROPS for the July – December 2012 period from the Redevelopment Property Tax Trust Fund.

  • League Recommendation: We have asked DOF for clarification on this matter since in some cases there may not be sufficient funds to do both. 

No. 2 (p. 1) Concerns the Consequences of Failure by DOF to Approve a ROPS by June 1 (Requested by League May 15). While initially indicating auditor-controllers should “make a timely distribution of pass through payments and distribute the remaining property tax to taxing agencies on June 1,” DOF agrees that H&S Code Section 34182 makes clear the duty of the county auditor-controller to administer the distribution for the benefit of holders of enforceable obligations and, to the extent the auditor-controller knows of such enforceable obligations that must be paid (e.g., bond debt service payments), the auditor-controller may hold such amounts in reserve until receiving an approved ROPS from DOF.

  • League Recommendation: if your city is in this position, we urge that you consult with your auditor-controller immediately and ask that he or she reserve the funds necessary to pay any enforceable obligations before distributing the balance of the funds to taxing agencies.

No. 9 (p. 3) Concerns DOF Rejection of Reestablishment of Interagency Agreements. In this answer DOF states it will object to “any reestablishment of an agreement with the local agency that created the redevelopment agency, unless the successor agency can demonstrate the redevelopment agency funding was contemporaneously pledged for payment of indebtedness obligations as set forth in Section 34171 of the Health and Safety Code.”

  • League Recommendation: Consult your legal counsel and, if they agree, continue to assert the position that such agreements are specifically authorized by AB x1 26 and cannot be rejected by DOF. H&S Code Section 34178(a) allows a successor agency to request approval from its oversight board to enter into or reenter into an agreement with the city that created it, and H&S Code Section 34180(h) allows an oversight board to approve such an agreement without documentation of an underlying enforceable obligation as suggested by DOF. Interestingly, DOF has proposed to clarify its authority in this regard in its proposed budget trailer bill (see point no. 2 in the CA Cities Advocate article on May 17 about the budget trailer bill). This may suggest DOF is aware of the lack of legal authority for its position.


 
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