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RDA and May Revise: DOF Draconian Proposal Unworkable

Calls to Legislators Needed to Ask that Bill be Rejected!

May 18, 2012

URGENT ACTION REQUESTED: Inform your legislators of the overwhelming challenges your city has faced with the redevelopment dissolution process and ask them to reject the Department of Finance’s (DOF) redevelopment budget trailer bill and use AB 1585 (Pérez), SB 986 (Dutton) and SB 1335 (Pavley) as a more positive starting point for redevelopment-related budget discussions and future state-local economic development efforts.

 

This is a time of great difficulty and confusion for cities dealing with the aftermath of AB X1 26. The loss of redevelopment has meant the halting of many vital infrastructure, affordable housing and commercial projects important to communities that would have created jobs and served as a catalyst to billions of additional private-sector investment. History will, no doubt, confirm that this was a very bad decision for the future of California and its economy.

Since Feb. 1, cities have had to layoff many experienced and dedicated staff and spend hundreds of hours in navigating a chaotic dissolution process of successor agencies, oversight boards, interactions with DOF other agencies. The objective of cities is obviously to protect, where possible, the assets important to their community they believe are consistent with the law and to achieve a reasonable wind-down of previous redevelopment activity. 

Cities have strongly supported AB 1585 (Pérez), which would provide improved clarity and stability for both municipal bond investors and local agencies grappling with the massive undertaking of unwinding decades of redevelopment activity. 

Some of the bill’s important features include:

  • Ensuring that a full year of bond debt service requirements may be provided on the first six-month enforceable obligation list;
  • Clarifying the ability of oversight boards to ensure that certain loans between local governments and redevelopment agencies are repaid;
  • Allowing asset disposal to occur in a more responsible manner; and
  • Reserving affordable housing funding for its intended purpose. 

Although the Assembly passed AB 1585 on March 26 with a strong bipartisan vote, it has remained stalled in the Senate without a hearing. Other helpful redevelopment cleanup bills are SB 986 (Dutton) and SB 1335 (Pavley) are pending on the Senate Appropriations Suspense File.

Heading into the June 1 property tax distribution date, there has been much uncertainty and confusion associated with an overtaxed DOF review of the Recognized Obligation Payment Schedules (ROPS) submitted by successor agencies. Contributing to the confusion is the vagueness of the law, the volume of activity associated with nearly 400 successor agencies and oversight boards, the complicated nature of former redevelopment activity, financial agreements and structures, and constantly evolving DOF interpretations and email messages on ROPS that evoke new rounds of discussion and questions. 

DOF Redevelopment Trailer Bill

Earlier this week, DOF released its proposed trailer bill on redevelopment.  The measure contains several provisions considered helpful; however, the thrust of the proposal is extremely negative for state-local relations. It proposes to sweep all remaining affordable housing and other funds to the benefit of the state budget, provide DOF and county auditor-controllers with draconian authority in all matters of dispute involving ROPS and enforceable obligations, limit the ability of successor agencies and oversight boards to defend against DOF decisions that are considered unreasonable, and erode local control. (See “Proposed Post-RDA Budget Trailer Bill Raises Major Concerns” in the May 17, 2012 issue of CA Cities Advocate.)

Next Steps and Requested Action:

The reaction of the Legislature to this DOF-proposed measure remains unclear. Speaker John Pérez (D-Los Angeles) has invested much in his efforts on AB 1585. Senate President Pro tem Darrell Steinberg (D-Sacramento) has been interested in crafting new tools that can be useful in implementing SB 375. DOF proposal would not only undermine the objectives of AB 1585, it would also set an extremely negative tone for future state-local relations on new tools going forward.

Next week, the Legislature will begin to review and discuss the Gov. Jerry Brown’s May Revise proposals. In advance of those discussions city officials are encouraged to call their legislators and focus on the following:

  1. Explain to your legislator your experience with the ROPS process, and any issues and concerns you have. Be specific about projects that are in jeopardy, and emphasize, where appropriate, oversight board approval as evidence of broader community support.
  2. Explain your concerns with the draconian approach taken by the DOF trailer bill, and how it will not only undermine your community, but also how it would set a negative tone for city-state relations going forward.
  3. Encourage legislators to reject the DOF trailer bill, and use the much more constructive AB 1585 (Pérez), SB 986 (Dutton) and SB 1335 (Pavley) as the starting point for redevelopment-related discussions.


 
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