Representatives from the Department of Finance (DOF) and State Controller’s Office gave presentations. Video of the entire hearing is available on Cal Channel’s website.
Committee members in attendance included:
Assembly Member Bob Blumenfield (D-Woodland Hills), chair
Assembly Member Richard Bloom (D-Santa Monica)
Assembly Member Susan Bonilla (D-Concord)
Assembly Member Rocky Chávez (R-Oceanside)
Assembly Member Tom Daly (D-Anaheim)
Assembly Member Jeff Gorell (R-Camarillo)
Assembly Member Diane Harkey (R-Dana Point)
Assembly Member Reginald Jones-Sawyer, Sr. (D-Los Angeles)
Assembly Member Holly Mitchell (D-Los Angeles)
Assembly Members Toni Atkins (D-San Diego), who heads an internal redevelopment working group formed of members of the Assembly Democrat Caucus, and Nora Campos (D- San Jose) also participated in the hearing.
Subcommittee Chair Assembly Member Bob Blumenfield (D-Woodland Hills), author of ABx1 26, in his opening remarks stated that the hearing’s purpose was to discuss oversight issues related to redevelopment dissolution. He thanked Assembly Member Toni Atkins for her work as chair of the redevelopment working group before allowing presentations from Justyn Howard, assistant program budget manager, DOF, and Walter Barnes, chief of special projects, State Controller’s Office.
Howard’s presentation covered redevelopment dissolution implementation including the progress of DOF’s review of enforceable obligations and bond obligations, the true-up process, housing successor issues, recognized obligation payment schedule (ROPs) reviews, the process for final and conclusive determinations for enforceable obligations, due diligence review and current litigation.
Barnes’ presentation covered asset transfers, audit guidelines and claims of insufficiency.
Following the presentations, committee members asked questions highlighting a number of issues.
Assembly Member Blumenfield asked for clarification on the 3 percent administrative cost cap. Howard noted that there was no flexibility in the statute but that administrative costs could be isolated to make accounting under the 3 percent cap more effective.
Assembly Member Gorell asked for clarification on findings of completion and DOF’s role following such a finding. Howard responded that the best way for successor entities to have more budgetary stability is to seek a final and conclusive determination from DOF.
Assembly Member Atkins asked how disagreements between DOF and the Controller’s office were being reconciled. Barnes said that to the extent the Controller’s office is aware of conflicting rulings from its office it would work with DOF to resolve them. Later in the hearing, Assembly Member Atkins addressed home ownership program issues including loans to homeowners. It was noted that legislation would not be required to address these problems.
Assembly Member Mitchell asked about inflexibility in deadlines, specifically noting that successor agencies are required to provide information to DOF prior to the date county auditors are required to provide that information to the successor agency. Howard noted that DOF is working to coordinate these deadlines to the best of their ability but noted that the dates are set in statute and may require a legislative fix if they could not be worked out in the next round of reviews.
Assembly Member Harkey asked about DOF approvals for the transfer to cities of property used for governmental purposes, such as public parking lots and facilities such as senior centers. Howard noted that to the extent that DOF could determine that the property was being used for a truly governmental purpose it would be approved. Following up later in the hearing, Assembly Member Harkey expressed concern about the meet and confer process and commented that the large number of pending lawsuits seems to favor local jurisdictions. Howard disagreed about the lawsuits and noted that the meet and confer process is not a negotiation. Howard indicated that the meet and confer process was merely a second chance for jurisdictions to provide further information which could be used to reverse DOF’s decisions. Howard reported that there are “50 plus” pending lawsuits, 15 of which were initiated by DOF to help the affected agency get a stipulated judgment.
Assembly Member Jones-Sawyer, Sr. asked about long range management plans for real estate to ensure the maximum value of properties, and asked whether DOF planned to bring on people with expertise in real estate development. Howard noted that DOF is working on internal guidelines for long range management plans for these types of properties and creating a master database of properties throughout the state, although it is not available yet. Howard also noted that after the creation of this database, some flexibility would be given to successor agencies and oversight boards to determine the best way to handle the asset.
Assembly Member Bonilla noted the lack of communication throughout this process and asked if DOF was considering training opportunities for successor agencies, possible simplifications or standardizations for ROPS including reducing the number of submittals to one per year, or offering public forums to solicit suggestions. Howard noted some of the steps DOF has already taken to improve communications including a “meet and discuss” process, assigning specific staff as points of contact for counties, and future training for oversight boards. Howard also noted that legislation would be required to reduce the number of ROPS submitted. Following up on this question, Assembly Member Blumenfield asked DOF to provide suggestions for legislation that would improve the process.
Assembly Member Bloom asked for clarification on bond proceeds, specifically why unencumbered bond proceeds are not enforceable obligations especially in the case of bond covenants which prevented the commitment of proceeds prior to June 2011. DOF’s position is that statute requires defeasement and the issuance of bonds without a contract does not constitute an enforceable obligation. Later in the hearing, Assembly Member Bloom noted that he was aware of 227 units of affordable housing which have been stalled by DOF during this process and that seemed to conflict with the Legislature’s intent to protect and prioritize affordable housing projects. In response, Howard noted that some projects were not included on the ROPs and they need to be listed to receive funding.
Assembly Member Chávez asked how jurisdictions with insufficient funds to pay enforceable obligations would be handled by DOF. Further, Assembly Member Chávez asked DOF to provide a data matrix showing DOFs actions related to these jurisdictions. Howard agreed to work with Assembly Member Chávez.
Assembly Member Daly asked about the DOF and the Controller’s office staff dedicated to redevelopment dissolution. DOF has 55 full time staff while the Controller’s office has 26.
League Legislative Director Dan Carrigg urged the committee to translate the real and valid concerns they had raised into actionable legislation that would help struggling cities. He noted that if legislators were unhappy with implementation issues they had the power to change the process.
Culver City Mayor Andy Weissman gave public testimony about his city’s experiences during the process of redevelopment dissolution and provided the committee with several recommendations to improve the process. City of Hayward Assistant City Manager Kelly McAdoo Morariu also testified on behalf of five cities in Alameda County further urging the committee to review the dissolution process and improve the process for all cities. A representative from Yuba City also asked the committee to carefully review specific issues related to bond obligations.
Housing advocates urged the committee to protect existing investments for affordable housing.
Interestingly, several school representatives expressed the seemingly unrealistic request that pass-through payments be continued even after the complete wind down of redevelopment agencies, because schools count on pass-through money for their budgets. Presumably the school advocates are arguing that schools should be receiving this money on top of the percentage of property tax allocated to schools.
In closing, the subcommittee agreed to continue its work, alongside the working group chaired by Assembly Member Atkins, to identify and resolve outstanding issues. City officials with legislators on the committee are encouraged to watch the hearing and thank their legislator for raising issues. While the participation and interest of legislators in the hearing was clearly sincere, and they should be commended for it, the true test is whether legislators opt to use their significant power to deliver a clear message to Gov. Jerry Brown that cleaning up the dissolution process is a high priority for them that is not to be dismissed or ignored.