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Senate Attempts to Move RDA Trailer Bill, AB 113, Monday

League Remains Opposed Due to Provisions Harmful to Cities

July 10, 2015
The Senate on Thursday waived rules to enable AB 113 (Committee on Budget) to be heard Monday in the Senate Budget Committee.
Despite the fact that Gov. Jerry Brown signed the FY 2015-16 budget several weeks ago, disputes have lingered over a 100-page bill drafted by the Department of Finance (DOF) that contains significant revisions to the redevelopment dissolution process, some of which seek to reverse recent court decisions benefitting affected cities. There may also be an attempt to move it quickly off the Senate Floor on the same day.

Because of the many League member cities that would be harmfully impacted by AB 113 in its current form, the League remains opposed unless the harmful provisions are removed. Since January, cities’ main concern with the proposal has been its effort to reverse and revise key provisions of dissolution laws offered to local agencies as incentives for resolving DOF issues and obtaining a “finding of completion.” 
These were promises that were made to cities in AB 1484 of 2012. Agencies that settled with DOF would be rewarded with the ability to have previous city-RDA loans repaid at interest rates benchmarked against a conservative fund managed by the State Treasurer. Now that many agencies have made the concessions to DOF necessary to obtain these findings, it is frustrating for affected agencies to have to spend the last six months combating an effort to move the goal posts.
AB 113 contains many provisions, but it is important to not be distracted from the major issues. The dissolution statute gave DOF staff wide latitude with no process for oversight or review other than the courts. With the original proposal’s introduction in January, one of DOF’s key objective focuses on undoing court decisions that have interpreted existing law in three areas — re-entered agreements, definition of “loans,” and calculation of interest rates. In these three instances the courts have overruled DOF’s interpretations to the benefit of the affected local agencies.  
While the effort to reverse appellate court decisions affecting re-entered agreements was thankfully withdrawn by DOF in the May Revise, AB 113 continues to attempt to moot the effect of two other cases: City of Watsonville v. California Department of Finance (relating to the definition of loans) and City of Glendale v. California Department of Finance (relating to calculation of interest). If local agencies are expected to respect court decisions that have gone against them, then cities believe DOF should as well.
Beyond the efforts to reverse Court decisions, this measure contains several provisions that would tip the balance on matters of interpretation of dissolution laws even further by exempting DOF from the Administrative Procedures Act and eliminating language in the law (that was previously agreed to by DOF and the Legislature in 2012) that enabled successor agencies to fund legal representation in the only due process forum where DOF staff decisions could be reviewed: Sacramento County Superior Court.
So while efforts to reverse aspects of AB 1484 and related court decisions can be purported by DOF to be “streamlining,” negatively affected cities characterize them as “unfair and harmful.” Many individual cities have directly reported to their legislators that such a change in law would collectively cost them hundreds of millions in lost loan repayments. 
The heart of the dispute is that AB 113’s definition of loan does not reflect the Court’s view in Watsonville and is an effort to insert into the law a DOF-interpretation the Court said was “improper.” The League has proposed a definition of “loans” to reflect the Court’s holding, but it has been rejected. While there are other debates about interest rates in the measure, if statutes are allowed to be rewritten in a manner that eliminates valid loans from the possibility of repayment, it does not matter what the interest rate is. 
As to the balance of the bill, there are essentially three categories of changes in the measure:
  1. Adjustments to various processes that can be represented as true “streamlining.”
  2. Provisions that address several outstanding dissolution-related issues of benefit to specific agencies, most significantly: San Francisco affordable housing, issuers of 2011 bonds, and clarifications on special levies for pensions.
  3. Provisions that have nothing to do with redevelopment dissolution but were added into this proposal at the May Revise. These provisions (negative bailout, San Benito County, Santa Clara city tax equity and a fix to assist recent incorporations) all have individual merit and should proceed separately as did an “excess ERAF” fix that was originally inserted into this proposal then later removed and enacted with the budget. 
It is regrettable that the current version of the measure remains so divisive. If the major areas of dispute cannot be appropriately resolved in a manner that accurately reflects the applicable court decisions, then the cities harmed by this measure are simply asking for existing law to be left as it is and allow the Courts to continue their work of interpreting the law without interference.
Next Steps
The League encourages cities harmed by this measure to contact their senators.  If the Senate passes AB 113, it awaits an uncertain fate in the Assembly where the Assembly Democratic Caucus has formed a working group to look closer at the measure’s harmful impacts. The Assembly does not appear inclined to take action on AB 113 prior to the month-long legislative summer recess that begins on Friday, July 17.  
A copy of the League’s opposition letter and a sample oppose letter can be found on the League’s website.

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