AB 113 is a 100-page bill drafted by DOF that contains significant revisions to the redevelopment dissolution process, some of which seek to reverse recent court decisions benefitting affected cities. While there are currently several other bills listed on the Senate Budget Committee’s agenda, all of them are “spot bills” with nothing in them.
An earlier effort to move this bill occurred in July prior to the legislative summer break when a hearing of the Senate Budget Committee was scheduled, then later cancelled due to a lack of sufficient support from the members. Nothing has changed in the bill since the last time it was set, but DOF has met with at least one senator to discuss possible amendments that might secure a vote. Such carve out tactics that have been employed through the year on this measure have been very divisive.
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 concerns with the proposal have been its effort to reverse and revise key provisions of dissolution laws offered to local agencies as incentives for resolving issues DOF and obtaining a “finding of completion.”
These were promises 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 eight 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 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While the effort to reverse appellate court decisions affecting re-entered agreements was thankfully withdrawn by DOF in the May Revise, AB 113 continues to attempt to moot the effect of two other cases: City of Watsonville v. California Department of Finance (relating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.
Below is a list of cities (and some counties) that as of Aug. 21 have re-confirmed with the League their opposition to this measure and sent letters to legislators:
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:
- Adjustments to various processes that can be represented as true “streamlining.”
- 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.
- 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 the work of interpreting the law without interference.
This is the time for action. Concerned cities are encouraged to contact their legislators immediately.