20150112_CC Legislative Days in Sacramento - City Loan to Former Redev AgencySACRAMENTO LEGISLATIVE TOUR
JANUARY 12-13, 2015
City Loan to Former Redevelopment Agency — Talking Points
Summary of Issue
• Funding for redevelopment projects included loans from sponsoring agencies.
• The RPV Redevelopment Agency (RDA) was formed in 1984 to mitigate an active coastal
landslide in the project area.
• The City of RPV loaned total principal of $6.7 million over the course of 13 years (1990
through 2012). This money was used for landslide mitigation projects.
• The RPV Oversight Board found that the loan was an enforceable obligation, and RPV has
received a Finding of Completion from the California Department of Finance (DOF).
• Dissolution law states "the accumulated interest on the remaining principal amount of the
loan shall be recalculated from origination at the interest rate earned by funds deposited
into the Local Agency Investment Fund" (LAIF).
• Using LAIF rates since the loan's inception in 1990, the RPV loan has accrued $5.3 million
of interest.
• The DOF interpretation of dissolution law requires accrued interest calculations for
sponsoring -agency loans to be based upon the LAIF rate earned for the calendar -year
quarter during which the local Oversight Board approved the loan.
• For RPV, that interest rate was 0.264% (4t" quarter 2013). The total accrued interest would
be calculated as $324,000 (vs. $5.3 million).
• The loan was made from the City's General Fund, in good faith that it would eventually be
repaid from property tax generated within the project area.
• If the City were to accept a lower interest rate on its loan, the City would be subsidizing
other state and local agencies that receive property tax from our project -area.
• We have no other example of a current interest rate being applied to a historical financial
event. The DOF interpretation does not make sense.
Current Status of Citv Loan
Even though RPV disagrees with the DOF interpretation for accrued interest, repayments of the
RPV Loan (beginning in the current fiscal year) have been approved by the DOF; only because
the repayment amount (calculated per formula outlined in dissolution law) is so much less than
the principal amount owed. The calculated repayment for FY14-15 is $72,915.
Proposed Legislation
AB -1582 was introduced by Assembly Member Mullin in February 2014. The bill was amended
by both the Senate & Assembly, and referred to the Committee on Rules during the 2013-14
regular session. Rancho Palos Verdes sent a letter of support to Senator Steinberg in August.
Summary of Position
Other agencies agree with our position. RPV Staff has been contacted by two cities
(Fresno & Glendale), and a law corporation representing other cities (Enterprise Counsel
Group) that disagree with the DOF interpretation.
Adopt state legislation clarifying that historical LAIF earnings rates should be used to
calculate accrued interest for historical periods.