RPVCCA_CC_SR_2015_03_03_J_Opposition_Letter_to_Proposed_Redevelopment_Dissolution_LanguageCITY OF
MEMORANDUM
k
k&\ RANCHO PALOS
TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS
FROM: CAROLYNN PETRO, AICP, DEPUTY CITY MANAGER®
DATE: MARCH 3, 2015
SUBJECT: LETTER IN OPPOSITION TO PROPOSED REDEVELOP-
MENT DISSOLUTION "CLEAN-UP" LANGUAGE IN THE
GOVERNOR'S 2015-16 STATE BUDGET PROPOSAL
Project Manager: Kit Fox, AICP, Senior Administrative Analyst
(O
RECOMMENDATION
Authorize the City Manager to sign a letter expressing the City's opposition to proposed
redevelopment dissolution "clean-up" language in the Governor's 2015-16 State budget
proposal, as requested by the League of California Cities.
BACKGROUND
On January 12, 2015, Staff participated in a webinar presented by the Department of
Finance (DOF) to introduce Governor Brown's proposal for "clean-up" language for
redevelopment dissolution to be included in his 2015-16 State budget proposal. At the
time, it appeared to Staff that most of the proposed language would have little impact
upon the City, its former Redevelopment Agency (RDA) or the Successor Agency (SA).
The major outstanding issue of concern to Staff has been DOF's determination regarding
the application of the Local Agency Investment Fund (LAIF) rate in calculating the accrued
interest owed to the City on its $12,000,000 loan (principal and interest) to the former
RDA. It has been Staff's position that historic LAIF rates would be applied over the life of
the loan (i.e., since 1990) in order to calculate the interest owed to the City, whereas DOF
has taken the position that the interest rate applied would be the LAIF rate in effect at the
time that the SA Oversight Board made the required finding that the loan was made for
"legitimate redevelopment purposes" (i.e., in 2013), applied over the life of the loan.
Based upon these differing methods of calculating the accrued interest, Staff estimates
that the City is owed roughly $5,300,000 in interest, whereas DOF estimates that the City
is owed roughly $300,000 in interest.
The City of Glendale had filed a lawsuit against DOF over this same issue (City of
Glendale v. DOF). On February 13, 2015, the Sacramento Superior Court issued a ruling
that held that the LAIF rate that would apply to the accumulated balance on a loan was
the rate in effect over the life of the loan since origination, rejecting DOF's contention that
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MEMORANDUM: Opposition Letter for Governor's RDA Dissolution Language
March 3, 2015
Page 2
the rate was the current rate on a fixed date. Although this decision bodes well for Rancho
Palos Verdes, Staff has subsequently learned that DOF proposed a "trailer" bill on
February 18, 2015, that includes language that would overturn the Glendale decision and
uphold DOF's original determination regarding interest rates.
The California League of Cities (League) has prepared a letter in opposition to most of
the proposed redevelopment dissolution "clean-up" language in the Governor's budget
proposal and the DOF trailer (see attached letter dated February 25, 2015). The League
has asked California cities potentially affected by this budget language to draft similar
letters of opposition. Therefore, Staff has prepared the attached draft letter for the City
Manager's signature, and seeks the City Council's approval to submit it to the Assembly
Budget Committee.
DISCUSSION
The draft letter reiterates the points raised by the League in its February 25th letter. It
also highlights the adverse fiscal impact that overturning the Glendale decision could
have upon the City of Rancho Palos Verdes (see attachments).
Even if the proposed language overturning the Glendale decision is eventually struck from
the 2015-16 State budget proposal, it is possible (and perhaps likely) that DOF will appeal
this decision to the State Appeals Court. In any event, Staff will continue to monitor this
issue and provide future updates to the City Council, Successor Agency and Oversight
Board on an as -needed basis.
CONCLUSION
In conclusion, Staff recommends that the City Council authorize the City Manager to sign
a letter expressing the City's opposition to proposed redevelopment dissolution "clean-
up" language in the Governor's 2015-16 State budget proposal.
ALTERNATIVES
In addition to the Staff recommendation, the following alternative actions are available for
the City Council's consideration:
Do not authorize the City Manager to sign the opposition letter for the proposed
redevelopment dissolution "clean-up" language in the Governor's 2015-16 State
budget proposal.
FISCAL IMPACT
There is no fiscal impact associated with authorizing the City Manager to sign the letter
opposing the proposed redevelopment dissolution "clean-up" language in the Governor's
2015-16 State budget proposal. However, as discussed above, Staff has estimated that,
if the recent decision in City of Glendale v. DOF is struck down—on appeal or as a result
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MEMORANDUM: Opposition Letter for Governor's RDA Dissolution Language
March 3, 2015
Page 3
of proposed language in the 2015-16 budget—the City stands to "lose" approximately
$5,000,000 in accrued interest on its loan to the former RDA.
Attachments:
• Draft Opposition Letter for Proposed Redevelopment Dissolution "Clean -Up"
Language in the Governor's 2015-16 State Budget Proposal
• League of California Cities letter opposing RDA dissolution language in State
budget proposal (date 2/25/15)
• City Council Policy No. 29
WLegislative Issues\RDA Dissolution\20150303_RDAD issoIutionOpposition Letter—Staff Rpt. docx
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March 4, 2015
The Honorable Adrin Nazarian, Chair
Assembly Budget Subcommittee on State Administration #4
State Capitol Building, Room 4146
Sacramento, CA 95814
FAX: (916) 319-2199
RE: Governor's Budget Proposal Affecting Redevelopment Dissolution (RN#15 08847)
Notice of Opposition
Dear Chairman Nazarian:
On behalf of the City of Rancho Palos Verdes I regret to notify you of our opposition to the
Governor's Budget Proposal Affecting Redevelopment Dissolution (RN#15 08847).
Collectively, the changes seek to reverse court decisions, change laws retroactively, undo
previous incentives, and limit transparency, accountability and opportunities for local agencies to
protect their legal rights; these provisions far overshadow other minor offerings. This proposal is
so harmful to the interests of cities that we urge you to reject the entire proposal if they are not
removed.
Governor's proposal is appro
City and used for both land
continues to fund more than
stretch of a regional arterial r
The City of Rancho Palos V
provisions harmful to cities ai
Douglas Willmore
City Manager
City of Rancho Palos Verdes
lrafting the lavas the Courts are interpreting. If local
J respect these laws, then the state should as well
ions in an attempt to avoid Court rulings deemed
,ies t& protect their legal rights.
agency was formed for the purpose of mitigating a
since 1956. The City of Rancho Palos Verdes loaned
agency for drainage and sewer improvements in the
has accumulated interest of $5.3 million, based upon
tes in effect during the history of the loan. If the
he City could lose up to $5 million that would be repaid to the
improvements and affordable housing in the City. The City
million of roadway maintenance annually to keep a 0.8 mile
ay in drivable condition.
respectfully urges your opposition to this proposal unless all
cc: Hon. Ben Allen, Senator, 26th District
Hon. David Hadley, Assemblymember, 66th District
Jeff Kiernan, League of California Cities, jkiernan@cacities.org
Meg Desmond, League of California Cities, mdesmond@cacities.org; FAX: 916-658-8240
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I, i 1400 K Street, Suite 400 • Sacramento, California 95814
1 Phone: 916.658.8200 Fax: 916.658.8240
110h�%1. www.cacities.org
DATE: February 25, 2015
TO: Members, Assembly Budget Subcommittee on State Administration #4
FROM: Dan Carrigg, League Legislative Director, (916) 658-8222
RE: Governor's Budget Proposal Affecting Redevelopment Dissolution (RN# 15 08847)
On behalf of the League of California Cities we regret to inform you that the League has taken an
Oppose, Unless Amended position on the language (RN# 15 08847) containing proposed changes to the
redevelopment dissolution process. A detailed analysis of the provisions is attached.
Collectively, the changes seek to reverse court decisions, change laws retroactively, undo previous
incentives, and limit transparency, accountability and opportunities for local agencies to protect their legal
rights; these provisions far overshadow other minor offerings. This proposal is so harmful to the interests
of cities that we urge you to reject the entire proposal if they are not removed.
Over the last three years, while the dissolution process has been very difficult, significant progress has
been made. The Department of Finance (DOF) has issued findings of completion for 329 agencies; these
agencies are now engaged in developing and completing their Long Range Property Management Plans,
of which 177 have been approved. The state budget has also benefited significantly. The Administration
projects that redevelopment dissolution will produce $5.375 billion in Prop. 98 contributions from FY
2011-12 through FY 2015-16, and $1 billion per year ongoing.
Naturally, some disputes remain. Per the dissolution statute, all disputes are under the jurisdiction of the
Sacramento Superior Court. While applying the law to specific facts, the courts have often ruled in
support of DOF's decisions; but, in other instances, local agencies have prevailed and DOF is appealing.
In short, the judicial system is working through complex issues and these disputes will run their course in
due time. Furthermore, DOF had a full hand in drafting the laws the Courts are interpreting. If local
governments are expected to comply with and respect these laws, then state should as well and not seek to
redraft and insert new retroactive provisions in an attempt to avoid Court rulings deemed unfavorable and
stifle the ability of local agencies to protect their legal rights.
The recent trend by the Legislature is to try to help, not hurt local agencies with the dissolution process.
Last year, legislators advanced several bills that included helpful clean-up to dissolution statutes,
supported by local government, to the Governor's desk. While two surgical measures, AB 471 and AB
1963, authored by Assembly Speaker Toni Atkins, were signed, other significant proposals including SB
1129 (Steinberg), AB 2493 (Bloom) and AB 1450 (Garcia) were vetoed.
The loss of redevelopment has been devastating for many communities. Cities lost the major tool they
had to address the needs of poorer and blighted neighborhoods. Gone are significant resources that were
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used to build affordable housing, transit -oriented development, clean up brownfields and rebuild
infrastructure.
We strongly urge you to reject the harmful aspects of this proposal on cities; enough harm has already
been done. We do recognize, however, that there are some proposals (listed on page 3 of the attached
document) that could be helpful to cities, and, of course, would be willing to work with all stakeholders
on such items and others to explore opportunities for consensus -based clean-up.
Thank you for your attention to this important matter.
cc: Mr. Michael Cohen, Director, Department of Finance
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Page 1 of 3
League of California Cities
Key Issues with DOF RDA Dissolution Trailer Bill'
The League of California Cities is Opposed to the following provisions due to their many harmful
impacts on existing cities. We are asking legislators to either remove these provisions or reject the
proposal in its entirety.
1) Overturns recent Court of Appeal decision upholding reentered agreements approved by
Oversight Boards. This change seeks to overturn Emeryville v. Cohen and impacts and
retroactively invalidates dozens of agreements validly entered into by cities and successor
agencies around the state and approved by the governing Oversight Board in those jurisdictions
based upon finding that the projects were in the best interests of all impacted taxing entities.
(Section 34178, page 46, 47, 48, Subdivision (h) page 57 and 58). Many other cities are affected
by this provision in addition to Emeryville: Bellflower; Citrus Heights; Coronado; Danville;
Lawndale; Loma Linda; Petaluma; Riverside; San Leandro; Santa Rosa; Sunnyvale; Twenty -Nine
Palms; Ukiah; Union City; and Watsonville.
2) Undoes incentives previously offered to successor agencies to make three required payments
to become eligible for a DOF "finding of completion." This proposal retroactively prohibits the
reinstatement of reimbursement agreements between a city and a redevelopment agency for
public improvements constructed by a third party; also makes these loans subject to RDA plan
time limits that don't apply to full repayment of other debts. (Subparagraph (2), page 67) also
((Section 34189, Page 64 and 65)
3) Retroactively undoes the effects of the February 13, 2015, ruling in Glendale v. DOF over the
appropriate method of calculating interest rates on reinstated loans. Judge Chang of the
Sacramento Superior Court recently issued a ruling that holds that the LAIF rate that would
apply to the accumulated balance on a loan was the rate in effect over the life of the loan since
origination. The judge rejected DOF's contention that the rate was the current rate on a fixed
date. The language (Subparagraph (3), on page 67) deletes the pertinent language relied on by
the Court and substitutes a rate "up to" one percent. Such a change would be a major loss of
funds needed by local agencies to provide public safety and other vital services, and also
significantly reduces the 20% set-aside for affordable housing.
4) Undercuts local agency ability to protect legal rights by revoking statutory authority to recover
legal costs outside of existing administrative cost cap. Existing law provides that litigation
costs related to assets, obligations, settlements, and judgments are not part of the
administrative cost allowance. This change would be a complete reversal of previous legislative
authority. (Section 34171 (b), Page 2). The dispute resolution process established is clear: (1)
oversight board approval; (2) DOF review of the ROPS; (3) an opportunity to "meet and confer"
with DOF on outstanding issues; and (4) an opportunity to appeal any final DOF decisions in a
Court of Law. Successor agencies have also had to respond to lawsuits filed against the
successor agency by other parties. For efficiency, all cases were directed to the Sacramento
Superior Court. This proposal restricts any litigation expenses to a limited administrative cost
1 Comments Based upon 02/18/15 version RN # 15 08847; this version currently has an urgency clause requiring a 2/3rds vote.
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Page 2 of 3
allowance, which is even further constrained in other areas of this proposal2. Further limitations
(Subdivision (F), page 6) prohibit a city's ability to independently assist with litigation costs3. The
objective of these provisions can have no other purpose but to severely limit a community's
ability to protect its legal rights.
5) Retroactively repeals authority for cities to make loans to successor agencies approved by
oversight boards for "project -related expenses." Imposes interest restrictions on other such
loans and makes repayment subordinate to all other payments and only if funding available.
When redevelopment was eliminated, many projects were underway, incomplete or required
routine maintenance, continuation of security services, etc. To ensure such public investments
did not languish or deteriorate, AB 26 authorized cities to loan funds to the successor agencies
with the approval of the oversight boards. This provision retroactively reverses such authority
and restricts the ability of the city to recover other such loans which were made in compliance
with existing law and good faith. (Subdivision (h), Page 14)
6) Retroactively exempts all DOF actions from the Administrative Procedures Act.
Redevelopment dissolution law has put DOF in a position of making thousands of quasi-judicial
decisions with enormous financial and other consequences for affecting individual communities,
properties and third parties. The proposed language (Section 34170.1, Page 2) deems such
actions equivalent to "the preparation, development or administration of the state budget."
Should such a change be enacted --especially in combination with other aspects of this proposal
which attempts to reduce an ability of a successor agency to challenge DOF actions in Court—it
would insulate the department's quasi-judicial decisions from needed transparency,
accountability and scrutiny. This is especially troubling when in over two dozen cases Courts
have ruled that DOF abused its discretion when administering RDA Dissolution Law.
7) Retroactively prohibits previously authorized work associated with "winding down" the work
of a former redevelopment agency. Successor agencies are empowered to hire staff to assist
with the work of "winding down" the former redevelopment agency. All of this activity is, of
course, subject to review and approval of the oversight board. This proposal (Section 34177.3,
Page 38 and 39) creates a long list of exclusions including "site remediation, removal of graffiti...
and other similar work" to the term "winding down" and makes it retroactive. This change is
puzzling, since successor agencies have an obligation to maintain the assets of the former
redevelopment agency.
2 The amount available for the successor agency's administrative cost allowance is further restricted by language (Subparagraph
(3), Page 3) which requires the amounts of loans repaid to a city as well as the amount of a prior administrative cost allowance
to be deducted before applying the 3% factor, Subparagraph (4) on Page 3 further restricts possible funding by imposing a
maximum 50% cap. All of these restrictions ignore the existing authority of an oversight board to review a successor agency's
administrative cost allowance and reduce it where appropriate. This language should also be contrasted with (Subdivision (j)
on Page 54) which authorizes a county auditor -controller to recover "all associated costs, including those of other county
departments providing related services."
3 Subdivision (h) on Page 14, repeals existing authority for a city to loan or grant funds to a successor agency. This language
also excludes "grants" which appears to work in tandem with other aspects of this proposal designed to limit the ability of the
successor agency to carry out the work of dissolving redevelopment.
Page 3 of 3
Other Issues: Provided the aforementioned harmful provisions are removed, many of the following
provisions are, in isolation, potentially workable. The League is willing to work on these and other
consensus -based changes to the dissolution process.
1. 2011 refunding bonds. Agreements between a city and successor agency to refunding or
refinancing of bonds prior to June 27, 2011, is considered an enforceable obligation.
(Subparagraph (2), Page 7)
2. Extension of RDA Time Limits to Repay Bond Debts: An issue that has arisen is how debts will
be repaid if the time limits of a former redevelopment agency have expired. This proposal
waives those limits for bond repayments only, so the question remains what happens to other
enforceable obligations that remain to be paid. (Section 34189, Page 64 and 65)
3. Annual ROPS: Changes from 6 -month to annual ROPS process commencing July 1, 2016.
(Subdivision (h), Page 8), Pages 34-37.
4. Final and Conclusive: Provides DOF with 100 days to render a decision on a final and conclusive
request. (Subdivision (i), Page 45 and 46)
5. Long Range Property Management Plans: Provides some helpful clarification that DOF does
not need to review either (1) transfers of governmental property or (2) transfers of property to
be retained for development pursuant to a DOF approved Long Range Property Management
Plans. It appears, however, that transfers to a third party are missing from this list. (Subdivision
(h), Pages 52 and 53)
6. Countywide Oversight Boards: There are a number of issues that are raised with the planned
transition to countywide oversight boards. (Subdivision (j), Page 54)
7. Public Parking Lots: Adds parking lots to the list of facilities deemed to be for a governmental
purpose, provided they do not generate revenue in excess of reasonable maintenance costs.
(Subparagraph (2), page 59). Agencies with previously approved plans may amend their plans to
incorporate these parking lots. (Subdivision (b), Page 66).
8. Auditor -Controller audits: Makes revisions to the existing audit process. Section 34186, Page
60 and 61).
9. Process for Dissolving Successor Agency following debt repayment: (Page 62, 63 and 64)
10. Optional Last and Final ROPS Process: Offers a last and final ROPS process to those agencies
where issues are resolved and debt repayment can be placed on autopilot. (Pages 72-79)
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CITY COUNCIL POLICY
NUMBER: 29
DATE ADOPTED/AMENDED: 08/01/95 (amended 02/19/02 & 03/04/14)
SUBJECT: Legislative Activities of the City Council
POLICY:
It shall be the policy of the City Council that the staff shall prepare and present
periodic legislative updates for the Council's review and consideration. The
legislation monitored Legislative Guidelines shall address issues at the regional,
County, State and Federal level and shall focus upon anticipated or proposed
laws, regulations, rules, or policies that may impact the City or the region.
The legislation monitored will include both those issues that the City Council
decides either to support or oppose and those that they choose to identify as issues
of concern, but not take a position on. The determination of what position to take
on pending legislation shall be solely that of the City Council. Staff will periodically,
at the request of a Council member, place matters of pending legislation on the
City Council agenda for consideration. Staff will provide regular updates on the
status of any legislative action affecting any issues of concern to the City Council
through the Weekly Administrative Report.
If the majority of the Council votes to support or oppose legislation, staff shall
prepare the appropriate correspondence to the appropriate Federal, State, County
and/or regional legislative representative(s) expressing the position of the City.
Individual Council members may wish to support or oppose a specific piece of
legislation whether the Council has taken a position on such legislation or not. Any
legislative activity by an individual Council member, including preparing legislative
correspondence, may be conducted by any Council member, who shall state that
he or she is not acting on behalf of the City and is representing his or her own
personal views. However, staff shall not assist in any legislative activity of an
individual Council member, including the preparation of legislative
correspondence, unless the legislative item has appeared on a Council agenda
and has received a majority vote of the Council.
The League of California Cities' "Legislative Bulletin" and any appropriate
publication that summarizes legislation shall be provided as part of the Weekly
Administrative Report to each member of the Council for review.
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BACKGROUND:
The City Council initially adopted a policy for Council involvement in Federal and
State legislative advocacy in 1995. Although the policy seems to have worked
adequately over the first seven years, by 2002 it was thought that it did not allow
the City to respond rapidly to requests to support or oppose legislation that may
be before a committee or on the floor or the Assembly or before Congress and
needs immediate action on the part of supporters or opponents. Therefore, the
policy was amended in 2002 to address these perceived deficiencies. In 2014, the
policy was amended again to revise the procedure for monitoring legislation, and
to explicitly include legislative issues at the County and regional level.
The City Council's revised legislative policy establishes an internal process for
identifying, tracking and advocating its position on pending legislation
synchronized to the fast -paced "legislation time clock." Through this proactive
policy, the City Council hopes to have a stronger "voice" in the Peninsula/South
Bay region, Los Angeles County, Sacramento and Washington, DC.
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