RPVCCA_SR_2011_04_05_08_Contribution_League_RDA_Legal_FeesCITY OF
MEMORANDUM
RANCHO PALOS VERDES
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
Staff Coordinator:
HONORABLE CHAIRMAN AND MEMBERS OF THE BOARD ~
DENNIS McLEAN,DIRECTOR OF FINANCE &INFORMATION ~
TECHNOLOGY
APRILS,2011
CONTRIBUTION TO LEAGUE OF CALIFORNIA CITIES
REDEVELOPMENT AGENCY LEGAL DEFENSE FUND
CAROLYN LEHR,CITY MANAGER ~
Matt Waters,Senior Administrative Analyst
RECOMMENDATION
Authorize City contribution of $200 to League of California Cities to support potential legal
action contesting Governor Brown's proposed statewide elimination of Redevelopment
Agencies.
BACKGROUND AND DISCUSSION:
The League of California Cities (League)recently contacted City Manager Carolyn Lehr
regarding the proposed elimination of redevelopment agencies (RDA)in cities and counties
as called for in Governor Jerry Brown's draft California State budget proposal.The League
is strongly opposed,referring to the Governor's plan as an "illegal and devastating
proposal."The letter states that the proposal is illegal because it violates provisions of
Proposition 22,passed by California voters in November,2010,which prohibits the State
from "...taking,borrowing,or redirecting local government funds including local
redevelopment."The letter also opines that the plan is in violation of multiple constitutional
amendments.This opinion is supported by a League-provided analysis conducted by the
law firms of Nielsen Merksammer Paarinello Gross and Leoni LLP,and Best Best &
Krieger LLP.
The proposal to eliminate RDAs statewide,as part of the State Budget,has not passed as
of March 30,2011.The League is preparing to file a request for a stay if the proposal does
pass and then pursue litigation to overturn the proposal.The League's letter references
recent expensive lawsuits that have made it difficult for the League to assume the expense
of additional legal proceedings.
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Contribution to League of California Cities Redevelopment Agency Legal Defense Fund
April 5,2011
Page 2
The League is reaching out to all RDAs to contribute to a legal defense fund to contest the
Governor's proposed plan.The requested contribution for RPV's RDA is $200 which is
based on the total amount of tax increment the RDA received in 2008-2009 as compared
with other agencies.This is a pro-active request from the League;its letter notes that if no
litigation is needed,RPV's RDA contribution will be returned.
The impact of the Governor's proposal on Rancho Palos Verdes is not as significant as it is
for cities with greater RDA involvement.The RDA currently has no active projects.At this
time,all of the RDA tax increment is obligated to fund repayment of debt to Los Angeles
County and to provide affordable housing via the 20%Set-Aside.
FISCAL IMPACT
The League of California Cities is requesting a contribution of $200 for its legal defense
fund.The financial impact on Rancho Palos Verdes from the State's potential elimination
of RDAs is unknown at this time,as specific proposed legal language is not yet available.
The FY10-11 RDA Portuguese Bend fund budget is adequate to absorb this additional
expenditure.
ATTACHMENTS:
League of California Cities Letter to Rancho Palos Verdes RDA
Legal analysis of Governor's Redevelopment Proposal Provided by League of California
Cities
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III California Redevelopment AssociationHi.Redevelopment.Building Better Communities
LEAGUE
OF CALIFORNIA
CITIES
1400 K Street,Suite 204,Sacramento,CA 95814,Phone (916)448-8760 FAX (916)448-8760
'j
Ms.Carolyn Lehr
City Manager
Rancho Palos Verdes RDA
30940 Hawthorne Blvd
Rancho Palos Verdes,CA 90275
MAR 9 2011
L .__I--............----~
Dear Carolyn:
As you know,the Governor has proposed elimination of redevelopment agencies in cities and counties in
California.While we are doing everything possible to defeat his illegal and devastating proposal,it is
important that we begin to prepare for litigation in case the Legislature approves it.Despite the fact that
over 61%of voters passed Proposition 22 last November to stop the State from taking,borrowing or
redirecting local government funds including local redevelopment,we cannot be sure State leaders will
follow the will of the voters.
Our legal team (see attached)believes that shutting down redevelopment agencies and taking your funds
for other State purposes is a clear violation of multiple constitutional provisions,including the recently
passed Proposition 22 as well as Article XVI,section 16,which requires tax increment to be paid to
redevelopment agencies to repay the cost of redevelopment projects.As a result,our legal team has been
instructed to prepare for possible litigation AS SOON AS POSSIBLE.
We must be prepared to protect redevelopment agencies,cities and counties from these unconstitutional
actions and resulting chaos,including filing a request for a stay with the court if the budget proposal passes
in order to maintain the status quo while the matter is litigated to conclusion.Of course,these legal actions
will require financial resources.After constant battles and lawsuits over the past several years to defeat or
pass ballot initiatives and to protect redevelopment funds from unconstitutional takings,we are not in a
position to absorb the cost of another lawsuit,but we can't afford NOT to sue to protect the very existence
of redevelopment agencies in California.
We are asking all redevelopment agencies to contribute to a legal defense fund.The amount of the
requested fee is based on the total amount of tax increment that you received in FY 2008-09.The fee for
your agency is $200.00 (See enclosed invoice.)We are asking that you pay it NOW before any legislation
takes effect to ensure that we have the resources we need for legal actions.If litigation turns out not to be
needed,your contribution will be returned.
Our respective Board members are committed to this fight,and they are counting on participation by all
agencies to defray the costs.We are aware of your budgetary constraints,and we are doing all we can to
protect your redevelopment funds now and into the future.We respectfully request your support in order
to continue our efforts.
Thank you.Please let us know if you have any questions.
Sincerely,
Christopher McKenzie
Executive Director
League of CA Cities
{4~t5
John F.Shirey
Executive Director
California Redevelopment Association
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NIELSEN MERKSAMER
PARRINELLO GROSS &LEONI LLP IMIK BEST BEST &KRIEGER:l
ArrORNEYS AT LAW
The above-referenced law firms have reviewed the Governor's Redevelopment Proposal and
have concluded the measure violates multiple provisions of the California Constitution.The Governor's
proposal seeks to disestablish redevelopment agencies,install "successor"agencies to hold
redevelopment agency assets,and use redevelopment tax increment funding for Medi-Cal and trial court
expenses in the short term-and for other non-redevelopment purposes in the long term.
This proposal violates at least three provisions of the California Constitution:
1)Proposition 22 -Cal.Const.,article xm,§25.5(a)(7).Proposition 22 (2010)was just adopted in
November 2010 to prohibit the State from directly or indirectly requiring redevelopment agencies to
use redevelopment tax increment for the benefit of the State,any agency of the State,or any
jurisdiction.By forcibly eliminating redevelopment agencies and transferring their assets to
different accounts under the control of different entities so that redevelopment revenues can be used
to fund Medi-Cal and trial courts-both of which are state programs-the Governor's
Redevelopment Proposal indirectly requires redevelopment agencies to transfer their assets for the
benefit of the State,in clear violation of Proposition 22.The meaning of Proposition 22 is not
ambiguous;and in any event,any conceivable doubts as to its meaning would be resolved by
reference to the Attorney General's title and summary,the Legislative Analyst's impartial analysis,
the ballot arguments in support of and in opposition to Proposition 22,and the measure's own
findings and declarations-which all forcefully declare that Proposition 22 flatly prohibits the State
from redirecting redevelopment revenues.
2)Cal.Const.,article XVI,§16(b)mandates that redevelopment tax increment funds "shall be
allocated to"and when collected "paid into a special fund ofthe redevelopment agency to pay the
principal and interest on...loans.moneys advanced to.or indebtedness ...incurred by the
redevelopment agency to finance ...redevelopment project[sj."The Governor's Redevelopment
Proposal violates Article XVI,§16 because it does not deposit redevelopment tax increment funds
into a special fund ofthe redevelopment agency,and does not use redevelopment tax increment
funding to repay loans.moneys advanced to,or indebtedness incurredfor redevelopment projects.
The funds are diverted into other accounts for non-redevelopment uses.
3)Cal.Const.,article xm A,§l(a)states that ad valorem real property taxes are ''to be collected by
the counties and apportioned according to law to the districts within the counties."}The Governor's
proposal seeks to use redevelopment funding for Medi-Cal and trial courts,but the Medi-Cal
program and trial courts are not districts within the counties.Therefore,Article xm A prohibits
allocating tax increment funding in this manner.Moreover,Cal.Constitution,article XIII B,§
6(b)(3),as amended by Proposition lA (2004),prohibits using ad valorem property tax revenue to
reimburse a local government for the costs of a new program or a higher level of service.As such,
the Governor's Redevelopment Proposal cannot circumvent Article XIII A by imposing the mandate
to fund Medi-Cal and trial courts directly on the counties and then forcing them to allocate
redevelopment property tax revenues for those purposes.
"Districts within the counties"has been interpreted by California courts to mean those local entities within a county
that levied a property tax prior to the approval of Proposition 13-which was the measure that added Article XIII A to the
Constitution.(City ofRancho Cucamonga v.Mackzum (1991)228 Cal.App.3d 929.)
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