RDA 'Clean-Up' Bills in California Legislature

SAN FRANCISCO — Three bills are moving through the California Legislature that attempt to clean up the process of unwinding the state’s redevelopment agencies.

Each bill is an attempt to try to fix various concerns, including potential bond defaults, spurred by the rapid dissolution of the RDAs after the state Supreme Court in December upheld legislation terminating them.

On Wednesday, a bill by Assembly Speaker John Perez, D-Los Angeles, moved out of a committee with only one “no” vote.

The bill, which has the support of the League of California Cities and the California Redevelopment Association, addresses a laundry list of issues related to the law that ended the agencies, including specifics about debt service payments and allowing municipalities to keep affordable housing money.

However, AB 1585 still has opposition as it is currently written in the form of two of the largest counties in the state, Los Angeles and Santa Clara.

“We believe the bill is going in the wrong direction,” Alan Fernandes, chief legislative advocate for Los Angeles County, said during a hearing Wednesday. “Let the process play out before changing the law.”

Fernandes noted that one of the biggest problems the county has with the bill is the expanded definition of enforceable obligations, which defines what the redevelopment agencies owe.

So far, Fernandes said, the county’s 71 RDAs said in the first six-month report that they owe $1.5 billion, even though tax-increment revenue collected by those agencies only adds up to $1.3 billion.

The Perez bill defines bonds as an enforceable obligation. It also allows successor agencies — typically the city or county that ran the redevelopment agency — to issue bonds to fund payments that exceed tax revenue.

All parties in the discussion have described the RDAs’ bond obligations as protected.

There have been more questions about what other obligations the state’s 400-odd redevelopment agencies entered into are “enforceable.”

At stake is how much tax-increment revenue that formerly went to the RDAs will be distributed to other governments, districts and agencies.

Perez’s bill would also allow the successor agencies to keep money that redevelopment agencies collected for affordable housing projects, rather than distributed to other local taxing agencies as defined in the current law.

The redevelopment dissolution legislation outlines a complex process to eliminate and hand over redevelopment debts and assets to a “successor agency.”

The process involves oversight and review of redevelopment finances by a local oversight board, county auditor-controllers, the state controller’s office and the state Department of Finance.

The two other bills are still active.

Senate President pro tempore Darrell Steinberg’s SB 654, which focuses on allowing municipalities to keep affordable housing money, already passed the Senate and is in the Assembly.

SB 986, by Sen. Bob Dutton, R-Cucamonga, would allow the successor agencies to keep all of the unspent bond proceeds of their RDA predecessors.

The measure is slated to be heard in the Government and Finance Committee March 28.

Earlier this month, the National Federation of Municipal Analysts warned that uncertainty surrounding California redevelopment agencies’ $23 billion of debt could lead to further defaults.

The NFMA has urged lawmakers to pass clean-up legislation as soon as possible to help avoid unintended bond covenant violations and-or missed debt service payments.

The League of California Cities has said AB 1585 addresses those concerns.

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