California Controller John Chiang released reports Tuesday finding unallowable transfers by the redevelopment agencies of Milpitas and Morgan Hill.

The transfers were made in the wake of the state government’s dissolution of all local redevelopment agencies, raising the possibility that the expiring RDAs would try to shift redevelopment assets to other city entities to keep them under city control.

“My responsibility is to conduct these reviews as required by the Legislature and courts, while also helping local governments to make sense of this process,” Chiang said in a statement. 

The review found that the Milpitas RDA transferred $175 million of assets to the city and its redevelopment agency between Jan. 1, 2011, and the end of January 2012, of which $147 million were unallowable.

The review also found that the “successor agency” to the city’s redevelopment agency still hasn’t received more than $234.7 million it is owed from the RDA, according to guidelines outlined in recent legislation.

According to state law, all redevelopment assets transferred to a city, county or other public agency after Jan 1, 2011, must be returned to the successor agency unless committed to a third party by June 28. The successor agency’s oversight board can return an asset to a local government if it serves a governmental purpose, according to the controller.

In Morgan Hill, the controller’s review found that $108 million of transferred RDA assets were unallowable out of $223 million moved to the city and its economic development corporation during the same period.

As required by state law, the controller will perform similar reviews of the other 400 former redevelopment agencies across the state.

Reviews are currently underway in 12 other cities.

The state Supreme Court last year upheld a law dissolving California’s redevelopment agencies.

Since then, there has been a scramble by the so-called successor agencies — in most cases, the municipalities that created RDAs — to tally their debts and assets and to make payments.

The state budget assumes $3.1 billion in savings from the end of redevelopment because money that used to go to redevelopment agencies is expected to flow to other local entities, primarily school districts.

Dollars that schools receive from local property taxes reduce the state government’s school funding obligation by the same amount.

A bill passed in connection with the state budget in June attempted to clarify some of the uncertainty surrounding the shutdown of redevelopment, but many municipalities complained it made things worse, with some saying it made it harder to cover debt service.

The new law clarified that the successor agencies’ payments to other local taxing entities, such as schools and fire districts, had to include tax-increment revenue going back to December 2011, increasing the total for some agencies.

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