SAN FRANCISCO — California lawmakers are considering two bills that would amend the fate of the state’s redevelopment agencies that are facing termination on Feb. 1.
One bill would extend the Feb. 1 deadline by more than two months, and the other would allow local governments that take over for the agencies to keep low- and moderate-income housing funds and redefine the agencies’ obligations.
When asked last week in Los Angeles about the legislation extending the deadline, Gov. Jerry Brown said, “I don’t think we can delay this funeral. It’s been a long time coming.”
Rating agencies have recently downgraded bonds issued by the redevelopment agencies because of concerns about how bond payments will be handled, stemming from the implementation of the new law.
The California Redevelopment Association and other advocates are pushing a bill by Sen. Alex Padilla that would postpone the dissolution until April 15. SB 659 is now being reviewed by a committee.
A spokeswoman for RDA supporters said they feel they have plenty of time to get the bill passed.
If the bill fails, the CRA has said it would focus on legislation to reinvent redevelopment.
Cities and counties, which typically run redevelopment agencies through their city councils or county supervisors, have been struggling to implement the new legislation since the state Supreme Court ruled earlier this month in favor of the law while striking down a companion measure that would have let the agencies survive if they gave up revenue to the state.
The high court’s decision started the process of unwinding the redevelopment agencies and transferring their obligations, including bonds, to new “successor agencies” under a complicated oversight process.
Senate President pro tempore Darrell Steinberg’s SB 654 would allow the “successor agency” to keep the money held for low and moderate housing development, representing 20% of the property tax collected by RDAs.
It would also expand the types of loans from municipal governments to the agencies that are considered enforceable obligations.
The bill was before the full Senate as of Tuesday.
A spokesperson for Steinberg said the measure does not need to be passed and signed before the Feb. 1 deadline, and the funds cannot be distributed until the amount of debt owed by the redevelopment agencies is established.
Local governments have been struggling to understand the debts that will be enforceable under the new law, especially since many of the agencies and municipalities are entwined through loans and transfers.
The new law sets up a review process, which involves a local oversight board, the county auditor-controller, the Department of Finance and the state controller, to determine what are “enforceable obligations” that must be honored after the ax falls on the RDAs.
The law says that the validity of bonds or other obligations issued or entered into after Jan. 1, 2011, could be reviewed for up to two years after the action.
Experts have said any obligations — such as projects, land deals or intergovernmental loans — approved in 2011 by RDAs will likely be up in the air until the approval process outlined in the bill filters them out.
Bonds that have already been sold should be safe.
The Department of Finance said in a recent statement on its website that it believed the new law requires the successor agencies to manage the redevelopment obligations according to the contracts.
According to Interactive Data, 378 redevelopment agencies have $19.8 billion of tax-allocation bonds outstanding.
By the end of June when the legislation passed, the agencies had already sold $1.1 billion of new-money tax-allocation bonds, the highest total in four years despite a generally down year in the primary municipal market.
Last week, Moody’s Investors Service downgraded $11.6 billion of tax-allocation bonds due to the uncertainty over the fate of RDAs.
Moody’s said the move affects tax-allocation bonds rated above Baa2, which will be lowered by one notch due to concerns about bond payments as the redevelopment agencies are phased out.
In October, Standard & Poor’s said the creditworthiness of more than a dozen RDAs were particularly at risk due to the legislation because of weak debt service coverage and liquidity.