SAN FRANCISCO — The National Federation of Municipal Analysts said Wednesday it has filed an amicus curiae brief in a California Superior Court in support of a lawsuit filed by insurer Syncora Guarantee Inc. over laws that extinguished redevelopment agencies in the state.
The NFMA said in a statement that it rarely files amicus briefs and almost never in trial court, saying the "board felt strongly that an exception should be made in this case given that the matter before the court has such far-reaching ramifications for the municipal bond market."
The brief is meant to alert the court to the "significant negative ramifications" to the municipal bond market that can result from a law that eliminates existing bondholder protections. The NFMA said it takes no position generally on the dissolution of the state's RDAs, only on the impact on the law.
"The NFMA is deeply concerned by the troubling precedent set when any state retroactively seeks to restructure, redistribute, and recast existing bondholder protections and covenants," said federation Chairman Jeff Burger in the statement. "The NFMA believes that it is important for the court to understand the far-reaching significance of such actions which negatively impact the foundation of municipal finance nationwide."
The federation said the laws implementing redevelopment's dissolution have resulted in bond rating downgrades, rating withdrawals and constrained liquidity and may, if not clarified by the court, fundamentally change market expectations nationwide.
In August, bond insurer Syncora sued the state in Sacramento County Superior Court, challenging the laws that shutting down redevelopment agencies. It said they imperil bond payments and unconstitutionally impair bondholder and insurers' rights.
The insurer claims the laws have significantly reduced money available to repay bonds, and wants the court to declare them unconstitutional.
Since the state Supreme Court in 2011 upheld the law dissolving California's redevelopment agencies, the so-called successor agencies - in most cases, the municipalities that created RDAs - have had to tally their debts and assets, get them approved by the state, and to make the required payments to the state and for debt service.
The review process involves oversight and review of RDA finances by a local oversight board, county auditor-controllers, the state controller's office and the California Department of Finance.
Many cities have been hard hit by the legislation since RDAs had been a source of inter-governmental loans and untangling those arrangements has been costly for some.
Some cities have filed also lawsuits against the state over the shutdown of the redevelopment agencies.
Last year, the Legislature passed a so-called "clean-up" bill to try to clarify the original legislation terminating redevelopment.
Rating firms have issued several warnings about the impact of the RDA unwinding on municipal finances, especially those that intermingled redevelopment funds with other city funds, and have handed out many downgrades and negative outlooks to RDA debt as a result.