Santa Cruz County has said it may have to draw on bond reserves to make a Sept. 1 debt service payment for redevelopment bonds if it is forced to make the payments of former redevelopment tax money as outlined by California.

The county said the state's calculation that it owes $11.5 million of tax increment from the "successor agency" to the county's former redevelopment agency and the penalties resulting from non-payment could force it to use reserves to pay debt service, according to a filing to the Municipal Securities Rulemaking Board's online EMMA system.

Santa Cruz County officials said in the filing that the successor RDA missed a full July 12 payment, which would  have gone to the county auditor for distribution to other local tax entities, because the only available funds it had to pay the state's bill were needed for March debt service.

The county said it received verbal instructions from the state Department of Finance to hold back the money for debt service pending a review.

County officials said they have been attempting to reach a settlement with state finance officials since July 6 and potentially face severe penalties.

The filing said that if the Department of Finance does not agree to waive the penalty or provide that the calculation of the July 12 payment should include the amount of debt service paid on March 1 and the amount reserved to pay the Sept. 1 debt service, then the "successor agency may have no option but to pay its funds on hand-over to the auditor and draw on the reserve funds established for the bonds to pay the Sept. 1 debt service in full."

The department has said 27 local governments have not paid or have underpaid redevelopment tax money, handing over only a little more than 5% of the $129 million California believes it is owed.

The municipalities that owe the most include San Jose, Santa Cruz, Brea and Chico, according to the department.

Many of the municipalities are fighting the state over how much money is owed in the wake of the termination of all the state's RDAs following 2011 legislation and court decisions.

Finance officials said they have never denied a redevelopment bond payment obligation by the successor agencies in the calculation of what tax money needs to be used for current liabilities before the rest of the cash is passed on to other entities such as school districts.

The state budget assumes $3.1 billion in savings from the winding down of redevelopment agencies.

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