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New Bill Significantly Changes Redevelopment Agency Dissolution Process

Legal Alerts

AB 1484 Provisions Require Immediate Action by Cities and Successor Agencies

JUNE 29, 2012

Governor Brown this week signed into law Assembly Bill 1484, a budget trailer bill that makes substantial changes to the redevelopment agency dissolution process implemented by Assembly Bill 1X 26. As with all budget trailer bills, AB 1484 went into effect immediately upon signature by the Governor on Wednesday. The bill is lengthy and complex, and will require careful consideration by cities and successor agencies. However, there are some key provisions of the bill that will immediately affect the redevelopment agency dissolution process. These key provisions include the following:

Sweep of Redevelopment Agency Funds and Safe Harbor Provisions

  • AB 1484 requires that a licensed accountant conduct a review to determine the unobligated cash balances held by the successor agencies including redevelopment agency funds and low-mod housing funds. The review must be reviewed by both the Oversight Board and Department of Finance (DOF). Once the review is completed those unobligated funds must be distributed to the other taxing entities. 
  • If the unobligated funds are not transferred in the required timeframes, DOF and the county auditor can offset sales and property tax distributions to the successor agency’s host city or county to recover those outstanding funds. We believe these “offset” remedies violate Proposition 1A, which limits the Legislature’s authority to modify the manner in which property taxes are allocated or change the method of distribution of sales taxes.
  • Once the successor agency does pay the full amount of unobligated funds, the redevelopment agency may receive a “finding of completion” which entitles the successor agency to certain “safe harbor” provisions, including:
    • The ability to retain real property owned by the redevelopment agency, after approval of a long range property management plan, as described below.
    • The right to repayment of loans made by the city to its redevelopment agency. However, no repayments could commence until the 2013-14 fiscal year and the amounts that could be repaid in each year would be significantly limited. Further, 20% of any repayment amount would have to be set aside for affordable housing development.
    • Unencumbered bond proceeds from pre-2011 bonds could be used for the purposes for which they were sold. The fate of bond proceeds from issuances after January 1, 2011 is still unknown.

Recovery of Pass-Through Payments and Property Tax Distributions from FY 2011-12

  • Some taxing entities may not have received their pass-through payments during the 2011-12 fiscal year due to the confusion stemming from the Supreme Court stay in the Matosantos case. If a taxing entity did not receive its full pass-through payment for the 2011-12 fiscal year, then that will be deducted from future allocations of property taxes to the successor agency.
  • The bill also includes a mechanism for recovering property taxes that were allocated to the successor agency for the January 1, 2012 – June 30, 2012 period, but should have been distributed to the other taxing entities. In each county, the county auditor-controller is required to determine the amount, if any, that each successor agency owes to the taxing entities, and send a demand for payment by July 9, 2012. Successor agencies must make that payment by July 12, 2012. If the successor agency does not make the required payment, it is subject to a penalty of 10% of the amount owed, plus 1.5% for each additional month that the payment is late. The host city will not receive its scheduled July 18, 2012 distribution of sales taxes, or any subsequent distribution, until the required payment is made.
  • BB&K recommends that successor agencies immediately contact the county auditor-controller and request an explanation of how the payments will be calculated.

Submission of ROPS for January-June 2013

  • The January 1 – June 30, 2013 ROPS must be submitted to DOF and the State Controller’s office, after approval by the oversight board, no later than September 1, 2012.
  • If the ROPS is not submitted in the required timeframe, the host city is subject to a $10,000 fine for every day the ROPS is late and the administrative cost allowance for the successor agency is reduced by 25%.

Long-Range Property Management Plan

  • The successor agency will be required to develop a long-range property management plan that governs the disposition and use of the former redevelopment agency property. Successor agencies will only be permitted to dispose of property pursuant to approved enforceable obligations, or after the approval of the long-range property management plan.
  • Many successor agencies have already begun the process of selling former redevelopment agency properties pursuant to the requirement of AB 1X 26. This new requirement calls into question whether successor agencies can sell those properties before a long-range property management plan is adopted and approved.

There are numerous other amendments made by AB 1484 that will have significant impacts on the dissolution process for all successor agencies. BB&K is preparing a more detailed analysis of the bill and will be considering the implications for our clients in the coming weeks.

If you have any questions on AB 1484 and its implications for your agency or city, please contact Ethan Walsh, T. Brent Hawkins or your Best Best & Krieger attorney.

Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.


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