HomeMy WebLinkAboutSB 986 - Disposition of Bond Proceeds from Former Redevelopment AgencyCITY OF PALM DESERT
OFFICE OF THE CITY MANAGER
STAFF REPORT
REQUEST: APPROVE THE PALM DESERT LEGISLATIVE REVIEW
COMMITTEE'S RECOMMENDATION TO PROVIDE A LETTER
OF SUPPORT FOR SB 986 (DUTTON).
SUBMITTED BY: Stephen Y. Aryan, Risk Manager
DATE: March 22, 2012
CONTENTS: Recommended Letter of Support
SB 986 Bill Text
Recommendation
By Minute Motion, approve the recommended letter of support for SB 986
(Dutton).
Committee Recommendation
On March 8, 2012, the Palm Desert Legislative Review Committee recommended that
the City Council approve a letter of support for SB 986 (Dutton).
Background
Existing law dissolved redevelopment agencies, as of February 1, 2012, and designated
successor agencies. Successor entities perform certain duties, including, among others,
remitting unencumbered funds of that agency to the county auditor -controller, and
overseeing the use of bond proceeds.
Existing law requires each successor agency to have an oversight board that is
composed of seven members. This proposed legislation provides that all bond proceeds
that were generated by the former redevelopment agency shall be deemed to be
encumbered and would prohibit a successor agency from remitting these proceeds to
the county auditor -controller. This bill also specifies that bond proceeds for Low and
Moderate Income Housing Funds shall be deemed encumbered.
This bill requires that the proceeds of bonds issued by a former redevelopment agency
must be used by the successor agency for the purposes for which the bonds were sold
pursuant to an enforceable obligation, as defined, that was entered into either by the
former redevelopment agency prior to its dissolution, or is entered into by the successor
agency by December 14, 2014. Staff is recommending that this deadline be increased
by approximately two years.
Staff Report: SB 986 (Dutton)
March 22, 2012
Page 2 of 2
Fiscal Analysis
Existing law (as enacted under ABX1 26) called for the dissolution of all redevelopment
agencies and is unclear as to what should be done with bond proceeds. This bill
clarifies the inconsistencies in ABX1 26 (2011) to allow bond proceeds generated by the
former Palm Desert Redevelopment Agency to be spent on the projects for which they
were sold.
Submitted By:
Stephen Y. Ar*an, Risk
Approval:
KI
Jo . Wohlmuth, Citger y
cffy'COUNCILACTION
APPROVED DENTED
RECEIVED OTHER
MEETING DA - - `) C, / `�
AYES:
NOES:�� —
Ai3SENT: 10
ABSTAIN: L OU-
VERIFIED BY:
Original on File with Citt i:'s
March 23, 2012
The Honorable Bob Dutton
California State Senate
State Capitol, Room 5097
Sacramento, CA 95814
Dear Senator Dutton:
On behalf of the City of Palm Desert, I am pleased to support SB 986 (Dutton), which
clarifies the inconsistencies in ABx1 26 (2011) to allow bond proceeds generated by
former redevelopment agencies to be spent on the projects for which they were sold.
With the dissolution of redevelopment agencies under ABx1 26 it is ambiguous as to
what should be done with bond proceeds. There are numerous shovel -ready projects in
the State of California that are stranded waiting for clarification on the ambiguities of
ABx1 26. By clarifying that bonds can be used for their intended purposes, jobs will be
created, infrastructure improved, and the economy stimulated.
This bill requires that the proceeds of bonds issued by a former redevelopment agency
must be used by the successor agency for the purposes for which the bonds were sold
pursuant to an enforceable obligation, as defined, that was entered into either by the
former redevelopment agency prior to its dissolution, or is entered into by the successor
agency by December 14, 2014. The City of Palm Desert respectfully requests that this
deadline be increased by approximately two years.
Thank you in advance for your support of SB 986.
Sincerely,
Robert A. Spiegel
Mayor
cc: City Council
The Honorable Bill Emmerson, California State Senate
The Honorable Brian Nestande, California State Assembly
Anthony D. Gonsalves, Joe A. Gonsalves & Sons
John M. Wohlmuth, City Manager
Paul S. Gibson, Director of Finance
Stephen Y. Aryan, Risk Manager
Bill Text - SB-986 Redevelopment: bond proceeds.
http://Ieginfo.legislature.ca.gov/faces/bilINavClient.xhtml?bill id=2...
SENATE BILL
SB-986 Redevelopment: bond proceeds. (2011-2012)
CALIFORNIA LEGISLATURE— 2011-2012 REGULAR SESSION
Introduced by Senator Dutton
January 31, 2012
No. 986
An act to amend Sections 34177 and 34180 of the Health and Safety Code, relating to
redevelopment, and declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
SB 986, as introduced, Dutton. Redevelopment: bond proceeds.
Existing law dissolves redevelopment agencies and community development agencies, as of February 1, 2012,
and designates successor agencies, as defined. Existing law requires that successor entities perform certain
duties, including, among others, remitting unencumbered funds of that agency to the county auditor -controller,
and overseeing the use of bond proceeds. Existing law requires each successor agency to have an oversight
board that is composed of 7 members who meet certain qualifications. Existing law requires the oversight board
to approve certain actions of the successor agency.
This bill would provide that all bond proceeds that were generated by the former redevelopment agency shall be
deemed to be encumbered and would prohibit a successor agency from remitting these proceeds to the county
auditor -controller. This bill would also require that the proceeds of bonds issued by a former redevelopment
agency must be used by the successor agency for the purposes for which the bonds were sold pursuant to an
enforceable obligation, as defined, that was entered into either by the former redevelopment agency prior to its
dissolution, or is entered into by the successor agency by December 14, 2014. This bill would also provide that if
an enforceable obligation is not entered into by that time, or if the purpose for which the bonds were sold can
no longer be achieved, then the bond proceeds shall be used to defease the bonds or to purchase outstanding
bonds on the open market for cancellation.
This bill would also require the oversight board to approve of the establishment of an enforceable obligation with
respect to bond proceeds. This bill would prohibit the oversight board from disapproving the establishment of an
enforceable obligation with respect to bond proceeds if that obligation is reasonably in furtherance of the
purposes for which the bonds were sold.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3 Appropriation: no Fiscal Committee: yes Local Program: no
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
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Bill Text - SB-986 Redevelopment: bond proceeds. http://Ieginfo.legislattre.ca.gov/faces/bilINavClient.xhtml?bill_id=2...
SECTION 1. Section 34177 of the Health and Safety Code is amended to read:
34177. Successor agencies are required to do all of the following:
(a) Continue to make payments due for enforceable obligations.
(1) On and after October 1, 2011, and until a Recognized Obligation Payment Schedule becomes operative, only
payments required pursuant to an enforceable obligations payment schedule shall be made. The initial
enforceable obligation payment schedule shall be the last schedule adopted by the redevelopment agency under
Section 34169. However, payments associated with obligations excluded from the definition of enforceable
obligations by paragraph (2) of subdivision (e) of Section 34171 shall be excluded from the enforceable
obligations payment schedule and be removed from the last schedule adopted by the redevelopment agency
under Section 34169 prior to the successor agency adopting it as its enforceable obligations payment schedule
pursuant to this subdivision. The enforceable obligation payment schedule may be amended by the successor
agency at any public meeting and shall be subject to the approval of the oversight board as soon as the board
has sufficient members to form a quorum.
(2) The Department of Finance and the Controller shall each have the authority to require any documents
associated with the enforceable obligations to be provided to them in a manner of their choosing. Any taxing
entity, the department, and the Controller shall each have standing to file a judicial action to prevent a violation
under this part and to obtain injunctive or other appropriate relief.
(3) Commencing on January 1, 2012, only those payments listed in the Recognized Obligation Payment
Schedule may be made by the successor agency from the funds specified in the Recognized Obligation Payment
Schedule. In addition, commencing January 1, 2012, the Recognized Obligation Payment Schedule shall
supersede the Statement of Indebtedness, which shall no longer be prepared nor have any effect under the
Community Redevelopment Law.
(4) Nothing in the act adding this part is to be construed as preventing a successor agency, with the prior
approval of the oversight board, as described in Section 34179, from making payments for enforceable
obligations from sources other than those listed in the Recognized Obligation Payment Schedule.
(5) From October 1, 2011, to July 1, 2012, a successor agency shall have no authority and is hereby prohibited
from accelerating payment or making any lump -sum payments that are intended to prepay loans unless such
accelerated repayments were required prior to the effective date of this part.
(b) Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing
the issuance of outstanding redevelopment agency bonds.
(c) Perform obligations required pursuant to any enforceable obligation.
(d) Remit unencumbered balances of redevelopment agency funds to the county auditor -controller for
distribution to the taxing entities, including, but not limited to, the unencumbered balance of the Low and
Moderate Income Housing Fund of a former redevelopment agency. In making the distribution, the county
auditor -controller shall utilize the same methodology for allocation and distribution of property tax revenues
provided in Section 34188. For purposes of this subdivision, bond proceeds of the redevelopment agency shall
be deemed to be encumbered, and therefore the successor agency shall not remit those funds to the county
auditor -controller.
(e) Dispose of assets and properties of the former redevelopment agency as directed by the oversight board;
provided, however, that the oversight board may instead direct the successor agency to transfer ownership of
certain assets pursuant to subdivision (a) of Section 34181. The disposal is to be done expeditiously and in a
manner aimed at maximizing value. Proceeds from asset sales and related funds that are no longer needed for
approved development projects or to otherwise wind down the affairs of the agency, each as determined by the
oversight board, shall be transferred to the county auditor -controller for distribution as property tax proceeds
under Section 34188.
(f) Enforce all former redevelopment agency rights for the benefit of the taxing entities, including, but not
limited to, continuing to collect loans, rents, and other revenues that were due to the redevelopment agency.
(g) Effectuate transfer of housing functions and assets to the appropriate entity designated pursuant to Section
34176.
(h) Expeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and
in accordance with the direction of the oversight board.
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Bill Text - SB-986 Redevelopment: bond proceeds. http://Ieginfo.legislature.ca.gov/faces/bilINavClient.xhtml?bill_id=2...
(i) Continue to oversee development of properties until the contracted work has been completed or the
contractual obligations of the former redevelopment agency can be transferred to other parties. Bond proceeds
shall be used for the purposes for which the bonds were sold unless purposes can no longer be achieves#, to
wive~ case, the proceeds Fn be used `e defease the bends if and to the extent that the successor agency is
either performing an obligation required pursuant to any enforceable obligation entered into by the former
redevelopment agency, or is performing an enforceable obligation entered into by the successor agency on or
before December 31, 2014, to fulfill the purposes for which the bonds were sold by the dissolved redevelopment
agency. Any amount of bond proceeds not subject to an enforceable obligation as of January 1, 2015, shall be
used to defease the bonds or to purchase outstanding bonds on the open market for cancellation. If the
purposes for which the bonds were sold by the dissolved redevelopment agency can no longer be achieved, then
the proceeds shall be used to defease the bonds or to purchase outstanding bonds on the open market for
cancellation.
(j) Prepare a proposed administrative budget and submit it to the oversight board for its approval. The proposed
administrative budget shall include all of the following:
(1) Estimated amounts for successor agency administrative costs for the upcoming six-month fiscal period.
(2) Proposed sources of payment for the costs identified in paragraph (1).
(3) Proposals for arrangements for administrative and operations services provided by a city, county, city and
county, or other entity.
(k) Provide administrative cost estimates, from its approved administrative budget that are to be paid from
property tax revenues deposited in the Redevelopment Property Tax Trust Fund, to the county auditor -controller
for each six-month fiscal period.
(1) (1) Before each six-month fiscal period, prepare a Recognized Obligation Payment Schedule in accordance
with the requirements of this paragraph. For each recognized obligation, the Recognized Obligation Payment
Schedule shall identify one or more of the following sources of payment:
(A) Low and Moderate Income Housing Fund.
(S) Bond proceeds.
(C) Reserve balances.
(D) Administrative cost allowance.
(E) The Redevelopment Property Tax Trust Fund, but only to the extent no other funding source is available or
when payment from property tax revenues is required by an enforceable obligation or by the provisions of this
part.
(F) Other revenue sources, including rents, concessions, asset sale proceeds, interest earnings, and any other
revenues derived from the former redevelopment agency, as approved by the oversight board in accordance
with this part.
(2) A Recognized Obligation Payment Schedule shall not be deemed valid unless all of the following conditions
have been met:
(A) A draft Recognized Obligation Payment Schedule is prepared by the successor agency for the enforceable
obligations of the former redevelopment agency by November 1, 2011. From October 1, 2011, to July 1, 2012,
the initial draft of that schedule shall project the dates and amounts of scheduled payments for each enforceable
obligation for the remainder of the time period during which the redevelopment agency would have been
authorized to obligate property tax increment had such a that redevelopment agency not been dissolved, and
shall be reviewed and certified, as to its accuracy, by an external auditor designated pursuant to Section 34182.
(B) The certified Recognized Obligation Payment Schedule is submitted to and duly approved by the oversight
board.
(C) A copy of the approved Recognized Obligation Payment Schedule is submitted to the county auditor -
controller and both the Controller's office and the Department of Finance and be posted on the successor
agency's Internet Web site.
(3) The Recognized Obligation Payment Schedule shall be forward looking to the next six months. The first
Recognized Obligation Payment Schedule shall be submitted to the Controller's office and the Department of
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Bill Text- SB-986 Redevelopment: bond proceeds. http://Ieginfo.legislature.ca.gov/faces/bilINavClient.xhtml?bill_id=2...
Finance by December 15, 2011, for the period of January 1, 2012, to June 30, 2012, inclusive. Former
redevelopment agency enforceable obligation payments due, and reasonable or necessary administrative costs
due or incurred, prior to January 1, 2012, shall be made from property tax revenues received in the spring of
2011 property tax distribution, and from other revenues and balances transferred to the successor agency.
SEC. 2. Section 34180 of the Health and Safety Code is amended to read:
34180. All of the following successor agency actions shall first be approved by the oversight board:
(a) The establishment of new repayment terms for outstanding loans where the terms have not been specified
prior to the date of this part.
(b) Refunding of outstanding bonds or other debt of the former redevelopment agency by successor agencies in
order to provide for savings or to finance debt service spikes; provided, however, that no additional debt is
created and debt service is not accelerated.
(c) Setting aside of amounts in reserves as required by indentures, trust indentures, or similar documents
governing the issuance of outstanding redevelopment agency bonds.
(d) Merging of project areas.
(e) Continuing the acceptance of federal or state grants, or other forms of financial assistance from either public
or private sources, where assistance is conditioned upon the provision of matching funds, by the successor entity
as successor to the former redevelopment agency, in an amount greater than 5 percent.
(f) (1) If a city, county, or city and county wishes to retain any properties or other assets for future
redevelopment activities, funded from its own funds and under its own auspices, it must reach a compensation
agreement with the other taxing entities to provide payments to them in proportion to their shares of the base
property tax, as determined pursuant to Section 34188, for the value of the property retained.
(2) If no other agreement is reached on valuation of the retained assets, the value will be the fair market value
as of the 2011 property tax lien date as determined by the county assessor.
(g) Establishment of the Recognized Obligation Payment Schedule.
(h) A request by the successor agency to enter into an agreement with the city, county, or city and county that
formed the redevelopment agency that it is succeeding.
(i) A request by a successor agency or taxing entity to pledge, or to enter into an agreement for the pledge of,
property tax revenues pursuant to subdivision (b) of Section 34178.
(j) The establishment of an enforceable obligation with respect to bond proceeds pursuant to subdivision (i) of
Section 34177. However, the oversight board shall not disapprove the establishment of an enforceable
obligation with respect to bond proceeds if that obligation is reasonably in furtherance of the purposes for which
the bonds were sold.
SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or
safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts
constituting the necessity are:
In order to provide guidance to the successor agencies on the use of bond proceeds, it is necessary for this act
to take effect immediately.
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