City edges forward with RDA payment

Rebecca Neipp

News Review Staff Writer

Nearly two years after Gov. Jerry Brown’s controversial decision to eliminate redevelopment agencies in California, the city of Ridgecrest is still trying to move forward with existing projects that have been hampered by political uncertainty and a labryinthine landscape of legal confusion.

Last Friday members of the Ridgecrest City Council, along with City Manager Dennis Speer and City Attorney Keith Lemieux, met to discuss action regarding a project that was approved with the understanding that it would receive credit for the state’s RDA program to provide low-income housing.

That and with many other projects in the works, as well as some $24 million in tax allocation bonds that had been sold but not spent, have been stymied while the state works through a backlog of claims from cities across California and the legal system seeks interpretation on the hastily written legislation that dissolved RDAs.

Speer presented the council with a request to authorize payment of the disputed claim amount of nearly $3 million to the state Department of Finance. He stated, however, that this action was separate from the city’s lawsuit pursuing the release of tax allocation bonds.

For years local governments had been fighting the state for control over redevelopment money. When cities appeared to have voters and courts on the side of local control, Brown responded, eliminating redevelopment.

Successor agencies rose up to wind down the affairs of RDAs, which included liquidating any assets and forwarding the revenue back to the state. The fate of projects in development has been far more nebulous, and legal advisors across the state have been hesitant to charge forward without clarity or precedent.

But Lemieux said that at least one precedent has been established where the state authorized a similar project in a different city — in the exact same phase of development — to move forward. Yet that same permission has not been granted to Ridgecrest.

To further complicate the city’s position, the demands being made by the state potentially create a liability for Ridgecrest regarding existing agreements with developers and obligations to bond holders.

In his proposal to the council, Speer summarized the history leading up to the present action, which began with the June 2010 sale of Tax Allocation Bond money.

“The major portion of the proceeds from these bonds were intended for the construction of various public improvements,” said Speer, noting that some were identified in the initial bond offering and others projects allocated later by the council.

Brown proposed the dissolution of RDAs in his June 2011 budget package, which was approved by a vote along party lines. That legislation outlined rules for repayment of unexpended and unencumbered funds.

“Following the procedures outlined by the DOF, the city submitted the necessary documents and remitted the required payments to the state,” said Speer. “However, in November 2012, the state disallowed an RRA loan in the amount of $2,992,887 as an enforceable obligation and requested payment as part of the due diligence review process.”

The city contested the amount, which led to the dispute, which in turn delayed the issuance of a finding of completion (FOC) for the housing project.

Speer said that an FOC can only be issued if there is no dispute or a court determination regarding the funds and that the FOC is necessary in order for the city to access and expend the TAB funds.

“At this point, the most expedient way to receive an FOC is to pay the demanded disputed amount in protest.”

Lemieux noted that although the city intends to remit the $2.9-million payment associated with the housing project, the city will still seek a reimbursement during the ongoing litigation with the state.

City officials acknowledged that there is no guarantee that the money will be paid back, but the consensus was that the risk was worth moving the project forward.

Councilman Jim Sanders thanked state Sen. Jean Fuller and Assemblywoman Shannon Grove for lobbying on behalf of the city, although the state has apparently not changed its stance.

Vice Mayor Chip Holloway noted that even legislators who supported Brown’s legislation have since written similar letters on behalf of their districts once they realized the devastating impacts to cities.

The council voted unanimously to approve the payment.

Story First Published: 2013-12-11