Has Your Successor Agency Received a Claim for Pass Through Payments Owed?

 

In this post-redevelopment dissolution world, it is now becoming commonplace for school districts and other taxing entities to submit claims to a successor agency for historical pass-through payments owed because of either (1) non-payment or (2) a dispute over the way payments were calculated in prior years.  In some cases, there was a long-running dispute between a taxing entity and a former redevelopment agency that began before redevelopment was eliminated.  Regardless of the circumstances, the successor agency staff should complete the following steps prior to placing any repayments on the Recognized Obligation Payment Schedule:

  1. Verify the claim – all documents and information should be independently reviewed and analyzed by staff or consultants:

    • Check the precise language of a negotiated pass-through agreement (taxing agencies may have a different interpretation of the legal language in the agreement that can result in claims with significantly over-inflated amounts owed).

    • For statutory pass through payments, make sure that the assessed valuation information matches your records and that the correct formulas pursuant to Health and Safety Code requirements are being used for the calculations.

    • Look at historical tax increment receipts and assessed valuations to ensure that the actuals match the amounts being used in the taxing agencies’ calculations.

    • Make sure that the tax increment excludes all legally obligated payments that were made (i.e., low moderate income housing set aside, SERAF) unless a negotiated agreement explicitly excludes these specific payments.

    • If pass-through payments owed resulted from an SB211 amendment (eliminating the time limit to incur debt), be sure to verify that the correct “adjusted base year” is being used by the taxing entity.  The incorrect adjusted base year can result in significantly higher payments allegedly owed.

  2. Meet with the taxing entity to review methodologies.
  3. Draft a Settlement Agreement for both parties to sign.
  4. Obtain the appropriate approvals.
  5. Submit the required documentation to DOF.

DOF won’t necessarily approve all repayments to taxing entities right away and a meet-and-confer may need to take place in order to walk DOF staff through the requirements and methodologies.

Following these steps can identify inaccuracies in methodologies that can result in significantly reduced residual revenues to all taxing entities (other than the taxing entity making the claim), including the City (i.e., General Fund).

In summary, these calculations should be reviewed very carefully order to preserve General Fund revenues.

Written by Hitta Mosesman, Principal at RSG.