Deconstructing Dissolution

 

Anyone who has been involved with redevelopment dissolution in California knows that it has basically been a total mess. ABx1 26 and AB 1484, collectively referred to as the Dissolution Act, were written by legislators (or their aides) who had little knowledge of how cities operate on a day-to-day basis. The Dissolution Act has since been enforced by the Department of Finance, which has even less knowledge of how cities operate on a day-to-day basis. In general, the Dissolution Act has been like an ill-fitting suit jacket that cities just couldn’t get comfortable wearing. 

As part of the annual budget, the Governor’s office hopes to enact clean-up legislation to tailor certain aspects of the ill-fitting Dissolution Act. As a follow-up to the Governor’s Budget Proposal Summary released Friday, January 9, 2015 (see: http://www.ebudget.ca.gov/FullBudgetSummary.pdf), the League of California Cities hosted a webinar with representatives from the Department of Finance (“DOF”) on Monday, January 11, to discuss clean-up legislation and hear concerns from California cities (see : RDA Dissolution Process). 

There are some really good ideas embedded in the proposed legislative changes. Converting the ROPS process into an annual schedule instead of bi-annual is a great idea. The concept of a “Last and Final” ROPS will be a great option for Successor Agencies that have wound down the majority of their obligations and have a highly predictive payment schedule on anything remaining. Clarifying the definition of a government-use parking lot on the Long-Range Property Management Plans (“LRPMP”) will benefit some agencies. But there are also several infuriating proposals that undercut a Successor Agency’s ability to get a fair break in this chaotic process. 

One of the most troubling ideas was that proposed legislation will disallow a Successor Agency from seeking funding on the ROPS outside of the Administrative Allowance for litigation specifically targeted at the Dissolution Act and DOF decisions. You can sue your school districts and counties all you want, and I guess you can continue to sue DOF, but DOF won’t help you pay for it. DOF and the State have faced hundreds of lawsuits since dissolution, and I imagine that about 95% of them are completely valid. Dissolution has been an unfair and brutalizing process, and litigation has often been a City’s only recourse against blatant money grabs, multi-million dollar disagreements over legal interpretations, and forensic scrutiny of 30-year old documents. A City’s ability to sue the State and DOF is a democratic right. Refusing to fund it while allowing funding for other lawsuits is self-protectionism at its worst. 

The other giant red flag for me in the Proposed Budget Summary was that County Auditor-Controller offices would staff the County Oversight Boards once the local ones are dissolved in 2016. The idea of a single County Oversight Board replacing all the local Oversight Boards already strikes fear into the heart of any brave consultant, but to have County Auditor-Controller offices staff them is truly terrifying. In the League of California cities webinar, the DOF representatives claimed this would be OK because Counties have proven to be “dis-interested, unbiased parties.” This may be true in many places, but in areas such as Los Angeles County -- where the County receives the largest property tax share, sometimes as high as 50%, and a Successor Agency is trying to sell a property with the County receiving a significant portion of those proceeds -- it is hard to imagine the County as an unbiased, dis-interested party. Successor Agencies need to speak on their own behalf and present their own agenda items, so the County Auditor-Controller’s role in staffing the Oversight Boards should be limited to agenda distribution and taking minutes. 

So what is the key takeaway from the Proposed Budget summary and League of California Cities webinar? If you are a Successor Agency, get your ducks in a row now before this process gets worse. Thinking of suing over a denied enforceable obligation? Do it now while you might still be able to receive funding. Have property to sell from your LRPMP? Sell it now before you have to get a County Oversight Board to agree to your selling price. Deal with the big issues now when the process is familiar and friendly (never thought I would say that), so that you as a Successor Agency can cruise into your “Last and Final” ROPS golden years unburdened by unfunded lawsuits, contentious property sales, and a desire to keep fighting. Redevelopment is gone, dissolution may get harder, we have lost, and it’s time to move on. 

Written by Jane Carlson who is an Associate at RSG