California lawmakers passed legislation to change the way communities wind down their shuttered redevelopment agencies, leaving cities and their advocates trying to tally the effects of the last-minute bill.
The bill could cost cities hundreds of millions dollars from unreimbursed redevelopment agency loans, but it also provides a method for cities to spend a percentage of so-called stranded 2011 bond proceeds.
"It is a mixed bag," said Dan Carrigg, legislative director for the League of California Cities.
The league, which opposed Senate Bill 107, estimated the bill's original version, Assembly Bill 113, could cost 49 cities $937.5 million if loans made to former redevelopment agencies are not reimbursed and interest rates are capped at 3% on the loans, rather than the previously agreed to local agency investment fund rate.
The vastly amended version of Senate Bill 107 didn't hit the Assembly and Senate floors for review until early the morning of Sept. 11, the last day of session. The League didn't have time to fully review the 104-bill before it passed both the Senate and the Assembly by 10 p.m. that Friday night, to see how much the financial impact may have changed.
"There was this bill called Assembly Bill 113 that went back and forth — and the League was trying to negotiate a clean-up," said Larry Kosmont, president and chief executive officer of Kosmont Cos., a Los Angeles-based real estate and economic development firm. "Then all of a sudden, we had this robust bill back from the state's Department of Finance that has elements of AB113, but other elements that are very prescriptive about funding and what can be done with existing bonds."
The level of complexity is significant, Kosmont said, and the bill is not good for many local agencies.
The bill caps loan reimbursements at $5 million, but there seems to be some confusion as to whether that is $5 million per loan or total reimbursement to cities.
Assemblymember Young Kim, a Fullerton Republican who opposed the bill, testified it would cost her district tens of millions of dollars. She said the bill creates winners and losers, and based on her comments, her district is clearly among the losers.
"The 104-page bill was in print for less than 24 hours before the Assembly took it up for a vote," Kim said. "What good is a full-time legislature if we cannot read what's in the bill we're supposed to vote on?"
San Diego will come out $65 million ahead through the bill, because it authorizes full loan repayment to cities on loans that were made to the former redevelopment agencies using federal grants.
In 2010, San Diego and its former redevelopment agency entered into a settlement agreement with the Department of Housing and Urban Development regarding Community Development Block Grant funds. Under the agreement, the redevelopment agency agreed to repay San Diego $79 million over a 10-year period.
The bill would provide relief to about 35 or 40 redevelopment successor agencies that have been prohibited from spending the proceeds of bonds issued between Jan. 1, 2011 and June 28, 2011. The bill allows successor agencies to spend up to 20% of bond proceeds with that percentage declining the closer the bonds get to the June 28 date.
The law that dissolved the state's redevelopment agencies restricted the use of bonds issued between Jan 1, 2011, the date the RDA dissolution law was introduced, and the June 28, 2011, the state it passed, because some lawmakers felt that agencies were racing to issue bonds before the law dissolving RDAs was passed.
If the proceeds are aimed at affordable housing projects, however, 100% of the proceeds can be used.
"I think the state is feeling pressure from affordable housing advocates to cut some of that money loose," Kosmont said.
There is no doubt need for a clean-up bill, but "I'm just not sure this is it," Kosmont said.