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HomeMy WebLinkAboutMINUTES - 08142012 - SD.3RECOMMENDATION(S): Consider ACCEPTING the oral and written report of the Deputy Director of Conservation and Development on implementing Assembly Bill (AB) 1484 which amended the Redevelopment Dissolution Act. FISCAL IMPACT: To be determined. As explained in more detail in the Background section, the statute obligates successor agencies of dissolved redevelopment agencies (RDA) to make three payments to the County Auditor-Controller within nine months. The first of these payments was made by the successor agency on July 12, 2012, using $2.2 million from its reserves. This payment represented the Auditor Controller's estimate of residual amounts of funds in the Redevelopment Property Tax Trust Fund (RPTTF) that would have been available to taxing entities if the Redevelopment Dissolution Act had gone into effect on October 1, 2012 as originally intended. A RPTTF was established for each successor agency following dissolution of the former RDAs on February 1, 2012. It receives property tax revenue that previously was allocated to RDAs as tax increment. The second payment to the County Auditor Controller is due November 28, 2012, and would represent any Low Moderate Income Housing APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 08/14/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS Contact: Steven Goetz, 925-674-7830 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: August 14, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: , Deputy cc: Bob Campbell SD. 3 To:Successor to the Contra Costa County Redevelopment Agency From:Catherine Kutsuris, Conservation and Development Director Date:August 14, 2012 Contra Costa County Subject:Report on progress implementing Assembly Bill 1484 which amended the Redevelopment Dissolution Act FISCAL IMPACT: (CONT'D) Fund (LMIHF) balances determined to be available pursuant to a specified review of the LMIHF. The third payment is due April 10, 2013, and would represent any cash and other assets determined to be available pursuant to a specified review of the other funds held by the successor agency. The County's sales and use tax receipts would be reduced by any payment amounts that the successor agency is unable to pay. BACKGROUND: Status on the July 12, 2012 Payment On July 10, 2012, staff reported to the Board on the near term impacts of AB 1484, including the County Auditor Controllers July 9th demand to pay $2.2 million by July 12, 2012. At that time the Successor Agency of the Contra Costa County RDA submitted a written request to meet and confer with the Department of Finance (DOF) stipulating that the payment amount exceeded the Successor Agency's obligation as defined by the Dissolution Act (see Exhibit A). DOF has not responded to our request to meet and confer or responded to messages left at th phone number provided for additional assistance on such matters. The Successor Agency made the payment under protest (see Exhibit B) by using $1.8M from the County Auditor Controller's December 2011 distribution of tax increment which was set aside in the RDA's Housing Fund pursuant to state law, and by deferring payment of certain enforceable obligations listed on the Successor Agency's Recognized Obligation payment schedule for the July 1 to December 31, 2012 time period (2nd ROPS). Some cities ultimately filed suit to prevent DOF from relying on the incorrect numbers and then directing the Board of Equalization (BOE) to suspend the city’s sales tax distribution. Subsequently, the BOE informed DOF it could not implement any sales tax suspensions on July 18 since there was inadequate time to do so. DOF sent a letter to redevelopment successor agencies on July 20, 2012 to advise the agencies that DOF staff is reviewing the billing information provided to the agencies by county auditor-controllers to verify the correctness of the amounts billed (See Exhibit C). The letter goes on to say that “[i]f we identify areas where it appears the county auditor-controller’s office used incorrect calculations, we will work with their staff to attempt to resolve the matter, and gain a full understanding of the circumstances that contributed to the differences. In cases where DOF staff concludes an error was made that modified the amount to which an Affected Taxing Entity was legally entitled, we will request a revision to the Successor Agency’s billing amount.” The County Auditor Controller has not been contacted by DOF regarding incorrect calculations for the County Successor Agency's billing amount. Status of Reviews to Determine the payments due November 28, 2012 and April 10, 2013. The remaining payments due to the County Auditor Controller pursuant to AB 1484 are to be determined by a licensed accountant hired by the successor agency to review the housing fund and other funds maintained by the successor agency. The first of these reviews is due October 1, 2012. DOF has not issued procedures for these reviews so the licensed accountant recommended by the County Auditor Controller to the County Successor Agency has not been willing to submit a proposal for this work at this time. The adopted Successor Agency budget also does not include funds for hiring the licensed accountant mandated by AB 1484. Successor Agency staff will report on any progress made on these reviews at the Board of Supervisors' meeting. Challenges to the Constitutionality of Penalty Provisions of AB 1484. The League of California Cities plans to move forward with litigation to challenge the unconstitutional provisions of AB 1484. The League’s board of directors met recently and unanimously agreed to instruct staff to commence the process for legal action. League officials posited that lawsuits were likely when the bill was first passed due to the "claw-back" of local sales taxes and city property taxes to satisfy the state's funding demands violate the constitution and measures adopted by the voters of California in 2004 (Proposition 1A) and 2010 (Prop. 22). In addition, such penalties are inconsistent with other parts of AB 1484 that declare that redevelopment successor agencies are separate and apart from city and county governments. The League attorneys will report back to the League board on the specific plans for implementing the litigation authorization. Their board’s authorization covered possible intervention in an action filed by member city/cities or successor agency/agencies or the filing of a separate legal action. The potential exists that the payments required by AB 1484 will exceed the Successor Agency's ability to pay, and thereby threaten the County's sales and property tax revenues. Successor Agency staff will report on any update regarding this potential as information is available. CONSEQUENCE OF NEGATIVE ACTION: None. CHILDREN'S IMPACT STATEMENT: None. ATTACHMENTS Exhibit A Exhibit B Exhibit C Department of Conservation & Development 30 Muir Road Martinez, CA 94553-4601 Phone: 1-855-323-2626 Contra Costa County Catherine Kutsuris Director Aruna Bhat Deputy Director Community Development Division Jason Crapo Deputy Director Building Inspection Division Steven Goetz Deputy Director Transportation, Conservation and Redevelopment Programs July 12, 2012 Bob Campbell, Auditor-Controller Office of the Auditor-Controller of the County of Contra Costa 625 Court Street Martinez, CA 94553 Re: Payment Under Protest - Health & Safety Code § 34183.5(b) Dear Bob: This letter responds to your demand dated July 9, 2012 that the Contra Costa County Redevelopment Successor Agency (the "Successor Agency"), pursuant to Health & Safety Code § 34183.5, remit $2,203,154.33 to the County of Contra Costa Auditor-Controller by July 12, 2012 for deposit from the Redevelopment Property Tax Trust Fund ("RPTTF") for subsequent distribution to taxing entities. We are sending this letter to clearly set forth the Successor Agency's position that, among other defects: 1) Pursuant to the California Supreme Court's decision in California Redevelopment Ass'n v. Matosantos, no RPTTF existed prior to February 1, 2012, and funds distributed to the former Contra Costa County Redevelopment Agency (the "Dissolved RDA") between July 1, 2011 and January 31, 2012 are tax increment funds not subject to the provisions of AB1x26 (the "Dissolution Act"), AB 1484, or Section 34183.5 regarding the use of RPTTF funds. Redistribution of tax increment funds to other taxing entities violates Proposition 22; 2) Distribution of these funds to taxing entities reallocates property tax among cities, counties, special districts, and school districts, yet was not approved by a two-thirds vote, as required by Article XIII, Section 25.5 of the California Constitution; 3) The methodology developed by the Department of Finance ("DOF") for calculation of amounts demanded is inconsistent with Section 34183.5(b), in that it fails to consider all enforceable obligations listed on the approved Recognized Obligations Payments Schedule for the period between January 1, 2012 and June 30, 2012 (the "First ROPS"); and it fails to consider the fact that the Dissolved RDA was mandated by state law to Mr. Campbell July 12, 2012 Page 2 of 2 deposit 20 percent of the last tax increment payment into its Low Moderate Income Housing Fund pursuant to Section 33334.2, and 4) Neither the County nor DOF is authorized to retroactively disallow payments made by the Dissolved RDA or the Successor Agency if those payments were shown on the Enforceable Obligation Payment Schedules prepared by the Dissolved RDA and the Successor Agency and were made prior to the approval of the First ROPS. Nonetheless, despite our view that your demand for remittance of funds is inconsistent with the State Constitution, the Dissolution Act, AB1484, Community Redevelopment Law and the decision of the California Supreme Court, as Successor Agency staff I am transmitting the enclosed cash journal entry for $2,203,154.33 to your office under protest as described in this letter. By remitting funds to the Auditor-Controller, the Successor Agency does not waive any constitutional, statutory, legal, or equitable rights and expressly reserves any and all rights, privileges, and defenses available under law and equity. Please feel free to contact me if you have any questions regarding the above. Sincerely, Steven L. Goetz Deputy Director Transportation, Conservation and Redevelopment Programs Enclosure cc: D. Twa, County Administrator C. Kutsuris, Director of Conservation & Development L. Driscoll, County Administrator’s Office T. Geiger, County Counsel’s Office Senator Mark DeSaulnier Assemblywoman Susan Bonilla Assemblywoman Joan Buchanan Assemblywoman Nancy Skinner P. Marshall, Goldfarb & Lipman G:\CDBG-REDEV\Successor Agency\County Auditor\july 12 2012 payment ltr.doc Department of Conservation & Development 30 Muir Road Martinez, CA 94553-4601 Phone: 1-855-323-2626 Contra Costa County Catherine Kutsuris Director Aruna Bhat Deputy Director Community Development Division Jason Crapo Deputy Director Building Inspection Division Steven Goetz Deputy Director Transportation, Conservation and Redevelopment Programs July 10, 2012 via e-mail Ana Matosantos, Finance Director Mark Hill, Program Budget Manager Department of Finance redevelopment_administration@dof.ca.gov John Chiang, Controller T. Austin California State Controller's Office taustin@sco.ca.gov Bob Campbell, Auditor-Controller Office of the Auditor-Controller of the County of Contra Costa Bob.Campbell@ac.cccounty.us Re: AB 1484 “True Up” Payment Due Under HSC 34183.5 Ladies and Gentlemen: The Contra Costa County Successor Agency to the Contra Costa County Redevelopment Agency (the “Successor Agency”/“Sponsoring Community”) wish to meet and confer with the Department of Finance (the “DOF”) to discuss the payment due on July 12, 2012 under Health and Safety Code Section 34183.5 (the “34183.5 Payment”). The Successor Agency and Sponsoring Community also request that the DOF notify the Auditor-Controller of the County of Contra Costa and the State Controller’s Office that no payment is due and no penalties or sales tax offsets should be assessed during the pendency of these discussions. Because serious concerns were raised while AB 1484 was before the Senate Committee on the Budget and Fiscal Review on June 26-27, 2012 regarding the processes for calculating and collecting the 34183.5 Payment, the DOF committed that it would work with Sponsoring Communities and Successor Agencies to avert assessment of the penalty and offset provisions. We wish to immediately commence that process for the enclosed demand from the County Auditor Controller. The Contra Costa County Redevelopment Agency (the “RDA” or “Dissolved RDA”) was dissolved on February 1, 2012. Prior to dissolution, the RDA received its December 2011/January 2012 installment of tax increment from the County of Contra Costa (the “County”) Page 1 of 3 Ms. Matosantos July 10, 2012 Page 2 of 3 2 on December 20, 2011 (the “Last Tax Increment”). Since ABx1 26 was stayed at this time, the RDA deposited the Last Tax Increment into its reserve fund. The RDA, prior to February 1, 2012, used the proceeds of the Last Tax Increment to pay costs of the RDA authorized under the Community Redevelopment Law. After February 1, 2012, the Successor Agency used the remaining proceeds of the Last Tax Increment to pay costs listed on the Enforceable Obligation Payment Schedule, and later, Recognized Obligation Payment Schedule (ROPS), all pursuant ABx1 26. Our First ROPS (Jan-June 2012) has received an approval letter from DOF. On July 3, 2012, DOF provided guidance on the 34183.5 Payment, which DOF refers to as the “July True Up Process” (the “Guidance”). There is an error and an inconsistency between the Guidance and AB 1484. Health and Safety Code Section 34183.5(b), added by AB 1484, provides as follows: “The amount to be retained by taxing entities pursuant to paragraph (4) of subdivision (a) of Section 34183 for the January 1, 2012, through June 30, 2012, period is determined based on the Recognized Obligation Payment Schedule approved by the Department of Finance pursuant to subdivision (h) of Section 34179 and any amount determined to be owed pursuant to subdivision (b).” [emphasis added] The relevant portion of the Guidance states that: “For purposes of determining the amount of RPTTF that a successor agency was authorized by Finance to expend for the January 2012-June 2012 period, county auditor-controllers must use the amounts shown in Column E of the Exhibit 12 document on this webpage.” Column E of Exhibit 12 deals only with a subset of the approved January through June 2012 ROPS (the “First ROPS”) and does not include all enforceable obligations approved by DOF. In particular, Column E includes only the portion of the First ROPS payable from the Redevelopment Property Tax Trust Fund (the “RPTTF”), and fails to recognize that other enforceable obligations were payable from other sources, including the Last Tax Increment. The First ROPS often showed amounts paid from the Last Tax Increment as payable from "Reserves" rather than from the RPTTF, because at the time the Last Tax Increment was received, AB1x26 had been stayed, and the RPTTF did not exist. To exclude from the approved First ROPS those payments for enforceable obligations made from the Last Tax Increment results in double payments by agencies. Had the RPTTF system been in effect at the time the Last Tax Increment was paid, the distribution waterfall that the Legislature directs to be simulated through Section 34183.5(b) would first have allowed all enforceable obligations on the approved First ROPS to be paid from amounts distributed under Section 34183(a)(2) before arriving at the residual amount available to taxing entities under the distribution prescribed in Section 34183(a)(4). Unless the enforceable obligation payment amounts shown from the Successor Agency Reserve Balance in the First ROPS are deducted from the Last Tax Increment, the Section 34183.5(b) calculation will overstate the amount of revenues from the Last Tax Increment available for distribution to the Ms. Matosantos July 10, 2012 Page 3 of 3 3 affected taxing entities in a manner inconsistent with the legislative intent that requires the consideration of all enforceable obligations listed on the First ROPS, not just a portion of them, as the basis for the calculation. Since previous DOF guidance and AB 1484 stated that there would be no RPTTF distribution on May 16, 2012 to make payments for approved enforceable obligations on the First ROPS, as a practical matter, the only source of funds the Successor Agency had to make their First ROPS enforceable obligations payments was the Last Tax Increment. The new Guidance calculation would in effect require the Successor Agency to spend the Last Tax Increment twice over -- once for the approved enforceable obligations listed on the First ROPS and then again to make the 34183.5 Payment. This is not consistent with AB1x 26 or AB 1484. Further it is our position that no 34183.5 Payment is due because the RPTTF did not exist until February 1, 2012 and thus there would be no residual from the RPTTF for the period for which the County Auditor Controller is required to calculate a residual distribution under Section 34183.5. The 34183.5 Payment violates numerous state laws, including Proposition 1A and Proposition 25. The 34183.5 Payment also violates Proposition 22, since the Last Tax Increment was “tax increment” at the time it was received by the RDA and therefore cannot be redirected by the State. Please contact me at your earliest convenience to arrange for our conference on this matter. In the meantime, we request your immediate confirmation to us, the Auditor-Controller of the County of Contra Costa, and the State Controller's Office that the Successor Agency and Sponsoring Community that the 34183.5 Payment obligation is suspended and postponed pending the outcome of our meet and confer discussions with DOF on this matter. Thank you for your prompt attention to our request. Sincerely, Steven L. Goetz Deputy Director Transportation, Conservation and Redevelopment Programs Enclosure cc: D. Twa, County Administrator C. Kutsuris, Director of Conservation & Development Senator Mark DeSaulnier Assemblywoman Susan Bonilla Assemblywoman Joan Buchanan Assemblywoman Nancy Skinner P. Marshall, Goldfarb & Lipman 103\01\1167165.2 7/6/20 G:\CDBG-REDEV\Successor Agency\DOF\DOF july 9, 2012 ltr.doc County of Contra Costa Redevelopment Property Tax Trust Fund Demand per AB 1484 Redev. Prop. Tax Trust Fund (RPTTF) Activity RPTTF Beginning Balance Disributed to Successor Agencies December 2011 Secured Property Tax Increment Unsecured Property Tax Increment Supplemental Property Tax Increment Unitary Total Total Distributed to Successor Agencies December 2011 H&S Code 34183 Distributions Admin. Fees to County Auditor-Controller: SB2557 ABX1-26 Total Admin. Fees Pass Through Payments: Total Pass Throughs Obligations Approved per DOF Exhibit 12 Less: Pass-Thru Estimates on Approved ROPS Less: SA Fees on Approved ROPS ROPS RPTTF Payable Successor Agency Admin. Cost Allowance SCO Invoices for Audit and Oversight H&S Code 34183 Dist Totals Demand Amount Due July 12, 2012 CONTRA COSTA COUNTY 0.00 7,083,258.10 -582.01 -77,567.52 48,064.14 7,053,172.70 7,053,172.70 0.00 0.00 0.00 1,142,983.37 4,850,046.00 1,142,983.00 250,000.00 3,457,063.00 250,000.00 4,850,046.37 2,203,126.33