This document summarizes a presentation given at the California Contract Cities Association Annual Municipal Seminar on May 18, 2012. The presentation discusses the demise of redevelopment agencies in California following legislation passed in 2011. It provides an overview of city expenditures and revenues, and how the loss of redevelopment agency funding impacted municipalities. The presentation also summarizes the legislation that dissolved redevelopment agencies and the process of establishing successor agencies and oversight boards to manage former redevelopment agency assets and obligations.

1. The Demise of RDAs: An Opportunity to
Restore Fiscal Health with a Vision for
Future Economic Development
California Contract Cities Association
Annual Municipal Seminar
Indian Wells, California
May 18, 2012

2. Joseph P. Buchman
Burke Williams & Sorensen LLP
444 S. Flower Street
Suite 2400
Los Angeles, CA 90071
www.bwslaw.com
(213) 236-2872 (direct)
(213) 236-2700 (fax)
jbuchman@bwslaw.com

3. City Expenditures
• General Government
– Legislative
– Management and Support
• Public Safety
– Police
– Fire
– Emergency Medical Services
– Street Lighting
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4. City Expenditures
• Transportation
– Streets, Highways and Storm Drains
– Public Transit
– Airports
– Ports and Harbors
• Community Development
– Planning
– Construction and Engineering Regulation
Enforcement
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5. City Expenditures
• Health
– Solid Waste Disposal
– Sewers
• Culture and Leisure
– Parks and Recreation
– Libraries
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6. City Expenditures
• Public Utilities
– Water
– Gas
– Electricity
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7. Summary of City Expenditures
Source: State Controller’s Cities Annual Report for
Fiscal Year ending 6/30/2010 (11/11/2011).
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8. City Revenues
• Tax Revenues
– General Property Taxes
– Sales and Use Tax and Transactions and
Use Tax
– Gross Receipts Tax
– Business License Fees and Taxes
– Utility Users Tax
– Transient Occupancy Tax
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9. City Revenues
• Tax Revenues (Cont.)
– Excise Taxes
• Development Tax
• Admissions Tax
• Parcel Tax
• Documentary Transfer Tax
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10. City Revenues
• Tax Revenues (Cont.)
– Special Taxes
• Mello-Roos
• Community Facilities Districts
• Police and Fire Protection
• Libraries
• Transportation
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11. City Revenues
• Tax Revenues (Cont.)
– Special Benefit Assessment Districts
• Public Improvements: street, drainage,
flood control, etc.
• Landscaping and Lighting
• Business Improvement Districts
• Infrastructure Financing Districts
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12. City Revenues
• Charges, Rates and Fees
• Development Fees
• Sewer Service Charges and Connection
Fees
• Solid Waste Fees
• Water Service Charges and Connection
Fees
• Franchise Fees: Cable TV, Electricity,
Telephone, Gas and Oil
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13. City Revenues
• Charges, Rates and Fees (Cont.)
• Fines and Forfeitures
• Park and Recreation Fees
• Airport
• Ports and Harbors
• Licenses and Permits
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14. City Revenues
• Intergovernmental Agencies
– State Subventions
– Federal and State Grants
– County and Other Local Agencies Revenue
Sharing
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15. City Revenues
• Other Financing Sources
– Revenues From Use of Money and Property
– Gifts
– Sale of Bonds
– Leasing Public Property
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16. Summary of City Revenues
Source: State Controller’s Cities Annual Report for
Fiscal Year ending 6/30/2010 (11/11/2011).
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17. City Revenues: Illustration
Utility User
Tax 4%
Service
Charges
(water, sewer, Sales Tax 10%
refuse, etc.)
39% Not
Restricted
36% x Property Tax
11%
Debt Other Tax 7%
Service Fees
1% 8%
Other 4%
State &
Taxes 3% Fed 10%
Assessments
Lic & Permits 1%
2%
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18. Revenue Losses
• ERAF Shifts
– Educational Revenue Augmentation Funds
• Property Tax Shift from Cities, Counties and Special Districts
to Schools Since 1992
• FY 2010-11 amount equals $7.5 billion.
– “SERAF” from Redevelopment Agencies
• FY 2010-11 SERAF total was $350 million
• VLF Loss (The “Triple Flip” to the “Flip Off”)
– SB 89 redirects all VLF revenue to law enforcement grants
usable only for police services.
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19. Redevelopment Agencies
• Property Tax Increment Funding
• Expenditures for Community
Redevelopment
• Agencies dissolved as of February 1, 2012
• Successor Agencies and Oversight Boards
dealing with the aftermath
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20. ABX1 26 Dissolution Bill
• January 10, 2011
– Governor Brown releases budget proposal, includes
elimination of redevelopment.
• June 15
– State Legislature passes ABx1 26 and 27.
• June 28
– Legislature passes new budget bill, and forwards
ABx1 26 and 27 to Governor for signature. Governor
signs, and the bills take effect immediately.
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21. ABX1 26 Dissolution Bill
• Froze redevelopment agency activities other than
as necessary to meet “enforceable obligations.”
• Required preparation of Enforceable Obligation
Payment Schedule within 60 days of Effective Date.
• Preliminary draft of Recognized Obligation Payment
Schedule (“ROPS”) was to be provided to
Successor Agency by September 30.
• Dissolution of Agencies to occur October 1, 2011,
with a Successor Agency taking over with decisions
to be made by an Oversight Board.
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22. ABX1 26 Dissolution Bill
• July 18, 2011
– CRA and LOCC filed suit in California Supreme
Court challenging ABx1 26 and 27.
• August 11
– Supreme Court announced it would hear lawsuit,
and issued order staying portions of ABx1 26 and all
of ABx1 27.
• December 29
– Supreme Court upholds ABx1 26 and invalidates
ABx1 27. Pre- May 1, 2012 deadlines extended 4
months. All Redevelopment Agencies dissolve as of
February 1, 2012.
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23. Redevelopment Agencies: Endgame
• Oversight Boards
– Formation and duties defined in Health &
Safety Code §§ 34179-34181.
– Oversight Board establishes the ROPS for
the Successor Agency.
– Oversight Board charged with disposing of all
assets and properties of the former RDA
funded by tax increment revenues.
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24. Redevelopment Agencies: Endgame
• Former RDA Properties and Assets
– City may retain properties and assets of the
former RDA (HSC 34180(f)).
– Requires Compensation Agreement with
other taxing entities for the agreed value of
the property retained.
– If no agreement on the value of the property,
then the county assessor is to determine fair
market value as of January 1, 2011.
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25. Redevelopment Agencies: Endgame
• Former RDA Properties and Assets
– Oversight Board may also direct the
successor agency to transfer ownership of
assets that were constructed and used for a
governmental purpose to the appropriate
public entity (HSC 34181(a)).
– May require compensation to the successor
agency depending on any agreements
governing the use of the asset.
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26. Redevelopment Agencies: Endgame
• Former RDA Properties and Assets
– Governor’s Revised State Budget relies on
RDA cash assets generating $1.4 billion for
K-14 education in FY 2012-13 and estimates
another $600 million in FY 2013-14.
– Budget Trailer Bill includes proposed AB x1
26 “Clean-Up” Legislation
– http://www.dof.ca.gov/budgeting/trailer_bill_language/business_transportation_and_housing/
documents/%5B210%5D%20ABx1%2026%20Redevelopment%20Clean-Up%20and
%20RDA%20Asset%20Disposition.pdf
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27. Redevelopment Agencies: Endgame
• Proposed “Clean-Up” Legislation
– Successor Agency Administrative Cost
Allowance
– “Enforceable Agreements” between City and
Former RDA
– RDA Assets
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28. Redevelopment Agencies: Endgame
• Proposed “Clean-Up” Legislation
– Successor Agency
• Separate Public Entity/Liabilities
• Has Two Governing Boards
• Can Sue and Be Sued
• Accountant For Due Diligence Review
• Can Issue Bonds to Refund RDA Bonds
• Can File Bankruptcy
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29. Redevelopment Agencies: Endgame
• Proposed “Clean-Up” Legislation
– Oversight Board
• Not a Separate Public Entity
• Cannot Be Sued
• Can Contract For Administrative Support
• Decisions Supersede Those of Successor Agency
Board and Staff
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30. Redevelopment Agencies: Endgame
• Proposed “Clean-Up” Legislation
– Department of Finance
• 10 Days Notice Before Disposition of Assets
• Oversight Board’s Decision Not Effective For 5
Business Days, Plus Up to 60 more
• Clawback Authority
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