HomeMy WebLinkAboutRES NO 070-11RESOLUTION NO. 0 7 0" 1 1
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
BAKERSFIELD STATING THE CITY'S INTENTION TO MAKE
REMITTANCES REQUIRED BY ABX1 27 IN ORDER TO AVOID
DISSOLUTION OF THE BAKERSFIELD REDEVELOPMENT
AGENCY
WHEREAS, on December 18, 1967, the City Council of the City of
Bakersfield activated the 'Bakersfield Redevelopment Agency ("Agency") by
adoption of Ordinance No. 1709; and
WHEREAS, the Agency, through the exercise of its powers under the
California Community Redevelopment Law (Health & Safety Code 33000 et
seq.) ("CRL") has made major contributions to the physical and economic
development of the City and has strengthened the City's ability to meet the
needs of its citizens and contributed to the quality of life throughout the City;
and
WHEREAS, the California Legislature has adopted, and the Governor has
signed ABX1 26 (2011) and ABX1 27 (2011), legislation that would dissolve the
Agency effective as of October 1, 2011, unless the City agrees to make certain
payments to the State Department of Finance and the County Auditor-
Controller; and
WHEREAS, now that the Governor has signed ABX1 26, redevelopment
agencies' powers purportedly are suspended and redevelopment agencies
purportedly are now prohibited from taking a number of actions, including
making loans and entering into or modifying contracts; and
WHEREAS, Section 34193, subdivision (a), of the California Health & Safety
Code, as added by ABX1 27, states that a city must adopt an ordinance on or
before November 1, 2011 declaring that the city will make the payments
required by ABX1 27 to avoid the suspension of its redevelopment agency's
powers and the dissolution of its redevelopment agency; and
WHEREAS, Section 34193, subdivision (b), of the California Health & Safety
Code, as added by ABX1 27, permits a city that intends to adopt an ordinance
declaring it will make the required payments to adopt a non-binding resolution
stating the city intends to adopt such an ordinance; however, at this time, the
exact amounts of such required payments are unknown, but will be calculated
by the State Department of Finance prior to August 1, 2011; and
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WHEREAS, the adoption of the non-binding resolution of intent described
above would allow the redevelopment agency to continue carrying out its
business, despite the enactment of ABX1 26.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
BAKERSFIELD AS FOLLOWS:
SECTION 1. The above recitals are true and correct and incorporated
herein by this reference.
SECTION 2. Based on the foregoing recitations and all evidence
presented to and considered by the City Council, and in accordance with
Health and Safety Code Section 34193, subdivision (b), the City Council hereby
declares by this non-binding resolution that it intends to adopt an ordinance
(the "Ordinance") on or before November 1, 2011 declaring it will make the
payments required by ABXI 27.
SECTION 3. This non-binding resolution of intent in no way warrants or
guarantees any payment of money by the City to any other entity, and the City
reserves the right to withdraw from making the payments required by ABXI 27
should the amount of such payments (as will be determined by the State
Department of Finance) prove to be in excess of the City's available funds not
otherwise obligated for other uses.
SECTION 4. This non-binding resolution shall in no way be construed as
requiring the City to abide by ABXI 26 or ABXI 27 in the event either, or both,
bills are found unconstitutional or otherwise legally invalid in whole or in part, nor
shall this resolution effect or give rise to any waiver of rights or remedies that the
City may have, whether in law or in equity, to challenge ABX1 26 or ABX1 27.
This resolution shall not be construed as the City's willing acceptance of, or
concurrence with, either ABX1 26 or ABX1 27; nor does this resolution evidence
any assertion or belief whatsoever on the part of the City that said bills are
constitutional or lawful.
SECTION 5. The Mayor, City Manager and Treasurer of the City are
hereby authorized to take all action necessary to effectuate this Resolution.
Page 2 of 3
HEREBY CERTIFY that the foregoing Resolution was passed and adopted
by the City Council of the City of Bakersfield at a regular meeting thereof held
on JUL 1 3 2011, by the following vote.
AYESAGENCY MEMBER BENHAM COUCH, H SON, JOHNSON, SALAS SULLI N, WEIR
NOES: AGENCY MEMBER O V\3~1
ABSTAIN: AGENCY MEMBER f1(jY~
ABSENT: AGENCY MEMBER ~1CTC~Q
AA4'/4,"~ -
CITY CLERK and EX Offici Jerk of the
Council of the City of Bakersfield
APPROVED:
JUL 13 2011
HARVEY L. HALL
MAYOR of the City of Bakersfield
APPROVED AS TO FORM:
VIRGINIA GENNARO
City Attorney
4 y:
J HUA H. RUDNICK
eputy City Attorney, II
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AB 1 X 26-27 FAQs
PLEASE NOTE: AB1X 26 (the "Dissolution Bill) and AB1X 27 (the "Continuation Bill") are
very complex and in many respects poorly drafted and ambiguous. This Q&A is intended to
give general answers to general questions. Each agency should consult with its legal counsel
concerning the application of the legislation to its specific circumstances.
1. Q: CRA intends to file a legal challenge to the Dissolution and Continuation Bills.
When will that happen and what impact will it have?
A: CRA's and the League of California Cities' lawsuit will be filed in the next few weeks
in the California Supreme Court. CRA will seek an immediate stay of the Dissolution and
Continuation Bills in order to preserve the status quo pending a decision on the
constitutionality of these laws. If the Court grants a stay, some or all of the provisions of the
Dissolution and Continuation Bills will be suspended until the Court makes a decision on
the merits of the case. It is difficult to predict the exact parameters of a stay but, at a
minimum, it should suspend the dissolution of agencies and the time for making
Continuation Payments. It is difficult to predict when the Court will act on the request for a
stay, but we believe it will act before agencies are dissolved (October 1, 2011), if it intends
to issue a stay. Until a stay is issued, the Dissolution and Continuation Bills remain law.
2. Q: How will cities/counties that have enacted a Continuation Ordinance be affected by
the lawsuit?
A: Cities and counties that enact a Continuation Ordinance will be able to continue normal
operations, subject to payment of the Continuation Payments. If the Court issues a stay that
suspends the time for making the Continuation Payments, then agencies would not have to
make those payments unless and until the Court finally concludes they are constitutional.
CRA will provide additional guidance when and if the Court issues a stay.
3. Q: How long will it take to decide the case on the merits?
A: This is difficult to predict. It depends on the Court. If the Court issues a stay, the need
for an immediate decision may be moderated, depending on the terms of the stay. CRA will
urge the Court to decide the case as quickly as possible so that agencies can know how to
plan.
4. Q: Should agencies be considering filing their own actions in addition to CRA's
lawsuit?
A: CRA's lawsuit will challenge the constitutionality of the legislation on its face as
violating Proposition 22, Article XVI, section 16 and other provisions of the California
Constitution. Some agencies may have special factual situations created by the legislation's
application to their specific circumstances that would be beyond the scope of CRA's lawsuit.
Agencies should consult their attorneys to determine if an individual suit would be
warranted. If an agency intends to file a separate suit, please notify CRA. Copies of CRA's
pleadings will be available on its website once the case is filed.
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Q: AB1X 26-27 became effective June 29 upon the signature of the State Budget by the
Governor. What can agencies do now?
A: AB1X 26 (i.e. the "Dissolution Bill") prescribes strict limits on what redevelopment
agencies may do between its effectiveness date and October 1, 2011, when all redevelopment
agencies will be legally dissolved unless the legislative body (city council or county board of
supervisors) enacts an ordinance pursuant to AB1X 27 (i.e. the "Continuation Bill")
committing itself to make payments to school districts and special districts (the
"Continuation Payments"). Until enactment of that ordinance (the "Continuation
Ordinance"), agencies are prohibited from entering into new agreements or indebtedness,
except as necessary to carry out "enforceable obligations" entered into prior to June 29.
"Enforceable obligations" are defined as bonds,' loans, payments to the federal government
or imposed by state law, judgments or settlements and contracts, including contracts
necessary for the continued administration or operation of the agency.
Except to carry out enforceable obligations, an agency may not incur indebtedness (including
bonds), refund or restructure indebtedness2, redeem bonds, modify or amend the terms of
payment schedules, execute deeds of trust or mortgages, or pledge or encumber any of its
revenue. Agencies are also prohibited from making loans, entering into new agreements,
amending the terms of existing agreements, renewing or extending leases, forgiving or
altering the terms of loans or increasing deposits to the Low and Moderate Income Housing
Fund beyond the minimum level required by law.
Except to carry out enforceable obligations, agencies are prohibited from acquiring or
disposing of real property and other assets such as cash, accounts receivable, contract rights,
or grant proceeds. Agencies are also prohibited from engaging in any activities related to the
preparation, adoption or amendment of redevelopment plans.
6. Q: What about agency staffing?
A: Agencies are prohibited from adding staff beyond the number of staff employed as of
January 1, 2011. However, agencies are specifically authorized and required to honor the
terms of any collective bargaining agreements and enter into contracts necessary for the
continued administration of the agency. The total number of staff may not increase, but
within that limitation, new staff may be hired. Contracts with consultants are permitted if
necessary for the continued administration of the agency. Many agencies have no employees
and contract with their legislative body (city or county) for staff services. The language of
the Dissolution Bill appears to be directed at employees of the agency and would not apply to
legislative body employees who provide services to the agency under agreement.
7. Q: Are cooperation or reimbursement agreements between agencies and their host
jurisdiction still valid?
A: Most redevelopment agencies have an agreement with their host legislative body (usually
' Note that the term "bonds" is defined broadly in the Community Redevelopment Law as "any bonds, notes, interim
certificates, debentures, or other obligations issued by an agency (Health & Safety. Code Sec. 33602.) This
definition would extend to more than formally issued bonds.
2 There is a very limited exception to refunding bonds to avoid a default on outstanding bonds.
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called a "cooperation agreement" or "reimbursement agreement") pursuant to which the
legislative body provides staff services, offices, equipment and other administrative
necessities and the agency reimburses the cost of these. Sometimes these agreements are
entered into when the redevelopment agency is established and before a redevelopment plan
is adopted. Other times, these agreements are entered into later, such as upon the adoption of
a new redevelopment plan. Some agencies have no written cooperation agreement, but have
accomplished the same purpose through the annual adoption of their budget. Finally, since
January 1, 2011, many redevelopment agencies have entered into agreements with their host
legislative body pursuant to which the agency has transferred assets to the legislative body
and the legislative body has agreed to complete redevelopment activities related to these
assets.
During the interim period after the effective date of the Dissolution Bill and prior to October
1, 2011, it appears that cooperation agreements and reimbursement agreements for staffing
and related administrative costs would remain in effect. During this interim period, the
agency must continue to make payments and perform obligations under its enforceable
obligations, which include "any legally binding and enforceable agreement or contract that is
not otherwise void as violating the debt limit or public policy" and "[c]ontracts or agreements
necessary for the continued administration or operation of the redevelopment agency." This
language suggests that cooperation agreement or reimbursement agreement for agency
staffing and similar costs would remain in effect until October 1, 2011, and the amounts due
under those agreements should be listed on the agency's initial repayment obligation
schedule.
After October 1, 2011, nearly all agreements between cities and agencies would be rendered
invalid. The Dissolution Bill explicitly states that after October 1, 2011, agreements,
contracts, or arrangements between the city or county, or city and county that created the
redevelopment agency and the redevelopment agency are invalid, subject to two narrow
exceptions: (1) agreements entered into in connection with the issuance of bonds issued prior
to December 31, 2010, solely for the purpose of repaying the bonds, and (2) agreements
entered into within two years of the date of creation of the agency. This provision of the
Dissolution Bill will invalidate many, perhaps most, cooperation agreements as of October 1,
2011. The successor agency will have the ability to enter or reenter into agreements with the
host legislative body, subject to approval by the oversight committee. This would give the
successor agency the option of contracting with the legislative body for continued staff
services through a continuation of a cooperation agreement.
Other cooperation agreements, particularly those entered into since January 1, 2011, and
involving a transfer of assets from the agency to the legislative body are at greater risk of
being declared invalid. The Dissolution Bill declares that any transfer of assets from the
redevelopment agency after January 1, 2011 is unauthorized, and grants the State Controller
authority to order the legislative body to return any transferred funds or assets back to the
redevelopment agency. Further, the Dissolution Bill indicates that nearly all agreements
between the agency and the legislative body are terminated as of October 1, 2011. It is clear
that the Dissolution Bill intends to invalidate any cooperation agreements entered into since
January 1, 2011. It is questionable whether the State can invalidate these and other
agreements with the legislative body in this manner, and individual agencies may choose to
challenge these provisions of the Dissolution Bill based on their specific circumstances.
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8. Q: What contractual obligations may an agency continue to carry out?
A: Contractual obligations entered into prior to June 29 are enforceable obligations and
agencies have not only the right but the duty to carry them out.3 These would include
disposition and development agreements, owner participation agreements, agreements for the
purchase or sale of property, contracts for demolition, site remediation or the construction of
public improvements. Moreover, new contracts necessary to implement those enforceable
obligations may also be approved and carried out. For example, if a disposition and
development agreement requires an agency to sell property to the developer and construct
public improvements, the agency may enter into an agreement with a title insurance company
to provide title insurance and may contract with a construction company to build the public
improvements, even though these contracts may be entered into after June 29.
Some agencies have asked whether they may approve a disposition and development
agreement when they have entered into an exclusive negotiation agreement with the
developer prior to June 29. The answer to that question is more nuanced and may depend on
the specific wording of the exclusive negotiation agreement. Agencies are encouraged to
consult with their individual legal counsel.
9. Q: If the legislative body of an agency intends to adopt a Continuation Ordinance,
what may the agency do before the ordinance is enacted?
A: Until the legislative body adopts a Continuation Ordinance, it is subject to the provisions
of the Dissolution Bill.
10. Q: How soon may the legislative body enact a Continuation Ordinance?
A: The legislative body may enact a Continuation Ordinance as soon as it wants. The only
statutory limitation is that the ordinance must be enacted before November 1, 2011. Until the
Department of Finance notifies agencies of the amount of their Continuation Payment on
August 1, 2011, agencies will not know precisely the amount of the payments, though the
calculation made by CRA should be in the ballpark. The Continuation Bill also has a
provision for appeal of the amount of the Continuation Payment. If a legislative body enacts
a Continuation Ordinance before it is notified of the amount of its Continuation Payment, or
during the appeal period, it should reserve its right to appeal.
11. Q: When is a Continuation Ordinance officially "enacted?"
A: Upon the second reading, unless enacted as an urgency ordinance, in which case the
second reading is waived.
12. Q: Once a Continuation Ordinance is enacted, what may an agency do?
A: After enactment of a Continuation Ordinance, the Dissolution Bill is inapplicable to the
agency and the agency may continue to operate normally as long as its legislative body
makes the Continuation Payments.
s With the possible exception of contracts with the legislative body, as noted above.
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13. Q: If the legislative body enacts a Continuation Ordinance, may it later rescind the
ordinance?
A: There is nothing in the Continuation Bill that limits a legislative body's authority to
rescind the Continuation Ordinance. If the legislative body rescinds the Continuation
Ordinance or fails to make the Continuation Payments, then the agency becomes subject to
the Dissolution Bill.
14 Q: What funds can be used to make the Continuation Payment?
A: The Continuation Payment is an obligation of the legislative body, not the agency. As
such, any City or County must recognize that if it agrees to make the Continuation Payment,
it is ultimately legally responsible, irrespective of what happens to the redevelopment agency
or its assets. The legislative body is authorized to utilize any available funds to make the
payments, subject to otherwise applicable statutory and Constitutional restrictions. However,
the agency and its legislative body are authorized to enter into an agreement whereby the
agency transfers to the legislative body annually an amount not to exceed the Continuation
Payment for that year for the purpose of financing activities within the redevelopment
project.
15 Q: May an agency use low and moderate income housing funds to make the
Continuation Payments?
A: The Continuation Bill provides that if the legislative body enacts a Continuation
Ordinance and makes the Continuation Payments for the 2011-12 fiscal year, its agency is
exempt from making the full allocation for that year to the low and moderate income housing
fund. The Continuation Bill does not authorize use of housing fund money, other than the
2011-12 set-aside, to reimburse the legislative body for the Continuation Payment. Thus, the
fund balance in the low and moderate income housing fund on June 30, 2011, must continue
to be used to increase, improve and preserve the supply of affordable housing in the
community.
Funds from the housing set aside or from accumulated low and moderate income housing
funds cannot be used to make the payments for the 2012-13 fiscal year and beyond.
16. Q: What factors should the legislative body take into consideration before making a
decision to enact a Continuation Ordinance?
A: Assuming that the legislative body will rely on the agency to reimburse it for the annual
Continuation Payments, the legislative body should conduct a careful review of the agency's
financial condition, including an annual cash flow analysis. A conservative projection of
future annual tax increment should be prepared. From the annual tax increment, the
following should be deducted:
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1. Pass-through payments, both statutory and contractual ;4
2. Debt service on bonds and other obligations;
3. Housing fund set-aside (except for fiscal year 2011-12);
4. The cost of contractual obligations under agreements;
5. Property tax administration fees paid to the county.
The analysis should also take into account the time and dollar limitations contained in the
redevelopment plan. After deducting the foregoing and the Continuation Payment, the
legislative body will need to determine if sufficient tax increment remains to continue to fund
the redevelopment program.
4 Note that the method of calculating these payments may change over time. For statutory payments, the percentage
of tax increment will increase over time in accordance with the formula in Section 33607.5. For pass-through
agreements, the specific terms of the agreements should be reviewed.
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