Does AB 1484 provide additional direction regarding the administrative cost allowance?
AB 1484 does add some clarification on administrative costs and provides additional flexibility that should be of benefit to successor agencies. HSC Section 34171(b) lists a variety of expenses that are excluded from being charged against the administrative cost allowance, and clarifies that bond proceeds and revenue sources other than property tax can be used to supplement the administrative allowance.
If the value of a housing or non-housing asset is required to be reported in the Due Diligence Review is it also required that the appraisers be approved by the oversight board?
Physical assets may be valued at purchase cost or at any recently estimated market value, as outlined in HSC Section 34179.5(c)(5)(C). The oversight board does not have to participate in the selection of an appraiser, except in certain instances where a city may wish to retain assets for future redevelopment activities funded with its own funds, pursuant to HSC Section 34180(f)(2).
Is there a way for an oversight board member to report questionable actions taken by a successor agency, such as questionable payments or asset transfers?
The Department of Finance has created an email “hotline” that can be used by any oversight board member to report what they believe may be questionable actions taken by successor agencies. If you have these types of concerns you are encouraged to send an e-mail with the pertinent details to the following email address: firstname.lastname@example.org
For bonds that were sold after January 1, 2011 but the proceeds were spent prior to June 29, 2011, what is counted as an unencumbered asset? The amount of proceeds received from the sale, or the amount (if any) remaining as of June 29, 2011?
There is no clear answer to this question since this is a complex situation. If the bond funds have been spent it is uncertain how this gets recaptured, since this is not a scenario specifically addressed by the legislation. It may depend on the DDR review for each bond and what is contained in the bond covenants, and also whether the payments were to private parties that would be adversely affected by any modifications. This most likely would have to be reviewed on a case-by-case basis, as there are many factors to consider.
Are there specific issue related to bonds issued after January 1, 2011?
Bond Proceeds related to bonds issued after January 1, 2011 would be added to the cash balance of the successor agency and would be subject to being swept. The Due Diligence Review process will identify restricted versus unrestricted assets, and the individual bond covenants will have to be reviewed to determine how the revenues from each bond are to be handled. Some bonds may have to go through a defeasing process.
What if a low income housing project was acquired with RDA funds and the rehab was done with HUD/HOME funds? Are the income proceeds split or does it all go to the successor agency (including lease unit monthly payments)?
The successor agency should review the documents on the HUD/HOME funds grant and what is required in terms of revenue sharing, as there are likely requirements that were established as part of the grant.
Is the 20% Low- and Moderate-Income Housing Fund (LMIHF) set-aside adjustment only for November 2011 through January 2012, or does it also include July and August of 2011?
The LMIHF adjustment goes back to the effective date of ABx1 26, which is June 28, 2011. HSC Section 34163(c)(4) states that an agency shall not have the authority to amend or modify existing agreements, obligations, or commitments with any entity, for any purpose, including, “making any future deposits into the Low and Moderate Income Housing Fund created pursuant to HSC Section 33334.3”. However, if a portion of these housing funds are dedicated to paying housing bonds or an enforceable obligation then it may require further investigation before proceeding with an adjustment.
How will funds remain available for any reinstated City/RDA loan agreements (per a Finding of Completion), if those funds are swept as a result of the Due Diligence Review (DDR)? Wouldn’t the DDR result in the sweeping of funds previously set aside for these loans?
Repayment of city loans must come from future RPTTF funds from fiscal year 2013/14 and beyond (HSC Section 34191.4(b)(2)(A)) and therefore uses a different source of funds.
Does the DOF need to approve the recertification of loan agreements between the SA and City?
Are loan agreements prior to January 1, 2011 in which proceeds are lent from the former RDA to the City valid? If not, how will those proceeds be recaptured for distribution to the affected taxing entities?
Once you have completed the Due Diligence Review and have been issued a Finding of Completion, the law provides for a process where loan agreements between the RDA and the City can become an enforceable obligation upon approval of the oversight board and the DOF, provided that the loans were for legitimate redevelopment purposes, pursuant to HSC Section 34191.4(b)(1). Repayment of City loans cannot be made until after the 2013/14 fiscal year (HSC Section 34191.4(b)(2)(A)), which means that successor agencies will have to wait until at least ROPS 4 to begin repayment of City loans. It should be noted that ABx1 26 barred RDAs from making new loans, pursuant to HSC Sections 34163(a) and 34177.3(d), which means that loans made after June 27, 2011 cannot be treated as an enforceable obligation, with the exception of loans made by the City to the RDA for wind-down purposes (HSC Section 34173(h)).
Can a successor agency dispose of RDA properties prior to the creation of a Long-Range Property Management Plan (LRPMP)? If the oversight board has already approved such a disposition but the transaction has not been completed, what should be done at that point? Should the OB stop the process?
The law is clear that any disposal of properties is to be suspended until after a LRPMP is approved by the DOF, with the exception of housing asset transfers and possibly governmental use properties. There is some ambiguity whether governmental use assets are subject to this suspension, however government use properties are narrowly defined in HSC Section 34181(a) and therefore have limited applicability. With the exception of housing asset transfers, any disposition or transfer of assets prior to completion of the LRPMP should be carefully scrutinized by the oversight board. The LRPMP cannot be completed until after a Finding of Completion has been issued by the DOF, which means that successor agencies should probably avoid moving forward with any non-housing asset transfers at this time.
Can the hiring of outside counsel for the oversight board be treated as a new enforceable obligation and not part of the administrative cost allowance?
AB 1484 is not entirely clear on this issue, however HSC Section 34177.3 (b) does allow the successor agency to create new enforceable obligations “to conduct the work of winding down the redevelopment agency, including hiring staff, acquiring necessary professional administrative services and legal counsel, and procuring insurance”. If an oversight board believes that this is an appropriate item to include on the ROPS then a reasonable argument can be made that it should be listed, subject to review and approval by the DOF.
Can the successor agency transfer property for governmental purposes before the Finding of Completion is issued by the DOF?
This issue is unclear. HSC Section 34191.5(c)(2)(C), states that “property shall not be transferred to a successor agency, city, county, or city and county, unless the long-range property management plan has been approved by the oversight board and the Department of Finance”, while Section 34191.3 states that the disposal of assets and properties as outlined in Sections 34177(e) and 34181(a) are suspended pending approval of the Long-Range Property Management Plan, with the exception of transfers of governmental use properties. It should be noted that the governmental use exception applies to a limited group of assets that were constructed and used for a governmental purpose, and whose transfer is pursuant to an existing contract that was in place prior to ABx1 26.
If a member of the Oversight Board is also an employee of the successor agency is this considered a conflict of interest under any State or County statutes?
No. AB 1484 provides clarification under HSC Section 34179(a)(7) which states, “in voting to approve a contract as an enforceable obligation, a member appointed pursuant to this paragraph shall not be deemed to be interested in the contract by virtue of being an employee of the successor agency or community for purposes of Section 1090 of the Government Code”.
Is the public review process of the Due Diligence Review (DDR) different than the regular oversight board meeting's public comment session? Are there additional noticing requirements, such as publication in a newspaper?
Yes, the DDR public review process is different, but AB 1484 does not require public meeting comment sessions to be noticed in a newspaper. HSC Section 34179.6(b) states that a public comments session is to take place at least five business days before the vote of the oversight board on the DDR. It would be a good idea to agendize this as a public comment period for the DDR separate from the general public comment period for other oversight board meetings.
Is there enough time for a notice of public hearing? Is the successor agency responsible for scheduling the hearing?
No public hearing is required, but rather a public comment session. Based on the deadlines listed in AB 1484 there should be enough time to provide notice of public meetings, though the schedule is tight for the Housing Due Diligence Review in October. If the successor agency is providing administrative support to the Oversight Board then they are responsible for scheduling all meetings.
Can approval of the Due Diligence Review be done the same day as the public comment session?
No. HSC Section 34179.6(b) states that, “upon receipt of the review, the oversight board shall convene a public comment session to take place at least five business days before the oversight board holds the approval vote specified in subdivision (c).”
Is the public review process of the Due Diligence Review different than the regular oversight board meeting's public comment session? Are there additional noticing requirements, such as publication in a newspaper?
There is nothing in AB 1484 that requires noticing public meetings in a newspaper. HSC Section 34179.6(b) states only that a public comments session is to take place at least five business days before the vote of the OB. It would be a good idea to agendize this as a public comment period for the DDR separate from the general public comment period.
If the DOF does not approve an item on the ROPS approved by the oversight board what happens then?
The DOF has final decision-making authority in deciding whether an item listed on a ROPS is an enforceable obligation, and their decisions trump those made by the oversight board and county Auditor-Controller. However, there is also a meet and confer process available to successor agencies if they wish to dispute a DOF determination, as outlined in HSC Section 34177(m).
Who transmits the oversight board approved ROPS?
The entity that provides administrative support to the oversight board transmits the ROPS, which is usually the Successor Agency.
On a previous ROPS the DOF required that the funding source for certain items be changed to non-RPTTF resources, including costs related to maintaining assets prior to disposition. If AB 1484 now defines these items an enforceable obligation, can the successor agency now list the items on ROPS 3 as an enforceable obligation without any further administrative approval by the DOF?
Everything on the ROPS has to be approved by the DOF, including the funding source. ABx1 26 requires that the funding source be identified for each enforceable obligation; furthermore, HSC Section 34177(l)(1)(E) states that RPTTF funds can be used, “but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or by the provisions of this part”. That means that the successor agency is required to exhaust all other available funding sources before using RPTTF. In this instance, the DOF may have believed that there were other funding sources available to pay the obligations. Before taking action to approve the use of RPTTF as the funding source for EOs the OB may want to first verify with the SA whether there are other funding sources available.
Is there a negative consequence if an Oversight Boards decides to place previously rejected items on the new ROPS because “it doesn't hurt”?
HSC Section 34178(a) states that a successor agency cannot “restore funding for an enforceable obligation that was deleted or reduced by the Department of Finance”. However, the DOF has instructed agencies that are requesting “reconsideration of previously denied obligations” to include them on ROPS 3. These obligations should be identified in the Notes page of the submitted ROPS, including a reference to any correspondence and supporting documentation provided to the DOF.
Can the City make a loan to the successor agency to pay for the Due Diligence Review audit and include it on the ROPS separate from the admin cost allowance?
The law is unclear about whether audit expenses can be covered outside of the administrative cost allowance, however a case could be made that these are necessary costs of winding down the RDA and can be listed on the ROPS as an enforceable obligation, pursuant to HSC Section 34177.3(b). There is also a provision in AB 1484 that allows the city to loan money to the successor agency for the purposes of winding down the affairs of the SA (HSC Section 34173(h)). Conducting an audit for the purposes of identifying cash balances to distribute to the affected taxing entities would likely qualify as an act of winding down the RDA.
Are there penalties for missing submission dates?
Yes, cities would pay substantial penalties as outlined in HSC Section 34177(m)(2) if submittal deadlines are not met by the successor agency.
Will the county Auditor-Controller commit to providing any comments on ROPS in advance of oversight board review, or at least advise the oversight board that it has no comments before the oversight board takes action on the ROPS?
The county Auditor-Controller will be reviewing the Agreed-Upon Procedures audit (AUP) to determine if there are items that should be removed and would recommend that oversight boards also take the results of the AUP into consideration before approving their ROPS. For the next ROPS period the county Auditor-Controller has until October 1, 2012 to provide comments. For subsequent ROPS, the county Auditor-Controller must provide oversight boards with a notice of objections 60 days before the allocation dates, pursuant to HSC Section 34182.5.
If the successor agency borrowed money from the Low- and Moderate-Income Housing Fund to pay SERAF obligations but the item was rejected by the DOF on a prior ROPS, can it be listed on ROPS3?
Yes, you can list this item on ROPS 3.
Was the Webinar only offered to county appointees? If so, should other oversight board members be notified to watch the Webinar video on the county website?
The training and associated materials provided by the county are available to all oversight board members regardless of who appointed them, and an invitation to participate in the Webinar was sent out to all members of each oversight board.
Is there a way to contact somebody at the county to answer questions about redevelopment dissolution, or to submit further questions after the webinar?
Who will select the firm to complete the Due Diligence Review? Is it OK to use the same auditor that completed the AUP?
The successor agency can select their own audit firm, but the firm must be approved by the county Auditor-Controller. The same firm that completed the Agreed-Upon Procedures audit can also be used for the Due Diligence Review. The county Auditor-Controller sent out a memo advising successor agencies on the process for getting a CPA firm approved for the Due Diligence Review.
Successor agencies have already received a demand for payment, how does that correspond to the Finding of Completion review?
The demand for payment was the true-up for ROPS 1, which is separate from the Due Diligence Review and cash balance processes.
Can the AUP audit performed by the A-C be used as a substitute for the DDR?
No, these are distinctly different processes.
What is the deadline for issuing a Finding of Completion?
There is no definitive date for issuing a Finding of Completion. According to AB 1484, the DOF must issue the Finding of Completion no later than 5 business days after the department receives notice from the county Auditor-Controller that all unencumbered balances owed to taxing entities (as determined by the DOF-approved DDR) have been paid, pursuant to HSC Section 34179.7. The successor agency has five business days to transmit payment to the county Auditor-Controller once the DOF makes its final determinations. If a successor agency disputes the DOF findings then the issuing of a Finding of Completion would need to be delayed to provide time to complete the required meet and confer process.
Is the Due Diligence Review and Finding of Completion discretionary, and if so who has that discretion?
HSC Section 34179.5(a) states that the SA “shall” complete the Due Diligence Review, which means that this is a requirement under AB 1484. The Due Diligence Review must be approved by the DOF in order for a Finding of Completion to be issued by the DOF. This impacts the ability of a successor agency to retain dissolved RDA assets, spend bond proceeds issued prior to January 1, 2011, and reinstate loan agreements between the city and RDA recognized as an enforceable obligation. Once the DDR is complete there are a number of remedies that the DOF can seek if the successor agency is unable to pay amounts owed to the affected taxing entities.
Does the oversight board need to approve the auditor used for the Due Diligence Review?
No, the successor agency selects the auditor, subject to approval by the county Auditor-Controller.