Claremont foots bill for payment of state redevelopment money

While cities throughout the state are scrambling last minute to make obligation payments resulting from the passage of Assembly Bill 1484, the city of Claremont has already mailed off its check to the state of California.

AB 1484, signed by Governor Jerry Brown late last month, aims to set further restrictions on local governments through a collection of unused redevelopment money. The Los Angeles Auditor-Controller recently sent out collection letters to cities throughout the count, with payments due by July 12. Late fees for nonpayment run $10,000 per day.

Claremont received its bill on July 9, totaling $949,498, according to a city news release. This amount represented the repayment of the $1.67 million received from the county in December 2011 and January 2012, less the $720,151 in approved enforceable obligations for January through June 2012. As the outcry set in and agencies struggled to find the resources, the city of Claremont had its bill paid in full.

“We prepared for this,” said Claremont’s Director of Finance Adam Pirrie. “We have had the funds in an account ready to go back to the county.”

Governor Jerry Brown approved 2 Assembly bills last June calling for the immediate suspension of the redevelopment agency’s power with the exception of existing contractual obligations.

In late 2011, the Supreme Court issued a hold on AB26—which would eliminate redevelopment agencies—in order to determine if the bill was constitutional. AB26 was questioned because of a possible violation of measures put in place to prevent the state from raiding local funds.

During this hold, the state was required to continue its normal practice of sending funds to municipalities for redevelopment. In December, the Supreme Court ruled that AB26 was indeed constitutional thus ending the hold and in February cities throughout southern California were forced to close down redevelopment operations.

The state is now asking for the money divvied out during the hold to be returned.

In anticipation of this, the city of Claremont prepared by scaling back on any expenditures unrelated to its redevelopment obligation payments, moving administrative costs previously funded through the RDA to the General Fund and cutting costs outside those required like bond repayment, according to Mr. Pirrie.

“The state has done this before, we’ve prepared by shifting costs away from redevelopment knowing it would go away. It’s crippled some cities, but we’re fortunate.”

Cities that are unable to pay the bill by July 12 will run the risk of having its sales tax payments suspended by the Board of Equalization effective July 18.

Further, AB 1484 gives the Department of Finance the right to impose $10,000 per day fines for late payments, according to the League of California Cities (LCC), an organization that deems the bill “unconstitutional.”

The California Constitution mandates that the state may not take or redistribute taxes collected by cities when the funds are budgeted for city use. The LCC deems that AB 1484 does just that. Additionally, the LCC maintains that reallocating city property taxes to fund school districts—as Governor Brown has stated will be done—is not permitted without a two-thirds vote as required by the state Constitution.

The collection of funds by the state also includes real property owned by the now defunct redevelopment agencies, which for Claremont includes a piece of property located behind the Richard Hibbard Auto Dealership.

“Eventually [the property] will be sold, and we need authority and direction from the oversight board on how they want us to dispose of the property,” Mr. Pirrie explained.

Although well-prepared, the dismantling of the redevelopment agency has proven to be a complicated process for city staff.

“The legislature comes up with a bill that’s confusing and we don’t get any direction from the state or the county on how to deal with it,” Mr. Pirrie said. “The last 6 months have been a real headache.”

The city’s press release states that sufficient funds remain to continue to make payments on the former redevelopment agency’s future obligations.

—Beth Hartnett


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