County Auditor-Controllers Disperse Payments, But Legal Disputes Still Unresolved

By Sean Belk - Staff Writer

June 19, 2012 – The California State Department of Finance has allowed a handful of Long Beach projects previously halted by the state’s sudden shutdown of redevelopment agencies (RDAs) to inch forward. Many other projects, however, remain tied up in legal disputes and are being challenged by the state or have yet to be pursued.

Earlier this year, the state legislature officially abolished redevelopment agencies to bridge a billion-dollar deficit, shifting property tax increment funding that once went to low-income housing projects and cleaning up blighted areas to public schools and other public interests. But the state’s action left many issues unresolved.

On June 1, county auditor-controllers began dispersing the first payments to what are referred to as successor agencies, allowing cities and counties to pay back bondholders and creditors, while also permitting some projects to move forward after being put on hold for months. Also, property tax increment payments are now being split between the city, the state and various nearby taxing entities.

Robert Zur Schmiede, deputy director of Long Beach Development Services, said the city – acting as successor agency to the defunct Long Beach RDA – has received a ROPS (recognized obligations payment schedule) payment of approximately $33.4 million from the Los Angeles County auditor-controller. The payment comes after discussions by city representatives with state officials on what former RDA obligations could be put on the table as enforceable under state laws and the state’s dissolution act, Assembly Bill 1X26.

The city’s first list of requests, covering through December 31, were compiled in a ROPS. After various conversations, and approval from a seven-member oversight board, the final ROPS was submitted last month and the state gave final authorization in a May 25 letter.

The approval now allows some projects and other obligations to commence or proceed. According to Zur Schmiede, those projects include: redeveloping the north block of the Promenade; design work for a new library in North Long Beach; finishing cleanup work along Long Beach Boulevard; improvements to a Bixby Knolls shopping center; and completing construction of Fire Station No. 12 in North Long Beach.

The department of finance, however, disapproved of other projects, requests and obligations, he said, including: construction of a 61-unit complex for low-income senior housing to be called Ramona Park Apartments and the rehabilitation of the 64-unit Bellwood Apartments. Zur Schmiede said the city will continue to pursue these projects.

Also, while the state approved the second phase of a storm drain project in West Long Beach, it remains uncertain whether the state will allow the final, third phase of $3.5 million worth of construction to proceed, since the phase wasn’t contracted prior to the state’s deadline. The Westside Project Area Council said in its June newsletter that area businesses might continue to be at risk of flooding if other funding sources for the project aren’t found.

In addition, the state is not recognizing “city-to-agency” loans as enforceable obligations. In the case of Long Beach, the city is owed some $100 million for payments made decades ago for the Downtown and Central Project areas, he said.

Although the state passed its fiscal year 2013 budget on June 15, Zur Schmiede said the city is hopeful that these and other disputes may be resolved in coming months through urgency legislation or budget trailer bills. “We’re in the midst of a legislative environment where the rules may change,” he said.

Meanwhile, many projects have not been pursued. Ownership of some 200 properties was transferred from the Long Beach RDA to the city last year. The city is required under state law to shift ownership to the successor agency. But the city is moving forward with only a few projects at a time. Many projects, including the proposed construction of a North Village Center, remain in question, Zur Schmiede said.

In the case of some projects, the city had already commenced negotiation agreements with private developers or received affordable housing funds. However, the city may have to put out a request for proposals for some projects and properties at market value in order find interested developers. “We’re taking it one a step at a time,” he said.

Bonds Downgraded

Some cities and counties, meanwhile, are worse off than Long Beach and face defaulting on redevelopment bond obligations due to the delays in tax revenue allocations caused by the state’s redevelopment dissolution law. The concerns caused Moody’s Investors Service, on June 14, to downgrade all California tax allocation bonds from a Baa3 or higher rating to Ba1.

Zur Schmiede noted that Long Beach is not in a position to default on any debt service payments, where as other former redevelopment agencies were “highly leveraged,” or maxed out on debt. “We weren’t nearly to our bonding capacity,” he said. The city’s bond debt service payments for fiscal year 2013 is $28.9 million.