CLEARLAKE — The Clearlake City Council opted Thursday to serve as the successor agency in the process to dissolve the Clearlake Redevelopment Agency (RDA). An oversight committee will be formed, which will serve as the ultimate decision-making entity.
Governor Jerry Brown signed into law last June a bill that dissolved all redevelopment agencies in the state additionally placing responsibility for the liquidation of redevelopment assets and payoff of RDA debts with a successor agency. The bill statutorily designated the community that created the RDA as the RDA”s successor agency unless the community expressly elected not to act as the successor agency. Interim City Administrator Joan Phillipe said that if the council chose not serve as the successor agency the option would be open for any other taxing agency to step in and assume. If no other taxing agency were to take on the task, the governor would then select three local residents to serve as the “designated local authority.”
“If we don”t (serve as the successor agency) we”re giving up the power to guide the ship,” Vice Mayor Jeri Spittler said.
A financial analysis of agency alternatives was prepared by Fraser & Associates. Interim Finance Director Sandra Sato said, according to the report, that the city will be entitled to approximately $166,000 for reimbursement for the administrative costs of the successor agency. She said based upon calculations, there will sufficient tax increment funds to cover up to $166,000 in costs (5 percent of tax increment) in the first fiscal year after dissolution of the RDA. She said thereafter, the agency is allowed reimbursement for up to $100,000 (or 3 percent of tax increment) of the administrative costs of the successor agency.
Sato said tax increment not needed to meet essential obligations will be distributed to all local taxing agencies. She said at this time it is unclear, but it is projected that a previous loan between General Fund and the Redevelopment Tax Increment Fund, which had a balance of $2,377,176 in June 2011, will not be considered an essential obligation of the successor agency even though the loan was made before the legislation went into effect and is listed on the Essential Obligations Payment Schedule. She said of more immediate concern is the loss of $241,489 in interest revenues to the General Fund in the current fiscal year, which was included in the Fiscal Year 2011-12 revenues.
“We are going to have to make some adjustments to this year”s budget for this alone,” she said. “It”s not a really good picture at this point. The biggest thing is that loss of $241,000.”
Another major financial issue is the fate of land and property owned by the RDA, which includes Clearlake City Hall and the Public Works incorporation yard. “It is not clear from the legislation whether this property will be transferred to the city or sold by the successor agency at the direction of a board comprised of only two city representatives,” Sato said. “Also, there is other property, which is owned by the agency, which will now be sold by the successor agency and the proceeds distributed to all county taxing agencies.”
City Attorney Mala Subramanian said that there are many of areas surrounding the new law that are ambiguous and that there will likely be a number of “cleanup bills” in the near future to address the multitude of issues.
The successor agency”s activities will be subject to review and approval by the oversight committee, which is to be comprised of seven political appointees from affected local taxing entities and the community. One member apiece is to be appointed by the following: county board of supervisors, mayor representing the city that created the RDA, the largest special district with territory in the territorial jurisdiction of the RDA that is eligible to receive property tax revenues, county superintendent of schools, chancellor of the California Community Colleges, member of the public appointed by the county board of supervisors and one member representing the employees of the former RDA to be appointed by the mayor.
The successor agency is required to receive approval from the oversight board before taking any of the following actions:
– Establishing new repayment terms for any outstanding loans;
– Refunding of outstanding RDA debt to provide savings or avoid debt service spikes. The successor agency is not permitted to create additional debt or accelerate debt service;
– Setting aside reserves for outstanding RDA bonds;
– Merging project areas;
– Continuing acceptance of grants or other financial assistance if the assistance is conditioned on the provision of matching funds in an amount greater than 5 percent;
– If a city wishes to retain any property or other assets for future redevelopment activities, the city can reach a compensation agreement with the other taxing entities to provide them a share of the value of the property retained. The agreement must be approved by the oversight board;
– Establish the Recognized Obligation Payment Schedule;
– Any agreement between the successor agency and the city or county that formed the RDA; and
– An agreement of the successor agency to pledge, or enter into an agreement to pledge property tax revenues.
Subramanian said that most cities across the state have elected to serve as successor agencies. She said she is aware of only two that have not. She said that staff intends to bring additional information back to the council at its next regular meeting regarding the effects the dissolution of the RDA will have on the low to moderate income housing fund.
