The URL can be used to link to this page

Home My WebLink AboutSA AG PKT 2012-07-09 #3 SUCCESSOR AGENCY TO THE SEAL BEACH REDEVELOPMENT AGENCY AGENDA STAFF REPORT DATE: July 9, 2012 TO: Honorable Chair and Board Members THRU: Jill R. Ingram, Executive Director FROM: Quinn M. Barrow, Agency Counsel REDEVELOPMENT DISSOLUTION LAW – A.B. 1484 SUBJECT: “CLEAN-UP” BILL TO AB X1 26 – UPCOMING DEADLINES AND PENALTIES AND POTENTIAL PAYMENT TO COUNTY TO BE MADE ON JULY 12, 2012 SUMMARY OF REQUEST: Staff recommends that the Board authorizes Staff to make that payment demanded by the County Auditor-Controller from available Successor Agency funds, if the Successor Agency receives a demand from the County Auditor to remit “surplus funds” pursuant to the new Health and Safety Code Section 34183.5(b) added by AB 1484. BACKGROUND AND ANALYSIS: On June 27, 2012, the Governor signed the redevelopment budget trailer bill AB 1484 and it became effective immediately. AB 1484 substantially impacts many aspects of AB X1 26, and added and revised various deadlines for Successor Agency actions. One such new deadline is the potential payment of “surplus” tax revenues to the County by July 12, 2012 pursuant to the newly added Health and Safety Code Section 34183.5(b). Under Section 34183.5(b), the County Auditor- Controller is required to determine if the Successor Agency owes such surplus tax revenues and, if any such amount is due, send a demand letter to the Successor Agency by July 9, 2012. Failure by the Successor Agency to make the surplus payment by July 12, 2012 will subject the City and the Successor Agency to substantial civil penalties and other severe sanctions, including a suspension of the City’s sales and use tax payment as of the scheduled July 18, 2012 distribution. Agenda Item Because of delays caused by the Matosantos case (the California Supreme Court case that invalidated AB X1 27 and upheld AB X1 26), many county auditor-controllers, including the Orange County Auditor-Controller, did not make a distribution of property taxes on May 16, 2012 for the period covered by the first Recognized Obligation Payment Schedule (“ROPS 1”) (i.e., January 1, 2012 through June 30, 2012). For such counties, this means that no surplus revenues (i.e., the amount left over after payment of pass through obligations, the enforceable obligations, and the administrative cost allowance) under the waterfall provisions of AB X1 26 (Health and Safety Code Section 34183(a)(4)) were distributed to the taxing entities for the ROPS 1 period. To correct for this, AB 1484 directs that a corresponding deduction should have been made with respect to the June 1, 2012 distribution of property tax revenues for the period covered by the second Recognized Obligation Payment Schedule (“ROPS 2”) (i.e., July 1, 2012 through December 31, 2012) to account for any unpaid surplus from the ROPS 1 period. Because AB 1484 was not law at the time of the June 1, 2012 distribution, county auditor-controllers may not have made the deduction required by AB 1484. Orange County informed Seal Beach in early June that it made the deduction, but the DOF has stated that most counties who attempted to make the deduction did so incorrectly. Therefore, if the county auditor-controller made the June 1, 2012 distribution without making the proper required deduction and the taxing entities are owed the surplus amount, AB 1484 directs the county auditor- controller to calculate the amount owed by the successor agency and to send the successor agency a demand for payment no later than July 9, 2012. No later than July 12, 2012, each successor agency which receives such a demand, must pay to the county auditor-controller the amount demanded. If the Successor Agency gets a demand for payment from the County Auditor- Controller, and the Successor Agency fails to pay the surplus amount demanded by the County Auditor-controller on or before July 12, 2012, the DOF or any affected taxing entity may file a lawsuit seeking to compel the successor agency to make the payment immediately. The lawsuit has priority over all other civil matters, so the court may act very quickly. More immediately, the Successor Agency will be subject to a civil penalty of 10% of the amount it owes to taxing entities plus 1.5% of the amount owed, imposed for each month the payment is late. The Successor Agency may not pay any obligations other than bond debt service until the payment is made. Although not entirely clear, it appears that the Successor Agency’s subsequent property tax allocations for payment of enforceable obligations on its ROPS are also subject to set off until the surplus payment (and possibly any civil penalties imposed) are paid in full. The DOF may request that a court waive some or all of the civil penalties if the DOF determines that imposition of the penalties will jeopardize the payment of enforceable obligations. Page 2 AB 1484 also provides that the City will be subject to the same civil penalty as the Successor Agency for late or non-payment of the surplus payment demanded. In addition, the City shall not receive the sales and use taxes scheduled to be distributed to it on July 18, 2012, or thereafter, up to the amount owed to the taxing entities, until the surplus payment is made. Sales and use taxes shall be withheld in the amount of the surplus payment demanded until such time as the demanded payment is made by the successor agency to the county auditor-controller. Because of the very short time provided to the Successor Agency to make the surplus payment, and the severe penalties for late or non-payment, if the Successor Agency receives a demand for that payment, we recommend that the Successor Agency make the payment on or before July 12, 2012, with a cover letter explaining that the payment is made under protest and without waiver of any legal rights and remedies the Successor Agency has or may have to challenge the payment, the amount of the payment, or the legality of the payment. FINANCIAL IMPACT: As noted above, under AB 1484, the County Auditor-Controller is required to send the Successor Agency a demand letter for the surplus payment by July 9, 2012. Staff will make a further report at this Board meeting regarding whether such a demand letter has been received, and if so, the amount of such demand. If the Successor Agency fails to make the payment by July 12, 2012, the Successor Agency will be subject to a civil penalty of 10% of the amount it owes to taxing entities plus 1.5% of the amount owed, imposed for each month the payment is late. ENVIRONMENTAL IMPACT: There will be no new environmental impact associated with this action. LEGAL ANALYSIS: General Counsel has reviewed and approved as to form. RECOMMENDATION: Staff recommends that the Board authorizes Staff to make that payment demanded by the County Auditor-Controller from available Successor Agency Page 3 funds, if the Successor Agency receives a demand from the County Auditor to remit “surplus funds” pursuant to the new Health and Safety Code Section 34183.5(b) added by AB 1484. . SUBMITTED BY: NOTED AND APPROVED: __________________________ ___________________________ Quinn M. Barrow, Agency Counsel Jill R. Ingram, Executive Director Page 4