Oversight boards charged with navigating complex process
Source: Daily Press
By Natasha Lindstrom
Two and a half months ago, they lost their battle against the state to keep redevelopment agencies alive.
Now, in a complicated, untested process that’s likely to take years, local government officials are members of a select group serving on new boards charged with overseeing the agencies’ demise.
Winding down the RDAs is no small task — it involves unloading blighted properties and paying off hundreds of millions of dollars in debt — and redevelopment experts are raising concerns over how the process will play out. The state controller estimates the 425 now-defunct agencies will pass on nearly $30 billion of debt to their successors. That’s on top of an estimated $5 billion to $20 billion worth of redevelopment agency property that’ll need to be sold over the next several years.
“There’s a time pressure, and then there’s a technical pressure,” said Larry Kosmont, CEO of Kosmont Companies, which specializes in public-private real estate transactions and public finance. “I think much of it will not be well reviewed because it’s almost an impossible task.”
Dating back some six decades, California’s redevelopment program once garnered the state accolades for being a leader in what’s known as Tax Increment Financing. By selling bonds backed by future property taxes, the agencies freed up funds to revitalize blighted areas, generate affordable housing and attract private investment by offering tenants various incentives and infrastructure improvements.
Redevelopment dollars helped sweeten the deal that put a SuperTarget along Interstate 15 in Hesperia, a Dr Pepper Snapple bottling plant at Southern California Logistics Airport in Victorville and Jess Ranch Marketplace in Apple Valley.
But critics, including Gov. Jerry Brown, accused the agencies of investing in too many for-profit ventures without enough public benefit and doing a lousy job of tracking their accomplishments — arguments that ultimately led the state Legislature to ax the agencies altogether as of Feb. 1.
The plan is to re-route more than $1.7 billion in tax increment that was going into RDAs back into cities and schools. It’s going to take a lot of untangling and prioritizing of debt obligations, assets and interfund loans to get there.
Sunday marks one of the first deadlines in the process, when successor agencies are supposed to turn in to the state their “Recognized Obligation Payment Schedule.” The goal is to determine which debts must be paid and which obligations can be dropped. The state Department of Finance can veto any local decisions it doesn’t agree with.
Hesperia’s successor agency must shore up revenue to repay about $807.4 million in total outstanding debt, with $32.86 million due this fiscal year, according to its ROPS. San Bernardino County, with a relatively small RDA compared to the 28 others within the county, owes $214.38 million, with $14.13 million due this fiscal year, according to county spokesman David Wert, who’s also serving on the oversight boards for Apple Valley and Redlands.
Apple Valley, Adelanto, Barstow, Hesperia and Victorville have all become successor agencies for their RDAs, and they’re in various stages of appointing the required oversight boards comprised of city, school, county, community college and special district representatives.
The composition of the boards themselves could pose the problem of what Kosmont refers to as the “dysfunctional family factor,” as agencies like school districts and cities often have a history of adversarial relations and competing interests. One might want to sell off a property right away to get their portion of revenue back, even if the best value for the overall community might be to wait, Kosmont said.
Several local officials said they have faith in their newly formed boards and the commitment of their members to learn the ropes quickly.
But many continue to fault Assembly Bill 1×26 — the law that axed RDAs — for leaving too much ambiguity about the next steps. About nine pieces of “cleanup” legislation are now making their way through the Legislature in an attempt to address some of the initial law’s unclear areas and unintended consequences.
“The way the law is written it’s vague, and in some cases contradictory. Even departments like the state Department of Finance are having difficulty understanding exactly what their perimeters are,” Apple Valley Town Manager Frank Robinson said. “It seems like every day there’s something new coming out of the DOF or they’re changing their direction a little bit. It’s an evolution that’s taking place right now.”