Signal Hill Community First
Working to Put the Interests of the Community First
January 17, 2012
Signal Hill City Council
City of Signal Hill
Signal Hill, CA 90755
Honorable Council Members:
The Feb. 1, 2012 dissolution of the Signal Hill Community Redevelopment Agency (CRA) presents a very serious challenge to the City and the community it serves. City decisions made now have immediate and future fiscal impacts that reduce the City’s ability to sustain the quality and effectiveness of current public services.
A June 2010 audit of City and CRA finances show revenues were less than expenses resulting in deficits for both entities. The City’s current budget also projects a deficit. In spite of the more positive changes in the local economy, the rate of revenue growth is not sufficient to support the addition of greater liabilities.
Without reservation, Community First strongly encourages the City Council and City Manager to protect the City from reductions in the quality and effectiveness of current public services; and, from the necessity to adopt new fees and taxes. We also strongly urge the City Council to seriously consider declining becoming the successor agency responsible for the disposition of redevelopment assets and liabilities.
Tonight, there is before you the decision to review and approve a list (Recognized Enforceable Obligation Payment Schedule) of the CRA’s debts that the City claims are legal obligations as defined by the State’s dissolution legislation, AB 1X 26. If any item listed on this schedule fails to be approved by county and state-level authorities, the City will be required to accept the liability, including reimbursements to the state.
In addition, the legislative intent of AB1X 26 is to preserve CRA assets for future property tax distributions to schools, cities, counties and special districts. It is important to have a list of enforceable obligations that is prepared with this intent in mind.
Every dollar spent on any suspect Enforceable Obligation puts the City at great financial risk. On this list are several suspect items. Among them are:
1) A $10 million loan agreement ($10 million at 10% until 2027) the City has with the CRA. To date, approximately $2.2 million has been paid to the City. There is a $750,000 payment to the general fund for this fiscal year. This loan is vulnerable to claims that it violates established law.
It is a loan made between two agencies that are governed by the same officials. It is not an agreement made at arms length and has resulted in the imposition of an above market interest rate of 10%.
2) The 2011 Tax Allocation Parity Bond that was issued in March 2011 to construct the proposed new library. The project is vulnerable to claims that it violates established law. AB1X 26 requires that all enforceable obligations be reported according to the stipulations of that legislation and other governing law and public policy.
The library site is not in the redevelopment project area, the site is not blighted land or adjacent to blight, and, claims that benefits will flow to the redevelopment area because the project removes blight are suspect. In addition, no contract for construction has been approved, leaving whole almost the entire bond proceed sum. AB1X 26 allows the use of bond proceeds to pay bondholders if the purpose is no longer achievable.
3) The Cooperative Agreements between the City and redevelopment agency for staff salaries and benefits. Funding sources for these obligations are identified as the AB1X 26 administrative allowance for the successor agency and the redevelopment Low and Moderate Affordable Housing fund. But, the housing funds are not available to pay for these obligations once the redevelopment agency is dissolved. To state that such funds are available is unwarranted.
There is state legislation offered to remedy the lack of housing funds and other ideas. But, there is no agreement in the Legislature on this or other suggestions. The Governor remains adamant that redevelopment agencies be dissolved. He remains adamant that education is a funding priority.
4) The costs to support the activities of the Successor Agency are suspect. These items are related to the cost to wind-down redevelopment obligations. The Enforceable Obligations list includes projections of these liabilities for several years into the future in spite of the mandate to expeditiously divest the assets and liabilities of the former redevelopment agency.
For the current fiscal year, these costs reach $3.5 million. Among these items are costs for services and activities such as land appraisals, legal services, marketing program, stipend for meeting reimbursements and others. There could be a cost savings to the city of $3.5 million if it declines to become the Successor Agency and would eliminate escalating fiscal pressures on the City’s general fund.
The way the Council and City Manager deal with this issue will determine if the community will continue to enjoy the current quality and effectiveness of our public services. Issues like these are complicated. But, with a clear priority to protect the City and the community, these issues become easier to manage.
For this reason, Community First asks the Council and City Manager to establish a strong policy to protect the City from accepting any liabilities resulting from the redevelopment agency dissolution. We also ask you to adopt a strong policy to reject establishing new fees and taxes as revenue sources in order to accept dissolution liabilities now or in the near future.
We also strongly urge the Council to seriously consider declining becoming the successor agency.
Signal Hill Community First Guidance Committee