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Cities Lose Suit Over ROPS Uncertainty (Updated)

CP&DR Staff on
May 29, 2012

Update: Yesterday, Sacramento Superior Court Judge Timothy M. Frawley ruled against a group of cities seeking a temporary restraining order that would have effectively set aside funds for former redevelopment obligations that are still under review by the Department of Finance. Though the loss is considered a blow to cities that are trying to cover bonds and pay for former redevelopment projects, it is expected to be only the first of many such lawsuits. 

Call it the spawn of Matasantos vs. California Redevelopment Association. As expected, the Department of Finance's rejection of hundreds of items for which successor agencies had requested funding has spurred a legal action. The first of what could be many lawsuits was filed last Tuesday by a coalition of nine cities.  A hearing is set for May 30 in Sacramento Superior Court.

The suit calls for a temporary restraining order that would prevent the state from disbursing tax increment funds to taxing entities and instead sequester those funds until the disputes are settled. 

DOF has reportedly questioned a total of $350 million worth of payments towards projects and other obligations statewide in the recent rounds of ROPS requests. Those payments are just for this year; the total value of affected projects is much higher. 

June 1 is the date on which the Department of Finance will release monies to cover successor agencies' approved obligations. The suit is intended to compel DOF to loosen its purse strings before that date rather than to effectively kill projects, in some cases, put successor agencies at risk of defaulting on bond payments. Many successor agency officials are anxious because, although they intend to re-submit their Recognized Obligations Payment Schedules, DOF's final decisions are still uncertain.  

In City of Palmdale, et al vs. Ana Matosantos, et al, the nine cities are asking a judge to issue a writ of mandate to require the June 1 payment to the successor agencies, a temporary restraining order prohibiting the distribution of the funds to the taxing entities while the amount of the payment to the successor agencies is in dispute, and declaratory relief resolving the disputed issues.

"The City and the Successor Agency understand and want to fully comply with the obligations of the Successor Agency under the law. Based upon the continued uncertainty caused by the State Department of Finance's lack of clear guidance, the looming June 1, 2012 payment date and the critical importance of this issue, we felt we had no choice but to join the other similarly situated cities in taking this action," said Mayor Andrew Weissman, who also serves as chair of the Culver City Successor Agency, in a statement.

DOF maintains that it is faithfully executing Assembly Bill 1X 26. He noted that the department sent letters to all successor agencies throughout the state on March 2 in order to give them notice of what the ROPS process would entail. 

"I think the authority given to Finance under the law as affirmed by the Sup Court is fairly clear," said DOF spokesperson H.D. Palmer. "As for the issue of timing, we have been nothing if not forward-leaning in terms of providing as much early notification as possible."

The far, the suit includes mainly Southern California cities: Pasadena, Glendale, Palmdale, Huntington Beach, Imperial Beach, Inglewood, National City, Hayward, and Culver City. Others, including Ojai, have indicated that they may join the suit.  

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