Legal Alerts

Revised Definition of “Enforceable Obligation” Provides Administrative Cost Allowance for Housing Successor Entity

On February 18, Gov. Jerry Brown signed into law Assembly Bill 471 that, among other things, affects the Recognized Obligation Payment Schedule (ROPS) process, effective immediately.

A successor agency may now list on the ROPS, starting with the ROPS 14-15A, funding for loan obligations scheduled beyond the applicable ROPS cycle, on a showing that the lender requires the successor agency to have the cash on hand. Additionally, a successor agency may now use reasonable estimates and projections to support payment amounts listed on the ROPS as due during the applicable ROPS cycle, but for which the successor agency has not yet received an invoice or other billing document. Further, a successor agency may list future bond obligations on the ROPS when an enforceable obligation requires issuance of the bonds during the applicable ROPS cycle.

AB 471 also revised the definition of “enforceable obligation” to provide an administrative cost allowance for the housing successor entity that assumed the housing obligations of the dissolved redevelopment agency, if the housing successor entity is a local housing authority. From July 1, 2014, to July 1, 2018, such a local housing authority may receive not less than $150,000 and up to 1% of the property tax allocated to the Redevelopment Obligation Retirement Fund on behalf the successor agency for each fiscal year, defined as the “housing entity administrative cost allowance.” The successor agency must list the housing entity administrative cost allowance on the ROPS for the housing authority to receive the allowance. Upon approval of the ROPS by the oversight board and Department of Finance, the successor agency is required to pay the housing authority the approved housing entity administrative cost allowance on each January 2 and July 1. If there are insufficient funds in any fiscal year to pay the housing entity administrative cost allowance, the unfunded amount may be carried over onto future ROPS, until paid in full.

This bill was signed into law as an urgency measure and is effective immediately. As a result, successor agencies that are in the process of submitting the ROPS 14-15A to their oversight board may want to review their ROPS to determine whether revisions to the ROPS are appropriate to address funding or cash flow for future obligations or include a housing entity administrative cost allowance.

Adding additional obligations to the ROPS will result in less residual cash remaining for distribution to the taxing entities. For those successor entities who are placing city/agency loans on the ROPS for repayment, the addition of new enforceable obligations on the ROPS pursuant to AB 471 will result in less residual cash available for repayment of city/agency loans.

AB 471 also made clarifying changes to the Long Range Property Management Plan provisions of the redevelopment dissolution law. Health and Safety Code Section 34191.5 provides that a Long Range Property Management Plan may provide for the disposition of property to the city, county or city and county that created the redevelopment agency for a project identified in an approved redevelopment plan. This bill clarifies that “identified in an approved redevelopment plan” includes identification in a community plan or a five-year implementation plan.

Further, AB 471 amends Government Code Section 53395.4 to eliminate the prohibition on infrastructure financing districts financing projects within a redevelopment project area and makes other changes to the infrastructure financing district law to conform with the redevelopment dissolution law.

For questions regarding AB 471 and how it may affect your agency or projects, contact the attorney author of this legal alert listed at right in the Municipal Law practice group, or your BB&K attorney.

Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.