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El Cerrito issues a statement on its legal challenge to state payment demand

The following release issued today by the City of El Cerrito outlines points of the city’s legal action challenging a demand for payment of $1.7 million to the state as part of the dismantling of the city’s redevelopment agency.
It includes remarks that Mayor Bill Jones plans to make at tonight’s council meeting, which starts at 7 p.m. at City Hall, 10890 San Pablo Ave.

EL CERRITO CHALLENGE’S “TRUE UP” PAYMENT

El Cerrito, CA: At the Tuesday, July 17, 2012 regular City Council meeting, Mayor Bill Jones will make a statement regarding the City of El Cerrito’s lawsuit filed last week against the Contra Costa County Auditor-Controller, the California Department of Finance, and the California Board of Equalization. The suit challenges the unlawful $1,756,794.67 payment demanded by the County Auditor-Controller on July 9, 2012.

A copy of the writ is available on the City’s website at http://el-cerrito.org/index.aspx?nid=745.

Mayor Jones’ statement to be delivered tonight will include the following key points:

· It is disappointing that we feel the need to file a lawsuit against the State of California and Contra Costa County in order to get the State to follow its own Constitution.

· Before filing the lawsuit, City Staff met with the State’s Department of Finance (DOF) on July 10th and outlined, both verbally and in writing, our interpretation of AB1484 as it relates to El Cerrito. The DOF unceremoniously rejected the City’s factual arguments out of hand and without serious consideration. The City saw no other alternative but to file suit.

· Among the many provisions of the hastily-passed AB1484 is the unprecedented possibility of the taking of the City’s general fund state tax revenues to pay for redevelopment agency bonds and liabilities. This shifts the burden of liability to the Cities. The ability of the State to reach into the Cities’ general funds to take revenues threatens the City’s public assets and our ability to continue to provide local services to our residents. It may also set a dangerous precedent for the future. AB1484 allows the DOF to take action against the cities without due process, public comment and review, and outside the scope of proper governmental transparencies.

· We do not take this action lightly and embark on this path only after intense study of the issues and on-going discussions with the State and County. We take this action to protect our resident’s public assets, the General Fund revenues, our current level of services and the employees that deliver these services.

On Thursday, July 12, 2012, the City of El Cerrito and the Successor Agency to the El Cerrito Redevelopment Agency filed suit in Sacramento Superior Court against the Contra Costa County Auditor-Controller, the California Department of Finance, and the California Board of Equalization.

The suit challenges the unlawful $1,756,794.67 payment demanded by the County Auditor-Controller on July 9, 2012.

The El Cerrito Redevelopment Agency was dissolved on February 1, 2012, by implementation of ABx1 26, also known as the Dissolution Act, which had been enacted by the State of California in June 2011. On June 27, 2012 The California Legislature hurriedly adopted and Governor Brown signed AB 1484 to modify and “clean-up” provisions in Dissolution Act. These new provisions included an attempt by the State to retroactively reallocate tax increment distributed prior to February 1, 2012 and property tax revenues without a 2/3rds vote of the legislature, both violations of the California Constitution.

AB 1484 requires the County Auditor-Controller to calculate a “true up” payment by the Successor Agency of unneeded funds that can be redistributed to other public agencies serving El Cerrito. The Contra Costa County Auditor-Controller relied on a flawed methodology provided by the Department of Finance that failed to take into account the Successor Agency’s obligations to pay debt service payments on its bonds and to fund two affordable housing projects.

On July 9, 2012, the County Auditor-Controller demanded the Successor Agency pay an additional $1.75 million for the “True Up” payment. The Successor Agency has refused to make the payment because it would result in a default on its next bond debt service payments and interfere with the Successor Agency’s ability to fund its contractual obligations on two affordable housing projects, amongst other obligations.

The amount of the housing contractual obligations in dispute is approximately $781,152. However these two projects leverage millions of dollars of public and private investment in El Cerrito. These two projects alone represent over $50 million of economic investment in our community, including over $7 million already invested by El Cerrito’s former RDA, to create 120 units of affordable rental housing with easy access to transit for families, persons with special needs and seniors.

AB 1484 allows the State Department of Finance to impose penalties and for the State Board of Equalization to withhold the City’s sales and use tax revenue until the amount of the True Up payment and penalties are recouped by the State. The True Up payment demanded from the El Cerrito Successor Agency totals about half of the City’s General Fund reserves and a $1.7 million loss would have the potential of significantly hindering City services.

Chris Treadway