3.3.7.3 Redevelopment Agencies
Created to assist in the redevelopment of blighted areas, redevelopment agencies were dissolved in 2012. The remaining successor agencies are charged with winding down the administration of the redevelopment agencies, which in some cases includes issuance of refunding bonds. Legal authority for the refunding of bonds previously issued by a redevelopment agency is set forth in California Health and Safety Code Sections 34161 et seq. and 34170 et seq. and Assembly Bill X1 26 (Chapter 5, Statutes of 2011); Assembly Bill No. 1484 (Chapter 25 Statutes of 2012); and Senate Bill 107 (Chapter 325, Statutes of 2015), together, the “Dissolution Act.” Bonds and refunding bonds issued by redevelopment agencies and their successors are paid from tax increment, as calculated under the Dissolution Act.
The Dissolution Act sets forth a detailed and complex mechanism for approval of refunding bonds. Typically, the successor agency’s oversight board directs the successor agency to undertake the refunding, which allows for all consultants to be paid from tax increment should the refunding fail to be approved. Once a pro forma set of numbers reflecting savings is prepared, the successor agency may adopt a resolution to approve the financing and all associated documents (including an indenture, purchase agreement, official statement, and continuing disclosure agreement), and the oversight board may adopt a resolution approving those actions of the successor agency and authorizing the refunding. Thereafter, the California Department of Finance reviews the action of the oversight board and approves the refunding. The Department of Finance has 5 days to request a review and then may take 40 days from the date of that request to approve or to return to the oversight board for reconsideration.
Many entities may have an interest in a former redevelopment agency’s tax increment. The successor agency must annually prepare a statement of its obligation payment schedule for approval by the Department of Finance before it may pay those obligations from tax increment. In structuring refunding bonds, it is important to review the recognized obligations payment schedule and determine any necessary subordinations.