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Santa Monica's Former Redevelopment Agency Could Owe Another $140 million, State Says

Santa Monica Real Estate Company, Roque and Mark
By Jason Islas
Staff Writer

April 18, 2013 -- The State Department of Finance (DOF) could add another $140 million to the tab it claims Santa Monica's former Redevelopment Agency (RDA) owes the County, The Lookout has learned.

In a letter to the City dated April 1, the DOF said it had added the $49 million Santa Monica spent on various capital improvement projects -- including upgrading and replacing Downtown public parking structures -- to the $19 million it says the former RDA owes of money it spent on housing projects.

In the same letter, the DOF claims that some $89.8 million worth of property that was transferred from the former RDA to the City would have to be reviewed. The properties include the site of the Civic Center Village project, part of the property between 4th and 5th Streets south of Arizona Avenue Downtown and the future site of Tongva Park.

An April 8 letter from the City Attorney makes it clear that the City will contest the DOF's findings.

“We made payments that are pursuant to bona fide contracts,” said Andy Agle, the City’s director of Housing and Economic Development.

But the main question seems to revolve around when those payments were made.

The City maintains that the DOF has no authority to take former RDA money that was committed by contract before February 1, 2012, the date that AB1x 26, the State law that dissolved RDAs, went into effect.

The DOF maintains that commitments made after March 9, 2011 are not enforceable because AB1x 26 sat in limbo for a year after it was introduced while the California Supreme Court determined its constitutionality.

“The DOF's retroactive application of (the law) to invalidate the enforcement of Cooperation Agreements between the former Redevelopment Agency and City prior to February 1, 2012 is incorrect,” the City's letter reads, adding that it conflicts with the State Supreme Court's ruling.

As part of the dissolution of RDAs, Santa Monica's former agency was required to submit “due diligence reports (DDRs)” of funds it believed were contractually obligated and, therefore, couldn't be given to the County without legal consequences for the successor agency.

The DDRs were divided into housing assets and non-housing assets.

The DOF ruled earlier this year that Santa Monica's former RDA owed $54 million to the County from financial commitments it made to housing projects. The City contested the amount, eventually filing a lawsuit against the State in January.

On April 3, the DOF sent a letter to the City saying that, upon further review, Santa Monica's former RDA owed $23 million less than the DOF originally determined. Combined with a $12.5 million payment the former RDA already made to the County, the new total owed was roughly $19 million.

The City is still fighting that claim.

The City Attorney has requested a “meet-and-confer” with the DOF to contest the ruling, just as it did over the ruling for the housing assets.

The first hearing for the lawsuit is scheduled for July 19, but whether the City will have to take further legal action over the new determination remains unclear.

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