San Diego - Some redevelopment agencies in California will scurry to market in coming weeks to avoid new restrictions imposed by a reform law that takes effect Jan. 1, according to redevelopment officials.
The measure imposes various new restrictions on redevelopment activity in California, including tightening the definition of blight for urban renewal activities. It also imposes new time limits on redevelopment plans and on incurring and repaying debt.
But bonds or other debt arranged prior to Jan. 1 are grandfathered - agencies may receive tax increments to pay those bonds beyond the limits established by the new law.
"I've already heard of a couple of bond issues that have gone to market that are 40 years [on some maturities], and it's specifically so they can collect the tax increments for a term longer than what's permitted in A.B. 1290," said William Carlson, executive director of the California Redevelopment Association, in an interview Friday at a redevelopment legislative conference here.
Bond sales for redevelopment purposes in California totaled $2.18 billion through Sept. 30 of this year, compared with $2.68 billion in 1992 overall, according to figures compiled by the California Debt Advisory Commission. A good part of this year's bond activity reflects refinancings, but sales designed to escape the pending restrictions also could help fuel volume by year's end.
Carlson said he is not surprised that some issuers are trying to get to market ahead of the law's restrictions.
"Once we took the urgency [clause] off the bill, which was done late in July, we knew that that would open the door for some people to adjust," Carlson said. "But again, we're going from old rules to new and there has to be a phase-in of some of these changes. They're just enormous and sweeping, and people need a chance to adjust."
The new law was the primary topic al Friday's conference that was sponsored jointly by Katz Hollis, a Los Angeles-based private consulting firm, and the redevelopment association. About 300 people attended the one-day meeting; a Katz Hollis official attributed the strong turnout to interest in the reform measure.
The redevelopment association sponsored the legislation - to curb eitner real or perceived abuses- - rather than wait for other special interest groups to develop even more draconian reform measures.
You recognized some of your own failures and you had the courage to deal with them before someone else did," Assemblyman Phillip Isenberg, D-Sacramento, said during a luncheon speech.
Isenberg, the author of the measure, said you have protected the future of redevelopment" by making serious reforms.
Although redevelopment officials will have to swallow some restrictions, Isenberg said the "biggest onslaught" was avoided because "the state decided not to further micromanage your activities."
But Isenberg said there are still trouble spots. "My opinion is, we didn't do anything" to establish partnerships with other local governments, particularly counties and school districts. "We're shooting at each other with lawyers and dollars, not bullets."
Redevelopment agencies obtain funding by capturing the property tax dollars generated by their renewal efforts.
Other local governments have often fought for a piece of that pie, claiming the redevelopment efforts siphoned off too many tax dollars. The new law gives other local agencies a share of the money based on a statutory formula, thereby replacing the negotiated pass-through agreements used up until now.
Conference participants asked numerous questions Friday during a panel featuring lawyers who specialize questions focused on interpretation of the law's language, including what happens when existing areas are merged or amended.
Moody's Investors Service praised the reform measure.
"While the bill does not significantly alter bondholder security, its clarification of pass-through payments, improved disclosure of indebtedness, and well-defined term limits for project areas all represent positive credit factors," Moody's said.
"Perhaps most importantly, by addressing redevelopment concerns on a comprehensive basis, the likelihood of major new legislative changes in future years is reduced, creating a more stable legal and political climate for redevelopment debt."
