AgdaPkt 2015-01-12 Joint SA Amended

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City of Redwood City 7.1.A. - Page 101 Notes to the Basic Financial Statements For the year ended June 30, 2014 NOTE 14 — DISSOLUTION OF THE REDWOOD CITY REDEVELOPMENT AGENCY (CONTINUED) In FY 2010 -11, prior to AB X1 26 becoming law, $3.3 million of real property assets (vacant land) were transferred from the RDA's Low and Moderate Income Housing Fund to the City in an attempt to protect these assets from being diverted for the benefit of the State. AB X1 26, however, specifically disallowed such transfers. Accordingly, the assets were transferred to the Low and Moderate Income Housing Asset Fund in FY 2011 -12. Prior to the dissolution of the redevelopment agency, under an agreement with San Mateo County to receive a cumulative $25 million of the County's share of tax increment and an agreement with the Legal Aid Society to deposit the first $11.9 million of the $25 million into the Low and Moderate Income Housing Fund, the agency had deposited $10.3 million into the Low and Moderate Income Housing Fund as of June 30, 2011. Pursuant to the agreement with the Legal Aid Society to restrict these funds to housing, after the dissolution of the redevelopment agency these funds were deposited into a new fund, Housing Legal Aid Society Fund, to be used for housing purposes. The State Department of Finance has disputed that these funds are restricted for housing, and the City has filed a lawsuit against the State of California on this matter. On October 30, 2013 the Superior Court Judge hearing the lawsuit filed against the State of California Department of Finance concerning the $10.3 million the City is holding in the Housing Legal Aid Society Fund as part of the dissolution of the former Redevelopment Agency issued a tentative ruling in favor of the State of California. On November 6, 2013 the Judge then issued a "Request for Further Briefing" to be held on November 22, 2013. On January 4, 2014 the Superior Court Judge ruled in favor of the State of California. In April 2014, the City filed an appeal, and as of the date of this report, a ruling on the appeal has not been issued. The accumulated funds in the amount of $10.3 million are reflected as a liability in the Housing Legal Aid Society Fund pending the outcome of the lawsuit. In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. The City's former Redevelopment Agency had entered into agreements with certain public entities whose jurisdictions were within the territory of the former Redevelopment Agency under which these entities received a specified share of the property tax increment received by the former Redevelopment Agency. Under Assembly Bill X1 26 the responsibility for making these payments has been shifted to the County of San Mateo. NOTE 15 — LITIGATION AND CONTINGENT LIABILITIES The City generally follows the practice of recording liabilities resulting from claims and legal actions only when they become fixed or determinable in amount. There are lawsuits pending in which the City is a party. In the opinion of the City Attorney, the City has adequate legal defenses and /or reserves to cover such liability if it does arise. 73