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REPORT <br />To the Honorable Chair and Agency Board <br />From the Executive Director <br /> <br />November 16, 2015 <br /> <br />SUBJECT <br />New State legislation regarding redevelopment agency dissolution requiring remittance <br />of funds identified by the State Department of Finance for distribution to the taxing <br />entities and the implications for Legal Aid Society Housing Funds currently under <br />litigation <br /> <br />RECOMMENDATION <br />Adopt a resolution approving the remittance of $10,272,916 (funds set aside in the <br />Legal Aid Society Housing Fund) to the County Auditor-Controller for distribution to the <br />taxing entities as specified in the December 19, 2012 State Department of Finance Due <br />Diligence Review (DDR) determination letter, as is required by new State legislation <br />(SB107) to enable the Successor Agency to proceed with a Finding of Completion while <br />the City's pending litigation against the Department of Finance regarding these funds is <br />pursued. <br /> <br />BACKGROUND <br />In June 2011, the State enacted legislation that eliminated redevelopment agencies as <br />of October 1, 2011. Later that year, certain aspects of the legislation were found to be <br />unconstitutional and the date of dissolution was extended to February 1, 2012. Prior to <br />the dissolution of the City’s redevelopment agency (RDA), under an agreement with <br />San Mateo County to receive a cumulative $25 million of the County’s share of tax <br />increment and an agreement with the Legal Aid Society to deposit the first $11.9 million <br />of the $25 million into the Low and Moderate Income Housing Asset Fund, the RDA had <br />deposited $10,272,916 into this Fund as of June 30, 2011. Pursuant to the agreement <br />with the Legal Aid Society to restrict these funds to housing, after dissolution of the <br />RDA, these funds were deposited into a new fund to be used for housing purposes. <br />Although the Due Diligence Review (DDR) performed by an independent auditor <br />identified these funds as encumbered, the State Department of Finance (DOF) issued a <br />determination letter on December 19, 2012 concluding that the agreement with Legal <br />Aid Society was not an enforceable obligation and the $10.3 million must be distributed <br />to the taxing entities. <br /> <br />The City filed a lawsuit against the State of California on this matter and in January <br />2014, the Superior Court Judge ruled in favor of the State. In April 2014, the City, joined <br />by the Legal Aid Society, filed an appeal. The case is fully briefed and is awaiting a <br />court date. <br />6.3.B. - Page 1