State Not Buying That SBIA Is Exempt From RDA Law

The California Department of Finance has rejected the contention of officials overseeing the development of  San Bernardino International Airport that they are due $432 million in property tax revenue over the next decade.
The San Bernardino International Airport Authority, a joint powers agency involving the county of San Bernardino and the cities of San Bernardino, Highland, Loma Linda and Colton devoted to the conversion of the former Norton Air Force Base into a civilian airport, and the Inland Valley Development Authority, which includes the county and the cities of San Bernardino, Loma Linda and Colton in an effort to promote the development of the property around the airport, both maintain they should be exempt from the provisions of state legislation passed last year shuttering the state’s county and municipal redevelopment agencies.
In 2011, Governor Jerry Brown induced the state legislature to pass a law, ABX1 26, that called for the elimination of redevelopment agencies and for money normally passed through to them by the state to be utilized for education and law enforcement funding. The law dissolvied redevelopment agencies and enjoined them from entering into contracts with enforceable obligations after June 28, 2011.
ABX1 26 and its companion law, ABX1 27, were challenged by a coalition of cities but upheld by the California Supreme Court, and the state’s redevelopment agencies were closed out effective February 1. Part of the legislation shelving the redevelopment agencies called for cities to create for themselves or have the county create for them a successor agency to  oversee and wind down that agency’s functions and dispose of its enforceable obligations by scheduling and executing the payments needed to discharge those obligations. The legislation also called for an oversight board to work in concert with each county’s auditor-controller and the California Department of Finance to oversee the successor agency through the dissolution process.
The boards for the San Bernardino International Airport Authority, known by its acronym SBIAA, and the Inland Valley Economic Development Authority,  which goes by IVDA, have argued that since they are joint powers authorities dedicated to the reuse of what was formerly federal military property, they are not municipal redevelopment agencies and, accordingly, not subject to ABX1 26 and ABX1 27.
SBIAA and IVDA maintain the property tax money from the area around the former air base should continue to be available to it and be used to defray the $949.5 million in debt and obligations those agencies have accumulated in the airport conversion effort so far. IVDA and SBIAA issued hundreds of millions of dollars in bonds to fund improvements to the facility and the area surrounding it. Those bonds were sold to investors under the assumption that the infrastructure to be purchased with the bond proceeds would lead to the creation of an aerodrome with operational revenue, and together with property tax revenue increases enough money would be generated to make timely payments to the bondholders.
SBIAA and IVDA officials maintain that by being allowed to proceed with the airport’s development, they will ensure that those revenue streams remain in tact and all obligations will be met. Those agencies told the state Department of Finance they believe they are legally eligible to remain in place and that they intended to bring in roughly $432 million in property taxes over the next ten years and had committed $22 million of that toward road improvements and the rest for improvements and operations at the airport.
In a terse response, the state has informed the authorities that since they had no specific contracts related to the $432 million, they have no legitimate claim to the projected property tax revenue, as the money was secured only by an agency board resolution.
At press time, IVDA and SBIAA officials, led by executive director A.J. Wilson were scrambling to appeal the Department of Finance’s ruling while simultaneously laying down the basis for a lawsuit against the state if it does not perpetuate the bond financing arrangements for airport improvements.
In addition to the bond financing, IVDA and SBIAA have been party to successful applications for Federal Aviation Administration grants and other federal funds. The expectation of the delivery of the  $432 million in property taxes to the agencies was intrinsic to arrangements made for the takeover of the base and failure to deliver on their financial  obligations could lead to the federal government reclaiming the airport or suing IVDA and SBIAA and their constituent agencies, according to Wilson. Both IVDA and SBIAA would we vulnerable as well to actions by the bondholders and the bond underwriters, he said. Moreover, the state action could compromise the bonds’ nontaxable status.
A provision of ABX1 26 is that any legal action contesting it has to be filed in Sacramento Superior Court. IVDA and SBIAA did just that in April, seeking a restraining order in an effort to prevent the state from cataloging IVDA and SBIAA as redevelopment agencies. A determination in that matter has yet to be rendered. IVDA and SBIAA are now perched to seek yet another restraining order blocking the state from confiscating any of the property tax money IVDA and SBIAA maintain are due them.

Leave a Reply