County Appeals Ruling Letting State Seize Loan To RDA For Cedar Glen Fire Repairs

(January 1)  The county of San Bernardino has struck back at the state of California and its Department of Finance over a ruling the latter made which called for the distribution of the $9 million dollar remainder of a county loan to the county’s redevelopment agency to other governmental agencies in 2012.
That move came after the state shuttered redevelopment agencies throughout the state. The county had not gone along with the diversion of all of the county redevelopment agency’s money because $10 million had been loaned to the county redevelopment agency by the county to redress devastation in the Cedar Glen area of the San Bernardino Mountains in the wake of so called Old Fire in 2003, which destroyed 345 homes.
Following the fire and its devastation, the county created a disaster project area and a disaster recovery plan. The county then loaned the county redevelopment agency $10 million from the county’s general fund to pay for infrastructure improvements.
As the county and the redevelopment agency were working toward the implementation of the plan, the state dissolved  redevelopment agencies statewide and the California Department of Finance blocked the actual initiation of the disaster recovery plan.
In accordance with the 2010 legislation that closed down the state’s redevelopment agencies, the California Department of Finance had jurisdiction in determining how money that remained in the pre-existing redevelopment agency accounts was and is to be disbursed. The California Department of Finance made a determination that all the money in the county redevelopment agency’s accounts, including the $9 million remaining from the county loan, would be allocated to local taxing entities.
The terms of the legislation shutting the redevelopment agencies required that any legal challenge to the California Department of Finance’s determination had to be filed in Sacramento Superior Court.  The county indeed challenged the Department of Finance determination with regard to the Cedar Glen loan, filing suit on February 27, 2013. On May 24, 2013, the judge hearing the case, Sacramento County Superior Court Eugene L. Balonon, held a hearing on the matter. On July 24, Balonon entered a judgment upholding the California Department of Finance.
On December 2, 2013 the successor agency to the county redevelopment agency under protest remitted the unspent county loans.
On December 20, 2013, attorneys for San Bernardino County and the successor agency to the county redevelopment agency – County Counsel Jean-Rene Basle, assistant county counsel Michelle Blakemore, and attorneys Amy Hoyt, J. Leah Castella, Susan Bloch and Nicholas Muscolino with the Oakland office of the Burke, Williams and Sorensen law firm – filed an appeal of Balonon’s ruling with the Third District Court of Appeal. Michael Cohen, in his official capacity as director of the State of California Department of Finance, is named as the respondent.
According to the legal brief filed on December 20, “The Department of Finance’s determination that the $9 million county loan must be allocated to local taxing entities is unconstitutional. The Department of Finance’s determination violates Article XIII Section 25.5(a) of the California Constitution because it changes local agencies’ pro rata shares of property tax revenue. The Department of Finance’s determination violates Article XIII Section 24 because it reallocates the county’s general fund money to other local agencies.”
The brief further states, “This case involves the county’s efforts to construct infrastructure that would provide basic services – water, roadways, and fire protection – to the residents of Cedar Glen, a community devastated by a catastrophic wildfire in 2003. The Department of Finance has thwarted those efforts through an arbitrary and capricious determination that a $10 million loan that the county made in 2005 from its general fund to the county redevelopment agency to finance the infrastructure improvements and that remains largely unspent cannot be used for its intended purposes and instead must be distributed to local taxing entities. This determination delivers a one two punch to the county: the county urgently needs the funds to complete the improvements to protect the community from the next wildfire. It will only recover those funds, if at all, over a protracted period. Meanwhile, the Department of Finance has given a windfall to other local taxing entities that have no entitlement to money from the county’s general fund. The loans are enforceable obligations that must be spent in accordance with the loan agreement and repaid to the county. The reallocation is plainly inequitable because it gives the other taxing entities a windfall of county general funds to which they have no claim whatsoever. The loan is needed to undertake the improvements that are required before most property owners can rebuild the homes destroyed in the Old Fire since most roads are now unusable and without a dependable water system owners do not want to take a chance at building  without fire service protection.”
The brief maintains “It is unjust for the Department of Finance and taxing entities to receive the unspent $9 million from the county loan. The county accumulated the vast majority of the $10 million loan from its own property tax revenue and local sales and use taxes  In its zeal to implement the [redevelopment agency] dissolution law, the Department of Finance has gone too far. It has ordered the transfer of county general fund money that the county loaned to the county redevelopment agency years earlier to finance sorely needed fire, water and road improvements for an area devastated by wild fires.”
As of press time, Cohen had not been in his office for two consecutive days and was not available for comment.

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