El Cerrito Challenges “True Up" Payment

On Thursday, July 12, 2012, the City of El Cerrito and the Successor Agency to the El Cerrito Redevelopment Agency filed suit in Sacramento Superior Court against the County Costa County Auditor-Controller, the California Department of Finance, and the California Board of Equalization. The suit challenges the unlawful $1,756,794.67 payment demanded by the County Auditor-Controller on July 9, 2012.

Download the Petition of Writ (lawsuit filed July 12, 2012)

Mayor Bill Jones and other Council members made statements regarding the lawsuit on July 17, 2012. (Download the meeting minutes.)

Brief Overview:

The El Cerrito Redevelopment Agency was dissolved on February 1, 2012, by implementation of ABx1 26, also known as the Dissolution Act, which had been enacted by the State of California in June 2011. On June 27, 2012 The California Legislature hurriedly adopted and Governor Brown signed AB 1484 to modify and “clean-up” provisions in Dissolution Act. These new provisions included an attempt by the State to retroactively reallocate tax increment distributed prior to February 1, 2012 and property tax revenues without a 2/3rds vote of the legislature, both violations of the California Constitution.

AB 1484 requires the County Auditor-Controller to calculate a “true up” payment by the Successor Agency of unneeded funds that can be redistributed to other public agencies serving El Cerrito. The Contra Costa County Auditor-Controller relied on a flawed methodology provided by the Department of Finance that failed to take into account the Successor Agency’s obligations to pay debt service payments on its bonds and to fund two affordable housing projects.

On July 9, 2012, the County Auditor-Controller demanded the Successor Agency pay an additional $1.75 million for the “True Up” payment. The Successor Agency has refused to make the payment because it would result in a default on its next bond debt service payments and interfere with the Successor Agency’s ability to fund its contractual obligations on two affordable housing projects, amongst other obligations.

Download the Demand from the County Auditor-Controller

The amount of the housing contractual obligations in dispute is approximately $781,152. However these two projects leverage millions of dollars of public and private investment in El Cerrito. These two projects alone represent over $50 million of economic investment in our community, including over $7 million already invested by El Cerrito’s former Redevelopment Agency, to create 120 units of affordable rental housing with easy access to transit for families, persons with special needs and seniors.

AB 1484 allows the State Department of Finance to impose penalties and for the State Board of Equalization to withhold the City’s sales and use tax revenue until the amount of the True Up payment and penalties are recouped by the State. The True Up payment demanded from the El Cerrito Successor Agency totals about half of the City’s General Fund reserves and a $1.7 million loss would have the potential of significantly hindering City services.

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Download the City's Letter to State Department of Finance of July 9, 2012
Download the City's Letter to County Auditor-Controller of July 12, 2012