Glendora Loses $6.9 Million in Money Loaned to RDA

When the Department of Finance notified cities that hundreds of millions of dollars in loans cities made to their redevelopment agencies would not be honored, Glendora lost nearly $6.9 million that would have been paid back to its general fund.

The loss was critical to Glendora, which is currently undergoing $1 million in reductions affecting all of its city departments and has laid off 25 percent of its workforce.

For other cities, the impact was more drastic – El Monte loaned $76 million to its RDA and Huntington Beach may not ever see the nearly $72 million it loaned to its RDA.

According to a statement by the Department of Finance, only loans made within the first two years of the creation of the redevelopment agency would be honored.

“It’s unbelievable how the state can just snap its fingers and taxpayer money doesn’t mean anything,” said Glendora City Manager Chris Jeffers.

Jeffers said it was a common practice for cities to loan money to their RDA’s to fund redevelopment projects, but critics argued that the practice allowed cities to move money between the agencies untracked.

However, Governor Brown's budget proposal, which included the dismantling of California's 400 RDA's to cover billions of dollars in state debt, was approved. Jeffers said the sudden demise of RDA’s with the “11th hour” passage of AB1X26 left cities little time to prepare for the financial fallout, including the millions of dollars in loans still pending.

Cities have challenged the legality of the dissolution of RDA’s, but suffered a setback when a Superior Court judge recently ruled that nine California cities were not entitled to redevelopment funds the cities claimed they were owed, according to the San Gabriel Valley Tribune.

Still, Jeffers said the ambiguous language in AB1X26 could offer some light for cities. When RDA’s were dissolved many cities moved to become the successor entity for their RDA’s.

Cities were required to create an oversight board and a list of debt owed to other parties.

Jeffers pointed to a section in the law, which would allow cities to authorize the oversight board to approve loan agreements for the to enter into, therefore honoring previous loans.

Jeffers said many cities are looking into this option, and the League of California Cities has approved this as a legitimate option.

“Glendora is certainly not alone in this, as we are one of the cities with the least amount on the line,” said Jeffers. “But there are many cities where this loss of funds will severely impact.”