- Associated Press - Tuesday, January 27, 2015

GLENDALE, Calif. (AP) - The city of Glendale has sued the state of California over a potential loss of more than $30 million in interest from loans made decades ago to its now-defunct redevelopment agency.

The case will hinge upon whether to use interest rates agreed upon when the loans were first signed in the 1970s or when the Department of Finance reinstated them a few years ago, the Los Angeles Times reported (https://lat.ms/1z6gsA4 ).

When the redevelopment agency was founded in the early 1970s, it received dozens of loans from City Hall for improvement and revitalization projects that were paid back to the general fund through property taxes.

State officials ended local redevelopment agencies in 2011, with tens of millions of dollars still owed to cities. To ease the impact, the Legislature passed a measure allowing Sacramento to reinstate some loans, but only if the money was intended for legitimate redevelopment purposes.

The state’s Department of Finance Oversight Board determined that amount in Glendale involved 13 projects worth $13.6 million, not accounting for any interest.

The Times said where local government and state government differ is the interest rate, also known as the Local Agency Investment Fund rate.

Those rates were as high as about 12 percent in 1981 but just 0.22 percent in the second quarter of 2014. Based on the rates when City Hall’s loans were distributed, the accumulated interest is $31.9 million, according to the complaint filed by city attorneys.

After several meetings between local and state officials, the Department of Finance said Glendale was entitled to a 0.28 percent rate - or only $974,200 in cash generated by interest, the complaint read.

City Manager Scott Ochoa called the process of pursuing the reinstatement of the loans a “bait and switch.”

“It’s as though the city is at a point where it is reaping the benefits of the good work done by the redevelopment agency only to have those flickers of opportunity snuffed out by the state,” he told the newspaper.

Ochoa added that the $31.9 million would have gone back to the general fund to benefit parks and community centers, for example.

State attorneys have filed a response to the city’s claims, but did not return phone calls seeking comment.

The city filed the case last summer. A Sacramento County Superior Court judge is scheduled to hold a hearing Feb. 13.


Information from: Los Angeles Times, https://www.latimes.com/

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