Protecting County Funds from the State

The LA Times website must have undergone some changes as this brief article did not come up in my search this morning, but is in their edition today.

Let me use it to provide some background.  As you know, the State of California has spent itself into a deep hole.  In fact, their hole is much deeper than the general public realizes.  That’s why I’ve recommended some strong action for the state, in the form of pursuing some form of receivership.

In Sacramento’s desperate efforts to find cash, the Legislature voted to take it from redevelopment agencies.  This is analogous to a parent emptying out their child’s piggy bank to pay a bill.  It’s one thing for someone in authority to negotiate a temporary borrowing.  It’s another just to bully your way to the funds and make a permanent taking.  This is inappropriate behavior.  It creates a dysfunctional relationship between an overspending parent and a saving child.  And, it’s unconstitutional.

What is a county (child) to do?  Regretfully, take it to court.

Our County Counsel sought direction from our Board on whether to join Los Angeles County and other counties in mounting a constitutional challenge to AB 26 4X, which requires redevelopment agencies to transfer $1.7 billion to the State in order to supply those funds to school districts and county education departments. Compliant redevelopment agencies may then take an extra year of tax increment which would otherwise go to counties and school districts and other agencies. Los Angeles County Counsel believes that the bill violates Article XVI, Section 16 and Article XIII, Section 25.5 of the California Constitution, which together can be read to provide that redevelopment tax increment funds may only be used to finance or pay for the redevelopment projects.

The Sacramento County Superior Court determined in 2008 that a similar statute was unconstitutional. This bill seeks to remedy the constitutional infirmity by directing County auditors to create a new fund—a “Supplemental Educational Revenue Augmentation Fund (SERAF)”—into which to put the redevelopment funds, and then to use the funds to assist local school districts and County Education Departments within the boundaries of the redevelopment district, under the theory that adequate schools are an essential element of a successful redevelopment.

Los Angeles County will front the cost of an outside counsel and will lend the services of an experienced Senior Deputy County Counsel who has had recent success in defeating the challenge to the property tax fees. Still, Orange County would then have to share in an as-yet undetermined amount based on its relative share of the total proposed funds shift.  So my inference that it will not cost the County anything was incorrect.  Orange County has a history of leading on court cases and not being reimbursed by neighboring beneficiaries.  In this circumstance, LA County is not returning the favor and  I apologize for the slip.

The CEO Budget office has determined that the estimated shift in Orange County redevelopment funds is $10.6 million over the next two years, but we do not know what percentage of the overall shift that would represent—something that would depend on how many—and which—counties join the lawsuit.

Los Angeles County sought a decision by September 30, because they intend to file the suit in early October. If the County does not join the suit, under Section 10 of the bill, it may be excluded from participating in relief if the courts uphold the lawsuit.

County joins fight to protect funds

LA Times

Orange County will join other California counties and cities in suing the state to block it from tapping redevelopment reserves.

County supervisors voted in closed session to join the lawsuit, which argues that taking $2 billion in local redevelopment funds to balance the state budget is unconstitutional.

According to recent estimates, Orange County’s share would be about $10.6 million over this and next fiscal year.

“We were advised that if we didn’t participate and L.A. County prevailed, that the benefit of that win in court would not apply unless you were an ally in the case,” said Supervisor John Moorlach.

He said Los Angeles County will be the main party in the case and absorb the costs.



October 1


Elise Gee of the Daily Pilot did the obituary for a dear friend, “Senior center’s ‘guiding light’ Sandy Pinkerton dies of cancer—Longtime volunteer praised by colleagues and Costa Mesa city officials.” 

                Most recently, Pinkerton persuaded Orange County Tax Collector and Treasurer John Moorlach to take on the role of active chairman of the senior center’s fund-raising campaign.

                Moorlach, who had known Pinkerton for years and called her a “vibrant” force in the community, said he always enjoyed working with her.

                “She had refined the art of arm twisting to an art form,” Moorlach said fondly.