April 19, 2013 -- The State informed Santa Monica Monday that it plans to block $24.6 million in tax revenues the City says its former Redevelopment Agency (RDA) has already committed, The Lookout has learned.

In a letter dated April 14, the DOF said that only $29 million of the $54.1 million the former RDA says it needs to make good on commitments between July and December would be released from County tax funds. The City’s inability to pay could lead to legal troubles.

About $14.5 million of the total was committed to pay back bonds taken out to fund affordable housing projects. The DOF claims that the agreements were between the City -- not the RDA -- and third parties. “Therefore, these items are not enforceable obligations and are not eligible for funding,” the DOF letter reads.

The move is part of an ingoing battle with the State Department of Finance (DOF) over more than $150 million the City says its former RDA had spent or committed before it was dissolved under State law. (“Santa Monica's Former Redevelopment Agency Could Owe Another $140 million, State Says”, April 18, 2013)

The money is being used to pay for affordable housing and capitol improvement projects across the 8.3-square-mile beachside city. Some of the money was also used to purchase properties that were bought by the RDA and later transferred to the City, including the Civic Center Village project, part of the property between 4th and 5th Streets south of Arizona Avenue Downtown and the future site of Tongva Park

Santa Monica has maintained that because the RDA entered into a cooperation agreement with the City to carry out the affordable housing projects, the obligations are enforceable.

In a letter sent to the DOF Thursday, the City Attorney’s office said it will contest the State's determination.

“The DOF has failed to cite any statutory authority for its determination that City third party agreements can never constitute enforceable obligations,” the letter reads.

The $14.5 million would go to pay back bonds the City took out to fund the FAME Senior Housing project, a 44-unit affordable housing complex in mid-city; High Place West, 47 deed-restricted apartments in the Pico Neighborhood; and 34 units of “special needs” housing on the 500 block of Colorado Avenue.

The DOF already denied the former RDA's request to free up County tax funds to pay the $14.5 million in October and denied the City's appeal of the decision in December 2012.

The DOF also wants to deny payment on $7.9 million worth of “bond reserves.”

“It is our understanding these reserves are already on deposit with the fiscal agent and no additional reserve funds are required,” the DOF letter reads.

The DOF's letter is a response to the former RDA's most-recent “recognized obligation payment schedule” (ROPS), a list which enumerates contracts and other financial commitments that the former RDA claims would prove to be legally problematic if not honored.

However, the DOF is required to review each ROPS before the money is released from the County Auditor-Assessor.

The ROPS are distinct from the two “due diligence reports” (DDRs) that the former RDA submitted to the State listing funds that the RDA had already spent on various projects throughout the city.

The most recent DOF letter comes less than two weeks after the State weighed-in on the former RDA's second DDR, claiming the agency owes $49 million -- spent on capital improvement projects like upgrading and replacing the Downtown public parking structures -- to the County.

That's in addition to the $19 million the DOF says the former RDA owes from money it spent on housing projects. That is pending a lawsuit against the DOF by the City that claims the application of the AB1x 26 has been “capricious” and “unconstitutional.”

The State also maintains that it has the right to review some $89.8 million worth of property that the former RDA purchased and later transferred to the City, even though the City maintains that much of that land is already tied up and can't be touched by the DOF.