City of Huntington Beach Successor Agency*

"As of the date of dissolution of redevelopment (February 1, 2012), all city operated redevelopment agencies, except Mission Viejo and Seal Beach, were exceeding the administrative costs limit of 5% of the tax increment distributed related to the ROPS as authorized by ABX1 26." The Huntington Beach City Council disagrees wholly with this Response: Finding. (Penal Code §933.05(a)(2).) The Finding encapsulates the deficiencies in the Grand Jury Report in that it mixes up two different laws that apply at two different times to two different entities. It implies wrongly-there was a 5% administrative cost cap applicable to redevelopment agencies prior to their dissolution. In fact, the 12% administrative figure accountable for the Huntington Beach Redevelopment Agency included both administrative and project administration costs. Prior to the enactment of AB1x 26, there was no administrative cost cap in the CRL that applied to redevelopment agency operations. The Finding, fails to recognize that State Law did not provide a cap of administrative cost caps imposed on redevelopment agencies before they were dissolved with the post-dissolution administrative cost cap that AB1x 26 imposed on Successor Agencies (not redevelopment agencies). The law, as applied to Successor Agencies, is that the maximum administrative costs allowance a Successor Agency will receive for Fiscal Year 2011-2012 (the fiscal year that ended June 30, 2012) is capped at 5% of the amount listed on the Recognized Obligation Payment Schedule as enforceable obligations, but not less than $250,000 (unless the Oversight Board reduces that minimum amount). The maximum amount a Successor Agency will receive for Fiscal Year 2012-2013 and succeeding fiscal years is 3% of the amount listed on the Recognized Obligation Payment Schedule as enforceable obligations, but not less than $250,000 (unless the Oversight Board reduces that minimum amount). By mixing the two laws, two time frames, and two entities to which the different laws applied, the Grand Jury created an erroneous finding.

"Of the agencies surveyed, only Costa Mesa and Santa Ana reported having a citizen involvement committee along the line of a Project Area Committee as authorized by Section 33385 of the Health and Safety Code." Response: The Huntington Beach City Council disagrees wholly with this Finding. (Penal Code §933.05(a)(2).) The implication in this Finding is that Huntington Beach was somehow deficient or violated the CRL because the Huntington Beach RDA failed to have a "citizen involvement committee along the line of a Project Area Committee." The City does have the Southeast Coastal Project Area, a formal committee, although it was not required by Law and this Grand Jury Report did not mention, it although twice information was provided to the Grand Jury. As noted earlier in this Response, Project Area Committees are triggered only under the criteria of Health and Safety Code Sections 33385 and The Honorable Thomas J. Borris September 20, 2012 33385.3 and none of those criteria existed at the time the Huntington Beach Project Areas' were formed.

"Historically, external oversight over redevelopment has been missing or ineffective in monitoring redevelopment agency compliance and performance. The newly formed oversight boards offer a potential to improve on that record by providing critical valuation of existing projects and management of the successor agency debt." The Huntington Beach City Council disagrees wholly with this Response: Finding. (Penal Code §933.05(a)(2).) The premise of this Finding is wrong insofar as the Grand Jury is blaming local redevelopment agencies and cities for a lack of oversight or ineffective monitoring. In Huntington Beach, the exact opposite is the case. The City Council performed extensive oversight and monitoring of redevelopment agency activities and the Huntington Beach RDA was exemplary in its transparency and in the public reporting of its finances and activities. The Huntington Beach RDA and City Council timely submitted all financial and other reports to the State Controller as required by the CRL. The activities of the Huntington Beach RDA were the subject of numerous public hearings and meetings before the Huntington Beach RDA Board and City Council. In Huntington Beach, at least, the record shows that the level of oversight and monitoring of performance of the Huntington Beach RDA was extensive. It was inaccurate for the Grand Jury to include Huntington Beach in its sweeping statement about lack of oversight when the oversight and monitoring of Huntington Beach RDA activities were exemplary. The City Council also must disagree with the Grand Jury that the Oversight Board "offers a potential to improve on that record .... " The record the Grand Jury refers to is a lack of oversight. As noted above, the premise of "lack of oversight" is wholly incorrect insofar as it applies to Huntington Beach. The Grand Jury also misstates the role of the Oversight Board, especially in light of AB 1484 adopted six days after the Grand Jury released the Report. The Legislature, in AB 1484, reduced the role and authority of the Oversight Board. RESPONSE TO RECOMMENDATIONS The Grand Jury Report sets forth six Recommendations but, as set forth in a table on The Honorable Thomas J. Borris September 20, 2012 The Recommendation has been implemented [Penal Code Response: §933.05(b)(1)] because Huntington Beach already complied with the totality of the Recommendation before the Grand Jury Report was released. As described in Huntington Beach's response to Finding #1, the Grand Jury misstates how the "administrative cost allowance" allocable to successor agencies actually works. Compliance with the 5% administrative cost cap for Fiscal Year 2011-2012, and the 3% administrative cost cap for Fiscal Years 2012-2013 and after, is automatic. A successor agency will not receive a distribution from the County Auditor-Controller for successor agency administrative expenses in excess of the allowable The debt is not "successor agency debt," but the debt of the dissolved redevelopment agency. The Successor Agency has no debt. Auditor-Controller errs because the maximum administrative cost allowance appears on the Recognized Obligation Payment Schedule, as approved by the State of California Department of Finance, before any distributions are made. Huntington Beach's successor agency administrative budget for Fiscal Year 2011-2012 and for 2012-2013 were adopted, and approved by the Oversight Board, in full compliance with the requirements of ABx1 26 and such will be the case in future fiscal years. So there is no mistaken impression left, Huntington Beach complied with these legal requirements before the release of the Grand Jury Report.