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State Demands $17.1 Million Payment from City of Cerritos

By Cerritos Mayor Jim Edwards

The California Department of Finance (Finance) has informed the City of Cerritos that Finance has completed its review of the Successor Agency to the Cerritos Redevelopment Agency Low and Moderate Income Housing Fund Due Diligence Review. Finance disagreed with the conclusions and Finance staff has demanded that the City make a cash payment of $17.1 million to the State of California.

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The City strongly disagrees with the State’s findings and is requesting to Meet and Confer with Finance staff to ask the State to reconsider its decision. An independent auditor prepared the Successor Agency to the Cerritos Redevelopment Agency Low and Moderate Income Housing Fund Due Diligence Review. The purpose of the review was to determine the amount of cash and cash equivalents available from the Low and Moderate Income Housing Fund for distribution to the affected taxing agencies (including the City, County of Los Angeles and State).

The review concluded that no cash or cash equivalents were available for distribution. The review was approved by the Oversight Board of the Successor Agency to the Cerritos Redevelopment Agency and submitted to Finance on October 15, 2012. The City believes all of its actions were legal and appropriate, however the State has informed the City, “HSC (Health and Safety Code) section 34177 (d) requires all unencumbered LMIHF [Low and Moderate Income Housing Fund] funds be remitted to the county auditor controller for distribution to the taxing entities.”

At the Meet and Confer with Finance staff, the City will present information which supports its position that the $17.1 million is not required to be transferred from the City to the other taxing entities. It is the City’s position that no payment is required at this time. The loss of $17.1 million would have a direct impact on the financial resources of the City, which will require City officials to closely evaluate future operating expenses. The loss would follow earlier raids by the State of the Agency’s funds.

In 2012, the State required the Successor Agency to the Cerritos Redevelopment Agency to pay $5,979,282 to the Los Angeles County Auditor. In addition, the State failed to make an estimated $8 million in property tax distribution payments to the Successor Agency to the Cerritos Redevelopment Agency from February through June 2012. The State also required the Cerritos Redevelopment Agency to make payments of $2,431,884 in 2011 and $11,812,007 in 2010 to the Los Angeles County Auditor as part of the “Supplemental Educational Revenue Augmentation Fund” (SERAF) to help fill the State’s budget deficit. On February 1, 2012, the dissolution of all redevelopment agencies in California took effect as a result of the State’s actions. In the Fiscal Year 2011-2012, the Cerritos Redevelopment Agency had been projected to receive $31,527,790 in property tax increment, however the State took a large portion of those funds as a result of the dissolution of redevelopment agencies.

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