RDA Grab Worse Than Previously Thought (Updated)
The Special City Council meeting on this subject may be one of the shortest such meetings on record. It began promptly at 2:00 with all council members present except Mayor Pro Tem Jim Righeimer, who crept in about 3 minutes late. After short, brief comments by three members of the public, the council adjourned to Closed Session. At that time the journalists in the audience outnumbered residents.
Ten minutes later the council returned to the Council Chambers and former City Attorney, now special counsel, Kimberly Hall Barlow, led the discussion of this issue, supported by Finance and Information Technology Director Bobby Young.
In a nutshell, Barlow and Young had spent many hours since the demand for payment was received at end of the business day Monday, July 9th reviewing the county calculations. They determined that the Orange County Auditor-Controller had miscalculated the debt in question and that the City didn't owe the County anything at this time.
PAY UNDER PROTEST
However, because the penalties are so severe - see letter below - they recommended that the council authorize payment as demanded UNDER PROTEST and forward an explanatory letter to the Auditor-Controller along with their worksheet showing the discrepancy.
During her comments to the council Barlow confirmed my suspicions that, if we failed to make the payment today, the penalties would be beyond severe. Yes, they could shut off future Sales Tax revenues to the City. And, yes, they could penalize BOTH the City AND the Successor Agency (the City in another dress) equally as described on pages 2 and 3 of the letter below.
So, the council voted 5-0 to cut the check for $1,392,470 out of the Successor Agency funds - leaving around $100,000 in that account - and authorized Barlow to proceed with negotiations with the Auditor-Controller's office to resolve the disputed amounts. The check will be hand-delivered to the Auditor-Controller this afternoon.
LITIGATION STILL A POSSIBILITY
If you read the letter below you understand why this was the wisest choice the council could make. The penalties that could be imposed are so onerous - which I'm sure was the intent by The State - that non-compliance was never an issue. However, the door was left open for the possibility of - you guessed it - litigation against the County if we are not able to resolve the dispute.
In my previous post I outlined what I thought were the facts of the reason for the Emergency City Council Meeting scheduled for today at 2:00 in Council Chambers. Part of that effort was to contact the County Auditor-Controller's office for clarification. I presented to you what I was told. Unfortunately, that information was not complete nor accurate. The reason for that was that he did not yet have access to the letter I'm presenting to you, below. Click on each page separately to enlarge for easier viewing.
You will note that the letter is dated July 11, 2012 but requires the County Auditor-Controller to perform actions on July 9th! That's a clue as to how messed up this whole process has become.
Here's the facts as I now understand them. Read the letter and interpret it as you wish.
1) The City is being required to pay the Auditor-Controller TODAY an amount just under $1.4 million. See the calculation sheet on my previous post for the actual numbers.
2) If we fail to submit those dollars TODAY the Auditor-Controller tells the State on Friday the 13th and they may withhold our Sales Tax revenue. It is unclear whether they will withhold ALL of our revenue each month until it's paid or just the amount of the outstanding debt. If they withhold ALL of it that might be in the range of $1.7 - $2 million each month!
3) By not paying TODAY the City is subject to a 10% penalty PLUS 1.5% each month until it's paid.
4) It appears, if you read the bullet points that begin at the bottom of page 2 and go on to page 3, that BOTH the City AND the Successor Agency (the city in a different dress) could EACH be subject to the penalties! Yikes!
4) The Successor Agency DOES have enough cash on hand to make this payment TODAY.
5) This letter seems clear enough until you try to drill down, then you realize that it is full of ambiguities. One thing is clear... if we don't pay TODAY it's going to cost us a lot of money downstream.
I'LL ATTEND AND REPORT BACK
I'm attending the meeting and will report back afterward.
Labels: Redevelopment Agency