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Judge Rules Santa Clara Must Hand Over Former RDA Property to “Successor Agency”

If the Santa Clara RDA’s name was on the deed, the property belonged the defunct RDA.

That was the conclusion reached by Sacramento Superior Court Judge Allen Sumner last October, when he ruled that the City didn’t show convincing evidence that real estate to which the Santa Clara RDA held title was, as the City claimed, actually owned by the City, and wasn’t subject to the 2011 law abolishing California’s redevelopment agencies. The property – the land housing the Convention Center-Techmart-Hyatt complex, Great America theme park, and the Hilton hotel – now must be handed over to the RDA Successor Agency.

The 2011 law shuttering California’s redevelopment program transferred all RDA assets, income and debts to Successor Agencies that were to unwind RDA operations, supervised by Oversight Boards appointed by local taxing entities – such as county governments and school districts.

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The law is retroactive, letting Boards claw back assets transferred from RDAs after the shutdown was proposed (January, 2011) and before it became law (June, 2011). The State Controller has the final word on decisions reached by the Boards, as well as disputes over assets.

RDAs were joint powers agencies (JPAs) – government entities created by the agreement of member agencies, but legally independent from them. The benefit of a JPA, even when there’s only one member, is that member agencies aren’t liable for JPA actions or debts. But legally, property owned by JPAs isn’t owned by member agencies, either.

There’s no dispute that the city, not the RDA, bought these properties decades ago, and no RDA tax increment funds were used. (Bonds issued to buy Great America in 1982 were repaid with lease revenue.) The city transferred ownership to the RDA in return for lease revenue payments ( in lieu of property tax) into Santa Clara’s general fund. As it became clear the legislature intended to abolish the RDA program, ownership was transferred back to the City in April 2011.

The State Controller disallowed the transfer in a 2013 RDA asset transfer review, and in February 2013 County Dept. of Finance filed suit demanding the City return the property titles to the Successor Agency.

The City’s reply was that the RDA only had a limited custodial interest in the properties, acting only as a property manager and trustee. In transferring the titles to the City, the RDA was simply restoring what Santa Clara already owned.

This is based on a redevelopment law provision allowing community legislative bodies to give property to an RDA to develop, lease or sell, in return for the revenue from those transactions; with payments determined solely by the legislative body. Such property transfers were commonly utilized by cities used to reduce liability and increase leasing flexibility, according to Santa Clara officials.

This section expresses clear legislative intent to allow cities to use their redevelopment agencies as conduits for the transfer of property while preserving the benefits of the transfer to the city, the City wrote to the Controller in April 2013, The Cooperation agreements [between] the City and the RDA state explicitly that the lease revenues .were to be treated as general fund revenues. Further, the letter noted, this provision wasn’t repealed or revised by the dissolution law.

In the judge’s eyes, however the City none of this proved the RDA didn’t own the properties. None of the Cooperation Agreements presented in the City’s case suggests the City retained any interest in the property it conveyed, he wrote.

Allegations that conveyances are subject to a trust and that legal title does not represent beneficial ownership have been historically disfavored because society and the courts have a reluctance to tamper with duly executed documents of legal title. He concluded, The City must prove these allegations by clear and convincing evidence. Its evidence falls far short.

The order has yet to be signed – nothing will change hands until it is – and a new judge has taken over the case. However, there’s little expectation by City officials that the order won’t be signed. The state has won most of the lawsuits filed by cities over former RDA assets and obligations.

When the judge’s order is finalized, the City is prepared to comply, says Santa Clara City Attorney Ren Nosky. The City has filed a cross complaint that has yet to be heard, and the legal process is not at a stage where appeals can be filed, explains Nosky.

An immediate question facing the Oversight Board is the operation of the Santa Clara Convention Center. The law intended that Successor Agencies dispose of property by selling it or declaring it a public facility and returning it to the municipality. There’s no provision for Successor Agencies to be in the property management business.

City officials say they’re focused on reaching a working agreement with the Convention Centers conplex’s operations.

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