City of Cerritos reaches settlement State of California regarding former Redevelopment Agency
Updated March 31, 2017
The City of Cerritos recently reached a settlement agreement with the State of California Department of Finance (DOF) concerning outstanding obligations relating to the former Cerritos Redevelopment Agency (CRA). The settlements will provide the City with a significant source of long-term revenue that will serve to support many City operations, programs and services, in addition to providing funds to facilitate the provision of State-mandated housing developments. The settlements also allow the City to secure a number of properties that are vital to the long-term growth and development of Cerritos.
In 2011, the State dissolved the more than 400 redevelopment agencies that were operating throughout California, including the CRA. The State's action was an effort to balance its budget through the utilization of former redevelopment tax increment revenue and the proceeds that were to be derived from the sale of redevelopment agency assets.
Prior to the State's decision to dissolve redevelopment, the CRA had utilized the tools available to it through California law to develop many of the facilities and senior housing communities in Cerritos, including the Cerritos Sheriff's Station, Fire Station #30, the Cerritos Senior Center and the Cerritos Center for the Performing Arts.
With the dissolution of redevelopment, the State's action meant that the City of Cerritos was at significant risk of losing $92 million in outstanding loan balances owed to the City by the CRA. The DOF also determined that the City would become responsible for the annual $860,000 bond payment obligations of the Cerritos Electric Utility (CEU). In response, the City filed a suit against the DOF seeking reimbursement for these obligations.
City staff continued to work with DOF officials in an effort to negotiate a settlement to the dispute. As a result of these negotiations, the DOF agreed to repayment of a total of $31 million in loan principal and up to $26 million in interest to be repaid over the course of up to 15 years. In total the City anticipates receiving approximately $57 million upon completion of the repayment schedule.
The City will receive an initial settlement payment of $2.2 million in the upcoming fiscal year. These funds will be utilized to make the annual CEU bond payments and to fulfill State housing requirements. After making those payments, approximately $900,000 will be available for General Fund use.
In addition to the loan settlement agreement, the City was able to reach a resolution regarding the status of many former properties owned by the CRA. As part of the dissolution process, the State required all redevelopment agencies to liquidate their property assets and forward the sale proceeds to the County for distribution to other taxing entities. This meant that the City was at risk of losing ownership of many properties, including the Cerritos Towne Center, the Lincoln Station Shopping Center and multiple automobile dealership properties, without compensation.
The originally agreed upon terms for the purchase of these properties would have required the City to pay approximately $42 million via annual payments over the course of 30 years. Through the negotiation process, the City was able to secure the properties for a lump sum purchase price of $11 million, and now retains full ownership of these properties.
"We are pleased to have secured a consistent stream of funds that will provide a substantial benefit to the overall City budget over the next 15 years," stated Cerritos Mayor George Ray. "Additionally, the property acquisition agreement allows the City to retain properties that will be vital to the ongoing success and development of the City and that will provide significant long-term value through the ground lease revenue they help generate.
"My City Council colleagues and I are very happy with the result of this settlement and are looking forward to the opportunities and benefits this funding will provide our City moving into the future," concluded Ray.
