Glendale is taking the state government to court over a potential loss of more than $30 million in interest from loans it made decades ago to its now-defunct Redevelopment Agency, it was reported Tuesday.
When the agency was founded in the early 1970s, it received dozens of loans from City Hall for improvement and revitalization projects that were paid back to the general fund through property taxes.
When officials in Sacramento ended local redevelopment agencies in 2011, tens of millions of dollars were still owed to cities. To ease the impact, the state Legislature passed AB 1484 to allow Sacramento to reinstate some loans, but only if the money was intended for legitimate redevelopment purposes, according to the Los Angeles Tines.
The state’s Department of Finance Oversight Board determined that amount in Glendale involved 13 projects worth $13.6 million, not accounting for any interest.
But where local government and state government differ is the interest rate, also known as the Local Agency Investment Fund rate, according to The Times. Those rates were as high as 12.04 percent in 1981 but just 0.22 percent in the second quarter of 2014.
Based on the rates when City Hall’s loans were distributed, the accumulated interest is $31.9 million, according to the complaint filed by city attorneys, The Times reported.
After several meetings between local and state officials, the Department of Finance said Glendale was entitled to a 0.28 percent rate — or only $974,200 in cash generated by interest, the complaint read.
City Manager Scott Ochoa called the process of pursuing the reinstatement of the loans a “bait and switch,” The Times reported.
—City News Service
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