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Redevelopment Agencies Add Further Strain to District Budgets

Several school districts have already received, or may receive, letters from redevelopment agencies (“RDAs”) requesting the districts to subordinate pass-through payments they receive from the RDA until the RDA pays its debts. The districts have forty-five (45) days to respond to any such request from the date the request was received. If the districts fail to do so, some or all of the pass-through payments will be automatically subordinated and the districts run the risk of not receiving any pass-through payments from the RDA for the relevant year. While the districts must timely reject or accept the request within forty-five days of receiving it, rejection is only appropriate where the districts have substantial evidence that the RDA will not be able to pay both its debts and any pass-through payment the districts are statutorily entitled to.

In sum:

  1. Any district that has received a request from an RDA to subordinate its share of pass-through payments has forty-five (45) days from receipt of the request to accept or reject the request. (CA Health and Safety Code § 33607.5(e)(3)).
  2. A district may only reject the request if it has substantial evidence that the RDA will not be able to both pay its debts and statutorily required pass-through payments to the district. (CA Health and Safety Code § 33607.5(e)(3)).
  3. If a district fails to timely respond to the RDA subordination request, the pass-through payments will be automatically subordinated.(CA Health and Safety Code § 33607.5(e)(3)).

In light of the current financial constrains that districts are having to adjust to, any additional threat to the receipt of statutorily mandated monies must not be taken lightly. Therefore, if a district has received a pass-through subordination request from an RDA, it should be on notice that failure to submit a timely response could result in the forfeiture of such pass-through payments. Kingsley Bogard is more than happy to assist with any questions regarding these RDA requests.

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