19D - EXHIBIT FY 10-11 RDA Annual Report

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COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA Notes to the Basic Financial Statements (Continued) Year Ended June 30, 2011 been met. The balance of this obligation, as of June 30, 2011, is $430,254,279, which includes accrued interest of $108,403,782. During the year ended June 30, 2011, the Agency paid to the City $2,537,690 for interest. (12) COMMITMENTS AND CONTINGENCIES (a) Legal Matters The Agency is a party as defendant to various legal actions arising in the normal course of business. In the opinion of management of the Agency, ultimate resolution of such matters will not have a material adverse effect on the financial statements of the Agency. (b) Recent Changes in Legislation Affecting California Redevelopment Agencies On June 29, 2011, the Governor of the State of California signed Assembly Bills X1 26 (AB X1 26) and 27 (AB X1 27) as part of the State's budget package. AB X1 26 requires each California redevelopment agency to suspend nearly all activities except to implement existing contracts, meet already - incurred obligations, preserve its assets and prepare for the impending dissolution of the agency. AB X1 27 provides a means for redevelopment agencies to continue to exist and operate by means of a Voluntary Alternative Redevelopment Program. Under this program, each city would adopt an ordinance agreeing to make certain payments to the County Auditor Controller in fiscal year 2011- 12 and annual payments each fiscal year thereafter. AB X1 27 indicates that the city "may use any available funds not otherwise obligated for other uses" to make this payment. The City intends to use available monies of its redevelopment agency for this purpose, and the City and Agency will be executing a reimbursement agreement to accomplish that obj ective. The amounts to be paid after fiscal year 2012 -13 have yet to be determined by the state legislature. AB X1 26 directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by AB X1 26. In the event that AB X1 26 is upheld, the interagency receivable recognized by funds of the City that had previously loaned or advanced funds to the redevelopment agency may become uncollectible resulting in a loss recognized by such funds. The City might additionally be impacted if reimbursements previously paid by the redevelopment agency to the City for shared administrative services are reduced or eliminated. The League of California Cities and the California Redevelopment Association (CRA) filed a lawsuit on July 18, 2011, on behalf of cities, counties and redevelopment agencies petitioning the California Supreme Court to overturn AB X1 26 and 27 on the grounds that these bills violate the California Constitution. On August 11, 2011, the California Supreme Court issued a stay of all of AB X 127 and most of AB X1 26. The California Supreme Court stated in its order that "the briefing schedule is designed to facilitate oral argument as early as possible in 2011, and a decision before January 15, 2012." A second order issued by the California Supreme Court on August 17, 2011 indicated that certain provisions of AB X1 26 and 27 were still in effect and not affected by its previous stay, including requirements to file an appeal of the determination of the community remittance payment by 40