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<br /> <br /> <br /> Response to DOF May 3, 2012 Letter <br /> May 18, 2012 <br /> Page 5 <br /> "Maintain reserves in the amount required by indentures, trust indentures, or similar documents <br /> governing the issuance of outstanding redevelopment agency bonds" [HSC Section 34177(b)1; and <br /> "to perform obligations required pursuant to any enforceable obligation" [HSC Section 34177(c)]. <br /> • Page 1, item 9; page 7, item 85, legal settlements totaling $500 million requiring Low/Mod <br /> set-aside from tax increment within the project areas- The DOF better states that settlements <br /> awarding a percentage of tax increment are not considered EOs, and pursuant to ABX1 26 tax <br /> increment is no longer payable to the redevelopment agencies and therefore there is not an <br /> obligation. <br /> i <br /> Response: We believe the DOF is confusing these Settlement Agreements with the more typical <br /> settlement agreements with taxing entities which are, in essence, contractual pass through <br /> agreements, and therefore not considered EOs under ABX1 26. The Settlement Agreements at <br /> issue here were entered into with third parties, not other taxing agencies, and are, therefore, no <br /> different than a contract with a developer pledging tax increment over time; thus, the Settlement <br /> Agreements are EOs pursuant to ABX1 26, specifically HSC Sections 34171(d)(1)(D) and <br /> 34171 (d)(1)(E). I ISC Section 34171 (d)(1)(D) provides that "Judgments or settlements entered by <br /> a competent court of law or binding arbitration decisions against the former redevelopment <br /> agency" constitute enforceable obligations. 1ISC Section 34171(d)(1)(E) can also be construed to <br /> mean that the Settlement Agreements are enforceable obligations, as these agreements constitute <br /> "legally binding and enforceable agreement[s] or contract[s] that [are not otherwise void as <br /> violating the debt limit or public policy." <br /> The Successor Agency is required to comply with the enforceable obligation to set-aside/utilize <br /> former tax increment as dictated by the Settlement Agreements. Specifically, item #9 South Main <br /> Corridor Settlement Agreement requires a portion of the tax increment (20%) to be utilized for <br /> public improvements, including parking and financial incentives in a particular section of the <br /> project area. Additionally, this settlement agreement, along with settlement agreements for four of <br /> the other project areas (item #85), require specific percentages of tax increment be set aside <br /> exclusively for low and moderate income housing and related activities. <br /> With respect to item 9 9, the Judgment on Stipulation for Entry of.ludgment and Resolution No. <br /> 84-2 (collectively "Settlement") adopted by the Redevelopment Agency ("RDA") was entered into <br /> by the RDA in response to and in order to settle a lawsuit, Gerald Peebler, et. a/. vs. C ily ofSanta <br /> Ana, filed in 1982. It is important to note that the Legal Clinic of the University of California, <br /> Irvine School of Law ("UC I-), recently filed a lawsuit against the City of Santa Ana, on behalf of <br /> the beneficiaries of this Settlement (including Oerald Peebler) to enforce the terms of the <br /> Settlement as an enforceable obligation. The filing was rejected by the court due to procedural <br /> issues. In ongoing discussions between the City and UCI, UCI has stated that they plan to re-file <br /> the lawsuit upon any adverse response by the State Department of Finance or City in failing to <br /> treat the terms of the Settlement as an enforceable obligation. <br /> 3-38 <br />