City sues for frozen $3.8 million

Posted on August 14, 2013 by Sonoma Valley Sun

The City of Sonoma is suing to free $3.8 million in bond money, earmarked for street repairs, that has been in limbo since the state dissolved redevelopment agencies in 2012.

At issue is the unspent portion of $15.75 million in bonds the city’s redevelopment agency (the CDA) issued in March of 2011. The bonds, secured by future property tax increment revenue, were expressly issued for the purpose of financing redevelopment projects.

Several projects related to street reconstruction and affordable housing were completed. Of the total bond proceeds, $3,819,244 remains unspent.

The city contends that redevelopment investment of the $3.8 million was underway well before the state dissolved the CDA, through the statewide Dissolution Act, on February 1, 2012.

Under that act, the state has ordered Sonoma, and other cities in the same position, not to spend that money as planned but rather use it to pay off the bond debt.

“The state is now seeking to retroactively invalidate these bonds even though they were issued at a time when it was lawful and valid to do so,” said City Manager Carol Giovanatto.

Although the bonds were issued nearly four months before the Dissolution Act was enacted, the state asserts the contracts for the projects are invalid, Giovanatto said.

“The law fails to recognize our circumstances,” she said. “We’ve delivered 17 pounds of documents to the Department of Finance to validate our position.”

The city lawsuit asserts that the state’s position violates the Dissolution Act itself, which strenuously protects and honors bonds as “enforceable obligations” of a former redevelopment agency.

Sonoma’s lawsuit joins some 130 others that cities and counties have filed to challenge the state. It may take up to six months for an initial hearing in the Sonoma case.

‘The city feels it’s in a very strong position.” Giovanatto said.