Glendale sues state over lack of loan payments

Glendale officials are taking the state’s Department of Finance to court again over more than $40 million in loans and interest the city says it’s owed from its now-defunct Redevelopment Agency.

Last year, the city won a lawsuit against the same department in a dispute about interest rates that could have significantly reduced the amount Glendale was seeking to go toward paying for local programs and services.

Despite the court win, the state’s finance department has yet to make a single payment, prompting Glendale attorneys to file another complaint accusing the department of going back on its word.

Opening arguments in the case are slated to begin in Sacramento Superior Court on Friday.

Since the Redevelopment Agency’s founding in the early 1970s, the city has lent it funds for revitalization projects to be repaid through property taxes.

However, amid the state budget crisis, state legislators ended the redevelopment program in 2011 and let those loans go unrepaid.

AB 1484, signed into law in 2012, tried to get cities that lent money back.

Glendale city staffers filed the paperwork and earned approval from an oversight board made up of local school and county officials and eventually won approval from the Department of Finance in 2013 to reinstate the loans, according to the lawsuit filed last summer.

At first, the finance department argued Glendale couldn’t use historical rates as high as 12.04% from 35 years ago to current lows of .22%.

In 2015, Sacramento Superior Court Judge Shelleyanne Chang ruled in favor of Glendale and said the historical interest rates had to be applied.

But now, City Manager Scott Ochoa said the Department of Finance is trying to duck payments again — this time attempting to invalidate many of the loans it had already approved to be reinstated.

“[The Department of finance] appears to be making up the rules as they go along because they previously had approved these loans and reinstated the loans … They decided, after the fact, we aren’t going to honor those any longer,” Ochoa said.

The city manager said the finance department’s positioning comes from amendments made to the Dissolution Act that negate many of the loans between the city and former redevelopment agency, although they were determined to be vetted and approved.

In a legal document responding to Glendale’s claims, the Department of Finance argues some of the city’s loans were not “enforceable obligations” and did not qualify because of a lack of documentation.

“There wasn’t any documentation for a number of those for us to be able to render that judgment properly and in accordance with the law,” said H.D. Palmer, deputy director of external affairs for the state’s finance department, in a phone interview.

Ochoa described the state’s actions as “moving the goal post” and said that if the city loses its upcoming case — which will also be overseen by Judge Chang — the city’s General Fund budget could end up losing $40 million.

It could mean an annual loss of $3 million or so, he said.

“It’s not enough to break the city, but it’s certainly enough to erase all of the gains we have seen in terms of our programs and offerings over the last several years as well as some of the investments we’re looking to make in infrastructure,” Ochoa said.

That boils down to items such as road repair work, after-school programs and homeless services, he said.

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Arin Mikailian, arin.mikailian@latimes.com

Twitter: @ArinMikailian