SANTA CLARA COUNTY, CALIF. – Today, the County of Santa Clara is calling for transparency and accuracy from the City of San Jose and reassuring bond holders that the City has sufficient funds to cover all of its former Redevelopment Agency (RDA) debt service. This call is a result of inquiries from Wall Street concerning misleading and inaccurate statements made about the City’s inability to meet its obligations on redevelopment agency debt.
The City of San José has been informing Wall Street that it will default on its former Redevelopment Agency bonded debt obligations. Additionally, the City has been attempting to divert attention away from its own imprudent financial management by asserting that the County of Santa Clara Auditor-Controller is “causing” this supposed default.
“These assertions are simply untrue!” said County Executive Jeffrey V. Smith. “The City will NOT default upon their redevelopment bonds unless they make an intentional effort to do so. Nothing that the Auditor-Controller has done, or will do, will cause the City to default!”
The new state law, ABX1 26, mandates that the City provide certain financial information to the Auditor-Controller in order to assess its ability to pay its bonded debt. That information is then sent to the state for analysis of the redevelopment funding. The City has delayed their production of the financial information for weeks, and that has delayed the ability of the Auditor-Controller and the state to produce such a plan.
On the evening of Election Day, the City finally began to produce some of the needed information. That financial information, produced by the City, shows that there is adequate funding to pay ALL former RDA bond debt service that had previously been backed exclusively by the resources of the RDA. There will be no reason for the City to default upon any bonded indebtedness from the previous RDA!
“San José’s situation is one-of-a-kind in that prior to ABX1 26, the RDA and has long faced a crushing debt burden that resulted from going beyond the original intent of the redevelopment law – eliminating blight,” said County Finance Director Vinod Sharma. “The County has been actively involved in reassuring those holding bonds from the City’s former redevelopment agency that there is no reason to be concerned about a default, despite the confusing messages from the City leadership.”
“If the City would simply comply with the state law by producing accurate and timely financial data, the Auditor-Controller and the state could do their jobs and develop a revenue disbursement plan that assures a smooth transition,” Smith continued. “The “cry wolf” approach that has apparently been adopted by the City staff is NOT an effective financial management tool, and shows an enormous disrespect to the RDA bondholders. The truth is that there will NOT be a default upon San Jose RDA bonded debt! Period!”
Media Contact: Gwendolyn Mitchell, Office of Public Affairs, (408) 299-5119; Orry Korb, Assistant County Counsel (408) 299-5902
Posted: June 8, 2012