* DEPARTMENT OF
CALIFORNIA FINANCE GAVIN NEWSOM GOVERNOR
915 L STREET I SACRAMENTO CA I 95814-3706 # WWW.DOF.CA.GOV March 4, 2019
Mr. David Welch, Successor Agency Manager
City of Riverside
3900 Main Street, 5th Floor
Riverside, CA 92522
Dear Mr. Welch:
Subject: Objection of Oversight Board Action
The City of Riverside Successor Agency (Agency) notified the California Department of Finance (Finance) of its January 17, 2019 Oversight Board (OB) Resolution on January 17, 2019.
Pursuant to Health and Safety Code (HSC) section 34179 (h), Finance has completed its review of the OB action.
Based on our review and application of the law, OB Resolution No. 2019-015, authorizing the exercise of the option to extend the Leaseback Agreement with the State of California, is not approved.
The Agency entered into a Lease Agreement with the State Department of General Services (DGS) for a 30 year term, expiring October 1, 2024. The Agency and DGS also entered into a Leaseback Agreement, which runs concurrently with the Lease Agreement. The Agency contends Section 17 of the Leaseback Agreement provides the Agency an option to extend the Leaseback Agreement for an additional ten years, which would cause the lease term to expire October 1, 2034. The Agency made findings that the extension will ensure the continued viability of the downtown area and is in the best interest of the taxing entities.
However, Section 17 also states that the Agency's option to extend the lease by an additional ten years is conditioned upon DGS's election to exercise its option to purchase the related property. It is our understanding DGS has not expressed interest in exercising the option to purchase, and according to the Agency, the purchase is unlikely to happen in the future.
Therefore, the Agency does not have the authority to exercise its option to extend the lease term pursuant to Section 17 of the Leaseback Agreement. Further, continuing the lease beyond the current term does not reduce the Agency's liabilities related to maintaining the property.
Therefore, this action is not in the best interest of the affected taxing entities. Further, HSC section 34177 (h) requires the Agency to expeditiously wind down its affairs and executing a long term lease commitment would be contrary to that directive.
As authorized by HSC section 34179 (h), Finance is returning this OB action to the board for reconsideration.
Mr. David Welch
March 4, 2019
Please direct inquiries to Cindie Lor, Supervisor, or Jeremy Bunting, Analyst, at (916) 322-2985.
Sincerely,
Lemong
JENNIFER WHITAKER
Program Budget Manager
cc: Mr. Rafael Guzman, Community and Economic Development Director, City of Riverside Ms. Pam Elias, Chief Accountant Property Tax Division, Riverside County