PITTSBURG -- A board that oversees the successor agency charged with winding down redevelopment on Thursday cleared the way for a six-figure settlement agreement involving the underwriting of municipal bonds.
The oversight board voted 6-to-0 to approve the agreement with Piper Jaffray & Co. and E.J. De La Rosa & Co., co-underwriters of the auction-rate securities issued in December 2005 and December 2006 by the former Redevelopment Agency and the city's water department.
The state Department of Finance still needs to approve the agreement.
Once that happens, the underwriters are required to issue a check within 30 days, with each responsible for paying half of the $900,000 settlement. After $315,000 in attorney's fees and expenses are subtracted, the remaining $585,000 will be distributed to the city and area agencies.
In recent years, some underwriters of auction-rate securities -- securities that have their rates of return periodically set through auctions -- have been sued by investors for not being clear enough about the risks that are involved.
The settlement was reached through a mediation process after a claim was filed in February 2012 against the underwriters by the successor agency and the city. It carries no admission of liability or wrongdoing by the underwriters and prohibits the parties from making public statements about it.
The agreement calls for $565,500 to be allocated as pass-through payments to 20 local agencies within the former redevelopment boundaries, including the Pittsburg Unified School District and the Contra Costa County Fire District. The remaining $19,500 will go to the city.
After a state law required redevelopment agencies to shut down in February 2012, successor agencies were formed to wind down redevelopment. Oversight boards must then approve actions taken by successor agencies. The state law requires that tax-increment revenues, which result from increased property taxes from redevelopment projects, be used to pay down redevelopment debt first before any pass-through payments can be made.
The successor agency has written to local agencies informing them that there would be no pass-through payments resulting from insufficient tax-increment revenues to make both redevelopment bond payments and pass-through payments.
The settlement amount was previously approved in March by the oversight board, but came back to the board on Thursday for approval of the settlement agreement.
Contact Eve Mitchell at 925-779-7189. Follow her at Twitter.com/EastCounty_Girl.