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SAN LEANDRO REDEVELOPMENT AGENCY Notes to the Financial Statements For the Year Ended June 30, 2011 NOTE 9 — COMMITMENTS AND CONTINGENCIES (Continued) D. Litigation The Agency is involved in various claims and litigation resulting from its normal operations. The ultimate outcome of these matters is not presently determinable. In the Agency managements' opinion, these matters will not have a significant adverse effect of the Agency's financial position. NOTE 10 — SERAF PAYMENTS The State Budget for 2010 -11 includes the second year of a two -year take from the redevelopment agencies to fund the Supplemental Educational Revenue Augmentation Fund (SERAF). During the fiscal year 2011, the Agency made the required payment for 2010 -11 is $876,208. Although the Agency was able to make that payment without borrowing from other funds, the requirement has a severe impact on the ability to complete and initiate redevelopment projects and programs in the near future. NOTE 11— SUBSEQUENT EVENTS In an effort to balance its budget, the State of California adopted ABxl 26 on June 28, 2011, which suspends all new redevelopment activities except for limited specified activities as of that date and dissolves redevelopment agencies effective October 1, 2011. The State simultaneously adopted ABxI 27 which allows redevelopment agencies to avoid dissolution by the City opting into an "alternative voluntary redevelopment program" requiring specified substantial annual contributions to local schools and special districts. Concurrently with these two measures, the State passed various budget and trailer bills that are related and collectively constitute the Redevelopment Restructuring Acts. If all sponsoring communities were to opt -in to the voluntary program, these contributions amount to an estimated $1.7 billion for fiscal year 2012 and an estimated $400 million in each succeeding year. If the City fails to make the voluntary program payment, the Agency would become subject to the dissolution provisions of ABxl 26. On July 18, 2011, the California Redevelopment Association, the League of California Cities and others challenged the validity and constitutionality of ABxl 26 and 27 to the California Supreme Court on numerous grounds, including that the acts violate certain provisions of the California Constitution. On August 11, 2011, as modified on August 17, 2011, the California Supreme Court agreed to hear the case and issued a partial stay of ABxI 26 and a full stay of ABxl 27, but the stay did not include the section of ABxl 26 that suspends all new redevelopment activities. It is anticipated that the Court will render its decision before January 15, 2012, the date the first voluntary program payment is due. The suspension provisions of ABxl 26 prohibit all redevelopment agencies from a wide range of activities, including incurring new indebtedness or obligations, entering into or modifying agreements or contracts, acquiring or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions, except actions required by law or to carry out existing enforceable obligations, as defined in ABxl 26. During the suspension period, an agency is required to prepare an Enforceable Obligation Payment Schedule no later than August 29, 2011, that allows it to continue to pay certain obligations. The Agency adopted its Enforceable Obligation Payment Schedule on July 18, 2011. 44