Uncertainty, Irony Loom after California Supreme Court Rules to Eliminate Redevelopment

By now you’ve probably heard. The California Supreme Court ruled last week to end redevelopment. The decision was a result of the high court’s opinion regarding the legality of two bills signed by Governor Jerry Brown that attempt to backfill the state budget with the tax increment revenue generated by redevelopment agencies. In summary, Assembly Bill 1X 26 ordered for the elimination of redevelopment agencies, and Assembly Bill 1X 27 offered an alternative opt-in redevelopment program given remittance payments of specified amounts from each agency. The subsequent lawsuit brought forward chiefly by the California Redevelopment Association (CRA) and the League of California Cities argued that the bills were unconstitutional under Proposition 22. Proposition 22, approved by California voters in 2010, generally prohibits the state from taking local funds.

In a worst-case scenario for redevelopment, AB 1X 26 was upheld and AB 1X 27 was ruled unconstitutional. In short, the California Supreme Court ruled that the Legislature had the right to eliminate the agencies since it created them, and Prop 22 provided them no protection from such action. Furthermore, in an ironic twist, the court ruled that the so-called “ransom payments” mandated by AB 1X 27, which would have allowed participating agencies to exist in an altered capacity, were unconstitutional under Proposition 22. In the end, the foundation of the CRA’s argument was used against itself to eliminate redevelopment agencies altogether.

Yes, many agencies wouldn’t have been able to pay their share of the $1.7 billion in remittance payments, causing them to go out of business anyway. However, the dissolution of over 400 agencies without an alternative can only be seen as a total loss by the CRA and redevelopment proponents. While some may choose to blame the CRA for its flawed and fateful approach, there was a widespread willingness to fight the bills in an effort to preserve redevelopment as it existed. More importantly however, finger pointing will do nothing to ease the anxiety of redevelopment agency employees and the organizations that benefited from their services.

Since the ruling there has been a mad scramble to understand the logistics and implications associated with dissolution of redevelopment while simultaneously fighting for its reinstatement – albeit in a different form. As of now, redevelopment is scheduled to sunset on February 1st when all agencies will hand their assets and obligations over to “successor agencies,” which, in most cases, will be the corresponding city. The successor agency will work with the State Department of Finance and the State Controller to pay off all enforceable obligations. The remaining assets and tax increment revenue will be placed in a state trust fund that will be distributed to schools, counties, and other agencies as regular property taxes would. This is, of course, a gross generalization of a process that is likely to be long, messy, and highly litigious.

In the meantime, the CRA is working to introduce legislation that would delay the dissolution date set by the Supreme Court. Over at the California Planning and Development Report, Bill Fulton and Josh Stephens suggest that some deal will be made to revive redevelopment, though without a solid bargaining position, the CRA, they suggest, will settle for an agreement in which they may need to contribute even more to state revenues than they would have under AB 1X 27.

At a press conference to unveil the 2012-2013 state budget on Thursday, Governor Jerry Brown remained open to the idea of funding some form of redevelopment, but under the condition that the Legislature brings him cuts to offset the losses in tax revenue. At the same press conference, Governor Brown announced that $4.8 billion would be cut from school funds if voters don’t approve a tax hike in November. The irony: Governor Brown initiated the legislation to eliminate redevelopment – and lauded the Supreme Court’s subsequent decision – primarily as a means of providing more funding for schools. With politicking like this the future of redevelopment and the prospect of battling economic and physical blight in California is bleak at best.

-Gerard Lopez-Miralles
2nd Year MPL, Sustainable Land Use Concentration

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