Redevelopment Agencies Eliminated in California Supreme Court Ruling

On December 29, 2011, the California Supreme Court upheld AB1X26, a bill designed to dissolve the nearly 400 redevelopment agencies across California and allow the state to recapture more than $1.7 billion previously earmarked for local projects. Because the Court also stopped AB1X27, which would have permitted the agencies to stay alive by surrendering a large portion of their funding to the state, the ruling leaves local officials scrambling to unwind redevelopment projects and obligations. For your reference, here’s a brief roundup of commentary on the ruling and its expected consequences. We will continue to update this list as additional analysis comes in:

Update on Redevelopment Law: The Supreme Court Makes it Official – Redevelopment is Dead in California (Sheppard Mullin Richter & Hampton LLP):

“The California Supreme Court released its opinion today in California Redevelopment Association v. Matosantos, challenging the Legislature’s adoption of AB 1X 26, providing for elimination of California redevelopment agencies (RDAs), and AB 1X 27, exempting from elimination any RDA that agrees to make its share of a $1.7 billion voluntary contribution of its revenues to other local government needs. The Court has upheld the Constitutionality of AB 1X 26 and struck down AB 1X 27. The Court held that RDAs do not have a constitutionally protected right to continue to exist…” Read more»

California Supreme Court Upholds Elimination of Redevelopment Agencies (Allen Matkins Leck Gamble Mallory & Natsis LLP)

“The result is that redevelopment agencies will cease to exist in California, and their assets and liabilities will be transferred to successor agencies to wind down the affairs of the redevelopment agencies, and all property tax revenues allocated to redevelopment agencies that are not necessary to discharge the existing indebtedness of the agency will be allocated as property tax revenues to other state and local agencies.” Read more»

California Supreme Court Ruling Winds Up Redevelopment Agencies: Legislative Reform May be Next (Miller Starr Regalia):

“Because of the litigation and associated stay, the Supreme Court extended all deadlines imposed under AB1X 26 by four months. Thus, it appears that the dissolution date of October 1, 2011 specified in AB1X 26 is extended to February 1, 2012. Enforceable obligations existing before adoption of the legislation in June 2011 are unaffected, and should continue to be honored by the redevelopment agency or its successor.” Read more»

Supreme Court Upholds Dissolution of Redevelopment Agencies and Invalidates “Pay to Play” Option (Manatt, Phelps & Phillips, LLP)

“The decision is likely to have wide-ranging impacts across the public and private sectors. From public infrastructure like roads, water and sewer lines, to parking garages, to residential, commercial, and industrial development, RDAs have invested billions of dollars throughout the state since their original post-World War II authorization through the California Community Redevelopment Act.” Read more»

It’s the End of Redevelopment as We Know It (Brad Kuhn)

“… there is already some murmuring about a possible legislative compromise designed to reinstate some form of redevelopment. Whether any such compromise sees the light of day remains to be seen. And even if it does, considerable obstacles may exist. In particular, any legislative effort to reinstate some form of redevelopment must overcome the very problem that led to the demise of ABX1 27: how to fund “Redevelopment 2.0” without running afoul of Proposition 22.” Read more»

See also:

California Supreme Court Hears Arguments on the Future of Redevelopment (Brad Kuhn) 

Proposal to Eliminate Redevelopement Agencies Creates Uncertainties for Some California Projects (Manatt, Phelps & Phillips, LLP) 

Update on Redevelopment Law: Litigation Proceeds – Uncertainty Continues (Sheppard Mullin Richter & Hampton LLP) 

California Supreme Court Agrees to Hear Redevelopment Challenge; Stays Portions of New Legislation (Miller Starr Regalia) 

Redevelopment Bills Challenged: CRA Files Lawsuit Challenging Redevelopment Bills (Miller Starr Regalia) 


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