California Supreme Court Kills Redevelopment Agencies. Now What?

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California’s redevelopment agencies (RDAs) receive 12 percent of the state’s property tax revenue. In this economic climate, that put a bull's-eye on their heads. Upon taking office, Governor Brown pushed through legislation to abolish RDAs, so the tax increment revenue they receive can be used for other purposes – mostly education. In a political compromise, the legislature passed two bills – AB 1X 26, which abolished RDAs; and AB 1X 27, which permited municipalities to keep their RDAs if they remit certain “voluntary” payments into the state’s fund for education. The RDAs sought immediate Supreme Court review, asking the Supreme Court to invalidate both of the bills. On December 29, 2011, the Supreme Court handed down the RDAs’ worst nightmare – upholding AB 1X 26, and thereby abolishing the RDAs, while invalidating AB 1X 27, which was their lifeline.

Ironically, the RDAs’ undoing was Proposition 22, a ballot initiative the RDAs had fought for and won just over a year ago.

The result has potential to create complications for developers who have projects in the works with RDAs.

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