It's the End of Redevelopment as We Know It


When Governor Brown took office earlier this year, he was faced with a massive budget deficit – to the tune of $25 billion. While he considered a variety of measures to reduce California's glaring budget problem, Governor Brown – like many of his predecessors – ultimately turned to the pockets of redevelopment agencies to narrow the gap. In January, he proposed completely eliminating redevelopment agencies, but he could not garner enough legislative support. Months later, Governor Brown and the Legislature finally reached a compromise, enacting two bills, ABX1 26 and ABX1 27. The first eliminated redevelopment agencies, while the second provided for the agencies' reinstatement upon their transferring to local school districts money ($1.7 billion this year and about $400 million annually thereafter) that the State would have otherwise been obligated to pay.

Declaring the laws an illegal "ransom" scheme, the California Redevelopment Association and the League of Cities challenged them in a lawsuit filed directly in the California Supreme Court, California Redevelopment Assn. v. Matosantos. While many redevelopment agencies intended to make the required payments, they figured they'd take a shot: either (1) the Court would uphold the bills, in which case redevelopment would proceed subject to the annual payments, or (2) the Court would declare the bills unconstitutional, and redevelopment would proceed as normal. But there was a devastating potential third option: the Court could uphold ABX1 26 while striking down AB1X 27. As the case proceeded in the Supreme Court, this "worst case" scenario started to look more and more likely.

Yesterday, the Court issued its opinion, and the outcome was the nightmare redevelopment agencies feared most. The Court upheld ABX1 26, allowing the dissolution of California's redevelopment agencies to proceed, but struck down ABX1 27, the "voluntary" buy back program that would have allowed redevelopment to continue.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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