Legal Update: California Supreme Court Ruling Winds Up Redevelopment Agencies: Legislative Reform May be Next

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In an opinion filed December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26, which dissolves redevelopment agencies as of October 1, 2011. The opinion also invalidated Assembly Bill 1X 27, which provides for the continuation of redevelopment agencies if the local jurisdiction agrees to make substantial payments to fund education and other functions. The immediate impact of this ruling is that it dissolves redevelopment agencies, and transfers control of redevelopment agency assets to a successor agency, which is contemplated to be the city or county that created the redevelopment agency. 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.

The Supreme Court’s ruling also invalidates AB1X 27, which would have allowed for continued operation of a redevelopment agency, conditioned on the local jurisdiction making specified payments for education and other local government functions. The Supreme Court found that this provision violates Proposition 22, enacted by the voters in 2010 and which amended the State Constitution to limit the state’s ability to require the payment of tax increment for the state’s benefit.

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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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