UPDATE: Sifting Through the Ashes: The Demise of Redevelopment Agencies and the Scramble to Figure Out the Next Step By Brian D. Shaffer*

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INTRODUCTION - Faced with a multi-billion dollar budget deficit, Governor Jerry Brown targeted the dissolution of redevelopment agencies (“RDAs”) as a means to lower the deficit and redirect RDA assets to other areas of state and local government. In July 2011, the legislature passed Assembly Bill 1X 26 (“AB 1X 26”), which dissolved RDAs and directed successor agencies to sell the former RDAs’ non-housing assets for the benefit of the taxing authorities and/or be used to satisfy the outstanding obligations of the former RDA. In California Redevelopment Association v. Matosantos, the California Supreme Court upheld the constitutionality of AB 1X 26, finding that if the legislature can create RDAs, it also has the power to dissolve them.

The Matosantos decision sent developers, investors, cities, and counties scrambling to interpret AB 1X 26 in order to preserve development agreements and maintain their assets. However, as detailed in the first installment of this article, certain ambiguities in AB 1X 26 spawned differing opinions as to how certain RDA assets are treated and the procedures required to effectuate a transfer of those assets to successor agencies and third parties. Apparently recognizing some of the issues with implementing AB 1X 26, on June 27, 2012, as part of the 2012-2013 state budget package, the Legislature passed and Governor Brown signed Assembly Bill 1484 (“AB 1484”). The primary purpose of AB 1484 was to make technical and substantive changes to AB 1X 26 to clarify issues under the prior statute and to make the dissolution of RDAs more orderly and understandable. 7 AB 1484 was a budget “trailer bill” and, therefore, took immediate effect upon signature by the Governor.

The first installment of this article identified four key issues with AB 1X 26, namely: (1) how transfers of properties between former RDAs and successor agencies and successor housing agencies should be documented in the chain of title; (2) whether oversight board approval is required for transfers of former RDA housing assets to successor housing agencies; (3) what types of properties are considered “housing” assets under the statute; and (4) whether there is a deadline to trigger the exception to the “claw back” provision for RDA assets transferred to a city, county, or other public agency and that are contractually committed to third parties. This second installment will analyze how AB 1484 addresses these issues and identify some further questions created by AB 1484.

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Published In: Administrative Agency Updates, Business Organization Updates, Constitutional Law Updates, Commercial Real Estate Updates, Residential Real Estate Updates

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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