Community Redevelopment Law Conflict-of-Interest Rules Apply to Successor Agencies

by Best Best & Krieger LLP

California Attorney General Weighs In on Rule That Will Impact Members of Successor Agencies’ Governing Boards and Employees

The California Attorney General recently opined that the conflict-of-interest rules under the Community Redevelopment Law will continue to apply despite the dissolution of redevelopment agencies. The rules apply to members of any successor agency governing board and may apply to city officials and employees who are required to participate in the approval of plans and policies for redevelopment project areas. In particular, the Attorney General Kamala Harris took the position that Health & Safety Code section 33130 will continue to prohibit such officers and employees from acquiring property within a redevelopment project area.

In 2011, the California Legislature passed ABx1 26, which directed that all redevelopment agencies be dissolved and provided for the creation of successor agencies charged with winding down the affairs of redevelopment agencies. ABx1 26 specifically vested in successor agencies all rights, powers, duties and obligations of redevelopment agencies which were not repealed, restricted or revised. Health and Safety Code section 33130 was not repealed, restricted or revised.

In light of the dissolution of redevelopment agencies, however, the duties and obligations which section 33130 imposes are not clear. Section 33130 only applies to the formulation or approval of plans and policies for the redevelopment of project areas, but ABx1 26 bars such activities. Harris takes the position that, even though successor agencies generally may not undertake new obligations, section 33130 will still apply because successor agencies are specifically authorized to begin new redevelopment work in compliance with existing enforceable obligations, to carry out redevelopment work already begun and to approve plans for project areas under limited circumstances.

Harris’ opinion explains that section 33130’s prohibition on acquiring property precludes certain officials or employees from acquiring property within a project area, and, therefore, the rule applies even if the official or employee disqualifies himself or herself from participation in discussions involving the project area.

There are three key exceptions to section 33130’s firm rule. First, an officer or employee may purchase or lease property for personal residential use within the project area, provided that the agency certifies that no improvements or construction will be done on the property or that the improvements or construction are already complete. Second, an officer or employee may lease property for use in his or her principal business if the lease contains market rate terms and cannot be sublet at a higher rate. Third, an official may acquire property to participate as an owner or reenter into business if he or she held a similar interest for three years preceding the selection of the project area. Even if an exception applies, the official or employee must disclose the interest in the official minutes. If the official or employee owns property that was previously acquired, that fact must also be disclosed in the official minutes.

Finally, Harris also opined that a board member may resign from the successor agency without resigning from the city council, even if the city council sits as the governing board of the successor agency. However, the opinion only specifically discusses the continuing redevelopment work that a successor agency is required to perform, and does not address any separate and distinct work required to be performed by city officials or employees. The constraints of section 33130 may still apply to a city council member notwithstanding resignation from the successor agency, depending on the city council’s role in any ongoing redevelopment activities.

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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