Legal Update: Redevelopment Agencies Face Elimination

Miller Starr Regalia
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The good news is that last week Governor Brown signed the 2011-2012 California State Budget. The bad news is that many popular government services and programs are being cut. Among other things, the budget seeks to close the deficit by reallocating money that would otherwise go to redevelopment agencies to other government functions. The State Legislature estimates that redevelopment agencies will "divert" about $5 billion in property tax revenue from other taxing agencies in the 2011-2012 fiscal year, and want to retain some of that revenue to fund education and other local government services. ABX1 26 and ABX1 27 are "trailer bills" passed by the California Senate and Assembly intended to help implement the State budget bill, by reallocating tax revenue which would otherwise go to redevelopment. In short, these two bills dissolve current redevelopment agencies as of October 1, 2011, but provide a mechanism for continuation of redevelopment agency operations if the agency commits to making specified payments for education and other local government functions.

ABX1 26 dissolves all redevelopment agencies effective October 1, 2011. Property taxes that would have been allocated to the agency if it had not been dissolved will be deposited into a Redevelopment Property Tax Trust Fund in the County in which the agency operates, and that money will be allocated to various taxing entities in the County. ABX1 26 precludes a redevelopment agency from - among other things - issuing new bonds, incurring new debts, entering into new financial obligations, entering into new agreements or amending existing agreements, adopting or amending redevelopment plans, disposing of or acquiring real property, or exercising the power of eminent domain. It requires the agency to continue to make scheduled payments for existing enforceable obligations, and provides a mechanism to do so. ABX1 26 withdraws from redevelopment agencies "all authority to transact business or exercise powers previously granted under the community redevelopment law." So, apart from paying existing obligations, redevelopment agency operations will largely cease.

Please see full publication below for more information.

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