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California Supreme Court Revises Stay of Redevelopment Dissolution and “Opt-In” Legislation

California Redevelopment Association, et al. v. Ana Matosantos, et al.

The Supreme Court has revised its August 11 partial Stay of AB x1 26 and x1 27 by clarifying that the entirety of  Part 1.8 (Health and Safety Code Sections 34161 through 34169.5) is excluded from the stay and remains in effect.  This means that Health and Safety Code Section 34167.5, which permits the Controller to review post- January 1, 2011 asset transfers from the Agency to the City, and potentially order the return of assets where the City is not contractually committed to a third party for expenditure or encumbrance of the assets, is in effect.  In addition, Section 34169, which requires agencies to adopt an enforceable obligation schedule by August 28, 2011, is no longer stayed.

The Court also excluded Health and Safety Code Section 34194(b)(2) of AB x1 27 from the stay.  This provision permits the State Director of Finance to calculate the remittance payments under AB x1 27, authorizes Agencies to appeal the calculation by August 15, 2011, and requires the Director of Finance to reject or approve each appeal by September 15, unless extended to October 15.
The Court has requested that the parties provide alternative dates for statutory compliance, including enactment of a continuation ordinance and payment of the remittance amount, in the event that the court upholds both statutes.  The Court refrained from expressing any opinion on the merits of the legislation, but noted that if AB x1 26 and x1 27 are upheld, they will be implemented “with as little delay as possible.” 

The effect of the August 11 and August 17 Court orders is as follows:

  • Health and Safety Code Sections 34161 through 34169.5 are still in effect.  This means:

    • Except for “enforceable obligations” (as defined in Section 34167(d)), all redevelopment agency activities are suspended (whether or not AB x1 27 Ordinance has been enacted).  Agencies may not enter into any new contracts or amend existing contracts, buy or sell property, renew leases, transfer any assets or increase staff.
    • Redevelopment agencies must continue to make payments of “enforceable obligations.”
    • Transfers of redevelopment agency assets to its legislative body are still subject to review by the State Controller.
    • All redevelopment agencies must adopt an enforceable obligation payment schedule by August 28, 2011.
  • Dissolution of agencies as of October 1, 2011 has been stayed.
  • The Court ordered an expedited briefing schedule on the merits, to conclude on October 7, and stated an intention to hold oral argument as early as possible in 2011 and to render a decision before January 15, 2012, the date when the first “voluntary alternative payments” to continue redevelopment activities would be due under AB x1 27.
  • We are advising that agencies not opt-in until stay is lifted or the Court rules on the merits.
  • Agencies that have already opted-in are subject to suspension provisions above.
  • The Director of Finance may still approve or reject the appeal of remittance payment calculations.