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Court Upholds Redevelopment Dissolution Bill, Strikes Voluntary Payment Bill

The California Supreme Court today issued an opinion in the California Redevelopment Association v. Matosantos case, upholding Assembly Bill x1 26 (the “Redevelopment Dissolution” bill) and invalidating Assembly Bill x1 27 (the “Voluntary Payment” bill). The Court provided a four month extension for all deadlines contained in AB x1 26 that arise prior to May 1, 2012. As a result, effective February 1, 2012, all redevelopment agencies in California will be dissolved.

Prior to their dissolution, agency activities are limited to carrying out “enforceable obligations” as defined in AB x1 26. Following dissolution, the successor entity (the city or county that formed the agency, unless such jurisdiction elects not to fill this role) is charged with winding up the affairs of the dissolved agency, subject to review by an oversight board composed of representatives appointed by the city, the county, the local school district, the local community college district, and the largest local special district. By March 1, 2012, the successor entity is required to prepare a draft recognized obligation payment schedule describing enforceable obligations payable during the period from January through June 2012. The successor entity is directed to dispose of the assets of the former redevelopment agency with the proceeds to be transferred to the county auditor-controller for distribution to local taxing entities. The successor entity may elect to retain the housing assets and functions previously performed by the redevelopment agency; however, funds on deposit in the Low and Moderate Income Housing Fund are not retained by the successor entity.

The Court held that AB x1 27 (the measure that would have permitted cities and counties to continue the operation of their local redevelopment agency by agreeing to make specified payments for the benefit of schools and special districts) violates Proposition 22, the ballot measure adopted in 2010 that limits the legislature’s ability to require local government payments.

Six justices signed the majority opinion. The Chief Justice issued a dissenting and concurring opinion in which she opined that AB x1 27 does not on its face compel the violation of Proposition 22.

Please contact any member of the Meyers Nave Redevelopment Practice Group for further information.