Adios CRA/LA: California Supreme Court Rules that the State can Abolish Redevelopment Agencies

Yesterday the California State Supreme Court issued a ruling (.pdf) affirming that the State Legislature has the authority to abolish Redevelopment Agencies (such as the CRA/LA) but struck down the Legislature’s attempt to allow Redevelopment Agencies to continue to exist in exchange for an additional share of their revenues.

Additionally, the Court revised the statutory deadlines associated with AB1X26 so the law can take effect on a delayed basis. Pursuant to the Court’s revisions, all redevelopment agencies will be dissolved effective February 1, 2012.

Reports and reactions from around LA: LA Daily News, Ron Kaye LA, LA Times, LAT's LA Now Blog, Curbed LA, LA Weekly. Here’s the key paragraphs from the ruling (emphasis mine):

We consider whether under the state Constitution (1) redevelopment agencies, once created and engaged in redevelopment plans, have a protected right to exist that immunizes them from statutory dissolution by the Legislature; and (2) redevelopment agencies and their sponsoring communities have a protected right not to make payments to various funds benefiting schools and special districts as a condition of continued operation.  Answering the first question “no” and the second “yes” we largely uphold Assembly Bill 1X26 and invalidate Assembly Bill 1X27.

Assembly Bill 1X26, the dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution.  That power includes the authority to create entities, such as redevelopment agencies, to carry out the state‘s ends and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper.  Proposition 22, while it amended the state Constitution to impose new limits on the Legislature‘s fiscal powers, neither explicitly nor implicitly rescinded the Legislature‘s power to dissolve redevelopment agencies.  Nor does article XVI, section 16 of the state Constitution, which authorizes the allocation of property tax revenues to redevelopment agencies, impair that power.

A different conclusion is required with respect to Assembly Bill 1X27, the measure conditioning further redevelopment agency operations on additional payments by an agency‘s community sponsors to state funds benefiting schools and special districts.  Proposition 22 (specifically Cal. Const., art. XIII, § 25.5, subd. (a)(7)) expressly forbids the Legislature from requiring such payments. Matosantos‘s argument that the payments are valid because technically voluntary cannot be reconciled with the fact that the payments are a requirement of continued operation.  Because the flawed provisions of Assembly Bill 1X27 are not severable from other parts of that measure, the measure is invalid in its entirety.

So, absent some immediate legislative action on the part of the Governor and the State Legislature, the CRA/LA, as we know it, is dead.

What remains unknown at this point is what exactly will happen to the CRA/LA’s, employees, assets, and projects on February 1, 2012.

As you may recall, in March 2011 the CRA/LA entered into cooperative agreement with the City for payment of approximately $930 million for costs associated with CRA/LA funded projects located within the City's existing redevelopment project areas (Council File 11-0086). Per that agreement the CRA/LA would "pledge the unencumbered resources in the current FY2010-11 Budget" (about $344 million) and the "Net Tax Increment from FY2011-12 through FY2015-16" (about $540 million) to the City for the completion of the long list of projects identified in the agreement. The agreement also included the no-cost transfer and conveyance of a significant amount of CRA/LA real estate (.pdf) to the City (Council File 11-0086-S1).

However the City-CRA/LA cooperative agreement may not be valid.

The State Legislature included a provision in AB1X26 (see § 34167.5) that seems to indicate that transfers that occurred after January 1, 2011 (which the City-CRA/LA cooperative agreement was) would be deemed “unauthorized” and would be invalidated. That provision states that the State Controller will review all such “asset transfers” to determine if the transferred assets are “contractually committed to a third party” and, if not, revert those assets back to the redevelopment agency or its “successor agency”.

Obviously there is much more to come on this story.