For many cities that have endured the painful process of dissolving their redevelopment agencies, the bloodletting has begun anew.
In the latest chapter of a long-running legal battle over affordable housing and redevelopment in Fontana, the Fourth District Court of Appeal has ruled that the city is not required to take on the former redevelopment agency’s affordable housing obligations.
“Under the scheme adopted by the Legislature under AB 26 [the law abolishing redevelopment], the liabilities of dissolved RA’s [redevelopment agencies] are limited to the assets transferred to successor agencies,” wrote Acting Presiding Justice Patricia Benke for a unanimous three-judge panel. “There is nothing in AB 26, or later amendments, that would exend that liability beyond an RA’s assets to municipalities and their general funds.” Prior to the dissolution of redevelopment agencies, Benke noted, low- and moderate-income liabilities “were never the liabilities of municipalities and their general funds.”
Fontana’s redevelopment agency had a long and litigious history in dealing with state affordable housing requirements. As laid out in a previous case, Fontana Redevelopment Agency v. Torres, 153 Cal.App.4th 902 (2007), the agency did not meet its low- and moderate-income housing obligation – in large part because of a complicated 1992 agreement with a developer that was a predecessor in interest to an entity now known as Ten-Ninety Ltd.
Under Proposition 22, neither the state Board of Equalization nor a county auditor-controller can constitutionally withhold tax funds as part of a redevelopment dispute, as called for by AB 1484, the 2012 bill that cleaned up the redevelopment wind-down, the Third District Court of Appeal has ruled.
The ruling represents a minor and belated victory for the League of California Cities, which wrote Prop. 22 and got it passed in 2010 expressly to stop the state from taking redevelopment funds – only to be outflanked by Gov. Jerry Brown a year later when he abolished the entire redevelopment system.
In setting the rules for the post-redevelopment world, AB 1484 authorized the Board of Equalization to withhold sales and use tax funds, and county auditor-controllers to withhold property tax funds, as a way of forcing cities and counties to turn over disputed redevelopment funds. But the Third District found these provisions unconstitutional on their face under Prop. 22.
Ever since Gov. Jerry Brown killed redevelopment in 2011, the conventional wisdom has been that eventually he would give it a second life – but only after he was sure the old system was completely dead, in a way that protects the state general fund, and probably after he himself won re-election to a final term.
San Bernardino County is not entitled to the return of $9 million in loan principal to the former county redevelopment agency, even though the funds were not tax-increment revenues and had come from the county’s general fund, the Third District Court of Appeal ruled Monday.
The appellate court concluded that once the funds had been transferred from the county to the redevelopment agency, they were subject to a state law voiding all agreements between local governments and their redevelopment agencies. The source of the funds is irrelevant, the court said.
In reaching this conclusion, the court saw no difference between a government agency spending tax money on items such as office supplies and a government agency loaning funds to another government agency. “[M]oney loaned by the county, even if the County obtained those funds as an allocation of taxes, does notretain its character as tax revenue in the hands of the borrower,” wrote Justice George Nicholson, a onetime Republican candidate for attorney general and aide to Gov. George Deukmejian, for a unanimous three-judge panel.
So, redevelopment is back, sort of. How much of a difference it will make remains to be seen.
Gov. Jerry Brown has signed AB 2 (Alejo), which permits cities to create tax-increment-based “Community Redevelopment Investment Authorities” (CRIA). It’s more or less the same bill that legislative leaders – led by former Senate pro tem Darrell Steinberg – have been trying to get Brown to sign since 2012, when the redevelopment agencies were shut down.
Unlike those earlier bills, however, this law makes the overt point of completely disconnecting the new system from the old redevelopment code sections in state law; and it makes no connection to SB 375 and the state’s other sustainability-based planning and development efforts.
The Third District Court of Appeal has rejected several arguments that the laws eliminating redevelopment violate the California constitution.
In a followup to California Redevelopment Association v. Matosantos, 53 Cal. 4th 231 (2011), the California Supreme Court ruling that permitted the elimination of redevelopment agencies, the Third District has ruled that AB 1x 26 -- the law that killed redevelopment -- does not violate 2004’s Proposition 1A. The court also rejected a series of other arguments, including the idea that Gov. Jerry Brown’s declaration of a fiscal emergency did not warrant the elimination of redevelopment.
The opinion was written by Justice Harry Hull, who was chairman of the board of McDonough Holland & Allen, a leading redevelopment law firm, before he was appointed to the bench. The language of the blunt-spoken opinion seems to suggest that the cities had a weak case all the way around.
When the redevelopment system was dismantled in 2012, redevelopment leaders around the state feared that the state Department of Finance’s desire for short-term cash would force a fire-sale of redevelopment assets that would drive prices down and undermine cities’ ability to complete their pending redevelopment projects.
More than three years later, the opposite has occurred: Successor agencies are moving slowly to put real estate on the market, in part because both successor agencies and DOF are just now getting around to dealing with Long-Range Property Management Plans or LRPMPs – the plans that delineate just exactly how properties owned by former redevelopment agencies will be disposed of. LRPMPs are required under AB 1484 of 2012, the post-redevelopment cleanup bill that sought to moderate the fire-sale fears, among other things.
In part, the slow disposition is the result of a dauntingly technical process. In the words of Tara Matthews, a partner with the Rosenow Spevacek Group, Inc. (RSG): "The disposition process is confusing, cities are short-staffed, the typical brokerage companies don't understand the process and are hesitant to take it on, and developers don't know what options are available or how to initiate the conservation with cities." Property sales must be approved both by the successor agency’s oversight board and by DOF.
Just when cities thought it was safe to sign on to notices of completion and put their long redevelopment nightmares behind them, a newly proposed bill yet again has put cities at odds with the state.
In the four years since Gov. Jerry Brown ordered the dissolution of the state’s nearly 400 redevelopment agencies, a series of laws and court cases –principally revolving around the 2012 law AB 1484 has resulted in a complex but, for the most part, manageable system by which cities dispose of properties and settle their accounts with the state Department of Finance (DOF). This has meant that DOF takes possession of properties and funds formerly held by redevelopment agencies while DOF reimburses cities for debts owed to them by their former redevelopment agencies and/or pays cities for certain expenses incurred in the dissolution process.
DOF and cities must agree to Findings of Completion before properties may be disposed of and cities receive their reimbursements. To avoid endless bickering over who is owed what, FOC's provide cities and DOF incentive to arrive at negotiated agreements so that cities can receive their rightful reimbursements in a timely manner.
CP&DR News Briefs, May 18, 2015: L.A. Mobility Plan; Delta Smelt Face Extinction; Solar Power Plan PostponedBy Matthew Hose on 18 May 2015 - 10:45am
The Los Angeles Planning Commission advised the City Council to adopt the city's proposed Mobility Plan 2035 (pdf), update the land use element of 35 community plans, and adopt an ordinance to implement new street standards and complete street principles.