Lawsuits Seek 11th-Hour Reprieve for Redevelopment (Updated)

 

UPDATE: Friday afternoon Superior Court Judge Lloyd G. Connelly refused to grant a stay against the dissolution of redevelopment, rejecting arguments advanced in two separate suits, led by the cities of Cerritos and Carlsbad. The ruling means that the dissolution of redevelopment will proceed Feb. 1 as ordered by the state Supreme Court.

With seven days to go before redevelopment agencies vanish from California's landscape, two consortiums of cities are sending up two different hail Marys in the hopes that the Sacramento Superior Court will give redevelopment a stay of execution -- or even wholesale salvation. 

Friday afternoon, the court will hold preliminary hearings on both suits. The first, filed by a consortium of cities led by the City of Cerritos, seeks to overturn Assembly Bill X1 26 on constitutional grounds. It had originally been brought by the cities before the state Supreme Court rendered its decision in California Redevelopment Association vs. Matosantos but was put on hold while that case was decided. 

The other, unrelated, suit was filed by a consortium of cities led by the City of Carlsbad following the Matosantos decision. It alleges that AB X1 26 can only be valid if its companion budget bill, AB X1 27, were enacted. But, because AB X1 27 was struck down by the Supreme Court, plaintiffs in the Carlsbad case contend that AB X1 26 can never go into effect. 

Both suits--either of which, if successful, could delay or prevent implementation of AB X1 26, regardless of the other's success -- pursue different legal approaches than the CRA did in the Matosantos case. CRA focused largely on Proposition 22, which, it contended, prohibited the state from appropriating redevelopment funds and, by extension, from dissolving agencies. 

"We raised constitutional challenges that were in addition to the primary focus of the lawsuit brought by CRA and League," said Bill Irkhe, partner at the law firm of Rutan and Tucker, which is representing the City of Cerritos.  "Per the request of the attorney general's office, we stipulated to holding this case off until the League and CRA case would be decided."

The Cerritos suit centers on three main claims. The first is that AB X1 26, which was passed by a simple majority, effectively redefines redevelopment's tax increment as an ad valorum property tax -- thus fundamentally changing the nature of the tax. That sort of change, plaintiffs argue, would require a two-thirds majority vote in the Legislature. Second, plaintiffs argue that AB X1 26 results in violations of federal and state contract law by impairing or invalidating contracts between redevelopment agencies and their respective cities. Third, plaintiffs claim that Gov. Jerry Brown's and the Legislature's efforts to go after redevelopment funds overstepped their bounds by responding to a short-term budget emergency with a remedy whose effects may last for 30 years, which is the lifespan of a redevelopment project area. 

Irkhe said he believes that these arguments may have sway in part because, according to a footnote in its decision, the Supreme Court explicitly did not consider this line of argument in deciding Matosantos. Therefore, the Superior Court may consider it an open legal question and therefore grant the injunction that plaintiffs are seeking. 

Plaintiffs in the Carlsbad case -- which names the state and five counties' auditor-controllers as defendants -- contends not that AB X1 26 is invalid but rather that it cannot be enacted until AB X1 27 is enacted. The Carlsbad suit alleges that the enactment of AB X1 26 is contingent upon the enactment of AB X1 27, in part because the Legislature intended the two laws to work in concert. Carlsbad city attorney Ron Ball said that AB X1 26 depended on the enactment of AB X1 27 -- which occurred -- and on the inclusion of Part 1.9, which is the part of AB 1X 27 that calls for redevelopment agencies to make voluntary payments to the state. 

"The whole law was determined to become unconstitutional, so Part 1.9 never arose," said Ball. "So how could the law become effective? There were two contingencies, one of them it made, and one failed." 

"The state’s position is contrary," said Ball. "They feel that either the law was not void ab initio, or else it was valid for a while before the Supreme Court turned it down."  

Plaintiffs' argument, according to Ball, differs from the "severability" argument that arose in Matosantos, in which attorneys for the state successfully argued that the Supreme Court could invalidate one of the laws without invalidating the other. 

"We learned more about severability than I ever wanted to know," said Ball. "That’s fine. But it didn’t answer this question."

Ball said that there is a chance that the judge could rule from the bench in favor of the plaintiffs, thus effectively halting dissolution. However, he said it is more likely that the judge rule that the preliminary injunction is either granted or denied. 

Neither groups of plaintiffs are collaborating directly with the CRA or League of California Cities, which were the lead plaintiffs in the Matosantos case. 

Both cases are scheduled to be heard 1:30pm in Sacramento Superior Court.