Among the roughly 400 redevelopment agencies that will shut down tomorrow, the vast majority have effectively elected to dig their own graves. That was one of the stipulations of AB X1 26, that cities may serve as their own successor agencies, which will oversee the wind-down of operations, liquidation of assets, and payment of outstanding obligations.  At least a handful of cities, however, have indicated that they want no part in what many consider an unfortunate process. The Los Angeles City Council very publicly voted not to serve as successor agency for the Los Angeles Community Redevelopment Agency . That vote was based in part on a city report that indicated that overseeing the shutdown of the state's largest RDA could cost the city up to $130 million -- more, by far, than the entire annual budgets of many redevelopment agencies.  In addition, the cities of Los Banos, Merced, Pismo Beach, Riverbank, and Waterford have all taken similar action as of last week. If a city opts out, then any other taxing entity that is affected by a city's redevelopment tax increment can volunteer to be successor agency. Most likely, this entity would be the county, but it could also be a school district or other special district. Thus far, no such entities have volunteered to take over. As such, the state Department of Finance will appoint an oversight board for each agency so abandoned.  Of the cities that have opted out, some were simply indifferent to the whole process.  "We didn't see a lot of benefit to the city to being the successor agency," said Riverbank city manager Pam Carder. "I know that we would get a little bit of money for administration, but the amount of work that was required for that money we just didn't see any benefit." The city councils of Pismo Beach and Bishop felt similarly.  "We have no blight and we have no bonded indebtedness," said Pismo Beach mayor Shelly Higginbotham. "It would become much more expensive for the city to take on that duty." Bishop assistant city clerk Denise Gillespie said that the city's redevelopment agency had been essentially dormant for over ten years and had "zero money;" it was dissolved Jan. 9.  Carder said that serving as successor agency would not save anyone's job either, since the city does not employ full-time redevelopment staff people. "It didn't affect our budget because we have no staff people that are being paid for out of redevelopment," said Carder.  The City of Merced, however, had deeper concerns.  "We felt that there was not enough clarity in the legislation to hold the successor agency harmless," said Merced city manager John Bramble. Bramble noted that, in part because AB X1 26 was passed hastily last year, legislators may have inadvertently left out language that legally protects cities that serve as successor agencies. "The Legislature cannot go backwards and determine what their legislation intent was.  Both AB 26 and AB 27 were approved at the end of the session…we found nothing that there was no liability to being successor agency."  Bramble said that the city, which has been famously devastated by the recession and housing collapse, did not have the financial resources to defend against litigation that could arise in the course of dissolution. Being held liable, he said, would be even worse. So the city was happy to shift both the burden of dissolution and the associated legal responsibilities to a successor agency.  Bramble said that, as in Los Angeles, Merced's City Council was also concerned about the cost of dissolving the RDA. Although AB X1 26 provides for some administrative costs, Bramble said "the amount of funds that are available to unwind the RDA assets does not even come close to what we have in terms of staff resources or cost" and that Merced's full-time city is obligated to the City Council, not to a potentially all-consuming special project.  Merced's approach does not, however, mean that it isn't reasonable for hundreds of other cities to accept the burden of serving as successor agencies. In many cases, creating a successor agency temporarily salvages the jobs of at least some RDA employees. As well, cities have an interest in making sure that successor agencies use a light touch when liquidating assets.  "There's always the desire to maintain control," said Bramble. "If they have a project that isn't quite finished and they're not quite sure where it stands, they're going to want to make sure it's done right."  Many cities, however, may not have made such measured calculations. Cities had only two weeks to decide on whether to serve as successor agencies, and those that may not have been certain were automatically opted-in under AB X1 26. By contrast, cities like Los Angeles and Merced took pains to understand what that choice entailed.  "We dropped everything for the next two weeks," said Bramble. "I involved city attorney, the finance office, my office, and economic development and RDA staff to go through absolutely everything." With that decision made, it is now up to the state to assign three-member oversight boards that will serve as successor agencies, unless any other taxing entity shows interest by Feb. 1. In some cases, relatively obscure taxing entities could have stepped up if they so chose. "If a city declines, then it's up to one of the other taxing entities to decide whether they want to become the successor agency, and if none of them step into that, then it goes to the state," said Jim Kennedy, interim executive director of the California Redevelopment Association.  For instance, the Merced Redevelopment Agency could, potentially, be succeeded by the Merced County Mosquito Abatement District. Not that it would choose to take on that task.  "There's not a lot of rewards to being a successor agency," said Marty Coren, a consultant and head of a California Redevelopment Association committee that is studying the RDA transition.  UPDATE:  The morning of Feb. 1 Gov. Brown named twelve individuals to serve on four governing boards--one for each county with cities that opted out--responsible for dissolving local redevelopment agencies. The governing boards' rosters can be found here , on Gov. Brown's website.

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.

This week Gov. Jerry Brown announced a draft package of reforms to the California Environmental Quality Act. The reforms are intended to streamline and simplify certain types of urban developments in order to reduce costs and hardship for developers who are pursuing environmentally friendly infill projects.  The reforms, drafted by the Office of Planning and Research, come in accordance with Senate Bill 226 and Assembly Bill 900, both of which were signed into law late last year.  Once these draft reforms are finalized, they will simplify the approval process for infill projects by eliminating repetitive studies of environmental effects already addressed in other planning documents, such as general plans and zoning codes. This will help reduce the time and cost often associated with infill projects, while also allowing cities to focus on new or unique projects that help create jobs, revitalize cities and promote transit. SB 226 also exempts solar projects located on existing rooftops and parking lots. AB 900 sends CEQA litigation for certain large projects directly to the Court of Appeal and requires a decision on the merits in a short timeframe. The law also offers immediate help to projects that provide California with the most economic and environmental benefit. Together, CEQA reforms in SB 226 and AB 900 are intended to reduce repetitive documentation and expedite litigation timelines while preserving informed decision-making and mitigation of environmental harm.  OPR's SB 226 guidelines can be found here ; the Natural Resources Agency's SB 226 guidelines can be found here . The AB 900 guidelines, released last month, can be found here .

Despite intense lobbying from supporters of redevelopment, Senate Bill 659, sponsored by Sen. Alex Padilla (D-Los Angeles) appears headed for defeat. Senate President Pro Tem Darrel Steinberg (D-Sacramento) yesterday told the Sacramento Bee , "It's not going to happen."  The bill would have delayed dissolution until April 15, allowing agencies and cities more time to organize their affairs. Steinberg said that the bill does not have enough support and that it would likely not even come up for a vote. Many have complained that the Feb. 1 deadline imposed by the Dec. 29 Supreme Court ruling has come far too quickly and that dissolution will not be a smooth process.  Meanwhile, Gov. Jerry Brown has said, "I don't think we should delay this funeral," referring to the demise of redevelopment. Without the governor's support, SB 659 was largely a moot point. Some are speculating that Brown intends to support a new version of redevelopment but that he wants to wipe away the old system so that lawmakers can fashion a new, reformed system from scratch.

With only a few days to go before the February 1 deadline to dissolve the state's redevelopment agencies, the Department of Finance has published a website describing the dissolution process as mandated by Assembly Bill X1 26. The site is intended to answer a host of questions that have arisen among many agencies and cities throughout the state.  Agencies and cities are cautioned that the website and its documents are meant for guidance only and do not constitute legal advice. Finance acknowledges that "the timeframes for dissolution activities may become very compressed" -- as many supporters of redevelopment have claimed -- and that the department cannot name specific individuals who will be working on dissolution nor can it promise that cities will be able to discuss the dissolution process with particular staff members. The department has, however, set up a hotline and an email address: redevelopment_administration@dof.ca.gov and 916.445.1546. Finance encourages redevelopment agencies and their successors to immediately begin work on Recognized Obligation Payment Schedules (ROPS) and in organizing the oversight board. Both Controller and Finance staff will be reviewing enforceable obligation schedules and jointly determining which items to review in more detail and make objections to. Finance has also released a pair of "frequently asked question" documents. One document answers questions about bond repayments  <.pdf> , in response to concerns that the California Redevelopment Association and others had raised about whether the schedule outlined in AB X1 26 would enable successor agencies to pay bond obligations on time. DOF assures agencies that the legislation does provide for on-time payments.  Another FAQ  <.pdf> concerns the structure of successor agencies and their relationship with their respective jurisdictions, especially with regards to labor regulations. Many cities are concerned that the dissolution of redevelopment agencies means that city staff who are paid partially with RDA money will have to be let go. DOF confirms that successor agencies may release superfluous employees. Any employees that are retained become employees of the successor agency but not of the city or county.

Last week bond rating agency Moody's took California's redevelopment bonds down a notch , and today fellow rating agency Fitch is expressing similiar concerns.  Citing concerns over the "short timeframe" that last month's Supreme Court decision dictated for the dissolution of the state's roughly 400 active redevelopment agencies, Fitch has placed all bonds secured by tax increment financing on Rating Watch Negative. Fitch is also concerned by the lack of progress in shoring up what redevelopment's supporters consider flaws and shortcomings in AB X1 26, the legislation that mandates and guides the process for agencies' dissolution. February 1 is the date on which agencies are supposed to be turned over to successor agencies.  According to a statement  <.pdf> released by Fitch, "While the intent to uphold existing obligations is clearly stated in the legislation, the mechanics of implementation are not." To determine whether or not outstanding bonds will be repaid, Fitch intends to review the process of handing off RDA assets and obligations to successor agencies and will review each agency's and oversight committee's ability to mange those assets and obligations.  Fitch's review will include the following: Once available, Fitch will review the guidelines and discuss with the appropriate county auditor-controllers their plans to adhere to guidelines that are being drafted by the California Association of Counties (CSAC). Fitch will assess whether each county auditor-controller, successor agency, and board is planning to track tax increment revenue generated by project area and for housing and non-housing purposes, pursuant to the pledges to bondholders, and whether each of these entities is prepared to apply procedures in a way that assures the flow of tax increment revenue pledged to secure each series of bonds. Fitch will evaluate whether the guidelines or subsequent legislation, if any, address the concern that the payment schedule is funded on a six month basis, rather than annually, which could result in funds being transferred to overlapping taxing entities prior to funding a full year of debt service. Fitch will confirm that Fitch-rated bonds are included on the schedule of payments permitted to be paid by the agency.  Fitch will evaluate the ability of a 'designated local authority' to staff and oversee a successor agency should no existing local entity elect to become the successor agency. While Fitch believes these uncertainties will be resolved for all or most affected entities, if any of these plans or procedures are inadequate to ensure timely payment of debt service, Fitch will take appropriate rating action on those individual credits.

If you listen carefully, you might be able to hear the sounds of hammers in some parts of California. After nearly five long years of recession and stagnation, recent reports indicate that new residential construction may be picking up.  A recent survey from the National Association of Homebuilders indicates that confidence among home builders has risen to its highest level in four years. Rising from nearly zero may not sound like much--the survey's overall rating of 25 still indicates that conditions are "poor"--but it's still an improvement. Construction in Los Angeles seems to bear out this trend, with $1.51 billion worth of projects--dominated by high-density rental apartments--underway in the second half of 2011; that's a 6% increase over the previous year. Meanwhile, home sales in the Bay Area rose 4.4% in December as compared with December 2010; prices, however, have continued to decline. In  Orange County , a developer has evoked headier times with the purchase of a 16-acre tract entitled for up to 143 home at an estimated $2 million per acre. And even in Sacramento , where construction of single-family homes hit a near standstill, the Sacramento Bee reports that a "modest building boom" of six projects is bringing over 250 units to high-density areas of the state's capital.  Clearly, this trend doesn't yet mean that a million tract homes will bloom. But it does mean that developers may be emboldened to restart dormant projects and even seek out new ones. In many cities, there are far fewer planners now than there were when the bubble first burst, but they now might have more work to do than they've had in a long time.

Judging by the likes of Apple, Google, and Chez Panisse – to say nothing of the relative stability of housing prices -- the San Francisco Bay Area might not seem like the most likely recipient of an economic planning grant. But the federal Department of Housing and Community Development thinks otherwise. Following a hotly competitive application process, HUD awarded the Metropolitan Transportation Commission, in partnership with the Association of Bay Area Governments, one of 22 Sustainable Communities Grants in late November. MTC's award of $4,991,336 is, by less than $10,000, the second-largest such grant that HUD awarded nationwide; the 22 grants totaled nearly $96 million. MTC will focus on a "prosperity plan" for the region. According to a statement supplied by HUD's San Francisco office, MTC received the grant because its "plan incorporates a broad region made of numerous communities with a real need to connect housing to jobs, provide transportation options for families, and generate the economic growth they need to win the future." HUD also cited the plan's ability to create middle-income jobs. The Sustainable Communities grants are the brainchild of the Obama Administration -- designed to help communities and regions improve their economic competitiveness while also connecting housing with jobs, schools and transportation. On that count, say Bay Area planners, the region needs all the help it can get. "The Bay Area has the same number of jobs in 2010 as it did in 1990 and we are the second-most expensive region in the country," said Doug Johnson, senior transportation planner with MTC. "We're seeing potentially astronomical costs for our low-income residents." Those costs have risen, say some, because the benefits of the boom in Silicon Valley and in certain urban centers, such as the City of San Francisco, have not necessarily extended to the region as a whole. And there is no formal mechanism to ensure that all parts of the region share equally in its success. "We lack any sort of comprehensive regional economic development strategy," said Jeremy Madsen, Executive Director of the Greenbelt Alliance, one of several nonprofit organizations that is partnering with MTC and ABAG on the grant. "That has kind of taken care of itself, which is both a blessing and a curse.  We have not thought comprehensively about where jobs should be going."  MTC and ABAG's approach to its Sustainable Communities Grant is to interpret "sustainability" in the broadest sense to include not only the widely ecological benefits of, for instance, compact, transit-oriented development, but also the benefits of promoting economic development in concert with land use and transportation planning. The grant recipients say that this sort of planning is crucial in a region that is expected to grow by two million people by 2040. MTC and ABAG will use the funding, to be spent over three years, to develop and implement a Regional Prosperity Plan in conjunction with local partners. The two major, interconnected areas of work are what the agencies describe as "a community-rooted process" to develop and implement a regional Economic Opportunity Strategy to expand economic opportunities for low- and moderate-income residents; and the implementation of a Housing the Workforce strategy that would create and preserve housing affordable to low-income workers. "This plan is about implementing a long-term vision for a region to be more environmentally, economically, and socially stable and prosperous," said Johnson. These programs encompass pilot projects spread among 30 participating Bay Area jurisdictions and nonprofit partners. The pilot projects include workforce training or job placement program for low- and moderate-income workers in a particular industry of opportunity; the development of small business clusters in new industries; and creation of a database that would match up low-income residents with affordable transportation and housing options. To curb housing costs, Bay Area Planners will be using the grant money to implement housing that is not only affordable for low-income residents but is also in close proximity to job centers – thus reducing housing costs without imposing onerous transportation costs on those residents who can least afford them and without perpetuating what many planners consider inefficient growth patterns. "It's…intending to make a better economy by moving away from the old model of ‘live where you want and drive an hour to work,'" said Kevin Riley, director of Planning & Inspection for the City of Santa Clara. One of the great frustrations about land use planning—especially long-range regional planning exercises, such as the Sustainable Communities Strategies that are under consideration in the state's major metro areas—is that planners must abide by population projections and activity patterns over which they have no control. Indeed, the use of land is, in many ways, predicated on the economic conditions that compel people to live and work in certain places. "This particular economic development strategy is really looking at how do we associate jobs and transit better," said Jeremy Madsen, executive director of environmental group Greenbelt Alliance. "How do we get beyond the old-style auto-oriented business park and into something that is a little more sustainable and meeting the new paradigms around planning." Allen Fernandez Smith, executive director of housing advocacy group Urban Habitat, said that the grant participants will try to answer a number of questions in the course of implementing the pilot projects: "Where do we need to build new housing stock? How can we have an early warning system where there are cities that are losing their affordable housing and turning over to market-rate, thus displacing people? What are anti-displacement strategies that cities and counties can take on?" said Smith. Smith emphasized that the answers to each of these questions must be grounded in concern for social equity, "insuring that there is inclusion and access for all people throughout the region, especially those that are most marginalized or that have been left historically behind by policies that have been crafted to keep people out." For many, the displacement of low-income residents is one of the unfortunate components of a regional economy that is skewed towards high-income jobs and towards younger residents who are willing to pay a premium for urban living.  The notion of a region-wide effort to coordinate housing and transportation may sound familiar, since it is nearly identical to the mission of the Sustainable Communities Strategies mandated by Senate Bill 375. But whereas that law compels the state's metro regions to coordinate land use and transportation planning for the sake of reducing greenhouse gas emissions, the HUD grant does so for the purpose of economic vitality and social equity. ‘"Housing the Workforce' is about making sure we are setting up affordable housing so that this workforce that we're trying to cultivate…throughout the Bay have places to live that were close to work and close to transit," said Smith.  Planners hope that the work funded by the HUD grant will offer models for the realization of the Bay Area's SCS. Johnson noted that the Regional Housing Needs Assessment, which determines how many units of housing the SCS must take into account, is primarily a "technical exercise." The RHNA does not, however, tell jurisdictions where housing should be developed and how housing should relate to transportation networks. That is, say planners, where the HUD Sustainable Communities grant will complement the SB 375-mandated SCS. "We've always had the RHNA allocation, but it's not really been a comprehensive regional strategy for how we achieve our housing goals and housing needs," said Madsen. "With the Regional Transportation Plan process and SCS process we have a lot to deal with the general land use and transportation component of good regional planning, and this grant brings in more of the specific housing and economic development piece." While the notion of marrying land use planning with economic development may sound like a powerful notion, some are concerned that this approach may be too ambitious. "The challenge is simply that you have a lot of pieces moving at the same time," said Riley, of Santa Clara. "It's a good thing but it takes a lot of time." Nevertheless, Riley said that the grant, plus the SCS planning process, represents a step in the right direction for a region that was, not long ago, considered fragmented. "It means we are all becoming more regionally adept," said Riley. I would say up until the last decade it has been very parochial, that cities care only about what happens inside their borders." Contacts: Doug Johnson, Senior Transportation Planner, Metropolitan Transportation Commission, 510.817.5846 Jeremy Madsen, Executive Director, Greenbelt Alliance, 415.543.6771 Kevin Riley, Director of Planning & Inspection, City of Santa Clara, 408.615.2450 Allen Fernandez Smith, Executive Director, Urban Habitat, 510.839.9510

Credit rating agency Moody's Investors Service downgraded by one notch all California tax allocation bonds rated Baa2 and above. Moody's is monitoring all other redevelopment bonds and may issue a downgrade in the future.  Moody's cites near-term cash flow risks surrounding the disollution of redevelopment, per Assembly Bill X1 26 and the subsequent Supreme Court decision upholding it, as the reason for the downgrade. AB X1 26 calls for successor agencies to assume RDAs' outstanding debt and to disburse funds that they receive from the state to RDAs' creditors. However, the stipulations of AB X1 26 have been criticized as being out of touch with typical bond repayment schedules. In issuing the downgrade, Moody's noted that "the implementation and potential for varying interpretations of the new legislation incrementally raises the risk that some debt service payments will not be made on a timely basis."  Though the downgrade is slight and may not have direct impacts on redevelopment projects or successor agencies, supporters of redevelopment say that the downgrade underscores their concerns over AB X1 26. The downgrade should, they say, give the governor and Legislature pause.  "It's sort of a shot across the bow," said Jim Kennedy, interim executive director of the California Redevelopment Association. The CRA has been lobbying for legislation that would extend the deadline for dissollution to April 15. "It's more important in terms of not the fairly modest downgrade...(but) in saying that there's a tremendous amount of ambiguoutiy and uncertainty in the law that needs to be corrected," said Kennedy. "If that doesn't happen, we may be seeing more than just a one notch downgrade."  Representatives of the governor's office did not respond to request for comment.  Click here for Moody's full rating update (.pdf).

Sen. Alex Padilla (D-Los Angeles) has introduced legislation that could give California's redevelopment agencies if not a reprieve then at least a stay of execution. Senate Bill 659 would push the dissolution date from Feb. 1 to April 15 in order to allow cities and agencies time to put their affairs in order -- and, presumably, to allow the Legislature to deliberate on a replacement for redevelopment before the agencies are dismantled and their employees laid off. Despite fervent support from the California Redevelopment Association and many cities and advocacy groups, the success of SB 659 is far from assured.  A recent report broadcast by the CRA indicates that SB 659 will not move forward unless it addresses a host of logistical problems that have been identified in AB 1x 26, the budget bill that authorized the dissolution of redevelopment. The CRA contends that AB 1x 26 and the dissolution process that is prescribes will lead to litigation, bond defaults, and other complications stemming from the liquidation of redevelopment agencies' assets.  CRA and its members have identified the following areas of concern:  -Many redevelopment agencies have outstanding contracts for design work on infrastructure projects, but the projects themselves have not yet been funded. Therefore, successor agencies would have to pay the design firms for designs that will, presumably, never be implemented.  -AB 1x 26 fails to respect the schedule by which property tax revenues are collected, in December and April. The Supreme Court's decision, however, calls for successor agencies to be funded May 16, meaning that, according to CRA's analysis, there may be no funds with which to honor outstanding debts. This discrepancy could lead to defaults and insurance policy claims on many payments that are due prior to May 16.  -Many bond payments are not paid off in equal, regular payments throughout the year. Section 34183(a)(2)  of AB 1x 26, however, calls for equal semiannual payments. This could result in a mismatch between the funds in successor agencies' coffers and the monies that are owed to serve RDAs' debt.  -AB 1x 26 calls for former tax increments to be pooled in Redevelopment Property Tax Trust Funds, with one trust fund for each county. CRA contends that this pooling does not respect the distinct project areas, including affordable housing, that rely on different types of financing and typically draw from funding pools that are kept separate from each other.  -The disposal of assets that are funded by tax-exempt bonds could run afoul of federal tax law.  -Agencies that received loans from their parent jurisdictions, in lieu of issuing more costly bonds, owe money to those jurisdictions that may not be covered under AB 1x 26's definition of "enforceable obligations."   -Many redevelopment agencies are members of joint powers authorities and may be party to bonds that have been issued by JPAs. AB 1x 26 does not specify how successor agencies are supposed to approach these bond obligations.  -Many agencies include employment contracts that require 120-day advance notice of termination. Successor agencies may not have funds to pay employees for this period.  CRA has identified other problems with AB 1x 26. Among the concerns are administrative costs, legal status of successor agencies, ability of RDAs to transfer properties, and the status of redevelopment plans and land us controls.

While cities around the state have been, reluctantly, agreeing to serve as undertakers for their respective redevelopment agencies, the Los Angeles City Council indicated this week that the city will not do so.  The 9-3 vote against serving as the "successor agency" that would liquidate the Los Angeles Community Redevelopment Agency's assets and oversee its existing contracts means that some other governmental entity will have to take over. The City Council vote took place after City Administrative Officer Miguel Santana released a report estimating that serving as successor agency could have cost the city up to $109 million. Some council members disputed this figure, saying that it was likely to be a high estimate.  CRA/LA, the largest redevelopment agency in the state, is distinctive among the state's redevelopment agencies for being an entirely separate entity from the city itself. It has its own, separate board of commissioners and, importantly, has its own labor agreements with its employees. CRA/LA employees are paid, on average, $109,000 annually�more than city employees are on average�and their contacts call for a 120-day notice of termination. This requirement conflicts with the Feb. 1 dissolution deadline imposed by Assembly Bill 1x 26. Therefore, a successor agency would have to pay CRA/LA employees even after the entity has been disbanded and its funds disbursed elsewhere.  The County of Los Angeles could step in, but it seems highly unlikely that county supervisors will want to assume those costs or the burden of overseeing hundreds of millions of dollars worth of obligations.  Gerry Hertzberg, policy and political director for Sup. Gloria Molina, said that no vote is planned and that if there was one, the supervisors would likely not be inclined to accept the burden.   "They don't have to take a formal vote, and I can't imagine that they would," said Hertzberg. "I don't know of anybody that's proposed it."   Hertzberg said that the relationship between the county and municipal redevelopment agencies was, as elsewhere throughout the state, a complex one. On the one hand, redevelopment agencies are accused of diverting property tax revenue that could go into county coffers. On the other hand, Hertzberg noted that CRA/LA was involved with major projects under Molina's purview, such as the Grand Avenue Project, a collection of high rises in downtown Los Angeles.  The county's demurral is would not necessarily a statement about redevelopment itself. "The county just has other priorities," said Hertzberg.  This means that responsibility for CRA/LA now falls to the state. However, the entity or department in state government that would take over has yet to be named. Critics of the dismantling of redevelopment say that it is taking place too quickly.  "What Los Angeles did is simply and indicator of the mass chaos and the problem that's associated with the dissolution date of Feb 1," said Jim Kennedy, interim executive director of the California Redevelopment Association. "Without really any ability to orderly plan for the implementation of a dissolution action and, frankly, an opportunity clean up some of the ambiguities and misstates that are in AB 1x 26."  If hundreds of cities statewide similarly passed off their former redevelopment agencies on to the state, the administrative burden could be enormous. However, signs indicate that few, if any, other cities have followed Los Angeles' lead.  "The circumstances associated with CRA/LA appear to be fairly unique," said Kennedy. Kennedy said he was aware of "only a handful of cities" that are opting not to serve as successor agencies.  Today is the deadline for cities to decide whether to serve as successor agencies or not. AB 659, sponsored by Sen. Alex Padilla, would extend the deadline for dissolution until April. That bill is pending in Sacramento.

Two bills have already hit the Legislature that would affect the wind-down of redevelopment:  SB 654 (Steinberg) Clarifies that any Low and Moderate Income Housing Fund balances will be transferred to the successor housing agency for use under current redevelopment law. (AB 26x contained conflicting sections on this point.) This bill is strongly supported by affordable housing advocates, who fear the disappearance of redevelopment funds -- totaling an estimated $2 billion annually -- that were previously set aside for affordable housing.  Status: This bill pass through the Senate Transportation and Housing Committee yesterday.  SB 659 (Padilla) Would extend the deadline for redevelopment agencies' dissolution from the current February 1 deadline to April 15. The language for this bill has not been released yet; it is expected to be heard in the Assembly Local Government Committee in the next few weeks.