End of Redevelopment in California: More on Yesterday's Supreme Court Decision

Yesterday, we reported briefly on the Supreme Court’s decision in California Redevelopment Assn. v. Matosantos.  As many of you undoubtedly know by now, the outcome was the nightmare redevelopment agencies feared most, but that many (including us) had forecast after listening to oral argument last month. 

The Court upheld ABX1 26, allowing the dissolution of California’s redevelopment agencies to proceed, but struck down ABX1 27, the “voluntary” buy back program that would have allowed redevelopment to continue.  In particular:

  • The Court had little difficulty upholding ABX1 26, the law eliminating California’s redevelopment agencies. The Court reasoned that because redevelopment agencies were created by the Legislature, the Legislature could also eliminate them:  “A corollary of the legislative power to make new laws is the power to abrogate existing ones. What the Legislature has enacted, it may repeal.” 
  • When it came to ABX1 27, the Court felt differently.  All but Chief Justice Cantil-Sakauye concluded that the “voluntary payment” portions of ABX1 27 run afoul of Proposition 22, adopted by voters in November 2010. The Court further concluded that the balance of ABX1 27 was not severable from the improper payment provisions, and the Court struck down ABX1 27 in its entirety. 

Though as a technical matter the CRA obtained a split decision (successfully attacking one of the two laws), the outcome represents a self-described “worst case scenario” that is obviously not what redevelopment proponents had in mind when they filed the lawsuit.  That said, the result is not too surprising to those who followed the oral argument, which focused largely on three issues:

  1. The fact that redevelopment agencies were created initially by the Legislature, which would, absent some constitutional prohibition, mean that the Legislature could also abolish them.
  2. The fact that the “voluntary” payments under ABX1 27 were not particularly voluntary, since failure to make them meant the redevelopment agency would be eliminated.  And, if not voluntary, the payments seemed to run afoul of Proposition 22.
  3. The question of whether the two laws were so intertwined that striking down one (presumably, ABX1 27) would necessitate striking down both. 

Much as it telegraphed during oral argument, the Supreme Court started by concluding that ABX1 26 – the dissolution bill – passed constitutional muster.  Rejecting the argument that Proposition 22 created a constitutional right for redevelopment agencies to exist, the Court found no discussion of redevelopment agencies taking on constitutional stature, and without some explicit mention of such a profound shift in the law, the Court would not imply any such intent.  As the Court summarized, the drafters of legislation do “not, one might say, hide elephants in mouseholes.” 

The Court moved on to ABX1 27, focusing its attention on the “voluntary” payment program.  The Court concluded that ABX1 27 was substantively indistinguishable from earlier efforts by the State to shift property tax increment from redevelopment agencies to the State’s educational revenue augmentation funds (“ERAFs”) – the very circumstance Proposition 22 sought to prevent. 

The Court then put the nail in the ABX1 27 coffin: “A condition that must be satisfied in order for any redevelopment agency to operate is not an option but a requirement.  Such absolute requirements Proposition 22 forbids.” 

Finally, the Court turned to the severability question, needing to decide whether ABX1 26 could stand alone, or whether it must fall given ABX1 27’s fate. The Court responded to claims that a number of legislators had reportedly opined that the Legislature would not have wanted such an outcome by looking at the statute’s specific severability clause stating the opposite, concluding that

whatever individual legislators may have said at one point or another, what the Legislature actually did establishes it would have passed [ABX1 26] irrespective of the passage of [ABX1 27], and that [ABX1 26] is volitionally separable. Consequently, it is severable.

Thus, the Court’s final conclusion: ABX1 26 stands, while ABX1 27 falls. 

What Happens Next: the Mechanics? The Court examined some of the mechanics of ABX1 26’s implementation in light of the partial stay and the passage of time that has rendered some of the law’s time frames impossible. The Court concluded that it had the power to reform the law, and it chose a superficially simple solution: all initial dates in ABX1 26 are shifted four months, representing the time period during which the Supreme Court’s partial stay was in place. 

But there is a twist. For any obligations that span multiple fiscal years, the Court did not reform the deadlines. Instead, only those trigger dates which fall before May 1, 2012, get shifted. This means, for example, that for the distributions required to be made on January 16 and June 1 every year, the January 16, 2012, distribution is now due May 16, 2012, but the June 1, 2012, distribution (and all future distributions) remain due as set forth in ABX1 26. 

What Happens Next: Implementation? Moving beyond the technical issues, the real question is what happens to redevelopment obligations and assets. This will be the subject of considerable discussion in upcoming weeks, but there are a few, bright-line rules people should know:

  1.  For obligations incurred prior to January 1, 2011, the obligations remain valid and binding. 
  2. For deals under negotiation when the Supreme Court stay was issued, the redevelopment agencies have no power to consummate the deals. 
  3. Remaining redevelopment assets will be sold. 
  4. If the agency transferred any assets to its city/county or another public agency after January 1, 2011, the transfer is potentially subject to ABX1 26’s “claw back” provisions. 

What Happens Next: a Legislative Compromise? Finally, entering into the realm of pure speculation, there is already some murmuring about a possible legislative compromise designed to reinstate some form of redevelopment. Whether any such compromise sees the light of day remains to be seen. And even if it does, considerable obstacles may exist. 

In particular, any legislative effort to reinstate some form of redevelopment must overcome the very problem that led to the demise of ABX1 27: how to fund “Redevelopment 2.0” without running afoul of Proposition 22. Moreover, a legislative compromise only works if the Governor approves it, and Governor Brown’s early comments do not suggest he is dissatisfied with the Court’s holding. 

For more information on the opinion and its aftermath, please join us for a webinar, Supreme Court Upholds Elimination of Redevelopment in California - Now What? It will take place on January 4, 2012, at 2:00 p.m. 

Supreme Court Upholds Law Eliminating California's Redevelopment Agencies

Today, the California Supreme Court issued its much-anticipated opinion in California Redevelopment Assn. v. Matosantos, the case challenging ABX1 26 and ABX1 27.  In a decision foreshadowed by the tone of last month's oral argument, the Court upheld ABX1 26, but struck down ABX1 27 as a violation of California's Proposition 22:

  • "Assembly Bill 1X 26, the dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution."
  • "A different conclusion is required with respect to Assembly Bill 1X 27, 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 ... expressly forbids the Legislature from requiring such payments."

This means that the law eliminating California's redevelopment agencies stands, while the law that would have provided a mechanism to reinstate redevelopment agencies upon making certain "voluntary" payments was struck down.  The bottom line:  the decision ends redevelopment in California.

We will have more on the opinion in the very near future.  In addition, we will be hosting a free webinar on Wednesday, January 4, 2012, at 2:00 p.m. to discuss the opinion, its implications, and what happens from here.  We hope you'll join us, you can register here

UPDATE, 2:05 p.m.  While we digest the opinion and attempt to write something meaningful about it, Robert Thomas has already managed two substantive blog posts on the case today, including a short summary of the opinion and a good collection of early reports on the decision

How Tax Cuts and Eminent Domain Got Tangled Up

The debate over the extensions of some of the Bush-era tax cuts have been making national news for some time.  It's splattered all over the newspaper and has its own running commentary on the political talk shows. 

But today, there's a different twist for those of us who deal with eminent domain.  Congress is debating the extension of the payroll taxes yet again, but this time, a major eminent domain issue is wrapped up in the fray.

Specifically, Republicans in Congress had said they planned to couple the extension of the tax cuts with a requirement to fast-track approval of a controversial pipeline project that President Obama previously planned to delay until at least 2013

The Keystone XL pipeline is intended to link oil fields in Canada with refineries in Oklahoma more than 1,500 miles away.  It has been the subject of considerable controversy, largely from environmentalists, but also from property-rights advocates objecting to the massive eminent domain that the project would entail.  

A November 7 article by Jonathan Mariano, Keystone XL Pipeline Relies on Eminent Domain for Success, explains:

The fight against the Keystone XL pipeline has been mostly an environmental fight, but quite frankly, not everyone is an environmentalist and may not resonate with this message. However, eminent domain may just provide enough common ground for the environmentalist and non-environmentalist alike.

So what happened?  This afternoon, Republicans in the House passed the payroll tax cut package, 234-193.  Included in the package is a requirement to accelerate approval of the Keystone XL project.  But the Republicans' "victory" may be illusory, as explained by Lisa Mascaro in a December 13 Los Angeles Times article, House approves payroll tax cut extension, with strings attached:

But the Republican win is expected to be short lived, as the bill has limited chances in the Senate, where Democrats oppose the GOP priorities . . . added to the bill to win Republican votes, including one to accelerate the controversial Keystone XL pipeline.

(As an amusing aside for those of us who have heard the name Susette Kelo more times than we can possibly imagine, one of the most vocal opponents of the Keystone project and its use of eminent domain is named, ironically enough, Sue Kelso.  An October 17 article in the New York Times, Eminent Domain Fight Has a Canadian Twist, talks about Ms. Kelso's part of the story.)

Supreme Court Hears Arguments on the Future of Redevelopment

The Supreme Court heard oral arguments yesterday in California Redevelopment Assn. v. Matosantos, the action filed by the California Redevelopment Association, League of California Cities and others challenging the constitutionality of ABX1 26 and ABX1 27.  Based upon their questions it appeared that the Justices were satisfied that ABX1 26, the bill abolishing redevelopment agencies, passes constitutional muster.  However, ABX1 27, the bill allowing for their reinstatement by the making of  “voluntary” payments, seemed to be on much shakier grounds.  The question then becomes:  are the two so inexorably intertwined that they must stand or fall together, or is 27 severable from 26?  The future of redevelopment in California may depend on how the Justices answer this question.  


A. What the Legislature Creates, the Legislature Can Abolish

Based on their questions, the Justices seemed convinced that, on a stand alone basis, AB1x 26 would be constitutional.  Redevelopment agencies are, after all, creatures of statute.  The Legislature which created redevelopment agencies has the power to abolish them.

Counsel for the Petitioners conceded this issue, but argued that the vice of 26 is not that it dissolves redevelopment agencies per se, but that it dissolves them and transfers their tax increments to schools and special districts in violation of Proposition 22.  The Legislature cannot use a constitutional means to achieve an unconstitutional end.  Of course, this argument hinges upon the contention that the Legislature enacted 26 in an effort to coerce cites and counties with redevelopment agencies to participate in 27’s “Voluntary Alternative Redevelopment Program,” which Petitioners claim is not at all voluntary.

The real test then becomes whether ABZX1 27 is or is not constitutional and, if it is unconstitutional, is it severable from ABX1 26? 

B. Is the “Voluntary Alternative Redevelopment Program” Truly Voluntary?

The Justices tested the Petitioners’ contention that reestablishment payments made by cities and counties under 27 would inevitably come from local tax revenue, in violation of Proposition 22.  As many of our readers will recall, Proposition 22 amended the California Constitution to prohibit the State from redirecting revenue from locally imposed taxes to pay for the State’s obligations.  Attorneys for Petitioners, Respondents and the Intervener, County of Santa Clara, all seemed to agree that payments under ABX1 27 would most likely come from local tax revenues. 

Counsel for the State argued that this was not prohibited by Proposition 22 because it merely prohibits the Legislature from making a law “requiring” tax increments to be diverted to state obligations.  ABX1 27 was drafted to avoid this prohibition by creating a “Voluntary Alternative Redevelopment Program” in which cities or counties may elect to participate.  Many of the Justices seemed skeptical of this argument.  More than once the term “ransom payment” was used to characterize the payments required by 27.

The Justices probed further as to what sources sponsoring agencies might have to make the ABX1 27 payments that would not otherwise be prohibited.  There seemed to be a consensus that if the payments made under 27 were deemed to be involuntary, they would indeed run afoul of Proposition 22. 

C. The Severability Clause in ABX1 27 

At various points the question was posed:  what happens to 26 if we decide that 27 is unconstitutional?  Counsel for the CRA and League of Cites argued that since 26 was enacted solely to compel cities to make the payments under 27, the two bills are not functionally severable.  He added that to uphold 26 and strike down 27 would be the worst of all possible outcomes for his clients.  Counsel for the State took a more nuanced approach, but ultimately acknowledged that his clients would be satisfied with such a result.  Counsel for the County of Santa Clara hammered hard on the theme that 26 should be allowed to stand while 27 should be struck down.  He argued that for too long redevelopment agencies have siphoned off money desperately needed by counties to meet their financial obligations. 

In the end, it may all come down to Section 5 of Chapter 5 of ABX1 27 which says, in essence, that if any provisions of 27 are held invalid, the provisions of ABX1 26 shall continue in effect.  Counsel for Petitioners argued that this clause is not conclusive.  He asserted that the Court must be able to conclude the Legislature would have passed 26 even if 27 had failed.  The legislative history of these two bills, he argued, shows that it was never the intent of the Legislature that redevelopment be abolished with no means for its reestablishment.  

Did the Legislature utilize a constitutional means in the adoption of ABX1 26 to achieve an unconstitutional end? Is ABX1 27 truly a “voluntary” program so as to not run afoul of Proposition 22?  Can the Court find that 26 and 27 are so joined at the hip as to not be functionally severable, despite the severability clause in 27?  These are the questions that the Justices are now weighing and which will be answered in their decision, which is expected to be handed down before January 15, 2012.

Stay tuned….

Follow Supreme Court Arguments on Future of Redevelopment Live

Last Friday I spoke at the CLE Eminent Domain Conference in San Francisco.  The topic of my talk was "The Death And Possible Rebirth of Redevelopment in California."  I spoke on the current state of limbo in which redevelopment agencies find themselves as a result of the passage of ABX1 26 and ABX1 27 and the ensuing lawsuit challenging their constitutionality.  While I mentioned that the California Supreme Court would be hearing arguments on November 10th, I neglected to mention how to access the webcast of the proceedings.  For those interested in watching the arguments, direct your browser at 9:00 a.m. on Thursday, November 10, 2011 to the California Channel at www.calchannel.com
Back in August, the Court agreed to hear the case on an expedited basis, so as to reach a decision before Jan. 15, 2012, when the first payments under AB1x 27 would be due.  The positions staked out by the two sides were neatly summarized in statements given this morning on Sacramento's Capital Public Radio by H.D. Palmer of the Governor's Department of Finance and Chris McKenzie of the League of California Cities.

Palmer: "We believe the law is clear, that these agencies were created by an act of the legislature, and similarly, they can be dissolved by an act of the legislature."

McKenzie: "It's an abuse of their power - you can't violate the constitution and claim, oh, but we really are just using this other power that we have."

We expect to see these conflicting arguments probed and challenged by the Supreme Court Justices on Thursday.  Check back here later in the week for our take on the arguments and how they were received.

Redevelopment: Supreme Court Denies Request for Clarification and Other Random Thoughts

As probably everyone following this blog already knows, redevelopment is under attack in California.  While some might assume the attack flows from continued outrage over the Supreme Court's Kelo decision, the reality is actually quite different.  Here in California, the driving force is not moral outrage, but budgetary crisis. 

As I learned earlier this week at the IRWA Chapter 67 lunch meeting, Governor Brown's plan to eliminate redevelopment is not part of some long-planned effort.  According to a presentation by one of my partners, Gale Connor, when now Governor Brown was Mayor Brown of Oakland in recent years, he actually benefited from and backed several redevelopment efforts.  It is only now, when facing nearly impossible budget shortfalls, that Governor Brown has taken this path. 


So where do things stand?


Status of the Lawsuit:  The lawsuit over ABX1 26 and ABX1 27 continues in the Supreme Court.  The respondents (those supporting the laws) filed their brief on September 9; the responsive brief from the California Redevelopment Association is due September 24.  (By the way, I've seen these bills referred in several iterations including "X1 26," 1x 26," "26 1X," and various other combinations.  According to the official bill on the legislature's website, the correct designations are ABX1 26 and ABX1 27.  I'll try to use that designation consistently from now on, but I make no promises.) 


Earlier this week, the Court also denied the CRA's request for clarification/modification of the partial stay entered last month. 


Other Recent Developments:  In an effort to avoid the new legislation and the murkiness of the lawsuit and the Supreme Court's partial stay, a few agencies have adopted a different tactic, seeking a legislative end run around the whole mess.  Whittier reportedly took the first crack at it, seeking a legislative exemption from the new law regarding the sale of the site of the former Fred C. Nelles Youth Correctional Facility.  


While initial press reports suggested this tactic might succeed, it ultimately failed in the legislature.  A September 12 article in the Whittier Daily News, "Defeat of Nelles development bill likely to delay project, Whittier officials say," describes the effort and its ultimate failure in more detail.   If Whittier had managed to garner legislative support, one must wonder whether Governor Brown would have signed the law. 


Other agencies are reportedly trying similar tactics, including an effort by Monrovia related to the Gold Line Extension Project, which is described in a September 7 article in the Altadena Patch, "Gold Line Extension Could be Delayed by Redevelopment Lawsuit." According to an article in today's Arcadia Patch, the Monrovia City Council has hired a lobbying firm to help with those efforts, but the legislative session has now ended, so it seems unlikely anything will happen on this front in the immediate future.


Finally, one "clean up" bill was passed before the legislative session ended.  SBX1 8 passed in both the Senate and Assembly on September 8, but it has not yet been signed by the Governor.  If signed, it would make several changes to ABX1 26 and ABX1 27.  We'll provide additional details about those changes when and if the Governor signs the bill. 

California Redevelopment Heading for the 2012 Ballot?

The California redevelopment circus continues today, as California's Secretary of State approved two potential referendums for the 2012 ballot.  One involves rural homeowners and payments for fire services; for our purposes, it's not very exciting (and since I'm pretty sure I don't live in a rural area, I'm not going to join that fray). 

But the other one is more interesting.  It's a proposal promoted by eminent domain opponent Marko Mlikotin to overturn AB X1 27.  For those who have trouble keeping score with all the bill numbers, this is the one that allows California's redevelopment agencies to avoid extinction by paying money back to the State (the payments the CRA challenges as "extortion" and a violation of Proposition 22.) 

In other words, assuming Mlikotin can collect the 504,760 signatures required over the next two months, California's voters will have the opportunity to overturn the bill that allows redevelopment agencies to stay alive, but (at least so far), not the ability to overturn the bill that eliminates them, AB X1 26.

Of course, by the time the state-wide election occurs in 2012, the Supreme Court likely will have ruled on the CRA's lawsuit, which, if successful, could render the referendum moot.  (Would we still have to vote on it if it qualifies for the ballot before the Supreme Court acts?)

Redevelopment Lawsuit: Response by California Attorney General

The battle continues over redevelopment in California.  Yesterday, the Attorney General filed an "Informal Opposition to Petition for Writ of Mandate."  The document is 20 pages long, with a 4-page list of Legal Authorities, so it really isn't very "informal"; still, that's what she called it.

Not surprisingly, Attorney General Kamala Harris takes the positions that:

  1. AB1X 26 and AB1X 27 are constitutional, and
  2. The CRA has not justified a stay in their enforcement. 

The Attorney General does not challenge the CRA's decision to file its lawsuit directly in the California Supreme Court.  To the contrary, the Attorney General "requests that [the] Court exercise its original jurisdiction," that it "set [the] matter for expedited briefing," and that it thereafter "[deny] the petition . . . on the merits."

The Opposition starts with an Introduction that chronicles the State's financial woes and bemoans the fact that as "California struggled with massive budget deficits," redevelopment agencies saw their coffers grow.  It goes on to explain that since redevelopment agencies are "creatures of statute," the Legislature has the power to dissolve them (i.e., that AB1X 26 is constitutional).  Finally, it explains that AB1X 27 does not violate Proposition 22 because the proposition precludes only "forced shifts and transfers from RDAs" - as opposed to the "voluntary" transfers AB1X 27 offers. 

The CRA's responses to these arguments are not hard to divine; what remains to be seen is how the Supreme Court views the issues. 

One thing does seem likely in light of this "Informal Opposition."  Given that the Attorney General agrees with the CRA that the matter is sufficiently urgent to warrant the Supreme Court's original jurisdiction, I suspect that the Court will take the parties up on the invitation, and that it will engage on this issue.   The outcome is a bit murkier. 

The Future of Redevelopment: From Elimination to Reform?

As we have previously reported (Fate of Redevelopment Remains in Limbo), the bills to eliminate redevelopment agencies have languished due to Republican opposition.  With so many redevelopment agencies scrambling to use or secure redevelopment funds in an effort to protect them from being taken by Sacramento and with shortfalls in property tax revenues due to declining property values, redevelopment agencies are no longer as tempting a target for bridging the State’s budgetary shortfall.  

While redevelopment agencies may survive this budget cycle, the fight over their abolition has subjected them to pointed criticism for various alleged abuses.  If redevelopment is to survive in the long run, some of those abuses, whether real or perceived, must be remedied.

A new bill, SB 286, introduced by Senator Rod Wright (D-Los Angeles), with the backing of the California Redevelopment Agency, is aimed at doing just that.  This bill takes aim at many of those hot button issues that have made redevelopment so controversial in California.

For example, Palm Desert’s use of redevelopment money to renovate greens and bunkers at a local golf resort created a major uproar.  SB 286 addresses this head-on by prohibiting the use of redevelopment money for golf courses.  To blunt criticism of the use of redevelopment funds for professional sports arenas, and perhaps to supplant AB 1234 (a blanket prohibition on use of redevelopment funds for stadiums), SB 286 would require local voter approval before tax increment funds could be spent on professional sports facilities. 

Criticism that redevelopment agencies are spending money on economic development that would otherwise be earmarked for education is partially addressed by excluding from tax increment revenues transferred to a redevelopment agency any funds considered educational entity property tax revenues.  The catch is that this would apply only to tax increment revenues generated from redevelopment projects established after January 1, 2012. 

The bill is scheduled to be heard in the Senate Governance and Finance Committee on Wednesday.  That hearing should give us some indication as to whether it will garner bipartisan support.  We will continue to track this bill and provide updates on a regular basis.

The Calm Before the Storm

Despite daily rumors to the contrary, neither chamber took up the issue of redevelopment last week.

Both the Senate and Assembly held brief floor sessions Friday morning without voting on either SB 77 or AB 101, the bills eliminating redevelopment. While both houses remained on-call over weekend and today, the next floor sessions are not scheduled until Tuesday, March 29.

Meanwhile, there have been intensive lobbying efforts in support of the CRA and League of California Cities Alternative solution. Essentially, they are proposing that redevelopment agencies voluntarily suspend their housing set-aside for 2011-2012 with an equivalent amount of funds being contributed to local school districts in redevelopment project areas. In exchange, the agency would be allowed to extend the life of its project area for two years. Alternatively, they could contribute up to 10% of their non-housing tax increment revenue stream each year to local school districts for 10 years, in exchange for which they could extend the life of their project areas for one year for each percentage of tax increment so contributed.

Under either scenario, money contributed to local schools by redevelopment agencies could be counted by the State as an offset against its Proposition 98 guarantees to the school district.

Because this would be a “voluntary” program, it would not violate Proposition 22, which prohibits the State from seizing redevelopment money. However, it is unclear whether this proposal is gaining any serious traction.

In view of this public silence, it may be tempting to think that the abolition of redevelopment could slip through the political cracks for this budget cycle. This would be a mistake.

Last Thursday, Ventura Mayor Bill Fulton, publisher of the land-use newsletter California Planning & Redevelopment Report was quoted as bluntly stating “I do believe that probably redevelopment will not survive in anything close to its current form.” Speaking at a redevelopment conference in Sacramento on Thursday, Fulton urged cities to look for alternatives to traditional redevelopment for financing urban revitalization.

Speaking at the same conference, Steve Shea, an aide to Senate President Pro-tem Darryl Steinberg, said that Brown’s proposal to end redevelopment “will fall into place as the larger budget deal come together.”

Thus, if the Governor is unable to place the tax extension on the June ballot and instead is forced to proceed with a ballot initiative in November, it is possible that the he may likewise take a new approach to his attack on redevelopment. Some alternative to AB 101 and SB 77 may be in the works. Whether these would be subsequent trailer bills introduce for a simple majority vote or some alternative approach remains unknown.

What is fairly certain is that this battle is far from over.

The Budget and Redevelopment: Plan B?

Another day has passed with no apparent movement on the two remaining elements of the Governor’s budget.  Rumors are circulating that plans are afoot for bypassing Republican legislators by placing a tax measure on the November ballot. 

Officially, the Governor’s office remains focused on the original plan.  In fact, the Governor’s spokesman, Gil Duran, was quoted as saying that it was “a lie” that the Governor has decided on a November election.  However, other anonymous sources say that while Brown is continuing to negotiate with Republicans to put the tax extension on a June ballot, he is also considering two alternatives if those negotiations fail.

The first would be to place a tax extension on the June ballot by a simple majority vote in the Legislature.  An opinion from the Legislative Counsel Bureau, solicited by Senate Republican Leader Bob Dutton, suggests that a tax proposal could be placed on the ballot with majority vote so long as it addresses a statutory tax initiative already passed by the voters.  Some Republicans have therefore argued that the Governor is seeking political cover by pursuing a two-thirds vote of the Legislature. 

On the other hand, not obtaining a two-thirds vote, as seems to be required by proposition 26, would be fraught with political and legal perils.  The more likely alternative would be to place an initiative on the November ballot.  It has been suggested that such an initiative could include concessions to Republican interest such as regulatory reforms and a spending cap.  This "Plan B" is not without its own difficulties.  Assuming that some announcement is made this week, proponents may have as little as three weeks to collect the hundred of thousands of signatures needed to qualify in time for the November election.

What has not been discussed, at least publically, is whether the Governor has a "Plan B" for redevelopment.  As we discussed in Friday’s post, if the bills abolishing redevelopment were reintroduced as non-urgency legislation, they too could be pass on a simple majority vote.  What is uncertain is whether some pro-redevelopment Democrats would break ranks and oppose the legislation.  After all, their vote to kill redevelopment placed many Democratic legislators at odds with their urban constituencies.  If the Governor were to propose a November ballot initiative which includes significant concessions to conservative interest, some of those Democratic legislators may be more willing to vote against killing off redevelopment.

UPDATE, 5:10 p.m.:  Perhaps to avoid the possibility of the defections described above, rumors are now afoot that Floor sessions for both the Senate and Assembly are possible tomorrow.  There may be an effort by the leadership to have one or both houses vote on a measure providing for the total elimination of redevelopment agencies by majority vote.  Stay tuned...

Fate of Redevelopment Remains in Limbo

Both the Senate and Assembly have adjourned for the weekend, but what a week it has been in the battle over the future of redevelopment.

The bill to kill redevelopment, SB 77, came up for multiple votes in the Assembly on Wednesday. The bill initially garnered only 50 of the 54 votes needed for the two-thirds majority. The Governor, working out of the Speakers office just off of the Assembly floor, personally lobbied and cajoled legislatures throughout the day. Eventually, he won over two wavering Democrats and one Republican, Chris Norby of Orange County. By the time of the bill’s final call late Wednesday night, the vote remained 53-23 - one vote short.

Though SB 77 was back on the Assembly's agenda for Thursday, Democrats did not take up the issue again, presumably because they are still hunting for that last vote.  Meanwhile, the Senate has yet to take any action on the parallel bill before it, AB 101. 

The Governor's main budget bill was approved Thursday on a party line vote, passing 25-15 in the Senate and 52-26 in the Assembly. You may realize that these numbers fall short of the two-thirds majority we've been discussing all week.  To get the main budget bill passed, the Democrats for invoked the first time Proposition 25, which changed the legislative vote required to pass a budget from two-thirds to a simple majority.

Having wrapped up the main budget bill with nearly $14 billion in spending reductions, the revenue side of the equation remains in limbo. The Governor must get his proposed tax extensions on the ballot and obtain voter approval in a June election. He also needs approximately $2.2 billion in redevelopment money to bridge the remaining gap for the upcoming fiscal year.

For both of those items, two Republicans in each chamber must cross over and vote with their Democratic colleagues, because the Governor needs a two-thirds majority vote. Or does he?

Some Republicans have argued that there is legal authority for placing the tax extension on the ballot by a simple majority vote of the Assembly and Senate. Democrats counter that Proposition 26, passed by the voters in November, requires a two-thirds margin for increasing taxes or fees

Abolition of redevelopment could also likely be passed on a simple majority vote if SB 77 and AB 101 were reintroduced as non-urgency legislation. However, this is not a particularly desirable solution for the Governor because rather than taking effect at the commencement of the upcoming fiscal year, they would not take effect until January 1, 2012.  Thus, a substantial portion of the $2.2 billion in redevelopment money needed to balance the Governor’s proposed budget would not be available, leaving a gap in this year’s budget.

Since there is a consensus that the constitutionality of abolishing of redevelopment agencies will ultimately be decided by the courts, such a gap may exist in any event. As we discussed in previous post, the California League of Cities and the California Redevelopment Association have already laid out their game plan for challenging these measures.

They will argue that they violate the constitutional amendment implemented by Proposition 22, which prohibits the State from directly or indirectly compelling the use of redevelopment tax increment for the benefit of the State or any agency of the State. The Governor’s proposal to divert tax increment to fund Medi-Cal and trial courts - both state programs - seems to run afoul of this prohibition.

The Governor’s office has expressed confidence that the proposal does not violate Proposition 22. With the abolition of redevelopment agencies, there are no longer any redevelopment tax increment funds. However, a lawyer from the office of the Legislative Council of California has added a cautionary note. In testimony before the Senate and Assembly Budget Conference Committee, an attorney from that office acknowledges that the proposed legislation is “problematic” because Proposition 22 “specifically prohibits the legislature from enacting a statute that requires an (redevelopment) agency to transfer tax increment money for the benefit of the State..”

Another Dramatic Legislative Session, But (So Far) Redevelopment Still Intact

The Assembly has been in session since 11:00, and as best I can tell (I haven't been able to watch the feed the entire day), it has not yet taken up SB 77 or redevelopment again today.  My understanding is that further discussion is planned before the session ends, and that SB 77 was - at least at the beginning of the session - "item #7" on the agenda. 

In the meantime, the 11:00 session started a bit late this morning, and both houses almost immediately convened in caucuses.  Later, they moved forward with a few of the budget bills, taking them up and (apparently) approving them based on a simple majority vote after some controversial procedural maneuvering. 

To add a bit of color, the relatively tame debate of yesterday has also taken a decidedly more negative tone today, as allegations of "fear mongering" resulted in demands for apologies.

Now (just after 4:00 p.m. Thursday), the Assembly is waiting for some bills from the Senate, and it still has not taken up SB 77.   In fact, it's starting to look like SB 77 may not come back to the Assembly floor today, as the Assembly speaker's office is saying the measure is still one vote short, so a floor vote may be delayed until that last vote is found.

We'll let you know if anything happens as the session progresses. 

P.S. Happy St. Patrick's Day (I wonder whether a bunch of kegs of green beer would help move the process along).

UPDATE, 5:35 p.m.  The Assembly just adjourned for the day, without further discussion of SB 77.

Bill to Eliminate Redevelopment Agencies Still One Vote Short as Assembly Adjourns for the Night

As the evening has worn on in the Assembly, SB 77 has been called to a vote several more times.  What started as 50 yes votes (four short of passage) has now become 53 "yes" votes - now a single vote away. 

Just before 7:00, the vote was 53-23, with 3 still abstaining.  Another vote was called at about 7:10, but the tally remained 53-23.  The plan at that time was to adjourn at 8:30 barring some change, but discussions continued until well past 9:00.

At about 9:20 p.m., the vote was called one more time.  It remained 53-23, one vote short.  At that point, the Assembly adjourned; it is scheduled to reconvene at 11:00 tomorrow morning. 

By the way, if you want to follow things live, The California Channel is airing the session live.  We'll see what tomorrow brings.  Stay tuned.

UPDATE,  7:30 a.m. Thursday:  For a detailed summary of yesterday's events, see John Myers' article, "Brown Cajoles, GOP Demurs."

Initial Vote on Bill to End Redevleopment Falls Short

SB 77 - the budget trailer bill to eliminate redevelopment agencies in California - has been debated on the Assembly floor much of the afternoon.  When it finally came time to vote at a little after 4:00 p.m. this afternoon, it was still unclear whether Governor Brown would receive the two-thirds vote necessary. 

As the votes came in, it became obvious that (1) the votes, as expected, would fall largely on party lines, with Democrats approving the bill and Republicans rejecting it, and (2) that the final result was going to be very close, one way or the other. 

Ultimately, the vote came in with a substantial majority voting yes - but not quite two-thirds.  Rather, Governor Brown fell four votes short, with Assemblyman Chris Norby from Orange County casting the lone "yes" vote from the Republican aisle.  The final tally:  50 yes and 21 no, with 8 abstentions.  (Apparently, there was one person missing; the Assembly contains 80 members, meaning a two-thirds majority requires 54 votes.)

UPDATE, 5:10 p.m.:  Just moments ago, the Assembly voted on several other components of the Governor's plan: SB 74, SB 80, and SB 82 all fell a few votes short, while SB 72 passed, with exactly 54 votes. 

Then, just before 5:00 p.m., SB 74 was called again.  This time, SB 74 passed, with 56 votes.  SB 80 also passed during another vote right at 5:00, with 54 votes, and SB 82 passed, also with 54 votes.

Finally, the Assembly called for another vote on SB 77, the redevelopment bill.  At 5:05 p.m., the Assembly once again failed to obtain the required two-thirds majority; it remained stuck at 50 yes votes. 

I'm guessing this isn't the end.  More to come. 

Vote on Governor's Plan to End Redevelopment Planned for Today

It looks like Governor Brown's proposal to end redevelopment as part of his overhaul of California's budget may come to a vote on both the Assembly and Senate floors today.  AB 101 and SB 77 are scheduled for a 1:00 p.m. vote, and both include within them the plan to eliminate redevelopment agencies.  They require a 2/3 vote for passage.

In the meantime, the California Redevelopment Association is promoting an alternative proposal that it hopes will be presented on the floor.  They claim that the CRA proposal will:

  • Provide significant funding to schools which could also help close the state’s budget deficit;
  • Avoid the unconstitutional provisions of the Governor’s proposal that would lead to contentious and costly legal battles; and
  • Continue local redevelopment’s contributions to reviving the state’s economy and supporting hundreds of thousands of jobs.

For more on the story, see the article in the Huffington Post, "California Legislature To Vote On Governor's Budget Proposal Wednesday."  It should be an exciting day.

A More Personal View of the Redevelopment Fight from National City

We've blogged a lot in the past two months about redevelopment issues and the Governor's plan to help right California's budget by, among other things, eliminating redevelopment agencies.  But most of what we've written has viewed redevelopment from the 30,000 foot level. 

For policy-making decisions, viewing the big picture is hugely important.  But a case making news this week out of National City reminds us that the redevelopment fight is also quite personal. 

The Community Youth Athletic Center has been fighting what it perceives as an attack on its very existence for nearly four years.  The battle began not as a right to take challenge in an eminent domain case, but as a challenge to the overall redevelopment plan for the area and, in particular, its determination that about 700 properties - including the CYAC's boxing gym - qualify as blighted. 

This week, CYAC's lawsuit is finally reaching the trial court for a decision on the merits, after years of procedural wrangling that includes a 2009 decision by the Court of Appeal in CYAC's favor.  CYAC claims that the agency failed miserably in its efforts to justify an extension of its 1995 redevelopment plan.  Part of its complaint arises from changes to California law that followed 2005's infamous Kelo decision, providing additional scrutiny and procedural hurdles to the way agencies make blight findings.  According to CYAC, in 2007 the agency simply did things the same half-hearted way it always had, ignoring completely the newly enacted requirements. 

CYAC is represented by the Institute for Justice, self-described as the "nation's only libertarian public interest law firm" - and the firm that pushed the Kelo case to the U.S. Supreme Court in 2005.  Among other things, they've prepared a short video about the CYAC, its mission to help at risk kids, and its fight with the city.  If nothing else, it's really well done:

So what's going to happen?  It depends on the outcome of the current trial.  If the CYAC prevails, it may get the agency's redevelopment plan invalidated, removing the threat of eminent domain to build planned luxury condominiums - at least until such time as the agency adopts a new, properly documented redevelopment plan. 

Moreover, regardless of whether the agency prevails in the current lawsuit, it claims that it has no plans to condemn the CYAC's property.  But if the agency wins, it could change its mind.  And if it does, it's probably safe to assume CYAC will fight the government's right to take its property.  

Turning back to the big picture, if the Governor gets his wish and abolishes redevelopment agencies, the whole issue may evaporate into thin air.  With no redevelopment agency, there's no redevelopment plan, no blight finding, and no (even hypothetical) plan to turn the CYAC's gym into condos. 

Finally, one might wonder why this battle is taking place now, if the agency says it has no plans to condemn the property.  Doesn't it make more sense to have this fight only when (and if) the government decides to condemn?  Probably, but that's not the way the law works. 

Under California law, if someone like CYAC wants to challenge the government's blight findings, it has to do it within a limited period of time after the plan is adopted (or, as here, amended).  Failure to challenge the blight findings now could make it difficult - or even impossible - to challenge them later as part of a right to take challenge. 

So the parties are in court this week fighting about a possible eminent domain action that may never even have happened in a dispute that may be rendered moot if the Governor's plan is adopted.

Vote on Redevelopment Agencies' Future Uncertain

Just when it looked liked we had reached the eleventh hour in the California's redevelopment battle, redevelopment agencies appear to be getting at least a temporary stay of execution. Governor Brown had declared a March 10 deadline for a vote on his proposal to overhaul California's budget, including "disestablishing" redevelopment agencies. 

But on Monday, those efforts stalled.  In an open letter to the Governor, five key Republican senators announced:

Although it is clear that you [the Governor] engaged in our conversation seriously, it appears we have reached an impasse.

In other words, don't expect a vote by your self-imposed deadline.  Even the Governor seemed to acknowledge the setback on Monday, admitting that "it might take a few more days than (the target date) at the rate we're going." 

The behind-the-scenes political wrangling undoubtedly continues, and while we all await final word on the fate of redevelopment, the agencies whose future lies in the balance continue to work to secure funding commitments, while commentators continue to debate the issue. 

A March 8 article in the San Francisco Chronicle, Jerry Brown makes right move on redevelopment
takes the Governor's side, telling disgruntled redevelopment proponents who forecast "doomsday scenarios" if the plan is approved to "join the club," in which "no individual or public agency is immune from the effects of a disastrous economic situation."

A March 7 article in Voice of San Diego, In a World Without Redevelopment ... may sum the issue up the best:

In reality, the end of redevelopment — and it's looking likely the Legislature will sign off on it — will be a nasty mess with the climax likely to play out in a courtroom rather than an empty office building.

Finally, earlier today I had a chance to listen to one of the strategists working with the California Redevelopment Association in its efforts to save redevelopment agencies from the death chamber.  Ken Lee of Rosenow-Spevacek Group, Inc. reported today at the IRWA Chapter 67 monthly meeting that while things remain uncertain, efforts continue to try to find a less drastic solution. 

Mr. Lee also discussed some (perhaps) unintended consequences of the Governor's proposal, including a potential impact on the ability to remediate contaminated properties.  The Polanco Act is a key tool in the government's arsenal to clean up Brownfield sites, often in conjunction with eminent domain.  But the Polanco Act is part of the redevelopment law, meaning it may well get thrown out along with everything else if the Governor gets his way. 

Finally, he noted a public meeting taking place tonight at the Buena Park City Hall, a self-described "Campaign to Oppose State Budget Elimination of Redevelopment Agencies, and Urge Legislators to Respect the Will of Voters via Prop. 22."  (If you attend, please let me know how it goes.)

As always with this rapidly moving story, stay tuned.

Summary of Obama Administration's Infrastructure Budget Proposal

Nossaman's Infrastructure Practice Group regulary provides updates on infrastructure projects and finance issues across the country on its blog, Infrainsightblog.com.  When the group provides an update that we think is informative for our readers, we try to mention it here. 

One recent article by our Infrastructure Group, "New Surface Transportation Legislation Likely to Encounter Many Roadblocks in the Coming Months," seems particularly useful.  The article indicates that the Obama Administration has the passage of a multi-year surface transportation bill high on its legislative agenda, and its new budget proposal pushes for a $556 billion surface reauthorization bill.  John Mica, the Republican Chairman of the House Committee on Transportation and Infrastructure, however, has warned transportation stakeholders that a Republican bill this year might contain only $250 billion in new budgetary authority over the next six years.  Mica is instead looking to alternative measures in an effort to increase revenues through transportation-related taxes.

A few other items of note:

  • Fuel taxes are currently inadequate to keep pace with transportation funding, yet they're unlikely to increase in this economic climate.
  • Vice President Joe Biden and Transportation Secretary Ray LaHood seek to expand investment in the nation's high-speed rail, but the House Appropriations Committee has limited transportation spending and is pushing for cuts (including cuts of $1 billion for high speed rail and $224 million for Amtrak).
  • The US Department of Transportation will seek to fund projects that "give the most bang for the buck," as opposed to formula funding.
  • California state and local agencies are pushing to streamline the environmental process by allowing the state to assume most federal responsibilities for environmental documents, which will, in turn, allow "concurrent" -- rather than consecutive -- federal/state review of projects (and thereby cut down the time it takes from design to implementation of a project).

Check out the full article for yourself and get a sense of what President Obama's budget proposal seeks to accomplish.

Agencies Scramble to Secure Redevelopment Funds as New Legislation to Abolish Redevelopment Agencies Surfaces

Around California, agencies are scrambling to use or secure redevelopment funds in an effort to protect against anticipated legislation to abolish redevelopment agencies in California.  We've been following the story for weeks, but things are really heating up now. 

As just a few examples from the past couple of days:

While all this is going on, the Governor's proposal to abolish redevelopment agencies is moving forward.  On Wednesday, the Department of Finance posted information on the budget trailer bill language proposed to effect the Governor's proposal.  The draft, dated February 23, 2011, is entitled "Redevelopment Agency Dissolution and Succession." 

We'll have more on the proposed legislation once we've had time to analyze it. 

New Salvo in Battle Over Redevelopment

In a report issued in advance of today’s Senate Subcommittee hearing on the issue, the Legislative Analyst's Office reiterated its support for the Governor’s call for an end to redevelopment in California.  While acknowledging that redevelopment does lead to economic development within redevelopment project areas, the report asserts that there is no reliable evidence that it attracts business to the state or increases overall regional economic development. 

This may all be well and good, but analyzing the issues this way creates a subtle - but important -shift in the argument.   Redevelopment agencies' statutory charge is to eliminate blight, a cause that seems lost in the LAO's report and its focus on whether redevelopment constitutes an effective engine for statewide economic development.

Indeed, the report suggests that a redevelopment agency might attract businesses to a redevelopment project area that were previously located elsewhere in California.  While this results in an increase in property tax revenue in the project area, the report suggests that this is a zero sum game, as the project area’s gain is some other region’s loss.  Once again, the statutory purpose of redevelopment, the elimination of blight, is given short shrift in the analysis.

Interestingly, the report suggests that the Governor’s proposal does not go far enough.  While the Governor proposes to use redevelopment funds to offset state General Fund and K-12 education costs for 2011-2012, thereafter, redevelopment funds would not be used to offset the state’s payments for K-12 and junior colleges.  The LAO assessment suggests that if future revenues are treated generally as property taxes, the state’s ongoing share of costs for K-12 costs could be gradually phased out.

The LAO report acknowledges that “dissolving redevelopment will be complicated and disruptive.”  Ordinarily, it would recommend that the state phase out this program over several years or longer to minimize the disruption and abrupt ending it would likely engender.  However, given the state’s extraordinary fiscal difficulties, the report suggests that such a gradual phase out may not be the best option.

Battle Over the Future of Redevelopment in California Rages On

In the wake of the Governor’s proposal to abolish all redevelopment agencies, State Controller John Chiang announced that his auditors “would be reviewing” 18 redevelopment agencies.  As he stated in his press release,

The heated debate over whether the RDAs are the engines of local economic job growth or are simply scams providing windfalls to political cronies at the expense of public services has largely been based on antidotal evidence.

These reviews, designed to “assist lawmakers in their budge debates” will therefore focus on how the targeted RDAs define a “blighted area,” whether they are appropriately paying for low-and moderate-income housing and how much RDA officials and employees are being compensated for their services. 

At the other end of the spectrum, supporters of redevelopment are gearing up for the initial legislative hearings. We can expect a vocal presence by local officials and stakeholder at the first hearings in the Senate and Assembly Budget subcommittees on February 3rd and 7th respectively. 

Meanwhile, the Legislative Analyst’s Office has identified a number of unresolved legal, financial and policy issues implicated by the Governor’s proposal:

  • Does the state have the authority to immediately dissolve all redevelopment agencies?
  • What entities will serve as the successor agencies? 
  • What happens to redevelopment agencies’ physical assets? 
  • Will there be an ongoing funding source for low-and moderate-income housing?

We will be following these issues as they unfold over the course of the next several weeks and will post regular updates here.

Battle Over Redevelopment Agencies' Future Continues in California

Earlier this month, we reported on the Governor's budget proposal, which includes the bold plan to "disestablish" (my new favorite word) redevelopment agencies as part of his plan to shore up California's budget.  We then told you about how the budget proposal interacts with Proposition 22, passed last November. 

Not surprisingly, the story is far from over.  A January 21 article in the Los Angeles Times by Patrick McGreevy, "Cities may sue governor over his redevelopment proposal," reports that earlier today, more than 100 mayors and city council members came together to condemn Governor Brown's proposal,

calling it an illegal money grab and warning that they will sue the state if it is adopted.

Within a few hours, the Governor's office reacted, claiming the proposal was perfectly legal:

Redevelopment agencies were created by an act of the Legislature, and they can be eliminated by an act of the Legislature. It's time for all of us, including local government leaders, to set aside narrow perspectives and turf wars and act as Californians first to address the state’s budget deficit.

I'm guessing things are just getting started.  Be prepared for a wild ride. 

Governor's Response to Redevelopment Agencies About Proposition 22: The Nuclear Option

The large pool of tax increment revenue flowing to the state’s 400-plus redevelopment agencies has long made a tempting target for a cash strapped State.  Time and again Sacramento has dipped into this pool to offset budget deficits.  Local interests have fought back, both at the ballot box (e.g., 2004's successful Proposition 1A "Protection of Local Government Revenue"), and in the courts.  Sometimes local interests gained the upper hand and sometimes the advantage went to the State.

Proposition 22, approved by the voters in November, was intended by its backers to be the ultimate trump card:  a constitutional amendment protecting local government funding sources from State "raids."

Before Proposition 22, the State had the power to require redevelopment agencies to shift revenues to local school districts for purposes of reducing State General Fund costs for education and other programs.  Recently, this resulted in the State requiring redevelopment agencies to shift $2 billion dollars, or roughly 15% of total redevelopment revenues, to schools over a two year period.

Proposition 22 changed all of that.  It amended Section 25.5 of Article XIII of the California Constitution to limit the ability of the State to modify the allocation of ad valorem property tax funds.  With the exception of funds appropriated to fund low-to-moderate income housing, Prop. 22 imposed an absolute prohibition on the State's ability to transfer taxes allocated to redevelopment agencies to or “for the benefit of” the State, any agency of the State, or any other jurisdiction.  (Article XIII, Section 25.5(a)(7).)

To address long term systemic deficits, the Governor's proposed budget for 2011-12 "calls for a vast and historic realignment of government services in California."  At its core, the “realignment” involves the shifting of responsibility for various programs and the funding thereof, from the State to local governments.  This would remove $5.9 billion dollars in program costs from the State’s books as those costs would now be borne by counties.

This realignment is to be paid for in the short term by an extension of four temporary tax increases.  With or without a comprehensive “realignment,” tax revenues previously allocated to redevelopment agencies would be redirected to offset State Medi-Cal and court costs as well as schools and other local agencies. 

This is precisely what Proposition 22 was designed to prevent.  The Governor has a simple solution:  abolition of all redevelopment agencies.  The reasoning goes that since redevelopment agencies were created by legislative enactment (Health and Safety Code sections 3300, et seq.), they can likewise be abolished by legislative enactment.  No redevelopment agencies means no special allocation of tax increments, which in turn means tax revunes otherwise allocated to redevelopment agencies would be distributed to cities, counties, and school districts in amounts proportionate to their share of the base county wide property tax.  As explained by the Governor’s Budget Director, Anna Matosantos, “If the legislature eliminated redevelopment agencies, then it’s just property tax.”

Governor Brown's Budget Proposes Major Changes to Redevelopment in California

It should come as no surprise that the budget proposal issued by Governor Brown today contains some painful cuts.  California remains in the midst of one of the worst economic cycles in history, and its budget shortfall has reached historic proportions.  According to the Governor, as he takes office, California's budget shortfall totals $25 billion - yes, that's Billion, with a "B." 

For me, I am particularly disturbed by proposed cuts to education; the UC system, which provided me with both my undergraduate and law degrees, may face numerous cuts, including a general, as-yet-to-be-determined expenditure reduction of $500 million.  (According to a letter from UC Regents President Mark Yudof, the proposal would mean that "the collective tuition payments made by University of California students for the first time in history would exceed what the state contributes to the system's general fund.")

But in my professional capacity, the most notable impact is almost certainly the proposal related to redevelopment and, more specifically, redevelopment agencies.  The Governor's proposed budget would effectively eliminate redevelopment agencies in California.  The plan includes:

  • "prohibit[ing] existing [redevelopment] agencies from creating new contracts or obligations effective upon enactment of urgency legislation;
  • "disestablishing" redevelopment agencies, effective July 1;
  • using huge portions of the agencies' existing revenue streams over the next few years to help pay off existing debts; and
  • creating successor agencies to manage existing debt service, which is expected to take 20 years.

The bottom line: "After 2011-12, the money available after payment of RDA debt would be distributed to schools, counties, cities, and non-enterprise special districts for general uses."

Not hard to imagine that this will be one of the hotly contested issues in the Governor's proposal.  We'll let you know what happens as the story develops.