by Ferdie F. Franklin (Orange Office)

CaliforniaRedevelopment agencies have been an important part of the political and economic landscape of the State of California since shortly after the end of World War II.  However, on December 29, 2011, the California Supreme Court confirmed the constitutionality of a law that dissolves such agencies while finding a companion law that would have allowed them to exist, subject to agreeing to certain financial compromises, unconstitutional.  Therefore, redevelopment agencies have been dissolved in this state, effective February 1, 2012. 

gaslamp_sign-webRedevelopment Agencies have been responsible for substantial improvements throughout the state.  The transformation of the Old Pasadena Historic District and the revitalization of San Diego's Gas Lamp Area are two commonly cited examples of successful redevelopment, accomplished through redevelopment agencies.  However, such agencies have come under increasing criticism, both for siphoning off property tax revenues needed for other purposes (the legislation dissolving the agencies declares that approximately 12% of statewide property tax revenues are taken by redevelopment districts) and for numerous alleged abuses.  There have been many claims that such agencies were too often used as a way to facilitate overly cozy deals with developers. 

Govenor Jerry Brown has been a vocal critic of redevelopment districts and spearheaded a movement to enact legislation dissolving them.  As a result, the legislature passed two laws in 2011 relating to such districts:  One law dissolved them and the second would have allowed them to exist, notwithstanding the first law, subject to a compromise whereby the agencies would have been required to share a portion of the property tax revenues they received.

The California Redevelopment Association, an umbrella organization for the roughly 400 redevelopment agencies throughout the state, brought a lawsuit challenging the constitutionality of these laws.  The California Supreme Court, in the case of California Redevelopment Association v. Matosantos, held the first law (dissolving the agencies) constitutional and the second law (allowing agencies to continue to exist, if they agreed to enter into a compromise regarding sharing tax revenues) unconstitutional.  In short, the law, as it now stands, dissolves redevelopment agencies throughout the state, effective February 1, 2012, without any ability for such agencies to continue to survive by entering into compromise agreements, as proposed in the law that the Supreme Court held unconstitutional. 

The law does provide for a winding down process, whereby the entities (cities and counties) that created the redevelopment agencies can continue to receive revenues until obligations incurred by those agencies (typically bonds used to help finance construction) are paid off.  Once that has occurred, however, all such revenues will be treated the same as any other property tax income.  Further, the ability of redevelopment agencies to enter into agreements creating new obligations has already been terminated. 

The Supreme Court's decision upholding the law dissolving the agencies held that since the legislature created the entities in the first place, the legislature could dissolve them.  Thus, there is nothing to prevent the legislature from enacting new legislation allowing redevelopment agencies to exist.  There was intense lobbying to delay the effect of the law (no doubt in hopes that with more  time enough support could be generated to undo it).  However, February 1 came and went without legislative action.  It is possible, in fact likely, that there will be Ferdie-headshot-web-namecontinuing efforts to re-instate the law authorizing redevelopment agencies, perhaps in a modified form.  Unless and until such legislation is enacted, however, redevelopment agencies are a thing of the past in the State of California. 

If you have questions about the impact of the California Redevelopment Association v. Matosantos case, feel free to contact the author at This email address is being protected from spambots. You need JavaScript enabled to view it.  or any attorney at the Firm with whom you are working.