Update: California Budget Wars - Legislature Approves Elimination Of Redevelopment Agencies

Author(s): Margo N. Bradish, Ofer Elitzur, Andrew K. Fogg, Stephen C. Ryan, Lisa D. Weil

Source: CCN Client Alert

6/29/2011

Late last night, the California State Assembly and Senate passed a comprehensive budget package that was immediately forwarded to Governor Brown who has already indicated that he will sign this budget. Balancing the budget relies, in part, upon the elimination of redevelopment agencies ("RDAs") as we have reported previously:

California Budget Wars - Legislature Approves Elimination of Redevelopment Agencies 

The final form of the legislation pertaining to the elimination of RDAs (the "RDA Legislation") and its legislative history may be found at the following links:

http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/abx1_26_bill_20110628_enrolled.pdf

http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/abx1_27_bill_20110628_enrolled.pdf  

We received inconsistent reports yesterday evening that Governor Brown already signed the RDA Legislation, although this morning's reports have not confirmed that he has done so. Regardless, it appears nearly certain that the RDA Legislation will be signed by the Governor prior to the close of the State's fiscal year this Thursday. As we have reported previously, it is likely only "binding, enforceable agreements" entered into prior to the enactment of the RDA Legislation will be honored.

The California Redevelopment Association ("CRA") continues to argue that the RDA Legislation is unconstitutional and that CRA will challenge the law if the RDA legislation is signed by Governor Brown. State Senate President Pro Tem Steinberg stated last night that he was "confident" as to the constitutionality of the RDA Legislation. It is unclear whether any legal challenge could be heard on any kind of expedited basis, whether any sort of court stay might be imposed during the pendency of a challenge, or whether any challenge is likely to be successful. It appears clear, though, that it will be very difficult to finance projects based upon the availability of RDA funding unless there is a demonstrable record that such funding was committed pursuant to an enforceable agreement entered into prior to the RDA Legislation going into effect.

Our Land Use & Natural Resources and Multifamily & Affordable Housing Teams will report more comprehensively on these events in the near future, but we wanted to alert you to this game changer immediately. These changes are complex and there are many uncertainties surrounding the interpretation and enforcement of these new rules. Certainly, projects that are counting on RDA funding need to proceed cautiously.

To view the full client alert, please click here and here.