State Supreme Court Upholds Law Eliminating Redevelopment Agencies

In a decision that will reverberate throughout the state, the California Supreme Court upheld a state law Thursday that eliminates redevelopment agencies and struck down a law that allowed the agencies to pay to stay in operation.

The ruling in California Redevelopment Association v. Matosantos clears the way for the cash-strapped state to implement Assembly Bill 26 and dismantle nearly 400 redevelopment agencies and use their assets to fund education programs. Supporters of the redevelopment agencies contended that the state did not have the authority to eliminate them, but the court disagreed.

"[The state's] power includes the authority to create entities, such as redevelopment agencies, to carry out the state's ends and the corollary power to dissolve those same entities when the legislature deems it necessary and proper," the court's ruling said..

Community redevelopment agencies for decades have allowed cities and counties to team with private developers to renovate blighted neighborhoods. The agencies can acquire property through eminent domain and can provide funding through tax increment financing, which allows the agencies to collect the higher property taxes after redevelopment to pay back the debt incurred by financing the projects.

The agencies were authorized starting in 1945 and strengthened with the 1951 passage of the Community Redevelopment Law, which was intended to help local governments cope with urban decay.

While upholding AB26, the state's high court also struck down Assembly Bill 27, a companion bill that allowed redevelopment agencies to remain in existence, if they made payments to the state. Both AB26 and AB27 were signed by Gov. Jerry Brown after they were approved in June by the state Legislature.

Los Angeles Mayor Antonio Villaraigosa in a statement commenting on the ruling said the city's Community Redevelopment Agency has created more than 18,400 jobs this year alone in Los Angeles and has helped transform communities such as North Hollywood and Bunker Hill.

"Many will see this decision as a set back, but I see it as an opportunity for California to step forward and responsibly invest in our future," Villaraigosa said.

Villaraigosa said he plans to work with lawmakers in Sacramento and across the state "to develop a responsible path forward that invests in our schools, our safety and puts the 14 million unemployed Californians back to work" and would invite mayors from across California, Gov. Jerry Brown, Speaker of the Assembly John Perez and Senate President Pro Tem Darrell Steinberg to meet next month to discuss long-term solutions.

There are no Community Redevelopment Agency projects currently in City Councilman Bill Rosendahl's 11th District, which includes Venice, Del Rey and Playa del Rey, said Tony Arranaga, a spokesman for Rosendahl.

Los Angeles County Supervisor Zev Yaroslavsky, whose 3rd District includes a portion of Venice, applauded the state high court's decision.

"Decades ago, redevelopment was a sound idea designed to invigorate blighted communities within our cities and counties," Yaroslavsky said in a statement. “Unfortunately, over the years it evolved into a honey pot that was tapped to underwrite billions of dollars worth of commercial and other for-profit projects that had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense.  All of this has come at considerable expense to counties and cities which are increasingly starved of cash to meet their basic obligations."

He said state and local government should work together to reform redevelopment law to limit its application to removing blight while preventing abuses.

The California Redevelopment Association and League of California Cities issued a statement following the decision, vowing to work with state legislators to develop legislation to revive redevelopment in order to protect local communities, job creation and the economy. 

CRA President Julio Fuentes said in the statement, “Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement. The legislative record is abundantly clear that Legislators did not intend to abolish redevelopment. We hope to work with state lawmakers to come up with a way to restore redevelopment.”

The majority decision was written by Justice Kathryn Mickle Werdegar and signed by five other justices. Chief Justice Tani Cantil-Sakauye signed a separate opinion in which she favored upholding AB27, the pay to stay compromise.

The full text of the decision is attached.