Last month, Gov. Brown signed into law two trailer bills, ABX1 26 and ABX1 27, which will eliminate all redevelopment agencies in the state unless cities agree to transfer a large amount of money from these agencies to school and other local services. As of now, San Leandro’s redevelopment agency cannot enter into any new contract or start any new project. The city must decide by October 1st whether it will dissolve the agency or pay the fee. If it decides to pay, it must pass an ordinance committing itself to do so. While the City’s analysis is preliminary, the expected payment will be somewhere north of $5M for 2012, and over $1M a year thereafter. As the state has been taking about $1M a year from the city’s redevelopment agency for the last decade, that annual payment should not make much difference in the working of the redevelopment agency long term, though some projects may have to be postponed. The $5M payment, however, would come out mostly from the city’s funds for affordable housing and it’s unlikely that it would be repleted.
Before this law was passed, the City’s Redevelopment Agency transferred most of its assets to the City and had the City assume its obligations. The new laws invalidates these transfers, however.
At this point, the City has several choices:
– Dissolve the Redevelopment Agency and get out of the business of doing redevelopment.
– Dissolve the Redevelopment Agency and have the city be in charge of redevelopment directly, while fighting the state in court to keep the former redevelopment agency’s assets/tax revenues.
– Pass the ordinance in question and be prepared to make a partial payment of the $5M fee in January 2012.
The League of California Cities, meanwhile, is suing the state at the California Supreme Court level to halt the enforcement of these laws. It argues that the laws violate several constitutional restrictions on the state’s power to allocate property taxes as well as the recently passed Prop 22, which specifically prohibits the state from taking money away from redevelopment agencies. The state’s argument is that it’s not taking money away – it’s allowing redevelopment agencies to stay open in exchange for a voluntary payment. A basic principle of law is that the state is not allowed to do indirectly what it cannot do directly, so there is a good chance the League will ultimately prevail – whether it would do so soon enough to halt this process is another matter altogether.
The most likely scenario for San Leandro is to pay the $5M fee and go on its merry way. It will continue to have funds to do redevelopment, and citizens will have fewer fights with the city about unwanted affordable housing projects.