by Daniel Frattin, Reuben & Junius LLP
As just about everyone in the real estate business knows, the California Supreme Court recently upheld AB 26, the law dissolving redevelopment agencies statewide. In the same decision, it overturned AB 27, a companion measure that would have allowed agencies to continue operating if they made payments to the state. Over the past month, prognostication about the broad impact of redevelopment’s demise has abounded in the press. Affordable housing production will slump, economic development will suffer, schools will get desperately needed funding, and so on.
Much less attention has been devoted to the nuts and bolts that have kept many developers up at night over the past month. Will the Planning Department take over the functions of the San Francisco Redevelopment Agency (“Agency”)? Will redevelopment plans still determine what gets built? Who will approve new projects in redevelopment areas? AB 26 created a bare-bones framework, providing for successor agencies to wind down existing redevelopment obligations. However, the creation of successor entities and details of implementation are left for local governments to implement. In this update, we cover San Francisco’s succession planning, which answers some, but by no means all, of these questions.
A Primer on AB 26
AB 26 was passed in June of last year and provided for the dissolution of redevelopment agencies on October 1, 2011. The Supreme Court stayed dissolution, until it had time to hear a challenge to the law brought by the California Redevelopment Association. Because many of the statutory deadlines had passed by the time the Supreme Court upheld AB 26 in California Redevelopment Assn. v. Matasantos, it extended most of them by four months. Hence, all 400+ redevelopment agencies in the state will now cease to exist on Wednesday of next week.
While the agencies themselves will close up shop, AB 26 provides for existing obligations and assets to be taken over by successor agencies, in most cases the city or county that created the redevelopment agency. These successor agencies are to continue to make payments and perform existing obligations. Agency funds, including proceeds from the sale of agency assets, are to be transferred to the county auditor-controller and distributed to other government entities, including school districts, according to state funding formulas. Tax increment monies are to be deposited in county-administered trust funds, which will first be used to pay existing obligations with the surplus distributed as above.
AB 26 also provides for the creation of oversight boards to oversee the fiscal management of successor agencies. The oversight boards are to ensure that funds are properly allocated between existing obligations and the entities entitled to any excess redevelopment funds. In most jurisdictions, power on the oversight boards will be diffused among representatives from municipalities, counties, school boards, community colleges and special district.
However, AB 26 includes special rules for oversight boards in consolidated city-counties, of which there is only one in the state: San Francisco. Here, the mayor will have a total of four appointees. Three are unrestricted; the fourth must represent the employees of the San Francisco Redevelopment Agency. All mayoral appointees are subject to confirmation by the Board of Supervisors. The remaining three oversight board members are to be appointed by the Superintendent of Schools, the Chancellor of the California Community Colleges, and BART.
for more on this issue please visit: The End is Nigh - Redevelopment Agency Dissolves February 1
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The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
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