Purpose and Scope of the Law

“In 1945 the Legislature enacted the Community Redevelopment Law, authorizing cities and counties to establish redevelopment agencies to remediate urban decay.” (Health & Saf. Code § 33000 et seq.; see also California Redevelopment Association v. Matosantos (2011) 53 Cal.4th 231, 245-46.)

“Under this method [of financing], those public entities entitled to receive property tax revenue in a redevelopment project area (the cities, counties, special districts, and school districts containing territory in the area) are allocated a portion based on the assessed value of the property prior to the effective date of the redevelopment plan.” (Matosantos, supra, 53 Cal.4th at 246; see also Sec. 33670.) “Any tax revenue in excess of that amount — the tax increment created by the increased value of project area property — goes to the redevelopment agency for repayment of debt incurred to finance the project.” (Id.) “In essence, property tax revenues for entities other than the redevelopment agency are frozen, while revenue from any increase in value is awarded to the redevelopment agency on the theory that the increase is the result of redevelopment.” (Matosantos, supra, 53 Cal.4th at 246-47; see also § 33670.) “The excess or increased property tax revenue that was purportedly generated by redevelopment (and that was thus allocated to the redevelopment agency) was referred to as “tax increment.” (Id. at 246-47.) By 2011, redevelopment agencies were receiving 12 percent of all property tax revenue in the state. (Id. at 247.)

Governance of the Redevelopment Agency

“A redevelopment agency may be (and usually is) governed by the sponsoring community's own legislative body.” (California Redevelopment Ass'n v. Matosantos (2011) 53 Cal.4th 231, 246 citing 33200; Coomes et al., Redevelopment in California (4th ed. 2009) pp. 21–23.) “An agency is authorized to ‘prepare and carry out plans for the improvement, rehabilitation, and redevelopment of blighted areas.’” (Matosantos, supra, 53 Cal.4th at 246 citing sec. 33131(a).) “To carry out such redevelopment plans, agencies may acquire real property, including by the power of eminent domain (Sec. 33391(b)), dispose of property by lease or sale without public bidding (Secs. 33430, 33431), clear land and construct infrastructure necessary for building on project sites (Secs. 33420, 33421), and undertake certain improvements to other public facilities in the project area (Sec. 33445). (Matosantos, supra, 53 Cal.4th at 246.)

“While redevelopment agencies have used their powers in a wide variety of ways, in one common type of project the redevelopment agency buys and assembles parcels of land, builds or enhances the site's infrastructure, and transfers the land to private parties on favorable terms for residential and/or commercial development.” (Matosantos, supra, 53 Cal.4th at 246 citing Coomes, at 16–19; see, e.g., Marek v. Napa Community Redevelopment Agency, supra, 46 Cal.3d at 1075.)

The 20 Percent Set Aside for Low and Moderate Income Housing

“In 1976, the Legislature amended the Community Redevelopment Law to require redevelopment agencies to set aside at least 20 percent of their tax increment to increase, improve, and preserve the supply of low and moderate income housing in their territorial jurisdiction.” (Sec. 33334.2; Sec. 33334.3; Craig v. City of Poway (1994) 28 Cal.App.4th 319, 325-26.) “The court refers to this as the ‘20 percent set aside requirement’ or the ‘20 percent housing set aside.....’ [t]his money had ‘to be held in a separate Low and Moderate Income Housing Fund until used.’” (Sec. 33334.3(a).)

The Dissolution Law

In June 2011, the Legislature enacted AB1X 26, eliminating both redevelopment agencies and the tax increment funding that financed them. In December 2011, the California Supreme Court upheld the constitutionality of AB1X 26 in Matosantos, supra, 53 Cal.4th 231. Since then, the Legislature has amended the provisions of AB1X 26 several times. The court refers to AB1X 26 and the various amendments thereto as the “Dissolution Law.” One of the primary goals of the Dissolution Law was to increase the share of property taxes going to cities, counties, schools and other local entities by reallocating to them the tax increment formerly allocated to redevelopment agencies. (See, e.g., Matosantos, supra, 53 Cal.4th at 241, 250, 263; 2011 Stats., 1st Ex. Sess., ch. 5, Sec. 1.) A complete reallocation, however, would not happen immediately because the Dissolution Law did not eliminate redevelopment agencies’ existing obligations even though the agencies themselves were eliminated. Once redevelopment agencies were dissolved, the Legislature established successor agencies to wind down their affairs. (Secs. 34173, 34177.) Among other things, successor agencies are responsible for making payments due on the former redevelopment agencies’ “enforceable obligations.” (Sec. 34177, subds. (a), (c).)

The Dissolution Law provides the term “enforceable obligation” includes “[a]mounts borrowed from, or payments owing to, the Low and Moderate Income Housing Fund of a redevelopment agency, which had been deferred as of the effective date of the [Dissolution Law],” provided the successor agency’s oversight board approves the repayment schedule. (Sec. 34171(d)(1)(G).)