Eminent Domain Report

Despite being destroyed and dismantled, redevelopment in California has been born once again, this time reincarnated under the name of "Infrastructure Financing Districts."  Last week, Governor Brown signed into law AB 471, which amends section 53395.4 of the California Government Code to allow infrastructure financing districts to finance a project or portion of a project located within a redevelopment project area or former redevelopment project area.

Infrastructure financing district law now provides a mechanism to finance projects that would have otherwise been financed by redevelopment agencies but for their elimination.  Local agencies can now form an infrastructure financing district over a redevelopment project area to finance redevelopment projects that were not yet completed prior to the dissolution of redevelopment agencies.  The newly formed infrastructure financing district can issue bonds to pay for real or other intangible property and certain public capital facilities of communitywide significance, and such bonds will be secured by any increase in property tax revenue over the assessed value of the property within the infrastructure financing district.

The new law also encourages local agencies to wrap up their redevelopment affairs, as a redevelopment project cannot be financed until the successor agency to the former redevelopment agency receives a finding of completion.  Similarly, the law makes clear that any new debt or obligation created under infrastructure financing district mechanism will be subordinate to enforceable obligations of the former redevelopment agency.  In other words, the new law may accelerate the redevelopment wind-down process.

The question now is whether or not infrastructure financing districts will be successful to re-invent redevelopment projects.  The infrastructure financing district idea passed the Legislature in the early 1990s as an alternative to redevelopment, permitting the use of tax-increment financing for infrastructure without requiring a finding of blight. But the idea has rarely been used, primarily because they require two-thirds voter approval to be created or issue bonds.  While there was discussion about reducing this requirement, as part of the new law the the two-thirds vote requirement was not changed.