Eminent Domain Report

It appears the state assembly is trying to get California back on the redevelopment wagon...again. (For a brief history lesson on redevelopment, see below.)  Assembly Bill 2 (AB2), which passed the assembly earlier this month, would create new entities called Community Revitalization Investment Authorities that would have the same legal authority as redevelopment agencies, i.e., the power to issue bonds, provide low-income housing, prepare and adopt a plan for an area, and among others, acquire property using the power of eminent domain.  The legislature explains that the dissolution of redevelopment has left local government entities without any tools for financing affordable housing, community development and economic development projects.   The bill would allow government entities to "invest in disadvantaged communities with a high crime rate, high unemployment, and deteriorated and inadequate infrastructure, commercial, and residential buildings."

While the similarities to the prior redevelopment law are not surprising, there are a couple of distinct differences worth noting.  First, any area the new "authority" plans to invest in would "be required to have an annual median household income that is less than 80% of the statewide annual median income" which was not the case under the prior redevelopment law.  Back then, RDAs were only "required to conduct a study and make a finding that blight existed in a project area before they could use their extraordinary powers, like eminent domain, to eradicate blight."  In addition, once an authority meets the 80% requirement, it must also meet three of four other requirements related to requisite employment rates, crime rates and deterioration of infrastructure as well.

Second, like the RDAs, the new authorities would freeze the property taxes of the area at the time the plan is approved and then collect the tax increment to use on specific activities.  But AB2 would require that the taxing entities in the plan area, like cities, counties and special districts, agree to divert tax increment to the authority.  Local government entities can also opt-out of participation if they change their minds but will have to first repay all debts incurred to that point.

A further limitation provides that a government entity must have completed the wind-down process of its RDA and receive a finding of completion from the Department of Finance that the former RDA is fully dissolved before it proceeds with forming an authority.

If this is starting to sound familiar, then you've been paying attention.  The Legislature passed a very similar bill, AB2280, last year, which the Governor vetoed because the bill vested the program in redevelopment law by cross-referencing the Community Redevelopment Law (CRL).  Instead, AB2 incorporates portions of the CRL into it rather than cross-referencing the CRL.  The bill is currently in the Senate and as of last week, was referred out to a Senate committee for recommendation.  We will keep you informed on the status of this bill.

[A brief history lesson on redevelopment:  Redevelopment began in 1945 to assist local governments with eliminating blight through development, reconstruction and rehabilitation (Community Redevelopment Law).  1951 brought us the mechanism redevelopment agencies used to subsidize redevelopment efforts with local property taxes.  In 1976, redevelopment was tied to the housing supply when the legislature required that at least 20% of the tax increment revenue from redevelopment project areas be used to increase, improve, and preserve the supply of housing for very low to moderate income households.  And in 1993, the legislature sought to restrict redevelopment activities and limit them to predominantly urban areas.

Then, in 2011, as part of the Governor's budget plan, the legislature approved the dissolution of the state's 400+ RDAs, which went into effect in 2012, and RDAs have been stuck in wind-down purgatory since then.  In late 2014, the Governor gave new life to tax increment financing by expanding infrastructure financing districts, a move some mislabeled as a step toward "bringing back" redevelopment.]