Budget guts: CA financial reporting impacts of eliminating redevelopment agencies.

• Author: Ali-Imam, Ken
• Position: Governmentupdate

During their deliberations to adopt a budget for the fiscal year 1 o ending June 30, 2012, California legislators passed Assembly bills XI-26 and XI-27, which would eliminate redevelopment agencies in the state.

Such agencies are units of local government that use a portion of the property taxes collected to benefit local communities by eliminating blight, providing infrastructure, providing low- and moderate-income housing; and creating jobs and revenue by assisting business in establishing themselves within that community.

Under the legislation, redevelopment agencies will be dissolved and the funding previously assigned to them will be used to make up part of the state's budget shortfall for fiscal year 2011-12 and beyond.

However, the legislation does allow for redevelopment agencies to continue operating--at reduced funding levels if certain voluntary payments are made to the county's auditor-controller to replace a portion of the state's funding of the public school system. These voluntary payments will be made by the city that establishes the redevelopment agency from "any available funds not otherwise obligated for other uses."

Redevelopment agencies may establish a reimbursement agreement so that this money can be used to fund this payment.

If the voluntary payments are not made, the redevelopment agency will not be permitted to initiate new projects, obligations or activities after July 1, 2011. Such agencies will only be permitted to pay existing obligations as defined by this legislation.

This legislation is facing lawsuits challenging its constitutionality; The League of California Cities and the California Redevelopment Association filed a lawsuit July 18, 2011, on behalf of cities, counties and redevelopment agencies petitioning die California Supreme Court to overturn the bills XI-26 and Xl-27 on the grounds that thev violate the California Constitution. The California Supreme Court issued a stay Aug. 1 1 tor all of Assembly Bill Xl-27 and mosl of Assembly Bill X 1-26. The Court, staled, "The briefing schedule is designed to facilitate oral argument as early as possible in 2011, and a decision before Jan. 15, 2012."

A second Court order issued Aug. 17 indicated thai certain provisions of Assembly bills XI-26 and 27 were still in effect and noi affected by its previous stay, including:

* Requirements to Hie an appeal of the determination of the community remittance payment by Aug. 15;

* The requirement to adopt an Enforceable...