BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1275|
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THIRD READING
Bill No: AB 1275
Author: Torres (D)
Amended: 9/1/11 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 6/22/11
AYES: Wolk, DeSaulnier, Hernandez, Kehoe, La Malfa, Liu
NO VOTE RECORDED: Huff, Fuller, Hancock
SENATE JUDICIARY COMMITTEE : 3-0, 7/5/11
AYES: Evans, Corbett, Leno
NO VOTE RECORDED: Harman, Blakeslee
ASSEMBLY FLOOR : 78-0, 5/23/11 - See last page for vote
SUBJECT : Redevelopment: agency contracts
SOURCE : Western Center on Law and Poverty
DIGEST : This bill provides that a contract or other
instrument entered into by a redevelopment agency may be
declared by a court to be null and void if the court
determines that the agency has (1) exceeded their authority
or abused its discretion; (2) entered into a contract that
violated the agencies powers or obligations; or (3) assumed
obligations that impaired its ability to meet obligations
under the Community Redevelopment Law. This bill
additionally prohibits a redevelopment agency from
delegating an obligation to decide, determine, or act to
another person, as specified, and makes clarifying changes.
CONTINUED
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Senate Floor Amendments of 9/1/11 allow courts to declare
redevelopment agencies' contracts and instruments to be
null and void if the courts make specified determinations.
ANALYSIS : Existing law, the Community Redevelopment Law
(CRL), authorizes the establishment of redevelopment
agencies in communities in order to address the effects of
"blight", as defined, in those communities and requires
those agencies to prepare, or cause to be prepared, and
approve a redevelopment plan for each project area.
(Health and Safety Code Section 33100 et seq.)
Existing law authorizes each agency to make and execute
contracts and other instruments necessary or convenient to
the exercise of its powers. (Health and Safety Code
Section 33125)
This bill provides that the above authority to make,
execute, and amend contracts is subject to the limitations
and obligations imposed on an agency by the CRL.
This bill additionally authorizes an agency to make and
execute amendments to contracts and other instruments,
subject to the limitations and obligations imposed on an
agency by the CRL, as may be necessary or convenient to the
exercise of its powers, including, but not limited to,
amendments to conform a contract or other instrument to the
redevelopment plan, an amended redevelopment plan, a
current state law or local ordinance, or to comply with a
court order, as specified.
This bill would provide that, notwithstanding Code of Civil
Procedure Sections relating to validating proceedings, a
contract or instrument entered into by an agency, or a
particular severable provision of that contract or
instrument, may be declared by a court to be null and void
if the court determines that the contracts violate the law
or public policy.
Existing law provides that when a decision, determination,
or other action by the agency or legislative body is
required, neither the agency nor the legislative body shall
delegate the obligation to decide, determine, or act to
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another entity unless a provision of the CRL specifically
provides for that delegation. (Health and Safety Code
Section 33121.5)
This bill additionally prohibits delegation of an
obligation to decide, determine, or act to person unless a
provision of the CRL specifically provides for that
delegation. The prohibition on delegating decisions does
not prevent administrative officers or employees from
making decisions that are consistent with the decisions of
the redevelopment agency or the underlying city or county's
legislative body.
Background
The California Constitution and the CRL gives local
officials the power to eradicate blight, and requires those
agencies to prepare, or cause to be prepared, and approve a
redevelopment plan for each project area. Redevelopment
officials have the power to divert property tax increment
revenues to pay for long-term debt, and, in order to
support affordable housing, existing law requires
redevelopment officials to annually set aside 20 percent of
the gross amounts of their property tax increment revenues
into a Low and Moderate Income Housing Fund.
This bill seeks to address issues raised in the case of
Fontana Redevelopment Agency v. Torres (2007) 153
Cal.App.4th 902 where the Fontana Redevelopment Agency
(RDA) repeatedly failed to set aside the required 20
percent of property tax increment revenues, and, whose
actions were validated by the lower courts. That
validation occurred through the filing of validating
lawsuits, which can be filed by public officials to
validate their actions, contracts, agreements, and bonds.
Successful validation suits arguably act to reassure
private investors and public agencies that their decisions
are reliable. For redevelopment decisions, opponents have
60 days to oppose validating suits; 90 days for decisions
that adopt or amend redevelopment plans �SB 1206 (Kehoe),
Chapter 595, Statutes of 2006]. In the case at issue
regarding validation of a settlement and $40 million bond,
the Court of Appeals, Fourth Appellate District, held:
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What the record inescapably demonstrates is Fontana RDA's
lack of compliance with the required 20 percent
contribution for affordable housing since 1987. Instead,
all tax increment revenues appear to be diverted to
Ten-Ninety to pay off almost a billion dollars in
interest. Any previous findings made in 1981 that
payments toward the infrastructure benefited affordable
housing were made under the law and circumstances
existing at the time, not in 2003 when the new tax
allocation bonds were proposed. The present and future
benefits to affordable housing appear to be nonexistent.
Although defendants may not be able to challenge earlier
actions by Fontana RDA, they should be able to curtail
this most recent effort to evade the statutory obligation
to provide and promote affordable housing. ( Fontana
Redevelopment Agency v. Torres (2007) 153 Cal.App.4th
902, 915)
In response to the above case, this bill provides that a
contract or other instrument entered into by an agency, or
a particular severable provision of the contract or other
instrument, may be declared by a court to be null and void
if the court determines that the agency has (1) exceeded
its authority or abused its discretion; (2) entered into a
contract that violated the agency's powers or obligations;
or (3) assumed obligations that impaired its ability to
meet obligations under the CRL. This bill makes other
changes regarding the ability to delegate and ability to
make and execute amendments to contracts.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 9/2/11)
Western Center on Law and Poverty (source)
OPPOSITION : (Verified 9/2/11)
California Redevelopment Association
City of San Jose
ARGUMENTS IN SUPPORT : According to the Assembly Housing
and Community Development Committee analysis, redevelopment
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agencies' actions are subject to various validation
procedures. In order for certain actions to be subject to
validation proceedings, there must always be an
'authorizing' statute. The authorizing statute to validate
redevelopment plans, amendments, and related activities are
subject to a 90-day statute of limitations. But validation
actions brought to validate other actions, like contracts,
are still subject to a 60-day statute of limitations
pursuant to the validation statutes. A challenge to
validate an agency's action may not be brought unless the
specific objections were presented either orally or in
writing to the agency or the legislative body before the
close of the required public hearing and the person
bringing the challenge objected to the adoption of the plan
or amendment before the close of the public hearing. If a
challenge is made at the public hearing, a person has
standing to bring an action to challenge the contract in
the courts. This bill is intended to provide a process to
challenge contracts that are believed to be illegal in the
courts. If a contract was found to be illegal in that it
violated a redevelopment agency's obligations under the CRL
it could be made void by the courts. In addition to the
scenario outlined in Fontana where the redevelopment agency
entered into an illegal contract, in the recent months,
some redevelopment agencies have amended their
redevelopment plans in anticipation of their possible
elimination. These amendments in some cases are intended
to allow agencies to increase their debt limitations and
enter into more contracts. This bill will be a more
important tool once those contracts have been initiated and
reviewed to allow for challenges if appropriate.
ARGUMENTS IN OPPOSITION : The California Redevelopment
Association, in opposition, notes that the purpose of the
restrictions in existing law is to "provide certainty for
bond purchasers and other agency creditors who need to know
agency pledges of tax increment to repay bonds and other
financial obligations are not subject to legal challenge,"
and argues that absent assurance, bond purchasers will be
unwilling to buy bonds, that redevelopment agencies have
relied on these provisions for decades, and that "�t]here
is no discernable reason why redevelopment agency contracts
should be treated differently from other public agency
contracts."
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ASSEMBLY FLOOR : 78-0, 5/23/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel P�rez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Cook, Gorell
AGB:mw 9/2/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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