California Redevelopment Ass'n v. Matosantos
53 Cal. 4th 231
Cal.2011Background
- In 2011 the Legislature enacted Assembly Bill IX 26 (dissolution of redevelopment agencies) and Assembly Bill IX 27 (optional continuation if sponsors make payments) to address a state fiscal emergency.
- The California Redevelopment Association and others challenged both measures as unconstitutional under Prop. 22 and related constitutional provisions.
- Redevelopment agencies are political subdivisions created by the Legislature and funded largely by tax increment; Prop. XVI authorizes tax increment, while Prop. 22 restricts transfers of such tax increment to the state or its agencies.
- Prop. 22 (article XIII, section 25.5, subdivision (a)(7)) generally forbids requiring redevelopment agencies to pay or transfer tax increment to the state; the text distinguishes between dissolution and ongoing restrictions on use of funds.
- The majority held IX 26 valid (dissolution permitted) and IX 27 invalid (continuation payments unconstitutional); IX 27 severability is denied, but IX 26 is severable and reformation of timelines was adopted to keep IX 26 in effect.
- The court stayed parts of IX 26/IX 27, then reformed deadlines to extend them four months due to the stay, concluding IX 26 can operate while IX 27 is invalid.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AB IX 26 dissolves redevelopment agencies under the Constitution. | Association contends dissolution violates Prop. 22 and Article XVI. | Legislature has plenary power to create or dissolve agencies; Prop. 22 does not prohibit dissolution. | AB IX 26 valid dissolution authority. |
| Whether AB IX 27 unconstitutional for compelling continuation payments under Prop. 22. | Prop. 22 prohibits direct or indirect payment requirements by agencies from tax increment. | Payments are voluntary off the agency and can be funded by sponsors; no direct compulsion on agency funds. | AB IX 27 invalid in its entirety. |
| Whether AB IX 27 is severable from AB IX 26. | If IX 27 is invalid, IX 26 should remain unaffected. | Legislative intent to sever IV IX 26 from IX 27, but IX 27 cannot be saved. | IX 27 not severable from IX 26; but IX 26 remains enforceable (severable Overall). |
| What is the proper construction of Prop. 22 in light of ERAF history and statutory text? | Liberally construe Prop. 22 to protect tax increment from any form of transfer. | Prop. 22 prohibits direct or indirect transfer by redevelopment agencies; historical ERAF shifts inform intent; not all ERAF schemes fall within scope. | Prop. 22 prohibits direct/indirect transfers by agencies; does not bar sponsor-pays arrangements under IX 27; majority’s broad reading rejected by the dissent. |
Key Cases Cited
- Serrano v. Priest (1971) 5 Cal.3d 584, 5 Cal.3d 584 (Cal. 1971) (education as a fundamental interest; equal protection in funding)
- Serrano v. Priest (1976) 18 Cal.3d 728, 18 Cal.3d 728 (Cal. 1976) (continued scrutiny of local funding mechanisms)
- Marek v. Napa Community Redevelopment Agency, 46 Cal.3d 1070 (Cal. 1988) (interpreting indebtedness and tax increment rights under Art. XVI)
- City of Dinuba v. County of Tulare, 41 Cal.4th 859 (Cal. 2007) (tax increment financing and redevelopment law principles)
- Los Angeles Unified School Dist. v. County of Los Angeles, 181 Cal.App.4th 414 (Cal. App. 2010) (ERAF and school funding obligations; funding shifts)
- Amwest Surety Ins. Co. v. Wilson, 11 Cal.4th 1243 (Cal. 1995) (strict construction of constitutional limitations on legislative power)