CA Redevelopment Agencies May be Forced to Close Shop

By Natalie Dolce

Print Email Share Reprints News Tip? Get Alerts

Disable this ad

Sign Up for the California AM Alert

Join the thousands of real estate professionals that subscribe to the California AM Alert. Each and every morning, we deliver the important stories, data, analysis…as well as the opinions and insights of industry thought leaders to provide you with market intelligence and a daily business advantage.

Become a registered member today and don’t miss another important story in the California market. Let GlobeSt.com be your source for everything real estate.

Renata

SACRAMENTO-In January 2010, the California legislature put forth two separate bills—one that eliminated redevelopment agencies and the second which reinstated them based upon a one-time payment and future smaller annual payments to the state. The court called the elimination of redevelopment “a proper exercise of the legislative power vested in the Legislature by the state Constitution.”

This week, the California Supreme Court ruled invalid the second bill—ABX1 27—that would have reconstituted redevelopment agencies in a different form—a decision that effectively eliminates redevelopment agencies throughout California. According to Renata Simril, managing director for Jones Lang LaSalle’s public institutions practice covering the Southwest region where she advises redevelopment agencies and other government entities, without further legislative action, there will be no new redevelopment projects in the state and redevelopment agencies must create successor agencies to unwind from pending and/or pipelined development and/or infrastructure project obligations—which could mean land sales and other disposition strategies.

The decision by the court, she says, also calls into question the future economic development strategy of more than 400 large and small cities and counties up and down the state of California and more importantly, Simril says, “the funding incentives for affordable housing and job creating projects in some of the State’s most challenged and underserved communities.”

Simril adds that she finds it hard to imagine the legislature not working with the Agencies to find a legislative solution to keep them operation in some form. “While there are and have certainly been abuses that must be addressed, the overall impact of redevelopment agencies in terms of job creation, enhanced local and state revenue and the overall positive economic benefit to the state is certainly proven,” she tells GlobeSt.com.

“Cities will now need to re-think public-private partnerships and alternative funding mechanisms to close project financing gaps inherent in redevelopment projects given their primary locations in underserved/challenged communities,” says Simril. “Alternative sources might include the CA Infrastructure Bank, Department of Commerce EDA or new stimulus funding with the possibility of leveraging lease revenue on existing projects as loan guarantees for Infrastructure Financing Bonds or EDA Loans. 

“Getting the State back on track in and full recovery mode will require both cost cutting measures as well as revenue generating initiatives—redevelopment has and clearly can impact the latter.”

Categories: West, Development, Sacramento