In upholding the RDA dissolution law, the justices took a dim view of the California Redevelopment Association’s argument that 2010’s Proposition 22 barred the Legislature from shuttering the RDAs it created; finding nothing to indicate that voters’ intended the constitutional amendment to assure RDA existence in perpetuity.
The legislative power vested in the Legislature by the state Constitution, they wrote, “includes the authority to create entities, such as redevelopment agencies…and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper.”
Proposition 22 didn’t change that. “The ballot materials…gave no hint …[it] was intended to make redevelopment agencies or tax increment financing a permanent part of the government landscape.” Nor does state law entitle RDAs to property tax diversions – it simply allows the legislature to approve such funding.
“It would be unusual in the extreme for the people, exercising legislative power by way of initiative, to adopt such a fundamental change only by way of implication…Had the voters in fact intended [this]…we would…expect to find at least a single mention of such an intention in the various supporting and opposing ballot arguments. Instead, we find silence.”
What Looks Like an ERAF, is an ERAF
The court struck down the second RDA bill (AB1X 27), which makes continued RDA operations dependant on additional payments to state funds, saying that Proposition 22 forbids the Legislature from requiring such payments.
Prior to Proposition 22, RDAs were subject to repeated levies – educational revenue augmentation funds, ERAFs – to reach constitutionally mandated school funding levels (1988’s Proposition 98). The court found AB1X 27’s payments to be substantially the same as those banned by the law.
The drafters of Proposition 22 must have intended “the provision to be broad enough to foreclose ERAF legislation previously enacted, or else the new constitutional protection would amount to an empty gesture…”
Chief Justice Disagrees
In her dissent of the AB1X 27 ruling, Chief Justice Cantil-Sakauye noted that “nothing in Assembly Bill 1X 27 compels community sponsors to violate Proposition 22…Although the majority assumes the drafters of Proposition 22 and the voters who endorsed it must have intended to preclude the kinds of ERAF shifts that had taken place since 2003…the term “ERAF” appears nowhere in either the voter guide or the text of the measure itself….”
The only way the majority’s interpretation of Proposition 22 would be correct, Cantil-Sakauye said, would be if Proposition 22 had been written differently, barring the Legislature from requiring “… a local government body . . . to pay, remit, loan, levy or otherwise transfer, directly or indirectly, funds based on taxes on…property allocated to its redevelopment agency.”
In fact, the chief justice concluded, “far from being a ‘raid’ of local revenues dedicated to government services, it seems apparent that the Legislature had in mind the needs of local communities when deciding how to best balance the continued needs of redevelopment.”
The court’s majority weren’t convinced, saying that “As construed by the dissent …Proposition 22 would prohibit only funding schemes the Legislature has not employed for nearly a decade, while permitting the very schemes its adoption history plainly demonstrates the initiative was intended to prohibit.”
Proposition 13’s Zero-Sum Legacy
In deciding the RDA dissolution case, the Supreme Court considered California’s tortuous system of redevelopment, municipal, and educational funding; characterizing 1978’s Proposition 13 as creating “a zero-sum game in which …cities, counties, special districts, and school districts would have to compete …for their slices of a greatly shrunken pie.”
In this zero-sum game, the Justices wrote, “Proposition 13 created a kind of shell game among local government agencies for property tax funds. The only way to obtain more funds was to take them from another agency.”
RDA projects “proved to be one of the most powerful mechanisms for gaining an advantage in the shell game,” the court wrote. The reason is that they divert property tax increases generated by the development – the tax increment – from ordinary distribution back to the RDA. While this increases municipal revenue, it decreases funding for schools and other public services.