Metropolitan News-Enterprise


Wednesday, October 12, 2016


Page 1


C.A. Rules That Cities No Longer Have to Pay Into Subsidized Housing Funds


By a MetNews Staff Writer


A requirement that cities with community redevelopment agencies pay a portion of the resulting “tax increment” into a fund for subsidized housing in the re­development area no longer exists now that the agencies have been abolished, the Third District Court of Appeal has ruled.

The court held Friday that the housing fund payments previously mandated by Health & Safety Code §§33334.2(a), 33334.3(a), 33334.6(c) & 33670 are not “enforceable obligations” within the meaning of §34171(d)(1). The mandate therefore does not survive the “Great Dissolution” of community redevelopment agencies, Justice M. Kathleen Butz wrote for the court.

Under the former community redevelopment laws, a city could designate an area as blighted and establish a CRA, which would receive “tax increment”—the increase above the tax base level attributed to redevelopment—in order to fund economic development. In 2011, however, the Legislature abolished the 400 or so CRAs in order to realize more than $1 billion in budget savings.

The “Great Dissolution” legislation provided for the winding up of the affairs of the agencies, which were abolished effective February 2012. The law included a provision, §34189, which declared that “all provisions of the Community Redevelopment Law that depend on the allocation of tax increment to redevelopment agencies . . . shall be inoperative” from that date.

Each county’s auditor-controller, however, must allocate to a trust fund an amount of property tax equal to the enforceable obligations of the former redevelopment agency that the city, or other successor agency, will use to pay the obligations. 

The litigation that the Court of Appeal ruled on Friday arose when the Sacramento-area City of Winters submitted a “recognized obligation payment schedule,” or ROPS, informing the state Department of Finance that it owed approximately $12 million to the former housing fund, with a payment due of $169,000. The department responded that the housing set-aside was no longer required, and the city filed an amended ROPS omitting the debt, and omitted it from the ROPS for two subsequent six-month periods as well.

In the ROPS for July through December 2013, however, the city once again included the $12 million as an outstanding debt to the former housing fund, and responded to the state’s request for documentation by attaching a letter from a public interest attorney. The lawyer argued that the entire amount of set-aside for the housing fund over the life of the project area—the area plan had been set to expire in 2033—was due ab initio and was an enforceable obligation that survived the abolition of the agency.

The department disagreed, and five citizens filed a mandate petition against the state to enforce the asserted obligation. Sacramento Superior Court Judge Michael P. Kenny denied relief, saying the housing set-aside, and other set-asides, did not fit any of the statutory definitions of an enforceable obligation.

Butz, writing for the Court of Appeal, said there was “little to add” to the trial judge’s explanation.

Section 34189, she said, clearly forecloses the petitioners’ argument. “As the housing set-asides are premised on the receipt of tax increment, they are accordingly inoperative,” she said.

She rejected an argument that §34176.1(a)(2), by permitting a successor housing agency, “[n]otwithstanding Section 33334.2,” to expend funds on homeless prevention and rapid rehousing services, expressed legislative intent to require the agencies to meet the obligations set forth in the latter section beyond dissolution.

“This would be a very roundabout and obscure way in which to accomplish such an end, and drafters of legislation are not presupposed to hide the elephant of such a major element inside an apparently unrelated mousehole, when it would have been so much more straightforward to amend section 33334.2 itself to provide that it continues to entail property tax paid to successor agencies notwithstanding section 34189,” the jurist wrote.

The petitioners were represented on appeal by S. Lynn Martinez, Richard A. Rothschild and Navneet Grewal of the Western Center on Law & Poverty, Alysa E. Meyer and Sarah Steinheimer of Legal Services of Northern California, Deborah A. Collins and Michael Rawson of the Public Interest Law Project, and Arnold & Porter’s Steven L. Mayer.

Deputy Attorneys General Marc A. LeForestier and Nancy J. Doig represented the Department of Finance.

The case is Covarrubias v. Cohen (City of Winters), 16 S.O.S. 5015.


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