Successor Agencies Will Be Disposing Of Former Redevelopment Agency Properties

ALERT
November 12, 2012

Following the passage of ABx1 26 and the California Supreme Court’s decision in California Redevelopment Association v. Matosantos (2011) 53 Cal.4th 231, earlier this year four hundred plus redevelopment agencies (RDAs) in California were dissolved and replaced by successor agencies with oversight boards. The successors to RDAs collectively own thousands of properties. Initially, the legislation dissolving the RDAs included a schedule that would have required rapid disposition of real estate properties. This led many to speculate that there could be opportunities to obtain properties at fire sale prices. On June 27, 2012, however, Governor Brown signed budget trailer bill AB 1484 into law, resulting in changes to the duties and procedures to be followed by successor agencies, oversight boards, county auditor-controllers, and the Department of Finance (DOF).

AB 1484 clarifies that a successor agency is a separate public entity and states that the liabilities of a former RDA shall not transfer to the sponsoring entity (there are provisions, however, potentially subjecting a sponsoring city and/or county to penalties and liabilities for actions and inactions of the successor agencies). Further, AB 1484 makes clear that a successor agency can file a Chapter 9 bankruptcy petition by amending the California Government Code to add successor agencies to the list of “local public entities” that can file for municipal debt adjustment under federal law.

Successor agencies are directed to dispose of former redevelopment agency properties. The Health and Safety Code (HSC) specifies how successor agencies are to dispose of properties. Instead of the expeditious property disposition requirements initially included in the new law, HSC section 34191.5 provides for the adoption of a long-range property management plan (PMP) by successor agencies that addresses the disposition and use of the real properties of the former RDA.

The PMP is to be submitted to the successor agency’s oversight board and the DOF for approval. The PMP is to include an inventory of all properties held by the successor agency containing the following information:

1. the date of the acquisition of the property and value of the property at that time, and an estimate of the current value of the property;
2. the purpose for which the property was acquired;
3. parcel data, including address, lot size, current zoning in the former agency redevelopment plan or specific, community, or general plans;
4. an estimate of the current value of the parcel, including, if available, any appraisal information;
5. an estimate of any lease, rental, or any revenue generated by the property, and a description of the contractual requirements for the disposition of those funds;
6. the history of environmental contamination, including designation as a brownfield site, any related environmental studies, and history of any remediation efforts;
7. a description of the property’s potential for transit-oriented development and the advancement of the planning objectives of the successor agency.

Alternatives for property disposition under PMPs include “the retention of the property for governmental use…, the retention of the property for future development, the sale of the property, or the use of the property to fulfill an enforceable obligation.” In most cases, it appears that PMPs are unlikely to be in place prior to the middle of 2013. Accordingly, the process of the property disposition has been significantly slowed from what was anticipated prior to the adoption of AB 1484. Nonetheless, there are still likely to be significant acquisition opportunities for proactive and informed developers.

There is publically available information regarding the properties held by successor agencies and properties that, in some instances, RDAs transferred to their sponsoring cities and counties prior to the dissolution of the RDAs. Successor agency and oversight board agendas and minutes are generally posted on sponsoring city or county websites. Although HSC section 34191.3 has suspended the expedited disposition requirements, it does not completely eliminate a successor agency’s ability to dispose of properties outside of a PMP. Moreover, housing development properties may also be subject to disposition outside of PMP. While timing remains uncertain, successor agencies will be disposing of many properties in the not too distant future.