COSTA MESA, Calif., Jan. 20, 2012 – A team of attorneys at Rutan & Tucker, LLP, Orange County’s largest full-service law firm, filed a motion on Jan. 4 in Sacramento County Superior Court on behalf of 10 Southland cities and their redevelopment agencies for a stay order and preliminary injunction seeking to stop the February 1, 2012 dissolution of all 400 redevelopment agencies in California. A hearing on the motion is scheduled for January 27th.
Rutan’s motion is now the focus of statewide interest as the January 27th hearing on the motion is part of the only judicial proceeding seeking to prevent the dissolution of redevelopment agencies scheduled to occur prior to the February 1st dissolution date.
The cities and redevelopment agencies represented by Rutan are Cerritos, Carson, Commerce, Cypress, Downey, Lakewood, Paramount, Placentia, Santa Fe Springs and Signal Hill, along with Cuesta Villas Housing Corporation, a private nonprofit affordable housing corporation, and Bruce Barrows as an individual taxpayer plaintiff. Barrows is also a Cerritos City Councilmember and current president of the Los Angeles Division of the League of California Cities.
The legal action is the latest development in a landmark lawsuit filed by Rutan on behalf of the consortium challenging the constitutionality of legislation adopted by the California State Legislature and signed into law by Gov. Jerry Brown last June.
Rutan’s motion seeking the stay order and injunction will be heard on January 27, 2012. The motion argues the February 1st dissolution of all redevelopment agencies should be halted because the bill that implements the dissolution violates various provisions in the California and United States Constitutions. (See fact sheet)
By way of history, on Sept. 26, 2011, the attorneys filed a lawsuit in Sacramento County Superior Court alleging the state’s plan—through the adoption of two bills—to dissolve redevelopment agencies or force the transfer of $1.7 billion from redevelopment agencies to benefit the State budget violates provisions of the California Constitution relating to the allocation of property taxes and the process by which the two bills were adopted. The lawsuit also challenges the bill that dissolves redevelopment agencies and withdraws all of their powers as violating clauses in the Federal and State Constitutions prohibiting the impairment of contracts, particularly with respect to various financing arrangements that are common among redevelopment agencies.
On Sept. 30, the attorneys also filed a friend-of-the-court brief with the California Supreme Court in support of a separate lawsuit brought by the California Redevelopment Association and League of California Cities that also challenged the two bills but on different constitutional grounds.
The consortium’s lawsuit in Sacramento County Superior Court was on hold pending the outcome of the CRA case. On December 29, 2011, the California Supreme Court issued its ruling in the CRA case. The Court invalidated the bill (AB1x27) allowing redevelopment agencies to remain in existence if they made the forced payments, but the Court upheld the constitutionality of the dissolution bill (AB1x26). As a result, all 400 redevelopment agencies are scheduled to be dissolved on February 1st pursuant to AB1x26 as modified by the California Supreme Court.
Because Rutan’s lawsuit argues the dissolution bill is unconstitutional on different grounds than those addressed by the California Supreme Court in its decision in the CRA case, the consortium’s lawsuit in superior court may now proceed. The Rutan team includes partners Jeffrey Oderman, Dan Slater, Mark Austin, Bill Ihrke, and Bill Marticorena, and associate Megan Garibaldi.
About Rutan & Tucker LLP
Rutan & Tucker is Orange County’s largest full-service law firm with offices in Costa Mesa and Palo Alto. Primary practice areas include corporate and securities law, business, real estate and intellectual property litigation, labor and employment law, intellectual property, real estate, government and regulatory law, land use law, bankruptcy, condemnation and property valuation, environmental law, and taxation and estate planning. Detailed information about the firm is available at www.rutan.com.
AB1x26 Motion Fact Sheet
Rutan’s motion seeking the stay order and injunction argues the February 1st dissolution of all redevelopment agencies should be halted because the bill that implements the dissolution— AB1x26 signed into law by Governor Brown on June 28, 2011—violates numerous provisions of the California Constitution:
• AB1x26 causes a reallocation of property taxes, which the Legislature may do only by a 2/3 vote of both houses of the Legislature. AB1x26 was not adopted by a 2/3 vote in the State Senate and therefore violates Article XIII, section 25.5(a)(3), of the California Constitution.
• AB1x26, as an appropriation bill, was required to be adopted by a 2/3 vote, but was not, and therefore it violates Article IV, section 12(d) & (e), of the California Constitution.
• AB1x26, if deemed as having an appropriation related to the budget bill, was not permitted to make sweeping changes to substantive law, such as effectively repealing the Community Redevelopment Law, because such changes would violate Article IV, section 9, of the California Constitution, known as the "single subject rule," as this rule applies in the budget act context.
• AB1x26 was adopted in a special session of the Legislature called pursuant to a proclamation issued by Governor Brown. Article IV, section 3(b), of the California Constitution limits legislation adopted in a special session to only the subjects specified in the Governor's proclamation, which was limited to the fiscal crisis for fiscal year 2011-12. AB1x26 went well beyond the scope of the Governor’s proclamation and thus violates Article IV, section 3(b).
• AB1x26 was adopted as a “budget trailer bill.” Article 12, section (c)(4), of the California Constitution prohibits the Legislature from sending the Governor budget trailer bills before the Legislature enacts and sends the main budget bill to the Governor. The Legislature sent the Governor AB1x26 before it sent the main budget bill to the Governor and thus AB1x26 is invalid under Article 12, section (c)(4).
• AB1x26 impairs valid and binding contracts, including but not limited to bonds and typical lease-leaseback financing arrangements many cities have entered into for funding of capital facilities. AB1x26 therefore violates Article I, section 9 of the California Constitution and Article I, Section 10, clause 1, of the United States Constitution.