## Facts

- California cities and counties created community redevelopment agencies (RDAs) under statute to conduct redevelopment projects funded primarily through tax-increment financing.
- In 2011, amid a state fiscal emergency, the Legislature enacted two measures: AB 1X 26 and AB 1X 27.
- AB 1X 26 barred RDAs from engaging in new business and provided for their windup and dissolution, including successor arrangements to complete termination-related tasks.
- AB 1X 27 permitted RDAs to continue operating only if their sponsoring cities or counties agreed to make specified payments into funds benefiting schools and special districts.
- Voters had adopted Proposition 22 (2010), adding constitutional limits on the State’s ability to require RDAs to shift, transfer, remit, or otherwise divert tax-increment funds to the State or other local entities.
- Petitioners (an association representing RDAs and related local entities) filed an original petition for writ of mandate in the California Supreme Court to enjoin implementation of both statutes and obtain declaratory relief that both were unconstitutional.
- State officials defended both measures; other local entities participated as respondents/interveners.

## Issues

1. Whether redevelopment agencies have a constitutionally protected right to continue existing that prevents the Legislature from dissolving them by statute.
2. Whether Proposition 22 prohibits conditioning an RDA’s continued operation on payments by the sponsoring community into funds benefiting schools and special districts.
3. If the continuation-payment statute is invalid, whether the dissolution statute remains enforceable under severability principles.

## Decision

- The court granted the writ in part and denied it in part.
- AB 1X 26 (dissolution) was upheld as constitutional and allowed to take effect.
- AB 1X 27 (continuation payments) was held unconstitutional and unenforceable under Proposition 22.
- AB 1X 26 was severable and remained operative notwithstanding invalidation of AB 1X 27.

## Legal Principles

- Statutory entities created by the Legislature do not possess a constitutional right to continued existence absent an express constitutional limitation; the Legislature may dissolve such entities.
- Proposition 22 restricts the State from requiring redevelopment agencies or their sponsors to transfer or divert redevelopment tax-increment funds to the State, schools, or other local agencies.
- A statute may violate Proposition 22 by imposing coercive conditions that effectively require prohibited transfers as the price of continued operation.
- Constitutional limits on state interference with redevelopment funds during operation do not, without more, eliminate legislative authority to end redevelopment agencies through dissolution.
- When measures enacted together are not mutually dependent, a valid dissolution scheme may remain enforceable even if a related funding mechanism is invalid.

## Conclusion

The California Supreme Court held that the Legislature could abolish redevelopment agencies through AB 1X 26, but it could not condition their continued operation on payments benefiting schools and special districts under AB 1X 27 because Proposition 22 bars compelled diversion of redevelopment funds; the dissolution statute remained in force after severing the invalid continuation-payment measure.


Cal. Redevelopment Ass’n v. Matosantos, 267 P.3d 580 (Cal. 2011)