## Facts

- California’s Community Redevelopment Law authorized local redevelopment agencies (RDAs) to address blight using tax-increment financing, diverting increases in property-tax revenue within project areas to RDAs.
- In 2011, amid a declared fiscal emergency, the Legislature enacted AB 1X 26, dissolving RDAs statewide and creating a wind-down process.
- AB 1X 26 directed that remaining tax-increment revenues be used to pay enforceable obligations and then be distributed to the taxing entities that would otherwise receive property-tax revenues.
- Proposition 1A (Cal. Const. art. XIII, § 25.5(a)(3)) limits legislative action that reallocates or reduces local agencies’ pro rata shares of ad valorem property-tax revenues, subject to exceptions.
- Cities and redevelopment-related organizations sued the State and the Director of Finance, alleging AB 1X 26 effectively modified local agencies’ pro rata shares by terminating RDAs’ tax-increment allocations and redistributing those revenues.
- The trial court denied a preliminary injunction, finding plaintiffs were unlikely to succeed on the merits; plaintiffs appealed.
- Although RDAs had already been dissolved by the time of appeal, the State argued the appeal was moot.

## Issues

1. Whether the appeal was moot because RDAs had already been dissolved and the statutory wind-down process implemented.
2. Whether AB 1X 26 violates Proposition 1A by modifying or reallocating local agencies’ pro rata shares of ad valorem property-tax revenues through dissolution of RDAs and redirection of tax-increment revenues.

## Decision

- The court held the appeal was not moot and reached the merits.
- The court affirmed the order denying the preliminary injunction.
- The court held AB 1X 26 does not violate Proposition 1A.

## Legal Principles

- A case is not necessarily moot where post-enactment implementation leaves a continuing controversy over the statute’s validity and ongoing effects.
- Proposition 1A restricts state interference with local agencies’ property-tax shares for state budgetary purposes, but it does not constitutionalize the continued existence of statutorily created entities or programs.
- The Legislature retains authority to create and abolish redevelopment agencies; ending a statutory tax-increment entitlement through dissolution is not, by itself, a prohibited “reallocation” of local agencies’ pro rata property-tax shares under Proposition 1A.
- Returning revenues to the underlying taxing entities under general allocation rules after dissolution is distinct from diverting local revenues to the State.

## Conclusion

The court upheld AB 1X 26 against a Proposition 1A challenge, concluding that dissolving redevelopment agencies and ending their tax-increment financing was a permissible legislative action and not an unlawful reallocation of local property-tax shares, and it affirmed denial of preliminary injunctive relief.


City of Cerritos v. State, 239 Cal. App. 4th 1020 (Cal. Ct. App. 2015)