An Express Article from the California Land Title Association
Bulletin 11/12-09 - July 20, 2011
On June 29th, the Governor signed into law two bills eliminating many redevelopment agencies in California. Those two bills are AB X1 26 and AB X1 27, passed during the Extraordinary Legislative Session devoted to the budget. In anticipation of redevelopment agencies offloading the real property under their control, one bill contained an “urgency clause” that created an immediate prohibition on the deeding of real property from redevelopment agencies to the respective cities in which they are located.
Both bills faced fierce opposition and were in print for only one day before they were quickly passed by both houses of the State Legislature and placed on the Governor’s desk for signature.
By way of background, redevelopment agencies subsidize construction in blighted areas in many California cities and have faced being eliminated by the Governor and State Legislature as a means of acquiring additional funds to balance the state budget which had a huge multi-billion dollar revenue gaps in the California state budget.
Cities and redevelopment agencies were in fierce opposition to the measures, claiming that eliminating the redevelopment agencies would threaten jobs generated by redevelopment projects. Governor Brown and Democratic lawmakers, who passed the budget without any Republican votes, said scarce tax dollars should go toward basic needs rather than private development. The governor and legislative Democrats ultimately agreed on a plan that allows agencies to survive so long as they contribute an almost $2 billion to schools and local governments this fiscal year, followed by $400 million annually thereafter. California would then cut funding to schools by a like amount, saving the state money.
Of particular interest to title companies, it appears that some redevelopment agencies already started transferring properties back to their respective cities in anticipation of the passage of these two bills.
Knowing the bills would prohibit these transfers, some redevelopment agencies decided to initiate these transfers to beat the statutory prohibition. Those provisions providing for such a prohibition can be found in Part 1.8, Chapter 1, Code Section 34163 of the Health and Safety Code (incorporated into AB X1 26). Such a practice is apparently creating potential title problems for these properties.
The California Land Title Association has referred this issue to its Forms and Practices Committee for review and possible recommendation of industry practices. In the meantime, CLTA strongly advises all title companies to be on the lookout for properties that may be associated with redevelopment agencies.
Stay tuned as the California Redevelopment Association and the League of California Cities and others have filed suit to attempt to block the enactment of both bills. It is expected that other cities will also be joining the litigation.