City Attorneys Department Post-Redevelopment Working Group

Transcription

1 1400 K Street, Suite 400 Sacramento, California Phone: Fax: City Attorneys Department Post-Redevelopment Working Group Subgroup 3: Property Transfer/City-Agency Agreements/ Pending Litigation & Eminent Domain/Project Limbo Issues Questions & Answers: Asset Transfer Assessment/State Controller Clawback Provision/Agency-City Asset Transfers/Third-Party Agreements/Property Acquisition and Eminent Domain GENERAL DISCLAIMER: This document represents an attempt to interpret the requirements of AB x1 26 as modified by the California Supreme Court in California Redevelopment Association v. Matosantos. This document does not constitute legal advice. Given the significant ambiguities, conflicts, and murkiness of AB x1 26, it is important to consult with legal counsel regarding any issues discussed in this document. Statements in this document reflect the consensus or recommendation of the subgroup that drafted this document in consultation with the members of the entire Working Group. No statement in this document should be attributed to any individual member of the subgroup or the Working Group. Where appropriate, this document discusses the interpretations, recommendations, and advice of other entities, such of the Department of Finance, the State Controller s Office, and the county auditor-controllers. These discussions do not necessarily represent an endorsement or agreement with the interpretation, recommendation, or advice, but are being provided solely as further information. This document represents an analysis as of the date set forth in the footer below. This document will be updated as needed to reflect legislative changes and revised analyses. If you have questions or comments regarding this document, please direct them to Patrick Whitnell, General Counsel for the League of California Cities, at pwhitnell@cacities.org. Q&A Number 1: Q: Our County Auditor-Controller transmitted a State Controller s ( SCO ) Asset Transfer Assessment ( Assessment ). The SCO letter says the form is due back to the SCO by April 16, Are we required to complete this form? A: Assembly Bill x1 26 ( ABx1 26 ) does not impose a specific legal obligation regarding completion of this form. Some cities have elected to decline to complete the Assessment, taking the position that all information requested on the Assessment will be reported in connection with the review that the County Auditor-Controller is required to complete by July 1 pursuant to 1

2 Section 34182(a)(1). 1 Other jurisdictions are completing the form if the requested information is readily available. In any event, we do not recommend that you ignore the SCO request. If you choose to decline to complete the form, we recommend that you provide a written explanation referring to the pending County review. If you intend to complete the Assessment but you are unable to complete it by April 16, we recommend that you transmit a letter indicating that you are in the process of compiling the requested information. The following comments address certain items requested on the Assessment. Q&A Number 2: Q: Can the SCO require the return of assets that were encumbered or committed after June 29 but before the SCO issues an order? A: The answer to this Question #2 focuses on interpreting limitations on the SCO s clawback remedy set forth in Section Although discussed in part below, we do not attempt in this answer to address all of the legal issues related to the validity of property transfers undertaken by the former redevelopment agency. Also, Section does not apply to property that was transferred from the former redevelopment agency to the successor agency upon dissolution of the agency. It instead only concerns properties that were transferred from the former agency to the city or other public agencies after January 1, The SCO letter accompanying the Assessment form states that cities, counties and other public agencies that directly or indirectly received redevelopment agency assets after January 1, 2011 will be ordered to return them to the successor agency except if the city, county or public agency has previously contractually committed to a third party for the expenditure or encumbrance of a specific asset. Such a commitment must be in place prior to June 29, However, the June 29, 2011 date does not appear in Section as a deadline for establishment of such third party commitments. Section clearly defines which transfers are subject to SCO review: those made after January 1, And the section clearly establishes the effective date of the statute as the date the SCO is supposed to commence review of transfers. On the other hand, contrary to the letter from the State Controller to the County Auditor-Controllers, the statute does not establish any specific date by which a city or other public agency must have contractually committed or encumbered property transferred from a redevelopment agency in order to be exempt from the clawback remedy provisions. It would be more reasonable to interpret Section to mean that property or assets that are contractually committed to a third party at the time that the Controller orders their return to the successor agency are covered by this exception. This interpretation is based on: (i) the use of the present tense in the pertinent portion of Section (e.g., and the government agency that received the assets is not contractually committed. ) (in short is means is, not was ); (ii) the fact that where the Legislature intended a particular provision of ABx1 26 to be applicable on 1 All section references are to the California Health & Safety Code unless otherwise specified. 2

3 the effective date of the bill it consistently so provided, and did so in many places in the bill (for example there is a reference to the effective date in this very section of the bill, but such date is not specified in connection with when a contractual commitment triggers the clawback exemption; the date is only stated in connection with when the SCO is to commence review of post 1/1/11 transfers), and (iii) this section involves the forfeiture of title to real estate and other property, and a public agency demanding the forfeiture of property should only be able to do so on the basis of a crystal clear statutory provision. Instead, the State Controller has assumed the right to demand the forfeiture of property that was contractually committed after June 28, 2011 by reading a date into the statute that isn t there. We recommend that any demand for the return of property or assets that are contractually committed to a third party at the time of receipt of such an order respectfully be denied on the grounds that the demand is not consistent with the statutory provision. In addition, cities should review property transfers from the redevelopment agency to see if they may be either exempt from the State Controller clawback provision or subject to different requirements under other provisions of the legislation, including: a. The property or asset was not funded by tax increment revenue. Although there might appear to be a conflict between Section 34177(e) (successor agency duties), which requires the return of assets and properties of the former redevelopment agency, and Section 34181(a) (oversight board duties) which only refers to directing the sale of property acquired by tax increment funds, consistency between these two sections is founded on the following: in Section 34177(e), the successor agencies are required to dispose of former agency assets as directed by the oversight board, and in Section 34181(a), the oversight board is only required to direct the sale of properties that were funded with tax increment revenues. Thus it serves no legal purpose to order property to be transferred to the successor agency if the duties of the successor agency are limited to oversight board directives and if the oversight board directive regarding asset disposition is itself limited to tax increment-funded properties. b. The property or asset was constructed and used for a governmental purpose and is not suitable for resale. The oversight board is given discretion to exempt such properties from resale in Section 34181(a), and this exemption is also recognized in the successor agency section (Section 34177(e)). c. The property or asset is an affordable housing asset. d. The property or asset involves federal funds or programs, and must be dedicated by applicable law to the uses dictated by such funding or program, consistent with the federal supremacy clause. e. The property was purchased with bond proceeds, and must be used in a manner consistent with, and for the purposes specified in, the documents governing the 3

4 Q&A Number 3: issuance of the bonds, including without limitation, requirements applicable to property purchased with the proceeds of tax-exempt bonds. Q: Our redevelopment agency transferred funds and land to the City after and before Can the City obligate those funds and land now (i.e. before an SCO order)? A: As discussed above, ABx1 26 does not specify a date by which transferred property must be encumbered or committed in order to be exempt from the SCO clawback. Provided that the obligation is entered into prior to the SCO order, a strong argument can be made that the exemption from the clawback provision should be satisfied. As a practical matter, however, it should be noted that title companies have been reluctant to issue policies insuring title to property originally transferred from redevelopment agencies. Some title companies have demanded certifications, indemnity agreements, and have insisted on including exceptions to title. Q&A Number 4: Q: The Assessment asks for a list of all assets owned by the redevelopment agency as of and the carrying value (defined to be book value or purchase price less allowed depreciation) as of and ABx1 26 does not ask for valuation information. Do we need to provide this information? A: Nothing in ABx1 26 requires disclosure of valuation information regarding assets formerly owned by redevelopment agencies. However, in many instances asset values may have been compiled in Consolidated Annual Financial Reports (CAFRs) prepared by former redevelopment agencies or in other publicly available documents, in which case there would presumably be no reason to withhold such information from the County Auditor-Controller or the SCO. It is unclear why the Assessment asks for "carrying value" as opposed to current fair market value since the statute provides that assets are to be disposed of at maximum value, or if retained by the Successor Agency, are to be valued at fair market value. Although ABx1 26 does not require Successor Agencies to provide valuation data, it may be advisable to include this information on the Assessment if it is readily available in public records. Q&A Number 5: Q: The SCO transmittal includes a certification which asks an officer of the Successor Agency to certify that the information provided on the Assessment is accurate, accounted for, and fully disclosed. What does accounted for and fully disclosed mean? Do we have to sign this certification? A: The language in the requested certification is not explained. The law does not require a certification, and there is no penalty for excluding it. You may wish to consider including a 4

5 transmittal letter that identifies who prepared the Assessment (e.g., Finance Department) and the source documents (e.g., CAFR). Q&A Number 6: Q: The Assessment indicates that housing assets are to be excluded from the summary of transferred assets. Are all of the following considered to be housing assets: proceeds of housing bonds, land or loans acquired or financed partially with 20% funds, mixed use projects? A: ABx1 26 allows a city to elect to retain the housing functions and assets of its former redevelopment agency, but does not define housing assets. There is a strong argument that the following assets of a former redevelopment agency should be considered housing assets that do not need to be listed on the Assessment: a. Any assets (i.e. real property, notes receivable, affordability restrictions, deeds of trust, option agreements, rights of first refusal, leases, or other agreements or rights related to affordable housing) acquired with or financed by funds from the Low and Moderate Income Housing Fund ( 20% Funds ); b. Any assets acquired by the proceeds of bonds secured by 20% Funds; c. Any assets acquired with 80% tax increment or nonhousing bond proceeds if such funds were used to supplement the 20% Fund and such assets were used for affordable housing purposes. d. Any assets that are subject to affordability covenants or restrictions. On March 30 th, the Department of Finance posted a set of Housing FAQs on its website. The FAQs include restrictive and controversial views on what constitutes a housing asset. Among other provisions, DOF asserts that to qualify as a housing asset, property must have been funded in whole or in part with 20% Funds. This assertion ignores the fact that affordable housing developments that are subject to recorded long-term income and occupancy restrictions may have been funded with a wide variety of local, state, federal and private sources of financing, and in some cases were funded with 80% tax increment or without any tax increment funds. The DOF FAQs also seem to indicate that DOF believes that mixed-finance or mixed-use projects should be counted as housing assets only to the extent of the proportional financing contribution made by the redevelopment agency. In addition, the DOF FAQs state that rents and loan repayments are to be distributed to the taxing entities unless such revenue streams are contractually committed for enforceable obligations associated with affordable housing. This assertion poses a host of practical and legal concerns. For example, it is unlikely that an agency would have executed contractual commitments for revenue streams that, in the case of residual receipts or deferred payment loans, may not be realized for many years. An upcoming Q&A from Subgroup 5: Housing and Special Project Issues, will further address this FAQ. 5

6 Q&A Number 7: Q: ABx1 26 requires the Successor Agency to effectuate the transfer of housing functions and assets to the appropriate entity. How should the Successor Agency effectuate the transfer of housing assets, and does this require Oversight Board approval? 2 A: Health and Safety Code Section provides that if the City that formed a redevelopment agency elects to retain the agency s housing assets and functions, all rights, powers, duties and obligations (excluding the Low and Moderate Income Housing Fund balance) shall be transferred to the City. If the sponsoring City does not elect to retain the agency s housing functions, then the housing assets are to be transferred to a local housing authority or to the State Department of Housing and Community Development. Pursuant to Health and Safety Code Section 34177(g), the Successor Agency is required to effectuate the transfer of housing functions and assets to the appropriate entity, and pursuant to Health and Safety Code Section 34181(c), the Oversight Board is required to direct the Successor Agency to transfer housing responsibilities to the appropriate entity. Some interpret the foregoing to mean that if the City has elected to retain the agency s housing assets, then those assets transferred to the City by operation of law when the agency was dissolved, but that Oversight Board action is required to transfer assets to another entity such as a housing authority. Others assert that all housing asset transfers were effectuated by operation of law upon dissolution of the redevelopment agency. However, some title companies have raised concerns about issuing title insurance for housing assets or financing transactions involving housing assets, even when such assets have been transferred to the sponsoring City. To address title company concerns, you may wish to consider the following procedures: (i) request the Oversight Board to adopt a resolution ratifying the transfer of housing assets by the Successor Agency to the City (or other housing successor), (ii) have the City acting in its capacity as Successor Agency adopt a resolution ratifying the transfer of housing assets to the City (or other housing successor), and (iii) have the City (or other housing successor) adopt a resolution ratifying the acceptance of the housing assets. The foregoing resolutions may include a list identifying all assets that will be transferred. For transactions for which a financing or closing deadline is imminent, if required by a lender or title company, you may also wish to consider providing notice to the Department of Finance of the Oversight Board s action in order to start the Department s three business day review period for Oversight Board actions. If the Department of Finance approves the action or does not request a review of the action within such three-day period, that may provide added comfort to title companies and other applicable parties that the transfers will not be subsequently challenged. If you choose to notify the Department of Finance, we recommend that the transmittal clearly state that the notice is not required by statute and is provided solely as a courtesy. 2 It should be noted that in FAQs recently posted on its website, DOF indicates that the transfer of housing assets to the housing successor must be approved by the Oversight Board, and thus is also subject to DOF review. We do not believe that this position is supported by the legislation. An upcoming Q&A from Subgroup 5: Housing and Special Project Issues, will further address this FAQ. 6

7 Q&A Number 8: Q: Our redevelopment agency transferred land to an economic development corporation whose board consists of City Council members. Will that transfer from the agency to the economic development corporation withstand an SCO order? A: The Controller s review, under Health and Safety Code Section , of asset transfers by dissolved redevelopment agencies, is limited to transfers that occurred after January 1, 2011 to the redevelopment agency s sponsoring community or any other public agency. The Controller s March 15, 2012 letter asserts that an SCO order to reverse specified transfers would directly apply to economic development corporations, joint powers authorities, or other public agencies that received assets directly or indirectly from a redevelopment agency after January 1, The language of Section is clear that transfers to public agencies will be subject to review. Public agencies would include joint powers authorities; however, it is not clear that public agencies would include economic development corporations or other types of corporations controlled by a public agency. Under Government Code Section , economic development corporations are local or regional nonprofit public-private economic development organizations recognized in a defined region by the public and private sector as the lead agency for the planning and implementation of job creation involving business retention and new business development. Government Code Section further defines local economic development organization to mean a public or public-private job creation agency recognized by cities and counties as the lead agency within that city or county for planning and implementation of job creation involving business expansion, business retention, and new business development. A transfer to an economic development corporation or to a local economic development corporation is different and distinct from transfers to any other public agency. Economic development corporations, even if formed by a city or county, are in fact separate legal entities. Economic development corporations are typically formed pursuant to, and governed by the California Corporations Code and the corporation s articles of incorporation and bylaws. Many are organized under the Nonprofit Public Benefit Corporation Law to achieve various purposes related to the provision of affordable housing, economic development, and easing the burden of government. While members of the city council (or county board of supervisors) may serve as officers and board members of these corporations, substantial municipal control over operations of the economic development corporation does not defeat their separate legal status so long as corporate formalities are maintained. Although some of these types of organizations may be subject to certain requirements typically applied to public agencies, such as the Brown Act, the application of the Brown Act or other requirements applicable to public agencies in and of itself does not make a corporation a public agency. Whether a transfer to an economic development corporation or other corporation will withstand an SCO order will depend upon the specific circumstances of the transfer and the type of 7

8 corporation or entity the asset was transferred to. It is likely that the SCO will examine whether the corporation that received the assets was duly organized as a separate corporation and whether it maintains all of the corporate formalities, including keeping books, records and accounts that are separate from those of the city or county. As with transfers of assets to cities or counties that occurred after January 1, 2011, a contractual commitment of the asset by the economic development corporation to a third party should bolster the ability to withstand an SCO order to return the asset. Q&A Number 9: Q: Our City adopted an ABx1 27 opt-in ordinance. What is the status of contracts that were executed or amended and asset transfers that took place in between the date the ordinance was adopted and the date of the Supreme Court stay? A: It can be reasonably argued that an adopted opt-in ordinance should be considered to have been effective during the period prior to the Supreme Court stay. There is legal support for the position that following adoption of an opt-in ordinance and prior to the stay, the redevelopment agency was not subject to the freeze provisions of ABx1 26, and therefore had authority to undertake asset transfers and execute contracts. The California Attorney General has argued in litigation involving ABx1 26 and ABx1 27 that the invalidity of ABx1 27 was effected by the order of the Supreme Court on December 29, 2011, and that the stricken bill was not void ab initio. Q&A Number 10: Q: What tools are available to validate or obtain declaratory relief regarding the validity of land and asset transfers? What are the pros and cons of seeking declaratory relief in advance of an SCO order or an unfavorable Oversight Board or Department of Finance decision regarding land transfers or enforceable obligations vs. waiting for the order/unfavorable decision? A: If State Controller, Department of Finance, Oversight Board, or other challenges to redevelopment agency property transfers or contractual obligations cannot be amicably resolved in some way, then there is a high degree of likelihood that litigation may be required. The question is how, when, and where such litigation should occur. Litigation relating to unwinding asset transfers may or may not be initiated by or on behalf of the State Controller at some time in the future. Alternatively, once it appears that an issue will have to be litigated, cities may consider consulting with their legal counsel to determine if it may be preferable for litigation to be initiated by the City. Faced with title uncertainties that have in many cases been raised by title companies and others, and not wishing to face additional lengthy delays while awaiting unknown future administrative actions, cities may want to consult with their legal counsel to consider the advisability of proactively filing such litigation prior to any official action being taken. Such litigation could be in the form of a validation action under Code of Civil Procedure where appropriate, or in the form of an action for declaratory relief. 8

9 Further, mandamus or some other equitable action might also be available to enforce the law in appropriate circumstances. Since legal actions that are filed in advance of actions taken by the SCO or other parties would not be contesting the validity of ABx1 26 or challenging actions taken pursuant to ABx1 26, arguably they would not be subject to the Sacramento venue requirements stated in the bill (Section 34168(a)), and would not be subject to legal requirements that might otherwise apply to the judicial review of challenged administrative acts. Q&A Number 11: Q: Can Successor Agencies amend existing agreements? If so, is Oversight Board approval required? 3 A: Under certain circumstances, Successor Agencies can amend existing agreements as well as enter into new agreements. Both Successor Agency and Oversight Board approval will be required depending on the timing and nature of the amendment or agreement. It should be noted, however, that some existing enforceable obligations may allow the executive director to approve nonsubstantive, discretionary, administrative modifications/amendments (e.g., minor changes to a schedule of performance, scope of development, or changes of address). If such discretion or authority for minor nonsubstantive changes or other modifications/amendments is not provided within the agreement itself, then Successor Agency and Oversight Board approval for the modification/amendment will be required. Successor Agencies were created under Part 1.85 of ABx1 26 which sets forth their duties and responsibilities. Except for those provisions of the Community Redevelopment Law (CRL) that are repealed, restricted, or revised by ABx1 26, all authority, rights, powers, duties and obligations previously vested with the former redevelopment agencies under the CRL are vested in the Successor Agencies (Section 34173(b)). Section sets forth numerous matters that Successor Agencies are required to do, which include but are not limited to performing obligations required by enforceable obligations, disposing of assets and properties, enforcing former redevelopment agency rights, effectuating the transfer of housing functions and assets, expeditiously winding down the affairs of the redevelopment agency, and continuing to oversee development of properties until contracted work has been completed. All of these activities will necessarily involve amendments or modifications of existing agreements, as well as entering into new contracts. As an example, a Successor Agency s disposition of real property may require the services of appraisers, brokers, attorneys, environmental consultants and title companies in order to finalize a sale. Thus to the extent a contract amendment or a new contract is in furtherance of an obligation that a Successor Agency is required to do as set forth in Section 34177, the Successor Agency may enter into that amendment or new contract. 3 Execution or amendment of affordable housing agreements should not require Oversight Board approval since they are the responsibility of the housing successor rather than the Successor Agency; provided however, existing agreements that require allocation of funds may be included on the Recognized Obligation Payment Schedule that is subject to Oversight Board review. An upcoming Q&A from Subgroup 5: Housing and Special Project Issues will address this issue further. 9

10 Once the Successor Agency determines that it may enter into the new contract or contract amendment, the next consideration is whether the Oversight Board must approve the matter. Section sets forth the actions of a Successor Agency that must first be approved by the Oversight Board, and provides that prior approval is required for contracts or amendments addressing such matters as establishment of new repayment terms for outstanding loans, compensation agreements pertaining to retention of property by a city for future redevelopment activities, agreements between the Successor Agency and the entity that formed the redevelopment agency, or agreements for the pledge of property tax revenues pursuant to Section 34178(b). It appears that new contracts or contract amendments that do not implicate any of these limitations are exempt from Oversight Board approval. Further, the Oversight Board must approve the Recognized Obligation Payment Schedule (ROPS), and based on a DOF opinion, effective May 1, 2012, a Successor Agency is only supposed to make payments for items listed on the ROPS. However, pursuant to Section 34177(l)(2), the ROPS is not deemed valid unless all of the following have occurred: (i) a draft ROPS is prepared by March 1 st, (ii) the ROPS is reviewed and certified by an external auditor, (iii) the certified ROPS is approved by the Oversight Board, and (iv) a copy of the approved ROPS is submitted to the county auditor-controller, the State Controller and DOF and posted on the Successor Agency s website. Absent these statutorily required actions, the ROPS is not technically final, and arguably can be amended by the Successor Agency even after May 1, 2012 to reflect changes to existing enforceable obligations such as new contracts or amendments stemming from existing enforceable obligations. Accordingly, aside from the specific matters listed in Section 34180, if a new contract requires the expenditure of property tax revenue (and thus must be listed on a ROPS approved by the Oversight Board), or a contract amendment requires an increased expenditure over that previously listed on the certified and approved ROPS, then Oversight Board approval will be required for the contract or amendment. However, if the ROPS has not yet been certified and approved pursuant to Section 34177(l)(2), the Successor Agency will need to amend the ROPS to reflect the new contract or contract amendment obligation. Q&A Number 12: Q: If a Disposition and Development Agreement that is an enforceable obligation required an Agency to acquire property or enter into additional ancillary agreements, can the Successor Agency carry out those actions, and if so, do the actions need to be approved by the Oversight Board? A: Similar to the discussion in item 11 above, to the extent the property acquisition or additional ancillary agreements (i.e., a new contract) is in furtherance of an enforceable obligation, the Successor Agency arguably may undertake those activities. Further, if the property acquisition or additional ancillary agreements or amendments require the expenditure of, or increase in, successor agency funds (and thus must be listed on an approved ROPS before payment can be made), the Oversight Board will need to approve the contract or amendment. 10

11 However, with respect to the authority of a Successor Agency to undertake property acquisition there is a degree of uncertainty given the numerous variables that can arise in any particular transaction, and thus the discretion invariably vested with the buyer (i.e. the Successor Agency) in its decision to accept and consummate a transaction on terms agreeable to a seller. Further, assuming that a Successor Agency can pursue a negotiated, voluntary property acquisition, it is less than clear whether a Successor Agency can adopt a resolution of necessity to acquire property by eminent domain should those negotiations fail. Practically speaking, a DDA should not definitively obligate a redevelopment agency, and hence the Successor Agency, to acquire real property and/or adopt such a resolution. Rather, to the extent a DDA contemplates possible property acquisition by an Agency for a private party, it should vest the redevelopment agency with unfettered discretion whether or not to acquire real property or adopt a resolution of necessity in the event negotiations fail, in order to avoid damage claims enunciated in Redevelopment Agency v Norm s Slauson (1985) 173 Cal. App. 3d Thus, if the Successor Agency cannot accomplish a voluntary acquisition of the property, there are some who question whether the Successor Agency has the authority to adopt a resolution of necessity. 4 Even if the Successor Agency does have such authority, and given the fact that adoption of such a resolution is a discretionary act, arguably, the exercise of discretion would divest the action of its status as an enforceable obligation that the Successor Agency is required to do. Thus, if the property acquisition were memorialized in a duly authorized purchase and sale agreement between the former redevelopment agency and the seller prior to the effective date of ABx1 26 or the former redevelopment agency adopted a resolution of necessity to acquire property by eminent domain prior to such date, and is thereafter obligated to carry out the acquisition to judgment, then the Successor Agency is most likely obligated to complete those transactions or actions. If the acquisition was not memorialized in a purchase agreement or an eminent domain action commenced prior to the effective date of ABx1 26, the Successor Agency will have the discretion of whether to undertake those actions, and it is advisable that such actions be approved by the Oversight Board. Finally, if the DDA obligates the private party to the agreement to pay all costs associated with the property acquisition, then notwithstanding the concerns about the discretion vested in the Successor Agency, in such an instance, the Successor Agency should be able to carry out those actions and likely would not require Oversight Board approval since there are no costs to be incurred by the Successor Agency. 4 Section 34163(e) of Part 1.8 of AB1x 26 provides that commencing upon the effective date of the legislation, redevelopment agencies no longer had the authority to acquire property by any means for any purpose, including the acquisition by eminent domain. Arguably, however, the authority, rights, powers, duties, and obligations vested in Successor Agencies pursuant to Section 34173(b) of Part 1.85 of AB1x 26 are not constrained by the provisions of Part 1.8 of AB1x 26, and nowhere in Part 1.85 is there any pronouncement that Successor Agencies may not acquire property by any means for any purpose, including the acquisition by eminent domain. However in the context of the Successor Agency s overarching directive to wind down the affairs of the former redevelopment agency, engaging in additional property acquisition, be it by negotiated purchase or eminent domain, seems counter-intuitive. That said, the Successor Agencies are vested with all authority, rights, powers, duties and obligations previously vested with the former redevelopment agencies under the Community Redevelopment Law pursuant to Section 34173(b), and the Community Redevelopment Law does include the power to acquire real property, including acquisition by eminent domain. 11

12 Note that notwithstanding the Successor Agency s obligation to perform in accordance with an enforceable obligation, Section 34181(e) provides that the Oversight Board may direct the Successor Agency to negotiate agreements to terminate or amend agreements with private parties in order to reduce liabilities or increase net revenue to the taxing entities, and such an amendment or termination agreement may effectively thwart the goals of the original obligation. Any such amendment or termination agreement would require the consent of the private party or the payment of compensation or damages. Q&A Number 13: Q: Our Successor Agency has substituted for the former Redevelopment Agency as the plaintiff in an eminent domain action filed before the enactment of ABx1 26. Can the Successor Agency complete the eminent domain action if the land will not be used for a traditional public purpose such as a park? If for some reason the Successor Agency cannot substitute for the former Redevelopment Agency as the plaintiff, and the land is to be used for a traditional public purpose, can the City bring the eminent domain action in its own corporate capacity? A: If the former redevelopment agency commenced an eminent domain action pursuant to an enforceable obligation (e.g., a DDA) with a private party, and if the DDA provides that once the agency has adopted a resolution of necessity to acquire the property by eminent domain it will be obligated to complete the acquisition, the Successor Agency as the substituted plaintiff is arguably obligated to complete the eminent domain action even if the property will be conveyed for a private use. If the Successor Agency for some reason cannot substitute in as plaintiff for the former Redevelopment Agency and the land is to be used for a traditional public purpose, such as a park, the City could bring the action in its own corporate capacity. The City would however, need to be careful to adhere to formal property acquisition procedures (appraisal, offer, reasonable attempts to negotiate acquisition voluntarily, etc.) before considering the adoption of a resolution of necessity to acquire the property by eminent domain. Further, given the relationship between the City and the former redevelopment agency and the same intended use, it is possible that the City may face claims under Norm s Slauson. *** 12