California Redevelopment Ass'n v. Matosantos

• Decision Date: 29 December 2011
• Docket Number: No. S194861.,S194861.
• Citation: 12 Cal. Daily Op. Serv. 32,135 Cal.Rptr.3d 683,267 P.3d 580,53 Cal.4th 231,2011 Daily Journal D.A.R. 18559
• Court: California Supreme Court
• Parties: CALIFORNIA REDEVELOPMENT ASSOCIATION et al., Petitioners, v. Ana MATOSANTOS, as Director, etc., et al., Respondents;County of Santa Clara et al., Interveners and Respondents.

12 Cal. Daily Op. Serv. 32

135 Cal.Rptr.3d 683

2011 Daily Journal D.A.R. 18,559

267 P.3d 580

53 Cal.4th 231

CALIFORNIA REDEVELOPMENT ASSOCIATION et al., Petitioners,

v.Ana MATOSANTOS, as Director, etc., et al., Respondents;County of Santa Clara et al., Interveners and Respondents.

No. S194861.

Supreme Court of California

Dec. 29, 2011.

West Codenotes

Held Unconstitutional

West's Ann.Cal.Health & Safety Code §§ 34193, 34194, 34194.1, 34194.2.Held Unconstitutional as Not SeverableWest's Ann.Cal.Health & Safety Code §§ 34192, 34192.5, 34193.1, 34193.2, 34193.3, 34194.3, 34194.4, 34194.5, 34195, 34196.Limited on Constitutional Grounds

West's Ann.Cal.Health & Safety Code §§ 34168(a), 34172.

Howard Rice Nemerovski Canady Falk & Rabkin, San Francisco, Steven L. Mayer and Emily H. Wood for Petitioners.

Richards, Watson & Gershon, Sayre Weaver, Brea, Steven R. Orr, Toussaint S. Bailey and Andrew J. Brady, Los Angeles, for the Association of Bay Area Governments and Various California Cities and Redevelopment Agencies as Amici Curiae on behalf of Petitioners.Carmen A. Trutanich, City Attorney (Los Angeles), Kelly Martin, Assistant City Attorney; Kane, Ballmer & Berkman, Los Angeles, Murray O. Kane, Susan Y. Cola and Donald P. Johnson for Community Redevelopment Agency of the City of Los Angeles, Southern California Association of Non–Profit Housing and Betty Yee as Amici Curiae on behalf of Petitioners.Rutan & Tucker, Costa Mesa, William M. Marticorena, Philip D. Kohn, Jeffrey T. Melching, Bill Ihrke and Jennifer Farrell for City of Irvine as Amicus Curiae on behalf of Petitioners.Rutan & Tucker, Costa Mesa, Jeffrey M. Oderman, Dan Slater, Mark J. Austin, Bill Ihrke and Megan K. Garibaldi for City of Cerritos, Cerritos Redevelopment Agency, City of Carson, Carson Redevelopment Agency, City of Commerce, Commerce Community Development Commission, City of Cypress, Cypress Redevelopment Agency, City of Downey, Community Development Commission of the City of Downing, City of Lakewood, Lakewood Redevelopment Agency, City of Paramount, Paramount Redevelopment Agency, City of Placentia, Redevelopment Agency of the City of Placentia, City of Santa Fe Springs, Community Development Commission of the City of Santa Fe Springs, City of Signal Hill, Signal Hill Redevelopment Agency, Cuesta Villas Housing Corporation and Bruce W. Barrows as Amici Curiae on behalf of Petitioners.Wallin, Kress, Reisman & Kranitz, Santa Monica, Peter J. Wallin; Law Offices of Robert V. Wadden, Jr., and Robert V. Wadden, Jr., Manhattan Beach, for Long Beach Central, West and North Project Area Committees as Amici Curiae on behalf of Petitioners.Michael W. Rawson, Deborah Collins, Vallejo, Craig Castellanet, Roland Chang, Ilene J. Jacobs, Marysville, Mona Tawatao, Pacoima, Shashi Hanuman, Remy De La Peza, Richard Rothschild, Los Angeles, and S. Lynn Martinez, Vallejo, for the Public Interest Law Project, California Rural Legal Assistance, Inc., Legal Services of Northern California, Public Counsel and Western Center on Law & Poverty as Amici Curiae on behalf of Petitioners.Pamela J. Walls, County Counsel, and Anita C. Willis, Deputy County Counsel, for County of Riverside as Amicus Curiae on behalf of Petitioners. Jean–Rene Basel, County Counsel, and Michelle D. Blakemore, Chief Assistant County Counsel, for County of San Bernardino as Amicus Curiae on behalf of Petitioners.Woodruff, Spradlin & Smart, Costa Mesa, M. Lois Bobak and Thomas F. Nixon for Association of California Cities–Orange County as Amici Curiae on behalf of Petitioners.Kamala D. Harris, Attorney General, Manuel M. Medeiros, State Solicitor General, Douglas J. Woods, Assistant Attorney General, Peter A. Krause, Seth E. Goldstein and Ross C. Moody, Deputy Attorneys General, for Respondents Ana Matosantos, as Director of the California Department of Finance, and State Controller John Chiang.Miguel Márquez, County Counsel, Orry P. Lorb, Assistant County Counsel, Lizanne Reynolds and James R. Williams, Deputy County Counsel, for Respondents Vinod K. Sharma, Auditor–Controller of the County of Santa Clara and the County of Santa Clara.Miguel Márquez, County Counsel (Santa Clara), Lori E. Pegg, Assistant County Counsel, Lizanne Reynolds and James R. Williams, Deputy County Counsel, for Santa Clara Unified School District as Amicus Curiae on behalf of Respondents.Remcho, Johansen & Purcell, San Leandro, Karen Getman and Margaret R. Prinzing for California's Teachers Association as Amicus Curiae on behalf of Respondents.Catherine A. Rodman for Affordable Housing Advocates as Amicus Curiae on behalf of Respondents.Bell, McAndrews & Hiltachk, Sacramento, Thomas Hiltachk and Ashlee N. Titus for California Professional Firefighters as Amicus Curiae on behalf of Respondents.Law Office of Christopher Sutton and Christopher Sutton for Municipal Officials for Redevelopment Reform and Assembly Member Chris Norby as Amici Curiae on behalf of Respondents.David Holmquist, Beverly Hills, John F. Walsh, Los Angeles; Strumwasser & Woocher, Los Angeles, Gregory G. Luke, Byron F. Kahr; and Abe Hajela for Los Angeles Unified School District and California School Board Association as Amici Curiae on behalf of Respondents.John C. Eastman, Anthony T. Caso, Sacramento, and Karen J. Lugo for Center for Constitutional Jurisprudence and California Alliance to Protect Private Property Rights as Amici Curiae.WERDEGAR, J. Responding to a declared state fiscal emergency, in the summer of 2011 the Legislature enacted two measures intended to stabilize school funding by reducing or eliminating the diversion of property tax revenues from school districts to the state's community redevelopment agencies. (Assem. Bill Nos. 26 & 27 (2011–2012 1st Ex.Sess.) enacted as Stats.2011, 1st Ex.Sess.2011–2012, chs. 5–6 (hereafter Assembly Bill 1X 26 and Assembly Bill 1X 27); see also Assem. Bill 1X 26, § 1, subds. (d)-(i); Assem. Bill 1X 27, § 1, subds. (b), (c).) Assembly Bill 1X 26 bars redevelopment agencies from engaging in new business and provides for their windup and dissolution. Assembly Bill 1X 27 offers an alternative: redevelopment agencies can continue to operate if the cities and counties that created them agree to make payments into funds benefiting the state's schools and special districts.

The California Redevelopment Association, the League of California Cities, and other affected parties (collectively the Association) promptly sought extraordinary writ relief from this court, arguing that each measure was unconstitutional. They contended the measures violate, inter alia, Proposition 22, which amended the state Constitution to place limits on the state's ability to require payments from redevelopment agencies for the state's benefit. (See Cal. Const., art. XIII, § 25.5, subd. (a)(7), added by Prop. 22, as approved by voters, Gen. Elec. (Nov. 2, 2010).) The state's Director of Finance, respondent Ana Matosantos, opposed on the merits but agreed we should put to rest the significant constitutional questions concerning the validity of both measures.¹ We issued an order to show cause, partially stayed the two measures, and established an expedited briefing schedule. We also granted leave to the County of Santa Clara and its auditor-controller, Vinod K. Sharma (collectively Santa Clara), to intervene as respondents.

We consider whether under the state Constitution (1) redevelopment agencies, once created and engaged in redevelopment plans, have a protected right to exist that immunizes them from statutory dissolution by the Legislature; and (2) redevelopment agencies and their sponsoring communities have a protected right not to make payments to various funds benefiting schools and special districts as a condition of continued operation. Answering the first question “no” and the second “yes,” we largely uphold Assembly Bill 1X 26 and invalidate Assembly Bill 1X 27.

Assembly Bill 1X 26, the dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution. That power includes the authority to create entities, such as redevelopment agencies, to carry out the state's ends and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper. Proposition 22, while it amended the state Constitution to impose new limits on the Legislature's fiscal powers, neither explicitly nor implicitly rescinded the Legislature's power to dissolve redevelopment agencies. Nor does article XVI, section 16 of the state Constitution, which authorizes the allocation of property tax revenues to redevelopment agencies, impair that power.

A different conclusion is required with respect to Assembly Bill 1X 27, the measure conditioning further redevelopment agency operations on additional payments by an agency's community sponsors to state funds benefiting schools and special districts. Proposition 22 (specifically Cal. Const., art. XIII, § 25.5, subd. (a)(7)) expressly forbids the Legislature from requiring such payments. Matosantos's argument that the payments are valid because technically voluntary cannot be reconciled with the fact that the payments are a requirement of continued operation. Because the flawed provisions of Assembly Bill 1X 27 are not severable from other parts of that measure, the measure is invalid in its entirety.²

I. Background

A. Government Finance: The Integration of State, School, and Municipal Financing

For much of the 20th century, state and local governments were financed independently under the “separation of sources” doctrine. In 1910, the Legislature proposed, and the voters approved, a constitutional amendment granting local governments exclusive control over the property tax. (Cal. Const., art. XIII, former § 10, enacted by Sen. Const. Amend. No. 1, Gen. Elec. (Nov. 8, 1910); see Simmons, California Tax Collection: Time for Reform (2008) 48 Santa Clara L.Rev. 279, 285–286; Ehrman & Flavin, Taxing Cal. Property (4th...