The California Supreme Court recently upheld bill AB 26X as constitutional, allowing the state to eliminate 400 local redevelopment agencies, which are a major source of funding for affordable housing projects in the state. The ruling in favor of Governor Jerry Brown and the California State Legislature will effectively allow the state to divert billions of dollars in order to deal with the state’s budget deficit. State analysts estimate that the elimination of these development agencies could free up nearly $2 billion a year for schools, courts and other services. In the same ruling, the Court struck down companion legislation, AB 27X, which would have enabled the redevelopment agencies to stay in business if they agreed to pay a big chunk of their revenues to the state.

By ruling that AB 26x was constitutional and AB 27x unconstitutional, the Court sanctioned the abolition while preventing any chance for the agencies to reform. This effectively means that California’s redevelopment agencies have been barred from taking on new obligations and must wind down their existing operations which in turn will be transferred to designated “successor agencies”. These successor agencies will assume responsibility for repaying existing redevelopment bonds. In most cases, projects that are already underway will likely move forward.

To read the California Supreme Court ruling, click here.