Redevelopment – The More Things Change, The More They Stay The Same

​The Board of Supervisors this week approved the first reading of legislation that will go a long way toward defining how the former San Francisco Redevelopment Agency (“SFRA”) will transition to, ultimately, its complete dissolution.  The legislation was introduced by Mayor Lee and sponsored by Supervisors Kim, Cohen and Olague.  The Board approved the legislation by a 10 to 1 vote, with Supervisor Campos opposing.

Under Assembly Bill 26 (“AB 26”) and the California Supreme Court’s decision upholding AB 26, all redevelopment agencies in the state, including the SFRA, were dissolved by operation of law as of February 1, 2012. Although the fact of dissolution was clear at that time, the nuts and bolts of how that dissolution would occur needed significant clarification.  Unanswered questions included:  whether redevelopment plans would still control development in existing project areas; who would approve new and ongoing projects in project areas; and whether the Planning Department would take over the functions of the SFRA staff.  The legislation approved by the Board of Supervisors this week answers many of these questions. 

The short answer is that a new, independent City agency, formally known as the Successor Agency to the Redevelopment Agency of the City and County of San Francisco (“Successor Agency”), will essentially step into the shoes of the former SFRA as to the management of “non-affordable” housing assets and obligations.  Just like the former SFRA, this new Successor Agency will have an Executive Director and will be staffed by former SFRA staffers, and will be governed by a five-member commission appointed by the Mayor (subject to confirmation by the Board of Supervisors) to serve four-year terms. 

The Successor Agency’s Executive Director could be quite powerful as the Successor Agency Commission is authorized to delegate to the Executive Director any of its duties it deems appropriate.  The Successor Agency will not have the power to collect tax increment financing or to create new redevelopment project areas, as its reason for existence is to wind down the affairs of the SFRA.  The Mayor’s Office of Housing (“MOH”) has been and will continue to manage the SFRA’s affordable housing assets and functions.

When redevelopment agencies were dissolved on February 1, AB 26 designated the City as the original successor agency as to non-affordable housing assets and obligations.  As required by AB 26, the City established a seven-member oversight board of the successor agency (“Oversight Board”). The Mayor appointed, and the Board of Supervisors confirmed, four members to the Oversight Board. The Bay Area Rapid Transit District, the Chancellor of the California Community Colleges, and the County Superintendent of Education each appointed one of the remaining three members of the Oversight Board.  Much of what the Successor Agency and Successor Agency Commission are now tasked with under the new legislation was previously within the jurisdiction of the Oversight Board.  The Oversight Board will continue to be responsible for the City’s semi-annual financial disclosures to the state Department of Finance.  These are referred to as Recognized Obligation Payment Schedules, or “ROPS.”

Pursuant to AB 1484, legislation adopted by the state Legislature in June 2012, the Board of Supervisors’ legislation will terminate the City’s responsibility as successor agency and now provides as follows: 

(1) the new Successor Agency is a separate public entity from the public agency that provides for its governance (the City) and the two entities shall not merge;

(2) the Successor Agency has its own name and the capacity to sue and be sued;

(3) the Successor Agency shall be substituted for the SFRA in all litigation to which the SFRA is a party;

(4) the Successor Agency succeeds to the organizational status of the SFRA but without any legal authority to participate in redevelopment activities except to complete the work related to an approved enforceable obligation;  

(5) the Successor Agency is a local entity for purposes of the Brown Act;  

(6) the Successor Agency is now distinct from the City but is still subject to the governance of the City acting through its legislative capacity; and

(7) the Successor Agency may retain, as it deems appropriate, the City Attorney for legal advice and representation.

Under the Board’s new legislation, the Successor Agency and the Successor Agency Commission will act in place of the SFRA to implement, modify, enforce and complete the surviving redevelopment projects.  These include, without limitation, the “Major Approved Development Projects” (Mission Bay, Hunter’s Point and the Transbay Transit Center), and all other enforceable obligations, except for those enforceable obligations for affordable housing that have been transferred to MOH.

The Successor Agency and the Successor Agency Commission also will approve all contracts and actions related to the assets transferred to or retained by the Successor Agency, including, without limitation, the authority to exercise land use, development and design approval authority for the Major Approved Development Projects and other surviving redevelopment projects, and the approval of amendments to redevelopment plans as allowed under AB 26 and AB 1484, and subject to adoption of such plan amendments by the Board of Supervisors and any required approval by the Oversight Board.

The Board of Supervisors is anticipated to approve the second reading of this legislation next week at its regular meeting (October 2), and then the Mayor will have 30 days to sign it into law.  Nevertheless, Successor Agency staff already is effectively in place and operational as authorized by the new legislation.  Please contact the author if you have any questions or would like additional information on this topic.

Clarification Regarding Gross Receipts Tax Proposal

In our last update, we discussed the San Francisco gross receipts tax proposal that will be on the November.  Our summary of the tax rates did not include a final change that was made before the legislation was approved for the ballot.  The final version has the following rates, which are slightly lower than previously proposed:

               Gross Receipts        Tax Rate

               Under $5M                0.285%

               Over $5M                  0.3%

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

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