Appeals Court: Withholding Local Tax Revenue Not OK in RDA Unwinding
March 11, 2016
A recent redevelopment-related court ruling upholds control of local revenues by local governments, a determination that run counter to state agency activity following the enactment of AB 1484 (Committee on Budget, 2012).
The Court of Appeals ruled that provisions permitting state agencies to withhold local tax revenues were not permissible, and that such “statues are unconstitutional to the extent they allow the state to reallocate, transfer, or otherwise use tax revenue belonging to the local government.” The court based the decision on Proposition 22 (2010), which restricted the state’s ability to redirect local revenues; specifically, court cited that “the Legislature may not reallocate, transfer, borrow, appropriate, restrict the use of, or otherwise use the proceeds of any tax imposed or levied by a local government solely for the local government’s purposes.”
AB 1484 imposed obligations and requirements on successor agencies related to Recognized Obligation Payment Schedules (ROPS) and other financial matters related to money that had once belonged to the now-defunct RDAs. The bill also provided enforcement options to penalize successor agencies that did not comply with the processes set in statue: the Board of Equalization could withhold sales and use tax revenues, and the county auditor-controller could withhold property tax revenues as a means of offsetting the return of funds improperly spent. The California Department of Finance (DOF) was also involved in determining allocations to local agencies.