KAMALA D. HARRIS Attorney General
LAWRENCE M. DANIELS Deputy Attorney General
AGO 15-1103
No. 15-1103
California Attorney General Opinions
Office of the Attorney General State of California
September 2, 2016
THE
HONORABLE JOSE MEDINA, MEMBER OF THE STATE ASSEMBLY, has
requested an opinion on the following question:
May a
member of a city's redevelopment successor-agency board
purchase commercial property located within a former
redevelopment area pursuant to a right of first refusal
contained in a lease that the member entered into before
taking office?
CONCLUSION
A
member of a city's redevelopment successor-agency board
may not purchase commercial property located within a former
redevelopment area pursuant to a right of first refusal
contained in a lease that the member entered into before
taking office.
ANALYSIS
In
1945, the Legislature created redevelopment agencies to
revitalize blighted areas of communities.1 For decades, the
redevelopment agency was the "principal instrument of
economic development" in California cities and
counties.[2]
In the vast majority of cases, the members of the legislative
body of the city or county would also act as the board of the
redevelopment agency.[3] The redevelopment agency board had the power
to acquire real property, dispose of it without public
bidding, construct infrastructure to enable building on
project sites, and improve other facilities.[4]
In
2011, confronted with a statewide fiscal crisis, the
Legislature enacted Assembly Bill 1X 26 (AB 1X 26) in order
to recapture property tax increment revenue that had been
diverted from schools to community redevelopment
agencies.5 This legislation prohibited
redevelopment agencies from engaging in new business,
directed that the agencies be dissolved, and provided for
"successor agencies" to wind down their
affairs.6 As
of February 1, 2012, the redevelopment agencies were
dissolved, and the successor agencies, usually the cities or
counties that created them, assumed both their assets and
obligations.[7]
We are
told about one city council member who took office on June
23, 2009, and, as part of his council duties, also served on
the city's redevelopment agency board until the board was
dissolved on February 1, 2012. At that point, he and the rest
of the city council became members of the city's
newly-created successor agency board.
In
2006, before assuming any of these offices, the council
member entered into a lease of commercial property in a
redevelopment area. The lease, which is set to expire in
2017,8 includes a right of first refusal,
under which the council member has the right to match a third
party's offer to purchase the property during the
duration of the lease.9 We are asked whether it would now be a
conflict of interest for the council member to exercise this
right of first refusal, and purchase the property. We believe
that it would.
In
considering this matter, we are guided by our earlier opinion
involving conflicts of interest for successor agency board
members. In 97 Ops.Cal.Atty.Gen. 75 (2014), we determined
that, after the passage of AB 1X 26, the conflict-of-interest
statutes that governed redevelopment agencies continue to
apply to their successor agencies.[10] Our reasoning was twofold.
First, AB 1X 26 vested in the successor agencies all the
duties and obligations of the redevelopment agencies that AB
1X 26 did not specifically repeal, restrict, or revise.
Second, AB 1X 26 did not alter the conflict-of-interest
statutes for redevelopment agencies.[11] We went on to conclude that
these anti-conflict statutes generally prohibit a successor
agency board member from acquiring real property in the
former redevelopment area.12 In reaching this
conclusion, we invoked Health and Safety Code section 33130,
subdivision (a), which provides that an "agency or
community officer" may not "acquire any interest in
any property included within a project area within the
community."13
We now
evaluate whether this same prohibition would prevent a
successor agency board member—such as the council
member at issue here—from purchasing commercial
property in a former redevelopment area pursuant to a right
of first refusal in a lease that the board member entered
into before joining the redevelopment/successor
agency board. In this evaluation, the phrase "acquire
any interest in any property" in Health and Safety Code
section 33130, subdivision (a) is crucial. If a successor
agency...
