On January 10, 2011, Governor Brown confirmed rumors that he intended to eliminate redevelopment agencies as of July 1, 2011. On May 16th the Governor presented his May Revise Budget which included his January proposal to eliminate redevelopment. In early June a new two-bill elimination proposal emerged that would eliminate agencies, then exempt them from elimination if they make payments to local schools. Later in the month the bills were passed and signed by the Governor: AB x1 26 suspending all new redevelopment activities and incurrence of indebtedness, dissolving redevelopment agencies and creating successor agencies effective October 1, 2011; and AB x1 27 allowing an Agency to avoid dissolution by opting into an alternative voluntary redevelopment program and paying annual contributions to local school and special districts.
These two bills were effective immediately and agencies were prohibited from entering into any new agreements until they enacted an ordinance committing to make the payments as required by AB x1 27. On July 12, 2011, the Lake County Redevelopment Agency staff offered an ordinance to participate in the Alternative Voluntary Redevelopment Program and it was approved by the Lake County Board of Supervisors. The second reading was July 19, 2011, and the ordinance took effect 30 days later.
On July 18, 2011, the CRA filed a Writ of Mandate to the California Supreme Court asking that the two bills be judged unconstitutional, and on August 11, 2011, the Court agreed to hear the case. The Court allowed AB x1 26 to remain in effect insofar as it precludes existing redevelopment agencies from incurring new indebtedness, pledging or encumbering revenue, making loans, disposing of or transferring assets, acquiring real property, entering leases, entering into new contracts or modifying existing contracts, entering into new partnerships, adopting or amending redevelopment plans, etc., but it stayed enforcement of both statutes in all other respects.
On December 29, 2011, the Supreme Court ruled that AB x1 27 was unconstitutional, but upheld AB x1 26. The effect of this ruling was to eliminate all agencies as of February 1, 2012. On January 24, 2012, the Board of Supervisors passed a resolution electing to have the County of Lake serve as Successor Agency to the Lake County Redevelopment Agency and electing not to retain the Housing assets and Housing functions previously performed by the Redevelopment Agency.