EIFDs, tax increment and the RDA legacy: public financing after redevelopment

For four decades redevelopment agencies were California's gap-financing machine, pledging property-tax increment from designated project areas. ABx1 26 dissolved them in 2011, and the California Supreme Court's CRA v. Matosantos decision upheld the dissolution while striking the companion measure that would have let agencies pay to continue. The wind-down statutes (Health & Safety Code § 34161 et seq.) put successor agencies in charge of paying enforceable obligations and unwinding everything else.

What replaced tax increment is narrower and consent-based. Enhanced Infrastructure Financing Districts (Gov. Code § 53398.50 et seq.) let cities, counties and special districts contribute their own shares of future increment to fund infrastructure — affordable housing included — while Community Revitalization and Investment Authorities (CRIAs) and a family of similar district tools cover revitalization areas. For a developer the stakes are twofold: districts are a slow-but-real financing source for large sites, and the RDA estate — ROPS obligations, recorded covenants, successor-agency land — still surfaces in title work.

Each dissolved RDA's obligations passed to a successor agency — usually the city that created it — which may spend former tax increment only on enforceable obligations: bonds, third-party contracts, recorded covenants and the like, listed on a Recognized Obligation Payment Schedule (ROPS) approved through oversight-board and state review. Housing assets and covenant enforcement moved to housing successor entities. Everything outside the ROPS — new projects, new debt, discretionary subsidies — ended with dissolution.

The underwriting consequence: if a legacy agreement benefits or burdens your site — an owner participation agreement's payment stream, a disposition and development agreement's completion covenants — its survival depends on qualifying as an enforceable obligation, and the current ROPS is where you verify that the money behind it still flows.

An EIFD is formed by the legislative bodies of the participating agencies — no redevelopment-style blight findings — and governed by a public financing authority. Each city, county or special district chooses whether to contribute its share of future property-tax increment within the district; school shares never participate, the structural difference from pre-2012 redevelopment. Districts can fund public capital facilities, including affordable housing, and can issue tax-increment bonds under approval mechanics far lighter than the supermajority-election rules that made the original infrastructure financing districts a dead letter.

In practice the sponsor is a city or county, not the developer; your role is making the case that district-funded backbone infrastructure — streets, utilities, transit access, parks — unlocks the assessed-value growth that pays for it. CRIAs run parallel for disadvantaged areas and carry built-in affordable-housing requirements.

• Underwriting watch-outs:
• Increment math starts near zero — a young district throws off little cash until assessed value grows, so bonds come years after formation. Treat EIFD proceeds as upside, not a base-case source.
• County participation is usually the swing factor: a city-only district captures only the city's slice of the tax dollar.
• Unlike a Mello-Roos CFD, an EIFD levies no new tax on your parcels — but it also gives you no formation control. Compare the tools in the Mello-Roos guide.
• Formation is a political project measured in years; if the pro forma needs the infrastructure by vertical start, the district is already too late.

Former-project-area parcels routinely carry redevelopment-era paper: recorded DDAs and OPAs with performance covenants, long-term affordability covenants now enforced by housing successors, repurchase options and use restrictions in old agency deeds. Dissolution did not erase recorded instruments — it changed the counterparty.

Successor agencies also disposed of substantial land inventories under state-approved property-management plans, so agency-sourced sites come with their own conveyance conditions. Before closing in a former project area, pull the ROPS to confirm which obligations still have money behind them and run the full covenant chain — the title and covenant diligence guide covers the workflow.

• Diligence checklist:
• Chase every title exception naming the former RDA, a successor agency or a housing successor to the underlying instrument — never waive one on a summary.
• Affordability covenants from agency deals commonly outlast the financing that created them; confirm the recorded term and the enforcing entity before underwriting rents.
• If a legacy payment obligation is supposed to fund your infrastructure, verify it appears on the current ROPS — an obligation struck in state review is not coming back.