SACRAMENTO, Calif. (AP) — Cities and groups that support agencies that finance local construction projects sued the state Monday to halt a change that would eliminate the redevelopment agencies and funnel their estimated $1.7 billion in tax revenue to basic services.
The California Redevelopment Association, the League of California Cities and two San Francisco Bay area cities are asking the California Supreme Court to block the change from taking effect until their case can be heard.
The Legislature approved two budget bills in June that would eliminate the state's 400 redevelopment agencies by Oct. 1. It allowed local governments to launch new agencies if they agreed to pay a share of property taxes to local governments and schools, replacing money the state pays.
Cities and agencies called that a "ransom demand." They say the move runs counter to Proposition 22, the constitutional amendment approved in November 2010 by 61 percent of voters that was supposed to halt state raids on local funding.
"The governor and Legislature have blatantly ignored the voters and violated the state constitution," Chris McKenzie, executive director of the League of California Cities, said in a prepared statement.
Neither of the two cities that sued — San Jose and Union City — expects to be able to make the payment, and they would be forced to halt projects worth tens or hundreds of millions of dollars, the cities said in the lawsuit.
The plaintiffs asked the court to rule by Aug. 15 on whether to halt enforcement of the redevelopment changes.
A spokesman for Brown's administration said the state is confident the redevelopment bills are legally sound.
"Redevelopment agencies were created by an act of the Legislature in 1945, and they can similarly be dissolved by an act of the Legislature," said Finance Department spokesman H.D. Palmer.
Agencies say the change will interfere with one of the few remaining tools local governments can use to finance construction projects and the jobs they generate. They also said many cities and counties will not be able to pay the money to keep operating under the new system.
The change would require each redevelopment agency to pay a share of the $1.7 billion in the first year to keep operating, and a proportional slice of $400 million a year thereafter.
Many of the agencies can't make the payment, and others say it will make it much harder for them to do their job, said John Shirey. Executive director of the California Redevelopment Association.
"This legislation is a job-killer and an opportunity killer for many local communities in need," Shirey said.
Brown had been pushing since January to eliminate the agencies as part of his budget proposal, saying scarce funds should be spent on core government services.
The agencies were created 60 years ago as a tool to fight post-war urban blight. Since then they have taken on roles in financing affordable housing and other development projects. They've been used to finance convention centers, retail complexes and entertainment districts, with tax proceeds from the work reinvested, sometimes to support private developments.
Critics and audits have pointed to questionable projects — sometimes in areas that show little sign of "blight" — and inflated local government salaries, accusing some agencies of acting as development slush funds.
But some legislators were leery of Brown's plan. It gained traction in June as part of a Democrat-backed two-bill package, with ABx1-26 eliminating the agencies and ABx-27 allowing their recreation — if they pay.
"The Legislature's actions are legal and balance redevelopment with other public priorities including education," Senate president Pro Tem Darrell Steinberg, a Sacramento Democrat, said Monday. "Redevelopment agencies keep 93 percent of their money going forward. This is not the agencies' money, nor the state's — it is the taxpayers'."
Lawmakers chose to reform redevelopment rather than eliminate it, said Assemblyman Bob Blumenfield, the Sherman Oaks Democrat who is chairman of the Assembly Budget Committee, which developed the bills.
"We acted in consultation with our attorneys who concluded that these reforms are constitutional," he said. "Because of these reforms, redevelopment still exists."
6 comments