California Supreme Court allows redevelopment money grab
By Howard Mintz email@example.com
The California Supreme Court on Thursday found that state lawmakers had a legal right to seize $1.7 billion in redevelopment money to help solve the state's budget woes, at the same time reaching a result that may put the state's nearly 400 local redevelopment agencies out of business forever.
California's high court concluded the Legislature had the authority to raid redevelopment funding earlier this year, rejecting arguments from redevelopment advocates that the budget gambit violated voter-approved Proposition 22, a 2010 measure designed to bar the state from seizing local funding to pay its bills.
The justices, however, struck down a separate state law approved as part of the legislative package that would have allowed redevelopment agencies to stay afloat if they agree to relinquish a large share of their funding to the state. Most redevelopment agencies had planned to take advantage of that safety net to remain in operation, but the ruling is likely to slam the door shut on their ability to fund local projects.
Chief Justice Tani Cantil-Sakauye dissented from that part of the ruling.
For Gov. Jerry Brown and state lawmakers, the ruling allowing the redevelopment money grab is a crucial win because they otherwise would be scrambling to find ways to fill a $1.7 billion gap in funding for the current budget. The ruling comes in time for a Jan. 15 deadline, when half of the redevelopment money is slated to be turned over to the state for the 2011-12 fiscal year.
But the decision is about the worst outcome possible for local redevelopment agencies, which led the legal challenge to the budget maneuver based on the argument it is unconstitutional because it violates Proposition 22, approved by the voters just last year. The state's redevelopment association, joined by the cities of San Jose and Union City, sued to block the state from raiding their coffers.
San Jose's already dwindling redevelopment agency, once a powerful institution that backed such projects as the HP Pavilion and Tech Museum, is likely to be one of the most significant casualties of the Supreme Court case.
The case centered on two related laws passed by the Legislature earlier this year. The first dissolves redevelopment agencies and redirects property tax revenues to the state, while the second gives agencies the ability to stay afloat if they "opt in" and agree to relinquish a large portion of their funding to pay for schools. San Jose had said it could not afford the so-called "pay to play" option, but most other agencies from San Bruno to Los Angeles planned to capitulate to stay alive.
Oakland, San Francisco, Walnut Creek and Concord were among the cities hoping to retain their redevelopment agencies. And Oakland was also eyeing redevelopment money as a way to retain the Oakland A's, a team trying to move to San Jose.
But barring future changes in the law, it appears the Supreme Court ruling removes that option of keeping the agencies operating. During arguments in the case in November, the lawyer for the statewide redevelopment association conceded such a split outcome would be the worst-case scenario for the agencies.
The Brown administration did not push hard for that outcome, but argued the Legislature created redevelopment agencies six decades ago and has the right to abolish them or divert their funding for other more pressing needs. The governor maintained redevelopment agencies over time abused the law to take tax money that could go to schools, counties and state services.
Santa Clara County joined the state in defending the redevelopment grab, arguing cities were diverting too much money for redevelopment projects. Redevelopment advocates argued the money was crucial to urban renewal and affordable housing projects across the state.
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ruling reverberates through region
By Lisa Vorderbrueggen
Contra Costa Times
Bay Area city and county leaders were grappling Friday with the death of their prized redevelopment agencies.
The California Supreme Court on Thursday upheld state legislation that eliminated the state's 400 redevelopment agencies and struck down a law that would have allowed them to buy their way back into life.
By late Friday afternoon, local government leaders and legislators were talking about legislative remedies that could restore some redevelopment services, particularly affordable housing programs.
Redevelopment agencies spend most of their share of local property tax money on projects to boost property values within their boundaries, such as roads, upgraded shopping and housing, and police services. They reap the rising revenue of property taxes.
"I'm telling people that we can fix this and create something really good from a public policy standpoint," said state Sen. Mark DeSaulnier, D-Concord, who voted to eliminate redevelopment agencies. "I think there is a better product out there."
Resurrection of redevelopment may prove extraordinarily difficult.
The court ruling triggers a pivotal shift in the way the state apportions property taxes and in turn, a new set of winners and losers.
Dollars that were diverted into redevelopment agencies will be reallocated to the hundreds of other public agencies that share the property tax pie.