Redevelopment agencies take fight to state Supreme Court

California’s redevelopment agencies, stripped of their funding and facing extinction, sued Jerry Brown and the Legislature in the state Supreme Court, saying the two-piece package approved by political leaders made an end-run around voters who sought to keep the state’s hands off of local funds. The suit urges the court to put the law on hold until the merits of the case are decided.

The legal challenge, in the works even before the Gov. signed the new laws last month, was filed directly with the state Supreme Court in what the agencies – creatures of the cities and counties – hope will lead to a speedier decision than if they went through the lower and appellate courts first. The agencies’ basic contention: The new law violates Proposition 22, which voters approved by in a near-landslide in November, that forbids the state from tapping redevelopment agencies’ money, local transportation money and other funding sources in order to balance its books.

“California voters overwhelmingly passed Proposition 22 just eight months ago to stop state raids, shifts and diversions of local redevelopment funds,” Chris McKenzie, executive director of the League of California Cities, said in a written statement. “The governor and legislature have blatantly ignored the voters and violated the State Constitution. We must now go to the Supreme Court to uphold the voters’ will and the Constitution by overturning this unconstitutional legislation. We are confident the Courts will uphold the will of the voters.”

The challenge was brought by the California Redevelopment Association and two cities, San Jose and Union City. San Jose the new law “could result in the forced termination of its redevelopment agency and kill hundreds of millions of dollars’ worth of vital redevelopment projects,” according to a statement released by the Redevelopment Association.

Union City, meanwhile,  “does not currently believe it will be able to pay the funds required to avoid elimination of its redevelopment agency,” the statement added.

The court action reflects the dilemma facing the local governments and their redevelopment agencies. The two bills approved by the governor first abolishes the agencies, then allows them to be reconstituted if they agree to pay collectively up to $1.7 billion to buttress state-ordered programs during the first year and some $400 million annually after that.

Of some 398 redevelopment agencies affected, perhaps 70 have indicated in an internal survey to their trade association that they likely would be unable to come up with the money, which they typically describe as “ransom payments” and extortion.” Proposition 22 barred the use of the redevelopment agencies’ funds, but by eliminating them first the administration believes that the Proposition 22 restriction doesn’t apply.

A draft listing of the agencies’ finances and estimated obligations under the new laws can be seen here.

As a state clock ticks, dozens of redevelopment agencies across California are deciding whether to pay the state to stay alive or throw in the towel.

“Local agencies are having that discussion, whether or not to continue as redevelopment agencies, and whether they are willing to pay,” said Assemblymember Cameron Smyth, R-Santa Clarita, who heads the Assembly Local Government Committee. “Right now, a lot local agencies are in their summer hiatus and I expect their staffs are beginning to do the research and present it to city councils.”

Meanwhile, time is running short: By Aug. 1 – less than two weeks from now – the Brown’s budget-writing office, the Department of Finance, will notify them of how much they owe to remain alive. The agencies can file an appeal – to the Finance Department itself — by an Aug. 15 deadline, and the state will inform the agencies of the final decision by mid-September.

For those agencies that agree to pay the state, their money must be turned over by Oct. 1.

The cities’ efforts to reach a compromise earlier in the year with the Brown administration over the agencies’ fate fell apart. Under the earlier plan, the agencies who decide to participate in the program would contribute up to 10 percent of their tax-based revenues to local school districts over the next decade starting this year, a move that would have shifted some $2.7 billion to schools.

In return, the agencies would have been allowed to remain in existence.

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