SACRAMENTO — 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.
In the ruling written by Justice Kathryn Mickle Werdegar, the court concluded the Legislature had a right to dissolve redevelopment agencies and there is nothing contained in Proposition 22 to “impair that power.” But the court did find Proposition 22 trumped the ability of the state to enact the second law forcing redevelopment agencies to turn over large portions of their funding in order to survive.
“A condition that must be satisfied in order for any redevelopment agency to operate is not an option but a requirement,” the court wrote. “Such absolute requirements Proposition 22 forbids.”
Chief Justice Tani Cantil-Sakauye dissented from that part of the ruling, saying the Legislature had a clear intent to keep redevelopment agencies in business, citing their ability to “successfully create jobs, encourage private investment, build local businesses, reduce crime and improve a community”s public works and infrastructure.”
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.
As expected, cities hoping to keep their redevelopment agencies open were dismayed by the ruling.
San Jose Mayor Chuck Reed called the ruling a blow to “job creation efforts in San Jose at the worst possible time.”
“Today”s Supreme Court decision eliminates critical tools to rebuild our economy, create jobs and revitalize neighborhoods — exactly the kinds of investments California cities should be making in this recession,” he said in a statement released by the city.
Livermore Mayor John Marchand called it the worst possible news for local governments, citing the fact his city”s hopes to build a regional theater may be dashed.
“What”s really unfortunate is that the redevelopment agencies were really the fuel in the economic engine that was going to turn around this recession,” he said.
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.
