California’s high court puts state’s 400 redevelopment agencies out of business
By Chris Levister –
“We’re down but not out.” “The fat lady can wait to sing, community redevelopment is not dead.” “We’re in a tizzy, but we’re not giving up.” "Take a deep breath folks, this ain't over."
That’s stiff upper lip reaction from Inland Area city and county leaders to the California Supreme Court ruling last week that state lawmakers have a legal right to seize $1.7 billion in redevelopment money to help solve the state’s budget woes.
“It’s a disaster for cities across the region,” said Fontana Mayor Acquanetta Warren. Warren has repeatedly defended the city's redevelopment program and has expressed outrage that "Sacramento is attempting to balance its budget by raiding local government funds."
"This is a devastating blow. Redevelopment has been one of California's great successes,” said San Bernardino County Board of Supervisors Chair Josie Gonzales.
Riverside Mayor Ron Loveridge calling the ruling "the worst possible outcome for cities" held a special meeting to discuss a potential $5 million deficit the ruling adds to the city's general fund budget. He warns several projects including a new shopping center in the 5 Points area and a long planned transit center may not get done.
“Shutting down RDAs strikes at the core of the Inland economy, from providing safe low income public housing, to throttling the multi-billion dollar movement of goods from the ports of L.A. and Long Beach along the I-10 corridor to building community's centers for seniors, and parks and recreation areas for families,” said Warren whose city was recently profiled as part of the ongoing “Strong Cities | Strong State” campaign highlighting local government success stories across California.
Fontana has a huge stake in the issue because it has one of the largest redevelopment agencies of any city in the state, spending more than $100 million.
Because of the new ruling, officials fear that many local construction and renovation projects could be completely derailed.
“What happens with outstanding loans the agencies made to finance housing projects? What happens to agencyowned properties that are awaiting development?
Does the state liquidate them and take the money? Who pays for road and transportation corridor improvements to support the eastward movement of goods from west coast ports," said Warren, "What employer would want to locate in a state that hangs out a sign saying “go away’."
In the early part of 2011, the California Legislature passed two bills relating to redevelopment in an attempt to help resolve the state's ongoing budget problems by freeing up more than $1 billion in state funds.
Both of the bills were opposed by the California Redevelopment Association and the League of California Cities, which filed suit while representing cities throughout the state.
The high court rejected 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 agreed to pay a large share of their funding to pay for schools.
The court explained that, because the Legislature had the authority to create redevelopment agencies, it also had the corollary power to dissolve them. The court noted that although Proposition 22, amended the state Constitution to impose additional limits on the state's fiscal powers, nothing in that initiative or other parts of the state Constitution guaranteed the continued existence of redevelopment agencies.
Gov. Jerry Brown and other state officials have said that cities' redevelopment agencies are not worthwhile because do not bring any new jobs to the state as a whole. They said that money being spent on redevelopment could be put to better use elsewhere. "This ruling validates a key component of the state budget and guarantees more than $1 billion of ongoing funding for schools and public safety," Brown said in a statement on Thursday.San Bernardino County had pinned much of its hopes for economic recovery restoring blighted areas near downtown through its RDAs but those hopes have been dashed for the time being at least.
The estimated annual loss from the elimination of the SB County RDA is $11.5 million, in addition to $22 million in unencumbered housing funds for a total one year loss of $33.15 million from the local economy.
The county’s 26 RDAs generate approximately $610 million in annual tax increment – money that goes into the local economythat will now go into the state’s treasury.
“We don’t think it was the Legislature’s original intent to completely abolish redevelopment,” said Gonzales in a written statement.
“However, the legal process has run its course, and we will now focus our efforts on joining the California Redevelopment Association and other counties and cities to work with the Legislature to re-establish redevelopment in a manner that confirms to the Constitution.”
Critics say many of the agencies have strayed from the intended mission of RDAs and instead evolved to benefit private developers, while some audits have revealed questionable projects and some misuse of funds.
"Now more than ever we need to regroup and preserve the tools we have left, like Enterprise Zones, to promote job creation and economic development throughout California,” said Gonzales.
Most redevelopment experts agree there is no local solution, given that cash strapped cities and counties do not have a pot of money comparable to the property taxes that had poured into redevelopment coffers to pay for urban renewal.
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