California Supreme Court holds fate of redevelopment agencies

By Judy Lin Associated Press SACRAMENTO, Calif. (AP) -- The California Supreme Court heard arguments Thursday in a case that has long-term implications for state budgeting and will determine the fate of hundreds of community redevelopment agencies. The high court is deciding whether the Legislature had authority last summer to eliminate about 400 redevelopment agencies run by cities and counties throughout California. Those agencies have become an important source of revenue for local governments, especially in attracting development and rehabilitating downtrodden business districts. The state wants the tax revenue generated by redevelopment zones to go to schools, law enforcement agencies and other local services, which would allow the Legislature to direct an equal amount of money elsewhere. The state is counting on $1.7 billion from the agencies in this year's budget and $400 million a year thereafter. Without the cash, Gov. Jerry Brown and lawmakers will have to find another way to fill the state's ongoing budget deficit. Redevelopment proponents say the Legislature and governor ran afoul of Proposition 22, a 2010 ballot initiative that prohibits the state from raiding local government budgets. They say cities are at risk of losing an important economic development tool. "By killing funding for redevelopment projects, they're killing the jobs that create the very tax revenue the state needs to fund education and other vital services," said Chris McKenzie, executive director of the League of California Cities. "It's a colossal mistake to shoot yourself in the foot on that scale." In June, lawmakers passed the legislation to dissolve redevelopment agencies and establish a voluntary program for cities and counties interested in continuing the agencies. The budget was passed on a majority vote by Democrats, who were unable to coax Republicans to support fee increases and closing tax loopholes. Brown, a Democrat, criticized redevelopment agencies for draining tax money from schools and public safety at a time when the state faces immediate and long-term fiscal problems. The state's high court will hear arguments about whether the state has authority to dissolve the agencies and set out new requirements for cities that want to maintain their agencies. The state argues that Proposition 22 only blocked the state from shifting and transferring money from redevelopment agencies. It argues that the Legislature has the power to eliminate those agencies altogether. "The state constitutional provisions that limit the Legislature's powers over RDAs do not prevent a legislative repeal of the RDA program," state lawyers wrote in a court brief. "RDAs are creatures of statutes -- and their existence is not guaranteed in the state Constitution -- so the Legislature was free to dissolve them." The governor and supporters of the law said the redevelopment agencies have become little more than slush funds for private developers, and they want the tax money generated by new developments to be diverted to local services. The court has indicated it will settle the matter before Jan. 15. That's the deadline for redevelopment agencies to make their first voluntary payments to the state under the new law. Published: Fri, Nov 11, 2011