Supreme Court Upholds Decision to Eliminate Redevelopment Agencies

The California Supreme Court upheld and affirmed the State's decision to dissolve redevelopment agencies Thursday.

In so doing, the court found in favor of Assembly Bill 1X 26 signed into law by Governor Jerry Brown in June 2011, but struck down Assembly Bill 1X 27 that would have allowed the agencies to operate by paying dues to the state.

"We've always contended that redevelopment agencies could be dissolved by an act of the legislature and given the fiscal crisis that California has been facing, we believe that other areas have more priority for these property tax dollars," said H.D. Palmer, Deputy Director for External Affairs at the California Department of Finance, on KQED on Friday. "And a priority is K-12 edcuation."

According to Santa Clara County property tax records, in 2011-2012 Mountain View's redevelopment agency diverted $594,123 in property taxes from the and $734,045 from the to redevelopment efforts downtown.

The elimination of the agencies also puts in motion the repayment of debt obligations. In preparation, Mountain View's city staff had offered various scenarios to the City Council in regard to how a court decision could impact Mountain View's redevelopment agency, which had already been scheduled to sunset April 2012. In September, the council had voted to set aside $2 million for debt repayment just in case the court ruled to eliminate the agency.

Yesterday's decision prevents the use of current redevelopment agency funds for any new projects; instead it forces Mountain View into repayment.

Property taxes funded the redevelopment agencies. Now the legislature will redistribute the $1.7 billion in RDA funds to other state agencies, including the schools. The amount owed per city will differ based on the size of the agency, state officials said.

Across the state, reactions of been swift. the California Redevelopment Association and the League of California Cities vow to work with state legislators to revive the agencies they said protect job creation and local economies.

"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement," said CRA Board President Julio Fuentes. "The legislative record is abundantly clear that Legislators did not intend to abolish redevelopment. We hope to work with state lawmakers to come up with a way to restore redevelopment."

In July 2011, CRA and the League of California Cities filed suit to enjoin Governor Brown's bill to eliminate redevelopment from communities.

Brown originally proposed the elimination of redevelopment agencies in 2010, but was voted down. The State Legislature reintroduced the bill with a proposed second option asking cities to pay the state in order to remain operational.

The California Supreme Court found the state government's request to redirect those property taxes unconstitutional and shot down AB27 request.

"I've seen firsthand the benefit of redevelopment in my district,” said Assemblyman Luis Alejo. “When I voted for the budget last June, I did so with the intent that redevelopment agencies in my district and throughout the state would continue to operate, continue to produce jobs and boost local economies 

"Today's ruling essentially kills redevelopment and I plan to start off 2012 by collaborating with my colleagues to restore redevelopment," Alejo said. "We need it in California."

The next legislative session begins in four days, and supporters of redevelopment agencies hope to have this decision reversed.

"CRA is ready and willing to engage in immediate dialogue with Legislators and the Governor on a meaningful 'fix' to this problem," said Interim Executive Director Jim Kennedy. "We have ideas for ways to restore redevelopment while also providing the state budgetary relief in a manner that doesn't violate Prop 22.

"Time is of the essence, and the future of California's economy is at stake," Kennedy said. "We hope legislators will join us in this important effort, for the sake of our future."