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Cities, lawmakers seek compromise on fate of 400 development agencies

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POSTED December 29, 2011 7:52 p.m.

SACRAMENTO . (AP) — The California Supreme Court on Thursday gave Gov. Jerry Brown and state lawmakers the right to eliminate community redevelopment agencies in a crucial decision that impacts the state budget.
But the fate of the more than 400 redevelopment agencies remains unclear as cities — and even many lawmakers — vowed to seek a legislative compromise next year that would ensure the agencies' survival.
The court affirmed the state's authority to dissolve the agencies, calling it "a proper exercise of the legislative power vested in the Legislature by the state constitution." Doing so means more of the property taxes generated within redevelopment zones will go toward schools, law enforcement and other local services, freeing up as much as $1.7 billion in the state general fund during the current fiscal year. The money now is returned to the agencies to spend on future redevelopment projects.
Lawmakers and the mayors of several large cities said Thursday they were inclined to work out a compromise after the justices issued their split decision. While they affirmed the Legislature's authority to dissolve redevelopment agencies, the justices in a unanimous decision invalidated companion legislation passed last summer that was intended to keep the agencies operating by forcing them to direct a certain amount of property tax revenue to schools and other services.
The majority said that law ran afoul of voter-approved Proposition 22, which prohibits the state from raiding local tax money.
"I intend to work closely with leaders in Sacramento and across California to develop a responsible path forward that invests in our schools, our safety and puts the 14 million unemployed Californians back to work," Los Angeles Mayor Antonio Villaraigosa said in a statement. "This includes new legislation to provide economic tools to communities most in need."
Redevelopment agencies were authorized by the Legislature shortly after World War II as a way to restore blighted neighborhoods and are largely controlled by cities and counties to promote construction projects. They have been credited with revitalizing blighted districts such as the Gaslamp Quarter in San Diego, downtown San Jose and Yerba Buena Gardens in San Francisco.
Critics, including Brown, say some have become little more than slush funds for private developers. They want property taxes generated by new developments to be diverted from the agencies to local services that now must be funded by the state.
Redevelopment money in the past has been used to finance big box retailers, sports complexes and other projects that critics say run counter to the agencies' original mission.
"Today's ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety," the governor said in a statement.
The ruling was highly anticipated because it was a key component of balancing this year's state budget. The state is heading into the new year with a $13 billion deficit over the next 18 months, and a ruling against the state would have widened the shortfall.
The governor proposed dissolving redevelopment agencies in January, then transferring their property tax revenue of about $5 billion a year to the cities and counties that controlled the agencies. They would then use the money to repay redevelopment debt and distribute money to cities, counties, special districts and schools, saving the state about $1.7 billion this year.
State lawmakers inserted a compromise in last summer's budget that allowed the agencies to keep operating if they made additional payments of about $400 million annually to schools and other local services starting next year. The court invalidated that piece of legislation, calling it "flawed."
The court opinion was written by Justice Kathryn Mickle Werdegar and signed by five other justices. The seventh, Chief Justice Tani Cantil-Sakauye, agreed but wrote a separate opinion saying she would have upheld the compromise law that would have permitted agencies to continue if they shared revenue.
The decision means schools can expect more than $1 billion each year in additional property tax revenues, but a firm figure won't be released until Brown presents his spending plan next month, said Brown's finance department spokesman, H.D. Palmer.
Local government officials say it does not make sense for the state to eliminate redevelopment agencies, which contribute $2 billion a year in economic activity. They say because the Legislature did not intent to eliminate local economic development efforts, agencies should be reshaped.
"We do know that the governor will be a tough nut on this, but at the end of the day, his primary challenge is to help balance the state budget," said Jim Kennedy, interim executive director of the California Redevelopment Association, which filed the lawsuit along with the League of California Cities.
San Diego Mayor Jerry Sanders called it a "sad day" while San Jose City Attorney Richard Doyle called the ruling a disappointment but not a total surprise, given the judges' reactions during arguments in November.

 

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