California Supreme Court deals blow to redevelopment agencies

California’s Supreme Court said today the state can dissolve its redevelopment agencies. It also struck down a law that forced the entities to pay the state $1.7 billion this year to reopen.

Redevelopment agencies use a portion of local property tax to finance construction projects and create jobs in depressed areas.

Earlier this year state lawmakers voted to dissolve the agencies to get at $1.7 billion in redevelopment dollars to help plug a $26 billion deficit. But the state also passed a second law that allowed agencies to stay open if they “volunteered” to give the a collective $1.7 billion to the state this year, and $400 million every year after that.

California’s Supreme Court unanimously agreed that the legislature has a right to dissolve agencies it created in the 1940s, but the majority of justices struck down the law that would force local agencies to give the state money in order to stay open. That violates Proposition 22, a 2010 measure that prevents the state from raiding local funds to balance its budget.

That leaves redevelopment agencies in a double-bind, on the brink of dissolution, without the ability to pay the state to remain open.

California’s chief justice Tani Cantil-Sakayue dissented on the court's decision to prevent agencies from delivering funds to the state, arguing that her colleagues had interpreted Prop. 22 too broadly.

"Today's ruling by the California Supreme Court validates a key component of the state budget," said Gov. Jerry Brown in a statement, "and guarantees more than a billion dollars of ongoing funding for schools and public safety."

The decision deals a blow to local governments. It means they’ve lost a funding source for low-income housing and construction projects, some of which (including a downtown project in San Jose and a transit project in Union City) will go literally half-finished.

"All over the state of California there are projects that've been on hold for the better part of a year that would be unable to go forward," Jim Kennedy, Executive Director of the CRA, told KPCC's Patt Morrison. "In every regional economy there's a fairly large number," he added.

Assemblyman Chris Norby (R) told AirTalk's Larry Mantle that he feels the court's decision makes legal and political sense.

"Redevelopment agencies were never intended to be a permanent form of government," he said. Instead, said Norby, they were intended to be a temporary solution to alleviate blight.

"It's a victory for those who believe in fiscal responsibility and it's a victory for the government as well," he said.

Meanwhile, Deputy Director of External Affairs for California's Department of Finance, characterized the ruling as a victory for K-12 schools, which he said would have had to trim their own budget had state legislators been unable to cut the redevelopment agencies' funds.

"We asked, 'what's priority for these budgets?'" said Palmer. "As a result of today's ruling, more than $1 billion will be going to K-12 schools this year."

This story has been updated.