The state Supreme Court on Thursday delivered a huge blow to cities counting on money from redevelopment agencies to provide local improvements, granting the Legislature the authority to eliminate more than 400 such agencies.
Redevelopment agencies have existed in California since the 1940s and they allow cities to create their own property tax districts to harness funds for blighted areas. But the Legislature put forward two measures to try to recapture those monies — one to eliminate the agencies, and an alternative that would allow agencies to remain, but at a high price.
The California Redevelopment Association, the League of California Cities and others sued over the measures, arguing that each measure was unconstitutional. They claimed the measures violated Proposition 22, which voters approved in November 2010 to limit the state‘s ability to require payments from RDAs for the state‘s benefit.
But on Thursday, the Supreme Court ruled for the state, saying the Legislature has the right to eliminate the agencies, reclaiming the property taxes previously directed away from the California budget. Scroll down to read the full ruling.
The court said no to an alternative measure that said agencies can continue to exist if they agree to pay $1.7 billion to the state in 2011 and another $400 million in the coming years. Proposition 22 expressly forbids the Legislature from requiring such payments, according to the court.
Thursday’s decision translates to a loss of $3.2 million in net funding per year for Goleta, according to City Manager Dan Singer. Future revitalization projects and programs for the city’s Old Town area will now be suspended, and the city’s General Fund will also be affected.
“This is obviously a huge setback to any revitalization efforts the city/RDA had for Old Town, and it virtually guarantees the continued blighted conditions that exist there, until and unless another tool becomes available to us,” he told Noozhawk.
In July, local officials decried the state grab while standing in front of a vacant lot in Old Town that planners would like to see become a park.
“We believe these bills are unconstitutional, plain and simple,” then-Goleta Mayor Margaret Connell said.
She said the elimination of RDA funds would cost the city $2.1 million in project monies and another $800,000 toward affordable housing.
State Sen. Sam Blakeslee, R-San Luis Obispo, called the move “an illegal effort” by the state.
“A team of us worked very hard to save redevelopment agencies,” he said. “Sadly, each and every one of those efforts at compromise were rejected categorically.”
Santa Barbara Mayor Helene Schneider was also at the conference and said that younger cities such as Goleta would miss out on long-term benefits. Santa Barbara has seen the benefit of RDA funds throughout the past 30 years, and Schneider said the funding has created a city where people want to live and visit.
“We wouldn’t have the vital economic engine of Paseo Nuevo or the waterfront area without redevelopment agencies,” she said.
Schneider called Thursday’s decision “disappointing,” and said she didn’t agree with the argument that redevelopment agencies were taking money from schools.
“Good RDA projects raised the boat for everybody, including schools,” she said.
Current projects funded by the RDA will be completed, but Schneider said the city will need to regroup and reprioritize some of the projects in the pipeline, including a new police headquarters and some waterfront projects.
The failure of the alternative measure means California still has a shortfall, she said, so “the state isn’t even getting the push they needed to close their budget gap.”
Assemblyman Das Williams, D-Santa Barbara, took a different tone Thursday.
“I supported the elimination of RDAs from the beginning, when it was either them or schools,” he said in a statement to Noozhawk. “I am glad to see that the state’s high court validated the legislative action that will divert needed money to our public schools, where it is needed the most.”
Williams said there are well-functioning, smaller redevelopment agencies throughout California, and said he was disappointed to see the court block fully funding affordable housing programs.
“But when faced with the choice between funding RDAs or our schools, I will always choose to fight for public education,” he said.
Affordable housing is another area of concern presented by the loss of funds. Local projects by groups like Habitat for Humanity of Southern Santa Barbara County have been made possible in the past by the funding, according to Joyce McCullough, the nonprofit organization’s executive director.
RDA funds enabled the group to purchase a west downtown site that is now home to four affordable units for families, she said.
“Without that source of funding, it will be much more difficult for us to acquire additional sites, and difficult for cities to meet their requirements established by the state housing elements,” McCullough said. “We believe this is a short-sighted way for the state to balance the budget, as more and more people require services provided through RDA funding.”
Habitat representatives will be going to Sacramento in January to meet with legislators to voice their concerns about the loss of affordable housing, “which is a growing need throughout the state as a result of the economic situation,” she said.
The organizations that opposed the decision expressed disappointment Thursday, but said they’ll continue to work with the Legislature.
“Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement,” said Julio Fuentes, board president of the California Redevelopment Association.
“The legislative record is abundantly clear that legislators did not intend to abolish redevelopment,” Fuentes said. “We hope to work with state lawmakers to come up with a way to restore redevelopment.”
Locally, officials from the Chambers of Commerce Alliance of Ventura & Santa Barbara Counties said they were let down by the ruling but expressed optimism that the Legislature would prioritize job creation in the coming year.
“The Chamber Alliance is disappointed that the Supreme Court has upheld the Legislature’s elimination of redevelopment agencies, which in many of our cities, represent the only job creation vehicles taking place,” said Patrick Ellis, board president of the Chamber Alliance and president and CEO of the Moorpark Chamber of Commerce.
“Nonetheless, the Chamber Alliance recognizes the opportunities to shape new redevelopment tools and will continue to urge our lawmakers to support job creation throughout our region.”