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Updated: 12/29/2011 01:53:32 PM PST :: The California Supreme Court ruled today that the state can dissolve the Los Angeles Community Redevelopment Agency and about 400 similar agencies statewide, but cannot force them to transfer some of their revenues to Sacramento.
The state has been counting on $1.7 billion from the agencies in this year's budget and $400 million a year thereafter. A nonpartisan analyst has since reduced the savings estimate to $1.4 billion for the year.
The agencies not only fund major building projects, like a proposed a new art museum, apartments and park in downtown Los Angeles and a proposed football stadium in downtown, but they also spend 20 percent of their income on affordable housing.
Gov. Jerry Brown hailed the court's ruling, saying that it "validates a key component of the state budget and guarantees more than $1 billion of ongoing funding for schools and public safety."
Los Angeles County Supervisor Zev Yaroslavsky also applauded the court's decision, saying the agencies long ago stopped being a catalyst to reinvigorate blighted neighborhoods.
"Unfortunately, over the years it evolved into a honey pot that was tapped to underwrite billions of dollars worth of commercial and other for- profit projects that had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense," Yaroslavsky said.
The California Redevelopment Association and League of California Cities vowed to work with state legislators immediately to develop legislation to revive redevelopment.
"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."
Mayor Antonio Villaraigosa also issued a statement, outlining his hope for a legislative compromise.
"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," he said. "This includes new legislation to provide economic tools to communities most in need."
City Councilman Tony Cardenas, who represents portions of the East San Fernando Valley, said the decision dealt a major blow to the city's efforts to recover from the recession.
"There was definitely a need to look to at improvements in redevelopment, but this decision goes too far," he said in a statement. "Having grown up in Pacoima, I've seen first hand the impact that blight has on a community, and I've also been able to watch how a community can be revitalized with the right kind of redevelopment, like what we've seen with Pacoima Plaza, the NoHo Arts District and Bunker Hill. Without redevelopment agencies, I am afraid we won't see the kind of investment our neediest communities deserve." According to the Los Angeles CRA website, the agency has more than $500 million invested in 166 projects, including 52 currently under construction.
Ruth Davidson-Guerra, assistant director of the Burbank CRA, called the court's decision "devastating" to her 17-square-mile city. The agency invests about $50 million annually in redevelopment projects, including $10 million for affordable housing.
"This is a huge blow to the community," she said. "It's taking dollars directly from the Burbank community. It's done so much good and so much in terms of community benefit."
The justices heard arguments from both sides last month.
They considered whether the laws passed by the Legislature earlier this year were invalidated by Proposition 22, which bars the state from seizing local tax money. Redevelopment agencies are funded by the increase in tax revenue generated by projects in their areas.
The high court upheld the statute forcing redevelopment agencies to close. However, it invalidated the other, which would have allowed local officials to keep them open if they make payments to the state.
Acting under the authority of that second statute, the Los Angeles City Council voted in August to preserve the city's Community Redevelopment Agency by transferring about $95 million in tax revenue - roughly one third of its 2011-12 operating budget - to Sacramento. That transfer was set to occur on Jan. 15.
Brown and state lawmakers said redevelopment agencies were created by the Legislature, giving the state the authority to dissolve them and impose new requirements if they want to continue operating.
Cities and redevelopment agencies called the move illegal because California voters banned raids on local government money by passing Proposition 22 in 2010.
The Supreme Court's decision determines the fate of a process that has shaped economic development in California for decades.
After World War II, the Legislature allowed cities to combat blight by creating special districts for redevelopment. Growth in property taxes in those areas then could be used to finance more projects, known as tax-increment financing.
In turn, the agencies have used their power to acquire property by eminent domain and sell, lease or develop the land.
California began the year with a projected $26.6 billion deficit and closed the gap with spending cuts, fee hikes and revenue estimates that were overly optimistic. The state budget called for 70 state parks to close next year, tuition increases at state colleges and universities, and cuts to schools and libraries.
In June, lawmakers passed legislation to dissolve the redevelopment agencies and a companion measure that allows cities and counties to continue their redevelopment efforts if they voluntarily funnel their tax revenue toward local services. The budget was passed on a majority vote by Democrats, who were unable to coax Republicans to support fee increases and closing tax loopholes.
Earlier this month, the governor authorized midyear budget cuts of an additional $1 billion, including about $46 million to the Los Angeles Unified School District.
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