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Court upholds RDA shutdown

Turlock to face budget gap

POSTED December 30, 2011 8:36 p.m.

The future of redevelopment – a statewide program which devotes a share of property tax to reducing blight and increasing property values – now appears to be non-existent.

The death of redevelopment follows a long-awaited Wednesday State Supreme Court decision which upheld the State Legislature’s right to eliminate redevelopment agencies across California, but ruled unconstitutional a measure which would have allowed those agencies to remain open should they make annual payments to the state.

“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,” said Gov. Jerry Brown in a statement.

But local officials, including Turlock Mayor John Lazar, see the move as just the latest in a series of state takes from local government. Lazar said, in particular, he was disappointed that Brown – a former Mayor of Oakland who employed redevelopment extensively – had “turned his back on local government.”

“I’m infuriated,” Lazar said. “I think we need to recall the judge, or recall a legislator or something, and make a statement.

“Those guys are out of control up there. They need to remember who put them there.”

 

Move traces back to state budget

The lawsuit traces back to June, when the State Legislature sought to close a $1.7 billion budget shortfall. Their solution: forcing redevelopment agencies statewide to either close – redirecting their funding to the state’s general fund – or requiring those agencies to make “voluntary” payments to remain open – which would be diverted in lieu of the state’s obligation to K-12 education.

The California Redevelopment Association argued that the “voluntary” payments were illegal under 2010’s Proposition 22, a constitutional amendment which explicitly prohibits “seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with” revenue dedicated to local government, including redevelopment dollars. A lawsuit based on that argument was quickly escalated to the California Supreme Court, and implementation of the plan was put on hold until a ruling could be issued.

On Wednesday, the court overturned the “voluntary” repayment scheme, but upheld the state’s move to shutter all RDA agencies – a move which both guarantees the state will not receive the $1.7 billion it had estimated, and that RDA agencies have no option to remain open.

The ruling represents the worst possible outcome, according to California Redevelopment Association Board President Julio Fuentes.

“Without immediate legislative action to fix this disaster, this ruling is a tremendous blow to local job creation and economic advancement,” Fuentes said. “The legislative record is abundantly clear that Legislators did not intend to abolish redevelopment. We will take lawmakers at their word and ask that they immediately reconvene to pass new legislation to revive redevelopment in California.”

 

Court unanimous

The court’s ruling to allow the dissolution of redevelopment agencies was unanimous, arguing that as the Legislature had created redevelopment agencies, they also could dissolve them. Additionally, Proposition 22 did not explicitly guarantee the continued existence of redevelopment agencies.

But Prop 22 did ban required payments based on redevelopment agency tax revenues, making the “voluntary” payment plan unconstitutional, according to a majority of justices. Only Chief Justice Tani Cantil-Sakauye dissented, arguing that Proposition 22 did not expressly prohibit an opt-in payment plan, and noting the legislature had drafted the measure so as to not violate Prop 22.

During the budget process, lawmakers lauded the redevelopment plan in part because it would allow redevelopment to continue.

 “This bill is the fair and right choice because it does not in fact eliminate redevelopment but it reduces its size,” said Senate President Pro Tem Darrell Steinberg during budget discussions.

 

Turlock to face budget gap

The shutdown of Turlock’s redevelopment agency will not affect current projects, such as the Public Safety Facility or the Avena Bella housing project, as the funding has already been committed. The law allows for agencies to continue paying all existing obligations, through a “successor agency” which exists solely to wind down the agency.

But without a redevelopment agency, Turlock loses its main source of project funding; the Turlock RDA funded the rebuilt Carnegie Arts Center, the new Public Safety Facility, downtown improvements, the city’s industrial park, the artificial turf track and field at Joe Debely Stadium, and the planned Avena Bella, a 80-unit low-income housing project on Linwood Avenue. Any other projects – including a planned second phase of 60 units for Avena Bella – will likely be tabled.

Additionally, the elimination of Turlock’s RDA creates a nearly $500,000 budget gap, when considering administrative, fixed, and employee costs currently funded by the RDA. The agency currently funds all or part of seven positions, plus a portion of administrative funding for six departments.

The RDA also funds code enforcement, graffiti abatement, and development of the city’s industrial park, all of which now face an uncertain future.

Because of the value redevelopment brings to the City of Turlock, the City Council took initial steps to enter the voluntary payment program; Turlock’s fee was calculated at a $2.46 million one-time payment and a further $615,000 per year. The cost was termed steep by city staff, emptying the RDA’s coffers and requiring more than half of the agency’s annual income be returned to the state, but would have ensured some money would still come to Turlock.

 

Future hazy

Following the Supreme Court’s action, all required deadlines for RDA dissolution have been extended four months.

During that time, the California Redevelopment Association has said they will work with lawmakers to create a solution whereby redevelopment can continue and the state can pay its bills as originally intended.

Lazar doesn’t see a solution forthcoming, though, given the never-ending gridlock in Sacramento.

“They don’t make hard choices, they just beg, borrow and steal from local governments to preserve their way of life up there,” Lazar said. “... It’s a mess, and I don’t see it getting any better.”

To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.

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