In a significant budget victory for Gov. Jerry Brown and lawmakers, the California Supreme Court ruled Thursday the state can eliminate the local agencies that subsidize construction in blighted areas.

The decision strengthens the state's ability to take funds from redevelopment agencies for the current budget. It also provides leverage for state leaders to use more than $1 billion annually in redevelopment property tax dollars to balance future budgets.

Fresno city officials warned the ruling could undercut efforts to revitalize deteriorating neighborhoods -- including downtown Fresno.

The court called the elimination of redevelopment "a proper exercise of the legislative power vested in the Legislature by the state Constitution."

But justices ruled invalid a second bill that would have reconstituted redevelopment agencies in a different form. That decision spells the agencies' demise unless lawmakers pass a new redevelopment plan when they return next month.

Lawmakers counted on raising $1.7 billion from the two-bill package. The court's ruling on the second measure may result in less money this year but more in future years from property taxes that would have otherwise gone to redevelopment.

"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," Brown said in a statement this morning.

Fresno City Council president Lee Brand said he wasn't surprised by this morning's ruling.

"We run a good program in Fresno," Brand said. "We are very selective in the projects we support. But I think a lot of cities abused the RDA in one way or another, and we got thrown into the bag with the bad ones."

Brand said he expects redevelopment agencies as they've been known for decades to soon be history.

"They're dead as a doornail," he said.

Brand said it probably will take a long time to "unwind" all of the local projects already on the books.

"The difference is there will be no new projects," Brand said.

Brand disagreed with critics who said redevelopment agencies were little more than slush funds for selected developers who didn't want to brave the competitive marketplace. He said Fresno's RDA created incentives for proven developers to build in areas whose blight harmed the social and economic structure of the entire city.

"In Fresno, the RDA was the primary mover of downtown development," Brand said. The court's ruling "takes a big weapon out of our arsenal to improve downtown and a lot of other areas. It's going to put more pressure on the private sector. You can't compel people to go downtown and build a residential development or an office building."

Brand pointed to the Assemi family's new residential and commercial projects in downtown's cultural arts district as proof of the good things the RDA has supported. He said some of those projects received about a 30% public subsidy. Without them, he said, the projects would have been "a no-go" and the sites would have remained empty lots or crumbling buildings.

Brand said the City Council and the administration of Mayor Ashley Swearengin must rethink the future of public-private partnerships. He said the court's ruling has to be of particular concern to Swearengin, who has made downtown redevelopment a priority of her first term and was counting on the RDA to help fund her plans.

Council Member Larry Westerlund, chairman of the Fresno Redevelopment Agency board, said the court's ruling will stagger the revitalizing efforts of the state's poorest cities if it means death to redevelopment agencies. The consequences will be felt by everyone, he said.