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."The state economic recession just got worse," Westerlund said.Westerlund said it's too early to tell if redevelopment agencies will disappear. The court ruling gives a four-month extension to legal deadlines for the orderly dissolution of the agencies. Redevelopment agencies will use that time to strike a deal with Sacramento that keeps them going, he said.Westerlund said the ruling leaves some gray areas that might be of advantage to agency supporters. For example, if the legislature kills all redevelopment agencies, what does that do to the taxes that were specifically earmarked for their use? If those taxes are still collected and set aside for use by a redevelopment agency that no longer exists, Westerlund said, would not Proposition 22's prohibition against a Sacramento raid on local revenues enable a new redevelopment-type agency to spend the money?Westerlund said such questions mean the issue is far from settled. "I think is just another round," Westerlund said.Westerlund said the court ruling didn't absolve state legislators from their responsibilities to many of the state's most vulnerable residents, including those who live in Fresno."What are we going to do" with Fresno's poorest neighborhoods, Westerlund said. "Wrap those areas in plastic and hope they come around in 30 or 40 or 50 years?"Assembly Member Chris Norby (R-Fullerton), one of Sacramento's most persistent critics of redevelopment agencies, was pleased with the court's ruling."These things were just too costly," Norby said. "The gravy train is over."Norby said the court simply affirmed the obvious -- redevelopment agencies are creatures of the legislature, and can be dissolved by the legislature."The irony," Norby said of redevelopment supporters, "is they cut their own throat. They should have accepted the compromise the governor offered them."That compromise was captured in the conflict at the heart of the court's ruling. The legislature had passed a law affirming it's authority to kill an agency that a mid-20th century legislature had created. The legislature then passed another law that permitted redevelopment agencies to survive if they agreed to annually pay a portion of their tax revenue to help fund schools and things like public safety.Redevelopment agency supporters balked, saying Sacramento couldn't dissolve the agencies and the state constitution prohibited the legislature from raiding their coffers to pay for other state responsibilities.It was a gamble that went bad for redevelopment agency supporters. The court said redevelopment agencies don't have to pay tribute to Sacramento to stay alive. But the loophole proved irrelevant when the court said the legislature can kill redevelopment agencies anytime it wants.Redevelopment agency supporters "lost everything, which is good," Norby said. "It's a clean victory."Norby said he expects Sacramento lawmakers to soon be under intense pressure to create a successor to redevelopment agencies. The supporters of such legislation, he said, face one insurmountable hurdle: "There's no money."Redevelopment agencies may have had a valid purpose when created decades ago, Norby said. The government has a legitimate interest in pursuing the improvement of blighted areas.But, he said, the agencies were supposed to do their work, then whither away."Instead," Norby said, "they became a permanent cash cow for developers. They distort what should be a free market."Local government advocates and some Democrats issued a response today calling for a new bill to reinstate redevelopment agencies."Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement," said California Redevelopment Association board president Julio Fuentes. "The legislative record is abundantly clear that legislators did not intend to abolish redevelopment."In his own statement, Speaker John A. Pérez, D-Los Angeles, called the decision a "mixed result" because the court struck down the second bill. He said lawmakers "remain committed to finding affordable housing solutions and making smart economic development investments in our local communities."State leaders axed redevelopment agencies in June as they closed a deficit once projected at $26 billion. As part of the plan, cities could reorganize the agencies only if they agreed to use their money to pay for state obligations this fiscal year and make smaller $400 million contributions in future years.Cities and redevelopment agencies sued the state in August to block the plan, saying it was akin to the state demanding a "ransom payment." Critics in the Legislature said the state could ill afford to subsidize private developers, pointing to venues such as "Dive Bar," a watering hole steps from the Capitol that features a mermaid tank.The state's high court agreed to fast-track the case. By issuing a decision today, the court gave state leaders guidance before Brown proposes his 2012-13 budget in less than two weeks.