The California Redevelopment Association (CRA) and a host of cities and counties – including Clearlake, Lakeport and Lake County – sued the state over its plan to require redevelopment agencies statewide to transfer $2.05 billion in local redevelopment funds over the next two years.
That plan came out of legislation passed last July, AB X4 26, which was part of the state budget.
CRA's arguments had included the assertion that AB X4 26 substantially impairs existing obligations of redevelopment agencies and that it is a violation of equal protection laws.
However, on Tuesday Sacramento Superior Court Judge Lloyd Connelly upheld AB X4 26 and also denied a request for a stay on the transfer of funds to the Supplemental Revenue Augmentation Funds (SERAF) on May 10.
Connelly found that the SERAF payments to schools are “reasonably related” to redevelopment’s statutory purposes. CRA argued that under this logic any state program could be, conveniently, called “redevelopment.”
“We strongly disagree with Judge Connelly’s decision which effectively says the Legislature has unlimited discretion to redirect local redevelopment funds to any purpose it wishes,” said CRA Executive Director John Shirey.
Shirey said the CRA Board of Directors voted unanimously in a special meeting Tuesday to authorize an appeal of the decision.
He said CRA's board also authorized seeking from the court of appeal a temporary stay so that agencies do not have to make payments on May 10.
The request was filed Wednesday, with a decision hoped for by week's end, Shirey said.
Shirey said CRA continues to believe that “taking local redevelopment funds and using them to fund State obligations is unconstitutional.”
CRA said it's urging redevelopment agencies not to make payments before May 10 but to be prepared to do so should the Court of Appeal deny or not act upon the stay request.
The redevelopment agencies in the state due to make the biggest payments are Los Angeles, $70.9 million; San Jose, $62 million; San Diego, $55 million; and Oakland, $41 million.
Lakeport Redevelopment Director Richard Knoll broke the news to the Lakeport City Council at its meeting Tuesday night.
Knoll told Lake County News on Wednesday that the city – whose redevelopment plan was adopted in 1999 – stands to lose $313,005 this year.
“Not only do we have this year's payment but we have another payment next year,” he said.
That second payment will amount to $64,380, according to the CRA table of city and county payments.
“This is not refundable,” said Knoll. “This is an outright take, the way we view it.”
He said this year's payment is equal to roughly one half of the agency's total tax increment revenue for a year. That tax increment is the agency's sole source of revenue.
“When it comes down to it, really for us, there will be very little left to work with, for this year anyway,” he said.
Those funds would have supported additional work on projects like downtown improvements, the city's facade program and a pedestrian safety project on Armstrong Street, Knoll said.
But those projects will now have to wait, said Knoll. “That's the direct result of the fact that the state is taking local revenues.”
Clearlake City Administrator Dale Neiman said Clearlake is due to pay out the most of the county's three redevelopment agencies, at $1,014,736 for this fiscal year.
The reason for the higher amount, he said, is that the Clearlake Redevelopment Agency generates more tax increment revenue than Lakeport or the county at large.
That's because Clearlake's redevelopment agency is the oldest, with its redevelopment plan accepted in 1990, he said.
The CRA table of payment shows that Clearlake must make another payment next fiscal year of $208,716.
The Lake County Redevelopment Agency was adopted by the Board of Supervisors in December 2000 and the Northshore project area was formed in June of 2001, said County Deputy Redevelopment Director Eric Seely
The agency is due to pay $764,000 this fiscal year and another $155,000 next year, according to County Administrative Officer Kelly Cox, who also is the county's redevelopment executive director.
“We budgeted for the entire loss so it won't require that we make any further adjustments to our current budget,” he said.
Cox added that, even with the decision, the county's redevelopment agency budget “will remain well in balance and we will continue making progress in our Northshore redevelopment communities.”
He said he hates not being able to keep local tax dollars in Lake County for local projects. “The state really needs to figure out a better way of balancing the state budget,” he said. “For whatever reason they seem incapable of doing so.”
Seely said that the CRA feels that they have a good case and can win a favorable decision on appeal.
“If we don't succeed with the appeal, the concern is, there may be future takings of our local redevelopment money from our project areas to fund the state,” he said.
Seely said cities, counties and redevelopment agencies are working on another front to prevent the state from funding its debt on the backs of local jurisdictions.
He pointed to the Local Taxpayer, Public Safety and Transportation Protection Act of 2010, whose proponents submitted 1.1 million signatures to the state on April 29 in order to qualify it for the November 2010 ballot.
According to its Web site, www.savelocalservices.com, the measure would prohibit the state from borrowing local property and gasoline tax, prevent it from taking locally levied taxes – such as parcel and sales taxes – or transit funding, and offer additional constitutional protections to prevent the state from raiding redevelopment funds or shifting redevelopment funds to other state purposes.
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