SAN FRANCISCO — California redevelopment agency proponents have filed a lawsuit in state Supreme Court to block laws that would kill or drastically curtail the RDAs to fill a gap in the recently adopted budget.
The League of California Cities and the California Redevelopment Association, along with San Jose and Union City, said in the suit filed Monday afternoon that it is unconstitutional for the state to require the agencies to pay $1.7 billion this year or face the axe.
“Dissolving the RDAs unilaterally and suddenly will stop many important, half-completed redevelopment projects dead in their tracks and expose cities and counties to legal liability for the obligations of their now dissolved RDAs,” the lawsuit filed in Sacramento said.
Experts have warned the legal wrangling could endanger local development as financing for projects remains up in the air.
The agencies, operated by city and county governments, collect incremental property tax growth in designated areas to back bonds that fund economic development those areas, which are declared to be blighted.
In the 126-page suit, the plaintiffs point to Proposition 22, a ballot measure passed in 2010 they say prohibits state politicians from taking or interfering with revenue dedicated to local governments.
The suit asks the court to grant a temporary stay by Aug. 15 to prevent the implementation of the new laws while the case is ongoing.
The two-part legislation eliminates all California RDAs on Oct. 1 unless the cities and counties operating the approximately 400 agencies remit revenues to schools and special districts. The agencies would be forced to give up $1.7 billion this year and $400 million annually thereafter.
The proponents named in the suit include state finance director Ana Matosantos, Controller John Chiang, and Patrick O’Connell, auditor-controller of Alameda County and a representative of the county auditor-controllers.
“We are confident that this measure, which was passed by Legislature and signed by [Gov. Jerry Brown], is legally sound,” said H.D. Palmer, a spokesman for the Department of Finance. “Redevelopment agencies were created by an act of the Legislature back in 1945, and similarly they can be dissolved by an act of the Legislature.”
Palmer said Proposition 22 does not apply to the new law because the ballot measure dealt specifically with tax increment and the legislation does not limit RDAs’ required payments to tax increment.
RDAs have come under fire because other local agencies lose out on the incremental tax revenue they collect. Some critics say the agencies sometimes fund development that has little to do with improving rundown areas.
The controller’s office earlier this year issued a report that said the agencies failed to provide a coherent explanation for their existence. Chiang said he found no reliable means to measure the impact of the redevelopment agencies on job growth.
RDAs claim that each year, redevelopment supports more than 300,000 jobs, $40 billion in economic activity, and $2 billion in state and local tax revenue.
Redevelopment’s share of total statewide property taxes has grown to 12%, according to a report this year from the nonpartisan Legislative Analyst’s Office.
The report found that the agencies receive more than $5 billion of tax increment revenues annually.
As of the end of June, California redevelopment agencies had already sold $1.33 billion of tax-allocation bonds, after issuing only $1.8 billion in all of 2010.