ALAMEDA, Calif. — A Superior Court judge in California Tuesday upheld the state government’s shift of $2.05 billion away from local redevelopment agencies to help balance the budget.
The California Redevelopment Association filed suit in October, after the state adopted a budget effectively transferring $2.05 billion to the state general fund from the local agencies over two years. It was the second consecutive year in which the budget had included an attempted fund shift from RDAs.
The California Redevelopment Association board voted Tuesday afternoon to appeal the ruling, and also to pursue a temporary stay to delay Monday’s scheduled payments.
Redevelopment agencies successfully challenged the previous attempt in court, and the state dropped its appeal in September.
The new lawsuit was heard by the same judge, Sacramento Superior Court Judge Lloyd Connelly, but this time the outcome was different.
State budget writers insisted that language in the most recent spending plan successfully addressed the issues that led Connelly to prohibit the earlier shift in redevelopment funds. The judge agreed.
The ruling, while bad news for redevelopment agencies, is good news for state budget writers, whose budget problem is now $2 billion smaller than it would have been had the state lost the case. Gov. Arnold Schwarzenegger will release his revised fiscal 2011 budget proposal by mid-month.
The shift is structured so that the payments from local redevelopment agencies will be distributed to schools in their areas. It’s a zero-sum game for the schools, because the money they receive from the Supplemental Educational Revenue Augmentation Funds, or SERAF, simply reduces the state’s education funding obligations on a dollar-for-dollar basis.
Judge Connelly rejected the state’s previous try at shifting funds away from RDAs, because it would have moved money out of the redevelopment areas.
This time, the budget language shifted money from RDAs only to schools in their redevelopment areas — and that was enough for Connelly.
The judge, in his ruling, also rejected arguments from redevelopment advocates that the mandatory fund shift would impair contracts, such as those between redevelopment agencies and bondholders.
“In particular, SERAF payments are subordinated to the lien of any pledge of collateral securing payment of the principal or interest on any bonds of the RDAs, including bonds secured by a pledge of tax increment,” he wrote.
Two redevelopment agencies joined the suit as plaintiffs and several county governments filed a similar suit that was heard and decided together with the redevelopment association’s suit.
The timing of Connelly’s ruling is important, because the RDAs are required make payments for the fund shift to their respective county governments by next Monday.
Meanwhile, redevelopment agencies have been working with a coalition of local government interests on another vehicle to prevent future fund shifts: a constitutional amendment.
The coalition announced last week that it had collected about 1.1 million signatures for its proposed ballot measure, which should be more than enough to provide the 694,354 valid voters’ signatures they need to place the amendment on the statewide ballot in November.
In addition to prohibiting any shifts in redevelopment funding, the proposed Local Taxpayer, Public Safety, and Transportation Act of 2010 would prohibit California from borrowing against local government property taxes, as it did last year; bar it from borrowing or taking gasoline taxes dedicated to transportation and transit; forbid the state from taking, borrowing or redirecting funding for public transit; and prevent it from taking locally levied taxes, such as parcel and sales taxes.