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California Supreme Court Allows State to Dissolve Redevelopment

The California Supreme Court deemed the state’s seizure of $1.7 billion in redevelopment money is legal, which could have a detrimental impact on Union City's future.

The vision for Union City’s economic future was blindsided by a California Supreme Court decision Thursday morning that ruled in favor of the state in a critical, months-long battle over redevelopment agency funds.

The justices found that the state’s seizure of $1.7 billion in redevelopment money is legal, sealing the fate of the state’s 398 redevelopment agencies. The money will go toward closing the state’s budget gap to fund schools and special districts, as proposed in Gov. Jerry Brown’s state budget plan passed in June.

But redevelopment advocates say the high court's decision was unwise.

“The court ruling today has not solved the state budget problem, it has not solved the funding problem for schools,” said Union City Redevelopment Manager Mark Evanoff. "No matter which way the court ruled, it would not have been solved.”

The under claims that state lawmakers violated the constitution when they passed two laws in June mandating that redevelopment agencies .

The high court rejected those claims and also struck down the second law that would have enabled the agencies to come back into existence if they agreed to contribute $400 million annually in future years to schools, transit and firefighting programs. Many redevelopment agencies, including Union City’s, hoped to take advantage of that law, with Union City ready to . 

Thursday’s ruling came in time for the Jan. 15 deadline, when half of the $1.7 billion in redevelopment dollars must be turned over to the state for the 2011-12 fiscal year.

While the ruling is good news for Brown and his camp of lawmakers, it may have detrimental effects on cities who used redevelopment funds for key development projects.

Many local projects, including Union Landing and several affordable housing communities, were made possible through the support of the local redevelopment agency.

When state lawmakers passed its laws earlier this year, it put Union City's , a transit-oriented community surrounding the BART station, at risk. The agency facilitated the development of the area to create more housing and commercial space, as well as link the station to various rail and bus systems.

As the lawsuit waned on, the agency continued to seek developers for the remainder of the project and .

Evanoff said the Station District plans will continue as promised, so long as the state doesn't attempt to take the transferred properties from the city. The agency, however, would not be able to enter new contracts, issue bonds or start new programs.

The agency has already invested tens of millions into the project and will lose an additional $77.2 million in leveraged grants once it is dissolved, Evanoff said in a previous interview.

Over the years, the agency has invested $50 million to develop land surrounding the BART station. The agency put $32 million into the construction of Eleventh Street, creating the infrastructure to establish housing on the former Pacific States Steel Corporation location, a previously contaminated site.

That community now generates $3 million a year in property tax, Evanoff said. The Avalon Bay community next to the BART station, also made possible via redevelopment, generates $1 million a year in property taxes, according to Evanoff.

The agency has also created 449 affordable housing units throughout the city, including 155 units at the new Mid-Peninsula Housing development.

“There’s not going to be any more affordable housing,” Evanoff said.

The local agency also funds several city staff positions, including positions in the Economic and Community Development department. The city will have to find another funding source to keep those positions.

Evanoff said the fight isn't over and that the California Redevelopment Agency will meet with state lawmakers next week to work toward a solution that would benefit both redevelopment agencies and the state.

“They need to realize that redevelopment is a critical tool to rebuild the economic health of California,” Evanoff said.

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