Supreme Court Hears Arguments in Redevelopment Battle

Bay City News Service — The state's nearly 400 city and county redevelopment agencies asked the California Supreme Court at a hearing in San Francisco Thursday to strike down two laws that would require the agencies to give up $1.7 billion in revenue and undergo restructuring.

The two laws were passed by the Legislature in June to help solve the state's budget deficit of more than $25 billion.

The measures would dissolve redevelopment agencies and divert $1.7 billion in property tax revenue from the agencies to schools and other programs in the current fiscal year.

If the agencies want to come back into existence, they must agree to participate in giving up a total of $460 million in revenue in future years.

Steven Mayer, a lawyer for the California Redevelopment Association, argued that the laws violate a 2010 voter initiative that barred the state from seizing revenues dedicated to local governments.

But Deputy California Attorney General Ross Moody argued the laws don't violate the initiative because the payments from the agency would be voluntary.

Justice Carol Corrigan commented, "That presupposes the choice to pay is a voluntary choice as opposed to a ransom."

"If the redevelopment agencies are put into a posture where they can continue to exist by making payments or be put out of business, it seems to me it's hard to argue that's voluntary," Corrigan said.

Moody answered, "It's a challenge to argue this case in the environment we're in when Governor Brown takes office and there's a $25 billion deficit and state revenues are down 30 percent."

Moody argued the state has the right to dissolve the agencies because they were created by a 1945 law and are not guaranteed existence by the state constitution.

The redevelopment association was joined in its challenge to the two laws by the League of California Cities, Union City and San Jose.

But Santa Clara County took a different position, asking the court to uphold the law dissolving the agencies but to strike down the measure allowing their voluntary restructuring.

Asked by Justice Marvin Baxter why the county took that position, Deputy County Counsel James Williams said the county was concerned that redevelopment agencies were draining money needed by schools and other local government services.

"The county is losing $90 million per year" in property tax revenue, Williams said.

Mayer, representing the agencies, argued that the two laws were so closely intertwined that it would be "functionally unworkable" to strike down one but not the other.

"The Legislature did not intend to end redevelopment," Mayer told the court.

The seven-member court took the case under submission after hearing an hour of arguments. It has said it will rule by mid-January, when the first payment of the diverted tax revenues is due.