Union City Sues State over Redevelopment Laws

When word spread in January that Gov. Jerry Brown was proposing an end to redevelopment agencies across the state, Union City officials said they wouldn’t go down whimpering.

The city made good on its word Monday when it joined the city of San Jose, the League of California Cities and the California Redevelopment Association in a lawsuit filed with the California Supreme Court questioning the legality of two recently passed laws that call for cities to either pay large sums to the state to continue redevelopment, or shut down the agencies entirely.

Approved by state legislators with last month were two contradictory bills: AB 1X 26, which will eliminate the 400 redevelopment agencies in the state by Oct. 1, and AB 1X 27, which allows agencies to continue to operate by paying their share of $1.7 billion this year and $400 million each year moving forward. Those funds would be diverted largely to schools and special districts.

The lawsuit claims that the bills are an unconstitutional violation of Prop. 22, an amendment approved by voters last November to prevent the state from taking money from local government, including the tax increments generated by redevelopment agencies.

“The governor and legislature have blatantly ignored the voters and violated the State Constitution,” said Chris McKenzie, executive director of the League of California Cities. “We must now go to the Supreme Court to uphold the voters’ will and the Constitution by overturning this unconstitutional legislation. We are confident the courts will uphold the will of the voters.”

The lawsuit also requests a stay by Aug. 15 to prevent the legislation from taking effect before the court can rule on the claims put forth in the lawsuit.

Unless the legislation is overturned, cities would be forced to reduce their role in revitalizing communities and creating jobs, according to redevelopment supporters.

“Since the budget bills passed, many redevelopment agencies have notified us that they cannot afford the ransom payment and will cease to exist. And those agencies that are planning on making the payment tell us that it will greatly diminish their ability to pursue vital local projects,” said John Shirey, executive director of the California Redevelopment Association.

“This legislation is a job-killer and an opportunity killer for many local communities in need,” he said.

In order to continue operating, Union City would be required to pay an estimated $7.6 million this year and $1.8 million each year the agency continues — an action Union City Administrative Services Director Richard Digre equates to extortion.

“It’s like someone jumping out of a bush with a gun saying, ‘Your money or your life,’” Digre said.

According to Redevelopment Manager Mark Evanoff, neither the agency nor the city can afford to pay that amount.

In a declaration to the court, Evanoff said that the agency will only receive $400,000 in property tax increment this year after debt obligations are paid. The agency will also receive $1.2 million in housing tax increment, but $450,000 of that sum is already obligated to various housing projects.

As a result, the dissolving of the local agency would have “serious adverse consequences” for , a transit-oriented community surrounding the BART station that has been in planning since the agency was established in the 1980s.

As part of the its BART Phase 2 plan, the agency is facilitating the development of the lands surrounding BART in order to create more housing and commercial space, as well as linking the station to various rail and bus systems. The agency is responsible for securing funding for the project, which it won’t be able to do if it is dissolved, Evanoff said.

“The bottom line is: we need to hold on to that agency property, or under the legislation it has to be sold off and we lose control,” Evanoff said.

The agency has already invested tens of millions into the project and stands to lose an additional $77.2 million in leveraged grants should the agency be forced to fold, Evanoff said.

The strongest engine for local economic development, the agency invested millions 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 Mid-Penninsula Housing development that is nearing completion.

Additionally, the agency funds 14 full-time city staff positions, including positions in the Economic and Community Development department. The city would have to find another funding source to keep those positions.

It’s a similar story in San Jose.

If the San Jose agency is dissolved, it would kill hundreds of millions of dollars’ worth of vital projects, including their Strong Neighborhoods Initiative, which aims to revitalize 20 of San Jose’s most disadvantaged residential neighborhoods.

Other redevelopment projects that would be lost are San Jose’s flood control project to protect industrial properties and several interchange widening projects near Highway 101.

Unless the laws are overturned, there is little the agencies will be able to do to protect their projects.

“There is no worst-case scenario," Evanoff said. "It’s choosing how to die.”