Group fights state budget cuts

A state organization is stepping up on behalf of Yuba City and other local governments whose redevelopment funds are threatened by the state budget.

The California Redevelopment Association and redevelopment agencies in Union City and Fountain Valley sued last week in Sacramento County Superior Court alleging it is illegal for the state to seize local redevelopment funds to fix its budget shortfall.

The state budget Gov. Arnold Schwarzenegger and legislators approved in July takes $2.05 billion from local redevelopment agencies throughout California. About $1.3 million of that is from Yuba City, where the funding is used for blight elimination, revitalization and the creation of low- and moderate-income housing, among other projects.

The seizure of funds was not planned for in the city's 2009-10 budget, said Finance Director Robin Bertagna. If the lawsuit does not prevail, the effects could be damaging.

"We knew it was a possibility," she said. "Unfortunately, it's always a possibility with the state. Rather than balancing their budget, they look to local funds to raid."

Without the funding, Yuba City will likely have reduce its number of projects and use reserves to balance the shortfall, Bertagna said.

City officials support the assoc ation's lawsuit and are optimistic it will be successful.

"I think they'll probably win again for the same reason," said Councilman Kash Gill. "If we can't use those funds to balance our books, the state should not be able to do it either."

The lawsuit alleges the seizure is unconstitutional because the California Constitution prohibits redevelopment tax increment funds from being used for anything but specified redevelopment activities. It also claims it impairs the contractual pledge of revenues on which redevelopment financing is based.

Redevelopment Agency funds come from taxes on residences and businesses in the redevelopment area. The majority of the agency's $4 million budget is leveraged to sell bonds for much larger projects, such as the Plumas Street revitalization, the pool at Gauche Aquatic Park and the transition from the old Del Monte cannery property to the Sutter North Medical Complex and Town Center fountain.

The Bridge Street restoration and the Facade Improvement Program are two current redevelopment projects, said Assistant City Manager Steve Kroeger. Funding for facade improvement may be delayed if the lawsuit is unsuccessful.

"We would absolutely be affected," Kroeger said. "Those redevelopment dollars are invested in the capital improvement of Yuba City."

And the hit does not stop at $1.3 million. Redevelopment funding is often a stimulus to complement other private or public funding, Kroeger said.

"We lose a lot of leverage in community improvement when we lose our redevelopment money," he said. "It could be matching funds in grants, matching funds for private investment."

The state already tried a similar tactic last year when it targeted $350 million in redevelopment dollars, about $280,000 of which would have come from Yuba City coffers.

The California Redevelopment Association sued, and the Sacramento County Superior Court agreed and deemed the grab unconstitutional. The state recently dropped its appeal.

While not surprising, for the state to resume its approach this year is still a little mind-boggling, said Bertagna.

"The state tried to take $350 million and was unsuccessful," she said. "Now they are trying to take $2.05 billion? The state needs to look at balancing their own budget."

Yuba City will continue to try to protect its local interests, by supporting the association and letting legislators know how important the funding is, Kroeger said.

The City Council acts as the Redevelopment Agency's board of directors.

Contact Appeal-Democrat reporter Ashley Gebb at 749-4724 or agebb@appealdemocrat.com.