Groups sue to save redevelopment agencies

SACRAMENTO – Groups representing California redevelopment agencies and cities sued the state Monday to halt a change that would eliminate the agencies and funnel their estimated $1.7 billion in tax revenue to local services.

The California Redevelopment Association, the League of California Cities and two San Francisco Bay Area cities – San Jose and Union City – filed the lawsuit with the California Supreme Court. They asked the court to block the redevelopment change from taking effect until the case can be heard.

The Legislature approved two budget bills in June that would eliminate the state's 400 redevelopment agencies by Oct. 1. It allowed local governments to launch new agencies if they agreed to pay a share of property taxes to local governments and schools, replacing money the state pays.

Cities and agencies called that a "ransom demand." They say the move runs counter to Proposition 22, the constitutional amendment approved in November 2010 by 61 percent of voters that was supposed to halt state raids on local funding.

"The governor and Legislature have blatantly ignored the voters and violated the state constitution," Chris McKenzie, executive director of the League of California Cities, said in a prepared statement.

A spokesman for Gov. Jerry Brown could not be reached by phone or email Monday afternoon.

Redevelopment agencies say the change will interfere with one of the few remaining tools local governments can use to finance construction projects and the jobs they generate. They also said many cities and counties will not be able to pay the money to keep operating under the new system.

The change would require each redevelopment agency to pay a share of the $1.7 billion in the first year to keep operating, and a proportional slice of $400 million a year thereafter.

Brown had been pushing since January to eliminate the agencies as part of his budget proposal, saying scarce funds should be spent on core government services.

The agencies were created 60 years ago as a tool to fight post-war urban blight. Since then they have taken on roles in financing affordable housing, public works and commercial development. They've been used to finance convention centers, retail complexes and entertainment districts, with tax proceeds from the work reinvested, sometimes to support private developments.

Critics and audits have pointed to questionable projects — sometimes in areas that show little sign of "blight" — and inflated local government salaries, accusing some agencies of acting as development slush funds.