20 Aug 2014
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Ruling to Kill Redevelopment Surprises Santa Monica

The ruling from the California Supreme Court upheld a state law that abolishes redevelopment agencies and struck down a second piece of legislation that allowed the agencies to pay to stay alive.

Ruling to Kill Redevelopment Surprises Santa Monica

The California Supreme Court upheld Thursday a new law annihilating hundreds of public agencies that have breathed new life into downtrodden areas of communities across the state, Santa Monica's popular downtown included. 

The ruling to uphold the new law was a major blow.

Many of the redevelopment agencies had signed on to sue the state over the legislation, which was designed to save California money as it grapples with a massive budget deficit. 

The court ruled, however, that a companion law forcing cities and counties to give a portion of their tax revenues—more than $27 million in Santa Monica—to the state to buy back into redevelopment was unconstitutional.

"It’s a surprising ruling," said Deputy City Manager Kate Vernez. "We don’t believe the Legislature intended that redevelopment would be ultimately eliminated … ABX127 would have allowed agencies to continue so long as they made the payment."

The California Redevelopment Association and League of California
, the plaintiffs in the lawsuits, called on lawmakers "immediately" to
develop legislation to revive the agencies.

Redevelopment agencies are funded by the increase in tax revenues generated by projects in their areas, called tax "increment." The agencies use the revenue to invest in additional projects mainly in blighted parts of cities. (In the 2009-10 fiscal year, Santa Monica's redevelopment agency generated $73.5 million in tax increment.)

Supporters of the agencies argue they are the best economic development
tool and catalyze redevelopment projects that private investors would otherwise
not build.

Santa Monica city officials were hesitant to speculate which projects could be impacted by the ruling. 

"We’re going to have to wait to do to the research on different projects," said Andy Agle, the Director of Housing and Economic Development for the City of Santa Monica.

Agle was also taken aback by the ruling. "I think it is surprising ... On a statewide basis, the impacts are quite severe."

Founded in 1957, the Redevelopment Agency of the City of Santa Monica, as it's officially titled, is one of the oldest in the state.

It has revamped portions of downtown, including, more recently, several parking structures and . Major projects are still in the works: the , the and the , among others.

"It’s our intent to move forward on existing projects where we have contracts which are unimpeded by the court’s decision," City Manager Rod Gould said in a statement.

The redevelopment agency has arguably played an even larger role in funding construction of new and existing housing for poorer residents. It's helped fund the construction of nearly 1,700 units and spent more than $195 million on such projects. 

"It's the largest source of affordable housing funding other than the federal government," said Agle.

The agencies were required to spend 20 percent of all redevelopment tax increment funds on affordable housing

“It’s regrettable that the Legislature and Supreme Court have stripped cities and counties of the one tool to produce affordable housing, generate jobs, and refurbish critical infrastructure," Gould said in a statement. "This is especially true during this time of double-digit unemployment, crumbling infrastructure and a paucity of affordable housing in our state. 

The court was unanimous in its opinion that the state had the right to dissolve redevelopment agencies "when the Legislature deems it necessary and proper."

However, six of the court's seven justices agreed that Proposition 22, passed by voters in March, forbids the state from forcing municipal agencies to transfer money to the state, and ruled the law invalid.

Chief Justice Tani Cantil-Sakauye dissented on that point, saying that the law does not "compel'' community redevelopment agencies to violate Proposition 22.

Gov. Jerry Brown has said the money would be better used to fund schools and other municipal functions during tight budgetary times. Opponents of the agencies cite a state analyst's report that shows the cost of redevelopment growing without any tangible economic benefit to the state.

He hailed the court's ruling, saying that it "validates a key component of the state budget and guarantees more than $1 billion of ongoing funding for schools and public safety."

County Supervisor Zev Yaroslavsky also applauded the court's decision.

He said the agencies long ago stopped being a catalyst to reinvigorate blighted

"Unfortunately, over the years it evolved into a honey pot that was tapped to underwrite billions of dollars worth of commercial and other for-profit projects that had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense," Yaroslavsky said.

Mayor Antonio Villaraigosa said he had a mixed reaction to the ruling.

He said Los Angeles' redevelopment agency had created 18,400 jobs this year and called it a "proven economic development catalyst."

But he added that schools are in a dangerous and desperate financial

"An investment in education at this pivotal time could save an entire generation, and those to come, from falling behind academically and economically,'' Villaraigosa said.

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