State Supreme Court Abolishes Redevelopment Agencies

The California Supreme Court today upheld a new state law abolishing the Los Angeles Community Redevelopment Agency and hundreds of similar agencies across the state, but ruled that a companion law forcing CRAs to give a portion of their tax revenues to the state was unconstitutional.

The ruling was a major blow to redevelopment agencies, which sued earlier this year to block both laws. Since the court ruling aborted the plan to allow local governments to buy back into redevelopment, the agencies will be phased out when their contracted projects are completed.

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

"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement," said association board president Julio Fuentes, adding that it was not the Legislature's original intent to completely abolish the agencies.

Redevelopment agencies are funded by the increase in tax revenues generated by projects in their areas. The agencies use the revenue to invest in additional projects mainly in blighted parts of cities.

The agencies not only fund major building projects, like a proposed art museum, apartments and park in downtown Los Angeles, but they also spend 20 percent of their income on affordable housing.

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 the law does not "compel" community redevelopment agencies to violate Proposition 22.

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

Gov. Jerry Brown 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 neighborhoods.

"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 situation.

"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.

The mayor said he would invite Brown, Assembly Speaker John Perez, and Senate President Pro Tem Darrell Steinberg to meet next month to discuss a solution.

"Many will see this as a setback, but I see it as an opportunity for California to step forward and responsibly invest in our future," the mayor said.

Others called the ruling disastrous for low-income housing.

"The ruling means that probably 25 percent of the citizens of Los Angeles who are rent burdened, paying above 30 percent of their income for rent, are going to continue not to be able to afford where they live," said Paul Zimmerman, executive director of the Southern California Association of Non-Profit. "They'll be making decisions to pay rent or pay for medical care, food or other basic needs."

"There is virtually no evidence from past periods that the private marketplace can produce housing that is affordable to 25-30 percent of the families in Los Angeles," Zimmerman added.