Redevelopment Decisions a Tangled Web for Cities

Your State At Work
Your State At Work

In fighting to protect redevelopment, cities may have created a worse problem.


To slow the state's slide into insolvency, the Legislature -- at the urging of Governor Brown -- shut down local redevelopment agencies in June. Virtually all California cities use their redevelopment authority to spur economic growth. But even as the Legislature killed redevelopment, a companion bill rigged a new mechanism to give redevelopment agencies a kind of afterlife.

AB X1 26 eliminated redevelopment and shunted agency reserve funds to the state. But AB X1 27 gave agencies that make "voluntary" payments to school districts and counties the option of staying in business . . . at the cost of having considerably less funding to work with.

Cities -- including Los Angeles -- knuckled under AB X1 26, took the poisoned pill of AB X1 27 to keep redevelopment going, and cheered as cities sued the state on the grounds that Proposition 22 (approved by voters last year) limits the ability of the Legislature to loot local government revenues.

That suit is now before the state Supreme Court. In its brief, the state claims ultimate sovereignty; the revenues of redevelopment agencies are the state's to dispose of. Cities assert that California voters, through the initiative process, placed some local revenues beyond the state's reach.

But what seems like a choice between state sovereignty and city autonomy has some court observers -- and some city attorneys -- very worried. The court could go a third way. The court could uphold the state's right to legislate redevelopment away and strike down the badly flawed "redevelopment lite" that was supposed to take away some of the fiscal sting.

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For cities, the court's decision must either be redevelopment as it's always been or the diminished scope allowed under the AB X1 27 "redevelopment resurrection" law. A split decision upholding the end of redevelopment and striking down redevelopment's afterlife would kill redevelopment permanently.

That would leave a gaping revenue hole that cities could never fill. According to Josh Rosa at PublicCEO (a website for local government managers):

Redevelopment politics aren't pretty. Abuses and fudges of the law abound. More than one city manager calls redevelopment revenue "funny money." But ending the ability of cities to finance big ticket projects with agency revenues doesn't make sense either.

If the court splits on redevelopment, cities will be left holding the empty bag. State sovereignty over city governments will tighten even more. State legislators will continue to offer the cynical advice that cities should raise local taxes to substitute for lost redevelopment revenue. And your city council will pass into further irrelevance.

The image on this page was taken by flickr user David Blumenkrantz. It is used under a Creative Commons License.

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