Coalition Challenges Redevelopment Cuts

Earlier this year, denouncing the potential elimination of local redevelopment agencies – to no avail.

Two bills that were part of the state budget package signed into law by Governor Jerry Brown last month effectively shut down the agencies unless they pay: AB 1X 26 eliminates redevelopment agencies, while AB 1X 27 allows them to continue to exist if they agree to pay their share of a $1.7 billion pie this year and $400 million annually in perpetuity.

In response, yesterday the League of California Cities, the California Redevelopment Association, along with the cities of San Jose and Union City filed a petition challenging the constitutionality of the two bills. The petition also requests the California Supreme Court to issue a stay to prevent the legislation from going into effect until the Court can rule on the merits of the legal claims.

Redevelopment is a process that allows local government, under the auspice of local redevelopment agencies (RDAs), to use increased property tax to obtain and repay bonds that cover the cost of redevelopment projects in designated blighted areas.

Ongoing redevelopment projects in Lake Elsinore include the that has been in the works for several years. The 113-apartment project located at W. Pottery Street between N. Langstaff Street and N. Riley Street is expected to be complete next spring.

In addition to the Pottery Court project, Lake Elsinore’s Redevelopment Agency is in the process of having 152 aging apartments refurbished at Lakeview Apartments on Riverside Drive. The Redevelopment Agency purchased the existing units at the site as part of a plan to renovate those needing upgrading.

The approximate $4.56 million project should conclude this summer. (See a list of Lake Elsinore projects made possible by redevelopment here.)

At the local level, Lake Elsinore City Councilwoman Melissa Melendez, who also chairs the city's Redevelopment Agency, said last month that Lake Elsinore's existing RDA projects are expected to move forward.

"The Lake Elsinore Redevelopment Agency's debt service obligations on existing bonds and contracts are not in jeopardy to our knowledge," she said last month. "All of our projects are contracts that are legally enforceable."

According to a July 18 news release from a coalition representing the League of California Cities, the California Redevelopment Association, as well as dozens of cities, counties and business interests, the central claim in the lawsuit filed yesterday is that AB 1X 26 and 27 “violate Proposition 22, the constitutional amendment passed by 61 percent of California voters in November 2010 … . Proposition 22 was passed by voters to conclusively and completely prohibit State politicians in Sacramento from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with revenue dedicated to local government. The revenues protected by Proposition 22 specifically include the annual increments of property taxes allocated to California’s 400 redevelopment agencies.”

The cities of Lake Elsinore and Wildomar are not named as part of the coalition, however the Lake Elsinore Valley Chamber of Commerce, the Wildomar Chamber of Commerce, and the Western Riverside Council of Governments are.

“California voters overwhelmingly passed Proposition 22 just eight months ago to stop state raids, shifts and diversions of local redevelopment funds,” said Chris McKenzie, executive director, League of California Cities. “The governor and legislature have blatantly ignored the voters and violated the State Constitution. We must now go to the Supreme Court to uphold the voters’ will and the Constitution by overturning this unconstitutional legislation. We are confident the Courts will uphold the will of the voters.”

“Unless nullified, AB 1X 26/27 will result in the elimination of redevelopment agencies or force ‘ransom’ payments by local agencies that will greatly reduce the ability of local agencies to pursue revitalization and job-creation projects,” the July 18 coalition news release stated. “The measures will kill hundreds of thousands of jobs and leave many communities with no opportunity to revitalize downtrodden areas with high unemployment, high crime and significant blight.”

But some point out that the RDA process needs reform. A March report from the state Controller's Office blasted some of California’s RDAs. The criticisms pointed out loose definitions for what constitutes a blighted area, failing to pay about $33 million owed to the state's public schools, poor tracking when it comes to the number of jobs created by redevelopment projects, accounting deficiencies, questionable payroll practices, faulty loans and the inappropriate use of affordable housing funds. 

"Taxpayers across the state have grown justifiably weary of the abuse of the redevelopment 'system,'" Melendez said last month. "Many of us are concerned about the standards for blight, which are extremely ill-defined. They include phrases like 'nearby incompatible land uses that prevent the development,' or 'a high crime rate,' or 'conditions that prevent or substantially hinder the viable use or capacity of buildings or lots.' This is a license to sin for municipalities who choose to take advantage of the power and authority given them."