California Supreme Court hears battle for redevelopment dollars

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The California Supreme Court heard arguments Thursday in a case that will determine the fate of more than 400 redevelopment agencies across the state.

Earlier this year, the state legislature voted to dissolve those agencies as a way to save nearly $2 billion. In a separate measure, they voted to reconstruct them – for a price. Cities and counties are challenging both moves.

Redevelopment agencies take a portion of local sales tax each year that would otherwise go to school districts and local agencies. The state government has been making up the difference,s and now the state wants the money back. Justice Joyce Kennard summed up the conflict.

"A fight, between the state and the schools on the one side and the redevelopment agencies on the other side, in getting control of the property tax revenue, [...] put in very, very simple terms," Kennard said.

In June, state lawmakers thought they got control over all property tax revenue in California when they voted to get rid of redevelopment agencies. But lawmakers let those agencies stay alive if the cities that run them voluntarily transferred a collective $1.7 billion in property taxes to school districts this year, plus $400 million every year after that. Attorney Steve Mayer for the California Redevelopment Association told the justices that lawmakers didn’t give redevelopment agencies much of a choice.

"The state makes a big deal of saying these payments are voluntary. But in fact, they’re no more voluntary than a bank robber's decision to turn over the money when the note says, 'Your money or your life,'" Mayer said.

Mayer said state lawmakers violated Proposition 22, a constitutional amendment passed by California voters last year to bar the state from raiding local funds to balance the budget. Justice Kathryn Werdegar asked Deputy Attorney General Ross Moody whether a bill that allows the "voluntary" transfer of local funds to the state violates Prop 22. Moody said he didn’t think so.

"Before Proposition 22, what would happen is, every once in a while when the state was short in funds, they would pass a law that said 'Redevelopment agencies, give us some money,'" he told Justice Werdegar. "For a few years it was happening regularly."

"Wouldn't one assume therefore that Prop 22's intention – and indeed, its statement of purpose — is that the state can’t do that and that's ingrained in the constitution?" Werdegar asked in reply.

The justices spent little time debating the state's right to dissolve redevelopment agencies – something the legislature voted to do in the 1940s and presumably can now undo. But the justices raised many questions about the "voluntary" program that lets the agencies live on if they surrender tax revenues to save the state billions of dollars.

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