Business & Economy

California Supreme Court hears redevelopment challenge

The California Supreme Court building.
The California Supreme Court building.
Justin Sullivan/Getty Images

The California Supreme Court wades into a battle Thursday over hundreds of local redevelopment agencies and the billions in tax dollars they control. Earlier this year the Legislature dissolved the agencies in a move that local governments say is illegal.

For more than 50 years these redevelopment agencies have used a portion of local property taxes that would otherwise go to the state. More than 400 of them use the money to invest in construction and renovation projects to fight blight and create jobs.

Last June state lawmakers voted to dissolve redevelopment agencies and use their $2 billion in funds to help balance the state budget.

H.D. Palmer with the Department of Finance says the state has that right. "Redevelopment agencies were created by an act of the Legislature back in the 1940s and similarly they can be dissolved by an act of the Legislature."

In other words, what the state giveth, the state can taketh away.

Chris McKenzie, though, who heads the League of California Cities, says the state can’t take away the will of the voters who passed Proposition 22 last year. Prop 22 prevents Sacramento politicians from taking money from local governments to balance the state budget.

"The voters said ‘thou shalt not take the funds either directly or indirectly,’" McKenzie said. "And the Legislature and the governor set up a system by which they indirectly divert the funds in violation of the constitution."

The League of California Cities and the California Redevelopment Association have jointly sued the state. The California Supreme Court is expected to issue its decision in the case by Jan. 15.