Marisa Lagos, Chronicle Staff Writer
Friday, December 30, 2011

The California Supreme Court dealt a deathblow to the state’s 60-year-old redevelopment program, ruling Thursday that lawmakers had the authority to eliminate the economic development program and striking down a law that would have allowed the agencies to exist in smaller form.

The ruling was the worst-case scenario for cities, which argued they needed the program to spur economic development in blighted areas and create jobs – but it was a win for Gov. Jerry Brown.

Brown argued that the state should no longer fund the program because those public dollars could be better spent on education and law enforcement. He praised the high court’s decision.

“Today’s ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety,” he said.

The ruling will force redevelopment agencies to put the brakes on proposed projects, such as San Francisco’s Mid-Market revitalization, and could cast uncertainty on approved projects, including the city’s redevelopment of the Hunters Point Shipyard and Mission Bay area. That’s because while state law allows redevelopment agencies to finish approved projects and pay off existing debt, the court ruling could spook bond investors needed to fund those projects.
Bad news for Oakland

It’s also bad news for cities such as Oakland, which rely on redevelopment money to pay for police officers and other city services.

The decision takes effect immediately, though the court gave redevelopment agencies four months to meet some legal deadlines tied to shutting down the program.

Supporters of the program, including San Francisco Mayor Ed Lee, immediately called on lawmakers to find a legislative fix that allows cities to preserve redevelopment, and leaders at the California Redevelopment Association said a bill to revive some form of redevelopment could be introduced as soon as next week.

“It’s unlikely that the Legislature intended to dissolve redevelopment agencies without an option to maintain true job creation, infrastructure and affordable housing projects,” Lee said in a written statement.
Projects under way OK

Lee noted that while “major projects well under way such as the Mission Bay, Bayview Hunters Point Shipyard and Treasure Island can keep going … continued future progress on developing affordable housing, revitalizing blighted neighborhoods and generating the resources to fund urban infill development and infrastructure” are at risk.

The ruling comes five months after the statewide Redevelopment Association and League of California Cities sued the state over two bills approved by lawmakers and signed by the governor in June as part of a larger package to solve the state’s multibillion-dollar budget deficit.
The 2 state laws

Under AB26 and AB27, the state’s 390 redevelopment agencies would cease to exist unless they agreed to pay $1.7 billion this year and $400 million in future years toward schools and other public programs such as special fire districts. Redevelopment programs currently receive about $5.7 billion a year.

On Thursday, the high court unanimously ruled that AB26, which eliminated the agencies, was legal because redevelopment agencies “were created by statute and can therefore be dissolved by statute.”

But the court said AB27, which would have forced agencies to pay schools and other public programs in order to stay in business, was not allowable.

Chief Justice Tani Cantil-Sakauye dissented on that ruling while the other six members of the court concluded that the law was unconstitutional because it required redevelopment agencies to give a portion of their funding to other programs. The majority said that requirement violated Proposition 22, a measure approved by voters to protect local funding from state raids.

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