Wyatt Buchanan
Updated 11:01 p.m., Tuesday, July 24, 2012

Sacramento –California cities are in a high-stakes fight with officials in Sacramento over money that the state says the cities owe as part of the winding down of redevelopment agencies.

County officials, under the state’s direction, have sent letters of demand to cities throughout the state in recent weeks, many for millions of dollars. Several cities, including El Cerrito, refused to pay and sued the state, which is threatening to penalize cities by withholding sales tax revenue that cities rely on to pay for police, parks and other general operating expenses.

Some local officials warn that if the state follows through with its threat, struggling cities could be pushed off the fiscal cliff. Recently, fiscal crises prompted three California cities – Stockton, Mammoth Lakes and San Bernardino – to declare bankruptcy.

“It’s time that we stand up and be counted, and defend our municipal affairs and rights, and push back,” William C. Jones III, mayor of El Cerrito, said at a City Council meeting July 12 after the council voted to sue the state.

Gov. Jerry Brown and the Legislature abolished redevelopment agencies last year as part of the budget plan to deal with California’s chronic deficits, redirecting billions to local governments for schools, public safety and other services. Some of that money helps the state’s budget by reducing the amount of the general fund that is required to go toward education.
$1.7 million demand

The letter sent to El Cerrito on July 9 demanded a $1.7 million payment within three days, but city officials said the demand was based on a miscalculation and filed a lawsuit instead of sending a check. The city is challenging the constitutionality of the demand, among other things. Jones said the state’s actions show it has “an unapologetic disregard for its cities.”

On Friday, state Department of Finance Director Ana Matosantos sent letters to local officials statewide saying the department was conducting a review of the amounts that cities owe to the state and that the agency’s staff had already found discrepancies.

“In some cases these discrepancies were significant,” Matosantos wrote. She said the state would delay imposing penalties until at least September as the reviews continue.

It is not clear exactly how much is at stake. County clerks calculated the bills on behalf of the state and sent them to the “successor agencies” that cities created to wind down the redevelopment agencies. The money from cities that complied with the demand was sent to county officials, who redistributed it to schools, counties, special districts and some to cities as well.

Finance officials said the amount of redirected money going to school districts – which is the only funding that affects the larger state budget – is expected to be $685 million. County officials are expected to report totals to the state later in the month.

In Contra Costa County, the clerk sent bills to cities and the county totaling just under $21.3 million, and in Alameda County the bills were just over $40 million, according to officials in those counties.
OK from Supreme Court

The state gave the money in question to redevelopment agencies in December. Under the old system, those agencies received a portion of property taxes in areas with redevelopment projects.

But later that month, the state Supreme Court gave the state the green light to abolish the redevelopment agencies. The ruling was a blow to cities that had sued the state, hoping to keep redevelopment alive.

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