UPDATED: Court Upholds Closure of Redevelopment Agencies

On Thursday, the California Supreme Court upheld a new state law to eradicate the Los Angeles Community Redevelopment Agency and hundreds of similar agencies across the state, but ruled that a companion law forcing redevelopment agencies to give a portion of their tax revenues to the state was unconstitutional.

The court ruling aborted the plan to allow local governments to buy back into redevelopment and the agencies will be phased out when their contracted projects are completed.

"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," Governor Jerry Brown said in a news release.

The agencies not only fund major building projects, like a proposed a new art museum, apartments and park in downtown Los Angeles and a proposed football stadium in downtown San Diego, but they also spend 20 percent of their income on affordable housing.

“It is unfortunate the Supreme Court allowed the legislature to remove such a valuable resource for our local cities,” said California Assemblyman Curt Hagman. “The cities in my counties used redevelopment funds to clean up Mission Blvd in Montclair, Revitalize Uptown Whittier and many projects that have created jobs and restored blighted areas.”

Mayor of Long Beach Bob Foster echoed Hagman's thoughts.

"Regrettably, no one 'wins' with today's decision," Foster said. "Eliminating the economic benefits of redevelopment is neither good for cities, nor the long-term fiscal health of the State. It is the worst possible time to eliminate investments in communities that create opportunities for job growth and increase the state's tax base for the future."

The court was unanimous in its opinion that the state had the right to dissolve redevelopment agencies "when the Legislature deems it necessary and proper.''

Los Angeles mayor Antonio Villaraigosa said that redevelopment agencies have been successful in creating jobs across the state and that the Supreme Court decision created yet another challenge for California.

“This year alone we have created more than 18,400 jobs through the Community Redevelopment Agency in Los Angeles," Villaraigosa said. "A proven economic development catalyst, these investments have transformed communities like North Hollywood and Bunker Hill with jobs and opportunity.

"Today, the court has spoken," he added. "We all must acknowledge the difficult challenge before us to create jobs, world-class schools and safe communities, keys to the future of our Golden State."

However, six of the court's seven justices agreed that Proposition 22, passed by voters in March, forbids the state from forcing municipal agencies to transfer money to the state, and ruled the law invalid.

Chief Justice Tani Cantil-Sakauye dissented on that point, saying that the law does not "compel'' community redevelopment agencies to violate Proposition 22.

Redevelopment agencies are funded by the increase in tax revenues generated by projects in their areas. The agencies use the revenue to invest in additional projects mainly in blighted parts of cities.

"Closer to home, we are going to take things one step at a time with the Long Beach Redevelopment Agency," Foster said. "It will take some time to assess some of the provisions within the ruling and how each will impact the City and our local RDA team. We will do everything possible to minimize disruptions to the public and continue our work on moving this City forward." 

Supporters of the agencies argue they are the best economic development tool and catalyze redevelopment projects that private investors would otherwise not build.

Gov. Jerry Brown has said the money would be better used to fund schools and other municipal functions during tight budgetary times. Opponents of the agencies cite a state analyst's report that shows the cost of redevelopment growing without any tangible economic benefit to the state. 

--with reports from City News Service