The League of California Cities, the California Redevelopment Association (CRA), and the cities of San Jose and Union City have filed a lawsuit to stop the elimination of the state’s approximately 400 redevelopment agencies (RDAs).
Filed with the California Supreme Court, the lawsuit challenges the constitutionality of two bills that were passed as part of the state budget in June.
The elimination of the RDAs is a huge blow to affordable housing developers. The agencies, which are required to set aside 20 percent of their funds for affordable housing, have been critical in funding housing projects across the state.
For example, Jamboree Housing Corp., a leading affordable housing developer based in Irvine, had eight projects with RDA involvement under construction earlier this year.
Projects in the pipeline may not be so lucky because their RDA financing is in jeopardy.
The uncertainty of the situation is creating havoc for developers trying to close deals, said Gary Downs, a partner at the Nixon Peabody law firm in San Francisco.
Pay or go away
Gov. Jerry Brown is wiping out the agencies to help balance the budget. Under the plans, money from the agencies will be redirected to aid the state’s public schools.
AB 1X 26 eliminates redevelopment agencies, and AB 1X 27 allows agencies to continue to exist if they agree to pay their share of $1.7 billion this year and $400 million annually. That means the agencies have to pay or go away.
The lawsuit seeks a stay to prevent the legislation from going into effect until the court can rule on the claims.
The central claim in the lawsuit is that the bills violate Proposition 22, a constitutional amendment passed by 61 percent of California voters in November 2010. Proposition 22 was passed by voters to “conclusively and completely prohibit state politicians in Sacramento from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with” revenue dedicated to local government, said the groups.
The revenues protected by Proposition 22 specifically include the annual increments of property taxes allocated to the redevelopment agencies, according to the League and CRA.
“California voters overwhelmingly passed Proposition 22 just eight months ago to stop state raids, shifts and diversions of local redevelopment funds,” said Chris McKenzie, executive director of the League, in a statement. “The governor and Legislature have blatantly ignored the voters and violated the state constitution. We must now go to the Supreme Court to uphold the voters’ will and the constitution by overturning this unconstitutional legislation. We are confident the courts will uphold the will of the voters.”