The long awaited court ruling on the state’s ability to take redevelopment
money away from local governments has been issued.

Sacramento Superior Court Judge Lloyd Connelly upheld a budget maneuver by
Governor Schwarzenegger and state lawmakers to shift $2.05 billion in local
redevelopment monies toward local education obligations through June 2011.

The California Redevelopment Association executive director John Shirey said
that if left to stand, the ruling would spell disaster for major community
revitalization projects in California. "If the decision stands permanently,
then it could mean the beginning of the end for redevelopment in California,"
Shirey said. "That's not an exaggeration on my part. Everyone knows that the
state of California has a severe structural deficit problem it seems incapable
of dealing with. We know it's going to continue for some years."

A year ago, Judge Connelly rejected a similar plan to take $350 million from
redevelopment agencies. Connelly’s ruled that the previous version would have
led to an agency's funds being spent outside its project area. Shortly after
that ruling, state leaders fashioned a new version to overcome the ruling.
Judge Connelly, a former assemblyman and Sacramento city council member, agreed
that it had done so. He wrote Tuesday that the Legislature has "broad discretion"
to define the scope of redevelopment spending as long as the money is used locally.

In a review of cities, many will owe significant sums.  For example, San Jose's
redevelopment agency estimates it will owe the state $75 million, of which $62
million is due next week. To make the payment, the agency has borrowed from the
city's park, sewage and low-income housing funds. Nearby Menlo Park has identified
a $4.1 million hit on its development fund.

In the southland, the redevelopment agency of Long Beach must pay $36 million
of which $30 million is due from this year’s budget.

The Sacramento Housing and Redevelopment Agency could lose $20 million in the fiscal
year ending June 30 and an additional $4 million to $6 million in 2010-11. The city
of West Sacramento’s Redevelopment Agency could lose $6.5 million this fiscal year.

The California Redevelopment Association said it would appeal the decision and seek
an immediate stay to block a transfer of $1.7 billion scheduled for next week.

In the meantime, local economic and redevelopment efforts are significantly impacted
in trying to put people back to work with this decision.

E-mail me your opinion.

  
Tim Johnson
tjohnson@CaliforniaBusinessMinute.com