Redevelopment Penalty Prompts Lawsuits (Updated)

For many cities that have endured the painful process of dissolving their redevelopment agencies, the bloodletting has begun anew. 

Among the roughly 400 redevelopment agencies that will shut down tomorrow, the vast majority have effectively elected to dig their own graves. That was one of the stipulations of AB X1 26, that cities may serve as their own successor agencies, which will oversee the wind-down of operations, liquidation of assets, and payment of outstanding obligations. 

As with so many trends, the use of tax-increment financing for redevelopment began in California. Since being created here in 1952, this vital aspect of redevelopment has spread to 48 other states. And yet if Gov. Jerry Brown's current budget proposal passes, it may very well die in the state where it was born.

It is not going quietly.

In the two weeks since Brown announced his intention to eliminate redevelopment in California as part of his proposal to cut the state's $24 billion deficit, what used to be a relatively obscure system intended to eradicate blight has been thrust into tumultuous debate.

The Fitch Ratings service on May 1 announced it was ready to take a sunnier view of tax allocation bonds (TABs) administered by successor agencies in California's redevelopment dissolution. The changed view could affect both the sale prices of existing bonds and the interest rates available to successor agencies when they refinance their existing debt with refunding bonds.

Raw fish will not singlehandedly save urban California. But it can still help.

Like the plot of the Bill Murray movie, Groundhog Day, Sacramento politicians are back to the same story on redevelopment this year. It's a re-run of last year, with proponents of redevelopment re-introducing many of the same bills as last year. 

Attempts to resurrect redevelopment were a flop in 2012 when Governor Jerry Brown vetoed most redevelopment-related bills. This year, there is hope for a different ending, where Brown and his Democratic allies can find themselves in agreement on future steps to aid economic development at the local level. 

The Coalition for Responsible Arena Development filed a notice of intent to bring a lawsuit against the proposed downtown arena in Sacramento. The group opposing the proposed development claims that the project violates CEQA and is a misuse of public funds.

As cities around the state are still stinging from the state's decision to deny many of their 240 redevelopment appeals, redevelopment skirmishes still continue around the state -- often about affordable housing projects that cities claim are nearing completion. Here's a sampling:

Santa Ana sues DOF over affordable housing project

KABC

The holiday season continues to be a cruel time of year for California's redevelopment community. Last year, the state Supreme Court struck a blow on Dec. 29, allowing the state to abolish redevelopment agencies.  And this year, on Dec. 18, the state Department of Finance denied funding to many of the 240 of the 400 successor agencies who had appealed earlier rejections. >>read more

When Jerry Brown first proposed killing redevelopment -- back in January 2011, when he released his first budget -- he said he would replace it with some other economic development tool. After Brown succeeded -- when he released his second budget, in January 2012, just days after the Supreme Court killed redevelopment – his tune changed, ever so slightly. He said he would consider bringing redevelopment back if it didn't affect the state's general fund.

Fair enough.

Over the past year, even the most irate objectors to Gov. Jerry Brown's dismantling of redevelopment held out hope that in agreeing to kill redevelopment, the legislature would invent a new, better system for stoking local economic growth. Last week, the governor dashed those hopes. 

When voters in Orange County approved the creation of the 1,300-acre Orange County Great Park out of the shuttered Marine Corps Air Station El Toro, they had every reason to believe the estimated $1.2 billion cost would come, partially, from redevelopment monies. Such was the status quo in 2002.