Budget Lawsuit #1: Redevelopment
"This is about upholding the voters' will," said California Redevelopment Association executive director John Shirey.
The lawsuit, which was filed this afternoon with the California Supreme Court, was no surprise; even before Governor Jerry Brown signed the budget on June 30, local officials vowed to carry the fight over redevelopment to the courts.
The budget offered the 400 redevelopment agencies (RDAs) across California a choice: close up shop or begin handing over a portion of RDA-earmarked property tax dollars. Needless to say, local officials didn't see that as much of a choice, and generally used terms akin to a violent hostage scenario.
The lawsuit, however, focuses on whether Brown and the Legislature actually had the power to do what they did. And it invokes one of the newest parts of the California Constitution, Proposition 22.
The budget deal extracted current RDA dollars for differing purposes: $1.7 billion to help balance the state budget this year, $400 million a year starting in 2012-13 for local services and schools. The first of those -- balancing the state budget -- is unconstitutional thanks to Prop 22, according to today's lawsuit. RDA supporters point to language in the the initiative amendment that says the state cannot:
Require a community redevelopment agency to pay, remit, loan, or otherwise transfer, directly or indirectly, taxes on ad valorem real property and tangible personal property... to or for the benefit of the State, any agency of the State, or any jurisdiction.
Redevelopment supporters are asking the state's highest court to take the case directly, given the importance of the issue and the date on the calendar; the budget brings down the hammer on redevelopment agencies on October 1, meaning very little time for a lengthy lower court fight.
The lawsuit was filed jointly by Shirey's CRA, the League of California Cities, and the cities of San Jose and Union City. Both cities said in a press release that the budget plan would kill infrastructure projects already in the pipeline.
[You can find PDF of lawsuit here.]
One intriguing question that goes beyond the fight over tax dollars is can RDAs continue to exist, even if they win? The budget actually included two separate pieces of legislation related to redevelopment agencies: one bill (ABx 26) that abolishes all RDAs on October 1 and a second bill (ABx 27) that allows an RDA to escape the death penalty if it agrees to begin sharing its property tax dollars.
If the courts nix the tax sharing, might the dissolution of RDAs remain on track, thus giving RDA supporters the ultimate in Pyrrhic victories? For most of this year, the discussion inside the Capitol was premised on the fact that redevelopment agencies were created by statute, and thus could be erased the same way. The financing of redevelopment, though, was enshrined by voters in the state constitution in 1952 (and, say backers of the new lawsuit, further protected by last fall's Prop 22). So might a legal win on the issue of money fail to keep redevelopment agencies open for business.
That seems to be backed up by this passage, found in the first of the two RDA bills, ABx 26:
If a legal challenge to invalidate any provision of this act is successful, a redevelopment agency shall be prohibited from issuing new bonds, notes, interim certificates, debentures, or other obligations.
In other words, change seems on the horizon... regardless of whether redevelopment agencies win their lawsuit over the money.
In an interview this afternoon, CRA's Shirey says the lawsuit asks the state Supreme Court to invalidate both pieces of redevelopment related budget legislation, thus avoiding that limbo status and allowing the agencies to continue their work as they always have.
Today's lawsuit is the first post-budget legal challenge, and it's likely that there are more to come (other legal challenges were filed before the final deal was completed)... thus kicking off what could end up as the Summer of Budget Lawsuits.
4:55 p.m. Update - Statement from Brown's budget spokesman, H.D. Palmer: "We're confident that this measure – which was passed by the Legislature and signed by the Governor – is legally sound... We cannot afford to be spending more than a billion dollars a year on local redevelopment projects at a time when our core services – including education and public safety – are being cut."
It's also worth noting that a key debate point in the lawsuit fight will be what dollars are being redirected by the budget. The budget bills say that local entities can transfer dollars out of "any available" funds, and the fact that the governor and Legislature see this as a "voluntary" program, thus being enough to sidestep the Prop 22 issue... or not.