Court Freezes Redevelopment Revise

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KQED/John Myers

In the six weeks since Governor Jerry Brown signed the new state budget into law, you'd be hard pressed to find a time period where the plan has been more rattled than now.

The latest tremor came this afternoon, when the California Supreme Court temporarily froze a controversial and fiscally important provision in the budget: the transfer of $1.7 billion from local redevelopment agencies.

In a 5-1 action (PDF), the state's highest court issued a formal stay on almost all of the provisions contained in the budget related to both the short-term taking of dollars previously earmarked for redevelopment and the long-term changes that would transfer some of those dollars to local schools and other services.

The order is the result of the lawsuit filed on July 18 by local officials, a legal appeal made directly to the state's highest court rather than a lower superior court. And today's action is by no means the end of the discussion; on the contrary, the justices will now consider the actual merits of the case filed by local officials.

The Court's order requires state officials to file their reasons for denying the redevelopment lawsuit no later than September 9 with a final ruling by January 15... just as Brown unveils a new budget proposal for the coming year.

Still, the order does appear to halt all transfers of money between the state and any of the approximately 400 local RDAs that were willing to go along with the budget, rather than the other alternative in the plan: close up shop.

The one element that RDA backers won't be pleased with in today's action: the Court did not suspend the budget's directive to stop most activity of redevelopment agencies choosing not to join the future revenue sharing plan (selling debt, entering into contracts, etc.). A laymen's interpretation of that directive seems to suggest that redevelopment agencies still have to decide -- per the budget -- by October 1 if they're going to participate in the new RDA proposal... they just don't have to hand over the money while the Court considers the case. And RDAs are actively engaged in those discussions, with Los Angeles officials agreeing on Wednesday to hand over money from their operation.

And that part -- not handing over the money -- is the real issue. It's still unclear just what schedule exists for local agencies to hand over the $1.7 billion counted towards this year's state budget shortfall. But it may further increase the pressure on the state's finances as of mid-December, the point at which state finance officials must take stock of the budget and determine whether the much talked about "trigger" is pulled on additional cuts.

For the real budget wonks, though, consider this: the $1.7 billion in redevelopment dollars is actually counted as a "savings" and not as revenue... thus raising the question of whether the fate of RDAs will play into the "trigger" calculation at all.

Still, today's suspension of the process will help fuel the fear among some budget watchers... already primed by Tuesday's cash assessment and by the recent Wall Street chaos... that Governor Brown and legislators will have to revisit the carefully crafted budget sooner rather than later.

Update 2:25 p.m. Governor Brown's budget spokesman, H.D. Palmer, while saying the administration is "pleased" that the Court took the case and will expedite a decision, points out two important points. First, the fact that the order leaves in place budget language freezing the new activities of RDAs means all local agencies, even those that agree to participate in the new plan, must stand down. And second, the budget didn't assume a first payment from RDAs until January 15... meaning no short-term fiscal impact.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • hello

    “the order leaves in place budget language freezing the new activities of RDAs means all local agencies, even those that agree to participate in the new plan, must stand down. ”

    Do I read this right as meaning that the Court order says RDAs must close up shop no matter what?

  • http://www.kqed.org/weblog/capitalnotes/blog.jsp John Myers

    Not exactly.

    The Court’s order means that all RDAs, regardless of whether they want to stay in business via the budget’s revenue sharing plan or not, must effectively freeze their new operations — incurring debt, signing contracts, etc. That’s not the same as closing up shop; rather, it means they can’t agree to any new business deals.

    If the RDAs prevail come January, then things are back to the way they always were… and the state budget goes back into the red. If the state prevails, the RDAs then will have to choose to either share their property tax dollars, or “close up shop.”