Cities and Agencies Question Legality of Redevelopment Laws

California lawmakers’ plans to eliminate redevelopment agencies are not sitting well with cities and associations throughout the state.

This proved true Monday when the League of California Cities, the California Redevlopment Association and the cities of Union City and San Jose filed suit a lawsuit filed with the California Supreme Court questioning the legality of two recently passed laws that call for cities to either pay large sums to the state to continue redevelopment, or shut down the agencies entirely.

Approved by state legislators with last month were two contradictory bills: AB 1X 26, which will eliminate the 400 redevelopment agencies in the state by Oct. 1, and AB 1X 27, which allows agencies to continue to operate by paying their share of $1.7 billion this year and $400 million each year moving forward.

Those funds would be diverted largely to schools and special districts.

Newark officials, like the representatives from the agencies and cities that filed suit, feel the newly passed laws are illegal, according to Community Development Director Terrence Grindall.

"This State legislation is clearly an unconstitutional raid on local government and we expect it to be overturned in the courts," Grindall said.

The lawsuit claims that the bills are an unconstitutional violation of Prop. 22, an amendment approved by voters last November to prevent the state from taking money from local government, including the tax increments generated by redevelopment agencies.

"The governor and legislature have blatantly ignored the voters and violated the State Constitution," said Chris McKenzie, executive director of the League of California Cities. "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."

The lawsuit also requests a stay by Aug. 15 to prevent the legislation from taking effect before the court can rule on the claims put forth in the lawsuit.

Unless the legislation is overturned, cities would be forced to reduce their role in revitalizing communities and creating jobs, according to redevelopment supporters.

“Since the budget bills passed, many redevelopment agencies have notified us that they cannot afford the ransom payment and will cease to exist. And those agencies that are planning on making the payment tell us that it will greatly diminish their ability to pursue vital local projects,” said John Shirey, executive director of the California Redevelopment Association.

“This legislation is a job-killer and an opportunity killer for many local communities in need,” he said.

The money each city owes the state is dependent upon particular percentages of property tax increments, Grindall said.

To continue operating, Newark would have to pay about $5,000 to the state this year to avoid elimination of its redevelopment agency, Grindall said.

That number could decrease and then eventually increase once projects begin on land designated for redevelopment.

Newark currently has two redevelopment project areas, one of which was adopted in 2002 that covers industrial portions of town near Mowry and Central Avenues and part of the area slated for the project.

The other new redevelopment area, adopted in 2010, includes portions of Old Town along Thornton Avenue, City Hall off Newark Boulevard and the auto mall area by Balentine Drive.

Nearby, Union City would have to pay an estimated $7.6 million this year and $1.8 million each year the agency continues.

Union City Administrative Services Director Richard Digre said the figures equate to extortion.

"It’s like someone jumping out of a bush with a gun saying, 'Your money or your life,'" Digre said.

If dissolved, Union City’s redevelopment agency would suffer “serious adverse consequences” for , a transit-oriented community surrounding the BART station that has been in planning since the agency was established in the 1980s.

While the short-term impact on Newark would be minimal, Grindall said in the long-term, there would be "limitation on our ability to improve the community."