Court ruling on redevelopment keeps $1.7 billion in state coffers

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State lawmakers acted legally when they abolished more than 400 redevelopment agencies earlier this year, according to a ruling issued Thursday by the California Supreme Court.

The ruling is a victory for Gov. Jerry Brown. State redevelopment agencies and the League of California Cities had challenged the measure signed by Brown earlier this year; had they succeeded, it would have created a new, $1.7-billion hole in a state budget that is already running a $13-billion deficit.

When Brown and state lawmakers eliminated existing redevelopment agencies earlier this year, they sought to strike a middle ground by creating a modified redevelopment program in its wake. But that replacement program, the court ruled, was unconstitutional.

The ruling leaves the future of redevelopment agencies in limbo, and sets the stage for another major battle on the issue in Sacramento next year. The more than 400 redevelopment agencies around the state use property tax dollars to revitalize blighted areas, but Brown argued that the money would be better spent on schools and local governments.

Brown signed a bill that required those agencies to dissolve, freeing up $1.7 billion to help balance the state’s books in the current fiscal year. The second measure, struck down by the courts Thursday, created a new redevelopment program which gave $400 million back to the state in subsequent years.

Opponents of the bills, led by the League of California Cities and the California Redevelopment Assn., argued the measures violated the terms of Proposition 22, a measure approved by voters in 2010 that aimed to prevent the state from using local funding to balance its books.

The court ruled the agencies were not protected by the constitution, but said the Legislature’s efforts to re-create a subsequent redevelopment program were not legal.

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-- Anthony York in Sacramento