State Supreme Court upholds abolition of redevelopment agencies

The state acted legally when it abolished more than 400 redevelopment agencies to help close a budget gap but overstepped the law by permitting some of the agencies to survive if they shared their property tax revenue, the California Supreme Court ruled Thursday.

The ruling was a major blow to redevelopment agencies, authorized by law since 1945  and responsible for the creation of such neighborhoods as Old Pasadena and  San Diego's Gaslamp Quarter, and a victory for state officials grappling with budget shortfalls.

It came in response to lawsuits filed by the redevelopment agencies but represents the worst possible outcome for them.

DOCUMENT: California redevelopment association

Redevelopment agencies sued the state to overturn both the law that ended redevelopment and a compromise measure that would have permitted some agencies to continue as long as they shared their revenue.

Redevelopment agencies permit cities and counties to carve out blighted neighborhoods for improvement through partnerships with private developers. The agencies can obtain property by eminent domain, purchase or lease, and use a portion of property taxes to help pay for improvements.

Redevelopment proponents say they have created jobs and bustling neighborhoods. Critics contend they have starved schools and the state of scarce tax revenue and in some cases invested the public’s  money foolishly.

Redevelopment agencies became fodder in the budget battle because their growth has led to their control of a larger percentage of tax revenue.

California officials estimated that the new laws would generate $1.7 billion this fiscal year and an additional $400 million in future years from agencies that decided to continue operations.

The ruling, written by Justice Kathryn Mickle Werdegar, said the Legislature has the power "to establish or dissolve local agencies and subdivisions as it sees fit."  But once it authorizes an agency, "it may not thereafter require that such allocated tax increment be remitted for the benefit of schools or other local agencies."

Chief Justice Tani Cantil-Sakauye did not join the other six justices in signing the opinion. In a separate opinion, she said she would have upheld the compromise law that would have permitted redevelopment agencies to continue if they shared revenue.

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 -- Maura Dolan

Photo: Justice Kathryn Werdegar at the California Supreme Court in San Francisco on Nov. 10. Credit: Jeff Chiu / Associated Press