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City officials decry court ruling against redevelopment agencies

December 29, 2011 | 11:53 am

Photo: Madeline Janis. Credit: Los Angeles Times Los Angeles officials and others described a California Supreme Court ruling Thursday that allows for the elimination of the state’s more than 400 redevelopment agencies as “the worst possible outcome” for cities and one that could be a “watershed” decision for local economic development.

“I’m disappointed. I personally thought there was an important compromise that was made in letting redevelopment agencies continue, but having some of the funds go toward dealing with the crisis in schools and public services,”  said Madeline Janis, one of Mayor Antonio Villaraigosa’s seven redevelopment agency board members.

Janis said she hopes the state Legislature will develop a new alternative that keeps redevelopment alive in low-income neighborhoods that need jobs and affordable housing. “In a city like Los Angeles, that’s a lot of neighborhoods,” she added.

Larry Kosmont, who advises many cities on redevelopment and budgetary issues, said the decision will have a profound effect on city budgets.

Many cities have been quietly using redevelopment funds for some city services for years and Kosmont predicted that some will have to abolish their own police and fire departments, and pool services.

"Its very bad news for cities," he said. "They are going to have to re-look at all their budgets."

He also predicted that many will be left with "half-baked assets" that are in preliminary stages of development.

Finally, Kosmont said that cities and the state Legislature will have to find a new engine for economic development.

"This is a watershed event for cities," he said.

But Gov. Jerry Brown said in a statement that the court’s ruling will mean more revenue to pay for state programs and services.

“Today’s ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety,” Brown said.

The California Supreme Court ruled that the state acted legally when it abolished 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 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.

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. The agencies control about $5 billion a year in property taxes, which will now be sent to the state.
Thursday’s court ruling was hailed by Los Angeles County Supervisor Zev Yaroslavsky, who had argued repeatedly that redevelopment agencies have been starving cities and counties of cash needed to deliver basic services by siphoning away much-needed property tax revenue. He said redevelopment started out as a sound idea but eventually fell prey to abuse.

“Unfortunately, over the years it evolved into a honey pot that was tapped to underwrite billions of dollars' worth of commercial and other for-profit projects that had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense,” he said.

Over the last 15 years, Los Angeles County had sued the city of Los Angeles to block it from creating new redevelopment zones in and around downtown.


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Photo: Madeline Janis. Credit: Los Angeles Times