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CA Supreme Court Rules RDA Elimination Legal

The California Supreme Court has ruled today that the elimination of Redevelopment Agencies by the Legislature was legal.

Here is a PDF of the Court’s decision.

The decision is a mixed bag in terms of its implications for the Enterprise Zone program. On the one hand, there was $1.7 billion dollars of budget deficit solutions riding on the elimination. To the extent that the budget deficit is smaller, there is less pressure to attempt elimination of Enterprise Zones. On the other hand, had the Court ruled that the elimination was illegal, it would have bolstered the argument that elimination of the EZs would also be illegal. Furthermore, many jurisdictions use their Redevelopment agency funding to fund the operation of their zone programs as well.

The following is the Sacramento Bee article immediately following the Court decision:

In a significant budget win for Gov. Jerry Brown and lawmakers, the California Supreme Court ruled Thursday the state can eliminate the local agencies that subsidize construction in blighted areas.

The decision strengthens the state’s ability to take $1.7 billion from redevelopment agencies for the current budget. It also provides leverage for state leaders to continue using redevelopment property tax dollars to balance future budgets.

The court ruled invalid a second bill that would have reconstituted redevelopment agencies in a different form.

The court called the elimination of redevelopment “a proper exercise of the legislative power vested in the Legislature by the state Constitution.”

State leaders axed redevelopment agencies in the June as they closed a deficit once projected at $26 billion. As part of the plan, cities could reorganize the agencies only if they agreed to use their money to pay for state obligations this fiscal year and make smaller contributions in future years.

Cities and redevelopment agencies sued the state in August to block the plan, saying it was akin to the state demanding a “ransom payment.” Critics in the Legislature said the state could ill afford to subsidize private developers, pointing to venues such as “Dive Bar,” a watering hole steps from the Capitol that features a mermaid tank.

The state’s high court agreed to fast-track the case. By issuing a decision today, the court gave state leaders guidance before Brown proposes his 2012-13 budget in less than two weeks.

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