Depending upon which camp you are in, the recently approved budget package is either a glaring violation of Propositions 22 and 1A and is illegal, or it is the vindication “of Californian’s property rights” and “halt(s) the egregious misuse of the ‘despotic power'” of redevelopment agencies.

Either way, the reality is that the demise of Redevelopment Agencies as we have known them for the last five decades and will likely soon head to the courts.

John Shirey, the Executive Director of the California Redevelopment Association, is one of the vocal leaders of the movement to save redevelopment agencies. Speaking on behalf of his organization he promised: “If the Governor signs the redevelopment trailer bills (AB 1x 26/27), we’ll quickly file a lawsuit to prevent these unconstitutional measures from becoming law.”

The two bills, AB 1x 26/27, were written and presented as a package deal. When legislators passed AB 26, they dissolved Redevelopment Agencies. Their next vote, which passed AB 27, provided a mechanism to continue redevelopment under new auspices.

One of the requirements of continuing a redevelopment agency would be to pay the state a one-time, prorated pass-through payment. Each subsequent year, the redevelopment agency would have to provide money to the state.

The Community Redevelopment Agency of Los Angeles calculated the costs of their first and subsequent payments to be $70 million by January of 2012 and approximately $38 million in each year thereafter.

These fees have been labeled as extortion money.

With these two bills destined for a legal challenge, it remains to be seen how much money the state will be able to use from the projected $1.4 billion take. Some of the defenders of Redevelopment Agencies, such as Senator Bob Huff, say that the realized, one-time cash infusion to the state’s general fund may be as low as a few hundred million dollars, significantly less than projected.

PublicCEO has previously reported on another development funding mechanism. Legislation pending before the Assembly will expand the applicable uses for Infrastructure Financing Districts.