On Monday, the League of California Cities, the California Redevelopment Association, and the cities of San Jose and Union City filed a petition with the California Supreme Court, challenging the constitutionality of the two redevelopment bills passed as part of the state budget in June. AB 1X 26 eliminates redevelopment agencies. AB 1X 27 allows agencies to continue to exist if they agree to make “ransom payments” of $1.7 billion this year and $400 million in subsequent years.

The lawsuit also requested the California Supreme Court to issue a stay to prevent the legislation from going into effect until the Court can rule on the merits of these claims. The petition was filed directly in the state’s highest court because expedited resolution is needed. Under the terms of AB 1X 27, cities with redevelopment agencies intending to make the “ransom” payment must notify the state by October 1.

The central claim in the lawsuit is that AB 1X 26/27 violate Proposition 22, the constitutional amendment passed by 61% of California voters in November 2010. Proposition 22 was passed by voters to “conclusively and completely prohibit State politicians in Sacramento from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with” revenue dedicated to local government. The revenues protected by Proposition 22 specifically include the annual increments of property taxes allocated to California’s 400 redevelopment agencies.

“California voters overwhelmingly passed Proposition 22 just eight months ago to stop State raids, shifts and diversions of local redevelopment funds,” said Chris McKenzie, executive director, League of California Cities. “The governor and legislature have blatantly ignored the voters and violated the State Constitution. We must now go to the Supreme Court to uphold the voters’ will and the Constitution by overturning this unconstitutional legislation. We are confident the Courts will uphold the will of the voters.”

Unless nullified, AB 1X 26/27 will result in the elimination of redevelopment agencies or force “ransom” payments by local agencies that will greatly reduce the ability of local agencies to pursue revitalization and job-creation projects.  The measures will kill hundreds of thousands of jobs and leave many communities with no opportunity to revitalize downtrodden areas with high unemployment, high crime and significant blight.

John Shirey, executive director, California Redevelopment Association, said:
“Since the budget bills passed, many redevelopment agencies have notified us that they cannot afford the ransom payment and will cease to exist.  And those agencies that are planning on making the payment tell us that it will greatly diminish their ability to pursue vital local projects.  This legislation is a job-killer and an opportunity killer for many local communities in need. Fortunately, voters passed Prop. 22 to put a stop to these types of destructive raids by the legislature. We must now go to the Courts to  protect our local communities and economies.”

Joining as co-petitioners are the cities of San Jose and Union City. In declarations provided to the Court each city says that it currently anticipates being unable to make the payment required to avoid redevelopment agency elimination.

The City of San Jose declares that, unless overturned, AB 1X 26/27 could result in the forced termination of its redevelopment agency and kill hundreds of millions of dollars’ worth of vital redevelopment projects. These include the Strong Neighborhoods Initiative, a project to revitalize 20 of the City’s most disadvantaged and struggling residential neighborhoods; a flood control project needed to protect industrial properties; and several interchange widening projects near Hwy 101.

The City of Union City does not currently believe it will be able to pay the funds required to avoid elimination of its redevelopment agency. Elimination will kill the “Station District Plan” to create a transit-oriented development near BART and multiple rail lines, with planned housing, office, commercial development and pedestrian and roadway connections on formerly contaminated industrial land. This project has been in the planning and implementation process for several decades, and the agency has spent tens of millions of dollars.  The Station District Project will remain unfinished if the Agency is dissolved.

The cities of Brentwood, Oakland, Modesto, West Sacramento, and Guadalupe also filed declarations in support of the lawsuit.

The Petitioners’ counsel are Howard Rice Nemerovski Canady Falk & Rabkin, located in San Francisco. The petition was filed directly in the state’s highest court because expedited resolution is needed. Under the terms of AB 1X 27, cities with redevelopment agencies intending to make the “ransom” payment must notify the state by October 1. The petition asks the Supreme Court to make an initial ruling on the request for stay by August 15.