The state’s unrivaled thirst for funds is being challenged by some of the smallest cities in the state, as millions of dollars in Redevelopment Ransom is being withheld from the state as a legal fight develops.

The accelerated timeframe given to cities across the state to turn over their redevelopment money shocked many. In many cases, cities had just 48 hours to appropriate millions of dollars in order to cut checks to the state. But in El Cerrito, the $1.7 million payment was withheld, and instead a lawsuit was filed.

Some see the issue as being more than the principle, for some cities its life or death. But those who can afford to turn over the millions aren’t necessarily happy about it, and local government organizations are calling the claw-back what they believe it to be – illegal.

From the San Francisco Chronicle:

California cities are in a high-stakes fight with officials in Sacramento over money that the state says the cities owe as part of the winding down of redevelopment agencies.

County officials, under the state’s direction, have sent letters of demand to cities throughout the state in recent weeks, many for millions of dollars. Several cities, including El Cerrito, refused to pay and sued the state, which is threatening to penalize cities by withholding sales tax revenue that cities rely on to pay for police, parks and other general operating expenses.

Some local officials warn that if the state follows through with its threat, struggling cities could be pushed off the fiscal cliff. Recently, fiscal crises prompted three California cities – Stockton, Mammoth Lakes and San Bernardino – to declare bankruptcy.

Read the full article here.