Bloomberg News

California Court Strikes Down Redevelopment Funds Law

January 04, 2012

(Adds background of case from second paragraph.)

Dec. 29 (Bloomberg) -- California laws allowing the state to seize $1.7 billion from redevelopment agencies to avoid a shortfall of money for schools and other projects were struck down by the California Supreme Court in San Francisco.

State officials had argued that redevelopment agencies that control billions of dollars of public money had to be revamped to allow California to divert the money for education, roads and fire departments.

Two laws eliminate 400 redevelopment agencies, require them to turn over a total of $1.7 billion starting in January and create a method for an “optional new voluntary” redevelopment program for communities that agree to give up their funds.

The California Redevelopment Association, the League of California Cities and the cities of San Jose and Union City had urged the court to overturn the laws, saying they violate a ballot measure approved by voters last year that prevents the state from seizing revenue dedicated to local government.

Governor Jerry Brown, a Democrat who took office in January, had counted on the money to balance the 2011-2012 budget and avoid deeper cuts to education.

Redevelopment agencies provide funding for road, sewer, lighting and affordable-housing projects across the state. Under California’s 65-year-old redevelopment law, if a city or county creates a redevelopment area to address urban blight, the agency receives related property-tax revenue increases that may result, known as the tax increment.

The California Supreme Court delayed enforcement of the laws in August and ordered the state to explain why the seizure of the funds shouldn’t be blocked. The funds diversion is scheduled to begin Jan. 15.

The case is California Redevelopment Association v. Matosantos, S194861, California Supreme Court (San Francisco).

--Editors: Glenn Holdcraft, Andrew Dunn.

To contact the reporter on this story: Karen Gullo in San Francisco at

To contact the editor responsible for this story: Michael Hytha at

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