Redevelopment Still Thorny Issue for Local Governments - NBC Bay Area
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Redevelopment Still Thorny Issue for Local Governments

While redevelopment agencies were officially abolished months ago, many city governments across California are still bracing for a fight over valuable property



    Redevelopment Still Thorny Issue for Local Governments

    While redevelopment agencies were officially abolished months ago,many city governments across California are still bracing for a fight over valuable property. (Published Thursday, Nov. 29, 2012)

    The last few years have been painful ones for the state of California, with budgets more often resembling pools of red ink than crisp, financial documents.

    Amidst all the slashing of services, payrolls and agencies, perhaps the greatest casualty for California local governments has been the end of redevelopment.

    A tool used by cities for decades to acquire property, spruce up blighted neighborhoods and provide valuable housing to the community, redevelopment met its end in 2011. As part of that year's budget, California Governor Jerry Brown dissolved all 402 redevelopment agencies to save the state money.

    "This is our fiscal cliff, and really it would be catastrophic to the city," Santa Clara Mayor Jamie Matthews said.

    Matthews is concerned that the state's effort to dissolve redevelopment has turned into an all-out seizure of valuable city-owned property.

    In a letter sent to Santa Clara taxpayers, Matthews wrote, "We are writing to inform you of a critical issue that could have devastating, long-term impacts on our city's budget and the vital services we provide our local residents and businesses."

    The letter goes on to brace residents about the possibility of having to give back up to $300 million in land and property assets -- including the approximate $13 million in revenues that come with them -- depending upon the outcome of an audit by the State Controller's Office.

    "I'll tell you how absurd this law is," Matthews said. "One of the properties that we have, the Bay Area Research and Extension Center (BAREC), we bought when the state of California surplused it. So imagine this: we bought the property from the state, paid them their value, and now they want it back for free?"

    Could this be true, that the state of California might demand back land sold directly to local governments? Perhaps even more egregiously, can the state seize land purchased entirely with taxpayer dollars, and no redevelopment funding?

    To understand the answer to those questions, we have to step back for a moment.

    In January of 2011, Governor Brown unveiled a new budget that included dissolving redevelopment agencies. The legislation forbade those agencies from taking on new debt, or "pledging, or encumbering, for any purpose, any of its assets or revenues."

    A translation to that legalese, the agencies were prohibited from taking on new projects, or moving their assets around, pending the approval of the bill.

    On June 28, Governor Brown signed the bill into law, retroactive to Jan. 1.

    But something frenetic happened in between those two dates: cities all across California shifted their land and property assets from the local redevelopment agency to city control, preparing for a fight.

    "The state's the only [entity] that I know that can retroactively go back in time, like 'Back to the Future,' and reset things," Matthews said. "I mean, this is the Marty McFly of legislation."

    The Supreme Court of California upheld the retroactive application in December of 2011.

    But the court's decision did not put to rest a thornier issue -- what to do about all of the property transferred from redevelopment agencies to the cities in that mad rush for legal standing that was bought and paid for by the cities in the first place.

    NBC Bay Area contacted more than a dozen legislators, including the local representatives for the City of Santa Clara, looking for answers.

    They all turned down requests to talk about redevelopment.

    The press secretaries and chief of staffs for several representatives, including Assemblymembers Paul Fong and Bob Wieckowski, acknowledged that the sensitivity of the issue was a reason why.

    Wieckowski said through his aide that he wanted to see the official report from the State Controller's Office before commenting on Santa Clara's potential land disputes.

    To date, that report has not been completed.

    "I'm not sure it's a legitimate defense, retroactivity is something that normally doesn't have legal standing," Political Science Professor Emeritus Terry Christensen said.

    Christensen taught local government at San Jose State University for more than four decades and has written numerous textbooks on the subject.

    In lieu of a state representative willing to talk about redevelopment, Christensen provided analysis.

    "Historically, it's always been recognized that the states are superior in authority to local governments," Christensen said. "So this I think would be the state's argument on the retroactivity issue- 'We're the boss, we can do this.'"

    Ultimately, it will likely be up to the courts to decide whether the state has a legitimate claim to properties originally titled under redevelopment agencies.

    As far as the state is concerned, it's made clear that only three qualifying criteria can exempt a property from being seized: if it was transferred before Jan. 1, 2011, if it has been contractually committed to a third party, or if it serves a 'clear governmental purpose.'

    What type of assets serve a clear governmental purpose?

    According to H.D. Palmer with the California Department of Finance, one would have to refer to state code, which cites "roads, school buildings, parks, police and fire stations, libraries and local agency administrative buildings" as examples.

    There's no mention of convention centers or theme parks, both assets Matthews is worried about losing after decades of ownership.

    "You can't justify this in any way," Matthews said. "You can't rationalize it in any way. And I don't care how many attorneys look at it, there are some things that are right, and some things that are wrong. And this is wrong."

    While Santa Clara still awaits a final audit, and has the option to 'meet and confer' with the state if it's displeased with the decision-there's nothing to refute the claim that California might rob this city, and many others, of long-held, city-financed property.

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