GRASS VALLEY, Calif. — A court decision Thursday means Grass Valley won't have money in the future for affordable housing, infrastructure projects and neighborhood improvements.
Gov. Jerry Brown and state lawmakers have the authority to eliminate community redevelopment agencies — but not to force them to pay what some called a ransom to keep the agencies going, the California Supreme Court ruled Thursday in a decision that will likely send both sides back to negotiations.
The state will be able to save more than $1 billion in this year's budget by eliminating about 400 redevelopment agencies, including those in Grass Valley and Truckee.
But it will not get an estimated $400 million a year thereafter from money that would have been set aside by agencies to continue operating. That money would have been redirected to local services.
The state, which is heading into the new year with a $13 billion shortfall over the next 18 months, had initially estimated the current-year savings at $1.7 billion.
In Grass Valley, projects already under contract that use redevelopment agency money will be allowed to continue. Those include construction of the Dorsey Drive interchange over the Golden Center Freeway, rehabilitation of the Valley Commons apartments on Sedgwick Drive.
Projects in the recent past that have relied on RDA funds include roads, sidewalks, and water and sewer lines for the Habitat for Humanity development off Whiting Street; new sewer lines in Upper Slide Ravine; the historic mining elements on display at the entryway corner of East Main and Richardson streets; and the roundabout at East Main and Idaho-Maryland Road.
“Beautification of downtown Grass Valley was one of the first RDA projects,” City Administrator Dan Holler said.
Future projects like them are unlikely to happen, because it's so much harder for the city to get money for them, Holler added
That's because redevelopment agencies are allowed to take the incremental rise in property taxes, as properties in improved areas grow in value, and dedicate that money to specific uses, Holler said.
Projects unlikely to happen, now, include plans to widen East Main Street north of Sierra College Drive where senior housing was to have been built. And any money that might have been available to help the developer install a bus stop and water and sewer lines, that's gone, too, Holler said.
Local governments will have a few months to disburse RDA funds before closing up shop.
One bright spot: Other local taxing districts, including schools and cemetery districts, will get that money instead, Holler said.
Because the state Legislature authorized the creation of redevelopment agencies, it has the power to eliminate them, the justices said. They called it “a proper exercise of the legislative power vested in the Legislature by the state constitution.”
But the court invalidated state legislation that diverts redevelopment funding, calling it “flawed.”
“Today's ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety,” Brown said in a statement.
Taking the RDA money was a key component of balancing the state budget. While the court allowed the state to dissolve redevelopment agencies, the Legislature had intended to keep redevelopment agencies going by requiring payments to schools and other local services.
The decision handed down Thursday said the state cannot argue those redevelopment payments are voluntary if the payments are a requirement for redevelopment agencies to continue operating.
The court handed the Legislature mixed results, Assembly Speaker John Perez, D-Los Angeles, told the Associated Press.
“The Supreme Court validated the Legislature's action to eliminate existing redevelopment agencies, but we are disappointed that they blocked the creation of smaller, more targeted redevelopment agencies that fully funded affordable housing,” he said in a statement.
San Diego Mayor Jerry Sanders called it a “sad day” and San Jose City Attorney Richard Doyle called the ruling a disappointment but not a total surprise, given the judges' reactions during arguments in November.
“We had obviously disagreed with the decision. Our position was that both laws ought to be thrown out,” Doyle said.
Sanders and Doyle said they hope local governments will be able to strike a compromise with the Legislature and the governor that would allow redevelopment agencies to continue operating, which will create jobs.
Doyle said the decision will not have an immediate hit on the city's budget, since officials had accounted for the elimination of redevelopment agencies in its budget plans.
The California Redevelopment Association vowed to work with lawmakers to revive redevelopment agencies. The association and cities had argued the move was illegal under Proposition 22 in 2010, which banned the state from raiding local government funding.
Supporters say redevelopment agencies are among the most powerful tools available for local governments to revitalize communities.
They have pointed to the successful renovation of downtrodden areas like around Oakland's Fox Theater, refurbished historic districts and financed public work projects.
But audits have revealed some agencies have misused the funds, a portion of which is intended to be used for low-income housing.
The justices heard arguments from both sides and split the decision by affirming the state's right to eliminate redevelopment agencies.
But they upheld Proposition 22, saying the state could not force payments from the agencies as a way for them to remain in business.
—-Associated Press Reporter Judy Lin contributed to this report.