Redevelopment efforts imperiled

Court ruling leaves city’s funds in doubt

The State Supreme Court may have dealt a fatal blow to Crescent City’s redevelopment agency and more than 400 others like it across California.

Last week the court issued a decision affirming the state’s authority to dissolve city-level RDAs, which were created to remedy blight, promote economic growth and build affordable housing using property tax revenue.

Crescent City’s RDA currently owns six properties, has $51,000 in cash reserves and $931,000 in a housing fund. How exactly these assets would be redistributed to other entities in the event of dissolution is something officials are still hammering out, said City Manager Eugene Palazzo.

“We’re all scrambling, trying to figure out what this means,” he said. “My goal is to have a comprehensive report to the City Council at their next meeting on Jan. 17.”

The fate of RDAs has been up in the air since last January, when Gov. Jerry Brown first pushed to eliminate them and got the authority to do so from Assembly Bill 26, which the court upheld

as “a proper use of legislative power.”

If the RDAs dissolve, property taxes generated within redevelopment zones will go toward schools, law enforcement and other local services, freeing up as much as $1.7 billion in the state general fund during the current fiscal year. The money now is returned to the agencies to spend on future redevelopment projects.

But dissolution wasn’t the only option for RDAs until last week’s court decision. Over the summer the Legislature also passed Assembly Bill 27, a compromise that allowed the agencies to keep functioning if they paid continuation fees to the state in support of school funding.

The justices said that law ran afoul of voter-approved Proposition 22, which prohibits the state from raiding local tax money.

“It is probably the worst of all worlds for the city and all cities in California because it upheld the dissolution, but took away the option to pay the ransom,” City Attorney Bob Black said of the court’s ruling.

A report delivered to the City Council in October concluded that the RDA would have retained more money after making the continuation payments than the city will receive if the agency dissolves, a difference of at least $350,000.

“It’s tragic. It’s really going to hurt the community and the city in moving forward with our economic development efforts,” said Palazzo. “It’s the only real funding source out there that can put together brick and mortar. That funding source is now gone.”

Recently RDA funds were used to remove the old Tsunami Landing pedestrian walkway, a $315,000 project. The agency also owns the El Patio motel site, which was recently burned to make way for affordable senior housing, Palazzo said. What happens there now is uncertain.

Critics, including Brown, say some RDAs have become little more than slush funds for private developers. They want property taxes generated by new developments to be diverted from the agencies to local services that now must be funded by the state.

Some lawmakers have spoken up on the court’s decision, saying it disregards the intent of AB 27 to reshape, rather than eradicate RDAs. North Coast Assemblyman Wes Chesbro is among them.

“The State Supreme Court's decision failed to recognize the benefits redevelopment has had on our small rural communities,” Chesbro said in a statement released by his office Tuesday. “I am committed to going back to the drawing board and working with the leadership of the Legislature and the governor to seek a workable compromise that will allow a scaled back form of redevelopment to help create local jobs.”

If nothing happens on the legislative front by Feb. 1, the RDA will likely start the dissolution process, Palazzo said.

The Associated Press contributed to this report.

Reach Emily Jo Cureton at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it