California's Supreme Court has ruled that the state government can eliminate local redevelopment agencies. The court's ruling in California Redevelopment Association v. Matosantos nixes Gov. Jerry Brown's plan to claim the billions of dollars in redevelopment funds the redevelopment agencies (RDAs) control, but by a unanimous vote the court agreed that Sacramento has the right to dissolve RDAs.
I'm ready to kiss a nurse in Times Square over this news, but two things make me cautious. First, I note that San Diego city councilman Carl DeMaio, a former Reason Foundation fellow and generally pro-market politician, calls the ruling "the worst possible outcome." However, DeMaio's parade of horribles looks to me like a list of arguments in favor:
Today's ruling…completely eliminates redevelopment agencies and undermines our ability to invest in economically distressed neighborhoods. Today's decision may also impact the city's General Fund by more than $15 million a year – requiring additional cuts in our day-to-day budget. This decision goes against the will of California voters who overwhelmingly passed Prop. 22 last year to protect redevelopment projects, and this decision will allow Sacramento to ransack important local funds in order to temporarily patch the massive budget deficit at the state. San Diego will lose jobs – and many of our most troubled San Diego neighborhoods will lose out on opportunities for revitalization.
I live in L.A., so when I hear that Sacramento is ransacking important local funds my general response is "at least now it will get wasted somewhere far away rather than being spent by people who are close enough to torment me on a regular basis. " As for the Prop. 22 issue: The court also ruled that the state government can't help itself to this money. Schwarzenegger-appointed chief justice Tani Cantil-Sakayue dissented on that part of the ruling.
In fact, I'm worried that not allowing the state to take redevelopment funds may undermine the good news here. If these bastards still have money, they'll find a way to save their own parasitic hides. The RDAs have a long history of adapting to changed political environments – not least when they replaced the toxic phrase "urban renewal" with the politically correct "redevelopment." In a year we could end up with reconstituted RDAs featuring all the same old crooks. It's instructive to recall how the Community Redevelopment Agency of Los Angeles (CRA/LA) responded when Gov. Brown proposed eliminating it. From my April column on RDAs:
True to its criminal nature, the CRA/LA has responded to Jerry Brown's proposal by breaking the law. After the governor's budget plan came out in mid-January, the agency called an emergency meeting, in violation of a state law that requires three days' public notice before a government agency holds a vote. (The meeting was called with less than 24 hours' notice, and as far as I can see, it was never announced on the agency's website.) Although a few local gadflies showed up to provide town hall theater, the board ended up voting to turn $884 million in development project funds (counting all assets and projects, that figure may end up topping $1 billion) over to the city, to be rolled over into a new redevelopment organization that would hire existing CRA staffers.
Meanwhile, I rejoice at the lamentations from some of the worst people in California. Board of Equalization member Betty T. Yee:
Unfortunately, this decision could eliminate a powerful tool for creating local jobs. Redevelopment has been successful at stimulating economic growth, revitalizing neighborhoods, and generating tax revenues. Despite isolated abuses, redevelopment, the largest economic development program in California, has proven more effective in creating local jobs and encouraging businesses to invest in local communities than tax breaks or other tools.
I'm disappointed. I personally thought there was an important compromise that was made in letting redevelopment agencies continue, but having some of the funds go toward dealing with the crisis in schools and public services.
Weep! Weep!! And weep again!!! Your tears are as sweet as wine to me!
Regardless of the details for California, this decision is an important precedent for the whole country in the campaign to eliminate redevelopment once and for all.
Update: Orange County Assemblyman Chris Norby tells me the ruling "reaffirmed the obvious – that the state has the power over the agencies. These agencies were huge abusers – fiscal abusers and eminent domain abusers."
Norby, the only state Republican who has consistently supported the destruction of redevelopment agencies, notes that the second part of the ruling will not leave as much money on the table as I suggested. It merely prevents the state from having RDAs "voluntarily" cough up their funds this year in exchange for not being eliminated. The $1.7 billion Brown is seeking is still in play, and emergency maneuvers like the CRA/LA's hasty meeting described above will only apply to existing commitments, not to future property tax revenues – which, not to put too fine a point on it, are headed down anyway. "Redevelopment may come back," Norby says, "but where's the money gonna come from?"
Update 2: More reactions show today's ruling is pleasing to the just and hateful to the wicked:
The City of Cerritos is gravely disappointed by the California Supreme Court's decision which eliminates redevelopment. This traumatic decision will have a catastrophic, long-lasting financial impact on cities throughout the State of California. The City pledges to make every possible effort to develop new legislation that will allow redevelopment to continue. The City is joining in the League of California Cities and the California Redevelopment Association's efforts to work with state legislators to develop legislation to revive redevelopment to protect local communities, job creation and our economy.
The Legislature had the constitutional authority to create redevelopment agencies and likewise has the authority to end what it created. Prop 22 did not change that. But what Prop 22 did change, the justices found, was the Legislature's power to shift redevelopment property tax dollars to higher priority uses. It therefore found that, under Prop 22, the Legislature no longer has the power to offer them a conditional lifeline. "The irony of these circumstances concerning Proposition 22 should not be ignored — the very measure that was crafted to protect financing for new redevelopment projects has been broadly interpreted in a manner that effectively ends all financing for new redevelopment projects," Chief Justice Cantil-Sakauye wrote. "This cannot be a necessary result intended by the proponents of Proposition 22 concerning redevelopment." Not the intended result, perhaps. But certainly the result they deserved.
Ventura County Star rounds up of local city managers and other luminaries:
Bruce Feng, Camarillo's city manager…hopes — but doubts — the property tax money used to fund redevelopment activities makes its way to school districts. "If it really did go there, it's not all negative," Feng said. The California Alliance to Protect Private Property Rights applauded the ruling as a victory for taxpayers and property rights. Some, like the alliance, have criticized the agencies' use of eminent domain. "California taxpayers fund redevelopment to the tune of over $5 billion a year without any reliable evidence that they create new jobs," said Marko Mlikotin, the group's president, in a release. The group had filed a brief with the court regarding the case. In Fillmore, City Manager Yvonne Quiring said so much money is involved something will have to be worked out. "There aren't a lot of good choices for either the state or the cities," she said. "It's in everybody's interest to find a solution to this." Laura Behjan, the assistant city manager in Simi Valley, said the decision represented a "significant taking by the state of local governments' authority." In Ojai, City Manager Robert Clark said the situation is "all quite murky." Clark and others expect more lawsuits will be needed to sort out details.
Without redevelopment funding, a plan for a 9000-seat baseball stadium in Escondido to lure a minor league team appears doomed. City officials had tentatively earmarked $50 million in redevelopment funds to build a venue for a San Diego Padres farm team now playing in Tucson… In San Diego, the court decision ends any thought of using redevelopment funds to build a downtown football stadium for the San Diego Chargers to replace Qualcomm Stadium and keep the team from moving somewhere, like Los Angeles.
Los Angeles Mayor Antonio Villaraigosa soldiers on:
This year alone we have created more than 18,400 jobs through the Community Redevelopment Agency in Los Angeles. A proven economic development catalyst, these investments have transformed communities like North Hollywood and Bunker Hill with jobs and opportunity. Today, the court has spoken. We all must acknowledge the difficult challenge before us to create jobs, world-class schools and safe communities, keys to the future of our Golden State.
Christina Walsh of Institute for Justice has yet more on the legal convolutions and the Institute for Justice's case against RDAs:
California redevelopment agencies have been some of the worst abusers of eminent domain for decades, violating the private property rights of tens of thousands of home, business, church and farm owners. The Institute for Justice has catalogued more than 200 abuses of eminent domain across California during the past ten years alone. In California Scheming: What Every Californian Should Know About Eminent Domain Abuse, the Institute for Justice exposed the enormous amounts of taxpayer money used to fund these illegitimate land grabs. In fiscal year 2005-2006 alone, redevelopment agencies' revenues were an astonishing $8.7 billion. In other words, 12 percent of all property taxes in California that year were sent to these bureaucrats. As part of the state's response to its fiscal emergency and to stop this drain on the state's resources, the legislature passed, and Governor Jerry Brown signed, two laws: Assembly Bill 1X 26, which dissolves redevelopment agencies, and Assembly Bill 1X 27, which exempted agencies that agreed to make payments into funds benefiting the state's schools and special districts. The California Redevelopment Association and the League of California Cities, among others, challenged both laws, arguing that they violated the California Constitution. The court held that AB 1X 26, the law barring the agencies from engaging in new business and providing for their windup and dissolution, was "a proper exercise of the legislative power vested in the Legislature by the state Constitution." The court concluded that the Legislature has both the power to create such agencies "and the corollary power to dissolve those same entities when the Legislature deems it necessary and proper." In contrast, the court concluded that AB 1X 27, which allowed the agencies to continue to exist if they made certain payments, violated a provision of the California Constitution that prohibits the Legislature from requiring payments from redevelopment agencies to the state. "This decision represents the worst of all worlds for California redevelopment agencies—and the best of all worlds for California property owners and renters," said Dana Berliner, a senior attorney with the Institute for Justice. "The agencies managed to achieve a decision that upholds their dissolution while striking down a law that gave these agencies a way to stay in existence. The agencies' arrogance, so often employed against property owners, finally proved their undoing."
Final thoughts from me:
1. I never really expected Jerry Brown's plan to eliminate RDAs to pass, and when it did I cringed at the idea that Prop 22 – which I voted for according to the always-tie-their-hands principle – might be the legal mechanism through which RDAs escaped death. It came close to that, but the principle worked: You can never go wrong tying the government's hands.
2. This is a great example of the healthy effects of going broke. The only reason the Democrats united on getting rid of RDAs is that the teachers came out for it, and the teachers only came out for it because the fiscal crisis has them scrambling to get their paws on taxes that were going to RDAs. That's winning ugly (and it's why you won't hear anybody suggesting that the money no longer going to RDAs should be returned to the taxpayers), but it's still winning.
3. I take back the reservations expressed above, both because I have a better grasp of the court's logic and because the reactions above make it clear: California Redevelopment Association v. Matosantos is a complete rout for RDAs, a great victory for the people of California and an encouraging sign for the rest of the country. We can end the tyranny of redevelopment agencies.
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