State raid of cities' funds a bad idea

Pasadena Star-News

January 5, 2010

Editorial

WHEN cities are faced with balancing their budgets, they cut programs, trim fat and sometimes raise fees. We credit them with addressing the problem head on.

When the state does it, it's often a shell game. Funds are transferred from one pot to the next. Phantom revenues don't materialize. Hence, despite all the hand-wringing and crowing, the problem never really gets solved.

Last summer, the state "balanced" its budget in part by requiring all cities with redevelopment agencies to transfer the contents of their savings to the state. The "take" amounts to $1.7 billion this fiscal year and another $350 million in 2010-2011.

One of many problems with this accounting maneuver is that it is illegal. The state Legislature and Gov. Schwarzenegger knew it was illegal but went ahead and included it in the adopted budget anyway.

That's some kind of arrogance. But it's part of the state's modus operandi when it comes to solving its budget woes. It's simply reckless accounting.

The state tried this maneuver in the 2008 budget and the cities sued and won. In an April 2009 ruling, a Sacramento County Superior Court said raiding city redevelopment funds was unconstitutional. The court said redevelopment funds - which come from property tax increments paid on improved parcels - can only be used for redevelopment activities. The court said the California Constitution stipulates the funds are "to finance or refinance ... the redevelopment project."

However, three months later, the Legislature included a similar maneuver in the current budget bill. Apparently the state thought it could ignore the courts and the constitution by changing the wording to read money from the raid would be used to help fund education. The cities were not fooled and filed a new lawsuit in October, a month after the state dropped its appeal, which seems to suggest it agreed with the court ruling.

No matter how desperate the state is for funds, it cannot ignore the judicial branch of government or the constitution.

Aside from the law being on their side, the cities make a good argument for keeping redevelopment agencies funded. Cities use these funds to pay bonds already sold.

To not pay the bonds would be a breach of contract, and hurt bond ratings, costing local taxpayers even more.

Well-planned redevelopment projects have helped revitalize our older cities. With a San Gabriel Valley developed more than 125 years ago when the railroad came through, our cities are old. Our downtowns need new life that redevelopment - when done right - can bring. Redevelopment has been credited with revitalizing Old Pasadena, Alhambra's Main Street, Monrovia's Myrtle Avenue, Covina's downtown and parts of Pico Rivera and Santa Fe Springs.

Redevelopment brings construction jobs and often boosts an area's retail districts and small businesses. These are the type of projects that can drive our economic recovery.

It's high time the state finds real solutions, ones that don't rely on taking revenues from cities and don't violate the law.