Yesterday, June 15, 2011, the California Legislature passed a budget that diverts essentially all redevelopment agency funding to school districts. The legislation, if signed by Gov. Brown as expected, disbands redevelopment agencies statewide but allows them to reconstitute conditioned on $1.7 billion in property tax contributions to school districts in fiscal year 2011-2012 and $400 million/yr. thereafter. It is expected that this requirement will financially gut most redevelopment agencies. The legislation makes no distinction between successful and unsuccessful redevelopment agencies. Successful redevelopment agencies often increased revenues to school districts resulting from increased property tax values. Redevelopment Agencies received funding from “tax increment,” i.e., the increase in property taxes presumably due to redevelopment efforts. In addition to a share of the pre-redevelopment property taxes, school districts received a share of the post redevelopment tax increment. The diversion of funds to school districts also comes at the expense of redevelopment affordable housing funds, which also received a share of the tax increment.
The California League of Cities and the California Redevelopment Association are expected to challenge the legislation in court based on last year’s constitutional amendment prohibiting the State from raiding redevelopment agency funds to close budget shortfalls, as well as portions of 1978’s Prop. 13 and 2004’s Prop. 1A. The legislation attempts to circumnavigate Prop. 22 by totally eliminating redevelopment agencies rather than simply diverting redevelopment funds.
Prop 22 Makes Redevelopment Abolishment Problematic, City Manager’s Blog, March 11, 2011
Redevelopment bill passes, threatens local funding, Roger Showley, San Diego Union Tribune, June 15, 2011