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High Court Kills Redevelopment Agencies

UPDATED: San Juan Capistrano will have to sell off property, send funds to the state and eventually dismantle the agency it used to fight blight and build low-income housing. City Council to discuss Tuesday.

“It’s the worst of all scenarios.”

San Juan Capistrano City Councilwoman Laura Freese was reacting to Thursday’s state Supreme Court ruling, which essentially stops redevelopment agencies dead in their tracks.

Cities like San Juan Capistrano form redevelopment agencies to encourage new building projects in blighted areas and to increase the number of low-incoming-housing units.

But with the state in constant financial crisis mode,  to help balance California's budget.

A separate law allowed redevelopment agencies to stay afloat as long as they relinquished most of their money to the state. San Juan Capistrano City Council members, wearing their hats as the city’s Redevelopment Agency directors, bit the bullet in late July, .

However, even that option is now off the table after the Supreme Court ruling.  The agencies will be phased out when their contracted projects are completed.

The City Council, meeting as the directors for the Redevelopment Agency, on Tuesday will discuss the ruling and its impacts on the city. The addition to the agenda was made today.

“This is awful,” Freese said. “It’s a very sad situation for a city like ours, where redevelopment dollars have been used fairly and wisely. I am very, very disappointed.”

The court was unanimous in its opinion that the state had the right to dissolve redevelopment agencies "when the Legislature deems it necessary and proper."

Gov. Jerry Brown hailed the court's ruling, saying that it "validates a key component of the state budget and guarantees more than $1 billion of ongoing funding for schools and public safety."

So the city’s first task is to form an oversight committee to manage the dismantling of its Redevelopment Agency, Freese said. It will be comprised of representatives from the city, county and local school district, in this case .

Agency-owned properties that have not yet been developed will have to be sold, with most of the proceeds going to schools, Freese said. The county and its agencies, such as the , will also get a share. A small pittance will return to the cities.

San Juan Capistrano owns several properties its agency has yet to develop. For example, the  is a 16-acre parcel on which Home Depot once considered building.

Freese said the plot has been appraised for $8 million, but under the laws upheld by Thursday’s ruling, the city will see very little of that.

Another venture the city was on the verge of starting was called the Groves, a 26-unit low-income housing project near , Freese said. That $10 million in housing funds will now revert to the state.

“There are a lot of projects like that that have come to a complete halt,” she said.

Still, Freese didn’t accept defeat.

“Maybe I’m just crazily optimistic, but I know we’ll be able to keep working through this with elbow grease and our thinking caps,” she said. “The beauty of our city is, where there’s a will, there’s a way. We’ll just have to find a way.”

The California Redevelopment Association and League of California Cities, the plaintiffs in the lawsuits, called on lawmakers to "immediately" develop legislation to revive the agencies.

"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement," said association board president Julio Fuentes, adding that it was not the Legislature's original intent to completely abolish the agencies.

– City News Service contributed to this report.

Jim Reardon December 30, 2011 at 03:12 AM
Freese's boundless enthusiasm aside, there is no rescue for the Lower Rosan situation. While it was owned and developed by the SJC CRA, roughly $8 million in borrowed money has been invested in this site. Meanwhile, the property has declined in value to a point where the city will be lucky to give it away without residual obligations. Millions are still owed to F&M Bank. It never was valuable. It was acquired to support a transaction with Home Depot that was emblematic of redevelopment abuse under the old system. That system has now been swept away. For local taxpayers, let's hope that this whole situation can be unwound with a minimum of damage to the city.

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