Eminent Domain Report

The Legislature may deal a death blow to redevelopment in California as early as next week.  Late yesterday afternoon, on a party line vote, the members of the Budget Conference Committee voted to move the Governor's proposal to eliminate redevelopment to both houses for a vote by the Assembly and Senate members.  The Governor wants the State Legislature to send him a budget package to sign by March 10, the date by which he must secure a two-thirds vote to get a measure to extend tax increases on the June ballot.

Therein lies the rub.  A minimum of two Republicans are needed in the Assembly and two in the Senate for the required two-thirds vote on placing a tax issue before voters.  The tax extension is one of the cornerstones of the budget proposal and the Democratic leadership is working hard to woo at least four of their Republican colleagues to cross over and vote to place it on the ballot.  Most of the Republican legislators are strongly opposed to this aspect of the budget.   

Interestingly, the tax extension is not the only aspect of the budget that Republicans oppose.  GOP members also refused to support the Governor's proposal to eliminate redevelopment agencies, citing legal concerns that prevent the state from raiding local government funds.

In an ironic twist, this places many Republicans in the same camp as the California League of Cities and the California Redevelopment Association.  "There is no doubt that eliminating redevelopment agencies and using the funding for state purposes is unconstitutional," said John Shirey, Executive Director of California Redevelopment Association.  Indeed, the CRA is circulating materials outlining its strategy for a possible constitutional challenge to the Governor's proposal, based in no small part on Proposition 22.  Adopted just last November, Proposition 22 amended the California Constitution (Article XIII, § 25.5(a)(7)) to prohibit the State from directly or indirectly requiring redevelopment agencies to use redevelopment tax increment for the benefit of the State.  By eliminating redevelopment agencies so that redevelopment revenues can be used to fund such State programs as Medi-Cal and trial courts, the Governor’s redevelopment proposal seems to require redevelopment agencies to transfer their tax increment revenue for the benefit of the State, in violation of Proposition 22.

Meanwhile, San Diego Mayor Jerry Sanders, along with several other big city mayors, have come up with a compromise plan that they submitted to the Governor last week.  Their plan is for redevelopment agencies to send to the state 5% of their annual revenues, approximately $200-million.  The 1.7-billion the Governor needs could be borrowed with the 200-million covering the debt payments.  So far, they have received no response.

Will the vote go forward next week if the votes are not there to place the tax extension on the ballot?  Will there be an 11th hour compromise along the lines proposed by California's big city mayors last week?  The situation remains very fluid.