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Cities can spend RDA funds on housing

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webmaster | 02/01/12

Bill passes state Senate Tuesday

SACRAMENTO (AP) — Cities that had community redevelopment agencies eliminated by the Legislature would be able to spend the money they had set aside for affordable housing under a bill that passed the state Senate on Tuesday.

Lawmakers acted as time ran out for the roughly 400 agencies, which were created after World War II as a way to help blighted neighborhoods.

Last year, lawmakers eliminated the agencies, effective today. That decision was upheld by the state Supreme Court, which found the Legislature had the authority to end the agencies and use their property tax money for schools, law enforcement and other local services.

Doing so will save the money in the general fund, giving the Legislature more spending freedom. An effort by some cities to delay the deadline or work with lawmakers on a compromise that might have saved redevelopment agencies fizzled.

Instead, the Senate approved SB654 by President Pro Tem Darrell Steinberg, which would allow local governments to spend a collective $1.4 billion for housing, fulfilling one of the goals of redevelopment agencies. The measure was sent to the Assembly on a 34-1 vote.

Republican lawmakers initially refused to support the bill, saying it did not go far enough to ease the transition and protect projects already under way.

Democrats, who hold the majority in the 40-member chamber, rejected amendments that would have expanded Steinberg’s bill. Republicans supported the measure after Steinberg removed an urgency clause that would have let the bill take effect immediately if it is signed by Gov. Jerry Brown.

“Redevelopment as we know it is dead, and there has been significant collateral damage to local government. ... How do we unravel that?” said Senate Minority Leader Bob Huff, R-Diamond Bar. “There’s a lot of legal issues that need to be clarified.”

The League of California Cities has warned that the move would spark a default on bonds and municipal bankruptcies. The major credit rating agencies — Standard & Poor’s, Moody’s and Fitch — have downgraded or placed redevelopment bonds on negative watch, citing concerns about debt service payments now that the agencies have been eliminated.

Steinberg, D-Sacramento, said lawmakers should consider using more than $2 billion in redevelopment agency assets. He has proposed selling the assets and giving the money to cities and counties to use for economic development.


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