AB 1389 was approved in September as part of the much-delayed 2008/09 budget package. The CRA suit claims certain sections "authorize a one-time raid of $350 million in redevelopment funds."

The lawsuit seeks to "invalidate that aspect of AB 1389 and to prohibit the state from forcing county auditors to divert redevelopment funds to finance state obligations," the suit states.

A possible suit was first made public in an exclusive interview in October, when CRA executive director John Shirey told GlobeSt.com his group was "considering whether we're going to bring suit against the state."

The basis for the lawsuit is that taking redevelopment funds to balance the state's budget is unconstitutional and in violation of Article XVI, Section 16 of the California Constitution. That was section was added to the state's constitution in 1952 by a vote of the electorate to authorize the use of tax increment funding. The language states the funds must be deposited in the accounts of redevelopment agencies and must be used from the various debts and obligations of those agencies.

"We believe this money when taken form agencies and used for some other purpose is not authorized under that section of the constitution," says Shirey.

The suit names the California Department of Finance as the principal defendant. A representative for the department was not immediately available for comment.

The suit makes a second claim that the state is "impairing contracts with this take of funds," Shirey argues. "Redevelopment agencies have contractual obligations. If the state can willy-nilly take money from redevelopment agencies it means that there is no assured source of revenue from those agencies with which they can pay those debts and obligations."

Moreno Valley's Redevelopment Agency joined the lawsuit to add validity to the suit, says Shirey. The group also has a legitimate gripe, he notes. Moreno Valley, located in western Riverside County, will face a $1 million deficit if it is required to send its revenues to fund state obligations, he adds.

This loss will require Moreno Valley to defund a planned storm drain project, thereby delaying and possibly canceling the project needed to alleviate flooding in part of the blighted 430-acre Edgemont neighborhood, Shirey says.

"Moreno Valley was hit very hard hit by the downturn in the economy and the mortgage foreclosure problem," Shirey adds. "This take of money is going to cause them to have to delay, may be even not do, some projects that were important to that city."

Instant Insights /

CRA Sues State for Redevelopment Take

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