UPDATED: CA Supreme Court Allows Seizure of Redevelopment Funds

* Updated at 5:15 p.m.: Adds reaction from Cerritos Mayor Carol K. Chen

The California Supreme Court today upheld a new state law allowing the seizure of more than $1 billion in redevelopment funds, jeopardizing some 400 redevelopment agencies throughout the state. The justices also ruled that a companion law forcing the agencies to give a portion of their tax revenues to the state was unconstitutional.

The ruling is a major blow to redevelopment agencies, which sued earlier this year to block both laws. Since the court ruling aborted the plan to allow local governments to buy back into redevelopment, the agencies will be phased out when their contracted projects are completed.

In response to today's developments, the California Redevelopment Association and League of California Cities, the plaintiffs in the lawsuits, called on lawmakers "immediately'' to 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.

Redevelopment agencies are funded by the increase in tax revenues generated by projects in their areas. The agencies use the revenue to invest in additional projects mainly in blighted parts of cities.

The Impact of Today's Ruling on Cerritos and Artesia

The city of Cerritos, which stands to lose $30 million in redevelopment funds -- 25% of the city's total budget -- has used this funding in the past for building projects for the , , and the .

“The City of Cerritos is gravely disappointed by the California Supreme Court’s decision which eliminates redevelopment. This traumatic decision will have a catastrophic, long-lasting financial impact on cities throughout the State of California," Cerritos Mayor Carol K. Chen said in a statement issued late Thursday afternoon.

“The City pledges to make every possible effort to develop new legislation that will allow redevelopment to continue. The City is joining in the League of California Cities and the California Redevelopment Association’s efforts to work with state legislators to develop legislation to revive redevelopment to protect local communities, job creation and our economy. The City of Cerritos, along with nine other cities, also filed a separate legal challenge in Sacramento Superior Court. This lawsuit raises constitutional claims which were not addressed in the California State Supreme Court decision on December 29, 2011," Chen added. 

(Click here to see Chen's entire statement in response to today's CA Supreme Court ruling, as well as the lawsuite filed on Sept. 26, 2011.)

Some of the projects supported by Artesia's redevelopment funds include the city's Downtown revitalization, the redevelopment of city parks, street reconstruction, improvements in the Historical District, and the city's new Public Works yard. City officials previously stated that the dissolution of the redevelopment funding would jeopordize city positions such as Finance Aide, Redevelopment and Planning Director, and Administrative Analyst.

The city of Artesia has yet to issue a formal response to today's court decision.

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.''

However, six of the court's seven justices agreed that Proposition 22, passed by voters in March, forbids the state from forcing municipal agencies to transfer money to the state, and ruled the law invalid. 

Chief Justice Tani Cantil-Sakauye dissented on that point, saying the law does not "compel'' community redevelopment agencies to violate Proposition 22.

Supporters of the agencies argue they are the best economic development tool to catalyze redevelopment projects that private investors would otherwise not build.

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.''

- Richie Duchon of City News Service contributed to this report.