It is revealing that Carol Giovanatto, Sonoma’s supremely competent and extremely bright city manager, required some 600 words to announce last week that the city was filing a lawsuit against the California Department of Finance (DOF) over the disposition of redevelopment bond money already contractually committed before the state shut down redevelopment agencies statewide.
Giovanatto’s efforts to articulate the bureaucratic and legalistic quagmire the state parked itself in as a result of frenzied efforts to balance the 2011 California budget, illustrate the absurdity of an attempt to wipe the books clean of billions of dollars of “enforceable obligations” for projects redevelopment agencies were contractually committed to completing.
Sonoma’s lawsuit joins 130 others with similar complaints against the state DOF, namely that, following the letter of the dissolution law passed by the state legislature on February 1, 2012, redevelopment agencies with legitimate, contractual commitments for such things as the Springs sidewalk and streetlight project and millions of dollars of street maintenance and repair projects inside Sonoma city limits, were nonetheless told they had no legal or legitimate right to spend bond money on the purposes for which the bonds were sold.
City authorities rightly believed that terms of the nearly $16 million worth of revenue bonds sold to finance their redevelopment projects required the money be used for the purposes stated in the bonds, and that bondholders had a legal right to the bond guarantee promise the bonds wouldn’t be called for 10 years, thereby providing investors the interest profit they expected.
The state’s tenacity in refusing the legitimate demands of local governments reflects the desperation with which the legislature and Governor Brown viewed the nearly $2 billion in local property tax revenue sequestered in redevelopment agencies when they were trying to balance the budget.
There were legitimate complaints lodged against some redevelopment districts, to be sure. As USC law professor George Lefcoe has noted in an exhaustive paper on California’s redevelopment history, there have been notable abuses. Lefcoe points to a Palm Desert project that allocated $16.7 million in redevelopment bonds to renovate a golf course and build a luxury hotel at the Desert Willow Golf Resort, and to a huge, human-scale fish tank, installed in part with $5.4 million in redevelopment funds, in Sacramento’s “Dive Bar” at a time schools were sending layoff notices to school teachers.
Those understandably egregious examples notwithstanding, countless constructive projects in depressed neighborhoods all over California benefited from redevelopment revenue, and many were legitimately funded and “shovel ready” when the RDA plug was pulled. Granted, the state’s property tax options have been hopelessly constrained by a series of initiatives and court decisions, including Propositions 13 and 22. And, clearly, reconstructing taxing mechanisms to serve the same purposes as redevelopment districts should be a top state priority.
But changing the rules of the game after the cards were dealt, as the state did, was both foolhardy and unfair. We are hopeful Sonoma’s suit will be successful.