UPDATE: State Supreme Court Upholds Law Eliminating Redevelopment Agencies

In a decision that will reverberate throughout the state, the California Supreme Court upheld a law Thursday that eliminates redevelopment agencies and struck down a law that allowed the agencies to pay to stay in operation.

The ruling in California Redevelopment Association v. Matosantos clears the way for the state to dismantle redevelopment agencies and use their assets to fund education programs. The CRA contended that the state did not have the authority to eliminate redevelopment agencies, but the court disagreed.

"[The state's] power includes the authority to create entities, such as redevelopment agencies, to carry out the state's ends and the corollary power to dissolve those same entities when the legislature deems it necessary and proper," the court's ruling reads.

Arcadia passed a earlier this year that allowed it to make a $1.7 million payment, or, "ransom" to the state to stay in operation, but the law allowing such ordinances was invalidated by the court Thursday.

City Manager Don Penman said Thursday that the city is scrambling to figure out what the decision will mean for Arcadia.

"We're impacted, but not as much as some cities who really depend on redevelopment (funds)," Penman said.

The city has four employees whose salaries are funded at least in part by redevelopment money, including Economic Development Manager Jerry Schwartz (redevelopment funds cover 70 percent of his salary), Penman and Assistant City Manager Jason Kruckeberg. 

Arcadia uses redevelopment money each year to fund current and future low-income housing projects for seniors. Also, the city has earmarked redevelopment funds for upgrades to the planned on the northwest corner of North First Avenue and East Santa Clara Street, as well as improvements to the surrounding downtown area.

Other redevelopment projects in Arcadia include the expansion of the dealership with a showroom extending onto Santa Anita Avenue.

Thursday's decision came as a huge hit to neighboring Monrovia and the entire Metro Gold Line Foothill Extension Project.

"On the face of it, it looks like we're out of business," Monrovia Mayor Mary Ann Lutz said. "At this point it just looks like bad news all the way around."

Interim City Manager Mark Alvarado had a lot to digest in his first day on the job Thursday. Alvarado called the decision "a blow to all redevelopment agencies."

Under the law upheld by the court, the agencies must turn over their assets to an oversight committee made up of city and county officials that will decide on how that money is doled out. The city already moved to shield $40 million in assets earlier this year by transferring them from the Monrovia Redevelopment Agency (MRA) to the city.

The court's decision has major implications for the for use in a critical maintenance yard project. The MRA entered into that deal, but since it is now dissolved, Alvarado said the city will pursue special legislation in Sacramento that would allow the transaction to be executed.

"[Special legislation] would still allow the agency to basically consummate the deal. We would just show the state, this is what we have lined up...all we're looking for is just a finalized transaction," Alvarado said.

Since the deal would allow a regional project like the Foothill Extension to progress, the state may be more agreeable to allowing it, Alvarado said.

"Because this is a deal that is not just for Monrovia...it's something that we feel is very important to all the transportation needs in the area," he said.

Penman expressed hope cities would be able to strike a deal with legislators.

"There's just a lot of things that have to be sorted out," he said. "I ultimately believe that some solution will come up that will not necessarily be favorable to cities, but will allow to them to continue their redevelopment operations."

In a written statement, the CRA and League of California Cities vowed to fight on and called for their own special legislation that would re-establish redevelopment in California.

"Without immediate legislative action to fix this adverse decision, this ruling is a tremendous blow to local job creation and economic advancement," wrote CRA Board President Julio Fuentes in the statement. "The legislative record is abundantly clear that legislators did not intend to abolish redevelopment. We hope to work with state lawmakers to come up with a way to restore redevelopment.