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RDA Ruling Just In Time for Gov. Brown's Budget

Josh Stephens on
Jan 7, 2012

Amid all the debating and litigating around redevelopment's demise, it's sometimes easy to forget what, exactly, Californians are fighting over. But this week's premature release of Gov. Jerry Brown's 2102 budget offers a handy reminder: it's money. 

Even after the Supreme Court ruling, the Brown Administration is assuming that the state will reap $1.7 billion in 2011-12 from the end of redevelopment -- and $1.8 billion in 2012-13, said H.D. Palmer, spokesman for the Department of Finance. Had the Supreme Court decided the other way, striking down both AB 1x 26 and AB 1x 27, then the governor would have been in a roughly $11 billion pickle rather than merely a $9.2 billion one.  

The Department of Finance estimates that the total tax increment that will be liberated by the demise of redevelopment amounts to roughly $5 billion, but roughly $2 billion of that will immediately go back to successor agencies so that they can fulfill RDAs' debt obligations.  The governor's budget estimates that of the $1.7 billion that will be recovered from RDA's this year, $1.05 billion will go to K-14 schools, thus offsetting the state's Prop. 98 General Fund obligation. That leaves nearly $600 million for "pass-through" payments to counties ($340 million), cities ($220 million), and special districts ($170 million). 

What's surprising about these numbers is that they are nearly the same as those that the governor presented in his 2011-12 budget.  Many supporters of redevelopment have claimed that the actual amount of money that will become available is far lower than $1.7 billion, and in the past year agencies have been scrambling to enter into new contracts and to shield assets. The Department of Finance is, however, confident in the numbers that it is using. 

"We update our numbers based on the data we get from the Controller's office," said Finance spokesperson H.D. Palmer. "Those are our best estimates based upon the actual data we have and the modeling we have for property tax revenue." 

If those numbers turn out to be off-base, the governor will revise the budget accordingly. 

"As with anything, if there are any changes to those projections based on data we get after we've locked in the budget we use those accordingly when we get to the May revision," said Palmer.  

Palmer said, however, that the department is not worried about all those deals that took place in 2011. The Department of Finance is prepared to undo any such deals that it considers illegitimate. A provision in AB 1x 26 enables the department to review all transactions that took place after Jan. 1, 2011.  

"If there are any that don't represent a true contractual obligations, that would be unwound and the proceeds would be divided up among the jurisdictions," said Palmer. 

Now the governor just has to come up with the rest of the $9.2 billion.