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League of California Cities Challenges Constitutionality of Portions of AB 1484, the Redevelopment Budget Trailer Law

September 24, 2012

Today the League of California Cities submitted a lawsuit for filing in the Sacramento County Superior Court challenging AB 1484, the 2012 redevelopment budget trailer bill.

 

The lawsuit contends that AB 1484 contains unconstitutional property and sales tax claw-back and other provisions that violate the California State Constitution, including both Proposition 1 A (2004) and Prop. 22 (2010). The petition does not seek to invalidate AB 1484 in its entirety, but it is being filed to ensure that the wind-down of redevelopment agencies is executed in an orderly and constitutional fashion without jeopardizing the fiscal stability of cities as they work to faithfully implement the redevelopment dissolution legislation.

The plaintiffs are: the League of California Cities, the city of Vallejo, the Vallejo Successor Agency, and League Executive Director Chris McKenzie as the taxpayer plaintiff. The defendants are: the Department of Finance, the Board of Equalization, the State Controller and the Solano County Auditor Controller.

In the lawsuit the petitioners contend that AB 1484 lacks sufficient standards to guide and constrain the Department of Finance’s decision making authority in a number of significant areas. The following provisions are being challenged as unconstitutional:

  • The “true-up” payment requirement;
  • The Department of Finance’s authority to order the Board of Equalization to withhold sales tax from those cities whose successor agencies failed to make the July “true-up” payment and in other circumstances;
  • County auditor-controllers’ authority to withhold property taxes in certain circumstances; and
  • Those provisions of AB 1484 that establish an unconstitutional delegation of legislative authority to the Department of Finance.

The League also asserts in the lawsuit that the Department of Finance has not complied with the Administrative Procedure Act (Act), which provides the procedures by which state agencies must adopt regulations. The Department of Finance has adopted no regulations under the Act to implement AB 1484.

League President and Pasadena Mayor Bill Bogaard: “By dissolving redevelopment agencies, the Legislature and Governor eliminated California’s most effective tool to build infill infrastructure, cleanup brownfields and build affordable housing. While disagreeing with that decision, city officials have accepted it and are working to implement the law in a conscientious and lawful manner. This lawsuit asks the court to require that the Legislature and the Administration follow our state constitution in carrying out the state’s responsibilities in this process, including establishment of an administrative process that guarantees certainty and transparency.”

League Executive Director Chris McKenzie: “AB 1484 was enacted to secure revenues for the state budget, but it also puts the property and sales tax revenues of cities at risk at a time of great fiscal uncertainty. These are the same funds cities use to provide vital public safety and other city services. We are filing this lawsuit to protect the ability of California cities to effectively deliver services to their residents and to insist that the voter-approved constitutional protections of these revenues be respected by our state government.”

McKenzie noted that the Department of Finance has recently taken some common sense steps to improve its administration of the redevelopment dissolution law. However, serious constitutional problems remain with the current administrative process and AB 1484 itself that put the sales and property tax revenues of cities at serious risk.



 
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