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State makes grab at city cash

City: California could take money from old town Newhall redevelopment

Posted: May 6, 2010 10:36 p.m.
Updated: May 7, 2010 4:55 a.m.
 
A court ruling this week that allowed California to grab $1.3 million from Santa Clarita’s redevelopment funds to cope with the state budget crisis will delay improvements to old town Newhall, city officials said Thursday.

City Councilwoman Marsha McLean said the money won’t put much of a dent in the state’s estimated $20 billion deficit, but makes a major difference to downtown Newhall. The redevelopment agency’s operating budget is about $7.5 million.

“It’s just very frustrating for local government to try and represent our citizens when the state just takes money that’s meant to be spent in our city, for our residents,” she said. “There are a lot of things in old town Newhall that we would like to accomplish.”

Sacramento County Superior Court Judge Lloyd Connelly ruled that the state can take more than $2 billion from local redevelopment funds and transfer the money to school operations to help close California’s budget deficit.

Local governments objected to diverting the money, which generally is used to promote public works projects and rehabilitate downtown areas.

The Santa Clarita Redevelopment Agency will lose $1.1 million this year and $233,000 next year.

The coffer grabs amount to $2 billion statewide — a fraction of California’s projected revenue shortfall of roughly $20 billion in the coming fiscal year. It will likely do little to save the state from having to make deeper cuts to education, social services and health care for children, the poor and teachers.

Labor groups and social service advocates are already gearing up for battle before Gov. Arnold Schwarzenegger releases his revised budget later this month.

The decision was a relief to the governor’s office.

“We dodged a bullet,” said Schwarzenegger’s spokesman, Aaron McLear. “This would have added $2 billion to our deficit.”

Tuesday’s court decision settled just one piece of the budget puzzle. But The California Redevelopment Association, the leading plaintiff in the case, said it will appeal.

Schwarzenegger and lawmakers had agreed to use more than $2 billion from redevelopment funds for schools in those districts as a way to make up for declining general fund revenue.

The redevelopment association and local governments argued that shifting that money was unconstitutional and would halt projects that create jobs at a time when California’s unemployment rate is at 12.6 percent.

Judge Connelly sided with the state, saying California could use that money to help support schools located within redevelopment agency boundaries because it served a public purpose.

Santa Clarita Deputy City Manager Darren Hernandez said the state’s coffer raid is a clear sign of California’s fiscal irresponsibility.

“If the state were managed the way the city is managed,” he said, “it would not be necessary for them to steal funds from cities and counties.”

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