Redevelopment Agency’s Bond Issue Upheld

The Santa Ana Community Redevelopment Agency has the power to authorize a $16.5-million bond issue in spite of the 1979 Gann initiative that limits government spending and tax-raising ability, a state Court of Appeal has ruled.

A unanimous three-judge panel in Santa Ana decided that the initiative, embodied in the state Constitution as Article XIII B, “is vague and uncertain as applied to the funding methods of redevelopment agencies.” The court ruled that the state Legislature acted appropriately in passing legislation allowing redevelopment agencies to use the bonds despite the Gann initiative restrictions.

“This is very disappointing,” said Santa Ana lawyer David L. Llewellyn, who brought the taxpayer suit challenging the agency’s 1983 bond issue. “The justices have basically undermined Article XIII B.”

Lawyers for the city could not be reached for comment. The bond issue is designed to repay $13.5 million in previously issued bonds and generate additional funds for new projects in a redevelopment area.

Llewellyn said the court decision was the first appellate opinion on the initiative to deal with the funding of community redevelopment agencies. The only other appellate case, he said, involved sales and use taxes.

The 1979 initiative, pushed by anti-tax activist Paul Gann, was aimed at closing what he saw as loopholes in the property-tax-cutting Proposition 13, passed a year earlier. The Gann Initiative’s purpose was to hold government expenditures at their 1978-79 level with adjustments only for cost-of-living changes, population increases and transfers of responsibilities from one governmental entity to another.

Redevelopment agencies were operating under laws governing their ability to use bonds, and the Legislature was not sure the initiative banned such bonds.

The Legislature concluded in a 1980 law that the wide reach of the Gann initiative fell short of covering the financing laws used by redevelopment agencies.

The appellate court said the Legislature was justified in its uncertainty over the initiative and acted appropriately.