Days after the California Supreme Court moved to shut down about 400 municipal redevelopment agencies, local officials are scrambling to convince the same Legislature that abolished the agencies to resurrect some of their spending powers.
Some local officials predict that if the Legislature doesn't act within the next month, there will be a flurry of lawsuits, as well as layoffs and further economic stagnation. The court's decision could affect everything from police services in Oakland to a planned walkway to the ocean in Santa Monica.
But there is no simple political path to saving redevelopment and the $5 billion in property tax revenues it generates each year for local coffers, much of which is used to stimulate private development.
A spokesman for Gov. Jerry Brown, who sought the money to plug a gaping hole in the state budget, described redevelopment as something the state can no longer afford and dismissed local officials' gloomy rhetoric as "exaggerated and often untrue."
Spokesman Gil Duran also said cities brought doom upon themselves by suing the state, challenging the compromise agreement the Legislature struck during last spring's budget negotiations. That deal, which would have allowed agencies to survive under a revenue-sharing agreement with the state, was struck down in Thursday's ruling.
"The redevelopment people are screaming from the mountaintops and calling for a compromise," Duran said. "They had a compromise, but they rushed to court and they blew themselves up."
Democratic legislative leaders said Friday that they want to continue some of the programs funded by redevelopment, such as construction of low-income housing and "smart economic development," in the words of Assembly Speaker John A. Pérez (D-Los Angeles). Redevelopment agencies generate about $1 billion a year for affordable housing, the largest local source of such funds.
But proponents say that even if a compromise is reached, the result will probably be a vastly pared-down version of redevelopment. Sources in the Legislature said they would also no longer allow the agencies to keep about $1 billion in property taxes each year that would otherwise have gone to schools.
In a sharp reversal from their angry rhetoric of last spring when Brown first proposed killing redevelopment, some local officials said they are now prepared to take what they can get from the Legislature, even if it means settling for much less than they had before.
"What we know going in is redevelopment ... probably needs to change," said Jim Kennedy, the interim executive director of the California Redevelopment Assn., which filed the lawsuit that led to the program's demise.
Oakland Mayor Jean Quan, whose city has used redevelopment money not just for building projects but also for part of her salary and those of 17 police officers, said she believes that lawmakers could get behind proposals that focus on affordable housing and "smart growth" that concentrates on homes, stores and offices around transit stops.
Another possibility, she said, is that lawmakers will narrow redevelopment's focus to communities with significant pockets of poverty, which would include Oakland and Los Angeles.
Redevelopment agencies were authorized by the state Legislature in 1945 and allowed to use a portion of property taxes to partner with private developers to eradicate blight. Redevelopment has been credited with some of the state's most shining success stories of urban revitalization, including Old Pasadena and San Diego's Gaslamp Quarter.
But there have also been abuses.
What began as a program to eliminate slum conditions in urban cores exploded after Proposition 13, the 1978 initiative that slashed property taxes and limited government's ability to raise new revenues.
These days, most California cities have a redevelopment agency. Critics charge that some have pushed the definition of "blight" to ludicrous extremes.
State Controller John Chiang last spring found that Coronado in San Diego County had multimillion-dollar oceanfront homes in its "blighted" redevelopment area. In Palm Desert, officials allocated $16.7 million to clean up blight at a luxury public golf course listed as a "best place to play" by Golf Digest magazine.
A Times investigation in 2010 found that dozens of cities spent hundreds of millions of dollars earmarked for affordable housing without building a single unit. The paper also found widespread instances of corruption, questionable spending and poor accountability.
Brown's spokesman alluded to that history Friday.
"We can no longer afford to have redevelopment agencies siphoning off this money for unnecessary projects," Duran said.
Local officials insist that, despite its flaws, redevelopment provides the only significant tool to create jobs, improve run-down neighborhoods and create homes for the poor.
"You can't have a state with no mechanism for building affordable housing," said Quan, the Oakland mayor. "Redevelopment is the main way we fund affordable housing in this state."
What's more, many local officials said, if the agencies are forced to shut down by Feb. 1 as current law calls for, chaos will reign.
"The law is a mess; that's the only way to characterize it," said Brent Hawkins, a lawyer who represents several cities and the redevelopment association. "It absolutely will breed more litigation."
Long Beach Mayor Bob Foster warned that unless changes are made, the agencies will be forced to sell prime land at the worst possible moment in the real estate market.
"It would be a fire sale," he said. "And everyone would know you have to sell."
Then there is the question of what will happen to all the projects that agencies have planned on for years.
In Santa Clara, officials said they fear they will have to scrap plans for a new library. In San Diego, the court decision ends any thought of using redevelopment funds to build a downtown football stadium for the San Diego Chargers to replace aging Qualcomm Stadium.
In Los Angeles, the promised projects that now may be dead include new lofts in Reseda, senior housing in Sylmar and a $1-million upgrade to the Warner Grand Theatre in San Pedro.
Santa Monica's redevelopment agency had $283 million in projects in the pipeline — some under construction, others just on the drawing boards — and does not yet know how many might have to be canceled, said Mayor Richard Bloom. In jeopardy, he said, are a seismic upgrade to the city's Civic Auditorium and new streets, walkways, bike lanes and benches stretching from a future Expo light rail station to the Santa Monica Pier.
Bloom said he did not have high hopes for a deal in Sacramento that would keep redevelopment money in local hands. "Now that they've got it, I don't see any of them giving it up," he said.
Assemblyman Felipe Fuentes (D-Sylmar), who is running for a seat on the Los Angeles City Council, confirmed those fears. He said he is open to any plan that reinvents redevelopment statewide. But for now, he added, the state desperately needs redevelopment money to balance its budget.
"Given the cuts we've had to make and will continue to make, I equate this situation to any other business that has assets or tools," he said. "When times are tough, you sell some of your tools. And as much as I value this tool, we need the cash."
Times staff writer Tony Perry contributed to this report.