California cities lose battle with state for property tax funds

A Sacramento County Superior Court judge Wednesday ruled against a group of California cities in their battle with the state over hundreds of millions of property tax dollars that used to flow to local redevelopment agencies.

Judge Timothy M. Frawley said he would not grant the request from Glendale, Pasadena, Huntington Beach and other cities for an injunction that would have prevented the payout of property taxes on Friday to schools and counties.

Cities believe some of the money belongs to them and should be used to pay for such projects as parks, affordable housing and freeway intersections that had been agreed upon before Gov. Jerry Brown won his battle to eliminate California’s 400 municipal redevelopment agencies late last year. Brown argued that the state can no longer afford redevelopment; the $5 billion in property taxes that cities took in each year will now flow back to school districts and counties.

But cities and the state have been fighting for months about the way the agencies are being dismantled.

The law allows cities to hold on to some of the money so they can pay existing debts. The problem is that the two sides have drastically different views of which contracts must be honored as “enforceable obligations.”

As of last week, state officials had questioned more than $350 million for this year alone that cities said they are entitled to in order to fund projects already decided upon.

Glendale City Manager Scott Ochoa said he was disappointed with the decision. “The residents of Glendale and other cities are being made to pay for the state of California’s dysfunction,” he said.

But H.D. Palmer, spokesman for the state Department of Finance, said officials were pleased by the ruling. He said the real harm would have been to school districts and counties if the judge had not denied the cities’ request.

Neither side expects the hearing to be the last time it sees the other in court. A spate of additional lawsuits is expected over specific projects.

jessica.garrison@latimes.com

Times staff writer Brittany Levine contributed to this report.