Glendale appeals redevelopment payout amid legal challenge

Glendale officials say the state is overcharging the city by $1 million to keep its redevelopment agency, prompting them to file an appeal with the Department of Finance.

State lawmakers earlier this year essentially forced local redevelopment agencies to funnel more of their tax revenues to Sacramento in exchange for a second lease on life.

Each of the nearly 400 redevelopment agencies learned this month how much they would have to pay. For Glendale, the tab was $11.9 million. Burbank was put on the hook for $18.5 million.

Redevelopment agencies are supposed to fight blight by using incrementally higher property tax revenue, which normally goes to the state, on affordable housing and development projects in designated areas.

By eliminating the agencies, or having them “pay to play,” the state plans to collect an additional $1.7 billion. About half of the nearly 400 agencies challenged their cut by the Monday deadline. Unlike Glendale, Burbank wasn’t one of them.

When calculating each city’s tab, state officials took debt service into account and used figures from fiscal year 2008-09. If an agency increased debt service by at least 10% in the interim, that could reduce its “ransom,” said Philip Lanzafame, chief assistant director of Glendale’s Community Development Department.

In March, Glendale agreed to issue $50 million in redevelopment bonds. That was on top of the $26 million in bonds issued to pay for renovations to the Central Library and the Adult Recreation Center in March 2010.

“We did that as a means to tie up tax increment and protect community assets,” Lanzafame said.

At the time of the $26-million bond issuance, the city didn’t know redevelopment would come under fire, Lanzafame said. By adding in its extra debt service, Glendale officials calculated a $1-million discount.

“Everything we do is for the benefit of the community,” Lanzafame said. “You want the community to get as much money as it’s entitled to.”

But the state Supreme Court last week put a hold on the state’s plan to dismantle the agencies that refuse to pay up in response to a lawsuit challenging the so-called “pay-to-play” plan. While the move halts the state’s ability to collect, it also blocks local redevelopment agencies from incurring more debt.

The legal drama has local officials scratching their heads.

“Things are a little uncertain,” said Ruth Davidson-Guerra, Burbank’s assistant community development director for housing and redevelopment.

In response to the court stay, Glendale may have to freeze some projects, but more research needs to be done before the city commits to its next move, Lanzafame said. Burbank’s City Council plans to discuss the matter on Aug. 23.

H.D. Palmer, a spokesman for the state Department of Finance, said the state’s budget won’t be affected by the court-ordered stay, as a final decision should be made before the agencies are required to start paying up on Jan. 15.

“As we have said from the beginning, we are confident that the state is on solid legal footing in this case,” he said.

Advocacy groups, such as the California Redevelopment Assn. and League of California Cities, that filed the lawsuit disagree, claiming the new rule violates Proposition 22, a constitutional amendment that limits state raids on local funds.