Nine cities, including Glendale and Pasadena, filed a lawsuit this week in an effort to force the state to make good on millions of dollars for local officials to pay down debt and other obligations left over by the dissolution of local redevelopment agencies.
The lawsuit, filed Tuesday in Sacramento County Superior Court, comes as so-called successor agencies — made up of various stakeholders in the wind-down of redevelopment operations — wade through the arduous process of untangling assets and paying down existing debts.
The state is scheduled to issue millions to successor agencies on June 1 to pay down those remaining debts, but city officials claim they've received mixed messages on whether the money will come.
For many cities, the stakes are high. Without the money, some cities would be forced to institute widespread layoffs and scramble to avoid default.
“We need to resolve this issue immediately, and we felt the only way to ensure the state followed through with their required payment was to join with our fellow cities,” Glendale City Manager Scott Ochoa said in a statement issued Wednesday.
The California Department of Finance is reviewing the lawsuit and plans to defend its control over redevelopment payments, said H.D. Palmer, a spokesman for the agency, which has final review over payment requests.
So far, Glendale and Pasadena have asked twice for six-month installments of money to pay for existing bonds, contracts, salaries and benefit costs, and other obligations. The first request, covering July through December, was never paid, according to the lawsuit.
Palmer said that payment was tied up as the state Supreme Court reviewed the mandate axing redevelopment, but it may come by June 1, with the second installment covering January through June.
Glendale is expecting to get less than it asked for the second round after the Department of Finance informed the city it was denying $12 million of its $34-million request, according to the lawsuit.
Pasadena's first request for $24 million was reduced to $9.6 million by the state, said Pasadena spokesman William Boyer. The state also said Pasadena is eligible for $14.5 million for its second installment, although the city asked for $26 million.
The state also informed Pasadena officials that their request for $1.1 million for paying off administrative requests, such as consultant services and personnel costs, was more than twice what it should have been.
Pasadena also asked for $132.9 million to pay off redevelopment-related debts, but was denied. Loans between cities and their redevelopment agencies will only hold if the contracts were created within the first two years of the Redevelopment Agency being formed.
The potential loss of money to repay the loans is one of the biggest issued for Pasadena “and all the other cities, specifically the cities that have joined us in the lawsuit,” Boyer said.
Suing the state “is the right thing for us to do to protect our taxpayers,” he added.
Existing bonds are also at stake, according to the lawsuit. While cities believed they'd be able to pay off bonds entered into before redevelopment's dissolution, the state has been rejecting some bonds it deems inappropriate. The cities claim that's illegal.
In cities like Glendale, local redevelopment revenues paid for the salaries of dozens of employees. Many of those jobs are now on the line as cities struggle to close yawning budget gaps without the aid of redevelopment revenues.
In Glendale, six employees received layoff notices earlier this month, the first of more than two dozen who are expected to be cut from the city's payroll due to the loss of local redevelopment revenues. Pasadena has already laid off 14 employees, some of whose salaries were tied to redevelopment revenues.
The other cities listed as plaintiffs in the lawsuit include Palmdale, Huntington Beach, Imperial Beach, Inglewood, National City, Hayward and Culver City.