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Santa Rosa to sue state over lost redevelopment funds

Santa Rosa plans to sue the state to recover some of the millions of dollars it lost when its redevelopment agency was dissolved.

The City Council voted unanimously in closed session Tuesday to file a lawsuit against the state Department of Finance in the matter.

The city joins a growing list of local agencies suing the state over the way Gov. Jerry Brown dissolved 400 redevelopment agencies in 2011 to help solve the state budget woes.

Brown's move was meant to free up tax dollars for other public needs and end cases of redevelopment waste and abuse. Redevelopment funds were initially conceived to help cities combat urban blight, but Brown and financial watchdogs contended the funds were being used for all sorts of projects, most contentiously a $17 million upgrade of a Palm Desert golf course.

Sonoma County found some success recently in the lawsuit it filed to recover $14 million in redevelopment funds to build a residential and commercial complex at an abandoned shopping center in Roseland and sidewalks along Highway 12 in the Sonoma Valley.

A Sacramento County judge ruled that the county's contracts to complete the projects were valid and that the state had abused its authority in redistributing the funds to other taxing agencies.

Santa Rosa is now hoping to recoup $7.4 million, most of it from loans that the city made to three different redevelopment areas, said David Gouin, the city's director of economic development and housing.

The redevelopment agency was in the process of repaying the city for the loans when the agency was dissolved and the loans were deemed to be “unenforceable obligations,” Gouin explained.

But Santa Rosa, following the rules outlined in the law dissolving redevelopment, AB 26, quickly re-entered into those loan agreements in an effort to ensure their repayment to the city, explained City Attorney Caroline Fowler.

Those new agreements are at the heart of the controversy.

The state last year passed a follow-up law called AB 1484 that was meant to clarify the dissolution process. That law invalidated such newly re-entered agreements.

But some cities are having success in challenging the new law's right to nullify such agreements.

The cities of Emeryville and Riverside have both convinced judges that because AB 26 expressly allowed these agreements, AB 1484 could not retroactively invalidate them, Fowler explained.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. On Twitter @citybeater

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