PD Editorial: Redevelopment agencies bet it all — and lose

California's redevelopment agencies bet their lives on one roll of the dice - and they came up snake eyes.

Gov. Jerry Brown and state legislators opted to abolish redevelopment agencies to help close a $25 billion budget deficit this fiscal year. The state expects to save $1.7 billion by halting the flow of local property tax revenue to redevelopment agencies.

Facing extinction, the agencies argued in court that the state Legislature lacks the legal authority to eliminate public agencies created by, well, the state Legislature.

The state Supreme Court wisely and appropriately rejected that argument in a 6-1 ruling handed down last week.

But that was only half of a stinging defeat for the state's 400 redevelopment agencies. The same decision overturned a companion law sparing redevelopment agencies that agreed to give up some of their revenue. As a result, the agencies will be limited to completing projects that already are under way.

For cash-strapped counties and public schools, the Supreme Court ruling will pay off in some badly needed budget relief because redevelopment agencies now vacuum up 12 percent of property tax dollars statewide.

Beyond that, an opportunity remains for state and local officials to restore the best parts of redevelopment, a system that has too frequently strayed from its purpose: promoting economic development and affordable housing projects.

Redevelopment, a fixture in California for 66 years, is a powerful tool. It allows communities to sequester property taxes to pay for infrastructure improvements and even finance business loans to revitalize aging neighborhoods and combat blight. As redevelopment zones flower, property values increase, and rising tax receipts cover the costs.

Sonoma County's successes include Windsor's Town Green, Petaluma's Theatre District and Boyes Hot Springs, where a county redevelopment project lends money to refurbish storefronts along Highway 12.

But the success stories here and around the state are accompanied by abuses of the process. The best known examples include Palm Desert, which spent almost $17 million on a luxury golf course, and Montebello, with a $31 million tab that included meals in Las Vegas, golf and embroidered polo shirts. Too many agencies have focused on big retail projects that generate sales tax dollars for local budgets but do little to address blight.

And anyone who witnessed the battle over Santa Rosa's Gateway Redevelopment Area knows how flexible the definition of blight has become. About 10 percent of the city ended up in the disputed zone, which stretches from Coddingtown to South Santa Rosa Avenue.

Redevelopment agencies fought fiercely to protect their turf. They lobbied in Sacramento, sponsored a ballot measure and raced to commit surplus dollars. Finally, they turned to the courts in a last-ditch attempt to avoid elimination - or a compromise that would have allowed them to stay in business for a price.

Playing hardball failed, but some legislators in both parties are ready to revisit the issue. The redevelopment agencies are left with a simple choice: Compromise or close their doors.