Related ruling by appellate court bolsters Santa Rosa’s case on redevelopment loans

Santa Rosa is another legal step closer to recouping $7.2 million in redevelopment loans the state claimed it did not need to repay the city.

A favorable ruling by a state appellate court for the city in a separate but related case - the City of Emeryville’s lawsuit against the state Department of Finance - could bolster a lower court decision that went Santa Rosa’s way last month.

In that case, Sacramento Superior Court Judge Timothy Frawley ruled the state had “abused its discretion” when it rejected the city’s requests for repayment of three redevelopment loans plus interest.

But the judge held off finalizing his decision pending the outcome of the state’s appeal of the Emeryville case.

The Third District Court of Appeal sided with Emeryville in a ruling last week. Now Santa Rosa is preparing to ask Frawley to finalize his ruling in its case, said Iris Yang, the attorney whose Sacramento firm has represented the city in redevelopment issues for years.

“The Court of Appeal ruling is important because it affirms that the trial court decision is correct,” Yang said. “And that means the (former redevelopment) agency should be able to be allocated money so it can repay these city loans.”

If the ruling stands, it means Santa Rosa would be cleared for repayment out of future local property tax revenue for three loans and one funding agreement that it made with its redevelopment agency years ago plus interest. After redevelopment agencies statewide were dissolved in early 2012, the city re-established the loan agreements with the successor agency charged with winding down redevelopment operations.

The $7.2 million would be repaid to the city over time - how long is unclear - and would be available for general city services, Yang said.

In its ruling, the appellate court rejected arguments similar to those by the state used in the Santa Rosa case. The state claimed that the laws dissolving the approximately 400 redevelopment agencies across California were not intended to allow successor agencies to re-enter agreements with the city or county that created them.

In both cases, the state argued that a June 2012 redevelopment law, Assembly Bill 1484, was meant to retroactively undo any such revived agreements. But the appellate panel found that the law was “unambiguous” and “explicitly authorized successor agencies to enter or re-enter into agreements, subject to approval by oversight boards.”

A similar case brought by Sonoma County against the state is also going before the Third District Court of Appeal on Wednesday, Yang said.

The struggle may now shift from the courts to the Legislature. Gov. Jerry Brown’s budget staff members have suggested that they may seek explicit authority to retroactively invalidate most such agreements, Yang said.

“There certainly was a hint that they would try to undo what the trial courts and now the court of appeal have approved,” Yang said. “Having lost in court, they are trying to seek a legislative fix.”

You can reach Staff Writer ?Kevin McCallum at 521-5207 ?or kevin.mccallum?@pressdemo?crat.com.