Cities must hand over the money

Friday was deadline for cities and counties to hand over funds. Some, however, are refusing to do so.

Deadline passes for redevelopment-fund transfers to state.

Cities and counties across California faced a Friday deadline for handing over millions of dollars — tens of millions in some cases — as the state winds down more than 400 redevelopment agencies.

Some cities, such as Santa Ana, are refusing to hand over the money, heralding another potentially contentious battle over the funds.

Friday was the deadline for many of the former redevelopment agencies to transmit funds that had been set aside to build affordable housing. The funds will be redistributed by the counties to cities, schools and other local government entities.

The state did not have a tally of the total amount to be collected. Locally, agencies in Los Angeles County have been ordered to pay $364.2 million in former housing funds, according to the county auditor-controller’s office. Orange County and about 17 of its 34 cities owed a combined $257 million.

The city of Los Angeles’ former redevelopment agency cut a check for more than $35 million, after negotiating the state down from its initial call for $44 million.

“We ended up not in conflict on this particular chapter of our dissolution,” said Christine Essel, outgoing chief executive director of CRA/LA, the body designated to shut down the city’s redevelopment agency.

Others took a more defiant posture.

Orange County owes $50 million, but county officials are contesting about $30 million of that. Julia Bidwell, the deputy director of OC Community Services, said the state Finance Department double-tallied the county’s funds.

And on Friday, Santa Ana held a special City Council meeting at which members unanimously voted to withhold the $56 million in low-income housing funds the state says it owes.

City Manager Paul Walters said that $26 million of the money is committed to contracts with housing developers and the other $30 million has been set aside to comply with low- and moderate-income housing lawsuits dating back to the 1980s. “The decisions that are being made at the state level are legally flawed,” Walters said.

H.D. Palmer, a spokesman for the state Department of Finance, said in a statement: “It’s unfortunate that the city doesn’t want to make a good-faith effort to comply with what is clearly a lawful order. The return of these monies is critical to schools and local governments’ ability to maintain essential public services.”

Palmer said the state would be evaluating its options. Those could include withholding tax proceeds from the city or even criminal penalties against local officials, although Palmer said the measures would be used only as a last resort.

The successor agencies had a chance to dispute the amounts owed, and 160 of them did. The state handed down its final decisions on Dec. 15.

Before their dissolution, redevelopment agencies were required to set aside 20% of their revenue for affordable housing projects, but in many cases the funds went unspent, as cities found it politically unpopular to build low-income housing.

People working in the affordable housing industry said, however, that the loss of those funds has been a major hit to their ability to build projects to help needy families.

“There’s a lot of uncertainty, and in the real estate development business, uncertainty is absolutely the worst thing you can have,” said Tim O’Connell, senior director of policy and advocacy at Century Housing, a Culver City-based nonprofit that finances affordable housing developments.