Redevelopment agency pays state $2 million following court ruling

The South Tahoe Redevelopment Agency handed over more than $2 million to a cash-strapped California on Monday following a judge's ruling last week.

The redevelopment agency was required to relinquish $2,070,160 to the El Dorado County Auditor because of a May 4 decision by Sacramento County Superior Court Judge Lloyd Connelly denying a stay order by the California Redevelopment Association.

The stay order would have, at least temporarily, stopped the state's use of more than $2 billion from 400 redevelopment agencies statewide to fund school operations.

With California facing an almost $20 billion deficit in the fiscal year beginning in July, Aaron McLear, a spokesman for Governor Arnold Schwarzenegger, compared the Connelly's decision to "dodging a bullet."

Schwarzenegger is expected to release his May budget revision this week. The revision is likely to include deep spending cuts.

City Manager David Jinkens, who is also the executive director of the South Tahoe Redevelopment Agency, called the state's use of redevelopment money "tragic and irresponsible" in a Sunday statement.

"Instead of these locally generated tax dollars going to fund local job creation, economic growth, and community improvements, this money will now be siphoned off to help pay the bills of a state government deeply in debt with spending out of control," Jinkens said.

How the takeaway will affect a new redevelopment area centered at the "Y" isn't known. The City Council approved creation of Redevelopment Area No. 2 the same day Connelly denied the stay.

"We budgeted for (the takeaway), but it hurts the community because that is money that could have been put back into roads or other services in the city," said Eugene Palazzo, the city's redevelopment and housing director, on Tuesday.

Redevelopment areas don't raise money for redevelopment agency programs until the value of property in a redevelopment area increases, but Palazzo has previously discussed giving Redevelopment Area No. 2 a loan from Redevelopment Project Area No. 1 so people could receive immediate benefits from the new project area.

On Tuesday, Palazzo said he is working on a presentation to the City Council to discuss options for the loan given the state takeaway.

The California Redevelopment Association has also vowed to challenge the state's use of redevelopment money. In April 2009, the association succeeded in a lawsuit to prevent California from using redevelopment funding to alleviate its budget problems.

In a Friday statement, John Shirey, executive director of the association, said the association expects to be successful in challenging the state takeaway, a process Jinkens said he expected to be "long and difficult."

"Taking this funding will stall job creation efforts in California at the worst possible time," Shirey said. "The money being turned over to fund State obligations would have been used for local revitalization projects that would have improved our communities, created jobs and stimulated our local economy."

- The Associated Press contributed to this story.