Union City and San Leandro have become the latest East Bay cities to file lawsuits to prevent the state from confiscating millions of dollars still in dispute following the dissolution of redevelopment agencies.
Last February, Gov. Jerry Brown dissolved about 400 redevelopment agencies to narrow the state's budget deficit. Most cities created successor agencies to wind down the agencies' former functions, settle debts and close the books.
In separate lawsuits, San Leandro has taken issue with the money the state says is still owed by the city's successor agency, while Union City is saying that its successor agency should be allowed to use $54 million in disputed development funds.
Union City officials twice met late last year with the state Department of Finance and argued that they need the money -- comprised of bond money and federal and state grants -- to complete several crucial transit-oriented projects and to continue social programs that help the city's seniors, ï»¿people with disabilities and low-income residents.
But the Department of Finance rejected the arguments and blocked the city from using any of the disputed money. That prompted Union City's lawsuit, which was filed Tuesday against the California Department of Finance, the State Controller and the Alameda County Auditor-Controller.
"In past years, we've funded (those programs) with redevelopment money," said Larry Cheeves, Union City's city manager. "But there's no funding source now, so the City Council will have to decide whether they want to fund them."
Cheeves said the state's redevelopment take-away threatens the construction of several projects, including BART Phase II, a part of Union City's BART Intermodal Station, a huge development combining housing, office space and retail. Benjamin Reyes II, a partner at Meyers Nave and attorney for Union City, will be in court Friday seeking a temporary restraining order to block the Department of Finance's ruling on the disputed $54 million.
The clock is ticking on BART Phase II, said Mark Evanoff, Union City's redevelopment manager. The BART board is scheduled Feb. 14 to vote on the project's $25 million construction contract and, if the restraining order is not granted, the board might reject the project, Evanoff said. That would cause a ripple effect in Union City, preventing it from completing projects necessary to meet state housing requirements from the Department of Housing and Community Development.
"Essentially, one state agency is telling us we can't meet our contractual obligation to another state agency," Evanoff said.
Earlier this month, the city of San Leandro also filed suit against the state Department of Finance, Alameda County Auditor-Controller, the county successor agency and others to fight confiscation of redevelopment funds.
Jayne Williams, partner at Meyers Nave and attorney for San Leandro, said the city's successor agency was told in July it owed the state $6.59 million in leftover redevelopment funds, but the city calculates it owes $521,000. The city contends in the lawsuit filed Jan. 17 that funds were wrongly charged to the city instead of the county's redevelopment agency for an area jointly covered by both agencies. The suit also says the state has not recognized that the city needs the money to pay redevelopment agency debts, Williams said.
Williams, who expects the lawsuit to be resolved next month, said if the ruling is in San Leandro's favor, the city will receive several millions of dollars in tax revenue that the county has been withholding until the dispute over liability is settled.
"The whole post-redevelopment process has been much more complex and convoluted than anyone ever imagined," Williams said. "We are now in a situation where we need to operate under a legislative framework that doesn't always fit the circumstance, so when that happens, you get the courts to make the determination."
In another redevelopment-related lawsuit, the city of El Cerrito in December reached a settlement with the state that allowed the city to keep $1.76 million. The Union City, San Leandro and El Cerrito cases were all filed in Sacramento.
Contact Chris De Benedetti at 510-353-7011 or Ashly McGlone at 510-293-2463.