For all the talk of the “Fiscal Cliff” in Washington, D.C. Orange County, and 19 O.C. cities and the are facing their own version of a fiscal cliff that could cripple their general funds. The state Department of Finance has demanded payment of $268 million in unspent redevelopment agency funds targeted for low- and moderate-income housing.
The agencies had claimed that these funds were obligated for expenditure before the dissolution of redevelopment agencies across the state last year. While some cities, like Anaheim and Brea have already payed up, others are fighting the state’s demand. They claim the states calculations are incorrect.
The City of Santa Ana, which faces a demand of more than $56 million, has called a special meeting for today to discuss what they can do. Santa Ana, like many others, do not have that kind of money sitting around that can be sent to the state. This leaves the general fund as the only place for the money. Earlier this year, the Santa Ana City Council implemented budget reductions, funded in-part by the outsourcing of the City’s fire department, addressed a $30 million hole in the city budget. With those cutbacks, there is little left to cut, while maintaining city service levels.
One of the options that Santa Ana and others have is to file suit against the state and get a court injunction to stave off the bill. Such a maneuver is risky, since previous lawsuits regarding the dissolution of redevelopment agencies failed, resulting in the state Supreme Court ruling that not only could the agencies be dissolved, but that the legislation allowing cities to continue redevelopment agencies in any form was not valid.