Capitol Alert: Redevelopment's demise leaves CA housing money in limbo

When more than 400 local redevelopment agencies in California went out of business this year, thanks to state legislation and a Supreme Court decision, it stranded as much as $2 billion in funds that had been set aside for low- and moderate-income housing.

The funds had been accumulated from a 20 percent set aside of property taxes that redevelopment agencies had collected in their project areas -- money that housing advocates often complained was being stockpiled rather than spent on housing projects.

What happens to that money -- whether it will spent on housing or join other redevelopment agency funds to be redistributed to schools and local governments -- is one of the issues left over from redevelopment's demise.

Housing advocates want the money retained for their projects, but it's uncertain whether they will prevail.

As Gov. Jerry Brown sought to phase out redevelopment, he originally proposed that the housing money should be kept intact for that purpose. But when the Legislature passed a bill to that effect, Brown vetoed it, saying it was premature because the entire issue was then before the state Supreme Court.

This year, after the Supreme Court ruled that redevelopment agencies could be abolished, the state Senate passed Senate Bill 654, which would keep the housing money intact. The bill, carried by Senate President Pro Tem Darrell Steinberg, is now pending in the Assembly.

The question arose again Wednesday when two Assembly committees staged a lengthy hearing on what, if anything, will be done to replace redevelopment as a local government tool.

Pedro Reyes, the chief deputy director of Brown's Department of Finance, was asked pointedly about the fate of the housing money and he replied, cryptically, "Unencumbered money is supposed to be swept (distributed to other governments)."

That left legislators and housing advocates wondering whether Brown would sign or veto SB 654 if and when it reaches his desk.