Following an unanticipated $5.5 million payment to the state of California, the city of Chula Vista is pursuing litigation.
The state’s Department of Finance sent the city a demand letter July 3 requesting it pay that amount by July 12 for property taxes not spent on redevelopment last year.
If the payment had not been made by the due date the penalty for late payments was the city losing its sales tax revenue.
For Chula Vista, that would be approximately 23 percent of the city’s budget.
Chula Vista paid the money in protest and filed a complaint for declaratory relief and injunction last week along with the city of National City and three North County cities, calling the payment “illegal and unconstitutional.”
It was an attempt to temporarily restrain the state from redistributing the money. However, the judge rejected the request last Friday.
Chula Vista Mayor Cheryl Cox called the state’s demand devastating and wrong.
“What the state Department of Finance apparently failed to recognize is that bills had to be paid, revenues collected from redevelopment,” she said. “The state failed to take into account that we had $6.3 million in expenditures.”
In essence, Cox said, the state counted the revenue the city took in and did not deduct monies it had previously paid out in legitimate expenses.
The county, which acts as the fiscal agent to collect the monies, will distribute it to school districts and water agencies.
State Gov. Jerry Brown eliminated some 400 redevelopment agencies last year and signed two related redevelopment bills, ABX126 which dissolved redevelopment agencies, and ABX127 which used an alternative redevelopment program to keep it going.
In August last year, the City Council voted to participate in the voluntary program, paying the state approximately $4.3 million to continue its redevelopment programs and projects, but that was struck down.
Chula Vista took the $5.5 million from its low- to moderate-income housing fund, of which there is less than $2 million left.
The amounts owed were calculated based on Assembly Bill 1484, a trailer bill passed by state lawmakers June 27, which modified the rules that applied to the state’s dissolved redevelopment agencies.
City Attorney Glen Googins said the bill compromises the ability of the successor agency to do what it was supposed to during a six-month period.
“They are asking us to in effect pay monies that we don’t have … monies that, under AB126, we’re obligated to pay anyway in November,” Googins said. “If we now set aside the money that we’d have to pay the state in November, we’d have no money to implement the successor agency.”
Googins said the city is ultimately seeking reimbursement of the demand amount in excess of what it should owe.
“This is the latest insult on how this process is being handled — the amount, timing and penalties that they were proposing to impose are outrageous,” Googins said.
The city passed its budget for the 2012-13 fiscal year last month, which could be affected if the state asks for more money later.
“If we don’t prevail in the lawsuit it could have ripple effects throughout the city…” Googins said. “That’s a big number on a budget that was barely balanced. It could turn into a very ugly policy decision that the city council would have to make.”
