City Prepares for Legal Battle Over Redevelopment Funds

Story updated 10:30pm Monday

The city will file a lawsuit against the state for withholding more than $34 million in redevelopment funds, money that has been earmarked for infrastructure projects including the East Washington Street intercharge, Old Redwood Highway improvements and initial planning of a crosstown connector at Rainier Avenue.

“We’ve been given direction to initiate litigation in the event we don’t get what it is that we need and we are very close to filing those documents,” City Manager John Brown told Patch Monday.

That evening, the city council voted 5-0 to pursue legal action, with councilmembers Chris Albertson and Teresa Barrett absent.

The lawsuit comes after months of feverish letters and meetings between the city and the state in an effort to salvage the funds.

In August Petaluma’s economic development director Ingrid Alverde, Brown, Mayor Dave Glass and several councilmembers went to Sacramento to urge the Department of Finance to release the funds, arguing that they were spoken for prior to the dissolution of redevelopment agencies in February 2012.

But the state rejected the claims, saying that Petaluma did not enter into contracts with vendors by the deadline and is therefore not entitled to the cash.

Later Glass testified about Petaluma's situation before the Assembly Budget Committee, explaining that the projects were obligated long ago and vital to dealing with the growing traffic problem.

“What they are doing is certaintly not fair because both of these projects have been on the books for a long time and considerable investments have already been made,” Glass said. “We will find a way, one way or another, to fund them because they are too important not to pursue. We need both the East Washington interchange and the Old Red improvements in light of the recently approved developments.”

Although some cities have contemplated joining forces to sue the state over the loss of redevelopment, Glass said that Petaluma’s list of obligated projects, which also includes a $7.5 million set-aside for the Rainier crosstown connector, are so unique that the city would likely be the sole claimant in the action.

Last Friday, Gov. Jerry Brown vetoed four bills that would have allowed cities to keep some redevelopment money for affordable housing and other economic development projects.

These include Senate Bill 1156, by Senate President Pro Tem Darrell Steinberg, D-Sacramento, that would allow for the creation of a "Sustainable Communities Investment Authority" to finance redevelopment-like projects.

Another was Assembly Bill 2144, which would would have expanded the types of local projects that could be financed under existing infrastructure financing districts.

Gov. Brown argued that the legislation would have allowed cities to try to find ways to access the funds instead of winding down redevelopment.