West Covina sues state to stop raid on city funds

From the City of West Covina: On May 1, 2013, the City of West Covina filed a lawsuit in Sacramento Superior Court of California against the State of California, applicable State agencies and taxing entities to protect the City from the State’s intention of illegally taking City funds that legally and rightfully belong to the City and its residents. The State is attempting to invalidate legal loan agreements between the City and former redevelopment agency and further take away $12.2 million in legally repaid loan payments that West Covina received prior to the elimination of redevelopment. The City loaned the former West Covina Redevelopment Agency more than $21 million to seed the removal of blight in the community. Since 1973, the City received loan repayments on loans that had been previously recognized as valid agreements by the State and County of Los Angeles. The loans were utilized by the West Covina Redevelopment Agency to develop projects that are now integral parts of the community, including the Westfield West Covina Mall, Eastland Center, Lakes Office Complex and Entertainment Center, West Covina Auto Plaza, The Heights Shopping Center, Lark Ellen Apartments, Promenade Apartments, West Covina Senior Villas I and II Senior Apartments, and the award-winning Big League Dreams Sportsplex. Through redevelopment over the past 12 years, more than 7.6 million square feet of building space was constructed with a value of over $600 million. More than 6,400 new jobs, including 4,000 construction jobs, were created in the City, and more than $12 million in annual new revenues (sales and property tax) was generated to help pay for high-quality public services, including police and fire, that residents have come to expect and deserve. In addition, 2,000 home improvement loans and 142 first time homebuyer loans were issued to West Covina residents as a result of redevelopment. In the effort to take billions of dollars that would have otherwise been invested in local communities, the State balanced its budget on the backs of local communities by eliminating redevelopment agencies, effective February 1, 2012. The rush to eliminate redevelopment agencies resulted in poorly written and vague legislation, including the State’s ability to invalidate previously approved loan agreements between a city and redevelopment agency. In its haste to seize even more funds, the State granted itself the authority to reach back an additional 13 months prior to the elimination of redevelopment -- to January 1, 2011 -- to take away more funds from cities, which includes city loan payments. The City attempted to reason with the State and provided all documentation showing evidence that such City loans were valid, legal, and contractually binding agreements under State and Federal Law. Despite the overwhelming evidence, the State of California denied the appeal, disapproved the $12.2 million in loan repayments and demanded the City remit payment to the County Auditor or be subject to penalties and claw back (raid) on sales and property tax revenues in the future. The City contends that the State is not only violating State and Federal Law, but the will of the people who approved three voter measures, Proposition 18 (1952), Proposition 1A (2004), and Proposition 22 (2010), which limited the State’s authority to shift property taxes and redirect tax increment revenues from cities. Currently over 60 California cities have filed similar lawsuits against the State, challenging various aspect of the elimination of redevelopment and taking of funds from cities. Should the State be successful in taking monies that rightfully belong to West Covina and its residents, City core operations including police and fire would be severely crippled. The City would lose its cash flow and ability to obtain other short-term loans necessary to fund basic operations and pay for salaries while revenue is sporadically received by the City throughout the year. The loss of cash flow could also impact the City's credit rating, which in turn could result in higher interest rates being charged to the City on loans and bond and further increasing the City’s costs and budget expenditures. All of these potentially real impacts could place the City in serious financial peril and poses a real and present danger to a City that prior to the elimination of redevelopment was healthy, vibrant and progressive. The City of West Covina reached out to all four State Legislators and is thankful to Senator Bob Huff, Senator Ed Hernandez, and Assemblyman Curt Hagman for their support in the City’s position. The fourth State Legislator, Assemblyman Roger Hernandez, chose not to support West Covina and the community that he previously served as a City Councilmember. “The City of West Covina will do whatever we can to protect the City and its residents,” stated Mayor Shelley Sanderson. “I think it is important for all residents to understand that this problem is one of the most important issues facing us today and that as a community, we need to come together, be united and demand the State to fix the problems that they created. I urge everyone to contact your legislative representative and ask for their immediate help."