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Council Defends Decision to Sue State, County

El Cerrito City Council members staunchly defended their risky decision to sue the state and the county over a demand that the city pay back $1.76 million in property tax revenues tied to the dissolved Redevelopment Agency.

El Cerrito's daring and potentially costly the state and the Contra Costa County Auditor-Controller last week was not made lightly, nor was its refusal to pay $1.76 million that the state and county say the city owes in the wake of the dissolution of the city's Redevelopment Agency.

That message was delivered with somber passion Tuesday night by members of the El Cerrito City Council.

"It's time that we stand up and be counted and defend our municipal affairs and rights, and push back," declared Mayor Bill Jones in extended remarks.

Fighting back for El Cerrito also included refusal to pay the $1.76 million by last Thursday's deadline. A new state law, AB 1484, says municipalties that don't pay face stiff penalties, including a blockage of the city's sales tax revenue, a penalty up to 20 percent of the amount owed and additional fines up to 3 percent of the bill for every month it's not paid.

The city is one of at least nine California cities that filed suit last week against the state Department of Finance and their county auditor controllers over a new move by the state to transfer funds that once went to local redevelopment agencies to the state.

The new state push was authorized in AB 1484, adopted June 27, and described by backers as "clean up" legislation for the state's decision last year to dissolve local redevelopment agencies.

Pursuant to the new law, many cities around the state received "demand for payment" bills from county auditor controllers early last week and were instructed to pay the bills by Thursday, July 12. Campbell sent the $1.76 million demand letter to El Cerrito on July 9, and the city filed suit Thursday in Sacramento County Superior Court.

El Cerrito maintains that Campbell's calculation of the bill is incorrect, and along with other suing cities, it argues that AB 1484 is illegal and unconstitutional.

"Several cities in the state are at or near bankruptcy as they struggle to save their cities, and the state turns around and hits them with this type of illegal action," Jones said.

"This would have been an excellent opportunity for the state and local governments to interact together during these tough times," he said. "However, the punitive actions of AB 1484 indicates the state has an unapologetic disregard for the cities."

"The supportive partnership between the cities and the state is rapidly disappearing, and this issue is only one example of this. This why I support that we draw the line in the sand and fight for our rights."

Other council members noted that the amount demanded is more than half of the city's reserve fund and that it could put city services and residents in jeopardy if paid.

"There's a point at which you just have to say enough is enough," said Councilmember Janet Abelson. "We can't keep just paying these demands. We don't have the resources to do it with."

"We've just got to stand our ground," she said. "This is I think the most egregious situation I've seen happen since I've been on the council." (Abelson's been on the council since 1999.)

She and other council members accused the state legislature of hastily pushing AB 1864 through without input from local governments.

She said the loss of funding damages the city's ability to render important services, including its chief responsibility, public safety.

"If you have a medical incident, if you have somebody trying to break down your front door, you need to know that we can actually send somebody that can get there in a reasonable amount of time."

Unlike El Cerrito, five cities from San Diego County that sued jointly – Chula Vista, National City, Oceanside, San Marcos and Vista – paid the "demand for payment" bills "under protest," asking the court to either return the money to them or set it aside in a protected account until the issue is legally resolved.

"I feel that if we had paid the $1.7 million payment demand, we would have not leverage in negotiating change," Jones said. If the city had paid and even if it were to prevail in court, Jones added, "I have no confidence that we would have been refunded the money by the state. They would have found some other excuse to keep it in the state coffers."

The state Department of Finance and Campbell have disputed El Cerrito's position and say that their actions were legal and appropriate.

For more details and background on the lawsuit, please see the July 17 El Cerrito Patch article, "City Sues State, County Over $1.76 Million 'Demand for Payment'." The suit and accompanying documents are attached to this article.

Brenda Willett July 18, 2012 at 04:37 PM
It was illegal for El Cerrito to collect to collect City Transfer tax on a home sale a few years back, however they collected over $3,000 from me and when they had to resind the law because it was illegal, they refused to give the money back! It's different isn't it depending on who's ox is being gored. A lot of home buyers and sellers got ripped off and maybe we should all have sued!
R.O.R.E. East Bay July 24, 2012 at 08:48 PM
I keep reading these comments about the $1.75 million exceeding El Cerrito's reserves. That number is actually lower than the $1.8 million originally quoted by the State, and shouldn't really be news to the city, should it? - Seems like I read about this around a year ago? http://elcerrito.patch.com/articles/pay-184-million-keep-redevelopment-agency-staff-advises-council Didn't the city, in anticipation of the Redevelopment Agencies' dissolution, sell rights to Safeway parcel, collecting $1.8 million? http://elcerrito.patch.com/articles/city-strategic-plan-safeway-windfall-budgeted Can a Patch reporter/city official/ or citizen help shed some light on where the Safeway 'windfall' went or explain what this is all for? The way I'd understood the article, paying the State to continue its redevelopment work was what it was earmarked for. Now it's gone or otherwise assigned? Did the city set up a separate agency and reallocate the money to operate a redevelopment agency independent of the state and now don't 'count' that money as part of El Cerrito's 'reserves?' Signed, Confused...
Charles Burress (Editor) July 24, 2012 at 11:20 PM
I appreciate your raising this question because I too am confused over the accounting for the revenue and assets of the former Redevelopment Agency. I think it's been a major headache for city staff too. One complication is the transfer of much of the assets and responsibilities to the Municipal Services Corporation, a nonprofit overseen by city officials. It keeps separate books and accounts. There is a large amount of information about the finances on the city Web site in staff reports for various meetings of the City Council and the Municipal Services Corp., but I haven't had the opportunity to digest all the information into an understanding that would allow me to answer your questions.

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