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Redwood City Hits Legal Set Back in Mission to provide Affordable Housing

Superior Court Rules that Funds Set Aside Under Legal Aid Society Agreement Should be Disbursed to Taxing Entities

Post Date:01/31/2014


For Immediate Release
January 31, 2014

Media Contacts
Sheri Costa-Batis
Public Communication and Engagement Manager

Redwood City, Calif. -- A Sacramento trial court has ruled that more than $10 million set aside for affordable housing in Redwood City pursuant to an agreement with the Legal Aid Society of San Mateo County must instead be paid to local taxing entities. Judge Allen Sumner determined that because the funds had not been committed to specific projects, they were available for disbursement. The City of Redwood City is considering whether it will appeal the decision. 

In 2011, to help the State's finances, the Legislature enacted a bill to eliminate California's nearly 400 redevelopment agencies, local entities that received a share of property taxes and used them to renovate blighted urban areas and develop affordable housing. Redevelopment agencies were replaced on February 1, 2012 by successor agencies, which in most cases, were their host cities. Successor agencies were required to undergo a review of what funds it could retain from the former redevelopment agency to pay for existing contractual obligations and what funds were available for distribution to taxing entities. Redwood City and its successor agency, as well as the Legal Aid Society in a separate lawsuit, challenged a determination by the State Department of Finance, the agency charged with overseeing the dissolution of redevelopment agencies, that the $10.2 million collected under a 1990 agreement with Legal Aid were considered "uncommitted funds."

"The City agreed that nearly $2 million in the Affordable Housing Fund was not committed funds, and paid that to the county auditor-controller for distribution to taxing entities. However, we strongly believed - and still believe - that our agreement with Legal Aid obligated us not just to collect the $10.2 million, but to use that money specifically for affordable housing," said City Manager Bob Bell. "The former redevelopment agency assisted in the development and/or preservation of 275 "below market rate" (BMR) rental units and 64 BMR ownership units in Redwood City, as well as made numerous First-Time Homebuyer loans, but there is more we could have done with that money for our community."

Mayor Jeff Gee agreed. "Should this ruling stand, it will further negatively impact a city's ability to provide affordable housing" he said. "This is not just about Redwood City. This is about local agencies' ability to create communities that people of all incomes can live in. I do not believe that the Legislature intended that we should not be able to honor our commitments under the Legal Aid Agreement." 

More than 150 lawsuits have been filed regarding the legislation dissolving redevelopment agencies, more than 100 of which are actively being pursued at the trial and appellate court levels. The vast majority of them challenge determinations made by the Department of Finance, including several involving affordable housing projects and agreements.

In the second part of its decision, the Court ruled that the City's 2005 $3 million loan to its Redevelopment Agency was not considered an enforceable obligation for which the Successor Agency could presently claim funds to reimburse the City. However, the successor agency may be able to do so in the future after it obtains what is called a "finding of completion" from the Department of Finance. 

To learn more about affordable housing, please visit the City's Web site. If you agree with us that affordable housing is important to Redwood City, call your local State legislators and let them know of your desire to have people of all income levels have the ability to live in your City.


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