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Cities challenge California's redevelopment law

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SACRAMENTO, Calif. — California cities announced Monday that they are challenging a law that gives state finance officials the power to take local tax revenue as community redevelopment agencies are being dismantled.

The League of California Cities filed a lawsuit in Sacramento County Superior Court against the state Department of Finance, the Board of Equalization and the state controller.

Executive Director Chris McKenzie said the Legislature passed an unconstitutional law earlier this year giving state finance officials the power to take and withhold tax revenue from cities. He said finance officials also have not followed basic administrative procedures.

McKenzie said the law authorizes the state to impose penalties that would take sales or property taxes cities need to pay for public safety and other basic services.

"This process has been an extremely painful process for our members," McKenzie said.

Finance spokesman H.D. Palmer said the state will defend AB1484, which was designed to distribute more money to schools and counties.

"We're confident that we will succeed in defending this measure from legal challenges," Palmer said.

Gov. Jerry Brown planned on receiving $3.1 billion from the elimination of about 400 community redevelopment agencies to help close California's budget deficit. Under the change, more property tax revenue that once went to economic development efforts would be going to local school districts — a move that helps offset state funding for schools.

While most local governments have made redevelopment payments to the state, about two dozen cities have failed to pay or underpaid the state. They dispute the bill from the administration, saying the state is using unreasonable accounting methods that are inflating their bills.

The lawsuit seeks to have portions of the state law declared unconstitutional. The league is joined in the suit by the city of Vallejo, which declared bankruptcy in 2008.

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