In what Santa Clarita city officials are calling the “worst case scenario,” the California Supreme Court ruled today that Gov. Jerry Brown’s proposal to eliminate redevelopment agencies as a way to deal with the state’s fiscal crisis will stand. The court simultaneously struck down an alternative proposal that would have allowed redevelopment agencies to continue operating if they make payments into funds that benefited schools and special districts.

“This is the worst that could have happened,” said Lisa Webber, Planning Manager in the City of Santa Clarita’s Community Development Department. “We thought it would be that either both were approved or both would be overturned, but this leaves us with no option to continue. We’re already working with our team from the city attorney and consultants and they are hearing that the Legislature, in their next session in early 2012, will be tackling this to restore redevelopment to some degree.”

Webber said she has already heard from members of the Old Town Newhall Association, concerned about the decision.

According to the court documents, the Legislature, responding to a state fiscal emergency in the summer, enacted two measures intended to stabilize school funding by reducing or eliminating the diversion of property tax revenues from the state’s school districts to the state’s community redevelopment agencies.

Assembly Bill 1X26 barred redevelopment agencies from engaging new business and provided for their windup and dissolution.

AB1X27 offered an alternative: Redevelopment agencies could continue to operate of cities and counties that created them to agree to make payments into funds benefiting the state’s schools and special districts.

The California Redevelopment Association and the League of California Cities immediately asked the court to determine the legality of the two proposals, arguing that each measure was unconstitutional, especially in light of the voter-approved Proposition 22, which limited the state’s ability to require payments from redevelopment agencies to the state’s benefit.

The court ruled that the redevelopment agencies exist at the pleasure of the Legislature, and that the fiscal limitations imposed by Proposition 22 didn’t affect the Legislature’s ability to dissolve them; however, the court ruled that Proposition 22 does prohibit additional payments such as those proposed by AB1X27, and overturned the second measure.

Brown signed AB1X26 and AB1X27 into law in June, forcing existing agencies to adopt an Enforceable Obligation Payment Schedule by Aug. 28, 2011. Santa Clarita’s agency approved such a schedule Aug. 23. According to the schedule established in August, the city was due to make a payment of $3,082,030 at the end of December.

“We did have payments due, but now those payments are extended,” Webber explained. “Those payments were part of AB1X27. Those ransom payments now go away. What we do need to do is work out the Obligation Payment Schedule, which is due March 1.”

“This would be any obligations we have, any payments we need to make from the agency. Our attorneys and the city team will be working through all the details in the coming weeks to make sure we’re compliant with AB1X26, but we’re also going to be watching what the Legislature will be doing.”

According to the city’s website, “the Redevelopment Agency of the City of Santa Clarita was created on November 28, 1989, to undertake redevelopment activities that remove physically and economically blighted conditions that inhibit and continue to plague economic growth in the city.

“The Agency’s first and only redevelopment project area was established by the City Council on July 8, 1997. The 913.63 acre project area includes retail, industrial, public, and residential properties generally along the Lyons Avenue, and Railroad Avenue and Newhall Avenue corridors. The historic downtown Newhall area and the Jan Heidt Metrolink Station are within the project area boundaries.”

Accomplishments cited by the agency include the renovation of the historic downtown Newhall corridor and establishment of the area as an arts district that hosts, among other events, arts festivals and the monthly “Senses” street parties that have attracted thousands of visitors to the area.

The agency also offered and continues to develop new grant programs to help small businesses with improvements such as façade renewals, marketing and business grants.