Redevelopment is dead. Long live redevelopment.

After seven months of debate, the state program that diverts property taxes from schools and other local governments to improve rundown neighborhoods was eliminated Wednesday as part of the state budget’s approval. But Gov. Jerry Brown also signed a companion bill that will allow redevelopment agencies to reestablish themselves if they pay more of their tax money to schools.

The situation sounds simple enough, but the future is anything but. Redevelopment backers, notably San Diego Mayor Jerry Sanders and other big city mayors, have supported calls for immediate lawsuits against the legislation. One could be filed as soon as this week. The state likely will have to go to court to try to unweave the tangled webs spun by cities to defend billions in future redevelopment dollars and properties from state action.

In the meantime, cities may have to decide if the school payoff they’ll need to make to keep redevelopment is worth it.

“I don’t think it’s the end,” said Frank Alessi, head of the Centre City Development Corp., San Diego’s downtown redevelopment agency. “But it puts a huge crimp in our project activities.”

Two projects potentially crimped are big. Downtown redevelopment dollars always have been part of plans to finance a Convention Center expansion and a new Chargers stadium. Sanders’ office and a Chargers official couldn’t be reached to discuss the redevelopment decision.

Beyond those efforts, the decision dramatically alters a system that long has been San Diego’s preferred means of financing numerous projects, including parks and affordable housing, which the city says it otherwise wouldn’t be able to pay for.

Brown and state lawmakers are counting on $1.7 billion from eliminating redevelopment to help balance California’s budget next year. In future years, the state wants $400 million from the agencies to help pay for school money lost to redevelopment.

San Diego redevelopment would lose approximately $86.5 million over the next two years, according to city estimates.

The biggest cash loser would be San Diego’s downtown agency, CCDC, which would forgo approximately $47 million next year and $11 million annually from there, Alessi said.

If the city opts into the deal, after next year’s big hit the downtown agency would receive about 9 percent less in property taxes annually.

But the agency says that cut will have a disproportionate effect on its spending. Alessi said CCDC would have to delay projects so it could pay its existing debts.

Statewide, future years’ payments would make up about half the money agencies have at their discretion, said John Shirey, head of the California Redevelopment Association, an advocacy group.

“These are substantial takes of funds from these agencies,” Shirey said.

Exactly how much remains up for debate. Two state senators held out on the main budget vote Tuesday night because they wanted assurances of detailed financial analyses on the effects to individual agencies, said Alicia Trost, spokeswoman for Democratic Senate leader Darrell Steinberg.

Everyone, including Brown, has agreed on the need to perform the analysis, Trost said.

In San Diego, City Councilman Todd Gloria, who heads a redevelopment committee, has asked for a thorough analysis of the laws’ effects. Gloria also asked to explore a lawsuit against the state.

He won’t be the only who wants to go to court. The League of California Cities is planning to file a suit as early as this week and is seeking action directly from the state Supreme Court.

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.

Liam Dillon

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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