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Galt sues to keep redevelopment funds for projects

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The city of Galt has filed suit against the state, protesting the Department of Finance’s rejection of millions in current and future payments for redevelopment work under way in the city’s historic area.

If the city loses, projects such as a new entertainment complex and improvements to C Street, originally supported by the city’s now-defunct redevelopment agency, would not be completed, according to City Manager Jason Behrmann.

The case, filed last week, is among nearly 50 redevelopment lawsuits that have been filed statewide against the Finance Department, according to Iris Yang, attorney for Best Best & Krieger LLP, who is representing the city.

The Finance Department has not responded to the allegations.

The California Supreme Court in December 2011 ruled that lawmakers acted legally to dissolve redevelopment agencies, a move that in part eased the state’s budget shortfall.

Cities and some counties were then put in charge of winding them down, relinquishing hundreds of millions of tax-increment dollars to schools, counties and other tax-sharing entities.

But it wasn’t long before a tug of war began with the state Department of Finance over whether a portion of the tax increment money could be retained to satisfy some redevelopment debts.

In its lawsuit, Galt believes the state has no basis to deny $7.4 million in redevelopment funds already collected by the city and set aside through bonds issued last year. The city contends the statutes dissolving redevelopment agencies specifically authorize the use of 2011 bond proceeds if the original purposes remain feasible, Behrmann said.

“We’re hoping we can work it out, because obviously it’s important for us to complete projects,” he said. “If we’re unsuccessful in the lawsuit ... then we would not be able to finish those projects, and the entertainment complex would not be able to move forward.”

In addition to the Old Town entertainment complex, the money was to be used for the Central Galt Corridor project and the Union Pacific Railroad open space and parking lot project. Last summer, the city council approved using bond proceeds to pay for property acquisition for revitalization efforts related to these improvement projects.

Behrmann estimates the litigation will cost taxpayers approximately $50,000, to be paid through money already set aside for administrative costs of the redevelopment successor agency.

This isn’t the first time the city has sued the state over its redevelopment funds.

Last summer, the city filed suit against both the state Department of Finance and the Sacramento County auditor-controller’s office for withholding $509,000 in property tax revenue it said it was entitled to. But 30 minutes before the first court hearing, the agencies agreed to turn over the money.

It was needed to pay bond debt service related to the redevelopment agency.

In the claim, the city specifically requested a restraining order against the county government agency that would prohibit it from transferring property tax revenue to the state, where it could be unrecoverable.

The Sacramento Bee contributed to this report.

Contact reporter Jennifer Bonnett at jenniferb@lodinews.com.

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