The city of Rancho Cordova, aiming to recoup $6.2 million it loaned in recent years to its former redevelopment agency, has sued the state Finance Department after it was denied repayment.
The city of Galt last week also filed suit against the state Department of Finance, protesting the department's rejection of some $12 million in current and future payments for redevelopment work under way in the city's historic area.
Plaintiffs in both cases are seeking to have the agreements with their one-time redevelopment agencies declared enforceable obligations.
The cases are among nearly 50 redevelopment lawsuits that have been filed statewide against the Finance Department, said Iris Yang, attorney for Best Best & Krieger LLP.
Most of the cases are being handled in Sacramento Superior Court. Their outcomes could determine the fate of tens of millions of dollars in California that historically supported redevelopment agencies.
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 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.
The Department of Finance last year began gearing up to handle the protests.
"In terms of our staffing up, we've got about 440 people at the Department of Finance," said departmental spokesman H.D. Palmer when asked about protests from local agencies.
Of that total, 80 staffers are working on local government issues like redevelopment, he said.
"Our goal is to try to resolve these issues in a collaborative manner," Palmer said. "In some of these (cases), there is no need for litigation."
Statewide, 240 of the 400 local governments responsible for dismantling redevelopment agencies have asked to meet and confer, Palmer said.
He said 160 did so to contest decisions about funds for low- and moderate-income housing programs, which were operated by redevelopment agencies.
Rancho Cordova's lawsuit, filed Dec. 28, is focused on funds the city provided to the redevelopment agency during its startup years, before it had time to collect adequate funds from the usual channel of property tax growth.
"It's a very young redevelopment agency," Rancho Cordova City Attorney Adam Lindgren said. "We knew when it was getting going that it was going to need an amount of money to start up to both pay for the administration and to prime the pump to get the agency going."
No one disputes that the city money was disbursed to the redevelopment agency in the years leading up to its dissolution.
What is in dispute, however, is whether the city should be fully repaid.
The redevelopment agency reimbursed the city $724,000 toward the end of the decade. Then the effects of the real estate downturn caught up with property tax proceeds, hitting them hard by 2010.
That meant the city had to give additional money to the redevelopment agency. "The lawsuit is simply to recognize (the reimbursement agreement) as an enforceable obligation," Lindgren said.
Two other major suits one by the League of California Cities and the other on behalf of Bellflower and a dozen other cities complain that the state goes too far in penalizing cities and counties if their former redevelopment agencies don't pay what the state is seeking.