Visalia Prepares to Sue State for $3 Million

The Visalia City Council has authorized filing of a lawsuit against the state of California, according to Alex Peltzer, city attorney. The action, if necessary, would be to reclaim redevelopment agency funds that came directly from the city treasury.

“We loaned it to ourselves for our redevelopment fund,” said Visalia Mayor Amy Shuklian. “There is $3 million which in any other case would be paid back to a bank.”

The state of California, after eliminating all city redevelopment agencies and replacing them with a successor agency to help channel their money back to Sacramento, is apparently planning to keep the money.

It was a common practice for Visalia and other cities across the state to loan money to their redevelopment agencies to avoid the interest of bank loans. Projects such as the parking structure at Visalia Mall were funded by this method.

There are currently 50 lawsuits filed by California cities to reclaim money loaned to their respective redevelopment agencies. Visalia’s situation is unique, however. It is the only city where money was loaned to a redevelopment agency but none of it was spent.

“It’s just cash sitting there,” Peltzer said. “The state is not allowing repayment back to the city. That’s the difference. It’s just a transfer of money from the city to the state.”

Shuklian and other city officials met recently with State Senator Jean Fuller (Bakersfield) and State Assembly Member Connie Conway to seek their help in resolving this issue.

“We wanted to see if they could make a phone call for us,” she said. “They probably did but it didn’t help.”

“The successor agency now has control of the money and is telling the state what it wants to do with it,” said Peltzer, who added that even if the successor agency wants to return the money to the city, the state can say no.

“If we want to sue, we will sue the successor agency,” he said.

The city is currently pursuing two courses of action, according to Peltzer. He said that the city is appealing to the California Department of Finance to get it to reconsider. A decision is due in 30-60 days, but Peltzer doesn’t expect it to be favorable.

“They’ve told us what their decision is going to be and it’s not returning money to the city,” he said.

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