City Manager Dan Rich said that the city was "concerned and disappointed" about the decision, which puts the kibosh on the city's plans to keep the agency running until 2013, providing about $5 million a year in revenue for redevelopment downtown.
Instead, officials say they face a shutdown in February this year, with a "successor agency" representing the city, county, local schools and the state overseeing its dissolution. City officials say they are looking at alternatives to fund ongoing development downtown, including a parking garage that may be needed in a few years.
"It just has a very significant impact on the things we wanted to finish downtown," said Mountain View's economic development director, Ellis Berns. "We were very actively looking to purchase some strategic properties with future development potential. We won't be able to do anything further with facade improvement or seeing what we might be able to do with the downtown grocery store," the Mountain View Market.
City officials were going to see if there was some way to assist the market's new owners in turning it into a popular neighborhood grocery store, Berns said. "But we are not going to be able to do that now."
Originally created to fight blight, redevelopment agencies keep all of the property tax increment within their boundaries for redevelopment, redirecting property tax revenues away from schools, counties and city general fund budgets.
The 16-block area around Castro Street that has paid its property tax increment toward redevelopment will now send about $1.5 million a year to the city's K-12 schools. The Mountain View Whisman district alone would have received $825,000 in the last fiscal year, while the Mountain View-Los Altos High School District was in line for $670,000.
The city's general fund will also see a boost in tax revenue, worth $840,000 last year, but that comes with an increase in staff costs. The Authority pays one-third of the salaries of economic development director Berns and his assistant Tiffany Chu.
The downtown revitalization district was created in 1969 to help fix up what was then a nearly vacant downtown. Over the years, numerous improvements to parking, signage and building facades have been made, and funds were used for purchasing properties to assemble them for larger developments. It also provided 20 percent of its funds to affordable housing projects. To some degree, the improvements helped: assessed property values downtown have nearly tripled since 2000, going from $150 million to $418 million in 2010. In 1969, the area was valued at only $22 million.
But in his state budget proposal a year ago, Gov. Jerry Brown told cities that "RDAs were not intended to become a permanent source of business subsidies" and that their original intent was to "relieve blight" in a limited amount of time.
According to the court, since the legislature had the authority to create redevelopment agencies, it also had the power to dissolve them.
"Today's ruling by the California Supreme Court validates a key component of the state budget and guarantees more than a billion dollars of ongoing funding for schools and public safety," Gov. Brown said in a statement released last week.
Redevelopment agencies were eliminated by AB-26, but another bill, AB-27 - dubbed "extinction or extortion" by staff — let agencies stay open by making hefty annual payments to the state. The League of California Cities and the California Redevelopment Association have filed a lawsuit challenging the constitutionality of both bills. The California Supreme Court ruling declared AB-27 unconstitutional based on the passage of Proposition 22 in November 2010, which made it illegal for the state to take money from local funds such as redevelopment revenue.
City officials paid a $2 million "ransom" to keep the Authority open under AB-27 last year, but to no avail. "The Supreme Court said, 'No, the state can take it all,'" said Mayor Jac Siegel.
The city's other property tax district, the Shoreline Community, is unaffected by the new legislation. It was created under special state legislation to pay for Shoreline Park and improvements to the surrounding industrial neighborhood and has no sunset date. Earlier this year the city council was persuaded to give local schools $13.6 million in Shoreline Fund property taxes over three years.