Redwood City is appealing a court ruling that it cannot keep more than $10 million set aside for affordable housing because the money had yet to be committed to specific projects.
The decision to give the money instead to local taxing entities keeps Redwood City from living up to its 1990 agreement with the Legal Aid Society to spend the funds on affordable housing, city officials said Wednesday in an announcement of its appeal plans.
The city’s original suit disagreed with the money being labeled “uncommitted funds” and argued it had an obligation to both the community and nonprofit to use the money for its original intended purpose.
The city’s now-defunct redevelopment agency had accumulated funds above and beyond the mandated 20 percent for low- and moderate-income level housing. But when the state dismantled each of its redevelopment agencies in 2011, Redwood City was told to turn over all the tax increment revenue — including the money exceeding the 20 percent set aside — to the county controller.
The city and Legal Aid Society of San Mateo County last year took the state to court to keep it from reclaiming the $10.2 million but in January, Judge Allen Sumner ruled in favor of the state Department of Finance.
A specific filing date with the Third Appellate District in Sacramento is not set, said city spokeswoman Sheri Costa-Batis, but the Legal Aid Society is expected to join the city in the appeal.
In appealing, the city hopes a higher court understands that the funds were committed to affordable housing as a whole but could not be earmarked for specific projects until reaching a high dollar amount.
“What we feel the court did not fully understand is that affordable housing funds cannot be spent in increments. A city must amass a large amount of dollars in order to effect change and earmark funds for specific projects,” Mayor Jeff Gee said in a prepared statement.
The city planned to use the money to develop sites on Bradford and Heller streets which it absorbed as the redevelopment agency’s housing successor agency. The money was also to help with development of other affordable housing projects.
Redwood City officials say the court case has the potential of impacting not only the $10.2 million in question but the fate of other cities grappling with affordable housing funds.
Gee said if the court decision stands it will have “a ripple effect” on any city in the midst of raising enough funds to build specific projects allowing “people of all incomes to live together in the same community.”
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