Bond insurer Syncora Guarantee Inc. filed a lawsuit challenging California measures dissolving local redevelopment agencies, saying they jeopardize bond payments and unconstitutionally impair bondholder and insurers’ rights.
Syncora claims that provisions of the law dissolving the redevelopment agencies and redistributing their funds has “significantly reduced” money available to repay bonds. The company, which provided bond insurance for debt issues by California redevelopment agencies, seeks a court order declaring the measures are unconstitutional and blocking the state from implementing them.
The lawsuit is aimed at provisions that transfer debt payment obligations from the agencies to municipalities and allow cities to use tax revenue not needed to satisfy debt obligations instead of retaining it to cover future debt, according to the complaint filed Aug. 1 in state court in Sacramento, California.
Under the law, 400 redevelopment agencies will be abolished and taxes going to them will be blended in a caretaker fund run by local governments that would pay investors holding more than $20 billion in bonds. The law, which was upheld by the California Supreme Court on Dec. 29, redirected more than $1 billion in redevelopment funds to fill a state budget gap.
Redevelopment agencies provide funding for road, sewer, lighting and affordable-housing projects across the state. State officials had argued that redevelopment agencies in control of billions of dollars of public money had to be revamped to allow California to divert the money for education, roads and fire departments.
Representatives of the state Department of Finance weren’t available for comment on the lawsuit after regular business hours today.
The case is Syncora Guarantee Inc. v. State of California, 12-80001215, California Superior Court, Sacramento.