The California Department of Finance is reducing by $29.4 million the amount of redevelopment funds that it is demanding Orange County redistribute to other local governments in the wake of the state’s dismantling of redevelopment agencies.

The state had demanded that the county redistribute $50 million as part of its larger effort to capture $257 million in housing funds from the county and 17 of its cities.

But the county had contested $29.4 million of that sum, arguing that the state miscalculated. After some negotiation, the state agreed to drop the total demanded to $20.4 million, according to a Department of Finance letter.

Not all of the county’s fiscal tussles with the state are over. The two are still embroiled in a court battle over $73 million in vehicle license fee revenue.

Other local governments have yet to be as successful as the county. Santa Ana is on the hook for $56 million and last week officially defied the state after the city failed to persuade Department of Finance officials that the figure was wrong. The City Council ordered city officials to refuse the demand and take all legal measures necessary to retain the funds.

Huntington Beach has been ordered to pay $31.1 million but is more than $26 million short, according to city spokeswoman Laurie Frymire. The city is negotiating with the state over the funds.

The state’s payment demands stem from the dissolution of the state’s approximately 400 redevelopment agencies, which diverted local property tax revenues toward new development aimed at cleaning up blighted areas. Gov. Jerry Brown, citing abuses, pushed to eliminate the agencies last year to help reduce the state’s budget defiit.

Redevelopment agencies were required to set aside for affordable housing programs 20 percent of their property tax increment revenue — funds that cities had diverted from their own general funds and from other local governments in redevelopment zones. When redevelopment agencies were axed, some estimated that $2 billion in low-income housing funds would be left over, the Sacramento Bee reported earlier this year.

Now the state is demanding that leftover money be distributed to school districts and other local governments in the area.


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