After the state Legislature approved a budget package that would require taking local funds to close most of the state’s $26.3 billion deficit, the Community Redevelopment Agency of the city of Los Angeles — along with the mayor of Los Angeles and five other California mayors — began preparations for legal action to block the state from seizing $100 million from the city’s coffers between 2009 and 2011.

Los Angeles and its CRA won’t be alone in the ring, though. Local redevelopment agencies across the state will be impacted by the state’s decision. Two of California’s other major cities are also considering joining the lawsuit.

In total, CRAs are set to contribute $2.05 billion to the state budget. The legislation requires redevelopment agencies to give the state $1.7 billion — about 30 percent of their property tax collections — in fiscal year 2009-10 as well as another $350 million in fiscal year 2010-11.

“What it will do to the redevelopment agencies of Los Angeles is it will pretty much wipe out our new revenue coming in this year,” said Cecilia Estolano, CRA/LA’s chief executive officer. “The take will cost us $100 million over the next two years; $83 million this year and another $17 million next year. Our net revenue after we pay debt services on our loans and we do our operating expenses will be about $84 million. So, it pretty much takes all the money that we would otherwise spend on projects and programs.”

Work will still be done on those projects and programs that have already been approved and for which have funding already committed. New initiatives or those that have partial funding will either be halted until resources shore or “come off the table” altogether, said Estolano.

Of the 45 projects expected to be affected, three in the South Los Angeles region include renovation of the Baldwin Hills Crenshaw Plaza and the Martin Luther King Jr. Shopping Center in Watts, as well as streetscape improvements along Normandie Boulevard.

About $72 million of what the state will be taking from the CRA/LA, added Estalano, will come from money that was set aside to target the city’s poorest communities. Prior to the budget approval, state law required CRAs to reserve 20 percent of all new revenue for affordable housing. This money could not be touched. The new legislation, however, would seemingly cancel out that rule of thumb.

Municipal bonds also help finance the construction of inexpensive residential, commercial and industrial developments in urban areas, which are often blighted. Redevelopment agencies then use the additional growth in property tax revenues to repay them.

“The state of California’s bond programs have been either stalled or put into question by the state’s financial situation and this source of financing is probably no longer available,” said Paul Zimmerman, executive director of the Southern California Association of Nonprofit Housing.

Low-income housing is also funded with the aid of a tax credit offered by the federal government and private investors, “but tax credits only work when you have private corporations that have profits that they need to shelter,” said Zimmerman. “Most of the traditional investors and low-income housing tax credits have not been profitable over the last year and may not be profitable going forward. [Therefore], there is no interest in investing in low-income housing.”

Private lenders, such as banks, also play a vital role in financing projects. With banks sinking into their own financial disparities and an unstable real estate market to add, however, institutions are skeptical about investing or lending to those developments.

Overall, the CRA/LA figures it will see a loss of roughly $500 million in private investments. With fewer reserves and resources, the CRA/LA will “have to dip into our housing funds in order to pay the tab and this is absolutely devastating for our community,” she said. But “not only does it mean that we can’t fund much needed affordable housing, it means that those construction jobs that would have been generated by that housing will disappear.”

Approximately 3,200 construction jobs are estimated to be eliminated as a result. The sector, said Richard Slawson, executive secretary of the Building and Construction Trades Council in Los Angeles and Orange County is “experiencing 30-35 percent unemployment.”

BCTC, a union for craftspeople, “directly would be affected by the negative reduction of employment opportunities for the families we represent, the crafts workers; meaning plumbers, electricians, operating engineers, brick layers, and other different trades,” said Slawson. “It destroys the industry. We’ve already been hit really hard by the housing market, which is not just residential housing but [also] commercial.”

Abode Communities, a leading nonprofit affordable housing provider in Southern California, “relies heavily on effective partnerships with agencies like CRA/LA to accomplish its mission,” said Robin Hughes, president of Abode Communities. “Over the past 20 years, CRA/LA has committed $29 million in investments to Abode Communities, resulting in the production of more than 800 affordable homes for working families, seniors and individuals with special needs. The proposed cuts would immediately impact Abode Communities’ work with CRA/LA, threatening the development of affordable homes for 180 working families already in our pipeline.”

Community redevelopment agencies perform a number of functions, such as giving away land for nonprofit use or at a discounted rate, forgiveness of taxes, as does it directly infuse dollars.

As for Zimmerman’s organization: “Our members are the developers, the non-profit organizations that develop and manage subsidized affordable housing,” he said. “So, many of members simply will not be able to fulfill their missions and develop much in the coming years.”

If these devastating cuts occur, said Mayor Antonio Villaraigosa in a released statement from his office, the state won’t just be taking $72 million away from Los Angeles’ poorest neighborhoods, it will destroy the foundation “we have built for economic recovery in this city.”

“More than ever, redevelopment projects are needed to bring jobs to Los Angeles and to protect affordable housing,” he said. “ … A hit of this magnitude undermines new investments in infrastructure, job creation and the green economy.”