A new lawsuit is giving the city of Rocklin more confidence that it will be able to hold on to redevelopment money the state planned to raid with this summer’s budget compromise.

Construction projects from Southern California to the Bay Area are frozen as city leaders look to the state court system to free up the cash.

“The city will not be paid back as quickly as we had hoped,” said Rocklin City Manager Carlos Urrutia.

Right now Urrutia said Rocklin is on the hook for $1.7 million this year and about $395,000 next fiscal year. So far Rocklin projects have not been delayed but the state tax grab has spurred a financial nightmare between the city and the city’s redevelopment agency.

“The redevelopment agency owes money to the city so we have to delay payment to the city side of cash,” Urrutia said. “It’s invested and they made a loan to the agency.”

On Oct. 20, the California Redevelopment Association filed a lawsuit in Superior Court in Sacramento to stop a California Assembly Bill, which authorizes more than $2 billion raid of local redevelopment funds to use for state purposes.

In a written statement, CRA Executive Director John Shirey said lawmakers are acting unconstitutionally and deliberately penned legislation to circumvent the system.

“That’s simply irresponsible policy-making, and it illustrates why many have concluded state government is broken and needs fixing,” Shirey said.

The CRA won a similar lawsuit against the state in 2008 and are confident the court will uphold their position. Rocklin is not a litigant in the case but its outcome will affect every California city with a redevelopment agency. Urrutia said Rocklin is ready if they lose. He said the city’s cost-saving measures has put Rocklin in a good financial footing to weather the tax grab if it happens.

“I don’t think we’ll need to cut any further,” Urrutia said. “It’s a temporary hit. We’ll adjust accordingly. We will be able to make our payments to the city as scheduled.”

Rocklin has time to plan as the Superior Court is expected to rule on the latest lawsuit by May 2010.