Petaluma officials are preparing to appeal the state's denial of the city's request for more than $34 million it says is owed by its former redevelopment agency, money that would be used to fund major transportation projects, economic development and low-income housing. But with the future of those funds in doubt, nonprofits like the Committee on the Shelterless and the Petaluma People Services Center have begun nervously anticipating what would be a huge cut in funding.

These organizations and others relied on the funds to make housing available to some of the community's poorest members.

"(The news) is very devastating," said Mike Johnson, chief operating officer of the Committee on the Shelterless, whose organization will take a roughly $1.4 million hit over the next few years if the state upholds its decision. "I'd liken it to closing an emergency room after an earthquake," he said, noting that the organization's budget was already stretched thin by previous cuts.

Elece Hempel, executive director of the Petaluma People Services Center, also forsees serious cuts, possibly to programs that help keep people on the verge of homelessness off the streets. "We're the last string on the safety net, and redevelopment allowed us to keep the safety net strong," she said.

City staff was still reeling from the unexpected news, similar to rejections that cities across California are receiving, but said that they planned to fight for all the funds that had been denied. That includes $1.7 million for work on the East Washington interchange, a project that is already underway, $11.3 million for work on the Old Redwood Highway interchange, which is supposed to begin within the year, and $7.4 million for the Rainier Crosstown Connector, in addition to $6.3 million that would go toward affordable housing and $6 million for economic development programs.

"The bottom line is Petaluma is going to do everything it can to fight for these funds that were fairly obligated by the redevelopment agency," said Ingrid Alverde, Petaluma's economic development manager.

The first step in that fight is the appeal that will soon be sent to the Department of Finance. If that appeal is also denied, it's unclear what other steps the city could take to secure the funds, though legal action is one possibility.

Mayor David Glass, meanwhile, sent a letter to Sen. Lois Wolk, who will soon replace Mark Leno as Petaluma's state senator through redistricting. She is looking at legislative fixes to address some of the most critical redevelopment issues cities are facing, and has asked some city leaders to submit letters outlining their most critical projects. Glass's letter makes a case for the East Washington and Old Redwood Highway interchange projects, which he says the city has invested the most resources in to date.

(Contact Jamie Hansen at Jamie.Hansen@argus