Glendale Redevelopment Agency v. County of Los Angeles

• Citation: 184 Cal.App.4th 1388,109 Cal.Rptr.3d 815
• Decision Date: 25 May 2010
• Docket Number: Nos. B212718, B213410.,s. B212718, B213410.
• Court: California Court of Appeals
• Parties: GLENDALE REDEVELOPMENT AGENCY, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES et al., Defendants and Respondents. Redevelopment Agency of the City of Compton, Plaintiff and Appellant, v. County of Los Angeles et al., Defendants and Respondents.

184 Cal.App.4th 1388 109 Cal.Rptr.3d 815 GLENDALE REDEVELOPMENT AGENCY, Plaintiff and Appellant, v. COUNTY OF LOS ANGELES et al., Defendants and Respondents. Redevelopment Agency of the City of Compton, Plaintiff and Appellant, v. County of Los Angeles et al., Defendants and Respondents. Nos. B212718, B213410. Court of Appeal, Second District, Division 5, California. May 25, 2010.

Luce, Forward, Hamilton & Scripps, Douglas J. Evertz, Irvine; Glendale City Attorney's Office, Gillian van Muyden, General Counsel, for Plaintiff and Appellant Glendale Redevelopment Agency.

Goldfarb & Lipman, John T. Nagle, Juliet E. Cox, Oakland, for Plaintiff and Appellant Redevelopment Agency of the City of Compton.

McDonough Holland & Allen, T. Brent Hawkins, Sacramento, for Amicus Curiae on behalf of Appellants.

Elizabeth M. Cortez, Assistant County Counsel, Thomas M. Tyrrell, Principal Deputy County Counsel for Defendant and Respondent.

ARMSTRONG, J.

Appellants are community redevelopment agencies "empowered to prepare and effectuate a redevelopment plan for the elimination of blighted areas in the community." ( Marek v. Napa Community Redevelopment Agency (1988) 46 Cal.3d 1070, 1082, 251 Cal.Rptr. 778, 761 P.2d 701.) Under the California Redevelopment Law (Cal. Const., art. XVI, § 16; Health & Saf.Code, §§ 33000 et seq.),¹ they are able to fund this activity because they are entitled to a certain portion of the property tax attributable to the redevelopment project. The amount is calculated through a Statement of Indebtedness (SOI) prepared by the redevelopment agency and submitted to the taxing authority by the agency "not later than October 1 of each year." ( § 33675, subd. (b).)

Appellants submitted SOIs to the County of Los Angeles, and some time later, after realizing that the SOIs were erroneous, submitted revised SOIs which showed that they were entitled to additional funds. The County refused to accept the revised SOIs or to remit additional funds, writing that under section 33675 it had no discretion to accept an amended SOI. The two agencies filed a petition for writ of mandate, seeking an order that the County accept their revised SOIs and pay the additional sums for the year in question. The trial court denied the petition. We reverse.

The Statutory Scheme

The California Redevelopment Law (CRL) "provides for the formation of redevelopment agencies to help eradicate blight." The law was adopted in 1951, and after voter approval was made a part of the California Constitution (now in art. XVI, § 16) in 1952.² ( City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 866, fn. 7, 62 Cal.Rptr.3d 614, 161 P.3d 1168.)

Under the CRL, redevelopment is financed through tax increment financing. In essence, a redevelopment agency, which is not empowered to tax, but which is empowered to acquire debt through loans or the sale of bonds (§ 33601), finances a redevelopment project through borrowing. When the redevelopment results in increased property values in the redevelopment area, the tax attributable to the increase in value—the tax increment—is distributed by the taxing authority to a special fund of the redevelopment agency, to pay the principal of and interest on its debt. (§ 33670, subd. (b).) " 'This way, the redevelopment project in effect pays for itself.' [Citations.] )" ( City of Dinuba v. County of Tulare, supra, 41 Cal.4th at pp. 865-866, 62 Cal.Rptr.3d 614, 161 P.3d 1168; Community Development Com'n of City of Oxnard v. County of Ventura (2007) 152 Cal.App.4th 1470, 1475-1476, 62 Cal.Rptr.3d 383.)

Taxes which are not attributable to the increase in property values, but which are instead attributable to a pre-redevelopment "base year value," are distributed as they would have been had a redevelopment plan not been adopted.( Redevelopment Agency v. County of San Bernardino (1978) 21 Cal.3d 255, 259, 145 Cal.Rptr. 886, 578 P.2d 133; § 33670, subd. (a).)

Importantly, an agency is entitled to the increment only in the amount of its indebtedness, less available revenue. (§ 33675, subd. (g).) Any tax increment in excess of that amount is distributed as base year taxes are distributed. (§ 33670, subd. (b).)

The amount of tax increment to which an agency is entitled each year is calculated through an annual SOI. Under section 33675 "(b) Not later than October 1 of each year, for each redevelopment project for which the redevelopment plan provides for the division of taxes pursuant to Section 33670, the agency shall file, with the county auditor or officer described in subdivision (a), a statement of indebtedness and a reconciliation statement certified by the chief financial officer of the agency." The statute specifies the information about debt and revenue which must be included in the SOI.

Facts ³

In September 2006, appellant Glendale Redevelopment Agency (the Glendale Agency) submitted a fiscal year 2006-2007 SOI for its San Fernando Road Corridor Redevelopment Project Area. This SOI showed $11,645,880 of indebtedness and $7,069,024 in available revenue. The County distributes property taxes over 10 months, beginning in November, and based on the SOI, it distributed $4,576,856 to the Glendale agency. This was $2.2 million less than the total tax increment created by the redevelopment project. That tax increment was distributed to other agencies, including the County's general fund.

However, in May 2007, the Glendale Agency realized that its SOI had omitted debt associated with a 2000 Owner Participation and Development Agreement (OPA) between the Agency and the Walt Disney Company. The CRL provides that a redevelopment agency may pledge its tax increment to fund expenses related to a certain project and that such a pledge "shall have priority over any other claim to those taxes not secured by a prior express pledge of those taxes." (§ 33671.5.) Pursuant to this statute, the Glendale Agency had pledged 75 percent of the tax increment attributable to the OPA. The County knew of this indebtedness and the pledge, having entered into an agreement with the Glendale Agency and the City of Glendale, under which the County agreed to pass back to the Glendale Agency a portion of the County's share of tax increment. On May 24, 2007, the Glendale Agency submitted a revised 2006-2007 SOI to the County, reflecting the Disney OPA.

The revised SOI for appellant Redevelopment Agency of the City of Compton (the Compton Agency) concerns fiscal year 2005-2006. The Compton Agency's SOI for that year both overstated revenue and understated debt. Pursuant to this SOI, Compton was allocated $13,351,015 in tax increment payments, leaving $4.3 million in tax increment. That sum was distributed to other entities. The Compton Agency submitted its revised 2005-2006 SOI on January 16, 2007, showing that it was entitledto the entire tax increment for 2005-2006.

In each instance, the County refused to accept the revised SOI, writing that the County "has no discretion to accept an amended Statement of Indebtedness (SOI) after the statutory deadline, much less to reallocate property tax revenues on that basis."

With their petitions, appellants produced evidence that it was not unusual for the County to make adjustments to correct accounting discrepancies or to correct miscodings. For example, in 2004, the County acknowledged that over a period of three years, the County had paid approximately $293,000 of the Azusa Redevelopment Agency's tax increment to the Los Angeles County Fire Protection District, and agreed to reallocate funds so that the agency received all the increment which was due to it.

Discussion

The parties agree, correctly, that the issue is statutory interpretation and our review is de novo. ( Redevelopment Agency of the City of Long Beach v. County of Los Angeles (1999) 75 Cal.App.4th 68, 74, 89 Cal.Rptr.2d 10.)

Appellants contend that section 33675 is silent on the question of revised SOIs, and is ambiguous. They ask us to construe the statute in light of the CRL as a whole, and argue that the statute does not prohibit the County from accepting, and acting on, a revised SOI, and that the County has a duty to distribute the additional tax increment. They cite the statutory and constitutional requirement that tax increment which reflects revenues and debt "shall" be distributed to the redevelopment agency (Cal. Const., art. XVI, § 16; § 33670, subd. (b), § 33675, subd. (a)) and point out that under the County's reading of the statute, that revenue is instead given to entities which have no statutory or constitutional entitlement to it. They also point out that the entire statutory and constitutional scheme for community redevelopment depends on a market for redevelopment agencies' debt, and argue that if an error in a SOI cannot be corrected, and tax increment may be distributed to other agencies, the stability of that market is threatened.

The County sees no ambiguity, and argues that with section 33675, the Legislature limited the time within which an agency can claim a given year's tax increment. The County further argues that the Legislature was empowered to enact such a limit, citing California Constitution, article XVI, section 16, which provides, inter alia, that "[t]he Legislature may provide that any redevelopment plan may contain a provision" for the tax increment financing and that "[t]he Legislature shall enact those laws as may be necessary to enforce the provisions of this section." (Cal. Const., art. XVI, § 16.) The County sees appellants' argument as a facial challenge to section 33675'sconstitutionality and argues that "restrictions on the authority of the Legislature are to be strictly construed...." ( Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1217, 70 Cal.Rptr.2d 745.)

We agree with appellants. Section 33675 is ambiguous. The statute does, as the County argues, provide that an agency "shall" file an SOI no later than October 1, but we cannot see that with that language, it also provided that...