City of Huntington Beach v. Bosler

• Decision Date: 03 December 2018
• Docket Number: C076809
• Parties: CITY OF HUNTINGTON BEACH et al., Plaintiffs and Appellants, v. KEELY BOSLER, AS DIRECTOR, ETC. et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

CITY OF HUNTINGTON BEACH et al., Plaintiffs and Appellants, v. KEELY BOSLER, AS DIRECTOR, ETC. et al., Defendants and Appellants.

C076809

COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)

December 3, 2018

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 34201380001441CUWMGDS)

This appeal arises from the "Great Dissolution" legislation freezing operations of community redevelopment agencies (RDAs) and then dissolving them and winding-up their affairs. (Health & Saf. Code, §§ 34161-34169.5 [Part 1.8 freeze component], and Health & Saf. Code, §§ 34170-34191.6 [Part 1.85 dissolution component]; statutory section references that follow are found in the Health and Safety Code unless otherwise set forth.)

Plaintiffs/petitioners -- City of Huntington Beach, "Successor Agency to the [former] Redevelopment Agency of the City of Huntington Beach" (Successor Agency), and Huntington Beach Housing Authority (Housing Authority) -- collectively, the City -- appeal from a judgment insofar as it partially denied their petition for writ of traditional mandate and complaint for declaratory and injunctive relief, against defendants Keely Bosler as director of California Department of Finance (DOF) -- and other defendants (e.g., State Board of Equalization or BOE) and real parties in interest who take no position in this appeal. Successor Agency is the former RDA's successor for purposes of winding up the former RDA's affairs. (§ 34173.) The Housing Authority is the new entity for implementing the still-existing community development laws (§ 34176). We refer to BOE despite the 2017 reassignment of much of its work to the California Department of Tax and Fee Administration. (Gov. Code, §§ 15570, 15570.22; Rev. & Tax. Code, § 20.5.)

The City argues on appeal that, under the dissolution laws, its former RDA's financial obligations in two projects -- the Pacific City project and the Emerald Cove project -- remain "enforceable obligations" payable from property tax revenues despite dissolution of the former RDA.

Bosler cross-appealed from the trial court's disallowance of certain statutory enforcement remedies as invalid under California Constitution, article XIII, section 24, subdivision (b), but we granted her request to dismiss the cross-appeal in light of case law decided while this matter was pending.

We grant City's November 19, 2015, request for judicial notice of DOF's May 13, 2014, Finding of Completion acknowledging payment in full by Successor Agency (§§ 34179.6-34179.7).

We allowed an amicus curiae brief in support of the City to be filed by the Public Interest Law Project (PILP or Public Counsel).

We shall conclude the appeal lacks merit, and we affirm the judgment.

THE HISTORY OF REDEVELOPMENT AGENCIES

Before dissolution, the Community Redevelopment Law (CRL), section 33000 et seq., authorized cities and counties to form community RDAs to assist in revitalizing blighted areas. Funding was provided by "tax increment financing," authorized by California Constitution, article XVI, section 16. (Cuenca v. Cohen (2017) 8 Cal.App.5th 200, 209 (Cuenca).) Tax increment financing allowed former RDAs, which did not have the power to tax, to finance redevelopment projects through loans or the sale of bonds. (Rogel v. Lynwood Redevelopment Agency (2011) 194 Cal.App.4th 1319, 1322.) Public entities entitled to receive property tax revenue in a redevelopment project area were allocated a portion based on assessed value before the effective date of the redevelopment plan. (Cuenca, at pp. 209-210.) Tax increment created by the increased value of project area property went to the RDA for repayment of debt incurred to finance the project. (Cal. Const., art. XVI, § 16, subds. (a), (b); § 33670, subds. (a), (b); Cuenca, at p. 210.) In essence, property tax revenues for entities other than the RDA were frozen, while revenue from any increase in value was awarded to the RDA on the theory that the increase was the result of redevelopment. (Cuenca, at p. 210.)

"Over the years, 'a perception had grown that some [RDAs] were used as shams to divert property tax revenues that otherwise would fund general local governmental services . . . .' [Citations.]" (Cuenca, supra, 8 Cal.App.5th at p. 210.) RDAs entered agreements with their "sponsor[] entities," i.e., cities, counties, or cities and counties, that created the RDAs and staffed RDA boards with officials of the sponsoring entity. (§ 34171, subd. (n); City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 855 (Tracy).) These "sponsor agreements" locked up an ever-increasing share of local property taxes. (Tracy, at pp. 855-856.)

In January 2011, Governor Brown initiated a public discussion about abolishing RDAs, in partial response to a state budget crisis, and in June 2011 the Legislatureenacted the Dissolution Law freezing RDA operations and providing an orderly process for dissolving RDAs and winding up their affairs. (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 250 (Matosantos); City of Pasadena v. Cohen (2014) 228 Cal.App.4th 1461, 1463-1467.)

Our Supreme Court upheld the law dissolving RDAs (commonly "AB 26," shorthand for Assem. Bill No. 1X 26; Stats. 2011, 1st Ex. Sess. 2011-2012, ch. 5), but invalidated a companion law (not at issue here) that would have allowed the continuation of RDAs in certain circumstances. (Matosantos, supra, 53 Cal.4th 231.) As therein described, Assembly Bill No. 26 consisted of two principal components, codified in two new parts of the Health and Safety Code. Part 1.8 (§§ 34161-34169.5) was the "freeze" provision, effective immediately upon gubernatorial signature on June 28, 2011, and Part 1.85 (§§ 34170-34191.6) was the "dissolution component." The latter dissolution component did not become operative until after the decision in Matosantos, which lifted a judicial stay of Part 1.85 and reformed its effective date from October 1, 2011, to February 1, 2012. (See Matosantos, at pp. 250-251, 274-275.)

The 2011 legislation made successor agencies responsible for winding down the outstanding "enforceable obligations" of the former RDAs. Successor agencies, the boards of which usually are also the officials of the former sponsoring entity, are separate legal entities from the sponsor. (§§ 34171, subds. (j), (d), 34173, subd. (g); City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 491, fn. 2 (Brentwood).)

To wind down affairs of the former RDAs, successor agencies were to submit Recognized Obligations Payment Schedules (ROPS) to DOF, which determines whether the obligations are enforceable under the dissolution laws and authorize distribution of funds from the Redevelopment Property Tax Trust Funds (RPTTF or Trust Funds) to pay outstanding "enforceable obligations." (§§ 34171-34172, 34177, 34179, 34182-34183.)

The freeze component of the 2011 legislation did not clearly exclude sponsor agreements from the definition of enforceable obligations. "During the freeze [beginningJune 2011], [RDAs] were authorized to continue distributing tax increment pursuant to enforceable obligations, the definition of which included 'sponsor agreements' between a former [RDA] and its sponsor agency." (Brentwood, supra, 237 Cal.App.4th at p. 494, citing §§ 34167, subd. (d) [enforceable obligations included "[l]oans of moneys borrowed by the [RDA] for a lawful purpose . . . to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms" and any legally binding and enforceable agreement or contract that is not otherwise void as violating public policy], § 34169, subd. (a) [until successor agencies are in place, RDAs shall continue to make scheduled payments for enforceable obligations as defined in § 34167, subd. (d)].)

However, the freeze component of the 2011 legislation acknowledged concern about potential abuse beginning in January 2011, when the Governor first proposed abolishing RDAs. Thus, under section 34167.5, as enacted in the freeze component of the Dissolution Law, "the Controller shall review the activities of [RDAs] in the state to determine whether an asset transfer has occurred after January 1, 2011 [italics added]" between an RDA and the sponsoring entity that created the RDA. If the assets were not contractually committed to a third party, the Controller was to order the return of the assets to the RDA. (§ 34167.5, as added by Stats. 2011-2012, 1st Ex.Sess., ch. 5 (A.B. 26) § 6, eff. June 29, 2011; see also, § 34167, subd. (a) [freeze component was intended to preserve corpus of RDA funds so they may use to fund core governmental services including police and fire protection services and schools].)

In the dissolution component, the 2011 legislation excluded sponsor agreements from the definition of enforceable obligations. (§ 34171, subd. (d)(2) [" 'enforceable obligation' does not include any agreements, contracts, or arrangements between the city . . . that created the [RDA] and the former [RDA]"; Brentwood, supra, 237 Cal.App.4th at p. 494.) "[T]he Legislature could well recognize that because of the conjoined nature of the governing boards of redevelopment agencies and their community sponsors, suchobligations often were not the product of arm's-length transactions." (Matosantos, supra, 53 Cal.4th at p. 258, fn. 12.)

In 2012, the Legislature enacted Assembly Bill No. 1484 ("AB 1484," Stats. 2012, ch. 26, eff. June 27, 2012) adding restrictions to the dissolution process. To the extent not clearly provided by the 2011 legislation, "[t]he 2012 audit process [AB 1484] represents a legislative rethinking in light of the resulting scurry on the part of sponsors and their...