City of Oakland v. Dep't of Fin.

• Decision Date: 06 May 2022
• Docket Number: C090832
• Citation: 79 Cal.App.5th 431,294 Cal.Rptr.3d 405
• Parties: CITY OF OAKLAND et al., Plaintiffs and Appellants, v. DEPARTMENT OF FINANCE et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

79 Cal.App.5th 431

294 Cal.Rptr.3d 405

CITY OF OAKLAND et al., Plaintiffs and Appellants,

v.DEPARTMENT OF FINANCE et al., Defendants and Respondents.

C090832

Court of Appeal, Third District, California.

Filed May 6, 2022

As Modified on Denial of Rehearing May 31, 2022

Burke, Williams & Sorensen, J. Leah Castella and Megan A. Burke, Oakland, for Plaintiffs and Appellants.

Rob Bonta, Attorney General, Thomas S. Patterson, Assistant Attorney General, Mark R. Beckington, Lara Haddad and Jerry T. Yen, Deputy Attorneys General, for Defendants and Respondents.

HOCH, J.

More than a decade after California dissolved its redevelopment agencies (RDA's), we continue to grapple with questions regarding the former RDA's continuing obligations. ( Cuenca v. Cohen (2017) 8 Cal.App.5th 200, 207, 213 Cal.Rptr.3d 689 ( Cuenca ); County of Sonoma v. Cohen (2015) 235 Cal.App.4th 42, 44, 184 Cal.Rptr.3d 911.) In dissolving the RDA's, the Legislature recognized that some agreements and loans made in connection with redevelopment projects would require continued funding. ( Cuenca, at p. 207, 213 Cal.Rptr.3d 689 ; Health & Saf. Code, § 34191.4, subd. (b)(2)(C)(i).)¹ As part of the Dissolution Law, the Legislature specified that enforceable obligations may be paid only under the oversight of the Department of Finance (DOF) and State Controller. ( City of Emeryville v. Cohen (2015) 233 Cal.App.4th 293, 298-299, 182 Cal.Rptr.3d 578 ( City of Emeryville ).) As relevant to this case, the primary manner in which DOF exercises its continuing oversight of payment of enforceable obligations of the former RDA's is by review of the recognized obligation payment schedule (ROPS).

This appeal focuses on two items that DOF rejected in reviewing ROPS submitted by the Successor Agency to the Oakland Redevelopment Agency (Successor Agency). The first involves item 426 in which a loan between the City of Oakland (City) and its former RDA to fund the West Oakland Projects Initiative was reinstated by resolution of the Successor Agency oversight board. The second was item 370, which relates to staffing costs required to ensure completion of several housing projects. After unsuccessful meet and confer efforts with DOF, the City and the Successor Agency sought a writ of traditional mandate in superior court to compel DOF to pay various ROPS items denied by DOF. The trial court heard the matter and issued a ruling agreeing with DOF's conclusion that none of the items for which the City and Successor Agency sought approval were enforceable obligations. The City and the Successor Agency timely appealed from the judgment.²

On appeal, appellants limit their focus to the denials of ROPS items 370 and 426. Appellants contend (1) the loan between the City and the Successor Agency relating to the West Oakland Projects Initiative constitutes an enforceable obligation under the Dissolution Law, (2) DOF lacked authority to deny funding for the West Oakland Projects Initiative on a ROPS after DOF approved the loan as an enforceable obligation, and (3) staffing costs required while the Successor Agency ensures completion of construction for various housing assets continue to be enforceable obligations of the Successor Agency.

We conclude that neither the cooperation agreement nor the funding agreement on which appellants rely constitute a loan that can be considered an enforceable obligation under the Dissolution Law. Whether considered singly or together, the cooperation and funding agreements lack the hallmarks of an actual loan but rather represent agreements to agree. Nothing in the Dissolution Law prevented DOF from reviewing the purported loan on appellants’ 2016-2017 ROPS just because DOF declined to previously review the Successor Agency oversight board's passage of a resolution purporting to reinstate the "loan." As to the staffing costs, we conclude that under the Dissolution Law, the transfer of housing assets to the City meant that all related obligations also passed to the City. Thus, the Successor Agency could no longer claim staffing costs as an enforceable obligation. Accordingly, we affirm.

BACKGROUND

Dissolution of California's Redevelopment Agencies

This court has previously explained that "[i]n the midst of California's fiscal emergency in 2011, the Legislature enacted two measures that implemented the dissolution of the roughly 400 redevelopment agencies then in existence. (Assem. Bill [No.] 26 [(2011-2012 1st Ex. Sess.) enacted by Stats. 2011, 1st Ex. Sess. 2011-2012, chs. 5-6 (Assembly Bill 1X 26)] & Assem. Bill No. 27 (2011-2012 1st Ex. Sess.) enacted by Stats. 2011, 1st Ex. Sess. 2011-2012, chs. 5-6 (Assembly Bill 1X 27); see generally [ California Redevelopment Assn. v. Matosantos (2011)] 53 Cal.4th [231,] 241, 245-246, 135 Cal.Rptr.3d 683, 267 P.3d 580 [( Matosantos I )].) Assembly Bill 1X 26 required the redevelopment agencies to conclude their activities and dissolve. ( Matosantos I, at p. 241, 135 Cal.Rptr.3d 683, 267 P.3d 580.) Although Assembly Bill 1X 27 would have allowed redevelopment agencies to continue if they paid into funds benefitting schools and special districts, the California Supreme Court struck down this alternative as conflicting with the California Constitution's prohibition on requiring such payments. ( Matosantos I , at p. 242, 135 Cal.Rptr.3d 683, 267 P.3d 580 ; Cal. Const., art. XIII, § 25.5.) After Matosantos I , redevelopment agencies had no option but to wind down and dissolve. ( City of Emeryville, supra , 233 Cal.App.4th at p. 298, 182 Cal.Rptr.3d 578.)

"Winding down California's redevelopment agencies and their projects proved to be no simple task. A year after enacting Assembly Bill 1X 26, the Legislature passed Assembly Bill [No.] 1484 [(2011-2012 Reg. Sess.)] to clarify and tighten restrictions on the funds from redevelopment projects. (Stats. 2012, ch. 26, §§ 6 -35.) In addition to winding down the redevelopment agencies, the Legislature also eliminated the tax increment. Subdivision (a) of section 34189 provides in pertinent part: ‘all provisions of the Community Redevelopment Law that depend on the allocation of tax increment to redevelopment agencies, including, but not limited to, Sections 33445, 33640, 33641, and 33645, and subdivision (b) of Section 33670, shall be inoperative.’ "Although the Legislature eliminated California's redevelopment agencies, it provided for the continuing validity of enforceable obligations previously created by the redevelopment agencies.... ( § 34171, subd. (d)(1)(D).) To ensure that claimed enforceable obligations met the criteria set forth in the Dissolution Law, the Legislature provided that ‘[e]ach oversight board ... has a fiduciary duty towards "holders of enforceable obligations and the taxing entities that benefit from distributions of property tax" ( § 34179, subd. (i) ) to carry out its duties, which include the duty to review specified actions by the successor agencies, including "[e]stablishment of the Recognized Obligation Payment Schedule." ( § 34180, subd. (g).) The recognized obligation payment schedule (ROPS) is "the document setting forth the minimum payment amounts and due dates of payments required by enforceable obligations for each six-month fiscal period ...." ( § 34171, subd. (h).) The successor agency has a duty to "[c]ontinue to make payments due for enforceable obligations." ( § 34177, subd. (a).) Thus, to help ensure the orderly windup and dissolution of the redevelopment agencies, the ROPS lists what remaining enforceable obligations exist.

" ‘To ensure each ROPS is accurate, both the [DOF] and the ... State Controller ... have the authority to require documentation of purported enforceable obligations, and they and any "taxing entity" have authority to sue "to prevent a violation under this part ...." ( § 34177, subd. (a)(2).) The [DOF] also has authority to "review an oversight board action taken pursuant to" Assembly Bill 1X 26. ( § 34179, subd. (h).)’ ( City of Emeryville, supra, 233 Cal.App.4th at pp. 298-299 .)

"Under the Dissolution Law, successor agencies could either retain responsibility for the ‘housing functions’ previously performed by the redevelopment agencies, or transfer the responsibility to a ‘ "housing successor." ’ ( § 34176, subd. (a)(1) & (3).) If a successor agency transferred responsibility to a housing successor, the housing successor assumed ‘all rights, powers, duties, obligations, and housing assets,’ except for ‘any amounts on deposit in the [Housing Fund] and enforceable obligations retained by the successor agency.’ (Id. , subd. (a)(1).) DOF is charged with responsibility to review whether a ‘transferred asset is deemed not to be a housing asset,’ in which case it must be returned for allocation to the taxing entities. (Id. , subd. (a)(2).)

"Under section 34177, ‘Successor agencies are required to [¶] ... [¶] (d) Remit unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to the taxing entities, including, but not limited to, the unencumbered balance of the [Housing Fund] of a former redevelopment agency.’ The Dissolution Law requires successor agencies to retain licensed accountants ‘to conduct a due diligence review to determine the unobligated balances available for transfer to taxing entities’ that are (1) held in the Housing Fund, and (2) former redevelopment agency assets held by the successor agency in any other form or fund. ( § 34179.5, subds. (a), (c)(1)-(5).) The successor agency must review and approve each due diligence review, followed by review and approval by DOF. ( § 34179.6.) Under section 34179.6, DOF has the prerogative to adjust the amounts deemed unencumbered. ( § 34179.6, subds. (c) & (d).) The successor agencies then remit the unencumbered moneys to the county auditor-controller, who transfers the moneys to the taxing entities. ( § 34179.6, subd. (f).)" ( Cuenca , supra , 8 Cal.App.5th at pp. 210-212, 213 Cal.Rptr.3d 689.)

West Oakland Projects...