Opinion
C076296
05-11-2020
CITY OF WATSONVILLE, Plaintiff and Appellant, v. KEELY BOSLER et al., as Director, etc., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 34201380001523CUWMGDS)
This is another case arising out of the dissolution of California's redevelopment agencies (RDAs). Petitioner City of Watsonville (the City) filed a petition for a writ of mandate and complaint against the Department of Finance and its Director (collectively DOF). The City asserted that: (1) DOF improperly refused to recognize that a 2011 cooperation agreement (the Cooperation Agreement) between the City and the former Watsonville RDA (the RDA or the former RDA), "reentered" under Health and Safety Code section 34178, subdivision (a), after initially being invalidated, represented an enforceable obligation; (2) DOF's refusal to acknowledge a loan from the City's Water Enterprise Fund (the Water Fund loan) to the former RDA as an enforceable obligation was unconstitutional under Proposition 218; and (3) in its due diligence review (DDR), DOF improperly disallowed more than $4 million in loan repayments the former RDA paid to the City under certain financing agreements. The trial court denied the petition and complaint in all respects, and the City appeals, raising the same three primary issues on appeal. We agree with the City concerning the reentered Cooperation Agreement only and modify accordingly.
Further undesignated statutory references are to the Health and Safety Code.
California Constitution, articles XIII C and XIII D, added by Proposition 218, adopted by voters, General Election (Nov. 6, 1996) (Proposition 218).
We note here that we received and considered the brief of amici curiae County of Santa Clara, County of Santa Clara Auditor-Controller, and Santa Clara County Office of Education, as well as the City's responsive brief.
FACTUAL AND PROCEDURAL BACKGROUND
General and Statutory Background
"In 1945, the Legislature authorized cities and counties to form community redevelopment agencies to address issues of urban decay in California. [Citations.] In 1951, the Legislature renamed the statutory scheme as the Community Redevelopment Law (CRL) and codified it at section 33000 et seq. [Citations.] 'The Community Redevelopment Law "was intended to help local governments revitalize blighted communities." ' [Citations.] Included in the aim of the CRL was the goal 'to increase the supply of low- and moderate-income housing.' " (Cuenca v. Cohen (2017) 8 Cal.App.5th 200, 209 (Cuenca).)
RDAs generally could not levy taxes, and, instead relied on tax increment financing. (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 246 (Matosantos).) "Under this method, those public entities entitled to receive property tax revenue in a redevelopment project area (the cities, counties, special districts, and school districts containing territory in the area) are allocated a portion based on the assessed value of the property prior to the effective date of the redevelopment plan. Any tax revenue in excess of that amount—the tax increment created by the increased value of project area property—goes to the redevelopment agency for repayment of debt incurred to finance the project. [Citations.] In essence, property tax revenues for entities other than the redevelopment agency are frozen, while revenue from any increase in value is awarded to the redevelopment agency on the theory that the increase is the result of redevelopment." (Id. at pp. 246-247.)
In 2011, to address a state fiscal crisis, the Legislature enacted Assembly Bill No. 26 (Assem. Bill No. 1X 26 (2011-2012 1st Ex. Sess.) ch. 5 (AB 1X 26)) to effect the dissolution of the RDAs, the elimination of the tax increment, and the transfer of property taxes back to local governments and schools. (City of Montclair v. Cohen (2018) 20 Cal.App.5th 238, 244 (Montclair); Cuenca, supra, 8 Cal.App.5th at p. 207.) "As described by our high court in Matosantos, Assembly Bill No. 1X 26 consisted of two principal components, codified in two new parts of the Health and Safety Code. Part 1.8 was the 'freeze' provision, effective immediately upon gubernatorial signature on June 28, 2011, and part 1.85 was the 'dissolution component.' [Citation.] The latter did not become operative until after the decision in Matosantos, which lifted a judicial stay of part 1.85 and reformed its effective date to February 1, 2012." (City of Grass Valley v. Cohen (2017) 17 Cal.App.5th 567, 573-574 (Grass Valley).)
As stated in section 34167, part 1.8, the freeze component, "is intended to preserve, to the maximum extent possible, the revenues and assets of redevelopment agencies so that those assets and revenues that are not needed to pay for enforceable obligations may be used by local governments to fund core governmental services including police and fire protection services and schools. It is the intent of the Legislature that redevelopment agencies take no actions that would further deplete the corpus of the agencies' funds regardless of their original source. All provisions of this part shall be construed as broadly as possible to support this intent and to restrict the expenditure of funds to the fullest extent possible." (§ 34167, subd. (a).)
While the freeze component froze RDA assets and prohibited RDAs from entering into new business (§ 34163), it did allow RDAs to continue to make payments on and perform what it referred to as "enforceable obligations" until successor agencies were authorized pursuant to part 1.85. (§ 34169.) Enforceable obligations were defined, for purposes of part 1.8, in section 34167, subdivision (d).
Section 34167.5, effective June 29, 2011, provided, in pertinent part, "the Controller shall review the activities of redevelopment agencies in the state to determine whether an asset transfer has occurred after January 1, 2011, between the city or county, or city and county that created a redevelopment agency or any other public agency, and the redevelopment agency. If such an asset transfer did occur during that period and the government agency that received the assets is not contractually committed to a third party for the expenditure or encumbrance of those assets, to the extent not prohibited by state and federal law, the Controller shall order the available assets to be returned to the redevelopment agency or, on or after October 1, 2011, to the successor agency, if a successor agency is established pursuant to Part 1.85 (commencing with Section 34170)."
As stated ante, the dissolution component, part 1.85, ultimately became operative on February 1, 2012. (§ 34170, subd. (a); Matosantos, supra, 53 Cal.4th at pp. 274-276.) It dissolved all RDAs and transferred control of RDA assets to successor agencies. (§§ 34171, subd. (j), 34173, 34175, subd. (b).) The dissolution component required successor agencies to remit all unencumbered balances of RDA funds to the county auditor-controller for distribution to other local agencies. (§§ 34177, subd. (d), 34183, subd. (a)(4), 34188.) It also required successor agencies to continue to make payments on and perform the former RDAs' enforceable obligations. (§ 34177.)
Under the dissolution component, successor agencies were required to submit Recognized Obligation Payment Schedules (ROPS) at specified intervals, "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 dissolution component also modified the definition of an "enforceable obligation" to exclude agreements between RDAs and the city, county, or city and county that formed the RDA. "While the former redevelopment agencies were legal entities separate from the city or county that created them, the governing body of the sponsoring agency generally governed them. Thus, in many situations, the same decision makers made decisions wearing two hats and, in essence, negotiated with themselves. In other words, decision makers, sitting as members of a city council, entered into reimbursement and funding agreements with the same decision makers, sitting as board members of the redevelopment agency the city created. [Citation.] The statutory scheme dissolving and winding down the redevelopment agencies thereafter swapped a successor agency for the redevelopment agency, but the decision makers in most cases remain the same—the members of the city council. Attuned to the conjoined nature of many of these decisionmaking bodies, the Legislature declared that 'agreements, contracts, or arrangements between the city or county, or city and county that created the redevelopment agency and the redevelopment agency are invalid and shall not be binding on the successor agency.' " (Montclair, supra, 20 Cal.App.5th at p. 244, quoting § 34178, subd. (a).) Thus, under the new definition, generally, any agreements, contracts, or arrangements between the city, county, or city and county that created the RDA and the former RDA did not constitute an "enforceable obligation." (§§ 34171, subd. (d)(2), 34178, subd. (a).) However, "a successor entity wishing to enter or reenter into agreements with the city, county, or city and county that formed the redevelopment agency that it is succeeding may do so subject to" certain statutory restrictions, and upon obtaining approval of its oversight board. (§ 34178, subd. (a).)
Each successor agency was to have an oversight board of seven members selected pursuant to the terms of section 34179.
In June 2012, the Legislature enacted legislation to "clean[ ]up" AB 1X 26. (Assem. Bill No. 1484 (2011-2012 Reg. Sess.); Stats. 2012, ch. 26 (AB 1484).) (City of Petaluma v. Cohen (2015) 238 Cal.App.4th 1430, 1434, fn. 4.) Together AB 1X 26 and AB 1484 are referred to as the dissolution law. (Petaluma, at p. 1434, fn. 4.)
Section 34179.5, added by AB 1484 and effective June 27, 2012, mandates "an audit of successor agencies to determine whether unobligated tax increment revenues were available for transfer to taxing entities. [Citations.] This due diligence review (DDR) [citation] identified '[t]he dollar value of assets and cash . . . transferred after January 1, 2011, through June 30, 2012, by the redevelopment agency or the successor agency to [a sponsoring entity] and the purpose of each transfer.' [Citation.] Assembly Bill No. 1484 required the successor agency to submit the results of this audit to the successor agency's oversight board [citation] and to the [DOF], which had the authority to adjust any amounts in the DDR [citation]. The bill did not change the general definition of 'enforceable obligations' that had excluded agreements between a former RDA and its creator, with exceptions." (Grass Valley, supra, 17 Cal.App.5th at p. 574.)
"This case in part involves what the parties loosely refer to as 'clawbacks.' [Citations.] This refers to the administrative unwinding (via the DDR) of specified RDA transactions that occurred after the Great Dissolution was proposed in January 2011. The period subject to clawbacks is from January 1, 2011, to June 30, 2012. It includes but is not limited to the approximate six-month period . . . described in the legislative history as the 'fire sale' of RDA assets, which lasted until the freeze took effect in June 2011." (Grass Valley, supra, 17 Cal.App.5th at p. 574.)
The Three Challenged DOF Determinations
The Cooperation Agreement
An RDA memorandum dated January 20, 2011, stated as its subject: "Cooperation Agreements between City and [RDA] Authorizing Expenditure of Tax Increment Funds for Specified Public Improvements and Redevelopment Activities and Adopting Findings Required by . . . Section 33445." The memorandum addressed this as an agenda item for the January 25, 2011, joint meeting of the Watsonville City Council (the City Council) and the RDA. The recommendation in the memorandum was to "[a]dopt a resolution approving a Cooperation Agreement between the City . . . and the [RDA] and making certain findings by which the City will implement and carry out specified public projects to be funded by the" RDA. The memorandum began its discussion of the relevant background by noting that, on January 10, 2011, the Governor in his state budget proposal proposed the elimination of RDAs, and further noted the likelihood of urgency legislation which would prevent RDAs from entering into new debt obligations and "would capture all tax increment and bond proceeds that the [RDAs] had not encumbered." The memorandum noted that the RDA's Watsonville 2000 Redevelopment Project Area had approximately $4 million that had "not yet officially been encumbered," and observed that it was possible this money would be redirected. The RDA staff recommended that the City Council and the RDA board consider entering into a cooperation agreement to be executed and become effective prior to the urgency legislation so that the RDA could "create a debt obligation in advance of the urgency legislation." By this cooperation agreement, the RDA intended to "obligate both existing funds and future property tax increment in the project area for implementation of [a] list of public improvement projects that the City would include in its capital improvement plan or similar document." The memorandum specified that "[a]pproval of the Cooperative Agreement is not necessarily approval of the projects contained on the list, many of which will require a separate public hearing process prior to final discretionary approval by the City Council or the" RDA. "Therefore, the City and the [RDA] reserve discretionary authority to deny a particular project prior to implementation; and, if positive discussion ensues between [RDAs] and the State, resulting in a more equitable sharing of the budget burden, the Cooperation Agreement may be amended accordingly by the City and the" RDA. The memorandum included an attachment of projects "identified in past years . . . ."
On January 25, 2011, the City Council approved and adopted the proposed Cooperation Agreement, effective immediately. Under the terms of the Cooperation Agreement, the RDA granted to the City, and the City accepted, a grant in an amount not to exceed $187,380,500 for use by the City to complete programs and projects contained on an attachment as exhibit A. Exhibit A included 21 projects, several of which consisted of discrete phases and subprojects. Some of the proposed projects were described with some specificity while others were more general and vague ("Trail Projects," "Business Loans," "Water Projects"). The total dollar value for all of the projects combined was $187,380,500. The source of the funds for the grant included all funds currently held by the RDA and not otherwise encumbered, and, essentially, all future tax increment revenue allocated to the RDA. The Cooperation Agreement provided that the City and the RDA would confer periodically to review and prioritize the projects, and it further contemplated that the City and the RDA could change the plan from time to time. It further provided that the public improvement projects on the attachment "may be modified by the City Manager on behalf of the City and the Executive Director on behalf of the" RDA. The Cooperation Agreement further specified, in Section 3.4, entitled "No Third Party Beneficiaries," that "[n]o person or entity other than the [RDA], the City and their permitted successors and assigns, shall have any right of action under this Agreement." (Underlining omitted.)
Petitioners assert that the Cooperation Agreement, and exhibit A, contemplated 20 projects. We count 21 projects listed on exhibit A.
In connection with the Cooperation Agreement, the City ultimately entered into contracts with three vendors for the completion of City projects (collectively the 2011 Third Party Contracts). The City contracted with: (1) GSE Construction Co., Inc., for the "Well 10 Modifications Project," "Project No. WA-11-02," in an agreement signed by the City Manager on November 3, 2011; (2) EcoPlexus/Bass Electric for the "Municipal Building Rooftop Solar Project," in an agreement signed by the City Manager on August 30, 2011; and (3) Pacific Electric Contracting for the "Main Street Streetlight Retrofit Project, Phase 2," in an agreement signed by the City Manager on January 5, 2012. In an amended ROPS for the period from January through June, 2012 (ROPS I), the City, as successor agency to the RDA, listed the outstanding debt/obligation for these three projects as $246,500, $1,781,262, and $387,450, respectively. However, ROPS I listed no "2011/12 Balance Due" under these line items, and listed no payments by month for the period covered.
By resolution adopted on April 11, 2012, pursuant to section 34178, subdivision (a), the Oversight Board for the former RDA reentered and reaffirmed the Cooperation Agreement, "but only to the extent of the City's obligations under the 2011 Third Party Contracts . . . ."
DOF Denial: By letter dated April 23, 2012, DOF stated that the ROPS line items corresponding to the foregoing three items did not qualify as enforceable obligations, stating that these items "in the amount of $2.4 million is for unencumbered project funding balances. [S]ection 34163(b) prohibits a redevelopment agency from entering into a contract with any entity after June 27, 2011." In a subsequent letter dated May 10, 2012, DOF stated that the corresponding line items in a revised ROPS did not qualify as enforceable obligations because the items set forth in those line items were "for unencumbered project balances. The contracts provided were signed after June 27, 2011. HSC section 34163(b) prohibits a redevelopment agency from entering into new contracts with any entity after June 27, 2011."
The Water Fund Loan
By resolution adopted on May 25, 2004, and agreement executed on May 27, 2004, the City agreed to loan $1,243,601 to the RDA from the City Water Enterprise Fund. The loan was made so that the RDA could repay the County of Santa Cruz for a tax increment overpayment to the RDA for fiscal years 2001-2002 and 2002-2003. The loan term was to be 20 years with an interest rate fixed at 2.5 percent over the first five years, and thereafter set at the pooled rate for city investments.
"Advance due Water Enterprise Fund (P&I) For County Error for FY's 2001-02 & 20[0]2-03" was listed on ROPS I, line item 10, with an outstanding debt/obligation amount of $825,650.12. No amount was listed for 2011/2012 balance due. On the ROPS for the period covering July through December 2012 (ROPS II), line item 8 was the same. The ROPS for the period covering January through June 2013 (ROPS III) included this item, stated that the total outstanding debt or obligation was $720,253, and stated that $60,022 was due during fiscal year 2012-2013.
DOF Denial: In a letter dated October 4, 2012, DOF stated that this line item on ROPS III did not qualify as an enforceable obligation, stating that "section 34171 (d) (2) states that agreements, contracts, or arrangements between the city that created the . . . (RDA) and the former RDA are not enforceable. This shall remain the case until a finding of completion is issued by [DOF] and the oversight board makes a finding that the loan was for legitimate redevelopment purposes according to . . . section 34191.4 (b). Therefore, these items are not enforceable obligation[s] and not eligible for funding on this ROPS."
A December 18, 2012, letter, which followed a meet and confer session on November 13, 2012 (see §§ 34177, 34179.6), stated that it superseded the October 4, 2012, letter. DOF stated: DOF "continues to deny this item at this time. [DOF] previously denied this item per . . . section 34171 (d) (2) which states 'enforceable obligation' does not include any agreements, contracts, or arrangements between the city that created the [RDA] and the former [RDA]. However, written agreements entered into at the time of issuance of indebtedness obligations and solely for the purpose of securing or repaying those indebtedness obligations or loan agreements entered into between the [RDA] and the city that created it, within two years of the date of creation of the [RDA], may be deemed to be enforceable obligations. None of these exceptions apply. The loan was neither issued within the first two years of the creation of the former RDA, nor was it entered into at the time of issuance of the indebtedness solely for the purposes of securing or repaying indebtedness; therefore, this item is not an enforceable obligation at this time. Per . . . section 34191.5 (b), upon obtaining a Finding of Completion from [DOF], loan agreements entered into between the [RDA] and the city, county, or city and county that created the [RDA] shall be deemed to be enforceable obligations provided the oversight board makes a finding the loan was for legitimate redevelopment purposes."
The Financing Agreements
In June 2006, the City and the RDA entered into the "Parking Structure" public improvement financing agreement. This agreement contemplated the transfer of a maximum sum of $3,236,651 to be paid by the RDA to the City through the use of tax increment funds for the purpose of reimbursing the City for a portion of the costs the City incurred in connection with the design and construction of a public parking structure. Also in June 2006, the City and the RDA entered into the "Civic Center Plaza" financing agreement (collectively the Financing Agreements). This agreement contemplated the transfer of a maximum sum of $1,192,579 to be paid by the RDA to the City through the use of tax increment funds for the purpose of reimbursing the City for a portion of the costs the City incurred in connection with the design and construction of a community room, library, and expansion space.
In a City memorandum dated March 3, 2011, relevant to a City Council and RDA meeting agenda item on March 8, 2011, the City and the RDA stated a desire to amend certain agreements, including the Financing Agreements, "to clarify and ratify that immediate payment is permissible for these legitimate [RDA] debt obligations to the City because of possible changes in redevelopment agency law." By resolutions dated March 8, 2011, the Financing Agreements were amended to state, " 'The [RDA] shall disburse all or any portion of the Maximum Reimbursement Amount to the City upon demand of the City.' "
By resolution also adopted on March 8, 2011, the City Manager was "instructed to immediately demand payment of all unpaid amounts remaining under . . . the two 2006 Public Improvements Agreements, as amended." The resolution further directed the Executive Director to "take all actions necessary or appropriate to obtain immediate repayment of all funds under said . . . agreements, as amended." The subject amounts were transferred to the City on March 9, 2011.
DOF Denial: DOF reviewed the ensuing transfer of money in its DDR. In a letter dated March 26, 2013, DOF stated, in effect, that assets transferred to the City between January 2011 and June 2012, in the amount of $4,466,870, which included the $4,429,230 encompassed in the Financing Agreements, were not enforceable obligations. According to DOF, these transfers were pursuant to agreements between the City and the former RDA, and, as such, were excluded under section 34179.5, subdivision (b)(2). DOF did state that, upon receiving a finding of completion, some of the agreements could become enforceable and eligible for funding on a subsequent ROPS.
Petition, Hearing, and Trial Court's Judgment
The City filed a petition for a writ of mandate and complaint for declaratory and injunctive relief. Among other things, the City sought a judgment finding that the Cooperation Agreement between the successor agency and the City, which had been reentered pursuant to section 34178, subdivision (a), and approved by the Oversight Board, was a valid, enforceable obligation; finding that DOF's refusal to acknowledge that the Water Fund loan was an enforceable obligation was unconstitutional in violation of Proposition 218; and requiring DOF to retract its DDR determinations concerning the Financing Agreements.
The trial court held oral argument on November 22, 2013. In its ruling on the submitted matter, the trial court recited that the City "contend[s] that DOF has committed three errors. First, DOF improperly refused to recognize a 'revived' agreement between the City and its former [RDA] [the Cooperation Agreement] as an enforceable obligation under . . . § 34178(a). Second, as part of its [DDR] under . . . § 34179.5, DOF improperly disallowed over four million dollars in loan repayments that the former [RDA] paid to the City prior to enactment of the Dissolution Law [the Financing Agreements]. Third, DOF improperly determined that a loan from the City's Water Enterprise Fund [the Water Fund Loan] to the former [RDA] does not qualify as an enforceable obligation under . . . § 34171(d)(2)." (Fn. omitted.) The court denied the petition in all respects. The trial court filed judgment denying the petition, entering judgment in favor of DOF on all causes of action, and awarding DOF costs.
DISCUSSION
I. Statutory Construction and Standard of Review
The matters at issue here turn, at least in part, on statutory interpretation. " 'The rules governing statutory construction are well established. Our objective is to ascertain and effectuate [the] legislative intent.' [Citations.] The same rules of construction apply when interpreting a voter initiative. [Citation.] [¶] In determining legislative or voter intent, we first look to the language itself. [Citation.] 'If the language is clear and unambiguous there is no need for construction, nor is it necessary to resort to indicia of the intent of the Legislature . . . .' [Citation.] 'But the "plain meaning" rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose . . . .' [Citation.] Moreover, ' "where a word of common usage has more than one meaning, the one which will best attain the purposes of the statute should be adopted, even though the ordinary meaning of the word is thereby enlarged or restricted and especially in order to avoid absurdity or to prevent injustice." ' " (City of Cerritos v. State of California (2015) 239 Cal.App.4th 1020, 1034-1035 (Cerritos).)
"When the language is ambiguous, we refer to other indicia of legislative or voter intent such as legislative history, public policy, or analyses and arguments contained in the official voter information guide. [Citations.] Our task is simply to interpret and apply the language of a statute or initiative so as to effectuate the Legislature's or electorate's respective intent. [Citation.] [¶] Courts must also construe words in context, 'keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible.' [Citation.] Every statute, then, should be construed in light of the whole system of law of which it is a part, so that all may be harmonized and have effect." (Cerritos, supra, 239 Cal.App.4th at p. 1035.)
"Finally, it is established that where ' " 'the terms of a statute are by fair and reasonable interpretation capable of a meaning consistent with the requirements of the Constitution, the statute will be given that meaning, rather than another in conflict with the Constitution.' " ' [Citations.] This rule flows from the assumption that the legislative body intended to enact a valid statute. [Citation.] 'We presume that the Legislature understands the constitutional limits on its power and intends that legislation respect those limits.' " (Cerritos, supra, 239 Cal.App.4th at p. 1035.)
"While we accord at least ' "weak deference" ' to an agency's interpretation of its governing statutes where its expertise gives it superior qualifications to do so [citation], the issue nonetheless is one subject to our de novo review." (County of Sonoma v. Cohen (2015) 235 Cal.App.4th 42, 47 (Sonoma).)
II. The "Revived" Cooperation Agreement
A. The City's Contentions
The City asserts that DOF abused its discretion in rejecting the reentered Cooperation Agreement. The City asserts that the Oversight Board validly approved reentry into the Cooperation Agreement, as it was authorized to do pursuant to section 34178, subdivision (a). The City further asserts that the Cooperation Agreement as originally entered into required the RDA to grant to the City all tax increments remaining after it satisfied its other obligations and required the City to use those funds for the public improvement projects appearing on exhibit A, and that these mutual, binding obligations created an enforceable agreement prior to dissolution. In short, the City asserts that the Cooperation Agreement was sufficient to give rise to a valid, binding agreement. The City asserts that, when the Oversight Board approved reentry into the Cooperation Agreement, it validly modified the approved projects to the three projects contemplated by the 2011 Third Party Contracts. The City asserts that the fact that the 2011 Third Party Contract obligations did not exist until after execution of the Cooperation Agreement was irrelevant. The City further asserts that, contrary to DOF's contentions before the trial court, the Cooperation Agreement was not invalidated by the subsequent enactment of AB 1484. We agree with the City.
B. Analysis
1. Reentry Into Agreements Generally
DOF asserts that the Cooperation Agreement was not an enforceable obligation on the successor agency's ROPS submissions because section 34171, subdivision (d)(2), invalidated such agreements. The City on appeal acknowledges, as it did in oral argument before the trial court, that AB 1X 26 invalidated agreements between former RDAs and the cities that created them (§ 34171, subd. (d)(2)), and therefore the Cooperation Agreement, as initially entered into between the RDA and the City, became unenforceable.
However, as the City asserts, under section 34178, subdivision (a), successor agencies were authorized to "enter or reenter into agreements with the city, county, or city and county that formed the" RDAs, upon obtaining approval from their oversight boards and possible review by DOF. (§ 34178, subd. (a); City of Emeryville v. Cohen (2015) 233 Cal.App.4th 293, 304 (Emeryville).) The City observes that, on April 11, 2012, the Oversight Board authorized the revival of the Cooperation Agreement under the authority of section 34178, subdivision (a), although it did so "only to the extent of the City's obligations under the 2011 Third Party Contracts . . . ." At this point, the City asserts, the Cooperation Agreement was, once again, a binding and enforceable obligation as so limited.
Before the trial court, DOF argued that, in addition to approval by the Oversight Board, for reentry into the Cooperation Agreement to be valid under section 34178, subdivision (a), the agreement, in effect, had to be formally re-executed. The trial court rejected this argument, concluding that, while section 34178 does not explicitly state what is required for reentry into an agreement, there was no reason to believe that re-execution was required. We agree. We do not find any language in section 34178, subdivision (a), that requires the formality of re-execution in order to validly reenter an agreement under that subdivision.
Thus, as a general matter, we agree with the City that, with the approval of the Oversight Board, the successor agency could validly reenter into an agreement with the City.
2. The Original Cooperation Agreement Was Valid, Binding and Enforceable
The City asserts that the mere fact that the original Cooperation Agreement did not require the construction of any particular project or set out the order in which the projects should be completed did "not negate the City's unequivocal commitment to use all RDA funds transferred under the Cooperation Agreement 'exclusively for the completion' of the Approved Projects."
DOF asserts that the Cooperation Agreement was void at the outset, unenforceable, and not legally binding. DOF maintains that, while the City asserts that the Cooperation Agreement created a binding, enforceable agreement because the RDA agreed to grant funding and the City agreed to build the projects, in reality, the City did not agree to build anything. Instead, according to DOF, by the Cooperation Agreement, the City attempted to preserve its control over the tax proceeds without committing to any given project. DOF asserts that there was no binding agreement originally, and therefore there was no valid agreement that the successor agency could elect to reenter pursuant to section 34178, subdivision (a).
Part 1.85 defines an enforceable obligation as, among other things, "Any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy." (§ 34171, subd. (d)(1)(E).) The parties seem to agree that, for present purposes, "the Legislature intended that the term 'agreement' denote[s] a 'legal and binding' pre-Dissolution obligation."
The factual circumstances in Emeryville, supra, 233 Cal.App.4th 293, are informative. In that case, on February 15, 2011, before the passage of AB 1X 26, the City of Emeryville (Emeryville) and its RDA entered into a contract pursuant to which the RDA pledged funds to Emeryville for 27 redevelopment projects. (Emeryville, at p. 301.) After the contract was invalidated by AB 1X 26, specifically the first clause of section 34178, subdivision (a), Emeryville and the successor agency executed five agreements "restating the provisions as to five of the original projects . . . ." (Emeryville, at p. 301.) The oversight board approved three of these five "reentered agreements." (Ibid.) The three approved agreements were included on an amended ROPS, and DOF rejected the amended ROPS. (Ibid.) Emeryville sued DOF seeking to compel it to recognize the enforceability of the three reentered agreements. (Ibid.) The trial court granted Emeryville relief in a judgment and writ of mandamus, and DOF appealed. (Id. at pp. 301-302.) Among other things, on appeal, DOF appeared to assert that the reentered agreements had new and different terms than the original agreements, and therefore they were not merely reentered agreements, but instead they were different agreements altogether. (Id. at p. 302.) However, notwithstanding the fact that the original agreements addressed 27 projects and the reentered agreements approved by the oversight board contemplated work on three of those projects, this court stated that DOF "does not articulate any material differences, and it was [DOF's] burden to explain any basis for reversal on which it seeks to rely." (Ibid.)
These underlying facts of Emeryville are markedly similar to the facts here. As stated by our high court in Matosantos, in January 2011, Governor Brown originally proposed eliminating RDAs. (Matosantos, supra, 53 Cal.4th at p. 250, citing Legis. Analyst, Governor's Redevelopment Proposal (Jan. 18, 2011) p. 4.) Almost immediately thereafter, on January 20, 2011, the RDA here proposed the Cooperation Agreement for consideration at a January 25, 2011, meeting of the City Council and the RDA. The RDA and the City entered into the Cooperation Agreement on January 25, 2011. The RDA granted to the City an amount not to exceed $187,380,500 for use by the City to complete the 21 projects contained on exhibit A. The source of the funds for the grant included all funds currently held by the RDA not otherwise encumbered, and, essentially, all future tax increment allocated to the RDA.
Similarly, on February 15, 2011, Emeryville and its RDA entered into a contract pursuant to which the RDA pledged money to Emeryville for the development of 27 projects. (Emeryville, supra, 233 Cal.App.4th at p. 301.) In both cases, the passage of AB 1X 26 invalidated the agreements. In both cases, after the passage of AB 1X 26, the successor agency reentered into the agreement with the City. (Ibid.) Here, the successor agency, through approval and resolution by the Oversight Board, reentered the Cooperation Agreement "only to the extent of the City's obligations under the 2011 Third Party Contracts . . . ." In Emeryville, the successor agency reentered into agreements pertaining to five of the original projects, and, ultimately, its oversight board approved of three of them. (Ibid.) In both cases, the reentered agreements appeared on ROPS submitted to DOF and in both cases DOF denied the entries. (Ibid.)
In short, in both Emeryville and here, AB 1X 26 authorized the City to reenter the agreements, subject to approval by the Oversight Board and review by DOF. (Emeryville, supra, 233 Cal.App.4th at p. 302.) The City obtained approval by the Oversight Board for the reentered agreements, which, when so approved, were valid unless they were disapproved by DOF. (Ibid.)
Taking a different tack than it did in Emeryville, the crux of DOF's arguments as to the Cooperation Agreement here is that, as originally entered into, it was not binding and enforceable because it was uncertain and indefinite, it lacked consideration and was illusory, it did not require the RDA to finance specific projects, it was not a valid agreement under section 33445, and it was a sham transaction intended to frustrate the Legislature's intent to dissolve RDAs. DOF asserts that, because the original Cooperation Agreement was not a valid, binding, enforceable agreement, in effect, there was no agreement to reenter within the meaning of section 34178, subdivision (a).
DOF also purports to incorporate by reference briefs it filed in other cases before this court, Sonoma, supra, 235 Cal.App.4th 42, Emeryville, supra, 233 Cal.App.4th 293, and a third, unpublished case. DOF's statement in this regard, in full, is: "To the extent interpretation of section 34178 is relevant to the issues briefed here, DOF incorporates by reference its briefs and arguments in [the three named] cases." "Instead of filing a brief, or as part of its brief, a party may join in or adopt by reference all or part of a brief in the same or a related appeal." (Cal. Rules of Court, rule 8.200(a)(5) (rule 8.200(a)(5)).) However, although joinder may be broadly permitted, rule 8.200(a)(5) is not satisfied by "cursory and unfocused statements" of joinder. (People v. Bryant, Smith and Wheeler (2014) 60 Cal.4th 335, 363.) Each litigant has the burden of demonstrating error and prejudice. (People v. Nero (2010) 181 Cal.App.4th 504, 510, fn. 11.) The City objects to joinder on the grounds that (1) these are not the "same or related" appeals, and (2) joinder would be prejudicial and allow DOF to far exceed content limitations in its briefing. Obviously, this case and the others to which DOF refers are not the "same" appeals. In any event, we need not determine whether this and the other appeals to which DOF refers are "related" appeals within the meaning of rule 8.200(a)(5), or whether DOF's cursory reference to joinder was sufficient. In each of these other appeals, we rejected DOF's arguments relative to section 34178, as we do here.
First, we note that, in Emeryville, this court did not expressly determine that the original agreement, which was reentered with regard to five of the 27 proposed projects only, and approved by the oversight board as to three, and which appears to have been similar to the Cooperation Agreement here, was not a binding, enforceable agreement which could not be reentered. In a footnote, the court did state, "[t]he trial court found the question of the validity of the three prior agreements was moot 'because the subject matter of those agreements was subsumed into' the three reentered agreements validated by the trial court. The parties evidently agree that any issues surrounding the prior agreements are moot if we uphold the three reentered agreements." (Emeryville, supra, 233 Cal.App.4th at p. 301, fn. 4.) Inasmuch as the reentered Cooperation Agreement is sufficiently binding, enforceable, and specific, by the reasoning of Emeryville, any issues surrounding the prior iteration of the Cooperation Agreement would be moot if we uphold the reentered agreements. (Ibid.)
Second, and more fundamentally, we are not persuaded that the Cooperation Agreement, as originally entered into by the RDA and the City, was invalid, unenforceable, nonbinding, or insufficiently specific. "Formation of a contract requires parties capable of consent, the consent of those parties, a lawful object, and sufficient consideration." (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1268-1269, citing Civ. Code, § 1550 [essential elements of a contract].)
By the original Cooperation Agreement, the RDA agreed to tender funds to the City from designated sources, not to exceed an amount certain, for the purpose of completion of the 21 projects included on exhibit A. The City agreed to use the funds tendered by the RDA on the completion of those projects. Thus, there were (1) parties to the agreement capable of consent, (2) those parties consented (3) to a lawful object, and (4) sufficient consideration was involved, in that the RDA agreed to tender money and the City agreed to undertake redevelopment projects.
DOF essentially contends that the Cooperation Agreement was not reasonably certain and definite, and lacked in consideration, because the agreement did not require the City to complete any particular project, but allowed it to choose from among the projects on the list, and further, by its terms, would allow the parties to change the improvement plan, and would allow the City Manager, on behalf of the parties, to modify the projects on exhibit A. " 'The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. " 'Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.' " ' " (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1174 (Daniels).) Here, a breach would consist of the RDA failing to tender the specified funds to the City or the City failing to undertake any of the listed projects or to use the money for anything other than the listed projects (or projects made the subject of the agreement through modification or amendment). We conclude that the terms are reasonably certain.
It is true that "[p]reliminary negotiations or agreements for future negotiations—so-called agreements to agree—are not enforceable contracts." (Daniels, supra, 246 Cal.App.4th at p. 1174.) "It is still the general rule that where any of the essential elements of a promise are reserved for the future agreement of both parties, no legal obligation arises 'until such future agreement is made.' " (Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal.App.4th 1251, 1256, fn. omitted.) We do not find this to be the circumstance here. The Cooperation Agreement did authorize the City essentially to choose which projects to undertake and in what order. However, the Cooperation Agreement nonetheless compelled the RDA to grant the City funding and the City to undertake projects from the list. " 'A contract is not too uncertain merely because a promisor is given a choice of performing in several ways, whether expressed as alternative performances or otherwise. He may be ordered to make the choice and to perform accordingly, and, if he fails to make the choice, the court may choose for him and order specific performance.' " (DVD Copy Control Assn., Inc. v. Kaleidescape, Inc. (2009) 176 Cal.App.4th 697, 719, quoting Rest.2d Contracts, § 362, com. b, p. 179; see also Rest.2d Contracts, § 34 ["terms of a contract may be reasonably certain even though it empowers one or both parties to make a selection of terms in the course of performance"].)
We further note here that a "contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, § 1643.)
We do not find the original Cooperation Agreement unenforceable, nonbinding, insufficiently specific, illusory, or lacking in consideration.
Third, we disagree with DOF's contention that the Cooperation Agreement did not satisfy then-effective section 33445. Section 33445 was declared inoperative upon the enactment of AB 1X 26. (§ 34189, subd. (a); see Cuenca, supra, 8 Cal.App.5th at p. 211; Emeryville, supra, 233 Cal.App.4th at p. 306, fn. 8.) However, prior to that change, section 33445 provided that an RDA "may enter into a contract with the community or other public corporation under which it agrees to reimburse the community or other public corporation for all or part of the value of the land or all or part of the cost of the building, facility, structure, or other improvement that is publicly owned, or both, by periodic payments over a period of years." (§ 33445, subd. (c)(1).) Contrary to DOF's contention, we conclude that the Cooperation Agreement indeed contemplated the RDA's reimbursement of the City for the cost of "all or part of the cost of the building[s], facilit[ies], structure[s], or other improvement[s]" set forth in the list of projects comprising exhibit A to the Cooperation Agreement. We do not agree with DOF that the failure to identify the order in which the projects would be undertaken, or which projects would be completed prior to exhausting RDA tax increment funds, brought the Cooperation Agreement outside of the bounds of section 33445.
Furthermore, section 33445 required that the legislative body make specific findings: "(1) That the acquisition of land or the installation or construction of the buildings, facilities, structures, or other improvements that are publicly owned are of benefit to the project area by helping to eliminate blight within the project area or providing housing for low- or moderate-income persons. [¶] (2) That no other reasonable means of financing the acquisition of the land or installation or construction of the buildings, facilities, structures, or other improvements that are publicly owned, are available to the community. [¶] (3) That the payment of funds for the acquisition of land or the cost of buildings, facilities, structures, or other improvements that are publicly owned is consistent with the implementation plan adopted pursuant to Section 33490." (§ 33445, subd. (a)(1)-(3); accord City of Cerritos v. Cerritos Taxpayers Assn. (2010) 183 Cal.App.4th 1417, 1434.) The resolution adopting the Cooperation Agreement expressly made these findings. "The determinations made by the agency and the local legislative body pursuant to subdivision (a) shall be final and conclusive." (§ 33445, subd. (b)(1).) We do not agree with DOF that the Cooperation Agreement failed to comply with section 33445 and that it was invalid at its inception.
DOF's reliance on Meaney v. Sacramento Housing & Redevelopment Agency (1993) 13 Cal.App.4th 566 (Meaney) is misplaced. Meaney involved an agreement between the county and an RDA to build a county courthouse within city limits and within the redevelopment project area. (Id. at pp. 572-573.) As the City asserts, the Meaney court cited "an extraordinary anomaly" in the process involved in that case: "the City made a finding on the County's finances." (Id. at p. 580.) However, the court stated that the City was not competent to make a determination as to the county's finances. (Ibid.) In the context of a county building being constructed within city limits, the city was required to make a determination as to the benefit to the project area and the county was required to make the determination as to unavailability of other means of financing. (Id. at pp. 580-581.) Here, unlike in Meaney, there is no contention that the wrong legislative body made any relevant finding.
Another anomaly in the resolution in Meaney was that it did not provide for any particular form of financing. (Meaney, supra, 13 Cal.App.4th at p. 581.) The agreement in Meaney did "not state whether the [RDA] will pay for part or all of the cost of the courthouse or other unidentified 'County public facilities,' whether it will make the initial payments to finance the facilities or reimburse the County for its costs, whether bonds will be issued and, if so, whether they will be long or short term, or whether the financing will rest solely on the [RDA's] credit or will be supported by a lease or other agreement between the [RDA] and the County. In short, the Courthouse Agreement provides only that the [RDA] will assist the County in financing the construction of the courthouse and other public facilities in a manner to be agreed upon in the future." (Ibid.) The Meaney court concluded that the city council's determination that "an unidentified form of financing constitutes the only 'reasonable means' of financing a County building is plainly meaningless," and that, because "it does not serve the intended purpose of the statutory requirement, it may fail to qualify as a determination of fact demanded by section 33445." (Meaney, at p. 581.) The Cooperation Agreement here, and specifically its discussion of the source of financing, does not suffer from anything resembling the degree of vagueness and uncertainty as found in the agreement in Meaney.
Fourth, while not decisive of the matter here, we note that it appears based on our review of the case law, published and unpublished, that agreements of the type embodied by the Cooperation Agreement here were not uncommon in the "fire sale" period leading up to the passage of AB 1X 26 and the commencement of the freeze component of the dissolution process. (See Grass Valley, supra, 17 Cal.App.5th at pp. 574-575.) We have not discovered a case involving the reentering of an agreement pursuant to section 34178, subdivision (a), in which a court determined that such an agreement as initially entered into was void as invalid, unenforceable, nonbinding, or insufficiently specific.
DOF asserts that the Cooperation Agreement was a "sham," and essentially that the City "acted with improper motives by rushing these agreements through with knowledge of a pending legislative change" (Emeryville, supra, 233 Cal.App.4th at p. 302) in order to " 'shield tax increment from the reach of the Dissolution Law.' " However, as this court stated in Emeryville, " 'It is presumed that official duty has been regularly performed.' [Citations.] . . . Nor is it necessarily sinister for a party to hasten to comply with a law before adverse changes occur. Finally, as the trial court explicitly found, the oversight board thoroughly debated the issues, and approved only three of the five agreements submitted to it, showing discretion was actually exercised." (Id. at pp. 302-303.)
We conclude that the original Cooperation Agreement was valid and enforceable, and therefore eligible to be the subject of "reentry" pursuant to section 34178, subdivision (a).
In light of our conclusion, we need not address the City's contention that its partial performance cured any defects in the Cooperation Agreement.
3. AB 1484 Did Not Invalidate the Cooperation Agreement
The City's final contention concerning the Cooperation Agreement is that AB 1484 did not invalidate that agreement because the new law neither clarified or was declarative of existing law nor applied retroactively. Specifically, the City asserts that AB 1484's addition of section 34177.3, and its amendment of section 34178, subdivision (a), did not retroactively invalidate the reentered Cooperation Agreement.
"[S]ection 34177.3, subdivision (c) partly provides that, 'Successor agencies shall lack the authority to . . . transfer any powers or revenues of the successor agency to any other party . . . except pursuant to an enforceable obligation on a [ROPS] approved by [DOF]. Any such transfers of authority or revenues that are not made pursuant to an enforceable obligation on a [ROPS] approved by the [DOF] are hereby declared to be void . . . .' Subdivision (a) of section 34177.3 precludes 'new redevelopment work,' except as to enforceable obligations that existed before [AB] 1X 26 took effect. Subdivision (d) partly provides: 'Any actions taken by redevelopment agencies to create obligations after June 27, 2011, are ultra vires and do not create enforceable obligations.' Subdivision (e) provides: 'The Legislature finds and declares that the provisions of this section are declaratory of existing law.' " (Emeryville, supra, 233 Cal.App.4th at p. 307.)
AB 1484 added a sentence to the end of section 34178, subdivision (a), which has since been eliminated, stating, "A successor agency or an oversight board shall not exercise the powers granted by this subdivision to restore funding for an enforceable obligation that was deleted or reduced by the Department of Finance pursuant to subdivision (h) of section 34179 unless it reflects the decisions made during the meet and confer process with the Department of Finance or pursuant to a court order." (§ 34178, former subd. (a), as amended by AB 1484.)
In Emeryville, DOF asserted that it did not matter that Emeryville reentered into the subject agreements prior to the passage of AB 1484 because that law authorized DOF to refuse to recognize as enforceable any agreements between a successor agency and another party. (Emeryville, supra, 233 Cal.App.4th at p. 308.) The Emeryville court rejected DOF's view that AB 1484 operated retrospectively in this way. (Emeryville, at p. 308.)
We need not "reinvent the wheel" here with respect to the retroactivity of these provisions of AB 1484 and whether AB 1484 invalidated previously "reentered" agreements. For the reasons stated in Emeryville (Emeryville, supra, 233 Cal.App.4th at pp. 307-312), we conclude, as we did in that case, that AB "1484 does not apply retrospectively." (Emeryville, at p. 312.)
In its discussion of AB 1484's retroactivity, the Emeryville court addressed section 34177.3, and did not expressly consider the amendment to section 34178, subdivision (a). However, the import of the potential retroactivity of these sections is the same for present purposes: whether AB 1484's amendments which served to revoke the authority of successor agencies and cities to, inter alia, reenter agreements without DOF approval (or court order) applied retroactively. We have determined that they do not.
4. Conclusion
We conclude that the successor agency and the City properly reentered the valid Cooperation Agreement following the passage of AB 1X 26, but prior to the passage of AB 1484. We further conclude that the passage of AB 1484 did not retroactively invalidate the reentered Cooperation Agreement as limited to the 2011 Third Party Contracts. Accordingly, we conclude that DOF erroneously refused to honor those items on the ROPS submitted by the successor agency.
III. The Water Fund Loan
A. The City's Contentions
The City asserts that DOF's invalidation of the Water Fund loan constituted an abuse of discretion. According to the City, invalidating the Water Fund loan resulted in the diversion of that money to general government purposes in violation of Proposition 218. The City asserts that "DOF's rejection of the Water Loan on the ROPS is robbing taxpayers of dollars that the City is constitutionally required to invest in the water system, and thus violates Proposition 218." The City also asserts that DOF is, in effect, "forcing the City to violate its constitutional responsibilities." The City further characterizes the Water Fund loan as an "inter-fund" loan, or analogous to such a loan, and states that such loans, contrary to the trial court's determination as to this particular loan, are not illegal. Further, the City asserts that, contrary to the trial court's finding, the money was loaned directly from the Water Fund, rather than being diverted first to the City's general fund and then to the RDA, and also asserts that, as a trustee, the City has standing to challenge a constitutional violation on behalf of its ratepayers.
For purposes of this appeal, we assume, without deciding, that the City has standing to advance its contention, in effect, on behalf of ratepayers, that DOF's determination as to the Water Fund loan violated Proposition 218. Also for purposes of resolving the issues presented on this appeal, we find it unnecessary to expressly find whether the loan was legal when made. (See City of Azusa v. Cohen (2015) 238 Cal.App.4th 619, 625, fn. 3 (Azusa).)
B. Analysis
In Azusa, supra, 238 Cal.App.4th 619, we rejected the central premise on which almost all of the City's claims concerning the Water Fund loan depend, concluding that, "once Utility money was loaned to the RDA, it ceased to be 'ratepayer money.' Because the City's legal claims hinge on a contrary view . . . each of the City's claims fails." (Id. at p. 623; accord County of San Bernardino v. Cohen (2015) 242 Cal.App.4th 803, 810 (San Bernardino) [money loaned to former RDA did not retain its character as tax revenue].) We reiterated that, "[a]s money was loaned to the RDA, it became an RDA asset, and therefore was subject to legislative disposition via the dissolution law." (Azusa, at pp. 625-626.) We find no reason to depart from the holding or reasoning in Azusa, and thus reach the same conclusion here.
"Under Proposition 218, approved in 1996, ' "[s]pecial tax" means any tax imposed for specific purposes . . . .' " (City of San Jose v. Sharma (2016) 5 Cal.App.5th 123, 135, quoting Cal. Const., art. XIII C, § 1, subd. (d).) Also pursuant to Proposition 218, revenues derived from a property-related fee or charge "shall not be used for any purpose other than that for which the fee or charge was imposed" (Cal. Const., art. XIII D, § 6, subd. (b)(2)), and may not "be imposed for general governmental services, including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners" (Cal. Const., art. XIII D, § 6, subd. (b)(5)). (Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.5th 1, 14.) Water services fees, "being fees for property-related services, may be fees or charges within the meaning of article XIII D." (Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 427 (Richmond).)
Our high court in Richmond discussed circumstances where water service fees are, and are not, subject to the restrictions set forth in California Constitution, article XIII D. (Richmond, supra, 32 Cal.4th at pp. 427-428.) Neither party here asserts that the funds comprising the Water Fund loan were not property-related fees subject to the restrictions in California Constitution, article XIII D, although, based on the amounts involved, it would seem at least possible that the funds included both sums subject to, and sums not subject to, those restrictions. (See generally Richmond, at pp. 427-428.) In any event, this distinction has no effect on our determination.
As a general matter, under section 34171, subdivision (d)(2), an agreement, contract, or arrangement between a former RDA and the city that created it is not an enforceable obligation. The Water Fund loan qualified as an agreement, contract, or arrangement within the meaning of section 34171, subdivision (d)(2), and the trial court properly determined that it therefore did not constitute an enforceable obligation. (See, e.g., San Bernardino, supra, 242 Cal.App.4th at p. 815.)
Turning to whether Water Fund money retained its character as ratepayer money after it was loaned to the RDA, "[w]hen the [City] loaned money to the RDA, the RDA took possession of the money, and the [City] received a promise of repayment. But the money was an RDA asset, whether it defaulted on the loan or not. All loans are potentially subject to default. On the effective date of the dissolution law, the RDA was in possession of that money, or whatever objects or interests it had acquired by spending some or all of that money. The dissolution law specifies how all of the assets held by the RDA were to be reallocated, and sets forth detailed definitions of which obligations would and would not be treated as 'enforceable' obligations. The dissolution law does not provide for tracing RDA assets so as to determine their source." (Azusa, supra, 238 Cal.App.4th at p. 626, fn. omitted.)
"All assets, properties, contracts, leases, books and records, buildings, and equipment of the former redevelopment agency are transferred . . . to the control of the successor agency, for administration pursuant to the provisions of this part. . . . Any legal or contractual restrictions on the use of these funds or assets shall also be transferred to the successor agency." (§ 34175, subd. (b).) " 'All assets' under this statute plainly encompasses loaned money." (Azusa, supra, 238 Cal.App.4th at p. 627.)
As the City does here, in Azusa, the plaintiffs asserted that "the RDA possessed certain types of assets that were not subject to disposition by [the dissolution] law, because those assets, due to the encumbrance, actually belonged to the Utility's ratepayers." (Azusa, supra, 238 Cal.App.4th at p. 627.) In Azusa, we concluded that "no ratepayer money was diverted when [DOF] sought to implement the dissolution law." (Ibid.) Contrary to the City's contention, "nothing in the dissolution law diverted any money from" the ratepayer Water Fund money. (Id. at p. 628.) "The Legislature did not divert any money from the" Water Fund. (Ibid.) "That money was diverted by the city council . . . when it loaned money from the [Water Fund] to the RDA. Accordingly, we reject [the City's] legal claims about diversion of special funds." (Ibid.) As DOF asserts, as was the case in Azusa, "it was the City that diverted restricted enterprise revenues from the Water Fund to loan to the RDA."
Our holding, and reasoning, in Azusa is controlling of the issue here. Azusa holds, and we agree, that, once loaned, enterprise funds no longer retained their character as such and "ceased to be 'ratepayer money.' Because the City's legal claims" premised on Proposition 218 "hinge on a contrary view . . . each of the City's claims fails." (Azusa, supra, 238 Cal.App.4th at p. 623.) Therefore, the City's contention, premised on Proposition 218, that DOF's rejection of the Water Fund loan was an abuse of discretion is without merit.
While not necessary to our determination here, we also conclude that DOF is correct that the Water Fund loan was not an inter-fund loan. The loan was between separate entities: a municipality and an RDA.
IV. The Financing Agreements
A. The City's Contentions
The City asserts that DOF's audit reversal invalidating payments made pursuant to the Financing Agreements constituted an abuse of discretion. According to the City, DOF's attempt to "claw back" tax increment funds paid by the RDA to the City under the Financing Agreements prior to dissolution violated Proposition 22. We do not delve more deeply into the City's contentions regarding Proposition 22, as our case law since the parties filed their briefs has addressed, and rejected, the claims raised here premised on Proposition 22. The City further asserts that the payments under the Financing Agreements were for goods and services within the meaning of section 34179.5, subdivision (b)(3), and, accordingly, the payments were not transfers within the meaning of that subdivision and were thus improperly invalidated by DOF. Again, we disagree.
B. Analysis
1. Proposition 22
"Proposition 22, the Local Taxpayer, Public Safety, and Transportation Protection Act of 2010, in part amended article XIII, section 25.5 of our Constitution to restrain the Legislature's ability to '[r]equire [an RDA] (A) to pay, remit, loan, or otherwise transfer, directly or indirectly, taxes on ad valorem real property and tangible personal property allocated to the agency pursuant to Section 16 of Article XVI to or for the benefit of the State.' [Citation.] Our Supreme Court held this provision of Proposition 22 did not preclude the dissolution of RDAs." (Grass Valley, supra, 17 Cal.App.5th at p. 589.)
"We have repeatedly rejected claims that the application of the dissolution statutes violates Proposition 22." (Grass Valley, supra, 17 Cal.App.5th at p. 589, citing Cuenca, supra, 8 Cal.App.5th at pp. 233-234; City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 861-863 (Tracy); San Bernardino, supra, 242 Cal.App.4th at pp. 810-814; City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 496-500 (Brentwood).) "Indeed, in [Cerritos, supra, 239 Cal.App.4th at p. 1038, fn. 2], we stated: 'The Supreme Court has already found that Assembly Bill 1X 26 did not violate either article XVI, section 16 or Proposition 22, which added article XIII, section 25.5, subdivision (a)(7). [Citation.] We are bound by the high court's ruling.' [Citation.] Our Supreme Court summarized its view in part by stating: 'Proposition 22, while it amended the state Constitution to impose new limits on the Legislature's fiscal powers, neither explicitly nor implicitly rescinded the Legislature's power to dissolve redevelopment agencies.' " (Grass Valley, at pp. 589-590.)
Proposition 22 neither constrained the Legislature's power to dissolve RDAs, nor its power to determine when and in what manner RDAs would cease to exist as legal entities, a determination which included the authority to retroactively invalidate agreements between the RDA and its sponsoring agency. (Brentwood, supra, 237 Cal.App.4th at pp. 499-500.) Such a decision does not violate Proposition 22 and is "constitutional because it does not reflect redirection of tax increment in the coffers of a viable redevelopment agency of indefinite existence." (Brentwood, at p. 500.) Proposition 22's "protection of former redevelopment agencies no longer applies after the point at which the Legislature decided that the redevelopment agencies did not have any further authority to exercise redevelopment powers[.]" (Tracy, supra, 3 Cal.App.5th at p. 861.)
The Legislature determined an RDA lost its authority to transfer assets to its sponsoring agency on January 1, 2011. (§ 34167.5.) Proposition 22 thus did not apply to the RDA's March 2011 payments to the City at issue here.
In the section of its brief addressing its Proposition 22 argument, the City also fleetingly raises Proposition 1A. In Cerritos, supra, 239 Cal.App.4th 1020, we concluded that AB 1X 26 "does not violate Proposition 1A. [AB 1X 26] does not shift property taxes away from local governments. It does the opposite." (Cerritos, at p. 1041.) To the extent the City can be deemed to have raised an argument pursuant to Proposition 1A, we conclude that the argument has no merit.
The City asserts that our high court's ruling in Matosantos supports its argument here. In Matosantos, our high court ruled unconstitutional, under Proposition 22, a portion of the Dissolution Law not relevant here (Assem. Bill No. 27 (2011-2012 1st Ex. Sess.)) because the law allowed an RDA to avoid dissolution if its sponsoring agency agreed to transfer tax revenue allocated for redevelopment to other local agencies. (Matosantos, supra, 53 Cal.4th at pp. 264-265.) The City asserts that the logic of that decision should apply here. This court rejected this argument in Brentwood, supra, 237 Cal.App.4th 488. According to the Brentwood court, Matosantos held that, under Proposition 22, "the Legislature could not condition the continued existence of redevelopment agencies on compliance with legislative redirection of their tax increment . . . ." (Brentwood, at p. 497.) Proposition 22, however, does not apply to an RDA that is being dissolved. As a result, it does not affect DOF's decisions to require the City to remit the subject payments.
2. Goods or Services Exception
We also agree with DOF that the City's argument that the March 2011 payments to the City were for goods and services is without merit.
"The freeze provisions include a 'claw back' provision. [Citation.] Under that provision, a redevelopment agency's transfer of assets is unauthorized after January 1, 2011. The State Controller must determine whether such asset transfers occurred between a redevelopment agency and its sponsoring agency. [Citations.] In general, if a relevant asset transfer occurred and the government entity that received the asset was not contractually committed to a third party for the expenditure or encumbrance of that asset, the Controller must order the return of the asset." (City of Culver City v. Cohen (2017) 14 Cal.App.5th 1, 13-14.)
As stated ante, section 34179.5 provides for DDR for the purpose of, inter alia, "identif[ying] '[t]he dollar value of assets and cash . . . transferred after January 1, 2011, through June 30, 2012, by the redevelopment agency or the successor agency to [a sponsoring entity] and the purpose of each transfer.' " (Grass Valley, supra, 17 Cal.App.5th at p. 574.) Transfers, within the meaning of section 34179.5, may be subject to "claw back," or administrative unwinding via the DDR. (Ibid.) Section 34179.5 exempts "a transfer of money in exchange for a type of good or service from its ambit." (Brentwood, supra, 237 Cal.App.4th at p. 502, italics added.) However, payments that are "solely to reimburse [a] city for its payment for goods or services to third parties . . . .[do] not come within the [goods or services] exception in section 34179.5." (Tracy, supra, 3 Cal.App.5th at p. 863, citing Brentwood, at pp. 502-503.)
As the City states, the Parking Structure Financing Agreement executed in 2006 obligated the RDA to pay the City "to reimburse the City for costs and expenses paid by the City in connection with the design and construction of a civic center parking structure." Similarly, the 2006 Civic Center Plaza agreement contemplated that the RDA would pay funds to the City from tax increment "to reimburse the City for costs and expenses paid by the City in connection with the design and construction of certain components of the Civic Plaza." On March 8, 2011, both agreements were amended "to provide for immediate payment upon demand, and on that same date, full payment was demanded." The following day, the RDA paid the full amount. These payments were not "a transfer of money in exchange for a type of good or service" (Brentwood, supra, 237 Cal.App.4th at p. 502), but rather were made "solely to reimburse [the] [C]ity for its payment for goods or services to third parties," and thus they do "not come within the [goods or services] exception in section 34179.5." (Tracy, supra, 3 Cal.App.5th at p. 863; Brentwood, at pp. 502-503.)
3. Conclusion
The trial court properly determined that DOF did not improperly invalidate these payments.
We decline the City's request that we reconsider our denial of its prior request for judicial notice. --------
DISPOSITION
The judgment is modified to grant a writ of mandate directing DOF to acknowledge the validity of the reentered Cooperation Agreement and the three 2011 Third Party Contracts in the amounts of $246,500, $1,781,262, and $387,450 that are the subject of that reentered agreement as enforceable obligations. As so modified, the judgment is affirmed. Neither party shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
/s/_________
MURRAY, J. We concur: /s/_________
BLEASE, Acting P. J. /s/_________
ROBIE, J.