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City of Emeryville v. Cohen

California Court of Appeals, Third District, Sacramento

January 16, 2015

CITY OF EMERYVILLE et al., Plaintiffs and Respondents,
MICHAEL COHEN, as Director, etc. Defendant and Appellant.

APPEAL from a judgment of the Superior Court of Sacramento County, No. 34201280001264CUWMGDS Michael P. Kenny, Judge.

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Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Marc A. LeForestier and Ryan Marcroft, Deputy Attorneys General, for Defendant and Appellant.

Michael G. Biddle, City Attorney; Burke, Williams & Sorensen, J. Leah Castella and Matthew D. Visick, for Plaintiffs and Respondents.



The factual and legal setting of this case is complex, involving the Legislature’s decision to dissolve the many redevelopment agencies which became a fixture of local government financing over decades, and involving the way the moneys remaining in the redevelopment agency coffers around the state would be redistributed.

But the narrow dispute on appeal turns on the straightforward interpretation of a few statutes. As the trial court correctly reasoned, those statutes authorized plaintiffs City of Emeryville and Successor Agency to the Emeryville Redevelopment Agency (collectively, Emeryville) to “reenter” into three agreements entered into before the dissolution of redevelopment agencies. And, contrary to the view of defendant Department of Finance (Department), nothing in the statutory scheme providing for the orderly distribution of redevelopment funds subsequently invalidated these reentered agreements. Accordingly, we shall affirm the judgment, which in effect compels the Department to acknowledge the validity of those agreements.


General Legal Background

As briefly summarized by our Supreme Court: “In the aftermath of World War II, the Legislature authorized the formation of community redevelopment agencies in order to remediate urban decay. [Citations.] The Community Redevelopment Law ‘was intended to help local governments revitalize blighted communities.’ [Citations.] It has since become a principal instrument

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of economic development, mostly for cities, with nearly 400 redevelopment agencies now active in California.” (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 245-246 [135 Cal.Rptr.3d 683, 267 P.3d 580] (Matosantos).)

However, as our Supreme Court explained, a perception had grown that some redevelopment agencies were used as shams to divert property tax revenues that otherwise would fund general local governmental services, and legislative efforts were made to address these concerns. (Matosantos, supra, 53 Cal.4th at pp. 247-248; see Meaney v. Sacramento Housing & Redevelopment Agency (1993) 13 Cal.App.4th 566, 579 [16 Cal.Rptr.2d 589].) Ultimately, a more draconian measure was adopted by the Legislature: “Responding to a declared state fiscal emergency, in the summer of 2011 the Legislature enacted two measures intended to stabilize school funding by reducing or eliminating the diversion of property tax revenues from school districts to the state’s community redevelopment agencies. (Assem. Bill Nos. 26 & 27 (2011-2012 1st Ex. Sess.) enacted as Stats. 2011, 1st Ex. Sess. 2011-2012, chs. 5-6 (hereafter Assembly Bill 1X 26 and Assembly Bill 1X 27).) Assembly Bill 1X 26 bars redevelopment agencies from engaging in new business and provides for their windup and dissolution. Assembly Bill 1X 27 offers an alternative: redevelopment agencies can continue to operate if the cities and counties that created them agree to make payments into funds benefiting the state’s schools and special districts.” (Matosantos, supra, 53 Cal.4th at p. 241, citations omitted.)

Our Supreme Court invalidated Assembly Bill No. 27 (2011-2012 1st Ex. Sess.) (Assembly Bill IX 27), because it conflicted with a provision of the California Constitution forbidding the payments required thereunder. (Matosantos, supra, 53 Cal.4th at pp. 242, 264-274.) Following that decision, the only lawful option for redevelopment agencies was windup and dissolution, as provided by Assembly Bill No. 26 (2011-2012 1st Ex. Sess.) (Assembly Bill IX 26), set forth in the Health and Safety Code, although Matosantos judicially reformed certain dates in Assembly Bill 1X 26 to best effectuate the Legislature’s intent. (Matosantos, at pp. 274-276.)

The Principal Statutes in Contention

Assembly Bill 1X 26 provided that successor agencies would “[e]xpeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and in accordance with the direction of the oversight board.” (Health & Saf. Code, § 34177, subd. (h).)[1] Each oversight board consists of members appointed as set forth by statute (§ 34179, subd. (a)),

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and 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 “Establishment 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 insure 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 Department and the State Controller, not a party herein, 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 Department also has authority to “review an oversight board action taken pursuant to” Assembly Bill 1X 26. (§ 34179, subd. (h).)

Under Assembly Bill 1X 26, section 34178, subdivision (a) provided in full as follows: “Commencing on the operative date of this part, 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; provided, however, that 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 upon obtaining the approval of its oversight board.” (Italics added.)

Further, section 34180, subdivision (h) requires oversight board approval of a request by a successor agency to enter into such an agreement.

However, effective June 27, 2012, Assembly Bill No. 1484 (2011-2012 Reg. Sess.) (hereafter Assembly Bill 1484) (Stats. 2012, ch. 26, § 14) added the following sentence to section 34178, subdivision (a): “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] pursuant to subdivision (h) of Section 34179 unless it reflects the decisions made during the meet and confer process with

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the [Department] or pursuant to a court order.” (§ 34178, subd. (a), as amended by Stats. 2012, ch. ...

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