49 Cal.App.5th 539
Cal. Ct. App.2020Background
- In 2011 the Legislature dissolved 400+ redevelopment agencies (RDAs), created successor agencies and Redevelopment Property Tax Trust Funds, and directed county auditor-controllers to allocate former RDA tax increment under Health & Safety Code §§ 34183 and 34188.
- Section 34183 sets a payment "waterfall": first passthrough payments, then enforceable obligations, then administrative costs, then any remainder to be distributed per § 34188.
- Section 34188 directs that distributions be proportionate to each taxing entity’s AB 8 pro rata share and contains language that had been read to cap total receipts (passthrough + residual) at an entity’s AB 8 share.
- The Legislature enacted Assembly Bill 1484 to “clarify” intent and required passthrough payments be paid in full, eliminating the so-called "haircuts," but did not fully rewrite § 34188, creating an irreconcilable statutory tension.
- Seven cities sued the San Diego county auditor-controller challenging her methodology for distributing the residual fund (Auditor follows Department of Finance approach). The trial court sided with the cities; the Court of Appeal reversed, directing denial of the writ.
Issues
| Issue | Plaintiff's Argument (Cities) | Defendant's Argument (Auditor) | Held |
|---|---|---|---|
| 1. Whether passthrough payments must be included in the pool used to compute each taxing entity’s AB 8 pro rata "entitlement" before distributing residuals | §34188 requires computing each entity’s entitlement using the trust fund amount that includes passthrough payments (so residual distributions should equalize totals to AB 8 shares) | §34183 gives passthroughs priority and, once paid, they are not “available” in the fund; AB 1484 requires paying passthroughs in full and then AB 8 shares apply only to the remaining residual | Rejected Cities’ view; the statutes cannot be harmonized to require including paid passthroughs in the distributable pool as Cities urge. |
| 2. Effect of Assembly Bill 1484 on §34188 (haircuts) | AB 1484 simply confirms passthroughs must be paid in full but does not erase §34188’s proportionate-distribution scheme | AB 1484 is a later enactment that removes, for passthroughs, the haircut language and must prevail where conflict exists | Court holds AB 1484 supersedes irreconcilable portions of §34188; passthroughs must be paid in full and the haircut provision cannot be enforced. |
| 3. Proper construction and operative methodology for county auditor-controllers distributing residual trust funds | Use §34188’s two-step entitlement/distribution calculation (include passthroughs in entitlement), producing proportional equalization to AB 8 shares | Follow §34183 priority, pay passthroughs/enforceable obligations/admin costs first (per AB 1484 passthroughs in full), then distribute remainder proportionally; this is workable and avoids conflict | Court adopts Auditor’s methodology (pay obligations first per §34183 and AB 1484; later-applied law controls where statutes irreconcilable) and reverses trial court. |
| 4. Whether Cities’ preferred method raises constitutional problems (Propositions 1A/22) | N/A at trial (Cities relied on statutory text and purpose) | Auditor and amici contend Cities’ method likely violates Prop 1A/22 because it reallocates local property tax shares without required legislative process | Court declines to rule on constitutionality but finds Cities’ construction raises serious constitutional doubts and that constitutional-avoidance supports adopting Auditor’s construction. |
Key Cases Cited
- California Redevelopment Assn. v. Matosantos, 53 Cal.4th 231 (2011) (Supreme Court overview of RDA dissolution and statutory framework)
- City of Alhambra v. County of Los Angeles, 55 Cal.4th 707 (2012) (discusses AB 8 allocation methodology)
- City of Cerritos v. State of California, 239 Cal.App.4th 1020 (2015) (addressed related redevelopment distribution issues but did not resolve passthrough construction here)
- State Dept. of Public Health v. Superior Court, 60 Cal.4th 940 (2015) (canon: courts may not rewrite statutes to achieve harmony)
- Professional Engineers in California Government v. Kempton, 40 Cal.4th 1016 (2007) (doctrine that later statutes prevail when irreconcilable)
- Jonathan L. v. Superior Court, 165 Cal.App.4th 1074 (2008) (constitutional-avoidance principle)
- Sacks v. City of Oakland, 190 Cal.App.4th 1070 (2010) (statutory construction: use reason, practicality, common sense)