91 Cal.App.5th 352
Cal. Ct. App.2023Background
- In 2011 the Legislature dissolved California redevelopment agencies and created successor agencies and ROPS (recognized obligation payment schedules) to wind down enforceable obligations and allocate Redevelopment Property Tax Trust Fund payments.
- Chula Vista (City) had lease-financing structures where the City made lease payments and the redevelopment agency agreed to reimburse the City via reimbursement agreements; funds were raised by certificates of participation issued in 1987, 1993, 1996, and 2003.
- The Successor Agency repeatedly sought ROPS funding (items 6, 7, 9) to reimburse the City for past lease payments under various series of certificates; the Department of Finance approved those items through ROPS 16-17 but later denied them for ROPS 17-18, 18-19 and 19-20.
- The Department’s denials rested on §34171(d)(2)’s exclusion of agreements between a sponsoring city and its former agency, arguing the reimbursement promises were either not contemporaneous with issuance of indebtedness or were contingent/illusory because repayment depended on available (unpledged) tax increment.
- The trial court upheld the Department. On appeal the Court of Appeal reviewed statutory interpretation de novo and held the 1996 reimbursement agreements and the 1993-A reimbursement agreement are enforceable obligations, reversed in part, and remanded for limited relief; estoppel claim rejected.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the 1996 reimbursement agreements (ROPS items 6 & 7) enforceable obligations under §34171(d)(2)? | Agreements were written, entered contemporaneously with the 1996 indebtedness, and solely to secure/repay that debt. | Agreements are contingent on available tax increment so are illusory and fall outside the §34171(d)(2) exception. | Reversed: 1996 agreements are enforceable; contingency does not make promise illusory and implied covenant of good faith limits discretion. |
| Are the obligations underlying ROPS item 9 (1993-A, 1993-B, 2003 certificates) enforceable? | The 1993 reimbursement agreement covers the relevant payments and was contemporaneous; thus falls within the §34171(d)(2) exception. | Only the 1993-A series had a contemporaneous reimbursement agreement; 1993-B and 2003 lacked contemporaneous agreements (and 1993 was refinanced), so those portions are not enforceable. | Partially reversed: 1993-A reimbursement agreement is an enforceable obligation; reimbursements tied to 1993-B and 2003 certificates are not covered. |
| Is the Department estopped from denying items based on its prior ROPS approvals? | Department’s prior approvals led plaintiffs to rely and are binding. | Past approvals warned they could be revisited; plaintiffs cannot show reasonable reliance or detrimental reliance; estoppel against government disfavored where public policy implicated. | Affirmed: estoppel unavailable—no reasonable/detrimental reliance and public-policy bar to estopping the Department. |
Key Cases Cited
- California Redevelopment Assn. v. Matosantos, 53 Cal.4th 231 (upholding the redevelopment dissolution scheme)
- County of Sonoma v. Cohen, 235 Cal.App.4th 42 (discussing exclusion of sponsor–agency agreements from enforceable-obligation definition)
- City of Brentwood v. Department of Finance, 54 Cal.App.5th 418 (de novo review on statute interpretation in Dissolution Law context)
- City of Oakland v. Department of Finance, 79 Cal.App.5th 431 (contract interpretation and limits on estoppel against Department)
- City of Grass Valley v. Cohen, 17 Cal.App.5th 567 (treatment of sponsor–agency agreements under §34171(d)(2))
- Lusardi Constr. Co. v. Aubry, 1 Cal.4th 976 (elements of equitable estoppel)
- Third Story Music, Inc. v. Waits, 41 Cal.App.4th 798 (implied covenant of good faith prevents contracts from being illusory)