City of Grass Valley v. Cohen, 17 Cal. App. 5th 567

Background

Following the 2011–2012 statewide dissolution of redevelopment agencies (RDAs), the City of Grass Valley (successor agency to its former RDA) sought judicial relief after the Department of Finance disallowed certain transfers as not being "enforceable obligations."
Two contested January 17, 2011 agreements: (1) a Dorsey highway-project agreement under which the RDA committed ~$5 million and paid $695,000 in tax increment to the City; (2) an Omnibus Agreement with transfers of over $18 million (with $307,161 at issue) to the City.
Department disallowed both as barred by Health & Safety Code §34171(d)(2) (generally excludes agreements between an RDA and its sponsoring city), and ordered clawbacks; the City paid under protest and sued for mandamus and declaratory relief.
The trial court remanded to the Department to reconsider (a) whether the Omnibus transfers were payments for "goods and services" under §34179.5(b)(3), and (b) whether the Dorsey highway agreement was an enforceable obligation under subsequently enacted statutory language.
Department cross-appealed, arguing the City failed to exhaust administrative remedies on the goods-and-services point; the City argued postjudgment legislation (Senate Bill 107) made the Dorsey agreement enforceable retroactively.

Issues

Issue	Plaintiff's Argument (City)	Defendant's Argument (Dept. of Finance)	Held
Whether the Omnibus Agreement transfers were for "goods and services" so as to avoid clawback	City: Transfers qualified as payment for goods/services; trial court should remand for Department to decide	Dept: City never raised this specific claim in the mandatory meet-and-confer; administrative exhaustion required	Court: City failed to exhaust; remand was improper — recall writ ordering Department to consider goods/services claim (remand vacated)
Whether postjudgment statutory amendment (SB 107) makes the Dorsey highway agreement an enforceable obligation retrospectively	City: New statutory exception for pre‑June 28, 2011 agreements relating to state highway improvements makes Dorsey enforceable; appellate court should apply current law	Dept: New language should be considered prospective or, if retrospective, Dept should decide first via its administrative process	Court: SB 107's highway-project exception is reasonably read retroactive; but Department must decide in first instance whether the Dorsey agreement fits the new definition — trial court ordered to compel that administrative consideration
Whether an umbrella 1986 Cooperation Agreement converted later 2011 transfers into enforceable "loans" within two years of RDA creation	City: 1986 agreement supports enforceability or loan characterization	Dept: 1986 umbrella lacked specific loan terms, amounts, repayment — not a loan agreement	Court: 1986 agreement was only an administrative ‘‘umbrella’’; not a loan; trial court correctly found it not dispositive
Do prior validation judgments prevent clawbacks under dissolution law?	City: Validation judgments declaring 2011 agreements valid bar later clawback enforcement	Dept: Validation judgments addressed lawfulness when entered; they did not and could not address later dissolution statutes unwinding RDAs	Court: Validation judgments are irrelevant to dissolution/DDR clawback determinations; they did not foreclose the Department's application of dissolution statutes

Key Cases Cited

California Redevelopment Assn. v. Matosantos, 53 Cal.4th 231 (Cal. 2011) (upholding RDA dissolution and explaining Parts 1.8 and 1.85)
NBS Imaging Sys., Inc. v. State Bd. of Control, 60 Cal.App.4th 328 (Cal. Ct. App.) (failure to raise issue administratively precludes court mandating agency consider it)
Brentwood v. Campbell, 237 Cal.App.4th 488 (Cal. Ct. App.) (discussion of DDR/clawback framework and retroactive application of dissolution statutes)
Tracy v. Cohen, 3 Cal.App.5th 852 (Cal. Ct. App.) (Legislature intended retroactive invalidation of sponsor/RDA agreements)
Watsonville v. State Dept. of Health Services, 133 Cal.App.4th 875 (Cal. Ct. App.) (applying current law in reviewing injunctive/declaratory relief)
Sharma v. City of San Jose, 5 Cal.App.5th 123 (Cal. Ct. App.) (addressing prospectivity of parts of SB 107 and remand where agency determination appropriate)
Bellflower v. Cohen, 245 Cal.App.4th 438 (Cal. Ct. App.) (narrow holding that statutory withholding of local tax revenues violates Proposition 22)