242 Cal. App. 4th 803
Cal. Ct. App.2015Background
- In 2005 San Bernardino County loaned its redevelopment agency $10 million to fund Cedar Glen disaster-recovery infrastructure; by 2012 $9 million remained unspent.
- The Legislature enacted the Dissolution Law (2011–2012) dissolving redevelopment agencies, creating successor agencies, and defining which obligations are “enforceable obligations.”
- Section 34171(d)(2) excludes from “enforceable obligation” any agreements between a redevelopment agency and the city/county that created it (with limited exceptions not invoked here).
- The County (as successor agency) listed repayment of its $10 million loan on a ROPS submitted to the Department of Finance (DOF); DOF rejected it as non-enforceable under §34171(d)(2).
- The County petitioned for writ of mandate; the trial court upheld DOF’s determination. The County appealed, arguing constitutional takings/reallocation claims, statutory construction (including third-party beneficiary), and unjust enrichment.
- The Court of Appeal affirmed: DOF’s rejection did not reallocate tax revenue, the loan is not an enforceable obligation under §34171(d)(2), and equitable complaints are for the Legislature/oversight board process.
Issues
| Issue | Plaintiff's Argument (County) | Defendant's Argument (DOF) | Held |
|---|---|---|---|
| Whether DOF’s rejection of the loan violated constitutional limits on state reallocation of local tax revenues (Cal. Const. Art. XIII §§24,25.5) | Money originated as tax revenue and thus DOF’s redirection of remaining funds unlawfully reallocates local tax proceeds | Loan proceeds ceased to be tax revenue once transferred to the redevelopment agency; DOF is not reallocating tax revenues but distributing loan proceeds under Dissolution Law | Held for DOF — no constitutional violation because loan funds lost their character as tax revenue when loaned to agency |
| Whether the County Loan is an “enforceable obligation” under §34171 | The loan qualifies as a loan and legally binding agreement (and benefits third parties), so it should be enforceable | §34171(d)(2) expressly excludes agreements between a redevelopment agency and its creator from enforceable obligations; exceptions do not apply here | Held for DOF — §34171(d)(2) bars enforcement; other statutory categories do not override the exclusion |
| Whether the presence of third‑party beneficiaries (Cedar Glen ratepayers) makes the loan enforceable | The loan benefited identifiable third parties, so it was not exclusively an agreement between County and agency and should survive §34171(d)(2) | The statute excludes any agreements between an agency and its creator regardless of incidental third‑party benefits; allowing an exception would swallow the rule | Held for DOF — incidental beneficiaries do not convert such agreements into enforceable obligations under the statute |
| Whether applying §34171(d)(2) results in unjust enrichment and warrants restitution | It is inequitable for taxing entities to receive a windfall from unspent loan funds; courts should remedy this | Equitable attacks on legislative fiscal policy are improper; statutory process (oversight board after finding of completion) provides the remedy Legislature intended | Held for DOF — equity argument rejected; statutory remedies, not courts, control |
Key Cases Cited
- California Redevelopment Assn. v. Matosantos, 53 Cal.4th 231 (2011) (upholding dissolution scheme reallocating tax-increment revenues)
- City of Azusa v. Cohen, 238 Cal.App.4th 619 (2015) (loaned funds cease to be protected "ratepayer" monies once loaned to agency)
- Professional Engineers v. Wilson, 61 Cal.App.4th 1013 (1998) (traceable gas-tax funds retained special character despite commingling)
- Collier v. City and County of San Francisco, 151 Cal.App.4th 1326 (2007) (limits on using fee-derived revenues for unrelated purposes)
- County of Sonoma v. Cohen, 235 Cal.App.4th 42 (2015) (statutory text controls over generalized policy arguments regarding redevelopment dissolution)