Cuenca v. Cohen
8 Cal. App. 5th 200
| Cal. Ct. App. | 2017Background
- From 1945–2011 California redevelopment agencies were funded by a property tax increment; statutes later required percentages of that increment be set aside for low- and moderate-income housing.
- The City of Santa Ana’s redevelopment agency had five stipulated judgments (four from 1984, one from 1994) requiring specified percentages of tax increment be set aside for housing; by 2012 ~ $56 million had been accumulated, mostly unencumbered except for a ~$3.5M Habitat loan.
- In 2011–2012 the Legislature enacted the Dissolution Law (Assembly Bills 1X 26 and 1484) dissolving redevelopment agencies, eliminating future tax increment, preserving only “enforceable obligations,” and requiring successor agencies to remit unencumbered balances to county auditor-controllers.
- DOF reviewed the Santa Ana housing successor’s Asset Fund and refused to recognize roughly $33M (later figures varied) held under the stipulated judgments as enforceable/encumbered, ordering remittance of unencumbered funds.
- Petitioners (Cuenca et al. and Habitat) sought writ relief to compel DOF to treat the stipulated judgments as enforceable obligations that would preserve the tax-increment funds for housing; the trial court excepted the Habitat loan but otherwise denied relief.
- On appeal the court considered standing, mootness, whether the stipulated judgments are enforceable obligations and whether the Dissolution Law’s clawback and remittance of unencumbered funds violates contract clauses or Propositions 1A/22.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the five stipulated judgments qualify as "enforceable obligations" under the Dissolution Law | Cuenca: judgments are court-entered settlements/judgments and therefore are enforceable obligations that must be honored | DOF: judgments are enforceable obligations but do not preserve continuing tax-increment collection or unspent, unencumbered funds | Court: Judgments are enforceable obligations under §34171 but they do not require continued collection of tax increment after the law eliminated it |
| Whether the stipulated judgments require continued collection/allocation of tax increment after the Dissolution Law | Cuenca: the judgments impose ongoing duty to collect and set aside tax increment for housing | DOF: agencies never had taxing power; Legislature eliminated tax increment, so nothing remains to set aside | Court: Stipulated judgments set percentages of tax increment to be set aside, but elimination of tax increment reduces that obligation to zero; no vested right to future tax increment collection |
| Whether unencumbered funds already set aside must be remitted to county auditor-controller | Cuenca: previously collected funds must remain available for housing per the judgments | DOF: unencumbered funds are subject to dissolution law’s remittance/"clawback" provisions | Court: Unencumbered pre-dissolution funds not subject to specific enforceable contracts/loans are properly remitted to county auditor-controller under §34177(d) |
| Whether remittance/clawback violates Contracts Clauses or Propositions 1A/22 | Cuenca: remittance impairs contractual and constitutional protections (contract clauses, Prop 1A, Prop 22) | DOF: Plaintiffs have no vested contractual right to preserve tax increment; Dissolution Law is within legislative power and consistent with constitutional limits | Court: No contracts-clause violation (no vested right to future tax increment); remittance does not violate Proposition 1A or 22; judgment affirmed |
Key Cases Cited
- California Redevelopment Assn. v. Matosantos, 53 Cal.4th 231 (Cal. 2011) (upheld Dissolution Law principles; distinguishes protection of local property tax allocations and limits on redevelopment agency rights)
- City of Emeryville v. Cohen, 233 Cal.App.4th 293 (Cal. Ct. App. 2015) (DOF/State oversight and enforceable-obligation review under Dissolution Law)
- City of Cerritos v. State, 239 Cal.App.4th 1020 (Cal. Ct. App. 2015) (rejected Proposition 1A/22 challenges to the Dissolution Law implementation)
- City of Azusa v. Cohen, 238 Cal.App.4th 619 (Cal. Ct. App. 2015) (legislative plenary authority and limits on redevelopment assets after dissolution)
- Welfare Rights v. Frank, 25 Cal.App.4th 415 (Cal. Ct. App. 1994) (consent decree tied to statutory obligations does not vest a contractual right to continued statutory performance)
- Board of Administration v. Wilson, 52 Cal.App.4th 1109 (Cal. Ct. App. 1997) (framework for contract-clause analysis and legislative modification)
- System Federation No. 91, Ry. Emp. Dept. v. Wright, 364 U.S. 642 (U.S. 1961) (court may modify or decline to enforce consent decrees when subsequent changes in law conflict with original statutory objectives)