Moving Oxnard Forward, Inc. v. City of Oxnard
B334636
Cal. Ct. App.May 20, 2025Background
- The City of Oxnard and two related public entities formed a joint powers authority (the Financing Authority) under California law to finance public capital improvements.
- In 2022, the Financing Authority issued two series of lease revenue bonds worth up to $45 million to fund street improvements and software upgrades for the City.
- The bonds were structured via a lease-leaseback arrangement: the City leased properties to the Authority, then subleased them back while paying rent equivalent to bond debt service and related costs.
- Moving Oxnard Forward, Inc. and Aaron Starr (plaintiffs) brought a reverse validation action, arguing the bonds violated constitutional debt limits for local governments because they were not approved by a two-thirds voter majority.
- The trial court ruled for the City and the Financing Authority, finding the bond issuances did not violate constitutional requirements or statutory procedures.
- Plaintiffs appealed, asserting both constitutional and statutory challenges to the bond financing structure and approval process.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Violation of constitutional debt limit (Cal. Const. art. XVI §18) | Bonds are a non-contingent debt needing 2/3 voter approval | Lease payments are contingent, not a long-term debt | No violation; lease structure is a valid contingency arrangement |
| Additional payments as unlawful long-term obligations | "Additional payments" (admin, taxes, insurance, reserve funds) are unconstitutional debt | Payments are contingent, part of contemporaneous consideration | Additional payments are valid as part of lease consideration |
| Rental payments not tied to fair market value | Base rent is set by bond payments, not actual rental value | Value determined by City analysis and equals fair rental | Lease structure does not require market measurement; arrangement upheld |
| Lack of evidentiary hearing under Marks-Roos Act | No evidentiary hearing, no evidence of "significant public benefit" | Act requires only a public hearing and substantial benefit finding | No evidentiary hearing required; record supports public benefit finding |
Key Cases Cited
- City of Los Angeles v. Offner, 19 Cal.2d 483 (Cal. 1942) (rent payments under bona fide lease do not incur unconstitutional debt)
- Dean v. Kuchel, 35 Cal.2d 444 (Cal. 1950) (lease payments contingent on use do not violate debt limit)
- Rider v. City of San Diego, 18 Cal.4th 1035 (Cal. 1998) (joint powers authority’s lease-revenue financing does not require two-thirds voter approval)
- Starr v. City and County of San Francisco, 72 Cal.App.3d 164 (Cal. Ct. App. 1977) (supporting contemporaneous consideration requirement for lease payments)
- Chester v. Carmichael, 187 Cal. 287 (Cal. 1921) (distinguishing immediate financial liabilities from contingent lease payments)