COUNTY OF SAN BERNARDINO et al., Plaintiffs and Appellants, v. MICHAEL COHEN, as Director, etc., Defendant and Respondent.
No. C074413
Third Dist.
Nov. 30, 2015.
242 Cal. App. 4th 803
Burke, Williams & Sorensen, Amy E. Hoyt, J. Leah Castella, Susan E. Bloch and Nicholas J. Muscolino for Plaintiffs and Appellants.
Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Marc A. LeForestier, Kari Krogseng and P. Patty Li, Deputy Attorneys General, for Defendant and Respondent.
OPINION
NICHOLSON, J.—When the Legislature dissolved redevelopment agencies,
We agree with the Department of Finance and the trial court, which upheld the action of the Department of Finance. And we reject the county‘s contentions on appeal that the determination of the Department of Finance (1) violated the constitutional prohibitions on the state‘s reallocation of tax revenues; (2) improperly concluded that the loan is not an enforceable obligation; and (3) was inequitable.
BACKGROUND
In October 2003, a fire devastated the community of Cedar Glen in San Bernardino County. To assist in rebuilding the community, including infrastructure, the county created the Cedar Glen Disaster Recovery Project Area and the Cedar Glen Disaster Recovery Plan. The county ordinance charged the preexisting San Bernardino County Redevelopment Agency, which was created by the county, with principal responsibility to carry out the disaster recovery plan.
In 2005, the county loaned the former redevelopment agency $10 million from its general fund for the Cedar Glen improvements. In 2009, the county and the former redevelopment agency executed an agreement called the “Service Area 70-CG Agreement,” which earmarked $4 million of the loan (hereafter, the County Loan) to provide water and road infrastructure improvements in Cedar Glen. By 2012, however, $9 million of the County Loan to the redevelopment agency remained unspent.
By legislation adopted in 2011 and 2012, the Legislature ended redevelopment in California in order to recapture the tax revenue that had been flowing to redevelopment agencies and distribute it to other taxing entities. (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 247–249 [135 Cal.Rptr.3d 683, 267 P.3d 580] (Matosantos).) It enacted Assembly Bill No. 1X 26 in 2011 (2011–2012 1st Ex. Sess.) (Stats. 2011, 1st Ex. Sess. 2011–2012, ch. 5X § 7) and Assembly Bill No. 1484 in 2012 (2011–2012 Reg. Sess.) (Stats. 2012, ch. 26, §§ 6–35) (collectively, the Dissolution Law) to dissolve redevelopment agencies, end tax increment financing, establish successor agencies to deal with the former redevelopment
For purposes of the Dissolution Law, the term “enforceable obligation” means such things as bonds, loans of money, payments required by federal or state law, payments required in connection with the agencies’ employees, and contracts necessary for the successor agency‘s operation. (
It is undisputed in this action that the County created the former redevelopment agency and that the loan to the former redevelopment agency was the result of an agreement, contract, or arrangement between the County and the former redevelopment agency.
In order to make a payment required by an enforceable obligation, a successor agency must apply to the Department of Finance for approval. It does this by preparing a schedule of the enforceable obligations it believes it must continue to pay. This schedule, called a recognized obligation payment schedule (ROPS), is prepared for each six-month fiscal period. (
In this case, the County included payment of its loan to the former redevelopment agency as one of the enforceable obligations in this list sent to the Department of Finance. But the Department of Finance rejected payment of the loan because the loan was an agreement, contract, or arrangement between the former redevelopment agency and the municipal government that created the redevelopment agency. (
The parties also recount what happened after entry of judgment in the trial court.1
When an agreement such as the County‘s loan to the former redevelopment agency has been rejected by the Department of Finance because it is not an enforceable obligation, there is a process to make it an enforceable obligation. After the Department of Finance issues a “finding of completion,” meaning the successor agency has complied with the statutes concerning disbursement of the assets of the former redevelopment agency, the loan may be repaid if an oversight board finds it was for legitimate redevelopment purposes. (See
After the trial court‘s judgment in this case, the County disbursed the remaining funds from the loan as required, but under protest, and received from the Department of Finance a finding of completion. The County may now seek a determination by the oversight board finding that the County Loan was for a legitimate redevelopment purpose.
STANDARD OF REVIEW
Here, the facts are undisputed, but the parties dispute how the law is to be applied. “While we accord at least ‘weak deference’ to an agency‘s interpretation of its governing statutes where its expertise gives it superior qualifications to do so (in contrast with the ‘strong deference’ standard in other jurisdictions), the issue is one ultimately subject to our de novo review. [Citation.]” (City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 500 [188 Cal.Rptr.3d 88].)
I
Constitutionality of Distribution of Loan Proceeds
The County contends that the Department of Finance‘s rejection of the County Loan under
The provision of the Dissolution Law at issue, former
The County argues: “Quite simply, Article XIII § 25.5 precludes the State from requiring a reallocation of tax revenues to other local government
The County‘s argument runs off a logical cliff before even approaching the promised land. Because the County loaned money to the former redevelopment agency, the former redevelopment agency did not receive or hold the money as part of a tax allocation. The County argues that “there is no authority for the proposition that the County‘s decision to loan General Fund money to [the former redevelopment agency] to finance critically-needed infrastructure improvements strips that money of its character as property, sales, and use taxes.” Nonetheless, logic dictates that money spent by the County is no longer tax revenue when it arrives at its destination. It would be nonsensical, for example, to argue that money spent on office supplies still held its character as tax revenue in the hands of the business providing office supplies. Likewise, money loaned by the County, even if the County obtained those funds as an allocation of taxes, does not retain its character as tax revenue in the hands of the borrower.
The County provides no authority for the proposition that, once the County obtains money from real property and other taxes, it retains its character as tax revenue when it is spent. The County argues that “the manner in which funds are expended does not change where those funds came from—sales, use and property taxes are still sales, use and property taxes even when they are loaned to a redevelopment agency.” This is true as far as it goes. The County may spend tax revenue, but the recipient does not receive it as tax revenue. Here, the Department of Finance is not attempting to direct the County to distribute or reallocate tax revenue; instead, it is directing the County, as the successor agency, to distribute loan proceeds, consistent with the Dissolution Law.
Therefore, contrary to the County‘s contention, the Department of Finance did not require the County to “distribute the County‘s General Funds.”
This case is unlike Matosantos, where the argument was made that the state could not redirect tax increment revenue allocated to the redevelopment agencies. There, the argument could be made, even though it ultimately failed, that the former redevelopment agencies that received tax increment
This court recently reached the same result in a similar case, City of Azusa v. Cohen (2015) 238 Cal.App.4th 619 [190 Cal.Rptr.3d 186] (Azusa). In Azusa, the city‘s municipal utility loaned money to the redevelopment agency. As in this case, the Department of Finance rejected the loans because they were agreements between the city that created the redevelopment agency and the former redevelopment agency. (
Here, when the County loaned money to the former redevelopment agency, that money ceased to be part of the County‘s general fund consisting of tax revenue. Therefore, the County cannot claim that the remaining loan funds must be treated as tax revenue for the purpose of this constitutional challenge to the Legislature‘s authority to prescribe what is done with the money left in the hands of the former redevelopment agency when it was dissolved.
In its reply brief and again at oral argument, the County argued that the funds loaned to the former redevelopment agency retained their character as tax revenue because “the County imposed contingencies on the loan proceeds.” This contention has no merit because (1) the record does not support the allegation of contingencies on the actual loan and (2) the placement of such “contingencies” did not mean that the funds transferred to the former redevelopment agency retained their character as tax revenue.
The document memorializing the County Loan provided that the loan was “for the purpose of undertaking various road and water improvements, providing financial assistance to residential households; providing financial assistance to commercial operation in the Project, and purchasing land within the Project Area.” Despite this recitation of the purpose of the loan, nothing in this document required the former redevelopment agency to obtain approval from the County before expending the loaned funds.
A schedule of items and the amounts allocated to those items (such as business assistance programs, road construction, water construction) appears in the administrative record immediately after the County Loan document;
The County cites staff reports as support for its allegation that there were contingencies attached to the former redevelopment agency‘s use of the County Loan funds, but those staff reports were not part of any loan agreement that we have been shown. Accordingly, the record does not reflect that the alleged contingencies were part of the loan agreement.
We also conclude that, even if the County had successfully established that the former redevelopment agency‘s use of the County Loan funds was contingent on the County‘s approval, any such contingencies did not cause the loaned funds to retain their character as tax revenue. As noted, the funds were transferred to the former redevelopment agency for redevelopment purposes. They were no longer in the County‘s coffers. Once that money was transferred by the County, it was not tax revenue, even if the County had some say in how the funds were spent.
The County cites Professional Engineers v. Wilson (1998) 61 Cal.App.4th 1013 [72 Cal.Rptr.2d 111] (Professional Engineers), in which this court held that the use of funds obtained from a gas tax could not be used to make payments on rail bonds (a use not permitted by the gas tax legislation, which allowed use of the tax revenue for highway purposes only) even though the gas tax funds had been commingled in the general fund. Since the funds were traceable directly to the gas tax, the law required that they be spent only in accordance with the gas tax legislation. (Id. at pp. 1023–1028.)
Professional Engineers does not support the County‘s argument. There, the County spent the gas tax funds in a manner contrary to law. Here, however, the funds were spent consistent with the law, to fund the former redevelopment agency. That there may have been contingencies on how the former redevelopment agency could, itself, spend those funds did not cause the funds to retain their character as tax revenue. In Professional Engineers, the gas tax funds retained their character as gas tax revenue while in the County‘s general fund, but the funds at issue in this case were no longer in the County‘s general fund. They had been transferred to the former redevelopment agency.
The County also cites Collier v. City and County of San Francisco (2007) 151 Cal.App.4th 1326 [60 Cal.Rptr.3d 698] (Collier). In that case, the city transferred revenue from building permit fees to other departments in contravention of the limitation that building permit fees could not be ” ‘levied
Accordingly, as we noted, when the County Loan money left the County‘s coffers and was deposited into the former redevelopment agency‘s account as a loan, that money was no longer tax revenue. The Dissolution Law‘s allocation of those funds did not violate
II
Enforceable Obligation
The County contends that its loan to the former redevelopment agency falls under the statutory definition of “enforceable obligation” and that the agreement is an enforceable obligation because there are third party beneficiaries and, therefore, the agreement was not made exclusively between the County and the former redevelopment agency. Neither contention has merit.
A. Statutory Definition
As we recounted above, under the Dissolution Law ” ‘enforceable obligation’ does not include any agreements, contracts, or arrangements between the city, county, or city and county that created the redevelopment agency and the former redevelopment agency.” (
The County cites the latter two provisions and declares that the County Loan is an enforceable obligation without explaining why the other provision making agreements between the County and its former redevelopment agency unenforceable does not apply. Consistent with the interpretation of the Department of Finance and the trial court, we conclude that the overriding provision is the one limiting the definition of enforceable obligation. Any other interpretation would render it meaningless.
Construing the Dissolution Law and the cited statutes to mean that agreements between the County and the former redevelopment agency are enforceable obligations would negate the intent of the Legislature, as shown by the words used, to make such agreements unenforceable. Accordingly, the language of the statutes supports only our interpretation, excluding the County Loan from the definition of “enforceable obligations.”
B. Third Party Beneficiary
The County further argues that its loan to the former redevelopment agency is enforceable because it included third party beneficiaries (Cedar Glen ratepayers) and, therefore, was not exclusively between the County and the former redevelopment agency. The County claims that “the Service Area CG 70-CG Ratepayers (‘Ratepayers‘) are express beneficiaries of County Loan.” (Sic.) This argument is without merit because the statutory language applies to all agreements between a former redevelopment agency and its creator, without mention of possible benefits that ratepayers may have obtained through performance of the agreement. The word “exclusively” is not in the statute.
The County contends that, if there is a third party beneficiary to the County Loan, then the provision excluding a former redevelopment agency‘s agreements with its creator from the definition of “enforceable obligation” (
This is a question of statutory interpretation, which means that our task is to determine whether the Legislature intended to allow an agreement between a former redevelopment agency and its creator to be an enforceable obligation if anyone could be identified as a third party beneficiary of the
On the face of
The County also relies, for its interpretation of the provision, on the Legislature‘s intent to “preserve redevelopment agency assets and revenues for use by ‘local governments to fund core governmental services’ such as fire protection.” (Matosantos, supra, 53 Cal.4th at p. 250.) But this perceived intent of the Dissolution Law is vague when applied to
As we noted recently in another case involving the dissolution of redevelopment agencies, the specific language of a statute must prevail over a general, overarching policy a party may perceive in the legislation. ” ‘[N]o legislation pursues its purposes at all costs. Deciding what competing values will or will not be sacrificed to the achievement of a particular objective is the very essence of legislative choice—and it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute‘s primary objective must be the law. Where, as here, “the language of a provision . . . is sufficiently clear in its context and not at odds with the legislative history, . . . ‘[we should not] examine the additional considerations of ‘policy’ . . . that may have influenced the lawmakers in their formulation of the statute.’ ” ’ (Rodriguez v. United States (1987) 480 U.S. 522, 525–526 [94 L.Ed.2d 533, 538, 107 S.Ct. 1391]; accord, Foster v. Workers’ Comp. Appeals Bd. (2008) 161 Cal.App.4th 1505, 1510 [75 Cal.Rptr.3d 272] [purpose of law cannot supplant legislative intent expressed in particular statute].)” (County of Sonoma v. Cohen (2015) 235 Cal.App.4th 42, 48 [184 Cal.Rptr.3d 911], italics omitted.)
In attempting to defend its proposed interpretation of the provision, the County provides no authority or valid reasoning supporting its premise
In any event, even if the Legislature intended to make agreements between a former redevelopment agency and its creator enforceable obligations under some circumstances in which another party is involved, there is no evidence of legislative intent to include agreements such as the one here by which ratepayers were to receive some incidental benefit.
The County claims that the Cedar Glen ratepayers were third party beneficiaries of the County Loan. We need not consider contract law with respect to third party beneficiaries, however, because this is a question of statutory interpretation, not a question of contract interpretation. We must determine whether the Legislature intended to make an exception to
Virtually every public works project of a redevelopment agency benefitted someone or some entity other than the redevelopment agency and its creator. Sewers benefit the property owners and residents along their line; roads bestow a similar benefit, in addition to assisting travelers. The process of improving blighted areas, which was the aim of redevelopment (County of Los Angeles v. Glendora Redevelopment Project (2010) 185 Cal.App.4th 817, 823–824 [111 Cal.Rptr.3d 104]), naturally entails benefits to ratepayers, property owners, business owners, and others.
In the case of the County Loan, ratepayers in Cedar Glen would have received a benefit. As the County notes, the agreement between the County and the former redevelopment agency provided: “The County hereby agrees to advance to [the former redevelopment agency] a County Loan for the purpose of undertaking various road and water improvements, providing financial assistance to residential households; providing financial assistance to commercial operation in the [redevelopment project], and purchasing land within the Project Area.” But the agreement did not identify anyone or any entity by name.
The ratepayers were not parties to the County Loan; they would have benefited only incidentally from the performance of the agreement.
The question of statutory interpretation is whether the Legislature intended to make an exception in
We therefore conclude that, under
III
Unjust Enrichment Argument
Finally, the County contends that application of
Before we consider this argument, we note that the County does not take into consideration the entire statutory picture. As discussed above, the Department of Finance has now issued a finding of completion. Based on that finding, the County can petition the oversight board for a finding that the County Loan should be enforced because it was for legitimate redevelopment purposes. (See
The County claims that application of
Not surprisingly, the County offers no authority for the proposition that the courts can veto the Legislature‘s taxing and fiscal policy decisions based on the equitable doctrine of unjust enrichment. It simply is beyond our purview. (Rio Linda Union School Dist. v. Workers’ Comp. Appeals Bd. (2005) 131 Cal.App.4th 517, 532 [31 Cal.Rptr.3d 789].)
The judgment is affirmed. The Department of Finance is awarded costs on appeal. (Cal. Rules of Court, rule 8.278.)
Blease, Acting P. J., and Hoch, J., concurred.