1

Filed 6/2/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

CITY OF GALT et al.,

Plaintiffs and Appellants,

v.

MICHAEL COHEN, as Director, etc.,

 Defendant and Respondent;

CALLANDER ASSOCIATES LANDSCAPE 

ARCHITECTURE, INC.,

Real Party in Interest and Respondent.

C075897

(Super. Ct. No. 

34-2013-80001380-

CUWMGDS)

APPEAL from a judgment of the Superior Court of Sacramento County, Eugene 

L. Balonon, Judge. Affirmed.

Best Best & Krieger, Iris P. Yang, Kimberly E. Hood for Plaintiffs and Appellants.

Kamala D. Harris and Xavier Becerra, Attorneys General, Douglas J. Woods, 

Senior Assistant Attorney General, Mark R. Beckington, Susan K. Smith, and John W. 

Killeen, Deputy Attorneys General, for Defendant and Respondent.

No appearance for Real Party in Interest and Respondent. 
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After Governor Brown announced his intention to dissolve redevelopment 

agencies, but before the legislation passed, City of Galt entered into an agreement (the 

Cooperative Agreement) with its former redevelopment agency under which the former 

redevelopment agency agreed to finance several parts of the redevelopment plan, totaling 

more than $22,000,000. To obtain money for the financing, the former redevelopment 

agency issued tax allocation bonds, which were to be repaid using tax increment revenue. 

With the dissolution of redevelopment agencies discussed but still not signed into law, 

City of Galt and its former redevelopment agency filed a complaint to validate the 

Cooperative Agreement. No one responded to the complaint, so the trial court entered a 

validation judgment.

The Legislature and Governor eventually dissolved redevelopment agencies (the 

Dissolution Law). The Dissolution Law, on its face, renders unenforceable any 

agreement between a local agency and its former redevelopment agency (sponsor 

agreements) during a specified period of time before dissolution took place (the freeze 

component of the Dissolution Law). The Department of Finance (DOF) determined that 

the Cooperative Agreement here is unenforceable under the freeze component. City of 

Galt filed a petition for writ of mandate, but the trial court upheld DOF’s determination.

On appeal, City of Galt contends: (1) the state must allow City of Galt to use the 

proceeds from the tax allocation bonds to fund the Cooperative Agreement projects; 

(2) the Cooperative Agreement is enforceable because it was the subject of a validation 

judgment, and (3) equitable estoppel bars DOF from determining that the Cooperative 

Agreement is unenforceable. None of City of Galt’s contentions has merit.

BACKGROUND

As background in this redevelopment dissolution case, we quote parts of the 

Supreme Court’s decision in California Redevelopment Assn. v. Matosantos (2011) 53 

Cal.4th 231 (Matosantos), which upheld the provisions of the Dissolution Law relevant to 

this case:
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“Assembly Bill[] 1X 26 . . . consist[s] of [two] principal components, codified as 

new parts 1.8 [and] 1.85 . . . of division 24 of the Health and Safety Code. Part 1.8 

([Health & Saf. Code,] §§ 34161 to 34169.5)[1] is the ‘freeze’ component: it subjects 

redevelopment agencies to restrictions on new bonds or other indebtedness, new plans or 

changes to existing plans, and new partnerships, including joint powers authorities (§§ 

34162 to 34165). Cities and counties are barred from creating any new redevelopment 

agencies. (§ 34166.) Existing obligations are unaffected; redevelopment agencies may 

continue to make payments and perform existing obligations until other agencies take 

over. (§ 34169.) Part 1.8’s purpose is to preserve redevelopment agency assets and 

revenues for use by ‘local governments to fund core governmental services’ such as fire 

protection, police, and schools. (§ 34167, subd. (a).)

“Part 1.85 (§§ 34170 to 34191) is the dissolution component. It dissolves all 

redevelopment agencies (§ 34172) and transfers control of redevelopment agency assets 

to successor agencies, which are contemplated to be the city or county that created the 

redevelopment agency (§§ 34171, subd. (j), 34173, 34175, subd. (b)). Part 1.85 requires 

successor agencies to continue to make payments and perform existing obligations. (§ 

34177.) However, unencumbered balances of redevelopment agency funds must be 

remitted to the county auditor-controller for distribution to cities, the county, special 

districts, and school districts in proportion to what each agency would have received 

absent the redevelopment agencies. (See §§ 34177, subd. (d), 34183, subd. (a)(4), 

34188.) Proceeds from redevelopment agency asset sales likewise must go to the county 

auditor-controller for similar distribution. (§ 34177, subd. (e).) Finally, tax increment 

revenues that would have gone to redevelopment agencies must be deposited in a local 

trust fund each county is required to create and administer. (§§ 34170.5, subd. (b), 

 

1 Further undesignated section references are to the Health and Safety Code.
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34182, subd. (c)(1).) All amounts necessary to satisfy administrative costs, pass-through 

payments, and enforceable obligations will be allocated for those purposes, while any 

excess will be deemed property tax revenue and distributed in the same fashion as 

balances and assets. (§§ 34172, subd. (d), 34183, subd. (a).)” (Matosantos, supra, 53 

Cal.4th at pp. 250-251.)

“During the freeze, redevelopment agencies were authorized to continue 

distributing tax increment pursuant to enforceable obligations, the definition of which 

included ‘sponsor agreements’ between a former redevelopment agency and its sponsor 

agency [such as City of Galt and the former redevelopment agency here]. (§§ 34167, 

subd. (d), 34169, subd. (a)). Postdissolution, however, the definition of ‘enforceable 

obligations’ entitled to tax increment from the successor agencies excluded all sponsor 

agreements. (§§ 34171, subd. (d)(2), 34177, subd. (a).)” (City of Brentwood v. Campbell 

(2015) 237 Cal.App.4th 488, 494 (Brentwood), original italics, fn. omitted.)

TIMELINE OF RELEVANT EVENTS

Retroactive to December 31, 2010 – Proceeds from bonds issued by a former 

redevelopment agency after this date may not be used by the successor agency if they are 

not encumbered by an enforceable obligation. (§ 34191.4, subd. (c)(2); statute eff. June 

27, 2012.)

Retroactive to January 1, 2011 – After this date, transfers of assets from the 

former redevelopment agency to the sponsoring agency were “deemed not to be in the 

furtherance of the Community Redevelopment Law and [] thereby unauthorized.” 

(§ 34167.5; statute eff. June 29, 2011.)

January 6, 2011 – City of Galt entered into an agreement with real party in 

interest Callander Associates Landscape Architecture, Inc. (the Callander Agreement). 

Callander agreed to provide design, engineering, and other services on the Central Galt 

Corridor Rehabilitation and Union Pacific Railroad (UPRR) Parking Lot projects in 
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exchange for $326,029, with some additional compensation for optional services. The 

former redevelopment agency was not a party to this agreement. 

January 18, 2011 – Governor Brown proposed eliminating redevelopment 

agencies as a partial means of closing the state’s projected operating deficit. 

(Matosantos, supra, 53 Cal.4th at p. 250.)

January 21, 2011 – City of Galt and its former redevelopment agency entered into 

a Cooperative Agreement under which the City agreed to complete nine redevelopment 

projects and the former redevelopment agency agreed to reimburse City of Galt a total of 

$22,015,000 for those projects. The following projects were specified: Central Galt 

Corridor Improvements ($2,000,000), UPRR Parking Lot and Landscaping ($1,000,000), 

Simmerhorn Commercial Property Acquisition ($3,000,000), Simmerhorn Infrastructure 

Improvements ($10,100,000), Industrial Way/Live Oak Road Improvements 

($1,000,000), SR 99 Water Crossing Improvement ($500,000), Old Town Property 

Acquisitions ($1,000,000), Theater Property Acquisition and Infrastructure 

Improvements ($2,000,000), and Brewster Building Rehabilitation ($1,415,000). Further 

details of the Cooperative Agreement are provided below.

February 1, 2011 – The board of directors of the former redevelopment agency 

passed a resolution authorizing the former redevelopment agency to issue up to $17 

million in tax allocation bonds to pay for redevelopment activities in Galt. The 

indentures would provide that the bond indebtedness would be paid from tax revenues. 

March 1, 2011 – The former redevelopment agency issued tax allocation bonds in 

the amounts of $7,720,000 (Series A) and $6,005,000 (Series B) under an Indenture of 

Trust. 

March 14, 2011 - City of Galt and the former redevelopment agency filed a 

complaint for validation judgment of the Cooperative Agreement between the City and 

the former redevelopment agency.
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June 29, 2011 – The Dissolution Law was enacted, as described above. (Stats.

2011, 1st Ex. Sess. 2011-2012, ch. 5X.) 

October 26, 2011 – The superior court entered judgment on the complaint for 

validation judgment, declaring the validity of the “Cooperative Agreement Between the 

Redevelopment Agency of the City of Galt and the City of Galt.” 

December 29, 2011 – The California Supreme Court upheld the Dissolution Law 

as constitutional. (Matosantos, supra, 53 Cal.4th 231.) 

February 1, 2012 – Redevelopment agencies in California were dissolved under 

the Dissolution Law as reformed in Matosantos. (Matosantos, supra, 53 Cal.4th at p. 

275.) City of Galt became the successor agency of the Redevelopment Agency of the 

City of Galt. 

May 15, 2012 – City of Galt, as successor agency, adopted Recognized Obligation 

Payment Schedules (ROPS I & II), which included the Callander Agreement and project 

delivery costs under the Cooperative Agreement as enforceable obligations to be paid 

with tax allocation bond proceeds, for the periods from January 2012 to June 2012 and 

from July 2012 to December 2012. The oversight board of the former redevelopment 

agency approved ROPS I and II. DOF approved ROPS I and II, with exceptions to that 

approval not relevant here. 

June 28, 2012 – The oversight board of the former redevelopment agency 

authorized use of the tax allocation bond proceeds to fund projects in Galt. DOF did not 

object to this action by the oversight board. 

August 23, 2012 – City of Galt submitted ROPS III to DOF for the period from 

January 2013 to June 2013, listing the tax allocation bonds and the Cooperative 

Agreement as obligations of the former redevelopment agency. Separately, ROPS III

listed the following as enforceable obligations to be paid out of bond proceeds: 

(1) $118,518 owed to Callander and (2) $7,374,530 payable to “various.” 
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December 18, 2012 – DOF determined that (1) the Callander Agreement was not 

an enforceable obligation of the former redevelopment agency because the former 

redevelopment agency was not a party to the contracts between City of Galt and 

Callander and (2) the “project delivery costs” under the Cooperative Agreement were not 

enforceable obligations because there were no contracts in place for the various projects. 

January 30, 2013 – City of Galt, on its own behalf and as successor agency of the 

redevelopment agency, filed a petition for writ of mandate and complaint for injunctive 

relief seeking a reversal of the determinations of DOF with respect to the Cooperative 

Agreement and other contracts relating to redevelopment projects. 

October 28, 2013 – The trial court entered judgment in favor of DOF, denying the 

petition for writ of mandate. On the issues relevant to this appeal, the court held:

 Issuance of the tax allocation bonds did not create enforceable obligations with 

respect to the projects to be funded by the bond proceeds. 

 City of Galt’s claim that DOF’s denial of the plan to use bond proceeds to pay for 

the projects is an impairment of contracts is premature. 

 “Project delivery costs” under the Cooperative Agreement are not enforceable 

obligations. 

 The Callander Agreement is not an enforceable obligation. 

 DOF’s denial of proposed enforceable obligations related to the Cooperative 

Agreement, which was the subject of the validation judgment, did not violate the 

separation of powers doctrine. 

 DOF is not equitably estopped from determining that the items proposed by City 

of Galt are not enforceable obligations. 
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DISCUSSION

I

Use of Bond Proceeds

City of Galt contends that the trial court erred in sustaining DOF’s determination 

concerning the use of bond proceeds to pay for Cooperative Agreement projects 

(including to meet the obligations of City of Galt on the Callander Agreement). We 

conclude the trial court did not err.

A. Bonds as Enforceable Obligations Argument

The Dissolution Law includes as enforceable obligations “[b]onds . . . , including 

the required debt service, reserve set-asides, and any other payments required under the 

indenture or similar documents governing the issuance of the outstanding bonds of the 

former redevelopment agency.” (§ 34171, subd. (d)(1)(A).) City of Galt argues that, 

under this provision, not only the payment of the bond debt itself is an enforceable 

obligation but also payments to fulfill the bond covenants. Specifically, City of Galt 

contends that the projects named in the Cooperative Agreement and meant to be financed 

with the bond proceeds are also enforceable obligations under section 34171, subdivision 

(d)(1)(A). We conclude that the Dissolution Law does not support this interpretation.

There is no dispute that tax increment revenue can be used to pay the enforceable 

obligation of debt service on the tax allocation bonds. We deal in this part of the 

discussion only with whether the Cooperative Agreement projects also became 

enforceable obligations by virtue of the intention of the former redevelopment agency to 

use the bond proceeds to finance the Cooperative Agreement projects. The simple 

answer is no. 

City of Galt contends: (1) the plain language of the Dissolution Law “makes the 

bond covenants, not just the debt service of the bonds, an enforceable obligation” and 

(2) DOF improperly applied a statute that was not in effect at the time the tax allocation 

bonds were issued. Neither contention has merit.
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First, the plain language of the Dissolution Law does not support a finding that the 

Cooperative Agreement projects became enforceable obligations because the former 

redevelopment agency intended to finance those projects from the bond proceeds. City of 

Galt argues that the language of the statute includes such projects as enforceable 

obligations, but it does not.

As quoted above, section 34171, subdivision (d)(1)(A) makes payment on the debt 

service of bonds an enforceable obligation. Also included as enforceable obligations are 

“any other payments required under the indenture.” (§ 34171, subd. (d)(1)(A).) But this 

language is unhelpful to City of Galt. Although the official statement accompanying the 

bond indenture mentions the Cooperative Agreement projects, it does not make them 

enforceable obligations. As recounted in City of Galt’s brief, the official statement 

provided: “A portion of the net proceeds of the Bonds will be used to pay all or a portion 

of the costs of financing redevelopment activities that are of benefit to the Project Area. 

Actual projects to be financed may vary based upon various considerations to be made by 

the Agency.” In other words, the official statement accompanying the bond indenture

provided that bond proceeds would be used in as-yet-to-be-determined ways and subject 

to future decisions of the former redevelopment agency. Therefore, on its face, the 

official statement did not require the former redevelopment agency to use bond proceeds 

to fund any particular project.

Also section 34177, subdivision (i), cited by City of Galt, does not turn any project

for which bond proceeds would have been used into an enforceable obligation. That 

subdivision, in part, provides that successor agencies are required to “[c]ontinue to 

oversee development of properties until the contracted work has been completed or the 

contractual obligations of the former redevelopment agency can be transferred to other 

parties. Bond proceeds shall be used for the purposes for which bonds were sold unless 

the purposes can no longer be achieved, in which case, the proceeds may be used to 

defease the bonds.” (§ 34177, subd. (i), italics added.) As we have previously held with 
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respect to this provision, “[s]ection 34177 details the obligations of the successor agency; 

it does not define ‘enforceable obligations.’ We do not read this provision on the duties 

of a successor agency to enlarge and supersede the specific definition of an enforceable 

obligation in section 34171. [Citation.] Here, the purpose for which the [tax allocation 

bonds] were sold ‘can no longer be achieved’ because it is prohibited by the enactment of 

the dissolution law. Therefore, there is no violation of section 34177, subdivision (i).” 

(City of Petaluma v. Cohen (2015) 238 Cal.App.4th 1430, 1440.)

And second, City of Galt’s suggestion that DOF improperly applied the 

Dissolution Law is unconvincing. City of Galt observes that one of the statutes cited by 

DOF to find that the projects mentioned in the official statement of the bond indenture 

were not enforceable obligations was passed after the issuance of the bonds, and City of 

Galt claims that there is no evidence that the Legislature intended for that statute to apply 

retroactively. We conclude the statute clearly applies, even though it was enacted after 

the tax allocation bonds were issued.

Former section 34191.4, subdivision (c) was enacted as part of Assembly Bill No.

1484 (2011-2012 Reg. Sess.), after the Supreme Court upheld the Dissolution Law in 

Matosantos. That statute provided that proceeds from bonds issued on or before 

December 31, 2010, “shall be used for the purposes for which the bonds were sold.”2 

(Stats. 2012, ch. 26, § 35, italics added.) The implication, of course, is that proceeds 

from bonds issued after December 31, 2010, are not to be used for the purposes for which 

the bonds were issued. Citing precedent that statutes are normally applied only 

prospectively (see Quarry v. Doe I (2012) 53 Cal.4th 945, 955; see also City of 

Emeryville v. Cohen (2015) 233 Cal.App.4th 293, 308 [“ ‘ “statute may be applied 

 

2 Former section 34191.4, subdivision (c) was amended in 2015. (Stats. 2015, ch.

325, § 21.) The parties have not suggested that this amendment changes DOF’s 

application of the law to this case.
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retroactively only if it contains express language of retroactivity or if other sources 

provide a clear and unavoidable implication that the Legislature intended retroactive 

application” ’ ”]), City of Galt claims this provision should not be applied to the tax 

allocation bonds, which were issued before Assembly Bill No. 1484 took effect. To the 

contrary, the reach of the statute was clearly stated: it approved use of “bonds issued on 

or before December 31, 2010” for the purpose for which the bonds were issued. This 

specific reference to the date of bond issuance in the statute evinces the Legislature’s 

intent concerning the application of the provision, whether retroactive or prospective. 

(City of Emeryville v. Cohen, supra, 233 Cal.App.4th at p. 310.) Therefore, the argument 

that the Legislature did not intend for the statute to operate retroactively is without merit.

B. Impairment of Contracts

City of Galt contends that not allowing it to use the tax allocation bond proceeds 

to fund the Cooperative Agreement projects unconstitutionally impairs contracts, namely 

the obligations to the bondholders. The contention is without merit because (1) City of 

Galt has no standing to raise the argument and (2) there is no impairment of any 

obligation. The bondholders will be paid as promised.

“No State shall . . . make any . . . Law impairing the Obligation of Contracts . . . .” 

(U.S. Const., art. I, § 10, cl. 1.) And a “law impairing the obligation of contracts may not 

be passed.” (Cal. Const., art. I, § 9.)

City of Galt’s argument is worded in a way that leaves doubt concerning whose 

constitutional rights are being discussed, whether it is City of Galt’s or the bondholder’s. 

If the constitutional rights are City of Galt’s, then it has no standing because a 

municipality may not complain that the state is impairing its contract. (Star-Kist Foods, 

Inc. v. County of Los Angeles (1986) 42 Cal.3d 1, 5-6.) If the constitutional rights are the 

bondholders’, then City of Galt has no standing to assert the rights of others. (Amador 

Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 

239-242.)
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In any event, even if City of Galt had standing to complain that the rights of the 

bondholders were being violated, the argument is without merit. City of Galt makes no 

attempt to establish that bondholders will not be paid under the terms of the bonds. 

Instead, City of Galt claims that “DOF’s rejection of the Validation Judgment as an 

enforceable obligation, and its determination that the [tax allocation bond] proceeds 

cannot be used to fund the Cooperative Agreement Projects specified in the Validation 

Judgment” “impermissibly results in an impairment of contract.” More specifically, City 

of Galt argues that, because the law existing at the time the tax allocation bonds were 

issued allowed issuance of the bonds to fund the Cooperative Agreement projects (see 

§ 34177, subd. (i) [“Bond proceeds shall be used for the purposes for which bonds were 

sold . . . .”]), DOF could not apply the amended law disallowing the use of the funds for 

the Cooperative Agreement projects (see § 34191.4, subd. (c) [enacted after issuance of 

tax allocation bonds]). In support of this argument, City of Galt cites cases for the 

proposition that the laws in effect at the time bonds are issued define the contractual 

obligations under the bonds. (See, e.g., Sutter Basin Corp. v. Brown (1953) 40 Cal.2d 

235, 241 [government cannot impair fulfillment of bond obligations under laws in 

existence at time of bond issuance].)

The defect in City of Galt’s argument is that it does not establish that the former 

redevelopment agency had an obligation to the bondholders to use the bond proceeds to 

fund the Cooperative Agreement projects. The obligation to the bondholders is to make 

the payments required. Citing a statute requiring the former redevelopment agency to use 

bond proceeds for the purposes for which the bonds were sold does not logically or 

legally create a duty to the bondholders. Since the former redevelopment agency had no 

contractual obligation to the bondholders to use the bond proceeds to fund the 

Cooperative Agreement projects, DOF did not impair those contracts (the bond 

agreements) when it determined that the bond proceeds could not be used to fund the 

Cooperative Agreement projects.
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C. Legislative Intent

City of Galt also contends that the “overarching goals regarding the wind down of 

redevelopment agencies under the Dissolution Act” support its argument that the tax 

allocation bond proceeds should be used to fund the Cooperative Agreement projects. 

Those goals include (1) payment of enforceable obligations and (2) maximizing value for 

taxing entities. The contention is without merit because (1) the Cooperative Agreement 

projects are not enforceable obligations and (2) the plain language of the law prevails 

over conceptions concerning the overarching goals of the Dissolution Law.

As we discussed above, the Cooperative Agreement did not create enforceable

obligations. Neither did the validation judgment.

Also, City of Galt fails to establish that the “overarching goals” of the Dissolution 

Law should prevail over the specific language of the statute. “[W]e are concerned with 

giving effect to the specific language of a specific statute, not an overarching policy 

penumbra.” (Brentwood, supra, 237 Cal.App.4th at p. 501.)

City of Galt cites Dissolution Law statutes providing that (1) oversight boards are 

intended to operate for the best interests of the taxing entities (§§ 34179, subd. (i); 34181, 

subds. (d) & (e)) and (2) successor agencies should act in a manner to maximize value 

and enforce the rights of the taxing entities while overseeing projects until contracted 

work is completed (§ 34177, subds. (e), (f) & (i)). 

None of these statutes contradicts the implication contained in former section 

34191.4, subdivision (c) that proceeds from bonds issued after December 31, 2010, are 

not to be used for the purposes for which the bonds were sold. (Stats. 2012, ch. 26, § 35.) 

A finding that the Legislature intended for bond proceeds to be used for the purposes for 

which the bonds were sold regardless of when the bonds were sold would render 

meaningless former section 34191.4, subdivision (c), which provides that the proceeds 

from bonds sold on or before December 31, 2010, “shall be used for the purposes for 

which the bonds were sold.” (Stats. 2012, ch. 26, § 35.)
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In summary, the Cooperative Agreement projects (or the “project delivery costs,” 

as referred to by the parties) were not enforceable obligations of the former 

redevelopment agency under the Dissolution Law, and DOF did not misapply the law.

II

Validation Judgment

City of Galt contends that, because it obtained a judgment validating the 

Cooperative Agreement with the former redevelopment agency, the Cooperative 

Agreement projects are enforceable obligations. We conclude that, even assuming that 

we must give effect to the judgment validating the Cooperative Agreement, the 

Cooperative Agreement, by itself, did not give rise to enforceable obligations, and the 

Dissolution Law prohibits creation of new enforceable obligations. Therefore, DOF

acted properly in rejecting City of Galt’s request to use the tax allocation bond proceeds 

to complete the Cooperative Agreement projects. 

Given this conclusion, we need not consider whether (1) the validation judgment 

is valid and entitled to res judicata and (2) the Dissolution Law violated the separation of 

powers doctrine if it had the effect of invalidating the validation judgment. As to those 

further considerations, we express no opinion. 

A “validation judgment forecloses any claims that attack the validity of the 

[agreement] or its terms. Code of Civil Procedure section 870, subdivision (a) provides 

in pertinent part that a validation judgment ‘if no appeal is taken, or if taken and the 

judgment is affirmed, shall, notwithstanding any other provision of law . . . become and 

thereafter be forever binding and conclusive, as to all matters therein adjudicated or 

which at that time could have been adjudicated, against the agency and against all other 

persons, and the judgment shall permanently enjoin the institution by any person of any 

action or proceeding raising any issue as to which the judgment is binding and 

conclusive.’ (Italics added.) ‘A validation action implements important policy 

considerations. “[A] central theme in the validating procedures is speedy determination 
15

of the validity of the public agency’s action.” [Citation.] “The text of section 870 and 

cases which have interpreted the validation statutes have placed great importance on the 

need for a single dispositive final judgment.” [Citation.] The validating statutes should 

be construed so as to uphold their purpose, i.e., “the acting agency’s need to settle 

promptly all questions about the validity of its action.” [Citation.]’ [Citation.]” (Macy v. 

City of Fontana (2016) 244 Cal.App.4th 1421, 1433 (Macy), original italics.)

We may give full effect to the validation judgment without finding that DOF erred 

because the Cooperative Agreement did not create enforceable obligations. Careful 

consideration of the Cooperative Agreement reveals only an agreement that future 

contracts would be created to complete the Cooperative Agreement projects. City of Galt 

agrees that future contracts would be necessary to accomplish the Cooperative 

Agreement projects. It writes: “The Cooperative Agreement . . . is an executory contract 

between the [former redevelopment agency] and the City [of Galt], which contemplates 

execution of additional agreements between the City and third parties for the projects 

specified for which the [former redevelopment agency] promised to reimburse the City.” 

City of Galt continues: “In other words, the Validation Judgment validated the 

Cooperative Agreement and the Projects specified in the Cooperative Agreement. 

Agreements to carry out projects covered by the Validation Judgment are part and parcel 

of that Validation Judgment. To hold otherwise would render the Validation Judgment 

and Cooperative Agreement meaningless.” 

The flaw in this argument is where City of Galt makes the jump from the 

Cooperative Agreement being validated by the validation judgment to the Cooperative 

Agreement projects (and the agreements necessary to accomplish those projects) being

validated by the validation judgment. The judgment did not validate the projects or any 

future agreements. The validation judgment is conclusive and binding as to the 

Cooperative Agreement, but not as to any other contracts.
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“The distinction between an executed and executory contract is defined in Civil 

Code section 1661 as follows: ‘An executed contract is one, the object of which is fully 

performed. All others are executory.’ ‘In an executory contract some act remains to be 

done, while in an executed contract everything is completed at the time of the agreement 

without any outstanding promise calling for fulfillment by the further act of either party.’ 

[Citations.]” (Branche v. Hetzel (1966) 241 Cal.App.2d 801, 807-808.)

The Cooperative Agreement essentially contained a wish list of projects and the 

amount the former redevelopment agency was willing to put toward those projects. It 

was an attempt to commit money to as-yet amorphous plans to continue redevelopment in 

Galt despite Governor Brown’s intent, later executed in the Dissolution Law, to dissolve 

redevelopment agencies and use tax increment revenue for the benefit of the taxing 

entities. (Matosantos, supra, 53 Cal.4th at p. 251; see also Macy, supra, 244 Cal.App.4th 

at pp. 1431-1432.)

The Cooperative Agreement did not commit funds obtained by issuing the tax 

allocation bonds; indeed, the Cooperative Agreement did not mention issuance of tax 

allocation bonds or identify a source of money with which the former redevelopment 

agency intended to finance further redevelopment in Galt.

City of Galt complains that the Dissolution Law cannot interfere with the projects 

proposed in the Cooperative Agreement. But City of Galt’s statement that “[t]o hold 

otherwise would render the Validation Judgment and Cooperative Agreement 

meaningless” provides no legal weight to its argument. The effect of the Dissolution 

Law is to dissolve redevelopment as we know it and prevent the creation of future 

enforceable obligations under the former law. The Legislature had authority to do that. 

(Matosantos, supra, 53 Cal.4th at p. 262.) While we agree that the inability to enter into 

future agreements to accomplish the Cooperative Agreement projects renders the 

Cooperative Agreement meaningless, City of Galt’s beef is with the Legislature and the 

Governor, not with us. The Legislature took away the means and ability to complete the 
17

Cooperative Agreement projects, at least to the extent City of Galt does not find some 

other way to finance those projects.

City of Galt argues the Cooperative Agreement was sufficient to bind the former 

redevelopment agency to pay for the future projects. It writes: “Such agreements have 

long been recognized as creating a valid indebtedness or obligation of redevelopment 

agencies.” For this proposition, City of Galt cites California Supreme Court precedent 

that “ ‘indebtedness,’ ” for the purpose of binding a redevelopment agency, 

“ ‘encompasses “obligations which are yet to become due . . . .” ’ ” (Marek v. Napa 

Community Redevelopment Agency (1988) 46 Cal.3d 1070, 1081 (Marek).) 

Marek does not help City of Galt. In that case, the redevelopment agency entered 

into an executory contract with a developer to convert the downtown area of Napa into a 

shopping district. The plan was to be financed with tax increment revenue. However, the 

county auditor claimed that the executory contract did not constitute an “indebtedness” 

under redevelopment law such that tax increment revenue could be disbursed. (Marek, 

supra, 46 Cal.3d at p. 1083.) The Supreme Court concluded that the term “indebtedness” 

in the redevelopment law should be construed broadly to include such executory 

contracts (including obligations yet to become due) in order to accomplish the intent of 

the law to spend tax increment revenue on redevelopment projects. (Id. at pp. 1081-1082, 

1087.)

Here, we must determine whether the Cooperative Agreement projects are 

enforceable obligations under the Dissolution Law, not under the former redevelopment 

statutes. The obvious shift in legislative intent is that tax increment revenue is to be 

preserved for taxing entities to the extent it is not necessary to fund current enforceable 

obligations of the former redevelopment agency. With this legislative intent in mind, 

there is no good reason to construe “enforceable obligation” broadly to include future 

contractual obligations taken on in furtherance of an executory contract. 
18

In Marek, the court defined “indebtedness,” which did not have a clear definition 

in the redevelopment statutes. On the other hand, the Dissolution Law includes a 

definition of “indebtedness.” (§ 34171, subd. (e).)3 However, City of Galt does not cite 

that definition but instead argues that the broad definition in Marek should be applied. 

The text of the Dissolution Law does not require the broad interpretation of Marek and 

does not refer to future obligations. The Supreme Court’s decision in Marek, construing 

the former redevelopment statutes and utilizing the former legislative intent, does not 

require City of Galt’s broad interpretation of “indebtedness” here. (See Matosantos, 

supra, 53 Cal.4th at p. 258 [citing Marek as representation of former legislative intent].)

We therefore conclude that the validation judgment does not require a finding in 

this litigation that the Cooperative Agreement projects and the obligations to be incurred 

in future contracts to complete those projects are enforceable obligations.

III

Equitable Estoppel

City of Galt contends that DOF must be equitably estopped from challenging the 

use of the proceeds from the tax allocation bonds to fund the Cooperative Agreement 

projects because (1) DOF did not challenge the resolution of the oversight board 

authorizing such use of the bond proceeds and (2) DOF did not object to ROPS I and 

ROPS II, which included use of the bond proceeds to fund the Cooperative Agreement 

projects. To the contrary, City of Galt’s equitable estoppel argument fails because 

(1) any reliance on DOF’s failure to object to the use of the bonds proceeds was 

 

3 “ ‘Indebtedness obligations’ means bonds, notes, certificates of participation, or 

other evidence of indebtedness, issued or delivered by the redevelopment agency, or by a 

joint exercise of powers authority created by the redevelopment agency, to third-party 

investors or bondholders to finance or refinance redevelopment projects undertaken by 

the redevelopment agency in compliance with the Community Redevelopment Law (Part 

1 (commencing with Section 33000)).” (§ 34171, subd. (e).) Indebtedness is included in 

enforceable obligations. (§ 34179.5, subd. (b)(2).)
19

unreasonable and (2) application of equitable estoppel in this circumstance would 

contravene public policy.

We note that City of Galt is not arguing that DOF is statutorily prohibited from 

challenging the use of the bond proceeds to fund the Cooperative Agreement projects 

because DOF did not challenge the oversight board’s resolution or the inclusion of the 

Cooperative Agreement projects in the earlier ROPS. Instead, City of Galt argues that 

DOF should be equitably estopped from challenging the use of the bond proceeds 

because DOF failed to make its objection to the use of bond proceeds earlier. 

“The equitable relief of estoppel requires proof that the opposing party was aware 

of the facts and intended reliance on its conduct (or induced a reasonable reliance), that 

the party asserting estoppel was ignorant of the true facts, and that the party asserting 

estoppel in fact relied on the opposing party’s conduct to its own detriment; in addition, a 

party cannot assert estoppel against a government entity if it would nullify a strong rule 

of public policy. [Citation.]” (Brentwood, supra, 237 Cal.App.4th at p. 504, italics 

added.)

In Brentwood, we rejected the claim that DOF was equitably estopped from 

rejecting an asserted enforceable obligation that had been approved in prior ROPS 

submitted to DOF because any reliance on the part of the local agency was unreasonable. 

Since our discussion in Brentwood is pertinent here, we quote it:

“The logic supporting Brentwood’s claim of estoppel is strained. The entirety of 

the argument on this point asserts that Brentwood ‘reasonably relied’ on the failure of the 

Department to dispute the listing of PIA [public improvement agreement] projects in 

ROPS I and II as enforceable agreements (or the inclusion of actual payments made for 

PIA projects in ROPS III) ‘to move forward with the projects’ (by which we assume 

Brentwood means it entered into the construction contracts with third parties).

“This argument founders on the reasonability of the reliance on the Department’s 

previous failure to raise any objection to the inclusion of PIA projects as enforceable 
20

obligations. As noted above, in its previous determination letters involving ROPS I to 

ROPS III, the Department each time informed Brentwood that past approvals would not 

prevent it from revisiting the validity of including an item on a future ROPS. If 

Brentwood had wanted an ironclad guarantee that approval of an enforceable obligation 

would be ongoing, it had the statutory remedy of petitioning the Department for a ‘final 

and conclusive’ determination of approval for subsequent payments for that enforceable 

obligation. (§ 34177.5, subd. (i).) Given the Department’s express reservation of rights 

and the existence of a statutory remedy to achieve the same result as the estoppel, what 

Brentwood now urges as reliance, after the fact, is not reasonable. Given the absence of 

this element, we do not need to consider whether application of estoppel in the present 

case would nullify public policy.” (Brentwood, supra, 237 Cal.App.4th at pp. 504-505, 

fn. omitted.)

The same absence of reasonableness defeats City of Galt’s claim of equitable 

estoppel. First, City of Galt did not avail itself of the statutory means of obtaining a 

“final and conclusive” determination of approval for subsequent payments for the 

proposed enforceable obligation. (§ 34177.5, subd. (i).) And second, City of Galt’s 

efforts, starting with entering into the Cooperative Agreement and continuing through

obtaining the validation judgment, came after Governor Brown revealed that 

redevelopment as we knew it was in peril. In other words, City of Galt saw the writing 

on the wall (end of tax increment financing for redevelopment) and tried to devise a plan 

to avoid it. That the plan was not successful in light of the state’s authority over 

redevelopment should not surprise City of Galt.

Another reason to reject City of Galt’s equitable estoppel argument is that it would 

nullify a strong rule of public policy, namely, that tax increment revenue should be 

released to local taxing entities for use by “local governments to fund core governmental 

services” such as fire protection, police, and schools. (§ 34167, subd. (a).). This public 

policy, as determined by the Legislature, would be unjustifiably nullified if local agencies 
21

were allowed to cite earlier actions of DOF, which made preliminary and perhaps 

unstudied decisions, to claim that the public policy decisions of the Legislature cannot be 

given effect.

DOF is not equitably estopped from challenging the use of the bond proceeds for 

the Cooperative Agreement projects.

DISPOSITION

The judgment is affirmed. The Department of Finance is awarded its costs on 

appeal. (Cal. Rules of Court, rule 8.278(a).)

 NICHOLSON , Acting P. J.

We concur:

 ROBIE , J.

 MURRAY , J.