Source: https://caselaw.findlaw.com/ca-court-of-appeal/1621398.html
Timestamp: 2019-04-25 12:59:44+00:00

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CALIFORNIA REDEVELOPMENT ASSOCIATION et al., Plaintiffs and Appellants, v. Ana MATOSANTOS, as Director, Etc., et al., Defendants and Respondents.
California Redevelopment Association, Plaintiff and Respondent, v. Ana Matosantos, as Director, Etc., Defendant and Appellant.
County of Los Angeles et al., Plaintiffs and Appellants, v. Ana Matosantos, as Director, Etc., et al., Defendants and Respondents.
Best Best & Krieger; McDonough Holland & Allen, Richard E. Brandt, T. Brent Hawkins, and Ann Taylor Schwing; Nielsen, Merksamer, Parrinello, Mueller & Naylor, Steven A. Merksamer, and Richard D. Martland, Sacramento; and Scott D. Bertzyk, Santa Monica, for Plaintiffs and Appellants, case No. C064907. Meyers, Nave, Riback, Silver & Wilson, J. Scott Smith, Robin Paige Donoghue, and Susan E. Bloch, Oakland, for League of California Cities as Amicus Curiae on behalf of Plaintiffs and Appellants, case No. C064907. Kamala D. Harris and Edmund G. Brown, Jr., Attorney Generals, Douglas J. Woods and Jonathan K. Renner, Senior Assistant Attorneys General, Zackery P. Morazzini, Stephen P. Acquisto and George Waters, Deputy Attorneys General for Defendant and Appellant, case No. C065329. Greenberg Traurig, Scott D. Bertzyk, Nancy Doig, Karin L. Bohmholdt; Andrea Sheridan Ordin, County Counsel, Elizabeth M. Cortez, Assistant County Counsel, Thomas M. Tyrrell, Deputy County Counsel, for Plaintiffs and Appellants, case No. C065390. Altshuler Berzon, Scott A. Kronland, and Caroline P. Cincotta, San Francisco, for State Building and Construction Trades Council of California as Amicus Curiae on behalf of Plaintiffs and Appellants, case No. C065390. Kamala D. Harris and Edmund G. Brown, Jr., Attorney Generals, Douglas J. Woods and Jonathan K. Renner, Senior Assistant Attorneys General, Zackery P. Morazzini, Stephen P. Acquisto, George Waters, and Seth E. Goldstein, Deputy Attorneys General, for Defendants and Respondents, case No. C064907. Kamala D. Harris, Attorney General, Douglas J. Woods, Senior Assistant Attorney General, and Seth E. Goldstein, Deputy Attorney General for Ana Matosantos, Director of the Department of Finance, as Amicus Curiae on behalf of Defendants and Respondents, case No. C064907. Best Best & Krieger, Richard E. Brandt, T. Brent Hawkins, and Ann Taylor Schwing; Nielsen, Merksamer, Parrinello, Gross & Leoni, Steven A. Merksamer, and Richard D. Martland, Sacramento, for Plaintiff and Respondent, case No. C065329. Kamala D. Harris, Attorney General, Douglas J. Woods, Senior Assistant Attorney General, Kimberly J. Graham and Seth E. Goldstein, Deputy Attorneys General for Defendants and Respondents, case No. C065390.
Responding to a fiscal emergency declared by the Governor on July 1, 2009, the Legislature enacted Assembly Bill No. 26, requiring redevelopment agencies throughout the state to contribute portions of their property tax increment funding for the 2009–2010 and 2010–2011 fiscal years into supplemental educational revenue augmentation funds (SERAF's) to be used for financing K–12 education in redevelopment areas. (Assem. Bill No. 26 (2009–2010 4th Ex.Sess.) enacted as Stats.2009, 4th Ex.Sess., ch. 21, §§ 6–9 (hereafter Assembly Bill 4X 26).) However, because Assembly Bill 4X 26 further required that the funds deposited in SERAF's be counted toward the state's overall obligation to fund education, the legislation effected no net increase in school funding. Instead, redevelopment agencies were forced to transfer funds to the state general fund as reimbursement for other state-funded local programs.
In these consolidated appeals, we conclude the Legislature acted within its constitutional authority in directing redevelopment agencies to deposit portions of their property tax funding into SERAF's. In California Redevelopment Association v. Matosantos (2011) 53 Cal.4th 231, 135 Cal.Rptr.3d 683, 267 P.3d 580 (Matosantos ), the California Supreme Court upheld the Legislature's power to dissolve redevelopment agencies altogether. Inherent in the power to dissolve is the power to limit funding available to redevelopment agencies. And because Assembly Bill 4X 26 does not otherwise violate constitutional limitations on the use of property taxes or impair contractual obligations of redevelopment agencies or their successors, we conclude it is a valid exercise of the Legislature's inherent budgetary powers.
In a related matter, we conclude the trial court erred in awarding attorney fees to the prevailing plaintiffs in connection with a challenge to an earlier legislative attempt to reallocate property tax funding from redevelopment agencies to the state.
Redevelopment agencies may “prepare and carry out plans for the improvement, rehabilitation, and redevelopment of blighted areas” (§ 33131, subd. (a)) by acquiring real property (§ 33391, subd. (b)), clearing land and constructing infrastructure necessary for building on project sites (§§ 33420, 33421), undertaking certain improvements to other public facilities in the project areas (§ 33445), and disposing of property by lease or sale (§§ 33430, 33431).
In the general election of November 2004, the electorate approved Proposition 1A, which added article XIII, section 25.5 to the state Constitution. (Stats.2004, res. ch. 133, hereafter Proposition 1A; Matosantos, supra, 53 Cal.4th at p. 249, 135 Cal.Rptr.3d 683, 267 P.3d 580.) Proposition 1A prohibits the Legislature from enacting any law that modifies the manner of allocating property tax revenues “so as to reduce for any fiscal year the percentage of the total amount of ad valorem property tax revenues in a county that is allocated among all of the local agencies in that county below the percentage of the total amount of those revenues that would be allocated among those agencies for the same fiscal year” under the laws in effect before the adoption of Proposition 1A. (Art. XIII, § 25.5, subd. (a)(1)(A); Stats.2004, res. ch. 133.) In effect, Proposition 1A prohibits the Legislature from raiding local property tax allocations to help balance the budget.
According to the petition in CRA v. Matosantos I, CRA is a California nonprofit corporation established in 1979 whose members are redevelopment agencies and whose associate members are businesses having interests in redevelopment activities. Moreno Valley RA and Madera RA are community redevelopment agencies under the CRL suing on behalf of themselves and all other redevelopment agencies in the state and the residents and businesses within the jurisdictions of such agencies.
On April 30, 2009, the trial court issued its decision in CRA v. Matosantos I, granting the requested relief and invalidating the transfer of tax increment funds from the redevelopment agencies to the ERAF's under Assembly Bill 1389. The court explained article XVI, section 16 prohibits the use of tax increment funds for other than redevelopment purposes. The court further explained Assembly Bill 1389 contains no provisions assuring that funds transferred to the ERAF's will be used for educational purposes solely within the redevelopment project areas. The court entered judgment for the plaintiffs, finding sections 33685 through 33689 unconstitutional and enjoining the defendants from enforcing those provisions. The court reserved jurisdiction on the issue of attorney fees for the prevailing plaintiffs.
The Director filed a notice of appeal from the trial court's decision. The plaintiffs moved for an award of attorney fees in the amount of $629,408.48, pursuant to Code of Civil Procedure section 1021.5 and section 1988 of title 42 of the United States Code. The trial court deferred ruling on the motion for attorney fees until resolution of the Director's appeal. On September 23, 2009, the Director abandoned the appeal.
The trial court thereafter determined the plaintiffs are not entitled to attorney fees under section 1988 of title 42 of the United States Code, because its ruling on the merits was based on state law alone. However, the court then issued an order awarding the plaintiffs attorney fees pursuant to Code of Civil Procedure section 1021.5 in the amount of $316,622.74, approximately half of the amount sought. The court found that at least half of the hours detailed in the plaintiffs' billing statements were either unnecessary or unrelated to the relief obtained in the litigation. The Director appeals from the order awarding attorney fees.
However, section 33690 also provides that the amount of property tax revenues otherwise apportioned to the affected school districts shall be reduced by the amount of SERAF funds received (§ 33690, subd. (k)(1)), thereby resulting in no net increase or decrease in funding to those school districts.
Assembly Bill 4X 26 also added section 33691, which provides that a given redevelopment agency may reduce its required transfer to the SERAF under section 33690 or 33690.5 by whatever amount is necessary to allow the agency to pay “existing indebtedness,” which is defined as the amount due in the given fiscal year on bonds and other such obligations previously incurred by the agency. (§§ 33691, subd. (a)(1), (b).) In effect, current fiscal year debt payments, but not the amount of the overall debt obligations, are given priority over SERAF payments.
On October 20, 2009, the Community Redevelopment Agency of the City of Union City (Union City RA) and Fountain Valley Agency for Community Development (Fountain Valley RA), on behalf of themselves and all other California redevelopment agencies, along with CRA and John Shirey (hereafter collectively the CRA Plaintiffs), initiated a mandamus action against the Director and the Auditor–Controller of Alameda County, on behalf of himself and all other auditors in California counties having redevelopment agencies, seeking to block enforcement of Assembly Bill 4X 26. (Cal. Redevelopment Assn. v. Matosantos (Super. Ct. Sac. County, 2009, No. 34–2009–80000359–CU–WM–GDS) (hereafter CRA v. Matosantos II ).) The CRA Plaintiffs allege, among other things, that Assembly Bill 4X 26 violates article XVI, section 16, and Propositions 13 and 1A.
Two days later, The Counties of Los Angeles, San Diego, San Bernardino, San Mateo, Riverside, Orange and Alameda, along with Don Knabe (hereafter collectively the County Plaintiffs), initiated a separate mandamus action against the Director and the Auditor–Controller of Alameda County seeking to block enforcement of Assembly Bill 4X 26. (County of Los Angeles v. Matosantos (Super. Ct. Sac. County, 2009, No. 34–2009–80000362–CU–WM–GDS) (hereafter County v. Matosantos ).) As in CRA v. Matosantos II, the Auditor–Controller of Alameda County was sued on behalf of himself and as the representative of all other auditors of California counties having redevelopment agencies.
On November 2, 2009, the trial court determined CRA v. Matosantos II and County v. Matosantos are related and assigned both cases to Judge Connelly, who had presided over CRA v. Matosantos I.
On December 18, 2009, in County v. Matosantos, the trial court certified a defendant class of county auditors in the 51 California counties having redevelopment agencies.
On January 22, 2010, in CRA v. Matosantos II, the trial court certified a plaintiff class of California redevelopment agencies and a defendant class of county auditors.
On February 5, 2010, the trial court conducted a hearing on both matters, at the end of which it requested supplemental briefing.
On March 30, 2010, the CRA Plaintiffs moved for a preliminary injunction or stay to maintain the status quo in order to prevent the scheduled transfer of tax increment funds on or before May 10. The County Plaintiffs joined in the motion.
In lieu of ruling on the motion for preliminary injunction or stay, the trial court issued its ruling on the merits of the plaintiffs' petitions on May 4, 2010. The court first found no violation of article XVI, section 16's requirement that all tax increment funds be used for redevelopment purposes. The court deferred to the Legislature's explanation and specification in Assembly Bill 4X 26 designating funding for local schools as part of the redevelopment process and explained that the fact the transfer of funds also relieves the state of some school funding obligations does not invalidate the legislation.
The court next concluded Assembly Bill 4X 26 does not unconstitutionally impair the redevelopment agencies' contractual obligations to bond holders, inasmuch as SERAF payments are subordinated to liens on redevelopment property and current fiscal year debt payments and SERAF payments are not required to be made from tax increment funds. The court further found no violation of Proposition 1A, inasmuch as redevelopment agencies do not fall within the scope of its protection. Although the plaintiffs also argued Assembly Bill 4X 26 permits the extension of redevelopment agency obligations for one year, which could result in a decrease in funding to the sponsoring agency as prohibited by Proposition 1A, the court concluded the significance of this delay is too uncertain. Finally, the court found no other constitutional infirmity in Assembly Bill 4X 26. In light of its ruling, the court denied the plaintiffs' request for a stay of the scheduled May 10, 2010, transfer of funds.
On May 5, 2010, the CRA Plaintiffs filed a petition in this court for supersedeas or mandate to block enforcement of the trial court's judgment and to maintain the status quo pending appeal. On May 7, we denied the petition.
On May 13, 2010, the trial court entered judgment denying the petitions in CRA v. Matosantos II and County v. Matosantos. The plaintiffs in both cases appeal.
In December 2011, the California Supreme Court issued its decision in Matosantos, upholding Assembly Bill 1X 26 (Matosantos, supra, 53 Cal.4th at pp. 262, 264, 135 Cal.Rptr.3d 683, 267 P.3d 580) but finding Assembly Bill 1X 27 in violation of Proposition 22 (Matosantos, at p. 270, 135 Cal.Rptr.3d 683, 267 P.3d 580). The court also found the two provisions severable. (Ibid.) As reformed by the court, Assembly Bill 1X 26 required all redevelopment agencies to dissolve effective February 1, 2012. (Matosantos, at p. 275, 135 Cal.Rptr.3d 683, 267 P.3d 580.) Since that date has now passed, all redevelopment agencies, including those who were parties to the present consolidated proceedings, have ceased to exist.
On April 30, 2009, the trial court in CRA v. Matosantos I issued its decision granting the requested relief and invalidating the transfer of $350 million in tax increment funds from the redevelopment agencies to the ERAF's. The court explained “the required payments by [redevelopment agencies] to their county ERAF's during the 2008–2009 fiscal year are inconsistent with the intent of [article XVI,] section 16 to use tax increment revenue for the financing of redevelopment projects․” This was so, according to the court, because there was no assurance in the legislation that the applicable funds would be used for the benefit of the redevelopment areas alone. The court thereafter entered judgment for the plaintiffs, finding sections 33685 through 33689 unconstitutional and enjoining the defendants from enforcing those provisions.
The plaintiffs moved for an award of attorney fees in the amount of $629,408.48, pursuant to Code of Civil Procedure section 1021.5 and section 1988 of title 42 of the United States Code. The trial court concluded CRA is entitled to attorney fees under the state provision but not the federal one. The court further found that at least half of the hours detailed in the billing statements submitted by the plaintiffs were either unnecessary or unrelated to the relief obtained in the litigation. The court awarded CRA $316,622.74, which was about half of what had been requested.
Before addressing the parties' contentions, we note that the motion for attorney fees in the court below was filed on behalf of not just CRA but two other plaintiffs, including a redevelopment agency. Without explanation, the trial court entered an order awarding fees only to CRA. Based on the record before us, it appears the billing submitted by the plaintiffs in support of their motion for attorney fees was for work performed by counsel on behalf of all plaintiffs, not just CRA. We fail to see how the trial court could have singled out CRA as deserving of a fee award while ignoring the other plaintiffs. At any rate, as we shall explain, we conclude none of the plaintiffs were entitled to an award of attorney fees.
The CRA Respondent's arguments in support of the award, and the trial court's explanation of its ruling, are apparently based on two factors: (1) CRA must be viewed in isolation and not as simply a conduit for its members' interests; and (2) the $350 million protected by the judgment was not for the benefit of CRA or its members but for the bondholders and other creditors who will be paid out of those funds. However, neither basis withstands scrutiny.
The CRA Respondents assert “[n]o agency or individual could afford to challenge [Assembly Bill 1389] alone,” so “[t]he financial burden of the challenge fell to CRA.” Thus, the CRA Respondents would have us look to CRA alone and not its individual members, including the two redevelopment agency plaintiffs, to determine whether the financial burden placed upon CRA was out of proportion to its individual stake in the matter. And since CRA has no stake in the outcome of the litigation apart from that of its members, so the argument goes, the cost of litigation was obviously out of proportion to CRA's stake.
In support of their argument that a nonprofit organization such as CRA may recover attorney fees under Code of Civil Procedure section 1021.5 regardless of its members' stake in the litigation, the CRA Respondents cite Pacific Legal Foundation v. California Coastal Comm'n (1982) 33 Cal.3d 158, 188 Cal.Rptr. 104, 655 P.2d 306 (PLF ); Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 186 Cal.Rptr. 589, 652 P.2d 437 (Folsom ); In re State Water Resources Control Board Cases (2008) 161 Cal.App.4th 304, 73 Cal.Rptr.3d 842 (Water Board Cases ); and Riverside Sheriffs' Assn. v. County of Riverside (2007) 152 Cal.App.4th 414, 61 Cal.Rptr.3d 295 (Riverside Sheriffs ). However, as we shall explain, those cases are all inapposite.
PLF is obviously inapposite to the present matter, as it involved application of the second requirement for a Code of Civil Procedure section 1021.5 award—the matter conferred a significant benefit on the general public or a large class of persons—and not the third requirement at issue here. Furthermore, it does not support the CRA Respondents' position because the high court concluded attorney fees were not warranted under the circumstances presented.
In Folsom, the plaintiffs were elderly or disabled individuals dependent on public transit who brought a declaratory relief action challenging the county's allocation of street and road project funds and obtained relief by way of a settlement agreement. (Folsom, supra, 32 Cal.3d at p. 671, 186 Cal.Rptr. 589, 652 P.2d 437.) In the litigation, the plaintiffs were represented by the Legal Services of Northern California and other public entities. (Id. at p. 681, 186 Cal.Rptr. 589, 652 P.2d 437.) On the issue of the plaintiffs' right to attorney fees, the court first concluded the fact the plaintiffs were represented by public entities did not bar such an award. (Id. at pp. 683–684, 186 Cal.Rptr. 589, 652 P.2d 437.) The court thereafter concluded the plaintiffs had been successful in the litigation, notwithstanding the settlement and voluntary actions by the defendants. (Id. at pp. 686–687, 186 Cal.Rptr. 589, 652 P.2d 437.) Notably, the court did not consider the question whether the burden on the litigants exceeded their personal stake in the matter, thus distinguishing it from the present case.
Water Board Cases too is inapposite as it dealt with a different requirement for an award of attorney fees, to wit, whether the necessity of private enforcement is such as to make an award appropriate. There was no question as to whether the financial burden placed on the plaintiffs was out of proportion to their individual stakes in the matter.
Thus, none of the cases cited by the CRA Respondents supports their assertion that the court may ignore the financial stake of an organization's members in deciding whether the financial burden on the plaintiffs was out of proportion to their individual stake in the litigation.
Blythe too is readily distinguishable from the present matter. Unlike CRA here, the clinic in Blythe was not a membership association suing on behalf of its members. The clinic sued on behalf of its customers. Moreover, the clinic in Blythe did not receive any monetary recovery in the action, whereas CRA obtained a judgment providing for the retention of $350 million by its members.
Families Unafraid is not helpful to the CRA Respondents. Our decision in that case was based on the unexceptional proposition that the trial court must consider all relevant evidence in determining if the cost of litigation was out of proportion to the plaintiffs' personal stake in the matter, both financial and nonfinancial.
The CRA Respondents contend the Serrano III plaintiffs “are equivalent to” the two redevelopment agency plaintiffs and the individual plaintiff in this matter, because they are “individually affected by the unconstitutional acts but not so situated that they could afford to sue individually.” However, given that the average recovery of each of the approximately 360 redevelopment agencies represented by CRA is approximately $10 million, it is hard to see such equivalence. The CRA Respondents also contend the two public interest legal advocates in Serrano III are “roughly equivalent” to CRA here. We suppose that depends on what is meant by “roughly.” The public advocates in Serrano III were the attorneys representing the plaintiffs in that case. They had no other relation or affiliation with the plaintiffs. CRA, on the other hand, is an association composed of the individual redevelopment agencies. It is not the legal counsel for those agencies but rather one of the entities hiring such counsel. Thus, Serrano III provides no support for the CRA Respondents.
The CRA Respondents nevertheless contend neither CRA nor its members had any real stake in this action, because the ultimate beneficiaries were the bondholders who will be paid from the recovered funds. However, this argument is like saying a debtor who collects an unrelated debt from a third party is not thereby benefited because the proceeds will ultimately be used to pay the debtor's creditors. Certainly the debtor is benefited to the extent he is not required to look elsewhere for funds to satisfy the debt. If CRA's members had lost the $350 million in funds, it would have had to find other means to satisfy bondholders.
We conclude the litigation in CRA v. Matosantos I did not impose a burden on CRA and its members out of proportion to their individual stakes in the matter and, hence, CRA is not entitled to an award of attorney fees under Code of Civil Procedure section 1021.5.
The Director makes no attempt to refute the foregoing argument. In her reply brief on appeal, she simply reiterates her arguments regarding the propriety of a fee award under Code of Civil Procedure section 1021.5. Nevertheless, we conclude the CRA Respondents' argument is without merit.
It is clear the basis for the trial court's ruling—that the appropriation of funds violates the requirement that such funds be used for redevelopment purposes—is not factually related to claims that the appropriation of such funds constitutes an impairment of contract or a taking of property without just compensation. Hence, CRA is not entitled to an award of attorney fees under section 1988 of title 42 of the United States Code. The trial court made no ruling on any of the issues raised by the federal claim.
Because CRA is not entitled to an award of attorney fees under either the state or the federal provision, the trial court's order granting such fees must be reversed.
Under the terms of Assembly Bill 4X 26, the redevelopment agencies were required to transfer $1.7 billion to the SERAF's by May 10, 2010, and an additional $350 million by May 10, 2011. (§§ 33690, subd (a), 33690.5, subd. (a).) The CRA Plaintiffs and the County Plaintiffs sought a preliminary injunction or stay in the trial court to block the required transfer of funds. The trial court denied the request for a stay. On May 5, 2010, the CRA Plaintiffs filed a petition in this court for supersedeas or mandate to block enforcement of the trial court's judgment and to maintain the status quo pending appeal. On May 7, we denied the petition. Presumably, the scheduled transfer of funds occurred on May 10, 2010, and May 10, 2011, as directed.
As described more fully above, in the summer of 2011, the Legislature enacted Assembly Bill 1X 26, providing for the winding down and dissolution of all redevelopment agencies in the state. In December 2011, the California Supreme Court issued its decision in Matosantos upholding Assembly Bill 1X 26. (Matosantos, supra, 53 Cal.4th at pp. 262, 264, 135 Cal.Rptr.3d 683, 267 P.3d 580.) As reformed by the court, Assembly Bill 1X 26 required all redevelopment agencies to dissolve effective February 1, 2012. (Id. at p. 275, 135 Cal.Rptr.3d 683, 267 P.3d 580.) Since that date has now passed, all redevelopment agencies presumably have ceased to exist.
At our request, the parties provided supplemental briefing on the impact of Assembly Bill 1X 26 and Matosantos on the present matter.
The Director argues these consolidated appeals are moot, because the required transfer of $2.05 billion from the redevelopment agencies to the SERAF's has already taken place and this court can no longer provide effective relief to the plaintiffs.
The Director argues this matter is moot because courts have no power to order the Legislature to enact a specific appropriation of funds. Hence, this court cannot direct the Legislature to return the $2.05 billion appropriated pursuant to Assembly Bill 4X 26 if we were to determine they were wrongly appropriated. However, the fact we cannot direct the Legislature on a specific appropriation of funds does not mean we are without power to enter a judgment in favor of the various plaintiffs. If that were the case, no money judgment could ever be entered against the state. Courts may enter such a judgment and leave it to the Legislature to determine how to satisfy it.
The Director also argues the matter is moot by virtue of Assembly Bill 1X 26, which dissolved all redevelopment agencies. She asserts this court cannot provide any meaningful relief in the event we were to decide Assembly Bill 4X 26 is invalid, because there are no longer any redevelopment agencies to whom misappropriated funds may be returned. While acknowledging that Assembly Bill 1X 26 provides for successor agencies to take over the functions of the dissolved redevelopment agencies, the Director argues “these entities exist only to pay off [redevelopment agency] indebtedness, [to] dispose of [redevelopment agency] assets, and to wind down the affairs of the [redevelopment agencies].” However, the Director fails to explain how the successor agencies are expected to pay off indebtedness if their funding is taken away. Any relief provided in this action obviously would inure to the benefit of these successor agencies, just as it would have inured to the benefit of the redevelopment agencies had they not been dissolved. Thus, we conclude this matter is not moot.
(1) Redevelopment agencies are directed to transfer the required funds to SERAF's for the benefit of schools in the redevelopment areas.
(2) County auditors are required to reduce the schools' property tax apportionments by the same amount as they receive from the SERAF's, thereby resulting in no net increase in funds to the schools in the redevelopment areas.
(3) The reduced property tax apportionments of the schools are transferred to county Supplemental Revenue Augmentation Funds (SRAF's).
(4) The SRAF funds are transferred at the direction of the State Controller to pay for other state-funded services and costs at the local level.
In effect, the County Plaintiffs argue, the funds earmarked by Assembly Bill 4X 26 are transferred from redevelopment agencies, laundered through redevelopment area schools, and wind up in the hands of the state for use in satisfying other state obligations. This, they argue, violates the requirement of article XVI, section 16 that all tax increment funds be used for redevelopment purposes.
“No language in [article XVI,] section 16 restricts the Legislature's definitional discretion, and no case law has constrained the Legislature's past expansive exercise of that discretion to control and direct [redevelopment agencies]' use of tax increment by, for example, requiring [redevelopment agencies] to annually set aside 20 percent of their tax increment for low-and moderate-income housing, to allocate or pass through specified percentages of their tax increment to local taxing agencies affected by redevelopment plans, to limit the duration and amount of tax increment used, or to pay the administrative costs of county auditor-controllers in allocating tax increment revenues to [redevelopment agencies]. [Citation.] Nothing in [article XVI,] section 16 insulates the [redevelopment agencies] from such legislative requirements that control and direct the [redevelopment agencies]' use of tax increment financing to further the purposes of the CRL in eliminating conditions of physical and economic blight in urban neighborhoods.
The CRA Plaintiffs take issue with the foregoing analysis by the trial court. They argue, among other things, there is no nexus between the funds required to be transferred to redevelopment area schools and the burden on those schools imposed by the redevelopment projects. However, we need not decide if the trial court correctly concluded the SERAF payments constitute redevelopment indebtedness. As we shall explain, contrary to the underlying premise of the trial court's findings, the Legislature was not constrained by article XVI, section 16 to use tax increment funds for redevelopment purposes alone.
In Matosantos, the state Supreme Court concluded article XVI, section 16 posed no impediment to the Legislature dissolving all redevelopment agencies. In doing so, the court explained that article XVI, section 16 neither requires creation of redevelopment agencies nor requires that they be allocated tax increment funds. Article XVI, section 16 states the Legislature “may” provide that any redevelopment plan “may” contain a provision allocating tax increment funds to redevelopment agencies.
What the Legislature did in Assembly Bill 4X 26 was to curtail in part the redevelopment agencies' entitlement to tax increment funds by requiring that a portion of such funds be reallocated elsewhere. This was not inconsistent with article XVI, section 16.
Amicus League of California Cities argues this type of reallocation does in fact violate article XVI, section 16, as interpreted by Proposition 22, which was approved by the electorate in the November 2, 2010 General Election (Proposition 22). Proposition 22 added article XIII, section 25.5, section (a)(7), to the State Constitution, expressly prohibiting such allocations in the future. However, that provision is not applicable to the allocations required by the previously enacted Assembly Bill 4X 26.
Assembly Bill 4X 26 applies only to redevelopment agencies and directs them to transfer $2.05 billion to the SERAF's. It would appear, therefore, that Proposition 1A is not implicated. The CRA Plaintiffs argue Proposition 1A is in fact violated because the $2.05 billion transferred by redevelopment agencies will ultimately come out of the coffers of the local agencies that created them. They reason that tax increment funds are allocated to redevelopment agencies only to the extent necessary to pay redevelopment obligations. Once those obligations are satisfied, the tax increment funds are reallocated to the creating agency. Thus, if $2.05 billion is diverted from redevelopment agencies now, that money will have to be made up on the back end of the redevelopment process, thereby delaying the ultimate transfer of tax increment funds to the creating agency.
The County Plaintiffs similarly contend Assembly Bill 4X 26 violates Proposition 1A. They point out the legislation contains a provision, section 33331.5, permitting the legislative body that created a redevelopment agency to extend the time limits for completion of redevelopment activities by one year upon payment of the SERAF obligation. The County Plaintiffs argue exercise of this option is a certainty and will result in an equivalent delay in the ultimate transfer of tax increment funds from the redevelopment agencies to the creating agencies, thus adversely impacting the creating agencies in violation of Proposition 1A.
The Director contends the foregoing issue has been resolved by the elimination of all redevelopment agencies pursuant to Assembly Bill 1X 26. According to the Director, the elimination of redevelopment agencies means there will be no one-year extension of redevelopment activities and, hence, no reduction in the flow of property tax revenue to the creating agencies. However, this argument ignores the one raised by the CRA Plaintiffs that every dollar taken from redevelopment agencies now will have to be made up by the creating agency at the back end. The obligations that might have been satisfied with the $2.05 billion do not just go away with the transfer of those funds to the SERAF's. They must be paid with other funds, which funds might otherwise have gone to the creating agency for other purposes.
Nevertheless, it is readily clear the CRA Plaintiffs' argument proves too much. They argue any transfer of funds from redevelopment agencies will inevitably come out of the coffers of the creating agencies. However, to accept this argument would mean that Proposition 1A, in effect, prohibits all transfers from redevelopment agencies. But this would be contrary to the voters' intent.
In matters of statutory construction, the overriding concern is to determine the intent of the Legislature or the electorate in adopting the provision so that, if possible, such intent may be effectuated. (Taxpayers to Limit Campaign Spending v. Fair Pol. Practices Com. (1990) 51 Cal.3d 744, 764, 274 Cal.Rptr. 787, 799 P.2d 1220; Outfitter Properties, LLC v. Wildlife Conservation Board (2012) 207 Cal.App.4th 237, 244, 143 Cal.Rptr.3d 312.) For this court now to interpret Proposition 1A as prohibiting any change in funding for redevelopment agencies would clearly violate the intention of the voters in approving Proposition 1A while rejecting the alternate Proposition 65. We conclude Proposition 1A did not prohibit the transfer of tax increment funds from redevelopment agencies required by Assembly Bill 4X 26.
The CRA Plaintiffs contend Assembly Bill 4X 26 effects an unconstitutional impairment of contract and a taking of bondholders' contractual rights to tax increment funds. Both the state and federal Constitutions prohibit the enactment of any law that impairs contractual obligations. (U.S. Const., art. I, § 10, cl. 1; Cal. Const., art. I, § 9.) The CRA Plaintiffs identify a number of alleged contractual impairments, which we shall consider in turn.
The CRA Plaintiffs next argue the claims of existing redevelopment creditors have priority over obligations to fund SERAF's under Assembly Bill 4X 26. However, the fact existing creditors may have priority over other claims to tax increment funds does not establish that the rights of existing creditors are somehow impaired. Again, the argument of the CRA Plaintiffs is premature. Assembly Bill 4X 26 provides that payments of obligations to redevelopment creditors due in the current fiscal year take priority over SERAF obligations. The CRA Plaintiffs point to nothing in this record to suggest current SERAF payments will impair payments to redevelopment creditors in future years.
The CRA Plaintiffs next point out that, as a result of Assembly Bill 4X 26, redevelopment bondholders have lost $2.05 billion in irrevocably-pledged security. They argue the $2.05 billion lost through Assembly Bill 4X 26 cannot be recouped and will force agencies to borrow with no means of repayment. This claim likewise is premature. The CRA Plaintiffs provide no basis for assuming the loss of $2.05 billion in 2010 and 2011 will make it impossible for the successor agencies to meet redevelopment obligations. It is not enough simply that money has been taken away. That take-away must cause an inability to otherwise meet obligations in order for there to be an impairment of contract.
The CRA plaintiffs next take issue with the redefinition in Assembly Bill 4X 26 of “existing indebtedness” from the entire amount of indebtedness owed by the redevelopment agency to merely the amount due in the current fiscal year. They argue this change ignores the multi-year nature of such obligations. However, the CRA Plaintiffs fail to explain how this will result in an impairment of contractual obligations. On this record, there is no basis for concluding such change will prevent the successor agencies from ultimately paying all redevelopment obligations. Hence, this claim too is premature.
The CRA Plaintiffs next challenge the redefinition of “redevelopment” in Assembly Bill 4X 26 to include payments to schools and school districts in the redevelopment areas. They argue such payments violate redevelopment creditors' rights to those funds as provided in article XVI, section 16. According to the CRA Plaintiffs, “[t]he Legislature cannot adopt inconsistent definitions or alter definitions affecting past transactions.” However, as explained earlier, article XVI, section 16, does not prohibit the use of tax increment funds for other than redevelopment purposes. Just as the Legislature is authorized, but not mandated, by article XVI, section 16 to allocate tax increment funds to redevelopment agencies, it can reallocate those funds elsewhere.
Finally, the CRA Plaintiffs argue section 33607.5, subdivision (f)(1)(B), is incorporated in all redevelopment bonds and contracts as a matter of law and provides that the payments made by redevelopment agencies under that section “are the exclusive payments that are required to be made by a redevelopment agency to affected taxing entities during the term of a redevelopment plan.” (§ 33607.5, subd. (f)(1)(B).) However, as previously explained, this statutory limitation can be superseded by a later enacted provision, such as Assembly Bill 4X 26.
The short answer to the foregoing is that there is no showing in this matter that any change in the law brought about by Assembly Bill 4X 26 has or will substantially impair any contractual obligation that has been assumed by the successor agencies. As with their other claims, the CRA Plaintiffs' claim in this regard is premature.
The CRA Plaintiffs nevertheless cite as support for their impairment of contract claim the circumstances facing Union City RA, which purportedly anticipated tax increment funding for the 2009–2010 fiscal year of $18.6 million but faced existing debt obligations which would leave it with a surplus of only $2.6 million. However, Union City RA also faced a $7.7 million SERAF obligation under Assembly Bill 4X 26, thereby leaving it with insufficient funds to meet all current obligations. But, as previously explained, Assembly Bill 4X 26 provides that current fiscal year obligations of redevelopment agencies take precedence over the SERAF obligations. Thus, Union City RA is not required to default on such obligations in order to make SERAF payments.
Because we find no impairment of contract under the circumstances of this matter, we likewise dispose of the CRA Plaintiffs' takings claim, which relies on the same arguments. Furthermore, there has been no taking of any property of the redevelopment agencies, because they never had an irrevocable right to the tax increment funds required to be paid to the SERAF's.
The CRA Plaintiffs contend Assembly Bill 4X 26 violates equal protection principles by reallocating school funding in such a way as to benefit students living or attending schools in redevelopment areas at the expense of all other students. Assembly Bill 4X 26 does this, they argue, by mandating that SERAF funds be spent in redevelopment areas, even though such expenditures might result in per-pupil expenditures in those areas far above such expenditures elsewhere.
The Director responds that the foregoing argument is based on a false assumption that SERAF money is allocated to individual students rather than to individual schools. According to the Director, school funding is a two-step process: “First, money is allocated to school districts. [Citation.] Then, the districts allocate funds to the schools. [Assembly Bill 4X 26] only provides guidance up to this point․” The Director argues: “[O]nce SERAF money is given to a school, that school can use the funds in a way that benefits pupils living in redevelopment areas but that also benefits students who do not live in those areas. For example, if School X fixes its leaky roof with SERAF money, it keeps students A, B and C dry, all of whom live in the redevelopment area, but all students share in the benefits conferred by those improvements.” The Director also argues it is hard to see how the disproportionate injection of $1.7 billion in fiscal year 2009–2010, which represents only 2.5 percent of total school funding, can cause an equal protection violation.
As the CRA Plaintiffs themselves acknowledge, there is no net increase in funding to school districts as a result of Assembly Bill 4X 26. Funding allocated to districts containing redevelopment areas will be offset by reductions in funding that would otherwise have been provided by the state. Under Serrano I and Serrano II, which eliminated local financing of education because of inherent funding disparities in violation of equal protection principles, the state is required to provide roughly equal educational opportunities to students throughout the state. We therefore presume efforts will be made by the state and local entities to maintain such rough equality. And while the CRA Plaintiffs point to an isolated case as demonstrating unequal classifications, such isolated case does not prove the rule. As a general matter, Assembly Bill 4X 26 does not create disparate classifications of students and therefore does not violate equal protection principles.
The CRA Plaintiffs contend Assembly Bill 4X 26 violates Proposition 98 which, as previously explained, requires minimum levels of funding for state schools. They argue: “SERAF funds cannot satisfy Proposition 98 because SERAF funds are severely limited in how and on whom they can be spent. [Citations.] SERAF is not available ‘for the support of school districts' as Proposition 98 requires because SERAF is limited to ‘pupils living in the redevelopment areas or in housing supported by the redevelopment agency funds.’ ” The CRA Plaintiffs assert such “[r]estricted-purpose” money cannot be counted toward the “general-purpose” money required by Proposition 98 for the support of schools.
Neecke is of no assistance to the CRA Plaintiffs. It provides no guidance as to whether funds allocated to school districts by virtue of Assembly Bill 4X 26 may be counted toward the state's Proposition 98 obligations. The CRA Plaintiffs themselves acknowledge Assembly Bill 4X 26 effects no net increase or decrease in overall school funding. At most, it results in a reallocation of funding among the various schools in the state. However, it contains no restriction on how such funds may be spent. But even if it did, the CRA Plaintiffs provide no basis for concluding such restricted funds cannot be counted toward the state's Proposition 98 obligations. Their Proposition 98 claim is therefore a nonstarter.
It is undisputed the foregoing provision expressly authorizes the Legislature to apportion property tax revenue among the various local governmental entities. (See San Miguel Consolidated Fire Protection Dist. v. Davis, supra, 25 Cal.App.4th at p. 148, 30 Cal.Rptr.2d 343.) However, the County Plaintiffs contend Assembly Bill 4X 26 goes further and permits the Legislature to apportion property tax revenue to itself to pay state expenses. It does this, they argue, by the following scheme of laundering the funds through local school districts. First, the funds are deposited in SERAF's. The SERAF funds are then allocated to school districts serving redevelopment areas. For every dollar allocated to those school districts, a dollar is taken from the school district and deposited in the county SRAF. Those SRAF funds are then transferred into the county office of education from which they are transferred to the state as reimbursement for state-funded local services. In effect, the tax increment funds are taken from local redevelopment agencies and used instead to pay for other local services.
Under the foregoing scheme, funds taken from the redevelopment agencies pursuant to Assembly Bill 4X 26 are ultimately given to the state as reimbursement for expenditures by the state for local services. In effect, the funds are taken from one local agency and given to another. As we see it, this is consistent with Proposition 13, which authorizes the state to allocate the one percent property tax among the various local districts. We are aware of no limitation on such allocation for local expenses that might otherwise be required to be funded by the state. The local entities retain control over budgetary decisions, programs and service priorities (see Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 226, 149 Cal.Rptr. 239, 583 P.2d 1281), with the state merely being reimbursed for expenses it must incur for those locally determined expenditures.
The CRA Plaintiffs contend Assembly Bill 4X 26 amounts to a gift of public funds in violation of article XVI, section 6. That constitutional provision bars the Legislature from, among other things, “mak[ing] any gift or authoriz[ing] the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever.” (Art. XVI, § 6.) Citing Golden Gate Bridge and Highway Dist. v. Luehring (1970) 4 Cal.App.3d 204, 84 Cal.Rptr. 291 (Golden Gate Bridge ), the CRA Plaintiffs argue article XVI, section 6 prohibits taking funds from one governmental entity to benefit another unless the funds are used to further the public purpose of the transferring entity. They further argue funds raised for a limited purpose, such as redevelopment, may not be diverted to an extraneous purpose.
Golden Gate Bridge is inapposite. That case involved an attempt by a bridge district to transfer excess funds collected from tolls to various counties for general use therein. Such transfer would have taken funds collected from one class of users, bridge patrons, and delivered them to another class, county taxpayers, for a purpose unrelated to the limited special purpose of the bridge district.
In the present matter, the funds in question were not raised by the redevelopment agencies for a specific purpose. They came from general property taxes that were allocated to the agencies. This is not a transfer of funds from the redevelopment agencies to other local agencies, as in Golden Gate Bridge, but a reallocation of funds by the Legislature from one public purpose to another. And the same general group of individuals who contributed the funds, county property taxpayers, will benefit from the use of those funds elsewhere. Under these circumstances, there has been no gift of public funds within the meaning of article XVI, section 6.
The CRA Plaintiffs assert the issue was raised in their reply brief. However, points first raised in a reply brief will not be considered unless good cause is shown for failure to present them earlier. (Neighbours v. Buzz Oates Enterprises (1990) 217 Cal.App.3d 325, 335, fn. 8, 265 Cal.Rptr. 788.) The CRA Plaintiffs provide no good cause for failing to raise their home rule argument sooner.
Furthermore, we disagree the point was raised in the CRA Plaintiffs' reply brief. The argument to which the CRA Plaintiffs refer dealt with article XVI, section 16 of the State Constitution, not article XI, the home rule provision. The CRA Plaintiffs argued article XVI, section 16 authorized the Legislature to enact the CRL notwithstanding the home rule rights of charter cities. (CRA RB 23) The CRA Plaintiffs further argued that, once the Legislature so acted, it could not repeal or modify the financing scheme established by the CRL. According to the CRA Plaintiffs, article XVI, section 16 mandates that, once redevelopment is financed by tax increment funds, those funds must be spent on redevelopment. (CRA RB 24) We rejected this argument earlier in this opinion.
Because the CRA Plaintiffs first raised their home rule issue at oral argument, thus giving the Director no opportunity to prepare a response, we decline to consider it on appeal.
1. Amicus has requested that we consider several items of evidence regarding the impact of Assembly Bill 4X 26 on redevelopment agencies in the state. We decline the request. The indicated materials are not relevant to the issues determined in this matter. The Director has requested that we strike the amicus brief in its entirety or at least those portions of the brief that rely on the foregoing evidence. We grant the Director's request only as to those portions of the amicus brief that rely solely on the indicated evidence.
2. The Director has requested that we take judicial notice of various reports from the State Controller and Legislative Analyst's offices relating to budgeting matter. The Director contends these materials are relevant to the issues raised in this dispute and are subject to judicial notice as official acts of executive departments. However, while the issuance of the reports may be official acts of the indicated departments subject to judicial notice, the contents of those reports are themselves hearsay. At any rate, our resolution of the issues raised in this matter does not require reference to the indicated materials. We therefore decline the Director's request.
We concur: BLEASE, Acting P.J. MAURO, J.

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