Source: https://www.leagle.com/decision/incaco20170614027
Timestamp: 2017-08-20 09:39:03
Document Index: 262731765

Matched Legal Cases: ['§ 34169', '§ 34162', '§ 34167', '§ 17', '§ 34179', '§ 34179', '§34179', '§ 34179', '§ 34171', '§ 34162', '§ 25', '§ 34179', '§ 25']

CITY OF BIG BEAR LAKE v. | No. C076576. | By... | Leagle.com
No. C076576.
Filed June 14, 2017.
Best Best & Krieger, Iris P. Yang and Irene S. Zurko for Plaintiffs and Appellants.
Kamala D. Harris and Xavier Becerra , Attorneys General, Douglas J. Woods , Senior Assistant Attorney General, Marc A. LeForestier and Nancy J. Doig , Deputy Attorneys General, for Defendants and Respondents.
The Dissolution Law1 (Assembly Bill 1X 26) immediately froze redevelopment (taking from redevelopment agencies the authority to create new enforceable obligations) and provided that only existing enforceable obligations of the former redevelopment agency could be paid from the funds held by the redevelopment agency and from future tax increment revenue. The law provided that any excess after payment of enforceable obligations would be distributed to local taxing entities. Later legislation (Assembly Bill 1484) declared that certain agreements between local municipal governments and their sponsored redevelopment agencies, such as the Cooperation Agreement here, are not enforceable obligations.
The Dissolution Law directed redevelopment agencies to continue making payments on enforceable obligations (Health & Saf. Code, § 34169, subd. (a))2 but prohibited those agencies from incurring additional obligations, freezing all such activities (§ 34162, subd. (a)). A primary goal of the Dissolution Law was "to preserve, to the maximum extent possible, the revenues and assets of redevelopment agencies so that those assets and revenues that are not needed to pay for enforceable obligations may be used by local governments to fund core governmental services including police and fire protection services and schools." (§ 34167, subd. (a).) The Legislature expressed the desire "that redevelopment agencies take no actions that would further deplete the corpus of the agencies' funds regardless of their original source."3 (Ibid.)
On June 27, 2011, the day before the Dissolution Law was signed by Governor Brown and became effective, City of Big Bear Lake and its former redevelopment agency, knowing about the imminent change of law and the Legislature's intent, signed the Cooperation Agreement. The agreement stated that the former redevelopment agency "desires to transfer that certain amount of redevelopment tax increment funds, and the Bond Proceeds secured with redevelopment tax increment funds . . . to the City, and the City desires to accept such funds for the City to acquire land and construct and install certain public improvements within the Project Areas." Under the terms of the Cooperation Agreement, the former redevelopment agency agreed to transfer to City of Big Bear Lake $23.5 million and the city agreed to undertake specified public improvements.
Also on June 27, 2011, City of Big Bear Lake entered into an agreement with Matich Corporation for street and drainage improvements for about $2.5 million. The city also had a 2006 agreement with Wireless Consulting — Joseph A. Cylwik (also referred to as Cylwik Property Management) to provide engineering services on an as-needed basis. Under this contract, Cylwik Property Management provided services related to the Matich Corporation project.
After the California Supreme Court decided Matosantos upholding the constitutionality of the Dissolution Law, the Legislature passed and the Governor signed Assembly Bill 1484, which required an audit of successor agencies to determine whether unobligated tax increment revenues were available for transfer to taxing entities. (See Assem. Bill No. 1484 (2011-2012 Reg. Sess.) adding Stats. 2012, ch. 26, §§ 17, 40.) This "due diligence review" or DDR (§ 34179.5, subd. (a)) identified "[t]he dollar value of assets and cash . . . transferred after January 1, 2011, through June 30, 2012, by the redevelopment agency or the successor agency to [a sponsoring entity] and the purpose of each transfer." (§ 34179.5, subd. (c)(2).) The amendment to the Dissolution Law required the successor agency to submit the results of this audit to the successor agency's oversight board (§34179.6, subd. (c)) and to DOF, which had the authority to adjust any amounts in the DDR (§ 34179.6, subd. (d)).
Crucial to this case, Assembly Bill 1484 also modified the definition of "enforceable obligations" to exclude all agreements between a former redevelopment agency and its sponsoring entity (sponsor agreements), with exceptions not relevant to this appeal. (§ 34171, subd. (d)(2).)
As required by the Dissolution Law, City of Big Bear Lake, acting as the successor agency, obtained a DDR, which listed transfers from the former redevelopment agency to City of Big Bear Lake. Included in that list was $2,629,622 for "[r]eimbursement to City [of Big Bear Lake] for street capital project expenses."
DOF met and conferred with City of Big Bear Lake but reiterated its position that the $2.6 million "was transferred in accordance with an agreement between the City and the [former redevelopment agency]." DOF informed City of Big Bear Lake in a letter that, if the city did not comply within 30 days, DOF would direct the Board of Equalization to withhold sales and use tax from the city. In response, City of Big Bear Lake informed DOF that it was not in possession of those funds.
• The Matich Corporation and Cylwik Property Management contracts were not enforceable obligations of the former redevelopment agency because those contracts were made between City of Big Bear Lake and those private contractors and did not involve the former redevelopment agency. • The contract between RRM Design Group and the former redevelopment agency is void because it was entered into after the Dissolution Law freeze went into effect. • The Cooperation Agreement is not an enforceable obligation of the former redevelopment agency because it is a sponsor agreement. • The fact that all payments were made under the Cooperation Agreement before it was rendered unenforceable by Assembly Bill 1484 is not dispositive. • City of Big Bear Lake cannot claim that DOF approved the payments made under the Cooperation Agreement to City of Big Bear Lake as part of the EOPS because City of Big Bear Lake did not list the Cooperation Agreement in the EOPS. • DOF's determinations in this case do not violate Proposition 22 because City of Big Bear Lake did not disclose the Cooperation Agreement in its EOPS. • The Dissolution Law does not violate the contracts clauses of the United States and California Constitutions. • DOF correctly determined that City of Big Bear Lake failed to transfer $2.6 million for distribution to local taxing entities. • The validity of the enforcements provisions of the Dissolution Law, allowing the state to withhold sales, use, and property taxes, is not ripe for review because the funds are no longer in the possession of the City of Big Bear Lake.
But City of Big Bear Lake complains that the former redevelopment agency was "bound by the RRM Contract once the [former redevelopment agency's] governing board approved it on June 27, 2011. The actual execution of the contract was a ministerial act. . . ." Even assuming for the purpose of argument that the former redevelopment agency staff had the ministerial duty to sign the contract (which is dubious because it no longer had the authority to do so on June 28, 2011), RRM Design Group was under no such duty and did not sign the contract until June 28, 2011. In other words, no potentially binding contract existed until RRM Design Group signed it June 28, 2011. No binding contract existed before the freeze took effect. The general rule is that a contract is not binding until both parties sign it. (Sparks v. Mauk (1915) 170 Cal. 122, 123.) We see no reason in this case to deviate from the general rule. Therefore, since no binding contract (and, hence, no enforceable obligation) existed before the freeze took effect, the freeze prevented the formation of a binding contract. (§ 34162, subd. (b).)
On appeal, City of Big Bear Lake asserts: "DOF tacitly approved the [former redevelopment agency's] transfers to the City and those transfers were valid." While the city discusses the statutes concerning the EOPS and the duty to pay enforceable obligations, it offers no authority for the proposition that this asserted tacit approval made those alleged obligations enforceable, even though they were not enforceable under the Dissolution Law. Specifically, the transfers to City of Big Bear Lake under the Cooperation Agreement for payments to Matich Corporation, Cylwik Property Management, and RRM Design Group were unenforceable because the payments were made to satisfy a sponsor agreement. Also, the agreement with RRM Design Group was not an enforceable obligation because the contract was signed after the freeze went into effect. These were not enforceable obligations, and "tacit approval" did not turn them into enforceable obligations.4
City of Big Bear Lake contends that the Dissolution Law violates Proposition 22 (2010), which generally prohibits the state from redirecting a redevelopment agency's tax increment revenue. (Cal. Const., art. XIII, § 25.5, subd. (a)(7).)5 The city argues that the constitutional provision precludes DOF from invalidating payments that were valid when they were made. As noted above, the trial court rejected this argument because the city did not include the Cooperation Agreement in its EOPS. But the city claims it was justified in not listing the Cooperation Agreement because it listed the "ultimate recipients"—Matich Corporation, Cylwik Property Management, and RRM Design Group—in the EOPS. After City of Big Bear Lake filed its opening brief, we held in Brentwood that retroactive invalidation of sponsor agreements does not violate Proposition 22.
Before we reach the constitutional issue, we agree with the trial court that City of Big Bear Lake did not preserve this issue of whether the Dissolution Law violates Proposition 22 under the facts of this case because the city did not include the Cooperation Agreement in its EOPS. As the trial court reasoned, "[w]hatever merit[] this argument may have for payments valid[ly] made prior to the [redevelopment agency's] dissolution, the failure to properly disclose the payments on the EOPS invalidated the payments. There is thus no Proposition 22 violation." Listing the "ultimate recipients," as City of Big Bear Lake characterizes it, did not meet the requirement of the statute to list the "enforceable obligations."
City of Big Bear Lake claims that Brentwood is distinguishable. It argues: "Here, all of the payments were made under the Cooperation Agreement during the `freeze' period, and were listed on the [former redevelopment agency's] EOPS, which DOF did not disapprove." We need not pause long on this argument that Brentwood is distinguishable because it is based on an unpersuasive argument concerning the facts. Here, the disputed payments were not made to the outside contractors listed on the EOPS; instead, the payments were made to City of Big Bear Lake under the Cooperation Agreement, which was not disclosed on the EOPS. There is no merit or reason to City of Big Bear Lake's argument that it was sufficient to list the contracts with the outside contractors in the EOPS because those contracts did not create enforceable obligations on the part of the former redevelopment agency, which is borne out by the fact that the former redevelopment agency made payments to the city, not to those outside contractors. Since the foundation of City of Big Bear Lake's attempt to distinguish Brentwood is unsupportable, we need not undertake a further comparison of the two cases.
City of Big Bear Lake contends that, because the city has already spent the money received from the former redevelopment agency, there are no "unobligated balances available for transfer to taxing entities." (§ 34179.5, subd. (a).) We see no relevance to this argument. It does not justify City of Big Bear Lake's refusal to turn over funds that must be turned over under the Dissolution Law.
Section 34179.5, subdivision (a) directs "each successor agency [to] employ a licensed accountant, approved by the county auditor-controller and with experience and expertise in local government accounting, to conduct a due diligence review to determine the unobligated balances available for transfer to taxing entities." This provision does not require the licensed accountant to determine (1) whether City of Big Bear Lake has spent the money received from the former redevelopment agency or (2) what is in City of Big Bear Lake's coffers; instead, it requires the licensed accountant to apply the Dissolution Law, analyze the transactions, and do the math to determine how much money the city must turn over. Section 34179.5 provides the process, but it does not require the licensed accountant to determine whether the city possesses the funds. City of Big Bear Lake establishes neither by the language of the statute nor by any other authority that it cannot be ordered to turn over funds for distribution to taxing entities just because it has already spent the money it received from the former redevelopment agency.
5. The constitutional provision on which City of Big Bear Lake relies prohibits the state from "[r]equir[ing] a community redevelopment agency (A) to pay, remit, loan, or otherwise transfer, directly or indirectly, taxes on ad valorem real property and tangible personal property allocated to the agency pursuant to Section 16 of Article XVI to or for the benefit of the State, any agency of the State, or any jurisdiction; or (B) to use, restrict, or assign a particular purpose for such taxes for the benefit of the State, any agency of the State, or any jurisdiction. . . ." (Cal. Const., art. XIII, § 25.5, subd. (a)(7).)