Court Opinion

ID: 4666248
Source: CourtListenerOpinion
Date Created: 2021-03-09 22:02:41.648839+00
Date Added: 2024-06-11T08:02:47.594685
License: Public Domain

Filed 3/9/21 El Cerrito Redevelopment Agency Successor Agency Successor Agency v. Bosler CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                     (Sacramento)
                                                            ----

 EL CERRITO REDEVELOPMENT AGENCY                                                               C078064
 SUCCESSOR AGENCY et al.,
                                                                                    (Super. Ct. No. 34-2013-
                    Plaintiffs and Appellants,                                     80001671-CW-WM-GDS)

           v.

 KEELY MARTIN BOSLER, as Director, etc., et al.,

                    Defendants and Respondents.

         In this appeal, we continue our court’s consideration of legal issues emerging from
historic legislation enacted in 2011 dissolving the state’s approximately 400
redevelopment agencies (the Dissolution Law). The issues in this case stem from a
“Cooperation Agreement” between the City of El Cerrito (City) and its redevelopment
agency and the assignment of the City’s rights and obligations under the agreement to the
El Cerrito Municipal Services Corporation (the Corporation), a nonprofit mutual benefit

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corporation formed and controlled by the City. Based on the assignment, the
redevelopment agency transferred certain properties and bond proceeds to the
Corporation to complete eligible projects and programs identified in the Cooperation
Agreement. The transfers were effected after the passage of legislation dissolving
redevelopment agencies but before February 1, 2012, when the redevelopment agency
was officially dissolved and its affairs assumed by the City in its capacity as the
“Successor Agency.” The Department of Finance (Finance) and the state controller
(collectively defendants) later reviewed the transfers and, exercising authority conferred
by the Dissolution Law, directed the City, the Successor Agency, and the Corporation
(collectively plaintiffs) to reverse the transfers. Plaintiffs filed a writ of mandate
challenging the decision. The trial court denied the petition. We affirm.
                             STATUTORY BACKGROUND
       In 1945, the Legislature authorized the formation of community redevelopment
agencies and the use of tax increment financing to fund them. Under this financing
method redevelopment agencies were entitled to a share of taxes imposed on property
within redevelopment areas measured by the property’s increase in value after the
effective date of an agency’s redevelopment plan. The method reflected an assumption
that any such increase in property values was attributable to development efforts, and the
redevelopment agency should receive the tax increment, which could be used to repay
debt incurred to finance the redevelopment plan. Property taxes reflecting the assessed
value of the property prior to the effective date of the redevelopment plan were allocated
to the other public entities entitled to receive property tax revenue. (California
Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 246-247 (Matosantos).)
       Tax increment financing was a boon to redevelopment agencies, which received
12 percent of all of the property taxes collected across the state (Matosantos, supra,
53 Cal.4th at p. 247; Historical and Statutory Notes, 41A Pt. 1 West’s Ann. Health & Saf.
Code (2014 ed.) foll. § 33500, p. 185), but it disadvantaged schools, special districts, and

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other taxing entities equally dependent on property tax revenue. (Matosantos, supra, at
p. 248.) For them, property tax revenue was frozen.
        Addressing a state fiscal emergency, and the negative impact of tax increment
financing by redevelopment agencies on school finance, the Legislature in 2011 enacted
Assembly Bill No. 26 (2011-2012 Ex. Sess.; Stats. 2011, 1st Ex. Sess. 2011-2012, ch. 5),
providing for the dissolution of nearly 400 redevelopment agencies then in place.
(Matosantos, supra, 53 Cal.4th at p. 241.) The legislation ultimately became effective on
February 1, 2012. (Id. at p. 275.)
        The Legislature made its intent explicit. Health and Safety Code section 34167
states: “This part is intended 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. It is the
intent of the Legislature that redevelopment agencies take no actions that would further
deplete the corpus of the agencies’ funds regardless of their original source. All
provisions of this part shall be construed as broadly as possible to support this intent and
to restrict the expenditure of funds to the fullest extent possible.” (Health & Saf. Code,
§ 34167, subd. (a).)1
        The Legislature sought to establish a mechanism to ensure that all enforceable
obligations of the former redevelopment agencies were paid, but unencumbered assets
and revenues would be available to local governments to fund core services. This was
not a simple task. While the former redevelopment agencies were legal entities separate
from the city or county that sponsored them, they were controlled by the governing body
of their sponsors. Control was assured by the overlapping membership of the two

1   Further undesignated statutory references are to the Health and Safety Code.

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governing bodies. Reimbursement and funding agreements were often entered into by
the same individual decisionmakers, sitting in two different capacities: as board
members of the redevelopment agency the city created, and as members of the city
council. The statutory scheme dissolving and winding down the redevelopment agencies
thereafter swapped a successor agency for the redevelopment agency, but generally the
city or county that created the redevelopment agency elected to become the successor
agency. (§ 34173.) Thus, the decisionmakers in most cases remained the same—the
members of the city council.
       Successor agencies, charged with winding down the affairs of the redevelopment
agency, are required to “[c]ontinue to make all scheduled payments for enforceable
obligations, as defined in subdivision (d) of Section 34167,” (§ 34169, subd. (a); see
§ 34177, subd. (a)(3); Matosantos, supra, 53 Cal.4th at p. 275), but are prohibited from
taking on new obligations. Successor agencies have an obligation to transfer
unencumbered funds to the county auditor, for distribution to the affected taxing entities.
(§§ 34177, subd. (d), 34183, subd. (a)(4), 34188; Matosantos, supra, 53 Cal.4th at
p. 251.)
       Nonetheless, sponsoring agencies, usually cities, and their former redevelopment
agencies, moved swiftly to lock up “tax increment” to which redevelopment agencies had
been entitled before the enactment of this “Great Dissolution.” (Matosantos, supra,
53 Cal.4th at pp. 243-248; City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 858-859
(City of Tracy).) Conscious of this inherent conflict of interest, and the possibility that
assets would be transferred from redevelopment agencies to their sponsors and illusory
“obligations” would be created to circumvent the intent of the dissolution, the Legislature
declared that “agreements, contracts, or arrangements between the city or county, or city
and county that created the redevelopment agency are invalid and shall not be binding on
the successor agency.” (§ 34178, subd. (a).)

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       The Legislature took additional steps as well. It empowered Finance and the state
controller to review redevelopment agency transactions to determine whether those
transactions gave rise to valid or enforceable obligations. Three review processes were
authorized.
Asset Transfer Review
       The controller’s asset transfer review (ATR) applies to asset transfers between a
redevelopment agency and the “city or county, or city and county that created” it.
(§ 34167.5.) The Legislature found “a transfer of assets by the redevelopment agency
during the period covered in this section is deemed not to be in the furtherance of the
Community Redevelopment Law and is thereby unauthorized.” (§ 34167.5.) If the
recipient of such a transfer “is not contractually committed to a third party for the
expenditure or encumbrance of those assets” the controller orders those assets returned to
the successor agency. (§ 34167.5.)
Due Diligence Review
       The due diligence review (DDR) requires successor agencies to submit an
accounting of former redevelopment agency funds. (§ 34179.5.) The DDR includes the
value of assets transferred between January 1, 2011, and June 30, 2012, by the
redevelopment agency to the city or county that formed the redevelopment agency.
(§ 34179.5, subd. (c).) The DDR identifies assets of the successor agencies that are not
encumbered by enforceable obligations or otherwise restricted and distributes them to
taxing entities. (§ 34179.5, subd. (a).)
       Enforceable obligations for the purposes of the DDR include bonds, loans,
payments required by law, judgments or settlements, and certain agreements or contracts.
(§§ 34171, subd. (d), 34177, subds. (a)(3), (l)(1).) However, enforceable obligations do
not “include any agreements, contracts, or arrangements between the city, county, or city
and county that created the redevelopment agency and the former redevelopment
agency.” (§ 34171, subd. (d)(2).) The Dissolution Law rendered such agreements

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invalid and unenforceable against a former redevelopment agency’s successor agency.
(§ 34178, sub. (a).) Finance must review and approve the DDR and can adjust any
amount. (§ 34179.6, subd. (d).)
The Recognized Obligations Payment Schedule Process
        The recognized obligations payment schedule (ROPS) process is a periodic
process that allows successor agencies to pay former redevelopment agencies’ approved
enforceable obligations. The ROPS covers transactions prior to the Dissolution Law.
Finance reviews the obligations listed on the ROPS and approves those items that qualify
as enforceable obligations. (§ 34177, subds. (a)(3), (l)(1), (m).)
        The property tax proceeds that were previously available to the former
redevelopment agencies are now placed into a redevelopment property tax trust fund.
(§ 34182, subd. (c)(1).) These funds may be used to pay for approved enforceable
obligations listed on the ROPS. (§ 34177, subd. (l)(1)(E).) The remaining funds are
distributed to the taxing entities.
        The enforceable obligations payment schedule (EOPS) was replaced by the ROPS.
The EOPS originally covered claimed enforceable obligation payments through the end
of December 2011. (§ 34169, subd. (g)(1)(D).) Subsequent legislation authorized
successor agencies to amend the EOPS to enable further payments until the first ROPS
was approved later in 2012. (§ 34177, subd. (a)(1).)
Definition of City, County, or City and County in Section 34167.10
        The ATR, DDR, and ROPS are designed to identify unencumbered assets held by
successor agencies to be made available for distribution to the affected taxing entities.
All three reference “city, county, or city and county.” That definition lies at the heart of
this appeal. The Legislature enacted an expansive definition that took into account the
realities of the relationships between redevelopment agencies and the bodies that control
them.

                                              6
       Section 34167.10 states: “(a) Notwithstanding any other law, for purposes of this
part [Part 1.8] and Part 1.85 (commencing with section 34170), the definition of a city,
county, or city and county includes, but is not limited to, the following entities: [¶]
(1) Any reporting entity of the city, county or city and county for purposes of its
comprehensive annual financial report or similar report. [¶] (2) Any component unit of
the city, county or city and county. [¶] (3) Any entity which is controlled by the city,
county, or city and county, or for which the city, county, or city and county is financially
responsible or accountable.” (§ 34167.10, subd. (a), italics added.)
       An entity “is controlled by the city, county, or city and county,” and is “therefore
included in the definition of a city, county, or city and county” based on a consideration
of the following factors: “(1) The city, county, or city and county exercises substantial
municipal control over the entity’s operations, revenues, or expenditures. [¶] (2) The
city, county, or city and county has ownership or control over the entity’s property or
facilities. [¶] (3) The city, county, or city and county and the entity share common or
overlapping governing boards, or coterminous boundaries. [¶] (4) The city, county, or
city and county was involved in the creation or formation of the entity. [¶] (5) The entity
performs functions customarily or historically performed by municipalities and financed
through levies of property taxes. [¶] (6) The city, county, or city and county provides
administrative and related business support for the entity, or assumes the expenses
incurred in the normal daily operations of the entity.” (§ 34167.10, subd. (b).)
       Section 34617.10 also provides: “For the purposes of this section, it shall not be
relevant that the entity is formed as a separate legal entity, nonprofit corporation, or
otherwise, or is not subject to the constitution debt limitation otherwise applicable to a
city, county, or city and county. The provisions in this section are declarative of exiting
law as the entities described herein are and were intended to be included within the
requirements of this part [Part 1.8] and Part 1.85 (commencing with Section 34170) and

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any attempt to determine otherwise would thwart the intent of these two parts.”
(§ 34167.10, subd. (c).)
                  FACTUAL AND PROCEDURAL BACKGROUND
Transactions in Question
       Cooperation Agreement
       The redevelopment agency and the City entered into a public improvements and
cooperation agreement effective as of February 7, 2011. Subsequently, the parties
entered into an amended and restated public improvements and cooperation agreement,
effective as of February 22, 2011, (the Cooperation Agreement). Scott Hanin signed the
Cooperation Agreement on behalf of both the redevelopment agency and the City.
       A memo from City staff to the city council and the redevelopment agency board
outlined the purpose behind the Cooperation Agreement: “One way to help protect tax
increment revenue is for an agency to enter into an agreement with its respective city
whereby the city would implement certain redevelopment projects and programs that the
agency would pay for.” In addition, “[a]doption of the Agreement will allow the Agency
to obligate both exiting Agency funds and future property tax increment funds for
reimbursement to the City.”
       Under the Cooperation Agreement, the City would perform redevelopment work
on behalf of the redevelopment agency: “The Parties desire to enter into this Agreement
to set forth activities, services and facilities that the City will undertake and make
available to the Agency in furtherance of redevelopment of the Project Area and to
provide that the Agency will fund or reimburse the City for actions undertaken and costs
and expenses incurred . . . in furtherance of the redevelopment of the Project Area.”
       The redevelopment agency agreed to pay the City funds to be used for projects
listed in exhibit A of the agreement. The projects consisted of “various projects and
programs the Agency is currently implementing or intends to implement” consistent with
the agency’s five-year implementation plan.

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        The source of the funds to be paid by the redevelopment agency to the City under
the Cooperation Agreement included certain available funds, bond proceeds, and future
tax increment revenue. These funds were to be used exclusively for the completion of
projects in accordance with the Cooperation Agreement. All unencumbered and future
redevelopment agency funds were promised to the “various projects and programs the
Agency is currently implementing or intends to implement.”
        Assignment Agreement
        On March 7, 2011, the City and the Corporation entered into an assignment
agreement regarding the Cooperation Agreement. In the assignment agreement the City
assigned to the Corporation all its rights, title, interest in, and obligations under, the
Cooperation Agreement excluding affordable housing projects. The City assigned to the
Corporation the right to receive payments from the redevelopment agency to complete
eligible projects and programs. The Corporation agreed to accept the City’s obligation to
complete these projects and programs.2
        Asset Transfers
        On March 9, 2011, the redevelopment agency transferred $400,243 in bond
proceeds and $950,649 in cash to the Corporation. On March 21, 2011, the
redevelopment agency approved a resolution to transfer four properties to the
Corporation pursuant to property conveyance agreements. The transfer was effective
March 22, 2011; the properties transferred were valued at $10,168,319.
        Subsequently, on January 6, 2012, the redevelopment agency transferred $631,340
to the Corporation. On January 31, 2012, the redevelopment agency transferred $400,000
to the Corporation. The redevelopment agency was dissolved on February 1, 2012.

2   The City formed the Corporation in 1982.

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Department and Controller Administrative Determinations
       EOPS and ROPS Determinations
       Prior to dissolution, the redevelopment agency submitted its original EOPS to
Finance in August 2011, for enforceable obligations due from August through December
2011. The following January, the redevelopment agency submitted an amended EOPS
for enforceable obligations from August 2011 through June 2012. The redevelopment
agency listed the Cooperation Agreement as an obligation with a total value of
$156,930,000 on both EOPS submissions. The redevelopment agency listed on the
amended EOPS $1,835,010 in obligations due through the end of the fiscal year 2011-
2012. Finance did not seek review of either submission.
       The Successor Agency listed the Cooperation Agreement in its ROPS submissions
for each of the six-month periods from January 1, 2012, through July 1, 2013. Finance
disallowed all of the items, finding they were not enforceable obligations since it was a
contract between the redevelopment agency and the City.
       Finance’s DDR Determinations
       In May 2013, Finance issued its initial DDR for the former redevelopment
agency’s nonhousing funds. Finance required the Successor Agency to remit $1,981,989
that had been transferred to the Corporation under the Cooperation Agreement between
the City and the former redevelopment agency. Finance concluded that the Cooperation
Agreement was an agreement between the redevelopment agency and the City, because
section 34167, subdivision (a)(1) defines city to include any reporting entity for purposes
of the city’s annual financial report. Finance concluded the Corporation was a
component of the City in its consolidated annual financial report. After meeting with the
Successor Agency about its initial DDR determination, Finance confirmed its findings in
its final DDR determination.

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       Controller’s ATR Order
       In April 2012, the controller ordered cities, counties, and agencies in receipt of
assets transferred from a redevelopment agency after January 1, 2011, “to immediately
reverse the transfer and return applicable assets to the successor agency of the relevant
redevelopment agency.” The controller’s order “directly applies to economic
development corporations, joint powers authorities, or other public agencies that received
assets, directly or indirectly, from a redevelopment agency after January 1, 2011,” and
that the controller would “review and audit cities, counties, and public agencies to ensure
that all applicable asset transfers have been reversed” pursuant to section 34167.5.
                            PROCEDURAL BACKGROUND
       Plaintiffs filed a petition for writ of mandate and complaint for injunctive relief
alleging Finance and the controller abused their discretion by improperly applying the
Dissolution Law. Plaintiffs also argued the law itself violated various constitutional
provisions. The petition challenged the constitutionality of the sales tax and use tax
offset remedy in the Dissolution Law. (§ 34179.6, subd. (h).)
       Following a hearing, the trial court denied the petition. The court upheld
Finance’s and the controller’s actions under the Dissolution Law. The court denied
plaintiffs’ request for declaratory judgment that the DDR is unconstitutional under
Proposition 22 (as approved by voters, Gen. Elec. (Nov. 2, 2010).) However, the court
also issued a declaratory judgment that the sales tax and the use tax offset provision of
section 34179.6, subdivision (h)(1)(C) is facially invalid under the California
Constitution, article XIII, section 24, subdivision (b). The court enjoined Finance from
threatening or ordering sales and use tax offsets in relation to the transactions at issue.
       Following entry of judgment, plaintiffs filed timely notices of appeal.
                                       DISCUSSION
       We review issues concerning the interpretation of dissolution legislation de novo.
(City of Tracy, supra, 3 Cal.App.5th at p. 860; City of Brentwood v. Campbell (2015)

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237 Cal.App.4th 488, 500 (Brentwood).) We review Finance’s factual determinations
and conclusions under the Dissolution Law under the substantial evidence standard.
(Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova (2007)
40 Cal.4th 412, 427, 435; Schwartz v. Poizner (2010) 187 Cal.App.4th 592, 615-616.)
Section 34167.10 and Retroactivity
       Plaintiffs argue the Cooperation Agreement entered into between the City and the
redevelopment agency predates the enactment of section 34167.10 and therefore the trial
court erred in applying the statute’s definition of “city” retroactively. According to
plaintiffs, the trial court departed from fundamental principles of retroactivity that have
been consistently applied by the courts.
       Background
       The trial court determined the Corporation fell within the scope of section
34167.10’s definition of “city, county, or city and county”: “The fact that all of the
Corporation’s directors and officers are City officials or employees, in conjunction with
the evidence showing that the Corporation routinely grants the City’s requests for funds,
tends to show that the City can, and does, exercise substantial, even complete, control
over the Corporation. Certainly there is no evidence that the Corporation ever engaged in
independent activities or in activities that were not in the City’s interest.” The court
found substantial evidence that the Corporation fell within the scope of section 34167.10,
subdivision (a) because it was included as a reporting entity in the City’s annual financial
reports for three years prior to Finance’s DDR determination. These reports indicated the
City “ ‘is financially accountable’ ” for the Corporation, bringing the Corporation within
the scope of section 34167.10, subdivision (a)(3).
       In addition, the court found several indicia of control under section 34167.10,
subdivision (b) including substantial municipal control, common overlapping boards,
involvement in the creation of the entity, and provision of administrative and business

                                             12
support for the entity. Therefore, the court considered the Corporation to be the City for
purposes of the redevelopment dissolution laws.
       The court noted all the transactions at issue were completed before Assembly Bill
No. 1484 (2011-2012 Reg. Sess.) containing section 34167.10 became effective.
Therefore, Finance’s contentions were sustainable only if section 34617.10 operates
retroactively. The court determined the context of the Dissolution Law revealed the
Legislature intended section 34167.10 to apply retroactively, noting that “[t]he intention
to make a statute apply retroactively may be inferred from the legislative history or from
the context of the enactment. (See, Evangelatos v. Superior Court (1988) 44 Cal.3d
1188, 1210.)”
       Discussion
       We addressed the issue of retroactivity in Brentwood, where the city argued the
Constitution prohibits retroactive invalidation of agreements while the redevelopment
agencies were still in existence. The city also claimed Finance misinterpreted the DDR
statutes by applying them retroactively. We found the Legislature intended to abrogate
the agreements retroactively. Such retroactive application fell within the Legislature’s
power to dictate the manner in which redevelopment agreements would end.
(Brentwood, supra, 237 Cal.App.4th at pp. 499-500; see also City of Tracy, supra,
3 Cal.App.5th at pp. 860-861.) In the present case the trial court correctly concluded the
definition of city in section 34167.10 applies retroactively.
Impairment of Contract
       The Corporation argues retroactive application of section 34167.10 constitutes a
severe impairment of the Corporation’s contract rights. The Corporation also contends it
has standing to challenge Finance’s attempt to unwind the assignment agreement.
       The trial court concluded the Corporation lacks standing to raise an impairment of
contract claim because it is “acting as a political subdivision of the State for purposes of
carrying out redevelopment work.” Under the trial court’s reasoning, the Corporation’s

                                             13
contract impairment claim relates to a contract under which the Corporation performs
functions delegated to it by a political subdivision of the state. This posture deprives the
Corporation of standing.
       Political subdivisions of the state have no standing to invoke the federal or state
impairment of contract clauses. (Star-Kist Foods, Inc. v. County of Los Angeles (1986)
42 Cal.3d 1, 6-7; Cox Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal.App.3d
952, 967.) In Cox, the court found that a city, as a political subdivision of the state, a
municipal corporation, acting in its legislative, governmental capacity, has no standing to
raise the defense of impairment of contract in opposition to acts of the state Legislature.
(Cox, at p. 967.)
       In the present case, under the assignment agreement, the Corporation was to
perform redevelopment work originally meant to be carried out by the redevelopment
agency. The record reveals that the assignment agreement was intended to allow the
Corporation to perform redevelopment work formerly carried out by the redevelopment
agency, using tax increment formerly allocated to the redevelopment agency. We agree
with the trial court’s assessment: “In essence, the Corporation is acting in this case as a
political subdivision of the state by accepting an assignment of the City’s contractual
duties to carry out redevelopment work under the Cooperation Agreement.”
       When a political subdivision assigns its functions to a nonprofit corporation, any
limitations or requirements applicable to the political subdivision also apply to the
nonprofit. In support of its finding that the Corporation lacked standing, the trial court
referenced an Attorney General opinion which found a nonprofit performing
redevelopment work delegated by a redevelopment agency is not exempt from the
statutory requirements applicable to the redevelopment agency. The trial court
determined that “statutory requirements applicable to redevelopment agencies may not be
avoided by delegating administrative responsibilities to a nonprofit corporation subject to
[the agency’s] control.” According to the trial court, “when a nominally independent

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nonprofit corporation acts as a surrogate governmental agency, it is subject to the laws
that apply to governmental agencies.”
       We agree with the trial court’s reasoning regarding standing. The “Corporation
‘stepped into the shoes’ of the City as a political subdivision of the state for the purposes
of carrying out redevelopment work.” Given the relationship between the City and the
Corporation, the Corporation is subject to the same prohibition against invoking federal
or state contract clauses that apply to the City, and lacks standing to pursue its
impairment of contract claim.
Proposition 22
       Plaintiffs contend the DDR process violates Proposition 22. Proposition 22 added
section 25.5, subdivision (a)(7) to article XIII of the California Constitution, which
provides in part: “The Legislature shall not . . . require a community redevelopment
agency . . . to pay, remit, loan, or otherwise transfer, directly or indirectly, taxes on ad
valorem real property and tangible personal property pursuant to Section 16 of Article
XVI to or for the benefit of the State, any agency of the State, or any jurisdiction.”
Jurisdiction is defined in Proposition 22 as a city, county, special district, school district,
or community college district.
       The trial court rejected the Proposition 22 claim, noting the DDR does not require
a community redevelopment agency to make any payments or transfers of its property or
tax revenues. Instead, the statute directs a successor agency to recover funds from the
former redevelopment agency’s sponsor city after the dissolution of the redevelopment
agency. According to the trial court, “the most significant factor is the fact that the
[redevelopment agency] no longer exists, but has been dissolved by operation of law
through a statutory scheme that has been upheld by the California Supreme Court against
various constitutional challenges, including arguments based on Proposition 22.”
       We agree. In Brentwood, we considered whether the DDR audit process was an
attempt by the Legislature to improperly distribute tax increment. In rejecting this

                                              15
argument, we observed that although the Legislature could have immediately dissolved
the redevelopment agencies it had the power to instead implement an orderly wind-down:
“Had the Legislature been willing to . . . [citation], it could have immediately dissolved
redevelopment agencies without a freeze period (as chaotic as that would have been) . . .
[citation], and invalidated sponsor agreements as of that date. Nothing in [Matosantos]
would have prevented this action. The Legislature’s choice to do so with retroactive
wisdom is therefore equally constitutional because it does not reflect redirection of tax
increment in the coffers of a viable redevelopment agency of indefinite existence.”
(Brentwood, supra, 237 Cal.App.4th at pp. 499-500.) Accordingly, the trial court did not
err in finding the DDR process does not violate Proposition 22.
January 2012 Payments to the Corporation
       Finally, the City and Successor Agency argue that the redevelopment agency’s
January 2012 payments of $631,340 and $400,000 to the Corporation were valid when
they were made because the definition of enforceable obligation includes “[a]ny legally
binding and enforceable agreement or contract that is not otherwise void as violating the
debt limit or public policy.” (§ 34167, subd. (d)(5).) According to the City and
Successor Agency, the revised definition, section 34171, subdivision (d)(2), which
excludes from the definition of enforceable obligation contracts between redevelopment
agencies and the cities that created them does not apply to the EOPS. The revised
definition did not become effective until February 1, 2012. Therefore, the January 2012
tax increment payments were valid.
       However, the City and Successor Agency’s argument assumes that the EOPS
process was final, making transactions that took place prior to the redevelopment
agency’s dissolution insulated from review or reversal. As the trial court pointed out the
EOPS process “was an interim process that was replaced by the ROPS and DDR
processes, and does not govern those later processes.” Once the ROPS process took
effect, the definition of enforceable obligation that excludes contracts between

                                             16
redevelopment agencies and creator cities also took effect. Under section 34177,
subdivision (a)(1), payments associated with obligations excluded from the definition of
enforceable obligations by section 34171, subdivision (d)(2) are excluded from the EOPS
and removed from the last schedule adopted by the redevelopment agency. As the trial
court determined, payments under the redevelopment agency and sponsor city
agreements are “properly listed on the [redevelopment agency’s] EOPS and paid during
the interim period prior to [redevelopment agency’s] dissolution, but . . . all such
payments were subject to review and reversal through the DDR process.”
                                      DISPOSITION
       The judgment is affirmed. Defendants shall recover costs on appeal. (Cal. Rules
of Court, rule 8.278(a)(1), (2).)

                                                      /s/
                                                  RAYE, P. J.

We concur:

   /s/
MAURO, J.

    /s/
HOCH, J.

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