Filed 12/3/18 City of Huntington Beach v. Bosler CA3

NOT TO BE PUBLISHED

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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This appeal arises from the “Great Dissolution” legislation freezing operations of community redevelopment agencies (RDAs) and then dissolving them and winding-up their affairs. (Health & Saf. Code, §§ 34161-34169.5 [Part 1.8 freeze component], and Health & Saf. Code, §§ 34170-34191.6 [Part 1.85 dissolution component]; statutory section references that follow are found in the Health and Safety Code unless otherwise set forth.)

Plaintiffs/petitioners -- City of Huntington Beach, “Successor Agency to the [former] Redevelopment Agency of the City of Huntington Beach” (Successor Agency), and Huntington Beach Housing Authority (Housing Authority) -- collectively, the City -- appeal from a judgment insofar as it partially denied their petition for writ of traditional mandate and complaint for declaratory and injunctive relief, against defendants Keely Bosler as director of California Department of Finance (DOF) -- and other defendants (e.g., State Board of Equalization or BOE) and real parties in interest who take no position in this appeal. Successor Agency is the former RDA’s successor for purposes of winding up the former RDA’s affairs. (§ 34173.) The Housing Authority is the new entity for implementing the still-existing community development laws (§ 34176). We refer to BOE despite the 2017 reassignment of much of its work to the California Department of Tax and Fee Administration. (Gov. Code, §§ 15570, 15570.22; Rev. & Tax. Code, § 20.5.)

The City argues on appeal that, under the dissolution laws, its former RDA’s financial obligations in two projects -- the Pacific City project and the Emerald Cove project -- remain “enforceable obligations” payable from property tax revenues despite dissolution of the former RDA.

Bosler cross-appealed from the trial court’s disallowance of certain statutory enforcement remedies as invalid under California Constitution, article XIII, section 24, subdivision (b), but we granted her request to dismiss the cross-appeal in light of case law decided while this matter was pending.

We grant City’s November 19, 2015, request for judicial notice of DOF’s May 13, 2014, Finding of Completion acknowledging payment in full by Successor Agency (§§ 34179.6-34179.7).

We allowed an amicus curiae brief in support of the City to be filed by the Public Interest Law Project (PILP or Public Counsel).

We shall conclude the appeal lacks merit, and we affirm the judgment.

The History of Redevelopment Agencies

Before dissolution, the Community Redevelopment Law (CRL), section 33000 et seq., authorized cities and counties to form community RDAs to assist in revitalizing blighted areas. Funding was provided by “tax increment financing,” authorized by California Constitution, article XVI, section 16. (Cuenca v. Cohen (2017) 8 Cal.App.5th 200, 209 (Cuenca).) Tax increment financing allowed former RDAs, which did not have the power to tax, to finance redevelopment projects through loans or the sale of bonds. (Rogel v. Lynwood Redevelopment Agency (2011) 194 Cal.App.4th 1319, 1322.) Public entities entitled to receive property tax revenue in a redevelopment project area were allocated a portion based on assessed value before the effective date of the redevelopment plan. (Cuenca, at pp. 209-210.) Tax increment created by the increased value of project area property went to the RDA for repayment of debt incurred to finance the project. (Cal. Const., art. XVI, § 16, subds. (a), (b); § 33670, subds. (a), (b); Cuenca, at p. 210.) In essence, property tax revenues for entities other than the RDA were frozen, while revenue from any increase in value was awarded to the RDA on the theory that the increase was the result of redevelopment. (Cuenca, at p. 210.)

“Over the years, ‘a perception had grown that some [RDAs] were used as shams to divert property tax revenues that otherwise would fund general local governmental services . . . .’ [Citations.]” (Cuenca, supra, 8 Cal.App.5th at p. 210.) RDAs entered agreements with their “sponsor[] entities,” i.e., cities, counties, or cities and counties, that created the RDAs and staffed RDA boards with officials of the sponsoring entity. (§ 34171, subd. (n); City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 855 (Tracy).) These “sponsor agreements” locked up an ever-increasing share of local property taxes. (Tracy, at pp. 855-856.)

In January 2011, Governor Brown initiated a public discussion about abolishing RDAs, in partial response to a state budget crisis, and in June 2011 the Legislature enacted the Dissolution Law freezing RDA operations and providing an orderly process for dissolving RDAs and winding up their affairs. (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 250 (Matosantos); City of Pasadena v. Cohen (2014) 228 Cal.App.4th 1461, 1463-1467.)

Our Supreme Court upheld the law dissolving RDAs (commonly “AB 26,” shorthand for Assem. Bill No. 1X 26; Stats. 2011, 1st Ex. Sess. 2011-2012, ch. 5), but invalidated a companion law (not at issue here) that would have allowed the continuation of RDAs in certain circumstances. (Matosantos, supra, 53 Cal.4th 231.) As therein described, Assembly Bill No. 26 consisted of two principal components, codified in two new parts of the Health and Safety Code. Part 1.8 (§§ 34161-34169.5) was the “freeze” provision, effective immediately upon gubernatorial signature on June 28, 2011, and Part 1.85 (§§ 34170-34191.6) was the “dissolution component.” The latter dissolution component did not become operative until after the decision in Matosantos, which lifted a judicial stay of Part 1.85 and reformed its effective date from October 1, 2011, to February 1, 2012. (See Matosantos, at pp. 250-251, 274-275.)

The 2011 legislation made successor agencies responsible for winding down the outstanding “enforceable obligations” of the former RDAs. Successor agencies, the boards of which usually are also the officials of the former sponsoring entity, are separate legal entities from the sponsor. (§§ 34171, subds. (j), (d), 34173, subd. (g); City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 491, fn. 2 (Brentwood).)

To wind down affairs of the former RDAs, successor agencies were to submit Recognized Obligations Payment Schedules (ROPS) to DOF, which determines whether the obligations are enforceable under the dissolution laws and authorize distribution of funds from the Redevelopment Property Tax Trust Funds (RPTTF or Trust Funds) to pay outstanding “enforceable obligations.” (§§ 34171-34172, 34177, 34179, 34182-34183.)

The freeze component of the 2011 legislation did not clearly exclude sponsor agreements from the definition of enforceable obligations. “During the freeze [beginning June 2011], [RDAs] were authorized to continue distributing tax increment pursuant to enforceable obligations, the definition of which included ‘sponsor agreements’ between a former [RDA] and its sponsor agency.” (Brentwood, supra, 237 Cal.App.4th at p. 494, citing §§ 34167, subd. (d) [enforceable obligations included “[l]oans of moneys borrowed by the [RDA] for a lawful purpose . . . to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms” and any legally binding and enforceable agreement or contract that is not otherwise void as violating public policy], § 34169, subd. (a) [until successor agencies are in place, RDAs shall continue to make scheduled payments for enforceable obligations as defined in § 34167, subd. (d)].)

However, the freeze component of the 2011 legislation acknowledged concern about potential abuse beginning in January 2011, when the Governor first proposed abolishing RDAs. Thus, under section 34167.5, as enacted in the freeze component of the Dissolution Law, “the Controller shall review the activities of [RDAs] in the state to determine whether an asset transfer has occurred after January 1, 2011 [italics added]” between an RDA and the sponsoring entity that created the RDA. If the assets were not contractually committed to a third party, the Controller was to order the return of the assets to the RDA. (§ 34167.5, as added by Stats. 2011-2012, 1st Ex.Sess., ch. 5 (A.B. 26) § 6, eff. June 29, 2011; see also, § 34167, subd. (a) [freeze component was intended to preserve corpus of RDA funds so they may use to fund core governmental services including police and fire protection services and schools].)

In the dissolution component, the 2011 legislation excluded sponsor agreements from the definition of enforceable obligations. (§ 34171, subd. (d)(2) [“ ‘enforceable obligation’ does not include any agreements, contracts, or arrangements between the city . . . that created the [RDA] and the former [RDA]”; Brentwood, supra, 237 Cal.App.4th at p. 494.) “[T]he Legislature could well recognize that because of the conjoined nature of the governing boards of redevelopment agencies and their community sponsors, such obligations often were not the product of arm’s-length transactions.” (Matosantos, supra, 53 Cal.4th at p. 258, fn. 12.)

In 2012, the Legislature enacted Assembly Bill No. 1484 (“AB 1484,” Stats. 2012, ch. 26, eff. June 27, 2012) adding restrictions to the dissolution process. To the extent not clearly provided by the 2011 legislation, “[t]he 2012 audit process [AB 1484] represents a legislative rethinking in light of the resulting scurry on the part of sponsors and their conjoined [RDAs] in response to the announced intention in January 2011 to overturn their lucrative apple cart.” (Brentwood, supra, 237 Cal.App.4th at p. 499 & fn. 14.) AB 1484 accordingly requires an audit of successor agencies and a due diligence review (DDR [§ 34179.5]) to identify “[t]he dollar value of any 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, subds. (a), (c)(3), italics added.)

AB 1484 does not change the general definition of “enforceable obligations” that already excluded agreements between a former RDA and its creator, with exceptions. (§ 34171, subd. (d)(2) [“ ‘enforceable obligation’ does not include any agreements, contracts, or arrangements between the city . . . that created the [RDA] and the former [RDA]”]; Tracy, supra, 3 Cal.App.5th at p. 859.) However, AB 1484 added section 34179.5, which required the DDR to include the “dollar value of assets and cash and cash equivalents transferred after January 1, 2011 [italics added], through June 30, 2012, by the [RDA] or the successor agency to the city . . . that formed the [RDA] and the purpose of each transfer. The review shall provide documentation of any enforceable obligation that required the transfer.” (§ 34179.5, subd. (c)(2).) The review shall add to the net balance of available funds any amounts transferred to sponsor agencies if an enforceable obligation to make that transfer did not exist, and the resulting sum is available for allocation to affected taxing entities. (§ 34179.5, subd. (c)(6); City of Bellflower v. Cohen (2016) 245 Cal.App.4th 438, 445-446 (Bellflower).)

DOF determines whether assets of former RDAs are (1) encumbered so as to be retained by the successor agencies for payment of enforceable obligations, or (2) available for transfer to local taxing entities. (§§ 34179.5, 34179.6.) DOF may order return of assets improperly transferred from RDAs to the sponsoring entity as early as January 2011, which is sometimes referenced as a “claw back.” (§§ 34179.5, subds. (b) & (c), 34197.6, subds. (c) & (d); City of Culver City v. Cohen (2017) 14 Cal.App.5th 1, 13 (Culver City); Cuenca, supra, 8 Cal.App.5th at pp. 210-211; Tracy, supra, 3 Cal.App.5th at pp. 855-856, fn. omitted.)

Brentwood held the Legislature could constitutionally invalidate predissolution sponsor agreements retroactively after having abolished RDAs. (Id., 237 Cal.App.4th at pp. 496-500.) Retroactive invalidation of payments made before RDA dissolution did not violate the California Constitution (Proposition 22, Cal. Const., art. XIII, § 25.5), even if the payments were made when the sponsor agreement was enforceable. (Brentwood, at pp. 496-500; accord, City of Big Bear Lake v. Cohen (2017) 12 Cal.App.5th 922, 933 (Big Bear Lake).)

Discussion

I

Standard of Review

Insofar as the facts are undisputed, we independently review the questions of statutory and constitutional law. (City of San Jose v. Sharma (2016) 5 Cal.App.5th 123, 134; City of Petaluma v. Cohen (2015) 238 Cal.App.4th 1430, 1438-1439.) Although a traditional writ of mandate ordinarily reviews administrative actions for abuse of discretion, at issue here is whether DOF correctly interpreted its governing statutes, which is subject to our de novo review without deference to DOF. (Tracy, supra, 3 Cal.App.5th at p. 860; but see, Brentwood, supra, 237 Cal.App.4th at p. 500 [we may accord at least weak deference to agency’s interpretation of its governing statutes where its expertise gives it superior qualifications to do so, but interpretation is ultimately subject to our de novo review].)

II

The Appeal

The City challenges DOF’s determination that two projects -- Pacific City and Emerald Cove -- do not constitute enforceable obligations under the RDA dissolution laws. We explain the City fails to show grounds for reversal.

A. Pacific City

On June 14, 2004, the City Council approved the Pacific City project as a large mixed-use development including 516 market rate residential condominiums, a hotel, retail, office, and restaurant space. This involved approval of a tentative tract map, a conditional use permit (CUP), a special permit, and a coastal development permit, to which the City refers as “entitlements.” The approval was conditioned on a specified percentage of residences (77 units) being affordable to very low income, low income, and moderate income families, with at least half of those units to be on-site. In 2005, the former RDA referenced Pacific City in the five-year implementation plan and 10-year housing compliance plan.

On October 9, 2006, pursuant to an amendment to the entitlement plan, the City of Huntington Beach, the (former) RDA, and private developer Makallon Atlanta Huntington Beach, LLC (Makallon), entered into an Owner Participation Agreement (OPA), for Makallon to develop the Pacific City project. The OPA included an Affordable Housing Plan for Makallon to pay the RDA $20 million, which the RDA would deposit into a fund for construction of 117 affordable housing units within the RDA’s Merged Redevelopment Project Area, but evidently not within the Pacific City project site. This affordable housing plan was to replace a prior agreement entered in 2003 between the City of Huntington Beach and Makallon.

Before any construction began and before any payments were made under the OPA, Makallon’s bank lender foreclosed on its trust deed.

In October 2011 (after the June 2011 enactment of the dissolution law), ownership of the Pacific City site was transferred to a new owner -- 21002 HB, LLC.

Pursuant to the dissolution law, the former RDA was dissolved effective February 2, 2012.

On July 24, 2012, the City of Huntington Beach approved the new owner’s application for an Entitlement Plan Amendment, and on August 20, 2012, the City of Huntington Beach and the new owner entered into a Development Agreement. At the same time, the City as Successor Agency to the former RDA, through its Oversight Board, approved Resolution 2012-04, “formally” terminating the Makallon OPA as a precautionary measure, while expressing the view that the Makallon OPA had already been automatically terminated by default and foreclosure of the deed of trust.

As part of the new Development Agreement, the City of Huntington Beach and the new developer executed an Affordable Housing Agreement (AHA) by which the developer would provide 51 moderate-income units on-site, and “Huntington Beach Housing Authority shall be an express third party beneficiary of this Agreement . . . .” The City of Huntington Beach Housing Authority, as the entity that assumed the housing functions of the former RDA, was statutorily obligated by the Community Redevelopment Law (CRL; § 33413) to create at least 26 very-low-income housing units, at an estimated cost of $6.5 million. These 77 total units are required by law based on the number of market rate units in the Pacific City project, pursuant to section 33413, subdivision (b)(2), a part of the CRL unaffected by the RDA dissolution legislation.

In August 2012, the City of Huntington Beach as Successor Agency to the dissolved RDA submitted a Recognized Obligation Payment Schedule (ROPS) under section 34177, for the period of January 1 through June 30, 2013, listing “Pacific City - Very Low Income Units” as Item 17, with a total outstanding debt or obligation of $6.5 million, and the same total stated to be due during the 2012-2013 fiscal year. For the 26 very-low-income units, the Successor Agency sought to use funds from the Low and Moderate Income Housing Fund (LMIHF). (§§ 3334.2, 34176.)

In October 2012, DOF sent its written initial determination that “section 34163(c) prohibits a RDA from amending or modifying existing agreements, obligations or commitments with any entity for any purpose after June 27, 2011. Therefore, this item [#17] is not an enforceable obligation” under the dissolution law.

The Successor Agency objected that Item 17 was enforceable because the LMIHF was encumbered for the Pacific City project as a result of entitlements issued in 2004 -- before the dissolution of the RDA.

After a meet-and-confer process, DOF issued its written final determination affirming its tentative decision based on section 34163 and rejecting the LMIHF argument because “obligations associated with the former RDA’s previous statutory housing obligations are not enforceable obligations. Upon the transfer of the former RDA’s housing functions to the new housing entity [the Huntington Beach Housing Authority], . . . section 34176 requires that ‘all rights, powers, duties, obligations and housing assets . . . shall be transferred’ to the new housing entity. This transfer of ‘duties and obligations’ necessarily includes the transfer of statutory obligations; to the extent any continue to be applicable. To conclude that such costs should be on-going enforceable obligations of the [City as] successor agency [of the former RDA] could require a transfer of tax increment for life -- directly contrary to the wind down directive in AB1x26/AB1484. Therefore, this item is not an enforceable obligation.” DOF similarly rejected the Successor Agency’s inclusion of the cost of the 26 units in its Due Diligence Review and Housing Asset Transfer review submissions.

The trial court found DOF’s position was supported by substantial evidence and was legally correct. The trial court also rejected the City’s argument that it would be inequitable to allow the taxing entities to keep the City’s money. The sole basis for the argument was that the amounts claimed were enforceable obligations, which the court had rejected. The City’s grievance was with the Legislature’s policy choice, which was not a matter for the court.

The City and amicus curiae argue the $6.5 million is an enforceable obligation under the RDA dissolution law, because it is an expense required by a different law that was unaffected by the RDA dissolution law -- i.e., the Community Redevelopment Law (§ 33413, subd. (b)(2)(A)(i)), requiring that a specified percentage of new units be affordable to persons of low or moderate income, of which a specified percentage had to be for very-low-income persons. (See, § 34173, subd. (b) [Except for CRL provisions that are repealed, restricted, or revised by the dissolution laws, former RDA authority, rights, powers, duties and obligations under the CRL are now vested in the successor agencies].) The City argues the trial court erred by focusing on the 2012 development agreement, rather than the CRL obligation that assertedly arose with the 2004 “entitlements.”

However, the CRL obligation for affordable housing creates only a separate obligation for the City of Huntington Beach and its Housing Authority pursuant to the 2012 development agreement executed after the former RDA was dissolved. It does not bind the former RDA or the City as Successor Agency to the former RDA. The City of Huntington Beach and its Housing Authority are ineligible to receive funding from the Trust Funds through the ROPS or DDR process, because the affordable housing obligation for the Pacific City project did not arise until after the dissolution of the former RDA.

The City argues the affordable housing obligation under the contract with the new developer stems from the 2004 entitlements created by statute, and the former RDA’s statutory obligation to produce the affordable housing arose the moment the City of Huntington Beach -- an entity separate from the former RDA -- issued entitlements of the Pacific City project in 2004. The City argues the 2006 OPA with Makallon and the 2012 events -- the Entitlement Plan Amendment and the new development agreement with the new owner -- merely documented the plans on how to meet the affordable housing production obligation arising from the 2004 entitlements.

However, the City cites no legal authority supporting its position. The City quotes from section 33333.8, subdivision (b), that “If, on the date of the time limit on the effectiveness of the redevelopment plan, a redevelopment agency has not complied with subdivision (a) [obligations to provide affordable housing], the time limit on the effectiveness of the redevelopment plan, and, if necessary, the time limit for repayment of indebtedness, shall be suspended until the agency has complied with subdivision (a). In addition, the agency shall receive and use all tax increment funds that are not pledged to repay indebtedness until the agency has fully complied with its obligations.” The City cites authority that affordable housing is important (California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435), and that the term “development” in other legislation (the Coastal Act) should be liberally construed to accomplish its objectives. (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles (2012) 55 Cal.4th 783, 796-797.)

The City thus appears to argue that the former RDA had an obligation to build the affordable housing units even if the Pacific City project were never built, e.g., even if no developer ever agreed to build the project, or even if a developer agreed but then backed out. For this proposition, the City cites no supporting legal authority. To the contrary, section 33413 of the CRL calls for affordable housing to be created “within four years of the destruction or removal” of existing affordable housing as part of a redevelopment project -- which contemplates a written agreement with a developer. (§ 33413, subd. (a).)

As it happened, a new developer did agree to build the project after RDA dissolution, with the City of Huntington Beach and/or its Housing Authority now assuming the CRL obligation for affordable housing units. (§ 33413, subd. (a) [“agency” shall cause affordable housing to be constructed]; § 33003 [“agency” under the CRL means an RDA “or a legislative body which has elected to exercise the powers granted to an agency by this part”].) Under the dissolution law, the entity that assumes the housing function of a former RDA is called the “housing successor.” (§ 34176, subd. (a)(3).) The city may elect to be the “housing successor” or that function may be assumed by the city’s housing authority. (§ 34176, subds. (a)(1), (b).) The responsibility for post-dissolution housing functions is transferred to the “housing successor” (here, the Housing Authority), except for remaining enforceable obligations of the former RDA which are handled by former RDA’s successor agency (here, the City of Huntington Beach as Successor Agency to the former RDA). (§ 34176, subd. (b); see also, § 34176.1 [distinguishing between successor agency’s use of LMIHF and housing successor’s use of housing “asset” fund which is successor to previous fund for subsided housing].)

There is thus no detriment to the public, and the CRL is satisfied by the Housing Authority assuming the responsibility for affordable housing pursuant to the new development agreement executed with the new developer. The question is whether the City of Huntington Beach or its Housing Authority can force tax increment financing by characterizing the new deal as an enforceable obligation of the dissolved former RDA. We think not.

While the dissolution laws provide for continued funding of enforceable obligations as part of the winding-up process (e.g., §§ 34176, 34176.1, 34177, 34181), the City fails to establish Pacific City as an enforceable obligation of the former RDA.

The August 2012 development agreement was a new deal by the City of Huntington Beach with a new developer, after the former RDA was dissolved by operation of law in February 2012, for a project that differed in detail from the 2006 deal that fell apart when the original developer defaulted. (Matosantos, supra, 53 Cal.4th at p. 275.) The dissolution stripped the former RDA of authority to enter into agreements to provide funds or to “amend or modify existing agreements, obligations or commitments with any entity, for any purpose.” (§ 34163, subds. (a), (c).)

Moreover, to the extent the City of Huntington Beach hoped to pay for the CRL obligation of the Pacific City project with tax increment funds, section 34189 of the dissolution law states that “all provisions of the Community Redevelopment Law [§ 33000 et seq.] . . . that depend on the allocation of tax increment to redevelopment agencies . . . shall be inoperative.” This provision does not extinguish CRL affordable housing requirements, as suggested by respondent, but ends tax increment financing.

Section 34189 further provides in subdivision (b) that, to the extent a provision in Part 1 of the CRL commencing with section 33000 (which includes § 33413) conflicts with “this part” (RDA dissolution), “this part shall control and shall eliminate and restrict the acts for which former RDAs had authority.” We agree with respondent that, deeming an unmet statutory obligation of the former RDA -- without a contract with a developer -- to be an enforceable obligation under section 34171 could keep former RDAs alive indefinitely (in the form of successor agencies), which would contradict the dissolution law’s goal of expeditiously winding down affairs of dissolved RDAs so that tax increment funds could be distributed to other entities such as schools and hospitals.

Amicus curiae argues that, whether the CRL affordable housing obligation does or does not depend on tax increment amounts to remain operative under section 34189 has no bearing on whether such obligations are eligible for funds from the RPTTF. However, such eligibility turns on the expense being an “enforceable obligation” under the dissolution laws. (§ 34171.) Amicus curiae argues this is an “enforceable obligation” because section 34171, subdivision (d)(1)(C), says the term includes “obligations imposed by state law,” and affordable housing is imposed by the CRL. However, this reference in the dissolution law for winding-up former RDA affairs speaks to enforceable obligations of former RDAs. Amicus curiae cites a new statute (§ 34177.7) enacted in 2015 to permit the successor agency to the former RDA of the City and County of San Francisco to issue bonds to continue pending projects in Mission Bay and Candlestick Hunters Point. No such legislation allows the City of Huntington Beach to get RPTTF funds for Pacific City. Amicus curiae also cites an article in a sports law journal about continued development of the Forty-Niners football stadium “put in motion” before the dissolution law. (Benjamin S. Bolas, 20 Jeffrey S. Moorad Sports L.J. 663, Who Is Going To Pay The Bills? (2013) at p. 687, fn. 163.) However, the article is about the ratio of private to public financing of sports stadiums and the citation merely says Santa Clara withheld $30 million in public funds in June 2012 and reallocated the money to public services, resulting in a lawsuit that was still pending when the article was written. (Id. at p. 687, fn. 163.)

Though not directly on point, we note that, while this appeal was pending, we held in Covarrubias v. Cohen (2016) 3 Cal.App.5th 1229, that a city’s set-asides for future affordable housing payments were not “obligations imposed by state law” that remained enforceable after dissolution of the RDA. (Id. at pp. 1235, 1237-1238.) There, city residents who allegedly qualified for subsidized housing claimed the entirety of set-asides to be paid over the life of a redevelopment project was due ab initio and thus survived the abolishment of tax increment in the dissolution law. (Id. at p. 1231.) We agreed with the trial court that the strictly statutory obligation to make set-asides accrued on an annual basis and accordingly expired when the RDAs dissolved and were no longer enforceable obligations of the former RDA. (Id. at pp. 1236-1238.) That the Legislature authorized RDAs to plan for surcharged set-asides in order to guarantee the RDAs received sufficient tax increment over the life of the project did not transmute future set-asides into a deferred present obligation. (Id. at p. 1236.)

We also held in Cuenca, supra, 8 Cal.App.5th 200, that stipulated judgments requiring a city to set aside tax increment funds for affordable housing did not purport to require the city to continue collecting tax increment after RDA dissolution, and thus the judgments were not enforceable obligations under the dissolution law. (Id. at pp. 226-227.)

Here, the CRL affordable housing requirement (§ 33413) for Pacific City is an obligation of the City of Huntington Beach and/or its Housing Authority, which has taken over the ongoing role of community redevelopment and has entered its own contract with the new developer. (§§ 34176, 34177, subd. (g), 34181, subd. (c).) It is not an obligation of the City of Huntington Beach as the former RDA’s Successor Agency in winding down affairs of the former RDA. Section 34176.1, subdivision (f), describes the duties of the Housing Authority as housing successor; it requires a “description of any outstanding obligations pursuant to Section 33413 that remained to transfer to the housing successor on February 1, 2012, of the housing successor’s progress in meeting those obligations, and of the housing successor’s plans to meet unmet obligations.” The new development agreement was entered in August 2012, after the former RDA had already been dissolved by operation of law on February 1, 2012. The new development agreement is a new obligation of the Housing Authority, not a surviving obligation of the former RDA. Thus, to the extent a CRL obligation for affordable housing units exists, it is an obligation of the Housing Authority as “housing successor,” not the former RDA’s Successor Agency.

Although amicus curiae suggests this creates an “unfunded mandate” subject to reimbursement by the Commission on State Mandates (Cal. Const., art. XIII B, § 6; Gov. Code, § 17500 et seq.), amicus curiae acknowledges the CRL affordable housing obligation is not necessarily dependent on tax increment financing, and RDAs could negotiate for developers to assume the cost (Palmer/Sixth Street Properties, L.P. v. City of Los Angeles (2009) 175 Cal.App.4th 1396, 1411), as the original developer in this case was to pay $20 million for affordable units to be built elsewhere, but the new developer was permitted to develop some of the required units on site. Additionally, as noted, the dissolution law speaks of housing successors using the housing asset fund. (§§ 34176-34176.1.) In any event, we have no need in this appeal to address any issue of unfunded mandate.

We conclude the City fails to show reversible error regarding the Pacific City project.

B. Emerald Cove

In 1984, the City of Huntington Beach loaned its former RDA over $1.7 million to buy real property for the Emerald Cove project. The City of Huntington Beach then leased the property back from the former RDA. That same year, 1984, the RDA sold $4.6 million in Certificates of Participation (COPs), which stated they were “payable from the Lease Payments to be made by the City [of Huntington Beach] under the Lease Agreement. . . .” The RDA had a practice -- never memorialized in writing -- of transferring funds from the affordable housing fund (LMIHF) to the City of Huntington Beach for the City of Huntington Beach to use in making its lease payments to the former RDA.

In 1991, the former RDA issued new Certificates of Participation.

In 2000, the City’s Public Financing Authority issued bonds (known as the September 2000 Lease Revenue Bonds, Series A) to refinance the Emerald Cove project.

In 2010, the Public Financing Authority issued additional bonds to refinance the project.

The documents for the 1984 Certificates and the 2000 Bond Series state that the debt service will be paid from lease payments made by the City of Huntington Beach. The 2000 and 2010 Bonds state the City of Huntington Beach will lease certain real property and make lease payments from “legally available funds in amounts calculated to be sufficient to pay principal of and interest on the Bonds when due.” The City of Huntington Beach and the RDA apparently continued the practice of having the RDA transfer funds to the City of Huntington Beach in order for the City of Huntington Beach to make its lease payments to the RDA.

In May 2009, the City of Huntington Beach and the RDA entered into an agreement to exchange ownership of the Emerald Cove property. They entered a Cooperation Agreement transferring title from the City of Huntington Beach to the RDA. The agreement provided that the RDA would pay for the property in two parts: (1) a $5.2 million promissory note, described as the amount “being the remaining debt service payable on the portion of the . . . Lease Revenue Bonds 2000 Series A” allocated to the site; and (2) $3.3 million retained by the City of Huntington Beach for the “entirety of the working capital of the City’s Emerald Cove Housing fund.”

The RDA on the same day in May 2009 issued a Promissory Note to the City of Huntington Beach for $5.17 million (corresponding to the $5.2 million amount which was approximate). The Promissory Note stated it was secured by “Set Aside Funds,” defined in the Cooperation Agreement as “that portion of taxes allocated and paid to the [former RDA] . . . required to be deposited in or otherwise used for the purposes of the Low and Moderate Income Housing Fund. . . .”

A year later, the Public Financing Authority issued bonds dated May 13, 2010, to refinance the 2000 Series Bonds. The 2010 bond documents state they are secured by lease payments to be made by the City of Huntington Beach “from legally available funds.” The documents specified the bonds were payable solely from and secured solely by the revenues and other moneys pledged thereto in the indenture, though the City cites a provision by which the RDA pledged to the City of Huntington Beach and granted a security interest in set-aside funds.

In winding down the former RDA’s affairs, the Successor Agency claimed as enforceable obligations (1) $3.6 million for the lease revenue refunding bond, and (2) annual payments due from the former RDA to the City of Huntington Beach under the 2009 Promissory Note.

DOF disallowed both items because they were not enforceable obligations under the dissolution laws. The Promissory Note was a Sponsor-RDA agreement between the former RDA and its sponsoring entity City of Huntington Beach and was therefore excluded under section 34171, subdivision (d). The bond was “secured solely through lease payments, and there [was] no requirement to repay this bond with tax increment.” Section 34183, subdivision (a)(2)(B) permits the use of tax increment to fund revenue bonds, but “only to the extent the revenue pledged is insufficient to make payments, and only where the agency’s tax increment revenues were also pledged for repayment.”

The amounts claimed did not come within the exception for certain Sponsor-RDA agreements “entered into (A) at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and (B) solely for the purpose of securing or repaying those indebtedness obligations may be deemed enforceable obligations for purposes of this part.” (§ 34171, subd. (d)(2).) The agreement was not entered into at the time of issuance of the indebtedness. Rather, the Cooperation Agreement was executed on May 18, 2009, and the 2010 Bonds for lease revenue refunding did not issue until almost a year later on May 13, 2010.

The trial court found that DOF’s disapproval of Emerald Cove items was supported by substantial evidence and was legally correct.

The City argues (1) the Emerald Cove Agreement is not subject to section 34171(d)(2)’s “nullification” for sponsor-RDA agreements; (2) even if it were, it is exempt from nullification by the very terms of the statute; (3) nullification would run counter to the Legislature’s express intent that no bond payments be missed and that the pledge of funds for such bonds not be disturbed; and (4) the Emerald Cove Agreement may not be retroactively nullified. The City’s arguments are not persuasive.

As indicated, in the dissolution component, the 2011 legislation excludes sponsor-RDA agreements from the definition of enforceable obligations. Section 34171, subdivision (d)(2), provides: “For purposes of this part, ‘enforceable obligation’ does not include any agreements, contracts, or arrangements between the city . . . that created the [RDA] and the former [RDA]. . . .” Such agreements are “invalid” and “not be binding on the successor agency.” (§ 34178, subd. (a).) Section 34171 expressly provides exceptions, as we discuss post, that are inapplicable here.

Although section 34171 expressly excludes “any” such agreements from the definition of enforceable obligations, the City asks us to construe “any” as meaning any “agreement seeking to circumvent the Dissolution Act with last minute transfer of redevelopment assets.” This argument is frivolous. The City skips over the first rule of statutory construction that we first look to the language of the statute, and the plain meaning controls unless the words are ambiguous. (Green v. State of California (2007) 42 Cal.4th 254, 260; Brentwood, supra, 237 Cal.App.4th 488.) Moreover, in construing a statute, we do not insert words into it, as this would violate the cardinal rule that courts may not add provisions to statutes. (Adoption of Kelsey S. (1992) 1 Cal.4th 816, 827.)

The plain language of the statute says “any” sponsor-RDA agreement is not an enforceable obligation, unless certain conditions are met that do not appear in this case, as we discuss post. We have no trouble construing “any” to mean “any.”

The City seeks to rely on the rule that literal construction should not prevail if it is contrary to legislative intent apparent in the statute. (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) However, construing “any” to mean “any” is not contrary to legislative intent apparent in the statute.

Moreover, the City is wrong in claiming that the only evidence of legislative intent addresses last-minute agreements transferring redevelopment assets as a means of circumventing the pending adoption of AB 26. Abuses between RDAs and their sponsors existed long before the Governor suggested abolishing RDAs in January 2011 and such abuses were the impetus for the Governor to suggest abolishing RDAs in the first place. (Cuenca, supra, 8 Cal.App.5th at p. 210.) “[T]he Legislature could well recognize that because of the conjoined nature of the governing boards of redevelopment agencies and their community sponsors, such obligations often were not the product of arm’s-length transactions.” (Matosantos, supra, 53 Cal.4th at p. 258, fn. 12.)

As indicated, Brentwood held the Legislature could constitutionally invalidate predissolution sponsor agreements retroactively after having abolished RDAs. (Id., supra, 237 Cal.App.4th at pp. 496-500.) Retroactive invalidation of payments made before RDA dissolution did not violate the California Constitution (Proposition 22, Cal. Const., art. XIII, § 25.5), even if the payments were made when the sponsor agreement was enforceable. (Brentwood, supra, 237 Cal.App.4th at pp. 496-500; accord, Big Bear Lake, supra, 12 Cal.App.5th at p. 933; Tracy, supra, 3 Cal.App.5th at pp. 860-861.) When it passed AB 1484, the Legislature intended to use section 34171, subdivision (d)’s definition of enforceable obligations to retroactively invalidate Creator/RDA agreements and payments that were legal when made. (County of San Bernardino v. Cohen (2015) 242 Cal.App.4th 803, 814-815 (San Bernardino); Brentwood, supra, 237 Cal.App.4th at pp. 500-502.)

Although section 34179.5 was enacted as part of AB 1484 in 2012, the freeze component of the original 2011 dissolution legislation also expressed concern about RDAs depleting assets beginning in January 2011 (§ 34167.5), when the Governor and Legislature first proposed abolishing RDAs, triggering the “frantic scurry” to reduce RDA assets to avoid losing them to local taxing entities such as school districts. (Tracy, supra, 3 Cal.App.5th at pp. 855-856.)

Thus, section 34167.5, as enacted in June 2011 in the freeze component of the Dissolution Law, provides: “Commencing on the effective date of the act adding this part, the Controller shall review the activities of [RDAs] in the state to determine whether an asset transfer has occurred after January 1, 2011, between the city . . . that created a [RDA] or any other public agency, and the [RDA]. If such an asset transfer did occur during that period and the government agency that received the assets is not contractually committed to a third party for the expenditure or encumbrance of those assets, to the extent not prohibited by state and federal law, the Controller shall order the available assets to be returned to the [RDA] or, on or after October 1, 2011, to the successor agency . . . . The Legislature hereby finds that a transfer of assets by a [RDA] during the period covered in this section [i.e., after January 1, 2011], is deemed not to be in the furtherance of the Community Redevelopment Law [CRL] and is thereby unauthorized.” (§ 34167.5, added by Stats. 2011-2012, 1st Ex.Sess., ch. 5 (A.B. 26) § 6, eff. June 29, 2011, amended by Stats 2012, ch. 162 (S.B. 1171) § 89.)

On the other hand, section 34167, also part of the freeze component of the original dissolution bill, provides that an “enforceable obligation” is “[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).) Section 34169, also part of the freeze component of the original dissolution bill, in part provides: “Until successor agencies are authorized . . . [RDAs] shall do all of the following: [¶] (a) Continue to make all scheduled payments for enforceable obligations, as defined in subdivision (d) of Section 34167.”

Additionally, the dissolution component in section 34171, subdivision (d)(1), defines “enforceable obligations” as including “Loans of moneys borrowed by the [RDA] for a lawful purpose, to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms” (id., subd. (d)(1)(B)) and “Any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy” (id., subd. (d)(1)(E)).

These provisions must be harmonized with the rest of the dissolution statutes, if possible. (See Moyer v. Workmen’s Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230 [“the various parts of a statutory enactment must be harmonized by considering the particular clause or section in the context of the statutory framework as a whole”].) The natural way to do so is to view the category of agreements between RDAs and their sponsors as the more specific category, and therefore generally not “enforceable” whether or not such agreements also fall within the broader definition of “enforceable” agreements provided by other parts of the dissolution statutes. Thus the specific exclusion of sponsor agreements (§ 34171, subd. (d)(2)), controls over the more general provisions. (Civ. Code, § 3534; Lake v. Reed (1997) 16 Cal.4th 448, 464.) We already have so held, or necessarily implied, in a number of published cases. (See Tracy, supra, 3 Cal.App.5th at pp. 860-861 [under the heading “The Legislature Intended Retroactively to Invalidate Transfers Pursuant to Sponsor Agreements”]; San Bernardino, supra, 242 Cal.App.4th at pp. 814-815 [“Construing the Dissolution Law and the cited statutes to mean that agreements between the County and the former [RDA] are enforceable obligations would negate the intent of the Legislature”]; Brentwood, supra, 237 Cal.App.4th at pp. 500-502 [captioned “The Legislature Intended to Abrogate Sponsor Agreements Retroactively”].)

As a matter of statutory interpretation, we reaffirm our prior opinions that the post-dissolution definitions of enforceable obligations as excluding sponsor agreements apply retrospectively to pre-dissolution transfers on pre-dissolution sponsor agreements.

Section 34171 allows a limited exception: “[W]ritten agreements entered into (A) at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and (B) solely for the purpose of securing or repaying those indebtedness obligations may be deemed enforceable obligations . . . .” (§ 34171, subd. (d)(2).) “Indebtedness obligations” are defined as “bonds, notes, certificates of participation, or other evidence of indebtedness, issued or delivered by the [RDA], or by a joint exercise of powers authority created by the [RDA], to third party investors or bondholders. . . .” (§ 34171, subd. (e); see also, § 34178, subd. (b)(1) [“A duly authorized written agreement entered into at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and solely for the purpose of securing or repaying those indebtedness obligations” is “not invalid and may bind the successor agency”].)

We need not address the second prong of section 34171 (agreement solely for the purpose of securing or repaying indebtedness), because Emerald Cove falters on the first prong in that the Promissory Note was not “entered into at the time of issuance” of the indebtedness obligation.

The Promissory Note (executed in May 2009) was not “entered into at the time of issuance” of the indebtedness in September 2010. (§ 34178, subd. (b)(1).) The City miscites the statute as requiring only that the note be “in place” at the time of bond issuance, but that is not what the statute says. It says “agreements entered into (A) at the time of issuance . . . .” (§ 34171, subd. (d)(2).) The City makes an unsupported assertion that “entered into” cannot mean “executed” because if the Legislature had intended concurrent execution and indebtedness obligation, it would have so stated expressly. We disagree. The City’s strained interpretation does not show the statute is susceptible to more than one reasonable interpretation and is therefore ambiguous.

The City also argues the interval between the Promissory Note and the bond issuance merely reflects the “timing realities of public bond issuances.” However, we agree with the trial court that it was appropriate to conclude that the phrase “at the time of issuance” cannot include an agreement entered into a year before issuance of the bonds. That the bonds refinanced bonds issued in 2000 does not make the 2009 Promissory Note an agreement entered into at the time of issuance of the indebtedness.

Section 34171 allows another exception allowing Sponsor-RDA agreements to be considered enforceable obligations if they were entered into “within two years of the date of creation of the redevelopment agency . . . .” (§ 34171, subd. (d)(2).) This exception does not apply to this former RDA, which was created in 1969.

Thus, the Legislature provided for exceptions from the rule that Sponsor-RDA agreements are not enforceable obligations, yet did not provide an exception as urged by the City for good-faith agreements executed before the Governor and Legislature started talking about RDA dissolution. Had the Legislature wanted to exclude from section 34171’s invalidation of Sponsor-RDA agreements any such agreements entered into in good faith or executed before dissolution was proposed, the Legislature could have and would have included a specific exception for such agreements. (City of Ontario v. Superior Court (1993) 12 Cal.App.4th 894, 902 [we must assume the Legislature knew how to create an exception if it wished to do so].)

We conclude the trial court correctly ruled in favor of DOF with respect to Emerald Cove.

Disposition

The judgment is affirmed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

HULL , J.

We concur:

BLEASE , Acting P. J.

MURRAY , J.