Opinion
C077659 C077661
04-20-2018
CITY OF SUNNYVALE, as Successor Agency, etc. Plaintiff and Appellant, v. MICHAEL COHEN, as Director, etc., et al., Defendants and Respondents. SANTA CLARA COUNTY OFFICE OF EDUCATION et al., Plaintiffs and Appellants, v. CITY OF SUNNYVALE, as Successor Agency, etc. Defendant and Appellant, MICHAEL COHEN, as Director, etc., et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published,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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 34201380001499CUWMGDS) (Super. Ct. No. 34201380001627CUWMGDS)
The City of Sunnyvale (the City) as the successor agency to its former redevelopment agency, and also in its own right (collectively, Sunnyvale), brought a petition for writ of mandate and complaint for injunctive and declaratory relief against Michael Cohen, as Director of the California Department of Finance (Finance) and Emily Harrison, as the Auditor-Controller of the County of Santa Clara, challenging two Finance decisions made during the dissolution and wind-down of the City's former redevelopment agency (former RDA). In the first, Finance disapproved two items on the recognized obligation payment schedule related to a 1977 contract between the former RDA and the City. In the second, Finance rejected two payments the former RDA made to the City under the same contract, concluding the 1977 contract did not create an enforceable obligation; the payment transfers were unlawful and had to be returned. The trial court denied the petition. Sunnyvale filed a timely appeal.
Santa Clara County Office of Education and Freemont Union High School District (Schools) filed a separate petition against Sunnyvale and Finance to compel Sunnyvale to transfer the full amount of Finance's original Other Funds and Accounts Due Diligence Review. The trial court granted most of the relief Schools requested. Sunnyvale filed a timely appeal. In a cross-appeal, Schools argues it is entitled to prejudgment interest on the transferred amounts.
We shall affirm the judgments and dismiss the cross-appeal.
FACTUAL AND PROCEDURAL BACKGROUND
Statutory Background
In 2011 the Legislature enacted and the Governor signed legislation that required the dissolution of nearly 400 redevelopment agencies and the winding down of outstanding redevelopment obligations (the Dissolution Law). As a consequence, sponsoring agencies, usually cities, and their former redevelopment agencies moved swiftly to lock up "tax increment" revenues—the share of property taxes to which redevelopment agencies had been entitled before the enactment of this "Great Dissolution." (City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 855-856 (City of Tracy); California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231, 243-248 (Matosantos).)
The Dissolution Law is divided into two parts. Part 1.8 is the "freeze component," which froze redevelopment agency assets and prohibited their transfer "for any purpose." (Health & Saf. Code, § 34163.) The freeze was intended to preserve assets and revenues that were not needed to pay enforceable obligations to provide funds for core governmental services including schools. (§ 34167, subd. (a); Matosantos, supra, 53 Cal.4th at p. 250.) Part 1.85 covers the dissolution or wind-down part of the law, under which a successor agency, generally the city or county which formed the redevelopment agency, must wind down the business of the agency, including making payments on existing bonds or other obligations. (Matosantos, supra, 53 Cal.4th at p. 251.)
Undesignated statutory references are to the Health and Safety Code.
Soon to be dissolved redevelopment agencies were permitted to make limited payments under Part 1.8. Redevelopment agencies could make "scheduled payments for enforceable obligations, as defined in subdivision (d) of section 34167" until successor agencies were appointed. (§ 34169, subd. (a).) Section 34167, subdivision (d) defines enforceable obligations and includes "[l]oans of moneys borrowed by the redevelopment agency for a lawful purpose . . . to the extent they are legally required to be repaid pursuant to a repayment schedule or other mandatory loan terms" or for "[a]ny legally binding and enforceable agreement or contract that is not otherwise void . . . ." (§ 34167, subd. (d)(2), (5).)
During this wind-down phase, agreements, contracts, or arrangements between the city or county that created the redevelopment agency and the former redevelopment agency are not enforceable obligations. (§§ 34171, subd. (d)(2), 34178, subd. (a), 34179.5, subd. (b)(2).) These obligations between a redevelopment agency and the city or county "often were not the product of arm's length transactions" because the same individuals constituted both the redevelopment agency governing board and the city council or county board that created the agency. (Matosantos, supra, 53 Cal.4th at pp. 258, fn.12, 266.)
However, these provisions do not prevent reimbursement of loans extended to the redevelopment agency by the agency creating it. A successor agency to a redevelopment agency may repay such loans upon issuance of a finding of completion. Finance must issue the finding of completion once the successor agency has paid all amounts due for 2011-2012 and transferred the unencumbered balance of its Low and Low and Moderate Income Housing Fund and other funds to the county auditor-controller after due diligence reviews. (§ 34179.7.)
Prior to each six-month fiscal period, successor agencies must list putative enforceable obligations on a recognized obligation payment schedule (Repayment Schedule). (§ 34177, subds. (a), (l)(1).) After Repayment Schedules are prepared, oversight boards and then Finance review them. (§§ 34177, subd. (l)(2)(B), 34179, subd. (h), 34180, subd. (g).) Finance may eliminate or modify any Repayment Schedule item. (§ 34179, subd. (h).) In addition, Finance may also require supporting documentation and may sue for non-compliance. (§ 34277, subd. (a)(2).) The successor agency may meet and confer with Finance concerning its decisions on a Repayment Schedule. (§ 34177, subd. (m).)
Successor agencies must remit unencumbered balances of former redevelopment agency funds to the county auditor-controller for distribution to taxing entities. (§§ 34177, subd. (d), 34183, subd. (a)(4), 34188; Matosantos, supra, 53 Cal.4th at p. 251.) Each successor agency must hire an accountant to review its balances in a due diligence review. (§ 34179.5.) The review determines the unobligated balances of the redevelopment agency available for transfer to other taxing entities, including amounts that may have been transferred to its creator city between January 1, 2011, and June 20, 2012. (§ 34179.5, subds. (a), (c)(2).) Each successor agency must submit two due diligence reviews: one for affordable housing assets (not at issue here) and one for all other funds and accounts (Other Funds and Accounts Due Diligence Review). (§ 34179.5, subd. (c)(5).)
The review is subject to approval by an oversight board and by Finance. (§ 34179.6.) In addition to rejecting any payments approved by the oversight board, Finance can "adjust any amount associated with the [due diligence review] based on its analysis and information provided by the successor agency and others." (§ 34179.6, subd. (d).) If Finance overturns any oversight board decision it must notify the board. (Ibid.)
A successor agency and its sponsoring city or county can request a meet and confer with Finance to resolve any dispute about due diligence review determinations. (§ 34179.6, subd. (e).) Following the meeting, Finance must confirm or deny its determinations. (Ibid.) Once notified of Finance's final decision, a successor agency has five working days to remit the unobligated funds as determined by Finance to the county auditor-controller. (§ 34179.6, subd. (f).)
Statement of Facts
Sunnyvale Redevelopment Plan
In 1975 the Sunnyvale City Council adopted the "Redevelopment Plan for the Central Core, Sunnyvale, California" (the Redevelopment Plan). The Redevelopment Plan was designed to bring the City's general plan into reality and spread over 183 acres in the city center. The Redevelopment Plan divided the project area into a primary clearance area, a secondary clearance area, and a stabilization area. The primary clearance area was to become a retail center called Sunnyvale Town Center. The secondary clearance area was to become an office area with satellite retail facilities, and the third area was to be "stabilized."
To pay the former RDA's costs to execute the Redevelopment Plan, the primary financing would be through the sale of bonds to be repaid through taxes in the project area. Parking charges would provide supplemental income for the debt service.
Town Center Project
In 1976 the former RDA began to acquire land to develop the Town Center Project. The Town Center Project centered on a shopping mall in downtown Sunnyvale.
Disposition and Development Agreement
In June 1976 the former RDA entered into a disposition and development agreement (Development Agreement) with Sunnyvale Towncenter Associates (Developer). Under the terms of the Development Agreement, the former RDA agreed to acquire real property, demolish existing buildings, prepare the site, construct infrastructure improvements, and build public parking facilities. The Developer agreed to develop a retail shopping mall, including three major department stores, additional retail, and specialty shops.
The property was to be divided into three parcels: a Developer Parcel, Agency Parcel No. 1, and Agency Parcel No. 2. Under the Development Agreement, the Developer was to construct a shopping mall on the Developer Parcel. The former RDA was to construct approximately 1,616 parking spaces on the Developer Parcel and 1,850 parking spaces on Agency Parcel No. 1. (Public Parking Facilities.) Agency Parcel No. 2 would be developed in the future. The Development Agreement provided the former RDA would finance the Public Parking Facilities through bonds and other financing mechanisms.
When completed, the Agency Parcel No. 1 parking facilities would be leased by the former RDA to the City. Under the Development Agreement, the master lease between the former RDA and the City would provide that "the Public Parking Facilities shall be available on a non-exclusive basis for members of the general public." Those facilities would be subleased by the City to the Developer for an annual rent of $298,000. The sublease also required parking on a non-exclusive basis for the general public. The former RDA expected to be fully reimbursed for the Town Center Project through payments from the Developer and additional taxes generated from the project area.
Series A Lease Revenue Bonds
In March 1977 the former RDA adopted a resolution authorizing the issuance of $11,200,000 in Series A lease revenue bonds. Proceeds were used to acquire the land for the Public Parking Facilities. To repay the bonds, the former RDA pledged all revenues as defined in the resolution. The Series A bonds have been fully refunded and no amount is outstanding.
The 1977 Repayment Agreement
On March 29, 1977, the former RDA and the City entered into a repayment agreement, the agreement at issue on appeal. The repayment agreement required the former RDA to reimburse the City for costs the City incurred under the project lease for the Town Center Project and any other contributions the City made to further the redevelopment project. The repayment agreement states: (1) the Redevelopment Plan provided for tax increment financing for the project area; (2) the value of land and the cost of installation and construction of any building or other improvements in the project area have been or will be paid or provided for initially by the City; (3) the former RDA may enter into a contract with the City in which it agrees to reimburse the City over a period of years; (4) the obligation shall constitute as indebtedness to carry out the redevelopment project in the project area; and (5) the former RDA and the City intend to enter into a project lease to amortize certain bonds of the former RDA.
Under the repayment agreement, the former RDA was required to repay the City for the rental payments made by the City to the former RDA under the project lease and "for all Contributions." "Contributions" includes payments to meet the costs of the Town Center Project and "all payments past and future made or to be made by the City to meet the costs of acquisition and construction of the Project . . . all City expenditures, including all City cash advances, within the Project Area both in the past or to be made within the future, such as, without limitation, payments for street widening, curbs, landscaping and all other works or property appropriate to the Project Area." "Project Area" is defined as "the Project Area described in the Redevelopment Plan."
The parties subsequently amended the 1977 repayment agreement, adding two new provisions. The amendment required the City to convey property, including the parking facility property in Agency Parcel No. 1, to the former RDA. It also required the former RDA to pay the City interest at 8 percent per year on any outstanding amounts owed.
First Implementation Agreement
In March 1977 the former RDA, the City, and the Developer entered into a first implementation agreement. The former RDA would issue $16,800,000 of tax allocation bonds and two series of lease revenue bonds, Series A and Series B, totaling $21,200,000. The Developer would advance the former RDA an additional $2 million because financial projections revealed the tax allocation and Series A bonds might not be sufficient to cover development costs under the Development Agreement. In exchange, the former RDA agreed to convey to the Developer portions of the Developer Parcel having an appraised value of at least twice the amount of the advance. The City agreed not to levy a parking district property tax on the Town Center Project.
The Project Lease
About a month later, the former RDA and the City entered into a project lease. The former RDA leased Agency Parcel No. 1, which the City had formerly conveyed to former RDA as part of the 1977 repayment agreement, to the City.
Actions Following Passage of the Dissolution Law
After enactment of the Dissolution Law, Sunnyvale submitted a repayment schedule requesting that Finance approve payment of amounts under the 1977 repayment agreement from the redevelopment property tax trust fund (Redevelopment Tax Fund). In Repayment Schedule I, Sunnyvale covered putative enforceable obligations of the former RDA due between January 1 and June 30, 2012. Item No. 5 proposed payment of $3,884,706 to the City under the 1977 repayment agreement. Finance approved Repayment Schedule I, reserving the right to remove the item from a future Repayment Schedule.
In Repayment Schedule II, which covered July through December 2012, Sunnyvale again listed the 1977 repayment agreement as an enforceable obligation of the former RDA, but did not propose any payments under the contract in this period. Finance approved Repayment Schedule II with the right to remove the item from a future Repayment Schedule.
Repayment Schedule III, covering the period between January and June 2013, listed a $2 million payment under the 1977 repayment agreement. Finance denied payment, finding the 1977 repayment agreement was not an "enforceable obligation" under section 34171, subdivision (d)(2). According to Finance, because the contract was between the City and the former RDA and the contract did not fall within the exception for contracts made within two years of the former RDA's creation, it was unenforceable.
Repayment Schedule 13-14A, covering the period between July and December 2013, again listed a payment of $2 million under the 1977 repayment agreement. Finance denied payment for the reasons previously stated and also because the 1977 repayment agreement was not a written agreement of an indebtedness obligation for the sole purpose of securing or repaying those indebtedness obligations as set forth in sections 34171, subdivision (d)(2) and 34178, subdivision (b)(1).
Due Diligence Review
Sunnyvale submitted a report to Finance listing the former RDA's unobligated funds and account balances available for allocations to local taxing entities as required under the Dissolution Law's Other Funds and Accounts Due Diligence Review process. On April 1, 2013, Finance determined the former RDA had made two transfers of property tax revenue to the City between January 1, 2011, and February 1, 2012, in payment of the 1977 repayment agreement, which was not an enforceable obligation.
The first was a transfer of $8,830,951 made on June 30, 2011, two days after the passage of the Dissolution Law. The second, a transfer of $4,988,407 was made on January 31, 2012, the day before dissolution of the former RDA. The transfers totaled $13,819,358.
According to Finance, the transfers were made "in accordance with a 1977 City general fund loan" and section 34719.5, subdivision (c)(2) only allowed transfers to the City that were required of an enforceable obligation that excluded the 1977 general fund loan. As a result, Finance adjusted the Other Funds and Accounts Due Diligence Review balance that was available for distribution to the local taxing entities by $13,819,358. (§ 34179.5, subd. (c)(6).)
On May 5, 2013, Finance issued a final determination after meeting and conferring with Sunnyvale. In the final determination, Finance agreed to adjust the Other Funds and Accounts Due Diligence demand downward by $3,884,407 because this amount had been listed for payment on Repayment Schedule I, submitted to Finance for approval, and Finance had not denied the payment. Finance reduced the amount of the Other Funds and Accounts Due Diligence demand by this amount and determined $9,934,652 must be returned and disbursed to taxing entities.
Once a successor agency has paid the amounts owed on the due diligence process, Finance issues a finding of completion. The finding of completion allows the successor agency to repay redevelopment agency loans. (§§ 34179.7, 34191.4.) Finance has not issued a finding of completion because Sunnyvale has not remitted the disallowed amount under the Other Funds and Accounts Due Diligence demand.
Subsequent Litigation
Sunnyvale filed a petition for writ of mandate and complaint for injunctive and declaratory relief alleging Finance abused its discretion in denying use of the Redevelopment Tax Fund to pay its obligations in Repayment Schedules III and 13-14A and in demanding the return of predissolution transfers to the City. The petition further alleged that the Other Funds and Accounts Due Diligence process violated article I, section 9 (bill of attainder, ex-post facto law or law impairing obligation of contract), and article XIII, section 25.5 of the California Constitution.
The petition sought a writ of mandate directing Finance to treat the amounts in question in the Repayment Schedules as enforceable obligations. The amount of item No. 2 on Repayment Schedule 13-14A was $984,564 to reimburse the City under the 1977 repayment agreement for payments due under a facility lease agreement to cover debt service on certificates of participation. The amount of item No. 4 on Repayment Schedule 13-14A was $2 million to reimburse the City under the 1977 repayment agreement for the City's contribution to the Town Center Project. The petition also sought a writ of mandate directing Finance to reduce the Other Funds and Accounts Due Diligence demand from $9,934,652 to $0 and to issue a finding of completion.
Schools filed a separate petition for writ of mandate and complaint for declaratory and injunctive relief seeking to revise Finance's Other Funds and Accounts Due Diligence finding and seeking a court order to require Sunnyvale to return the full $13,819,358. The trial court related Schools' petition to Sunnyvale's petition and conducted a joint hearing on both.
Trial Court's Ruling
Following further briefing, the trial court issued a joint ruling. The court ruled the 1977 repayment agreement did not qualify as an enforceable obligation of the former RDA because it was not entered into for the purpose of securing or repaying an "indebtedness obligation" pursuant to section 34171, subdivision (d)(2). The court found Finance correctly interpreted and applied the Other Funds and Accounts Due Diligence processes to invalidate the former RDA's predissolution transfers of funds in payment of the 1977 repayment agreement. In addition, the court ruled the retroactive invalidation of predissolution transfers was not a reallocation of tax increment in violation of article XIII, section 25.5 (Proposition 22) of the California Constitution. Finally, the court determined that the due diligence demand, seeking to recover tax revenue transferred to the City prior to the former RDA's dissolution, did not amount to an unconstitutional gift of public funds pursuant to article XVI, section 6, of the California Constitution.
The court denied Sunnyvale's petition and granted Schools' petition. The court ordered Finance to revise the Other Funds and Accounts Due Diligence demand to reflect the correct amount of $13,819,358 and Sunnyvale to make diligent efforts to recover the amount. Finance issued a revised Other Funds and Accounts Due Diligence in the amount of $13,819,358 plus interest. Sunnyvale appealed the denial of its petition and the granting of Schools' petition. Schools cross-appealed.
DISCUSSION
In interpreting the dissolution legislation, we give no deference to Finance's interpretation; our review is de novo. (City of Tracy, supra, 3 Cal.App.5th at p. 860; City of Brentwood v. Campbell (2015) 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 34177, subdivision (m) authorizes Finance to "make its determination of the enforceable obligations and the amounts and funding sources of the enforceable obligations." Under section 34179.6, subdivision (d), Finance is authorized to adjust any amount of an oversight board on due diligence review based on its analysis and information provided by the successor agency and considering any findings or opinions of the county auditor-controller or the state controller.
Enforceable Obligation and the 1977 Repayment Agreement
Sunnyvale contends the 1977 repayment agreement falls within the statutory definition of an enforceable obligation for the former RDA. Under section 34171, subdivision (d)(2), written agreements entered into (A) prior to December 31, 2010, and at the time of issuance of the indebtedness obligations, and (B) solely for the purpose of securing and repaying those indebtedness obligations, are enforceable obligations. Sunnyvale argue the 1977 repayment agreement satisfies this standard because it was entered into prior to December 31, 2010, at the time of the issuance of the first implementation agreement for the Development Agreement, for the purpose of repaying the City for funds advanced to the former RDA under those agreements.
"Indebtedness obligations" are defined as "bonds, notes, certificates of participation, or other evidence of indebtedness, issued . . . to third-party investors or bondholders to finance or refinance redevelopment projects undertaken by the redevelopment agency in compliance with the Community Redevelopment Law . . . ." (§ 34171, subd. (e).)
The trial court considered Sunnyvale's argument and concluded: "Even if the Town Center DDA [the Development Agreement] constitutes an 'indebtedness obligation' for purposes of § 34171, the 1977 Repayment Agreement was not entered into at the time of issuance of the Town Center DDA. The Town Center DDA was executed in June of 1976, while the 1977 Repayment Agreement was entered into in March 1977, and amended in May of 1977. [¶] Further, even if the 1977 Repayment Agreement was entered into at the time of issuance of the Town Center DDA, the 1977 Repayment Agreement was not issued solely for the purpose of securing or repaying that agreement. Among other things, the 1977 Repayment Agreement obligates the redevelopment agency to repay any payments or expenditures made by the City for the project or within the 'project area.' For these reasons, the court concludes that the 1977 Repayment Agreement does not qualify for the 'indebtedness obligation' exception under section 34171[, subdivision ](d)(2). [Fn. omitted.]"
The trial court is correct. Our review of the 1977 repayment agreement does not support Sunnyvale's argument that it secures an "indebtedness obligation" under section 34171, subdivision (d)(2). The agreement only refers to the City and the former RDA and requires that the former RDA repay the City for any debts the City itself incurred. The agreement does not mention any "bonds, notes, certificates of participation or other evidence of indebtedness issued. . . to third party investors or bondholders." (§ 3417, subd. (e).) Nor does the agreement reference any third party—it only secures or repays debt incurred by the City.
Reimbursement for 1977 Repayment Agreement
Sunnyvale argues even if the 1977 repayment agreement was not an enforceable obligation, the Dissolution Law does not require the successor agency to remit reimbursements the former RDA made to the City before the former RDA's dissolution. In effect, Sunnyvale challenges the trial court's finding that the Dissolution Law is retroactive: "Where the trial court lost its way . . . is in concluding that the Legislature intended [due diligence] reviews to judge 'transfers' from the Former RDA to the City against a definition of 'enforceable obligation' that took effect only after the Former RDA had dissolved, which is to say several months after the last of those 'transfers' could have occurred."
The trial court concluded that the "language of section 34179.5 shows the Legislature intended AB 1484 to retroactively invalidate such transfers." We reached a similar conclusion in Brentwood, supra, 237 Cal.App.4th 488. In Brentwood, 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 due diligence review 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. (Id. at pp. 499-500; see City of Tracy, supra, 3 Cal.App.5th at pp. 860-861.)
Sunnyvale also contends the former RDA's payments to the City under the 1977 repayment agreement were for goods or services and not transfers for the purposes of the due diligence review. Section 34179.5, subdivision (b)(3) defines transferred for the purposes of due diligence review as "the transmission of money to another party that is not in payment for goods or services or an investment where the payment is de minimus. Transfer also means where the payments are ultimately merely a restriction on the use of the money."
The trial court disagreed, finding: "Sunnyvale's interpretation of the phrase 'payment for goods or services' is overly-broad, and would exclude virtually every payment made by a redevelopment agency or successor agency to another party, even if there was no enforceable obligation requiring the payment. This interpretation is contrary to the purposes of the statue, which contemplates a comprehensive review of transfers made by the redevelopment agency to identify and recover funds that were transferred without an enforceable obligation. [Citation.] [¶] A more reasonable interpretation is that the Legislature intended to create a 'contemporaneous exchange' exception for payments made contemporaneously with the receipt of new goods or services (i.e., new value). Such is not the situation here."
We agree with the trial court's assessment and note that we rejected Sunnyvale's argument in Brentwood. We found only payments for goods and services provided by the sponsoring city to the redevelopment agency are excluded from the due diligence review. Brentwood failed to demonstrate that the payment from its former redevelopment agency fell within this definition. (Brentwood, supra, 237 Cal.App.4th at p. 501.) Brentwood stated it was acting as a manager of redevelopment work for its former redevelopment agency. However, the public improvement agreements were filled with references to paying Brentwood for costs it would incur, not for services it provided. In essence, the public improvement agreements were reimbursement agreements, not service contracts. (Id. at pp. 502-503.) Here, the former RDA's payments to the City were made to reimburse the City for its rental payments under the project lease. The former RDA did not receive any new goods or services in exchange for the payments.
Constitutional Challenges
Finally, Sunnyvale argues the due diligence review requirement that the successor agency recover funds previously transferred to the City violates article XIII, section 25.5, subdivision (a)(7) of the state Constitution (Proposition 22) which prohibits the Legislature from requiring a redevelopment agency to transfer its tax increment to, or for the benefit of, the state. Additionally, Sunnyvale contends the action also constitutes a prohibited gift of public funds in violation of article XVI, section 6 of the state Constitution.
Sunnyvale asserts that requiring the City to repay the sums it received from the former RDA during the freeze period violates Proposition 22. Proposition 22 amended section 25.5 of article XIII of the California Constitution to prohibit the Legislature from requiring any redevelopment agency "to pay, remit, loan, or otherwise transfer, directly or indirectly . . . to or for the benefit of the State, any agency of the State, or any jurisdiction" tax increment the agency had received through property tax allocations. (Cal. Const., art. XIII, § 25.5, subd. (a)(7).)
We rejected this argument in Brentwood, supra, 237 Cal.App.4th 488. We held that the Legislature's decision to dissolve redevelopment agencies does not violate Proposition 22 because invalidation of payments made prior to dissolution does not constitute the redirection of tax increment from a viable and functioning redevelopment agency of indefinite existence. We reasoned: "The Legislature is not attempting to impose a redistribution of tax increment on redevelopment agencies that had open-ended operations. Had the Legislature been willing to '[c]ry "Havoc," and let slip the dogs of war' (Shakespeare, Julius Caesar, act III, scene 1, line 1501), it could have immediately dissolved redevelopment agencies without a freeze period (as chaotic as that would have been) in response to the original proposal from the Governor, which missed the necessary two-thirds margin by a single vote in March 2011 [citation] and invalidated sponsor agreements as of that date. . . . 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, at pp. 499-500.)
Sunnyvale also contends that the requirement that the City repay the $13,819,000 constituted an unconstitutional gift of public funds in violation of article XVI, section 6 of the state Constitution. We rejected this argument in City of Azusa v. Cohen (2015) 238 Cal.App.4th 619. In Azusa, the appellants argued the prohibition against the gift of public funds would be violated if funds transferred from one group of tax payers would benefit another group of taxpayers unless the transferred funds benefited the donor entity. (Id. at pp. 629-630) We found this argument without merit: "This contention still does not account for the fact that, once loaned, the money in the RDA's coffers was an RDA asset. Neither the Utility, nor its ratepayers, retained any possessory interest in the money lent. As the trial court found: 'Section 34171 does not take money from the ratepayers. The Dissolution Law only reallocates the former RDA's tax increment and assets to other local entities.' " (Id. at p. 630.)
Schools' Cross-appeal
Schools requested an award of prejudgment interest on the $13,819,000 the trial court ordered the City and successor agency to transfer to the county auditor-controller. Schools appeals, arguing the $13,819,000 illegally transferred to the City constituted damages and is subject to prejudgment interest under Civil Code section 3287.
We grant the request for judicial noticed filed February 16, 2016, by Schools and Emily Harrison, as Auditor-Controller of the County of Santa Clara.
Civil Code section 3287, subdivision (a) provides: "A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state."
Civil Code section 3281 defines damages: "Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages."
Schools contends the invalidly transferred amount the trial court ordered remitted constitutes damages and therefore the court erred in failing to award prejudgment interest. In support, Schools cites City of Clovis v. County of Fresno (2014) 222 Cal.App.4th 1469. In Clovis, the court held a monetary judgment awarded in a petition for a writ of mandate that decided the allocation of public funds between government agencies constituted damages under Civil Code section 3287, subdivision (a). The court explained: "[T]he appropriate inquiry is whether the money award is damages in light of the purposes of [Civil Code] section 3287, not whether it is damages in light of the purposes of the Government Claims Act. A primary purpose of [Civil Code] section 3287 is to ensure that a plaintiff awarded money by a court receives, in addition, the lost time value of that money. [Citation.] That purpose is applicable here." (Clovis, at p. 1480.)
According to Schools, the same reasoning applies in this case: "Freemont Union is a 'basic aid' school district. As a result, Freemont Union does not receive any additional state funds when property tax and other revenues decline. The Successor Agency's continued failure to recover and the City's continued refusal to remit the $13.819 million therefore deprives Freemont Union of money that it could use to provide educational services to the students it serves. Freemont Union's loss of use of this money is exactly what prejudgment interest under [Civil Code] section 3287[, subdivision ](a) is supposed to compensate for."
However, Civil Code section 3287, subdivision (a) mandates prejudgment interest to "[a] person who is entitled to recover damages certain, or capable of being made certain by calculation." It is uncertain how much of the funds the trial court ordered reimbursed will be refunded to the Santa Clara Office of Education or the Freemont Union High School District. Schools seems to acknowledge this uncertainty. In its cross-appellants reply brief, in the context of detriment under Civil Code section 3281, Schools states: "Because Cross-Appellants were legally entitled to a portion of the DDR amount, they suffered detriment as understood in [Civil Code] section 3281." (Emphasis added.) Schools argues at length that the damages were capable of calculation, but the discussion centers on the total damages, not on the damages owed to Schools specifically. Accordingly, we find the trial court did not abuse its discretion in declining to award prejudgment damages.
DISPOSITION
The judgments are affirmed and the cross-appeal is dismissed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3) & (5).)
RAYE, P. J. We concur: HULL, J. NICHOLSON, J.
Retired Associate Justice of the Court of Appeal, Third Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.