Filed 9/29/16
                            CERTIFIED FOR PUBLICATION




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




CITY OF TRACY, as Successor Agency, etc., et al.,                     C077440

                Plaintiffs and Appellants,                    (Super. Ct. No. 34-2013-
                                                             80001570-CU-WM-GDS)
        v.

MICHAEL COHEN, as Director, etc., et al.,

                Defendants and Respondents.1




       APPEAL from a judgment of the Superior Court of Sacramento County,
Shelleyanne W.L. Chang, Judge. Affirmed as modified.

      City of Tracy, as successor agency, and City of Tracy, Bill Sarton, City Attorney;
Goldfarb & Lipman, Dolores Bastian Dalton, James T. Diamond, Jr., and Karen M.
Tiedemann, for Plaintiffs and Appellants.



1 We again adjust the appellate title in one of these appeals, putting the official capacity
cart (“Successor Agency, etc.”) back behind the party name horse (“City of Tracy”), and
deleting the Department of Finance as a party, a redundant defendant. (City of
Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 492, fn. 3 (Brentwood)).


                                              1
      Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney
General, Marc A. LeForestier and John W. Killeen, Deputy Attorneys General, for
Defendants and Respondents.



       In 2011, the political branches of our state government decided as a matter of
public policy that abuses of the redevelopment law, which constituted an ever-growing
drain on state finances, required the dissolution of nearly 400 redevelopment agencies
and the winding down of outstanding redevelopment obligations; this resulted in a frantic
scurry on the part of “sponsoring entities”2 (usually cities) and their conjoined former
redevelopment agencies 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.’ ” (California Redevelopment Assn. v. Matosantos (2011) 53 Cal.4th 231,
243-248; Brentwood, supra, 237 Cal.App.4th at pp. 491, 492, fn. 4, 499 & fns. 13, 14.) It
has also resulted in scores of actions in the Sacramento County Superior Court (§ 34168,
subd. (a)) that primarily involve the sponsoring entities and their equally conjoined
“successor agencies”3 seeking to evade this legislative determination.

       We confront a recurring issue in this appeal. In 2012, the Legislature decided to
apply the postdissolution exclusion of any agreements between a sponsor and a former
redevelopment agency (hereafter, sponsor agreements) from the definition of
“enforceable obligations” (see fn. 3, ante, at p. 2) to any 2011 sponsor agreements that


2 “ ‘Sponsoring entit[ies]’ ” are the local entities that created the former redevelopment
agencies, the officials of the local entities usually constituting the redevelopment agency
boards. (Health & Saf. Code, § 34171, subd. (n); undesignated statutory references are
to the Health and Safety Code).
3 “ ‘Successor agenc[ies]’ ” are essentially caretakers, the boards of which usually are
also the officials of the former sponsoring entities, empowered only to complete ongoing
“ ‘[e]nforceable obligations’ ” (those which are still entitled to tax increment) of the
former redevelopment agency. (§ 34171, subds. (j), (d); Brentwood, supra,
237 Cal.App.4th at p. 491, fn. 2.)


                                             2
antedated dissolution (which previously had still been included in the definition), for the
purpose of retransferring to “taxing entities”4 any redevelopment agency transfers to
sponsors pursuant to a 2011 sponsor agreement; the Legislature also created an audit
process to identify these sponsor transfers. (Brentwood, supra, 237 Cal.App.4th at
p. 494; §§ 34167, 34171, subd. (d)(2), 34179.5, 34179.6.)

       The City of Tracy (City) brought this action as the successor agency to its former
redevelopment agency (and also in its own right) against Michael Cohen as director of
the Department of Finance (the Department) to challenge administrative determinations
that invalidated the transfer of funds from the former redevelopment agency—before its
dissolution—to the City because this action was pursuant to a 2011 sponsor agreement,
and that directed return of a portion of the funds (constituting bond proceeds) to the
successor agency and another portion (constituting former tax increment) to the Auditor-
Controller of San Joaquin County (Auditor-Controller),5 the administrator of the trust
fund for former tax increment (§ 34182, subd. (c)), to distribute to the taxing entities.
(Brentwood, supra, 237 Cal.App.4th at p. 492 & fn. 3.) The trial court granted judgment
in favor of defendants.

       Without any analysis of Brentwood, which antedates its briefing, the City makes
a lengthy argument in its opening brief (to which it does not return in its reply brief) that,
as a matter of statutory analysis, the 2012 audit procedure and its incorporation of
the postdissolution definition of enforceable obligations was not intended to apply to
any predissolution 2011 sponsor agreements. It also contends there are constitutional


4 “ ‘Taxing entities’ ” are the entities now entitled to tax increment after the abolition of
redevelopment agencies. (§ 34171, subd. (k); Brentwood, supra, 237 Cal.App.4th at
p. 492.)
5 The Auditor-Controller is the nominal other defendant. Although he filed an answer
contesting the petition, neither party points to any further participation on his part in the
litigation in the trial court and he has not filed a brief on appeal.


                                               3
obstacles to retroactive exclusion of 2011 sponsor agreements from the definition of
enforceable obligations.6 Alternately, it argues that the transfers it received come within
the “goods or services” exception to the exclusion of sponsor agreements. (§ 34179.5,
subd. (b)(3).)7 Finally, the City contends that it was entitled to a declaration that the
Department may not constitutionally avail itself of an administrative remedy that allows
the Department to order diversion of future local tax revenues (sales, use, and property)
to recover wrongfully transferred tax increment from a sponsoring entity. (§§ 34179.6,
subd. (h), 34179.8, subd. (a).)

       We agree that a portion of the payments made to the City reflect goods or services
that the City provided to the redevelopment project that the successor agency was
overseeing. Our decision in City of Bellflower v. Cohen (2016) 245 Cal.App.4th 438,
remittitur issued May 3, 2016 (Bellflower), renders moot any need for a declaration in the
present action that the administrative diversion of future local tax revenues violates a




6 In this context, the City mentions a violation of due process in a heading, and adverts
in passing to interference with a vested interest in the body of its analysis, but does not
develop either argument. This forfeits any further consideration of these suggestions
(Imagistics Internat., Inc. v. Department of General Services (2007) 150 Cal.App.4th
581, 593 (Imagistics)), which are also unavailing in any event. (Brentwood, supra,
237 Cal.App.4th at p. 498, fn. 12; see Star-Kist Foods, Inc. v. County of Los Angeles
(1986) 42 Cal.3d 1, 6.)
7 Improperly admixed under the due process heading is an unrelated lurking argument
that the trial court improperly ordered return of the bond proceeds because these may
now properly be expended on the redevelopment expenses for which the bonds were sold.
(§ 34191.4.) This manner of raising the issue forfeits our plenary consideration.
(Imagistics, supra, 150 Cal.App.4th at p. 593, fn. 10.) We simply observe that, while it
does seem pointless to order the return of bond proceeds that the successor agency can
then expend on the same project, it is also difficult to find ultimate prejudice to the City,
thus requiring modification of the judgment.


                                              4
provision of our state charter (Cal. Const., art. XIII, § 24, subd. (b)).8 We otherwise
reject the City’s claims and affirm the judgment as modified.

                  FACTUAL AND PROCEDURAL BACKGROUND

       As is typically the case with the statutory interpretation involved in these
redevelopment agency dissolution cases, the particular facts are largely irrelevant. We
include them primarily for context.

       The City created its former redevelopment agency in 1970, designating its city
council as the administrating body. The former redevelopment agency adopted a
community redevelopment plan in 1990 for the project area. In 2008, the former
redevelopment agency developed a five-year implementation plan, which included the
development of a downtown shopping plaza. To this end, the City and its former
redevelopment agency issued bonds in 2008, from which the former redevelopment
agency received $2.13 million in proceeds (rounded to the nearest ten thousand, as will
be all dollar figures in this opinion). However, the former redevelopment agency did not
enter into any contractual obligation to carry out the planned downtown improvements
before 2011.

       In January 2011, the Governor announced his intention to seek the abolition of
redevelopment agencies, leading to the resultant frenzy on the part of former
redevelopment agencies and their sponsoring agencies throughout the state to lock up
unencumbered tax increment. (Brentwood, supra, 237 Cal.App.4th at pp. 493, 499.) The
City and its former redevelopment agency were among these. At a January 2011 special
meeting of the city council in its joint capacities, the City and its former redevelopment
agency entered into a “cooperation agreement” for the former redevelopment agency to
fund identified improvements from the five-year plan, for which the City would acquire

8 Further references to articles are to the California Constitution.



                                              5
land and provide design and construction services. The sources of the revenue were all
“funds currently held by the [redevelopment agency] . . . not previously budgeted or
appropriated for other . . . projects . . . .” The agreement specified four projects: the
downtown shopping plaza, downtown infrastructure, acquisition of properties for joint
public-private improvements, and a signage program. In response to an inquiry whether
there was any binding commitment to these four projects, the City’s finance director
stated at the meeting that the agreement “does not mean the projects are being funded.
The plan is simply moving forward.” The agreement “will allow the City Council to
proceed and to award contracts for these projects.” The purpose of entering into the
cooperation agreement was to “directly address some of the issues presented by the
Governor’s proposed budget”; rather than return redevelopment agency reserves to the
“state” (actually, to the taxing entities), “the action . . . transfers the funds to the City.”
The City and the redevelopment agency thus enacted resolutions approving the
agreement. The redevelopment agency on the same date transferred $4.18 million in tax
increment funds and $2.13 million in bond funds to the City pursuant to the agreement.

       In declaring that it was not subject to the California Environmental Quality Act,
the cooperation agreement recited that it was a funding mechanism that did not commit
any funds to any specific public improvement. The agreement provided that the funds
the City received from the redevelopment agency could be used to pay for “land
acquisition, relocation, demolition, site preparation and remediation, design, and
construction” of the listed projects, and reimbursement of the City’s “staff, consultant and
other administrative costs in connection therewith.” The City and the redevelopment
agency retained the power to modify the plan to add or delete projects.

       The City estimates the construction costs for the plaza project on its February
2014 completion to have been $3.81 million. The City had entered into contracts in May
2011 with third parties to provide landscaping and engineering services for the plaza for a


                                                6
total cost of $141,000. The City incurred an additional $911,000 in “design, construction
management, staff and inspections costs” for the work of City employees in connection
with the plaza project. In June 2011, the City entered into a $2.30 million contract with
Knife River Construction to build the shopping plaza. An additional $460,000 in funds
were attributed to a 20 percent contingency fee. The City also entered into a contract in
June 2011 with a third party to buy land near the plaza for $650,000. This brought the
total amount of expenditures at issue to $4.46 million, which reflected the $2.13 million
in bond proceeds and $2.34 million in tax increment from the former redevelopment
agency (our rounding of the components resulting in a larger sum than the total).

       On June 28, 2011, the Legislature enacted the Great Dissolution as an urgency
measure, immediately freezing the authority of the former redevelopment agencies to
incur further obligations and providing a process for the dissolution of the former
redevelopment agencies on February 1, 2012 (as judicially reformed). (Brentwood,
supra, 237 Cal.App.4th at p. 494.) After that date, the successor agencies were
responsible for winding down the outstanding enforceable obligations of the former
redevelopment agencies, which did not include “sponsor agreements” between the former
redevelopment agency and its sponsoring agency. (Ibid.; §§ 34171, subd. (d)(2), 34177,
subd. (a).) Pursuant to section 34179.5, enacted in 2012, a successor agency had to
undertake audits of the former redevelopment agency’s accounts, subject to the
Department’s review. Upon the Department’s determination that transferred funds were
not the subject of any enforceable obligation, a successor agency had the obligation to
transmit such funds in its possession to the county’s auditor-controller for distribution to
taxing entities and make a diligent effort to recover funds already transferred to the
sponsor agency. (Brentwood, at p. 495.) As noted at the outset, for the purposes of this
audit, the Legislature applied the postdissolution definition of enforceable obligations
that specifically excluded transfers pursuant to sponsor agreements executed in 2011,



                                              7
which previously had been considered enforceable under section 34167. Section
34179.6, as noted, provided an administrative remedy in the form of diverting future local
tax revenues to recoup funds wrongfully transferred to a sponsor agency.

       In reviewing the result of such an audit, the Department concluded the cooperation
agreement was an invalid sponsor agreement, and consequently the $6.31 million transfer
was not an enforceable obligation. The City returned $1.84 million to the successor
agency under protest. The Department directed that the remaining bond proceeds be
returned to the successor agency, and the tax increment to the Auditor-Controller.

       The City then brought the instant action in July 2013. The Department thereafter
issued a demand that the City comply with its administrative findings, or else it would
direct the diversion of the City’s future local tax revenues to reclaim the $4.46 million.
However, it never took action to direct the diversions. Under protest, noting that it had
already expended all the funds at issue on the redevelopment project, the City remitted
the contested amounts from its general fund in December 2015 in order to meet an
impending deadline for obtaining a “finding of completion” (§ 34179.7).

                                      DISCUSSION
1.0    The Legislature Intended Retroactively to Invalidate Transfers Pursuant to
       2011 Sponsor Agreements

       In interpreting the Great Dissolution legislation, we do not owe any deference to
the Department; we decide the issue de novo. (Brentwood, supra, 237 Cal.App.4th at
p. 500.)

       The City contends the incorporation in section 34179.5 of the postdissolution
definition of enforceable obligation for the audit and retransfer process should not be
interpreted as intending to include 2011 sponsor agreements predating dissolution. To
this end, it gives a strained reading of section 34179.5, and concocts “conflicts” with
sections 33445 (the statute previously authorizing sponsor agreements), 34164 (which

                                              8
froze any new predissolution redevelopment activities), 34167.5 (which allowed asset
transfers to third parties pursuant to enforceable contracts), 34177 (a provision of which
directs distribution of unencumbered funds designated for subsidized housing to auditor-
controllers), and 34167 itself (the predissolution definition of enforceable obligations),
without explaining why the Legislature could not conclude “in retrospect [that] the facts
on the ground demonstrated . . . the need to have abrogated the authority to enter into
sponsor agreements from the moment that ERAWKI [end of redevelopment as we knew
it] was foretold . . . .” (Brentwood, supra, 237 Cal.App.4th at p. 499.)

       In Brentwood, we rejected this tactic of hunting indirectly through legislative
mouseholes for an elephant of legislative intent. “[I]f this were in fact the intent in
enacting section 34179.5[,] it would have been so much more straightforward simply to
define ‘enforceable obligation’ by reference to section 34167 rather than section 34171.”
(Brentwood, supra, 237 Cal.App.4th at p. 501.) In short, the Legislature intended to layer
upon the existing statutory dissolution framework a new procedure and definition to
recapture diverted tax increment that the sponsors and former redevelopment agencies
siphoned away through these sponsor agreements beginning in January 2011 in response
to the imminence of ERAWKI before the judicially delayed dissolution date of February
2012, as detailed in the February 2012 report of the Legislative Analyst (Brentwood, at
p. 499, fns. 13 & 14). We accordingly reject without further elaboration the City’s
arguments to the contrary.
2.0    The Legislature Did Not Violate the Constitution in Retroactively
       Invalidating Transfers Pursuant to 2011 Sponsor Agreements

       2.1    Section 34179.5 Does Not Result in a Gift of Public Funds
       The City argues that the redirection of funds transferred under 2011 sponsor
agreements is a gift of public funds in violation of article XVI, section 6. The claim,




                                              9
which is not renewed in its reply brief, ignores this court’s decision in California
Redevelopment Assn. v. Matosantos (2013) 212 Cal.App.4th 1457 (CRA v. Matosantos).)

       We rejected this claim in CRA v. Matosantos. Relying on authority that a
redirection of local tax revenues (derived only for general purposes from residents of the
county) from specific local agencies to the county’s general fund is not a gift of public
funds (CRA v. Matosantos, supra, 212 Cal.App.4th at p. 1499), we concluded that tax
increment is similarly derived only for general purposes, and could thus permissibly be
reallocated from redevelopment agencies to taxing entities for the general benefit of
county residents (id. at pp. 1499-1500). We accordingly reject this argument again.

       2.2    Section 34179.5 Does Not Violate Article XIII, Section 25.5, Subdivision
              (a)(7)
       The City contends the electorate, through a 2010 initiative adding article XIII,
section 25.5, subdivision (a)(7) to the state charter, prohibited the Legislature from
reallocating tax increment from the former redevelopment agencies to taxing entities.
The contention, which is not renewed in its reply brief, ignores this court’s decision in
Brentwood.

       We determined that this constitutional protection of former redevelopment
agencies no longer applies after the point at which the Legislature decided that the
redevelopment agencies did not have any further authority to exercise redevelopment
powers, and thus the withdrawal in 2012 of the authority to enter into sponsor agreements
in 2011 was constitutional. (Brentwood, supra, 237 Cal.App.4th at pp. 499-500.) We
thus reject this argument again.

       2.3    Section 34179.5 Does Not Violate Article XIII, Section 24, Subdivision (b)
       The City (mistakenly referencing a different initiative) makes an abbreviated claim
that the same 2010 initiative, in also adding article XIII, section 24, subdivision (b),
prohibited the Legislature from reallocating its general fund to the taxing entities to repay


                                             10
wrongfully diverted and already expended tax increment. As we will explain, while this
provision precludes the Legislature from seizing incoming local tax revenues via an
administrative process and reallocating them to taxing entities, it is not an obstacle to the
pursuit of judicial remedies against sponsors wrongfully appropriating redevelopment
agency funds.

       “[T]he Legislature ‘may not reallocate, transfer, borrow, appropriate, restrict the
use of, or otherwise use the proceeds of any tax imposed or levied by a local government
solely for the local government’s purposes.’ ” (Bellflower, supra, 245 Cal.App.4th at
p. 451, quoting art. XIII, § 24, subd. (b), italics added.) Accordingly, the authorization in
section 34179.6 from the Legislature for the Department to order diversion of future local
tax revenues from sponsors to taxing entities was unconstitutional; the constitutional
provision is “a prohibition on transferring away from the local government any tax
revenue to which the local government is entitled.” (Bellflower, supra, at p. 453.)

       However, we were careful to note that “[w]ithholding the tax revenue to which the
sponsoring agency is entitled is not the only means by which the State can acquire from
the sponsoring agency the funds that should [have been] distributed to other taxing
entities, if such a result is justified. For example, the State is authorized to obtain judicial
relief for violation of the dissolution law. (§ 34177, subd. (a)(2).).” (Bellflower, supra,
245 Cal.App.4th at p. 453, italics added.)

       The import of Bellflower is that the Legislature cannot withhold local tax revenues
from sponsors through administrative fiat as a remedy for violation of the directives in
the Great Dissolution. However, the sponsors are not rendered judgment-proof by virtue
of the constitutional provision, such that their general funds are immune from answering
for a violation of state law in court. A judgment is not a legislative action to “reallocate,
transfer, borrow, appropriate, restrict the use of, or otherwise use” local tax revenues in
the coffers of a sponsor. (Art. XIII, § 24, subd. (b).) The City does not direct us to any


                                              11
indicia in the November 2010 initiative materials that would compel us to infer such a
drastic restriction on judicial authority in the postdissolution landscape. We decline to do
so.

3.0    To the Extent the City Itself Provided Redevelopment Services (as Opposed
       to Third Parties with Whom It Contracted), It Comes Within the Exception
       to Section 34179.5 for Goods or Services

       In Brentwood, we concluded section 34179.5 unambiguously “exempts only a
transfer of money in exchange for a type of good or service from its ambit. As a result,
Brentwood must demonstrate that the payment from its former redevelopment agency
comes within this definition.” (Brentwood, supra, 237 Cal.App.4th at p. 502.) Because
the payments were solely to reimburse the city for its payments for goods or services to
third parties, we concluded these did not come within the exception in section 34179.5.
(Brentwood, at pp. 502-503.)

       The City contends payments from the former redevelopment agency for the costs
of redevelopment services that City staff provided, as well as for the costs to the City for
services that third parties provided, come within the exception. Brentwood forecloses the
City from receiving payments for the latter; we do not see anything in the cooperation
agreement to indicate that the former redevelopment agency was engaging the City’s
services as a manager for the specific projects involving the third party contracts, or
engaging it to execute any redevelopment contracts with third parties in general. The
cooperation agreement described itself as simply a “funding mechanism” for future
redevelopment work—i.e., a reimbursement agreement for these third party
arrangements. However, the City is correct that it was entitled to be paid for the
redevelopment work that its own staff directly provided; this was not the case in
Brentwood, a distinction that the Department overlooks. We also decline to accept the
Department’s suggestion that we should “interpret” the unambiguous section 34179.5 as
including a requirement for payments from a former redevelopment agency to be

                                             12
contemporaneous with redevelopment services that a sponsor provided. We therefore
will modify the judgment to grant a writ of mandate directing the Department to reduce
its determination of the total required reimbursement by $911,495 (the exact figure at
issue).
4.0       Bellflower Has Established That Section 34179.6 Is Unconstitutional, So the
          Erroneous Denial of a Declaration in the Present Case Is Moot

          Bellflower determined that the remedy provided in section 34179.6, subdivision
(h) violates article XIII, section 24, subdivision (b) because it purports to allow the
Department to order the reallocation of local tax revenues. (Bellflower, supra,
245 Cal.App.4th at p. 451.) That decision is now final.

          The trial court thus erred in finding to the contrary in denying the requested
declaratory relief. However, we cannot assume that the Department will act in disregard
of this declaration (indeed, it never acted upon its threats to employ the remedy in the
present case), so the issue of a declaration to the same effect in the present case is moot.
(Burke v. City etc. of San Francisco (1968) 258 Cal.App.2d 32, 34-35.) We therefore
decline to modify the judgment to include a declaration of unconstitutionality.

                                        DISPOSITION

          The judgment is modified to grant a writ of mandate directing the Department to
reduce its determination of the total required reimbursement by $911,495. As




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thus modified, the judgment is affirmed. Neither party shall recover costs on appeal.
(Cal. Rules of Court, rule 8.278(a)(5).) (CERTIFIED FOR PUBLICATION)



                                                         BUTZ               , J.



We concur:



      HULL                 , Acting P. J.



      ROBIE                , J.




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