Filed 5/17/13 Grantville Action Group v. City of San Diego CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
GRANTVILLE ACTION GROUP, D059318
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2008-00092628-
CU-MC-CTL)
CITY OF SAN DIEGO et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Diego County, Joan M.
Lewis, Judge. Affirmed.
Law Office of Craig A. Sherman and Craig A. Sherman for Plaintiff and
Appellant.
Kane Ballmer & Berkman, Murray O. Kane, Donald P. Johnson; Thomas E.
Montgomery, County Counsel, and William A. Johnson, Deputy County Counsel, for
Defendants and Appellants.
In May 2005 the City of San Diego (the City) and its redevelopment agency (the
Agency) adopted the Grantville Redevelopment Project (GRP) finding that the area
within the GRP was blighted and required action by the Agency to remedy that blight.
In this action, plaintiff Grantville Action Group (GAG) sought to challenge, under
the Community Redevelopment Law (CRL), Health & Safety Code (all undesignated
statutory reference are to the Health & Safety Code) section 33000 et seq., decisions
made by the defendants City, the Agency, and the County of San Diego (the County)
(collectively referred to as defendants) arising from a settlement of the County's lawsuit
challenging the GRP. Specifically, GAG asserts that the County's lawsuit, and the
subsequent settlement agreement, improperly guaranteed the County would recapture 100
percent of its projected $49 million in lost tax revenue from adoption of the GRP. GAG
asserts that this "revenue shifting scheme" is "exactly the type of action the Legislature
sought to prohibit in enacting the [CRL]." Further, GAG asserts that these actions
violated the legal doctrine that you "cannot do indirectly what the law (and Legislature)
prohibits [you] from doing directly."
Following a court trial, the court issued a decision in the City, County and
Agency's favor, finding the CRL does not "prohibit[] the transfer of monies in this
manner."
On appeal, GAG asserts the court erred in its ruling because (1) the settlement of
the County's lawsuit violated the CRL, which established a pass-through formula, offset
requirements for such projects, and other requirements for redevelopment plans; (2) when
approving the transfer and use of a redevelopment tax increment for public facilities, it
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was inappropriate to reference an entire redevelopment plan, with no identified project;
and (3) the County's agreement to transfer and use the GLP's tax increment for
construction/improvement of its County Administration Center (CAC) was in violation of
the restrictions set forth in the CRL. We affirm.
FACTUAL BACKGROUND
A. The GRP
In May 2005 the City and the Agency adopted the GRP. In the GRP, the City and
Agency found that the area within the boundaries of the GRP was blighted and required
action by the Agency to remedy that blight. The objectives of the GRP included the
following: (1) eliminate and prevent the spread of blight and deterioration of the area; (2)
improve traffic flow through the development of a circulation network to the Mission
Gorge corridor and Grantville industrial area; (3) improve public infrastructure, including
storm drains to Alvarado Creek and the San Diego River, widening existing roadways
and sidewalks or creating new ones, and undergrounding utilities; (4) alleviate the
shortage of commercial and industrial parking; (5) streetscape enhancements and
revitalization of incompatible uses and obsolete buildings; (6) revitalize the commercial
corridor along Mission Gorge Road; (7) expand and add community park and recreational
facilities, including along the San Diego River.
The Agency also adopted a five-year implementation plan (Five-Year Plan), which
provides a general outline of the actions the Agency may take in eliminating blight in the
Grantville area. The actions proposed during the first year of the Five-Year Plan involve
actions relating to the objectives described, ante, including, among other items: (1)
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planning for Mission Gorge Road traffic improvements, including the Interstate 8
interchange at Alvarado Canyon Road; (2) pedestrian circulation improvements along
Alvarado Creek, focused on the Grantville Trolley Station; (3) identifying storm drain
improvements; (4) developing opportunities of the San Diego River Master Plan once it
is finalized; and (5) monitoring, coordinating and expanding activities with other public
agencies, including business outreach and marketing, housing programs, streetscape,
lighting and landscape improvements.
B. The County's Lawsuit
The County filed an action challenging the adoption of the GRP. The County's
complaint alleged, among other claims, that there was insufficient evidence of physical
and economic blight in the Grantville area.
Atomic Investments, Inc. (AII) also filed a case challenging the GRP. AII
challenged the inclusion of two of its properties (the Discount Tire property and the
Veteran's Administration property) in the GRP.
The County and the AII cases were subsequently consolidated (the County Case).
GAG did not participate in the County Case. Thereafter, the County Case settled.
C. Hearings on GRP
On July 29, 2008, the San Diego City Council (City Council) and the Agency's
board (the Board) held a joint public hearing on the subject agreements. Proponents and
opponents of the proposed settlement and the related agreements were heard. The
opponents, including GAG's representative, Brian Peterson, criticized the Agency's
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finding of blight in the Grantville area and the Agency's possible use of eminent domain
relating to the GRP.
At the conclusion of the public hearing, the City Council and Agency's board
adopted resolutions approving four cooperation agreements by a vote of seven to one and
made findings required by section 33445. The Agency's board also adopted a resolution
to settle AII's claims in the County Case by a vote of eight to zero.
Similarly, on September 23, 2008, the County Board of Supervisors held a public
hearing and adopted resolutions relating to two cooperation agreements and made
findings required by section 33445
Counsel for the opponents of the settlement submitted a letter to the County and
made a presentation in opposition to the settlement and its related agreements. GAG also
submitted a letter and made a presentation in opposition to the settlement.
The settlement agreement, which included four cooperation agreements, was
approved by all parties on August 29, 2008. The four cooperation agreements and
resolution that effectuated the settlement consist of the following:
1. The transit line improvement cooperation agreement, which provided that the
Agency would transfer $31.36 million to the City for the construction of improvements to
the C Street trolley line downtown as part of the Centre City Redevelopment Project.
Those improvements were required to permit a direct transit line for trolley line riders
between Grantville and downtown, thereby increasing Grantville public transit use and
alleviating existing transit congestion in Grantville.
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2. The North Embarcadero improvements and facilities cooperation agreement
(North Embarcadero agreement) provided for the Agency's payment of $31.36 million in
Centre City Development Corporation (CCDC) funds to the County for use in
constructing improvements relating to the County Waterfront Park Plan along the harbor-
front area of downtown, so long as they are consistent with CRL.
3. The joint projects cooperation agreement provided for the payment by the
Agency of $7.84 million for the development of projects recommended by the County
that benefit the Grantville Redevelopment Project area consistent with the CRL.
4. The affordable housing credit and allocation agreement, which provided that
the County would receive $9.8 million in affordable housing credits towards its share of
the regional housing needs allocation.
5. The AII resolution, which provided that certain properties owned by AII would
not be subject to eminent domain.
On September 8, 2008, pursuant to the settlement agreement, the court issued a
judgment on validated actions. That judgment validated the GRP and found that the GRP
was legal and valid in all respects. No party to the validation action filed an appeal.
D. The Instant Action
On September 26, 2008, GAG filed a complaint and petition for writ of mandate
seeking to invalidate the resolutions, actions and findings made by the City, the Agency,
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and the County, related to the GRP.1 In its complaint and petition, GAG challenged
three of the four cooperation agreements - the transit line improvements agreement, the
joint projects agreement, and the North Embarcadero agreement GAG also challenged
the resolution that settled AII's claims, but that claim was subsequently dismissed by the
court.
The trial in this matter was heard on November 16, 2010. At the conclusion of
trial, the court took the matter under submission.
On December 20, 2010, the trial court issued its tentative statement of decision. In
that tentative statement of decision, the trial court made several findings. As to GAG's
argument that the defendants "cannot do indirectly what [they] cannot legally do
directly," the court found: "Although there is some appeal to this argument, the Court
does not believe the law prohibits the transfer of monies in this manner. The Court
agrees with the thoughts expressed by the Attorney General's office that 'although it
might be questioned whether this arrangement carries out the Legislatures' [sic] intent in
adopting the anti-pass through provision in 1993, it appears to be technically permissible.'
[Citation.] [¶] For the foregoing reasons—and for the reasons discussed below—this
Court concludes that the appropriate findings under [section] 33445 were made and that
the settlement and related transactions did not violate pass-through restrictions. The
motion for judgment on this issue is therefore denied."
1 A complaint filed by an interested person to invalidate a public agency matter is
commonly referred to as a "reverse validation" action. (Bonander v. Town of Tiburon
(2009) 46 Cal.4th 646, 656.)
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Footnote 5 in the court's tentative decision states: "In this regard, the Court finds
Graber v. City of Upland (2002) 99 Cal.App.4th 424 to be distinguishable. There, the
improper purpose of the ordinance was conceded by the City as the Court of Appeal
acknowledged ['Although the issue is a close one, the city's candid statement of its
reasons for adopting ordinance No. 1683 makes it clear to us that the sole purpose of the
ordinance was to avoid the base year limitation for the 77-acre parcel. We agree with the
trial court that this is an improper purpose which conflicts with the statutory scheme.'] In
this case there is no acknowledged improper purpose."
As to GAG's argument that the agreements should be reviewed as a single
transaction in determining if they were lawful, rather than reviewing each individual
agreement, the trial court found that GAG challenged only certain portions of the overall
settlement, and that, "Similar to how [GAG] approached the case—and as Defendants
argue—the Court believes it may look at each agreement separately to see if any of
Plaintiff's other arguments have merit."
As to the transit line agreement, the trial court found that the agreement "was
adequately provided for in the Grantville Redevelopment Plan" and "[t]he appropriate
findings" were made pursuant to section 33445, and therefore GAG's motion as to that
agreement was denied
As to the joint projects agreement, the court found, "Although the 'Joint Projects'
are not identified with specificity, the Joint Projects Agreement provides that the projects
be consistent with the CRL [citation], which requires a five year implementation plan.
[Citation.] The Grantville Five-Year Implementation Plan lists specific projects that may
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be funded. [Citations.] Moreover, the funding of a joint project must follow a process
requiring Agency approval based upon whether the proposed project benefits the
Grantville Redevelopment Project area consistent with the CRL. [Citation.] The Court
concludes that the Joint Projects are sufficiently identified for purposes of compliance
with the CRL." The court also found that this challenge to the joint projects agreement
had not been administratively exhausted as to the City and Agency.
As to the North Embarcadero agreement, the court found that the issue relating to
the alleged possible use of the North Embarcadero funds to improve the County
Administrative Center in purported violation of section 33445, subdivision (g)(1) (section
33445(g)(1)) had not been administratively exhausted, and therefore denied judgment as
to that issue.
On February 15, 2011, the court entered judgment in defendants' favor, finding
that all of the subject actions taken by the City, Agency, and County were "adequate,
sufficient, legal, and valid and in conformity with the applicable provisions of laws and
enactments, including the applicable provisions of the Community Redevelopment
Law . . . ."
After plaintiffs filed this appeal from the judgment of dismissal, the CRL was
amended to dissolve all redevelopment agencies in California. (§ 34172.) The Agency
was dissolved effective June 29, 2011, and the City of San Diego Redevelopment
Successor Agency (Successor Agency) was designated as its successor agency as
provided for in the amended provisions of the CRL. (§§ 34171, subd. (j), 34173, subds.
(b) & (d)(1), 34176, subd. (a).) The Successor Agency now stands in the place of the
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Agency in this litigation. (§ 34173, subd. (b) ["all authority, rights, powers , duties and
obligations previously vested with the former redevelopment agencies . . . are hereby
vested in the successor agencies."].)
DISCUSSION
On this appeal, GAG does not challenge the affordable housing credit and
allocation agreement or the AII resolution. Therefore, only three of the cooperation
agreements are before us on this appeal: the transit line improvements agreement, the
joint projects agreement and the North Embarcadero agreement.
I. STANDARD OF REVIEW
Because this appeal involves issues of law, we apply the de novo standard of
review. (Redevelopment Agency v. County of Los Angeles (1999) 75 Cal.App.4th 68, 74;
Community Youth Athletic Center v. City of National City (2009) 170 Cal.App.4th 416,
427.)
II. ANALYSIS
A. Section 33445 Permits the Subject Agreements
Redevelopment agencies are funded by a portion of property taxes generated
within a redevelopment project area, which is commonly referred to as "tax increment"
financing. (Section 33670, subd. (b)); City of Dinuba v. County of Tulare (2007) 41
Cal.4th 859, 866.)
Section 33445, subdivision (a) (section 33445(a)) authorizes the transfer of tax
increment from a redevelopment project for the construction of public facilities. At the
time the subject agreements were approved, former section 33445(a) permitted the
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transfer of tax increment for a public facility within or without the redevelopment project
area if the appropriate legislative body made the following findings: (1) "That the
buildings, facilities, structures, or other improvements are of benefit to the project area or
the immediate neighborhood in which the project is located, regardless of whether the
improvement is within another project area;" (2) there are "no other reasonable means of
financing" the public improvements; and (3) the payment of the funds for the public
improvements will assist in eliminating one or more blighting conditions within the
project area and is "consistent with" the redevelopment project implementation plan.
The findings required by section 33445(a), if they are made as specified in that
section, are final, conclusive, and not subject to court review. (§ 33445, subd. (b)
(section 33445(b)).)
As we have discussed, ante, defendants made these findings in satisfaction of the
requirements of section 33445(a). Furthermore, those findings procedurally complied
with the requirements of the CRL governing the adoption of the related resolutions.
(Meaney v. Sacramento Housing & Redevelopment Agency (1993) 13 Cal.App.4th 566,
580-581 (Meaney).)
Moreover, Courts of Appeal have consistently approved the use of tax increments
for public improvements under section 33445. In Meaney, supra, 13 Cal.App.4th 566,
the county entered into an agreement with the city and agency by which the City of
Sacramento and its redevelopment agency agreed to pay the county the amount of
property tax it would have otherwise received and provided that such payment would be
made toward a new county courthouse and "other related County public facilities." (Id. at
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p. 573.) The court rejected the plaintiff's argument that use of tax increment to construct
the courthouse was illegal, stating, "It will be noted that the first paragraph [of section
33445] generally authorizes an agency to pay for the construction cost and land value of
publicly owned facilities which benefit the [redevelopment] project area. . . . The
agency's authority to make the payments implies, we conclude, authority to enter into
agreements governing the conditions of payment, including agreements with the local
government which will own the public facility." (Meaney, at p. 575.)
In this case, defendants found that (1) the North Embarcadero improvements
would benefit the Centre City Redevelopment Project or the immediate neighborhood in
which the improvements were located; and (2) the use of $7.84 million of tax increment
for joint projects consistent with the CRL would benefit the GRP or the immediate
neighborhood in which they are located. Thus, under section 33445 and Meaney, these
are lawful expenditures of the Grantville tax increment.
Similarly, in City of Cerritos v. Cerritos Taxpayers Assn. (2010) 183 Cal.App.4th
1417 (Cerritos), the Court of Appeal addressed a transaction in which the redevelopment
agency agreed to lease school district-owned property to a nonprofit housing corporation
whose board of directors was the city council. The agency would then finance the
development of a low-cost housing project. As part of that same transaction, the city
agreed to purchase certain real property and improve that property for the relocation of
the school district offices. (Id. at pp. 1425-1427.) The Court of Appeal affirmed the trial
court judgment validating the transaction, holding that the subject transaction was
prmitted by section 33445(a). (Cerritos, at pp. 1430-1431.)
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Moreover, as both the Meaney and Cerritos courts noted, the required legislative
findings are final and conclusive and beyond judicial review under section 33445(b).
(Meaney, supra, 13 Cal.App.4th at p. 578 ["the evidentiary basis for the findings are
supported by substantial evidence or by any evidence at all in the administrative record"];
Cerritos, supra, 183 Cal.App.4th at pp. 1434-1435 ["The City and Agency made all the
findings required by [section 33445(a)] . . . . Nothing further is required by section
33445. And, as subdivision (b) of that section states, 'The determinations . . . shall be
final and conclusive.'"] The only permissible judicial review is whether the appropriate
procedures were followed and whether the determinations that were made comply with
section 33445. (Meaney, supra, 13 Cal.App.4th at pp. 578-579.)
In this case, defendants utilized the procedures prescribed by section 33445(a).
They approved the expenditure of GRP funds for the construction of public
improvements located outside the Grantville Project area. In approving those
expenditures, defendants made the statutory findings that the subject expenditures will
benefit the GRP or the immediate neighborhood in which the project is located, that there
is no other reasonable means of financing the public improvements, and that the
expenditures for the public improvements will assist in the elimination of one or more
blighting conditions and are consistent with an adopted implementation plan.
Those findings are now beyond judicial scrutiny because defendants proceeded as
required by law. (§ 33445(b).)
Finally, it should be noted that the Attorney General's Office reviewed the subject
transactions and opined in a letter to Senator Christine Kehoe that the subject transactions
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are "permissible" under the CRL. An opinion by the Attorney General's Office, while not
binding, "'[is] entitled to great respect' and given great weight by the courts." (Shapiro v.
Board of Directors (2005) 134 Cal.App.4th 170, 183, fn. 17.)
B. Legislators' Motivation
As noted, ante, GAG asserts that the City, Agency, and County were
impermissibly motivated to "do indirectly what [they] cannot legally do directly." We
reject this contention because courts do not review the motivations of local legislators in
the actions they undertake. Courts only review the legality of the actions themselves.
In County of Los Angeles v. Superior Court (1975) 13 Cal.3d 721, the plaintiff
filed a taxpayer suit challenging the County's adoption of an ordinance on the basis that it
had been adopted as a result of a threatened illegal strike by public employees. The trial
court granted a motion to permit certain discovery relating to the supervisors' motivation
in enacting the ordinance. The California Supreme Court issued a writ of prohibition as
to that discovery, holding it was barred by the rule precluding courts from inquiring into
legislators' motivation. As our high court explained, "[T]he discovery order in the instant
case implicates a . . . fundamental, historically enshrined legal principle that precludes
any judicially authorized inquiry into the subjective motives or mental processes of
legislators. As early as 1855, Chief Justice Murray declared in an opinion for this court:
'I know of no authority this Court possesses to inquire into the motives of the Legislature
in the passage of any law; on the contrary, it has been uniformly held, that they could not
be inquired into.' [Citation.] This doctrine has been reiterated in literally scores of
California decisions." (Id. at p. 726.) "'The diverse character of such motives, and the
14
impossibility of penetrating into the hearts of men and ascertaining the truth, precludes all
such inquiries as impracticable and futile.'" (Ibid.)
Similarly, in Board of Supervisors v. Superior Court (1995) 32 Cal.App.4th 1616
the court stated, "'[T]here is an element of futility in a judicial attempt to invalidate a law
because of the bad motives of its supporters. If the law is struck down for this reason,
rather than because of its facial content or effect, it would presumably be valid as soon as
the legislature or relevant governing body repassed it for different reasons.'" (Id. at p.
1624, fn. 3.)
Also, the United States Supreme Court in Soon Hing v. Crowley (1885) 113 U.S.
703, 710-711, made the following statement: "[T]he rule is general with reference to the
enactments of all legislative bodies that the courts cannot inquire into the motives of the
legislators in passing them, except as they may be disclosed on the face of the acts, or
inferrible from their operation, considered with reference to the [conditions] of the
country and existing legislation."
In Rider v. City of San Diego (1998) 18 Cal.4th 1035 (Rider II), the California
Supreme Court reviewed a transaction by which the City of San Diego and the San Diego
Port Authority formed a joint authority to issue bonds for expansion of the City's
convention center. The plaintiff there asserted that the City and Port Authority's
motivation in doing so was to avoid the two-thirds vote requirement that would have
applied if the City had issued the bonds. Our high court rejected that argument, stating,
"We are not naive about the character of this transaction. If the City had issued bonds to
pay for the Covention Center expansion, the two-thirds vote requirement would have
15
applied. Here, the City and the Port District have created a financing mechanism that
matches as closely as possible (in practical effect, if not in form) a City-financed project,
but avoids the two-thirds vote requirement. Nevertheless, the law permits what the City
and Port District have done." (Id. at p. 1055.)
Acknowledging the holding in Rider v. County of San Diego (1991) 1 Cal.4th 1
(Rider I) that local governments could not circumvent Proposition 13's requirement of a
two-thirds vote to impose "special taxes" by creating a financing agency, our high court
nevertheless held that the actions of the City in Rider II were proper: "The short answer
to plaintiffs' argument is that the Constitution and the City's charter permit the City to
avoid the two-thirds vote requirement by creating a joint powers agency to finance public
works projects. Therefore, however we might characterize the financing plan at issue
here, we cannot characterize it as unlawful." (Rider II, supra, 18 Cal.4th at p. 1042.)
Accordingly, GAG's attempt to challenge the agreements based on defendants'
purported motivation is unavailing. Courts may not inquire into the motivations of a
local legislative body, such as the City Council, Agency and County Board of
Supervisors, to determine if they intended to "do indirectly what they could not do
directly."
GAG asserts that Graber v. City of Upland, supra, 99 Cal.App.4th 424, controls in
this case. However, the Court of Appeal in Graber was only able to consider the local
legislators' intent only because that intent was admitted by the city and expressly stated in
the ordinance that was under review by the court: "[T]he city's candid statement of its
reasons for adopting ordinance No. 1683 makes it clear to us that the sole purpose of the
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ordinance was to void the base year limitations for the 77-acre parcel. We agree with the
trial court that this is an improper purpose which conflicts with the statutory scheme."
(Id. at p. 433).
In this case, however, defendants have made no such admissions relating to the
subject agreements. Rather, it has been defendants' position throughout these
proceedings that the subject agreements were lawful under the CRL.
GAG's citation to St. John's Well Child & Family Center v. Schwarzenegger
(2010) 50 Cal.4th 960 is also unavailing. That case concerned the Governor's line item
veto power, not the motivation of legislators in enacting laws. (Id. at p. 979, fn. 13.)
C. The Subject Agreements Do Not Violate Section 33607.5
GAG asserts that the settlement violates section 33607.5 because the settlement
amounts to a prohibited "pass-through" of tax increment to the County. Procedurally,
that argument is barred by the doctrine of failure to exhaust administrative remedies.
Substantively, the argument fails as the agreements are not subject to the limitations of
section 33607.5. Finally, this contention misapprehends the payments under the subject
agreements. They are not payment of additional general fund moneys "passing through"
to the County. Rather, they are permissible transfers of tax increment for projects
consistent with the purpose of redevelopment.
1. Failure to exhaust administrative remedies
GAG never raised any issue relating to a potential violation of section 33607.5 in
its opposition at the City/Agency hearing or at the County hearing. Therefore, that issue
is barred by the doctrine of failure to exhaust administrative remedies. (Evans v. City of
17
San Jose (2005) 128 Cal.App.4th 1123, 1136-1137 [In a validation action challenging a
redevelopment plan adoption, the challenger must raise all issues at the administrative
level.].)
2. The agreements are not subject to section 33607.5
Section 33607.5, subdivision (f)(2) (section 33607.5(f)(2)) provides:
"Notwithstanding any other provision of law, a redevelopment agency shall not be
required, either directly or indirectly, as a measure to mitigate a significant environmental
effect or as part of any settlement agreement or judgment brought in any action to contest
the validity of a redevelopment plan pursuant to Section 33501, to make any other
payments to affected taxing entities, or to pay for public facilities that will be owned or
leased to an affected taxing entity."
However, the legislative history of section 33607.5, states that it "[p]rohibits an
agency from paying for any public improvement unless the legislative body makes the
determination that the proposed improvement will assist in the elimination of blight."
(Assem. Com. on Housing and Community Develoment, Rep. on Assem. Bill No. 1290
(1993-1994 Reg. Sess.) June 16, 1993, p. 4, italics added.) Defendants made such a
finding as to each cooperation agreement and therefore section 33607.5 does not apply.
Additionally, appellant's argument as to the joint projects agreement also fails
under the express language of section 33607.5(f)(2). This is so because (1) the Agency is
not being compelled to make the subject payments, they are voluntary payments under
the terms of the subject cooperation agreements; (2) there is no payment to the County as
the payment is to a joint account; and (3) there is no evidence that a joint project will be
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owned by the County because the agreement requires the joint project to be consistent
with the CRL, under which such ownership would be precluded.
Recognizing that the express provisions of section 33607.5(f)(2) do not support its
position, GAG argues that the intent of the CRL should override the specific statutory
provisions. However, "'"If the [statutory] language is clear and unambiguous there is no
need for construction, nor is it necessary to resort to indicia of the intent of the
Legislature."'" (People v. Zambia (2011) 51 Cal.4th 965, 972.)
Further, the intent of the CRL as to additional payments to local taxing entities
does not assist appellant in this case. The intent of the CRL was to eliminate pass-
through agreements and replace them with the statutory pass-through payments.
Under sections 33607.5 and 33607.7, agencies must pay a portion of their tax
increment to "affected taxing entities." These payments are referred to as "pass-through"
payments. (Los Angeles Unified School Dist. v. County of Los Angeles (2010) 181
Cal.App.4th 414, 421-422 [discussing the general nature of pass-through payments].)
However, in this case, the Agency (now the Successor Agency) is not paying any
additional money into the County's general fund pursuant to the subject agreements. Any
money transferred pursuant to the subject agreements is strictly for projects consistent
with the CRL. For example, the joint projects agreement repeatedly provides that any
expenditure under the agreement must benefit the GRP consistent with the CRL.
Similarly, the Agency found that the North Embarcadero improvements will benefit the
Centre City Redevelopment Project. (1AR ex. 8:69, ¶ 1.a)!
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Therefore, because any tax increment transferred under the joint projects
agreements is limited to benefiting redevelopment consistent with the CRL and is not
paid into the County's general fund for any expenditure that the County may choose to
make, the funds transferred under the subject agreements do not constitute impermissible
additional payments under section 33607.
Finally, GAG argues that public policy should support its position. However,
questions relating to public policy are to be addressed by the Legislature, not the courts.
(Los Angeles Unified School Dist. v. County of Los Angeles, supra, 181 Cal.App.4th at p.
427 "[I]t is not our province 'to second-guess the wisdom of legislative appropriations.
The forums for addressing this issue lie with the voters and the Legislature.'"].)
D. Failure To Identify Specific Projects
GAG contends that the joint projects agreement violates the CRL because it does
not specifically identify the joint projects that are the subject of the agreement. That
argument is unavailing for two reasons. First, this issue has been waived because neither
GAG nor any other entity or person raised that issue in the administrative hearings
conducted by the City and Agency. Second, this contention is not supported by law.
Under the CRL, joint public projects may be "consistent with" the redevelopment plan
without being specifically identified.
1. Waiver
No objection was made at the joint public hearing of the City Council and Agency
board that the joint projects agreement was unlawful because it failed to identify the
specific development projects that were going to be constructed. As we have noted, ante,
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a challenger in a validation case "must also show that the issues raised in the judicial
proceeding were raised at the administrative level. . . . [¶] 'The rule affords the public
agency an "opportunity to receive and respond to articulated factual issues and legal
theories before its actions are subjected to judicial review."'" (Evans v. City of San Jose,
supra, 128 Cal.App.4th at pp. 1136-1137.)
GAG asserts that even if it did not exhaust this issue as to the City and Agency, it
did exhaust the issue as to the County. That contention is unavailing because GAG (or
another individual or entity) was obligated to raise and preserve the issue at all stages of
the administrative proceedings. (City of San Jose v. Operating Engineers Local Union
No. 3 (2010) 49 Cal.4th 597, 609 ["Exhaustion requires 'a full presentation to the
administrative agency upon all issues of the case and at all prescribed stages of the
administrative proceedings.'"].) Because the joint projects agreement was required to be
approved by the City/Agency and the County, GAG was required to raise this issue
before each approving body.
2. Failure To Identify Specific Projects
As we have noted, ante, GAG also asserts that the subject agreements violate the
CRL because they fail to identify any specific projects. We reject this contention.
GAG's argument misapprehends the purpose of a redevelopment plan. A
redevelopment plan is not a blueprint for the construction of specific identified projects
on specific identified parcels of land in the project area. As the California Supreme Court
stated in In re Redevelopment Plan for Bunker Hill (1964) 61 Cal.2d 21, 52: "It appears
that a final [redevelopment] plan under the Community Redevelopment Law does not
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require an architectural plan complete with engineers' specifications; it contemplates,
rather, a comprehensive method or scheme of action, a way proposed to carry out within
the essential framework of the law a particular project of redevelopment."
In County of Santa Cruz v. City of Watsonville (1985) 177 Cal.App.3d 831, 841
the Court of Appeal stated: "Thus, a redevelopment agency is unique among public
entities since in order to achieve its objective of eliminating blight it must rely upon
cooperation with the private sector. Redevelopment is also a process which occurs over a
period of years. These realities dictate that a redevelopment plan be written in terms that
enhance a redevelopment agency's ability to respond to market conditions, development
opportunities and the desires and abilities of owners and tenants. Such a plan then cannot
always outline in detail each project that a redevelopment agency will undertake during
the life of the plan. [Citations.] [¶] . . . . 'It cannot be seriously argued that a final plan
must be a compilation of blueprints or working drawings, representing final engineering
studies, primarily because the agency is not the one who does the building. The final
plan is not required to be precise from an engineering standpoint but only as reasonably
precise and detailed from a planning standpoint as may be expected in light of 'the
complexity and diversity of the conditions which will be encountered.'"
A redevelopment plan is just that: a general plan for the redevelopment of
different types of identified projects. Here, the GRP provides for a wide variety of public
projects (in addition to private projects) designed to eliminate blight in the Grantville
Project area, as we have detailed, ante.
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Therefore, GAG's contention that the joint projects agreement lacks any identified
projects is unavailing. As the court correctly found, the public projects that are the
subject of the joint projects agreement are adequately identified in the GRP and the
related Five-Year Plan.
GAG asserts that defendants improperly found that the joint project may benefit a
neighborhood that is outside the neighborhood in which the joint project is located, rather
than solely the Grantville Project area. We reject this contention.
First, the joint projects agreement requires that any proposed joint project benefit
the Grantville Project area. The Agency (now the Successor Agency) is obligated to
determine if the project proposed by the County "benefits the Grantville Redevelopment
Project Area."
Further, defendants' findings were in accord with the provisions of former section
33445, subdivision (a)(1) (section 33445(a)(1)) as it existed at the time of the findings in
2008, which provided: "(a) Notwithstanding Section 33440, an agency may, with the
consent of the legislative body, pay all or a part of the value of the land for and the cost
of the installation and construction of any building, facility, structure, or other
improvement that is publicly owned either within or without the project area, if the
legislative body determines all of the following: [¶] (1) That the buildings, facilities,
structures, or other improvements are of benefit to the project area or the immediate
neighborhood in which the project is located, regardless of whether the improvement is
within another project area, or in the case of a project area in which substantially all of
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the land is publicly owned that the improvement is of benefit to an adjacent project area
of the agency." (Italics added.)
Therefore, because defendants made the appropriate findings under section
33445(a)(1) as it is applicable to the joint projects agreement, GAG's challenge to that
finding lacks merit because those findings are final and conclusive. (§ 33445(b).)
E. Alleged Use of Tax Increment for County Administration Center
GAG asserts that the use of tax increment for improvements to the CAC violates
the CRL. GAG's argument is unavailing. First, the North Embarcadero agreement does
not provide for, or allow, funds to be used for the CAC building. Second, GAG failed to
raise this issue in the administrative proceedings, and therefore, as the trial judge
correctly concluded, the argument is waived.
1. The North Embarcadero agreement funds were not intended for use on the
CAC building
The North Embarcadero agreement does not authorize funds to be used to
construct/improve a county administration building. Pursuant to the North Embarcadero
agreement, the Agency (now the Successor Agency) will provide a total of $31.36
million in 39 annual payments to pay for the North Embarcadero Project Improvements.
The North Embarcadero Project Improvements are described in exhibit B to the
agreement which provides, "'North Embarcadero Project Improvements' shall include
projects consistent with the County 'Waterfront Park' Plan and the California Community
Redevelopment Law, as they may be amended from time to time."
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Thus, the provisions of the North Embarcadero agreement require compliance
with the CRL and only include projects related to the proposed Waterfront Park Plan, not
the CAC building itself.
For example, the Waterfront Park Plan provides for a waterfront park on land
adjacent to and in the vicinity of the CAC building. The Waterfront Park Plan's purpose
is to "transform this land into an unparalleled waterfront park . . . ." The term "land"
refers to the surface parking lots on either side of the County building, not the building
itself.
Section 33445(g) does not prohibit the use of tax increment to improve a public
park on County-owned land. It only prohibits using tax increment funds towards either a
new County administration building or rehabilitation of an existing County
administration building. Former Section 33445, subdivision (g)(1) (now section 33445,
subd. (e)(1)) provides: "Notwithstanding any other authority granted in this Section, an
agency shall not pay for, either directly or indirectly, with tax increment funds the
construction, including land acquisition, related site clearance, and design costs, or
rehabilitation of a building that is, or that will be used as, a city hall or county
administration building." (Italics added.)
The improvements and facilities which are the subject of the North Embarcadero
agreement, as set forth in exhibit B, do not include any description that would expressly
or impliedly allow the funds to be used for the CAC building. Because the CRL
specifically prohibits the expenditure of Agency funds for the "construction or expansion
of a county administrative office," the North Embarcadero agreement does not permit the
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alleged illegal expenditure argued by GAG. Indeed, if the County expenditures under the
North Embarcadero agreement are inconsistent with the agreement, i.e., violate the CRL,
the Agency Director is authorized to withhold the funds.
GAG's argument is based on selected references to a planning document for the
Waterfront Park Plan that describes possible enhancements to the CAC building itself.
However, none of those building projects are included in the list of projects in exhibit B
to the North Embarcadero agreement because such use would be inconsistent with CRL
and contrary to the intent of the North Embarcadero agreement.
GAG thus ignores the relevant evidence and the North Embarcadero agreement in
asserting that it allows funding for the CAC building itself. By the explicit terms of the
North Embarcadero agreement, the funds may only be used to fund projects consistent
with the Waterfront Park Plan and the CRL. Using the transferred funds for a County
administration building would violate the CRL and thus it is prohibited by the terms of
the North Embarcadero agreement itself. Accordingly, GAG's argument that the North
Embarcadero agreement violates the CRL and section 33445 is unavailing.
2. GAG failed to raise this issue at any public hearing
As the trial court found, neither GAG nor any other entity or person raised this
issue in the administrative proceedings, therefore, the issue has been waived. However,
GAG asserts that exhausting administrative remedies as to this issue would have been
futile. We reject this contention.
"The doctrine requiring exhaustion of administrative remedies is subject to
exceptions. [Citation.] Under one of these exceptions, '[f]ailure to exhaust
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administrative remedies is excused if it is clear that exhaustion would be futile.'
[Citations.] 'The futility exception requires that the party invoking the exception "can
positively state that the [agency] has declared what its ruling will be on a particular
case."'" (Coachella Valley Mosquito & Vector Control Dist. v. California Public
Employment Relations Bd. (2005) 35 Cal.4th 1072, 1080-1081.)
Here, GAG never raised this issue before the City and Agency and, as discussed,
ante, exhaustion is required before all approving public entities. Further, there is nothing
in the administrative record that suggests that the public hearing was a sham or the result
a foregone conclusion. Rather, the public was allowed to speak freely about the proposed
agreements, and the members of the Board of Supervisors debated the agreements and
approved them by a split vote.
Had GAG raised the issue at the County's public hearing, the record could have
been clarified to make clear that the North Embarcadero agreement does not permit the
use funds for construction, land acquisition, site clearance, design costs, or rehabilitation
of the CAC because the use of the funds must be consistent with the CRL
Accordingly, GAG's "futility" exception argument lacks merit.
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DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal.
NARES, Acting P. J.
WE CONCUR:
McINTYRE, J.
IRION, J.
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Grantville Action Group v. City of San Diego CA4/1
Combined Opinion