UCI SCHOOL OF LAW COMMUNITY & ECONOMIC DEVELOPMENT CLINICCarrie Hempel; State Bar No. 126713Robert Solomon; State Bar No. 280022401 E. Peltason Dr. Suite 1000Irvine, CA 92697Telephone: (949) 824-0975

Attorneys for Petitioner and Plaintiff, Gerald Peebler

SUPERIOR COURT OF THE STATE OF CALIFORNIAFOR THE COUNTY OF SACRAMENTO

GERALD PEEBLER, et al.Petitioner and Plaintiff,

vs.

STATE OF CALIFORNIA DEPARMENT OF FINANCE; ANA J. MATOSANTOS, in her official capacity as Director of the State of California Department of Finance; JAN GRIMES, in her official capacity as the Auditor-Controller of the County of Orange; and CITY OF SANTA ANA AS SUCCESSOR AGENCY FOR THE FORMER COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF SANTA ANA,

Respondents and Defendants.

Case No. 34-2012-80001172

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PETITION FOR WRIT OF MANDATE

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PETITION FOR WRIT OF MANDATE

TABLE OF CONTENTS

INTRODUCTION...........................................................................................................................3

STATEMENT OF FACTS..............................................................................................................3

I. REDEVELOPMENT AGENCIES AND FINANCING FROM PROPERTY TAX REVENUE......................................................................................................3

II. THE 1984 PEEBLER SETTLEMENT....................................................................5

III. THE RDA’s PARTIAL PERFORMANCE UNDER THE PEEBLER SETTLEMENT........................................................................................................7

IV. THE PEEBLER SETTLEMENT FUNDS AT STAKE.........................................10

V. THE DISSOLUTION OF REDEVELOPMENT AGENCIES..............................12

VI. THE DOF’S DISAPPROVAL OF THE PEEBLER SETTLEMENT’S INCLUSION IN THE CITY’S ROPS ..................................................................13

VII. PROCEDURAL HISTORY...................................................................................15

ARGUMENT.................................................................................................................................16

I. THE PEEBLER SETTLEMENT IS AN ENFORCEABLE OBLIGATION PROPERLY INCLUDED IN THE ROPS.............................................................16

II. THE CITY AND MR. PEEBLER ENTERED INTO A BINDING CONTRACT AND THE CITY IS OBLIGATED TO PERFORM UNDER THE AGREEMENT..............................................................................................19

A. The Parties Created a Clear and Binding Contract That Obligates the RDA to Set Aside Additional Tax Revenue for Low-Income Housing and to Spend Additional Tax Revenue on Improvements in the Corridor......................................................................................................19

B. If the Parties’ Intent Under the Peebler Settlement is Ambiguous, Extrinsic Evidence Demonstrates Their Intent to Enter Into a Definite, Contingency-Free Contract........................................................................21

C. Even If This Court Were to Find that the Peebler Settlement is Contingent on the Continued Existence of Tax Increment Financing, the Funds Collected Prior to the Passage of the Dissolution Act That Have Not Been Utilized Are a Part of the Legally Enforceable Obligation..................................................................................................30

III. THE DOF’S INTERPRETATION OF THE DISSOLUTION ACT UNCONSTITUTIONALLY IMPAIRS PETITIONER’S CONTRACT BY RENDERING THE SETTLEMENT AGREEMENT UNENFORCEABLE.......31

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IV. THE DOF’S INTERPRETATION OF THE DISSOLUTION ACT CONSTITUTES AN UNCONSTITUTIONAL TAKING BY DEPRIVING MR. PEEBLER OF THE VALUE OF HIS SETTLEMENT................................36

CONCLUSION..............................................................................................................................36

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TABLE OF AUTHORITIES

STATE CASES

Allen v. Board of Administration

(1983) 34 Cal.3d 114…………………………………………...…………………….26–27

Baiza v. Southgate Recreation & Park Dist.

(1976) 59 Cal.App.3d 669……………………………………………………………….13

Board of Administration v. Wilson

(1997) 52 Cal.App.4th 1109…………………………................................................29, 30

California Ass’n for Health Services at Home v. Dept. of Health Services

(2007) 148 Cal.App.4th 696…………….…………………………………………...13, 14

Cal. Redevelopment Ass’n v. Matosantos

(2011) 53 Cal.4th 231…………………………………..……………………..1, 10, 14, 16

California Teachers Assn. v. Cory

(1984) 155 Cal.App.3d 494…………………………………………………….……29, 30

City of Dinuba v. County of Tulare

(2007) 41 Cal.4th 859……………………………….……………………………..…….13

County of Solano v. Vallejo Redevelopment Agency

(1999) 75 Cal. App. 4th 1262.…………………………………………………………...15

Delta Dynamics, Inc. v. Arioto

(1993) 69 Cal.2d 525………………………….…………………………………………18

Donlan v. Weaver

(1981) 118 Cal.App.3d 675………………………………………………..………….…29

Ersa Grae Corp. v. Fluor Corp.

(1991) 1 Cal.App.4th 613………………………..………………………………………17

Marshall & Co. v. Weisel

(1966) 242 Cal.App.2d 191, 196………………………………….……………………..16

Mendly v. County of Los Angeles

(1994) 23 Cal.App.4th 1193…………………………….….............................................27

Monks v. City of Rancho Palos Verdes

(2008) 167 Cal. App. 4th 263……………………………………………………………31

Peebler, et al. v. City of Santa Ana

(Super. Ct. Orange County, 1982, No. 38 58 59)…………………………………….…...3

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Save the Plastic Bag Coalition v. City of Manhattan Beach

(2011) 52 Cal.4th 155, 165………………………………………………………………13

Sonoma County Org. of Public Employees v. County of Sonoma

(1979) 23 Cal. 3d 296…………………………………........................................28, 29, 30

Redevelopment Agency v. County of San Bernardino

(1978) 21 Cal.3d 255…………..………………………………………………………...21

Reigelsperger v. Siller

(2007) 40 Cal.4th 574……………………………………….…………………………...16

United Firefighters of Los Angeles City v. City of Los Angeles

(1989) 210 Cal.App.3d 1095.............................................................................................30

FEDERAL CASES

Allied Structural Steel Co. v. Spannaus

(1978) 438 U.S. 234 ……………………………........................................................27, 29

Chicago B. & Q.R. Co. v. Chicago

(1897) 166 U.S. 226……………………………………………………………………...31

Home Bldg. & Loan Ass'n v. Blaisdell

(1934) 290 U.S. 398………………….………………………………………………26, 28

U.S. Trust Co. of New York v. New Jersey

(1977) 431 U.S. 1…………………………………………………………..…….27, 28, 30

STATUTES

AB1X 26…………………………………………………………………………………….passim

AB 1484.…………………………………………………………………………………………..9

Code of Civil Procedure

§ 1085(a)………………………………………………………………………….………13§ 1086…………………………………………………………………………………….16§ 1556…………………………………………………………………………………….16§ 1565…………………………………………………………………………………….16§ 1596…………………………………………………………………………………….16§ 1605…………………………………………………………………………………….17

Health and Safety Code

§ 1(j) ……………………………………………………………………………………..27§ 16.. ……………………………………………………………………………………..17§ 33334.6………………………………………………………………………………4, 25

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§ 33334.6, subdivision (c)..………………………………………………………………25§ 34167, subdivision (a)...………………………………………………………………..27§ 34171, subdivision (d).…….……………………………………………………………9§ 34171, subdivision (d)(1)…..…………………………………………………………..14§ 34171, subdivision (d)(1)(D)………………………………………………………10, 15§ 34171, subdivision (d)(G)(2) ...………………………………………………………..27§ 34173……………………………………………………………………………………9§ 34173, subdivision (g)..…………………………………………………………………9§ 34175, subdivision (a)...………………………………………………………………..15§ 34176, subdivision (a) ...……………………………………………………………….25§ 34177……………………………………………………………………………………9§ 34177.3…………………………………………………………………………………10§ 34178, subdivision (b)(1) ……………………………………………………………...27§ 34179………………...…….……………………………………………………………9§ 34180………………...…….……………………………………………………………9§ 34183………………….……………………………………………………………12, 15§ 34183, subdivision (a)….……………………………………………………………9, 15

CONSTITUTIONAL PROVISIONS

California ConstitutionArticle I, § 9…….………………………………………………………………………..26Article I, § 19…….………………………………………………………………………31

United States ConstitutionArticle I, § 10……..…….………………………………………………………………..26

OTHER AUTHORITIES

Coomes, Jr., Joseph E. et al., Redevelopment in California (4th ed. 2009)…………………..…21

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INTRODUCTION

In 1982, the City of Santa Ana (“City”) adopted a Redevelopment Plan (“Plan”) for the

South Main Street Redevelopment Project Area (“Project Area”). Gerald Peebler, a longtime

property owner in the City of Santa Ana’s South Main Street Commercial Corridor (“Corridor”),

filed suit to contest the Plan, which he believed neglected the needs of businesses and low- and

moderate-income residents within the Corridor. In 1984, Mr. Peebler negotiated a settlement with

the City. Pursuant to the terms of Mr. Peebler’s settlement, the Community Redevelopment Agency

of the City of Santa Ana (“RDA”) set aside $64 million for low- and moderate-income housing and

$45 million for the Corridor from property tax revenues raised from 1984 to 2011. As of this date,

the RDA has only spent two-thirds of the money raised on public improvements in the Corridor.

The California Department of Finance (“DOF”) has adopted a position, unsupported by law,

that has abrogated Petitioner’s longstanding contract rights and effectuated the misappropriation of

millions of dollars in additional tax revenues. The 1984 Peebler Settlement (“Peebler Settlement”

or “Settlement”) is an enforceable obligation as defined by Assembly Bill x1 26 and Assembly Bill

1484 (collectively, the “Dissolution Act”). First, the Dissolution Act classifies preexisting legally

binding agreements and stipulated judgments, like the Peebler Settlement, as enforceable

obligations. The Peebler Settlement’s plain language pledges 40 percent of additional tax revenues

collected in the Santa Ana’s South Main Redevelopment Project Area (“Project Area”) for public

improvements and low- and moderate-income housing, regardless of whether such funds are labeled

“tax increment.” Second, even if this Court finds such language ambiguous, extrinsic evidence of

party negotiations and subsequent performance demonstrates the parties’ intent that additional tax

revenues continue to be spent as the Settlement dictates. Third, even if the DOF’s interpretation

does not violate the Dissolution Act, it violates Petitioner’s rights under the impairment of contract

and takings clauses of the California and United States Constitutions by rendering the Settlement

provisions he bargained for unenforceable. For these reasons, Petitioner requests that this Court

issue a writ of mandate compelling the DOF to recognize the Peebler Settlement as an enforceable

obligation.

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STATEMENT OF FACTS

I. REDEVELOPMENT AGENCIES AND FINANCING FROM PROPERTY TAX REVENUEIn the 1940s, the Legislature authorized the formation of community redevelopment

agencies to help local governments revitalize communities suffering from blight. (Cal.

Redevelopment Ass’n v. Matosantos (2011) 53 Cal.4th 231, 245-46.) The Legislature gave

redevelopment agencies the powers to acquire land, including using the power of eminent domain;

clear land to construct and enhance infrastructure; and make a variety of public improvements. (Id.

at 246.) Exercising these powers, redevelopment agencies became “a principal instrument of

economic development.” (Ibid.)

To finance their work on behalf of blighted communities, redevelopment agencies relied on

a funding method known as tax increment financing. (Id.) Under this system, taxing entities

allocated tax revenue from increases in property value in a redevelopment project area to

redevelopment agencies in recognition of their contribution to the property’s increase in value. (Id.

at 246-47.) A redevelopment agency could receive only the annual portion of these property tax

revenues that did not exceed its total indebtedness, less its revenue on hand. (Id. at 247.)

The Community Redevelopment Agency of the City of Santa Ana (RDA) operated from

1973 until 2012. (Five-Year Implementation Plan (2010–2015), (Exhibit A at 9).) During the

period from 1973 to 1989, the RDA adopted six redevelopment project areas. (Exhibit A at 9.) It

established the Central City Redevelopment Project Area in 1973. (Id. at 11.) The RDA’s 1982

Redevelopment Plan established four project areas: Inter-City, North Harbor, South Harbor, and

South Main Redevelopment Project Areas. (Id.) In 1989, it established the Bristol Redevelopment

Project Area. (Id.) In 2004, the RDA merged these six project areas into one merged project area.

(Id. at 9.) Each project area covers approximately 400–1,500 acres of land. (Id. at 12–17.)

Of the six project areas, the South Main Redevelopment Project Area is the largest,

encompassing approximately 1,500 acres of land. (Id. at 16.) The South Project Area is comprised

of (1) a relatively large area of new manufacturing and light industrial uses along the southeastern

boundary of the City and (2) the narrow South Main Corridor. (Id.) The South Main Corridor - 2 -

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PETITION FOR WRIT OF MANDATE

spans “Main Street North of Warner Avenue and on First Street.” (Resolution No. 84-2, Exhibit B

at 4.) On South Main Street, the distance from Warner Avenue to First Street is approximately two

miles. (Google Maps, (Exhibit C).) The RDA’s primary focus for Project Area has been “on the

needed revitalization of the commercial corridors through street improvements, rehabilitation

programs and assisting in private development that will eliminate obsolete and incompatible uses.”

(Exhibit A at 16.)

II. THE 1984 PEEBLER SETTLEMENT

The Peebler Settlement resulted from a series of negotiations between the parties in Peebler,

et al. v. City of Santa Ana (Super. Ct. Orange County, 1982, No. 38 58 59). (See Declaration of C.

Robert Ferguson In Support of Petition For Writ of Mandate, filed concurrently with this Petition,

“Ferguson Decl.” ¶¶ 11–22.) On July 6, 1982, the City of Santa Ana (“City”) adopted the

Redevelopment Plan for the South Main Street Redevelopment Project Area (“Plan”). (See Plan,

(Exhibit D) at 1.) Soon after the Plan’s adoption, Gerald Peebler and John Albert, property owners

in the South Main Corridor (“Corridor”), filed a lawsuit against the City and the RDA, challenging

the Plan’s validity. (Peebler Complaint, (Exhibit E).)

According to Robert Ferguson, the attorney for the plaintiffs in Peebler, the case had

significant merit and, if it had not been settled, its litigation would likely have caused the RDA to

lose hundreds of millions of dollars in redevelopment financing. (Ferguson Decl. ¶¶ 8–11.) As a

result, the City and RDA desired to settle the matter quickly and their attorneys informed Mr.

Ferguson they were willing to make significant concessions in order to do so. (Id. ¶ 11.) During

settlement negotiations, the City and RDA initially offered the following: (1) neighborhood

residential property would be incorporated into a neighborhood integrity program; (2) 30 percent of

the tax increment collected in the South Main Redevelopment Project Area (“Project Area”) would

be used for low- and moderate-income housing; (3) Mr. Peebler’s and Mr. Albert’s properties

would be exempt from eminent domain; and (4) the City and RDA would pay reasonable attorney’s

fees. (See id. ¶ 13.)

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The plaintiffs rejected this initial offer. (See id. ¶ 15.) The plaintiffs wanted any additional

tax funds raised in the Project Area to be spent improving the Corridor. (See id. ¶ 16–17;

Declaration of Gerald Peebler In Support of Petition For Writ of Mandate, filed concurrently with

this Petition, “Peebler Decl.” ¶ 8.) They were particularly adamant that these funds should be spent

only on projects that benefitted Corridor businesses. (See Peebler Decl. ¶¶ 5, 8; Ferguson Decl. ¶

17.) They had specific demands, and insisted that the Settlement provide for additional parking in

the Corridor and bar the creation of a center divider on South Main Street. (See Peebler Decl. ¶ 5;

Ferguson Decl1. ¶ 17.)

The plaintiffs agreed with the inclusion of the housing set-aside provision in the initial offer.

(See Ferguson Decl. ¶ 20.) The plaintiffs wanted to ensure that additional tax funds raised in the

Project Area also benefitted low- and moderate-income residents throughout the City. (See id. ¶¶

20–21.) Over the course of settlement negotiations, the City and RDA accepted the plaintiffs’

request that an additional 20 percent of the funds be allocated to improve South Main Street and

reduced their initial offer of a 30 percent housing set-aside to 20 percent. (See id. ¶ 22.) The

plaintiffs accepted the defendants’ revised offer. (See Exhibit B at 4.)

The plaintiffs provided substantial consideration in the Ssettlement, as they stipulated to the

Court entering a judgment validating the Redevelopment Plan. (Settlement Agreement, Exhibit F at

1.) In return, the Settlement provided that “[t]he Redevelopment Agency and any and all

successors thereto are lawfully obligated to carry out and accomplish the terms of Resolution No.

84-2,” which is included in the Settlement by reference. (Id. ¶ 5 (Italics added).) The Settlement

obligated the City and RDA in three ways that directly affected the plaintiffs. First, the RDA

committed to spend “[t]wenty percent (20%) of the tax increments or tax increments generated or

related revenues, or moneys repayable from tax increments from the project area” on public

improvements in the Corridor. (Exhibit B at 4 (Italics added).) Second, the RDA promised to set

aside 20 percent of the same for low- and moderate-income housing. (Id.) Third, the RDA agreed

to waive its right of eminent domain with respect to the plaintiffs’ properties, and to all residential

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properties in the Project Area, through the duration of the Plan or any amendment or extension to

it.1 (Id. at 2–3.)

The parties to the agreement also negotiated a date by which this specific allocation of a

portion of the property tax revenue would end. (See id. at 4.) Resolution No. 84-2 “entitl[es] the

Agency to the receipt of all taxes to be allocated to the Agency pursuant to the terms of the Plan.”

(Id.) The Plan was originally effective for 30 years from the date of its adoption, or through July 6,

2012. (See Exhibit D at 30 § 800.) The City later extended the Plan’s duration with a series of four

amendments. (See Santa Ana Main Street Redevelopment Plan Limits Spreadsheet, (Exhibit G).)

The latest of these amendments, adopted in 2007, extended the Plan until July 6, 2025. (Ordinance

No. NS-2751, (Exhibit H at 1).) The same amendment also authorized the RDA to collect tax

increment revenue through July 6, 2035 to repay indebtedness incurred under the Plan. (Id.)

The Peebler Settlement involved the collection and use of tax increments because, at the

time, these funds were the RDA’s sole source of income and the only option for funds to support

public improvements and housing. (Ferguson Decl. ¶ 25.) The plaintiffs and their attorney

reasonably expected that such funds would exist throughout the Plan’s duration, especially since tax

increment income projections well in excess of 25 years were typically used to establish the

economic feasibility of a project area under Health and Safety Code section 33352(e). (Ferguson

Decl. ¶¶ 26–27; see also Declaration of Greg Soo-Hoo In Support of Petition For Writ of Mandate,

filed concurrently with this Petition, “Soo-Hoo Decl.” ¶¶ 25, 31–33.) The plaintiffs would not have

agreed to a settlement that did not effectively guarantee funding for its provisions or allowed the

RDA to shirk its responsibilities under the agreement. (See Ferguson Decl. ¶¶ 29–31.)

III. THE RDA’S PARTIAL PERFORMANCE UNDER THE PEEBLER

SETTLEMENT

In the years following the Peebler Settlement, the RDA collected tax increment from the

Project Area and used it to partially perform its obligations pursuant to the Settlement. RDA

employees who worked on projects in the Corridor, acting in the scope of their employment,

1 The Settlement also exempted from eminent domain “all property which fronts on First Street and that portion of South Main Street between First Street at the north and south to Warner Avenue through December 31, 1988.” (Exhibit B at 3.)

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believed the Peebler Settlement was a legally binding obligation to use additional tax revenues to

improve the area. (See Declaration of Vicki Uehli In Support of Petition For Writ of Mandate, filed

concurrently with this Petition, “Uehli Decl.” ¶ 5; Declaration of Cynthia Nelson In Support of

Petition For Writ of Mandate, filed concurrently with this Petition, “Nelson Decl.” ¶ 6.) From 1984

to 2011, the RDA spent approximately $29 million on public improvements in the Corridor in

accordance with the Settlement. (Declaration of Susan Gorospe In Support of Petition For Writ of

Mandate, filed concurrently with this Petition, “Gorospe Decl.” ¶.) These projects included: a

façade reconstruction rebate program; improving sidewalks by adding decorative stamped concrete,

lighting, curbs, and gutters; installing traffic signals; realigning McFadden Street; and placing a

historical archway sign on South Main Street. (Uehli Decl. ¶ 9; Nelson Decl. ¶ 9.) The RDA also

used Settlement funds to build parking lots on Main Street, specifically addressing concerns raised

by the Peebler plaintiffs about inadequate parking in the area. (See Uehli Decl. ¶ 9; Peebler Decl. ¶

5.) Without Peebler Settlement funds, the RDA would not have been able to finance many of these

public improvement projects in the Corridor. (Uehli Decl. ¶ 11.)

RDA employees understood the Peebler Settlement bound their redevelopment spending

capabilities. (Nelson Decl. ¶. 10.) Employees believed if they wanted to spend Settlement funds

outside the Corridor, they needed Mr. Peebler and Mr. Albert to amend the Agreement. (Nelson

Decl. ¶ 10.) In fact, in 2009, RDA Executive Director Cindy Nelson and City Manager David

Ream met with Mr. Peebler and his son to discuss spending Settlement funds in project areas not

included in the original Ssettlement. (Nelson Decl. ¶ 12; see also Peebler Decl. ¶¶ 10–13.) Mr.

Peebler did not approve this request, as he wanted to be sure that funds collected under the

Settlement actually benefitted businesses within the Corridor. (See Peebler Decl. ¶ 13.) The RDA

did not expend funds for the proposed project. (See Nelson Decl. ¶ 14.)

In 2010, Ms. Nelson and Mr. Ream suggested that Joe Adams, President of the Discovery

Science Center, a museum in Santa Ana, contact Mr. Peebler about using Settlement funds to build

a new parking lot for the museum. (Declaration of Joe Adams In Support of Petition For Writ of

Mandate, filed concurrently with this Petition, “Adams Decl.” ¶¶ 4–5; see also Nelson Decl. ¶ 13.)

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In order to convince Mr. Peebler to release Settlement funds, Mr. Adams considered a variety of

actions the Discovery Science Center could take to benefit the Corridor. (See Adams Decl. ¶¶ 6, 8.)

These included: advertising for and directing traffic to Corridor businesses, providing free

admission to children of Corridor residents and business owners, and helping business owners

create a museum devoted to the Corridor’s history. (Adams Decl. ¶ 6.) Negotiations to amend the

Settlement ultimately failed because Mr. Adams was not able to offer anything that would benefit

the Corridor as much as public improvements made under the Peebler Settlement could. (Adams

Decl. ¶¶ 8–9.) Again, the RDA, understanding that it was bound by the Peebler Settlement, did not

release funds for the museum parking lot. (See Adams Decl. ¶¶ 9.)

Beginning in 1984, also in accordance with the Peebler Settlement, the RDA created a

separate fund, the Low and Moderate Income Housing Fund (“LMIHF”). Each year, the RDA

deposited 20 percent of the additional property tax revenues collected as a result of development in

the project area into the LMIHF. (Declaration of Shelly Landry-Bayle In Support of Petition For

Writ of Mandate, filed concurrently with this Petition, “Landry-Bayle Decl.” ¶.) This housing set-

aside was to be used solely for low- and moderate-income housing projects throughout the City.

(Landry-Bayle Decl. ¶.) The RDA employees who worked on the affordable housing projects at the

City level understood that the Peebler Settlement was a legally binding obligation, requiring that the

LMIHF be used solely for low- and moderate-income housing developments. (Landry-Bayle Decl.

¶.) From 1986 to 2011, the RDA expended money from the LMIHF to fund approximately 1,329

low-and moderate-income housing units the City. Such expenditures include the construction of

units and the facilitation of acquisitions, including existing units targeted for rehabilitation.

(Landry-Bayle Decl. ¶.) The use of Peebler Settlement funds to provide low-and moderate-income

housing addressed concerns raised by the Peebler plaintiffs regarding the displacement of a

significant number of low- income residents in the South Main Redevelopment Project Area.

(Ferguson Decl. ¶¶ 9, 20.) Without the LMIHF, the RDA would not have been able to complete

many of the low and moderate income housing units throughout the City. (Landry-Bayle Decl. ¶.)

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Between July 2009 and March 2011, the RDA entered into four agreements with third party

developers. (Recognized Obligation Payment Schedules (“ROPS”)ROPS III, (Exhibit K at 4–5);

Landry-Bayle Decl. ¶.) The four housing projects are the following: (1) Vista Del Rio Housing

Partners LP rental family housing units; (2) Habitat for Humanity single family units; (3) Santa Ana

Station District family housing; and (4) the WBB Project. Construction on these four projects

commenced in 2012, but the construction on these projects is currently on hold. According to City

employees, these projects are not suspended due to the passage of the Dissolution Act. Instead,

these projects are incomplete due to the lack of cash sources apart from the Redevelopment

Property Tax Trust Funds (“RPTTF”)RPTTF. (Landry-Bayle Decl. ¶.)

The refusal of the DOF to recognize the Settlement Agreement as an enforceable obligation

has prevented the City as Successor Agency from entering into agreements to implement the intent

of the Agreement. In early 2011, recognizing the success of previous façade improvement

programs, the RDA decided to undertake a ten-year façade enhancement program for the Corridor.

(Uehli Decl. ¶ 13; see also façade improvement before/after photos, (Exhibit I).) The City solicited

proposals for the project, interviewed and scored applicants, and on June 21, 2011, recommended

that the RDA enter into a contract with ABACUS Project Management, Inc. (See Uehli Decl. ¶ 14;

ABACUS Approval, (Exhibit J).) The RDA drafted a contract to engage ABACUS, which it was

prepared to execute, but the City could not move forward with the project because of the passage of

the Dissolution Act and the DOF’s refusal to approve the City’s Recognized Obligation Payment

Schedules (“ROPS”)ROPS. (See Uehli Decl. ¶ 15.) The City will not be able to start this façade

enhancement project, which would significantly benefit business owners in the Corridor, until the

DOF approves the Settlement’s inclusion in the City’s ROPS. (See Uehli Decl. ¶¶ 15–16.)

IV. THE PEEBLER SETTLEMENT FUNDS AT STAKE

From 1984 to 2011, the RDA allocated approximately $45 million for utilization in the

Corridor in compliance with the Settlement. (Gorospe Decl. ¶.) In May 2010, the RDA borrowed

$6.3 million from the $17.5 million in the Corridor fund to help pay its mandatory contribution to

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the county Supplemental Educational Revenue Augmentation Fund (“SERAF”).2 (See Gorospe

Decl. ¶.) The RDA was to repay this SERAF loan back into the Corridor fund in annual

installments over the next nine years.3 (Gorospe Decl. ¶.) The City’s outside consultants projected

that the RDA would receive $82 million in additional property tax revenues from the Project Area

from 2011 to 2035. (Soo-Hoo Decl. ¶ 38, Exhibit D; see also Gorospe Decl. ¶.)

From 1984 to 2011, the County collected a total of $64,397,163.00 for low and moderate

income housing developments in compliance with the Peebler Settlement, as well as from the

settlement agreements for the Bristol, South Harbor, North Harbor and Inter-City project areas.4

(Finance and Management Services Spreadsheet, (Exhibit L); Landry-Bayle Decl. ¶.)

The affordable housing database list consists of approximately thirty low and moderate

income housing projects, attached as Exhibit N. (Landry-Bayle Decl. ¶.) The majority of the

projects listed were never owned by the RDA, but instead owned by a third party developer.

(Landry-Bayle Decl. ¶.) Although the City states that it is not easy to ascertain which projects were

initially owned by the RDA, any such projects were governed by a Disposition and Development

Agreement (“DDA”) so that ownership of any such property transferred, or will transfer, from the

RDA Redevelopment Agency to a third party developer. (Landry-Bayle Decl. ¶.)

V. THE DISSOLUTION OF REDEVELOPMENT AGENCIES

In June 2011, the Legislature passed AB x1 26, which dissolved California redevelopment

agencies and established successor agencies to wind down their affairs. (California Redevelopment

Assn. v. Matosantos, supra, 53 Cal.4th 231, 250.) The California Supreme Court upheld AB x1 26

on December 29, 2011, and the law’s provisions went into full effect on February 1, 2012.

(California Redevelopment Assn. v. Matosantos, supra, 53 Cal.4th 231, 276.) In June 2012, the

Legislature passed AB 1484 to amend and clarify certain AB x1 26 provisions. (See AB 1484). 2 Under Health and Safety Code section 33690, the RDA was required to make its 2009-2010 county SERAF fund payment before May 10, 2010.3 In borrowing this money from the Corridor fund, the RDA deviated from its previous practice of requesting the Peebler plaintiffs’ permission to spend funds outside of the parameters dictated by the Settlement. Assuming arguendo that the RDA was entitled to use Corridor funds for this purpose, the RDA consistently evidenced its intent to repay the $6.3 million it borrowed from the Fund and treated the loan amount as a Corridor fund asset. (See, e.g., Exhibit A at 35.)4 The County of Orange serves as the collection agency for the taxes collected pursuant to the tax increment laws and also maintains the collected funds.

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The statute does not eliminate the former redevelopment agencies’ existing obligations.

Although tax increment financing no longer exists, auditor-controllers still must collect the excess

property taxes that would have been available to RDAs and deposit the funds in Redevelopment

Property Tax Trust Funds (“RPTTF”)the RPTTF. (Health & Saf. Code § 34172(c).) Successor

agencies must use RPTTF funds to pay for “enforceable obligations” as defined by Health & Safety

Code section 34171(d). (Health & Saf. Code §§ 34171(d), 34183(a)). To ensure these enforceable

obligations are paid, successor agencies must list them on a series of ROPS, which are subject to the

approval of oversight boards and the DOF. (Health & Saf. Code §§ 34177, 34179, 34180.)

Nor does the Dissolution Act eliminate all future redevelopment activity. The statute makes

clear that successor agencies retain “legal authority to participate in redevelopment activities . . . to

complete any work related to an approved enforceable obligation.” (Health & Saf. Code §

34173(g).) The Dissolution Act also contains a section clarifying that successor agencies have the

authority to “create new enforceable obligations under the authority of the Community

Redevelopment Law . . . [and] begin new redevelopment work . . . in compliance with an

enforceable obligation that existed prior to June 28, 2011.” (Health & Saf. Code § 34177.3)

VI. THE DOF’S DISAPPROVAL OF THE PEEBLER SETTLEMENT’S INCLUSION IN THE CITY’S ROPS The City of Santa Ana exercised its option to become the successor agency to the RDA,

charged with carrying out new and existing redevelopment activity in compliance with the RDA’s

enforceable obligations. The City as Successor Agency determined that the Peebler Settlement is

an enforceable obligation, since enforceable obligations include “[j]udgments or settlements entered

by a competent court of law.” (5/18 City Letter to DOF, (Exhibit N at 5–6) (quoting § 34171(d)(1)

(D)).).

The City as Successor Agency’s first ROPS, for the period of January 1 through June 30,

2012, included several items that reflected its determination that the Peebler Settlement is an

enforceable obligation. (See ROPS I, (Exhibit O).) Items 9, 89, and 90 reflect the City at Successor

Agency’s total outstanding debt and obligation for public improvements in the Corridor. (Id. at 1,

7.) Item 83 recognizes the City’s obligation to repay the funds the RDA borrowed from the

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Corridor Fund for its May 2010 SERAF payment. (Id. at 7.) Items 85 and 88 reflect an outstanding

debt and obligation for low- and moderate-income housing, some of which is attributable to the

Settlement. (Id.) On April 10, 2012, the Oversight Board for the Successor Agency of the

Redevelopment Agency of the City of Santa Ana (“Oversight Board”) approved the City’s first

ROPS, including its recognition of the City’s obligations under the Settlement. On April 18, 2012,

the City submitted its first ROPS to the DOF. (See 5/3 Letter from DOF to Santa Ana, (Exhibit P

at 1.).)

The DOF has refused to recognize the Peebler Settlement as an enforceable obligation. On

May 3, 2012, the DOF issued a letter to the City in which it objected to certain items on the ROPS,

including several of the City’s obligations under the Peebler Settlement. (See id.) In its comments

concerning rejection of items 9 and 85, the DOF stated that “[s]ettlements awarding a percentage of

tax increment are not considered [enforceable obligations]” because “tax increment is no longer

payable to the redevelopment agencies.” (Id. at 1–3.) The DOF further stated that items 88 and 89

are not enforceable obligations because “[the Dissolution Act] does not allow successor agencies to

enter into new contracts.” (Id. at 3.)

Since the DOF’s initial decision, both the City and Mr. Peebler have repeatedly asked the

DOF to review its determination that the Peebler Settlement is not an enforceable obligation. On

May 18, 2012, the City sent a letter to the DOF requesting reconsideration and providing

information to assist the DOF in confirming the Settlement as an enforceable obligation. (5-18

letter Santa Ana to DOF, Exhibit N at 5–6.) The City also continued to include items related to the

Settlement on its second5 and third6 ROPS. (See ROPS II, (Exhibit Q at 1, 7;) and Exhibit K at 2.)

The DOF rejected the inclusion of the Settlement on both of these ROPS. (See DOF 5/24

letter, (Exhibit R at 2); 10/19 DOF letter, (Exhibit S at 1).) The DOF’s May 24, 2012 letter

responding to ROPS II simply reiterated its previous rationale for finding the Settlement is not an

enforceable obligation. (See Exhibit R at 2.) In its October 19, 2012 letter responding to ROPS III,

the DOF rejected these items on two new grounds: First because “the requirement to set aside 20

5 Items 9, 83, 85, 88, 89, and 90 on the City’s ROPS for the period of July 1 to December 31, 2012.6 Items 14, 15, 16, 17, 18, and 22 on the City’s ROPS for the period of January 1 to June 30, 2013.

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percent of RDA tax increment for low and moderate income housing purposes” no longer existed

“[b]ecause there no longer are such taxes allocated to the Agency;” and second, because Health and

Safety Code section 33690 (c) “does not require SERAF payments from . . . sources [other than

low- and moderate-income housing funds] to be repaid with tax increment distributions.” (See

Exhibit S at 1.) Thus, the DOF decided that the repayment of the Corridor SERAF loan is not an

enforceable obligation. (Id.)

Mr. Peebler, through counsel, has twice attempted to convince the DOF to review its

decision that the Peebler Settlement is not an enforceable obligation. First, on May 25, 2012, Mr.

Peebler’s counsel submitted a letter to the DOF in support of the City’s request that the DOF

recognize the Settlement as an enforceable obligation. (See UC Irvine Law Clinic’s 5/24 letter to

the Department of Finance, (Exhibit T).) Second, on October 26, 2012, Mr. Peebler’s counsel wrote

the DOF to attempt to resolve this matter informally. (See 10/26 Clinic letter to DOF, (Exhibit U).)

As of the date of this filing, the DOF has failed to respond to either of these letters.

VII. PROCEDURAL HISTORY

Under Health and Safety Code section 34183, the Orange County Auditor-Controller

(“OCAC”) was scheduled to disburse tax increment to successor agencies and to local taxing

entities on June 1, 2012. That same day, Mr. Peebler petitioned the Superior Court for the County

of Orange, pursuant to its inherent authority to enforce its own judgments, to enter a temporary

restraining order (“TRO”) against the OCAC to prevent the OCAC from transferring the disputed

Project Area funds to other entities. (Orange County Superior Court Case No. 38 58 59, (Exhibit

V).) The court (Brenner, J.) entered a TRO enjoining the OCAC from transferring the disputed

funds until June 18, 2012, and scheduled a preliminary injunction hearing on the matter for June 18,

2012. Exhibit W, OC Temporary Restraining Order, Exhibit W at 2.)

On June 7, 2012, Mr. Peebler initiated this suit by filing in Sacramento his Petition for Writ

of Mandate and Verified Complaint for Declaratory and Injunctive Relief to compel Respondents to

recognize the Judgment as an enforceable obligation. (Petition for Writ, Exhibit X at 10 (Exhibit

X).)

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On June 11, 2012, Mr. Peebler filed an Ex Parte Application for a TRO in Sacramento.

(Exhibit Y, Ex Parte Application for TRO.) On June 14, 2012, this Court heard arguments and

denied the Application for a TRO. (Exhibit Z, Transcript of Hearing for Ex Parte Application,

Exhibit Z.)

After Mr. Peebler filed his Petition for Writ of Mandate and Ex Parte Application for a TRO

in Sacramento, he withdrew his ex parte application for a TRO in Orange County and took the June

18th hearing off of the calendar due to this Court’s denial of the TRO. The TRO that was earlier

issued by the Orange County Superior Court expired on June 18, 2012.

As of the date of this filing, the OCAC has allocated no funds from the Redevelopment

Property Tax Trust FundRPTTF to the City as Successor Agency for use in compliance with any of

the enforceable obligations related to the Peebler Settlement listed on its ROPS, even though DOF

has approved many of these obligations.

ARGUMENT

The Court should issue a writ of mandate compelling the DOF to recognize the Peebler

Settlement as a preexisting enforceable obligation. This would allow the City as Successor Agency

to fulfill the Settlement’s requirements by utilizing 20 percent of the increased tax revenue from the

Project Area for public improvements in the Corridor and setting aside 20 percent of the same

revenue for low- and moderate-income housing development through the end of 2035.

A writ of mandate will issue when three requirements are met. First, the petitioner must

have a beneficial interest in the performance of the respondent’s alleged duty. (Save the Plastic Bag

Coalition v. City of Manhattan Beach (2011) 52 Cal.4th 155, 165; see also Cal. Code Civ. Proc. §

1086.) Second, the petitioner must have no plain, speedy, and adequate remedy at law. (Id.)

Finally, the respondent must have a clear, present, and usually ministerial duty to perform the action

the petitioner seeks to compel. (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 868; see

also Cal. Code Civ. Proc. § 1085(a).)

Each of these requirements is met here. As to the first element, a beneficial interest is “a

special interest over and above the interest of the public at large.” (California Ass’n for Health

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Services at Home v. Dept. of Health Services (2007) 148 Cal.App.4th 696, 706.) Mr. Peebler is a

beneficially interested party because the DOF’s failure to perform its duty under the Dissolution Act

will deprive him of the benefit of his contractual rights under the Settlement Agreement, and this

interest is specific to Mr. Peebler. Additionally, because there is no administrative remedy available

to Mr. Peebler, there is no plain, speedy, and adequate remedy at law by which he may obtain the

benefits of his contractual right. (See Baiza v. Southgate Recreation & Park Dist. (1976) 59

Cal.App.3d 669, 673-74 [exhaustion of administrative remedies is a prerequisite to intervention by a

court of law].) Both Mr. Peebler and the City have already written to the DOF asking it to approve

the Settlement as an enforceable obligation, and the DOF has repeatedly denied this request.

Finally, as argued below, the Dissolution Act imposes a clear, present, and ministerial duty upon the

DOF to approve the inclusion of the City’s obligations on its ROPS. A ministerial duty is “one that

the entity is required to perform in a prescribed manner without any exercise of judgment or opinion

concerning the propriety of the act.” (California Ass’n for Health Services at Home v. Dept. of

Health Services, supra, 148 Cal.App.4th at pp. 707-07.) Because the Peebler Settlement is a

preexisting obligation the DOF is required to approve under the terms of the Dissolution Act, the

Court should issue a writ of mandate compelling the DOF to perform this duty and properly

approve the Settlement Agreement on the City’s ROPS.

I. THE PEEBLER SETTLEMENT IS AN ENFORCEABLE OBLIGATION PROPERLY INCLUDED IN THE ROPS.

The Peebler Settlement is an enforceable obligation of the Successor Agency as both an

enforceable contract in the form of a settlement agreement and a judgment entered by a court of

law. The DOF contends that the 1984 Peebler Settlement is not an enforceable obligation, but the

plain language of the Dissolution Act compels a finding that the Settlement Agreement is

enforceable. Although the California Supreme Court upheld the statute in California

Redevelopment Assn. v. Matosantos, supra, 53 Cal.4th 231, the Court did not discuss what

constitutes an enforceable obligation. Section 34171(d)(1) of AB 1484the Health and Safety Code

defines “enforceable obligation.” for purposes of Part 1.85 of AB x1 26. It provides that

“enforceable obligations” include “[a]ny legally binding and enforceable agreement or contract that - 14 -

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PETITION FOR WRIT OF MANDATE

is not otherwise void as violating the debt limit or public policy.” The Peebler Settlement is a

legally binding and enforceable agreement which was executed in 1984, long before the Dissolution

Act was passed. Accordingly, just as the City has recognized the Settlement Agreement as an

enforceable obligation under the plain language of the statute, so too must the DOF.

The Dissolution states that “enforceable obligations” include “[j]udgments or settlements

entered by a competent court of law or binding arbitration decisions against the former

redevelopment agency, other than passthrough payments that are made by the county auditor-

controller pursuant to Section 34183.7” (Health & Saf. Assem. Bill No. AB xX1 26 (2011-2012

Reg. Sess.) § 34171(d)(1)(D).) As noted above, the Peebler Settlement is a binding and enforceable

judgment issued by a California court in favor of third party private entities, not affected taxing

entities. It is not a passthrough agreement, as it is not an agreement between the RDA and another

public agency.8 It also was issued and became binding and enforceable long before the effective

date of the Dissolution Act. As such, not only is the Settlement Agreement an enforceable

obligation under the statute as a “legally binding and enforceable agreement,” but also as a

“judgment or settlement.”

Further, the Dissolution Act makes clear that the Legislature intended to honor all pledges

made by the former RDARedevelopment Agency. (See Health & Saf. § 34175(a).) That section

specifically protects the “stream of revenues available to meet the requirements” of such protected

pledges. (Id.) The structure of the Settlement Agreement—pledging a percentage of tax increment

to a specific person, entity or purpose—was typical of many redevelopment transactions, and there

is no indication in the Dissolution Act that the Legislature intended to invalidate this type of

agreement.

Because the terms of the Dissolution Act deem preexisting obligations such as the Peebler

Settlement to be enforceable obligations, the DOF may not refuse to approve the ROPS submitted

7

8 Health & Safety Code section 34183(a)(1) allows the continuation of “any passthrough agreement between a redevelopment agency and a taxing jurisdiction that was entered into prior to January 1, 1994, that would be in force during that fiscal year had the redevelopment agency existed at that time.” (Emphasis added.) Examples of such “taxing jurisdictions” include “other public agencies such as school districts, water districts, etc.” (County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal. App. 4th 1262, 1268.)

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by the City. The Court should order the DOF to comply with the terms of the Dissolution Act and

approve the Settlement Agreement as an enforceable obligation.

II. THE CITY AND MR. PEEBLER ENTERED INTO A BINDING CONTRACT AND THE CITY IS OBLIGATED TO PERFORM UNDER THE AGREEMENT.The Peebler Settlement’s plain language obligates the City as Successor Agency to set aside

additional tax revenues for low- and moderate-income housing and utilize additional tax revenues

on Corridor improvements for the Plan’s duration. If this Court should find the contract’s language

ambiguous, parol evidence further demonstrates the parties intended to enter into a definite, non-

speculative agreement. Even if this Court finds the contract is contingent upon tax increment’s

continued existence, the City as Successor Agency is obligated to utilize any funds collected prior

to the Dissolution Act as the Settlement dictates.

A. The Parties Created a Clear and Binding Contract That Obligates the RDA to Set Aside Additional Tax Revenue for Low-Income Housing and to Spend Additional Tax Revenue on Improvements in the Corridor.

Mr. Peebler entered into a clear and unambiguous contract with the City in 1984, and the

DOF’s refusal to recognize the contract as a preexisting enforceable obligation is in violation of the

terms of the Dissolution Act. Under general principles of California contract law, a valid and

enforceable contract must satisfy the following elements: (1) parties capable of contracting; (2) their

consent; (3) a lawful object; and (4) sufficient consideration. (Civ. Code, § 1550; Marshall & Co.

v. Weisel (1966) 242 Cal.App.2d 191, 196.) The Peebler Settlement satisfies all of these elements,

and the parties are consequently bound by its terms.

Mr. Peebler and the City were capable of contracting, as “[a]ll persons are capable of

contracting, except minors, persons of unsound mind, and persons deprived of civil rights.” (Civ.

Code, § 1556). There is no dispute as to this element. The parties also knowingly consented to the

contract. Mutual consent for a contract is determined under an objective standard applied to the

outward manifestations or expressions of the parties. (Reigelsperger v. Siller (2007) 40 Cal.4th

574, 579.) The consent of the parties must be free, mutual, and communicated by each to the other.

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(Civ. Code, § 1565.) Mr. Peebler’s and the City’s consent to the contract was indeed free, mutual,

and communicated by each to the other, as evidenced by the fact that all parties were represented by

counsel, there was substantial negotiation as to terms, the negotiation resulted in a signed

Settlement Agreement, and the parties’ subsequently performed pursuant to the signed Agreement,

as discussed in further detail below. Neither the City nor Mr. Peebler ever disputed that they gave

informed consent when entering into the contract.

Additionally, the Settlement Agreement constitutes a lawful object, as it was both lawful and

possible when entered into by the parties. (Civ. Code, § 1596). The parties intended for Mr.

Peebler to withdraw his lawsuit and waive his rights to further objection to the redevelopment

Pplan. The City, for its part, promised to undertake certain obligations with regard to the setting

aside and utilizing of additional tax revenue in the South Main Project Area. There is no dispute as

to this element.

Finally, the contract was supported by consideration. Consideration is defined as “[a]ny

benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the

promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person,

other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the

promisor, is a good consideration for a promise.” (Civ. Code, § 1605). When Mr. Peebler entered

into the contract, he gave up his constitutional right to pursue his lawsuit and his meritorious claim

for invalidation of the entire redevelopment Pplan. In exchange, the City agreed both to exempt his

property from eminent domain and to set aside two pots of incremental tax revenue funds: a 20

percent set- aside for low-income housing in the South Main Project Aarea, and a 20 percent set-

aside to be utilized for public improvements in the South Main Corridor. Both parties bargained for

these benefits and gave up legal rights, which constitute valid consideration. As the Peebler

Settlement meets each of the four elements to establish a contract under California law, it is

undeniable that Mr. Peebler and the City entered into an enforceable contract when they signed the

Settlement Agreement. The DOF admitted as much in the temporary restraining order hearing in

June 2011. (See Exhibit Z at p. 15 [“It’s a contract.”].)

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Not only did Mr. Peebler and the City enter into a contract, but the terms of the contract

were sufficiently certain so as to render it enforceable. Under California law, a contract will be

enforced if it is sufficiently definite for the court to ascertain the parties’ obligations and to

determine whether those obligations have been performed or breached. (Ersa Grae Corp. v. Fluor

Corp. (1991) 1 Cal.App.4th 613, 623.) Here, the contract unambiguously states that Mr. Peebler

stipulates to the Redevelopment Plan’s lawfulness and gave up his right to the lawsuit. (Exhibit F,

¶¶ 1–-5.)

The contract’s language also unambiguously demonstrates that the City as Successor

Agency must fulfill the Settlement’s requirements to utilize 20 percent of the increased tax revenue

for public improvements and low- and moderate-income housing through the end of 2035. The

Settlement’s use of mandatory language like “obligation” and “shall”9 indicates that the City is not

free to evade its responsibilities under the agreement.

The Peebler Settlement obligates the RDARedevelopment Agency (and now the City as

Successor Agency) to spend a specified percentage of property tax revenues in the Corridor,

whether those revenues are terms “tax increments” or something else. The Settlement states that

“[t]wenty percent (20%) of the tax increments or tax increments generated or related revenues, or

moneys repayable from tax increments from the project area” on low- and moderate-income

housing in the Project Area and on improvements in the Corridor. (Exhibit B, italics added.) The

inclusion of the “related revenues” language demonstrates that the parties intended that any funds

related to increased property value from the Project Area, whether delineated as tax increment

revenues or otherwise, be included in the 20 percent provisions of the Settlement Agreement.

Further, the Peebler Settlement states, “the Redevelopment Agency and any and all

successors thereto are lawfully obligated to carry out and accomplish the terms and conditions of

[the Judgment].” (Exhibit F ¶ 5, italics added) Such language should obligate the City as Successor

Agency to comply with the Settlement’s terms.

Finally, the Settlement includes language that demonstrates that its specific allocation of a

portion of the property tax revenue will end in 2035. The documents related to the Settlement and 9 California Health and Safety Code section 16 defines “shall” as mandatory. (Health & Saf. Code § 16.)

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Plan are interconnected and explain the Settlement’s intended length. Resolution No. 84-2

“entitl[es] the Agency to the receipt of all taxes to be allocated to the Agency pursuant to the terms

of the Plan.” (Exhibit B at 4.) The Plan was originally effective through July 6, 2012, 30 years

from the date of its adoption. (See Exhibit D at 30 § 800.) The Settlement’s reference to the Plan

presumably includes any amendments made to it prior to the Dissolution Act. The latest of these

amendments, adopted in 2007, extended the Plan until July 6, 2025. (Exhibit H.) The same

amendment authorized the RDA to collect additional tax revenue through July 6, 2035 to repay

indebtedness incurred under the Plan. (Id.)

The scope of both parties’ duties under the contract is clear, and a party’s noncompliance

with any of these provisions would constitute a breach of the agreement. As such, the terms of the

contract are sufficiently certain to render the Peebler Settlement enforceable, and the DOF must

approve the City’s ROPS listing the contract as a preexisting enforceable obligation.

B. If the Parties’ Intent Under the Peebler Settlement is Ambiguous, Extrinsic Evidence Demonstrates Their Intent to Enter Into a Definite, Contingency-Free Contract.

Even if this Court were to find, based on its review of the contract language, that the parties’

intent under the agreement is ambiguous as to whether it was speculative or based on a contingency,

extrinsic evidence proves that the intent of the parties was to create a definite, non-speculative

agreement. While the parol evidence rule generally bars extrinsic evidence of prior or

contemporaneous agreements to add to or modify the terms of an unambiguous “integrated” written

contract, when two equally plausible interpretations of the language of a contract exist, parol

evidence is admissible to interpret the parties’ intent under the written agreement. (See Delta

Dynamics, Inc. v. Arioto (1993) 69 Cal.2d 525, 528.)

In the present case, the DOF contends that the contract was never a guarantee of money, but

rather a speculative agreement dependent on the continued existence of tax increment financing.

(See Exhibit Z at p. 15.) The DOF argues that, because the Legislature has renamed revenue

earned from rising property values “property tax revenues” as opposed to the former “tax increment

revenues,” this effectively disposes Mr. Peebler of his right, bargained for in settlement

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negotiations, to direct the use of the additional revenue obtained from the increase in property

values in the designated area. (See id. at pp. 13-15.) The DOF bases this argument on the language

of the Dissolution Act, which provides: “[u]pon their dissolution, any property taxes that would

have been allocated to redevelopment agencies will no longer be deemed tax increment. Instead,

those taxes will be deemed property tax revenues and will be allocated first to successor agencies to

make payments on the indebtedness incurred by the dissolved redevelopment agencies.” (AB x1 26

section 1(i).)

However, the Legislature’s renaming of this tax revenue is not a legal basis on which to

deprive Mr. Peebler of the benefit of his bargain. Mr. Peebler bargained for a specific portion of the

funds generated from rising property values in the South Main Project Area to be utilized on public

improvements in the Corridor, and for an additional portion of those funds to be set aside for low-

income housing in the Project Area. (See Exhibit B, at 4.) The parties agreed that these designated

portions of the funds would continue to be used in this manner through the end of the current Plan,

including amendments to the Plan. They did not intend for the contract to apply solely or

specifically to “tax increment financing” or to be based on the contingency that tax increment

financing exist. As such, the 20 percent contract provisions remain enforceable, despite the

Legislature’s renaming of tax increment financing, through July 6, 2035, the end date for the

collection of additional tax revenues to repay indebtedness incurred under the Plan.

If this Court should find that the Settlement’s language is ambiguous, parol evidence is

admissible to demonstrate the parties intended that 20 percent of additional tax revenue from rising

property taxes in the Project Area to be spent in the Corridor and on low-income housing during the

existence of the Plan and any amendments extending it.

1. Extrinsic Evidence Involving Negotiations of the Peebler Settlement Demonstrates the Parties’ Intent.

Evidence involving the parties’ negotiations of the Peebler Settlement demonstrates their

intent to be bound by a definite, non-speculative contract which mandated that additional tax

revenue be spent in the South Main Corridor and set -aside for low-income housing in the Project

Area during the pendency of the Plan. Mr. Peebler’s goals in negotiating the Settlement Agreement

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were twofold: (1) prevent his property from being seized through eminent domain; and (2) secure

funding to be spent on improvements in the South Main Corridor and low-income housing in the

Project Area. (See Peebler Decl. ¶¶ 5, 8; Ferguson Decl. ¶¶ 15–-17.) While saving his property

from eminent domain was a significant concern for Mr. Peebler, it was not his only concern.

Securing funds for improvements in the Corridor was also a primary goal, and his attorney

specifically bargained for this provision when he consented to the Settlement Agreement, as

evidenced by negotiation letters between the parties. (See Peebler Decl. ¶¶ 5, 8; Ferguson Decl. ¶¶

12, 13, 15–-16.) In fact, obtaining funds for the Corridor was such an integral aspect of the contract

that Mr. Peebler would not have entered into the Settlement Agreement had the City not promised

to utilize increased tax revenue in this area. (See Peebler Decl. ¶ 8; Ferguson Decl. ¶ 15.)

On its part, the City secured valuable consideration in the form of a waiver of all objections

to the Plan, which was critical to allow the City to move forward.

Knowing the funds were such a vital component of Mr. Peebler’s settlement goals, Mr.

Ferguson, as Mr. Peebler’s attorney, specifically structured the Settlement Agreement to require that

funds be collected and committed to improvements in the South Main Corridor. (See Ferguson

Decl. ¶¶ 18, 30–32.) Understanding that tax increment financing was a means to raise funds for

development, but not the only means, Mr. Ferguson negotiated terms that went beyond tax

increment financing by including language calling for 20 percent tax increments or “related

revenues” collected in the Project Area to be spent on improvements in the Corridor. (See Exhibit

B at 4.) In structuring the Peebler Settlement this way, Mr. Ferguson furthered the intent of the

parties by ensuring that any funds related to increased property values from the South Main Project

Area, whether delineated as tax increment revenues or otherwise (i.e. “related revenues”) would be

included in the 20 percent provisions of the Settlement Agreement.

Basically, Mr. Ferguson foresaw the State’s argument that the characterization of the tax is

more important than its function, and carefully drafted language to negate such a claim and protect

his clients’ rights. The natural consequence of the Plan was that property would appreciate and as

that occurred, property tax revenues would increase. Rising property tax revenues are related to tax

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increment revenues, given that tax increment revenues were designed “so cities could benefit from

the resulting increase of property values they caused” and is “based on the assumption that a

revitalized project area will generate more property taxes than were being produced before

redevelopment.” (Soo-Hoo Decl. ¶¶ 22-23; Redevelopment Book p. 232; see also California

Redevelopment Assn. v. Matosantos, supra, 53 Cal.4th at p. 246-47.) Accordingly, despite the

Legislature’s relabeling of “tax increment” revenues to “property tax revenues,” the City as

Successor Agency’s obligation under the Peebler Settlement remains intact, as the Settlement

Agreement was structured to explicitly include any additional tax revenues generated from rising

property values in the Project Area.

To ensure that any successor agency was obligated to abide by the Peebler Settlement’s

terms, Mr. Ferguson included language stating that, “the Redevelopment Agency and any and all

successors thereto are lawfully obligated to carry out and accomplish the terms and conditions of

[the Judgment].” (Peebler SettlementExhibit F at 2;, ¶ 5; Ferguson Decl. ¶ 34.) Mr. Ferguson used

mandatory language such as “shall” and “obligation” to demonstrate that the City was undeniably

bound by the terms within the Settlement Agreement. Both parties executed the agreement with the

mandatory language and, at the City’s request, took the additional step to enter it as a court

judgment. (See Ferguson Decl. ¶¶ 18, 30-32.)

In sum, not only does the language of the Peebler Settlement itself indicate that the parties

intended any funds related to tax increment financing to be included in the 20 percent provisions,

but evidence of the parties’ negotiations demonstrates that they intended for funds from additional

tax revenues to be spent on Corridor improvements and low-income housing for the duration of the

Plan. As “property tax revenues” were encompassed within the 20 percent provisions of the

Settlement Agreement, Mr. Peebler is entitled to the benefit of his bargain. The City should be held

to this agreement. To allow the City to comply with the clear mandates of the contract, the DOF

must recognize the Peebler Settlement as an enforceable obligation.

2. The RDA’s Subsequent Performance Under the Peebler Settlement Demonstrates Its Intent to Spend Additional Tax Revenue in the Corridor.

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In addition to the plain language of the Settlement Agreement and the extrinsic evidence of

the parties’ intent upon entering into the Agreement, evidence of the RDA’s subsequent

performance under the Peebler Settlement also demonstrates its intent to be bound by a definite,

contingency-free contract. Since entering into the Settlement Agreement in 1984, the RDA’s

performance demonstrates that it intended to utilize 20 percent of revenues related to tax increments

from the Project Area towards public improvements in the Corridor, per the terms of the Peebler

Settlement. Since 1984, the RDA has actively searched for ways in which it could utilize the

Peebler Settlement funds on improvements in the Corridor, and it has undertaken a number of

public improvement projects that were funded by money derived from the Settlement. (See Uehli

Decl. ¶¶ 7–-10, 13; Nelson Decl. ¶¶ 8–-9.) Such public improvement projects include:

1. establishing a façade rebate program running from the late 1980s to mid-1990s, and starting

again in 2001;

2. building parking lots on Main Street in the mid-1980s;

3. improving lighting, sidewalks, curbs, and gutters on the Main Street sidewalk in the early

2000s;

4. installing traffic signals on the Main Street Corridor;

5. realigning McFadden Street; and

6. placing a historical archway sign over South Main Street.

(See Uehli Decl. ¶¶ 7-10, 13; Nelson Decl. ¶ ¶ _9.)

More recently, the City as Successor Agency would have commenced and completed

additional South Main public improvement projects had the DOF recognized the Settlement

Agreement as an enforceable obligation and approved the City’s ROPS. For example, in early 2011

the RDA began looking into the feasibility of a façade enhancement program that would benefit the

business owners of the Corridor. (See Uehli Decl. ¶¶ 13-14.) The RDA planned and began to

institute a program which was phased over ten or more years. (Id.) Around March 2011, the RDA

interviewed companies to undertake the project and eventually settled on Abacus Project

Management, Inc. (Id. ¶ 14.) The RDA drafted a contract to engage Abacus and was ready to

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execute the contract. (Id.) However, the RDA was forced to abandon the project after the passage

of the Dissolution Act and the DOF’s refusal to approve the City’s ROPS, as it could not finance the

project without Peebler Settlement funds. (Id. ¶¶ 14–-15.)

In addition to taking affirmative steps to expend Peebler Settlement funds on public

improvements in the Corridor, the RDA also acted in compliance with the Settlement Agreement by

adhering to the Agreement’s limitations. For instance, because the RDA knew the Peebler

Settlement limited where it could spend the Peebler funds, the RDA did not spend Peebler funds

outside the Corridor. When the RDA did want to spend Peebler Settlement funds outside of this

area, RDA officials understood that they had to obtain Mr. Peebler and Mr. Albert’s permission to

do so. (See Peebler Decl. ¶¶ 10–-13; Nelson Decl. ¶ 12.) This is evidenced by David Ream and

Cynthia Nelson’s meetings with Mr. Peebler and Mr. Albert in 2010 in which they asked for

authorization to spend funds outside the Corridor. (See Peebler Decl. ¶¶ 10–-13; Nelson Decl. ¶

12.)

In addition to seeking permission for itself, the RDA also advised others that Mr. Peebler

and Mr. Albert would need to consent before any Peebler Settlement funds were used outside the

Corridor. When Joe Adams, the Director of the Discovery Science Center of Santa Ana, expressed

his desire to obtain Peebler Settlement funds to improve the Discovery Science Center, Cynthia

Nelson and David Ream informed him that Mr. Peebler and Mr. Albert would have to authorize the

spending of funds outside the Corridor. (See Peebler Decl. ¶¶ 17–-19; Nelson Decl. ¶ 13; Adams

Decl. ¶¶ 4–-5.) In seeking permission from Mr. Peebler and Mr. Albert and its advising of others to

do the same, the RDA demonstrated that it understood it was bound by the terms of the Settlement

Agreement.

3. The RDA’s Subsequent Performance Under the Peebler Settlement Demonstrates Its Intent to Spend 20 Percent of Additional Tax Revenue on Low- and Moderate-Income Housing.

The RDA’s performance since 1984 demonstrates that it understood that, pursuant to the

Peebler Settlement and judgment, it was legally required to set -aside 20 percent of additional

property tax revenues from the South Main Project Area towards affordable housing in Santa Ana.

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(SL-B Decl.) Since 1984, the RDA has actively searched for ways in which to use the Peebler

Settlement money throughout the City for housing. The RDA undertook a number of housing

projects with third party developers using money derived from the Peebler Settlement. (SL-B Decl.)

Such low- and moderate-income housing projects include:

1. for-sale single family homes: five projects, twenty-four units total, for residents ranging

from 50-120% Area Median Income (“AMI”);

2. special needs transitional and permanent housing units for the homeless and people with

HIV/AIDS: one project, twenty-six units total, for residents at 80% AMI;

3. rental family homes: multiple projects, 1000+ units, for residents ranging from 14-120%

and 26%-50% AMI; and

4. senior rental units: two projects, 147 units total, for residents ranging from 50%-80% AMI.

(See SL-B Decl., Exhibit A)

The Peebler Settlement precedes the enactment of Cal. HSC §33334.6, which in pertinent

part states: “Except as otherwise permitted by subdivisions (d) and (e), not less than twenty percent

of the taxes allocated to the agency pursuant to Section 33670 from project areas . . . shall be

deposited into the Low and Moderate Income Housing Fund . . . .” (Health & Saf. Code Cal. HSC §

33334.6(c).). This requirement under § 33334.6 did not exist at the time of the stipulated judgment.

This is significant, as it shows the 20 percent housing set-aside was not included simply to restate

existing law but, like the rest of the Peebler Settlement, was a part of negotiated terms and not

merely a recitation of existing law.

In its letter, dated May 24, 2012, the DOF asserts that line item 88 on ROPS II, represents

funds that should be transferred from the City back to the County of Orange. (Exhibit R at 2__.)

The DOF cites the text of the Cal. HSC §34176(a). (Id.) That language states:

If a city, county, or city and county elects to retain the authority to perform housing functions previously performed by a redevelopment agency, all rights, powers, duties, obligations, and housing assets, as defined in subdivision (e), excluding any amounts on deposit in the Low and Moderate Income Housing Fund and enforceable obligations retained by the successor agency, shall be transferred to the city, county, or city and county.

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DOF assumes incorrectly that the funds collected and represented in line item 88 were collected

solely due to the statutory housing set-aside requirement in Cal. HSC §Health and Safety Code

section 33334.6. However, these funds were set aside in accordance with the Peebler Settlement,

not Cal. HSC §34176(a). To comply with Peebler, the City is obligated to use these funds for third-

party contracts to create low and moderate income housing.

C. Even If This Court Were to Find that the Peebler Settlement is Contingent on the Continued Existence of Tax Increment Financing, the Funds Collected Prior to the Dissolution Act That Have Not Been Utilized Are a Part of the Legally Enforceable Obligation.

Mr. Peebler maintains that because the Settlement encompasses rising property tax revenue

resulting from redevelopment as funds “related to” tax increment revenue, as well as tax increment

revenue, the Peebler Settlement remains an enforceable obligation even after the passage of the

Dissolution Act. As such, the DOF should be ordered to approve the City’s ROPS to enable the

City as Successor Agency to perform under the contract through the end of the existing Plan. But,

even if this Court were to adopt the DOF’s position that the Legislature’s relabeling of tax

increment financing extinguishes the City as Successor Agency’s future obligations under the

Peebler Settlement, the City as Successor Agency is still legally obligated to comply with the

Settlement for the funds that were collected prior to the passage of the Dissolution Act. $17.5

million was collected under the Peebler Settlement before the statute was enacted—i.e. when “tax

increment” money existed in name. (Gorospe Decl. ¶ _.)

If the DOF wishes to ignore the past funds collected under the Settlement as an enforceable

obligation, at a minimum, it must point to language in the Settlement that indicates the parties

agreed to waive the payment of those funds. There is nothing in the Settlement that would permit

the DOF to make such a claim. In Mendly v. County of Los Angeles (1994) 23 Cal.App.4th 1193,

1205-06, a case concerning the enforcement of a stipulated judgment against a change in county

welfare benefits, the court allowed the county to waive retroactive benefits because the judgment

contained an explicit waiver of those benefits. Mr. Peebler’s Settlement does not contain any

provision resembling such a waiver, nor does it have provisions that permit the Settlement to be

altered if State legislative action implicating the Settlement occurs. (Id. at 1209-–10.) Unlike - 26 -

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PETITION FOR WRIT OF MANDATE

Mendly, the Peebler funds vested upon the collection of the tax. The stipulated judgment before

this court is inapposite to the one in Mendly because it was never even considered that the

contracting parties could waive past funds unilaterally or under the framework of new legislation.

These funds are preexisting enforceable obligations because, to use the DOF’s words, the

“money flow that would be coming in” under the Peebler Settlement had not yet been “cut off.”

(Exhibit Z at p. 19.) Since, tax increments were still collected and allocated to the appropriate

entities—including the South Main Corridor and the low-income housing fund—even accepting the

DOF’s position, the Dissolution Act did not affect the property tax revenues that were allocated

prior to the statute’s enactment. At a minimum, the ROPS II should be approved as to all Peebler

funds collected prior to the Dissolution Act’s effective date.

III. DOF’S INTERPRETATION OF THE DISSOLUTION ACT UNCONSTITUTIONALLY IMPAIRS PETITIONER’S CONTRACT BY RENDERING THE SETTLEMENT AGREEMENT UNENFORCEABLE.The DOF’s failure to recognize the Peebler Settlement as an enforceable obligation not only

violates the plain language of the Dissolution Act, but also results in an unconstitutional impairment

of the Settlement. The Contract Clauses in Article 1, section 10 of the United States Constitution

and Article 1, section 9 of the California Constitution prohibit the State from passing legislation

impairing contractual obligations. The United States Supreme Court has ruled that impairments are

constitutional only under very narrow circumstances. (Home Bldg. & Loan Ass’n v. Blaisdell (1934)

290 U.S. 398, 420.) The California Supreme Court has stated that an impairment must pass both

federal and State constitutional muster. (Allen v. Board of Administration (1983) 34 Cal.3d 114,

119.) Therefore, California courts analyze an impairment claim by asking first whether it was

substantial, and then, whether the state has a significant and legitimate public purpose behind its law

or action, such as the remedying of a broad and general social or economic problem. (Allied

Structural Steel Co. v. Spannaus (1978) 438 U.S. 234, 245; Mendly v. County of Los Angeles,

(1994)supra, 23 Cal.App.4th 1193,at pp. 1210-11.) Furthermore, when the State seeks to impair a

contract between a private party and a political subdivision of the State, courts give less deference

to the State’s claims of justification for the impairment. (U.S. Trust Co. of New York v. New Jersey

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431 U.S. 1, 26 (1977) [“A governmental entity can always find a use for extra money, especially

when taxes do not have to be raised. If a State could reduce its financial obligations whenever it

wanted to spend the money for what it regarded as an important public purpose, the Contract Clause

would provide no protection at all.”].) Finally, a court can only sustain an impairment if it is both

reasonable and necessary to address the State’s proffered interest. (Ibid.)

The State cannot meet its burden of proving that impairing the Peebler Settlement is

justified. In passing the Dissolution Act, the Legislature intended to redirect a portion of the funds

that would otherwise have been used for redevelopment to other local governmental services to

promote the common good. (Assem. Bill No. AB xX1 26 (2011-2012 Reg. Sess.) § 1(j); Health &

Saf. Code § 34167(a). ) However, if the Dissolution Act is construed to render the Settlement

Agreement unenforceable and thereby impair the petitioner’s contractual rights, the Legislature’s

asserted justification for the impairment is to use the tax increment set-aside pledged under the

Settlement “to fund core governmental services including police and fire protection services and

schools.” (Health & Saf. CodeAssem. Bill No. AB xX1 26 (2011-2012 Reg. Sess.) § 31467(a).)

The Legislature has indicated an increased need for such funding because the California economy is

“slowly recovering from the worst recession since the Great Depression.” (Assem. Bill No. AB x1

26 (2011-2012 Reg. Sess.)Ibid. § 1(a).)

The fiscal crisis created by the recent recession is not a sufficient justification for an

impairment of the Settlement. In the seminal Contracts Clause case Home Building & Loan Assn. v.

Blaisdell, supra, 290 U.S. at pp. 415-417, the State passed a law that provided temporary relief

through court ordered extensions of sales and periods of redemption for mortgage-holders who were

unable to make payments. While the Supreme Court upheld the impairment in Blaisdell based on

economic emergency (Id. at pp. 444-47.), the extension of mortgage redemption periods upheld did

not void the contract indebtedness, but merely eased the repayment terms of existing debts.

Furthermore, the statute was enacted “during the depth of the [Great] Depression” when the state

had “no effective alternative.” (United States Trust Co., supra, 431 U.S. at p. 15.)

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As the California Supreme Court noted, the legislation in Blasidell was unlike many acts of

impairment because it “was temporary and limited to the exigency that provoked the legislative

response.” (Sonoma County Org. of Public Employees v. County of Sonoma (1979) 23 Cal. 3d 296,

306.) Moreover, the California Supreme Court highlighted that the temporary emergency measure

in Blaisdell imposed reasonable conditions to protect the rights of those affected: “[T]he redemption

period was extended upon reasonable conditions; the integrity of the mortgage indebtedness was not

impaired; interest continued to run, and the right of the mortgagee to buy the property or to obtain a

deficiency settlement remained inviolate.” (Ibid.)

Under the DOF’s interpretation, the Dissolution Act impairs contractual rights under the

asserted justification of taking funds allocated for specific private interests for governmental

services suffering from the current recession. The DOF’s interpretation goes against the Supreme

Court’s concern in Sonoma County that legislation, which is not temporary or limited to the

exigency of the legislative response, is unjustifiable In this case, the statute’s dissolution of

redevelopment agencies and redirection of redevelopment funds is not temporary. If the statute is

construed to render the Settlement Agreement unenforceable, it will permanently deprive the

petitioner of all contractual benefits.

California courts sometimes uphold impairments because the modification of a contract is

slight or still provides benefits to the contract holders. This is particularly relevant when the interest

is in an area traditionally regulated by the state to achieve a social purpose. (Cox Cable San Diego,

Inc. v. City of San Diego (1987) 188 Cal.App.3d 952, 967 [“The reasonable governmental

regulation of rates and tariffs in industries affected with the public welfare has long been established

as a proper exercise of the police power.]; Interstate Marina Development Co. v. County of Los

Angeles (1984) 155 Cal.App.3d 435, 448 [“The County rent law as applied to Lessees passes

constitutional muster because it is an interim measure in response to a real scarcity of affordable

housing, has a broad legitimate purpose that is within the police power, and is a reasonable response

to the exigency which called it forth.”].) These cases are inapposite from the matter before this

court because, in those cases, the contracts were left intact, although modified. Under the DOF’s

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interpretation, the Peebler Settlement will be completely extinguished. Thus, the State cannot argue

that its impairment is temporary or is limited to the economic crisis facing the State, if it eliminates

any probability that the contract will be fulfilled at a later date once the economic exigency has

passed.

Moreover, the Dissolution Act contains no reasonable conditions that would protect the

petitioner’s contractual rights. Essentially, the abrogation of his contractual rights under the DOF’s

interpretation would be total. The United States Supreme Court wrote in Allied Structural Steel Co.

v. Spannaus (1978) 438 U.S. 234, 245 that “[t]he severity of the impairment measures the height of

the hurdle the state legislation must clear.” In the DOF’s situation, the hurdle may be unattainable,

because of the extreme measures taken. The fact that the impairment eliminates all funds owed to

the petitioner under the Settlement makes it highly severe and must be balanced against many other

factors including, the nature and extent of the impairment, and whether the legislation is

appropriately tailored and limited to the situation necessitating its enactment. (See Donlan v.

Weaver (1981) 118 Cal.App.3d 675, 682.)

Although budget shortfalls are of great concern to the State, California courts do not

automatically permit State impairment of contracts simply because the State asserts a fiscal

emergency exists. (Board of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1161 [ruling

that legislation changing the schedule of pension payments to California employees during a fiscal

crisis violated the Contracts clause]; California Teachers Assn. v. Cory (1984) 155 Cal.App.3d 494,

512 [holding that the Governor and the DOF’s plan to withhold payments to teachers’ retirement

fund to address gaps in education funding did not justify impairment]; Sonoma County, supra, 23

Cal.3d at p. 302 [ruling that legislation that limited salary raises with city-contracted labor

organizations in a response to a “fiscal crisis” resulting from Proposition 13 was an invalid

impairment].) In fact, the State has even indicated in a previous proceeding related to this matter

that “[petitioner’s] argument that enforceable obligations are higher than core government services

may be true . . . .” (Exhibit Z at p. 27.)

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An impairment of the Peebler Settlement would be extremely severe, and thus substantial,

when balanced against the State’s justification of fiscal emergency. Millions of dollars that have

accrued and been set aside by the RDA over the past 25 years in order to comply with the

Settlement Agreement will be permanently lost without any prospect of recovery. Redevelopment

efforts that the City of Santa Ana and many of its residents have undertaken in reliance on the

Settlement funds will be cancelled. To put matters in perspective, budget shortfalls in California

have come and gone. It is worthy to note that many of the United States Supreme Court decisions

that upheld impairments came out of efforts to combat the Great Depression. (Veix v. Sixth Ward

Building & Loan Ass'n of Newark (1940) 310 U.S. 32, 41 [legislation impairing contracts to protect

buildings and loan associations from excessive withdrawals is permissible]; (Home Building &

Loan Assn. v. Blaisdell, supra, 290 U.S. at pp. 444-47.) Even then, these decisions modified but did

not extinguish private claims. The current recession does not equal the Great Depression in

magnitude, and the Legislature acknowledged that the California economy had already begun

recovering from the recession prior to the passage of the Dissolution Act. (Assem. Bill No. AB

xX1 26 (2011-2012 Reg. Sess.) §1(a).) Thus, the state’s reliance on Blaisdell and its progeny are

limited because of the distinguishable economic environments and the severity of the remedy as

interpreted by the DOF.

The United States Supreme Court has traditionally held that a total destruction of a contract

will fail to pass constitutional muster. In W.B. Worthen Co. v. Kavanaugh (1935) 295 U.S. 56, 62,

the Court struck down a law that impaired the contracts of bondholders by limiting their remedies to

foreclose mortgage benefit assessments given as security for their bonds. The Court characterized

the impairment as being “an oppressive and unnecessary destruction of nearly all the incidents that

give attractiveness and value to collateral security” because it would make the security almost

worthless from the perspective of a rational investor. (Id. at pp. 60-62.) This was unacceptable

from the Court’s point of view. The Court has therefore used the impairment in Kavanaugh as the

benchmark of severity when having to analyze contractual impairments in subsequent cases.

(United States Trust Co., supra, 431 U.S. at p. 15; Allied Structural Steel Co. v. Spannaus, supra,

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438 U.S. at 250-51.) Thus, implicit in any court ruling on impairment is that a total extinguishment

of a contract is the least likely to satisfy constitutional standards.

When compared to Kavanaugh, a State impairment of the Peebler Settlement is even more

severe because it will permanently eliminate the petitioner’s bargained for consideration without

any hope of it being recovered in the future. Past and future funds set aside to comply with the

Settlement will be forever lost. Therefore, the DOF’s determination that a budget shortfall is a valid

impairment is not justified when balanced against the impairment’s severity, as well as its nature

and extent.

Furthermore, although the Dissolution Act is intended to redirect redevelopment funds for

“admittedly important purposes,” the severity of the impairment makes it certain that the

government justification is not “both reasonable and necessary” to serve those purposes. (United

States Trust Co., supra, 431 U.S. at p. 29.) One Court of Appeal wrote that “in adopting cost-

cutting measures to further an important public purpose, there must be some indication the public

entity has given considered thought to the severity of the effect an enactment might have on the

particular contractual scheme at issue and to the possibility of alternative, less drastic, means of

accomplishing the public goal.” (United Firefighters of Los Angeles City v. City of Los Angeles

(1989) 210 Cal.App.3d 1095, 1115.)

The DOF has not given such consideration, since it seeks to abrogate the entire Peebler

Settlement and neither recognizes past nor future funds that are meant to fulfill the Settlement’s

obligations. In Board of Administration v. Wilson, California Teachers Assn. v. Cory, and Sonoma

County Org. of Public Employees v. County of Sonoma, California courts determined that even

slight adjustments in pay schedules unconstitutionally violated the impairments clauses. In

petitioner’s case, the DOF takes the most drastic step possible by abrogating the entire Settlement.

Furthermore, there is no indication that the DOF attempted to conjure a plan that would be less

drastic than simply nullifying the Peebler Settlement.

The DOF makes a weak determination that not recognizing the Settlement as an enforceable

obligation is part of the best possible solution to address the State’s economic justification. That

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argument, taken to its logical conclusion, would allow the State to abrogate any contract in the

interest of the legislature’s statement of fiscal necessity. Even though the State may argue that

budget constraints inhibit it from recognizing the Peebler Settlement, it still has the ability to collect

revenue from other sources, which mitigates the need to extinguish the entire Peebler Settlement.

Since other revenue sources exist and the State has not indicated why a total abrogation of the

Settlement is necessary, the impairment here violates the Contract Clauses of the United States and

California Constitutions. The Dissolution Act must then be construed to honor the Peebler

Settlement in order to prevent this violation.

IV. THE DOF’S INTERPRETATION OF THE DISSOLUTION ACT CONSTITUTES AN UNCONSTITUTIONAL TAKING BY DEPRIVING MR. PEEBLER OF THE VALUE OF HIS SETTLEMENT.Article 1, Section 19 of the California Constitution and the Fifth Amendment to the United

States Constitution prohibit the taking of private property for public use without just compensation.

The Fifth Amendment Takings Clause applies to the States through the Fourteenth Amendment.

(See Chicago B. & Q.R. Co. v. Chicago (1897) 166 U.S. 226.) The California Constitution’s

Takings Clause is broader than the federal Takings Clause because it allows for compensation for

property damage, but California courts have “construed the clauses congruently.” (Monks v. City of

Rancho Palos Verdes (2008) 167 Cal. App. 4th 263, 294.) The DOF’s denial of the Peebler

Settlement as an enforceable obligation imposes a severe burden on Mr. Peebler’s property rights

under the Settlement, for which he received no compensation. Thus, the DOF’s interpretation of the

Dissolution Act effectuates an unconstitutional taking.

CONCLUSION

Because the Peebler Settlement is an unambiguous and valid contract entered into before the

passage of the Dissolution Act, it is statutorily defined as an enforceable obligation and should

properly be included in the City’s ROPS. The Settlement Agreement is unaffected by the

Dissolution Act’s relabeling of “tax increment” revenue to “property tax” revenue, as the plain

language of the 20 percent provisions within Settlement Agreement include related revenues, which

undeniably encompasses “property tax revenues.” Even if the contract is ambiguous as to whether

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the 20 percent provisions were dependent upon the existence of tax increment financing, extrinsic

evidence involving negotiations of the Settlement Agreement and the RDA’s subsequent

performance pursuant to the agreement demonstrates that the parties intended for the Peebler

Agreement to dedicate additional tax revenue to improvements in the Corridor and low-income

housing in the Project Area.

Furthermore, even if this Court were to find that the Dissolution Act renders the 20 percent

provisions of the Settlement Agreement moot, this Court should still hold that the statute does not

permit the DOF to take from the City the $17.5 million in additional property tax revenues that were

collected prior to the statute’s dissolution of tax increment financing. At a minimum, the City as

Successor Agency owes Mr. Peebler the entirety of the Peebler funds that were collected prior to

the Dissolution Act’s effective date, and the Court should order the DOF approve this amount on

the City’s ROPS. If the DOF’s current decision stands, it will abrogate the entirety of the Peebler

Settlement and thus, unconstitutionally impair Mr. Peebler’s contract.

For these reasons, Petitioner requests this Court issue a writ of mandate compelling the DOF

to recognize the Peebler Settlement as an enforceable obligation, which would allow the City as

Successor Agency to comply with the Settlement’s terms through the end of 2035.

Dated: December 18, 2012 Respectfully Submitted,

Community and EconomicDevelopment ClinicUniversity of California, IrvineSchool of Law

By:________________________Robert SolomonCarrie HempelAttorneys for Plaintiff Gerald Peebler

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