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HomeMy WebLinkAbout2012-007 SASUCCESSOR AGENCY RESOLUTION NO. 2012-007 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA ANA ACTING AS SUCCESSOR AGENCY TO THE FORMER COMMUNITY REDEVELOPMENT AGENCY APPROVING THE THIRD RECOGNIZED OBLIGATION PAYMENT SCHEDULE (ROPS) AND ADOPTING AND APPROVING THE SUCCESSOR AGENCY'S ADMINISTRATIVE BUDGET FOR THE PERIOD OF JANUARY 1, 2013 THROUGH JUNE 30, 2013 PURSUANT TO HEALTH AND SAFETY CODE SECTIONS 34177(1)(1) AND 34177(m), AND CERTAIN OTHER ACTIONS PURSUANT TO PART 1.85 OF DIVISION 24 OF THE CALIFORNIA HEALTH AND SAFETY CODE ("DISSOLUTION ACT") BE IT RESOLVED BY THE MEMBERS OF THE SUCCESSOR AGENCY OF THE CITY OF SANTA ANA, AS FOLLOWS: Section 1. The City Council of Santa Ana, acting as Successor Agency to the former Agency, hereby finds, determines and declares as follows: A. Pursuant to the Dissolution Act, on January 9, 2012, pursuant to section 34173 of the California Health & Safety Code, the City of Santa Ana ("City") elected to serve as the Successor Agency for the dissolved Community Redevelopment Agency ("Agency") of the City of Santa Ana and selected the Housing Authority of the City of Santa Ana to act as "Successor Housing Agency". B. The City Council serves as the governing body of the Successor Agency under the Dissolution Act, as recently amended by AB 1484, to administer the enforceable obligations of the Agency and otherwise unwind the Agency's affairs. Many actions of the Successor Agency are subject to the review and approval of a seven member Oversight Board. C. The first and second ROPS and associated administrative budgets were approved by the Successor Agency on April 2, 2012 and May 7, 2012, respectively, and subsequently by the Oversight Board on April 10, 2012 and May 8, 2012, respectively. The documents were made available to the appropriate entities [State Controller's Office, State Department of Finance (DOF), and County- Auditor Controller] as required by law. The DOF approved both ROPS on May 24, 2012, however, several items deemed enforceable obligations by the Successor Agency and Oversight Board were disapproved by DOF, which disapproval was and is disputed by the Agency. To date, the DOF and Agency have not reached a resolution of these matters. SA Resolution No. 2012-007 Page 1 of 24 D. Additionally, there is pending litigation (Gerald Peebler, et al., v. State of Califomia Department of Finance, et al., Case No. 34-2012-80001172), regarding the South Main Settlement Agreement, one of the enforceable obligations on the prior ROPS which was approved by the Successor Agency and Oversight Board, but denied by DOF. E. On July 12, 2012, DOF sent a letter to all redevelopment agencies stating that no further revised ROPS for periods prior to January 1, 2013 would be accepted and no further requests for reconsideration of such prior ROPS (or items on such ROPS) would be considered. F. The ROPS (Exhibit A of Exhibit 1) and Budget (Exhibit B of Exhibit 1) for the January 1, 2013 through June 30, 2013 period is now being presented for Successor Agency approval. Based on the DOF instructions for the third ROPS, the DOF is allowing the Agency/Oversight Board to include previously disputed items on this third ROPS. These disputed items are included as directed in the "Notes" section of the form provided by DOF. G. Following action by the Successor Agency, the ROPS and Budget will be forwarded to the Oversight Board, DOF, County and other appropriate entities as required by AB 1484. The Oversight Board will consider the ROPS and Budget at a special meeting anticipated to be held August 28, 2012. H. Pursuant to AB 1484 and DOF directive, the approved ROPS must be submitted to the DOF no later than September 4, 2012, or the Successor Agency/City will be subject to severe financial penalties. 1. Health and Safety Code Section 34173(e) provides that "the liability of any successor agency, acting pursuant to the powers granted under the act adding this part, shall be limited to the extent of the total sum of property tax revenues it receives pursuant to this part and the value of assets transferred to it as a successor agency for a dissolved redevelopment agency." Thus, the City's obligations as Successor Agency are limited by the amount of property taxes and the value of assets it receives in its role as the Successor Agency. Despite this language, the Dissolution Act (as amended by AB 1484) also provides for the withholding and diversion of sales tax and property tax revenues otherwise due to the City in order to recover certain expenditures deemed to have been improperly made by the former Agency; however this offset is inapplicable to the present actions. Section 2. The attached Recognized Obligation Payment Schedule (Exhibit A), which is hereby approved by the Successor Agency, establishes those obligations which the Community Redevelopment Agency of the City of Santa Ana has binding commitments that it has entered into and includes legal commitments that it is obligated to perform from January 1, 2013 through June 30, 2013, in order to meet the pre-existing SA Resolution No. 2012-007 Page 2 of 24 commitments of contracts and obligations that were established prior to the effective date of the Dissolution Act. Such approval is conditional upon approval of the Oversight Board. Section 3. Pursuant to the Dissolution Act, the Successor Agency approves the proposed Administrative Budget, attached hereto as Exhibit B and incorporated by this reference. Such approval is conditional upon approval of the Oversight Board. Following action by the Successor Agency, the ROPS and Budget will be forwarded to the Oversight Board, DOF, County and other appropriate entities as required by AB 1484. Section 4. The City Manager, or his/her designee ("City Manager"), is directed to file the Recognized Obligation Payment Schedule and the Administrative Budget in the manner required by law. Section 5. The City Manager and/or the Director of Finance, or their respective designees, as delegated officials of the City acting as Successor Agency, are authorized to make any augmentations, modifications, additions, or revisions as may be necessary to the ROPS or Administrative Budget, and as may be amended from time to time, based upon review by the State Department of Finance or the independent auditor selected by the County of Orange. Section 6. This Clerk of the Council shall attest to and certify the vote adopting this Resolution. ADOPTED this 20th day of August 2012. APPROVED AS TO FORM: Sonia R. Carvalho, City Attorney By:` Lisa E. Storck Assistant City Attorney SA Resolution No. 2012-007 Page 3 of 24 AYES: Councilmembers: Alvarez, Benavides, Martinez, Pulido, Tinajero (5) NOES: Councilmembers: None (0) ABSTAIN: Councilmembers: None (0) NOT PRESENT: Councilmembers: Bustamante, Sarmiento (2) CERTIFICATION OF ATTESTATION AND ORIGINALITY I, Maria D. Huizar, Clerk of the Council, do hereby attest to and certify the attached Resolution No. 2012-007 to be the original resolution adopted by the City Council acting as the Successor Agency on August 20, 2012. Date: elbw Z Gl7s?-- ?. r Maria D. Huizar, Clerk of the Council SA Resolution No. 2012-007 Page 4 of 24 Q H m_ X W C O m E O C U C O U U C d O N N a) U U 7 cn O I- N O) U ns C Q co c ca L6 O N 2 v Q O ` ca -D a) > a ? a ) CF Q 3 :) CD m L . cu O 00 ca U C U M , a) o LO w r 'It ' (D 0 E co 2 L7 ca m c C: (U U M 0 c o I 00 Z E ccoo t c U) - r U C m Q `o N N O U U O o (U '-' E m O Z U L 3 < Z Q a) L: v c M a) E ai a) ) -0 a) m = L i Zi=aw o? E -a Z F- O -p U U U U zQ f0 m m m w- ` `am U U a) - C C C c U U U U c c o U U a Uu (U/i U U w m m m C C C C E E C c c U U U U `a < UU O O ) Q a C C U w SA Resolution No. 2012-007 Page 5 of 24 Q H LYI 2 X W w J D w 2 U o H LL Z M W r 2 0 a° M Z N O? Q O M J r m C) O o? w Z. N Z ? 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Y Y 2 2 .Y 2 u 2 .Y t .Y t . t t n E E E E E E E E z w Z c° m 2 2 ? E i 3 S ? ? S ` p b b ? b ? XX $ pp ? b a3 E E U U U U U b U b U U b S ? a L b A: a i > `m > 5 > ? > > A > Fe X > > ' > -`? > a a a a a a aa a a N N t% S E O "u u ' Y 4 "a "a M "a y u U -a M I > ? U o U E U o U 0 U 0 U 0 o U U E U o p E U E' C C °c m m m C m e od U ° u a a E a E E E E E E E ? r° zY z r sY ? c E ? b J9 P1 b Yl 19 19 ?rn a U U U U U U U U ?? a° - v T i u G Ti L Ti ? u $ g _ a =o ?o .m E N O W J ° 7 W n x v U N ? F- - a =, ws F c 6 ar O a^ O W- 2 0 O W SA Resolution No. 2012-007 Page 9 of 24 U m Q N U O W E Z m a W ? C ? N C N ° N ? W c cr. L 7 L N U O N O LW V O 0 A °c L p N O C E m U C o E m a N N V N w 0 U j _ O L W FL N W C O o W m N N ? O ? N C - « N N U W ? J m E U U y ? W aEi J N l0 W O N N u_ ? U W N o o N L .- W O W N W £ W y m ? N N r 5 N ,C !- U 3 O C W ? J v N ° W E _? J N ° °? U f0 « N W O N W ? N N U U W c W W O ? d W E ?" U W w v N N o N W N 10 ? N a O 0: ? 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C7 J CD O p N z O U Santa Ana Successor Agency General Dispute Issue: DOF Waiver of Obiections to ROPS Pursuant to Section 34179, as it read prior to June 27, 2012, the DOF had three business days to request review of the ROPS and, if it requested review within that three day time period, the DOF had ten days to approve or reject enforceable obligations included on the ROPS.' The ROPS for January-June 2012 was submitted to the DOF on April 16, 2012. DOF did not submit a request to review the January-June 2012 ROPS until April 23, 2012 at 5:22 p.m., via e-mail; thus, DOF's request to review the January-June 2012 ROPS was received more than three business days (in fact, a full week) following submission of this ROPS to the DOF. The Successor Agency did not receive a letter from the DOF rejecting items included on the January-June 2012 ROPS until May 3, 2012 at 7:33 p.m., after close of business on the tenth day following DOF's request to review this ROPS. Further, the Successor Agency submitted the July-December 2012 ROPS to the DOF on May 9, 2012. The DOF requested review of this ROPS on May 14, 2012, but did not provide a response rejecting items on the July-December 2012 ROPS until after close of business (at 9:34 p.m.) on May 24, 2012. We hereby reserve our right to challenge the DOF's requests for review and rejections of the ROPS as untimely and to assert that the DOF waived its right to object to the inclusion of enforceable obligations on the ROPS. 1 AB 1484 extended these time periods to five business days for the DOF to request review and 45 days to respond with approvals and/or disapprovals of specified items on the ROPS; however no part of AB 1484 was made retroactive; therefore the DOF was required to act within the time periods in effect at the time the ROPS was submitted, and resubmitted, to the DOF. ' AB 1484 extended these time periods to five business days for the DOF to request review and 40 days to respond with approvals and/or disapprovals of specified items on the ROPS; however no part of AB 1484 was made retroactive; therefore the DOF was required to act within the time periods in effect at the time the ROPS was submitted, and resubmitted, to the DOF. SA Resolution No. 2012-007 Page 11 of 24 Santa Ana Successor Agency Dispute on Overall Project Costs Items: In our first two ROPS, DOF moved legitimate project costs into "Administrative" costs. This was contrary to DOF's own position (set forth in "Exhibit 4" on the DOF webpage devoted to ABX1 26 issues) which treats such costs as "specific project implementation activities such as construction inspection, project management or actual construction [which] would not be viewed by Finance as `administrative."' Recently enacted AB 1484 further reinforces this position. Thus, project costs from our prior two ROPS need to backed out of the "Administrative Cost Allowance," and our ROPS allocations and Administrative Budgets recalculated accordingly. SA Resolution No. 2012-007 Page 12 of 24 Page 1 of 2 Santa Ana Successor Agency Dispute on ROPS #'s 14 -18 (Settlement Agreements): The Settlement Agreements consist of legal settlement agreements between the Former Agency and third parties ("Contractual Settlement Agreements"), and judgments entered against the Former Agency by the California Superior Court for the County of Orange ("Judgment Settlement Agreements"). These are not pass through agreements with affected taxing entities, but are similarly structured, in that the terms of these agreements required the Former Agency to apply a specified percentage of tax increment from specified component project areas to specified improvements and other purposes. We have provided all documentation requested by the DOF relating to the Settlement Agreements and we have explained more than once already why the Settlement Agreements are enforceable obligations of the Successor Agency that were properly included on the ROPS. In the May 24 Letter, the DOF rejected the Settlement Agreements, stating (without statutory reference or legal support) that "Settlements awarding a percentage of tax increment are not considered EOs." The DOF went on to explain, again without specific statutory or other legal authority, that "pursuant to ABx1 26, tax increment is no longer payable to redevelopment agencies and is therefore not an E0." The DOF's position is contrary to the plain language of the Dissolution Act and applies the Dissolution Act in an unconstitutional manner. Section 34171(d) defines "enforceable obligation" for purposes of Part 1.85 of the Dissolution Act; Section 34171(d)(1)(E) provides that "enforceable obligations" include "[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy,"' The Contractual Settlement Agreements are legally binding and enforceable agreements which were executed long before June 28, 2012, when the Dissolution Act became effective. Section 34171(d)(1)(D) provides 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.s2 As noted above, the Judgment Settlement Agreements are binding and enforceable judgments issued by California courts in favor of third party private entities, not affected taxing entities. The Judgment Settlement Agreements are not passthrough agreements. As with the Contractual Settlement Agreements, the Judgment Settlement Agreements were issued and became binding and enforceable long before the effective date of the Dissolution Act. In addition to the plain language of Section 34171, subdivisions (d)(1)(D) and (d)(1)(E), the DOF's statement that payments of tax increment are not permitted by AB 1 x 26 is patently false. Section 34183 specifically requires county auditor-controllers to make payments under pass through Identical language is found in subparagraph (5) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. z Identical language is found in subparagraph (4) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. SA Resolution No. 2012-007 Page 13 of 24 Page 2 of 2 agreements to taxing agencies. Many such agreements required former redevelopment agencies to pay a specified percentage of tax increment to taxing agencies. Section 34171(d)(1)(D) specifically refers to such pass through payments, and excludes payments made by county auditor-controllers under Section 34183 from the purview of Section 34171(d)(1)(D), presumably to avoid double payments to taxing entities. This indicates that the California legislature intended judgments and settlements, like the Judgment Settlement Agreements, that are similar in structure to pass through agreements, to be considered enforceable obligations and included on the ROPS. Further, Section 34175(a) makes clear that the legislature intended to honor all pledges made by the Former Agency; that section specifically protects the "stream of revenues available to meet the requirements" of such protected pledges. The structure of the Settlement Agreements-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 these types of agreements (nor could they, without violating the constitutional prohibition against impairing contracts 3). In the May 24 letter, the DOF also challenges the Successor Agency's obligation to enter into agreements for. improvements as required by the Settlement Agreements, stating "ABx 1 26 does not allow successor agencies to enter into new contracts; any unencumbered balances should be remitted to the County Auditor Controller." The DOF cites language in Section 34176 that excludes low and moderate income housing funds from the housing assets to be transferred to the successor housing agency. This section does not purport to invalidate enforceable obligations or prevent payment of enforceable obligations using housing funds. In fact, Section 34177(1) expressly lists the Low and Moderate Income Housing Funds as one source of payment for enforceable obligations listed on the ROPS. Thus, the DOF's apparent position that otherwise legal and binding obligations payable using housing funds are not enforceable obligations is contrary to the intent of the legislature. To the extent DOF's determination that the Settlement Agreements are not enforceable obligations rests on an interpretation of the Dissolution Act to prohibit successor agencies from entering into new agreements for any purpose, even if required to do so by an enforceable obligation, AB 1484 clarified the legislature's intent to permit successor agencies to enter into such "new" obligations in Section 34177.3(a), which states: "Successor agencies shall lack the authority to, and shall not, create new enforceable obligations under the authority of the Community Redevelopment Law ... or begin new redevelopment work, except in compliance with an enforceable obligation that existed prior to June 28, 2011."a In response to the DOF's position that the Settlement Agreements are not enforceable obligations, a lawsuit has been filed in the Superior Court of the State of California, County of Sacramento (Gerald Peebler, et al, v. State of California Department of Finance et al, Case No. 34- 2012-80001172). See Article I, Section 10, Clause 1 of the United States Constitution ("No State shall ... pass any ... Law impairing the Obligation of Contracts ...") and Article 1, Section 9 of the California Constitution ("A ... law Impairing the obligation of contracts may not be passed.") Emphasis added. SA Resolution No. 2012-007 Page 14 of 24 Page 1 of 5 Santa Ana Successor Agency Dispute on ROPS #35 & 36 (SA Venture Agmnts.): The ROPS includes the outstanding obligation of the Former Agency (and therefore the Successor Agency) under the S.A. Venture Agreement to pay certain transportation impact fees ("Fees") in the event Santa Ana Venture (the third party oblige under the S.A. Venture Agreement referred to in this letter as the "Developer") constructs additional retail and/or office improvements pursuant to the agreement. Specifically, in the event the Successor Agency's obligation to pay the Fees is triggered, the Successor Agency will be required to pay one percent (1%) of the estimated cost of construction of the development for which the Fees are charged directly to the City and the Developer will make a loan to the Successor Agency equal to the remaining amount of the Fees ("Fee Loan"). The Fee Loan is required to be paid from and is secured by a pledge of former tax increment accruing from the Site (defined in the S.A. Venture Agreement). Although the specific development to which the Fees and the Fee Loan relate has not yet commenced, the Successor Agency's obligation to pay the Fees and to borrow and repay the Fee Loan constitute one component of a broader, multifaceted contractual arrangement between the Former Agency (now the Successor Agency) and the Developer. The Developer has expended significant moneys and taken substantial actions in reliance on the Former Agency's/Successor Agency's obligation to perform its obligations under the S.A. Venture Agreement, including payment of the Fees and repayment of the Fee Loan. The DOF has taken the position that "Section 34163 (b) prohibits a redevelopment agency from incurring any obligations or making commitments after June 27, 2011." The DOF further states, in the May 24 Letter, that the DOF believes "that commitments have not been made for the $1.6 million [Fees/Fee Loan] and that this is an estimated amount for possible future projects." As an initial matter, Section 34163 is not applicable to the Successor Agency. Section 34163, cited by the DOF, does not mention successor agencies at all; instead, this section lists actions that former redevelopment agencies were prohibited from taking during the period between the passage of AB 1x 26 and February 1, 2012, the date all redevelopment agencies were dissolved.' More fundamentally, the S.A. Venture Agreement and the Former Agency's obligation to pay the Fees in connection with specified future development pursuant to that agreement do not constitute new obligations or commitments of the Former Agency or the Successor Agency. This obligation was set forth in the original Participation Agreement, executed in 1984, and was amended in the Third Amendment to the Participation Agreement, executed in 1992-Long before the passage of the Dissolution Act and AB 1484. Even if Part 1.8 governed the obligations and authority of successor agencies, Section 34167, subdivisions (d)(5) and (f) clarify the California legislature's intent that obligations such as the S.A. Venture Agreement were intended to be honored in the dissolution process. Section 34167(d)(5) defines "enforceable obligation" to include `[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy." Section 34167(f) Specifically, Section 34163 states "Notwithstanding Part 1 (commencing with Section 33000), Part 1.5 (commencing with Section 34000), Part 1.6 (commencing with Section 34050), and Part 1.7 (commencing with Section 34100), or any other law, commencing on the effective date of [Part 1.8], an agency shall not have the authority to, and shall not, do any of the following: ... (b) Enter into contracts with, incur obligations, or make commitments to, any entity ... for any purpose...." Emphasis added. SA Resolution No. 2012-007 Page 15 of 24 Page 2 of 5 provides that "[n]othing in this part shall be construed to interfere with a redevelopment agency's authority, pursuant to enforceable obligations as defined in this chapter, to (1) make payments due, (2) enforce existing covenants and obligations, or (3) perform its obligations."z DOF is reading Section 34163 out of context and is therefore mistaken in its conclusion that the S.A. Venture Agreement is not an ongoing enforceable obligation. The obligation to pay the Fees was a legally binding and enforceable agreement of the Former Agency and is now a legally binding and enforceable agreement, and therefore an enforceable obligation, of the Successor Agency. As discussed above, if the DOF rejected the S.A. Venture Agreement due to the potential need to enter into future implementing agreements, AB 1484 (specifically Section 34177.3(a)) clarifies that Successor Agencies may enter into new obligations to the extent required by enforceable obligations. We dispute DOF's characterization of the S.A. Venture Agreements as requiring the Successor Agency to enter into new obligations; however, even if this was the case, AB 1484 clarifies that this is permitted when required by an enforceable obligation. The S.A. Venture Agreement is a legally binding agreement, enforceable in accordance with its terms. The fact that the Developer must perform future obligations to trigger the Successor Agency's obligation to pay the Fees or that future additional agreements may be required to implement the S.A. Venture Agreement does not render the agreement unenforceable. Contracts with executory provisions are nonetheless binding and enforceable under California law, as explained in more detail below. California Law Upholds Enforceability of Executory Contracts. On December 22, 2008, in a landmark decision emphasizing California's public policy favoring liberal enforcement of contracts, in Patel v. Liebermensch, (2008) 45 Cal Ath 344, the California Supreme Court held that an enforceable contract to sell real estate arises whenever the contract identifies the parties, the price, and a reasonably certain description of the property. If the parties do not agree on other so-called "non-essential" terms that might typically be included in a real estate transaction - such as closing date, title insurance, financing terms, due diligence periods and the like - California courts will supply such terms as are reasonable. Patel is thus sometimes known as the "Essential 3-P's" decision. In thus clarifying the law relative to the enforcement of real estate contracts, our Supreme Court emphasized the parties' intent controls. Under California law, where terms are sufficiently definite for a court to ascertain the parties' obligations and to determine whether those obligations have been performed or breached, a contract will be enforced.3 An obligation is enforceable where its provisions are sufficiently certain to make ascertainable the precise act that is to be done.4 A binding contract is created wherever its essential terms are clearly enough stated to allow the parties to understand what each is required to do, the contract is supported by consideration,s and the parties agreed to the terms of the contract.6 Accordingly, California law is generally predisposed to uphold contracts as enforceable.' Emphasis added. 3 Weddington Prods., Inc. v. Flick (1998) 60 Cal.AppAth 793, 811; Boyd v. Bevilacqua (1966) 247 Ca1,App.2d 272, 287; Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500-501; Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407. 4 Cal. Civ. Code, § 3390, subd. (5) (requiring that specific performance is only available where the agreement has terms sufficiently certain to make the precise act to be done clearly ascertainable). 5 Cal. Civ. Code § 1614 provides that "(a] written instrument is presumptive evidence of consideration." The S.A. Venture Agreement is, naturally, a written instrument, and provides presumptive evidence of consideration. SA Resolution No. 2012-007 Page 16 of 24 Page 3 of 5 For instance, in Ersa Grae Corp. v. Fluor Corp., (1991) 1 Cal.AppAth 613, 623, Division 1 of the Second District Court of Appeal (Los Angeles) found the terms of large scale real estate development contract sufficiently definite to enforce where the contract stated one party, Ersa Grae, agreed to provide funding within a defined period after the satisfaction of certain conditions; the other, Fluor, agreed to select and pay for the services of all third-parties needed to supervise and carry out the necessary construction work; and, upon completion, Fluor agreed to transfer its interests in the completed project and underlying land lease to a consortium in exchange for £1 million.8 In rejecting Fluor's claim that the contract was unenforceable because it contemplated the parties' negotiation and execution of future agreements necessary to carry out their intent (e.g., the parties' required negotiation and execution of their contemplated future agreement to convey the fully developed property subject to a long-term land lease),9 Ersa Grae explained: The fact that an agreement contemplates subsequent documentation does not invalidate the agreement if the parties have agreed to its existing terms. (See Clark v. Fiedler (1941) 44 Cal.App.2d 838, 847 ["`Any other rule would always permit a party who has entered a contract like this ... to violate it, whenever the understanding was that it should be reduced to another written form, by simply suggesting other and additional terms and conditions. If this were the rule the contract would never be completed in cases where, by changes in the market, or other events occurring subsequent to the written negotiations, it became the interest of either party to adopt that course in order to escape or evade obligations incurred in the ordinary course of commercial business."']. See also, Smissaert v. Chiado (1958) 163 Cal.App.2d 827, 830.0 The legally enforceable contract in Ersa Grae is very similar to the S.A. Venture Agreement. Here, the Former Agency agreed to pay certain Fees in connection with certain types o future development performed by the Developer at the Site. Ersa Grae is just one of dozens of published cases holding contracts of this type fully enforceable. See, e.g., Bleeeher v. Conte (1981) 29 Ca1.3d 345, 354-55 [the law does not bar specific performance of a land sales contract in which a city's future approval of certain development plans is made a condition precedent to completion of the agreement]; Larwin-Southern California, Inc. v. JGB Investment Co. (1979) 101 Ca1.App.3d 626, 638 [the mere presence of a satisfaction clause in a contract does not result in that contract's nullity]; Mattei v, Hopper (1958) 51 Cal.2d 119 [land sale contracts containing satisfaction clauses are generally enforceable, except where such clauses render a party's obligation to perform illusory]. Here, DOF does not advance the unsustainable claim that anything in the S.A. Venture Agreement renders either party's duty to perform illusory. Black letter law further holds that "[a] contract's material terms (such as subject matter, price, payment terms, and duration) must be `sufficiently definite' so that each party can be Moreover, "[c]onsideration may be an act, forbearance, change in legal relations, or a promise." 1 Witkin, Summary of California Law (10th ed. 2005) CONTRACTS, § 202. e Judicial Council of California Advisory Committee on Civil Jury Instructions 302, Contract Formation - Essential Factual Elements. 7 See, e.g., Patel v. Lieberrnensch (2008) 45 Cal .4th 344, 369-70 (quoting and citing Mclllrnoil v. Frawley Motor Co. (1923) 190 Cal. 546). s 39 (1991) 1 Cal.AppAth 613, 623. 9 Ersa Grae Corp., 1 Cal.AppAth at 623. 10 Id. at n. 3 (citations in original). SA Resolution No. 2012-007 Page 17 of 24 Page 4 of 5 `reasonably certain' about what it is promising to do or how it is to perform.s, I Here, the subject matter of the S.A. Venture Agreement is unambiguous and includes a detailed description of the Former Agency's obligations to the Developer with respect to payment of the Fees and repayment of the Fee Loan.12 The dollar amount of the Former Agency's payment obligation is ascertainable through the formula set forth in Section 6 of Attachment No. 4 of the Participation Agreement, as amended by the Third Amendment. That same provision sets forth a clear formula for the principal amount of the Fee Loan, as well as the interest rate, the source of payments, and a pledge of site specific tax increment securing repayment of the Fee Loan. The Former Agency's (and now the Successor Agency's) future obligations under the S.A. Venture Agreement are therefore sufficiently defined in the agreement to enable the parties to perform their obligations. Finally, the DOF's May 24 Letter ignores the difference between the parties' execution of documents needed to carry out pre-existing contractual commitments and the negotiation of entirely new agreements. An "agreement to agree" - i.e., an agreement to negotiate and sign future agreements or legal documents required to effectuate the purpose and intent of a pre-existing contractual obligation - is fully enforceable in California. Copeland v. Baskin Robbins U,S.A. (2002) 96 Cal.AppAth 1251, 1260 ["[W]hen the parties are under a contractual compulsion to negotiate ... the covenant of good faith and fair dealing attach[es], as it does in every contract. In the latter situation the implied covenant of good faith and fair dealing has the salutary effect of creating a disincentive for acting in bad faith in contract negotiations."] Hence, DOF's suggestion that there is no enforceable duty to negotiate the terms of legal documents needed to carry out the parties' otherwise clearly stated deal in good faith is simply contrary to law. Even if "detail" terms are omitted, contracts are enforceable under California law. California courts have specifically enforced agreements that have not expressly contained-all of the terms agreed upon. For instance, in Goodwest Rubber Corp, v. Mun"oz (1985) 170 Cal.App.3d 919, 921, reversing a judgment denying specific performance when the contract called for payment at "market value," the court stated: The modern trend of the law is to favor the enforcement of contracts, to lean against their unenforceability because of uncertainty, and to carry out the intentions of the parties if this can feasibly be done. Neither law nor equity requires that every term and condition of an agreement be set forth in the contract. Case law holds that where "detail" or non-essential terms of a contract are to be agreed in the future, the contract remains enforceable. 13 While certain ministerial arrangements may remain outstanding, the material terms of the S.A. Venture Agreement are in place; hence, the S.A. Venture Agreement is enforceable. Pledges of Tax Increment are Honored by the Dissolution Act. The Successor Agency's obligation to repay the Fee Loan under the S.A. Venture Agreement is supported by a pledge of tax revenues from the Site. Section 34175(a) specifically protects pledges of tax revenues made by the Former Agency, as follows: "Dyer v. Bilaal (D.C. 2009) 983 A.2d 349, 356. 12 See Section 6 of Attachment No. 4 of the Participation Agreement, as amended by the Third Amendment. 13 City of Los Angeles v. Superior Court (1959) 51 Ca1.2d 423, 433. SA Resolution No. 2012-007 Page 18 of 24 Page 5 of 5 It is the intent of this part that pledges of revenues associated with enforceable obligations of the former redevelopment agencies are to be honored. It is intended that the cessation of any redevelopment agency shall not affect either the pledge, the legal existence of that pledge, or the stream of revenues available to meet the requirements of the pledge. Section 34174(a) provides further support for the conclusion that the obligation to pay the Fees is an enforceable obligation protected by the Dissolution Act: [N]othing herein is intended to absolve the successor agency of payment or other obligations due or imposed pursuant to the enforceable obligations; and provided further, that nothing in the act adding this part is intended to be construed as an action or circumstance that may give rise to an event of default under any of the documents governing the enforceable obligations. The legislature was clearly mindful that the Dissolution Act would be unconstitutional if it impaired existing contractual obligations of the Former Agency. 14 14 See footnote [5], above. SA Resolution No. 2012-007 Page 19 of 24 2 W N q ? 6 `- Q O K 6 ? ? ? J r O U W ? ? Q S O u U o p W ? w m Z ? 0 _ o « u O ? 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HI a t ??.? ? k xk r i,a ?i r Succe,ssor "Agency,,„?, Estimated ;Amounts Staff Support (EOPS, ROPS, Admin Budget, Records Management, etc.)1 $ 236,041 Brown Act requirements (agendas, minutes, etc.) 1 14,200 Supplies, printing, telephones, misc. items 19,210 Consultants (legal, financial, etc.) 416,357 Subtotal $ 685,807 Oversight Board Staff Support (research, reporting, etc.) 1 $ 56,780 Brown Act requirements (agendas, minutes, etc.) 1 6,555 Supplies, printing, misc. items 4,803 Subtotal $ 68,138 Delivery Charges Building Rental $ 183 6,545 Rental City Equipment 778 Computer Services Charge 70 IS Strategic Plan 2,708 Insurance Charges 4,480 Subtotal $ 14,763 Share of ?s,Cos , Ilo '' ' '? Indirect Costs $ 19,082 Subtotal $ 19,082 TOTAL ESTIMATED AMOUNT $ 787,789 The estimated amount of the Administrative Budget for the six month period covering January through June 2013 is to be paid from property tax revenues deposited in the Redevelopment Property Tax Trust Fund. This budget may be augmented, modified, added to, or revised as authorized under the resolution. 1 Includes salaries, wages, and all fringe benefits offered by the City to employees. SA Resolution No. 2012-007 Page 24 of 24