Exhibit A
Settlement Agreement and Mutual Release
This Settlement Agreement and Mutual Release (“Settlement Agreement”) is made by and among the signatories below (the “Parties” or "Settling Parties"), which comprise the City of Pomona ("City"), the successor agency to the former redevelopment agency for the City of Pomona ("Pomona SA"), and the County of Los Angeles, the County Library, the County Flood Control District, and Consolidated Fire Protection District (collectively, the “County” or the “County Entities”), regarding the facts recited below:
RECITALS
Former Health and Safety Code section 33401 ("former section 33401"), as it read prior to the Community Redevelopment Law Reform Act of 1993, (Assembly Bill 1290), permitted a redevelopment agency to agree to pay to any taxing entity with territory located within a project area any amounts of money that the redevelopment agency found necessary and appropriate to alleviate the financial burden or detriment caused to the taxing agency by a redevelopment project.
As authorized by former section 33401, the former redevelopment agency for the City of Pomona ("Pomona RDA") and the County entered into two tax sharing agreements, the Agreement for Allocation of Tax Increment Funds dated December 6, 1988 (Contract No. 60552), relating to the Pomona RDA's Southwest, Downtown 1, Downtown II, Holt Avenue/Indian Hill, Reservoir Street Industrial, and Mountain Meadow Redevelopment Projects (the "Southwest Agreement") and the Agreement for Allocation of Tax Increment Funds dated June 25, 1991 (Contract No. 65447), relating to the South Garey Avenue/Freeway Corridor redevelopment Project (the "South Garey Agreement"). The Southwest Agreement and South Garey Agreement are collectively referred to as the "Deferral Agreements." The Deferral Agreements provided that the County would receive a share of property tax revenue ("pass-through payments") generated from specified project areas of the Pomona RDA to alleviate the financial detriment imposed on the County by those project areas. The Agreements also provided that the County would defer receipt of these passthrough payments until events described in the Deferral Agreements occurred that would trigger payment of the passthrough to the County, plus interest on the deferred amounts at prescribed interest rates.
In or around 2012, the State Legislature approved Assembly Bill x1 26 (the "Dissolution Act"). The Dissolution Act dissolved redevelopment agencies, including the Pomona RDA, effective February 1, 2012, and established successor agencies in their place to wind down the affairs of the dissolved redevelopment agencies. The Successor Agency to the Redevelopment Agency of the City of Pomona ("Pomona SA") is the entity responsible for winding down the affairs of the Pomona RDA.
In or around 2018, the California Department of Finance ("DOF") issued a series of letters to various successor agencies, wherein the DOF denied successor agencies' requests to pay deferred pass-through payment as "enforceable obligations" on the agencies' "recognized obligation payment schedule" as those terms are defined under the Dissolution Law. If treated as enforceable obligations on an agencies recognized obligation payment schedule, the passthrough payments would result in the payments being paid using money from those successor agencies' redevelopment property tax trust funds ("RPTTF"). DOF's denial was premised on DOF's understanding that such pass-through payments are to be repaid according to Health and Safety Code section 34183(a)(1), which requires county auditor-controllers to determine the amounts owed under the pass-through agreement and make the payments.
On or about January 18, 2019, the County Auditor-Controller issued a letter to the Finance Director/Treasurer for the City of Pomona, on behalf Pomona SA, to provide notice that the County would begin administering the pass-through agreement pursuant to the guidance provided by the DOF in 2018.
In and during 2019 through 2022, the City and County periodically engaged in negotiations over the deferred pass-through amounts owed by the Pomona SA, including a tolling agreement executed by the County and City in May 2019.
On September 24, 2021, the County proposed a settlement to the City, offering to reduce the interest rate applicable to the South Garey and Southwest Agreements to the average County treasury pool rate in effect from the fiscal year each pass-through deferral began, through Fiscal Year ("FY") 2020-2021, among other terms.
On January 1, 2022, Section 34183.1 of the California Health and Safety Code, as added by Senate Bill 734, became effective, which provides that a successor agency and one more taxing entities may enter into an agreement to modify the interest owed by a former redevelopment agency.
In June 2022, the City informed the County that the City would accept the September 24, 2021 settlement proposal from the County, which has now led to the County and City agreeing to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing facts and the promises set forth below, it is agreed as follows:
Repayment Terms
For the Southwest Agreement, the Parties agree as follows:
The interest rate applicable to the Southwest Agreement shall be reduced to the average County treasury pool rate in effect from the fiscal year the Southwest Agreement pass-through deferral began, through Fiscal Year ("FY") 2020-2021, which is 3.39 percent; The reduced interest rate of 3.39 percent shall be applied prospectively and retroactively, with the effect that the total amount repaid shall be reduced by $103,209,109.00.
A payment schedule for the Southwest Agreement, calculated using the 3.39 percent rate, including the remaining balance and estimated annual payments to be repaid, is attached as Exhibit A.
As set forth in Exhibit A, the deferral repayment is estimated to be fully repaid in FY 2028-2029, but the actual final repayment date shall be subject to actual collections of gross tax increment.
Upon full repayment of the Southwest Agreement balance according to the term set out in this Settlement Agreement, the pass-through owed to the County shall be considered fully repaid.
The parties agree to resolve any issues not anticipated in the repayment schedule in good faith.
For the South Garey Agreement, the Parties agree as follows:
The interest rate applicable to the South Garey Agreement shall be reduced to the average County treasury pool rate in effect from the fiscal year the South Garey Agreement pass-through deferral began, through FY 2020-2021, which was 2.32 percent.
The reduced interest rate of 2.32 percent shall be applied with the effect that outstanding balance was repaid in FY 2020-2021 and the deferral is now fully repaid.
A payment schedule for the South Garey Agreement, calculated using the 2.32 percent rate, is attached as Exhibit B.
As a result of the revised payment schedule, the City waives any right to any overpayment made by the City prior to June 1, 2023. has overpaid by $3,583,678. County shall refund this overpayment amount within 30 days of execution of this Agreement.
Debt Service Adjustments.
In the event that in any fiscal year, the Auditor-Controller determines Pomona SA's RPTTF balance is or likely will be insufficient to satisfy DOF-approved enforceable obligations for bonded indebtedness, the Parties agree that the Auditor-Controller may reduce the pass-through payments to the County provided for in this Settlement Agreement ("Debt-Service Adjustment") so that there is sufficient RPTTF available to pay such DOF-approved enforceable obligations for bonded indebtedness.
The amount of any Debt-Service Adjustment shall remain part of the outstanding principal balance owed to the County and shall be repaid to the County, together with interest, in a future RPTTF distribution or distributions when the Auditor-Controller determines sufficient RPTTF is available.
Conditional Effectiveness
The City and Pomona SA shall submit this Settlement Agreement to the First District Consolidated Oversight Board ("Oversight Board") and the California Department of Finance ("DOF") for consideration.
This Agreement shall not be effective until the Oversight Board and DOF have received the proposed Settlement Agreement from the City and/or Pomona SA and had sufficient opportunity to review the Settlement Agreement and raise any objections to the terms.
This Agreement shall be void in the event either the Oversight Board or DOF fails to approve this Agreement, or raises any objections that create a legitimate question as to the legality of the form or substance of this Agreement, or would put the County in legal jeopardy, in the reasonable determination of the County.
EFFECTIVE DATE: This Settlement Agreement shall become effective upon full approval by the City, Pomona SA, the Los Angeles County Board of Supervisors, and approval by the Oversight Board and DOF. For purposes of approval by the Oversight Board and DOF, "approval" shall mean a formal action, correspondence, or notification by the entity that it approves this Settlement Agreement or the Agency does not object to the Settlement Agreement.
Authority to Enter Into Settlement Agreement. The City and Pomona SA warrant and represent to the County that: (1) the Pomona SA has full authority to enter into this Settlement Agreement; and (2) no provision of the Dissolution Act, including Section 34183.1 of the California Health and Safety Code, limits, prohibits, or otherwise prevents the Pomona SA from entering into this Settlement Agreement.
Indemnification and Defense. The City and Pomona SA agree to indemnify and defend the County from any claim that the County's actions in complying with the terms of this Settlement Agreement are improper due to Section 34183.1 or any other provisions of the Dissolution Law or any other law, or that the City and/or Pomona SA are legally prohibited from entering into this Settlement Agreement or any terms therein.
Termination of Tolling Agreement. The tolling agreement entered into between the parties in May 2019 is hereby terminated.
Release. The City and Pomona SA waive and release all claims and disputes against the County regarding pass-through agreements authorized or entered into pursuant to former Health and Safety Code section 33401 or any other provisions of the Community Redevelopment Law (Health and Safety Code 33000, et seq) or the Dissolution Law. The County waives and releases all claims and disputes against the City and Pomona SA regarding pass-through payments and agreements authorized or entered into pursuant to the former Health and Safety Code section 33401 or any other provision of the Community Redevelopment Law (Health and Safety Code 33000, et. seq) or the Dissolution Law.
WAIVER OF CIVIL CODE SECTION 1542: With respect to the specific subject matter of the release set forth in Paragraph 6.0, above, City and Pomona SA hereby waives against County all rights under California Civil Code section 1542 and any other comparable statute, rule, or law that provides in pertinent part as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” City and Pomona SA understand and acknowledge the significance and consequence of the specific waiver of section 1542 of the California Civil Code along with the benefit and effect of California Civil Code section 1542 and hereby assumes full responsibility for any and all injuries, damages, losses, and expenses, hereinafter incurred by the abovementioned disputes and/or claims.
With respect to the specific subject matter of the release set forth in Paragraph 6.0, above, County hereby waives against City and Pomona SA all rights under California Civil Code section 1542 and any other comparable statute, rule, or law that provides in pertinent part as follows:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” County understands and acknowledges the significance and consequence of the specific waiver of section 1542 of the California Civil Code along with the benefit and effect of California Civil Code section 1542 and hereby assumes full responsibility for any and all injuries, damages, losses, and expenses, hereinafter incurred by the abovementioned disputes and/or claims.
Advice of Counsel and Review of Settlement Agreement: The Settling Parties warrant and represent that the independent advice of legal counsel has been obtained by the Settling Parties prior to signing this Settlement Agreement. The County, City, and Pomona SA each executes this Settlement Agreement voluntarily, with full knowledge of its significance and with the expressed intention of extinguishing all obligations, except as expressly set forth herein.
Successors And Assigns: The Settling Parties understand and agree that the Settlement Agreement, undertakings, acts and other things done or to be done by Settling Parties in this Settlement Agreement shall run to and be binding upon the Settling Parties and each party's heirs, successors, executors, administrators, and assigns.
Compromise of Disputed Claims: The Settling Parties understand and agrees that by acceptance of the revised pass-through amounts, the County does not admit any liability on its part, but that this agreement is the compromise of disputed claims and is made solely to avoid the cost and risk of litigation.
Entire Agreement: This document contains the entire agreement and understanding of the SETTLING PARTIES concerning the subject matter of this Settlement Agreement. This Settlement Agreement supersedes and replaces all prior negotiations and agreements, written or oral between the SETTLING PARTIES. City and Pomona SA acknowledges that no other party, agent, attorney, employee, or representative of COUNTY has made any promise, or representation or warranty not contained herein. This Settlement Agreement is an integrated agreement.
Additional Acts: The Parties agree to execute such additional documents as shall be necessary to implement the terms of this Settlement Agreement.
Attorneys' Fees and Costs: Each party shall bear its/hers/his own costs and attorneys’ fees incurred in the ACTION.
Applicable Law: This Settlement Agreement is made and entered into in the State of California and shall in all respects be interpreted, enforced, and governed through the laws of said state. If any provision of this Settlement Agreement is determined to be invalid under the laws of the State of California by a competent court of law, then such invalid provision(s) shall not cause the remainder of this Settlement Agreement to become invalid.
Rule of Construction: The County, City, and Pomona SA represent, acknowledge, and agree that the rule of construction that ambiguities are to be construed against the drafting party shall not be used or employed in the interpretation or construction of any of the provisions contained in this Settlement Agreement.
Counterparts Permissible: This Settlement Agreement may be executed in counterparts and shall be effective when fully signed. Electronic, copy and facsimile signatures are considered to have the same force and effect as originals.
THE UNDERSIGNED HAVE READ THE FOREGOING SETTLEMENT AGREEMENT AND FULLY UNDERSTAND IT.
DATED: _______________, 2023 CITY OF POMONA
By: __________________________________
Name: __________________________________
Title: __________________________________
APPROVED AS TO FORM:
DATED: _______________, 2023 BEST BEST & KRIEGER
By:________________________________________
Attorneys for City of Pomona and
Successor Agency to the former Redevelopment Agency for the City of Pomona DATED: _______________, 2023 COUNTY OF LOS ANGELES
By: __________________________________
Name: __________________________________
Title: __________________________________
APPROVED AS TO FORM:
DATED: _______________, 2023 DAWYN R. HARRISON
Acting County Counsel
By: ________________________________________
Michael S. Buennagel Senior Deputy County Counsel Attorneys for the County of Los Angeles
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