Judge rules in favor of Glendale in lawsuit against state

A Sacramento judge’s final ruling was made in favor of Glendale in its dispute with the state’s Department of Finance over $40 million the city is owed.

Superior Court Judge Shelleyanne Chang said in her decision the finance department abused its discretion when it refused to make payments to the city of Glendale that it promised for services such as road maintenance.

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The source of the funds came from the now-defunct Glendale Redevelopment Agency, which was given many loans from the city dating back to the 1970s for infrastructure-improvement projects.

In 2011, the state government stepped in and dissolved redevelopment agencies throughout California, giving the money lent to them to public education.

The following year, the state allowed cities to form Successor Agencies and oversight boards so they could get that money back. Glendale met all the requirements and won approval from the finance department in 2013 to get back the money it was owed.

A few payments were made, but they later stopped. Last year, the finance department claimed the city lacked necessary documentation, citing a new law that went effect around the same time. The department tried to make that law retroactive and apply it to Glendale, despite the city already having approval.

Judge Chang said the finance department was in the wrong because it went back on its word.

“The record shows that [the finance department] has had multiple opportunities to review the oversight board’s approval of the loan agreements and that [the finance department] has already reviewed the loan agreement and determined that they were enforceable obligations,” she wrote.

In its single-sentence comment, the finance department said the matter may not be over.

“We have 60 days to decide upon whether we will appeal, and we are in the process of assessing our options,” said H.D. Palmer, deputy director of external affairs for the department.

City Manager Scott Ochoa said the $40 million — which would be doled out in annual payments of between $3.5 million and $4.5 million over the next several years — is needed to pay for rising employee pension costs and city services, such as road surface repairs.

Despite not receiving a check from Sacramento, city officials are hopeful about the situation because Chang sided with them, Ochoa said.

“We have accounted for [the money] … That’s how strong we felt and how confident we were,” he said in a phone interview.

Ochoa has been candid in his comments about the finance department acting in bad faith. Now, he says fingers are crossed there won’t be a second round of legal battles in the case.

“Considering the very strong language of the final ruling, we’re hopeful that the department of finance will not appeal,” he said.

In 2015, the city won a separate case with the finance department over the same $40 million in question. That time, the department argued a much lower interest rate had to be taken into account with the redevelopment loans, which would have drastically cut the amount the city was owed.

Chang presided over that case, as well, and ruled in favor of the city.

Ochoa said he’s optimistic, but still weary this time around and hopes even if the state doesn’t appeal or loses an appeal, it won’t try to undercut the court system again by trying to change policy.

“At this point, we are relieved … We’re going to remain vigilant in case the state decides they’re going to try to change the law again,” he said.

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Arin Mikailian, arin.mikailian@latimes.com

Twitter: @ArinMikailian