Judge orders state to reimburse Huntington Beach $25M for redevelopment of waterfront
Huntington Beach sought in the late 1980s to revitalize a portion of its downtown area to make it more attractive to developer projects that would benefit the city by bolstering property taxes and make Surf City a tourist destination.
The City Council authorized a $22.4-million loan, acting as a local redevelopment agency that, thanks to a California law passed in 1945, could use property tax gains incurred from building projects to pay off the original loan.
The 1988 “Waterfront Loan” was one of about a dozen or more loans taken out to help breathe new life into Huntington Beach parcels deemed blighted by incentivizing improvements and development there.
In the years that followed, the Waterfront Beach Resort, a Hilton project, and the Hyatt Regency Huntington Beach Resort & Spa were developed south of the city’s pier through the statewide program.
“The state law said if a city makes commitments of property or money, the state will reimburse the city,” City Atty. Michael Gates said Wednesday. “It was a win-win-win for everybody.”
More than 400 redevelopment agencies, called RDAs, were operating throughout California in 2011, when lawmakers decided to end the program to help solve the state’s fiscal crisis during the recession. The state established “successor agencies” to oversee the winding down of activities after the program ended on Feb. 1, 2012.
Many municipalities were left uncompensated by the dissolution, including Huntington Beach.
The city sued the state Department of Finance in 2018, claiming it was owed up to $75 million in promised reimbursements for development projects that took place from the 1980s through the 2000s.
On Wednesday, a California state court judge determined in a final ruling the state should repay the original loan amount, plus 10% annual interest, amounting to a nearly $25 million win for the city.
Department of Finance officials had attempted to argue the loan agreement between the city and the RDA did not constitute an “enforceable obligation,” eligible for reimbursement under state law. They maintained that because the agreement allowed the agency to make payments in perpetuity, there was no real obligation to pay.
Gates and his legal team submitted financial records showing the redevelopment agency had made various loan payments to the city between 1989 and 2011, including $14.78 million allocated for the Waterfront Loan.
California state court Judge James P. Arguelles determined the agreement did, indeed, obligate repayment of the loan and that the RDA “did not have unbridled discretion to ignore its payment obligation.”
“The agreement contains an obligation to pay and DOF should have treated it as an enforceable obligation when the successor agency submitted its [recognized obligation payment schedule] 17-18,” Arguelles wrote in his decision.
The recent ruling isn’t the first determination in the city’s favor. Last April, Arguelles ordered the state to pay $5.2 million as reimbursement for a loan taken out in 2009 for the sale of the Emerald Cove senior citizen apartment complex on Parktree Circle.
The Department of Finance argued that its obligation was not enforceable, but a judge ruled otherwise.
Huntington Beach Mayor Tony Strickland, in a news release Tuesday, praised Gates for his acumen in pursuing the repayment.
“I appreciate Mr. Gates’ willingness to fight the fights that other cities don’t,” he said. “He is a real asset to Huntington Beach, and the taxpayers should be proud.”
The city attorney said Wednesday he is willing to undertake any fight, even against the state, with authorization from the City Council.
“We went in with guns blazing with a really robust evidentiary record — we did our homework,” Gate said, estimating that, pending an appeal from the state, the reimbursement could be delivered sometime in the next fiscal year. “Those are real dollars going back into our general fund.”
All the latest on Orange County from Orange County.
Get our free TimesOC newsletter.
You may occasionally receive promotional content from the Daily Pilot.
