An Orange County Superior Court judge Friday ruled against an activists’ lawsuit that claimed Anaheim’s financing plan for the $180 million convention center expansion is illegal.
But the court battle probably isn’t over.
Cory Briggs, one of the attorneys fighting the city in the case, vowed to appeal the ruling. He said Superior Court Judge Randall J. Sherman replaced another judge who was supposed to preside over the case and didn’t have enough time to understand all the complexities of the relevant laws.
“It’s not the judge’s fault. He did the best he could under the circumstances,” Briggs said.
A citizens watchdog group known as Coalition of Anaheim Taxpayers for Economic Responsibility or CATER filed the the lawsuit in May, after the City Council approved issuing up to $300 million in bonds to pay for the convention center project. The bonds would also include $20 million in city improvements and the refinancing of other debt.
The city’s general fund — which pays for core services like the police and fire departments — would be on the hook for 30 years to pay for the debt. City leaders argue that a group of hoteliers taxed themselves to pay for promoting the city’s resort district, thereby freeing up the city’s general fund to pay for the convention center expansion.
CATER argues that Anaheim created an illegal financing scheme to circumvent the city charter’s requirement for a citywide vote on the bonds. Days after the suit was filed, Citigroup terminated a deal to purchase the bonds because of the perceived litigation risk.
The city approved issuing a new set of bonds in July, and CATER has filed a another suit aimed at stopping those as well.
This week, many arguments on both sides were presented to Sherman. But at the heart of the case is whether a partnership known as the Anaheim Public Financing Authority – formed between the city and an entity called the successor agency – has the power to issue the bonds.
The successor agency replaced the city’s redevelopment agency after the California legislature axed the state’s redevelopment program, which was intended to spruce up blighted areas by diverting property tax revenue to new projects. But the state found that they were often abused and unnecessarily took revenue away from schools and other government agencies.
Both the city and the successor agency are controlled by the city council, with all five members sitting on both governing boards.
CATER argues that successor agencies only have the power to wind down the affairs of the defunct redevelopment agencies and therefore can’t be party to a joint powers authority that issues new debt.
Briggs, attorney for the Inland Oversight Committee, which joined CATER as a co-plaintiff in the case, likened Anaheim’s bond issue to a married couple in the midst of divorce incurring new community debt.
“All of the power the redevelopment agency once had, is now taken away,” Briggs said.
However, Mark J. Austin, general partner with Rutan & Tucker and the lead attorney making arguments for the city, said the joint powers authority is an entity independent of the successor agency and the city, with powers “greater than the sum of its parts” under the Joint Exercise of Powers Act.
So while the successor agency can’t on its own incur new debt, in this case it did nothing, Austin argued. That’s because the Anaheim Public Financing Authority is entirely separate and endowed with its own powers, he said.
Sherman sided with the city’s argument.
“Obviously we’re very happy with it. We think the judge was right on,” Austin said after the ruling.
The fate of the convention center expansion’s financing is still unclear. Even if CATER wins in its appeal, there still is the second lawsuit over the July bond issuance.