Filed 8/30/18 City of Lakewood v. Bosler CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

—-

CITY OF LAKEWOOD et al.,

Plaintiffs and Appellants,

v.

KEELY BOSLER, AS DIRECTOR, ETC. et al.,

Defendants and Respondents;

COUNTY OF LOS ANGELES et al.,

Real Parties in Interest and Respondents.

C078788

(Super. Ct. No. 34201380001683CUWMGDS)

This appeal arises from the dissolution of redevelopment agencies. The Department of Finance (Department) and the state auditor determined that promissory notes a former redevelopment agency made to its sponsoring agency, the City of Lakewood, did not qualify as enforceable obligations that would survive the dissolution. The officials ordered the city to remit two payments on the notes it received from the redevelopment agency.

The city and the redevelopment agency’s successor agency challenged the Department’s and the state auditor’s decisions, and lost. They contend on appeal the officials’ orders (1) violated the redevelopment dissolution statutes by determining the notes were not enforceable obligations; (2) violated a state constitutional amendment that restricted the state’s access to tax revenues allocated to redevelopment agencies; (3) violated the constitutional right against government impairment of contracts; and (4) worked an unconstitutional taking without just compensation.

We disagree with their contentions and affirm the judgment.

FACTS AND PROCEEDINGS

A. Statutory Background

The Legislature enacted statutes to abolish redevelopment agencies in 2011. These statutes, referred to as the Dissolution Law, contain two components. (Assem. Bill No. 1X 26 (1st Ex. Sess. 2011-2012, ch. 5) adding Stats. 2011, ch. 5.) The first, the freeze component, became effective on June 29, 2011. It froze redevelopment agency assets and prohibited redevelopment agencies from engaging in new business. (Health & Saf. Code, § 34163; (unless otherwise stated, statutory section references that follow are to the Health and Safety Code.) Of importance here, it allowed redevelopment agencies to continue to make payments and perform “enforceable obligations” until other agencies took over. (§ 34169, subd. (a).) For the duration of the freeze component and until a redevelopment agency was actually dissolved, an “enforceable obligation” included loans incurred by the redevelopment agency. (§ 34167, subd. (d)(2).) But the Legislature expressly declared retroactively that any asset transfer between a redevelopment agency and the local agency that created the redevelopment agency (the sponsoring agency) that occurred after January 1, 2011, nearly six months before the freeze component took effect, was “unauthorized.” (§§ 34167.5, 34171, subd. (n); see City of Culver City v. Cohen (2017) 14 Cal.App.5th 1, 13-14.)

The Dissolution Law’s second component is the dissolution component. It became operative on February 1, 2012. (§ 34170, subd. (a); Matosantos, supra, 53 Cal.4th at pp. 274-276.) The dissolution component dissolved all redevelopment agencies and transferred control of agency assets to successor agencies. (§§ 34171, subd. (j), 34173, 34175, subd. (b).) It required successor agencies to remit all unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to other local agencies. (§§ 34177, subd. (d), 34183, subd. (a)(4), 34188.)

The dissolution component also required successor agencies to continue to make payments and perform the redevelopment agency’s enforceable obligations. (§ 34177.) However, it modified the definition of an “enforceable obligation.” Under the revised definition and with exceptions not relevant here, any agreement, contract, or arrangement between the redevelopment agency and its sponsoring agency was deemed not to be an enforceable obligation and to be invalid and not binding on the successor agency. (§§ 34171, subd. (d)(2), 34178, subd. (a).)

The Dissolution Law includes two different provisions by which the state may recover funds that a redevelopment agency transferred to its sponsoring agency after January 1, 2011. Commentators have referred to these provisions as the “claw back” provisions. (Miller & Starr, Cal. Real Estate (4th ed.) § 30:1.)

One provision enlisted the services of the state controller. It required the controller to conduct an asset transfer review and determine whether a redevelopment agency transferred any assets to its sponsoring agency after January 1, 2011. (§ 34167.5.) If the controller found the redevelopment agency made such an unauthorized transfer, and the sponsoring agency that received those assets was not contractually committed to a third party for their expenditure or encumbrance, the controller was required to order the sponsoring agency to return the assets to the redevelopment agency or its successor agency. (§ 34167.5.) The sponsoring agency, upon receiving such an order from the controller, was required to reverse the transfer and return the assets to the redevelopment agency or successor agency. (§ 34167.5.)

In 2012, the Legislature amended the Dissolution Law to add a second “claw back” provision. (Assem. Bill No. 1484 (2011-2012 Reg. Sess.) adding Stats. 2012, ch. 26, §§ 17, 40, “AB 1484.”) To enforce successor agencies’ obligation to remit all unencumbered redevelopment agency funds to the county auditor-controller, AB 1484 required a successor agency to hire an accountant to review its assets and determine the unobligated balances available to be remitted. (§ 34179.5, subd. (a).) This review is known as a due diligence review.

As part of the review, the accountant identified the dollar value of cash and assets the redevelopment agency and its successor agency transferred to its sponsoring agency from January 1, 2011, through June 30, 2012. (§ 34179.5, subd. (c)(2).) The review had to provide documentation of any “enforceable obligation” that required the transfer. (§ 34179.5, subd. (c)(2).) For purposes of the review, the accountant applied the revised definition of an “enforceable obligation” to the transfers. (§ 34179.5, subd. (b)(2).) AB 1484 required the due diligence review to disclose the amounts of the transfers as available for allocation to other taxing entities. (§ 34179.5, subd. (c)(6).)

The successor agency submitted the results of the due diligence review to its oversight board and to the Department, and each would determine the assets available for remittance. (§ 34179.6, subds. (b), (c), (d).) The two entities could meet and confer if they reached different conclusions, but once the Department’s determination was final, AB 1484 required the successor agency to transfer the amounts designated by the Department to the county auditor-controller. (§ 34179.6, subds. (e), (f).)

B. City’s Loans to the Redevelopment Agency

The city created its redevelopment agency in 1972. Beginning in 1985, the city loaned money to the redevelopment agency almost annually. In 2010, the city and the redevelopment agency agreed to consolidate the outstanding loans, and they executed three new promissory notes, one for each of the redevelopment agency’s three redevelopment projects. The total amount outstanding was approximately $35.2 million. Interest accrued under each note at 12 percent and installments were due annually.

In February 2011, the redevelopment agency amended the terms of the notes by adding a payment schedule to each.

As stated above, the Dissolution Law’s freeze went into effect on June 29, 2011. On June 30, 2011, the redevelopment agency transferred $7,849,061 to the city as payment on the notes. On January 23, 2012, the redevelopment agency transferred another $3,339,521 to the city as payment on the notes. Under the Dissolution Law, the redevelopment agency was dissolved on February 1, 2012.

The transferred funds total $11,188,582 and are the funds in dispute.

C. Due Diligence and Asset Transfer Reviews

On March 15, 2013, the Department notified the successor agency it had completed its due diligence review to identify the redevelopment agency’s and the successor agency’s transfers of cash and assets to the city from January 1, 2011, through June 30, 2012, and the purpose of each. It disallowed the $11.2 million loan payments the redevelopment agency made to the city in June 2011 and January 2012 because agreements between the redevelopment agency and the sponsoring agency were not “enforceable obligations,” as that term is defined by its revised definition. After the parties met and conferred, the Department on May 2, 2013, issued its final determination and again disallowed the roughly $11.2 million transferred to the city. After taking account of other reviewed transactions not at issue here, the Department ordered the successor agency to transmit approximately $9.3 million to the county auditor-controller.

On April 4, 2014, the state controller informed the city he had completed his review of assets the redevelopment agency had transferred to the city after January 1, 2011. He concluded the redevelopment agency’s loan payments to the city in 2011 and 2012 were unauthorized asset transfers under section 34167.5. He ordered the city to reverse the transfers and return the funds to the successor agency for remittance to the county auditor-controller.

In 2015, the successor agency under protest made full payment of the amount owed to the county auditor-controller, and the Department issued it a finding of completion.

We grant the Department’s request that we take judicial notice of its letter announcing its finding of completion. (Evid. Code, § 452, subd. (c).)

D. Litigation

The city and the successor agency (plaintiffs) filed a complaint for declaratory and injunctive relief and a petition for writ of mandate challenging the Department’s final determination on the due diligence review disallowing the $11.2 million in payments on the notes and the state controller’s order that the city return those funds to the successor agency. Plaintiffs contended (1) the Department and the state auditor violated the Dissolution Law by applying the revised definition of “enforceable obligation” in their reviews; (2) the Department’s and the state auditor’s orders violated Proposition 22, a state constitutional amendment that restricted the state’s access to tax revenues allocated to redevelopment agencies; (3) the orders violated the constitutional right against government impairment of contracts; and (4) the orders worked an unconstitutional taking without just compensation.

The trial court denied plaintiffs all relief.

Plaintiffs raise the same contentions here.

We note that plaintiffs also assert the Dissolution Law’s remedies of ordering offsets of future sales and use tax revenue and reductions of property tax revenue violate Proposition 22 by reallocating tax revenues. (§ 34179.6, subd. (h).) In City of Bellflower v. Cohen (2016) 245 Cal.App.4th 438, we agreed with plaintiffs’ argument and held those remedies unconstitutional. (Id. at p. 443.) Plaintiffs’ challenge to those remedies is moot.

DISCUSSION

I

Due Diligence Review

Plaintiffs claim the Department did not comply with the Dissolution Law when it performed its due diligence review. It asserts the Department erred when it applied the revised definition of “enforceable obligation” instead of the original definition to conclude the loan payments were not made pursuant to enforceable obligations. They argue the revised definition, which expressly excludes agreements between redevelopment agencies and their sponsor agencies, did not apply to the notes because it was part of the Dissolution Law’s dissolution component, which did not become operative until February 1, 2012, after the redevelopment agency made its loan payments. Plaintiffs argue that, as a result, the Department was required to apply the original definition of “enforceable obligation” contained in the freeze component, which, plaintiffs contend, includes the notes.

Plaintiffs also argue that even if the Department did not err in applying the revised definition of “enforceable obligations,” it erred in concluding the notes were not enforceable obligations under that definition.

We disagree with plaintiffs’ contentions. The Dissolution Law required the Department to use the revised definition of “enforceable obligation” when it conducted its due diligence review, and the Department properly concluded the notes were not enforceable obligations.

As mentioned above, section 34179.5, added to the Dissolution Law by AB 1484 in 2012, required the Department to conduct its due diligence review to determine the unobligated balances held by the successor agency that should be transferred to the county auditor-controller. As part of that review, the Department was required to review and report the dollar value of any assets and cash the redevelopment agency or the successor agency had transferred to the sponsoring agency from January 1, 2011 through June 30, 2012. (§ 34179.5, subd. (c)(2).) The review was also required to provide any documentation of any “enforceable obligation” that required the transfer. (Ibid.)

For purposes of the Department’s due dilligence review, an “enforceable obligation” is defined by the revised definition found in section 34171, subdivision (d). (§ 34179.5, subd. (b)(2).) That definition expressly excludes from “enforceable obligations” “any agreements, contracts, or arrangements” between the redevelopment agency and the sponsoring agency, subject to exceptions not relevant here. (§ 34171, subd. (d)(2).) This statutory language is unambiguous; the Department was required to apply the revised definition of “enforceable obligation” when it performed its due diligence review.

Moreover, nothing in the Dissolution Law required the Department to apply the original definition of “enforceable obligation.” There is no dispute the redevelopment agency made its loan payments before the revised definition became operative. However, the Legislature enacted the due diligence review statutes in 2012, and they became effective on June 27, 2012, months after the revised definition became operative. And more importantly, the Legislature expressly directed the Department to apply the revised definition in its due diligence review to transfers that occurred before the redevelopment agency was dissolved. We must enforce that intent absent constitutional infirmity. (Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828, 841.)

Plaintiffs alternatively claim the notes are enforceable obligations even under the revised definition of enforceable obligations. Under that definition, an “enforceable obligation” includes “[l]oans of moneys borrowed by the redevelopment agency for a lawful purpose, to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms.” (§ 34171, subd. (d)(1)(B).) It also includes “[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy.” (§ 34171, subd. (d)(1)(E).) Plaintiffs contend the notes satisfy both of these definitions. They were required to be repaid pursuant to the required payment schedule adopted in February 2011, and they were legally binding agreements that did not violate the debt limit or public policy at the time they were adopted.

This argument, however, ignores section 34171’s specific and categorical exclusion of agreements between redevelopment agencies and sponsoring agencies. “On its face, the statutory exclusion of agreements [with sponsoring agencies] from the definition of ‘enforceable obligations’ identifies the extent of the exclusion: ‘For purposes of this part . . . .’ (§ 34171(d)(2).) ‘This part’ is the Dissolution Law, set forth in part 1.85 of division 24 of the Health and Safety Code [the dissolution component]. Therefore, for purposes of the Dissolution Law, the exclusion in section 34171(d)(2) applies to all ‘agreements . . . between the . . . [city] . . . that created the redevelopment agency and the former redevelopment agency’ (§ 34171(d)(2)) . . . .” (County of San Bernardino v. Cohen (2015) 242 Cal.App.4th 803, 815, italics added.)

Section 34171’s specific exclusion for sponsor agreements controls over the more general definitions of enforceable obligations contained in other portions of section 34171 and relied upon by plaintiffs. “If inconsistent statutes cannot otherwise be reconciled, ‘a particular or specific provision will take precedence over a conflicting general provision.’ (People v. Vessell [(1995) 36 Cal.App.4th 285,] 289, citing Code Civ. Proc., § 1859 [‘In the construction of a statute . . . when a general and particular provision are inconsistent, the latter is paramount to the former. So a particular intent will control a general one that is inconsistent with it’]; see also Civil Code, § 3534 [‘Particular expressions qualify those which are general’].) The Supreme Court has confirmed, ‘ “where the general statute standing alone would include the same matter as the special act, and thus conflict with it, the special act will be considered as an exception to the general statute whether it was passed before or after such general enactment. [Citations].” ’ (People v. Gilbert (1969) 1 Cal.3d 475, 479.)” (Stone Street Capital, LLC v. California State Lottery Com. (2008) 165 Cal.App.4th 109, 119.)

The definitions of “enforceable obligation” on which plaintiffs rely, “[l]oans of moneys borrowed by the redevelopment agency for a lawful purpose” (§ 34171, subd. (d)(1)(B)), and “[a]ny legally binding and enforceable agreement or contract” (§ 34171, subd. (d)(1)(E)) would, standing alone, include the notes between the redevelopment agency and the sponsoring agency that section 34171, subdivision (d)(2) excludes from the definition. As a result, the exclusion of the notes under section 34171, subdivision (d)(2) controls and precludes the definitions relied on by plaintiffs.

Plaintiffs have not shown the Department violated the Dissolution Law. Their real complaint challenges the Legislature’s clear and express decision to void transfers and agreements between redevelopment agencies and sponsoring agencies retroactively. “[A] statute’s retroactivity is, in the first instance, a policy determination for the Legislature and one to which courts defer absent ‘some constitutional objection’ to retroactivity. [Citation.]” (Myers v. Philip Morris Companies, Inc., supra, 28 Cal.4th at p. 841.) “If the Legislature has clearly indicated its intent that [statutes] operate retroactively, we must carry out that intent unless the Constitution forbids.” (Bouley v. Long Beach Memorial Medical Center (2005) 127 Cal.App.4th 601, 607.)

Because we find no error in the Department’s due diligence review, we need not address plaintiffs’ arguments against the state controller’s asset transfer review, as both reviews resulted in identical orders.

We turn to plaintiffs’ constitutional arguments.

II

Proposition 22

Plaintiffs contend the Dissolution Law’s provisions that authorized the Department’s due diligence review violate a clause of the California Constitution that prohibits the Legislature from requiring a redevelopment agency to transfer its tax increment revenue to the state or another agency. The clause, article XIII, section 25.5, subdivision (a)(7)(A), was adopted by the electorate in 2010 as Proposition 22. It prohibits the Legislature from enacting a statute that requires a redevelopment agency “to pay, remit . . . or otherwise transfer, directly or indirectly,” any property tax revenue allocated to a redevelopment agency “to or for the benefit of the State, any agency of the State, or any jurisdiction[.]” Plaintiffs claim Proposition 22 protected the 2011 and 2012 loan payments against remittance under the due diligence review because the redevelopment agency made them with allocated property tax revenues to repay loans incurred before the Dissolution Law was enacted, and because the payments were made before the redevelopment agency was dissolved.

This court has rejected plaintiffs’ argument. (City of Big Bear Lake v. Cohen (2017) 12 Cal.App.5th 922, 933; City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 861-862 (Tracy); City of Brentwood v. Campbell (2015) 237 Cal.App.4th 488, 499-500 (Brentwood).) We reject it again here.

As we explained in Brentwood, Proposition 22 did not constrain the Legislature’s plenary power to dissolve redevelopment agencies. As a result, it also did not constrain the Legislature’s power to determine when and in what manner redevelopment agencies would cease to exist as legal entities, a determination which included the authority to retroactively invalidate agreements between the redevelopment agency and its sponsoring agency. Such a decision does not violate Proposition 22 and is “constitutional because it does not reflect redirection of tax increment in the coffers of a viable redevelopment agency of indefinite existence.” (Brentwood, supra, 237 Cal.App.4th at p. 500, italics added.) Proposition 22’s “protection of former redevelopment agencies no longer applies after the point at which the Legislature decided that the redevelopment agencies did not have any further authority to exercise redevelopment powers[.]” (Tracy, supra, 3 Cal.App.5th at p. 861.)

The Legislature determined a redevelopment agency lost its authority to transfer assets to its sponsoring agency on January 1, 2011. (§ 34167.5.) Proposition 22 thus did not apply to the redevelopment agency’s June 2011 and January 2012 loan payments to the city.

Plaintiffs contend our ruling in Brentwood does not apply here because the unenforceable reimbursement agreements in that case between the redevelopment agency and its sponsoring entity were created after January 1, 2011, but before the freeze went into effect on June 29, 2011. The promissory notes here were executed no later than 2010. Our decision in Brentwood, however, did not turn on the days the agreements in that case were created. Rather, it turned on the Legislature’s plenary power to determine, as part of dissolving redevelopment agencies, when redevelopment agency powers would cease to exist.

Plaintiffs further claim the Supreme Court’s ruling in Matosantos supports their argument. There, the Supreme Court ruled unconstitutional under Proposition 22 a portion of the Dissolution Law not relevant here (AB 1X 27) because the law allowed a redevelopment agency to avoid dissolution if its sponsoring agency agreed to transfer tax revenue allocated for redevelopment to other local agencies. (Matosantos, supra, 53 Cal.4th at pp. 264-265.) Plaintiffs claim the logic of that decision should apply here. We rejected this argument in Brentwood as well. Matosantos held that under Proposition 22, “the Legislature could not condition the continued existence of redevelopment agencies on compliance with legislative redirection of their tax increment . . . .” (Brentwood, supra, 237 Cal.App.4th at p. 497, italics added.) Proposition 22, however, does not apply to a redevelopment agency that is being dissolved. As a result, it does not affect the Department’s and state controller’s decisions to require the city and the successor agency to remit the redevelopment agency’s 2011 and 2012 loan payments.

III

Impairment of Contract

Plaintiffs assert the Department’s due diligence order violates the state and federal constitutional rights against the impairment of contracts. (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9.) The argument is not well taken. “The City has no right to complain that the state is impairing its contractual rights.” (City of Grass Valley v. Cohen (2017) 17 Cal.App.5th 567, 592.) Though cities may enjoy a greater degree of autonomy with regard to local affairs than counties, “they too are subject to the sovereign’s right to extend, withdraw or modify the powers delegated. [Citations.] [¶] This legislative control over cities and counties is reflected in the well-established rule that subordinate political entities, as ‘creatures’ of the state, may not challenge state action as violating the entities’ rights under the due process or equal protection clauses of the Fourteenth Amendment or under the contract clause of the federal Constitution. ‘A municipal corporation, created by a state for the better ordering of government, has no privileges or immunities under the federal constitution which it may invoke in opposition to the will of its creator. [Citations.]’ (Williams v. Mayor of Baltimore (1933) 289 U.S. 36, 40 [77 L.Ed. 1015].)” (Star-Kist Foods, Inc. v. County of Los Angeles (1986) 42 Cal.3d 1, 6 (Star-Kist), italics added.)

Plaintiffs retort they have standing to challenge state action under the federal supremacy clause and the commerce clause. Star-Kist makes that point clear. (See Star-Kist, supra, 42 Cal.3d at pp. 8-10.) But standing under those clauses exists to challenge a state’s encroachment on federal power. “State action cannot be so insulated from scrutiny that encroachments on the federal government’s constitutional powers go unredressed.” (Id. at p. 9, italics added.) “Courts have recognized that, consistent with our federal system of government, state political subdivisions should be given standing to invoke the supremacy clause to challenge a state law on preemption grounds.” (City of Garden Grove v. Superior Court (2007) 157 Cal.App.4th 355, 371, citing Star-Kist, supra, 42 Cal.3d at pp. 5-10, italics added.)

Plaintiffs, however, claim Star-Kist extends this authority to challenge state actions as unconstitutional under the contract clause because the state actions “implicate the fundamental structure of government,” in this case, the relationship of Proposition 22 to the Dissolution Law. Star-Kist does nothing of the sort. It granted standing to cities and counties to “invoke the federal Constitution to challenge a state law which they are otherwise duty-bound to enforce.” (Star-Kist, supra, 42 Cal.3d at p. 6 [city and county could challenge under the commerce clause state statute exempting products of foreign origin from ad valorem taxation].) Local agencies have this standing where the case “implicates constitutional concerns respecting the relationship between state and federal law.” (City of Garden Grove v. Superior Court, supra, 157 Cal.App.4th at pp. 370-371 [city had standing to challenge state statute requiring police to return confiscated medical marijuana where possession violated federal law but not state law].) Neither Star-Kist, nor plaintiffs for that matter, cite to any authority that would authorize a city to challenge a state statute under the federal supremacy clause, commerce clause, or contract clause because it is inconsistent with a state constitution and impairs a city contract.

For the first time in this litigation, plaintiffs contend the Department’s due diligence order is an unconstitutional impairment of contract because the Dissolution Law was motivated by state budget concerns and was not an exercise of police power. These are not factors we apply to determine whether a state may impair a city’s contractual rights. The issue is whose constitutional rights are being discussed. “If the constitutional rights are [the city’s], then it has no standing because a municipality may not complain that the state is impairing its contract.” (City of Galt v. Cohen (2017) 12 Cal.App.5th 367, 378.)

IV

Taking

Plaintiffs contends the due diligence review order violated their rights under the federal and state constitutions to be compensated for a governmental taking of property. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) But those provisions require compensation only when state government takes private property. (Ibid.) The Department’s actions in determining a sponsoring agency loan is not an enforceable obligation harms no private interests. (City of Azusa v. Cohen (2015) 238 Cal.App.4th 619, 630.) “ ‘The Legislature is free, within the confines of the California Constitution, to reconfigure and redistribute authority to its subdivisions as it chooses.’ [Citations.] This includes the power to reallocate public money, again, within the confines of the limitations in the California Constitution. But no taking of private property—money or an uncollected debt—has occurred . . . where one political subdivision disgorges assets to another political subdivision.” (Ibid.)

The city contends it is not a “political subdivision” of the state like a county and it cannot be altered at will by statute in light of constitutional protections such as Proposition 22. For purposes of the Dissolution Law and the cases cited herein, the city defines the term “political subdivision” too narrowly. The term here refers to the city’s authority in relation to the sovereign, not with the technical means by which cities are created and governed. “ ‘In our federal system the states are sovereign but cities and counties are not; in California as elsewhere they are mere creatures of the state and exist only at the state’s sufferance.’ (Board of Supervisors v. Local Agency Formation Com. (1992) 3 Cal.4th 903, 914; see also City of El Monte v. Commission on State Mandates [(2000) 83 Cal.App.4th 266,] 279 [‘Only the state is sovereign and, in a broad sense, all local governments, districts, and the like are subdivisions of the state’].)” (Matosantos, supra, 53 Cal.4th at p. 255.)

Plaintiffs argue the notes and cash payments were protected property under the Eminent Domain Law and they were entitled to be compensated for their taking. (Code Civ. Proc., § 1235.170.) The Department, however, did not bring proceedings under the Eminent Domain Law, and any right of compensation that law provided for takings of public property by the state was a statutory right, not a constitutional right. Moreover, nothing in the Eminent Domain Law suggests it should be applied to the state’s recognized ability to reallocate public money between its political subdivisions.

Plaintiffs cite to State of California v. United States (9th Cir. 1968) 395 F.2d 261, 264, to assert the federal and state constitutions protect government property from an uncompensated taking by another government entity. That case affirms, without discussing, the judicially-created rule that the Fifth Amendment prohibits the federal government from appropriating property of a state without compensating for it. (See City of St. Lewis v. Western Union Tel. Co. (1893) 148 U.S. 92, 101 [37 L.Ed. 380].) But plaintiffs cite no case holding a state cannot reconfigure statutorily-created agencies and redistribute funds without compensating affected local governments. The Department’s due diligence review and order did not result in an unconstitutional taking.

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to respondents. (Cal. Rules of Court, rule 8.278(a).)

HULL , Acting P. J.

We concur:

BUTZ , J.

MURRAY , J.