Greg Diamond, DPOC vice chair for the North County District, candidate for district attorney, OJ blogger and CATER lawyer, sent a notice to the Anaheim City Council of CATER’s intention to sue the city of Anaheim. Here’s the document:
March 25, 2014, 4:45 p.m.
(email address redacted)
Councilmembers and Staff, City of Anaheim: Two weeks ago, you voted on offering an unspecified amount of municipal bonds of multiple types. with unspecified amounts issued under each type, for the expansion of the Anaheim Convention Center (as well as unspecified “other capital projects of the City, the funding of which with proceeds of the 2014 Bonds is permitted by California law and will not adversely affect the Tax-Exempt status of the 2014A Bonds.”) Earlier that day, you had received a letter from attorney Cory Briggs reading in pertinent part:
Dear Mayor and City Council: On behalf of The Inland Oversight Committee, I am writing to urge you not to approve the items before you tonight. Your approval of these items would be illegal. First, the Anaheim Public Financing Authority (“APFA”) does not have the legal authority to issue the bonds contemplated by this agenda. The City nay not incur this level or length of indebtedness without obtaining the voters’ consent, and the Anaheim Redevelopment Agency’s authority to transact business or exercise powers has been fully withdrawn by the Legislature. See HEALTH & SAFETY CODE § 34172(b).
Significantly, even the ARA’s successor agency’s “rights, duties, and performance obligations under [any Joint Powers Agreement] shall be limited by the constraints imposed on successor agencies by [Assembly Bill X1 26 (2011)].” Id., § 34178(b)(3). The APFA does not have the authority to issue bonds under the Joint Powers Agreement or, even if the Agreement were to purport to give that authority, the APFA would no longer have the authority because neither of the parties to the Agreement has the authority at this point. In short, the APFA has no more legal authority to issue the bonds than the City or the ARA does. Second, the proposed financing structure is an obvious attempt to get around the debt limitations in City Charter Sections 1209 and 1210, which require a vote of the electorate before the City incurs any general- or revenue-bond indebtedness. Indeed, Sections 3 and 4 of the Site and Facility Lease confirm that the transaction is being structured for the purpose of giving the APFA an interest in City property that APFA then uses as collateral for the bonds, the proceeds of which the City will direct.
The Purchase Agreement for the bonds would have no effect without the City executing it. The other transaction documents confirm the scam being pulled on the public without a vote of the City’s electorate: namely, this is a debt being incurred by the City in substance, even if not (entirely) in form. Unless this transaction is put to the voters, it is illegal. 2 Third, the proposed financing structure also violates Section 18(a) of Article XVI of the California Constitution, which essentially prohibits the City from incurring any debt that cannot be serviced by the current year’s income and revenue. The $300 million the City seeks cannot be paid back in any fiscal year, much less the one in which the money is received. Without a vote of the electorate, the structure is illegal.
Lastly, it appears that you have not subjected the “2014 Project,” as described in the agenda materials and defined in the Indenture, to environmental review under the California Environmental Quality Act. The Indenture’s definition is specific enough to allow for meaningful review in connection with this attempt to generate the financing for the 2014 Project. Accordingly, to approve the project before subjecting it to environmental review would violate CEQA and render your actions invalid.
For these reasons, I urge you not to approve the items before you today. Cory J. Briggs Briggs Law Corporation At your meeting, you approved issuance of these bonds notwithstanding the above threat of litigation. You, and those who might invest in these bonds, may have some question as to whether the threat of litigation will necessarily materialize. I write, above all else, to eliminate any such uncertainty.
As General Counsel of CATER, the Coalition of Anaheim Taxpayers for Economic Responsibility, I write to: (1) associate CATER with each and every statement made by Cory Briggs as if made by us, and (2) assure you that, either in association with Mr. Briggs or on our own, we will file suit against the City of Anaheim, in accord with the above concerns and additional ones mentioned below, within the appropriate statute of limitations provided, unless our concerns are rendered moot.
CATER presumes that the City of Anaheim will disclose this notice of litigation, as it must, to potential investors prior to any sale. CATER does not itself seek to stop the issuance of the bonds on April 1, 2014; that decision would be up to the City and the sponsoring bank. CATER notes that, should the issuance of these bonds be found to have been illegal, the law appears not to require the City to reimburse funds to those who had purchased the bonds, despite their not being able to hold the City to their terms. CATER also notes, however, that the failure to honor those bonds may have adverse effects on the City’s credit rating, unnecessarily costing Anaheim substantial sums in higher interest rates should the sale of bonds proceed and the City’s promises not be honored. Preventing such an outcome is in the City’s hands.
Sincerely, /s/ Greg Diamond General Counsel, CATER
According to Council member Jordan Brandman, this suit places in jeopardy thousands of union jobs. “He is trying to stop a project that will create and enhance thousands of good craft, HERE, SEIU, and Teamster jobs,” Brandman told the LiberalOC. “Not to mention the addtional funding also included in the bonds which will be proposed by City staff to build two new fire stations and make vital neighborhood/parks improvements.”
According to documents from the City of Anaheim, outside counsel to deal with CATER has already cost taxpayers about $20,000. This effort will only add to the cost.