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Page 1 of 2 Santa Ana Successor Agency Dispute on ROPS #'s 14 -18 (Settlement Agreements): The Settlement Agreements consist of legal settlement agreements between the Former Agency and third parties ("Contractual Settlement Agreements"), and judgments entered against the Former Agency by the California Superior Court for the County of Orange ("Judgment Settlement Agreements"). These are not pass through agreements with affected taxing entities, but are similarly structured, in that the terms of these agreements required the Former Agency to apply a specified percentage of tax increment from specified component project areas to specified improvements and other purposes. We have provided all documentation requested by the DOF relating to the Settlement Agreements and we have explained more than once already why the Settlement Agreements are enforceable obligations of the Successor Agency that were properly included on the ROPS. In the May 24 Letter, the DOF rejected the Settlement Agreements, stating (without statutory reference or legal support) that "Settlements awarding a percentage of tax increment are not considered EOs." The DOF went on to explain, again without specific statutory or other legal authority, that "pursuant to ABx1 26, tax increment is no longer payable to redevelopment agencies and is therefore not an E0." The DOF's position is contrary to the plain language of the Dissolution Act and applies the Dissolution Act in an unconstitutional manner. Section 34171(d) defines "enforceable obligation" for purposes of Part 1.85 of the Dissolution Act; Section 34171(d)(1)(E) provides that "enforceable obligations" include "[a]ny legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy,"' The Contractual Settlement Agreements are legally binding and enforceable agreements which were executed long before June 28, 2012, when the Dissolution Act became effective. Section 34171(d)(1)(D) provides that "enforceable obligations" include "[j]udgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency, other than passthrough payments that are made by the county auditor- controller pursuant to Section 34183.s2 As noted above, the Judgment Settlement Agreements are binding and enforceable judgments issued by California courts in favor of third party private entities, not affected taxing entities. The Judgment Settlement Agreements are not passthrough agreements. As with the Contractual Settlement Agreements, the Judgment Settlement Agreements were issued and became binding and enforceable long before the effective date of the Dissolution Act. In addition to the plain language of Section 34171, subdivisions (d)(1)(D) and (d)(1)(E), the DOF's statement that payments of tax increment are not permitted by AB 1 x 26 is patently false. Section 34183 specifically requires county auditor-controllers to make payments under pass through Identical language is found in subparagraph (5) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. z Identical language is found in subparagraph (4) of Section 34167(d), which defines "enforceable obligation" for purposes of Part 1.8 of the Dissolution Act. SA Resolution No. 2012-007 Page 13 of 24