REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Al Zelinka, City Manager
VIA: Michael E. Gates, City Attorney
Sunny Han, Chief Financial Officer
PREPARED BY: Michael E. Gates, City Attorney
Subject:
title
Authorize the Appropriation and Transfer of $3,650,000 of Litigation Reserves and $181,000 of FY 2023/24 General Fund Available Surplus to the General Liability Fund to fund the payment of attorney’s fees for Kennedy Commission v. City of Huntington Beach and City of Huntington Beach v. the State of California
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Statement of Issue:
Authorization to appropriate and transfer $3,650,000 of Litigation Reserves and $181,000 of General Fund FY 2023/24 Available Surplus to the General Liability Fund is requested to fund the payment of attorney’s fees for Kennedy Commission v. City of Huntington Beach and City of Huntington Beach v. The State of California.
Financial Impact:
The fiscal impact includes a General Fund (100) budget appropriation of $3,831,000 and transfer to the General Liability Fund (552) for the payment of attorney’s fees. $3,650,000 will come from the General Fund Litigation Reserve and the remaining $181,000 from the General Fund FY 2023/24 available surplus.
Recommended Action:
recommendation
Approve the appropriation and transfer of $3,831,000 from the General Fund to the General Liability Fund business unit no. 55240101 to fund the payment of attorney’s fees for Kennedy Commission v. City of Huntington Beach and City of Huntington Beach v. the State of California.
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Alternative Action(s):
Do not approve the recommended action, and direct staff accordingly. Denial of this request would result in the accrual of interest and noncompliance with a legal judgment.
Analysis:
The Kennedy Commission lawsuit was filed in July 2015 alleging the City's Beach Edinger Corridors Specific Plan (BECSP) amendments of May 2015 were in violation of California’s Housing Element laws. The case was tried in Superior Court, with an initial decision in favor of the Plaintiff. The City appealed the trial court decision and prevailed upon appeal. The Supreme Court denied review, which operated to uphold the Court of Appeal’s decision in favor of the City.
There were also two other legal disputes in the case that, upon Appeal, resulted in wins for the City. In total, the City prevailed in each of the three Appeals in this case; the City has not lost any judicial determinations on the merits of the challenges brought by Kennedy Commission over the City's May 2015 BECSP Amendments.
In February 2020, the City adopted a revised Housing Element in order to become eligible for State SB 2 funding in order to address the homeless crisis in the City. Because of the City's SB 2 eligibility, the City has received over $1,000,000 from the State in SB 2 funds.
In response, the Kennedy Commission requested its remaining claims against the City be dismissed and filed a motion for attorney’s fees. In July 2021, the Superior Court awarded the Kennedy Commission $3.5 million in attorney’s fees based on the "Catalyst Theory," i.e., that even though the Kennedy Commission never won a legal battle in this case, its lawsuit presumably "caused" the City to update its Housing Element in 2020. This decision too was appealed. The appeal was denied in July 2023.
The FY 2023/24 Budget was adopted by City Council on June 26, 2023, for the fiscal year beginning July 1, 2023. The existing budget appropriation in the Self Insurance General Liability business unit (55240101) is insufficient to fund the $3,831,000 payment of attorney’s fees awarded for Kennedy Commission vs. City of Huntington Beach and City of Huntington Beach vs. The State of California.
$3,650,000 is available in the General Fund Litigation Reserve to fund this request. Sufficient General Fund revenues are available to fund the balance of the request of $181,000.
Corresponding appropriations of $3,831,000 in the Self Insurance General Liability business unit (55240101) is also requested to pay the judgment, which is offset with a transfer in from the General Fund.
Environmental Status:
Not applicable
Strategic Plan Goal:
Economic Development & Housing
Fiscal Sustainability, Public Safety and other
Attachment(s):
None.