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Solimar Research

Local Control Falls Through the Doughnut Hole

Jun 1, 2001
If you do not care about either law or land use, there is much to laugh at in the story of how Majestic Realty used the state Legislature as a club with which to beat the City of Redlands. The premise seems funny enough: A somewhat nave, small-town city council says no to a regional mall, then finds itself overmatched by a billionaire developer with a beetled brow and a notoriously heavy hand. They are fighting over 1,200 acres of orange groves and empty space known locally as the Doughnut Hole, which nobody cared about until very recently. Gray Davis himself appears in a comic cameo as the Good Witch who grants the developer his wish in the name of "military-base reuse." For anyone who cares about local land-use control, however, the story of the Doughnut Hole is an infuriating example of how money and power can subvert government and orderly land-use regulation. The Doughnut Hole is an unincorporated piece of land in San Bernardino County entirely surrounded by Redlands. In 1972, the county LAFCO placed the Doughnut Hole within the city's sphere of influence. Redlands did not think of annexing the land until the 1990s, probably because most of the site was farmland protected by Williamson Act contracts. In the late 1980s, the Pentagon announced the closing of Norton Air Force Base, which lies immediately west of the Doughnut Hole. In 1990, the Inland Valley Development Agency, the joint-powers group responsible for the reuse of Norton, included the Doughnut Hole acreage in its jurisdiction; the agency is promoting development in a 14,000-acre area, which includes the former Air Force base. Farmers, who can smell development like they can smell rain, stopped renewing their ag preserve contracts and began selling to investors. One developer that stood particularly tall among the orange groves was Majestic Realty, which is based in City of Industry and is probably the largest and wealthiest developer in Los Angeles County. Under chief executive Ed Roski Jr., Majestic developed an enormous portfolio of industrial buildings, then branched out to office buildings, a Las Vegas casino and half-ownership of Staples Center arena in downtown Los Angeles, where Roski also plans to build a long-awaited convention-center hotel. In 1993, Roski applied to the City of Redlands to build the 1.4 million-square-foot Citrus Plaza on a 125-acre site. The developer and the city did not come to terms on development fees, however, nor did the city grant water and sewer hook ups for the project. Roski and other would-be Doughnut Hole developers sued the city multiple times over the standoff. In 1999, Roski convinced State Assemblyman Thomas Calderon (D-Montebello) to author a bill that would take the Doughnut Hole out of Redlands' sphere of influence and give it back to San Bernardino County. Smelling rich sales-tax revenues Roski had dangled an astronomical $18 million in annual sales tax from his project San Bernardino County was receptive. The bill, one of dozens of special-fix bills that come swarming through at the end of the legislative session like salmon flapping up fish ladders, was vetoed by California's sharp-eyed freshman governor. At the same time, Davis said Redlands' position of turning down virtually all development was "ridiculous" in the light of the 10,000 jobs lost when Norton closed. Seeing the Roski project and others as potential job creators, Davis promised to sign a similar bill the coming year if the parties did not work out their problems among themselves. They did not work out their problems. Instead, the lawsuits became strategic and nasty, such as an environmental challenge brought by Roski and his fellow developers over a 500,000-square-foot Hershey's candy warehouse proposed inside the city of Redlands. In other words, if Redlands was going to stand in the way of Roski's mall, Roski was going to stop the city from building its own favorite projects. True to his word, Davis signed the second Calderon bill in August 2000. The governor's spokesmen hotly rejected the suggestion that governor had shown favoritism to the developer, who had contributed $80,000 to Davis's gubernatorial campaign. Roski spokesman Tim Chaikovsky also dismissed the idea. "Ed supports people that basically are supportive of business growth in the state of California," Chaikovsky told the Los Angeles Times. The governor's rationale that the Doughnut Hole is somehow important to the redevelopment of Norton Air Force Base is hard to accept, other than the mall would be a big provider of low-paying, service-industry jobs. I do not believe, however, that Davis took a dive for Roski. The governor, instead, has a history of favoring solutions that are both friendly to business and of minimal political risk to himself. If this held true, the governor's pro-business instincts won out over his local-control convictions. In February of this year, everybody agreed to stop the lawsuits. The Redlands City Council, the San Bernardino Board of Supervisors and the developers all signed a cease-fire that essentially gave Roski the right to build, and the city the right to control the process. The fight had been costly for Redlands, which spent more than $1 million fighting a developer whose pockets are far deeper than the city's. Today, Roski is moving forward with the first phase of Citrus Plaza, a 450,000-square-foot power center anchored by a Target store and a multiplex theater. Property-rights advocates might say, with some justification, that the city got its just desserts for trying to deny Roski's right to build anything at all. But was Sacramento justified in stepping into this local dispute? I think not. The Calderon bill weakens local land use control by allowing a well-heeled developer to turn to the Legislature for a better deal. There are indeed cases when the state should step in, such as when cities refuse to build an adequate amount of affordable housing. But in a straightforward land use dispute, the courts have a role, not made-to-order legislation. (It is also true that both sides used the courts, not to resolve the dispute but to punish each other.) There is no denying that the Doughnut Hole is a funny story. But the punch line of the Doughnut Hole leaves an empty feeling where local control should be.
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