The housing market slowdown appears to be running straight into the state's new flood control laws. It makes one wonder which way Gov. Arnold Schwarzenegger, who is close to homebuilders, will turn when the collision occurs.

Schwarzenegger signed a collection of six bills aimed at limiting urban development in flood-prone areas of the Central Valley on Wednesday. Ironically, on the same day, backers of a San Joaquin County project that helped spur the bills — partly because of Schwarzenegger's interference — said their development is on hold because of the flat housing market.

The project is River Islands in the City of Lathrop, about 10 miles south of Stockton. As approved by the city in 2003, River Islands would have 11,000 housing units a 325-acre "employment center" and a mixed-use town center 4,800 acres along the San Joaquin River. The city approved the project even though floodwaters had inundated the site six years earlier.

The developer, the Cambay Group, said it would prevent future flooding by building 300-foot-wide levees known as "high ground" and by strengthening other levees. Still, the project needed the approval of the obscure Sate Reclamation Board. After the board and its staff asked hard questions, Schwarzenegger dumped the board and appointed all new members. River Islands soon had its permit.

River Islands is not dead. The British-funded developer is in it for the longer term and continues to build infrastructure in anticipation of future housing. But would the project have been approved if provisions in the six new flood bills had been effective in 2003? Probably not.

The primary reason is not the legislation's new requirement for 200-year flood protection and general plan hazard policies. The primary reason is liability.

One of the bills signed on Wednesday is AB 70, by Assemblyman Dave Jones (D-Sacramento). Although the language is a bit vague, AB 70's premise is this: If a city or county approves development on a flood-prone farmland protected by a state levee, the city or county is partially liable should that development flood. The legislation came in response to a 2003 Court of Appeal decision that said the state was solely liable for property damage caused by the 1986 failure of a levee in Yuba County, a decision that ultimately cost the state $500 million. The Jones bill is effective only until 2015, when other legislation requiring general plan policies and 200-year flood protection takes effect.

The League of California Cities and the California State Association of Counties opposed AB 70 because they see it as a poison pill.

If AB 70 had been in place four years ago, would the Lathrop City Council have approved 11,000 houses on real estate that was underwater only six years earlier? At the time of approval, Lathrop's mayor brushed aside flood issues by saying they were the state and federal government's problem. But if the city were liable for property damage from a future flood, that thinking changes. Property damage from only one flood could easily bankrupt the city.

AB 70 aside, would River Islands survive under other bills signed on Wednesday? Again, probably not. The cornerstone of this year's flood legislation is SB 5 by Sen. Mike Machado (D-Linden). Among other things, the bill requires the state to prepare a Central Valley flood protection plan by 2012, and for cities and counties to incorporate the plan's data, policies and implementation measures into general plans and zoning ordinances by 2015.

It's hard to imagine how a flood protection plan for the entire region — by which Lathrop would have to abide — could allow development on the River Islands tracts. The property is adjacent to a river that has a history of flooding, and lies upstream of the City of Stockton and on the edge of the Bay Delta. Yes, the developers could probably spend enough money on levees to protect their project from floodwaters. But that only sends floodwaters into Stockton and the fragile Delta more quickly — a prospect that a regionwide plan would likely discourage.

Love it or hate it, River Islands is here to stay. The project actually has a pretty intriguing land use plan. But under the new rules approved by Schwarzenegger, the project is possibly the last of its kind. That was the point of the legislation.

For a more complete rundown on the bills, check our recent story "Lawmakers Approve Flood Measures."

- Paul Shigley