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Fast Growing Stockton Faces Many Issues, Many Lawsuits

A slew of land use issues are converging on Stockton, an older Central Valley city that is simultaneously struggling to revitalize its downtown and deal with a political environment that is both pro-growth and environmentally conscious.

Stockton recently adopted a new general plan that permits expansive growth, at the same time that the city has invested roughly $200 million in a downtown revitalization effort that has yet to take off. City leaders have long been unabashedly pro-growth, yet environmentalists and farmland preservation advocates do have a voice. Stockton has provided a great number of housing tracts for Bay Area and Sacramento commuters, which recently resulted in Stockton having one of the highest foreclosure rates in the country. The City Council voted to ban new big-box stores only after Wal-Mart opponents exposed the city's awkward steps to approve a Wal-Mart where apartments had been planned.

If all that were not enough, the city has an image problem. A recent National Research Center study ranked Stockton 230th out of 231 cities for quality of life. The ranking was based on a survey of Stockton residents, only 30% of whom rated the quality of life as good or excellent.

"Obviously, we have some work to do," Ed Chavez, the mayor and former police chief, told the Record newspaper.

It may not be entirely fair to tell a city's story via litigation. However, two recently filed lawsuits and three court decisions paint a picture of the issues Stockton faces, and how the city is dealing with them.


General Plan

The City Council in December concluded a sometimes-contentious, five-year process by adopting a comprehensive general plan update that could accommodate a doubling of Stockton's population to about 600,000 by 2035. The general plan, which replaced a 1990 plan, emphasizes growth in a series of new villages, primarily on the north and south edges of town. By providing for housing, retail uses, services and offices in fairly close proximity to each other, the villages may encourage a different style of development than the single-family housing tracts and power centers that have dominated Stockton development patterns.

"We've ratcheted up the requirement for density by about 20%," said David Stagnaro, the city's planning manager. "We're really shooting for 6 1/2 to 7 units per acre."

The plan mandates the incorporation of separated bike and pedestrian paths to encourage village residents to make short trips without driving, Stagnaro explained. Still, some of the villages could be quite large — as many as 25,000 to 30,000 people — so retail and services need to be sized accordingly, he said.

Besides, allowing for extensive greenfield development, the plan also calls for continuation of a two-year-old program aimed at revitalizing older districts, Stagnaro said. Overall, the general plan anticipates up to 24,000 new infill housing units, including 4,000 units in or adjacent to downtown. To encourage infill, the city has cut in half building permit fees in redevelopment project areas. The city also is considering reducing impact fees for infill development.

Environmentalists and farmland preservation advocates tried to rein in Stockton's expansive growth ambitions but made little headway. The City Council did eliminate a proposed growth area east of Highway 99 and adopted a last-minute measure promising to "aggressively combat climate change" with land use planning. The council also made a late concession to A.G. Spanos Company by striking language that would have discouraged construction of a multi-screen cinema outside of downtown, even though the city has had such a policy in place to protect a 16-screeen downtown movie house. Spanos reportedly has plans for a large cinema in a shopping center on the north end of town.

In January, the Sierra Club and the Morada Area Association (a group of unincorporated area landowners) filed lawsuits over the general plan and its environmental impact report. The Morada lawsuit argues that the city has not made adequate provisions for water and, as a result, the city may deplete groundwater resources on which the Morada homeowners rely. The Sierra Club lawsuit is much broader and attacks the general plan and the EIR's handling of climate change, traffic, growth inducement, housing, air quality and traffic.

"Over 50% of the new development would occur on the outskirts of town, and that would create a host of impacts on traffic and air quality," said Amy Bricker, of Shute Mihaly & Weinberger, which is representing the Sierra Club.

Stagnaro said the plan does not address climate change directly because the city is awaiting direction from the state.

"Each city shouldn't be doing things independently for reducing CO2. It's an ad-hoc way of doing things. There should be some leadership from the state and federal and international bodies," Stagnaro maintained. "There should be some uniformity."

Even so, Stagnaro noted that the general plan calls for all new municipal buildings to be LEED certified. Plus, he said, the city since the early 1990s has collected air quality fees from builders to fund bike lanes and alternative fuel city vehicles.
 

Downtown Redevelopment

Since the 1990s, Stockton has pressed ahead with downtown redevelopment more aggressively than all but a few California cities. One of the results is a restored waterfront lined with a new minor league baseball stadium, a new multi-use arena, a 180-room hotel that opened in November, and a 10-acre park with an open-air event center (see CP&DR Local Watch, December 2006; Economic Development, July 2001).

In the works now are a $25 million marina and waterfront promenade extension funded primarily with state and federal grants, and the city's acquisition for $35 million of the eight-story Washington Mutual building that serves as a downtown anchor. WaMu is pulling out of Stockton, and the city intends to use most of the 250,000-square-foot building for city government offices. In addition, San Joaquin County is building a $110 million administrative office building, and a $230 million county courthouse is planned.

The city has struggled, however, to attract private investment. One of the reasons, according to city officials, is the lack of readily available development sites and a parking shortage. Partly to address those issues, the city recently decided to demolish seven single-room occupancy (SRO) hotels to provide surface parking in the short-term, and building sites for the future.

The decision drew a lawsuit from a group called Save Old Stockton (SOS). The lawsuit contends the city violating the California Environmental Quality Act (CEQA) by committing to the project before undertaking environmental review. The organization would like to see the hotels preserved and adapted to new uses, said Joy Neas, of SOS.

"Our goal is for downtown to be an historic district with a restored Main Street and heritage tourism, with continued reinvestment for preservation from the city," Neas said.

But the lawsuit frustrates Redevelopment Director Steve Pinkerton. "These are just decrepit, old, turn-of-the-century, working-man hotels," he said. They served as part of Stockton's huge skid row from the Depression until recent years, when the city bought the SRO hotels and began closing them down. "The folks who are suing us do not have businesses downtown," Pinkerton complained.

Paul Rapp, chairman of the city's Cultural Heritage Board, said at least four of the structures may be worth saving. The city agreed to further investigate three of the structures, but only one of which the Cultural Heritage Board says might be worth preserving.

"As far as them [the buildings] being too far gone, I think the city is using a blanket statement," said Rapp, who is not involved in the litigation. "We just want the council to explore housing, mixed-use, whatever the market will bear."


Hotel Stockton

One of the most high-profile redevelopment projects involves reuse of the Hotel Stockton, a landmark that was a center of activity for decades before it closed nearly 20 years ago. Today, the upper floors contain about 150 apartments for senior citizens, while offices and a much-anticipated new restaurant (scheduled to open in March) are going in on the ground floor, according to Pinkerton.

But the project has had its setbacks, including a falling out with an earlier developer. In December, the state Supreme Court ruled unanimously for the city in the dispute, finding that developer Civic Partners Stockton, LLC, should have filed a claim for damages with the city before pursuing litigation. Although the court said the developer could still file a claim, such a move seems like a long shot now.

The Stockton Redevelopment Agency originally signed two agreements with Civic Partners in 2000 — one for rehabilitation of Hotel Stockton and one for construction of a multi-screen cinema next door. By early 2002, though, the agency was dissatisfied with the progress Civic Partners was making. So the agency handed over the project to a development team headed by Sacramento's Cyrus Youssefi. Contending that the city improperly reneged on the contracts and agreements to reimburse expenses, Civic Partners sued the redevelopment agency for breach of contract, and sued the city and Youssefi for interfering with the contracts.

In 2004, a trial court judge ruled the lawsuit could go forward. However, the Third District Court of Appeal ruled against Civic Partners because it never submitted a claim for damages to the city or redevelopment agency, as required by the Government Claims Act. At the state Supreme Court, Civic Partners attorney Malcolm Misuraca argued that breach of contract claims are exempt from the claim requirement. But a unanimous state high court disagreed.

"Contract claims fall within the plain meaning of the requirement that ‘all claims for money or damages' be presented to a local public entity," Justice Carol Corrigan wrote. Filed December 3, the case is City of Stockton v. Superior Court, No. 139237, 2007 DJDAR 17723.


Overly Aggressive Redevelopment?

Stockton's victory at the state Supreme Court followed by one month a sharp rebuke from the Third District Court of Appeal in another case involving downtown redevelopment.

This lawsuit was filed by the Wong family, which owns two downtown parcels, one of which contained an old hotel and one of which was a surface parking lot. During the late 1990s, the city began a code enforcement crackdown on downtown property owners, including the Wongs. The city ordered the property owners to demolish the building. When they refused, the city tore down the structure and ripped apart the parking lot in January 2001. In September 2005, the Wongs filed suit, seeking compensation for inverse condemnation.

A San Joaquin County Superior Court Judge dismissed the suit, but the Third District reversed the lower court and reinstated the suit. The city contended there was no taking (or inverse condemnation) because it demolished the building and parking lot pursuant to the city's police power. The Wongs countered that the city razed the building and removed the parking lot in order to diminish the property value so the city would not have to spend as much when taking the property by eminent domain.

The court did not rule on the merits of the lawsuit, but it clearly sympathized with the property owner. In an unpublished opinion, the court said the city had wrongly denied the Wongs the ability to remedy the alleged code violations "[T]here are no facts to support a legal determination that the demolition was a lawful exercise of the city's police power," Justice Coleman Blease wrote for the court.

Instead, the court said, the "city created an inventory of cheaper raw land available for redevelopment and avoided having to pay for existing improvements in eminent domain. … Less drastic means could have been employed to correct the dangerous conditions."

The case is Wong v. City of Stockton, No. 053601. The unpublished decision was filed on November 5, 2007.


Big-Box War

Last year, the Stockton City Council adopted a policy prohibiting new stores that exceed 100,000 square feet and also sell groceries, with the exception of membership stores. The policy essentially outlaws Wal-Mart Supercenters and SuperTargets, and it caused the city to drop out of litigation over a Wal-Mart Supercenter proposed by Spanos in the north part of town. Still, Spanos fought the lawsuit filed by a group called Stockton Citizens for Sensible Planning. In late November, the Third District ruled for the Wal-Mart opponents.

In 2002, the city approved a master development plan for the 560-acre Spanos Park West. The plan listed multi-family residential development as the primary use of four parcels consisting of 43 acres. The plan envisioned 935 multi-family residences on those parcels. Instead, less than two years later, Spanos sought permission to build a 207,000-square-foot Supercenter on 22 acres designated for residential development.

In a December 15, 2003, letter labeled "status report," the city's community development director said the proposed Wal-Mart was in compliance with the master plan. Spanos then requested, and apparently received permission, to transfer its obligation to build 627 residential units to anywhere else in town. In February 2004, the city filed a notice with the county clerk that the Wal-Mart decision was a ministerial action not subject to environmental review.

Not until July 2004 did Wal-Mart opponents file their suit. They argued that they were unaware the city had made any decision until Wal-Mart filed an application for a liquor license. Spanos and the city argued that the lawsuit was filed after the statute of limitations had expired — an argument rejected by a trial court and by the Third District.

In a 2-1 decision, the appellate court panel determined that the statute of limitations never commenced because there was no valid project approval. The court found that the director's non-public decision on the Wal-Mart violated the master development plan, violated the limited authority delegated to him by the city, and "violated the provisions of CEQA that preclude the delegation of a public agency's authority to review a project that may have environmental consequences."

In a dissenting opinion, Justice George Nicholson said the statute of limitations started running when the city filed the notice of ministerial approval, so the opponents filed their suit too late.

The ruling combined with the city's new big-box limitations appear to eliminate the possibility of a Wal-Mart Supercenter at the Spanos development. Published on November 28, 2007, the case is Stockton Citizens for Sensible Planning v. City of Stockton, No. C050885, 2007 DJDAR 17567.

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