Many people in the planning and development community are saying good riddance to 2009. It was a year marked by extreme financial distress for government agencies and private industry. If 2008 was a year to "do more with less," then 2009 was a year to "do less with even less"--a year simply to hunker down and try to endure.

Thus, it is no surprise that three of CP&DR's top four planning and development stories of the year involve money--or, more precisely, the reaction to a severe lack of money. When there is no funding available, the planning priorities and projects seem to simply slip away.

Will 2010 be any different? Almost every indicator and forecast says money will remain very tight, and we should expect a repeat of 2008 and 2009. On that less-than-encouraging note, we offer CP&DR's Top 10 stories of 2009.

1. State budget disaster

California's budget inevitably affects planning and development heavily, especially when the budget is getting whacked. No matter what protections local governments try to put into place, the state always finds ways to take local revenue. This year was no exception.

The Legislature and Gov. Schwarzenegger settled on a "budget" for the 2008-09 fiscal year in February � more than seven months after the fiscal year began. That budget rested on spending and revenue measures placed before voters in May. Sending mixed messages � the budget cuts were too deep and taxes should be raised; the government has enough money and this isn't the time to raise any taxes � voters rejected the ballot measures. That sent lawmakers, the administration and the lobbying corps back to work. In late July, lawmakers approved a 2009-10 state budget that allegedly closed a $24 billion deficit.

There are a number of reasons why this year's state budget impacts people in the business of planning and development: The budget shifts $2.05 billion in tax increment from local redevelopment agencies to schools and the state; subventions to counties that conserve farmland were eliminated; state funding for transit was axed, at least until a court intervened; and the Governor's Office of Planning and Research was placed on the chopping block.

The budget's redevelopment tax revenue shift of $1.7 billion this fiscal year and another $350 million in 2010-11 is a larger version of a shift approved in 2008. The California Redevelopment Association (CRA) successfully sued to block implementation of the 2008 shift, and the organization filed a new lawsuit over the latest state maneuver. The redevelopment lobby's basic contention is that the state constitution protects redevelopment revenues. According to the CRA, the tax revenue shift would force many redevelopment agencies to halt new activities and devote all remaining revenues to debt retirement (see CP&DR, August 1, 2009). Some agencies might even have to go out of business entirely. The potential transfer, along with decreased revenues because of the real estate market collapse, has caused agencies to cut back. For example, San Jose's redevelopment agency, the state's largest, reduced its staff by about 25% this fall.

The budget approved by lawmakers contained $27.8 million for subventions to counties that implement Williamson Act (California Land Conservation Act) contracts for farmland conservation. That amount was down from $35 million during recent years, and from a high of $39 million. The money is intended to backfill county coffers, as the Williamson Act provides substantial property tax breaks for landowners who agree not to develop their properties for 10 years. However, Gov. Schwarzenegger slashed all but $1,000 in subventions (see CP&DR, August 15, 2009). As a result, a number of large agricultural counties have revisited their participation in the land conservation program, and some counties have declined to enroll new properties in the program. In Yolo County, which has long enforced some of the strongest agricultural land protection policies in the state, the Board of Supervisors decided to put a farmland preservation tax on the 2010 ballot to replace the $1.1 million in subventions the county lost this fiscal year. Without additional funding, supervisors say, they will have to discontinue Yolo County's participation in the land conservation program.

The budget deal also eliminated the State Transit Assistance program, which provided $230 million a year to local transit agencies for operating and capital assistance. The cut came at the same time the state is requiring regions and localities to reduce greenhouse gas emissions through AB 32 and SB 375. The California Transit Association sued over the cut and won, but it remains unclear when local agencies might receive their money from the state. In addition, a Superior Court in mid-December ruled the state must pay transit operators $1.2 billion the state had diverted during the 2007-08 budget cycle. The state has until April 2010 to show the court how it will replenish the State Transit Assistance fund.

When budget negotiations resumed after the May election, Schwarzenegger called his own Office of Planning and Research (OPR) a "total waste." Soon thereafter, it appeared that most if not all of OPR's planning, environmental and California Environmental Quality Act functions would be parceled out to other entities, such as the Air Resources Board and the Department of Finance (see CP&DR Insight, September 1, 2009). But while it remains short-staffed, OPR is still alive and will apparently remain in business unless state lawmakers transfer its responsibilities to other entities.

There were other impacts of the budget mess. Some state funding was slow to go out because the state could not issue debt for a while. "Furlough Fridays" mean most state offices are closed 15% of the time, which, among other things, has done no favors for the City of Sacramento's slow efforts to revive downtown. And there is little reason to think the pain will subside. With revenue coming in slower than expected and accounting gimmickry in the 2009-10 budget becoming evident, the state is already facing another deficit that the Legislative Analyst's Office pegs at $17 billion. 

2. Figuring out SB 375

Senate Bill 375 is potentially so far-reaching that it dominated discussion at many California planning and local government conferences this year, even though the law has not taken effect yet at the local level.

Passage of SB 375 was CP&DR's top story of 2008. Here's what we said one year ago: "State Sen. Darrell Steinberg's bill has the potential to alter the planning system in dramatic fashion. Essentially, the bill uses the urge to limit driving as a way to mandate regional planning. Quite clearly, the goal is to encourage infill development, mixed uses and transit, and to discourage greenfield housing subdivisions." In 2009, planners began to grapple with just how dramatic the alteration may be.

The legislation requires the Air Resources Board (ARB) to establish regional greenhouse gas emissions reductions targets related to land use by September 30, 2010. The state's 18 metropolitan planning organizations (MPOs) must then incorporate the targets into "sustainable communities strategies" that coordinate land use and regional transportation plans so as to reduce vehicle miles traveled (VMT). In 2009, an advisory committee completed a report to the ARB regarding methodology for setting targets. The Regional Targets Advisory Committee recommended that the board establish a list of best management practices, and use those practices in addition to modeling to determine regional targets (see CP&DR, October 1, 2009). Although the advisory committee in September urged swift action by the ARB, the board has not acted on the committee's recommendations.

Meanwhile, two different approaches for local governments and MPOs emerged during 2009. Some agencies began designing bureaucratic approaches under which they could prove future compliance with SB 375 and mandates related to climate change. Other agencies took a more direct approach by preparing and starting to implement policies that most people agree will cut the all-important VMT (see CP&DR Insight, July 1, 2009). 

The ARB's determination of regional emissions reductions targets � and the likely land use consequences of those targets � undoubtedly will be a very big story during 2010.

3. Petaluma lays off all its planners

The Sonoma County city of Petaluma has a special place in planning history. In 1972, Petaluma became the first California city with voter-mandated growth control. In 2009, Petaluma earned a new distinction when the City Council disbanded the Community Development Department and laid off all of the planners (see CP&DR Local Watch, May 2009).

Faced with severe budget problems, city officials in 2008 greatly reduced general fund support for Community Development and forced the department to survive primarily on its own fees. But with very little development generating fee revenue, the department had racked up a nearly $300,000 deficit by early April of this year. With no firm alternative to carry on planning functions, the city later that month shut down the department. 

In July, the city hired Mountain View-based Metropolitan Planning Group to handle planning functions. In turn, the consultant hired three former City of Petaluma staff members to provide some continuity.

4. Housing construction reaches new low

It was not even close. Builders constructed fewer new housing units in 2009 than any year since the end of World War II.

When the year began, the Construction Industry Research Board forecast that builders would pull permits for 67,000 housing units in 2009 � just up from the previous low of 65,380 units in 2008, and down an amazing 74% from the recent peak of 212,960 units in 2004. But that prediction turned out to be wildly optimistic. By the end of October, builders had received permits for only 29,901 units and the construction board was projecting only 36,000 housing starts for the year. That would mark a 45% drop from the previous record low.

Housing construction remained desperately slow despite a federal tax credit of $8,000 and a state tax credit of up to $10,000 for buyers of new homes. Builders said the state credit in particular increased buyer activity in new subdivisions, and the California Building Industry Association urged an extension of the tax credit program after it expired in July. State officials declined to renew the program, but the builders will lobby to revive the tax credit in 2010.

5. Football stadium wins CEQA exemption

Shortly after the new year began, the City of Industry approved Majestic Realty's proposal for a 75,000-seat football stadium, 25,000-space parking lot and about 3 million square feet of entertainment, retail and office development on a 560-acre site near the intersection of the 60 and 57 freeways. That project replaced a 5 million-square-foot business park that Industry had approved for the same location in 2004 but which never broke ground.

Neighbors were not happy about a stadium that would bring tens of thousands of cars to an area already choking on traffic and smog. The neighboring cities of Diamond Bar and Walnut as well as a Walnut-based citizens group sued over the new project's environmental impact report. Diamond Bar quickly settled in exchange for $20 million in traffic mitigation, a school athletic field, property for a hotel, and up to $1 million annually for a community fund. 

When the City of Walnut and the group Citizens for Community Preservation declined to settle, Industry began lobbying the state Legislature for an unprecedented exemption from the California Environmental Quality Act (CEQA) and the state law requiring a project to be compatible with a city's general plan. The city also sought to nullify all legal challenges. After lining up support from labor unions, Industry found a surprisingly receptive audience from Democrats in the Capitol.

Under intense pressure from state lawmakers and the governor's office, the Walnut City Council in late September dropped its lawsuit in exchange for $9 million in traffic mitigation, annual contributions of up to $500,000 for a community fund, and promises from Industry and Majestic regarding transit, noise and public safety. But when Citizens for Community Preservation refused to budge, lawmakers � acting in a special October session � approved AB 81 X3 (Hall). That legislation provided the exemptions requested by Industry and barred all previous and future legal challenges based on CEQA (see CP&DR Capitol Update, October 15, 2009). Schwarzenegger signed the bill on the project site amid much fanfare.

Supporters called the project "one of the most significant job-creation projects in the nation." Opponents and CEQA defenders called AB 81 X3 "disastrous."

6. Water legislation passes

Schwarzenegger and Steinberg, who took over as state senate president pro tem in 2009, have proven to be a strange-bedfellows duo willing to address difficult topics. One of those is water.

The five-bill package approved during a special session in November and signed by Schwarzenegger might be the most significant water legislation since approval of the State Water Project in 1960. At least that's the conventional wisdom. But doubters persist, in large part because the legislative package included an $11.1 billion bond for various water and environmental projects that will appear on the November 2010 ballot. Considering the state's perilous budget situation, selling voters on more debt could be very difficult.

Still, the legislation does establish a new Delta Stewardship Council that is charged with preparing a Delta plan by 2012 and determining the consistency of local plans and projects with the Delta plan. Lawmakers also created a new conservancy to manage Delta ecosystem restoration and established a "watermaster" to enforce state decisions regarding freshwater flows into the Delta (see CP&DR, November 15, 2009). The idea is to centralize Delta management so that it is more consistent and accountable. In addition, the five-bill package created the first statewide groundwater monitoring program, requires urban water consumption to decrease 20% by 2021, and repealed a loophole allowing unreported water diversions by Delta landowners.

California's longstanding north-south division re-emerged during the water legislation debate, and the 2010 water bond campaign may magnify that division.

7. Cal Supremes get serious about Proposition 218 enforcement

In 2008, the state Supreme Court struck down a Santa Clara County Open Space Authority assessment as a violation of Proposition 218 because the authority did not put the assessment to a vote. The court followed up this year with a somewhat technical ruling in Bonander v. Town of Tiburon, 46 Cal. 646 (2009) that cleared the way for Tiburon property owners to challenge an assessment for placing utility lines underground (see CP&DR Legal Digest, July 1, 2009). The property owners argue they have the right under Proposition 218 to decide on the assessment.

Only two weeks after issuing the Tiburon decision, the state high court accepted another Proposition 218 case for review. The question in Greene v. Marin County Flood Control District, No. S172199, is whether Proposition 218 requires secret voting, and, if so, whether the flood control district violated the requirement during 2007 balloting on a proposed storm drainage fee. If the court decides the district's process was legally inadequate, it could make Proposition 218 compliance more difficult for local government. The court is likely to hear the case in 2010.

8. MTA approves $40 billion L.A. transit plan

Freeways may define Los Angeles, but in October the Los Angeles Metropolitan Transportation Authority approved a long-range transportation plan that calls for $40 billion worth of public transit projects over the coming two decades (see CP&DR Insight, December 1, 2009). Among the projects included in the plan are light rail line extensions to Los Angeles's Westside (including the long-discussed "Subway to the Sea"), to Los Angeles International Airport and further into eastern Los Angeles County suburbs; a new regional connector to ease light rail trips through downtown Los Angeles, and four north-south bus rapid transit lines in the San Fernando Valley.

For nearly two decades, transportation officials in Los Angeles have steered investment toward public transit. The result has been construction of more than 100 miles of light rail lines, creation of the most popular bus rapid transit route in the state in the San Fernando Valley, and establishment of the Metrolink heavy rail system that connects five counties. The MTA's new long-range plan takes the public transit emphasis at least one step further.

9. Air pollution fee on new development is upheld

A first-of-its-kind air pollution fee on new development was upheld in October, when the Fifth District Court of Appeal rejected building and taxpayer group arguments over the San Joaquin Valley Unified Air Pollution Control District's "indirect source" fee program. More than three years ago, the district began assessing the smog mitigation fee on most residential, commercial, industrial, office and public projects. The fee averages about $475 per dwelling unit, and the district uses the money to fund air pollution offsets, such as diesel engine retrofits. Project proponents may reduce their fee by including "smart growth" provisions, such as higher densities and access to transit, and by incorporating energy efficiency and clean air measures.

Builders, business advocates and taxpayer groups argued the fee violated the Mitigation Fee Act because the district did not demonstrate a nexus between the effects of development and the fee. However, the court ruled the fee is regulatory in nature, not a development fee, and, therefore, is not subject to the Mitigation Fee Act's nexus requirement (see CP&DR Legal Digest, October 15, 2009).

The ruling is expected to ease the implementation of fees tied to greenhouse gas emissions.

10. State finalizes climate adaptation plan

The Earth's changing climate is going to result in higher sea level, bigger floods, and more and larger wildfires � and public agencies that have land use authority or that provide infrastructure should plan accordingly. That was the message contained in the California Climate Change Adaptation Strategy that the Schwarzenegger administration completed in early December. Development interests said the plan overreaches, while environmentalists said it does not go far enough (see CP&DR Insight, November 1, 2009).

What appears certain is the Schwarzenegger administration's commitment to the plan. The governor appointed a committee to make specific implementation recommendations based on the plan. The committee includes such heavy hitters as former Gov. Pete Wilson, former Assembly Speaker Robert Hertzberg, and former U.S. Environmental Protection Agency Administrator William Reilly. With a July 2010 deadline, the committee could make big news next year.