Delays in constructing roads and utilities funded by Mello-Roos bonds do not absolve property owners of paying Mello-Roos assessments, the Fourth District Court of Appeals ruled in a recently published opinion. In a case from Riverside County, the unanimous three-judge panel found that property owners have an obligation to bondholders that is independent of any dispute over how bond proceeds are used. The County created Community Facilities District 88-8 under the Mello-Roos Community Facilities Act of 1982 (Gov. Code §53311 et seq.). The CFD covered a slice of land along the west side of Interstate 215 north of Perris. More than two-thirds of landowners within the CFD voted to authorize the county's proposed sale of Mello-Roos bonds to fund roads and utilities to encourage industrial development. Improvements were scheduled to be finished by April 1992, but various problems delayed completion until mid-1996. John and Barbara Harvill, owners of 12 parcels within the CFD, defaulted on payment of special taxes related to the Mello-Roos bonds for the 1994-95 tax year. The CFD then foreclosed on behalf of bondholders. The Harvills did not dispute the unpaid taxes. Instead, they contended that the special election authorizing the bond sale created a contractual relationship between them and the CFD, and that the CFD failed to live up to that contract. San Diego Superior Court Judge Herbert Hoffman issued summary judgement for the CFD, and the appellate court affirmed the decision. "Harvills' claim CDF failed to perform contractual obligations, thereby excusing nonpayment of special taxes, is not a defense to this type of action," wrote San Diego Superior Court Judge E. Mac Amos, sitting on assignment to the Fourth District, Division One. The CFD brought the foreclosure action on behalf of bondholders, and the Harvills provided "no evidence bondholders had any obligation to them related to construction of the improvements by CFD or County," Amos wrote. Even if a contract exists between the Harvills and the CFD, bondholders are not party to it. "We further note that as a matter of public policy, a municipal bondholder's right to repayment cannot be frustrated by disputes between the issuing entity and the property owners regarding the use of bond proceeds," Amos continued. The court rejected the Harvills' argument that special taxes are invalid because of alleged construction irregularities. "Where, as here, it is undisputed Harvills' special taxes remain unpaid, the court cannot prevent or enjoin the collection of those taxes," Amos wrote. The appellate court also upheld the trial court's award of attorneys' fees to the county, and ordered the Harvills to pay attorneys' costs on the appeal. The Case: Community Facilities District No. 88-8 v. John Harvill, Nos. D029328, D029926, 99 C.D.O.S. 7309, 1999 Daily Journal D.A.R. 9303, filed August 6, 1999, modified and ordered published September 2, 1999. The Lawyers: For CFD 88-8: Susan Feller, Sherman & Feller, (510) 452-3222. For Harvill: Henry Heater, Endeman, Lincoln, Turek & Heater (619) 544-0123

Two lawsuits Attorney General Bill Lockyer filed against Tulare County regarding approval of giant dairies have been settled. The county agreed to add an animal waste management element to its general plan and to complete a program EIR by the end of the year. Under terms of a settlement reached in August, the Airosa Diary agreed to suspend its 3,600-cow expansion of a dairy near Pixley until the county completes the EIR and reviews the expansion. An October settlement of a second lawsuit places the same conditions on the Jongsma family, which received county approval for a 3,200-cow dairy near Earlimart earlier this year. Lockyer filed the lawsuits because he contended Tulare County was not performing adequate environmental review of dairy proposals, which the county was approving based on mitigated negative declarations. (See CP&DR Local Watch, July 1999.) Tulare County is the number one dairy county in the nation, with more than 300,000 cows and about 20 applications for new or expanded facilities. "This settlement is a good blueprint for addressing environmental review of diary projects," Lockyer said in a written statement. Lockyer, environmentalists and anti-poverty advocates fear that runoff from the giant dairies can pollute surface water and groundwater.

Architects and planners like to think they are building "for the ages." Recent experience, however, suggests the very opposite. The culture, the economy and fashions in urban design all appear to be in a rapid state of change. Perhaps the Internet and advances in telecommunications are shortening the half-life of cultural events. Perhaps we're just getting older and the world seems to be getting faster. Notwithstanding, buildings that exemplified urban life only 20 years ago are rapidly becoming obsolete. The ability, therefore, to recycle these buildings becomes important indeed if downtown areas are not to become elephants' graveyards. That's why the Paseo Pasadena project, a make-over of the old Plaza Pasadena shopping center in downtown Pasadena, may have importance far beyond the city boundaries. Built in 1980, this three-block shopping center was one of many across the country that promised to bring retail trade back downtown. Plaza Pasadena tried to be a good urban citizen, and the mall had some forward-looking features for a project of its time. The shopping center more or less conformed to the existing street grid, even if the two-story, 700,000-square-foot mall was a three-block-long pancake. Plaza Pasadena made a gesture toward pedestrians by providing a grand entrance off Colorado Boulevard, the city's most important commercial street (even though most shoppers quietly entered and exited at the rear of the property, in their cars.) Those gestures aside, Plaza Pasadena was a dog. Beyond a weak tenant mix and mediocre sales, the mall was architecturally boring, lining Colorado Boulevard with acres of blank walls of tan-colored brick. Surrounded by Pasadena's extraordinary collection of Classical-style buildings, mostly dating from the era of the City Beautiful movement, the vacuity of Plaza Pasadena was an enduring insult — the bore at the party who would not stop talking amid a crowd of brilliant guests. Retail did, in fact, return to downtown Pasadena in the form of Old Pasadena, a redevelopment project that created retail venues and movie theaters out of neglected older buildings on Colorado Boulevard, a few blocks from Plaza Pasadena. Few cities have provided a more dramatic example of the latent power of pedestrian-oriented retail districts. Old Pasadena apparently answered some unmet demand for pedestrian-oriented nightlife; the district has been jammed for the 10 years since it opened, while Plaza Pasadena lay like a beached whale, slowly dying of some mysterious toxin. The initiative to reinvent Plaza Pasadena came from its owner, TrizecHahn Corporation, a descendant of The Hahn Company, which built the mall. As one of the nation's largest developers of retail malls, TrizecHahn knew something was not working. Unlike most mall developers, which stick religiously to tried-and-true formulas, TrizecHahn has shown itself willing to take on non-traditional projects in urban settings. The Hollywood & Highland project — an unusual Hollywood retail and entertainment project with a Metro stop — is a case in point. (See CP&DR Places, July 1998.) Remarkably, this main-line mall developer came up with the idea of rejiggering the moribund Plaza Pasadena into an entertainment center, with retail, office and — in the tour-de-force of the project — 400 loft-style apartments above the retail space. The regional mall was to become an urban village. The commitment to housing is more than skin deep: in a total building program of just over 1 million square feet, 369,000 square feet are devoted to the apartments, while 478,826 square feet are given to the new multiplex and retail construction. The existing Macy's is 159,000 square feet. Making this mixed-use program work in the envelope of the retail pancake called for some bold strokes. Essentially, the strategy was almost to turn the mall inside out: nearly all mall merchants would have their own streetfronts. Instead of the internalized megastructure of the traditional mall, the Paseo project removed major parts of the mall to form three, freestanding buildings, which look like eight separate buildings. Of equal importance was the creation of pedestrian space in and around the mall. The new mall does not restore the grid to its pre-1980 form; the project still covers three city blocks. Yet the project does restore at least one of the goals of Pasadena's City Beautiful plan of 1915, prepared by architect Robert Bennett. By opening up a 70-foot-wide pedestrian walkway at Garfield Avenue, the architects at Ehrenkrantz, Eckstut & Kuhn Associates restored the view of the Pasadena City Auditorium from City Hall, three blocks north. This simple gesture goes miles in integrating the project part into the larger civic whole. An obvious difficulty with opening up the mall is what happens in the center of the block; here the architects have created a new pedestrian allee with a fountain court that the architects believe will echo a similar fountain courtyard at Pasadena City Hall. While the architecture and planning of the project are well out of the ordinary, the commercial decisions about the Paseo are equally non-formulaic. In its negotiations with the developers during the entitlement process, Pasadena city officials stressed that they did not want the new project to cannibalize merchants from the city's two other established commercial centers, Old Pasadena and Lake Street. The tenant mix, therefore, is not the usual shortlist of mall chain stores. With the exception of a Macy's outlet store (Macy's refused a buyout of its lease) the majority of tenants in Paseo Pasadena are local merchants, and the uses tend toward the neighborhood-serving variety of retail: a hardware store, an upscale grocery store, restaurants, and the like. At first glance, a preference for local merchants seems counter-intuitive for a multi-billion-dollar developer like TrizecHahn. Yet TrizecHahn claims to have pre-leased nearly 70% of the Paseo before construction has begun; lenders typically ask for 50% pre-leasing to finance mall construction. The happiest part of the project, in urban design terms, is that the Paseo Pasadena may achieve what Plaza Pasadena tried, and failed, to achieve for years: To create a link to the intense pedestrian activity at Old Pasadena. Thus, a missing piece of the puzzle of downtown Pasadena has been restored, and the city that was envisioned in 1915 may finally start coming into focus. Beyond Pasadena, the experience of turning a mall inside-out may be an important piece of research-and-development for TrizecHahn, which could conceivably create a new profit center in converting 1970's malls that don't work into urban villages that do. What remains remarkable to me is that a major mall developer was willing to undertake this project. Such a radical departure from standard practice needed a big developer with TrizecHahn's depth and credibility. If a community-based nonprofit organization had attempted the same project, Paseo may not have been taken seriously. Just as it took a conservative president like Nixon to re-establish diplomatic relations with Communist China, it may have taken a shopping-mall stalwart like TrizecHahn to find a new rapprochement between the retail industry and Main Street. Who knows? Maybe it will last longer than 20 years.

The Fourth District Court of Appeal has sided with the County of Los Angeles in its tug of war with the City of Long Beach over the setting of base year property values in a redevelopment area. The court concluded that the tax assessment role in place when Long Beach approved the redevelopment plan contained the base year property values. The court rejected Long Beach's argument that the base year values should reflect the lowering of some property values by the county's own Assessment Appeals Board. At issue in this case was how to assign base year property values. The city wanted property values to be as low as possible so that future increases would return to the city's redevelopment agency as "tax increment." The county wanted base-year values to be as high as possible to protect its revenue stream. The city — pursuant to special state legislation in the wake of the 1992 Los Angeles riots — created a redevelopment area for parts of Long Beach and Signal Hill on September 21, 1993. After adopting the redevelopment plan, the city asked the county to reduce base-year values for certain properties to reflect resolved assessment appeals. A number of property owners had convinced the county to reduce their original 1993-94 tax year assessments. The county refused, so the city sued. San Bernardino County Superior Court Judge Stanley Hodge sided with the city and ordered the county to lower its base year tax rolls to reflect decisions of the Assessment Appeals Board. But the Fourth District, Division Two, reversed Hodge's decision. "The crux of the problem here is the determination of the assessment roll ‘last equalized' before the redevelopment plan was adopted," Justice James Ward wrote for the unanimous three-judge panel. No previous published cases were on point, but Ward cited a 1971 Attorney General's opinion, 56 Ops. Cal.Atty.Gen. 184 (1973), interpreting Revenue and Taxation Code §2050 et seq. The code requires the assessor to submit the last equalized roll on August 20 of each year. The attorney general concluded that "the roll in existence on the August date is the last equalized roll and continues as such … ." Long Beach argued that the tax roll issued in August of 1993 was not the final equalized roll because the county later made changes. The city essentially argued that the August 1993 roll was only a temporary roll, not a final one. But the appellate court rejected this notion. The court said the city was adding the term "final," which does not appear in the statutes. Furthermore, if the city did insist that the August 1993 roll was "temporary," then the city should accept as "final" the 1992-93 assessment roll, the court said. The city did not make that argument, though. "To apply the 1992-93 ‘final' roll would be contrary to the Attorney General's opinion, which did address the question of whether the previous year's final roll or the current year's August roll should be used," Justice Ward wrote. Furthermore, the "final" adjusted roll for 1993-94 did not come into existence until long after the city approved the redevelopment plan, the court said. "Had the City of Long Beach wished the tax increment allocation to be based upon a final ‘last equalized assessment roll,' it could have adopted the redevelopment plan ordinance at such a time as it became effective at least three days after the assessment appeals board adjourned for the year, so as to incorporate the final assessment values for that year into the allocation formula," Ward wrote. The Case: Redevelopment Agency of the City of Long Beach v. County of Los Angeles, No. E021721, 99 C.D.O.S. 7900, 1999 Daily Journal D.A.R. 9987, filed September 22, 1999. The Lawyers: For Long Beach: Robert Shannon, city attorney, (562) 570-2205. For Los Angeles County: Thomas Tyrrell, principal deputy county counsel, (213) 974-1880.

Although it may not receive as much attention as high-tech powerhouses such as San Jose, Santa Clara and Mountain View, Fremont has attracted numerous small and medium-sized technology companies in recent years. Now, Fremont — in southern Alameda County about 12 miles north of downtown San Jose — is poised to become an even bigger player. Catellus Development Corporation has received nearly all the government approvals necessary for 8.25 million square feet of commercial development in a 325-acre technology-based business park. Catellus's Pacific Commons — between Interstate 880 and San Francisco Bay — is among the largest of its type in the Bay Area. Fremont city officials, who have supported the latest versions of the project, believe 20,000 to 30,000 people could work at Pacific Commons businesses at full build-out, depending upon who locates in the park. "This is where the action will be over the next 20 years," said Dan Marks, Fremont planning manager. "No one else (in the Bay Area) has this amount of land available." That may be an exaggeration, especially as Cisco Systems considers a 400-acre campus in South San Jose's Coyote Valley. Still, Pacific Commons is important to the East Bay and Silicon Valley. The project means that Fremont (population 204,000) likely will add jobs at an even faster rate than projected by the Association of Bay Area Governments. Fremont employment already was expected to grow from 71,500 jobs in 1995 to 84,600 in 2000, then to 118,000 in 2020, according to ABAG. Development plans for the 840-acre site have been around since the 1970s. Earlier proposals called for residential development, which proved controversial because the area is in the city's "industrial heartland," according to Marks. In 1996, the city approved a development agreement and site plans that called for 8.25 million square feet of industrial space, big-box retail development, and homes. However, in the process of receiving a wetlands permit from the U.S. Army Corps of Engineers, Catellus lost nearly half of its planned development footprint to wetlands and habitat mitigation. The latest version of the project contains only the industrial development, Marks said. Catellus still must receive city approval for a revised development agreement and new site plans. The city has yet to determine what level of review is necessary under the California Environmental Quality Act, Marks said. The earlier version of the project was subjected to an EIR. Because of wetlands restrictions, buildings will assume a more vertical nature, with structures up to eight stories tall, said Don Little, a Catellus senior vice president. But Marks indicated taller buildings could be just fine. The city has encouraged a design that incorporates a major transit spine, and bus- and pedestrian-friendly features. Shuttles will connect with area BART stations. A commuter train runs along the western edge of the site, and the city might pursue a train station, Marks said. Buses would take workers from the train station to their offices. "We're trying to design something that is different from campus business parks of the past, which were designed as a number of isolated projects," he said. The city, which has a joint marketing agreement with Catellus, wants Pacific Commons to have a sense of place, said Rosie Rios, the city's economic development manager. This is especially important because the site is across the freeway from the other, more established, part of town. Sidewalks and trails will link three "activity centers" that offer workers retail shopping and parks. The city has encouraged the Pacific Commons project because city leaders want a bigger slice of the silicon pie. Fremont has seen some campus-style development and the opening of new headquarters, but it wants more. "R and D development is encouraged by any city that I know of because of the level of jobs involved," Rios said. Semiconductor, telecommunications and biotechnology and the three strongest segments of the high-tech world in Fremont, Rios said. According to the city's Economic Profile, Lam Research Corporation, Seagate Magnetics, and HMT Technology Corporation employ more than 2,000 workers apiece, making them the second, third and fourth largest private employers in town. The New United Motors Manufacturing plant, with 5,500 workers, remains Fremont's biggest employer, but the economy of Fremont and other East Bay cities is changing. A report by San Francisco business consultant McKinsey & Co. said the economy of cities in Alameda and Contra Costa counties has shifted from one based on heavy manufacturing, defense-related work and finance to one based on information and services. Little expects telecommunications, software and networking companies to become Pacific Commons tenants. "That's the tenant community that needs and wants the space," he said. "There is such an acute scarcity of land available in that marketplace." Warehousing and heavy manufacturing are not planned, he added. Although they have not provided financial incentives, Fremont leaders did make the city a co-applicant with Catellus for a Clean Water Act §404 permit from the Army Corps of Engineers. The Corps finalized that permit in early September, removing the last major hurdle in the governmental process. The federal Environmental Protection Agency has said it will not challenge the project. The Corps permit allows Catellus to fill 47 acres of wetlands along the edge of San Francisco Bay and to encase about a mile and a half of a flood control canal. In exchange, Catellus must set aside 390 acres for a nature preserve, which will provide habitat for the tiger salamander, vernal pool tadpole shrimp and the Contra Costa goldfields, a flower. The state lists the salamander as an endangered species, while the shrimp and goldfields enjoy federally protected status. Additionally, Catellus must create 77 acres of on-site and off-site wetlands. Catellus also must avoid 59 acres of existing wetlands. Doug Makitton, a corps spokesman, said the agency has permitted very few projects of this magnitude in San Francisco Bay. "This one has gone through a number of changes in the last three or four years to get to this point. Anything in and around the Bay takes careful planning and a lot of negotiations," he said. "The key point is that it is a net gain (of wetlands)." Marks, the city's planner, said Catellus has cooperated a great deal to expedite the 404 process. The three-year review was brief considering the project's scope, he said. Catellus would like to begin infrastructure construction in summer of 2000. Marks is not ready to commit to a time frame but said the city will complete its reviews as quickly as possible. The development agreement runs through 2014, although Little thinks Pacific Commons could build out a few years before that date. Besides getting a major new job site, the city also will get an expensive extension of Cushing Parkway. Cushing is an arterial that will link Pacific Commons with other industrial areas. The extension is expensive because portions must be raised above sensitive habitat. Contacts: Don Little, Catellus senior vice president for Northwest development, (415) 974-4500. Dan Marks, Fremont planning manager, (510) 494-4515. Rosie Rios, Fremont economic development manager, (510) 494-4804. Doug Makitton, Army Corps of Engineers public affairs officer, (415) 977-8658.

Valery Pilmer, a former San Bernardino County land use services director, pleaded no contest to a misdemeanor charge of stealing a public document. Under the plea agreement with the county district attorney's office, Pilmer was sentenced to 300 hours of community service and retired from county employment effective October 15. Pilmer was indicted earlier this year on four felony counts relating to hiding, altering or destroying public records and lying about it in a sworn statement. The charges stem from the district attorney's long-running investigation of Rail-Cycle, a proposed Mojave Desert landfill. (See CP&DR, March 1999, December 1997, October 1997) Pilmer's attorney, Dennis Kottmeier, told the San Bernardino Sun that Pilmer did nothing wrong and that she accepted the plea agreement simply to get the matter behind her. Pilmer had been on administrative leave since the indictment. Meanwhile, the Rail-Cycle case — which allegedly involved fraud, wiretapping, burglary and other illegalities in an attempt to win approval for and open the landfill — appears to have bogged down. Some or all charges have been dismissed against four employees of project proponent Waste Management and a contract county worker. Also, a Superior Court judge ruled that prosecutors allowed their key witness to lie to a grand jury.

A six-year dispute between Shasta County and the new City of Shasta Lake regarding tax revenue has been decided in favor of the city. The Third District Court of Appeals upheld nearly all aspects of a ruling issued during binding arbitration by retired Siskiyou County Superior Court Judge James Kleaver. The appellate court said the city, which incorporated on July 2, 1993, has the right to receive Proposition 172 sales tax revenue and that the Proposition 172 revenue should offset the amount the county charges for providing law enforcement services. The appellate court — in an unpublished part of the opinion — overturned Kleaver only on the matter of whether the city owed the county interest on a portion of payments in dispute. The decision means the county must pay the poor city of 9,300 residents about $1 million. The appellate court decision, penned by Acting Presiding Justice Coleman Blease, came on a 2-1 vote. Justice George Nicholson said the court should dismiss the appeal because the court did not have jurisdiction to review a decision made in binding arbitration. Prior to incorporation, the Shasta County Local Agency Formation Commission performed a fiscal analysis that determined the proposed incorporation would result in a net gain for the county general fund of about $200,000 annually. Still, the county pressed LAFCO to reconsider the conditions of incorporation. The result was a mitigation agreement between the county and the city's predecessor, the Shasta Dam Area Public Utilities District. Almost immediately, the county and city began disputing the terms and conditions of the mitigation agreement. They stipulated to binding arbitration before retired Judge Kleaver. He ruled that revenues from Proposition 172 — a half-cent sales tax approved after the state had shifted property taxes from counties and cities to schools — should be treated as property tax revenue under terms of the agreement and they should offset a portion of the county's cost of providing sheriff's services to the new city. On appeal, the county argued that the mitigation agreement referred only to actual property taxes, not to property taxes plus replacement revenues, such as Proposition 172 sales taxes. But the court said money is money. "The court must determine whether the measure of the payment is the amount of property taxes which the County retains, as the County contends, or the amount of property tax benefit which the County receives, i.e., the property tax retained by the County plus replacement revenue given in lieu of property tax diverted by the state," Justice Blease wrote. "Since the declared purpose of the payment is to mitigate the so-called negative effect occasioned by property tax losses resulting from the incorporation, the City's candidate is the more reasonable. There is no incremental negative fiscal effect on the County attributable to the diversion of property tax revenue by the State to the extent that it receives either property taxes or replacement revenues." As for payment for law enforcement services, the court interpreted a law enforcement services agreement (LEA) between the city and county. The county argued that the agreement allowed the county to charge the city for the "entire cost" of sheriff's services within the city limits for the 1993-94 fiscal year, the city's first year of existence. The city contended it should be credited for revenues generated from inside the city limits but retained by the county, including Proposition 172 funds. The court determined that under the LEA the county could charge the entire cost of services only if the city had requested that the county discontinue the service. The city did not make that request, the court said. The court also ruled that the phrase "entire cost" in the LEA means the same thing as "net cost" under Govt. Code §57384, which addresses the subject of county services to a new city, the court said. The court also interpreted that section to say that the city should receive credit for Proposition 172 funds. "Such revenues were ‘generated' in the formerly unincorporated territory, even though the allocation of Proposition 172 revenues is not situs-based," Justice Blease wrote. "Proposition 172 revenues are allocated to cities according to the amount of property tax revenue diverted to ERAF. (§30054.) This is a calculable amount, and is an amount ‘generated' by the City." The Case: City of Shasta Lake v. County Shasta, No. C029036, 99 C.D.O.S. 7859, 1999 Daily Journal D.A.R. 9954, filed September 12, 1999. The Lawyers: For Shasta Lake: John Kenny, Moss & Enochian, (530) 225-8990. For Shasta County: Michael F. Dean, Kronick, Moskovitz, Tiedemann & Girard, (916) 321-4500.

A 5,855-square-foot retail and office building proposed for downtown Mill Valley is exempt from environmental review under revised California Environmental Quality Act Guidelines, the First District Court of Appeals has ruled. The court ruled that buildings of up to 10,000 square feet proposed for an urban area may be exempt from CEQA review. In the Mill Valley case, the court concluded that the project opponent did not prove the existence of any "unusual circumstances" that would preclude the exemption. Interestingly, in the unanimous opinion for the three-judge panel, Justice Patricia Sepulveda said that the project probably did not qualify for an exemption when the city processed the application in early 1998. The proposed structure's occupant load would have been too large to qualify for an exemption. But the new Guidelines for Implementation of CEQA (Cal. Code Regs., tit. 14 §15000 et seq.) adopted by the Secretary of Resources in October 1998 "extended the exemptions to some structures that would not have been covered" by the previous version. Lawyers on either side said they believe this case is the first court interpretation of the year-old CEQA Guidelines. Craig Labadie, the city's attorney, called the ruling helpful because it clarifies the square footage limitation for exempt projects. But the attorney for the project opponent said she would seek a rehearing because the issue of applying the revised Guidelines retroactively was never briefed. Attorney Laurel Stanley also noted that the appellate court upheld her client's argument regarding occupant load. "I think we deserve the chance to get back to the trial court, at least on the issue of attorneys fees" because the appellate court agreed with her primary argument, she said. But Labadie said the project opponent won nothing. "The court said we did not violate CEQA, we did not violate our general plan, and we did not violate the parking ordinance. I'd say that's a win for us," Labadie said. This proposal to construct new commercial buildings in downtown Mill Valley first reached the city in early 1996. The applicants, Jack Lee and Christine Lum, proposed demolishing one building, expanding a parking lot and converting a retail building to office use. The city approved the project, but the applicants never built it. Instead, they returned one year later with more extensive development plans. The Planning Commission recommended approval, but the City Council requested revisions. The applicants on January 9, 1998, submitted plans for one retail/office building of 5,855 square feet on a portion of a parking lot behind an existing commercial building. The Planning Commission again endorsed the idea but sought clarification on some issues, including CEQA review. On April 6, 1998, the City Council unanimously approved the project with 31 conditions. The next day, the city filed a notice of exemption from CEQA under Guidelines §§15301, 15302(b), 15303(b) and (c), and 15061(b)(3). One month later, project opponent Patricia Ann Fairbank filed a petition for writ of mandate to overrule the exemption. But Marin County Superior Court Judge Vernon Smith ruled for the city. Smith found that the project qualified for an exemption under §15303(c), that Fairbank did not "produce substantial evidence to show a reasonable possibility of adverse environmental impact," and that the city had followed its codes for the grandfathering of nonconforming parking facilities. The appellate court upheld Judge Smith's ruling but used different reasoning. Fairbank argued that for the city to give this project a "Class 3" exemption, the building could not have an "occupant load" of more than 30 people as determined by the Universal Building Code. Fairbank argued that with 3,130 square feet of office space and 2,725 square feet of retail space, the proposed building would have an occupant load of 122 people. The City, however, argued that the Guidelines neither defined "occupant load" nor name the UBC as the authoritative source. The appellate court sided with Fairbank by concluding that commercial buildings were "required to meet the UBC's ‘occupant load' standard in order to enjoy a Class 3 exemption from the requirements of CEQA. If that were the end of our inquiry," Justice Sepulveda wrote, "we would almost certainly have to reverse the trial court's decision on the Guidelines §15303(c) exemption." Unfortunately for Fairbank, the court did not stop there. Rather, the court noted that the revised Guidelines eliminated references to "occupant load" and based the exemption solely on square footage. "Thus," Sepulveda wrote, "under Guidelines §15303(c), as amended in 1998, the Class 3 exemption applies to ‘ store, motel, office, restaurant or similar structure … not exceeding 2,500 square feet in floor area' and ‘ n urbanized areas … up to four such commercial buildings not exceeding 10,000 square feet on sites zoned for such use.'" Fairbank argued that the revised Guidelines meant any single structure of more than 2,500 square feet was not exempt. In an interview, Fairbank's attorney, Stanley, called the wording in the Guidelines confusing. "I do think there is a difference between a single building of 10,000 square feet and four individual buildings of up to 10,000 square feet," Stanley said. But the court found the wording clear. "The most plausible reading of current Guidelines §15303(c), as amended in October 1998, is that a commercial project to be built in an ‘urbanized area' may be found to be exempt if it involves the construction of one, two, three or four commercial buildings on a parcel zoned for such use, so long as the total ‘floor area' of the building(s) does not exceed 10,000 square feet," Sepulveda wrote. Fairbank also argued that the project did not qualify for an exemption because it lacked adequate parking and would impact traffic circulation. But the court said Fairbank needed to show that this was an "unusual circumstance" that could significantly affect the environment. "While the addition of any small building to a fully developed downtown commercial area is likely to cause minor, adverse changes in the amount and flow of traffic and in parking patterns in the area, such effects cannot be deemed ‘significant' without a showing that some feature of the project distinguishes it from any other small, run-of-the-mill commercial building or use," the court said. "Otherwise, no project that satisfies the criteria set for in Guidelines §15303(c) could ever be found to be exempt." In an unpublished portion of the opinion, the court shot down Fairbank's arguments concerning cumulative impacts on parking and impacts to the O'Shaughnessy Building, which Fairbank called historic. The court said Fairbank failed to make a "fair argument" regarding parking and the court found that the city acted consistently with its parking ordinance. The court said that although Fairbank cited comments regarding the O'Shaughnessy's historic character, the building is neither listed in nor eligible for the California Register of Historic Resources, as is required to receive scrutiny. The Case: Patricia Ann Fairbank v. City of Mill Valley, No. A085018, 99 C.D.O.S. 8106, 1999 Daily Journal D.A.R. 10307, filed September 30, 1999. The Lawyers: For Fairbank: Laurel Stanley, Stanley & Rose, (510) 663-5171. For Mill Valley: Craig Labadie, McDonough, Holland & Allen, (510) 273-8780. For Lee and Lum: Neil Sorensen, (415) 499-8600.

Forced by a lawsuit to incorporate the California Environmental Quality Act process into the way it issues streambed and lake alteration permits, the California Department of Fish & Game has issued new procedures that will require more property owners to do greater environmental review before they undertake such projects. Every permit (often called a "1600" for a section of the Fish and Game Code) will be examined to see how CEQA applies, according to Jim Steele, a DFG program manager in Sacramento who is overseeing the new procedures intended to comply with a court order. Fish & Game regulations previously allowed the agency to grant permits for such alterations without requiring review under CEQA, but a series of legal challenges in Mendocino and Sonoma counties led to the change. Final regulations have not yet been issued, but DFG officials and project proponents have already acknowledged there will be some delays as new paperwork and procedures are worked out. Steele expects Fish & Game will issue new regulations for public review next year. The new interim procedures began in May, following an order by Mendocino County Superior Court Judge Conrad Cox in Mendocino Environmental Center v. California Department of Fish & Game, case No. CV76761. In that case, environmentalists used a proposal to remove salvaged lumber from estuaries and rivers to launch a full-scale attack on DFG's failure to require CEQA review for the permits. DFG argued that its regulations under Section 1603 made its handling of the lumber salving proposal a ministerial act, not a discretionary act, so no CEQA analysis was required, according to environmental attorney Paul Carroll. But the court ruled that this was clearly a discretionary act, so DFG agreed to change its procedures, Carroll said. The impact is expected to be felt most where DFG is the lead agency for a project. The agency will require CEQA review for undertakings such as building a bridge across a creek, adding rip rap to prevent erosion, or altering a stream's flow for agricultural irrigation, "It looks like they're going to be a lot more stringent," said Peggy Rose, project manager for the Ventura County Resource Conservation District. Rose is planning a streambed alteration to revitalize and stabilize a stream, similar to a project she did several years ago. On the earlier project, DFG did not require a permit, but this time they've already told her that the district needs one. She expects it will take several months to get the permit. But DFG can develop five-year memorandums of understanding for maintenance to streamline the review process, Steele said. Morgan Wehtje, DFG biologist for Ventura County, said most developers have dealt with the new procedures well. Wehtje said she expected the new rules to delay permit processing by up to a month. Requiring an EIR, however, could lead to delays of three months to a year for a project, Steele said. But EIRs are rarely, if ever, required for such permits, he added. Steele said that 15 new employees, including nine environmental specialists, have been added to deal with the increased CEQA work for the permits. He said the price of the permits is expected to rise to cover the additional costs. The current base price of the permits is $132, with an inflation adjustment expected soon. Wehtje said one impact from the changes has been in projects that were approved in the past that are now ready to build. Environmental review documents for the past 10 years said the issue of streambed or lake alteration permits will be addressed when the time to build arrives, she explained. Now, those projects face more stringent review. But Steele said that in many cases, CEQA studies done by other agencies have been adequate to let the agency issue permits. Under the new procedure, those seeking to alter a streambed or lake are encouraged to meet with their regional office of the DFG, after filling out two forms and paying fees on the alteration project. The DFG will review the forms and determine whether a Lake or Streambed Alteration Agreement is required. Legal language on the alterations is spelled out under Sections 1600-1603 of the Fish and Game Code. But those new review procedures drew the criticism of Tara Mueller, an attorney for several environmental groups including the Sierra Club. She said DFG is not commencing CEQA review until negotiated agreements are completed, making it harder for the public to review what is occurring. "That makes CEQA a post-hoc rationalization because they've already agreed on mitigation" before they've done environmental review, she said. Mueller said a better time to commence CEQA review would be when a landowner submits a notice of an alteration to DFG. But Steele said the process is a good use of his agency's limited resources, and he said, "it gets a much more cooperative applicant." Curtis Alling , chair of the legislative review committee of the Association of Environmental Professionals, said he hasn't seen much of an impact from the new procedures. Fish & Game field biologists seem to be involving themselves sooner and more proactively in the process, doing things like defining mitigation for streambed impacts and providing input sooner. " encourages better mitigation planning," he said. Mueller noted that under the new procedures, DFG is only the lead agency if it is providing the only permit for a project. If a development is part of a bigger project, then no separate notice is issued and there is a smaller chance that there will be analysis of riparian impacts by the lead agency. Land-use attorney Michael Zischke of San Francisco said he expects the new procedures to affect primarily public agencies. "A typical new development is going to do a CEQA review through the land-use process, and then Fish & Game is simply a responsible agency," he said. "Where it will become more of an issue, I think, is in public agency maintenance ... and also to some extent maybe some private activities of existing operations where there isn't a prior environmental review for the operation." Contacts: Curtis Alling, Association of Environmental Professionals, (916) 414-5800. Paul Carroll, attorney, (650) 322-5652. Tara Mueller, Environmental Law Foundation, (510) 208-4555. Peggy Rose, Ventura County Resource Conservation District, (805) 386-4685. Jim Steele, Department of Fish & Game, (916) 653-1485. Morgan Wehtje, DFG, (805) 491-3571. Michael Zischke, Landels, Ripley & Diamond, (415) 512-8700. Web site: www.dfg.ca.gov/wahcb/1600.html

As more large development proposals rely on water transfers to meet expected urban needs, the complexity of such transfers becomes apparent. Water transfers can engender strong opposition, especially from people in the area that would lose the water, and sizeable water transfers continue to hit major snags. At least four giant development projects, several Central Valley cities, and one Southern California water agency intend to siphon water from farmland to new homes and businesses. But all of these water transfers can have multiple effects, ranging from groundwater depletion to impacts on a farm-based economy. In Northern California, where most of the state's rain falls, many farmers, environmentalists and public officials hold strong negative opinions about the idea of transferring "their" water to subdivisions and businesses in metropolitan regions. Fallowing Sacramento Valley farmland for the benefit of urban growth makes no sense, said Barbara Vlamis, executive director of the high-profile Butte Environmental Council. Such action makes money for one landowner, but it hurts farmworkers and agricultural-dependent businesses, she said. "They want water in Southern California, and there are eager and greedy people in Northern California who will sell their community down the river to make money," Vlamis said during the California Water Policy Conference in Los Angeles in October. That extreme view is not uncommon in some water-wealthy areas, and it could pose an obstacle to proposed water transfers. Among them: o The Tracy Hills project of 5,500 homes and 500 acres of commercial development in Tracy. To get water, the Grupe Co. purchased all 1,000 acres in the Widren Water District near Firebaugh. The developer then appointed directors who agreed to transfer about 3,000 acre-feet of water to Tracy Hills. Fresno County, however, has filed a lawsuit to prevent the transfer. o The 11,000-unit Dougherty Valley subdivision near Livermore. Shapell Industries has begun building homes in areas served by the East Bay Municipal Utility District. However, a plan to import water from Central Valley farms to serve the bulk of the subdivision is mired in a lawsuit, of which Shapell lost the first round. o The 5,000-unit Diablo Grande subdivision and golf resort in western Stanislaus County. The developer purchased farmland on the valley floor and plans to transfer the water to the project. A coalition of farmers and environmentalists sued to halt the project. (See Legal Digest, page 8.) o The 12,000-acre Newhall Ranch near Santa Clarita, which would contain 21,000 homes and 1,000 acres of commercial and industrial development. A transfer is one of three potential water sources. While these developments rely on more of a private-party approach, several public entities also are pursuing transfers. In August, the Metropolitan Water District, the Imperial Irrigation District and the Coachella Valley Water District agreed to a plan in which IID can ship 200,000 acre-feet of its Colorado River water to the San Diego County Water Authority. The San Diego agency, which serves a growing urban area, would pay Imperial Valley farmers to install water conservation devices. Although plenty of details remain — and both MWD and CVWD have since filed lawsuits — the deal would be the nation's largest transfer of water from agricultural to urban uses. On a smaller scale, the cities of Tracy, Lathrop, Manteca and Escalon have been working on a water transfer with the South San Joaquin Irrigation District to provide for the needs of these rapidly growing towns. This transfer remains only a proposal. To stir the waters even more, several companies — including Western Water Co., Cadiz Inc., U.S. Filter and Vidler Water Co. — have begun purchasing land throughout the state with water rights while waiting for a more formal water market to get established. Clearly, these transfers, whether private or public in nature, will confront major obstacles. Kevin Wolf, a Davis-based water planning consultant, said he has encountered supervisors in rural counties who are dead set against all water transfers. In one instance, a Tehama County supervisor refused even to discuss taking floodplain orchards out of production. Officials in Yolo County have erected as many barriers as possible to water transfers because they fear farmers will sell surface water and then irrigate fields with groundwater, which is viewed as precious, Wolf said. Many small-scale transfers already occur, especially from one agricultural user to another. The transfers that earn attention are those done under purview of the State Water Resources Control Board, said Judith Redmond, of the Community Alliance with Family Farmers in Yolo County. These transfers usually involve a long-term change in land use, such as permanent fallowing of farmland, or a new point of water diversion, she said. Opposition arises because directing irrigation water to urban uses decreases the water available for downstream farming, as agricultural water often gets used repeatedly as it makes its way downstream, explained Redmond, who also spoke at the Water Policy Conference. Such cumulative impacts should be considered before a water-transfer is implemented, Redmond advised. Redmond also spoke of Yolo County transfers during 1991, when county farmers voluntarily removed 13 percent of their farmland from production temporarily. The farmers contributed 96,000 acre-feet of water to the state Drought Water Bank, but a study found 450 people lost jobs as a result. Redmond and Vlamis, of the Butte Environmental Council, said water transfer programs ought to account for local concerns and community input. The Water Education Foundation makes a similar point in a briefing paper: "There also are risks of third party impacts to rural communities and agricultural-related industries if farmers sell their water and quit farming. Agricultural suppliers, farm workers and other related businesses can lose income, which can rock the rural community." Defining the water truly available for transfer also can prove problematic, explained Wolf. The question is whether a farmer may change to more efficient irrigation — which saves surface water but reduces the amount percolating into the groundwater table — and sell the savings, he explained. Thus far, state officials have not answered the question of transferring water that would have been "over-applied" to fields, said Mary Johannis, of the U.S. Bureau of Reclamation in Sacramento. "The rules really need to be defined as to what water can be transferred," she said. It appears likely that state lawmakers will either ignore the question or let the governor's administration decide. Lawmakers introduced only three bills during 1999 on water transfers, and they passed only one of them. "It's a hot topic but there are not a lot of members who are interested anymore," said Jennifer Galehouse, an Association of California Water Agencies' lobbyist. The one minor measure the Legislature did pass was SB 970 (Costa), which Gov. Davis signed. The measure clarifies existing water transfer law, says that water transferred for environmental uses is counted as part of a river's mandatory flow, and streamlines the Water Resources Control Board process, according to a Senate bill analysis. Interestingly, the Department of Water Resources urged a veto because it said SB 970's definition of temporary land fallowing contains a loophole. The bill only nibbled at the edges of the Model Water Transfer Act, said Galehouse, whose association backed the legislation. Galehouse predicted legislation that addresses what water is available for transfer might be introduced during 2000. Also one of this year's unsuccessful bills, SB 506, which concerns compensation for conveying transferred water, will return. Contacts: Kevin Wolf, Kevin Wolf & Associates, (530) 758-4211. Mary Johannis, U.S. Bureau of Reclamation, (916) 978-5202. Barbara Vlamis, Butte Environmental Council, (530) 891-6424. Jennifer Galehouse, Association of California Water Agencies, (916) 441-4545. Water Education Foundation website: www.water-ed.org

The Proposition 218 requirement for public elections regarding property-based taxes does not apply to areas annexed into a jurisdiction that already has such taxes, according to an Attorney General's opinion. The opinion issued in October by Deputy Attorney General Gregory Gonot says that a Local Agency Formation Commission may require that taxes levied by the jurisdiction be imposed on the newly annexed parcels, even though those landowners did not vote on the taxes. The proposition was not intended to apply to LAFCO proceedings, he concluded. To read otherwise would create "an administrative imbroglio." Landowners who dislike the taxes may reject the annexation proposal, Gonot concluded in opinion No. 99-602.

Sonoma County has won the first round in its lawsuit over the state's 1993 shift of property taxes from counties and cities to school districts. Sonoma County Superior Court Judge Laurence Sawyer ruled that the Educational Revenue Augmentation Fund (ERAF) shift was unconstitutional because "the shift of local property taxes compels the counties to accept financial responsibility in whole or in part for a program that was required to be funded by the State." Fifty-three counties joined the lawsuit, which has about $10 billion at stake. State officials vowed to appeal the ruling. Since the state implemented ERAF, counties have made up some money through a statewide sales tax increase. Also, lawmakers this year provided limited local budget relief based partly on the ERAF shift. (See CP&DR, July 1999, October 1997.) The case is County of Sonoma v. Commission on State Mandates, SCV-221243.