A school district may charge only limited mitigation fees on a redevelopment project in which new houses replace demolished residential units, the Fourth District Court of Appeal has concluded. The court held that the Tustin Unified School District could levy fees only on the difference in square footage between old apartments and the new houses that replaced the apartments. The school district appeared to lose the case because its fee study did not satisfy the court. "The fee study did not address the burden created by redevelopment construction, as opposed to new residential construction that did not displace existing housing, and thus did not show the requisite connection, or ‘nexus,' between the amount of the fee imposed and the burden created," Justice Eileen Moore wrote for the unanimous three-judge panel. The redevelopment project in question was the demolition of 56 apartments and construction of 38 single-family homes by Warmington Old Town Associates in Tustin. The school district levied its usual mitigation fee of $1.93 per square foot on the new houses, for a total fee of $122,080. Warmington said it should get credit for the demolished square footage and paid the fee in protest. Most school districts grant a square-footage credit for replacement housing, although the Education Code is unclear. When Tustin Unified refused to offset the full fee, Warmington filed a lawsuit. The developer argued that it should get credit for the 56 units it demolished, and that the district's fee study did not show a nexus between the new homes and student generation. Orange County Superior Court Judge John Woolley ruled that the school district was entitled only to the difference between the new construction (63,254 square feet) and the demolished units (47,500 square feet). The court ordered the district to refund $92,640 plus 10% annual interest. The Fourth District upheld the decision, but on a different basis than Woolley used. The trial court judge found that Education Code § 17620, subdivision (a)(1), distinguished between "new construction" and additions of more than 500 square feet. Woolley ruled that the Warmington project amounted to an addition, and he allowed the fee only for the difference between the old buildings and the new buildings, minus 500 square feet. The appellate panel held that the statute Woolley cited "was intended to refer to residential remodeling projects, not to total demolition and replacement." Instead, the court found that the school district had run afoul of the Mitigation Fee Act (Government Code § 66000 et seq.), which required the district to show a reasonable relationship between the impact of the project and the fee. The school district argued that its 1998 fee study provided adequate basis to levy the fee. But the court said the study fell short in the area of redevelopment projects. A school fee study must contain three elements, the court held, citing Shapell Industries, Inc. v. Governing Board, (1991) 1 Cal.App.4th 218 (see CP&DR Legal Digest, January 1992). The study must forecast the total amount of new housing expected to be built, it must determine the approximate number of students the housing will generate, and it must estimate the cost of providing school facilities to the additional students. Tustin Unified's study, "failed to meet the first and second prongs of the Shapell test," the court ruled. "It failed to meet the first prong to the extent that the projection of the total amount of new housing failed to take into consideration the demolition of housing units for redevelopment," Justice Moore wrote. "Similarly, it failed to meet the second prong because the fee study did not approximate the number of students to be generated by redevelopment (i.e., the difference between the number of students that previously inhabited redevelopment sites and the number of students projected to subsequently inhabit those sites)." The school district argued that it was too late to challenge the fee study, but the court disagreed, saying the district's compliance with the Mitigation Fee Act "was squarely before the court." The court upheld the entire refund, but lowered the interest rate to the 8% rate prescribed by Government Code § 66020, subdivision (e). The Case: Warmington Old Town Associates v. Tustin Unified School District, No. 02 C.D.O.S. 8013, 2002 DJDAR 10022. Filed August 30, 2002. The Lawyers: For Warmington: Don Fisher, Palmieri, Tyler, Wiener & Wilhelm, (949) 851-9400. For Tustin Unified: Wendy Wiles, Bowie, Arneson, Wiles & Giannone, (949) 851-1300.

A City of Cotati lawsuit against mobile home park owners who challenged the city's rent control ordinance was not a strategic lawsuit against public participation (SLAPP), the state Supreme Court has ruled unanimously. The city filed a validation lawsuit against Gene Cashman and other mobile home park owners in state court after the park owners sued the city in federal court over the rent control law. The park owners contended that the city's lawsuit was a SLAPP, and Sonoma County Superior Court Judge Laurence Sawyer agreed. But an appellate court overturned the decision, and the state Supreme Court upheld the appellate court's ruling. The state high court ruled that an actual controversy — the legitimacy of a rent control ordinance — was the basis for the city's lawsuit in state court. The city's lawsuit did not arise from the park owners' federal lawsuit, so the city's lawsuit was not subject to the anti-SLAPP statute (Code of Civil Procedure § 425.16). In 1998, the city adopted a mobile home rent stabilization ordinance to maintain the affordability of housing. Shortly thereafter, mobile home park owners sued the city in federal court, claiming the ordinance amounted to an uncompensated regulatory taking. The city then filed a lawsuit in state court seeking a declaration that the ordinance and the city's application of it to individual property owners were constitutional. The park owners called the city's lawsuit a SLAPP — an illegal lawsuit that project proponents sometimes wield in hopes of shutting down their opponents. The city conceded it filed the lawsuit because it saw state court as a more favorable venue, and that it intended to ask the federal court to abstain while the other lawsuit proceeded. But the city also argued that a valid controversy existed for the state court to decide. Judge Sawyer sided with the park owners, saying the city's lawsuit arose from the property owners' exercising their right to petition the government. The First District Court of Appeal reversed the decision and remanded the case back to the trial court in July 2001. The appellate panel ruled that Cotati's lawsuit sought to resolve the same constitutional issues that mobile home park owners had raised themselves. The court also held that Cotati's lawsuit served the public interest and did not result in additional expense or inconvenience for the park owners. At the state Supreme Court, the definition of the term "arising from" became the turning point. In the two-part test for determining whether a lawsuit is a SLAPP, a court must first decide whether the lawsuit is one "arising from" protected activity, such as speaking freely. If the answer is yes, then the court must determine if the plaintiff has demonstrated a probability of winning the lawsuit. If the plaintiff cannot do so, the lawsuit is subject to the anti-SLAPP law and the court can strike the lawsuit. The court held that "arising from" does not mean the same thing as "in response to." "[T[he mere fact an action was filed after protected activity took place does not mean it arose from that activity," Justice Kathryn Mickle Werdegar wrote for the court. "The anti-SLAPP statute cannot be read to mean that ‘any claim asserted in an action which arguably was filed in retaliation for the exercise of speech or petition rights falls under § 425.16, whether or not the claim is based on conduct in exercise of those rights,'" Werdegar continued, citing ComputerXpress, Inc., v. Jackson, (2001) 93 Cal.App.4th 993. To rule as the park owners urged "would in effect render all cross-actions potential SLAPPs," the court ruled. " he actual controversy giving rise to both actions — the fundamental basis of each request for declaratory relief — was the same underlying controversy respecting city's ordinance. City's cause of action therefore was not one arising from owners' federal suit," Werdegar wrote. Thus, the city's lawsuit was not subject to the anti-SLAPP law. Whether or not the city filed its lawsuit as a tactical response to the park owners' suit was irrelevant under the anti-SLAPP statute, the court held. Park owner arguments that the city's lawsuit was an attempt to chill free speech were also irrelevant, Werdegar wrote. In fact, requiring the defendant of a lawsuit to prove that the action had a chilling effect would deprive the defendant of anti-SLAPP protection, she wrote. Chief Justice Ronald George and Justices Joyce Kennard and Carlos Moreno concurred with Werdegar's opinion. Justices Janet Rogers Brown, Marvin Baxter and Ming Chin agreed with the portion of the opinion addressing the definition of "arising from" but called the rest of the opinion unnecessary. The state's high court issued two other SLAPP rulings the same day the Cotati opinion came down. The common ruling in all three cases was that a defendant in an alleged SLAPP lawsuit did not have to prove subjective motive behind the lawsuit. The Case: City of Cotati v. Cashman, No. S099999, 02 C.D.O.S. 7957, 2002 DJDAR 9950. Filed August 29, 2002. The Lawyers: For Cotati: Donald Lincoln, Endeman, Lincoln, Turek & Heater, (619) 544-0123. For Cashman: R.S. Radford, Pacific Legal Foundation, (916) 362-2833.

State lawmakers closed their 2001-02 session by approving bills that limit local government's ability to regulate housing density, urge better coordination by state agencies, protect agricultural land, add requirements to local general plans, and decrease litigation over condominium construction. Lawmakers did not approve proposed housing element reforms, changes to the state-local government finance system, or a bill that called for the Governor's Office of Planning and Research (OPR) to prepare a collection of "best practices." The California Environmental Quality Act remained largely untouched. The fate of several of the approved land use bills remained uncertain. Gov. Gray Davis had until September 30 to take action on the bills, although in the past he has gone a few days beyond the deadline for signing or vetoing legislation. Overall, the two-year session was a good one for affordable housing advocates, who consider legislation behind the $2.1 billion housing bond on the November ballot (SB 1227) their biggest achievement. Environmentalists generally fared well, while developers and real estate interests held a mixed bag when the session concluded. Local governments could cheer only the defeat of hostile bills. "It was quite a positive year for affordable housing, looking on balance at the things that passed," said Julie Snyder, a lobbyist for the group Housing California. Housing bills divide Many planners and local government officials were urging Davis to veto two key housing bills, AB 1866 (Wright) ad AB 2292 (Dutra). The former bill makes permits for second units a ministerial act and forces local governments to grant nearly any request for a density bonus. The latter measure requires "no net loss" of zoned housing density unless a city or county makes findings that a downzoning is consistent with an approved housing element. Daniel Carrigg, a lobbyist for the League of California Cities, predicted the two bills would lead to more litigation, rather than to development of more second units and apartments. "People think they can just sue their way through the housing issue," Carrigg lamented. But Marc Brown, of the California Housing Law Project, which supported both bills, said opponents have made too much of the measures. "I frankly have been amazed at how everybody has gotten so worked up over this," Brown said of AB 1866. He said AB 2292 was more the important bill but he still called it "pretty much a restating of existing law." Backers of AB 1866 said the bill is necessary because cities and counties often implement local regulations that make second units and density bonuses impossible to get. Lawmakers appeared swayed by testimony about how an application for a second unit could take a year and multiple hearings to process. "Part of the problem with our lack of housing in California is that you don't just have a hearing when you establish the zoning standards, you also have a hearing when a property owners comes in to comply with the zoning," Brown said. Brown charged that local governments' opposition stemmed primarily from provisions in both bills that allow a court to grant attorneys fees to litigants — such as developers and housing advocates — in successful lawsuits against cities and counties. City and county representatives do not deny that they dislike the attorneys fees provisions, but say that they have policy concerns, too. Carrigg, for example, argued that the mandate for over-the-counter permits in AB 1866 tramples due process rights. "You don't shut up the public without a consequence. They expect to be notified and they expect to have some kind of outlet at the Planning Commission or the Board of Supervisors or wherever," Carrigg said. While AB 1866's provisions regarding second units generated a great deal of attention, the bill's density bonus language could have broader implications. The bill allows the density bonus — already allowed by state law for affordable housing projects — to trump local regulations, except historic preservation or in cases where there would be an adverse health and safety or environmental impact. "That's way beyond what most reasonable people would think is the appropriate way to handle density bonuses," said Sande George, lobbyist for the California Chapter of the American Planning Association. A letter to Gov. Davis from George, Carrigg and California State Association of Counties (CSAC) Executive Director Steven Szalay complains that AB 1866 "sweeps all other public policies aside in favor of the demands of a developer." But the same groups complained that AB 2292 would harm developers because it would make city councils and boards of supervisors reluctant to approve downzoning, or to rezone property from residential to commercial uses. " e believe that the practical outcome of this legislation will be to stifle the ebb and flow of the marketplace and hamper local ability to respond to changing conditions in their communities," George, Carrigg and CSAC lobbyist DeAnn Baker wrote. A different housing bill intended to induce construction of condominiums benefited from a truce between builders and consumer attorneys over construction defects (see CP&DR, August 2002). Senate Bill 800 (Burton) sets performance standards for builders and gives builders a right to repair alleged defects before a homeowner may sue. Bill supporters said it would decrease litigation over construction defects, which builders say has suppressed condominium construction. State planning With no votes to spare in the lower house, Assemblywoman Patricia Wiggins (D-Santa Rosa) won approval for a bill that comes as close as lawmakers were willing to get to "state planning." Wiggins's bill, AB 857, emerged from a conference committee in June. It requires state agencies to adopt consistent planning and capital spending priorities based on promoting infill development, protecting environmental and agricultural resources, and encouraging efficient development patterns. The measure also calls for the governor to establish a process whereby agencies work out differences when their policies conflict. The state "doesn't have any direction as to how it does infrastructure planning at this time," Wiggins said. "Basically it's been a rudderless ship." Wiggins stripped language from the bill that would have imposed planning mandates on local governments because she could not get the votes. She also had to exempt schools, transportation projects — and even the University of California, because the new UC Merced campus would not meet the bill's dictates. In the end, Wiggins found allies in inner-city lawmakers, who contend the state too often spends money for infrastructure on the urban fringe while ignoring already developed areas. "The builders and realtors at the state level were opposed," Wiggins said, "basically because they don't want any limits on where infrastructure can go, and their opposition influences some members ." Sandra Spelliscy, an attorney and lobbyist for the Planning and Conservation League, called AB 857 a good first step. But, like many people, she said its impact will be determined by how seriously lawmakers and future administrations treat the measure. A bill that called for OPR to prepare model planning policies and practices failed. The policies would have promoted a number of "smart growth" themes, such as mixed-uses, infill, walkable neighborhoods, and certainty in the entitlement process. Senate Bill 1521 (Kuehl) also would have given bonus points on state grant applications to local agencies that adopted the model policies and practices. However, the administration dropped its support of SB 1521 in August amidst opposition from both builders and local government. At the time, interim OPR Director Tal Finney called the bill a political loser. Green acres Lawmakers approved four bills that, taken together, demonstrate a growing interest in preserving farmland. The bills are AB 1997 and AB 2370, both by Assemblywoman Helen Thomson (D-Davis), AB 3057 (Matthews) and SB 1515 (Machado). Davis has signed both Thomson bills and SB 1515. Thomson's AB 1997 prohibits the subdivision lands that are subject to agricultural or open space easements, while AB 2370 bars a local agency formation commission from allowing a city to annex land that is under a Williamson Act contract. The latter bill builds on a two-year-old overhaul of LAFCO law, which prohibited annexation of territory in a farmland security zone (FSZ). "California loses approximately 50,000 acres of agricultural and open space land per year to urbanization," according to an Assembly analysis of AB 2370. "One of the primary ways in which this happens is through annexation of farmland or open space to cities. This bill would prohibit LAFCOs from approving either expansions of spheres of influence or annexation proposals that would affect land under FSZ or Williamson Act contracts, except under certain specified circumstances." Assembly Bill 3057 adds the word "agriculture" to the name of the open space element, which is a required part of local general plans. The bill also requires local governments to revise their general plans to minimize or avoid land use conflicts and to promote long-term agricultural viability. Senate Bill 1515 prohibits land protected by an open space or agricultural easement, the Williamson Act or the farmland security zone from being part of a Mello-Roos community facilities district. The bill does not apply to territory that received protection prior to January 1, 2003. General plan specifics Besides the AB 3057 requirements for an "agricultural and open space element," three other bills also expanded the scope of local general plans. The bills are AB 2175 (Daucher), AB 2954 (Simitian), and SB 1468 (Knight). However, Davis vetoed AB 2175. The Daucher bill would have required OPR to include "human service matters" in its general plan guidelines. The bill also would have required the guidelines to address the effects of civilian development on active military bases. Davis called the bill too expensive, saying the $100,000 needed by OPR to prepare the guidelines was not budgeted. The second provision of AB 2175 tied in with SB 1468, which mandates that the land use element of general plans consider the impact of development on military activities. The bill was sponsored by the Navy, which has seen several of its bases squeezed out of existence by neighboring urban development. Assembly Bill 2954 requires that a land use element adopted or amended after January 1, 2004, address the distribution of child care facilities. Proponents argued that child care facilities are as important as housing, retail business, industry, open space, schools and garbage disposal facilities — all of which general plans already consider. The sessions's most controversial general plan bill, SB 910 (Dunn), would have allowed the state Department of Housing and Community Development (HCD) to fine cities and counties whose housing elements failed to receive HCD certification. The bill also would have altered the regional housing allocation process. The bill was the subject of countless working group meetings and private negotiating sessions at the Capitol, but in the end lawmakers could not agree. Most people expect similar legislation to reappear in 2003. Other general plan bills that failed this year included AB 2863 (Longville), which would have redefined the terms "residential unit" and "substantial compliance" with housing element law; AB 2864 (Wiggins), which would have required local governments to submit annual reports on how their general plan complied with state guidelines; and SB 1939 (Machado), which would have required OPR to notify the Attorney General's office if a general plan were eight years old, rather than wait until a plan were 10 years old. Contracts: Marc Brown, California Housing Law Project, (916) 739-6293 Daniel Carrigg, League of California Cities, (916) 658-8222. Sande George, California Chapter, American Planning Association, (916) 443-5301. Julie Snyder, Housing California, (916) 447-0531. Sandra Spelliscy, Planning and Conservation League, (916) 444-8726. Assemblywoman Patricia Wiggins, (916) 319-2007. Legislation websites: California Housing Law Project: www.housingadvocates.org California Chapter, American Planning Association: www.calapa.org Planning and Conservation League: www.pcl.org/LEG/leg.html State of California: www.leginfo.ca.gov

Over the years, there has been quite a bit of talk about splitting California into two states. The idea is that Northern California and Southern California do not have a lot in common and should not have much to do with each other. The idea has not gotten much of anywhere. But maybe that's because the reality is somewhat different than people's perception. A glance at the November ballot in cities and counties throughout the state reveals that California is already two states. But it is not divided into North and South. Rather, it is divided into West and East — between the populous and crowded coastal counties and the land-rich but rapidly growing inland areas. In Western California, residents vote on all kinds of land-use issues on a regular basis. In the other California, they don't. By our count, there are at least 20 different local measures dealing with land-use issues on the November ballot. Of those, only three are in inland counties. And one of those is hardly a "growth control" measure at all. In fact, it is quite the opposite: The Nevada County property rights initiative would require the county to reimburse private property owners when their development proposals are rejected (see , June 2002). The other 17 ballot measures are in coastal counties. For the most part, they represent a familiar mélange of sundry local issues, and they are from a familiar set of communities where ballot-box zoning has become deeply embedded in the political culture. These include Ventura County, small cities between Los Angeles and San Diego such as San Juan Capistrano and Oceanside, and the usual Bay Area direct-democracy axes such as Berkeley and San Francisco. Increasingly, the measures that we see today are there because of measures that we saw yesterday. That is, they are the result of previous ballot measures requiring "subsequent voter approval" in order to make major land-use changes. The best example is in ballot-happy Ventura County, which has four land-use measures on local ballots. Three of the Ventura County measures fall into the "subsequent voter approval" category. In Simi Valley — adjacent to the San Fernando Valley — slow-growth activists are seeking to shrink the urban growth boundary imposed in 1998 as part of the famous group of SOAR (Save Open-space and Agricultural Resources) initiatives (see , December 1998). In the semi-rural community of Santa Paula, a developer is trying to expand the SOAR boundary to include a large hillside property that is already inside the city's sphere of influence. In the beach town of Ventura, where the SOAR movement started in 1995, a hillside landowner is seeking voter approval for a development project that would set aside 80% of the property as open space. To make matters more confusing, the Ventura project does not require approval under SOAR because the property is already within the city's sphere of influence. But under a different ballot measure adopted last year, the project requires voter approval to extend water and sewer service into the hillside area. The fourth Ventura County measure is not on the ballot because of a previous ballot measure, but it will surely require more ballot measures if it passes. In the quaint town of Ojai, a local environmental group has placed a measure on the ballot that would require the city to turn down development projects if traffic impacts are not fully mitigated, and give increased power in the future to voters to decide such projects. It is difficult to know whether all this one-off citizen activism in coastal communities does more good than harm. After all, projects placed on the ballot pursuant to a previous initiative tend to be divorced — at least in public discussion — from the underlying planning policies of the community. And a political campaign does not necessary guarantee any more truth-telling in the public arena than the normal planning process before a city council. But once in a while, you run across a ballot measure that actually solves a problem — one that represents a comprehensive approach to a long-standing program in a way that is constructive and even inspiring. This year that ballot measure is the "Watsonville Orderly Growth and Agricultural Protection Initiative," which seeks to resolve a longstanding dispute over whether and how the poor farmworker town of Watsonville will expand onto surrounding farmland. Already overcrowded, Watsonville has been at loggerheads with Santa Cruz County environmentalists for more than a decade over expanding its urban area. Among other things, the city sought for many years to leap over Highway 1 onto the coastal plain, a move that the Santa Cruz County Local Agency Formation Commission and the California Coastal Commission blocked. In 1999, however, business and environmental leaders in the Watsonville area got together to form a group called Action Pajaro Valley, a typical group of do-gooders intent on building civic consensus. Three years later, that group has agreed on a growth strategy and an urban growth boundary that will appear on the ballot in November. Under the plan, half of the expected residential development in Watsonville during the next 20 years will take place inside existing city limits. The ocean-side of Highway 1 remains out of bounds. The Watsonville initiative allows development in six new areas. All of these are inside a new urban growth boundary that will remain in places for 20 or 25 years unless future voters change the boundaries. There have been only a few ballot measures in the recent history of California that have resolved complicated land-use issues rather than simply making them more difficult and cumbersome to deal with. In fact, the last was probably a decade ago, when Pasadena voters threw out growth caps from the 1980s and replaced them with a new and more comprehensive General Plan (see , December 1992). If the Watsonville measure passes, maybe it will inspire more community leaders in California — both elected politicians and civic leaders — to use the ballot.

The City of Rancho Palos Verdes does have the authority to regulate placement of radio antennas, but the city cannot deny a use permit for an antenna solely because the antenna would be used for commercial purposes, the Second District Court of Appeal has ruled. Under the Telecommunications Act of 1996 the city "may deny a permit for a legitimate reason," the court held. "But the city may not, as it did here, deny a permit based solely on the type of transmissions: commercial as opposed to amateur." In 1990, Mark Abrams erected a 52-foot radio antenna at his home near the peak of the Palos Verdes Peninsula. The city had approved a site plan review application for the structure. Seven year later, Abrams attached a 40-foot antenna to a fence around the tennis court on his property. He received approval for a site plan review application after the fact for the second antenna. Abrams is both an amateur radio operator (a "ham") and owns for-profit businesses that sell two-way radio equipment and provide commercial transmission services. Under the Rancho Palos Verdes antenna ordinance, Abrams had to get a conditional use permit to operate the antennas commercially. Abrams said the two permanent antennas only handled amateur radio traffic, but two portable antennas in his yard carried commercial relays. In April 1999, the city and the state sued Abrams, seeking an injunction that barred Adams from operating antennas for commercial purposes. Abrams argued that federal law preempted the city's permit requirement because it prohibited the use of radio frequencies allocated to him and his customers by the Federal Communications Commission. The trial court urged Abrams to go through the city's planning process, which he did. However, the Rancho Palos Verdes Planning Commission and, on appeal, the City Council, rejected Abrams's application to operate commercially. The case proceeded and Los Angeles County Superior Court Judge Cesar Sarmiento ruled for the city. Meanwhile, Abrams sued the city in federal court, where a district court vacated the city's use permit decision because there was no substantial evidence that commercial use would cause harm. Abrams appealed the decision rendered in state court, saying he had the right to use existing, city-approved antennas for commercial purposes. A unanimous three-judge panel of the Second District, Division One, sided with Abrams and overturned the trial court judge. The city argued that Abrams should not be allowed to "convert" his permitted antennas to commercial use because a change in use triggered the city requirement. A permit to construct a house in a residential zone, the city argued, would not authorize the owner to use the house for commercial purposes even though the external appearance remained the same. But the court rejected this argument, finding that federal law pre-empted the city's regulation in this case. There are three types of pre-emption of state law by federal law, the court explained: "Express pre-emption," in which Congress explicitly defines the extent to which it pre-empts state law; "field pre-emption," in which the federal government regulates all conduct in one subject area; and "conflict pre-emption," in which state law is pre-empted because it prevents someone from complying with federal law. "We conclude," Justice Robert Mallano wrote, "that the city's permit requirement, as applied in this case, is pre-empted because it conflicts with the licenses granted by the FCC (conflict preemption) and because Congress intended the FCC, not local authorities, to determine the frequencies that a radio operator may use (field preemption)." The court, however, rejected Abrams's argument that the owner of an FCC license did not have to apply for a city permit at all. "The city has the right, consistent with federal law and in furtherance of the goals of the antenna ordinance, to grant or deny a permit for commercial use," the court held. But a city needs a legitimate reason to deny such a permit. The court cited cases in which denial was upheld because antennas would have disrupted a mountain slope, caused significant aesthetic impacts, and detracted from the character of a neighborhood. None of the cases had to do with permit denial based solely on the commercial use of an antenna. The Case: City of Rancho Palos Verdes v. Abrams, No. B151086, 02 C.D.O.S. 7584, 2002 DJDAR 9561. Filed August 20, 2002. The Lawyers: For the city: Carol Lynch, Richards, Watson & Gershon, (213) 626-8484. For Abrams: Wilkie Cheong, Cheong, Denove, Rowell, Antablin & Bennett, (310) 277-4857.

In the years following passage of the Clean Water Act of 1972, counties and cities across the country found themselves forced to comply with restrictions on the release of municipal sewage and industrial waste. For the most part, they accomplished this by cracking down on polluting factories and by investing billions of dollars in advanced mechanical filtration and chemical disinfectant technology. Such measures could only do so much. They were effective in controlling pollution from large, easily identifiable sources. But 40% of the nation's surface waters remains too polluted to meet the Clean Water Act's goal of being safely swimmable and fishable, according to the Environmental Protection Agency (EPA). Pollutants ranging from pesticides and fertilizer, to oil and gasoline, to human and animal waste continue to reach rivers, streams and coastal waters. The contamination comes from "nonpoint sources," such as farm fields, urban streets, parking lots, and suburban back yards. "Today, nonpoint source pollution remains the nation's largest source of water quality problems," according to the EPA. The nation's water-quality regulators are now going after these diffuse, harder to control sources. And if the response by several municipalities in California is any indication, the new generation of wastewater treatment facilities will look a lot less like sewage plants and more like, well, just plain plants. The strategy, known as bioremediation, relies on living organisms to naturally remove such contaminants as nitrogen and organic compounds from polluted water. This approach is winning fans in the private and public sectors. One of the most ambitious examples of this strategy will soon be provided by the Irvine Ranch Water District (IRWD). The district provides domestic water service, sewage collection, and water reclamation for the City of Irvine and the unincorporated areas of south-central Orange County, as well as portions of Tustin, Santa Ana, Newport Beach, Costa Mesa, Orange and Lake Forest. The district's service areas drains into Newport Bay primarily through San Diego Creek, both of which the State Water Quality Control Board (SWQCB) has identified as "impaired" because of contamination by heavy metals, pesticides and other toxins. Newport Bay also is contaminated by nutrients such as nitrogen and phosphorus, which are not themselves toxic but which cause huge algae blooms that lead to fish die-offs as decaying algae deplete the water of oxygen. The EPA adopted pollutant standards for sediment, nitrogen and phosphorus in the San Diego Creek-Newport Bay watershed in 1999, and for toxic contaminants in June of this year. Additionally, the state has adopted a nonpoint source pollution control plan, mandated by the EPA, which delegates responsibility for devising and enforcing specific pollution-control measures to the state's nine regional water quality control boards. The Santa Ana Regional Water Quality Control Board, with authority over most of coastal Orange County (as well as portions of Riverside and San Bernardino counties), adopted new stormwater standards for Orange County and all its cities earlier this year. Like most of coastal Southern California, the Newport Bay watershed was once farmed but is now almost entirely urbanized. In 1983, agriculture accounted for 22% and urban uses for 48% of the Newport Bay watershed, according to Orange County. As of 2000, agriculture had dropped to approximately 7%. The San Diego Creek watershed is more than 90% urbanized. What this means is that compliance with the maze of new coastal water pollution standards falls increasingly on municipal agencies that serve urban homeowners and developers — agencies such as IRWD. Although these standards have drawn irate opposition from many city officials and representatives of the building industry, as well as environmental organizations (See CP&DR Environment Watch, August 2001, March 2000), IRWD is taking a pragmatic approach adopted by several other agencies throughout California. The district plans to construct about 37 small wetlands scattered throughout the San Diego Creek watershed. Dry-weather runoff from existing and new development will be shunted through the network of ponds and marshes, where plants and microbes will absorb nitrogen and other nutrients, and break down bacteria and other contaminants. Once it has been cleaned by biological processes, the runoff will be allowed to flow into the natural waterways. The district is calling its project the "Natural Treatment System." The district estimates the system will cost $25 million to $30 million to build, and $2 million to $3 million annually to maintain. It is modeled after an earlier marsh restoration project the district credits with a 25% decrease in algae blooms in Newport Bay. Beginning in 1996, the district diverted the flow from San Diego Creek into a restored wetlands complex known as San Joaquin Marsh. After circulating through the marsh and its ponds for several days, during which it is filtered by algae, cattails, bulrushes and other aquatic vegetation, the water returns to the creek channel with half its nitrogen content removed. An estimated 1,000 similar projects have been undertaken across the country. Wetlands remove dairy cow waste from agricultural runoff in Chino, fecal coliform from street runoff in Laguna Niguel, and contaminants in municipal sewage plant discharges in Pacifica. Chevron operates a nitrate-removing wetland at its refinery in Richmond. The Orange County Water District uses a complex of 50 small wetlands behind Prado Dam in Riverside County to remove nitrates from the Santa Ana River before it is allowed to recharge the local groundwater basin. The IRWD project, which it is developing in partnership with Orange County and several cities, is still in the early planning stages. Environmental review is expected to end this month and design is expected to commence after that. If all goes as planned, construction will begin next year. Some of the wetlands will be installed in existing storm water and flood retention basins. In new development areas, however, the district expects landowners to provide property or easements, and to pay for the costs of constructing the wetlands and related facilities. The district also is seeking state and federal grant money to cover part of the cost. Marilyn Smith, IRWD's community relations manager, said there has been no opposition to the proposal from the local development community, perhaps because the watershed is dominated by just one developer — the Irvine Company — which supports the project. The wetlands, Smith said, won't by themselves solve the problem of nonpoint source pollution. But they do represent a cost-effective way to tackle one aspect of it. "It's one more tool in the toolbox," she said. Contacts: EPA's Nonpoint Source Pollution Program: http://www.epa.gov/OWOW/NPS/ California Coastal Commission's Water Quality Unit: http://www.coastal.ca.gov/web/nps/npsndx.html Irvine Ranch Water District: (949) 453-5300

In canceling a Williamson Act contract, the Mendocino County Board of Supervisors did not need to find that the cancellation was consistent with the county general plan or that an emergency situation existed, the First District Court of Appeal has ruled. The county only needed to find that "other public concerns" substantially outweighed the need to protect farmland, and that no other suitable land not subject to the Williamson Act was available for the proposed development. The case stems from an American Indian tribe's proposed housing development in the rural Willits Valley of southern Mendocino County. In May 1997, the Sherwood Valley Rancheria acquired the 160-acre Bettansid Ranch and planned to construct 15 low-income homes on 3 1/2 acres. The ranch, however, was subject to a Williamson Act contract, which provides tax breaks for property owners who maintain their land for agriculture or open space. In September 1997, Bettansid Ranch Inc. gave notice of nonrenewal, which starts a 10-year phase out of the Williamson Act restrictions. The Ranch and the tribe also jointly applied for immediate cancellation of the contract. Cancellation is allowed only if the property owner pays substantial penalties or under certain circumstances. In early 1998, the Mendocino County Planning Commission voted to deny the cancellation petition, citing concerns about loss of agricultural land. Later that year, the Board of Supervisors overturned the decision, and approved the cancellation and the development. The tribe and the county also signed an agreement obligating the landowners to comply with Williamson Act restrictions on 53 acres of prime agricultural land. The tribe's development site was on the 107-acre portion of the ranch that was wooded hillside. A group called Friends of East Willits Valley sued, challenging the Williamson Act cancellation and the county's environmental review. Mendocino County Superior Court Judge Vincent Lechowick ruled for the residents. He found that no substantial evidence existed to support the Williamson Act decision. He also concluded the county should have prepared an environmental impact report (EIR) rather than a negative declaration. The tribe appealed, and a unanimous three-judge panel of the First District, Division Five, overturned the lower court. While the appeal was pending, the Bureau of Indian Affairs accepted the ranch into trust for the tribe, which is a standard action. The Tribe argued that the federal action voided the Williamson Act restriction, or, alternatively, that the action prevented the state court from deciding the issue. The court ruled that it had jurisdiction and that the Williamson Act still applied. It then considered the merits. Under Government Code § 51282, a county may cancel a Williamson Act contract only if cancellation is consistent with the act, or if cancellation is "in the public interest." The county approved cancellation based on the public interest. The residents argued that the county could approve cancellation only if the project were consistent with the county general plan, if an emergency situation existed, if the project were contiguous to existing development, and if the project would not result in loss of adjacent agricultural uses. The residents cited case law and sections of the Williamson Act. But the appellate court held that none of these four findings were necessary. The county only needed to have substantial evidence that a public interest outweighed the goal of the Williamson Act, and that no other suitable land was available for the housing project outside of properties protected by the Williamson Act, the court ruled. "Substantial evidence supports the County's finding that the project will promote low-income housing. The record establishes that more than 70% of Tribe member's households have incomes below 50% of the median in Mendocino County. More than 40 families are living in substandard or overcrowding or housing that consumes more than 30% of their income … . Seventeen families are living on the Tribe's existing lands without electricity and with inadequate water," Justice Linda Gemello wrote for the court. "Furthermore, the county was entitled to decide that the impact on Williamson Act interests from cancellation would be negligible," Gemello continued. "Under the terms of the tribal/county agreement, the portion of the ranch that potentially constitutes prime agricultural land will remain subject to Williamson Act restrictions until September 30, 2007, essentially the same period for which such restrictions would have continued to apply in the absence of cancellation. The county therefore could conclude that cancellation would have little, if any, impact on the interests protected by the Williamson Act, and that those interests were substantially outweighed by the need for additional low-income housing." In an unpublished portion of the opinion, the appellate court upheld the county's negative declaration. The court said that the residents provided no evidence other than testimony of community members that the project would impact road conditions or water resources. And the court thought little of a letter from the California Department of Conservation saying the project could induce growth. The state agency based its conclusion on projects elsewhere that had golf courses — projects unlike the tribe's low-income housing development, the court ruled. The Case: Sherwood Valley Rancheria v. Friends of East Willits Valley, No. A094872, 02 C.S.O.S. 7488, 2002 DJDAR 9380. Filed August 14, 2002. The Lawyers: For the Rancheria: David Rapport, Rapport & Marston, (707) 462-6846. For Friends: Rose Zoia, (707) 526-5894.

A doughnut shop owner who remained in his place of business for six years after the city acquired the property for redevelopment still qualified for relocation benefits as a "displaced person," the Second District Court of Appeal has ruled. The fact that the business owner "did not vacate the premises for six years after the agency's initial acquisition of the premises is irrelevant. The critical factor is not when the property was vacated but why it was vacated," the Second District ruled in an opinion that the state Supreme Court ordered published. In February 1993, Veisna Kong signed a sublease with Frank Bartha, the primary tenant of property on Carson Street in Hawaiian Gardens. In July of that year, the Hawaiian Gardens Redevelopment Agency notified Kong that the city was considering acquiring the property and that he was eligible for relocation advisory assistance and possibly for relocation benefits. The city did purchase the property in August 1993. The following year, the city sold the property to Dr. Irving Moskowitz for development of a casino. Moskowitz, however, was not ready to pursue his project, so he and Bartha signed a new lease in June 1994. Kong remained as a subtenant and the city advised him that he would be eligible for relocation benefits when the contract extension expired. In April 1999, Moskowitz was ready to pursue his project. He gave Bartha six months notice that he was terminating the lease. Kong protested that the notice was improper, argued with Moskowitz and eventually as evicted from the premises in December 1999. In July 2000, Kong filed a claim with the city for $72,000 in relocation benefits, and, in September 2000, he filed a lawsuit demanding payment. (He also filed a separate lawsuit in federal court alleging inverse condemnation.) Los Angeles County Superior Court Judge Dzintra Janavs ruled for the city. Judge Janavs found that Kong had failed to prove that he vacated the property as a direct result of the city's acquisition six years earlier, so the city had no duty to pay relocation benefits. Kong appealed, arguing that he was a "displaced person" under the California Relocation Assistance Law (Government Code § 7260 et seq.). A unanimous three-judge panel of the Second District, Division One, agreed with Kong. The city argued that Kong did not qualify as a displaced person because he did not vacate the premises until after the expiration date of his original sublease with the Barthas. But the court ruled that the original sublease was terminated by the city's acquisition of the property. "Petitioner was able to continue operating his donut shop after Dr. Moskowitz acquired the property from the agency only because Frank Bartha entered into a new lease agreement with Dr. Moskowitz," Presiding Justice Vaino Spencer wrote for the court. "Thus, the only reasonable construction of the evidence is that the original master lease between the Barthas and the Veady Family Trust was terminated as a result of the agency's taking of the property and replaced with the Bartha/Moskowitz lease. … That petitioner ultimately was not required to vacate the premises until after what would have been the last day of his original sublease with the Barthas (December 31, 1998) does not compel a contrary conclusion. Had Dr. Moskowitz needed the premises earlier, he could have terminated his lease with Frank Bartha well before that date." The "crucial factor," Spencer wrote, "is the ‘causal connection between the acquisition by the public entity and the displacement.'" Spencer cited Peter Kiewit Sons' Co. v. Richmond Redevelopment Agency, (1986) 178 Cal.App.3d 435. "The bottom line is that petitioner was required to move and thus was displaced for a public project," Spencer wrote. This makes him eligible for relocation benefits as a displaced person. The appellate court sent the matter back to the trial court to determine the amount of relocation benefits to which Kong is entitled. The Case: Kong v. City of Hawaiian Gardens Redevelopment Agency, No. B149322, 02 C.D.O.S. 9416. Filed June 13, 2002. Ordered published September 11, 2002. The Lawyers: For Kong: Anthony Parrille, (626) 294-0010. For Hawaiian Gardens: M. Lois Bobak, Woodruff, Spradlin & Smart, (714) 558-7000.

An appellate court has overturned a jury's verdict on the fair market value of property that the City of Ripon took through eminent domain. The appellate panel ruled that the trial judge allowed the jury to hear inadmissible evidence about how the city allegedly blocked development of the property to diminish its value. "We conclude it is reasonably probable the City would have obtained a more favorable result in the absence of the challenged evidence, and the erroneous admission of the evidence constitutes a miscarriage of justice that requires reversal of the judgment," Justice Richard Sims wrote for the unanimous three judge panel of the Third District. In November 1998, the city filed an eminent domain complain to acquire 0.6 acres along Highway 99 owned by Marshall and Billie Sweetin, who lived on the property and operated an auto repair business there. The city said it needed the property for construction of a new interchange at Jack Tone Road. The Sweetins answered the eminent domain lawsuit by alleging that the city's "unreasonable and oppressive conduct and activities" had impaired their property value. In June 2000, the city sought to bifurcate the questions of precondemnation damages and fair market value. Precondemnation damages are commonly known as Klopping damages, in reference to the state Supreme Court decision in Klopping v. City of Whittier, (1972) 8 Cal.3d 39. In Klopping, the court ruled that a property owner must receive the chance to argue that a public agency that is taking property via eminent domain has acted improperly or has unreasonably delayed, causing a decrease of property value. At a hearing in August 2000, however, the Sweetins stipulated that they were not seeking Klopping damages. Instead, they argued that the city's activity was relevant to the question of their property's valuation, and that they should be allowed to show a jury the effect of that activity on the "highest and best use" of the property. The city objected, but San Joaquin County Superior Court Judge K. Peter Saiers agreed with the Sweetins. During the trial, the landowners argued that the value of their property should be based on highway commercial uses. A defense expert presented testimony that the city had known since 1988 that it would take the property for the interchange. If it were not for the interchange project, the expert testified, the city would have extended sewer, water and storm drain services to the Sweetins' property during a 1994 infrastructure project, allowing them to pursue development of a fast-food restaurant. The city argued that the property value should be based on light industrial uses. The property was zoned light industrial and nearby uses on that side of the freeway were light industrial. The city set a value of $190,000. The Sweetins' expert said the property was worth $365,000. The jury accepted the Sweetins' value, and Judge Saiers also awarded them $56,000 in attorneys' and other legal costs. The city appealed, arguing that the verdict was based on inadmissible evidence. The appellate panel agreed. The Sweetins' claim was "a classic Klopping claim," Sims wrote. "The appropriate procedure is to bifurcate the trial of the action so that the question of the liability of the public entity is first adjudicated by the court without a jury." " he evidence of the City's alleged unreasonable precondemnation conduct was not relevant to show the ‘highest and best use' of the property as that term is properly understood," Sims continued. Rather, highest and best use reflects the use to which the property would reasonably be put in the near future. " vidence of the City's past alleged unreasonable conduct did not tend to show that future use of the property for ‘highway commercial' purposes was reasonably likely in the reasonably near future," Sims wrote. "Admission of the evidence was in error. The erroneous admission of this evidence allowed the jury to adjudicate a question that should have been adjudicated by the court …" However, because the Sweetins stipulated they were not seeking Klopping damages, there was nothing for the court to adjudicate. Allowing this testimony into the jury trial "doubtless affected the jury's computation of the fair market value," the appellate court held. The Case: City of Ripon v. Sweetin, Nos. C036592, C037212, 02 C.D.O.S. 6855, 2002 DJDAR 8585. Filed July 30, 2002. The Lawyers: For Ripon: Thomas Terpstra, Herum, Crabtree, Dyer, Zolezzi & Terpstra, (209) 472-7700. For Sweetin: Joseph Fagundes, Cassel, Malm Fagundes, (209) 870-7900.

In a case that pitted open space protection against eminent domain law, the First District Court of Appeal has ruled that a Sonoma County open space district did not need to get voter approval before granting an easement for a treated wastewater pipeline across district property. Opponents of the pipeline project contended that because the City of Santa Rosa only threatened to get the easement through condemnation proceedings, the district had voluntarily sold the easement. A voluntary sale without voter approval would violate the law on which the district's creation was based. But the appellate court ruled that the property transaction was indeed controlled by eminent domain law because the city had "expressed unequivocally by words and actions its intent to condemn if negotiations proved fruitless." The case is only one aspect of a long-running controversy over whether Santa Rosa should dispose of its treated wastewater by injecting it into the "Geysers Known Geothermal Resources Area" in the mountains 40 miles northeast of town. The project is also intended to generate steam, which would be used to create electricity. In 1990, Sonoma County voters approved creation of the Sonoma County Agricultural Preservation and Open Space District. Four years later, the National Audubon Society granted the district a "Forever Wild" easement on 1,400 acres the Society owned in the mountains between Healdsburg and the Geysers. The area is known as the Mayacamas Mountain Sanctuary. In 1998, Santa Rosa approved the wastewater disposal and power generation proposal — called the Geysers Research Project — over the objection of some environmental organizations. In April 2000, the city selected a route for the pipeline carrying treated wastewater to the Geysers. The city chose the route, in part, to settle a California Environmental Quality Act suit that the Audubon Society filed against the city regarding the pipeline project. The route crossed about 3 1/2 miles of the Mayacamas Mountain Sanctuary and required construction of a pump station on the sanctuary. The city then set about acquiring the property it needed to build the pipeline. The city reached settlements with 80 property owners and filed eminent domain actions against about 28 other landowners. In October 2000, the city asked the district to approve Audubon's conveyance of a utility easement across the sanctuary. The district's general manager and a county attorney then began negotiating with city representatives and the Audubon Society. They struck a deal in which the district would approve the utility easement in exchange for the city giving the district conservation easements to four city-owned properties comprising 1,400 acres. Additionally, the agreement called for the Audubon Society to use the $1.3 million the city had paid to settle the CEQA suit to "restore, preserve, protect and provide public access to" the sanctuary. In March 2001, the district's board backed the deal. In approving the deal, the board found that Public Resources Code § 5542.5 — which contains a presumption that open space was the best and most necessary use of the property — had been rebutted. The board further found that § 5540 — which requires either voter approval or state legislation for the district to transfer an interest in property used for open space — did not apply because the district's approval of the easement was not voluntary. Jack Johnston, a Sonoma County landowner, then sued, arguing that the district violated § 5540. Sonoma County Superior Court Judge Lawrence Antolini found that the transaction was governed by eminent domain law (Code of Civil Procedure § 1230.010 et seq.), not by the Public Resources Code, and he ruled for the district. The appellate court upheld that decision. In the appeal, Johnston argued that the "mere threat" of condemnation did not make the Public Resources Code mandate go away. He argued that the conveyance was a backroom deal made by public officials and should have been decided by voters. But the court found that the city had triggered eminent domain law, which allows for involuntary transfers of open space. "The law of eminent domain is triggered when there is ‘evidence of implied or actual threat of condemnation, so that the ultimate result is a foregone conclusion,'" Justice James Marchiano wrote, citing Pacific Outdoor Advertising Co. v. City of Burbank, (1978) 86 Cal.App.3d 5. "The conveyance of the sanctuary utility easement was done after an unequivocal expression of the intent to condemn, and thus in lieu of inevitable condemnation," Marchiano continued. " nder the law of eminent domain, the District had the right to negotiate a resolution of the looming threat of the easement's condemnation — and properly did so …" In fact, Government Code § 7267.1 required the city to enter negotiations with property owners, the court noted. And the district has "an obligation to achieve the best result for its members at the most propitious stage." Pointing to the new open space easement on 1,400 acres of city land and the dedication of $1.3 million to sanctuary management, the court found that the district "obtained settlement terms far out of proportion to any money judgment in an eminent domain proceeding, and of substantial public benefit. … No court sitting in an eminent domain would have the power to order these measures," Marchiano wrote. A court could have only compensated the district with about $100,000 to $150,000, he concluded. The Case: Johnston v. Sonoma County Agricultural Preservation and Open Space District, No. A097121, C.D.O.S. 6916, 2002 DJDAR 8645. Filed July 31, 2002. The Lawyers: For Johnston: Rachel Hooper, Shute, Mihaly & Weinberger, (415) 552-7272. For the district: Sue Gallagher, deputy county counsel, (707) 565-2421. For the City of Santa Rosa: Patrick Wilson, assistant city attorney, (707) 543-3040. For the Audubon Society: J. William Yeates, (916) 860-2000.

Three counties in the eastern Bay Area are in position to capitalize on a predicted boom in the biotechnology industry, according to a new report. Alameda, Contra Costa and Solano counties, in fact, could be in better position than other locales in the Bay Area to accommodate manufacturing and distribution of new biotech products. While the report provides good economic news, it also makes clear that future prosperity will not happen without the active involvement of local governments, economic development advocates, workforce training experts, industry insiders and educators ranging from high school science teachers to university researchers. The study's 60 recommendations fall into two areas — economic development, and workforce education and training. In the former, the study recommends development of a business assistance and promotion center, development of a business incubator, and better coordination between the industry and local planning and building officials. In the workforce category, the study recommends establishing formal ties between the industry and local schools, improving training programs at community colleges and universities, and development of a workforce training center. The Bay Area biotech study says that the region's expensive real estate, infrastructure and labor "will become a significant disadvantage" as the sector moves beyond the research and development stage and into manufacturing. To help make the area more competitive, the study recommends that local governments adopt common standards for industry buildings and familiarize planners and building officials with industry needs. The study also recommends zoning sites near freeways and public transit that have infrastructure and good telecommunications capabilities. "It is quite likely that local government and economic development agencies need to have a proactive and aggressive role in retaining and attracting facilities in the region," states the report, which notes that San Diego, Seattle, North Carolina and even Scotland try to poach Bay Area companies. The report, "A Critical Analysis of the Local Biotechnology Industry Cluster in Alameda, Contra Costa & Solano Counties," was prepared by three consulting firms for an industry trade group, and local economic development and workforce training organizations. The report, released earlier this summer, came out only two weeks after the Brookings Institution released a study ("Signs of Life: The Growth of Biotechnology Centers in the U.S.") that found most communities that are chasing the biotech pot of gold are wasting their time. One of the few exceptions was the Bay Area, which, by most measures, has the oldest, largest and best-funded biotech cluster in the world. Proximity means everything in the biotech industry, said Sue Markland Day, executive director of the Bay Area Bioscience Center. "Life sciences are unique. The more people per square foot you have in a lab, the more ideas you get," she said. The Brookings study concluded that the Bay Area is a prime location: "The Bay Area benefits from an impressive combination of intellectual and financial capital. Biotech firms have spun off from each of the region's three major research institutions (Stanford, Berkeley and University of California, San Francisco). Silicon Valley continues to have the largest concentration of venture capital investors in the world, as well as the greatest number of highly active biotech investors." Of course, much of this biotech activity occurs in the tech hotbeds of Silicon Valley, San Mateo County and San Francisco, whose UC campus is a national research leader. But the latest report found that the three counties in the study have about 14,500 people working in 164 biotech companies. The number of biotech jobs in the three-county region increased 150% from 1992 to 2000. In fact, Emeryville, in Alameda County, is home to one of the region's largest biotech company — the 1.700-employee Chiron Corporation. And another giant, South San Francisco-based Genentech, has built major manufacturing facilities in the Solano County city of Vacaville. Still, there is not much local government can do about the two issues Bay Area company executives say are the two biggest obstacles to growth — the cost of living and the expense of space. Solano County Economic Development Corporation President Linda Brown believes her county can get past the real estate and development issues. Solano County has larger sites and cheaper real estate than most places in the Bay Area, and Vacaville, which is on the western edge of the Central Valley, has proven accommodating to biotech manufacturers. "We have strength in attracting manufacturing." Brown said. "We're well-positioned between UC Davis, which is just beyond the county line, and UC Berkeley, down Interstate 80." Day, of the Bioscience Center, seemed to think the development hurdles were not too tall, although she would like to see local government assist with redevelopment of vacant industrial sites that are ideal for the biotech industry. Already a number of Peninsula start-ups have located their manufacturing plants in the East Bay, partly because most of the industry's workforce already lives in the East Bay's less-expensive housing. Plus, she said, these types of companies grow out of existing businesses and universities, and they like to keep close track of production. So it is unlikely a company would build its manufacturing facilities in another locale. The bigger issue, at least in Solano County, might be a potential shortfall of skilled workers, Brown said. To address this, Solano Community College has established a biotech production training program and has big plans for expansion. Furthermore, said Day, California State University, Hayward offers "nuts and bolts" degrees on running a biotech company. The study recommends more of these sorts of programs and even modifying high school curricula "to meet the basic needs" of the industry. Day would like to see stronger links between UC Berkeley and the industry. "We know there are a lot of ideas on the campus that have not been commercialized," she said. Indeed, the study found that the industry is not as well connected as it could be to schools and the community in general, and the report suggests strengthening ties so that everyone understands the evolving industry's needs. Contacts: Sue Markland Day, Bay Area Bioscience Center, (415) 834-1401. Bioscience Center website (contains report), www.baybio.org. Linda Brown, Solano Economic Development Corporation, (707) 864-1855. Brookings Institution report, www.brookings.org/dybdocroot/urban/publications/biotech.htm.

A new requirement that nearly every California development project built with any public subsidies — including many affordable housing projects — must be constructed with prevailing wage labor appears to be having an impact. But the effects may not be as substantial as some people fear, at least not yet. No one disputes that the law will raise the cost of many subsidized affordable housing projects; the ironic impact of the measure is to increase wages for workers on subsidized projects but not on private developments for affluent residents. Whether the law has actually forced a reduction in the number of units built is unclear. The law also applies to many local economic development and redevelopment efforts, but local officials say the new requirement in and of itself will not cause businesses to flee to other states. "Our projects are going to be more costly," summed up Ken Emanuels, a lobbyist for the California Redevelopment Association (CRA). Last year, the Legislature approved SB 975 (Alarcon) —amending the Labor Code and the Government Code — on votes that fell along party lines. Some of the key parts of the bill were added late in last year's legislative session, and there was only one hearing on those amendments, Emanuels recalled. Stopping or greatly amending SB 975 was a top priority for the CRA, which was joined in its opposition by local governments, economic development organizations and business interests. But, Emanuels said, the die was cast. "Labor wasn't willing to give an inch. Why would they? They got exactly what they wanted," said Emanuels, noting that no lawmakers or members of the Davis administration requested amendments. The bill was a tough one for affordable housing advocates, who often sing from the same hymnal as labor leaders. "There was a split in strategy and probably in policy, too," said Marc Brown, of the California Housing Law Project. "I was one of those who thought it was not absolutely crazy not to oppose SB 975. … I think in the end, they (labor) will bring more to the table than they will take away." The San Francisco-based California Housing Partnership Corporation (CHPC), which serves as a consultant to affordable housing developers, was among those who thought Brown was crazy. "I understand the unions want to make a decent wage," said Janet Falk, CHPC executive director, "but they are doing it on the backs of the poorest people, not on the market. People building luxury housing don't have to do a thing." Defining terms The prevailing wage is typically a union-level, big-city pay scale. The state Department of Industrial Relations establishes prevailing wage. It is the basic hourly rate paid to the majority of workers in a particular trade or craft within a defined geographic area, explained Dean Fryer, a department spokesman. When setting the prevailing wage, the agency looks at the nearest big city "labor market." Thus, for example, the agency uses San Francisco rates to determine the prevailing wage for the nine-county Bay Area, and uses Sacramento rates for a huge area stretching from the Oregon border to Tulare County. The agency sets new rates or adjusts existing rates only on request, Fryer said. In general, contractors who receive public works contracts for projects like building roads and courthouses have long had to pay prevailing wage. Senate Bill 975 closed a loophole that allowed projects financed with Industrial Development Bonds issued by the California Infrastructure and Economic Development Bank to be built without prevailingwage labor. Few people argued with that new requirement. However, SB 975 also extended prevailing wage requirements to many private developments that receive public funds. The legislation defined "public funds" to include grants, fee waivers, tax reimbursement plans, and even the installation of infrastructure — nearly every financial incentive local government offers to business. While SB 975 applies to the entire state, many of its provisions are no stricter than ordinances already adopted by local officials in Los Angeles, San Jose, San Francisco and elsewhere. Most affordable housing projects receive some kind of "public funds." The legislation exempted some housing projects, but the biggest exemptions expire at the end of 2003. A bill to increase the housing exemptions to the prevailing wage requirement, SB 972 (Costa), appeared headed toward approval at the end of the legislative session. As of late August, it had received the backing of labor and the Davis administration. That bill would exempt sweat-equity projects, mortgage and down payment assistance programs for single-family homes, and some emergency or transitional housing projects. (See CP&DR in October for a full wrap up of the legislative session.) Housing advocates hoped for more expansive clean-up legislation. But it appears that labor interests were unwilling to budge. Representatives of the California Building and Construction Trades Council, SB 975's primary backer, did not return CP&DR telephone calls. "It's an extremely narrow and extremely modest bill," CRA lobbyist Emanuels said of SB 972. "It doesn't solve any of the problems we have with prevailing wage." The real impact How much the prevailing wage regulations truly affect housing and economic development projects remains to be seen. Falk, of the CHPC, figures that after SB 975's exceptions sunset in 2003, 85% to 90% of affordable housing projects will be affected. If the amount of available subsidies is fixed, she said, then the final result will be fewer units. The impact could be largest in rural areas, where construction laborers often work for considerably less than prevailing wage. Brown agreed that projects will require greater subsidies than in the past. But, he noted, Los Angeles affordable housing developers have been able to complete projects within the confines of local prevailing wage mandates. In the area of economic development, the picture is equally muddy. Again, the greatest potential impact is in rural areas. Emanuels said redevelopment projects of all kinds will cost more, as trade unions saw redevelopment as "the last great loophole." Craig Johnson, vice president of the California Association of Enterprise Zones, noted that manufacturers' tax credits — in which businesses get income tax credits in exchange for projects that add jobs — are not subject to SB 975. Other tax breaks that enterprise zones offer could be subject to the prevailing wage requirements, but the law is vague and there appears to be no enforcement mechanism, he said. "From an enterprise zone standpoint, we kind of shrug," Johnson said. "But for the people who have bricks and mortar projects, they have concerns." John Lehn, president of the Kings County Economic Development Corporation, said the prevailing wage mandate by itself will not cause growing businesses to look outside of California. Rather, the requirement is simply another factor businesses need to consider when making location choices. "It certainly has an impact on our overall attractiveness," Lehn said. Still, many of the largest businesses in the Central Valley need to be close to farms, and government financial incentives mean little in the end, he said. Because of SB 975, the City of Redding has dropped its primary financial incentive program, in which the city offered development fee discounts or waivers in exchange for new jobs, said Economic Development Director Mike Mitchell. "It's too bad that what little incentive package we had has gone by the wayside," he said. Still, the incentives were never a big factor in private enterprise location decisions, Mitchell said. To induce economic growth now, Redding is considering putting in some infrastructure for areas where businesses could locate in the future, Mitchell said. City officials are also studying the local job market to determine whether the official prevailing wage is substantially greater than laborers would earn in Shasta County anyway. Depending on what they find, officials might reinstate the incentive program. Some housing advocates plan to press for legislation next year that would exempt more projects from the SB 975 requirements. But Emanuels said he sees no reason to go the legislative route. "I think the policy has been set. Democrats in the Legislature won't consider it. Prevailing wage is an article of faith with them," he said. Instead, redevelopment supporters plan to work with the Department of Industrial Relations on clear administrative regulations. Contacts: Ken Emanuels, California Redevelopment Association lobbyist, (916) 444-6798. Marc Brown, California Housing Law Project, (916) 739-6293. Janet Falk, California Housing Partnership Corporation, (415) 433-6804. Craig Johnson, California Association of Enterprise Zones, (323) 890-7107. Mike Mitchell, City of Redding, (530) 225-4060. John Lehn, Kings County Economic Development Corporation, (559) 585-3536.