An infrastructure fee shortfall for an 1,840-acre project in the City of Modesto could reach into the tens of millions of dollars and has become a major controversy in the Central Valley city. No one knows for sure just how large the deficit is, but there is little doubt that the revenue available to the city does not match the amount needed for roads, storm drains, parks and other infrastructure promised in the Village I Specific Plan. And the potential solutions � ranging from increasing fees on future development to asking current residents to pay more taxes to whittling away at planned infrastructure � are all unpalatable. The reasons for the mess are many. A consultant concluded that fee reductions for the Village I Community Facilities District (CFD) � which the City Council approved in 1994 and 1997 to induce development � created a deficit. The city has compounded the problem by failing to increase fees to account for inflation and rapidly rising land costs. This issue is frequently a front page story in local newspapers and has even drawn the interest of the district attorney. In a May report for the city, Goodwin Consulting of Sacramento estimated the shortfall in the CFD and in the Village I portion of a separate capital facilities fee (CFF) to be nearly $47 million. The consultant and city officials have since backed away from that estimate and are now working to identify the deficit precisely. "The initial report was a good way to test whether there was a problem," consultant Susan Goodwin said. "We found that there was one, and that got everybody focused." Mayor Carmen Sabatino figures the shortfall is at least $35 million. Builders, however, are not ready to concede to any amount until there is further investigation. The city intends to hire an outside auditor this month to determine how much money the city has received, how it has spent the funds, and how the city went about crediting developers for building infrastructure during the 1990s. "We don't have people here who were necessarily responsible or accountable for that period of time," Councilman Denny Jackman said. The remedies being considered by city officials include increasing annual taxes on existing residents, raising the CFD and CFF fees on future Village I development (the area is about half built), reducing amenities such as parks, and shifting annual maintenance taxes to capital projects. In the meantime, the city has placed a one-year moratorium on new developments in Village I, although vested projects can still proceed. "If there's a lesson to learn here," Mayor Sabatino said, "it's that infrastructure goes in first, and then you build the houses." A new style of development The history of Village I, on the city's northeast side, dates to the late 1980s, when the city began work on a specific plan and a number of precise plans within the nearly three-square-mile specific plan area. The specific plan calls for about 6,200 housing units, 220 acres of industrial development and 15 acres of commercial development. Village I was designed as a neo-traditional development, with fairly high densities, and neighborhood stores and parks within walking distance of many homes. To date, about half of the housing units have been built, but Village I still awaits its first nonresidential construction. In October 1990, city officials adopted the first Village I finance plan. The following month, Modesto voters approved extension of a sewer trunk line to the area. A 1980 initiative requires voters to decide on sewer extensions. Then, in 1992, the 219 registered voters in the specific plan area approved annexation to the city. At that point, development could proceed. However, a recession � which would last about six years � was just settling into the region. With the Village I Specific Plan collecting dust, city officials in 1994 approved a revised finance plan with lower fees. There was little market response, so the city cut fees again in 1997. That's where fees have remained, despite inflation and right-of-way acquisition costs that have risen at least 40%. "We failed to raise the fees when the construction got hot," Mayor Sabatino said. "You had developers making $50,000 to $60,000 a house, but the fees were $10,000 too low." Bill Zoslocki, a Village I developer, said the city made several decisions in 1997 that helped spur construction. The city eliminated some parks from the plan and shifted the cost for some planned roads to adjacent property owners. Both moves reduced the fees, and the different approach to roads made developers feel more comfortable. Still, larger market factors were clearly an influence on Village I activity. In 1998, the recession started to ease, and by 1999 Modesto began to ride the swell of prosperity that swept across Northern California. Silicon Valley created hundreds of thousands of jobs, and many of the people who filled those jobs sought affordable housing in the Central Valley. However, not long after Village I development began getting serious, storm drainage problems arose. The city chased those gremlins for a couple years and eventually decided the system needed about $5 million in upgrades. But officials also detected other shortcomings, so they hired Goodwin to get a handle on the situation. The Goodwin report of May estimated the average CFD fee of $7,700 per residential unit is less than half the amount needed to pay for infrastructure required by the specific plan, and the average CFF fee of $5,380 per unit is about two-thirds of what is necessary. Goodwin said financing plans for any large project often contain assumptions regarding the pace and cost of construction, land values and regulations that do not hold true over the many years of development. "It's not completely unique to Modesto by any means. It points out the need for regular updates to any financing plan for a major development," she said. Who was in charge? No one disputes that the City Council slashed fees in hopes of encouraging development during poor economic times. But whether the fee reductions were the result of simple policy choices or of political shenanigans is an open � and touchy � question in Modesto. The District Attorney's Office is investigating campaign donations by Mid-Valley Engineering to Modesto city councilmembers, as well as the city's contracts with Mid-Valley. Mid-Valley engineered some of the infrastructure in Village I and prepared reports on which the council based the 1997 fee reductions. Two years ago, the Fair Political Practices Commission fined Mid-Valley $185,000 for laundering campaign contributions to candidates for the Modesto and Oakdale city councils. Councilman Jackman, who was a slow-growth activist in Modesto for years before winning election in 2001, said the building industry had a great deal of influence on the City Council at the time of the fee reductions. Only one of seven councilmembers remains from that time. "I'm hopeful that there wasn't malfeasance. I hope it was a response to the ills of the day," Jackman said of the fee cuts. Zoslocki said Jackman and others have exaggerated the industry's influence. The city conducted a public process, hired professionals for their expertise and made documents available. "We never had control of the process � ever," said Zoslocki, a member of the Building Industry Association of Central California board who insisted he was only speaking for himself. "Everybody needs to get off their soap box." That seems unlikely to happen soon. But city officials clearly want to learn more about the situation before making some difficult decisions. "The only thing we seem to know for sure is what parcels are vested, and what parcels are not vested," said Jackman. Sabatino said he "not optimistic" about what the outside auditors will find. By his reckoning, Village I needs $68 million worth of infrastructure. So far, the city has collected $12 million, but the portion is already half-built. Sabatino does not like any of the options for resolving the issues, although he concedes the council majority might try to recover some of the last money by substantially increasing fees on undeveloped and unvested portions of Village I. Backers of that idea say it is the best way to raise revenue, but Sabatino considers it discriminatory. Plus, Sabatino said, Village I development could soon slow. The undeveloped portions of the project area have more than 100 property owners. Many of them live on ranchettes and, a city survey found, have no short-term plans to sell. A proposal to ask property owners citywide to pay a special tax has few supporters. And either a citywide tax or an increase in annual assessments on existing Village I residents would need two-thirds voter approval. Zoslocki urged city officials to identify fully the problem before going any further. He, for one, cannot believe that the highest development fees in the city were off by half. "There's a lot of discovery that needs to be done," he said. Goodwin and city officials hope by April to prepare a new infrastructure financing plan and formulate a financing district to bridge the funding gap. "I don't believe that there are fatal flaws. There are solutions that can be implemented," Goodwin said. But, she added, the city ought to have those solutions in place when the current moratorium expires in June 2003. Contacts: Modesto Mayor Carmen Sabatino and Councilman Denny Jackman, (209) 571-5169. Bill Zoslocki, Bill Zoslocki Construction Company, (209) 579-1221. Susan Goodwin, Goodwin Consulting Group, (916) 561-0890. Village 1 Specific Plan, http://www.ci.modesto.ca.us/cdd/Planning_Division/plng_spec-plans.htm#village-one Village 1 finance documents, http://www.ci.modesto.ca.us/cmo/cfd/villageone.htm

A water district in Fresno County has the authority to pursue incorporation as a city, the Fifth District Court of Appeal has ruled. The court rejected arguments from Fresno County that the Malaga County Water District needed special legislation to proceed with creation of a new city. The court ruled that prohibiting the water district from pursuing incorporation could be inconsistent with the Cortese-Knox Local Government Reorganization Act (Government Code § 56000 et seq., since amended as the Cortese-Knox-Hertzberg Act). The Cortese-Knox Act provided the district with specific authority for incorporating a new city, the court held. In 1998, the water district, which serves a mostly industrial area just outside the City of Fresno, filed an incorporation resolution and petition for change of organization with the Fresno County Local Agency Formation Commission (see CP&DR, May 1999). The district paid a $14,000 filing fee and agreed to fund a LAFCO study estimated to cost $80,000 to $150,000. Fresno County filed a lawsuit arguing that the water district was acting beyond its statutory powers and that its expenditures were unconstitutional gifts of public funds. Fresno County Superior Court Judge Jane York ruled for the county, finding that the water district's authority was limited to that in its specific enabling statute. Therefore, she held that the expenditures with LAFCO were unconstitutional. The water district appealed and a unanimous three-judge panel of the Fifth District reversed the lower court. The water district provides water and sewer services typical of water districts. It also has specially legislated authority to own parks and to run parks and recreation programs. The district qualifies as both a "special district" and as a "district of limited powers" under Cortese-Knox. The issue, the appellate court explained, was whether a district of limited powers could reorganize itself and incorporate as a new city. Fresno County pointed to statutory language that addressed how districts of limited powers may merge with, or become subsidiaries of, cities. The county argued, therefore, that a district of limited powers could only pursue a merger. But the appellate court ruled that the merger option must be considered in context. "The district of limited powers can, but is not required to, merge with or become a subsidiary district of the city," Justice Herbert Levy wrote for the court. "It does not follow that the existence of this option for districts of limited powers excepts those districts from the statute that grants any district the ability to make any change of organization (Government Code § 56119). Rather, construing the 1985 Act in this manner runs counter to the rules of statutory interpretation." Cortese-Knox was intended to allow cities and districts to provide for the needs of a county and its communities. Fresno County's restrictive interpretation "would result in a district of limited powers being unable to adapt to social and economic developments occurring within its territory. Rather, a district of limited powers would not be able to change its organization in any manner unless its territory overlapped the boundaries of a city," Justice Levy wrote. The court also dismissed the county's argument that because a different community services district in the past had received special legislative authority to incorporate as a city, Malaga needed similar legislation. "The fact that special legislation has been employed previously does not establish such legislation as a condition to incorporation," Levy wrote. The Case: County of Fresno v. Malaga County Water District, No. F038163, 02 C.D.O.S. 6934, 2002 DJDAR 8663. Filed July 31, 2002. The Lawyers: For the county: J. Wesley Merritt, chief deputy county counsel, (559) 488-3479. For the water district: Neal Costanzo, Hargrove & Costanzo, (559) 261-0163.

The tortured history of a development in downtown Oakland added another chapter when a state appellate court overturned a lower court decision against Citicorp Real Estate, which had foreclosed on the project. The appellate panel found that the jury had been instructed incorrectly and that Citicorp had done nothing legally wrong in respect to its handling of the "Old Oakland" project. A jury had awarded the project developers $41.82 million. However, the trial court judge threw out all but $900,000 of the award because of a technicality. The latest setback for the developers came when the First District Court of Appeal overturned the trial court decision in full. The Old Oakland project has been around since the early 1980s. It involved restoration of 19th century buildings and other construction on a strip of land bordered by Broadway, Clay, Eighth and Tenth streets. Acting as architects, developers and building managers, brothers Glenn and Richard Storek pursued redevelopment of the area as an office, retail and nightclub district. In 1984, the Storeks borrowed $30 million from the City of Oakland, which raised the money by issuing bonds backed by letters of credit from Citibank. Over time, it became clear the Storeks needed more money to complete the project. In 1989, they signed an agreement with Citicorp, which loaned them an additional $8.9 million. Citicorp, however, placed a number of conditions for when it would disburse the loan funds: the project could not go over budget, the developers had to deliver executed leases, and there could be no default or potential default by the Storeks. From August 1989 through August 1990, Citicorp disbursed $8 million. However, the bank's construction monitor found millions of dollars of cost overruns, and the developers never raised $1 million in equity capital that they had promised to deliver as part of the second loan deal. The Storeks said they would get $5.6 million from other sources, but they did not deliver that either. By August 1990, a Storek partnership that owned property in San Francisco � which had secured the original loan � was in bankruptcy. By December of 1990, a court had found the developers in default and appointed a receiver. The development partnership filed for bankruptcy, and Citibank foreclosed on Old Oakland. A Citibank affiliate purchased the property for $6 million, Citibank put more money into the project, and much of it was completed � although the project has never reached its initial promise. The developers sued Citicorp, alleging that Citicorp deliberately engineered the project's collapse so that the bank could foreclose. They contended the bank never had any intention of fully financing the development. One trial resulted in a hung jury. After a second trial, a jury awarded the developers the $900,000 that Citicorp never disbursed from the second loan, and $40.92 million in punitive damages for fraud. Later, Alameda County Superior Court Judge Richard Hodge ruled that the plaintiffs (Glenn Storek and 39 limited partners) were not eligible to receive punitive damages because they were assignees of the original plaintiffs (Storek & Storek, Inc.). Both Citicorp and the plaintiffs appealed. At issue was whether Citicorp had breached an implied covenant of good faith and fair dealing. Citicorp argued that there could have been no breach because it acted based on the express terms of the contract. A three-judge panel of the First Circuit essentially agreed with Citicorp. The court held that Citicorp only had to act reasonably. "Citicorp owed no duty of good faith in determining whether the conditions precedent to its performance had been fulfilled," Justice Lawrence Stevens wrote for the court. "The loan agreement was a freely negotiated contract entered into by sophisticated business entities. Under the terms of that contract, expressly agreed to by Old Oakland, Citicorp's obligation to disburse the loan funds was conditional on its objectively reasonable determination that the project budget was in balance. No obligation to act in good faith can be implied to contradict or limit that express condition precedent. No inquiry into good faith can be made. In our view, the jury was incorrectly instructed to evaluate Citicorp's determination regarding the loan balance for both reasonableness and good faith." If the developers wanted to claim Citicorp breached an express obligation � not simply an implied obligation � they should have said so, the court ruled. However, the plaintiffs dropped that claim from the lawsuit early on. Because there had been no breach of the contract, there was no fraud on which the jury had based the punitive damages, the court concluded. The Case: Storek & Storek, Inc., v. Citicorp Real Estate, Inc., Nos. A092772, A093724, 02 C.D.O.S. 6284, 2002 DJDAR 7838. Filed July 15, 2002. The Lawyers: For Storek: Elliot Bien, Bien & Summers, (415) 898-2900. For Citicorp: Jerome Falk Jr., Howard Rice Nemerovski, Canady, Falk & Rabkin, (415) 434-1600.

Challenges to a City of Indio redevelopment project area expansion from three other government agencies have been thrown out on a technicality by the Fourth District County of Appeal. The Coachella Valley Water District, the Coachella Valley Mosquito and Vector Control District, and the Valley Sanitary District contended that an area Indio added to its redevelopment project area in November 1999 was neither physically blighted nor predominately urbanized, as required by redevelopment law. The water district filed a "reverse validation" lawsuit against the mosquito control and sanitary districts, and other entities in early 2000. The mosquito control and sanitary districts filed cross-complaints soon thereafter. The public agencies accused Indio of making a "land grab" for financial gain. Indio and Riverside County, which was also named as a defendant in the litigation, asked a Riverside County Superior Court to dismiss the water district lawsuit because the water district published an incorrectly worded summons. The trial court denied the request, but the Fourth District reversed and directed the trial court to dismiss the lawsuit. In the latest go-round, Indio and Riverside County argued that because the court had dismissed the original lawsuit, the court could not hear the cross-complaints from the mosquito control and sanitary districts. The trial court agreed and ruled in favor of Indio and the county. The Fourth District upheld the decision. In the appeal, the special districts argued that the court should hear their cross-complaint because it was a separate action, was filed on time and was served personally to the defendants. Indio and the county countered that the court did not have jurisdiction to decide the cross-complaints related to the original reverse validation lawsuit, which had been tossed out. The unanimous three-judge appellate panel agreed with Indio and the county. The trial court could not decide the cross-complaints when it never had jurisdiction over the original reverse validation lawsuit, the court held. "Rather than take the risk of relying on another party to comply with the statutes, the Mosquito District and Valley Sanitary could have filed its own reverse validation actions," Justice Barton Gaut wrote for the court. The appellate panel never reached the merits of the controversy. The Case: Coachella Valley Mosquito and Vector Control District v. City of Indio, No. E029531, 02 C.D.O.S. 7340, 2002 DJDAR 9163. Filed August 9, 2002. The Lawyers: For the districts: Lisa Garvin Copeland, (760) 341-7773. For the city: Kevin Sullivan, Lounsbery, Ferguson, Altona & Peak, (760) 743-1201.

Two of the highest profile pieces of land use legislation died at the statehouse in mid-August. A bill to reform the housing element law, SB 910, died when the author, Sen. Joe Dunn (D-Santa Ana), refused to accept amendments watering down the measure. And Assemblyman Darrell Steinberg (D-Sacramento) threw in the towel on AB 680, which would have established a sales tax sharing arrangement and encouraged housing development in the six-county Sacramento region. The housing element bill would have permitted the state Department of Housing and Community Development (HCD) to fine cities and counties if the agency ruled the local housing element inadequate. Local governments fought the bill since its introduction in early 2001. A committee of local government, state, housing, development and other interest group representatives met for months to work on language but in the end could agree on little, least of all the process for allocating housing units to regions and localities. In August, Assembly Housing and Community Development Committee Chairman Alan Lowenthal (D-Long Beach) and Assembly Local Government Committee Chairwoman Patricia Wiggins (D-Santa Rosa) insisted on amendments that would have required a judge — not simply HCD — to decide on housing element validity before fines could be levied. That change and others were enough for the League of California Cities, the California State Association of Counties (CSAC) and the California Chapter of the American Planning Association (APA) to drop their opposition to the bill, which had been written into SB 498. But Dunn aide Mark Stivers said the changes "would have significantly weakened current law with respect to HCD's authority to require implementation of a community's housing element and with respect to the standing of HCD's review in court." Local government lobbyists disagreed. The sales tax bill died because the League of California Cities and CSAC marshaled opposition from local governments across the state, even though the bill pertained to the Sacramento region, said Sande George, a lobbyist for the state APA. Steinberg conceded AB 680 did not have enough votes in the Senate, but most people expect him to try a new bill in 2003. The state Department of Housing and Community Development (HCD) won the first-round in a lawsuit filed by the Southern California Association of Governments (SCAG) and six of its members over the regional housing needs assessment process. In August, Riverside County Superior Court Judge Robert Spitzer ruled that HCD had the authority to reject SCAG's attempt to slash its housing allocation for the 1998-2005 planning cycle by 13% to 438,000 units (see CP&DR, February 2001). In the lawsuit, SCAG argued that HCD relied on old information and should have used the same growth forecast SCAG used for its 2001 regional transportation plan. But Judge Spitzer ruled that there has to be a cut-off for data collection to avoid rendering statutory deadlines meaningless. The judge did find that HCD exceeded its authority when it invalidated some city and county housing allocation reductions that SCAG had granted to inland jurisdictions, while at the same time HCD approved revisions for coastal cities and counties. But the court called HCD's interference with the local appeals process "minor." More proceedings in the case remain ahead. Supervisors in Riverside and San Bernardino could meet before the year is over to discuss leaving the Southern California Association of Governments and possibly creating a two-county council of governments. The counties were frustrated by SCAG's handling of the regional housing allocation process and have other gripes with the agency. Some Riverside County officials say their county has more in common with San Diego than with Los Angeles. A growth-control initiative approved by Tracy voters in 2000 does not apply to projects approved before the election, a San Joaquin County judge has ruled. Superior Court Judge Michael Platt upheld city guidelines that essentially keep in place a building cap that Measure A sought to cut in half. The city's 1994 growth management ordinance limited annual residential building permits to a maximum of 1,500, and an average of 1,200. Measure A cut those limits in half (see CP&DR, December 2000, April 2000). In February 2001, the city approved implementation guidelines that allowed previously approved projects to proceed under the older cap. The Tracy Regional Alliance for a Quality Environment (TRAQC), which authored Measure A, sued, arguing that only projects with development agreements were entitled to proceed under the higher cap. The city contended that the Government Code required it to treat projects based on the ordinances in effect at the time the city approved the projects. Judge Platt agreed with the city, concluding that "Measure A has no application to the vested projects." The seismic retrofit of six Bay Area bridges could cost twice as much as Caltrans originally estimated and take five years longer than anticipated, according to a report by the State Auditor. Caltrans originally estimated the projects would cost $2.6 billion and be completed by 2004. The agency now says the work will cost $4.6 billion and will not be done until 2009 — a full 20 years after the Loma Prieta earthquake caused a portion of the Bay Bridge to collapse. But in a report released in August, the State Auditor questioned even those projections. The auditor cited a Metropolitan Transportation Commission study that estimated the work would cost an additional $250 million to $630 million, assuming Caltrans can keep to the latest schedule. "We were able to confirm that the consultant was correct with regard to the significant underestimating of a time-related overhead cost," the State Auditor wrote. "This seems to suggest that Caltrans may need additional funding to complete the Bay Bridge unless the contingency reserves it has planned for other retrofit projects are overstated. However, past experience has shown that Caltrans' planned costs for retrofitting its toll bridges are generally understated rather than overstated." State Auditor's report No. 2001-122 is available at www.bsa.ca.gov/bsa/index.html Environmentalists have sued the Town of Truckee over approval of a resort. The suit from the Mountain Area Preservation Foundation alleges that the city did not perform an adequate environmental review and that the project violates the city's general plan. Project opponents also submitted signatures on a referendum. City officials say they handled the project correctly, and they contended election officials should disallow the petitions because of defects. The Old Greenwood resort proposes 104 houses, 15 townhouses, 159 time share units and housing for 28 employees, a 20-unit lodge, more than 300,000 square feet of commercial space and exercise facilities, and a golf course. Most the 900-acre site, which straddles Interstate 80, would remain undeveloped. The project is one of two in Truckee being pursued by East West Partners, which has completed extensive resort development in Colorado (see CP&DR Local Watch, March 2002). The developer who owns nearly half the land in Sacramento County's 2,600-acre Sunridge Specific Plan area (see CP&DR Local Watch, August 2002) has lost a lawsuit seeking to shut down a nearby rendering plant. Sacramento County Superior Court Judge Loren McMaster struck down the suit filed by AKT Development as a SLAPP — Strategic Lawsuit Against Public Participation. The developer filed the lawsuit after Sacramento Rendering Company officials testified at public hearings regarding Sunridge and the larger Sunrise-Douglas Community Plan. AKT contended an agreement between itself and Sacramento Rendering that called for AKT to pay for odor-reduction equipment barred the rendering company from speaking publicly about the project. The lawsuit also called the plant a public nuisance. But Judge McMaster said the plant was not a nuisance when it opened in wide-open fields in 1956. The county approved the specific plan and community plan in July, but it cannot issue permits until the odor-reduction equipment is in place. AKT and Sacramento Rendering have not reached agreement on paying for the equipment, which could cost a few million dollars. The East Bay Municipal Utility District and Sacramento County have won a lawsuit filed by other water agencies over a proposal to divert water from the Sacramento River. Sacramento County Superior Court Judge Lloyd Connelly's ruling upholds the agreement among East Bay MUD, the county and the City of Sacramento to divert water from a point downstream of the city (see CP&DR Environment Watch, December 2001). East Bay MUD considers the diversion an emergency backup, while Sacramento County intends to supply new homes with the water, including homes in the Sunrise-Douglas Community Plan area. But two water contracting coalitions contend the diversion would threaten supplies for numerous water agencies and harm San Francisco Bay Delta water quality. An environmental impact report is pending. Less than two years after signing on to the Williamson Act farmland protection program, Sutter County is taking steps to drop out. County leaders fear the state in the future will not cover revenue losses the county sustains under the Williamson Act. The Williamson Act provides property tax breaks for landowners who agree to preserve their farmland or open space for 10 years. The state makes up for the lost county tax revenue. But this year, Gov. Davis proposed eliminating the subventions permanently. Lawmakers placed this year's funding — totaling about $38 million — back into the budget. Sutter County officials remain worried about the future and figure the county better get out of the program before the tax liability gets greater, said Dale Follas, a planner for the county. Owners of 38,700 acres in Sutter County have enrolled in the Williamson Act, earning tax breaks of about $165,000 this year. If the county opts out of the Williamson Act, those tax breaks would phase out over nine years, Follas explained. Local farmers oppose the county's intentions. The Board of Supervisors is scheduled to decide in October. The City of Cypress's attempt to acquire through eminent domain 18 acres owned by a church has been blocked at least temporarily. U.S. District Court Judge David Carter granted Cottonwood Christian Center's request for a preliminary injunction against the city. The property lies within a redevelopment project area, and the city wants the land for retail development. But Cottonwood hopes to build a large sanctuary, school and related facilities on the site. Carter based his August 6 decision in part on the Religious Land Use and Institutionalized Persons Act, which restricts government's ability to regulate churches (See CP&DR, May 2002). Restrictions on cyber cafes in Garden Grove have been put on hold by an Orange County judge. The rules adopted in July require the businesses to close by 10 p.m. on weekdays, expel minors at 8 p.m., track the names and addresses of patrons, and hire security guards. The city, which placed a moratorium on new cyber cafes early this year, has seen two slayings and numerous assaults related to activity at the approximately 20 businesses that rent Internet time (see CP&DR In Brief, February 2002). Cyber cafe owners said the rules were unworkable and asked for an injunction, which Orange County Superior Court Judge Dennis Choate granted in August. A tax-sharing agreement between San Bernardino County and the City of Redlands to allow development of a 1,100-acre island of unincorporated territory has died. The county pulled out of the "Donut Hole" agreement, blaming a citizen lawsuit and potential referendum over the contract. The agreement called for Redlands to provide sewer and water to the land in exchange for a portion of sales taxes from new development (see CP&DR In Brief, February 2002, Deals, June 2001). The county is now talking with City of San Bernardino officials about providing sewer and water service to the Donut Hole, where extensive commercial development is planned. Redlands officials, however, say they are still interested in working with the county. A federal judge has withdrawn a recent consent decree that resulted in the U.S. Fish & Wildlife Service rescinding designation of 3.9 million acres of critical habitat for the red-legged frog. U.S. District Court Judge Richard Leon of Washington, D.C. agreed with environmental groups that argued they should have been heard in court before the judge approved the settlement between the Home Builders Association of Northern California and the Fish & Wildlife Service. The builders had sued over the designation of 4.1 million acres of critical habitat in 28 counties for the disappearing amphibian. State Senate President Pro Tem John Burton (D-San Francisco) has called for creation of yet another commission to review the state-local fiscal relationship. Burton insisted that "everything is on the table," including Proposition 13, and the shift of property taxes from city and counties to schools.

A ferocious debate that has raged for more than three decades over the fate of a river in the Sierra Nevada foothills appears likely to end soon with a whimper. Within the next few months, the U.S. Bureau of Reclamation (USBR) expects to conclude its environmental review and begin seeking a contractor to build a gate of steel plates across the mouth of a diversion tunnel bored through a ridge in the American River canyon northeast of Sacramento. When that gate closes — probably within two years, according to Jeff McCracken, a USBR spokesman — the river will return to its natural course through the long-idle construction site of the Auburn Dam. By agreeing to block the 2,400-foot diversion tunnel and restore the river to its channel, the USBR likely has sounded the death knell for what would have been the biggest concrete dam in the United States at 800 feet high and 4,000 feet wide at its crest. The agreement also means a new era in flood-control planning for the Sacramento Valley. Founded more than 150 years ago in the floodplain at the confluence of the American and Sacramento rivers, California's capital city is protected today by a system of levees, bypass channels and dams. The most prominent of these protective structures is Folsom Dam, completed in 1957 about 25 miles upstream from the Capitol. Folsom is a multipurpose dam designed to generate electricity, hold back floods and impound a water supply for farms and cities. Its effectiveness is hampered, however, by the contradictory natures of these tasks. To capture spring floods, the reservoir behind the dam must be drawn down during the winter, when demand for irrigation water and electricity are low. If spring runoff is sparse, however, the reservoir will greet the beginning of the dry season with depleted storage. But if the dam's operators hold back too much water, they will not have room to capture the runoff from a giant storm. Folsom's operational shortcomings are exacerbated by its designers' unwitting reliance on inaccurate estimates of the river system's flood potential. Folsom was designed to protect Sacramento from a 250-year storm, but floods in 1955, 1963 and 1965 demonstrated that the hydrologists' estimates of potential runoff were far too low. When the federal government subsequently redrew its floodplain maps of the area, thousands of residents — and numerous proposed developments — became subject to flood insurance requirements and building restrictions. To many Sacramento-area politicians, business owners and community leaders, the solution to the city's floodplain woes was another dam upstream from Folsom. Congress authorized Auburn Dam in 1965 and the USBR began construction in 1967. In 1975, however, an earthquake struck about 45 miles away near Oroville Dam. At magnitude 5.7, the quake was five times more powerful than Auburn Dam had been designed to withstand. Construction halted while geologists conducted new seismic surveys and engineers redesigned Auburn, which was being constructed directly atop a fault. Work never resumed. Instead, the project fell victim to rising costs (estimates of which exceeded $1 billion), public concern about quake safety, opposition by the increasingly powerful environmental movement and the growth of a lucrative recreational rafting industry. Auburn Dam would drown more than 40 miles of the Middle and North Forks of the American River, an area that records more than 500,000 visitor days per year, according to the California Department of Parks and Recreation. Still, Sacramento politicians and business leaders maintained their faith in Auburn Dam, encouraged by a destructive flood in 1986 that nearly brought disaster to the capital. Led by Republican Rep. John Doolittle, who has fought doggedly for the dam for more than a decade, the region's congressional delegation pressed hard for funding. But their bills failed on the House floor in 1992 and in committee in 1996. The delegation fragmented after that, with Democrat Rep. Robert Matsui and Republican Rep. Doug Ose throwing their support behind plans to improve levees and raise the height of Folsom Dam by 7 feet. The Senate Appropriations Committee in July approved initial funding for a study of the Folsom project, which has been endorsed by the U.S. Army Corps of Engineers and the Sacramento Area Flood Control Agency. The USBR began considering closing the tunnel bypassing the moribund dam site after California Attorney General Bill Lockyer sent federal officials a letter in 1999 warning that they had a public-trust obligation to restore the American River, and threatening litigation if they did not do so. In March 2000, the USBR and the state began negotiating a deal, which they signed in January 2001. The tunnel closure will follow construction of a permanent pumping station for the Placer County Water Agency (PCWA), enabling it to withdraw up to 35,000 acre-feet from the river each year. (The bureau had removed the PCWA's original pumping station when dam construction began in 1967, providing temporary pumps so PCWA could withdraw as much as 25,000 acre-feet annually.) The USBR released the final environmental impact statement for the project on June 20. Once the river reoccupies its original channel and begins supporting fish and wildlife, odds are slim that anyone will be able to force it out again, McCracken said. Laws passed since the dam's 1965 authorization — the Clean Water Act, the National Environmental Policy Act and the Endangered Species Act among them — would hamper efforts to once again divert the river's entire flow. Doolittle, whose suburban district needs water more than flood control, remains convinced that Auburn Dam should be built. He argues that the federal government will have spent almost as much on the Folsom project and levee improvements as it would have to build the dam, without providing nearly as much protection. "As long as there are people living in harm's way there will be a need for Auburn Dam," said Richard Robinson, Doolittle's press aide. To spend millions of dollars on projects that will not assure Sacramento's safety from a catastrophic flood, he said, "is a misuse of federal funds." To opponents of the dam, however, the USBR's plan to block the tunnel is reason to rejoice. "We talk of it as putting another nail in the coffin of Auburn Dam," said Betsy Reifsnider, executive director of Friends of the River, which has been battling the project almost since its inception. "I think that when they put the water back in that river, there will be lots of people watching from the bank with tears in their eyes." Contacts: Jeff McCracken, U.S. Bureau of Reclamation, (916) 978-5100. Rep. John Doolittle, (202) 225-2511. Betsy Reifsnider, Friends of the River: (916) 442-3155.

Landowners who filed a lawsuit contending that Santa Cruz County's second unit ordinance conflicted with state law should have filed suit when the county most recently amended the ordinance, not when the county applied the ordinance to conditional use permits, the Sixth District Court of Appeal has ruled. The ruling came in a 2-1 decision, with Acting Presiding Justice Patricia Bamattre-Manoukian dissenting. She concluded that a new statute of limitations arose every time the county applied the contested ordinance. The substantive issue in the case was whether Santa Cruz County's ordinance — which limits who may live in second units and what rent can be charged — conflicts with the Costa-Hawkins Rental Housing Act (Civil Code § 1954.50 et seq.). The state law, approved in 1995, limits local rent control efforts. The court hinted that the local ordinance might run afoul of Costa-Hawkins, but neither the majority nor the dissent ever fully addressed the merits of the case. The majority said the lawsuit was too late, and the dissenter urged a remand to the trial court for a decision on the merits. The court also split over the question of whether a potentially invalid ordinance could be challenged anew every time a local government enforced the ordinance. Santa Cruz County first adopted a second unit ordinance in 1981. Over the years, the county has amended the ordinance several times, permitting larger units, reducing the minimum lot size and relaxing occupancy standards. In its most recent form, approved in November 1997, the ordinance restricted second unit occupancy to low-income households, seniors or family members of the landowner. The law also restricted rent based on a sliding scale. In April 1999, Steven Travis applied for a permit to convert a single-family dwelling that was already under construction into a second unit, and to construct a primary dwelling unit on his property in the unincorporated community of Boulder Creek. The county approved the permit subject to the occupancy and rent conditions. Travis appealed the conditions, but he lost. So he filed a lawsuit in September 1999 and was joined by Stanley and Sonya Sokolow. In 1996 and in 1998, the Sokolows had received permits to build second units on two parcels they owned outside the Santa Cruz city limits. They did not administratively appeal the permit conditions but instead protested to the county counsel and the Board of Supervisors that Costa-Hawkins preempted the local ordinance. In their lawsuit, Travis and the Sokolows argued the second unit ordinance was preempted by state law, was discriminatory, violated state planning and zoning law, was an unconstitutional taking and was invalid because of the county's lack of a valid housing element. Santa Cruz County Superior Court Judge Robert Yonts ruled that the landowners' challenge of the ordinance itself was too late, as was the Sokolows' challenge to their particular permit conditions. Judge Yonts found that Travis's constitutional challenge was timely, but that there had been no taking. Acting as their own lawyers, the landowners appealed. The split appellate panel upheld the trial court's decision, although on slightly different grounds. The first question for the court was whether the lawsuit was a "facial" challenge — meaning the entire ordinance was brought into question — or an "as-applied" challenge — meaning only the county's application of the law to the landowners' particular situations was at issue. The landowners said their lawsuit was both. They argued that the ordinance was unlawful, and each time the county enforced the ordinance, it could be contested again. The court ruled that the lawsuit was strictly a facial challenge. "Petitioners do not contend that the conditions attached to their particular second unit permit applications differed in any way from the conditions imposed on other applicants for such permits," Justice William Wunderlich wrote for the majority. "Petitioners' essential claim is that the Ordinance is invalid no matter how, when or to whom it is applied, because state law preempts it." The court then moved on to the question of which statute of limitations applied. The landowners, of course, argued for the longest statute of limitations possible. They also argued that a new time limit commenced every time the county applied the ordinance — a "continuous accrual." The court, however, said the 90-day statute of limitations in Government Code § 65009, subdivision (c) applied. The state law gives those who seek to "attack, review, set aside, void, or annul the decision of a legislative body to adopt or amend a zoning ordinance" 90 days to commence legal action. That was precisely what Travis and Sokolows sought to do, so they should have sued within 90 days of the Board of Supervisors' decision to amend the ordinance in 1997, the court ruled. "The Legislature has enacted short statutes of limitation for attacks on conditional use permits, and for challenges to zoning ordinances that conflict with the governing general plan, as well as for attacks on the adoption or amendment of zoning ordinances," Wunderlich wrote. " t is clear that the Legislature intended that local land use decisions would be reviewed quickly or not at all." And the majority rejected the idea of continuous accrual: "The case before us is governed by a specific limitation statute, § 65009, subdivision (c)." In her dissent, Bamattre-Manoukian wrote that she "cannot accept the result that a local ordinance that may be void due to the preemptive effect of state law is rendered immune from challenge." Giving the landowners 90 days starting with the county's 1997 decision was wrong, Bamattre-Manoukian wrote. First, the amendments approved in 1997 were not the ones the landowners contested, Bamattre-Manoukian noted. The restrictions in question already existed and the county did not change them in 1997. Second, the challenged restrictions "appear to intrude into the area of landlord/tenant relations," she wrote. "Courts have found similar ordinances regulating the users of property to be ‘suspect' as zoning law." She cited City of Santa Barbara v. Adamson, (1980) 27 Cal.3d 123, and Coalition Advocating Legal Housing Options v. City of Santa Monica, (2001) 88 Cal.App.4th, 451. Moreover, Bamattre-Manoukian accepted the argument of continuous accrual. She pointed to the state Supreme Court's decision in Howard Jarvis Taxpayers Assn. v. City of La Habra, (2001) 25 Cal.4th 809 (see CP&DR Legal Digest, July 2001), in which the court found that a new statute of limitations arose every time a city collected a tax under an invalid ordinance that was several years old. "I would apply the same reasoning to our case and find that a cause of action arises, and a corresponding statute of limitations begins, each time the county acts to enforce its ordinance by issuing a permit imposing the challenged conditions," Bamattre-Manoukian wrote in her dissent. The Case: Travis v. County of Santa Cruz, No. H021541, 02 C.D.O.S. 6718, 2002 DJDAR 8391. Filed July 25, 2002. The Lawyers: Steven Travis in pro per. For the county: Dwight Herr, assistant county counsel, (831) 423-5800.

Twelve years ago while running for governor against a knowledgeable growth management ex-mayor, Democrat Dianne Feinstein scribbled the word "growth" on her hand so she would not forget to bring it up in her debate with Republican Pete Wilson. No such scribbling is likely in this year's gubernatorial campaign, which pits a powerful Sacramento insider against a business executive who has never run for office before. Incumbent Gray Davis has never comprehensively addressed the growth question — though he has occasionally focused on specific components, especially transportation and open space. Meanwhile, Republican nominee Bill Simon spent a couple of campaign days in August focused on growth and housing, and he did make a few headlines. But with his campaign on the defensive, it is unlikely that we will see a serious discussion of any growth policy issues. That's too bad. California's eternal issues associated with growth have not vanished, and the state's rickety system of land-use planning, environmental review, infrastructure investment, and state-local finance only gets harder to manage each year. Beyond that, however, the difference in approach between the two gubernatorial candidates has the makings of an interesting policy debate. In keeping with his reputation, Davis has used money — in the form of annual appropriations and big bond issues — to promote his objectives on growth-related issues. Simon, on the other hand, has laid out an aggressive and detailed program of regulatory reform designed primarily to stimulate the state's sluggish housing construction levels. At a time when Sacramento is awash in red ink, it is questionable how Davis will continue to promote his agenda and still avoid regulatory reform. So a gubernatorial policy debate on growth issues could actually be a serious and useful discussion — if anybody wanted to have it. During his first term, Davis has assiduously used the state's powers — especially its financial muscle — to court favored constituencies. The result has been a significant flow of dollars into activities that will affect the state's future growth patterns. On open space, he has supported three bond issues, Propositions 12, 13, and 40, all of which passed. When the budget was flush, he promoted a series of innovative housing programs, including programs to reward local governments financially for building more than their fair share of housing. He has also targeted transportation funds to specific large projects with constituencies important to him, such as the BART extension from Fremont to San Jose. Of course, Davis has had to kill or delay virtually all appropriations that depend on general fund revenue because of the budget deficit. And the list of accomplishments provided by his office mentions only three land use-related regulatory reform bills that Davis signed, all from last year: SB 497, Sen. Byron Sher's bill to close a loophole on lot-line adjustments; SB 221, Sen. Sheila Kuehl's bill to strengthen the link between land use planning and water supply; and SB 32, Sen. Martha Escutia's bill to give local governments more power to order cleanup of small brownfields. No major reform of planning or environmental law, or of the state-local fiscal relationship, has been adopted during Davis's term. By contrast, Simon has taken on growth and housing in an aggressive way. As one might expect, he has called for increased infrastructure spending. Simon told the Association of California Water Agencies, for example, that he favors building more reservoirs. He has also continued to advocate the use of private toll lanes despite the state's unfavorable experiments in this area, apparently at the behest of Reason Foundation's Robert Poole, one of his policy advisers. On land use and related issues, however, he has gone far beyond Davis and called for considerable regulatory reform. On August 7, he issued a policy white paper called "Renewing the California Dream By Increasing Home Ownership" and campaigned for two days around the state on the issue of housing cost. First, he gave a speech to the Oakland Chamber of Commerce in which he attacked Davis for signing SB 975, which requires prevailing wages to be paid on affordable housing projects. The following day, he made a campaign swing in Southern California in which he called for regulatory reform on land use. Making stops in Ventura and Corona — both notorious slow-growth towns — he blamed restrictive land-use regulations for high housing prices. "These laws, however well meaning, shrink supply and drive up prices for everyone," he said in Ventura. Virtually the only substantive policy proposal in the Simon arsenal that has received attention is his call for greater use of plastic pipes in home plumbing — an issue he has used to highlight Davis's ties to the construction trade unions. However, in his full position paper -- which is not posted on the campaign website — Simon has laid out a comprehensive, if conservative, approach to regulatory reform. Among other things he is proposing: • A change in state affordable housing policy to discourage inclusionary zoning, which he claims drives up the price of market-rate units. • Reform of the California Environmental Policy Act to exempt small projects, permit streamlined review of larger projects consistent with General Plans, and establish standard significance thresholds. • More flexible brownfield cleanup standards so not all brownfields must meet the highest standard in order to be reused. • Reform of construction defect liability laws. • Providing more money to local governments by reallocating future property tax growth according to formulas in effect prior to the adoption of the Educational Revenue Augmentation Fund (ERAF) reallocation almost a decade ago. • Softening prevailing wage laws on private development projects. No matter what Simon might propose, however, nobody cares. Politically, all bets are on Davis and no significant interest group in the planning and development world dares to take on the sitting governor. For example, city officials around the state have spent most of the last four years complaining that Davis reneged on a promise to solve the ERAF problem. Indeed, the League of California Cities seemed to delight in playing an audiotape of Davis apparently making that commitment at the League's conference in October of 1998, just a few weeks before he was elected. However, in spite of the fact that Davis has neither proposed nor implemented any "structural" reform of ERAF, the League and many city leaders have continued to play ball with him, apparently because they view Davis as the only game in town. Virtually all the high-profile mayors in the state support him. Admittedly, most are Democrats, even though they run for local office on a nonpartisan basis. But the comments of Irvine Mayor Larry Agran at a June press conference supporting Davis are typical. "With Gray Davis at the helm, not only has direct funding for local government increased but, more importantly, he respects that local officials are often the best suited decision makers for their communities," Agran said. Maybe one of these years, the governor's race will serve as a useful forum to discuss how to plan for and manage the state's growth. But not this year.

Some people react almost viscerally to the suggestion of combining schools with shopping centers, and with some reason. Education and retail are fundamentally different activities. Schools — at least our mental picture of them — are protective and cloistered, while shopping centers are bustling places wide open to the entire public. Like chocolate and onions, the two just do not seem to go together. Why, then, should these two very different uses be combined? Land economics is one good reason. Urban school districts, such as Pomona Unified in eastern Los Angeles County, have a growing demand for new school facilities and a shrinking inventory of buildable sites. Aging regional malls with land assemblages of 50 acres or more, obsolete buildings and dwindling customer bases look like good quarries for school sites. And for a failing mall in a secondary market, a new life as a school may well be a "higher and better use." The Village at Indian Hill started life in the 1960s as Moreno Valley Center, one of the earlier enclosed malls in the country. Successive attempts in the 1970s and 1980s to enlarge and modernize the mall were largely futile, as local residents found newer and fancier places to shop. By the mid 1990s, the center, patronizingly renamed "Plaza Azteca," was half empty and had become a liability to its largely Spanish-speaking, working class neighborhood. With one-third of its 31,000 school children in temporary classrooms, Pomona is one of many communities in greater Los Angeles with a big deficit in school facilities. Sensing a school-facilities windfall, the district leased 300,000 square feet of the 550,000-square-foot Plaza Azteca mall in 1995. The district eventually bought the entire mall in 1999, after much of the initial work on education facilities was complete. An interesting twist about the Village at Indian Hills is that this 550,000-square-foot facility operates as a mixed-use school site, teacher-training facility and shopping center. The retail portion of the mall has shrunk to about 250,000 square feet. Pomona Unified has built a new freestanding elementary school, while remodeling a former Zody's department store — an archetypal big box — into a pair of elementary-school villages and teacher-training space. To do so, the architects reinforced the building with steel to meet the state's stringent building code for schools, while adding numerous skylights throughout the project. As a whole, the Village houses about 1,500 children in three elementary schools and one small, magnet high school with 120 students. Eventually, 2,000 students will have seats in Village classrooms. The facility has attracted a slew of teacher-training facilities, including a 2,500-square-foot space operated by Jet Propulsion Laboratory for training science teachers. The Village provides office space for the district's Child Development, Head Start and vocational training programs. The neighborhood also benefits: A mall that was in danger of becoming an eyesore now becomes architecturally interesting — at least in parts — and has become a central institution in the neighborhood, rather than an urban no man's land. Notwithstanding the value of the urban planning and architecture, money is the most interesting part of the Village at Indian Hills. In 1999, Pomona Unified spent a paltry $6.4 million to acquire the entire mall. According to the district's own numbers, that is less than the $8 million to $10 million needed to build a single elementary school, and a fraction of the $40 million needed to build a large high school. So far, school officials have spent at least $10.5 million to create the three elementary schools and the small high school, and may spend another $20 to $40 million to build a middle school and other facilities in the future. The other "beauty part" about money is Pomona Unified's new role as shopping-center landlord. In 1996, the district created the Pomona Valley Educational Foundation to manage the commercial space. Although the school district has declined to release current figures on rental income, our seat-of-the-pants estimate is that the center could yield about $2.5 million when fully occupied, based on 1999 rent levels. (The center, which now contains an eight-screen multi-plex, has only one vacancy.) The many grants that the Village has received from the likes of Sodexho Marriott and others help make twhe Village's operations self-sustaining, according to A.J. Wilson, the foundation's executive director. The Village further benefits from $2.4 million of "in-kind" services contributed by corporations and other benefactors. Pomona Unified is feeling confident enough about the program at the Village at Indian Hill to propose two similar projects. A group of four buildings, currently used as the Credit Union Center California, would become an elementary school and "overflow" facility for a nearby high school. Even more intriguing is the proposal known as Village at Ganesha Hills, a 20-acre site that would include several schools, 100,000 square feet of commercial space, an urgent-care facility, and a child-care center. About 80 townhouses, both for sale and for rent, would be set built as affordable housing for teachers and administrators. What makes this work, I strongly suspect, is that the school is in charge and can dictate to the commercial tenants — not the other way around. Also, the site is a proven retail location, despite its poor performance in recent years. On the other hand, proposals like the Belmont High School in downtown Los Angeles, where Los Angeles Unified had proposed building a retail strip along one edge, seem far riskier, because the retail is located along a minor street with no history of retail and little shopping nearby. In such cases, retail is both unnecessary and foolhardy. For many districts, putting retail and schools together may be forever unpalatable. But growing districts seeking something that they can afford on the pricey menu of school facilities may just acquire the taste for these combinations.

Since the mid-1990s, most new market-rate housing in California has been of the single-family detached (SFD) variety. Under traditional assumptions, these units should be generating school-age children at a predictable rate — because they would be occupied by families with a predictable number of children. But when single-family homes represent the only housing being built, those assumptions might go out the window. All types of households might occupy the new houses. And that raises some obvious questions about student generation rates. Under such circumstances, do K-12 students really live in the new houses? And, conversely, are those students rarer in multi-family dwellings (MF)? A quick comparison we did between the Central Valley towns of Clovis and Fresno and the coastal cities of Ventura and Oxnard found that the traditional assumptions might be faulty. Yes, the new houses have kids. But far more children appear to live in apartment buildings and townhouses these days than in years past. A May 2001 facilities needs assessment by the Clovis Unified School District — a Central Valley district of about 150,000 people with a considerable amount of new housing — follows the traditional assumptions. The district calculated student generation rates of 0.7822 students per single-family home, and of 0.330 students per multi-family dwelling. These rates imply that there are nearly 2 1/2 times more K-12 students in single-family houses than in multi-family units. These rates are not unusual for California, but they are on the high side nationally. We explored the "kid rate" for new housing developments, and we compared current demographics with 20-year-old data to see if the number of students in different types of housing has changed. We also compared inland (Clovis and Fresno) to coastal (Ventura and Oxnard). This is not a rigorous analysis — more of a quick look — and we only looked at the percentage of households with children younger than 18. Our new housing areas are in Census 2000 blocks that were built between 1990 and 2000 and are nearly all single-family and owner-occupied. For the past-versus-present study, we selected Census 2000 tracts that were either at least 90% single-family or at least 60% percent multi-family. The most interesting thing we found is that the percentage of multi-family units with children appears to have jumped significantly. Both the inland and coastal multi-family kid rates increased — nearly doubling inland from 32% to 60%, and increasing from 40% to 53% in the coastal area. The MF population and persons-per-unit number increased accordingly. In the single-family neighborhoods, we found that children are far more likely to live in new houses than in pre-1980 structures. We found that about 60% of households in newly built areas have children younger than 18, whether those areas are coastal or inland. This figure is a bit below Clovis Unified's calculated rate. We also found that coastal households are slightly larger, but, given that this is not a scientific sample, we cannot say for sure. In the established inland neighborhoods, the single-family-dwelling kid rate was 34% in both 1980 and 2000. In the coastal area, the SFD kid rate was lower yet (about 22%) and also unchanged from 20 years earlier. Ours is a quick look at only a few census tracts. But we may be seeing a pattern in which young households first move into multi-family housing (little of which is getting built these days) and remain there longer with their school age children before moving into newly built houses. Meanwhile, older single-family houses remain occupied predominantly by households with no children. This pattern appears to be more pronounced inland. Christopher Williamson is senior research associate at Solimar Research Group. Mivelia Andika is an intern at Solimar.

A state appellate court has invalidated a City of Upland redevelopment plan because the city improperly manipulated the base tax year for one parcel, and because the area was neither predominately urbanized nor blighted. The decision by a unanimous three-judge panel of the Fourth District Court of Appeal, Division Two, was the latest in a string of published rulings against redevelopment agencies since 1998. Courts have also ruled against redevelopment plans in Murrieta, Mammoth Lakes and Diamond Bar. "It's important that redevelopment agencies do their jobs correctly to begin with," said Kathryn Reimann, an attorney who represented San Bernardino County in the lawsuit against Upland. "And they can't avoid the base year requirements." The court held that Upland could not move 77 acres from one redevelopment project area to a newly created project area simply to change the base year from which tax increment would be derived. The city moved the property out of the older project area because the property value had actually decreased, meaning there was no tax increment to fund renewal. The city "did what was legally permitted for an improper reason," Justice Thomas Hollenhorst wrote for the court. " he reason was improper because the City was attempting to do indirectly what it could not do directly, i.e., change the base year assessment of the subject parcel and the time it was in redevelopment. Such a change would certainly upset the tax distribution balance between the redevelopment agency and other taxing jurisdictions." In 1999, the Upland City Council approved ordinances 1683 and 1684. The former amended the Town Center redevelopment plan by deleting 77 acres from the project area, while the latter established a new redevelopment plan incorporating the 77 acres and 15 other noncontiguous parcels. The county and a citizen filed separate lawsuits challenging the validity of the city's two ordinances. San Bernardino County Superior Court Judge Peter Norell ruled against the city, and the Fourth District upheld the decision. The city did not hide the reasons for its actions. Properties in the Town Center redevelopment project area, established during the early 1990s, had lost value, stymieing redevelopment efforts. The city wanted to reassign the properties with the lowest assessed values to a new project area to reflect the decline. In redevelopment, the lower the base year value, the greater the tax increment that redevelopment agencies receive. The county argued that the city was improperly manipulating the base year and that by moving land from one project area to another, the city was avoiding the 40-year sunset date for redevelopment activity for that land. "Although the issue is a close one," Justice Hollenhorst wrote, "the City's candid statement of its reasons for adopting ordinance 1683 makes it clear to us that the sole purpose of the ordinance was to avoid the base year limitations for the 77-acre parcel. We agree with the trial court that this is an improper purpose which conflicts with the statutory scheme." The court then reviewed the new redevelopment project area and found it did not meet the legal requirements of being "predominately urbanized" and blighted. At issue was "Subarea O" — 380 acres that included 171 acres used previously for a garbage dump, a rock quarry, and a flood control and siltation basin. The quarry closed in 1985, and there had been almost no use of the land since then. Redevelopment law requires at least 80% of a project area to be developed for urban uses. Subarea O amounted to more than 20% of the project area. So if Subarea O were not considered urbanized, the entire project area would be invalid. The city argued that the dump, mine and flood control project qualified as urban uses because those sites were located within a large urban area, and proximity to urban uses is a factor that can be considered in making the urbanization determination. The court, however, was not persuaded. " t seems that the question we must consider should be whether the rock mine and dump were developed for urban uses in the early 1980s," Hollenhorst wrote. "We therefore disagree with the City's argument that we must consider the current built-out condition of the City as showing the area is predominately urban. Indeed, it appears from the aerial photograph that the area was primarily vacant land which was surrounded by vacant land in the early 1980s. The area was also vacant at the time of a field survey in May 1998." Moreover, a quarry and dump are not inherently urban uses, the court ruled. Because Subarea O was not predominately urbanized, only 77.65% of the project area qualified as urbanized. Thus, the court ruled the whole project area invalid. Reimann, the county's attorney, said, "Courts understand there is no bright line between what's an urban use and what's a rural use. … Just because it's a rock quarry that produces materials for a building 100 miles away does not make the rock quarry an urban use per se." The court also ruled that a city survey failed to provide substantial evidence that the new project area was blighted. The survey found that 85.5% of buildings were "deficient," meaning they at least had peeling paint or cracked fascia. That definition was too broad for the court, which instead pointed to the 0.2% of buildings that fell into the more serious category of "dilapidated." And 0.2% was not enough blight for the court, which cited County of Riverside v. City of Murrieta, (1998) 65 Cal.App. 4th 616 (see CP&DR Legal Digest, August 1998). In that case, the court ruled that a report identifying less than 5% of a project area's buildings as unsafe or unhealthy did not constitute substantial evidence of blight. The Case: Graber v. City of Upland, No. E029769, 02 C.D.O.S. 5416, 2002 DJDAR 6811. Filed June 18, 2002. The Lawyers: For Graber: C. Robert Ferguson, (909) 482-0782. For San Bernardino County: Kathryn Reimann, (831) 647-1430. For Upland: James Markman, Richards, Watson & Gershon, (714) 990-0901.

A City of Salinas fee to finance stormwater drainage facilities and system maintenance has been ruled unconstitutional by the Sixth District Court of Appeal. The court found that the fee was subject to the voter-approval requirements of Proposition 218, which amended the state constitution in 1996. The court rejected the city's argument that the charge was a user fee that qualified for the exemption afforded to utility fees. Instead, the court ruled that it was an assessment related to property ownership. In 1999, the Salinas City Council approved two ordinances to fund and maintain a program intended to clean up the water in the city's storm drainage system. The city imposed an annual "storm water management utility fee" on owners of developed property to pay for facilities and maintenance. The city based the level of the fee on the amount of impervious surface on a parcel, with the single-family home rate set at $18.66 per year. Property owners with their own stormwater management systems could reduce or eliminate their fee. Owners of undeveloped parcels were exempt. The Howard Jarvis Taxpayers Association, which wrote Proposition 218, and some Salinas property owners filed suit. They argued that the fee was a property-related assessment, so it required approval of the majority of affected property owners or of two-thirds of the residents. Monterey County Superior Court Judge Richard Silver ruled that the charge was not a property-related fee, and that it met the exemption requirements for sewer and water service fees. A unanimous three-judge panel of the Sixth Appellate District, however, reversed the lower court. Article XIIID, § 6, subdivision (c), of the state constitution provides an exception to Proposition 218's voter-approval requirements "for fees or charges for sewer, water, and refuse collection services." The city argued that the stormwater fee was a utility fee like these. The city also argued that the charge was a user fee — and not a "property-related fee" — because a property owner could avoid the fee by maintaining a private stormwater management system. The appellate panel rejected both arguments. Storm drains are often referred to as "sewers," the court conceded. But storm drains are not sanitary sewers, the court ruled, and Proposition 218 should be read liberally to encourage voter-approval of fees. "We conclude that the term ‘sewer services' is ambiguous in the context of both § 6(c) and Proposition 218 as a whole," Justice Franklin Elia wrote for the court. "We must keep in mind, however, the voters' intent that the constitutional provision be construed liberally to curb the rise in ‘excessive' taxes, assessments, and fees exacted by local governments without taxpayer consent. Accordingly, we are compelled to resort to the principles that exceptions to a general rule of an enactment must be strictly construed, thereby giving ‘sewer services' its narrower, more common meaning applicable to sanitary sewerage." And, the court ruled, the storm drainage system clearly is not what a voter would envision as "water service." The court also concluded that the fee was in fact a property-related assessment, and not a charge based on measured use or metered service. The fact that the city would reduce or waive the fee if the property owner had private facilities was not enough for the appellate panel. "A property owner's operation of a private storm drain system reduces the amount owed to the City to the extent that runoff into the City's system is reduced. The fee nonetheless is a fee for a public service having a direct relationship to the ownership of developed property," Justice Elia wrote. Thus, the storm drainage fee "burdens landowners as landowners," Elia wrote, citing Apartment Assn. of Los Angeles County, Inc. v. City of Los Angeles, (2001) 24 Cal. 4th 830 (see CP&DR Legal Digest, February 2001). Because of this, the fee required voter approval. The Case: Howard Jarvis Taxpayers Association v. City of Salinas, No. H022665, 02 C.D.O.S. 4853, 2002 DJDAR 6161. Filed June 3, 2002. The Lawyers: For Jarvis: Timothy J. Morgan, (831) 429-9841. For Salinas, James Sanchez, city attorney, (831) 758-7256.