An appellate court has thrown out a decision by a City of Los Angeles planning commission because of the activities of a planning commissioner prior to a public hearing. Before considering an appeal of a proposed five-house project, South Valley Area Planning Commissioner Tony Lucente wrote an article for a neighborhood association newsletter about the project, and he introduced at an association meeting a property owner who had appealed the project. Those activities, the court ruled, gave rise to an unacceptable probably of actual bias, and Lucente should have recused himself. At issue was development of five lots on 3.8 acres owned by Nasha LLC on Multiview Drive in the Hollywood Hills. Nasha sought permission to build five three-story houses of 5,173 to 6,648 square feet on the existing lots. In late 2000, city planners issued a proposed mitigated negative declaration for the project. The Santa Monica Mountains Conservancy and some neighbors complained that the project would interfere with wildlife habitat and a migration corridor. Planners added a new mitigation measure and the project went to the Mulholland Design Review Board, an advisory panel. The Design Review Board recommended disapproval of the project because the proposed houses were too big and incompatible with the environment. The board also recommended that an EIR be prepared. The project then went to the planning director, who was the decision-maker. The planning director (a deputy, actually) approved the project and certified the mitigated negative declaration in March 2001. The Santa Monica Mountains Conservancy and Mark Hennessy, who lives next to Nasha's property, appealed the project approval and environmental document to the planning commission. While the appeal was pending, Lucente wrote an unsigned article in the June 2001 edition of the newsletter for the Studio City Residents Association, of which Lucente was president. Among other things, he wrote that the site “is an absolutely crucial habitat corridor” and suggested that people contact either the Conservancy or Hennessy. Also in June 2001, Lucente introduced Hennessy at the neighborhood association's monthly meeting. Hennessy spoke against the project, although Lucente said he left the room during Hennessy's presentation. At the start of the appeal hearing on June 28, 2001, Lucente said that his association's newsletter contained information on the project. Lucente said had not “had any direct contact with the appellants.” At the end of the hearing, the planning commission voted 3-1 (a bare majority) to uphold the appeal. One week later, Nasha filed a request for reconsideration based on new information regarding bias by Lucente. Nasha filed another request a week later. The planning commission did not reconsider and in October 2001 adopted findings for overturning the planning director's decision on the project and the mitigated negative declaration. Nasha then sued, seeking to overturn the planning commission's decision. Nasha argued that Lucente's role in the newsletter article (which Lucente conceded during a deposition that he wrote) and his introducing Hennessy reflected a reasonable appearance of bias. Nasha also challenged the planning commission's findings and the application of a specific plan to the project. Los Angeles County Superior Court Judge David Yaffe ruled that Nasha had failed to raise the issue of bias at the administrative level, so he dismissed it. Later, Yaffe found that evidence in the administrative record supported the planning commission's decision. The landowner appealed, and a unanimous three-judge panel of the Second District Court of Appeal, Division Three, overturned the lower court. The appellate panel ruled only on the issue of bias. The court found, contrary to Judge Yaffe's decision, that Nasha had raised the question of bias at the administrative level when the landowner twice requested a rehearing. Besides, the appellate court ruled, when the issue is whether a hearing was fair, the trial court may consider evidence that is not in the administrative record. The proceeding before the planning commission was quasi-judicial in nature because it involved the application of facts peculiar to an individual case, the court noted. “Accordingly, procedural due process principles are applicable,” Presiding Justice Joan Klein wrote. Still, administrative decision makers are not held to the same standard as judges. Thus, Nasha had to establish “'an unacceptable probability of actual bias on the part of those who have actual decisionmaking power over their claims,'” Klein wrote, citing , 81 Cal.App.4th 1205, 1236 (see CP&DR Legal Digest, August 2000). The court found that Nasha had made its case. “Contrary to the position taken by Lucente, the newsletter article was not merely informational. The article clearly advocated a position against the project, which it characterized as a 'threat to wildlife corridor,'” Klein wrote. “Lucente's authorship of the newsletter article gave rise to an unacceptable probability of actual bias and was sufficient to preclude Lucente from serving as a 'reasonably impartial, noninvolved reviewer.' ( , (1998) 68 Cal.App.4th 213, 219). Lucente clearly should have recused himself from hearing this matter. His participation in the appeal to the planning commission requires the commission's decision be vacated.” The court directed the planning commission to conduct a new hearing. The Case: , No. B167071, 2004 DJDAR 15369. Filed December 29, 2004. The Lawyers: For Nasha: Robert Glushon, Luna & Glushon (818) 907-8755. For the city: Steven Blau, deputy city attorney, (213) 978-8233.

Nearly seven years ago, state Sen. Byron Sher wrote what turned out to be a prophetic commentary for the San Francisco Examiner about the pending resolution of one of the most bitter, drawn-out and violent disputes over forest management in California history. "Look beyond the hype over the deal to save the Headwaters Forest," he wrote in June 1998, "and you'll see that taxpayers may not be getting their money's worth." Last month, with the key partner in that agreement warning that it would declare bankruptcy if not allowed to disregard key environmental safeguards, the words of the veteran legislator, termed out in December, seemed uncannily prescient. The renewed debate over Headwaters also finds Gov. Arnold Schwarzenegger in a distinctly awkward position of his own making. He campaigned as a staunch supporter of the business community, but has also pledged to fight hard to defend California's environmental assets. And now, with those interests on a collision course in the redwoods, the governor is being pressed to take sides. This would be a delicate balancing act under any circumstances but it is made much harder by the fact that former timber industry lobbyists and executives occupy key positions in his administration. The 1999 Headwaters purchase, through which the state and federal governments paid a combined $480 million to acquire about 7,000 acres of old-growth redwood forest on the North Coast from Pacific Lumber Co. (PALCO), remains the single most expensive conservation acquisition in California history. The deal included a commitment by the company to adopt a habitat conservation plan for its remaining Humboldt County property, limiting logging to protect such species as coho salmon and the marbled murrelet. As Sher suggested in 1998, the breathtakingly high price tag dwarfed the commercial value of the land and the trees. "This huge expenditure is justified only if the public can be assured that the side agreement - a giant string attached to the purchase, known as a habitat conservation plan - won't imperil the future of endangered species on the rest of Pacific Lumber's 200,000 acres nearby," he wrote. After PALCO signed off on the HCP, it went to work cutting every tree it could. Since September 2004 alone, the North Coast Regional Water Quality Control Board (RWQCB) has approved 40 of the company's timber harvest plans and continues to process more applications. The board has jurisdiction over the plans because logging can expose slopes to erosion, contaminating waterways with sediment. In January, PALCO sought RWQCB approval for 11 additional timber plans, asking the board to relax restrictions on streamside logging in the Elk River and Freshwater Creek watersheds so the company could cut more trees. Board staff concluded that the plans would not adequately protect waterways from contamination, and noted that the company had repeatedly violated provisions of it previous permits, ruining drinking water supplies. Company executives met privately with the governor and his top advisors to plead their case, threatening to declare bankruptcy, close mills and lay off hundreds of employees unless granted more lenient logging permits. Bankruptcy, the company warned, would effectively dissolve the HCP agreement, removing most restrictions on logging. It is an odd time for Pacific Lumber to declare financial hardship. The western timber and wood-products industries are experiencing a record boom. The Portland-based Western Wood Products Association reported that U.S. lumber demand in 2004 soared to 59.7 million board feet, the highest level ever and the sixth record-setting year in the past eight. Consumption is being driven by the red-hot domestic housing market and by the falling value of the dollar, which has made imported lumber more expensive. For many timber companies, the result has been fat profits. Plum Creek Timber, for example, posted a 27.8% increase in sales from 2003 to 2004, and saw net income rise a whopping 88.5% . Weyerhaeuser's net earnings more than doubled from 2003 to 2004. Environmentalists have long regarded PALCO with loathing, and were quick to dismiss the bankruptcy threat as a ploy to evade its legal obligations. "They are using their employees as human shields," said a Sierra Club representative. Once a model of sustainable forestry, the family-owned company was acquired in 1996 through a hostile takeover by corporate raider Charles Hurwitz, whose Maxxam Inc. promptly began liquidating old-growth redwoods to retire the bonds used to finance the takeover. As the chainsaws buzzed ever deeper into the remaining stands of old growth, protestors by the thousands began to block logging roads, chain themselves to gates, and occupy individual trees to thwart the loggers. One activist died when a tree cut by a logger fell on him. Although the company says it has become a model environmental citizen since the HCP was negotiated, its behavior continues to draw criticism. One Headwaters watchdog, the Garberville-based Environmental Protection Information Center, says it has documented hundreds of violations of the company's HCP agreement, including logging too close to streams and improper use of herbicides. In 2003, the Humboldt County district attorney filed a fraud case against PALCO, alleging that it had lied about the number of landslides caused by its logging practices; the company responded by bankrolling an expensive but unsuccessful recall campaign against him. As illustrated by the recall campaign, the company remains a divisive element in the local community, where it provides a significant share of the jobs but also is suspected of contributing to mudslides and floods that have damaged homes and farms. Further evidence of split public opinion came earlier this year, when the Humboldt County Board of Supervisors voted - without prior public notice, possibly violating the state's open meeting law - to send a letter to the RWQCB supporting PALCO's request to expand logging. Scores of angry residents confronted the board at its next meeting to decry the maneuver and criticize the company. If he decides to intervene in the dispute, Schwarzenegger risks inflaming suspicion about the sincerity of his environmental commitment, already rendered suspect by the prominence of former industry representatives in his administration. For example, PALCO's former director of external relations, James F. Branham, is the number two administrator in the California Environmental Protection Agency, which oversees the state's regional water quality control boards. Melinda Terry, deputy secretary for legislation in the Resources Agency, was a lobbyist for the California Forestry Association when the governor hired her earlier this year. Contacts North Coast Regional Water Quality Control Board, (707) 576-2220. Pacific Lumber Company, (707) 764-2222. Environmental Protection Information Center: http://www.wildcalifornia.org . Western Wood Products Association: http://www.wwpa.org .

The San Joaquin Valley will likely lose a considerable amount of farmland to urbanization over the next 40 years no matter what policies the region adopts. However, different policy scenarios can substantially reduce the amount of farmland loss, according to a new report that I helped prepare for the Public Policy Institute of California. The report plays out four different scenarios for how the eight-county region will urbanize in order to accommodate a doubling of population - to about 7 million people - by 2040. The most likely scenario is that the amount of urbanized land will triple, from about 600,000 acres in 2000 to about 1.7 million acres in 2040, while the amount of agricultural land will be reduced by about 15%, from 5.7 million acres to about 4.9 million acres. Based on a GIS urbanization model developed at the University of California, Santa Barbara, the scenarios were not meant to serve as realistic future alternatives. Rather, these speculative scenarios show how several different sets of broad policies might affect the region's growth. And while the scenarios described the geographical extent of urbanization, they did not seek to describe the texture or the character of new urban development. The four alternatives were: 1. An “accommodating urban development” scenario, which assumed that the urban development patterns from 1940 to 2000 would be replicated from 2000 to 2040. 2. A “prime farmland conservation” scenario, which assumed that all land categorized as prime farmland by the Department of Conservation was protected but all other private land was available for development. 3. A “high-speed rail” scenario, which assumed that most development would occur within a 20-mile radius of the planned stops for the proposed high-speed rail line. 4. An “automobile-oriented managed growth” scenario, which assumed that most growth will cluster around a series of highway improvements, mostly on east-west corridors up and down the Valley. All scenarios were based on the same population assumption - an increase from 3.3 million to slightly more than 7 million people, or about 116%. Broadly speaking, the “accommodation” scenario showed that urbanization would quadruple, from 600,000 acres to about 2.4 million acres. The rail and automobile scenarios showed a tripling of urbanization, to between 1.7 million and 2 million acres. The farmland preservation scenario showed an increase in urbanization of 134%, to about 1.4 million acres - only slightly higher than the percentage of population increase. Significant farmland loss would occur under all scenarios except farmland preservation. The “accommodation” scenario showed a loss of 1.5 million acres of farmland - 26%. The rail and auto scenarios showed losses of 800,000 to 1.1 million acres - 15% to 20%. The farmland preservation scenario preserved all prime farmland but showed a loss of almost half a million acres of non-prime farmland. The scenarios had some different effects on the northern counties, which draw many Bay Area commuters, as opposed to the southern counties, which are still rooted in agriculture. The prime farmland scenario actually led to less urbanization in the “Bay spillover” counties, such as San Joaquin and Stanislaus, because they have more prime farmland. The high-speed rail scenario led to more urbanization in these counties because they are slated to have more rail stops than the other counties. Perhaps the biggest surprise was that the auto-oriented scenario was similar, in the aggregate, to the rail scenario. In some cases, the auto-oriented model proved even easier on agriculture because the assumed transportation improvements drew development to the transportation corridors at fairly high densities. Furthermore, the high-speed rail scenario would cluster development around existing cities on Highway 99 - and, therefore, on prime farmland - while the auto scenario would disperse more development to the west, where there is less prime farmland. We concluded that the San Joaquin Valley is not well prepared to deal with problems on a regional basis. We also raised questions about whether the urbanization scenarios would foster further urban and social decay in poor areas, especially in the southern agricultural counties. The report, “Urban Development Futures in the San Joaquin Valley,” was written by Michael Teitz, a former UC Berkeley planning professor and a senior fellow at PPIC, along with Charles Dietzel, a Ph.D. student in the Department of Geography at UCSB, and myself. It is available at www.ppic.org .

An animal shelter project in the City of Long Beach that was partially funded by the city was not subject to the prevailing wage law for public works projects that was in effect at the time, the state Supreme Court has ruled. Although local governments and the development industry were on the winning side of the case, the ruling appears to have minimal implications. That is because the Legislature in 2000 amended the prevailing wage statute to ensure that it covered precisely the sort of pre-construction activities that Long Beach funded. Under the prior version of the law, the court said in a 6-1 ruling, the prevailing wage law did not extend to preconstruction activities such as architecture and design, project management, surveying, insurance and legal counsel. And the court declined to address the question on many minds - whether the prevailing wage law applied to a "municipal affair" of a charter city. Government agencies and developers have long griped about having to pay prevailing wage, which is set by the Department of Industrial Relations (DIR) and typically reflects big-city, unionized pay levels. Still, state law since 1937 has required the payment of prevailing wage for public works construction. In 2000, the Legislature approved an amendment that changed the definition of "construction," and in 2002 the Legislature went further to put almost any construction project that receives any sort of public assistance (including fee waivers or discount real estate) under the prevailing wage requirement. These changes have plagued some local economic development efforts. However, it was the law in effect in 1998 that the state Supreme Court interpreted. That was the year Long Beach signed a contract with the SPCA of Los Angeles. The city agreed to pay $1.5 million toward the SPCA's $10 million animal shelter. The project would be built on land leased by the SPCA from the city, and the city would house its animal control operations in part of the facility. The city limited expenditure of its $1.5 million to preconstruction items. Acting on an inquiry from a labor union, DIR in 2000 investigated and determined that the project was a public work that was subject to prevailing wage requirements. The city sued DIR, arguing that the project was not a public work and that, even if it were, the city's status as a charter city prevented the application of the prevailing wage law. Los Angeles County Superior Court Judge David Yaffe ruled for the city. The Second District Court of Appeal disagreed and ruled for the DIR. Finally, the state Supreme Court sided with the city. The case turned on the 1998 definition of "construction" in former Labor Code § 1720, subdivision (a). The DIR argued that construction encompassed planning, design and other pre-building phases of the project. The city argued that the term had a more limited meaning. Both sides pointed to the 2000 amendment for support. The city contended that the amendment was a prospective change in the law that expanded the definition of construction. The DIR argued that the 2000 amendment only clarified the existing law. The state high court agreed with the city. In reaching its conclusion, the court cited the legislative history, including a letter from the bill's author, state Sen. John Burton, that said the change would "operate prospectively." Additionally, the Legislative Counsel's digest spoke of a revision in the definition of public works and the imposition of new costs on local government. The history suggests the 2000 amendment was more than a restatement of existing law, the court concluded. The court also cited dictionary definitions of construction, and the U.S. Secretary of Labor's definition, which does not cover work done by surveyors, lawyers and project managers prior to the start of actual building. " nder the law in effect when the contract at issue was executed, a project that developers built solely with funds on land leased from a public agency remains private," Justice Ming Chin wrote for the majority. "It does not become a work subject to the PWL merely because the city had earlier contributed funds to the owner/lessee to assist in defraying such 'preconstruction' costs or expenses as legal fees, insurance premiums, architectural design costs, and project management and surveying fees." In a dissenting opinion, Justice Joyce Kennard said that when the Legislature does not define its terms, the court should defer to DIR as long as the DIR's decision was made by senior agency officials and was consistent with previous DIR decisions, which was the case here. She further noted that the contracts for construction management and architecture extended to all phases of construction. The extensive argument over the meaning of the 2000 statutory amendment was irrelevant, Kennard added. " he intent of the 2000 Legislature has no bearing here. What is at issue is the intent of the Legislature back in 1937,when it first used the word 'construction' to define public works in former § 1720(a)." Kennard said the project was a public work subject to prevailing wage. She urged the court to then consider the other issues in the case: Whether the project was a "municipal affair" of a charter city that was exempt from prevailing wage requirement, and whether the prevailing wage law was a matter of statewide concern that would override such an exemption. Instead, the court majority said it would leave those questions - on which many government, labor and development groups had provided input - for another day. The Case: , No. S118450, 04 C.D.O.S. 11142, 2004 DJDAR 15029. Filed December 20, 2004. The Lawyers: For the city: Robert E. Shannon, city attorney, (562) 570-2205. For the DIR: John Rea, chief counsel, (415) 703-4240.

The state Supreme Court has accepted for review an unusual Subdivision Map Act case from the City of Goleta. Last year, the Second District Court of Appeal ruled that the Goleta City Council had the discretion to reject a final subdivision map (see , November 2004). Ordinarily, approval of a tentative map is a discretionary action, while approval of the subsequent final map is a ministerial matter. But a 1998 amendment to the Subdivision Map Act gave a newly incorporated city discretion over a final map in instances where the county had approved the tentative map. At issue is a 109-unit housing project proposed by Oly Chadmar Sandpiper General Partnership. The Santa Barbara County Planning Commission approved a vesting tentative map and development plan for the project six days before Goleta voters approved incorporation. On appeal from project opponents, the Board of Supervisors approved the project two weeks before incorporation became effective - and over the objection of the mayor-elect. When the final map was ready for approval, however, it went not to the county but to the city, which refused approval. That prompted the developer's lawsuit. In accepting the case, the state Supreme Court outlined two questions for itself: Must a newly incorporated city approve a final subdivision map if the county previously approved a tentative map? Is a newly incorporated city barred from disapproving a tentative map previously approved by the county if the city adopted the county ordinance requiring approval of the final map, exempted the project from a development moratorium, and worked with the developer to clear conditions? The case is , No. B175054.

It is rare for a suburban city of 50,000 people take the lead in a $440 million transportation project. The City of Placentia in northern Orange County has, though, and the effort has stirred political controversy and placed the city under financial strain. The project is known as OnTrac, short for Orange North-American Trade Rail Access Corridor. The currently preferred alternative involves building a five-mile-long trench for railroad tracks that slice though the town from west to east. The project would look and function much like the ballyhooed Alameda Corridor, which connects the Los Angeles and Long Beach ports with rail yards near downtown Los Angeles. In fact, the Placentia project is also called Alameda Corridor East because Placentia's problem is created by trains headed to and from the downtown rail yards. All 10 north-south arterials in town have an at-grade rail crossing. Three decades ago, that was no big deal because fewer than 20 trains a day went through town. But as the shipping ports have become busier, the number of trains has increased to about 70 per day. Analysts expect train traffic to more than double during the next 20 years. One hundred fifty trains per day equates to a train about every 10 minutes on average, which means more often than not there would be a train somewhere in the residential suburb's city limits. “Everybody knows this is a problem that's bad and it's going to get a whole lot worse,” Placentia Mayor Scott Brady said. “The City of Placentia must do something about the train traffic that is barreling through our community. The question is how best we should do it.” Last November's City Council election was, essentially, a referendum of OnTrac. Brady, an OnTrac proponent, narrowly won re-election, but two candidates who were critical of the project also won. Although the new council has not yet backed away from the project, there appears to be movement toward a cheaper alternative that involves a series of overpasses and underpasses. A group called Citizens for a Better Placentia has become the most outspoken OnTrac opponent. “While the train in the ditch is a good project,” said group co-founder Craig Green, “the obtaining of funds to do it didn't seem plausible. In fact, it still doesn't.” The city embarked on the project in 2000 under the assumption that state and federal funds would be forthcoming. State and federal transportation experts and elected officials recognize the problem caused by the increasing number of trains hauling cargo through metropolitan regions, especially Los Angeles. Placentia got rolling with OnTrac just as state and federal transportation funds were drying up, though. The state was supposed to supply $30 million up front, but state budget troubles have held up half of that amount, said Chris Becker, OnTrac's executive director. Placentia also got caught by Congress's failure to pass a transportation spending bill last year. In its final form, the failed bill contained $900 million for projects of national economic significance, including OnTrac. All of this means that Placentia has spent millions of its own money and borrowed funds on the project. To raise the money, the OnTrac Joint Powers Authority - which is merely the city and its redevelopment agency - has issued certificates of participation, and the city has sold surplus land and even mortgaged parkland. Altogether, the city has accumulated about $35 million in debts for the project. Some services have been reduced and other capital projects postponed. Still, the project continues to advance. In January, the first part of the project was completed - a railroad overpass at Melrose Avenue, next to the city's aging downtown. A large transit-oriented redevelopment project is proposed for the area. The OnTrac preferred alternative calls for putting the train in a 35-foot-deep trench starting just east of Melrose and running to about the eastern city limits. This would eliminate eight at-grade crossings. An environmental impact report for this part of the project is due out this summer. Becker called the project essential because the trains - mostly Burlington Northern Sante Fe (BNSF) cargo trains, but also some Amtrak and Metrolink passenger trains - cut the town in half. Emergency responses can be delayed. About 300 school buses cross the tracks daily, he said. Another part of the project is a “quiet zone.” This involves the installation of extended concrete medians, more elaborate rail crossing gates, and additional signals and signs. The $7 million, project, to which the federal government has contributed $3.4 million, will allow trains to pass through town without having to blow their whistles. In 2001, BNSF trains started sounding their horns again, leading to outrage from people who live near the tracks. Eventually, putting the train in the trench would eliminate the need for whistles and alleviate some other train noise. Although the train-in-a-ditch concept and the quiet zone are fairly new ideas, what might be most unusual about OnTrac is Placentia's willingness to go it alone. The Alameda Corridor East Construction Authority, which is dealing with the same issues in the San Gabriel Valley, has more participants. Transportation projects of this magnitude are regional in nature, observed Ray Young, a city planning professor and dean of graduate studies at California State University, Fullerton. The neighboring cities of Brea, Fullerton, Yorba Linda and Anaheim have shown little interest in joining the OnTrac JPA, despite requests from Placentia. Neighboring cities have at-grade rail crossings of the same line, but the issue has not received the same level of attention. In Fullerton and Anaheim, the tracks run through industrial areas, not large residential neighborhoods like Placentia's. Fullerton is working on one major grade separation project. “Other jurisdictions do not see it as a great community priority,” said Young. “I'm a little surprised that it gained such prominence and such a central role in Placentia's agenda over about 24 to 36 months.” Detractors say the project gained prominence because of the aggressiveness of consultants, including Becker. When he was hired to run the OnTrac project for $4.5 million over 10 years, Becker was the city's public works director. For a period, he served as both lead consultant and public works director. “How,” asked Citizens for a Better Placentia's Green, “could the city's director of public works hire himself as a consultant for $450,000?” Project opponents have demanded a criminal investigation. The city has since reworked Becker's contract at a lower rate. Becker denies wrongdoing and contends the complaints are politically driven. Contacts: Scott Brady, Placentia mayor, (714) 993-8117. Chris Becker, OnTrac, (714) 577-5819. Craig Green, Citizens for a Better Placentia, (714) 854-9100. Ray Young, CSU Fullerton, (714) 278-3602. OnTrac website: www.ontrac-jpa.org .

If there was ever a city that needed to roll the dice and get lucky, it's Richmond. Facing problems of poverty, crime and budget deficits, the city really could use a new pair of shoes. The city's plight might explain why the City Council recently made a controversial deal with an Indian tribe to allow the development of a casino on prime real estate on San Francisco Bay. Whether the project ever gets built is questionable. But Richmond is already receiving money it can spend now, part of a $15 million option package that is to be paid over four years. The city stands to make a total of $50 million from sale of the property, as well as increase its tax base and create employment for local residents. But already, two California Environmental Quality Act lawsuits challenging the proposed $800 million development at Point Molate have been filed. Still, the developers are footing the bill for the city's legal fees, so there appears to be little downside for Richmond's gamble. Richmond came into possession of the 320-acre parcel on the bay in 2003, after the U.S. Navy closed its operations there. The Navy used Point Molate as a fuel depot and is now cleaning up environmental contamination. The Navy expects to be finished with cleanup by 2009, but developers hope to speed the effort. The parcel also sits next to ChevronTexaco's Richmond refinery. ChevronTexaco bid for the property, but the Richmond City Council chose a casino deal proposed by the Guidiville Band of Pomo Indians. The Native American tribe is working in partnership with Harrah's and a group called Upstream Point Molate, headed by Bay Area developer Jim Levine. ChevronTexaco proposed light industrial development on the land, and was expected to use the land as a buffer for its refinery. ChevronTexaco offered the city $55 million up front, plus $1 million annually for 25 years. But the winning developers offered more, at least in the minds of the city council members: the promise of more than 4,000 jobs and tax revenues from a 225,000-square-foot gaming complex to be operated by Harrah's, along with four hotels containing 1,100 rooms. Expected to offer competition to Nevada's gambling industry, the project also is to include 300,000 square feet of retail space, 15 restaurants, an indoor theatre and a convention center. Upstream plans to retain existing historic buildings on the site, including an old winery building that will house the casino. Not everyone wants to see intense development on the waterfront site. Nearby plots of land are already parklands, and part of a trail envisioned to ring all of San Francisco Bay crosses the property. After the City Council approved the project in November, Citizens for East Shore Parks and the East Bay Regional Parks District filed separate but similar CEQA suits. The lawsuits claim that the city did not perform a thorough environmental review before agreeing to sell the property. “There's been no serious study of the issues,” said Robert Cheasty, president of Citizens for East Shore Parks and former mayor of the nearby City of Albany. Cheasty said community discussions at the time of the base closure never included a proposal for a casino in the old winery building, which he said would “totally dominate the waterfront.” But developer Levine said all 33 acres of the waterfront will remain undeveloped, and the proposed development will include trails, parks and open space. Only a 90-acre portion of the entire property will be developed in the existing footprint, he said. “In the development world, you get sued all the time and you keep moving,” Levine said. Point Molate is being billed as a destination resort. An existing Navy pier on the property is to be used for a proposed ferry service that would whisk passengers from San Francisco to the casino. Upstream paid the city of Richmond the first $1 million installment in December. It is money the city can use, having laid off 250 employees in 2004 due to a $12 million budget shortfall. A state audit released in December blamed the shortfall on the city's spending more money than it took in after increasing employee salaries and retirement benefits. Councilman Tom Butt was part of the 6-2 council majority voting for the deal with Upstream. He said the site's “incredible views” would make the property a destination resort. “The bottom line is they're going to pay us $15 million for options to develop the property,” he said. If the property cannot be developed as a casino, Upstream has agreed to develop the property in a mixed-use fashion that includes retail, a hotel and 800 housing units. Levine said the area's proximity to the ChevronTexaco refinery does not pose a problem because of a 500-foot hill that separates the two parcels. Ninety percent of the time, Point Molate is upwind of the refinery, he noted, and there is already housing downwind of the refinery. Butt said residents have complained about the increased traffic, crime and undesirable newcomers the casino could attract. But he said the city needs the income for $200 million in street repairs and to address its 10% unemployment rate in poorer sections. One-third of the jobs created by Upstream are to go to the city's most needy residents. The project needs to undergo environmental review at both the federal and state levels, which Levine expects to begin soon. Additionally, the Guidiville Band needs approval from the federal Bureau of Indian Affairs (BIA) before the tribe opens a casino, and BIA approval typically is neither quick nor automatic. The band must also complete an agreement with state officials, which could be even more problematic. The problem is that Gov. Arnold Schwarzenegger has stated he will not allow another casino to be located within 35 miles of a casino in San Pablo, where a different tribe wants to build the largest gambling hall in the state. The San Pablo site is less than five miles from Point Molate. But Levine said the exclusivity right for the San Pablo casino does not apply to his project because the Guidiville Band has a federal court order granting the tribe a restored land claim. Although the tribe has historic ties to land in Lake and Mendocino counties, federal legislation passed a few years ago gave the tribe the right to restore their land in Contra Costa County. Further complicating the Indian gambling picture is the proposal of another tribe, the Scotts Valley Band of Pomo Indians. That tribe has proposed building a separate casino in North Richmond with 2,000 slot machines. Contacts: Tom Butt, Richmond City Council, (510) 236-7435. Robert Cheasty, Citizens for East Shore Parks, (510) 525-1000. Jim Levine, Upstream Point Molate, (510) 652-4500. The cases: , Contra Costa County Superior Court No. MSN04-1657; , Contra Costa County Superior Court No. MSN04-1698.

In the latest setback for a proposed water project in the Sacramento-San Joaquin River Delta, a state appellate court has thrown out water permits and an environmental impact report approved by the State Water Resources Control Board. The court ruled that the water board improperly postponed decisions about end users of the Delta Wetlands project and regarding the project's environmental consequences. The water board four years ago approved permits that allowed the private company behind the project to appropriate water and store it in shallow reservoirs on two Delta islands (see , April 2001). The project calls for diverting water into the reservoirs during times of high flows and selling water during the dry season. Proponents say they could provide between 170,000 and 800,000 acre-feet of water per year. The project also includes converting two other islands from farmland into wildlife habitat. Because the Cal-Fed Bay-Delta Program has proposed similar “in-Delta” storage, many people believe the Delta Wetlands proponents were pursuing the project so they could eventually sell it to Cal-Fed. Whatever the proponents' motivation has been, the project has received substantial opposition since first proposed during the late 1980s - years before Cal-Fed originated. Only months before the case at hand was decided, the Third District Court of Appeal ruled that San Joaquin County had the authority to regulate the project ( , 121 Cal. App. 4th 128; see , September 2004). That ruling was also a setback for Delta Wetlands proponents, who unsuccessfully argued that the county's requirement for a conditional use permit was counter to state law and was discriminatory. The state water board approved the project in February 2001. Prior to that decision a number of project detractors - including the East Bay Municipal Utility District, the Contra Costa Water District, California Urban Water Agencies and the City of Stockton - signed settlement agreements with Delta Wetlands proponents. Still, the Central Delta Water Agency, the San Joaquin County Flood Control District, five reclamation districts, San Joaquin County and two farm companies challenged the water board's permits and environmental impact report in court. Sacramento County Superior Court Judge Gail Ohanesian ruled for the state, but a unanimous three-judge panel of the Third District Court of Appeal overturned the lower court. The project opponents' primary argument was that the water board failed to require the proponents to specify the end uses, locations and amounts of water. Opponents further argued that without those end-use details, the EIR was inadequate. The water board had approved the project based on a number of potential areas of use, which amounted to nearly the whole state. The water board conditioned the permits to require future determinations by staff members regarding specified uses and the ability to transport (or “wheel”) the water to purchasers. The EIR did not evaluate the consequences of the potential uses of water because those uses were too speculative. Agreeing with the project opponents, the Third District said that this sort of postponement was improper. “ nder the state constitution and the Water Code, an application for a permit to impound water in a reservoir must state, and the water board must determine, that an actual, intended beneficial use, in estimated amounts, will be made of the impounded waters. A general statement of potential beneficial use is insufficient and the board may not satisfy its statutory and constitutional obligations by conditioning a permit on a particular use and in amounts to be specified at some later date,” Justice Coleman Blease wrote for the court. Citing numerous sections of the Water Code, the court ruled that the water board may not delegate such details. “Although the board may employ personnel to assist it (Water Code § 186), it may not delegate the authority to determine the merits of an application for a permit to appropriate water, except as provided by statute,” the court held. Because the permits should designate end users and amounts of water, the EIR must then include “an analysis of the environmental impacts of the project relevant to the end user,” the court ruled. The court rejected opponents' argument regarding an unmitigated significant loss of agricultural land. The court concluded the opponents' raised the argument too late - after the water board's public hearing had closed. Still, the court noted that some of the opponents have permitting authority and “a responsible agency with permit authority does reach its own conclusions whether and how to approve the project, notwithstanding the lead agency's approval of the project.” The ruling could harm the prospects not only for the Delta Wetlands project, but also for any speculative water project that assumes buyers will come forward in the future. The Case: , No. C041749, 04 C.D.O.S. 10330, 2004 DJDAR 14015. Filed November 19, 2004. Modified December 16, 2004 at 2004 DJDAR 15010. The Lawyers: For Central Delta: Dante John Nomellini, Nomellini, Grilli & McDaniel, (209) 465-5883. For the state: Clifford Lee, deputy attorney general, (415) 703-5546. For real parties in interest: Anne J. Schneider, Ellison, Schneider & Harris, (916) 447-2166.

Half a century ago, farmers cultivating the fertile plains and valleys of Ventura County sprayed their crops with the miracle pesticide dichlorodiphenyltrichloroethane, a potent post-war product of American chemical ingenuity. Ventura County growers were not alone in taking advantage of DDT's characteristics. Because of its lethal and persistent effectiveness against a wide range of insects, the pesticide became popular with home gardeners, exterminators, timber producers, farmers and public mosquito-control agencies throughout the United States. In the 30 years it was in wide use, an estimated 675,000 tons of DDT were applied domestically, according to the U.S. Environmental Protection Agency (EPA). The peak year was 1959, when nearly 80 million pounds were applied in the United States. The EPA banned DDT use domestically in 1972, following revelations that the chemical harmed wildlife and threatened human health. Yet now, more than three decades later, many California growers are about to find themselves paying a long-delayed price for the pesticide's past popularity. In just one watershed in Ventura County, the cost to growers alone could be as high as $140 million in the first year, according to an estimate released in January. That eye-popping figure is the product of an important but widely overlooked regulatory process slowly grinding its way into place in California, with potentially far-reaching implications. Growers may find themselves forced to give up large swaths of productive land to serve as streamside pollution buffers. Homeowners could face escalating sewer fees. Urban and rural agencies could end up squabbling fiercely over who should bear the bulk of compliance costs. The regulations are known as total maximum daily loads, or TMDLs. They are a way of addressing water pollution from “nonpoint sources” - the diffuse runoff from agricultural fields and urban storm drains that, unlike emissions from factories and sewage treatment plants, lacks an identifiable discharge point where pollution controls can be installed and monitored with relative ease. A TMDL is a calculation of the maximum amount of a pollutant that a water body can receive and still meet standards established by states and tribes to protect the identified beneficial uses of that water, such as municipal supply, recreation, and support of aquatic life. A TMDL not only sets the total amount of a single pollutant that can enter the water body, it also divides the total load among all of the sources of that pollutant in the watershed and tells each discharger how much it may contribute. Although authorized under § 303 of the Clean Water Act of 1972, TMDLs and nonpoint pollution were largely ignored by state and federal regulatory agencies until relatively recently. The EPA did not even adopt implementing regulations for TMDLs until 1985, refining those standards further in 1992. And it has only been within the past decade that enforcement has begun, largely a consequence of a barrage of lawsuits by environmental organizations seeking to force the EPA and the states to adopt TMDLs for impaired streams and lakes (see , July 2002). The EPA is under court order or consent decrees in many regions to ensure that TMDLs are established, either by the state or by EPA. One such consent decree is in place for the greater Los Angeles region, including Ventura County, where the process of developing TMDLs for the Calleguas Creek watershed - home to scores of farmers now confronting the legacy of decades-old pesticide application - is the most advanced in the state and serves as a good illustration of the program's promises and pitfalls. The process of developing TMDLs is painfully slow and complex. It starts with what regulators refer to as the “303 (d) list,” a comprehensive listing of all impaired waters within their jurisdiction that states, territories and tribes are required to submit periodically to the EPA. In California, 687 water bodies have been reported to the EPA as impaired. the largest category being streams, creeks and rivers, with 435 listed. The next largest category is coastal shoreline, with 97 areas listed. Each listing identifies the specific pollutants for which the water fails to meet health and safety standards. In the Calleguas watershed, for example, those contaminants include salt, excess nutrients such as nitrogen, pesticides and PCBs, silt, fecal bacteria, and toxic metals such as copper, mercury and zinc. Once the pollutants have been identified, researchers have to figure out where they are coming from, how much of each can be discharged into the watershed under varying hydrological conditions without posing a risk, and how much each discharger will be allowed to emit. In a large watershed containing hundreds or thousands of potential sources - and with scientific data about precise health risks sketchy for many substances - this is a daunting and imprecise task. The consent decree compelling development of the Calleguas Creek TMDLs was signed in 1999, and so far only the standards for nutrients and salt have been completed. Those for historical pesticides (including discontinued ones such as DDT, which can remain in the soil for decades and wash into streams with every big storm) and PCBs are expected to be completed this year. Bacteria and metals TMDLs are being developed. Twenty percent of the impaired watersheds in the Los Angeles region (which includes Los Angeles and Ventura counties, along with small portions of Kern and Santa Barbara counties) have TMDL plans in place or in process, said Sam Unger, who monitors TMDL programs for the Los Angeles Regional Water Quality Control Board. That may not seem like much, but it puts the area well ahead of the statewide curve. Only 1% to 5% of the impaired watersheds in other regions in California have done the same, according to Cindy Lin, who oversees the TMDL program for the EPA's Southern California field office. Under the 1999 consent decree, regulators in the Los Angeles region have until 2011 to complete the process. Absent a court order, the EPA has not set a deadline for other areas. Strategies for controlling contaminated runoff vary. Farmers might change irrigation practices, or turn land near streams and other drainages into naturally vegetated buffers. Cities can install wetlands or other biological filters to treat storm flows or sewage plant discharges. In many watersheds, nearly every person and activity stands to be affected. “There's no bad guys out there,” said Richard Hajas, general manager of the Camrosa Water District in Ventura County and vice chair of the group developing the Calleguas watershed plan. “In this particular case, we're all the culprit.” Contacts: Cindy Lin, Environmental Protection Agency, (213) 244-1803. Sam Unger, Los Angeles Regional Water Quality Control Board, (213) 576-6784. Calleguas Creek Watershed Management Plan: www.calleguas.com/ccbrochure/cc.htm .

For planners, developers and local government officials, Gov. Arnold Schwarzenegger's budget proposal for 2005-06 might be as important for what it does not contain as for what it does contain. Notably, the budget does not have a new shift of funds away from local government, nor does the budget lay a new round of unfunded mandates on the locals. Instead, Schwarzenegger proposes to close a big part of the projected $9 billion deficit by slashing education and social service funding by nearly $4 billion. Still, he did reduce transportation spending by $1.5 billion, mostly through a suspension of Proposition 42, the 2002 initiative that directed gasoline sales tax revenue to road and transit projects. John Shirey, executive director of the California Redevelopment Agency, said it is important to remember that the budget for 2005-06 already has a shift of revenue from cities and counties to schools. The shift was part of the Proposition 1A agreement, in which state officials agreed not to raid local coffers in the future if cities and counties contributed $1.3 billion during this budget year and next. Voters overwhelmingly approved Proposition 1A last November. “We already gave $1.3 billion, and $250 million of that came from redevelopment agencies,” Shirey said. “It's kind of like it is forgotten already.” While most analysts say the 2005-06 budget proposal is more “honest” than past budgets, the spending proposal does not quite match the State of the State speech that Schwarzenegger gave shortly before delivering the budget. In his speech, Schwarzenegger emphasized the need to improve the state's infrastructure. “Californians can't get from place to place on little fairy wings. This is a car-centered state. We need roads,” the governor said. “Like Gov. Pat Brown before me, I intend to see that the government builds the roads that Californians need.” Yet the budget directs $1.3 billion worth of gasoline sales tax and $200 million in a public transportation account to the general fund. Part of the problem is that $1.2 billion that the governor had hoped to get from casino-owning Indian tribes has not materialized because of disputes with the tribes. Much like the Proposition 1A deal, the budget calls for a constitutional amendment that would prevent future Proposition 42 raids, starting with the 2007-08 fiscal year. Although transportation advocates have been slow to criticize the governor's budget, state lawmakers are raising questions. “We can't get around, as he said, on little fairy wings. But you can't build roads on little fairy wings either,” Senate Transportation and Housing Committee Chairman Tom Torlakson (D-Antioch) told the . Indeed, the governor delivered his speech only one day after the California Transportation Commission (CTC) issued its annual report to the Legislature - a report that stated right up front, “California's transportation program is in crisis and on the verge of collapse.” The report dwells on unfunded needs, project delays, economic damage due to congestion, and an uncertain future. If the state continues to suspend Proposition 42, “many, perhaps most,” of the projects in the State Transportation Improvement Program will be deleted, CTC Chairman Bob Balgenorth warned the Legislature. The proposed budget does promise to pay the Proposition 42 diversions back to transportation accounts, but over 15 years. And the budget does include $2.7 million for an environmental impact report on the proposed high-speed rail project. In his speech, Schwarzenegger tied transportation to housing - an interesting juxtaposition considering that the state Senate has combined the transportation and housing committees this year, and because local government officials have long complained that Sacramento leaders have failed to see the link between the two. “We need roads and affordable housing,” Schwarzenegger told lawmakers. “The median price of a home in California is $460,000. That's too much. A home of your own is part of the American dream. I believe in such dreams, so I will proposed legislation that eliminates regulatory and legal hurdles that delay construction and increase the costs of new housing.” On the day the budget was released, Business, Transportation and Housing Secretary Sunne McPeak and Housing and Community Development (HCD) Director Lucy Dunn conducted a conference call with a number of housing lobbyists and stakeholders. However, McPeak and Dunn declined to hang specific details on the governor's promise besides saying that California Environmental Quality Act (CEQA) reform would be part of the housing package. In late January, an HCD spokeswoman confirmed that details were still being finalized. A number of Capitol insiders who are typically part of the housing policy debate said they have heard little from the administration, and the anxiety level appears to be rising in Sacramento. “It sounds like everybody is going in their own direction,” said DeAnn Baker, a housing and transportation lobbyist for the California State Association of Counties. “People keep saying we have a housing crisis. But we not only have a housing crisis, we have a transportation crisis, we have an infrastructure investment crisis,” Baker said. “Just don't go out and tell us to zone for housing without any understanding of what it takes to make housing happen.” Christine Minnehan, a housing lobbyist for the Western Center on Law and Poverty, noted that Schwarzenegger spoke only to home ownership, even though 45% of the state's residents are renters, many of whom spend more than half of their income for housing. For more than six months, McPeak has been talking about a homeownership initiative, Minnehan said, “But until you see words on paper, what do you say? We have nothing to respond to.” “I'm not seeing anything that helps people who are really over the edge,” Minnehan added. “I don't hear anything about people who are paying that much of their income for housing and will never, ever buy a house.” In fact, the budget proposes a 70% reduction in a tax relief program for low-income seniors and disabled renters and homeowners, she noted. Outside of transportation and housing issues, the governor's budget includes a major reduction in spending on the Cal-Fed Bay Delta project. That reduction was not a surprise, and Cal-Fed officials have already started leaning more on farmers, water districts and the federal government for funding. Ongoing natural resource-related spending would remain roughly the same, although capital investment would shrink dramatically because of a reduction in available bond money. Of course, no one knows for certain how much of the budget proposal will survive. If the California Teachers Association and education supporters wage full-scale war, the administration and lawmakers may take another look at city and county revenues. “This budget is ambitious,” the CRA's Shirey said. “It's not going to be easy to get passed.” The Legislative Analyst's Office (LAO) suggested that it should not be passed. The LAO found that Schwarzenegger's proposal to give the governor the authority to make across-the-board, mid-year budget cuts made little sense. The LAO also questioned a provision that would prohibit future education spending reductions that violate Proposition 98 guarantees. “ he administration suggests that a key problem is that state spending is on autopilot,” wrote Brad Williams, the LAO's director of fiscal forecasting and budget overview. “If the Legislature believes that this is the case, the solution would not be placing more spending on cruise control - as the administration is proposing for Proposition 98 and other areas of the budget. The solution would be to eliminate these types of provisions that limit the Legislature's and governor's authority to make annual budgetary decisions.” Contacts: John Shirey, California Redevelopment Association, (916) 448-8760. DeAnn Baker, California State Association of Counties, (916) 327-7500. Christine Minnehan, Western Center on Law and Poverty, (916) 442-0753. Governor's budget: www.govbud.dof.ca.gov . Legislative Analyst's office budget report: www.lao.ca.gov/2005/budget_overview/2005-06_budget_overview.htm . California Transportation Commission annual report: www.cate.ca.gov .

As two recent economic efforts illustrate, some job-creating projects require large public subsidies, and others do not. The public agencies running a former military base in San Bernardino and a reserve base in Moreno Valley waged a campaign involving millions of dollars in public subsidies in an effort to attract a DHL cargo sorting and shipping hub. March Air Reserve Base in Moreno Valley won the competition in December. Meanwhile, the City of Emeryville will see a major expansion of Pixar Animation Studios' two-year-old campus with no direct public financial involvement at all. Pixar appears to have struck a video gold mine with animated movies such as “Toy Story,” “Finding Nemo,” and “The Incredibles.” The company completed a 215,000-square-foot headquarters in Emeryville in 2002, and had planned to add another 200,000 square feet on the 16-acre campus at some point. But the company found it needed to accommodate faster growth, so it asked to modify a development agreement with the city. In May 2004, the City Council approved the changes, which permit Pixar to add 533,000 square feet in three buildings, plus a six-level parking garage, on a campus totaling 21 acres. The growth would occur in three phases over as long as 18 years. With the facility expansion, Pixar would grow from about 700 workers to roughly 2,000. Project opponents forced a referendum on the development agreement, general plan amendment, bicycle plan amendment and rezoning for the project. But in last November's election, more than 70% of voters backed the project. During the last decade, Emeryville has transformed itself from a rusty manufacturing town into a modern commerce center largely through the use of redevelopment, plowing millions of dollars into infrastructure and environmental remediation (see Deals, October 1998). So what did it take to lure Steve Jobs's movie studio from nearby Point Richmond - and to keep the studio growing in Emeryville? Not that much. “It wasn't like they needed financial assistance,” said Patrick O'Keeffe, Emeryville's director of economic development and housing. “They really only needed entitlement assistance. We just needed to make it happen.” The Pixar site had been a Del Monte cannery. During the 1990s, the city signed a development agreement with Kaiser Permanente for a new hospital on the site, but the deal fell apart. When Pixar showed interest, the city facilitated the deal between the movie studio and Del Monte, which parted with the land inexpensively, O'Keeffe said. The city and Pixar signed a development agreement in 1998. The proposed expansion proved more involved. The most controversial aspect was the city's agreement to sell an undeveloped right-of-way to accommodate the expansion. Pixar agreed to relocate the bike path planned for right-of-way with a 40-foot-wide bicycle/pedestrian path and linear park along the eastern boundary of the campus. Also, because Pixar purchased a site where a redevelopment agency-subsidized housing project was planned, Pixar paid the $860,000 subsidy back to the city. In fact, Pixar is paying a great deal to public agencies, including development impact and school fees of about $2.5 million and a $1.5 million “capital improvement and services fee” in three installments. Once Pixar's campus is complete, the city expects to receive about $3 million a year in revenue, largely in the form of redevelopment property tax increment, according to O'Keeffe. During public hearings and the referendum campaign, project opponents complained that the city should get more concessions from Pixar. They suggested that because Pixar had already invested tens of millions of dollars in the first phase of the Emeryville campus, Pixar could not leave. Opponents sought additional Pixar funds for traffic mitigation, affordable housing, child care facilities and job training. The $1.5 million capital improvement and services fee can go toward those items, O'Keeffe said. Pixar offers just the sort of jobs most communities covet: high-paying, tech-oriented and nonpolluting. So far, there has not been much spin-off, although a small computer training school has opened in Emeryville, and it is growing quickly, O'Keeffe said. While Emeryville paid virtually nothing for hundreds of highly desirable jobs, the scene in the housing-rich Inland Empire is different. German cargo company DHL chose March Air Reserve Base for a new cargo hub. March beat out airports in San Bernardino and Ontario for the DHL hub, which will initially employ about 250 people. March's victory did not come cheaply, though. Under the deal approved in mid-December, the March Joint Powers Authority will issue up to $35 million in bonds to fund construction of a 380,000-square-foot cargo facility for DHL. March GlobalPort, the airport's private developer, will lease the facility to DHL for about 6 cents per square foot, which is about 10% of the market rate. Additionally, March will waive landing fees for the first six flights a day for three years, and reduce fuel loading fees for three years. DHL said it initially plans to have about eight flights and 18 truck deliveries daily at the facility. Although Ontario International Airport expressed interest, Ontario already has a UPS hub, so the fight for DHL was largely seen as one between San Bernardino International Airport and March. Both communities lost thousands of jobs during the base closures of the 1990s. San Bernardino (the former Norton Air Force Base) offered significant incentives. But San Bernardino could not match March's reduced airport operations cost. Because DHL would be the only user of San Bernardino's airport facilities, which are idle, the cargo company would have to pay all airport infrastructure maintenance costs. Because March still serves as a military reserve base, the federal government will share the cost of running the airport. Officials at both San Bernardino and March see the DHL hub not only as an employment center, but as a magnet to attract other businesses to the immediate area. However, residents of Riverside's Orangecrest area, which is about two miles from March, filed a lawsuit in November over the cargo hub project. The project opponents contend that the environmental impact report did not adequately analyze impacts on noise, air pollution and water supplies. They also complain that the deal with DHL violates a nighttime flight curfew. Furthermore, they say the incentives provided to DHL amount to a federal subsidy of a private company. DHL, which purchased Airborne Express last year, has only about 6% of the $50 billion parcel shipping market in the U.S. But DHL has announced a $1.2 billion expansion, and has already chosen to place sorting hubs in Phoenix, Salt Lake City, Denver, Baton Rouge, Memphis, Minneapolis and Erie, Pennsylvania.

An appellate court has overturned separate environmental impact reports and project approvals for two Bakersfield shopping centers with Wal-Mart supercenters as anchors. The court ruled that the city must address the potential for the projects to cause urban decay, consider the combined impacts of the two shopping centers, and correlate the projects' air quality impacts to effects on human respiratory health. The published opinion - the first regarding a Wal-Mart supercenter - appears to be a home run for Wal-Mart opponents, who are making similar arguments in numerous locations. Attorney Steven Herum, who represented a group of project opponents called Bakersfield Citizens for Local Control, said the court “correctly identifies the fact that Wal-Mart supercenters have unique impacts and that the EIR is going to have to reflect this.” Attorney Stephen Kostka, author of numerous California Environmental Quality Act practice treatises, called the decision an “atomic bomb.” The Fifth District demanded that an EIR contain an analysis of something that most analysts would call speculative, namely the impact that a Wal-Mart supercenter could have on specific other retailers and business locations, said Kostka, of Bingham McCutchen. How, he asked, do you mitigate the impact of lower prices? Kostka, who is not involved in the litigation, also questioned how an EIR could correlate a tiny increase in cumulative air pollution to ultimate impacts on human health, as the court required. Bakersfield City Attorney Virginia Gennaro said city officials were still evaluating the ruling and deciding how to proceed. “Here in the City of Bakersfield, we don't think urban decay will be a problem,” Gennaro commented. “We are growing at such a rate that it isn't a concern.” The fact that both shopping centers are partially built complicates the situation. At one site, a Lowe's Home Improvement Warehouse is complete and in business, and at the other location a Kohl's department store has opened. At both locations, Wal-Mart supercenters sit partially complete. A trial court judge earlier halted further construction of the Wal-Mart stores. Four days after the Fifth District issued its ruling, project opponents asked the Fifth District to halt all construction at the two shopping centers until litigation is resolved. Nearly three years ago, developer Panama 99 Properties LLC filed an application for a 370,000-square-foot shopping center on Panama Lane in southwestern Bakersfield. At the time, the empty site was zoned for low-density residential uses and open space. The new center would feature a Wal-Mart supercenter, Lowe's and a gas station. The proposed supercenter would replace an existing, smaller Wal-Mart 1.4 miles away. One week later, developer Castle & Cooke Commercial-CA (C&C) filed an application for a 700,000-square-foot shopping center called Gosford Village. Zoned for service industrial uses, the site was 3.6 miles away from the Panama Lane project site. Although the Gosford Village EIR said no tenants had been identified, it was common knowledge the project would have a supercenter, Kohl's, a Sam's Club and numerous other stores and restaurants. Two separate EIRs were prepared. The Panama Lane EIR identified significant and unavoidable impacts on air quality and noise. The Gosford Village EIR found significant and unavoidable impacts on air quality, both individually and cumulatively. The Bakersfield City Council considered both projects on February 12, 2003. The council certified both EIRs and adopted statements of overriding considerations, with all actions occurring under the City Council's consent calendar. Later in the meeting, the council conducted a public hearing to approve general plan amendments and rezonings for the projects. Bakersfield Citizens for Local Control (BCLC), a group associated with grocery store labor unions, filed separate lawsuits over the EIRs. In January 2004, Superior Court Judge Kenneth Twisselman ruled the documents inadequate because they did not study the question of whether the two shopping centers, individually or cumulatively, could trigger a series of events leading to urban decay. However, Judge Twisselman left the project entitlements intact and allowed construction to proceed - except for the Wal-Mart supercenters, construction of which Twisselman halted. The Wal-Mart opponents appealed parts of the decisions in both cases; C&C appealed part of the decision regarding Gosford Village. The Fifth District combined the appeals and then ruled squarely for BCDC. Wal-Mart opponents and regulatory bodies across the country have pressed the urban decay argument. The BCDC presented a study by San Francisco State University economics Professor C. Daniel Vencill that identified 29 businesses, many of them grocery stores, that were at risk of closing if the projects went forward. Those closures could lead to long-term or permanent vacancies, building deterioration and “then culminate in physical effects associated with blight-light conditions,” Vencill concluded. The opponents also submitted studies and news reports from California and nationally about the effects on a market that is saturated with supersized retailers. The Fifth District ruled that the environmental studies' lack of a discussion regarding potential urban/suburban decay violated CEQA. “ he economic and social effects of proposed projects are outside CEQA's purview,” Justice Timothy Buckley wrote for the court. “Yet, if the forecasted economic or social effects of a proposed project directly or indirectly will lead to adverse physical changes in the environment, then CEQA requires disclosure and analysis of these resulting physical impacts.” “ hen there is evidence suggesting that the economic and social effects caused by the proposed shopping center ultimately could result in urban decay or deterioration, then the lead agency is obligated to assess this indirect impact,” Buckley continued. “Many factors are relevant, including the size of the project, the type of retailers and their market areas, and the proximity of other retail shopping opportunities. The lead agency cannot divest itself of its analytical and informational obligations by summarily dismissing the possibility of urban decay or deterioration as a 'social or economic effect' of the project.” The court said the record contained “a great deal of evidence” regarding potential urban decay. “This evidence cannot be cavalierly dismissed as 'hit pieces' designed to disparage a specific corporation. Studies discussing the experiences of other communities constitute important anecdotal evidence about the way the proposed shopping centers could serve as a catalyst for urban deterioration and decay in the city. The Vencill report is extremely significant and it strongly supports BCLC's position that CEQA requires analysis of urban decay,” the court ruled. Furthermore, the Fifth District said the city must address the unique nature of giant stores that operate 24 hours a day. “ o simply state as did the Gosford EIR that 'no stores have been identified' without disclosing the type of retailers envisioned for the proposed project is not only misleading and inaccurate, but it hints at mendacity,” Buckley wrote. The court also found that the city should not have considered the project EIRs in isolation. “There is not merit to the position of city and developers that cumulative impacts analysis does not require consideration of both shopping centers because, in each case, the other shopping center is outside the radius of the 'project area' as defined in the EIRs,” Buckley wrote. “Simply put, selection of 'appropriate' geographic areas that just happen to narrowly miss the other large proposed shopping center in every category of impacts despite their overlapping market areas and shared roadways does not constitute the good faith disclosure and analysis that is required by CEQA.” Regarding air quality, the court found the EIRs did not acknowledge “the well-known connection between reduction in air quality and increases in specific respiratory conditions and illnesses. … The health impacts resulting from the adverse air quality impacts must be identified and analyzed in the new EIRs.” The court ordered Bakersfield to void certification of the EIRs, the findings of overriding consideration and project approvals. After completing new EIRs, the city “may require completed portions of the projects to be changed or removed,” the court noted. Kostka, of Bingham McCutchen, said the decision is worrisome because the court relied heavily on BCLC testimony presented at the City Council public hearing. “It not only allows late hits, it rewards them,” Kostka said. “What the case says is that someone can wait until the very, very end of the process, and then pile information and reports on the agency.” Herum, however, denied that was opponents' strategy. “That was the first and only time the City Council ever looked at the project,” Herum said. “We made the same arguments that we had been making since the scoping session.” And the Fifth District did not look favorably on the city's CEQA process, saying the city “improperly segmented environmental review from project approval in contravention of Guidelines § 15202, subdivision (b).” The public may raise new environmental objections until the close of a public hearing on project approval, the court determined. The Case: , No. F044943, 04 C.D.O.S. 10918, 2004 DJDAR 14768. Filed December 13, 2004. The Lawyers: For BCLC: Steven Herum, Herum, Crabtree & Brown, (209) 472-7700. For the city: Virginia Gennaro, city attorney, (661) 326-3721. For Castle & Cooke California: Craig Beardsley, Jones & Beardsley, (661) 664-2900. For Panama 99 Properties: John Nolan, Gresham, Savage, Nolan & Tilden, (909) 684-2171.