WASHINGTON — The U.S. Supreme Court gave property owners the right to jury trials in federal court in regulatory takings cases brought against state or local governments under the federal civil rights law. The 5-4 ruling handed down in late May upheld a $1.45 million jury award won by a developer against the city of Monterey for blocking a planned oceanfront residential development during the 1980s. The division in the case was mostly along normal conservative-liberal ideological lines, with conservative justices backing the developer's right to a jury trial while liberal-leaning justices voted against it. However, Justice John Paul Stevens — a former Chicago city attorney and usually a reliable vote for the government in property rights cases — left the liberal bloc to vote in favor of permitting jury trials. Justice Sandra Day O'Connor, who has generally supported broader property rights, voted against it. Michael Berger, the longtime property rights litigator who represented the developer, predicted the decision would encourage more such suits and discourage local planning agencies from giving "the runaround" to developers and property owners. "It's going to make people take notice that when they act this way, there is a penalty," the Santa Monica-based lawyer said. But George Yuhas, the San Francisco lawyer who represented Monterey, called the ruling "a narrow decision" with an uncertain long-term impact. "It depends on how courts apply the decision," Yuhas said. "I'm cautiously optimistic that courts will give the decision a narrow scope" The decision for Del Monte Dunes at Monterey, Ltd., reflected the justices' evident disapproval of the city's treatment of two separate developers who unsuccessfully sought permission to build on a 37.6-acre parcel over a five-year period. The city rejected five applications and 19 different site plans for the residentially zoned property along Highway 1 in north Monterey, even though developers continually scaled down the project. The city said it wanted to protect habitat for a rare butterfly. All of the justices joined the first sections of Justice Anthony Kennedy's opinion, which depicted the parcel as a neglected, spoiled site and the developer's plans as sensitive to land use and environmental issues. But the justices divided on the legal issue of whether the developer was entitled to a trial before a jury rather than a judge in a suit brought under the Reconstruction-era federal civil rights law, 42 U.S.C. section 1983. The law permits money damages and injunctions against state or local governments for actions that interfere with federal constitutional rights. Traditional civil rights plaintiffs have made frequent use of the statute in recent decades, but only recently have developers and property owners turned to it as a vehicle for taking complaints about unfavorable land use decisions into federal court. In this case, Del Monte Dunes claimed the city's final rejection in 1986 of its pared-down plans for a 190-unit development on the site violated its property rights under the Fifth and Fourteenth Amendments by denying any "economically viable use" of the land. After preliminary legal battles, the judge in the case ruled that Del Monte Dunes was entitled to a jury trial on the major parts of its suit. The jury found that the city's actions amounted to a "temporary taking" and a violation of the developer's equal protection rights and voted a $1.45 million-damage award. The city, supported by an array of local government and planning organizations, urged the high court to bar jury trials in such cases. Berger attracted support from property rights groups, the National Association of Home Builders and the American Farm Bureau Federation in arguing in favor of jury trials. For the high court, the issue turned on an interpretation of the Seventh Amendment, which provides that the right to jury trial "shall be preserved" as it existed at common law. The amendment, which applies only to federal courts, has spawned an assortment of rulings that turn on efforts to draw analogies between newly created legal remedies and suits recognized in America and England in the 1700s or before. The court divided three ways on the question. In the main opinion, Kennedy reasoned that the takings claim amounted to "an action at law" — the phrasing from the Seventh Amendment — because it sought "a compensatory remedy" for "a constitutional violation." He went on to carefully distinguish between a takings claim and a normal inverse condemnation suit, which he said would not need to be tried by a jury. Only three other justices joined that passage of Kennedy's opinion. Justice Antonin Scalia provided the fifth vote for the decision in a separate, broader opinion. Scalia said that any suit brought under section 1983 gave rise to a right to a jury trial and that the distinctions in Kennedy's opinion were "irrelevant." In an odd twist, Kennedy added a sentence to his opinion agreeing with much of Scalia's reasoning. In the dissenting opinion, Justice David Souter argued that the Seventh Amendment did not apply because there was no analogous legal action at the time the Constitution was written. "The notion of regulatory taking or inverse condemnation was yet to be derived," he wrote. The justices also divided on the likely impact of the ruling. Kennedy, in a passage that Scalia did join, minimized the potential effects on local land use decisions. He noted that federal courts cannot entertain takings claims "unless or until the complaining landowner has been denied an adequate postdeprivation remedy." Kennedy also emphasized that Del Monte Dunes was complaining only about the city's action in its case and was not broadly challenging the constitutionality of the city's planning and land use policies. But Souter said Kennedy's qualifications would provide "cold comfort" to local governments. "The narrowness of the Court's intentions cannot be accepted as an effective limit on the consequences of its reasoning," Souter wrote. Property rights groups praised the court's decision. James Burling, a lawyer with the Pacific Legal Foundation in Sacramento who filed a friend of the court brief, called the decision "a major victory for landowners, who are now assured of having their grievances against government heard by members of their own community who also may be impacted by regulatory actions." On the opposite side, John Echeverria, a professor at Georgetown University Law Center in Washington, D.C., who filed a brief on behalf of environmental organizations, said the decision was "a disappointing loss for local government in California and across the country." Having the right to a jury trial, Echeverria said, "gives developers more leverage in negotiating with local government and gives them a valuable tool if they go to litigation." The Case: City of Monterey v. Del Monte Dunes at Monterey, Ltd., No. 97-1235, 99 C.D.O.S. 3846, filed May 24, 1999. The Lawyers: For Monterey: George Yuhas, Orrick, Herrington & Sutcliffe, (415) 773-5492. For Del Monte Dunes: Michael M. Berger, Berger & Norton, (310) 449-1000. Kenneth Jost, formerly editor of the Los Angeles Daily Journal, is staff writer for Congressional Quarterly and author of The Supreme Court Yearbook.

Business Improvement Districts created by cities under the Parking and Business Improvement Area Law of 1989 are not subject to the voting requirements of Proposition 218, the Fourth District Court of Appeal has ruled. The unanimous three-judge panel said that Proposition 218 has no effect on cities' ability to levy assessments under the 1989 law (Streets & Highways Code §§ 36500-36551). The court concluded that San Diego's Pacific Beach Business Improvement District did not impose an "assessment" within the meaning of Proposition 218. In a decision closely watched by cities around the state, the court noted the difference between the 1989 measure, which allows assessments on business owners, and the Property and Business Improvement District Law of 1994, which provides for levies on property. For all 16 of its Business Improvement Districts, San Diego assesses business owners — not property owners — under the 1989 law, Deputy City Attorney James Chapin said. "That's the critical distinction for the purposes of Proposition 218," he said. If San Diego relied on the 1994 law to create the BID, "we wouldn't have been successful" because a BID based on the 1994 law would be subject to the proposition, he said. California voters approved Proposition 218 — the Right to Vote on Taxes Act — in November 1996. The measure requires two-thirds voter approval for adoption, extension or increase of taxes or assessments on real property. The initiative threw into question the validity of many lighting and landscaping district assessments and other levies issued by cities and special districts for specific services. The City of San Diego created the Pacific Beach BID to acquire, construct and maintain parking facilities in the area, to promote public events in the area, to furnish music, and to decorate the district. Business Improvement Districts are increasingly popular tools to raise revenue to fund street fairs, dress up neighborhoods and even add private security (see CP&DR Trends, December 1998). In fact, 85 cities joined in an Amicus Curiae brief to aid San Diego's case. In the Pacific Beach BID, the city assesses businesses based on the business size, type and location within the district. San Diego based the BID on the 1989 Parking and Business Improvement Area Law, rather than the Business Improvement District Law of 1994 (§ 36600). Four businesses registered their opposition to the Pacific Beach BID during a public hearing in June 1997, but the city went ahead with the BID anyway. The four business are assessed $60 apiece every year, according to Chapin. Arguing that the BID assessment violated Proposition 218, the protesting businesses and the Howard Jarvis Taxpayers Association then filed suit for declaratory and injunctive relief. San Diego County Superior Court Judge S. Charles Wickersham awarded the city summary judgement on the bases that Proposition 218 did not apply to the BID. On appeal, the BID opponents argued that Proposition 218 provides a "constitutional definition of assessment" that includes, but is not limited to, special assessments, benefit assessments, maintenance assessments, and special assessment taxes. The court, however, noted that Proposition 218 specifies "any levy or charge upon real property." "Proposition 218 clearly does not state a constitutional definition of assessment for all constitutional and statutory provisions," Presiding Justice Daniel J. Kremer wrote for the Fourth Appellate District, Division One. "To read such an all encompassing ‘constitutional definition' of assessment into Proposition 218 would require us to ignore the clear language of the proposition and rewrite the proposition. This we may not do." Extending Proposition 218 to other assessments not based on real property would result in the repeal of numerous levies, ranging from assessments on health care providers for state oversight, to assessments on avocado growers to fund the California Avocado Commission, the court said. The court also rejected the BID opponents' argument that the Pacific Beach BID levied a "special tax" within the meaning of Proposition 218. State law recognizes a distinction between a special tax and a special assessment. The California Supreme Court in Knox v. City of Orland, (1992) 4 Cal4th 132, explained that a special assessment is a "compulsory charge to recoup the cost of a public improvement made for the special benefit of a particular property." A special tax, meanwhile, is levied "without reference to peculiar benefits to particular individuals or property." The court in Evans v. City of San Jose, (1992) 3 Cal.App.4th 728, ruled that a levy imposed on business owners under the 1989 Parking and Business Improvement Area Law was not a special tax and was not subject to Proposition 13 because it benefited a discreet group. The reasoning in Evans applies to the San Diego case, the court said. Proposition 218 did not overrule the Evans decision, not did it change the meaning of "special taxes," the court said. The Case: Howard Jarvis Taxpayers Association v. City of San Diego, No. D031348, 99 C.D.O.S. 3693, 1999 Daily Journal D.A.R. 4719, filed May 19, 1999. The Lawyers: For Jarvis: Trevor A. Grimm, (213) 380-0303. For San Diego: James M. Chapin, deputy city attorney, (619) 533-5800.

Although new guidelines for implementing the California Environmental Quality Act went into effect in February — the first major overhaul in 13 years — no one is suggesting they have wrought a revolution. Nevertheless, the Davis Administration has vowed at least to review the changes made during the final months of Pete Wilson's second term. Several years of haggling among planners, attorneys, environmentalists, developers and state officials resulted in revisions to the CEQA guidelines issued by the Office of Administrative Law in October. The attorney who guided the Wilson administration through the revisions, Maureen Gorsen, recently expressed disappointment that the guidelines were diluted to the point of not making major improvements to the CEQA process. "We were so consensus driven, I don't think there was anything in the guidelines that really changed anything," said Gorsen, who is now with McClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish in Los Angeles. "We put so much hedging language in it to satisfy all of the interests." The revisions mostly codified court decisions and standard CEQA practices, she contended. Still, some environmentalists and planners worried that the revisions tilted the process too far toward development interests. Hoping to find an ally in Gov. Davis, they have lobbied the new administration to rescind or modify the revisions, according to Patrick Wright, Davis's new deputy secretary for resources. The Resources Agency will give a serious look at the guideline changes, Wright promised, but he did not provide a timetable for the review. "We have no preconceived agenda, and we don't know if there is anything that needs to be fixed or not," Wright said. "It's definitely something on our agenda as something we want to look at." The revisions to about 60 sections of guidelines constituted the first overhaul since 1986, and agencies were supposed to comply with the new guidelines by late February. The guidelines do not carry the weight of law, but judges often refer to them when deciding CEQA cases. "The primary mandate that these revisions fulfill," Gorsen wrote at the time "is to provide objectives, criteria and guidelines for the orderly evaluation of projects and the preparation of EIRs and negative declarations consistent with CEQA. In short, these revisions seek to improve the roadmap for lead agencies to follow." In late December, the Wilson administration made one final change when it exempted five-acre infill projects from CEQA review — with some exceptions. The New Checklist Among the most notable changes for planners who do daily CEQA work is a new checklist, which is generally receiving a favorable response from practitioners. "Those who have used it report that it is vastly superior to the old checklist," said Al Herson, president of Jones & Stokes Associates. With more detailed questions that reflect updated environmental laws, the checklist helps planners better determine a project's potential significant impacts, he said. The checklist, which is Appendix G, also is better organized and integrates the former Appendix G, which listed "impacts considered significant," he said. Curtis Alling, vice president of EDAW, Inc. in Sacramento, agreed the new checklist is an improvement. However, he noted, the more detailed questions take time to answer. "For the very simple projects — the ones that are clearly a negative declaration, and not even a mitigated negative declaration — it's taking longer to process," said Alling, who is also chairman of the Association of Environmental Professionals legislative review committee. Setting Thresholds While many counties have established thresholds for determining the significance of a project's impacts, many cities have not. Developers complain that the lack of clearly identified standards creates uncertainties. The new guidelines (§ 15064.7) encourage cities and counties to establish thresholds of significance. Many thresholds can be adapted from state standards, but in some instances a local jurisdiction may want to set its own standards for impacts in areas such as noise and circulation. "There are probably more jurisdictions establishing local thresholds than there were before the revisions to the CEQA guidelines," Herson said. The guidelines further recommend an agency conduct a public process for adopting thresholds of significance. Some planners and environmentalists contend that established thresholds intrude on the "fair argument" test. Under this standard, an EIR must be prepared if someone can make a fair argument that a project may create significant environmental impacts. Some people worry it could be more difficult to make a fair argument if a project falls below established thresholds, especially if thresholds allow for considerable change in the environment. "I think it's going to require a court case to decide it," said Alling, who shares this concern and would like to see the guidelines better reflect case law. "There is a presumption that if an impact doesn't meet the standard, it's not significant." But planners should be careful when making that presumption, he warned. "My advice to clients is that fair argument is law, and these are only guidelines." The Baseline Is Now … Sometimes The revisions say the baseline physical conditions for environmental study are those that exist "at the time the notice of preparation is published, or, if no notice of preparation is published, at the time environmental analysis is commenced" (§ 15125). But confusion begins with the next sentence, which says, in part, "this environmental setting will normally constitute the baseline …" Alling said the AEP insisted on the word "normally" because sometimes the point of the notice of preparation is not useful. For instance, in reviewing projects that may impact rivers, the best baseline data about the river may come from a series of previous years, he said. The revision was intended to get local planners thinking about — and explaining — the baseline, said Herson, who testified on the guidelines for the California Chapter of the American Planning Association. Planners may legitimately use a different baseline than the time of the notice of preparation, but they must carefully document why, Herson said. For example, if planners know infrastructure that is acceptable now will be at capacity when project construction begins, they should use the future condition as a baseline, he said. Possibly a larger point of confusion concerns cumulative impacts, Herson said. Revisions were supposed to streamline the process for determining cumulative impacts. Instead, the guidelines created too many options for analyzing cumulative impacts, he said. Solving this confusion will require more experience, case studies and professional education, he suggested. Smart Growth Meets NIMBY? The watered-down language decried by Gorsen, the former Resources Agency attorney, affects a change backed by some "smart-growth" advocates. In late December, the Wilson Administration added a guideline (§ 15332) that exempts infill projects of five acres or less from CEQA review. However, the exemption applies only to projects that "would not result in any significant effects relating to traffic, noise, air quality or water quality." In other words, planners must complete a miniature environmental study to determine if a project qualifies for an exemption. The first iteration of the exemption was quite broad but received strong criticism from planning and environmental organizations, Gorsen recalled. "By the end, what we adopted was symbolic — we think infill is a good idea," she said. "To us, it was very disappointing." She added, "To do a real infill exemption, you would need to do a legislative change because you can't exempt something with significant environmental impacts." While the planning community waits for someone to test the new infill exemption, there are rumblings from environmental justice advocates. They say the measure does not afford urban residents who live next to infill sites the same level of protection as people who reside next to greenfields. No Revolution It remains too early to see all of the fallout from the guideline. While interest in learning about the changes is high among planners, most jurisdictions appear to be following the same pattern as before the state published the revisions. In Santa Barbara County, for example, environmental review is quite rigorous and will continue to be, said Dan Gira, a planner in the long-term planning division. "I don't think it has had a significant impact on how the county does business," he said. Contacts: Al Herson, president, Jones & Stokes Associates, (916) 737-3000. Curtis Alling, vice president EDAW, Inc., (916) 362-3606. Maureen Gorsen, McClintock, Weston, Benshoof, Rochefort, Rubalcava & MacCuish, (213) 623-2322. Patrick Wright, deputy secretary, Resources Agency, (916) 653-5672. Guidelines online: http://ceres.ca.gov/ceqa

They come with Spandex and attitude. And they come with an agenda no less ambitious than to change urban transportation. They are adherents to the merry prankster of grassroots planning movements — Critical Mass. Massers have a simple modus operandi: (1) organize mass bicycle rides once a month, (2) ride through the city, sharing travel lanes with cars, (3) demonstrate that bicyclists have road rights, too. Like other anarchist-oriented movements, Critical Mass boasts no central organizational structure. Instead, Massers publicize, organize, and communicate through Web sites and coffeehouse fliers. As planning street theatre, it's great stuff. The bigger question is, will Massers change transportation policy? As a movement, Critical Mass is growing. What began with 45 riders in San Francisco's Financial District in 1992 has mushroomed into a global grassroots pressure group challenging the car's domination of public rights-of-way. According to the "unofficial" web-site, 155 monthly rides occur in cities around the world — 61 of them in North America. California has its fair share, including documented groups in Arcata, Santa Rosa, Sacramento, Walnut Creek, Berkeley, Marin County, San Francisco, Silicon Valley, Santa Cruz, Fresno, San Luis Obispo, Ventura, and Los Angeles. The San Francisco monthly ride boasts 5,000 participants, though other rides are markedly smaller. So far, results are inconclusive on the policy-change question. Whereas Critical Mass rides may demonstrate how the wheels of progress ought to spin smoothly, their effectiveness with policymakers has yet to be demonstrated. With unofficial Internet-published goals including "creating a car-free space in the center of our cities," and "enjoying the great outdoors," Massers provide municipalists no clear entity with which to tango. Because Critical Mass is frustratingly difficult for policy makers to deal with, police departments and the news media take up the task. This leads to the public relations black-eye suffered during San Francisco's July 1997 ride. During that event, more than 5,000 cyclists fanned out well beyond the bounds of the route brokered by the San Francisco Bicycle Coalition and the city. Police arrested 250 cyclists, mainly for traffic violations and illegal assembly. Authorities eventually dropped all charges, but such run-ins with local police may be inevitable for an urban movement that materializes with little notice and confronts the transportation status quo. At least one of Critical Mass's founders, Chris Carlsson, eschews any further negotiated settlements with municipalists. Says Carlsson, "Critical Mass is one of the most political events of this depressing decade … it has no further purpose than its continued existence, which in itself is an affirmation of communities that are otherwise invisible and easily ignored." More policy-oriented Critical Mass sympathizers have recognized the need to be more visible, and have taken a more conventional tack. Leah Shahum, of the San Francisco Bicycle Coalition, calls her group "the yin to the Critical Mass yang." In 1998, the SFBC swallowed a disappointing setback when it failed to convince the Parking and Traffic Commission to adopt a full package of street enhancements needed to complete a proposed bicycle network in the City. But Shahum asserts progress is being made. "Two years ago, politicians did not even have bicyclists on their radar. Now they do," she says. Physical progress is also becoming evident. The SFBC recently prodded the City to implement a green arrow program for San Francisco streets. Painted symbols, illustrating a bicycle inside a bright green arrow, remind drivers to share the city's narrow roadways with cyclists. The program will eventually cover nearly 60 miles of the street system. Statewide cyclists efforts have begun to make some policy progress as well. In October 1997, the California Bike Coalition succeeded in its efforts to get AB 1020 passed. The bill increased 13-fold the amount of money Caltrans allocates to bicycle facilities statewide, from $360,000 to $5 million annually through 2004. Despite the paucity of demonstrable policy accomplishments, Massers have struck a nerve. In forcing the revamping the urban transportation discussion, they have even stolen the fire from transportation agencies' numerous alternative mobility efforts. Indeed, some of these government-sponsored efforts seem to be watered-down copies of the original. Is it any coincidence that California's Bike-to-Work Week, which recently completed its fifth edition, is two years younger than Critical Mass? The annual event is endorsed by Caltrans and sponsored by a host of the state's regional COGs. It seems only fair to ask, is the annual bike commute event merely Critical Mass in public agency clothing? Stephen Svete, AICP, is a principal in the Ventura-based consulting firm of Rincon Consultants Inc.

The Fourth District Court of Appeal has overturned a trial judge's ruling that environmental review of the proposed Eagle Mountain landfill in Riverside County was inadequate. The additional review was conducted under a court order that found fault with the previous environmental work on the project. The Eagle Mountain project would convert a former Kaiser Steel iron-ore mine into a landfill of 2,200 acres with the capacity of accepting up to 20,000 tons of waste per day for more than a century. However, it would be located within 1.5 miles of Joshua Tree National Park — a fact that has galvanized project opponents, including the National Parks and Conservation Association. The current case emerged from challenges to a new environmental impact report prepared by Riverside County in response to a previous court challenge on the project. The National Parks and Conservation Association and landfill opponents sued the county. In 1994, San Diego Superior Court Judge Judith McConnell, who handles many challenges under the California Environmental Quality Act from surrounding counties, ordered a new environmental impact report. Among other things, she said, the EIR should have spent more time describing the cumulative impact of the project and wrongly dismissed a possible hydroelectric project associated with the landfill as remote and speculative. She also ruled that the evidence was insufficient to support the EIR's conclusions regarding the desert tortoise habitat and the proximity to Joshua Tree National Park. Proponents appealed McConnell's ruling, but the Fourth District upheld her decision in 1996. (National Parks & Conservation Assn. v. County of Riverside, 42 Cal.App.4th 1505 (1996); CP&DR Legal Digest, April 1996.) Between 1994 and 1997, the county re-examined many environmental issues and eventually produced an entirely new EIR. The Board of Supervisors then issued a decision that the project, as mitigated, would have only one significant impact — an adverse impact on the "wilderness experience" — and issued a statement of overriding considerations in approving the project. However, opponents challenged the adequacy of the new EIR and eventually won another favorable ruling from Judge McConnell. This time, McConnell ruled that the county had not complied with her earlier order to adequately examine the impact on both the wilderness experience and the desert tortoise population at the park. On appeal, the county and the project proponents, Kaiser Steel Resource and Mine Reclamation Corp., argued that substantial evidence supports the county's decision to approve the project. The Fourth District, Division One, agreed with the county and overturned Judge McConnell's ruling. One of the complicating factors in the EIR was the fact that the 1994 California Desert Protection Act upgraded Joshua Tree from a National Monument to a National Park. Interpretation of this change had a major impact on both Judge McConnell and the appellate court, especially with regard to the "wilderness experience" portion of the environmental analysis. For example, the appellate court noted that when the Desert Protection Act was passed, Senator Dianne Feinstein, D-California, the legislation's main sponsor, wrote a letter to Interior Secretary Bruce Babbitt stating that she never intended this action to dictate the creation of a private "buffer zone" around the park. It was in this context that the appellate court examined the wilderness experience analysis. This issue came into play in the appellate court's discussion of the noise analysis. According to the county, the project's opponents were demanding, in effect, a "zero impact" standard inside the park for noise and other impacts. In the absence of National Park or federal noise standards that could be applied, the EIR used the county's residential noise standards, which sets 65 decibels as the level of significance. "There is no authority to create a private de facto buffer zone around the Park for the purposes of land use," the court wrote. "Absent more closely applicable standards, it appears that the county had a substantial basis for accepting the EIR's use of county residential noise standards for assessing noise impacts. There is no requirement that all noise from the project be mitigated to a level of inaudibility, particularly as to nonwilderness parklands." Similarly, on the issue of the wilderness experience to park visitors, the court disagreed with Judge McConnell and found the EIR's discussion adequate. Noting that it is difficult to measure these impacts well, the court said: "The EIR acknowledges the potential subjective impacts of the project, even though it does not go much farther in defining them; however, its analysis goes the extra mile in examining every possible sensory impact on a Park visitor." Regarding the impact on the desert tortoise, the court took Judge McConnell to task. She found a lack of substantial evidence to prove that the impact on the tortoise — an endangered species — had been mitigated to a level of insignificance, and in particular questioned why the county did not require the project to fence the 52-mile railroad line through the project. According to the appellate court, the U.S. Fish & Wildlife Service examined this option and determined more study was needed. "On balance," the court said, "it appears that the trial court effectively substituted its judgment on the fencing issue for those of the expert agencies and biologists in the field. It had no adequate basis for doing so." The court also rejected Judge McConnell's judgment that landfills are not permitted in the tortoise areas under the federal Desert Tortoise Recovery Plan. The Case: National Parks and Conservation Association v. County of Riverside, No. D031056, 1999 Daily Journal D.A.R. 4309, 99 C.D.O.S. 3395 (issued May 7, 1999). The Lawyers: For National Parks and Conservation Association and other plaintiffs: Floy E. Andrews, Gibson, Dunn & Crutcher, (213) 229-7206. For Riverside County and other defendants: Michael H. Fish, Nugent & Newnham, (619) 236-1323.

When taking real estate by eminent domain, a public agency must pay the landowner for the value of unmined aggregate on the property, the Second District Court of Appeals has ruled. The unanimous three-judge panel ordered the Ventura County Flood Control District to pay owners of 67 acres $2.6 million to compensate for the owners' loss of the aggregate resource. The value of mineral deposits, including sand, clay and gravel, is an element in determining fair market value, which the public agency is required to pay when condemning land, the court said. "Knowledgeable buyers and sellers would not ignore the valuable aggregate any more than they would a gold, diamond or basalt mine," wrote Justice E. Jeffrey Burke, a San Luis Obispo County Superior Court judge temporarily assigned to the Second Appellate District, Division Six. "The value of the aggregate is neither driven by the project nor is it the project, as suggested by District. … As the trial court found, District hoped to pay for the project with royalties it would obtain from the aggregate." The district in 1995 hired Southern Pacific Milling to excavate a basin that would intercept floodwater on the Grubb Ranch, which was owned jointly by Daniel Campbell and James Alger. Under the contract, SP Milling would pay the district $1.3 million for the aggregate from the ranch, located along the Santa Clara River near Oxnard. However, when that SP Milling contract lapsed, Campbell, who owns Truestone Concrete Products, sought to mine the aggregate. County planners said he would need an environmental impact report before getting a permit to mine. The district in November 1995 offered to buy portions of the ranch for $35,000 an acre. Campbell rejected the offer, and the district soon adopted a revised initial study and negative declaration reflecting its plans to obtain the entire ranch. Campbell sought a writ of mandate challenging the project's lack of an EIR, but he lost in Ventura County Superior Court. The district proceeded with its eminent domain action and, after the district deposited $2.4 million, the court on April 8, 1996, ordered possession to the district. Campbell then sued Alger and the district, asserting his right of first refusal to purchase the property. Campbell lost that suit in Superior Court and, in an opinion handed down the same day as the valuation suit, Campbell lost the appeal in the Second District. In October 1996, Alger accepted a stipulated settlement from the district for $1.2 million. Just before Alger accepted the purchase offer, Campbell filed suit seeking declaratory and injunctive relief, and asserting violations of civil rights and unjust enrichment. The trial court rejected all of Campbell's arguments except those regarding unjust enrichment. A jury set the fair market value of the ranch at $5.2 million, awarding $2.6 million to Campbell, plus $150,000 in legal fees. The district appealed the jury's verdict, and Campbell appealed the amount of legal fees. The Flood Control District said the trial court erred by permitting evidence regarding the hypothetical market for aggregate. The land's value should have been based on its agricultural use, the district argued. Furthermore, the district contended the enhanced property value was attributable to the project. In upholding the ruling by Ventura County Superior Court Judge William L. Peck, the appellate court said allowing evidence of an active aggregate market in a rapidly developing area was correct. In fact, the district had solicited proposals to excavate Grubb Ranch and accepted a bid from CalMat Co. for $3 per cubic yard, enough to generate $5 million for the district. "The open bids by SP Milling and CalMat, private building materials companies, establish an existing market for scarce aggregate in the community. The fact that the aggregate was extracted to provide a basin for the flood control project does not change its intrinsic value to the private sector for building material," the court said. The court added, "We admonish district not to suggest to juries, as it did here, that is should consider the liability of taxpayers in valuing the condemned property." The appellate court rejected Campbell's request to recover more legal costs and his civil rights claims. The district may legitimately pursue a project that intercepts floods, protects high groundwater and conserves farmland, the court said. As for Campbell's separate suit regarding his right of first refusal, the appellate court said,"The Legislature has provided that if a public entity is forced into eminent domain litigation, it should settle with as many owners as swiftly as possible to minimize the costs, uncertainties and time to obtain such needed land. Private holders of rights of first refusal may not thwart such public purposes by forcing the owner or the subsequent public entity to sell it to them. (Gov. Code §7267.2; Melamed v. City of Long Beach (1993 15 Cal.App.4th 70, 81-83.)" The Cases: Ventura County Flood Control District v. Campbell, No. B117274, 99 C.D.O.S. 2610, Daily Journal D.A.R. 3347, and Campbell v. Alger, No. B115217, 99 C.D.O.S. 2599, Daily Journal D.A.R. 3333, filed April 7, 1999. The Lawyers: For the Flood Control District and Alger: James L. McBride, Ventura County Counsel, (805) 654-2580. For Campbell: M. Reed Hunter, Crosby, Heafey, Roach & May, (213) 896-6000.

The U.S. Environmental Protection Agency's Brownfields redevelopment program is geared toward inner cities, but state officials would like to bring Brownfields aid to rural areas where timber mills have closed. For more than 100 years, timber companies erected sawmills all over northern and central California. However, as nature and government regulators restricted the timber supply, many of those sawmills closed, leaving a huge hole in the economy of the rural towns that grew up around the mills. The state Trade and Commerce Agency's Mill Reuse Pilot Program is intended to turn about six of those idled mill sites into new industrial centers. A $200,000 Brownfields grant from U.S. Environmental Protection Agency is funding is the pilot program. Trade and Commerce Agency analysts identified more than 100 closed mill sites in the central and north state. They received 10 applications for pilot program grants, project manager Karen Homolac said. The grants will pay for phase one and, if necessary, phase two environmental assessments of five or six mill sites, depending on study expense. The agency also will help the communities involved undertake a visioning program for the mill sites, which are often the only industrially zoned parcels in the area, Homolac said. Business boosters, local officials and landowners in rural areas often know little about the EPA's program, Homolac said. "People just have to get educated about what Brownfields are. People don't understand the legislation. Many of these properties just stay fenced up," she said. "This recognizes that Brownfields can be rural, not just urban." A sawmill closure can devastate a small town. Not only are good-paying sawmill jobs lost, but work for tree fallers, truck drivers and those who serve the sawmill also decreases. Transforming an old mill site into a center of new industry takes years. When South Fork Timber Industries in 1994 closed its sawmill in the unincorporated Madera County community of North Fork, it surprised no one. The mill employed up to 120 people at its peak but the work force dwindled to 45 by the time of closure. Area residents two years earlier began forming what would become the North Fork Community Development Council, said Barry Vesser, the agency's director. Since its formation, the council convinced South Fork Timber to donate the 135-acre site to the Madera County Redevelopment Agency in exchange for tax credits. The council enticed the EPA to perform environmental assessments and the council lined up grants to pay for a master plan and accompanying environmental impact report. The EIR is nearly complete, Vesser said. Once it is finished, the redevelopment agency will give the land to the council, which will be in charge of redevelopment. The master plan calls for 60 percent of the site to be used for light industrial businesses, 30 percent for a recreational vehicle park and 10 percent for a community park. Significant local interest exists for investment in the RV park, but enticing companies to build in the light industrial area could be a difficult marketing effort, Vesser said. Also, pollution from the former mill's log dip tank is a factor and no one knows how much cleanup will cost, he added. The council is considering a land swap with a developer who would remediate the contamination. "These sites are an asset, but like a lot of assets, they have liabilities attached to them," he said. Pollution usually impacts only a portion of a former mill site, said Sandy Karinen of the Department of Toxic Substances Control. Problems often stem from dip tanks in which logs were treated with a chemical solution to prevent mildew, she said. "For the most part, it's not nearly as expensive a problem with a saw mill as with a pressure-treating facility or a pulp mill, where a lot of chemicals are involved," she said. However, pollution is but one of many obstacles on the road to sawmill reuse. Patience may be the most vital asset for anyone wanting to redevelop an old mill site, said Hanan Bowman, project manager for Oregon's Mill Site Conversion Project, on which California's pilot program is based. After four years of work by the project, six of the twelve targeted sites are moving toward redevelopment, Bowman said. "The timeline for each site is a lot longer than anyone anticipated," said Bowman, who works for the private, nonprofit Rural Development Initiatives. Finding cooperative landowners, assessing environmental damage, planning, and attracting development funding all take time, he said. Because the federal Brownfields program is geared toward urban areas, efforts to get money for rural projects take longer, he said. Redeveloping one old mill site costs $2 million to $4 million, Bowman added. Contamination cleanup alone can cost anywhere from $250,000 to $1.5 million, he estimated. Soft costs, such as money spent for accountants and attorneys, also can eat up hundreds of thousands of dollars, he said. "The question is where is the money going to be coming from. And it's a question we have not solved," Bowman said. Homolac acknowledged these downsides and recognized the long-term commitment that mill site reuse requires. The state wants to draw the public into the process because many locals oppose, or are at least skeptical of, mill redevelopment, she said. North Fork's Vesser agreed that eliciting community support for planning mill site reuse is important because the sites often are large, visible, near the center of town and zoned for industry. Maintaining community interest while discarding pie in the sky notions is critical, he said. Getting the public involved "costs you some time and costs you some money, but it's time and money well-spent. Considering these are not quick processes, you can plug that in pretty economically," Vesser said. Bowman, of the Oregon program, recommended program managers set short-term goals so citizens and landowners remain motivated. Program backers believe revitalizing old mill sites is essential to keep alive the small towns that grew up around the mills. Big Fork is a perfect example of a foothill town that needs a new industrial base. The largest employers now are the local school district and the U.S. Forest Service, Vesser said. Many Big Fork residents must commute to jobs in Fresno (an hour away) or Oakhurst (30 minutes away). Trade and Commerce Agency officials intend to pick five or six mill sites for the pilot program by early June. Contacts: Karen Homolac, California Trade and Commerce Agency, (916) 324-8656. Hanan Bowman, Oregon Mill Site Conversion Project, (541) 684-9077. Barry Vesser, North Fork Community Development Council, (559) 877-2244. Mill Reuse Pilot Program, www.commerece.ca.gov/millreuse.

The Metropolitan Water District must complete an environmental impact report before creating a mitigation bank that MWD and private developers would use to offset building on habitat for endangered species, the Fourth District Court of Appeals has ruled. The ruling reverses a trial court judge's decision that allowed plans for the multiple species reserve in western Riverside County to go forward with only a mitigated negative declaration. The appellate court backed San Bernardino Valley Audubon Society's contention that, under the California Environmental Quality Act, a fair argument could be made that the project will have significant effects on endangered, threatened and other plant and animal species, and, therefore, an EIR was required. "The fair argument is not speculative or hypothetical because the documents themselves allow for these possibilities. Thus, there is substantial evidence in the record that these potentially significant effects may occur," Justice Thomas E. Hollenhorst wrote for the unanimous three-judge court. The court was especially troubled that the Lake Mathews Habitat Conservation Plan and Natural Community Conservation Plan provided a "blank check" for Southern California developers wanting to build on habitat for endangered species. However, Chris Beale, a Department of Fish & Game attorney, downplayed the ruling's impact on mitigation banks. "We have always maintained you would have to do appropriate CEQA review of subsequent projects," he said. The ruling means that officials must ensure mitigation bank agreements make clear that CEQA review is still necessary for projects that would use the mitigation bank, and that mitigation credits are determined on a case-by-case basis. There was no intention for the HCP and NCCP to authorize "incidental take" permits, as the Audubon Society implied, he said. The Metropolitan Water District, U.S. Fish & Wildlife Service, the state DFG and the Riverside County Habitat Conservation Agency prepared the Lake Mathews Multiple Species Habitat Conservation Plan and Natural Community Conservation Plan for 6,000 acres owned by MWD around Lake Mathews. The plan creates a 5,110-acre multi-species reserve around the lake. The plan also would serve as a basis for incidental take permits for six endangered species and 59 target species under the Endangered Species Act, according to the court. The reserve would act as a mitigation bank for MWD. The plan further estimates that MWD would not need about 650 acres of the reserve, so it could sell the mitigation credits to private developers from all over Southern California. The Audubon Society filed a petition for writ of mandate to compel the agencies to prepare an environmental impact report. Riverside County Temporary Superior Court Judge Gloria Trask ruled that the mitigated negative declaration was adequate. The Audubon Society appealed. At the appellate court level, the public agencies contended this is not a development project; rather it is a "conservation program will not cause any unmitigated environmental impacts itself, but merely provides a mechanism whereby biological mitigation can be implemented for any future projects …." They contended the plan, which contained a lengthy biological report describing the plant and animal species in the proposed mitigation bank, will be good for endangered and threatened species. The Audubon Society, however, argued that the plan would allow MWD and private developers buying into the bank to wipe out endangered and threatened species during the course of future construction — without additional public review — for 50 years. The public agencies pointed to the plan's four "effect-minimizing" measures, which would extend to off-site projects. The first measure gives the California Department of Fish & Game 10 days notice if a listed plant species is present at a construction site and gives DFG access to salvage plants or collect seeds. A second measure calls for avoiding the habitat of threatened birds during breeding season. Thirdly, use of pesticides that could harm listed species would be "avoided and minimized." Finally, construction near the multi-species reserve would be monitored. The court found a variety of different ways in which a fair argument could be made that the project would have unmitigated environmental effects. "First, Audubon could fairly argue that the provisions allowing the mitigation bank to be used as mitigation for take on other projects throughout Southern California essentially gives developers a blank check to disregard endangered and threatened species on the projects, so long as they utilize the mitigation bank. Such provisions greatly expand the scope of the project," Justice Hollenhorst wrote. The court found no proof that the effect-minimizing measures would work. Furthermore, the plan would allow MWD and developers to offset actual destruction of endangered species with potential habitat. "Thus, for example, an animal with limited range, such as the western spadefoot toad, would be taken in an outside project and the mitigation bank would provide mitigation for the take merely because it is potentially suitable habitat, not because any toads actually live there," the court said. The plan's habitat value formula troubled the court. The complex formula did not call for the acre-for-acre and species-for-species mitigation usually required. Instead, it allowed an acre to be used as mitigation multiple times if it contained multiple species. The court said this "apparently novel idea" was a "compression of habitat that could have a significant effect." Finally, the court said cumulative impacts could be substantial. The case: San Bernardino Valley Audubon Society v. Metropolitan Water District of Southern California, No. E021361, 99 C.D.O.S. 2724. The lawyers: For the Audubon Society: Kate Neiswender, (805) 639-0035. For MWD: William S. Abbey, deputy attorney general, (213) 897-2604, and Gene Tanaka, Best, Best & Krieger, (909) 686-1450.

A 1998 law that takes Williamson Act property taxes breaks for agricultural land one step further is constitutional, according to a state attorney general's opinion. The opinion, written by Deputy Attorney General Gregory L. Gonot, (Attorney General's opinion No. 98-1106, filed March 10, 1999) concludes the "Super Williamson Act" approved by the Legislature does not violate state constitutional requirements that all property be taxable at the same percentage of fair market value. Farm interests said the opinion should end confusion that had slowed implementation of the measure, which provides tax incentives for landowners not to develop farmland and open space. However, Stanislaus County Assistant County Counsel Vernon Seeley, who requested the opinion, believes the opinion is incorrect and has asked the attorney general to reconsider. Lawmakers considered the Williamson Act constitutional when they approved it in 1965. But they amended the act over several years after approval of a 1966 constitutional amendment that addressed land conservation. In the opinion, Gonot quotes that constitutional amendment, which became Section 8 of Article XIII: "To promote the conservation, preservation and continued existence of open space lands, the Legislature may define open space land and shall provide that when this land is enforceably restricted, in a manner specified by the Legislature, to recreation, enjoyment of scenic beauty, use or conservation of natural resources, or production of food or fiber, it shall be valued for property tax purposes only on a basis that is consistent with its restriction and uses." The Legislature last year approved Farmland Security Zone tax incentives (Revenue and Taxation Code § 423.4) to strengthen the Williamson Act (Government Code §§ 51200-51295). Under the Williamson Act, a landowner may contract with a city or county to restrict the use of agricultural land in exchange for lower property taxes based on the farmland's restrictions and actual use, rather than on the land's potential as a development site. The size of the tax break depends on the land's location and base-year value. Williamson Act contracts, which are renewed annually, have 10-year rolling terms. The Legislature last year declared its desire to find greater incentives for farmland preservation. The Farmland Security Zone tax incentives bill, known as the Super Williamson Act, provides for a 35 percent reduction in value for property tax purposes. In exchange, the landowner agrees to maintain the farmland or open space for 20 years. Property owners who sign Super Williamson Act contracts place their property in a different classification, according to Gonot. "The principle that different tax rates may apply to property in different classifications was expressed by the court in Hewlett-Packard Co. v. County of Santa Clara (1975) 50 Cal.App.3d 74, 79: ‘The constitutional mandate for uniform … taxation applies only to property which has not been classified in a manner different from other property or has not been exempted from taxation in whole or in part,'" Gonot writes. The opinion continues, "Since land subject to a Farmland Security Zone contract is under more use restrictions than land subject to a Williamson Act contract, the former must be valued less for property tax purposes than the latter. Accordingly, Section 423.4 sets the value at 65 percent of the value of Williamson Act land under Section 423. Because the Constitution prohibits the same valuation for lands subject to different restrictions, Sections 423 and 423.4 carry out this constitutional mandate." Seeley, the Stanislaus County attorney, differs. In an interview, Seeley said he is convinced the Super Williamson Act is unconstitutional because the state constitution does not authorize the Legislature to make tax exemptions, such as this one, by statute. "There is a great deal of case law that says you cannot have an exemption without a constitutional amendment," Seeley said. In this instance, "the constitution was not amended." Seeley rejects the attorney general's conclusion that the Super Williamson Act places land in a different classification. The only change is in the terms of a landowner's contract with the county, he argued. Stanislaus County, which has not implemented the Super Williamson Act, supports the goal of farm preservation. The county's fear is that it could not defend against a taxpayer lawsuit, Seeley said. Since then-Gov. Pete Wilson signed the Farmland Security Zone law in August 1998, six counties have begun offering the contracts, according to the California Farm Bureau, which praised the opinion. "Now that this cloud has been taken off the Farmland Security Zone program, we believe more landowners will step forward wanting to get involved and more counties will begin to offer it," John Gamper, the bureau's taxation and land use director, said in a written press release. Contacts: Vernon Seeley, Stanislaus County Counsel's office, (209) 525-6376. John Gamper, California Farm Bureau, (916) 446-4647.

Citizens have no right under the federal constitution to seek a voter referendum of a city's land sale, the Ninth U.S. Circuit Court of Appeals has ruled. In a case from Arizona, the federal appellate court dismissed arguments that the Tenth Amendment establishes the right to a referendum. The state constitution sets the rules for referenda, the court determined. "It is the power of the federal government which is constrained by the Tenth Amendment, not the power of the states," the court wrote. The case arose from an ordinance adopted by the Prescott City Council in October 1995. The measure provided for the sale of the city-owned Hassayampa Lake to Hassayampa Lake Holdings, LLC. The small but deep reservoir about 10 miles outside town was formerly part of the city's water system. The lake had become a popular place for people to swim, kayak and hang out during the summer, prompting complaints from nearby residents and raising liability concerns for city officials. The City Council's ordinance included a declaration of emergency "for the immediate preservation of the public peace, health and safety" and it took effect immediately. Citizens who spent leisure time at the lake opposed the sale, and they began to pursue a referendum. However, the Prescott city clerk refused to issue referendum petitions because the ordinance included the emergency declaration and, therefore, was not subject to referendum under the Arizona constitution. The California constitution has a similar referendum exception. Article II, Section 9(a) excepts "urgency statutes, statutes calling elections, and statutes providing for tax levies or appropriations for usual current expenses of the state." In Prescott, opponents of the sale sued in Yavapai County Superior Court. The court said the emergency ordinance was a non-reviewable action whether or not an actual emergency existed. The state appellate court and state Supreme Court declined to hear an appeal. Opponents then took their case to federal court, where U.S. District Judge Stephen M. McNamee granted the city summary judgement. On appeal, opponents of the lake sale argued three things: that they had a Tenth Amendment Right to referendum, that the emergency ordinance exception violated their First Amendment rights to petition the government, and that the federal court should determine whether a true emergency existed. None of the three contentions found favor with the three-judge appellate panel. The opponents "misapprehend the scope and purpose of the Tenth Amendment," Judge Sidney R. Thomas wrote. "Plaintiffs cannot found a Section 1983 claim on the Tenth Amendment because it is neither a source of federal authority nor a fount of individual constitutional rights." As for the first amendment claim, the court agreed that "states may not place overly restrictive conditions on citizens attempting to exercise initiative or referendum rights." The court pointed to the Colorado case of Buckley v. American Constitutional Law Foundation, Inc., (1999) 119 S. Ct. 636, in which the court ruled that a requirement that petition circulators be registered voters and wear name badges was an unjustifiable restriction on First Amendment rights. The appellate panel also pointed to Meyer v. Grant, (1988) 486 U.S. 414, in which a Colorado law that prohibited paying referendum petition circulators was ruled an undue burden on political expression. "However, plaintiffs' claims do not fall within the orbit of Meyer and Buckley," Judge Thomas opined. "Those cases teach that where the people reserve the initiative or referendum power, the exercise of that power is protected by the First Amendment applied to the states through the Fourteenth Amendment." Opponents of the lake sale, Thomas continued, sought to expand the referendum right beyond that contained in the Arizona constitution. That state's constitution does not make laws passed under declaration of emergency subject to referendum. "This is not a restriction, condition or requirement that impermissibly burdens the exercise of the referendum power, thereby invoking protection of the First Amendment. Instead, it is a delegation to the Legislature by the people of a part of their reserved power of referendum. Thus, the emergency declaration by itself does not implicate First Amendment concerns," the court said. The appellate court was not about to decide whether a true emergency existed. " laintiffs' remedy lies in the Arizona state courts, or perhaps at the ballot box, not with a federal jury," the court said. The case: Stone v. City of Prescott, No. 97-17121, 99 C.D.O.S. 2437, 99 Daily Journal D.A.R. 3185, filed April 2, 1999. The lawyers: For Stone: William B. Fortner, (520) 445-3817. For Prescott: Ralph M. Hess, City of Prescott legal department, (520) 776-6302.

As the debate over revenue-neutrality continues at the state Capitol and in local board chambers, something strange is happening. New cities are incorporating anyway. There is no tidal wave of incorporations, but the City of Laguna Woods in Orange County started business March 24, and the Contra Costa County community of Oakley will become a city on July 1. Also, leaders of Elk Grove incorporation appear near an agreement with Sacramento County officials, who bitterly fought the 1997 incorporation of Citrus Heights. Do these developments mean revenue-neutrality — the state requirement that a county be made fiscally whole by a newly incorporated city — still pose a hurdle for would-be cities? Absolutely, say observers. But evidence indicates communities can cross the hurdle, especially if a community is growing. "You can get by it," Paul Hahn, assistant executive officer of the Sacramento Local Agency Formation Commission, said of the revenue neutrality requirement. A would-be city with the ability to increase its tax base stands a better chance of surviving the revenue-neutrality test, he said. Citrus Heights, for example, will not have a great deal of money because it is not growing much. Besides the revenue-neutrality requirement, the property tax shift from counties and cities to school districts is another factor that complicates incorporations, said Alvin D. Sokolow, a University of California, Davis, professor. Also, said Sokolow, "the cities that were primed to incorporate did so in the '80s and early '90s." The remaining would-be cities are more problematic or lack the momentum that other communities had 10 years ago, he said. Although only Citrus Heights and Shasta Lake incorporated from 1993 through 1998, at least 20 California communities are in some stage of the incorporation process. California's Newest Cities Two-month-old Laguna Woods may be the state's most peculiar city. Almost the entire city lies within Leisure World, a giant, gated retirement community. The four-square-mile city contains 18,000 residents, but only 60 businesses, no schools or public parks, and almost no public roads. Opposition to opening a commercial airport at nearby El Toro Marine Corps Base galvanized Laguna Woods' incorporation drive. Although the county backs base conversion, it did not stand in the way of the new city, which voters narrowly approved three weeks before the incorporation's effective date. Revenue-neutrality "was not a huge issue," Orange County LAFCO Executive Officer Dana Smith said, because Laguna Woods' $3 million annual budget is so small. The annexation agreement calls for Laguna Woods to pay the county $400,000 annually for seven years. Rancho Santa Margarita, near Mission Viejo, could be Orange County's next city. Incorporation hearings are likely by early July, Smith said. As in Orange County, Contra Costa County did not fight incorporation of Oakley, a formerly rural hamlet in the midst of the rapidly growing east county. Oakley voters last November approved incorporation of the first new city in Contra Costa County since the mid-1980s, said Annamaria Perrella, Contra Costa County LAFCO executive director. An analysis indicated the proposed incorporation would not harm county coffers, Perrella said. County supervisors did not dispute the finding and did not insist on mitigation payments from the city, she said. Perrella conceded, though, that Oakley is probably an exception. The mostly residential city of about 14,000 people lacks commerce, whose sales and property taxes often provide the basis for county-city squabbles. Peace in Sacramento? The majority of the Sacramento metropolitan area lies in unincorporated Sacramento County, which had not had a new city for 50 years prior to Citrus Heights' incorporation. The protracted battle between Citrus Heights and Sacramento County sent a message statewide, said Professor Sokolow, who was lead author of a guide for communities considering incorporation. The county fought incorporation of the eastern Sacramento suburb for years, and the two sides did battle in court regarding tax transfers from Citrus Heights, which has a great deal of retail development. A 1998 settlement essentially gives property taxes to the county for 25 years and lets the city keep sales tax revenue. (See CP&DR September 1998.) Indications were that Sacramento County might fight the proposed incorporation of Elk Grove, a few miles south of Sacramento, just as aggressively. The county was not friendly to previous Elk Grove incorporation attempts, which voters last rejected in 1994. Acting County Executive Officer Robert Ryan Jr. in March recommended the county insist that Elk Grove and other new cities provide revenue exchanges in perpetuity. The LAFCO board, however, declined to condition Elk Grove's incorporation on revenue transfers without a sunset date. Instead, the conditions require that the suburb surrender some of its property taxes for 25 years, said Hahn, the LAFCO assistant executive. "There is a better trust level between the county and the incorporation proponents this time. There is an amount of property tax that can be secured," Hahn said. Because property taxes are paid directly to the county, the city cannot withhold payments, he noted. Elk Grove incorporation is scheduled to return to the ballot next year. Sacramento County also is the site of the fledgling movement to incorporate Rancho Cordova, on the Highway 50 corridor. The proposed city contains extensive retail, office and industrial development, the former Mather Air Force Base (which the county owns), and parcels of pasture owned by high-powered developers. Incorporation proponents began collecting petition signatures in April in hopes of getting the issue on the November 2000 ballot. Hahn said he doubted that timeframe. "This one has incredible financial implications for Sacramento County," he warned. More cities may be on the way The largest movement is actually a secession. In March, Los Angeles County officials determined petitions to detach the San Fernando Valley from the City of Los Angeles were valid, setting the stage for a massive study. Who will perform and pay for the study — estimated to cost at least $2 million — remains undecided. Los Angeles officials, led by Mayor Richard Riordon, are vigorously fighting secession, which would create a city of roughly 1.5 million people in the northern half of what is now Los Angeles. An election on San Fernando Valley secession is unlikely before 2002. Among the more unusual incorporation drives is one in the Fresno County industrial area of Malaga, where the Malaga County Water District is leading the charge. The proposed city would encompass seven to eight square miles southeast of Fresno. Malaga has long been a warehouse and manufacturing district, and about 80 percent of the proposed city is zoned commercial or industrial. Only 1,200 people live in the area, said Gerald Forde, water district general manager. Leaders of the district, which provides water, wastewater treatment, solid waste collection and recreation services, are charged with ensuring the financial health of the area, Forde said. Gaining control of land use decisions is the best way to ensure the district develops as needed, he said. "It's part of prudent management by the board, and it's providing for the future financial stability of the district," Forde said. "By going out on our own, we felt we could plan our destiny a little." Fresno County sees Malaga, the majority of which remains undeveloped, as a cash cow, and the county's land use decisions may not be best for the district, Forde contended. For instance, most of the county's sites for adult businesses are in Malaga, he complained. Until coming to the district in December 1996, Forde was in charge of economic development in Vernon, an industrial city with few residents in Los Angeles County. "Malaga can become the Central Valley's City of Vernon or City of Industry," Forde said. Fresno County, however, has sued the district. The county argues the district has no authority to pursue incorporation, and the county seeks an injunction to prevent the district from spending funds on the effort. Back at the Capitol The California State Association of Counties and the League of California Cities are behind competing Assembly bills regarding revenue-neutrality. The CSAC-backed measure, AB 1495 by Assemblyman Dave Cox, R-Sacramento, contains provisions on which the cities and counties agreed last year and builds on some of those provisions, said Hugh Bower, Assembly Local Government Committee consultant. Last year's bill, carried by Assembly Bruce Thompson, R-Fallbrook, did not become law. This year, Thompson had introduced city-backed legislation that dilutes the revenue-neutrality mandate, imposes shorter timelines on the LAFCO process and requires a LAFCO to compare like-sized communities. The legislation requires a LAFCO to take a "balanced approach" and states, "Communities that demonstrate the necessary resources, capacity and desire for self-governance shall not be denied the opportunity to incorporate solely due to the amount of mitigation payments required." Although the two sides appear far apart, CSAC and the League have been negotiating. "I think they both have legitimate concerns. I think until we have a more equitable way of financing municipal services, it seems the county loses every time," Bower said. "It all comes back to local government finance." Contacts: Paul Hahn, Sacramento County Local Agency Formation Commission, (916) 874-6458. Gerald Forde, Malaga County Water District, (559) 485-7353. Hugh Bower, Assembly Local Government Committee, (916) 445-6034. Dana Smith, Orange County Local Agency Formation Commission, (714) 834-2556. Alvin D. Sokolow, University of California, Davis, (530) 752-0979.

The Coastal Act does not allow destruction of a designated environmentally sensitive habitat area simply because the destruction is mitigated off-site, the Fourth District Court of Appeals has ruled. The court also determined that residential development of wetlands and removing a pond to build a road were not permissible under the Coastal Act. The decision stems from the 25-year controversy over Bolsa Chica, a 1,588-acre area of wetlands and coastal mesas near Huntington Beach where developers have sought to build. In reviewing challenges from the environmentalists and developers over the Local Coastal Plan approved by the Coastal Commission, the appellate court sided with the environmentalists in every instance. Paul Horgan, attorney for the Land Trust, called the ruling "the most definitive decision concerning wetlands that I've seen from an appellate court." The case marks the first time an appellate court has tackled the issue of building on a portion of a wetlands under the theory that the rest of the wetlands would be spared and improved, he said. The court said the Coastal Act prohibits the trade-off approved by the Coastal Commission. Justice Patricia Benke quoted the trial court decision: " ‘The Commission's interpretation would open the door to any type of development in a wetland whenever a finding could be made that funds were otherwise unavailable to restore degraded wetlands.'" In 1985, Orange County and the Coastal Commission approved a 5,700-unit residential development, a marina, a 600-foot-wide navigable ocean channel, and oceanfront hotels and shops. After outcry from environmentalists, a public-private coalition worked out an LCP that the Coastal Commission approved in 1996. The LCP eliminated the marina and navigable channel, reduced the number of homes to 3,400, and expanded the open space and wetlands restoration to 1,300 acres. By late 1997, the number of homes was scaled down to 1,235 and homes were eliminated from the wetlands. The Bolsa Chica Land Trust sued over the LCP. The land trust argued that replacement of a eucalyptus grove with nesting poles and other trees in a public park was impermissible. The land trust also argued the Commission could not allow residential development of a lowland as a way to finance wetland restoration, and the Commission could not approve elimination of Warner Pond to accommodate Warner Avenue widening. San Diego County Superior Court Judge Judith D. McConnell sided with the land trust regarding the lowland development and Warner Pond, but approved relocation of the bird habitat. Judge McConnell remanded the entire LPC to the Commission for further proceedings. The land trust appealed the bird habitat portion of the ruling, while the Coastal Commission, Koll Real Estate Group and Signal Bolsa Corp. appealed the rulings regarding lowland development and Warner Pond. The unanimous three-judge panel upheld the decision to prevent houses on the lowland area and to prevent destruction of Warner Pond. The appellate court reversed the trial court regarding the bird habitat. The Commission itself identified the 6 1/2-acre eucalyptus grove as an environmentally sensitive habitat area within meaning of the Public Resources Code § 30107.5. At least 11 species of raptors nest in the trees or use them as lookouts. The Coastal Act provides heightened protection to ESHAs, the court ruled. Justice Benke cited Sierra Club v. California Coastal Commission, (1993) 12 Cal.App.4th 602, known as the Pygmy Forest case. "We have found that under both the Coastal Act and CEQA: ‘ "The courts are enjoined to construe the statute liberally in light of its beneficent purposes. The highest priority must be given to environmental consideration in interpreting the statute,"'"Justice Benke wrote. All sides agree the eucalyptus grove is unhealthy, but that does not mean it receives less protection as an ESHA, the court said. Furthermore, the court rejected the argument that transferring habitat values to a different location is allowed under § 30007.5 in this instance. No one proved why preservation of raptor habitat at the existing location is unworkable, the court wrote. As for the wetlands, the Commission allowed residential building in portions because development would fund needed restoration in other degraded portions of the wetlands. The trial court, in interpreting § 30411, disagreed with the Commission's reasoning, as did the appellate court. If the Legislature had intended to permit residential development in wetlands, it would have said so unambiguously, the court ruled. The appellate court said Warner Pond must be protected because roadway expansions into a wetlands "are permitted only when no other alternative exists and the expansion is necessary to maintain existing traffic capacity." In this case, Warner Avenue was being widened to accommodate future traffic, the court said. The ruling will again slow Bolsa Chica development because the Coastal Commission must revise the LCP. However, because the developers have agreed to sell all the wetlands to the state, the ruling may not significantly affect the most-recent development plans. The Case: Bolsa Chica Land Trust v. Superior Court of San Diego County, Nos. D029461, D030270, 99 C.D.O.S. 2821, 1999 Daily Journal D.A.R. 3619, filed April 16, 1999. The Lawyers: For Bolsa Chica Land Trust: Paul Horgan, (213) 622-2717. For California Coastal Commission: Jamee Jordan Patterson, deputy attorney general, (619) 645-2023. For Koll Real Estate Group and Signal Bolsa Corp., Alvin S. Kaufer, Nossaman, Guthner, Knox & Elliott, (213) 612-7800.