The current system of regulating municipal securities, including Mello Roos and Marks Roos bonds, is "inadequate" and "encourages non-compliance", according to a new report a state task force. Noting the alarming rate of defaults among land-based securities, the report recommends creation of a new municipal bond law-enforcement division within the state's department of justice. The findings and recommendations have been praised by both government officials and some industry observers, although at least one prominent bond counsel objected strongly to what he described as the negative portrayal of bond professionals in the report. As if to underscore the urgency of the report, a grand jury in July returned a criminal indictment of the city attorney of the City of Waterford relating to his activities as a bond disclosure counsel in several Marks-Roos deals, while an allegation has been made that $70 million of the city's Marks Roos bonds may be illegal. The "Report of the Interagency Municipal Securities Task Force" was issued by the California Debt and Investment Advisory Commission - the result a two-year investigation conducted by a task force appointed by State Treasurer Matt Fong, in response to the rising rate of defaults on land-based bonds. (The default rate in 1997 for land-based bonds exceeded $200 million, nearly three times the level of the previous year.) According to the report, the default rate for Mello-Roos bonds alone is at least 5%, which is "extremely high relative to the capital market or any sector of the municipal market." The "key question facing state policy makers," the report goes on to say, "is whether the regulatory framework for municipal securities has kept pace with the changes described above and affords adequate protections for investors and issuers. Ill-advised borrowing decisions have already brought certain small communities through the state to the brink of bankruptcy and put at risk the delivery of essential public services." Part of the blame lies with the bond industry, according to the report: "In these cases (of default), municipal bond industry professionals actively promoted fraudulent transactions to earn high fees. In other cases, professionals are opening flaunting both the letter and intent of the law." Among the task force's findings: o The lack of enforcement of state bond laws encourages non-compliance; o The concern that land-based bond defaults may pose serious risks to local agencies who issue them; and o The fact that underwriters and bond traders are targeting "unsophisticated" investors, "through mass advertising, and other techniques, as customers for some of the most speculative municipal securities in the market today," according to the report. The central recommendation of the task-force report is the creation of a Municipal Bond Law Enforcement program to remedy the lack of enforcement of the state's existing municipal-bond laws. Specifically, the task force recommends that the legislature "direct the Department of Justice to initiate a program to review municipal bond offerings, focusing primarily on Marks-Roos bond and other types of debt with a high potential for abuse. Peter W. Schaafsma, executive director of the debt advisory commission, says response so far to the task-force report has been positive. "We have received several letters from investors who like the idea" of a bond law-enforcement program, he said. One government official who said he is "enthusiastic about those recommendations" was Sen. Quentin Kopp, I-San Francisco, a leader in Marks-Roos reform. In May, Governor Pete Wilson signed into a law sponsored by Kopp, SB 147, which requires projects financed by Marks-Roos bonds to be located in the jurisdiction of at least one of the local agencies that are issuing the bonds. (Marks-Roos bonds are issued by joint-powers authorities). The bill was intended to correct a perceived abuse of Marks-Roos bonds, in which of local municipalities using their bonding authority to finance speculative real estate projects that are hundreds of miles away. "I am particularly desirous for a specific unit in the Department of Justice to monitor municipal bond transactions, such as those issued by the Pacific Genesis firm in San Francisco," said Kopp, referring to the bond underwriter that has been associated with several issues that either defaulted or drew on reserves in the cities of Wasco, Waterford, and elsewhere. (Pacific Genesis officials said in interviews that all those defaults have been cured.) He described the practice of issuing Marks-Roos bonds by some cities as an indication of "greed and desperation by local officials." Local agencies are often able to generate a high "administrative fee" for issuing for re-financing the bonds, which is seen as an incentive for those agencies to issue land-based securities. Kopp complained about the practice of underwriters who "pay (cities) a fee to borrow their name" for the purpose of issuing securities, describing it as an "invidious practice." Kopp said that he would be willing to sponsor legislation to create the proposed bond law-enforcement program, but would be unable to do so, because of he will soon leave the Senate under term-limits.. A different response, however, came from some bond lawyers, according to Schaafsma. "I have heard from some of the bond lawyers that they dislike the report, but support the recommendation," he said. One lawyer who was incensed by the report is Roger Davis, who heads the municipal bond practice group in the San Francisco office of Orrick Herrington & Sutcliffe. He criticized the fact that the report suggests there are widespread problems in the issuance of Marks Roos bonds, when in actuality the problems are "all coming from a single firm," which he did not name. He also was critical of the report's correlation of bond failure and a lack of due care by bond professionals. Most of the Mello-Roos defaults, he observed, were the result of the real estate recession of the early 1990s, not substandard underwriting or legal work. The report, he concluded, is "an insult to the entire bond profession." Notwithstanding that rebuke, alleged mishandling of Marks-Roos bonds is creating legal problems for at least one lawyer. Waterford City Attorney William E. Gnass surrendered to a Stanislaus County Judge on July 20 to answer charges of 11 separate violations of the California Government Code. He pled innocent to all charges. Since 1996, the city has issued $76 million in Marks Roos bonds. Gnass was both disclosure counsel and city attorney at the time the deals were executed. In 1996, a Stanislaus County grand jury investigation concluded that Gnass had properly disclosed his dual role at the time of the transactions. Separately, in late June, State Attorney General Dan Lungren issued a formal opinion that nearly $70 million of Marks-Roos bonds issued by the City of San Joaquin in Fresno County are technically illegal, because they were issued by an illegal agency - that is, an agency that does not exist in the eyes of the law. Specifically, Lungren ruled on two questions: (1) Can a joint-powers agency, such as one that issues Marks-Roos bonds, legally consist a city and a non-profit public benefit corporation created by that city? And (2) Can a joint powers agency consisting of those two entities impose development fees on property outside their geographic boundaries, for the purpose of paying off the bonds? Lungren's opinion on both questions was no. About $62 million of the San Joaquin bond proceeds went to finance the River Ranch project in Madera County. Contacts: Roger Davis, partner, Orrick Herrington & Sutcliffe, (415) 392-1122. Peter Schaafsma, executive director, California Debt and Investment Advisory Commission (916) 654-7440. Sen. Quentin Kopp, (916) 445-0503

For twenty years, water planning on the Monterey Peninsula has been in a stalemate, as local voters have turned down proposals to increase the water supply in the region. Now, a bill moving through the legislature may finally bring resolution to the matter - or complicate things further. The bill, AB 1182, by Assemblyman Fred Keeley, D-Santa Cruz, would require a special election to choose between either building a dam on the Carmel River or moving forward with a plan developed by the Public Utilities Commission to develop water resources without building a dam. The original bill - which has since been amended numerous times - would require the election in November 2000, although that date may change in the final bill. While the rest of California enjoys a respite from the drought, water conservation measures are currently in effect in the Monterey area, with outdoor watering limited to two days a week. A local water company is seeking a moratorium on building from the PUC and also approval for a mandatory rationing plan if it's needed. The problem is not a lack of water, but a lack of storage facilities for the water. The Carmel River, which runs through the region, provides three times the amount of water the region needs, according to Fran Farina, former chair of the Monterey Peninsula Water Management District, a special district created by the state in 1978 to manage water issues. But voters turned down the proposed 24,000-acre foot-New Los Padres Dam on the river in November 1995, with 57% casting no votes. They also gave a thumbs down to building a desalination plant in 1993. It was a turnaround from the height of the drought in 1987, when voters in the district had approved an advisory measure to build a dam by a 2-1 ratio, Fuerst said. The district is made up of the cities of Seaside, Sand City, Del Rey Oaks, Pacific Grove, Monterey, Carmel, and unincorporated areas of the peninsula, including Pebble Beach and Carmel Valley. It serves about 115,000 people in an area of 170 square miles. The district planned to finance the dam with bonds and then sell the water to the local water company, California-American Water Company, known as Cal-Am. But after the voters turned down the project and with the passage of Proposition 218, Cal-Am announced that it would build the new dam without public funding. The dam that Cal-Am currently is proposing would hold the same amount of water, but would not set aside 3,400-acre feet for new construction and remodeling as the earlier proposal did. Cal-Am has been scrambling for a secure water supply for several years. In July 1995, the State Water Resources Control Board ruled that Cal-Am did not have valid rights to 70% of the water it delivered to the area. Most of that water is taken from the Carmel River. Cal-Am is currently supposed to use 80% of its previous water allocation, but went over that amount in 1997, and was ordered to pay a fine of approximately $170,000. Two small dams already exist on the river, but both are old. Environmentalists, who oppose the new dam, have proposed dredging the older dams of silt, to create more storage capacity. "It kind of points out how dams don't work," said Gillian Taylor, chair of the local chapter of the Sierra Club. "They silt up." Taylor said other ideas for increasing the water supply are to inject stormwater runoff into an aquifer in Seaside, and to study desalination again. The district is currently in the middle of a pilot project to test the feasibility of using the Seaside aquifer, Fuerst said. Taylor said that dams harm fish runs and are growth-inducing. Cal-Am has promised that its new dam will be used for only drought protection and environmental protection, not for growth, Fuerst said. But Taylor said she doesn't believe that will happen once a supply of water is available. The water district argues that the Keeley bill would usurp local control, and would complicate and delay the Cal-Am dam project, whose supplemental EIR is due in October. The district is the lead agency for CEQA, and would have to review the EIR. If the EIR is approved, it would then be sent to the PUC for final approval. That process is supposed to be completed in the spring of 2000. Farina said the proposed law is about changing "how the game is played." "If they do it to this community, will they do it to your community?" she asked. But Cal Am's proposal to build a dam is something that the PUC ultimately decides, Keeley noted. "That's hardly local control," he said. And Taylor noted that voters opposed the dam in 1995, and Cal Am still resurrected it. "That's about as undemocratic as you can get," she said. In a letter that the district's board sent to the Senate's Local Government Committee in late June, the board also expressed legal concerns. "By not offering the voters a no-project choice, AB 1182 exposes the vote between the Cal-Am and PUC water supply proposals to potential legal challenges," the letter said. But Keeley said with Cal-Am under pressure to procure new water, "doing nothing is not a choice." The assemblyman called the water district "an utter failure," charging that it has spent $40 million over 20 years and "hasn't produced a drop of water." AB 1182 easily passed the full California Assembly in May on a 55-7 vote. Two days after the district voted to oppose the measure, it was approved in the Senate Local Government Committee on a 5-3 vote. The measure was then referred to the Senate Agriculture and Water Committee, where no vote had yet been scheduled in late July. Senator Jim Costa, D-Fresno, is chair of that committee, and voted against the bill when it was before the Local Government Committee. Keeley said in late July that he'd met with Costa three times since the vote, and that the bill continues to be amended. Representatives of local groups ranging from the chamber of commerce to the Sierra Club, have been meeting to try to reach consensus on the bill as well, he said. Taylor said the alternatives that are being proposed by environmentalists would provide solutions if taken as a whole. "You may be able to get 2,000 acre-feet from dredging, " she said. The conventional wisdom on dredging, she said, is that it's too expensive. But it's one of the options that deserves further study, she said. Contacts: Gillian Taylor, Sierra Club, (831) 659-0298. Darby Fuerst, General Manager, Monterey Peninsula Water Management District, (831) 649-4866. Fran Farina, (831) 625-5544. Assemblyman Fred Keeley, (916) 445-8496.

Four years is a long time in most life situations. In four years, a child can learn to walk, talk, and become a social being. A stand of bamboo can grow 20 feet. The governor of California can serve out a complete term, and a pair of flies can generate several billion offspring. But in the glacial pace of planning, four years is the blink of an eye. That's why the completion of the Long Beach Aquarium of the Pacific in the City of Long Beach is such a notable accomplishment. After a public investment of $185 million on construction and other improvements, the aquarium opened in June to large crowds, and is currently accommodating up to 10,000 people a day. The facility created permanent jobs for 200 people. More remarkably, everything seems to have gone according to plan, on time and slightly under budget. Even so, it is uncertain whether how much of the Long Beach experience, if any of it, can be replicated elsewhere. To understand the momentum behind the aquarium, one must first understand Long Beach, which is one of the most pro-growth, self-promoting cities in the state. The city, of course, is home to the nation's busiest harbor (when combined with the neighboring Port of Los Angeles). The city has invested heavily in its downtown area, and promoted a row of high-rise buildings on Ocean Avenue, the city's main street. And the city has tried repeatedly to soften the image of its rough-edged waterfront as a place of trucks, tankers, and broken-nosed sailors. In particular, the city has built (and expanded) a convention center on the water, while attempting to buttress that investment with lukewarm attractions, such as the Queen Mary cruise ship and the now-departed Spruce Goose aircraft display. After being turned down for a Disney theme park in 1992, the city decided in 1994 that it wanted an aquarium on Queensway Bay, and things began to move rapidly at that point. At first, the city courted corporations and at least one entertainment figure to make a private contribution toward the aquarium. A few months later, Kajima USA, the U.S. arm of the Japanese construction giant, arrived on the scene, and the project took a new direction. Kajima had just completed an aquarium in Tampa Bay, Fla., and wanted to do another project. (Kajima is currently pursuing at least three other aquarium projects.) The developer proposed an unorthodox arrangement, which the city eventually accepted: Kajima would build the project as a merchant developer. The executive architect would be Hellmuth Obata Kassabaum, the St. Louis-based firm in which Kajima has a 40% interest. (The San Francisco-based firm of Esherick, Homsey & Davis, designer of the much-admired Monterey Bay Aquarium was the design architect.) The construction would be done by a joint venture of Kajima and Turner Construction of Los Angeles. In other words, Kajima offered the city a "vertically integrated," design-build package. The city signed off on the deal in late 1994 and a 20-month construction schedule started in spring 1995. Motivating the speed, in part, was competition, recalls Paternoster, who pointed out that several communities - including neighboring San Pedro ( the harbor area of the City of Los Angeles), Ventura County and Santa Barbara - were all considering aquariums. (Santa Barbara is moving forward with its project.) To fund the project, the city created a non-profit corporation, known as Aquarium of the Pacific, which issued $117.5 million in tax-free revenue bonds. In addition, the city spent another $14 million in roadway improvements, including a $7.4 million ISTEA "demonstration project", $3.18 in state gas tax revenues, $1.1 million in SB 821 money and about $800,000 from the city's gas and water departments. The city obtained another $40 million from HUD Section 108 economic development loan guarantee. Long Beach used the HUD money to build the Rainbow Harbor and other waterfront improvements, including a 5.4-acre wetlands mitigation. The $13.4 million parking structure was financed by U.S. Economic Development Administration, the U.S. General Services Administration and the aquarium bond proceeds; while a $1.675 million boat launch was paid for by state DBAW funds and a portion of the Tidelands Fund, which is funded by the Port of Long Beach. Even though Long Beach did not put up hard money for the aquarium, the city did help back up the bonds. In the event of a revenue shortfall at the aquarium, the city agreed to make the bond payments from the a portion of the hotel tax revenues that normally go to pay off a $35 million debt to the Long Beach Harbor Commission. To help out, the harbor commission agreed to take second position on the debt. To make the Kajima's lucrative arrangement palatable to the city, the developer agreed to assume interest payments on the bonds, in the event that the construction went over budget. The "carrot," on the other hand, was a promise that any unspent construction money would be split between the aquarium and the developer, 60-40. (There was, in fact, a surplus, which helped pay for landscaping near the aquarium.) Overall, "Kajima came out very well," said Bob Paternoster, the director of the Queensway Bay project, in an interview. The Queensway Bay specific plan calls for waterfront-oriented retail. For a site directly across the street from the aquarium, the city is currently negotiating with a developer to build 500,000 square feet of restaurants and a 16-screen multiplex (we should have seen that coming). City officials hope that the sales tax from the new construction will throw off about $4 million annually in sales tax, possessary-interest tax and ground-lease revenues - enough to offset anticipated $3 million in interest that the city needs to pay on the $40 million Section 108 loan. Given the high interest in aquariums among California communities, a number of California cities are probably watching Long Beach closely. Yet Paternoster suggests that the city's experience in aquarium-building "may not be easily duplicated elsewhere." Long Beach had a number of advantages, including an existing site with supporting uses and a specific plan already in place. In addition, not every city would have been willing to cut such a sweeping deal with a developer, without going through a conventional RFP and multiple-bid process. Still, that unusual move bought Long Beach a lot of time, in terms of process and in construction, and enabled the city to take the lead in the regional aquarium race. Other communities did little more than stare at the drawing board, in the time it took Long Beach to blink its eyes.

The city of San Diego did not prosecute the owner of a sex club maliciously or selectively even though the city made a series of mistakes in granting him zoning approvals and then prosecuting him, the Ninth U.S. Circuit Court of Appeals has ruled. Reversing a district court jury's decision, the three-judge panel concluded that the city did not violate Elbert Poppell's civil rights and that Zoning Administrator Sharren Carr should not be held personally liable because she was acting in a professional capacity and did not act with malice. "This case does no more than describe the complications that arise from our form of government that separates various functions and then requires them to work together as they implement the rule of law," wrote Justice Stephen S. Trott for the unanimous panel. "The meshing of these gears is not always perfect, but the usual play in the criminal justice system does not suggest, without more, malice or foul play on the part of the various actors." The Ninth Circuit ruling is the latest in a long and complicated series of legal maneuvers arising from a dispute between Poppell and the City of San Diego over his sex club, which has operated in various locations in the city. The friction with the city began in 1988, when Carr concluded that Poppell's location on Monroe Street constituted a zoning violation because his club was operating within 1,000 feet of a residential neighborhood. Poppell was criminally prosecuted and placed on three years' probation. In 1990, Poppell moved his club to an industrial zone on Sunrise Street, where he stated - on an application to transfer his business tax certificate - that he would use the location to interview potential club members, not for sexual encounters themselves. Carr inspected the location and erroneously concluded that Poppell's operation conformed to city zoning ordinances. He operated without incident for a year, and later acknowledged that he would not have been able to operate legally without the mistakenly issued business tax certificate. When his landlord sold his building, Poppell moved to a residence on E Street in the same industrial zone and the city again approved the transfer of his business tax certificate based on his earlier misstatement of the nature of his operation. Late in 1991, a residential neighbor on E Street complained to the police and to the Bob Filner, the local city council member, that Poppell's operation was disruptive because a variety of sexual acts were taking place in the vicinity. Filner responded with a letter to the resident assuring her that various departments of the city would work together to develop a plan to close down Poppell's club. Over the next few months, Poppell was the subject of intense interest by city officials. He was cited for a fire-code violation by the fire marshal, and the city police frequently cited club members for parking violations and related small incidents. During this period, the city's code enforcement officials and the city attorney's office concluded that Poppell was violating the zoning ordinance, based on the city's erroneous approval of his business tax certificate transfer when he moved to the Sunrise Street location. After an inspection, Poppell was charged with four criminal zoning violations - two for operating an adult entertainment business within 1,000 feet of a residential zone, and two for operating in an improper zone. He was also accused of 90 building code violations, of which 26 remained at trial. He was convicted of operating in an improper zone, as well as 24 of the building code violations, and acquitted of violating the 1,000-foot rule. (The reason for the acquittal was that the city had miscalculated the distance between his sex club and a residential neighborhood, apparently because of a freeway in between the two.) He was sentenced to six months in jail and three years' probation. Poppell appealed these convictions in California state court. He argued that he should have been able to use the city's erroneous approval of his location as a defense against the charges, but that the trial judge ruled the erroneous approval inadmissible. He lost all of his appeals in California state court, then filed a writ of habeas corpus in federal court. He argued that the lack of admissibility of the erroneous approval had robbed him of his only possible defense. But Judge John Rhoades did not rule that Poppell had to be retried; instead, he simply ruled that the city a limited period to decide whether to retry him. The city declined, and Poppell then filed a federal lawsuit against the city and against Zoning Administrator Carr, claiming both malicious and selective prosecution. Carr moved for judgment as a matter of law based on a claim of qualified immunity because she was functioning in her role as zoning administrator. Judge Rhoades rejected this claim, arguing that if Poppell could prove malicious intent, then she would not have been acting reasonably or in good faith. A federal jury then found that the city had engaged in a systematic attempt to drive Poppell out of business. The city appealed and the Ninth Circuit panel reversed. "Although we have taken great care to respect the prerogatives of the jury, we reverse its decision and hold that there is no substantial evidence ," Trott wrote. "On close examination, Poppell's case against Carr is a case of theories and suppositions without evidentiary support. Speculation was allowed to do duty for probative facts as there was no evidence of malice: Carr merely did what was required of her by virtue of her job." Continued Trott: "in this case, the record contains no direct evidence of malice, and no substantial evidence that the acquittals were the result of anything other than a mistaken calculation of distance having to do with the existence of a freeway between the two relevant points of measurement." Poppell also argued that Filner's letter showed there was a conspiracy to put him out of business, but the Ninth Circuit also nixed that argument, saying that the letter "does not speak of driving Poppell out of business, only of closing his club." On the selective prosecution allegation - which took the form of an equal protection claim - the Ninth Circuit ruled that there was no evidence that any other repeat zoning offenders had been treated differently from Poppell, and in any event concluded: " he class of repeat code violators is not a suspect or a quasi-suspect classification and thus, minimal security is appropriate." The Case: Poppell v. City of San Diego, No. 96-56844, 98 Daily Journal D.A.R. 7587 (July 13, 1998). The Lawyers: For Poppell: Michael R. Marrinan, Adler & Marrinan, (619) xxx-xxxx. For City of San Diego: Michael R. McGuinness, Deputy City Attorney, (xxx) xxx-xxxx.

In this time of widespread prosperity and record consumer confidence, it's hard to swallow the notion that, as a society, we may be on the wrong track. But that's exactly the thesis that a report by the new National Commission on Civic Renewal supports. Sure, crime rates are down from the early 1990s, and school test scores have edged upward from their nadir in the mid-1980s. But a far-reaching statistical evaluation presented in the Commission's recent report "A Nation of Spectators" suggests that as a functional, civil society, America is in serious trouble. The national epidemic of civic ENNUI has begun to alarm some heavy hitters in our cultural landscape. In response, former education secretary William Bennett and a consortium of Washington political and academic intelligentsia formed the commission with the purpose of reinvigorating citizen participation in social institutions. Civic renewalists believe that democracy "is neither a consumer good, nor a spectator sport, but rather the work of citizens engaged in shared civic enterprises." Their mission is critical, and the stakes are high. If unsuccessful in turning around citizenship trends, the renewalists say that our very democracy itself will ultimately fail to live to its promise. The study, taking a cue from the environmental sustainability indicators movement, is dubbed Indicators of National Civic Health, or INCH. It employs statistically weighted data in 12 issue areas to establish trend lines in five categories: political activity, trust in government, membership in social and civic organizations, crime, and family. The measurement targets a 25-year spread of data - enough to track a generation. The Commission acknowledges that there have been isolated improvements in crime, school achievement, and out-of-wedlock birth trends, but warns that the overall inclination for each of the five categories is down, particularly since 1974. The index is calibrated to 100 for the year 1972, and drops to 83 by 1996. The most sustained plunge occurs after 1984, a year marked by Ronald Reagan's re-election. The plunge wasn't interrupted until 1991, a year before the Clinton administration took power. Some indicators show dramatic swings, others moderate gradient changes. The percentage of Americans who trust in government wanes from 54% in 1970 to 25% in 1980, then rebounds. On the other hand, participation in local government exhibits a slow steady decline from 14% of the population in 1974 to 8% in 1994. As with the environmental sustainability indicators projects, the renewalists have designed their database to work as an evolving index to gauge overall improvement or decline in civic health. In the meantime, they will pursue their agenda of support of a range of civic health endeavors. In another insightful parallel with the sustainability movement, the group suggests that government is neither the entire cause nor the entire solution to problems related to civic health. Government has had and will have a role in both. But the solution emphasis lies in the hundreds of things done by millions of people for a sustained period. The commission encourages government toward activities be redirected to supporting and fostering community-based movements. The commission has picked a thornier topic than their environmentally oriented counterparts. In tackling what are fundamentally social and moral issues, they slog bravely into the swamp of special interest, value-loaded politics. Unflinchingly, it recommends national school testing, civic education and participation by youth, restraint in content choices by the entertainment and news media, and a fundamental rethinking by adults about the tradeoffs between personal satisfaction versus the-good-of-the-whole. For urbanists, the focus on civic health may signal a welcome return to the inquiry of sociology, as well as a shift in cultural perspective. This ought to be heartening in our postmodern era, which has directed focus on the physical community, often to the exclusion of social concerns. In "A Nation of Spectators", the commission unflinchingly states that their data-supported decline in civic life is our own fault. Their red-flag report suggests that in this time of unprecedented economic wealth in America, it is important to distinguish consumer satisfaction from civic health. And in a note of particular relevance to planners - who could clearly take a lead in facilitating civic revivalism - renewalists state that citizens need no "special preparation, advanced education, or bureaucratic permits to get involved."

The California Supreme Court has remanded one takings case against the Coastal Commission to the Second District Court of Appeal, in Los Angeles, to be reconsidered in light of the high court's decision in another takings case against the Coastal Commission. In Coastal Commission v. Buckley, No. B081544, the Second District reversed a $2.1 million takings award against the California Coastal Commission, saying that the evidence on the record does not establish that the Commission's actions against a single-family property owner in Malibu constitutes a regulatory taking. The court also ruled that the Coastal Commission did not have jurisdiction over the project because it was located in a single-family zone, meaning jurisdiction lies with the Los Angeles County Regional Planning Commission. (CP&DR Legal Digest, December 1997.) However, in May, the California Supreme Court ruled in a different that a temporary taking did not occur when an erroneous decision by the California Coastal Commission delayed a property owner's plans to build a house in Malibu In Landgate Inc. v. California Coastal Commission, 17 Cal.4th 1006, the Coastal Commission rejected the property owner's argument that a temporary taking should have been found under the temporary taking doctrine contained in the U.S. Supreme Court's ruling in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987). The court ruled in favor of the Coastal Commission by a 4-3 vote. "We conclude that the present case falls squarely into the category of a normal delay rather than a temporary taking," Mosk said in an opinion that was joined by Chief Justice Ronald George and Justices Joyce Kennard and Kathryn Werdegar. (CP&DR, June 1998.)

The City of Murrieta's was wrong to declare 3,500 acres of land blighted in order to create a redevelopment project area, the Fourth District Court of Appeal has ruled. In a lawsuit brought by the Riverside County government, the Fourth District found that the property is not "predominantly urban" nor is "blighted," both of which are required in order to create a redevelopment area. With the exception of 200 acres of vacant county land that was withdrawn, the area in question "has been depicted as a rural and formerly rural area beginning to be developed in spite of some minor deficiencies in the infrastructure. No problems with crime and no significant other problems have been demonstrated," the court said. The appellate court upheld Riverside County Superior Court Judge Stephen Cunnison's ruling that the property was not blighted. The original proposed redevelopment area included some 3,700 acres, 81% of which Murrieta claimed was "urban", Only agricultural and vacant lands were classified as non-urban. However, Judge Cunnison noted that about 600 acres of the land were defined in the city's general plan as rural-residential (2.5-acre minimum lots) and equestrian-residential (0.5-acre minimum lots). Both categories allow livestock and agriculture. Judge Cunnison concluded that this property should not be viewed as urban -thus decreasing the total percentage of land used for urban purposes to about 66%. Even if the 200 acres of vacant land is eliminated, the urban land total is only about 70% of the entire project area. Cunnison ruled that this does not fit the definition of "a predominantly urbanized area" and the appellate court agreed. In affirming Cunnison's interpretation, the appellate court relied heavily on Honey Springs Homeowners Assn. v. Board of Supervisors, 157 Cal.App.3d 1122 (1984). In Honey Springs, the Court of Appeal recognized that the term urban "has no fixed, objective, and easily ascertainable meaning". However, the case laid out a lengthy list of factors to take into consideration, including existing public facilities, on-sight sewage capacity, proximity of employment centers, the size of signs, and other factors. The Honey Springs court also cautioned that urban may not have the same meaning in the different locations. Without laying down a fixed definition of "urban", the court in the Murrieta case said: "Even if we defer to the definitions employed by the City's land use categories, there is a paucity of evidence in the administrative record to support a determination that the project area is predominantly urbanized." The appellate court also affirmed the trial court's ruling that blighted conditions did not exist in the project area. The city's blight report found that 41 of the existing 1,100 structures were identified as unsafe or unhealthy. A smattering of other deficiencies were also found, such as incompatible, nonstandard, and nonconforming uses. The city report also noted that traffic and flooding problems had been exacerbated by the construction of the junction of Interstate 15 and Interstate 215. " fter sifting through the general commentary that describes much of the redevelopment report, we discover there is little substantive material to be gleaned," the court wrote. "Although the report speaks in the statutory language used to define blight, the report offers little concrete evidence of actual conditions of blight." The court also took the city to task for employing the jargon of redevelopment and blight without identifying anything unusual or unique to the project area. For example, the report talked about "functional obsolescence" of buildings - meaning that older buildings tend to be less valuable. But, the court concluded, "the foregoing does not show the existence of blight in the City of Murrieta. The report makes little attempt to describe specific problems caused by older buildings or estimate the cost of repairing those problems." The court also chastised the city for not quantifying the loss of property value due to blight - but, rather, emphasized low retail sales rates and claimed they were a condition of blight. In addition, "The bald claim of inadequate parking is also not supported." The Case: County of Riverside v. City of Murrieta, No. E020294, 98 Daily Journal D.A.R. 7759 (filed Juily 15, 1998). The Lawyers: For Riverside County: George L. Hampton IV, McDermott Will & Emery, (xxx) xxx-xxxx. For City of Murrieta: John R. Harper, Harper & Burns, (xxx) xxx-xxxx.

Reversing a trial judge's ruling, the Second District Court of Appeal has ruled that a development company's lawsuit against its own engineering firm is not a Strategic Lawsuit Against Public Participation - a so-called SLAPP suit - within the meaning of the state anti-SLAPP law. It is one of the few instances in which an attempt to use the state anti-SLAPP law has failed in the appellate courts. SLAPP suits are often filed by developers against citizen groups or others who speak out against their projects. The anti-SLAPP law, Code of Civil Procedure §425.16, permits defendants to file a motion to strike and argue that the alleged SLAPP suit should be dismissed. Since the passage of the anti-SLAPP law some eight years ago, the overwhelming majority of published appellate rulings have upheld the motion to strike. In this case, however, the Second District, Division Six, did not do so. The case involved Penfield & Smith Engineers Inc., and its involvement with two different developers seeking to construct a "big box" retail project in Goleta. Los Carneros Community Associates hired Penfield in the mid-1980s to assist with land-use approvals for a 50-acre project. Penfield employee Michael Caccese managed the project for Los Carneros until January of 1996. Among other duties, he was charged with advocating the project. In 1994, Camino Real LLC hired Penfield to assist in obtaining land-use approvals for another property in Goleta. Beginning in 1995, however, both Camino and Los Carneros sought to obtain approval for construction of a big-box retail project. During that time, Camino's project manager, Mark Linehan, came to the conclusion that Caccese, working for Los Carneros, was criticizing the Camino project publicly. Asked by Linehan to choose between the two developers, Penfield chose to terminate its relationship with Camino and continue working for Los Carneros. Late in 1995, Penfield sought to re-established its relationship with Camino and reassured Camino that it would limit its activities on the Los Carneros project to "those which are appropriate for an engineering company and those that do not involve active opposition to your project." Subsequently, Camino hired Penfield to work on unrelated projects. However, Los Carneros regarded the relationship as a violation of its contract with Penfield and terminated Penfield. Caccese resigned from Penfield but continued to work for Los Carneros through another engineering firm. Los Carneros then sued Penfield, Camino, Linehan and others alleging interference with prospective business advantage, declaratory and injunctive relief and breach of contract. Penfield and Camino filed a motion to strike under the anti-SLAPP law, which was granted by Santa Barbara County Superior Court Judge Bruce Dodds because of the "expansive" nature of the previous court rulings. However, the Second District reversed. "The common thread among the cases is that the statements or acts which formed the gravamen of the plaintiffs' complaints were directly related to a matter of some public interest, and the litigation was designed to stifle a citizen's right to free speech or to extinguish the public's participation in the public process," wrote Justice Arthur Gilbert for a unanimous court. "The alleged acts Los Carneros complains of were not made in furtherance of such rights, but instead may constitute a breach of contract. The legal action here does not take on public significance simply because it bears some relation to proceedings before a government or administrative agency. We do not construe the statute so broadly as to abrogate the law of contracts." Gilbert added: "It is true that SLAPP suits are often pleaded in terms of breach of contract or other valid actions. When presented with a motion to strike a complaint pursuant to section 425.16, a court must consider the active objective of the suit and grant the motion if the true goal is to interfere with and burden the defendant's exercise of his free speech and petition rights. "By the same token, not every lawsuit between parties who appear before legislative or executive bodies on some common issue is a SLAPP suit. To apply the statute here would give immunity to parties contracting to perform services concerning matters before government agencies." The Case: Los Carneros Community Associates Inc. v. Penfield & Smith Engineers, No. B105545, 98 Daily Journal D.A.R. 7232 (filed June 29, 1998). The Lawyers: For Los Carneros: Richard M. Coleman, Coleman & Richards, (xxx) xxx-xxxx. For Penfield & Smith: Samuel J. Muir, Collins, Collins, Muir & Traver, (xxx) xxx-xxxx.

A California appellate court has affirmed that the Sierra Club and other environmentalists did not exhaust their administrative remedies before filing a lawsuit to challenge the San Joaquin County Local Agency Formation Commission's annexation of the Gold Rush City property to Lathrop. However, the appellate court justices said that they consider the rule on which they based their decision "outmoded" and urged the California Legislature or the California Supreme Court to overturn it. Gold Rush City is a large development project proposed on an island in the Sacramento-San Joaquin Delta. In 1996, the San Joaquin County LAFCO approved annexation of the Gold Rush City property to Lathrop and adopted a statement of overriding considerations in certifying the environmental impact report. After the LAFCO action, Eric Parfrey, an environmental consultant who has been critical of the Gold Rush City project, notified the LAFCO that requesting reconsideration and indicating that he would soon submit the required $700 fee. The following day he withdrew the request and then joined with the Sierra Club, the San Joaquin County Farm Bureau, and others in filing a lawsuit challenging the statement of overriding consideration. San Joaquin County Superior Court Judge Bob McNatt dismissed the case, claiming that Parfrey and the other plaintiffs failed to exhaust their administrative remedies because they did not follow through on their motion for reconsideration. The Third District Court of Appeal affirmed McNatt's ruling, relying on a rule first laid down in Alexander v. State Personnel Board, 22 Cal.2d 198 (1943) - even though, the court said, the rule is outmoded. The Alexander rule emerged from a personnel case, in which two fired state employees sought a court hearing, rather than a re-hearing before the State Personnel Board, because they believed the Personnel Board hearing was "irregular". But the California Supreme Court ruled that where a rehearing is permitted under law it is a necessary step in exhausting administrative remedies. Even while following the Alexander rule, the Third District called it "wooden" and pointed to dissents from California Supreme Court justices - including the eminent Roger Traynor - that a permissive rehearing option, rather than a mandatory rehearing requirement, should not trigger a requirement for a rehearing to exhaust administrative remedies. "Justice Traynor notes that in he long run such a rule would avoid unnecessary litigation and impel the Legislature to make the policy decision concerning the requirement of seeking rehearing for each statutory scheme," the Third District wrote, "Not surprisingly, the majority opinion in Alexander has been criticized by commentators." The appellate court rejected, however, the plaintiff's argument that Alexander has already been rendered not binding because it is in conflict with Code of Civil Procedure §1094.6, which has an apparent inconsistency over when the time period for reconsideration ends. The court also rejected the environmentalists' argument that they should be excused from the exhaustion requirement under the futility exception. "An exception that swallows the rule is no exception," the court wrote. In a short concurring opinion, Justice Puglia disagreed with the majority's call for a review of the Alexander rule, which he called "readily understood" and "easy to comply with". Noting that the environmentalists' lawyers were apparently not aware of the Alexander rule, Puglia wrote: "The Supreme Court must have better things to do than to reconsider long established rules simply to accommodate inattentive or parsimonious counsel". The Case: Sierra Club v. San Joaquin LAFCO, No. C027361, 98 Daily Journal D.A.R. 6712 (issued June 19, 1998). The Lawyers: For Sierra Club: Susan Brandt-Hawley, Brandt-Hawley & Zoia, (707) xxx-xxxx. Forf Califia Development Group (real party in interest): Steven A. Herum, Herum, Crabtree, Dyer, Zolezzi & Terpstra, (209) xxx-xxxx.

With the election-year session coming to a close, the California Legislature has not moved aggressively on most issues associated with planning and development. A deal to place a multibillion-dollar school bond on the November ballot may still materialize - and if it does it could repeal or reform the state's long-standing Mira doctrine on school impact fees. A constitutional amendment to permit sales-tax sharing is still moving forward, as it a minor revision of the housing element law and a few other bills. By and large, however, the 1998 legislature has chosen not to tackle major planning and development issues. No major revision of the California Environmental Quality Act or related environmental laws appears to be under way. And several high-profile attempts to change planning and development laws have gone down to defeat, including an effort to bolster the connection between water supplies and land-use planning and an attempt to restrict neighboring cities from raiding each other's "big box" retailers. Meanwhile, cities and counties may still reach agreement on a "revenue neutrality" bill, but the substance of such an agreement has not yet been publicly released. Probably the most interesting battle in Sacramento this year was the attempt by the East Bay Municipal Utilities District and the California Farm Bureau Federation to expand the influence of water agencies over land-use permitting decisions - this time through the actions of local agency formation commissions. In an effort led by East Bay MUD, the legislature passed a bill in 1995 requiring local governments to consult with water purveyors when large residential development projects are proposed. The bill arose out of East Bay MUD's struggle with Contra Costa County over the approval of the 11,000-home Dougherty Valley project, which the East Bay MUD board at the time opposed. The bill was supported by the Farm Bureau because of concerns in the Central Valley that urban developers would provide water to their projects by purchasing farms and/or water rights from farmers. This year, East Bay MUD attempted to broaden the water/land-use connection by sponsoring a bill to place water issues in the middle of the sphere of influence and annexation processes controlled by each county's LAFCO. Assemblyman Mike Sweeney, D-Hayward, who is chair of the Assembly Local Government Committee amended his bill AB 1476 so that it would have required LAFCOs, when acting on all sphere and boundary changes, to determine that sufficient water supplies are available to accommodate the proposed development within those areas. East Bay MUD lobbyist Randy Kanousee said the proposed bill was strongly supported by his board - even though many of the board members were elected with strong building industry sponsorship after the passage of the earlier water/land-use bill. In June, Kanouse aggressively lobbied to move the bill forward at the Senate Local Government Committee, and his efforts even generated editorials in the Sacramento Bee and San Jose Mercury News. However, Sweeney pulled the bill after the building industry weighed in on the issue. Kanouse said he received a telephone call from Secretary of State Bill Jones asking that he lay off. According to Kanouse, the building industry threatened to withdraw support from a potential November water bond if Sweeney's bill moved forward. However, Rex Hime, executive director of the California Business Properties Association, told a somewhat different story about what happened to the Sweeney bill. Hime called the bill East Bay MUD's attempt to get "a second bite of the apple" on the Dougherty Valley project. Him confirmed Kanouse's amendments came in late in the session and violated an agreement made among all the parties to the 1995 law that they would negotiate any future changes. Hime confirmed that the building industry indicated that there would be "serious implications in the water bond negotiations" if the bill moved forward. Richard Lyon of the California Building Industry Association did not go so far as to say the water bond negotiations would have been stalled as a result, but he agreed that it was a "late hit" that represented a breach of lobbying etiquette on Kanouse's part. Here is a rundown of other pending bills of interest: Sales Tax Competition Assemblyman Tom Torlakson, R-Contra Costa County, attempted to make a serious run at reducing competition among neighboring jurisdictions for sales-tax competition with AB 1835, which would have prohibited cities and counties from offering financial inducements to an auto dealer or a "big box" retailer that relocates from one jurisdiction to another within the same market area. Though motivated by an apparent attempt to subsidize a big-box move within his district, Torlakson struggled to find a meaningful approach. He finally limited the bill to auto dealers and retailers of 75,000 square feet or more, and his bill would have required a city or county to identify such businesses when they are subsidizing them and make a finding that the business is not relocating within the same market area. The bill also sought to define a subsidy as an appropriation, a tax incentive, or a "nontax" incentive. The bill passed the Assembly but died on a 4-4 tie in the Senate Local Government Committee. Hime, who was active in opposing the bill, said he was concerned that it might prevent large retailers with several types of retail stores from closing one store (for example, Dayton-Hudson-owned Mervyn's) in one city and opening a different store (for example, Dayton-Hudson-owned Target) in another city with financial incentives. Meanwhile, however, Assemblyman George Runner's constitutional amendment on tax-sharing is still alive. ACA 10 would permit local governments to share tax revenues if voters in the affected cities approved the idea. The bill passed the Assembly on July 10 and is now in the Senate. Housing Elements While Assemblyman Torlakson has not gotten very far on big-box retailers, he is moving forward a little more successfully on housing elements. Torlakson's AB 438 appears likely to pass. It makes only minor revisions in the housing element law, however, leaving more substantive changes for another time. As currently written, the bill makes several minor changes in housing element law, including the following: o 25% of a city's "fair share" of affordable housing can take the form of existing, rehabilitated units, so long as those units meet certain criteria. They must be "substantively" rehabilitated and they must remain affordable for a 20-year period. o Existing market-rate units and federally subsidized units threatened with a loss of federal subsidy can be counted toward "fair share" if certain conditions are met. o At the request of the state's councils of government, which must devise the "fair share" housing numbers, the mathematical formulas calculating "fair share" will be altered to include transportation data - a change that will supposedly make the figures more accurate. Other Bills of Interest o Yet another bill by Torlakson, AB 270, would give LAFCOs more financial and political independence by requiring cities and special districts to bear some of their costs, rather than just counties. LAFCOs are administratively run by counties, which sometimes leads to allegations of bias. The bill has passed the Assembly and is still under consideration by the Senate. o A bill that would have greatly affected local governments' ability to impose exactions has been shelved for the year. AB 2621 (Cardoza), which was sponsored by the California Chamber of Commerce, would have required that exactions be "feasible" and that there be a "reasonable relationship" between exactions and projects. The Senate Local Government Committee staff analysis suggested that the bill might have reversed a long series of exactions cases, including Arnel, Hart/Mira/Murrieta, and perhaps even Associated Homebuilders, a 1970s court case that established the original nexus rules for exactions. o A bill by Assemblyman Kevin Murray, D-Los Angeles, would amend the pedestrian mall law - but it appears to be tied to a roiling development controversy in Westwood. AB 1768 would update the 1960 law to allow cities and counties to take possession of property to be used as a pedestrian mall, if the property is being taken by eminent domain and there is a dispute over the property's value. The bill would make the law conform with other, similar laws, but it is opposed by Westwood activists who oppose a developer who would be able to take advantage of the law if it passed.

Reports on the need for farmlands preservation in the urbanizing Central Valley have become nearly as commonplace as tract homes in Fresno. But when a high-powered group of valley farmers released their own report last month, the reactions indicated that this one might carry more weight than the rest. The California Building Industry Association, sensing the potential loss of a sometime ally in the valley's land-use wars, condemned the report as "alarmist rhetoric". And the head of a environmental coalition seeking to get land-use issues on the next governor's agenda said the report indicated an opportunity 'to get ag support on our side. The significance of the report from the Central Valley Agricultural Task Force was not only what was in it -- calls for farmer-friendly water policies, taxes to pay for the purchase of agricultural easements, coordinated planning policies among valley counties, and the like -- but who issued it: a coalition of farm groups that represent most of the valley's 40,000 farmers. The report marked the first time the industry formally acknowledged the spread of urban development as a serious economic threat. It did so with the kind of strong rhetoric heretofore embraced mainly by environmentalists. "We find that the country's most productive food factory is jeopardy, said Jack Pandol, a Bakersfield grape-grower and former undersecretary at the California Environmental Protection Agency, who chaired the task force. "Acre by acre, it is being paved over by sprawling, poor, wasteful patterns of urban growth and development ....We need to recognize that as a nation and as a state that we have a problem we can no longer afford to overlook." The task force was formed in response to growth rates in the Central Valley that in many places are outpacing coastal counties in Southern California and the Bay Area. Pandol and co-chair Mike Chrisman, a Tulare County rancher and former deputy secretary of the state Resources Agency, secured the endorsement of nearly every major trade group in the state, including the California Farm Bureau Federation. Pandol called the 10-point plan a starting point for the development of more ag-sensitive planning policies in the valley and said task force members plan to meet with Republican Dan Lungren and Democrat Gray Davis in an attempt to make the issue part of the debate in the fall campaign for governor. "It bodes well for what we on the environmental side are hoping -- that next year, with a new governor, we are going to turn some attention to growth-related problems," said Gary Patton, general counsel for the Planning and Conservation League. "It is a very encouraging sign that Central Valley ag interests are now understanding that they need to cooperate with others to save farmland." Patton chairs the California Futures Network, a coalition of environmental and other groups that hopes to present a set of farmland-protection policies early next year to the new governor and legislature. For all its rhetoric about the need for policies that promote concentrated urban development, the report falls well short of calling for mandates such as rigid urban-limit lines or the creation of regional planning authorities to implement those goals. The task force's reliance on voluntary implementation measures, said Patton, shows that the agriculture industry is not yet willing to let go of its historic distrust of government regulation.' From the other side, the report was criticized by Robert Rivinius, chief executive of the California Building Industry Association, as a self-interested plan to protect an industry whose statewide production grew 60% in volume and 369% in value since 1967. Rivinius was particularly critical of the report's suggestion that fees be levied on new development to pay for the purchase of agricultural easements. He called it a tax designed to protect big agriculture that would lead to economic devastation in the valley, where unemployment rates are the highest in the state. The report acknowledges that the farming industry remains divided on land-use policy. Indeed, it notes in its introduction, The agricultural community often plays both sides of the issue, wanting protection from the problems associated with farming next to urban areas while also encouraging growth into productive agricultural areas by making land readily available for development (i.e., selling ... when the price is right). Whatever its shortcomings -- criticisms from both sides tend to characterize the report's prescriptions as all-take, but no-give from farmers -- the mere acknowledgment that policies to preserve farmland are in farmers' best interests represents a historic breakthrough, said Eric Vink, California field director for the American Farmland Trust.' "When I think back to where the agriculture industry was three years ago," said Vink, "this is a whole new universe." The task force's recommendations included the following: o Habitat: When requiring developers to mitigate the loss of habitat to development, cities should direct the mitigation to areas other than farmlands. o Buffers: When urban development occurs at the outskirts of a city, the party responsible for making the change in land use should be required to provide a buffer between the new urban edge and adjacent farmland. o Williamson Act: A companion program should be established with contracts of 20 to 30 years, rather than 10; the report also recommends unspecified "greater incentives" for farmlands conservation. o Taxes: The state should provide income tax credits equal to the value of the easement when a farmer donates an agricultural conservation easement; land under agricultural easements should be exempt from federal estate taxes and subject to reduced capital gains taxes when sold. o Fees: When farmland is converted to urban uses, a land conversion assessment should be levied on developers, with the revenue to be placed in a fund for the purchase of agricultural conservation easements. o Local government financing: ERAF property tax funds should be returned to local government; revenue-sharing agreements should be entered into among cities and counties to reduce competition for sales-tax generators. o CEQA: EIRs should be required to address "the long-term cumulative social impact" of taking farmland out of production. o Density: The Cortese-Knox Act should be amended to require LAFCOs to allow annexations only if cities have attained a specificied average residential density within city limits. Copies of the report can be ordered from the California Farm Bureau Federation at (916) 561-5677. Contacts: Jack Pandol, (805) 397-2150. Mike Chrisman, (209) 685-3213.

A proposal to build a high school on farmland under Williamson Act protection has set off fireworks between local farmers and the school district in San Luis Obispo County. "This is the first time that we have seen such a controversy" over a public benefit acquisition of Williamson Act land, said Will Dale, staff attorney for the state Department of Conservation. Notwithstanding, the furor may presage similar conflicts as the agendas of farmland preservation and school construction crash head on in the rapidly developing Central Coastal area, according to Robert Corley, a Ventura-based school facilities consultant. The 1965 Williamson Act allows public agencies to acquire protected farmland to build public-benefit projects. (The act allows cancellations for three reasons: non-renewal of the contract, public acquisition and cancellation.) Parties that acquire land for public acquisition must demonstrate that no other land was suitable for the intended purpose, whether that land would be used as a nature preserve or as a recycling center, to cite two recent examples of public acquisition in San Luis Obispo County. Driving the controversy is the need for a new high school in the Nipomo area. Currently, the area is served by the 20-year-old Arroyo Grande High School in the neighboring City of Arroyo Grande; current enrollment at the high school is nearly double the building's capacity of 1,500 students. In March 1997, district voters approved a $24 million school bond, most of which was earmarked for a new high school. Shortly after, a public committee spent eight months evaluating sites in the Nipomo area for a new high school. In October of the same year, the committee chose 77 acres amid farmland owned by the Dana family, which has owned the land since the 19th century. Non-farmland sites were also considered by the committee, but were rejected because they were located in a flood plain or lacked infrastructure, or were habitat for oak trees and native plants, according to Sandy Davis, assistant superintendent of Lucia Mar Unified. In contrast, the proposed school site was flat and easily built upon, above the flood plain, and served by water and sewage lines. Early on, the site seemed uncontested. "We were so excited because the community had really been in support of the site," Davis said. In November, county planners told the school district that state officials would approve the public-benefit acquisition because the land was not prime farmland, the most zealously protected classification. County planners determined the land was not prime, because the Williamson Act follows federal guidelines for classifying farmland, and one guideline is irrigation. The Dana site is not irrigated. Despite that inconsistency, the site has been classified as prime farmland since 1972, and has been receiving subventions of $5 per acre annually from the state. (Non-prime land receives only $1 per acre.) The determination of prime vs. non-prime might be a purely bureaucratic one, except for the strong emotions that the proposed school has provoked among neighboring farmers and agri-businesses, including the C&M Nursery, which leases land from the Danas. That owners of that nursery, Mark Moore and Michael Cavaletto, have drawn a line in the loam by hiring the director of a private engineering and planning firm, John L. Wallace & Associates, to argue their case. On May 11, the nursery owners appeared to win an important policy battle, when the county's Agricultural Preserve Review Committee, which voted unanimously to oppose the site. County officials then concluded that the deciding factor in school construction is whether or not the land is truly prime farmland, and asked the state Department of Conservation for an opinion. In a July letter, staff attorney Dale Will surprised some observers by saying that the land was indeed prime, despite the lack of irrigation, because the soil quality suggested that the land could potentially be high-yielding farmland. In the same letter, Will also said the final decision lay with the county. "For years, the county has been taking the position that the soil qualifies as prime," said Dale in a July interview. "Then comes in the school district to build a high school on the same land, and now it's not prime after all. Our perspective is that we rely on the county to be the lead agency on their subventions." Would that mean that the county is not enforcing the Williamson Act? Non necessarily, said Dale. The state act, he argued, "is not intended to protect existing operations so much as to protect the land source from conversion to other (non-agricultural) uses." Another possible argument, then, is that "whether the land is irrigated or not irrigated is not dispositive, if the land itself qualifies for this Class 1 or 2 rating, assuming irrigation." In other words, there seems to be a gray area between land that is prime, because it is being irrigated, or potentially prime but requiring irrigation. Lucia Mar Unified's Davis said she is surprised and disappointed by the controversy, and noted that Arroyo Grande high school was built in a similar way, and remains surrounded amicably by farming on three sides. "We had hoped we could have that same relationship with Nipomo. We were sorry about that," she said. Dale said he had received a letter from the San Luis Obispo County Board of Supervisors saying that the board does not view the site as a good one for the high school, but requested further information on the issue of prime vs. non-prime land. "I guess we will be responding to that letter," Dale said. Davis acknowledged that the school district knows it does not have the support of the county supervisors, but continues to complete the draft EIR. If built, the new school would open in 2003 with 800 students. Contacts: Robert Corley, school-facilities consultant, (805) 658-2995. Sandy Davis, business administrator, Lucia Mar United School District, (805) xxx-xxxx. Will Dale, staff attorney, Department of Conservation,