Home prices are flattening out. Interest rates are going up. Foreclosures are at their highest rate in years. The real estate boom is clearly over. But does that mean California’s high-density/infill/mixed-use boom is over as well? You would think so. But, in fact, the rush to infill in California depends not just on the overall real estate market, but on two aspects of that market. The first is condo prices. And the second is the condition of the market in two particular parts of the state – the southern half of the Bay Area and the coastal portions of Southern California. A decade ago, the kind of mixed-use and infill development we are seeing in California today was hardly imaginable. California still seemed like a suburban state, where everybody preferred a single-family house with a big backyard. When we saw higher-density housing development, it tended to be townhouses, often in suburban settings. Accustomed to thinking about real estate markets in a segmented fashion – residential, retail, office – lenders did not want to touch mixed use. The market was slow, and although home prices seemed high at the time – about $200,000 on average – they were not nearly high enough to support the cost of buying land and going through the entitlement hassle in an urban area. That is why Los Angeles County saw only one new housing unit for every 10 additional residents during the 1990s. All that has changed during the last five years. Partly because of traffic congestion, urban living is more popular. Lenders have gotten their brains around mixed use, and a whole new generation of developers specializing in infill has emerged. But the most important factor in making infill work in California is a market factor – the dramatic drop in interest rates and the commensurate rise in home prices – especially the demand for condos, which, as it turns out, are the key to infill. Condominium markets were traditionally thought of as “soft.” Nobody would buy a condo if they could afford a house. But almost overnight, the price of a classic suburban house built for a typical middle-class family jumped to three-quarters of a million dollars. Suddenly, a half-million-dollar condo didn’t seem like such a bad deal. Not only did young and/or childless households go condo, so did retirees and lots of investors who thought they could make a killing on appreciation. Suddenly, a condo developer could outbid anybody else for land and still turn a tidy profit. But the rise in interest rates has turned this whole situation upside down. Mortgage interest rates have gone up one percentage point during the last year – from an average of around 5% to an average of around 6%. That means a family with a household income of $100,000 has seen its mortgage-buying power drop from $447,000 to $400,000. If rates go up another point over the next year – as many expect – that buying power will drop even more, to $360,000. When interest rates go up, homebuyers can’t afford as much house, which means developers have to lower their prices – and often that means projects will no longer “pencil.” So begins a slowdown in development until something changes – interest rates go down again, or incomes go up, or recalcitrant landowners begin to lower expectations about how much their land is worth. None of that is happening in California yet. But it doesn’t really matter what is happening in California generally. As far as infill goes, what matters is the trend in certain expensive urban areas. Despite all the hype about infill, high-density housing development has been extremely concentrated in seven counties — the four counties ringing San Francisco Bay (San Francisco, San Mateo, Santa Clara, and Alameda) and the three counties along the Southern California coast (Los Angeles, Orange, and San Diego). Everybody else has been building single-family homes almost exclusively. According to the latest figures from the Department of Finance Demographic Research Unit, these seven counties accounted for 40% of the population growth in the state from 2000 to 2005 (about 1.4 million people), but only about 30% of housing production (about 300,000 units). Most striking, however, is the way that the newly constructed housing supply in these seven counties is diverging from the rest of the state. From 2000 to 2005, only 44% of new housing units in these seven dense counties were single-family homes, whereas 50% of new units were condos and apartments of five units or more. For the other 51 counties combined, 80% of new housing units were single-family homes, while only 13% were condos and apartments. Almost as many single-family homes were built in Riverside County alone (119,000) as were built in the seven dense counties (133,000). Meanwhile, almost two-thirds of all condos and apartments built in the entire state were built in the seven dense counties. This is a big change from the 1990s, when the pattern was much more even across the state. So the critical question for infill is not what happens to the real estate market statewide, but what happens to the condo market in these two dense and expensive parts of the state. Although interest rates do not vary much from one part of the state to the other, demand and prices do vary – and the early results are not encouraging. In June, San Diego experienced its first year-over-year drop in prices in a decade. And while all prices were down by only 1%, condo prices were down 5%, rekindling fears that the condo market will be softer than the single-family market and, therefore, prices will drop faster. In the short run, there appears to be little doubt that condo construction will slow – and so will infill development that is highly dependent on condos to pencil. But the countervailing trend may be in rental apartments. Rents have been stagnant for a long time – anybody who could afford an expensive apartment could also afford a house – but with interest rates pushing houses beyond people’s reach, rents are going up too. Apartments haven’t been penciling for anybody lately, but it is possible that if rents increase, apartments will prop up the infill market in the short run. Then there’s the long run. It looks good for infill, especially in the seven dense counties. The trend toward more urban living in these counties is clearly permanent, so now it is a matter of numbers, not a matter of demand. No matter what anybody thinks about whether condo prices are high enough to make projects pencil today, they are still three times what they were a decade ago. While prices might drop a little, they are unlikely to drop a lot. Whenever interest rates come down – or landowners drop their prices – condos will serve as the cornerstone of infill development once again.

With the August 31 deadline for legislative action looming, state lawmakers face the usual mountain of bills during the session’s final weeks. Among the land use bills in that mountain are two major flood control measures, the biggest overhaul of redevelopment law since the early 1990s and a complicated housing bill that cities strongly oppose. Nearly as interesting are the bills that appear to have failed, including a builder-friendly housing bill that had the administration’s backing and another measure that would have further reduced local regulation of second dwelling units. Still, “gut and amend” is a popular bill-writing strategy during the final weeks of a two-year session, meaning that no proposal is dead until lawmakers start heading for the airport. The redevelopment reforms are contained in a cluster of bills: SB 53, SB 1206 and SB 1650 , all by Sen. Christine Kehoe (D-San Diego), and SB 1210 (Torlakson). The centerpiece bill, SB 1206 tightens the legal definition of “blight,” gives opponents more time to challenge redevelopment decisions, and makes it easier for the attorney general’s office to intervene in redevelopment controversies. Redevelopment agencies oppose the bill, arguing that the blight finding requirements for project extensions are unreasonable. The other three bills all deal directly with eminent domain. Senate Bill 53 requires redevelopment agencies to specify how, when and where they will use eminent domain, and requires agencies to make new blight findings before extending the time period for eminent domain authority. Similarly, SB 1210 requires renewed blight findings before an agency may extend its eminent domain authority. The bill also adds some property owner protections to eminent domain actions. Finally, SB 1650 requires a two-thirds vote of the governing body to change the original designated public use of a condemned property. Lawmakers have already sent the governor two other redevelopment bills: AB 782 (Mullin) eliminates the existence of antiquated subdivisions as a means of determining blight, while AB 1893 (Salinas) confirms that redevelopment money may not be spent on city halls or county administration buildings. While numerous flood bills have stalled this session, Assemblywoman Lois Wolk (D-Davis) is carrying the two major flood bills that remain alive, AB 802 and AB 1899 . The bills alter both long-range and project-specific planning practices. Criticism of AB 802 is muted, but AB 1899 faces fierce opposition from the building industry, landowners, the California Chamber of Commerce and local governments. The California Chapter of the American Planning Association also is opposed. Assembly Bill 802 requires cities and counties to revise their general plans to identify flood hazard zones and establish policies to minimize risk for new development; identify existing and planned development in flood zones; identify areas subject to inundation if levees fail; specify essential infrastructure at risk of flooding; and adopt policies to protect against flooding. Assembly Bill 1899 prohibits cities and counties from approving subdivisions unless the state Board of Reclamation determines the project site has 100-year flood protection, and the local government or the state board determines the site has or will soon have 200-year flood protection. The bill’s provisions apply only to the Central Valley and they exempt infill projects in urbanized areas. The year’s biggest housing bill may be AB 2511 (Jones), which is sponsored by affordable housing groups and the California Association of Realtors. The bill permits courts to intervene if a city or county does not file an annual general plan progress report with the Department of Housing and Community Development; strengthens a law against downzoning residential land; reduces from 180 days to 90 days after completion of environmental review the time local government has to decide on affordable housing projects; and deletes the “granny flat” age provisions in state law regarding second units. A different Jones bill, AB 2922 , that sought to boost the amount of redevelopment tax increment dedicated to housing has been substantially amended and now addresses only agencies’ administrative costs and the rights of low-income residents. The California Building Industry Association housing bill that died before summer recess is SB 1800 (Ducheny). The measure would have required cities and counties to identify 20-year land supplies for new housing, permitted more by-right housing development, and decreased environmental review and public hearing requirements for projects that conform with a general plan. The bill’s language was introduced late, and the legislation never gained traction, even though it had administration support. Other land use bills of interest: • AB 1387 (Jones) increases California Environmental Quality Act exemptions for urban infill projects of up to 100 housing units. • AB 1766 (Dymally) allows all enterprise zones to extend their life spans by 25 years. • AB 1881 (Laird) requires cities and counties to adopt the State Department of Water Resources’ model ordinance for water efficient landscaping. • AB 2158 (Evans) requires regional housing needs assessments to consider local agency formation commission growth policies. • AB 2295 (Arambula) makes local road rehabilitation projects eligible for money through the State Transportation Improvement Plan. Counties strongly support. • AB 2610 (Keene) extends immunity for hazardous substance cleanup to anyone who acquires property from a redevelopment agency if the agency is immune from liability. • AB 2634 (Lieber) requires housing elements to provide for “extremely low-income” households that have incomes of 30% of median. • AB 3042 (Evans) establishes a procedure for cities and counties to transfer shares of regional housing needs. • AB 2762 (Levine) lets 16 Indian tribes join the Southern California Association of Governments. • SB 1432 (Lowenthal) overhauls Mello-Roos community financing law. Among other things, the bill would permit use of Mello-Roos bonds for affordable housing projects, and for services such as street lighting and maintenance, graffiti removal and snow plowing. • SB 1532 (Alarcon) requires preparation of economic impact reports for proposed retail stores of at least 75,000 square feet. • SB 1627 (Kehoe) requires local governments to approve ministerially the placement of telecommunications antennas in most instances.

I don’t agree with the saying that laws are made to be broken. That is the attitude of criminals. I believe, rather, that laws are elastic. Like the fan belts in cars, they are made be stretched until they snap. (You know the sound: Snap! Whaff, whaff, whaff….) One law currently being stretched out of recognition is the Indian Gaming Regulatory Act of 1988. If we were looking for a spot where the federal statute is wearing thin, one place we could find it would be Barstow, a city in San Bernardino County best known for being a pit stop on the way to Las Vegas. The cause of the stress is the questionable practice known as reservation shopping. Two tribes proposing side-by-side casinos in Barstow are not local. One tribe, the Los Coyotes Band of Mission Indians, hails from San Diego County, 150 miles to the south. The other, the Big Lagoon Rancheria, lives near the coastal redwoods of Humboldt County, 700 miles to the north. (“Better think about replacing that fan belt,” says a gas station attendant in my imagination. “I can smell burning rubber.”) The proposed Barstow casinos are an example of reservation shopping. This practice consists of an Indian tribe attempting to build a casino on land that is not on the tribe’s reservation, and to which the tribe has tenuous or no ancestral ties. In some cases, tribes (and their well-heeled, non-Indian business partners) are shopping for choice casino sites across state lines, or near major cities and freeways. The federal statute restricts Indian casinos to tribal lands with few exceptions. In addition, California voters approved both Proposition 5 in 1998 and Proposition 1A in 2000 partly on the assurance of tribal leaders that casinos would be built on tribal lands only. “The people of California did not intend for tribes to establish casinos hundreds of miles from their ancestral lands or off their existing reservation lands,” wrote Leslie Lohse, a member of the Paskenta Band of Nomlaki Indians in a July 18 op-ed piece in the San Francisco Chronicle. The Barstow case, though, is vexing because both tribes have compelling reasons for wanting to build casinos outside their ancestral lands. The San Diego County tribe occupies an arid, mountainous area that is difficult to reach. The Humboldt County tribe, which consists of only 22 people, is currently suing the State of California to allow the tribe to build a gambling hall amid the near-pristine coastal wilderness, even though the coastal redwood forest is no place for a casino. Gov. Schwarzenegger’s office last year negotiated a deal with both tribes permitting each to build a casino in Barstow as a compromise. A Detroit outfit known as BarWest Gaming, which is linked to the family that owns the Little Caesar pizza chain, is the investor behind both proposals. Barstow is particularly attractive to some gambling promoters because the city is a milestone on Interstate 15, the route to Las Vegas from Southern California. The rationale seems to be that if you can peel gamblers off the road just across the state line, you should be able to snag a few in Barstow, too. The City Council, which has worked out its own agreements with the tribes, is all for it. The origins of this deal seemed reasonable enough. Earlier in the decade, BarWest cut a casino deal with the Chemehuevis band, which is native to San Bernardino County. For some reason, however, Gov. Schwarzenegger did not accede to the tribe’s request for a state compact that would allow the casino to go forward. Seeking to discourage the practice of reservation shopping in Barstow, former mayor Manuel “Gil” Gurule drafted a ballot initiative for the June 2006 municipal election. The measure would have given preference to the Chemehuevis and other local tribes in local approval of casino construction. In addition, the initiative would have created a 600-acre casino district outside of downtown Barstow as a means to limit gambling to one area of town. Barstow voters rejected an Indian card hall in 1992, but they voted down Gurule’s Measure H by a 4-to-1 ratio. BarWest and its allies, including a number of casino-owning Indian tribes in Southern California, spent heavily to defeat the measure. Gurule said he wonders whether local voters actually understood the measure. Many voters, he contended, rejected his initiative because they believed it promoted Indian casinos, whereas his aim was to protect the interests of the Chemehuevis. Beating the initiative, however, does not seem to have given much momentum to the BarWest proposal. Early in July, the Assembly Government Operations Committee, which oversees Indian gambling, voted 7-2 to reject the pact worked out by the governor. A number of Indian tribes testified against the proposal, saying that the agreement, which includes requirements of union hiring and generous revenue cuts for the state of $190 million over 20 years, would set a ruinous precedent. Committee members seemed troubled that the reservation-shopping deal would violate the terms of Proposition 1A. (At this point, I can hear my wife saying, “Honey, don’t you think we should replace that belt? The man at the gas station said it was about to break.”) Skeptics, including the editorial board of the Sacramento Bee, think the real issue for tribal leaders is competition. (One of the tribal leaders who testified against the Barstow casino was Richard Milano, leader of the Cahuilla Band of Agua Caliente Indians in Palm Springs. He recently apologized to fellow Indians for contributing $10 million to Jack Abramoff, the disgraced Washington lobbyist who had a talent for siphoning money from tribes grown affluent from gaming.) Hopefully, state lawmakers will be able to hold off BarWest long enough for Arizona Sen. John McCain to introduce amendments to the Indian Gaming Regulatory Act that would outlaw off-reservation gambling. The idea of a casino near Humboldt Bay is so repellent, however, that finding another compromise site is the probably a better idea. That said, the federal statue is clearly having negative impacts on California, which has at least 61 Indian casinos existing or on the way, far more than any other state. If every Indian tribe has the right to build a casino, must every tribe, indeed, build one? It’s time (snap! Whaff! Whaff! Whaff!) to repair the Indian Regulatory Gaming Act.

The regional housing wars have begun again in Southern California. And how they come out will go a long way toward determining how much influence the state’s four major “blueprint” regional planning efforts will have over local development patterns – especially infill housing – during the next few years. In July, the Regional Council of the Southern California Association of Governments, SCAG’s governing body, spent several hours debating the agency’s proposed pilot Regional Housing Needs Assessment program. The guts of SCAG’s proposal would involve a controversial merger of regional housing and transportation plans and a new set of regional incentives encouraging the locals to follow SCAG’s “2% Strategy” – the infill-oriented growth vision that resulted from the regional “Compass” project. In the end, the Regional Council agreed to back the pilot program, sending it on to Sacramento for further consideration. But many local governments in the SCAG region still appear to be wary of the idea, fearing it will lead in the direction of mandating implementation of the 2% approach. (Full disclosure: My firm, Solimar, has worked under several SCAG contracts oriented toward implementing the 2% Strategy.) How the SCAG pilot program works out is an important bellwether for regional planning in the state. All four major metropolitan regions – the Bay Area, Sacramento, San Diego, and SCAG – have conducted regional “blueprint” projects that have resulted in a regional consensus to pursue an infill-oriented, high-density, “smart growth” approach. Now it is crunch time. Local governments must decide whether to follow through and implement the blueprints, which are especially controversial in the area of housing. The SCAG region is the state’s “big kahuna” for infill – and for controversy over the state-mandated Regional Housing Needs Assessment program, or RHNA. The implementation phase at SCAG, as elsewhere, emphasizes the tension between “smart growth” philosophy – which generally emphasizes the quality of places and projects – and both state and federal housing and transportation planning practices, which focus on the numbers. SCAG has long been known for bruising RHNA battles, partly because – with six counties and 180 cities – it is by far the largest regional planning agency in the nation. The last RHNA period was supposed to cover 1998-2005, though, because of internal disputes and lawsuits, SCAG did not complete the process until a settlement agreement was signed in 2004. Frankly, it has always amazed me how seriously local governments within SCAG and elsewhere take the RHNA and housing element process, considering the long odds of something bad happening if they ignore it. If a city does not have a housing element certified by the state Department of Housing and Community Development, the city can’t qualify for affordable housing grants and loans. That is hardly punishment for a community that does not want affordable housing to begin with. The city also is theoretically vulnerable to a judge’s decision to strip the jurisdiction’s ability to issue permits – but this happens very rarely in real life. But for many local governments, there’s just something offensive about the idea that the state – or a regional planning agency such as SCAG – can tell them how much housing they must plan for and how they must zone their land. It pushes their buttons. The proposed pilot RHNA program from SCAG pushed all kinds of local government buttons. For one thing – in keeping with the agenda of outgoing Business, Transportation, and Housing Secretary Sunne Wright McPeak’s approach – the pilot project calls for every jurisdiction to identify a 20-year supply of land and rezone enough land for 10 years of needed housing. But what appears to make the locals most nervous is the ways in which the pilot program would link the RHNA to implementation of the 2% Strategy. To see what is going on here, it’s important to understand that SCAG is trying to mesh three different “moving targets”: • The RHNA, which is a top-down, state-driven process requiring local governments to plan for housing based on state demographic forecasts. • The Regional Transportation Plan, or RTP – SCAG’s main responsibility under federal law – which is supposed to map out the solution to traffic problems created by current and future development patterns. • The 2% Strategy, an infill-oriented approach that will form part of the basis for the RTP but is strictly voluntary for local governments, according to SCAG. Combining all three is elegant in theory. Not only do the RTP and the RHNA operate under different philosophical approaches to growth forecasts, they also operate under different timelines (2007-2010 and 2008-2014, respectively). By merging these two processes – and bumping the RHNA for two years in the process – SCAG and its member local governments could operate off of only one growth forecast, not two. (The way the system is supposed to work, SCAG’s growth forecast would be created for transportation purposes, then amended based on a variety of local constraints – sewer and water capacity, open space, agricultural preservation – that are currently contained in state law.) To the extent that this doesn’t line up with the 2% Strategy, SCAG could encourage locals to do more infill – and maybe even encourage some locales to take more than their RHNA numbers – by providing infrastructure funds and regulatory relief that wouldn’t otherwise be available. Elegant in theory. Even though the Regional Council approved the pilot program, it is clear from the formal comments made by cities and counties that many locals are wary because they fear the pilot program will be a way to impose 2%-style higher densities on them. In its responses, SCAG stuck consistently to the line that the RHNA is a consensus process and 2% implementation is voluntary. As a result, SCAG has had to finesse the question of whether the 2% Strategy is designed to deliver numerical results. As the SCAG staff wrote in response to one comment from a city: “The Compass program will always be voluntary, however, the Compass is not about the ‘number,’ rather it is a series of policy instruments built upon incentives tie (sic) to performance (i.e., beyond and above local inputs) and tie (sic) to well-delineated 2% opportunity areas.” SCAG’s further comments suggest that the agency simply hopes that by adopting such policy instruments “the distribution could be realized by the end of the planning period.” And therein lies the rub. It’s not about numbers to use so much as it’s about to use numbers at all. In the pursuit of smart growth, all of us – not just SCAG — are straddling. Smart growth advocates – myself included – often argue that focusing on numbers is a divisive enterprise, and instead we should focus on the quality and pattern of urban development. But we’re still stuck with the numbers-oriented state housing law, as well as the numbers-oriented federal law requiring the RTP. To some extent, the smart growthers are operating on faith, hoping that people will like the on-the-ground results enough that, in the end, they will accept higher numbers. Almost inevitably, the jurisdictions in question here are the older suburbs in the San Gabriel Valley, the South Bay, and southern Los Angeles and northern Orange Counties. Yet many of these same cities are the ones most resistant to growth and to SCAG, whereas most new development still occurs in the Inland Empire and the Antelope Valley. It remains to be seen whether faith is any match for hard numbers.

An environmental impact report for one of the first Wal-Mart supercenters approved in California has been upheld by the Sixth District Court of Appeal. The court ruled that the City of Gilroy did not have to prepare a new economic analysis in the supercenter’s environmental impact report because previous studies were adequate. The court upheld the city’s reliance on a 1992 economic study and a 1993 EIR prepared for a 174-acre annexation and general plan amendment that included Wal-Mart’s eventual supercenter location. Those reports said that the annexation and proposed retail complex would have only a minor impact on Gilroy’s central business district. “ espite the city’s refusal to commission further studies, the City Council had a fully developed picture of the economic impacts of the supercenter project,” the court ruled. “The whole record provides substantial evidence that urban decay was adequately considered in connection with the supercenter.” Amitabh Barthakur, a senior associate with Economic Research Associates who works on studies to determine projects’ potential to cause urban decay, said, “The court didn’t really care about the means by which the urban decay impact potential was substantiated. The EIR built on previous economic studies and EIRs that had looked into similar issues.” Barthakur, who was not involved in the Gilroy project, pointed to the court’s conclusion that “additional formal studies would not add information not already available to the City Council.” The fight over the Wal-Mart Supercenter in Gilroy was a familiar one. Union grocery clerks and small business owners complained about Wal-Mart’s business practices and contended that the 220,000-square-foot store would cost the town better-paying jobs and locally owned business. Wal-Mart has had a store in Gilroy since the early 1990s, but the proposed supercenter was an issue in the 2003 City Council campaign. Wal-Mart supporters won and, in 2004, the City Council approved the project on a 5-2 vote. The supercenter, which has been in operation for nearly a year, replaced a 120,000-square-foot Wal-Mart that did not carry groceries. After the council approved the project, a group composed primarily of unionized grocery store workers called Gilroy Citizens for Responsible Planning sued, alleging a number of deficiencies in the EIR. A trial court judge upheld the EIR, as did a three-judge panel of the Sixth District. How local governments should address the potential for big-box stores to cause urban decay has become an issue during the last few years while Wal-Mart opponents have fought to prevent the company from building supercenters. In , 124 Cal.App.4th 1184 (2004), the court rejected two environmental impact reports for two planned supercenters because the city failed to address the potential for the projects to cause urban decay or consider the combined impacts of the two closely situated stores (see , January 2005). But in , 130 Cal.App.4th 1173 (2005), the court upheld a supercenter EIR because there was an economic study prepared for the project and there was substantial evidence to support the city’s conclusion the project would have no negative economic consequences (see , September 2005). In Gilroy, the project opponents argued that the city should have completed an initial study before relying on a 12-year-old economic analysis; that the city’s tiering off previous documents was improper; and that evidence in the record indicated negative economic impacts could occur. Regarding the initial study, the opponents noted that supercenters did not even exist when the 12-year-old analysis was completed. But the court ruled that no initial study was required because the city had already determined an EIR was required, the project was consist with existing zoning, and the project “did not require major revisions in a previously prepared EIR.” As for tiering, the opponents said the city used a negative declaration as a first-tier document — and not an EIR — in violation of the California Environmental Quality Act (CEQA). The court disagreed, finding that the first-tier documents were the 1992 economic study, and the 1993 EIR for the area annexation and general plan amendment, which included the 1992 economic study. The court noted that the EIR also incorporated by reference the EIR for a revised general plan, with which the supercenter was consistent. “The Wal-Mart EIR clearly notified interested persons of its genealogy,” Justice Eugene Premo wrote for the court. As for the contention that the city should have commissioned a new study of potential economic impacts, the court found instead that the City Council was fully aware of the supercenter project’s potential economic impacts. The 1992 economic study of the retail project planned for the annexation area predicted that the retail project would modestly increase the shifting of the central business district (CBD) toward specialized retail, professional services and restaurants. The EIR for the annexation and general plan amendment was even more detailed and “concluded the CBD would not be protected by disapproving additional retail development in Gilroy.” This annexation and general plan amendment EIR, Premo wrote, “found the adverse economic impacts on the CBD resulting from the proposed project to be ‘small in comparison to the effects from competing suburban mall and retail services areas which have been constructed in the surrounding region in the recent past.’” Additionally, the court noted, project opponents submitted two reports on economic impacts, and Wal-Mart submitted one, as well. The City Council was justified in finding that further study was not warranted, the court concluded. The court also rejected arguments that the city violated CEQA in numerous other ways. The Case: , No. H028539, 06 C.D.O.S. 5639, 2006 DJDAR 7982. Filed June 22, 2006. The Lawyers: For Gilroy Citizens: William Kopper, (530) 758-0757. For the city: Andrew Faber, Berliner Cohen, (408) 286-5800. For Wal-Mart: Arthur Friedman, Steefel, Levitt & Weiss, (415) 788-0900,

In the ongoing controversy regarding local government authority over wireless telecommunication antennas, the Fourth District Court of Appeal has upheld San Diego County’s zoning ordinance that establishes a detailed permitting process for such antennas. The court ruled that state law allowing antennas in the public right of way allows the county’s permitting scheme — even though a federal appeals court threw out a similar scheme adopted by the City of La Cañada Flintridge because it was superceded by state law. The state court in the San Diego County case said that the Ninth U.S. Circuit Court of Appeals’ decision in , (2006) 435 F.3d 993, “is wrong and should not be followed.” The Fourth District did not rule on the San Diego County zoning ordinance’s legitimacy under the Federal Telecommunications Act, although the court did assert that its ruling was consistent with federal law. Rather, Sprint is litigating the applicability of the federal Telecommunications Act in federal court, where a district court judge threw out the ordinance. That decision has been stayed pending the Ninth Circuit’s ruling on the county’s appeal. San Diego County adopted its wireless technology ordinance as part of the zoning ordinance during 2003. The ordinance establishes four different processes, depending on the location and visual impact of the proposed antenna. Facilities that would have very low visual impacts and facilities proposed for commercial, industrial or special purpose zones are decided administratively by the planning and land use director. More conspicuous towers and those proposed for residential and rural zones require use permits, are subject to public hearings and may be decided by the county Planning Commission. The ordinance lays out a number of general and design regulations and setback requirements, and all applications must be accompanied by detailed information regarding the proposed facilities and services. In its state court lawsuit, Sprint argued that Public Utilities Code § 7901 prevents local governments from regulating the installation of telecommunications equipment in the public right of way (ROW) except to accommodate the public use of the ROW. San Diego County Superior Court Judge Charles Hayes ruled the county’s ordinance is legal, a decision upheld on the appeal. The Fourth District decided two questions: Do wireless telecommunications companies have the same privileges as traditional “telephone corporations” under § 7901? If so, does the statute prevent local governments from imposing design and siting restrictions on equipment in the ROW? The court ruled that wireless companies and telephone companies are the same thing these days, so § 7901 applies. However, in answering the second question, the court ruled, “The rights conferred by § 7901, although broad, are not unlimited.” The court noted that not only does § 7901 preclude installation of equipment in a location or manner that “incommodes” the public use of the ROW, § 7901.1 declares that a telephone company’s privileges are subject to a local government’s “right to exercise reasonable control as to the time, place and manner in which roads, highways and waterways are accessed.” The court cited extensively from California Public Utility Commission regulations and decisions that give municipalities the authority to adopt reasonable regulations on the location of telecommunications equipment in the ROW. “The approach adopted by the PUC — ceding to local authorities the primary authority to issue discretionary permits for ROW installations while retaining the ability to pre-empt local decisions where a superceding state interest is undermined by local obstructionism — is an appropriate resolution that balances the interests of local governments in managing and preserving the local ROWs against indiscriminate use while ensuring the statewide interest in the deploying of ubiquitous communications systems is protected,” Justice Alex McDonald wrote for the court. Sprint argued that the county’s ordinance is inconsistent with the limited local discretion contained § 7901, and Sprint and appeared to have the La Cañada Flintridge decision on its side. In that case, the Ninth Circuit ruled that cities’ “regulatory power is functional, and does not extend to aesthetics.” The Ninth Circuit ruled that state law pre-empted local authority (see , March 2006). But the Fourth District ruled that local authority is not pre-empted. “Although state law fully and completely covers the exclusive right of the state to empower telephone companies to use ROWs and to disable local governments from extracting franchise fees from telephone companies for the right to operate therein, there is no general state law regulating the siting or appearance of the equipment so authorized,” Justice McDonald wrote. Sprint further argued that the county ordinance demanded irrelevant information, imposed subjective design criteria, and let the county deny an application for any reason. “However,” the court ruled, “zoning ordinances with even fewer guidelines and granting even broader discretion have been upheld in the face of similar attacks.” The Case: , No. D045957, 06 C.D.O.S. 5537, 2006 DJDAR 7742. Filed June 20, 2006. The Lawyers: For Sprint: Daniel Pascucci, Buchanan Ingersoll, (619) 578-5000. For the county: Thomas Bunton, county counsel’s office, (619) 531-4860.

A Superior Court’s award of damages to a billboard company that sued over the City of Arcata’s building and sign ordinances has been thrown out. Humboldt County Superior Court Judge J. Michael Brown had ruled that state law pre-empted the city’s sign ordinance, and he awarded Viacom Outdoor, Inc., $39,000 in attorney fees and nearly $39,000 in damages for lost rent. In overturning Brown, the First District Court of Appeal found that the city’s ordinances were the type that the state law “positively anticipates if not encourages.” The court further ruled that because Viacom never even applied for the permits the city contended the company needed, Viacom’s claim for damages was premature. During the fall of 2001, windstorms destroyed four Viacom billboards originally built during the 1950s and 1960s next to Highway 101 in Arcata. The company had permits from Caltrans for all four signs. When Viacom began rebuilding the billboards, the city posted “stop work” orders directing the company to halt rebuilding until it applied for permits required by the city’s Building Code and Sign Code. Viacom stopped rebuilding. But instead of apply for permits, the company sued the city. The company argued that the Outdoor Advertising Act (Business & Professions Code § 5200 et seq.) was the only applicable law and preempted the city’s regulations. Viacom also contended the city violated the company’s rights of equal protection and due process, and took the company’s property without compensation. Judge Brown ruled for Viacom and ordered the city to pay damages and fees. The city appealed and a unanimous three-judge panel of the First District, Division Two, overturned the lower court. The city’s Sign Code requires a permit “to erect, construct, enlarge, alter, repair, move, improve, remove, convert, demolish, equip, use or maintain a sign or sign structure.” Viacom argued, and Brown agreed, that the state Outdoor Advertising Act pre-empted such an ordinance, and that California Code of Regulations 2270-2271 gives Caltrans complete authority in this instance. Viacom maintained that municipal regulations could apply “only at the time of placement of billboards.” The First District read the statute and regulations differently. “ he state act makes considerable allowance for past and future county and city ordinances on the subject of advertising displays,” the court ruled. “As shown by the plain language of §§ 5228, 5230, 5231 and 5408.3, the Legislature clearly contemplated that local regulation would augment the state act, and might in some instances go beyond it.” As for the Code of Regulations, the court determined that re-erection of a billboard is the same thing as “placement,” and, “Placement of an advertising display is an area where local power is expressly recognized by the state act.” “Moreover,” wrote San Francisco Superior Court Judge Peter Busch, sitting by assignment to the First District, “the language of Regulation 2271 speaks exclusively to the power of Caltrans. It does not address whether any other jurisdiction’s permit might be needed before a billboard is re-erected. Nothing in it suggests a restriction of the traditional power of cities and counties to require construction permits.” Viacom pointed to , (1993) 6 Ca.4th 1152, in which the state Supreme Court ruled that Caltrans had the authority under Business & Professions Code § 5463 to prohibit the rebuilding of a billboard that had been blown down. But the First District found Traverso of no use here because that case concerned the constitutionality of § 5463, and the Supreme Court did not address the scope of local regulations or whether billboard re-erection was the same thing as placement. The court also rejected Viacom’s contention that a standard in § 5401 requiring a sign to be built to withstand “20 pounds of pressure per square foot of exposed surface” was evidence the state intended to occupy the entire field of regulating billboard construction and, therefore, bar local regulation. “The city’s Sign Code provisions,” Judge Busch wrote, “do not conflict with the state act. All of these provisions either address subjects not addressed in the state act or appear fully compatible with the state act’s declared intent to establish only minimum standards, with the clear implication that additional input could come from cities and counties.” The Case: , No. A110628, 06 C.D.O.S. 4910, 2006 DJDAR 7145. Filed June 9, 2006. The Lawyers: For Viacom: William Barnum, Barnum & Herman, (707) 442-6405. For the city: Nancy Diamond, (707) 826-8540.

A plan to build housing for faculty and staff members at Sonoma State University appears to have widespread community support except for one detail: The university’s chosen location is a greenbelt outside of the City of Rohnert Park’s politically popular urban growth boundary. The university purchased the 88-acre site one year ago and has been in negotiations with the city ever since about the provision of water and sewer services to the proposed development. City officials, however, say the city cannot legally provide the services to a site outside the urban growth boundary (UGB) that voters approved in 2000. “We’re no closer to resolving our differences now that we were a year ago,” Rohnert Park City Councilman Jake Mackenzie said. Saying the negotiations are ongoing, Sonoma State officials put forward a more positive face. “Out timeline is as soon as possible. People continue to talk all the time,” said Susan Kashack, SSU associate vice president for communications and marketing. “We hope to have things really ironed out within the next six months.” Housing has been an issue for Sonoma State— located in Rohnert Park, just south of Santa Rosa — for years, and the problem has compounded during recent years with the rise in housing prices. University leaders say that affordable housing is crucial to attract and retain faculty and staff members who would have their choice of housing options in university towns elsewhere in the United States at a fraction of Sonoma County’s $630,000 median price. So in 2005, a university auxiliary acquired 88 acres northeast of town for $4.2 million. The university has plans to develop 400 single-family houses and 32 units of attached housing, according to Neil Markley, SSU senior director for entrepreneurial activities. The university is also considering developing a community building, parks, gardens and other assets on the site. The university chose the property because it is fairly close to campus and was reasonably priced, Kashack explained. The university would like to sell houses to faculty and staff members for prices in the $300,000s, she said. City officials and community leaders do not quarrel with the university’s goal of providing housing that SSU employees can afford. But the chosen site is agricultural land a mile beyond the Measure E urban growth boundary. Since 1996, voters in Sonoma County and its cities have approved 10 different urban growth boundary ballot measures, noted Daisy Pistey-Lyhne, the Sonoma-Marin field representative for Greenbelt Alliance. “I think it’s a really clear mandate from the voters. The university as a neighbor and as a member of the community should respect this mandate,” Pistey-Lyhne said. Mackenzie, a Greenbelt board member and three-term councilman, agreed. “We don’t wish to have to have 400 housing units on the northeast side of Rohnert Park outside our UGB,” Mackenzie said. “Very clearly, the reason they bought that property was they could get it cheaply. They figured they were above the city’s rules.” Indeed, the university is not legally obliged to follow local land use regulations, even those approved by voters. University officials acknowledge that, if the city refuses to provide services, they are considering other options, such as groundwater wells and a large septic system. However, those options are not without drawbacks. Area landowners already have in place an active campaign to limit groundwater pumping because of concerns about aquifer depletion. A septic system would need a permit from a potentially reluctant North Coast Regional Water Quality Control Board. Ron Bendorff, the city’s planning and community development director, said the city has no choice but to deny the services SSU is requesting. “We’d have to go back to the voters. They set the urban growth boundary,” he said. Bendorff and other city officials point to two growth areas within the UGB as more appropriate sites for university housing. One location is within the university district specific plan area, nearly 300 acres of agricultural and open space just across the street from the SSU campus. In May, the city approved the specific plan calling for 1,645 units of various types of housing and a large commercial village. The city still needs to annex the university district site, but it does lie within the voter-approved growth boundary. However, the specific plan is in limbo because a week after the city approved it Sonoma County Superior Court Judge Knoel Owen, in a lawsuit filed by a citizens group called the Owl Foundation, rejected a city water supply assessment that was used in the university district project’s environmental impact report. The city is appealing that ruling; in the meantime, the annexation is on hold, according to Bendorff. Sonoma State officials did talk with developer University District, LLC, about acquiring land within the district, but the two parties reached no agreement and have gone their separate ways. A second option favored by city officials is known as the “Agilent site” — about 170 acres one mile south of campus. Agilent Technologies pulled out of Rohnert Park, leaving behind 750,000 square feet of light industrial buildings. Local developer Codding Enterprises is now working to fill those buildings with new tenants and to develop about 1,800 units of housing and a large commercial center. Roughly half the site is undeveloped. Bendorff said that the Agilent site project faces at least two years of planning and environmental review, but that it is a “logical” location for university housing. Representatives of Codding and SSU have talked but have reached no agreement, the university’s Markley confirmed. The site does fit within the school’s parameters in that it is a short bike ride from campus, he noted. “We’ve said from the outset of this process that we don’t want to be in the housing business,” Markley emphasized. “If any developer is willing to come in and provide the product we’re looking for at the price we’re looking for, we’d walk away from our project tomorrow.” Councilman Mackenzie said he is encouraging the university and Codding to work together, but, he conceded, the city does not get the final say. Said Bendorff, “I think a lot of cities that are adjacent to major universities have these problems.” Contacts: Neil Markley, Sonoma State University Entrepreneurial Services, (707) 664-4068. Jake Mackenzie, Rohnert Park councilman, (707) 584-1195. Ron Bendorff, Rohnert Park Planning and Community Development Department, (707) 588-2236. Daisy Pistey-Lyhne, Greenbelt Alliance Sonoma-Marin Field Office, (707) 575-3661.

The latest round to be decided in the ongoing fight over building inspection and plan check fees has gone to the City of Corona, which successfully defended a lawsuit originally brought by developer Barratt American and its chief fee consultant. A trial court judge refused to let Barratt American and the consultant, The Paladin Group, participate because they had no direct interest in the litigation. The suit went forward with a resident as plaintiff, but the Fourth District Court of Appeal upheld the city’s methodology for setting the fees. Barratt American and Paladin have been involved in numerous fee lawsuits, forcing some jurisdictions to change their fee methodologies while losing other cases. The company won a minor victory at the state Supreme Court in late 2005 when the court ruled that the company could contest the validity of a fee ordinance that the Rancho Cucamonga City Council re-adopted — unchanged from an earlier ordinance — in 2002 ( , 37 Cal.4th 685, see , January 2006, November 2005). The Supreme Court overturned an appellate court, which had ruled that because there were no changes in the ordinance, the time to challenge the fees had passed. Barratt American has a long, adversarial history with the City of Corona. In 1997, Barratt American sued the city for a refund of building permit and plan check fees. A trial court and the Fourth District ruled the lawsuit was filed too late. Two years later, Barratt American, Paladin and Corona resident George Jenkins sued, alleging that the city’s fees exceeded the cost of providing service. The city revised its fees and the lawsuit was dismissed. The latest round of litigation involved the same players and similar fees. After a consultant completed a study that determined building inspection and plan check costs, and allocated the costs among tasks, the Corona City Council in May 2001 adopted revised fees. The new fees were actually about one-third lower than the previous rates. Still, Barratt American, Paladin and Jenkins sued, arguing that the fees violated the Mitigation Fee Act, Proposition 13, Proposition 62, the Fifth and Fourteenth Amendments and the federal Civil Rights Act. Riverside County Superior Court Judge Erik Michael Kaiser removed Barratt American and Paladin from the lawsuit, finding that they had no direct interest. The litigation went forward with Jenkins as the plaintiff. On the merits, Judge Kaiser found that the city’s methodology was not precise enough, and he ordered the city to establish new fees. The city appealed to the Fourth District and won a unanimous decision of the three-judge panel. The Fourth District first addressed the city’s contention that the Mitigation Fee Act (Government Code § 66000 et seq.) bars challenges to fee reductions. Citing the state Supreme Court’s decision in the Rancho Cucamonga case, the Fourth District disagreed. Re-enactment of a fee constitutes a modification or amendment of the fee, whether or not the fee increases, and a new 120-day period to challenge the fees commences, the court ruled. The court then undertook an extensive discussion of the city’s fee methodology. Essentially, the city’s consultant, Revenue Cost Specialists (RCS), determined the 10-year average for building and plan check fee revenue, and estimated the cost of providing the service for the 2000-01 fiscal year. The consultant found that fee revenue averaged $808,000 a year, while the estimated cost of providing the service during 2000-01 was $565,000. So RCS recommended setting fees at 69.9% of the then-current level. Judge Kaiser ruled that the 10-year revenue averaging was too imprecise to comply with the Mitigation Fee Act. But the Fourth District found that Kaiser’s review went too far, and that the city did comply with the act. “ he act requires only that fees ‘may not exceed the reasonable cost of providing the service for which the fee is charged,’ absent voter approval,” Justice Thomas Hollenhorst wrote for the appellate court, citing Government Code § 66014. “The trial court’s implicit finding that the act requires a dollar-for-dollar correspondence between the city’s fee revenue and costs is not supported by the act. … The act does not require a precise calculation.” Hollenhorst cited , (1993) 14 Cal.App.4th 264, in which the court ruled, “ he record need only demonstrate a reasonable relationship between the fees to be charged and the cost of the service or program to be provided.” The City of Corona met that test, the court ruled. “Nothing in the act,” Hollenhorst continued, “mandates a city should perform its duties. Here, the city properly exercised its discretion in deciding how to proceed with the mandates of the act.” Jenkins had appealed different portions of the trial court’s ruling, but the Fourth District rejected those contentions and even ordered Jenkins to pay the city’s appeal costs. The Case: , No. E036270, 06 C.D.O.S. 5013, 2006 DJDAR 7250. Filed May 10, 2006. Ordered published June 14, 2006. The Lawyers: For Jenkins: Jason Brent, Brent & Klein, (661) 823-1103. For the city: Jeffrey Dunn, Best, Best & Krieger, (949) 263-2600.

A housing development proposed for North San Diego County may give county decision-makers the opportunity to apply some of the “smart growth” principles contained in a proposed general plan update before the plan is even adopted. A landowner has proposed a 2,700-unit housing development in a fashion that concentrates the housing on less than 20% of the 2,320-acre site along Interstate 15. About 1,300 acres of the Merriam Mountains project would be dedicated as open space for a habitat conservation effort. The county’s proposed general plan, which has been in the works for eight years, designates a number of georgraphic nodes for fairly dense growth while making large areas essentially off-limits to any significant development. The Merriam Mountains project site is not one of the growth nodes in the proposed version of the general plan, which designates the area for 40-acre parcels. However, a general plan alternative put forth by county supervisors does call for development on the site. An additional complicating factor is local reception. Two county advisory groups (known as community sponsor groups) that represent the area have made clear that they oppose the project. “A lot of us moved here because of the way it was, not because of how developers want to make it,” said Charles Davis, vice chairman of the Bonsall Community Sponsor Group. A decision on the Merriam Mountains project could come next year; the landowner already is six years into the planning process. Although it is mostly rural, North San Diego County along I-15 definitely is within the path of growth. The area lies just north of the rapidly growing cities of San Marcos and Escondido, and just south of the exploding suburbs in western Riverside County. Interstate 15 frequently is jammed with people commuting to and from jobs closer to San Diego. Officials in San Diego and Riverside counties have formed a joint policy committee to address growth and transportation issues along the I-15 corridor. Stonegate Development — a privately held entitlement company based in Orange County — has acquired nearly 60 parcels comprising 2,320 acres in a 2 1/2-mile stretch along the west side of I-15, between the communities of Twin Oaks Valley and Bonsall. The site’s proximity to the freeway makes it ideal for development, said Joseph Perring, project manager for Stonegate. “We have been working on this project since the year 2000. The plan has always been to create a state-of-the-art, conservation-oriented master planned community,” Perring said. That plan has evolved over time. Originally, Stonegate proposed about 2,400 units, primarily single-family houses and condominiums, spread across the majority of the site. County planners and wildlife agencies gave that concept a thumbs down. Stonegate responded by adding some acreage and clustering the proposed development into five neighborhoods totaling approximately 420 acres. Stonegate would contribute at least 1,300 acres for the north county multiple species habitat conservation plan (MSHCP). Other open space would be provided as parkland or integrated into the development as open space. There also would be a 10-acre commercial site. The plan calls for nearly 1,000 single-family houses, primarily on lots of 4,000 to 7,000 square feet, about 1,400 condominiums in various forms, and 270 affordable apartment units. Stonegate has applied for a general plan amendment, rezoning and vesting tentative tract maps. A portion of the site is now zoned light industrial and commercial, but that type of development is not feasible, Perring contended. He said that, although the area is considered rural, the Merriam Mountains planned community is not out of character. The Hidden Meadows planned development lies across the freeway, and the Lawrence Welk resort with hundreds of mobile homes plus timeshares and condominiums is nearby. “We’re right in the middle of some existing developments that, in their day, were very similar to what we are planning,” Perring said. But Davis, of the Bonsall advisory group, said Stonegate’s property should either remain undeveloped open space, or should be developed only with estate homes on very large lots. Davis condemned Stonegate’s plan revisions that cluster development and add units. “It’s Orange County-style development that most of us don’t like in North County,” Davis said. “You don’t improve something by increasing the density.” Members of the Twin Oaks Valley Sponsor Group have expressed similar sentiments. Earlier this year, Twin Oaks Valley Equestrian Association President Carol Shuttleworth told that the project would “destroy everything that we’re about.” Perring said Stonegate has reached out to locals, but he conceded there is no common ground. “The local planning group will never support a project like this. Their idea for our property in the general plan update was one unit per 40 acres,” Perring said. The company did consider an estate-lot approach — and nearly 60 parcels already exist — but very low-density development could not support the needed infrastructure, he said. Additionally, environmentalists and regulatory agencies generally oppose large-lot projects, Perring noted. Dan Silver, executive director of the Endangered Habitats League, confirmed the latter point. Local residents may say they favor large-lot housing, but such development consumes valuable habitat and is unsustainable in the long-run, Silver said. Silver called the Merriam Mountains project “complicated” because it would provide a large chunk of habitat reserve, yet it conflicts with the proposed general plan update that the group likes. Endangered Habitats League neither supports nor opposes the housing project. “It’s a very large, intact block of chaparral,” Silver said of the site. “There are very few of these large blocks left in the North County at all, especially west of Interstate 15. It’s at least reassuring to us that there is a viable MSHCP piece if the project is approved.” Currently, Stonegate representatives are answering county planners’ questions about the project’s environmental impact report. A draft EIR is expected to be released this fall. The project would then move to the Planning Commission for hearings that are sure to be contentious. Contacts: Joe Perring, Stonegate Development, (949) 367-9400. Charles Davis, Bonsall Community Sponsor Group, (760) 726-7472. Dan Silver, Endangered Habitats League, (213) 804-2750.

A controversial housing development proposed for the shores of Big Bear Lake appears to have died a final — and costly — death when U.S. District Court Judge Manuel Real fined developer Irving Okovita $1.3 million for violating the Clean Water Act and the Endangered Species Act. Okovita grabbed headlines two years ago when he filed a racketeering lawsuit against an environmentalist and three U.S. Forest Service employees, contending they conspired to stop him from developing 133 condominiums, a marina and tennis courts in the unincorporated community of Fawnskin. Last year, Judge Real threw out that lawsuit and fined Okovita's attorneys $267,000 (see CP&DR In Brief , September 2005). Okovita filed the lawsuit after a federal judge halted building when environmentalists and the Forest Service complained that work at the construction site was damaging bald eagle habitat. In Judge Real's most recent ruling, that damage — resulting from the dredging and filling of wetlands and grading that caused erosion — cost Okovita $1.3 million. The developer vowed to appeal the decision. The long-delayed development of a new town in Madera County will have to wait even longer. Stanislaus County Superior Court Judge Roger Beauchesne ruled that Madera County did not have sufficient evidence of an adequate water supply for the 1,800-acre River Ranch Estates, which would be the first project built in Rio Mesa. Madera County designated Rio Mesa, 20 miles north of Fresno, as a growth area during the mid-1990s. Up to 30,000 housing units in three villages are envisioned (see CP&DR Local Watch , May 2004). A collection of local government agencies, farming and environmental interests sued over the River Ranch Estates environmental impact report. They argued that developer Central Green does not have rights to the San Joaquin River, which would be the primary water supply, and that the river is already overburdened. Judge Beauchesne appeared to agree with the Madera County Planning Commission, which had unanimously rejected the River Ranch Estates EIR. The Board of Supervisors overturned the Planning Commission's decision. The City of San Diego has salvaged its inclusionary housing ordinance. In late July, the city agreed to settle a lawsuit filed by the San Diego County Building Industry Association regarding the ordinance. First approved three years ago, the ordinance requires developers to provide a certain percentage of affordable units in their projects or pay in-lieu fees. In May, a San Diego County Superior Court judge ruled the ordinance is unconstitutional because it contains no exception for developers who could prove their projects would not exacerbate the city's affordable housing shortage. To settle the lawsuit, the city agreed to add the exception to the ordinance. The city also agreed to calculate in-lieu fees based on the time a development application is submitted and determined to be complete — and not at the time building permits are issued. Because the city recently raised in-lieu fees, that change could cost the city more than $10 million from the approximately 4,000 housing units that have been approved or are in the planning process. The settlement does let the city keep about $9 million of already collected in-lieu fees. Housing advocates, who for years lobbied for an inclusionary ordinance in California's second largest city, appeared resigned to the settlement because it does keep the ordinance in place. The state controller's office reported that eight redevelopment agencies did not submit annual reports for the 2004-05 fiscal years. Additionally, the controller noted 86 "major violations," the most common being the lack of a five-year implementation plan, which has been required since 1994. There were 51 instances of agencies not filing implementation plans. Failing to file annual reports at all were Chowchilla, Compton, Cudahy, Imperial, Oakdale, Richmond, San Diego and Sierra Madre. It was the third time in four years that Chowchilla, Compton and San Diego have not submitted the mandatory reports. Additionally, the California State University Channel Islands Site Authority failed to file a compliance report. The state controller's massive annual report, which compiles redevelopment agency fiscal information, is available on the controller's website, www.sco.ca.gov . The U.S. Environmental Protection Agency's smart growth project has presented 20 case studies illustrating smart growth developments and policies. Five of the 20 case studies are from California: • Hismen Hin-Nu Terrance, a 92-unit redevelopment project in Oakland, for creating a range of housing opportunities and choices; • Downtown Brea, for fostering a distinctive, attractive community with a strong sense of place (see CP&DR Places , January 1998); • The 14-acre mixed use project that replaced a closed department store and parking lot in San Diego's Uptown District, for strengthening an existing community; • Greenbelt Alliance's compact development endorsement program, for helping make smart growth decisions fairer; • Various redevelopment projects in San Diego's Barrio Logan, for encouraging community and stakeholder collaboration. The EPA report, "Smart Growth Illustrated," is available at www.epa.gov/smartgrowth/case.htm . Butte County has banned new private roads. The county will now require that roads in new unincorporated subdivisions be covered by a "permanent road division," under which the county will levy annual fees on property owners to pay for road maintenance. County officials said many private roads serving rural area subdivisions have not been adequately maintained. Correction . A Legal Digest item in the June edition regarding Allegretti & Co. v. County of Imperial , a case concerning the regulation of groundwater pumping, listed the incorrect attorney for the county. Antonio Rossmann and Dave Owen of Rossmann & Moore represented the county.

A statewide initiative that could completely change how government agencies regulate land use, carry out infrastructure projects and redevelop cities has qualified for the November ballot. The authors of Proposition 90 have dubbed it “The Protect Our Homes Act,” and have focused their fledgling campaign on the initiative’s provisions to prohibit the use of eminent domain for private development projects. However, Proposition 90 also contains a regulatory takings provision that requires the government to compensate a property owner for “government actions that result in substantial economic loss to private property.” The measure is not written the same as Oregon’s Measure 37, the 2004 initiative that reworked Oregon’s land use planning regimen. But the point of Proposition 90 is the same: The government must compensate property owners affected by land use regulations. Money to fund the successful signature-gathering effort in California came primarily from Howard Rich, a New York City real estate investor who has been active for years in libertarian causes and term limit campaigns. Rich’s Fund for Democracy provided $1.5 million in seed money, and Rich was in California during July to raise more funds. A group called Montanans in Action, which has political ties to Rich, has provided $600,000 to the Proposition 90 campaign. Local government organizations, land use planners, environmentalists, affordable housing advocates and providers of emergency services are lining up in opposition and trying to entice business and anti-tax groups into a coalition. Vivian Kahn, an Oakland-based planning consultant and member of the American Planning Association’s legislative and policy committee, said property rights proponents are trying to capitalize on popular sentiment against eminent domain. “It (Proposition 90) is masquerading as an anti-eminent domain measure. In fact, it has sweeping implications,” Kahn said. “Were it to pass, the cost of litigation would be astronomical.” Ed Thompson, California state director of the American Farmland Trust, called Proposition 90 “the most deceitful and treacherous public initiative that I’ve ever seen.” The measure would essentially end regulatory efforts to steer urban growth away from the Central Valley’s 6 million acres of irrigated cropland, said Thompson, who signed the ballot argument against Proposition 90. “It is an outright and direct assault on the powers of city councils to build strong cities,” added Chris McKenzie, executive director of the League of California Cities. “It would drastically reduce the ability of city councils to make land use decisions for their cities.” Proposition 90 advocates, however, discount the sky-is-falling arguments and say the measure only ensures that property owners receive fair treatment. The measure requires compensation only if a government regulation decreases property by a “substantial” amount, and the initiative provides exceptions for regulations to protect public health and safety, noted Tim Sandefur, an attorney with the Pacific Legal Foundation (PLF). Sandefur said that, for example, the government could still pass laws limiting pollution because they protect public health, but regulations such as view shed or tree ordinances would not be excepted. The eminent domain provisions would provide property owners with “a much fairer shake than under the current law,” Sandefur contended. The measure requires the government to pay a property owner based on the value of “the use to which the government intends to put the property.” Currently, the government must pay fair market value, which does not consider the government’s proposed use of the property. The measure also requires the government to pay all of the property owner’s costs, including attorney fees. “A lot of times the government gets away with these eminent domain actions because they low-ball the property owners,” Sandefur contended. “This would discourage the eminent domain abuse.” Kevin Spillane, a Republican campaign consultant and lead spokesman for the Proposition 90 campaign, said the initiative would put “the little guy” on the same footing as the government and well-connected property owners. Opponents, however, question how the measure’s “just compensation” provisions would be implemented in eminent domain cases. What if a property were condemned to permit development of an electricity generating plant, asked Cathy Christian, an attorney who prepared a Proposition 90 analysis for opponents. Would the property owner, she questioned, get paid based on electricity revenues? The Post-Kelo World Proposition 90 appears to combine an outpouring of public sentiment against the use of eminent domain for economic development with property rights advocates’ long-held contention that the government should compensate people who are prevented from using their property as they wish. The eminent domain issue came to the forefront in 2005, when the U.S. Supreme Court ruled in , 125 S. Ct. 2655, that a local government-run development corporation could acquire 15 parcels of land and then turn over the property to the developer of a mixed-use project on the New London waterfront. The ruling sparked a public backlash, and bills and ballot initiatives aimed at limiting eminent domain were introduced in many states, including California (see , March 2006; , January 2006; , August 2005; , July 2006). The decision appeared to have minimal legal impact in California because state redevelopment law governs the use of eminent domain for economic development projects. However, to the delight of property rights champions, packed a huge political wallop. Four initiatives were proposed for the ballot, and state lawmakers authored numerous bills — all aimed at prohibiting the use of eminent domain for economic development. But while about 25 states have approved some new limitations on eminent domain, the California legislative majority showed little interest in a significant overhaul, and the only bills that appear likely to pass this year are modest changes to redevelopment law. The Legislature’s tame response to appears to be providing indirect support to Proposition 90. “This ( ) decision has opened the floodgates for other cities seeking to increase their tax base at the expense of homeowners,” Assemblywoman Mimi Walters (R-Laguna Niguel) charged after an Assembly committee killed her AB 1990, which would have prevented use of eminent domain for economic development. “This is not what the framers of the constitution intended when they wrote the Fifth Amendment, nor is this what they intended when they reluctantly granted local governments the power of eminent domain.” Walters — who, as a Laguna Niguel councilwoman, helped lead the fight against a proposed civilian airport at the El Toro Marine Corps base — has signed on as the honorary chairperson of the Proposition 90 campaign. State Sen. Tom McClintock (R-Thousand Oaks), who is running for lieutenant governor, also has endorsed Proposition 90. “The Supreme Court decision galvanized public opinion on eminent domain,” said Spillane. “You had local governments over-reaching, and it backfired on them.” However popular the eminent domain policies in Proposition 90 may be, they could be secondary to the regulatory takings provision. The measure redefines property “damage” to include any regulation that results in “substantial economic loss to private property.” The initiative names downzoning, elimination of access and limits on the use of private air space as examples of damage. The government would have to compensate the owner for such damage, with jury trials apparently deciding disputes. Attorneys and land use experts have started sounding alarms. The initiative would “vastly expand landowner remedies for downzoning or other currently non-actionable government planning activities,” wrote John Murphy and Lisa Holmes, of Nossaman, Guthner, Knox and Elliott in Orange County. Christian, of Nielsen, Merksamer, Parrinello, Mueller & Naylor in Sacramento, said the “very badly drafted measure” raises many questions. The new definition of damage, Christian wrote in her analysis for opponents, “could commit California to a radical departure from basic principles regarding regulatory takings, resulting in greatly increased costs of governmental regulations affecting the value of property — costs that will be borne by all taxpayers.” The measure makes an exception for regulations to protect “public health and safety.” The word that’s missing from this phrase is . That’s important, said Christian, because many environmental and land use regulations are implemented for the benefit of the public welfare. “This initiative is no longer about eminent domain,” said John Shirey, executive director of the California Redevelopment Association. “This initiative is about limiting the ability of the government to do sound land use planning.” “It would raise property rights over every other right in California,” said Christine Minnehan, a housing lobbyist for the Western Center on Law and Poverty. “Do we want to be Texas? Do we want no zoning? I just wonder if people are contemplating what this could mean for how we grow.” Spillane, the Proposition 90 campaign spokesman, contended that the regulatory takings provisions are directly related to the eminent domain restrictions. “It really is about protecting your property from government abuse,” he said. But the Farmland Alliance’s Thompson and others said the initiative is one-sided. The provisions requiring compensation to property owners “are not only destructive of good public policy, but they fail to take into consideration all of the good things that government regulation does,” Thompson said. “A lot of property gets its value from actions government takes.” “I’m all for it,” added planning consultant and University of California, Berkeley, professor Gary Binger, “as long as they put in a provision that says whenever the government puts in any infrastructure improvements or does anything to increase property value, the property owner compensates the government in return.” Higher Costs For All? Housing advocates are calling Proposition 90 “extremely dangerous.” Minnehan said “every single policy” that she works on — zoning that requires developers to provide affordable units, relocation benefits for evicted tenants, ordinances that limit the conversion of apartments to for-sale condominiums, rent control — would be impacted by the initiative. Any new regulation or even amendment to an existing regulation would be threatened with litigation and a demand for payment of attorney fees, she said. Proposition 90’s eminent domain limitations would also affect housing programs, Minnehan added. Redevelopment agencies and housing authorities often assemble parcels to provide sites for affordable housing projects, and the agencies sometimes threaten and even carry out eminent domain to deal with a holdout property owner or two. Without eminent domain, the agencies would have to either pay a premium to holdout property owners or drop the project, she said. The initiative does permit the use of eminent domain for “projects of public use,” but the initiative’s replacement of “fair market value” with the “just compensation” standard could change the economics of some public projects. “Clearly,” said the redevelopment association’s Shirey, “with the redefinitions of just compensation that are in this initiative, all property acquisitions will be more expensive.” The just compensation requirement could have serious implications for the infrastructure bonds that are also on the November ballot, added the APA’s Kahn, because bond money would not go as far as envisioned. But none of these arguments go far with the initiative’s supporters, who say government has only itself to blame. “California has been severely abusive of its eminent domain law,” charged the PLF’s Sandefur, who recently authored a book, , about government intrusion on property rights. He pointed to an Institute for Justice report that found California government agencies from 1998 to 2003 took 223 properties and provided them to private developers. He also cited a 1998 Public Policy Institute of California study that concluded many redevelopment activities are intended primarily to boost local government revenues. Redevelopment advocates say Institute for Justice numbers are skewed and note that redevelopment agencies have taken virtually no owner-occupied homes for private development in recent years. All of these punches and counter-punches are likely to be thrown repeatedly during the campaign. Whether Proposition 90 will become a factor in the governor’s campaign is an open question. People on either side say it could be that neither Arnold Schwarzenegger nor Phil Angelides will want to touch the initiative. “Governor Schwarzenegger has not uttered a single word about eminent domain since ,” a frustrated Sandefur said. The Sacramento-based Pacific Legal Foundation, one of the country’s foremost property rights advocacy groups, was not involved in writing Proposition 90, according to Sandefur, who declined to endorse the measure. The PLF had been working with Sen. McClintock on a competing eminent domain initiative that has failed to qualify for the ballot. McClintock is expected to make Proposition 90 a part of his campaign. Privately, some opponents concede that they have a very difficult job ahead of them. Public anger stirred by remains strong, and “protect our homes” is an easy campaign slogan to pitch. The opposition is calling Proposition 90 a “taxpayer trap,” but the intricacies of land use regulation do not lend themselves well to campaign sound-bites. Contacts: Tim Sandefur, Pacific Legal Foundation, (916) 419-7111. Kevin Spillane, Proposition 90 campaign, (916) 924-7501. Cathy Christian, Nielsen, Merksamer, Parrinello, Mueller & Naylor, (916) 446-6752. Vivian Kahn, Kahn Mortimer Associates, (510) 482-1031. Chris McKenzie, League of California Cities, (916) 658-8200. Christine Minnehan, Western Center on Law and Poverty, (916) 442-0753. John Shirey, California Redevelopment Association, (916) 448-8760. Ed Thompson, American Farmland Trust, (530) 753-1073. Similar State Initiatives California is not the only state where property rights advocates have placed an initiative on the statewide ballot. All of the measures seek either to limit use of eminent domain, force the government to pay landowners affected by land use regulations, or both. • Arizona. The “Private Property Rights Protection Act” will appear as Measure 207 on the November ballot. The initiative would require just compensation for diminution of property value. It also would limit use of eminent domain to public use projects, and “slum clearance and redevelopment.” • Idaho: Proposition 2 in November would prohibit use of eminent domain for economic development. The measure also states: “If an owner’s ability to use, possess, sell or divide private real property is limited or prohibited by the enactment or enforcement of any land use law after the date of acquisition by the owner of the property in a manner that reduces the fair market value of the property, the owner shall be entitled to just compensation, and shall not be required to first submit a land use application to remove, modify, vary or otherwise alter the application of the land use law as a prerequisite to demanding or receiving just compensation.” • Montana: Measure 152 on the November ballot would require state or local governments to compensate property owners for diminished value resulting from regulations. The initiative also would prohibit the use of eminent domain if the property were to be transferred to a private entity. • Nevada: The “Nevada Property Owners’ Bill of Rights” initiative is circulating but has not yet qualified for the ballot. The measure’s limitations on eminent domain and requirement of compensation for “actions which result in substantial economic loss to private property” are very similar to California’s Proposition 90. • Washington: Measure 933 has qualified for the November ballot. The initiative would require compensation when regulation “damages the use or value of private property,” and would “forbid regulations that prohibit existing legal uses of private property.” Section 1. Statement of Findings … (c) Neither the federal nor the California courts have protected the full scope of private property rights found in the state constitution. The courts have allowed local governments to exercise eminent domain powers to advance private economic interests in the face of protests from affected homeowners and neighborhood groups. The courts have not required government to pay compensation to property owners when enacting statutes, charter provisions, ordinances, resolutions, laws, rules or regulations not related to public health and safety that reduce the value of private property. … Section 2. Statement of Purpose (a),/b> The power of eminent domain available to government in California shall be limited to projects of public use. Examples of public use projects include, but are not limited to, road construction, the creation of public parks, the creation of public facilities, land-use planning, property zoning, and actions to preserve the public health and safety. (b) Public use projects that the government assigns, contracts or otherwise arranges for private entities to perform shall retain the power of eminent domain. Examples of public use projects that private entities perform include, but are not limited to, the construction and operation of private toll roads and privately-owned prison facilities. (c) Whenever government takes or damages private property for a public use, the owner of any affected property shall receive just compensation for the property taken or damaged. Just compensation shall be set at fair market value for property taken and diminution of fair market value for property damaged. Whenever a property owner and the government can not agree on fair compensation, the California courts shall provide through a jury trial a fair and timely process for the settlement of disputes. … Section 3. Amendment to the California Constitution Section 19 of Article 1 of the state constitution is amended to read: Sec. 19 (a) (1) Private property may be taken or damaged only for a stated public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner. Private property may not be taken or damaged for private use. (2) Property taken by eminent domain shall be owned and occupied by the condemnor, or another governmental agency utilizing the property for the stated public use by agreement with the condemnor, or may be leased to entities that are regulated by the Public Utilities Commission or any other entity that the government assigns, contracts or arranges with to perform a public use project. ... (3) If any property taken through eminent domain after the effective date of this subdivision ceases to be used for the stated public use, the former owner of the property or a beneficiary or an heir, if a beneficiary or heir has been designated for this purpose, shall have the right to reacquire the property for the fair market value of the property before the property may be sold or transferred. … (b) For purposes of applying this section: (1) “Public use” shall have a distinct and more narrow meaning than the term “public purpose;” its limiting effect prohibits takings expected to result in transfers to non-governmental owners on economic development or tax revenue enhancement grounds, or for any other actual uses that are not public in fact, even though these uses may serve otherwise legitimate public purposes. (2) Public use shall not include the direct or indirect transfer of any possessory interest in property taken in an eminent domain proceeding from one private party to another private party unless that transfer proceeds pursuant to a government assignment, contract or arrangement with a private entity whereby the private entity performs a public use project. … (3) Unpublished eminent domain judicial opinions or orders shall be null and void. (4) In all eminent domain actions, prior to the government’s occupancy, a property owner shall be given copies of all appraisals by the government and shall be entitled, at the property owner’s election, to a separate and distinct determination by a superior court jury, as to whether the taking is actually for a public use. (5) If a public use is determined, the taken or damaged property shall be valued at its highest and best use without considering any future dedication requirements imposed by the government. If private property is taken for any proprietary governmental purpose, then the property shall be valued at the use to which the government intends to put the property, if such use results in a higher value for the land taken. (6) In all eminent domain actions, just compensation shall be defined as that sum of money necessary to place the property owner in the same position monetarily, without any governmental offsets, as if the property had never been taken. Just compensation shall include, but is not limited to, compounded interest and all reasonable costs and expenses actually incurred. … (8) Except when taken to protect public health and safety, “damage” to private property includes government actions that result in substantial economic loss to private property. Examples of substantial economic loss include, but are not limited to, the down zoning of private property, the elimination of any access to private property, and limitations on the use of private air space. “Government action” shall mean any statute, charter provision, ordinance, resolution, law, rule or regulation. … (e) Nothing in this section shall prohibit the use of condemnation powers to abate nuisances such as blight, obscenity, pornography, hazardous substances or environmental conditions provided those condemnations are limited to abatement of specific conditions on specific parcels.