Kern County should have prepared an environmental impact report before adopting an ordinance regulating the disposal of sewage sludge on agricultural land, the Fifth District Court of Appeal has ruled. The court ordered Kern County to study direct and indirect impacts of the regulation, including the effects that result from out-of-county agencies having to find new sludge disposal methods. The court did uphold the county's authority to regulate the land application of sewage sludge, and the court ruled that sanitation agencies should have completed environmental reviews of contracts for the hauling and land disposal of sewage sludge. The court also left the county's sludge regulation in place while the county completes an EIR. The ruling came in a lawsuit filed against Kern County by Los Angeles County, Orange County and City of Los Angeles sanitation agencies, as well as sanitation associations and a private sludge disposal company. They object to a 1999 Kern County ordinance that requires the heightened treatment of sludge that is applied to land (see , July 2000). Both sides claimed a measure of victory in the 104-page decision. The ruling makes clear that Kern County must evaluate the beneficial impacts of sludge application on farmland and consider the potential impacts of alternative disposal, such as hauling the sludge longer distances to willing counties, said Daniel Hyde, attorney for Los Angeles County Sanitation District No. 2. “If it's an impact on the environment, it doesn't matter whether it occurs in Kern County or not,” Hyde said. The county still must study it. Deputy Kern County Counsel Charles Collins, meanwhile, said that the ruling is important for local agencies because the court rejected the sanitation agency's argument that the commerce clause precluded Kern County from regulating sludge disposal. Less than a week after the court issued its decision, Kern County supervisors directed staff members to prepare an ordinance that would prohibit the importation of any sludge into the county. The Fifth District decision “did an awful lot to give us more authority over our own future,” Board of Supervisors Chairman Ray Watson told the . The issue of sludge disposal is controversial in many rural counties. Because of other regulatory barriers and the rising cost of dumping sludge in landfills, sanitation agencies during the 1990s began hauling most of their sludge to farmland, where the material is used as a soil amendment. However, officials and citizens in Kern and other counties that receive out-of-town sludge worry about the health impacts of large-scale land application of the wastewater treatment bi-product. In the industry, sludge is known as “biosolids,” a term that describes human and industrial waste that has been filtered from treated wastewater, pumped into tanks and allowed to cook in its own biologically generated heat until bacteria and other pathogens have been neutralized. Whether the federal and state governments have done enough study and regulating of biosolids is a question that receives much debate. The Central Valley Regional Water Quality Control Board issued the first general order permitting use of sludge as a soil amendment in 1993. More recently, the State Water Resources Control Board adopted a regulatory framework and completed a program EIR. Kern County successfully challenged that EIR in court, and the state board revised it last year. In October 1999, Kern County adopted Ordinance G-6638. It permitted the continued disposal of “class B” sewage sludge on already approved sites for three years. Starting January 1, 2003, sludge disposed on land would have to be “exceptional quality,” meaning it has received more treatment than Class B sludge. The county concluded that no environmental impact report was necessary and adopted a negative declaration. The sanitation agencies and associations sued Kern County, arguing that the county should have prepared an EIR, that the county did not have authority to regulate sludge disposal, and that a “biosolids impact fee” was illegal. The county counter-sued the sanitation agencies, arguing that changes they made in their sludge disposal programs should have undergone environmental review. Tulare County Superior Court Judge Paul Vortmann essentially let everything stand. He upheld Kern County's negative declaration, ordinance and fee, and he upheld actions of the sanitation agencies. Both sides appealed. The county contended that the ordinance itself needed no further environmental study because the law sought to improve the environment. As for the ordinance's broader impacts caused by different sludge disposal techniques, the county argued that any such impacts were too speculative to address. The court disagreed, noting there was evidence that the disposal of sludge had beneficial effects, such as dust reduction and making marginal land useable. “ or projects that may cause both beneficial and adverse significant impacts on the environment, preparation of an EIR is required because the consideration of feasible alternatives and mitigation measures might result in changes to the project that decrease its adverse impacts on California's environment,” Justice Betty Dawson wrote for the court. The court sided with the sanitation agencies and associations regarding broader impacts. They argued that evidence showed sanitation agencies would have to truck sludge longer distances, increasing vehicle traffic and, thus, increasing air pollution. They also contended the regulation would burden landfills, and force farmers to use more pesticides and untreated animal manure, thus harming water quality. Plus, they said, treating sludge to exceptional quality standards requires heating the material in gas-fired boilers, which consumes a great deal of energy and produces air pollution. The court ruled that all of these impacts were reasonably foreseeable and the county must study them in an EIR. The county cited , 105 Cal.App.4th 468 (see , March 2003), in which the Fifth District rejected a challenge to a similar Kings County ordinance. In that case, the court upheld the county's determination that its regulation was categorically exempt from CEQA. was different, the Fifth District ruled, because there was no substantial evidence to support a fair argument that the ordinance would cause adverse impacts. “There is no re-inventing of the wheel here,” said Hyde, attorney for Los Angeles County Sanitation District No. 2. “It's a failure to look at impacts that were widely known and readily available.” Deputy County Counsel Collins, though, wondered where exactly to draw the line. “If courts continue to look at things this way, you're going to see more public entities looking into larger and larger geographical areas as part of 'the project,'” Collins said. “You can make an argument that everything is related. It almost gets philosophical.” Regarding, the commerce clause, the sanitation agencies and associations argued that the ordinance was unconstitutional because it discriminated against out-of-county biosolids and because it was adopted for the protectionist purpose of upholding Kern County agricultural products' reputation. The court rejected both contentions. Justice Dawson wrote, “ he ordinance's burden on the sewage sludge industry is the same without regard to the place of origin of the sewage sludge.” And the court ruled, “ he possibility that the reputation of agricultural produce from Kern County benefited from the enactment of Ordinance G-6638 is not enough to violate the commerce clause.” Moreover, state Water Code § 13274 permits the county to regulate the application of sludge to land, the court ruled. As for the biosolids fee, the court ruled that the fee violated the Vehicle Code but remanded the issue to the Superior Court for further proceedings. As for Kern County's argument regarding the sanitation agencies' hauling and disposal contracts, the court agreed that the agencies must perform environmental reviews. The Case: , No. F043095, 05 C.D.O.S. 2907. Filed April 1, 2005. The Lawyers: For Sanitation District No. 2: Daniel Hyde, Lewis, Brisbois, Bisgaard & Smith, (213) 250-1800. For Orange County Sanitation District: Tami Crosby, Woodruff, Spradlin & Smart, (714) 564-2635. For City of Los Angeles, Keith Pritsker, deputy city attorney, (213) 978-8141. For California Association of Sanitation Agencies: Roberta Larson, Somach, Simmons & Dunn, (916) 446-7979. For Southern California Alliance of Publicly Owned Treatment Works: Robert Dowd, Griswold, LaSalle, Cobb, Dowd & Gin, (559) 584-6656. For Responsible Biosolids Management, Inc.: Mark Jones, Jones & Beardsley, (661) 664-2900. For Kern County: Bernard Barmann Sr., county counsel, (661) 868-3800.

Local governments in California have no authority over Indian casinos and collect no taxes from the casinos. But some cities and counties still see value in having a casino nearby and manage to reap economic benefits of a casino and its accompanying facilities. The state Economic Development Department reports that Indian casino payrolls continue to expand, and casinos now employ nearly 50,000 workers, which helps make some cities and counties comfortable with a gambling hall. Indian casinos also can generate storms of angry protest because they involve gambling and because locals have no control over the developments. Thus, some localities fight tooth and nail to keep casinos out. The issue of “reservation shopping” - in which tribes seek out the best land for developments even if ancestral links are weak - can also complicate the situation. Stuck in the middle are jurisdictions that accept they have no authority and try to get Indian tribes to pay for public services and infrastructure. Until recently, Indian casinos were largely a county issue because most reservations are in rural areas. But the issue is becoming one for cities because tribes are finding sites in urban areas and because urban growth is headed in the direction of some formerly distant reservations. “It's certainly an emerging issue for cities,” League of California Cities lobbyist Daniel Carrigg said. “I'm sure there is going to be a spectrum of opinion. In some communities, it's going to be a real lightening rod issue. In other communities, it's going to be seen as a new jobs and economic development opportunity.” No city in California has a more intimate relationship with an Indian casino than Palm Springs. The Agua Caliente Band of Cahuilla Indians has a large Indian casino right downtown - not surprising considering that the tribe's reservation includes 6,700 acres within the city limits. For eight years, the tribe had a casino in a large tent. Eighteen months ago, the tribe opened the new, much larger Spa Resort Casino. The city has tried to capitalize on the Agua Caliente Band's investment, said John Raymond, Palm Springs community and economic development director. The casino is located just a couple blocks from the convention center, and sits between the convention center and the downtown's main drag, Palm Canyon Drive. “It is a positive to the hospitality industry,” Raymond said. “Now, is it a positive for the rest of downtown? That depends on the retailer you talk to.” A resort and retirement community, Palm Springs' downtown problem is the opposite of most cities. In Palm Springs, downtown is full of people after 5 o'clock. During daytime business hours, however, downtown is quiet, Raymond pointed out. The gambling hall may exacerbate the dominance of eating and drinking establishments in downtown. Partly for that reason, the city is trying to entice regional and national retailers to the area. Although some of the Agua Caliente Band's development plans are controversial in Palm Springs, Raymond said that the only people who complain about the casino itself are gambling opponents and some residents who gripe when the tribe closes streets for special events. “It doesn't stick out like a sore thumb,” Raymond said of the Spa Resort Casino. “They didn't do a 23-story hotel with a ground-floor casino, which is the Vegas model.” Palm Springs gets no direct revenue from the casino, but non-Indian hotels - there are large ones within walking distance of the casino - collect a 13.5% transient occupancy tax for the city. And, Raymond noted, the tribe annually gives out more than a $1 million to community groups. Palm Springs' attitude is an exception right now, but it might portend the future. A more typical response can be found in the Bay Area, where local governments around a proposed Indian casino near the Oakland Airport are united in opposition to the project. The Cities of Oakland, San Leandro and Alameda, plus Alameda County and the East Bay Regional Park District recently signed an agreement to work jointly on defeating the plans of the Lower Lake Rancheria-Koi Nation, a landless 30-member tribe of Pomo Indians. Working together should allow the jurisdictions to maximize what little leverage they have, Oakland City Attorney John Russo said. “What you don't want is cities saying, 'Don't put it here, put it there. No, put it there,'” Russo said. Russo argued that the economic benefits of the proposed casino do not add up, especially because of the proposed location. People could fly into Oakland Airport, take a shuttle to the casino, stay at a casino hotel and eat at casino restaurants, Russo said. People could make the whole trip without spending money at a business that pays taxes to the city. “It is not everything it's cracked up to be fiscally, if you look at a municipality as a corporation. We believe the public service costs far outweigh the benefits,” Russo said. About 20 miles north on the Interstate-80 corridor, however, the City of San Pablo has endorsed the idea of converting a 10-year-old card room into a larger Indian casino - specifically because of the economic benefits. The proposed 300,000-square-foot casino could provide 3,000 jobs in the city of 31,000 people. “San Pablo is a working-class city trying to survive economically,” Councilman Leonard McNeil told the . “If you are economically well-off, you can afford to take a moral stance about whether people should gamble or not.” The San Pablo City Council voted to endorse the casino in February. Less than two months later, the Contra Costa County Board of Supervisors voted to oppose all urban gambling. The proposal from the Lytton Band of Pomo Indians for converting the San Pablo card room has become a national issue. Legislation by U.S. Rep. George Miller (D-Martinez) placed the card room site in trust for the Lytton Band, a necessary step toward casino development. Since then, Miller has distanced himself from the project, saying he did not envision a project as large as the Lytton Band has proposed. Nearby, the City of Richmond has designated part of an old Navy base now controlled by the city for a large Indian casino and hotel (see , February 2005). Like their colleagues in San Pablo, Richmond leaders cited the number of jobs that a large casino would bring to a long-struggling city. Contacts: John Raymond, City of Palm Springs, (760) 323-8228. John Russo, City of Oakland, (510) 238-3814. Daniel Carrigg, League of California Cities, (916) 835-8222.

Water problems both physical and legal are threatening to slow development in the foothills and mountains of eastern Fresno County. Groundwater resources are proving increasingly unreliable, causing the Board of Supervisors to impose stricter well pumping tests for new structures. Meanwhile, surface water in two reservoirs that developers have long planned to tap is legally out of reach, at least for now Although Fresno County remains a relatively growth-friendly jurisdiction, the water constraints are making some officials hesitant. County Supervisor Phil Larson said the first question he asks anyone talking about new development is, “Where are you going to get the water?” “We don't have any water here,” Larson explained. “They have to bring water with them.” The Board of Supervisors was expected to give final approval to the new groundwater regulations just as was going to press. Those regulations require landowners to prove their wells can produce at least 1 gallon of water per minute - double the previous standard. Landowners whose wells do not produce at least 5 gallons per minute will be required to have 2,000 gallons of water storage. The county will no longer allow new homes to rely on trucked-in water, which at least one 60-home subdivision currently does. The regulations apply to anyone seeking a building permit or approval of a parcel map. Since 2000, the county has required proof of water for any subdivisions of five or more lots, said Leona James, a county planning and resources analyst. The problem is that urban refugees build a home in the foothills or high country, and then learn they have no water. They turn to the county for help, but the county has no assistance to offer, Larson said. Some developers and contractors have grumbled about the new regulations, but there has been no widespread protest. Last year, a group of residents formed the Sierra and Foothill Citizens Alliance to bring attention to the problem, said group President Gary Temple. Wells are not producing as they once did, and some have gone dry, he said. Temple called the new regulations “steps in the right direction.” Besides imposing new regulations, the county has also hired hydrogeology company Geomatrix to study groundwater issues. Groundwater in the mountains is in fractures and fissures, not in a more easily defined aquifer. So predicting where groundwater lies and what impact a new well will have on an existing well is tricky. Temple also endorsed the county's decision to study the situation. “It seems like there's something going on, and before we allow a great deal more development, we should find out more,” said Temple, an Auberry architect. “They are building houses in this area like they are going out of style. But ultimately where the water is going to come from is anyone's guess.” At least two developers hope ultimately to get water from existing reservoirs. This is where the legal issues arise. In 1984, the county approved a specific plan for a new town in the hills above Millerton Lake, a Central Valley Project reservoir approximately 20 miles northeast of Fresno. The plan has been amended a few times since then and the county has approved four vesting tentative tract maps, but the project remains largely the same as originally envisioned: 3,500 housing units, shopping areas, a hotel and conference center, and a golf course. The new town would cover approximately 1,400 acres. A community services area would provide a variety of services, including water and wastewater, storm drainage, parks, street lighting and garbage collection. The county approved the project and subsequent amendments with the understanding that water from Millerton would serve the development. Developer Ben Ewell has reportedly invested more than $5 million in pumps, pipelines and a water treatment plant to serve the new town and the adjacent 400-lot Brighton Crest subdivision. The county has even taken possession of the infrastructure. However, although the territory lies within the Bureau of Reclamation's irrigation service boundary, all of Brighton Crest and nearly all of the new town are outside of the Bureau's “municipal and industrial” service boundary. No one seems to agree on exactly how long all of the parties have known about this discrepancy. Bureau of Reclamation spokesman Jeff McCracken said the agency has known since the 1980s and informed the developer then. Ewell, who declined to speak with , told the that he did not find out until last year that nearly all of the land was outside the boundary. County officials seem to have learned of the problem at varying times. McCracken said the Bureau will ensure that the “place of use” boundary gets moved. “It's something that has to be drawn on a piece of paper,” he said. However, only the State Water Resources Control Board can draw that line. And the state will do so only after preparing an extensive study and environmental impact report, board spokeswoman Liz Kanter said. That process can take years, and it has not started, she warned. “We're waiting for the people with the water rights - in this case the Bureau of Reclamation - to tell us they want to change the use,” Kanter said. Farther up the mountains, development near Shaver Lake also is facing an uncertain future. The county has approved about 1,400 lots in the area, and roughly half of those have been developed with homes. All development relies on groundwater, and county officials insist that 2,000 lots is the maximum they will approve until developers gain water rights to Shaver Lake. Earlier this year, while approving changes to the 600-lot Wildflower Village plan near Shaver Lake, supervisors capped the number of new homes in the subdivision at 250 until the surface water becomes available. The Shaver Lake situation has drawn the attention of the state Department of Health Services, which has warned the county not to approve new development until water sources are proven. Drawing water from Shaver Lake for nearby residential development may be even more difficult legally and politically than gaining access to Millerton. Shaver is owned by the Friant Water Users Group and Southern California Edison, and all of the water in the lake is appropriated elsewhere. Again, the Water Resources Control Board has the final say. Shaver Lake area developers have stated they will gain the surface water rights within three years. But Supervisor Larson expressed skepticism. Contacts: Leona James, Fresno County Public Works and Planning Department, (559) 262-4853. Fresno County Supervisor Phil Larson, (559) 488-3541. Gary Temple, Sierra and Foothill Citizens Alliance, (559) 855-5653. Jeff McCracken, Bureau of Reclamation, (916) 978-5100.

A recent ruling by the Department of Industrial Relations regarding labor rates for subsidized housing projects might be an advantage for affordable housing development, especially in rural areas. However, the situation regarding “prevailing wage” requirements might best be described as fluid. In late February, Department of Industrial Relations (DIR) acting Director John Rea ruled that a 120-unit affordable housing project in the City of San Marcos that is being subsidized with federal tax credits and tax-exempt bonds is not subject to prevailing wage requirements. The State Building and Construction Trades Council of California (SBCTC) has asked Rea to reconsider and has suggested it will take the matter to court if Rea declines to change his mind. In the meantime, housing developers have asked DIR to rule that projects financed with more direct subsidies - such as Community Development Block Grant funds, federal HOME funds and local redevelopment monies - also are not subject to prevailing wage requirements. A DIR spokeswoman could not say when a decision would be reached in that matter, or on the SBCTC appeal. “It's far from over as a topic of public concern. It's about as clear as mud right now,” said Jeff Loustau, executive director of the California Housing Consortium, an umbrella group of for-profit and nonprofit developers. The issue is this: In 2001, state lawmakers approved SB 975 by Los Angeles state Senator Richard Alarcon, a champion of organized labor. The legislation expanded the definition of “public works” to include nearly all development projects that receive any direct or indirect subsidy (see , September 2002). A public works is subject to prevailing wage requirements. Affordable housing projects - which often rely on multiple public and private sources of capital - were exempt from the new mandate, but only until 2004. Traditional public works projects, such as the construction of roads and courthouses, have long had prevailing wage requirements. The 2001 legislation extended the wage rules to private development projects that get public money. The DIR establishes prevailing wage rates. It is the basic hourly rate paid to a majority of workers in a particular trade or craft within a defined geographic area. However, the setting of prevailing wage rates is nearly as much art as science. The agency looks to large labor markets, such as in San Francisco or Los Angeles proper, and then relies heavily on contracts reported by labor unions for commercial projects. Thus, the established prevailing wage - which the DIR applies to broad geographic areas - is often toward the top end of the scale in the most expensive labor markets. The system is great for roofers, tile-setters, dry-wallers and others working in the construction trades, but not for developers and financers, and cities trying to provide affordable units. Depending on the project and the location, the prevailing wage requirement can raise the cost of an affordable housing development anywhere from 5% to 40%, according to developers. In general, for-profit developers oppose the wage mandate, while the nonprofit community is divided. Some nonprofit developers want to create as many housing units as possible, while others say they do not want to build at the expense of laborers. Interpreting the law The case decided by the DIR was brought by a for-profit developer called RSF Village Partners. The project is a 120-unit apartment project for seniors with incomes of 60% or less of median. The occupancy restrictions would remain in place for 55 years. Development is to be funded in part by federal low-income housing tax credits, which are awarded by the California Tax Credit Allocation Committee. The amount of tax credit is based on the cost of constructing the units. Another source of funding is tax-exempt “conduit bonds” issued by the California Statewide Communities Development Authority. The term conduit bonds comes from the fact that CSCDA acts solely as an intermediary. The Authority issues and sells the bonds at the same time. All proceeds go a private trustee for the bondholders. The trustee advances the money to the developer, which is responsible for repaying the bondholders. These details were important to Rea's ruling. In interpreting the statute (Labor Code § 1720), he had to determine whether the financing amounted to the payment of public funds or to a reduced a contractual obligation of the developer. Rea said no. With regard to the federal income tax credits, Rea wrote, “ either the state nor a political subdivision is making any payment to the owner . Moreover, a tax credit 'involves no expenditures of public money received or held … but merely reduces the taxpayer's liability for total tax due,'” Rea cited , (1989) 210 Cal.App.3d 1476. Quoting the statute itself, Rea continued, “While the tax credits may reduce owner's federal income tax obligations, these are not 'obligations that would normally be required in the execution of the contract.' The execution of the contract entails expenditures by, not income to, owner.” Rea concluded that the bonds are not public funds. “ either the conduit bond revenues nor the loan repayments ever enter the coffers of a public entity, nor are they collected for the public entity,” Rea wrote. The loan to the developer “is made by the bond trustee, so even if the interest rate were below-market, neither the state nor a political subdivision thereof is charging interest at less than fair market value.” The Trades Council contends that a financing tool that reduces a developer's tax liability is a subsidy, as are low-interest loans facilitated by a state agency. “The director ignored economic reality in concluding that this project did not get a substantial public subsidy,” said Scott Kronland, attorney for the SBCTC, which has asked for reconsideration. If the ruling were to stand - and just about everyone expects it to - the full impact is uncertain. Gary Downs, the attorney for the developer, said the decision “clarifies the rules” and sets a precedent for the entire state. Any developer may rely on it in good faith, he said. Kronland declined to go that far. “People look to the director's opinions for guidance for the future,” he said. However, only the courts can say what the law means, Kronland said. And court is almost certainly where the issues is headed. What's Next? Affordable housing developers are trying to figure out how to proceed, said Loustau, of the California Housing Consortium. State agencies, he said, are sending mixed signals. The Tax Credit Allocation Committee, for example, is requiring applicants to submit project applications with and without prevailing wage costs. The prevailing wage requirement has caused trouble for a number of affordable housing developers, Loustau said. “It has meant there's been a falloff in applications for low-income housing tax credits and projects where tax-exempt bonds are used,” he said. Those financing tools are used in almost every affordable housing project, he added. In fact, the number of applications to the Tax Credit Allocation Committee during 2004 decreased by 30% from the year before to 135. The number of units financed by the tax credits dropped by 23% to 4,349 during 2004. These figures reflect a dilemma for developers. If labor costs for a project go up, a developer either has to find an additional funding source or build fewer units, said Rob Weiner, executive director of the California Coalition for Rural Housing. “Unlike in market-rate developments,” attorney Downs said, the affordable housing developer “cannot pass along the costs for paying prevailing wage to the tenants.” Some cities - including San Marcos, the site of the disputed development in the DIR case, and Redding - have offered to increase their subsidy to help offset the higher labor costs. If the DIR ruling stands, Weiner said, “It means considerable cost savings in some markets. That's especially true in the more rural and suburban areas of the state.” While some nonprofit developers have cheered the DIR ruling, Weiner said his organization is comfortable with a prevailing wage requirement. The problem, he said, is with the way rates are established. Applying a commercial project rate from San Francisco to a residential project in, for example, Yuba County makes no sense because the markets are entirely different, he said. Two major players - the Southern California Association of Non-Profit Housing (SCANPH) and Housing California - are trying to work with organized labor and the DIR to create residential prevailing wage rates for specific jurisdictions. SCANPH has had some success: Unions for 14 trades now report a residential prevailing wage rate for Los Angeles. In exchange, SCANPH tries to steer more work to those unions. Weiner doubts that unions will be willing to establish residential rates in suburban and rural areas because too much money is at stake. The rates SCANPH has helped create are not substantially lower because of the Los Angeles labor market. Jan Breidenbach, executive director of SCANPH, said that the organization did not take a position on SB 975, and her members are divided over the prevailing wage issue. “I'm assuming in the long run, affordable housing is going to have prevailing wage,” she said. One of the biggest challenges in implementing the prevailing wage mandate is ensuring that the workers get the money, said Breidenbach. The handful of general contractors in metropolitan Los Angeles who build most affordable housing projects have grown accustomed to the regulation and the accompanying paperwork. However, subcontractors often make off-the-books deals with workers or pay in cash, and then keep the surplus that they get from the general contractor. These shady arrangements might be getting easier to pull off because a growing number of construction laborers are recent immigrants or illegal aliens. “The amazing thing is that nobody knows what people actually get paid on construction sites,” Breidenbach said. “They only tell you what people are going to be paid.” This cheating by subcontractors is something of a side issue, but it is potentially important. If prevailing wage requirements are supposed to help workers, but workers are not benefiting, something will have to give. Breidenbach said that labor costs are only one worry for affordable housing developers. Real estate prices in urban areas continue to increase dramatically, and skyrocketing materials costs have stung everyone in the building industry. Still, there is nothing that the government can do about the cost of concrete and two-by-fours, and only a limited amount it can do about real estate costs. What the government can influence is labor costs. State lawmakers have not taken up the issue publicly this year, but legislation is a possibility. “This issue will not stop being contentious,” Breidenbach said. Contacts: Jeff Loustau, California Housing Consortium, (415) 677-4436. Jan Breidenbach, Southern California Association of Non-Profit Housing, (213) 480-1249. Rob Weiner, California Coalition for Rural Housing, (916) 443-4448. Gary Downs, Pillsbury, Winthrop, Shaw, Pittman, (415) 983-1000. Scott Kronland, Altshuler, Berzon, Nussbaum & Rubin, (415) 421-7151. Department of Industrial Relations decision: www.dir.ca.gov/dlSR/coverage/2004-016.pdf (PDF).

A lawsuit challenging a building permit granted by San Francisco was not filed and served before the statute of limitations deadline, the First District Court of Appeal has ruled. The court also held that the city's notice of decision and order did not deceive the project opponent regarding the deadline. In April 2002, David Robins and Marge Chambers applied for a variance to add onto their house in the Bernal Heights district. After receiving the Planning Department's approval of the variance, Robins and Chambers applied for a building permit. Their neighbor Lisa Honig then filed a request for discretionary review of the building permit application. After a hearing in December 2002, the Planning Commission denied the request for discretionary review. Two months later, the city issued the building permit. However, Honig appealed the permit issuance to the Board of Appeals. She argued that the variance would allow Robins and Chambers to create a code violation and a fire hazard. In a notice and order dated June 10, 2003, the Board of Appeals upheld issuance of the building permit. On September 8, 2003, Honig filed a lawsuit against the city and her neighbors, alleging that the city's decisions conflicted with the municipal Planning Code, and that the decisions created a code violation and nuisance. Honig asked the court to set aside the variance and order removal of her neighbors' addition. The city said Honig was too late. In Superior Court, Honig conceded that she had missed the deadline for filing and serving a lawsuit over the variance but contended she could still challenge the building permit. San Francisco Superior Court Judge Ronald Quidachay ruled that Honig had 90 days to file and serve the lawsuit, and that she missed the service deadline. On appeal, a unanimous three-judge panel of the First District upheld the lower court. Government Code §§ 65009 and 65903 set the time limits for challenging local land use decisions. Essentially, they give someone 90 days to commence and serve a lawsuit that contests a land use decision. The short deadline is intended to provide certainty to the government agency and the property owner. Honig argued that those statutes did not apply because she was attacking the building permit, not the variance, which was clearly covered by the statutes. The First District would have none of this argument. “The attack on the building permit is, in reality, nothing more than a challenge to the variance,” Justice Mark Simons wrote for the court. “Nowhere in the petition is there any suggestion that the building permit contained a defect unrelated to the variance.” The issue involved zoning and planning; therefore, the court held, the 90-day statute of limitations applied. Honig also argued that the city's notice of decision and order was deceptive. It stated that the time to file for judicial review of the decision was governed by Code of Civil Procedure § 1094.6. That statute requires the filing of an action within 90 days but says nothing about service of the lawsuit. Thus, Honig argued she received no notice of the 90-day service requirement. The court said Honig needed to read the entire statute, which says that any conflicting, shorter statutes of limitations apply. “ othing in the language of the notice of the Board of Appeals, or in the Code of Civil Procedure sections referenced in that notice, directed appellant to apply an incorrect and untimely limitations period to filing or serving her petition,” Justice Simons wrote. The Case: , No. A106305, 05 C.D.O.S. 2166, 2005 DJDAR 2975. Filed March 10, 2005. The Lawyers: For Honig: Clifford Fried, Wiegel & Fried, (415) 552-8230. For San Francisco: Judith Boyajian, deputy city attorney, (415) 554-4636. For Robins and Chambers: Joel Yodowitz, Reuben & Junius, (415) 567-9000.

As has become customary for at least the last five years, the state Capitol is awash in legislation concerning housing. And, as usual, much of the legislation deals with small pieces of California's housing puzzle. This year, though, the cast of characters is different, and there is serious talk about major policy changes. New to the picture this year are the Schwarzenegger administration and state Senate President Pro-Tempore Don Perata (D-Oakland). Schwarzenegger representatives are shopping around a broad set of proposed housing policy changes. Perata is showing more interest in housing policy than any recent state Senate leader has. Additionally, the League of California Cities and the California Building Industry Association (CBIA) are trying to join forces on a compromise housing bill. In the past, the League and the builders have been adversaries. There also is more movement toward California Environmental Quality Act “streamlining” or “reform” than Sacramento has seen since the early 1990s. Some insiders see a consensus forming around the easing of environmental review for infill development; however, that approach could run into significant opposition from environmental justice advocates in the Legislature. At the least, there are very different ideas circulating about desirable CEQA changes. Members of the administration have been promising a big housing package since last summer (see , August 2004), but only in recent weeks has a written plan emerged. The plan has not been publicly released, but lobbyists have received copies and are offering comments. It is unclear when or in what form the package will be introduced in the Legislature. Thus far, the plan has received mixed reactions. Environmentalists appear to be the strongest opponents, closely followed by local governments. Affordable housing advocates like some of the administration's proposals, while builders appear to be the most satisfied. The administration's 45-page plan tackles many subjects. The common theme, though, is plain: Make it easier for developers to build housing units. The plan calls for cities and counties to designate enough land to meet 20 years of housing needs, a provision endorsed by builders but opposed by local governments. The administration would expand by-right housing development with certain minimum densities to prevent cities and counties from adding permit conditions in areas zoned for housing. Housing elements would be updated only once a decade (rather than every five years), but there would be new standards for actual affordable housing production, new by-right development provisions, additional reporting requirements and potential fines for noncompliance. The administration discourages inclusionary zoning by prohibiting local governments from using inclusionary units to meet production standards - another provision that divides builders and local governments. The administration plan calls for cracking down on ballot measures that restrict growth, a provision that worries environmentalists. The administration would also limit environmental review of a project if there has been prior environmental analysis. The plan would strengthen anti-NIMBY laws, but would eliminate an existing prohibition against housing permit moratoriums - two measures that provide a mixed bag for affordable housing advocates. Environmentalists say they are disappointed because Schwarzenegger campaigned on a green platform that mentioned smart growth. “We think they are missing the big picture of smart growth,” said Bill Allayaud, state legislative director for the Sierra Club. The administration, he said, incorrectly assumes that if the market is flooded with new housing, affordable units will automatically be part of the deluge. “They are getting down to housing, housing, housing,” Allayaud charged. “But we're just going to get traffic, traffic, traffic.” Allayaud noted that under the plan, local governments are encouraged to protect habitat and farmland, but local governments are required to approve more by-right development projects. Further frustrating environmentalists are the various movements to weaken CEQA. “CEQA has been a great law. Right now it's being scapegoated by the builders,” Allayaud complained. “No one has shown that it's a significant cause of higher home prices.” Builders, though, contend that CEQA - and CEQA abuse - can add years to the approval process, which costs developers and landowners money. And mitigations required by CEQA can add to the cost of development. Marc Brown, of the California Housing Law Project, is among the affordable housing advocates who would like to see CEQA reform. Exemptions for infill and low-income housing projects are too narrow to be useful, he said. “The abuse of CEQA is one of the main barriers to affordable housing that we hear about,” Brown added. The Resources Agency has a working group leading the administration's CEQA reform effort, but no proposals have emerged publicly. League of California Cities lobbyist Dan Carrigg said that CEQA changes must be connected to infill and high-density development. Carrigg has been a participant in the extensive talks between League representatives and the CBIA. “It's a good faith effort on both sides,” he said. “I think that we've been making some progress, working through some of the details. But we've got a ways to go. The land supply issue has a ways to go.” The CBIA's mantra - which the administration is picking up on - is “certainty.” The industry wants cities to designate 20-year land supplies and then allow development that meets zoning regulations to proceed by right. Designating a 20-year supply, however, raises annexation and related issues over which local agency formation commissions have jurisdiction, and could strain already difficult city-county relations, Carrigg said. Plus, development certainty cannot overrun community concerns, he said. If developers want certainty that they can build houses, cities want certainty that they will have the funds to provide infrastructure and public services to the new units. Thus, a proposal that simply clears the way for more greenfield development that relies on Mello-Roos financing for infrastructure is not worth pursuing, Carrigg warned. Carrigg may sound uncertain about where the League-CBIA effort is headed, but Brown is concerned about the alliance. Both the League and the CBI A want to “gut” the housing element law and eliminate state review, Brown said. “That would be just a total jailbreak,” Brown said. “The potential to have the Folsoms of the world working together with the high-end builders is troubling.” Then there is the effort headed by Perata and his allies, state Senate Transportation and Housing Committee Chairman Tom Torlakson (D-Antioch) and state Senate Environmental Quality Committee Chairman Alan Lowenthal (D-Long Beach). They have introduced a four-bill package of SBs 44, 521, 575 and 832 (see sidebar). It appears that SB 832 will be the centerpiece. As introduced, the bill makes modest increases to environmental review exemptions for infill projects in large cities. Bill amendments are on the way; it appears that they will have the approval of environmentalists. “While we all agree that technical improvements can be made to the California Environmental Quality Act,” Lowenthal said, “we must ensure that these changes do not weaken the act or encourage poorly planned developments that Californians do not want and cannot afford.” It is difficult to see how the Democrat's cautious approach will jibe with the administration's stated plan to reduce barriers to all types of housing. Finding common ground could become even more difficult because partisan differences over a variety of issues, including the budget, are becoming more overt. Key Pieces of Housing Legislation Introduced This Session AB 237 (Arambula). Authorizes the Department of Housing and Community Development (HCD) to forgive farmworker housing loans under certain circumstances. AB 350 (Matthews). Authorizes local governments in Alameda, Contra Costa, Santa Clara, San Joaquin and Stanislaus counties to create infrastructure finance districts in jobs-housing opportunity zones. AB 517 (Hancock). Extends the life of the Berkeley Redevelopment Agency exclusively for the purpose of carrying out affordable housing projects. AB 549 (Salinas). Creates a pilot program in which a local government may self-certify its housing element based on production criteria. AB 590 (Walters). Allows cities and counties to designate senior-only mobile home park zones and grant conditional use permits for senior-only mobile home parks. AB 712 (Canciamilla). Strengthens the “no let loss” law that limits density reductions. The bill tightens the standards for findings necessary for density reductions. AB 890 (Cogdill). A spot bill that could be amended to contain the Schwarzenegger administration's housing package. AB 906 (Houston). Provides tax credits for brownfield and mixed-use developments, and projects near transit stations. AB 912 (Ridley-Thomas). Exempts from tax the interested that financial institutions earn on loans to fund the redevelopment of brownfields in blighted areas. AB 921 (Daucher). Authorizes redevelopment agencies to extend the life of project areas by 25 years without a finding of blight. An agency would get only 50% of tax increment, and 60% of that would have to be devoted to market-rate and affordable housing. AB 939 (Mullin). Expands the area where pooled redevelopment housing set-aside funds may be expended to include sites near BART stations and along El Camino Real on the Peninsula. AB 1087 (Florez). Requires local governments to reject a development application if the government finds that the water or sewer provider has failed to provide services for affordable housing. AB 1192 (Villines). Exempts nonprofit housing construction from prevailing wage requirements. AB 1203 (Mullin). Authorizes local governments to create “greyfield housing and investment zones,” in areas where job growth and high-density housing is desired. The zones could use tax-increment financing and would have access to infrastructure and housing funds. AB 1233 (Jones). Requires the unmet housing need to be included in the regional housing needs assessment. AB 1259 (Daucher). Allocates additional tax revenue to cities and counties that produce housing equal to at least 80% of the jurisdiction's regional housing need allocation over 5 years. AB 1352 (Baugh). Permits redevelopment agencies to transfer housing funds to other agencies within the same council of governments region. AB 1367 (Evans). Requires the state to consider local growth control initiatives when calculating fair-share housing requirements. AB 1387 (Jones). Carves a loophole in CEQA for urban infill projects that comply with the transportation policies in a general plan or zoning ordinance. AB 1390 (Jones). Expands enforcement of a redevelopment agency's low- and moderate-income housing requirements, and amends certain replacement and rehabilitation housing requirements. AB 1491 (Calderon). Gives the City of Industry control over half of its redevelopment housing set-aside funds. Los Angeles County now has control over the money. AB 1702 (Frommer). Extends by-right development rights to planned unit developments. SB 44 (Kehoe). Requires all jurisdictions to adopt air quality elements that account for development patterns. SB 223 (Torlakson). Establishes a new program in which the Department of Housing and Community Development would offer forgivable loans to cities and counties for the preparation of specific plans that provide for additional infill housing opportunities of at least 500 units in metropolitan areas and 200 units in non-metropolitan areas. SB 253 (Torlakson). Authorizes a council of governments to charge a fee to local governments for the cost of the regional housing needs allocation process. SB 326 (Dunn). Amends a two-year-old law prohibiting cities from requiring use permits for certain multi-family housing developments. The bill would extend the by-right provision to development of single-family units. SB 435 (Hollingsworth). Clarifies last year's SB 1818 regarding density bonuses for projects that have an affordable component. Bill sponsors want to devise a list of incentives from which developers may choose, and limit developers to one incentive, unless a developer uses less than half of the density bonus to which the developer is entitled. SB 521 (Torlakson). Permits redevelopment agencies to use tax increment financing to develop high-density projects near transit stations. SB 565 (Migden). Increases the set-aside in the low-income housing tax credit program for small developments. SB 575 (Torlakson). Strengthens anti-NIMBY law relating to affordable housing projects by preventing cities and counties from concluding that a project is not needed or that it is an incompatible use, unless the jurisdiction has a certified housing element. SB 588 (Runner). Permits redevelopment agencies to spend “surplus” housing funds for purposes other than housing. SB 832 (Perata/Torlakson/Lowenthal). Expands the CEQA exemption for urban infill projects. Major amendments are likely. SB 948 (Murray). Requires a local government to prepare a “short form environmental impact report” for certain residential developments that are consistent with local land use requirements. SB 950 (Torlakson). Increases the types of housing that are considered “at risk” for the purpose of awarding tax credits. SB 968 (Torlakson). Requires cities and counties to identify in a general plan's land use element sufficient land to accommodate the jurisdictions' housing need for the duration of the general plan's planning period. This bill could be amended to include measures endorsed by the League of California Cities-California Building Industry Association Housing General Plan Task Force. SB 1026 (Perata). Spot bill regarding housing elements. The bill will likely address land supply for residential development.

When the City of Lake Forest added the power of eminent domain to a 14-year-old redevelopment plan, the city should have made new blight findings, the Fourth District Court of Appeal has ruled. The city had argued that it was only changing the focus of the original redevelopment plan for the El Toro Road area and, therefore, could rely on the original blight findings. The court rejected that argument, concluding that the addition of eminent domain authority was a “material and significant” amendment to the redevelopment plan that required updated blight findings. The decision could make redevelopment more difficult in California, although how much more difficult is not clear. The court said that its decision was based on the case's particular facts and should not “be read to establish an automatic rule to the effect that any time a power of eminent domain is added to a redevelopment plan, a new finding of blight is 'warranted.'” The fact-bound decision is good for cities generally, said attorney T. Peter Pierce, who filed an amicus brief in the case for the League of California Cities. Cities had feared the court might create a far-reaching new rule. Still, Pierce acknowledged that the ruling does not settle the issues at hand. “This leaves open a lot of questions,” Pierce said of the ruling. “It doesn't give us any concrete guidance. I think there is going to be a lot more litigation.” Attorney Kathryn Reimann, who represented Lake Forest, predicted the ruling would hinder redevelopment. “These things take a long time. One would hope the level of blight is not the same after 14 years,” Reimann said. “If courts are going to require agencies to re-establish the same level of blight every time they change the focus of a redevelopment plan, it's going to be much more difficult for cities.” In 1988, before Lake Forest incorporated, the Orange County Board of Supervisors adopted a redevelopment plan with 14 sub-areas, one of which was the El Toro project area. The primary motivation was not to improve the commercial centers along El Toro Road, but to alleviate the thoroughfare's traffic congestion. The 1988 plan expressly disavowed the use of eminent domain. The city incorporated three years later and in 1998 gained jurisdiction over the redevelopment project area. By that time, the commercial strips along El Toro Road were suffering with declining sales and increasing vacancies. In May 2002, the city amended the redevelopment plan to focus on improving commercial and industrial properties while also maintaining residential properties. The city also included the power of eminent domain because officials wanted to condemn the Saddleback Valley Plaza and a shopping center whose anchor, K mart, had closed in 1994. Harvey Boelts, who owned an interest in one of the shopping centers, filed a lawsuit challenging the validity of the city's actions. He contended that the city's findings to justify its decision were not supported by substantial evidence. Orange County Superior Court Judge C. Robert Jameson ruled for Boelts and blocked implementation of the plan amendment. Judge Jameson determined that the addition of eminent domain authority was a material and substantial plan amendment that warranted new findings of blight. The county made the original blight findings under different circumstances, and those findings were insufficient to support the plan amendment, Jameson ruled. The city appealed, but a three-judge panel of the Fourth District, Division Three, upheld the lower court. The city's primary argument was that once the initial finding of blight was made and the time for challenging that finding in court had passed (which it did in 60 days), blight was conclusively established. The city based its argument on Health and Safety Code § 33368, which addresses procedures for adopting an initial redevelopment plan. But the Fourth District said that the city was improperly reading § 33368 in isolation. The city needed also to consider § 33457.1, which deals with redevelopment plan amendments. In some circumstances when a plan is amended, blight findings are warranted under § 33457.1, the court ruled. “ riginal blight findings remain conclusive under § 33368 a timely validation action brought pursuant to an amendment (if such findings are warranted under § 33457.1), but, by the very terms of § 33368, only until then,” Presiding Justice David Sills wrote for the court. Property owner Boelts filed the validation action here. And because the power of eminent domain is extraordinary, the addition of such power is a material change to the plan that warrants new blight findings, the court held. The city, though, did not attempt to support the plan amendment with updated blight findings. Reimann contended that the court misread the law and said she would ask the state Supreme Court to review the decision. All the city did in 2002 was add the power of eminent domain because the city did not want to pay “speculative prices” for commercial real estate, she said. “It's clearly the same overall plan. The goals and objectives remain the same. The agency was always authorized the buy and sell property,” Reimann said. The Case: , No. G033549, 05 C.D.O.S. 1680, 2005 DJDAR 2277. Filed February 24, 2005. The Lawyers: For the city: Kathryn Reimann, (831) 647-1430. For Boelts: Michael Leifer, Palmieri, Tyler, Wiener, Wilhelm & Waldron, (949) 851-9400.

The forests of the Sierra Nevada have long been a landscape of controversy, a battleground for conflict over logging, wildlife protection, water diversion, and the accelerating encroachment of vacation homes and subdivisions into flammable scenery. Gubernatorial politicking may soon move into the woods as well, as forest policy could provide an issue that Democratic challengers to the state's Republican governor use to draw a contrast between themselves and the incumbent. During the recall campaign that swept him into the state's highest office, California Gov. Arnold Schwarzenegger issued a package of promises - "Arnold's Agenda to Bring California Back" - that included a strong environmental component. Among the planks that most cheered green groups was a pledge to uphold and defend a landmark forest management plan called the Sierra Nevada Framework against critics' efforts to derail it. The framework established new rules for managing 11 national forests encompassing 11.5 million acres of the Sierra Nevada (see CP&DR Environment Watch , April 2004, March 2001). The framework would have established a protected network of "old forest areas" to maintain suitable habitat for old-growth-dependent species. The plan put large trees off limits to logging. An estimated 191 million board feet of timber would have been available for harvest during each of the first five years, a one-third reduction from logging levels during most of the 1990s. The purpose of the framework was to avoid a repeat of the court-ordered logging shutdown that affected Oregon and Washington during the late 1980s and early 1990s, the result of protections imposed through litigation for endangered wildlife dependent on old-growth forests, such as the spotted owl. The process of developing the Sierra plan involved local community groups, the timber industry, scientists, environmentalists, recreation groups, economists, and state and federal agencies. It cost $20 million, involved nearly 200 public meetings and attracted the participation of 47,000 people. It was finalized in January 2001 just three days before President Clinton left office. The U.S. Forest Service (USFS) initially indicated support for the plan. "I believe our new management direction will protect and improve habitat for species, and avoid the need for listings as threatened or endangered," Pacific Southwest Regional Forester Brad Powell said when he issued the final decision adopting the framework. "This will also reduce flammable materials in these areas to the point that prescribed fire can be used safely." Before the year was out, however, the new regional forester, Jack Blackwell, announced his agency would undertake an extensive "review" of the document after receiving more than 200 appeals. The veiled meaning of Blackwell's announcement was not lost on environmentalists or those seeking their support. During the 2003 recall campaign, Schwarzenegger called the plan "a model of forest ecosystem protection," and pledged that if elected governor, he would "direct all relevant state agencies to comply fully with the framework and call on the federal government to honor its pledge to abide by the policies set forth in this unprecedented compact." The federal government clearly felt unbound by the pledge. In January 2004, only two months after Schwarzenegger became governor, the revised framework landed on his desk with a thud. Critics said it was less a revision than a wholesale rewriting of the plan. The new plan more than doubles the amount of logging, eliminates the protected "old forest areas" and allows larger trees to be cut. "Our district rangers who have worked hard to implement the (2001) framework have told me that it's difficult or impossible to meet its good goals," Blackwell said in issuing the new plan. "For instance, the framework's reliance on prescribed burning to reduce fuels is not working out due to limitations imposed by weather or local residents' objections to smoke." Cutting more and larger trees was necessary, Blackwell said, to "help offset the cost of removing the less valuable smaller trees and brush that are unnaturally dense due to decades of fire suppression." In response, Governor Schwarzenegger veered off the path blazed by Candidate Schwarzenegger. The pro-framework pledge quietly disappeared from his campaign website. And he submitted no formal response to the Sierra plan revision, even though 9,000 members of the public filed appeals with USFS objecting to the new version. On March 21, Agriculture Undersecretary Mark Rey (a former timber industry lobbyist) affirmed the revised plan. Attorney General Bill Lockyer, who had vowed to sue the Bush administration if it overturned the 2001 framework, made good on his word. In a complaint filed February 1, he accused the Forest Service of acting "arbitrarily and capriciously in jettisoning the 2001 framework," and contended that the agency had thereby violated both the Administrative Procedure Act and the National Environmental Policy Act. In producing the new policy as a replacement for the 2001 plan, Lockyer argues, the USFS provided no reasoned analysis justifying the change. It also failed, he contends, to conduct a thorough environmental review of the new policy as required by NEPA, and did not examine alternatives to the policy it adopted. Lockyer's lawsuit echoes many of the criticisms directed at the Forest Service by environmental organizations and community groups that participated in creation of the earlier framework. "The Framework was a balanced approach to forest management that reduced the wildfire threat to communities while protecting forests, wildlife and water quality," said Craig Thomas of the Sierra Nevada Forest Protection Campaign. "This decision revokes a sound plan and ignores the advice of scientists commissioned to review it." Continuing his campaign to intercede where the Schwarzenegger team has been noncommittal, Lockyer also filed a lawsuit March 3 challenging a USFS management plan for Giant Sequoia National Monument that would allow commercial logging of up to 7.5 million board feet annually. It is not only federal forests that provide an opportunity for Schwarzenegger's critics to focus potentially unflattering attention on the sincerity of the governor's commitment to environmental principles. Earlier this year, the governor - who has appointed former timber-industry representatives to high-level positions in the state's resource management agencies - was asked to intervene in a dispute between Pacific Lumber Company and the North Coast Regional Water Quality Control Board over logging on company land in Humboldt County (see CP&DR Environment Watch , March 2005). Lockyer, a Democrat, is a probable candidate for governor in 2006. Before he can take on Schwarzenegger (assuming the governor seeks re-election) Lockyer will face off against state Treasurer Phil Angelides, who announced his candidacy on March 15. It is unlikely that forest policy alone will put any candidate on the endangered list, but it does allow potential challengers to chip away at the governor's image.

The Third District Court of Appeal has published its decision in a case involving the environmental impact report for the 6,000-acre Sunrise Douglas community plan in the City of Rancho Cordova. In a rather harsh opinion, the Third District ruled against the Environmental Council of Sacramento and Vineyard Area Citizens for Responsible Growth. The court found that the project opponents failed to state the facts fairly and did not address the evidence in the record (see CP&DR Legal Digest , March 2005 ). The case is Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova , No. C044653, 05 C.D.O.S. 2170, 2005 DJDAR 2979. It was filed on February 8, 2005, and ordered published on March 10, 2005.

The City of Escondido erred when it approved a lower-than-requested mobile home rent increase, but the city's action did not constitute a taking of private property, the Fourth District Court of Appeal has ruled. The court determined that the city did not have evidence to support the $31 rent increase. But rather than find that a taking occurred, the court simply directed the city to conduct a new hearing on the mobile home park owner's rent increase request. Escondido voters approved mobile home rent control in 1988. The ordinance and its application have been litigated virtually nonstop ever since. The H.N. & Frances C. Berger Foundation brought the case at hand. Berger owns a 155-unit, senior mobile home park. In February 2002, Berger applied for a $90 increase, equal to 25% of the average rent. The City Council, acting as the Mobilehome Rent Review Board, approved an increase of $31. Berger sued, seeking damages based on inverse condemnation and a violation of due process. San Diego County Superior Court Judge Lisa Guy-Schall ruled for the city. On appeal, a unanimous three-judge panel of the Fourth District, Division One, reversed part of Guy-Schall's decision. Escondido's rent control ordinance lists a number of factors for the Rent Review Board to consider in granting increases, but the ordinance does not specify a method or formula. For Berger's request, the city's expert on the question of a fair return on investment was Kenneth Baar, author of . He recommended an increase of $26.50 to cover higher operating costs, two capital improvements and an application fee. He recommended an additional $11.94 increase based on an indexing of the increase in the consumer price index (CPI) - for a total rent rise of $38.44. The board accepted Baar's recommendation, but it also considered two other figures, $31.67 and $25. The $31.67 was based strictly on 60% of the increase in the CPI. The $25 figure was based on a study of comparable mobile home spaces, excluding non-rent-controlled spaces. The board averaged the three figures and rounded down to $31. The Fourth District ruled that the “averaging method was faulty because there was no showing that two of the figures the board relied on were within the range of reasonable rents under the fair return criterion.” The $25 figure was based on the single factor of comparable rents, but only for rent-controlled spaces. The city could not make that distinction because, under the ordinance, “the mobile home park must be comparable, not the manner in which rents are set,” the court ruled. As for the $31.67 figure, there was no evidence to support that a straight 60% of the CPI increase amounted to a fair rate of return, the court ruled. In fact, Baar stated that a fair rate of return had to consider increased operating expenses and capital improvements. The court, however, rejected Berger's argument that rents must rise by 100% of the CPI. Berger's operating expenses increased at less than the CPI, the court noted. “Moreover, as Dr. Baar explained in his report, the use of indexing ratios may satisfy the fair return criterion because park owners typically derive a return on their investment not only from income the park produces, but also from an increase in the property's value,” Presiding Justice Judith McConnell wrote for the court. As for the inverse condemnation and due process contentions, the court ruled that Berger had not properly briefed the issues. Additionally, the court held, “when the remedy of future rent adjustments is available as a matter of due process, as here, there can be no taking or other civil rights violation.” The court directed the city to give Berger a new hearing. The Case: , No. D043829, 05 C.D.O.S. 1686, 2005 DJDAR 2257. Filed January 26, 2005. Ordered published February 24, 2005. The Lawyers: For Berger: Ronald St. John, Barton, Klugman & Oetting, (213) 621-4000. For the city: Donald Lincoln, Endeman, Lincoln, Turek & Heater, (619) 544-0123

In a March referendum election, El Dorado County voters upheld a revised county general plan and rejected a growth-control measure that would have tied growth to Highway 50 improvements. The election was another step toward a new general plan, as the county has been without a legal general plan for six years. In other March election activity, voters in Palm Springs sent a decidedly mixed message by rejecting an initiative to prohibit most development in the hills above town while also rejecting a golf course resort planned in those same hills. In Beverly Hills, voters upheld a city decision to approve and subsidize an upscale resort project. In an advisory measure, Redondo Beach voters said they would like to see a 65-acre park replace a waterfront power plant. El Dorado County has been trying to get a new general plan for nearly a generation. The county started an update process in 1989. A consultant completed a draft plan in 1992, and staff members prepared a second draft in 1994, only to have a new, pro-growth Board of Supervisors alter the plan again before adopting it in 1996. A collection of 18 homeowner and environmental groups and government agencies sued the county, arguing that the environmental impact report for the plan was inadequate. In 1999, a Sacramento County judge agreed with the general plan opponents in finding numerous problems with the EIR (see , March 1999, March 1996). The ruling ended the county's ability to approve discretionary projects, and required the county to get court ratification of any new general plan. One year ago, El Dorado County voters overwhelmingly rejected an initiative that was similar to the 1996 plan. Still, county officials used the 1996 plan as the base for a general plan that the Board of Supervisors adopted in July 2004. Opponents, who argued the plan permits too much growth in the mostly rural county, quickly qualified a referendum for the ballot. The latest version of the plan continued to divide the Board of Supervisors, but the board majority, as well as U.S. Rep. John Doolittle (R-Rocklin) and Assemblyman Tim Leslie (R-Tahoe City) urged voters to keep the plan. In the March election, 50.9% of voters backed Measure B to keep the plan. The next step is for the county to get clearance from the court to implement the plan. However, the county can expect a courtroom fight from opponents. Attorney Stephan Volker, who represents the opponents, said the EIR for the general plan ignores impacts to high Sierra lakes that would serve as water sources, oak woodlands and wildlife habitat. By a wider margin (60.5% to 39.5%), El Dorado County voters rejected Measure D, an initiative that would have prohibited new subdivisions until Highway 50 between Cameron Park and the Sacramento County line is widened to eight lanes. Most of that stretch of freeway is four lanes. Voters in the City of Palm Springs also faced one referendum and one initiative. In the desert city, the referendum concerned the Palm Hills project, a resort of more than 100 houses and time-share units, a hotel and a golf course in the foothills of the Santa Rosa Mountains at the southeastern edge of town. The City Council approved the project last year, but 55.6% of the electorate voted no on Measure C, overturning the council's decision. The mountains above Palm Springs have remained almost entirely undeveloped, and the Sierra Club-backed Measure B sought to keep the hillsides that way. The measure would have established 40-acre minimum lot sizes for a 55-square-mile preservation zone along the city's southern and western borders. Besides the Palm Hills projects, two smaller housing developers are planned in the hills. Although 54.8% of voters rejected the hillside preservation initiative, environmentalists vowed to keep fighting in the courtroom and at the ballot box. In Beverly Hills, voters backed a new hotel on North Beverly and North Canyon drives, in the Golden Triangle. In approving the Measure A referendum 53.5% to 46.5%, voters backed the Beverly Hills Garden Specific Plan, which the City Council approved last year. The project calls for a 214-room Montage hotel topped by 25 condominiums. The upscale hotel would feature a spa, banquet facilities, a restaurant, ground floor retail shops, and a roof-top swimming pool and grill. Under an agreement with developer Athens Group, the city agreed to invest $33 million in an underground parking garage, a 33,000-square-foot public garden and a three-story civic building. Athens Group, Montage and the owners of the existing Peninsula Beverly Hills hotel, who opposed the project, spent more than $3 million on the election, equal to about $350 per vote. Project opponents said the deal was bad for the city, in part because officials were not counting in the subsidy the $14 million worth of the public land involved in the project. They also complained because the Montage would be eight stories in an area currently limited to 45-foot-tall buildings and would bring additional traffic. Backers countered that the city-owned land would remain in public hands so it did not amount to a subsidy. They said the project would generate $5 million to $6 million annually in bed, sales and property taxes. They also said the project would replace empty and earthquake-damaged buildings. The Redondo Beach advisory election concerned waterfront land owned primarily by AES, which operates a power plant on the site. Although the land does not appear to be available, voters were asked to choose between a 65-acre park, and a seaside development of 350 housing units, a hotel, some commercial space and a 16-acre park. About 55% of voters picked the big park.

Los Angeles County supervisors approved a revised environmental impact report for a 2,500-unit project in the Santa Clarita Valley, a project that two years ago lacked proof of adequate water. The revised EIR does not identify new sources of water. Rather, the document provides additional analysis of the reliability of the State Water Project (SWP) and more information from the Castaic Lake Water Agency regarding local supplies, demand and future needs. The 2003 Court of Appeal decision in Santa Clarita Organization for Planning the Environment v. County of Los Angeles , 106 Cal.App. 4th 715 (see CP&DR Legal Digest , April 2003) was memorable for the second sentence of the ruling: "The dream of water entitlements from the incomplete State Water Project (SWP) is no substitute for the reality of actual water the SWP can deliver." The court was particularly critical of the county for not addressing the SWP's ability to deliver water, and the likelihood of new local supplies being developed. While the revised EIR satisfied the Board of Supervisors, environmentalists were not persuaded and vowed to continue fighting. Supervisor Zev Yaroslavsky also was not convinced, and he cast the lone vote against the environmental study because of ongoing concerns over "paper water." The revised EIR must satisfy the court before the project may advance. The developer, Newhall Land and Farming, is confident this version of the EIR will pass muster. "It was not an issue of water supply. It was an issue of analysis," Newhall spokeswoman Marlee Lauffer said. Two environmental organizations have reached an agreement with developers at Northstar Resort that will end the environmentalists' opposition to a proposed 1,450-unit condominium and townhouse development at the high Sierra resort in eastern Placer County. Developer East West Partners Tahoe reached the agreement with Sierra Watch and Mountain Area Preservation Foundation. In exchange for the environmental groups' support for the Highlands project, East West and property owner Trimont Land Company agreed to prepare a Habitat Conservation Plan for the entire 8,000-acre resort, the majority of which is undeveloped. Also, a real estate transfer fee of 0.50% will be placed on all sales at Northstar, with the money going to the Truckee Donner Land Trust. The fee is expected to generate $30 million over 25 years for land purchases in the Martis Valley, which is experiencing a great deal of growth pressure. Also, East West agreed to leave untouched 233 acres along Highway 267, which links Truckee with Lake Tahoe's north shore. The agreement was announced in March, only two weeks after Placer County approved the project. The agreement, however, may not end existing Northstar property owners' objection to development. Last year, an appellate court ruled for the property owners, who had contested the county's environmental review of an earlier phase of the Highlands project. ( Association for Sensible Development at Northstar Inc. v. Placer County , 122 Cal.App. 4th 1289; see CP&DR Legal Digest , November 2004.) Also clouding the picture is a tentative ruling issued in February by Placer County Superior Court Judge James Garbolino. In the tentative ruling, the judge found that the environmental review was inadequate for the Martis Valley Community Plan that Placer County adopted in 2003 (see CP&DR Local Watch, March 2002). The community plan covers the Northstar property, but the Highlands project apparently would have been permitted under the 1975 version of the plan. A former local government lobbyist in San Joaquin County was convicted on 17 counts of attempted extortion, conspiracy, mail fraud and witness tampering in a corruption case involving the proposed development of a power plant at the Port of Stockton. A federal jury in March convicted Monte McFall, who prosecutors said had shaken down companies that were seeking permission to build the power plant. McFall, who has been a player in San Joaquin County politics for years, told the companies that he could use his influence to halt the project if they did not pay him cash (see CP&DR In Brief , February 2005). Former San Joaquin County Sheriff Baxter Dunn, former county Supervisor Lynn Bedford, his former aide J. Tyler Reves and former state Office of Criminal Justice Planning Director N. Allen Sawyer had already pleaded guilty in the corruption case. All five men now await sentencing, although McFall faces many more years in prison than his associates. Yolo County has sued the City of Woodland over the city's approval of a 55-acre retail power center and auto mall along Interstate 5. The county contends that the city failed to mitigate the loss of farmland and impacts on nearby agricultural operations, and did not adequately address impacts to water supply, wastewater treatment facilities and a proposed freeway ramp. "This last-resort action is seemingly what it will take to provide for the appropriate mitigation," county Board of Supervisors Chairwoman Helen Thomson said. City officials, who approved the project and an environmental impact report in February, rejected the county's contentions and said the county should stay out of city business. San Diego has approved two hotels with a combined 350 rooms at the site of the former Naval Training Center on Point Loma. The hotels, which still need approval from the Coastal Commission, would be one of the first new uses at the former 361-acre boot camp, which closed eight years ago. Plans also call for 350 housing units, office buildings, schools, a cultural center, another hotel and a 46-acre park (see CP&DR Base Reuse, September 1996). Base reuse has been controversial in part because of the height of the proposed buildings. A city ballot measure approved in 1972 restricts buildings in the coastal zone to 30 feet, except downtown. However, an appellate court in 2003 ruled that Proposition D did not apply to the former base because of the Federal Base Closure Act and the state Government Code. ( Save Our NTC, Inc. v. City of San Diego , 105 Cal.App. 4th, 285; see CP&DR Legal Digest , February 2003). The hotels approved in March would be 59 feet and 57 feet tall. Fresno County supervisors have decided to put some new subdivisions on hold while officials review the county's subdivision policy. The move came in early March, when the Board of Supervisors considered an appeal of a 23-lot, 59-acre subdivision in a rural area a few miles east of Clovis. Supervisors voted 4-0 to uphold the Planning Commission's denial of a zoning change and subdivision map. However, supervisors conceded that the project met most of the county's guidelines, prompting the supervisors to question those guidelines. Fresno County has a great deal of "rural sprawl," which in the past has prompted concerns about infrastructure, loss of farmland and air pollution.