Two Oakland ordinances that crack down on shoddy motels have been upheld as constitutional by the Ninth U.S. Circuit Court of Appeals. The unanimous three-judge panel rejected contentions from motel owners that the ordinances were an unconstitutional taking, denied the owners their due process and equal protection rights, and were too vague. After years of wrestling with illegal activity in and around run-down motels, the Oakland City Council in 1999 adopted two ordinances aimed at improving the physical condition of motels and rooming houses. Ordinance No. 12136 required regular housekeeping, proper security and good record-keeping. Ordinance No. 12137 placed all legal, nonconforming motels into a new "deemed approved hotel program" that required all such motels to abide by the other ordinance or face misdemeanor prosecution and possible closure. The Hotel & Motel Association of Oakland and a number of motel owners challenged the new laws on constitutional grounds. District Court Judge Thelton Henderson upheld the ordinances. The motel owners appealed but got no further at the Ninth Circuit. The appellate panel ruled that the takings claim — based on motel owners being denied economically viable use of their land — was not ready for judicial review because the owners had never sought state administrative or judicial remedies. The court also rejected the argument that because they did not advance a legitimate state interest, the ordinances amounted to takings. "Based on legislative findings, the ordinances target an increasing concentration of illegal activity, unsanitary and dangerous conditions, and a variety of nuisances associated with problem hotels," Justice Margaret McKeown wrote. "The purpose is undeniably legitimate … and the means chosen substantially advances that purpose." The court quickly disposed of due process and equal protection claims because the city ordinances applied to all hostelries in town. As for the vagueness argument, the court held that the motel owners had to prove that there was no set of circumstances in which the ordinances would be valid. The motel owners failed that test. The Case: , No. 02-15220, 03 C.D.O.S. 8496, 2003 DJDAR 10613. Filed September 17, 2003. The Lawyers: For the association: Frank Weiser, (213) 384-6964. For the city: Arlene Rosen and Christopher Kee, city attorney's office, (510) 637-0360.

A state law that requires developers of housing within the coastal zone to provide low- and moderate-income units does not apply in instances where all of the actual dwelling units are built outside the zone. Constructing a road and utility lines in the coastal zone to serve new houses outside the zone is not enough to trigger the affordable housing requirement, the Second District Court of Appeal ruled. The decision was the second published ruling regarding a controversial project in the City of Los Angeles that is split by the coastal zone boundary. In a different case, the Second District held that the Coastal Commission cannot consider the environmental impacts to areas inside the coastal zone that result from development proposed outside the zone. That case, , (2003) 107 Cal.App. 4th 1030 (see , June 2003), has since been accepted for review by the state Supreme Court. The project that is causing the controversy is a 114-lot housing subdivision on 45-acres in Playa del Rey proposed by Catellus Residential Group. (Construction actually began this year.) The coastal zone boundary splits the parcel. Under the project that Los Angeles and the Coastal Commission ultimately approved, all of the houses would be built on 33 acres outside the coastal zone. Only a road, utilities and erosion control facilities would be built on a portion of the 12 acres inside the coastal zone. The groups Coalition of Concerned Communities and Spirit of the Sage Council sued the city. They contended that the environmental impact report was inadequate and that the city violated Government Code §§ 65590 and 65590.1 — statutes that require housing developers in the coastal zone to provide affordable units “where feasible” in the coastal zone or elsewhere in the city. Los Angeles County Superior Court Judge David Jaffe ruled for the city. The project opponents appealed but also lost at the First District, where a three-judge panel ruled 2-1 that the city did not violate the affordable housing provision. In the unpublished portion of its decision, the court unanimously upheld the EIR. At issue was the definition of “new housing developments constructed within the coastal zone” as used in Government Code § 65590, subdivision (d). The two-justice majority found the term to be “ambiguous,” while the dissenting justice did not. Writing for the court, Justice Richard Aldrich construed the key phrase to mean “new developments that include residential structures constructed within the coastal zone.” “Our construction,” Aldrich wrote, “gives effect to each word of the phrase in the context of both the phrase and the statute as a whole, the clear purpose of which is to require the provision of affordable housing based on activities within the coastal zone.” Thus, because Catellus proposed no actual homes inside the coastal zone, the affordable housing requirement did not apply, the court held. In his dissent, Justice Walter Croskey centered on the term “housing developments.” He wrote: “After repeated references to ‘dwelling units’ and ‘residential structure’ earlier in the statute, subdivision (d) pointedly does not state that the affordable housing requirement applies only if there are ‘new dwelling units constructed within the coastal zone or only if there are ‘new residential structures constructed in the coastal zone.’ Rather, the statute employs a term that encompasses not only dwelling units and residential structures but the whole of an improved tract of land: ‘housing developments.’” Croskey contended that if a “substantial part” of a housing development were constructed in the coastal zone, the affordable housing requirement was applicable. In this case, 2.3 acres of grading for a road, utilities and erosion control were a substantial part, he opined. But the two-judge majority said Croskey’s standard was “amorphous” and provided “no clear direction.” Besides, the majority said, 2.3 acres of grading in a 45-acre project is not a “substantial part” of the project. The Case: C , No. B149092, 03 C.D.O.S. 8215. Filed September 8, 2003. The Lawyers: For Concerned Communities: Craig Sherman, (619) 702-7892. For the city: Jack L. Brown, city attorney’s office, (213) 473-5502.

The last project in the re-creation of downtown Anaheim is scheduled to break ground before year’s end. The project will bring about 1,000 full-time residents to a district that has blossomed with private sector offices and government facilities during the last 25 years. While downtown Anaheim has become a job center for office workers, medical professionals and public employees, downtown is pretty well limited to an 8-to-5 schedule. The new project — about 490 loft apartments and for-sale townhouses — is expected to bring round-the-clock life to downtown, induce retail success, provide density needed for express bus transit, and offer needed housing. Anaheim’s downtown renewal is one of several ongoing in the cities of Orange County, which has long been considered only a collection of suburbs without centers. Different cities have taken different approaches to downtown redevelopment. Brea created one of the country’s first newfangled instant downtowns (see , January 1998). Santa Ana is building on a flourishing arts district. Fullerton has dedicated years and resources to retaining its core commercial area. Anaheim, meanwhile, wiped the slate clean and started over. Downtown was a tired, mostly industrial 100-acre slice of a 2,369-acre redevelopment project area that the city adopted in 1973. Over time, the city applied many items from the redevelopment tool box to downtown: The city acquired the entire 100 acres, demolished buildings, assembled parcels for sale to developers, built infrastructure, placed utility lines underground, erected parking structures and created pleasant streetscapes. A wave of area construction during the late 1970s and early 1980s was followed by an even bigger swell of building during late 1980s and early 1990s, when about 600,000 square feet of office space was built in 8- to 11-story towers, according to Community Development Deputy Director Brad Hobson. “From the commercial development perspective, it really was starting over with the downtown area,” he said. Today, about 13,800 people work in approximately 1 million square feet of downtown office space, which has a relatively low vacancy rate of about 7%. While the city started over with the commercial core, it has worked to preserve the historic residential neighborhoods right around downtown, known as the Anaheim Colony Historic District. Residents, the city and a consultant, The Planning Center, have worked on design guidelines intended to meld new and old. And those guidelines — plus extensive community input — have helped shape the final project in downtown. City officials and the CIM Group are planning for a 6-acre development of about 490 housing units and 60,000 square feet of retail development. Some of the structures will have a 1920s and 1930s feel to them, with brick warehouse characteristics. The bulk of the units will be loft-style apartments above ground-floor retail. Mary Anderson, CIM Group project director, said the city has “set the stage” for the development by providing some retail and extensive streetscape work, especially along the pedestrian-friendly Center Street Promenade, which splits the CIM project site. Downtown lacks multi-family housing, and the project is being designed for people attracted to an urban environment, whom Anderson described as mostly young professionals and empty nest couples. “It’s a very concentrated area, and this will provide pressure for retail services,” Anderson said. “It’s all about vitality.” Indeed, Hobson said the CIM project “gets that critical mass that we’ve been working toward all these years.” The city and CIM expect the retail component will fill with businesses that serve downtown residents and workers, creating more of a full-time urban environment. Anderson said restaurants, which are few downtown, have shown interest in the project. While the CIM project will help complete the downtown, the city and developers John Laing Homes and Brookfield Homes are working on about 800 units of infill housing in the adjacent historic district. Those units, which are higher density than the older homes, help create a better link between the well-preserved residential neighborhoods and the commercial core, said Brian Judd, project manager with The Planning Center. While the CIM project will essentially complete downtown redevelopment, the city will continue to receive tax increment through 2018. The larger district, which contains other areas still available for development, generated total revenues of $29.3 million, including $22.9 million of property tax increment, during the 2001-02 fiscal year, according to the State Controller’s Office. By far the largest expense was $10.7 million of debt service. Hobson believes downtown Anaheim is realizing success because it has stayed with the approach established during the 1970s. “Councils over the decades have really stuck with that overall strategy,” he said. “Projects come and go, but the overall vision, as long as it remains consistent, will pay off.” Downtown Anaheim’s largest employers Company: Employees SBC Communications 3,200 City of Anaheim 2,875 Alstyle Apparel 1,500 Anaheim Memorial Hospital 900 CKE Restaurants 700 Interstate Electronics 600 3-Day Blinds 550 RSI Home Products 550 Western Medical Center 400 Anaheim City School District 318 Contacts: Brad Hobson, City of Anaheim, (714) 765-4319. Mary Anderson, CIM Group, (323) 860-4929. Brian Judd, The Planning Center, (714) 966-9220.

An appellate court has rejected a psychiatric home developer’s challenge to water and sewer connection charges. The court held the developer should have presented its challenge when the governing board adopted its fee ordinance, not when the water district applied the fees to the project at hand. The controversy arose when California Psychiatric Transitions, Inc., proposed a 32-bed adult residential care facility in Merced County. The facility lies within the Delhi County Water District, which provides water and sewer services. The district classified the project as a rest home under its fee structure. Rest homes are charged at one-third of current connection fees per bed, meaning the base residential rate was multiplied by one-third the number of beds. Under this formula, the district charged the psychiatric home developer $45,333. The developer paid the fee but immediately filed a protest and then a lawsuit. Merced County Superior Court Judge William Ivey ruled for the district. California Psychiatric Transitions appealed, and a unanimous three-judge panel of the Fifth District Court of Appeal upheld the lower court. What became the central issue of the case was whether the developer was challenging the fee ordinance, or the district’s application of the fee to this project. Both sides agreed that if the developer was contesting the ordinance, the lawsuit was filed years too late. Government Code § 66013 permits local agencies to impose fees for “water and sewer connections” and “capacity charges.” Developers have 120 days to contest fees adopted under § 66013. Government Code § 66020 addresses “fees imposed on a development project,” which are essentially development impact fees. The imposition of fees under § 66020 can be contested within 180 days of the date the fees are levied. California Psychiatric Transitions relied on this code. But the Fifth District pointed to , (2001) 26 Cal.4th 1185, in which the state Supreme Court held that fees imposed in connection with a development project are not automatically “fees imposed on a development project” under § 66020. In the Delhi case, the fees could be considered capacity charges (which pay for capital improvements) or user fees, and are not necessarily related to property development, the court held. Thus, the court did not allow the challenge under § 66020. Furthermore, the court noted, California Psychiatric Transitions had argued that the water district’s only direct expense related to the project was an inspection that cost $37. So, the developer argued, the fee was not based on the district’s actual costs. The court held that this argument was not an attack on the specific fee that the water district assessed for a specific project. “The underlying claim by appellant is that respondent’s fee structure does not comply with the statutory mandate that connection fees reflect the estimated cost of labor and materials,” Presiding Justice Steven Vartabedian wrote for the court. “ his clearly is an attack on the ordinance.” The Case: , No. F040278, 03 C.D.O.S. 8195, 2003 DJDAR 10163. Filed September 5, 2003. The Lawyers: For California Psychiatric Transitions: Michael Ott, Erickson, Arbuthnot, Kilduff, Day & Lindstrom, (559) 449-2600. For the district: David Capron, (209) 722-8144.

Gov. Gray Davis closed out the 2003 legislative year by signing a three-bill package intended to settle the Colorado River water wars. Following the governor’s bill signings, the Imperial Irrigation District narrowly approved the plan, and Interior Secretary Gale Norton signed a new Colorado River water pact with Imperial and three other Southern California water agencies. The bills removed many of the obstacles that blocked an earlier plan for California to reduce gradually its use of “excess” Colorado River water and to transfer water from Imperial Irrigation District farms to San Diego County homes and businesses. The major sticking points concerned the health of the Salton Sea — which survives largely via agricultural runoff — and species that rely on the sea for habitat, and Imperial Irrigation District fears that it would get stuck with the bill for environmental mitigation. The bills that Davis signed are: • SB 277 (Moreno), which authorizes the Department of Water Resources to purchase up to 1.6 million acre-feet of water over 15 years from the Imperial Valley. The department will then sell the water to urban areas, generating an estimated $300 million for Salton Sea restoration. • SB 317 (Kuehl), which gives the Department of Fish and Game greater flexibility in dealing with “fully protected species,” a category outside the state and federal endangered species acts that covers some species reliant on the Salton Sea. The bill also directs the Resources Agency to prepare a preferred alternative for restoring the Salton Sea. • SB 654 (Machado), which establishes a joint powers authority to oversee mitigation of impacts on the Salton Sea that result from water transfers to San Diego. The bill also authorizes $50 million in Proposition 50 bond money for Salton Sea restoration, and $235 million in state funds to line the earthen All American and Coachella canals. Upon signing the bills, Davis declared, “Peace has broken out along the Colorado River.” The Metropolitan Water District, the Coachella Valley Water District and the San Diego County Water Authority all approved the multi-party deal shortly before Davis took action. The Imperial Irrigation District, which voted 3-2 against an earlier plan in December 2002 — causing the Interior Department to slash the state’s use of Colorado River water — voted 3-2 for the deal in early October. Imperial Director Bruce Kuhn, who switched his vote, conceded that he succumbed to pressure from Washington and Sacramento. Deal opponents in the Imperial Valley say the plan will require farmers to fallow their fields. Deal supporters contend conservation measures funded by the state and urban water users will keep farmers in business. Under the Quantification Settlement Agreement, the state has 14 years to reduce its use of Colorado River water from 5.3 million acre-feet annually to its longtime legal entitlement of 4.4 million acre-feet per year. Furthermore, the Imperial Irrigation District will sell to the San Diego County Water Authority up to 277,000 acre-feet of water — enough to meet much of the county’s growth needs for decades — for 45 to 75 years. Additionally, all parties agreed to drop existing lawsuits and to cooperate with a new, multistate-federal Colorado River alliance. While Davis praised the agreement and Norton called it “a historic turning point,” others remained skeptical. Environmentalists, led by the Center for Biological Diversity, complained about weak environmental provisions. And Mexican officials said that lining earthen canals would decrease groundwater recharge in the region, harming farmers south of the border. In other legislative matters the governor the following bills: • AB 514 (Kehoe), which gives urban areas supplied by the Central Valley Project 10 years to install water meters. • AB 944 (Steinberg), which permits property and business improvement districts to issue assessment bonds and levy assessments against business owners. • AB 1244 (Chu), which lets schools apply for modernization funds every 25 years, eliminating a one-time-only restriction. • AB 1410 (Wolk), which makes transit-oriented development a preferred use when public agencies are selling surplus land. • AB 1492 (Laird), which doubles penalties and creates new procedures for terminating Williamson Act farmland preservation contracts when there is a contract breach. • AB 1631 (Salinas), which ends the requirement that schools switch to a multi-track schedule if they convert a single-story structure to a multi-story building. • SB 68 (Alpert), which establishes the San Diego Bay Advisory Committee for Ecological Assessment and gives the panel until December 31, 2005, to prepare a report. • SB 114 (Torlakson), which prohibits all subsidies of vehicle dealerships and retail stores of at lest 75,000 square feet that relocate within the same market. • SB 352 (Escutia), which, with some exceptions, prohibits new schools within 500 feet of a freeway or busy road. • SB 445 (Kuehl), which requires nonprofit organizations to submit a management plan to the Coastal Commission and Coastal Conservancy before assuming operation of a public accessway to the coast. • SB 566 (Scott), which allows cities to place quarter- or half-percent sales tax increases before voters. Previously, cities needed special legislation for sales tax increases. The bill also doubles the permissible, cumulative sales tax override in a county to 2%. • SB 619 (Ducheny), which, among other things, prohibits local governments from requiring conditional use permits for a multi-family residential project of 100 units or less that is proposed in a multi-family zone. • SB 810 (Burton), which makes clear that regional water quality control boards — not the Department of Forestry and Fire Protection — have authority over water quality provisions in timber harvest plans. Davis the following bills: • AB 51 (Simitian), which would have required general plans to identify land use categories that provide for child care facilities. Davis called the legislation a mandate that the state could not afford. • AB 94 (Chu), which would have permitted cities and counties to increase property tax rates to pay for pensions approved by voters prior to Proposition 13. Davis blocked the bill because it allowed tax increases without voter consent. • AB 487 (Frommer), which would have required rental car companies to charge a 2.29% fee to fund state highway projects near airports. “I believe it is inappropriate to impose new fees purely for the benefit of one industry,” Davis said in his veto message. • AB 773 (Strickland), which would have expanded membership of the Ventura County Transportation Commission to include all 10 cities, rather than only three at a time. Davis contended the bill did not reflect a local consensus.

After more than four years of taking a timid approach to land use, the Davis administration is going out with a flurry. In the days just before and after the recall election, the administration issued detailed policy papers, reports and legal guidelines on everything from general plans to the California Environmental Quality Act to groundwater. Tal Finney, director of the Governor’s Office of Planning and Research, promised to produce even more policy documents before stepping down, including the first update in 25 years of the Environmental Goals and Policy Report. “I’ve been holding off for two years, and now it’s all coming out,” Finney said. “I really think California stands to gain for years to come from the work my staff has done in the last two years.” The flood of thick reports hit so quickly that many lobbyists and observers — even those who had contributed to reports — were unable to keep up. “I have all of these things in front of me that I need to read,” said Jim Metropulos, a lobbyist on water issues for the Sierra Club. While Governor-elect Arnold Schwarzenegger and his backers called for Davis to stop signing bills and quit making appointments, the incoming administration has been silent on the last-minute release of the land use and natural resource documents. Exactly why reports and guidelines have hit all at once is unclear. Some sources said it appeared Davis’s inner circle of advisors, who had reportedly bottled up many of the reports, either stopped paying attention or no longer cared to play it safe. Among the items that have come out are: • The first update of CEQA Guidelines since the Wilson administration • Expanded general plan guidelines • The five-year update of the state water plan • A comprehensive groundwater report issued by the Department of Water Resources (DWR) • Environmental justice recommendations from CalEPA • Water Desalination Task Force findings and recommendations • A report on “green buildings” prepared by the Sustainable Building Task Force. Other items that were reportedly ready to hit the street before Schwarzenegger takes office this month include the Environmental Goals and Policy Report, city incorporation guidelines for local agency incorporation commissions, an OPR environmental justice report, and a wetlands study by the State Water Resources Control Board. Finney said the Environmental Goals and Policy Report would be “the ultimate planners tool.” He said it will address the environment, the economy, land use planning, the regulatory system and more. By law, the Legislature is supposed to have the opportunity to comment on the document before it is complete, but the report had not been forwarded to lawmakers as of late October. Still, Finney vowed the report would become public, and he added, “I can’t imagine Governor Schwarzenegger’s people won’t be interested in carrying this out.” A document that did hit the streets after much delay was the CEQA Guidelines, prepared jointly by the Resources Agency and OPR. State officials had been working on an update since at least 2001, and draft updates with extensive Guideline amendments were circulated in 2002. Not all of those amendments made it into the update on which public comment closed October 6 — the day before the election. The revised Guidelines contain mostly technical, nonsubstantive changes, according to Finney. His office and the Resources Agency were working on more substantial changes, but administration officials do not have time to complete the work, Finney said. A quick reading suggests the biggest Guidelines changes cover determinations of significance of cumulative impacts, mandatory findings of significance, expanded requirements for recirculation of an EIR when last-minute information becomes available, more inducements to tier environmental documents off of a master EIR, and a new categorical exemption for habitat restoration projects of 5 acres or less. ( will have a more extensive review of the amendments in future editions.) The general plan guidelines, also an update of a Wilson-era document, contain a new section on environmental justice, an extensive discussion of public participation, a revised housing element section, guidance for water and energy elements, and recommendations for annual general plan implementation reports. The environmental justice material is not entirely new to planners, so OPR wrapped environmental justice into a broader discussion of sustainability, explained Brian Grattidge, an OPR senior planner. The environmental justice section explains the statutory framework, and then emphasizes the importance of public participation, good information and analysis, equitable distribution of public facilities and services, and preventing concentrations of industrial facilities from impacting schools and homes. The new public participation chapter provides more advice on the topic than previous editions of the guidelines and includes case studies. Much of the material may sound familiar to longtime planners, but the document makes the point that public participation is essential, said Julia Lave Johnston, of the California Research Bureau, who wrote the chapter. “It’s not a passing investment. It does make sense to do the groundwork,” she said. Indeed, Grattidge said an OPR survey found that public participation consumes 25% of a typical general plan budget. There is renewed interest in water and energy elements, which are optional under general plan law, Grattidge said. “What we’ve been seeing are energy strategic plans that are either regional or for a specific city. That’s something that could evolve into a general plan element, so we thought we should put the guidance out there,” he said. While updated CEQA and general plan guidelines are usually high on planners’ reading lists, a new groundwater study should get the attention of anyone in the land use business. Interim Water Resources Director Michael Spear called the document, known as California Groundwater, Bulletin 118 — Update 2003, “the first comprehensive report on groundwater in the state in almost three decades.” Besides noting that groundwater aquifers continue to be overdrafted by 1 million to 2 million acre-feet annually, the report repeatedly notes that development affects the quantity and quality of groundwater. “We really try to stress what a close link there is between land use decisions and potential benefits to groundwater if the decision is well thought out, or potential impacts if groundwater is not considered,” said John Woodling, principal geologist at DRW. Woodling said the groundwater report can be considered a subset of the state water plan, which is known as Bulletin 160. The department released the water plan for stakeholder comments in October, with a draft for public comment due out this month. The plan is similar to the Interior Department’s “Water 2025” framework in that both documents say we must make do with existing resources because additional storage facilities are unlikely to be built (see and , August 2003). The state plan estimates California could get roughly 5 million to 7 million acre-feet of water for the growing population through urban and agricultural efficiency measures, transfers from farms to cities, municipal water recycling, improved system operations, groundwater storage, and desalination of brackish groundwater and sea water. Those measures would be enough to quench the state’s thirst for the next 25 years and still keep agriculture thriving, the agency contends. The report has received mixed reviews. Farmers fear they will get squeezed too hard. Other people question whether the efficiencies the plan describes are realistic. Then there is the cost of implementing the measures. The plan does not contain detailed estimates but suggests the cost could be tens of billions of dollars. Another water report, this one from DWR’s Water Desalination Task Force, makes clear that desalinated water could be a cost-effective way to provide a modest amount of water — less than 10% of future needs. But the “overarching recommendation” of the report is that “desalination projects should be evaluated on a case-by-case basis.” Aside from water issues, CalEPA’s environmental justice recommendations appear to provide the state’s most comprehensive approach to the topic. The report — published on election day — emphasizes the need for public participation and for government agencies to respond to public input; the need for more scientific information, especially regarding cumulative impacts on communities; and integrating environmental justice into numerous government programs and planning efforts. Besides issuing a great deal of virtual and real paper, the Davis administration also completed some major bond-funded land purchases during its final weeks. The state spent $140 million on a deal that resulted in the state acquiring or preserving about 550 acres at the Ballona wetlands in Los Angeles (see , October 2003). The other high-profile purchase was the $135 million acquisition of the 2,800-acre Ahmanson Ranch in eastern Ventura County, where an unpopular 3,000-unit subdivision had been approved (see , December 2002). Smaller deals included the purchase of 691 acres of timberland in Humboldt County for $18.3 from Pacific Lumber, and acquisition of 731 acres along Nevada County’s South Yuba River for $3.4 million from Sierra Pacific Industries. Contacts: Tal Finney and Brian Grattidge, Office of Planning and Research, (916) 445-0613. John Woodling, Department of Water Resources, (916) 651-9291. CalEPA website: www.calepa.ca.gov DWR website: www.water.ca.gov OPR website: www.opr.ca.gov

Interest in smart growth varies by state and region, but many communities located in disparate parts of the country, whether or not they are growing rapidly, want to implement at least some aspects of smart growth. And far from being a tool only used to stem or redirect growth, smart growth is seen in the East as a way to stimulate redevelopment of existing towns. Those are early conclusions that can be drawn from Solimar Research Group’s work on a U.S. Environmental Protection Agency-funded project. Earlier this year, Solimar, Smart Growth America, the University of Southern California’s Community Development and Design Forum, and the University of Colorado’s Real Estate Center signed a contract with EPA to provide technical assistance to a small number of localities over the next three years. These are communities that have a commitment to smart growth but that are struggling with building broad-based support, implementation, and other issues. The eventual goal is to create a set of “smart growth implementation tools.” Late in September, our group solicited applications. We had no preconceived notions about how many we would receive or from where they would come. We were gratified by the results: 105 applications flooded in from 37 states. It is clear from the applications (see map) that smart growth is not an issue only in fast-growing states, and localized conditions can make smart growth a pressing issue. While Sunbelt states appear to be smart growth hotspots, the Rust Belt states of Rhode Island, New Jersey, Pennsylvania, Massachusetts, Michigan and Illinois also generated numerous applications. The only region not represented was the Northern Plains. About 45% of applications came from states growing slower than average — including one from West Virginia, which is hardly growing at all. California led the nation with 18 applications. Alaska and Hawaii each had one application. In our solicitation, we gave localities the opportunity to define the problems with which they need help. In the resulting applications, planners, elected officials, and citizens’ groups cumulatively listed 301 requests, which we then grouped into eight categories (see table). While these are not strictly survey results, they are an indication of smart growth implementation difficulties that practitioners face. Problems with zoning codes figured prominently at nearly 25% of the requests; growth management followed closely at 19%. Growth management was not the biggest issue in California, which has a statewide growth rate slightly more than the average of all applicants. Help with growth management issues (mainly sprawl, infill and farmland preservation) was frequently requested in states with relatively low 1990-2000 growth rates. Communities in West Virginia (0.8% growth rate), Pennsylvania (3.4%), Connecticut (3.6%), and Ohio (4.7%) all sought growth management advice. But localities in the fastest growing states – Arizona (40%), Colorado (36.6%) and Idaho (28.5%) — did not request any assistance with growth management. Several applications from slower growing parts of the county mirrored California concerns. The pressure of localized growth on infrastructure or the threat of being enveloped by expanding urban development from a neighboring community prompted a substantial number of requests for assistance. Interestingly, smart growth is not only seen as a way to stem growth, but to induce it. Some older communities in the Rust Belt seek to implement smart growth policies to make redevelopment of their aged areas more attractive to investors and residents. The development patterns dictated by most existing zoning ordinances prohibit the kind of places identified by researcher Richard Florida as being attractive to the sought-after “creative class.” In general, the Golden State generated much less than its share of requests for assistance in economic development and redevelopment, community consensus, and code implementation. Except for applications from one community each in California, Idaho, Kansas and Texas, economic revitalization and redevelopment requests were an East-of-the-Mississippi phenomenon. Illinois and Maryland had several each. Of 17 requests for help with public education, only one came from California, perhaps reflecting the state’s reliance on the California Environmental Quality Act process for public outreach. Requests from other states — regardless of whether the applicant locality is currently experiencing population loss or rapid growth — cited the public’s mistrust of density as a roadblock to adopting or implementing smart growth policies. A related theme repeated in many applications was that, while the public accepts smart growth in theory, the public is not so sure it wants to put the theory into practice on the lot next door. Mixed-use development apparently has stouter legs in California than elsewhere; our state generated nearly 40% of requests for assistance with mixed use. And true to stereotype, California proved to be more image-conscious: more than one-fifth of all requests for design assistance originated here.

The state Supreme Court has added two cases involving fees to its expanding list of land use controversies under review. In October, the court accepted a case involving impact fees from reuse of the Fort Ord Army base, and a challenge of planning and building fees charged by the City of Rancho Cucamonga. In the Fort Ord case, the Sixth District Court of Appeal ruled 2-1 that California State University was not required to fund off-site road and fire safety improvements needed to serve the CSU Monterey Bay campus (see , August 2003). The Fort Ord Reuse Authority and the City of Marina argued that the environmental impact report for the campus failed to recognize CSU’s responsibility for funding its fair share of infrastructure. A trial court ruled for the Reuse Authority and the city, concluding that the California Environmental Quality Act (CEQA) required the university to contribute to a fund for the mitigation of cumulative impacts. The appellate court overturned that decision, ruling that fees — not an interpretation of CEQA — was at issue. According to the state constitution, Government Code § 54999 and case law, traffic and fire safety improvements necessary for a public university are the responsibility of the locality, not the university, the court ruled. The case is , No. S117816. The second new case for the high court involves building permit and plan review fees for a 123-unit subdivision levied by Rancho Cucamonga (see , July 2003). The developer, Barratt American, argued that the city failed to complete an annual audit to determine that the fees did not exceed the cost of providing service, and that the fees were arbitrarily based on the value of construction. The developer also contended the fees were special taxes prohibited by Proposition 62. A trial court and the Fourth District Court of Appeal ruled for the city. The appellate court ruled that the lawsuit was filed after the statute of limitations had passed and relied on the wrong statutes. The court ruled that even though Barratt American filed a lawsuit contesting the fee schedule within the 180-day statute of limitations, the suit was still too late because the city only re-adopted existing fees, and did not increase fees or levy new ones. The case is , No. S117590. The state’s high court has five other land use cases under consideration, none of which have been set for oral argument yet. Those cases are: • , No. S113466, in which lower courts ruled the composition of the Coastal Commission is unconstitutional. • , No. S116081, concerning the Coastal Commission’s jurisdiction outside the coastal zone. • , No. S105078, over whether Proposition 218 should apply to a water connection fee and a fire suppression fee charged to developers. • , No. S109597, which involves the statute of limitations for contesting the county’s second-unit ordinance. • , No. S116870, regarding state enforcement of the Surface Mining and Reclamation Act.

The most famous definition of architecture comes from Vitruvius, the ancient Roman writer, who said the word applied to structures that are (in my inexpert translation) beautiful, useful and well-built. What has long impressed me about this unsurpassed definition is how intrinsically different these three qualities are from each other. In a building, beauty has little to do with either practicality or comfort. Similarly, good construction has no necessary relation to good looks or convenience, although these things can co-exist very happily. My standing joke is that a building, to be of interest, should fulfill at least one of the three criteria. As it turns out, surprisingly few new buildings meet even these lowered expectations. This admittedly pedantic lead-in may help explain why I find the Beverly Hills reverse-osmosis water treatment plant a fit topic for inaugural Innovations column. The plant is a public building that cost the city nothing to build (although it did entail other financial obligations). The water-filtration plant helps solve the city’s, and the region’s, long-term water-supply problems. The building supplies office space and even educational space — something very unusual for a workhorse piece of infrastructure like a water treatment plant. And, as a fine piece of architecture designed by Mehrdad Yazdani of Cannon Design Group, the building adds visual quality to the fast-gentrifying industrial area of Beverly Hills. The origins of the reverse-osmosis plant probably owe much to Government Code § 5956 that allows municipalities to contract with private firms to design, build and operate certain facilities. The design-build process, according to Beverly Hills Public Works Director Robert Beste gave the city more control because the city started with a fixed cost and asked the developer what it could achieve for the money. The more traditional route would be to design the project, and then asking builders to compete on a cost basis. The design-build process “allowed us to get a building that the community wanted, and yet the building performs a very technical function,” Beste said. The company that won the job was Earth Tech, a Long Beach-based division of Tyco International, the manufacturing and services conglomerate. Earth Tech agreed to build the $17 million plant at its own cost on land the city leases to Earth Tech for a dollar per year. The city supplied, at its cost, four new water wells, which are not reflected in the construction budget. The city also has an agreement to purchase the water Earth Tech treats. The plant currently processes 2.7 million gallons daily, or nearly a quarter of the city’s water needs. The water is not cheap. At $530 per acre foot, the locally purified groundwater is more expensive than the supply available from the Metropolitan Water District (MWD) at about $420 to $470 per acre-foot. Making the deal feasible is a subsidy from MWD of $250 per acre-foot. That hefty assistance reflects the Met’s goal of encouraging local water providers to develop their own supply. In public finance, the attraction of the deal is that the cost of the locally purified water remains stable while the cost of MWD water fluctuates with demand and could increase in the future as the region continues its startling growth. Intended to be “cost neutral” to the city, the plant could end up saving money for the city by eventually producing water more cheaply than it can be bought on the open market, according to Beste. After 20 years, the developer-operator will have recouped its costs and realized its profit, and the city will take possession of the plant (although the city has an option to buy the plant in as soon as five years). To sweeten the deal further for the developer, the city instructed Earth Tech to provide 30,000 square feet of office space to house the city’s public works department. Sergio Bazerevitsch, the project manager for Earth Tech, would not disclose the office lease rates, which I estimate are about $36 per square foot annually. The building also includes a public meeting room suitable for conducting environmental-education classes for school kids. Visitors can see the water-filtration plant, which, in reality, is little more than two giant steel barrels, connected to pipes, with no moving parts. Educational, perhaps, but hardly entertaining. Although Beverly Hills has a reputation for having a tough design-review process, architecture did not enter the picture until several city councilmen, in negotiations with the developer, suggested that the plant needed more design. Beverly Hills’ so-called industrial area is a thin ribbon of aging office buildings and warehouses tucked behind City Hall. Unlike most other industrial areas, the Beverly Hills site is highly visible. The area is one of the few in the city where creative tenants can find the funky, old buildings they prefer, and the area has slowly gentrified. Madonna’s independent record label, Maverick Records, has its offices in a former ice plant here. Yazdani’s design for the façade is exuberant and curvilinear, which may seems at odds with the big, dumb box immediately behind the fancy wrapper. The façade is not falsification, however: The architect has located the public rooms and the office space at the front of the building, where they belong. The prominent curved protrusion in the front of the façade is the public meeting hall, while office space is located behind the tower at right. The architect has talked about the possibility of a municipal band rehearsing in the public meeting room — certainly a first for a water-filtration plant. The point of architecture, as we suggested at the outset, is to do more than one thing at the same time. Beverly Hills’ mixed-use building is an example of how a single structure can respond to a multiplicity of requirements — financial, architectural, governmental and technical. On the Vitruvius scale, it gets three thumbs up.

The City of Milpitas has adopted an ambitious specific plan for the heart of town, yet the city's approach to implementing the plan relies heavily on private investors. The plan calls for thousands of new housing units in densities of at least 30 units per acre — a remarkable change for a city of 65,000 that has grown up mostly as a single-family-home suburb. At the same time, the city's redevelopment agency (the entire specific plan area lies in a redevelopment project area) is mostly focused on basic infrastructure rather than on acquiring and assembling land for development. Located between San Jose to the west and Fremont to the northeast, Milpitas has always been something of a crossroads. Interstate Highways 880 and 680 carry hundreds of thousands of vehicles per day through Milpitas. Highway 237, which is a boulevard through Milpitas, has long been an important link between 880/680 and the Palo Alto area. And the town is the site of a Union Pacific rail yard. The midtown specific plan that the city adopted in 2002 actually builds on the crossroads traits, but in a 21st century fashion. Two stations for the Tasman East Light Rail Transit line are under construction and are scheduled to open in Milpitas next year. The light rail will connect the southern end of midtown Milpitas with downtown San Jose and other parts of Santa Clara County. And Milpitas is scheduled to get a BART station when BART is extended from Fremont to San Jose later this decade. Those transit stations, and a second BART station for which the city is lobbying, provide the centers around which high-density housing is planned. And the residents of those housing units are essential to the success of the midtown plan, explained James Lindsay, acting planning manager. "That critical mass of housing is what's important," he said. During much of the 1970s, ‘80s and ‘90s, Milpitas paid little attention to its traditional core. Today, the midtown thoroughfares of Main and Abel streets sport extensive strip commercial development with abundant surface parking, numerous mom-and-pop retail and service businesses, some vacant parcels, and a mishmash of housing. "The legacy is that the homebuilders built on the periphery, the shopping centers went up by the freeways, and the downtown was forgotten," said Allen Folks, a principal for EDAW, Inc., who helped write the midtown specific plan. Folks said midtown has a great deal of underused real estate. Over the years, the city made a number of attempts to generate new life on Main Street, but "nothing seemed to work well," Lindsay said. He figures part of the reason for the failure of past attempts was that they were not city-wide efforts. In 1998, voters approved a city-sponsored ballot measure that established a tight, 20-year urban growth boundary and essentially halted annexations (see , December 1998). At the same time, city leaders still wanted to stimulate economic growth. "Infill development really was the only way that was going to be accomplished. Suburban sprawl wasn't going to be permitted," Lindsay said. So the city took a new look at its traditional core and in late 1999 began the planning process that led to adoption of the specific plan. This time, the city reached out broadly to the public. The city conducted 10 meetings that were heavy on public participation. When it came time for the City Council to adopt the specific plan last year, the hearings were smooth and the public opposition was muted. Most of the opposition came from midtown business owners who lease space for car repair shops, car washes and other small enterprises. The business owners feared the city plan would make the real estate too valuable for their leases. The community acceptance of the plan can be seen in a proposed library expansion. The current library lies in a civic center complex across the railroad tracks from midtown. Voters backed a hotel tax increase to fund expansion of the library. But rather than expand the library at its current location, library supporters want to reuse a historic grammar school building at the north end of midtown. The specific plan calls for 4,860 housing units, 720,000 square feet of office space, 300,000 square feet of "general commercial" and 61,000 square feet of new retail, plus 48 acres of parks and extensive off-street pedestrian and bicycle paths. The focus of the plan is twofold: a mixed-use pedestrian district along Main and Abel streets, and high-density housing around transit stations. The plan recently won a comprehensive planning award from the California Chapter of the American Planning Association. While the plan contains some notions common to downtown revitalization, the planning area is atypical. In fact, three things that could be considered major constraints affect the area: an automobile-oriented shopping mall, a rail yard and transfer facility, and the county jail. The Great Mall shopping center is at an old Ford auto assembly plant. The city subsidized the reuse during the mid-1990s, and the mall continues to generate sales tax revenue. Although the mall does not match the pedestrian- and transit-orientation of the specific plan — and the city left the mall out of the specific plan area — the city chose to see the mall as a midtown asset, Lindsay said. The mall can anchor the midtown's south end and help draw people to a part of town they might otherwise ignore, he said. The rail yard and transfer facility are still in use and divide the town into an east side and a west side. The plan designates the rail site as "manufacturing and warehouse," but there is a transit-oriented development overlay zoning and city officials clearly would like to see the area redeveloped in a way that connects midtown with the newer parts of town east of the rail line. Lindsay said the city will simply have to wait until Union Pacific, which is considering development on a number of its rail yards elsewhere, decides the Milpitas property would be worth redeveloping. The Elmwood Correctional Facility also lies within the specific plan area. City officials acknowledge they have to live with the 2,500-inmate jail, but earlier this year the city ensured the jail will get no bigger. The city agreed to pay the county $135 million for 35.5 acres of county-owned land near the jail. The city envisions a 6.5-acre park on one parcel, and up to 700 housing units (20% of which would go for less than market rate) on two other parcels. KB Homes has an exclusive negotiating right to develop the housing. And KB is not the only developer interested in midtown Milpitas these days. Santa Ana-based RJC recently developed 450 townhouses near the Great Mall and now has entitlements to develop 282 more units — including 58 restricted to very low-, low- and moderate-income buyers — on 7.3 acres. The units will be 1,000 to 1,400 square feet apiece, with two-car garages, said RJC Chief Executive Officer Jim Murar. Although Silicon Valley has lost hundreds of thousands of jobs during the last three years, "the market has remained relatively constant at the levels we are talking about," Murar said. "We hope to be at a lower price point than anything else in Santa Clara County." That means selling units for less than $400,000. The key to controlling the sale price is density, said Murar, who hopes to do more business in Milpitas in the future. Despite the developers' interest, most of the specific plan area looks just the same today as when the city adopted the plan in March 2002. The city is preparing for a tax increment financed bond to fund a new streetscape on Main and Abel streets, utility undergrounding, the library project and acquisition. Except for the surplus county land, the city appears to have no other plans for real estate acquisition from willing sellers or otherwise. Some properties are starting to come onto the market, and potential developers are beginning to undertake their own land assemblies, Lindsay noted. Folks, of EDAW, believes the city has a good long-term plan. "They have to be patient, and they can realize the fruits of their endeavors," he said. Contacts: James Lindsay, City of Milpitas, (408) 586-3274. Allen Folks, EDAW, (916) 414-5800. Jim Murar, RJC Development, (949) 553-0627.

Arnold Schwarzenegger may or may not know anything about being governor of California, but one thing is for sure: He likes to keep people guessing. The guessing game was evident during the recall campaign, and it’s even more prevalent now that the movie star is taking over as governor. On planning and development issues – as on most other issues – it’s almost impossible to figure out who Arnold is. Is he the political Terminator, as he claimed so often during the campaign? Is he simply Pete Wilson in an Incredible Hulk suit, as many of his political moves would suggest? Or is he a Democrat in a Pete Wilson suit, as his in-laws like to claim? With a vast budget deficit, Schwarzenegger will almost certainly have to pose as the Teminator in Sacramento, at least at first. During the campaign he promised to balance the budget, protect education, and cut the car tax. It’s not clear whether it’s even possible to do all these things at once. But if he’s serious about it, there’s really only one approach: Trim education a little and eliminate everything else. Local governments would almost certainly take a huge hit, similar to the smack that Wilson administered to escape a budget mess a decade ago. All state programs, including programs that shape planning and development in California, such as housing finance programs and Fish and Game regulation, would have to shrink or disappear. Even Caltrans would not escape the knife. Presumably, programs funded by bond issues – ranging from open space to housing – would be spared, but the Terminator would almost certainly have to continue Davis’s practice of using bond funds to backfill regular programs no longer paid for by the general fund. Perhaps even more significantly, a huge array of regulatory programs and state mandates would probably be suspended. That is potentially good news for local governments that do not like to follow state laws and regulations. Housing elements could be suspended; so might strict application of the California Endangered Species Act. But the Terminator scenario is hard to imagine for any governor – much less an inexperienced one – given the thicket of powerful political interests in Sacramento. And most indications are that Schwarzenegger won’t be that bold. At the same time that he has been talking like the Terminator, he’s been acting like Pete Wilson. Even during the campaign, Schwarzenegger surrounded himself with both political and policy advisors from Wilson’s regime. Former Wilson Chief of Staff Bob White appeared to be running Schwarzenegger’s campaign and his day-to-day transition operation. White’s ex-assistant Patricia Clarey is the new governor’s selection for chief of staff. This is only logical because these folks represent the moderate Republican establishment in the state. But it is instructive as well, because, recall aside, Wilson took office under somewhat similar circumstances. He was a moderate Republican with many Democratic friends, and he was quickly faced with a huge budget deficit. What Wilson did more than a decade ago might be a good indication of what Schwarzenegger will do. Indeed, on conservation issues, the only person on Schwarzenegger’s 65-member transition committee with background in that field is former U.S. Environmental Protection Administration chief William Reilly – an old Wilson crony. Essentially, Wilson responded to the crisis by becoming a much more conservative Republican. In order to balance the budget, he needed to raise taxes. And as a Republican, he could not raise taxes without the support of the hard-right Republicans in the Legislature. To court them, he became a “caveman” himself. He stopped appointing Democrats; he cut spending severely; and he became a social, as well as fiscal, conservative – taking a hard line on immigration, for example. Schwarzenegger’s star power might give him more leverage over the Legislature than Wilson had. And he does keep threatening to “take it to the voters” if the Legislature does not give him what he needs. But if he is surrounded by Wilson veterans, he may take the pragmatic Wilson line. Instead of being the Terminator, he might be cautious and extremely sensitive to the political winds. But there is no guarantee that Arnold Schwarzenegger is just warmed-over Pete Wilson because Schwarzenegger also comes with the Hollywood-Kennedy connection. Especially on environmental issues, these connections might put him farther to the left than anybody thinks. And that could make the Schwarzenegger years pretty interesting for planning and development. Schwarzenegger did not discuss substantive policy issues much during the campaign. But he did issue a series of short position papers that look pretty green. Most notably, he wants to promote hydrogen fuel as an alternative to gasoline. He also promised that state agencies would comply with the Sierra Nevada Framework – a comprehensive management plan from which the Bush Administration has backed off (see , March 2001; , February 2002). And Schwarzenegger came out strongly in favor of cleaning up brownfields to promote infill development. This isn’t surprising when you take a look at who his environmental advisors are. Robert F. Kennedy Jr. – his wife’s cousin and a noted environmental attorney in New York – has repeatedly come to the new governor’s defense. And Schwarzenegger appears to be listening carefully to the staff of Environment Now, a Santa Monica-based environmental advocacy group with a left-leaning agenda and connections to Hollywood. Environment Now was created from the estate of former Disney executive Frank Wells – and, ironically, the organization used to be headed by Mary Nichols, who has been Gray Davis’s resources secretary. When the recently sought a comment from the Schwarzenegger transition team about the possible development of Tejon Ranch, the phone call was returned by Environment Now’s Dave Myerson. (Full disclosure: Solimar Research Group, parent company, is under contract to Myerson and Environment Now on a study of infill development in Los Angeles. However, I have not spoken with anyone at Environment Now about the Schwarzenegger transition.) So far, even Environment Now has been noncommittal about precisely what Schwarzenegger’s agenda on planning and development is likely to be. One thing is for sure: The new governor will have to contend with a wide variety of land use issues, thanks partly to the fact that the Davis administration has been pumping out policy initiatives at a rapid pace since the beginning of the recall campaign (see accompanying story). So whichever suit Arnold decides to don, he is likely to have a major impact on the growth of the state.

In a victory for the owners of senior water rights, the Ninth U.S. Circuit Court of Appeals has ruled that the operators of the Central Valley Project (CVP), in times of water shortage, could reduce a larger proportion of water from the two districts than from other entities with older water rights and separate contracts. The decision was the seventh district or appellate court ruling in litigation filed by Westlands Water District over the operation of the federal water system. This specific controversy involved water allocations during the 1994 water year (March 1, 1994 to February 28, 1995). Because of a water shortage at the time, the Bureau of Reclamation granted Westlands — a 600,000-acre farming district along Interstate 5 in western Fresno and Kings counties — and the much smaller San Benito Water District 35% of their contractual entitlements. At the same time, the Bureau granted 75% of contractual entitlements to five other entities called the “exchange contractors” — the San Joaquin River Exchange Contractors Water Authority, Friant Power Authority, Friant Water Users Authority, Chowchilla Water District and Madera Irrigation District. The final allocations ended up being 42.5% and 100%. Westlands and San Benito filed a lawsuit seeking “equal apportionment” of water. The district court, though, ruled that the contracts Westlands and San Benito had with the CVP did not prevent the Bureau from satisfying its obligations to holders of senior water rights. Westlands and San Benito appealed, and a unanimous three-judge panel of the Ninth Circuit upheld the lower court. At issue were state water law and three contracts for CVP water: The 1939 exchange contractors agreement, the 1963 Westlands contract and the 1978 San Benito contract. Under the 1939 contract, the exchange contractors gave San Joaquin River water rights to the Bureau in exchange for substitute water from the CVP. The 1963 and 1978 contracts permitted Westlands and San Benito to purchase water from the CVP’s San Luis Unit, subject to reductions during times of water shortage. Westlands argued that California water law’s principle of “first in time, first in right” did not give the exchange contractors priority to CVP water. But the court, noting that the exchange contractors had both riparian and appropriative water rights, called that argument “illogical and unsupportable.” The court pointed to Westlands’ own 1963 application to the CVP, in which the district said it intended “to take only that water which is in excess of the water needed to supply the valid vested rights under reasonable means of diversion and use.” As for the CVP’s contractual obligations, Westlands and San Benito argued that all the water in the CVP should be considered “available supply.” But the district court and the appellate court ruled that Westlands and San Benito were limited to the available supply from the San Luis Unit, while the exchange contractors had access to the entire system. “Exchange contract water cannot be included as ‘available supply’ under the Westlands contract since (1) the ‘substitute’ water provided to the exchange contractors is not a ‘contractual commitment;’ and (2) the exchange contractors’ water allocation has priority over the Westlands water service contract,” Judge Betty Fletcher wrote for the court. The court also rejected the pro-rata allocation argument because the exchange contractors’ water rights were independent of the Westlands and San Benito contracts, and “neither the Westlands nor the San Benito service contract support a finding of pro-rata distribution that includes the exchange contractors water allocation.” The Case: , No. 01-16987, 03 C.D.O.S. 6769, 2003 DJDAR 8533. Filed July 31, 2003. The Lawyers: For Westlands: William Chisum, Kronick, Moskovitz, Tiedemann & Girard, (916) 321-4500. For the U.S.: Maria Iizuka, Department of Justice, (916) 930-2202.