A state District Court of Appeal has rejected a property owner’s contention that design review permits for two houses in San Mateo County were “deemed approved” because the county failed to act on his applications within 60 days. The court ruled that the permits could not be deemed approved because neither the county nor the applicant had notified the public that deemed approval was a possibility. The case involved an interpretation of provisions in the Permit Streamlining Act that give an agency 60 days to approve or deny a project that is exempt from environmental review. The question for the court was whether “a statement that the project shall be deemed approved if the permitting agency has not acted within 60 days” must be included in the public notice. A unanimous three-judge panel of the First District, Division Five, answered affirmatively. And because such a statement did not appear in the county’s public notice, the project could not be deemed approved, the court ruled. In early 1999, Thomas Mahon applied to San Mateo County for design review to build two houses on adjacent lots on Second Street in the unincorporated beach town of Montara. County planners determined that the projects were exempt from environmental review under the California Environmental Quality Act and conditionally approved the permits within the 60-day period. However, in October 1999, planners concluded that Mahon’s neighboring property owners did not receive notice of the design review permit applications as required by state law and county policy. The county then mailed notices to property owners within 300 feet of Mahon’s property and posted a notice on the project site. The notices did not state that the permits would be deemed approved if the county failed to act within a certain time period. Soon thereafter, objections came pouring in from neighbors and the Mid-Coast Community Council. Opponents complained that the proposed houses were too large and did not conform to county design standards. One year later — in October 2000 — county planners conditionally approved one of the houses. Neighbors appealed, and the county Planning Commission upheld the appeal. Mahon then appealed to the Board of Supervisors, which in August 2001 sent the application back to the Planning Commission for consideration of a new design. Mahon submitted revised plans, but apparently nothing happened until early 2004, when Mahon hired legal counsel. Mahon’s attorney advised the county that the permits were deemed approved because the county had failed to act within 60 days of the Board of Supervisors’ decision to remand the matter, or within 60 days of Mahon’s submission of revised plans in July 2002. The county rejected the “deemed approved” contention, and the Planning Commission then denied design review permits for both houses. Mahon sued the county, arguing that the permits were deemed approved. San Mateo County Superior Court Judge Robert Foiles ruled for the county, and the First District affirmed the decision. The First District found no published case that addressed the question at hand. “In sum,” Presiding Justice Barbara Jones wrote for the court, “we are confronted with the following: (1) a project cannot be deemed approved without ‘public notice required by law,’ but § 65956 does not define what ‘public notice required by law’ means; (2) the statute specifies an notice must advise that the application will be deemed approved unless acted upon within the statutory time period, but the statute does not specify what is to be included when the agency gives notice.” Mahon argued that because the agency provided the public notice, the notice need not include a warning about deemed approval. Mahon also contended that he did not have to provide public notice because the county’s notice was adequate. The court disagreed, holding, “ e see no reason why ‘public notice required by law’ would mean one thing if notice is provided by the agency and another if provided by the applicant.” Mahon argued that if the county was required to provide notice of the possibility of deemed approval, the county could rig the process — and thus avoid the mandate of the Permit Streamlining Act — by never providing such notice. Again, the court disagreed, noting that the applicant himself had the ability to provide the public notice triggering the deemed approval provision. “If an applicant wishes to avail himself of deemed approval, the statute requires him initially to advise the agency that he intends to do so,” Justice Jones wrote. “The agency may then be spurred to provide the ‘public notice required by law’ itself, relieving the applicant of this chore. But even if it does not, the applicant can provide the public notice and preserve the potential for deemed approval. This process serves the purpose of the Act to avoid protracted delays in processing permit applications while protecting the interests of neighboring landowners.” After concluding that the notice was inadequate under the statute, the court declined to consider whether adjoining landowners have a distinct due process right to notice of the potential for deemed approval. The Case: , No. A110171, 06 C.D.O.S. 4156, 2006 DJDAR 6065. Filed May 18, 2006. The Lawyers; For Mahon: Ron Zumbrun, (916) 486-5900. For the county: Kimberly Marlow, county counsel’s office, (650) 363-4250.

So, the smart growthers have their candidate for governor. No statewide public figure in California has been more closely identified with “smart growth” and “New Urbanism” than Phil Angelides. This affiliation didn’t matter in the Democratic primary. And it probably won’t matter in the general election, either. But it will matter if Angelides is elected. The Democratic nominee’s election is not the current betting in most quarters, of course. Angelides – currently the state treasurer – is the anti-Schwarzenegger, a skinny guy who is a bit awkward on the stump, and it’s hard to imagine him defeating the Governator. But 2006 is shaping up as a Democratic year. Schwarzenegger is still recovering from last year’s political wounds. And the anti-Schwarzenegger approach just might work. After all, California has a long history of electing boring career politicians (Deukmejian, Wilson, Davis) running against the rich and famous (Mike Curb, Dianne Feinstein, Al Checci). So it is worth thinking about what Angelides the governor would be like for planning and development. There is little doubt that Angelides, if elected, would pursue an aggressive smart growth agenda. The big question is whether he could move it successfully. Partly, of course, that will depend on how much political capital he will have if he wins. But it will also depend on factors beyond his control – most importantly, the infrastructure bonds and the economy. If the infrastructure bonds pass, then moving a smart growth agenda will require Angelides to expend a lot political capital on the distribution rules for the bond money. If the economy tanks, as happened to Wilson in 1991, then no one will care what his approach to growth is. But the big challenge will be the California Environmental Quality Act (CEQA), whose needle of reform Angelides will have to thread to succeed. Angelides’ bona fides as a true believer in smart growth and New Urbanism are real. His primary opponent, Controller Steve Westly, depicted Angelides as an anti-environment developer — and his longtime connection to major Sacramento builder Angelo Tsakapoulos (who really does have the record of an anti-environment developer) didn’t help. Although Angelides has been a greenfield developer, however, he has not been a standard suburban sprawl developer. He was the developer of California’s first New Urbanist project – Laguna West in Elk Grove, designed by Calthorpe & Associates during the early 1990s. So immersed was Angelides in New Urbanism that during the 1992 presidential campaign, he arranged to have Bill Clinton speak at the Laguna West Town Center and turned his Clinton introduction into a lecture on the virtues of New Urbanism. Clinton, characteristically, won the crowd over (not too difficult after the droning introduction) by making a joke about New Urbanism. Since his election as treasurer in 1998, Angelides has been a regular on the smart growth speakers circuit – and has learned to use the peculiar powers of the office he holds to promote that agenda. California’s treasurer is powerful because the office was the final political resting place of the brilliant Jess Unruh, who spent much of the 1970s and ’80s setting up little-known but powerful committees controlled by the treasurer’s office. As a board member of the California Public Employment Retirement System, Angelides has promoted not only socially responsible investment but also infill development, and as a result PERS now has considerable investments in infill projects for the first time. As chair of the Low-Income Housing Tax Credit Committee, Angelides has changed the scoring system for projects to include proximity to transit stops and other smart growth ideas. As a result, “tax credit developers” have had to become infill and transit-oriented developers as well. Angelides’ approach has been shaped partly by the powers of his office, which deal with finance. But his approach was also shaped by the policies of the most successful state-level smart growth politician of the last decade, former Gov. Parris Glendening of Maryland. Eschewing a regulatory approach as too politically risky, Glendening instead focused on the state budget, changing spending priorities to encourage infill development and greenfield preservation. If elected, Angelides can be expected to take the same approach – perhaps relying on AB 857, the mostly ignored 2002 law that requires all state actions to promote infill development, compact greenfield development, and protection of agricultural and open space land. If the $37 billion in infrastructure bonds passes, it will give him a huge smart growth club. But it’s not at all clear that he will have enough political capture to wield that club. And even then, he won’t be out of the woods because inevitably he’ll get sucked into the CEQA reform battle. The bonds cut both ways for smart growth. The housing bond has $850 million to support transit-oriented housing, and the parks bond also has some smart growth rhetoric. But the big kahuna on the ballot is the $20 billion transportation bond. That bond is tilted toward roads rather than transit. And historically it’s been impossible for even the strongest politicians to muscle transportation money away from the pork barrel crowd and use it to shape growth. So the transportation bond is just too big to ignore, but Angelides’ chances for meaningful change would be fairly slim – especially if the bonds got more votes than he did, or (as seems likely) growth patterns are not much of an issue in the campaign. But that would be only part of the Angelides dilemma, because if he truly wants to promote infill development, he will have to tackle CEQA. Most experts agree that CEQA is one of the biggest obstacles to infill development. Nearly all infill projects have to go through a CEQA analysis, meaning they lead developers down the familiar path of uncertainty in terms of time and money. And because most infill occurs in congested urban neighborhoods, CEQA highlights infill’s weak spot: traffic. So far, reformers have been able to only nibble around the edges – a little-used exemption here, a juice bill for Jerry Brown in downtown Oakland there. In theory, Angelides could create the perfect Nixon-goes-to-China scenario on CEQA. Only a liberal Democrat with a loyal environmentalist following could take on CEQA and streamline review for infill projects. In seeking to streamline CEQA for infill, however, Angelides would inevitably get pinned down between warring factions. On the one hand are the environmentalists, who view CEQA not only as a tool of environmental protection but also as a tool of citizen empowerment – and who also believe that urban residents are among those citizens who need the most empowering. On the other hand are the homebuilders, who believe that CEQA reform is too important to limit to infill situations, especially because – as Angelides himself would be hard-pressed to refute – most new housing development in the state will still occurs on greenfield sites. More than one American governor has been cut down in the crossfire over state-level regulations on growth – which, in California, is what CEQA amounts to. If Gov. Angelides had only to worry about spending money in a smart growth way, he would make some progress and he could call that a victory. But he needs a win on the CEQA front as well. Unless he can persuade the enviros that an infill exemption is a good thing – and then persuade the builders that it’s better than nothing – he won’t succeed as California’s smart growth governor.

The south Orange County city of Lake Forest is poised to approve a plan that would not only permit 5,400 housing units, but would help tie together what are now two distinct parts of town. The plan could also give the city a large sports park, a new city hall and a true town center. All of this is possible because of a project that did not go forward — a civilian airport at the now-closed El Toro Marine Corps base, which lies just west of Lake Forest. The properties in question all lie under the old El Toro flight path and would have been under an even busier flight path had the base become an airport. Orange County voters, however, vetoed the airport, and the base is now being redeveloped with thousands of housing units and a large park. Existing zoning of the vacant Lake Forest property calls for 9.8 million square feet of industrial and commercial development because industrial uses were considered compatible with the airport noise. The proposed plan rezones most property for residential or retail uses. “It could lend itself well to residential development,” said Gene Spindler, vice president of Shea Properties, which is working with Baker Ranch Properties, owner of 380 acres in the plan area. “The dilemma was that it was under the flight path for El Toro and for OTX if it had ever occurred. The only reason it was ever designated commercial was because of the flight path.” Indeed, the flight path — and a corresponding noise corridor — carved a swath through Lake Forest on either side of the Foothills Transportation Corridor toll road. The area has been quiet since 1999, when the Marine Corps closed the base, but the properties remained designated for industry while the battle over the 4,000-acre military base was waged. When voters formally killed the El Toro airport with passage of Measure W in March 2002 (see , March 2006, April 2002), owners of land underneath the flight path began approaching Lake Forest officials with notions of residential development. The city inherited the industrial and commercial zoning designations from the county when voters in 1991 approved incorporation of the community that had been known as El Toro. (Lake Forest is the name of a large development in the town.) The city has no desire to maintain the industrial and commercial designations because the city already has extensive industrial development, noted Cheryl Kuta, Lake Forest senior planner, and because Lake Forest is adjacent to the gigantic Irvine Spectrum, which offers miles of business parks. The city decided that a comprehensive planning effort was in order, and it invited the owners of all 13 parcels under the flight path to participate. Six owners with 838 acres agreed to work with the city, and their noncontiguous parcels became the subject of the city’s “opportunities study.” About three years ago, the landowners submitted concept plans for a total of 6,600 housing units. The city used those plans as something of a starting point. “This is the rest of the city. Everything else is built out,” explained Kuta. “We wanted to make sure we looked at this comprehensively.” After more than two years of planning, workshops and environmental review, the city earlier this year unveiled the preferred plan. In addition to 5,415 housing units, the plan calls for a 45-acre sports park and city hall/civic center complex, about 150 acres of open space and neighborhood parks, and 650,000 square feet of retail space. What is crucial for the city, said Kuta, is the public benefits component, especially the sport park and civic buildings. The city of 78,000 people now has only one significant sport facility, and city hall is in leased office space. “We really saw this as our opportunity to tie the city together with more like uses, and to provide the community gathering place that our general plan has called for,” Kuta said. Under the plan, developers are required to sign a development agreement committing them to providing the sports park and civic facilities. Developers are also expected to sign a mitigation agreement with the local school district to upgrade existing classrooms and provide for new ones, and to provide extensive road improvements, including the long-sought completion of Alton Parkway. “The city has placed a very aggressive public benefits package as part of the plan,” said Shea Properties’ Spindler. “When you put all of those things together, it’s a very expensive package. One of the things we’re wrestling with is how you finance all of that.” Public input thus far has been mostly positive, although some residents have expressed concerns about traffic congestion, increased runoff and the impact on schools. Kuta said that the school issues “really are not part of this project,” although Spindler and representatives of the Irvine Ranch Water District, which owns 82 acres it seeks to develop, understand that cutting a deal with the Saddleback Valley Unified School District is expected. The city has a detailed traffic mitigation plan that should solve any potential congestion, Kuta said. Spindler agreed, noting that infrastructure in the area was planned to serve industrial development, which generates more traffic than homes. A city study estimated that the proposed development would generate about 47% as much traffic as the earlier planned industrial development, although peak commute traffic levels would be about the same. Noting the planned completion of Alton Parkway through the Baker Ranch property, Spindler said, “I think traffic in Lake Forest will be better than it has been in years.” The city also expects to benefit from a wide variety of new housing units. Shea, whose 380 acres is the largest piece in the opportunities study area, has been allocated 2,815 units under the proposed plan. Spindler said those units would come in the form of a wide variety of attached and detached units, apartments and even some mixed-use buildings. This will be a large community, and Shea wants to appeal to a broad range of the market, he said. The Irvine Ranch Water District is working with development giant Lewis on plans for the district’s land, which it inherited when it consolidated with another district several years ago. The city’s plan allocates 833 residential units to the water district’s property. Development of the property will provide money for the district’s replacement fund, which pays for wastewater and water lines, said Terry Loomis, the district’s treasurer. “We’re happy with the process,” Loomis said. “The city has tried to be careful as it has gone through it. It’s a difficult process, especially when you’re dealing with six landowners.” Spindler characterized the process as “long,” and expressed a bit of frustration because the housing market has tempered greatly since late 2005. The environmental impact report for the opportunities study is scheduled to go to the Lake Forest Planning Commission this month. The City Council should begin considering the entire package — general plan amendment, zoning change, traffic mitigation ordinance, development agreement and EIR — in August or September. Once all of those items are adopted, the city expects the larger landowners to return with more detailed plans, including tract maps, which will likely require subsequent environmental review, Kuta said. Actual development in the opportunities study area could commence as early as next year. Contacts: Cheryl Kuta, City of Lake Forest, (949) 461-3479. Terry Loomis, Irvine Ranch Water District, (949) 453-5340. Gene Spindler, Shea Properties, (949) 389-7116. Opportunities study website: www.ci.lake-forest.ca.us/opportunitiesstudy/

A state appellate court has upheld an exemption from environmental review for a 14-story residential building proposed in San Diego. The court ruled that the city correctly applied an urban infill exemption contained in the 1998 update to the California Environmental Quality Act Guidelines. The case provides the first published interpretation of the urban infill exemption in CEQA Guidelines § 15332 for projects that meet five criteria. The court rejected project opponents’ contention that unusual circumstances should have prevented application of the CEQA exemption. The project that spurred the lawsuit is a 14-story, 14-unit residential tower proposed for a 10,000-square-foot vacant lot at Sixth Avenue and Upas Street, across the street from the northwestern corner of Balboa Park. Developers Mi Arbolito, LLC, and 1700 Investors, LLC, and architect Martinez + Cutri proposed the project in early 2003. Later that year, the city issued a shoring and grading permit, and soon thereafter approved a building permit for pad footings and an underground parking garage. The Banker’s Hill, Hillcrest, Park West Community Preservation Group sued the city, arguing that the city had violated CEQA by not conducting environmental review. After the lawsuit was filed, the Development Services Department issued a notice of exemption from environmental review because the project required only ministerial approval and because it qualified for the urban infill exemption. The preservation group appealed to the City Council, which upheld the exception based solely on the project’s urban infill aspects. The opponents then amended their lawsuit, arguing that the project was not eligible for the urban infill exemption and that the city had impermissibly piecemealed review of the project by approving some permits before making an environmental determination. San Diego County Superior Court Judge Ronald Prager ruled for the city, and a three-judge panel of the Fourth District, Division One, upheld the lower court. The Fourth District dealt at length with the standard that should have governed the city’s decision, and the court’s review of that decision. The court ended up with a split: It decided the city’s determination regarding the urban infill exemption was governed by the substantial evidence standard, which favored the city because the existence of conflicting evidence would not necessarily matter. But the court decided that the question of whether unusual circumstances called for an exception to the exemption was guided by the fair argument standard, which favored the opponents because conflicting evidence could be enough to force additional review. After deciding the standards, the court considered whether the project qualified for the urban infill exemption. The exemption is available to projects that are consistent with general plan and zoning designations, are on sites of 5 acres or less that are “substantially surrounded by urban uses,” are on sites containing no rare species habitat, “would not result in any significant effects relating to traffic, noise, air quality or water quality,” and can be adequately served by utilities and public services. The preservation group argued that the San Diego project did not qualify because it was not surrounded by urban uses, was inconsistent with the general plan and would impact traffic. The court rejected all of the arguments, including the contention that Balboa Park was not an “urban use.” “Balboa Park,” Justice Joan Irion wrote for the court, “is a quintessential urban park, heavily landscaped, surrounded by a densely populated area, and containing urban amenities such as museums, theaters and restaurants.” As for general plan and zoning consistency, the opponents said the project’s setbacks were substandard and the project would block views of the park protected by a 1989 community plan. The court, however, found that the project would have greater setbacks than required by the zoning, and site lines from the street to the park would not change much. Traffic was a trickier question, partly because the adjacent intersection is offset. Opponents said the project would make the offset intersection more hazardous. But the court concluded, “ lthough the testimony of the local residents arguably provides some evidence of the dangerous nature of the intersection, the record contains no factual foundation for the claim that the project would that condition for pedestrians and drivers.” The court also ruled that the loss of three on-street parking spaces for an alley to serve the project “cannot be described as ‘significant.’” The court then turned to the question of whether “unusual circumstances” would provide an exception to the CEQA exemption. Here, the opponents needed only to present a fair argument. They contended that the project’s proximity to Balboa Park, historic houses, an existing condominium tower and an offset intersection created unusual circumstances. The court rejected the arguments because the preservation group did not provide enough evidence to pass even the fair argument standard. The court noted that community character and view impacts had already been established by a condominium tower next door to the project site. As for piecemealing, the court declined to consider the preservation group’s arguments because the group had not presented them to the city and, thus, failed to exhaust administrative remedies. The Case: , No. D046360, 06 C.D.O.S. 3823, 2006 DJDAR 5657. Filed May 8, 2006. The Lawyers: For the preservation group: Kevin K. Johnson, Johnson & Hanson, (619) 696-6211. For the city: Joe Cordileone, city attorney’s office, (619) 533-5854. For the developers: Monty McIntyre, Seltzer, Caplan, McMahon & Vitek, (619) 685-3003.

An important case involving the delivery of water to farmers and fish appears to have sputtered to an end with the Ninth U.S. Circuit Court of Appeals’ short-order rejection of the farmers’ claims. Two San Joaquin Valley farmers and two water agencies sued the Bureau of Reclamation over the bureau’s plan for operating New Melones Reservoir. Under that plan, the bureau releases water for fishery habitat purposes during the spring and fall. The farmers argued that the plan violated the 1992 Central Valley Project Improvement Act (CVPIA) because a study had forecast that the New Melones releases for fish would cause the bureau to violate a state salinity standard for water pumped from the Delta to the San Joaquin Valley. The farmers claimed they were due damages for future harm to their crops. In a 2002 decision that concerned environmentalists, the Ninth Circuit ruled that the farmers and water agencies had legal standing to pursue their claims in court ( , 306 F.3d 938 ( ); see , January 2003). The Ninth Circuit returned the case to District Court, where Judge Oliver Wanger rejected the claims. On appeal, a different three-judge panel upheld the lower court because the Bureau had not violated the CVPIA since 1994, and because the farmers and water agencies had not shown that future violations were more than hypothetical. “As an initial matter, the Delta parties argue that they need not show an actual violation of the CVPIA because our prior decision in is the ‘law of the case,’” Judge Stephen Trott wrote. “There is no such law of the case, however, because our decision on standing does not obviate the need to address the merits of the litigation. … The Delta parties cannot stand on our prior decision to avoid the need to demonstrate an imminent statutory violation.” The Case: , No. 04-16632, 06 C.D.O.S. 4191, 2006 DJDAR 6160. Filed May 22, 2006. The Lawyers: For Central Delta Water Agency: Daniel McDaniel, Nomellini, Grilli & McDaniel, (209) 465-5883. For the bureau: David Shilton, Department of Justice, (202) 514-2000.

An extraordinarily complicated takings case stemming from the City of Capitola’s mobile home rent control ordinance has received new life, even though the city has won numerous rounds in federal and state court. In the most recent decision, the Sixth District Court of Appeal ruled that the mobile home park owner who is fighting the city should have the opportunity to amend a lawsuit because the trial court judge applied an incorrect test for determining if an unconstitutional taking had occurred. The problem, the Sixth District ruled, “is the reliance by the parties and the court on the concept that the ordinance either did or did not ‘substantially advance a legitimate government interest.’ The United States Supreme Court has held that the ‘substantially advances’ formula is not a valid method of identifying regulatory takings for which the Fifth Amendment requires compensation.” The Sixth District cited the Supreme Court decision in , 544 U.S. 528 (2005), which reversed a 25-year-old precedent from , 447 U.S. 225 (1980). The court held that a government regulation that does not substantially advance legitimate state interests could amount to a regulatory taking. But in , the court ruled that such a regulation posed a due process question, not a takings question (see , July 2005). The decision was widely seen as a victory for cities with rent control, because property owners had started successfully using the “substantially advances” test to challenge rent control ordinances. But in the Capitola case, the decision — which was issued after the trial court had ruled — appears to have worked against the city. “The error of applying a due process test in determining a takings claim requires reversal,” Justice Eugene Premo wrote for the Sixth District. “Furthermore, since the error permeates the case from pleadings to final determination, and because park owner was not allowed to amend its as-applied takings, equal protection and due process claims when they were ripe, park owner should be allowed to amend its complaint.” The case involves a long-simmering conflict and a great deal of ill feeling. In 1987, Los Altos El Granada Investors purchased Castle Mobile Estates, a 108-space mobile home park in Capitola a short distance from the Santa Cruz beach. The park is governed by the city’s rent control ordinance first adopted in 1979. Almost immediately, the new park owner began pressuring tenants to sign long-term leases that remove the tenants’ spaces from rent control protections. At least as early as 1994, the park owner began both demanding large rent increases and offering to sell the park to residents for millions more than the $1.7 million the owners paid in 1987. The park owner apparently got few leases and no interest in a park sale to tenants, so the owner began trying to close the park once space at a time. Litigation eventually halted that scheme, but residents claim the intimidation has continued. In March 2000, the park owner filed with the city a request for a $300 a month rent increase — equal to a rise of about 150%. Several months later, the owner renewed an offer to sell the park to the tenants for somewhere between $6 million and $10 million. After extensive bickering over methodologies and experts’ abilities, the city in April 2001 approved a rent increase of $5.68 on top of a small inflationary increase, plus $9.69 per month for the city’s expert witness costs. The property owner eventually filed four lawsuits in federal court alleging that the city had taken property without just compensation. The city successfully defended three suits, but one case ( , U.S. District Court No. C-03-3859-JF) remains pending after the district court determined that the park owner’s takings claims were ripe for adjudication. However, the case is on hold pending the outcome of the state court litigation. The park owner’s state court lawsuit, filed in 2002, did not get far at the trial court level. The court found that the property owner’s claims were facial challenges to the ordinance itself, and, because the ordinance has been around for years, the claims were barred by the statute of limitations. The court also determined that prior federal court rulings on the same claims prohibited the state court from considering the claims. Finally, the court determined that the city’s approval of the April 2001 rent increase was supported by substantial evidence. On appeal, the park owner continued to press its takings claims. The Sixth District upheld portions of Santa Cruz County Superior Court Judge Robert Atack’s decision, including his ruling regarding the base year from which the city should calculate rent increases — a victory for the city. The Sixth District also upheld Judge Atack’s refusal to grant the park owner an “ reservation,” in which the park owner attempted to notify the court that it would pursue only its state law claims in state court while reserving federal claims for federal court. (Federal courts have declined to consider takings claims adjudicated by state courts.) The Sixth District found that an reservation was not applicable here. Still, the heart of the Sixth District decision was the reversal based on the lower court’s incorrect application of the “substantially advances” test. The litigation now heads back to Superior Court for further proceedings. The Case: , No. H027860, 06 C.D.O.S. 4062, 2006 DJDAR 5902. Filed May 17, 2006. Modified June 16, 2006, at 2006 DJDAR 7614. The Lawyers: For Los Altos El Granada Investors: Robert Coldren, Hart, King & Coldren, (714) 432-8700. For the city: John Barisone Jr., Atchison, Barisone, Condotti & Kovacevich, (831) 423-8383.

After suffering two generations worth of economic decline and malaise, the East Bay city of Pittsburg is trying to reinvent its downtown as a residential, office and retail district. Although the city has been working at redevelopment since the late 1970s with mixed results at best, the downtown project appears to be taking off. Developers A.F. Evans and the Olson Company are building mixed-use projects, while the city’s redevelopment agency is investing more than $50 million in infrastructure improvements and real estate development. The agency also has begun implementing a master plan for the marina, a plan that intends to connect downtown to the Delta waterfront via a wide pedestrian promenade. Few cities in the Bay Area are in more obvious need of revitalization than Pittsburg, a city of 63,000 people on Highway 4, just over the hills from the wealthier Contra Costa County cities of Walnut Creek, Concord and Pleasant Hill. However, for the better part of a century, Pittsburg was the economic hub. The city grew up around the railroad line that connected the Black Diamond coal mine on Mount Diablo to Pittsburg’s docks, where the coal was loaded onto barges. Later, the fishing industry rose to prominence. From 1942 to 1954, Pittsburg was the home to Camp Stoneman, the principal jumping off point and welcoming home center for U.S. Army soldiers headed to and from World War II’s Pacific Theater and the Korean War. But by the mid-1950s, the coal, the fishermen and the soldiers were gone from Pittsburg. Ever since, the city’s primary regional role has been to provide affordable housing for the East Bay’s blue collar workers and commuters. In the last couple of years, though, city officials have adopted new plans for downtown (or “Old Town” as it has become known) and signed agreements with downtown-savvy developers. Construction is under way on numerous projects at once, with more to come. Although there is no single keystone project, the largest so far is Vidrio, also known as the Black Diamond project — a five-story mixed use development along Railroad Avenue, downtown’s main drag. The project is planned to contain 196 condominiums above nearly 40,000 square feet of ground floor retail space, plus two public plazas, according to a city newsletter. The Pittsburg Redevelopment Agency is providing a $4 million subsidy to ensure that 30 of the units are available to moderate-income buyers. A.F. Evans began work on the project in June. The first block of the three-block project is scheduled for completion during 2007, with full completion likely to take three years. "It's three contiguous blocks in a downtown that has incredible water access," Muhammad Nadhiri, A.F. Evans project manager, said of the site. "It's a fairly central location for East Contra Costa County. It's just an area that is screaming for people to come to it." To make room for Vidrio, the city had to take via eminent domain the landmark Scampini building, a boxy white structure that many people in town considered an historic landmark. City officials, however, shed few tears. “For as long as I’ve been here, I’ve heard we need to revive downtown,” then-Councilman and now-Mayor Michael Kee told the . “I would like to see us save the building, but I think it needs to be sacrificed to create the image and memories of what people remember as a vibrant downtown.” The city owns much of the land on which Vidrio is rising, and officials chose A.F. Evans to develop the site over Hometown Group and Olson. The city picked A.F. Evans partly because the Oakland-based company proposed the most parking spaces. Although some people questioned the wisdom of providing more than 2 parking spaces per residential unit in a supposedly walkable district, parking is major a public concern and city officials ended up requiring more parking yet. Still, the environmentalists at Greenbelt Alliance endorsed the project “because it will revitalize Pittsburg’s downtown and create new homes without building on farmland and hillsides outside the city.” The project that Olson is working on is called Mariner Walk, a 123-unit, single-family home development that also includes a public park. That project, in which the redevelopment agency is investing $1 million, is expected to be complete in about a year. At the entrance to downtown on Railroad Avenue is the Gateway project by Domus Development. Gateway is planned to have 28 apartments for low- to moderate-income renters, offices for the city and about 4,000 square feet of space for retail shops or a restaurant. The redevelopment agency is investing $8 million in the Gateway project. Gateway is under construction right across the street from the location of what would be downtown’s first elementary school since the 1960s. The new Pittsburg Unified School District campus is planned for the site of a closed school and other parcels that the redevelopment agency has helped assemble. The redevelopment agency intends to put several million into the school project so that the general public may have access to the school’s parking. Construction also is under way on $15 million in improvements to the marina area, including dredging, a 25-foot-wide promenade reaching to downtown, new docks and more parking. Plans also call for the marina to offer a restaurant and an eight-unit bed-and-breakfast inn, with the redevelopment agency again providing funding. Elsewhere in downtown, the redevelopment agency is investing upwards of $20 million on more mundane items, such as new utility lines, storm drainage and sidewalks. The city is able to put so much capital into downtown because its redevelopment agency is among the richest in the Bay Area. More than half of the city lies within the city’s Los Medanos project area, which generated $35 million of tax increment for the city during the 2004-05 fiscal year, according to the state controller’s office. There is more downtown development on the way. Between Vidrio and the marina lies the site of the proposed New Mecca Square, where local developer Albert Seeno III has proposed 40 townhouses above retail spaces. Several blocks east lie 20 acres of former industrial property that has been rezoned for as many as 400 housing units. Cleanup of toxic materials is necessary before development occurs there. And in a true sign of revitalization, Mechanics Bank is expected to open a downtown branch shortly, providing the district’s first full-service bank since the 1980s.

The presence of ammonium perchlorate—an ingredient used in rocket fuel, military munitions and other applications—in underground aquifers is contaminating drinking water supplies in several high-growth areas around the state. Water providers in the Santa Clarita Valley, the Inland Empire, the Santa Clara Valley, Rancho Cordova and elsewhere are faced with closing wells, charging customers for treatment, and blending their supplies. Some cities could soon face limitations on additional development or be forced to consider charging developers for the additional cost burden. Ongoing litigation, prolonged negotiations, and regulatory uncertainty over legal limits of perchlorate allowed in drinking water complicate things further. Although perchlorate is not widely believed to be cancerous at concentrations found in California’s drinking water, contaminated water can result in hypothyroidism in adults and developmental deficiencies in unborn babies. Decades of unregulated disposal by the military and defense contractors prior to the creation of laws governing the handling of the hazardous material is primarily to blame. In 1997, technological advances enabled widespread testing that revealed hundreds of contaminated wells in California and throughout the West. By 2000, many dischargers had been identified and either engaged in settlement agreements or litigation aimed at recovering costs for cleanup and treatment. Many cases remain unresolved. In March 2004, the California Environmental Protection Agency set a public health goal (PHG) of 6 parts per billion (ppb), a level at which perchlorate in drinking water is not believed to cause harm. The PHG is merely a regulatory guideline, however, and is not strictly enforceable. The California State Department of Health Services is working on setting maximum contaminant levels (MCLs) for perchlorate in drinking water — the level at which water retailers could be found liable for delivering a harmful product. The MCL is not required to be the same as the PHG. The Federal Environmental Protection Agency has also set standards for perchlorate contamination, but they are more lenient. In the Santa Clarita Valley, six wells have been closed—one permanently—as a result of perchlorate contamination. Local water suppliers and the valley's largest polluter, Whittaker-Bermite, along with current property holders, have been embroiled in litigation since 2000. According to Fred Fudacz, legal counsel for Castaic Lake Water Agency (CLWA), the local water wholesaler and the lead plaintiff in the suit, a good portion of the roughly $80 million needed for long-term cleanup—perhaps $44 million—is available, but no money has changed hands yet. In the meantime, conservation groups including Santa Clarita Organization for Planning the Environment (SCOPE) and the Sierra Club have challenged two recent development proposals, one for an industrial park, the other for 1,089 residential units. Environmentalists argue the developments count on water that CLWA hasn't demonstrated it can provide. The environmental impact reports (EIRs) for these projects, known respectively as the Gate-King Industrial Park and Riverpark, rely on CLWA's assertion that contaminated well water is readily available because a settlement for perchlorate pollution is virtually in hand. They also rely on a transfer of 41,000 acre-feet per year transfer from the State Water Project. Yet, the decision in , 133 Cal.App.4th 1219 ( , December 2005) cast doubt over the use of the contaminated water, and EIRs for the water transfer have not been certified. Without these sources on the books, the region is short the water necessary to approve the projects, said Lynne Plambeck, SCOPE president. The city has not a final decision on either Gate-King or Riverpark. The rapidly growing Inland Empire cities of Rialto, Colton, and Fontana, whose water is now heavily contaminated by perchlorate discharge from a former World War II munitions base in northern Rialto, are also without a solution. The City of Rialto has filed a suit targeting 42 parties, including the Defense Department, military contractors and fireworks operations, seeking hundreds of millions of dollars for treatment and cleanup for a site that presents a problem for local water providers. Roughly 40% of Rialto's wells are contaminated, said Bill Hunt, the interim director of the city's public works department. “We don't receive any state water,” said Hunt, “and about 95% of our municipal water supply comes from groundwater.” Two of Rialto's seven contaminated wells are now being treated, with another coming on line soon, he said. But without any real compensation, the city — whose City Council has adopted a zero-tolerance policy on perchlorate — has been forced to pass the cost along to its customers for now. Some communities have considered blending water from contaminated wells with clean water from other wells, said Kurt Berchtold, assistant executive officer of the Santa Ana Regional Water Quality Control Board. But with MCL levels hanging in the balance, it’s hard for a provider to know how to approach this, he said. An MCL of 8 to 10 ppb would allow most water providers to blend quite easily, said Berchtold, while an MCL of 2 to 4 ppb might force a reliance on treatment. The Santa Ana board has issued a cleanup order to Black & Decker and forced negotiations with Goodrich, both defense contractors who once occupied Rialto’s World War II site. Some federal and state appropriations have been provided, said Berchtold, but the money has arrived in a slow trickle. One of the biggest questions facing retailers is how to cover treatment cost. A city like Rialto could pass the costs along to developers provided that it is a developer’s project that necessitates the cleanup, said Fred Curry, chief of the California Public Utilities Commission's (PUC’s) Water Board, “It’s often argued that cost-causers should pay the cost,” said Curry. Hunt, however, said this is not an option that Rialto has seriously considered because much of the city’s growth is to the north, a portion of the city supplied by other retailers. Passing the cost on to the developers is not an option that the Fontana Water Company — which supplies Fontana and portions of north Rialto — is likely to embrace, said General Manager Mike McGraw. “Hopefully, we wouldn't get to that point,” said McGraw, “but if we did, we'd probably opt to spend some of our own money on treatment, or pursue a rate increase spread amongst all water users.” “Putting this all on private developers may not sit well with the community and the PUC may not look favorably upon it either,” said McGraw, adding that Fontana would do what it could to clean up the water supply and avoid holding up regional economic development. Contacts: Kurt Berchtold, Santa Ana Regional Water Quality Control Board, (951) 782-4130. Fred Curry, California Public Utilities Commission, (415) 703-1739. Fred Fudacz, Nossaman, Guthner, Knox & Elliott, (213) 612-7823. Bill Hunt, City of Rialto, (909) 820-2608. Mike McGraw, Fontana Water Company, (909) 822 2201. Lynne Plambeck, Santa Clarita Organization for Planning The Environment (661) 255-6899.

A city is not required to provide credit against park and recreation fees when it requires a developer to dedicate private open space, the Sixth District Court of Appeal has ruled. In an opinion interpreting the Quimby Act, the unanimous three-judge appellate panel reversed a lower court’s decision ordering the City of Santa Cruz to provide credit for the dedication of private open space in a small subdivision. “ ocal legislatures retain the flexibility to implement a private open space credit as they determine reasonable under local conditions,” the Sixth District ruled. In 1999, Branciforte Heights, LLC, applied for a conceptual planned development permit to demolish four houses on Branciforte Avenue and replace them with 10 new single-family units. The City Council approved the application but cut the number of new houses to nine. The council also required that the subdivision be reconfigured so that there would be a common area in the front yards that would be maintained by the homeowners association. One year later, the council approved a tentative map, design permit and demolition authorization. Approval again came with the condition of a common area. In July 2003, the council approved the final map. Shortly thereafter, Branciforte Heights notified the city that the developer would not be paying park and recreation in lieu fees because it was dedicating usable open space for parks and recreation to serve the subdivision. The city insisted that the usual fee still applied. Under the city’s municipal code, a planned development permit allows a developer to deviate from the underlying zoning if the project provides more amenities than usual. In this case, Branciforte was able to build at least two additional houses, but one of the required amenities was the common open space. As it began pulling building permits in December 2003, the builder paid the fees, eventually paying a total of $39,966. The developer then sued the city, demanding $118,000 in credit for the 4,000 square feet of open space and improvements. Last year, Santa Cruz County Superior Court Judge Robert Yonts ordered the city to “to allow a credit against the park fees for the value, at the time the fee was imposed, of that portion of the private open space in the development that is suitable for active recreational use.” The city appealed, and the Sixth District ruled that Judge Yonts read the statute incorrectly. At issue was an interpretation of the Quimby Act (Government Code § 66477). Subdivision (e) of § 66477 says that common interest developments “shall be eligible to receive a credit, as determined by the legislative body, against the amount of land required to be dedicated, or the amount of the fee imposed, pursuant to this section, for the value of private open space within the development which is usable for active recreational uses.” The developer argued this language commanded the city to provide a credit. The city contended the phrase “as determined by the legislative body” gave the city an option. Citing extensively from the legislative history, the court sided with the city. The language in question was inserted into the Quimby Act in 1982 at the same time that the state Legislature mandated that a developer’s dedication of public park and recreational improvements “shall be a credit” against park and recreation fees. The Legislature did not go that far with regard to the dedication of private open space. “ he Legislature did not go so far as to dictate the precise parameters of any private open space credit or to define the meaning of ‘usable for active recreational uses.’ Instead it left it up to local legislative bodies to determine the exact criteria and procedures for granting a credit,” Presiding Justice Franklin Elia wrote for the court. Santa Cruz has no ordinance that provides for a credit for private open space, the court noted. Without such an ordinance, the city has no duty to provide Branciforte Heights with a specific amount of credit, and the developer has no right to a credit, the court concluded. The Case: , No. H028864, 06 C.D.O.S. 3217. Filed April 19, 2006. The Lawyers: For Branciforte Heights: John Barisone, Atchison, Barisone, Condotti & Kovacevich, (831) 423-8383. For the city: Edward Chun, Bosso Williams, (831) 426-8484.

A billboard company has won the latest round in a drawn-out conflict with the City of Riverside. The Ninth U.S. Circuit Court of Appeals has ruled that Valley Outdoor Inc. may challenge the city’s handling of a permit application but may not contest the city’s sign ordinance. With its ruling, the Ninth Circuit sent the case back to federal district court for additional proceedings. In January 2000, Valley Outdoor began pouring foundations for five billboards next to the 91 Freeway in Riverside without permits. Two days after pouring foundations, Valley Outdoor sued the city, arguing that the city’s sign ordinance violated the company’s First Amendment rights. A few days after that, a state appellate court in an unpublished opinion struck down sections of the city’s ordinance, specifically a ban on billboards located within 750 feet of a freeway and a content-based exception to that ban ( , No. E022351). Valley Outdoor President J. Keith Stephens then attempted to file a permit application, but he was told the city still would not permit billboards within 750 feet of a freeway and he was turned away. In late February 2000, after the company had completed construction of all five billboards, Valley Outdoor again tried to apply for a permit. This time the city accepted the application. While it was pending, the city adopted a revised ordinance that restored the 750-foot freeway exclusion zone and prohibited offsite signage. In a letter dated one day before the effective date of the new ordinance, the city notified the billboard company that the city was rejecting the permit application because Valley Outdoor had not precisely identified the color and materials used for the sign uprights, and because the company failed to provide specific street addresses for two sign locations. Shortly thereafter, the city ordered Valley Outdoor to remove the billboards. Valley Outdoor amended its lawsuit, and in 2002 the district court ruled that the five billboards were governed only by those sections of the original sign ordinance left standing after the decision. In 2003, District Court Judge Dickran Tevrizian ruled that because Valley Outdoor had violated the city’s permit provisions by starting construction without applying for a permit, the company had no standing to challenge the billboard ordinance. Judge Tevrizian then granted the city’s motion for judgment as a matter of law. On appeal, the Ninth Circuit dealt only with the issue of whether Valley Outdoor has standing to bring the lawsuit. The court ruled that the company could not challenge the city’s regulations themselves. The original billboard ordinance “is irrelevant because its substantive restrictions were invalidated by ,” Judge Diarmuid O’Scannlain wrote for the court. And the amended ordinance does not apply because Valley Outdoor installed its billboards before the law’s effective date. However, the Ninth Circuit ruled that the billboard company could contest its treatment by the city. The court noted “that the city’s billboard ordinance contains a detailed procedure by which the city will process an application filed after the beginning of construction, i.e. a ‘latefiled’ permit application.” “Valley’s commencing construction before applying for the required permits does not constitute disqualifying ‘selfhelp,’ as the district court concluded, but actually gives rise to this very case or controversy,” O’Scannlain wrote. “Thus the district court erred in ruling that Valley lacked standing to assert constitutional claims related to the city’s conduct in refusing to process the latefiled permit applications.” The Ninth Circuit further ruled that the district court should have considered evidence regarding the city’s actions. “A jury could find that any differential treatment of Valley’s latefiled application may have been irrational and wholly arbitrary, in violation of equal protection principles,” the Ninth Circuit ruled. In a concurring opinion, Federal Circuit Court Senior Judge Daniel Friedman, sitting by designation, wrote that he disagreed with “some of the court’s statements” but that he agreed with the result. “I hope that evidence would be developed addressing these items: (1) Valley’s reasons, if any, for not seeking a permit before beginning construction of the billboards (other than its claim that such application would have been futile); and (2) the city’s reasons for apparently not considering the merits of Valley’s retroactive request for a permit or for denying that request (other than the city’s apparent position that it has absolute discretion to grant or deny a permit without stating a reason),” Friedman wrote. The Case: , No. 04-55029, 06 C.D.O.S. 3485, 2006 DJDAR 5036. Filed April 27, 2006. The Lawyers: For Valley Outdoor: Eliot Disner, Van Etten, Suzumoto & Becket, (310) 315-8200. For the city: Timothy Coates, Greines, Martin, Stein & Richland, (310) 859-7811.

A use permit condition limiting groundwater extraction to 12,000 acre-feet of water per year did not constitute a taking of property, the Fourth District Court of Appeal has ruled. An owner of farmland in Imperial County unsuccessfully tried just about every argument there is to convince the court that a taking had occurred. But the unanimous three-judge appellate panel ruled that there had been no physical appropriation of the water, and that the landowner had not shown that the county effected a regulatory taking. In 1994, Allegretti & Company, which owns 2,400 acres of land, filed an application for a conditional use permit to redrill an inoperable well. The well, one of several on the property, would provide water for crop production on 200 acres. Nearly three years later, the county approved the permit but with a condition limiting Allegretti’s draw of groundwater to 12,000 acre-feet per year from all wells on site. Allegretti never recorded the permit, and there exists today no county-imposed restrictions of groundwater pumping at the site. In November 1997, Allegretti sued the county for inverse condemnation, arguing that the county had no jurisdiction to require a conditional use permit and that a regulatory taking had occurred. After procedural wrangling that made its way to the Fourth District, Imperial County Superior Court Judge Jeffrey Jones ruled for the county. Judge Jones found that not only did the permit conditions not deprive Allegretti of all economically viable use of its property, Allegretti had failed to show that the conditions “would have any economic impact at all.” On appeal, Allegretti tried numerous approaches to win a reversal. First, Allegretti alleged that the county’s action amounted to a physical taking in that the county had denied the landowner access to water on its land. Allegretti relied heavily on a Federal Circuit Court of Claims decision in , (2001) 49 Fed.Cl. 313. In that case, the court ruled environmental regulations that prohibited farmers from receiving water deliveries to which they were contractually entitled amounted to a physical taking (see , March 2004). The Fourth District, however, said that it was not bound by the decision of an intermediate federal court, that the cases were different because only involved contractual water rights, that a more recent decision in , (2005) 67 Fed.Cl. 504, undercut , and that it disagreed with the holding. The court then considered the regulatory takings arguments. Allegretti contended that the county’s regulation amounted to a total regulatory taking because the landowner had been deprived of all “economically beneficial or productive use” of its property. The court quickly dismissed this argument, noting that a tenant had farmed 400 to 800 acres of the property’s 1,600 cultivatable acres. The court then undertook a takings analysis, which emphasizes three factors: the economic impact of the regulation, the extent to which the regulation interfered with “distinct investment-backed expectations,” and the character of the government action. The court found that Allegretti failed to pass the test. “Allegretti has not demonstrated any economic impact from county’s 12,000 acre-feet per year limitation other than unspecific lay testimony regarding reduced profits via a below market rental rate or diminution in value as a result of its inability to use the entirety of its 2,400-acre property for farming,” Justice Terry O’Rourke wrote for the Fourth District. “It is well established that mere diminution in value of property, however serious, does not constitute a taking.” Moreover, although Allegretti has superior groundwater rights as an overlying user, those rights are restricted to reasonable beneficial use consistent with Article X, §2 of the state constitution, O’Rourke noted. The final argument concerned whether the government regulation substantially advances a legitimate state interest. Last year, the U.S. Supreme Court in , (2005) 544 U.S. 528, disavowed this as a stand-alone takings test (see , July 2005). Allegretti argued that the substantially advances test still applies in California because the state Supreme Court used it in one of its most recent takings cases, , (1998) 17 Cal.4th 1006 (see , January 1999, June 1998). The court was willing to entertain the argument, and explained, “Under , no taking occurs if objectively there is ‘sufficient connection between the land use regulation in question and a legitimate governmental purpose, so that the former may be said to substantially advance the latter.’” Allegretti argued that the permit conditions could not advance a legitimate purpose because the county has no jurisdiction over groundwater usage. The court rejected the argument. “The permit condition, imposed under county’s police power for the purpose of conserving groundwaters and preventing their undue waste, had an objectively sufficient connection to that valid governmental interest,” O’Rourke wrote. “Allegretti does not identify and thus does not meaningfully challenge county’s underlying reasons for its action, nor does it explain why county’s limitation is in any way arbitrary.” As long as a governmental entity engages “in decision-making whose purpose is not delay for delay’s sake but legitimate oversight,” there is no compensable taking, the court concluded. The Case: , No. D045156, 06 C.D.O.S. 3519, 2006 DJDAR 5057. Filed March 28, 2006. Ordered published April 26, 2006. The Lawyers: For Allegretti: Michael Berger, Manatt, Phelps & Phillips, (310) 312-4000. For the county: Ralph Cordova, county counsel’s office, (760) 482-4400.

A Rohnert Park mobile home park owner’s demand that a court grant a rent increase because an unconstitutional city law held down rents has been rejected. The landlord sought a rent hike to make up for a rent cap based on an ordinance that a federal court threw out. But the First District Court of Appeal denied the increase because the property owner did not show that it was denied a fair return on its investment. In fact, the property owner argued that it did not have to show it was deprived a fair rate of return, a legal strategy that “defeats any possible right to recovery,” the court ruled. The controversy here started nearly 20 years ago, when the City of Rohnert Park adopted a rent control ordinance that limited mobile home park rent increases. Park owners chafed under the ordinance, and in 1996 a federal district court ruled the law unconstitutional because it did not provide landlords with a fair rate of return on capital improvements. The city appealed that decision, but the Ninth Circuit declared the appeal moot because the city in 1995 had amended the ordinance to allow park owners to recoup the cost of capital improvements. In 2002, a district court ruled that the amendment had corrected the constitutional defect. In 2003, the owners of the Rancho Grande Mobilehome Park — Hillsboro Properties and Goldstone Enterprises, whom the court called simply “Hillsboro” — filed an application for a rent increase to compensate for the period from 1988 to 1995, when the unconstitutional ordinance limited rents. The park owners contended that they were due a “ adjustment.” In ., (1997) 16 Cal.4th 761, the state Supreme Court said that future rent increases could make up for prior enforcement of a rent control law that overreaches. In a follow up case, , (2001) 24 Cal.4th 1003 (see , March 2001), the state Supreme Court ruled that a property owner could receive damages for a violation of constitutionally protected rights only by showing that a rent ceiling had been confiscatory and a adjustment was inadequate. Rohnert Park, however, refused to process the application because the city’s Mobile Home Rent Review Board has no jurisdiction over such an application. The city contended that the property owners had to seek either a net operating income (NOI) adjustment or a capital improvement pass-through. In September 2004, the park owners sued the city, alleging inverse condemnation. Sonoma County Superior Court Judge Raymond Giordano ruled for the city, finding that the takings claims were precluded by the five-year statute of limitations and that the challenge to the ordinance was also filed too late. He also ruled that the park owners had not shown that they were due a adjustment. A unanimous three-judge panel of the First District Court of Appeal upheld the outcome, although it took a different approach to the case. The appellate court first determined that the statute of limitations might not bar the takings claim because the claim might not have arisen until the city refused to process the 2003 application. The court did not decide on the statute of limitations issue, though, because it determined the property owners had not “made the allegations necessary to support any form of relief.” “ he crux of the dispute in this case,” Justice Stuart Pollak wrote for the court, “comes down to a single issue: Is Hillsboro entitled to recover rental income (either from its tenants or from the city) that it was precluded from charging by a constitutionally defective rent control ordinance if it was not thereby deprived of a fair rate of return on its investment?” Yes, the property owners argued, because the mere application of the defective ordinance denied them their substantive due process rights. There was no need to show they were denied a fair rate of return, the property owners contended. “Hillsboro’s position is based on a faulty premise,” Pollak countered. “One is not denied substantive due process simply because one is affected by the application of a governmental promulgation that for some reason is found to be constitutionally defective. A denial of due process giving rise to a claim for relief arises only if application of the defective measure deprives one of a constitutionally protected right.” “The constitutionally protected right that is involved in this case, as in , is the right to receive a fair rate of return on one’s property,” Pollak continued. “Hillsboro’s argument proceeds on the unarticulated premise that a property owner has the constitutionally protected right to charge as much as it wants for the use of its property, so that enforcement of an invalid rent ceiling deprives it of a constitutionally protected right. That is not what the federal or state constitutions, or or any other case, protect.” “A rent control measure is ‘confiscatory’ and its enforcement constitutes a violation of the substantive due process rights of the owner if it deprives a property owner a fair return,” the court ruled. Siding with the city, the court said the property owners should have sought an NOI adjustment or capital improvement pass-through. “ e are unable to conceive of any circumstance in which an owner would not receive a fair return that does not come within the scope of the NOI increase or capital improvement provisions,” Pollak wrote. The Case: , No. A110441, 06 C.D.O.S. 2882, 2006 DJDAR 4147. Filed April 6, 2006. The Lawyers: For Hillsboro: David Spangenberg, (707) 473-4340. For the city: Michelle Marchetta Kenyon, McDonough, Holland & Allen, (510) 273-8780.