Now that DOF has decided 240 redevelopment appeals, the next step shouldn't surprise anybody: The lawsuits are beginning to roll in: Murietta sues over affordable housing, city loan Murrieta has sued DOF over its decision to invalidate two payments – one a $3 million payment to the city from the RDA and the second a $1.2 million payment to developers on an affordable housing project called Monte Vista San Bernardino County sues to get loan repayment San Bernardino has become the rare county to sue DOF, claiming money it provided to a redevelopment project as a loan should not be given to other taxing entities but, rather, repaid to the county. El Cerrito settles DOF lawsuit, will skip "true-up" payment El Cerrito has settled its lawsuit with DOF, which permitted the city to skip a $1.7 million "true-up" payment Meanwhile ... Oakland tries to cover $18.5 million in clawbacks The city always used redevelopment funds aggressively to cover operating costs. Oakland claims 2,000 affordable housing units are at risk.

Almost 60% of lawsuits filed under the California Environmental Quality Act challenge environmental review projects in infill locations as opposed to greenfield locations, according to a new analysis of 95 recent cases by two lawyers at Holland & Knight. The new analysis comes on the heels of three other recent studies concluding that CEQA actions are struck down by courts between 40-60% of the time, compared to virtually zero for NEPA. Mixed-use projects and infrastructure projects were challenged more frequently than any other type of project. Most of the EIRs were challenged on the basis of  water supply, traffic, or air quality. The study by veteran CEQA hands Jennifer Hernandez and Daniel Golub also concluded that about 70% of the plaintiffs in these cases were local organizations, most frequently environmental or homeowner groups. About two-thirds of the projects were private development projects, while a third were public projects. The Holland & Knight study is the fourth study by private CEQA practitioners on trends on CEQA litigation – a topic that has been the subject of lots of political spin over the years but very little empirical research In 2011, veteran CEQA lawyer Clem Shute found that over a 40-year period, courts had found CEQA EIRs inadequate more than 40% of the time, compared to 0% -- yes, zero – for NEPA compliance by federal agencies. More recently, the Thomas Law Group – the firm of veteran CEQA lawyer Tina Thomas – found that EIRs were successfully challenged about half the time , while Negative Declarations were successfully challenged 60% of the time. A recent study by Holland & Knight using the same database found that 52% of Categorical Exemptions were struck down in court as well . The latest Holland & Knight report was an analysis not of outcomes but of who sues and over what. It was based on 95 court challenges to environmental impact reports between 1997 and 2012.

As cities around the state are still stinging from the state's decision to deny many of their 240 redevelopment appeals, redevelopment skirmishes still continue around the state -- often about affordable housing projects that cities claim are nearing completion. Here's a sampling: Santa Ana sues DOF over affordable housing project KABC The City of Santa Ana in Orange County is suing the state Department of Finance over DOF's decision not to permit the city to complete construction on a 41-unit low-income housing project the city claims is 75% completed. Meanwhile, Santa Ana's city manager and city attorney are under fire and may be at risk of losing their jobs, though this controversy appears unrelated to the redevelopment situation.  Arcata owes money to contractors even though DOF has demanded it Eureka Times-Standard Meanwhile, the North Coast city of Arcata in Humboldt County claims that much of the money DOF has demanded was already paid to -- or is still owed to -- contractors on the Sandpipe affordable housing project. Tulare County sues Porterville over RDA expansion Porterville Recorder Redevelopment may not exist anymore, but that didn't stop Tulare County from suing Porterville over a 1,500-acre expansion to its redevelopment project area in 2010. Presumably Tulare County is seeking a financial settlement over tax-increment funds collected between June 2010, when the expansion occurred, and February 2012, when redevelopment ended.

Approximately one-third of new housing units constructed in California's metropolitan counties between 2000 and 2009 were built in infill locations, according to a new report from the Environmental Protection Agency . The EPA Office of Sustainable Communities found that 386,000 infill units were built in the state's 19 metropolitan counties – 33.5% of the 1.15 million units built overall. This figure did not change between the boom years in the first half of the decade and the bust years in the second half. The Los Angeles-Orange County metro area (a separate metro area under the Census definition) led the state with 62% infill, followed by 59% in the Bay Area and 38% in San Diego. The highest percentage in the state was Santa Clara County (again, technically a separate metro according to the Census) with almost 80%. The lowest figures were 11% in the Inland Empire and 14% in both the San Joaquin Valley and the Sacramento Valley, suggesting that these inland areas continue to serve as the greenfield "escape valves" for crowded coastal metros. California's figure was significantly higher than the national total of 21% and about the same as the 32% total in the Northeast. Unlike in California, most metros saw an increase in infill construction during the bust. The EPA defined infill housing as housing constructed in Census block groups that were mostly developed in 2000. The agency used American Community Survey data, land cover analysis, and comparative aerial images in doing the analysis. % of New Housing In Infill Locations, 2000-2009

There's been a lot of redevelopment news around the state this week: DOF at your service: Santa Barbara ordered to sell parking lots and train depot . Modesto can't use redevelopment funds to pay off bonds for downtown projects . Ukiah surrenders Costco site to successor agency. ... Meanwhile, Lois Wolk seeks to eliminate voter approval for Infrastructure Finance Districts ... Housing setaside legacy project s NoHo apartment complex opens. Affordable housing project opens near Alkali Flats in Sacramento ... On a sad note, redevelopment lawyer Tim Sabo passes away ... And on the lighter side ... Sacramento's Mermaid bar -- sometimes used as Exhibit A in the fight over redevelopment in 2011 -- is up for sale. You can read Bill Fulton's defense of subsidizing the Mermaid bar as sound public policy here . And finally ... deep down you knew it was true:  Retailers  are the big losers in the death of redevelopment.

Exploiting a subtle difference between AB 32 and Gov. Arnold Schwarzenegger's  2005 Executive Order that preceded the bill, environmentalists have successfully persuaded a San Diego Superior Court judge to strike down the environmental impact report for the sustainable communities strategy adopted by the San Diego Association of Governments. In ruling for the plaintiffs, Judge Taylor wrote that SANDAG's approach "kicks the can down the road" and "perverts the regional planning function of SANDAG". Although the facts of the case suggest that the impact might be limited only to San Diego, if the environmentalists can win an appellate court ruling, other SCS's around the state could be in trouble. In any event the ruling suggests that SANDAG's strategy of stretching the SCS timeline out to 2050 may not work. SANDAG adopted an SCS that stretched the time horizon out to 2050, but did an EIR showing that would reduce per-capita greenhouse gas emissions by 14% for 2020. The state Air Resources Board's target for SANDAG was 7% by 2020 and 13% by 2035. However, critics of the plan claim that after 2020, per-capita emissions will actually increase, resulting in a net decrease in per-capita emissions of 9% by 2050. ARB has set no target for 2050 and, despite rhetoric from Schwarzenegger to the contrary, AB 32 does not set a target for 2050. However, in 2005 Schwarzenegger issued Executive Order S-03-05 -- never rescinded -- which calls for an 80% reduction in GHG emissions statewide by 2050.  Like other metropolitan planning organizations around the state, SANDAG approved a sustainable communities strategy, or SCS, under SB 375 and tied it to the federally mandate regional transportation plan, or RTP. Whereas the RTP only extends to 2035, however, the SCS extends to 2050. The Cleveland National Forest Foundation, the Center for Biological Diversity, and the Sierra Club sued, claiming that SANDAG front-loaded the SCS with freeway projects and did an inadequate job of dealing with long-term environmental impacts even it the time horizon was stretched out an additional 15 years. Cleveland National Forest Foundation v. SANDAG, San Diego Superior Court Case No. 2011-00101593.

While perhaps not surprising news to LAFCO wonks like Peter Detwiler, two recent decisions illustrate the special role that local agency formation commissions play in influencing local government and special district activities. The first decision, Citizens Association of Sunset Beach v. Orange County Local Agency Formation Commission (October 5, 2012, G045878) ___ Cal.App.4th ___ , wrestles with the intersection of Proposition 218 voting requirements with LAFCO's ability to order island annexations. (Government Code section 56375.3) Originally developed in 1904, Sunset Beach is a small, unincorporated enclave located adjacent to Huntington Beach. Confined to less than 134 acres, Sunset Beach is home to roughly 1200 permanent residents.  As authorized by the Government Code, Orange County LAFCO ("OC LAFCO"), upon review of the location, size and status of Sunset Beach, concluded that the area met the qualification for an island annexation, and ordered it annexed to Huntington Beach. At the time, existing property owners within the city limits of Huntington Beach paid two taxes that their adjacent neighbors in Sunset Beach did not pay: a five percent utility tax and a pre-Proposition 13 retirement property tax. LAFCOs approval of the island annexation thus triggered the following question: Did Proposition 218 give the Sunset Beach voters the right to vote on the taxes as a condition to the annexation going forward. Voters within Sunset Beach filed suit. The trial court decided that 218 voting requirements did not extend to LAFCO-compelled island annexations completed under the authority of Government Code section 56375.3. The appellate court reached the same conclusion. In so deciding, the appellate court reviewed the history to voter enacted tax reform starting with Proposition 13 (1978). The appellate court reasoned that had the voters intended to apply the vote requirement to the then existing-statutory scheme which authorized island annexations, the voters would have drafted the measure to expressly do so. Failing the ability to find that legislative objective in Proposition 218, the appellate court declined to read the proposition in a manner to reach a result not reasonably read into the adopted text. The second case, although primarily a CEQA decision, also illustrates LAFCo's potential range. In Voices for Rural Living v. El Dorado Irrigation District , (October 4, 2012, C064280) ___ Cal.App.4th ___, affected parties filed suit, challenging El Dorado Irrigation District's ("EID") approval of a Memorandum of Understanding (MOU) with a tribe, the effect of which was to increase the amount of water delivered by EID to the tribe for a casino operation. In 1989, the County LAFCO had approved an annexation request by EID to serve the tribal property. LAFCO imposed a condition which limited the water service for residential purposes and accessory uses, serving not more than 40 residential lots. Neither the tribe nor LAFCO ever challenged the validity of the limitation. A little more than ten years later, a casino was proposed for the property. This casino in turn necessitated the increase in water deliveries as well as construction of an on off ramp on Highway 50. The affected agencies prepared the required NEPA and CEQA documents. The water limitation proved problematic, and eventually EID become convinced that the LAFCO restriction was an improper limitation on EID serving a sovereign nation. EID then entered into the MOU with the tribe providing for water deliveries substantially in excess of those authorized under the LAFCO condition. Adjacent owners filed suit, alleging CEQA grounds along with the violation of the LAFCO restriction. The appellate court concluded that EID lacked the authority to unilaterally void the LAFCO limitation even in circumstances in which it thought the limitation was unconstitutional. This authority rests with the LAFCO or courts, not the agency charged with implementing the restrictions previously imposed. The appropriate course of action for EID was to go back to LAFCO (as it expressly had retained jurisdiction) and file a request for an amendment. In circumstances in which the LAFCO declined the amendment request, EID could then seek judicial review. LAFCOs are not exactly the new sheriff in town; they have been broadly empowered for decades.  As the these agencies become more confident in their independence and legal authority, expect them to take a seat at the table where important decisions are made regarding community growth and municipal organization. Citizens Association of Sunset Beach v. Orange County Local Agency Formation Commission (October 5, 2012, G045878) ___ Cal.App.4th ___Voices for Rural Living v. El Dorado Irrigation District, (October 4, 2012, C064280) ___ Cal.App.4th ___

The Fourth District Court of Appeal has struck down the environmental impact report for a large development project in Santee, saying the EIR failed to deal with several water supply issues, including a discrepancy between the EIR and the water supply assessment as to how much water the project would consume. After a previous proposal was shot down by the voters, the City of Santee approved entitlements for the Fanita Ranch project, along with certifying an environmental impact report and a water supply assessment. Long in the planning stage, the proposed project at Fanita Ranch would involve development 970 acres out of a 2,600-acre real estate holding to build 1,380 single-family dwellings, 230 acres of a pedestrian-oriented village, and a 10-acre lake. About half the area, 1,400 acres, would be approved as an open space preserve. Opponents – including the Endangered Habitats League and the Center for Biological Diversity -- challenged the EIR, and the trial court found a CEQA error pertaining to fire safety. The trial court declined the opponents request to set aside all of the approvals, opting for limited relief as contemplated by Public Resources Code section 21168.9. The trial court also awarded attorneys fees to the opponents under the authority of Code of Civil Procedure 1021.5. Both sides appealed. The Fourth District held the EIR held to be inadequate for:  (1) Failure to explain a material discrepancy between the EIR and the water demand numbers in the water supply assessment;  (2) Failure to disclose potential uncertainties associated with long-term delivery of a firm water supply, and (3) Failure to assess impacts of groundwater extraction to fill and maintain a 10-acre project lake. As the project would meet the standards of a multi-species plan (while the plan was yet to be formally adopted the lead agency), the project's contribution would be less than considerable, affirming the cumulative impact analysis in the EIR. The appellate court affirmed the trial court's decision on the fire issue, but concluded that there were other deficiencies as well. First, as to fire safety impacts, the EIR relied upon a fire protection plan, one element of which was the open space fuel management strategies. When the City approved the project, it did not include the fuel management strategies as part of its approval (although not entirely clear, it may have been omitted due to species concerns.) As a consequence, the appellate court concluded that there was a lack of substantial evidence to support the conclusion of no or less than significant impacts. The appellate court did uphold the evaluation of cumulative impacts to biological resources. In this case, the lead agency had relied, in part, upon a draft multi-species plan. The multi-species plan had been adopted by the City and County of San Diego, but not the City of Santee. However, the EIR assumed that the City would either adopt the species plan, or adopt similar standards, but in either event, the project met the species plan standards and would not interfere with plan implementation. On this basis, the lead agency properly concluded that the project's contribution would not be cumulatively considerable. Turning next to the mitigation measures for the Quino checkerspot butterfly, the appellate court found that the EIR failed to describe the actions contemplated for active management for the Quino within the preserve area and were improperly deferred to a later to-be-developed management plan; thus the approvals failed to contain sufficient protocols and standards as a substitute. The appellate court also rejected the analysis of the project's water supply impacts and related matters. First, the court observed that there was a significant difference in water demand numbers set forth the EIR (1,446 AF) compared to those in the Water Code 10910-10912 assessment (881 AF) prepared for the project, but there was no reconciliation in the EIR as to these differences. In a very rigid analysis, the appellate court concluded that "such an unexplained discrepancy precludes the existence of substantial evidence to conclude sufficient water is likely to be available for the project." The appellate court also faulted the City in that the EIR failed to account for uncertain or known contingencies to a reliable water supply (deliveries ultimately tied to the State Water Project.) The EIR also failed to account for the impact of filling and recharging the 10 acre lake with groundwater, which potentially could compound the threshold issue of the water supply assessment, as the water district would be the only other source of potable water necessary to fill the lake. Addressing next the remedy question, the appellate court recognized that CEQA grants the trial court the discretion of a remedy commensurate with the nature of the CEQA violation and that invalidation of the approvals is not mandated in every instance. However, in light of the additional interrelated CEQA errors it identified, the court intimated that a limited remedy may not be appropriate, although, as the trial court had invalidated all of the local government approvals in a later court proceeding, the appellate court did not have to address the application of this discretion to the case pending before it. As to the award of attorneys fees and the ensuing appeal, the court remanded it back to the trial court in light of the plaintiff/appellants success on appeal for further proceedings. Preserve Wild Santee v. City of Santee (October 19, 2012, D055215) ___Cal.App.4th ___.

Now that Ray LaHood has finally announced he is stepping down as President Obama's Secretary of Transportation, speculation has immediately focused on whether outgoing L.A. Mayor Antonio Villaraigosa will succeed him. There's no question that Obama needs a Latino in the Cabinet. It's not clear whether Obama thinks he needs a big name like Villaraigosa at DOT, and Villaraigosa claims to have taken himself out of the running because he doesn't want to leave office before his term is over on June 30. But that, in and of itself, doesn't necessarily mean he's out.The timing and messaging of LaHood's departure would seem to point in Villaraigosa direction: LaHood took his time making a decision and made it clear he'll stay on until a successor arrives. But maybe the most interesting question raised by the Villaraigosa possibility is whether a mayor is the best choice the DOT job. As   a recent blog  in Atlantic Cities noted, there's a pretty good case for a  mayor as opposed to a career transportation expert or a transplant from Capitol Hill.  The job is important to planning and development because the Department of Transportation has by far the most money of any federal agency involved in the field. It's one of three agencies (Environmental Protection Agency and Housing and Urban Development being the other two) involved in the Obama's Partnership for Sustainable Communities. And, of course, transportation investments drive development patterns. Villaraigosa's name is in play because he is a high-profile Latino with a strong record of accomplishment in the transportation field. On his watch, L.A. has moved to the forefront on rail transit construction, and Villaraigosa has eloquently advocated for "elegant density" as a solution to the city's problems. Most recent Transportation Secretaries have been either transportation professionals (like Mary Peters in the Bush Administration) or members of Congress who worked on transportation issues (like Norm Mineta, who had also been a mayor, and Ray LaHood). In the case of both Mineta, a Democrat, and LaHood, a Republican, the incumbent president used the DOT slot to give a Cabinet job to a respected member of Congress from the other party. But, as Atlantic Cities points out, mayors have a different take on DOT than other folks, because they view transportation as part of the overall system of their city's functions and they are more likely to view transportation investments in economic development terms. In many ways, Villaraigosa resembles former Denver Mayor Federico Pen a, who was President Clinton's first DOT secretary in 1993. Pena was a well-respected Latino mayor who had gotten one big transportation project done (the new Denver Airport) and had laid the groundwork for urban redevelopment both downtown and at the old Stapleton Airport site. (You can read a piece I wrote about Pena at the time here .) Pena did not have nearly the high national profile that Villaraigosa has, however. Pena sometimes seemed over his head in the job at first, but in the end did a good job. But it was easier to be Secretary of Transportation in those days, principally because of money and politics. The pathbreaking ISTEA law had passed with bipartisan support just two years earlier and the federal gas tax had gone up. Now, the federal Highway Trust Fund is bankrupt and it took Congress four years to pass an 18-month extension to the transportation bill. It is also hard to know how Villaraigosa -- a big city mayor -- would handle the state DOTs, who have enormous influence over how transportation money is spend. It is worth noting, however, that he spent six years in California Assembly, rising to the position of Speaker. In the end, the question of whether Villaraigosa goes to DOT is a political calculation on both sides -- whether President Obama sees an advantage to having this high-profile Latino in his Cabinet, and whether Villaraigoisa views the DOT job as a useful stepping stone toward his presumed next goal, a run for governor after Jerry Brown steps down. But it would be interesting to see whether Villaraigosa can push a smart growth transportation agenda more effectively than anybody else.

Here's CP&DR 's roundup of recent events around the state regarding the redevelopment wind-down. Just click on the headline to read more -- sometimes from us, sometimes from other sources. West Sac passes Chiang's test, Hercules struggles, Morgan Hill sues CP&DR Controller John Chiang has audited four former redevelopment agencies so far and only West Sacramento has been given a clean bill of health. Hercules is struggling to comply amid an unrelated redevelopment scandal, while Milpitas and Morgan Hill got rapped for creating what Chiang concluded was a bogus economic development entity. Morgan Hill is suing the state over that one. Menlo Park sells pricey land at direction of oversight board San Jose Mercury News Menlo Park has sold a 2-acre site previously owned by its redevelopment for $8 million, and the proceeds will be distributed to local taxing agencies. The property on Hamilton Avenue is zoned M-1 but could support 38 housing units. The RDA had been attempting to find a developer before redevelopment was dissolved. Over the summer, the oversight board directed the city as successor to issue an RFP for a developer. The purchaser is Greenheart Land Co. plans to build all market-rate units. Read the staff report here . Victorville airport authority defaults on bonds Contra Costa Times The Southern California Logistics Airport Authority has defaulted on bonds for the second time this year, blaming the end of redevelopment for the problem. The VIctorville-based joint powers authority was originally created to deal with land at the former George Air Force Base and was given redevelopment powers in the process. DOF says no to WeHo park project West Hollywood Patch The state Department of Finance has denied West Hollywood's request to use $14 million in redevelopment funds to help fund a $41 million renovation of Plummer Park. The city floated $30 million in bonds in 2011 to cover the remainder, but expected to use redevelopment money for about a third of the project. Plummer Park is one of only three parks in WeHo and served as the location for the temporary city hall when the city was incorporated in 1984. Camarillo loans $250,000 to successor agency Ventura County Star The City of Camarillo has loaned its redevelopment successor agency $250,000 to cover administrative costs.

West Sacramento has become the first city to emerge unscathed from a redevelopment audit by the State Controller's Office. Meanwhile, the Bay Area city of Hercules finds its asset transfers caught in the crossfire of a variety of other problems, including alleged long-term mismanagement of the redevelopment agency. West Sacramento was the fourth city to have its 2011 asset transfers audited by Controller John Chiang's office . In general, Chiang's audits have found that redevelopment agencies transferred government facilities to cities in 2011 – rather than letting the successor agency do that – and also have transferred redevelopment project assets to the city or a city-created economic development group. Like many cities around the state, West Sacramento – located just across the Sacramento River from the State Capitol – transferred most of its redevelopment agency's assets to the city in 2011. Chiang's office found in November that all of West Sacramento's $77 million in asset transfers were legal. Chiang's office said the city should have turned 12 parcels with zero book value involved in that transfer over to the successor agency – but West Sacramento's oversight board subsequently approved the city's retention of those properties, so West Sacramento got a clean bill of health overall. The first two – Morgan Hill and Milpitas – got whacked for transferring redevelopment assets to a newly created economic development entity controlled by the city. Milpitas's response was more hard-line than Morgan Hill's, though Morgan Hill is suing over the economic development entity. The third – Hercules – was criticized for transferring several critical redevelopment parcels to the city. Chiang's office had previously found mismanagement in the redevelopment agency prior to 2011. Hercules The Hercules situation is messy because of an underlying financial scandal and other factors. In January, the city and the RDA were sued by their bond insurer, Ambac, when it became clear that the RDA would miss a bond payment on February 1 – the same day that the RDA was scheduled to go out of business. Subsequently, the city settled the lawsui t with, among other things, a promise to sell two RDA properties, Parcel C and Victoria Crescent, that had been transferred to the city by the RDA in 2011. It was clear that, without the legal settlement, Hercules would have had to declare bankruptcy. Further scandal erupted in September, when an audit by Chiang's office revealed that the city had misspent or otherwise not properly accounted for $50 million in RDA expenditures between 2007 and 2010. The audit specifically called out the city's former city manager – apparently Nelson Oliva – whose private consulting firm received $3 million to run various housing programs during this period, including $2 million from the RDA's housing setside fund, apparently without competitive bid. Many other irregularities were also found, including failure to pay ERAF funds and poor documentation (no appraisals, for example) for four properties the RDA purchased during this time, including Victoria Crescent. The city subsequently sued Oliva and his three daughters, seeking to recover the $3 million. In November, Chiang's office found that $35 million of the $124 million in assets transferred from the city to the RDA were improper. These included about $4 million in cash and, apparently, about $30 million in the form of three pieces of property – Sycamore Crossing and the two parcels the city is compelled to sell to settle the Ambac suit, Victoria Crescent, and Parcel C. Chiang's report does not specify these three properties but the City Council ordered the transfer of these three properties a t its meeting on November 13 , five days after Chiang's audit came out. Chiang's office also knocked Hercules for not turning out $15 million in affordable housing assets, but the city claimed this was related to a dispute over who would be the successor agency. Hercules declined to serve as the successor agency for housing and waited all summer while the Contra Costa County Housing Authority – the default entity under AB 1x 26 – determined whether to accept the role of successor agency for housing purposes. The Housing Authority eventually declined and Hercules claimed it did not know who to transfer the assets to. Milpitas In August, Chiang's office found that $147 million of the $175 million in assets transferred in 2011 were not permitted and recommended that these assets be transferred to the successor agency. Of these, about $97 million were government facilities and public works assets transferred to the city, including the Milpitas Civic Center, valued by the city at $30 million. About $50 million, including $37 million in investment funds, was transferred to the Milpitas Economic Development Corp., a newly created entity. Milpitas responded by saying that the assets transferred to the city were governmental assets built, at least in part, with redevelopment funds as was permitted under the redevelopment law. Regarding the assets transferred to the economic development entity, Milpitas claimed that it is a separate entity and the city cannot compel the corporation to surrender assets to the successor agency. In its counter-response, Chiang's office said that it was up to the oversight committee to determine which government facilities to transfer and noted that the economic development corporation was set up by the city and the City Council serves as its board. Morgan Hill Also in August, Chiang's office virtually identical fault with transfers in Morgan Hill as its found in Milpitas. Chiang found that $108 million of the $228 million in assets transferred in 2011 were not permitted and recommended that these assets be transferred to the successor agency. Of these, about $88 million were public facilities transferred to the city, including the city library and a variety of sports and recreation complexes. The other $20 million in assets were downtown redevelopment assets, including a parking garage, parking lots, and a theater, which were transferred to the Morgan Hill Economic Development Corp. – which, as in Milpitas, was a new entity created in response to the possible end of redevelopment. Unlike Milpitas, the city agreed to turn the city assets over to the successor agency. The Morgan Hill Economic Development Corp., however, was another story. The EDC was created by the city on March 2, 2011, specifically to carry on the work of the RDA. But the city tried to create an arms-length relationship with the EDC. The boundaries were the entire city, not just the old redevelopment project area. The EDC's initial board of directors was the City Council; but on March 7, the EDC met and changed the by-laws so that a majority of its board members were not City Councilmembers. The RDA had initially transferred the downtown assest to the city, but ater in March, the city transferred these assets back to the RDA, which immediately transferred to the EDC. In its response, the city argued vigorously that the EDC was beyond the city's control, but Chiang's office didn't buy it, saying that at the time of the asset transfer the EDC board still consisted of the City Council. In September, the Morgan Hill City Council decided to sue the state on the issue of the economic development entity.

There is some irony in contemplating the demise of state affordable housing programs at this moment. Residential values have taken a major haircut and interest rates are at record lows, the two factors together resulting in new levels of affordability. Nevertheless, over the long run, state programs have served a vital role in affordable housing and from a long term policy perspective, should remain funded and operational. The most recent decision in this area, in Housing Partners I, Inc. v. John C. Duncan, pertains to prevailing wage requirements and the specified exemptions to the obligation to pay prevailing wage on public projects, depending upon the funding source. California's prevailing wage requirements are found in the Labor Code at sections 1720-1861. Two commonly utilized exemptions from the obligation to pay prevailing wages involve projects financed through a qualified housing fund or from a combination of qualifying housing funds and private funds (Labor Code section 1720(c)(4), and below-market interest rate funds for projects meeting qualified income and affordability criteria (Labor Code section 1720(c)(6)(E)).  In this case, Housing Partners I, Inc. developed a senior citizens housing project in Redlands. To finance the project, the developer utilized 1720(c)(4) funds and 1720(c)(6)(E) monies. As permitted by state law, a prevailing wage monitoring group requested a prevailing wage coverage determination from the Department of Industrial Relations.  The monitor first concluded that the project met the definition of a public works project, which would typically require the developer to follow prevailing wage law.  The monitor then turned to the nuanced question of whether or not a developer who receives funds from two sources, each of which meet the test for the exemption, loses the exemptions if the funding sources are combined. As difficult as it is to imagine that the legislative purpose behind the exemption would be lost if the two sources were combined, that is what the monitor concluded.  That decision was confirmed following an administrative appeal, and by the trial and appellate courts. As the appellate court observed, the legislative goals behind the exemption have to yield to the unambiguous terms of the statutes. In the situation of section 1720(c)(4) funds, the statute qualifies the exemption to circumstances in which those funds are the sole source of funds.  Commentary When it came to interpreting what the legislature enacted, the director and the court got it right. If there is legislative wisdom to such a restriction, it is far from evident. This case reminds me of Humpty Dumpty in Alice In Wonderland: "When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean - neither more nor less." The moral of this case is to be careful of what you wish for and how you draft legislation. The Case:  Housing Partners I, Inc. v. John C. Duncan (June 15, 2012, E052582) __Cal.App.4th __; 2012 Cal.App. LEXIS 709 The Attorneys:  Atkinson, Andelson, Loya, Ruud & Romo, Thomas W. Kovacich and Jennifer D. Cantrell for Plaintiff and Appellant. Vanessa L. Holton, Chief Counsel, Steven A. McGinty, Assistant Chief Counsel, and John L. Korbol, Staff Counsel, for Defendant and Respondent.