A recent appellate court opinion that cast doubt on the legal status of thousands of lots in 19th century subdivisions has been decertified. The California Supreme Court ordered the depublication of the Second District Court of Appeals' decision in Circle K Ranch Corp. v. Board of Supervisors of the County of Santa Barbara, B124996 (see CP&DR Legal Digest, May 2000). However, the state's high court did not accept the case for review. The Second District ruled that separate parcels do not exist today...

You can lead a horse to water, but you can't make it drink. Likewise, you can lead California's road builders to ISTEA/TEA-21Transportation Enhancements, but you apparently can't make them take advantage of the matching funds. That's a shame because this resistance ensures that the state has poorly landscaped roads, fewer bridge and railroad depot renovations, and minimal interpretive centers for historic and scenic area. The Transportation Enhancement (TE) program is a cornerstone of the revolutionized federal highway funding legislation, and it's designed to beautify utilitarian roadways. It also nicely complements other parts of the ISTEA/TEA-21 by providing funding for greenways and bike paths, bicycle and pedestrian safety programs, control and removal of outdoor advertising, and nine other eligible activities intended to balance transportation systems. Planners might think of the TE program as a New Urbanist approach to circulation. ISTEA — the Intermodel Surface Transportation Efficiency Act — has been the Federal funding legislation since 1991. In 1998, it was reauthorized as TEA-21. It replaced the old Federal Highway Act with a new approach to transportation planning and decision making. For the first time, federal transportation law called for (1) long-range, multi-modal planning, (2) active involvement of local governments, (3) extensive public involvement, (4) greater attention to maintenance of the existing system, fiscal accountability, social equity and environmental responsibility, and (5) inclusion of bicycling and walking. We now know that this bold step forward is enabling communities to make the best transportation decisions for their future. But a recent study summarizing nationwide spending patterns for transportation enhancements presents a disappointing picture. The report, published by the National Transportation Enhancement Clearinghouse, found that 100% of the National Highway system funds were "obligated" (in the transportation jargon), and 78% of the Congestion Mitigation and Air Quality Improvement (CMAQ) funds were obligated. However, only 65.5% of the available TE funds were claimed nationally. California was among the worst of the pack. In the 1999 program year, the state grabbed only 53.8% of the $320 million dollars available. In contrast, Puerto Rico, Alaska, and Wyoming all obligated at least 99% of the eligible funds. California ranks 43rd in a list of 52 states, districts, and territories eligible. It gets worse for people who would prefer beautified and bike-friendly movement corridors. Since 1995, the amount of obligated funds has steadily declined, even though TE funding has generally grown. National data for 1999 show that of $631 million, only $365 million (58%) is obligated. What is going on? Megan Betts, manager of the National Transportation Enhancement Clearinghouse, said that implementation of transportation enhancements needs to speed up. "We need to figure our why, nationwide, things are not moving faster," Betts said. Kate Bickert, director of the Rail to Trails Conservancy's California Field Office, said one problem is that planning money is not readily available for TE projects. Without documented planning support, there is no obligation of funds. There have been structural problems at the state level as well: until December 1998, all projects had to go to Caltrans' state office to compete for funds. That system did not bode well for projects that many engineers consider to be "frills." Thankfully, the California Transportation Commission appears to have cured this bureaucratic problem by redirecting TE project decision-making to local transportation commissions, which work with Caltrans' district office staff for clearance. But other regional issues remain: Are there local project advocates? Are the Caltrans district engineers willing to accept alternative transportation? Are they comfortable with designing trails? Are relations good between a transportation commission and Caltrans staff? Bickert contended that institutional bias runs deep at Caltrans, especially in Los Angeles, the Central Valley, the Inland Empire, and rural counties. "If an engineer has 20 projects, and five are multi-million dollar road projects, the one-million dollar bike trail quickly falls to the bottom of the list," she said. California's transportation enhancement projects that have come about are highly visible. Consider that the renovation and adaptive reuse funds for Los Angeles' Union Station and San Francisco's Ferry Building came from the TE pot. Then, there is the East Bay's Iron Horse Trail – a multi-purpose facility linking two counties, 11 cities, and three BART stations. Also, the Ventura County Transportation Commission bought a 32-mile railway corridor for a proposed rail-with-trail project in the rural Santa Clara River Valley with TE money. It is encouraging that the system works in some of the state's regions, and may get better statewide. "We have and will continue to obligate all of our TE money in our region" said Ginger Gherardi, director of the Ventura County Transportation Commission. Gherardi's agency maintains an active relationship with its constituency and the Caltrans district staff. Better leadership at the state level may also be forthcoming, added Bickert. "The fact that the TE coordinator in Sacramento, who had worked alone, now has two staff members is a good step. And though it remains to be seen, it appears that Jeff Morales has some good ideas." Still, while our planning institutions deal with the expanded universe of transportation as defined in ISTEA/TEA-21, we may need work harder to convince the horse that it is indeed thirsty. Stephen Svete, AICP, is president of Rincon Consultants, Inc., a Ventura-based consulting firm.

Linkage fees are back. But will they do any good — or any harm? A "linkage fee" is a fee imposed on one kind of development to help fund a different kind of development that otherwise might not get built. Most commonly, this means slapping a fee on commercial development (which presumably brings more jobs to a community) in order to fund affordable housing development (which presumably will house the workers who take the jobs). Linkage was all the rage back in the late '80s — when office development was so hot that every town seemed to be planning for a 5-million-square-foot office park. Having lost faith in the private market's ability to provide worker housing, "lefty" cities such as Santa Monica, Berkeley, and San Francisco began charging office developers a per-square-foot fee to fund affordable housing projects. The fee idea soon spread to a few high-end employment rich cities, such as Cupertino. But it pretty much stopped there. The boom of the '80s ended, developers complained that the fee was bad for business, and the housing market tanked anyway. The City of Los Angeles, for example, started the process of adopting a fee but never completed the task. Now, the economy is hot again. Housing production is off but non-residential construction is strong, and there is a growing jobs-housing imbalance in many parts of the state. So it's not surprising to see a resurgence in the linkage concept. Some cities that have had fees for a long time are considering increasing them. And several places that have not had fees before are talking about imposing them. A housing task force appointed by the Los Angeles City Council has proposed the linkage fee as part of an overall strategy to create a $50-million-a-year affordable housing trust fund. Calabasas, an affluent city adjacent to the San Fernando Valley, has imposed linkage fees for the first time, and has created a different fee schedule for retail and office development (90 cents per square foot for retail versus $1.50 for office). The charming small city of Sonoma — not exactly a center of commercial development — is currently doing a study to determine what level its fees should be. The resurgence of linkage fees raises two related questions about whether they are good public policy. First, are they really justified? And second, do they really make any difference? The whole concept of the "development impact fee," of course, is based on the assumption that new development makes certain demands on a community and therefore the developer must take responsibility for mitigating the impact. This process, in turn, assumes that it's possible to measure the impact. This quantification is probably far easier in examining whether a flower or bird gets wiped out than determining whether a new office building or store is driving up the price of housing. In order to justify the fees, a municipality must make a series of assumptions about how much money employees will make, what kind of housing they're likely to seek, and what percentage of those employees are likely to look for housing in the same political jurisdiction where they work. But, of course, commute sheds and housing markets are regional in nature. Very often, companies will seek to locate in a particular jurisdiction because it's within commuting distance of a good labor pool, which may or may not be located in the same jurisdiction. And vice versa. In some geographical areas, this argument sticks nicely. For example, the connection in the Silicon Valley could scarcely be more obvious. Since the beginning of the Internet boom five years ago, something like seven jobs have been created for every home constructed in Santa Clara County, and the average home price in the county now exceeds a half-million dollars. The Internet companies employ vast numbers of in-commuters, yet they are highly resistant to moving their operations closer to their employees' homes. So it's not surprising that the Silicon Valley cities of Palo Alto, Menlo Park, Sunnyvale, and Cupertino all have linkage fees. But one of the biggest linkage fee programs in the state is run by the Sacramento Housing and Redevelopment Agency, the joint agency that serves the city and county of Sacramento. Back in the '80s, homebuilders sued Sacramento. They argued that — far from driving housing costs up -— employers were locating in Sacramento because housing prices were low, at least in comparison to the Bay Area. The homebuilders lost the case — the judges were reluctant to overturn Sacramento's impact analysis — but their argument has a certain logic. Why impose housing fees on businesses that are chasing low housing prices to begin with? Then there's the question of whether all these linkage fees actually make any difference in providing housing affordable to the employees who work in the new facilities being built by the commercial developers who pay the fees. A recent statewide survey by The Wall Street Journal estimated that all the commercial linkage fees in the state had raised less than $100 million for housing over a 15-year period. That's not chicken-feed, but it's not much in the context of a multibillion-dollar housing need statewide. The money usually gets thrown together with other local housing money, such as block-grant funds or redevelopment funds, to help provide a pool of subsidies for affordable housing projects. In other words, like so many other fees, it's difficult to trace a direct connection between the employment center creating the problem and the employees who are supposed to benefit. This is a little like Mello-Roos taxes for school construction, which often create more "school construction capacity" for the school district but rarely provide new schools for the children who actually live in the Mello-Roos project. The basic question, of course, is whether housing is either (1) a profit-making activity or (2) a piece of "community infrastructure" that is likely to lose money if it is pursued in a manner appropriate to the community's needs. Over the past half-century, American public policy has assumed that the answer is #1. But in a high-cost location like California, the answer, increasingly, appears to be #2. The question is not WHETHER somebody other than actual home buyers ought to pay for housing, but WHOM. A century ago, the most common answer to the question was the employers themselves, many of whom built magnificent "company towns" such as Scotia, the hamlet built by Pacific Lumber. Today, the most common answer is that the government ought to serve as some sort of "middle man" extracting money from profitable community ventures to subsidize unprofitable ones. But given the low esteem in which most people hold their government, it remains to be seen whether linkage fees are the right technique.

An appellate court has thrown out the Town of Mammoth Lakes' redevelopment plan and the plan's EIR. The Third District Court of Appeal held that there was no substantial evidence that the 1,139-acre redevelopment project area was blighted or even predominately urbanized. The court also ruled there was no evidence that current conditions prevented economic development. As for the EIR, the court ruled that the town's program EIR was inadequate and the town should have thoroughly analyzed all 72 projects in the redevelopment plan. In mid-1997, the Town Council certified the EIR and adopted the redevelopment plan, which covered three areas comprising nearly half of the town. A group called Friends of Mammoth filed lawsuits challenging the validity of both the plan and the EIR. Mono County Superior Court Judge Edward Denton ruled for the town, but the unanimous three-judge appellate panel overturned Denton. In a lengthy opinion, Justice George Nicholson repeatedly noted that the town made assertions about blight and poor economic conditions but provided no proof. Nicholson said Mammoth Lakes improperly calculated the amount of land that is "predominately urbanized." Redevelopment law (Health & Safety Code �33030) requires 80% of a project area to be predominately urbanized. The town counted all portions of partially developed parcels as urbanized, such as all 76 acres of community college site even though only 2 acres are developed. Nicholson said a 1992 amendment to redevelopment law specifically used the word "land" rather than "parcel" or "property." "The facts of this case exemplify the misuse of redevelopment power the Legislature sought to curb. The Town sought to include in the Project Area undeveloped and obviously non-blighted land which is planned and approved for extensive private development," Nicholson wrote. Furthermore, the town provided inadequate evidence that the area suffers from physical conditions that cause blight or that there are factors that "prevent or substantially hinder" economic viability. " he Town Council could not determine from the evidence that the flat rate of tax revenues was caused by defective design or construction, inadequate lot sizes or substandard site design," the court ruled. Regarding the EIR, the town argued that the document functioned as a first-tier EIR and individual projects would receive additional review in the future. But the court ruled that the California Environmental Quality Act would prohibit future analysis of the individual projects. Because the redevelopment plan was so detailed � to the point of, for example, specifying the size and location of parking lots � the 72 projects would be "deemed approved" upon plan adoption. " ecause each project is deemed approved for purposes of CEQA, the significant impacts to the environment likely to be caused by each individual project must be analyzed in the redevelopment plan EIR at least to the same extent each project is detailed in the redevelopment plan and its accompanying Final Report," Nicholson wrote. The Cases: Friends of Mammoth v. Town of Mammoth Lakes, Nos. C029659 and C03104, 00 C.D.O.S. 6141, filed July 21, 2000. The Lawyers: For Friends: Murray Kane, Kane, Ballmer & Berkman, (213) 617-0480. For the town: Peter Tracy, town attorney, (760) 872-1101.

The University of California is preparing to expand its Davis campus to accommodate more students during the next 10 years. Although Davis's expansion is not expected to be as large as at other campuses in the UC system, UCD's plans could conflict with a slow-growth initiative that city voters approved in March. At the very least, Measure J appears to have strained relations between university representatives and city officials. Although the planning process is just getting started, UC officials have hinted that they might undertake development of a separate university town to ensure that future students and faculty members have someplace to live — maybe even in neighboring Solano County. "Nothing is firm," said Richard Keller, director of physical, environmental and capital planning for UCD. Still, Keller noted that the Davis housing market is extremely tight, with a 0.2%, apartment vacancy rate and home prices having risen 22% in one year. "If they are not going to ensure capacity, we have to take a look at providing adequate housing," Keller said. In an interview with a campus publication after the March election, UCD Chancellor Larry Vanderhoef said: "With Measure J's passage, the cost of housing will, in my opinion, go up, as well as the rental costs of apartments. That means we have to be thinking about impacts on Winters, Dixon and Woodland. And we also have to be thinking about our own on-campus solutions for housing for our students, faculty and staff — solutions that would minimally impact the city of Davis." Vanderhoef even said that building an elementary school on campus is a possibility. Measure J requires an election for the rezoning of agricultural land or open space. Four of five current Davis city councilmembers supported the ballot measure. But Councilwoman Sue Greenwald, a Measure J advocate, said UCD officials ought not view Measure J as a vote against university growth. What sparked Measure J was the proliferation of new single-family-home subdivisions on the town's periphery. That growth has nothing to do with the university, as students do not live in the new subdivisions and even many UCD employees cannot afford the new houses, she said. Instead, Sacramento commuters, retirees and Bay Area refugees are buying the houses, she said. "I think if we didn't have Measure J, we'd have more of these subdivisions that don't serve university faculty and students," Greenwald said. Greenwald said she would love to work with UCD officials on developing housing in which UC would have some form of equity so that it could be reserved for faculty and students. "I don't know why they are being so hostile when we are so eager to cooperate," Greenwald said. But Davis Mayor Pro-Tem Susie Boyd said city-university relations began to sour about two years ago, and Measure J added to the strain. Now, UCD appears to be moving ahead without the city. "There doesn't seem to be an avenue down which we can walk together," Boyd said. "We learn of the university's intentions by reading the newspaper, which is indicative of how bad things have gotten." However, what course the university will eventually take is not clear. System-wide plans call for UCD to grow slower than other campuses but still add about 900 faculty and staff members and 6,000 students during the next 10 years, giving UCD about 31,000 students in 2010. Officials are completing a core Academic Plan that spells out UCD's educational and research missions. The Academic Plan will serve as a basis for a new Long Range Development Plan, on which officials intend to begin work this fall, according to Keller. The Academic Plan will go a long way toward defining what types of facilities UCD needs. The university adopted the existing Long Range Development Plan in 1989 and amended it in 1994. The plan has a horizon of the 2005-06 academic year. The new plan should be good through 2015. The university will establish a community advisory committee and invite input before selecting a preferred alternative. Once the campus leadership decides on a plan, a master environmental impact report will be prepared. Then the whole package will go the UC Board of Regents for final approval, probably in two to two-and-half years, Keller explained. In the past, UCD has primarily relied on the market to provide housing for students, staff and faculty. But that might not be a realistic expectation for the future, especially in light of Measure J. University planners will complete a number of studies and undertake what Keller calls "scenario planning" during the long-range planning process. "We would be in this scenario planning whether Measure J passed or not. We would have asked our question: ‘How do we go about accommodating our growth?'" Keller said. "I don't think we know the effects of Measure J." The university owns 5,200 acres, only 850 acre of which constitute the core campus. The rest is mostly small-plot agriculture that UC would like to avoid developing, Keller said. That approach could play into some type of Solano County strategy. For years, landowners in unincorporated Solano County, which is just across Interstate 80 from the core campus, have made pitches about collaborating on some sort of master development for UC, Keller acknowledged. It is also worth noting that UCD already provides a number of its own municipal services, including water service, irrigation, wastewater treatment, fire protection, an airport and a landfill. Thus, UCD is even less reliant on local government that most state institutions, none of which need local government approval for development. Moreover, UCD recently hired John Meyer, who had been Davis city manager for nine years, as vice chancellor for resource management and planning. All of these factors make Davis city officials nervous. Boyd, the Measure J opponent, said the community is based on its tight connection to the university. As UCD becomes more insular, the city as a whole loses, she said. "It's not a good situation for the city. It doesn't necessarily hurt the university because they will still get what they need," Boyd said. But Greenwald thinks people might be jumping to conclusions. There is no reason to believe voters, under the rules of Measure J, would not approve a "modest scale" student or faculty housing project. In fact, she said, Measure J should force developers to propose market-rate rental housing because students make up a large voting bloc in Davis, she said. And, Greenwald said, the pro-Measure J councilmembers will fight to ensure that developers of already-approved projects provide market-rate rental housing that serves UCD. Contacts: Rick Keller, UC Davis director of physical, environmental and capital planning, (530) 752-2433. Sue Greenwald, Davis councilwoman, (530) 756-5831. Susie Boyd, Davis mayor pro-tem, (530) 758-1435. UC Davis campus newspaper: www-dateline.ucdavis.edu

A city councilmember can appeal a planning commission decision and then cast a vote on the appeal, the Second District Court of Appeal has ruled. The court decided that the owner of a pool hall in Torrance who sought a permit to sell alcohol could get a fair hearing in such circumstances. The unanimous three-judge panel made clear that the case was dissimilar to a 1994 case in which the Second District ruled that it was a conflict of interest for the Thousand Oaks City Council to appeal a Planning Commission decision to itself. (Cohan v. City of Thousand Oaks, (1994) 30 Cal.App.4th, 547; see CP&DR Legal Digest January 1995.) In Cohan, the city made a number of errors that added up to violation of a developer's substantive and due process rights. But in the new case from Torrance, the court ruled that the city followed its municipal code — which specifically allows a councilmember to appeal a planning commission decision — and that the pool hall owner did not prove the City Council's hearing was unfair. Furthermore, Cohan involved an appeal by the entire City Council, while the Torrance pool hall was appealed by only one councilman. The unanimous three-judge panel also ruled that the City Council's de novo hearing was proper, and rejected the business owners' contentions that campaign contributions should have disqualified four councilmembers. In early 1997, the owners of BreakZone Billiards submitted an application for a conditional use permit. The pool hall had been located in the Rolling Hills Plaza for three years. The owners wanted to expand their operation to include food service, outside dining and amplified music at a new location within the shopping center. BreakZone also sought permission to sell alcohol. The Planning Commission approved the application in November 1997, but Councilman Dan Walker filed an appeal, citing a Police Department recommendation that the full council should decide. BreakZone attorneys and city officials then wrangled over a number of procedural issues, including BreakZone's assertion that four of five councilmembers should recuse themselves because they had received campaign contributions from the owner of Rolling Hills Plaza, which was in litigation with BreakZone. Eventually, the entire City Council heard the appeal in February 1998. Police described the pool hall as a gang hangout and said it contributed to area crime. Public testimony was split. The City Council voted 5-0 to deny the use permit and the following month adopted findings to support the decision. BreakZone then filed a lawsuit making many claims, but Los Angeles Superior Court Judge David Yaffe ruled for the city. In upholding Yaffe's decision, the appellate panel dealt at length with the question of bias. BreakZone argued that it could not receive a fair hearing because Councilman Walker appealed the Planning Commission's decision, voted on the application and had accepted $5,500 in campaign contributions from the Rolling Hills Plaza developer. But the court held that a unilateral perception of bias is not grounds for disqualification and that BreakZone did not prove its case. "To prevail on a claim of bias violating fair hearing requirements, BreakZone must establish ‘an unacceptable probability of actual bias on the part of those who have actual decision making power over their claims,'" the court held, citing U.S. v. State of Oregon (9th Cir. 1994) 44 F.3d, 758. "A mere suggestion of bias is not sufficient to overcome the presumption of integrity and honesty." Writing for the court, Los Angeles Superior Court Judge Allan Goodman, siting by assignment, continued: "It is clear that the Cohan court did not resolve whether and under what circumstances an elected official might both appeal to a city council the decision of one of its committees, and later vote on, an action of such committee. … Is it fundamentally unfair for the government official appealing the action to participating in the hearing on the appeal and vote on that appeal? Cohan suggests that it might be, but does not expand on that suggestion. Neither party cites cases which decide the question." The court then noted that the Torrance mayor did not let Walker run the appeal hearing, and that BreakZone was given ample opportunity to respond to testimony. As for the campaign contributions to Walker and three other councilmembers, the court made clear that no conflict of interest was presented. The Political Reform Act (Gov. Code §81000 et seq.) prohibits a public official from voting on a matter if he has received at least $250 during from an interested party during the last 12 months. In this case, no one had received a contribution from the shopping center owner in at least 17 months. "The concept that campaign contributions perpetually disqualify the recipient from participating in governmental decisions has been expressly and emphatically rejected by our Supreme Court," Judge Goodman wrote. As for the type of hearing, the court said the city acted appropriately. "Although it is styled as an ‘appeal' of the decision of the planning commission, a hearing before a city council on an application for a CUP after hearing by a planning commission is a proceeding de novo. … As such, the burden is on the applicant to establish to the satisfaction of a majority of the city council that the application should be approved. As a de novo hearing, all issues are before the reviewing body, in this case the city council." Finally, the court ruled that substantial evidence existed to support the City Council's decision. Although the city appeared to blame BreakZone for more than its true share of police calls, there were legitimate concerns about land use conflicts and the alteration of the business from "family-oriented" to one that served alcohol. "While it is a correct statement that the record reveals that there were already 18 other establishments in the same vicinity which sold alcoholic beverages … it does not follow that the council must approve every application for a business that dispenses alcoholic beverages," Goodman wrote. "Decisions such as this — literally, where to draw the line — are best left to local zoning agencies; they are in the best position to exercise sound judgement as to appropriate uses for sites within zoning classifications which they establish." The Case: BreakZone Billiards v. City of Torrance, No. B128098, 2000 Daily Journal D.A.R. 7163, filed June 30, 2000. The Lawyers: For BreakZone: Hillary Arrow Booth, Grossblatt & Booth, (310) 556-9766. For Torrance: Philip Kohn, Rutan & Tucker, (714) 641-5100.

Doctor, I need to tell you why I am lying on the couch today. In my line of work, as you know, I report on public-private deals for California's most distinguished land-use newsletter. And, for the most part, I perform my job without major psychic distress or disturbance (except for occasional bouts of rage when I learn that redevelopment agencies have declared open fields of wildflowers to be "blighted" in order to build power centers.) But something has happened recently. I heard that the City of Oakland took the very unusual step of accepting stock warrants from a technology company in partial payment for a piece of land. The topic seemed so good, so right for a chest-thumping Deals column. But for days I have been unable to write. Each time I think about Oakland's deal, I think about ... about ... (I am almost too embarrassed to say it) ... Olivia Newton-John doing the sexy dance in that skin-tight, black leather outfit at the end of "Grease." Hold on, doctor. It's not what you think. The symbolism runs deep. Oakland's deal, like Olivia's outfit, is provocative: The city has sold 14.5 acres near the Oakland Airport to Zhone Technologies Inc., a telecommunications start-up, to build a 300,000-square-foot plant on the site. For this site, Zhone (pronounced "zone") paid $6 million, plus 100,000 warrants. (A warrant gives the holder the right to buy shares in a stock company at some future time.) Zhone, which was founded less than a year ago, expects to go public sometime in the near future, but the date has not been fixed. Although a number of real estate developers and landlords have been willing to accept stock in lieu of rent, Oakland is the first city to accept equity in a company as payment in a real estate transaction, according to Frank Fanelli, the city's real estate manager, who negotiated the Zhone deal. Doctor, somehow I feel I am being manipulated. I feel like the City of Oakland is trying to get a rise out of me. The calculated reaction, of course, is for everyone to roll their eyes and say sober and respectable things like, "the Public Interest is too important to play dice with," or "Cities should not put taxpayers at risk by gambling on the overheated stock market." Why, the very idea of accepting stock warrants for publicly owned land sounds as reckless — as insane — as investing our Social Security savings in the stock market. (I'm not making a political statement, doc. I know that you put your Roth IRA into a high-tech mutual fund, and that you now have more money than Ed McMahon.) Oakland's Fanelli told me that he is proud of this transaction. "We have a lot of horsepower and creativity here to think outside the box," he said in an interview. "It was quite novel for a public agency to try and act like a private entrepreneur." He even invited other companies to make similar offers to Oakland: "The city is open for business. Bring us a deal we can't refuse." Now, a close examination suggests that this deal is actually very tame and very safe — especially compared with a typical Marks-Roos bond deal, which is based entirely on speculation. The Oakland property is part of a 22-acre parcel that the city bought from the Port of Oakland for about $9 million, or roughly $9.39 per square foot. According to my Texas Instruments calculator, Zhone paid about $9.50 per square foot for its parcel, so the city already has recovered its costs. Offering the land at cost is perfectly acceptable, of course, if the goal was to attract an employer who would provide 1,300 high-paying jobs, as Zhone plans. As for the warrants, they are gravy. If the city makes money, that is great. If the warrants turn out to be worthless, however, City Hall workers will not be forced to sell their office furniture at a lawn sale. And unlike the parade of dot-coms that are currently crashing in front of our eyes, Zhone may just hit pay dirt. The company was founded by the top executives of Ascend, which was purchased last year by Lucent Technologies for about $24 billion. Not yet a year old, the new company has already attracted $500 million in seed money from high powered investment outfits such as Kohlberg Kravis Roberts & Co., Texas Pacific Group and New Enterprise Associates. At this point in my reporting, doc, it hit me: Oakland is showing off! It wants to exclaim to the world how au courant and techno-hip it is. And why does Oakland need to show off? Well, doc, I'm a little bit of an amateur shrink myself, and I have a theory. The city has an inferiority complex. Oakland is one of the last Bay Area cities to reap the benefits of the computer and Internet revolutions. Oakland has become tired of being viewed as the Camden of Northern California, a city of industry, urban grit and crime. Oakland wanted to do something to get itself noticed — something other than electing a wacky ex-governor as mayor or spending tens of millions of dollars on a bad football team. The whole thing reminds me of Olivia in Grease. Remember the picture, doc? In the beginning, she is a plain girl in a plain dress. She is not cool or flashy. She makes a number of ill-fated attempts (here symbolizing Jerry Brown's election and the Raiders' deal) to draw the attention of John Travolta. But she appears hopelessly unable to make Travolta (symbolizing the high-tech and dot-com sector) pay attention to her. Then, in the movie's finale, she appears in that smashing outfit (again, symbolizing the Zhone lease). She is hotter, more flamboyant, than any other girl. John Travolta at last pays attention to her, and soon the pair is dancing energetically. Success and happiness abound. Now, doctor, I am fixated. I know I should be writing about Oakland's strong assets in transportation, its affordable real estate, its bay frontage and the city's investment in downtown. But whenever I think of that flashy warrant deal, I find myself unable to write. I just can't get the picture of that dancing woman out of my mind. Can you help me, doc? Can you? Doctor F (after a pause): "Explain one thing, if you would, please. These warrants ... are they still available?"

The Fourth District Court of Appeal has turned away a Proposition 218-based challenge to the City of San Diego's tax on rental residences. The court held that the tax is an excise tax that is not subject to the provisions of Proposition 218, the "Right to Vote on Taxes Act" of 1996. San Diego began assessing a "rental unit business tax" on apartments and hotels in 1942. The tax evolved over the years, and in 1992 was extended to cover all residential properties available for rent, including single-family homes. The city's last substantial amendment of the tax, codified at San Diego Municipal Code §31.0305, was in 1993, when the city raised the rates. The city assesses owners $50 plus $5 per unit for one to 10 units, $57 plus $9 per unit for 11 to 100 units, and $150 plus $8 per unit for more than 100 units. The city deposits the revenues into the general fund for general governmental purposes. Two property owners, Edward Teyssier and Robert McCarty, challenged the rental tax, claiming that the city had to put the assessment to a vote. But the property owners lost at separate trial courts, and, a unanimous three-judge panel of the Fourth District, in combined proceedings, upheld both rulings. Teyssier and McCarty pointed to the provision of Proposition 218 that "no tax, assessment, fee or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership." They argued that this language meant Proposition 218 applied to any assessment related to property ownership. But the Fourth District, Division One, panel refused to give Proposition 218 the broad reading that the property owners wanted. The court accepted the city's contention that the annual assessment is levied upon the use of property, not the ownership of property. "The plain meaning of ‘incident' as relevant here is ‘something that occurs … in connection with something else' or ‘something appertaining or attaching to something else,'" Acting Presiding Justice Don Work wrote, citing The Random House Dictionary. "By its plain language, applies to fees levied strictly as an incident of property ownership, without any additional condition present." Work continued, "Were Proposition 218 intended to include excise taxes imposed for the exercise of a privilege of ownership or a particular use of property, its drafters could have said so, clearly and expressly. They did not." As an excise tax, San Diego's assessment qualifies as a "general tax" under Proposition 218 (Articles XIII C and XIII D of the California Constitution), the court held. As a general tax, it would be subject to Proposition 218's voting requirement only if it were imposed, extended or increased after January 1, 1995, the court said. San Diego last increased the tax in 1993. The San Diego property owners presented an argument similar to one that was successful last year in a challenge to the City of Los Angeles's apartment inspection fee. (Apartment Association of Los Angeles v. City of Los Angeles, 74 Cal.App.4th 681; see CP&DR Legal Digest, October 1999.) In that case, the appellate court held that Proposition 218 did not distinguish between property owners in general and property owners who rent or lease their property. The state Supreme Court now has the case under review. But in a footnote to the San Diego case, the Fourth District said San Diego's ordinance is "significantly different" from Los Angeles' fee. In Los Angeles, the assessment was levied regardless of whether the unit was occupied, and the revenues were earmarked for anti-slum enforcement, the court said. In San Diego, the assessment is "a residential rental component of the business tax," is unrelated to inspections and pays for general governmental purposes. The Cases: Edward M. Teyssier v. City of San Diego, No. D033171 and City of San Diego v. Robert McCarty, No. D033622, 00 C.D.O.S. 4833, 2000 Daily Journal 6409, filed June 15, 2000. The Lawyers: For Teyssier and McCarty: Norman Blumenthal, Blumenthal, Ostroff & Markham, (619) 239-1111. For San Diego: Anita Noone, assistant city attorney, (619) 533-5800.

Santa Cruz County's granting of six variances for a new house on the beach has been upheld by the Sixth District Court of Appeal. The unanimous three-judge panel ruled that the county could consider federal and county regulations as "special circumstances" in approving variance requests. The controversy was centered on some of Santa Cruz County's most desirable real estate, namely, Beach Drive, next to Rio Del Mar Beach, in Aptos. In 1996, Jim and Judi Craik purchased a house at 415 Beach Drive, and Norma Odenweller and Robert Fleck bought the adjacent lot at 413, which contained a garage and parking area. Odenweller and Fleck then submitted plans to build a house and sought numerous variances. The county Planning Commission approved six variances allowing three stories instead of two; a 32-foot-high structure instead of 28 feet; a 16-foot front yard setback and 8-foot second story deck setback instead of 20 feet for both; 53% lot coverage instead of 50%; a second story deck; and more than 50% of the front yard to be used for parking. The county provided findings for all the variances and noted conditions such as the narrow 35-foot lot and FEMA hazard zone regulations that prohibit living space in the lower 23 feet of the structure. Moreover, most of Beach Drive was developed before the county adopted a general plan and zoning regulations, and few of the existing 61 houses meet current regulations. For example, 19 of the existing houses have three stories, and the majority has front yard setbacks of 10 feet or less. The Craiks sued, arguing that the county was making ad hoc, parcel-by-parcel decisions in violation of state planning and zoning laws. They contended that the county could grant a variance only if there were physical disparities between the subject property and other lots in the zoning district. They also argued that the variance conflicted with the county general plan and that the county's findings were inadequate. But Santa Cruz County Superior Court Judge Richard McAdams and the appellate panel rejected all three arguments. "First, there is no authority to support that a ‘physical' disparity is a precondition for a variance," Acting Presiding Justice Eugene Premo wrote for the Sixth District. "Government Code §65906 requires variances to be granted ‘because of special circumstances applicable to the property.' The Santa Cruz County Code adopts the same concept (‘special circumstances'). And the leading case in this area interprets the concept as emphasizing only undefined ‘disparities between properties.' Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506. Thus, defendant was not barred from considering the FEMA and related county regulations as special circumstances." Even though the regulations apply to everyone, the practical impact of the rules can be considered disparate, the court held. As for the general plan conflict, the court ruled that the general plan limitations were a matter of interpretation and the court would defer to the county. Finally, Premo wrote that the county's findings "need not be stated with judicial formality. … We have no trouble following defendant's analysis. The property in question is small and the backyard is unusable. Hence the need for a forward-setting building site and decks. The proposed structure cannot be occupied in the first 23 vertical feet. Hence the need for 4 additional feet and an extra story." The Case: Jim Craik v. County of Santa Cruz, No. H020690, 00 C.D.O.S. 4980, 2000 Daily Journal D.A.R. 6627, filed May 3, 2000, ordered published June 1, 2000. The Lawyers: For Craik: Douglas E. Marshall, (831) 425-7900. For the county: Rahn Garcia, assistant county counsel, (831) 454-2040.

A day before his agency issued sweeping regulations to protect threatened salmon and steelhead in California, Oregon, Idaho and Washington, Will Stelle was matter-of-fact about the likely reaction: litigation. As northwest regional administrator for the National Marine Fisheries Service, he's been in the hot seat for years as the region has struggled to reverse the devastation visited upon native fish species by dams, farming, urban development, road construction, logging, water diversions, and commercial and recreational fishing — virtually everything people do in or near the water. Working from an office in the dour National Oceanic and Atmospheric Administration complex on the shore of Seattle's Lake Washington, Stelle has been in the center of a pitched political and legal battle among local government officials, business owners and environmental groups over the intertwined fates of fish and local economies. Lawsuits are inevitable, he said. In fact, they might be the only way the conflict between fish protection and economic pursuits will ever be resolved. In late June, NMFS issued its final rule for preservation of 14 runs of salmon and steelhead, including three in California. The document was still warm from the photocopier when the Washington Environmental Foundation and four other groups filed a notice of intent to sue the agency to overturn the rules as inadequate to protect fish. Simultaneously, the rules were denounced as excessive by the National Home Builders Association and the Pacific Legal Foundation, a property-rights advocacy group, which had already filed suit on behalf of bait shops, motels, landowners and fishermen in southwest Oregon. The suit challenged NMFS's authority to list coho salmon there as threatened under the Endangered Species Act (ESA). Attorney Russ Brooks said the group may broaden the suit to challenge the new rules. Reaction in California was more muted because many watersheds affected by the new regulations are already under restrictions imposed by previous ESA listings. Nevertheless, the NMFS rules released on June 20 have potentially far-reaching effects on local land-use practices across a broad swath of California. The regulations also represent an intriguing new approach to federal regulation. It is, in fact, the approach local communities have been demanding for years. But now that they have gotten their wish, local officials are almost completely unprepared to respond. Technically, the document issued by NMFS is known as a "final 4(d) rule," after a section in the Endangered Species Act. When the relevant federal agency (the U.S. Fish & Wildlife Service for inland species and a few marine species, and NMFS for most marine creatures and anadromous fish) declares a species endangered, a blanket prohibition on "take" of that species automatically is imposed. When a species is listed as threatened, however, protection is not conferred until the agency devises a rule under section 4 (d) of the ESA describing regulations that are "necessary and advisable to provide for the conservation of the species." In the past, NMFS has simply issued 4(d) rules that prohibit the take (any action that harms individuals or their habitats) of threatened species. The rules issued June 20 break with this tradition, providing exemptions for actions that are carried out under approved state, local or tribal conservation programs. With this deceptively simple change, NMFS opened the door for local communities to decide how they will respond to the ESA listing, giving them a chance to continue some activities that harm fish as long as these occur in the context of a broader approach that improves the species' chance of survival — habitat restoration, land conservation, rigorous water-quality controls, removal of fish-blocking dams and culverts. This locally determined approach — in contrast to the top-down, one-size-fits-all mandate typically issued from Washington — has long been the regulatory grail sought by community leaders in regions hosting endangered species. Locals' presumption has been that they know the terrain best and must live with the consequences of the listing; therefore, local community leaders are in a better position to craft protections that respect both the ecological needs of imperiled creatures and the economic needs of their community. Now they will have a chance to prove this presumption valid. The new rules apply to 14 "evolutionarily significant units" of salmon and steelhead. An ESU is a biologically distinctive group of salmon or steelhead that is uniquely adapted to a particular area or environment. The California ESUs involved are the Central Coast steelhead, the South-Central Coast steelhead, and the Central Valley steelhead. Their habitat encompasses the coastal watersheds from just south of San Luis Obispo north to the Russian River, and the Central Valley from just south of Modesto to Redding — a total of 26,858 square miles comprising all or part of 31 counties. The final 4(d) rules single out several state or local regulatory or conservation plans as being acceptable to NMFS; any activities that occur under their auspices are exempt from the ESA's "take" provisions. To provide comparable exemption, the rules invite other agencies to seek NMFS approval of their own plans for land-use regulation, fisheries management, hatchery operations, forestry practices, and water diversions. However, none of the programs NMFS singled out for embrace is in California. The most likely candidate is the California Coastal Salmon and Watersheds Program, an embryonic initiative modeled after similar statewide plans in Oregon and Washington. In addition, two multi-county initiatives have been established to coordinate salmon and steelhead recovery along the North Coast. Other than that, little has been done at a state, regional or local level to prepare for the final rule. This means state, county and city agencies in California will have to seek federal approval to learn if their existing regulations provide adequate protection for steelhead Greg Bryant, recovery coordinator for NMFS in California, said his agency has been trying for two years, with little success, to get the state to cooperate in developing a 4(d) response package. In 1990-2000, California allocated $13 million to salmon restoration — a relative pittance compared with its neighbors. For example, Washington's Salmon Recovery Funding Board has at least $75.5 million available in the 1999-2001 cycle for such work. Most of the money invested in programs of potential benefit to California steelhead have come through the CalFed program, a state-federal initiative to improve ecological conditions, water quality and supply reliability in the Sacramento-San Joaquin river delta. Those programs, however, address only Central Valley watersheds, not the coast. The NMFS steelhead rules, which are controlled by a court order, take effect 60 days after their July 10 publication in the Federal Register, giving California until September 8 to respond. The salmon rules would take effect in January 2001. That is not much time to respond. Without a comprehensive plan like the ones being developed in Washington and Oregon, California will end up mediating the inevitable conflicts between fish and people one lawsuit at a time. Contacts: Greg Bryant, National Marine Fisheries Service: 707-825-5162. Russ Brooks, Pacific Legal Foundation: (425) 576-0484. Michael Rossotto, Washington Environmental Council: (206) 622-8103.

An appellate court has ruled against a citizens group that had protested Placer County's handling of an application for a 22-unit lodge at Lake Tahoe. The Third District Court of Appeal ruled that the citizens group had no standing to bring a lawsuit based on alleged violations of the California Environmental Quality Act because the group did not seek county Board of Supervisors' review of the negative declaration approved by the Planning Commission. The unanimous three-judge panel rejected the argument that raising CEQA issues during the Planning Commission hearing was adequate to preserve judicial standing. The court also held that the CEQA issue was never properly before the Board of Supervisors even though a staff report to board — which considered an appeal of parking requirements for the lodge — referred to the negative declaration and supervisors adopted the negative declaration. In late 1997, the owners of Vista Shores Resort on Highway 28 along the northwest shore of Lake Tahoe applied for a conditional use permit to redevelop their property. The owners sought permission to replace an eight-unit motel with a two-story, 22-unit lodge of mostly two- and three-bedroom units. In June 1998, the Placer County Planning Commission approved a negative declaration and conditional use permit for the project. Neighboring property owners Larry and Sharon Kramer immediately filed an appeal with the Board of Supervisors, claiming that the 26 proposed parking spaces were inadequate. The Board of Supervisors considered the appeal in August. The planning department's staff report said the appeal was "of the Planning Commission's action to approve a Negative Declaration and Conditional Use Permit. …The reason for the appeal was cited as insufficient parking on the site." During the appeal hearing, no one questioned the negative declaration. Supervisors decided to require 10 additional parking spaces but voted unanimously to deny the appeal, adopt the negative declaration and find that the project complied with a "parking demand table" approved by the county and the Tahoe Regional Planning Agency. The Kramers and others then filed a lawsuit claiming that the county should have completed an EIR and that the project violated both the parking demand table and the North Tahoe Community Plan. Placer County Superior Court Judge James Garbolino found that the project opponents failed to exhaust their administrative remedy by not appealing the negative declaration to the Board of Supervisors. He also found that the project complied with parking requirements, and he issued summary judgement for the county. On appeal, the project opponents argued that a section of CEQA (Public Resources Code §21177) does not require that every issue be raised at every hearing, or even at the final hearing, before a lawsuit is filed. They also said CEQA was in fact an issue before the Board of Supervisors. The Third District disagreed. " laintiffs appeal placed only the conditional use permit before the Board of Supervisors and only with regards to parking," Justice George Nicholson wrote. "The appeal form provided a specific notation by which plaintiffs could have appealed the Planning Commission's approval of the negative declaration, but plaintiffs did not specify they were appealing the Planning Commission's decision on that point. Such a failure to raise an issue in an administrative appeal after raising the issue in the first public or administrative hearing constitutes a failure to exhaust administrative remedies and prevents the issue from being raised in a subsequent judicial action." The trial court should not review an issue that was not raised before the administrative body with final decision-making authority, the court held. The appellate court also said the title of the staff report was irrelevant and that county code required the board to adopt "all findings necessary to implement its approval of the project," including the negative declaration. In an unpublished portion of the opinion, the court held that "substantial evidence supports the County's finding that the project complied with the Parking Demand Table." The Case: Tahoe Vista Concerned Citizens v. County of Placer, No. C032876, 00 C.D.O.S. 4736, 2000 Daily Journal D.A.R., 6273, filed June 13, 2000. The Lawyers: For Concerned Citizens: Rose Zoia, Brandt-Hawley & Zoia, (707) 938-3908. For the county: Scott Finley, Placer County Counsel's office, (530) 889-4044.

The Fourth District Court of Appeal has overturned an award of nearly $300,000 in attorneys fees to groups that lost a case based on the California Environmental Quality Act. The Fourth District ruled that even though the groups felt obliged to pursue the lawsuit, which followed an earlier successful suit, they were not entitled to fees in the second lawsuit. The case stems from Riverside County's approval of the giant Eagle Mountain landfill at a former iron-ore mine only 1.5 miles from Joshua Tree National Park. Environmentalists led by the National Parks and Conservation Association sued the county over the EIR during the mid-90s. A trial court and the Fourth District both ruled that the EIR for the proposed 2,200-acre garbage dump was inadequate. National Parks & Conservation Assn. v. County of Riverside, (1996) 42 CalApp.4th; see CP&DR Legal Digest, April 1996. After losing the appellate court ruling, Riverside County prepared a new EIR — and environmentalists sued for a second time. San Diego County Superior Court Judge Judith McConnell again found the EIR deficient, but the Fourth District overturned that ruling and said the document was acceptable. National Parks & Conservation Assn. v. County of Riverside (1999), 71 Cal.App.4th, 1341 (National Parks II); see CP&DR Legal District, June 1999. The California Integrated Waste Management Board has since issued permits to Kaiser Ventures, which is trying to sell the project. However, neighboring landowners have sued the Department of the Interior in federal district court over steps the Bureau of Land Management took to accommodate the landfill. The latest issue in state court concerned attorneys' fees. Although the Fourth District, Division One, upheld the county's EIR last year, it postponed the issue of legal costs. Judge McConnell had ordered the county to pay $294,000 of environmentalists' attorneys' fees, an order that the green groups tried valiantly, but unsuccessfully, to defend on appeal. Code of Civil Procedure §1021.5 allows a court to award attorneys' fees to a successful party when its private enforcement of laws upholds an important public right, and a significant benefit was conferred. Most of CEQA case law is built on such cases. The National Parks and Conservation Association argued that §1021.5 gave trial courts broad discretion to award fees. The association also contended that the appellate panel should look at the litigation as a whole, rather than at success or failure of one particular stage. And the group argued that it had a continuing obligation to review the second EIR and "raise reasonable grounds for objection." The unanimous three-judge appellate panel rejected all three arguments. First, the court noted, the trial court never handled the case after it was overturned on appeal. "The obvious failure of this argument is that the trial court was never given the opportunity to exercise is discretion to determine whether the Association was a prevailing party after we reversed the court's order in its entirety," Justice Judith Haller wrote. Because the association lost the case, the award of attorneys fees must be reversed, he court ruled. As for looking at the litigation as a whole, the court said such an approach was inapplicable because the association recovered fees for prevailing in the lawsuit over the first EIR. Challenging the second EIR was "a substantively discreet action." Finally, Haller wrote, "There is no statutory authority or case law requiring an opponent in environmental litigation to bring a challenge to a revised EIR filed on a return. While the Association had a right to commence proceedings challenging the adequacy of the Return, it was not ‘required' or compelled to do so." In one small victory for the landfill opponents, the court found that the Association might be eligible for $13,902 in fees "reflecting work performed during the administrative process leading to the certification of the Return EIR." It is arguable that this work ensured the second EIR addressed the deficiencies found in the first study, the court ruled. It remanded this issue back to Judge McConnell. The Case: National Parks and Conservation Association v. County of Riverside, No. D032228, 00 C.D.O.S. 4426, 2000 Daily Journal D.A.R. 5927, filed June 5, 2000. The Lawyers: For the association: Jeffrey Dintzer, Gibson, Dunn & Crutcher, (213) 229-7000. For the county: Steven Weston, Weston Benshoof Rochefort, Rubalcava & MacCuish, (213) 623-2322.