The Del Mar City Council had enough evidence to deny a permit for a two-story home addition based on aesthetic grounds only, the Sixth District Court of Appeal has ruled. In so doing, the court reversed San Diego County Superior Court Judge Lisa Guy-Schall's decision to grant the homeowner a writ of mandate requiring the city to issue the permit. In overturning the trial judge, the appellate court found that Del Mar had not violated the landowner's civil rights under federal law. Significantly, on one issue the court relied entirely on the opinions of neighbors and city commissioners as "substantial evidence." The case involved a proposal by Breneric Associates and Stephen Scola to build a two-story addition to an existing single-family residence. Beginning in 1993, Breneric sought a permit from the city to build the addition. Under Del Mar rules, a design review permit is required prior to construction. The city's Design Review Board denied the permit, stating in particular that the use of glass panels on the roof deck was incompatible with the existing architecture of the building. The DRB also claimed that the siting of the addition would create a crowded condition incompatible with the surrounding neighborhood. Breneric appealed to the City Council, which remanded the case back to the DRB. The DRB again denied the permit, and Breneric again appealed to the City Council, which this time denied the permit as well. Breneric sued, claiming that the city violated the landowner's civil rights under 42 U.S.C. 1983, the federal Civil Rights Act. The lawsuit also sought a writ of administrative mandate to compel Del Mar to issue the design review permit. Judge Guy-Schall sustained Del Mar's demurrer to the Section 1983 action, effectively giving the city victory on that point. The judge also concluded there was insufficient evidence in the administrative record to support the denial of the permit under the city's ordinance and granted Breneric the writ of administrative mandate ordering the city to issue the permit. Del Mar cross-appealed, arguing that substantial evidence did indeed exist and the writ should be overturned. On appeal, the court affirmed Guy-Schall's first ruling and overturned her second, giving the city total victory in the case. Among other things, the court concluded that the heightened scrutiny required under the so-called Nollan/Dolan line of cases does not apply in this case. Breneric had not made this point but the Pacific Legal Foundation did so in an amicus curiae brief. The Nollan/Dolan line of cases requires a heightened level of judicial scrutiny in exaction cases. (For more discussion, see the report of the California Supreme Court's ruling in Santa Monica Beach Ltd. v. Superior Court, CP&DR Legal Digest, February 1999.) The appellate court concluded that Nollan/Dolan does not apply because the case did not involve an exaction of land or money from the landowner. On the substantial evidence question, the court addressed both the glass-panel question and the siting issue. On the siting issue, the court noted that the proposed addition left no sideyard setback on one side. "The testimony of neighborhoods and the opinions of the DRB members constitute substantial evidence." On the question of the glass panel, the court noted that Del Mar had found that the design did not coordinate with "color, materials, architectural form and detailing of the existing structure." One architect called the existing house "a unique example of a Victorian cottage" and concluded that a glass panel was inconsistent. On the Section 1983 complaint, the court found that Breneric had not made its case. Among other things, the court found that Breneric's lawsuit did not allege that Del Mar had deprived Breneric of a protected property interest; the DRB permit was a discretionary permit. The court also found no evidence that Del Mar had acted arbitrarily because the city had a sound policy basis for its decision. In addition, the court found that the facts of the case did not support the contention that the city denied Breneric equal protection or that its taking claim was ripe. The Case: Breneric Associates v. City of Del Mar, No. D024838, 99 Daily Journal D.A.R. 469, 99 C.D.O.S. 389 (issued December 15, 1998, published January 15, 1999). The Lawyers: For Breneric: Joseph S. Carmellino, (619) 622-8377. For City of Del Mar: Mark A. Potter, (619) 455-9737.

Downtown Riverside appears to be using the legal system as a revitalization tool - not by suing anybody, but by recruiting new courthouses. Last year, Riverside County agreed to finance construction of a $21 million federal courthouse in the same neighborhood as the county's Hall of Administration and County Courthouse. And in January, the Fourth District Court of Appeal moved from its longtime headquarters in downtown San Bernardino to a new courthouse adjacent to the federal site. The Court of Appeal move is considered a coup for Riverside, but it came as a blow to the already beleaguered downtown of San Bernardino. Division Two of the Fourth District has been located in downtown San Bernardino since it was created in 1966. But with a caseload that has doubled since 1987, the court has outgrown location in a former Safeco Title Insurance building there. The new building, which cost $7.2 million to build, is located at the corner of Lime and 12th in downtown Riverside. The new building's location was "driven by politics," Presiding Justice Manuel Ramirez told the San Bernardino Sun. The court receives approximately half of its workload from each county, with Inyo County accounting for a small portion of the caseload. The Riverside courthouse is the second new Court of Appeal courthouse constructed in a downtown location in recent years. Division Six of the Second District Court of Appeal - the only division located outside of Los Angeles - built a new courthouse in downtown Ventura after many years of renting office space there. The federal courthouse in Riverside will be located at the corner of Lemon and 12th. The county is building the courthouse with county-issued bond funds and leasing the property to the federal government for 15 years. The county had previously purchased the U.S. Bankruptcy Court building to accommodate its own expanding courtroom needs. Public Debt Issuance Stays Constant Public debt issuance in California remained constantly in 1998 at approximately $40 billion, according to new figures from the California Debt Investment and Advisory Commission. Local bond issues accounted for $28.7 billion, while state issues accounted for $11 billion - figures little changed from 1997. However, local agencies increased their debt in several areas, including housing, redevelopment, and hospitals. On the local front: o Local debt issuance for housing more than doubled in 1998, to approximately $2.1 billion. Most of the growth came from an increase in multifamily issues. In 1997, local agencies raised $600 million for multifamily housing on 91 bond issues; those figures grew in 1998 to $1.56 billion on 150 bond issues. Single-family debt rose from $475 million on 26 issues to $572 million on 29 issues. o On the commercial and industrial development front, local debt issuance remained constant at approximately 24 issues for $88 million. o Multiple-purpose redevelopment bonds rose by approximately 30%, from 77 issues for $1.28 billion in 1997 to 105 issues for $1.69 billion in 1998. o Local hospital and health-care bond issues rose from $1.29 billion (on 36 issues) in 1997 to $1.51 billion (on 42 issues) in 1998. o Local public works bond - the largest single category of local bonds - dropped slightly from $12.89 billion to $12.56 billion. o Local school facilities bonding dropped. For K-12 public schools, the figure dropped from $3.6 billion to $2.9 billion. College and university bonding remained more or less the same. Statewide bond issues were also about the same but had some overlap, including the following: o State public works bonding dropped from $2.6 billion to $1.4 million, largely because multiple-purpose public improvement projects dropped from $900 million in 1997 to almost zero in 1998. o As with local agencies, state agency bonding for housing projects increased substantially. But unlike local projects, the state funding went mostly for single-family housing. State housing bonds rose from $1.4 billion to $2.5 billion, with single-family bonds rising from $1.2 billion to $2.4 billion. Multifamily housing remained approximately the same at $147 million. o State education bonds, like their local counteparts, dropped somewhat. State school bonding dropped from $2.89 million to $2.27 billion. K-12 public school bonding dropped from $980 million to $820 million, while higher education bonding dropped from $1.88 billion to $1.13 billion. These trends are not likely to continue, however, given the passage of Proposition 1A, which authorized the issuance of some $9 billion in new state school bonds. More information on 1998 debt levels is available at the CDIAC web site, http://www.treasurer.ca.gov/cdadocs.htm.

No sooner had the fast-growing San Joaquin County city of Tracy settled a lawsuit and agreed to set up a joint powers authority on traffic issues than it was hit with a second lawsuit challenging its water supply and other facets of another huge development. In December, Tracy, Alameda County, the nearby city of Livermore, and the Sierra Club announced a settlement to a lawsuit brought over traffic issues raised by the city's approval of the 5,000-unit Tracy Hills project. Under the settlement, the JPA will be set up along with a developers fee of $1,500 per unit to pay for traffic improvements in Tracy and in nearby Alameda County. At the same time, the Tracy City Council approved another development, called South Schulte, which is expected to have about 6,000 homes. The developer of the project agreed to the same traffic mitigation fees. But the Sierra Club then filed suit on January 19 claiming that the city didn't have adequate water supplies or wastewater treatment for the new development. Eric Parfrey, a Sierra Club member and environmental planner who lives in Stockton, said the Sierra Club also had water concerns involving Tracy Hills, but settled the case because the traffic fee solution was so attractive. A separate case over the water supply for Tracy Hills is still pending. That lawsuit was brought by the County of Fresno because a water district there is supposed to supply the Tracy Hills water. A summary judgment motion on the Fresno County case was set for a late January hearing in Sacramento County Superior Court. "It's unclear how much staying power they're going to have," Parfrey said. "They wanted the Sierra Club not to settle on Tracy Hills." Parfrey said the water supply is important because the Tracy City Council has approved 20,000 new units of housing. Current plans are for the city to grow from a population of 48,000 to 160,000 in the next thirty years. Housing prices are low by Bay Area standards. Water supply "is really the Achilles heel for the ambitious growth of Tracy," he said. The U.S. Bureau of Reclamation warned the city in May 1998 that new developments could not be guaranteed a water source from the Delta during drought years. Tracy is about 70 miles from San Jose, and as Silicon Valley's housing and rental market has heated up, many workers there have moved to San Joaquin County. Commutes are as long as two or three hours each way. Most commuters drive on Interstate 580, which runs through neighboring Alameda County and the city of Livermore. Some are also beginning to commute via a new train service that began in late 1998. Alameda County, which has also seen significant growth of office parks in the Pleasanton area, has seen thousands of new vehicles on Interstate 580. Tracy officials argue that they're addressing a jobs-housing imbalance caused by the explosion of jobs in some Bay Area counties. Steven Meyers, Tracy's attorney in the Tracy Hills lawsuit, said that the JPA will study regional transit problems. At a later date, San Joaquin County may also join the JPA. Lakeside Tracy Associates, developers of Tracy Hills, will pay $174,000 for the study. Parfrey praised the JPA. "As a planner I loved it...a regional planning solution was what was called for," he said. The $1,500 per residence traffic fee is expected to generate $7.5 million. One-third of the money is slated for Alameda County projects, and the rest is slated for traffic projects in the Tracy area. Construction of the Tracy Hills project is slated to begin in a year. Meyers said the traffic fee could be placed on other developments when data is developed on their traffic impacts. But under state law, the settlement agreement couldn't arbitrarily set a fee for future developments, he said. If the other proposed units in Tracy adopt the traffic fee, another $22.5 million will be available for traffic improvements. The Tracy Hills settlement also contains a number of trip reduction elements. The developer of the project can seek a reduction in fees for providing such things as land for park and ride facilities, shuttles to transit lines, carpool/vanpool subsidies, and telecommuting programs. Under the settlement, the governmental parties are to "consider regional implications for major development projects" and "to recognize those regional environmental impacts that extend beyond jurisdictional boundaries." Parfrey noted that job growth in Santa Clara County, home of Silicon Valley, slowed last year. Tracy may be approving more units than the market needs, he said. The South Schulte lawsuit by the Sierra Club that the city's EIR failed to adequately analyze or mitigate a number of impacts including added traffic, storm drainage, impacts of leapfrog development, air quality, water supply and wastewater treatment and disposal. The developer of the South Schulte project includes Samir Kawar, who was part of a development group that tried unsuccessfully to develop the 5,200-unit Tassajara Valley project in Contra Costa County. In 1997, Kawar was identified by the San Francisco Chronicle as a Jordanian parliament member and former minister of water and transportation in that country. The application for Tassajara Valley was later withdrawn after widespread public opposition. The state's Fair Political Practices Commission fined Fakhry Kawar, an American citizen who manages his brother's properties, $22,000 for laundering $7,700 in campaign contributions to five Contra Costa supervisor candidates in 1992, according to the paper. Contacts: Steven Meyers, attorney for Tracy, Meyers, Nave, Riback, Silver & Wilson (510) 351-4300. Eric Parfrey, Sierra Club member, planner, (510) 420-8686 The case: The Sierra Club v. City of Tracy, case no. CV006772.

A Malibu property owner can't rely on the so-called "Calvo exclusion" - which exempts single-family homes from Coastal Commission jurisdiction - because the property owner had previously agreed to submit to the commission's control, the Second District Court of Appeal has ruled. "Appellant has taken inconsistent positions in this litigation, first waiving the right to further litigate the Calvo exclusion and agreeing to obey any Commission order regarding restoration of the property, and later asserting the Calvo exclusion and denying any obligation to obey Commission orders," the court wrote. It is the second Calvo exclusion case handed down by California appellate courts in recent months. In December, the Second District Court of Appeal re-affirmed a ruling to overturned a $2 million takings judgment against the Coastal Commission as the result of a jurisdictional dispute based on the Calvo exclusion. The case began in 1991, when the Coastal Commission sued property owner Amir Tahmassebi, charging that he had graded and filled his land and installed a culvert without seeking a permit from the commission, which has jurisdiction over coastal property. A year later, Tahmassebi and the Coastal Commission stipulated a judgment in which the Tahmassebi greed to obtain various permits, pay a fine of $15,000 and restore the property to its original state, if restoration was necessary, within 30 days of filing the restoration application. In November of 1994, more than two years after the stipulated judgment, the Coastal Commission ordered Tahmassebi to restore the property. In January of 1998, the Commission went to court to enforce the motion for enforcement of the judgment. The Commission alleged that Tahmassebi had not restored the property - as the Commission's order required - but instead had filed a restoration application that called not for restoration but rather called for the retention of the illegal development project in place. The Commission also charged that Tahmassebi had engaged in "false promises" and delays but had never complied. L.A. County Superior Court Judge Daniel A. Curry ruled in favor of the Coastal Commission, but Tahmassebi appealed. His main argument on appeal was that the Calvo exemption applied to his house. The Calvo exemption waives the requirement for a coastal development permit in the case of single-family homes which meet specified criteria dealing with location and water supply. Los Angeles County had, indeed, issued a Calvo exemption to Tahmassebi. But the Coastal Commission argued that the county had later ordered the property owner to seek a coastal permit. The Calvo exemption issue had been part of the case since the beginning - a fact that worked against Tahmassebi. The Second District ruled that Tahmassebi had waived his right to further litigate the Calvo exemption when he signed the stipulated judgment against him in 1992. Among other things, the Second District rejected Tahmassebi's claim that jurisdiction - that is, the Coastal Commission's jurisdiction over the property - cannot be conferred by the consent of the property owner. The Second District ruled that the Coastal Act gave Judge Curry clear subject matter jurisdiction over the issue, and furthermore argued that Tahmassebi's real beef was not with subject matter jurisdiction but with his allegation that the Coastal Commission exceeded that jurisdiction. The case was originally filed in October but was ordered published in January by the Supreme Court. The Case: California Coastal Commission v. Tahmassebi, No. B122210, 99 Daily Journal 484 (issued October 2, 1998, ordered published January 13, 1999). The Lawyers: For Tahmassebi: Thomas N. Banks, (310) 451-8831 For California Coastal Commission: Daniel A. Olivas, Deputy Attorney General, (213) 346-2688.

Ruling on wide-ranging issues in three separate cases filed by the same business, the Fourth District Court of Appeal has upheld a Newport Beach adult business ordinance as constitutional and concluded that the city did not violate the business's constitutional rights by denying some permits and revoking others. As the court stated in its decision, the case is about "appropriate ways in which to distinguish a theater from a restaurant - something with which the general public seems to have absolutely no difficulty, but which regularly defies the best efforts of courts and counsel." The cases were filed by the family of An Nguyen, which sought to convert a vacant restaurant into an adult entertainment establishment known as "The Mermaid". The restaurant was purchased with a pre-existing conditional use permit, but the city required the Nguyens to amend the permit to offer entertainment. In February of 1994, the City Council denied the amended permit application, concluding that the business was a theater in which food was an "ancillary service", rather than a restaurant. The city applied an unwritten "principal use" test to the situation, noting that 32% of the net public area would be used for entertainment, that the Nguyen's admitted that food would be "incidental to the entertainment," and that the Nguyens described their business as "adult theater " on their liquor license application. The Nguyens sued, and in response the city altered its zoning code to define a restaurant as a business whose primary purpose is selling food and beverages for on-site consumption. The ordinance placed a 20% limit on the net public area devoted to entertainment. At the same time, the city also adopted a requirement that an entertainment permit be required for any business that would provide both entertainment and food and beverages. The Nguyens subsequently applied for an entertainment permit, but the ordinance as it was then written included no time frame for acting on such applications and the Nguyens' application was neither approved nor denied. Subsequently - again in response to the Nguyens' plans - the city amended its entertainment permit ordinance and the Nguyens submitted a second application. The application was denied by both the city manager and the City Council - again because they concluded the Mermaid was a theater seeking permission to operate in a location zoned for a restaurant. After the second episode, the city also adopted an adult-oriented business ordinance requiring an adult entertainment permit and placing certain limitations on adult entertainment activities, including a "no-touching rule" and a prohibition on nude dancing (known as the "pasties-and-g-string ordinance". The Nguyens redesigned the Mermaid to comply with the city's definition of a restaurant and also successfully obtained entertainment and adult business permits as well. The Mermaid opened in February 1996. From the beginning, the Nguyens admit, the restaurant did not comply with the requirements of the ordinances. The city manager revoked the Mermaid's entertainment permit and refused to renew its adult business permit. The Mermaid appealed to the city council, which eventually affirmed the city manager's action. However, the Mermaid remained opened. In November of 1996, the city sued the Nguyens, the Mermaid, and its employees. The Nguyens filed several lawsuits against the city. They challenged the city's initial decision to deny their permit as a violation of their constitutional rights. They challenged the constitutionality of the pasties-and-g-string ordinance. And when the city sued the Nguyens to enforce its ordinances, the Nguyens cross-complained that their constitutional rights were violated when the later-issue permits were revoked. A series of trial court judges ruled in favor of the city in these various causes of action, and the Fourth District affirmed the trial court in all cases. Regarding the definition of a restaurant, the Nguyens claimed that the original ordinance gave the city too much discretion in making a determination. On that count, the appellate court agreed. By permitting the city to use an informal "primary use" test, the ordinance gave city officials "impermissible unbridled discretion" to deny a permit. However, the court concluded that the revised ordinance, with a 20% limit on entertainment space, "provides precisely the objective standard previously missing." The Nguyens also claimed that the entertainment permit represented a prior restraint on its First Amendment rights because the city manager has too much discretion. But, the court said, "there is nothing impermissible in authorizing the city manager to 'conduct an investigation' ... It would be preposterous to do otherwise." On the pasties-and-g-string ordinance, the appellate court concluded it was constitutional by relying heavily on the U.S. Supreme Court ruling in Barnes v. Glen Theater Inc., 501 U.S. 560, which concluded that protecting public decency is within the government's power. The appellate court also specifically rejected the Nguyens' argument that the pasties-and-g-string ordinance was pre-empted by various state statutes regulating sexual activity, saying that no state law specifically overrides local nude dancing prohibitions. The Nguyens also argued that the requirements of the adult business permit, which placed restrictions on touching and tipping among other things, was unconstitutional. But the appellate court disagreed. The court found three of the six requirements to be invalid - because they require managers and employees to exert control over patrons and performers - but nevertheless found the city to be within its discretion in revoking the permits. The Cases: Tily B. Inc. v. City of Newport Beach, Nos. G016950 and G019250, and City of Newport Beach v. An Nguyen, No. G022132, 99 C.D.O.S. 62 (issued December 30, 1998). The Lawyers: For An Nguyen: Ronald Talmo, (714) 738-1000 For City of Newport Beach: Jeff Goldfarb, Rutan & Tucker, (714) 641-5100.

One of the more interesting outcomes of the explosion of the Internet on our culture is the wave of anxiety it has produced at City Halls and in Sacramento. And it's not because the powerful new interactive media isn't already being used in hundreds of ways by state and local government to connect and its constituents - or otherwise benefiting our technology-strong economy. It is because the Web's success threatens to siphon off the lifeblood of the public agency revenue stream: sales tax. The threat is being taking very seriously. For openers, the National League of Cities vigorously opposed the Clinton-backed Internet Tax Freedom Act. Of course the League failed, and the ITFA was signed into law October 21, 1998 with heavy support from Internet Service Providers and e-retailers. President Clinton said that taxing the 'Net would be unfair, and would "weigh it down and stunt the development of the most promising new economic opportunity in decades." Among other provisions, the Act instates a three-year moratorium on state and local (but not federal) taxes on Internet access charges. And maybe more important for state and local government, the law cements into place the practice of prohibiting collection of sales tax by electronic vendors with no "outlets" in an out-of-state customer's home state. There certainly is ample evidence that e-commerce, with its potential to rearrange the taxing table, merits close scrutiny. After all, most of the wildly optimistic Internet use projections seem to be bearing out. And e-retailing is expanding as part of that trend. A January report by the Pew Research Center for People claims that 41% of Americans had gone on-line by the end of 1998. Compared with just 14% in 1995. An estimated 32% of Internet users bought something on-line in 1998, and these figures are before the Christmas-season surge. That's 34 million Americans - a fourfold increase from four years ago. So far, there is little hard evidence of any direct effect on municipal revenue streams. And according to the Chicago Tribune, internet sales still only account for 1% of retail sales. However, with the growth of e-commerce, it stands to reason that the more a state or municipality relies on sales tax for its revenues, the tighter a looming revenue pinch will feel. According to Forrester Research, Inc., e-retail will increase tenfold over the next five years. And currently, situs-based retail sales taxes make up nearly 30% of California's revenue stream. to Davis-based government revenue specialist Michael Coleman says that even though they make up only 9.6% of municipal revenues, sales tax has become the number one source of California cities' discretionary revenues. Even a modest drop in these proportions may yield dramatic effects. Mayor Harry Smith of Greenwood, Mississippi, reported to the National League of Cities that a 5% drop in sales tax revenues in his community would directly result in a loss of five police officers - 10% of his city's police force. Booksellers may be the first Main Street-styled retailers to take an e-commerce hit. Palo Alto-based Printers Inc. recently shuttered, reporting that they couldn't survive the 10% drop in year-to-year sales experienced over the 1998 Christmas season. The trend may grow as the overall population joins the on-line community in numbers mirroring Palo Alto's Silicon Valley home. But though e-commerce has become the latest problem for local government financiers, it's important to remember that the problem precedes Internet culture. The tax structure remains based on a taxing model designed for an insulated economic system: a geographically fixed economy where goods rather than services are produced, and where people live and work in the same community. The outmoded structure is politically hobbled by the very popularity of the Internet as a promising new medium and the corresponding unpopularity of taxes - despite the flagging public service levels faced by most communities. Traditional catalog sales have resulted in the same loss of local sales tax revenues. Observers from all perspectives agree that fundamental inequities in the tax structure push the whole question of e-retail taxation towards a discussion of overall tax reform. In California, the urgency of tax reform is underscored by dramatic in-state inequities amongst cities. Here, cities geographically blessed with favorable locations for regional malls, auto-malls and outlet centers have always been at a major revenue advantage to less favored locales - often only a few miles away. So are we facing yet another unforeseen consequence of the Internet? A comprehensive reform of state and local taxing structure that levels the playing field for all parties? Maybe. But not until Year 2004 will we be able to revisit the e-retail tax question. In that year, an ITFA-created Advisory Commission on Electronic Commerce will be required to propose new taxing recommendations. By then, harder data may be available. And policy makers just may figure out how to sell an equitable taxing program to a skeptical public. In the meantime, maybe city finance directors should invest municipal reserves into Amazon.com equities. Stephen Svete, AICP, is a principal in the Ventura-based consulting firm of Rincon Consultants Inc.

Despite the heavy emphasis on education issues, newly elected governor Gray Davis has sent some early signals that planning and development will also be important to his administration. The strongest signal yet has been his appointment of strong environmentalists to his Cabinet, as well as comments in his State of the State speech and the budget request he submitted to the Legislature during his first week in office. In his speech, the governor said: "After education and public safety, the most vocal complaint is traffic. It's a symptom really of inadequate planning and overburdened systems." But the governor offered no simple answers. "As you know, there are no quick, easy, inexpensive solutions." The governor did announce plans for a State Housing Task Force to be headed by Lt. Governor Cruz Bustamante and including Treasurer Phil Angelides, a former developer. The task force he said, would look at a number of options, including growth management incentives, affordable housing, and tax distribution and it "will consider whether state government should oversee the use of surplus redevelopment funds." The governor was apparently referring to redevelopment agencies' failure to use hundreds of millions of dollars of "setaside" money earmarked by state law for low- and moderate-income housing. The budget document addressed the question of how pursuit of sales-tax revenue drives land-use decisions in the state, and promised discussions on the issue. "In initiating a dialogue concerning land use," the budget said, "the Administration endorses the principle that any solution to this problem should be revenue neutral and suggests that a gradual sharing of growth in revenues may provide the best mechanism by which to correct this problem." In his budget, Davis said he planned to create a Commission on Building for the 21st Century, which is supposed to report back by May 1 with a multi-year bond package to be placed on the ballot in 2000. The budget document said that the bond package would be "the first step...to meet the public building needs of California." That commission will also be led by Bustamante. Davis appointed two environmentalists to key positions: Mary Nichols was named Resources Secretary, and Winston Hickox as head of the California Environmental Protection Agency.Each seems better suited for the job that the other was appointed to. Nichols has extensive governmental experience in air pollution issues, while Hickox was formerly head of the League of Conservation Voters, which focuses more on land conservation. Nichols was secretary of environmental affairs and chair of the state Air Resources Board under Gov. Jerry Brown, and, in the Clinton Administration, was an assistant administrator at the U.S. Environmental Protection Agency in charge of national air pollution policies. An attorney, Nichols also founded the Los Angeles office of the Natural Resources Defense Council. Nichols indicated in an interview with the Los Angeles Times that she will increase enforcement of the state's Endangered Species Act. She also indicated support for a state bond to rebuild urban parks and acquire open space. Davis' State of the State speech also called for protection of open spaces and the California Coastline. He added $1 million to his budget for the state's Coastal Commission that had been previously vetoed by former Gov. Pete Wilson. The money will assist local governments to complete their local coastal plans and to strengthen enforcement of the Coastal Act. Another $10 million has been earmarked in the budget in challenge grants to fund coastal access and wetlands restoration projects. In addition $2 million in funding was set aside for the Agricultural Land Stewardship Program, which provides grants to local non-profits to purchase land threatened by development. But that figure is less than it was under Wilson, according to Carol Whiteside, president of the Great Valley Center in Modesto and a former assistant resources secretary in the Wilson Administration. At the same time, Whiteside said Davis' comments about farmland conservation in the State of the State speech were "encouraging," and she said she expects to see policy initiatives for farmland conservation. Davis said he intends to keep the CalFed effort moving forward. CalFed is a state and federal effort to restore the Sacramento River-San Joaquin River Delta while preserving water supplies and protecting endangered species. In his speech, Davis said an agreement on CalFed will require compromise from all parties. Davis announced his intention during the campaign to restore local government funding that the state had taken during the early 1990s budget crisis. Known as ERAF funding, the money is property-tax revenue had formerly gone to counties, cities and other local government agencies, but instead went to the Educational Revenue Augmentation Fund for schools. "The administration supports mitigation of the ERAF Shift," the budget said. "Given other demands on the Budget, it will likely take a period of years to further complete this transaction." "ERAF will be one great step," said Sande George, lobbyist for California chapter of the American Planning Association. Otherwise, "he hasn't done an awful lot yet," George said in mid-January. "He doesn't have an OPR (Office of Planning and Research) director or an HCD (Housing and Community Development) director." Darryl Young, a former aide to Senator Tom Hayden, who chairs the Senate Committee on Natural Resources, has been appointed as acting director of OPR. George doubted whether many changes would be made to either the California Environmental Quality Act or the California Endangered Species Act, since "a lot has been done" during the Wilson administration. The Sierra Club would like to make changes to both of them, she said. Davis appointed Jose Medina, a San Francisco Supervisor, to head Caltrans. Medina has worked on local mass transit issues in San Francisco, but doesn't have a great deal of transportation experience. Medina has pledged that the agency will listen to local governments. He told the San Francisco Chronicle that while he's not "anti-car," he support alternative means of transportation, including mass transit. Even though the federal transportation law, ISTEA, and its successor, TEA-21, have given a great deal of power to regional transportation organizations such as the Bay Area's Metropolitan Transportation Commission, Caltrans is still important, according to Steve Hemminger, deputy director of the MTC. "It's a large organization and our primary transportation partner," he said. Hemminger said a major challenge is to maintain existing roads, a point that Davis mentioned in his budget outline. In announcing the State Housing Task Force, Davis said one of the most difficult problems facing local governments is "the conflict between the need to build more affordable housing and land use policies that seek to maximize local revenues by discouraging housing in favor of commercial and industrial development." Finance Director Tim Gage said such considerations should be tied to negotiations with local governments over ERAF issues. That concern was also spelled out in the budget. "Agreement on the method of returning an equivalent amount of revenue to local government must include other aspects of local finance," the budget said. "The impact of local sales tax allocation on land use decisions, the adoption of marginal redevelopment projects that adversely affect the General Fund, concerns over housing, and the large balance of unused redevelopment agencies' housing funds for low-and moderate-income households must be resolved." Rex Hime, president of the California Business Properties Association, said he was pleased to see that the new governor had asked for $50 million in funding for the state's Infrastructure Bank, which is designed to provide financing to local governments for sewers, roads and some environmental projects. The program had been established several years ago, but was funded for the first time last year. Hime also praised Davis' statements on the state's economy. "It's very clear that as governor, he recognizes a healthy economy allows us to maintain a healthy environment," Hime said. Contacts: Steve Hemminger, Deputy Director, Metropolitan Transportation Commission (510) 464-7700. Carol Whiteside, president, Great Valley Center, (209) 522-5103. Sande George, American Planning Association, (916) 443-5301. Rex Hime, president, California Business Properties Association, (916) 443-4676.

The First District Court of Appeal has overturned the Hayward City Council's decision to adopt a proposed ballot initiative reaffirming open-space designations within the city and subjecting future open-space zone changes to a vote. The court concluded that because the signature-gathering effort was legally flawed, the council did not have the right to adopt the initiative as a city ordinance. The decision - a reversal of the trial judge's ruling - is a victory for Mervyn's, the retail chain, which has been seeking to redesignate several of its properties from open space to industrial use. However, the court also reversed the trial judge's award of attorney fees to Mervyn's under the private attorney general doctrine, saying that such a fee award was not necessary to motivate the company to litigate. The complicated history of the Mervyn's properties began in 1990, when a citywide open space plan was adopted that designated the city's baylands and hills - including several properties owned by Mervyn's - for parks and open space. Hayward voters passed an initiative requiring voter approval to redesigate one of those properties - an old golf course - from open space to any other use. That initiative was rejected by the courts, but local citizens never mounted a broader initiative campaign. In 1996 a citizen group called Save Open Space gathered signatures for an initiative that would re-affirm the 1990 open space plan and subject all future open-space zoning changes to a vote. On November 12, 1996, Mervyn's sent a letter to Hayward protesting the designation of its land as open space and requesting that a land-use change on its property from open space to industrial. Three days later, SOS filed its signatures petitions with the city. On December 3, while the signatures were pending, the Hayward City Council redesignated the Mervyn's property to industrial. On December 30, the city clerk certified the number of signatures as sufficient, thus forcing the City Council to either place the measure on the ballot or adopt it. The council scheduled a meeting on the initiative for February 11, 1997. Four days prior to the meeting, Mervyn's went to court seeking a stay or temporary restraining order, but these were denied. At the February 11 meeting, the Hayward City Council adopted the initiative petition as a city ordinance, effectively reversing the land-use designation on the Mervyn's property and subjecting future changes to a vote. As Mervyn's legal case moved forward, Alameda County Superior Court Judge Mark Eaton ruled in favor of the city, but found one section of the initiative - establishing its precedence over other city ordinances - invalid. Eaton also awarded some $7,000 in attorney fees to Meryvn's for its success in defeating the one provision. On appeal, the Second District overturned Eaton and concluded that the initiative did not comply with Election Code §9201, which states that any initiative must include the text of the measure being proposed. The appellate court found that Save Open Space should have attached 17 pages of the city's general plan which are referred to in the initiative text. "Governmental land use decisions can be challenged by initiative or referendum," the court wrote. "In either case, it is imperative that persons evaluating whether to sign the petition be advised which laws are being challenged and which will remain the same. Only inclusion of the existing general plan will accomplish such purpose." Thus, the court concluded, the Hayward City Council did not have the right to adopt the initiative. On the attorneys' fees, the Second District concluded that Mervyn's did not qualify for them under the private attorney general doctrine because the company had expressed its intent to pursue the litigation in any event. The case was decided in December but published in January after, among other things, an impassioned plea to do so from Sherman Lewis, a Cal State Hayward political science professor and head of SOS. In a letter to the court, Lewis said the initiative process reveals "the fragility of citizen action" and said: "Your decision in Mervyn's v. Reyes makes such action more difficult." He asked that the opinion be published so that other citizen groups would be forewarned of the courts' "willingness ... to second-guess citizen initiatives." The Case: Mervyn's v. Reyes, No. A078208, 99 Daily Journal D.A.R. 365 (issued December 10, 1998, published January 11, 1999). The Lawyers: For Mervyn's: Arthur Fred Coon, Miller Starr & Regalia, (925) 935-9400. For City of Hayward: Michael John O'Toole, City Attorney, (510) 583-4455. For Sherman Lewis: Stuart Flashman, (510) 652-5373.

In a case with potentially widespread significance, a sharply divided California Supreme Court has upheld the Santa Monica rent control law against an inverse condemnation claim. In concluding that rent control cases are subject to a different level of judicial scrutiny than cases involving exactions and other economic aspects of land-use regulation, the Supreme Court has created the possibility that different types of inverse condemnation cases will be treated differently in court. Especially given the court's divided ruling, property rights advocates can be expected to lobby aggressively for the U.S. Supreme Court to take the case. The plaintiff in the case, a property firm known as Santa Monica Beach Ltd., is represented by James S. Burling and R.S. Radford of the Pacific Legal Foundation in Sacramento. In a 4-3 vote, a majority of the court overturned an appellate court ruling and concluded that the lesser "rational basis" test is appropriate in rent control cases. In an opinion by Justice Stanley Mosk, the lone surviving Democratic appointee on the court, the majority concluded that rent control laws should be considered under a different standard from land-use cases such as those dealing with exactions. The plaintiff, Mosk wrote, "seeks to engage courts in the task of evaluating whether a piece of complex legislation has sufficiently measured up to its objectives to preserve its constitutional validity. Nothing in the United States Supreme Court's recent jurisprudence indicates that it envisions such an activist role for the courts." Five different justices wrote opinions in the case - including three who filed lengthy separate dissents - suggesting an unusually divisive split within the court on the issue of how "takings" law fits together with rent control. The dissenters all argued that the U.S. Supreme Court's recent Nollan-Dolan line of cases requires the court to apply the stricter scrutiny test to rent control cases. "Rent control is not simply a species of price control subject to a due process-type analysis like that undertaken by the majority," wrote Justice Marvin Baxter in perhaps the most blunt-spoken dissent. "....The Santa Monica ordinance takes from the property owner the right to chart market rent for the owner's property and by so doing compels the owner to subsidize the tenant." Santa Monica Beach owns a 12-unit apartment building in Santa Monica. In 1992, the company petitioned the city Rent Control Board for a rent increase, arguing that it was no longer earning a fair return because of rent restrictions. A hearing examiner found the company should be awarded a permanent rent increase of $3 per month and a temporary rent increase of $58 per month per unit. The company appealed to the Rent Control Board, claiming that the hearing officer improperly applied the law and therefore improperly denied the company with three-quarters of its requested rent increase. In filing suit against the Rent Control Board, Santa Monica Beach claimed that its property had been "taken" by regulation and, under the Fifth Amendment of the U.S. Constitution, the company was entitled to just compensation. The crux of Santa Monica Beach's argument was that the rent control ordinance, which was one of the most restrictive in the nation when it was adopted in 1979, had not achieved its stated objectives. The rent control ordinance states that it is meant to "alleviate the hardship" on tenants caused by a lack of affordable housing in the city. It specifically identifies "the poor, minorities, students, young families, and senior citizens" as groups at risk. However, the Pacific Legal Foundation presented considerable evidence in court that gentrification has occurred in Santa Monica at a significant pace even with rent control in place. For example, the Foundation found that the percentage of low-income households and female households with children both declined during the 1980s, while the percentage of very high income households increased. Santa Monica Beach's lawyers argued that the court should apply the "substantially advance" standard of review as it was developed in the U.S. Supreme Court's two recent rulings on exactions, Nollan v. Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1992). In those cases, the Supreme Court reiterated that the abridgment of property rights through the police power must involve a "substantial advancement" of a legitimate state purpose. But in his majority opinion Justice Mosk concluded that both the U.S. Supreme Court and the previous rulings of the California Supreme Court permit judges to apply the "substantially advance" standard differently "depending on the type of government action under consideration". Mosk quoted language from both Nollan and Dolan suggesting that the U.S. Supreme Court was focused specifically on applying the "substantially advance" standard to exaction situations. Furthermore, he quoted the California Supreme Court's own ruling in Ehrlich v. City of Culver City, 12 Cal.4th 854 (1996), in which the court upheld the use of the Nollan-Dolan standard in the case of an individual land-use permit. In that case, the court concluded that a lesser level of judicial scrutiny should be applied when exactions are imposed as the result of a legislative act (such as a General Plan revision) as opposed to a quasi-judicial act (such as a tract map approval). In a legislative situation, the court ruled in Ehrlich, "the heightened risk of the 'extortionate' use of the police power to exact unconstitutional conditions is not present." Mosk went on to argue that rent control can also be considered "a species of price control rather than a land use regulation." Quoting the California Supreme Court's recent decision in Kavanu v. Santa Monica Rent Control Board, 16 Cal.4th 761 (1997), Mosk noted that the standard of judicial scrutiny used in that case was "reasonable relationship to a proper legislative purpose". Concluding that the court did not have to determine whether the "rational relationship" test is appropriate for rent control legislation, the court concluded that the standard "must be at least as deferential as for generally applicable zoning laws and other legislative land use controls" - meaning the Nollan-Dolan standard shouldn't apply. He argued that the U.S. Supreme Court's ruling in Pennell v. City of San Jose, 485 U.S. 1 (1985), and Yee v. City of Escondidio, 503 U.S. 519 (1992) - both issued after Dolan - support his position. Having resolved the standard of review issue, Mosk went on to conclude that the Santa Monica Beach didn't "adquately state a claim for inverse condemnation" because the company focused incorrectly on only one aspect of the legislative intent of the rent control ordinance - its impact on poor, elderly, and young families. He also argued that, even if imperfect, the Santa Monica rent control ordinance may be assisting some poor, elderly, and young families. "In sum," Mosk wrote, "with rent control, as with most other such social and economic legislation, we leave to legislative bodies rather than the courts to evaluate whether legislation has fallen so far short of its goals as to warrant repeal or amendment." Mosk's opinion was signed by a bare majority of four justices, including Chief Justice Ronald George, Justice Kathryn Werdegar, and Justice Joyce Kennard. Kennard also filed a concurring opinion in which she specifically addressed the question of whether "means-end" testing "is an appropriate measure of whether a regulatory taking has occurred" - an issue Mosk's ruling did not address. She traced the history of "means-end" testing for land-use regulation back to Nectow v. Cambridge, 277 U.S. 183 (1928). In Nectow, a followup case to the famous Euclid v. Ambler case (which upheld the constitutionality of zoning), the Supreme Court ruled that land-use regulation "effects a taking if the ordinance does not substantially advance legitimate state interests". Kennard's opinion was essentially a plea for the U.S. Supreme Court to tackle the issue head-on. "Outside the Nollan/Dolan context, should a means-end test be used to determine whether a taking has occurred, or instead should means-end testing remain within due process jurisprudence" she asked. Justices Marvin Baxter, Ming Chin, and Janice Brown all filed separate dissenting opinions. Baxter's dissent was longer than Mosk's majority opinion. In it, he took issue with Mosk's assertion that only the legislative branch, not the courts, can take action if a law does not achieve its intended purpose. Mosk's error, Baxter wrote, "results in part from the mistaken notion that the separation of powers doctrine somehow precludes the plaintiff from introducing evidence in support of its taking clause claim that the stated purposes of the Santa Monica rent control ordinance has not been substantially advanced over time. Among other things, Baxter argued that Mosk had applied judicial standards of review from due process cases (dealing with both price controls and zoning legislation) and applied them in the takings context. While acknowledging that zoning laws have often been subjected to a "deferential, rational basis, level of judicial scrutiny," he argued that this scrutiny applied only in the case of due process challenges. "There is no comparable level of judicial scrutiny when it is claimed that a zoning law takes property for which compensation must be paid however. This is so because determining whether a zoning law brings about a compensable taking can be determined only after a variety of evidentiary factors." Baxter also took issue with Mosk's conclusion that, under settled law, rent control does not create a taking because it is a form of price control. "Rent control differs from and cannot be equated to other forms of price control because it encroaches on property rights in ways that price control does not," he wrote. "The Santa Monica rent control ordinance takes from the property owners the right to charge market rent for the owner's property and by so doing compels the owner to subsidize the tenant. Price control creates no comparable direct transfer of a property interest to a third person." In addition, he noted that the Santa Monica ordinance - unlike price controls - restricts the ability of the landowner to go out of the rental housing business (a section of the ordinance that was heavily litigated in the 1980s). Given this reasoning, Baxter argued that Santa Monica Beach should have been permitted to introduce evidence suggesting that the rent control ordinance has not achieved its stated purpose. He also came to the conclusion in his dissent that the ordinance does in fact create a compensable taking. "The character of the governmental action - controlling rent in order to forestall excessive and exorbitant rent increases - may have a proper governmental purpose insofar as it assists persons unable to afford safe and decent housing, but to achieve that purpose the law requires private property owners to subsidize their tenants. This is a burden that in fairness and justice should be borne by the community as a whole," he wrote." In his dissent, Justice Ming Chin also took Mosk to task for confusing due process and takings law, "thus undoing much of our effort in Kavanu". Noting that demographic changes in Santa Monica may have been caused by factors other than rent control, he said: "I share some of the majority's skepticism about plaintiff's assertions". But, he said, Santa Monica Beach should be permitted to make its case in a trial without being required "to prove what is tantamount to a due process violation when it has brought a takings case." In her dissent, Justice Brown said that Mosk's ruling inappropriately implies that "property merits only an inferior level of protection." Her opinion leveled broad criticism toward rent control as a regulatory system that would not survive the heightened level of judicial scrutiny contained in the Nollan/Dolan cases. Brown argued that a regulatory takings claim such as a challenge to rent control involves "both prongs of the Fifth Amendment" - the substantial advancement of a legitimate state purpose and the requirement that the burdens of the general purpose are not imposed arbitrarily or in a discriminatory fashion. If ordinances such as Santa Monica's system of rent control "are capable of withstanding a Nollan-inspired takings clause analysis, the high court ought to tell us so, preferably sooner rather than later," she concluded. The Case: Santa Monica Beach Ltd. V. Superior Court, No. S052824, 99 C.D.O.S. 95, 99 Daily Journal D.A.R. 131 (filed January 4, 1999). The Lawyers: For Santa Monica Beach: James S. Burling, R.S. Radford, Pacific Legal Foundation, (916) 641-8888. For Santa Monica Rent Control Board: Anthony A. Trendacosta, (310) 312-5536.

A pro-active approach to preserving open space and create a Natural Communities Conservation Plan is taking shape in Placer County in the Sierra Nevada Mountains. Members of the county's planning staff are working with the Sierra Business Council to design a countywide program that may serve as a model for other urbanizing counties in the Sierra. The program, known as the Placer Legacy, seeks to set up an NCCP before the county is forced to do so by a legal challenge or a government agency, and also is identifying open space lands for recreation and other uses. Rather than dealing with habitat and open space issues on a project-by-project approach, the program seeks to deal with such matters on a countywide basis. "It's not driven by the regulatory hammer of the Endangered Species Act," said Tracy Grubbs, the SBC's lead staff person on the project. Placer County grew from a population of 118,400 in 1980 to 206,000 in 1996. Population projections for the year 2020 call for 358,500 people. While the county stretches from the Sacramento suburbs to Lake Tahoe, most of the growth is occurring in the western section closest to Sacramento. Between 1984 and 1992, 19,000 acres of prime farmland were lost to development. And growth continues: developments in the city of Lincoln, for example, are projected to add 22,000 people to a current population of 8,500. (See CP&DR, May 1998.) The county's Board of Supervisors directed its planning staff in the fall of 1997 to address concerns about growth. What emerged was the outline of the Placer Legacy. Grubbs compared the situation to San Diego County, where the listing of the California gnatcatcher as threatened - and the likely listing of many other birds as well - forced the county to come up with a series of Natural Communities Conservation Plans (See CP&DR, December 1997). By the time the gnatcatcher issue arose in San Diego County, land values were high. The cost of land acquisition in San Diego County is estimated at between $300 million and $350 million. By beginning the process now, Placer County hopes to avoid those costs. Grubbs said the specific outlines of the program have not yet been set, such as which lands will be set aside in reserves and how to acquire the land. Various funding mechanisms are being contemplated, including a sales-tax increase and developer fees. In addition to providing habitat protection and corridors for willife migration, the reserves will also provide open space areas in the county. The SBC, with 500 business members throughout 12 Sierra counties, is helping to raise the estimated $1 million to create the plan, Grubb said. About half that amount has already been raised through grants, she said. Developers will benefit from the Placer Legacy, she said, because it will streamline the permit process. SBC is charged with coordinating public participation in the project, and has held open space forums throughout the county. Contacts: Tracy Grubbs, Director of Special Projects, Sierra Business Council, (530) 582-4800. Final Wilson Wetlands Report One of the environmental legacies of the last years of the Wilson administration is apparently a net gain in wetlands. A report issued at the end of Gov. Pete Wilson's term reports that the net gain of wetlands for 1996 and 1997 was 15,129 acres. × "California is the first state in the nation to quantitatively determine that it has achieved its goal of no overall net loss, and more importantly, a net gain in wetlands for the years 1996 and 1997," the wetlands report said. The total gain was 17,503 acres of wetland habitat, consisting solely of restoring historic wetlands and creating new habitats. But at the same time, federal Clean Water Act Permit 404 data and data from the California Department of Fish and Game showed a loss figure of 2,370 acres, so the actual net gain was 15,129 acres. The report does not include non-reported, illegal wetland fills, and impacts to small, isolated seasonal wetlands less than one acre in size. The December 1998 report said that more than 137,500 acres of existing wetlands have been enhanced since 1993. In addition, between 1993 and 1998, the state found that 61,904 acres of wetland habitats had been set aside for permanent protection. An earlier report found that the state had added about 78,000 acres between August 1993 and 1995 (see CP&DR, February 1996). Wilson signed Executive Order W-59 93 in 1993, which established the nation's first statewide comprehensive wetlands program. The policy called for 33 specific actions, ranging from performing wetlands inventories to regional wetlands restoration and enhancement efforts. According to the report, 17 actions were implemented in full and 12 actions were implemented in part. The report's statistics showed how much wetlands acreage has been lost. Inventory of wetlands found that 87,000 acres remained of the historic 188,600 acres of wetlands in San Francisco Bay. Figures for how many acres had been lost in the Central Valley were not included, but for Southern California an examination of 41 separate coastal wetlands found that 14,898 acres remain from an historic level of 46,865 acres, a 68 percent decrease. The report said that six regional wetlands restoration efforts are underway throughout the state, including in the Central Valley, San Francisco Bay and in Southern California. The report said the state had provided $5.6 million in funding for restoration and enhancement projects in the 1998-99 fiscal year for the Southern California Wetlands Clearinghouse, the regional conservation effort there. The report also pointed to increased wetlands acreage due to cooperative partnerships set up to help private landowners, and also to land acquisition by a variety of non-profit, private land trusts, as well as duck hunting and environmental organizations. The report gave much of the credit for wetlands restoration to private nonprofits such as the Trust for Public Land, the Audubon Society, and the Nature Conservancy. The bulk of the additions to the state's wetlands came from 1993 to 1996. According to a 1996 report from the Resources Agency, its goal was to have 225,000 acres of acquired, restored, and enhanced wetlands habitat by 2010.

The late James Michener once wrote a novel called THE SOURCE, which told the story of a single piece of land in Israel. The metaphor of the story was an archeological dig: the reader went back in time, as if removing layer after layer of soil, uncovering a different story with each stratum. I could never finish the book, to tell the truth: The writing was dry, and the book was a bit of a doorstop. Still, I admired the conceit that any given piece of ground had a good story to tell, or indeed many stories. A San Francisco-based nonprofit homebuilder, Mercy Charities Housing California, recently discovered the decidedly mixed joys of working on a piece of land that had many stories to tell. The case in point was the former Notre Dame High School, a building in San Francisco's Mission District, which the nonprofit converted last year into 66 units of low-income housing. While the homebuilder was not exactly bargaining for a major archaeological find, Mercy Charities found itself in the position of sponsoring a dig for antiquities at the same time that it was coping with the complexities of adapting an old, non-residential building into housing. Now known as Notre Dame Plaza, the former school is a local landmark in San Francisco's tough but gentrifying Mission District. The site is across the street from the Mission San Francisco de Assisi, popularly known as Mission Dolores, which dates from the 1780s. In the 1860s, the church gave the site to the Sisters of Notre Dame, who built a convent on the site, and later expanded it into a school in the following decades. Although the building survived the 1906 earthquake, city officials dynamited the school to prevent the spread of fire that was ravaging the city immediately after the quake. The present building, a broad-shouldered structure with a mansard roof, was built on the foundation of the earlier building in 1907, and operated as a school until the early 1980s. The idea to convert the old school into low-income housing came from the Sisters of Notre Dame themselves in the 1980s, but the idea was slow to catch. "In the early stages, everyone in the city thought it was crazy. I thought it was crazy," said Barbara Gualco, who later became project manager. Cost was an obvious concern: Converting the old school into housing meant partitioning the old classrooms into separate apartments, and Gualco acknowledged that adaptive reuse would cost only a little less than new construction. Eventually, however, the nonprofit became convinced that the project was feasible, and work began in 1996. Financially, Notre Dame Plaza is unusual among low-income housing projects in California, because it makes use of neither redevelopment housing set-aside money nor historic-preservation tax credits. HUD's Section 202 Program provided $6.12 million in both construction and permanent financing. (The project applied three times for the federal funding before getting a thumb's up from the feds). A second HUD grant, this time a Rental Project Rental Assistance Contract, provided $5 million in rental subsidies over 20 years. Residents pay no more than 30% of their income in rent. One resident is paying $150 in a district where comparable market-rate units are going for as much as $1,000. Additionally, the Mayor's Office of Housing provided a deferred loan of $4.74 million, which was funded by the city's "bed tax" on hotel rooms. "One of the joys of doing business in San Francisco is that the city has a huge commitment to housing," Gualco said. Although the project is not technically historic preservation, the building is a designated landmark, and the State Office of Historic Preservation took an active interest in both the building and the archaeological importance of the site. The state agency made an agreement with HUD to excavate portions of the site during rehab. Eventually, the church-based nonprofit spent about $100,000 of its construction budget on archaeology. The dig, as it turned out, was unexpectedly productive. The site yielded plentiful artifacts of the mission and the Spanish occupation of California, particularly the little-documented lives of Native Americans who lived and worked at the missions. Prior to the padres, a band of Chutchui Indians had lived on the spot. Archaeologists found glass tools dating back to the 18th Century, which demonstrated that the Spanish had forced the Native Americans to abandon their traditional stone tools and adopt European-style implements of iron and glass. Researchers also discovered a stone-and-adobe wall, identical to the walls of the original mission. By the early 19th Century, several thousand Native Americans from several tribes lived on the site. After the secularization of the mission in 1833, however, the community quickly disbanded, and the Mission area became a sort of Gold Rush-era urban entertainment zone: A bear-and-bull baiting ring stood on the current site of the Notre Dame Plaza, before the nuns and their students arrived. Archaeology and construction are not a natural mix, and the potential for conflict is great. In this case, however, the contractor and the archaeologists were mutually cooperative: the contractor re-arranged his construction schedule to accommodate the archaeologists. Construction ended about a year ago, and in April, the state historic-preservation agency nominated Notre Dame Plaza for the National Trust/HUD Secretary's Award for Excellence in Historic Preservation. Luckily, most affordable housing projects do not bear the weight of history as intimately as Notre Dame Plaza. Still, it is pleasing to think that the project was the vehicle that allowed the earth to speak, as it were, and divulge some ancient secrets. More to the point, perhaps, the old convent school has provided affordable housing in a city with rapidly rising rents and a high housing deficit. And this old building, which has seen disaster and prosperity and decline, will now be around to witness another century of stories in the historic core of San Francisco.

A new state commission is examining local govern issues and is expected to produce a proposed legislative overhaul of the Cortese-Knox by December. The 15-member Commission on Local Governance for the 21st Century was created last year as a by-product of legislation making it easier for the San Fernando Valley to pursue secession from the City of Los Angeles. The commission is officially charged with reviewing the Cortese-Knox Act, proposing methods to increase public participation in local government, and examining whether boundary practices in California do not cause racial discrimination. It is chaired by San Diego Mayor Susan Golding and staffed by Ben Williams, a veteran staffer from the Governor's Office of Planning & Research who last worked on military base closure issues. Other members include elected local government officials, professional planners and land-use lawyers, and former state legislators knowledgeable in the field. The commission was created by AB 1484, a 1997 bill carried by Assemblyman Bob Hertzberg, D-Van Nuys, whom most commission members acknowledge is the "godfather" of the new commission. The Local Governance Commission is one of several new efforts to examine local government organization and finance issues. Gov. Gray Davis has identified local government finance as a major issue for his administration (see accompanying story). In addition, the Senate Budget Committee scheduled six hearings around the state on local government finance in late January and early February. And Assembly Speaker Anthony Villaragoisa, D-Los Angeles, convened a meeting of a separate task force on local government finance in late January. There is little question that the commission will tackle well-known problems of government organization - especially issues associated with revenue distribution between cities and counties in annexations and new incorporations. "What we have on the books is a morass of contradictory provisions, a legal Winchester Mystery House," Hertzberg said in a statement. "I proposed the commission to give the issues the thoughtful examination they deserve. My intent is to work closely with the commission, and my goal is to use their work as a guide for future legislation." The bigger question is whether the commission will move beyond narrow issues to deal with state-local fiscal relations and the land-use implications of local government organization. On the one hand, many members of the commission appear to be eager to delve into broader issues, such as competition for sales-tax revenue and other attractive real estate development options. Commissioner Trish Clarke, a Shasta County supervisor, strongly stated in an interview that she hopes the commission will deal with land-use and revenue issues - even to the point of proposing that the commission take on the question of restoring property tax revenue that the state shifted from cities and counties to schools in 1992 and '93. On the other hand, commissioners appear wary of creating a set of recommendations that will wither on the shelf - as happened with the recent California Constitution Revision Commission, which dealt with similar issues. "We are painfully aware of the CCRC experience," said Michael Colantuano, a commissioner who works as a municipal lawyer for the Los Angeles firm of Richards, Watson & Gerson. He said he expected the commission to focus on "feasible and politically realistic" reform. Echoing the sentiments of several other commissioners, he indicated strong hope that Hertzberg, who has emerged as a leading legislator in the term-limited Sacramento environment, would aggressively seek to pass whatever legislative proposals the commission put forward. Clark agreed, stating that she hoped the commission's representatives will sit down soon with Gov. Gray Davis and his top-level staff: "The commission is made up of people that the governor might listen to and the Legislature might listen to." Whether or not the commission deals with broader issues, a proposal to overhaul the Cortese-Knox Act appears likely. The Cortese-Knox law, which last underwent major changes in 1985, governs boundary changes, annexations, incorporations, special districts, and all other actions of Local Agency Formation Commissions. City-county boundary relations have been somewhat strained in several parts of the state in recent years. Several counties have severed annexation negotiations with their cities in the last decade. In addition, the creation of new cities, such as Citrus Heights in Sacramento County, has been met with stiff opposition from counties fearing a loss of revenue. This problem led to the passage of the so-called "revenue neutrality" law in 1992, which requires that new cities - though they must be fiscally viable - cannot be created at the financial expense of counties. The result has been a dramatic slowdown in the creation of new cities. At present cityhood advocates in more than 20 communities around the state are awaiting action. The issue of apportioning revenues and service responsibilities between cities and counties is "a problem," said veteran land-use lawyer William Ross, who was appointed to the commission by the Democratic leadership in the Senate. "It needs to be fixed." At the same time, recent legislative amendments designed to deal with special district issues have been less than successful. A bill sponsored by then-Assemblyman Mike Gotch - who now represents the California Association of LAFCOs - expanded membership on most LAFCOs to include special districts and gave LAFCOs independent power to consolidate special districts. Advocates of special-district consolidation say the bill was one-sided - letting the special districts in on the one hand but giving LAFCOs little political incentive to consolidate them. In addition, in many cases, local advocates have taken special district issues directly to the Legislature, circumventing local LAFCOs. The commission has appointed a committee, chaired by Ross, to draft legislative amendments to the Cortese-Knox Act. The committee has split the law into five parts and is working on drafting proposals to amend each of the five areas. The commission met for the first time last August and has scheduled a total of 13 meetings around the state. Most recently, the commission met in Redding in January and February, hearing - among other things - a report from the City of Redding and Shasta County on the need for better city-county revenue cooperation. The commission's remaining scheduled meetings include March 5 in Burbank, March 25-26 in Monterey, April 30 in Oakland, June 4 in the Inland Empire, July 23 in Fresno, September 17 in Orange County, October 13 in Sacramento, and November 18-19 in Los Angeles. A complete list of commission members includes the following: Appointed by Gov. Pete Wilson: o Susan Golding, mayor of San Diego, who is chair of the commission. o Ruben Barrales, a former San Mateo County supervisor and now president of Joint Venture Silicon Valley, who is vice-chair of the commission. o Marian Bergeson, longtime chair of the Senate Local Government Commission, whom Gov. Gray Davis recently retained as Secretary of Child Development and Education. o Bert Boeckmann, a Northridge car dealer and financier of the Valley secession movement. o Trish Clarke, a Shasta County Supervisor and chair of the Shasta LAFCO. o Cody Cluff, president of the Entertainment Industry Development Corp. and formerly Wilson's appointee on the South Coast Air Quality Management District. o C. Timotby Raney, a member of the Citrus Heights City Council and a planner with EIP Associates in Sacramento. o Carolyn Ratto, a member of the Turlock City Council. o Larry Zarian, a former member of the Glendale City Council and board member of the Metropolitan Transportation Authority of Los Angeles. Appointed by the Senate Rules Committee: o Robert Hunt, an attorney with the Service Employees International Union in Los Angeles. o Nick Petris, an Alameda County attorney who served in the state legislature from 1959 until he was forced out of office by term limits in 1996. o Jacki Bacharach, former mayor of Rancho Palos Verdes and former board member of the L.A. County Transportation Commission. Appointed by the Assembly Rules Committee o Michael Colantuano, a partner with Richards, Watson & Gerson, a municipal law firm in Los Angeles. o William D. Ross, a prominent land-use lawyer in private practice in Palo Alto.. o John Shatz, general manager of the Santa Margarita Water District. The commission is being staffed out of the Governor's Office of Planning & Research by OPR veteran Ben Williams (916 322-9906). Web address: www.clg21.ca.gov.