George Lucas' movie production company and the Presidio Trust are close to signing a lease that will allow Lucas to construct a large office complex inside the national park in San Francisco. Finalization of the lease this spring would be a major advancement in a process that has involved a great deal of planning, political maneuvering and bickering over protection of historical resources at one of San Francisco's most treasured sites. Lucasfilm plans to build 900,000-square-feet of offices and other workspace in an L-shaped campus, as well as a 1,500-space underground parking garage, near the Lombard Street entrance to the Presidio. An estimated 2,500 people would work at the digital moviemaking and technology center, which would replace the dilapidated and closed Letterman Army Medical Center complex. "I think the next big event will be the signing of the lease and the building coming down," said Ron Sonenshine, a spokesman for the Presidio Trust, the federal agency that oversees the 1,480-acre Presidio. Preliminary site work began early this year. In June 1999, the Presidio Trust selected Lucasfilm's Letterman Digital Arts Center development for the site of the old Army hospital. The development is intended to generate revenue so that the Presidio, which the military handed to the National Park Service in 1994, can become self-sufficient by 2013. Lucasfilm is expected to pay about $5 million annually to lease the site. Although 18 developers showed interest in the site, the competition came down to Lucas – the creator of "Star Wars" and "Indiana Jones" – and a development team headed by Walter Shorenstein, one of the Bay Area's most prominent developers and a confidante of San Francisco Mayor Willie Brown. Shorenstein/Interland Corp. proposed a New Urbanist-style, live-work project with 500,000 square feet of offices and retail shops, 450 housing units, a library and a museum. "We had to make a decision between two strong teams," Presidio Trust Executive Director James Meadows told the San Francisco Chronicle at the time. "But with its concentration on educational outreach, scientific research and cutting-edge technology, we felt that the Lucas plan more closely fit the goals of the Trust." A Lucasfilm spokeswoman declined to discuss the project because the lease is still pending. According to public documents, the moviemaker's proposal includes a museum that will use the company's high-tech expertise to explain the 200-year history of the Presidio, which was first established by Spanish explorers. The plan also calls for a "great lawn" with extensive landscaping and a view of the nearby Palace of Fine Arts. Since federal officials selected Lucasfilm nearly two years ago, the Trust has complete an environmental impact statement and adopted planning guidelines for the project. Neighbors and environmentalists have raised concerns about a development of this scale bringing too many people and vehicles to the Presidio. They say that the Congressional mandate for Presidio self-sufficiency has forced the Trust to move too quickly and to accept a large project that will detract from the national park. Some people also complained that the glitzy, multi-media company is not an appropriate tenant for the stately former military base, and others have criticized the Presidio Trust for selecting a project with no housing component. Much of the attention, however, has focused on historic preservation issues. "The building itself is not historical at all, but it is a part of an historical landmark district," the Trust's Sonenshine said. Last fall, the National Trust for Historic Preservation, the federal Advisory Council on Historic Preservation and the California State Historic Preservation Office lodged protests over the Digital Arts Center's original design. They said the proposed $250 million complex was too massive and contained too much glass. They said the proposed complex looked like any suburban office enclave and clashed with the historical landmark district in which it was to be located. Lucasfilm architects went back to work and have apparently satisfied most of the preservationists' concerns — but not all. In a January letter to the Presidio Trust, Jane Crisler of the Advisory Council on Historic Preservation endorsed the project. "The Council finds many elements of the proposed design, in particular the overall site plan and below grade parking proposal, to be an excellent response to challenges posed by the site," she wrote. However, she continued to question several aspects of the project, including its landscaping, the buildings' mass and scale, and the design of a dining pavilion. The buildings are designed around a landscape that is planned to include freestanding Greek columns, a lagoon, a stream and water stairs. Preservationists have disliked the concept from the outset, and Crisler contended it does not adhere to the adopted design guidelines. "The columns are designed as an instant ruin that conveys a false sense of the past, and designed aspects of the water features do not have a precedent at the Presidio. Together, these elements diminish the integrity of the Presidio National Historic Landmark District," she wrote. Steade Craigo, of the state Office of Historic Preservation, agreed that the project does not meet design guidelines and he said the planning process should not be considered complete. The Trust's Sonenshine said preservationists' concerns could result in design modifications. But, he said, they have not asked for anything that will delay the project. Contacts: Ron Sonenshine, Presidio Trust, (415) 561-5300. Steade Craigo, State Office of Historic Preservation, (916) 653-6624. Jane Crisler, Advisory Council on Historic Preservation, (303) 969-5110. Presidio Trust website: www.presidiotrust.gov

When voters in Tracy approved an annual "cap" on new housing construction last November, it was the first time since the late 1980s that a California municipality enacted this venerable — yet controversial — method of restricting growth. After grinding through 1,000 to 1,500 residential building permits annually for the last several years, the San Joaquin County commuter town will now have to restrict itself to 750 permits in any one year — and an annual average of 600. Until the passage of the Tracy housing cap, it seemed like the housing cap was a dying mechanism — a vestige of an earlier era of suburban growth, now limited mostly to older suburbs in coastal metropolitan areas like Sonoma, Ventura, and San Diego counties. After all, housing production has been off dramatically in California ever since the latest economic upturn began in about 1996. Thus, the caps had not really come into play. Most of the towns that have them are inner-ring suburbs that are now adding more jobs than housing. And the growth management tool of choice these days seems to be the growth boundary, not the growth cap — a decision to focus on geography, not quantity. Yet in the last couple of years, a number of cities have voted — either by initiative or council action — to renew their housing caps for another decade or two. These jurisdictions include Simi Valley and Camarillo in Ventura County, and several communities in San Luis Obispo County. At the same time, several cities have actually bumped up against the annual cap for the first time in many years. And the successful Tracy initiative suggests that the caps might move inland in certain parts of the state, especially in San Joaquin and Stanislaus counties, where Bay Area-style growth restrictions might reasonably be expected to follow Bay Area-style growth. All of this means that, whatever its limitations as a growth management mechanism, the housing cap has not gone away. Housing caps emerged in the Bay Area in the early 1970s, when burgeoning suburbs such as Petaluma found themselves in the same position that Tracy is in today — suddenly accessible to growing job centers (in Petaluma's case, because of the completion of Highway 101) and therefore attractive to starter-home developers. Indeed, Petaluma was the test case for housing caps in California; after imposing a restriction of 500 houses per year in the early 1970s, the city fought a long, hard — and, ultimately, successful — battle against the building industry to affirm the constitutionality of the restriction. (Construction Industry Association, Sonoma County, v. City of Petaluma, 522 F.2d 897 <9th cir 1975> .) Once the courts upheld the constitutionality of the housing cap, it quickly became popular — especially among growing suburbs in the Bay Area, in Ventura and San Diego counties, and in communities along the Central Coast. In Santa Cruz, Monterey, San Luis Obispo, and Santa Barbara counties, the mechanism was often a "population cap," but it was still implemented as a restriction on the construction of new housing units. By 1992, according to a report by UCLA researchers Madelyn Glickfeld and Ned Levine, about 60 cities and counties in California — more than 10% of all jurisdictions — had a limit on housing or population that restricted construction. Almost all of the caps were in coastal counties. Over time, the implementation of housing caps became a tool not simply to restrict the overall growth of a community, but also to increase the quality (and cost) of development as well. Once you restrict the number of houses that can be built, then you have to come up with an allocation process. Most communities chose to use what came to be known as a "beauty contest" — a competition in which developers often sought to outbid each other in offering up community benefits. Most jurisdictions have a laundry list of desired items; and while some of them involve basic community infrastructure (sewers, water, roads), many city councils and boards of supervisors also give high priority to upscale suburban amenities, such as parks and equestrian trails. As a result, some communities have successfully used the beauty contest to transform themselves into desirable, upper-middle-class suburbs with high home prices. But have they successfully used housing caps to restrict or manage growth in any kind of useful way? That is a tough one. There is no question that housing caps have given local politicians and local voters the illusion of control. In fact, however, from Petaluma's experience forward, housing caps have usually been set high, in response to a crisis. So, in most years and in most communities, the number of proposed housing units has not come close to the ceiling. In Petaluma, for example, the annual 500-unit cap set in the early 1970s seemed low compared to the 900 units that were coming through the pipeline at that time — but it was much higher than the historical 200 to 300 units per year the city had been getting. Similarly, Tracy's cap of 750 seems low compared to the 1,200-1,500 permits the city has processed in recent years. But it's worth noting that during the recession a few years ago, Tracy had imposed such high impact fees that most projects there did not pencil out and hardly anything was built. Indeed, research by planning professor John Landis of University of California, Berkeley, has found that virtually all cities with housing caps imposed them during the middle of a boom, and set them at such high levels that the city hardly ever hit them again. And when comparing overall residential growth, he found there was hardly any difference between communities with housing caps and those without. (In his analysis, he used "matched pairs" of similar communities, one of which had a cap and one of which did not — Upland and Redlands, for example, and Turlock and Lodi.) It did not really matter whether the builders were stopped at the ballot box in November or nickel-and-dimed before the planning commission every Tuesday night. The result was more or less the same. Ironically, a housing cap no longer seems to be a sure way to restrict a city's population any more — largely because household sizes are increasing throughout the state. For example, in Ventura County, Camarillo — which has had a housing cap for almost 20 years — recently renewed its ordinance. This led the local newspaper to extol the virtues of housing restrictions by comparing Camarillo to its blue-collar neighbor, Oxnard. In fact, however, Camarillo's population grew faster during the 1990s, even with the housing cap, than Oxnard's did without a cap (21% for Camarillo to 12% for Oxnard). Maybe this is why many suburbs with housing caps have gone one step further during the last few years and adopted urban growth boundaries. Housing caps may dampen demand in the occasional white-hot real estate market — not such a bad thing, actually — and they may encourage developers to build bigger houses in order to pay for all the amenities demanded by the local "beauty contests." But it's not clear whether they truly shape or manage growth. Of course, most cities in California really do have housing caps embedded in their general plans. It's called the "build-out" scenario, and it's a long-term restriction on growth, rather than a short-term restriction. Instead of holding a community to 500 units annually, the general plan build-out may impose a limit of 10,000 units over 20 years. This is probably a better way to handle things — allowing for a few ups and downs in the market and managing growth according to a more cohesive overall vision than simply requiring a few equestrian trails.

The California Supreme Court in February heard oral arguments in a California Environmental Quality Act case for the first time since 1997. But members of the court gave few indications of how they would rule in the case, which centers on the lack of an environmental review for a city-sponsored ballot measure. Justices peppered attorneys on either side of Friends of Sierra Madre v. City of Sierra Madre, No. S085088, with questions throughout the hour-long proceedings in Sacramento. Afterward, lawyers declined to speculate on how the court might rule. In late 1999, the Second District Court of Appeal threw out the results of a 1998 election in Sierra Madre because the city violated CEQA. Sierra Madre voters approved a city-sponsored ballot measure removing 29 homes from the city's Register of Historic Landmarks. The court found that the removal of the properties from the landmarks list required environmental review because of potential adverse impacts to historical resources. The city contended ballot measures were exempt from CEQA, but the court distinguished between measures voluntarily placed on the ballot by the City Council and ballot measures that qualify via voter petitions. The appellate court said that when a City Council places a city-sponsored measure before voters, the council is making a discretionary decision that is subject to environmental review. During oral arguments before the State Supreme Court, Donald Sobelman, the city's attorney, argued that CEQA and its Guidelines make no such distinction. "When the voters make the decision, CEQA does not apply," he told the justices. When Justice Ming Chin asked what authorized such an exemption, Sobelman cited Natural Resources Code § 21065, which addresses the definition of a project, and § 21080, which deals with CEQA exemptions. And several times, Sobelman pointed to the court's own decision in DeVita v. County of Napa, 9 Cal.4th 763. Justice Stanley Mosk's opinion in the landmark DeVita case said that ballot measures are not subject to CEQA review, Sobelman argued. "This is a matter of crucial importance to California cities. For more than 25 years they have relied upon the Guidelines to place initiatives before the voters," Sobelman said. Chief Justice Ronald George asked if the city placed the measure on the ballot to avoid preparing an environmental impact report. Sobelman said no. The delisting was not a project under CEQA, he said, because "the delisting does not remove environmental protections." Justice Joyce Kennard said the city was taking an inconsistent position. During earlier proceedings, the city did not dispute that delisting the properties was a project for CEQA purposes. Sobelman said that the city did not dispute that point at the trial level but did so in briefs before the high court because Friends of Sierra Madre raised the issued. He said there was no project because the City Council took no action and granted no entitlement. But Susan Brandt-Hawley, attorney for Friends, argued that delisting the properties was indeed a project under CEQA because it removed two protections in the City Code for historic properties. She cited the court's most recent CEQA decision in Mountain Lion Foundation v. Fish & Game Comm'n, 16 Cal.4th 105 (1997), in which the court ruled that removing protections for a species triggered an environmental review. Several justices' questions probed the practical differences between a city-sponsored ballot measure and a citizen initiative. Does not, asked Justice Janice Rogers Brown, the electoral process achieve the same end as CEQA, namely informing the public? Not in this case, responded Brandt-Hawley. Voters were not told of specific impacts to historical resources, she said. A bit later, she said that voters expect measures placed on the ballot by elected officials to have received some level of environmental review. Joining Brandt-Hawley before the high court was Deputy Attorney General Christine Sproul, while Attorney General Bill Lockyer watched from the audience. Sproul took issue with the city's "calculated strategy" to avoid CEQA. That charge drew an immediate question from Justice Kennard, who asked what evidence Sproul had. Sproul pointed to a city staff report and a City Council meeting transcript as proof that the city used the electoral process to avoid the costs of an environmental impact report. The appellate court had cited the same evidence in making its decision. But, asked Justice Kathryn Werdegar, what is wrong with saving money if it is allowed by law? Sproul said it is not allowed by law in this case. "The Legislature has been clear in applying CEQA to decision-makers," Sproul said. The law differentiates between decision-makers and voters. "They are taking an affirmative action to place the measure before voters," she said, later adding, "Should the court sanction the city's actions, we would have grave concerns." In a closing response, city attorney Sobelman dismissed the notion that properties removed from the Register of Historic Landmarks could be substantially altered without environmental review. The City Council placed the measure on the ballot "to avoid CEQA too early in the process," he argued. "No one in Sierra Madre thinks there will not be CEQA review before demolition," he added. After oral arguments, Sobelman said he believes the case is clear-cut: the Legislature has given citizens authority to decide such matters on their own. Attorney Michael Zischke, who has helped represent Sierra Madre during the litigation, said the case could set an important precedent for cities. A number of major projects have been approved by ballot measure, including baseball and football stadiums in San Francisco, Zischke said. But Brandt-Hawley said a city victory would set a dangerous precedent. "It would be inviting cities to dodge CEQA," she said. The state Supreme Court is expected to rule by early May.

The City of Hermosa Beach's "no-oil" initiative overrides the city's pre-existing contract with an oil company to permit oil drilling on a city-owned parcel of land, the Second District Court of Appeal has ruled. The initiative is not trumped by the contracts clause of the U.S. Constitution, and the oil company in question did not have a right to proceed in the face of the initiative, the court decided. Hermosa Beach voters originally banned all oil drilling in the city in 1932. However, in 1984, to generate funds needed to acquire parks and open space, the voters approved two propositions to create exemptions from the ban for two publicly owned sites, including one owned by the city known as the City Yard Site. In 1995, voters approved Proposition E, an initiative that repealed the two exemptions. In the meantime, however, the city had moved forward to contract with the Macpherson Oil Company, which had been a leading force in placing the 1984 ballot measures before the voters. In ruling for a coalition of environmental groups, the Second District, Division Two 2, concluded that Proposition E's ban on oil drilling in order to protect public safety — and, subsequently, the city's decision to terminate the contract based on the same grounds — was a proper exercise of the city's police powers and overrode Macpherson's argument that the initiative violated the company's constitutional right to carry out a contract executed with the city. The court also ruled that because Macpherson had borne only "soft" costs and not "hard" costs — and because the company had not acquired all of the necessary permits to begin drilling —- it had not obtained a vested right to move forward with the oil-drilling project. Between the passage of the ballot measures in 1984 and the initiative in 1995, the city entered into two contracts with Macpherson, one in 1986 and one in 1992. Under the terms of the lease, the city was required to give Macpherson the City Yard Site and obtain State Lands Commission approval for drilling in the tidelands. Macpherson was required to obtain all necessary permits, including a conditional use permit from the city and a coastal development permit from the Coastal Commission. After certifying an environmental impact report, the city approved a general plan amendment and zone change in 1990. Three years later, the city certified an addendum to the EIR and approved the conditional use permit. Environmental groups sued to challenge the EIR's adequacy and the CUP approval but eventually abandoned an appeal after losing in the trial court. The State Lands Commission originally approved the project in 1993. But, after environmentalists filed a lawsuit, the project returned to the commission, which approved it again in 1994. The Coastal Development Permit was approved in 1998, after being submitted two times and withdrawn once. In the meantime, the Hermosa Beach Stop Oil Coalition qualified an initiative to ban all oil drilling in the city. The initiative was approved by 56% of the voters in the November 1995 election. The initiative specifically repealed the 1984 exemptions to the city's oil-drilling ban, including the exemption regarding the City Yard Site. The ballot arguments focused mostly on the Macpherson proposal and the City Yard Site. Fearful of being sued for a contracts violation, the city continued to honor its lease with Macpherson after the passage of Proposition E. However, in 1997 the Stop Oil Coalition sued the city, seeking declaratory and injunctive relief to require the city to apply Proposition E to the Macpherson project. In 1998, Los Angeles County Superior Court Judge Kurt J. Lewin ruled in favor of the city and Macpherson, stating that while there was no question that Proposition E was intended to apply to the project, implementing it would be an unconstitutional impairment of the contract between the two parties. "The voters by initiative may repeal any law including the limited exceptions to the oil ban," Judge Lewis wrote. "They may not by legislative fiat extinguish a valid subsisting contract … without a demonstration that such total impairment of the contract is reasonable and justified because it is compelled by real threats to the health, safety, and welfare of the community." Prior to the trial judge's ruling, the city stopped performing under the terms of the contract based on a consultant's analysis that public safety could be endangered by the risk of an escaping methane gas cloud. Macpherson subsequently filed a cross-complaint against the city alleging that the methane gas risk had previously been assessed and accusing the city of breach of contract. On appeal, Stop Oil contended that Proposition E was intended to apply to the Macpherson project; that the initiative was a valid exercise of the police power that did not violate the contracts clause of the constitution; and that the contract between Macpherson and the city was authorized by the lease agreement itself. Macpherson contended that it had a vested right to move forward with the project. The three-judge appellate panel ruled in favor of Stop Oil on all counts. The court decided that Proposition E was clearly aimed at the Macpherson project, and concluded that the measure does not constitute a retroactive application of a law to a situation but, rather, applies only to future permits which Macpherson was required to obtain to move forward. As for vested rights, the court noted that Macpherson had not obtained all required governmental approvals, including the coastal development permit, at the time Proposition E passed. Also, because it had invested only in "soft" costs, the company had not made a "substantial investment," as required under the leading vested rights case, Avco Community Developers Inc v. South Coast Regional Commission (1976) 17 Cal.3d 785. "With only a conditional use permit (as to which many conditions remained unfulfilled), no building permit and no substantial work done to construct the project, Macpherson can claim no vested right to preclude application of Proposition E to the oil drilling project at the City Yard Site," wrote Los Angeles County Superior Court Judge Dennis Perluss, sitting by assignment to the appellate court. Most significantly, the court ruled that Proposition E does not violate the contracts clause of the U.S. Constitution. First, the court said, the initiative was a proper exercise of police power because it raised a legitimate question of public safety. The appellate court disagreed with the trial court and concluded that substantial evidence of the public safety threat had been presented during the trial. Furthermore, the court concluded, the 1992 lease actually anticipates regulatory changes such as Proposition E. "By its express mandate that Macpherson obtain a drilling permit, the lease thus incorporates this further command that the Macpherson project operate in compliance with then-existing law," wrote Judge Perluss. Furthermore, he wrote, "one of the conditions of the CUP issued in 1993, to which Macpherson agreed, was that he subject property shall be developed, maintained, and operated in full compliance with the conditions of this grant and any law, statute, ordinances, or other regulation applicable to any development or activity on the subject property." Perluss also pointed out that Macpherson could have negotiated for protection from future regulatory changes but did not. The Case: Hermosa Beach Stop Oil Coalition v. City of Hermosa Beach, No. B138557, 01 CDOS 722, 2001 Daily Journal D.A.R. 913, issued January 24, 2001. The Lawyers: For Stop Oil: Jan Chatten-Brown, Chatten-Brown & Associates, (310) 474-7793. For City of Hermosa Beach: Michael Jenkins, Richards, Watson, & Gershon, (213) 626-8484. For Windward Associates (Macpherson): James Bright, Bright & Brown, (818) 243-2121.

With electricity in California in short supply during recent months, it is easy to overlook the boom in power plant construction that has already started. Since April 1999, the California Energy Commission has approved nine plants capable of increasing the state's generating capacity by 12%. And, the commission is reviewing 14 more proposals that would add another 12% to the state's generating abilities, bringing the capacity to about 67,000 megawatts. This building boom causes some analysts to predict the state will become a net exporter of electricity within two years. Still, policy makers of all stripes are urging speedier reviews of new power plants, and some – led by the new Bush Administration – have called for relaxing environmental protections. A bill providing up to $5 billion for the state to purchase and build power plants (SB 6X, Burton) was advancing through the Legislature in late February, as did other bills related to power plants. A new Energy Commission study of 32 potential locations for "peaker plants" could aid the process of the state itself building power plants, according to a commission official. Surprisingly, most of the recently approved and proposed power plants have met little local resistance. Four of the nine already approved projects are in remote areas of Kern County, where the oil and natural gas industries already have a strong presence. And several mainstream environmental organizations have welcomed new gas-fired power plants because they create electricity more efficiently than older models. Still, some proposals have hit local obstacles, notably proposals in San Jose's Coyote Valley, in the Los Angeles suburb of South Gate, and in Huntington Beach. A One-Year Process In 1974, the Legislature passed the Warren-Alquist Act, which created the State Energy Resources Conservation and Development Commission, commonly known as the California Energy Commission. The legislation (Public Resources Code § 25000 et seq.) gives the Commission sole authority to certify construction and operation of thermal electric power plants of at least 50 megawatts. Projects undergo an environmental review (the document is often called a Final Staff Assessment) that is similar to the process mandated by the California Environmental Quality Act. Before issuing a license, the Energy Commission must also assure that the plant will comply with state and regional regulations, including often-stringent air quality mandates. The commission is not bound by local zoning or decisions of local officials. But in practice, the agency often places great weight on local laws and likes to see support from local authorities, according to John C. Funk, an attorney with Weston, Benshoof, Rochefort, Rubalcava & MacCuish in Los Angeles. Kern County Planning Director Ted James said the Energy Commission has asked local planners to comment on projects and review environmental documents for new power plants in his county. "It's positive that the state is communicating and coordinating with us," James said. "Our arrangement — and it's worked very well — is that they contact us and work with my staff on the local issues." Once the Commission determines an application to construct a power plant is complete, the agency has one year to decide on the project. Legislation approved last year (SB 970, Ducheny) shorted that timeline to six months for power plants of fewer than 100 megawatts that present no significant environmental impacts. "Peaker plants" that would operate limited hours during high-demand periods through 2003 receive a four-month review under the legislation. An Executive Order issued in February by Gov. Davis extended the four-month review process to peaker plants for which an application is filed this year. And peaker plants that can be online by July 31 are eligible for 21-day emergency processing procedure. However, few project proponents have taken advantage of the shorter process, according to Rob Schlichting, an Energy Commission spokesman. El Paso Merchant Energy Company's 51-megawatt plant at San Francisco International Airport underwent the four-month process (actually closer to five months), and the 99-megawatt Hanford Energy Park Project in the Kings County town is in the six-month process. Mixed Receptions Kern County has proven popular with power plant developers because it already has extensive oil and natural gas production, according to James. Many of those extraction facilities have co-generation plants, so construction of a full-fledged power plant is a logical next step. Plus, the California Aqueduct runs through the county, so water is available for plant cooling, and Kern County is fairly close to major urban centers, James added. Thus far, the Kern County projects have spurred only light opposition. "We're seeing groups like the Sierra Club and the Audubon Society asking questions about how many do we want in one area?" said James. He added that the documents he has reviewed indicated Energy Commission has fully addressed questions regarding air quality and cumulative impacts. The proposed Metcalf Energy Center in south San Jose provides a different example, and it demonstrates how odd the politics of power plant development can be. The Sierra Club and the American Lung Association have endorsed the project, while big business, in form of Cisco Systems, opposes it. In 1999, Calpine Corporation, which has become a major supplier of energy in California in the last few years, and Bechtel Enterprises announced plans for a 600-megawatt, gas-fired power plant on 14 acres in San Jose's Coyote Valley. The site was chosen because it is less than a mile from a high-pressure natural gas line, and because the power plant could tie in with an existing 230 kilovolt transmission line less than 500 feet away. But Cisco, which won approval last year for a 6.6-million-square-foot campus near the proposed power plant site, came out strongly against the power plant. Cisco said the facility would harm local air quality and was an inappropriate industrial use in an area long envisioned as a site for technology business growth. San Jose Mayor Ron Gonzales sided with Cisco, and in November 2000, the City Council unanimously denied Calpine's general plan amendment and rezoning applications. Since then, pressure has mounted on the Energy Commission to override the city's decision. State Senate President Pro Tem John Burton has endorsed the project, as have five Democratic Assembly members from the South Bay, and the Santa Clara County Board of Supervisors. Calpine and backers insist no basis exists for opposing the power plant. They point to a Bay Area Air Quality Management District analysis that found the power plant would have a negligible impact on air quality. Calpine has even offered to build an air monitoring station at any location and agreed to shut down should the plant exceed standards, said Lisa Poelle, a spokeswoman for Calpine/Bechtel Joint Development. "This has become the premiere poster child for NIMBYism anywhere in the country because Cisco is so powerful," Poelle said. "Cisco got the mayor to back them on us, and the City Council followed his lead." Rich Ferguson, California energy chair for the Sierra Club, said opponents of any thermal generating plant always raise air pollution concerns. In the case of the Metcalf Energy Center in San Jose, he said, those concerns are overstated. "Our data, the Lung Association's data and the local air quality district's data do not show that as an issue. We found that traffic to and from the new Cisco campus would create far more air pollution impacts," Ferguson said. But Elizabeth Cord, president of the Santa Teresa Citizens Action Group, a neighborhood organization, argued that the public health risk assessment for the plant is inadequate. South San Jose already has the worst air quality in the Bay Area because of prevailing winds and the narrowness of Coyote Valley, she said. Her viewpoint received backing in mid-February when a group of meteorologists from the Naval Postgraduate School in Monterey questioned the atmospheric modeling used by Calpine and the air district. The City of Morgan Hill, a project opponent about seven miles south of the site, commissioned the meteorologists. "I think there could well be within San Jose and Santa Clara County appropriate sites for power plants," said Cord, whose organization supported the controversial Cisco campus. "I think the way things are going, we would be happy to have some power generation. But this isn't the right site." Four hundred miles to the south, Sunlaw Energy's proposal to build a 550-megawatt power plant in South Gate his run into major local opposition. The 13.5-acre site near the 710 Freeway is now a truck depot. It lies in a heavily urbanized community populated primarily by non-English speaking residents, said the Energy Commission's Schlichting. Thus, environmental justice concerns have come to the forefront. The City of South Gate has placed on the March 6 ballot an advisory measure on the power plant. Although the Energy Commission is continuing with its review process, Sunlaw officials have suggested they would abide by the results of the non-binding advisory vote because they do not want to build where they are not wanted. Speeding the Process President Bush's first official response to California's energy situation was to call for relaxing federal environmental regulations. And in mid-February, Bush ordered agencies such as the Environmental Protection Agency and the National Marine Fisheries Service to "expedite federal permit approvals for siting and operating power plants in California." Bush's action came at the request of Gov. Davis, who in early February issued six Executive Orders and introduced a legislative package. Among other things, the executive orders offered a bonus to developers who bring new plants on line by July, directed the California Air Resources Board to establish a State Emissions Offset Bank, and allowed generators to maximize output and pay mitigation fees if necessary. The legislative package includes rebates and tax incentives for generators of renewable energy; loans for businesses that build on-site generating facilities such as solar-powered cells or co-generation plants; and money for water districts to convert diesel generators to natural gas technology. "We'll demonstrate that California can cut red tape, build needed energy supply, and maintain our respect for the environment," Davis said during a February news conference. The governor also appointed Larry Hamlin, vice president of power production, operations and maintenance services for Southern California Edison, as the state's "energy construction czar." Hamlin took a two-month leave from Edison to "ride herd on every single project," Davis said. Davis and the Legislature's majority Democrats appear to have left behind Republican lawmakers. They have suggested building power plants on active and closed military bases, letting local government keep all property tax revenues from new power plants, and giving the governor emergency authority to approve new generating facilities. Republicans have also jumped on the electricity crisis as a way to champion a new round of dam building. Sen. Tom McClintock (R-Thousand Oaks) has even urged the proposed public power authority to acquire and reopen Rancho Seco nuclear power plant, which the Sacramento Municipal Utility District closed about 10 years ago. Republicans have also urged the Energy Commission to issue swift approvals to projects in Huntington Beach and Morro Bay. Many people, including some power generators, say that environmental regulations are really a straw man. They say that no one built any power plants in California for 10 years because of market conditions. State Energy Commission officials are quick to point out that they have approved every plant proposed during the last decade, several of which were never built. An unusual coalition of labor and environmental groups urged Davis and the Legislature not to reduce environmental protections. Nine power plants received Energy Commission approval under the existing system, so there is no reason to alter the system for the benefit of future developers, said Sharon Cornu, of the California Labor Federation. The City of Huntington Beach has also questioned ramifications of speedier permit processing. On orders from the governor, the Energy Commission has implemented a 60-day process for approval of refurbishment and reactivation of two old gas-fired generators owned by AES Corporation. But Huntington Beach Mayor Julien Houchen told the Los Angeles Times, "The people and environment of Huntington Beach are in jeopardy as this train races down the track." Environmentalists say they are not to blame for the 1990's dearth of power plant development. The Sierra Club's Ferguson said the latest technology makes new plants cleaner and more efficient. "Basically, the argument is that if you don't build the new stuff, the old stuff will keep running," he said. Contacts: Ted James, Kern County Planning Department, (661) 862-8600. Lisa Poelle, Calpine/Bechtel Joint Development, (408) 792-1285. Rich Ferguson, Sierra Club, (916) 447-7983. Sharon Cornu, California Labor Federation, (415) 986-4003. California Energy Commission website: www.energy.ca.gov Santa Teresa Citizen Action Group website: www.santateresacitizen.org

A Rancho Palos Verdes homeowner who challenged the city's "view protection ordinance" has lost his case at the Second District Court of Appeal. The court rejected arguments that the ordinance — which allows the city to order the pruning of trees that block ocean views — is an impermissible use of the city's police power and a taking. The court also dismissed arguments that the city's application of the ordinance violated due process rights. In 1989, Rancho Palos Verdes voters approved Measure M, a city-sponsored ballot measure that restricts the height of buildings and foliage. Under the ordinance, a resident of this coastal town whose view is impaired can apply for a "view restoration permit." If approved, the permit allows the city to order foliage trimmed or removed at the cost of the applicant. In February 1997, Norbert Keilbach filed a view restoration permit application to compel his neighbor, Jon Echevarrieta, to trim eight trees that stood 20 to 60 feet tall. After more than a year of proceedings before the city's View Restoration Commission and the City Council, the council approved the view restoration permit. It required Echevarrieta to trim his trees substantially and required Keilbach to plant a barrier of 20 to 25 low-growing shrubs to mitigate Echevarrieta's privacy concerns. In June 1998, Echevarrieta filed a petition for writ of mandate and a complaint for declaratory relief, taking, and spot zoning. Los Angeles County Superior Court Judge Jean Matusinka ruled for the city. On March 3, 2000, the court issued a warrant authorizing entry onto Echevarrieta's property for the purpose of "trimming, culling and lacing trees and foliage." Echevarrieta obtained a 90-day stay of execution, but the court of appeal declined to extend the stay. On appeal, Echevarrieta argued that the ordinance does not state a valid purpose and — as applied — impermissibly expands the city's police power. The Second District, Division Four, disagreed and upheld the trial court. Writing for the unanimous three-judge panel, Justice Gary Hastings quoted extensively from the ordinance, which states in part, "The hillsides provide potential vista points and view lots. The City's General Plan recognizes these natural resources and calls for their protection. The public health, safety and welfare of the City require prevention of needless destruction and impairment of these limited vista points and view lots." Wrote Hastings, "Enacting the ordinance for these purposes is clearly a legitimate exercise of the city's traditional police power." Both Hastings and the trial court cited Kucera v. Lizza, (1997) 59 Cal.App.4th 1141 (see CP&DR Legal Digest, January 1998), in which an appellate court upheld a similar ordinance in the City of Tiburon. As for the takings argument, the court found that the ordinance did not deny all economically beneficial or productive use of Echevarrieta's property — the standard set in Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003. "Appellant cites the damages to his property as his loss of privacy and ‘utility saving cooling shade,'" Hastings wrote. "Appellant cannot show he has a vested right to foliage of a certain height or to a fixed amount of utility charges. …While appellant cherishes his park-like privacy, the regulation of tree heights throughout the city may indirectly increase the property's value, as the city becomes known for one which has scenic vistas." The court also found that the warrant authorizing entry onto Echevarrieta's property was not a "physical invasion" barred by the Fifth Amendment, as the homeowner had argued. Echevarrieta's refusal to comply with the City Council's decision compelled such activity, the court held. Regarding due process, the court rejected the argument that the city retroactively applied the ordinance, which amounted to an arbitrary action. "There is no automatic retroactive reach of the ordinance. Homeowners are allowed to keep foliage at the height it existed on the effective date of the Ordinance. It is only when another homeowner applies for a view restoration permit that the inquiry begins whether the foliage must be trimmed to a lower height," Hastings wrote. The court also rejected the argument that the ordinance is deceptive and uncertain. The Case: Jon Echevarrieta v. City of Rancho Palos Verdes, No. B138366, 01 C.D.O.S. 696, 2001 Daily Journal, D.A.R. 863, filed January 3, 2001, ordered published January 18, 2001. The Lawyers: For Echevarrieta: Robert Hampton Rogers, Sullivan, Workman & Dee, (213) 624-5544. For the city: Carol Lynch, Richards, Watson & Gershon, (213) 626-8484.

The owner of a commercial building and billboard next to a freeway could not avoid state prohibitions against off-site advertising simply by leasing office space to the advertisers, the First District Court of Appeal has ruled. The court held that the Outdoor Advertising Act (Bus. & Prof. Code § 5200 et. seq.) prohibited the billboard's use for promoting commercial enterprises that were clearly undertaken elsewhere. In the early 1990s, Nano Maldonado purchased a commercial building next to the southbound lanes of Highway 101 in Redwood City. On top of the building is a double-sided billboard erected in 1956. In March 1993, Maldonado applied to Caltrans for a permit to use the billboard for off-premise displays. Caltrans denied the permit because Highway 101 was classified a "landscaped freeway" under the Outdoor Advertising Act, which prohibits billboards unless they promote goods or services available at the property on which the sign is located. Later in 1993, Caltrans cited Maldonado for violating the Act because his billboard was advertising off-site goods and services. In October 1996, Caltrans again cited the property owner and ordered him to remove the advertising within five weeks. Maldonado appealed to the California Outdoor Advertising Review Board, which upheld Caltrans' decision. Caltrans then sued to abate a public nuisance. Maldonado argued that he did not violate the Act's ban on off-premise advertising because the businesses that leased the billboard space also leased office space in the building. But San Mateo County Superior Court Judge Barbara Mallach ruled that Caltrans properly denied the permit because none of the lessees actually provided goods or services on the site. Mallach ruled that the advertisements violated the Act, and she enjoined Maldonado from placing further advertising on the billboard without permission from Caltrans. A three-judge panel of the First District, Division Five, unanimously upheld the trial court. According to essentially undisputed facts in the record, only two of the advertisers ever used the office space at all, and those two "did so only briefly and for purposes wholly unrelated to the message of their advertising," Justice Barbara Jones wrote for the appellate court. "At trial, appellant testified that he did not know the nature of the business conducted in his building by Palo Alto Holiday Inn, Stanford Shopping Center, Skyway Cellular or Golden Time Jewelers. He was unaware of these businesses ever, respectively, offering meals and accommodation, opening a shopping annex, selling cellular telephones or selling watches at his building," Justice Jones wrote. Furthermore, there was no evidence that the businesses that did use the office space constituted the primary activity in the building or Maldonado's principle source of income. The court cited People ex rel. Dept. of Transportation v. Harris, (1982) 128 Cal.App. 3d 264. In that case, the court ruled that a sign on Harris Ranch property along Interstate 5, and saying "Harris Ranch 7 Miles," violated the Outdoor Advertising Act because it directed motorists to a restaurant seven miles away from the sign's location. Maldonado also argued that his billboard for off-premise advertising was lawfully erected before passage of the Act, and pointed to § 5216.1, which states that there is a rebuttable presumption that such a sign is legal if the owner has not been cited during the previous five years. But the appellate court rejected this argument, too. Section 5441 states that prohibited signs along landscaped freeways are subject to removal three years from the date Caltrans designated the freeway as landscaped and the character of the freeway has been changed, the court ruled. "Therefore, the fact the billboard may have been lawfully erected for purposes of § 5216.1 became moot once the portion of Highway 101 alongside appellant's property was designed ‘landscaped' in 1993," Justice Jones wrote. "Any advertising display that violates the Act is a public nuisance and subject to removal." The First District upheld Judge Mallach's injunction except for one portion requiring Maldonado to get a permit. Proper billboards do not require a permit under the Act, the court held. In an unpublished portion of the opinion, the court upheld Mallach's decision not to allow Maldonado to file a cross-complaint and an amended answer alleging inverse condemnation and that the sign was grandfathered. The trial judge gave the property owner 30 days to file an affirmative defense, but Maldonado missed the deadline. The Case: The People ex rel. Department of Transportation v. Nano Maldonado, No. A089538, 2001 Daily Journal, D.A.R. 1463, filed January 10, 2001, certified for partial publication Feb. 7, 2001. The Lawyers: For Caltrans: David Sandler, (415) 982-3130. For Maldonado: Terry Traktman, (707) 769-3090.

The California Supreme Court has dealt a setback to property rights advocates and outlined a new standard for proving that a government agency violated a property owner's federal due process rights. On a 5-2 decision, the court held that a landlord who is subject to a mobilehome rent control ordinance can receive compensation under the federal Civil Rights Act (42 U.S.C. Section 1983) only if the government deliberately flouts the law. " ot every government action that fails to measure up to the ideal of a fair and efficient rent control proceeding inflicts a constitutional injury. Only those government actions that amount to a deliberate flouting of the law qualify for relief under Section 1983," Justice Stanley Mosk wrote. In a sharp dissent, Justice Janice Rogers Brown wrote, "In the latest of a series of decisions rejecting the claims of property owners, the court now refuses to enforce federal civil rights remedies when it comes to confiscatory regulations." The case stems from a long-running feud between the owner of a 260-space mobilehome park, and the City of Clovis. The source of the friction is the city's mobilehome rent control ordinance that was in effect from 1978 to 1993. During the 1980s, owner Roger Galland challenged the constitutionality of the ordinance and twice sued over the amount of rent increases approved by the city. He lost every round at the appellate level and, in an unpublished opinion, was sanctioned by the court for a frivolous appeal. Galland filed for new rent increases in April 1988, June 1989 and January 1990. During proceedings that lasted several years, the city rejected the 1988 request, and granted portions of the 1989 and 1990 rent hikes – but not until 1992. In May 1990, Galland sued the city for damages for inverse condemnation, for denial of substantive and procedural due process under the state and federal constitutions, and for Section 1983 violations. He argued that Clovis's application of its rent control ordinance amounted to a regulatory taking and that the City Council and the Mobile Home Rent Review Commission denied him a fair hearing. In 1994, Fresno County Superior Court Judge Gary Ray Kerkorian found that the manner in which the city administered its ordinance violated Galland's due process rights, although Kerkorian held that the violation did not support an inverse condemnation claim. But, after hearings on liability and damages, Kerkorian did conclude that Galland was entitled to Section 1983 damages because the city did not grant the landlord a fair rate of return. The judge awarded Galland $236,000 in lost rents from 1989 through March 1995, and more than $700,000 in legal and administrative costs. The Fifth District Court of Appeal upheld the lower court. However, the state Supreme Court overturned the decision and remanded the case back to the trial court. According to Justice Mosk's analysis, Galland brought two distinct due process claims under Section 1983. The first stemmed from the city's failure to grant rent increases, resulting in confiscatorily low rents. The second claim related to the excessive procedural costs Galland said he had to pay in order to obtain a rent increase. Mosk based his opinion in part on the court's decision in Kavanau v. Santa Monica Rent Control Bd., (1997) 16 Cal.4th 761. In Kavanau, a takings case, the court held that a landlord challenging a rent ceiling as confiscatory must first ask the regulatory agency for a future rent adjustment to compensate for previous losses – a "Kavanau" adjustment. Mosk extended the same theory to Galland's due process claims. "When landlords seek Section 1983 damages from allegedly confiscatory rent regulation, we hold that they must show (1) that a confiscatory rent ceiling or other rent regulation was imposed and (2) that relief via a writ of mandate and a Kavanau adjustment is inadequate," Mosk wrote. The state Supreme Court remanded those issues to the trial court, directing the court to determine whether the rent ceilings "were within the constitutionally permitted broad zone of reasonableness." If Galland can prove the rent ceiling was confiscatory, "it is for Clovis to attempt on remand to adjust rent ceilings to compensate for lost rents, and for the trial court to review whether such adjustments are adequate to meet the constitutional standard for a fair return," Mosk wrote. If the Kavanau adjustment proves inadequate, Galland can file a Section 1983 action. Plus, Mosk wrote, the city and court must consider the administrative expenses the city imposed on Galland when considering the Kavanau adjustment. As to Galland's claim of excessive procedural costs, Mosk said the claim was really more substantive that procedural because Galland's alleged injury stemmed from the city's demands for extensive financial records and analyses, which Galland contended were arbitrary and irrational. "The question, then, is whether Clovis's actions during the rent adjustment hearings of 1988 to 1990, independent of the outcome of those hearings … violated the Gallands' substantive due process rights," Mosk wrote. That question was remanded to the trial court, but this is where the State Supreme Court set its new standard, based partly on County of Sacramento v. Lewis, (1998) 523 U.S 833, and partly on Silverman v. Barry, (D.C. Circuit 1988) 845 F.2d 1072. "In cases such as the present," Mosk wrote, "a deliberate flouting of the law may be said to have occurred if the city's demands for information and other procedural demands were so excessive and irrelevant to the regulatory task at hand as to lead a court to conclude that such demands were imposed not in order to obtain more information or increase the reliability of the eventual decision, but rather to obstruct or discourage landlords from either requesting or obtaining reasonable rent increases to which they are constitutionally entitled. We emphasize, however, that something more than mere ‘bureaucratic bungling' is required." Joining Mosk's opinion were Chief Justice Ronald George, and Associate Justices Ming Chin, Joyce Kennard, and Kathryn Werdegar. First District Court of Appeal Justice Barbara Jones, sitting pro tem for a recused Justice Marvin Baxter, filed a concurring and dissenting opinion. In her dissent, Brown suggested the court was picking on property owners. It might look more favorably on the victim in a classic civil rights case, such as a black firefighter who has been denied promotions or raises in a city with a history of discrimination, she wrote. "Would this court reverse and tell the firefighter: You have no remedy under Section 1983; instead, you have to go back to the city and petition for extra promotions and raises that will diffuse the incipient constitutional violation?" Brown wrote. The Case: Roger Galland v. City of Clovis, No. S080670, 01 C.D.O.S. 1034, 2001 Daily Journal, D.A.R. 1313, filed February 5, 2001. The Lawyers: For Galland: Jaquelynn Pope, (310) 379-3410. For the city: David J Wolfe, Lozano Smith, (559) 431-5600.

Faced with growing demand for student housing, University of California, Santa Cruz, has agreed to lease the Santa Cruz Holiday Inn for 10 years for about $19.5 million. During the past three years, UCSC has leased a small portion of the hotel for student housing. But starting later this year, the 170-room hotel will be turned over completely to students, faculty and campus visitors. About 250 students will live at the hotel, which is three miles from campus. Santa Cruz city officials are angry about the deal because it will cost the city about $500,000 a year in transit occupancy tax. The Holiday Inn is one of only two large hotels in town. Cities and counties in the Inland Empire have sued the state Department of Housing and Community Development and the Southern California Association of Governments over fair-share housing targets. Filing the suit were the counties of Riverside and San Bernardino, and the cities of Moreno Valley, Hemet, Victorville and Chino. Those jurisdictions argue that they are being forced to accommodate more than their share of the region's housing need (see CP&DR, February 2001). The City of Oxnard has also sued SCAG over its method of allocating low- and very low-income units. Under the Regional Housing Needs Assessment adopted by SCAG late last year, Oxnard must provide 1,211 low- and very low-income units out of a total of 3,074 new homes. A San Diego councilwoman with ties to the owner of the San Diego Padres has resigned and agreed to pay a $10,000 fine for violating the California Political Reform Act. San Diego County Superior Court Judge Wayne Peterson accepted the plea agreement between Valerie Stallings and federal prosecutors. Stallings pleaded guilty to a charge of intentionally failing to disclose gifts from the Padres and team owner John Moores, and one count of intentionally failing to disqualify herself from City Council votes on a new stadium for the Padres and related downtown development projects. The gifts included airplane tickets for Stallings' family to visit her in Kansas during cancer treatment, use of Moores' house in Carmel, and various Padres souvenirs. The FBI began investigating Stallings over what appeared to be a sweetheart stock deal involving Stallings and a Moores-owned company. But the FBI found no evidence of insider trading, and Stallings did report her $11,000 stock profit in disclosure forms. State parks officials announced in February that they were dropping plans for development of a luxury resort at Crystal Cove State Park in Orange County. Officials said public protest over the project was simply overwhelming. The state parks department in 1997 signed a lease with a developer to convert 46 1920's-vintage cottages into expensive, hotel-style cabins. But environmentalists, historic preservation advocates and supporters of public beach access fought the proposal vigorously. The state will now need to buy back the lease it signed with developer Michael Freed. Money for that and an overhaul of the cottages might come from the Coastal Conservancy. The state in February also served eviction notices on tenants of the cottages, some of whom have lived there for decades. The state has tried, but failed, to evict the tenants off and on since the late 1970s, in part because of a failing septic system. Opponents of a proposed Indian casino at the site of a cardroom in the Bay Area city of San Pablo are lobbying Gov. Davis to halt the project. Legislation carried by Rep. George Miller (D-Martinez) allows the Lytton Band of Pomo Indians to add the 10-acre cardroom site along Interstate-80 to their reservation. The Lytton Band, which is based 70 miles away in Sonoma County, is negotiating with the governor's office in hopes of bringing full-scale gambling to the Bay Area. Owners of existing cardrooms and a number of local government officials are hoping to block the casino. The San Francisco Board of Supervisors approved a six-month ban on construction of live-work lofts in mid-February. The moratorium, approved 9-1, halts conversions that have been changing the nature of several working-class neighborhoods and displacing lower-income families. Supervisors said they would work with community activists on ways to encourage development of new housing for low- and middle-income families. Supervisors also extended an existing jobs-housing linkage fee to developers of large hotels, retail projects, entertainment centers, and some research and development projects. Officebuilders in San Francisco have paid the affordable housing fee for years. The battle over the Redlands Doughnut Hole appears to have ended. Both the Redlands City Council and the San Bernardino County Board of Supervisors voted to approved a settlement agreement. Majestic Reality fought with the city for years for the right to develop a 125-acre retail center on a portion of the 1,200-acre unincorporated island, but Majestic and the city could never reach agreement. Last year, the state Legislature approved a bill that essentially gave the county the right to approve development at the site. Under the agreement, the city will drop objections to the Majestic development, and the county and Majestic will end their challenge to a large commercial project the city approved in December. Two members of the Redlands City Council voiced strong objections to the agreement, calling it "disastrous." Opposition to construction of apartments resulted in voters in Fontana's Hunter's Ridge district overwhelmingly approving modifications to a Mello-Roos special tax district. In mail-only balloting that concluded in late-January, residents voted 1,191 to 19 in favor of Measure T. The refinancing divides $3 million in Mello-Roos bond payments among future residents of a subdivision, rather than requiring the builder of apartments to pay the money up front. The vote also allows the city's rezoning of a 23-acre parcel to go forward, permitting development of 142 single-family homes. Hunter's Ridge residents fought an earlier proposal, envisioned in the original Mello-Roos bond financing, to construct 390 apartments on the site. Residents said the apartments would reduce property values and increase crime. The City Council in the far-eastern Contra Costa County community of Brentwood approved a 45-day moratorium on housing construction in one area of town. Planners sought the moratorium, which could be extended for up to a year, to allow time to complete a study that should determine whether the fast-growing city has adequate land zoned for a jobs-housing balance. Correction. Southern California Association of Governments Principle Planner Joe Carreras was misquoted in the February edition. In arguing for a lower housing target for the region, Carreras said that the federal census found 600,000 fewer Californians than the state Department of Finance had estimated.

WASHINGTON _ Supreme Court justices appeared mired in a swamp of messy issues on February 26 as they heard a Rhode Island landowner's plea for compensation for being blocked from filling 18 acres of Atlantic coastal wetlands. Attorneys for Anthony Palazzolo and the State of Rhode Island disagreed about virtually everything in the closely watched property rights case from the facts of the dispute to the procedural and substantive rules for resolving it. For their part, the justices groped for answers on such basic issues as the exact size of Palazzolo's holding and the possible value of any permitted development on the site. "How do we know?" Justice Stephen G. Breyer asked Palazzolo's lawyer, James S. Burling of the Sacramento-based Pacific Legal Foundation. The justices' uncertain questioning could presage a muddled outcome. That could disappoint property rights advocates, who had hoped for a ruling clarifying landowners' rights for compensation in "regulatory" takings cases. But state and local governments could also be disappointed if the ruling gives any additional room for takings claims. Palazzolo argues that he is being blocked from building up to 74 houses on the 18 acres of wetland, which lie just inland of an oceanfront road in the town of Westerly. He is asking for more than $3.15 million in compensation, the amount he says he could realize by developing all 74 lots. In rejecting his plea, the Rhode Island Supreme Court called the projection "unrealistically optimistic." Along with the wetlands, Palazzolo's holding encompasses a small but not precisely determined amount of "upland" property that includes a road and a developable "turnaround." Rhode Island officials say he could build at least one house on the upland. Palazzolo's lawyers argue one house amounts to "a pittance." The case history is long and complex. Palazzolo, 80 years old and an auto wrecker by trade, bought the property along with two other people in 1959 for $8,000. Under local zoning law, he thought he could develop it for residential or recreational purposes. In 1971, a state agency gave him permission to fill the land with material dredged from adjacent Winnipaug Pond, but the agency revoked the permit shortly thereafter. The closely held corporation Palazzolo formed lapsed in 1978, and title to the property passed to him individually. In the 1980s, he made two further attempts to win approval to fill all or part of the wetlands. The state's Coastal Resource Management Council turned him down in 1983 and again in 1985. Three years later, Palazzolo sued, claiming the state deprived him of all economic use of his land and asking for compensation under the Fifth Amendment's Takings Clause. Procedurally, Palazzolo's case faces a major obstacle: the judicial doctrine of ripeness, which courts use to stay out of cases not yet completely developed. Palazzolo never filed a residential development plan, so Rhode Island officials say there is no way to know whether he might have been allowed to build some houses. Conservative justices, however, were skeptical. "Why do you have to keep coming back?" Justice Antonin Scalia asked Rhode Island Attorney General Sheldon Whitehouse. Eventually, Whitehouse conceded that regulators might be "overbearing" if they forced a property owner to cross too many procedural hurdles. On the merits, the justices struggled with two major issues: first, whether Palazzolo should have known he would not be allowed to fill the wetland when he took title to the property in 1978; and, second, whether he had an "economically viable use" of part of the land even if filling was not permitted. Burling argued coastal landowners had every right to fill wetlands until the new regulatory regime was imposed during the 1970s, while Whitehouse said the state had protected wetlands "since time immemorial." On the value of the land, Whitehouse said Palazzolo had manufactured a takings case by focusing solely "on the portion of the property that is not buildable." Burling countered that some "nonzero value" was not enough to defeat a takings claim. The case attracted more than a dozen friend-of-the-court briefs, with homebuilders, farmers, and property rights groups on Palazzolo's side, and state and local government groups and environmental organizations on Rhode Island's. A decision is due before the court breaks for its summer recess at the end of June. The Case: Palazzolo v. Rhode Island, No. 99-2047 The Attorneys: For Palazzolo: James S. Burling, Pacific Legal Foundation, (916) 362-2833. For Rhode Island: Attorney General Sheldon Whitehouse, (401) 274-4400. Kenneth Jost, formerly editor of the Los Angeles Daily Journal, is staff writer for Congressional Quarterly and author of The Supreme Court Yearbook.

The first update of housing elements in a decade has resulted in something of a standoff between the Southern California Association of Governments and the state Department of Housing and Community Development. Stuck in the middle are Riverside and San Bernardino counties and several inland cities that do not know how many housing units to plan for. After negotiations with SCAG representatives throughout 1999, state officials ordered the regional agency to plan for 504,000 housing units during the 1998-2005 planning cycle. However, last November, SCAG submitted a final Regional Housing Needs Assessment (RHNA) allocating 438,000 housing units to the region's six counties and 184 cities. In December, HCD rejected SCAG's report, saying no justification existed for the reduction. The state adjusted SCAG's RHNA to 503,000 units. State law required SCAG jurisdictions to submit housing elements to HCD by December 31. Nearly a month after the deadline, only about 30 of 190 local governments had completed housing plans. The SCAG-HCD stalemate appears to force 11 local governments, mostly in the Inland Empire, to negotiate directly with the state, as HCD officials say they will reject housing elements that use disapproved SCAG housing targets. The various parties continue to talk, but HCD says its December response was final. Several state lawmakers have met with key players, but the legislators appear unlikely to intercede, at least for now, according to sources at the Capitol. "It's at the stage where it is all quite dicey," said Ty Schuiling, director of planning and programming for the San Bernardino Association of Governments. It will be difficult for HCD to back down. If the state allows SCAG to unilaterally decrease its housing allocation, the Association of Bay Area Governments and other regional planning organizations could see an invitation to develop their own housing targets despite the state's allocation formula. "We have fulfilled our statutory requirement to work with SCAG on coming up with the numbers," said Cathy Creswell, acting deputy director of HCD, who said HCD has authority to override SCAG's numbers. "We are required to make sure a region provides its fair share of the state's housing needs." Marc Brown, co-chairman of the California Housing Law Project said, "I think it's unfortunate in this case that SCAG felt like it has to challenge the entire process." Determining the need The housing allocation effort is a state-mandated process designed to give each city and county in the state a target number housing units at a variety of income levels. Local jurisdictions use the target numbers as a basis for their general plan housing elements, which must spell out how and where the city or county will accommodate the units. The state provides an allotment of housing units to every region, and the regional planning agency divvies them up among its cities and counties. The state originally gave the SCAG region a target of about 675,000 units, a number that SCAG eventually negotiated down to 504,000. But dozens of local jurisdiction were dissatisfied with how SCAG allotted those units across the southland. So SCAG conducted two rounds of appeals for its members — about a quarter of which sought to reduce their targets (see CP&DR, June 2000). During the second round, SCAG accepted all or part of appeals from 11 cities and counties for a total of 67,000 units. But SCAG never added those 67,000 units to other jurisdictions, instead cutting its RHNA by the same amount. Leaders of SCAG contend that state officials relied on outdated information and assumptions when they set the region's housing target. In a November letter to Housing and Community Development Director Julie Bornstein, SCAG President Ronald Bates wrote, "SCAG has reduced the regional housing need from the Draft RHNA because parts of the region have experienced long-term and profound distress in the housing market, influenced by base closures, high vacancy, foreclosure, and the lingering effects of the last recession." Plus, said SCAG Principle Planner Joe Carreras, the census counted more Californians than the state Department of Finance had estimated, meaning that more large families are living in the same home, a trend not reflected by HCD's housing allocation. "Clearly there is a really huge affordable housing crunch statewide, and we're a part of that," Carreras said. But focussing on the RHNA number instead of on how to solve the problem does little good, he said. The association worked on establishing good, defendable housing goals and did not worry so much about the final number, he said. Also, SCAG is following through on an action plan that resulted from a "housing summit" last fall, and is preparing a 10-year review of the region's housing and economic trends, he said. Officials in Sacramento are unconvinced. In an attachment to HCD's December response to SCAG, the state defended its use of Department of Finance data: "What is reflected in more recent DOF housing and household estimates is low housing production, or lower household formation; a problem that needs to be addressed by measures to increase housing construction, not reinforced by constraining the projected need, or the capacity to accommodate it. The incidence of families doubling up in single housing units, for example, does not justify defacto incorporation of it as a planning parameter." Creswell said state officials began working with SCAG on regional housing targets in 1997. She said SCAG had a good process until late last year, when it deviated from the process by reducing some jurisdictions' targets without redistributing those units elsewhere. The Inland Inquiry Lying at the center of the dispute are western Riverside and San Bernardino counties. San Bernardino County and its cities of Chino Hills, Victorville and San Bernardino all had their housing targets lowered on appeal by SCAG. Riverside County and its cities of Moreno Valley and Riverside also had their targets lowered by SCAG. Those seven jurisdictions account for 50,000 of the disputed units, as HCD insists that they keep their original allotment from SCAG. In the case of unincorporated San Bernardino County, HCD insists on a target of 43,668 units, while SCAG approved a target of 16,211. Neither number reflects market trends, as the generally pro-growth county has issued about a 1,000 housing permits a year recently. "The rate at which the Inland Empire would have to grow to meet the SCAG targets would be equal to the highest growth rate ever in the area, year after year after year," said SANBAG's Schuiling. "We don't claim to know what the right regional total is. But I do know that it is unreasonable to expect any part of the region to have record-setting growth year after year to meet a target handed to it by another agency." Arguing that it has not recovered from the recession and military base closures of the early 1990s, the City of San Bernardino successfully lobbied SCAG to reduce its housing target from nearly 3,800 units to zero. Both SCAG and HCD relied on old census data that did not reflect the closure of Norton Air Force Base and the Santa Fe rail yard, which eliminated thousands of jobs, said Valerie Ross, senior planner for the city. "We had the highest HUD foreclosure rate in the nation," she said. "We have vacant units throughout the city, both single- and multi-family." Ross also contended it is unfair for HCD to certify housing elements from other jurisdictions in the SCAG region while it rejects others that rely on SCAG-approved targets. The state's approvals eliminate the possibility of units getting redistributed to other jurisdictions. San Bernardino has not yet submitted a housing element to the state. The City of Moreno Valley has submitted a housing element, but it was based on a target of 3,500 units that SCAG approved on appeal — down from an earlier allotment of 10,000. The city has not heard back from the state, said Linda Guillis, the city's community and economic development director. Moreno Valley, just southeast of Riverside, was stung when March Air Force Base shuttered, eliminating 10,000 jobs. During the recession, Moreno Valley accounted for 62% of Riverside County's foreclosures, Guillis said. Even now, the city issues permits for only about 300 new homes a year, despite the existence in specific plans approvals for 19,000 units, she said. "We do have land available. We have an extremely business-friendly process and political environment. Frankly, we're ready to see the housing end of the market catch up," she said. Like other people, Guillis complained that SCAG appeared to view the Inland Empire as a convenient place to dump affordable housing. While Riverside and San Bernardino counties account for 19% of the current population, the original RHNA placed 46% of growth in the area. "We'd like to see some logical relationship between the jobs and the housing for people who work in those jobs. We're already in a housing-rich area," Guillis said. "When you create housing units in Moreno Valley, people are on the 91 freeway commuting to jobs in Orange County, and on the 10 and 60 freeways to get to jobs in Los Angeles County. What you have is a significant impact on the transportation corridors and on the air quality." Guillis also noted that the RHNA process is intended to prevent undue concentrations of low- and moderate-income housing. Yet at its current growth rate, Moreno Valley could not provide the targeted number of 2,900 very low- and low-income units sought by HCD — even if every new unit approved during the planning cycle were in the very low- and low-income bracket, she said. Creswell, of HCD, said she is sympathetic to many of these arguments. But, she said, SCAG should have dealt with them and not deferred the controversy to HCD at the end of the planning process. The department will certify housing elements from other jurisdictions because it cannot hold them hostage while a small group disputes its housing targets, she added. In the December response letter, state officials reject pleas from the Inland Empire and SCAG regarding a flat economy. The state employment growth has been double the national rate, which itself set records, and the Riverside-San Bernardino area had a higher rate of employment growth than any of the state's other major metro areas in 1999 and 2000, according to HCD. Still Creswell said state officials are willing to provide resources to aid economic development in Riverside and San Bernardino counties. The housing allocation process offered the opportunity for regional planners to determine a better distribution of jobs and housing; instead, they reaffirmed the traditional pattern of jobs near the coast and housing inland, she said. "We absolutely appreciate their (Inland Empire leaders) concern about needing a stronger job base in relationship to their housing," Creswell said. But she added, "This is fundamentally a problem that the region needs to deal with. … From our perspective, the region has gone without planning for housing for most of the last decade." Carreras, principle planner at SCAG, defended the association's decisions based on a weak Inland Empire job market, high vacancy rates, and lingering effects of the military's pullout. He said the association will promote dialogue between its members and the state. Carreras also said he recognizes the need for infill development of affordable and high-end housing in mature areas, especially three zones that are targets for venture capital, namely Eastern Ventura County, Santa Monica and Irvine. However, developers see infill projects as risky, and cities are often reluctant to approve housing development when there is limited vacant land available, he said. "We have to address fiscalization of land use if we're going to see any changes in development patterns of any scale in California," Carreras said. Whether the Legislature addresses that concern in a meaningful fashion this year is unknown. There is talk in the Capitol this year of housing element reform, including putting teeth in the existing housing element law by establishing serious penalties for noncompliant jurisdictions. No matter what the Legislature does, housing advocate Brown said, SCAG needs to ensure low-income housing units are fairly distributed. And cities in the Inland Empire and elsewhere need to decide how they are going to meet an unquestionable housing demand, he said. Contacts: Cathy Creswell, Department of Housing and Community Development, (916) 323-3183. Joe Carreras, Southern California Association of Governments, (213) 236-1856. Ty Schuiling, San Bernardino Association of Governments, (909) 884-8276. Linda Guillis, City of Moreno Valley, (909) 413-3210. Valerie Ross, City of San Bernardino, (909) 384-5057. Marc Brown, California Housing Law Project, (916) 446-9241. SCAG RHNA website: http://api.ucla.edu/rhna/index.cfm

Taxpayer organizations recently lost two lawsuits against the City of Los Angeles alleging violations of Proposition 218. In its first interpretation of the initiative, the California Supreme Court held that the city's apartment inspection fee was not subject to the voter approval provisions of Proposition 218. In the other case, an appellate court ruled that the city's water service fees and the transfer of money from the water fund to other funds were not subject to Proposition 218. In the apartment inspection fee case, the state Supreme Court chose a fairly narrow interpretation of Proposition 218, the 1996 Right to Vote on Taxes Act, which added article XIII D to the California Constitution. The ruling pleased many cities, about 90 of which filed amicus briefs in the case, but angered taxpayer groups, which said the court created a loophole for local government. In July of 1998, the City Council approved an apartment inspection program intended to combat slum housing. To fund the program, the council levied a $12-a-year fee on each of the city's approximately 750,000 apartments. Apartment owners filed a lawsuit, but lost at the trial court level when the judge ruled that the fee was not subject to Proposition 218 because it applied only to owners of rental units. However, a unanimous three-judge panel of the Second District Court of Appeal reversed the lower court, saying the charge was a user fee for property related service and, thus, subject to Proposition 218 (see CP&DR Legal Digest, October 1999). The city had argued that it could avoid putting the fee to voters because the levy was a regulatory charge on a business, not a tax on property. In a 5-2 decision, the California Supreme Court overturned the appellate court. Writing for the majority, Justice Stanley Mosk said neither the apartment owners nor the city were entirely correct. "The mere fact that a levy is regulatory (as this inspection fee clearly is) or touches on business activities (as it clearly does) is not enough, by itself to remove it from article XIII D's scope," Mosk wrote. "But the city is correct that article XIII D only restrict fees imposed directly on property owners in their capacity as such. The inspection fee is not imposed solely because a person owns property. Rather it is imposed because the property is being rented. It ceases along with the business operation, whether or not ownership remains in the same hands. For that reason, the city must prevail." Mosk dissected the language of Proposition 218, noting a crucial difference between a fee imposed on an incident of property ownership, versus a fee on a person or parcel as an incident of property ownership. " axes, assessments, fees and charges are subject to the constructional strictures when they burden landowners as landowners. The ordinance does not do so: it imposes a fee on its subjects by virtue of their ownership of a business — i.e. because they are landlords," Mosk wrote. "What plaintiffs ask us to do is alter the foregoing language — change ‘as an incident of property ownership' to ‘on an incident of property ownership.' But to do so would be to ignore its plain language meaning — namely, that it applies only to exactions levied solely by virtue of property ownership. We may not interpret article XIII D as if it had been rewritten." Chief Justice Ronald George, and Justices Joyce Kennard, Kathryn Werdegar and Ming Chin joined Mosk. Justice Janice Rogers Brown issued a dissent that was joined by Marvin Baxter. "In my view, the voters did not intend the courts to look any further than a standard dictionary in applying the terms of article XIII D," Brown wrote. "The dictionary defines an ‘incident' as ‘something incident to something else,' that is ‘dependent upon or involved in something else.' In other words, if the imposition of a fee depends upon one's ownership of property, it comes within the purview of article XIII D unless otherwise excepted." The water fees case was more clear cut, as a unanimous three judge panel of the Second District Court of Appeal upheld Ronald Sohigian's decision that a taxpayers' group had no grounds for its lawsuit. "Appellants contend that the charges imposed for water service in Los Angeles are in reality special taxes, imposed as an incident of property ownership, and therefore, require voter approval. We disagree," Justice Gary Hastings wrote for the court. "The usage rates are basically commodity charges which do not fall within the scope of Proposition 218. … The charges for water service are based primarily on the amount consumed, and are not incident or directly related to property ownership." The court also held that the city charter authorized the City Council to transfer water fund surpluses to a reserve fund, and then to the general fund. The Cases: Apartment Association of Los Angeles County v. City of Los Angeles, No. S082645, 01 C.D.O.S. 209, 2001 Daily Journal D.A.R. 237, filed January 8, 2001. Howard Jarvis Taxpayers Association v. City of Los Angeles, No. B137639, 00 C.D.O.S. 9465, filed November 1, 2000, ordered published November 29, 2000. The Lawyers: For Apartment Association: Trevor Grimm, California Apartment Law Information Foundation, (213) 380-0303. For Jarvis: Timothy Bittle, (916) 444-9950. For L.A. in apartment case: Miguel Dager, deputy city attorney, (213) 847-0165. For L.A. in Jarvis case: Fay Chu, deputy city attorney, (213) 367-4580.