Four months after making a sweeping proposal to re-orient the state's infrastructure investments around "smart growth" principles, State Treasurer Phil Angelides — a former "New Urbanist" developer -— is moving forward with at least three different proposals to change the selection criteria in state bond and tax credit financing programs. "It's a new way of thinking for the state and the public finance community," Angelides said. "But it's not irresponsible and it is creditworthy." Angelides has already changed the criteria for doling out the state's low-income housing tax credits, and he contended that the smart growth criteria he has added is now playing an important role in determining which low-income housing projects receive the tax credits. He is moving forward with similar changes in the state's mortgage revenue bonds for both single-family and multi-family projects, which are administered by the California Debt Limit Advisory Committee. Finally, Angelides has proposed a dramatic shift in the proposed criteria for doling out $475 million in funds newly allocated to the state infrastructure bank to reflect smart growth principles as well as traditional job creation priorities. The bank's oversight committee — which is controlled by Gov. Gray Davis, not by Angelides — is scheduled to consider the Angelides changes at a meeting in October. Angelides also said he hopes to propose legislation next year that will embed smart growth principles in the state's five-year Capital Outlay Program, mandated under a bill passed this year by the Legislature. "Smart growth" is defined by its advocates as a series of policies that encourages new development in existing communities, preservation of farmland and other open space, and the creation of more transit- and pedestrian-friendly neighborhoods and business districts. Not surprisingly, smart growth activists in the state are enthusiastic about Angelides' initiative. The state treasurer began his smart growth push in June, with the release of a proposed "smart investments" strategy in his office's annual debt affordability report. Angelides, a veteran Democratic Party activist, said he wants to seize on political leaders' and voters' recognition that the state needs to invest more money in infrastructure. "I give the Chamber of Commerce and the California Business Roundtable credit for raising the issue," he said. "But there was a hole in the discussion. I began to think that it wasn't just about how much money. It's about how we want to grow." Before winning election last year, Angelides was best-known as the developer of Laguna West in suburban Sacramento — the first New Urbanist development actually built on the West Coast. His June report represented a radical departure from the approach of past state treasurers. In releasing the legally mandated "debt affordability report" — a sober recitation of the state's current bonding capacity — Angelides retitled the report "Smart Investments" and added a high-profile section calling for a dramatic shift in the state's approach to public infrastructure investment. Among other things, he said state investments should move beyond "‘magic' budget percentages and project laundry lists investments support livable communities, sustainable development, and sound environmental practices." "Smart Investments" was short on specifics, but Angelides quickly began to use his powers as treasurer — most of which were created during the '70s and '80s while former Assembly Speaker Jesse Unruh's was treasurer — to move the idea forward. Angelides first revised the criteria used by the California Tax Credit Allocation Committee to select recipients for low-income housing tax credits. The competition for tax credits is highly competitive, with four applications for every project selected. Angelides' predecessor, Matt Fong, selected the winners by lottery. Angelides replaced that system with a lengthy set of criteria in which project density, linkages with mass transit, and child-care programs are taken into account. He claims that the winners — which were announced in late September — included many projects that scored high on these "sustainability" criteria. He is now moving forward to embed smart growth principles in the selection criteria for a variety of state loan programs administered by the California Debt Limit Allocation Committee, especially housing mortgage revenue bonds. But Angelides biggest immediate challenge appears to be to win over the governor's staff in order to incorporate smart growth principles into the funding criteria for the state infrastructure bank. Established several years ago, the bank never received any state appropriations until the 1998-99 fiscal year, when it got $50 million. In the ‘99-2000 budget, however, Gov. Gray Davis and the Legislature gave the bank an additional $425 million — thus increasing the significance of its selection criteria. The bank was created partly to give a financial incentive to local governments to follow the state's own growth management priorities. However, when the criteria were first drafted in April — mostly by staff holdovers from the Wilson Administration — they reflected conventional economic development and public finance priorities. The most important criteria were job creation, leveraging of private funds, and whether the project was ready to proceed. Angelides, however, has proposed a dramatic revision in which environmental protection, land use, and efficient use of infrastructure would be the most significant measurement. Job creation and leveraging would be only half as important as under the staff proposal, while readiness would have no significance at all. (See chart.) It is hard to say whether Davis — who is always cautious and often mysterious — will embrace the Angelides proposal. The treasurer said he has "spoken briefly" to the governor. Smart growth advocate Steve Sanders of the California Futures Network said he has met with Finance Director Tim Gage and Trade & Commerce Secretary Lon Hatamiya to promote the infrastructure bank revisions and received positive feedback. Angelides has also pitched his "smart growth" ideas to Davis's infrastructure commission, which is co-chaired by Lt. Gov. Cruz Bustamante and Business, Transportation, and Housing Secretary Maria Contreras-Sweet. However, in its interim report, issued in August, the infrastructure commission did not specifically embrace "smart growth" principles. Indeed, in its proposed recommendations for bond criteria, the infrastructure commission proposed placing priority on need, impact on public health and safety, economic impact, and — the only item linked to Angelides agenda — impact on quality of life. The infrastructure commission's transportation subcommittee called for investment in multi-modal transportation systems and a high-speed rail network but did not specifically call out "smart growth" ideas. Two other parts of Angelides' proposal will have to wait until next year. The first is his idea to have the state's Capital Outlay Program support infrastructure projects only if they have been vetted through a regional planning process. Angelides has been discussing this topic with, among others, Assemblyman Tom Torlakson, D-Antioch, one of the Legislature's leading advocates of local governance reform. The second is a proposed ballot initiative that would eliminate the two-thirds voter approval requirement for local general obligation bond issues and allow for simple majority voter approval. Angelides has committed himself to raising $5 million in campaign funds for that initiative.

A lawsuit challenging the San Joaquin County Local Agency Formation Commission's approval of a large annexation has been reinstated by the California Supreme Court. The state's high court overturned a decision by the Third District Court of Appeals against the Sierra Club and the San Joaquin Valley Farm Bureau. The appellate court ruled that the environmentalists and farmers did not exhaust their administrative remedies because they had not requested a LAFCO rehearing. Thus, under the "Alexander rule," they did not have standing to sue, the court ruled. At the same time, two of the three justices on the appellate panel urged repeal of the 56-year-old Alexander rule. A unanimous state Supreme Court did just that, calling the Alexander rule unnecessary and often-overlooked. The controversy in this case started in 1996, when the San Joaquin LAFCO approved annexation of an island in the Sacramento-San Joaquin Delta to the City of Lathrop, about 10 miles south of Stockton. In certifying the EIR, LAFCO adopted a statement of overriding considerations. Califia Development Group sought annexation to accommodate the proposed Gold Rush City — a 5,800-acre project that includes two theme parks, nine "themed villages," a golf course, and a shopping district. The Lathrop City Council adopted both a specific plan and an EIR in February 1996 and annexed the land later that year. The project is nearly as big as the existing city. Project proponents contend Gold Rush City will attract up to 8 million visitors annually and create 15,000 to 20,000 new jobs in San Joaquin County. The Sierra Club, local farm bureau and others sued LAFCO. They alleged that substantial evidence to support the overriding considerations was lacking, and that LAFCO failed to follow statutory provisions for the annexation. The trial court granted a motion to dismiss because the project opponents had not sought a rehearing before LAFCO. An appellate court affirmed the decision based on the Alexander rule. The Alexander rule emerged from a personnel case in which two fired state employees sought a court hearing, rather than a rehearing before the State Personnel Board. The California Supreme Court ruled that where a rehearing is permitted under law, it is a necessary step in exhausting administrative remedies. Alexander v. State Personnel Bd. (1943) 22 Cal.2d 198. Writing for the unanimous court, Justice Kathryn Werdegar said the Alexander rule "serves little practical purpose and is inconsistent with procedure in parallel contexts." In cases where circumstances have not changed and there is neither new evidence nor new legal arguments, the requirement to seek rehearing is a waste of time, the court said. "The likelihood that an administrative body will reverse itself when presented with only the same facts and repetitive legal arguments is small. Indeed, no court would do so if presented with such a motion for reconsideration, since such filing is expressly barred by statute," Werdegar wrote. Furthermore, although the Legislature has never specifically repealed the Alexander rule, its continued applicability was unclear to many people, the court said. Some legal practice guides say the Alexander rule is no longer good law, or the mandate to seek rehearing is no longer commonly applied. " ven an alert legal practitioner could overlook the necessity of seeking rehearing as a condition of judicial review …," Werdegar wrote. The court rejected the LAFCO's argument that recent action by the state Legislature affirmed the Alexander rule. The court said there is not enough evidence to determine legislative approval, or disapproval, of the Alexander rule. "As best we can surmise, the considered public policy judgement of the Legislature is that the exhaustion of administrative remedies doctrine is adequately safeguarded by the requirement that the administrative proceedings must be completed before the right to judicial review arises," Werdegar wrote. Still, in cases where there is new evidence, changed circumstances or new legal arguments, parties should seek a re-hearing. Parties also should seek a new hearing to note "errors or omissions of fact or law in the administrative decision itself," the court ruled. The Case: Sierra Club v. San Joaquin Local Agency Formation Commission, No. S072212, 99 C.D.O.S. 6719, Daily Journal D.A.R. 8553, filed August 19, 1999. The Lawyers: For Sierra Club: Susan Brandt-Hawley, Brandt-Hawley & Zoia, (707) 938-3908. For LAFCO and Califia Development: Steven Herum and Thomas Terpstra, Herum, Crabtree, Dyer Zolezzi & Terpstra, (209) 472-7700.

Although Democrats took control of state government this year for the first time since the early 1980s, the legislative session did not produce a batch of liberal bills. In fact, with regards to land use, environmental regulation and local government finance, the session may have been most remarkable for what lawmakers did not do. The Legislature approved no major changes to the California Environmental Quality Act. Transportation and affordable housing bonds died. Proposals to reduce the voting requirement from two-thirds to majority for local transportation-related sales tax measures and local school bonds also failed to advance. However, the Legislature did place on the March 2000 ballot a $2.1 billion parks bond, a $2 billion water resources bond, and a$350 million library bond. Lawmakers also strengthened affordable housing laws, approved a measure intended to prevent local governments from competing for major retailers, and closed a loophole in Marks-Roos bond financing rules. Gov. Davis has until Oct. 10 to decide on the bills. Local Land Use Two of September's most interesting bills reduced local land use control, but one of them received a quick Davis veto. The governor rejected a last-minute measure to prevent cities and counties from approving big-box stores with grocery and pharmacy departments. He had not taken action on another bill that moved control of a large, unincorporated island from the City of Redlands to developer-friendly San Bernardino County. Wal-Mart and its big-box brethren were targets of legislators' gut-and-amend tactics. AB 84 by Assemblyman Brett Granlund (R-Yucaipa) originally addressed political committees. But only three days before the Legislature's September 10 deadline, Assembly Speaker Antonio Villaraigosa and Assemblyman Richard Floyd (D-Wilmington) removed the original text and inserted new language. As amended, the measure prohibits cities and counties from approving a retail store of more than 100,000 square feet that has more than 15% of floor space dedicated to nontaxable merchandise. The bill supposedly gives relief to local agencies that must provide expensive public safety and roads to such stores, prevents big box retailers from pitting communities against one another, and discourages development on the urban fringe. But the measure is aimed clearly at Wal-Marts with grocery sections, Sam's Club, and Costco. Those stores typically are larger than 100,000 square feet and have substantial portions dedicated to food and drugs, which are nontaxable. Organized labor and several large grocers, including Safeway, Ralph's and Stater Bros., backed the measure. Big boxes' employees are often nonunion, while most supermarket jobs are union. Traditional supermarkets have struggled to compete with the all-in-one discounters. (See also Local Watch, page 2.) Floyd told the Los Angeles Times that warehouse stores should be contained "before these bastards take over the whole country." In his veto message Davis conceded that "the fiscal arrangement between state and local governments" encourages cities and counties to choose retail development over manufacturing and housing. "But," Davis said, "matters largely involving local land-use and zoning decisions should not be preempted by the Legislature and Governor without thoughtful deliberation." The Redlands measure, AB 1553 by Thomas Calderon (D-Montebello), would preempt a local land-use and zoning decision. (See CP&DR Local Watch, November 1998; CP&DR Legal Digest, November 1997.) Majestic Realty, headed by influential developer Ed Roski Jr., wants to build a shopping mall and other retail outlets on a 1,200-acre unincorporated island known as "the doughnut hole." Under state law, Redlands, which wants to annex the territory, has the final say because the property lies within the city's sphere of influence. However, Redlands earlier tried to make a deal with a different developer, and Majestic has resisted annexation. The bill requires the San Bernardino Local Agency Formation Commission to remove the doughnut hole from Redlands' sphere of influence, and allows a county service area to provide water and sewer, even though Redlands has facilities nearby. This bill is not the Legislature's first foray into local LAFCO decision-making, as lawmakers have made several attempts this decade to adjust spheres of influence and special district boundaries. A Senate analysis stated, "AB 1553 invites the Legislature to intervene in a specific land use squabble, as if it were some Super-LAFCO." Bonds The largest bond measure to qualify for the next state ballot was Villaraigosa's AB 18, a $2.1 billion parks proposal, and Davis signed the bill. Villaraigosa's measure focuses on urban parks, with $826 million earmarked for local parks, zoos, playgrounds, trails and ball fields. The $1.97 billion water bond, AB 1584 by Assembly Mike Machado (D-Linden), contains money for a large mixture of programs, including aquifer storage, flood protection, watershed protection, water system repairs, conservation and river cleanup. The bond earmarks no funding for new reservoirs, although the measure's supporters say all the programs combined equal one moderate-sized dam. Senate President Pro Tempore John Burton's transportation bond package did not make the ballot. Burton initially proposed four $4 billion bonds spread over six years. He later condensed SB 3 to one $8 billion bond. The measure, which needed a two-thirds vote in both houses, passed the Senate 32-8, but Republicans blocked it in the Assembly. They argued for a pay-as-you-go approach. Lawmakers might revive a transportation bond when they reconvene in January. Housing Although housing bonds failed, SB 948 by Senator Richard Alarcon (D-Los Angeles) amends various state regulations, including the housing element law. Among other things, the measure: broadens the anti-NIMBY law by tightening the findings a city or county must make to deny an affordable housing project; lengthens rent-control provisions; requires local agencies to decide on an affordable housing project within 90 days of EIR certification; allows lawsuits challenging housing element adequacy at any time — not just shortly after adoption — so long as the local jurisdiction receives 60 days to correct deficiencies; clarifies density bonus requirements. Farmworker housing is the subject of AB 1505 by Assemblywoman Denise Ducheny (D-San Diego). The measure requires local general plans to identify adequate sites with public services for housing agricultural employees. The law also allows development of farmworker housing on Williamson Act parcels of no more than 5 acres, within certain requirements. Local Government Finance Lawmakers approved a small package of relief bills along with the budget in June. But a proposal to phase out the property tax shift from cities and counties to schools (ACA 17) became a two-year bill. A bill to eliminate competition among cities and counties for sales tax-producers did pass and received Davis's signature. AB 178 by Assemblyman Tom Torlakson (D-Antioch), prohibits local governments from offering incentives — such as tax rebates, discount real estate and low-interest loans — to a big box retailer relocating within a 25-mile radius, or to an auto dealer within 40-miles. Local governments may offer incentives only if the "winning" city or county agrees to share sales tax revenue with the "losing" jurisdiction. AB 1511 by Dean Florez (D-Shafter) closes a loophole that allows local agencies to issue Marks-Roos bonds for projects outside their jurisdiction. The measure prohibits a joint powers authority that includes a mutual water company from issuing the bonds. Florez pursued the bill after the cities of Waterford and San Joaquin created a JPA with a developer's water company for the purpose of issuing bonds for a San Bernardino County subdivision. Williamson Act Several bills made adjustments to the Williamson Act. AB 1480 limits mining on Williamson Act property and alters procedures for swapping Williamson Act land for conservation easements. SB 985 prohibits the building of artificial lakes created as subdivision amenities or as waterskiing facilities on Williamson Act land. The bill also forbids land swaps for property under the Super Williamson Act. AB47 guides Williamson Act cancellation fees to the Agricultural Land Stewardship Program Fund, rather than the state's general fund. Other Legislation o AB 1630 appropriates $320,000 to the Los Angeles LAFCO to study the feasibility of detaching San Pedro, Wilmington and Harbor City from the City of Los Angeles. o AB 1473 requires the governor, beginning in 2002, to submit annually a five-year capital improvement program and proposed funding sources. o AB 1555 expedites island annexations — except certain large islands, gated communities, Laguna Beach's Emerald Bay, and Redlands' doughnut hole. o AB 597 requires Caltrans to develop flexible highway design standards. The measure is aimed at highways that also serve as city streets. o SB 47 reenacts and modifies the state Superfund law. The measure establishes a mechanism for state cleanup funding, but provides no money, and it requires the state to pursue many responsible parties, not only those with deep pockets. o AB 497 lets the attorney general enforce violations of the Community Redevelopment Law. o SB 807 lets LAFCOs approve water service by cities and special districts outside their jurisdictions in response to threats to public health or safety. o SB 216 creates the San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy to acquire and manage public lands. o SB 754 creates the Los Angeles River Conservation and Restoration Commission to prepare a conservation and restoration plan. o AB 1229 broadens the California Farmland Conservancy Program.

The Ninth Circuit U.S. Court of Appeals has rejected a takings claim and request for a jury trial filed by a property owner in Washington who disputed a zoning decision made under that state's Growth Management Act of 1990. It was the Ninth Circuit's first takings decision since the U.S. Supreme Court voted 5-4 to uphold a takings decision and jury award of damages in May. In City of Monterey v. Del Monte Dunes at Monterey Ltd., 119 S. Ct. 1624, the high court broke new ground by allowing an aggrieved landowner to plead his case in front of a jury, which issued a $1.45 million damages award. (See CP&DR Legal Digest June and July, 1999.) But the Ninth Circuit said Del Monte Dunes does not establish a right to a jury on every takings claim. The appellate court noted the "facts and procedural posture in Del Monte Dunes were extreme," and quite different from the case at hand. Still, writing for the Ninth Circuit's unanimous three-judge panel, Judge M. Margaret McKeown noted, "Frankly, we have some difficulty parsing the distinctions laid out by the Supreme Court concerning when a jury trial is required. We find ourselves in uncharted territory with a map for related but different waters." The Washington case was brought by the Buckles family, which owns 10 acres in unincorporated King County. The family purchased the property in 1974 and has occupied its single-family residence, guest house and barn since 1979. A salmon-spawning stream crosses the property. The land is in the midst of a large rural residential area, although some small commercial uses abut the Buckles' property and other neighboring properties were zoned industrial or commercial. When King County began widespread rezoning pursuant to the Growth Management Act (GMA) in 1994, it proposed changing the Buckles' zoning from Residential with a one-acre minimum lot size, to Residential with five-acre minimums. The Buckles lobbied the King County Council and had the zoning changed to Rural Neighborhood, which allows limited commercial uses. But the King County Comprehensive Plan was challenged on numerous grounds, including a claim that the Buckles' last-minute rezoning violated the GMA's public participation requirements. The Growth Management Hearings Board for Central Puget Sound, established by the GMA to decide appeals, ruled that the rezoning violated the public participation mandate. The hearings board sent the comprehensive plan back to the King County Council, which conducted public hearings and settled on the residential five-acre zoning for the Buckles' lot. The Buckles challenged that decision at the hearings board, but lost. They then filed substantive and procedural due process claims against King County and the hearings board members under the federal Civil Rights Act, 42 U.S.C. §1983. They later added a takings claim under the federal and state constitutions. Circuit Court Judge John Coughenour dismissed the suit against the hearing board members and issued summary judgement for King County. On appeal, the Buckles argued that changing the zoning from commercial to residential was an unfair downzoning, and placed greater restrictions on them than on neighboring property owners who have commercial uses. They argued that the King County rezoning did not advance a legitimate county interest, was a taking without just compensation, and that a jury should decide the dispute. But the Ninth Circuit said the Buckles ignored the facts. Their lot is part of a large tract zoned as residential and has never been used for commercial purposes, the court noted. Furthermore, the Rural Neighborhood zoning was never final and was the product of a GMA violation. "The county cannot ‘take' what the Buckles did not have. The zoning designation for limited business uses was never final and Buckles ended up exactly where they started — residential use," McKeown wrote. The court cited landmark cases to determine that a taking did not occur. "A land use regulation does not constitute a taking if the regulation does not deny a landowner all economically viable use of the property and if the regulation substantially advances a legitimate government interest," McKeown wrote. She cited Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987), and Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). The Buckles did not suffer a loss because even their own appraiser valued the property at three times its 1974 purchase price. Furthermore, the court concluded, drawing a line at existing commercial uses in a rural area is a legitimate governmental activity. As for a jury trial, the court said: "Under Del Monte Dunes, a plaintiff has the right to a jury trial on the ‘predominately factual question' of ‘whether a landowner has been deprived of all economically viable use of his property.'" Again, that was not at issue with the Buckles. The Del Monte Dunes case was dissimilar in that the City of Monterey five times rejected proposals that appeared to comply with city-approved zoning for the property. In this case, the Buckles argued that their zoning was inconsistent with zoning on surrounding properties, the court said. The court rejected the procedural and substantive due process takings claims and upheld the absolute immunity of hearings board members. "If Board members were not protected by absolute immunity, we predict that many losing parties would turn around and sue the Board members in a damages action instead of appealing the Board's substantive decision to the Superior Court. … Permitting suits against the quasi-judicial decision makers would discourage knowledgeable individuals from serving as Board members and thwart the orderly process of judicial review," McKeown wrote. The Case: Bruce Buckles v. King County, No. 98-35270, 99 C.D.O.S. 7504, 1999 Daily Journal D.A.R. 9542, filed September 10, 1999. The Lawyers: For Buckles: Richard M. Stephens, Groen & Stephens, Bellevue, Washington. For King County, H. Kevin Wright and Darren Carnell, King County Prosecuting Attorney's Office, Seattle.

It's no surprise that Ephrain Corona didn't have time to talk when I called. The immigrant owner of a five-store Mexican roasted chicken chain based in Oxnard was too busy growing his business. What Corona undoubtedly realizes is that the time is ripe to cash in on California's fastest growing consumer segment: foreign immigrants. Joining this growing group of entrepreneurs are a few developers and a handful of planning departments – mainly redevelopment agencies – all of whom may have found the best hope yet to juice inner city and small town revitalization efforts. On drawing boards in many California cities are a host of so-called "mercado" developments – shopping centers built on sites of abandoned or under-performing commercial properties in immigrant neighborhoods. Currently, plans for Latino-oriented shopping centers are being studied in Escondido, Oceanside, San Jose, and Long Beach, to name a few. And plenty of businesses want to fill these centers, including the likes of Corona's El Pollo Norteño. Considering the explosive growth of this immigrant-based economy, it's no wonder more organized developers with larger-scaled projects are entering the arena. According to Monique Nordholm, of Santa Barbara-based Hispanic Business magazine, Hispanic buying-power jumped 30% from 1992 to 1997, rising from $204 billion to $266 billion annually. Although the Latino community's growing middle-class accounted for much of this growth, immigrants represent an important piece. Latino centers have only recently become part of a formal shopping center inventory. Asian-oriented centers have thrived in Orange County and Los Angeles's near-east suburbs for years. Bridgecreek Development is one of the leaders. The 23-year-old, Westminster-based Bridgecreek is best known for developing the 300-store Asian Garden Mall in the heart of Orange County's Little Saigon. John Duong, one of Bridgecreek's vice presidents, says that the firm is retooling to expand into other underserved market segments — namely, the Latino market. Bridgecreek's first attempt at crossover made a big splash. On September 16, Duong hosted none other than Gov. Gray Davis, who attended the grand opening of the new San Pablo International Marketplace in the East Bay. Formerly the El Portal Shopping Center that once housed a Safeway, the 52-acre, 500,000-square-foot center in the East Bay is more than a symbol of the alternative immigrant economy's importance. It is perhaps the first attempt to service a spectrum of immigrant communities, and a test case of local government reorienting redevelopment efforts by tapping into the immigrant economy. The San Pablo Redevelopment Agency pitched $2.5 million into the project, which is a cornerstone for the aging community's downtown revitalization efforts. Anchoring the San Pablo center is the newest Asian-oriented Ranch 99 supermarket. Bridgecreek partnered in with Ranch 99 years ago in Orange County to open the first of the supermarket chain's 30 stores. At the other end of the San Pablo mall is the 16-screen Maya Cinema. Moctesuma Esparanza, an East Los Angeles cable television provider and movie producer joined in this cross-cultural retailing venture. Esparanza hopes to launch five Maya cineplexes per year, primarily in communities with large Latino populations. Meanwhile, Bridgecreek, anticipating the success of its recent expansion to the Bay Area from its Orange County base, has plans to go nationwide. That international mercados have arrived in California's inner city neighborhoods won't surprise urbanites, who are accustomed to multiculturalism. But it still may be difficult for most Californians to fathom the demographic change in California's farmbelt. From Brawley to Biggs, the shift from a traditional small-town American society to a Latino and/or Asian one has fundamentally changed the culture and economy. For instance, in Delano, a Kern County agricultural town that was ground zero for the United Farm Workers 30 years ago, the population is about 60% Latino, and 20% Filipino. And just as the flavor and language of the neighborhoods have changed, so has the business activity on Main Street. "We have no chain stores like Rexall or Woolworth," says Keri Cobb, city planner in Wasco. "Instead, we have many Hispanic-owned businesses, many of the 99-cent type. A new store opened recently that sells everything from wedding dresses to chickens." A market area ripe for international shopping centers? Maybe. But hungry as farmbelt towns are for new retail development, few have been approached by developers like John Duong. Nor are many of the towns actively pursuing such developers. Cobb, for example, says that most of Wasco's economic development efforts are geared towards traditional code enforcement and sign control issues. "We mainly work on educating local merchants on the importance of signage and color to retain an attractive downtown setting." Cultural preferences aside, it should not be long before immigrant-oriented developers like Bridgecreek begin knocking on doors of farming towns. Grocery chains like Los Angeles-based Tres Sierras or Bakersfield's three-store Mercado Latino are likely anchors for international centers in smaller agricultural towns. If they partner with a godfather like Bridgecreek, we just may see the latest in inner-city retail development coming home to the farm. And if Duong is lucky, he might get Ephrain Corona to slow down long enough to come to the phone. Stephen Svete, AICP, is a principal in the Ventura-based consulting firm of Rincon Consultants, Inc. Hispanic-owned businesses: U.S. total 1980: 263,720 2000: 2,017,803 2020: 3,341,801

Citizens and organizations with gripes about proposed developments are continuing to win more big lawsuits based on the California Environmental Quality Act than they are losing. According to a CP&DR analysis, petitioners — who these days range from environmentalists to public agencies in dispute with other public agencies — have won 14 of 25 significant, published CEQA cases since 1996. And that record appears to be just fine with the state Supreme Court, which shows no interest in CEQA these days. Nearly 30 years have passed since California lawmakers and then-Gov. Ronald Reagan approved the California Environmental Quality Act, the law that sets the ground rules for studying and offsetting development's effects. But the law still remains open to interpretation, and environmental groups continue to use CEQA to halt government approvals of development. Since CEQA's passage in 1970, scores of appellate court cases and several state Supreme Court decisions have interpreted the law. Planners, lawyers and scientists now have decades of experience. But, even counting a late-August ruling for the City and County of San Francisco (see Legal Digest, page 7), groups and citizens filing CEQA lawsuits have compiled a winning appellate court record in recent years. Those victories stem from the fact that only a few of CEQA's fundamentals — such as when to perform an environmental impact report and when to go with a lesser degree of scrutiny — are clear cut, say CEQA practitioners on either side of the issues. While environmentalists are winning more often than not, a California Supreme Court that ranks as conservative by most standards has shown almost no inclination in recent years to overturn rulings favorable to environmentalists. In fact, the state's high court has issued only one CEQA ruling in the last four years (a 1997 decision that said de-listing an endangered species is not subject to CEQA review) and there are no CEQA cases pending at the court. In the 1970s, the state Supreme Court issued a number of rulings to define the law. During the recession of the early 1990s, the Deukmejian-appointed high court took a few cases to stem the tide of environmental litigation. But CEQA evidently is not a high priority for the court these days. The practice of CEQA law has gone mainstream since the 1970s and early 1980s, when only true believers fought to protect the flora and fauna from residential and commercial development. Legal practitioners said they are not surprised that people filing the lawsuits are winning more big cases than they are losing. "It's tough to win, but there are lots of agencies that are still confused about CEQA," said Susan Brandt-Hawley, a Sonoma-based attorney who takes CEQA cases statewide. "There are lots of open issues in CEQA." James Moose, of Sacramento's Remy, Thomas & Moose, agreed that CEQA "remains an evolving area of the law." "Petitioners can still win because it's impossible to predict what courts will do," said Moose, whose firm often defends government agencies. He said he has lost cases he felt positive about, and won cases where he was less sure. That turn may seem odd considering the large number of former prosecutors sitting on appellate court benches in California. "I assumed that every appellate court judge under 60 is a conservative Republican, but some of them are greener than you might think," Moose said.. Michael Zischke, of Landels Ripley & Diamond in San Francisco and the author of a CEQA practitioner's guide, also said the law has "lots of gray areas." Many nooks and crannies of CEQA remain only partially explored. Zischke, who frequently defends developers, pointed to the use of master EIRs for development that occurs over a long period, the treatment of historic properties, and determining an "environmental baseline" as three areas that remain less than black and white. Moose said case law is unclear on what precisely is required in an alternatives analysis. Also, what CEQA means for projects that decrease habitat for endangered species is another area that remains lightly litigated. What has changed since the 1980s, said Brandt-Hawley, is that government agencies now recognize that environmental review of development is something they cannot avoid. In the 1980s, environmentalists were still using the courts to establish the need for serious scrutiny of a project's effects, she said. Still, Brandt-Hawley warned not to underestimate CEQA's complexity. "What continues to surprise me is that most cases that I handle, even if it looks straightforward at the beginning, it turns out to have twists that I never expected," she said. In fact, one of her cases has opened a whole new area of CEQA law. In Stanislaus Natural Heritage Project v. County of Stanislaus, (1996) 48 Cal.App.4th 186, the court tossed out an EIR that deferred analysis of where the Diablo Grande subdivision and golf resort would get its water, and how transferring water would affect the environment. In July, Brandt-Hawley's partner, Rose Zoia, won the first round of Diablo Grande II when a Stanislaus County superior court judge said a supplemental EIR still failed to adequately address water issues. Moose said Diablo Grande I was very significant because it has led to a trend of working water planning into EIRs. Previously, EIRs only said the local water district had, or did not have, adequate resources to serve a proposed development, but provided no further analysis. The muddy waters of CEQA likely mean that litigation will continue for the foreseeable future. Another factor is the ability of many attorneys to turn themselves into environmental practitioners to fight a project they personally dislike. A decade or two ago, a small cadre of lawyers gained most environmental victories. But of the 14 major victories for petitioners in recent years, only one lawyer, Brandt-Hawley, has more than one win. She has won three major cases since 1996— shutting down Diablo Grande, forcing Oakland to prepare on EIR before demolishing an historic industrial building, and getting an EIR for a Monterey County dam declared inadequate. This summer, Brandt-Hawley convinced San Diego County Superior Court Judge Judith McConnell to halt work on the Padres new stadium until the city completes an EIR. In August, Brandt-Hawley won a CEQA-related case on non-CEQA grounds at the state Supreme Court. (See Legal Digest, page 6.) The court ruled that parties challenging the overriding considerations adopted by a local agency formation commission need not seek a LAFCO rehearing before filing suit. Contacts: Susan Brandt-Hawley: (707) 938-3908. James Moose, (916) 443-2745. Michael Zischke, (415) 512-8700.

In the San Diego suburb of Santee, it's the old houses versus open space controversy — but with a twist. In November, Santee voters will decide the fate of a 2,988-lot subdivision already approved by the City Council. The twist comes in the form of an advisory measure on the same special election ballot that asks if the City Council should try to buy the property as permanent open space. The City Council approved the subdivision, golf course and hotel for the Fanita Ranch in May, but opponents of the development then qualified a referendum for the ballot. The referendum on the City Council's action is standard-issue, which could allow the advisory measure placed on the ballot by the City Council to steal voters' attention. The measure asks whether the City Council should pursue purchasing the Fanita Ranch as permanent open space if voters reject the proposed development. The advisory measure says the land purchase could result in a tax increase of up to $150 per residential parcel. The exact amount and style of assessment would have to be decided later. Neither the developer nor project opponents supported the advisory measure because both fear the measure will cloud the referendum. "This is certainly the largest project in the city's history, and the largest that we ever will experience," said City Development Services Director Doug Williford. The Fanita Ranch covers about one-quarter of the city and contains the majority of the remaining undeveloped property in the city of 57,000. The fate of the 2,589-acre Fanita Ranch has been a topic of discussion for decades, with development proposals coming and going. All the while, residents of this community about 15 miles east of downtown San Diego used the site's rugged hills for hiking, mountain biking and even camping trips. Now, the 19-year-old city is deeply divided. Robin Rierdan, of Preserve Wild Santee, the group behind the referendum, called the project "a betrayal of the general plan and a betrayal of the community." But developer Bill Meyer of Terrabrook contended the project will provide needed homes, fund park upgrades and provide money for Highway 52 widening. "It provides a mix of housing products, from single-family attached to estate lots, so it will provide housing for a wide variety of income levels," Meyer said. Williford characterized the homes as mostly upper-end models. But he pointed to the large number of concessions Terrabrook has made that benefit the city. The specific plan, general plan amendment and tentative map approved by the City Council calls for 2,604 single family homes on lots ranging from 2,500 square feet to one acre, plus 384 multi-family units. The project also calls for a golf course and 100-room inn, and a 15-acre neighborhood commercial center. Development would occur over an eight- to 12-year period, with much of the 1,400-unit central village coming on line in the early stages, Meyer said. Terrabrook would leave 1,259 acres — nearly half the site — as a habitat preserve with a public trail system, Williford explained. Also, the developer must: purchase 210 acres in the city of San Diego for additional habitat; pay a $22 million fee to Santee and provide $6 million worth of off-site park improvements before receiving building permits; and construct three parks, two elementary schools and a fire station. The city will use the $22 million for major projects, which potentially include additional lanes on Highway 52, park improvements, street upgrades and a new library, Williford said. Although growth has its opponents in Santee, voters in November 1998 rejected a proposition that would have limited Fanita Ranch development to 1,277 homes. Rierdan, a project opponent and initiative supporter blamed the defeat of the Santee Traffic Relief Act on being outspent 40-to-1 by development interests. Rierdan said many people had earlier assumed the Fanita Ranch would remain in its natural state because it was part of a Multi-Species Conservation Plan adopted about five years ago by the U.S. Fish & Wildlife Department. However, USF&W officials later approved a plan that allowed partial development of Fanita Ranch in exchange for preserving property elsewhere. An additional 3,000 homes would compound Santee's existing circulation problem, Rierdan said. "Traffic is a huge issue in our community. It takes people hours to get to work. It's a huge issue on our surface streets in town, and it's a huge issue on our freeways," she said. Meyer conceded that traffic is the biggest issue, but he contended that the project will ease highway congestion. A portion of the $22 million fee will leverage state funds and ensure a third lane is built on Highway 52 in each direction between Santee and Interstate 15, even though the Fanita Ranch will add only about 4 % more vehicles, he said. "The bulk of the existing streets in Santee were built assuming a Fanita Ranch of 3,500 to 5,000 units, despite what the opponents might say," Meyer added. Meyer said he appreciated the sentiment behind the advisory measure — a community must pay for its open space — but said he feared the measure could harm Fanita Ranch development at the polls. "The concern I have with it is that voters get confused or get mad when they see something like that and they just vote ‘no' on everything," Meyer said. Meyer said he is happy to have a special election in November for the referendum because he wants an answer as soon as possible. Contacts: Doug Williford, Santee Development Services Department, (619) 258-4100, ext. 170. Robin Rierdan, Save Wild Santee, (619) 448-1779. Bill Meyer, Terrabrook, (619) 455-1234.

In renewing federal hydropower licenses, The Federal Energy Regulatory Commission does not have to consider the hypothetical question of what the environmental conditions would be if the dams in question were never built, the Ninth U.S. Circuit Court of Appeals has ruled. The Ninth Circuit also ruled that while FERC must consider environmental concerns raised by the Interior and Commerce Departments, the commission has final discretion to address those concerns. But in writing the unanimous opinion, Ninth Circuit Judge Kim McLane Wardlaw, went out of her way to make it clear that while FERC's environmental decisions were legal, they were not necessarily good. "We express no opinion on the merits of the Commission's environmental findings," she wrote. "Moreover, we stress that nothing we have said should be construed as eviscerating the pro-environmental object beneath the ECPA amendments." ECPA is the Electric Consumers Protection Act of 1986, which established the relicensing procedures. The ruling came in a case in which several environmental groups and the Interior Department challenged FERC's decision to renew the federal hydropower permits for two dams located on the McKenzie River in Lane County, Oregon. The environmental groups argued that FERC had not conducted adequate environmental analysis under the National Environmental Policy Act, and also had violated sections of the Federal Power Act that require construction of fishways when the Interior and Commerce Secretaries claim those fishways are appropriate. In 1997, FERC renewed the hydropower licenses of the 14.5-megawatt Leaburg Hydroelectric Project, originally built in 1930, and the 8-megawatt Walterville Hydroelectric Project, originally built in 1911, for a period of 40 years. The Leaburg project, which creates a 57-acre backwater, has two fish ladders, only one of which is operational. The Walterville project has no fish screens. Together the projects divert water out of the McKenzie River for a total of 13 miles. The proposal to renew the license called for a slight increase in the project's generation capacity, as well as increases in the water level at Leaburg Lake and minimum flows in the bypasses. The Interior Department and the Commerce Department proposed a total of 56 environmental mitigation measures. FERC adopted some of them, including the construction of fish ladders and fish screens. But the commission rejected many others as being outside the scope of the FPA provisions that give Interior and Commerce the power to require "fishway prescriptions." In considering the license renewals, FERC prepared an environmental impact statement under NEPA. The EIS included five alternatives, including a "no-action" alternative that contemplated a continuation of the existing operation. Other alternatives included issuing the permit with more environmental mitigations, issuing a non-power permit that would have retained the dams without generating power, or retiring the project. After issuing the final EIS, FERC initiated an "alternative dispute resolution" effort in an attempt to reach a negotiated solution. These meetings narrowed the points of controversy to three areas: (1) whether to raise the water level of Leaburg Lake, (2) whether to install diversion dams at the Walterville facility, and (3) what the appropriate minimum flows at the bypasses should be. FERC resolved these issues to its satisfaction, but Interior Secretary Bruce Babbitt subsequently filed modifications requiring more fish screens. Claiming that it was not required to abide by this modification, FERC rejected these additional requirements. Subsequently, the Interior Department, the National Marine Fisheries Service, Oregon Department of Fish & Wildlife, and a group of environmental organizations filed suit. In court, the resource agencies and the environmental groups argued that FERC had chosen the wrong "baseline" scenario for the EIS analysis. They claimed that rather than using existing conditions, FERC should have chosen a theoretical reconstruction of what the McKenzie River would be like at present if the two dams had not been built. The court rejected this argument. Among other things, Judge Wardlaw noted that the congressional conference report on the ECPA in 1986 stated that " n exercising its responsibilities in relicensing, the conferees expect FERC to take into account existing structures and facilities in providing for these nonpower and nondevelopmental values." Even if the dams had not been erected, the valley would not be the same place today as it was before 1911, the court said. Judge Wardlaw wrote: "It defies common sense and notions of pragmatism to require the Commission of license applications to ‘gather information to recreate a 50-year-old environmental base upon which to make present day development decisions.' The past fifty years of development in the McKenzie River Valley has reconfigured its environmental makeup, introducing changes that include differences in land use, water flows, water quality, river geomorphology, fish species composition, and fishery management practices. To the extent a hypothetical pre-project or no-project environment can be recreated, evaluation of such an environment against current conditions at best serves to describe the current cumulative effect on natural resources of these historical changes." The Ninth Circuit panel also rejected the argument of the resource agencies and environmental groups that FERC did not adequately consider the alternative of removing the dams. The resource agencies and environmental groups also argued that FERC, under § 10(j) of the Federal Power Act, must accede to the Interior and Commerce secretaries on "fishway prescriptions." The court disagreed. "The Commission must afford ‘significant deference to recommendations made by state (and federal) fish and wildlife agencies for the "protection, mitigation, and enhancement" of fish and wildlife,'" wrote Wardlaw, quoting from Kelly v. Federal Energy Regulatory Commission, 96F.3d 1482 (D.C. Cir. 1996). "Nevertheless, Congress clearly has ordained that this deference must yield to the Commission's reasoned judgment in those instances where the parties cannot agree." The Case: American Rivers v. FERC, No. 98-70079, and Oregon Department of Fish & Wildlife v. FERC, No. 98-70084, 99 C.D.O.S. 6411. The Lawyers: For American Rivers: Todd D. True and Kristen L. Boyles, Earthjustice Legal Defense Fund, Seattle. For Oregon Department of Fish & Wildlife: Jas Jeffrey Adams, Oregon Department of Justice, Salem, Oregon. For U.S. Department of the Interior: Sean H. Donahue, U.S. Department of Justice, Environmental & Natural Resources Division, Washington, D.C. For FERC: John H. Conway and John S.L. Katz, FERC, Washington, D.C.

The row crops and cattle ranches of San Benito County are remarkably similar to those of Santa Clara County during the pre-Silicon Valley era. But, just as the computer chip has transformed Santa Clara County into one of the world's great industrial centers, it is now exerting influence on rural San Benito County, where land remains available and relatively inexpensive. San Benito's predicament is the result of Santa Clara County's well-known jobs-housing imbalance. And the disparity only gets worse, according to the Silicon Valley Manufacturing Group, which has established a Housing Trust Fund Initiative. Since 1992, Silicon Valley has created 250,000 jobs, but only 50,000 housing units, according to the organization. In a market that is already off-kilter, the result is astronomical real estate prices. The median single family home price in Silicon Valley reached $392,000 this spring. Rental vacancies are rare, and double-digit rent increases are common. San Benito is only the latest county to feel the effects of the Silicon Valley economic machine. Portions of Alameda, Contra Costa, San Joaquin and Stanislaus counties have already been converted into bedroom communities. Silicon Valley workers often must commute an hour, 90 minutes or even longer each way to reach work. "We surrounding counties are Santa Clara County's affordable housing, which means there is no housing for our people," said Rob Mendiola, San Benito County planning director. Public and private agencies are taking a more active role the situation, which some people fear threatens continued economic growth. "Companies are starting to realize one of their biggest problems is attracting qualified employees," said Christina Perry, spokeswoman for the Silicon Valley Manufacturing Group. "They (recruits) get off the plane and look around at housing, and then they get back on the plane as fast as they can." Thus, the organization started the Housing Trust Fund, with the goal of raising $20 million during the next two years. Already, five companies — Adobe Systems, Applied Materials, Inc., Cisco Systems, Kaufman and Broad, and Solectron Corporation — have given $200,000 each. Also, Santa Clara County has provided $2 million and the City of San Jose has pledged $1 million to the trust fund. "When it comes to the housing issue, it's recognized across the board as critical," said Giesela Bushey, the Housing Trust Fund project director. "There's a lot of momentum behind this effort." The official fund-raising campaign is scheduled to begin in October, said Bushey, who was unsure when the first grants would become available. Community Foundation Silicon Valley will actually administer the funds. As designed, the Housing Trust Fund would provide about one-third of its money to each of three areas: housing for homeless and very low-income families, new and rehabilitated affordable rental units, and first-time homebuyer assistance with down payments and closing costs. San Jose increases efforts The City of San Jose, home to slightly more than half of Santa Clara County's 1.6 million residents, also stepped up its housing program this year. The city has financed construction or rehabilitation of about 8,500 units during the last 10 years. Under a program adopted by the City Council in April, the city would finance that many units during the next five years, said Alex Sanchez, the city's housing director. The plan calls for the city to take a larger role in development, rather than acting primarily as a lender. To meet the goal, the city has earmarked an additional $30 million for housing, Sanchez explained. Still, creativity is essential. For every dollar the city has spent in the past 10 years, the city has leveraged four dollars from banks, other government lenders and equity partners. Because of the high cost of development and the large subsidy necessary to make units affordable for low- and moderate-income families, up to six funding sources may be necessary for a single project, according to Sanchez. Redevelopment is a mixed blessing for the city. Cisco Systems, for example, plans 5 million square feet of industrial development during the next 18 months, all in a redevelopment area, Sanchez said. That sort of development will provide a great deal of tax increment to finance housing programs, but it also will demand thousands more workers. Less than two months after San Jose boosted its housing program for the next five years, mortgage lender Fannie Mae announced a multi-billion program for the same time frame. Fannie Mae's House Bay Area program will provide assistance throughout the Bay Area, but it pinpoints San Jose, San Francisco and Oakland. Officials said the program will help 13,000 San Jose residents find affordable homes. Fannie Mae will offer down payment assistance for low- to middle-income families, ease mortgage eligibility requirements for immigrants, loosen underwriting standards for people willing to live near public transportation, and provide other assistance. Too little too late? Even by conservative estimates, Silicon Valley needed 100,000 additional housing units yesterday to satisfy demand. And indicators point to an uglier housing situation. A 1997 study by the Hausrath Economics Group predicted job growth would be more than double the number of new housing units over the next 20 years. Since Hausrath completed the study, Cisco Systems announced plans for a 400-acre, 20,000-employee campus in south San Jose's Coyote Valley. In the City of Mountain View, in northern Silicon Valley, the 1992 general plan identified 1.5 jobs per employed resident, and the plan predicted 1.63 jobs per employed resident in the future. "It's essentially impossible to redress a jobs-housing balance at this late date," said Mike Percy, Mountain View's principal planner in charge of long-range planning. Because the city is 98 percent built-out, options are extremely limited, he noted. The city of 75,000 residents has added 7,000 to 10,000 jobs during the last five years, depending upon how one accounts for the recession. But only about 2,000 new housing units have been approved or are in the planning process, he said. About half of those units are on land previously zoned commercial. Bushey, whose Housing Trust Fund would initially assist about 5,000 families, said it is not too late to tackle the issue in Santa Clara County. But, she agreed, time is critical. Back in San Benito County Silicon Valley's latest relief valve lies to the south. San Benito County and its county seat of Hollister, about an hour's drive from San Jose, have felt growth pressure from their northern neighbor for about two decades, but that pressure has risen in recent years, said Mendiola San Benito's planning director. And 1999 could be a pivotal year, as the City of Hollister has reached its wastewater treatment capacity, and county officials are considering a measure that would limit growth. San Benito County — with a total population of 48,000 and an unincorporated population of 17,000 — already has applications for the 1,100-unit Northeast Fairview development just east of Hollister, and for Paicines Ranch, a 1,500-unit subdivision and golf resort 12 miles south of Hollister. There are rumblings about another 1,000-unit subdivision, and a handful of smaller projects are working through the system, said Mendiola, the county planning director. Plus, Cisco's Coyote Valley plan would put high-tech jobs even closer to San Benito County. The momentum is difficult to fight, as evidenced by the uproar over a proposed 1% annual growth cap in unincorporated areas. The Planning Commission sent the proposal to the Board of Supervisors without a recommendation. Well-paid Silicon Valley workers have already skewed the San Benito housing market. Now, it is not unusual for people working at lower-paying jobs in the Hollister area to live in Los Banos — a mountainous 50-mile drive away — because they cannot afford the local housing market, Mendiola said. Mendiola would like to see Silicon Valley share some of the commercial and industrial riches with San Benito County, which cannot afford to provide services to existing houses, let alone new ones. "We need to decentralize the jobs," Mendiola said. "From a planning perspective, I think we need to build balanced communities. But there is nothing that encourages that. In fact, our taxation policies discourage residential uses." Contacts: Rob Mendiola, San Benito County Planning Department, (831) 637-5313. Mike Percy, Mountain View Community Development Department (650) 903-6306. Alex Sanchez, San Jose Department of Housing, (408) 277-5817. Giesela Bushey, Silicon Valley Manufacturing Group Housing Trust Fund, (408) 501-7864. Housing Trust Fund Web page: www.svmg.org

The operator of a golf course on leased property was not entitled to compensation when a public agency condemned part of the property to accommodate a trolley line, the Fourth District Court of Appeals has ruled. The unanimous three-judge panel said the San Diego Metropolitan Transit Development Board (MTDB) was correct when it compensated the owner of the real estate, not the lessee. The court also said the lessee was not entitled to payments for loss of goodwill because of the trolley project. The Handlery Hotel owns a 217-unit hotel, swim and tennis club, and cinema on 15 acres in Mission Valley. For more than 40 years, Handlery leased a 200-acre parcel next door, on which it built and operated a 27-hole golf course. Handlery built a clubhouse and parking on its own land. Handlery paid $500 a month to lease the 200 acres from the owners, Chevron Corporation and the Levi/Cushman families. When Chevron, the general partner, took a more active interest in developing the property, Chevron advised Handlery it expected to net $1.2 million to $2 million annually from the golf course. In late-1993 and early-1994, Handlery and Chevron failed to agree on a new 15-year lease. At the same time, the transit board revealed its plans for the 6.2-mile Mission Valley West Light Rail Transit Extension from Old Town to Jack Murphy Stadium (now Qualcomm Stadium). Recognizing that Handlery's lease was about to expire, the transit board negotiated only with Chevron. (The transit board did use eminent domain to take five acres of Handlery's property, for which the transit board paid Handlery.) After its long-term lease expired, Handlery continued to operate the golf course under a short-term lease and a series of extensions. The final extension terminated when the transit board assumed ownership of a portion of the golf course property in September of 1996. Handlery sued for payment for pre-condemnation damages because the transit board had negotiated with Chevron. Handlery also requested compensation for loss of business goodwill. But the trial court concluded the transit board's actions "constituted neither unreasonable pre-condemnation conduct nor inverse taking." Additionally, the trial court ruled that transit board did not cause Handlery to lose goodwill. On appeal, Handlery argued that by entering into discussions with Chevron about redesigning the golf course away from the hotel to accommodate the trolley line, the transit board undertook unreasonable pre-condemnation conduct that amounted to inverse condemnation of personal property. Handlery further noted the transit board promised to compensate Chevron for a period when the course was closed. Handlery argued that the transit board's agreement to provide Chevron with an "in-kind" golf course lead to Chevron's termination of lease negotiations with Handlery, which deprived the hotel of conducting the golf course business on a long-term basis. But the Fourth District, Division One, of the Court of Appeals said Handlery was not entitled to compensation because it neither owned the property nor had a long-term lease to use the real estate. "Handlery's hypothetical lease resting on speculative expectation of renewal is not compensable," Presiding Judge Daniel Kremer wrote. Handlery's lost lease was the result of a business decision between two private parties, Kremer continued. "MTDB did not restrain Handlery," Kremer wrote. "MTDB was not included in the lease negotiations between Handlery and Chevron. … Handlery simply did not convince Chevron/PDR that it was in their best interests to continue their business relationship with Handlery as operator of their golf course." The Code of Civil Procedure, §1263.510, permits compensation for loss of goodwill, which is typically read as payment for instances when a business is forced to give up benefits of its location, the court said. But, citing Redevelopment Agency v. International House of Pancakes (1992) 9 Cal.App.4th 1343, the court ruled that only owners of real property may claim compensation for loss of goodwill. "None of the tees, fairways or greens for the golf course were located on Handlery's property," Kremer noted. The Case: San Diego Metropolitan Transit Development Board v. Handlery Hotel , No. D029645, 99 C.D.O.S. 5577, 1999 Daily Journal D.A.R. 7081, filed June 17, 1999, certified for publication July 12, 1999. The Lawyers: For SDMTDB: Bruce W. Beach, Best Best & Krieger, (619) 525-1300. For Handlery: Susan Hinz, (530) 247-8030.

In an unpublished opinion, the Fourth District Court of Appeals rejected a lawsuit over the November 1998 ballot measure approving financing for San Diego's new baseball stadium. Ballpark opponents, led by former City Councilman Bruce Henderson, argued that the city should have prepared an EIR ahead of time, that the measure required a two-thirds vote, and that Proposition C should have specified that the city would incur $225 million of new debt. The unanimous three-judge panel rejected all of the arguments. Regarding the EIR issue, the court said the election, which approved a memorandum of understanding between the city and the Padres, did not vest the Padres with any land-use rights, so it did not qualify as a project under the California Environmental Quality Act. " he city remains free to consider alternatives to the ballpark plan, including the ‘no project' choice, upon receipt of the EIR," Justice Gilbert Nares wrote for the three-judge panel. The two-thirds vote provision did not apply because the MOU did not commit the city to any form of financing, the court ruled. " inancing options are available which may be effected without a vote of the electorate," the court said. The case is Mailhot v. Abdelnour, No. D032123.

Although it shares a name with the ritzy wine-making region, the City of Napa has long been a mostly blue collar city with only weak links to the big-dollar wine and tourism industries. But downtown Napa, home to professional offices and mom-and-pop stores that close before dark, is about to become a player in the business of wine tourism, which brings 5 million visitors a year to Napa Valley. Legendary winemaker Robert Mondavi chose a 12-acre site on the eastern edge of downtown Napa for the American Center for Wine, Food and the Arts, a $50 million facility that organizers believe will attract at least 300,000 visitors a year. Other commercial activity in and near downtown includes: the opening this fall of a visual arts school for high-school age students, development of a convention center and hotel on the former Town & Country Fairgrounds, conversion of a 100-year-old industrial building into a waterfront retail market and spa, and the restoration of an 1879-era opera house. Clearly, the American Center is the cornerstone project. Mondavi, the man most responsible for Napa Valley's elite ranking in the wine world, is the chief financial backer. Other private investors are also contributing money to the center, which is a nonprofit entity, said Kurt Nystrom, deputy director for finance and operations. "We really think this is going to revitalize downtown," Nystrom said. "Here are these 5 million people driving by on Highway 29. Now we're going to get hundreds of thousands of them to turn off the highway and drive through town to get to the center," Cassandra Walker, the city's redevelopment and economic development director, agreed. "It's a significant impact for the city, which is trying to create a cultural and arts center downtown. It shows a commitment to downtown," Walker said. Downtown revitalization is not a new topic in Napa. The city created a 33-block downtown redevelopment area in 1969, demolished older buildings to make way for box-like retail stores and built an awkward parking garage, Walker said. Downtown hardly boomed, even though the small, "upvalley" cities of Yountville, St. Helena and Calistoga, 10 to 25 miles north of Napa, cashed in on the growing wine industry and tourist trade. Yountville, for example, gets half of its general fund revenues from transient occupancy tax. The American Center "is saying that downtown is part of the tourist economy," Walker said. The opera house renovation, which is near commencement after years of fund raising, is another asset. "That provides an ongoing entertainment center for traveling theatrical productions that we haven't had before. That really benefits locals as well as tourists who want something to do at night," she said. Walker and others hope tourists will tie a day of cultural events in downtown Napa with a visit to upvalley wineries. One catalyst for downtown Napa's renaissance is a massive flood control project that will remake the Napa River. The river flooded portions of downtown in 1995, 1996 and, to a lesser degree, 1998. In response, voters approved a half-cent sales tax that partially funds a $180 million Army Corps of Engineers' river project. (See CP&DR, May 1998.) Much of the river through downtown Napa is now obscured, but the project will open up the waterfront. And a six-mile bike trail along the river will provide public access all through town, said Heather Stanton, the city's project manager. "I think there will be more opportunities for restaurants and retail as a result," Stanton said. The City of Napa does not have the money to provide substantial commercial development subsidies, Walker said, but the American Center required few for a project of its size. Under the development agreement with the American Center, the city will provide about $1 million worth of improvements, such as underground utilities, landscaping and signs, she said. The center received an extended period to complete the project, for which ground broke in June. A grand opening is scheduled for Thanksgiving of 2001. The American Center will be built on a 12-acre oxbow that offers river frontage on three sides. Plans call for an 80,000-square-foot building and extensive outdoor displays. The center will explain the cultural and societal influence of wine and food in America, Nystrom said. The center will host seminars and touring art exhibitions. Proponents also plan a 150-room hotel nearby. While the American Center has actually begun construction, development likely will be more extensive at the old Town & Country Fairgrounds, now called Napa Valley Expo. The state Legislature last year authorized the fairgrounds to lease the 34-acre site to a nonprofit organization for private development. That organization, Friends of the Napa Valley Exposition, expects to hire a development partner this month, said expo consultant John Salmon. The eventual project, which must be self-supporting, will include a 350-room hotel and conference center, retail spaces and a demonstration farm. Development of a tourist reception center, performing arts spaces and an education center are also possible. Community events and the annual fair will continue on the site. Part of the impetus for the project is a desire to keep tourists from trampling the valley, where bumper-to-bumper traffic is the weekend norm. The expo could serve as a base for taking groups to into the valley. "It becomes the beginnings of managing visitation to the valley," Salmon said. The huge number of visitors, which grows almost every year, is attracting hotel developers. By one count, 15 projects containing approximately 2,500 rooms are in some phase of the planning process. Nearly all of those hotels are in or near the city of Napa, which has seen little hostelry development in recent years. Smaller merchants also are renewing interest in downtown Napa. For example, an upscale, 140-seat restaurant called Tuscany is scheduled to open this month at First and Main streets, within walking distance of the American Center and of the proposed factory-turned-spa. Not too many years ago, that restaurant would have located in Yountville or St. Helena. "The next 10 years in Napa are going to have the most extensive development the city has ever seen," said Nystrom, of the American Center. "I think it's going to be a city in California to watch." Contacts: Cassandra Walker, Napa Redevelopment/Economic Development Agency, (707) 257-9502. John Salmon, Napa Valley Expo consultant, (707) 333-6010. Kurt Nystrom, American Center for Wine, Food and the Arts, (707) 257-3606.