RICHMOND RE-INVENTS A FORD PLANT AS HOUSING Thirty years after the start of the historic preservation movement, a debate has arisen in the preservation community on how best to save old buildings. Two camps have emerged: let's call them the Authenticizers and the Pragmatists. The Authenticizers are purists in preservation matters, and believe that buildings should be maintained, or returned, as closely as possible to their original condition and use. The Pragmatists, for their part, see the old building as a point of departure for adaptive reuse. Pragmatists see nothing wrong in making alterations here and there, although such projects, in their most extreme form, risk remodeling the building so dramatically that its historic form may be obliterated. Extreme examples of adaptive reuse cited in Stewart Brand's excellent book, How Buildings Learn, include the group of Quaker Oats grain silos in Akron, Ohio, that were converted into a hotel, and an Italianate house on the East Coast that became a McDonalds. Another example of extremity here in California is the proposed Ford Point in the waterfront area of the City of Richmond. In this extraordinary project, a mothballed Ford factory dating from 1931 is to be converted into 213 units of live-work housing, with some extra space left over for office space and a museum of the building's earlier career as an automobile assembly plant. The building is the last remaining structure on the West Coast designed by Albert Kahn, a prolific Detroit architect who provided both fancy-dress corporate buildings — including the immense, former General Motors headquarters building in Detroit — as well as countless factories that are notable for unpretentious elegance. Beyond its interest as adaptive reuse, Ford Point might symbolize another ongoing phenomenon of recent years: the gentrification of California's industrial waterfronts. Richmond is among a number of cities, including Long Beach, Suisun City and Monterey, that have put a great deal of energy into redesigning their outdated waterfronts into places of recreation, tourism and up-scale housing. We're not going to spend much time on Richmond's waterfront site plan. The plan is admirable in its intent to create a stimulating community on and near the waterfront with an array of uses, including a commercial/industrial park, a shopping center, a mixed-use residential community with 2,200 housing units, the Regatta Center for Research and Development, laboratories for the state Department of Health Services, and a UC Berkeley research field station. The bad news is the physical planning itself is improvised and casual. Here, history has been both a villain and a hero. It was probably difficult or impossible to superimpose a more regular pattern of streets onto the large, irregularly shaped waterfront parcels that are the vestiges of Richmond's industrial past. Still, there is something suburbanizing about some of the parcels, with inward-looking circulation systems, that are regrettable, if not entirely avoidable. There is little cause for regret, however, at Ford Point. Although the proposal may seem improbable at first glance, the actual diagram of the project is convincing as housing. The design is notable for finding new possibilities in the building's existing shape. Particularly ingenious is the way in which designers have fit the units inside the former Ford plant. The live-work units are arranged like rowhouses inside the immense shell of the automobile factory, with pedestrian alleys in front and behind. Each unit is located directly under one of the "teeth" atop the saw-tooth roof of the Ford building, which originally provided natural light to the factory. The added ceiling height provided by the old vertical skylights allows the designers to give each live-work unit a bottom floor, a mezzanine level up half a flight of stairs, and an upper loft space up another half flight of stairs. To provide light and air, the designers have removed part of the roof while leaving the structural skeleton intact. This concept makes the pedestrian alleys into open-air spaces without changing the façade or the basic shape of the building. These alleys form the public or semi-public circulation system inside the immense building. On the exterior, architects have marked these pedestrian entrances with tower-like "way-finding beacons" that stand forward from the historic façade. These are the most conspicuous changes to the original building. The plan also calls for 129,000 square feet of office space, 13,000 square of "specialty retail," the museum and leasing offices. Johnson Fain Partners is the managing architect for Ford Point, and has assistance from Michael Willis & Associates, David Baker Associates Architects (loft design) and Carey and Co., Inc (restoration architecture.) The developer is Forest City Enteprises of Cleveland, Ohio. Despite the creativity of the reuse, Ford Point is one of those rare projects that succeeds as both historic preservation and adaptive reuse. Here, perhaps, is one place where the Authenticizer and the Pragmatist camps in the preservation movement are reconciled. Admittedly, it is easier to build new uses inside the immense shell of a former factory or warehouse than it would be inside a Victorian house. Still, there is more to admire in Ford Point than ingenuity. The scheme has created, at least on paper, a place that looks like a good place to live and start a business. It has found a manner to use the existing spaces and profile of the building in ways that were never imagined by the original architect. And if the housing is successful commercially, the building will be safe for decades. The "extreme" solutions of adaptive reuse don't always work well with the original structure. In the case of Ford Point, however, the extreme solution is also the best fit.

Although they appeared to lose on the most basic issue, municipal and environmental lawyers are claiming victory in the U.S. Supreme Court's recent Del Monte Dunes case. They claim that government agencies dodged a bullet when the Supreme Court refused to extend the so-called Nollan/Dolan test to takings cases. In Del Monte Dunes v. City of Monterey, 99 C.D.O.S. 3846, the Supreme Court granted property owners the right to a jury trial in some regulatory takings cases if they are brought against state or local governments under federal civil rights law. On a 5-4 decision, the court upheld a $1.45 million jury award against the City of Monterey, which denied an oceanfront residential development in 1986. No sooner had property-rights advocates claimed victory, however, than municipal lawyers, the American Planning Association and other groups sympathetic to the City of Monterey's case began arguing that they had won as well. The reason? The Supreme Court had rejected that portion of the Ninth U.S. Circuit Court of Appeals' ruling concluding that the Nollan/Dolan "rough proportionality" rule should be applied to takings cases in which the government agency actually denied development permits. The day after the ruling was handed down, the American Planning Association issued a press release headlined: "Supreme Court Upholds Land-Use Planning Authority." And land-use law guru Daniel J. Curtin, author of Curtin's California Land Use and Planning Law, also hailed the court's ruling, calling it "the first unanimous decision in years by the high court on such an important takings issue." When the Supreme Court's ruling in Del Monte Dunes was first handed down on May 24, it appeared to be a clear victory for property owners. Monterey had denied five different applications for the property, even though the proposed project got smaller each time. The property owner sued in federal court under the federal civil rights act, 42 U.S.C. § 1983. A judge ruled that the property owner had the right to a jury trial. The jury found a temporary taking and awarded $1.45 million in damages. The Ninth U.S. Circuit Court of Appeals affirmed the judge's ruling and the $1.45 million award. In a narrow decision, the Supreme Court did the same. Property-rights lawyers hailed the ruling as a clear victory. "It's going to make people take notice that when they act this way, there is a penalty," proclaimed Michael Berger, a prominent property rights lawyer who represented Del Monte Dunes. (CP&DR Legal Digest, June 1999.) Underneath the obvious victory, however, was a broader-based ruling on the part of the Supreme Court to reject the Ninth Circuit's decision to apply the Nollan/Dolan doctrine. Based on two Supreme Court rulings (Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374), the Nollan/Dolan doctrine imposes a higher level of judicial scrutiny in exactions cases. The critical concept is "rough proportionality" — that is, when imposing a "physical" exaction such as an easement, a government agency must ensure that the impact of the exaction is approximately proportional to the impact of the project on the problem that the exaction is trying to ameliorate. In the case of Dolan, the Supreme Court threw out a requirement that an appliance store provide a bike path across its property in exchange for a building permit, claiming the city had done no analysis on the relationship between the expanded store and potential bike traffic. Since 1992, the Nollan/Dolan doctrine has been applied only to exactions cases, not takings cases. Ruling in the Del Monte Dunes case after Dolan was issued, the Ninth Circuit applied the Nollan/Dolan doctrine in the takings context — stating, essentially, that the denial of the Del Monte Dunes project was not "roughly proportional" to the potential impact the project might have on the environment and the community. "The government agencies were very scared that the Supreme Court might uphold this," said Katherine E. Stone, a municipal lawyer who specializes in land-use cases. In particular, said Stone and others, government agencies feared that Justice Antonin Scalia, who invented the Nollan/Dolan doctrine, would seize the opportunity to expand it. However, the Supreme Court did not do so. In the plurality opinion, Justice Anthony Kennedy dispensed with the Nollan/Dolan doctrine quickly and easily. "The rule applied in Dolan considers whether dedications demanded as conditions of development are proportional to the development's anticipated impacts," he wrote. "It was not designed to address, and is not readily applicable to, the much different questions arising where, as here, the landowner's challenge is based not on excessive exactions but on denial of development." In separate opinions — which included some dissent — the other justices, including Scalia, concurred with that portion of Kennedy's ruling. Georgetown University Law Center professor John Echeverria, who represented several environmental groups in the case, said the rejection of the Ninth Circuit's ruling on the rough proportionality issue was important for several reasons. Among other things, he said, the heightened scrutiny required under the Nollan/Dolan doctrine shifts the burden of proof from the property owner to the government agency. But Berger, the winning attorney, said the rough proportionality angle was overblown. "I think these people overreacted to what the Ninth Circuit said and paid no attention to what the Ninth Circuit did," he said. The Ninth Circuit found ample reason to uphold the takings award on its own merits and added the Nollan/Dolan points at the last minute because the Supreme Court issued the ruling after Del Monte Dunes had been briefed before the appellate court, he said. Pacific Legal Foundation lawyer James Burling, who filed an amicus brief in the case, also downplayed the significance of reversing the Ninth Circuit's ruling on Nolan/Dollan. Burling noted that the court upheld the judge's instructions to the jury, which included advice to consider whether a "reasonable relationship" existed between the problems presented by the project and the city's denial. "The cities were arguing that there should not be any analysis of the justification of the denial," he said. With "reasonable relationship," he said, "we don't have to talk about rough proportionality." While conceding Burling's point as far as it goes, Echeverria claimed a distinction between what he called the "logic" of the denial — which he said the jury could properly question — and the precise issue of proportionality. Like other lawyers who sided with the government, Echeverria questioned how the application of rough proportionality to a project denial, as opposed to an exaction, would work. While opening the door to jury trials in § 1983 cases, Del Monte Dunes apparently does not invite jury trials in inverse condemnation cases filed in state court. Even Burling agreed that inverse condemnation cases will continue to be heard before judges in state courts — partly because of the doctrine that property owners alleging takings must seek state remedies before going to federal court. (Del Monte Dunes pre-dated that doctrine, which was laid down in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987). However, many property rights lawyers, including Burling and Berger, now argue that subsequent California takings cases have eroded the "state remedy" and therefore their clients should be permitted easier access to federal courts — that is, if California courts do not restore the remedy. The two lawyers pointed specifically to Landgate Inc. v. California Coastal Commission, 17 Cal. 4th 1006 (1998), in which a state appellate court ruled against a property owner in a takings case. Contacts: Katherine E. Stone, Myers Widders Gibson & Long, (805) 644-7188. James Burling, Pacific Legal Foundation, (916) 362-2833. John Echeverria, Georgetown University Law Center, (202) 662-9850. Michael Berger, Berger & Norton, (310) 449-1000.

Treasurer Phil Angelides and Attorney General Bill Lockyer filed papers in San Bernardino County Superior Court to halt a planned $15 million bond sale by two Central Valley cities. The bonds would finance a housing development 300 miles away in San Bernardino County. Angelides and Lockyer filed an answer to a validation action submitted by the Rancho Lucerne Valley Public Financing Authority. The Superior Court will now conduct a trail to determine if the bond sale can go forward. Waterford, a 6,600-person city in Stanislaus County, and San Joaquin, a 3,100-person city in Fresno County, joined with a developer's private water company to form the financing authority. They want to issue $15 million worth of bonds to build the 4,000-home Rancho Lucerne subdivision and golf course in San Bernardino County. Forming the authority made use of a loophole in a 1998 law that requires a geographic connection between local bond issues and the project being financed. Lockyer referred to the planned bond issuance as "municipal junk bonds." Angelides said such bonds shake the confidence of investors in more legitimate local financing for schools and roads. Assemblyman Dean Florez (D-Shafter) said he would introduce legislation to eliminate the loophole. Officials of the two cities said the state was overreacting and contended that such bond deals make towns hundreds of thousands of dollars for local projects. But a 1998 state auditor's report said Waterford and San Joaquin had abused the 1985 Marks-Roos Local Bond Pooling Act.

The California Supreme Court will decide the constitutionality of a 1994 law that allows religious organizations to exempt themselves from local historic preservation laws. The court agreed to take the case of East Bay Local Development Corp. v. State of California, 69 Cal.App.4th 1033 (1999), in which the Third District Court of Appeal ruled that the exemption for religious groups did not violate the federal and state constitutional ban on establishing religion. Historic preservation advocates lamented the ruling, and developers contended religious groups received an unfair economic advantage. About 40 years ago, the Legislature gave cities and counties authority to impose special conditions to protect locally designated historic places or structures. But a 1994 law (AB 133) said a religious corporation could exempt itself from local laws intended to protect landmarks if the religious group would suffer a financial hardship or be hindered in its religious mission. Sacramento County Superior Court Judge Joe S. Gray ruled that the religious exemption was unconstitutional. But the appellate court reversed Gray. "The exemption provided by AB 133 does not constitute an endorsement of religion," the court said. "Although exemption is limited to nonprofit religiously affiliated organizations, it does no more than facilitate the efforts of those organizations to advance their own purposes." The appellate court also rejected arguments that AB 133 conflicted with the constitution's equal protection clause. In a petition to the state Supreme Court, the City and County of San Francisco and historic preservation groups said the exemption would have a devastating effect on preservation programs. They also argued that AB 133 discriminates against nonreligious owners of landmarks. State lawyers, however, followed the appellate court's reasoning that AB 133 actually aided separation of church and state by removing a government regulation affecting religious affairs. Voting to review the appellate court's opinion were Chief Justice Ronald George, and Justices Joyce Kennard, Ming Chin and Janice Brown.

The federal Americans with Disabilities Act applies to local zoning ordinances, the Ninth Circuit U.S. Court of Appeals has ruled. The decision stemmed from a City of Antioch urgency ordinance that prevented a methadone treatment clinic from opening on an appropriately zoned site. The unanimous three-judge appellate panel reversed a ruling by District Court Judge Susan Illston, who agreed ADA applies to local zoning but refused to issue a preliminary injunction against the city. The appellate panel said Illston applied the wrong legal test when deciding the clinic's preliminary injunction. The appellate court said the preliminary injunction blocking the urgency ordinance is appropriate if the clinic demonstrates it "does not pose a significant risk to the health or safety of the community" or that such threats may be ameliorated. The ruling is important for drug treatment clinics, group homes for mentally ill people and proponents of other land uses that are often unpopular, said Amitai Schwartz, attorney for the methadone clinic. "What it basically holds is that the ADA overrides the typical zoning considerations a city might entertain when adopting zoning ordinances and general plans," Schwartz said. However, the city's lawyer, Gary Lepper, said application of the ruling to actual land use matters might prove limited. The ruling is "more sweeping theoretically than it is practically," he said. Still, Lepper said he expects ADA proponents to cite the case extensively. In December of 1997, Contra Costa County officials told Bay Area Addiction Research and Treatment, Inc., and California Detoxification Programs, Inc., that the methadone clinic operated by those two organizations in the Pittsburg courthouse would have to move by September 30, 1998. The county is renovating the courthouse, where the methadone clinic has operated for 13 years. Clinic operators found a suitable new location among medical and commercial offices on Sunset Lane in Antioch, the town just east of Pittsburg. Antioch's deputy director for community development notified clinic operators in writing that the clinic would be a permitted use under the city's general plan and zoning designation. But when Antioch residents who live nearby learned of the clinic's planned relocation, they demanded the City Council prevent the move. The City Council responded on April 28, 1998, with a 45-day urgency ordinance forbidding issuance of permits for substance abuse clinics within 500 feet of a residential property. Residential backyards abut the proposed clinic site. In June, the council extended the ordinance and singled out methadone clinics. Councilmembers said the clinic would attract drug dealers and increase area crime. The clinic operators sued. They contended zoning is an activity covered by the ADA, 42 U.S.C. §§12131-12165, and the Rehabilitation Act, U.S.C. §794. The district court agreed but ruled against the request for a preliminary injunction because the clinic had not demonstrated it would be irreparably harmed without the injunction or that it was likely to prevail on the suit's merits. In defending the appeal, Antioch conceded that ADA and the Rehabilitation Act apply to zoning. Still, the appellate court noted that other jurisdictions have argued that zoning is not a service, program or activity within the meaning of ADA, and the court considered the issue. In reviewing the ADA's legislative history, Judge Wallace Tashima wrote, "Congress specifically rejected an approach that could have left room for exceptions to §12132's prohibition on discrimination by public entities." Tashima further noted that the U.S. Department of Justice's Technical Assistance Manual "expressly cites zoning as an example of a public entity's obligation to avoid discrimination." Frequently citing the Second Circuit's decision in Innovative Health Systems, Inc., v. City of White Plains, 117 F.3rd 37 (2d Cir. 1997), Tashima wrote, "Although we recognize that zoning is a traditionally local activity, Congress has spoken. Accordingly, we hold that APA applies to zoning." As for the preliminary injunction request, the appellate panel said the district court wrongly applied the "reasonable modifications test." This test holds that " public entity shall make reasonable modifications in policies, practices or procedures when the modifications are necessary to avoid discrimination on the basis of disability, unless the public entity can demonstrate that making the modifications would fundamentally alter the nature of the service, program or activity." According to Schwartz, the clinic's attorney, District Court Judge Illston refused the preliminary injunction because there were other places in town where the clinic could open. The appellate court agreed with Schwartz, who argued that the reasonable modifications test "makes little sense in the context of a statute that discriminates against qualified individuals on its face rather than in its application." Instead, the district court should have used the significant risk test. " he ADA does not wholly preclude public entities from making certain distinctions on the basis of disability if those distinctions are absolutely necessary. The significant risk test provides public entities with the ability to craft program or statutes that respond to serious threats to the public health and safety while insuring that these (rare) distinctions are based on sound policy grounds instead of on fear and prejudice," the court ruled. To receive protection under the ADA, the methadone clinic operators need only show that it does not present a "direct threat" to the health or safety of others, the court said. Lepper, the city's lawyer, said the test prescribed by the Ninth Circuit will lead to the same answer is almost every instance. Antioch, for example, has never had a methadone clinic before, so proving that one would pose a threat to the community is nearly impossible, he said. People on either side of the issue could argue that the experience of another town is not applicable in Antioch, he said. "How do you demonstrate that it's a threat? It's going to be a damned tough test for the city to pass," Lepper said. Because it considers part of the opinion ambiguous, the city has field a request with the Ninth Circuit for a rehearing. The Case: Bay Area Addiction Research and Treatment v. City of Antioch, No. 98-16612, D.C. No. CV 98-2651 SI, 99 C.D.O.S. 4223, Daily Journal D.A.R. 5381, filed June 3, 1999. The Lawyers: For BAART: Amitai Schwartz, (415) 398-0922 For Antioch: Gary M. Lepper, Lepper, Schaefer & Harrington, (925) 256-6180.

An industrial business park, a commercial truck center and what may be the largest truck stop in the United States will create an estimated 5,200 jobs on a portion of the former Kaiser steel mill in unincorporated San Bernardino County, according to project backers. County supervisors unanimously approved a specific plan for a 320-acre industrial and commercial complex, and granted a conditional use permit for a 75-acre truck stop between the cities of Fontana and Ontario. Kaiser Ventures, owned mostly by retired Kaiser steelworkers and their dependents, hopes to begin about 20 months of construction in fall of 2000, said Lee Redmond, Kaiser Ventures' vice president of real estate. "It's a good project," said Mac Coleman, San Bernardino County senior associate planner. "It takes what is left of the Kaiser mess and converts it to a productive land use." However, the U.S. Fish & Wildlife Service is now raising endangered species issues, and infrastructure construction that would serve the project may require "incidental take" permits from federal regulators. Arranging those permits can be a slow process. As proposed, the Kaiser Commerce Center will have three components: 3.8 million square feet of manufacturing, distribution and warehouse buildings, an 80-acre commercial complex along Interstate 10 that will serve as an auto mall for truckers, and a giant truck stop, Redmond explained. The large manufacturing and distribution center makes sense because both the Burlington Northern Santa Fe Railroad and the Union Pacific Railroad serve the site, he said. The commercial truck center has good freeway visibility. The truck stop meets an obvious demand in an area where about 43,000 trucks pass daily. "There is such a need for additional facilities for the massive number of trucks coming through this area," Redmond said. "We'll be able to handle right at about 1,300 trucks a night." The site is west and south of California Speedway, completed in 1997 on 527 acres of Kaiser's vast real estate holdings in the Fontana area. A large recycling facility and other industrial operations lie on other portions of the former Kaiser mill and manufacturing site. "It all seems to live pretty well with each other, even though it is vastly different," Redmond said. Kaiser Ventures and county officials project the commerce center, when complete, will create about 5,200 on-site jobs and nearly that many more directly related off-site jobs. The steel mill at its peak employed about 11,000 people. The project is one aspect of the Fontana area's continued recovery from the steel mill's closure during the mid-80s and of the rapid industrial expansion in the region. The San Bernardino-Riverside metropolitan area ranked third in the nation for construction of new manufacturing facilities in 1998, according to Site Selection magazine. The area's 58 new industrial buildings last year accounted for about 20 percent of the state total, and was topped only by Chicago and Detroit. Since 1995, the City of Fontana has approved 6.2 million square feet of warehouse, distribution and manufacturing space, according to Dean Libbee, a city planner. And more land remains for industrial development, he said. Why Fontana? "The land is cheap, and we're close to I-10, I-15, and the 60 freeway," Libbee said. Close proximity to Ontario International Airport, which aids that city's industrial expansion, is another factor, Libbee noted. Reuse of the Kaiser property is one of the biggest parts of the region's business growth, and the planned commerce center will provide an employment core that many cities would envy. However, the commerce center project has drawbacks. Caltrans still must approve planned freeway access projects, and environmental concerns promise to be even stickier. In approving the commerce center this spring, the county adopted statements of overriding consideration for off-site traffic congestion, and regarding air pollution during construction and after project completion. Also, Kaiser Ventures plans to use at least a portion of the millions of cubic yards of slag remaining from the steel mill for building foundations. An environmental impact report concluded there is no inherent danger in using the slag, but no one knows for sure what lies inside and underneath the 40-foot slag heaps, Coleman said. Marjorie Musser Mikels, an Upland attorney, argued that the project EIR failed to disclose significant impacts on water, traffic and air quality. She contended the county is ignoring underground pollution that taints groundwater for the sake of economic growth. "If you're going to put all these wonderful economic uses there, and these people are going to make all these millions of dollars, then they should have to clean up these places and not just cover it over," said, Mikels. (Mikels is the estranged wife of County Supervisor Jon Mikels, in whose district the Kaiser project lies.) Environmentalists and state regulators have raised concerns about PM10, which comprises a significant part of diesel exhaust. (PM10 are microscopic dust particles tiny enough to infiltrate human lungs.) A thousand trucks idling all night would only exacerbate the region's dirty air. Furthermore, biologists believe construction of a freeway interchange and work on a flood control channel may harm habitat for two federally endangered species, the Delhi sands flower-loving fly, and the San Bernardino kangaroo rat. Sands appropriate for the fly are located near the site and should be surveyed, said P.J. White, a Fish & Wildlife Service biologist. Kangaroo rats have been captured in washes near the Kaiser property, he said. The federal highway administration, which is providing partial funding for the work at I-10 and Etiwanda Avenue, is conducting a survey, White said. Federal regulators have asked the flood control district to conduct a separate survey before proceeding with work on San Seveine Creek. The creek, which runs through the Kaiser property, is already confined to a concrete channel, but the flood control district and county proposed enlarging the channel to withstand a 100-year flood. Doing so would prevent replenishment of sensitive alluvial sage scrub habitat favored by the kangaroo rat, he said. "As of right now, we don't have any concerns with Kaiser Ventures itself," White said. However, the public agencies behind the off-site projects — on which the Kaiser Commerce Center depends — may have to receive incidental take permits from USF&W because of impacts on the two endangered species. Coleman said the county's analysis disagrees with the federal concerns, which federal officials raised too late for inclusion in the commerce center EIR. Despite these concerns, few see any reason to doubt the area's continued industrial growth. The San Bernardino-Riverside area has absorbed 12 million to 16 million square feet of industrial space every year this decade. A recent economic forecast by California State University, Long Beach, predicted the San Bernardino-Riverside area would maintain job growth of at least 4% annually through 2001, the fastest in the Los Angeles region. Not surprisingly, construction employment leads the way. Contacts: Mac Coleman, San Bernardino County senior associate planner, (909) 387-4131 Lee Redmond, Kaiser Ventures vice president of real estate, (909) 483-8500. Dean Libbee, Fontana planner, (909) 350-7676. P.J. White, U.S. Fish & Wildlife Service biologist, (760) 431-9440.

A federal district court judge — not a Nevada state court — has jurisdiction in a water rights dispute even though the dispute involves decisions of the Nevada State Engineer, the Ninth U.S. Circuit Court of Appeals has ruled. The decision is the second Ninth Circuit ruling in the last six months stemming from disputes over water allocation between federal and local governments in Churchill County, Nevada, east of Reno. The ruling emerged after a series of "dueling injunctions" in federal and state court. In 1996, the U.S. Fish & Wildlife Service announced a plan to reallocate water from the Newlands Reclamation Project in response to a 1990 federal law designed to resolve a series of complex water-rights issues involving native tribes and environmentalists. Among other things, the Service has been charged with the task of reallocating enough water to restore 25,000 acres of wetlands in the Lahontan Valley. Under the plan, the Service expects to buy rights to 55,000 acre-feet of water from within the Carson Division of the Newlands project, and acquire 35,000 acre-feet through other means. The Carson Division is located in Churchill County, Nevada, near the City of Fallon. Fallon, Churchill County, and the Sierra Pacific Power Co. have all pursued litigation to try to block the water transfers. Last year, for example, the three parties won a Ninth Circuit ruling that the Fish & Wildlife Service should have prepared a programmatic environmental impact statement under the National Environmental Policy Act early in the process, rather than a final EIS later on. (See CP&DR Legal Digest, December 1998.) However, Churchill County also filed a protest with Nevada State Engineer Michael Turnipseed seeking to block the Fish & Wildlife Service's request for Turnipseed to reallocate the water. Under the legal settlements that originally adjudicated the water, known as the Alpine and Orr Ditch decrees, the state engineer's approval is required when a reallocation would alter the manner and use of the water in way that the legal settlements did not contemplate. In the protest, Churchill County argued that the water transfer would deplete the county's groundwater supply, harm its tax base, and create a dust hazard. After a public hearing in 1996, Turnipseed granted one of the Fish & Wildlife Service's reallocation requests. Churchill County then appealed Turnipseed's decision to the Third Judicial District Court, a Nevada state court. Before the Third Judicial District, Turnipseed argued that only federal courts have jurisdiction over alterations of federally adjudicated water rights. Turnipseed and the federal government asked U.S. District Court Judge Lloyd D. George to enjoin the Nevada state court from further proceedings. Churchill County then filed a motion in state court, asking the state court judge to enjoin the federal proceeding. Both the federal and state judges then issued injunctions against the other. Churchill County appealed the federal court injunction to the Ninth Circuit in San Francisco, arguing that the federal courts have only limited jurisdiction in the matter. A three-judge panel of the Ninth Circuit ruled that the federal courts do, in fact, have jurisdiction over Turnipseed's rulings. "We have consistently interpreted both the Alpine and Orr Ditch Decrees to provide for federal district court review of decisions of the State Engineer regarding applications to change the place of diversion or manner or place of use of water rights derived from the Alpine and Orr Ditch Decrees," Judge Wallace Tashima wrote for the panel. In reaching this conclusion, Tashima referred to a whole series of lawsuits interpreting the two decrees, most recently United States v. Orr Water Ditch Co., 914 F.2d 1302 (9th Cir. 1990). Churchill County had argued that the Fish & Wildlife Service's application to Turnipseed is not subject to federal court review because federal jurisdiction permitted under the decrees "is highly extraordinary‚ and limited to cases involving the federal interests in the Newlands Reclamation Project." The Ninth Circuit rejected this argument, noting that even if jurisdiction is limited to "highly extraordinary" circumstances, this "does not mean the district court may exercise jurisdiction only in rare instances." Rather, according to the Ninth Circuit, the language refers to the highly extraordinary circumstance of the district court's appellate jurisdiction over the water allocation as spelled out in the two decrees. Tashima's ruling also concluded that the federal courts have exclusive jurisdiction over reallocation under the decrees, meaning state courts do not have jurisdiction. In addition, the Ninth Circuit rejected Churchill County's argument that Judge George had abused his discretion because he did not need to impose an injunction in order to retain his supposedly limited jurisdiction over the case. The Ninth Circuit noted that federal courts are empowered to enjoin state court proceedings that interfere with federal judgments. In a similar vein, the Ninth Circuit also rejected Churchill County's argument that Judge George's injunction amounted to a direct federal district court review of state court decision, which is not permitted. The Ninth Circuit reasoned that Judge George's ruling was based not on his interpretation of state law, but on his conclusion that the state court had improperly ruled on a matter over which the federal court had jurisdiction. The Case: United States v. Alpine Land & Reservoir Co., No. 97-17011, and United States v. Orr Water Ditch Co., No. 97-17016, 99 C.D.O.S. 2569, 99 Daily Journal D.A.R. 3352 (filed April 8, 1999). The Lawyers: For U.S. Government: Lois J. Shiffer, Assistant Attorney General, Sacramento, (916) 554-2100. For State of Nevada: David C. Creekman, Deputy Attorney General, (775) 687-4170. For Churchill County: Richard G. Campbell, Campbell & Stone, Reno, (775) 332-0707.

A city has no obligation to provide new water service to development in unincorporated areas, and a city may use its utilities as growth-management tools, the First District Court of Appeals has ruled. The unanimous three-judge panel said that Crescent City did not act unreasonably when the City Council decided to prohibit new water utility connections outside the city limits. The appellate panel overturned the ruling of Del Norte County Superior Court Judge George L. Nelson. He had characterized the city's decision as "blackmail," and he ruled the city acted arbitrarily. "The city's first duty, as reflected in the applicable city and county ordinances, is to its own residents, who funded the system in the first place. Existing customers, wherever located, also have a right to continued service," Justice Timothy A. Reardon wrote for the First District, Division Four. "A proposed multimillion-dollar water system upgrade was on the table. The city was under a cease and desist order from the RWQCB (Regional Water Quality Control Board) with respect to its wastewater system. Under these circumstances it was not unreasonable for the city to reserve new connections for city residents and businesses." In the 1950s, Crescent City purchased a private, unregulated water system that relied on muddy wells. Most — but not all — of the system's customers were within the city limits. The city approved a general obligation bond to upgrade the system, and in 1958 received a permit from the State Water Resources Control Board. The permit allowed the city to draw water from a Smith River tributary, and the permit defined a "place of use" that included acreage inside and outside the city limits. By 1990, about two-thirds of the 3,600 water customers were in unincorporated Del Norte County. City officials complained the city was losing tax revenue because commercial and residential builders, who relied on the city's water system, were not required to seek annexation into the city. The city approved an interim policy that gave first priority for new service to users inside the city limits and disallowed major new users outside the city limits to connect unless there was a specific agreement. That interim policy — followed by drought in 1992 and capacity problems in 1994 — led to negotiations between the city and county. The two sides settled on a revenue-sharing agreement that gave the city about $60,000 annually in sales tax revenue. But the county withdrew from the agreement in June 1997. The city responded one month later by cutting off new water connections in unincorporated areas. The county then asked the Water Resources Control Board to intervene. The board, however, said the 1958 permit does not oblige the city to provide water to entire "place of use." The County filed suit on Jan. 20, 1998, and the trial court ordered the city to provide water connections on a nondiscriminatory basis. On appeal, the county argued that the city's acquisition of a private water system required the city to provide service to all potential users in the "place of use" designated by the Water Resources Control Board permit. The appellate panel rejected this contention. " t is apparent that there is no grounding for the county's contention that inhabitants of the unincorporated area have a right to new hookups today by virtue of the city's purchase of a private, unregulated water system in 1958 with a different source and undefined service area and terms," Justice Reardon write. "For purposes of our analysis, it is as if the city started from scratch as a water provider when it financed system improvements through a general obligation bond and then received its permit from the board." Reardon continued, "The ‘place of use' authorized by the board pursuant to a water appropriation permit is not equivalent to the ‘service area' associated with a privately owned public utility. … Thus, persons coming into unincorporated lands within the ‘place of use' do not have a vested right to new service under terms of the permit." The city's general plan legally says the city may use its utilities as a growth management tool, the court said. "For example in Dateline Builders Inc. v. City of Santa Rosa (1983) 146 Cal.App.3d 520, a developer filed suit for relief arising out of a city's refusal to extend its existing sewer line to a proposed ‘leap frog' development beyond city boundaries. The reviewing court held that the city could use the sewer hookup as a ‘planning device' to manage growth," Reardon wrote. The appellate panel rejected the county's argument that the city violated the California Environmental Quality Act by going forward on a project without determining if the project would impact the environment. The statute of limitations for a CEQA suit is 180 days, and the county filed its lawsuit 194 days after the city's new policy took effect. The appellate court also discounted the county's argument that the city violated open meeting laws during the July 10, 1997 meeting where it halted new water connections. The county did not raise the issue at the time or at the trial court level, the appellate court said. The Case: County of Del Norte v. City of Crescent City, No. A082256, 99 C.D.O.S. 3078, 1999 Daily Journal D.A.R. 3995, filed April 28, 1999. The Lawyers: For the county: Steven P. Belzer and S. Craig Hunter, Livingston & Mattesich, (916) 442-1111. For the city: Dohn R. Henion, city attorney, (707) 464-9761.

Vice President Al Gore has promised to speed environmental review of the proposed University of California campus near Merced. Ironically, the likely "Smart Growth" candidate for president in 2000 has sided with a project proposed on rangeland outside Merced's earlier-adopted urban growth boundaries which contains habitat for endangered species. The campus and "university community" would rise on the western edge of a large vernal pool grassland, which is home to fairy shrimp — a federally listed endangered species — and other rare plants and animals, said Steven Johnson, director of stewardship and science in California for The Nature Conservancy. "California is probably the last place on the planet with remaining vernal pool habitat," he said. Still, after meeting with Merced-area politicians, teachers and children in early April, Gore announced formation of a task force to expedite federal review of the tenth UC campus and a new town for 31,500 people that would abut UC Merced. The vice president's announcement came at the request of Rep. Gary Condit, D-Ceres. Condit's chief of staff, Mike Lynch, insisted the task force will serve only as a clearinghouse and is not an effort to circumvent environmental regulations. The task force will streamline the review process, coordinate with a proposed state implementation team and work with local stakeholders, he said. UC Merced will be the first University of California campus built from scratch in more than 30 years — meaning it will be the first new campus subject to the California Environmental Quality Act, the federal Endangered Species Act, the National Environmental Policy Act, and other laws that have come to play an important role in shaping urban growth. However, UC has gained experience with CEQA and other regulations in recent years during hard-fought battles over "long-range development plans" to allow expansion of Berkeley, Davis, UCLA and other campuses. "I really want to get away from any thoughts that we want to get around the system, because that is not our strategy," said Roger Samuelsen, UCM chief of staff and director of administration. "Our approach is to work within the regulatory environment and go about this in the most responsible, environmentally sensitive and economical way." Samuelsen and others at UC admit CEQA will lengthen the process, but he does not anticipate a need for legislative assistance. Still, Lt. Gov. Cruz Bustamante, during a regents meeting in March, made clear he wants UC Merced built quickly, and he suggested he would back legislation to help the project clear environmental hurdles if necessary. In 1995, university regents chose the 10,400-acre site near Lake Yosemite, six miles northeast of Merced, over competing "greenfield" sites in Madera and Fresno counties. The Lake Yosemite site's relative proximity to urban areas, the availability of water, the location in depressed Merced County and the landowners' willingness to donate 2,000 acres for the actual campus were factors. The university now stands as a symbol of hope in Merced, where planners otherwise predicted a doubling of the population within 20 years despite continued economic woes. Recently, representatives of UC, the city and county of Merced, the Merced Irrigation District, and the Virginia Smith and Cyril Smith trusts (which owns the land) completed a year-long collaborative planning process to settle fundamental issues. Their concept plan calls for a core campus on 200 acres on the eastern edge of the site, surrounded by an ancillary campus of 1,800 acres for up to 25,000 students and 6,600 faculty and staff members. West and south of the campus would be a university community with 31,500 residents and 8,500 jobs, covering another 3,000 acres. That would leave 5,400 acres — about half the site — for open space, parks and environmental mitigation. Merced County now is processing a specific plan for the private areas while UC creates a long-range development plan for the campus itself. But two major issues remain: preventing urban sprawl from covering the area's prime farmland, and crafting an environmental mitigation plan, especially for vernal pools, that satisfies state and federal regulators. "It's intuitive that in this location, you would not have a town but for the university," said Brian Boxer, vice president of EIP Associates in Sacramento, which assisted UC with conceptual planning. The city and county have already expanded their urban growth boundaries to accommodate UCM. Now, the county is trying to create regulatory mechanisms to prevent speculative development that sprawls around the campus and planned community, Merced County Planning and Community Development Director Robert E. Smith said. Marsh Pitman, conservation chair for the local Sierra Club group, said a tightly contained new town that does not rely on the automobile is important. "The implications go far beyond Merced County or San Joaquin Valley or even the state, as the agricultural production in this valley is so important to the nation," Pitman said. Samuelsen, of UC, recognizes the issue. "I think it's in all our best interests to protect agricultural land as best we can," he said. "We worked very hard to avoid prime agricultural land in choosing this site." Interestingly, the vernal pool issue has forced the campus and most of the new town to the 17-square-mile site's eastern side, which is farther yet from Merced. Vernal pools are small depressions in the landscape, underlain by an impermeable layer of earth, that become wetlands during the rainy season. Vernal pools are unique to the Central Valley and are so important that The Nature Conservancy holds a 5,000-acre conservation easement on the 13,500-acre Flying M Ranch, next to the UCM site, to protect the seasonal wetlands. To build the campus, UC must obtain wetland fill permits from the Army Corps of Engineers and special "incidental take" permits from the U.S. Fish & Wildlife Service, which administers the Endangered Species Act. As mitigation, UC may undertake a habitat conservation plan, Samuelsen said. Johnson said The Nature Conservancy is encouraging UC to examine the entire vernal pool complex and to work with neighboring landowners on conservation easements. Johnson believes UC could design an environmentally friendly campus and the new town could develop in a compact manner that is sensitive to fragile habitat. UC planners talk of using the area's wetlands as "outdoor classrooms." While mainstream environmentalists believe UC has good intentions — UC has already forged ties with Yosemite, Sequoia and Kings Canyon national parks — the political pressure to build quickly is strong. To meet the stated goal of opening the campus to 5,000 students in fall of 2005, preliminary construction must begin in 2001, said EIP's Boxer. That schedule would require a fast-track environmental review. Contacts: Roger Samuelsen, University of California Office of the President, (510) 987-9554. Steven Johnson, The Nature Conservancy, (415) 281-0443. Roger Smith, Merced County Planning and Community Development Department, (209) 385-7654. Marsh Pitman, Merced Group of the Tehipite Chapter, Sierra Club, (209) 723-2986. Brian Boxer, EIP Associates, (916) 325-4800.

A pilot program is underway in San Diego County to self-certify the county's housing element, as well as the housing elements for each of its 18 cities. But despite San Diego's receiving the autonomy desired by many local jurisdictions, the allocation of low-income units continues to hamper the planning process. The state-approved program was designed to give local governments more flexibility in meeting affordable housing goals and avoiding oversight by the state Department of Housing and Community Development. But so far, the program overseen by the San Diego Association of Governments has run into the same roadblocks that other jurisdictions in California hit when trying to create acceptable housing elements. The association has not yet approved a regional housing statement that identifies each jurisdiction's proportion of the region's low-income housing needs — despite a June 30 deadline for the county and the 18 cities to complete their housing elements. To give SANDAG six additional months, Assemblywoman Susan Davis, D-San Diego introduced AB 411. The Assembly approved the bill in early May, but the Senate had not taken action as of late May. "It's taking longer to agree how to allocate housing needs than we had anticipated," said Susan Baldwin, senior regional planner with SANDAG. The primary issue, she said, is allocating low-income housing units, which make up 38% of the homes needed in the county. The association's board rejected a regional housing needs statement this spring, and is now scheduled to decide new alternatives by June 25. San Diego is the first county attempting to self-certify all its housing elements. "The ideas was to look and see how it worked out," said Baldwin. "It's too early to see how it's worked out." Under the law setting up the self-certification program, AB 1715 from 1995, San Diego County and its cities were supposed to show they had produced a certain number of affordable housing units during the previous housing cycle. If that can be shown, then HCD does not have to review the housing element. HCD officials sit on SANDAG's housing element advisory committee, along with representatives of local government and local groups, such as advocates of low-income housing. When lawmakers considered AB 1715, a legislative analysis said "local officials are frustrated with HCD's inflexible requirements, which are impossible to meet. The current housing element law emphasizes the preparation of a ‘planning document' instead of ‘housing production.'" The idea behind self-certification was to simplify the complicated housing element law by establishing performance standards based on production of units for cities to meet. Local government also has to produce goals for the next five-year cycle. While 10 cities in county have met their own goals for production of housing during the previous cycle and consider themselves to be self-certified, SANDAG has not figured out how many low-income units each jurisdiction must accommodate. The proposed regional housing statement rejected by SANDAG's board in March was criticized by cities that already have high numbers of low-income residents. Those cities want other jurisdictions to take more responsibility for housing low-income people. So SANDAG will now be asked to consider two new alternatives, along with the one it rejected. The total regional share allocation for 1999 to 2004 is the same — 95,479 units. But each alternative gives cities different allocations of very low-income, low-income, moderate-income and above moderate-income housing. Each jurisdiction must show that it will absorb future growth by adopting programs and zoning land for those specific housing needs. Under the alternative that was rejected in March, the mostly upper-middle-class city of Carlsbad would have to set up programs and zoning for 1,305 units of very low-income housing. Under a middle-ground alternative, it would have to do the same for 1,541 units of very low-income housing, and under the third alternative, it would have to create the same for 1,770 units of very low-income housing. In contrast, poorer National City would have to do the same for 79 units of very low-income housing under the first alternative, 43 under the second alternative, and nine under the third alternative. "All of the alternatives are pushing the jurisdictions towards a more equitable distribution of low-income and very low-income households in the region," Baldwin said. And some local officials expect the third alternative, which redistributes the low-income housing need, to pass. Catherine Rodman, an attorney for Friends of Legal Aid who sits SANDAG's Housing Element Advisory Committee, said the cities with more low-income residents are fighting harder for the third alternative than some of the county's wealthier enclaves. "The most lobbying is going to come from the National Cities, not the Del Mars," she said. So far, 10 of the county's jurisdictions have met their goals for the 1991-99 cycle and are eligible for housing element self-certification. But those goals for low-income housing were low. A recent draft SANDAG report said that because of "limited resources available for low-income housing," the annual fair share goal for each jurisdiction was 2.5% per year of each jurisdictions' low-income housing needs. Over a five-year period, the jurisdictions had to meet only 12.5% of those needs. The housing element is a state-mandated section of each city and county general plan. Under law, the housing element must show how each community will meet affordable housing targets established by state and regional agencies. HCD reviews the housing elements but enforcement generally occurs only through litigation. While San Diego's self-certification program is unique, other COGs in California are also grappling with regional share allocations as they prepare for upcoming housing element review. Due to state budget cutbacks, money was not allocated during much of the past decade for housing element work, and the work was not done. At the same time, HCD made housing element compliance a higher priority during the Wilson administration, a trend that is expected to continue under the Davis administration. More than half the state's jurisdictions are in compliance, according to Mike Rawson, director of the California Affordable Housing Law Project in Oakland. Rawson's organization serves as co-counsel on a number of housing element lawsuits. Recent cases have been against the city of Benicia, Sonoma County, Santa Cruz County, and Los Angeles County, which is being sued over its housing element policies in its approval of the Newhall Ranch project. Contacts: Susan Baldwin, SANDAG, (619)595-5300 Catherine Rodman, Attorney, Friends of Legal Aid, (619)233-8474 Mike Rawson, Director, California Affordable Housing Law Project, (510)891-9794 Jim Griffin, Director of Community Development, City of El Cajon, (619)441-1741

The long-running feud over school impact fees was supposedly settled with passage of last year's SB 50 and subsequent approval by voters of Proposition 1A, a $9.2 billion school construction and rehabilitation bond. Some city and school officials, however, continue to argue that schools need more money from developers than allowed by SB 50, and a few cities appear openly defiant of the law. In Livermore, for example, homebuilders still pay more than double the SB 50 cap of $1.93 per square foot as part of an uneasy truce with the city. "If they didn't want to pay for the impacts of their development, then we weren't going to develop any more," Livermore Mayor Cathie Brown said recently. State lawmakers, builders and school supporters last year cut a deal in which builders agreed to back the bond measure in exchange for an impact fee limit of $1.93 per square foot on new homes. The legislation also attempted to clamp down on jurisdictions that ignored a previous impact fee limit. The law went so far as to state that payment of the $1.93-per-square-foot fee was "hereby deemed to be full and complete mitigation of the impacts … on the provision of adequate school facilities." Senate Bill 50 suspended for eight years the Mira, Hart, Murrieta court precedents that let cities reject developments on the basis of inadequate schools. The measure also prohibited the often-used tactic of forcing developers to join a Mello-Roos district to raise additional funds for school construction. Despite last year's deal, the issue is not settled. An analysis by the California Chapter of the American Planning Association states, "The bill was crafted mainly behind the scenes by the legislative leadership and contains vague language, technical problems and inconsistencies as a result. … any issues will have to be addressed in follow-up legislation or court cases, since the new law does not provide clear direction in some cases, or any direction at all in others." However, Richard Lyon, senior legislative advocate for the California Building Industry Association, said people should let the new program run its course before tinkering with it. "One of the problems we have with cleanup legislation is that the program hasn't even been operating. What we've been arguing is that we need to let it operate, give it some breathing room for a couple of years before we know if cleanup is needed," Lyon said. While the new law makes clear that cities and counties cannot deny a project or require fees greater than $1.93 per square foot, questions remain over how to apply the California Environmental Quality Act. In many instances, school officials say $1.93 per square foot does not provide enough money to meet Proposition 1A's local match requirement. Under one interpretation, CEQA requires an environmental impact report for every project with unmitigable school impacts. Under another interpretation, SB 50 removes schools from CEQA review because the legislature deemed payment of $1.93 per square foot as full mitigation. Scott C. Smith, general counsel to CCAPA, recommended local agencies document the shortfall in the environmental review and note that the state prevents further mitigation. Whether that environmental review must include an EIR is a live question. There is no case law on the subject; follow-up legislation this year is unclear. Senate Bill 50 still allows school districts to issue bonds to achieve the local match, and it allows schools and cities to request — but not require — that developers pay more than $1.93 per square foot. Bay Area Cities Chart Own Course Among the most aggressive cities in exacting school fees is Livermore. Leaders of the Alameda County town vowed not to abide by the $1.93-per-square-foot maximum and instead crafted an agreement with local developers that calls for builders to pay about $5 per square foot, Mayor Brown said. The Livermore Valley Joint Unified School District will repay developers up to half of the fee if, and when, the school district receives adequate state funding to build new facilities. City officials, school district representatives and some developers hashed out the agreement to end Livermore's moratorium on new subdivisions, Brown explained. "The school district and the developers convinced the other developers we could not build new schools with the fees they wanted to pay," Brown said. Plus, the city was not going to budge. "The developers who are here now are working with us," she added. Lyon, of the CBIA, said Livermore homebuilders accepted the deal because it got Livermore schools into the state construction program for the first time. Previously, the school district insisted builders shoulder all costs of school expansion, he said. Livermore's status as a hot real estate market where developers are eager to build undoubtedly gave city leaders confidence, as did success in defending an earlier lawsuit filed by the Homebuilders Association of Northern California. In an unpublished opinion filed in February, the First District Court of Appeals upheld the city's previous method of exacting up to $6 per square foot in school impact fees. The court has since granted a rehearing. Backlash to development is pushing growth-control initiatives onto upcoming ballots in the Tri-Valley area. That citizen outcry may embolden other Tri-Valley cities to insist — somehow — on higher school fees. In Pleasanton, a citizen group called Reduce Overcrowded Campuses is insisting the school district add one high school and one elementary school to a master plan. But city and school officials did not include those additional schools in previous financing equations, which puts them face to face with the impact fee limit, said Pleasanton Planning Director Brian Swift. Pleasanton since 1992 has charged two to three times the amount allowed by state impact fee limits. (As in all jurisdictions, contracts between Pleasanton and developers for higher fees signed prior to SB 50 remain in effect.) Like the new arrangement in Livermore, developers in Pleasanton get some fees refunded if the schools receive adequate state money. The Pleasanton agreements allow for annual review. The question is whether the city could increase those agreements' school impact fees in light of SB 50, said Swift, who is doubtful. Money in the Pipeline Elsewhere in California, however, the availability of Proposition 1A funds has silenced the debate over school impact fees. James Murdoch, lobbyist for the Coalition for Adequate School Housing, said impact fees are not a subject of discussion among the group's 500 member school districts. "As a result of Senate Bill 50 and all the local bond issues that have passed, there is a ton of money out on the street, which districts are accessing to build schools," Murdoch said. Kent Hunt, spokesman for the state's General Services Department, said spending the $6.7 billion Proposition 1A earmarked for new schools is going according to the four-year allocation plan. Many CASH members are urban school districts, which are not often affected a great deal by growth, Murdoch conceded. For that reason, the coalition backed the SB 50/Proposition 1A package because it contained costs for builders and provided state funds for schools, he said. The concern for CASH has become Proposition 1A's limited funding for modernization, which totals $2.1 billion. "I think that the (Proposition 1A) money for growth is adequate. It appears that the money for modernization is not. It is being used up rapidly," Murdoch said. Murdoch is not the only person who sees the school impact fee cap having different effects on different districts. According to the California School Boards Association, small school districts may not have enough growth to generate the 50% match required to get Proposition 1A funds, and they can no longer fall back on the Mira, Hart, Murrieta cases to exact additional fees. Districts can issue bonds for the local match, but they need a two-thirds majority vote, which can be more difficult to achieve in small districts. Livermore Mayor Brown, however, contended SB 50 hit hardest in suburban cities where growth is causing the need for more schools, not in slow-growing areas with small districts. Smith, the CCAPA attorney, said nothing in SB 50 prevents city officials from asking that developers talk with school officials about higher impact fees. At the same time they make that request, city officials might want to note the marketability of a subdivision with overburdened schools, he said. Contacts: Cathie Brown, Livermore mayor, (925) 373-5149. Brian Swift, Pleasanton Planning and Community Development director, (925) 484-8023. James Murdoch, Coalition for Adequate School Housing lobbyist, (916) 441-3300. Richard Lyon, California Building Industry Association senior legislative advocate, (916) 443-7933.

The gavel came down last year on the greatest job auction of all time: The State of Kentucky agreed to give Willamette Industries up to $8.8 million in tax credits for each new job the company would provide in the City of Hawesville. As it turned out Willamette created 105 jobs instead of the required 15, so the subsidy was only $1.26 million per job. In that light, the $35 million subsidy approved last month by the Los Angeles City Council to the developer of the Playa Vista development seems like small change. This deal promises to pay a between $81,000 and $172,110, in present-day dollars, for each job created at Playa Vista. Still, at that rate, the Playa Vista deal may be a candidate for the annual "Terrible Ten Corporate Candy Store Deals" compiled by Greg LeRoy, director of Good Jobs First, a project of the Institute on Taxation and Economic Policy in Washington, D.C., LeRoy's eye-opening compendium of the Terrible Ten for 1998 was published in the May issue of The Progressive magazine. Five of the 10 deals in this year's list offered subsidies of $100,000 or more per job. In Alabama, for example, LeRoy estimates that corporations will be entitled to $6.4 billion in tax credits during the next 20 years, or $280,000 per job for the 22,668 jobs created last year by corporations that took advantage of the state's incentives. At Playa Vista, the actual tax credits range from $2,700 to $5,737 annually for 30 years, depending on the salary level and the type of job. Playa Vista is a 1,087-acre entertainment and technology-oriented development on the Los Angeles oceanfront. The development partnership, known as Playa Group, proposes 5 million square feet of industrial buildings and more than 4,000 housing units on the degraded wetlands and old industrial sites formerly owned by Howard Hughes. The most notable tenant of Playa Vista, of course, is DreamworksSKG, the new film studio created by Steven Spielberg, David Geffen and Jeffrey Katzenberg, which will use the tax credits for its expected staff of 1,000 people. Not surprisingly, Dreamworks is viewed as a sort of "anchor tenant" that can attract many other technology- and entertainment-related companies to Playa Vista. The Dreamworks lease is a big deal to the city, psychologically as well as fiscally. The agreement is one of the peak achievements of Mayor Richard Riordan's business retention efforts. Previously, the mayor's office had been active in retaining at least two other media companies, Capitol Records and Chiat Day. While any city would be pleased to hang onto major employers, Los Angeles is particularly sensitive about business retention, because the city has watched numerous corporate headquarters leave town. Predictably, there are the pointy-head types who object to big public subsidies to the likes of Dreamworks and Morgan Stanley, a partner in Playa Vista. (God knows why.) But even a cold-eyed, business-minded look at this package questions whether it is worth its salt in economic-development terms. Arguably, subsidies for a steel mill in Alabama or a paper mill in Louisiana are more defensible than the Playa Vista incentives. In depressed urban areas and in underdeveloped rural areas alike, the presence of major employers can create new "clusters," to borrow a term from the economic development experts. Not only will the big plant employ hundreds of people, but the big plant will function as an economic "anchor" for many ancillary businesses that support it, directly or indirectly — parts suppliers, messenger services, real estate brokerages, fast food restaurants, and so on. The problem with the Playa Vista deal, on the other hand, is that the economic cluster already exists. Here, we assume that Dreamworks will be the anchor tenant that will attract many smaller businesses of similar ilk. Obviously, the film business has already spawned an immense human and physical infrastructure in Los Angeles. True, Dreamworks and other new tenants can reasonably be expected to add new wealth to this infrastructure. But "the synergistic effect may be muted, because the cluster already exists," says Jeff Finkle, president of the Council on Urban Economic Development in Washington, D.C. But what about job creation, the rationale for subsidies? Playa Vista promises to become a major business center. Still, the economic benefits for the City of Los Angeles remain somewhat intangible. True, Playa Vista, a condition of receiving the tax credits, will provide an impressive 6,300 jobs exclusively for Los Angeles residents. On a regional basis, however, that seems less impressive because those jobs were going to be in the Los Angeles area anyway. Unlike Mercedes, Dreamworks cannot locate in Alabama. A major film studio can only go to Los Angeles or New York. And not just anywhere in Los Angeles: Keep in mind that film studios are major land users, sometimes covering hundreds of acres. Dreamworks will cover at least 47 acres. The most important question remains: Did Los Angeles overpay for the jobs? It depends on how you look at it. By corporate standards, the rate appears to be in the high-but-defensible range. By the standards of genuine job creation and net economic development, however, probably. Dreamworks and other entertainment-related tenants need to be in greater Los Angeles, if not in Los Angeles proper. The most attractive part of the deal is that a third of the jobs are earmarked for city residents. On the other hand, many of those jobs would have gone to Los Angeles residents anyway, because Los Angeles is where the great majority of people in the entertainment industry live. (Here we are talking about the lower- and mid-level studio, post-production and technology-related employees, not just moguls and stars.) So what is the Los Angeles City Council really paying for? In a word, marketing. Landing Dreamworks and its hangers-on means that the city can be perceived as a viable location for major entertainment companies. A major new corporate headquarters is a marketing coup for an insecure city. But let's not mistake marketing for economic development. At this point, Los Angeles residents might be forgiven for having a sinking feeling that they have waived $35 million in tax revenue merely for the privilege of saying that Los Angeles is the home of Dreamworks. Even in Tinseltown, that's a lot to pay for symbolism. But in this uncontested auction, that's exactly what Los Angeles has bought.