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A Punching Bag Called Local Government

The clamp on local governments in California grows only tighter and tighter.

The number and detail of state mandates continues to increase. The ability to raise revenue continues to decrease. The amount of litigation never decreases. Redevelopment is in doubt. Keeping a city or county out of financial or legal trouble seems to get more difficult every year.

Those were the implicit and sometimes explicit messages during the UCLA Extension Land Use Law and Planning Conference in Los Angeles last Friday. As always at the conference, expert practitioners and analysts reviewed last year's lawmaking, rulemaking and courtroom activity, and speculated about the year ahead. It was difficult to detect many rays of light for cities or counties.

Naturally, everybody was abuzz about the future of redevelopment. San Gabriel City Manager Steve Preston described the situation as "turmoil" right now. Since Gov. Brown revealed a budget proposal that would eliminate local redevelopment authority, a number of redevelopment agencies have taken hasty action to obligate tax increment revenues in order to protect the money from the state. However, the administration, the Legislative Analyst's Office and others in Sacramento are looking skeptically at the quick activity, and it's likely that the state will define "obligate" very tightly, Preston warned.

Regarding other revenues, we learned that under Proposition 26, "a charge is a tax unless it's not," said Peter Detwiler, staff director of the state Senate Governance and Finance Committee. The Chamber of Commerce-backed the initiative requiring two-thirds voter approval for any revenue increase except those in seven exempt areas. Detwiler said development impact fees grounded on a solid nexus study or general plan are exempt, as are permit processing fees.

However, conference co-chair Susan Hori, a partner at Manatt, Phelps & Phillips, was not so sure about the status of development impact fees because the Proposition 26 language is vague. The building industry is hinting that impact fees may not be exempt, and things like indirect source fees that some air pollution control districts have begun to exact could be targets for Proposition 26 challenges, she said.

Hori said that cities and counties could get around Proposition 26 by signing development agreements, because developers willingly accept any fees or taxes that are part of such an agreement. But attorney William Abbott, of Abbott & Kindermann, pointed to a recent court case as a warning about development agreements. In Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes, the city was ordered to pay $32 million in damages and attorneys fees for violating a development agreement. The city was liable because a development agreement makes a city subject to contract law, limiting the city's discretion, he explained.

Attorneys Michael Zischke, of Cox, Castle & Nicholson, and Susan Brandt-Hawley, who runs a small Sonoma County law office, made clear just how often cities and counties find themselves defending California Environmental Quality Act lawsuits. The attorneys, who typically represent opposite sides, covered no fewer than 25 CEQA decisions that the California Supreme Court or state appellate courts handed down during 2010, including 17 in which a city or county were directly involved. Local governments won some, lost some and even these two experienced attorneys often disagreed on what decisions meant. Still, it wasn't hard to draw a few conclusions: A city or county dealing with a controversial land use matter will get sued on CEQA grounds, and success in court depends on factors not entirely within the local government's control.

Of course, an environmental impact report for a development project or growth plan needs to explain very clearly the sources of water to serve future homes and businesses. Hori recommended that all water assessments take note of extensive litigation over management of the Delta smelt, because that litigation has the potential to restrict the export of water from the Sacramento-San Joaquin River Delta. The litigation has been ongoing for years and is nowhere near a final resolution. Good luck with plans that rely on imported water even water that the State Water Project has delivered in the past.

On a different environmental front, David Smith, a vice president of development company DMB Associates, noted a quandary that will arise as regional planning agencies move forward on SB 375 implementation and the required sustainable communities strategies. The point of the law is to encourage denser development in advantageous locations. This development should provide regional benefits, but it will cause localized congestion which raises both CEQA and local political issues for cities.

And there was more. Senate Bill 812 from last year requires housing elements to analyze the needs of developmentally disabled people. It's a noble concept, but how, Detwiler asked, are city planners supposed to comply with this mandate? He offered no suggestions.

The Williamson Act has served as the cornerstone for agricultural land preservation in California since the 1960s, but its future is "very uncertain," Detwiler observed. The state this fiscal year is providing $10 million to counties that lose money because of Williamson Act property tax breaks, but even that minimal amount is unlikely to survive the current budget debate.

I continue flipping the pages of my notebook and the 450 pages of conference materials looking for an encouraging sign for local government. I'll let you know if I find one.

Paul Shigley

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