Building Industry Challenges Public Art Requirements

The Building Industry Association of the Bay Area has filed a lawsuit in federal court in the Northern District of California challenging the City of Oakland’s recent adoption of a public art ordinance on constitutional grounds.

The challenged Ordinance requires developers to install art works (worth at least 1/2% of the total cost of residential projects or 1% of commercial projects) as part of their developments using artists approved by the City. Builders may opt out of the public art requirement only if they pay an in-lieu fee to the City to be used to fund installation of publicly owned art on City property.

Public Art -- Oakland

BIA’s complaint in the case contends that the Ordinance’s requirements violate the Fifth Amendment by imposing exactions that do not have a sufficient nexus to an identifiable adverse impact of development, and thereby amount to unconstitutional conditions. The lawsuit also claims that the Ordinance’s requirement that developers install art works as part of their projects, and that such art be approved by the City, violates their rights to free expression under the First Amendment.  BIA seeks an injunction preventing implementation of the Ordinance.

If At First You Succeed, Don’t Try, Try, Try Again

The Fifth District Court of Appeal has confirmed that the 90-day statute of limitations under the Subdivision Map Act includes takings claims arising out of Map Act decisions. Honchariw v. County of Stanislaus, No. F069145 (Fifth Dist., June 3, 2015).  (Honchariw III)

This is the third published decision arising from denial of plaintiff Honchariw’s nine-lot subdivision. Honchariw won the first case (Honchariw I), obtaining a ruling invalidating the denial of his map for failure to make certain findings specified in the Housing Accountability Act, Government Code section 65589.5(j). (See our Nov. 18, 2011 Update). The Board of Supervisors subsequently approved the subdivision.dca_dist5

Honchariw (who was self-represented) then sought to recover attorneys’ fees against the County under the same statute.  In Honchariw II, the court of appeal rejected his claim, ruling that the statute authorized attorney fees only for denial of a development containing affordable housing, which Honchariw’s did not. (See our August 22, 2013 case report: No Affordable Housing, No Attorney’s Fees Under Housing Accountability Act).

Undeterred, Honchariw filed another lawsuit contending that the denial of his tentative map resulted in a temporary taking of his property without just compensation. He sought damages of $2.5 million for the alleged taking. The County successfully demurred on the ground the action — filed years after the challenged decision — was barred by the 90-day limitations period for actions under the Subdivision Map Act.

On appeal, Honchariw acknowledged the California Supreme Court’s 1994 decision in Hensler v. City of Glendale that an inverse condemnation claim arising from a Map Act decision was subject to that statute’s 90-day limitations period. He argued, however, that Hensler allowed the inverse condemnation action to be filed after the successful conclusion of a mandamus action challenging the decision, as long as the latter case was timely filed under the Map Act. The court of appeal rejected this expansive interpretation of Hensler. It pointed out that Hensler allowed an inverse condemnation action to be filed after the conclusion of an administrative mandamus action only if it “alleges the existence of a final judgment establishing that there has been a compensable taking of the plaintiff’s land.” In other words, the initial mandamus action must present the unconstitutional takings claim to the court as one basis for invalidation of the Map Act decision. Only if such a claim is timely filed under the 90-day Map Act statute and litigated to a successful conclusion may a plaintiff then seek damages for the unconstitutional taking. Because Honchariw’s original mandamus action did not include a takings claim, his subsequent effort to obtain damages for a taking was time-barred.

Courts Continue to Reject Claims That Reasonable Reliance on Public Agency Representations Establishes an Entitlement to an Existing Use of Property

Property owners should not rely on courts to uphold equitable estoppel claims against local agencies to establish an entitlement to an existing use of property. Under the doctrine of equitable estoppel, a public agency may be barred, or “estopped,” from asserting that an existing use of property is invalid if the property owner justifiably relied on the agency’s representation that the use was consistent with applicable zoning ordinances. In land use cases, courts are required both to find that the requirements of estoppel are met and to balance any adverse effect on public interest against the avoidance of injustice caused by failing to uphold the estoppel claims. Courts usually consider the public’s interest in maintaining the character of an area through established zoning plans and processes to be dispositive. Schafer v. City of Los Angeles, No. B253935 (2nd App. Dist., May 20, 2015).

Over the course of fifty years, Los Angeles and a property owner, Triangle Center, interacted several times regarding two adjacent lots being used as a parking lot. During this period, Los Angeles repeatedly recognized the parking lot as an existing use. No certificate of occupancy was issued at any time, however, and at one point the zoning was amended to remove parking lots as a permitted use. Ultimately, two residents of the nearby neighborhood challenged the use of the lots.

In its decision finding that the parking lot was not a legal nonconforming use, the Los Angeles zoning administrator noted that a certificate of occupancy was required. Triangle appealed this decision to the city’s planning commission, which reversed the zoning administrator’s decision, finding that its prior interactions with Triangle estopped Los Angeles from disallowing continued use of the property as a parking lot.

The two neighbors filed a petition for a writ of mandate challenging the planning commission’s decision. The trial court directed Los Angeles to set aside the planning commission’s decision. On appeal, the court affirmed the trial court’s decision, holding that the circumstances were not sufficiently exceptional to bind the government by equitable estoppel.

When evaluating equitable estoppel claims against a government, courts must balance the interests of the property owner with those of the general public. However, courts are especially wary of granting equitable estoppel against governments. The Schafer court explained that such a grant of equitable estoppel could negatively affect public policy if “estoppel can too easily replace the legally established substantive and procedural requirements for obtaining permits.”

In conducting this balancing test, the Schafer court gave heavy weight to the public’s interest in the “enforcement of the land use laws enacted by its elected representatives” and found that economic hardship alone was insufficient injustice to outweigh the public’s interest. From the perspective of property owners, the lesson stemming from this case is that one is wise to be wary of implied representations made by local agencies about the validity of an existing use. Even reasonable reliance that causes economic injury to the property owner is unlikely to be found to outweigh the public’s interest in enforcement of established zoning and permitting requirements.


The Importance of Independence: The Ninth Circuit Provides Helpful Clarification on Connected Actions in the Energy Project Development Context

The Ninth Circuit Court of Appeals has held that a right-of-way for an access road over Bureau of Land Management (BLM) land to connect a wind project to a state highway did not trigger formal consultation under the Endangered Species Act because the proposed access road would not have significant impacts to the environment. Sierra Club v. Bureau of Land Management, 786 F.3d 1219 (9th Cir. 2015).

North Sky River Energy developed a wind project on 12,000 acres of private land in the Tehachapi area. North Sky applied to the BLM for a right-of-way across federal lands for an access road to connect the wind farm with a state highway. North Sky could have accessed the highway through a private road, but preferred the access road over BLM land because the private road required substantial grading and would have greater environmental impacts. If the BLM had denied North Sky’s application, North Sky could have pursued the private road option.

After reviewing North Sky’s application and evaluating the potential environmental impacts, the BLM issued an Environmental Assessment concluding that the proposed road project would not have significant environmental impacts. Therefore, the BLM concluded that it need not prepare an Environmental Impact Statement or formally consult with the Fish and Wildlife Service under the Endangered Species Act. The BLM’s determination depended in large part on its finding that the private-road option was a viable alternative to the BLM access road project and thus the wind project had independent utility from the BLM access road project. The BLM issued a permit for the BLM access road project.

Project opponents — the Sierra Club, the Center for Biological Diversity, and the Defenders of Wildlife — alleged that the BLM right-of-way violated the Endangered Species Act and the National Environmental Policy Act (NEPA). The primary basis for the project opponents’ arguments was the theory that the environmental impacts of the BLM access road project should have been considered together with those of the wind project. They argued that when the impacts of the wind project and the access road were considered together, there would be significant impacts requiring the preparation of an Environmental Impact Statement and formal consultation under the Endangered Species Act. Continue Reading

EIR Comments Should Improve The Environmental Review Process, Not Derail It

CEQA guidelines require only that a lead agency give detailed responses to comments that identify an important new matter not discussed in the draft environmental impact report or raise questions about a significant environmental issue, the Fourth District Court of Appeal ruled, allowing Orange County to proceed with a long-considered expansion of a county jail. City of Irvine v. County of Orange, No. G049527 (4th Dist. 3rd Div., July 6, 2015).

The decision in City of Irvine resolved the third unsuccessful attempt to stop Orange County’s proposed expansion of the Musick Jail facility. Orange County first prepared an EIR for the project in 1996. The plans stalled because the county did not have sufficient funding, but the project was revived in 2012. The county certified a supplemental EIR that reflected changes to the project since the original EIR had been prepared. Irvine filed a petition for writ of mandate, asserting, among other claims, that the county’s responses to its comments on the draft supplemental EIR were inadequate.

The court of appeal held that the county’s responses to Irvine’s comments were legally adequate and, to the extent any of them might be viewed as lacking in some respect, Irvine did not demonstrate any prejudice. The court explained that the CEQA comment process can produce a better EIR by raising issues that the lead agency may have overlooked when it prepared the draft EIR. The court warned, however, that project opponents could abuse the comment process if they use it to wear down a lead agency by making onerous demands for information with the intent of delaying or derailing the project. An agency must confront comments that raise a significant environmental issue or that bring a new issue not previously addressed to the table; on the other hand, an agency need only provide brief responses to comments that are merely objections to the project itself, and a response can be sufficient if it refers to the discussion in the draft EIR of the environmental concerns raised by the comment. Based on these principles, the court concluded that the county adequately responded to Irvine’s comments.

The court also rejected Irvine’s argument that the county should have prepared a new EIR rather than a supplemental EIR. The court explained that the lead agency has discretion to choose whether to prepare a supplemental EIR or an entirely new EIR and that “the appropriate judicial approach is to look to the substance of the EIR, not its nominal title.” The court held that the county did not abuse its discretion in choosing to prepare a supplemental EIR because many aspects of the project remained the same, and the supplemental EIR (which was several times longer than the original EIR) adequately addressed new issues and changes to the project.

Finally, the court rejected two challenges to the substance of the supplemental EIR. The court held that it was sufficient for the county to evaluate traffic impacts at the beginning and end of the project, without studying interim traffic impacts during construction. The court also held that the county properly concluded that three mitigation measures for the loss of agricultural land—purchasing agricultural conservation easements, creating a transfer-of-development-rights program, and enacting a right-to-farm ordinance—were impractical because of the “astronomical” property values and lack of  agricultural land in Orange County.

Irvine demonstrates the substantial discretion that a lead agency has in preparing an EIR and the heavy burden on plaintiffs to demonstrate a prejudicial abuse of that discretion in order to successfully challenge an EIR.


Supreme Court Invalidates EPA Pollution Standards

The Supreme Court has struck down the Environmental Protection Agency’s rule limiting the amount of mercury and air toxics emitted by coal- and oil-fired power plants, finding that the agency acted unreasonably in failing to consider the cost of the regulation.  Michigan v. Environmental Protection Agency, No. 14–46 (June 29, 2015).  The Court ruled that a statutory mandate that the regulation be “appropriate and necessary” encompassed cost considerations, and that it was not “‘appropriate’ to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.”  Read our full Update here.

Coal Plant

Court Defers to San Diego’s Approval of Bridge in Balboa Park

Giving a green light to construction of a new bridge in the historic Balboa Park, a court has reaffirmed a city’s discretion to interpret and apply its own general plan and zoning ordinances notwithstanding conflicts with specific general plan policies protecting historic resources. Save Our Heritage Organization v. City of San Diego et al., No. D063992 (4th Dist., May 28, 2015).

The Balboa Park bridge project includes a new bypass bridge and paid parking garage, allowing the main portion of Balboa Park to return to a vehicle-free zone, but adversely affecting a significant historic resource in the park. Opponents challenged the project, raising several issues regarding consistency with applicable land-use plans.

Cabrillo_Bridge-2The San Diego Municipal Code requires that permits for site development “not adversely affect the applicable land use plan.” The opponents argued that because the project conflicted with several policies protecting historic resources in the City’s general plan, the project would necessarily have adverse effects on the plan. Rejecting this interpretation, the Court of Appeal held that projects need not conform to all policies of a land use plan but have to generally be “in agreement or harmony.” The City’s findings acknowledged inconsistencies with several general plan policies, but concluded that the project “would not adversely affect the General Plan and the project as a whole would be consistent with several of the goals and policies of San Diego General Plan.” Noting the great deference accorded a local agency’s determination of consistency with its own general plan, the court concluded that substantial evidence supported the City’s finding that the project would be consistent with a majority of the applicable goals and policies. Continue Reading

Don’t Bank On It: Court of Appeal Takes Issue with City’s Development Prohibition

A city cannot prohibit development on more than one-third of an otherwise developable site in anticipation of future condemnation of that portion of the property. Such a restriction denies the landowner all economically beneficial use of the restricted land and constitutes a taking requiring just compensation. Jefferson Street Ventures, LLC v. City of Indio, No. G049899 (4th App. Dist., April 21, 2015).

Jefferson Street Ventures owned a vacant 27-acre parcel that included the site of a long-proposed highway interchange project. In 2005, Jefferson submitted a proposal to the City to develop a retail shopping center on its entire parcel. At the time, the federal and state agencies involved in the interchange project were in the process of completing environmental reviews to satisfy NEPA and CEQA. The City could not acquire property for the interchange until the environmental reviews were completed.

indio-california12The City Council did not approve development of the entire 27-acre parcel, but rather conditioned approval of Jefferson’s master plan on leaving nine acres for the future interchange undeveloped and reserving a two-acre temporary no-build area for a highway off-ramp during the interchange construction. The City Council included the conditions based on the advice of its staff that it would be much more expensive to acquire property for the interchange project if Jefferson developed the entire site because the City would then incur additional condemnation costs for demolition of buildings and relocation of tenants

The court of appeal held that the City’s conditional approval of Jefferson’s development plan resulted in an uncompensated taking of the 11 acres. A regulation that deprives a landowner of all economically beneficial or productive use of its property is a per se taking that requires just compensation. Under all applicable land use regulations, Jefferson’s entire 27-acre property was developable, and its master plan was in full compliance with governing regulations. Continue Reading

“True Lease” Required for Lease-Leaseback Exemption from Public Bidding

In a decision that may imperil many pending school construction transactions, the Fifth District Court of Appeal has held that, to qualify for exemption from public bidding, a lease-leaseback transaction must include “a financing component” and a “genuine lease” that provides for school district use of the facilities during the lease term. Davis v. Fresno Unified School District, No. F068477 (Fifth Dist., June 1, 2015). The court determined that the contract before it did not meet these criteria and hence was subject to competitive bid requirements under the Public Contract Code.gaston-front

Contracts for construction of school facilities exceeding $15,000 ordinarily must be competitively bid. An exception to public bidding exists under Public Contract Code § 17406, which provides that a district “without advertising for bids, may let . . . real property that belongs to the district if the [lease] requires the lessee . . . to construct . . . a building or buildings for the use of the school district.” Under such a “lease-leaseback” arrangement, the district leases land to the contractor on which the contractor agrees to build school facilities to be leased back to the district for a specified time and rental amount. At the end of the lease term, title to the school facilities must vest in the school district. § 17406(a)(1).

The Fresno Unified School District entered into such a lease-leaseback arrangement for construction of a $36 million middle school. Plaintiff challenged the arrangement, arguing that the contract did not create a true lease or satisfy other criteria under Section 17406, and hence was not exempt from public bidding. Continue Reading

California Supreme Court Broadly Construes Municipal Power to Enact Affordable Housing Measures

In a case closely watched by home builders, low-income housing advocates, and cities and counties throughout the state, the California Supreme Court has strongly endorsed inclusionary housing ordinances, ruling that they are legally permissible as long as it can be shown the ordinance is reasonably related to the public welfare. California Building Industry Association v. City of San Jose, No. S212072 (Cal. Sup. Ct., June 15, 2015). The court rejected a claim that a city may only impose inclusionary housing requirements on new residential development projects it if first shows that the need for affordable housing is attributable to new development.

supremecourt-March2015_bannerThe City’s Inclusionary Housing Ordinance. In order to respond to the lack of sufficient housing affordable to low and moderate income residents, many California cities have adopted “inclusionary housing” programs, which require developers to set aside units in new residential development projects for low and moderate income households. San Jose’s inclusionary housing ordinance, for example, requires that the sale price of at least 15 percent of for-sale units in projects of 20 or more units be affordable to low or moderate income households. The ordinance gives developers the option of meeting their inclusionary housing obligations by constructing affordable units off site, paying an in-lieu fee or dedicating land of an equivalent value, or acquiring and rehabilitating a comparable number of inclusionary units. The ordinance also provides various incentives to encourage developers to meet the ordinance’s affordable unit requirements onsite. Continue Reading