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

Controversial Clean Water Act Rule Published

The Environmental Protection Agency and Army Corps of Engineers published a final rule on May 27, 2015 to redefine the critically important term “Waters of the United States” under the federal Clean Water Act.

  • The rule explains the agencies’ jurisdiction with respect to “tributaries” and “adjacent” waters and comes amidst considerable debate over where to draw the lines of federal permitting authority.
  • The rule affects virtually every type of land development and resource utilization, especially in the West, where the Act’s coverage over ephemeral and intermittent streams is particularly controversial.

The new rule will almost certainly be challenged in the courts and in Congress. In this update, we analyze the details and impact of the new rule.  Read our full Update here.

Fish and Wildlife Service Launches Regulatory Initiative on Migratory Bird Incidental Take

For the first time since the Migratory Bird Treaty Act was enacted in 1918, the federal government is proposing a permit system to authorize the incidental take of the more than 1,000 species of migratory birds.

  • The Migratory Bird Treaty Act is strict liability criminal law, and it has been the subject of several recent high-profile enforcement actions against energy project developers.
  • The notice describes a three-tier system for incidental take authorizations—MOUs for federal agencies, general permits for specified industry sectors and individual permits for all other projects.

The new permit system is likely to have significant effects on projects that regularly impact migratory birds.  Read our full Update here. 

Vesting Rights Restrictions of Subdivision Map Act Do Not Bind Water District

A water district is not subject to the same vesting rights as a local agency under the Subdivision Map Act. Thus, the Subdivision Map Act does not restrict a municipal utility district’s authority to require an easement as a condition of providing water service to a residential lot on a newly-subdivided parcel. Tarbet v. East Bay Municipal Utility District, First Appellate District Case No. A140755, April 29, 2015.

In 2005, the County of Alameda approved a parcel map which subdivided a parcel into three lots. A condition of approval required that that each lot be connected to the East Bay Municipal Water District water system and the parcel map included an easement for a District water main. When the subdivider sought a letter confirming that water service would be available for each lot, the District indicated it would provide water service contingent upon compliance with its regulations.

EBMUDTarbet bought one of the lots and applied for water service. The District provided a water service estimate for installing a service connection, based on an additional 15-foot easement onto Tarbet’s property for the installation and maintenance of a water main and drain valve. Tarbet rejected the requested easement, and the District consequently refused to provide service. Continue Reading

Court Rejects Another Attempt to Stop New Kings Arena

Opponents of the Sacramento Arena project took another shot at halting the new Kings arena project, challenging the city’s certification of the project EIR on a variety of grounds. But the Court of Appeal upheld the city’s certification of the EIR, rejecting every one of the opponents’ arguments.  Saltonstall v. City of Sacramento, 234 Cal. App. 4th 549 (2015).

Arena-NightThe Project

The Sacramento Kings have played in Sleep Train arena, located in the Natomas area of Sacramento, since it opened in 1988. In March 2013, an investor group presented a plan to acquire the Sacramento Kings, construct a new downtown arena in partnership with the City, and keep the team in Sacramento on a long-term basis. The city council approved a preliminary nonbinding term sheet for development of a new entertainment and sports center in downtown Sacramento at the site of the Downtown Plaza. In 2013, the National Basketball Association approved the sale of the Kings to the investor group, reserving the right to acquire and relocate the franchise to another city if a new arena was not opened in Sacramento by 2017.

To facilitate meeting this deadline, the Legislature amended CEQA exclusively for the downtown arena project to expedite the environmental review process. The legislation also specifically allowed the city to prosecute an eminent domain action for the arena site prior to completing CEQA review.

Consistent with these accelerated deadlines, the city engaged in an expedited review process starting in April 2013. In January 2014, the city council adopted a resolution to acquire the site for the new arena by eminent domain and, in May 2014, certified the final EIR and approved the project.

Project opponents promptly sued, challenging the constitutionality of state legislation that modified several deadlines under CEQA. The court of appeal rejected the opponent’s constitutional challenge to the state CEQA legislation. Undeterred, opponents filed this second action challenging various aspects of the CEQA review performed for the project. Continue Reading

Mello-Roos Financing May Be Used to Acquire a Private Water Utility Through Eminent Domain.

An agency may acquire the assets of a private utility through condemnation using Mello-Roos bond financing, including intangible property incidental to the real or tangible property being acquired. Golden State Water Co. v. Casitas Municipal Water District, 235 Cal. App. 4th 256 (2015).Water Facilities

Upon petition by the City of Ojai, the Casitas Municipal Water District elected to acquire all of the assets of Golden State Water Company, a private utility, and take over Golden State’s water service in Ojai. Casitas formed a Mello-Roos Community Facilities District (CFD) to finance the purchase, and took steps to acquire the assets through eminent domain. Golden State filed a reverse validation action seeking to invalidate the resolutions forming the CFD and authorizing the bond financing. It argued that Mello-Roos financing cannot be used to finance acquisition of property by eminent domain or to acquire intangible assets such as goodwill and contractual water rights.

The Court of Appeal rejected the challenge, finding no support for the proposition that Mello-Roos cannot be used to acquire property through eminent domain. Observing that the Act states that its provisions shall be liberally construed, the court found that the word “purchase” in the Act connoted acquisition in exchange for compensation regardless of whether the property was being acquired voluntarily. In an acquisition by condemnation, the court noted, the public entity must pay the same price the owner would have received in an arm’s length transaction. Given the obvious practical need in certain circumstances to use condemnation powers, the court concluded that the word “purchase” was properly construed to include taking by eminent domain upon payment of just compensation. Continue Reading