Redevelopment, Real Estate and Housing

Bad Landlords Beware – Annual Inspections of Rental Property Upheld

A California Court of Appeal just upheld a 2010 City of Santa Cruz ordinance which calls for annual inspections of all residential rental properties within City limits.  (See, Harold Griffith v. City of Santa Cruz, July 16, 2012, 12 C.D.O.S. 8036.)  Under the ordinance, residential rental units that are not owner-occupied are subject to an annual inspection by City staff; annual registration and annual fee per unit.  (SCMC, section 21.06.010 et seq.)   Griffith filed a writ of mandate seeking to invalidate the ordinance on numerous grounds including:  that it was preempted by the State Housing Law and violated the 4thAmendment Right to Privacy; Equal Protection and,  Proposition 218  - because the “fee” was really a “tax” that had not been voted on by the property owners.

SB 654 Introduced To Preserve $2 Billion In Redevelopment Funds For Cities And Counties

On January 4, 2012 Senate President Pro Tem Darrell Steinberg introducedSenate Bill 654, which (if passed) would allow municipalities to permanently retain the portion of redevelopment dollars earmarked for affordable housing projects. According to Steinberg, the bill is intended to preserve for affordable housing the roughly $2 billion in outstanding balances in the Low and Moderate Income Housing funds maintained by redevelopment agencies throughout the state.

For a copy of the proposed bill, click here.

Court Upholds Redevelopment Dissolution Bill, Strikes Voluntary Payment Bill

The California Supreme Court today issued an opinion in the California Redevelopment Association v. Matosantos case, upholding Assembly Bill x1 26 (the "Redevelopment Dissolution" bill) and invalidating Assembly Bill x1 27 (the "Voluntary Payment" bill). The Court provided a four month extension for all deadlines contained in AB x1 26 that arise prior to May 1, 2012. As a result, effective February 1, 2012, all redevelopment agencies in California will be dissolved.

Prior to their dissolution, agency activities are limited to carrying out "enforceable obligations" as defined in AB x1 26. Following dissolution, the successor entity (the city or county that formed the agency, unless such jurisdiction elects not to fill this role) is charged with winding up the affairs of the dissolved agency, subject to review by an oversight board composed of representatives appointed by the city, the county, the local school district, the local community college district, and the largest local special district. By March 1, 2012, the successor entity is required to prepare a draft recognized obligation payment schedule describing enforceable obligations payable during the period from January through June 2012. The successor entity is directed to dispose of the assets of the former redevelopment agency with the proceeds to be transferred to the county auditor-controller for distribution to local taxing entities. The successor entity may elect to retain the housing assets and functions previously performed by the redevelopment agency; however, funds on deposit in the Low and Moderate Income Housing Fund are not retained by the successor entity.

The Court held that AB x1 27 (the measure that would have permitted cities and counties to continue the operation of their local redevelopment agency by agreeing to make specified payments for the benefit of schools and special districts) violates Proposition 22, the ballot measure adopted in 2010 that limits the legislature's ability to require local government payments.

Six justices signed the majority opinion. The Chief Justice issued a dissenting and concurring opinion in which she opined that AB x1 27 does not on its face compel the violation of Proposition 22.

Please contact any member of the Meyers Nave Redevelopment Practice Group for further information at 800.464.3559. 

Challenge Filed Against Redevelopment Bills ABX1 26 and ABX1 27

The California Redevelopment Association (CRA) and the League of California Cities (LOCC) together with named Plaintiffs, the City of Union City and the City of San Jose, filed a petition on Wednesday, July 18 asking the California Supreme Court to overturn Assembly Bill X1 26 and Assembly Bill X1 27.  These bills would dissolve Redevelopment Agencies unless their sponsoring jurisdictions agree to make payments in support of local taxing entities. The petition alleges that the bills violate the California Constitution, including Propositions 1A and 22, it requests the Court to issue a stay on the implementation of the bills by August 15, and it requests a decision on the merits by December 20.

Next Steps for Redevelopment Agencies After Passage of Dissolution and "Pay to Play" Assembly Bills

On Tuesday, the Legislature approved the latest budget proposal (SB 87) and sent the previously passed trailer bills, AB 1X 26 and 27, to the Governor for signature. The California Redevelopment Association and the League of California Cities will be filing legal actions in efforts to invalidate the legislation and obtain a stay on implementation. 

If the legislation is upheld, redevelopment agencies will need to decide whether they should dissolve in accordance with AB1X26, or "pay to play" in accordance with AB1X27. This is a decision that should be analyzed in light of the particular circumstances of each redevelopment agency. Agencies should evaluate projects in process, property and other assets the city and agency may lose if the agency is dissolved, whether future net tax increment will be sufficient to fund planned redevelopment activities, and whether the agency can make the payments required by the legislation. 

City Approval Of Preliminary Terms for New Football Stadium Was Not A Project Approval And Did Not Violate CEQA

Cedar Fair, L.P. v. City of Santa Clara

In the latest case interpreting Save Tara, the Sixth District Court of Appeal found that the City of Santa Clara did not violate CEQA when it approved preliminary terms for a new football stadium. The City had adopted a 39-page Stadium Term Sheet which detailed proposed construction, financing and other provisions for development of a stadium for the 49ers National Football League team. Despite the detailed description of the proposed stadium project and supportive statements by City officials, the court determined that the term sheet did not commit the City to approve the stadium project and did not rule out consideration of mitigation measures or alternatives in later CEQA reviews.

This case confirms the Save Tara principles that determining whether a development-related agreement constitutes a project approval under CEQA is highly factual. In addition to extensive discussion of Save Tara, the analysis sets forth the relevant facts from the stadium term sheet and "surrounding circumstances" and shows how they balance in favor of the City's action in this instance. The recent Parchester Village Neighborhood Council case cited in the decision also balanced the relevant facts in favor of a city action, finding that approval of a municipal services agreement was not a project approval. By contrast, the Riverwatch case cited in the decision determined that a water district agreement to provide recycled water to a landfill operator was invalid because it committed the agency to action without benefit of CEQA compliance. Through Cedar Fair and other recent cases, the courts are providing useful guidance on how the facts of a particular situation may weigh one way or the other in the Save Tara balance.

Go here for the full analysis of the Cedar Fair case.

Mobile Home Rent Control Ordinances Still a Viable Option in California

On May 17, 2011, the U.S. Supreme Court refused to hear a developer’s challenge to the City of Goleta’s mobile home rent control ordinance, ending a long court battle over the future of the high value real estate and the validity of rent control regulations for mobile home parks in California.  (See Guggenheim, et al. v. City of Goleta, 598 F.3d 1061 (9th Cir.(Cal.) Mar 12, 2010), cert denied --- S.Ct. ----, 2011 WL 884881, 79 USLW 3554 (U.S. May 16, 2011).)  In December, an en banc panel of the Ninth Circuit upheld the ordinance, rejecting the Guggenheim’s regulatory takings claim finding that none of the three factors for establishing a regulatory taking, set forth Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), were satisfied.  (Click here to read prior post on Ninth Circuit ruling.)  This decision affirms the validity of rent control regulations as a tool for municipalities to provide housing options for lower income residents. 

Mobilehome Park Rent Control – the Battle Continues

The battle between private property owners and municipalities over the constitutionality of rent control ordinances for mobile home parks wages on. Owners of a mobilehome park in the City of Goleta, the Guggenheims, have filed a petition for certiorari seeking U.S. Supreme Court review of the Ninth Circuit’s rejection of their Fifth Amendment takings claims in July 2010. Their petition asks the Supreme Court to reverse the Ninth Circuit’s decision and find that the City’s ordinance caused a taking of their property. (Click here to see the Guggenheim v. City of Goleta petition for certiorari.)

In 1997, the Guggenheims purchased the mobilehome park subject to rent control under a County ordinance. The ordinance was adopted by the City of Goleta when it incorporated in 2002. The Guggenheims promptly sued the City claiming the rent control ordinance caused a taking of their property without payment of just compensation. The trial court granted summary judgment for the City, but a three judge panel of the Ninth Circuit reversed in a controversial decision. The Ninth Circuit granted the City’s request for a rehearing en banc and affirmed the trial court decision in favor of the City.

The Guggenheims’ argue that the Ninth Circuit’s en banc decision conflicts with the Supreme Court’s holding in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), conflicts with decisions from other federal and state appellate courts and is “a major blow to private property rights.” In essence, the Guggenheims seek to restrict the authority of local governments to adopt land use regulations affecting private property unless the government compensates the property owner, and/or any subsequent owner, for any economic impact of the regulation either at the time of adoption or at any time in the future.

Appellate Court Finds that Inclusionary Housing Requirement is Not an Exaction, Therefore Challenge is Time-Barred

Trinity Park v. City of Sunnyvale

In a decision supportive of local inclusionary housing ordinances, the Sixth District Court of Appeal ruled that a subdivider's challenge to a development condition requiring below market rate housing was not governed by the AB 1600 Mitigation Fee Act statute of limitations. The case is primarily analyzed as a statute of limitations issue, but in the course of the analysis, the court finds that Sunnyvale's affordable housing requirements were imposed as land use restrictions, and were not subject to AB 1600, the Mitigation Fee Act. Accordingly, the applicable limitations period was 90 days based on the Subdivision Map Act and Government Code section 65009(c)(1)(E). Since the developer did not file its challenge within the 90 day limitations period, the complaint was time-barred (Trinity Park v. City of Sunnyvale, ___ Cal.App.4th ___, March 24, 2011).

This is a good decision for local inclusionary housing ordinances. The court's ruling that the inclusionary requirements were not subject to the Mitigation Fee Act eliminates the Act as a potential source of challenge for similar local ordinances that are not imposed to defray the costs of public facilities for a development project pursuant to section 66020. The decision does not insulate inclusionary ordinances from other sources of challenge, but it does limit the potential for challenge based on the Mitigation Fee Act definition of an exaction. Apart from the inclusionary housing issue, the court reminds land use practitioners of the general rule that "the applicable statute of limitations depends on the nature of the cause of action...". Especially in today's complex entitlement processes where there may be multiple types and layers of land use approvals, there may also be the potential for multiple statutes of limitations. Determining the correct statute(s) of limitations requires a careful examination of the nature of the approval and the particular action being challenged.

Go here for the full analysis of Trinity Park v. City of Sunnyvale.

Proposed Legislation to Address Governor's Proposal to Destablish Redevelopment Agencies

Late in the afternoon on Wednesday, February 23rd, the State Department of Finance released language for a proposed budget trailer bill that addresses the Governor’s proposal to disestablish redevelopment agencies. The 26-page bill has not yet been formally introduced, but may be introduced and considered by the Budget Conference Committee within the next few days. It is likely that the bill will undergo modification prior to consideration by the legislature, and if adopted, the bill may be subject to legal challenge.

The proposed legislation states that it is an urgency measure that would take immediate effect upon approval by the legislature and signature by the Governor. Although urgency legislation normally requires approval by two-thirds of both the Senate and Assembly, it is possible that the legislation may be included as part of the budget package and become effective with majority approval and the Governor’s signature.

Go here to read the full summary of the Department of Finance proposed trailer bill as released on February 23rd.

Community Facilities District Financing Triggers Prevailing Wage Requirements For All Public Improvements of a Project

In Azusa Land Partners v. Department of Industrial Relations, the Second Appellate District Court of Appeal has upheld the California Director of Industrial Relations and the Superior Court of Los Angeles County in determining that use of Mello-Roos bonds to fund certain infrastructure required for a city’s approval of a mixed-use project requires payment of prevailing wages for the construction of all public facilities and infrastructure improvements required for the Project, and not just the public improvements funded by the bond proceeds.

In 2004 Monrovia Nursery entered into a Development Agreement with the City of Azusa (the City) for development of over 1,200 homes, 50,000 square feet of commercial construction, and public improvements and infrastructure, including a public school, park, sanitation district facilities, landscaping, and backbone infrastructure for the cities of Glendora and Azusa. The Nursery’s successor-in-interest, Azusa Land Partners (ALP) then entered into a Funding and Acquisition Agreement (Acquisition Agreement) with the City to provide partial funding of the required public facilities through establishment of a Community Facilities District to sell Mello-Roos tax bonds. The Acquisition Agreement initially referred to the eligible facilities simply as “Publicly Financed Facilities.” After the Mello-Roos bonds were issued, the City and ALP modified the Acquisition Agreement to identify specific, publicly financed facilities eligible for Mello-Roos funding.

The Acquisition Agreement required ALP to perform the public improvement work as a condition of approval of the project even if the actual cost exceeded the amount of bond funds. The bond proceeds funded a little less than half the actual cost of the public improvements, with the balance funded privately.

In 2007 the Director of Industrial Relations determined that the entire Project constituted a public work subject to prevailing wage requirements within the meaning of Labor Code Section 1720(a)(1). The Director also determined that the Project qualified for the partial prevailing wage exemption in Labor Code Section 1720(c)(2) under which only those public infrastructure improvements required as a condition of regulatory approval are subject to prevailing wage requirements, as long as the public funds contributed do not exceed the construction cost for the public improvements and the public entity does not retain a proprietary interest in the project. This determination was affirmed on administrative appeal in 2008.

ALP contended that only the public improvements actually funded by the Community Facilities District should be subject to prevailing wages and filed a petition for writ of mandate, which the trial court denied. The trial court found that Mello-Roos bond proceeds are public funds, the project is a “public work,” and that all public improvement work required as a condition of regulatory approval is subject to the prevailing wage law, regardless of the source of funding.

On appeal by ALP, the court of appeal stated that the entirety of Labor Code Section 1720 must be examined in analyzing prevailing wage issues, rather than focusing on select portions as ALP did. The statute should be liberally construed in keeping with the overall purpose of protecting employees on public works projects. The court addressed three specific arguments advanced by ALP.

First, the court rejected ALP’s contention that Section 1720(a)(2), defining public works as “[w]ork done for irrigation, utility, reclamation, and improvement districts…” limited application of prevailing wage requirements to work actually funded through the Community Facilities District. The court noted that the statute references “work done for” rather than “work paid for” by an improvement district, that all of the public improvement work was eligible for funding by the Community Facilities District and was required as a condition of regulatory approval, and that all work done for an improvement district is public work. Most important, the court found that the duty to pay prevailing wages on public works cannot be limited or eliminated by contract, such as specifying only certain public works that will be funded from Mello-Roos bond proceeds.

Next, the court determined that Mello-Roos bond funds “are public funds under the plain language of section 1720 and the Mello-Roos Act.” In so doing the court distinguished Mello-Roos bond financing from mere “conduit” financing where a public entity assigns its rights, including possession and control of the money, to a third party. The court also rejected ALP’s argument that Mello-Roos bond proceeds are akin to a government loan, the repayment of which is not contingent and is not at less than market rate interest.

Finally, the court held that use of the Mello-Roos bond proceeds to fund even a portion of the required public improvements triggered prevailing wage requirements for the entire project, subject to the Section 1720(c)(2) partial exemption. (The court also distinguished the analysis in Vineyard Creek Hotel & Conference Center, Redevelopment Agency, City of Santa Rosa (Oct. 16, 2000) Dept. Industrial Relations, PW 2000-016, which used a five-part test to determine whether “public” and “private” portions of a project were sufficiently integrated to impose prevailing wage requirements on the entire project, because the issue in Azusa was whether all public improvements should be subject to prevailing wages, and not the scope of the entire project. Following Azusa, it is unclear what effect the Vineyard Creek analysis may have in determining project scope outside the context of the Section 1720(c)(2) partial exemption.) The public improvements required for the project meet the test of the Section 1720(c)(2) partial exemption: The work was required as a condition of regulatory approval, the work cost more than the City’s contribution of public funds, and the City maintained no proprietary interest in the Project. The court found that applying ALP’s more narrow interpretation would result in developers being permitted to allocate lump sum public contributions to specific structures in order to minimize payment of prevailing wages and would thereby “render ineffectual” prevailing wage requirements for required public improvement work.

Ninth Circuit Rejects Takings Challenge to Affordable Housing Regulations and Endangered Species Protections

The City of Cotati has defeated the Pacific Legal Foundation ("PLF") in a challenge to the City's affordable housing regulations and protections for the endangered California Tiger Salamander ("CTS").

In Mead v. City of Cotati, Ninth Circuit Case No. 09-15005, PLF sued the City and state and federal wildlife agencies on behalf of a housing developer alleging various constitutional claims resulting from two conditions included in the Cotati Planning Commission's decision to issue a permit for his project - (1) comply with the City's affordable housing regulations and (2) comply with guidance issued by the wildlife agencies for the protection of the endangered CTS.

The Pacific Legal Foundation argued that both conditions were exactions and therefore should be analyzed under the takings test set forth in Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994). They then argued that equitable relief is an available remedy under the Nollan/Dolan test and asked the court to enjoin the City from enforcing the two conditions. The City, represented by Meyers Nave, disagreed and explained that (1) the issues were not ripe for review, (2) a generally applicable development fee is not a land use exaction, and 3) the proper test to determine whether a taking had occurred was the Penn Central test, not the Nollan/Dolan test.

During the litigation, PLF announced on its website that the lawsuit against the City of Cotati was ground zero in its national campaign to eradicate affordable housing regulations and to change takings law in favor of property owners. On July 22, in an unpublished opinion, the Ninth Circuit affirmed the dismissal of the case by the District Court for failure to state a viable claim and rejected PLF's entreaties to soften the takings standards for property owners. In reaching its conclusion, the court agreed with the City on all grounds. This decision reaffirms the viability of the ripeness doctrine and the limited application of the Nollan/Dolan takings test in the Ninth Circuit.

Ninth Circuit Clarifies Scope of Owner/Operator Liability Under CERCLA

Attorney Authors: 

On July 22, 2010, in State of California Department of Toxic Substances Control v. Hearthside Residential Corporation, the Ninth Circuit held that owner liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) is measured from the date cleanup costs are incurred rather than the date the lawsuit seeking reimbursement for cleanup costs is filed.

In this case, Hearthside Residential Corporation (Hearthside) purchased an undeveloped tract of wetlands in 1999 that it knew was contaminated with polychlorinated biphenyls (PCBs). Two years later, Hearthside entered into a consent order with the State of California Department of Toxic Substances Control (DTSC) under which it agreed to remediate its property. Hearthside, however, refused to remediate adjacent residential parcels that DTSC believed had been contaminated by the PCBs on Hearthside’s property. As a result, DTSC contracted to clean up the adjacent parcels itself and incurred cleanup costs between July 2002 and October 2003.

Hearthside completed the remediation of its property in December 2005, and then sold it to the California State Lands Commission that same month. In 2006, DTSC filed a lawsuit against Hearthside under CERCLA seeking reimbursement for the cleanup costs DTSC had incurred to remediate the adjacent parcels. DTSC alleged that Hearthside was liable as an “owner” under CERCLA because Hearthside’s former property was the source of the contamination and Hearthside owned the source property at the time DTSC incurred cleanup costs. Hearthside denied liability, arguing that it was not an “owner” under CERCLA because ownership status is determined at the time the lawsuit is filed, and Hearthside was not the owner of the source property at the time DTSC filed its complaint.

CERCLA is silent as to the date from which ownership is measured. Therefore, the Ninth Circuit looked to CERCLA’s statute of limitations and purpose to determine how ownership should be measured . The Ninth Circuit concluded that measuring ownership at the time cleanup costs are incurred is most consistent with CERCLA’s statute of limitations, which accrues from the time a removal action is completed or a remedial action is initiated on a site, and with CERCLA’s purposes of encouraging responsible parties to clean up property quickly and to achieve an early settlement with environmental regulators.

Since 2001, former property owners were deemed responsible parties under CERCLA only if they owned the property at the time the contamination occurred. Now, under the Ninth Circuit’s holding, former property owners may also be responsible parties if they owned the property at the time cleanup costs were incurred.

Affordable Housing Regulations Survive Another Challenge

The City of Cotati has defeated the Pacific Legal Foundation ("PLF") in a challenge to the City’s affordable housing regulations and protections for the endangered California Tiger Salamander. (Click link to read the opinion in Mead v. City of Cotati, Ninth Circuit Case No. 09-15005.) In 2008, PLF sued the City and state and federal wildlife agencies on behalf of a housing developer alleging various constitutional claims resulting from two conditions included in the Cotati Planning Commission’s decision to issue a permit for his project – comply with the City’s affordable housing regulations and comply with guidance issued by the wildlife agencies for the protection of the endangered California Tiger Salamander ("CTS"). On PLF’s website they announced that the lawsuit against the City was ground zero in their national campaign to eradicate affordable housing regulations and to change takings law in favor of property owners. On July 22, in an unpublished opinion, the Ninth Circuit affirmed the dismissal of the case by the District Court for failure to state a viable claim and rejected PLF’s entreaties to soften the takings standards for property owners. Not surprisingly, this case no longer appears as the poster child on PLF's website.

Redevelopment Plan Invalidated Due to Insufficient Blight Findings

Attorney Authors: 

In County of Los Angeles v. Glendora Redevelopment Project, the Court invalidated the City of Glendora’s Redevelopment Plan for the Merged Glendora Redevelopment Project (Plan) because the Court found that the administrative record did not contain substantial evidence of physical blight in the project area.

The Plan was adopted by the City Council of the City of Glendora in July 2006. The Plan amended the redevelopment plans for three of the City’s existing project areas, created a new project area and merged all four project areas for financing purposes and to extend the redevelopment agency’s power of eminent domain. The ordinance adopting the Plan contained findings that blight exists in the newly created project area and that it remains in the three existing project areas.

The County of Los Angeles filed a reverse validation action in September 2006 challenging the adoption of the Plan on the grounds that Glendora’s blight findings were not supported by substantial evidence. The trial court determined that Glendora’s blight findings were not supported by substantial evidence and invalidated the Plan on that basis.

On appeal, the Court considered whether Glendora’s blight findings satisfied the criteria for physical blight in Section 33031 of the Community Redevelopment Law, as it read in 2006 when the Plan was adopted. Physical blight under the 2006 iteration of Section 33031 included the following four conditions: (1) buildings in which it is unsafe or unhealthy for persons to live or work; (2) factors that prevent or substantially hinder the viable use or capacity of buildings or lots; (3) adjacent or nearby uses that are incompatible with each other and which prevent the economic development of those parcels or other portions of the project area; and (4) the existence of subdivided lots of irregular form and shape and inadequate size for proper usefulness and development that are in multiple ownership.

The Court found that there was no substantial evidence of physical blight in the project area under any of the four categories in Section 33031. Glendora’s evidence of building code violations, deteriorated or dilapidated buildings, buildings with seismic problems, and buildings containing hazardous materials in the project area was insufficient to establish physical blight under the first category because there was no evidence that these conditions rendered the buildings unsafe or unhealthy. Similarly, Glendora’s evidence of lack of parking in the project area did not establish physical blight under the second category because Glendora did not demonstrate that the lack of parking prevented or substantially hindered the viable use or capacity of buildings or lots in the project area. As to the third category of physical blight, Glendora’s evidence of incompatible uses in the project area was inadequate because there was no evidence that such uses were preventing development or causing lower property values. Lastly, Glendora failed to establish physical blight under the fourth category despite evidence that the project area contained smaller parcels, some of which are irregularly shaped and many of which are unbuildable, because the record did not demonstrate that these conditions rendered the parcels inadequate for proper usefulness and development.

It is important to note that the current blight definitions in Sections 33030 and 33031 are significantly more stringent than they were in the 2006 iterations of Sections 33030 and 33031 considered by the Court in this case. Following the U.S. Supreme Court’s ruling in Kelo v. City of New London, the Legislature enacted SB 1206, which amended Sections 33030 and 33031 to “restrict the statutory definition of blight and to require better documentation of local officials’ findings regarding the conditions of blight.” For example, prior to SB 1206, blight could be established based on antiquated subdivision conditions without a showing of economic blight. Now, to establish blight, there must be a showing of both physical and economic blight.

Will the Vacancy Control Provisions in Goleta's Rent Control Ordinance for Mobile Home Parks be Upheld in the Latest Court Battle?

The Ninth Circuit is poised to reconsider its controversial decision that a vacancy control provision in a rent control ordinance for mobile home parks in the City of Goleta caused a taking of private property under the Fifth Amendment. The split decision by a three judge panel in Guggenheim v.

Redevelopment Agency SERAF Payment Requirements Upheld

In a setback for redevelopment agencies, Judge Lloyd Connelly ruled today to deny petitions seeking to overturn AB 26x4 which mandates a statewide contribution from redevelopment agencies equal to an aggregate $1.7 billion during fiscal year 2009-10 and an additional $350 million in fiscal year 2010-11. The 2009-10 payments are due to county auditor-controllers on May 10. In the ruling, the court denied the California Redevelopment Association’s (CRA) petition to stay the transfer of funds; however, the CRA Board of Directors has announced that it will file an appeal to the ruling, and may again seek a stay pending the appeal. Redevelopment agencies should be advised that as detailed in prior e-alerts, the legislation imposes a number of sanctions on redevelopment agencies that fail to timely pay or arrange for payment of the SERAF payment on the agency’s behalf. Meyers Nave is monitoring developments and will provide updated information via our Web site.

Appellate Court Holds Redevelopment Agencies May Use Low/Mod Funds for any Authorized Purpose Provided there is a Nexus with Affordable Housing; Affirms Article 34 Exemption

A California Court of Appeal recently held that redevelopment agencies may use Low and Moderate Income Housing Fund (LMIHF) monies to purchase and renovate buildings that will not themselves be used for affordable housing so long as there is a nexus between the expenditures and the goal of improving and increasing affordable housing. In the same case, the Court affirmed the applicability of an exemption from Article 34 voter approval requirements for privately-owned housing developments in which less than one-half of the units are restricted for occupancy by low-income households. Click here to read more.

Proposed Bill Would Let Redevelopment Agencies Directly Assist Local Businesses

Attorney Authors: 

Current law limits a redevelopment agency’s authority to give local businesses economic assistance. The California Redevelopment Law only explicitly authorizes agencies to provide commercial rehabilitation loans and, in certain circumstances, financial assistance for industrial and manufacturing facilities and capital equipment. However, AB 2531, introduced by Assembly Member Felipe Fuentes, would significantly enhance an agency’s ability to attract and retain local businesses.

AB 2531 would expand the definition of “redevelopment” and explicitly permit agencies to give businesses in a project area direct financial assistance to, among other things, retain or expand employment and increase buildings’ energy efficiency. It would also authorize agencies to establish small business incubators and to guarantee loans for small businesses within project areas. The California Redevelopment Association says that AB 2531 “has the potential to act as both a short-term and long-term economic stimulus program to get California’s economy moving again.”

The Assembly Housing & Community Development Committee will hear AB 2531 on April 28, 2010. To read the full text of AB 2531, click here.

Is Mobile Home Park Rent Control a Taking?

On March 12, 2010, the U.S. Ninth Circuit Court of Appeals granted the City of Goleta’s request for an en banc hearing in the case of Guggenheim v. City of Goleta 582 F.3d 996 (9th Cir. 2009). The wrangling surrounding this case has been closely watched by both sides of the debate on the regulatory takings front since the Court issued its split decision in September 2009. In this 2-1 decision by Judge Bybee, the Court found that Goleta’s mobile home rent control ordinance caused a facial regulatory taking for which compensation must be paid (under Penn Central Transportation Co. v. New York City 438 U.S. 104 (1978)). The mobile home park owners brought suit after the City imposed the already existing county rent control ordinance when it incorporated in 2002. The opinion was immediately controversial – assailed by many, including low-income housing advocates, as a vast departure from existing jurisprudence and hailed and applauded by property owners advocates. Goleta promised to seek a full panel hearing the from the Court, and that requested was granted. Oral arguments are tentatively scheduled for June 21, 2010.

For an in depth review of the opinion, click here.

County Must Include ERAF Revenue in Calculating Pass-Through Payments By Redevelopment Agency to School District

On January 27, 2010 the Court of Appeal filed its decision in Los Angeles Unified School District v. County of Los Angeles et al., in which the Court analyzed the overlap between the Educational Revenue Augmentation Fund (ERAF) legislation in the Revenue and Taxation Code and the pass-through legislation applicable to redevelopment agencies found in the Health and Safety Code. In reversing the Los Angeles Superior Court and remanding for further proceedings, the Court determined that Los Angeles County had erroneously calculated the Los Angeles Unified School District’s percentage share of property taxes and thus subjected the District to an improper reduction in the amount of pass-through payments to which the District was entitled. Read more here.

Court of Appeal Publishes Opinion in Hotly Debated Community Redevelopment Case

The Court of Appeal has published its December opinion in JSM Rivara, LLC v. the Community Redevelopment Agency of the City of Los Angeles and the City of Los Angeles (JSM Rivara, LLC v. CRA/LA). Its publication underscores the importance of the case for redevelopment agencies around the state. JSM Rivara, LLC v. CRA/LA raised significant questions, as well as public debate, about the extent to which redevelopment agencies have the authority, under the state's Community Redevelopment Law, to impose design and development controls to implement redevelopment plans. The Court's affirmation that the actions of the CRA/LA in this case carried out the mandates of state law, rather than local laws, represented a major victory for redevelopment agencies in their efforts to eliminate blight and revitalize communities. The Court also clarified the application of state density bonus requirements in redevelopment areas. Read more about the case here or read the published opinion.

Court Upholds Redevelopment Agency's Authority to Impose Design and Development Controls

In a major victory for redevelopment agencies seeking to adopt and implement redevelopment plans, the California Court of Appeals ruled that redevelopment agencies have broad authority outside of local zoning laws to impose design and development controls.

The ruling came less than a week after oral arguments in a case involving a redevelopment project in the North Hollywood section of Los Angeles (NoHo). In its unpublished decision, the Court of Appeals emphasized that when a redevelopment agency adopts and implements a redevelopment plan under the Community Redevelopment Law, it is carrying out state, not local, policy.

The case stems from the September 2007 adoption by the Community Redevelopment Agency of the City of Los Angeles (CRA/LA) of design guidelines for development in NoHo. The design guidelines adjusted the allowable densities, building sizes, floor area ratios, and other development and design criteria in the project area to concentrate higher densities near mass transit, to preserve the character of the different NoHo neighborhoods, and to provide opportunities for density bonuses in exchange for community benefits that furthered the goals of the redevelopment plan.

Local developer JSM sued the CRA/LA and the City of Los Angeles, alleging that the design guidelines were a de facto zoning ordinance because they altered the allowable zoning characteristics for the area. Based on this assertion, JSM insisted the design guidelines were not properly adopted pursuant to state zoning and planning laws. JSM also argued that the reduction in base density to allow the CRA/LA to provide density bonuses violated the mandates of state density bonus law.

The trial judge rejected all of JSM's allegations, finding the design guidelines were implementing a lawfully adopted redevelopment plan; therefore, laws governing the adoption of zoning ordinances did not apply and there was no conflict with state density bonus law.

The Court of Appeals, in an unpublished opinion affirmed the trial court in full. The Court explained that the actions of a redevelopment agency to implement a redevelopment plan carry out the mandates of state, not local, laws. Since the design guidelines simply implemented the policies of the redevelopment plan, the Court found that the CRA/LA was acting within its authorities under state redevelopment law and that local zoning law was inapplicable.

This was a key holding in the opinion because the Court expressly rejected the developer's argument that actions taken to adopt and implement state redevelopment law cannot impact the zoning in the redevelopment plan area.

Read more here.

Latest Court Decision in Palmer/Sixth Street Properties v. City of LA May Affect Inclusionary Housing Ordinances

Following a decision by the California Supreme Court to not review or depublish the appellate court decision in Palmer/Sixth Street Properties v. City of Los Angeles, cities and counties should evaluate their inclusionary housing ordinances with respect to rental properties. The Palmer decision calls into question whether inclusionary housing ordinances which require developers to offer a portion of rental units as low-income units or pay an in-lieu fee may be in violation of California's Costa-Hawkins Act. Unless and until the Legislature amends the Costa Hawkins Act, local agencies should consider how to revise their existing inclusionary requirements in accordance with Costa-Hawkins and the Palmer decision. Click here to read more analysis of the court's decision. Click here to read our previous post on Palmer.

HUD Issues NOFA for Second Round of Neighborhood Stabilization Program

Earlier this month, HUD issued notice that $1.93 billion has been appropriated for a second round of NSP funding. States, local governments, public and private nonprofits (including public housing authorities), and consortia of nonprofit entities are eligible to compete for the NSP funding. In addition, any eligible entity may submit a proposal in partnership with a for-profit entity provided that the governmental or nonprofit entity is the lead agency. Applications for NSP funds are due on July 17, 2009.

Affordable Housing In Lieu Fees

Although the specific question raised in Building Industry Association of Central California v. City of Patterson involved the interpretation of a development agreement ("DA"), the Court's answer could have far reaching implications for the collection of affordable housing in lieu fees throughout the State. In this case, developers and the City of Patterson entered into a DA for two residential subdivisions in the City. At the time the DA was entered, the City's affordable housing in lieu fee was $734 per unit. The DA, however, recognized that the City was updating its affordable housing in lieu fee and the developer agreed to pay the updated fee so long as the updated fee was "reasonably justified." Click here to read on.

New Budget Proposal Permanently Takes From Redevelopment Funds

The California Redevelopment Association (CRA) has reported that the recent budget proposal from the California legislature will require all redevelopment agencies to make a payment to the Educational Revenue Augmentation Fund (ERAF) to help alleviate the $15.2 billion budget deficit. The estimated amount from all redevelopment agencies is $350 million for the fiscal year 2008-2009. According to the CRA, the budget proposal does not include any extensions to time limits within redevelopment plans or repayment to redevelopment agencies.

City of Cotati Defends Affordable Housing and the California Tiger Salamander

The Pacific Legal Foundation ("PLF") recently filed a lawsuit in federal court against the City of Cotati's inclusionary housing ordinance which requires new development to set aside affordable housing units or pay a fee to finance affordable housing. PLF, who represents the plaintiff developer, claims that the City is trying to force the developer to subsidize affordable housing, thus creating an unlawful taking. Additionally, PLF alleges that a condition imposed on the development project for mitigation of impacts on an endangered species, the California Tiger Salamander, is an unlawful taking. In response to PLF's lawsuit, the City filed a motion to dismiss for failure to state a claim for which relief can be granted. The City is represented by Meyers Nave.

Governor Proposes Permanent Take From Redevelopment Funds To Close Budget Deficit

The California Redevelopment Association (CRA) has issued a Legislative Alert to its members that the Governor is proposing to permanently take redevelopment funds to help close the existing state budget deficit. CRA has not reviewed any formal budget proposal, but understands the estimated take from redevelopment funds is $200 million statewide, or approximately 4.385% of gross tax increment from each redevelopment agency in the state.

Federal Housing Bill - Resources for Local Government CalHFA Community Stabilization Home Loan Program

Summary: On July 30, 2008, President Bush signed into law H.R. 3221, the Housing and Economic Recovery Act of 2008 (the "Act"). This comprehensive bill includes the most far-reaching housing finance reform legislation of the past several decades. In addition to the widely-reported measures that increase FHA loan limits, provide tax-exempt financing to permit the refinancing of sub-prime mortgages, give tax breaks to first-time homebuyers, and provide federal support for Fannie Mae and Freddie Mac, the Act includes a number of provisions that will benefit California communities grappling with rising rates of foreclosure and neighborhood blight resulting from property abandonment.

New Legislation Allows For Daily Fines for Neglected Foreclosure Property

Cities and counties can now impose civil fines of up to $1,000 per day on owners who fail to adequately maintain residential foreclosure property. The new urgency legislation (SB 1137, adding § 2929.3 to Cal. Civil Code) that went into effect on July 8, 2008 authorizes a "government entity" (which includes cities, counties and special districts) to impose fines on a "legal owner" who purchases a vacant residential property at a foreclosure sale or who acquires the property through foreclosure under a mortgage or deed of trust. Under new Civil Code § 2929.3, owners can be fined if they do not maintain the exterior of their property. Some of the examples of "failure to maintain" include permitting vegetation to grow excessively such that the value of surrounding properties is diminished; failing to prevent trespassers or squatters from remaining on the property; allowing mosquito larvae to grow in standing water; and permitting other conditions that create a public nuisance. (Civ. Code § 2929.3(b).)

If a governmental entity seeks to impose a fine under the new provisions, it must first provide notice of the alleged violation, including a description of the conditions, and a notice of intent to impose a civil fine. (Civ. Code § 2929.3(a)(1).) The owner must be given at least 14 days to begin corrective action and 30 days to complete it before a fine can be imposed, unless a specific condition exists on the property that threatens public health and safety. (Civ. Code § 2929.3(a)(2).) If such a public health and safety threat exists, the local entity can require the condition be remedied in less than 30 days, but the owner must be given notice of the determination that a public health and safety issue exists, along with a specified time for compliance. (Civ. Code § 2929.3(c).) Prior to imposing a fine, the governmental entity must allow for a hearing and opportunity for the owner to contest any fine that may be imposed.     The fine can be imposed for each day the owner fails to properly maintain the property, beginning on the day after the time to remedy has expired. Any fines collected are allocated to the local government's nuisance abatement programs.

Although the legislation specifically states that it does not preempt any local ordinances and the remedies are cumulative and in addition to any other remedies, governmental entities cannot impose fines under both the new legislation and a local ordinance. (Civ. Code § 2929.3(e).) Local governments are not, however, precluded from imposing a fine under the state legislation and commencing an abatement action under their local ordinances.

This bill, which expires on January 1, 2013, provides an important new tool for the local governments in their code enforcement tool kit.

This post was prepared by Nancy Thorington ( in the Santa Rosa office of Meyers Nave.

Proposition 1C TOD Housing Program Draft Guidelines - Public Comment and Forums

The California Department of Housing and Community Development (HCD) is seeking comments on draft guidelines for the Transit Oriented Development Implementation Development Program (TOD Housing Program). Click here for a copy of the draft guidelines. Additional information is available at The HCD web site also includes a partial list of transit stations meeting the proposed eligibility requirement specified in Section 103(a)(3)(A) of the draft guidelines. HCD expect to have posted information on drive times, as described in Section 103(a)(3)(B), before the public forums.

HCD is accepting written comments and questions on the draft guidelines, via e-mail to The deadline for comments is September 10, 2007. When sending comments, use “TOD Guidelines Comments” as the subject line.

Oral comments will be accepted at the public forums listed below. These forums will include a short overview of the draft guidelines, but their primary purpose is to provide members of the public with an opportunity for oral comments. If you plan on attending, RSVP by emailing Donella Moran at, and specify which session you plan to attend.

Forum Locations:

Sacramento, August 27, 2007 from 1:00-3:00 PM

1800 3rd Street, Suite 183, Sacramento, CA 95811 (near 8th & O Light Rail Station)

Oakland, August 28, 2007 from 9:00-11:00 AM

Ehilu Harris Building- Auditorium, 1515 Clay Street, Oakland, CA 94612 (near 12th and 19th Street BART Stations)

Los Angeles, September 4, 2007 from 1:00-3:00 PM

Ronald Regan Building- Auditorium, 300 South Spring Street, Los Angeles, CA  90013

San Diego, September 5, 2007 from 10:00-12:00 Noon

SANDAG Boardroom, 7th Floor, 401 B Street, San Diego, CA 92101

Compliance with Senate Bill 53 and Senate Bill 1809

The deadline for compliance with Senate Bill 53 (SB 53) is July 1, 2007. Effective January 1, 2007, SB 53 requires all redevelopment agencies with a redevelopment plan adopted prior to December 31, 2006, to adopt an ordinance setting forth the redevelopment agency's authority to use eminent domain and a program for eminent domain activities. This includes redevelopment agencies that no longer have the authority to use eminent domain under its redevelopment plan. The ordinance must be effective before July 1, 2007.

Related to SB 53, Senate Bill 1809 (SB 1809) requires all redevelopment agencies with a redevelopment plan adopted prior to December 31, 2006, to record a revised statement that certain property is subject to a redevelopment plan. The revised statement must include certain disclosures regarding the redevelopment plan's authorization of eminent domain. The deadline for compliance with SB 1809 is December 31, 2007.

To review SB 53, click here.

To review SB 1809, click here.

Court Affirms Municipal Services Agreement between Redevelopment Agency and Native American Tribe for Development of a Gaming Facility

The court in Hesperia Citizens for Responsible Development v. City of Hesperia affirmed that a redevelopment agency's execution of a municipal services agreement with a Native American tribe did not violate California Health and Safety Code Section 33426.5, which generally prohibits redevelopment agencies from assisting businesses in the development of gaming facilities. The Redevelopment Agency agreed only to provide police, fire, water and sewer services to a proposed gaming development and not to subsidize or otherwise participate in the gaming operations. (Filed and certified for publication on May 30, 2007)

To read the case, click here

CRA Basic Affordable Housing Workshop

Please join Meyers Nave attorneys Sue Bloch, Ruben Duran, Michelle Sexton and Keith Nagayama at the May 15-16, 2007 CRA Basic Affordable Housing workshop at the Ontario Convention Center.

Also joining them:

David Paul Rosen & Associates (DRA)

David Rosen, Ph.D., Principal

Nora Lake Brown, Principal

Michael Pyatok Architects

Mike Pyatok, Principal

Laura Simpson, Housing and Community Development Manager, City of Vallejo

For more information, please contact California Redevelopment Association or send an e-mail to

Meyers Nave Named One of California's Top Real Estate Law Firms

Meyers Nave has been named one of California's top real estate law firms in a special report published by California Real Estate Journal (CREJ). The results were based on a 2007 CREJ survey which ranked law firms by the number of real estate attorneys, partners, real estate practice areas and specialities, and recent California projects and/or cases.

Citizens for Political Responsibility v. Pico Rivera Redevelopment Agency, et al

Meyers Nave successfully defended the City of Pico Rivera Redevelopment Agency in Citizens for Political Responsibility in Pico Rivera v. City of Pico Rivera Redevelopment Agency, et al. Specifically, the Court found that in reviewing the real party in interest's (Wal-Mart) application for a building permit, the Agency complied with the provisions of its Redevelopment Plan, that it did not violate CEQA and that Petitioner's request for declaratory relief was improper.

Writ of Mandamus

The first cause of action dealt with to the Agency's alleged failure to abide by its Redevelopment Plan. Here, Petitioner sought a traditional writ of mandate under Code of Civil Procedure section 1085. The Court found that Petitioner lacked standing to seek a mandamus action in this instance because they had no "beneficial interest" for a writ to be issued. The Court also found that Petitioner failed to exhaust its administrative remedies. Lastly, the Court found that the Redevelopment Plan does not inflexibly require the Agency to make written findings on review of a permit application. Rather, Debbie Lopez's approval of the building plans was an approval in writing that was acceptable under the Redevelopment Plan.


In its second cause of action, Petitioner alleged that the Agency did not comply with the provisions of CEQA by its failure to analyze whether the Wal-Mart expansion could result in significant environmental impacts.

The Court found that the building plan approval was not a project under CEQA because it was a ministerial act. Additionally, the Court found that the building permit approval was not an "approval" of a project triggering the Agency's obligation to conduct CEQA review. Lastly, the Court found that there was no change in the project to require further CEQA review. The Court ultimately found that the record contained substantial evidence to support the Agency's decision to not conduct additional CEQA review.

Declaratory Relief

Finally, in its third cause of action, Petitioner sought a judicial determination whether the Agency should have complied with alleged procedural requirements of the Redevelopment Plan, and whether compliance with those procedures is optional. The Court found that Petitioner's declaratory relief action was a collateral means of attack on the particular actions of the Agency that Petitioner was challenging in its petition for writ of mandamus. Specifically, the court held that a declaratory relief action cannot be used to attack the approval of a building permit and a specific order or decision can only be reviewed via a writ petition.

Petitioner, a citizens group filed a petition for writ of mandate and complaint for declaratory relief against the Agency and its directors. The action challenged the Agency's review and approval of a building permit to expand an existing Wal-Mart store. The Court denied Petitioner's three causes of action and awarded the Agency its costs.


In Neilson v. City of California City (January 9, 2007), the Court of Appeal reversed the trial court's ruling in favor of defendant, the City of California City, and invalidated the amendment to the City's redevelopment plan. The Court of Appeal held that the City misinterpreted Redevelopment Law (California Health & Safety Code Section 33000 et seq) by finding that subdivided lots without legal and physical access to a right-of-way were of "irregular form and shape."

Redevelopment Law defines "the existence of subdivided lots of irregular form and shape and inadequate size for proper usefulness and development that are in multiple ownership" as a physical condition that causes blight. The City interpreted "irregular" to mean "not conforming to the standard of law, propriety, method or custom, lacking an established pattern" and found that vacant, subdivided lots that had no legal or physical access to a public right-of-way were "irregular." The Court of Appeal held that the City misinterpreted and misapplied the term "irregular."  The term "irregular" must be interpreted as describing the "form and shape" of lots that are blighted and not as a definition of blight in and of itself. The lack of legal or physical access to a public right-of-way does not affect the "form and shape" of a lot, thus the City's findings were invalid.

To review the entire opinion, click here:

Oakland's Oak to Ninth Development Project Referendum Blocked

John Russo, the Oakland City Attorney, has advised the Oakland City Clerk that a referendum to block the City's largest mixed-use housing development in decades should be invalidated because referendum proponents failed to comply with the requirements of the California Elections Code when they did not present the correct version of the ordinance, the subject of the referendum, to voters. Earlier this year the City Council adopted Ordinance No. 12760, approving the 3,100-unit Oak to Ninth project. In August, referendum proponents submitted over 25,000 signatures seeking to either have the City Council overturn its approval of the project or put the Oak to Ninth project before voters. When collecting signatures, referendum proponents failed to include the ordinance, as adopted by the City Council, and all incorporated exhibits. A failure to do so is a potential violation of the Elections Code. The City Attorney has directed the City Clerk not to certify to the City Council any petition that does not attach the version of the ordinance, as adopted by the City Council, or is missing exhibits to the ordinance.

For more information on the referendum challenge go to

To review the Oakland City Attorney's legal opinion go to

To view the Oak to Ninth referendum efforts go to

Affordable Housing Financing and Developer Negotiations

Please join us for a Public Law Education Series presentation on Affordable Housing Financing and Developer Negotiations at our Oakland office on Thursday, September 28 or at our Los Angeles office on Monday, October 9.

Status of Redevelopment Bills 2006

The following summary of the 2006 bills relating to Redevelopment was prepared by Peter M. Detwiler, Staff Director of the Senate Local Government Committee. Also see the post of 9/1/06 regarding the California Redevelopment Association’s Legislative Update related to Redevelopment bills. To review the Legislation, click here.

SB 53 (Kehoe) requires redevelopment plans to spell out how, when, and where redevelopment officials will use their eminent domain powers, and requires redevelopment officials to document “blight” before extending the time period for using eminent domain. Status: Governor’s Desk.

SB 1206 (Kehoe) tightens the statutory “blight” definition, increases oversight by the State Department of Finance, and makes it easier to challenge redevelopment decisions. Status: Governor’s Desk.

SB 1210 (Torlakson) requires redevelopment officials to document “blight” before extending the time period for using eminent domain, and changes the procedures for taking condemned property. Status: Senate Floor, concurrence pending.

SB 1809 (Machado) requires local officials to add information about a redevelopment agency’s possible use of eminent domain in the formal statements that current law already requires officials to record about redevelopment project areas. Status: Governor’s Desk.

AB 773 (Mullin) increases the referendum petition period for redevelopment decisions from 30 days to 90 days. Status: Signed; Chapter 161, Statutes of 2006.

AB 782 (Mullin) repeals the antiquated subdivision exception to the statutory “blight” definition. Status: Signed; Chapter 113, Statutes of 2006.

AB 1893 (Salinas) codifies the Ruffo decision, banning redevelopment spending on city halls. Status: Signed; Chapter 98, Statutes of 2006.

AB 2161 (Klehs) allows new residential units built outside a redevelopment project area in Alameda County to count towards affordable housing requirements. Status: Governor’s Desk.

AB 2922 (Jones) requires redevelopment officials to record documents regarding housing affordability restrictions and allows suits to enforce affordability restrictions. Status: Governor’s Desk.

California Redevelopment Association Issues Legislative Update

The California Redevelopment Association issued the Executive Director's Legislative Update today, which provides the status of several redevelopment-related bills, including SB 1206--Kehoe [redefines "blight" for purposes of establishing a redevelopment project area]. To view the full text of the Legislative Update visit the California Redevelopment Associations website.

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