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HomeMy WebLinkAboutMINUTES - 06271988 - 2.8 T 2. 8 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order on June 28, 1988 by the following vote: AYES: Supervisors Powers, Fanden, McPeak, Torlakson and Schroder NOES: None ABSENT: None ABSTAIN: None SUBJECT: Pleasant Hill BART Station Area Specific Plan, Proposed. Moratorium and Reduced Densities (FARS) The Board of Supervisors HEREBY ACKNOWLEDGES RECEIPT of the attached June 17, 1988 memorandum from Victor J. Westman, County Counsel, entitled: " Pleasant Hill BART Station Area Specific Plan, Proposed Moratorium and Reduced Densities (FARS) . " Gn a010n taken and€ntereed on iha mirsu%.:� or xh;a Board of Supervisors on the date abown. :aT?'t^aT"tD: dfir C3 Supervisors and County tl%,,I':,' .»g`::;ic., C:escay cc: Community Development County Administrator COUNTY COUNSEL ' S OFFICE "-008 Aw CONTRA COSTA COUNTY MARTINEZ , CALIFORNIA Date : June 17 , 1988 To: Board of Supervisors From: Victor J. Westman, County Counsel Re: Pleasant Hill BART Station Area Specific Plan, Proposed Moratorium and Reduced Densities (FARs) I . SUMMARY. If the County' s planning agency is contemplating a general plan, specific plan or zoning change for the Pleasant Hill BART Specific Plan area and the Board finds by a 4/5 vote that there is a current and immediate threat to public health, safety or welfare from current and proposed development which may conflict with the contemplated change(s ) , interim moratorium regulations may be adopted to prohibit such conflicting uses . Such a moratorium would probably not apply to those properties covered by existing development agreements and properties for which the owners have obtained vested rights to develop (e.g. , issued building permits and expended substantial sums for site improvements of the site) . Such a moratorium may subject the County to claims for interim damages . For those properties in the Specific Plan area covered by development agreements, there is significant legal doubt whether the County can adopt any effective moratorium preventing their developing to the extent specified (density, use, height, etc. ) in their approved development agreements . Under the BART development agreement, any attempt- to impose a moratorium may allow BART (at its discretion) to demand a refund of its $2,400, 000 in paid development fees from the County and its Development Agency. Depending upon the extent and length of a moratorium restriction, such regulation could create difficulties for repayment or refinancing of the County Redevelopment Agency' s $7,500, 000 of outstanding tax increment anticipation notes and of the $4 , 849 , 514 debt the Redevelopment Agency owes the County. Under current case decision law, the imposition of proper moratorium regulation should not subject the County to any valid claim for refund of assessment district debt paid or to be paid by involved landowners in the Specific Plan area. Board of Supervisors -2- June 17 , 1988 II . INTRODUCTION. Earlier this year, the Board of Supervisors considered a proposal to, in part, direct staff to report on the feasibility of declaring a moratorium on further approvals in the Pleasant Hill BART Station Specific Plan area, the impacts of reducing planned densities (FARs) and the financial consequences of such actions . The Board did not approve the proposal but did direct the County Counsel ' s office to review and report on possible legal and related financial implications of approving a moratorium and reducing some planned densities . III . BACKGROUND. On June 7, 1983 the Board of Supervisors approved the Pleasant Hill BART Station Area Specific Plan pursuant to Government Code provisions S§ 65450-65457 . After the adoption of Specific Plan, the County approved assessment district proceedings to finance major public infrastructure improvements and issued assessment bonds for that purpose in the principal amount of $11,047, 360 for the Specific Plan area. After the Specific Plan adoption, the County established a redevelopment agency and adopted a redevelopment project that includes most of the Specific Plan area. In 1987 the Redevelopment Agency sold $7 ,500, 000 in five year tax allocation notes secured by the future tax increment growth expected from development in the Pleasant Hill redevelopment project area. The County and the Redevelopment Agency have also approved development agreements for parcels of properties contained within the Specific Plan area. Development Agreements have been entered with Taylor Woodrow, Urban West, and the Bay Area Rapid Transit . District (BART) . A proposed fourth development agreement is presently being considered with Embassy Suites on a portion of the Taylor Woodrow property. In each of the approved development agreements, the County agrees for either a ten or fifteen year term that the involved developer may develop its properties in accordance with the "approved land use standards" (use, density, height, etc. ) specified in the said agreements on its effective date. In each of the approved development agreements, the County agrees that during the agreement' s term it will not adopt any new rules or regulations such as "a moratorium on development, a quota or other growth restriction which limits the amount of development" allowed by the approved land use standards specified in each development agreement (e.g. , S 15 . 8, page 28, BART Acquisition and Development Agreement) . The BART development agreement also provides that should the County reduce the allowed density which is permitted by that agreement, BART is entitled to receive a proportionate cash Board of Supervisors -3- June 17 , 1988 refund of the $2,400, 000 of development fees it has paid. Finally, the BART agreement provides the County is jointly and severably liable with the Redevelopment Agency to pay this refund within ten days of BART' s proper demand for it (§ 28 .4 , pages 48 and 49, BART agreement) if the density reduction results from a voluntary County action (e.g. , a moratorium) . IV. DISCUSSION. The Board' s request for a report on the moratorium proposal was not specific in that it did not indicate any proposed exceptions the moratorium. For this reason, we will first generally discuss moratoriums (authority for them and possible general limitations ) and the extent to which a moratorium .could apply to the Specific Plan area properties covered by approved development agreements. Also, consideration will be given to the difficulties which a moratorium could present for the County' s Pleasant Hill redevelopment project, the Agency' s payment of its County debt and the related assessment district financing. A. Moratoriums . 1 . Government Code § 65858 . The statutory authority for a general law county or city to adopt a development moratorium ordinance is by following the provisions of Government Code § 65858 to prohibit any uses which may be in conflict with a contemplated general plan, specific plan, or zoning proposal which a county or city is considering or intends to study within a reasonable time. A county board of supervisors can adopt such an interim ordinance only where it (the Board of Supervisors) makes findings by a four-fifths vote that there is a current and immediate threat to the public health, safety or welfare and that the approval of any additional entitlements for use would result in a threat to public health, safety, or welfare. 2. First Lutheran case. Since the U.S. Supreme Court rendered its 1987 decision in the. First Evangelical Lutheran Church of Glendale v. County of Los Angeles (55 L.W. 4781, 107 S .Ct. 2378 ) case, a serious question has arisen as to the extent of a city or county's authority to impose moratoriums pursuant to Government. Code § 65858 and not be subject to payment for interim damages . In the First Lutheran Church case the U.S. Supreme Court indicated there could be damages awarded against a city or county for the interim period of time during which moratorium regulations denied a land owner the beneficial use of his property. The U.S Supreme Court did indicate that this new doctrine (allowing damages for temporary or interim takings ) would Board of Supervisors -4- June 17, 1988 probably not apply to normal development delays in obtaining building permits, changes in zoning ordinances, variances "and the like" . The question yet to be answered by the courts is does the phrase "and the like" include moratorium ordinances for reasonable interim periods . For this reason, some legal commentators now advise that where a city or county proposes to adopt a moratorium ordinance it should provide in that ordinance for some reasonable exceptions and/or uses of the property during the interim restriction period. I assume, in part, that this is why the recent brief moratorium regulations adopted by the City of Walnut Creek contained a number of interim use exceptions and exempted from the moratorium any property for which a completed application for development had been filed and accepted prior to the effective date of it (Contra Costa Times, 2-13-88) . 3 . Regulation. Assuming the County can validly make the findings, specified in Government Code § 65858 and take action by the required four-fifths vote, it could adopt interim moratorium restrictions for the Specific Plan area. But, unless sufficient reasonable interim uses are .allowed, the County may be subject to interim period damage claims . Also, there is serious legal question whether the County can adopt such a moratorium for those portions of the Specific Plan area covered by the aforenoted development agreements . To the extent the County may be able to adopt moratorium regulations for the development agreement areas, that action may subject the County and/or its Redevelopment Agency to the refund of development fees received. Finally, the imposition of such a moratorium could prejudice or delay payment of the Redevelopment Agency' s issued five year due tax allocation notes . All of these points will be hereinafter further discussed. B. Development Agreements . 1 . Introduction and Agreement Provisions . As noted earlier, the County has entered three development agreements for the Pleasant Hill BART Station Specific Plan area. These agreements have been entered with Taylor Woodrow, BART and Urban West. The provisions of these development agreements are similar except for the BART agreement. For that reason, we will only discuss the provisions of the Taylor Woodrow ( "TW" ) agreement and the BART agreement. In each of these development agreements, the County has agreed that "the laws, rules, regulations and official policies governing permitted uses of the Property, development, density and intensity of use, improvement, and occupancy applicable to the Property" shall be those rules and regulations in force on the effective date of the agreement and that no moratorium or other growth restrictions will be imposed which interferes with a Board of Supervisors -5- June 17 , 1988 the agreed to development so long as the developer has not breached the agreement (TW, pages 9 & 10, S 2 . 3 (a) & (b) , and BART, pages 25 & 28, §§ 15 . 3 & 15 . 8 ) . The BART development agreement contains other provisions which will be discussed later in subsection 3 . Development agreements are entered pursuant to the provisions of the California Government Code (§§ 65864 - 65869 .5 ) . One of the declared purposes of the development agreement statutory provisions is to assure development project applicants that approved development projects may proceed in accordance with policies, rules and regulations and conditions of approval imposed by development agreements (Govt.Code § 65864 ) . These statutes provide that a development agreement shall specify the permitted uses of the property., the density or intensity of use, the maximum height and size of proposed buildings and may cover other related matters (Govt.Code § 65865 . 2 ) . Unless otherwise provided in a development agreement, the rules and regulations governing permitted uses of the involved land (e.g. , density, etc. ) shall be those in force at the time of the execution of the agreement (Govt. § 65866 ) . These three development agreements either specify their effective date or became effective on the dates of their execution. Finally, unless a development agreement is properly amended or cancelled, the development agreement pursuant to state law is enforceable "by any party thereto notwithstanding any change in applicable general or specific plan, zoning, - subdivision or building regulations adopted. by the . . . County "which alters or amends such rules, regulations and policies specified in the agreement (Govt.Code S 65865 .4 ) . In other words, if a county (after entering a development agreement providing that applicable general plans, specific plans, zoning and other related regulations shall be those in force on certain date) then changes those regulations, the involved developer or property owner pursuant to state statute (Govt.Code S 65865 .4 ) may enforce the agreement to be bound only by the standards specified in the development agreement. Of course, nothing in state law or the three development agreements prevents the County from applying any new rules, regulations or policies which do not conflict with those rules, regulations and policies applicable to the development project specified in the agreement (Govt.Code S 65866 ) . 2 . Moratorium Ordinance. As noted in DISCUSSION A. 1 . , the County to adopt a moratorium ordinance must comply with the provisions of the Government Code S 65858 . This section allows an urgency ordinance to be adopted to prohibit any uses from being established which may be in conflict with a contemplated general plan. specific plan or zoning proposal . R Board of Supervisors -6- June 17 , 1988 But Government Code § 65865 . 4 provides that where a development agreement is in force its provisions may be enforced where the involved county or city later changes the general or specific plan or other building regulations applicable to the property' s area. In other words, it appears that § 65865 .4 ' s provisions probably prevent the effective use of § 65858 ' s moratorium's provisions to stop the uses allowed by the current three development agreements now covering portions of the Specific Plan area. For this reason, there is serious legal question whether the County has any effective authority pursuant to applicable state statutes to adopt an interim moratorium ordinance or permanent regulatory .change to prohibit the uses authorized by the three existing development agreements in the BART station area. The legality of development agreements under the state statutes (Gov. Code §§ 65864-65869 .5) governing them has yet to be directly tested in any reported court decision. For this reason, it is not yet completely clear the courts will uphold a development agreement against a subsequent attempt by an involved city or county to change the development standards specified in it by adopting a moratorium or other zoning regulation contrary to the agreed to uses . The state statutory provisions governing development agreements do make specific provision for a moratorium ordinance in one situation. A newly incorporated city can take action to modify or suspend the provisions of development agreement entered for the city' s area prior to incorporation where the city finds the agreement would subject residents to "a condition dangerous to their health or safety, or both" (Govt.Code § 65865 . 3 (b) ) . Since the State Legislature has made express specific provision for a newly incorporated city to adopt a moratorium controlling pre-incorporation development agreements and has made no similar express provision for counties or older cities, this arguably indicates an intent on part of the state legislature not to give that statutory moratorium authority to counties and older cities annexing territory covered by a development agreement. Unless the Board is persuaded that sufficient reasons exist . to challenge these three development agreements (and subject the County to significant legal liability should it not prevail) by adopting moratorium or zoning regulations contrary to the agreements ' provisions, we recommend the Board comply with the agreements ' commitments . 3 . BART Development Agreement. BART' s Acquisition and Development Agreement contains provisions which are not in the two other development agreements entered by the County for the Pleasant Hill BART Specific Plan area. After entering the BART agreement and pursuant to it, BART has provided to the County and Board of Supervisors -7- June 17 , 1988 Redevelopment Agency development fees in the amount of approximately $2,400, 000 . Similar to the two other development agreements, the BART agreement provides that the County will not adopt any new land use regulations, rules or policies which would conflict with the approved land use standards specified in it and in force on 9-14- 85 . The BART agreement further provides that any subsequently adopted conflicting rules or regulations include (by definition) any moratorium on development or a quota or other growth restriction limiting the amount of development which the BART agreement' s approved land use standards would allow (BART, § 15- 8) . In other words, the adoption of such a moratorium regulation could properly be characterized by BART as a breach of the agreement and an event of default on the part of the County. If any of the parties to the BART agreement breach it (in a manner that constitutes an event of default) , the agreement provides the other parties with a number of remedies (BART - 28) . Section S 28 .4 of the agreement provides that if the County or Agency take any action that results in a reduction of agreed to density on the BART property (by agreement breach or by any subsequently enacted County law) , BART may treat that as an event of default and demand refund of the paid development fees from the County and Agency within the 10-day period following the first 30 days after the event of default (BART - § 28 .4 ) . The BART agreement makes the obligation to refund to BART its paid development fees (should a breach occur) jointly and severably that of both the County and Agency (BART - § 28 .4(e) ) . The BART agreement further provides that this refund of development fees payment will be prorated to require payment on a fixed formula per square foot for any reduction made below 1,265, 000 square feet of potential development on the BART property. The problem posed by a complete moratorium is that it would prevent any development of the BART property for a limited period of time and allow BART to demand a refund of the entire $2,400,000 . On this point, the agreement also provides that if, after prohibiting or reducing the amount .of agreed to density on the BART property, new County regulations are adopted restoring the ability of BART to build, BART (at its sole discretion but in order to use the restored density) can repay the refunded fees to the County on a prorated basis for each additional square foot of development allowed (BART - S 28 . 5. ) This possible development fee refund to BART represents a monetary liability for the County should it choose to proceed with a moratorium on the BART property. C. Redevelopment Agency. Board of Supervisors -8- June 17 , 1988 ( 1 ) County Debt. The Community Development Department has indicated that the Contra Costa County Redevelopment Agency covers most of the Pleasant Hill BART Specific Plan area. That Department further advises that at the end of 1987 the Redevelopment Agency sold $7 ,500,000 in tax anticipation notes secured by existing and expected future tax increments from the Pleasant Hill BART Station project area. These notes are due in (and therefore must be refinanced prior to) December 1992 . The Department has indicated that to refinance the 5-year notes in 1992 the Agency will require at that time non-housing tax increment of approximately 1 . 1 million dollars but that the project' s current tax increment (for 1987-88) is $589,000. If for any reason (extended moratorium, significant reduction in FAR, etc. ) the agency cannot generate the 1 . 1 million tax increment needed in 1992, it will have difficulty refinancing the tax notes in 1992 . Further, the Community Development Department indicates that the County has loaned $4 ,849 ,514 to the Redevelopment Agency in order to allow the Agency to proceed with its early activities and certain infrastructure facility improvements . While this Agency debt is not directly secured by the Specific Plan area' s tax increment, delay in major planned redevelopment area improvements and private building activities could significantly delay repayment of the debt to the County. (2) City Annexation. If all or a significant part of the County' s Pleasant Hill BART Station redevelopment area were annexed to a city, the County would still have jurisdiction to conduct the affairs of its Redevelopment Agency in that area (H.&S.C. S 33214 ) . But this would result in a situation where another public entity (the annexing city) would control the exercise of zoning and related building regulation and the pace of development in the area. The Community Redevelopment Law (H.&S.C. SS 33215 and 33216 ) does provide several procedures whereby a city and county can agree to the transfer of jurisdiction for a pre-annexation existing county redevelopment agency project to a city in which that involved redevelopment agency' s project is now located. While the law provides a great deal of authority for the parties to negotiate concerning the terms and conditions of that transfer and requires that the city's redevelopment agency must assume the debt to the County (H.&S.C. SS 33215 (d) (2) and 33216 (e) ( 2 ) ) , it does not expressly provide the manner or way in which that debt is to be repaid. D. Assessment District Financing. The Community Development Department has indicated that the assessment district debt outstanding for the Pleasant Hill BART Specific Plan area in its principal amount is approximately $11,000,000 . Should a It . Board of Supervisors -9- June 17 , 1988 moratorium be declared and FAR (and related building opportunities ) be reduced, this could have an effect on the involved property owner' s ability to repay the assessment lien debt in a timely manner. Assessment district lien debt is spread to involved properties in accordance to the benefit each property is expected to receive from the district' s proposed public improvements assuming that property were to develop to the extent allowed by the then applicable or expected general plan and related zoning regulations . If, after the assessments are spread assuming a certain level of possible development, that level is then lowered, the involved properties will have been assessed for more benefit then they can receive from the improvements.. Under current case law decisions, it would not appear that the refund of assessments would be required because of a proper moratorium and subsequent reduction of potential development opportunities in the Specific Plan area. In 1979 the California Supreme Court ruled that if after assessments have been levied and liens imposed based on benefit for one level of development and the potential for that level of development is subsequently reduced by government initiative, the involved assessed landowners may be entitled to a refund of the excess assessments placed on their property or some other remedy. (Furey v. City of Sacramento, [ 1979] 24 Cal. 3d 862. ) But the California Supreme Court went on to say that this rule would not obtain where the public improvements financed by assessment proceedings were undertaken at the request, or with the consent of the involved property owners. In that event, the property owners would not be allowed to be heard and complain because a subsequent event of intervening regulation barred the use of the improvements by that property owner to the extent his property had been assessed for them. The Furey, case land owner thereafter sued for refund of the excess improvement assessments levied on his property in Federal Court. The Federal Court ruled that the landowner was not entitled to any refund for the excess of assessments for sewer improvements because he had originally signed the petition requesting the assessment proceedings and, for this reason, was involved with the improvement' s initiation. (Furey v. City of Sacramento [N.D.Cal . 1984] 592 F.Supp. 463 . ) It is our understanding that in the BART Pleasant Hill Specific Plan area assessment proceedings were conducted only where the involved r Board of Supervisors -10- June 17 , 1988 property owners signed petitions requesting the initiation of the. assessment district activities . VJW:df cc: Community Development Department County Administrator' s Office Attn: Kerry Harms Lee C. Rosenthal Goldfarb & Lipman One Montgomery St. , West Tower 23rd Floor San Francisco, CA 94104