Blue Jeans Equities West v. City and County of San Francisco

• Decision Date: 31 January 1992
• Docket Number: No. A051759,A051759
• Parties: BLUE JEANS EQUITIES WEST, Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 114

4 Cal.Rptr.2d 114

3 Cal.App.4th 164

BLUE JEANS EQUITIES WEST, Plaintiff and Appellant, v. CITY AND COUNTY OF SAN FRANCISCO, Defendant and Respondent.

No. A051759.

Court of Appeal, First District, Division 3, California.

Jan. 31, 1992.

Review Denied April 29, 1992.

Howard N. Ellman, Ellman, Burke, Hoffman & Johnson, San Francisco, for plaintiff and appellant.

Ronald A. Zumbrun, Edward J. Connor, Jr., Richard M. Stephens, Sacramento, for amicus curiae on behalf of plaintiff and appellant.

Louise H. Renne, City Atty., George E. Krueger, Utilities Gen. Counsel, Robin M. Reitzes, Deputy City Atty., San Francisco, for defendant and respondent.

WHITE, Presiding Justice.

In this action we consider whether the heightened scrutiny test alluded to in Nollan v. California Coastal Comm'n (1987) 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (hereafter Nollan ) should be applied to San Francisco's Transit Impact Development Fee (TIDF) Ordinance. (Ord. No. 224-81, codified at S.F.Admin.Code, § 38.1 et seq.) We conclude the Nollan analysis is applicable only to "possessory takings," rather than "regulatory takings," and does not apply to the TIDF.

FACTS AND PROCEDURAL BACKGROUND

Plaintiff Blue Jeans Equities West is the owner and developer of Levi's Plaza, a five-building office, retail and condominium complex in the north or northeast waterfront section of San Francisco. This area of San Francisco is located away from the financial district, the traditional area of downtown office space. At the time of the project's conception, the main tenant was to be Levi Strauss & Company, which was then located in the financial district of the city. Prior to construction of the complex, a final environmental impact report was prepared by the San Francisco Department of City Planning. Among other things, the The permit for Levi's Plaza was approved by the San Francisco Planning Commission's Resolution No. 8142 on January 4, 1979. The resolution contained a condition in its transit mitigation section, designated as paragraph 5(c), which provided: "The owner of the project shall make a good-faith effort to participate in future funding mechanisms to assure adequate transit service to the area of the city in which the project is located."

report discussed the adverse impact the project would have on transportation. ¹

On May 5, 1981, the San Francisco Board of Supervisors enacted the TIDF ordinance. As our Supreme Court described it: "The ordinance, which became effective the following month, requires developers of downtown buildings containing new office space to pay a TIDF as a condition of issuance of a certificate of completion and occupancy. [Citation.] The TIDF, not to exceed $5 per square foot of new office space, provides revenue for the municipal railway to offset the anticipated costs of the increased peak-period ridership generated by the new office space over the useful life of each office building. [Citation.]" (Russ Bldg. Partnership v. City and County of San Francisco (1988) 44 Cal.3d 839, 844-845, 244 Cal.Rptr. 682, 750 P.2d 324 (hereafter Russ II ).) At the time of its enactment, plaintiff had not yet received a certificate of completion for Levi's Plaza.

Plaintiff filed a complaint for declaratory relief against the city, contending the TIDF ordinance is unlawful and invalid as applied to the Levi's Plaza project and the TIDF may not be imposed with respect to plaintiff. While the case was pending, the parties stipulated to the fee calculation and plaintiff deposited the agreed amount, over $3.1 million, in trust, pending the case's outcome.

The trial court entered judgment for defendant, finding that the TIDF ordinance is not an unconstitutional "taking" on its face or as applied to plaintiff, plaintiff acquired no vested right to build or use Levi's Plaza without payment of the TIDF, and defendant is not estopped from requiring plaintiff to pay the TIDF. This appeal followed.

DISCUSSION

In Russ Bldg. Partnership v. City and County of San Francisco (1987) 199 Cal.App.3d 1496, 246 Cal.Rptr. 21 (hereafter Russ I ), Division Five of this District held the San Francisco TIDF ordinance was a valid development fee, which could not be challenged under articles XIII A and XIII B of the California Constitution or the equal protection and due process clauses of the federal and state Constitutions. In essence, the opinion finds the TIDF a fee, rather than a special tax. (Id., at p. 1507, 246 Cal.Rptr. 21.)

In Russ II, the Supreme Court addressed the question of whether the TIDF ordinance could be applied to projects which, at the time of the enactment of the ordinance, were in the course of construction pursuant to building permits conditioned on the developers' participation "in a downtown assessment district, or similar fair and appropriate mechanism, to provide funds for maintaining and augmenting transportation service...." (Russ II, supra, 44 Cal.3d at p. 843, 244 Cal.Rptr. 682, 750 P.2d 324.) ² The high court concluded that the condition encompassed the TIDF, and held that the TIDF could be imposed on the projects without impairing the developers' vested rights. (Ibid.) However, the Russ II court expressly declined to address whether the TIDF violated the takings clause of the United States Constitution, as interpreted In Nollan, the United States Supreme Court held the California Coastal Commission had violated the Fifth Amendment by conditioning a building permit for beachfront property on the owners' dedication of an easement allowing the public to walk on the portion of the property nearest to the ocean. The condition requiring an easement violated the "taking" clause, because it did not serve a governmental purpose related to the permit to rebuild. (Nollan, supra, 483 U.S. at p. 838, 107 S.Ct. at p. 3149.) At least one California court has interpreted the Nollan holding as providing "there must be a substantial connection, or 'nexus' between the public burden created by the construction and the necessity for the easement." (Surfside Colony, Ltd. v. California Coastal Com. (1991) 226 Cal.App.3d 1260, 1267, 277 Cal.Rptr. 371, fn. omitted.) This interpretation is based, in part, on footnote 3 of the Nollan opinion: "[O]ur opinions do not establish that these standards are the same as those applied to due process or equal protection claims. To the contrary, our verbal formulations in the takings field have generally been quite different. We have required that the regulation 'substantially advance' the 'legitimate state interest' sought to be achieved, [citation], not that 'the State "could rationally have decided " that the measure adopted might achieve the State's objective.' [Citations.]" (Nollan, supra, 483 U.S. at pp. 834-835, fn. 3, 107 S.Ct. at p. 3147, fn. 3.)

in Nollan. (Russ II, supra, 44 Cal.3d at p. 845, fn. 6, 244 Cal.Rptr. 682, 750 P.2d 324.)

A threshold issue is whether the Nollan nexus test should be applied to the case at bench. Plaintiff takes an affirmative position, while defendant disagrees.

It is settled that any regulation of economic interests which "goes too far" becomes a "taking" under principles of inverse condemnation. (Penna. Coal Co. v. Mahon (1922) 260 U.S. 393, 415, 43 S.Ct. 158, 160, 67 L.Ed. 322; First Lutheran Church v. Los Angeles County (1987) 482 U.S. 304, 316, 107 S.Ct. 2378, 2386, 96 L.Ed.2d 250; Golden Cheese Co. v. Voss (1991) 230 Cal.App.3d 727, 731, 281 Cal.Rptr. 602.) However, there is no set formula for determining what constitutes a "taking"; the courts rely instead on ad hoc, factual inquiries into the circumstances of individual cases. (Connolly v. Pension Benefit Guaranty Corp. (1986) 475 U.S. 211, 224, 106 S.Ct. 1018, 1025, 89 L.Ed.2d 166; Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104, 123-124, 98 S.Ct. 2646, 2658-2659, 57 L.Ed.2d 631.)

In Agins v. Tiburon (1980) 447 U.S. 255, 100 S.Ct. 2138, 65 L.Ed.2d 106, the United States Supreme Court stated: "The application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, [citation], or denies an owner economically viable use of his land, [citation]. The determination that governmental action constitutes a taking is, in essence, a determination that the public at large, rather than a single owner, must bear the burden of an exercise of state power in the public interest." (Id., at p. 260, 100 S.Ct. at p. 2141.) Nollan has been construed as refining the first prong of the Agins test "to require that the regulation advance the precise state interest which avowedly motivated it." (Long Beach Equities, Inc. v. County of Ventura (1991) 231 Cal.App.3d 1016, 1029, 282 Cal.Rptr. 877.)

However, the high court appears to make a distinction between "regulatory takings," i.e., economic regulation, most forms of zoning, and other restrictions on land use, and "possessory takings," where the government, or an authorized third person, physically intrudes upon or appropriates the property. (See Manheim, Tenant Eviction Protection and the Takings Clause, 1989 Wis.L.Rev. 925, 939.)

Nollan specifically points out that "our cases describe the condition for abridgment of property rights through the police power as a 'substantial advanc[ing]' of a legitimate state interest. We are inclined to be particularly careful about the adjective where the actual conveyance of property is made a condition to the lifting of a land-use restriction, since in that context there is heightened risk that the purpose is avoidance Case law subsequent to Nollan appears to confirm this view. Pennell v. San Jose (1988) 485 U.S. 1, 108 S.Ct. 849, 99 L.Ed.2d 1, concerns a city rent control ordinance that permits consideration of "hardship to a tenant" when determining whether to approve a rent increase proposed by a landlord. In addressing whether rent control was per se a taking the court stated: "[W]e have 'consistently affirmed that...