Commercial Builders of Northern California v. City of Sacramento

Citation941 F.2d 872
Decision Date07 August 1991
Docket NumberNo. 89-16398,89-16398
PartiesCOMMERCIAL BUILDERS OF NORTHERN CALIFORNIA, and its affected members, Plaintiffs-Appellants, v. CITY OF SACRAMENTO, Council of the City of Sacramento, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Edward J. Connor, Jr. and John M. Groen, Pacific Legal Foundation, Sacramento, Cal., for plaintiffs-appellants.

Alletta D'A. Belin, Marc B. Mihaly and W. Robert Ward, Jr., Shute, Mihaly & Weinberger, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before SCHROEDER, BEEZER and NOONAN, Circuit Judges.

SCHROEDER, Circuit Judge:

INTRODUCTION

Commercial Builders appeals the district court's grant of summary judgment in favor of the City of Sacramento in Commercial Builders' suit challenging a city ordinance to help expand available low-income The district court granted summary judgment in favor of the city, holding that the Ordinance did not effect an unconstitutional taking. It specifically found that the Ordinance substantially advanced a legitimate interest and that the city had adequately supported its contribution requirement by showing a sufficient nexus between nonresidential development and the demand for low-income housing. The court therefore concluded that the ordinance was not infirm under Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), which requires such a nexus between land use restrictions and the articulated purpose behind them. Because we agree that the Ordinance here at issue does not amount to an unconstitutional taking, we affirm.

                housing.   The Ordinance in question conditions certain types of nonresidential building permits upon the payment of a fee intended to offset the burdens on the city caused by low-income workers who move there to fill jobs created by the project in question.   Appellants are a group of commercial developers who filed suit contending the ordinance constitutes a taking under the fifth and fourteenth amendments
                
DISCUSSION

In 1987, the City and County of Sacramento commissioned a consulting firm, Keyser-Marston Associates, to study the need for low-income housing, the effect of nonresidential development on the demand for such housing, and the appropriateness of exacting fees in conjunction with such development to pay for such housing. Keyser-Marston submitted its report, estimating the percentage of new workers in the developments that would qualify as low-income workers and would require housing. As instructed, it also calculated fees for development based on a yearly subsidy of $12,000 per qualified household that would be connected to the development. This figure represented the difference between $42,000, the minimum cost of building a two-bedroom apartment, and $30,000, the maximum rental income expected from a low-income household. Also as instructed, however, in the interest of erring on the side of conservatism in exacting the fees, it reduced its final calculations by about one-half.

Based upon this study, the City of Sacramento enacted the Housing Trust Fund Ordinance on March 7, 1989. The Ordinance lists several city-wide findings, including the finding that nonresidential development is "a major factor in attracting new employees to the region" and that the influx of new employees "create[s] a need for additional housing in the City." Pursuant to these findings, the Ordinance imposes a fee in connection with the issuance of permits for nonresidential development of the type that will generate jobs. The fees, calculated using the Keyser-Marston formula, are to be paid into a fund to assist in the financing of low-income housing. The city projects that the fund will raise about $3.6 million annually, nine percent of the projected annual cost of $42 million for the needed housing. Additional money will come from other sources, such as debt funding and general revenues.

Commercial Builders does not argue that the city lacks a legitimate interest in expanding low-income housing. Rather, it contends that this Ordinance constitutes an impermissible means to advance that interest, because it places a burden of paying for low-income housing on nonresidential development without a sufficient showing that nonresidential development contributes to the need for low-income housing in proportion to that burden. We affirm because we find the Ordinance sufficiently related to the legitimate purpose it seeks to achieve.

We have held that a condition placed upon the granting of a permit to develop land may constitute an impermissible taking, but we have done so only where the condition lacked any rational relationship to the project for which the permit was sought. In Parks v. Watson, 716 F.2d 646 (9th Cir.1983), we held that where a developer seeking vacation of platted streets offered to pay for such vacation, a city could not insist that the developer dedicate its geothermal wells to the city as a precondition We noted in Parks that the analysis we applied was based upon a consensus among the states that had considered the constitutionality of subdivision exaction regulations. 716 F.2d at 653. Prior to Nollan, other federal courts similarly upheld ordinances placing restrictions or conditions upon development where the ordinances were reasonably related to legitimate public purposes. See, e.g., Rogin v. Bensalem Township, 616 F.2d 680, 690-92 (3d Cir.1980), cert. denied sub nom. Mark-Garner Associates v. Bensalem Township, 450 U.S. 1029, 101 S.Ct. 1737, 68 L.Ed.2d 223 (1981); Maher v. City of New Orleans, 516 F.2d 1051, 1064-67, reh'g denied, 521 F.2d 815 (5th Cir.1975), cert. denied, 426 U.S. 905, 96 S.Ct. 2225, 48 L.Ed.2d 830 (1976); Texas Landowners Rights Ass'n v. Harris, 453 F.Supp. 1025, 1031-32 (D.D.C.1978), aff'd mem., 598 F.2d 311 (D.C.Cir.), cert. denied, 444 U.S. 927, 100 S.Ct. 267, 62 L.Ed.2d 184 (1979). Under this analysis, the Ordinance here at issue cannot be said to work an unconstitutional taking. It was enacted after a careful study revealed the amount of low-income housing that would likely become necessary as a direct result of the influx of workers that would be associated with the new nonresidential development. It assesses only a small portion of a conservative estimate of the cost of such additional housing. The burden assessed against the developers thus bears a rational relationship to a public cost closely associated with such development.

                for such vacation.   The dedication requirement, we held, "had no rational relationship to any purpose related to the vacation of the platted streets."  716 F.2d at 653.   The condition therefore violated the fifth amendment
                

The appellants contend that, even if the Ordinance would pass constitutional muster under these principles, it must be struck down because the Supreme Court has now articulated a more stringent standard under which courts must analyze the imposition of conditions upon development. The appellants point out that in Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), the Court held that such conditions must not only be ones that the government might "rationally have decided" to employ for a given legitimate public purpose; they must also substantially advance such a purpose. See 483 U.S. at 834 & n. 4, 107 S.Ct. at 3147 & n. 4. They argue that under the standard articulated in Nollan, an ordinance that imposes an exaction on developers can be upheld only if it can be shown that the development in question is directly responsible for the social ill that the exaction is designed to alleviate.

As a threshold matter, we are not persuaded that Nollan materially changes the level of scrutiny we must apply to this Ordinance. The Nollan Court specifically stated that it did not have to decide "how close a 'fit' between the condition and the burden is required," because it found that the regulation in question "d[id] not meet even the most untailored standards." 483 U.S. at 838, 107 S.Ct. at 3149. It also noted that its holding was "consistent with the approach taken by every other court has considered the question," citing Parks as the lead case in its string cite. Id. at 839, 107 S.Ct. at 3150. Other circuits that have considered the constitutionality of ordinances that placed burdens on land use after Nollan. None have interpreted that case as changing the level of scrutiny to be applied to regulations that do not constitute a physical encroachment on land. See, e.g., St. Bartholomew's Church v. City of New York, 914 F.2d 348, 357 n. 6 (2d Cir.1990), cert. denied sub nom. Committee to Oppose Sale of St. Bartholomew's Church v. Rector, --- U.S. ----, 111 S.Ct. 1103, 113 L.Ed.2d 214 (1991); Adolph v. Federal Emergency Management Agency, 854 F.2d 732, 737 (5th Cir.1988); Naegele Outdoor Advertising, Inc. v. City of Durham, 844 F.2d 172, 178 (4th Cir.1988). In keeping with this generally accepted view, we have recently reversed a district court's invalidation, under Nollan, of a requirement that a developer undertake off-site measures to mitigate harm to the environment, finding that that court had inappropriately required too close a nexus between the regulation and the interest at stake. Leroy Land Development v. Tahoe Regional We therefore agree with the City that Nollan does not stand for the proposition that an exaction ordinance will be upheld only where it can be shown that the development is directly responsible for the social ill in question. Rather, Nollan holds that where there is no evidence of a nexus between the development and the problem that the exaction seeks to address, the exaction cannot be upheld. Where, as here, the Ordinance was implemented only after a detailed study revealed a substantial connection between development and the problem to be addressed, the Ordinance does not suffer...

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