Redevelopment Agency v. Shepard

• Decision Date: 29 November 1977
• Citation: 75 Cal.App.3d 453,142 Cal.Rptr. 212
• Parties: REDEVELOPMENT AGENCY OF the CITY OF SAN PABLO, a public body of the State of California, Plaintiff and Respondent, v. Louis SHEPARD, Defendant and Appellant. Civ. 40332.
• Court: California Court of Appeals Court of Appeals

Page 212

142 Cal.Rptr. 212

75 Cal.App.3d 453

REDEVELOPMENT AGENCY OF the CITY OF SAN PABLO, a public body of the State of California, Plaintiff and Respondent, v. Louis SHEPARD, Defendant and Appellant.

Civ. 40332.

Court of Appeal, First District, Division 1, California.

Nov. 29, 1977.

Hearing Denied Jan. 26, 1978.

Leland F. Reaves, San Pablo, for defendant and appellant

Wilson, Jones, Morton & Lynch, Kenneth I. Jones, Robert G. Auwbrey, San Mateo, for plaintiff and respondent.

AVAKIAN, ^* Associate Justice.

Appellant, who is Executive Director of the Redevelopment Agency of the City of San Pablo (herein Agency), has appealed from a judgment validating the proposed issuance of $10,000,000 in revenue bonds to finance the Redevelopment Plan for the Oak Park Community Redevelopment Project initially adopted by the Agency and approved by the City Council of San Pablo in 1973, and again approved by both bodies on January 12, 1976, with amendments bringing the project under the Redevelopment Construction Loans Act (Health & Saf.Code, § 33750 et seq.), which was adopted as an urgency measure in 1975 and became effective on April 30, 1975.

STATEMENT OF CASE

Respondent filed this action as an in rem proceeding to validate the proposed bond issue pursuant to Health and Safety Code section 33799 and Code of Civil Procedure section 860. Appellant was the only party who answered. The redevelopment plan called for conversion of what had been determined to be a blighted area into a residential development which would include low-density residential, multi-family residential, and commercial areas. The sale and lease of lands would be at fair market value, and there would be no income test either for loan eligibility or for purchase or occupancy of the newly constructed properties.

The judgment is attacked on these three grounds: (1) The project violates article XVI, section 6 of the California Constitution, which prohibits gifts of public money or property or the use of public credit in aid of private persons or organizations; (2) the Act unconstitutionally delegates legislative power to the Agency; and (3) the project requires voter approval under article XXXIV, section 1 of the state Constitution.

We conclude that none of these contentions is valid.

1. THE REDEVELOPMENT PLAN DOES NOT INVOLVE A GIFT OF PUBLIC FUNDS OR AN IMPROPER USE OF PUBLIC CREDIT.

The prohibition against giving or lending the property or credit of the state to private persons or groups is contained in the following portion of article XVI, section 6 of the state Constitution: "The Legislature shall have no power to give or to lend, or to authorize the giving or lending, of the credit of the State, or of any county, city and county, city, township or other political corporation or subdivision of the State now existing, or that may be hereafter established, in aid of or to any person, association, or corporation, whether municipal or otherwise, or to pledge the credit thereof, in any manner whatever, for the payment of the liabilities of any individual, association, municipal or other corporation whatever; nor shall it have power to make any gift or authorize the making of any gift, of any public money or thing of value to any individual, municipal or other corporation whatever; . . ."

It is well established that this provision does not preclude expenditures and disbursements for public purposes. "The benefit to the state from an expenditure for a 'public purpose' is in the nature of consideration and the funds expended are therefore not a gift even though private persons are benefited therefrom." (County of Alameda v. Janssen (1940) 16 Cal.2d 276, 281, 106 P.2d 11, 14.)

The most recent application of this principle to housing legislation is California Housing Finance Agency v. Elliott (1976), 17 Cal.3d 575, 131 Cal.Rptr. 361, 551 P.2d 1193. That decision upheld the Zenovich-Moscone-Chacon Housing and Home Finance Act (Health & Saf.Code, § 41000 et seq.) against a charge that the making of loans to private investors and mortgage lenders at below-market interest rates constituted a gift of public funds.

What constitutes an adequate public purpose for expenditures which incidentally benefit private persons is primarily a matter of legislative discretion which will not be disturbed by the courts if it has a reasonable basis. (County of Alameda v. Janssen, supra, 16 Cal.2d at p. 281, 106 P.2d 11; County of Alameda v. Carleson (1971) 5 Cal.3d 730, 746, 97 Cal.Rptr. 385, 488 P.2d 953; California Housing Finance Agency v. Elliott, supra, 17 Cal.3d at p. 583, 131 Cal.Rptr. 361, 551 P.2d 1193.)

The statutory enactment in this case contains a legislative declaration of a need for redevelopment agencies to generate mortgage funds and provide financial assistance to finance residential construction, lest many redevelopment areas "stagnate and deteriorate because owners and investors are not able to obtain loans from private sources." (Health & Saf.Code, § 33750.)

The Legislature made the following specific findings in Health and Safety Code section 33751: "The Legislature further finds and determines that a program to provide residential construction financing would accomplish the following: (P) (a) Facilitate increasing the supply of urban housing and ease the housing shortage that exists in many parts of the state. (P) (b) Encourage Californians of all social and economic positions to reinhabit urban areas, thereby rendering these areas more socially balanced and economically self-sufficient. (P) (c) Reduce pressures for suburbanization and thereby mitigate many of the problems caused by urban migration, including inefficient use of scarce energy resources and urban sprawl. (P) (d) Stimulate urban building and construction activity and thereby increase urban employment and improve the urban tax base."

It made this further declaration of policy in Health and Safety Code section 33752 "It is the intent of the Legislature, in enacting this chapter, to strengthen the vitality and promote the completion of urban redevelopment for the general public benefit. The construction of federally assisted housing for low- and moderate-income households is not a primary purpose of this chapter. However, nothing in this chapter shall be deemed to prohibit financing of federally assisted housing for low- and moderate-income households when such housing is consistent with the redevelopment plan and the loan is directly or indirectly insured."

The omission of any guaranteed benefit for low and moderate income persons is the prime basis for appellant's contention that there is no adequate public purpose in this project.

It now appears settled, however, that providing decent housing for the public in a general way is a public purpose even though no precise segment of the public is defined as a backdrop for evaluating the public interest to be served. (The Housing Authority v. Dockweiler (1939) 14 Cal.2d 437, 94 P.2d 794; Redevelopment Agency v. Hayes (1954) 122 Cal.App.2d 777, 266 P.2d 105; Winkelman v. City of Tiburon (1973) 32 Cal.App.3d 834, 108 Cal.Rptr. 415; Board of Supervisors v. Dolan (1975) 45 Cal.App.3d 237, 119 Cal.Rptr. 347.)

The Elliott opinion sees in these cases common threads of substantial public purpose in upgrading residential housing even though no identical combination of elements was involved and even though there was a range from serving only low-income families (Dockweiler ) to completely ignoring income as a test (Dolan ).

The findings recited in Health and Safety Code sections 33750 and 33751, supra, show a substantial public purpose for the Act and for its authorization of projects like the instant one.

2. THERE IS NO UNCONSTITUTIONAL DELEGATION OF LEGISLATIVE POWER TO THE AGENCY.

Appellant contends that the Act delegates legislative authority to the Agency without adequate guidelines in the following respects: (1) The authority to establish fees, charges and interest rates (Health & Saf.Code, § 33762); (2) the power to establish rules and regulations (Health & Saf.Code, § 33767); (3) the authority to establish architectural and engineering design standards (Health & Saf.Code, § 33790); and (4) the power to do all things necessary or convenient to carry out the purposes of this chapter.

These contentions are not persuasive. The powers delegated are those which must customarily be exercised by an administrative agency in a manner tailored to the exigencies of its activities and in the light of the practical considerations of the market place. They are substantially identical with the provisions of the housing statutes involved in Elliott and Dolan, supra (which did not discuss their validity because no challenge on that ground was made). Should the occasion arise, the validity of any particular exercise of such powers can be determined in the light of the purpose and intent of the legislation considered in the context of the market-place conditions to which the Agency's action relates.

3. THE PROJECT DOES NOT REQUIRE VOTER APPROVAL UNDER ARTICLE XXXIV, SECTION 1 OF THE STATE CONSTITUTION.

The pertinent portion of article XXXIV, section 1 of the state Constitution reads as follows:

"No low rent housing project shall hereafter be developed, constructed, or acquired in any manner by any state public body until, a majority of the qualified electors of the city, town or county, as the case may be, in which it is proposed to develop, construct, or acquire the same,...