IN THE SUPREME COURT OF THE STATE OF CALIFORNIA. No. DARTMOND CHERK AND THE CHERK FAMILY TRUST, Petitioners and Appellants, COUNTY OF MARIN,

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1 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA No. DARTMOND CHERK AND THE CHERK FAMILY TRUST, Petitioners and Appellants, v. COUNTY OF MARIN, Respondent and Appellee. After an Opinion by the Court of Appeal, First Appellate District, Division One (Case No. A153579) On Appeal from the Superior Court of Marin County (Case No. CIV , Honorable Roy O. Chernus, Judge) PETITION FOR REVIEW LAWRENCE G. SALZMAN, No OLIVER J. DUNFORD, No Pacific Legal Foundation 930 G Street Sacramento, California Telephone: (916) Facsimile: (916) LSalzman@pacificlegal.org ODunford@pacificlegal.org Counsel for Petitioners and Appellants Dartmond Cherk and The Cherk Family Trust 1

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... 3 QUESTION PRESENTED FOR REVIEW... 5 REASONS FOR GRANTING REVIEW... 6 FACTUAL BACKGROUND AND PROCEDURAL HISTORY... 8 ARGUMENT I. The Petition Should Be Granted to Settle the Important Question of Which Types of Abridgements of Property Interests Constitute Exactions A. The Unconstitutional Conditions Doctrine Prohibits Abusive Exactions in the Context of Land Use Permitting B. The Court of Appeal Failed to Recognize the Alternative Dedication Condition as an Exaction A Purchase Option Is a Property Interest A Right to Sell Is a Property Interest A Beneficial Interest Is a Property Interest C. The Perpetual, Recorded Encumbrances on the Future Use of Lots or Housing Units Dedicated to Affordable Housing Distinguish the Program from Ordinary Land Use Restrictions CONCLUSION CERTIFICATE OF COMPLIANCE DECLARATION OF SERVICE

3 TABLE OF AUTHORITIES Cases Apartment Ass n of L.A. Cnty. v. City of Los Angeles, 24 Cal. 4th 830 (2001) Armstrong v. United States, 364 U.S. 40 (1960)... 8, 22 Cal. Bldg. Indus. Ass n v. City of San Jose, 61 Cal. 4th 435 (2015) , 11-12, 14-17, 19-20, 26 Dolan v. City of Tigard, 512 U.S. 374 (1994) , 14, 16-18, 22 Ex parte Quarg, 84 P. 766 (Cal. 1906) Fisher v. City of Berkeley, 37 Cal. 3d 644 (1984) Gregory v. City of San Juan Capistrano, 142 Cal. App. 3d 72 (1983) Horne v. Dep t of Agric., 135 S. Ct (2015) Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013) , 12, 14, 16-18, 23, 25 Laguna Royale Owners Ass n v. Darger, 119 Cal. App. 3d 670 (1981) Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987) , 14, 16-18, 22, 25 Old Dearborn Distrib. Co. v. Seagram Distillers Corp., 299 U.S. 183 (1936) Sterling Park, L.P. v. City of Palo Alto, 57 Cal. 4th 1193 (2013) Wooster v. Dep t of Fish & Game, 211 Cal. App. 4th 1020 (2012) State Statute Cal. Civ. Code Rules of Court Cal. R. Ct (a)(1)... 1 Cal. R. Ct (b)(1)... 6, 26 3

4 Marin County Code MCC (B)(2) MCC (B)(2)(c) MCC (B)... 12, 21 MCC (A)... 9, 11, 18 MCC (B)(1) MCC (B)(1)-(2) MCC (B)(3) MCC (B)(5)... 13, 18 4

5 Pursuant to California Rule of Court 8.500(a)(1), Petitioners Dartmond Cherk and The Cherk Family Trust (Cherks) submit this Petition for Review of the unpublished decision of the Court of Appeal, First Appellate District, in the matter of Dartmond Cherk, et al. v. County of Marin, No. A The decision was filed on December 14, 2018, and became final on January 13, A copy of the ruling is attached as Exhibit A (Opinion). QUESTION PRESENTED FOR REVIEW The County of Marin s inclusionary-housing ordinance conditions the approval of land subdivisions and building permits on compliance with the County s affordable-housing program. That program requires permit applicants to either (a) dedicate land or housing units to affordable housing or (b) pay a fee in lieu of the dedication. The question presented is: Whether a dedication of land or housing units pursuant to an inclusionary-housing ordinance constitutes an exaction triggering heighted judicial scrutiny under the unconstitutional conditions doctrine, where the dedication grants to the government a perpetual purchase option to the subject property; restricts the owner s right to freely alienate property and set its price; and grants to the public a beneficial interest in the dedicated lots or homes akin to a covenant or negative servitude? 5

6 REASONS FOR GRANTING REVIEW The Court should review this case in order to settle [an] important question of law. Cal. R. Ct (b)(1). The case presents an opportunity to clarify this Court s holding in Cal. Bldg. Indus. Ass n v. City of San Jose, 61 Cal. 4th 435 (2015) (CBIA), which left unresolved the matter of which types of property-rights abridgments constitute exactions to trigger heightened scrutiny pursuant to the unconstitutional conditions doctrine. See CBIA, 61 Cal. 4th at 457 ( there can be no valid unconstitutional conditions takings without a government exaction of property ); id. at 459 ( [T]he full range of monetary land-use permit conditions to which the Nollan/Dolan test applies under the Koontz decision remains at least somewhat ambiguous. ) (footnote omitted). A growing number of inclusionary-housing ordinances and affordable housing programs in the state impose an increasingly wide diversity of requirements on developers and landowners who seek permission to develop or change the use of their privately owned property. Typical ordinances require property owners to contribute money, dedicate land, or restrict the use or alienation of developed-housing units in exchange for the approval of a land use permit. Some ordinances, like the one addressed in CBIA, are lawful when they provide at least one option for compliance that does not exact an interest in an applicant s property. Id. at But ordinances like the one in this case are suspect, because each 6

7 of the compliance alternatives exacts a discrete interest in an applicant s property (or a fee in lieu of taking that interest). Under a fair reading of U.S. Supreme Court precedent, this lack of lawful alternatives should trigger heightened scrutiny according to the unconstitutional conditions doctrine established by Nollan v. Cal. Coastal Comm n, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013). The Court of Appeal below (and the trial court before that) erred by construing CBIA too broadly and failing to recognize that each of the alternatives offered by the County to comply with its affordable-housing ordinance exacts a property interest. Unless this Court reviews the ruling, lower courts, municipalities, and property owners face uncertainty about what kinds of affordable housing conditions will or will not be deemed exactions. At worst, the decisions below, if left unreviewed, fail to mitigate the central concern of Nollan and Dolan: the risk that the government may use its substantial power and discretion in land use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, and thereby diminish[] without justification the value of the property. Koontz, 570 U.S. at 614. Notably, in exempting the County s ordinance from heightened scrutiny, the Court of Appeal s judgment makes property owners especially 7

8 vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits. Koontz, 570 U.S. at 605. Review is warranted to ensure that local governments do not abuse affordable housing programs to compel individual property owners and developers alone to bear costs that, in all fairness and justice, should be borne by the public as a whole. Armstrong v. United States, 364 U.S. 40, 49 (1960). In particular, the Court of Appeal failed to recognize that each of the alternatives available to the Cherks for complying with the affordable housing ordinance abridges legally cognizable property rights (purchase options, the right to transfer, beneficial interests, and use restrictions), which constitutes an exaction under the Nollan/Dolan/Koontz line of cases. Further, the Court of Appeal s assumption, that the lack of a formal conveyance of those property interests to the government exempts an affordable housing ordinances from review under Nollan/Dolan/Koontz, threatens to create an exception that will swallow the unconstitutional conditions rule. This Court should accept this case for review to clarify which types of property rights are protected by the unconstitutional conditions doctrine. FACTUAL BACKGROUND AND PROCEDURAL HISTORY The County of Marin imposed a $39,960 in-lieu fee as a condition of granting the Cherks a permit to split their vacant 2.79-acre residentiallyzoned parcel of land into two single-family lots. The fee was imposed pursuant to the County s inclusionary-housing program, which is 8

9 implemented as Title of the Marin County Code (MCC). In relevant part, that code requires landowners seeking to subdivide their property to dedicate: 20 percent of the total number of [] lots within a subdivision to affordable housing.... Where the inclusionary housing calculation results in a decimal fraction greater than 0.50, the fraction shall be rounded up to one additional dwelling lot of unit. Where the inclusionary housing calculation results in any decimal fraction less than or equal to 0.50, the project applicant shall pay an in-lieu fee proportional to the decimal fraction. MCC (A) (Inclusionary Housing Standards Lot Creation) (emphasis added). The Cherks divided their single parcel in two, which the County interpreted as creating two lots, resulting in a calculation to dedicate 0.40 lots to affordable housing. Because that calculation was less than 0.50, the fee of $39,960 (40% of the estimated value of an affordable housing unit on the date the Cherks application for the subdivision was complete) was, by the terms of the County ordinance, added as a condition of approving their lot split. Accordingly, the Conditions of Approval section of the County resolution approving the Cherks lot split states: BEFORE RECORDATION OF THE PARCEL MAP, the applicant shall submit to the Community Development Agency an in-lieu participation fee for the construction of affordable housing. JA 281. The Cherks paid that fee under protest in July

10 It is an undisputed fact that the County made no determination that the Cherks lot split created any public burden related to affordable housing. The only finding made by the County during the permit process that related to the Cherks proposed lot split and housing is contained in the staff report recommending approval of the subdivision with conditions: The project is consistent with the goals and policies of the Countywide Plan because it would create two residential parcels.... The project would result in a future increase in the availability of housing opportunities in an existing residential community. AR 278. In August 2016, the Cherks filed a petition for traditional and administrative mandate and complaint for declaratory relief in the Marin County Superior Court, challenging the fee as a violation of the Mitigation Fee Act and unconstitutional conditions doctrine. The trial court held that (1) the Mitigation Fee Act did not apply at all to the in-lieu fee because the County did not intend the fee to defray adverse public impacts caused by the Cherks lot split; and (2) the fee was not a monetary exaction and, therefore, not subject to the unconstitutional conditions doctrine. Judgment became final in January 2018 and the appeal to the First Appellate District followed. The Court of Appeal affirmed the trial court s judgment. First, it agreed with the trial court that the Mitigation Fee Act s heightened standard of review was inapplicable since the affordable-housing fee was not intended to offset any adverse impact of the Cherks project. Rather, the court noted, 10

11 the inclusionary-housing program is broadly aimed at increasing the amount of affordable housing in Marin County. Opinion at 13. Second, the court made a finding, interpreting the language of MCC (A) in tension with the County resolution cited above, that the County did not make an exclusive demand for money as a condition of their permit. Id. at Rather, it reasoned, the Cherks could have avoided the fee by choosing an alternative of rounding up the County s calculation of the inclusionary housing obligation and satisfying the requirement by dedicating one full lot for affordable housing. Id. The court further determined that this alternative did not constitute an exaction of an interest in the Cherks property. Id. On that basis, the Court of Appeal concluded that the Cherks circumstance was analogous to the facts of CBIA and ruled the County s affordable-housing fee is not subject to the unconstitutional conditions doctrine because there were alternative means of complying with the inclusionary housing ordinance that did not violate the standards set out in leading unconstitutional conditions cases. Id. at 17. The Court of Appeal noted as a separate basis for its holding that legislatively prescribed monetary fees as distinguished from ad hoc monetary demands by an administrative agency that are imposed as a condition of development are not subject to the unconstitutional conditions doctrine. Opinion at 16 (citing CBIA, 61 Cal. 4th at 459 n.11) (quotation marks omitted). The question of whether legislatively proscribed fees are 11

12 subject to the unconstitutional conditions doctrine after Koontz is a question which this Court left open in CBIA. Some further description of the County s inclusionary housing program is necessary considering the Court of Appeal s finding that the Cherks could have avoided the in-lieu fee, and escaped a monetary exaction, by dedicating a full lot to the affordable housing program. Contrary to the Court of Appeal s assumption, each of the alternatives arguably available to the Cherks abridges a discrete interest in property. First, the dedication of a lot (or dwelling unit built on such a lot) itself constitutes an exaction because the dedication is permanent: All affordable housing units shall be income-restricted in perpetuity, unless the review authority reduces the term of the affordability requirement to meet legal requirements pertaining to Federal or State financing sources. MCC (B). Dedicating a property to affordable housing under the program means that the property may be sold and resold from the date of the original sale only to income qualifying households as certified by the County. MCC (B)(2). Further, the County, rather than the property owner, controls the sales of affordable housing units and specifies the class of or particular persons to whom the property must be sold: the County or its designee shall advertise the inclusionary housing units to the general public and seek and screen qualified purchasers through a process involving applications and 12

13 interviews or lottery. MCC (B)(2)(c). The price received by selling owners (and subsequent resellers) of affordable housing units is likewise controlled by the County. See MCC (B)(1) ( the price received by the seller of a resale unit shall be the lowest among fair market value and two prices calculated in relation to the region s median income or consumer price index). Moreover, the burdens of the inclusionary housing program are recorded as deed restrictions. See MCC (B)(3) (purchasers of the inclusionary housing units shall, upon purchase, sign and record... documents as provided by the County or its designee, stating the restrictions imposed by the inclusionary housing program). Finally, the inclusionary housing ordinance effectively deeds to the County a perpetual purchase option to control the sale and resale of inclusionary units: The County or its designee shall be given the responsibility of monitoring the resale of ownership inclusionary units. The County or its designee shall have the option to commence purchase of ownership inclusionary units after the owner gives notification of intent to sell or in the event of any default or violation of the income restrictions. Any abuse in the resale provisions shall be referred to the County for appropriate action. MCC (B)(5) (emphasis added). 13

14 ARGUMENT I. The Petition Should Be Granted to Settle the Important Question of Which Types of Abridgements of Property Interests Constitute Exactions A. The Unconstitutional Conditions Doctrine Prohibits Abusive Exactions in the Context of Land Use Permitting The U.S. Supreme Court has established a special application of the unconstitutional conditions doctrine aimed at protecting land-use permit applicants [that] are especially vulnerable to government pressure to give up property without compensation, under the guise of the permitting process. Koontz, 570 U.S. at 605. This is because a property owner is likely to accede to the government s demand, no matter how unreasonable where the land use permit is more valuable than the demand. Id. As a consequence, this line of cases holds that government may not constitutionally exact money or property from a property owner as a condition of changing the use of their property unless (1) the exaction has an essential nexus to an adverse public impact of the proposed use, Nollan, 483 U.S. at 837, and (2) the exaction is roughly proportionate in both nature and extent to negative impacts caused by the new use, Dolan, 512 U.S. at 391. This Court has interpreted that doctrine in the context of inclusionaryhousing ordinances. In CBIA, the Court considered a San Jose ordinance that required developers of certain projects to set aside 15% of newly built units for use or sale at below-market rates in furtherance of the city s affordable- 14

15 housing program. The ordinance allowed developers an alternative of setting aside those units on the site of the project by electing (a) to build belowmarket housing off-site of the developers project or (b) pay a fee to the city in lieu of setting aside units. See CBIA, 61 Cal. 4th at The Court ruled that San Jose s inclusionary-housing ordinance was not subject to the test for an unconstitutional exaction because the on-site setaside requirement does not require a developer to give up a property interest for which the government would have been required to pay just compensation under the takings clause outside of the permit process. Id. at 461. Rather, this Court reasoned, the set-aside requirement simply places a restriction on the way the developer may use its property by limiting the price for which the developer may offer some of its units for sale. Id. Because the on-site set-aside option for complying with the ordinance did not exact a property interest, it follows that the affordable housing requirement of the San Jose ordinance as a whole including the voluntary off-site options and in lieu fee that the ordinance makes available to a developer does not impose an unconstitutional condition in violation of the takings clause. Id. at In short, [n]o developer is required to pay the in lieu fee [or convey other property interests to the City] and may always opt to satisfy the ordinance by providing on-site affordable housing units. Id. at

16 CBIA thus stands for the rule in California that inclusionary-housing ordinances are not subject to review under the unconstitutional conditions doctrine if they allow at least one option for compliance that does not exact an interest in property from a land use permit applicant. As the instant case demonstrates, however, this leaves open the question of which types of abridgments of property rights rise to the level of an exaction and thus trigger heightened scrutiny under the Nollan/Dolan/Koontz tests. B. The Court of Appeal Failed to Recognize the Alternative Dedication Condition as an Exaction In the trial court and in the briefing before the Court of Appeal, the unconstitutional conditions claim in this case centered on the lack of any nexus or proportionality between the fee paid by the Cherks and any adverse public impact of their project. This was due to an apparent distinction between Marin County s ordinance, as applied to the Cherks, and the ordinance at issue in CBIA. 1 For small lot splits like the Cherks, the text of the County s ordinance, as well as the official resolution approving and conditioning the Cherks subdivision, indicated that the property owner shall pay an in-lieu fee to the government. As a result, contrary to the circumstances in CBIA, it appeared that the exclusive means of satisfying the 1 It is also noteworthy that the CBIA case involved only a facial challenge, whereas the instant case is an as-applied challenge, contesting the manner in which the County s ordinance was actually implemented in the Cherks permitting process. 16

17 ordinance in the Cherks circumstances was to pay a fee. As Koontz makes clear, a demand for a fee conditioning the use of a specific parcel of land implicates the central concern of Nollan and Dolan: the risk that the government may use its substantial power and discretion in land use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue. Koontz, 570 U.S. at 614. Absent a constitutionally permissible alternative means of satisfying the inclusionary-housing requirement, there is no doubt that the affordable-housing fee is an exaction that fails the unconstitutional conditions test. Id. (holding that a fee constitutes an exaction when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property ). However, the Court of Appeal failed to address the question whether the fee imposed on the Cherks violated Nollan/Dolan/Koontz. Instead, its ruling hinged on its conclusion that the unconstitutional conditions doctrine is inapplicable because the Cherks could have avoided the [in-lieu] fee by satisfying the inclusionary housing program in an alternative way. Opinion at 2. The implication is that the Marin County ordinance was essentially the same as the ordinance at issue in CBIA, in that at least one of the alternatives available to the Cherks would not have constituted an exaction of a legally cognizable property interest. Yet, a review of terms of the dedication 17

18 alternative demonstrates that all of the options available to the Cherks result in exactions triggering review pursuant to Nollan/Dolan/Koontz. According to the Court of Appeal, the Cherks could have avoided paying a fee to the County (and thereby escaping an exaction) by rounding up the calculation of their obligation under the ordinance and dedicating a full lot to the affordable housing program. There are two problems with the Court of Appeal s reasoning here. First, this option was not truly available to the Cherks as applied to them. See MCC (A) (requiring either (1) when the calculation is greater than 0.50, rounding up to one additional unit for dedication to the County, or (2) when the calculation is equal to or less than 0.50, paying an in-lieu fee). Second, assuming this alternative was available to the Cherks, it would have merely constituted another type of exaction. This is because the dedication option transfers to the County several discrete interests in property that were not appreciated or recognized by the Court of Appeal. Specifically, the dedication of a lot (or developed housing units) requires a property owner to give up the following property interests to the County without compensation: (1) a perpetual purchase option (MCC (B)(5)); (2) the right to freely alienate property and set its price (MCC (B)(1)-(2)); and 18

19 (3) a beneficial interest in the dedicated lots or homes, which is (a) valued at the difference between the market and County-designated affordable price, and (b) secured by a recorded agreement equivalent to a covenant or negative servitude. Each of those demands transfers legally cognizable interests in property to the County. 1. A Purchase Option Is a Property Interest This Court has made it clear that a purchase option is a protected property interest. Sterling Park, L.P. v. City of Palo Alto, 57 Cal. 4th 1193, (2013) ( Compelling the developer to give the City a purchase option [as a condition of receiving a permit under a city s affordable-housing program] is an exaction[.] ). Notably, this Court discussed purchase options in CBIA, acknowledging that a demand for a purchase option is a sufficiently strong interest in the property to require compensation if the government takes it in eminent domain, thereby making it subject to heightened judicial scrutiny. CBIA, 61 Cal. 4th at 482. It then considered the fact that executing an option to purchase is one type of document that may be included to ensure the continued affordability of an affordable unit under the San Jose ordinance, but unlike in the Sterling Park case, San Jose s ordinance does not require the developer to grant an option to purchase to the city either on the initial sale or resale of an affordable housing unit, but lists a large number of alternative[s] available that were not deemed to 19

20 exact an interest in property. Id. at 467 n.15. Not so with the Marin County ordinance, which grants to the County an option to purchase all resales of affordable units. 2. A Right to Sell Is a Property Interest Property owners also have a well-recognized right to sell their property to whomever they choose, at whatever price they choose. See Horne v. Dep t of Agric., 135 S. Ct. 2419, 2429 (2015) (finding a per se taking of seized raisin crops, even where a substantial portion of the financial value of the raisins is returned to the farmers, since the growers lose any right to control their disposition ); Apartment Ass n of L.A. Cnty. v. City of Los Angeles, 24 Cal. 4th 830, (2001) (recognizing the right to freely alienate property through sale or lease as an essential incident of property ownership); Old Dearborn Distrib. Co. v. Seagram Distillers Corp., 299 U.S. 183, (1936) ( [T]he right of the owner of property to fix the price at which he will sell it is an inherent attribute of the property itself, and as such is within the protection of the Fifth and Fourteenth Amendments. ); see also Gregory v. City of San Juan Capistrano, 142 Cal. App. 3d 72, (1983) (A purchase option/right of first refusal is a legally cognizable property right.), disapproved of on other grounds by Fisher v. City of Berkeley, 37 Cal. 3d 644 (1984); see also Laguna Royale Owners Ass n v. Darger, 119 Cal. App. 3d 670, (1981) (recognizing an owner s right to use and dispose of property as he chooses); Ex parte Quarg, 84 P. 766, 767 (Cal. 20

21 1906) (An owner of property has a clear right to dispose of it, to sell it to whom he pleases and at such price as he can obtain. ); Cal. Civ. Code 711 (a property owner has the right to freely alienate property, and to be free from unreasonable restraints on alienation of property). This right to freely alienate property to a person and at a price of one s choosing is taken without compensation in favor of the County or the public by dedicating a lot or housing unit to the affordable-housing program. With respect to this right, the County s ordinance restricts the right to alienate one s property only to particular people or classes of people designated by the County. 3. A Beneficial Interest Is a Property Interest The whole purpose of the dedication option is to secure for the County a beneficial interest in the dedicated lots or housing units at no cost to the government. The County wants to provide low-cost or subsidized housing to its residents. It does not want to pay for providing that benefit to its residents, so it has sought a way to achieve the same result off-budget, and at the expense of individual property owners, through its land use permitting scheme. By controlling the terms of sale and resale of the dedicated properties in perpetuity, MCC (B), the County effectively commandeers the dedicated lots and develops inclusionary housing units for the public benefit of subsidized housing. * * * 21

22 Therefore, the County s program does not simply regulate the use of Petitioners property but has pressed it into public service to alleviate the County s need for below-market rate housing, and it has done so in a way that allows the government to evade the cost. The function of this purportedly benign dedication option is to leverage the County s land use permitting process to force individual property owners to bear the cost of the County s affordable-housing program, which would (and should) otherwise be borne by the public as a whole. Preventing that kind of government action is the essence of the Takings Clause. See Armstrong, 364 U.S. at 49. If the County sought to achieve the affordable housing objective by enacting an ordinance to convert a percentage of existing homes within the County to affordable homes that thereafter could only be sold to or occupied by income-restricted residents, it would undoubtedly be required to use its eminent domain power and pay just compensation. Instead, it here employs a sleight-of-hand to achieve the very same objective by pressing newly built homes into public service without compensation by leveraging the County s permitting power. The Nollan/Dolan tests were established for the precise reason of prohibiting the government from achieving illicit uncompensated takings through the permitting process. 22

23 C. The Perpetual, Recorded Encumbrances on the Future Use of Lots or Housing Units Dedicated to Affordable Housing Distinguish the Program from Ordinary Land Use Restrictions The fact that the income restrictions and other limitations on dedicated units are recorded in the chain of title and persist in perpetuity distinguish affordable-housing programs like the County s from ordinary land use restrictions like zoning. To begin, ordinary land use regulations restrict current uses, and those restrictions are subject to revision or repeal according to the political process; by contrast, the encumbrances placed on property dedicated under the County s affordable-housing program are recorded and permanent. Koontz rejected the notion that permit conditions are considered ordinary land use restrictions: [P]etitioner does not ask us to hold that the government can commit a regulatory taking by directing someone to spend money. As a result, we need not apply Penn Central s essentially ad hoc, factual inquir[y], Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978), at all, much less extend that already difficult and uncertain rule to the vast category of cases in which someone believes that a regulation is too costly. Eastern Enters. v. Apfel, 524 U.S. 498, 542 (1998) (opinion of Kennedy, J.). Instead, petitioner s claim rests on the more limited proposition that when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property, a per se [takings] approach is the proper mode of analysis under the Court s precedent. Brown v. Legal Found. of Wash., 538 U.S. 216, 235 (2003). Koontz, 570 U.S. at

24 Further, under an ordinary use restriction like zoning, the public does not acquire an affirmative right in the regulated property. But under the County s affordable-housing program, the public does gain a substantial property interest in the regulated property by vesting in the County a right to perpetually secure the use of that property for the benefit of low-cost housing. The right to enforce a covenant or negative servitude, which is the best description of the so-called use restriction at issue here, is a wellestablished property right. See, e.g., Wooster v. Dep t of Fish & Game, 211 Cal. App. 4th 1020, 1026 (2012) (holding that negative easements are protected property interests for takings purposes). Also notable is that inclusionary-housing programs don t look like typical use restrictions because they allow developers to bypass the restrictions on payment of fees or other valuable consideration to the government. A zoning ordinance does not generally allow developers to pay in-lieu fees as a means of ignoring a restriction say, building a commercial development in a residential zone. This feature of the inclusionary-housing program should be unsurprising since the overarching purpose of the program is to reduce the amount of public money required to build a stock of County-controlled affordable housing. It does so by requiring individual landowners or developers to bear the expense of below-market land or housing units, at no cost to the government, in exchange for land use permits. This public benefit is achieved whether the property owner dedicates a 24

25 beneficial interest to the County to control relevant aspects of the owner s property or provides money in the form of fees to allow the County to buy or build other inclusionary housing units. Municipalities adopting such affordable-housing programs have taken the view that the perpetual control over the use and disposition of the dedicated property does not constitute a taking on the ground that there is no formal conveyance of a property interest to the government. But this is too cramped a view of the kinds of deprivations of property that constitute exactions. See Koontz, 570 U.S. at 607 ( Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation. ). The permit condition at issue in the Nollan case, for example, required no actual conveyance of property to the state; it required only that the owners record a deed restriction acknowledging that the public had a right to pass across a portion of the beachfront property. Nollan, 483 U.S. at 858 (Brennan, J., dissenting). This public benefit, of course, constituted an exaction and was declared unconstitutional by the U.S. Supreme Court. A beneficial interest in property, such as the one created in favor of the public by the inclusionaryhousing program, is valuable and legally cognizable. 25

26 CONCLUSION This Court should grant the Petition under Rule of Court 8.500(b)(1) to settle the important question of which types of property interests fall within the ambit of CBIA s holding and which trigger analysis under the unconstitutional conditions doctrine. DATED: January 15, Respectfully submitted, LAWRENCE J. SALZMAN OLIVER J. DUNFORD Pacific Legal Foundation By /s/ Lawrence G. Salzman LAWRENCE G. SALZMAN Counsel for Petitioners and Appellants Dartmond Cherk and The Cherk Family Trust 26

27 CERTIFICATE OF COMPLIANCE Pursuant to California Rule of Court 8.504(d)(1), I hereby certify that the foregoing PETITION FOR REVIEW is proportionately spaced, has a typeface of 13 points or more, and contains 5,057 (less than 8,400) words. DATED: January 15, /s/ Lawrence G. Salzman LAWRENCE G. SALZMAN 27

28 DECLARATION OF SERVICE I, Lawrence G. Salzman, declare as follows: I am a resident of the State of California, residing or employed in Sacramento, California. I am over the age of 18 years and am not a party to the above-entitled action. My business address is 930 G Street, Sacramento, California On January 15, 2019, a true copy of PETITION FOR REVIEW was electronically filed with the Court through truefiling.com. Notice of this filing will be sent to those below who are registered with the Court s efiling system. Those who are not registered will receive a hard copy via first-class U.S. Mail, postage thereon fully prepaid, and deposited in a mailbox regularly maintained by the United States Postal Service in Sacramento, California. TARISHA K. BAL DAVID L. ZALTSMAN Office of the County Counsel 3501 Civic Center Drive, Room 275 San Rafael, CA COURT CLERK Marin County Superior Court 3501 Civic Center Drive San Rafael, CA COURT CLERK California Court of Appeal First Appellate District, Division One 350 McAllister Street San Francisco, CA

29 I declare under penalty of perjury that the foregoing is true and correct and that this declaration was executed this 15th day of January, 2019, at Sacramento, California. /s/ Lawrence G. Salzman LAWRENCE G. SALZMAN 29

30 y Filed 12/14118 NOT TO BE PUBLISHED IN OFFICIAL REPORTS or for IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE DARTMOND CHERK et al., Plaintiffs and Appellants, v. COUNTY OF MARIN, Defendant and Respondent. A (Marin County Super. Ct. No. CIV ) Dartmond Cherk and the Cherk Family Trust (the Cherks) appeal from the denial of their petition for writ of administrative mandate under Code of Civil Procedure section The Cherks challenge the validity of a $39,960 "in-lieu" fee imposed by the County of Marin (County) under its inclusionary housing program as a condition for subdividing their property. 2 The Cherks contend that the fee is invalid under both the Mitigation Fee Act (the Act) (Gov. Code, et seq.) and the "unconstitutional conditions doctrine," established by the United States Supreme Court in Nollan v. California Coastal Comm 'n (1987) 483 U.S. 825 (Nollan) and Dolan v. City of Tigard (1994) 512 U.S. 374 (Dolan). We disagree. The fee falls outside the scope of the Act's 1 All further statutory references are to the Code of Civil Procedure unless otherwise noted. 2 Inclusionary housing programs " 'require or encourage developers to set aside a certain percentage of housing units in new or rehabilitated projects for low- and moderate-income residents.' " (California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435, 441 (San Jose).) 1

31 scrutiny of certain "exactions" because it serves broader purposes than simply mitigating the impact of the Cherks' subdivision. And the unconstitutional conditions doctrine is inapplicable because the Cherks could have avoided the fee by satisfying the inclusionary housing program in an alternative way. Accordingly, we affirm. I. FACTUAL AND PROCEDURAL BACKGROUND For almost two decades, the Cherks have been engaged in an on-again, off-again effort to subdivide a 2.79-acre parcel of land into single-family residential lots. The effort began in 2000, when they applied to the Planning Division of the Marin County Community Development Agency (Planning Division) to split the parcel into two singlefamily residential lots. The Planning Division deemed the application complete and began its review of the project, but in 2002 the Cherks asked for the review to be put on hold because they saw proposed changes to the Marin County Code as potentially enabling them to subdivide their property into three, rather than two, lots. A. Ordinance No ls Enacted In October 2003, the County adopted Ordinance No. 3393, amending the "affordable housing regulations" contained in Title 22 (Development Code) of the Marin County Code. In enacting the ordinance, the County Board of Supervisors found that the amendments would implement the policies contained in the County's housing policies encouraging the development of new affordable housing. (Marin County Ord. No. 3393, V.) In relevant part, the 2003 ordinance "expand[ed] the applicability of the inclusionary housing requirements for all new residential projects resulting in two or more housing units or lots where the [prior] ordinance applie[d] only to new projects resulting in 10 or more residential units or lots" and "[i]ncrease[d] the percentage of required affordable housing units for most new residential projects from 15% to 20%." (Ibid.) As amended, Marin County Code, section (section ) provides that "20 percent of the total number of dwelling units or lots within a subdivision shall be 2

32 developed as, or dedicated to, affordable housing. Where the inclusionary housing calculation results in a decimal fraction greater than 0.50, the fraction shall be rounded up to one additional dwelling unit or lot. Where the inclusionary housing calculation results in any decimal fraction less than or equal to 0.50, the project applicant shall pay an inlieu fee proportional to the decimal fraction." ( A.) B. After Delays and Revisions, a Tentative Subdivision Map Is Approved. In February 2004, after concluding that the 2003 amendments would not make it any easier to subdivide the property into three lots, the Cherks initially moved forward with their original plan for a two-lot division. But, after meeting with staff in the Planning Division and others, the Cherks decided to apply for a three-lot division after all, with the third lot dedicated to affordable housing. In a December 2004 letter to principal planner Thomas Lai, Dartmond Cherk urged the County to approve the three-lot division, stating, "The Planning department has been charged with finding more affordable housing for Marin County. When asked if we could come up with a plan, we fully cooperated. In our effort to help, we not only came forth with a plan for infill affordable housing, but we built a scale model, met with housing agencies, met with your Housing Strategist, met with the Supervisor, her aide, as well as with the neighborhood representatives. We went to this expense not only because we believe in affordable housing, but we also wanted to help the County achieve its goal. With regards to this issue, we need our three lots if only to enable any less ambitious attempt to provide some affordable housing." A year and a half later, however, the Cherks again changed course and revised the project back to a two-lot division. In a July 2006 internal , Stacey Laumann of the Marin County Community Development Agency gave instructions to a planner "for [his] communications with the Cherks." Laumann wrote, "In this case, 2 developable parcels are being created. Therefore either 1 of the two lots should be deed restricted for development of low or very low income units, or an in-lieu fee of $39,960 would be required by the County." She further explained that the in-lieu fee was calculated as 40% of the fee for a single affordable housing unit valued at $99,900. 3

33 Following a noticed public meeting in December 2007, the Deputy Zoning Administrator approved the Cherks' tentative map. The final project approval was conditioned upon the Cherks' payment of an in-lieu fee of$39,960 in accordance with the formula contained in section A. In December 2008, the Planning Division informed the Cherks that the in-lieu fee had increased to $92,808 in light of the County's re-evaluation of the market value of one affordable housing unit. The County reconsidered, however, and ultimately charged the Cherks the original amount of the in-lieu fee based on the prevailing market value when the application was initially deemed complete. C. The Project Is Finally Approved and the In-lieu Fee Is Paid Under Protest. The Cherks again suspended their subdivision efforts after determining that the value of their property was impaired by then-existing economic conditions. For several years, they obtained extensions oftime to file a parcel map. In late 2014, the Cherks submitted their parcel map to the Planning Division for final review. The Planning Division informed the Cherks that the parcel map was approved but could not be recorded until the in-lieu fee was paid. The County offered the Cherks the option of paying the in-lieu fee in installments, with half of the fees due at the time of sale for the first lot, and the remaining balance of the fees due within three years of the map's recordation. In a July , the Cherks accepted the County's offer to pay the in-lieu fee through an installment plan. But several weeks later, the Cherks paid the fee in full, although they did so under protest. In an accompanying letter that contained a reference line entitled "extortion payment," Dartmond Cherk stated the County was "violating the law that requires in-lieu affordable housing fee when creating two (2) or more new lots. We are creating only one new lot." He also complained that the project was "substantially completed well in advance of the new housing law. It is wrong for you to apply it retroactively." In February 2016, attorneys for the Cherks wrote to the County asking it to refund the in-lieu fee. The letter claimed the fee was an unconstitutional exaction in violation of 4

34 the Fifth Amendment takings clause and also violated the Cherks' equal protection rights. The County did not respond to this letter. D. The Cher ks File a Petition for Writ of Administrative Mandate. In August 2016, the Cherks filed a verified petition for traditional and administrative mandate and complaint for declaratory relief, claiming the County had abused its discretion by imposing the in-lieu fee because it violated the Act and the unconstitutional conditions doctrine. They later moved for judgment on their petition. In December 201 7, the trial court issued a tentative decision denying the petition. The court found that the in-lieu fee was not a development-impact fee intended to defray the public burden caused by the Cherks' project and was therefore not subject to the Act's "reasonable relationship" test. It also found that the in-lieu fee did not constitute a monetary exaction subject to the unconstitutional conditions doctrine under the California Supreme Court's decision in San Jose, supra, 61 Cal.4th 435, and the Court of Appeal's opinion in 616 Croft Ave., LLC v. City of West Hollywood (2016) 3 Cal.App.5th 621 (West Hollywood). 3 The Cherks voluntarily dismissed their remaining claims, and the court issued a final judgment in January This appeal followed. A. The Standard of Review. II. DISCUSSION "In reviewing an agency's decision under Code of Civil Procedure section , the trial court determines whether ( 1) the agency proceeded without, or in excess of, jurisdiction; (2) there was a fair hearing; and (3) the agency abused its discretion." (McAllister v. California Coastal Com. (2008) 169 Cal.App.4th 912, 921.) "On appeal from the denial of a petition, our role is identical to that of the trial court." (Id. at p. 922.) 3 The trial court also concluded the petition was not untimely and the Cherks were not required to exhaust administrative remedies because the County never provided them with written notice required by Government Code section 66020, subdivision ( d), when a local agency imposes fees, dedications, reservations, or other exactions under the Act. 5

35 "Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence." ( , subd. (b).) The petitioner has "the burden of proving that the agency's decision was invalid and should be set aside, because it is presumed that the agency regularly performed its official duty. When the standard of review is the substantial evidence test,... it is presumed that the findings and actions of the administrative agency were supported by substantial evidence. [Citations.] Thus, since the same standard of review applies now on appeal as did in the trial court, the burden is on [the] appellant to show there is no substantial evidence whatsoever to support the findings of the [agency]." (Desmond v. County of Contra Costa (1993) 21 Cal.App.4th 330, ) B. Judicial Review Is Not Barred by the Cherks' Failure to Exhaust Their Administrative Remedies. The County argues that the judgment should be affirmed because the Cherks failed to exhaust their administrative remedies. According to the County, tentative map decisions are appealable to the Marin County Planning Commission and Board of Supervisors under Marin County Code, section , and the Cherks should have brought an administrative appeal back in December 2007 when the Deputy Zoning Administrator conditioned approval of the tentative map on payment of the in-lieu fee. We begin by considering, and rejecting, the Cherks' contntion that the County forfeited this argument because it did not cross-appeal the portion of the trial court's ruling that the Cherks were not required to exhaust administrative remedies due to the County's failure to provide written notice as required by the Act. It is true that, as a general rule, a respondent who fails to file a cross-appeal cannot claim error in connection with the opposing party's appeal. (Preserve Poway v. City of Poway (2016) 245 Cal.App.4th 560, 585.) But section 906 provides a "limited exception," which "allows a respondent to 'request the reviewing court to... review [the judgment] for the purpose of determining whether or not the appellant was prejudiced by the error or errors upon which he relies for reversal or modification of the judgment from which the appeal 6

36 is taken.'" (Preserve Poway, at p. 585.) This exception applies here, as the County raises the administrative-exhaustion issue to show that the judgment against the Cherks can be affirmed on the basis of an alternate legal theory. We therefore consider the merits of the County's exhaustion argument, but we are not persuaded by them. "The exhaustion of administrative remedies doctrine 'bars the pursuit of a judicial remedy by a person to whom administrative action was available for the purpose of enforcing the right he seeks to assert in court, but who has failed to commence such action and is attempting to obtain judicial redress where no administrative proceeding has occurred at all; it also operates as a defense to litigation commenced by persons who have been aggrieved by action taken in an administrative proceeding which has in fact occurred but who have failed to "exhaust" the remedy available to them in the course of the proceeding.' " (Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865, 874.) While the administrative-exhaustion doctrine "remains a 'fundamental rule of procedure' [citation]... courts have repeatedly recognized the rule is not inflexible dogma. [Citations.] Exceptions to the rule include situations... when resort[ing] to the administrative process would be futile because it is clear what the agency's decision would be [citations]. Before a court can determine whether an exception is applicable the court must analyze and determine whether the benefits served by the administrative hearing outweigh denying a litigant meaningful judicial review." (Doster v. County of San Diego (1988) 203 Cal.App.3d 257, (Doster).) Any benefits of insisting on administrative exhaustion here are outweighed by the harm of denying the Cherks meaningful judicial review. This case turns on "a straightforward legal issue that needs little in the way of factual development" and "presents a dispositive question within judicial, not administrative, competence." (Action Apartment Assn. v. Santa Monica Rent Control Bd. (2001) 94 Cal.App.4th 587, 615.) The legal issue is simply whether the in-lieu fee violates the Act or the unconstitutional conditions doctrine. The County's position is clear and based on appellate authority. 7