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HomeMy WebLinkAboutMinutes - December 13, 2005 SSCITY OF LODI INFORMAL INFORMATIONAL MEETING "SHIRTSLEEVE" SESSION CARNEGIE FORUM, 305 WEST PINE STREET TUESDAY, DECEMBER 13, 2005 An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday, December 13, 2005, commencing at 7:01 a.m. A. ROLL CALL Present: Council Members — Beckman, Hansen, Johnson, Mounce, and Mayor Hitchcock Absent: Council Members — None Also Present: City Manager King, City Attorney Schwabauer, and City Clerk Blackston B. TOPIC(S) NOTE: Items below were heard out of order as listed. B-2 "Review of the City of Stockton's proposed General Plan Land Use Element" Community Development Director Hatch reviewed Lodi's and Stockton's General Plan map and sphere of influence. He pointed out that from a long term perspective the only direction for Stockton to grow is north. Stockton's General Plan seems to acknowledge Lodi's proposed greenbelt/separator along the Highway 99 corridor; however, it appears not to factor in the White Slough area of influence because it is considered to be in the County. Mr. Hatch recommended that when the update to Lodi's General Plan is conducted, that the study area include Highway 12 west to Interstate 5, noting that this intersection serves as the gateway to Lodi and its wineries. In reply to Mayor Pro Tempore Johnson, Mr. Hatch stated that if Lodi were to provide sewer service to Flag City it would strengthen its position that the area bears relation to Lodi and should be included in its General Plan study area. In response to Council Member Hansen, City Attorney Schwabauer stated he had been informed that at a 2x2x2 meeting Jim Glaser, Stockton Community Development Director, had indicated that he interpreted the sphere of influence agreement to include a 500 foot buffer that began at Lodi's White Slough Plant, not from the southern boundary of the property. Subsequent to hearing this, Mr. Schwabauer sent a letter to the Stockton City Attorney's Office who called in response and expressed agreement that the buffer begins at the southern boundary of the property. Mr. Schwabauer clarified that the buffer is for residential construction. With Stockton's "village" concept there will be commercial and/or industrial construction, which could be built in the northernmost area of Stockton's sphere in relation to the White Slough property. City Manager King stated that staff would probably request that Stockton reflect the agreed upon buffer in their General Plan. He warned that there could be potential opposition from Stockton to the proposed Resource 500 power plant project and the White Slough property in general in terms of odor, lights, etc. In reply to Mayor Hitchcock, Mr. Schwabauer reported that the Local Agency Formation Commission (LAFCO) denied Lodi's request to expand its area of influence to include property south of White Slough. LAFCO stated that Lodi would have to buy the property and then seek to increase its sphere. He stated that, in part, the decision was due to it not being contiguous with Lodi's city limits; however, he believed the primary reason was that LAFCO felt Lodi was trying to drive down prices so it could buy the property at a discount. Continued December 13, 2005 Mayor Hitchcock asked whether more property should be purchased for future needs of the White Slough Plant and felt that a decision should be made quickly while options are still available. Public Works Director Prima reported that an evaluation is currently being done on groundwater impacts at the White Slough facility. One of the outcomes of the sphere study was to develop a concept plan that called for 100% reuse of the water through irrigation of landscaping and other non -potable uses. If that were done, the amount of land needed would be minimal. If treated effluent were reused, the only land application would be for industrial cannery water and bio solids. Mr. Prima noted that the land north of the White Slough facility between the City's property and Highway 12 is also a suitable site for expansion. In addition, land east of Thornton Road has some potential. B-1 "Discussion on use and value of development agreements" City Attorney Schwabauer explained that development agreements were created in response to California Supreme Court case Avco Community Developers, Inc. v. South Coast Regional Commission (1976). The court held that cities can raise development impact fees or change their development standards at any time up until the developer has: 1) received its building permit and completed all discretionary permits necessary to begin construction, and 2) expends money toward construction. Mr. Schwabauer stated that these two actions, under existing standards, provide vested rights for construction. Subsequent to the Avco case developers asked for relief in the form of legislation and development agreements were created as another way to establish vested rights. Due to two cases, i.e., 1) Nolan v. California Coastal Commission (1987), and 2) Dolan v. City of Tigard (1994), the law now states that when a city exacts a condition as a requirement for development it must be both temporally related and proportional to the impact. Mr. Schwabauer explained that with development agreements the City can ask for whatever it wants in exchange for locking in the development standards and fees. The City's risk is that its expenses increase more than the value it was able to extract from the development agreement, between the time the fees were locked in and construction begins. Lodi's 2004 impact fee adjustment allows developers to (in some cases) lock their fees in earlier than the timeline required by the Avco case. He explained that a development agreement is a legislative act, and once the legislative act is taken, it locks in the 30 day statute of limitations for challenging those portions of the project which are approved. Development agreements lock in the right to develop within the terms that are internal to the agreement and can reserve subsequent discretionary approvals. Development agreements are considered first by the Planning Commission and then heard by the City Council at a public hearing. He recommended that at the December 21 City Council meeting Resolution 2004- 238 be amended to provide that the fee increases established in the resolution are not locked in until the latest date allowed by California law. In response to questions posed by Council Member Hansen, Mr. Schwabauer reported that Frontier Community Builders has not made any filings in advance of the fees that are currently in place, so its fees are not locked in. He stated that development agreements can dictate density and can advance creative projects that are not within the traditional parameters of the City's General Plan. Mayor Hitchcock asked whether a development agreement could have the effect of locking in all remaining growth allocations, to which Mr. Schwabauer stated that it could if the City wished to negotiate it. In reply to Council Member Hansen, Community Development Director Hatch explained that city limit signs are informational and have no legal bearing. 2 Continued December 13, 2005 Mayor Pro Tempore Johnson and Council Members Hansen and Mounce voiced support for placing Lodi's city limit signs as far out as possible in an effort to protect the City's interest in its sphere of influence areas. PUBLIC COMMENTS: oo Jeffery Kirst recalled that the original 2% growth initiative was struck down by the appellate court and Council later enacted an ordinance, which it has the ability to amend. Mr. Schwabauer noted that the 2% growth limit is also incorporated in the City's General Plan, which makes it more difficult to change. oo Pat Patrick, President of the Chamber of Commerce, urged that the City's General Plan development be driven by the economic buoyancy of Lodi, rather than population growth. An agricultural preserve would relate directly to an economic benefit that Lodi would profit from. Mr. Patrick stated that the Executive Director of LAFCO indicated that a plan of Lodi's that was expanded and incorporated an agricultural preserve concept around the current urban area would be acceptable because such a plan serves different parties of shared economic interest. C. COMMENTS BY THE PUBLIC ON NON -AGENDA ITEMS None. D. ADJOURNMENT No action was taken by the City Council. The meeting was adjourned at 8:23 a.m. ATTEST: Susan J. Blackston City Clerk TO: Mayor & City Council Members FROM: Steve Schwabauer, Cita Attorney R: Development Agreement Manual Attached is a copy of the Institute for Focal Self Government Development Agreement Manual for your review in advance of the Shirtsleeve on Tuesday. J:1CA',C['MCOUNCIL:COi%RES\M-DF VAGRMAN UAL. DOC' r.?, TO: Mayor & City Council Members FROM: Steve Schwabauer, Cita Attorney R: Development Agreement Manual Attached is a copy of the Institute for Focal Self Government Development Agreement Manual for your review in advance of the Shirtsleeve on Tuesday. J:1CA',C['MCOUNCIL:COi%RES\M-DF VAGRMAN UAL. DOC' INSTITUTE jor LOCAL LF GOVPRNIMPNT COLLABORATION OF Commuwy INTERESTS Prepared by David J. Larsen, City Attorney, Loomis; Berdiiig & Weil, LLP PROM'CTION & EDITING JoAnne Speers Q Kara Leda OCharles Suramerelt 0 Mcghan Sokol 0 Jude Hudson AA tulan& V. Argent All final decisions about the content and lormarting of this repart were made by the. Institute for- Local Self Governrnent. With Special Thanks to the Following Individuals Who Contributed Their Time and Expertise to This Manual: William Curlev Craig Ewing Vince Rertoni Attorney Director ofCozmalunity Development Planning Manager Richards, Watson & Gershon City of Belmont City (if Santa Clai ita Steven P. Rudolpb Janet Ruggiero, Linda Guillis City Attorney .Director of Community Development Community and Econornic City of Folsom City of Citrus Heights Development Director City of Moreno Valley Peter Brown TOM Sullivan Debra R. Corbitt City Attorney Director of Community Development City Attorney City of Carpinteria City of Saratoga City of'i'racy PROM'CTION & EDITING JoAnne Speers Q Kara Leda OCharles Suramerelt 0 Mcghan Sokol 0 Jude Hudson AA tulan& V. Argent All final decisions about the content and lormarting of this repart were made by the. Institute for- Local Self Governrnent. Dr,vELOPMBN"r AGREEMIENT MANUAl.: COLLABORATION IN PURKJfT OI' COMMUNITY INTGRL5T5 2002 by the rNsi-jn EifarLocAL SELFGohY-IRNN117NT 1400 K STRLP,r, Suin 400 SACRAVIFNl'O, CA 95914 (9 If)) 658-8208 www.ilsg.org CONTENTS 1. INTRODUCTION..a...........a...........•.....................a...........no..........a...........9 Whatare Development Agreements ................................................................>..........9 InThis Manual......—. .......... .......... ...... ........ ...................... ........... -.— ....... 9 2. THE ADVANTAGES AND DISADVAN"T"AGES OF DEVELOPMENT AGREEMENTS.........................................................................1. I AdvancingLand Use Policies .....................................................................>...............I I Potential Advantages: The Ability to Better Implement Planning Policies ..... ...12 Potential Disadvantages: May Promote Had Planning.......................................13 ImposingConditions .............................. __.......... ...,........................................ ........... 14 Potential Advantages- More Encompassing Developer Requirements May be Enforced. ..... ................. -- .......................................... ....... ....... -- ........ 15 Statutory and Constitutional Restrictions ,... ...... - ...........................................15 �uaw Avoiding Constraints and Uncertainties................»........................................17 Potential Disadvantages: Unrealistic Expectations May Make Project Infeasible.... ................ ............. ..>............................................. ...... .,.>...... >.>........... 1 g Assuring Project Can -Be Built ....................................................>..............................119 Potential Advantages: Fewer Surprises After Project Approval ........................20 Potential Disadvantages: Rules of Engagement Are Locked In........................20 Summary............... ............ .......... .>.................. ....>..................... ..................... >..>.>...... 23 . ACHIEVING LAND USEPLANNING OBJECTIVES THROUGH )EVEI,OPMEN'rAGREEMENTS ..........a......................................................25 The Importance of Comprehensive Planning.......................................................>...25 The hale of Planning Policies in the Negotiation Process..................................26 Planning Policies as a Mechanisms for Defining Project Proponent Expectations . Uses of Development Agreements..... ............>.>..............................................--......28 Summan.............. ...... ..>.................... .................... .............................................. .......28 4. THE NUTS AND BOLTS OF PROCESSING DEVELOPMENT AGREEMENTS30 In Purpose/hindings....................................................................»>.................................31 ApplicationProcess ...............................................................................................>....31 Public Hearings and Notice .... ........................ --- ... --- ....... --- ...... ............. .......... 32 DevelopmentAgreements and Public Input. ............. - ... . .................... ........ —.32 Public Input on Consideration of'the Proposed Agreement................................34 NoticeIssues .... ...... .............. .................. ....... .......... -..... ................ ,.... >..... ........... 35 Decisionmaker Input on Development Agreements and Findings ..........................36 Involving the Planning Commission Early On ......................................................36 Planning Commission ileconunendation and Input on Fiadings......,®..................37 Governing Body Hearing and Decision on the Development Agreement .......... 38 Actionon the Agreement......................................................................................39 Recordation and tither Post -Approval Steps............................................................39 Amending the Development Agreement...:...............................................................40 Development Agreements and Accountability.. . . ...... ........ - .................... .... --.40 Summary.....................................................................................................................41. 5. THE ART of NEGOTIATING E VELOPMEN"I" AGREEMENTS ................43 Whois Going to Negotiate?.......................................................................................43 ReachingConsensus..................................................................................................44 Knowing Who is Across the Table .................................>,.....................................44 SettingExpectations..............................................................................................44 The Utflity of Ground Rules—. ....... —.— ........................................ .......... 45 SettingPriorities..........................................................>.................,.......................46 Havea Strategy....... ...... ... - .................................. -- ...... ............... 46 Interest -Based Bargaining Techniques................................................................47 Suanmary............................................................>..................<.....................................48 G. THE SUBSTANCE OF A DEVELOPMENT RFEMENT— ........................49 WhoWill do the Drafting?.........................................................................................49 WhenShould the Drafting Begin?.............................................................................50 Common Provisions In Development Agreements ............. —..................................50 The Parties to the Agreement .......................<..................,.......................,..,.......,,50 Useof Recitals ... ............. ......... ........... ___ ..................... ...a.. ........... ...a. ...... ........ 51 Term............................................................................................................a..........51 RequiredContents .................... ........... .......................... ............. aa.. ..................... m52 PublicBenefits...................................................................................a. _ ...... Addressing a Potential .Police Power Challenge...........:......................................53 Recoveryof Costs .................................... ..................... .m,....., ...... a........................ 55 WhicbRegulations Are Frozen? .............. .......m.................,m..................a..m............55 "Milestone" Requirements..................................................................................5{ Default, Remedies and T'ermination56 Non -Performance Issues...........a...... .......... ...................... .am...... .................... ........ 56 Stateor Federal Laws ...... .............. ...a.,ae_....... e....a,v....... ....... ............................. .57 AnnualReview-- .................... _ ........ __ ........... . ................................ - ....... -57 Enforcement..........a.............o.•............>>.....................................,..v.aa.a,...m...............58 Recordation...... .............. ......... a.............. ............. .................................... .m...,..,..... 58 Certificate of Satisfaction ...... --- .............. ............ ......m.......•...................... ..,.m.,,...5$ Indemnification and Hold Harmless Provision... ................... ......... --- ............ Amendment or Cancellation... .............. ............. __ .. . ............ ............. . ..... --.59 Assignment,,,..a•............................................................................................>...,....59 Successors.............................................................................................................59 Validity of Portions of the Agreement Severability ...............................a.............60 AttornevsFees ............. .a................ ............. ___ ........................ ,a....,,..a............... 6a0 Good Faith and Fair Dealing.....- ......... ...... .............. _ ..................... .. . ....... 60 Signatures and Subordination ....... — .... . ...............................................................60 Summary.......................................................................................................a.............61 7. CONCLUSION.....................................................................................69 FEEDBACKFORM...........................................................................®.......71 PUBLICATION ORDER FORM..................................................................73 INDEX..........................................................................................®........... 75 INSTITUTE'jar LOCAL iLF, GOVERNMENT Spring, 2002 Dear Reader; On behalf of the fnstitute's board of directors, we are pleased to be able to offer this resource to assist you in understanding issues relating to development agreements. A key Institute goal is to make a difference for local agencies and the communities they serve. Your feedback and input is a vital part of our efforts to assess the Institute's value and impact: Did this publication help you? How? Did it make a difference in how you approached a local issue or policy relating to development agreements? How can the publication be improved! Did we leave anything out? Do you disagree, with something we said? Do you have examples of the kinds of issues we discuss that we might be able; to include in future updates of this publication? Are you interested in contributing to the Institute's programs in general? To assist you in providing feedback, we have provided a feedback form at the back of this publication. 'aur feedback is also welcome through ow -,Nrebsite at vvww.ilsg.org. Thank you in advance for your assistance_ Very truly yours, JoAnne Speers Executive Director Jerry Patterson President, Board of Directors I ir� 11111 iliq Development agreements are contracts negotiated between project proponents and public agencies that govern the lana lases that May be allowed in a particular project.' Although subject to negotiation, allowable land uses trust be consistent with the local. planning policies foraanulated by the legislative body through its general plan, and consistent with any applicable specific plan. ' Neither the applicant nor the public agency is required to enter into a development agreement. When they do, the allowable land uses and other terms and conditions of approval are negotiated between the parties, subject to the public agencies' ultimate approval. While a development agreement must advance the agencies' local Alai -ming policies, it naay also contain provisions that vary from otherwise applicable zoning standards and land use requirements, The development agreement is essentially a planning tool that allows public agencies greater latitude to advance local Manning policies, sometimes in new and creative ways. WI -tile a development agreement may be viewed as an alternative to the traditional development approval process, in practice it is commonly used in conjunction with. it. It is not €uaconin on, for example, to see a project proponent apply for approval of a conditional use permit, zone change and development agreement for the same project. IN ' Cis MANuAL As discussed in Chapter 2, both parties to the agreement receive benefits. In addition to the greater latitude afforded by the development agreement to advance local planning policies, the public agency has greater flexibility in imposing conditions and requirements on proposed projects,' while the applicant is afforded greater assurance that once the project is See Ca. Gov't Code # 65364 and following. ,See Cal. Gov't Code 65867JS See Cat. Gov't Code 66000(6). What Are Dea eiopinent Agreements? .................................<. 9 lu This Manual ........... ................. -9 0 I DFVFL®t'MENT ACRE MEN'r MANUAL approved, it can be built.' There may be disadvantages associated with develop ent agreements as well (see Chapter 2). Because development agreements afford greater latitude, local agencies may want to take steps to ensure that .local land use objectives are not din'inished through the use of development agreements (se.Q Chapter 3). Giving adequate thought to how the parties conduct negotiations can improve azi agency's chances of accomplishing its objectives, as well as ensuring that .reasonable expectations of both patties are achieved (see Chapter 4). Finally, understanding the ".nuts and bolts of processing development agmetiients, and the terms and provisions that are typically included, will ensure that procedural requirements are met and legal interests protected (Chapter 5)0 In short. this nituival provides a practical overview of the: development agreement process, including: • The advantages and disadvantages of ruing development agreements; • The role development agreements can play in achieving local ageticy land use plaming objectives; • Procedural issues related to development agrectuetns; • Substantive provisions in development agreements, and • 'The art of negotiating development agreements. This nnanual reflects the variety of experiences that California public agencies and project proponents have had with development agreements, and builds upon the groundbreaking work of the original Development .Agreement Manual.. written by Daniel Curtin and published in 1980 (supplemented in 1985) by the League of California Cities. ' Set, Cal. Gov't Code § 65855.4. Development agreements Have three defining characteristics: They allow greater latitude than other methods of approval to advance local land use policies in sometimes new and creative ways; ® They allow public agencies greater :flexibility in ii-nposing conditions and requirements on proposed projects; and 0 They afford project proponents greater assurance that Advancing Land Use Policies ..... :i l once approved, their projects can be built. Imposing Cnnditions ..................14 Although these characteristics can be advantageous, they can also present challenges. The purpose of this chapter is to discuss potential advantages Assuring project Will Be BuM 19 and disadvantages of development agreements, from the perspective of Sommary ...e..e...,...... �� both the public agency and project proponent. Aw CIN LAND USE OL ICIES Because development agreements are themselves ordinances, they may supersede existing land use regulations as long as they are consistent with the general plan and any applicable specific plan.' As a result, they can afford the public agency and project proponent greater latitude concerning allowable land uses in a particular instance. However, there are potential advantages and disadvantages associated with having this flexibility. 5 See Cal. Oov't Code § 65867_5. 12 1 DEVELOPMENT AGREEMENT MANUAL POTENTIAL ADVANTAGE& DIE ABILITY TO BETTER IMPLEMENT PLANNING POUCIES From a planning perspective, development agreements have been instrumental in allowing creative and award-wianing laimd use projects because the agreements can facilitate projects that would not have been allowed under otherwise applicable zonipg regulations, : e approval of creative land use concepts — and the. construction of resulting projects. --- have advanced the state of urban planning, and allowed pudic: agencies to better combat the visual and aesthetic impacts of "cookie -cutter" development. In a similar v6i, there are instances in which literal coznphance with zoning ordinance provisions can thwart promotion of general platy policies. For example, the general plan may encourage the existence of open space, whereas the applicable zotiing district roes not allow suflicient density to accommodate the clustering of residential units tmecessary to accommodate an open space component. There may also be instances in which the legislative body wishc's to promote unwritten policies, such as those involving growth ztmarl gement. As long as the project is consistent with t o local plannitig policies formulated by the legislative bandy through its general plan, the development agreement � can provide greater latitude to incorporate land use :concepts and components that are tailored specifically to address particular community concerns. In each of these cases, the ability to vary from strict adherence, to otherwise applicable zoning provisions. can Help ensure that the public agency's land use policies are being advanced, in sometimes new and innovative ways. These advantages are shared by the public agency and project proponent alike. The following example shows imow using a development agreement allows the parties to develop a unique latmd use proJect to: 4mdv ice the public agency's land ase policies creatively .and responsibly ti rotigh the give-and- take of negotiations, as both patties address their respective needs and desires. INSTITUTE for LOCAL SELF GovE NMENT ® COMMUNITY LAND USE PROJECT 1 13 Whsle few things in life go as snnoott ly as the hypothetical approval of Sports World (above), the process of negotiating development agreements can allow the development of nein and creative concepts, address associated issues and concerns unique to a particular project, and ensure adherence to local land use policies in conformance with the general plan. 14 1 DEVELOPMENT AGREFNIENNT MANUAL, POTENTIAL DISADVANTAGES: MAY PROMOTE AD PLANNING The latitude afforded the parties through use of a developaliefit ai roement may also have potential disadvantages. For example, the agency's staff and legislative body may become convinced ced that, in exchange for the Significant sales tax revenue the agency is likely to receive from a partic.talar project, or in consideration of the fact that the project proponent is willing to construct a new city park or other significant public; amenity, the agency should agree to compromise its platnrning standards in a nrarrrrer that could reduce the quality of life in. the comrnt trity. The pressure to comploMise may be especially great in the case of a ``friendly developer" who'has a popular presence in the conrnamity. From the project proponent's perspective, it is possible that the legislative body may decide to disallow uses that would otherwise be allowed, and which are appropriate from a eonvo ntional plaiaraing perspective. The suggestions that appear in this manual are intended to help avoid nususing development agreements. They are based can the prennise that from the outset, the planning policies and objectives that have been embraced by the comrrituaity through adop.tion.of the general plan, and those included in any applicable specific plan, should be an integral part of the discussions and negotiations between the parties to a development agreement. By idea l'yitng applicable plarming. policies early on, and coPtitntling to use them as yardsticks in determining what land uses are appropriate, the parties should be able to avoid unacceptable compromises when negotiating development agreements. IMPOSING CONDITIONS Developmentagrec€ tr nts provide public agencies greater flexibility in imposing requireiuents on proposed development, such. as development conditions exactions and fee s, because constraints and uncertainties that affect a local agency's ability to taiilaterally impose such reilttirements do not apply to mutually agreed upon development agreement provisions.' a See Cal. Gov't Code � 06000(u) (oxduding " fQes collected under development a�reeme�its., from the type of fie covered aojer the Mitigation l-ee ,pct). INSTITUTEfor LOCAL SELF GOVERNMENT • COMMUNITY LAND USE PROJECT 1 15 POTENTIAL ADVANTAGES: MORE ENCOMPASSING DEVELOPER REQUIREMENTS MAY BE ENFORCED Public agencies face the following types of legal constraints and uncertainties that directly affect their ability to regulate development. Such constraints and uncertainties may be overcome, however, through the use of development agreements. Voter Initiatives. During the past several decades, public agencies have been subjected b a number of fiscal setbacks that have impeded their ability to meet the service and infrastructure deeds of their communities. A number of voter initiatives have limited public agencies' revenue raising authority, and questions associated with these initiatives have created legal uncertainties. ERAF Shift. In 1992, in reaction to a serious deficit, the state enacted legislation that annually shifts some of the financial responsibility for funding education, pursuant to Proposition 98, to local public agencies. Through the intervening the years, the Educational Revenue Augmentation Fund (ERAF) has deprived local agencies of more than $30 billion. Since the ERAF shift and passage of initiative measures limiting public agencies' general revenue sources, agencies have increasingly required project proponents to bear the costs to the community associated with development of their projects. Many agencies have adopted development impact fees, for example, that are designed to require project proponents to pay the costs of infrastructure, facilities and public services required to service their projects. STATUTORY AND CONSTITUTIONAL RESTRICTIONS Mitigation Fee Act. Commonly referred to as Assembly Bill (AB) 1600, the Mitigation Fee Act was enacted in 1987.' It closely regulates the adoption, levy and collection of development fees, including project -specific fees, imposed by local agencies. The act requires the agency to identify the purpose and use of the fee, and to explain why there is a reasonable relationship between the fez and the developments Fees may not exceed the estimated reasonable cost of providing the service for which the fee is collected.' These requirements, among other things, have restricted the reach of development impact fees. ' See Cal. Gov't Code § 66000 and rollowing. B See Cal. Gov't Code § 66001. 9 See Cal_ Gov't Code § 66005. 16 I DEVELOPMENT AGREEMENT MAN1JAL School Facility Fees. Local public agencies historically have been responsible for financing schools. In 1998, however, Senate Bill (SB) 50 significantly changed the extent to which agencies can require developers to contribute to the cost of building new schools." SB 50 setsamaxanum amounts on such fees." It also prohibits agencies from imposing other conditions on development to ensure the existence of adequate school facilities." Each of these constraints and uncertainties limits a local agency's ability to adequately condition new development in a manner that will cover the cost of associated infrastructure, facilities and public services. Regulatory Takings. The term "regulatory takings" derives from the Takings Clause of the Fifth Amendment to the United States Constitution, which states: `°... nor shall private property be taken for public use, without just compensation"" A "taking" is any confiscation of private property by a public agency, A "regulatory taking" is an indirect confiscation of private property through government regulation. If a court finds that a challenged regulation constitutes a taking, the public agency must compensate the owner of the property. In recent years, takings litigation (acid the threat of such litigation) has become a significant factor in land use decision-making. Increasingly, project proponents have invoked the Takings Clause in an effort to persuade public agencies to reduce their efforts to require developers to pay various costs associated with infrastructure and public services. Moreover, the courts have displayed a greater inclination to second-guess public officials' decisions—a departure from the traditional deference the courts have afforded decisions of local officials in the past. The expanding scope of what constitutes a compensable taking is of concern to local agencies because of the potential for being assessed large monetary judgments in connection with the imposition of development requirements. '0 See Cal. Gov't Code § 65995(a)- ` See Cal. Gov't Code § 65995(b)- �' See Cal. Gov't Code § 65996(b). An overview of SB 50 is available from the League of California Cities. To obtain a copy, League members may contact the League and request "Strauss Opinion or. SB 50, January 1999.., " To the same effect is article 1, section 19 of the California Constitution: "Private property may be taken or damaged fmpublic use only when just compensation, ascertained by ajuny unless waived, has first been paid . _. INSTITUTE for LOCAL SELF GOVERNMENT s COMMUNITY LAND USE PROJECT 1 17 A public agency can avoid the types of constraints and uncertainties described above by entering into development agreements, since the project proponents agree to fees and requirements. Once the agreement is executed, the project proponent has generally waived his or her right to challenge the fairness or appropriateness of a particular requirement. For example, the local agency can ask that the project proponent agree to finance public facilities and improvements without the specter of a regulatory takings claim. Similarly, the local agency may ask the project proponent to constrict a new school without fear that school facility -fee limitations will be invoked. The project proponent must agree to such requirements, of course, before they may become enforceable. The local agency may also bargain for completion of facilities and improvements at an earlier stage in the development process. This can result in needed infrastructure and facilities being put in place prior to or concurrently with the development, reducing the development's Impact on existing facilities or services. Similarly, the project proponent may agree to pay additional fees to protect the agency and existing residents from any budgetary impacts associated with the development. For facilities and infrastructure that are funded by multiple projects, the development agreement process can provide a mechanism to ensure that each project proponent pays its fair share in a timely manner. The project -specificity of the development agreement process offers the public agency the opportunity to design more tailored implementation programs for its planning policies and objectives as they relate to the proposed project. The process of negotiating the agreement can help the agency identify and address issues relating to the project before the agency provides final approval. The agency may also require that the agreement include provisions dealing with identifiable contingencies related to the proposed project Finally, the fact that the development agreement is recorded provides a convenient mechanism for binding future owners to the requirements and obligations created by the agreement." ",See Cal. Godt Code § 658685 (" -. the burdens of the agreement shall be binding upon, at the benefits of the agreement shall inure to, all successors in it to the parties to the agreement") 18 1 DEVELOPMENT AGREEMENT MANUAL POTENTIAL DISADVANTAGES: UNREALISTIC EXPECTATIONS MAY MAKE PROJECT INFEASIBLE From the project proponent's viewpoint, local agencies may expect more encompassing project requirements than are financially feasible. The myriad of issues developers face, including 'land availability, financing, market considerations and federal, state and local regulatory requirements can make it difficult to propose financially feasible development projects_ Against this hack drop, some developers have abandoned development agreements altogether. This avoids the risk of dscovering after months of negotiations that the local agency expects the developer to construct an 16 Cal Lab. Code § 1720(6). " Cal. Lab. Code §§ 1770; 1771. w Cal. Lab. Code § 1771, 'a Cat Lab. Code § 1720(6). z. Id " Id. 22 Id. n ld. 2" Id21 . CaL Lab. Code § 1720(e). INSTITUTE for LOCAL SELF GOVERNMENT i COMMUNITY LAND USE PROJECT 119 expensive public amenity, such as a school or park, in consideration of the benefits the developer will receive from a development agreement. As further discussed in Chapter 4, one way of avoiding this type of problem is to discuss the parties' expectations at the outset, as a prelude to beginning negotiations. That allows each party to assess early on whether a development agreement will meet each party's needs. • One of the challenges project proponents face in the usual regulatory process is that the project must meet the regulatory standards in effect at each stage of the development process. This can result in a proposed project being subject to new regulations even after it has received final approval, and even if the new regulations preclude or prohibit construction of some or all of the project. As a result, it can be difficult for a project proponent to know at the outset what criteria the project must meet. It is not until the proponent's right to complete the project has `bested," that he or she has the right to build the project without concern that new regulations may apply. -- Unforeseen regulatory changes (including those adopted by the voters through the initiative process) can add time and expense to a proposed project. Moreover, a proponent of a large project must typically invest receives "vested rights" to complete the project as approved. " City of San Jose v. State ofCalifornin, 45 CL .App- 4th 1802, 53 Cal. Rpn'.2d 521 (6th Dist. 1996) rev- denied (1996). 20 I DEVELOPMENT AGREEMENT MANUAL On the other hand, a project proponent who is a party to a development agreement receives "vested rights" to complete the project as approved. This occurs immediately upon execution of the agreement, by virtue of the fact that a development agreement "freezes" applicablelocal land use regulations with respect to the proposed project." POTENTIAL ADVANTAGES: FEWER SURPRISES AFTER PROJECT APPROVAL From a project proponent's perspective, the added certainty associated with receiving "vested rights" to construct a proposed project without concern that new regulations may apply can be invaluable. It may be especially important to a project proponent worried about a potential ballot measure or a change in the governing body majority that could adversely affect the project. While development agreements are subject to voter referenda," an opponent would have to file his or her submittal within 30 slays after final approval of the development agreement in order to preserve the right to put the approval of the agreement on the ballot." Once the 30 -day period is over, dre project proponent can safely asstune that the project will not be affected by future ballot measures. There are limits to the degree of assurance that a public agency can offer. For example, additional conditions may be imposed onthe project if further environmental analysis is needed under the California Environmental Quality Act (CEQA). Also, a development agreement cannot prevent the application of state or federal regulations, as further discussed below."' Another advantage from the project proponent's perspective is limiting the potential for regulatory change. This can be helpful when the proponent seeks financing. It can also be reassuring with respect to large projects that have significant upfront costs. POTENTIAL DISADVANTAGES: RULES OF ENGAGEMENT ARE LOCKED IN A development agreement can lunit the public agency's ability to respond to a changing regulatory environment, precisely because it locks in the " See Cal. Gov't Code § 65865A. xe See Cal. Gov't Code § 65867.5- 2B See Cal_ Elect Code § 9237. "' See Cal. Gov't Code § 65869.5. INSTITUTE for LOCAL SELF GOVERNMENT - COMMUNITY LAND USE PROSECT 1.21 regulatory requirements in effect at the time the agreement is approved. Pf the agency's planning regulations are in need of review or updating, the agency may be subject to criticism if the conditions imposed by the agreement do not sufficiently protect the community's interests. In the absence of a development agreement, and should the need arise, the agency retains the prerogative to change the nates relating to the project, even if that change makes the intended use unlawful. A development agreement also places a premium on an agency being able at the outset to identify all of the issues presented by a project. Since changes to the agreement require mutual assent, it may be difficult to add conditions or requirements later, should the agency identify the need to do so after the agreement is entered into. From the proponent's perspective, the project's obligations are also Locked in by the agreement. Some elements of market changes --including changes in the project's economics--i-nay not be reflected in the agreement. This can put a premium on a project proponent's ability to anticipate areas of potential change and then negotiate the flexibility to respond to those changes (for example, by negotiating a range of future uses, based on what the market will bear at the time of build out). Another possible disadvantage is the degree of protection from regulatory change, which is limited to local regulations. The development agreement law specifically provides that a development agreement must be modified if necessary to comply with subsequently enacted state or federal law." The new state or federal law may prevent or preclude compliance with the provisions of the development agreement. The issue for file project proponent is whether some protection from regulatory change is better than none at all. d1 .See Cal. Gov't Code § 65869.5. 22 1 DEVELOPMENT AGREEMENT MANUAL INSTITUTE for LOCAL SELF GovERNMENT " COM.MUNtTY LAND USF PROJECT 123 This chapter has examined the advantages of the three defining characteristics of development agreements ---greater regulatory latitude, flexibility and assurance for project proponents. But these characteristics can also present obstacles for the parties negotiating a development agreement. Some developers may continue avoiding the use of development agreements because of the potential for expensive project requirements. Some local agency staff may avoid development agreements because of the limitations that development agreements impose on an agency's ability to respond to a changing regulatory environment. Nevertheless, the latitude afforded by development agreements to advance local agencies' planning objectives --in sometimes new and innovative ways—makes the development agreement a useful and viable tool in service to the community in a number of different applications. For both parties, a development agreement can involve a great deal of time and energy to negotiate and implement. Accordingly, it is important at the outset to carefully evaluate the advantages and disadvantages of using a development agreement in each specific instance. 24 1 DEVELOPMENT AGREEMENT MANUAL ACHIEVING 1 USE PLANNING THROUGH DEVELOPMENT 4 Development agreements can be used for a wide range of projects, from large mixed-use developments to smaller projects. Moreover, the scope of a development agreement can vary according to the needs of the project in question. Although a development agreement can be comprehensive, detailing every aspect of the project, it can also focus on particular aspects of a project. This chapter discusses the tole that development agreements can play in a local agency's overall planning process. Fundamentally, development agreements are one tool in the local agency's toolbox for achieving the community's song -term planning and development goals. In authorizing the use of development agreements, the Legislature emphasized that development agreements are intended to serve as a tool to strengthen a community's commitment to comprehensive land use planning." The concept behind the use of development agreements is to encourage communities to trunk ahead, in a comprehensive mariner, about the impacts of development within their jurisdiction and the steps necessary to make that development a win-win proposition for both the project proponents and the community. " See Cal. Gov't Code § 65864(a) ("The Legislanne rinds and declares that; (a) The lack of certainty in thea rproval of development projects can result in a waste of resources, escalate the cost of housing and other development to the consumer, and dlsconroge inveshn no in and conommo,nt to comprehensive plannoo, which would make maximum efficient utilization of resources at the least economic cost to the public.") (emphasis added). HA T The Importance of Comprehensive Planning......,.... 25 Uses of Development Agreements..__ ............................. 28 snm ma ry...................................... 28 26 I DEVELOPMENT AGREEMENT MANUAL A development agreement generally allows a project proponent to proceed with a project that meets the "policies, rues and regulations" in effect at the time the development agreement is approved." A development agreement may also supersede an agency's existing policies, rules and regulations, as long as the project is consistent with the general plan and any applicable specific plan. " THE ROLE OF PLANNING POLICIES IN THE iNEGOTIATION PROCESS A helpful starting point is having well -understood planning regulations that reflect the community's current and anticipated needs. Such policies, when adhered to, facilitate the negotiation process, ensuring that a proposed development agreement reflects the local governing body's policies. This approach can also address a source of decisionmakei discomfort with the development agreement process, because even though the governing body ultimately approves a development agreement, it also needs a mechanism to provide direction to the negotiation process. planning policies meet this need. Typically in a negotiation process, decisionmakers provide their negotiators with parameters on key bargaining issues. It is important that the parameters remain confidential, so fine other side does not know how much leeway the negotiators have. Confidentiality is difficult in the context of development agreement negotiations because the state's open meeting laws" do not generally allow an exception for public agency negotiators on development agreements to receive direction from the governing body There may be aspects of a development agreement—for example, the price and terms of payment for acquisition of property—that can be discussed in closed session. However, only those issues may be discussed in closed session --not the development agreement in general. The agency's planning policies, therefore, may serve as the negotiators' key source of direction in this circumstance. in addition, a local agency may want to consider directing its staff to adopt a different type of negotiating style, where identification of "interests" replaces the need to establish outer " See Cal. Gov't Code § 65864(6) ('rhe Legislature finds and declares that .. (b) Assurance to the applicant for a development project that upon approval of the project, the applicant may proceed with the project in accordance with existing policies, rules and regulations, and subject to conditions of approval, will strengthen the public planning process, encourage private participation in comprehensive planning, and reduce the economic costs of development.") (emphasis added). See also Cal. Gov't Code § 65866. See Cat- Gov't Code § 65867.5. 3` See generally Cal. Gov't Code § 54950 and following (The Ralph Sl. Brown Act). INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 127 "positions" or parameters (see discussion in Chapter 4). If an agency uses as interest -based negotiating strategy, there are fewer strategic disadvantages associated with a governing body's trying to provide direction in open session. Well -conceived and up-to-date planning policies can also assist local agencies to avoid having to ask the staff to negotiate in a vacuum, with little or no immediate direction or feedback from decisiomnakers. When the agreement is before the legislative body for final approval, it may be difficult for the body to modify aspects of the agreement without, in effect, renegotiating the agreement from the dais to change the terms that the staff negotiated. 28 ( DEVELOPMENT AGREEMENT MANUAL PLANNING POLICIES AS A MECHANISM FOR DEFINING PROJECT PROPONENT EXPECTATIONS An agency's planning documents, including its local development agreement procedures, can provide an important source of guidance for project proponents going into negotiations. By stating in the procedures that the local agency is committed to using development agreements as a tool to promote the community's needs, the agency makes clear that it expects to receive greater community benefits than it could otherwise achieve through the land use regulatory process. This level of understanding can be helpful in setting the proper tone, so both parties have realistic expectations going into the negotiations. Such an approach also may be helpful in responding to community concerns that the community has not received adequate benefits in the past from development agreements. These concerns may arise, especially when the project proponent has an ongoing relationship with the public agency. l FUTRIZERM Local government agencies have successfully used development agreements to facilitate; • School, park and other facility funding; • Affordable housing projects; • Large-scale mixed use projects; and • Multi -phase commercial project's. Development agreements can also be a vehicle for addressing concerns among developers about perceived adverse impacts of neighboring projects. Used judiciously, development agreements are a useful tool for achieving an agency's land use planning objectives. Well -articulated planning policies " Cal. Gov't Code § 14045. " Cal. Gov't Code §§ 65460, IQ 6546M '5 Cal. Gov't Code § 65913.5 INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUN.[Ty LAND USE PROJECT 12'9 may also provide important policy direction to staff in negotiating such agreements. BOLTS PROCESSING DEVELOPMENT AGREEMENTS I From a local agency standpoint, the development agreement process begins with the local agency's procedures for development agreements. The development agreement law contemplates the adoption of such procedures by local government agencies." If there are none, some must be adopted upon the request of an applicant." Sample procedures are available online at wwwJIsa.ora/deviagmt and typically include the following: • A statement of purpose/findings concerning the public benefits of development agreements; C Application requirements; Purpose/Findings Notice and hearing Application procedures; Y Planning commission and governing body review; + Recordation; rj 31 Public Hearings and Notice........ 32 Dveisionmaker input on Development Agreement and Findings ........................................ 36 Recordation and Other Post- e tenenation;t and Approval Steps ........................ termination; and e periodic review. Amendment— ..... ... - ........ ......... _40 Development Agreements and Accountability .............................. 40 Summary...................................... 41 " See Cal. Gov't Code § 65865(b) ("Every city, emmty or city and county, shall, upon request of an applicant, by resolution or ordinance, establish procedures and requirements for the consideration of development agreements .. "). °° See Cal. Gov't Code § 65865(b). INSTITUTE for LOCAs. SELF GOVERNMENT " COMMUNITY LAND USE PROJECT (31 Such procedures may be adopted by ordinance or resolution.,, The development agreement law allows Local agencies to recover the direct costs associated with adopting procedures for the agencies' consideration of development agreements." This chapter discusses procedures and issues an agency may include in its development agreement procedures resolution or ordinance, as well as the general steps in the process of approving a development agreement. RaWITMOWNWITM The agency's development agreement procedures provide an opportunity for the local agency to state its goal for considering development agreement requests, which is "...to promote the community's needs and receive greater community benefits than otherwise can be achieved through the land use regulatory process." A goal statement similar to this example can be helpfill in setting the tone for negotiations, so that both parties have realistic expectations going into the negotiations. It is also helpful to refer to the development agreement statute, California Government Code section 65864 and following. An application form specifying the type of information an agency needs to process the development agreement request is an efficient way of ensuring that the agency receives all of the information it needs in a timely manner. Some development procedures authorize the agency's planning director to develop a form application for development agreements. A sample tone is also available online at uww.ilsa.orgldevtamt. It can also be helpful for an agency's development agreement procedures to authorize the local agency's attorney to develop a form agreement. Having a readily available form agreement saves staff time in reviewing development agreements; it also provides See Cal. (iov't Code § 65865(b). '� See Cul. Gov't Code § 65865(d). 32 ( DEVELOPMENT AGREEMENT MANUAL, greater assurance that the agreement will cover all of the agency's needs. Chapter 6 discusses the content of development agreements. Sample forms are available online at www.ilsg.or�fdevtaamt. Some public agencies charge fees to process applications. A local agency's development agreement procedures can specify those fees or cross reference a fee schedule that includes this particular type of fee." The local agency will also need to ensure that the environmental analysis requirements under the California Environmental Quality Act (CEQA) have been satisfied." A Another important aspect of development agreements is the role of public input. The development agreement law requires a Noticed public hearing by both the planning agency and by the local agency's governing body before a development agreement is approved." DEVELOPMENTr AGREEMENTS AND ]PUBLIC INPUT Both the project proponent and the local agency have an interest in satisfying community concerns with respect to a development agreement, insofar as development agreements are subject to repeal by voter referendum." lin fact, a development agreement cannot legally take effect until after the 30 -day period for such a referendum expires." There is also a 90 -day statute of limitations to challenge the adoption or amendments of any development agreement approved after January 1, 1996."a 41 See generally Cal. Gov't Code § 66000(b) (excluding "fees collected under development agreements" front the type of fee covered under the Mitigation fee Act) and following, " See generally Cal. Pub. Res. Code § 21000 and following- "' See Cal. Gov't Code § 65867- "" Sege Cal. Gov't Code § 65867.5. " See Cal. Nlect. Code § 9141; Referendum Contmirtee v_ City of Hermosa Beach, 184 Cal App, 3d 152 (1986); Ifidway Orchards v. County ofButte, 220 Cal, App, 3d 765 (1990). "s See Cal. Gov't Code § 65009. INSTITUTE for LOCAL SFI,F GOVERNMENT a COMMUNITY LAND USE PROJECT 133 As a practical matter, though, it may be advisable to include stakeholders (interested parties such as community groups, business leaders and others interested in the cotrnnunity's development) in the development agreement process. While it may not be practical to allow stakeholders to attend negotiations, it may be possible to consult with them ahead of time, or perhaps on a "meet and confer" basis as negotiatio us proceed. As the following example illustrates, the process of negotiatin g a developm cut agreemen t is susceptibl e to "comrnun ity back [as that public agency staff has agreed to recommend what they perceive as controversial concessions. Meeting with stakeholders ahead of time to discuss possible actions, such as attracting a large retail outlet, allows legitimate issues to be aired before serious negotiations begin. After some evaluation, stakeholders may decide their issues can be resolved, or the agency may decide it should re-evaluate its priorities. In the case of the merchants in this illustration, had they been given the opportunity to meet with the agency to team about the experiences of other cities, they might have concluded that attracting Taxco would actually help business retention. 34 IDEVELOPMENT AGREEMENT MANUAL Meeting and conferring with stakeholders during the negotiation process allows them to provide input on the specific terms and conditions that are being negotiated. Many times, the same underlying goal can be accomplished in a slightly different manner to accomodate stakeholders' needs. In the Taxco example, city staff needed to keep the negotiations confidential, so that a neighboring city, would not undermine their efforts. While the need< for confidentiality snakes it more difficult to include' stakeholders, including them in the process withoutr;l sharing every detail enables the local agency to be on a firmer community relations footing when it comes to approving the development agreement. PUBLIC INPUiT ON CONSIDERATION OF THE PROPOSED AGREEMENT The development agreement law specifies what kind'tgeA, of public hearings and notice must be given when an syr th"f&k td agency gets to the point of considering whether to l oos pgt ( et approve development agreements." Bearings must be held by the local planning agency and its atntae governing body." Such hearings are subject to the state's open meetings laws," which require that all aus thdtltd as ria interested persons be allowed to attend these� 1 { ..... p meetings" and provide public comment before the iS.r £h �d1 aker g planning commission's or governing body's a�rt5na a 'arjrl itil'y ti consideration of the development agreement. l t Members of the public are also entitled to request s copies of all documents included in the agenda packet." The state's Public Records ,Act also may entitle members of the public to request other documents relating to Are proposed agreement` as See Cat Gov't Code § 65867, so See Cal. Gov't Code § 65867. sr See Cal. Gov't Code § 54950 and Following. See Cal. Gov't Code § 54953(a). 5' See Cal. Gov't Code § 549543- " See Cal. Gov't Code § 54954.1. ss See Cal. Gov't Code § 6250 and following. An exception may be preliminary drafts of development agreements if they are not kept in the ordinary course of busiuess. See Cal- Gov't Code § 6254(a). INSTITUTE,f©r LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 135 NOTICE ISSUES The development agreement law provides notice requirements for hearings related to the potential adoption of a development agreement'° The notice is the same as that required under the planning and zoning law for: • Plans (publication in at least one newspaper of general circulation or posting in three public places within the jurisdiction if there is no newspaper of general circulation, with special consideration given to drive- through facilities);" i Projects (10 -day mailed notice to the property owner, the project proponent, affected local agency service/facility providers; and" Neighboring property owners within 300 feet, as well as published and posted notice, again with special consideration given to drive-through facilities)." The agency must also give notice to anyone who has requested it.60 The notice must contain: The date, time, and place of the hearing; e The identity of the hearing body; 0 A general explanation of the matter to be considered (in other words, the development agreement); and se See Cal. Gov't Code § 65867- ' See Cal- Gov't Code § 65090. This includes each local agency expected to provide water, sewage, streets, roads, schools, or other essential facilities or services to the project, whose ability to provide those facilities and services may be significantly affected. see Cal. Gov't Code § 65091(a)(2). sv See Cal. Gov't Code § 65091. &0 See Cal. Gov't Code § 65092: "when a provision of this title requires notice of s public hearing to be given pursuant to Section 65090 or 65091, the notice strait also be mailed or delivered at least 10 days pion to the hearing to any person who has filed a written request for notice with either the cleric of the governing body or with any other person designated by the governing body to receive these requests. The local agency pray charge a fee which is reasonably related to the costs ere roviding this service and the local agency may require each request to be annually renewed" 36 1 DEVELOPMENT AGREEMENT MANUAL, A general description, in text or by diagram, of the location of the property that is die subject of the development agreement, and hence the hewing." To facilitate Informed public discussion of the matter, it may be helpful to include a brief explanation of what development agreements are. A sample of such a description is available online at DywAssorg devta Yr . A local agency's development procedures present an opportunity governing body to ask the planning eom make a recommendation on whether i the agreement and weigh in on proposed MEMEMSEMWEEM f When development agreements are neg.,—...., -, staff, subject to planning commission review before final approval by the legislative body, planning commissioners may feel they have been `left out of the loop." This may be especially titre if the legislative body is the only one receiving updates as negotiations proceed. The consequences of $re planning feeling insufficiently involved may inclu i Bad feelings on individual commissioners: A lack of planning input during negotiz 61 See Cal- Gov't Code $ 65094. INSTITUTE for LOCAL SELF GOVERNMENT - CommuNITY LAND USE PROJECT 137 Less protection of elected officials' interests by appointed commissioners. One approach to informing the plafuuing commission early on is to schedule the project for discussion at a regular planning commission meeting at the start of negotiations. This provides the planning commission with an opportunity to provide its input to the negotiating team on key policies and objectives to be achieved on behalf of the connmunity through the development agreement. Another approach is to convene a subcommittee of the planning commission as an adjunct to the negotiation process. If the subcommittee is if the commission, the discussion may occur without the overlay of open meetings requirements.", While the subcommittee could be made part of the negotiating team, it may be more practical, given the competing demands on planning commissioners' time, for staff to confer with the subconmrittee outside of negotiations. This approach allows the negotiating team to benefit from at least some planning commissioners' perspective, wh le the negotia, ng team remains reasonably sized. PLANNING COMMISSION RECOMMENDATION AND INPUT ON FINDINGS An agency's development agreement procedures can solicit the planning commission's input both on whether the development agreement should be approved, and on the findings accompanying any approval. Such findings may include whether the agreement: a Is consistent with the objectives, policies, general land uses and programs specified in the agency's general plan and any applicable specific plan; Is consistent with the provisions of the agency's zoning regulations; "' See Cal. Gov't Code §§ 54952.2(a) ("As used in this chapter, `meeting' includes any congregation of a majority of the members of a legislative body at the same time and place to hear, discuss, or deliberate upon any item that is within the subject in alter ifit isdiction of the Iegistat i ve body or the local agency to which it pertains") 54952 ("As used in this chapter, 'legislative body' means'.... (b) A _. committee _. of a local agency, whether per or temporary, decision-making or advisory, created by charter, ordinance, resolution. or formal action of a legislative body. However, any advisory committee, composed solely of members of the legislative body which are less than a quorum ofthe legislative body are not legislative bodies .. ') 38 1 DEVELOPMENT AGREEMENTMANUAL Promotes the public health, safety, and general welfare; • Is just, reasonable, fair and equitable under the circumstances facing the agency;" Has a positive effect on the orderly development of property or the preservation of neighboring property values; and Provides sufficient benefit to the community to justify entering into the agreement. GOVERNING BODY HEARING AND DECISION ON THE DEVELOPMENT AGREEMENT As discussed in Chapter 3, well articulated planning policies and objectives should increase the likelihood that the staffs acid planning commission's input to the development agreement negotiation process produces a satisfactory agreement for the governing body. Adoption of an interest -based negotiation i v approach may also allow the governing body to provide direction to negotiators early on in the j process in open session, consistent with the state's open meeting laws. " Weil -conceived and up-to-date planning policies also avoid the prospect of asking staff to negotiate in a vacuum, with little or no itnrnediate direction or feedback from decisionmakers. This maximizes the likelihood that the agreement presented for decision - maker approval reflects their concerns and policy direction. It minimizes the likelihood of having to renegotiate the agreement from the dias. (The doumside of which, is inclusion of language in the agreement which may have unintended consequences or not fully protect the agency's interests.) °' See generally Morriso, Horses Corp. n. City afPleasantmy 58 Cal. App, 3d 724 11976) (analyzing the "contracting away the police poweP' issue in the context or an annexation agreement). See also Denio v. City, of Huntfnglon Beach, 22 Cal, 2d 589 (1943), Carntlh v. Cory of Modem, 233 Cal, App. 2d 688 (1965). " See generally Cal Gov't Code § 54950 and following (the Ralph Nt. Brown Act) INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 139 ACTION ON THE AGREEMENT The governing body must approve a development agreement by resolution or ordinance.`s Ordinances must go through a two -reading process, with at least a five-day intervening period.°" Changes require an additional five-day waiting period. " APPROVAL STEPS After a development agreement is approved, the clerk of the governing body must: + Record a copy of the development agreement within 10 days of the entity's entry into the agreement, along with a description of the land subject to the development agreement; " and i Publish the ordinance approving the development agreement." See Cal. Gov't Code § 65867.5. ee See Cal. Gov't Code §§ 36934 (city requirements), 25131 (county requirements). See Cal. Gov't Code §§ 36934 (city requirements), 25131 (county requirements). ev ,See Cal. Gov't Code § 658655. 's A clink must publish each ordinance (or a summary of it) within 15 days atter passage as follows: 1) In a newspaper f general circulation published within thejurisdiction, or 2) If there is none, by posting as required by state law. Cal. Gov't Code §§ 36933 (cities), 25124 (counties) (note that state codes are available online at htTLJ/wwsy h ainfaca 2ov by clicking on "California Law"). The publication must include the names of the governing body members voting for and against the ordinance. Cal. Gov't Code §§ 36933(c) (cities), 25124 (counties). 40 1 DEVELOPMENT AGREEMENT MANUAL In cities and counties, failure to satisfy the publication requirement in a timely manner prevents the ordinance from taking effect or being valid."' ♦ !1 11 1r r AGREEMENT After a development agreement has been signed, it may be amended only by mutual agreement of parties." Most development agreement procedures require amendments that are initiated by the project proponent to go through the same process as the initial application for the development agreement. For local agency -initiated amendments, the procedures usually require notice to the project proponent and provision of information about the process that the agency will employ. DEVELOPMENT AGREEMENT'S AND s Fundamental to the concept of an enforceable agreement is the notion that each party will do what it promises to do in the agreement. To underscore that notion, the development agreement law requires local agencies to include at least an annual review of the project proponent's compliance with the delineated responsibilities." The review must require the proponent to demonstrate good faith compliance with the tenns of the agreement" If a local agency finds, based on substantial evidence, that such compliance has not occurred, the agency may modify or terminate the agreement." In addition, the development agreement law provides that the development agreement is "enforceable by any party."" A development agreement typically contains provisions specifying procedures for notice and termination in the event of a default by either party. r" Cal, Gov't Code § 36933(6) ('cities). (/ Cal_ Gov't Code § 251240 (providing failure of county clerk to publish means the ordinance does not take effect for 30 days). " See Cal, Gov't Code § 65868. See Cal. Gov't Code § 65865-1. See Cal. Gov't Code § 65865, 1. '0 See Cal. Gov't Code § 65865.1. " See Cal. Gov't Code § 65865.4. INSTITUTE for LOCAL SELF GOVERNMENT a COMMUNITY LAND USE PROJECT 1141 A well -crafted set of development agreement procedures will provide a useful road map to staff and others in sheparding an agreement through the approval process, Such procedures are also useful for considering any amendments to and temrination of an agreement. Important parts of the process include the notice and hearing process, as well as mechanisms for providing decision -maker input. p6 City of San Diego, Development Agreement Monitoring System, February 2000 (Submission for League of California Cities Helen Putnam Award for Excellenee)- 42 I DEVELOPMENT AGREEMENT MANUAL The ail of negotiation comprises several facets. Fundamentally, it is important to decide who is going to negotiate and how the parties will reach consensus. This chapter addresses the issues associated with each facet of negotiation. Within the public agency, senior staff or their representatives typically negotiate development agreements. The manager (or representative) should be involved because he or she presumably knows the community, understands the desires of the legislative body and can gauge flee agreement's value to the community. The agency's plaiming director (or representative) is typically on the negotiating team because of his or her planning background. While the manager may focus on financial benefits to the community, the planning director will be concerned with the impact of the project on land use issues, including its compatibility with surrounding land uses. Engineering or public works staff should be included if infrastructure issues are involved. The public agency also may want to include the attorney on the negotiating team, rather than just at the agreement's drafting stage, especially if the project proponent is represented by legal counsel. Legal issues will undoubtedly arise during negotiations, and drafting issues may overlap with substantive deal points. Whether or not legal counsel participates in the negotiations, he or she should be filly apprised as the negotiations proceed. Who Is Going to Negotiate? .......43 Reaching Consensus . .......... ..... .. 44 Summary ER 44 (DEVELOPMENT AGREEMENT MANUAL As for the project proponent, lie or she (or a representative with full legal authority to bind the project proponent) should participate in the negotiations. On larger projects, the project proponent may want to assemble a team drat includes the project proponent, an architect, planner and land use attorney. Depending on what aspect of the agreement is being negotiated, the project proponent may want to include one or more of the team members in the negotiations. REACHING CONSENSUS How parties conduct negotiations may be the best indicator of whether they will achieve consensus. Participants should be trained in the process of negotiations, and have a framework in mind to guide the negotiation process. KNOWING WHO Is ACROSS THE TABLE Before negotiations begin, each party should become familiar with the other's background. In addition, the project proponent should become familiar with the local political climate, while local agency staff should learn about the project proponent's reputation in the community, or in other communities where the proponent's developments have been approved. The parties should also determine in advance what they expect to gain through the negotiations, what the other party may need, and what they are willing to give. SETTING EXPECTATIONS Once the parties meet, they should frankly discuss their respective expectations. The local agency should emphasize that it expects to gain greater exactions than it could require under its regulatory authority. The project proponent should explain why the particular project requires a development agreement. The parties should agree upon an initial timeframe in which to complete negotiations. The agency negotiators should explain that they do not have authority to bind the agency—that is the province of the legislative body during final public hearings. The parties may benefit from adopting a "checkoff' system so that once they reach a concaphial agreement on deal points, they " See Cat. Gov't Code § 1090. the Attorney General reached this contusion even though the spouse had no ownoiship interests in the firm, Ire would not work on the agency's project, and his income would not be affected by the outcome of the development agreement or project. The Attorney General's opinion will be published at 85 Cal, Op. Att'y Gen._(2002), and is available online at httpd/caag.state,ca.us/opinions1index,hnn. INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 145' do not need to continually renegotiate those points, unless circumstances change. THE UTILITY OF GROUND RULES Ground odes for negotiations are very important. Typical ground rules include: • Who is the spokesperson for each side? To what extent does that person have authority to bind their respective principals? • Who will take notes and document the points of agreement? • Where, when and for how long will are negotiators meet? Will telephone negotiations be allowed? • Are these meetings open to the media and public? • When and how will issues related to the development be presented to decisionmakers, including individual members of the governing body? • How will media inquiries be handled? + What strategies, if any, will be employed if bargaining reaches an impasse? 461"DEVELOPMEN'r AGREEMENT MANUAL Such ground titles should be memorialized in writing. Each party should be clear on their organization's priority issues going into the negotiations, so each priority can be addressed early on. Reaching agreement on these priority issues is, of course, the key to successful negotiations. Typical priority issues for local agencies include: • Land Use Issues. What regulations relating to density, design, uses, and construction standards is the agency willing to freeze in place at the time the agreement is executed? On what issues does the agency wish to retain the flexibility to adapt its regulations to changing circumstances and new information? s Exaction Issues. Which public improvements and facilities will be constructed, dedicated or financed by the project proponent? On what schedule? Will there be a reimbursement provision if the project proponent fronts the financing for a facility? • Special Issues Relating to State Requirements. What role will school facilities and affordable housing issues play? Thinking through these issues and what the local agency will need to make the development agreement a net gain in terms of the public's interest is a key to successful negotiations. HAVE A STRATEGY Fundamentally, each party comes to the negotiations with certain priorities and objectives—some of which may be unrealistic. Finding compromise solutions can require a sense of the other party's true ,objectives (and presenting one's proposals in terms of those objectives) and patience while the other parry works through what they had hoped to receive as the result of the negotiations and what they actually can receive. Moreover, negotiations can be stressful; less skilled negotiators may react to such stress with displays of anger and attempts to badger their way into prevailing. INSTITUTE'. for LOCAL SELF GOVERNMENT • COMMUNITY LAND USE 'PROJECT 147 In most instances, it is important for both sides to keep in mind that there is a long-term relationship to be fostered. This relationship is frequently more important than short-term gains or "gotchas" on elements of the deal. w The parties may also agree in advance to use a particular negotiating approach. Historically, the negotiating model has involved a static process of developing positions in advance, based on confidential parameters set by the principals. More recently, professionals have advocated a more dynamic or synergistic approach that involves both parties working together to transcend competing interests. Advocates of synergistic negotiations suggest that parties should: e Share interests during negotiations (for example, what they fundamentally wish to accomplish or avoid) rather than pre -determine, then haggle over positions; • Acquire a real (in other words, empathctic) understanding of what the other party needs; 0 Use brainstorming techniques to develop lists of options from which "outside -the -box" solutions can flow; and • Agree to rely on objective standards or third -parry authority to settle differences and overcome obstacles. Although conducting successful negotiations is a much larger topic than can be adequately addressed here, there are a number of resources that explain the benefits of negotiating in a more dynamic or synergistic fashion." For the local agency, an interest -based approach works better in light of the constraints of the state's open meeting law. As a general matter there is no exception to the open meeting laws for local agencies to instruct their negotiating team on the provisions of a development agreement. '9 See, For example, Getting to Yns by William Ury and Roger Fischer, and 71e Seven Ambits of Highly Fffeetive People by Stephen R. Covey. 48 IDEVELOPMENT AGREEMENT MANUAL The following illustrates this approach toward negotiations. By preparing in advance, developing a negotiating framework in which to proceed, and adopting ground roles, including how negotiations should be conducted, the parties should be able to create a negotiating enviromnent that will increase the likelihood of reaching consensus. A number of considerations should be taken into account when drafting a development agreement. For efficiency, many jurisdictions start with a standard form agreement that has already been reviewed and approved by the agency's attorney. It is also helpful for negotiators to have reviewed: Current version of the development agreement law;" Planning policies for the area in question, including fee and dedications requirements and environmental analyses; and e Agency procedures for processing development agreements.90 v. who Will De The "These steps help those involved in the negotiations identify the issues that Drafting? .. ...... --- ......... ........... -49 will need to be negotiated to protect the public's interests when drafting the agreement. It is also important to think ahead about implementation issues. When Should The Drafting Begin? ..._...................... 50 '['his chapter discusses some of the drafting and drafting -process issues that Common Provisions m typically arise with development agreements. Development Agreements...................................50 �y7 7� WHO HO ILL DO THF DRAFTING„� Summary— ......... -- ... ....... ... 67 A threshold issue is: From whose draft will the parties work? As indicated above, for local agencies expecting to be involved in a niumber of development agreements, it can be helpful for the agency to begin with a standard development agreement form that covers lQy and standard issues of concern to the agency. Sample development agreements are available online at www. iIs oor ldevtaemt. " See Cal. Gov't Code § 65864 and following (also available online athttrrlhvWw-leQiirtaca aoe by clicking on "California Law"). H0 See Chapter IV and the sample procedures available online at wuhv lsa otaidevGtemC 50 1 DEVELOPMENT AGREEMENT MANUAL Of course, the standard form agreement can take negotiators only so far. The next question is which party's attorney will take the first crack at filling in the project -specific elements of the form. Development agreement negotiation veterans typically advise that the public agency's counsel retain this role. In either event, it is not desirable to have both attorneys generating drafts of their own. F It may be tempting to prepare drafts of the development agreement as negotiations proceed. Some participants may derive comfort from having concrete proof that they are actually making progress. However, the practice of preparing a draft as each of the deal points emerges can be expensive and result in unnecessary rewrites of the agreement This practice may also afford the opportunity for drafting gamesmanship, in which slight but important changes are attempted beyond the scope of what the negotiators agreed to. The attorneys for each negotiating team must thoroughly review every draft, elevating otherwise avoidable tension in the remaining negotiations. It is preferable to list agreed-upon deal points for the entire agreement, including dates of each proposal and the name of the person who made it. Then, the development agreement can be drafted in close -to -finished form and subjected to final editing and review by all parties. Use of the redline/strikeout computer function simplifies the process. 1 WI e THE PARTIES TO THE AGREEMENT Local agencies may enter into development agreements only with persons who have a "legal or equitable interest" in the real property in question.' There may be others who should be parties to the agreement (for example, lenders). The goal is to identify whether there is anyone whose participation is necessary for the local agency to receive the benefit of its bargain, who would not automatically be bound by the agreement by its provisions as a successor -in -interest when the agreement is recorded," e, See Cal. Gov't Code § 65865(a). See also A'aiional Parks and Conse, moon A" ociaiion v. County of Riverside, 42 Cal. App. 4i' 1505 (1996). " See Cat Gov't Code § 658683. INSTITUTE for LOCAL SELF GOVERNMENT • COMMUNITY LAND USE PROJECT 151 USE OF RECITALS It is common to include recitals, typically following the first paragraph of the agreement, that identify the parties to the agreement. Many development agreements begin with a recital explaining the advantages offered by this development agreement, and stating that the agreement is entered into pursuant to state development agreement law, Government Code section 65864 and following. Recitals typically explain: a Who the parties are; • What the project is; C That the project is consistent with the general plan and any applicable specific plan; and • That the parties have complied with The California Environmental Quality Act. Recitals may also identify other discretionary Land use approvals that are required for the project (for example, approval of a subdivision map or discretionary land use permit), and whether those approvals have previously occurred, will occur simultaneously, or will occur only after the development agreement has been approved_" On occasion, a recital may address contingencies that will delay the effective date of the agreement, such as the need for property annexation." TERM The term must be stated in the body of the agreements` Larger projects, especially those constructed in phases, may require longer terms. In other instances, planning staff may argue for a shorter term, perhaps five to ten years, to enable the local entity to revisit the property's zoning and general plan designations sooner rather than later There is some indication that the term of the agreement — or at least the time during which the agency agrees not to apply changes in land use as See Cat Gov't Code § 65865.2. 14 See generally Cal. Gov't Code § 65865.3 (development agreements and newly noorporated orannexcd areas)_ " See Cal.Gov't Code § 65865,2 52 IID EVELOPMENT AGREEMENT MANUAL regulations to the development—is one factor that the courts will evaluate if the development agreement is challenged."a It is generally a good idea to allow the parties to terminate the agreement early in the event of a material breach. (See further discussion concerning default, remedies, and termination, below.) Note that development agreements for unincorporated territory withm, cities' sphere of influence must specify a timeframe within which the annexation must occur." The agreement does not become operative until the annexation occurs " REQUIREID CONTENTS A development agreement must specify the: 6 Permitted uses of the property; 0 Density or intensity of use, and • Maximum height and size of proposed buildings " These are also known as the development plan. Because development agreements can and are being used in a variety of applications, the required content outlined above can be addressed more genetically or more specifically, depending on the goals of the parties and the degree to winch the absence of such specification in die agreement means that the agency's regulations apply." As a matter of draftsmanship and avoiding a basis for challenge, however, it is usefid to address each of the required content elements. 91 For example, the permitted uses can be generically established by reference to a zoning category, such as retail commercial, or specifically established "B See generally Santa Margarita Area Reside ils ; agether v. San Luis Obispo County Board of Supervisors, 84 Cal, App. 4"i 221 (2000) (sugge's'ting such it cannot be of unlimited duration and upholding a zoning freeze for five years) 81 See Cal. Gov't Coda § 65865(6). " See Cal. Gov't Code § 65865(6). "s Cal. Gov't Code § 65865.2 (contents of development agreements). "' See generally Santa Margarita Arco Residents Together v. San Zits Obispo County Board of Supervisors, 84 Cal, App. 4"i 221 (2000) (finding the fact that the agreement did not mention maximum height and size of proposed buildings was not fatal because the agreement was subject to the county regulations of those variables). " See ,generally Santa Margarita Area Residents Y'ogoher v. San Lass Obispo County Board of Supervisors, 84 Cal. App, 4'" 221 (2000) (adopting a "substantial compliance" approach to these required content elements). INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 153 by reference to a site plan detailing every aspect of a proposed project. Likewise, the density and intensity can be generically designated by using a range of possibilities, (six to ten units per acre, for example), or specifically designated (two units per acre). Similarly, the requirement that the maximum size and height of proposed buildings be included does not mean that every development agreement must propose buildings. PIUBLIC BENEFITS Another required element of a development agreement is the provision for reservation or dedication of land for a public purpose." A "permissive element" refers to the terms and conditions relating to the project proponent's financing of necessary public facilities and the subsequent reimbursement of the project proponent for its non -pro rata share over time. In fact, it is a good idea to specify all of the public benefits that will result from the agreement, following a recital explaining that the project proponent recognizes that he or she is being afforded greater latitude in exchange for agreeing to contribute greater public benefits than could otherwise be required, and that the project proponent does so freely and with full knowledge and consent. ADDRESSING A POTENTIAL POLICE POWER CHALLENGE Early on, commentators speculated whether adopting a development agreement might constitute an illegal "contracting away" of an agency's police powers, which, in this context, refers to a local agency's governing powers. "Police" derives from the Greek word polis, which means city. Cities and counties typically obtain their police powers through the state Constitu tion. v" The California Constitution says, for example: "A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.." These powers afford the local agency latitude in dealing with issues that are local in nature and have not been addressed by the state legislature. 02 Cal. Gov't Code § 65865.2, " S'ee generally Santa Margarita Area Residents Together v. San Luis Obispo County Board of Supervisors, 84 Cal. App. 4"i 221 (2000) (fording the fact that the agreement did not mention maximum height and size of proposed buildings was not fatal because the agreement was subject to county regulations of these variables). See Cal, Const. Alt, XI, §i. °' Car Const. art. Xl, § 7. 54'IDEVELOPMENT AGREEMENT MANUAL One thing a public agency cannot do is to contract away its police powers by enabling a private body or individual to control the exercise of its governing powers 96 In the case of development agreements, the question is whether the "freezing" of applicable land use regulations, so that the public agency cannot change the rifles in a way that will prevent the project proponent from constructing or operating the project as approved, constitutes an illegal contracting away of police powers. There are two ways that freezing of odes and regulations could conceivably constitute an illegal contracting away of police powers. First, development agreements lock in the right to construct the project as approved once the agreement is in effect. Without a development agreement, the law allows the agency to impose additional requirements on a project up to the point at which the project proponent acquires vested rights by obtaining a building permit and doing substantial construction work in reliance on that permit" Second, development agreements do not allow the imposition of new rules that conflict with those in existence when the agreement was approved."n Without a development agreement, the agency may change the applicable zoning in a manner that is inconsistent with the project proponent's vested rights, in which case, the property may acquire what is known as a "nonconforming use status" because the development on the property no longer conforms with Ore applicable zoning. While vested tights allow the owner to continue building and operating the project as originally approved, there may nonetheless be limitations on how the property can be used, Including a prohibition against expanding nonconfonning uses. Whether either of these two aspects of development agreements constitutes an illegal contracting away of police powers may turn on the extent to which an agency surrenders all of its control over land use Functions, rather than reserving most of its police powers except to the limited extent otherwise provided by the agreement.` " See generally Sano Margarita Area Residents Together v. San Luis Obispo County Board of Supervisors, 84 Cal. App. 41' 221 (2000) (finding government entity does not contract away its police power unless the contract amounts to a sunendo or abnegation of a proper governmental function). " See Aveo Communist Project Proponents, Inc. v. South Coast Regional Commission, l7 Cal.3d 785 (1976). Cal. Gov't Code § 65865A See Morrison Homes Corp, v. City of Pleasanton, 58 Cal, App. 3d 724 (1976) (holding that an annexation agreement did not constitute an illegal "contracting away" oriis legislative authority because it did not contract away all of the agency's authority). INSTITUTE for LOCAL SELF GOVERNMENT ' COMMUNITY LAND USE PROJECT 155 Accordingly, it is a good idea for the drafters to include a provision in the development agreement explaining the extent to which the property will continue to be subject to the entity's zoning rules, regulations and policies, as well as a provision explicitly reserving tine entity's police powers unto itself, except as otherwise provided in the agreement. RECOVERY OF COSTS Depending on the nature of the project, negotiating a development agreement can involve significant costs for the public agency in the form of staff` time and legal fees. The agency may want to provide for the recovery of some or all of those costs, either in its local procedures (as part of the cost of processing a development agreement) or as a term of the agreement itself. If provided for in the agency's local procedures, the agency will want to ensure that it does not assess the project proponent more than its actual costs. One way is to establish an hourly rate aid record the staff s time spent working on the project. WHICH REGULATIONS ARE FROZEN? Three drafting considerations affect which local land use rules and ' regulations will apply under the terms and conditions of the development agreement. First, state law says that unless the agreement provides otherwise (see sidebar at right), the rules and Land use policies in effect when the development agreement is adopted will apply to the project The project proponent will be inclined to want language to the effect that the local agency is not allowed to apply rules or land use policies that would effectively nullify its prior approval of the project. In turn, the agency's attorney will want language that confirms the statute allows the agency to apply new rules in One future, as long as they are not in conflict with the rules and regulations that were in place when the agreement was adopted. Second, the attorneys need to decide what language to use in the event the parties agree to allow land uses that are inconsistent with the otherwise applicable zoning requirements in existence at the time the development agreement was negotiated. One approach is to include language saying the then -existing zoning ordinance governs, but only to the extent it is not inconsistent with any provisions of the agreement. Depending on the circumstances, the agency attorney may prefer to actually amend the zoning ordinance so that it is consistent with the development agreement, in order to allow other projects to request that zoning in the future. Sb (DEVELOPMENT AGREEMENT MANUAL Third, the development agreement should state that the agency's compliance is subject to later -enacted state and federal regulations."" "MILESTONE" REQUIREMENTS On larger, phased -in projects, it may be useful to include "milestone" requirements so the agency can terminate the agreement if phases of construction have not been completed within a specified fimefcame. The project proponent may resist agreeing to absolute deadlines. In this case, the public agency may want to consider allowing the timeframe to begin with a specified event, such as issuance of building permits. Before doing so, however, the public agency should make sure there are adequate incentives for the project proponent to stay on schedule, and that the decision to begin the next phase is not left entirely to the project proponent's discretion. DEFAULT, REMEDIES AND TERMINATION Drafters typically recite that upon the commission of a material breach, the other party may terminate the agreement and exercise other legal remedies that it may have, Especially with respect to larger projects, parties may be motivated to enter into elaborate provisions concerning default, available remedies and termination, so that in the event of a material breach, the breaching party has a specified time to "cure" the breach, before the other party can terminate the agreement. These provisions may contain what are known as "force majeure" recitals that preclude terminating the agreement, or that extend the term of the agreement when performance is not possible due to war, insurrection, terrorism, strikes and other events that are beyond the control of the parties. Such provisions are generally advantageous to the project proponent, and create potentially lengthy periods in which the agency is Linable to apply new land use rules and regulations that may affect the agency's ability to do responsive land use planning. NON-PERFORMANCE ISSUES It is important to remember that a development agreement is indeed a contract, the breach of which may be subject to monetary damages. Some local agency attorneys include clauses limiting remedies against the agency to specific performance. Under some circumstances, liquidated damages 10' Cal. Gov't Wde § 65869.5. 0 INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 157 clauses may protect the agency from the upside risks associated with damages awards. The local agency will also find it helpful to consider what kinds of assurances it wants to have available in the event the project proponent defaults on certain obligations. Some of the options local agencies may want to consider include: • Letters of credit; • Performance bonds; and Withholding certain approvals (for example building pennits, until satisfactory performance occurs). The agency may also want to think through timing issues associated with the project proponent's perfonnanee. In some instances, it may be advisable to specify timeframes for performing aspects of the development agreements and the consequences of not meeting those ti neframes. STATE OR FEDERAL LAWS The parties may want to include a provision addressing the fact that state and federal regulations are not suspended by a development agreement. If a state or federal regulation is amended in a way that would preclude further performance wider the agreement, the affected provisions of the development agreement will be modified or suspended. "" ANNUAL REVIEW The parties may want to recite their awareness of the requirement for an annual review of the development agreement by the local entity. Recognize, however, that to the extent the parties make it the agency's contractual obligation to conduct such a review, they may be setting the agency up for a failure to perform. "' It is preferable to specify the agency's procedures for conducting its annual review in the agency's procedures ordinance or by resolution. 1 " See Cal. Gov't Code § 65869.5_ 1 " A number of agencies admit to having neglected annual reviews, which is inadvisable. A "tickler" system developed in collaboration with the clerk's office can be a helpful reminderto hold these hearings once a year. S$ I'DEVELOPMENT AGREEMENT MANUAL ENFORCEMENT The parties may want to include an enforcement provision reciting that the agreement is enforceable notwithstanding any changes to the general plan, specific plan (if any), or the zoning, which alters or amends an ordinance, rule, regulation or policy governing the zoning of the property during the term of the agreement, The parties may want to recite their awareness of the requirement that the agreement be recorded within 10 days following execution. Recognize, however, that to the extent the parties make :it a contractual obligation of the local agency to timely record the agreement, they maybe setting the agency up for a failure to perform. CERTIFICATE OF SATISFACTION The project proponent may wish to obtain "certificates of satisfaction" from the agency as phases of construction are completed, reciting that each phase is in full compliance with its obligations under tine development agreement. This certificate may be important to potential lenders. To the extent there are ongoing obligations, or obligations that transcend the physical boundaries of a particular phase, it may be difficult for the local agency to make such attestations until the term of the development agreement has fully expired. INDEMNIFICATION AND HOLD HARMLESS PROVISION It is not uncommon to have the project proponent hold the local agency harmless from any liability the agency may incur as a result of entering into the agreement. Also helpful is a provision requiring the project proponent to indemnify and defend the agency at the proponent's cost against any legal action instituted by a third party to challenge the validity of the agreement, including a challenge based on an assertion that the California Environmental Quality Act has not been complied with. "' ��o such arrangements have received the blessing of the CaIICorti Ia Attorney General's Office, See 85 Cal, Op. At'y Gen.,_ __ (2002), available online at http:Ncaagstate.ca.us/opinions/index.him INSTITUTE for LOCAL SELF GOVERNMENT • COMMUNITY LAND USE PROJECT 159 AMENDMENT OR CANCELLATION State law provides that a development agreement can be amended or canceled, in whole or in part, by the mutual consent of the parties upon notice of intention to amend or cancel in the fomn required by Goverrunetn Code sections 65090 and 65091, and adoption of an ordinance amending the agreement. The ordinance must also be found to be consistent with the general plan and any applicable specific plan, and is subject to referendum, just as the original ordinance adopting the development agreement was. Drafters typically recite these statutory requirements in the agreement for the convenience of the parties. ASSIGNMENT Drafters typically include a provision that neither patty shall assign or transfer any of its rights, interests or obligations under the agreement without the prior written consent of the other, which consent shall not be unreasonably withheld. The project proponent may want to seek additional language, which states that subsequent purchasers automatically become parties to the agreement upon transfer of ownership. SUCCESSORS It is common to include a provision indicating that the obligations unposed by the agreement constitute "covenants running with the land" and that the burdens and benefits bind and more to all estates and interests created in the subject property and to all "successors -in -interest' of the original parties. Public agencies have faced difficulties once a number of people become successors -in -interest by virtue of acquiring property governed by the agreement. In some cases, project proponents have gone bankrupt, making it difficult to justify enforcing the agreement against individual owners. Depending on the circumstances, public agencies may want to require as a condition of approval that project proponents have homeowners (or property owners) associations governed by covenants, conditions, and restrictions (CC&Rs). The CC&Rs should include the development agreement obligations so that the association, as well as individual property owners, is responsible for ensuing performance of the development agreement. To the extent the provisions of the CC&Rs supersede the development agreement, the association may have the flexibility to amend development 60 (DEVELOPMENT AGREEMENT MANUAL agreement obligations by a vote of less than 100 percent of the association membership. Also, the public agency may be granted enforcement rights under the CC&Rs. It is connlion to include a provision stating that if one aspect of the agreement is held by a court to be illegal, the validity of the remaining provisions are not affected. ATTORNEYS FEES In lawsuits involving contracts, the law does not allow a party it) recoup its attorneys fees as part of its damages unless the agreement so provides. As a result, many written agreements contain a provision stating that if a lawsuit or other legal action is brought with respect to the agreement, the prevailing party is entitled to recoup reasonable attorneys fees and costs. GOOD FAITH AND FAIR DEALING Many agreements recite that the parties expressly acknowledge that any actions they take pursuant to the development agreement will be measured by the "implied covenant of good faith and fair dealing" SIGNATURES AND SUBORDINATION The drafter will want to decide who should sign the development agreement. In addition to the property owner and public agency, some practitioners require lenders, lessees and others with an interest in the property to sign the development agreement. Other attorneys require lenders, lessees and other interested parties to sign subordination agreements, which make their interests in the property subject to the terms and conditions of the development agreement. In the event subordination agreements are balked at, local agencies may want to consider requiring other interested parties to at Mist sign a written acknowledgment and consent, stating they are aware of the existence of the development agreement and that they understand its terms. INSTITUTE for LOCAL SELF GOVERNMENT ° COMMUNITY LAND USE PROJECT 161 A number of issues warrant consideration when drafting a development agreement. In the final analysis, a well -drafted development agreement should accurately capture the deal points negotiated by the parties, and anticipate and address potential problems that may arise during implementation of its terms. The Institute offers a variety of sample development agreements online through its database. The database is accessible through www.ilsg,or z\devtaynt. The Institute also welcomes submittals from public agencies of additional samples for this database. 62 DEVELOPMENT AGREEMENT MANUAL INSTITUTEfor LOCAL SELF GOVERNMENT ' COMMUNITY LAND USE PROJECT 163' 641DEVELOPMENT AGREEMENT MANUAL INSTITUTE for LOCAL SELF GOVERNMENT • COMMUNITY LAND USE PROJECT 165' 661 DEVELOPMENT AGREEMENT MANUAL INSTITUTE for LOCAL SELF GOVERNMENT • COMMUNITY LAND USE PROJECT 167 68'-(DEVELOPMENT AGREEMENT MANUAL Development agreements can be a useful tool in land use planning, creating win-win opportunities For bath project proponents and local agencies when dealing with uncertainties associated with die regulalory environment. The goal of this rnan€aai is to help local agencies in understanding development agreements and to provide them with practical tools to assist thein in using development agreements within their jurisdiction, Did the manual succeed in achieving this goal'? The Institute and its financial supporters are eery interested in local agency feedback. Please fill out the fonn at the enol of this publication to let the Institute know whether this material was useful and how it could be itnprovedo A. Feedback Form ....................:........ 67 Additional Institute Publications __............................. 69 701DEVELOPM.FN " AGRFEMENT MANUAL "DEVELOPMENT AGREEMENT MANuAL FEEDBAcK FORM We are interested to hear your cor ments. This is your chance to shape future Institute publications. You may either copy this page and rnail or fax it to: Institute for Local Self Govenunent Attn: Development Agreement 1400 K Street, Suite 400 Sacramento, CA 95814 Fax: (916) 658-8240 Or comment by email to i[s (d� jis�.= Please put "Development Agreement Manual" in the subject line. 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To order publications, fill out this order form and mail it with your payment to the Institute for I..,ocal Self Government at the address shown below. Thank you,for yonr order. `title of Publication (or Video) SKU l # Quantity Un t Price Total Development Agreement Manual: Collaboration in 117(3 S20.00 Pursuit of Comtnunity Intetests Ballot Box Planning: Undetstanding Land Use Initiatives if?39 � 200)in California The Local Official's Guide to Ethics Laws 1181 $ 1i).o0 Farmland Protection Action Guide. 24 Strategies for 1187 $ 20.00 California i0 penwil discountfor orders of ftve or more copies of'the saute publication; 011prices include TOTAL sales wx and postage, Mailing Address: 74 (DEVELOPMENT AcRE.EMENT MANUAL ORGANIZATION NAME TITLE STREET ADDRESS CITY STATE ZIP CODE. TELEPHONE Send Payments with order for to: Make check payable to: Institute for Local Self Government c/o League of California Cities ATTN: Publications 1400 IC Street, Suite 400 Sacramento, CA 95814 Phone: (9.16) 658-8257 (direct line to Pu:blications) _.Check —.---VISA _.–MasterCard Fax: (916) 658-8220 (direct fax to Publications) Name of Cardholder: V(SA/MC Card Number: Expiration Date: Authorized Signature: ,�, INSTITUTEfor FOCAL SELF GOVERNMENT - COMMUNITY .,ANI] USE ROJEm, � 75 A -B AB 160(1 ................................65 Affordabic hmo sing. ............... 28 Amendment ......... 16, 30, 59, 62 Annual review .......................22 Application ......... 18, 22, 30, 31 Application Process........ 30, 31 Assignment .....................59, 62 Attorneys fees,.. ... .... - - . - 6 0 Brown Act... ...... ....... 20, 5!, 45 Building pemi.it 17, 19, 22, 41e 54, 56, 57, 67 C -E California Environmental Quality Act (C1 QA)...... 20, 32, 51,58 Cancellation ........................... 59 Certificate of satisfaction...... 58 Challenge, statute of limitations for—.—. ........ - 17, 22, 23, 32, 54 Coastal zone..... .... .......... 17, 35 Conditional use pennit ......9, 32 Confidentiality, see also Brown Act.........................................2(i Covenant of good faint and fair dealingl 7, 19, 40, 5O) Lit}, 62„ 64 Covenants, conditions and mstrictions (CC&Rs).............51) Default, ret c6ts and twminat€on.................56, 62, 64 Density ............................26, 52 b9 `88'SS `bS 175 `ZZ `OZ `OZ `L I....)e1 lr pe)saA &b ............ ..... .....oull anr3.r1 r.rr al f) ZS `LZ. 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