California Supreme Court Upholds Referendum Challenges to Zoning Amendments, Even When Temporary Zoning Inconsistencies Ensue

The California Supreme Court held last week that a referendum petition may be used to challenge a zoning ordinance amendment intended to make a city's zoning consistent with its general plan. In City of Morgan Hill v. Bushey (August 23, 2018), the Court clarified that such a challenge by referendum is permissible even though it may perpetuate a temporary inconsistency between the city's zoning and general plan. This adds a wrinkle to the general rule, established in the deBottari v. City of Norco (1985) 171 Cal.App.3d 1204 interpretation of Government Code Section 65860(a), under which courts consider zoning ordinance referenda that are inconsistent with general plans to be invalid at the time of their adoption. The statutory requirement to make zoning and general plans consistent, called "vertical consistency," applies to all general law cities, such as the City of Morgan Hill.

In reaching this conclusion, the Court emphasized that a referendum "challenging a zoning ordinance amendment seeking to make the zoning ordinance consistent with a general plan amendment falls within the exception created by section 65860, subdivision (c)—at least where other consistent zoning designations could have been selected instead." The exception, the Court explained, "allows inconsistent zoning for a 'reasonable time,' and a single referendum and responsive government action do not render the amount of time it takes to reach consistency 'unreasonable.'" In concluding that a referendum may temporarily perpetuate a zoning and general plan inconsistency, the court resolved one issue—the extent of referendum powers to challenge zoning amendments—but uncovered new ones, including: how long is a "reasonable time"? To this end, the Court remanded the case to the Court of Appeal to determine how a city might "comply with a successful referendum while making the zoning ordinance and the general plan consistent with one another."

Coalition Attempted to Block Hotel Development

In 2014, the City of Morgan Hill (City) amended its general plan's land use designation for a vacant lot from "Industrial" to "Commercial." The lot's owner, River Park Hospitality (River Park), planned to develop a hotel at the site. In 2015, the City sought to rezone the site from "ML-Light Industrial" to "CG-General Commercial," making the site's zoning consistent with its general plan designation, and thereby allowing development of the hotel. Shortly thereafter, the Morgan Hill Hotel Coalition (Hotel Coalition) petitioned for a referendum challenging the zoning ordinance amendment. In the 2016 action that ultimately led to the instant case, the trial court ordered the referendum removed from the ballot, holding that the referendum would produce an invalid zoning ordinance that was inconsistent with the general plan.

The Hotel Coalition appealed, and the Court of Appeal reversed the trial court, holding that a referendum "can invalidate a zoning ordinance amendment approved by a local jurisdiction to achieve compliance with a general plan amendment, where other general-plan-compliant zoning designations are available."

California Supreme Court Affirms Court of Appeal Decision

The Supreme Court agreed with the Court of Appeal and further provided that a referendum challenging a zoning amendment is valid even if there are no current zoning designations that are consistent with the general plan, so long as the local jurisdiction can create new zoning designations or alter the general plan to attain such consistency.

Interpreting the exception to the vertical consistency requirements in Government Code Section 65860(a), the Court explained that a referendum does not "enact" or "revive" the inconsistent zoning, thus making the reasoning in the deBottari line of cases inapplicable. Instead, a successful referendum rejects the zoning amendment before it takes effect—the prior zoning was never eliminated. The Court also explained how the "reasonable time" provision in Section 65860(c) can be harmonized with the referendum powers, concluding that the provision "is best read as compatible with use of referendums, rather than as an oblique way to specifically exclude the use of referendums." But the Court did not specify the duration of a "reasonable time," providing only that "a 'reasonable time' includes the time necessary to bring at least one referendum challenge, and to rectify the inconsistency between the zoning ordinance and the general plan in a manner that complies with the referendum." In reaching this holding, the Court emphasized its duty to "jealously guard" the referendum powers and "liberally construe those powers so that they be not improperly annulled" (internal quotations omitted). In this vein, the Court characterized River Park's argument that a referendum cannot create a zoning inconsistency—even a temporary one —as essentially urging the Court "to find that the policies underlying general plans are of such great importance that they require us to eliminate the right to referendum." The Court declined to do so, instead upholding the referendum's power to challenge zoning ordinance amendments.

Implications of Morgan Hill

The Court has clarified the scope of some referendum powers vis-à-vis state planning and zoning law and has reconciled a number of conflicting appellate decisions on this issue. The practical results of this decision, however, are uncertain. In providing a mechanism to engender a vertical inconsistency that must be remedied in a "reasonable time," the decision could allow project opponents to use a referendum to produce a vertical inconsistency, delay a project, and ensure that no discretionary permits will be issued while the inconsistency persists. The ability of a local agency to find alternative means to achieve vertical consistency through legislative actions will vary by jurisdiction, which may result in greater uncertainty for the development community.