California Appellate Court Determines Agreement Between City and Developer is Subject to Referendum

On March 6, 2024, the First Appellate District held that a city council resolution approving an agreement between the City of Livermore and an affordable housing developer was legislative in nature and thus subject to a referendum petition. In so holding, the appellate court in Move Eden Housing v. City of Livermore reversed the Alameda Superior Court’s denial of a petition for writ of mandate seeking to require the City to process appellants’ referendum petition. This decision is the sequel to a prior published opinion in which the same court of appeal affirmed the trial court’s denial of a petition for writ of mandate challenging the City’s approval of the project. (Save Livermore Downtown v. City of Livermore (2022) 87 Cal.App.5^th1116.) As a result of the current action, the ongoing challenge to the affordable housing project (or at least a component of it) will likely be decided by the voters this November.

This opinion continues a long line of cases that distinguish between legislative actions, which are subject to referendum petitions, and administrative or adjudicatory actions, which are not. Some legislative actions are obvious, such as general plan amendments, zoning amendments, and development agreements, while other actions are less so. In particular, characterizing approvals of transactions between local agencies and developers can be difficult, and resolution of the issue is often fact-specific.

BACKGROUND

In 2008, the City’s former Redevelopment Agency (RDA) acquired the subject property, with a portion of the purchase price refinanced by funds from the State of California. When the State dissolved RDAs statewide a few years later, the property was included in the City’s Long Range Plan that the State approved.

In 2018, the City and affordable housing developer Eden Housing entered into a Disposition and Development and Loan Agreement for development of the property, which stated that a portion of the property “will be dedicated to the City for a park.” In May 2021, the City approved the land use entitlements for the project and an amendment to the 2018 agreement. The following month, project opponents filed their initial lawsuit to set aside the project’s approvals. In February 2022, the trial court denied the petition for writ of mandate.

On May 24, 2022, the City adopted the Resolution that was the subject of the current action. The Resolution authorized the execution of an agreement that superseded the 2018 agreement as amended in 2021. The 2022 agreement reflected the City’s decision to spend $5.5 million on constructing and improving Veteran’s Park as part of the project. The developer would manage the construction of the park, but the City would pay for the work. The opening paragraph of the opinion inexactly refers to the referendum challenging “a development agreement,” even though it was not a statutory development agreement subject to referendum. (Gov. Code § 65867.5)

Soon thereafter, a referendum petition was circulated for signatures. On July 8, the referendum proponents submitted the referendum petition to the City Clerk. The petition had more than the required number of signatures, which was confirmed by the City Clerk’s prima facie count. Nevertheless, the City Clerk sent a letter to the referendum proponents stating that the City had determined that the Resolution “was an administrative act, not a legislative action, and not subject to referendum.” As such, the City Clerk stated that the City would take no further action on the referendum petition. The proponents then filed a petition for writ of mandate.

The Alameda Superior Court denied the writ petition on the ground that the Resolution was an administrative act and that it was lawful for the City Clerk to refuse to process the referendum petition. The trial court also ruled that even if the City Clerk had violated the law by not carrying out her ministerial duty to process the petition, it was proper for the court to “retroactively validate” the conclusion that the referendum was invalid. In the alternative, the trial court held that the City was acting as an administrative agency of the State in adopting the Resolution, which thereby preempted a local referendum.

 

ANALYSIS

The Resolution Was A Legislative Act

The Elections Code does not empower a city or a city clerk to refuse to process a referendum petition signed by more than 10 percent of the voters of a city. Instead, if a city believes that a referendum should not be presented to the voters, the city must file a petition for writ of mandate seeking to remove the referendum petition from the ballot. (See Save Lafayette v. City of Lafayette (2018) 20 Cal.App.5^th657, 663.) Nevertheless, case law has created a narrow exception to this rule, which allows a trial court to retroactively validate a city’s refusal to place a referendum petition on the ballot “on a compelling showing that a proper case has been established for interfering” with the referendum process. (Id. at 663-664.)

On appeal, respondents first argued that the City Clerk’s refusal was not unlawful because the trial court subsequently found the referendum was invalid. The appellate court rejected this argument on two grounds. First the court cited to a line of cases holding that a clerk’s duties are ministerial and are limited to whether or not the procedural requirements have been met. Second, the court held that a city clerk cannot make judgments on the substance of the referendum.

Turning to the “compelling showing” exception, the appellate court then examined the legislative/administrative dichotomy, and cited a number of cases involving approvals of agreements between local agencies and private parties. In general, this line of cases distinguish between actions that constitute the initial policy determination regarding a project (legislative) and those that are simply carrying out prior policy determinations (administrative). Courts also examine the character of the transaction, and those involving purchasing property or expending city funds are usually considered legislative. For example, the appellate court distinguished San Bruno Comm. For Econ. Just. v. City of San Bruno (2017) 15 Cal.App.5th 524, upon which the trial court relied. The court of appeal explained that the San Bruno case involved the sale of land to a private developer without providing any subsidy to the developer. (Id. at 531.) Moreover, the contract to sell land in San Bruno occurred after the primary policy decisions regarding the proposed development had already been made. (Id. at 536.) Conversely, the Resolution in the present case “was the initial relevant policy determination regarding the park’s construction and improvements” and involved the expenditure of public funds, and was thus legislative in nature.

The City Was Not Acting As The State’s Agent

The court of appeal also overturned the trial court’s alternative basis for denying the writ, which was that the City acted as an administrative agent of the State in adopting the Resolution. In doing so, the appellate court first reviewed the role of RDAs prior to their dissolution by the State via the “Dissolution Law.”

To support their argument that the Dissolution Law preempted the City’s legislative powers, Respondents relied on a line of cases where the local legislative body’s discretion was largely preempted by statutory mandate. The appellate court stated that respondents failed to explain how the Dissolution Law made the City’s decision to allow the construction and improvement of Veteran’s Park an administrative decision. The City’s Long Range Plan specified how the property should be developed with affordable housing, but it did not address the construction of the park. The appellate court ruled that in deciding to construct the park via the Resolution, the City made discretionary policy determinations that were not dictated by the Long Range Plan or any provision of the Dissolution Law. Thus, the requisite “clear showing” of the Legislature’s intent to limit the City’s discretion was absent, and the City did not act as an administrative agent of the State.

The court of appeal also reversed the superior court’s requirement that petitioners furnish a $500,000 bond per Code of Civil Procedure section 529.2, holding that the present challenge was not to the affordable housing project and was instead based on the City’s failure to comply with the Elections Code.

This case is another example of the complexities involved when trying to determine whether a local agency approval is legislative or administrative, particularly when agreements are involved. As State law makes opposition to new housing development increasingly difficult for project opponents, opponents may resort more often to the ballot box to stall or defeat a project. Cities and developers, on the other hand, should avoid seeking legislative approvals for new housing projects, if possible, to minimize the risk of a referendum petition, automatic delay, and potential defeat by the electorate.