Olivia Project – A decision between following laws some residents dislike vs. opinions that trigger significant financial risks to the City’s well being?

As a Councilmember, I heard and felt the anger and fear the Olivia project caused. I understand the concerns for the potential visual impact of three-story, multi-family apartment structures near downtown. I too have mixed feelings re the use State law at this location that caused Mr. Jordan the ability to claim a density bonus from otherwise permitted 60 units to 81 units that necessitated the three-story nature of the development.

That said, the responsibility of City Councilmember is to represent and protect the interest of their constituents. For the Olivia project, the question became a clear:

1) Do you approve a project that abides by the laws that many residents dislike? or
2) Do you deny a project that will likely trigger significant financial risks to the City’s well being?

Based on the my knowledge/experience, and that of the city’s consultants and legal professionals, I chose the former.

The appeal hearings that the City Council concluded on March 3rd for the Olivia project constitute exhaustion of administrative remedies. The process does not, however, necessarily stop with a City Council’s decision. Council decisions become final only if they are not challenged and reversed via litigation, which is now pending.

On March 3, I evaluated the merits of the project, including the likelihood the City would have prevailed in a lawsuit, and that is why I voted “yes.”

Had I factored in my own opinions (or others’ opinions), the outcome could have been different. But instead I applied the law based on facts. I placed great deference to the consultants, staff and our City Attorney, who are experienced professionals on CEQA and planning matters. I also considered my own experience as a land use attorney, having entitled countless projects and worked on a wide range of CEQA matters.

A “no” vote by the Council, and the consequences from the City making a mistake in rejecting a project in violation of the Housing Accountability Act, would be dramatic and would surely change our small City. On the project approval decision, if the City was deemed to have denied the project in bad faith, a court could order the project approval, award attorneys fees to the plaintiff, and impose penalties of a minimum of $10,000 per unit, and up to $50,000 per unit. This could be in excess of $4 million, in addition to the court ordering the project approved.

On the CEQA exemption decision, the City could have ordered the applicant to do additional environmental review, which would have effectively postponed the project decision by 6-9 months (as confirmed by the City Attorney at the hearing). We could have also been sued by the applicant for requiring additional review unnecessarily, which could result in liability for attorneys’ fees and costs. Nothing in the record showed that the project would have a significant environmental impact under CEQA.

In greater detail, some residents were concerned e.g. about lack of parking. However a parking deficit, if present, is not considered a CEQA environmental impact, per case law. Under the State Density Bonus Law, the applicant was also entitled to a parking waiver. The City could NOT legally deny the parking waiver. That said, we (at my and Mayor Pierce’s guidance) were able to convince the applicant to increase the parking count by 20 spaces to 106 on-site spaces and to continue to work on possible additional parking at the AT&T lot, thus making the project better.

The three Councilmembers (Pierce, Wolfe, Catalano) who voted “yes” protected the City from potentially devastating financial consequences. The “yes” vote did not risk the City’s $5 million reserve, or the approx. $5.5 million annual general fund budget on costly and time-consuming litigation. Our City budget is small, but prior City leadership has always been fiscally conservative so that police and all other services that our residents benefit from on a daily basis can be maintained. The “yes” votes chose not to risk the City’s financial future on litigation that the City would most likely lose.

The State Density Bonus Law also entitled the applicant to 35% bonus in number of units above and beyond what the City’s zoning for those parcels allowed. That is State law, and the reason why the applicant was allowed to pursue the project at the proposed size. There is nothing we could legislate in Clayton that would supersede State laws.

At Tuesday night’s Council hearing, I repeatedly asked the other Councilmembers to identify proper basis for denial of the CEQA exemption or the project approvals, if they were leaning towards a “no” vote. A challenge to a CEQA exemption must be based on substantial evidence, which means facts, reasonable assumptions predicated upon facts, or expert testimony. Denial of the project approvals requires the Council to make written findings of a specific and adverse impact on public health and safety, findings that any City Attorney will indicate are difficult to make and which the State legislature intended to arise infrequently. During the discussion at the meeting, no Councilmember was able to articulate proper, legally required basis or findings for project or exemption denial. Without a proper basis, the risk of the City taking a chance on an argument or opinion is, as noted above, significant.

If the City had full discretion to deny or approve, and if State laws did not apply to Clayton, the vote at the March 3 hearing would likely have been different.

While we are on the topic of housing, coming ahead later in 2020, California Dept. of Housing and Community Development will provide Bay Area the overall number of new housing units that cities must provide for in the next cycle. For the current 2014-22 cycle, the Regional Housing Needs Allocation (RHNA) allocation Clayton received was proportionally smaller in share than Clayton’s population is in comparison to Contra Costa County population. Based on what has happened already in the Los Angeles and Sacramento metropolitan areas, the overall numbers are expected to be significantly higher.

In 2021, Clayton will have to submit its Housing Element update to the State, identifying vacant or underutilized parcels that can accommodate Clayton’s RHNA figure for the next cycle. Thereafter, Clayton will need to rezone some parcels to provide for corresponding zoning. Additionally, because of State law from Senate Bill 330, no one in Clayton will be downzoning any parcels anytime in the near future, and instead we will be required to upzone to accommodate additional density once the RHNA figures are assigned. Regardless of who sits on the City Council in 2021 or thereafter, the Council will be required to upzone additional parcels, or decide not to comply with State law, which will trigger financial implications and the risk of being sued by the State (for which there is already precedent). If any of the property owners whose property is identified as a potential opportunity site (per State requirements) decides to file an application for a project, we will be faced with the same decision – whether to comply with laws or not on the project approvals

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