By: Robert Gammon
courtesy of Boatworks
Plus, a judge threw out the city’s developer impact fee, ruling that it violates state law. The decision could cost the city $35 million and threatens to delay the opening of Jean Sweeney Park.
The city of Alameda has lost two major court battles involving a 182-unit housing development proposed for a large vacant lot just north of the Park Street Bridge. And in one of the cases, an Alameda County judge invalidated the city’s developer impact fee, ruling on Thursday that the fee, which applies to all new development in the city, violates state law in several ways. That ruling could cost the city more than $35 million and delay the opening of Jean Sweeney Open Space Park.
The two cases were brought by Boatworks, an Emeryville-based developer that has been trying since at least 2005 to develop 9.4 acres of land that it owns along the estuary. Boatworks filed one of the cases this summer when the city’s Planning Board demanded that the developer increase the number of affordable units in its project from 15 percent to 20 percent. However, a judge put that decision by the Planning Board on hold last month, ruling that the board had likely acted illegally.
The second case, filed by Boatworks in 2014, involves a challenge to Alameda’s developer impact fee, which the city raised by 300 percent two years ago. And of the two cases, this one has far more serious financial impacts for the city.
As we noted in our November news story, “A Costly Fight Over Housing,” Boatworks contends that city’s increased developer impact fee violates state law in several ways. In its lawsuit against the city, Boatworks also argued that the city’s rationale for raising the developer fee—known as a Nexus Study—was deeply flawed. And a judge on Thursday agreed.
Alameda’s Nexus Study, completed in 2014, concluded that city was justified in raising the impact fee by 300 percent in order to buy more parkland to accommodate new homes and residents that are expected to arrive in Alameda by 2040. The study concluded that the city could use most of the $38.9 million in funds generated by the fees to buy about 20 acres worth of parkland.
But Boatworks argued in court that the study failed to account for all the new parkland that city had already received for free from the Navy at Alameda Point. And that once that land becomes park, as it is intended to be, then Alameda won’t actually need to buy any more parkland to accommodate new residents.
On Thursday, Alameda County Superior Court Judge Frank Roesch sided with Boatworks, ruling that the city’s decision to enact an impact fee to buy parks it already owns is a clear violation of state law. Roesch noted that in court, attorneys for the city of Alameda acknowledged that the city has no plans to use the $38.9 million in developer impact fees, or DIF, to buy parkland, but rather intends to use the money to turn land it already owns into parks. Roesch called that an illegal bait and switch under state law. “[T]he calculation of the DIF fee based on the purchase of approximately 20 acres of land that do not, in fact, need to be purchased, is a violation of the [California] Mitigation Fee Act,” Roesch wrote.
Roesch also ruled that it would be illegal for the city to use developer impact fees to pay for improvements needed to open Jean Sweeney Park, because the city already owns that land. The judge ruled the impact fees could only be used to buy new parkland or make improvements on new land that the city purchases. As a result, the judge’s ruling threatens to delay the opening of Jean Sweeney Park indefinitely—because the city likely won’t have the funds to do it.
Alameda City Attorney Janet Kern declined to comment on Roesch’s ruling, saying through a spokesperson that her office was still examining it. Boatworks attorney Thomas Roth declined to comment specifically on Roesch’s decision, but noted that the ruling could end up costing the city “in the neighborhood of $36 million” by 2040 because of the loss of impact fees.
The judge’s ruling not only prohibits the city from collecting the new higher developer impact fees from now on, but it also jeopardizes the fees it has already pocketed. If the city decides to not appeal Roesch’s ruling, then developers who have already paid the fees will be able to go to court and request a refund. Roesch also scheduled a January hearing to determine how much the city must pay Boatworks in the case.
In the other case, Boatworks sued the city for breach of contract, arguing that the Planning Board’s decision to require more affordable housing violated a 2010 settlement between the city and Boatworks that agreed on 15 percent affordable units in the project. The Alameda City Attorney’s Office responded in court that the settlement agreement was no longer in effect and asked the court to throw out Boatworks’ suit.
However, Alameda County Superior Court Judge Kimberly Colwell refused to dismiss the case, ruling in November that Boatworks would likely win the case if it were to go to trial. Colwell also stayed the Planning Board’s decision and ruled that the settlement agreement, which stipulated 15 percent affordable housing, was still in effect.
“We’re very pleased that the court recognized that there has been an obvious breach of contract and that we would likely prevail at trial,” said Shona Armstrong, Boatworks’ attorney in this case.
Boatworks had actually planned to build 20 percent affordable originally when it first proposed to build 242 units on its land. But the city council twice rejected that version of the project, saying it was “too dense.”
For more on this second case, see our November story. The city has not yet made a decision on what it plans to do with this case.