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Arcadia Development Co v. City of Morgan Hill et al

August 5, 2011


Trial Court: Santa Clara County Superior Court Superior Court No. 1-04-CV020598 Trial Judge: Hon. Thomas W. Cain (Santa Clara County Super. Ct. No. 1-04-CV020598)

The opinion of the court was delivered by: Premo, J.



Plaintiff Arcadia Development Company (Arcadia) is the owner of an undeveloped 69-acre parcel of land annexed by defendant City of Morgan Hill (City) in 1990. Under City's general plan the Arcadia property is zoned R-1 (7000), which allows single family residential developments on lots as small as 7,000 square feet. Notwithstanding its general plan designation, the Arcadia property is limited by a City ordinance known as the "Density Restriction" to 20-acre lots. The Density Restriction applies only to the Arcadia property and to no other property within City's urban service area. The question in this appeal is whether the Density Restriction is an invalid exercise of City's police power or a violation of Arcadia's right to equal protection of the law. (U.S. Const., 14th Amend.; Cal. Const., art. I, § 7, subd. (a).) We conclude that there are conceivable rational reasons for the restriction and, therefore, that the ordinance is valid.


City is situated in the southern portion of Santa Clara County in the flat lands of the Santa Clara Valley about 20 miles south of San Jose. The Diablo Mountain Range is to City's east; the Santa Cruz mountains are to its west; Monterey Road runs in a roughly north/south direction down the middle, bisecting City's central core. Highway 101 runs parallel to and east of Monterey Road.

City is most heavily developed to the west of Highway 101. City's urban service area extends east of Highway 101 in two irregularly shaped branches. The Arcadia property is a rectangular parcel that lies midway along the southern edge of the southern branch, about a mile east of Highway 101 and two miles east of City's central core. The property juts out from this southern branch of the urban service area such that its western and southern borders abut county land. The land immediately to its west is unincorporated rural property, some of which is considered prime agricultural land. The land to its south is also agricultural. The Arcadia property has been cultivated for many years and most recently has been used for dry-land farming. It is improved with one or two residences and a few scattered agricultural structures. The land to the north and east of the Arcadia property lies within City's urban service area and is developed with single family homes.

Arcadia first requested annexation of what was then an 80-acre parcel in 1986. Because City already had a surplus of residentially developable land within its urban service area, City staff recommended denying the request. Nevertheless, City asked the Santa Clara County Local Agency Formation Commission (LAFCO) to consider it. The 1989 environmental impact report (EIR) prepared at LAFCO's request found that development of the Arcadia property would be contiguous with and a logical extension of existing development. Development of the property would also "expand the fringes of the City outward, while there is more than adequate supply of developable land within the [urban service area]." Development "could have the adverse effect of hastening development of the agricultural and open space lands to the south and west rather than protecting or retarding growth in those areas." Despite these concerns, and in the face of neighborhood opposition, LAFCO ultimately approved the request and the Arcadia property was added to City's urban service area on March 19, 1990.

Meanwhile, City voters concerned about rapid growth had been drafting an initiative (Measure P) to halt expansion of City's urban service area. During the 1970s, City experienced a period of explosive population growth, which led City to adopt a residential development control system (RDCS) under which City granted housing allotments for new residential developments pursuant to a formula designed to control the quality, type, distribution, and quantity of new residential housing. But in spite of the enactment of the RDCS, City's population continued to grow, prompted largely by the growth of Silicon Valley in the 1980s. As a result, the pressure to expand City's urban service area increased. A glut of annexation requests like Arcadia's came in the late 1980s. City approved six applications between 1986 and 1987, adding 379 acres. City considered 10 more applications in 1988, ultimately approving four of them and adding another 300 acres. By 1990, City's general plan designated 997 acres as vacant and zoned for residential development. Since City absorbed about 50 acres per year, that meant that City had enough residentially developable land for about 20 years of growth. Measure P proposed to amend the RDCS to limit further extension of the urban service area.

The proposed Measure P included "Findings and Purposes," several portions of which are pertinent here. One finding was, "The indiscriminate continued expansion of the city and urban service area boundaries further imbalances the jobs to housing ratio . . . , adversely affects the city's ability to maintain its level of services, can adversely affect the quality of life in the city, and is not necessary to meet the city's fair share of regional growth." Another finding was that "leapfrog" development of land outside city boundaries, as well as within the city "adversely affects the city's level of services and quality of life." Development on property that is "not contiguous with existing developed land, contributes to urban sprawl, and can reduce the vitality of the city's urban center. Such leapfrog development should be discouraged, as it is an inefficient way to develop, and [im]poses greater burdens on the community than 'in-fill' development with[in] the city's existing urban service area."

Based on these findings, the initiative declared: "The people of Morgan Hill are therefor opposed to any further expansions of the city and its urban service area until such time as expansion is needed to support projected growth for the next five years. . . . [¶] . . . [¶] The unique character of the city depends on its rural surroundings. In order to maintain this rural atmosphere, provide a buffer against development and preserve a greenbelt legacy for future generations, the city must take steps to preserve open space and agricultural lands and public parklands in and around the city." And finally, "Because city services such as water are finite and limited, and because development on the outskirts of the city causes the delivery of needed services to be more expensive and difficult, the rate of population growth of Morgan Hill should not be increased when lands are added to the city or its urban service area."

Measure P addressed the foregoing concerns by prohibiting any further addition of land to City's urban service area until City's inventory of residentially developable land was insufficient to meet five years' growth. The only exception to the prohibition would be where the land qualified as desirable infill, defined as a parcel of 20 acres or less, abutting City on at least two sides, or abutted on one side by City and having two other sides within a quarter mile from a City boundary.

Measure P, which was to go before the voters in November 1990, also introduced the Density Restriction. The Density Restriction provided that properties added to the urban service area between March 1, 1990, and the effective date of Measure P could not be developed at a density greater than that allowed by the county general plan to which the property would have been subject absent its annexation. The express purpose of the provision was to discourage "urban sprawl and noncontiguous development" in order to assure that "City services and resources are not unduly burdened." The drafters reportedly chose March 1, 1990, as the cutoff date in order to discourage a rush of annexations, which they feared might occur once the initiative's provisions were made public.

Measure P was approved and went into effect on December 8, 1990. By then the Arcadia property had been added to City's urban service area and Arcadia had received housing allotments for 11 acres on its eastern border. The remaining 69-acre parcel was subject to the Density Restriction. Under the zoning designation of City's general plan, Arcadia would have been eligible to compete for up to 345 homes on this parcel; under the Density Restriction it was limited to about four homes. There were two other properties added to City's urban service area during the nine-month period between March 1, 1990 and the effective date of Measure P but these were not subject to the Density Restriction; one was industrially zoned and the other was fully developed. Thus, the Arcadia property was the only residentially developable property within City's urban service area that could not compete for housing allotments at the density allowed by its general plan zoning designation.

Measure P was set to expire in 2010. Beginning in early 2002, City began considering updating the measure and extending it to 2020. City found that Measure P had been successful in directing growth to areas that were contiguous with existing development and served by adequate infrastructure. Most City residents favored restricting rather than expanding development. Critical goals of the Measure P update were simplification of the development review process and the continued encouragement of efficient patterns of development.

Arcadia urged City to do away with the Density Restriction, arguing that the restriction unfairly singled out its property. During public hearings on the issue City staff, planning commissioners, and members of the public acknowledged that the Arcadia property was the only property subject to the Density Restriction. Some questioned the legality or the necessity of continuing the restriction. City considered deleting it or allowing it to expire in 2010 as it would have under Measure P. It was acknowledged, however, that deleting the provision might "cost votes." Indeed, ...

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