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Jefferson Street Ventures, LLC v. City of Indio

California Court of Appeals, Fourth District, Third Division

April 21, 2015

JEFFERSON STREET VENTURES, LLC, Plaintiff and Appellant,
CITY OF INDIO, Defendant and Respondent.

Appeal from a judgment of the Superior Court of Riverside County, No. INC072101 John G. Evans, Judge.

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Manatt, Phelps & Phillips and Michael M. Berger for Plaintiff and Appellant.

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Richards, Watson & Gershon, Gregory M. Kunert and Saskia T. Asamura for Defendant and Respondent.



Jefferson Street Ventures, LLC (Jefferson), appeals from a judgment in favor of the City of Indio (the City) in this combined petition for writ of administrative mandamus/inverse condemnation action. In 2007, the City conditioned approval of Jefferson’s 2005 application for development of a shopping center upon Jefferson leaving approximately one-third of its property undeveloped to accommodate the reconstruction of a major freeway interchange that was in the planning stages. The City intended to eventually acquire the development-restricted property through either eminent domain or negotiated purchase. But it could not acquire the property at the time Jefferson’s development application was approved due to funding constraints imposed by the byzantine planning and review process for the interchange that involved various local, state, and federal agencies, and which the City did not anticipate being complete for at least a few more years-as it turned out it was almost seven. When Jefferson’s development application was being approved, City staff explained the City could not allow development on the part of the site designated for the interchange because the City would incur additional costs for the property if and when it was later taken for the interchange.

Jefferson sued the City contending the development restrictions were invalid because they constituted an uncompensated taking of its property. Following a hearing on the writ petition, the trial court found the development restrictions were permissible and denied the writ. Although the court originally declined to consider whether the facially valid development restrictions nonetheless amounted to an uncompensated taking, it subsequently granted the City’s motion for judgment on the pleadings on the inverse condemnation causes of action agreeing the ruling on the writ petition included a finding there was no compensable taking.

On appeal, Jefferson contends: (1) the trial court erred by denying its petition for writ of administrative mandate because the City’s development restrictions constituted an uncompensated taking; and (2) regardless of the ruling on the mandamus cause of action, the trial court erred by denying it a trial on its inverse condemnation claims. We agree with the former contention and conclude the restrictions constituted a de facto taking of the development restricted portion of Jefferson’s property and the trial court erred by denying Jefferson’s petition for writ of mandate.

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In Hensler v. City of Glendale (1994) 8 Cal.4th 1, 7 [32 Cal.Rptr.2d 244, 876 P.2d 1043] (Hensler), our Supreme Court held a landowner alleging government action constitutes an uncompensated taking must first challenge the action by way of a writ of mandate so as to “afford the local entity the opportunity to rescind its action rather than pay compensation for a taking.” In this case, however, that option appears to now be foreclosed. While this appeal has been pending, responsibility for rights-of-way acquisition for the interchange project has been transferred to the County of Riverside (the County), and in February 2014, the County commenced a direct condemnation action to acquire the requisite portions of Jefferson’s property for construction of the interchange. The direct condemnation action will encompass many, if not all, of the damage claims Jefferson asserts against the City in this action. However, we cannot conclude this action is moot because the direct condemnation action has not proceeded to trial or final judgment. Accordingly, although we reverse and remand for further proceedings, we also direct the trial court to consider consolidation of this action with the direct condemnation action so as to avoid duplication of damages.


The I-10/Jefferson Street Interchange Project

Jefferson is the owner of a vacant 26.85-acre parcel of land located in the City (the Property). The Property is bounded by the I-10 freeway to the south, Jefferson Street to the west, and Varner Road, which curves around the property’s northern perimeter from Jefferson Street tapering down to the I-10 and then running parallel to the I-10 freeway. The Property is surrounded by mostly vacant land.

The I-10/Jefferson Street interchange was one of several I-10 interchanges in the Coachella Valley slated for reconstruction and enlargement to accommodate increasing population growth and development in the area. The reconstruction of the I-10/Jefferson Street interchange will require acquisition of rights-of-way including a portion of Jefferson’s property.

Since the late 1990’s, numerous governmental agencies have been involved in studying, planning, and funding the I-10 interchange projects including the Federal Highway Administration (FHWA), the State of California, Department of Transportation (Caltrans), the County, the Coachella Valley Association of Governments, and the City. The City was originally designated as the responsible agency for the I-10/Jefferson Street interchange (hereafter the Interchange Project). Preparation of the requisite environmental studies for the Interchange Project began in 2001. Those studies had to meet requirements of both the National Environmental Policy Act of 1969 (NEPA,

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42 U.S.C. § 4321 et seq.; 49 C.F.R. §§ 1105.6, 1105.7 (2014), and the California Environmental Quality Act (CEQA, Pub. Resources Code, § 21000, et seq.; Cal. Code Regs., tit. 23, § 3775, et seq.). Acquisition of rights-of-way for the Interchange Project could not begin until all environmental review was complete and approved. As the City’s public works director explained to the city council in March 2007, the average time for a NEPA document on an interstate highway interchange project to wend its way through all the requisite federal and state agencies was about seven years. And as the City’s community development director explained in August 2007, state and federal funds could not be released until environmental review was complete and the City had no control over the federal environmental review process.

There were three potential configurations for the Interchange Project identified by Caltrans-Alternatives 1, 2, and 3. Although some environmental studies were pointing to Alternative 1 as early as 2003, by November 2005, the City’s staff was designating alternative 3 (Alternative 3) as the preferred configuration. However, as will be explained anon, in 2007, the city council selected Alternative 1 as its preferred Interchange Project configuration.

Jefferson’s Project

At some point, Jefferson acquired the Property. In 2004, Jefferson began consulting with City staff on its development plans for the Property and on July 27, 2005, Jefferson submitted a proposal to the City for development of a retail shopping center on the entire 26.85-acre parcel.

Jefferson’s development proposal, Project Master Plan No. 05-01-38 (hereafter the PMP), was for about 20 buildings with a combined total square footage of 248, 600. It placed the largest buildings, including the proposed supermarket “anchor tenant, ” along the I-10 perimeter of the Property facing towards Varner Road. A triangular area at the southeast end of the Property (where Varner Road tapers towards I-10 and then runs parallel to it) was not designated for buildings but as a drainage retention basin. The PMP contained an appendix addressing the proposed Alternative 3 configuration for the Interchange Project, which would require acquisition of approximately 15 acres of the Property by the City, including the area most desirable for a supermarket.

The City’s planning commission’s first public hearing on Jefferson’s project was set for May 10, 2006. City staff reported that although the original PMP was for the entire 26.85-acre site, Jefferson had revised its proposal in light of the Interchange Project and the City’s preference for Alternative 3, and the revised site plan and proposal was for 17.50 acres with 156, 650

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combined square feet of buildings. City staff recommended approval noting the PMP was consistent with the City’s general and specific plans and zoning ordinances. Staff recommended adoption of a mitigated negative declaration for the project under CEQA. However, before the planning commission meeting, Jefferson informed City staff it would not revise the PMP and wanted approval for the 26.85-acre project as submitted. The planning commission hearing was continued numerous times while City staff and Jefferson worked through various issues.

At the January 10, 2007, planning commission hearing, City staff explained various governmental agencies were still trying to agree on the Interchange Project alignment that worked for all the parties and by this time Jefferson was expressing a preference for Alternative 1 as the least damaging to its project.The City’s community development director and the planning commissioners lamented that Jefferson was caught up in a lengthy process involving numerous state and federal agencies, with environmental problems and other issues concerning the Interchange Project that still were not resolved. The city attorney reported the City had just recently received a letter from Caltrans on behalf of FHWA advising the City that NEPA environmental work had to be completed before the City could move forward on the Interchange Project. The public hearing on the PMP was continued to February 14, 2007, and then to March 14, 2007.

On March 7, 2007, the city council held a noticed public hearing to consider staff’s recommendation to approve Alternative 1 for the Interchange Project as the City’s preferred configuration. The city manager explained the I-10 interchanges had been funded and defunded due to budget problems and urged a decision be made immediately as to the preferred alternative so funding was not lost again. The draft environmental impact report still had to be circulated to the public and reviewed by FHWA, the Federal Transportation Administration and at least 15 other agencies-a process staff hoped might be completed in another two and one-half years. Additionally, Caltrans would have to approve the locally preferred alternative.

Jefferson’s principal, Charles Ellis, advised the city council that Alternative 1 was the least onerous for its project and urged the city council to approve Alternative 1. The City approved Alternative 1 for the Interchange Project, and authorized staff to solicit proposals to complete construction drawings for the interchange based on Alternative 1.

On March 14, 2007, the planning commission held its final hearing on the PMP. The staff report explained the City had approved Alternative 1 for the Interchange Project, which reduced the developable area of Jefferson’s property to approximately 17.1 acres. Therefore, there must be a condition to

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approval of the PMP that before building permits were issued, Jefferson must submit a revised plan providing for the building envelope for the development to be revised to accommodate the Alternative 1 configuration for the Interchange Project. There was some discussion during the meeting during which Jefferson’s project planner explained about how the project might be revised to fit a 17-acre site. Ellis indicated Jefferson was “reluctantly” modifying its PMP (i.e., to accommodate the Alternative 1 alignment for the Interchange Project), with the understanding the City would be paying Jefferson just compensation for the property being taken for the Interchange Project. The planning commission adopted a proposed resolution recommending the city council approve the PMP subject to staff’s recommended conditions.

On July 18, 2007, the city council held its first hearing on the PMP. The community development director explained the approval would allow Jefferson to proceed immediately with development of a 17-acre project, on a site with an as yet unknown configuration, and if the Interchange Project did not eventually get funded (and built), Jefferson could come back and build out the rest of the Property.

Ellis advised the city council that Jefferson did not agree to approval of only a 17-acre project. He reiterated that Jefferson’s project had been in the planning process since August 2004 and it had submitted the PMP to the City for approval in January 2005. It was still not clear to him the City would in fact ever condemn the nine acres the City wanted removed from the proposed development (hereafter referred to as the Alternative 1 Acreage). Ellis stated he understood the quandary the City was in-by declaring the Alternative 1 Acreage unbuildable it was effectively taking Jefferson’s property now, but the City had to rely on third parties to pay for that taking and it was unknown if and when that would happen. Accordingly, Ellis ...

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