The Fourth District Court of Appeal reversed a Superior Court ruling and held that approval of a voter-sponsored development agreement was an invalid exercise of the initiative power. The court held that approval of a development agreement by initiative was barred under the development agreement statute. [Center for Community Action and Environmental Justice v. City of Moreno Valley, 26 Cal.App.5th 689 (4th Dist. 2018).]

 Factual and Procedural Background

In 2015, the Moreno Valley City Council approved a development agreement for a logistics center project called the World Logistics Center. A number of environmental organizations filed a California Environmental Quality Act (CEQA) lawsuit challenging that decision.

Rather than waiting for the lawsuit to be resolved, a group funded by the developers filed an initiative petition (the Moreno Valley Workforce Training Initiative) to repeal the city’s approval and approve a new development agreement. The initiative received sufficient signatures to qualify for the ballot. Once the initiative qualified for the ballot, the city council had the option of adopting the initiative rather than submitting it to the voters, and voted to do so.

The environmental organizations and other groups filed new petitions for writ of mandate challenging the city’s adoption of the initiative. They alleged that the California Legislature exclusively delegated the power to enter into development agreements to the local governing body, thus precluding adoption by initiative. The trial court denied the petitions and the groups appealed.

The Court of Appeal’s Decision

Reversing the trial court, the Court of Appeal held that, in adopting the development agreement statute (Gov. Code, § 65864 et seq.), the Legislature intended to exclusively delegate approval of development agreements to governing bodies and to preclude the right of initiative.

The California Constitution

The court started its analysis with a discussion of the initiative and referendum power in California. The court noted that under the California Constitution, initiative and referendum is not a right granted to the people, but a power reserved by them, and therefore, the courts have a duty to jealously guard and liberally construe the right so that it be not improperly annulled. The public right of initiative and referendum, however, is not unfettered. Although there is a strong presumption in favor of the electorate’s power of initiative and referendum, the court explained that the presumption is rebuttable upon:

• . . .a definite indication that the Legislature, as part of the exercise of its power to preempt all local legislation in matters of statewide concern, has intended to restrict that right.

Thus, the question before the court was whether the Legislature intended to restrict the right of initiative under the development agreement statute.

Government Code 65867.5: Distinguishing Referendum from Initiatives

The court’s answer turned on the interpretation of Government Code § 65867.5, which addresses the approval of development agreements. That section states in pertinent part:

• (a) A development agreement is a legislative act that shall be approved by ordinance and is subject to referendum. [¶] (b) A development agreement shall not be approved unless the legislative body finds that the provisions of the agreement are consistent with the general plan and any applicable specific plan.

The appellants argued that the phrase “subject to referendum” in section 65867.5, subdivision (a), reflects legislative intent to preclude the power of initiative to adopt development agreements. The respondents countered that the Legislature’s reasons for including only the term referendum was unknown, and that it cannot be inferred that the Legislature intended to preclude initiative by referring only to referendum.

The court agreed with the appellants, finding their interpretation of the statute was more reasonable. First, the court found that there must have been some reason the Legislature specified that a development agreement is “subject to referendum,” while omitting “initiative” and found relevance in the fact that § 65867.5, subdivision (a) specifically states that a development agreement is a “legislative act.” According to the court, the Legislature’s designation of a development agreement as a legislative act, coupled with its decision to reference only referendum, provided textual support for a limitation on initiative that could not be ignored.

The court also found that the reference to “legislative body” in § 65876.5, subdivision (b) also supported its conclusion that the Legislature intended to exclusively delegate the approval of development agreements to the local legislative body.

The Initiative Process Inconsistent with a Negotiated Development Agreement

Finally, the court found that the initiative process is inconsistent with the fundamental concept of a development agreement as a negotiated contract between a local government and a developer, since it does not contemplate negotiation and cannot be changed before adoption. Thus, although the Legislature did not expressly state that adoption of a development agreement by initiative was barred, the court held that there was sufficient evidence to find that was the Legislature’s intent and the court had no problem finding that the development agreement statutory scheme is of statewide concern.

In its conclusion, the court noted that it was sensitive to its duty to guard the right of initiative and to resolve doubts in its favor. But the court found that there was clear evidence that the Legislature intended to exclusively delegate approval of development agreements to governing bodies and to preclude the right of initiative, and the Legislature’s intent controlled.

Conclusion and Implications

Although there is a strong presumption in favor of the electorate’s initiative power, the court held that such power is precluded under the development agreement statute. The court’s determination that developments agreement cannot be approved by initiative will obviously have statewide ramifications and could attract the attention of the California Supreme Court. Absent Supreme Court review or a legislative amendment to the development agreement statute, approval of a development agreement by initiative is not an option for local governments.

The opinion is available here: http://www.courts.ca.gov/opinions/documents/D073451.PDF

(Chris Stiles)