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High Court Upholds County, City Fees on Hotel Conversions
Los Angeles Times
March 5, 2002
Maura Dolan
Times Staff Writer
SAN FRANCISCO -- Property owners who want
to convert residential hotels to hotels for tourists can be
required to provide replacement housing for the poor or money
to build it, the California Supreme Court ruled Monday.
The 4-3 ruling allows California
cities and counties to pass regulations that
require groups of owners to mitigate the impact caused by
changes to their property. Hundreds of cities and counties,
including Los Angeles,
now impose such development fees.
In an opinion written by Justice Kathryn Mickle Werdegar, the court upheld
mitigation fees enacted by city councils and other legislative bodies if
they are applied generally and without discrimination to a class of
property owners. "It is the detrimental effects of a change in the
use of property that motivates the regulation," Werdegar wrote.
"A use not in itself noxious or harmful, such as the operation of a
tourist hotel, may nonetheless call for mitigation."
The state high court reviewed a San Francisco law that requires owners of
residential hotels to pay a fee to a special city real estate fund to
convert to a tourist hotel or to set aside guest rooms for low-income
residents.
Supporters likened San Francisco's law to the fees that many cities
require developers to pay to cover the costs associated with growth.
Opponents, by contrast, said San Francisco's law was an attempt to hold
hotel owners' property for ransom.
Thomas and Robert Field, owners of the San Remo Hotel in San Francisco,
paid a $567,000 conversion fee under protest to San Francisco when they
turned their 62-room building into an all-tourist inn several years ago.
The owners then sued San Francisco, contending that the law was
unconstitutional.
The court majority said the law affected 500 residential hotels in the
city, a sizable class, and was intended not to raise general revenues but
to ensure a continuing supply of low-income housing.
"A burden placed broadly and nondiscriminatorily on changes in
property's use is not the equivalent of an arbitrary decision to hold an
individual's property for ransom," Werdegar wrote.
Justice Marvin Baxter, joined by Justice Ming W. Chin, partially
dissented from the ruling. They differed with much of the
majority's analysis and argued that the case should have been
sent back to a lower court to determine whether
San Francisco 's law complied
with legal requirements.
Justice Janice Rogers Brown, in a withering dissent, contended
that the San Francisco
ordinance represented a "taking" of
private property by the government.
"Theft is theft even when the government approves of the
thievery," Brown wrote. "Turning a democracy into a kleptocracy
does not enhance the stature of the thieves; it only diminishes the
legitimacy of the government."
Brown complained that the decision means that property rights
in California
are now "hollow."
"The right to express one's individuality and essential human dignity
through the free use of property is just as important as the right to do
so through speech, the press or the free exercise of religion," she
wrote.
Monday's ruling ensures that local and state governments can continue to
use development impact fees widely, said San Francisco City Atty. Dennis
Herrera.
"These fees provide a crucial source of funding for infrastructure,
such as streets, water and schools, and are used to reduce the
environmental impacts of real estate projects."
San Francisco Deputy City Atty. Andrew W. Schwartz, who argued
before the state high court, said property owners who want
to challenge mitigation fees such as
San Francisco's now will have to prove
that they are arbitrary.
Andrew Zacks, an attorney for the hotel, complained that the
ruling in San Remo Hotel vs. City and
County of San Francisco,
SO91757, makes it "virtually impossible for property
owners to win."
He said the hotel owners will take their case to federal district court to
argue that the law violates the U.S. Constitution.
Pedro Echeverria, chief assistant city attorney for
Los Angeles, said the court appears
to have given cities flexibility to address the impact of
development. He said Los Angeles
as a traffic mitigation fee imposed on development
that leads to increased traffic. Monday's ruling gives the
city a "greater degree of comfort."
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