Schreiber v. City of Los Angeles ( 2021 )

Filed 9/28/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
SCOTT SCHREIBER et al., 2d Civil No. B303642
(Super. Ct. No. BS173256)
Plaintiffs and Appellants, (Los Angeles County)
v.
CITY OF LOS ANGELES,
Defendant and Respondent;
KIWI NEMAN et al.,
Real Parties in Interest and
Respondents.
The density bonus law (Gov. Code, § 65915)1 requires
that cities and counties allow increased building density, and
grant concessions and waivers of permit requirements, in
exchange for an applicant’s agreement to dedicate a specified
number of dwelling units to low income or very low income
households. Here we hold that neither the statute nor the Los
1 Undesignated statutory references are to the Government
Code.
Angeles City ordinance implementing it requires the applicant to
provide financial documentation to prove that the requested
concessions will render the development “economically feasible.”
Appellants Scott Schreiber and Jessica Sabbah-Mani
appeal denial of a petition for writ of administrative mandamus
challenging the City of Los Angeles’s approval of a development
project. Appellants contend: (1) the city abused its discretion
when it approved incentives and waivers without obtaining the
required financial documentation, and (2) the city’s approval of
the project was not supported by substantial evidence. We
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Kiwi Neman and 488 San Vicente LLC (Neman)
proposed a mixed-use development in the city of Los Angeles.
Retail space and a residential lobby were planned for the ground
floor and residential units above. Appellants reside in a
single-family home nearby.
Existing zoning requirements would limit the
building to three stories, a height of 45 feet in the front and 33
feet in the back, a total of 40 units, and a maximum floor area of
21,705 square feet (floor area ratio [FAR] of 1.5:1). Neman
initially applied to build 53 units including five very low income
units. The proposed building was 75 feet tall in seven stories,
and 60,388 square feet of floor area (FAR 4.2:1). The proposal
was modified in October 2017 to build 54 units including five very
low income units, five moderate income units, and 59,403 square
feet of floor area (FAR 4.1:1).
The original application included a Financial
Feasibility Analysis prepared by RSG, Inc. (“RSG analysis”). It
included estimated development costs, net operating income, and
2
financial feasibility. It calculated the cost per unit as $1,106,847
without the requested incentives, and $487,857 with the
incentives.
A January 2017 memorandum from the Department
of City Planning to staff and the public discussed recent
amendments to the density law, including Assembly Bill No. 2501
(2015-2016 Reg. Sess.) (Stats. 2016, ch. 758, § 1, eff. Jan. 1, 2017)
(“A.B. 2501”). The memorandum stated: “The ability of a local
jurisdiction to require special studies is eliminated unless they
meet the provisions of state law. [¶] Financial pro-formas and
third party reviews will no longer be required . . . .”2 In response,
Neman advised the city he would “not be moving forward with a
pro forma [for] this project.”
At the City Planning Commission (CPC) hearing, a
city planner stated that as a result of A.B. 2501, “financial pro
formas, or financial analyses can no longer be considered as part
of the density-bonus application.” A commissioner thanked her
for the “[h]elpful clarification.”
Following the hearing, the CPC approved the project
including the requested density bonus. It also approved two “off
menu” incentives (increased floor area and maximum height),
and two waivers (transitional height and rear yard setback
requirements). The CPC found: “The record does not contain
substantial evidence that would allow the City Planning
Commission to make a finding that the requested Off-Menu
waivers and modifications do not result in identifiable and actual
2 Pro forma balance sheets and income statements are
financial projections based on expected revenues and costs.
(Herman & MacLean v. Huddleston (1983) 459 U.S. 375, 378, fn.
3; see § 57606, subd. (a)(4).)
3
cost reduction to provide for affordable housing costs per State
Law.” It further found, “Granting of the off-menu requests would
result in a building design or construction efficiencies that
provide for affordable housing costs. The off-menu requests allow
the developer to expand the building envelope so that additional
affordable units can be constructed . . . . These incentives
support the applicant’s decision to set aside five dwelling units
for Very Low Income households for 55 years as well as provide
an additional five units for Moderate Income households.”
Appellants filed a petition for writ of administrative
mandamus. They alleged the CPC misinterpreted the density
bonus law, and its findings were not supported by the evidence.
(Code Civ. Proc., § 1094.5.) The trial court denied the petition.
DISCUSSION
We independently review questions of statutory
interpretation. (Hartnett v. San Diego County Office of Education
(2017) 18 Cal.App.5th 510, 517.) The density bonus law “shall be
interpreted liberally in favor of producing the maximum number
of total housing units.” (§ 65915, subd. (r).)
In reviewing an administrative determination, the
trial court determines whether the agency “has proceeded
without, or in excess of, jurisdiction; whether there was a fair
trial; and whether there was any prejudicial abuse of discretion.
Abuse of discretion is established if the respondent has not
proceeded in the manner required by law, the order or decision is
not supported by the findings, or the findings are not supported
by the evidence.” (Code Civ. Proc., § 1094.5, subd. (b).) “An
appellate court independently determines whether the agency
prejudicially abused its discretion by failing to proceed in the
manner required by law, such as by failing to comply with
4
required procedures, applying an incorrect legal standard, or
committing some other error of law.” (Pedro v. City of Los
Angeles (2014) 229 Cal.App.4th 87, 99.)
Density bonus law
The density bonus law requires that cities and
counties allow increased building density for development
projects that dedicate at least ten percent of the dwelling units to
low income households, or at least five percent to very low income
households, for a period of 55 years or longer. (§ 65915, subds.
(b), (c)(1)(A).) The amount of density increase is based on the
percentage of low or very low income units. (§ 65915, subd. (f).)
Section 65915 also requires that the city or county grant
incentives or concessions (subds. (d), (k)) and waivers or
reductions of development standards (subds. (e), (o)(1)). As
required by subdivision (a)(1) of section 65915, the city adopted
an ordinance to implement the statute. (Los Angeles Municipal
Code (LAMC), section 12.22.A.25 (“the ordinance”).)
Appellants do not contend that the city erred in
granting the density bonus. The city was required to grant it
because the developer agreed to dedicate the required percentage
of units to affordable housing. (Friends of Lagoon Valley v. City
of Vacaville (2007) 154 Cal.App.4th 807, 825.) Section 65915 does
not require an applicant to provide financial information to
support an application for a density bonus.
Appellants instead contend that section 65915
requires that applicants submit certain financial information to
support a request for incentives and waivers. We conclude that
the city’s ordinance, which requires an applicant to submit
information to show the incentives are needed to make the
project “economically feasible,” conflicts with the statute and is
5
preempted.
Financial requirement for incentives
“Concession” and “incentive” are synonymous in the
statute. (§ 65915, subd. (k).) As defined, they include “[a]
reduction in site development standards or a modification of
zoning code requirements or architectural design requirements
. . . that results in identifiable and actual cost reductions, to
provide for affordable housing costs.” (§ 65915, subd. (k)(1),
italics added.)
The applicant, however, is not required to establish
that cost reductions will result. Instead, “[t]he city . . . shall bear
the burden of proof for the denial of a requested concession or
incentive.” (§ 65915, subd. (d)(4).) Subdivision (d)(1) provides
that the city “shall grant the concession or incentive requested by
the applicant unless the city . . . makes a written finding, based
upon substantial evidence, of any of the following:
“(A) The concession or incentive does not result in
identifiable and actual cost reductions, consistent with
subdivision (k), to provide for affordable housing costs . . . .
“(B) The concession or incentive would have a
specific, adverse impact . . . upon public health and safety or the
physical environment or on any real property that is listed in the
California Register of Historical Resources . . . .
“(C) The concession or incentive would be contrary to
state or federal law.”
The ordinance includes a parallel provision requiring
approval of incentives unless the city finds exception (A) or (B),
above. (LAMC, § 12.22.A.25(g)(2)(i)c.) It provides a “Menu of
Incentives” available to developers. (LAMC, § 12.22.A.25(f).) It
also permits “off-menu” incentives, with a more stringent
6
application process than menu incentives. (LAMC, § 12.22.A.25
(g)(3).)
By requiring the city to grant incentives unless it
makes particular findings, the statute places the burden of proof
on the city to overcome the presumption that incentives will
result in cost reductions. (See Pinnacle Museum Tower Assn. v.
Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223,
238-239 [presumption that covenants and restrictions enforceable
unless unreasonable]; In re Shannon M. (2013) 221 Cal.App.4th
282, 290 [presumption that juvenile jurisdiction shall terminate
unless particular conditions exist].) Accordingly, Neman was not
required to show, and the city was not required to affirmatively
find, that the incentives would actually result in cost reductions.
Waivers
Waivers or reductions of development standards are
provided for in subdivision (e)(1) of section 65915: “In no case
may a city . . . apply any development standard that will have the
effect of physically precluding the construction of a development
meeting the criteria of subdivision (b) at the densities or with the
concessions or incentives permitted by this section.”
“Development standard” is defined as “a site or construction
condition, including, but not limited to, a height limitation, [or] a
setback requirement . . . .” (§ 65915, subd. (o)(1).) The city may
refuse the waiver or reduction only “if the waiver or reduction
would have a specific, adverse impact . . . upon health, safety, or
the physical environment,” would have “an adverse impact” on an
historic resource, or “would be contrary to state or federal law.”
(§ 65915, subd. (e)(1).) Subdivision (e) imposes no financial
criteria for granting a waiver.
7
Financial information requirement
A.B. 2501 amended section 65915 to limit the
documentation that can be required by a local government. It
provides:
“A local government shall not condition the
submission, review, or approval of an application pursuant to this
chapter on the preparation of an additional report or study that is
not otherwise required by state law, including this section. This
subdivision does not prohibit a local government from requiring
an applicant to provide reasonable documentation to establish
eligibility for a requested density bonus, incentives or
concessions, as described in subdivision (d), [or] waivers or
reductions of development standards, as described in subdivision
(e) . . . .” (§ 65915, subd. (a)(2), italics added.)
A.B. 2501 similarly amended subdivision (j)(1) of
section 65915 to provide:
“The granting of a concession or incentive shall not
require or be interpreted, in and of itself, to require a general
plan amendment, local coastal plan amendment, zoning change,
study, or other discretionary approval. For purposes of this
subdivision, ‘study’ does not include reasonable documentation to
establish eligibility for the concession or incentive or to
demonstrate that the incentive or concession meets the definition
set forth in subdivision (k). This provision is declaratory of
existing law.” (Italics added.)
A city or county is not prohibited from requesting or
considering information relevant to cost reductions. Subdivisions
(a)(2) and (j)(1) neither mandate nor prohibit the city from
requiring that the applicant provide “reasonable documentation”
regarding cost reductions. But the city’s ordinance provides that
8
a request for an off-menu incentive “shall include a pro forma or
other documentation to show that the waiver or modification of
any development standard(s) are needed in order to make the
Restricted Affordable Units economically feasible.” (LAMC,
§ 12.22.A.25(g)(3)(i)a, italics added.)
A showing that an incentive is needed to make the
project “economically feasible” relates to the overall economic
viability of the project and is not the same as showing the
incentive will result in “cost reductions.” The city may not
require information that an incentive is necessary to make the
project “economically feasible” because that information does not
“establish eligibility for the concession or incentive or . . .
demonstrate that the incentive or concession meets the definition
set forth in subdivision (k).” (§ 65915, subd. (j)(1).)
The “economically feasible” language in the ordinance
is based on a former version of the statute, which provided: “The
applicant shall show that the waiver or modification is necessary
to make the housing units economically feasible.” (§ 65915,
former subd. (f), italics added.) This requirement was deleted in
2008. (Stats. 2008, ch. 454, § 1; Wollmer v. City of Berkeley (2011)
193 Cal.App.4th 1329, 1346.) “[I]t is clear that one of the effects
of the 2008 amendments is to delete the requirement that an
applicant for a waiver of development standards must show that
the waiver was necessary to render the project economically
feasible.” (Wollmer, at p. 1346.)
A local ordinance is preempted if it conflicts with the
density bonus law by increasing the requirements to obtain its
benefits. (Latinos Unidos Del Valle de Napa y Solano v. County
of Napa (2013) 217 Cal.App.4th 1160, 1169 [voiding ordinance
requiring larger percentage of affordable housing than provided
9
in § 65915].) The ordinance here does so; it conflicts with the
state density bonus law to the extent that it requires an applicant
demonstrate that an incentive is needed to make the project
“economically feasible.” It is therefore preempted by state law.3
Substantial evidence
Appellants contend the CPC’s determination is
invalid because it is not supported by substantial evidence. We
disagree.
We review the entire administrative record to
determine whether substantial evidence supports the trial court’s
decision. (Pasadena Unified School Dist. v. Commission on
Professional Competence (1977) 20 Cal.3d 309, 314; Walnut Acres
Neighborhood Assn. v. City of Los Angeles (2015) 235 Cal.App.4th
1303, 1312-1313 [administrative mandamus by neighbor
challenging zoning variance].) “‘We “‘do not reweigh the evidence;
we indulge all presumptions and resolve all conflicts in favor of
the [agency’s] decision. Its findings come before us “with a strong
presumption as to their correctness and regularity.” [Citation.]’”
[Citation.] When more than one inference can be reasonably
deduced from the facts, we cannot substitute our own deductions
for that of the agency. [Citation.] We may reverse an agency’s
3 Appellants rely in part on a provision that requires the
city to notify applicants whether they have “provided adequate
information for the local government to make a determination as
to [requested] incentives, concessions, or waivers or reductions of
development standards.” (§ 65915, subd. (a)(3)(D)(i)(III).) This
provision does not apply because it was not effective until
January 1, 2019, after the city approved the project. (Stats. 2018,
ch. 937, § 1.3.) Moreover, it does not specify whether financial
data is included as part of the “adequate information” needed to
support a concession or waiver.
10
decision only if, based on the evidence before it, a reasonable
person could not have reached such decision. [Citations.]”’
(Poncio v. Department of Resources Recycling & Recovery (2019)
34 Cal.App.5th 663, 669.)
In administrative mandamus proceedings, “[a]ll or
part of the record of the proceedings before the inferior . . . board
. . . may be filed.” (Code Civ. Proc., § 1094.5, subd. (a).) “The trial
court presumes that an agency’s decision is supported by
substantial evidence; it is the petitioner’s burden to demonstrate
the contrary.” (Wollmer v. City of Berkeley, supra, 193
Cal.App.4th at p. 1338.) Appellants have not met their burden.
The city did not make a finding that the incentives
would not result in cost reductions, and was not required to
substantiate this negative finding with evidence. But even if
substantial evidence regarding cost reductions was required, the
RSG analysis was sufficient for this purpose.
The RSG analysis reviewed cost and other financial
information that supported its conclusion that the incentives
resulted in “identifiable and actual cost reductions.” (§ 65915,
subd. (k)(1).) And an attachment to the application from
Elizabeth Peterson Group, Inc., explained how public health and
safety or historic resources would not be adversely affected. The
trial court properly concluded that the CPC findings were
supported by substantial evidence in light of the whole record.
Appellants challenge RSG’s assumptions as to how
many units would be built without the requested concessions.
But it is not our function to reweigh the evidence. The RSG
analysis constitutes substantial evidence upon which a
reasonable trier of fact could conclude that the incentives would
result in cost savings. (In re I.J. (2013) 56 Cal.4th 766, 773.)
11
The comments at the CPC meeting do not establish
that city staff or the CPC did not consider the RSG analysis.
Moreover, it is not necessary to establish that the CPC relied on
the document. We review the entire administrative record for
substantial evidence, including documents “not directly
introduced or discussed at the administrative hearing nor
specifically referenced in the final statement of decision.”
(Malaga County Water Dist. v. State Water Resources Control Bd.
(2020) 58 Cal.App.5th 447, 480.)
Appellants contend that the RSG analysis did not
contain firsthand information about the developer’s costs or
finances. An expert may rely on hearsay evidence that
“‘provide[s] a reasonable basis for the particular opinion offered.’”
(Howard Entertainment, Inc. v. Kudrow (2012) 208 Cal.App.4th
1102, 1115.) The fact that RSG was a paid consultant did not
preclude the court from considering its conclusions. (San
Franciscans Upholding the Downtown Plan v. City & County of
San Francisco (2002) 102 Cal.App.4th 656, 684.)
Appellants’ reliance on McMillan v. American
General Finance Corp. (1976) 60 Cal.App.3d 175, 181, fn. 6, and
Porterville Citizens for Responsible Hillside Development v. City
of Porterville (2007) 157 Cal.App.4th 885, 894, is misplaced. In
those cases, the trial courts improperly considered evidence that
was not before the involved city councils. (McMillan, at p. 186;
Porterville, at p. 893.) But the RSG evaluation was part of
Neman’s application to the city and was part of the record before
the CPC.
Finally, appellants contend that the CPC’s order is
deficient because it did not “set forth findings to bridge the
analytic gap between the raw evidence and ultimate decision or
12
order . . . [b]y focusing . . . upon the relationships between
evidence and findings and between findings and ultimate action.”
(Topanga Assn. for a Scenic Community v. County of Los Angeles
(1974) 11 Cal.3d 506, 515.) But the CPC was required to grant
the incentives unless it made a finding that they did not result in
cost reductions. It did not make such a finding. It was not
required to make an affirmative finding that the incentives would
result in cost reductions, or to cite evidence to establish a fact
presumed to be true.
DISPOSITION
The judgment is affirmed. Respondents shall recover
their costs on appeal.
CERTIFIED FOR PUBLICATION.
TANGEMAN, J.
We concur:
YEGAN, Acting P. J.
PERREN, J.
13
Mitchell L. Beckloff, Judge
Superior Court County of Los Angeles
______________________________
Wolf, Rifkin, Shapiro, Schulman & Rabkin, Marc E.
Rohatiner and Johnny White for Plaintiffs and Appellants.
Best Best & Krieger, Alisha Winterswyk, John Cotti;
Michael N. Feuer, City Attorney, Terry P. Kaufmann Macias,
Assistant City Attorney, Amy Brothers and Yongdan Li, Deputy
City Attorneys, for Defendant and Respondent City of Los
Angeles.
Glaser Weil Fink Howard Avchen & Shapiro, Elisa L.
Paster and Elizabeth G. Chilton for Real Parties in Interest and
Respondents Kiwi Neman and 488 San Vicente LLC.