«JOURNAL OF LAW, ECONOMICS & POLICY VOLUME 10 SPRING 2014 NUMBER 2 EDITORIAL BOARD 2013-2014 Steve Dunn Editor-in-Chief Crystal Yi Meagan Dziura Sarah ...»
The Recitals of Chula Vista Ordinance No. 3080 delineate in general terms the underlying concerns of the councilmembers. These concerns included: neighborhood decline, attractive public nuisance, lower property values, and reluctant purchasers, all of which were alleged to be the result of abandoned residences.124 At a city council meeting, city building officials and the Code Enforcement Manager emphasized defaults and foreclosures that led to bank-owned homes, a lack of maintenance, and a difficulty in identifying such homes.125 Such concerns led the director of planning and building to recommend to the city council that it adopt an “Abandoned Residential Property Registration Program as a means of ensuring that residential neighborhoods are spared the negative impacts associated with abandoned residential properties.”126 The “Discussion” portion of the recommendation points to events that occurred in Chula Vista that must have reinforced the focus on lenders and trustees, but does not provide supportive data. According to the Planning and Building Department, new homes constructed during 2001 to 2005 were purchased with “risky financing arrangements offered by lenders specializing in sub-prime loans.”127 In the effort to control the perceived future threat, the city council was convinced that lenders, not borrowers, should register and maintain the vulnerable properties, and voted on August 7, 2007, to enact Ordinance No.
125 See generally BD. OF APPEALS AND ADVISORS OF CHULA VISTA, CAL., MINUTES OF A REGULAR MEETING (June 11, 2007); see also note 140 (regarding the number of bank-owned homes during the years 2006 to 2008).
126 CITY OF CHULA VISTA, CITY COUNCIL AGENDA STATEMENT 15-1 (July 17, 2007) (emphasis added). The phrase suggests the negative impacts had not yet occurred.
127 Id. at 15-2. As discussed in Part II of this article, lenders created “risky financing arrangements” to satisfy the pressure to meet quotas of loans for low-income and minority borrowers imposed by the federal government, the Federal Reserve Bank, Fannie Mae, and community organizations.
MORGENSON & ROSNER, supra note 2, at 115–17; SOWELL, supra note 1, at 42–44; see also, Zywicki & Adamson, supra note 39, at 12, 25 (“But subprime lending has placed many people on the road to homeownership, and only a minority of subprime loans could be considered ‘predatory’.... But foreclosure and delinquency do not necessarily indicate the presence of unaffordable loans, predatory loans, rising interest rates, or borrowers under duress.”).
128 See CHULA VISTA, CAL., ORD. 3080 § 1 (2007). The CVAPO went into effect sixty days later and was amended in 2010.
crime data to support their concerns about blight. In addition, the Recitals, meeting minutes, and the city council agenda statement do not supply empirical data to support the findings and conclusions made by the city councilmembers. Without data, the councilmembers’ conclusions were based primarily on general observations.129 The testimony of city staff connected “risky financing arrangements” and foreclosures with the potential for blight in general terms, which is an insufficient basis for an ordinance that seeks to prevent blight.130 When faced with a high volume of foreclosures that might lead to blight, a city ordinance ought to adhere to the same standard as an ordinance that adopts a redevelopment plan to eradicate blight because it is imperative that local governing bodies not enact legislation based on speculation. This speculative regulation significantly impacts contractual obligations and private property interests, just as condemnation impacts the landowners of the area targeted for redevelopment. When local authorities act on speculation, a community is worse off because such decision making ultimately diminishes the importance of legitimate private agreements and private property interests. The scrutiny of such speculative regulation is justifiably heightened so that the local governing body must first make the factual finding. Reliance upon speculation turns the regulation into an illegitimate governmental function.
If blight conditions did exist, they were not as severe as that spoken of in the state statute.131 There may have been particular lots and parcels that were in decline, but the 2008 written testimony of Doug Leeper, Code Enforcement Manager for City of Chula Vista, before a Congressional Subcommittee estimated that about 2100 homes were vacant in May 2008132 in the second largest municipality in San Diego County with a current population of nearly 250,000133 and a population of 173,556 in 2000.134 Other than 129 See infra notes 132, 135–37. It is one thing if the City Council were to rely on a comprehensive study of the existence and consequences of “risky financing arrangements” that actually led to foreclosures and blight, but it is altogether different to rely solely upon observations made by city code enforcement officers who make their rounds but do not inquire into the details of the homeowners’ purchase financing.
130 Beach-Courchesne v. City of Diamond Bar, 80 Cal. App. 4th 388, 398–400 (2000); see also Zywicki & Adamson, supra note 39, at 12–35.
131 See supra notes 115–17 and accompanying text.
[T]rue blight is expressed by the kind of dire inner-city slum conditions described in the Bunker Hill case: unacceptable living conditions of 82 percent; unacceptable building conditions of 76 percent; crime rate of double the city’s average; arrest rate of eight times the city’s average; fire rate of nine times the city’s average; and the cost of city services more than seven times the cost of tax revenues.
Beach-Courchesne, 80 Cal. App. 4th at 407 n.11 (emphasis in original).
132 Testimony of D. Leeper, supra note 15, at 104.
133 See ABOUT THE CITY OF CHULA VISTA, CITY OF CHULA VISTA, http://www.chulavistaca.gov/About/ (last visited Sept. 14, 2013).
134 POPULATION CHANGE 1990–2000 INCORPORATED CITIES BY COUNTY, CAL. DEP’T OF FIN.
DEMOGRAPHIC RESEARCH UNIT,2014] NATURE ABHORS A VACUUM AND SO DO LOCAL GOVERNMENTS 369 one specific instance,135 Mr. Leeper spoke about blight only in general terms136 and he acknowledged an improvement in the negative impacts.137 Newspaper accounts during the relevant time period do not indicate there being widespread decline or that blight actually existed.138 If blight did not exist in the municipality, it is an illegitimate use of police power to enact regulation that interferes with private property rights such as security lien interests. Under the appearance of preventing blight, the CVAPO forces private parties to undertake certain action contrary to private agreements in a way the parties would not otherwise consider.139 Such a regulation would prematurely alter property interests today in the hope that blight does not occur in the future. If preemptive regulation that seeks to prevent blight before it starts were permitted, then constitutional validity is reduced to any language that merely provides a tenuous relationship between the controlling mandate and any problem that could possibly occur. Local government would not need to carry the burden of compiling and presenting the empirical data to support new regulations. Such a standard expands police power at the expense of the landowner’s or lender’s legitimate private property rights. The nature of government officials is to expand their power and control in order to lower the standard, justifying even earlier and more premature governmental intervention in other private contractual relationships to achieve other desired goals. But history proves such goals usually conflict with private property rights.
The city would undoubtedly contend that its police power permits it to prevent blight before it is created. In other words, the CVAPO is justifiable because it either prohibits conduct that could lead to blight or mandates conduct to prevent blight. But such an argument assumes that blight necessarily follows from “risky financial arrangements” and foreclosures. Foreclosures did increase in the lead up to the passage of the CVAPO in 2007 and over the next year,140 but did blight actually occur? Property values did http://www.dof.ca.gov/research/demographic/state_census_data_center/productsservices/documents/table1.xls.
135 Testimony of D. Leeper, supra note 15, at 97.
136 Id. at 100, 102–03. Mr. Leeper did not cite any studies or statistics compiled by his department (other than those mentioned in his testimony and supra text accompanying note 132) or the local police department.
137 Id. at 105.
138 See Emmet Pierce, Blight-prevention law emerges as a national model; Chula Vista forces lenders to maintain foreclosures, SAN DIEGO UNION-TRIB. (Oct. 12, 2008), http://legacy.utsandiego.com/news/metro/20081012-9999-1n12blight.html (the article makes no reference to actual blight, but does refer to the ordinance as “blight-prevention”); see also Lori Weisberg, Homeowners associations countywide are hit by foreclosure fallout and feeling the pinch of... Unpaid dues, SAN DIEGO UNION-TRIB. (Nov. 1, 2007), http://www.utsandiego.com/uniontrib/20071101/news_1n1dues.html.
139 See infra discussion at notes 172–73.
140 RealtyTrac is an entity that compiles data regarding the number of notices of default, notices of trustee sale, and lenders’ “real estate owned” (REO) properties. REALTYTRAC, INC., FORECLOSURE
decrease,141 but were the physical and economic conditions “so prevalent and so substantial” that “a serious physical and economic burden on the community” was created?142 No, the city would likely respond, because the enactment and enforcement of the CVAPO prevented such consequences.
But this begs the question whether such preemptive measures by local government are permissible in the first place.143 Without the empirical data, we do not know if blight existed at the time the CVAPO was enacted.
“[F]indings of blight must be supported by substantial evidence in the administrative record,”144 otherwise the enactment is not a legitimate governmental function.145 In this instance, the record is inadequate.
Consequently, the CVAPO does not satisfy the requirement that it be based on a finding that statutory blight exists within the city. Thus, if the CVAPO were classified as one that concerns blight, it would be invalidated if challenged on this ground. Moreover, the rule of law is undermined because the local government has expanded its police power to control private contracts and interfere with property rights without the justification of findings based on substantial empirical data that blight actually exists.
3. The Validity of the CVAPO as a Public Nuisance Regulation
The CVAPO can be classified as a public nuisance regulation because of its emphasis on the eradication of nuisances that negatively impact the property and its value, as well as that of the surrounding neighborhood. As a charter city, Chula Vista has some latitude in promulgating regulations so long as the regulations reasonably relate to a legitimate objective that protects the public health, safety, morals, and welfare within its jurisdiction.146 In the context of nuisances, a court will determine whether the regulation is ACTIVITY REPORT FOR SAN DIEGO COUNTY 2005 (2ND QTR.)–2009 (1ST QTR.) (electronic spreadsheet compiled by RealtyTrac and licensed to author in August 2012) (on file with author). For 2006, its data states there were 1262 notices of default in the City of Chula Vista and of those, 33 (or 2.6%) became REO properties. Id. At the end of 2007—after the CVAPO was enacted in July 2007—there were 3,704 notices of default, of which 599 (or 16%) became REO properties. Id. In 2008, there were 4,381 notices of default and 2,598 (or 59.3%) became REO properties. Id.
141 SOWELL, supra note 1, at 58–60.
142 CAL. HEALTH & SAFETY CODE § 33030(b)(1) (West 2011).
143 Such an argument is analogous to the contention that government costs have been reduced because there are no more auto accidents after government regulation made private ownership of autos illegal and confiscated all autos. It is still necessary to ask if such a regulation is constitutional. The means by which government seeks to achieve its intended objective is not justified merely by the achievement itself.
144 Beach–Courchesne v. City of Diamond Bar, 80 Cal. App. 4th 388, 400 (2000).
145 E E. Bay Mun. Util. Dist. v. Richmond Redevelopment Agency, 93 Cal. App. 3d 346, 356 (1979).
146 Graham v. Kingwell, 218 Cal. 658, 659 (1933); Thain v. City of Palo Alto, 207 Cal. App. 2d
an appropriate expression of a local government’s police power as it asks “(1) whether the object of the ordinance is one for which the police power may be properly invoked and, if so, (2) whether the ordinance bears a reasonable and substantial relation to the object sought to be attained.”147 The courts recognize a presumption in favor of an ordinance’s validity “if any rational ground exists for its enactment.”148 However, an ordinance will be held invalid if it is “palpably unreasonable, arbitrary or capricious, having no tendency to promote the public welfare, safety, morals, or general welfare.”149 When the findings of a local legislative body are fairly debatable, courts will not attack the findings and the ordinance will be upheld.150 However, where “the physical facts show that there has been an unreasonable, oppressive, or unwarranted interference with property rights in the exercise of the police power,” the courts will set aside a legislative body’s decisions “as to matters of opinion and policy.”151
a. A Public Nuisance Hybrid Regulation