The use and abuse of the California Environmental Quality Act and the elections laws by special interests such as business competitors and labor unions is a pervasive and problematic feature of the California development process. Although the state legislature has done little or nothing to correct this unfortunate and well-documented reality—and in fact the legislature is sometimes complicit in it, as my partner, Art Coon, and I recently wrote about here—the courts have been more willing to reject such abuses. The First District Court of Appeal did just that in San Bruno Committee for Economic Justice v. City of San Bruno, __ Cal.App.5th __ (Sept. 20, 2017), rebuffing the efforts of a phony special interest group and a hotel and restaurant workers’ union to use the referendum process to thwart a private hotel development that would not employ union workers.

The referendum challenged a project that had been in the planning process since at least 2001, when the City certified an environmental impact report and specific plan that called for development of a hotel and retail development on the former U.S. Navy site. The City bought the site in 2012 and issued an RFP seeking a firm to design, finance, and build the hotel. The City selected the developer of the project in 2013 and approved an exclusive negotiating rights agreement. In 2015, the City approved certain specific plan amendments. And in 2016 the City’s planning commission found the project consistent with the general plan because it would complete the build out of development and fulfill the City’s vision for a mixed-use transit-oriented development in the specific plan area. The development of a hotel would also fulfill a key economic development objective of the specific plan by providing a high quality hotel with meeting and banquet space and generating long-term tax revenues to the City. In addition, given its location at the prominent intersection of El Camino Real and I-380, the project would play a key role as a catalyst for economic development and revitalization on El Camino Real and the nearby transit corridors plan area. Shortly after the planning commission’s general plan consistency determination, the City Council adopted a resolution to enter into a purchase and sale agreement with the selected developer.

The referendum petition was circulated and filed with a sufficient number of signatures to qualify for placement on the ballot. The city attorney determined that the City would not certify the petition so it could be placed on the ballot, however, because the resolution to sell the land to a hotel developer was not a legislative act and thus not a proper subject of a referendum. The referendum proponents then filed a writ petition to compel the city clerk to certify the petition. They argued, in essence, that the City’s adoption of a contract to sell City-owned real property for private development is necessarily a legislative act.

The trial court denied the motion, finding that the purchase and sale agreement was generated in the course of implementing prior legislative decisions regarding the development of the property, rendering the resolution an administrative rather than legislative act.

The Court of Appeal began its analysis with an explanation of key general principles regarding ballot referenda, noting that the courts have long observed that the power of referendum applies only to acts that are legislative in character and that executive or administrative acts are not within the scope of that remedy. Legislative acts, of course, are generally those that declare a public purpose and make provisions for the ways and means of its accomplishment. Administrative acts, on the other hand, are those that are necessary to carry out the legislative policies and purposes already declared by the legislative body. Thus, while the courts have consistently said the “reserved” power of initiative and referendum is to be liberally construed to uphold it whenever reasonable, “it is established beyond dispute that the power of referendum may be invoked only with respect to matters that are strictly legislative in character.”

The Court distinguished cases the referendum proponents relied on, including Hopping v. Council of City of Richmond (addressing whether a city council’s decision to accept an offer of land for a new city hall was subject to referendum), Lindelli v. Town of San Anselmo (addressing whether a contract to provide services to a city was subject to referendum), and Reagan v. City of Sausalito (addressing whether a decision to acquire land for a city park was subject to referendum). The Court reasoned that the City is not acquiring land but selling it to a private developer for a profit, not providing any subsidy to the developer, and the developed property will not house any municipal buildings or serve any municipal function. The Court thus agreed that the City’s adoption of the resolution to sell the property was an administrative act because it implements prior legislative actions that established the manner in which the site would be developed. Those prior actions merely set the stage for the purchase and sale agreement and the failure to challenge those actions does not create the right to referend them now.

San Bruno Committee for Economic Justice is an important new case of first impression that squarely rejects the notion that a public agency’s decision to sell land is automatically a legislative act subject to referendum. Instead, if such action is supported by previously approved legislative policies, the agency is merely using its administrative powers to implement them and the action is not subject to referendum.