Before we get to the California Supreme Court's opinion in Sterling Park, L.P. v. City of Palo Alto, No. 204771 (Oct, 17, 2013), here's what we think is the money quote:
For these reasons, we believe Fogarty and Williams correctly interpreted [Cal. Cov't Code] section 66020. The statute governs conditions on development a local agency imposes that divest the developer of money or a possessory interest in property, but not restrictions on the manner in which a developer may use its property. [Cal. Gov. Code] Section 66499.37 governs the latter restrictions.
Slip op. at 17.
The court backed into defining "exaction," since the case involved the choice of which statute of limitations applied to the plaintiff's challenge to the city's requirement that developers who want to build (in this case, a 96 unit condominium project) must either set aside a certain percentage of units for sale at below-market rates, or make a cash payment to the city. The plaintiff went ahead with the development, but challenged the requirements under section 66020, a statute that permits a property owner to protest an "exaction" even though it has moved forward with its development. Generally, under California law, if a developer goes forward, it forfeits or waives any challenges to development conditions imposed, or must challenge the action within 90 days.
Thus, the issue the court resolved was whether the city's below-market rate housing program was merely a "land use regulation" as the city asserted, or was an "exaction." If the latter, the plaintiff's action was timely. If the former, a different statute of limitations governed and the challenge was filed too late.
As noted above, the court came down on the side of "exaction," holding that the legislature meant to include demands for both money and property as conditions of developent within section 66020's ambit. The court also relied on the practicalities:
The procedure established in section 66020, which permits a developer to pay or otherwise ensure performance of the exactions, and then challenge the exactions while proceeding with the project, makes sense regarding monetary exactions. By the nature of things, some conditions a local entity might impose on a developer, like a limit on the number of units (see Fogarty, supra, 148 Cal.App.4th 537), cannot be challenged while the project is being built. Obviously, one cannot build a project now and litigate later how many units the project can contain — or how large each unit can be, or the validity of other use restrictions a local entity might impose. But the validity of monetary exactions, or requirements that the developer later set aside a certain number of units to be sold below market value, can be litigated while the project is being built. In the former situation — where the nature of the project must be decided before construction — it makes sense to have tight time limits to minimize the delay. In the latter situation — where the project can be built while litigating the validity of fees or other exactions — it makes sense to allow payment under protest followed by a challenge and somewhat less stringent time limits.
Slip op. at 17.
More, includiing some thoughts about the court's distinction between "exactions" and restrictions on the use of property, and how this may impact the post-Koontz case now pending in the California Supreme Court, fter a chance to read the opinion in detail.
Sterling Park, L.P. v. City of Palo Alto, No. 204771 (Cal. Oct. 17, 2013)