Commentary: The Cost of Lawsuits Is More Than You Think

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Yesterday the Vanguard reported on yet another lawsuit against a project in Davis.  Since 2011, we have seen lawsuits filed against the water project, against a conditional use permit (CUP) for a therapist office, against the Hotel Conference Center, against Nishi, against the Hyatt House, against the Marriott, against Trackside and now against Nishi again.

A few of them have settled rather than allow litigation to hold up the projects, but in none of them has a court ruled against the city on the merits – and, in fact, on the water project, the CUP, and Nishi there have been rulings against the litigants.

There were early mistakes by the city, such as settling on the water project which allowed the litigant to claim victory and collect a settlement amount.  That seemed to only encourage more lawsuits, and for the most part, whether it has been Hyatt House, Trackside or Nishi, the city’s procedure is not to settle but to allow the litigation take its course.

However, there is a cost to these suits – beyond the attorney fees and beyond the delay in these projects.

The comments by Robb Davis illustrated this on Tuesday night.  He pointed out that Lincoln40 as a Transit Priority Project was exempt from the need to do an EIR.  The city however, in an abundance of caution, went the extra mile to do an EIR on the project, hoping to avoid litigation.

In our view, litigation on the Lincoln40 project will be difficult if not impossible and we do not expect a lawsuit.  The problem that the litigants would face is twofold.  First, the fact that the project was Transit Priority would normally exempt the project, therefore any EIR is actually by itself above and beyond the legal requirements – and thus it would be difficult to argue that the EIR was insufficient if the EIR was not even required.

The second problem is that a court has already ruled on the issue of the traffic study and impacts at Richards and Olive.  As such, any attempt to litigate might be vulnerable to summary judgments and perhaps the implementation of attorney fees.

But there is a cost to this litigation, as the mayor pointed out on Tuesday.

“I will acknowledge a little bit of frustration as I read (the EIR), realizing that we didn’t have to do it,” he said.  “We chose to make a disclosure when the law of the state of California would not require it.”

The mayor explained, “I think that gets to this council’s willingness to be transparent and staff’s desire to be transparent.  I think those are important qualities but they do add costs that mean that we can’t do other things.”

He said, “I think we need to consider the burden that we place on any project and what it means.  It bothered me a little bit over the weekend.

“As a disclosure document it’s something that we can be proud of,” he added.  “But does it really serve our community when we’re not required to – and it adds costs that otherwise could be going into a few extra beds.”

To flesh out the mayor’s comment here, one of the mistakes made early on was that they went to a mitigated negative declaration for the Hotel Conference Center.  It was a bad mistake that invited litigation on CEQA grounds and that is precisely what happened.

The project ended up settling for a nominal amount, but financing issues either independent of or compounded by the litigation forced the Hotel Conference Center to be greatly reduced in scope and thus of benefit to the community.

The lesson learned from that mistake is to go the EIR route, as it makes it far more difficult for opponents to prevail in court.  That is the lesson of Nishi.  The litigants against Nishi continued the suit even after Nishi was defeated at the polls and they ultimately lost the battle in court, which may pave the way for the new project as well as Lincoln40.

But, instead of relying on state law for environmental review in Lincoln40, the applicants at the advice of the city went the EIR route to ensure against a lawsuit. We can estimate that the costs there well exceeded half a million.

That has a cost.  There were two areas where I think the council would have liked more from the applicant.  One was on the overcrossing.  Ultimately, the council pushed the applicant to go from $869,000 in direct contributions up to a million.  But that means the city is going to end up paying just under $2 million for their share of the project – most of that coming from development impact fees and thus not costing general fund money that can and should go elsewhere.

But if the developer didn’t have to pay for the EIR, maybe they could have taken on another half to a full million extra dollars for the overcrossing.

Or perhaps affordable housing should be the priority.  There were complaints that the project only went to 12 percent on affordable housing.  That meant it fell short of the 15 percent goal.

The council ultimately decided to stick with the 12 percent and keep the very low income units, rather than going broader at 15 percent but shallower in terms of benefits.

But without the EIR, maybe they could have gone to 100 affordable beds.  That is 29 students every year that will not have the opportunity for the reduced rate of affordable units, because someone might have sued the city and the city went the EIR route when they didn’t have to.

Certain litigants used to like to brag about how much they saved the ratepayers on water, but how much are they now hurting the students who are struggling to afford the cost of housing while they get their education?

I think Robb Davis is right, transparency is something we seek, but at some point we have to ask, at what cost?

—David M. Greenwald reporting



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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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49 thoughts on “Commentary: The Cost of Lawsuits Is More Than You Think”

  1. Tia Will

    I will acknowledge a little bit of frustration as I read (the EIR), realizing that we didn’t have to do it,”

    What I think this shows is the complex nature of civic decision making and the thoroughness of our current mayor in his decision making processes. While I have sometimes disagreed with his ultimate decision making, I have never doubted that the current mayor is acting as an honest broker when trying to deal with the needs and wants of members of our community with conflicting priorities. I have confidence that the incoming mayor will prove to use the same deliberative, open minded processes in his decision making.

    I hope that in selecting our new council members, we will choose those who have an open mind and will consider the positions of all members of the community, not merely accede to the wishes of one constituency whose interests happen to coincide with their own. We certainly have no lack of choices for the two positions to be filled.

    1. David Greenwald Post author

      “What I think this shows is the complex nature of civic decision making”

      And what I think it shows is that the cost of a few people filing a lawsuit is that there are tradeoffs and the community and vulnerable people don’t get some things that they would otherwise get. And we need to decide if those tradeoffs are worthit.

      1. Tia Will

        we need to decide if those tradeoffs are worthit.”

        “Worth it” is a subjective assessment. Some law suits doubtless have merit, while others may not. Unfortunately, we sometimes don’t know until it has been fully adjudicated. Maybe we should not be making this decision on the basis of our own philosophies.

        1. Don Shor

          In some cases we can just look at who the plaintiffs are and make a reasonable judgment about whether it is likely to have merit, or is merely a tactic.

        2. Mark West

           “Some law suits doubtless have merit”

          Perhaps, though as David points out, the recent history suggests otherwise. What we do know, however, is that all of these suits are an added expense for the residents of Davis and increase the cost of living here. When you bring a lawsuit against the City the impact is to sue all of your taxpaying neighbors as well since we will be paying the bills.

          These suits also add to the total expected cost of proposed developments, both in terms of the total financing required and in the time to get the project built. These can become overriding factors in determining a reasonable return on investment and result in some good projects never even being proposed as a consequence. Those that are built, will require greater revenues as well as design tradeoffs to compensate for these added expenses, ultimately resulting in higher monthly rents for the tenants and driving up the cost of living in Davis.

        3. Ron

          “When you bring a lawsuit against the City the impact is to sue all of your taxpaying neighbors as well since we will be paying the bills.”

          Developers are responsible for the legal costs, not the city.

          Ultimately, one might ask why the city approves developments that they already know will likely result in lawsuits. In general, perhaps one more sign that some are simply not willing to accept that Davis is a slow-growth community.

        4. Mark West

          “Developers are responsible for the legal costs, not the city.”

          And we all pay more for the extra cost of development. The money comes from the end users ultimately.

          “Ultimately, one might ask why the city approves developments that they already know will likely result in lawsuits. In general, perhaps one more sign that some are simply not willing to accept that Davis is a slow-growth community.”

          Or perhaps a sign that the self-serving fanatics who bring lawsuits are not acting in the best interests of the City or its residents.

  2. Ron

    ” . . . but financing issues either independent of or compounded by the litigation forced the Hotel Conference Center to be greatly reduced in scope and thus of benefit to the community.”

    Key words – “independent of”.  Entirely different meaning than “compounded by”.

    The latter phrase appears to be pure speculation. These two phrases do not belong in the same sentence as “proof” of anything.

    1. David Greenwald Post author

      “The latter phrase appears to be pure speculation. ”

      False as written. There is a speculative element in it, but it has a factual basis. Also point out, speculation is permissible in a commentary and it’s a side point, not the main point of the article.

  3. Ron

    “But if the developer didn’t have to pay for the EIR, maybe they could have taken on another half to a full million extra dollars for the overcrossing.”

    Maybe they could have “anyway”.

    As a side note, the grant to build it is not in place, and is not guaranteed. It may be years into the future, if/when the overpass is actually built. (However, it’s virtually guaranteed that Lincoln40 will be built soon.)

    Interesting idea presented, that EIR’s serve “no useful purpose” – other than to increase costs. Good to know that traffic and other impacts apparently do not have to be considered, for large-scale developments.

    1. David Greenwald Post author

      “Maybe they could have “anyway”.”

      Nope. And more to the point, even if they could, that would mean without the added cost of the EIR, they ALWAYS would be able to do more.

      1. Ron

        It certainly doesn’t mean that they WOULD do more.

        Just to clarify – you think that EIR’s are a waste of money? And, you think that doing one prevents lawsuits? (If so, I’m pretty sure you’re wrong – e.g., regarding lawsuits.)

    2. Tia Will

      Ron

      Maybe they could have “anyway”.

      This is a major problem because only the developer has access to what “pencils out” or they “could do”. The city staff, city council and citizens are never privy to the actual numbers behind what the developer could and could not do. It seems fine to some of our city council to simply accept the developers word for it while holding other members of the community to a higher standard.

      1. Ron

        Exactly, Tia.  And sometimes, the city disputes the consultants they hire to create an independent fiscal analysis, as was the case with Nishi 1.0. “Fortunately”, the city has done away with the process entirely, for Nishi 2.0.

        Other times, the city proceeds to enact interim ordinances (e.g., regarding Affordable housing) without even waiting for a report from an external analyst that’s already been hired and is due to deliver an analysis, shortly.

  4. Ron

    “Certain litigants used to like to brag about how much they saved the ratepayers on water, but how much are they now hurting the students who are struggling to afford the cost of housing while they get their education?”

    “They” are not hurting the students at all (and may be saving them – and all of us, costs related to water).  Not sure that I would use the term “bragging”.

      1. Ron

        Who told you that?

        How do you know what developers can “afford” to provide?

        Do you think that developers’ cost savings are always passed on to end-users (e.g., renters)?

        1. David Greenwald Post author

          That’s how the math works out. Look, you’re arguing the wrong point – the amount they can afford is the unknown. It’s basically a zero sum game. Whatever they spend on thing a is something can’t spend on thing be. So regardless of what they can afford, reducing costs on EIR means they have more money elsewhere.

  5. Ron

    What’s really scary is the state’s efforts to “cram in” developments throughout California by exempting them from certain requirements such as EIRs (and/or, actually “forcing” cities to accept these developments).

    There’s yet another state effort (SB 827) to essentially override local zoning requirements, initiated by the same guy (Weiner, from San Francisco) who has already been involved in similar efforts.  It’s causing a lot of concern in communities throughout the state.

    Local control is under threat, by folks who just can’t accept limitations to growth/development.

    Personally, I’m looking forward to the next “housing crash”, when the “statewide housing shortage” will mysteriously disappear.

      1. Ron

        Forcing cities to accept whatever the state decides – not such a “good idea”. (That’s essentially what SB 827 would do.)

        This is causing concern in cities throughout California, including cities that are considered to be “green” (e.g., Berkeley).

    1. John Hobbs

      “Personally, I’m looking forward to the next “housing crash”, when the “statewide housing shortage” will mysteriously disappear.”

      Care to explain for those of us in the real world?

      1. Ron

        Do you think you can ever make a comment without including an insult?

        Housing couldn’t even be sold, during the housing crash.  There were thousands of unoccupied dwellings.  What happened to those who used to live in them, and why weren’t they clamoring for more to be built at that time?

        1. John Hobbs

          Yes, of course, housing couldn’t be sold during the crash. No one (except speculators) could afford to buy, the stock of new houses, plus the flood of foreclosures was unprecedented, the outrageous actions of big banks like Wells Fargo, HSBC, Deutche Bank and others caused families to lose their life savings and builders to go bankrupt. That stock of old housing is apparently gone. Zillow estimates 12% fewer houses on the market than last year and not much building on the horizon. Since 2009, California’s population has grown by about 2.5 million people.

          When an chronically ill-informed, intentionally disingenuous  and anonymous poster, like you makes an outrageous and totally unsupported statement like “Personally, I’m looking forward to the next “housing crash”, when the “statewide housing shortage” will mysteriously disappear.”  expect to be questioned.

        1. Ron

          “When an chronically ill-informed, intentionally disingenuous  and anonymous poster, like you . . .”

          Somehow, comments like that are continually allowed on the Vanguard, it seems.

        2. John Hobbs

          I think that he is being intentionally obtuse. Frankly, it’s behavior I’d expect from another anonymous poster, but I don’t want to stir up that whole “other’s motivations” nonsense.

        3. John Hobbs

          “When an chronically ill-informed, intentionally disingenuous  and anonymous poster, like you . . .”

          “Somehow, comments like that are continually allowed on the Vanguard, it seems.”

          The truth is my only defense.

           

      1. Ron

        Yeah – just one EIR (for multiple housing projects, on campus), unless there’s significant changes it seems. Seems like a pretty cost-effective way to build multiple projects.

  6. Ron

    Interestingly enough, David neglects to note that local concerns may often result in better developments (e.g., more Affordable housing, greater contributions toward infrastructure – such as bicycle overpasses, more equitable impact fees for the city, etc.).  (Perhaps even smaller victories, such as avoiding dislocation of local owls – which has a quaint Davis “ring” to it.)

    1. David Greenwald Post author

      The point here is that the tradeoff in this case was more spent on EIR, less spent elsewhere. You can decide whether that’s a good thing or a bad thing. I’ve weighed in on my view of it.

        1. Ron

          And, perhaps more importantly, do you view EIRs simply as a waste of money?  (You already know that they don’t prevent lawsuits. In fact, the “findings” of an EIR are often the target of lawsuits.)

          Seems to me that you’ve often referred to the traffic study (cited in the Lincoln40 EIR) as “proof” that there’d be minimal impacts at Olive/Richards. (In other words, it was actually “useful” regarding your argument in that case.)

          Perhaps studies and EIRs are something that’s actually needed, to determine and disclose impacts, and make better decisions.

          1. David Greenwald Post author

            I think doing an EIR for an apartment complex, for a roadway that has already been studied, and was legally exempt, was not the best use of resources. I think doing an EIR for major peripheral projects are necessary expenses. But if your choice is MND and get sued or EIR, then I do EIR.

        2. Ron

          I think doing an EIR for an apartment complex, for a roadway that has already been studied, and was legally exempt, was not the best use of resources.

          EIR’s consider more than a particular roadway.  And, there likely isn’t much cost to “reuse” an existing study.

          Again, the bigger concern is that the state is now apparently exempting these types of developments.

  7. David Greenwald Post author

    Ron: “How do you know what developers can “afford” to provide?”

    I would suggest you take a look at page 708 to 709 of the Nishi staff report, it has the economic analysis of the Lincoln40 project and I think it illustrates that the city has at least a workable back of the envelop calculation for costs.  Staff also has an idea for things like investors, relative cost differentials, and other things to be able to evaluate things.

    The developer here was willing to take on another $130K or so for the overpass, but that I think pushed them pretty close to not getting enough ROI for their investors.

  8. Ron

    Below is a link regarding SB 827, which is opposed by the League of CA Cities.  (I wonder if Davis is one of the cities that would oppose it?)

    “Specifically, SB 827 would undermine locally adopted General Plans, Housing Elements (which are certified by the Department of Housing and Community Development), and Sustainable Community Strategies (SCS). SB 827 allows private for-profit housing developers and transit agencies to determine housing densities, parking requirements, and design review standards within one-half mile of a “major transit stop” or along a “high-quality transit corridor” which could be miles away from an actual bus stop.

    http://www.lbreport.com/news/jan18/sb827c.htm

    There’s lots of articles on the Internet regarding the concern being created by this proposed bill.

        1. David Greenwald Post author

          Pretty sure half the (bleap) I look up for you, which has been considerable, you could find on your own as well. That wasn’t my point however.

        2. Ron

          Not sure about that, as I post a lot of links on here.  (With the notable exception of links to the new, local online publication that I now understand are “not allowed”.)

          But, my main point is that there’s lots of articles regarding SB 827.  I recall that Weiner is the same guy who’s behind some of the recently-passed housing bills. All, or most of these bills seem like something that you’d support. (Not me.)

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