On August 5, 2011, the Sixth District Court of Appeal in Arcadia Development Co. v. City of Morgan Hill (2011) __Cal.App.4th__, affirmed a judgment denying the property owner’s challenge to a city ordinance restricting residential development. The appellate court held the ordinance was valid because the city had conceivable rational reasons for the restriction, even if the ordinance only applied to one property within the city’s urban service area. Therefore, the city had not violated the developer’s right to equal protection and had not engaged in discriminatory spot zoning.

In 1986, Arcadia Development requested the annexation of 80 acres (Arcadia property) into the City of Morgan Hill’s urban service area. After an environmental impact report was prepared in 1989, the Arcadia property was added to the city’s urban service area on March 19, 1990. Before Arcadia received housing allotments for all of the 80 acres, voters passed Measure P and imposed a density restriction on properties added to the urban service area between March 1, 1990 and December 8, 1990. As a result, the Arcadia property was limited to four homes on the remaining 69-acre parcel that had not received housing allotments before the density restriction ordinance went into effect. In comparison, the 69-acre parcel would have been eligible to compete for 345 homes under the city’s general plan zoning designation if Measure P had not passed. Of the other two properties added to the city’s urban service area between March 1 and December 8 of 1990, one was industrially zoned and the other was fully developed. As the only residentially developable property added within the relevant nine month period, the Arcadia property alone was affected by the density restriction ordinance.

Before the density restriction ordinance expired in 2010, it was extended to 2020 by Measure C, which voters approved on April 17, 2004. Arcadia filed a lawsuit alleging the extension of the density restriction ordinance was illegal spot zoning and violated its right to equal protection under the Fourteenth Amendment. The trial court found the action was barred by the statute of limitations. The Sixth District reversed that ruling in 2008. The matter returned to the trial court, which held that the ordinance was valid because the city had a rational basis for limiting development on the property. Arcadia appealed.

The appellate court first established the standard of review for equal protection claims, stating that the plaintiff must show the difference in treatment was not based on any legitimate purposes. Finding Arcadia’s argument to be a facial challenge instead of an as-applied challenge to the ordinance, the court further explained that the plaintiff had to show the statute would be unconstitutional in all or most cases. The court also acknowledged that the ordinance singled out the Arcadia property for differential treatment, and proceeded to consider not only the text of the ordinance but also its application to the particular circumstances.

Next, the court addressed Arcadia’s contention that the density restriction ordinance was discriminatory spot zoning. The court cited Hamer v. Town of Ross (1963) 59 Cal.2d 776, which involved a 2.2-acre parcel that was surrounded by property with less restrictive zoning designations. In contrast, the Arcadia property was much larger and was bordered on two sides by rural agricultural land. The court concluded the extension of the density restriction ordinance did not create or perpetuate illegal spot zoning.

Finally, the court evaluated whether there was any rational reason for the restriction imposed on the Arcadia property. The court found the city had two legitimate goals: (1) to minimize the burden on city resources by discouraging urban sprawl, and (2) to maintain the City’s rural, aesthetic character. The court rejected Arcadia’s argument that the restriction of development on its property was unfair since the city allowed other developments on parcels of similar size and distance from the city’s central core. Following precedent, the court held that the city was entitled to regulate development and make land use decisions at its own discretion. The court also rejected Arcadia’s argument that Measure C could hypothetically allow the city to add new non-infill parcels to which the Density Restriction would not apply, finding this scenario to be unlikely and dependent on too many unknown factors.