By Michael S. Riback
Because the issue of how the Planning Commission handled the Starbucks hearing and the advice given by staff to the Planning Commission has been of some controversy, I felt it appropriate to provide this discussion as to the Planning Commission's ability to consider economic competition when making land-use decisions.
My consistent opinion has been, and continues to be, that economic competition cannot be considered when making land-use decisions. Jeffrey Schwartz, in a commentary in the Feb. 19 Saratoga News, challenged this opinion, claiming that case law allows the city to consider economic competition and that the city has, in fact, done so in the past.
Mr. Schwartz cites two cases in support of his position. However, a reading of these cases clearly shows that the courts concluded that cities cannot consider economic competition. The court in Ensign Bickford Realty v. City Council of the City of Livermore (1977) states that "[w]here the sole purpose of a zoning ordinance or decision is to regulate or restrict business competition, the regulation is subject to challenge. It is not a proper function of a zoning ordinance to restrict competition or to protect an enterprise which may have been encouraged by a prior zoning classification."
This principle is also present in the other case Mr. Schwartz cited, Van Sicklen v. Browne (1971).
Mr. Schwartz's opposite conclusion may be due to an understandable misreading of language in these cases where the courts discuss the economic effect of land-use decisions. The court in Van Sicklen recognized that "land-use and planning decisions cannot be made in any community without some impact on the economy of the community." But the court concluded:
"We hold that so long as the primary purpose of the zoning ordinance is not to regulate economic competition, but to subserve a valid objective pursuant to a city's police powers, such ordinance is not invalid even though it might have an indirect impact on economic competition."
The term "police powers" refers to the city's ability to regulate to preserve the public's health, safety, convenience or welfare. The facts in Van Sicklen help illustrate the court's point.
In Van Sicklen, the city refused to approve the plaintiff's gas station in part because the neighborhood in which the gas station was to be placed was already adequately served. The court upheld this refusal as a proper exercise of the city's police powers. The court recognized that the consideration of what is referred to as "intensity of land use" was a valid city concern and, with respect to gas stations, related to both health and safety factors. In addition, Government Code section 65850(c) specifically permits cities to regulate intensity of land use. If, in contrast, the city had denied approval because it feared the gas station would adversely compete with already existing gas stations in the area, the court would have ruled differently.
The denial by the city in 1992 of a use permit for a liquor store, in part because two similar establishments already operate in t he Village, was raised. This denial was interpreted to mean that the effect of economic competition on the already existing business was a factor in the denial. This is incorrect. The city was concerned with the intensity of land use with respect to liquor stores in the area. As previously mentioned, Government Code section 65850 specifically allows for this type of consideration. In the resolution discussed by Mr. Schwartz, the city was not denying the permit because it feared the new liquor store would compete with the existing one. It denied the permit, in part, because the public was already adequately served by the existing liquor stores. This is a proper use of its police power.
I realize that this is a subtle legal distinction. But it is a real distinction, and the courts do recognize it. If the city were to ignore this distinction and make land-use decisions based on considerations of economic competition, it potentially would be exposing itself to legal challenge and costly litigation.
Michael S. Riback is city attorney for Saratoga. Copies of this letter were sent to the mayor, City Council and the Planning Commission.
This article appeared in the Saratoga News, March 5, 1997.
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