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The Almighty Tax Revenue

April 21, 2002

The city of Cypress' turf battle over a vacant lot in the shadow of the Los Alamitos Race Course underscores the unduly strong influence that municipal pocketbooks have on development in Orange County. Whether it's a Costco being built on the lot in Cypress or the newly approved Home Depot planned in San Juan Capistrano, cash-strapped local governments are assigning too much weight to projects that promise to drive additional sales tax receipts.

This isn't a new issue. The nonprofit Public Policy Institute of California three years ago asked officials in 300 local governments to name the biggest influences on land development. Sales tax revenue topped the list for these cash-strapped municipalities. It's hard for cities to defend zoning decisions when angry residents and competing developers can point to the local government's addiction to new sales tax receipts. Disgruntled residents in five California communities last month used the ballot box to circumvent city planning processes and close the doors on Ikea, Home Depot and other retailers.

The only point of agreement in Cypress is that something should be built at the corner of Katella Avenue and Walker Street. The 18-acre sea of asphalt is interrupted only by the occasional weed patch and an abandoned snack bar that once catered to swap-meet bargain hunters. Cottonwood Christian Center in 1999 paid $13 million for the land it envisions as home to a complex that would replace its cramped building in a Los Alamitos industrial park. The city, with an eager eye on potential sales tax revenue, wants to turn the corner lot over to a developer with ties to Costco or another big retailer.

City officials, the church and racetrack owner Edward C. Allred for months had been talking about a land swap that would give the city its retail development and shift the proposed church to adjacent land that Allred owns. Negotiations unfortunately broke down. The city is signaling its intent to use eminent domain to take the parcel, which is in a redevelopment district. The church is suing the city under a federal law that places strict limits on government's ability to stop religious building projects.

Cypress shouldn't be standing in the way of Cottonwood. The city has two options. It could process the church's application and clear the way for construction. The city spent months negotiating with the church on a possible land swap that would have resulted in a retail development being built on the contested corner and a church complex rising next door. So the city will be hard-pressed to say that a church doesn't belong in this neighborhood.

Or the city could take a deep breath and return to the table in the hope of reaching agreement on the proposed land swap. A negotiated settlement would give the city its sales tax infusion and the church would get a new home and spare both sides a lengthy and costly court fight.

There's no easy solution at hand for the zoning disputes that will continue to surface in Orange County when retail developments and automobile dealerships are proposed. Consider the 131,00-square-foot Home Depot that recently was approved near downtown San Juan Capistrano. Opponents argue that the store will create traffic jams, pollute the air and block ocean breezes--in short, do everything but accelerate global warming. Whether or not the criticisms are justified, the city's clear desire to bolster sales tax receipts casts an unwanted shadow on the planning process. What cities approve should be consistent with a neighborhood's character and good planning principles.

Though not an immediate solution for Orange County, a bill that would modify how local sales tax revenues are distributed in the Sacramento area, AB 680, focuses the kind of attention that is needed on the problem. Sales tax revenue is important, but it must not override sound planning and zoning at the local level.

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