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Wednesday, November 07, 2012

City Council to Explore Its Commercial Property Regulation Options

• Legal Memorandum Outlines Constraints on Municipal Efforts to Control Shopping Center Tenancy


Although the issue appeared to some to have gone into a dormant state, the bid by a local group urging the Malibu City Council to consider legislation to regulate commercial lease holdings at two local shopping centers returns to center stage this month.
A city planning staff report on possible ordinances indicates that ongoing research in response to a March council directive to prepare a commercial diversification ordinance sought by the Preserve Malibu effort for the Civic Center and Trancas Canyon commercial centers encountered questions “regarding regulating and enforcing an ordinance, and [possible need] for an amendment to the city’s Local Coastal Program.”
In light of the research findings and related legal analysis by the city attorney’s office, planning staff will ask the city council at its Nov. 13 meeting whether the department should continue preparation of either a diversification or a formula business ordinance to regulate tenant composition at the two centers and consider possible application citywide.
The draft commercial diversification ordinance proposes restricting shopping centers larger than 10,000 square feet and more than 10 tenants to specific allowable space allocation percentages in the categories of food and service; hard goods; soft goods; retail service other than food; and chain or formula businesses with more than 10 locations.
The draft ordinance would exempt existing chains, banks, movie theaters and anchor tenants with provisions for phase-out. A use diversification permit would be required for new commercial use that is above the ordinance’s space percentages.
Council support for more stringent anti-chain controls could take the form of the draft formula retail ordinance, which would attempt to preclude businesses with more than 10 locations from leasing space in the city’s commercial center and possibly citywide.
Expected to play a major role in the council members’ deliberation on how to direct planning staff to proceed on the issue that has pitted Preserve Malibu against local commercial property owners is a 19-page memo from City Attorney Christi Hogin that provides the first detailed look at the complicated issue of government regulation of commercial business holdings since contention emerged two years ago.
The thrust of the memo is that before the city council can direct staff on the matter, it needs to address “whether there are existing city goals that are not being met that the council believes may be advanced by a diversification or formula business regulation.”
Hogin asked, “[Is the council’s goal] independent-business protectionism or aesthetics.” Does the council think that “Malibu’s commercial centers have a ‘cohesive character’ that needs to be protected?” The legal analysis states that it is important to address these elements of the review process before determining a course of city action.
The memorandum notes that the law firm representing Malibu is not aware of any federal or state cases on diversification so “the city does not enjoy the certainty that comes with a legally tested law.” Similarly, the memo adds there are “no cases that uphold a formula business ordinance like the one in draft.”
Hogin indicated, “To the extent that the city seeks primarily to discourage franchises and encourage independent businesses through this ordinance, the city wades into murky waters.”
The memo cites a Florida case in which an ordinance that tried to use “preserving distinctive community character” as its rationale was struck down in court when it was determined the “true purpose was protecting particular local businesses.”
In another ruling, a formula ordinance failed to pass muster because the court found that the city did not demonstrate that it had “any small town character to preserve.”
The issues of subjectivity and vagueness also will have to be acknowledged by the Malibu City Council because, according to the memo, “fair notice is required and an ordinance is an unconstitutional delegation of power if the regulation allows unfettered discretion to implement it because it does not establish discernible standards that reflect the purpose of the ordinance.”
Hogin said, “The primary purpose of the ordinance cannot be to protect local businesses from the invasion of large-scale chain stores that do business all over the country.”
Seen in this content, the city attorney concluded, “The city cannot create a “discriminatory effect…where formula businesses have been driven away from the city due to the burdensome nature of the ordinance.”

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