California Court of Appeal Affirms California Coastal Commission’s Charge of $5.3 Million In-Lieu Mitigation Fee as a Condition of Issuing Seawall Construction Permit to Condominium Complex Homeowners

In Ocean Harbor House Homeowners Association v. California Coastal Commission, (— Cal.Rptr.3d —, 2008 WL 2152686, Cal.App. 6 Dist., May 23, 2008), a California Court of Appeal rejected a homeowner association’s challenge to the California Coastal Commission’s (“Commission”) requirement that the homeowners pay a multi-million dollar fee, to mitigate the loss of an acre of beach, as a condition of granting the homeowners a permit to construct a seawall to protect their property.


Ocean Harbor House is a 40-year-old, 172-unit, beachfront condominium complex in the City of Monterey (“City”). Because for many years the complex has been threatened by storms, high water levels, and shoreline erosion, Ocean Harbor’s homeowners’ association (“Homeowners”) applied to the City and the Commission for permits to build a 585-foot protective seawall. An environmental impact report found the seawall would result in the loss of an acre of beach over the next 50 years, breaking the continuity of a two-mile stretch of beach and reducing recreational use. City granted a permit conditioned on alternate lateral beach access. The Commission granted a permit conditioned on Homeowners payment of an “in lieu mitigation fee” based on the economic recreational value of the land, of $5.3 million discounted to present value and payable over five years, to be used to buy public beach property in another area of Monterey Bay.

Prior to the Commission hearing on the matter, Commission staff had issued a report notifying Homeowners that the Commission would consider the mitigation fee as a permit condition. The report detailed three ways the fee could be determined: based on the value of lost sand, loss of real estate value, or loss of recreational value, each of which took a different perspective on the nature of the loss of the beach. The Commission staff had recommended that the loss of real estate measure be used, which would result in a fee of about $1 million. As noted, however, the Commission chose to use the recreational value method.

Homeowners filed a superior court action seeking a writ of administrative mandate to block the Commission’s action. When the trial court denied the writ, Homeowners appealed.


On appeal, Homeowners made four basic arguments: (1) the fee was an unconstitutional taking of property without due process; (2) the Commission lacked statutory authority to impose a fee; (3) the decision to impose the fee was not supported by substantial evidence; and (4) the Commission’s decision to impose the higher increased fee amount was arbitrary and unreasonable. The Court of Appeal rejected all four arguments.

As to Homeowners’ claim of unconstitutionality, the court relied on two U.S. Supreme Court cases, Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), and a California Supreme Court case, Ehrlich v. City of Culver City, 12 Cal. 4th 854 (1996), to evaluate (1) whether an “essential nexus” existed between the Commission’s permit condition and a legitimate state interest, and (2) whether the condition imposed by the Commission had “rough proportionality” to the projected impact of granting the permit. While no “precise mathematical calculation” was required, the court said, the Commission must “make some sort of individualized determination” that the condition was “related both in nature and extent to the impact” of the proposed project, i.e., the seawall. The court found the Commission met both tests in imposing the in-lieu mitigation fee.

Clearly, the state of California has an interest in protecting and maintaining its beaches as recreational resources. There also was no dispute that the proposed seawall would cause erosion that would eventually eliminate a large portion of the beach – an “unavoidable impact” that there was no feasible way to directly mitigate. The Commission’s imposition of a fee thus had a nexus – i.e., a logical connection – to the loss of the recreational resource, the court stated. The Commission also engaged in an exhaustive analysis of the economic impact of losing the beach, including a calculation of average daily, per-person beach-related expenditures that the state stood to lose, and a study of litigation concerning an oil tanker spill off Huntington Beach in which the jury awarded damages based on loss of recreational use of a portion of beach. By taking all these factors into account and arriving at a dollar-value for loss of recreational use, the Commission arrived at a mitigation fee that was roughly proportional to the impact of the seawall on recreational use and therefore constitutionally valid, the court said.

The court also rejected Homeowners’ claim that the Commission’s decision was not supported by substantial evidence. The Commission’s reliance on the Huntington Beach study was appropriate because it utilized an approach — called “benefit transfer”– specifically approved by EPA Guidelines for evaluating the recreational value of spoiled beaches, the court said. The Commission’s use of the average number of visitors to an acre of beach generally also was appropriate, even if few people actually used the beach near the complex, the court said, because the Commission could reasonably view the entire stretch of beach as a single recreational resource whose total usage was evenly distributed over its entire length and breadth. Homeowners’ evidence, on the other hand, largely ignored the recreational value estimate of beach loss.

Finally, the court found that the Commission had statutory authority to impose the fee as a condition of permit issuance, and that the Commission’s decision was neither arbitrary nor capricious. Although § 30235 of the California Coastal Act (Pub. Res. Code §§ 30000 et seq.) specifically allows seawalls if needed to protect existing structures, the court said the statute is not exclusive and does not preempt statutes requiring the Commission to consider a number of other factors in determining whether to grant coastal development permits – such as compliance with public access and recreational policies and protection of environmentally sensitive habitats. The Coastal Act grants the Commission broad discretion to adopt measures designed to mitigate all significant impacts the construction of a seawall may have, the court said. The court found the Commission acted within its authority in imposing the permit conditions and that the trial court acted correctly in refusing to block the agency’s determination.

Therefore, the appeals court affirmed the trial court decision.