Bldg. Indus. Ass'n-Bay Area v. City of Oakland

Citation: 289 F. Supp. 3d 1056Docket: Case No. 15–cv–03392–VC

Court: District Court, N.D. California; February 4, 2018; Federal District Court

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The City of Oakland's motion to dismiss the Building Industry Association-Bay Area's challenge to its art funding ordinance is granted with prejudice. Oakland's ordinance, effective July 2017, mandates that developers of multifamily projects with over twenty units allocate 0.5% of development costs for art displays or contribute to a public art fund. Commercial developers must either install art valued at 1% of their costs or pay a fee to the fund. While the ordinance generally applies to all qualifying projects, exceptions exist—such as for affordable housing projects that might be economically unfeasible if forced to comply. The Association argues that the ordinance violates the Fifth Amendment’s Takings Clause and the First Amendment’s free speech protections. 

In analyzing the takings claim, the court notes that the exactions doctrine, as established in Supreme Court cases like Nollan and Dolan, applies to discretionary actions regarding individual properties. The Association's argument does not align with this interpretation since the ordinance is a broadly applicable regulation rather than an ad hoc condition imposed on specific projects. The relevant legal framework for assessing such regulations is the Penn Central regulatory takings test, which emphasizes the broader legislative intent rather than individual property exactions. Thus, the court finds the ordinance constitutionally valid.

The Association references Levin v. City and County of San Francisco, where Judge Breyer applied the exactions doctrine to an ordinance mandating property owners to compensate evicted tenants to mitigate displacement impacts amid rising rental prices. The Ninth Circuit's decision in McClung stated that Nollan and Dolan do not pertain to generally applicable development conditions. However, Breyer contended that this was contradicted by the Supreme Court's ruling in Koontz, which clarified that the exactions doctrine pertains to monetary demands but did not extend the doctrine to facial challenges of generally applicable land-use regulations. Koontz emphasized a direct link between governmental demands and specific parcels of land, highlighting concerns over government misuse of land-use discretion potentially diminishing property value unjustifiably. The exactions doctrine historically protects against such abuses concerning individual properties. Although arguments exist for broadening the doctrine to encompass facial challenges, such a change should originate from the Supreme Court rather than a district court. The ordinance in question, affecting various nonresidential and multifamily developments, must be assessed under the regulatory takings framework. The Association has not successfully articulated a viable facial regulatory takings claim, as the ordinance's fee, capped at one percent of development costs and applicable only under certain conditions, does not constitute a significant loss of value. This aligns with precedents set in Keystone Bituminous Coal Association v. DeBenedictis and Penn Central.

The Association contends that the ordinance infringes upon its members' First Amendment rights by mandating developers to engage in speech through the purchase and display of artwork. The court finds it hard to accept Oakland's claim that the ordinance does not implicate the First Amendment, as the purchase and display of art is a protected form of expression. However, the court also challenges the Association's assertion that the ordinance is inherently invalid due to compelled speech, noting that many laws compel a degree of speech without triggering heightened scrutiny. 

Judicial scrutiny is heightened when laws compel specific political or ideological messages, as they disrupt open discourse. In contrast, if a speech requirement is minimal and does not significantly deter other speech, scrutiny is less stringent. Oakland's ordinance does not raise significant concerns; it does not compel a specific viewpoint since developers can choose the art they display. Furthermore, compliance can occur without altering building designs, as art can be placed in nearby public spaces. 

The ordinance's compulsion is minimal because developers may opt to pay a fee to the City instead of displaying art. The Association cannot reasonably argue against a local government's ability to allocate funds for public art. Thus, the ordinance is reviewed under the First Amendment only to ensure its alignment with legitimate governmental objectives. The City has identified goals such as enhancing aesthetics and increasing property values, both of which are deemed reasonable outcomes of the ordinance. Additionally, the ordinance addresses potential aesthetic detriments of development. Consequently, the court concludes that the ordinance does not violate the First Amendment.