Law’s Wording Fuels Feud Over Carlsbad Development Fee

Tales of bureaucratic woe are hardly a rarity in the development community. But James Warmington’s story, many builders agree, is a doozy.

Warmington is an Orange County developer building a subdivision on the gently rolling coastal slopes of southern Carlsbad. In 1983, he purchased the property for $6.85 million from Dwight Spiers, another Orange County developer, and proceeded to meet the array of requirements imposed on builders who wish to plant housing tracts atop oceanfront farmland.

Perhaps the biggest burden was an agricultural subsidy fee of $27,000 per acre that Warmington was required to pay into a fund designed to preserve prime agricultural land elsewhere in Carlsbad. Warmington paid fees to cover the first phase of his 57-acre project, and the bulldozers roared.

In 1984, however, a bill by Assemblyman Bill Bradley (R-Escondido) abolished the state’s fledgling farm subsidy program and mandated the refund of two-thirds of the fees already collected. Most developers viewed the event as a godsend, but not Warmington: An ambiguously worded section of the bill ensured that Spiers--the former owner of the Carlsbad property--received the refund of fees paid by Warmington.

Further, a contract predating the legislation requires that Warmington continue to pay the $27,000 per acre fee in order to complete his 381-home development; the rebate on those fees--which total nearly $1 million--will also go to Spiers.

“This is one of the most fascinating chapters in politics that the Capitol has seen in a long time, and it has had Draconian impacts on my client,” said Norbert Dall, a Sacramento lobbyist for Warmington.

“Basically, Jim Warmington got punished because he didn’t have a lobbyist in Sacramento. There was no one watching the store so the other side came in and raided the cookie jar.”

Today, representatives of Warmington Homes will ask the California Coastal Commission to remedy what they call a cruel injustice and provide the company with an escape from its extraordinary and costly bind.

They are seeking relief from the fees and admission to a new program that permits some Carlsbad developers to build on farmland if they purchase an equal amount of prime agricultural acreage elsewhere in the state’s coastal zone which would be turned over to the state Coastal Conservancy and retained indefinitely for farming. Such a program could cost Warmington substantially less than $27,000 per acre.

The commission’s staff analysts in San Diego are recommending approval of Warmington’s request--the builder’s latest attempt to thwart the onerous fee system, keep the refunds out of Spiers’ hands and get on with development of his project east of Interstate 5 near Poinsettia Lane.

But attorneys representing Spiers’ company, Carlsbad Investors Ltd., are putting up quite a fight. They argue that Warmington is attempting to circumvent both state law and contracts requiring that he pay the fees to block their client from receiving the refunds he rightfully deserves.

“We view this as an attempt by (Warmington Homes) to get the Coastal Commission to reverse the Legislature’s decision as to how those fees should be distributed,” said Roger Grable, an attorney for Carlsbad Investors. “The commission doesn’t have the authority to do that, to substitute their judgment for that of the Legislature. We’ve clearly got the law on our side.”

Roy Gorman, chief counsel for the Coastal Commission in San Francisco, agreed that the panel may not alter state law. But he noted that commissioners are not barred from amending permits and other agreements they have forged with landowners, which is technically what Warmington is requesting.

The face-off before the commission is only the latest chapter in an intriguing and rancorous battle between the two equally tenacious developers, each of whom is described as a prideful, successful Orange County businessman who believes he was wronged by the other.

To many, their feud is nothing but a mildly amusing spitting match between two wealthy builders seeking to best the other. But other observers say the battle--which has included two lawsuits, heavy lobbying and special-interest bills--illustrates the political machinations that have historically characterized coastal development in Carlsbad.

According to attorney Grable, the roots of the dispute date to late 1983, when Spiers invited Warmington to join him in pursuing legislation to abolish the struggling agricultural subsidy program and obtain and split the fee refunds. Believing Warmington endorsed the idea, Spiers deployed lobbyists to find a legislator to introduce a bill that carried out the plan.

When Spiers returned to Warmington with the legislation, however, Warmington rejected the deal, Grable said, “in essence reneging on an agreement.” Warmington maintains that he never supported the idea of pursuing the refunds because “he agreed to pay the fees for the right to build and intended to meet his responsibility,” Dall said.

Spiers, rebuffed and indignant, decided to pursue another tack--a bill that would arrange for refunds exclusively to him. Grable said such an approach was fair because Spiers had initially sold the Carlsbad property at a price “discounted by the precise amount of the agricultural subsidy fees,” which Warmington had agreed to pay. Citing land sales documents, Warmington representatives deny there was any discount.

Unbeknownst to Warmington, lobbyists for Spiers convinced Assemblyman Bradley to work the unusual refund arrangement into his bill gutting the Carlsbad farm subsidy program. The bill passed, and more than $400,000 in fees paid by Warmington was refunded to Spiers.

“We were all stunned,” lobbyist Dall said. “You’ve got to admire the chutzpah of these folks in getting that through. But it’s sad that the lawmaking policies in our society can be put to such use.”

Since the bill passed, Warmington has ceased construction on the half-finished Harbor Pointe subdivision; in order to obtain building permits, the developer must first pay the $27,000 per acre farm subsidy fees, which in turn would be refunded to adversary Spiers.

Meanwhile, Warmington has made numerous efforts to overturn the refund arrangement. Attorneys approached the state Board of Control, challenging Spiers’ right to the money. Dall found a legislator to introduce a bill altering the flow of refunds. A lawsuit has been filed toward the same goal.

But nothing has worked, and now the matter is in the Coastal Commission’s lap.

At today’s hearing in Los Angeles, Warmington representatives will paint the issue as an environmental question, Dall said. He intends to argue that the company’s offer to buy and preserve one acre of agricultural land for each acre developed in Carlsbad benefits coastal resources more than the current fee arrangement.

But coastal resources aside, the commission’s verdict may well mark the end of the developers’ long and bitter feud.