Developer Learns the Hard Way That Lobbying Pays Off

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 a Costa Mesa developer building a subdivision on the gently rolling coastal slopes of southern Carlsbad in San Diego County. In 1983, he bought the property for $6.85 million from Dwight Spiers, an Irvine 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-San Marcos) 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 $600,000--also will 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.”

On Thursday, the California Coastal Commission, meeting in Los Angeles, denied Warmington’s request to escape the unusual requirement that he pay fees that would be funneled to Spiers.

Representatives of Warmington Homes asked the commission to relieve them of the fees and instead include the company in a new program that permits property owners in Carlsbad to develop agricultural acreage if they purchase an equal amount of farmland elsewhere in the state coastal zone.

But commissioners, reluctant to inject themselves into a politically charged dispute fraught with legal questions, rejected the request on a 9-3 vote. Explaining their opposition, several members of the state panel argued that the matter deserved a hearing before the Carlsbad City Council in advance of any action by the commission.

“Who wants to be the bird in this badminton game?” Commissioner Donald McInnis said. “Not Carlsbad, most likely. Nonetheless, we should demand that this issue go back to the city and before the local people. At this stage, that’s where it properly belongs.”

Commissioners Steve MacElvaine, Thomas McMurray Jr. and Dorill Wright voted in favor of Warmington’s request on grounds that the proposal was consistent with the state Coastal Act and would be of greater benefit to coastal resources than the fee payments currently required of the developer.

Warmington representatives expressed disappointment at the commission’s verdict but vowed to continue their fight against Spiers and his company, Carlsbad Investors Ltd., before a judge. A lawsuit challenging Spiers’ right to the fees has been filed in San Diego Superior Court.

“We suggested this program because we’d rather see our money go toward the preservation of agricultural land than into Dwight Spiers’ pocket,” said Stephen Maloney, a vice president for Western Properties Service Corp., Warmington’s financial partner in the 381-home Carlsbad project. “Too bad the commission doesn’t feel the same way.”

Spiers, meanwhile, said the commission’s action reflected “the facts and equities of the situation” and added that he hoped Thursday’s hearing had “put an end to this thing, for the benefit of all parties involved.”

The face-off before the commission was 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.

Roots of the Dispute

According to Roger Grable, an attorney for Carlsbad Investors, 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,” 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.”