Appendix D — Kelly v. Tahoe Regional Planning Agency

Case No. 18325

Dept. No. I

IN THE NINTH JUDICIAL DISTRICT COURT

OF THE STATE OF NEVADA

IN AND FOR THE COUNTY OF DOUGLAS

WILLIAM CODY KELLY, TRUSTEE

Under Trust Dated December 12, 1962

Plaintiff,

VS.

TAHOE REGIONAL PLANNING AGENCY, etal.

Defendant.

FINDINGS OF FACT

CONCLUSIONS OF LAW AND JUDGMENT

INTRODUCTION:

This matter came on for trial starting on the Sth day of

February, 1990, and was completed on the 6th day of March,

1990. The Plaintiff was represented by Daniel R. Walsh,

Esq., and Jon Yaple, Esq. The Defendant Tahoe Regional

Planning Agency was represented by Gary A. Owen, Esq.,

and J. Thomas Susich, Esq., of the firm of Crowell, Susich,

Owen & Tackes, Ltd. The Defendant State of California was

represented by Richard Skinner, Esq., Deputy Attorney

General for the State of California. The Defendant State of

Nevada was represented by Marta Adams, Esq., Deputy

Attorney General for the State of Nevada. The court consid-

ered the extensive testimony presented at trial, the numerous

documents and other items of evidence admitted and the

briefs and arguments of counsel, and thus being fully advised

in the premises hereby enters its Findings of Fact, Conclu-

sions of Law and Judgment as follows:

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FINDINGS OF FACT FOR PARTS |

AND II OF THE COURT’S DECISION:

1. In 1963 William Cody Kelly [Kelly] heard about the

studies of the Fieischmann Foundation toward creating an

interest in regional planning at Lake Tahoe and was aware at

that time of the discussion of perhaps creating an interstate

agency to address problems that were occurring at the Lake.

2. The William Cody Kelly Trust [the Trust] acquired 44

acres of property adjacent to Lake Tahoe in Douglas County,

Nevada, from the heirs of Sara Hamilton Fleischmann in

September of 1966 for $500,000. [The Kelly property will

be referred to as “Uppaway” from this point forward].

3. Uppaway was originally acquired to serve as a per-

sonal residence for Kelly, however prior to acquisition Kelly

explored its development potential with a real estate

brokerage firm. Kelly was advised that the property’s

ultimate value after development would be between $500,000

and $1,000,000. Kelly wanted to make sure that, when

spending a sum of $500,000.00 for a residence, he could

recover his investment in the property. If he could not sell

the undeveloped land with existing- residence to another

person for $500,000.00, a means to recoup his investment

would be through subdividing the land. Planking Area

Statement No. 059, applicable to Uppaway, allowed single-

family residential development at a density of one residential

unit per acre.

4. At the time of Kelly’s purchase of the 44-acre parcel,

there existed on it the Fleischmann Mansion or “main

house”, comprising lot 19 of the present subdivision. The

mansion was an object of Kelly’s desire for a residence prior

to his purchase of the land.

5. Kelly moved into the mansion in May of 1966 under a

four-month lease-option to purchase. Kelly lived in the

residence with his family from 1966 until 1984. He contin-

ued to maintain a residence in the guest house on lot 17, but

at the current time he lives in Ohio. Apart from the

> 2.

Fleischmann Mansion, when Kelly purchased the 44-acre

parcel it also contained a caretaker’s residence (lot 7) and the

guest house on lot 17.

6. The Tahoe Regional Planning Agency [hereinafter

“TRPA”] was formed by the States of California and Nevada

and the United States of America through a bistate compact

in 1969. The 1969 Compact found a need, “to maintain an

equilibrium between the region’s natural endowment and its

man-made environment, to preserve the scenic beauty and

recreational opportunities of the region .. .” and to establish

“an areawide planning agency with power to adopt and

enforce a regional plan of resource conservation and orderly

development... .”

7. Under the 1969 Compact, TRPA enacted a land use

regulatory scheme requiring that local governments issue

permits for projects in accordance with TRPA’s regional

standards. In doing so, the local governments were intended

to utilize their own procedures but be bound by the substan-

tive regional standards enacted by TRPA. The scheme also

required TRPA to review permits for major developments

and variances. TRPA’s authority to approve or deny a

permit, however, was only fully exercised to the extent the

TRPA Governing Board could muster a dual-majority vote

under art. III(g) of the 1969 Compact. In other words, the

TRPA couid not act without an agreement on action by a

majority of both states’ delegations to the Governing Board.

8. Kelly first attempted to subdivide Uppaway in 1974.

Kelly submitted plans and maps to TRPA, approved by

Douglas County, which depicted a Planned Unit Develop-

ment [PUD] consisting of approximately 39 lots [“lots”

refers to a 2,500 square foot building envelopes within the

PUD] to be constructed in three phases. The property not

contained within the Lots is common property within the

PUD. The proposal was presented to the governing board of

TRPA as a “major development” and received the following

vote:

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Five California Delegates Against

Two Nevada Delegates Against

Two Nevada Delegates For

One Nevada Delegate Absent

9. TRPA maintained, in an action before the Federal

District Court for the District of Nevada, that this vote

amounted to a disapproval of the PUD. The Court disagreed

as reflected in an order entered on October 24, 1975 holding

that under Article VI(k) of the 1969 Compact the action of

TRPA amounted to “no action” and that the subdivision was

“deemed approved” under the “dual majority rule”.

10. In July of 1977 Kelly created Uppaway Development

Company, a Nevada Corporation [UDC], and had the trust

convey 28 of the 39 lots to it while retaining ownership of

the remaining 11 lots. Kelly was president of UDC from its

creation until he resigned in 1984. He was also a member of

the board of directors until his resignation as president in

1984. The corporation was set up by Kelly upon advise of

counsel. Kelly gradually transferred UDC’s shares to his

children and grandchildren, as part of his estate planning.

11. The eleven lots, which the trust retained, were the

following:

A. The Hilltop Lots known as lots 33 through 39. All

of these Hilltop Lots lie within phase three of the PUD

B. Lot 7, the caretaker’s home near the entrance

C. Lot 17, the existing guest house, for which Kelly

was asking the sum of $195,000.00 in 1989.

D. Lot 19, the Fleischmann Mansion, which later sold

for $1.1 million.

E. Lot 32, a shoreline lot and foundation which was late

sold for $522,500.00.

12. Phases one and two of the PUD were substantially

completed and most lots within those phases were sold.

-D 5-

13. Kelly has derived substantial economic benefit from

the development of Uppaway Estates of which the Hilltop

Lots are a part.

14. In 1980 the TRPA Compact was amended by the

Nevada and California Legislatures and the United States

Congress. The amended compact deleted the dual majority

rule and mandated that TRPA adopt environmental thresh-

olds in order to protect Lake Tahoe.

15. On August 25, 1981 TRPA Ordinance 81-5 went into

effect implementing the Lake Tahoe Regional Water Quality

(208) Management Plan. Under the terms of this ordinance a

planning team was appointed to evaluate all subdivisions

within the Nevada portion of the Lake Tahoe Basin. This

team was required to inspect all Nevada subdivisions and

rate them for purposes of determining their compliance with

the plan.

16. Under the then existing procedures case by case

review of building lots and approval of building permits

could be conducted only within subdivisions which had been

rated as adequate or potentially adequate under TRPA

Ordinance 81-5.

17. Uppaway was evaluated and it was determined that

phases one and two were potentially adequate. Phase three

was rated as being in need of further consideration because

the subdivision improvements as to phase three had not yet

been constructed.

18. On October 29, 1981 Kelly was specifically notified

that the Hilltop portion of the PUD had been rated as in need

of further consideration. He was advised of the method for

appeal of the determination.

19. Kelly was notified once again of the phase three

evaluation in a letter dated January 21, 1982 and once again

was specifically advised of the appeal procedure. These

notifications advised Kelly that he could not proceed with

case by case review of the Hilltop lots until phase three

received a rating of adequate or potentially adequate.

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20. Sometime during the Fali of 1981, Robert Lahmann,

an employee of Mr. Kelly, contacted TRPA with proposed

modifications to the Hilltop. Mr. Lahmann proposed moving

various lots, eliminating some lots and converting the rail

access system [funicular] to the Hilltop into a roadway.

Similar proposals had been make by Kelly through his

counsel as early as the late 1970’s.

21. Mr. Lahmann’s proposal was reviewed and he was

advised by letter dated December 23, 1981 that the proposal

would have to be submitted in the form of an application to

modify the Uppaway map and improvement plans.

22. In 1982 TRPA adopted its Environmental Threshold

Carrying Capacities as mandated by the 1980 compact.

Included in those thresholds were standards for water

quality, both in Lake Tahoe and in its feeder streams, and for

soil conservation, including the amount of impervious

surface which could be created without undue stress upon the

environment.

23. A meeting was conducted on June 4, 1982, in the

offices of Governing Board Chairman Bennie Ferrari con-

cerning the proposed changes submitted by Mr. Lahmann.

Mr. Kelly was represented at the meeting by attorneys

William T. O. Aird and Paul Hogan of the law offices of

Daniel Walsh. Also present at the meeting were Gary Owen,

TRPA’s attorney, and Gordon Barrett, a TRPA employee.

24. During this meeting Mr. Kelly’s representatives

argued for the changes. Kelly was most concerned that the

changes not be viewed as “substantial” in order to avoid

having to have the matter reconsidered by the TRPA Govern-

ing Board.

25. It was agreed at the meeting that Kelly’s proposed

changes, including the elimination of Lot 35, would not be

considered “substantial” by TRPA and that Kelly could

proceed without submitting the change to the Governing

Board.

7-

26. Shortly after the meeting Kelly informed TRPA that

he wished to eliminate lot 39 rather than lot 35. This change

was agreed to by TRPA in a letter dated June 23, 1982 from

Barrett to Walsh.

27. On July 22, 1982 Mr. Walsh sent a letter to TRPA

memorializing the agreement regarding the changes. This

letter was signed by Mr. Barrett and Mr. Ferrari. The letter

provided that Kelly would have to follow the normal case by

case review procedure before building permits could be

approved.

28. On July 27, 1982 Kelly submitted applications for

case by case review Concerning Lots, 33, 34, 35, 36 37 and

38. No appeal concerning phase three’s rating of “in need of

further consideration” was filed.

29. The case by case review office had numerous applica-

tions before it during the Fall of 1982. In January of 1983

Mr. Walsh was notified by TRPA that on site inspection of

the lots would have to be delayed due to the heavy snow

which occurred that year. On February 9, 1983 Mr. Walsh

acknowledged the snow problem in a letter to TRPA.

30. In July of 1983 Mr. Walsh sent a letter to Louis R

Doescher, TRPA’s attorney, complaining that he thought that

phase three had been rated as adequate under the subdivision

review procedure outline in Ordinance 81-5., Mr. Walsh felt

that by allowing subdivision improvements to phase three to

be constructed, TRPA was admitting that it was adequate

under the ordinance. Ordinance 81-5 provides that a rating of

adequate or potentially adequate can be given only after the

subdivision improvements have been constructed and

inspected.

31. TRPA continued to attempt to complete the case by

case review of the lots during the Summer of 1983. On July

21, 1983, TRPA offered to work with Kelly to attempt to

have the subdivision inspected during the Summer of 1983 in

order to try to gain a potentially adequate rating.

-_D 8-

32. On August 26, 1983 the Governing Board of the

TRPA adopted a moratorium preventing further evaluation of

case by case applications until adoption of an Amended

Regional Plan mandated by the 1980 amended compact. This

action was based upon the advice of counsel and concern that

continued approvals by TRPA prior to adoption of the

amended plan would be illegal as being in violation of the

compact and would place the property owners themselves in

potential jeopardy.

33. TRPA advised Kelly that it would attempt to immedi-

ately complete processing of the Hilltop case by case appli-

cations as soon as the moratorium was lifted.

34. On October 10, 1983 Kelly completed the subdivision

improvements which allowed phase three to be evaluated and

rated as potentially adequate.

35. On April 26, 1984 TRPA adopted its Amended

Regional Plan. This plan provided under section 4.20 that

completed applications on file before August 26, 1983 would

be processed under the old procedures. Thus Kelly’s appli-

cation would have been processed if the amended plan had

remained in effect.

36. On April 26, 1984, the same day as the amended plan

was adopted, suit was filed against TRPA by the Attorney

General of the State of California and the League to Save

Lake Tahoe in the Eastern District of California. As a result

of that suit a restraining order was issued by the Federal

Court on or about May 1, 1984, prohibiting TRPA from

acting to approve projects under the amended plan. An

opinion transforming the TRO into an injunction was issued

by the court on June 15, 1984. The actual preliminary

injunction order was signed on August 9, 1984. the August

9, 1984 Injunction was appealed by TRPA to the Ninth

Circuit Court of Appeals. The Ninth Circuit affirmed.

37. In his order converting the TRO into a Preliminary

Injunction, the court stated, among other things, that the

provisions contained within the 1984 Amended Plan allowing

processing of case by case applications under the old plan

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[4.20] was in violation of the environmental thresholds,

among other things, and thus was illegal under the new

compact.

38. TRPA was_ thus. prohibited from _ processing

Mr. Keily’s case by case applications concerning the Hilltop

lots by action of the Federal District Court for the Eastern

District of California as approved by the Ninth Circuit Court

of Appeals.

39. Settlement negotiations were initiated in 1984

between the parties to the federal law suit in order to see if a

new plan could be developed which would comply with the

compact and environmental threshold carrying capacities.

40. It was decided to create a “Consensus Building

Workshop” [CBW] in order to develop a new plan. The

CBW was open to all interested persons and included local

residents and varied experts and authorities.

41. Lake Tahoe is in many ways unique among the large

lakes of world. Considering its surface area and volume,

Tahoe has a relatively small watershed which, in its natural

condition, produces few nutrients which enter the Lake via

the more than 100 streams which flow into Tahoe. As a

result, Tahoe is regarded as an ultraoligotrophic lake, and

only Crater, Lake, in Oregon, and perhaps Lake Baikal in

Irkutsk, U.S.S.R., are comparable large aline lakes in water

quality and clarity.

42. The retention time of water entering Lake Tahoe

approximates 700 years, meaning that, if sediments or

nutrients enter the Lake from any source, it can take about

seven centuries before such material may be removed by

outflow via the Truckee River, Tahoe’s only stream outlet.

This lengthy retention time requires a conservative approach

to allowing nutrient inputs to the Lake; once such nutrients

get into the Lake, they remain there virtually permanently for

all human considerations.

-D 10-

43. Since about 1960, when human development in the

Basin commenced at high rates, the amounts of phosphorus,

nitrogen and trace metals important to algal growth in Lake

Tahoe have increased beyond historical levels. Studies by

the Tahoe Research Group indicate that the algal growth rate

of Tahoe, itself dependent on nutrient input to the Lake’s

waters, has been increasing at a rate of about 5 1/2 percent

per year. As a consequence, Lake Tahoe is losing its famous

Clarity at the rate of about 1/2 meter per year. Unless this

growth rate of nutrient input to Lake Tahoe is halted and

even turned around, the Lake may be transformed forever

into an ordinary algae-ridden water body in as few as 40

years.

44. When TRPA put together its 1987 Regional Plan it

faced a Tahoe Basin which already was significantly commit-

ted to development. Large gaming casinos, ski-areas,

commercial and residential development with corresponding

destruction of important nutrient-stripping wetlands had

taken place in the prior three decades. Additionally, more

than 17,000 single family parcels, including Plaintiff’s,

remained in the inventory of unbuilt parcels, many located in

environmentally-sensitive areas: steep slopes, wetland,

and/or relatively erodible soils. Because the uncontrolled

development of ali these parcels would likely ensure the

permanent loss of Lake Tahoe to eutrophication in the near

future, TRPA, pursuant to the Compact, was required to

construct a regulatory matrix which included a reasonable

and responsible program for governing the future of these

undeveloped single family parcels. That program entitled the

Individual Parcel Evaluation System (IPES), after develop-

ment by the CBW, was adopted by TRPA as part of its Code

of Ordinances on May 27, 1987.

45. The new plan [1987 Plan], including IPES, went into

effect in July of 1987.

46. Kelly was thus required, due to the actions of the

Federal District Court for the Eastern District of California,

and the subsequent adoption of the 1987 plan, to have his

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lots evaluated under the 1987 Plan, which included IPES.

before those lots could be developed.

47. Under IPES, TRPA sends a team of experts to evalu-

ate each vacant single family parcel, primarily for erosion

hazard and runoff potential. Each evaluated lot receives a

score, and then, in each of the five counties around the Tahoe

Basin, each such lot is ranked against its counterparts. Based

upon a Statistical formula, TRPA then established an initial

minimum score; those lots with scores above that minimum

were eligible to be developed, subject to other conditions not

at issue in this case, while those whose scores fell “below the

line” were required to wait for eligibility. The initial mini-

mum score established by this process was 725.

48. Kelly’s Hilltop Lots were evaluated under IPES and

received the following IPES Scores

Lot 33....679

Lot 34.... 531

Lot 35 629

Lot 36 . 758

Lot 37 615

Lot 38 . 635

Since Lot 36 received a score above 725 it is immediately

cligible.

49. Kelly appealed the remaining scores under Subsection

37.10.D of the Code of Ordinances and Rules of Procedure of

the TRPA. Under this procedure the appealed lots were

reevaluated under IPES by a new team and new scores were

issued. The appealed scores are

FS ee pt

Lot 34....694

©} - Pee sy,

Lot 37.... 702

Lot 38.... 693

Therefore under the IPES criteria all but three of Kelly’s

lots are immediately eligible

-D 12-

S50. IPES includes a process whereby, in each county

where certain conditions are met, which include such things

as installation of erosion control measures, monitoring of

water quality, and the like, the minimum IPES score to be

eligible will be reduced each year. As the “line” moves,

down, lots with lower scores will become eligible to build.

Theoretically, over time, all the vacant lots in the Basin will

become eligible to build, with those scoring the lowest being

last in line.

51. IPES makes an exception to the above stated general

rule for eligibility in that those lots which are part of what

TRPA calls Stream Environment Zones, or SEZs, are per-

manently barred from development because of the extreme

environmental hazard created by such development. None of

Kelly’s lots are within an SEZ.

52. Kelly argued at trial, and presented evidence contend-

ing, that IPES is not reasonably related to a reduction in the

continuing decline of Lake Tahoe. While there currently are

no studies comparing the full extent of natural nutrient

loading at Lake Tahoe versus that loading due to cultural

activities in the Basin, even small amounts of additional

loading from unnatural sources can play a disproportionate

role in upsetting Tahoe’s natural equilibrium.

53. The nutrients included by Kelly’s expert, Timothy

Durbin, in his budgets, i.e., dissolved inorganic nitrogen and

soluble reactive phosphorus, are not the only significant

forms of nitrogen and phosphorus in evaluating the causes of

algal growth and the eutrophication of Lake Tahoe. Al-

though the complete processes of the cycling of nitrogen and

phosphorus at Lake Tahoe have not been quantified because

of the complexity of the ecosystem, particulate and organic

forms of both nitrogen and phosphorus are an important, if

not more important, source of nutrients to the more than 100

forms of Tahoe algae because of the recycling of nitrogen

and phosphorus from one form to another and back again in

the natural cycles of each.

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54. The processes to be evaluated in depicting a complete

nutrient budget for Lake Tahoe are far more complex than

the simple, two-chemical evaluation utilized by Mr. Durbin

to support his theses about the Lake. TRPA, in conjunction

with the Tahoe Research Group and the Lake Tahoe Inter-

agency Monitoring Program, have been engaged in an effort

to describe a thorough nutrient budget for Tahoe for some

years, but it will take much more work, time and funding

before the results are complete enough to describe all the

processes affecting algal growth in Lake Tahoe. However, it

is unnecessary, for policy making purposes, to have a com-

plete nutrient budget for Tahoe. Scientists studying the Lake

have identified a variety of sources of causes of eutrophica-

tion of Lake Tahoe, including land disturbance; TRPA is

well-justified in attempting to reduce or control those

sources of causes as they are identified, without waiting until

the total process can be more perfectly quantified, so long as

it continues as well to conduct further base-line and research

Studies.

55. Mr. Durbin’s budget analysis is further flawed in its

approach, whereby he attempts to explain all the nutrient-

contributing processes in Tahoe’s entire ecosystem by a

simple examination of an isolated part. Not only is it not

valid to extrapolate conclusions about other, entirely differ-

ent processes form such an analysis, Mr. Durbin’s efforts

ignored the extraordinary dynamism of the whole.

56. Since particulate and organic forms of nitrogen and

phosphorus are derived almost entirely from land disturbance

at Tahoe, Mr. Durbin’s failure to consider these forms in his

budgets results in those budgets being greatly oversimplified

in their attempts to describe nutrient processes at Lake Tahoe

as being derived primarily from atmospheric sources. For

Similar reasons, Mr. Durbin’s budgets fatally understate the

contribution of development to nutrient loading of total

nitrogen and total phosphorus to Lake Tahoe.

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57. As Lake Tahoe has received greater quantities of

nitrogen from human influences on the Basin, other nutrients

are beginning to play more significant roles in governing the

growth and rate of growth of eutrophicating algae. At times,

phosphorus is the limiting nutrient in such processes, and

trace elements also seem to play critical parts in stimulating

algal growth. Since these nutrients all derive almost entirely

from land disturbance, as contrasted to atmospheric inputs,

Mr. Durbin’s failure to analyze fully these other nutrients is

another flaw in the conclusions he draws form his attempted

depiction of nutrient processes at Lake Tahoe.

58. While Mr. Durbin’s theoretical budget work rested

entirely on limited forms of nitrogen and phosphorus, by

which he attempted to draw valid conclusions about the

causes of Tahoe’s eutrophication, actual bioassay studies of a

variety of nutrients, performed under carefully controlled

scientific conditions, reveal that such causes are much more

complex than Mr. Durbin’s analysis comprehends.

59. Such bioassay analyses demonstrates that the simple

addition of nitrogen or phosphorus to Tahoe’s lake water

produces limited or no algal growth response. Similar results

are obtained when the chemicals contained in atmospheric

pollution are added to lake water. Such experiments come

closest to mirroring the simple processes analyzed by

Mr. Durbin’s work. On the other hand, when Tahoe stream

water, with all the complex chemicals, including nitrogen

and phosphorus in all their forms, as well as the various trace

elements, found therein, is added to Tahoe lake water, the

algal growth rate is highly stimulated. These experiments

tend to show that land disturbances in the Tahoe Basin,

which particularly enriches the input of particulate and

Organic nitrogen and phosphorus as well as trace elements to

the Lake via streams, is an important factor which TRPA

must address in its attempt to halt and reverse Tahoe

eutrophication.

60. Lake Tahoe, before modern human influence, was

able to maintain its ultraoligotrophic state notwithstanding

some natural nutrient loading from the atmosphere and from

its watershed. The amount of that natural loading is un-

known. Since the cause of Tahoe’s increasing eutrophication

Stems from the increment of nutrient loading introduced by

human behavior, Mr. Durbin’s depiction of the relative

amount of such loading, compared to total loading, misses

the point, even if such depiction were reliable. Even if the

increment from human behavior is quite small relative to the

total, controlling that increment is the most reasonable and

appropriate strategy for TRPA to undertake to restore the

Lake to natural equilibrium.

61. Even giving Mr. Durbin’s limited nutrient analysis

unwarranted credibility, he still concedes that land distur

bances from development in the Tahoe watershed contributes

at least six percent of the total load of dissolved inorganic

nitrogen to Lake Tahoe, and at least 3,000 tons of a total of

24,000 tons of sediment annually. While these amounts may

be small relative to the total inputs hypothesized by

Mr. Durbin, they are part of the human-induced increment

which has brought Lake Tahoe out of uliraoligotrophic

equilibrium, and thus are part of the loading which TRPA

properly must endeavor to reduce or eliminate.

62. Plaintiff’s experts produced no credible evidence that

atmospheric pollution is transported from the urbanized coast

and valley west of the Basin to Lake Tahoe. To the contrary,

defendants’ expert, Dr. Cahill, testified that the primary

airsheds from which prevailing winds blew into Tahoe were

in the Pacific and the northwestern continent — some of the

cleanest airsheds in the world. The bulk of atmospheric

deposition of nutrients on Lake Tahoe thus likely is produced

within the Basin itself.

63. Studies of Tahoe’s sediment core, conducted by the

Tahoe Research Group, demonstrate a profound change in the

diatom population of Lake Tahoe occurred around 1960,

coincident with the onslaught of modern land development in

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the Basin. This diatom change is demonstrative of Tahoe’s

trend towards eutrophication, which began at that time. The

same sediment core studies show an increase in the rate of

sedimentation input into Lake Tahoe, which increase could

only have been caused by land disturbance, as opposed to an

increase in atmospheric pollution.

64. The sediment core studies did not show that Tahoe

suffered any lasting increase in either sedimentation rate or

nutrient input rate as a result of logging practices in the

Basin during the late nineteenth century. Such a result is

best explained by the testimony of Dr. Margaret Davis, who

described scientific studies of other lakes and watersheds

which underwent similar perturbations and reacted much like

Lake Tahoe has. In those other cases, the impact from

logging in past centuries was relatively minor, as natural

processes were able rapidly to recover from such distur-

bances. On the other hand, when permanent housing devel-

opment took place in the same watersheds, the nutrient and

sediment input to the affected lakes was much greater and

quite persistent.

65. The use of best management practices (BMPs) to

reduce erosion and runoff is valid strategy employed as part

of TRPA’s regulatory practice to reduce or eliminate input to

Lake Tahoe from land usage. BMPs, however, are not a

panacea. There are no guarantees that such practices will be

maintained over the life of the particular development whose

impacts are meant to be addressed by the BMPs, and TRPA’s

experience demonstrates that such long-term maintenance is

an exception, rather than the rule. When not maintained,

BMPS inevitably fail, and their value in controlling sediment

and nutrient inputs to the Lake commensurately dwindles.

Accordingly, it is not irrational of TRPA, in IPES, to deny

special credit to land developers like plaintiff for its installa-

tion of BMPs on its property — particularly because TRPA,

aS a matter of course in its 1987 Regional Plan, requires

every land developer to install at least a minimal level of

such BMPs.

-D 17-

66. Over time, unless the accumulation of silt and sedi-

ment in the Uppaway infiltration trench system is peri-

odically and effectively removed and disposed of outside the

Basin, the drainage control system in that development will

become ineffective in trapping such sediments. Eventually,

the system will fail altogether from overload.

67. Nutrient uptake processes take place, for the most

part, in the shallowest portion — no deeper than three or

four inches — of the soil profile. The infiltration of water

below this zone of uptake, as is accomplished by the infiltra-

tion system at Uppaway, impedes for a time the ability of

plants to accomplish nutrient removal, ensuring a nutrient-

enriched groundwater, but there is no indication that this

nutrient groundwater reaches the Lake from the slopes of

Uppaway.

63. Loss of vegetation through development causes the

loss of the ability of the natural environment to remove

nutrients from surface and near-surface waters, thus con-

tributing to nutrient loading of streams and groundwater.

The limitation in IPES on the creation of impervious surfaces

via development is a valid strategy to limit the loss of such

nutrient-stripping vegetation.

69. Cagwin soils make up most of the soils at Uppaway.

When those soils are compacted, they are susceptible to a

great deal of runoff and a high rate of erosion. These

problems are dangerously exacerbated during major storm

events such as when warm spring rain falls on a major snow

pack.

70. The results derived from the rainfall simulation

experiments of Douglas Guerrant, plaintiff’s expert, were

fatally affected by flaws in experimental design and

methodology. Of the four devices utilized in the experi-

ments, only one produced dat: that even plaintiff could

characterize as_ useful. However, in that experiment,

Mr. Guerrant, by raking the soil in the test plots which were

claimed to reproduce sites which emulated development,

created plots which were calculated to produce the highest

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rate of infiltration — a condition not extant on actual

developed sites. As a consequence, Mr. Guerrant’s results

greatly overstated the ability of Uppaway’s soils to withstand

erosion and runoff upon development. Notwithstanding,

Mr. Guerrant’s results confirmed TRPA’s view that slope and

disturbance are major factors producing soil loss, and that

Cagwin soil, when compacted is highly erodible.

71. The study by Mr. Mahannah of five Tahoe water-

sheds, even if its limited scope is given credit, did not show

that construction does not contribute to nitrogen and

phosphorus loading of streams; indeed, Mr. Mahanna’s study

revealed that, in many cases, loading of those nutrients was

greater in the streamwater below development than above.

72. Phosphorus, nitrogen and some important trace

elements in Lake Tahoe are in fact increasing beyond their

historical levels.

73. Increased levels of nutrients are in fact causing

increased algal growth.

74. Increased algal growth and sedimentation do in fact

cause loss of water clarity.

75. Sediment and nutrient transport from so-called

“hazardous” residential areas are in fact having a meaningful

and pronounced effect on the contribution of phosphorus and

nitrogen and trace elements to the Lake.

76. IPES, as evaluated in this case, is an evenly applied

and non-discriminatory effort to control or reduce nutrient

and sediment inputs to Lake Tahoe from residential develop-

ment. TRPA’s IPES program, because it attempts to predict

the relative contributions of both organic and inorganic

forms of nutrients, dissolved and particulate, is properly

aimed at regulating the input of all these nutrients to the

lake from the development of single family homes in the

watershed.

77. The Hilltop Lots, the subjects of this action, maintain

current, substantial value under the regulations of the 1987

TRPA Regional Plan.

-D 19-

78. In addition to the above findings, the Court incor-

porates the findings set forth in the Court’s Order Partially

Granting and Partially Denying Motions for Summarv

Judgment signed on August 23, 1989.

Based on the above Findings of Fact, the Court makes the

following:

CONCLUSIONS OF LAW:

1. The Plaintiff having conceded at the hearing on

Defendants’s Motions for Summary Judgment that he was

not seeking monetary relief against individual members of

'RPA’s Governing Board, said defendants are entitled to

judgment against Kelly on any claims for relief alieging

damages against them

2. Despite major changes since 1979, the TRPA is still an

independent agency. The Plaintiff has produced legally

insufficient evidence to establish that the Agency is the alter

ego of either State Defendant; moveover, there is no evi-

dence that Nevada or California officials acted in an action-

ably tortuous or condemnatory fashion. The dismissal of the

State Defendants is therefore appropriate.

3. Plaintiff has no standing to collaterally attack a

neighboring federal court ruling nor has Plaintiff established

a basis for relief under a malicious prosecution theory

against the State of California.

4. The action of the Federal District Court for the Eastern

District of California cannot form the basis of a claimed

taking and therefore Plaintiff is entitled to no relief for an

alleged First English taking during the time the Federal court

injunction prevented TRPA from allowing Plaintiff to

develop his property.

5. Plaintiff, having proved no Constitutional violations, is

entitled to no relief under 42 United States Code Section

1983.

-D 20-

6. Plaintiff has failed to demonstrate that TRPA has

deprived him of procedural due process. Procedural due

process rights do not include the right to force an agency to

take action on permit application.

7. TRPA’s ordinances 81-1 and 81-5 were written to

apply to all property owners on the Nevada side of the Tahoe

Basin. Those procedures were evenly and properly applied

and therefore Plaintiff was not denied the equal protection of

the laws.

8. TRPA’s powers are derived from a federal Compact

ratified by the Congress of the United States. The Compact

itself is a congressional exercise of power under the Compact

Clause and amounts to federal legislation. As federal law,

the regional plan adopted by the TRPA preempts state law

and state constitutional provisions. Accordingly, any claims

asserted by the Plaintiff based upon Nevada’s Constitutional

provisions should be dismissed.

9. To date Plaintiff has received no building permits for

construction on the parcels in question. Having not yet

received building permits he has no vested rights as a matter

of law.

10. Plaintiff has failed to prove that TRPA’s conduct

concerning the regulation of building on Plaintiff’s property

was the product of inaction or discrimination directed against

Plaintiff. Given the context in which TRPA’s activities must

be placed, the court concludes that Plaintiff is not entitled to

estoppel relief as claimed in the complaint.

11. Plaintiff has an adequate remedy at law for any

temporary taking of his property anc therefore is not entitled

to estoppel relief.

12. There is no evidence of fraud or malice on the part of

TRPA and therefore Plaintiff is not entitled to punitive or

exemplary damages.

13. There is legitimate governmental interest in the

protection of the Lake Tahoe Region by attempting to insure

an equilibrium between its natural endowment and _ its

-D 21-

manmade environment. The Court has found that the IPES

system examines runoff and erosion hazard characteristics of

individual lots and anticipates the effect which development

may have on sediment and nutrient transport. Even though

the IPES point system, for the most part, discounts the

mitigating effect which best management practices may have

upon nutrient and sediment transport, it is, nonetheless

rationally based because it evenly and scientifically rates

runoff potential and erosion hazard which might ultimately

flow from the parcels it measures. Therefore, the regulatory

system predicated upon IPES is a valid exercise of the police

power.

14. The 1987 TRPA Regional Plan and its implementing

ordinances, including IPES, are facially constitutional.

15. TRPA’s 1987 Regional Plan and ordinances, includ-

ing IPES, substantially advance the legitimate governmental

interest in the protection of the Lake Tahoe Region.

16. TRPA’s 1987 Regional Plan and ordinances adopted

thereunder, including IPES, do not deny Kelly the economi-

cally viable use of the lots which are the subject of this

action.

17. Kelly has failed to present sufficient evidence that his

parcels have been permanently taken by action of the TRPA

since IPES contains a procedure which will allow the “cut off

line” to move downward thereby making it likely that all of

Kelly’s lots will eventually become eligible for building

permits. TRPA’s 1987 Regional Plan and _ ordinances

adopted thereunder, including IPES, do not, therefore, take

Kelly’s lots, the subjects of this action, without just compen-

sation in violation of the Fifth and Fourteenth Amendments

to the United States Constitution.

18. TRPA’s Ordinances 81-1 and 81-5, and each of them,

substantially advanced the legitimate governmental interest

in the protection of Lake Tahoe and did not deny Kelly the

economically viable use of his lots, the subjects of this

action. TRPA’s Ordinances 81-1 and 81-5, and each of them,

do not violate Kelly’s right to substantive due process of law

-D 22-

under the Fifth and Fourteenth Amendments to the United

States Constitution. TRPA’s Ordinances 81-1 and 81-5, and

each of them, did not, permanently or temporarily take

Kelly’s lots, the subject of this action, without just compen-

sation in violation of the Fifth and Fourteenth Amendments

to the United States Constitution.

18. Kelly is entitled to no damages for an alleged tempo-

rary taking during the period between August 26, 1983 and

April 26, 1984, known as the “moratorium”, since TRPA’s

suspension of review of building permit applications was

done in good faith for a significant public purpose and was

reasonable in duration given the complexity of the tasks

undertaken.

19. Kelly is entitled to no damages for an alleged tempo-

rary taking between April 26, 1984 and May 27, 1987, the

effective date of the 1987 Regional Plan, since the inability

of TRPA to authorize construction during this period was the

result of a Federal District court order over which TRPA had

no control.

20. Kelly is entitled to no damages for an alleged tempo-

rary taking after May 27, 1987 since Ipes [sic] is a rationally

based system calculated to help prevent degradation of Lake

Tahoe and thus benefits Kelly directly. Further, TRPA’s

1987 Plan, including IPES, does not violate Kelly’s right to

substantial due process of law under the Fifth and Fourteenth

Amendments to the United States Constitution.

21. As long as the benefit received by the property from

the ordinances is direct and substantial and the burden

imposed is proportional, the TRPA can force landowners like

Mr. Kelly to postpone their building plans for a reasonable

period of time.

22. Neither the 1987 Regional Plan for the Lake Tahoe

Basin nor the Code of Ordinances, nor any predecessor plan

Or ordinance, have deprived Mr. Kelly of his interest in

property in a manner requiring compensation under the Fifth

and Fourteenth Amendments to the United States

Constitution.

-D 23-

23. Neither the 1987 Regional Plan nor the Code of

Ordinances, nor any predecessor plan or ordinance, has

deprived Kelly of this right to equal protection of the laws

under the Fourteenth Amendment to the United States

Constitution.

24. Plaintiff is entitled to no injunctive relief.

Based upon the above stated Findings of Fact and Conclu-

sions of Law the Court enters its

JUDGMENT:

Judgment is entered as follows:

1. Based upon the findings and conclusions set forth

herein, as well as the findings and conclusions set forth in

the court’s order of August 23, 1989 partially granting and

partially denying motions for summary judgment, the States

of Nevada and California are dismissed from this suit as

parties defendant.

2. Judgment is entered in favor of TRPA and against the

Plaintiff as to the following causes of action and claims for

relief:

A. All malicious prosecution and conspiracy claims.

B. All claimed denials of civil rights.

C. All due process claims under the United States

Constitution.

D. All takings claims under the United States

Constitution.

E. All equal protection claims under the United States

Constitution.

F. All claims under the Constitution of the State of

Nevada.

G. All claims of vested rights.

H. All estoppel claims.

I. All claims for injunctive relief.

-D 24-

J. All claims for punitive and exemplary damages

K. Any and all additional claims contained within the

complaint as more fully set forth in the Court’s

Order Partially Granting and Partially Denying

Motions for Summary Judgment signed on August

23, 1989 and the Court’s Decision filed on July 13,

1990.

3. Defendant TRPA is awarded its costs in the amount of

$241,836.69 and its attorneys fees in the amount of

$7,500.00, (please see Court Order dated February 20, 1991

and the Explanatory Order filed of even date herewith).

FINDINGS AND CONCLUSIONS FOR

PART III OF COURT’S DECISION:

1. Uppaway Estates is a planned unit development of

44.45 acres located at Glenbrook, Lake Tahoe, Nevada.

Plaintiff Kelly purchased this property in 1966 which was

and still is zoned one acre residential by Douglas County

Ordinance.

2. In 1972 the estate contained three residences consist-

ing of the main house, a guest house and a caretaker’s house

From early on, Mr. Kelly intended to develop the property

because he thought 44.45 acres was too large for one

residence, and he thought he could recover his investment.

3. In 1972 the Tahoe Regional Planning Agency (TRPA)

adopted a Land Use Ordinance for the entire Lake Tahoe

Basin imposing population density controls and land cover-

age limitations. This ordinance limited development on the

Kelly property but allowed for variances if it could be

demonstrated that the project would not cause detrimental

environmental consequences.

Accordingly, Mr. Kelly sought to design a development in

such a way to demonstrate that it would cause no environ-

mental harm to Lake Tahoe, even though the land coverage

-D 25-

limitations imposed by the TRPA Land Use Ordinance would

be exceeded. In doing so he needed a variance.

Section 8.25 of the TRPA Land Use Ordinance provided:

Additional Land Coverage — Administrative Permit

“Land coverages in excess of those permitted in

any Land Capability District may be authorized by

administrative permit issued by the permit-issuing

authority upon a showing in a Land Capability

Report by the applicant, in accordance with the

applicable provisions of the Rules and Regulations

of Practice and Procedure, that:

ec * * ©

(2) the applicant’s proposed development, as

designed and located, will not cause the detrimen

tal environmental consequences on the land of the

applicant, or on other lands or waters, that were the

basis of the classification of the applicant’s land in

the applicable Land Capability District in the first

instance.”

4. The tentative map of Uppaway Estates which depicted

each building envelope as to site and size, was presented to

and, after public hearings, approved by the Douglas County

Planning Commission and the Douglas County Board of

County Commissioners in 1974. The project consisted of 39

residences on the 44.45 acres not to exceed 2,500 square feet

of impervious cover for each building envelope with the one

exception of the main residence built in 1938.

5. The permit issuing authority for variances in this case

was the Douglas County Board of County Commissioners.

The Douglas County Planning approved the project on

August 27, 1974. On September 20, 1974, the Douglas

County Commissioners approved the tentative map and

issued an administrative permit to allow land coverage in

excess of those permitted by the TRPA Land Capability

Districts on the subject property, pursuant to Sec. 8.25 of the

TRPA Land Use Ordinance.

-D 26-

“(T]he applicant’s proposed development, as

designed and located will not cause the detrimental

environmental consequences on the land of the

applicant or on other lands or waters, that were the

basis of the applicable Land Capability District in

the first instance.”

6. The tentative map and administrative permit were then

taken to the TRPA for review which held three separate

hearings before its Governing Board. Kelly presented

evidence and testimony of six (6) expert witnesses on soil,

geology, surface drainage, and the inherent design relation-

ship, water and fire hazard.

7. The TRPA Governing Board vote on the development

resulted in a lack of a dual majority, which, under the

language of the TRPA compact at that time resulted in

approval. However, TRPA wished to test this procedure and

filed suit against Plaintiff, Kelly and Douglas County at-

tempting to annul the Douglas County Administrative permit

and the “deemed-approved” mechanism. The United States

District court held:

(1) the project is approved under the compact

because of lack of dual majority vote

(2) that the Douglas County variance was legally

granted, permitting the excess ground coverage for

Uppaway.

The TRPA Governing Board concluded that further legal

action on behalf of the staff was unwarranted and the District

Court decision became final.

As a result of the Federal Court litigation this Court finds

that the issues presented to the Federal Court have been

fairly tried by a competent tribunal and the doctrine of res

judicata is applicable to these issues. However, events

occurring since approval have caused the parties to become

more and more uncertain about the exact application of the

Federal Court ruling to the hilltop. Examples include some

intervening changes sought to the subdivision itself and the

2 27.

evolution of a new Plan and several new Ordinances not

within the contemplation of the Federal Court.

8. To give these issues an historical setting, Mr. Kelly

planned to improve and sell off units in the development in

orderly phases, with the !akeshore lots to go on line first, the

tennis court lots to follow, and finally the hilltop that is the

Subject of this litigation. No unreasonable delays on Kelly’s

part interrupted this orderly procession.

9. In 1981 it was determined that a road to the hilltop

would be more suitable than a funicular and plans were

drafted for this purpose using no more coverage than that

authorized for the funicular. Among other reasons, the fire

chief and sheriff sought a road for purposes of fire protection

and law enforcement. On April 30, 1981, Mr. Barrett wrote a

letter to Douglas County reciting in pertinent part:

“TRPA staff considers this modification of

access and land coverage to be a significant

modification to the TRPA approval and, therefore,

subject to Governing Board approval.”

10. Robert Lahmann moved to Uppaway in 1976 to serve

as on-site manager for Mr. Kelly. He _ continued in this

position until 1982 (Tr. 333). Gordon Barrett, Senior Plan-

ner for the TRPA, was delegated the overall supervision of

the Uppaway project by TRPA Executive Secretary

Overynder.

11. In the summer of 1981 Mr. Lahmann prepared a draft

proposal to “settle all the issues” between the TRPA and

Uppaway. This overture proposed to eliminate two hilltop

lots to overcome Mr. Barrett’s objection to the hilltop lots.

Lahmann had advised Barrett that Uppaway had not been

over covered and would provide a survey.

12. In the fall of 1981 an application was made to the

TRPA for a building permit for lot 34. See Plaintiff’s

Exhibit 1-2 for location. The TRPA staff responded with a

letter dated October 29, 1981, reciting:

-D 28-

“On August 25, 1981, Ordinance 81-5 went into

eftect***"

“In processing your individual application, it

has been found that your lot is a critical land

capability area and is located within a subdivision

which has been classified as of in need of further

consideration. Therefore, your application will not

be eligible for review until (1) drainage and

erosion control improvements are made to the

subdivision, as per plans approved by the Agency

and the subdivision is then reclassified as either

“adequate” or “potentially adequate”; or (2)

adoption by the Agency of amendments to the

Regional Plan pursuant to Article V(c) of the

Compact.”

13. At this point in 1981 TRPA staff discounted the prior

approvals for Uppaway by the Douglas County Planning

Commission, Douglas County Commission, the TRPA and

the United States District Court. Ordinances 81-1 and 81-5

and the 1987 Regional Plan gave the TRPA staff (which has

never liked the coverage aspects of Uppaway) successive,

arguable reasons for reasserting jurisdiction

81-1 proscribes:

“|T]hose activities NOT having a_ substantial

effect on the land, water, air, space or other natural

resources of the Tahoe Region and are NOT

PROJECTS under the Tahoe Regional Planning

Compact, as amended and not subject to review

and approval of the agency confirming that such

activities will not have a significant effect on the

environment and thus exempt from the requirement

of preparation of an environmental impact state

ment.” (Emphasis added.)

-D 29-

81-1 Section 2

“Critical area. An area within the Region that is

of such sensitivity that any activily may substan

tially affect the land, water, air space or any other

natural resource in the region. (1) Critical land

capability areas, including high hazard lands (land

capability districts la, 1b, 1c and 2).”

Section 3.10

“Residential activities

“The residential activities set forth in Sections

3.11, 3.12 and 3.13 are not “projects” within the

meaning of the Compact * * * and are exempt from

the Agency’s review and approval.

3.12 New Residential Construction

“The following activities are exempt if they are

located in a subdivision approved by the Agency

after February 10, 1972, which subdivision was

approved without reliance upon sections * * *

8.25(2) * * * of the Agency Land Use Ordinance.”

Uppaway was approved pursuant to a variance granted

under section 8.25(2), but the TRPA was taking the position

that Ordinance 81-1 classifies the Uppaway hilltop lot as a

new “project”

14. Ordinance 81-5 purports to prohibit development in

land classified as high hazard

Section 12.60

“Except as otherwise provided by this Ordinance,

and subject to the exceptions set forth in this

Subsection, no person shall perform any grading,

clearing, removal of vegetation, filing or creation

of land coverage upon land within land capability

districts la, lc, 2 and 3. Said prohibition and

provisions of subsections 12.10, 12.20, 12.30 and

12.40 do not apply to:

-D 30-

“12.61 Approved Subdivisions

Land within subdivisions approved by

the agency’s land capability district

regulations, without reliance upon or

reference to sections * * * 8.25(2) * * *.”

15. Sections 12.10, 11 and 12 create classifications for

“adequate”, “potentially adequate” or in need of further

study. The TRPA letter of October 29, 1981, Plaintiffs

Exhibit 1-7, relating to hilltop lot 34 recites in part:

“It has been found that your lot is in a critical

land capability area and is located within a subdivi-

sion which has been classified in need of further

consideration.”

The TRPA advised Plaintiff that even though these lots

had been granted a prior variance upon a Douglas County

finding approved by the TRPA and reaffirmed by a federal

court that this “development will not cause detrimental

environmental consequences on the land of the applicant or

other lands or water of the Tahoe Basin,” that the Uppaway

hilltop lots were nonetheless subject to Section 12.11(c):

(c) “In need of further consideration” - poor

placement of roads and drainage structures in

relationship to natural features; unstable cuts and

fills, which are incapable of satisfactory rehabilita-

tion; unstable internal and downstream drainages

and waterways; land coverage generally exceeds

that permitted by the Agency’s Land Use Or-

dinance; and the lack in individual cases of substan-

tial construction of roads, utilities or drainage

structures.”

16. Plaintiff's choice in 1981 and 1982 was either to

disregard TRPA’s efforts to reimpose its jurisdiction and

face threats of fines of $5,000.00 per day, or to seek a

compromise. He chose the latter course, which was reason-

able under the circumstances.

-D 31-

17. In September of 1981 Mr. Kelly met with Engineer

Ernie Jones to request an update of the engineering drawings

for the development of the seven hilltop lots. Plans were

prepared and submitted to the TRPA in December citing all

lots below 30% slope to comply with the Bailey system

which had been adopted by the TRPA. Plaintiff’s Exhibit

1-9. Mr. Barrett responded with Plaintiff’s exhibit 10 stating

that Mr. Kelly “must submit an application to the Agency to

modify the final map and improvement plans of Uppaway.”

18. On January 21, 1982, TRPA staff wrote another letter

Stating that Ordinance 81-5 was applicable to the hilltop and

within an area “classified in need of further study.” In May

of 1982 Mr. Kelly’s attorney telephoned TRPA’s attorney to

advise that Mr. Kelly was going to proceed with the con-

struction of the Hilltop pursuant to prior approvals and court

order and that 81-1 and 81-5 are not applicable to Uppaway.

TRPA counsel wrote the following letter:

“Thank you for your telephone call yesterday

indicating Uppaway Estates intends to solicit bids

for construction of a road on the hilltop portion of

the subdivision. The purpose of this letter is to

formalize a means through which we might at least

clarify the issues involved in the proposed construc-

tion of the subdivision road. * * * *”

“TRPA maintains the amendment of the

Uppaway Subdivision map to approve the road in

lieu of the funicular was a substantial modification

of the subdivision, requiring further approval by

the TRPA Governing Body.” Plaintiff’s Exhibit

1-14.

19, The TRPA position was refuted by Mr. Kelly’s

counsel who continued to refuse to recognize the application

of 81-1 and 81-5 to the hilltop lots and refused to take the

approved hilltop development back to the Governing Board

of the TRPA.

-L) 32-

On May 19, 1982, TRPA counsel responded as follows

“Pursuant to our meeting today, I am writing to

confirm our understanding and agreement as

follows

1. Your clients shall submit, or cause to be sub

mitted, to Gordon Barrett of TRPA staff a copy of

all construction drawings and other pertinent

information with respect to the proposed construc

tion of improvements relating to Lots 33 through

39 of Uppaway Estates, including the proposed

road, TRPA agreeing that by submitting such

information, or by causing it to be submitted, your

clients do not waive or otherwise detract from any

legal right or contention possessed or maintained

by them: and

2. Your clients shall not commence construction

of said improvements until TRPA staff has had an

opportunity to determine whether the proposed

construction is substantially in accordance with the

subdivision plans deemed approved by TRPA

pursuant to the Tahoe Regional Planning

Compact.”

20. The TRPA letter was followed by a Kelly letter

reiterating his contention that the change from a funicular to

a road was not a substantial change and that the issues would

not go to the Governing Board, that they would instead b«

settled with staff and the Chairman of the Governing Board,

Bennie Ferrari. Plaintiff's Exhibit 1-16 TRPA counsel

responded that Gordon Barrett is “doing his utmost to

achieve an expeditious determination regarding substantial

conformance.” Chairman Ferrari was to make the final

determination.

21. A meeting was then held on June 4, 1982, between

TRPA Chairman Ferrari, Gordon Barrett and attorney Gary

Owen, acting on behalf of the TRPA, and Paul Hogan and

Bill Aird from the Law Offices of Daniel R. Walsh, repre-

senting Mr. Kelly. The primary issue was the development

-D 33-

of the hilltop lots including (1) the construction of the access

road to the hilltop instead of the funicular, (2) the construc-

tion of the hilltop road including all offsite improvements for

the lots and (3) construction of the lots. In consideration of

the elimination of lot 39, and the relocation of other building

envelopes to sites less steep than before, TRPA evidenced a

willingness to allow construction to proceed without further

action by the Board

22. Gordon Barrett approved the improvement plans for

lots 33-38 on July 22, 1982, in writing and with the TRPA

seal. Plaintiff's Exhibits 41, 43, 44, 46, 1-21, 1-21A

Pursuant to a request on behalf of Kelly, Mr. Barrett also

noted on the plans that the TRPA approvals were pursuant to

the July 22, 1982 understanding. Plaintiff's Exhibit 1-24.

23. Mr. Barrett testified that the major concern of Kelly

“was the legal status of these approvals and they seemed

fairly adamant that they were not going to go to the Board

lor any kind of approval.” Tr. 237. The only way Kelly

could avoid going to the Board was to be found in substantial

compliance with the previous approvals through the Court

Order. Tr. 237 Mr. Barrett found the plans to be in substan-

tial conformance, obviating compliance with 81-1 and 81-5.

Tr. 218, 219.

This Court also finds the construction work completed by

Mr. Kelly on the hilltop to be in substantial conformance

with the subdivision plans deemed approved by the TRPA

and the federal court and concludes that the changes made

were, in a jurisdictional sense, minor changes.

24. Applications for TRPA approval of building permits

for the hilltop lots on the consent calendar were filed with

the TRPA on July 28, 1982, six days after the agreement. A

fee of $220.00 was paid for each lot for a total of $1,320.00,

which has never been returned to Mr. Kelly.

25. Construction of the access road instead of funicular,

and hilltop road with offsite improvements for the six lots,

plus infiltration trenches, commenced immediately. Except

-D 34-

for some minor items, the road and all offsite improvements

were completed by October 1982. (Tr. 388-392, 397).

“In addition to the environmental protection

measures taken on the rest of the subdivision the

hilllop measures included a connection from the

roadside infiltration facilities up to each one of the

individual building sites so that any drainage that

was collected on the roof structures or on site of

each one of the lots would be provided with a

connection into the infiltration system so that any

of the water that was created on the individual

parcels would be integrated as a part of a master

storm drainage system. The plan was submitted to

and approved by the TRPA.” Tr. 273

See also Tr. 270, 271, 275, 278 and 283 for further

description of the hilltop improvements. Plaintiff’s

Exhibits 1-42 depicts the actual construction

conditions and 1-23 depicts the offsite improve-

ments after construction.”

26. Approved as being in substantial conformance with

prior approvals and court order were (1) the change from

funicular to road and the construction of this access road; (2)

the construction of the hilltop road and all offsite improve-

ments for the six lots and (3) the six lots.

27. Mr. Keily was finally able to apply for building

permits on a section of the subdivision which the TRPA

conceded as adequate under existing rules and procedures.

28. Building plans were submitted to Douglas County for

the purpose of obtaining building permits from the county on

November 22, 1982. Plaintiff's Exhibits 1-27. Building

permits were issued by Douglas County on December 30,

1982, for the six hilltop lots. Plaintiff’s Exhibit 1-28. Mr.

Kelly paid $1,600.00 for each building permit. On August

11, 1986, the Douglas County District Attorney issued an

opinion reciting in part as follows:

“It is my understanding that the permits were

issued originally with 6 conditions. Following the

-D 35-

approval Uppaway paid the required fees and

proceeded to complete the conditions outlined by

the Board of Commissioners. One of these condi-

tions states that “construction shall not commence

until all conditions are completed.” One of the

conditions which had to be completed concerned

approval by the Tahoe Regional Planning Agency

or a court of competent jurisdiction. Since TRPA

has not acted on these permits it would seem that

the process contemplated by the approval is still

ongoing, therefore, the permits are still active so

long as the approval of TRPA is being sought by

Uppaway and the agency has not taken final action

or the court has not decided the matter.” Plaintiff's

Exhibit 1-49.

29. The TRPA did not act on Plaintiff’s applications from

August, 1983, to April, 1984, on the basis of TRPA inaction

on the files; (nonetheless, there is no evidence of intentional

neglect or malice pertaining to this inaction over the winter

months of 1983/84. See next two numbered paragraphs.)

The California Attorney General’s office, then obtained a

preliminary injunction from the Federal Court in Sacramento

that prohibited the TRPA from acting on applications for all

building permits in the Tahoe basin.

30. During the period from 1982 through 1987, when Mr

Kelly’s case-by-case applications under Ordinance No. 81-5

were filed with and pending approval by TRPA, TRPA was

faced with the difficult and time-consuming task of im-

plementing the novel and complex planning approach of the

1980 Compact, including its pressing deadlines for the

adoption of environmental threshold carrying capacities and

a new plan and ordinances attaining and maintaining them as

well as meeting state and federal air and water quality

Standards. Added to this task was resolving the dilemma of

what to do about the 17,000, more or less, preexisting

Single-family lots, of which Mr. Kelly’s holdings were a

portion. Ordinance 81-5, adopted June 1981 and effective

-D 36-

August 1981, was an interim measure at least partially to

deal with the issue of the numerous lots in the State of

Nevada, and particularly those in high-hazard classifications

such as Mr. Kelly’s. The ordinance resulted in many case-

by-case applications, the processing of which, commencing

in August 1981, was occurring simultaneously with TRPA’S

compliance with the regional planning mandates of the 1980

Compact.

31. In addition, in early 1983, pursuant to a TRPA staff

indication that winter snow conditions precluded on-site

assessment of the proposed case-by-case lots, Mr. Kelly,

through his counsel, advised TRPA that Mr. Kelly would not

be prejudiced by the winter delay. During the spring and

summer of 1983 TRPA was processing numerous case-by-

case applications, but because of the Compact deadline for

adopting a new regional plan, it determined in August 1983

that it no longer legally could issue case-by-case permits,

including those pursuant to Mr. Kelly’s applications. In its

regional plan adopted in April 1984, however, TRPA specifi-

cally provided for the continued processing and approval of

case-by-case applications such as Mr. Kelly’s. That proce-

dure was not allowed to commence because TRPA’s 1984

Plan was immediately enjoined from taking effect, through

an injunction which prohibited TRPA from approving

development projects, including single-family residences,

until adoption of TRPA’s 1987 Regional Plan.

32. The TRPA 1987 Regional Plan and IPES were finally

adopted by the TRPA on July 1, 1987, which sought to deny

the development of the Plaintiff’s hilltop lots on the basis of

the content of the new Plan and Ordinances. This lawsuit

followed. Despite the delays, the Court finds actions of the

TRPA to be reasonable and justified under all of the

circumstances.

33. Kelly agreed to and did forfeit hilltop Lot 39 in

exchange for the TRPA promptly processing his applications

for TRPA approval of six building permits for Lots 33, 34,

45, 36, 37, and 38. The TRPA did not process these

-D 37-

applications and consequently they were never approved.

Plaintiff Kelly should be returned to the same position he

was in before he agreed to forfeit Lot 39. There was a failure

of consideration of the condition upon which he gave up Lot

39 in the first place. Mr. Kelly can file an amended map

with Douglas County to reinstate Lot 39. Reinstated Lot 39

will be considered in the same legal position as Lots 33, 34,

35, 36, 37 and 38.

34. Considering all Douglas County and TRPA prior

approvals and the federal court order, Mr. Kelly does not

have to obtain an allocation under Chapter 33 of the TRPA

ordinances for these seven lots. The TRPA cannot force

Mr. Kelly or the purchasers or assigns of these lots to stand

in line with everybody else in light of the history of this

development. The Douglas County building permits issued

for these seven (7) lots are above and beyond the TRPA

allocation to Douglas County. The exemptions for these lots

run with the land and can be transferred to purchasers or

assigns from Mr. Kelly.

35. Mr. Kelly, his purchasers or assigns will have to pay

the air quality fee of $1,000 and the $2,500 refundable

security deposit to assure proper completion of the residence

in compliance with Douglas County ordinances and permit

conditions. However, these lots are exempt from the water

quality mitigation fees imposed by TRPA ordinance for each

Square foot of new coverage. Mr. Kelly has already spent

considerable funds on mitigation. The fees Mr. Kelly paid to

the TRPA in 1982 as described in finding 24 above may be

credited against the fees that may be due the TRPA under

this finding.

36. As a specially-engineered “planned unit develop-

ment”, Uppaway is far more than a traditional subdivision.

What was “deemed approved” as Uppaway Estates under

Article VI(k) of the 1969 Compact was a tentative subdivi-

sion map for 39 vacant, 2,500 square foot lots and a permit

for “excess coverage” under Section 8.25 of the Land Use

Ordinance.

-D 38-

When Uppaway became legally approved, the subdivision

map was not just a device which created new and smaller

parcels from a larger parcel. The “approved” permit stated

exactly how many rooftops, roadways and driveways would

interfere with the natural state of the topography and the

nitrogen and phosphorus absorbing features of the soil and

vegetation. The specific placement of each building enve-

lope was set forth along with the exact amount of coverage to

be contained therein. A height limitation was included. The

utilities to each lot were delineated.

37. Section H of the Ray Smith report (Exhibit 39)

contains the “heartwood” of Mr. Kelly’s 1974 application

and allows for 4.88 acres of coverage (212,900 square feet).

This Court finds that the land coverage contained in the Ray

Smith report represents an already adjudicated issue favoring

Mr. Kelly, and the “deemed approved” stamp covers the

whole development, and in that sense, makes Uppaway

different from any other subdivision in the Tahoe Basin.

38. The development was engineered with an elaborate

infiltration system to control drainage and erosion. All hard

road surfaces tilt inward toward specially designed infiltra-

tion trenches working together with slope stabilization

measures on both sides of the roadways. The infiltration

system itself was purposefully over designed to protect

against fifty year storm events, although the TRPA regula-

tions at the time (and still) only required twenty year, one

hour storm event mitigation measures.

39. Never, during the period of time the system was

designed and installed, did the Plaintiff evidence any callous

disregard for the nutrient transport sensitivities of his

project. The design which he commissioned for the so-called

“offsite” improvements (every place but building pads) was

in every respect above-standard: the contractors did a

workmanlike job of installing the tilted roadways, the

infiltration trenches, the junction boxes and other facets of

the system; appropriate warning signs telling people to stay

-D 39-

off the rocks are strategically placed on roadways; the

asphalt appears evenly sloped and well-maintained.

There is absolutely no evidence that the infiltration

system has ever failed, at least in the upper reaches of the

subdivision where the hilltop lots are located, even though it

has been in place now for several years. The hilltop lots are

located in places which are as flat as feasible. The lots

themselves are quite a distance from the shores of the lake

and migrating water, even subsurface flows, would have to

pass through a portion of the redundant system, as well as

though several hundred feet of fairly heavily vegetated open

space before reaching the lake. As long as the infiltration

trenches are cleaned and maintained, the evidence shows that

the likelihood that the hilltop lots would generate nutrient

transport that would reach the lake is practically non-

existent. It would be reasonable for the TRPA to require

owners of property with systems like Uppaway to post a

performance bond to assure regular clean up and mainte-

nance of these systems.

40. To the extent that land coverage issues under IPES

are in conflict with the land coverage issue adjudicated by

the federal court decision, IPES must give way to the federal

court decision. The IPES system, which is built upon a

modified Bailey system, does not reflect such remarkably

new insights into the Tahoe ecology as to vitiate the basis for

the earlier approvals, given this Court’s finding of lack of

detrimental impacts, and the special de jure status of this

subdivision under the Federal Court ruling.

Nevada has a strong legal tradition sanctioning planners

from changing their minds about permissible uses after

existing zoning and land uses ordinances have encouraged a

developer to invest substantial sums in reliance on prior

representations. Mr. Kelly has spent substantial sums in

reliance upon his approvals, and the doctrine is properly

applied to this case.

41. Since this Court has found that the prior federal court

ruling is dispositive on the subject of how much gross land

-D 40-

coverage is available to Mr. Kelly, there is no legal impedi-

ment to Mr. Kelly preventing him from proceeding immedi-

ately to build or sell his seven (7) hilltop lots in a manner

consistent with these findings.

CONCLUSIONS OF LAW

1. The issues relating to the Plaintiff’s hilltop lots 33, 34,

35, 37, 38 and 39 have been fairly tried in 1975 by the

United States District Court for Nevada, and the doctrine of

res judicata is applicable to the following issues:

(A) The excess land coverage for Uppaway Estates

was approved by a variance legaily granted under

Section 8.25(2) of the TRPA land use ordinance.

(B) Uppaway was approved under the TRPA

Compact because of lack of dual majority vote.

(C) Considering all Douglas County and TRPA

prior approvals and the federal court order,

Mr. Kelly does not have to obtain an allocation

under Chapter 33 of the TRPA ordinances for these

seven lots. The TRPA cannot force Mr. Kelly or

the purchasers or assigns of these lots to stand in

line with everybody else in light of the history of

this development. The Douglas County building

permits issued for these seven lots are above and

beyond the TRPA allocation to Douglas County.

The exemptions for these lots run with the land and

can be transferred to purchasers or assigns from

Mr. Kelly.

(D) Mr. Kelly, his purchasers or assigns, will have

to pay the air quality fee of $1,000 and he $2,500

refundable security deposit to assure proper

completion of the residence in compliance with

Douglas County ordinances and permit conditions.

Mr. Kelly has already spend considerable funds on

mitigation. The fees Mr. Kelly paid to the TRPA

-D 41-

in 1982 as described in finding 24 above may be

credited against the fees that may be due the TRPA

under this finding.

(E) Since this Court has found that the prior

federal court ruling is dispositive on the subject of

how much gross land coverage is available to Mr.

Kelly, there is no legal impediment to Mr. Kelly

preventing him from proceeding immediately to

build or sell his seven (7) hilltop lots in a manner

consistent with these findings.

2. Kelly is not guilty of laches.

3. On July -22, 1982, an understanding was reached

between Plaintiff Kelly and the TRPA whereby access to the

hilltop would be by road rather than funicular; that Kelly

could proceed with construction of the hilltop road and all

offsite improvements for hilltop lots 33, 34, 35, 36, 37, 38.

4. The understanding of July 22, 1982, between Plaintiff

Kelly and the TRPA could not be implemented because of a

moratorium placed on the- TRPA by a California Federal

Court Order. There was a failure of consideration of the

condition upon which Mr. Kelly gave up Lot 39. Mr. Kelly

can file an amended map with Douglas County to reinstate

Lot 39 and the TRPA shall take no action to interfere with

Kelly’s right to obtain a Douglas County building permit for

Lot 39 or build thereon.

5. The actions of the TRPA during the period from 1982

to 1987 are not confiscatory and do not’ require

compensation.

6. Mr. Kelly’s Douglas County building permits for six

hilltop lots are still valid from the standpoint of the parties to

this litigation but, of course, remain subject to the jurisdic-

tion of Douglas County, and any of its ordinances, special

conditions, or regulations.

7. Building envelopes will not exceed 2,500 square feet

per parcel together with a small (380 square foot) allowance

-D 42-

for impervious coverage for driveways (see Explanatory

Order of even date herewith)

JUDGMENT

IT IS THEREFORE ORDERED, ADJUDGED AND

DECREED that Plaintiff William Cody Kelly may forthwith

proceed to obtain building permits from Douglas County for

hilltop lots 33, 34, 35, 36, 37, 38 and 39, and he, his pur

chasers or assigns, may construct residences on these [ots in

a4 manner consistent with the above Findings of Fact and

Conclusions of Law

JATED this Ist day of November, 1991

/s Charles M. McGee

DISTRICT JUDGI

-D 43-

CERTIFICATE OF SERVICE

Pursuant to NRCP S(b), I certify that I am an employee of

CROWELL, SUSICH, OWEN & TACKES, LTD., and that on

the 6th day of November, 1991, I deposited for mailing at

Carson City, Nevada, postage prepaid, a true and correct

copy of Notice of Entry of Judgment, addressed to

Richard M. Skinner

Deputy Attorney General

State of California

P.O. Box 944255

Sacramento, CA 94244-2550

Brian Chally

Deputy Attorney General

State of Nevada

123 West Nye Lane

Carson City, NV 89710

Jeffrey Blanck, Agency Counsel

Tahoe Regional Planning Agency

P.O. Box 1038

Zephyr Cove, NV 89448-1038

| also certify that a copy of the Notice of Entry of Order was

personally served by hand delivery on November 6, 1991.

during regular business hours, to the Law Offices of Daniel

R. Walsh, located at

Daniel R. Walsh, Esq

Capital Plaza

1100 East William, Suite 217

Carson City, NV 8970]

s/ Lauren Arends

LAUREN ARENDS