Exhibit A PUBLIC TRUST POLICY For The California State Lands Commission The Legislature has given the California State Lands Commission authority over California?s sovereign lands lands under navigable waters. These are lands to which California received title upon its admission to the Union and that are held by virtue of its sovereignty. These lands are also known as public trust lands. [The Commission administers public trust lands pursuant to statute and the Public Trust Doctrine the common law principles that govern use of these lands. Public Trust Doctrine The Public Trust Doctrine is set forth in common law. Several of its guiding principles are that; I. Landsunder the ocean and under navigable streams. are owned by the public and held in trust for the people by government. These are referred to as public trust lands, and include ?lled lands formerly under water. Public trust lands cannot be bought and sold like other state-owned lands. Only in rare cases may the public trust be terminated, and only where consistent with the porposes and needs of the trust. II. Uses of trust lands, whether gamed to a local agency or administered by the State directly, are generally limited to those that are water dependent or related, and include commerce, ?sheries, and navigation, environmental preservation and recreation Public trust uses include, among others, ports, marinas, docks and wharves, buoys, hunting, commercial and Sport ?shing, bathing, swimming, and boating. Public trust lands may also be kept in their natural state for habitat, wildlife re?iges, scienti?c study, or open space. Ancillary or incidental uses, that is, uses that directly promote trust uses, are directly supportive and necessary for trust uses, or that accommodate the public?s enjoyment of trust lands, are also permitted. Examples include facilities to serve visitors, such as hotels and restaurants, shops, parking lots, and restrooms. Other examples are commerCial facilities. that must be located on or directly adjacent to the water, such as warehouses, container cargo storage, and facilities for the development and production of oil and gas. Uses that are generally not permitted on public trust lands are those that are not trust use related, do not serve a public purpose, and can be located on non-waterfront property, such as residential and non-maritime related commercial and of?ce uses. While trust lands cannot generally be alienated from public ownership, uses of trust lands can be carried out by public or private entities by lease from this Commission or a local agency grantee. In some cases, such as some industrial leases, the public may be excluded from public trust lands in order to accomplish a proper trust use. Ill. Because public trust lands are held in trust for all citizens of California, they must be used to serve statewide, as opposed to purely local, public purposes. Commission Authority The Legislature has granted general authority to the Commission to manage trust lands. Unless otherwise expressly stated in the State Constitution or statutes, the'public trust doctrine mandates the criteria for Commission management of trust lands. In out its management responsibilities, the Commission commonly leases trust lands to private and public entities for uses consistent with the doctrine. Subject to the criteria in statutes and case law, the Commission may also exchange public trust lands for non-trust lands, lift the trust from public trust lands, enter into boundary line agreements, and otherwise generally manage trust lands. While most of the authority over public u'ust lands possessed by the Legislature is vested in the Commission, the Legislature, as the people?s elected representatives, has not delegated the authority to modify uses permitted on public trust lands by the Public Trust Doctrine. There are times when the Legislature, exercising its retained powers, enacts laws dealing with public trust lands and uses for specified properties. This may include, in limited circumstances, allong some non-trust uses when not in con?ict with trust needs, in order to serve broader public trust purposes. Implementation by the Commission of the Public Trust Doctrine. The Commission implements the Public Trust Doctrine through careful corniderationof its principles and the exercise of discretion within the Speci?c context of proposed uses. Factors such as location, and planned surrounding facilities, and public needs may militate in favor of a particular use in one area and against the Same use in another. The Commission applies the doctrines tenets to proposed projects with consideration given to the context of the project and the needs of a healthy Califomia society, to meet the needs of the public, business and the environment. The Commissiion may also choose among competing valid trust uses. The Commission must also comply with the requirements of other applicable law, such as the California Environmental Quality Act. In administering its mist responsibilities, the Commission exercises its discretionary authority in a reasoned manner, accommodating the changing needs of the public while preserving the public?s right to use public trust lands for the purposes to which they are uniquely suited; I Relationship of the Commission to Granted Lands The Legislature has granted certain public trust lands to local governments for management A grantee must manage trust lands consistent with its own granting statutes and the Public Trust Doctrine, The Legislature has retained for the state, by delegating to the Commission, the power to approve land exchanges, boundary line agreements, etc. The State Lands Commission exercises oversight over all granted lands. Generally, this means the Commission carries out this responsibility by working cooperatively with grantees to assure that requirements of the legislative grants and the Public Trust Doctrine are carried out and to achieve trust uses. 'llie Commission monitors and audits the activities of the grantees to insure that they are complying with the terms of their statutory giants and with the public trust. With a few exceptions, grantees are not required to secure approval from the Commission before embarking on development projects on their trust lands nor before expending revenues generated from activities on these lands. However, where an abuse of the Public Trust Doctrine or violation of a legislative grant occurs, the Commission can advise the grantee of the abuse or violation; if necessaly, report to the Legislature, which may revoke or modify the grant; or ?le a lawsuit against the grantee to halt the projector expenditure. Exhibit The Public Trust Doctrine I. Origins of the Public Trust The origins _of the public trust doctrine are traceable to Roman law concepts of common pr0perty. Under Roman law, the air, the rivers, the sea and the seashore were incapable of private ownership; they were dedicated to the use of the public.1 This concept that tide and submerged lands are unique and that the state holds them in trust for the peeple has endured throughout the ages. In, 13th century Spain, for example, public rights in navigable waterways were recognized in Las Siete Partidas, the laws of Spain set forth by Alfonso the Wise.2 Under English common law, this principle evolved into the public trust doctrine pursuant to which the sovereign held the navigable waterways and submerged lands, not in a proprietary capacity, but rather ?as trustee of a public trust for the bene?t of the people" for uses such as commerce, navigation and ?shing.3 I After the American Revolution, each of the original states succeeded to this sovereign? right and duty. Each became trustee of the tide and submerged lands within its boundaries for the common use of the people.4 Subsequently admitted states,1ike California, possess the same sovereign rights over their tide and submerged lands as the original thirteen states under the equal-footing doctrine.5 That is, title to lands under navigable waters up to the high water mark is held by the state in trust for the people. These lands are not alienable in that all of the public 5 interest in them cannot be extir'iguished.6 'lnstitutes ofJustinian 2.1.1. 2Las Siete Partidas 3.28.6 (3. Scott trans. ed. 1932). JCOIberg, Inc. v. State OfCalz?Jrnia ex rel. Dept. Pub. Works (1967) 67 Cal.2d 408, 416. 4Marrin v. Waddell (1842) 41 U.S.- (16 Pet.) 367, 410. sPollard Lessee v. Hagen (1845) 44 U.S. (3 How.) 212, 228-29. 6Pe0ple v. California Fish CO. (15213) i 166 Cal. 576, 597-99; City ofBerkeIey v. Superior Com? (1980) 26 Cal.3d 515, 524-25. II. Purpose of the Public Trust The United States Supreme Court issued its landmark opinion on the nature of a state? 5 title to its tide and submerged lands nearly 110 years ago, and although courts have reviewedtidelands trust issues many times since then, the basic premise of the trust remains fundamentally "unchanged. The Court said then that a state title to its tide and submerged lands is different from that to the lands it holds for sale. ?It is a title held in trust for the people Of the State that they may enjoy the navigation of the waters, carry on commerce over them, and have liberty of ?shing? free from obstruction or interference from private parties.7 In other words, the public trust is an af?rmation of the duty of the state to protectthe people 5 common heritage of tide and submerged lands for their common use.8 - But to what common uses may tide and submerged lands be put? Traditionally, public trust uses were limited to water-related commerce, navigation, and fishing. In more recent years, however, the California Supreme Court has said that the public trust embraces the right of the public to use the navigable waters of the state for bathing, swimming, boating, and general recreational purposes. It is suf?ciently flexible to encompass changing public needs, such as the preservation of the lands in their natural state for scienti?c study, as open Space and as wildlife habitat. The administrator of the public trust ?is not bugdened with an outmoded classi?cation favoring one mode of utilization over another." The Legislature, acting Within the con?nes of the common law public trust doctrine, is the ultimate administrator of the tidelands trust and often may be the ultimate arbiter of permissible uses of tmst'lands. All uses, including those speci?cally authorized by the Legislature, must take into account the overarching principle of the public trust doctrine that trust lands belong to the public and are to be used to promote public rather than Vilinois Central RR. Co. Illinois (1892) 146 US. 387, 452. sNarz'onal Audubon Society v. Superior Court (1983) 33 Cal.3d 419, 441. ?Mar/cs v. Whitney (1971) 6 Cal.3d 251, 259-260. exclusively private purposes. The Legislature cannot commit trust lands irretrievably to private development because it would-be abdicating the public trust,? Within these con?nes, however, the Legislature has considerable discretion. The Legislature already may have spoken to the issue of the uses to 'whiCh particular tide and submerged lands may be put when making grants of these lands in trust to local government entities. Statutory trust grants are not all the same -some authorize the construction of perts and airports, others allow only recreational uses and still others allow a broad range of uses. A further and often complicating factor is that granted and ungranted lands already may have been developed for particular trust uses that are incompatible with other trust uses or may have become'antiquated. Some tidelands have been dedicated exclusively to industrial port uses, for example, and in these areas, recreational uses, even if also authorized by the trust grant, may be incompatible. Similarly, tidelands set aside for public beaches may not'be suitable for construction?of a cannery, even though a cannery may be an acceptable trust use. Piers, wharves and warehouses that once served commercial navigation but no longer can serve modern container shipping may have to be removed or converted to a more productive trust use. Historic public trust uses may have been replaced by new technologies. Antiquated structures on the Waterfront may be an impediment rather than a magnet for public access and use of the waters. Public trust uses may and often do con?ict with one another. The state and local tidelands grantees, as administrators of their" respective public trust lands, are charged with choosing among these conflicting uses, with the Legislature as the ultimate arbiter of their choices. For all these reasons, a list of uses or a list of cases without more may not be as useful as an analysis of public trust law applied to a speci?c factual situation. willinois Central Railroad v. Hanan, supra, at 452-53. E1. The Leasing of Tidelands A few principles established by the courts are instructive in analyzing under the public trust doctrine the leasing of public trust lands for particular uses. For sample, it was settled long ago?that tidelands granted in trust to local entities may be leased and improved if the leases and improvements promote uses authorized by the statutory trust gran-t and the public trust. Leases for the construction of wharves and warehouses and for railroad uses, structures that directly promote port develbpment, were approved early in the 20?h century. 11 Later, leases for structures incidental to the promotion of port commerce, such as the Port of Oakland? 5 convention center, were held to be valid because although they did not directly Support port business, they encouraged trade, shipping, and commercial associations to become familiar with the port and its assets.?2 Visitor-serving facilities, such as restaurants, hotels, shops, and parking areas, were also approved as apprOpriate uses because as places of public accommodation, they allow broad public access to the tidelands and,? therefore, enhance the public' senj cyment of theSe lands historically set apart for their benefit}3 These cases provide three guidelines for achieving compliance with the public trust when leasing tidelands for construction of permanent structures to serve a lessee 3 development project: l) the structure must directly promote uses authorized by the statutory trust grant and trust law generally, (2) the structure must be incidental to the promotion of such uses, or (3) the structure must accommodate or enhance the public enjoyment of the trust lands. Nonetheless, when considering what constitutes a trust use, it is critical to keep in mind the following counsel from the California Supreme Court: The objective of the public trust is always evolving so that a trustee is not burdened with outmoded classi?cations favoring the original and traditional triad of commerce, navigation and fisheries over those uses encompassing changing public needs.? ?Son Pedro etc. RR. Co. v. Hamilton (1911) 161 Cal. 610; Koyner v. Miner (1916) 172 Cal. 448; Oakland v. Lorne Wharch Warehouse Co. (1918) 179 Cal. 207; City of Oakland v. Williams (1929) 206 Cal. 315. ?Haggeny v. City oanklana? (1958) 161 Cal.App.3d 407, 413-414. ?Id. at p. 414; Martin v. Smith (1960) 184 Cal.App.2d 571, 577-78. l4National Audubon Society v. Superior Court. supra. at p.434. 4 IV. Promotion-of Trust Uses and Public Eniovment of Trust Lands Installations not directly connected with water-related commerce are appropriate trust uses when they must be located on, over or adjacent to water to accommodate or foster commercial enterprises. Examples include oil production'facilities, freeway bridges and nuclear power plants;15 Hotels, restaurants, shops and parking". areas are appropriate because they accommodate or enhance the public ability to enjoy tide and submerged lands and navigable waterways. The tidelands trust is intended to promote rather than serve as an impediment to essential commercial services bene?tting the people and the ability of the people to enjoy trust lands.16 Nevertheless,the essential trust purposes have always been, and remain, water related, and the essential obligation of the state is to manage the tidelands in order to implement and facilitate those trust purposes for all of the people of the state.17 Therefore, uses that do not accommodate, promote, foster or enhance the statewide public' 5 need for essential commercial services or their enjoyment of the tidelands are not appropriate uses for public trust lands. These would include commercial installations that could as easily be sited on uplands and strictly local or ?neighborhood-serving" uses that confer no signi?cant bene?t to Californians statewide. Examples may include hospitals, supermarkets, department stores, and local government buildings and private of?ce buildings that serve general rather than speci?cally trust?related functions. l5See Boone v. Kingsbury (1928) 206 Cal.148, 183; Colberg, Inc. v. State of California ex rel. Dept. Pub. Work, supra, at pp. 421-22; and Carstens v. California Coastal Com. (1986) 182 Cal.App.3d 277, 289. ?Carstens v. Califomia Coastal Com, supra, at p. 289. ?Joseph L. Sax, ?The Public Trust in Stormy Western Waters," October 1997. V. Mixed-Use Developments Mixed-use development preposals for ?lled and un?lled tide and submerged lands have generally consisted of several structures, including non-trust use structures or structures where only the ground floor contains a trust use. While mixed-use developments on tidelands may provide a stable population base for the development, may draw the public to the development, or may yield the ?nancing to pay for the trust uses to be included in the development, they ought not be approved as consistent with statutory trust grants and the public trust for these reasons. These reasons the deveIOpment ?nancially attractive-to a deveIOper. Projects must have a connection to water?related activities that provide bene?ts to the public statewide, whiCh is the hallmark of the public trust doctrine. Their failure to achieve" this goal simply to make a'development ?nancially attractive sacri?ces public benefit for private or purely local advantage. A mixed-use development may not be compatible with the public trust, not because it-may contain some non-trust elements, but because it promotes a ?commercial enterprise unaffected by a public use" ?3 rather than'promotingi, fostering, accommodating or enhancing a public trust use.19 That use, howeVer, need not be restricted to the traditional triad of commerce, navigation and ?shing. It is an evolving use that is reSponsive to changing public needs for trust lands and for the bene?ts these-lands provide.20 Moreover, Commercial enterprises without a statewide public trust use. may violate the terms of statutory trust grants. Typically, grants allow tidelands to be leased, but only - for purposes ?consistent with the trust upon which said lands are held. This term is not equivalent to ?not required for trust uses? or ?not interfering with trust uses." Since leases of tidelands must be consistent with statutory trust grant purposes, leases which expressly contemplate the promotion of non-trust uses rather than trust uses would not comply with the terms of the trust grants. ?City ofLong Beach v. Morse (1947) 31 Cal.2d 254, 261. lgHa:gga?m?v v. City oankland, supra, at pp. 41344. ZONational Audubon Society v. Superior Court, supra. at p. 434. For these reasons, non-trust uses on tidelands, whether consideredseparately or part of a mixed-use development, are not mitigable. That is, unlike some environmental contexts where developments with harmful impacts may be approved so long as the impacts are appropriately mitigated by the developer, in the tidelands trust context, mitigation of a non-trust use has never been recognized by the courts. To the contrary, the California Supreme Court has said that just as the state is prohibited from selling its tidelands, it is similarly prohibited from freeing tidelands from the trust and dedicating them to other uses- while they remain useable for or susceptible of being used for water?related activities.21 Vl. Incidental Non-Trust Use All structures built on tide and submerged lands should have asftheir main purpose the furtherance of a public trust use. Any structure designed or used primarily for a non- trust purpose Would be suspect. Mixed?use development proposals, hOWever, frequently justify non-trust uses as ?incidental? to the entire project. The only published .case in California in Which a non-trust use of tidelands has'been allowed focused on the fact that the real or main purpose of the structure was a public trust use andthat the non?trust use would be incidental to the main purpose of the structure.22 In this context, the court noted that because the real or main purpose of the structure was to promote public trust uses, non- - trust groups could also use the facility, but the non?trust uses must remain incidental .to the main purpose of the structure.23 This is the state of the law, and it is supported by good policy reasdns as well. If the test for whether a non-trust use is incidental to the main purpose of a development were not applied on a struCture by structure'basis, pressure for more dense coastal development may increase as developers seek to maximize the square feet of allowable non-trust uses. Disputes may arise as to how to calculate the square footage attributable to the proper trust uses versus non-trust uses, with 'open waterways and i parking garages likely being the dominant trust uses and structures being devoted to non- trust uses. It is beyond contention that the state cannot grant tidelands free of the trust merely because the grant serves some public purpose, such as increasing tax revenues or because the grantee might put the property to a commercial use?1 The same reasoning applies to putting tidelands to enduring non-trust uses by building structures 0n them. Accordingly, v. Hammond (1935) 4 cited 31,42-43. zzHaggerzy v. City of Oakland, supra, at p. 413. Blind. Audubon Society v. Superior Court, supra, at p. 4-40. the only enduring non-trust uses that may be made of tidelands without speci?c legislative authorization are those incidental to the main trust purpose applied on a structure by structure basis. Each structure in a mixed-use development on tidelands. must have as its primary purpose an appropriate public trust use. If its real or main purpose is a trust use, portions of the structure not needed for trust purposes may be leased'temporarily to non- trust tenants, provided that the non-trust use is incidental to the main purpose of the structure. vs. The Role ofthe Legislature The Legislature is the representative of all the people and, subject to judicial review, is the ultimate arbiter of uses to which public trust lands may be put. The Legislature may create, alter, amend, modify, or revoke a trust grant so that the tidelands are administered in a manner most suitable to the needs of the people of the state.? The Legislature has the power to authorize the non-trust use of tidelands. It has done so rarely, and then on a case- speci?c basis.?5 Many of its actions have been a recognition of incidental non-trust uses or of a use that must be located on the tidelands. When these legislative actions have been challenged in court, the courts, understandably, have been very deferential, upholding the actions and the ?ndings supporting them}7 The Legislature has provided a statutory framework for the leasing of tidelands for non~trust uses by the cities of Long Beach and San Francisco grounded on ?ndings that the tidelands are not required for (San Francisco) or not required for and will not interfere with (Long Beach) the uses and purposes of the granting statute.28 Where, as in these two statutes, the Legislature has authorized in general terms the use of tidelands for non-trust purposes, the statutes provisions must be interpreted so as to be consistent with the paramount rights of commerce, navigation, ?shery, recreation and environmental 35cm? ofCOronado v. San Diego Unified Port District (1964) 227 Cal.App.2d 455, 474. 26For example, in Chapter 728, Statutes of 1994, the Legislature authorized tidelands in Newport Beach to continue to be put to non?trust uses for a limit?d term after it was determined that the tidelands had been erroneously characterized and treated as uplaniis by the city due to incorrect placement of the tidelands boundary. :7See, Boone v. Kingsbury, supra, at p. 183 and City ofCOronado v. San Diego Uni?ed Port District, supra, at pp. 474-75; but see Mallon v. City of Long Beach (1955) 44 Cal.2d 199, 206-07, 212. 28Ch. 1560, Stats. 1959; Ch. 422, Stats. 1975. These statutes also provide for, inter alia, the lease revenues to be used to further trust uses and purposes. protection. This means that the tidelands may be devoted to purposes unrelated to the common law public trust to the extent that these purposes are incidental to and accommodate projects that must be located on; over or adjacent to the tidelands. These non-trust uses are not unlimited, for there are limits on. the Legislature? authority to free tidelands from trust use restrictions.29 To ensure that the exercise of the Long Beach and San Francisco statutes is consistent with the common law public trust, the tidelands to be leased for non-trust uses must have been ?lled and reclaimed and no longer be tidelands or submerged lands and must be leased for a limited term. The space occupied by the. non-trust use, whether measured "by the percentage of the land area or the percentage of the structure, should be relatively small. Finally, any structure with a non-trust use should be compatible with the overall project. Findings such as these are necessary because legislative authorizations to devote substantial portions of tidelands to long-term non-trust uses have generally been considered by the courts as tantamount to alienation}? In several out-of?state cases, speci?c, express legislative authorizations of incidental leasing of publicly-?nanced of?ce building space to private tenants solely for the purpose of producing revenue have been subject to close judicial scrutiny, although they did - not involve tidelands trust use restrictions.? One case involved construction of an international trade center at Baltimore 5 Inner Harbor with public financing where legislation expressly permitted portions of the structure to be leased to private tenants for the production of income. Another was a condemnation case where the statute authorizing the New York Port Authority to acquire a site on which tobuild the World Trade Center was challenged on the basis that it allowed portions of the new structure to be used for no other purpose than the raising of revenue. 'In both cases, opponents of the projects argued that a publicly financed of?ce building should not be permitted to have any private commercial tenants even though the respective legislatures had expressly allowed incidental private use of each building. The state courts in both Maryland and New York held that so long as the primary purpose of the of?ce building was for maritime purposes connected with the port, legislation authorizing the leasing to private tenants was valid.32 Although both cases 29Illinois Central RR. Co. v. Illinois, supra, at pp. 452-54. wAWwod v. Hammond. supra. at p. 42; see also Illinois Central Co. v. Illinois, supra, at pp. 454?53. 3llaerclt v. Maryland Port Authority (1965) 240 Md. 438; Courtesy Sandwich Shop, Inc. v. Port of New York Authority (1963) 12 379. 3215M. - involve challenges to ?nancing and condemnation statutes and do not involve the public trust, they are instructive because they demonstrate the importance to the courts,-ev-en in the context of public ?nancing and condemnation, that when a portion of a structure is to be leased for the purpose of raising reVenues to offset expenses, this incidental non-public leasing must have been legislatively authorized. Exchanges of Lands Situations where a local government or a private party acquires a right to use former . trust property free of trust restrictions are rare.33 In order for such a right to be valid, the Legislature must have intended to grant the right free of the trust and the grant must serve the purpose of the trust. Public Resources Code section 6307 is an example of the rare situation where abandonment of the public trust is consistent with the purposes of the trust. Section 6307 authorizes the Commission to exchange landsof equal value, whether ?lled or un?lled, Whenever it ?nds that it is ?in the best interests of the state, for the improvement of navigation, aid in reclamation, for ?ood control protection, or to enhance the con?guration of the shoreline for the improvement of the water and upland, on - navigable rivers, sloughs, streams, lakes, bays, estuaries, inlets, or straits, and that it will not substantially interfere with the right of navigation and ?shing in the waters involved. The lands exchanged may be improved, ?lled and reclaimed by the grantee, and upon adoption by the Commission of a resolution ?nding that such lands (1) have been improved, ?lled, and reclaimed, and (2) have thereby been excluded from the public channels and are no longer available or useful or susceptible of being used for navigation and ?shing, and (3) are no longer in fact tidelands and submerged lands, the lands are thereupon free from the public trust. The grantee may thereafter make any use of the lands, free of trust restrictions. In order for such an exchange of lands to take place, the Commission must ?nd that the lands to be exchanged are no longer available or useful or susceptible of being used for navigation and ?shing, taking into consideration whether adjacent lands remaining subject to the trust are suf?cient for public access and future trust needs; that non-trust use of the lands to be freed of the public trust will not interfere with the public 3 use of adjacent trust lands; and that the lands that will be received by the state in the exchange not only are of equal, or greater, monetary value but also have value to the tidelands trust, since they will take on the status of public trust lands after the exchange. Only then can the Commission ?nd that the transaction is in the best interests of the state, that the exchange of lands will promote the public trust and that it will not result in any substantial interference with the public interest in the lands and waters remaining. 33 National Audubon Society v. Superior?Courr. supra. at p- 440. lO'