Lay of the Land

The Initiative and CEQA

Published on: February 13, 2017 | By Kenneth Bley and Lisa Patricio

The development of a real estate project of almost any size is going to require compliance with the California Environmental Quality Act – CEQA – generally through the preparation of an environmental impact report – an EIR. Those who have gone through the process know that the preparation of an EIR can cost hundreds of thousands of dollars and take a year or more, all this before the first public hearing. Further, opposition to an approved project frequently results in a lawsuit, one which generally claims that there has been a failure to comply with CEQA, either because an EIR should have been prepared (if one hadn’t been) or else that the EIR that was prepared was inadequate. That litigation can, by itself, add hundreds of thousands of dollars in costs and two or three years before the first spoonful of dirt can be moved even assuming that the opponents’ lawsuit fails. Costs and delays increase if the lawsuit is successful. Small wonder that developers look for ways around CEQA.

The California initiative process allows for project approval either because a city council decides to adopt the initiative as written or because it is submitted to the voters who vote in favor of the initiative. It has been the law for over a decade that a project that is proposed through the initiative process and approved by the voters is not subject to CEQA. This has led several developers, including Wal-Mart, to use the initiative process to get their project approved. Wal-Mart scored a significant victory in 2014 when the California Supreme Court held that CEQA wasn’t implicated when the proposed initiative was adopted by a city council. In that case, Wal-Mart proposed, and the city council adopted, a specific plan that authorized the expansion of an existing Wal-Mart store.

Other developers have followed Wal-Mart’s lead. For instance, Moreno Valley’s City Council adopted an initiative that approved a 40,000,000 square foot logistics facility in November, 2015. However, the opposition’s responses demonstrate that the use of the initiative process isn’t a silver bullet. First, opponents attempted to get enough signatures on a referendum petition to overturn the Council’s adoption of the initiative. That worked in 2015 in Carlsbad when a referendum overturned the council’s approval of a proposed shopping center. When the opponents couldn’t get enough signatures to put a referendum on the ballot in Moreno Valley, four lawsuits were filed in February 2016 attacking the Council’s action. A Riverside Superior Court judge ruled in favor of the City in September 2016. That judgment is now on appeal.

Nor should it be assumed that a city council will automatically adopt an initiative. Land use is political and a council may, or may not, be willing to take responsibility for approving a project by adopting the initiative. The alternative is to put the initiative on the ballot to let the voters decide. Such initiatives were on the ballot in Beverly Hills, Cupertino, Cypress, and San Diego County in November 2016. All were rejected by the voters.

The bottom line? There is a way around CEQA, but it’s neither guaranteed nor cost free. Nevertheless, the use of the initiative should be considered for a substantial project.

Looking Forward – Retail Perspectives 2017 Forecast

Published on: February 8, 2017 | By Cox Castle

As we have done for the past eight years, the Retail Group of Cox, Castle & Nicholson LLP has, once again, taken on the daunting task of forecasting what to expect in the forthcoming year in four critical segments that affect the retail industry. In doing so, the Retail Group analyzed the social, political and economic events of 2016, reviewed various economic data and projections and have come to certain opinions relating to the retail industry and where it is heading in 2017. Below is a product of their thinking, in the form of four articles of interest addressing such topics as capital markets, retailing, retail development and the impact of residential development on retail. If you would like to read the content of the report, click the links below.

“Most Likely Descendants” Regulations Enter Approval Process

Published on: February 1, 2017 | By Kurt Whitman

California’s Native American Heritage Commission has issued its initial approval of draft regulations that, if finally approved, will guide the treatment and disposition of Native American human remains and associated burial items in connection with development projects and other ground-breaking activities in California.

The Draft Regulations. The overarching goal of the regulations is to protect Native American burial sites and remains that may be disturbed as a result of development. The main thrust of the regulations is to address certain problems associated with the “Most Likely Descendants” (MLDs) process and the treatment and disposition of Native American human remains. These problems include, for example, identifying the appropriate MLD for the treatment and disposition of human remains and confidentiality during the process of conferring with landowners regarding that treatment and disposition.

From the perspective of developers and landowners, the regulations appear broad in scope. They apply to any “project,” which encompasses not only “projects” as defined under the California Environmental Quality Act, but also “any ground-disturbing activity that results in the inadvertent discovery of Native American human remains.”

Key elements of the regulations include (1) implementation of specific timing and procedural requirements for identifying tribes or consortia of tribes as MLDs upon discovery of Native American human remains in any “project”; (2) the creation of rules and guidelines for required conferrals (including an optional mediation process) between landowners and MLDs; and (3) the establishment of a Code of Ethics for MLDs and their authorized representatives to follow in the context of the treatment and disposition process. The regulations also clarify the confidential nature of decisions and agreements surrounding treatment and disposition of Native American human remains and limit the types of related information available to the public.

Next Steps in the Process. The Commission’s recent approval is not the final step for the regulations. Instead, this approval serves to initiate the formal rulemaking process for potential future adoption and publication.

Pursuant to the Commission’s approved timeline, the first public comment period is expected to commence on April 13, 2017, and end on June 26, 2017. A public hearing is tentatively set for July 21, 2017. If timely approved and adopted, the regulations will take effect in early 2018.

Key dates in the Commission’s current schedule for the rulemaking process are as follows:

February 3, 2017: Commission Staff submits proposed rulemaking package and draft proposed regulations to the California Department of Finance for review of fiscal impact.
April 3, 2017: Commission Staff submits required rulemaking documents to the California Office of Administrative Law (“OAL”) for publication.
April 13, 2017: OAL publishes Notice of Proposed Action, which begins the formal process of adopting the regulations and the period for public comment and tribal consultation.
June 26, 2017: Public comment period ends.
July 21, 2017: Public hearing.
August 11, 2017: Publication of substantial changes to the proposed regulations, which commences another public comment period of 28 days.
September 8, 2017: Public comment and tribal consultation periods end.
October 20, 2017: Potential date of Commission adoption (if adopted, the regulations will be submitted to the OAL for final review and submitted to the California Secretary of State, with an effective date likely to take place in early 2018).

The proposed draft regulations presented at the Commission’s January 20 meeting are available here: Most Likely Descendants Regulations

Surprise! California Has a Housing Crisis!!!

Published on: January 18, 2017 | By Tim Paone

In its recent draft assessment of “California’s Housing Future,” the State’s Department of Housing and Community Development (HCD) made these observations, among many others:

California needs 180,000 new homes each year.
Over the last ten years, annual production has averaged less than 80,000 homes.
Californians overpay for housing, commute too far, and are overcrowded.
The existing system of land use regulation creates barriers to development.
The housing crisis makes it difficult for California businesses to attract and retain employees.
A smaller percentage of Californians own their homes than at any time since the 1940s.
The housing shortage disproportionately impacts California’s younger residents and the economically and physically disadvantaged.
California is home to 12% of the nation’s population and 22% of the nation’s homeless.
Funding for affordable housing is unstable.
High housing costs increase health care costs and decrease educational outcomes.
California’s population will grow from today’s 39 million to 50 million by 2050.

While this report is candid and open, its findings mean little if California’s elected officials at every level do nothing meaningful to counter these growing and disturbing – but hardly surprising – realities. The Legislature cannot continue to avoid reconciling legitimate environmental concerns, the challenges of climate change, the need for greater housing affordability, and the increasing demand for housing of all types by avoiding true CEQA reform and adopting ever increasing restrictions on new housing development. Nor can it simply decree that more affordable housing be built, ignoring the reality that those who build homes will not do so unless it makes sound business sense. At the local level, residents understandably want to avoid traffic jams and overcrowding and would like to define their own visions of their communities. Those who own their homes are thrilled by the increases in home prices resulting from the housing shortage. But when every community says “We don’t oppose more housing, just do it somewhere else,” there ultimately is nowhere else in California to go. Combine these factors with environmental solutions that, intended or not, produce elitist housing outcomes, and we have a housing crisis which no one denies, but the most powerful forces in the state are seemingly helpless to address. The challenges are complex and there’s no easy answer, but looking the other way only increases the cost of housing, makes doing business in California less attractive, and sends our young adults elsewhere. That, for sure, is not an acceptable outcome.

Public comment on the HCD draft report is open through March 4. Click here for the full draft report or go directly to the HCD website.

This post was previously published by Tim Paone in LinkedIn.

Commercial Development: A City That Thinks Outside the (Parking) Box

Published on: January 9, 2017 | By Tim Paone

Do Parking Formulas Deprive Cities of Revenue Opportunities?

When a city planning department proposes a change in the city’s development standards to address a specific planning concern, it often is asked by its city council “What are other cities doing?” This question is particularly likely when the proposed change, on its face, suggests that local residents might be inconvenienced. But in the face of increasing economic challenges, some California city councils are willing to pioneer creative planning approaches to stimulate economic activity in their cities, rather than let that activity land elsewhere.

One example is the adoption in late 2016 by the Lancaster City Council of an ordinance which eliminates specific off-street parking requirements (e.g., the number of spaces which must be provided based upon the square footage of the proposed development) for development in commercial zones. Instead of the arbitrary “one size fits all” approach for particular uses, Lancaster’s ordinance requires developers with projects in commercial zones to demonstrate that they are providing adequate parking for their proposed use without being tied to a formula which may or may not be a good measure of the demands of that use. One of the stated purposes of the ordinance is to maximize the City’s economic return from commercial development. In its report on the ordinance to the City Council, Lancaster’s planning staff expressed its belief that “the City’s minimum parking requirements were rooted primarily in a perception of convenience, and not in economic return.” The staff report recommending approval of the ordinance recognized that removing the “regulatory barrier” of formulaic minimum parking requirements in favor of requirements based on actual demand would give developers “the ability to maximize land use potential and value generation, with resulting long-term benefits to the City.” In other words, common sense planning can be a win-win.

From the perspective of the commercial developer, the adoption of Lancaster’s flexible approach to parking requirements is both enlightened and welcome. Most significantly, it reflects an acknowledgement of the many unintended consequences of the typical cookie-cutter approach to parking requirements. Perhaps most impressive is the recognition that rigid parking requirements dictate the design of buildings in ways that, ultimately, may contribute to vacancy and lost economic productivity for the city. Rather than an abstract, formulaic, or “this is how we’ve always done it” approach to planning, Lancaster’s approach reflects the uncommon understanding that what makes a project work for the developer also is likely to be what makes the project work for the city.

The City of Lancaster is located in northern Los Angeles County, relatively far from the hustle and bustle of the Los Angeles metropolitan area. While the remote location of Lancaster undoubtedly influenced its desire to take steps to enhance economic activity within its community, the logic of its new parking ordinance makes sense for any city competing for new economic activity. Beyond parking, this approach could open the door to merging planning and economic development considerations in other types of development. For example, the affordability of nearby housing for employees is a factor which impacts the decisions of businesses to locate within a particular community. For retail development in particular, more houses also means more customers which, in turn, generates greater economic activity for the city. Perhaps one day, California communities will see the wisdom of easing development standards and other regulations for housing to facilitate the production of desirable and affordable residential communities that will benefit home purchasers, tenants, the broader community, and even the city’s coffers. Stay tuned.

COASTAL COMMISSION HAS OVERNIGHT ACCOMMODATIONS IN ITS CROSSHAIRS

Published on: December 16, 2016 | By Stanley Lamport

Anyone who is considering developing, remodeling, or demolishing hotels, motels, or other visitor-serving lodging in the California coastal zone needs to be aware that these projects are likely to be receiving much greater scrutiny at the Coastal Commission.

California’s Coastal Act requires the Commission to protect, encourage, and, where feasible, provide “lower cost visitor and recreational facilities,” which includes lodging. However, under the Coastal Act the Commission cannot fix private overnight room rental rates or set income eligibility standards for overnight room rentals.

The Commission has been discussing ways to provide low-cost overnight accommodations in light of these limitations. The Commission is now approaching the issue with renewed emphasis due to the recent enactment of AB 2616. AB 2616 allows the Commission to consider environmental justice and “the equitable distribution of environmental benefits throughout the state when acting on a coastal development permit.” The new law defines “environmental justice” as “the fair treatment of people of all races, cultures, and incomes with respect to the development, adoption, implementation, and enforcement of environmental laws, regulations, and policies.”

Although AB 2616 takes effect on January 1, 2017, the Commission already is applying environmental justice principles with respect to lodging. At a recent workshop, the Commission’s staff presented preliminary recommendations to address low-cost overnight accommodations. While the Commission has not yet adopted any formal guidance, we expect the Commission will be using the principles discussed at the workshop in evaluating applications in the meantime.

There are some immediate implications that applicants need to plan for now:

First, the Commission is likely to scrutinize renovations and demolitions of existing lower-cost lodging much more closely. The Commission has seen examples of locally approved renovations of affordable accommodations that removed the units from the affordable category. The Commission is now aware of companies investing in that business model. We can expect the Commission to maintain that such upgrades require coastal development permits conditioned to address the anticipated loss of affordability. We also anticipate that the Commission will deny permits to demolish or repurpose affordable accommodations, unless replacement accommodations are first provided.

Second, we can expect that the Commission will require projects that are not affordable to provide onsite low and moderate-cost accommodations (such as camp sites, RV overnight facilities, and similar lower-cost classes of accommodations). We also expect the Commission to impose higher in-lieu fees on all classes of lodging projects and appreciably higher in-lieu fees on high-cost lodging projects, even where existing affordable accommodations have not been eliminated. The Commission’s data shows that fees collected to date have not been enough to create the affordable accommodations for which they were imposed.

Third, Commission staff’s preliminary recommendations emphasize consideration of a project’s affordability relative to the availability of affordable overnight accommodations in the vicinity of the project. The Commission and the State Coastal Conservancy are developing a database for this analysis. Applicants need to be prepared to address marketplace affordability and project economics before the Commission.

Fortune favors the prepared. That certainly will be the case when it comes to dealing with lodging in the coastal zone in the coming years.

Environmental Justice is Coming to California General Plans

Published on: November 29, 2016 | By Tim Paone

Environmental justice goals and policies are coming to the general plans of California cities and counties. So what does that mean for new development projects?

Timing. The new environmental justice requirements are the product of SB 1000, which was signed into law by Governor Jerry Brown on September 24, 2016. Under SB 1000’s amendments to Government Code Section 65302, a local agency will now be required to address environmental justice issues when, on or after January 1, 2018, it concurrently adopts or revises two or more general plan elements. In those circumstances, the local agency must either adopt an environmental justice general plan element or include environmental justice goals, policies, and objectives in its existing general plan elements.

The Meaning of Environmental Justice. To better understand the environmental justice movement and the types of “EJ” provisions local agencies will be pressed to place in their general plans, it is helpful to look at the goals of the California Environmental Justice Alliance, which, along with the Sierra Club and other prominent environmental organizations, is one of the state’s strongest advocates for EJ legislation. The Alliance’s goals include assuring that all families live in healthy neighborhoods, that polluting industries are replaced by green industries, that planning priorities place people above profit, and that lower cost housing is not exposed disproportionately to sources of noise, air, and other pollution.

“Disadvantaged Communities.” Under the new law, all general plans must identify “disadvantaged communities” within their boundaries. These may be areas already identified under existing law in Cal EPA’s list of disadvantaged communities. Areas on that list are specifically targeted for the investment of funds generated by the California Air Resources Board’s cap-and-trade program for reducing greenhouse gases.

Alternatively, a “disadvantaged community” may be identified as a “low-income area” that the local agency has determined to be “disproportionately affected by environmental pollution and other hazards that can lead to negative health effects, exposure, or environmental degradation.” A “low-income area,” in turn, is an area with household incomes at or below 80% of the statewide median income or with household incomes at or below the low income threshold designated by the Department of Housing and Community Development.

SB 1000 appears to provide local agencies with considerable discretion in interpreting the boundaries of “disadvantaged communities,” which is likely to lead to different approaches to defining those boundaries throughout the state.

General Plan Requirements. So, what are the required policy considerations that these environmental justice general plan amendments must address? Pursuant to SB 1000, they must spell out objectives and policies that:

Reduce the unique or compounded health risks in disadvantaged communities by means that include . . . the reduction of pollution exposure, including the improvement of air quality, and the promotion of public facilities, food access, safe and sanitary homes, and physical activity.
Promote civil engagement in the public decisionmaking process.
Prioritize improvements and programs that address the needs of disadvantaged communities.

As with the definition of “disadvantaged communities,” the interpretation of these broad policy statements is likely to lead to the implementation of the new law in vastly different ways.

Prudent Practices. Keeping in mind that all new development must be consistent with the provisions of the local general plan, landowners and developers should keep close tabs on general plan amendments implementing the new law so that their concerns are considered before the new general plan provisions are firmly in place.

In addition, developers should know exactly where their local agency stands in the process of making the required amendments. If a local agency has not timely made the required amendments, legal challenges are likely to confront projects approved when the local agency is not yet in compliance. Buyer beware: this should be a due diligence consideration when acquiring land, not merely something to address at the tail end of the entitlement process.

What the Future Holds. In the end, environmental justice issues are likely to play an increasingly significant role in all new development in California. Each local agency will approach its own EJ considerations in the context of its own political environment, its existing state of development, and its anticipated future development patterns. You should expect that some EJ general plan amendments will contain mundane and less impactful requirements, while others will contain more aggressive provisions that easily could jeopardize the viability of a project.

Given the broad, generalized requirements of the new law, and the likelihood that its provisions will be interpreted and applied in varying ways by local jurisdictions throughout the state, rest assured that the courts will play a key role in shaping the scope of environmental justice requirements throughout California. This definitely falls within the category of “Stay Tuned.”

When the Coastal Act Clashes with the State’s Housing Density Laws

Published on: November 17, 2016 | By Scott Birkey

No matter your politics or perspective on development in the state, one thing is beyond debate – California is facing a serious housing shortage crisis. A recent article in the Los Angeles Times warns that this shortage will have significant adverse effects on the state’s economy. Making matters worse is a dearth of affordable housing. Efforts by policymakers to deal with these shortfalls have resulted in mixed success. Most recently, Governor Brown’s proposal to streamline the approval of “as of right” housing projects that include some affordable units stalled last August.

The California Legislature, however, has come up with new tools to either incentivize or require a developer to intensify development and create affordable housing opportunities. An issue that sometimes comes up is how these tools of local government square with existing state statutes or regulations governing conservation or protection of sensitive lands, such as those regulated by the California Coastal Commission.

No Density Bonus for this Coastal Project

In Kalnel Gardens, LLC v. City of Los Angeles, the court of appeal tackled this issue in the context of a relatively small project in the Venice area of Los Angeles. The developer applied to the City to tear down a two-story, three-unit apartment building and replace it with five duplexes and five single-family homes for a total of 15 residential units. The project was granted additional density and height limits beyond what was allowed on the site because two of the units would have been designated as affordable units.

The City’s Zoning Administrator granted these development incentives based on the following statutes:

Housing Accountability Act. This act is sometimes referred to as the state’s “anti-NIMBY law.” The Housing Accountability Act limits the ability of local governments to reject or make infeasible housing development projects based on their density without a thorough analysis of the “economic, social, and environmental effects of the action,” including the adoption of express findings required by the statute.
Density Bonus Act. This act addresses the shortage of affordable housing in California by requiring local governments to award a developer certain development concessions and a density bonus that allows an increase in density above what the zoning ordinance allows if the developer agrees to set aside a certain percentage of the units in a housing development for low or very low income residents.
Mello Act. This act establishes minimum requirements for affordable housing within the coastal zone by requiring, first, the construction of replacement low income housing when existing affordable housing is demolished and, second, new affordable housing units as part of new developments, either at the site of the new development or somewhere else.

A group of neighbors administratively appealed the project, alleging that it violated the Coastal Act because the project’s height, density, setbacks, and other visual and physical characteristics were inconsistent with the existing neighborhood. The West Los Angeles Area Planning Commission found that the project did not conform to the Coastal Act on that basis, and on appeal to the City Council by the developer, the City Council agreed with the Commission.

The developer sued the City, arguing that the City had violated the housing density statutes identified above by reducing the size of the Project and denying the incentives sought under the Density Bonus Act. The question for the court, then, was whether the Coastal Act takes precedence over the “density bonus” allowances sought by the developer.

The court’s answer? The Coastal Act does supersede a local government’s obligations under these housing density laws. The court reached this conclusion by assuming that it must apply the law in a manner that is “most protective of coastal resources,” essentially putting the housing density statutes in the backseat. In sum, in a clash between the Coastal Act and the state’s housing density statutes, the Coastal Act will win.

Although the court here looked to specific language in the Coastal Act and the housing density laws to reach this conclusion, this decision suggests that other statutes similarly protective of sensitive lands may be viewed as superseding other state law mandates that local government incentivize affordable housing projects in order to meet the state’s housing crunch. Bottom line: if you face that balancing act as a developer, beware.

SB 820: Sacramento Extends California’s Best (Remaining) Tool For Brownfield Renewal

Published on: November 14, 2016 | By Robert Doty

From timber country to the urban core, California is struggling to get its brownfield sites – land contaminated or believed to be contaminated by hazardous chemicals – back into productive use. The elimination of California redevelopment agencies in 2011-2012 set the process back dramatically, and the state’s best tool apart from redevelopment was set to expire at the end of 2016. Fortunately, a campaign spearheaded by the California Association for Local Economic Development (CALED) and Senator Bob Hertzberg secured passage of SB 820, saving California’s Land Reuse and Revitalization Act (CLRRA) from extinction.

CLRRA is Chapter 6.82 of the California Health and Safety Code. It was enacted in 2004 to help restore sites burdened by historically common, and unfortunately lax, chemical handling and disposal practices. All too often these sites sit unused, or badly underutilized, because the legal and regulatory challenges associated with them drive developers and local jurisdictions to focus on sites without such chemical problems – so-called greenfields.

The “greenfields before brownfields” cycle often reinforces downward socio-economic spiral in areas most needing economic renewal and investment, and it broadly undermines land use and environmental policies tied to reducing sprawl. Brownfield stagnation also frustrates the state’s efforts to build housing, both affordable and market-rate, in urban core areas. Many sites well suited to the production of urban housing were historically used for commercial and industrial activities that involved lax chemical handling.

CLRRA addresses these brownfield challenges by clarifying and simplifying the liability and regulatory framework applicable to brownfield sites. The fear of potentially joint and several liability for cleanup costs disproportionate to the anticipated redeveloped value of a site typically poses the first and biggest legal hurdle for brownfield redevelopers, whether private or public sector (or the public-private partnerships that have taken on the state’s most ambitious brownfield projects in places like Emeryville, downtown San Diego, and Carson and other formerly industrial areas in greater Los Angeles).

CLRRA addresses this challenge in multiple ways, most notably by conferring on “bona fide purchasers” a statutory immunity for cleanup work beyond the “response plan” needed to make the site suitable for a proposed redevelopment. As a practical matter, this enables brownfield redevelopers to understand ahead of time what their cleanup obligations will be. Clarity on this point allows a redeveloper to confirm that the cleanup obligations fit within a pro forma financial model that is viable to capital sources, both debt and equity. CLRRA also strengthens cost recovery leverage, another aspect of the liability framework that can be critical to the financial pro forma for complex brownfield sites.

Fear of a byzantine, even Kafka-esque, regulatory process that will swallow time, resources and sanity itself is the second legal hurdle that must be overcome at many brownfield sites. CLRRA addresses this challenge by laying out a procedural path that balances interests with inherent tensions – development efficiency, scientific certainty, and public input.

In general, the CLRRA process starts with a Phase I Environmental Site Assessment and an agreement to pay the oversight costs incurred by the Department of Toxic Substances Control or a Regional Water Quality Control Board. The statutory immunities trigger at this early juncture. Thereafter, the applicant works through four “streamlined” steps: site assessment, cleanup planning, public comment, and implementation/completion certification. The objective is to make the site safe for its intended use(s) as defined in local planning and zoning documents, not to evaluate and cure every conceivable issue associated with the historic chemical impacts.

Needless to say, the statute has technical intricacies. This brief survey should be taken as encouragement to work with experienced practitioners (both legal and technical) when pursuing a CLRRA site. It must also be noted that the legislative effort to enact the original CLRRA statute involved a good amount of awkward sausage making. Certain sites are ineligible for CLRRA treatment for reasons that defy logic and sound public policy. The statute clearly can be improved, hopefully in the upcoming legislative session now that SB 820 has resolved the looming sunset issue.

Nonetheless, CLRRA’s enactment and SB 820 represent huge steps forward for California’s ongoing efforts to revitalize urban areas, build affordable housing, and pursue smart growth management.

Builder Update On School Fees In California

Published on: November 9, 2016 | By R. Clark Morrison

Yesterday, California voters approved Proposition 51, a $9 billion bond to replenish the State’s school construction fund. Proposition 51 was passed just in the nick of time because, according to the California State Allocation Board (SAB), the State has run out of money for new school construction.

Just last week, despite the outstanding legal efforts of the California Building Industry Association (CBIA) to forestall it, SAB published a notice to initiate significant “Level 3” school fee increases throughout California. The passage of Proposition 51 (for which we can thank CBIA leadership, among others) will replenish the State’s coffers and should provide a defense against the imposition of Level 3 fees. Politics being what they are, however, it remains to be seen whether Proposition 51 will actually induce cash-strapped school districts to drop their guard.

Given the uncertainty surrounding school construction in California, builders are looking for creative alternatives. Just this year, Cox Castle lawyers negotiated two widely-touted developer-built-school deals with districts in the Bay Area (Fremont and Foster City-San Mateo). These highly-specialized transactions can provide great benefits to builders, including assurance of timely delivery of new schools to serve their neighborhoods and the potential for reduced costs in light of the significant upward pressure on statutory school fees. These deals also provide benefits to school districts in the form of state reimbursement of funds from Proposition 51.

These transactions are complex and take time to negotiate. If you or your building or development company are looking for ways to navigate this uncertain regulatory environment, it may be worth your while to consider building a school.