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Although we, as lawyers, don’t much care for it, one of Shakespeare’s most quoted lines is “The first thing we do, let’s kill all the lawyers.” Hopefully, our clients don’t subscribe to that wish, but developers must at times wish that they had more control over which lawyers gets paid and how much.

The problem arises after a project is approved. Frequently, a city or a county will include a condition of project approval which requires the developer to indemnify the city or county and hold it harmless if an opponent sues to set aside the approval. This will include paying the costs incurred by the city or county to pay its lawyers in defending the lawsuit seeking to set aside the approval. This means that the developer is immediately on the hook for two sets of lawyers: its own and the agency’s.

Often in the past, cities and counties left the defense – and thus the cost of the lawyers – up to the developer. It wasn’t cheap, but at least it meant that the developer didn’t have to pay twice. That may be changing. Continue reading

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It’s frequently important to know when a land use project’s approvals are safe from judicial review. Sales often won’t close until the buyer is certain that the project’s approvals won’t be lost and lenders generally won’t lend until they can be certain that the approvals are good. Unfortunately, litigation is an all too often component of the real estate development process in California. Opponents have been presented by the Legislature and the courts with a whole panoply of weapons to attack the approval of a project, the three main ones being the California Environmental Quality Act (“CEQA”), the Planning and Zoning Act and the Subdivision Map Act. However, all of the acts contain statutes of limitations which specify how long an opponent has to start litigation but the time limits and who has to be served differ.

The first thing to know is what level of government is granting the approval and whether it is appealable to a higher level. As an example, many cities and counties will allow a planning commission to approve a tentative subdivision map subject to appeal to the city council or board of supervisors. The appeal must be filed within ten days of the planning commission’s approval of the tentative map. A failure to appeal means that an opponent has failed to exhaust its administrative remedies and is therefore barred from having a court review the approval regardless of the claimed violation of law. The law is similar for conditional use permits and variances which are also generally approved by planning commissions, subject to appeal to the city council or board of supervisors.

Other approvals, such as general plan amendments, rezonings and development agreements, can only be approved by a city council or a board of supervisors. There are no administrative remedies to exhaust because no further appeal is available. The only way to attack these approvals is to file a lawsuit within the time allowed by the appropriate act. For this reason, a transactional document should never condition an action on the time in which to bring an “appeal” has passed without one having been filed when it is the city council or board of supervisors which is the approving entity. Continue reading

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As California developers and public agencies well know, the entitlement process in our state is driven by CEQA, the California Environmental Quality Act.  CEQA, in turn, functions pursuant to the CEQA statute and the “CEQA Guidelines.” If you’ve ever wondered who writes those CEQA Guidelines, the answer is “the Governor’s Office of Planning and Research,” or “OPR.”  The CEQA Guidelines reflect OPR’s interpretation of CEQA’s statutory requirements, its reading of case law construing CEQA, and its take on “practical planning considerations.”  As a result, this little known operation in the Governor’s office plays a pivotal role in California’s entitlement process.  CEQA Guidelines are formally adopted by the Natural Resources Agency following review by the Office of Administrative Law, but OPR basically writes the Guidelines.

This year, OPR is engaged in two separate endeavors to amend the CEQA Guidelines.  One ongoing effort is the product of SB 743, legislation adopted in 2013 which likely will revolutionize the way traffic impacts in California are evaluated and mitigated by focusing on vehicles miles travelled (VMT) rather than level of service (LOS).  We have discussed with you in prior “Lay of the Land” posts the potential implications of the new SB 743 Guidelines being prepared by OPR.

The other effort began two years ago, when OPR announced its intent to consider a broad range of revisions to the CEQA Guidelines.  OPR solicited public comments and received a very large number of comments making a wide variety of suggestions.  Since then, OPR has been considering the many comments and suggestions received, and OPR has now, on August 13, released a preliminary draft of proposed Guidelines amendments based on the public suggestions and OPR’s own ideas.  The public is invited to comment, through October 12, and this is an important opportunity for stakeholders in the CEQA process to evaluate the proposals and weigh in with comments.  In contrast to recent Guideline amendments on particular topics such as greenhouse gas emissions, this is the first overall update of the Guidelines in many years. Continue reading

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In the legal world, the word “dictum” refers to words in a court opinion which are best considered non-binding “remarks” or “comments.”  Relying on dictum in a 2006 Supreme Court decision, the California State University Board of Trustees (the “University”) concluded that paying its fair share of offsite mitigation related to the traffic impacts of its proposed expansion of the San Diego State University campus was “infeasible.” Under CEQA, a proper finding of infeasibility would have allowed the University to adopt a Statement of Overriding Considerations and avoid the University’s fair share of offsite traffic mitigation.  The only factual basis for the University’s finding of infeasibility was that the Legislature had not earmarked specific funds to cover the University’s traffic mitigation costs and was not likely to do so.

This week, the California Supreme Court issued a decision in City of San Diego v. Board of Trustees of the California State University stating in a moment of candor that the dictum which had been relied upon by the University was “simply an overstatement.” The Court concluded that the University failed to address the availability of funding from other sources and could not support its claim that using other funds available to the University for offsite mitigation would be an illegal gift of public funds. The Court agreed with the position urged by the City of San Diego, stating that under the University’s reasoning “off-site mitigation would likely be found infeasible for many, if not all, state projects that receive non-state funding, and more such projects would proceed without mitigation pursuant to statements of overriding considerations.”  Because the Court concluded that the absence of earmarked funds did not make the University’s participation in the mitigation infeasible, the Statement of Overriding Considerations was invalid.

Although the specific holdings of this case apply to State agencies, the decision is an important reminder of the care that must be taken with any project, whether private or public, in making proper findings to support a Statement of Overriding Considerations.  To support a Statement of Overriding Considerations, CEQA requires both (i) that a finding be made that there are specific considerations which make identified mitigation measures or alternatives infeasible and (ii) that there are “overriding economic, legal, social, technological, or other benefits of the project” which outweigh the project’s significant unmitigated impacts. For the first finding, CEQA defines “feasible” to mean “capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social, and technological factors.”  Therefore, in the City of San Diego case, once the Court determined that reliance on the Legislature’s failure to earmark mitigation funds did not alone make the University’s fair share traffic mitigation obligation “infeasible,” the Statement of Overriding Considerations was doomed.

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Forget nexus. Don’t worry about rough proportionality. It’s not an exaction and it’s not a taking.  In a ruling that will adversely impact landowner and market-rate developers, while providing new opportunities for affordable housing developers, the California Supreme Court has given the go-ahead to the City of San Jose’s affordable housing ordinance which requires developers to include affordable housing units within their market rate projects, unless they elect other equally impacting alternatives.

As a result of the Court’s ruling today in California Building Industry Association v. City of San Jose, developers should anticipate that both the Legislature and local municipalities will consider new opportunities to increase the numbers and distribution of affordable units, both rental and for-sale, within local communities. One of the important practical effects of this ruling is that municipalities will not need to demonstrate that market rate housing creates the need for affordable housing in order to adopt and implement an affordable housing ordinance.

The San Jose ordinance applies to all for-sale projects of twenty or more new, additional, or modified residential units. The ordinance requires that fifteen percent of a project’s on-site units be available to “moderate income” households, those earning no more than 120 percent of the area median income. The ordinance itself provides that it will not apply to rental units until a 2009 appellate court decision, Palmer/Sixth Street Properties, L.P. v. City of Los Angeles, is no longer the law.  When and if that occurs, the ordinance requires nine percent of the rental units to be available at rates affordable to moderate income households, with another six percent to be available at affordable rates to very low income households. It also contains alternative methods of compliance, such as building off-site affordable for-sale units, paying an in lieu fee, dedicating land, and rehabilitating offsite affordable units. The Court’s focus, however, was on the “inclusionary” component of the ordinance.

In adopting this ordinance, the San Jose City Council found that, among other things, new market-rate housing drives up the price of land and diminishes the amount of land available for affordable housing. It also found that new market rate homes create demands on services resulting in “a demand for new employees” whose earnings will allow them only to pay for affordable housing. Those circumstances, in turn, were found to “harm the city’s ability to attain employment and housing goals articulated in the city’s general plan and place strains on the city’s ability to accept and service new market-rate housing development.”

The stated purposes of the ordinance included meeting the city’s share of regional housing needs, implementing the goals of the city’s general plan and, specifically, its housing element, and providing for the integration of affordable and market rate housing products in the same neighborhoods.

In its ruling, the Court made a critical distinction between affordable housing impact fees intended to mitigate the specific impacts of a project and an inclusionary affordable housing requirement designed “to serve a constitutionally permissible public purpose other than mitigating the impact of the proposed development project.”  In doing so, the Court carefully distinguished both state and federal judicial decisions focusing on “nexus” and “rough proportionality,” concluding that this ordinance is more akin to other “permissible land use regulations,” such as use, density, size, setback, and aesthetic requirements and restrictions and price controls.  As a result, the Court concluded that the San Jose ordinance is neither an exaction nor a taking, but rather a proper exercise of the city’s general police power to regulate land development to promote the public welfare.  In the context of constitutional law, once the Court reached that conclusion, it could only review the ordinance “deferentially” and the burden shifted to the California Building Industry Association to establish that the ordinance bears “no reasonable relationship” to the public welfare, a challenging threshold which the Court determined had not been met.

The Court concluded that increasing the supply and distribution of affordable housing within the city is within the city’s “constitutionally permissible public purposes” and is “intended to shape and enhance the character and quality of life of the community as a whole.”  As a result, the ordinance was found to address “the critical need for more affordable housing in this state” and allowed to stand.

In rendering this decision, the Court has provided public agencies and developers alike with additional guidance on how far a California agency may go in regulating land development before its actions will be considered an exaction subject to the constitutional limitations of “nexus” and “rough proportionality.” The implications of this decision are likely to be significant not only with respect to affordable housing, but also with respect to other land use restrictions and requirements aimed at “promoting the public welfare.”

Unless a hearing before the United States Supreme Court is sought and granted, this is the final say on the validity of San Jose’s affordable housing ordinance.

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2015 is shaping up as a year of significant developments in land use law thanks to the Governor, the Legislature, and the courts. Here’s an update on anticipated developments related to Sea Level Rise, Affordable Housing, Traffic Impact Analysis and the Drought, any or all of which could constrain land development:

 

. . . SEA LEVEL RISE AND THE COASTAL COMMISSION: Prospective purchasers, developers, and owners of coastal land should pay close attention to the Coastal Commission’s development of policies to address rising sea level and its implication not just for coastal resources, but also for existing and proposed development. Although final guidance has not yet been issued, the Commission’s Draft Sea-Level Rise Policy Guidance concludes that sea level rise threatens “seven wastewater treatment plants, commercial fishery facilities, marine terminals, Coastal Highway One, fourteen power plants, residential homes, and other important developSealevel setbackment and infrastructure.” Add in impacts to tourism, commercial fisheries, coastal agriculture, the ports, and sensitive coastal resources and it is easy to anticipate that the projected risks from sea level rise will create tough decisions for the Commission as it acts on Local Coastal Programs, LCP amendments, and Coastal Development Permits. Hazard avoidance and mitigation are likely to result in proposals for significant constraints on development. Every site and project will be different, but it will be important to evaluate the potential significance of sea level rise over the life of the project in the context of any investment or development within the Coastal Zone. The picture above is from a presentation by Charles Lester, Executive Director of the Coastal Commission, to the Senate Budget Subcommittee 2 on March 20, 2014. It shows a pre-Coastal Act home and more current setback requirements along a blufftop in Pismo Beach which has been impacted by bluff erosion.

 

. . . AFFORDABLE HOUSING FEES: We told you earlier this year that the California Supreme Court will be weighing in on the validitysan jose of an in lieu affordable housing fee in San Jose.   Oral arguments in California Building Industry Association v. City of San Jose (click here to read the appellate court decision which is under review) were heard on April 8. CCN’s Mike Zischke was in attendance and observed an engaged and inquisitive Court. When this decision comes down, its significance likely will go beyond the affordable housing issue. With two new Justices sworn in at the beginning of this year, this decision could foretell where the Court will lean on land use issues, particularly those involving exactions and impact fees.

 

. . . THE DROUGHT: Governor Brown’s Executive Order calling for a 25% reduction in the State’s water usage will impact not only daily life for Californians (there goes that ten-minute shower), but potentially development proposals. At a time when some areas in the state are experiencing housing shortages, there undoubtedly will be pressure from some interest groups to cut back on the development of new housing. It’s too early yet to understand what the full effect of Executive Order B-29-15 will be, as local water agencies and local governments will be developing their own policies to comply with the Governor’s directive.

  Continue reading

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(Mike, a Cox Castle & Nicholson partner, is the Co-Author of the CEQA treatise “Practice Under the California Environmental Quality Act.”) 

Click here to review an in depth summary of the legislative and case law developments in 2014 relating to CEQA and its environmental review requirements.

Once again, in 2014 there were a number of substantial CEQA developments coming from the State Legislature, the California Supreme Court, and the Courts of Appeal. In some cases, certainty and predictability are enhanced. In others, the world of CEQA has become more complicated for developers and their counsel.

AB 52 expanded CEQA’s reach, requiring evaluation of potential impacts to “tribal cultural resources.” It includes provisions governing notice to tribes, consultation with tribes, and the confidentiality of information about tribal cultural resources. There were also minor changes affecting statutory exemptions from CEQA.

The California Supreme Court issued one CEQA decision in 2014, holding that a local legislative body does not need to comply with CEQA before approving a voter-sponsored initiative measure. In this case, Tuolumne Jobs, the initiative granted all the legislative approvals needed for a Wal-Mart store – with no CEQA review.

In 2015, expect the California Supreme Court to make a great deal of CEQA news. There are more CEQA cases pending before the Court than ever before. Those cases address issues including “fair share mitigation,” CEQA exemptions, the impact of existing environmental conditions on future residents, the standard of review for “subsequent” environmental documents, the role under CEQA of the California Endangered Species Act, the time during the administrative process at which a litigant needed to assert a CEQA claim, the use of “business as usual” environmental baselines, the scope of judicial review, and the need for CEQA review of rail projects. So, stay tuned. We will comment on these decisions in this blog as they happen during the year. Continue reading

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Wouldn’t it be nice if you only had to prepare a mitigated negative declaration (MND), rather than an EIR, before getting your project approved? The Planning Director says “That’s all we need,” but your lawyer says “Not so fast.” Your project manager calculates that an MND will save you six months and at least a hundred thousand dollars. Your lawyer repeats, “Not so fast.” You ask yourself, “Now what was it that Shakespeare said about lawyers?”

CEQA documentation, like Gaul, is generally divided into three parts: exemptions, negative declarations, and environmental impact reports (EIRs). Rarely does a project of any substantial size or complexity qualify for an exemption or a “pure” negative declaration. If the agency determines that there are potential project impacts, the choice narrows to an MND or an EIR. If specific mitigation measures can adequately address those impacts and the applicant agrees to accept those measures before circulation, then an MND may be used. However, if potential impacts remain or if there are impacts which cannot be mitigated, an EIR must be prepared. But the decision frequently is not clear and, ultimately, is made by the agency, generally with input from the developer.

CEQA Scale

CEQA Litigation Doesn’t Rely On The Scale

For the developer, what are the typical considerations? An EIR may cost hundreds of thousands of dollars and take a year or more to prepare, followed by circulation for public review and comment. Then, responses to comments must be prepared. Sometimes, the EIR must be recirculated. That adds up to a lot of dollars and delay. Preparing an MND, however, also requires significant time and money, although, in the short run, less than an EIR. Circulation for review and comment, though for less time than for an EIR, also is required. While CEQA does not mandate written responses to comments on an MND, many agencies exercise their prerogative to do so. So, why might a developer ask the agency to prepare an EIR when the agency has said that an MND is enough? Continue reading

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In addition to the endangered California Red-Legged Frog being named as the official State of California Amphibian (AB 2364), here are some other items of note as we move into 2015:

CaliforniaRedLegFrog_AliceAbela_219x219


Tribal Cultural Resources: Under AB 52, for projects for which either an EIR notice of preparation or a notice of negative declaration is filed on or after July 1, 2015, potential impacts on “tribal cultural resources” must be evaluated. For more information on AB 52 and other 2014 CEQA legislation and CEQA court decisions, please click here to see Mike Zischke’s post entitled “CEQA Update: 2014 Case Law And Legislative Developments.”


Oil Pump Silhoutte Fracking Reporting: Effective January 1, 2015, oil and gas operators must submit quarterly water reports to the State’s Division of Oil, Gas & Geothermal Resources providing information related to fracking activities, such as the source, volume, quality, and disposition of all injected water, the quality, treatment and disposal method of all produced waters, and the source, quality, and use of all other treated and recycled waters used in their oil and gas field activities. For the Legislative Counsel’s Digest and full text of SB 1281 click  here. For DOGGR’s “Notice to Operators” regarding the requirements of SB 1281, click here.


New Wetlands Mitigation Guidelines from the Corps. The U.S. Army Corps of Engineers (Corps) has issued a comprehensive new set of guidelines for mitigation to be required under Section 404 wetland fill permits. Click here to review the post of Clark Morrison and Scott Birkey on the scope and implications of the new guidelines.

Notaries: Effective January 1, 2015, Civil Code Section 1189 requires new wording and formatting for notary acknowledgements. County Recorders will not record documents that are not notarized in compliance with the new provisions of Section 1189. Click here to review the amended Section 1189. Continue reading

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The U.S. Army Corps of Engineers has issued a comprehensive new set of guidelines for mitigation to be required under Section 404 wetland fill permits. The 2015 Regional Compensatory Mitigation and Monitoring Guidelines for the South Pacific Division USACE became final on January 12, 2015, and will apply to all wetland permits issued throughout the State of California. They will undoubtedly complicate and significantly increase the cost of preparing and implementing mitigation plans for new development.

On one hand, the Guidelines seek to increase the predictability of the Corps’ regulatory process by defining the various technical considerations that should go into the development of wetland mitigation plans. On the other hand, the Guidelines recognize the vastly increased scientific understanding of wetlands that has developed since the Corps’ regulatory program was born in the 1980s. Basically, wetlands have become a much more complicated business over the last twenty-five years. The Guidelines seek to improve the effectiveness of the wetlands regulatory program by harnessing this growing body of knowledge.

Building on nationwide regulations adopted by the Corps in 2008, the Guidelines strongly support a “watershed approach” to mitigation projects, particularly where mitigation is implemented through an in lieu fee program or mitigation bank (rather than a turnkey mitigation project proposed by a developer). This can offer a welcome degree of flexibility in certain instances, particularly where the agencies have developed or are developing regional conservation plans such as those in Contra Costa, Santa Clara, Placer, or Solano Counties. Continue reading

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