On October 15, Governor Brown vetoed AB 890, a bill that would have limited the use of the voter initiative to effect certain land use actions. In his veto message, Governor Brown noted his concerns regarding a “piecemeal” approach to California Environmental Quality Act (CEQA) reform, stating instead his preference for a more “comprehensive approach” that balances the need for more housing and environmental analysis. Industry observers also had raised concerns regarding the constitutionality of the bill’s attempted limits on the initiative power.
Over the past four months, Sacramento lawmakers have introduced a number of bills to tinker with the state’s premier environmental statute, the California Environmental Quality Act (CEQA). While it is too early to know whether any of the proposed changes to CEQA will be enacted, each could impact the building industry. Below are a few to watch as they wind their way through the legislature:
- SB 224 (Jackson) would fundamentally change how CEQA analysis is performed. Today, to determine whether a project would have a significant adverse effect on the environment, a lead agency looks at the change to existing environmental conditions (usually referred to as the “environmental baseline”) resulting from the project. That change is then measured against the agency’s “threshold of significance.” If the change exceeds the agency’s significance threshold, then it must be mitigated, avoided, or overridden as prescribed by CEQA. In establishing the environmental baseline conditions, the lead agency is not now required to examine whether conditions at the project site, such as existing development, occurred legally and pursuant to a required permit. Unpermitted and illegal conditions at the project site are included within the baseline based on CEQA’s current language and well-established case precedent. SB 224 would change the baseline equation by excluding from the environmental baseline existing conditions resulting from illegal or unpermitted actions, emergency repairs to public service facilities, or other actions necessary to prevent or mitigate an emergency, if such actions were made without CEQA review. This change will require lead agencies, in describing the environmental baseline, to figure out if past illegal, unpermitted, or emergency actions occurred without CEQA review at any time in the past, and then look beyond what actually exists at the project site and speculate on what the condition of the environment would be without those actions. (This approach to establishing the environmental baseline is similar to that historically used by the California Coastal Commission for projects within the Coastal Zone.) SB 224 is set for hearing by the Senate Standing Committee on Environmental Quality on April 19.
- AB 890 (Medina) would require an initiative proponent to file a copy of a proposed measure with the local agency and ask for environmental review of the measure. The local agency then has 30 days to determine if the action proposed by the initiative is subject to CEQA, and if so, whether it has the potential to significantly impact the environment. If it has such a potential, the proposed measure cannot be adopted by initiative, but instead could receive a public hearing if a sufficient number of signatures are collected and after CEQA review is complete. Even if the action proposed by the initiative has no potential to significantly impact the environment, AB 890 gives the local agency 180 days to prepare a negative declaration and requires that the negative declaration be circulated for public review and comment for at least 20 days before the meeting at which the legislative body would consider certifying the initiative. Assembly member Medina has described AB 890 as closing “an initiative process loophole that wealthy developers use to avoid environmental review,” but that description fails to capture the bill’s transformative nature. As drafted, the bill constrains the right of any person, not just the wealthy, to have a direct voice in local land use decisions. AB 890’s next hearing will be before the Committee on Elections and Reapportionment.
- AB 1404 (Berman) would expand the scope of CEQA Guidelines Section 15332, more commonly known as the “infill exemption.” This categorical exemption promotes California’s goal to locate new development in already developed areas as a way to preserve pristine land and reinvigorate existing communities. As currently drafted, the infill exemption applies in cities, but not counties. AB 1404 would expand this exemption to include proposed development within the unincorporated areas of a county on for projects of no more than five acres which are “substantially surrounded by urban uses.” If this bill passes, smaller infill projects in counties could be approved more quickly, avoiding lengthy CEQA review. The bill awaits its first hearing before the Assembly’s Committee on Natural Resources.
- SB 80 (Wieckowski) would make a number of changes to CEQA’s noticing requirements. The most significant of these changes involves projects determined by the lead agency to be exempt from CEQA. Currently, an agency does not need to file a notice of determination with the Office of Planning and Research when it approves a project that it finds to be exempt. SB 80 requires the filing of such notices for exempt projects. This bill adds to CEQA’s required procedures and could trip up an unwary lead agency. Many project applicants already ask the lead agency to file a notice of determination for exempt projects because doing so shortens the statute of limitations for challenging the exemption from 180 days to 35 days. This bill would make that filing a necessity which project applicants should closely monitor to make certain that the agency makes the filing. SB 80’s next committee hearing will be before the Senate Committee on Appropriations.
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.
Less than one week remains to comment on important proposed changes to the CEQA Guidelines that flow from the 2013 adoption of “SB 743.” Once phased in, these Guidelines will change the evaluation of a project’s potential transportation impacts and, if the Guidelines function as the Governor’s Office of Planning and Research (OPR) desires, alter the pattern of California land development. Under the Guidelines, vehicle miles traveled (VMT) will replace level of service (LOS) as the standard a lead agency must measure a project’s traffic impacts. Under the new metric, what was mitigation for traffic impacts, such as the widening of roads, will soon be considered a significant impact. Accordingly, the implications of these Guidelines go beyond the need for traffic engineers to retool their traffic models (itself a complex task).
Of course changing CEQA is bound to be controversial. OPR’s first Guideline proposal generated numerous and diverse comments, reflecting differences among California’s lead agencies’ size and access to transit, and stakeholders’ individual (often ideological) views on transportation. As a result, OPR issued a second set of proposed Guidelines on January 20, 2016, which can be viewed on OPR’s website. Comments on this latest draft must be submitted to CEQA.Guidelines@resources.ca.gov by 5:00pm on February 29, 2016.
Practical Implications of the New Guidelines
OPR proposes to revise Appendix G, which is the heart of the proposed Guidelines. Although Appendix G is provided for guidance only, agencies typically follow it almost to the letter. As proposed, the transportation significance thresholds in Appendix G would eliminate questions related to LOS and instead focus on VMTs, including whether a project would induce additional automobile travel by increasing physical roadway capacity. In addition, OPR proposes technical guidance, to be published as a separate document, to help lead agencies implement the new Guidelines. This technical guidance includes recommended quantitative thresholds and analysis methods for determining the transportation impacts from various types of projects, including residential, retail, office, and roadway development. Following are some of the practical consequences that we foresee resulting from the proposed changes: Continue reading →
Most of us know that the California Department of Fish and Wildlife is the state agency in charge of administering the California Endangered Species Act, which is the state’s version of the federal Endangered Species Act. CDFW is also the state agency that regulates certain work activities within streambeds. Under the California Fish and Game Code, CDFW has regulatory authority over the installation of culverts, bridge supports, erosion controls, or other such work within streambeds. But beware! CDFW’s regulatory reach has been extended significantly. A recent decision by a California Court of Appeal now gives CDFW regulatory authority over the mere taking of water out of its natural flow for agricultural purposes, even if the streambed itself is not altered to facilitate the taking of that water.
By way of background, before a person may start work in a streambed, typically he or she must submit a “notification” to CDFW informing the agency of the nature of the work and any anticipated impacts to waterways or special species habitats within or adjacent to those waterways due to that work. If CDFW determines the work may “substantially adversely affect” any fish and wildlife resources, then the agency will attempt to negotiate a “streambed alteration agreement” with the party. These agreements often include significant, and sometimes quite onerous, conditions and restrictions on development. Moreover, the whole process can take several months and typically requires some form of environmental clearance under the California Environmental Quality Act. Only after both (i) CDFW and the party performing the work have signed the agreement and (ii) all other necessary approvals have been obtained may work in the streambed commence.
In Siskiyou County Farm Bureau v. Department of Fish and Wildlife, the Third District Court of Appeal determined Continue reading →
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 →
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 →
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 →
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.
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 development 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 validity 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.