Lay of the Land
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.