September 30, 2016
By Dennis Kaiser
In the first two days of a four-part series, leading up to Connect Inland Empire, we have detailed the challenges facing developers, explored what the CEQA threat is and explained its impact. Today, we’ll look at some of the reasons why the lawsuits are filed, who files them, as well as some potential solutions to a challenge facing developers across California.
“Unions file CEQA lawsuits for the purpose of negotiating a project labor agreement [PLA] with the developer,” said Michelle Ouellette, a land use attorney with Best Best & Krieger, who notes the PLA’s could add millions of dollars of cost to a project. Ouellette said, “Given the proliferation of lawsuits brought for economic gain, I would consider them to be in violation of the spirit of CEQA, if not actually meeting the technical legal definition of a frivolous lawsuit.”
CEQA lawsuits cloud the timing of projects and can be costly for developers, both to defend, as well as in possible lost rental cash flow, or worse, the loss of a potential occupier that may chose another project to call home.
“Entitlements are expensive and very difficult to secure. An entitled site is worth much more than an unentitled site,” said Colliers International’s Thomas Taylor. “In addition, once entitlements are virtually secured through the municipality where the property is located, multiple special interest groups are now suing, which slows down progress with mitigations adding additional costs to the proposed development.”
John Husing, an Inland Empire economic development consultant says, a project in Moreno Valley, the World Logistics Center, has become the “cause celebre” on environmental issues. The proposed 2,000-acre master-planned industrial park is envisioned to encompass 40 million square feet. While that sounds massive, Husing notes, the project would provide the equivalent of roughly two years of the Inland Empire’s normal growth. The project has been the focus of no less than five CEQA cases and the uncertainty surrounding the development remains unresolved.
So what’s a developer to do in order to manage the development risk?
Western Riverside Council of Governments’ (WRCOG) Rick Bishop notes that CEQA lawsuits tend to focus on large and controversial projects. “What that suggests to us is that developers should really do their homework and understand what the hot button issues are regarding their specific development,” said Bishop.
The flip side to the situation is that challenges create barriers to entry. Weathering them requires a strong developer and quality project. The net result is these challenges could reduce competition in the marketplace.
Solutions to Consider
There’s considerable dialogue going on across the state to bring about change. Whether that be in the fashion of reform or modernization of the CEQA act.
WRCOG participates in regional and statewide efforts to address CEQA on behalf of its member agencies, and there’s even a CEQA Working Group that’s looking at the issue.
In the past, Ouellette notes, many bills would be passed annually that actually provided rules and guidance for CEQA practitioners. Since there is much less current CEQA legislation, “CEQA is now being guided almost completely by the courts, who often disagree with each other and/or create more questions than answers,” said Ouellette. “In my experience, public agencies and developers just want to know what the rules are so that they can comply with them.”
Ouellette agrees that legislation is needed to protect public agencies and developers from these types of lawsuits. “We need to start working on meaningful CEQA reform and to actually get it passed by the legislature,” she said. Included among her suggested solutions are:
- Prevent CEQA lawsuits for economic gain
- Allow prevailing defendant public agencies and developers to recover attorney’s fees
- Require petitioners who bring lawsuits to identify who their clients are and not simply hide behind an anonymous group with no local members
- Limit last minute “document dumps.” A favorite tactic for project opponents is to dump thousands of pages on a public agency very close to the final project approval. These documents become part of the “administrative record” which is the basis of any litigation. Unless the public agency continues the hearing, they do not have time to rebut the comments which will be used against them in litigation.
- Streamline/limit CEQA review for certain types of projects that are needed and should have minimal impacts, such as infill developments, renewable energy projects, and low-income housing
“The only solution is for the legislature to change the law,” said Husing.
Connect Media’s series on development challenges in the California concludes on Monday. The final installment features an in-depth Q&A with Allen Matkins’ John Condas, one of the state’s most experienced land use attorneys.
For comments, questions or concerns, please contact Dennis Kaiser