CEQA Diagnosis: Surgery Needed Now!

California in general and the Los Angeles region in particular have a number of problems that ultimately come from the fact that times were good for a long time.  Success – in economic growth, development and wealth creation – led people to ignore certain issues,  or to absorb their impacts as a cost of doing business in the state.   Some of these issues include certain laws we’ve enacted in California which were well-intentioned when passed, but which have grown – like a cancer cell – from something that is healthy and useful to something that damages the host organism (our economy).   Like cancer, a law that metastasizes too far into a malignant obstacle can even kill its host.

We are battling approximately 12.9% unemployment in Los Angeles County.  Many folks in the business community – including the Los Angeles Economic Development Corporation, which I currently chair (although the opinions in this article are my own) -- are trying to figure out what we can do collectively to spur economic and employment recovery.  Rather obviously, we need jobs.  And that means we need to persuade private companies to hire locally.

Unfortunately, many of our well-intentioned laws add complexity and cost to doing business.  Sometimes that is justified -- and sometimes desired by the citizens, who may have different priorities than in certain other states.  However, some of these laws and regulations have been twisted, either by extensive additional regulations or through the development of additional requirements through litigation, and misused for purposes other than they were originally intended.

In the real estate area, one of the worst of these is CEQA, the California Environmental Quality Act.  Originally enacted in the 1970’s, CEQA was intended to make sure that developers disclosed, and public agencies considered, the likely environmental impact of a proposed project (an activity undertaken by a public agency or a private activity which must receive some discretionary approval  from a government agency) prior to the its approval or disapproval by the permitting agency.  Since the definition of a project was any such activity which might cause either a direct physical change in the environment, or a reasonably foreseeable indirect change in the environment, virtually any real estate development must be given a CEQA review.   The agency then may decide either to approve the project (either finding that it would have no impact on the environment, or that its impact could be mitigated by taking certain actions, or that it would have unmitigated impacts, but the agency would find overriding considerations which justified its approval), or to disapprove the project.

The goal of CEQA was not a bad one:  to get the public agencies to focus on the environmental consequences of development which, at the time, seemed out of control in California’s then-booming economy.

But, like cancer, which starts as a normal cell that grows when needed but fails to heed the body’s signal to stop growing, CEQA has expanded from a thoughtful review for environmental purposes to an unruly set of laws and regulations frequently used for non-environmental purposes.  For example, it is not uncommon for competitors, such as student housing developers or retailers, to organize or fund real or spurious neighborhood groups to oppose developments by or for their business competitors.  It’s also become fairly common for groups with union ties to oppose projects on CEQA grounds in order to exact promises that the proposed development will be constructed with union labor only ("greenmail").  Finally, a cottage industry of CEQA lawyers has sprung up who oppose virtually every development, threatening or bringing litigation in hopes of extracting a financial settlement from the developer of a given project (also greenmail).  All of these are abuses of CEQA:  all are misuses of the statute as a weapon for non-environmental purposes.  All of them deter investors from developing in this state, as well as new businesses with larger site needs from entering it .  They also significantly slow down previously approved public infrastructure projects needed to rebuild our economic sinews.

The CEQA law and regulations, as interpreted by the courts, have allowed this.  As a practical consequence, any developer in California must build into its projected costs not just the cost to prepare and present to the permitting agency a reasonably detailed environmental impact report (“EIR”),  but also the substantial additional costs of anticipating and defending against spurious attacks on the EIR both before the permitting agency and, frequently, litigation over the EIR.  All of these add time, carry costs, out of pocket costs and, most importantly, uncertainty to the process of getting a project entitled.

The last 20 years have brought amazing technologies – and cure rates – to cancer.   The same is not true of exponentially increasing uncertainty created by regulations and litigation-spawned case law.  (Certain politically connected developers seek to avoid CEQA altogether through special bills passed in the state legislature exempting their projects.  Like quack cancer cures, this creates other problems by avoiding equal application of the law to all projects – and doesn’t help the overall business-friendliness of the state to development.)  However, there is a better solution:  a careful surgery on the law to prune away the malignant parts of CEQA that enable the worst non-environmental abuses of the law. 

A careful, reasonable “CEQA-ectomy” should include the following changes to the law:

1.  Transparency:  every person or entity supporting or opposing a proposed project should have to disclose to the permitting agency its identity, and that of its members, as well as who or what entity is paying its costs to oppose the project.  That way, if ABC Company wants to oppose project for its competitor, DEF Company, it could do so – but the permitting agency would have a better understanding of what the real parties’ interests are, and could take that into consideration in making its decision.
2. Deference to permitting agency’s substantive decision:  Require the courts to uphold the permitting agency’s decision on the merits of the project and its environmental impact, eliminating “de novo” review of the agency’s environmental impact analysis and decisions based on it.  Instead, the courts’ reviews would be limited to a review of whether the agency followed the applicable procedural rules, unless there’s compelling evidence of bribery or corruption of the permitting agency or fraud upon it.  This change in the standard of review would direct the courts, who are not expert in the economic development of cities, to defer to the factual decisions made by the agencies that are – while retaining the courts’ right to review whether the agencies’ procedures were followed.  Ultimately, if the permitting agencies approve too many unpopular developments, their members (or the elected officials they answer to) can be voted out.
3. Shorten the statute of limitations:  Change the law so that any court challenge to an agency’s decision on a project must be brought within a very short period (such as 15 or 20 days after the decision).  Any legitimate challenge should be able to be brought in the shorter time – longer time periods (on top of the already lengthy development process to get to a CEQA hearing) just exacerbates the delay and adds to the costs of development.
4. Designate CEQA judges/courts:  Require that all CEQA litigations (including appeals) be heard before special purpose CEQA courts staffed by judges knowledgeable about CEQA so that all challenges to permitting agencies’ decisions are heard by judges with CEQA expertise.  This would avoid creating more conflicting case laws, and would lead to more consistent application of the law throughout the state.
5. Eliminate the “private attorney general” provision:  the right of any private person or entity to “act as” a city, county or state attorney general to bring a litigation challenging a permitting agency’s decision to approve or disapprove a project under CEQA grounds.  This would eliminate the cottage industry of CEQA-challenging lawyers intent on extorting nuisance settlements from developers.  If there were a real problem on a given project, the opponents could try to enlist the city’s, county’s or state’s prosecutor or attorney general to bring suit to overturn the permitting agency’s decision.  Alternatively, if that’s not politically palatable,  we should change the CEQA law to provide that, if any permitting agency’s approval is allowed to be challenged by a private party, the challenger shall pay all of the legal fees and all related costs of the permitting agency and developer unless the ultimate resolution (whether by trial verdict or by settlement) is found by the court to have improved (by a material amount – perhaps 35% or more) the mitigation of environmental impacts on the proposed project.

If such surgery were performed on CEQA, the fundamental purpose of the law – to assure the informed consideration of the environmental impacts of any project by the permitting agency charged with approving or disapproving it – would remain strong.  But the abuses of CEQA – its use for non-environmental purposes – could be greatly reduced.  That surgery, swiftly done, might help local economic development and thus help assure the long-term survival of the California real estate economy.