Anyone even remotely connected to development in California has heard the ills of CEQA by now. In San Francisco, where following land use could be one of the most popular hobbies, blogs dedicate entire posts to the intricacies and pitfalls of the local CEQA appeal process. And these ills of CEQA are not illusory – the law continues to have unintended consequences on the development process in California. In an age where graduate level environmental and planning programs are teaching smart growth as a solution to climate change, high-gas prices and unhealthy living, CEQA continues to give a powerful tool to those who oppose change. With Democratic super-majorities in Sacramento, there has been increasing discussion and news coverage of potential improvements to the law. But while the legislature has gotten all the attention, the San Francisco Planning Department has been quietly and deliberately acting on a local level to significantly improve the CEQA process in the city.
One of the key problems with CEQA – and especially its implementation in San Francisco – is that new projects need to undergo a bevy of studies before even being determined exempt from the law. These studies add costs and – just as importantly – significant time to the entitlement process. And in a market where 6 months can put you on one side or another of a business cycle, months lost to the entitlement process can be critical. Further delay and cost can be caused by the need for a mitigation measure for a project, triggering the need for a negative declaration or an EIR. For many projects, the difference between an exemption and negative declaration can mean a cost difference of $150,000 and a delay of 6 to 12 months.
As far back as 2005, when the city enacted the Rincon Hill area plan, the Planning Department understood the potential of targeted rezonings, and their associated Environmental Impact Reports, to improve the CEQA process. If a project is consistent with the new zoning, it should be able to rely on the area plan EIR and skip case-by-case review by the Planning Department. In many ways, these area plans have worked – significant amounts of previous analysis can be relied upon for code-consistent projects in these areas. Further, these area plans also incorporate mitigation measures that can allow a project to delay analysis on a particular environmental issue until after entitlement, when the project sponsor has the major discretionary city decisions (i.e. risk) out of the way. For example, the Eastern Neighborhoods EIR has effectively taken archeology off the table as a potential trigger of heightened environmental review. The EIR essentially states that if you are in an area that could have impacts on archeological resources, you need to conduct additional study and potentially develop a plan to be sensitive to potential resources – after entitlement and without the need for a negative declaration or EIR.
Some unexpected CEQA curveballs have also been thrown at the Planning Department. Many readers may remember in early 2012 when the Bay Area Air Quality Management District issued new air quality “thresholds” – essentially the measurements used to determine whether a project has a significant adverse effect on air quality – that would eliminate the possibility of a CEQA exemption for even modest-sized projects. The Planning Department actively pursued a patchwork of regulations that have basically solved the problem, by relying on performance-based ventilation requirements that already exist in the city’s Health Code. Once again, so long as a project conducts a limited air quality study and complies with the requirements of the already-in-effect ventilation rules, no heightened CEQA review is necessary. The Planning Department is currently developing legislation to codify these rules, expected to be introduced in the near future.
While these area plan EIRs were intended to remove as much uncertainty in the CEQA process as possible, there has been at least one hole to plug. Both the Eastern Neighborhoods and Market-Octavia area plans failed to include a mitigation measure that would avoid the potential for required soils testing prior to entitlement. As a result, heightened environmental review could be triggered, such as a negative declaration or EIR. Projects proposed on sites with a history of industrial use would then be required to conduct soils testing to determine if any hazardous soil removal was necessary. This was previously required to take place before entitlement, and actual soil remediation would be required prior to entitlement if any hazardous materials were detected. This was particularly a problem in the Eastern Neighborhoods, where much of the area has been historically dedicated to industrial uses. Most projects would be unable to rely on the Eastern Neighborhoods EIR, undercutting the whole purpose of the area plan EIR in the first place – to minimize environmental review.
Fortunately, over the past few months the Planning Department has shepherded a piece of legislation through a multi-agency review process which would expand the boundaries of the “Maher Zone” – an area, mostly adjacent to the bay, where local law required that soil study and remediation take place when excavation was proposed. Due to technical subtleties of CEQA, the fact that it is a legal obligation of properties within the zone to conduct the studies, no mitigation measure would be required to bind a project to the remediation requirements. And because no mitigation measure is required, there is no potential for the soils testing to trigger a negative declaration. The legislation would expand the zone to cover all properties that have ever been used or zoned for industrial use. The Board of Supervisors passed the legislation in July, and it went into effect starting next week. As a result, the potential for soils testing to trigger a negative declaration in the Eastern Neighborhoods and Market-Octavia plan areas has been eliminated.
Few Potential Heightened Environmental Review Triggers Remain
As a result of these efforts by the Planning Department, the number of environmental issues that could potentially trigger a negative declaration or EIR for a Planning Code-consistent project has been drastically reduced. Under normal circumstances, the only remaining environmental issue that could trigger such heightened review in the Eastern Neighborhoods and Market-Octavia is transportation. Even outside those plan areas, the Planning Department has effectively reduced the relevant environmental issues to transportation and archeology. The Planning Department is not done yet – they are currently conducting environmental review on a proposed transportation sustainability fee. While many understandably loathe new development fees in an already fee-rich process, this fee is intended to eliminate the need for ever conducting a transportation study for an individual project. Some may find it worthwhile to eliminate the risk and time involved with a $50,000, 6-month transportation study with an across the board fee.
As a creature of state law, CEQA cannot directly be avoided or changed by the city, but the Planning Department has done a commendable job at making the law’s local implementation as efficient as possible. This benefits the Planning Department as well, as staff is currently faced with a significant workload. The increased efficiency also significantly furthers the environmental purpose of CEQA, by clearing the way for some of the best positioned smart growth in the country.
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.