Land Use Approvals in California Can Avoid CEQA If a City Directly Adopts a Voter Land Use Initiative

A city need not conduct an analysis of the potential environmental impacts of a proposed development if it chooses to directly adopt a voter-sponsored initiative for the project.

For developers of projects that are popular but likely to be challenged by a small minority, the California Supreme Court’s decision in Tuolumne Jobs & Small Business Alliance v. Superior Court is good news.  A popular project can skip the preparation of an Environmental Impact Report (EIR) or other environmental document pursuant to the California Environmental Quality Act (CEQA).  This strategy saves time and money in two ways.  First, developers can save months – sometimes years – waiting for a city to prepare technical studies analyzing the environmental impacts of proposed projects.  These studies are almost always prepared at the developer’s expense.  Second, if there is no CEQA document, there is no CEQA litigation.  The cost and delays that result from CEQA litigation are avoided.  As a result, project opponents have one less arrow in their quiver to try to delay or kill a project by filing a CEQA lawsuit.

The facts of the case are straightforward. Walmart Stores, Inc. (Walmart) operated a store in the City of Sonora.  Walmart sought to expand the store in order to convert it into a “Supercenter,” which would sell groceries and be open 24-hours every day.  The city circulated for public comment a draft EIR for the expansion.  After a hearing, the city’s planning commission recommended to the City Council that the EIR be certified and the project approved.

Before the matter was heard by the City Council, a citizen served the city with a notice of intent to circulate an initiative petition. The “Walmart Initiative” proposed to adopt a specific plan for the contemplated expansion. The City Council postponed its vote on the EIR and project approval while the initiative petition circulated. The petition was signed by more than 20 percent of the city’s registered voters, qualifying it for the ballot.

Under California law, when a city council receives a voter initiative petition with sufficient signatures, the city is required to do one of the following: (1) immediately adopt the initiative without change; (2) immediately submit it to a special election; or (3) order the preparation of a report within 30 days, which the city council uses to decide whether to adopt the initiative or submit it to a special election. In Tuolumne, the City Council ordered that a report be prepared to examine the initiative’s consistency with previous planning commission approvals for the Walmart expansion. At its next meeting, the City Council considered the report and adopted the proposed initiative as an ordinance without further complying with CEQA.

The Tuolumne Jobs & Small Business Alliance sought a writ of mandate, claiming, among other things, that the City Council violated CEQA by adopting the ordinance without first conducting a complete environmental review.  The trial court denied the CEQA claim.  The Court of Appeals reversed, holding that when a land use ordinance is proposed in a voter initiative petition, full CEQA review is required if the city council adopts the ordinance rather than submitting it to an election.

The California Supreme Court disagreed. CEQA does not apply to a city council’s action to adopt a voter-sponsored land use initiative. The language and legislative history behind the Elections Code statutes did not support the proposition that the city was required to comply with CEQA before adopting the voter-sponsored measure.

The project opponents argued that “developers could potentially use the initiative process to evade CEQA review, and that direct adoption by a friendly city council could be pursued as a way to avoid even the need for an election.” While that may be true, the Supreme Court was not convinced: “The initiative power may be used to thwart development [too]. . . . The process itself is neutral. The possibility that interested parties may attempt to use initiatives to advance their own aims is part of the democratic process.” What’s more, California’s election laws offer another protection from overreaching by the city: the referendum power. If voters disagree with a city council’s adoption of a voter-sponsored initiative, they can file a referendum petition and a vote to block the enactment of a land use measure.

The Tuolumne case can be an effective tool when both a city council and the public support a popular development project. However, a well-thought-out legal and political strategy is crucial for success. For example, a city must still hold a public hearing before adopting the voter measure, affording the public an opportunity to be heard. How city council and the developer prepare for this hearing is important. Wise city council members will order a report to help develop a record in support of their decision and to show that they have considered countervailing arguments. In addition, environmental protections are still afforded by California’s other environmental laws and regulations. It is crucial to develop a plan for project approvals that must be obtained from other regulatory agencies that may have permitting authority over the proposed project. Indeed, CEQA compliance may still be required in order to obtain permits or approvals from state agencies or other governmental authorities. Developers do not get a “free pass.” Before using the Tuloumne strategy, developers should consult counsel to understand the legal and political risks.


San Francisco Establishes Mandatory Seismic Retrofit Program For “Soft Story Buildings”

Residential building owners must seismically retrofit their buildings, under a new law adopted by the City and County of San Francisco.

The law applies to wood frame buildings of three or more stories, or two stories over a basement or underfloor area that has any portion extending above grade.  Each building must also contain five or more dwelling units.  Finally, the focus is on older buildings where the permit to construct was applied for prior to January 1, 1978 and the building as not been previously seismically strengthened.

Why focus on these buildings?  Wood-frame, multi-unit residential buildings can have a soft, weak or open front wall line (a so-called “soft story condition”).  When the first story has perimeter walls that have large openings for garage doors or windows, few interior partitions, or is constructed of materials that have deteriorated over time, then the building is at a greater risk of damage in an earthquake.

Some buildings are exempt from the new law.  For example, a building that has been seismically strengthened within 15 years prior to the operative date of the legislation — June 18, 2013 — is exempt, but only upon the City’s approval of documentation showing that such work was properly permitted, completed and maintained as required.  (One has to question what standards the City will apply to determine whether the work was “properly . . . maintained.”)  Other buildings that have participated in City-approved, voluntary seismic strengthening programs are also exempt.

The legislation seeks compliance from building owners through a few mechanisms.  If the owner of a building is notified that its building is within the scope of the new law, the owner must engage an architect or engineer to submit to the City a “Screening Form.”  The form will require information on the compliance status of the property and a declaration from the owner stating whether the building is exempt from the law or the building’s applicable “Compliance Tier.”   As of this writing, there is no fee payable for submittal or review of the “Screening Form.”

Alternatively, a building owner may submit an optional “Evaluation Form” to determine whether an existing building already meets the requirements of the new law.  It is also completed by an architect or a licensed civil or structural engineer.  The “Evalution Form” must describe the dates and scope of any seismic retrofit work as well as plans and other information that the City may require that are sufficient to support a declaration that the building satisfies the law.  The City will charge a fee for review of the optional Evaluation Form.

The City plans on sending a notice to each applicable building owner that it should comply with the seismic retrofit law.  However, some buildings may “slip through the cracks.”  In that case, the deadlines for compliance may be extended for property owners that do not have actual knowledge that their properties must be brought into compliance with the new law.

Each building that must comply is placed in a “Compliance Tier.”  All buildings, regardless of Compliance Tier, must submit a screening form or optional evaluation form within one year of the effective date of the law.

Tier 1 buildings are those that contain a Group A (assembly), E (education), R-2.1, R-3.1 or R-4 (various residential) occupancy on any story.  Permit applications for the seismic retrofit work must be submitted to the City within two years and the work must be completed within four years of the effective date of the new law.

Tier 2 buildings contain 15 or more dwelling units, with some exceptions.  Permit applications for the seismic retrofit work must be submitted for Tier 2 buildings to the City within three years and the work must be completed within five years of the effective date of the new law.

Tier 3 buildings are those that do not fall within the definition of another tier. Permit applications for the seismic retrofit work must be submitted for Tier 3 buildings to the City within four years and the work must be completed within six years of the effective date of the new law.

Tier 4 buildings contain a B (business) or M (mercantile) occupancy on the first story or in a basement or underfloor area that has any portion extending above grade, and buildings that are in mapped liquefaction zones, except for buildings in Tier 1. Permit applications for the seismic retrofit work must be submitted for Tier 4 buildings to the City within five years and the work must be completed within seven years of the effective date of the law.

For each non-exempt or non-complying building, the owner shall submit an application for a building permit for the proposed seismic retrofit.  A permit for the seismic retrofit work may include minor ancillary work, but generally shall be separate from any other permits for building alterations or repairs unless such work is triggered by or integral to the seismic retrofit work.  After the work is completed, the building will obtain a “Certificate of Final Completion and Occupancy.”  Any building that has been retrofitted under the law shall not be required to do another seismic retrofit for 15 years after June 18, 2013, unless damaged or further altered so it doesn’t meet the engineering criteria.  (Why wasn’t the safe harbor extended to 15 years after the property owner completes improvements complying with the law?)

If property owners do not comply, the City may post on the building, and record against the property, a notice that states:  “Earthquake Warning:  This building is in violation of the requirements of the San Francisco Building Code regarding Earthquake Safety.”  Other penalties may also apply.

Damaged buildings must be brought up to the new standards more quickly.  If a building suffers damage from an earthquake or fire caused by the earthquake that renders the building uninhabitable, results in structural damages that triggers the City’s retrofit regulations, or results in “disproportionate damage” as defined in the City’s code, the building must comply with the chapter within one year of the damage.

Special rules apply to historic buildings, if any portion of the seismic retrofit work will be visible from the exterior of the subject property.

How will property owners pay for this?  The costs have both building owners and tenants’ advocacy groups concerned.  (The costs of retrofit will be passed through to tenants through higher rents.)   The City announced that it has worked with real estate finance lenders and banks to make available seismic retrofit financing.  In addition, the City is considering the creation of a special tax mechanism to help finance the costs of the seismic improvements.  (In other words, the City may allow you to tax your own property to pay for the improvements, establishing an income stream for payment of up front costs.)  Of course, there is some relief for financially strapped landlords —  eligible landlords may file a hardship application with the City to seek temporary relief from compliance.

Achieving earthquake readiness is a laudable goal; however, it remains to be seen how property owners (and tenants) will respond when the economic costs of this new legislation impact their bottom line over the next few years.