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The California Supreme Court has ruled that an inclusionary housing requirement is an exaction rather than a land use regulation – a distinction that means inclusionary housing could be judged by the same nexus and proportionality requirements as other exactions. In a unanimous ruling last Friday, the Supreme Court reversed an appellate court ruling and sided with developer Sterling Park in an ongoing dispute against the City of Palo Alto. Sterling Park had sought to fulfill its inclusionary housing commitment under protest, as permitted by the Mitigation Fee Act (Govt Code Section 66020). Palo Alto claimed that the inclusionary housing requirement was not an exaction under the Mitigation Fee Act but rather a land use regulation under the Subdivision Map Act (Govt Code Section 66499.37). Palo Alto's inclusionary housing program "is different from a land use regulation … (a limit on the number of units that can be built); instead, it is similar to a fee, dedication, or reservation under section 66020," wrote Justice Ming Chin for the unanimous court. The Supreme Court did not decide the merits of the case, in which Sterling Park challenged the inclusionary housing ordinance as an impermissible use of the city's power to impose exactions in exchange for land-use permits. Instead, it remanded the case to the Sixth District Court of Appeal for that decision. However, the Supreme Court's ruling certainly sets the stage for a possible ruling that would outlaw or significantly rein in  inclusionary housing ordinances. Under exaction law, a jurisdiction seeing to impose an inclusionary housing requirement on a developer would have to prove a strong nexus between the construction of the project and the need for affordable housing. In the 2009 case Palmer v. City of Los Angeles , 175 Cal.App.4th 1396 (2009), the Second District Court of Appeal called into question the legal validity of inclusionary housing requirements on rental housing projects. The court ruled uled that an inclusionary housing requirement on a rental development project near Downtown Los Angeles was effectively setting the rent on the housing units, thus violating the state's Coast-Hawkins Rental Housing Act. Just last week, Gov. Jerry Brown vetoed AB 1229, a bill designed to overturn the Palmer ruling, by saying he wanted to wait to see what the Supreme Court did in the Sterling Park case. The case began in 2006, when Sterling Park LLC sought approval of a proposal to demolish an existing commercial development on 6.5 acres of property on West Bayshore Drive and replace it with 96 residential condominiums. As a condition of approval, Sterling Park agreed, under the city's inclusionary housing ordinance, to set aside 10 units for affordable tenants and also pay the city a fee totaling approximately 5% of the actual sales value of the market-rate units. Three years later, however, Sterling Park filed a letter of protest as permitted under Government Code Section 66020, a part of the Mitigation Fee Act, claiming that the developer had agreed to the conditions under duress and claiming that the inclusionary housing requirements were invalid. The city did not respond and Sterling Park sued, seeking invalidation of the inclusionary housing requirement. In response, the city argued that the inclusionary housing requirements were not exactions imposed under the Mitigation Fee Act but, rather, conditions of approval imposed under the Subdivision Map Act . The Mitigation Fee Act contains the protest procedure that Sterling Park followed; the Subdivision Map Act has not such equivalent procedure. Both the Superior Court and the Sixth District Court of Appeal ruled in favor of the city, but the Supreme Court reversed. The appellate court had relied heavily on Trinity Park, L.P. v. City of Sunnyvale (2011) 193 Cal.App.4th 1014, which held that the Mitigation Fee Act covered only impact fees designed to defray the cost of infrastructure needed to serve the project. By contrast, the Supreme Court relied heavily on Fogarty v. City of Chico (2007) 148 Cal.App.4th 537, which held that the phrase "or other exactions" contained in the Mitigation Fee Act should be interpreted broadly. The Fogarty case, in turn, depended in large part on an appellate court ruling in Williams Communications v. City of Riverside (2003) 114 Cal.App.4th 642. Using the reasoning of Fogarty and Williams , rather than the ruling in Trinity, the Supreme Court so long as the number of units being constructed is not being challenged – in issue that would be covered by the Subdivision Map Act -- the conditions attached to how those units may be rented or sold can be litigated under the Mitigation Fee Act during or after construction of the project.  "The procedure established in section 66020, which permits a developer to pay or otherwise ensure performance of the exactions, and then challenge the exactions while proceeding with the project, makes sense regarding monetary exactions.," wrote Justice Chin or the court. "By the nature of things, some conditions a local entity might impose on a developer, like a limit on the number of units … cannot be challenged while the project is being built. Obviously, one cannot build a project now and litigate later how many units the project can contain — or how large each unit can be, or the validity of other use restrictions a local entity might impose. But the validity of monetary exactions, or requirements that the developer later set aside a certain number of units to be sold below market value, can be litigated while the project is being built." In the case of the Sterling Park development, Chin wrote, Palo Alto's inclusionary housing ordinance "offers developers two options, either of which, by itself, would constitute an exaction. The imposition of the in-lieu fees is certainly similar to a fee. Moreover, the requirement that the developer sell units below market rate, including the City's reservation of an option to purchase the below market rate units, is similar to a fee, dedication, or reservation."

California's Office of Planning & Research appears likely to make a major impact this year by revising the General Plan Guidelines and pushing the envelope on the California Environmental Quality Act in a way that hasn't been seem for a decade or more. OPR is currently preparing an update of both the General Plan Guidelines and the CEQA Guidelines. Such updates are not usually front-page news, but this time around both cases could be the leading edge of significant change in the pra ctice of planning in California. The General Plan Guidelines now in the works will focus on integrating the process of updating plans with environmental review, which is often tacked on to the end. "All of the feedback I've been getting is that CEQA eats the life out of your general plan – the tail wags the dog," said OPR's CEQA expert Chris Calfee at last week's state planning conference in Visalia. Meanwhile, OPR also must undertake implementation of the many revisions to the California Environmental Quality Act that Gov. Jerry Brown has pushed through the Legislature since he took office – most importantly, rethinking the "Level Of Service" standard for traffic.  "We are looking very seriously at vehicle miles traveled as a more appropriate measure of a particular development on traffic and traffic services and what are the impact on complete streets and transportation alternatives," OPR Director Ken Alex said in a keynote speech in Visalia.  The timelines for each of these updates are tight. Under the terms of SB 743 – recently signed by Gov. Jerry Brown – OPR must come back with a report and a proposed game plan by July. Meanwhile, OPR hopes to complete the General Plan Guidelines update by December. As one tweeter from Visalia suggested, OPR is not preparing "your father's General Plan Guidelines update". Key to the state's approach is the availability of thousands of layers of geographical data on the state's "geoportal" .  But it may be the connection to CEQA that is most important part of the General Plan Guidelines update.  Regarding the way CEQA "eats" General Plans, Calfee said in Visalia: "We can address some of that if we look at how we do timing of General Plans and EIRs. We want to revamp section on CEQA and General Plans to better address what are the key intersections between development of General Plan  and development of CEQA review. We may put out a time line in order to get people to think about environmental issues at the very front end of the process." He added: "Also, we want to set forth other key linkages between General Plans and environmental review. Project objectives in the General Plan -- those should be linking up to project objectives in EIR. Alternatives prepared for General Plan should be the alternatives in your EIR. And so forth."

Will CEQA ever give infill development a break? SB 731 – now pending in the Assembly – is intended to do just that. But in the latest twist in an increasingly long-running tale, the bill has now been amended in a way that could push CEQA significantly in the direction of assessing the socioeconomic impact of infill development. On Monday, Senate leader Darrell Steinberg took some amendments to SB 731 and Assembly Speaker John Perez referred it back to the Assembly Natural Resources Committee.  The major change calls on the Governor's Office of Planning & Research to do a study on economic displacement of residents in infill neighborhoods and revise the CEQA Guidelines based on the results. The economic displacement idea was first raised two weeks ago in a letter from ClimatePlan, Greenbelt Alliance, and the Planning & Conservation League.   "While infill development, done right, can greatly improve the quality and livability of a neighborhood and the health of its residents," the letter wrote, "new development can also result in both physical (direct) displacement and economic(indirect) displacement. Unchecked, the displacement of residents and neighborhood-serving businesses thatc an no longer stay in a neighborhood because of escalating rents/property values brought on by new development, can have significant harmful environmental, social, and health equity consequences. We believe these impacts should be fully incorporated into the CEQA framework. " In the past, the state has explicitly rejected moves toward assessing the socioeconomic impact of development via CEQA – in contrast to New York, whose CEQA equivalent moved in that direction a long time ago (but is not as frequently used on private development). These amendments reveal the tension among liberal Democrats in reforming CEQA. On the one hand, they want more infill development. But on the other hand, they can't let go of the idea that infill development will be bad for people who currently live in urban neighborhoods. In an interesting blog posted on Monday, High Speed Rail blogger Robert Cruickshank argued that the opposite is true – that a lack of infill development can sometimes lead to gentrification too. "As San Francisco proves, the opposite is the case. Rules that limit or block infill development cause rents to skyrocket, since potential renters are all fighting over a small, finite set of available units," he wrote.  If OPR's study led to actual changes in the CEQA guidelines requiring consideration of socioeconomic issues, it would broaden CEQA's scope considerably in infill locations – perhaps requiring different analysis, rather than less, which was the original goal of Steinberg's bill. Meanwhile, on Monday, the Assembly passed SB 1, which would partially revive redevelopment. It seems headed for Gov. Jerry Brown's desk, though Brown vetoed an identical bill last year.

As the California legislative session winds down, both CEQA reform and the revival of redevelopment appear headed to Gov. Jerry Brown's desk. Both bills are being carried by Senate leader Darrell Steinberg, D-Sacramento. They both passed the Assembly Appropriations Committee last Friday. The redevelopment bill – SB 1, virtually unchanged since last spring -- passed 12-5, presumably on a party-line vote. The CEQA bill – SB 731, the subject of endless wrangling in August – passed 17-0. The redevelopment bill would permit cities to use tax-increment financing in limited circumstances. Counties and other local taxing entities would have to agree; school tax-increment would not be included; and the money could be spent only in transit priority areas, walkable locations, and clean-tech districts. Brown vetoed a virtually identical bill last year. Steinberg thought he had consensus on the CEQA bill last spring, but that appeared to fall apart at the end of July when both CEQA reformers and CEQA defenders found fault with the compromise. Later in August, the CEQA Works – the CEQA defenders – got bent out of shape a second time in response to a set of amendments proposed by  Brown's Office of Planning & Research, some of which were incorporated into the bill by Steinberg. OPR's proposals included a proposal that clarifying that parking and exceedance of level of service standards do not, in and of themselves, represent a significant impact under CEQA. The OPR proposal also includes a suggestion, which Steinberg accepted, that CEQA settlements be approved by trial judges and then only when certain findings can be made. The CEQA Works letter of Aug. 19 zeroed in on the judicial approval of settlements in particular. Acknowledging that the provision may be intended to discourage settlement illegitimate CEQA lawsuits, the CEQA Works letter claimed the provision represented "a solution where there is, in fact, no evidence of a problem." However, the CEQA Works letter to did not discourage Steinberg from accepting many of the proposed amendments; not did it prevent the 17 members of the Appropriations Committee – including 12 Democrats – from approving it.

Recently, economist and entrepreneurship expert Carl Schramm announced a discovery in the pages of Forbes.com: "the practice of city planning has escaped reality." Planners don't see the big picture. They don't understand economic growth. They've unleashed upon us scourges like live-work lofts, fire stations, and bloated pensions. Planning thus joins a small, list of obscure fields that could benefit from self-analysis and reform. To my reckoning, that list includes finance, medicine, government, journalism, technology, religion, and everything else short of Pet Sounds .  You need only take a few glances at major American cities and suburbs to know that there have been lousy plans and, by extension, lousy planners for a very long time. Most every cul-de-sac and downtown surface parking lot indicates as much. Schramm's criticism, as that of an entrepreneurial evangelist looking create business-friendly, is undeniably valuable.   How critical is Schramm? Quite. In "It's Time for Business to Adapt a New Model," he accuses planners of being self-serving and of writing many general plans good only to line the wallets of planning firms and architects. In reading a handful of cities' plans – which cities? we'll get to that in a minute – he and his graduate business students at Syracuse University concluded that planners are blind to the forces of demographics and macroeconomics.  Schramm writes: measures of city health that are clearly more faddish than practical. None set a goal of full employment or even mentioned unemployment.  Poverty was a missing word.  What discussion existed regarding economics was confined to making a specific kind of neighborhood, often called an arts district, to provide propinquity for the city's "creative" population.  If a link to the economy is mentioned it usually is a passing reference to new and small businesses that would grow up if, again, the physical environment was engineered in a specific way.  In short, writes Schramm, planners who believe that their job is merely to create a functioning built environment are shirking their duties as captains of economic development and reduction of poverty. They "have no idea of how the complexities of dynamic economies actually are sparked to life." He also accuses planners of ignoring demographic projections; he writes, "none of the plans ever spoke of what the city's population might be at the end of the planning period!" Schramm would replace all of those arts districts with facilities for "scale production…(which) is the only path to growth and urban futures that hold the potential to restore communities" – as if American cities will be saved by Chrysler and U.S. Steel. Planners' Hidden Agenda As debatable as Schramm's conception of the 21 st  century economy may be, many of his concerns are so obvious as to be implicit in the work of many contemporary planners. When, for instance, New Urbanists speak of vibrancy and street life, they're not assuming that everyone is strolling around because they're unemployed. When developers build dense mixed-use developments, they do so in the hope that thriving businesses will fill those ground floors (and that the residents above will have more disposable income because they're spending less on cars). When progressive planners talk of making cities "better," they do so with the conviction that improvements in quality of life lead to economic prosperity -- and vice-versa. Plenty of contemporary plans address exactly the concerns that Schramm raises. Take Santa Monica's relatively new, much-admired general plan , for instance: it's chock-full of rhetoric about stoking the local economy and supporting local businesses. Same for San Jose's new Envision 2040 plan. But those are just two examples from two cities. Planners certainly aren't enlightened enough to pursue that line of thinking on a really large scale, are they? As it turns out, they are.  California's Senate Bill 375 , for instance, requires cities to do exactly what Schramm and his students advise. A huge component of SB 375 is based on demographic projections, with the goal of reducing per-capita greenhouse gas emissions according to targets for the years 2030 and 2050. It addresses the relationship between the location of jobs and that of housing – a key factor in cultivating a healthy workforce. The models that the Air Resources Board and the state's "Big Four" metropolitan planning organizations are using to meet these targets incorporate piles of data to this effect. Under SB 375, every metropolitan planning organization (MPO) must publish and abide by a Sustainable Communities Strategy (SCS) and every city in those planning areas has to address the SCSs in their plans. Granted, SB 375 isn't expressly intended to promote business -- it has far more important goals -- but it most certainly takes the state's economic climate into account.  Anyone worried about demography might also check out California's Regional Housing Needs Assessment program, designed to ensure that every city in the state absorbs its fair share of new low- and moderate-income housing. (Whether cities follow these rules usually depends on politics, with conservatives often opposing growth.) Most sensible cities not only plan housing accordingly; they also plan for amenities and services. So if a city expects a population increase in a certain neighborhood, it might also add a fire station or a park. Schramm, however, sees fire stations as symbols of cronyism and waste: "every plan discusses the importance of new buildings for fire station," he writes, disapprovingly. Maybe the problem on the local level is that planners are fixated on the arts, to the detriment of other economic activities.   In many places, these industries probably play a smaller role in today's urban economies than boosters like Richard Florida and Elizabeth Currid-Halkett would like to admit. Then again, the arts is often shorthand for a much larger, and vibrant, creative industries, ranging from entertainment, to video games, to interior design -- but not, alas, to "scale production." But the reason that the arts have become an avatar for a new wave of urban planning is that urban forms that are good for the arts and artists may also be good for all sorts of other industries and residents. What's good for Banksey may be good for America.  Schramm also lambasts these plans for not calculating the costs of cities' pensions, claiming "not one of the plans discussed…the unfunded costs of pensions for retired and current public servants." Why not tell planners to cure cancer too?  While pension obligations gravely threaten some cities, I'm not sure why they are planners' problems or how planners would solve them. Conflicting obligations within a city -- between, say, building a nicer city and paying long-term debts -- need to be worked out at the level of city government. Then again, Schramm isn't a big fan of any sort of government. If planners have their way, "government…(will have) control over all aspects of the built environment." He doesn't mean that in a good way.  Shining Exemplars How did Schramm and his students reach these conclusions? Is the state of planning as bleak as they imply? Of course it is – if you base your conclusions on Syracuse, Stockton, and…wait for it…Detroit. (Schramm does not name these cities in his Forbes piece, but he was candid enough to reveal them to me via email.) Anyone who knows anything about contemporary American urbanism already know what I'm going to say. Judging the planning profession according to some of America's most famously destitute (and bankrupt) cities is like judging lending by Countrywide, finance by Lehman Brothers, international banking by the Libor scandal, and entrepreneurship by the shuttered frozen yoghurt shop down the block. Schramm's students might as well have thrown in Atlantis too.  If Schramm had presented his Forbes piece explicitly as a study of cities that have run aground, and his Forbes editors had titled it as something like "Bad Planning and Urban Downfall," then he might have ended up with a compelling, nuanced commentary about the common traits that poorly planned cities share. The graduate course at Syracuse that gave rise to his article is called "Fast Cities / Failed Cities," so Schramm can clearly distinguish between good and bad. His students, though, seem to have taken a cursory, one-week look at a complex, generational issue and then rendered a sweeping decision that vilifies an entire field. Regarding Detroit in particular, Schramm presents a curious argument. He writes that Detroit's general plan is a failure because "Detroit remains hopeful that someday 2.3 million people will live there once again." First of all, a lousy land use plan is the least of Detroit's worries. Secondly, even if Detroit's general plan  does  refer to a target population of 2 million, that just means that the document disagrees with literally every single member of the greater planning field. That's probably to be expected from a city that elected a criminal as its mayor. Fortunately for Schramm, if he thinks that planners should figure out how to plan for a smaller Detroit, then he should delighted.  That's exactly what planners are doing. (Whether they can pull off such a monumental task, and generate the political will and financial resources to implement it, is another story.) Job Creators I have no doubt that Schramm would give great advice to an entrepreneur, such as the mom and pop who are setting up a small business, whether on a Main Street, in a mini-mall, or in a co-working space in a converted flour mill. He would likely fight like crazy to help that business succeed. He seems like that type of guy. I'm also willing to wager that the first thing he would tell clients is to be true to their vision no matter what impediments lie in the way.  Schramm surely knows that no entrepreneur, anywhere, creates his or her own competitive landscapes -- nor their literal landscape. To imply that any plan or planning decision could undermine ingenuity, hard work, and guts is an insult to the spirit of entrepreneurship. The best entrepreneurs know how to read existing conditions, adapt to changing circumstances, and anticipate what lies ahead. The availability of one kind of office space or another should not dissuade them. Of course, Schramm is right that to say that planning and business are interconnected. But it's a two-way street. Schramm overlooks the very real role that business plays in creating plans (and, often, in circumventing them). I can't imagine a city in which the business community does not have its fingerprints all over the general plan. Many chambers of commerce have lobbyists dedicated to planning and development. So, if a plan isn't business-friendly, whose fault is it? These days, it takes a real lack of imagination to disregard the ways that a pleasant urban environment can stoke economic development. But if business groups are as skeptical as Schramm is, then there's a raft of literature  -- dating back at least to Jane Jacobs' The Economy of Cities – that suggests that cities built on the principles of smart growth will be friendlier to business.  Density creates more interactions, makes labor and customers more accessible, and can make people infinitely happier and more energized. It's not a coincidence that some of the densest cities in the world are also some of the most prosperous cities in the world. Even so. Whether you're in Hong Kong, Tokyo, or San Francisco -- or not to mention San Bernardino, Riverside or Stockton -- no one ever said that business was easy. And neither is planning.

The First District Court of Appeal has batted down an attempt by the California Building Industry Association to turn CEQA on its head, saying that the passage of significance thresholds is not a project under the environmental law. In so doing, the court concluded that an environmental analysis is not required to examine the environmental impact of the standards used to conduct environmental analysis and assess environmental impact.  In other words, the appellate court ruled that CEQA does not apply to CEQA – at least not in this case. In CBIA v. BAAQMD , CBIA filed a lawsuit under the California Environmental Quality Act after the Bay Area Air Quality Management District adopted new significance thresholds for several pollutants, including a significance threshold for greenhouse gas emissions. The GHG threshold for development projects is 1,100 metric tons of carbon dioxide equivalent or 4.6 metric tons per service population per year. CBIA sued, arguing most importantly that the adoption of significance thresholds is a project under CEQA and therefore should have triggered a CEQA analysis. Alameda County Superior Court Judge Frank Roesch ruled in favor of CBIA, concluding that significance thresholds are "a discretionary activity directly undertaken by a public agency which may cause a reasonably foreseeable indirect physical change in the environment." He agreed with CBIA's claim that the evidence in the record supports the argument that the Thresholds "might discourage infill development, encourage suburban development or change land use patterns. . ." The First Appellate District, Division Five, reversed Roesch's ruling, on two grounds. First, the court concluded that the CEQA Guidelines already lay out a process for public review of significance thresholds and a CEQA review – with an initial study and possibly an environmental impact report – would be duplicative. And second, the court said that there was not enough evidence in the record to support CBIA's contention that the thresholds would not discourage infill development. On the first point, Justice Henry Needham, writing for a unanimous three-judge panel, cited Guidelines Section Section 15064.7(b), which lays out the process by which thresholds should be adopted. "The District drafted proposed revised thresholds of significance in 2009, utilizing the scientific and administrative expertise of its staff," Needham wrote. "It then conducted public hearings, outreach, and workshops for more than a year. The administrative record, which contains staff reports, scientific reports and protocols, analyses of the effect the proposed thresholds would have on various projects, letters from interested parties, responses by the District, transcripts of hearings, and records from various workshops, is in excess of 7000 pages. CBIA and other groups with similar concerns about the proposed thresholds and their effects participated in that process. The District took the comments of such groups into consideration before adopting the?2010 Thresholds." Requiring the air district to also conduct a CEQA analysis "would result in a duplication of effort, at taxpayer expense and to little if any purpose." Needham also concluded that the record did not prove that adoption of the significance thresholds would discourage infill development or encourage sprawl. "Teasing out the extent to which undefined future projects might be built or abandoned as a result of the Thresholds, and the extent to which land development projects might be relocated to a more suburban location, would require a prescience we cannot reasonably demand of the District. No public agency other than the District is committed to using the Thresholds, and the District does not act as the lead agency for the type of residential and commercial projects CBIA alleges will be displaced," Needham wrote.

Two weeks after it was left for dead, SB 731 – the bill to reform the California Environmental Quality Act – unanimously passed the Assembly Local Government Committee Wednesday. The bill was amended last week to ease parking requirements on infill development but it was unclear whether that would be enough to satisfy the Assembly.  However, Wednesday's 5-0 vote suggested that the bill is likely to become law this year despite business opposition. After it passed the Senate unanimously in May, SB 731 ran into problems when a business group – the CEQA Working Group – switched from support to opposition and Assembly Speaker John Perez said more analysis was needed.  On Wednesday, Senate leader Darrell Steinberg – who is carrying the bill – had tough words for the CEQA Working Group. He was quoted in the Los Angeles Times as saying: "You want to move a mile, we will move a mile. You want to move one hundred miles in ways that may not be good, that's not going to happen with this bill."  Capital Public Radio quoted him with even blunter words: ""If there is any expectation – and I know there is a big expectation – that my bill will include the lengthy and ever-changing list that the CEQA coalition seems to want, you're gonna have to find another author, another year, another time, another way to do this."

At a glance, last week's California Supreme Court ruling in the Expo Line CEQA case laid down a pretty clear rule: Lead agencies can use a "future baseline" for environmental analysis, but they have to be very careful in documenting the reasons why. L.A. Metro erred in using a "future baseline," but fortunately for the agency the court concluded that it didn't make any difference to the analysis. A deeper look at Neighbors for Smart Rail v. Exposition Metro Rail Construction Authority , however, reveals a deeply split court that apparently almost went the other way – and that could have significant implications in the future for the way the California Environmental Quality Act unfolds in future court cases.  The court split 3-3-1 in the case. Justice Goodwin Liu provided the deciding vote on the future baseline question – but he didn't agree with the plurality decision on the question of whether using the future baseline made any difference in the outcome. And a close read of the two main opinions – the plurality opinion written by Justice Patricia Werdegar and the main dissent written by Justice Marvin Baxter, both of which got three votes – suggests that Baxter's was originally written as the majority opinion and Werdegar's as the dissent. Baxter's dissent begins with a broad and sweeping description of CEQA – typical of a majority opinion – while Werdegar's plurality contains many refutations of Baxter's points, as a dissent typically does. Had Baxter's reasoning carried the day, lead agencies would have virtually unlimited discretion in deciding what kind of baseline analysis to use. Why is this important? Because we've entered a new period of CEQA court rulings focused on narrow, technical decisions that have enormous consequences on the size and scope of the analysis.  For the first 20 years after CEQA was passed – from 1972 until 1990 – the courts consistently expanded CEQA's scope so that more and more issues had to be analyzed in great technical detail, thus creating ever-expanding environmental analyses. For the next 20 years – after the California Supreme Court's New Year's Eve 1990 ruling in Citizens Of Goleta Valley, v. Board Of Supervisors, 52 Cal.3d 553, 801 P.2d 1161, 276 Cal.Rptr. 410, the courts were much less aggressive in expanding CEQA's scope – largely because Goleta Valley contained a pretty clear warning.  Now, however, we appear to have entered the CEQA's "third wave". The courts are not vastly expanding CEQA's reach, and plaintiffs know better than to push in that direction. Instead, plaintiffs are relying on narrow technical arguments to make their case – mostly about what the ground rules for the analysis are. But while the arguments are narrow and technical, the impact of the rulings is not. For example, in Ballona Wetlands Land Trust v. City of Los Angeles (2011) 201 Cal. App. 4th 455, the Second District Court of Appeal ruled that a project's impacts do not have to be measured against future changing environmental conditions (for example, sea level rise). Similarly, in last week's Neighbors for Smart Rail v. Exposition Metro Line Construction Authority, the issue was whether or not L.A. Metro erred in the way it created the baseline of analysis for traffic and air quality impacts. For those two issues – but not for others – Metro use a "future baseline" of 2030 without the Expo Line Phase 2 in place, rather than a current baseline.  In a lot of ways, this makes sense. After all, we're not talking about a development project here. We're talking about a transportation project. So, whereas you might be able to analyze a development project against current conditions – assuming that the only change is whether or not the new subdivision is built – the whole point of a transportation project is to change future conditions from what they otherwise would be.  This was persuasive to Justice Baxter and the two judges who agreed with him. TO quote Baxter at some length:  "As a major infrastructure project designed specifically to address projected long-term increases in traffic congestion and air pollution, Expo Phase 2's very operation will, over time, achieve environmental objectives and efficiencies in complete alignment with CEQA's goals of enhancing and protecting the environment in this state. The majority does not disagree that the traffic and air quality conditions in 2007 will no longer exist when Expo Phase 2 is fully operational. But despite Expo Authority's reliance on this reality as a justification for omitting an impacts analysis based on the 2007 conditions, the majority proceeds to fault the agency for failing to analyze the conditions projected to exist eight years after that date, when Expo Phase 2 is scheduled to begin operations in 2015.  "The unfairness of today's decision is stunning: the majority finds an abuse of discretion based on the lead agency's failure to use a baseline that is nowhere mentioned in the CEQA statutes, regulations, or case law, and that no agency or member of the public ever advocated in the administrative review process below." But it wasn't persuasive to the majority. Quoting Werdegar's opinion – which got four votes: "Projected future conditions may be used as the sole baseline for impacts analysis if their use in place of measured existing conditions—a departure from the norm stated in Guidelines section 15125(a)—is justified by unusual aspects of the project or the surrounding conditions.  "That the future conditions analysis would be informative is insufficient, but an agency does have discretion to completely omit an analysis of impacts on existing conditions when inclusion of such an analysis would detract from an EIR's effectiveness as an informational document, either because an analysis based on existing conditions would be uninformative or because it would be misleading to decision makers and the public." This last bit of reasoning – that existing conditions can only be omitted if uninformative or misleading – appeared to be especially infuriating to Baxter. "It is unclear," he wrote, "how an agency might show that an existing conditions analysis would be "uninformative" or "misleading," without actually conducting such an analysis." Baxter concludes that the majority's decision will increase the complexity of CEQA analysis significantly and will lead to further conclusion and delay for both public and private projects in California. He may well be right. One can't help but notice that Baxter's reasoning is pretty clean and simple, while Werdegar's – while not tortured – is nevertheless complicated. As Baxter says, it's hard to know exactly how to follow the bouncing ball.  When CEQA's critics complain that the law is unnecessarily complicated, this is the kind of thing they're talking about. At its core, the question in the Expo Line CEQA analysis is simple: Will the construction of a major light-rail line benefit the environment or harm it? The Neighbors for Smart Rail ruling deals with the question of "compared to what" – and provides, , unfortunately, a rule that gives CEQA critics even more ammunition when they say the law is unnecessarily complicated.

Reports of CEQA reform appear to be greatly exaggerated. After sailing through the Senate late last spring, SB 731 – Senate leader Darrell Steinberg's supposedly consensus-based reform of the California Environmental Quality Act – is still in the Assembly.  Business-oriented CEQA reformers have reversed their earlier position and come out against it, while labor and environmental groups may also have problems with the bill.  Steinberg took some amendments to the bill on Tuesday – in particular, making it easier to deal with parking issues in infill locations -- but it remains to be seen whether that'll be enough to get the bill out of the Assembly. Back in May , Steinberg appeared to have a CEQA reform bill in the bag. After Michael Rubio, chair of the Senate Environmental Quality Committee, resigned to work for Chevron, aggressive CEQA reform proposals were dropped and Steinberg came up with a more modest bill that had the support of both CEQA defenders and CEQA reformers. That bill – which, among other things, linked CEQA reform to the implementation of SB 375 – passed the Senate on a unanimous vote in May and seemed headed for Gov. Jerry Brown's desk. But, surprisingly, the bill got hung up in the Assembly. At the end of July, Assembly Speaker John Perez told the Los Angeles Times , "There's not been the real discussion necessary for such a huge issue." at the end of the session. Perez's comments came a week after a surprising letter to Steinberg from the CEQA Working Group, a business-oriented coalition of CEQA reformers that had previously supported SB 731. "Unfortunately, as drafted, SB 731 would not advance true CEQA reform and, in fact, could make approval of worthy and responsible projects even more difficult," the letter said. Specifically, the letter called out the following points: * CEQA reform should "reduce duplicative environmental reviews and reduce meritless lawsuits" against projects that advance the goals of SB 375 and renewable energy projects. The letter was not specific about how this should occur. * SB 731 should be amended to "require disclosure of any party that has financially contributed to CEQA litigation, similar to campaign finance disclosure laws and court mandates for third parties seeking to file advocacy briefs in lawsuits. * CEQA plaintiffs should have "skin in the game" and "be required to pay for the lead agency's preparation of the record required for CEQA litigation." It is not clear precisely why the CEQA Working Group changed course or what the hangup in the Assembly is. In an insightful blog last week , caeconomy.org's Justin Ewers suggested that all sides are now engaged in pushback against the bill but labor in particular has objected to the CEQA streamlining for infill development contained in the bill. Labor sometimes uses CEQA to stall anti-union projects such as Wal-Mart stores, and often sides with environmental justice advocates who see CEQA as a tool to protect low-income communities. At the heart of the Steinberg bill is a proposal to streamline review of certain issues in transit-rich locations, both by establishing statewide significance thresholds and declaring that certain issues cannot be considered significant impacts. The main change in Tuesday amendments was to move parking from the thresholds category to the no significant impact category. Previously, the bill called on the state to create infill thresholds for noise, transportation and parking, while declaring that no significant impact could be found on asthetics. The new version moves parking from the thresholds to the no significant impact category. It's not clear whether that change will satisfy the critics, however, since the larger issues appear to deal with the standing and timing of lawsuits. None of the CEQA Working Group's recommendations were included in the revised bill and labor would be unlikely to agree to them in any event.

San Francisco's Transbay Transit Center is slowing taking shape in a hole south of Market Street. Three years of subterranean excavation are supposed to lead to steel beams for a five-story building that will begin to rise in 2014.  When  completed in 2017, the four-block-long transit center is expected to become a civic and regional landmark, with a large rooftop park, surrounded by numerous skyscrapers and a pedestrian-dense office, retail and residential community. Project boosters are referring to it as the Grand Central Station of the West. San Francisco officials are hoping the transit center helps redevelop the surrounding area into the densest neighborhood west of the Mississippi.  It's a far cry from what was once a light industrial neighborhood in the shadow of the city's downtown, located only a few blocks way. But the area has benefited from city policies that encourage development to migrate south from the city's financial district, as well as development sparked by the removal of the nearby Embarcadero Freeway after the 1989 Loma Prieta Earthquake. The new transit center will rise on the same spot as the city's Transbay Terminal, which served commuters from 1939 until 2010. The old Transbay Terminal was a rundown, forlorn structure on Mission Street, where streetcars once ended their routes across the Bay Bridge.  Starting in the 1950s, the terminal was strictly used by  buses, which arrived from throughout the entire Bay Area on special freeway offramps. But under the guidance of a Joint Powers Authority, composed of San Francisco officials and the Bay Area transit districts that used the old facility, a new terminal, with a new name--the Transbay Transit Center--is now being built at a cost of $4 billion.  The new center is supposed to bring together 11 transportation systems, and serve 45 million people a year. Some of the transportation systems don't yet service San Francisco, and funding for many of the projects isn't yet secured.  But project planners are thinking big. To encourage the transit-oriented development, the city has created a plan for 40 acres around the transit center, which includes generous upzoning of commercial properties, planned retail corridors, and pedestrian friendly amenities such as wide sidewalks and alleyways lined with townhomes.  Much of the new development is planned for land freed up by tearing down parts of the Embarcadero Freeway and one freeway off-ramp that once served the transbay terminal, according to Courtney Pash, assistant project manager for the Transbay Redevelopment Project Area, which is a successor agency to San Francisco's Redevelopment Agency. The revitalized area around the Transit Center is expected to have 4,600 housing units, with 25% of them affordable units. Many of the residences will be at the southern end of the redevelopment area along Folsom Street, complementing new residential construction in nearby Rincon Hill. Six million new square feet of new commercial and office space will be created, much of it in high rises. The skyscrapers are will be slender, to minimize shadows. The signature high-rise will be on Mission Street property that once was the front entrance of the Transbay Terminal.  Construction is expected to begin soon on a 1,070-foot-high, 60-story glass tower, designed by the firm of Pelli Clarke Pelli. The building, known as the  TransbayTransit Tower, will dwarf the city's Transamerica Pyramid by more than 200 feet when it is completed in 2017. Across the street from the Transbay Transit Tower, two additional towers are supposed to rise, with 1.2 million square feet and 605 condominiums, in a project spearheaded by TMG Partners. The two towers will be almost as tall as its neighboring tower, with a 59- story office tower and 56-story condo tower. Stephanie Reichin, a spokesman for the Joint Powers Authority, said there are  five other new high-rises planned in the area. The center's construction during the recession may have jump-started development in the area, which had seen many high rises built during before 2008. "A lot of development was planned prior to the recession and then stopped when it hit,"Reichin said. "When we started construction of the transit center in 2010, it was a sign of economic recovery and a catalyst for many developers in the area." It also helped that zoning increased to allow bigger, taller buildings. "For some of the parcels in the plan area, the allowable height was increased," Pash said ."The goal is to increase the density." "The goal for the area has always been to extend downtown south of Market," she  said. A successful redevelopment is evident a few blocks from the transit center, at Yerba Buena Gardens, where a park, a convention center and several museums and hotels all expanded the downtown core. Fears that the increased construction near the transit center might not withstand earthquakes have been addressed, Pash said. "All buildings have to meet the city's strict earthquake standards," she said. "The terminal and Transbay Tower exceed the city's standards." The office vacancy rate in San Francisco is currently at 8.7 percent, as San Francisco reaps the benefits of being at the northern arc of Silicon Valley.  The new transit center may also make commuting easier for the thousands of San Franciscans who now commute south to San Mateo and Santa Clara County, where many high tech companies are located. Pash said the transit center and surrounding area will feature 9.5 acres of parks, including a signature 5.4 acre park located on top of the transit center itself. The park will include a 1,000 person amphitheatre. Plans for the new transit center envision tying together 11 different transportation systems, although not all have yet been funded   One examples is California's high speed rail, with bullet trains beginning their journeys to Los Angeles there. But funding fights over that project, and opposition to its operation on the San Francisco Peninsula, have raised questions about whether it will ever be built. In addition, Amtrak is supposed to end its lines at the transit center, if Amtrak decides to deliver rail passengers to San Francisco. Caltrain, the peninsula's three-county rail service, is also supposed to terminate there, if money is ever found to extend the rail system from its current San Francisco terminus about a mile away. Plans also call for a people mover sidewalk to speed passengers from the center to a BART station in downtown's Embarcadero Center. Rendering of new Transbay Transit Center and office tower

The City of San Jose has won an important round in a potentially landmark chase challenging the legality of inclusionary housing ordinances in California. The California Building Industry Association has challenged San Jose's inclusionary housing ordinance, claiming that in adopting it the City did not make a necessary "nexus" finding. In essence, CBIA is arguing that an inclusionary housing requirement is an exaction and therefore cannot be imposed unless a reasonable relationship is proven between the development being approved (market-rate housing) and the impact being mitigated (the need for affordable housing). Santa Clara County Superior Court Judge Socrates Monoukian ruled in favor of CBIA. On appeal, however, the Sixth District Court of Appeal ruled that the inclusionary housing ordinance is an exercise of the police power, not an exaction, and therefore the burden of proof lies with CBIA, not with the City. The Sixth District remained the case to the trial court. It's a blow for the homebuilders, who have been trolling for a winning argument against inclusionary argument. Having lost Home Builders Ass'n of Northern California v. City of Napa (2001) 90 Cal.App.4th 188, 194 – in which the homebuilders claimed that inclusionary housing amounted to an unconstitutional taking – the builders now claim that inclusionary housing is an exaction. Inclusionary housing ordinances – requiring housing developers to set aside a certain percentage of their units as affordable or else pay a fee in lieu of that set-aside -- have become more common in California in recent years. According to one study in 2006, at least 30,000 affordable housing units have been constructed as a result of inclusionary requirements. However, the building industry has consistently argued against inclusionary ordinances, saying that they increase the cost of all housing and therefore actually make housing less affordable. In a 2009 letter to CBIA, Lynn Jacobs – then the state housing director and a former president of the Los Angeles BIA – stated that local governments should analyze inclusionary housing ordinances as a potential constraint to affordable housing when preparing their housing elements. San Jose adopted an inclusionary housing ordinance in 2010, which required residential developments of 20 or more units to set aside 15 percent for purchase at a below-market rate to households earning no more than 110 percent of the area median income. Developers had the option of providing the units off-site or paying a fee in lieu of providing the units. Relying on standards laid down in San Remo Hotel L.P. v. City & County of San Francisco (2002) 27 Cal.4th 643, and Building Industry Association of Central California v. City of Patterson <(2009)> 171 Cal.App.4th 886, CBIA filed a facial challenge to the ordinance, claiming that the City had failed to show a reasonable relationship between residential development projects and the inclusionary requirement, which it characterized as an exaction.  CBIA argued that the city's action lacked any "attempt to identify, much less to quantify, any 'deleterious public impacts' on City needs for affordable housing caused by new market rate development" and that the inclusionary percentages contained in the ordinance were arbitrary. Apparently seeking to distinguish this case from the Napa case, CBIA also went out of its way to make the point that it was not making a takings claim, which probably would have required an action for relief from a developer who had actually been subjected to the ordinances, rather than a facial challenge from a trade association such as CBIA. Judge Manoukian bought CBIA's argument, concluding that "the challenged portion of the ordinance bears no reasonable relationship to permissible outcomes in the generality or great majority of cases." The City and several affordable housing groups appealed the case to the Sixth District. They argued that the inclusionary housing ordinance should be considered a land use regulation enacted through as an exercise of the City's police power, not an exaction. For this reason, they claimed, the Court should have applied a difference standard of review -- giving great deference to the City – that required the Court to uphold the ordinance if it "merely has a reasonable relation to the public welfare" and also placed the burden of proof with CBIA, not the City. The appellate court sided with the City, reversed Manoukian's decision on the standard of review, and sent the case back to the trial court. CBIA argued that the inclusionary ordinance is an exaction because residential developers must "dedicate or convey property (new homes) for public purposes," or alternatively, pay a fee in lieu of "such compelled transfers of property."  However, the appellate court did not buy CBIA's argument. "This alternative portrayal of the inclusionary housing requirement misses the mark," the court wrote. "The IHO does not prescribe a dedication." The Court knocked down CBIA's arguments drawn from a whole series of exactions cases – most especially San Remo, which required hotel owners to provide affordable housing units as compensation for lost affordable housing when single-room occupancy hotels in San Francisco were converted to tourist use.  "We thus conclude that the standard articulated in San Remo is inapplicable here, and that the Ordinance should be reviewed as an exercise of the City's police power," the Court ruled. The Court did caution that "this does not entail unthinking acquiescence to the City's stated goals." But it did review case law on exercise of police power at some length and reiterated that the burden of proof lies with CBIA, not with the City.

The U.S. Supreme Court has tightened the screws on exactions, ruling in a case from Florida that government agencies must follow the Nollan/Dolan doctrine – even when a permit is denied and when the exaction involves money as well as property. At a glance, the ruling would appear to strike down the California Supreme Court's 17-year-old ruling in Ehrlich v. Culver City , 12 Cal.4th 854, which gave cities and counties more leeway on exactions when they are imposed as part of a general plan policy rather than a one-off permit.  The Nollan/Dolan doctrine demands that exactions imposed on developers be closely connected to the development's impacts. In Nollan v. California Coastal Commission , 483 U.S. 825 (1987), the Supreme Court ruled that there must be a "rational nexus" between a development and an exaction. In Dolan v. City of Tigard , 512 U.S. 374 (1994), the Supreme Court ruled that there must be "rough proportionality" between the cost of the impact created and the cost of the exaction demanded.  In Koontz v. St. Johns Water Management District , the court ruled 5-4 – along predictable ideological grounds – that these two rules apply in a situation where a property owner declined to accept the exactions and therefore the permit was denied. The court also ruled that there is no difference between an exaction of property and an exaction of money. Writing for the five-justice majority, Justice Samuel Alito resolved the most basic question in the case by saying that an actual taking did not have to occur in order for the property owner to have his constitutional rights violated. "Extortionate demands for property in the land-use permitting context run afoul of the Takings clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation." He added: " he impermissible denaiol of a government benefit is a constitutionally cognizable injury." Writing for the four-judge minority, Justice Elena Kagan predicted that the ruling's effects would be widespread and confusing because ordinary fee setting will now be subject to federal constitutional tests. "The Federal Constitution … will decide whether one town is overcharging for sewage, or another is setting the price to sell liquor too high."  The facts of the case will be pretty familiar to anybody who follows California land-use regulation and wetlands regulation in particular. Property owner Cory Koontz bought a piece of land along the East-West Expressway east of Orlando in 1972, then lost part of it via eminent domain for an extension of the highway in 1987. Koontz was left with 14.2 acres of land, of which 12.8 acres is located in the Riparian Habitat Protection Zone (RHPZ) of the Econlockhatchee River Hydrological Basin and therefore subject to regulation by the water district. In 1994, Coontz sought approval to develop 3.7 acres of the property, of which 3.4 acres were wetlands and 0.3 acres were uplands. This was the portion of the property closest to highway. The water district agreed to permit this development so long as Koontz dedicated the remaining 10.5 acres to a conservation area and engaged in a variety of offsite mitigation efforts, including replacing culverts and plugging drainage canals several miles away. As an alternative. the water district said he could reduce his project to one acre and dedicate the rest to the conservation district. Koontz rejected the offsite mitigation and the alternative and the water district denied his permits. Writing for the court, Alito stopped short of deciding whether the property owner was entitled to monetary damages and remanded the case to Florida courts for further discussion. As stated above, by subjecting all exactions to the Nollan/Dola n test, Koontz would appear to overrule the longstanding Ehrlich rule in California, which permits more flexibility on exactions if they are imposed as part of an overall policy such as a general plan. Koontz would appear to eliminate any such flexibility. The Koontz ruling put to rest the idea that a conservative justice – possibly Antonin Scalia – would cross over to the liberal camp on the argument that the Takings clause cannot be applied in a case where a permit was not issued and therefore nothing was actually taken. He appeared to be leaning in that direction during oral argument. In the end, however, he sided with his conservative brethren. Koontz is notably for its unusually cross-referential banter between Alito and Kagan. Each refers to the other's opinion repeatedly and refutes it at length. As is his custom , Alito cloaked his ruling in arcane cases from long ago, a palpable anti-government streak (he used the word "confiscate" four times), and an unwillingness to play out the consequences of the ruling. Indeed, he spends a significant amount of time in his ruling explaining why the court does not need to go further than simply rule whether the Nollan/Dolan doctrine applies. He bases his opinion in large part on the doctrine of "unconstitutional conditions" – a doctrine rarely relied on, at least overtly, in land use cases – and his view that exactions are similar to liens, a notion that has rarely been put forth previously in a land use case. By contrast, Kagan's dissent is written in a straightforward fashion that is much more accessible to the lay reader and deals more extensively with the likely consequences of the ruling. Indeed, throughout both opinions, it is sometimes not clear whether or not the two justices are even talking about the same case. Kagan's interpretation of the interplay between the water district and Koontz is far different from Alito's, and this interpretation plays a big role in her conclusions. Alito accepted Koontz's version of the facts, saying that the water district gave Koontz two alternative mitigation proposals, both excessive. Kagan's dissent oozed skepticism about this black-and-white view of what happened, saying instead that the water district had simply proposed two mitigation options as possibilities and invited Koontz to negotiate further. " he District never made a demand or set a condition – not to cede an identifiable property interest, not to undertake a particular mitigation project, not even to write a check to the government. Instead, the District suggested to Koontz several non-exclusive ways to make his applications conform to state law." This interpretation led her to argue that if even casual negotiations between government agencies and developers are subject to the Nollan/Dolan rule, then government agencies will simply stop negotiating with developers and turn permits down – not a good outcome for developers.