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THE CEQA CHALLENGE

Developers face many hurdles in California, but the most daunting may well be the 1970 California Environmental Quality Act.

CEQA, as the act is called, is the most important change in the state’s development landscape since the 1960s, when Bob Reiling, owner and president of Los Angeles-based Zelman Development Co., started in the business.

The law requires California’s cities and counties to manage growth through their own local agencies, and it puts the onus on developers to answer any questions raised by the eco-conscious public.

“Basically, it says that in order to develop anything of significance, you have to do an environmental impact report and mitigate the impact to zero,” Reiling said. “Under certain conditions, you can have a ‘statement of overriding consideration,’ which has to be approved by the city council or planning commission.”

The act defines environmental impacts broadly, from traffic changes to added noise and light pollution. Mitigation of such impacts can translate into huge costs.

Reiling recalls spending $3 million to reduce traffic around a 100-acre project in Burbank, but then studies revealed more impacts three miles away. “We weren’t in the position to go fix intersections three miles away, so in addition we wrote the city a check for $10 million,” he said.

Design and consulting fees incurred during the entitlement process for a typical power center usually run between $1 million and $3 million, says Reiling.

Jeffery M. Axtell, Southern California project director for Phoenix-based development firm Vestar, says he counts on the entitlement process taking two or three years to complete. CEQA makes projects 35 percent to 40 percent costlier to complete, he estimates.

“You need a certain level of detail before you can start the EIR [environmental impact report] and your city approval process, so we take the first six, nine or even 12 months to do all our conceptual design and meet with the city officials to get their ideas,” Axtell said. “You need at least 12 months for the EIR itself.”

— JG