SB 7 Creates Expedited CEQA Litigation Schedule for Qualifying Projects

Signed into law by California Gov. Gavin Newsom on May 20, 2021, and taking immediate effect as an "urgency statute," Senate Bill (SB) 7 revives and expands the previously enacted Environmental Leadership Development Project (ELDP) litigation process. Although billed as a law that will "streamline" housing, the new law does not streamline the project approval process in any way, and neither does it provide any exemption from the California Environmental Quality Act (CEQA). However, it does provide important litigation benefits for ELDP projects, aiming to shorten the duration of CEQA lawsuits from more than three years to less than one year. (Public Resources Code Section 21178, et seq.) SB 7 expands ELDP eligibility to include certain qualifying mixed-use and residential projects that were not previously eligible for certification.

Project applicants can "opt in" to the ELDP process by applying to the governor's office for ELDP status, which must be certified before a Final Environmental Impact Report (EIR) is certified. ELDP projects must meet specified eligibility criteria, the most economically material of which are that the project applicant 1) must agree to construction and operational union participation and wage provisions acceptable to the governor, 2) must voluntarily agree to meet specified climate criteria, including "net zero" greenhouse gas and other environmental and transportation criteria on terms acceptable to the California Air Resources Board, and 3) must dedicate at least 15 percent of any housing units to lower-income residents, as certified by the U.S. Department of Housing and Urban Development (typically households earning less than approximately 80 percent of area median income), or as specified in a local inclusionary housing ordinance. Only projects for which an EIR is being prepared are eligible for ELDP enrollment.

Background

Initially created only for job-creating projects during the Great Recession more than a decade ago, ELDP projects most notably included professional sports venues as well as a few office/mixed-use projects that typically operated under significant time constraints (e.g., deadlines established by professional sports associations), occurred in "infill" locations within regions with substantial union workforces, and were aimed at higher-income tenants and guests. The original ELDP program excluded residential uses. Accordingly to the California Senate Office of Research, as of April 2019, only two completed projects (the Apple campus in Cupertino and the Sacramento Kings arena) had utilized the ELDP program or a similar statute. Also as of April 2019, only the arenas for the Kings and Golden State Warriors, as well as the 8150 Sunset Boulevard project in Los Angeles, had been challenged under CEQA and received expedited judicial review.

Expanded ELDP Criteria Under SB 7

Similar to the prior version of ELDP legislation, ELDP projects now also include a broad mix of uses, such as residential, retail, commercial, sports, cultural, entertainment and recreational uses (including mixes of these uses). Qualifying projects also include clean/renewable energy projects generating electricity exclusively through solar or wind, and clean energy manufacturing projects. Such qualifying projects must result in an investment of at least $100 million in California upon completion of construction.

The new law allows much smaller residential and mixed-use projects resulting in an investment of $15 million to $100 million to participate in ELDP, provided that these projects include at least 15 percent low-income housing, preclude short-term rentals (i.e., less than 30 days or those to be used as a hotel or for transient lodging), include at least two-thirds residential use, exclude manufacturing and industrial mixed uses, and provide "unbundled" parking (such that private vehicle parking spaces are priced and rented or purchased separately from dwelling units) for market-rate housing. Environmental sustainability criteria have been modified to impose complex requirements to measure and achieve "net zero" greenhouse gases (GHG) emissions. All ELDPs must agree to construction and operational union participation and wage provisions acceptable to the governor. Unlike the more costly $100 million-plus projects, these less-costly housing development projects do not need to receive Leadership in Energy and Environmental Design (LEED) certification.

Litigation Benefits of ELDP Designation

More elaborate and costly application, review and litigation procedures apply to ELDP projects. The administrative record must be maintained, as well as posted for immediate public review on a website, at all times during the application, environmental impact report, and public and agency hearing process. The applicant must agree to pay for trial and appeal court costs, as well as the costs of preparation of the administrative record.

The ELDP CEQA litigation streamlining benefits include:

• Completion of the trial and appeal court proceedings within 270 days, "to the extent feasible," based on California of Court Rules of Court, Title 3, Division 22, Chapter 2, as adopted by the Judicial Council. This 270-day process is not a mandatory maximum, and the few ELDP projects challenged in lawsuits prior to the expiration of the first ELDP program were in court for about a year rather than 270 days. However, this accelerated litigation process is substantially less than the three to four years often required to complete the normal CEQA superior and appellate court process.
• Key to this expedited litigation process is the concurrent preparation of the record of proceedings with the administrative process, and the option for the lead agency to elect to prepare the record rather than give CEQA petitioners the right to elect to do so.

In order to receive the streamlining benefits of SB 7, the governor must certify an ELDP project before Jan. 1, 2024, and the lead agency must approve the project before Jan. 1, 2025. SB 7 remains in effect until Jan. 1, 2026, unless a later statute extends or repeals that date. As a practical matter, the current ELDP program is likely to apply only to projects for which a complete project description has been provided, and for which a Notice of Preparation for commencement on an EIR has been issued, by about Jan. 1, 2023.

Conclusion and Next Steps

Holland & Knight's West Coast Land Use and Environment Group has experience assisting in obtaining ELDP certification on behalf of its clients. For information about whether ELDP certification may be appropriate for your project, contact the authors or your Holland & Knight attorney.