The Impact of the California Environmental Quality Act on Hotel Development

By Larry K. Kimball Director of Hotel Development, C. W. Clark, Inc. | June 11, 2010

If you are not developing a project in California and think this article is irrelevant, keep reading because the California Environmental Quality Act ("CEQA") is the model for future regulations in your jurisdiction. We will highlight how CEQA shapes development projects but more importantly how politicians, organized labor, and environmentalists often leverage the CEQA approval process to further their self-interests at the expense of developers and communities.

CEQA Rules the Approval Roost

While the applicability of CEQA to a proposed project is not always automatic, if discretionary approvals from state and local public agencies are needed then prudent developers should increase their development budgets for higher costs from legal fees, consultants, focused community outreach programs, and hard construction costs. Likewise, operating pro-forma should include ongoing compliance costs which will reduce operating margins and subsequent project valuations.

An environmental review under CEQA guidelines includes science but the interpretation is an art. "The fundamental purpose of the Guidelines is to make the CEQA process comprehensible to those who administer it, to those subject to it, and to those for whose benefit it exists. To that end, the Guidelines are more than mere regulations which implement CEQA as they incorporate and interpret both the statutory mandates of CEQA and the principles advanced by judicial decisions. (1)" For all math-inclined readers, (Regulations + case law) * interpretation = CEQA.

It is beyond the scope of this article to present and discuss the Guidelines. Rest assured, it is a growing body of work. The latest amendment, effective March 18, 2010, addresses the new CEQA step of determining the significance of impacts from greenhouse gas emissions (2) from a project. As you close your eyes and imagine, an evolving art form will be future interpretations of this by agencies leading a CEQA review aided, of course, by a cottage industry of consultants.

A more interesting issue is how is the CEQA approval process used by stakeholders to advance their agenda. A couple of examples will follow to illustrate this mix.

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