March 28, 2017 - From the March, 2017 issue

Ballot Box Planning in California: Results From Developers & Municipalities Turning To Citizen Initiatives

The process of making policy in California is not a spectator sport. For over a century, Californians have had direct access to public policy through the initiative and referendum process, to make choices and constrain the actions of officials. With a broken CEQA system, citizens have repeatedly turned to the initiative to do land-use planning and zoning policy. As seen in the recent Measure S and LV battles, cities big and small have been tested in recent elections. However, other California regions have been faced with pro-growth measures, not just focusing on anti-development. At the USC Gould School of Law Real Estate Forum, experts convened to discuss the results and impacts of these ballot box initiatives. Amy Forbes of Gibson, Dunn & Crutcher LLP, Beverly Grossman Palmer of Sturmwasser & Woocher LLP, and Steve Sugerman of Sugerman Communications Group provide insights as to how cities, developers, and the courts have handled these land use initiatives. TPR presents an excerpt of this panel. 


Amy Forbes

"It is much easier to tell voters that they are voting to stop a project or to build a community asset. Both Measures S and LV shared a challenge in communicating to voters that their initiatives sought to give citizens a larger role in the planning process. Good planning does not make for a sexy slogan, so these initiatives struggle to communicate their value." - Beverly Grossman-Palmer, Sturmwasser & Woocher LLP

Amy Forbes: In starting out, we need to define what our terms are. First: What is an initiative? An initiative is a direct harnessing of the power to legislate by the people. In California, it is a constitutionally protected right. A referendum is the electoral un-doing of a legislative act taken by the governing body. There are some other states that allow for initiatives, but California is the preeminent state. What has happened in California is that initiatives are being used both to stop growth and to affirmatively approve growth. That’s a new development.

It’s important to understand that there are only certain kinds of actions that can be taken through the initiative process, and those are so-called legislative enactments. A legislative enactment is a policy decision. Measure S, as an example, is about the General Plan and zoning—laws. The initiative process cannot be used for approvals like CUPs, variances or other development permits.  Those are administrative actions. That’s where you take the general policy and apply it to a specific set of facts.

The other kind of action is a ministerial action, which means you can just do it as a right. A building permit is typically a ministerial action. A ministerial action and an administrative action are not legislative in nature, and cannot be done by initiative.

We’re covering LA’s Measure S and Santa Monica’s Measure LV; Beverly Hills’ Measure HH (the Beverly Hilton project); an anti-growth initiative in Costa Mesa called Measure Y, and from earlier last year, a Carlsbad referendum on a project that had initially been approved by initiative, and was ultimately subject to referendum that undid the initiative approval.

This gives you a sense of what’s happening all over California. The interesting thing is that when we look at the different characteristics, we found that the no-growth initiatives are being done on a citywide scale like LA. But for pro-growth initiatives, the sweet spot seems to be about 110-112,000 people. For the initiative process to work to proactively approve development, it’s really not going to happen on a huge city. It’s going to happen in a small-enough scale city where you can circulate and get the signatures signed. Beverly Hills is even smaller—about 35,000 people. That gives you an idea of the universe we’re operating in.

Typically, initiatives are used more as no-growth measures. Historically, if we look back over the past 10-20 years, there are measures in Ventura—Save Our Agricultural Resources (SOAR), and they put in green boundaries and prohibited any advancement of development. But more recently, the initiative process has been used as a way to avoid the public process and the lengthy delay brought about by the California Environmental Quality Act (CEQA) by affirmatively putting a project on the ballot to be approved.

The process is very fast. You can collect your signatures, go to the Council, the Council gets 30 days to do this Section 9212 report if they want to, and at that point they either adopt the measure or put it to a vote. Either way, you’re going to get an answer a lot quicker than a lot of these big projects that take 3-5 years to get approved and then another 3-5 years to resolve the litigation.

The one that is most famous recently is the NFL Stadium for the Rams in Inglewood. It was that process that galvanized a lot of concern—the speed of the initiative process makes some people question its validity. It has caused a backlash.

The rationale for why an initiative should not be subject to CEQA is because the voters are making the decision, not city council. The EIR is designed to create information from which decision-makers can then craft mitigation measures or look at alternatives to the project—to shape or change the project. But once the initiative is done, you can’t change a word of it. There’s nothing that could come out of the CEQA process that could change one word of this legislation.

The big change in this came in August 2014, with the Tuolumne decision by the California Supreme Court. It used to be that there had been a line of cases that said: If the council puts it to a vote of the electorate, it was exempt from CEQA, but if the council adopted it, it wasn’t—on the theory that the council was taking an action. But the California Supreme Court said: That’s not true, because you can’t change a word of it. Even if you did an EIR before you put it on the ballot, it wouldn’t matter, because you can’t change anything. That was the change: They said CEQA does not apply.

That was a big thing. It led to what everybody thought was going to be these floodgates of new initiatives coming in. In fact, that has not come to pass, but there are lessons to be learned. I also not that there is a brand new state law pending that would prohibit the use of an initiative to approve a development. If this state law passes, then the initiative process cannot be used proactively.  So keep your eye out for new developments.

We’re going to talk about two recent pro-growth initiatives: the first in Inglewood and second in Beverly Hills.

Steve Sugerman: This was rapid-speed approval for a huge project in Inglewood, three months after this Tuolumne case came out. The mayor of Inglewood, James Butts, had a supermajority supporting him on the city council. A rival football project was down the freeway in Carson. There seemed to be momentum that someone was going to get selected, and it was no longer going to be Downtown Los Angeles—it was going to be one of these two. And so he just felt very comfortable that he had the support of the residents and voters of Inglewood.

Amy Forbes: The original approvals for the project in Inglewood were in 2009. I had worked on it since 2004. To put in perspective why the initiative was so attractive, it took five years to secure the approval of the original mixed-use development in Hollywood Park.

Construction had been delayed, and the owners of the project were just about to break ground—literally putting shovels in the ground to begin the mixed-use project. They had this unique EB-5 financing that they needed to start construction of quickly or they were going to lose their financing, and that was going to have a lot of ramifications for them, not just on this project but other projects that they owned, and so construction had to start.

The project area includes the so-called 60 acres that Walmart had tried to develop about 15 years ago. They had tried an initiative to approve that Walmart and had gone down 60-40, rejected by the voters. So that property had stayed empty until Stan Kroenke, the owner of the then-St. Louis Rams bought it at the end of 2013. He approached the owner of Hollywood Park, saying, “Can I buy a chunk of your Hollywood Park project and build a stadium?”

The problem was that if they bought a chunk, it was going to undo all of the approvals for Hollywood Park. It was an integrated project. It had a lake in the center that was the water treatment part of it. If that went away, they would have to start from scratch and do another five years. So the answer was: “You cannot buy a part of it, and if you buy all of it, you have to pay us a fully entitled price. We’re not going to sell it to you and wait 3-5 years while you go get a stadium approval, if at all.”

It was this bargain: “If you want to do it, you can buy it, but you can only buy it if you agree that we’ll give you a little bit of time, but not a lot of time, to get a stadium. The only process we think is going to work is an initiative.”

So when we were putting it together, we knew that all of the approvals for the stadium had to be legislative in nature; we could not have any remaining discretionary approvals, because we could get the legislative approval, but then if we still needed a conditional use permit or something else, we would be back in the CEQA world and it would be defeated. We had to devise a set of regulations so that all that would be necessary to build the stadium was a building permit, which is what we ultimately did.

The entire package had to be perfect, because it couldn’t be changed. We spent a lot of time drafting about a thousand pages of documents. The net result was that we filed for the initiative on January 2, 2015; the city council, using the Tuolumne decision, did get a 9212 report, and then unanimously approved the project on February 24, 2015. The total time it took to get the project approval was eight weeks.

Now, in that process, we collected 22,000 signatures from voters in Inglewood. The whole city population is about 110,000 people. In the previous election—the mayoral election, about five months before—there had been a total of about 15,000 votes cast in the aggregate. More people signed that petition in favor of the stadium than had voted, so the council felt comfortable in moving forward.

At this point, everybody thought, “Oh my goodness, CEQA is going to be eviscerated, we’re going to have all these initiatives coming forward, it’s terrible.” Experience shows that it’s a much more complicated process, and the people—the legislative experts—are far more sophisticated than they get credit for. 

Steve Sugerman: My firm was then hired to go into Beverly Hills for the Beverly Hilton. The existing site plan had been proposed and approved through an EIR process, including a planning commission vote and city council approval over a period of two years. That plan includes what is now the Waldorf Astoria being built at the corner of Santa Monica and Wilshire, and two condominium towers, one 18 stories and one 8 stories on the west side of the Hilton property.

As they were designing and building the project, they realized that the project would be better if they could have one tower on Santa Monica Wilshire, and have the rest of it open space on Wilshire. The city had said, even during the prior approval process, that they wanted a green entry to the city at Wilshire Boulevard.

The original approval by the City Council was taken to referendum, and the referendum was defeated so the project approval stood. That was in 2008. This time around, the proposed amendment to that plan went to initiative. Although we qualified it, it ultimately lost by over 10 points. Turnout was much lower than we expected for a November election.

Another message here is that this is very expensive. The truth is, in a place like Beverly Hills, people don’t just sign a petition. They want to know about it. There was an extensive door-to-door campaign; there were canvassers out on Rodeo Dr. Residents need to be communicated with at great levels.

The other two complications, back to the issue of political leadership: The mayor of Beverly Hills opposed this project. Also, the idea of this amount of development on the parcel was upsetting to some. Many voters were fuzzy on the details of the project that was already approved with two condominium buildings and a hotel eight years earlier.

There’s this idea that somehow land use is sacred, and you can’t use initiatives. Why is it okay to decide on capital punishment or marijuana legalization by initiative? Why is it okay to do slow-growth measures—and do no CEQA analysis whatsoever on those measures?

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I would suggest that there’s a double standard on this. I think ultimately voters should have the right to decide and know what’s before them, and a well done 9212 report, while done very quickly, shares with the voters, I think, significant amounts of important information—and in a manner that many would say is more accessible than an Environmental Impact Report.

Amy Forbes: The last measure we’ll talk about is a no-growth measure that passed in Costa Mesa, Measure Y.

Costa Mesa is a small city—about 112,000 people. But this initiative is going to require a vote of the people, if you want to do a project in Costa Mesa and it involves a general plan amendment, zone change or a Specific Plan Amendment—essentially any legislative approval going forward. It applies to any project that adds 40 housing units or 10,000 square feet of retail. And, weirdly, it includes a lookback provision. It’s not just your project, but also any project within a half-mile of your project over the past eight years. If you just want to build four housing units, but it happens that in the past eight years, within a half-mile of you, there have been 36 housing units built, then for you to get the zone change to allow you to do that, you will have to go to a special election and you will have to pay for it. And you’re going to have to pay for it after the city has completed its process. 

Typically with no-growth initiatives, the developers think that in order to do a new plan they would have to go through this whole planning process, do an EIR, and probably get referended anyway. So, they might as well just take the election upfront, take people’s temperature, and at the end of the day it's faster and probably ultimately less expensive than having to go through the full process. Here, in Costa Mesa, if you want to do anything that’s going to essentially add any traffic within a half-mile you’re going to have to go through that process, pay for the Environmental Impact Report, go through the whole public process with the city, and then subject your project to an election. I think it’s safe to say that in Costa Mesa, there just won’t be any zone changes or General Plan amendments for the foreseeable future.

This didn’t get a lot of publicity; it was sort of controversial in Costa Mesa, but I don’t think a lot of people really understood the ramifications of it.

Beverly, talk about what happened in Carlsbad.

Beverly Grossman Palmer: This was an initiative/referendum process that took place in Carlsbad in 2015-16, involving a project called the Agua Hedionda project, which was proposed by Rick Caruso.

As Amy mentioned, the Tuolumne Jobs case says you can adopt an initiative without CEQA compliance. But that is not the end of the story. The Supreme Court did note in the opinion that voters do have statutory remedies if they don’t like the Council’s direct adoption of the initiative. The legislature has outlined clear procedures for voters to overturn an ordinance adopted against the majority’s will.

What they’re talking about is the referendum. As the court said, whichever path a city chooses in dealing with an initiative, the voters can have the final say. And that is what happened in Carlsbad.

The Agua Hedionda project was to preserve and develop an area in Carlsbad. The plan would have developed about 15 percent of a roughly 200-acre area, and left the rest of it as open space. In May 2015, Caruso submitted an initiative to the city of Carlsbad. In general, the initiative created a new Specific Plan for the area. It was a very careful, detailed initiative. It addressed all sorts of possible consistency issues with the existing city’s plans. It amended the General Plan Land Use Element, Open Space Element, and Parks and Recreation Element. It amended the city’s land use plan, which is a Coastal Commission-required document. It amended the zoning code, and it seems to have made sure that there were no possible internal conflicts among all those laws. That’s an important consideration when you’re drafting an initiative like this.

The project still would have required review by the Coastal Commission, but I think it would have saved many years and uncertainty that would have been engendered by a city approval process followed by the coastal process. You can’t get around the Coastal Commission by initiative.

What was interesting to me is that Caruso did attempt to do an environmental review, essentially a robust CEQA-light. His analysis was over 500 pages, and did cover all of the typical CEQA study areas. It did not have an alternatives analysis or mitigation and monitoring program, but it does include environmental protection features. According to the report, if the protections were in place there would no significant impacts. It was made public, although it was not an official environmental document.

In July 2015, Caruso submitted 20,000 signatures and the Council then decided to adopt the initiative outright.  But it was not over. Opponents of the project decided to circulate a referendum and obtained 9,000 signatures over 30 days. This forced the Council to decide on the project again. They decided to put it on the ballot, and decided to do a special election for February 2016.

Caruso ended up spending up over $11,000,000 to support the initiative, and the opponents ended up spending over $200,000 before Election Day. It was a very close race, and ultimately the initiative was defeated with 52% of the vote. Voter turnout was about 62% for a special election, which is quite high for a local election.

The specific plan was rejected as a result of this effort, and the zoning returned to what it was before the project. The city council is also barred from adopting the same or similar plan for a year, and in November elections one sitting councilmember was ousted by a supporter of the victorious “No” campaign.

Ultimately, I believe that projects are better because of the CEQA-process. The back-and-forth between parties leads to projects that are more scrutinized and thus more reflective of community concerns.

The takeaways are that there are no guarantees. I remind people—partially because of Tuolumne—that the ballot process is always an option. Even if the Council adopts your initiative, you could still have it taken back by the voters through a referendum.

Secondly, the CEQA-like elements in the Caruso initiative plan shows me that people still recognize the value of environmental impact analysis. It shows that voters and residents care about the impacts of projects, and the city process for informing the residents. It is not enough to just provide information. The process has a large role to play.

Amy Forbes: Steve, would you advise your client to undergo the initiative process? If so, under what circumstance?

Steve Sugerman: The state’s lack of reforming the CEQA-process is what opens the door for developers and lawyers to try the initiative process. A broken CEQA process that enables a project to be held up for years in litigation leads developers, landowners and project managers to look to the election code to get projects approved.

The most important thing is to assess the community. Then, you ask yourself whether you have the financial resources and the time to deal with multiple years of litigation post-approval if you expect that to be the result after completing the CEQA process. If you do not have those resources or the wherewithal to withstand a lengthy litigation process, perhaps you consider asking the voters to decide.  

Voters are quite smart. They know that in many cases, their government is not representing their best interests. In cities like Inglewood, the Mayor understood the feelings of the community and has done an impressive job of galvanizing support around a bold vision for the city. The Mayor saw the great combination of the NFL; the Hollywood Park mixed use plan; and the repositioning of the Forum by Madison Square Garden. In other cities, that would not have been possible. 

Amy Forbes: Before we wrap up, let’s discuss the impact of one of the recent ballot box initiatives: Santa Monica’s Measure LV.

Beverly Grossman-Palmer: Measure LV was characterized as an anti-growth initiative. That is not how I would characterize it. I would call it a voter-approval initiative. It required a vote of the people for projects that would exceed the city’s pre-set zoning limits.

It was a broad initiative that created a new development approval. The initiative lost decisively in the November 2016 election, and over 8,000 voters chose not to even vote on the initiative. This says to me that there was voter confusion or exhaustion from so much being on the ballot. Primarily real-estate developers in Santa Monica, to the tune of $1.2 million, funded the opposition.

The Yes on LV campaign had trouble getting over the opposition’s expenditures, and I do not think the voters really understood what they were voting on.

It is much easier to tell voters that they are voting to stop a project or to build a community asset. Both Measures S and LV shared a challenge in communicating to voters that their initiatives sought to give citizens a larger role in the planning process. Good planning does not make for a sexy slogan, so these initiatives struggle to communicate their value.

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© 2017 The Planning Report | David Abel, Publisher, ABL, Inc.