February 28, 1990 - From the February, 1990 issue

The New Sewer Hook-Up Interim Ordinance: A Point/Counterpoint

For almost two years, Los Angeles development has been regulated by the issuance of sewer permits in order to limit the annual sewage flow. With the 1988 emergency ordinance near expiration, debate has begun on the replacement interim sewer ordinance. This new ordinance has already been modified and approved by the City Planning Commission and will be reviewed this month by the City Council. The new ordinance limits annual growth to 5 MGD and allocates 10% of all permits to public projects, 30% to priority projects and 60% to all others. The Planning Report recently asked Commissioner Felicia Marcus of the Board of Public Works and Michael S. Woodward, a land-use attorney with the firm of Munger, Tolles & Olson to respond to some of the most pressing questions in the debate.


“Marcus: If L.A. can’t manage its growth, federal agencies will take the management out of our hands.”

What should be appropriate ratio of sewer permits available for residential vs. commercial and industrial projects?

Marcus: A ratio favoring residential development is warranted. The AQMD has designated Los Angeles as jobs-rich and housing-poor. If the City is to avoid regulatory actions forcing future jobs to other areas of the southland, the City must address our jobs/housing imbalance by adding housing. Moreover, because our affordable housing crisis is attributable to a lack of truly “affordable” housing, the addition of housing stock to the market can help alleviate competitive pressures driving up housing prices. An appropriate ratio, therefore, would favor residential development Although there is no precise method for calculating the number, a 60/40 or 65/35 split would appear to be appropriate.

Woodward: The initial Interim Control Ordinance of 1988 established an allotment of 65% for residential projects and 35% for commercial and industrial development However, an important feature of this policy enabled unallocated residential permits to be transferred at the end of each month for use by commercial and industrial projects. With this allocation feature, the actual rate of application for sewer permits has yielded a 50/ 50 split in the past two years between residential and non-residential projects. Given this data, the current allotments should provide for a 50/50 split between residential and non-residential projects.

When only 35 % of project permits are available for commercial and industrial projects—in a draft ordinance which reduces the MGD limit to 5 MGD and which reduces the percentage of capacity available for non-priority development projects to 60%—the net effect is that since 1987, this legislation will reduce commercial allotment by 75%-80%.

What should be the limit in annual increase of sewage per year? Should it be indexed to future sewer capacity?

Marcus: There should not be any increase in sewage limits during the relatively short period the ordinance is in place. The existing ordinance was enacted because the City is in a sewage capacity crisis. Sewage capacity is an objective reality—if we run out, or even cut it too close, we will have sewage overflows into Santa Monica Bay.

In addition to endangering our public health and marine environment, such events would almost certainly result in federal, state or judicial action to slap a total moratorium on building permits in the city—at great cost to all. It’s happened in the state (Oxnard) and would likely happen here. On a more long-term basis after Tillman II’s 40 MGD of capacity comes on line, we will have to be flexible. The balanced growth ordinance that will replace the sewer limit ordinance in late 1991 will have sewage as only one of many factors to be considered in approving development

Woodward: The limit of MGD has been reduced from 10 MGD (1980-1987) to 5 MGD in this ordinance. However, the proposed Sewer Ordinance's EIR shows that even at a growth rate of 7 MGD there is no future capacity problem with the City’s sewer system, given the enhancements now underway. A review of current sewage data shows, moreover, that 1989 outflow levels at Hyperion under the ICO are below 1987 levels notwithstanding new permits issued during those two years.

This data clearly shows that conservation measures are having an effect on wastewater. More importantly, it underscores the extent to which the current sewer ordinance proposal is unrelated to the sewage problem and is merely an excuse to use the planning and building permit process in order to force some well-intentioned but poorly conceived social engineering. Therefore, the MGD limits should be relaxed to 7 MGD upon completion of the Tillman II improvements in 1992-3.

Should the new ordinance contain a reallocation provision at the end of each month for unused permits from any category, as is currently allowed in the existing sewer ordinance?

Marcus: No. There definitely should not be total reallocation for all capacity unused by priority projects. Reallocation would make nearly meaningless the priority policies set forth in the ordinance. The public and the regulatory community are looking to the City for efforts, not merely words. On the other hand, this is but the first step in L.A.’s road toward managing its growth and a certain amount of guesswork is involved. The process will be refined and adjusted during the comprehensive planning and community outreach that should accompany development of the balanced growth element. So although a small portion of the unused capacity could be reallocated on a quarterly or semi-annual basis as necessary, to avoid unduly severe impacts, the rest should not.

Woodward: Absolutely. The current ICO allows reallocation of unused sewage capacity from each of the various categories. What this has meant in the past two years is that unused capacity reserved for residential projects can be allocated to commercial and industrial developments which have been waiting up to three months to receive their sewer hook­up permit. The absence in the draft ordinance of a reallocation provision of unused allotment from one category to another creates a regulatory system which is overly rigid and mechanical, frustrates the precise recommendations of the Citizens Advisory Committee, and forces the City into a mechanical program resulting in a large job loss. The current draft ordinance additionally has a punitive effect on non-residential development because the unused capacity will be wasted, thus building a larger waiting list for non-residential development.

Reallocation from one category to another must be allowed at least on a quarterly basis. This is more severe than the present monthly allocation procedure being used but no so strict that it will destroy projects.

What are the merits of modifying the ordinance to require that the plan check process commence with a sewer permit?

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Marcus: There is some sentiment on the part of developers that this would be a welcome change because it might lower their sewer facility charge. It could wreak havoc, however, with the City’s ability to keep track of real sewage capacity. Many projects that start in plan check never proceed through the plan check process. To allocate precious sewer capacity to projects that are not truly ready to proceed would result in withholding allocation from those ready to proceed.

Woodward: This ordinance is unfair in that any developer who relies on City zoning and community planning in seeking project approval can wander through the current land use mine field to obtain City approval only to find himself or herself caught in a two-year delay for a building permit caused by this sewer ordinance. As such, this ordinance makes the planning and zoning system rather meaningless. If the priority projects (30% of all permits allocated) are so important, why aren’t they part of our land-use system instead of constituting a second and completely different set of planning rules which you confront after you have already complied with all existing planning and zoning laws.

What is the justification of a priority project status? What projects qualify and how, and by whom is the decision made?

Marcus: This status is given to projects which advance important city policies. Priority is meant both to protect such projects from any potential burden of delay and to nudge development in the direction of attaining citywide goals. Moreover, the priorities must demonstrate to regulatory agencies that Los Angeles is attempting to address these issues. These “priorities” will undoubtedly be refined during the Council’s deliberation process. The best list would be one that actually encourages some builders to develop priority projects.

Woodward: The draft ordinance provides for an annual allotment of 1.5 MGD to be set aside for Priority Projects. This is an extremely important category because more capacity will be set aside for these projects than for all the commercial and industrial development. But the descriptions of numerous “priority projects” are vague. For example, it’s not clear that mixed-use projects which have multiple buildings would be included as mixed-use. Buildings near mass transit must be near stations which have a “fully funded contract” executed by a government agency. Are any transit stations fully funded? Given the large capacity allocated to this newly created category, much of the ambiguous terminology needs to be clarified.

How do you anticipate that the ordinance, as adopted by the City’s Planning Commission, will affect the wailing time to receive a sewer hook-up permit?

Marcus: While it is impossible to predict the wait for non-residential projects, the Planning Department estimates the longest wait during the period the ordinance will likely be in effect to be six months.

Woodward: Two provisions already discussed, the lack of a reallocation policy and the placement of the sewer permit clearance before beginning plan check, will extend the waiting time for sewage capacity. Further, development projects will be competing for a significantly smaller number of permits. From 1980-1987, 10 MGD were available for development projects. That figure dropped to 5 MGD after the 1988 ICO, and with the current draft ordinance’s emphasis on public benefit and priority projects, only 3 MGD are available for all other development projects.

The net effect is that residential projects which have not had to wait for sewer permits will have to wait several months. For commercial and industrial applicants, this ordinance could add a year to 18 months to the construction time, causing many projects to be postponed or cancelled.

What, if any, will be the economic impact on Los Angeles or the Southern California basin of the ordinance?

Marcus: Over the short period of time the ordinance is in effect, its impact on new job growth will be minimal. No jobs will be lost. The longer term growth management element could over a long period of time result in less job growth than might occur were we to implement no growth management at all. However, the latter course is an impossibility given the current regulatory climate.

If Los Angeles cannot show that it can manage growth to lessen environmental and housing problems, state and federal agencies will take that management out of our hands. The challenge facing the City as it proceeds into the 90’s will be to manage our growth while at the same time actively encouraging development of both clean jobs and affordable housing.

Woodward: The major reduction in commercial and industrial construction on a City-wide basis will negatively impact the tax base and erode the employment base. An Economic Impact Assessment (EIA) was prepared as part of the ordinance adoption process which indicates a loss of 490,308 jobs over 20 years when this alternative is compared to the growth allowed from 1980-1988. The EIA also shows a decrease in the jobs/housing ratio from 1988 levels. In addition, funds generated from commercial/industrial construction are to be, used to construct affordable housing through a housing linkage fee. As a result of this ordinance, some projects will never be built, while others will be greatly delayed. This will cause a delay in the generation of housing linkage fee revenues and diminish the total amount of such revenues the City will collect.

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