By Rafael F. Muilenburg, James E. Pugh, and Michael Hansen

On September 30, 2008, the rules governing regional planning changed dramatically when Governor Schwarzenegger signed Senate Bill No. 375 ("SB 375") into law. SB 375, in its essence, attempts to control greenhouse gas ("GHG") emissions by curbing urban sprawl through the implementation of "sustainable community strategies" in land use and transportation planning, along with various related incentives relating to housing development.

SB 375 was put together through an unusual compromise that brought together the diverse interests of the California Building Industry Association, League of California Cities, environmental groups, and affordable housing advocates. The "compromise" nature of the bill is apparent from the text – most of the mandatory requirements or "teeth" contained in earlier versions of the bill have been stripped out, and the final bill represents a hodgepodge of different provisions that advance the respective goals of the various constituent groups. Nonetheless, the planning requirements of the bill are likely to have significant and direct "persuasive" effect on local jurisdictions and developers, and these requirements may obtain further force under certain developing CEQA requirements relating to climate change (as discussed below).

SB 375 creates a complex set of requirements that may represent the first step towards creating an overarching strategy for pursuit of regional transportation-oriented development and the AB 32 goals for GHG emissions reduction. Although the extent of the actual substantive changes SB 375 will trigger is difficult to quantify, the likely impact of the bill should not be minimized – its implementation over the next few years will tell the tale. Whatever the ultimate outcome, interested parties throughout California, from regional transportation agencies to local governmental agencies to land developers and industries alike, will need to navigate this new legal landscape as it evolves. For such parties, it is critical to carefully consider SB 375’s provisions now and become involved early on in its implementation.

Background Information

The bill applies to every region in the state that has a Metropolitan Planning Organization ("MPO"), which is a policy-making organization made up of representatives from local government and transportation authorities. MPOs receive state and federal funds to accomplish regional transportation planning.

California has 18 MPOs. Please see the attached map that shows the jurisdictional boundaries for the state’s 18 MPOs. Most of the MPOs cover a single county, such as the San Diego Association of Governments ("SANDAG") and the Santa Barbara Association of Governments, while the MPOs in certain regions cover multiple counties. For example, the Bay Area region’s MPO is the Metropolitan Transportation Commission ("MTC") associated with the Association of Bay Area Governments ("ABAG"), which serves nine counties, and the MPO for the Los Angeles region and adjoining counties is the Southern California Association of Governments ("SCAG").

MPOs prepare the region’s Regional Transportation Plan ("RTP"). The RTP sets forth the long-range (20 year) transportation plan for the region and is based upon a set of land use assumptions about future development patterns. The RTP identifies the existing and future transportation needs in the region and includes rough cost estimates. RTPs must be updated every four or five years, depending on whether the region meets federal air quality attainment standards.

What Does SB 375 Say?

The bill requires all Metropolitan Planning Organizations ("MPOs") to update their Regional Transportation Plans ("RTPs") so that resulting development patterns and supporting transportation networks can reduce GHG emissions by the amounts to be set by the California Air Resources Board ("CARB"). The language of SB 375 articulates changes to the landscape of regional planning and the applicable standards for analysis of transportation-related climate change impacts under CEQA through a multi-pronged approach. The key elements of that approach include:

1. Regional GHG Targets

AB 32 requires CARB to set reduction targets for the state for various sectors of the economy. CARB will soon release its Scoping Plan, which the board plans to adopt by January 1, 2009. The Scoping Plan will include reduction targets for the state and a strategy for meeting those targets. SB 375 requires CARB to divvy up the state targets and assign each region a target for the automobile and light truck sectors for 2020 and 2035.

To develop these targets, the bill requires CARB to create a Regional Targets Advisory Committee by January 31, 2009 to recommend facts to consider and methodologies to use for setting the regional GHG targets. The committee must be comprised of representatives of the MPOs, affected air districts, the League of California Cities, the California State Association of Counties, local transportation agencies, and members of the public. The Regional Targets Advisory Committee must submit its report to CARB with its recommendation by September 30, 2009. In turn, CARB will review the report and must provide targets for each region by June 30, 2010.

Interested parties may want to closely monitor the formation of the Regional Targets Advisory Committee and the rest of the process to ensure that CARB sets the targets for each region in a reasonable manner.

2. Sustainable Community Strategies

Each of the Metropolitan Planning Organizations described above ("MPOs") that are tasked with implementing SB 375 must incorporate a Sustainable Community Strategy ("SCS") as a new linchpin element of its Regional Transportation Plan ("RTP"). The SCS will be effectively a blueprint-like set of planning assumptions that shape the land use component of the RTP. Its goal is to promote development density near urban cores and transit centers.

Under SB 375, each SCS prepared by an MPO must, at a minimum, (a) identify the general location of uses, residential densities, and building intensities within the region; (b) identify a transportation network to serve the transportation needs of the region; (c) identify areas within the region sufficient to house all the population of the region over the life of the RTP; (d) include a discussion of how the development pattern and transportation network can work together to reduce greenhouse gas emissions; and (e) set forth a forecasted development pattern for the region, which, when integrated with the transportation network and other transportation measures and policies, will reduce the GHG emissions from automobiles and light trucks to achieve, if there is a feasible way to do so, the reduction targets set by CARB. Determining what is "feasible" will likely be a much-debated (and potentially litigated) subject, especially considering that SB 375 uses the definition of "feasible" found in CEQA, thus incorporating a standard that is extremely flexible and case-specific. CARB must certify that the final SCS meets the regional targets before it is enforceable.

If CARB does not approve the SCS, the MPO can revise and resubmit it. Alternatively, if it is clear that "federal planning requirements" preclude meeting the GHG emissions targets or if the public will not accept the proposed framework of the SCS, the MPO must adopt an Alternative Planning Strategy ("APS"). The APS would theoretically show how the GHG emissions targets could be achieved through alternative development patterns or additional transportation measures. The APS would not be adopted as part of the RTP and would not be considered an "applicable land use plan" under CEQA. In contrast, because the SCS is the land use plan for the RTP, inconsistency between a project and the SCS could form the basis of a significant environmental impact under CEQA.

Prior to adoption of the SCS, the MPO must conduct at least two informational meetings in each county within the region for members of the board of supervisors and city councils. Each MPO must also adopt a Public Participation Plan for development of the SCS that includes: outreach efforts to encourage active participation of a broad range of stakeholder groups; consultation with congestion management agencies, transportation agencies, and transportation commissions; workshops for the public; circulation of a draft SCS for at least 55 days; and at least three public hearings on the draft SCS.

Land owners and other interested parties in each region should be actively involved in the development of the SCS through the above process to advocate for current and future projects to be included within the "forecasted development patterns" submitted for approval in the SCS.

3. Regional Housing and Transportation Planning

SB 375 requires that planning for transportation and housing occur together. To accomplish that goal, the bill extends the general plan housing element update period from five to eight years, thereby synchronizing those efforts with the eight-year Regional Housing Needs Allocation ("RHNA") periods. Procedurally, the MPOs will first allocate housing units among cities and counties using the RHNA. Those allocations must be consistent with the approved SCS. Second, and based on the RHNA, the local governments must submit a new housing element to the Department of Housing and Community Development. The housing element must comply with various planning requirements provided in Section 65583 of the California Government Code as amended by SB 375. Then, the local governments have 3 years to rezone parcels within the housing element boundaries to demonstrate consistency with the SCS.

If a local government fails to do so, the local government generally may not disapprove a housing development project, or impose other discretionary measures to make the project infeasible, if the project is otherwise consistent with the SCS. (The local government may only disapprove the project if it makes findings based on substantial evidence that the project would adversely impact public health and safety.) This may give project proponents significant additional leverage to obtain local approval of infill or high-density projects that are consistent with the SCS.

4. Transportation Funding

SB 375 focuses public transportation funds on infrastructure improvements that are consistent with or facilitate the SCS. The financial element of the RTP will recommend that projects consistent with the SCS be financed with regional improvement funds – presumably, it will be harder to obtain funding for projects that are inconsistent with the SCS. This may result in increasingly privately financed transportation infrastructure, such as toll roads, to fund those developments that are not considered consistent with the SCS.

5. Streamlined CEQA Review for Qualifying Projects

SB 375 fast-tracks "transit-priority projects" that are consistent with general use designation, density, building intensity, and applicable policies specified in either the SCS or APS. It also provides CEQA exemptions and streamlining provisions for certain residential and mixed use projects that are consistent with such policies (this generally includes certain infill and high-density projects located adjacent to transportation nodes or corridors, which satisfy other applicable policies such as providing affordable housing on site). SB 375 provides detailed definitions regarding what characteristics these qualifying projects must include; and it outlines the streamlined CEQA procedures that apply to qualifying projects.

What Does SB 375 Not Say?

Specific "disclaimer" language was inserted into the bill at the behest of the various interest groups that reached the compromise on the legislation, which expressly provide that "nothing" in the bill (the six "nothings") shall:

1. Be interpreted to supersede the prerogatives of local agencies over land use planning;

2. Be interpreted to limit the California Air Resources Board’s authority under any law;

3. Be interpreted to authorize the abrogation of vested rights;

4. Require a local agency’s land use policies and regulations to be consistent with the regional plans that are created;

5. Require a metropolitan planning organization to approve a strategy inconsistent with federal law; or

6. Relieve a public or private entity or any person from compliance from any other law.

SB 375 further states that "Nor will the plans that are developed under the provisions of SB 375 regulate the use of land."

These "disclaimer" provisions may lead to arguments in the future regarding their interpretation, as some of them arguably conflict with other provisions of SB 375. For example, though the plans developed under SB 375 may not regulate the use of land directly, they certainly have a strong indirect effect on the planning process that controls land use, and may in some cases act to "supersede the prerogatives of local agencies over land use planning." Such issues could very well be the subject of litigation in years to come.

When Will SB 375 Be Implemented?

  • December 11, 2008: CARB plans to adopt the Scoping Plan required by AB 32 on this date. The Scoping Plan must include state-wide GHG reduction targets for various sectors of the economy. We may want to provide comments on the proposed final plan.
  • January 31, 2009: CARB must create a Regional Targets Advisory Committee, which must recommend facts to consider and methodologies to use for divvying up the state targets and assigning each region a target for the automobile and light truck sectors for 2020 and 2035.
  • September 30, 2009: The Regional Targets Advisory Committee must submit a report to CARB with its recommendation regarding the regional targets.
  • June 30, 2010: CARB must provide each region its GHG emissions reduction targets for use in the region’s next RTP update.
  • After June 30, 2010: Each MPO must prepare an SCS (and possibly an APS) as part of its next regular RTP update.

So, What Does SB 375 Really Do?

Ultimately, no one knows exactly what SB 375 will do, other than create a series of planning milestones that must be met between now and 2010, and then into the future. These milestones may be what is needed to begin to pull the diverse landscape of regional planning together into a coherent policy for meeting California’s housing and transportation needs into the future. Each agency and property owner will need to evaluate the legislation to determine how it affects them and how to address its dictates, and stay closely in contact with the planning processes being conducted by CARB and by the local MPO will affect specific properties located within their jurisdictions and/or ownerships.

For land owners it could provide significant density incentives and CEQA streamlining benefits for certain transit-oriented projects. Land owners may also want to consider promoting an SCS that is favorable to their parcel. One way to do this is to join the advisory committees established by each MPO that will shape the development of each RTP, or otherwise participate in the public processes established by each MPO as described above. There are also incentives to develop housing with a minimum of 49% affordable units, since these projects may qualify for an "anti-NIMBY" defense if a local government fails to grant the necessary approvals for a project that meets zoning requirements and the applicable requirements specified in SB 375.

On the downside, traditional auto-oriented development (i.e., "sprawl") will be even more carefully scrutinized under SB 375, as the ultimate goal for the SCS is to meet GHG emissions targets set by CARB. For agencies, the transportation-funding provisions of SB 375 could provide access to funds for meeting their transportation goals, for projects that are consistent with an adopted SCS – however, transportation funding may be more scarce for infrastructure outside the urban core. On the brighter side, SB 375 requires that realistic "planning assumptions" be applied under federal law, and this may allow for arguments on behalf of land owners in shaping the SCS process, e.g. that feasibility and financeability of future projects should be considered. Both local agencies and developers will need to be alert to these issues in planning future projects and arguments supporting the inclusion of proposed projects within the SCS will need to be carefully analyzed.

On the CEQA side, the implementation of SB 375 will present both significant challenges and significant opportunities. The legislation contemplates CEQA exemptions for "transit-priority projects" as discussed above and other CEQA streamlining for projects that are consistent with the applicable SCS. Likewise, the new CEQA guidelines currently being considered by ARB and the Office of Planning and Research would grant projects that are consistent with the applicable SCS (at either a program level or an individual-project level) an exemption from having to analyze their transportation-related impacts to global climate change. On the other hand, it is fairly clear (through not explicitly stated) in SB 375 that proposed new projects that are inconsistent with an adopted SCS will be more likely to be viewed as having a significant transportation-related impact to climate change, which will require mitigation. These details, like so many others, will be fleshed out in the upcoming months as the legislation is implemented.

For all of these reasons, it is essential to carefully consider SB 375 provisions and how they will affect the properties and business plans of land owners and developers, and the future responsibilities of local agencies, as early as possible.

Sheppard Mullin has a team of 60 attorneys throughout California with specialized knowledge and experience in land use, real estate, and environmental law, and an interdisciplinary team of attorneys specializing in global climate change law in California and other jurisdictions, who can advise clients on SB 375 and other evolving climate change rules in a wide variety of practice specialties and issue areas. Several of our attorneys have been involved in the development and early implementation of SB 375, and have been speaking as well as writing on the topic. As such, our attorneys are well-positioned to assist developers and public agencies in benefiting from SB 375 or avoiding its pitfalls.

Authored by:

Rafael F. Muilenburg

(858) 720-8908

James E. Pugh

(213) 617-4284

Michael Hansen

(619) 338-6590

Rafael F. Muilenburg is a partner in the Real Estate and Land Use and Environmental Practice Group and the Global Climate Change Practice Group in the firm’s Del Mar Heights office. James E. Pugh is an associate in the Real Estate Land Use and Environmental Practice Group in the firm’s Los Angeles office. Michael Hansen is an associate in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Diego office.