Alert December 11, 2008

California's New Law SB 375: Important Considerations for Developers

California Governor Arnold Schwarzenegger signed SB 375 into law on September 30, 2008 to curb sprawl and meet the environmental goals of the state’s Global Warming Solutions Act of 2006 (AB 32). SB 375 directs California’s metropolitan planning organizations (MPOs) to coordinate planning for housing, land use and transportation, with an objective of reducing greenhouse gas emissions. The Federal Aid Highway Act requires the formation of MPOs in urbanized areas to channel federal funding to transportation projects and programs developed by local government and transportation authorities.

SB 375 provides incentives for transit-oriented developments – livable, walkable communities centered around high-quality transit systems – to protect the environment and combat traffic congestion. For example, projects located in denser communities will get priority in the distribution of public transportation funds under the new law.

SB 375 contains several provisions of interest to the development community:

Regional Greenhouse Gas Emission Reduction Targets

By September 30, 2010, the California Air Resources Board (CARB) must provide each MPO with a greenhouse gas emission reduction target for automobiles and light trucks. CARB is required to establish a “Regional Targets Advisory Committee,” which includes local governments, builders and planners to assist in setting the targe, that will be revised every eight years.   

Sustainable Communities Strategy Links Transportation and Housing 

Once an MPO receives its target from CARB, it must create a Sustainable Communities Strategy (SCS). The SCS must set forth a development pattern for the region that is designed to achieve the greenhouse gas emission reduction target. The SCS is tied to federal law because it will become part of the Regional Transportation Plan (RTP), a blueprint of a regional transportation system required by federal transportation law. The SCS will also incorporate the Regional Housing Needs Allocation (RHNA) for a jurisdiction. RHNA numbers, which represent that jurisdiction’s “fair share” of regional growth, must conform to the SCS, meaning that local governments must work together to allow more housing in transit-heavy areas. Local jurisdictions must rezone property within three years if required to do so by the RHNA or face a writ of mandate to compel rezoning and other remedies for affordable housing development projects. The new law places all transportation and housing planning processes on the same eight-year schedule to align the review process for revisions and updates with regional planning efforts.

CEQA Exemptions and Streamlining

Under SB 375, two types of projects can potentially qualify for exemptions or streamlining under CEQA if they conform to the SCS:  (1) residential or mixed-use, and (2) “transit priority projects.”  Residential or mixed-use residential projects are those with at least 75% of the total square footage for residential use. Transit priority projects are projects that contain at least 50% residential use, have a minimum net density of 20 units per acre and a floor-area ratio for the commercial portion of 0.75, and are located within a half-mile of a regional transit corridor.

Under the new law, transit priority projects will qualify for a full CEQA exemption if the local legislative body finds, after conducting a public hearing, that the project meets the specified criteria and is declared to be a SCS project. Residential or mixed-use projects and those transit priority projects that do not qualify for a full exemption will qualify for a streamlined CEQA review. Those projects will not have to address growth inducing impacts or any project-specific or cumulative impacts generated by the project on global warming or the regional transportation network. These incentives are offered to encourage development consistent with the goal of reducing greenhouse gas emissions and can help developers bypass some costly and timely CEQA procedures. An exemption or streamlined review will only be available once an SCS has been adopted, which is not likely to occur within the next three years.

The Impact of SB 375

The true significance of SB 375 remains unclear. No change is likely to occur at the ground level for at least three years, while CARB sets the emissions reduction targets and then while MPOs develop SCSs. Multiple public meetings and agency coordination is required, which may make the planning process unwieldy. Transportation funding decisions must be consistent with the SCS, but the MPO board members with decision-making authority are elected officials who may not be keen to restrict transportation funding to their respective jurisdictions. SB 375 does not confer land-use authority on the MPOs, and it specifically states that the SCS is not a land use plan, so a local government’s General Plan does not have to conform to the SCS.

The development industry must ensure it is represented on CARB’s Regional Targets Advisory Committee, and that it participates in regional planning efforts, particularly the creation of SCSs because compliance with a SCS is required to attain CEQA exemptions and streamlining.