Mahon v. County of San Mateo (2006) 139 Cal.App.4th 812 The “deemed approved” remedy for untimely processing must give heads up to neighbors — what may be “deemed” is not what it seemed. By Joel Ellinwood, AICP Recognizing that the often seemingly interminable delay by local agencies in development permit processing drives up costs of providing housing and other desirable projects, the development industry succeeded in persuading the legislature to impose what at first glance appear to be strict timelines for the agency to approve or disapprove projects. The timelines are given teeth by provisions which may result in projects being “deemed approved” if the agency fails to act within the time provided. However, as the recent case of Mahon v. County of San Mateo (2006) 139 Cal.App.4th 812 (modified June 19, 2006) illustrates, the teeth don’t seem to have much bite. This article will identify strategies for making the best use of what little bite is left to help manage the pace of development processing. The “deemed approved” remedy appears in the Permit Streamlining Act (“PSA”), Government Code section 65920 et seq., first adopted in 1977, at section 65950 and section 65956, as well as in the Subdivision Map Act (“SMA”) sections 66452.4, 66452.5 and 66458, first adopted in 1974. The same concept also applies to failure of the agency to make a timely response to the submission of applications for development projects – which may be “deemed complete” (Gov. Code, § 65943), or for approval of subdivision final maps, (Gov. Code, § 66458.2). When the City of Ojai tried to defend against a developer’s suit to compel approval of his project when the City missed the PSA deadline by arguing that project neighbors due process rights would be violated if a project were deemed approved without public notice, the Court of Appeal held, without deciding the due process issue, that the City could not hide behind its own failure to give proper notice. (Palmer v. City of Ojai (1986) 178 Cal.App.3d 280). In response, in 1987 the legislature amended the PSA to require that public notice required by law have been given before the “deemed approved” remedy could be effective, and gave the applicant the right to provide a notice which would include an explanation that the project would be “deemed approved” if the agency failed to act within 60 days of that notice. In Mahon the applicant argued that his design review applications for construction of two single-family homes should have been “deemed approved” when the County of San Mateo Board of Supervisors failed to timely act on the applicant’s appeals of the decision of the Planning Commission to deny the applications. The public notice issue had a long and convoluted history in the case. Mahon first applied for design review permits in February and March 1999. The County determined each project was exempt from environmental review under the California Environmental Quality Act (“CEQA”), which started the PSA clock running. As allowed under the local ordinance, the staff administratively approved the applications within the PSA time limits. Mahon applied for building permits. In October of 1999 the County staff concluded that they had erred in failing to give notice by mail to property owners within 300 feet of the project and rescinded the approvals. The County then mailed and posted notices of the application describing the location, size and exterior finishes for each home, and the date by which comments had to be submitted. The notices did not refer to the time limits applicable to the County or the deadline for taking an appeal of any administrative approval. Neighbors and a community council sent in numerous objections to the scale of the structures, compatibility with the neighborhood and compliance the County’s design review standards. Nevertheless, the staff granted the applications, almost one year later. The neighbors and council appealed. The Planning Commission granted the appeal in January 2001. Mahon appealed to the Board of Supervisors, which remanded the matter back to the Planning Commission in August 2001 for consideration of a redesign. Over two years passed. Finally in early February of 2004, Mahon hired an attorney who asserted that the project had been deemed approved when the County failed to act within 60 days after the remand to the Planning Commission (by October 2001) or in early in September 2002, 60 days after Mahon had submitted the last set of revised plans to the Planning Commission. The County responded that Mahon had not provided the required notice to the county or the public for the project to be deemed approved. The Planning Commission then denied the design permits in early 2004 and Mahon appealed to the Board. As of one year later the Board had not yet acted, nearly six years after the applications were originally filed. Mahon didn’t wait. In June of 2004 he filed suit, seeking to compel the County to issue the permits deemed approved by operation of law. The issue centered on whether the “public notice required by law” had been given. Mahon argued that the notice belatedly mailed and posted by the County in October 1999 satisfied that requirement. All necessary parties had been put on notice of the application and a description and drawing of the proposed houses and the date for submitting comments. Both the trial and appellate court agreed with the County that the notice was insufficient because it did not include the language that the project could be deemed approved if the County failed to take timely action. The Court of Appeals reasoned that Mahon had two options: 1) he could have brought a writ to compel the County to issue a notice including the “deemed approved” language in the notice, or 2) he could have given the notice himself. Although Mahon’s attorney could not necessarily have predicted this result, one could suggest that it might have been prudent for Mahon to have given the applicant’s alternative notice in 2004, prior to the remand hearing to the Planning Commission. However, under Mahon’s theory, the chicken had flown the coop at least eighteen months before. How could he have put the hen back in the henhouse when the County no longer had any authority or pending project on which to rule? How much process is due, when the neighbors had actual notice, submitted comments, won an appeal and had the matter remanded back to the Planning Commission for further action? Does everyone really think the process can go on indefinitely without resolution? (Oh, right. This is California – yes they do.) What about due process rights for the applicant? The short answer is when you rely on a “gotcha” theory, you never know who is gonna get got. Since Mahon is now represented by the notorious property-rights advocate Ronald Zumbrun, we might expect a petition to the California Supreme Court. Stay tuned at least until August 18, 2006. Aside from including in the notice a warning of the potential that the project could be deemed approved if the local agency fails to act within the PSA or SMA time limits, the effective application of the “deemed approved” remedy under either statute has two other conditions which may limit its practical benefit to many projects. First, for the remedy to be available, the applicant must include a statement on the application that it is an application for a “development project.” (Gov. Code, § 65943(a), but whether it is sufficient that the application be for a project that is within the statutory definition of a development project without an incantation of these magic words is unclear, see Palmer at p. 292, but given the result in Mahon, don’t bet against it). Second, and most significantly for most applications, the PSA and SMA time limits only start running once a CEQA determination has been made. Both Palmer and Mahon involve the relative anomaly of a project found to be exempt at the outset. With the recent decisions in Wal-Mart, Inc. v. City of Turlock (2006) 138 Cal.App.4th 273 and Banker’s Hill, et al. v. City of San Diego (2006) 139 Cal.App.4th 249 (see previous Abbott & Kindermann Land Use Law Blog articles on Wal-Mart and Banker’s Hill), upholding CEQA exemptions under Public Resources Code section 21083.3 and Guidelines section 15183 for projects consistent within the general plan and Guidelines section 15332 for urban infill projects, local jurisdictions may be encouraged to make greater use of these CEQA streamlining techniques. The cynic will ask, “Why would agencies put the PSA and SMA gun to their head for a quick turnaround on project applications, when they can control the time line to suit their leisure by taking the path more traveled for a mitigated negative declaration, or EIR (even if tiered and narrowed in focus)?” Most agencies defer adoption of an Negative Declaration or certification of an EIR until they are ready to make a final project approval. Frequently CEQA action and project approval occurs in the same meeting. In that case the PSA and SMA time clock never gets started until the project is approved. No pressure. Wait a minute. Under Public Resources Code section 21080.2 and Guidelines section 15060-15063, don’t agencies determine whether a project is exempt or decide to prepare a negative declaration or EIR within 30 days after the application is accepted as complete? Once that determination is made, isn’t a negative declaration to be adopted within 180 days or an EIR certified within one year? Yes and no. Without a specific consequence for failure to meet statutory deadlines in CEQA, and other regulatory processing, the courts have found statutory time limits to be directory goals or guidelines only, not mandatory requirements. Meridian Ocean Systems, Inc. v. State Lands Commission (1990) 222 Cal.App.3d 153. In other words, the local jurisdiction can delay making a CEQA determination indefinitely and avoid starting the PSA/SMA clock, and under the current state of the law there is little or nothing an applicant can do about it. There is no incentive for an agency to make use of CEQA streamlining exemptions for private development projects and no practical consequence for failure to apply available exemptions even if they are arguably available. Because of the inherent delay in litigation (two to four years before there is a resolution if the case is appealed) it does not make economic sense for applicants to sue to compel a local agency to apply available exemptions, even though there is lots of hortatory language in CEQA that agencies should do so. Rather than push a rope, most applicants roll over and submit to extended and expensive studies to support a finding of the absence of significant impacts or the adequacy of mitigation measures for adoption of a negative declaration, or for some form of EIR, because it takes less time and is more certain to achieve defensible CEQA compliance than would be entailed for litigation over whether an exemption or other streamlining technique should apply. Legislation to provide teeth to the CEQA time lines would likely be a tough sell in the legislature. To use the “deemed approved” approach to CEQA compliance would be at cross purposes with the underlying rationale for CEQA – to require identification, public awareness, opportunity for participation in the analysis of all potentially significant environmental effects, and exploration of feasible alternatives prior to project approval. Imposing consequences favorable to project approval because the agency has failed to complete the process within an arbitrary time line cuts at the heart of CEQA (although some of our clients would no doubt like to cut the heart out entirely, out of total frustration). Many times delays are due to the agency staff and elected decision makers attempts to work with the applicant and the objectors to minimize or prevent the potential for litigation, and if so, its worth some patience and expense. What may be couched as CEQA compliance is frequently based more on political considerations than the law. Safety and caution are common characteristics of public sector planners (otherwise known as bureaucrats), which often chafes for the entrepreneur and developer whose raison d’etre is taking calculated risks. How to manage processing time lines in an unaccountable system? Here are a few recommendations: 1) Know the rules, and their limitations 2) Let the local agency know that you know the rules 3) Follow the rules, and let them know that you expect them to follow the rules. 4) Establish an expectation of competence, good-faith and professionalism (in part by modeling and in part by clear communications) with agency staff. 5) Agree on realistic milestones, taking into account staff workloads. Offer sympathy and help. Stay on top and follow up. Thank staff whenever key milestones are met. Let the electeds know that you thanked staff. 6) Thoroughly explore any option to streamline the process as early as possible, even before filing the applications (exemptions, tiering, providing professional studies for peer review by the agency, etc.). 7) Be prepared to question politely and educate. Be prepared to go up the chain of command on key issues (application completeness, preliminary review analysis of CEQA process, initial study results). Politely, don’t take no for an answer if you think you have a shot at getting someone higher up to agree. Know when to give in if and when you don’t have that shot. If staff or elected tell you that there is a key constituency or interest group that must be dealt with in some manner or another, listen and engage. 8) Keep your eye on the prize – a favorable vote by the electeds. Engage them if you have to with problems in timely processing in a problem-solving mode. You don’t necessarily have to wait until the staff and planning commission have had their way with you. You can appeal intermediate decisions (completeness, which CEQA process is appropriate, etc.). Do so if you have to, but carefully. 9) Make a record that will stand up in court. They will realize you are making the record without having to make empty threats. This includes giving the applicant’s alternative public notice of hearings with the “deemed approved” consequence, if the agency won’t do it themselves after you’ve asked them to do so. 10) Make sure your attorney knows their attorney (professionally, not personally), at least along the way in the process. Both sides will know that each knows what their options and risks are. 11) Explain your needs and perspective. Most planners haven’t, probably couldn’t, and most likely don’t want to develop. They don’t understand. Educate them, even if they say they don’t care. It’s their job to know, whether they know it or not. Most planners have not been trained in development economics. They tend to view land use regulation in a vacuum without much awareness of market forces and how such forces can make regulation more or less effective and successful. Regulatory costs, delay and uncertainty increase risks. High risk players are harder to control and tend to play for bigger stakes. Development capital flows where reasonable returns are relatively predictable. Here is a handy flow chart produced by Abbott & Kindermann, which shows the CEQA and Permit Process: California Land Development Guides – 2006 Permit and CEQA Processing Joel Ellinwood is a senior associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595. The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.