Distribution center construction file photo

A recent court decision has left developers in the City of Fresno in a sort of limbo with their projects.

In early August, a California appellate court ruled that Fresno’s Program Environmental Impact Report (PEIR) failed to comply with the California Environmental Quality Act, ordering the city to revise its PEIR.

The court found that Fresno’s PEIR did not assure that greenhouse gas mitigation measures would be effective in reducing emissions under the significant impact threshold.

Developers of residential, industrial and environmental projects now have them on hold as next steps are determine.

The court’s ruling will now require developers to perform their own environmental reviews to get their projects back on track.

According to court documents, the city failed to “substantiate its greenhouse gas analysis,” “improperly deferred air quality mitigation measures, unjustifiably found traffic mitigation infeasible, failed to analyze potential impacts on pedestrians” and “inadequately addressed groundwater decline.”

The South Fresno Community Alliance filed the petition to challenge the project approval and PEIR’s compliance with CEQA.

The alliance alleged that Fresno failed to “complete a thorough analysis of the significant adverse impacts of [the] General Plan” and by including “vague, nonbinding policies … to reduce [greenhouse gas (GHG)] emissions…”

Ethan Smith, senior vice president at Newmark Pearson Commercial, said this ruling has left the developer community uncertain on what the next stops are to get projects through the approval process.

“I don’t think it was closely followed by many people in the development community,” Smith said of the ruling.

He added it has left the residential and commercial developers most impacted, as the industrial community has had significant regulatory uncertainty and regulatory challenges for about six years now.

Delaying projects will add time and increase costs, which can dramatically alter the viability of a project. 

The ruling has impacted projects in the pipeline in the city, as projects approved were reviewed under one methodology now potentially have to be reviewed under another, he said.

Smith said if there is not a clear path to the approval process, a project could simply be dumped.

The costs for conducting environmental reviews can vary for different types of projects, but they are not insignificant and take time.

Most developers don’t have the review resources in house, he said, and typically hire third-party experts for their services.

There is no question that this ruling will prevent projects, especially small to mid-size ones, from going forward, Smith said.

John Kinsey, attorney and partner at Wanger Jones Helsey PC, said that since developers can no longer rely on their analyses under the former EIR process, they essentially have to restart their process from scratch.

Depending on the size and nature project, an a PEIR can cost anywhere from several thousands of dollars to over $100,000.

It could take several months just to prepare for the process, which can be pretty disruptive for projects that are close to approval that will now have to go back to review.

“Property owners could have a contract with someone looking to lease the property, and oftentimes those agreements only last for a certain period of time, and if they get to the expiration and don’t have it approved—that could be a reason a landowner or developer can just decide to walk away,” Kinsey said.

There is not much that developers can do about this ruling, but they will need to get their teams to make the best possible permitting strategies. Ultimately, they will have to pay more money for more studies, he said.

Kinsey said the city is coming up with a plan for different types of projects, and are in communication with the various applicants affected.

He said the city should reach out to industry more proactively during the planning processes, and seek assistance to help avoid permitting issues in the future.

Kinsey said the ruling effects projects in every industry across the board, from residential construction to office, as well as the city’s planning documents.

The court decision has also affected the ability for developers to build homes, he said.

“We are in the middle of a housing crisis, and the last thing our community needs is for there to be greater roadblocks for the construction of new housing,” Kinsey said.