When developers Craig Rowell and Rick Moe bought 2.7 acres of land in Santa Cruz in April 2007, they weren’t expecting it to look the same more than 11 years later.

Today, the site at 1930 Ocean Street Extension is much the same mix of open grassy area and a few trees—not a development of 32 housing units, let alone the original proposal of 40. That doesn’t look likely to change anytime soon, either, as the site is now the subject of a lawsuit brought under the California Environmental Quality Act, known as CEQA (pronounced SEE-quah).

The Ocean Street Extension Neighborhood Association filed the suit in late October against Rowell and Moe, as well as the city of Santa Cruz and the City Council. The suit alleges —among other issues—that the environmental impact report (EIR), a document required under CEQA for some projects, doesn’t adequately analyze the cumulative impacts of the proposed development and fails to respond to many of the comments put forth by neighbors in the report drafting process.

Rowell and Moe say they weren’t surprised by the lawsuit. They feel neighbors have been opposed to the project, which would include at least a few affordable units, from the beginning. In their eyes, the CEQA suit is just another tool to try to stop it entirely.

“CEQA was certainly written and enacted with all the best of intentions,” Moe says. “And it has done a lot of good, there is no question. But it has some holes in it, and it is getting used to try to stop projects.”

Legal analyses of CEQA, which was signed into law in 1970 by then-Gov. Ronald Reagan, show divisions over its ripple effects on development and the state’s housing supply. Over the past three years, California’s nonpartisan Legislative Analyst’s Office, which blames lousy housing affordability on a lack of housing construction, has argued that CEQA inhibits housing construction statewide. This past winter, a study by San Francisco law firm Holland & Knight, published in the Hastings Environmental Law Journal, concluded CEQA has mostly been used in recent years “to block infill housing and transit-oriented land-use plans, as well as public service and infrastructure projects.”

Another recent report, however, published by the UC Berkeley School of Law, “Getting It Right,” contends that claims of CEQA’s slowing effects are overstated, and that the real drivers of struggles to add more housing are local agencies such as zoning boards and planning commissions that must sign off on any proposed development.

In extreme instances, outside groups have used CEQA as a way to extract last-minute payments out of developers and local governments, as one Irvine resident named Michael Goolsby did this past spring when he issued a couple challenges to a 125-unit Redwood City development shortly before the project set a date to break ground. The developer contributed $50,000 toward a settlement agreement with Goolsby, who is barred from practicing law.

No developers have stories of incidents quite so extreme happening on Santa Cruz side of the hill. Over there, Santa Cruz, Bill Parkin, a partner at the Wittwer Parkin LLP law firm, is representing Ocean Street Extension neighbors in their case against Rowell and Moe, and he’s well aware that CEQA sometimes gets painted as a law that slows down development or is used by “not in my backyard” (NIMBY) groups. CEQA, he says “is just not the problem.”

“At the end of the day, this notion that the environment is mutually exclusive from people having homes and from economic growth is simply silly,” he says. He adds that the environmental law is used as a “scapegoat,” and says developers really don’t want the potential impacts of their projects disclosed.

Complex Legacy

The Ocean Street Extension Neighborhood Association has spent much of the past decade entrenched in the proceedings around the development at 1930 Ocean Street Extension. Community members filed more than 100 comments during the drafting of the project’s EIR, and “many of them were not addressed at all” in the final report as required by CEQA, says Ellen Aldridge, a member of the group’s steering committee.

“Our neighborhood association has been concerned about this development since it’s been proposed,” Aldridge says. Their concerns include the potential for increased traffic on the narrow road and how that might affect bicycle and pedestrian safety as well as residents’ ability to evacuate in an emergency, especially if Highway 9, the other route in and out of the neighborhood, is closed.

In a Sept. 25 Santa Cruz City Council meeting, council members voted 5-2 to advance the project at 32 units instead of the proposed 40, in what appeared to be a form of concession to neighborhood concerns. At least five of the units would be affordable. The affordable housing component seemed to be a selling point for some council members on the project at a time when the pace of affordable housing construction locally—as throughout much of the state—has failed to meet mandated goals.

Even with the change to the number of units, the neighborhood group says no one has responded its concerns in any substantive way. The goal of its lawsuit is to have the city reissue the EIR, Aldridge says, “and substantively address the questions we raised and consider mitigations and alternatives,” which she says “were given short shrift.”

“Everyone acknowledges there needs to be additional housing, that there’s a housing crisis,” Aldridge says. “That doesn’t mean you put projects that aren’t suitable for the site or the surrounding infrastructure in to just say you built more housing. You have to do a critical analysis of both the legal requirements and the environmental concerns, and make sure you’ve got the right project in the right place.”

That’s the key part of this lawsuit, Parkin says. The Ocean Street Extension project, he says, didn’t consider all feasible mitigations and alternatives that might reduce environmental impacts.

“What is very interesting about the Ocean Street case is the whole affordable housing crisis we have is driving this almost like a collective insanity,” Parkin says. “We just throw the baby out with the bathwater when it comes to good planning.”

Building Stamina

Santa Cruz Principal Planner Eric Marlatt can’t comment on the Ocean Street Extension case, but says that the city does occasionally receive letters from attorneys about CEQA documents before a project gets a hearing. Often, those letters are from attorneys representing neighbors who are opposed to a project. They don’t always progress to litigation like this one did.

Marlatt routinely goes to conferences to learn about the latest in environmental requirements. Generally, he says that most CEQA litigation has less to do with content of the actual environmental analysis than it does the procedural steps that a given agency follows. And, procedurally speaking, CEQA is doing what it was supposed to do, Marlatt says—local governments are looking at potential impacts to a project, disclosing them and mitigating or offsetting them.

Over Marlatt’s nearly 30-year career, CEQA has become more complex, he says, due in part to litigation that’s shaped the body of law around it.

When he first started interacting with CEQA in the early 1990s, an initial study for a project was a two-page checklist. Now, an initial study “many times can be 80 to 100 pages of analysis,” he says.

Rowell and Moe, the Ocean Street Extension developers, say they’ve spent some $713,000 to date in the effort to see their vision of housing on the property turn into a reality (not counting the $1.65 million they paid to purchase the site). The consultant fees and city review of the EIR alone cost nearly $100,000 combined, and took around two years. That was due, in part, to the “extensive” comments from neighbors, they say.

Other developers have shared similar concerns about CEQA gumming up housing construction that they see as essential, and which many advocates are clamoring for. Jesse Nickell, senior vice president of construction and development at Swenson, says the bottom line is that “people are really afraid of change.” While CEQA is generally a really good thing, he says, “it becomes a tool sometimes for anti-development.” From there, the effects are a simple matter of supply and demand on Santa Cruz’s housing market, he says. “If nobody can get the product out, then everything goes up in value,” Nickell says.

Ocean Street Extension residents insist, though, that the project proposed in their neighborhood simply isn’t the right product for Santa Cruz. Aldridge says she and her neighbors aren’t against development, and she knows the lot won’t be vacant forever. “But the laws are there for a reason,” she says.

Rowell and Moe believe that the case against them doesn’t have anything to do with considering alternatives for environmental purposes. They say it appears more focused on stopping their whole project.

“I think what they really want,” Rowell says, “is they want us not to be there.”

Additional reporting by Jennifer Wadsworth. This article was originally published in San Jose Inside/Metro Silicon Valley’s sister paper, the Santa Cruz Good Times.