What California Can Do to Improve Its Business Climate

You may have missed this in the news: For the 11th year in a row, California ranked dead last in the annual survey by Chief Executive Magazine of the “Best and Worst States for Business”. This is a survey that is conducted with CEOs, the people who make the decisions on where jobs locate. The survey revealed that the states with the lowest ratings were scored low because of their high tax rates and regulatory environments.

One of the greatest contributors to California’s image as a bad state for business is the lack of progress in reforming the California Environmental Quality Act (CEQA), the landmark legislation passed 45 years ago. No one claims that CEQA has not been valuable in protecting the environment. The problem is that it often has been manipulated to delay or stop legitimate projects for reasons other than the environment.

Case in point: Last year, the firm that had been commissioned to assemble 175 new rail cars in Palmdale for METRO announced that it was moving out of state because of a threat by a union to sue under CEQA. Only after Mayor Garcetti intervened, were things worked out and the cloud of a lawsuit lifted. Interesting that the deal he brokered with the union had nothing to do with the environment. The word on the street was that the union wanted the manufacturer to agree to a “card check” system to enroll its employees in the union.

You may have read recently that high rents are driving more Californians into poverty and forcing hundreds of thousands of low and middle income workers to move to other states. Did you know that more than half of the nation’s most expensive residential real estate markets are in California? Did you ever wonder whether our own children will be able to afford to live in this state?

The fact is that it is so difficult to build new projects in California that it has artificially raised the cost of living here and exacerbated a shortage of housing opportunities. The many CEQA lawsuits in Hollywood to stop additional infill projects are only emblematic of what is happening statewide.

Several years ago, the Sacramento Bee said that “CEQA has become not a protector of the environment but a promoter of sprawl, pushing the housing market away from existing neighborhoods and onto farmland, where the cows don’t sue.” Pretty ironic I would say for a law that is supposed to protect the environment.

Something must definitely be wrong when the California legislature itself takes the action of exempting its own pet projects such as stadiums, arenas and high speed rail from CEQA challenges. Even Governor Brown, two years ago, referred to the need for CEQA reform as “the Lord’s work” … and yet today, there is not a single bill going forward in Sacramento to reform CEQA. There are powerful interests lined up to prevent any changes. Everyone is afraid to touch it!

We visited Sacramento last month and discussed the need for CEQA reform. We were given a sympathetic ear by the legislators with whom we spoke, but they pointed out that there is no legislation this year for them to consider.

The fact is that you do not need to gut CEQA in order to achieve reforms that would make a difference. There are numerous steps that could be taken to level the playing field, such as increasing transparency, limiting the legal maneuvers that delay court action such as last minute “document dumping” by project opponents, expedited dispute resolution, etc. All it requires is a legislature with the courage to do what is right and to rein in the many frivolous claims that stop needed projects from going forward.

The Hollywood Chamber of Commerce will continue to call for reform of CEQA, and we will urge our own representatives to lead the way. What a shame that there is no hope of progress this year. Let’s hope that next year true change will occur. Maybe then, California will get out of the basement as a place in which to do business.

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Leron Gubler has been serving as the President and CEO of the Hollywood Chamber of Commerce for the past 23 years. His tenure since 1992 continues to oversee the great comeback story of Hollywood.

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