How California Environmental Law Makes It Easy For Labor Unions To Shake Down Developers
“Greenmailing” drives up construction costs and wait times, making the state’s already expensive housing even less affordable.
The state of California has made it shockingly easy for construction unions to delay new construction under the guise of environmental protection, through a practice known as "greenmailing." And time after time, they have.
Consider Newport Crossings, a 350-unit apartment complex complete with 7,500 square feet of commercial space, and a half-acre public park proposed by developer Starboard Realty Partners.
Starboard's planned development would replace a blighted, 1970s-era shopping center where some 70 percent of the shopfronts sit vacant. Newport Crossings would add new housing to an area currently dominated by office blocks, shops, and restaurants.
Normally, this sort of project would meet stiff resistance in California, where approval times for a comparable development can range from two to three years. But Starboard worked with community groups to iron out issues over parking and landscaping, and agreed to reserve 78 of its new units for lower-income renters.
"These Newport Crossings guys really went the extra mile and met with environmentalists, met with some of these slow growth guys. Met with a whole host of community types," says Erik Weigand, the vice chair of the Newport Beach Planning Commission. (Weigand also serves as the treasurer of the Orange County Republican Party.) "They met with everyone, and came up with a project that everyone would like."
By law, projects like Newport Crossings must make plans available for 45 days of public comment. And in January of this year, on the very last day of the mandatory comment period, the Southwest Regional Council of Carpenters (SWRCC)—a union representing 50,000 carpenters throughout the Southwest—submitted a letter detailing a number of supposed deficiencies in the city's environmental study of Newport Crossings.
The city's analysis, according to the SWRCC, failed to incorporate enough discussion of what the conversion of the site from solely retail to mostly residential would do for air impacts and greenhouse gases, not to mention traffic and population growth. Nor, the SWRCC letter said, did the city do enough to identify other projects in the area which might, when considered cumulatively alongside the Newport Crossings project, have significant environmental impacts.
And while Starboard was already required by the city to retain an archeologist to watch out for dinosaur fossils and Native American artifacts—which would be quarantined and assessed for their importance if found—the SWRCC took issue with the fact that the city's draft environmental impact report didn't specify what would happen with any of these artifacts should they actually be determined to be important.
City planning staff dismissed most of these complaints as inaccurate or irrelevant, saying in a February-dated written response that none of the objections raised by the union "indicates that there would be a substantial increase in the severity of a previously identified environmental impact that will not be mitigated."
And even though an SWRCC representative showed up at the final Planning Commission hearing on the project to rehash his group's objections, the Commission nonetheless approved the project unanimously. In response, the union appealed to the city council in March, asking that the environmental report adopted by the commission be rejected, and a more thorough version of the report responding to the SWRCC's complaints be prepared.
This threatened to delay approval of Newport Crossings by weeks or months. Had Newport Beach's city council also approved the project, the SWRCC likely would have sued, stretching things out even longer.
None of this transpired. Instead, in late April the SWRCC suddenly dropped its appeal. Despite the fact that none of its environmental concerns had been addressed by the city, the union was now happy for it to go forward.
That's because the SWRCC's complaints were never about the environment, says Weigand, a four-year veteran of the planning commission, who alleges more cynical motivations are at play.
"They're just trying to force the developer to get their guys the work," he says. "Basically, you have these carpenters trying to shake down the process."
Because project labor agreements are private contracts between two private parties, and because they can contain clauses forbidding the disclosure of their terms or even their existence, tracking how many projects are bound by them and how much they cost developers is nearly impossible.
But what Weigand is describing is the practice of greenmailing, whereby self-interested parties file frivolous environmental complaints against a project as a means of extracting concessions from its developer.
Construction unions—enabled by a convoluted set of regulations that often make fighting these environmental complaints more expensive than just giving in—have become expert greenmail practitioners, using the tactic to secure exclusive, generous project labor agreements across the state.
This is particularly true of the SWRCC, which has targeted more than a dozen projects in Southern California with environmental comment letters, administrative appeals, and lawsuits that seem to have little to do with the union's core mission. (The SWRCC did not respond to Reason's repeated requests for comment.)
The individual projects targeted by these greenmailing tactics can be stalled for years at a time, both delaying the delivery of new housing and raising its costs upon completion.
The ease with which unions can employ these tactics gives them a powerful political incentive to resist any efforts at streamlining the approval of new construction.
At a time when California's housing supply is stretched to the breaking point, and even modest dwellings are selling or renting for amounts well above what's typical in most other states, these union-backed efforts to delay and raise the cost of new housing are fueling a housing affordability crisis in a state that's said to be short some 3.5 million units.
Protecting the Environment—or Protecting Union Jobs?
The reason that labor unions can so easily hold up projects with frivolous objections dates back to 1970, and the passage of the California Environmental Quality Act (CEQA).
CEQA was originally intended to safeguard California's natural environment from state-sponsored development projects by requiring that government agencies study projects they undertake for any significant environmental impacts.
Should significant impacts be found, the agency in question was required to mitigate them before moving ahead with the project. The law was also written to be self-executing, meaning that it is ultimately enforced by litigation from citizens "or the threat thereof."
Members of the public who believe an agency approved a project without properly studying some environmental impact are empowered to appeal that approval to a higher government body. Should these administrative appeals be rejected, CEQA empowers them to sue in state court.
The scope of CEQA grew dramatically over time. In 1972, a California Supreme Court decision clarified that the law covered not only publicly funded projects, but also privately sponsored developments that required the discretionary approval of a government agency. A subsequent 1987 decision expanded the definition of discretionary to include the approval of any building permit that came with requirements or conditions beyond what was spelled out in local zoning codes.
As CEQA expanded to cover more projects, the law also demanded more and more environmental impacts be studied and mitigated. In addition to studying impacts on air quality and wildlife populations, CEQA now mandates that projects be examined for their effect on greenhouse gas emissions and cultural resources like Native American artifacts or historic buildings.
The result was that most every development in the state now has to be studied for a long list of potential environmental effects. This has made it "a very, very powerful greenmail" tool, says Jennifer Hernandez, a land use attorney with the law firm Holland & Knight.
A group suing under CEQA "doesn't need to have members in the community where the project is located," Hernandez says, adding that these groups "can write a very standard [complaint]. 'Your traffic analysis is wrong. Your air analysis is wrong. You haven't provided enough detail about this or that.'"
The costs of appealing a CEQA decision are typically quite low—a couple hundred dollars, depending on the locality—while the sometimes months-long delays they cause can cost developers hundreds of thousands of dollars. Things are even more lopsided once an appeal becomes a lawsuit, says Hernandez.
"Not only are the odds fifty-fifty that someone suing will win but if they sue and win, they're entitled to attorneys' fees and a bonus on top of attorneys' fees," she says. "If they sue and lose, they still held up financing for the project, but will never be liable for attorney fees for the other side."
"It's almost a zero-cost lawsuit and an immediate ability to halt a project," she says.
"I Have Rarely Seen CEQA Used to Actually Protect the Environment"
In short, the structure of CEQA makes it a perfect tool for self-interested parties who are eager to extract concessions from deep-pocketed developers. That includes labor unions who have used the threat of CEQA litigation to secure generous, exclusive project labor agreements.
"Think of it like a settlement agreement," says Hernandez, telling Reason that project labor agreements secured through CEQA appeals and lawsuits will typically include a promise to hire a specific union local and pay them union-level wages and benefits. In addition, she says, developers will often agree to fund union apprenticeship programs, pension funds, and legal work. And these agreements happen in private, lending plausible deniability to both parties.
Tracking how many projects have been targeted by union-backed CEQA administrative appeals and lawsuits is possible, but still difficult as these actions happen before a multitude of planning commissions, city councils, county boards of supervisors, and state agencies. The task is made harder by the fact that labor groups often prefer to file CEQA actions through apparent proxies or other closely related organizations.
One example would be the Coalition for Responsible Equitable Economic Development (CREED LA), a prolific filer of CEQA comment letters on large developments in Los Angeles. The group's CEO is Mike Layton, who also serves as the financial secretary for Southern California Pipe Trades District Council 16, a union. The two organizations share the same address.
CREED LA's website describes it as having the "active support of the Mechanical, Electrical, Plumbing, Iron Worker, and Rod Buster Trades." (CREED LA did not respond to Reason's request for comment.)
The California Policy Center—a conservative think-tank—maintains a long list of environmental groups it claims are "masquerading" as grassroots groups which use CEQA to secure project labor agreements.
In this sense, the SWRCC is more transparent than many other unions, affixing its own name to its legal and administrative CEQA filings. Nevertheless, getting a firm count of the projects targeted by the union is a difficult task.
According to data from Holland & Knight, the SWRCC has targeted eight separate projects since 2017 with CEQA actions. Reason turned up another three such examples in the city of Los Angeles during that time. Counting the Newport Beach project, that makes at least a dozen projects that have been hit with SWRCC CEQA comment letters, appeals, and lawsuits.
Sometimes these CEQA actions are done solely on behalf of the SWRCC. In Los Angeles, they are often done in conjunction with Laborers' Local 300—a union of construction workers affiliated with the Laborers' International Union of North America (LIUNA).
In 2018, the SWRCC filed three lawsuits against the City of Los Angeles, as well as its city council and planning commission, alleging these bodies approved three separate mixed-use developments—totaling 1,823 residential units plus 236,000 square feet of commercial space—in violation of CEQA's environmental reporting requirements.
Those include the 475-unit 520 Mateo project being developed by Carmel Partners, the 725-unit College Station project being built in Chinatown by Atlas Capital, and Icon Company's 623-unit Panorama project. (This latter lawsuit was filed jointly with LIUNA Local 300.)
The SWRCC's lawsuits raise a strikingly similar set of objections to these projects' approval—objections that also surfaced during the union's protests over Newport Crossings.
In its CEQA lawsuit against the City of Los Angeles over its approval of the 520 Mateo development, the SWRCC argued, citing a 2015 California Supreme Court decision resolving a challenge to a state agency's approval of a large residential development, that the city's use of statewide greenhouse gas emission targets (known as the "Scoping Plan") to evaluate the significance of the project's emissions—as opposed to relying on city-adopted emissions targets—was a CEQA violation.
"To rely on the Scoping Plan, an agency, such as Respondent [the City of Los Angeles], must provide analysis that adequately explains why application of the Scoping Plan at the project-level would be suitable under the circumstances. Respondent provided no such analysis and, thus, Respondent's reliance on the Scoping Plan is erroneous," reads the SWRCC's lawsuit targeting the 520 Mateo project.
Compare that to the lawsuit the SWRCC filed against the city over its approval of Atlas Capital's College Station project, which also alleges an impermissible reliance on the statewide emission targets.
"To rely on the Scoping Plan, an agency, such as Respondent [the City of Los Angeles], must provide analysis that adequately explains why application of the Scoping Plan at the project-level would be suitable under the circumstances. Respondent provided no such analysis and, thus Respondent's use of the Scoping Plan is erroneous," reads that lawsuit.
The SWRCC raised a similar complaint about the Newport Crossings project, writing in its January comment letter that "The City [Newport Beach] incorrectly relies on federal and statewide plans and regulations which were not designed to be applied at the project-level…the City provides little analytical connection between these plans and requirements for the Project itself."
Concerns about union-level wages, hiring practices, or other labor issues naturally don't surface in the SWRCC's CEQA filings. But the union's other communications tell a different story.
Take Icon's Panorama project, for example.
In joint comment letters and appeals, the SWRCC and LIUNA Local 300 argued the environmental impact report prepared for Panorama failed to adequately study the project's impacts on air quality, traffic, and local public services like schools and fire protection.
These same objections surface in the joint lawsuit the two unions filed in October 2018 targeting the project.
Yet an October 2018 lobbying disclosure filed by LIUNA Local 300's lobbyist Ernesto Pantoja with the Los Angeles City Ethics Commission mentions none of these environmental concerns.
"I reached out to the Council office to gain support from the developer to use Union Labor on the proposed project," reads Pantoja's filing regarding Icon's project.
Icon CEO Billy Ruvelson reports receiving a similar appeal in his dealings with the SWRCC and LIUNA Local 300 in regards to his company's Panorama project.
"The unions began opposing and appealing our project once we circulated our [environmental impact report] and throughout our administrative process," Ruvelson says. "Their demands to us consistently involved entering into labor agreements with them in return for dropping their opposition and appeals."
Throughout 2017 and 2018, Ruvelson and his business partners were in frequent contact with the SWRCC and its representatives, telling them they would work to include unionized contractors where feasible, but signing on to an all-union labor contract would make the project prohibitively expensive. Ruvelson tells Reason that using all-union labor would raise the costs of his project by as much as 20 percent, and that Icon "couldn't obtain the rents required to support such cost increase."
A number of studies have attempted to flesh out how much union wage requirements raise construction costs. One 2005 study from UC Berkeley estimated these requirements raised costs anywhere from 9 to 37 percent. A 2014 state-sponsored study found union wage requirements raised the cost of affordable housing development by 11 percent.
At no point were the environmental concerns the SWRCC was raising in comment letters and appeals brought up during their one-on-one communications and in-person meetings with Icon, Ruvelson says.
The absence of environmental concerns from lobbying disclosures isn't definitive; perhaps those activities all occurred outside of contexts that require disclosure. But the disclosures do clearly demonstrate keen interest in the labor issues surrounding these developments. And the overlap between the pecuniary interests of the union and its oddly altruistic environmentalism has raised eyebrows.
Indeed, the SWRCC's use of CEQA to force Icon into hiring all-union labor was transparent enough to earn a public rebuke from Los Angeles Planning Commission's President David Ambroz, who called the union's environmental objections "specious at best" and "patently false."
"I am dismayed that I have rarely seen CEQA used to actually protect the environment," said Ambroz at an April Planning Commission hearing. "This seems to be a labor question, whether you are going to use union labor or not."
In January, Icon counter-sued both the SWRCC and LIUNA Local 300, claiming that their use of CEQA to shake down the company amounted to a violation of federal anti-racketeering laws. The case is expected to go to trial sometime this summer. Ruvelson tells Reason that the CEQA-induced delays on the Panorama project have cost his company millions of dollars.
For developer Onni's 231-unit 6901 Santa Monica Boulevard project, the story is similar. LIUNA and the SWRCC also filed a joint comment letter alleging the city failed to comply with CEQA in approving the project.
The lobbying disclosure filed by LIUNA Local 300, however, mentions nothing about CEQA. Instead, Pantoja, the union's lobbyist, says only that he "reached out to Council office 4 to request assistance in helping to set up a meeting with the developer of this project Onni Group. We wanted to sit down with the developer to attempt to convince them to hire Union Labor on this proposed project."
LIUNA's lobbying disclosure for the 520 Mateo Project likewise only describes the union's desire to work with city officials to secure a project labor agreement from the developer.
In the separate CEQA appeals filed by the SWRCC and LIUNA targeting 520 Mateo, however, the unions' objections focused only on the potential environmental impacts the project might have on their members' health.
"Southwest Carpenters live and work in the City of Los Angeles, and is concerned about the environmental impacts of this Project," reads the SWRCC's environmental appeal for the 520 Mateo project. "Without an adequate [Environmental Impact Report], Southwest Carpenters is aggrieved by the lack of disclosure regarding the Project's environmental impacts."
"Members of appellant Laborers International Union of North America Local 300 live in the vicinity of the proposed Project. They breathe the air, suffer traffic congestion, and will suffer other environmental impacts of the Project unless it is properly mitigated," reads LIUNA Local 300's July appeal of the same project.
LIUNA and the SWRCC also filed separate CEQA appeals of Atlas' College Station project, a project which is also referenced in LIUNA Local 300's lobbying disclosure. That particular disclosure mentions neither environmental concerns, nor anything about securing a project labor agreement, only that LIUNA's lobbyist sought help getting a meeting with Atlas.
The SWRCC sued the city over its approval of the 520 Mateo project in August 2018. The union's lawsuit against the city over the approval of the Chinatown project was filed in December 2018. Onni's 6901 Santa Monica project appears to have escaped litigation.
Both the Chinatown and 520 Mateo lawsuits appear headed for settlement. It's unclear what, if any, additional environmental reviews or mitigation measures the developers or the city agreed to undertake in either case. Neither Atlas Capital nor Carmel Partners responded to Reason's request for comment.
Paying the Price
At least 97 separate projects have been targeted by labor unions with CEQA appeals and lawsuits, according to a count provided by Holland & Knight. Of these, the majority are residential projects, followed by retail developments, as well as a handful of renewable energy projects.
This list of targeted projects, however, is likely far from comprehensive. It is obviously missing any greenmail-induced project labor agreements worked out in private, before appeals and lawsuits came into play.
In addition to using a law intended for environmental protection for their own economic self-interest, labor's use of CEQA to greenmail developers comes with real costs for a state grappling with a severe housing affordability crisis borne of insufficient supply.
By delaying the delivery of new housing with all those appeals and lawsuits, market-rate renters that could be occupying those newly constructed flats are instead left to bid up the price of existing units. Low-income tenants are meanwhile left waiting for a spot in severely over-subscribed rent-restricted housing.
Should developers agree to union demands, they will be left paying substantially higher wages on their project. That, in turn, raises the costs of development.
Studies of prevailing wage laws in California, which require that developers pay a uniform, union-level wage to construction workers, find that the cost of projects are raised by anywhere from 9 to 37 percent. Ruvelson's estimate that the SWRCC's demands would raise the costs of his Panorama project by some 20 percent fall towards the lower end of that range. In California, where housing is scarce and renters can't afford to be choosy, these cost increases are inevitably going to be passed on to renters.
For Weigand, this deliberate infliction of additional costs on housing development is one of the more offensive things about how unions, and the SWRCC in particular, use CEQA.
"The developer is going to eat it at first, but they'll just pass that down to the consumer, and the consumer gets dinged," he says. "That's the problem in California is these things cost so much to build, and the homeowner and the renter has to spend so much money to cover the expenses that are unnecessary."
In a more indirect way, the threat of greenmailing can ensure that many marginal projects don't happen at all. The potential for CEQA litigation, says Hernandez, can serve as a powerful disincentive for anyone considering trying to build new housing.
"When you start an approval process, you think about buying land, you think about going through this two- or three-year approval process…and then at the end of the day, you can still be sued and held up, what you've really done is substantially reduced who can play in that sandbox," she says.
And when the costs of CEQA appeals and litigation are coupled with the possibility that, at the end of that process, a developer might be stuck paying unaffordable union wages, the deterrent the law creates becomes stronger still.
A recent Los Angeles city ballot initiative provides a good example of how forcing developers into paying union-level wages can deter the construction of new housing.
In 2016, voters in the city approved Measure JJJ which, among other things, required that projects larger than 10 units, requiring a zoning variance of some kind, would have to pay union-level wages. In essence, the law mandated what unions have been trying to achieve through greenmailing.
According to a May 2019 study from University of California, Berkeley's College of Environmental Design and Los Angeles-based think tank LAplus, prevailing wages required by Measure JJJ were increasing costs by 20 percent across the board. Developers interviewed for the study reported not being able to incorporate these costs into their projects, with some saying they had abandoned plans to build homes or even their entire business model. Only one project subject to Measure JJJ's requirements has been approved since its passage.
The value of CEQA as a greenmailing tool comes at another cost. It gives building trade unions a powerful incentive to oppose almost any reform to California's building regulations that might make housing development faster and cheaper.
Reforming the law itself is obviously going to be a non-starter with labor, a point former Gov. Jerry Brown made bluntly back in a 2016 interview.
"You can't change CEQA," Brown told University of California Los Angeles' BluePrint magazine that year. "The unions won't let you because they use it as a hammer to get project labor agreements. The environmentalists like it because it's the people's document that you have to disclose all the impacts."
Refusing to consider changes to CEQA as currently written not only allows labor unions to put pressure on developers. It also allows every other interest group in the state that might want to stop a project, or even engage in a little greenmailing themselves, to do so.
And because the CEQA process is invoked whenever a project needs some sort of zoning variance or is subject to discretionary approval by a government agency, labor unions are loathe to support wider changes to the state's byzantine zoning regulations and approval processes.
In 2016 Brown proposed making the construction of apartment buildings "by right" meaning that they wouldn't be subject to discretionary approval by local governments or CEQA review. By all accounts, union opposition to the bill was the decisive factor in killing that reform.
The state's unions also helped put an end to other housing reform legislation in 2018. The bill would have upzoned residential land near transit stops, allowing apartments to be built where only single-family homes are permitted today.
The Sacramento Bee noted that many housing reforms that passed the state legislature in 2017 came with prevailing wage requirements.
That California is in the midst of a major housing affordability crisis is accepted by most everyone in the state. There is also a wide and growing consensus that this crisis is fundamentally a problem of supply: too many people, not enough homes.
Yet as long as even the most uncontroversial developments like Newport Crossings can be delayed by environmental law and labor unions, who themselves want the project to go forward, there is no way the state is going to build itself out of its housing woes.
"The only people we're helping is the union guys because they're the ones that're looking for the work," says Weigand. " We're hurting everyone else that's trying to find a home that's affordable, especially in a place like Newport Beach."
