Development projects suddenly in limbo as Fresno scrambles in wake of court ruling

Ten years ago, the City of Fresno approved a new General Plan in the teeth of the Great Recession. The decision over where to build 135,000 homes came at a turning point for the city. With home-building rates dropping to the lowest levels in decades and the city on the verge of bankruptcy, hard times could have been an opportunity to chart a new course for the city. 

Instead, the city’s 2014 General Plan resulted in the same old-school approach: two homes of sprawl for every house of infill – the same ratio used for the past half-century, according to an Urban Institute report this spring. 

In 2021, as new environmental regulations made charting this course more difficult, the city cut developers a break. The Fresno City Council exempted developers from completely addressing the traffic, air quality and water impacts of sprawl, arguing that these new state requirements didn’t apply to them because the priorities of growth outweighed public health.

However, a court ruling handed down Aug. 6 said that the city could not simply opt out of these requirements – stalling more than 20 projects and leaving most of the city without a legitimate environmental impact report, according to City Manager Georgeanne White.

“Anything that relies on a negative declaration would be at risk,” said Councilmember Miguel Arias.

The ruling puts as many as hundreds of projects in nearly every corner of the city – outside of downtown and the city’s west area specific plan – in development quicksand, three sources with close knowledge of the city’s environmental review process told Fresnoland. They were granted anonymity because they were not authorized by their employers to speak publicly about the situation.

With the court ruling, many projects could face months or years in delays and tens or hundreds of thousands of dollars in new costs for a custom-made environmental review, they explained.

The city has historically allowed developers to streamline approvals by relying on the citywide environmental impact report to assess potential impacts rather than financing their own project-specific environmental impact reports. This shortcut is now off the table due to the court ruling. 

Unless a project is exempted from environmental review under state criteria, typically for small infill projects, many projects could simply get stuck. The city could decide to move forward without additional environmental review on some larger projects if they felt the risk of litigation was low, the sources explained.

Fresno court ruling exposes vulnerability in city’s housing strategy

The court’s decision highlights the risks and costs of Fresno’s long-standing approach of taking shortcuts when it comes to assessing sprawl’s impacts. 

The City Council “unjustifiably” concluded that developers couldn’t mitigate their traffic impacts, the California’s Fifth District Court of Appeal found, improperly allowing the industry to defer solutions to air quality problems. City planners also failed to demonstrate how the General Plan would align with California’s ambitious targets for combating climate change, the ruling concluded.

Fresno officials relied on a faulty argument, the court found, to justify their General Plan’s compatibility with state climate targets. Rather than undertaking a rigorous, case-specific analysis, the city reasoned that if California as a whole were to meet its climate change goals, Fresno’s new projects would automatically be in compliance. This was an incorrect baseline to use for the city’s overall climate change goals, the court ruled.

“Our hope is that the city will try to write a better plan that actually meets the needs of community,” said Ivanka Saunders, a policy manager at Leadership Counsel for Accountability and Justice, who provided legal support for community residents who filed the lawsuit. “Communities shouldn’t have to fight this hard to push them in that direction.”

The recent court decision has thrown Fresno’s already shaky development strategy into disarray, raising serious questions about how the city will tackle its two defining crises: the shortage of affordable housing and climate change. City officials have yet to provide clear answers. 

“We are evaluating the court’s ruling with our counsel to determine next steps,” White, the city manager, told Fresnoland.

Since 2021, home construction rates in Fresno have fallen three straight years, according to US Census data. Developers are building fewer and fewer homes in each new area of town, an Urban Institute report found. The city’s plans for 45,000 homes in southeast Fresno, already beset by delays, had key parts of their environmental justification overturned by the court’s ruling. To make matters worse, the state’s housing agency is scrutinizing the city’s housing element, on the basis that the city lacked accountability for its previous housing policies.

As Fresno struggles to address the housing crisis, city officials have started utilizing harsher measures, such as criminalizing homeless encampments. The court ruling is likely to exacerbate these issues, forcing the city to confront the shortcomings of its current approach to development, said Dillon Savory, the executive director of the Central Labor Council, which represents 50 unions and 105,000 workers in the Fresno area.

He questioned whether the city should write a new General Plan – something city officials have resisted in the past few months.

“We now know that the formula and the math that the developers have been relying on for the last decade is wrong,” he said. “We’re one of the worst-planned cities in the United States.”

Next steps

The court ruling also throws a double-barrel blast to the city’s major residential and industrial hopes. 

A plan in the Southeast Development Area (SEDA) to build 45,000 homes, as well as south central Fresno, where the city aims to build 40 million square feet of warehouse space, had their key environmental justifications overturned.

City officials estimate that the 9,000-acre SEDA project will increase Fresno’s annual carbon emissions by 500,000 tons, effectively wiping out the city’s progress on climate goals for the next two decades. 

City planners said last August they hoped to defer these problems until the developers built it, relying on a so-called Greenhouse Gas Checklist. That checklist was thrown out as too weak in the court ruling. 

City officials must now go back to the drawing board to address these deficiencies if they hope to keep the massive SEDA project alive. But with a judge and a team of four environmental lawyers – rather than the Fresno City Council – scrutinizing the legality of future plans, the revised climate change plans will face a very different set of tests than last time.

Standard accounting measures could drive up the costs of pollution for developers. For example, using the Biden administration’s estimate, the costs of SEDA’s carbon emissions could come with a hefty $25.5 million annual price tag. The project is also estimated, according to city documents, to triple air pollution levels in southeast Fresno.

Faced with the daunting costs of mitigating sprawl, the court ruling may force Fresno to fundamentally rethink its growth strategy. As Fresno revises its regulations to ensure that developers bear a greater cost of sprawl, it is an open question whether the real estate industry finds that infill becomes a more financially attractive option. 

Darren Rose, a real estate industry leader and the current CEO of the Fresno-Madera Building Industries Association, could not be reached for comment. 

Savory, who has previously called on the city to scrap its current General Plan, sees the court ruling as an opportunity for the city to shift the balance toward infill. He called for flipping the plan’s 2:1 sprawl-to-infill ratio, to something like four houses in infill areas for every house of sprawl. 

“The truth of the matter is if we continue up to sprawl at the 2:1 level, the city’s going to not be able to sustain itself,” he said. 

“We don’t really have an economic model. The economic model of the city is to let everybody live here for cheaper than other parts of California.”