What is Urban Decay? (And Why the Answer Matters)
In many California cities, developers have to deal with a unique type of environmental analysis for a proposed project. Under the California Environmental Quality Act ("CEQA"), cities have begun requiring developers of large-format retail stores (aka: "big box stores") to prepare what is called an "urban decay study." The study is meant to identify possible environmental impacts that result from closing businesses over a period of time. The courts have largely upheld the legality of the urban decay study, so I’m not writing to discuss whether or not I think they are legal. However, despite their legality, urban decay requirements completely lack specificity, an omission that ultimately weakens the purpose of urban decay studies and opens them up to ever-present CEQA abuse.
What is an Urban Decay Study?
An urban decay study evaluates the extent to which the project would have competitive impacts on existing retail stores in the area and consequently cause store closures and potentially result in "urban decay." Urban decay is not defined by CEQA but it largely follows a common narrative, resulting from two California court cases.
The first case, Bakersfield Citizens for Local Control v. City of Bakersfield, established what would largely be considered "urban decay." Urban decay is not the closing of a specific or even multiple stores, and CEQA does not trigger an automatic presumption of urban decay. Normally, this type of economic effect caused by a project is not subject to review under CEQA (Guidelines, §§ 15126.2, 15064, (d)(3)). However, where the court agreed with Citizens for Local Control is that urban decay becomes an environmental impact is when the closing of stores can lead to the economic conditions that contribute to an external manifestation of urban decay. This is a bureaucratic way of saying, if a project causes store closures followed by physical deterioration of the structure, abandoned buildings, boarded doors and windows, unauthorized use of properties, graffiti, dumping, dead vegetation, litter, extensive weed growth, and homeless encampments, then it has caused urban decay. When these conditions are introduced as potential impacts, they must be studied under CEQA and included in a project’s environmental impact report (“EIR”). In the Bakersfield case, the project’s EIR did not address these potential impacts and, therefore, the court invalidated the project’s EIR.
The second case, Anderson First Coalition v. City of Anderson, can be credited for defining how a project should address these potential impacts, thus creating the model format for urban decay studies. Project opponents again argued that the project would cause urban decay, relying on their own study as evidence. However, the project's EIR, unlike the one in the Bakersfield case, fully addressed the claims and concluded that the impacts would be less than significant by relying on an economic analysis of the project’s impacts on nearby businesses. In other words, the project had conducted an urban decay study to prove that the project would not result in urban decay.
The law is relatively clear that a store closing is not urban decay in of and itself, and simply providing evidence of social or economic impacts that do not contribute to, or are not caused by, physical impacts on the environment does not constitute substantial evidence. (Guidelines, § 15384(a)). I’ve attended many community meetings where large retailers have to defend against a small business owner who claims their business will close as the result of a nearby big box store. While this may be true in an economic sense (market competition), project supporters are often put in the unenviable position of having to argue that, while concern is understandable, it is not the job of a single project to protect all business from competition. However, this murky line between environmental and socio-economic effects weakens the entire point of the urban decay study, leaving it vulnerable to be used as a tool of groups with politically and/or philosophically motivated agendas that have nothing to do with either the environment or sound urban planning.
If you were like me, one of the first questions you have about urban decay studies is if there is a size threshold. As I pointed out, market competition is a fundamental aspect of a capitalist market. Businesses enter, compete, and exit the market regularly, which raises the question about when an urban decay study should be required for a project. For example, if there are many nail salons along a street and another opens up, why would that nail salon not be required to prepare an urban decay study to prove that it would not negatively impact the adjoining nail salons?
As CEQA does not define what constitutes urban decay, it also does not define any threshold that would require an urban decay study. Though most legal cases regarding urban decay focus on large-format or big-box stores, there is also no case law to identify any quantitative threshold. Therefore, any project under CEQA could theoretically be subject to the urban decay study requirement, yet only large-format stores have been required to prepare them thus far. While conceptually it may make sense (which is an argument I will get to later), without some guidance or threshold, the requirement comes off as arbitrary and/or capricious. Why should a Walmart or Target be the only stores required to prepare an urban decay study if other stores, such as a Trader Joe's, are exempt from them? In the case of Trader Joe's, the store offers low cost groceries at a location that is very popular with consumers. It would not be unreasonable to expect that a Trader Joe's could successfully compete with mom-and-pop grocery stores in a neighborhood and consequently cause their closure.
What you’re selling matters
Using the Trader Joe's example is ideal because it presents several other discussion points. Unlike a Walmart or a Target, a Trader Joe's is simply a grocery store. Ignoring their business model of opening low cost grocery stores where people can easily afford to pay more, the market impact of Trader Joe's is specific only to grocery stores, which likely represents a smaller percentage of any given neighborhood’s commercial real estate market. A Walmart or Target sell a wide range of retail goods and, in the case of a Super Target or Walmart Supercenter, also sell grocery items, thus making their singular presence a larger impact on the market.
While this may be true, it again represents a shortcoming of the current urban decay requirement. Without specificity, singling out large stores is again arbitrary because it denies the fact that the existence of any chain store, no matter how "beloved" it may be, can cause real economic impact that has the potential to result in what we loosely consider urban decay. One must ask: If a Trader Joe's with low cost food and alcohol opened up in an underserved neighborhood where they could easily out-compete any neighboring like business, would they be required to produce an urban decay study?
Politics of urban decay
Like much of CEQA, urban decay is easily used as a political tool to stop projects from companies the public, or other competing companies, simply don’t like. While everyone is entitled to their opinion on pretty much anything, such freedom does not (or should not) entitle use of a law intended to protect the environment for individual political or ideological agendas (which is an issue with CEQA well beyond the matter of urban decay). And this goes both ways.
Unlike an environmental group opposing new oil drilling, which at first glance may seem both political and ideologically motivated (it is), there is substantial scientific evidence documenting the impacts oil drilling has on the environment. Therefore, those projects are appropriately subject to strict requirements under CEQA. Yet as I’ve pointed out, urban decay is vague and undefined. There is no consensus threshold the same way that greenhouse gas emissions are quantified. This means that anyone can challenge a project, claiming they cause urban decay, forcing the project developer to spend extensive time and resources on preparing a full EIR and urban decay study.
From the opposite end, urban decay studies are prepared by project developers or, more specifically, by the consultants they hire. I cannot think of any urban decay study that has been prepared, or even challenged, that admitted to causing urban decay. Whether you believe that is because they are faking it or not is really beside the point. There is little incentive for them to move forward with a project that would admit to causing urban decay. Such an admission would require additional and costly mitigation measures. Further, without specificity, consultants are free to use whatever methodology they see fit in an attempt to quantify and define urban decay for their projects. It is therefore not a large leap to see why there is no urban decay study that admits to causing urban decay. And if that’s the case, it makes the entire exercise of producing an urban decay study both expensive and pointless.
Returning to my question of the previous section, if you believe a Trader Joe's should not have to produce an urban decay study, that’s fine, but there should be a clear indication and reason that differentiates Trader Joe's from Walmart or Target beyond the conceptual. Simply being America's favorite grocery store should not exempt them from exploring potential environmental consequences of their economic and social impacts unless there is a clearly defined threshold.
While urban decay is a reasonable concern of cities, it is nevertheless a façade for the real concern: economic impacts which, of course, are not covered under CEQA. I don’t say this to make an accusation so much as a request an honest admission of priorities. Concerning yourself with the health of your neighborhood or city economy is not only justified but incredibly prudent. However, using an environmental mechanism to achieve the goal of preserving local business is disingenuous and weakens CEQA overall. There are much stronger local alternatives to achieve this socio-economic goal.
There are alternatives to onerous urban decay studies, including anti-blight laws and so-called "big box ordinances."
While I still have issues with big-box ordinances, especially city-wide big-box ordinances (which is a topic on its own for another post), I am not philosophically opposed to their limited use. Relatively new in California, these ordinances offer a more well-defined alternative to the ambiguity of a urban decay study under CEQA. The ordinances require an applicant to prepare an economic analysis documenting the socio-economic impact of their project on local business if the project meets or exceeds certain requirements and thresholds. Though each city that creates them may define different thresholds, most big-box ordinances in California, for example, set a square footage threshold of 100,000 square feet of floor area before this separate analysis is necessary. Also, the project usually has to devote more than 10 percent of their sales floor area to the sale of non-taxable goods (i.e., grocery items).
For example, Los Angeles requires applicants to identify effects such as: would demolition of housing be involved, would the store result in physical displacement of any business, will the store provide low cost high quality goods than currently exists, would it displace jobs, any blight impacts, what kind of fiscal impact would it have on the city, and any mitigation measures that are available. Though not a complete list, the previous provides a similar example to the requirements of an urban decay study but appropriately focuses on economic impacts. The specificity of the ordinance addresses questions about arbitrariness because it applies to any project that meets its definition, regardless of personal or ideological opinion.
Additionally, many cities already have mechanisms in place to deal with urban decay. For example, San Jose and San Francisco have ordinances that require property owners to maintain vacant buildings, residential or commercial, so they do not result in blight, regardless of the existence of any competitive store. If such rules are in place to prevent economic conditions that could lead to urban decay, then only unaddressed economic impacts remain, and economic impacts are not within the scope of CEQA.
Again, we can say that economic impacts are worthy of note, but CEQA is not the appropriate vessel.
Ultimately, urban decay studies are legal and they aren't going to go away anytime soon. Nevertheless, without a degree of specificity, urban decay studies will always fall short of their intended goal. They will continue to be used as a political tool to unnecessarily drive up costs and delay or stop projects for reasons unrelated to protecting the environment.