Tejon Ranch’s CEQA battle offers warning for new Solano city

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The investment firm Flannery Associates recently announced that over the past five years it had quietly spent over $800 million to acquire over 50,000 acres of rural land in east Solano County with the intention of building a new city. Less than 60 miles from San Francisco, this proposed city makes sense. But it will probably never happen given the history of a similar project north of Los Angeles.

To cope with an ongoing and severe housing shortage, California’s Legislature has passed laws that override local zoning laws to make it easier for developers to construct high-density “infill” projects within existing cities. What California’s policymakers have not done, however, is encourage the development of new cities on raw land.

One such developer is the Tejon Ranch Co., which has fought for over two decades to construct homes in Southern California. Their travails against environmentalists, while mostly behind them, offer a cautionary note to developers such as Flannery Associates.

Tejon Ranch is a unique property. At 270,000 acres, it is the largest privately owned parcel of land in the state, with a fascinating history.  Originally consisting of four Mexican land grants, they were purchased and consolidated in the 1865 by Edward Fitzgerald Beale, an explorer and surveyor who, among other things, was the first person to bring news of the discovery of gold in California to the east coast in 1848.

In 1912, Beale’s descendants sold the massive property to a group of Los Angeles businessmen and developers headed by Harry Chandler, who later became publisher of the Los Angeles Times. In 1936, this ownership group incorporated as the Tejon Ranch Co., which since 1999 has been listed on the New York Stock Exchange.

The company decided to develop its property after extensive negotiations with environmentalist organizations. In 2008, it agreed to leave 90 percent of the property undeveloped. Evidence of the agreement being consistent with environmentalists’ initial demands is documented in a 2006 letter sent to then Gov. Arnold Schwarzenegger and other prominent politicians.

The primary conditions of the compromise: “Conservation biologists have recommended that approximately 90 percent (245,000 acres) of the Tejon Ranch be preserved to ensure that ecosystem processes are maintained.”

According to a spokesperson for Tejon Ranch, the agreement was reached in 2008 after several years of scientific study to identify the appropriate parts of the ranch for development. But then something happened to nearly derail the entire project. One of the environmental groups that had been involved in the negotiations dropped out before the final agreement to preserve its right to sue the company under the California Environmental Quality Act.

More than any other single piece of state legislation, CEQA has stopped countless housing project applications from getting approved and built. Signed by then-Gov. Ronald Reagan in 1970 to ensure that state projects anticipated and mitigated “significant environmental impacts,” CEQA was a reasonable response to rapid growth across the state. But in 1972 judges determined that “state projects” meant any construction project that required government approval – and ever since, CEQA applies to all construction in California.

See Edward Ring’s Free Cities Center two-part series (part one and part two) on the proposed new Solano County city.

See Free Cities Center Director Steven Greenhut’s article on how that city can be a game-changer.

CEQA is now a bottleneck that chokes and kills the good more than the bad. More to the point, anyone can use CEQA to sue a developer. Consequently, the Center for Biological Diversity, decided to sue the Tejon Ranch Co. to stop its projects. While at times joined by other environmentalist groups, this organization has been a consistent opponent of development plans on the Tejon Ranch.

There are four distinct Tejon Ranch development projects. All of them have been under assault. In the south San Joaquin Valley, near the junction of Interstate 5 and the southernmost extremity of Highway 99 is the project that has progressed the furthest. Called “The Oasis on I-5,” it already has gas stations, EV chargers, hotels, restaurants and retail outlets.

Moving south along I-5, the next project is the Grapevine Master Planned Community, planned to include 12,000 homes and 5 million square feet of commercial space. This project was approved by Kern County in 2016, then sued by the Center for Biological Diversity in 2017. In the subsequent ruling, the judge required the company to make supplemental additions to its Environmental Impact Statement regarding traffic impact. That was done and approved in 2019, wherein the Center for Biological Diversity sued again. That lawsuit was dismissed by the court in 2021.

According to Tejon Ranch representatives, the Center for Biological Diversity has either sued directly or filed lawsuits against other entities that are part of their development process a dozen times. They sued the expansion of the Tejon Ranch Commerce Center and lost, then appealed and lost again at the appellate court.

The third project on the Tejon Ranch is Mountain Village, located in the mountains at the top of the pass navigated by I-5 to connect the San Joaquin Valley to Los Angeles. The project would include resort amenities up to 700 hotel rooms and a residential community of 3,450 homes. Currently litigation-free, the mountain village is fully approved and a final tract map has been approved by Kern County. But nothing compares to the company’s fourth and biggest project named “Centennial.” It is located on the southernmost section of the Tejon Ranch and inside Los Angeles County.

By 2019, the company had gotten its plans approved by the county, but was immediately hit with two CEQA lawsuits. In separate judgments in 2021, the court ruled against all counts brought in the Center for Biological Diversity’s case, and against all but two counts in the other case. The company agreed to mitigate the two issues, and in late 2021 the plaintiff in that case agreed to a negotiated settlement. But it wasn’t over.

The situation perfectly illustrates how CEQA lawsuits have created burdens on developers that are so expensive and time consuming that only those with deep pockets and the ability to endure years if not decades of delays can stay in the game.

Although the Center for Biological Diversity had lost its lawsuit, its filing included a statement that it agreed with the complaints in the other lawsuit. As a result, the group argues that it has the right to also negotiate a settlement agreement with the company, insofar as it didn’t agree with the terms of the settlement that the other plaintiff had negotiated. The case remains unresolved.

The Center for Biological Diversity, with reported revenue of $27 million in 2022, has been around for a long time. In 1999, the New Yorker had this to say about it: “What’s unusual about the center is not so much its agenda, which is shared by the rest of the so-called deep-ecology wing of the environmental movement, as its effectiveness.” The article quotes Robin Silver, who remains a principal officer at the center, as saying that to accomplish its goals, “we will have to inflict severe economic pain.”

As the Tejon Ranch projects slowly take shape in Southern California, Flannery Associates and their billionaire investors in Northern California should expect similar pain. Their dream of building a new city in Solano County may come true, but maybe not in their lifetimes. Meanwhile, residents of California who want an affordable home for their families have to wait, and wonder why.

Edward Ring is a co-founder of the California Policy Center and the author of “The Abundance Choice: Our Fight for More Water in California.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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