Anyone experienced with developing land realizes that the regulatory process one must complete for a given development is daunting, at once complicated and cumbersome and surely expensive.  I often tell landowners who want to become “developers” in order to capture more value in the price of their land, that it is not for the faint of heart or the risk averse–I’m usually proven right.

The most consistent regulatory challenge associated with developing land is regulatory inefficiency or regulatory “creep”.  It is not unusual that a given development application will require a review for possible stormwater or wetland impacts; developers accept this and realize there are costs associated with this process.  However, what frustrates them to no end is the multiple layers of government that are involved with even the most routine development application.  In the case of stormwater and wetlands, an application likely will have to be reviewed by multiple agencies with overlapping and maybe even conflicting jurisdictions, such as the U.S. Army Corps of Engineers (USACE), local watershed districts, department of natural resources and pollution control agency, as well as the local jurisdiction in which the development is proposed.  It is typical for each agency to have a permit process with their own requirements for submission and review.  In fairness, they do try to coordinate their review but some are more cooperative than others.  What is certain is that each will have its own technical professionals involved, often aided by private consultants; moreover, there is no prescribed timeline to reach a conclusion so any hold-out delays the process for everyone.  And, of course, no application is ever perfect; invariably someone will want additional details or alternative plans created and submitted—another source of delay and added cost.  Developers frequently lose the entire building season due to simple delays even if they made a timely submission for review.  The crazy thing is that most developers would gladly incur the cost of the redundant process if they had an assurance that the process itself would be completed in a predictable and reliable manner.  Instead, they get the cost and frustration of an inefficient process without assurance of anything.

I’ve been working with a client for several years on a wetland permit for expansion of a mining operation.  In 2019, after extensive back and forth with the state and local agencies involved with their permit review, the company thought they were nearly finished based on statements from the state’s lead permit reviewer.  My client had been expecting its permit to be approved by the end of that year but instead, out of nowhere, they learned that the permit reviewer had retired at the end of the year; instead of receiving the promised permit, his replacement announced summarily that not only would my client not get the expected permit but that the state agency was unilaterally giving itself 6 months more to review the permit.  Essentially, they were starting over with no explanation given.  So here we are in early 2021 and still we have no permit; instead the process continues to drag on and more recently has gone backward.  More on that below.  The point is that the applicant is held hostage to a process that is time-consuming, very expensive and offers very limited due process.  It is not for the faint of heart.

Closely connected to the cost of delay is the risk of a shifting regulatory environment.  Developers accept their responsibility to protect wetlands, erodible slopes and water bodies.  Any setbacks or restrictions on the use of their land is a cost that must be borne by the balance of the development.  It is not unusual to see a third or more of a development tract placed off-limits by setbacks, open space requirements, dedications or sensitive environmental conditions.  Again, experienced developers recognize this as a cost of doing business.  They build their project proformas around these assumed costs.  You can imagine that it makes a developer very unhappy when a regulator moves the goal line while an application is being reviewed.

I’ve seen state and local agencies change their position on setbacks, density or land preservation requirements on the fly with no regard to the added cost to the applicant or whether they will get a demonstrably better regulatory result in the end.  This frequently happens when a project has generated controversy; for elected officials the easiest thing for them to do, short of an outright denial, is to impose additional conditions on a development to appease angry objectors.  If a 25-foot setback is good, a 50-foot setback must be a lot better.  The unfortunate truth is that the regulatory bodies have so much discretion in these areas that challenging them is often more time-consuming and expensive for the developer than actually achieving the desired outcome; the pragmatic response is to accept the added conditions and cost, if possible, and move on with an approval.  The cost implications are not the regulator’s concern; the developer, on the other hand, needs to recalculate its proforma to absorb the loss of additional usable area and hope the project remains viable.  The development business is not for the risk-averse.

Back to the mining permit; after several years of review, the company recently received a written determination by the state agency confirming a new restriction on their property: no prior notice, no prior input from the company.  This sort of regulatory creep is unfair and essentially unchecked short of a permit applicant’s willingness and ability to push back.  In most cases the risk of challenging, not to mention the cost of delay, often forces the permit applicant to swallow their pride along with the newly imposed condition in order to simply be done.

Experienced developers try to complete their due diligence on their development projects in advance of initiating the public review process.  They understand that once they commit to a site and have incurred the cost of tying up the property and preparing the necessary applications, there is great risk in the public process.  One would wish that the process itself would provide more confidence in the anticipated outcome.  Unfortunately, the state and local regulatory bodies control the process.  This means they control not only the clock but also the rulebook itself.  It’s not for the faint of heart or the risk averse.

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