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AB 98, the bill that places strict restrictions on where warehouse-distribution projects can be built has been signed into law, but some of the bill’s opponents are determined to get it changed anyway.
The law, which Gov. Gavin Newsom signed Sept. 29, is scheduled to take effect in 2026. From the time it was introduced, it drew stiff opposition from the state’s business community, which argued that the placement of logistics operations should be decided by cities and counties, not the state legislature in Sacramento.
“AB 98 is a massive unfunded mandate that will harm our cities, stifle job growth, and threaten the economic lifeblood of communities throughout California,” said Daniel Parra, presided of the League of California Cities, in a statement released shortly after Newsom signed the bill.
“We are committed to finding a fix to this harmful bill in next year’s legislative session.”
Parra was referring to what lawmakers call clean-up legislation, in which a bill that has already been signed into law is modified, or even rewritten, if enough legislators agree that a bill/law is flawed enough to merit such treatment.
Such an action is rare, but AB 98 is an instance in which clean-up legislation could be justified, according to Melissa Sparks-Kranz, the league’s environmental quality lobbyist.
“AB 98 is an 11th hour piece of legislation,” Sparks-Kranz said during a telephone interview. “Cities were left out of the discussion. A lot of the people who were involved agreed that the bill has flaws, and that it needs to be fixed.”
In fact, one of the major allegations leveled by the bill’s opponents was how quickly it was pushed through both legislatures with little or no debate in either the Senate or the Assembly according to Sparks-Kranz.
It then landed on Newsom’s desk, where he signed it on the last day of the year he was allowed to sign or veto legislation. Critics charged that bill had not been property vetted either the state Senate or Assembly.
The result is a law that, despite its potential impact on cities, has very little city input.
“We need to sit down with the legislature, because this is a city issue and the city voices were not heard,” Sparks-Kranz said. “The bill was passed with only a few days left in the legislative session, so there was no chance to offer any amendments.
“That is not transparent government.”
Because it was hastily written, it’s not clear if the law applies to other large industrial projects or only to warehouse-distribution operations.
“They need to clarify whether or not you have to comply with the law if you aren’t building a warehouse-distribution center,” Spark-Kranz said. “The language is not clear. In terms of clean-up legislation, that would be a good place to start.”
What the new law does make clear is that, starting on Jan. 1, 2026, cities and counties will not be allowed to approve new or expanded distribution centers unless those proposed projects meet certain requirements.
Those requirements include mandating that all warehouse-distribution centers be built on major thoroughfares, or local roads that are used mostly for commercial purposes. Also, those sites must also be several hundred feet away from houses, schools and hospitals, which it calls “sensitive” sites.
If a developer removes a house to make room for a warehouse-distribution center, the law requires that the developer build two units of affordable housing for each unit that was taken away. The developer is also required to pay displaced tenants the equivalent up to 12 months rent.
AB 98 did attract some support.
In a joint statement released the day Newsom approved the legislation, the California Chamber of Commerce, as well as the state’s retailers’, apartment and restaurant associations called the law “a sensible path forward” that will protect individuals and communities while allowing businesses to remain profitable.
“While any (law) of this magnitude is expected to have future clean-up, the (law) will help maintain California’s position as a leader in economic innovation and environmental stewardship,” the statement reads.
But the Los Angeles Area Chamber of Commerce, the California Business Roundtable and the California Business Properties Association joined the League of California Cities in calling for immediate fixes to the new law when the state legislature reconvenes in January.
If that doesn’t happen, the Inland Empire – which is home to more than 20 million square feet of industrial space – could take a huge hit economically, said Paul Granillo, president and chief executive officer of Inland Empire Economic Partnership in Rancho Cucamonga.
“AB 98 was so bad the authors of the bill admitted it has to be fixed,” Granillo said “If it’s not fixed, the ramifications to the Inland Empire will be severe. It was a ‘smoke-filled room’ deal that was pushed through the state legislature at the last minute, and all it will do is push more projects into Arizona and Nevada.”
Clean-up legislation is the best way to fix AB 98, but it’s not the only option, according to Granillo.
“If that doesn’t work there’s always litigation,” Granillo said. “But either way it won’t be easy to fix, because it has so many flaws.”
Maybe the biggest flaw is treating a local issue as a statewide issue, said Jay Prag, professor of economics at the Drucker School of Management at Claremont Graduate University.
“It seems like a heavy-handed approach to what is a local issue,” Prag said. “I understand some cities want to limit logistics development, but there are also areas, particularly rural communities, that really need it. They need those jobs.”
Prag is skeptical of any significant changes being made to AB 98.
“I don’t know how you fight it,” Prag said. “It doesn’t start until 2026, so that does allow for some lead time. I can see some projects getting speeded up so they get in under the wire, before the law takes effect.”
Having a year to work on changes may help, but it doesn’t assure anything.
“There will be new issues, and probably more than 30 new legislators, when the next legislative session starts,” Sparks-Kranz said. “So there’s no guarantee anything will happen.”
