The California Environmental Quality Act (CEQA) is a 1970s law that requires a public agency proposing to undertake a project or approve a discretionary action to consider the potential environmental impacts of that action. The state's procedures for forming a new city are embodied in the Cortese-Knox-Hertzberg Act (CKH, Sections 56000 and following of the CA Government Code). Local Agency Formation Commisisons (LAFCOs) exist in each California County and have authority to control a municipal incorporation procedure.  Nothing in the CKH Act requires a LAFCO to invoke CEQA for an incorporation process, but it has become standard practice for LAFCOs to do so. And that has been a key reason why the formation of a new city is so costly and why the process is so cumbersome and time-consuming.

In January 2000, the state Commission on Local Governance for the 21st Century issued a report, "Growth Within Bounds", that suggested changes for the CKH Act. The Act was subsequently amended, but not every recommendation of the Commission was included. A recommendation that was ignored was the Commission's finding that a statutory CEQA exemption should be provided for a new incorporation. The Commission wrote that an act of incorporation constitutes only a political reorganization that did not commit an area to any changes in land use. Further, a Superior Court ruled in 2008 that Monterey County LAFCO abused its discretion by regarding the proposal to form a City of Carmel Valley as a "project" under CEQA and forcing the process to include a time-consuming and expensive Environmental Impact Report. Unfortunately, that case is not officially citable because the court's decision was not appealed.

Applying CEQA to a political reorganization process is pointless. The environment is not affected in any way merely because of a change in governance. Under state law a County's existing General Plan and implementing ordinances (that guide day-to-day land use and development) remain in effect when a new city is formed until the new city creates its own General Plan and implementing ordinances (roughly a three-year process), the creation of which requires application of CEQA. The Legislature should clarify that a municipal incorporation process is exempt from CEQA, as was recommended by the Commission on Local Governance for the 21st Century and as was validated by the 2008 court decision.