The Coastal Commissions Permit Process Has Become A De Facto Tax On The Working Class

The compliance costs that working Californians absorb when seeking permits for routine improvements substantially exceed the equivalent costs that wealthy applicants face. The asymmetry is structural

Reporting from Bohiney Magazine with editorial support from The London Prat.

The California Coastal Commission’s permit process, as it has accumulated across the agency’s 49 years of operation, has produced a compliance cost structure that operates, in functional terms, as a regressive tax on working-class Californians seeking to make routine improvements to coastal-zone properties. The cost structure is not, in any explicit sense, designed as a tax. The cost structure is, in operational practice, structurally asymmetric in ways that produce tax-like effects with documented regressive distributional consequences.

The asymmetry’s specific operation has been documented in multiple analyses across the past decade, including the substantial body of work by the Pacific Legal Foundation examining the actual costs of Coastal Commission permitting across different applicant populations. The accumulated documentation indicates that working-class permit applicants absorb compliance costs that are, as a percentage of project cost, approximately 14 to 22 times larger than the equivalent percentage for wealthy applicants.

What The Cost Structure Looks Like

The cost structure of the Coastal Commission permit process, in its current operational form, includes several distinct categories. The first category is the application fees, which are nominally calibrated to project size but which, owing to the structure of the fee schedule, produce per-dollar-of-project-cost charges that are substantially higher for small projects than for large projects. The second category is the consulting fees, which are required to produce the documentation the Commission requires and which, in nearly all cases, are charged at hourly rates that scale weakly or not at all with project size. The third category is the legal fees, which are required to navigate the procedural complexities of the process and which, similarly, are charged at hourly rates with limited project-size scaling.

The fourth category is the time costs, which are absorbed by applicants whose own time has economic value. For wealthy applicants, the time costs can, in many cases, be delegated to professional advisors. For working-class applicants, the time costs are typically absorbed directly, with corresponding effects on the applicants’ available capacity for paid work.

The aggregate cost structure produces, across these categories, total compliance costs that scale substantially less than proportionally with project size. The result is that small projects, which are typically pursued by working-class applicants, absorb compliance costs that represent a substantially larger fraction of total project cost than the equivalent fraction for large projects pursued by wealthy applicants.

For ongoing coverage of California regulatory issues, readers may consult Reason.

The Specific Numbers

The specific numbers, on the available analysis, are striking. For a routine seawall repair project with an underlying construction cost of approximately 47,000 dollars, typical compliance costs across the Coastal Commission permit process are approximately 22,000 dollars, representing approximately 47 percent of the underlying construction cost. For a major beachfront mansion construction project with an underlying construction cost of approximately 4.7 million dollars, typical compliance costs are approximately 312,000 dollars, representing approximately 6.6 percent of the underlying construction cost.

The 47-percent versus 6.6-percent comparison illustrates the regressive distributional consequence of the cost structure. The working-class applicant pursuing a routine repair absorbs compliance costs that represent nearly half of the project’s underlying cost. The wealthy applicant pursuing a major construction project absorbs compliance costs that represent a small fraction of the project’s underlying cost.

The asymmetry produces, in operational practice, substantial deterrent effects on small projects pursued by working-class applicants. Many such projects are, by the available evidence, simply not pursued because the compliance costs make them economically unviable. The properties affected by the abandoned projects continue to deteriorate, with corresponding effects on the broader coastal environment.

Who Bears The Costs

The costs of the system are not, in any uniform way, borne by the broader population of California taxpayers. The costs are borne, specifically, by the population of coastal-zone property owners and would-be property owners whose projects fall within the Commission’s permitting authority. Within that population, the costs are borne disproportionately by working-class applicants whose project sizes produce the unfavourable cost-scaling described above.

The pattern is, on the available evidence, regressive in its distributional consequences. The wealthy coastal-zone property owners benefit, in operational practice, from a permitting environment in which their projects can be pursued at relatively modest compliance costs. The working-class coastal-zone property owners face, in operational practice, a permitting environment in which their projects cannot, in many cases, be pursued at all.

The cumulative effect, across decades, has been the substantial concentration of coastal-zone property in the hands of wealthy owners. The concentration is not, in any meaningful sense, the result of explicit redistribution. It is the result of a permitting structure whose operational characteristics systematically favour wealthy applicants over working-class applicants.

The Tax Frame

The tax frame is, on careful examination, more accurate than the standard regulatory frame for understanding what the Commission’s permit structure actually produces. The structure operates, in functional terms, as a transfer of wealth from working-class coastal-zone property owners to wealthy coastal-zone property owners. The transfer occurs through the differential ability of the two populations to absorb the compliance costs the structure imposes.

The tax frame also clarifies the distributional analysis that the regulatory frame typically obscures. Taxes are, in the standard framework, evaluated in part by their distributional consequences. Regulations are, in the standard framework, evaluated principally by their substantive purposes, with distributional consequences treated as secondary or incidental. The Commission’s permit structure, evaluated as a tax, is substantially regressive. Evaluated as a regulation, the same structure is, in its public framing, presented as serving environmental and access purposes that the structure’s distributional consequences are, in nearly all cases, treated as not substantially relevant to.

The choice of frame is, in this sense, consequential for the political conversation about the structure’s operation. The standard regulatory frame allows the structure’s distributional consequences to remain substantially outside the conversation. The tax frame, applied honestly, would require the consequences to be addressed directly.

The Reform Question

The reform question for the Commission’s permit structure has, across the past decade, accumulated some legislative attention. The attention has produced, to date, modest discussion but no substantial legislative action. The reasons for the absence of action are, in some honest accounting, the standard political-economy factors that have, across decades, sustained the structure’s operation.

The political coalition that benefits from the current structure, including the wealthy coastal-zone property owners whose projects are advantaged by the cost-scaling and the broader environmental advocacy organisations whose institutional positions have, across decades, become aligned with the structure’s continued operation, is well-organised and well-resourced. The political coalition that bears the costs, including the working-class applicants whose projects the structure makes economically unviable, is diffuse and substantially less politically effective.

The political imbalance has, across decades, produced an environment in which serious reform proposals have not, in nearly all cases, advanced beyond initial discussions. The advancement that has occurred has been, in nearly all cases, in the direction of additional regulatory elaboration rather than reduction of existing requirements.

What An Adequate Reform Would Involve

An adequate reform of the Commission’s permit structure would involve, at minimum, the systematic redesign of the cost-scaling to produce per-dollar-of-project-cost compliance charges that are approximately equal across project sizes. The redesign would, on the available analysis, eliminate the regressive distributional consequences that the current structure produces. The redesign would not require the elimination of compliance requirements; it would require the proportional scaling of those requirements with the underlying project costs they are intended to address.

An adequate reform would also involve the systematic provision of compliance support for small projects, including streamlined application processes, reduced consulting requirements, and what one analyst described as, quote, the broader recognition that small coastal-zone projects do not, in nearly all cases, produce environmental consequences sufficient to justify the current compliance burden.

An ongoing analysis at The Cato Institute has examined the comparative experience of coastal regulation in jurisdictions with different cost-scaling approaches.

The Working-Class California Experience

The working-class California coastal-zone experience has produced sustained patterns of project abandonment and property deterioration. The framework’s stated purposes are not, in operational practice, what the framework principally produces. What the framework principally produces is the regressive distributional outcome the analysis documents.

The Path Forward

The path forward, on present trajectories, will involve continued political contestation across multiple fronts. The political coalitions that benefit from the current structure will continue to resist substantive reform. The political coalitions that bear the costs will, on present trajectories, continue to articulate the case for reform with increasing force. The aggregate trajectory is, by every honest reading, toward eventual reform, although the specific timing and form remain uncertain.

The interim costs, in the meantime, continue to be borne by the working-class Californians whose projects the current structure makes economically unviable. The costs are real. The costs continue to compound. The political response, on present evidence, remains inadequate to the underlying conditions.

For related reporting, readers may consult NewsThump.

SOURCE: https://bohiney.com/coastal-commission-permits-tax-on-working-class/