Author Archives: Laura Harris

Fourth District Upholds City of Tustin’s Reliance on CEQA’s Infill Exemption for a Costco Gas Station and Parking Lot

In Protect Tustin Ranch v. City of Tustin (2021) 70 Cal.App.5th 951, Division Three of the Fourth District Court of Appeal upheld the City of Tustin’s reliance on CEQAs’ categorical exemption for infill projects, holding that the petitioner failed to show that the project did not meet the requirements for the exemption or that an exception to the exemption applied.

Background

This case involves a proposal by Costco Wholesale Corporation to build a gas station next to an existing Costco warehouse in the Tustin Ranch area of the City of Tustin. The project site is already developed with a shopping center and is surrounded by commercial uses, as well as some residential development.

The project includes two components: (1) a 16-pump gas station with a canopy and landscaping, and (2) the demolition of an existing Goodyear Tire Center and parking lot, which would be replaced with a new 56-stall parking lot.

The planning commission voted to approve the project and adopted a resolution finding that the project is categorically exempt from CEQA under CEQA Guidelines section 15332 (Class 32, Infill Development Projects).

Members of the public appealed the planning commission’s decision to the city council. The staff report for the city council hearing explained why staff believed the project fell within the infill exemption. It also explained that, although Costco’s initial application indicated that the project site is 11.97 acres, the project site (i.e., the portion of the site to be developed) is actually only 2.38 acres.

The city council agreed with the planning commission and staff that the project is exempt under the infill exemption. The city council adopted a resolution finding the project categorically exempt and approved the project. In doing so, the city council expressly found that the project did not present any unusual circumstances as compared to other projects that would qualify for the exemption.

The trial court upheld the city’s determination that the project is categorically exempt from CEQA review. Petitioner appealed.

The Court of Appeal’s Decision

To qualify for the Class 32 infill exemption, a project must meet five criteria: (1) the project must be consistent with the general plan and with the zoning code, including all applicable general plan policies and zoning regulations; (2) the project must be located within city limits on a site that is no larger than five acres and is surrounded by urban uses; (3) the site must have no value as habitat for special-status species; (4) approval of the project must not cause any significant impacts related to air quality, noise, traffic, or water quality, and (5) the site must be adequately served by utilities and public services. (CEQA Guidelines, § 15332.)

Petitioner challenged the city’s reliance on the infill exemption only with respect to the size of the project, arguing that the project does not qualify for the exemption because the project site is larger than five acres. The court explained that the city’s conclusion that the project site is five acres or less is a factual determination to which the court applies the deferential “substantial evidence” standard of review. Under this standard, the court does not weigh conflicting evidence. Rather, the court must uphold the agency’s determination if it is supported by any substantial evidence in the record as a whole. In the case before it, explained the court, multiple documents in the administrative record confirmed that the size of the project site is 2.38 acres. For instance, Costco’s revised development application states that the “area of work” would be 2.38 acres, inclusive of the new gas station and parking at the demolished Goodyear site. A water quality management plan and maps of the project also showed that the site is 2.38 acres.  Additionally, at the city council’s hearing on the project, city staff clarified that the total project site was calculated by adding together the acreages of both components of the project—1.74 acres for the gas station and 0.64 acres of new surface parking where the Goodyear center would be demolished. Thus, held the court, substantial evidence supports the city’s determination that the project fits within the requirements of the infill exemption.

The court next considered whether the “unusual circumstances” exception to the categorical exemption applies. CEQA Guidelines section 15300.2, subdivision (c), provides that “[a] categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” If a project meets the requirements of a categorical exemption, the burden is on the party challenging the exemption to produce evidence supporting an exception. The Supreme Court, in Berkeley Hillside Preservation v. City of Berkeley (2015) 60 Cal.4th 1086, explained that this showing may be made in two ways. First, the challenger may identify evidence that the project will have a significant environmental impact. Alternatively, the challenger may show that the project is unusual because its features distinguish it from others in the exempt class, and that there is a “reasonable possibility” that the project will result in a significant environmental impact due to that unusual circumstance. The substantial evidence standard applies to an agency’s determination that there are no unusual circumstances. But the less deferential “fair argument” standard applies to the question of whether there is a reasonable possibility that the unusual circumstances may cause a significant effect.

Petitioner argued that the unusual circumstances exception applied for three reasons. First, the project is located on a former Goodyear Tire Center where tires were installed and oil and other fluids were changed. Second, the proposed gasoline fueling station with 16 pumps is unusually large. And third, Costco proposed to re-route traffic during peak hours. The court summarily rejected these arguments, however, because petitioner had failed to explain why these features made the project unusual compared to other projects qualifying for the infill and exemption. In fact, evidence in the record showed that the project is similar to other Costco gas stations in California and is not unusually large—as evidenced by the fact that the project is less than five acres in size. The court went so far as to question whether the size of a project can be a characteristic that makes an otherwise exempt infill project unusual, since the infill exemption is expressly limited to projects less than five acres in size.

Petitioner further argued that the city’s reliance on the exemption was improper because the city should undertake studies to determine whether the project would contaminate soils. The court rejected this argument, however, explaining that unsupported assumptions and speculation are not enough to require the city to conduct CEQA review. By law, a categorically exempt project is deemed not to have potentially significant impacts unless the project’s administrative record shows that an exception to the exemption applies. Here, petitioner failed to show an exception applies. The fact that the project may have a significant environmental impact is not a sufficient basis to require CEQA review for a categorically exempt project.

Implications

This case highlights the standard of review that the courts will apply to an agency’s determination that a project is categorically exempt from CEQA. The burden of showing that the “unusual circumstances” exception applies is on the petitioner. In this case, the petitioner did not offer any concrete reasons or evidence showing that the project is distinct from other projects qualifying for the in-fill exemption. Therefore, the court upheld the city’s reliance on the exemption.

In a Procedurally-Dense Opinion, First District Court of Appeal Clarifies that Real Parties in CEQA Cases Are Not Always Indispensable Parties

In Save Berkeley’s Neighborhoods v. Regents of the University of California (2021) 70 Cal.App.5th 705, the First District Court of Appeal upheld a trial court’s determination that the developer and operator of a proposed campus expansion project were not indispensable parties to a lawsuit challenging the Regents of the University of California’s (Regent’s) approval of that project. In doing so, the court held that Assembly Bill No. 320 (AB 320) (2011–2012 Reg. Sess.)—which amended CEQA to require agencies to identify the recipients of project approvals on a project’s notice of determination (NOD) and to require CEQA petitioners to name and serve those persons or entities listed on the NOD—did not alter the court’s analysis of whether a party is “indispensable” to the lawsuit under Code of Civil Procedure section 389, subdivision (b) (CCP section 389(b)).

Background

The Regents approved a project to demolish an existing parking structure, construct student housing above a new parking structure, and develop a new academic building adjacent to the new residential building (project). The Regents prepared and certified a supplemental environmental impact report (SEIR) for the project. On May 17, 2019, the Regents filed an NOD, which identified American Campus Communities (ACC) and Collegiate Housing Foundation (CHF) as the parties undertaking the project. ACC is the developer for the project, and CHF is the ground lessee and borrower for the housing component of the project.

On June 13, 2019, petitioner Save Berkeley’s Neighborhoods filed a petition for writ of mandate seeking to vacate the Regents’ certification of the SEIR on the ground that the Regents violated CEQA. The petition named the Regents as a respondent, but did not name ACC or CHF as parties. Nor did petitioner serve ACC and CHF. On September 18, 2019, petitioner filed a first amended petition, which added ACC and CHF as real parties in interest. The amended petition acknowledged that ACC and CHF were listed as parties undertaking the project in the NOD, and thus were being named pursuant to Public Resources Code section 21167.6.5, subdivision (a), which requires the entities identified as recipients of project approvals on an NOD to be named as real parties in interest.

ACC and CHF filed demurrers to the first amended petition, asserting that petitioner failed to name them as parties within the applicable statute of limitations and that they are necessary and indispensable parties to the litigation, so the entire action should be dismissed. The trial court sustained the demurrers without leave to amend, but did not dismiss the lawsuit. The court held that ACC and CHF should have been named as real parties because they were listed on the NOD as the parties undertaking the project. Because petitioner had failed to amend its petition to name them as parties within 30 days after the Regents filed the NOD, petitioner’s challenge against ACC and CHF was time-barred under Public Resources Code section 21167. The court held, however, that the failure to timely name ACC and CHF as real parties did not justify dismissing the case because ACC and CHF were not indispensable parties under CCP 389(b).

ACC and CHF appealed, arguing that the trial court erred in concluding they were not indispensable parties. Petitioner filed a cross-appeal, arguing that the trial court erred in applying CEQA’s 30-day statute of limitations to the lawsuit because, according to petitioner, the Regents’ NOD for the project – the filing of which triggered the 30-day statute of limitations – was defective. The Court of Appeal affirmed the trial court’s order sustaining the demurrer.

Discussion

Appealability

As a threshold matter, the appellate court considered whether the trial court’s order sustaining the demurrer was appealable. Petitioner argued that it was not because the appeal arose from an interlocutory (non-final) order and thus violated the “one final judgment” rule. Furthermore, petitioner argued, the issue of whether AOC and CHF are indispensable parties remained in the underlying action because that issue was also raised by the Regents, who remained a party to the action, so the court should not consider that issue yet. The court rejected these arguments. The court explained that in actions involving multiple parties, an order fully disposing all of the issues as to one party is appealable, even if those same issues remain as to the other parties. Accordingly, the appeal was proper.

Necessary and Indispensable Parties

The court next considered whether the trial court erred in determining that CHF and ACC were not indispensable parties. If CHF and ACC were indispensable parties, the lawsuit must be dismissed in full. If they were not indispensable, then petitioner’s lawsuit against the Regents could move forward. The Court of Appeal agreed with the trial court that CHF and ACC were not indispensable parties.

Assembly Bill 320 Did Not Alter a Court’s Analysis of Whether a Real Party is “Indispensable”

CEQA currently requires petitioners to name, as a real party in interest, any person or entity identified on an NOD as a recipient of the project’s approval. Prior to 2012, however, CEQA did not require the recipients of the project approvals to be identified on the NOD. CEQA did, however, require any recipient of a project approval to be named as a real party in interest. The phrase “any recipient of an approval” was not defined by the statute, leading to confusion in the courts.

In 2011, the Legislature passed AB 320, which amended CEQA to require agencies to identify the recipient of a project’s approval on the project’s NOD. (Pub. Resources Code, § 21108.) It also amended CEQA to require petitioners to name the entities identified on the NOD as real parties in interest and to serve the petition on those entities. (Pub. Resources Code, § 21167.6.5, subd. (a)). The AB 320 amendments also provided that the “failure to name potential persons, other than those real parties in interest described in Public Resources Code, § 21167.6.5, subdivision (a), is not a ground for dismissal pursuant to Section 389 of the Code of Civil Procedure.” (Pub. Resources Code, § 21167.6.5, subd. (d).)

ACC and CHF argued that AB 320 was intended to provide “finality and certainty” as to who must be joined in a CEQA action and, therefore, CCP 389(b), which provides an equitable balancing test for determining who constitutes an indispensable party, does not apply. The court rejected this argument, holding that the AB 320 did not alter judicial analysis of whether a party is indispensable.

ACC and CHF argued that the express language of Public Resources Code section 21167.6.5, as amended by AB 320, demonstrates that CCP 389(b) does not apply. Specially, subdivision (d) of that statute states: “Failure to name potential persons, other than those real parties in interests described in subdivision (a), is not grounds for dismissal pursuant to Section 389 of the Code of Civil Procedure.” (Italics added.) The court disagreed that this language indicates that CCP 389(b)’s equitable balancing test does not apply when the petition fails to name a real party. As the court explained, the statute does not explicitly state that CCP 389(b) cannot be applied in CEQA actions in which the real party has not been properly named and served. Rather, that statute only suggests that the failure to name a real party in interest may be grounds for dismissal, depending on the equitable factors set forth in CCP 389(b).

Turning to the Legislative intent, the court found that in enacting AB 320, the Legislature did not intend to prevent application of CCP 389(b). Rather, the bill was only meant to clarify who constitutes a real party in interest, as there had been confusion on that issue in the courts. Moreover, AB 320’s Legislative history suggests that rather than intending to limit CEQA actions, AB 320 was intended to “prevent the dismissal of important and meritorious CEQA cases.” Applying a blanket rule that the failure to timely name a real party in interest constitutes a ground for mandatory dismissal of a CEQA case would frustrate that intent.

Application of CCP 389(b)’s Equitable Factors

The court next considered whether the trial court erred in holding that ACC and HCF were not indispensable parties. Under CCP 389(b), if a necessary party cannot be joined, “the court shall determine whether in equity and good conscious the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable. The factors to be considered by the court include: (1) to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person’s absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.” (Code Civ. Proc., § 389, subd. (b).)

Applying these factors, the trial court held that ACC and CHF were not indispensable parties. Among other things, ACC and CHF’s interests were closely aligned to that of Regents because ACC and CHF were undertaking the project for the Regents’ own use and benefit. Moreover, petitioner would have no way of challenging the SEIR if the case was dismissed. On the other hand, ACC and CHF were parties in a related case challenging the same SEIR and were thus unlikely to be harmed by a settlement.

On appeal, ACC and CHF argued that they had fundamentally different interests in the project than the Regents. The Regents’ interest was to add housing and academic space to the campus, whereas ACC and CHF’s interest was to develop and operate the project. The court disagreed, explaining that the Regents, like ACC and CHF, had a strong interest in moving forward with the project; the fact that the Regents might have different motivations for doing so was immaterial. Further, contrary to ACC and CHF’s assertion, the Regents had a strong economic interest in the project because the Regents would manage and operate the new parking structure and the new academic building and the Regents would regain ownerships of the project once the project’s debt was repaid. ACC and CHF had failed to cite any evidence that they had unique financial interests or would be more harmed by an adverse judgment than the Regents. Accordingly, the trial court properly concluded that ACC and CHF were not indispensable parties.

Petitioner’s Cross Appeal – Did the Trial Court Err in Applying CEQA’s 30-Day Statute of Limitations?

Turning to the cross appeal, the court held that the trial court properly applied CEQA’s 30-day statute of limitations to the first amended petition. Petitioner argued that the statute of limitations should not apply because the Regents’ NOD for the project failed to accurately describe the project. In particular, the NOD did not explain that the project would result in an increase in student enrollment. The court disagreed that such information was required, holding that an increase in student enrollment was not a material component of the project. To the contrary, the NOD and SEIR indicated that the project was intended to accommodate the existing student body and planned growth, not necessarily to increase enrollment. Although it is possible that the project could result in an increase in enrollment, the record did not suggest that increasing enrollment was a component of project. Therefore, the trial court correctly held that the Regents’ filing of the NOD triggered CEQA’s 30-day statute of limitations.

Implications

The Court of Appeal was unwilling to interpret AB 320’s amendments to CEQA as modifying judicial analysis of whether a party is indispensable in a CEQA case. Although Public Resources Code 21167.6.5, as amended, could be interpreted as implying that the failure to name a real party in interest is a ground for dismissal under CCP 389(b), as the court noted, the statute does not explicitly require such a result. Thus, where a CEQA petitioner fails to name all parties listed as approval recipients on an NOD (or a notice of exemption (NOE)), case law decided under the former statute is still relevant to the question of whether a party is indispensable. The case also clarifies that although a project might result in changes to the existing baseline (e.g., an increase in student enrollment), that change need not be described as a component of the proposed project in the NOD or NOE.

First District Holds City of San Mateo’s Denial of an Application for a Multifamily Building Violated California’s Housing Accountability Act

In a landmark decision, California Renters Legal Advocacy & Education Fund v. City of San Mateo (2021) 68 Cal.App.5th 820, the First District Court of Appeal held that the City of San Mateo violated the Housing Accountability Act (HAA) in denying a proposed multi-family housing project based on the city’s concerns that the project’s height and scale conflicted with the city’s design standards. The court held that because the city’s design standards are subjective, rather than objective, those standards could not serve as a basis to deny the application under the HAA. The court also upheld the HAA against challenges that it infringed upon the city’s and neighboring property owners’ rights under the California Constitution.

Background

Nearly 40 years ago, the Legislature passed the Housing Accountability Act (HAA), also known as the “Anti-NIMBY” law with the goal of “meaningfully and effectively curbing the capability of local governments to deny, reduce the density for, or render infeasible housing development projects.” (Gov. Code, § 65589.5, subd. (a)(2)(K).) The HAA provides that local governments may only deny an application to build housing if the proposed housing project does not comply with “objective” general plan, zoning, and design review standards. (Gov. Code, § 65589.5, subd. (j)(i).) In 2017, the Legislature added weight to this requirement by specifying that a housing development is deemed to comply with a municipality’s objective standards if “substantial evidence … would allow a reasonable person to conclude” that the project is consistent with those standards. (Gov. Code, § 65589.5, subd. (f)(4).)

In 2015, a developer applied to the City of San Mateo to build a ten-unit, multifamily residential building on a site surrounded by single-family residences. The site is designated for high-density multifamily residential in the city’s general plan and zoning code. The city’s planning staff concluded that the project was consistent with the city’s general plan and zoning code standards for multifamily dwellings and with the city’s design guidelines. Staff recommended the planning commission approve the project.

The application came before the planning commission in August, 2017. At the hearing, several city residents objected to the project, opining that it was too large for the surrounding single-family residential neighborhood. After continuing the hearing, the planning commission voted to deny the application, agreeing with neighboring residents that the building was out of scale with neighboring single-family homes. The commission directed staff to prepare findings that the project is inconsistent with the city’s design guidelines because it is not in scale and not in harmony with the character of the neighborhood and that the building is too tall and bulky for the site. More specifically, the commission observed that there is a two-story differential between the project and adjacent single-family dwellings, which is inconsistent with the requirement in the design guidelines that there be a “transition or step in height” between the buildings.

At its next meeting, the planning commission adopted the proposed findings in full and voted to deny the project. The plaintiffs, a group of housing advocates, appealed to the city council. The city council upheld the planning commission’s decision. The plaintiffs then filed a lawsuit seeking a writ of administrative mandamus on the ground that the city’s denial of the project violated the HAA.

The trial court denied the petition. The trial court held the city’s design guidelines were objective for the purposes of the HAA and that the city properly denied the application because the project was inconsistent with the guidelines. The court also denied the petition on the ground that the HAA conflicted with the California Constitution. In particular, the court held that to the extent the HAA conflicted with otherwise enforceable provisions of the city’s municipal code regarding housing development, the HAA is unenforceable as an intrusion into the city’s municipal affairs under the “home rule” doctrine of the California Constitution. (Cal. Const. Art. IX, § 5(a).) In addition, the trial court found that the HAA violates the prohibition on delegation of municipal affairs to private parties (Cal. Const. Art. XI, § 11(a)). The plaintiffs appealed.

The Court of Appeal’s Decision

Application of the HAA to the City of San Mateo’s Design Standards

The appellate court first considered whether the city properly denied the application for the multifamily housing project under the HAA. The court explained that the key question in its application of the HAA is whether the city’s design guidelines qualify as “applicable, objective general plan, zoning, and subdivision standards and criteria, including design review standards, which would allow the city to disapprove the project under Government Code section 65589.5, subdivision (j)(1), if they are not satisfied. The court concluded that the portions of the design guidelines addressing height are not objective for the purposes of the HAA.

The court explained that the question of whether the design standards are “objective” within the meaning of the HAA is a question of law to which the court owes the city no deference. The court determined that the language in the city’s design guidelines requires subjective judgment, and is therefore not objective. For example, the design guidelines provide that if building height varies by more than one story, the city may require a “transition or a step in height.” The fact that the guidelines allow a choice in how to address the height differential shows that the standard is not entirely objective. Moreover, the terms “transition” and “step in height” are open to interpretation. For instance, some might view the placement of large trees in between buildings, or the addition of trellises, as providing a transition or a step in height. Indeed, under the city planning staff’s original interpretation of the design guidelines, the question was treated as one of design choice which could be resolved in a variety of ways, depending on which form the designer viewed as most “compatible” with adjacent buildings. Furthermore, even assuming the guidelines require a setback in height, the guidelines do not state how large the setback must be, leaving that determination open to subjective determination. Based on these and similar considerations, the court held that the city’s design standards are subjective, rather than objective, so those standards cannot be a basis to deny a housing project under the HAA.

California Constitutional Challenges

The court next considered whether the HAA violates the California Constitution—specifically, whether subdivision (f)(4) of the HAA violates the “home rule” doctrine for charter cities, and the prohibition on delegation of municipal functions, and whether the HAA denies neighboring property owners of procedural due process rights. The court concluded that the HAA does not violated the California Constitution on any of these grounds.

The “Home Rule”

The California Constitution’s “home rule” provides that charter cities may govern themselves without legislative intrusion into municipal affairs. (See Cal. Const., Art. XI, § 5.) The courts apply a four-part test to determine whether the Legislature may exert control over a charter city’s action, despite its right to home rule: (1) whether the ordinance at issues regulates a “municipal affair”; (2) whether the case presents an actual conflict between local and state law; (3) whether the state law addresses a matter of statewide concern; and (4) whether the state law is “reasonably related” to resolving the concern at issue and is “narrowly tailored” to avoid unnecessary interference with local governance. Under this test, if the court determines that the subject of the state statute is of statewide concern and that the statute is reasonably related to its resolution and not unduly broad, then the conflicting charter measure is deemed not to be a “municipal affair” and the Legislature may pass legislation addressing it.

Applying these factors to the HAA and the city’s design review ordinance, the court held that the first two prongs were met because planning and zoning laws are a traditional municipal affair and, to the extent the city’s ordinances allow the city to reject applications for housing developments based on subjective standards, the ordinances conflict with the HAA. As to the third prong, the parties agreed that the provision of housing is a matter of statewide concern. The city argued, however, that subdivision (f)(4) of the HAA does not itself address a matter of statewide concern because local governments’ denial of housing projects is not the sole cause of the housing crisis. Other factors, such as high construction costs, a shortage of construction labor, and delays caused by the need to comply with CEQA, also contribute to the shortage. The court rejected this argument, explaining that the fact that local government’s denials of housing permits are not the only cause of the state’s housing crisis is immaterial. The question is whether the problem the Legislature is trying to solve is a statewide problem, not whether the solution is the only possible solution.

As to the fourth and final prong – whether the statute is reasonably related to the resolution of the identified statewide concern and is narrowly tailored to avoid unnecessary interference with local government – the court found that the Legislature’s limiting the ability of local governments to deny new development based on subjective criteria is reasonably related to providing additional housing. Furthermore, the statute is narrowly tailored in that it leaves local governments free to establish and enforce policies and development standards, as long as those standards are objective, and do not otherwise interfere with the jurisdiction’s ability to meet its share of regional housing needs. Additionally, the HAA does not bar local governments from imposing conditions on projects to meet subjective standards; the HAA only prohibits local governments from reducing a project’s density or denying the project altogether based on subjective standards. The HAA also allows local governments to deny a proposed housing project if the project would have an unavoidable adverse impact on health and safety. (See Gov. Code, § 65589.5, subd. (j)(1)(A) and (B).) Accordingly, the statute is not only reasonably related to a statewide concern, but also narrowly tailored to avoid undue interference with local control over zoning and design decisions. Therefore, section (f)(4) of the HAA does not violate California Constitution’s “home rule.”

Delegation of Municipal Functions

The court next considered whether subdivision (f)(4) of the HAA violates the California Constitution’s prohibition on “delegate[ing] a private person or body power to … perform municipal functions.” (Cal. Const. Art. XI, § 11, subd. (a).) The court held that it does not. Although subdivision (f)(4) of the HAA lowers the burden to show a project is consistent with objective standards, the statute does not cede municipal authority to private persons. For example, local agencies maintain the authority and discretion to determine whether the record contains substantial evidence that a reasonable person would find the project is consistent with applicable objective standards, and to impose conditions of approval on the project, provided that they do not reduce the project’s density where applicable objectives are met.

The city argued that subdivision (f)(4) of the HAA would allow anyone, even the project proponent, to place in the record evidence that a project is consistent with objective standards and thereby force a local agency to approve the project. The court rejected this argument, however, because the “substantial evidence” standard provides a sufficient degree of scrutiny such that not just any self-serving evidence will support the conclusion that a project is consistent with applicable objective standards. Furthermore, subdivision (f)(4) requires that the evidence to allow a reasonable person to consider the project in conformity with the objective standards. Therefore, the statute does not require a local agency to approve a project based on the unsupported opinion of a single person, or upon evidence that a reasonable person would not find credible.

Due Process

Lastly, the city argued that subdivision (f)(4) of the HAA violates the rights of neighboring landowners by depriving them of the opportunity to be heard before a housing project is approved. More specifically, the city argued, subdivision (f)(4) renders local government review a useless exercise because if anyone submits evidence that the project is consistent with applicable objective standards, the project is deemed consistent and must be approved.

The court rejected this argument. Even assuming that due process protections apply to a municipality’s determination that a project is consistent with objective standards under subdivision (f)(4), there is no due process violation. The substantial evidence standard requires evidence that is of “ponderable legal significance” and is reasonable, credible, and of solid value. Nothing in the HAA prevents neighbors from presenting evidence to the agency that the substantial evidence standard is not met. Furthermore, neighbors can also present evidence that the agency should impose conditions on the project to minimize adverse effects or even deny the project if it would have an unavoidable “specific, adverse impact upon the public health or safety.” (Gov. Code, § 65589.5, subd. (j).) Therefore, although subdivision (f)(4) may affect which arguments carry the day, it does not deprive opposing neighbors with a meaningful opportunity to be heard.

Implications

The Court of Appeal in this case strictly interpreted what is meant my “objective” in the meaning of the HAA. The case makes clear that if there is room for personal judgment in deciding whether a proposed project complies with a given design standard, the standard is “subjective” and cannot be a basis to deny the housing project. The case serves as a warning to local agencies to heed the HAA’s limits on the ability to deny a proposed housing project. In the words of the court: “As the Legislature has steadily strengthened the statute’s requirements, it has made increasingly clear that those mandates are to be taken seriously. …The HAA is today strong medicine precisely because the Legislature has diagnosed a sick patient.”

Fourth District Court of Appeal upholds determination that one group of utilities undergrounding projects is exempt from CEQA because of petitioner’s failure to exhaust, but remands for further consideration of GHG impacts from second group of utilities undergrounding projects

In a procedurally complicated holding, in McCann v. City of San Diego (2021) 70 Cal.App.5th 51,the Fourth District Court of Appeal upheld the trial court’s ruling on the City of San Diego’s determination that one set of utilities undergrounding districts is exempt from CEQA, but remanded for further analysis of another set of utilities undergrounding districts to determine whether the project’s greenhouse gas (GHG) emissions are consistent with the City’s Climate Action Plan (CAP).

Background

The City of San Diego adopted a Utilities Undergrounding Program Master Plan in 2017, which sets out a process by which the City is converting overhead utility wires to an underground system. Undergrounding includes digging tunnels or trenches, installing underground conduit, filling in the soil, and pulling cable through the conduit. In addition, the City installs new above-ground transformers, three-foot cube-shaped cable boxes, and pedestals. The Master Plan and the City’s Municipal Code divide the larger effort to convert the entire above-ground utility system into smaller “districts,” each of which the City considers and approves separately.

Margaret McCann, a property owner, challenged the City’s approval of two sets of districts. The first set, City staff determined, was exempt from CEQA pursuant to Guidelines section 15302, subdivision (d). For the second set, the City adopted a mitigated negative declaration (MND).

The exempt districts

City staff determined that the first set of districts is exempt from CEQA. The City posted a Notice of Right to Appeal Environmental Determination in its City Development Services Department Office and on its website, and emailed the notice to City Councilmembers and local community planning groups. The notice stated that the exemption determination was appealable to the City Council within ten days. No one appealed. The City Council subsequently mailed notice of a public hearing regarding the districts to affected property owners, including McCann. McCann emailed the City and indicated that she had not seen the Notice of Right to Appeal, and that she believed the environmental review was inadequate. Her attorney also spoke at the Council hearing. The City Council subsequently approved the projects and the City filed a Notice of Exemption.

The MND districts

Separately, the City published a draft MND for another set of undergrounding districts, because some of them included sites with cultural significance. The MND also considered potential aesthetic and GHG effects from the projects. McCann and her attorney submitted written comments disputing the adequacy of the MND, and McCann’s attorney spoke at the public hearing. The City Council adopted the MND and approved the undergrounding districts.

Trial court decision

McCann filed a petition challenging both the exempt districts and the MND districts. The trial court denied the petition in its entirety. With respect to the exempt projects, the trial court found that McCann failed to exhaust administrative remedies, and in the alternative, denied her claims outright. Regarding the MND projects, the trial court found that McCann failed to demonstrate that substantial evidence supported a fair argument that the projects may have a significant effect on the environment.

The Court of Appeal’s Decision

The Court of Appeal agreed with the trial court, with one exception. First, with respect to the exempt projects, the court explained that CEQA does not prescribe a specific appeal process following a determination that a project is exempt. But, the court said, CEQA does require that if a nonelected official or decisionmaking body determines that a project is exempt, the agency must allow for an appeal of that determination to the decisionmaking body. Here, the City provided an administrative appeal process, but McCann did not file a timely appeal pursuant to the City’s procedures. McCann argued that City staff’s exemption determination did not comply with due process principles, but the court disagreed because the determination was not a land use decision and did not deprive McCann of any significant property interest. As a result, the court concluded, McCann failed to exhaust her administrative remedies, barring her claims with respect to the exempt projects.

Second, with respect to the MND projects, the Court of Appeal rejected all but one of McCann’s arguments. McCann argued that the City improperly segmented the projects; the court disagreed because each utility underground district is independently functional and does not rely on other districts to operate, and no set of districts is the “first step” toward any other projects. McCann argued that the project description was inadequate because it did not identify the precise locations of above-ground transformer boxes; the court disagreed because regardless of the precise location of each transformer, the environmental impacts of the project are the same. McCann argued that the MND projects will have significant aesthetic effects on the environment; the court disagreed because McCann failed to meet her burden to identify substantial evidence in the record that the project might have significant impacts. Most of McCann’s arguments, the court said, revolved around her neighborhood, which falls under the exempt projects, not the MND projects. McCann also cited to testimony of a person who commented on the project, but the court concluded that stray comments or expressions of concern related to aesthetic impacts are not enough to constitute substantial evidence.

The Court of Appeal remanded to the trial court on one narrow issue–the City’s determination that GHG impacts are not significant. Interestingly, the court explained that it was not holding that McCann proved that substantial evidence supported a fair argument that the project might have significant GHG impacts, which is usually the standard of review applied by the courts when considering an MND. Instead, the court said that because the City relied on an inapplicable checklist to conclude that the project was consistent with the City’s CAP, the City’s conclusions were not supported by substantial evidence.

To determine whether the project is consistent with the CAP, the City looked to its “Climate Action Plan Consistency Checklist.” The checklist directs staff to first consider whether a project is consistent with the City’s land use and zoning regulations. If yes, staff must then move to step two. But the checklist explains that step two does not apply to projects that, like this one, do not require a certificate of occupancy. Because step two does not apply, the City concluded that the project was consistent with the CAP. The court found, though, that the City could not rely on a checklist which expressly states that it does not apply to projects like this one to make a consistency determination. Thus, the court concluded, the City never considered whether the MND projects are consistent with the CAP. The court clarified that the use of a checklist to determine consistency might still be appropriate; the City could amend the checklist to include a step for assessing infrastructure projects, or it could create a separate checklist entirely. Without such a checklist though, the City was required to consider whether the projects comply with each individual action identified in the CAP if it wished to rely on streamlined review of GHG impacts.

The Court of Appeal reversed the trial court’s judgment on this limited issue, with directions to the trial court to enter a new judgment granting the petition in part, and to issue a peremptory writ of mandate directing the City to set aside its adoption of the MND and approval of the project.

COURT HOLDS DENSITY BONUS LAW PROHIBITS CITIES AND COUNTIES FROM REQUIRING PROOF THAT PROJECTS WILL BE “ECONOMICALLY” INFEASIBLE WITHOUT REQUESTED CONCESSIONS AND WAIVERS

The density bonus law (Gov. Code, § 65915) requires cities and counties to allow increased building density, and development incentives and waivers of permit requirements, in exchange for the applicant’s agreement to dedicate a specified number of dwelling units to low or very-low income households. In Schreiber v. City of Los Angeles (2021) 69 Cal.App.5th 549, the Second District Court of Appeal held that the City of Los Angeles’ municipal code is preempted by the state density bonus law to the extent that the city’s code requires an applicant to prove that the concessions it requests under the density bonus law are needed to make the affordable-housing component of the project financially feasible.

The case involves a mixed-use development in the City of Los Angeles, with retail uses on the ground floor and residential units above. Absent concessions and waivers, the city’s zoning code would limit the site’s development to three stories, a height of 45 feet, and a maximum of 40 units. Under the density bonus law, however, the applicant proposed to develop a seven-story building, with 54 units, including five very-low income units and five moderate income units.

Prior to the city planning commission’s first hearing on the project, the California Legislature passed Assembly Bill No. 2501 (AB 2501), which amended the density bonus law to prohibit local governments from conditioning their review or approval of an application under the density bonus law “on the preparation of an additional report or study that is not otherwise required by law.” (Gov. Code, § 65915, subd. (a)(2).) AB 2501 clarified, however, that local agencies are not prohibited from “requiring an applicant to provide reasonable documentation to establish eligibility for a requested density bonus, incentives, or concessions.” (Ibid.) It also clarified that the term “study” does not include “reasonable documentation to establish eligibility for the concession or incentive or to demonstrate that the incentive or concession meets the definitions” set forth in the density bonus law. (Gov. Code, § 65915, subd. (k).)

Based on AB 2501, the city’s planning department advised that financial pro formas and third-party reviews can no longer be required. Although the applicant had provided financial information regarding the project, in response to city staff’s interpretation of AB 2501, the applicant stated that he would not be providing a pro forma for the project.

Following a hearing, the city planning commission approved the project, including the requested density bonus. The planning commission also approved two “off menu” incentives (increased floor area and maximum height) and two waivers (transitional height and rear yard set back requirements).

The plaintiffs, residents of a nearby single-family home, filed a petition for writ of mandate alleging that the city misinterpreted the density bonus law. In particular, the plaintiffs argued that the city erred in granting the off-menu incentives because the applicant had not submitted financial information showing that the incentives were needed to make the project economically feasible—information that, the plaintiffs observed, was required under the city’s municipal code. The trial court denied the petition and the court of appeal affirmed.

The appellate court explained that under AB 2501’s amendments to the density bonus law, a local government cannot condition its approval of incentives on the preparation of a report that is not otherwise required by law. The city’s municipal code, however, provided that a request for an off-menu incentive must include a pro forma or other documentation showing that the incentive is needed to make the affordable-housing component of the project economically feasible. The court held that the city may not require information that an incentive is necessary to make the project economically feasible because that information is not needed to show that the project is eligible for the incentive. Rather, the “economically feasible” language in the city’s municipal code was based on a prior version of the statute, which required applicants to show that an incentive was necessary to render the affordable units economically feasible. That requirement, however, had been removed from the statute in 2008. Because the city code conflicted with state density bonus law, the court held that the city code is preempted to the extent that it requires an applicant to demonstrate that a requested incentive is needed to make the project economically feasible.

The case provides helpful guidance regarding the documentation that local agencies may require in processing a request for incentives and waivers under the density bonus law. The case clarifies that an agency may not require an applicant to prove that the requested incentives and waivers are necessary to make the affordable-housing component of a project economically feasible. The court’s reasoning in the case is consistent with the requirement that the density bonus law be “interpreted liberally in favor of producing the maximum number of total housing units.” (Gov. Code, § 65915, subd. (r).)

California Supreme Court Holds that Stanislaus County Well Permits Are Not Categorically Ministerial

Well construction permits in Stanislaus County are issued under an ordinance that incorporates the California Department of Water Resources’ (DWR’s) well construction standards. Prior to the Supreme Court’s recent decision in Protecting Our Water and Environmental Resources v. County of Stanislaus (2020) 10 Cal.5th 479, the County categorically classified well construction projects that did not require a variance as ministerial, rather than discretionary. Ministerial projects—i.e., projects that involve no agency discretion—are exempt from CEQA. The plaintiffs, challenged the County’s categorization, alleging that all County well construction permits are discretionary projects requiring CEQA review. The Supreme Court held that the County’s “blanket classification” that all nonvariance permits are ministerial violated CEQA. Rather, CEQA requires the County to determine whether the issuance of a well permit is ministerial on a case-by-case basis.

Legal Background

CEQA does not apply to “[m]insterial projects proposed to be carried out or approved by public agencies.” (Pub. Resources Code, § 21080, subd. (b)(1).) “A ministerial decision involves only the use of fixed standards or objective measurements, and the public official cannot use personal, subjective judgment in deciding whether or how the project should be carried out.” (14 Cal. Code Regs. (“CEQA Guidelines”), § 15369, italics added.) Rather than exercise judgment, for ministerial approvals, “[t]he public official merely applies the laws to the facts as presented but uses no special discretion or judgment in reaching a decision.” (Ibid.)

A a project is discretionary, in contrast, if the approval requires exercise of judgment or deliberation. “The key question is whether the public agency can use its subjective judgment to decide whether and how to carry out or approve [the] project.” (CEQA Guidelines, § 15357.)

Factual Background

DWR has issued Water Resources Bulletin No. 74, Water Well Standards: State of California, described as “‘a 90-page document filled with technical specifications for water wells.’” The California Water Code requires counties to adopt well construction ordinances that meet or exceed the standards in Bulletin No. 74. Many counties have incorporated the bulletin’s standards into their well-permitting ordinances.

Stanislaus County’s groundwater ordinance, which regulates the location, construction, maintenance, abandonment, and destruction of wells, incorporates many of the standards set forth in Bulletin No. 74, including:

    • Standard 8.A (re well distance from contamination sources): All wells must “‘be located an adequate horizontal distance’” from potential sources of contamination. For example, a well should be located at least 50 feet from any sewer line, and 150 feet from any cesspool or seepage pit. Agencies may increase or decrease the suggested distances, however, depending on circumstances. Determining “‘the safe separate distance for individual wells requires detailed evaluation of existing and future site conditions.’”
    • Standard 8.B: “‘[W]here possible, a well shall be located up the ground water gradient from potential sources of pollution or contamination.’”
    • Standard 8.C: “‘[I]f possible, a well should be located outside areas of flooding.’”
    • Standard 9: A well’s “annular space” must be “‘effectively sealed’” and the well must be located at established minimum surface seal depths.

The County’s ordinance also allowed the county health officer to waive these and other requirements when, in his or her opinion, the provisions were unnecessary. When authorizing such a variance, the health officer could prescribe additional conditions that the health officer deemed necessary to protect water resources.

In 1983, the County adopted CEQA regulations which, broadly-speaking, classified well construction permits as ministerial projects, except for well construction projects that required a variance. Permits requiring a variance were designated discretionary, and thus triggered environmental review. In practice, the County treated all nonvariance permits as ministerial.

Plaintiffs sued the County, alleging “a pattern and practice” of approving well permits without CEQA review. Plaintiffs asserted that all well permits issued under the County’s groundwater ordinance are discretionary because the County may “deny [a] permit or require changes to the project as a condition of permit approval to address concerns relating to the environmental impacts.”

The Supreme Court’s Decision

The Court explained that in determining whether the County’s issuance of well permits is discretionary, it is guided by the principle that CEQA must be interpreted “‘to afford the fullest possible protection to the environment within the reasonable scope of the statutory language.’” Additionally, the Court observed, one purpose of CEQA is to reduce or avoid environmental damage by requiring project’s changes when feasible. Against this backdrop, the Court held the County violated CEQA by categorically classifying nonvariance well permits as ministerial. Instead, held the Court, the County must decide whether a well permit is ministerial on a case-by-case basis.

The Court reasoned that the plain language of Bulletin No. 74’s standards incorporated into the County’s groundwater ordinance required the exercise of judgment. For instance, Standard 8.A requires the health officer to determine the “‘adequate horizontal distance,’”—a judgment that may depend on “‘[m]any variables.’” Further, Standard 8.A states that “‘[n]o separation distance is adequate and reasonable for all conditions.’” And, although the standard provides a list of minimum suggested distances, the standard also states that ‘[l]ocal conditions may require greater distances.’” Moreover, the standard allows for lesser distances which may be approved “‘on a case-by-case-basis.’”

The Court found Standard 8.A “confers significant discretion on the county health officer to deviate from the general standards,” depending on the proposed permit’s unique circumstances. It is clear from the County’s ordinance, which incorporates Bulletin 74’s standards, that the County “may shape a construction project in response to concerns that could be identified by an environmental review.” Thus, held the Court, a permit that required the County to exercise its independent judgment under Standard 8.A. is not properly classified as ministerial.

The County argued that Standard 8.A is part of a much larger regulatory scheme, which, when read as a whole, allows little or no judgment in determining whether a well permit may be issued. The Court rejected this argument as inconsistent with the CEQA Guidelines, which provide that when a project “‘involves an approval that contains elements of both a ministerial action and a discretionary action, the project will be deemed to be discretionary.’ (CEQA Guidelines, § 15268, subd. (d).)” Further, noted the Court, when there is doubt, an approval should be treated as discretionary, in service to CEQA’s environmental protection goals.

The County further argued that the issuance of well permits is ministerial because the County’s ability to mitigate potential environmental damage under the ordinance is highly constrained. The County posited, for instance, that Standard 8.A only allows the health officer to adjust the location of the well to prevent groundwater contamination. The ordinance does not allow the County to address other environmental concerns, such as groundwater depletion, or to impose other measures to prevent contamination, such as regulating the use of pesticides or fertilizers. Unpersuaded, the Court explained that “[j]ust because the agency is not empowered to do everything does not mean it lacks discretion to do anything.” Although the groundwater ordinance does not authorize the County to impose other mitigation measures, that does not mean the permit is ministerial.

The Court also rejected the County’s argument that the Court should hold the permits are ministerial in deference to the County’s determination. The Court explained that although case law suggests a local agency’s interpretation of its own ordinance may be entitled to deference, here, the relevant standards come from DWR’s Bulletin No. 74, not just a local ordinance. Furthermore, although the courts will defer to an agency’s factual determinations supporting a conclusion that a given approval is ministerial, the County’s determination in this case was based solely on the County’s legal interpretation of Bulletin No. 74’s requirements. The Court need not defer to a local agency’s interpretation of state law.

The Court was also unpersuaded by the County’s argument that a decision in plaintiffs’ favor will increase costs and delays in the issuance of well permits. The Court explained that “CEQA cannot be read to authorize the categorical misclassification of well construction permits simply for the sake of alacrity and economy.” Furthermore, observed the Court, even though CEQA review may be required for some well permits, this does not mean that an EIR would necessarily be required. Rather, the County may be able to approve a well permit by relying on another categorical exemption or preparing a negative declaration or mitigated negative declaration.

Lastly, although the Court disagreed that the County’s well permits are categorically ministerial, the Court also rejected plaintiffs’ claim that the permits are always discretionary. In some circumstances, the Court reasoned, the County’s issuance of a well permit might not require the exercise of judgment. For example, Standard 8.A only applies when there is nearby contamination. If no contamination source is identified during the permit approval process, the discretion conferred by Standard 8.A would not come into play. This, in turn, would mean that the permit may be ministerial.

In First Opinion Addressing a Sustainable Communities Environmental Assessment, the Third District Upholds the City of Sacramento’s Approval of an Infill Project

In Sacramentans for Fair Planning v. City of Sacramento (2019) 37 Cal.App.5th 698, the Third District Court of Appeal upheld the City of Sacramento’s reliance on a Sustainable Communities Environmental Assessment (SCEA), a relatively new method for conducting streamlined CEQA review for certain projects that help the state meet its greenhouse gas (GHG) reduction targets. (See Pub. Resources Code, § 21155.2, subd. (b).) The decision is the first published opinion addressing the propriety of an SCEA. The court held that the transit priority project at issue was consistent with the region’s sustainable communities strategy and therefore the City’s reliance on the SCEA complied with CEQA.

The court also upheld the City’s reliance on a unique provision in its general plan that allows the City to approve projects that are inconsistent with the City height and density limits if the projects offer significant community benefits.

Background

The Sustainable Communities and Climate Protection Act (SB 375) was created to integrate transportation and land use planning to reduce GHG emissions. SB 375 directed the California Air Resources Board to develop regional targets for automobiles and light trucks to reduce emissions. In turn, federally designated metropolitan planning organizations (MPOs) must now include a “sustainable communities strategy” (SCS) in their regional transportation plans/ metropolitan transportation plan (MTP). (Gov. Code, § 65080, subd. (b)(2)(B).) MTP/SCSs direct the location and intensity of future land use developments on a regional scale to reduce vehicle emissions. The Sacramento Area Council of Governments (SACOG) is the MPO for the Sacramento area. SACOG adopted an MTP/SCS for the region in 2012 and certified an EIR for the MTP/SCS at that time.

Under SB 375, the mandated reductions may be achieved through a variety of methods, including “smart growth planning.” The Legislature determined that one type of development that can help reduce vehicular GHG emissions is a “transit priority project.” This type of project contains at least 50% residential use, has a minimum density of 20 units per acre, and is located within one-half mile of a major transit stop.

To boost development of transit priority projects, SB 375 allows for streamlined CEQA review through an SCEA if the project: (1) is consistent with the general use designation, density, building intensity, and applicable policies specified for the project area’ in the strategy; and (2) incorporates all feasible mitigation measures, performance standards, and criteria set forth in the prior applicable environmental impact reports’ and which were adopted as findings. (Pub. Resources Code, §§ 21155, subd. (a), 21155.2, subds. (a), (b).)

The “Yamanee” project at issue in Sacramentans is a proposed 15-story multi-use building made up of one floor of commercial space, three levels of parking, residential condominiums on 10 floors, and one floor of residential amenities. The building is proposed to be located near public transit in Sacramento’s growing “Midtown” area, adjacent to the City’s downtown. The project is located in the MTP/SCS’s central city subarea of a “Center and Corridor Community.” Under the MTP/SCS, Center and Corridor Communities are typically higher density and more mixed than surrounding land uses. SAGOG organized the MTP/SCS in such a way that policies for reducing GHG emissions were embedded in the MTP/SCS’s growth forecast assumptions. Thus, projects that are consistent with the MTP/SCS’s growth forecasts are automatically consistent with the MTP/SCS’s emission-reduction policies.

The City determined that the Yamanee project qualified as a transit priority project and that the project was consistent with the general land use designation, density, building intensity, and applicable policies in the MTP/SCS. Therefore, the City used an SCEA to review the project under CEQA. The SCEA explained that, as a transit priority project, the Yamanee project would increase housing options near high quality transit and reduce vehicle miles traveled. It also explained that the project is consistent with the MTP/SCS’s forecast of low to high-density residential and mixed uses in the center subarea of the Center and Corridor Community.

The City Council upheld the City planning and design commission’s approval of the project and rejected the petitioner’s appeal of that decision. The petitioner sought a writ of mandate in the superior court, claiming that the City’s approval of the project violated CEQA and the planning and zoning law. The superior court denied the petition and the Court of Appeal affirmed.

CEQA

The Court of Appeal rejected the petitioner’s claim that the City erred by relying on SACOG’s MTP/SCS to justify using an SCEA. The petitioner argued that because the MTP/SCS lacked specific density and building intensity standards, the City could not rely on it as a basis for an SCEA. Further, claimed the petitioner, the MTP/SCS undermines the City’s general plan because it treats the City’s center as “higher density,” whereas the general plan sets forth a more nuanced approach under which building intensities and densities increase the closer a development gets to the downtown. These arguments, concluded the court, were premised on a misunderstanding of the MTP/SCS’s role. An MTP/SCS does not regulate land use. The purpose of an MTP/SCS is to establish a regional development pattern, not site-specific zoning. SB 375 authorized the City to review the project in an SCEA if the project was consistent with the regional strategy. Because it was, the city was allowed to rely on an SCEA. Although, as the petitioner contended, reliance on an SCEA could mean that certain projects receive less environmental review than traditionally required under CEQA, the court advised that the petitioner should take this concern to the Legislature, not the courts.

The court also rejected the petitioner’s claim that the City erred by relying on previous EIRs for the general plan and MTP/SCS to avoid analyzing the project’s cumulative impacts. In particular, the petitioner claimed that streamlined review was inappropriate in this case because no prior environmental analysis had considered the cumulative impacts of high-rise development in Sacramento’s midtown. The court explained that CEQA required the City to prepare an initial study (IS) before drafting the SCEA. The City’s IS for the project concluded that cumulative effects had, in fact, been adequately addressed and mitigated, and therefore did not need to be analyzed further in the SCEA. Additionally, the project included all applicable mitigation measures recommended in the prior EIRs. The petitioner failed to show that the City’s analysis was not factually supported. Accordingly, the City did not err by relying on prior cumulative impact analyses.

Planning and Zoning Law

The development proposed by the project is denser and more intense than what would ordinarily be allowed under the City’s general plan and zoning code. The City approved the project, however, under a provision in its general plan that allows the City to approve more intensive development when a project’s “significant community benefits” outweigh strict adherence to the density and intensity requirements. The City determined that the project would have several significant community benefits, including helping the City to achieve its goal of building 10,000 new residential units in the central city by 2025, and reducing dependency on personal vehicles. These, and other benefits, outweighed strict adherence to the City’s density and intensity limits.

The petitioner argued that the City’s decision to allow the Project to exceed the general plan and zoning code’s intensity and density standards constituted unlawful “spot zoning.” The court explained that spot zoning occurs where a small parcel is restricted and given fewer rights than the surrounding property (e.g., when a lot is restricted to residential uses even though it is surrounded by exclusively commercial uses). This case, explained the court, is not a spot-zoning case in that the property was not given lesser development rights than its neighboring parcels. The petitioner argued that the neighboring parcels had, in fact, been given lesser development rights through the City’s approval of the project, but there was no evidence in the record that any neighboring owner sought and was denied permission to develop at a greater intensity or that the City would arbitrarily refuse to consider an application for such development.

The petitioner also argued that the phrase “significant community benefit” as used in the City’s general plan was unconstitutionally vague. The court disagreed, explaining that zoning standards in California are required to be made “‘in accord with the general health, safety, and welfare standard,’” and that the phrase “significant community benefit” was no less vague than the phrase “general welfare.” Additionally, held the court, the phrase “significant community benefit” provides sufficient direction to implement the policy in accordance with the general plan.

The court also held that the City had articulated a rational basis for the policy allowing the City to waive the density and intensity standards for projects that provide significant community benefits, which is all that the Constitution required.

Conclusion

In this case, the City of Sacramento successfully employed CEQA’s streamlined provisions for transit priority projects to expedite and simplify its environmental review of an infill project that will help the City meet its aggressive new housing goal and reduce greenhouse gas emissions. The City’s general plan allowed the City to approve the project because the project would provide significant public benefits, even though the project is inconsistent with the general plan and zoning code’s density and intensity standards. As California continues to combat the dual threats of a housing shortage and climate change, cities and counties are likely to increasingly rely on streamlined approaches to the approval process for mixed-use projects near public transit.

The Fourth District Court of Appeal Rejects Community Service District’s Attempt to Exempt Itself from City’s Zoning Ordinance

In City of Hesperia v. Lake Arrowhead Community Services District (2019) 37 Cal.App.5th 734, the Fourth District Court of Appeal upheld the trial court’s conclusion that the Lake Arrowhead Community Services District’s (“District”) Solar Project is not exempt from – and must comply with – the City of Hesperia’s (“City”) zoning ordinances.

The District, which is only authorized to provide water and wastewater treatment services within its boundaries, planned to develop a solar energy project on property zoned as “Rural Residential” that it owns within the City. The City’s Municipal Code dictates that solar farms are only permitted in nonresidential and nonagricultural areas with the approval of a conditional use permit by the City’s planning commission.

Pursuant to CEQA, the District prepared and circulated an Initial Study and Mitigated Negative Declaration for comments on the Solar Project in May 2015. The City commented that the Project required a general plan amendment and zone change to be filed with the City and that the Project would violate the City’s Municipal Code, which prohibits solar farms within 660 feet of agriculturally designated property. Government Code section 53091 requires that local agencies comply with the building and zoning ordinances of the county or city in which they are located.

On December 15, 2015, the District’s Board adopted a resolution that purported to render the City’s zoning ordinances inapplicable to the Solar Project. In passing this resolution, the District relied on Government Code section 53091, subdivision (e), an absolute zoning exemption for electrical energy generation facilities, and Government Code section 53096, a qualified zoning exemption for projects with no feasible alternative location.

The City subsequently filed a lawsuit contending that the Solar Project is beyond the scope of the District’s authority and is subject to the City’s zoning ordinances. The court agreed with the City and held that the Project was not exempt under either of these sections.

Section 53091, subdivision (e)

Section 53091, subdivision (e), of the Government Code states that the “[z]oning ordinances of a county or city shall not apply to the location or construction of facilities . . . for the production or generation of electrical energy.” The court explained that while the section 53091, subdivision (e), exemption does apply to the Project, the same section also includes an exception to the exemption that applies to the Project and negates the exemption. The exception to the exemption provides that “[z]oning ordinances of a county or city shall apply to the location or construction of facilities for storage or transmission of electrical energy by a local agency, if the zoning ordinances make provision for those facilities.” Here, the court agreed with the City that the Solar Project involves the transmission of electrical energy and is therefore not exempt from the City’s zoning ordinances under section 53091, subdivision (e).

In reaching this conclusion, the court was influenced by the fact that the District had earlier entered into an agreement with Southern California Edison Company, which stated that the District “will export electrical energy to the grid” and be responsible for “delivery of electricity.” The dictionary definitions for “export” and “delivery” are consistent with the “transmit” terminology in the exception. The court rejected the District’s argument that using the plain meaning of the word “transmission” would prohibit any electrical energy facility from qualifying for a zoning exemption because section 53096, subdivision (a) (discussed below), provides a qualified exemption for energy facilities under certain conditions.

Section 53096, subdivision (a)

Government Code section 53096, subdivision (a), provides a qualified exemption from zoning ordinances for facilities related to the transmission of electrical energy upon a four-fifths vote by the agency’s board that there is no feasible alternative to the proposed use. Here, the District’s Board determined that it was not feasible to install the Solar Project at any alternative locations, as doing so “would result in a significant cost increase, measurable power loss, and project delay.”

The court concluded that while the Board followed the proper procedural requirements of the qualified exemption, the administrative record did not contain substantial evidence to support the District’s findings. The City successfully demonstrated to the court that the administrative record did not include evidence of “economic, environmental, social, or technological factors associated with an alternative location.” The court was persuaded by the fact that the Board failed to consider any alternative location for the Solar Project in reaching its discretionary determination under section 53096, subdivision (a).

In determining the definition of “feasible” for purposes of this exemption, the court relied on case law related to CEQA’s definition for feasible alternatives and mitigation measures. The court cited Citizens of Goleta Valley v. Board of Supervisors (1988) 197 Cal.App.3d 1167, which dictates that the consideration of feasible alternatives is governed by the “rule of reason” – where alternatives must be analyzed if doing so is “necessary to permit a reasoned choice.” Here, the court concluded that the “any ‘rule of reason’ requires consideration of alternatives.” (Italics original.) The District therefore needed to provide evidence that it considered an alternative location and “economic, environmental, social, and technological factors” related to the alternative, but it merely provided evidence that the site was a “good location” for the Project. Thus, the court held that the section 53096, subdivision (a), exemption also does not apply to the Solar Project.

Second District Upholds City of Los Angeles’ Determination That EIR Not Required to Assess Population or Housing Impacts for Hotel Project on Site of Vacant Former Apartment Building

In an opinion certified for partial publication on July 22, 2019, the Second District Court of Appeal affirmed the trial court’s decision and held that the City of Los Angeles was not required to prepare an EIR to assess housing-related impacts for a boutique hotel project on the site of a now-vacant former apartment building. Hollywoodians Encouraging Rental Opportunities (HERO) v. City of Los Angeles (B285552; filed 6/28/19, ordered published 7/22/19) ___ Cal.App.5th___ (“HERO”).

The project at issue in HERO is a proposed 24-room boutique hotel in the Hollywood area of Los Angeles. Prior to 2013, the project site was occupied by an 18-unit apartment building that was subject to the city’s Rent Stabilization Ordinance. In 2013, the owner filed a notice of intent to withdraw all 18 units from the rental housing market pursuant to the Ellis Act in order to pursue construction of a condominium project on the site. While the condo project was later abandoned due to a lack of financing, the building never returned to the rental market and remained uninhabited for nearly two years.

In July 2015, the owner of the property submitted a new application to the city, this time seeking to convert the site into a 24-room hotel. The city prepared an initial study for the hotel project. The initial study concluded that, with mitigation, the project would have no significant environmental impacts. With respect to population and housing impacts specifically, the initial study concluded that the project would not displace housing units or residents because the apartments had been withdrawn from the rental market and the building was uninhabited. Accordingly, the zoning administrator adopted a mitigated negative declaration (MND) and approved the project. The zoning administrator’s decision was subsequently affirmed following appeals to the area planning commission and city council.
Following the city council’s approval of the project, three petitioners, including a resident of a nearby building, a former tenant of the apartments, and HERO, filed a petition for writ of mandate challenging the approval. The thrust of the petitioners’ CEQA claims was that the city was required to prepare an EIR to analyze the project’s direct, indirect, and cumulative impacts on the supply of rent-stabilized housing and the displacement of tenants. The trial court denied the petition in full, holding that the city properly concluded the project would have no impact on housing or population because the rental units had been removed from the market and vacated long before the hotel project was proposed. The trial court further ruled that, aside from the baseline issue, the petitioners failed to demonstrate that the project would have a significant effect on the physical environment, and not just socioeconomic impacts.

On appeal, the petitioners’ primary argument was that the city was required to prepare EIR because substantial evidence supported a fair argument that the cumulative effect of the project and other similar projects would be to eliminate rent-stabilized housing units in Hollywood and displace residents that depend on such housing. The Court of Appeal rejected the petitioners’ argument, holding that the proper baseline against which the project’s impact must be assessed is a vacant building, not a tenant-occupied rental property. As the court explained, at the time the environmental analysis for the project commenced in 2015, the property did not include rent-stabilized apartments. Rather, as noted above, the all units had been withdrawn from the rental market in 2013 and the building sat uninhabited since that time. Because these events occurred prior to the project proposal and initial study, the court explained, they were not attributable to the project. Thus, the city properly determined an EIR was not required to analyze such impacts on housing and population. Moreover, the court added, there was nothing in the record to suggest that the 2015 hotel project was a reasonably foreseeable consequence of the initial condominium project for which the apartments were originally removed from the rental market, and there was no evidence that the city was attempting to chop up or evade CEQA review.

Turning to the issue of cumulative impacts, the court held that the city was not required to prepare an EIR to inquire into the cumulative impact of the project on housing and population. Because there was no substantial evidence of a project-specific potentially significant impact, the court explained, the city properly determined that the effects of the project would not be cumulatively considerable and no further analysis was required.

Remy Moose Manley partner Sabrina Teller and associate Christina Berglund represented the Real Parties in Interest in this matter.