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Fifth District Court of Appeal Excuses Petitioner’s Failure to Exhaust Administrative Remedies, Holds that Unlined Landfills are Not “Facilities” for Purposes of the Class 1 Categorical Exemption

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In the published portions of Los Angeles Department of Water and Power v. County of Inyo (2021) 67 Cal.App.5th 1018, the Fifth District Court of Appeal held that the issue exhaustion requirement in Public Resources Code section 21177, subdivision (a) did not apply where the County of Inyo did not provide adequate public notice prior to adopting a Notice of Exemption (NOE) and that the County abused its discretion in finding that condemning three landfill sites was categorically exempt from CEQA under the “existing facilities” exemption in CEQA Guidelines section 15301 (the “Class 1” categorical exemption).

FACTUAL AND PROCEDURAL BACKGROUND

Beginning in the 1950s, the County began leasing land within the County owned by the Los Angeles Department of Water and Power (LADWP) for waste management purposes. At issue in this case were three sites leased by the County for use as unlined landfills. The County’s operation of the landfills is subject to permitting by the California Department of Resources Recycling and Recovery (CalRecycle). Beginning in 2012, the County sought to amend the permits for two of the three landfill sites to increase the permissible daily usage, overall capacity, and to accelerate the closure dates, effectively shortening the useful life of the landfills.

After negotiating with LADWP to extend the lease agreement for one of the sites, the County determined that acquiring all three landfill sites through condemnation was necessary. In a letter to the Board of Supervisors, LADWP objected to the County’s decision, in part, arguing that that the County was required to comply with CEQA before taking any action on the proposed condemnation. At the Board hearing on the condemnation proposal, County staff suggested that the Board’s actions would be exempt from CEQA review for several reasons, including the “existing facilities” categorical exemption under CEQA Guidelines section 15301. The Board approved the condemnation proceedings, but its written decision made no mention of CEQA.

LADWP filed suit. The Kern County Superior Court ruled that the County violated CEQA and issued a writ of mandate directing the County to rescind its resolutions relating to the condemnation proceedings, pending compliance with CEQA. The County appealed.

THE COURT OF APPEAL’S DECISION

Before turning to the merits of LADWP’s CEQA claims, the Court of Appeal addressed the “threshold procedural issue” of whether LADWP’s CEQA claims were barred because it failed to exhaust its administrative remedies with respect to the issues that it raised in court. After discussing the statute and relevant case law, the court acknowledged that because CEQA did not require a comment period prior to determining that a project is exempt from CEQA, the relevant question was whether the agency provided adequate notice to the public prior to considering an exemption. Specifically, the court explained, an agency’s notice must inform the public that the agency will consider a CEQA exemption; otherwise, the issue exhaustion requirement in Public Resources Code section 21177, subdivision (a), does not apply. Here, the court found that the first mention of CEQA and the Board’s consideration of an exemption was made by staff during the hearing, and the hearing notice was silent on CEQA. The court concluded that the public was not provided with adequate notice regarding the exemption, and therefore, LADWP was not required to exhaust on its CEQA challenges to the County’s exemption determination.

Turning to the exemptions relied on by the County, the court found that because the issues before it involved the scope of the “existing facilities” categorical exemption and statutory construction, review of the County’s actions was de novo. After reviewing the language of CEQA Guidelines section 15301, the court concluded that the term “facilities” is ambiguous, agreeing with the Second District Court of Appeal in Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165 (Azusa). Further agreeing with Azusa, the court reasoned that, because an unlined landfill was “excavated” rather than “built,” an unlined landfill was more akin to an alteration in the condition of land rather than a facility. The court reasoned that because section 15301 was revised following the Azusa decision but did not expressly mention landfills, the court concluded that the Secretary of Resources who issued the revised Guideline must have agreed with Azusa that unlined landfills are not a class of projects that do not have a significant effect on the environment. Thus, the court concluded that the County abused its discretion in finding the condemnation proceedings categorically exempt under the Class 1 categorical exemptions.

– Nathan O. George

First District Court of Appeal Holds That Governor Newsom’s Certification of Oakland Howard Terminal Project Under AB 734 Was Timely

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In Pacific Merchant Shipping Association v. Newsom (2021) 67 Cal.App.5th 711, the First District Court of Appeal held that there was no deadline for the Governor to certify the Howard Terminal Project as qualifying for expedited judicial review under Assembly Bill (AB) 734, and specifically, that the Howard Terminal Project was not subject to the certification deadline in the Jobs and Economic Improvement Through Environmental Leadership Act of 2011 (AB 900).

FACTUAL AND PROCEDURAL BACKGROUND

The Howard Terminal Project is a proposed development located at Oakland’s Howard Terminal. It includes a new baseball stadium for the Oakland A’s, as well as residential, retail, commercial, and other uses.

In 2018, the Legislature passed AB 734, which provided that, if the Governor certified that the Howard Terminal project met specific environmental standards, then litigation challenging the project’s environmental review would be subject to expedited judicial review. AB 734 was a stand-alone bill applicable solely to the Howard Terminal project. In many respects, AB 734 was modeled after separate legislation, generally referred to as AB 900, providing for expedited judicial review of “Environmental Leadership Development Projects” (ELDP projects).

First enacted in 2011, the Legislature has amended AB 900 several times, in part to extend various deadlines embedded in the statute. In September 2018, when the Legislature enacted AB 734, AB 900 provided that the Governor had to certify a project by January 1, 2020, and the lead agency had to approve the project by January 1, 2021, when AB 900 would sunset. AB 900 also authorized the Governor to adopt guidelines to implement the statute. The Governor’s AB 900 guidelines reflected AB 900’s deadlines.

AB 734 provided that the Governor’s AB 900 guidelines apply to the “implementation” of AB 734 “to the extent the guidelines are applicable and do not conflict with specific requirements” of AB 734. Unlike AB 900, AB 734 did not specify any deadlines in the text of the statute.

Shortly after the Legislature adopted AB 734, Governor Newsom amended his AB 900 guidelines to reference AB 734 and the Howard Terminal project, along with a different project – the Los Angeles Clippers’ proposed basketball arena in Inglewood – subject to its own, stand-alone, fast-track legislation (AB 987) that contained a similar reference to the Governor’s AB 900 guidelines.

In March 2019, the A’s submitted an application to the Governor for certification under AB 734. As a precursor to Governor certification, the California Air Resources Board (CARB) had to find that the Howard Terminal project would meet strict greenhouse gas emission reduction targets mandated by AB 734. In August 2020 – 16 months after the A’s submitted their application, and eight months after AB 900’s January 1, 2020, certification deadline – CARB made this finding. Governor Newsom certified the Howard Terminal project in February 2021.

A coalition of businesses operating at the Port of Oakland, led by the Pacific Merchant Shipping Association (PMSA), sued the Governor, challenging his authority to certify the project. PMSA alleged that the Governor’s authority to certify the project under AB 734 had expired as of January 1, 2020—the deadline for certification in AB 900. Specifically, PMSA argued that, by incorporating the AB 900 guidelines into AB 734 “to the extent the guidelines are applicable and not in conflict with the specific requirements” of AB 734, the legislature had incorporated AB 900’s deadline for certification. The trial court rejected PMSA’s arguments. PMSA appealed.

THE COURT OF APPEAL’S DECISION

After discussing the general rules of statutory interpretation, the Court of Appeal concluded that the text of AB 734 was ambiguous as to whether the January 1, 2020, deadline for certification of ELDP projects under AB 900 also applied to the Howard Terminal project under AB 734.

Turning to the legislative history for insight, the court noted that the author of AB 734 proposed a standalone bill for the Howard Terminal project, in part, because the project could not meet AB 900’s deadlines. Thus, one option the legislature considered was whether to simply extend AB 900’s deadlines and have the project proceed under AB 900. The court reasoned that the legislature was aware of this option but chose to adopt AB 734—with no deadlines—instead. Based on its review of the legislative history as a whole, the court concluded that the legislature had not intended to incorporate AB 900’s certification deadline into AB 734.

The court also determined that its construction of AB 734 was supported by the legislative purpose of the statute. As the court noted, the purposes served by enactment of AB 734 are made clear in the legislation: to assist the City of Oakland in retaining the Oakland A’s by streamlining environmental review for a “state-of-the-art baseball park” project; to generate thousands of high-wage, highly skilled jobs during construction and operation of the project; to support the City’s and region’s goals for sustainable, transit-oriented housing, including affordable housing; to provide an opportunity for investment “in new and improved transit and transportation infrastructure”; and to “implement sustainability measures designed to improve air quality and mitigate the emissions of greenhouse gases resulting from the project.” For all these reasons, the special legislation was deemed necessary so that the Howard Terminal Project could be developed in an “expeditious manner.” In light of the significant environmental, economic, and cultural benefits which prompted the adoption of AB 734, the court concluded that PMSA’s reading of the statute would undermine rather than promote the general purposes of the statute and the objectives to be achieved.

Lastly, the court concluded that a practical reading of AB 734, including its lack of deadlines, supported the respondents’ argument that the legislature did not intend to incorporate AB 900’s certification deadline into AB 734. Among other practical reasons for rejecting PMSA’s reading of the statute, the court noted that CARB’s step in the process alone exceeded PMSA’s alleged one-year deadline for certification.

The Court of Appeal agreed with the trial court and affirmed the judgment.

RMM attorneys Whit Manley and Chris Stiles represented Real Party in Interest Oakland Athletics Investment Group LLC in the litigation.

– Nathan O. George

First District Court of Appeal Holds That a Necessary and Indispensable Party is Not Bound to a Tolling Agreement That It Did Not Sign

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In Save Lafayette Trees v. East Bay Regional Park District (2021) 66 Cal.App.5th 21, the First District Court of Appeal held that PG&E, a necessary and indispensable party in the case, was not bound to an agreement to toll the CEQA statute of limitations executed by only the petitioners and the respondent public agency.

FACTUAL AND PROCEDURAL BACKGROUND

On March 21, 2017, the East Bay Regional Park District’s (District) Board of Directors issued a resolution accepting funding from PG&E as compensation for the removal of 245 trees on District property near PG&E’s natural gas transmission pipelines. PG&E issued this funding as a part of its “Community Pipeline Safety Initiative.” The District and PG&E later signed an MOU for the implementation PG&E’s initiative and ongoing maintenance and monitoring of the area near the natural gas pipeline. On June 27, 2017, the District filed a Notice of Exemption after finding the MOU and related activity categorically from CEQA.

On July 31, 2017, Save Lafayette Trees, Michael Dawson and David Kosters (Appellants), and the District entered into a tolling agreement to toll all applicable statutes of limitations for 60 days. PG&E did not consent to this agreement. On September 29, within the 60-day tolling period, Appellants filed a petition for writ of mandate challenging the District’s approval of the MOU under CEQA, as well as for violations of local ordinances and state constitutional due process rights. The action named PG&E as a real party in interest. PG&E demurred to the CEQA cause of action as time-bared by both the 35-day and 180-day statute of limitations periods under Public Resources Code section 21167. The trial court sustained the demurrer.

THE COURT OF APPEAL’S DECISION

Upholding the trial court’s decision, the Court of Appeal determined that PG&E was not bound to the tolling agreement between Appellants and the District. The court concluded that PG&E was both a necessary and indispensable party in the litigation, and therefore, was entitled to assert or waive the statute of limitations defense. The court noted that CEQA does not statutorily authorize tolling agreements, which means that they are not a statutory right. Rather, tolling agreements are private agreements between parties that have no effect on parties not in privity. Citing Salmon Protection & Watershed Network v. County of Marin (2012) 205 Cal.App.4th 195 (“Salmon Protection”), the court explained that CEQA does not prohibit tolling agreements to extend the limitations period, but to be effective they must include the recipient of an approval (the project proponent), the public agency, and the would-be petitioner. Because PG&E was a necessary and indispensable party, it was not bound to the tolling agreement to which it was not a signatory.

The court further reasoned that binding an indispensable party like PG&E to a tolling agreement to which it did not consent would defeat the purpose of the limitations period in Public Resources Code section 21167 to “protect project proponents from extended delay, uncertainty and potential disruption of a project caused by a belated challenge to the validity of the project’s authorization.”

The court also rejected Appellants’ argument that the 180-day limitations period had not run because they did not have constructive notice of the project. Appellants claimed there was no constructive notice because the removal of the trees was not included in the Board’s agenda for the project nor the accompanying description of the Board’s resolution. Public Resources Code section 21167 provides that the 180-day period begins after the agency’s decision or commencement of a project. The court noted that the Supreme Court has held that a public agency’s formal decision to carry out or approve a project is deemed constructive notice for potential CEQA claims. In this case, the court determined that the MOU for funding the tree replacement was consistent with the Board’s resolution and the project as outlined in the staff report, and did not, as Appellants asserted, constitute a “substantial difference” that would not provide constructive notice. The court explained that any flaws in the project approval process do not delay the applicable limitations period where, as here, the public agency gave notice of the very approval Appellants challenged.

The court concluded that the 180-day limitations period thus began to run on March 21, 2017, when the Board made its final decision and expired on September 18, 2017, eleven days before Appellants commenced their action. Therefore, the court held that the CEQA cause of action was properly dismissed as untimely.

– Veronika S. Morrison

THIRD DISTRICT COURT OF APPEAL DISMISSES PETITIONERS’ CHALLENGE TO A MITIGATED NEGATIVE DECLARATION BECAUSE THE CLAIMS DID NOT ESTABLISH A FAIR ARGUMENT OF SIGNIFICANT ENVIRONMENTAL IMPACTS.

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In Newtown Preservation Society v. County of El Dorado (2021) 65 Cal.App.5th 771, the Third District Court of Appeal affirmed the trial court’s decision to uphold El Dorado County’s adoption of a mitigated negative declaration (MND) for a bridge replacement project. In the published portions of the opinion, the court held that Petitioners failed to establish a “fair argument” that the project would have significant environmental impacts. Instead, Petitioners raised concerns regarding existing wildfire hazards that could impact residents near the project, but did not establish that the project may significantly impact the environment by creating or exacerbating wildfire hazards.

Factual and Procedural Background

The County, in preparing the MND, determined that the bridge replacement project could interfere with emergency response or evacuation plans and—as a result—expose people or structures to risk of loss or injury. However, the County also determined that these impacts would not be significant since a temporary evacuation route would be constructed to mitigate the risk. Such a route would only be used for emergency evacuation and, regardless of whether it was in place, any evacuation or emergency orders would be executed as the El Dorado County Sheriff’s Office of Emergency Services saw fit. Additionally, the County consulted with this office as well as the El Dorado County Fire Protection District in preparing the MND and both entities were comfortable with the document’s conclusions and assessments.

The County initially refrained from discussing the temporary evacuation route in detail in its mitigated negative declaration since it was concerned this would “lead people to believe that they should follow a certain evacuation route.” But, as a result of comments raised by one of the petitioners’ counsel and others regarding the possibility of a temporary evacuation route, the County’s responses to comments elucidated its plans and evacuation procedures in greater detail. It outlined several evacuation options given numerous emergency conditions depending on whether the temporary evacuation route was constructed.

After the County adopted the MND, Petitioners filed a writ a mandate, claiming the County failed to 1) properly consider the no-project alternative and 2) “adequately address the impact of closing the bridge without committing to construction of an evacuation route.” Petitioners claimed there was sufficient evidence in the record—including letters, correspondences, and hearing comments—supporting a fair argument that the bridge replacement project would significantly impact public safety. For example, a resident who lived on Newtown Road discussed past fire damage near her home; another resident complained that the County had not determined with finality whether a temporary route would be constructed; and another expressed concern about the effects of wind in the area on fire management; an aerial firefighter argued that recent history of wildfires demonstrated the danger in the County’s temporary evacuation route plans; Ms. Nagel, one of the petitioners, discussed her extensive firefighting experience; and Ms. Nagel’s attorney argued that the County’s MND violated CEQA by deferring important emergency management analysis.

The trial court, however, found that none of the petitioners’ arguments constituted substantial evidence, especially in light of explanatory testimony and responses to comments by the County and its experts, as well as the detailed evacuation options outlined in the MND. Instead, Petitioners’ letters and comments amounted to mere complaints and fears, backed up by speculation and unsubstantiated, non-expert opinion.

The Court of Appeal’s Decision

On appeal, Petitioners argued that the trial court erred in upholding the MND since “substantial evidence supports a fair argument of potentially significant impacts on resident safety and emergency evacuation.” The court noted that evidence supporting a fair argument can be substantial even though other equally compelling evidence may exist to the contrary. Still, the court concluded that Petitioners’ “framing of the fair argument test [was] erroneous. The question is not whether substantial evidence supports a fair argument that the proposed project will have significant impacts on resident safety and emergency evacuation. . . . [T]he question is whether the project may have a significant effect on the environment.” Yet Petitioners failed to identify any potentially significant effects the project might have on the environment and instead merely raised possible increased effects the environment might have on the community as a result of poorer evacuation procedures.

Furthermore, the Court of Appeal, like the trial court, pointed out that substantial evidence must be based on relevant information and facts; or at least reasonable inferences, assumptions, or expert opinion supported by facts. Unsubstantiated opinions, arguments, or speculations generally will not do. The court noted, however, that lay opinion may be considered substantial evidence where expertise is not necessary, which was not the case with the emergency evacuation issues raised by the Petitioners. The Court of Appeal explained again that Petitioners’ cited comments and letters were “mere speculation” and simply “dire predictions by nonexperts” and that they “fail[ed] to identify any factual foundation” for their assertions. Some comments were even directly contradicted by factual evidence in the record. Nowhere did Petitioners establish that any of the individuals whose testimony was cited were experts in evacuation planning. Thus, the court concluded that Petitioners’ claims did not constitute substantial evidence supporting a fair argument that the project may have a significant impact on the environment.

– Blake C. Hyde

Fourth District Court of Appeal Upholds Denial of Anti-SLAPP Motion to Strike Malicious Prosecution Claim in CEQA Lawsuit with Respect to Defendants, but Not Their Attorneys

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In Dunning v. Johnson (2021) 64 Cal.App.5th 156, a project developer (“Cal Coast”) sued defendant Clews Horse Ranch (“the Ranch”) and its attorneys (“attorney defendants”) for malicious prosecution in response to the Ranch’s earlier lawsuit alleging that the City of San Diego violated CEQA by approving and adopting a mitigated negative declaration for Cal Coast’s project. In response, the defendants filed an anti-SLAPP motion, which the trial court denied. The Fourth District Court of Appeal affirmed the motion’s denial with respect to the Ranch, but reversed the denial with respect to the attorney defendants.

Background

In the underlying action, Clews Land and Livestock, LLC v. City of San Diego (2017) 19 Cal.App.5th 161 (“Clews”), Cal Coast sought approval from the city to build and operate a school on its property, adjacent to Ranch property. Concluding that significant environmental impacts either were not present or would be mitigated, the city did not prepare an EIR. Instead, it adopted a MND and approved the project. The Ranch argued that the project would adversely affect the surrounding environment, that it would interfere with the Ranch’s operations, and that the city’s use of a MND was improper. The attorney defendants, on behalf of Ranch, appealed the approval of the project, but failed to timely appeal the city’s adoption of the MND. The city rejected the appeal.

The Ranch then sought a writ of mandate to compel the city to abandon the project and set aside the MND, arguing that the city’s procedure for preparing and adopting the MND violated CEQA. Additionally, it challenged the city’s appeal process for environmental findings. The trial court denied recovery on both procedural and substantive grounds, and the court of appeal affirmed.

Upon the conclusion of Clews, Cal Coast brought a malicious prosecution action against the Ranch and the Ranch’s attorneys, alleging that the CEQA action had been brought for an improper purpose. Cal Coast alleged that the Ranch simply sought to prevent or delay the project and preserve the Ranch owner’s privacy to enable criminal activity on the premises. (The Ranch owner pled guilty and was sentenced to prison in 2018 for child pornography charges.) Cal Coast also argued that the attorney defendants had maintained the case in an effort to force the Project’s abandonment, hoping to avoid a legal malpractice claim or a complaint to the State Bar for their failure to timely appeal the adoption of the MND. The defendants filed an anti-SLAPP motion to strike the malicious prosecution claim. The trial court denied the anti-SLAPP motion and the defendants appealed.

The Court of Appeal’s Opinion

To defeat the anti-SLAPP motion, Cal Coast simply needed to show minimal merit in its malicious prosecution claims that the CEQA action in Clews was brought without probable cause and with malice. This court held that Cal Coast met its burden with respect to the probable cause question. However, it concluded that Cal Coast could only point to evidence of malicious action by the Ranch, and not by the attorney defendants.

The court emphasized evidence in the administrative record showing that the Ranch’s concerns about the project were rooted in its potential impacts on the Ranch specifically, rather than on the environment. The Ranch’s concerns were therefore not within the scope of CEQA. The court additionally noted that the Ranch generally did not point to substantial evidence supporting a fair argument that the project could have a significant environmental impact. Under Preserve Poway v. City of Poway (2016) 245 Cal.App.4th 560, this showing is required to establish a MND’s insufficiency. The speculation, arguments, and opinions posited by the Ranch did not constitute substantial evidence. The court therefore concluded that Cal Coast established a probability for prevailing on the question of probable cause.

The court also noted the Ranch’s aggressive and consistent efforts to oppose any use of the proposed project site, including by prior owners of the property. It thus concluded that Cal Coast introduced sufficient evidence of the Ranch’s malice to survive the anti-SLAPP motion with respect to the Ranch. However, the court determined that there was not sufficient evidence to conclude that the attorney defendants acted maliciously, as there was no indication that the attorneys were actually aware of either the Ranch’s improper motives or the untenability of the Ranch’s claim. Cal Coast’s speculation that the attorney defendants were merely acting to avoid a malpractice claim or a State Bar complaint was insufficient to support a finding that the attorney defendants acted maliciously in maintaining the CEQA claims in Clews.

– Louisa I. Rogers

SB 7 – Jobs and Economic Improvement Through Environmental Leadership Act of 2021

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On May 20, 2021, Governor Gavin Newsom signed Senate Bill (SB) 7, known as the Housing + Jobs Expansion & Extension Act. SB 7 extends the provisions of legislation enacted in 2011 (Assembly Bill 900) that created an expedited judicial review process under CEQA for large development projects that met certain criteria. AB 900 was repealed by its own terms on January 1, 2021.

SB 7 reenacts and updates AB 900 in order to “expedite the development and construction of urgently needed housing, clean energy, low carbon, and environmentally-beneficial projects, and the jobs they create.” The bill notes that numerous large projects under consideration in California have the potential to create thousands of high-skill, high-wage jobs. Many of these projects will replace old and outdated facilities with newer, cleaner, and innovative facilities that will lead the nation in environmental impact mitigation and reduction.

Thus the bill streamlines and facilitates development projects in a number of ways. First, the Governor may certify a project before the lead agency certifies a final EIR. Second, the environmental review, administrative process, and record of proceedings may be prepared concurrently. Third, the project applicant must agree to pay trial court costs if the lead agency’s certification is challenged. Fourth, to the extent feasible, judicial review of lead agency action must conclude within 270 days once commenced. Finally, the Bill extends the benefits of AB 900 to those projects that were certified by the Governor before AB 900’s expiration and by the lead agency within one year of AB 900’s expiration.

In order to be eligible for streamlined certification, a project must fall into at least one of the following categories. It must be on an infill site, certified as LEED Gold (or better), and able to achieve a 15% improvement in transportation efficiency. Or it must be a clean energy project that either generates power exclusively through wind or solar energy or manufactures equipment used in renewable energy production. Or it must be a housing project on an infill site that will dedicate at least 15% of the development to affordable and low-income housing. Although it may include mixed-use development—assuming at least two-thirds is residential—or transitional housing, no part of a certified housing project may be used for transient lodging, manufacturing, or industrial uses.

Regardless of the category it falls into, the project must meet certain criteria. First, it must result in at least $100 million in investment in California (except for housing projects, which must result in an investment of between $15 million and $100 million). It must also create high-wage and high-skill jobs that help reduce unemployment and encourage apprenticeship training. And, at a minimum, it must not lead to a net increase in greenhouse gas emissions, including from employee transportation. Finally, the project applicant must agree to monitoring and enforcement of its mitigation efforts by the lead agency.

SB 7 aims to boost California’s economic recovery by creating more and better housing and jobs, and doing so in an environmentally sustainable way. As Governor Newsom noted when he signed the legislation, “California’s recovery from the pandemic must tackle the housing shortage that threatens our economic growth and long-term prosperity. Cutting red tape to save time and remove barriers to production helps us meet the urgent need for more housing while creating good jobs and preserving important environmental review.” Indeed, AB 900 had already led to roughly twenty major clean energy and housing projects, 10,000 housing units, and thousands of high paying jobs. Proponents of SB 7 hope its passage will continue this trend.

The Governor’s press release is available here: https://www.gov.ca.gov/2021/05/20/in-san-jose-governor-newsom-signs-legislation-to-fast-track-key-housing-economic-development-projects-in-california/

– Blake C. Hyde

First District Court of Appeal Reverses Denial of Mixed-Use Affordable Housing Project’s Ministerial Approval Under Government Code Section 65913.4

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In Ruegg & Ellsworth v. City of Berkeley (2021) 63 Cal.App.5th 277, the First District Court of Appeal reversed the trial court’s denial of appellants’ petition filed after their application for ministerial approval of a mixed-use affordable housing development was denied under Government Code section 65913.4. Finding that the trial court improperly applied a deferential standard of review, the court held that the ministerial approval did not conflict with the City’s “home rule” authority over historic preservation or commercial uses and did not involve demolition of a historic structure that was placed on a historic register.

Background

In 2015, appellants submitted an application for a mixed-use development (the “Project”) in the City of Berkeley (the “City”). The Project is located in the West Berkeley Shellmound, an area designated as a City of Berkeley Landmark and listed in the California Register of Historical Resources. The Shellmound is a sacred burial ground from early native habitation and includes subsurface artifacts, but no above ground buildings or structures. In November 2016, the Berkeley Planning and Development Department (the “Department”) prepared a Draft Environmental Impact Report for the Project application, which concluded that the Project’s impacts on the Shellmound would be reduced to less-than-significant with mitigation measures.

On January 1, 2018, Senate Bill (“SB”) 35 went into effect, which added section 65913.4 to the Government Code. Section 65913.4 requires a streamlined ministerial approval process and an exemption from a conditional use permit for certain affordable housing projects when a locality has failed to provide its share of “regional housing needs, by income category.” In March 2018, appellants submitted an application pursuant to section 65913.4 for the development of 260 dwelling units, 50 percent of which would be “affordable to low-income households,” and retail space and parking. In April 2018, appellants asked the City to suspend processing of the use permit and California Environmental Quality Act documentation for the Project.

On June 5, 2018, the Department provided appellants with the required written response pursuant to section 65913.4, subdivision (b)(2), stating that SB 35 does not apply to the Project because it impinges on “legitimate municipal affairs”— the preservation of a designated City landmark. The Department nonetheless explained that several components of the application were inconsistent with the criteria for approval under section 65913.4. The Department denied the application for ministerial approval after appellants responded to each of the City’s points. Appellants subsequently filed suit.

The Court of Appeal’s Opinion

Demolition of a Historic Structure

The court determined that section 65913.4 is not a historical preservation statute and the term “structure” in section 65913.4, subdivision (a)(7)(C) does not include historical resources or sites. The court reasoned that section 65913.4 thus protects cultural resources differently from historic structures placed on a historic register; a project that threatens the former may obtain ministerial approval if there are no tribal objections, while the latter is ineligible for ministerial approval. While the court acknowledged that the Shellmound is an important historical and cultural resource, it concluded there is no evidence that it is a structure, let alone one that could be demolished by the Project.

Retroactive Application of AB 831’s Tribal Cultural Resource Protections

The court also refused to apply Assembly Bill (“AB”) 831’s tribal cultural resource protections retroactively to the Project application. It determined that the Legislature deliberatively allowed for some projects to proceed without tribal consultation to account for the interests of those who relied on section 65913.4 prior to AB 831’s effective date. The court held that it would be contrary to the Legislature’s intent and manifestly unfair to apply AB 831 retroactively.

The City’s “Home Rule” Authority Over Historic Preservation

Emphasizing the Legislature’s long history of frustration with local governments’ interference with addressing the statewide housing crisis, the court concluded that applying section 65913.4 would not interfere with the City’s “home rule” authority over historic preservation. Determining whether a matter falls within a charter city’s authority to govern itself free of state legislative intrusion requires the court to consider four issues: (1) whether the city ordinance at issue regulates an activity that can be characterized as a municipal affair; (2) whether there is an actual conflict between local and state law; (3) whether the state law addresses a matter of statewide concern; and (4) whether the law is reasonably related to resolution of that concern and narrowly tailored to avoid unnecessary interference in local governance.

The court dismissed the first three parts of the “home rule” test as essentially undisputed. As for the fourth part of the test, the court determined that section 65913.4 is reasonably related to resolving the statewide interest it addresses—affordable housing—and does not unduly interfere with the City’s historical preservation authority. Citing the legislative findings in Government Code section 65589.5, the court concluded that section 65913.4 is narrowly tailored because historical preservation is precisely the kind of subjective discretionary land use decision that the Legislature sought to prevent localities from using to defeat affordable housing development.

Applicability to Mixed-Use Developments

The court held that section 65913.4 applies to mixed-use development projects. The court rejected respondents’ argument that the statute is limited to projects located on sites that meet the minimum residential requirement for mixed-use developments, rather than the actual development that is the subject of the ministerial approval application. The court concluded that the Project at issue satisfied the two-thirds residential requirement, as it includes a residential area that would occupy 88 percent of the development space. The court further explained that regardless of whether the Project should be deemed consistent with this requirement, it is consistent with the standard due to the Department’s failure to timely raise any conflict with respect to the mixed-use aspect of the application in its letter.

The City’s “Home Rule” Authority to Regulate Commercial Uses

The court rejected respondents’ argument that applying section 65913.4 to mixed-use developments interferes with the City’s authority to regulate commercial uses. Applying the “home rule” test, the court found that any interference of section 65913.4 with the local regulation of commercial uses is minimal and incidental to the statute’s purpose of facilitating development of affordable housing. The court acknowledged that the overall Project would not be subject to a conditional use permit, but nothing in the statute permits ministerial approval of a Project with commercial uses that conflict with local zoning.

Conflict with the City’s AHMF and Traffic Capacity Requirements

The court also concluded that respondents’ Affordable Housing Mitigation Fee (“AHMF”) requirements and traffic zoning standards did not provide a sufficient basis for denial of ministerial approval. The court reasoned that the statewide interest served by section 65913.4 should not be defeated by the local AHMF ordinance, which requires a lower percentage of low-income housing than the Project involves. Additionally, the court determined that the traffic zoning standards did not constitute “objective standards” pursuant to section 65913.4 and the City failed to provide adequate written documentation of potential conflicts with any specific criterion for measuring traffic impacts.

Third District Court of Appeal Holds That a Responsible Agency’s Decision to Prepare a Supplemental EIR Does Not Require It to Step in as a Lead Agency

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In California Coastkeeper Alliance v. State Lands Commission (2021) 64 Cal.App.5th 36, the court upheld the State Lands Commission’s decision to prepare and approve a supplemental Environmental Impact Report for the proposed Lease Modification Project for the Poseidon desalination plant in Huntington Beach, California. The court concluded that the Commission did not engage in piecemealing, improper deferral of environmental review or inadequate consideration of alternatives, and was not required under California Code of Regulations, title 14, section 15052, subdivision (a)(2) (“CEQA Guidelines”) to step in as the lead agency for the lease modification.

Background

In 2010, the City of Huntington Beach approved a subsequent EIR to the initially certified 2005 EIR for the desalination project. There were no legal challenges to the 2010 subsequent EIR.

In 2015, the State Water Resources Control Board amended its Water Quality Control Plan to include a Desalination Amendment, which updated methods for intake and discharge systems in desalination facilities. The Desalination Amendment also required the Regional Water Quality Control Board to conduct an analysis under Water Code section 13142.5, subdivision (b) of all new and expanded desalination facilities and required that the owner or operator evaluate a reasonable range of nearby sites for subsurface intakes. In response, Poseidon modified the project in 2016 and 2017 to include (1) one-millimeter steel screens on the offshore intake pipeline to reduce impingement and entrainment; (2) three-port diffusers to diffuse brine discharge reentering the ocean; and (3) a reduction of the seawater intake volume of the Project by 45.3 million gallons per day.

In 2017, the Commission, as a responsible agency, elected to prepare a supplemental EIR for the proposed lease modification project, which incorporated the 2010 subsequent EIR by reference. California Coastkeeper Alliance filed a petition for writ of mandate challenging the certification of the 2017 EIR.

The Court of Appeal’s Opinion

Decision to Prepare a Supplemental EIR

The court determined that substantial evidence supported the Commission’s decision to prepare a supplemental EIR instead of a subsequent EIR. Pursuant to CEQA Guidelines section 15163, the 2017 version of the project consisted of only minor additions or changes from the 2010 version. Therefore, the Commission did not prejudicially abuse its discretion.

Assuming the Lead Agency Role

Rejecting the petitioners’ contention that the Commission was required to assume lead agency status under CEQA Guidelines section 15052, the court concluded that this requirement was inapplicable. A proper determination to prepare a supplemental EIR, rather than a subsequent EIR, removes the subsequent environmental review from the scope of CEQA Guidelines section 15052. Thus, the Commission was not required to step in as the lead agency. The court also rejected the petitioners’ argument that the Commission “acted like” a lead agency during the review process, stating that it acted like a responsible agency because a supplemental EIR is subject to the same notice and public review requirements as the initial draft EIR.

Piecemealing

Petitioners claimed that the Commission illegally piecemealed the project by only reviewing the lease modification project, and not the entire desalination project. The court explained, however, that the 2017 EIR incorporated by reference the 2010 EIR, which was never challenged and thus presumed to comply with CEQA for purposes of use by the Commission. The Commission was thus only required to analyze the changes to the project since the 2010 subsequent EIR, which it did. Further, the court rejected the petitioners’ contention that the Commission deferred parts of the environmental review analysis to other agencies. Again, the Commission satisfied its requirements by analyzing the impacts associated with the proposed enhancements to the project in combination with the previously analyzed impacts.

Consideration of Alternatives and Current Conditions

Petitioners also challenged the Commission’s consideration of alternatives to the project on several grounds, all of which the court rejected. Pursuant to CEQA Guidelines section 15126.6, the court concluded that the 2017 supplemental EIR considered a reasonable range of alternatives, including an intake pipeline extension and a two-port brine diffuser. The court held that the Commission was not required to reevaluate alternatives that were considered and rejected in the 2010 subsequent EIR, nor was it required to consider alternatives beyond those relevant to the proposed modifications.

The court also dismissed the petitioners’ assertion that changes in Orange County’s water needs supplanted the need for the project because they failed to lay out evidence in support of their position, which was fatal to their claim. Even if they had provided evidence in support of their claim, the court reasoned, substantial evidence in the record supported the Commission’s conclusion that Orange County still needed the project to add to its water supply.

Lastly, the court determined that the Commission was not required to consider the Orange County Water District’s (“OCWD”) construction of a new water distribution option involving injection wells and pipelines as a reasonably foreseeable project change. Based on the record, the court concluded that any consideration by OCWD of a different water distribution system than what was reviewed in the 2010 EIR was merely speculative and not reasonably foreseeable. The court held that the Commission had no way to know the particulars of a potential new distribution system, and therefore an EIR could not provide meaningful information on such a speculative change.

First District Court of Appeal Rejects CEQA Claims for Failure to Exhaust Administrative Remedies and Finds General Plan Arguments Not a CEQA Issue

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In Stop Syar Expansion v. County of Napa (2021) 63 Cal.App.5th 444, a partially published opinion, the First District Court of Appeal upheld the trial court’s denial of a writ petition challenging the EIR for an expansion of Syar Industries, Inc.’s aggregate operation in Napa County. The court concluded that the petitioner, Stop Syar Expansion (SSE), failed to exhaust its administrative remedies because it did not comply with Napa County’s local appellate procedures. In addition, the court held that SSE’s argument that the project is inconsistent with the County’s General Plan was not a CEQA issue and SSE therefore failed to properly raise the issue. Further, the court determined that SSE’s argument lacked merit because the County had adequately addressed potential inconsistency issues and reached a reasonable conclusion that the project was consistent with the General Plan.

Exhaustion Doctrine

Citing Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577 (“Tahoe Vista”), the court emphasized that the burden is on the petitioner in a CEQA case to demonstrate that it exhausted its administrative remedies prior to filing suit by complying with the procedures applicable to the public agency in question. SSE was therefore required to demonstrate that it complied with the procedures in chapter 2.88 of the Napa County Code of Ordinances by timely filing a notice of intent to appeal and timely submitting an appeal packet which specifically identified the grounds it raises in its petition. The court noted that a list of string-cites to the administrative record without explanation as to how each citation supports the assertion the public agency was fairly apprised of the asserted noncompliance with CEQA, is not sufficient to meet the petitioner’s burden.

Consistency with the County’s General Plan

The court also addressed SSE’s contention that the EIR failed to consider whether the project was consistent with the County’s General Plan. The court held that the issue, as presented by SSE, was not a CEQA issue. Thus, the mandate procedures provided for CEQA violations under Public Resources Code section 21168.9 did not apply. SSE was therefore required to assert this cause of action under Code of Civil Procedure section 1085 for ordinary mandamus. SSE failed to ask for leave to amend its writ petition to add a cause of action under section 1085 in the trial court, and therefore, the claim was not properly before the court.

Further, the court noted, the standard of review for an agency’s consistency determination with its own General Plan is highly deferential to the agency. Such a decision can only be reversed if it is based on evidence from which no reasonable person could have reached the same conclusion. The court concluded that SSE did not make any General Plan inconsistency arguments based on this applicable standard of review. The court rejected SSE’s contention that it was not challenging the County’s substantive consistency determination and that a different standard of review should apply because SSE had argued that the EIR failed to disclose inconsistencies with the General Plan.

Finally, even if SSE had made its arguments under the proper standard—which the court reiterated it did not—the court held that the County addressed the project’s consistency with the General Plan at length in both the EIR and in a “General Plan Consistency Analysis.” The court concluded by noting that it is not the court’s place to “micromanage” the County’s determination whether a project is consistent with its own General Plan.

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