Fifth District determines city improperly delegated authority under CEQA but affirms city’s characterization of historical status of buildings

The Fifth District Court of Appeal addressed two main issues under CEQA: (1) delegation of a lead agency’s authority, and (2) the standard of review to apply when reviewing an agency’s characterization of a resource as historical or not. (Citizens for the Restoration of L Street v. City of Fresno (Aug. 29, 2014) Case No. F066498.)

The City of Fresno approved infill construction of 28 two-story townhouses on about 1.25 acres of land in the city’s downtown area. Two old houses—constructed in 1906 and 1910—were located on the project site. One house was a designated Heritage Property by the Preservation Commission, and the other house had no historical designation. Both were in a significant state of disrepair and had lost considerable integrity as historical structures. As a result, the Commission determined the homes were not worth preserving; indeed, the homes were offered for sale for one dollar each, and no buyers showed interest. So, as part of the infill project, the city proposed issuing demolition permits for the two structures.

The city prepared an initial study and mitigated negative declaration for the infill project, and issued a notice of intent to adopt the MND in June 2011. The notice did not identify the necessity of development permits or the decisionmaking body approving the demolition, or discuss that the Preservation Commission would have any role in the CEQA review process. The Preservation Commission took the lead in the certification of the MND and determined the two buildings on the project site were not historic. The Commission also certified the MND. Citizens appealed this decision to the City Council, which upheld the Commission’s certification. Citizens filed suit.

The Delegation Issue

On appeal, Citizens renewed its successful argument from below that the Preservation Commission did not have the authority to act as the city’s decisionmaking body for the purpose of certifying the MND. The appellate court turned to the city’s municipal code for guidance to determine if the Commission could be characterized as the decision-making body under CEQA Guidelines § 15356. The court determined that the municipal code did not explicitly grant the Commission the authority to approve the environmental review documents concurrently with the other project-related approvals (though the court noted that the city could adopt such an ordinance expressly granting the Commission this authority).

Due to the structure of the city’s municipal code and the approval process here, the court concluded that the city improperly split responsibility for approval of the project and certification of the environmental review. When this project was on appeal to the city council, the city council was not reviewing the demolition permits or CUPs issued for the project by the Preservation Council. Instead, the city was only reviewing the Commission’s decision to certify the MND. Therefore, the city council was not acting as the final, independent decisionmaking body for the project and the MND, as CEQA requires. The court also found the city’s notice for the public review period of the MND to be inadequate. Finally, the court determined that the city council did not explicitly address and adopt the findings required by CEQA Guidelines section 15074, and Public Resources Code section 21082.1.

The Historic Resource Designation Issue

On the issue of the appropriate standard of review to apply to an agency’s characterization of a building or site as historical or not, the court sided with the city. The court, relying on its prior analysis in Valley Advocates v. City of Fresno (2008) 160 Cal.App.4th 1039, concluded that the substantial evidence standard of review applied. Citizens urged the court to apply the fair argument standard instead.

Citizens suggested that the city’s characterization of the buildings should be reviewed under the fair argument standard because the city adopted a MND, which is reviewed under the fair argument standard. But the court explained that the Legislature adopted a specific section in CEQA (§ 21084.1) addressing historical resources. Final discretionary decisions about whether a building or site is historical are to be made during the early stages of environmental review, and since the Legislature allowed lead agencies to make discretionary decisions regarding the historic significance of resources before preparing CEQA review, application of the fair argument standard in these situations would be contrary to Legislature’s intent. An agency cannot freely exercise discretion when taking action if courts review that action as a matter of law, like under the fair argument standard. For these reasons, the court affirmed the application of the substantial evidence test to the city’s determination that the project would have no impacts on historical resources.

Conclusions and analysis

This case follows other recent cases where courts have faulted lead agencies for splitting approval of project elements, such as CUPs or permits, from certification of the project’s environmental analysis. Interestingly, the Fifth District declined to note that the bifurcated situation in this case was created by Citizens’ failure to appeal both the demolition permits and the MND to the city council. But even though Citizens only appealed the MND, arguably failing to exhaust its administrative remedies on the other issues, the court still held the city responsible for the procedural error in the approval process. This outcome sends a clear warning to lead agencies to be vigilant about ensuring the final, decisionmaking body has the discretionary authority to act on project approvals and the project’s environmental review document. The decision also affirms the Fifth District’s prior analysis in Valley Advocates with regard to agency determinations of whether buildings or sites are historic.