Berkeley Hillside Preservation et al., v. City of Berkeley et al., (Feb. 15, 2012) __Cal.App.4th__ (Case No. A131254)
(May 23, 2012, Petition for Review granted; CA Supreme Court Case No. 201116)
On February 15, 2012, the First District Court of Appeal ruled that the City of Berkeley violated CEQA when it approved the construction of a single-family residence based on a determination that the project qualified for a categorical exemption. Applying the “fair argument” standard to its review of the City and trial court’s contrary conclusion, the court held that an exception to the categorical exemption applied because substantial evidence of a fair argument that the project would have significant environmental impacts had been presented.
Factual and Procedural Background
In 2009, a property owner filed an application for a use permit with the City of Berkeley to demolish a single-family dwelling on a 30,000-square-foot lot in Berkeley and replace it with a new home. The application indicated the new dwelling would be a 6,478-square-foot home with an attached 3,394-square-foot garage on a Berkeley hillside.
Berkeley’s Zoning Adjustment Board approved the project without requiring an EIR because it found that the proposed construction was categorically exempt from CEQA pursuant to CEQA Guidelines sections 15332 (In-Fill Development Projects) and 15303, subdivision (a) (New Construction or Conversion of Small Structures, single-family residence). The board determined that the proposed project did not trigger any of the exceptions to the exemptions under CEQA Guidelines section 15300.2. Specifically, the board concluded that the “unusual circumstances” exception did not apply because the proposed construction would not have any significant effects on the environment due to “unusual circumstances.”
An appeal was filed with the board, arguing that the unusual circumstances exception should apply because the proposed dwelling would be one of the largest houses in the city. The city responded to the appeal with its own evidence of comparable sized “dwellings” in the city and the project vicinity. Appellants further challenged the board’s finding that the proposed construction was categorically exempt from CEQA, arguing the project’s unusual size, location, nature and scope may have a significant impact on its surroundings and therefore that an EIR was required to evaluate the proposed construction’s potential impact on noise, air quality and neighborhood safety.
The city received numerous letters supporting and opposing the appeal. One letter supporting the appeal was submitted by a geotechnical engineer specializing in foundation engineering and construction. The engineer argued that the project would require significant grading and extensive trucking operations and concluded the project would likely have significant environmental impacts. A geotechnical engineer for the project proponent disagreed with these findings, noting that the opposing engineer appeared to have relied upon incorrect, outdated project plans and presented evidence that the project would not have a significant impact.
After receiving a supplemental report and hearing arguments from both sides, the city adopted the findings made by the board, affirmed the decision not to require an EIR, and approved the use permit. Appellants filed a petition for writ of mandate, which the trial court denied after concluding that there was substantial evidence in the administrative record to support the city’s determination that the infill and new construction categorical exemptions applied to the proposed construction.
The trial court denied the writ despite finding that the project presented unusual circumstances and finding that the proposed construction would cause significant environmental impacts. The trial court applied a two-part test established in Banker’s Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego (2006) 139 Cal.App.4th 249, 278. Under Banker’s Hill, when considering whether to apply the “unusual circumstances” exception, a court is required to determine: (1) whether the project presents “unusual circumstances” and (2) whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances.” (Banker’s Hill, Hillcrest, Park West Community Preservation Group v. City of San Diego, supra, 139 Cal.App.4th 249, 278 (original italics).) In emphasizing that each step is an independent element, Banker’s Hill stated that, “[a] negative answer to either question means the exception does not apply.” (Id.) Applying this test, the trial court held that, although there were unusual circumstances were present and the project could have significant impacts, the proposed construction did not trigger the exception to the exemptions because the possible significant impacts were not due to the unusual circumstances.
Court of Appeal Decision
On appeal, Appellants conceded that the proposed construction was subject to the two CEQA categorical exemptions. Appellants argued, however, that the “unusual circumstances” exception to the exemptions should apply. CEQA Guidelines section 15300.2, subdivision (c), provides that an activity which would otherwise be categorically exempt is not exempt if there are “unusual circumstances” which create a “reasonable possibility” that the activity will have a significant effect on the environment.
The Court of Appeal reversed the trial court’s decision denying the writ. It held that where there is substantial evidence that a proposed activity may have an effect on the environment, an agency is precluded from applying a categorical exemption. “The fact that proposed activity may have an effect on the environment is itself an unusual circumstance, because such action would not fall ‘within the class of activities that does not normally threaten the environment,’ and thus should be subject to further environmental review.”
The Court of Appeal found Appellants had presented substantial evidence of a fair argument that the proposed construction would have a significant effect on the environment. This alone was enough for the unusual circumstances exception to apply. The court relied heavily on the letter submitted by the geotechnical engineer in opposition to the project. The court noted contrary evidence was not adequate to support a decision to dispense with an EIR. As a result of the substantial evidence in the record supporting a fair argument that the project would have a significant impact, the application of a categorical exemption was inappropriate. The Court of Appeal, therefore, ordered the prior judgment reversed, and directed the trial court to order the preparation of an EIR.
By taking this approach, the Court of Appeal essentially rejected the two-part Banker’s Hill test. Interestingly, however, the court did not expressly state that it was rejecting the Banker’s Hill test. To the contrary, it proclaimed in the decision that “[the] conclusion that the unusual circumstances exception applies whenever there is substantial evidence of a fair argument of a significant environmental impact is  not inconsistent with Banker’s Hill.” (A previous error in this statement was corrected by a modification issued by the Court of Appeals on March 7, 2012.)
Despite the Court of Appeal’s statement otherwise, the decision is not consistent with Banker’s Hill. The court’s holding that the unusual circumstances exception will apply whenever there is substantial evidence of a fair argument that a proposed project will have a significant effect on the environment is contrary to Banker’s Hill and significantly limits the availability of categorical exemptions under CEQA. The apparent split in authority creates substantial uncertainty for the future application of categorical exemptions.