Supreme Court Holds State Agencies Cannot Decline to Make Fair-Share Mitigation Payments Where Legislature Does Not Appropriate Funds for Such Mitigation

On August 3, 2015, the California Supreme Court issued an opinion for City of San Diego v. Board of Trustees of the California State University, Case No. S199557. The Court addressed the following issue:

Does a state agency that may have an obligation to make “fair-share” payments for the mitigation of off-site impacts of a proposed project satisfy its duty to mitigate under the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) by stating that it has sought funding from the Legislature to pay for such mitigation and that, if the requested funds are not appropriated, it may proceed with the project on the ground that mitigation is infeasible?

The Court answered in the negative. It held that a state agency may not condition its contribution to off-site mitigation on earmarked appropriations, to the exclusion of other available sources of funding, and then find mitigation infeasible solely upon denial of Legislative funding.

Facts and Procedural Background

In 2005, the California State University (CSU) Board of Trustees (Board) prepared an EIR for a project to expand the campus of San Diego State University (SDSU) to accommodate over 10,000 additional students over the next several years. The project would contribute significantly to traffic congestion off-campus in the City of San Diego. The EIR identified improvements that would avoid most traffic impacts, and calculated CSU’s “fair share” for the cost of the improvements. But the EIR stated payment of fair-share funding was conditioned on requesting and obtaining funds from the California Legislature. If the Legislature did not appropriate the money, then the funding would not be provided and impacts would be significant and unavoidable. The Board asserted that any contribution of its own funds for off-site mitigation would amount to a prohibited assessment of state property and an unlawful gift of public funds, and thus concluded that the SDSU was not legally responsible for funding or constructing road improvements. The Board received criticism from the City on this approach. In response, the Board committed to ask for the appropriations, but also conditioned its fair-share payment on receiving those funds.

The trial court held the Board had complied with the Supreme Court decision in City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341 (City of Marina), where the Court wrote that “a state agency’s power to mitigate its project’s effects through voluntary mitigation payments is ultimately subject to legislative control; if the Legislature does not appropriate the money, the power does not exist.”

The Fourth District Court of Appeal reversed. It held the Board had violated CEQA by failing to consider alternative approaches to making fair-share payments for off-site traffic impacts, and by assuming an appropriation from the State Legislature was the only means of making such payments. The Court ruled the Board had an obligation to consider other ways of raising the money necessary to pay its fair share for these improvements. The court dismissed the cited City of Marina passage as misconstrued dictum. It noted that no law precluded the Board from using non-legislatively-appropriated funding for making voluntary mitigation payments, and thus held the availability of potential sources of funding other than the Legislature should have been addressed in the EIR before being deemed infeasible.

Meanwhile, the Board requested $10.5 million in funding for the off-site environmental impacts at SDSU in three separate years, but received no legislative appropriations.

Supreme Court Decision

The Supreme Court considered whether the dictum in City of Marina supported the Board’s assumption that CSU may not contribute its fair share to mitigate the off-campus environmental effects of campus expansion unless the Legislature makes an appropriation for that purpose. The Court concluded the cited passage did not justify the Board’s arguments, and that the Board’s other, later-raised contentions under the Education Code and Government Code also lacked merit.

The Court noted that a lead agency may disclaim responsibility for mitigating effects on regional infrastructure only when another agency has exclusive responsibility for such effects. Otherwise, CEQA does not limit a public agency’s obligation to mitigate or avoid significant environmental effects to those effects occurring on the agency’s own property.

In any case, the dictum in City of Marina did not justify the Board’s position that the University may contribute funds for off-campus environmental mitigation only through an appropriation designed for that specific purpose. The Court characterized its prior proclamation that “if the Legislature does not appropriate the money, the power does not exist” as a mere overstatement. In mitigating the effects of its projects, the Court explained, a public agency has access to all of its discretionary powers and not just the power to spend appropriations. Indeed, all but one of the new physical facilities proposed in the EIR were to be financed with nonappropriated funds.

Furthermore, the Board’s interpretation of the City of Marina dictum depended on a legally erroneous distinction between environmental impacts occurring on the project site and those occurring off-site. CEQA does not draw such a distinction with regard to mitigation.

The Court laid out the unreasonable consequences that would ensue under the Board’s proposed rule. For one, it would force the Legislature “to sit as a standing environmental review board to decide on a case-by-case basis whether state agencies’ projects will proceed despite unmitigated off-site environmental effects.” The cost of addressing the project’s cumulative impacts on local infrastructure would fall on local and regional government agencies. Off-site mitigation would likely be found infeasible for many, if not all, state projects that receive non-state funding. And, in any event, the Court could not compel the Legislature to make such appropriations.

In summary, adopting the Board’s proposed rule would substantially impair the fundamental statutory directive that each public agency shall mitigate or avoid the significant effects on the environment of projects it carries out or approves whenever it is feasible to do so. The Court emphasized that while education may be CSU’s core function, avoidance or mitigation of the environmental effects of its projects is also one of its functions—and is “the plain import of CEQA.”


The opinion is located here.