In a partially published decision issued on October 3, 2019, the Third District Court of Appeal affirmed a judgment upholding an EIR for a Walmart expansion project in Chico against challenges to the EIR’s urban decay analysis. (Chico Advocates for a Responsible Economy v. City of Chico (2019) 40 Cal.App.5th 839.)
In 2015, Walmart applied to the city to expand its existing Chico store in a regional retail center that includes the Chico Mall and several national chain retail stores. A FoodMaxx grocery store is also nearby. Walmart planned to expand its existing store by approximately 64,000 square feet, add an eight-pump gas station, and create two new outparcels for future commercial development. Approximately 49,000 square feet of the new space would be used for grocery-related sales.
The city prepared an EIR for the project that included, among other things, a “robust 43-page urban decay analysis.” The urban decay analysis was supported by a 123-page expert study prepared by ALH Urban & Regional Economics. The purpose of the ALH study was to assess the economic impact of the project on retailers in the surrounding area and to evaluate the extent to which the project could contribute to store closures and urban decay. For purposes of the study, “urban decay” was defined as “visible symptoms of physical deterioration . . . that is caused by a downward spiral of business closures and long term vacancies . . . [and]. . . so prevalent, substantial, and lasting for a significant period of time that it impairs the proper utilization of the properties and structures, and the health, safety, and welfare of the surrounding community.”
The ALH study concluded that, on its own, the project would have a negligible impact on sales for competing retailers and that store closures were not expected to follow. Based on these findings, the EIR concluded that the project would not cause the type of severe economic effects that would lead to urban decay. With regard to cumulative impacts, the ALH study concluded that the project, when combined with other planned retail projects in the area, could induce the closure of one full-service grocery store. The city’s retail vacancy rate, however, would only increase by approximately one percent and would remain “well within the range of a robust, healthy commercial retail sector.” The EIR further explained that Chico has a strong history of “backfilling” store vacancies, that existing vacant properties are well-maintained, and that the city has regulations to prevent decay and blight. For these reasons, the EIR concluded that although some economic impacts were expected, cumulative impacts likely would not result in urban decay.
Following the city’s certification of the EIR, Chico Advocates for a Responsible Economy (CARE) challenged the urban decay analysis in an administrative appeal to the city council. CARE supported its challenge with its own “retail expert” report refuting the city’s analysis. The city council denied the appeal. CARE then filed a petition for writ of mandate seeking to rescind the EIR and project approvals. The trial court denied the petition in full and CARE appealed.
On appeal, CARE challenged the EIR’s urban decay analysis on two grounds. First, CARE argued that the EIR relied on an “unnaturally constrained” definition of “urban decay” and, as a result, failed to treat the loss of “close and convenient shopping” as a significant environmental impact. Second, CARE argued that, due to flaws in the ALH study’s methodology, the EIR’s urban decay findings were not supported by substantial evidence.
Addressing the first issue, the court began its discussion by explaining the applicable standard of review for allegations that an EIR failed to include necessary information. Citing the Supreme Court’s recent decision in Sierra Club v. County of Fresno (2018) 6 Cal.5th 502, the court explained that CARE’s argument presented the predominantly legal question of whether the EIR included enough detail “to enable those who did not participate in its preparation to understand and consider meaningfully the issues raised by the proposed project,” which is subject to independent review. On this issue, the court found “CARE’s argument lacks merit – the City did not violate CEQA because the potential loss of close and convenient shopping is not an environmental issue that must be reviewed under CEQA.” “CEQA is concerned with physical changes in the environment,” the court explained, and “[a]lthough the loss of close and convenient shopping could impact some Chico residents psychologically and socially, such impacts are not, by themselves, environmental impacts.”
Next, the court turned to CARE’s attack on the methodology for the urban decay analysis. CARE alleged three flaws with the urban decay study’s methodology. First, CARE argued that the study relied on incorrect assumptions for calculating the anticipated grocery sales. Second, CARE argued that the study underestimated impacts on Chico stores by incorrectly assuming shoppers from the neighboring Town of Paradise would patronize the Walmart. Lastly, CARE argued that the study incorrectly assumed economic impacts would be spread amongst existing stores, rather than concentrated on the closest competitor – the FoodMaxx grocery.
In rejecting each of CARE’s arguments, the court explained that challenges to the EIR’s methodology are reviewed under the substantial evidence standard. Under this standard, challenges to the EIR’s methodology “must be rejected unless the agency’s reasons for proceeding as it did are clearly inadequate or unsupported.” Moreover, the court explained, when an agency is faced with conflicting evidence on an issue, it is permissible to give more weight to some evidence than others – mere “disagreement among experts” does not render an EIR inadequate.
In this case, the court concluded that CARE’s challenge amounted to “nothing more than differences of opinion about how the Project’s expected grocery sales should be estimated, how the Project’s market area should be defined, and which competitors are most susceptible to impacts from the Project.” These differences in opinion, the court explained, did not render the EIR’s analysis clearly inadequate or unsupported. Therefore, CARE’s challenge failed under the substantial evidence test.
The court further noted that although CARE’s own expert report showed additional store closures would occur, CARE failed to demonstrate how such closures would lead to urban decay. As the court explained, “Store closures, by themselves, do not amount to urban decay.”