Save Tara v City of West Hollywood, ___ Cal. 4th ___ (Oct. 30, 2008, Case No. S151402)
In this case, the California Supreme Court invalidated agreements by the City of West Hollywood (“City”) for a housing project that was conditioned on future environmental review. The court avoided establishing a bright-line rule that would define CEQA approvals as either entering into any agreement for development of a well-defined project, or the execution of unconditional agreements that irrevocably vest development rights. Instead it articulated the general principle that before conducting CEQA review, agencies must not take any action that significantly furthers a project in a manner that forecloses alternatives or mitigation measures that would ordinarily be part of CEQA review of the project. Surrounding circumstances along with the agency’s agreements should be evaluated by the courts when applying this general principle. To assist in making the determination, the court set forth a two-step approach: (i) whether the agency, in taking action indicates it will perform environmental review before making any further commitment to the project, and if so, whether the agency nevertheless limits its discretion regarding environmental review; and (ii) whether the record shows the agency committed significant resources to shape the project and thereby foreclosed consideration of meaningful alternatives.
The site for the project contained a large colonial style home with an estate‑like appearance nicknamed “Tara” that had been designated a “local cultural resource” by the City in 1994. Tara was donated to the City in 1997, conditioned on the owner being allowed to reside there until death and the owner’s tenants (at least four apartments existed on the property) having six months to vacate following the owner’s death.
After the death of Tara’s owner in 2000, non-profit developers secured the City’s support for conversion of Tara into a 35-unit, low-income senior housing project. The City planned to provide the land at a discounted value and other funds for a combined contribution of $2.5 million. In June 2003, the city council granted the developers an option to acquire the property, thereby allowing the developers to demonstrate control of the site in their federal HUD grant application. Late in 2003, HUD provided a $4.2 million grant, which triggered enthusiastic statements by the City about the project and the commencement of tenant relocation plans. In April 2004, the City provided notice of the city council’s plans to enter into an agreement to facilitate development of the project “subject to environmental review.”
Project opponents called “Save Tara” wrote the City arguing that before the City could enter into the agreement, CEQA required preparation of an environmental impact report (EIR). On May 3, 2003, the city council approved entering into a “Conditional Agreement for Conveyance and Development of Property” with the developers which included a $1 million development loan to explore tenant relocation options. The agreement conditioned further City funding and land conveyance on satisfaction of CEQA requirements as reasonably determined by the city manager. Statements from City staff that other uses (i.e., a public library) would not be pursued, coupled with its tenant relocation efforts made it clear to Save Tara that the City was committed to the project notwithstanding its purported future CEQA plans.
Save Tara sued in July 2004, alleging the City violated CEQA by approving the loan and the May 3rd agreement without first preparing an EIR. After Save Tara’s mandate petition was denied by the trial court, Save Tara appealed. The appellate court reversed the trial court’s ruling, noting that under Public Resources Code Section 21100, an EIR is required whenever a lead agency proposes to approve or carry out a project that has the potential to significantly affect the environment. The court found the trial court was incorrect in holding the EIR process could be postponed until a final agency decision about the project. The court explained that an EIR is intended to be part of the evaluation of the project to assist a lead agency in its decision-making process. The court held the time to engage in environmental review arises whenever there is enough information about the development project to allow a meaningful environmental assessment. The case was remanded with instructions to void the City’s approval of the agreements. A dissenting justice argued the matter was moot because during the appeal the City had certified a final EIR. The California Supreme Court granted the City’s and developers’ petitions for review, which raised both the mootness issue and the substantive question as to when a EIR must be prepared.
The Supreme Court found that because the project had not undergone irreversible “physical change” or experienced any “legal changes” during the pendency of the litigation, the certification of the EIR did not render the appeal moot. Save Tara could still be afforded the relief it sought by securing an order voiding the City’s approvals of the agreements until the City conducted a complete EIR review.
In considering EIR timing, the court explained an “approval” of a private project “occurs upon the earliest commitment to issue or the issuance by the public agency of a discretionary contract, grant, subsidy, loan or other form of financial assistance…” (quoting Cal. Code Regs, tit. 14, § 15352 (b)). The court emphasized two legislative policy considerations relating to the timing issue. First, an EIR should not be required until the project is sufficiently defined to permit a meaningful environmental assessment. Second, an EIR should not be so delayed that it fails to serve its intended function of being a tool to aid an agency in making a fully informed decision on a project. Because Save Tara’s claim challenged the City’s postponing its preparation of the EIR on future conditions, the challenge was predominantly procedural, subject to de novo review with heightened scrutiny (citing Citizens of Goleta Valley v. Board of Supervisors (1990) 52 Cal.3d 553, 564). The court noted that characterizing the timing issue as procedural did not remove all agency discretion, but did establish an outer limit. The court explained that agencies could not evade the central tenets of CEQA by establishing procedures that allow for the commitment to a project to occur prior to EIR preparation.
With regard to the practice of making public-private agreements contingent on subsequent CEQA compliance, the court found such provisions can be a “legitimate ingredient” in preliminary agreements relating to a proposed project. However, if circumstances demonstrate that an agency has already committed itself to the project, then an approval has already occurred. A condition for CEQA compliance in the future will not rectify the failure to have engaged in pre-approval environmental review. The City and developers argued that an agency commitment constituting a CEQA approval should be limited to unconditional agreements that irrevocably vest development rights and bind the agency to a certain course of action. The court disagreed, noting such an approach was inconsistent with the CEQA Guideline that defines agency approval as occurring upon the agency’s “earliest commitment” to a project (quoting the CEQA Guidelines, Cal. Code Regs., tit. 14, §15352(b), emphasis added by court). Another problem with limiting CEQA approvals to unconditional commitments that vest development rights is that by the time such actions occur, the project may have already acquired so much “bureaucratic and financial momentum” that a strong incentive will exist to ignore environmental concerns (citation omitted). Moreover, postponing the EIR process until a binding development agreement exists undermines CEQA’s goal of demonstrating to the public that the environmental implications of a project have in fact been analyzed. Instead, such postponement creates a risk the EIR will be viewed as a post hoc rationalization of the agency’s action.
The Supreme Court also disagreed with the appellate court’s suggestion that all agreements should be deemed CEQA approvals if a project is sufficiently well‑defined when the agreements are executed to allow preparation of an EIR. The court said such a requirement ignored the commitment requirement, noting that CEQA recognizes a number of pre-approval actions, such as feasibility or planning studies, that can occur without environmental review (citing Cal. Code Regs., tit. 14, § 15262). The court further observed that CEQA was not intended to unnecessarily burden an agency’s preliminary or tentative agreements executed prior to deciding project specifics. Instead, the court provided the following guiding general principle: “[b]efore conducting CEQA review, agencies must not ‘take any action’ that significantly furthers a project ‘in a manner that forecloses alternatives or mitigation measures that would ordinarily be part of CEQA review of that public project.’” Save Tara, ____ Cal. 4th ____ (citing Cal. Code Regs., tit. 14, §15004(b)(2)(B)). Surrounding circumstances along with the agency’s agreements should be evaluated by the courts when applying this general principle. To assist in making the determination, the court set forth a two-step approach: (i) whether the agency, in taking action indicated it would perform environmental review before making any further commitment to the project, and if so, whether the agency nevertheless limited its discretion regarding environmental review; and (ii) whether the record showed the agency committed significant resources to shape the project and foreclosed consideration of meaningful alternatives (citations and quotations omitted).
Applying the two-step approach to the facts of the case, the court found the City’s agreements evidenced commitment to the project by among other things: (i) repeatedly stating the project would be developed as outlined in the HUD application; (ii) allowing almost a half a million dollars to be loaned which was not conditioned on CEQA and would not be repaid if final approval did not occur; (iii) limiting the City’s discretion over the CEQA process by improperly delegating to the city manager such authority and limiting such determinations to a “reasonableness standard” (exposing the City to potential challenges it acted unreasonable if it ultimately did not to certify the EIR); and (iv) phrasing the condition that “requirements of CEQA” be “satisfied” as raising questions as to whether the City would still be able to reject the project on substantive grounds even if it found the EIR legally adequate. In looking at the overall circumstances evidencing the City’s commitment to the project, the court pointed to: (i) public statements unequivocally advancing support for the project and rejecting alternatives; (ii) preparatory tenant relocation actions; (iii) substantial financial contributions; and (iv) the willingness to condition its obligation to convey the property based on whether CEQA was satisfied as reasonably determined by the city manager. In this case, both the provisions in the City’s agreements and the surrounding factual circumstances convinced the court that the City had improperly “committed itself to a definite course of action regarding the project before fully evaluating its environmental effects. That is what sections 21110 and 21151 [of the Public Resources Code] prohibit.” Save Tara, __ Cal. 4th ___.
David Collins is an associate in the Real Estate, Land Use and Natural Resources and Environmental Practice Group in the firm’s Orange County office.