American Canyon Community United for Responsible Growth v. City of American Canyon et al. (November 17, 2006; certified for partial publication December 18, 2006, A111278) __ Cal.App.4th__

By Lori Wider

In this case, the Court of Appeal determined that the City of American Canyon (“City”) violated CEQA because the City’s determination that project changes would not substantially increase traffic impacts was not supported by substantial evidence and the City failed to proceed in accordance with law by refusing to consider potential extraterritorial urban decay effects of a proposed Wal-Mart supercenter.  The changes would have increased the size of the approved project by 6.5% and added 30 traffic trips.  The Court also determined that the City violated its zoning ordinance by approving the supercenter without approving a major modification application.  Only the CEQA portion of the decision is certified for publication; the last section of the decision, addressing the alleged zoning ordinance violations, is not.

The decision follows the trial court’s denial, in consolidated actions, of petitions for writs of mandate challenging the City’s approval of a design permit and sign program for a Wal-Mart supercenter.  Petitioners and Appellants, American Canyon Community United for Responsible Growth and Citizens Against Poor Planning sought to set aside the City’s approvals on the grounds of alleged CEQA and zoning ordinance violations.

In 2003, developer Lake Street Ventures applied for and received approvals for a two?phase project.  Phase I consisted of about 32,000 square feet of retail space, a hotel and multi-family housing.  Phase II consisted of about 165,000 square feet of retail space.  The Phase II retail space was reflected on the project site plan simply by a notation of “163,000 SF developable area” and a “future road,” while the landscape plan showed a detailed layout, with at least eight retail buildings or pads along with a roadway and parking areas.  A Mitigated Negative Declaration (“MND”) was adopted by the City, and the project development applications approved.

Wal-Mart subsequently applied for a design permit and sign program for construction of a proposed Wal-Mart Supercenter in the Phase II area of the development.  The supercenter as proposed would operate seven days a week, 24 hours a day and would include both a general merchandise department and a full?service grocery department.  As described in the City’s staff report, the Wal-Mart site plan located an approximately 173,653 square foot building and a 12,676 square foot outdoor garden center on a 15.48?acre portion of the property.  An additional outdoor seasonal event sales area would be located in the parking lot.  The remainder of Phase II was described as reserved for future uses that would be subject to separate design review.

Determination That No Additional Environmental Review Required

In approving the Wal-Mart applications, the City determined that no additional environmental review was required because there were no substantial changes in the project requiring revisions to the previously adopted MND.  City staff advised that no further CEQA review was necessary on the basis that adding 154,074 square feet of commercial uses (excluding the stockroom, employee use area and seasonal event sales area) to the 37,930 square feet of commercial uses in Phase I, was consistent with the 196,000 square feet evaluated in the MND for the entire development.  A revised trip generation was prepared, using 154,074 square feet as the size of the supercenter.  The revised analysis projected lower traffic levels than those projected in the MND.  The Court concluded that the City did not accurately identify the project changes and that the supercenter proposal substantially changed the type and size of the Phase II retail component.

The Court pointed to the originally approved project plans which showed three adjoining “box” stores at the end of Phase II and smaller retail pads on edges of the project site.  There was no indication that the “box” stores, which the Court indicated appeared to be less than one-third the size of the supercenter, would operate 7 days a week, 24 hours a day, as would the supercenter. The Court also referred to “evidence in the record” (without specifying further) to suggest that supercenters might have unique traffic impacts because of the larger market from which they draw.  These “changes” were coupled with what the Court determined was a 6.5% increase in the Phase II retail space with the supercenter.

In assessing the change in traffic impacts associated with the supercenter, the Court determined that the City had erroneously excluded approximately 32,255 square feet of stockroom and employee use area and, therefore, incorrectly concluded that with the supercenter, there would be a decrease in retail space.  The Court found that there was no “reasoned basis” for excluding the stockroom and employee use area and that by doing so, the City could not fairly compare the space with the retail space in the original project (which had not been adjusted to exclude these areas).  Since the changes to the type and size of the retail space in Phase II were not accurately identified, the Court concluded that the traffic analysis was flawed.  According to the Court, using the correct figures would have resulted in a 30?trip increase in traffic trips.  Evidence submitted by Appellant’s expert demonstrated that a 30?trip increase could cause a degradation in intersection LOS (Level of Service).  Thus, a 30?trip increase could have a significant effect on intersections already operating at LOS E.

Since the City underestimated the size of the supercenter, the City’s determination that the proposal would have not significant effects on traffic requiring supplemental environmental review was not supportable.

Failure to Consider Extraterritorial Urban Decay Effects of Supercenter

Appellants alleged a CEQA violation for the City’s failure to consider the potential urban decay effects of the proposed Wal-Mart on neighboring cities.  The Court of Appeal agreed. Citing Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1184, the Court discussed the CEQA requirement to evaluate the environmental effect of physical deterioration of a commercial area resulting from the economic competitive effects of new development.  In support, the Court also cited the recent California Supreme Court decision in City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341, for the proposition that CEQA requires an agency to identify and attempt to mitigate extraterritorial effects of a project.  Since the City did not consider the potential urban decay effects resulting from the proposed Wal-Mart supercenter on neighboring cities, the Court concluded that the City failed to comply with the requirements of CEQA.

The Court found that the city manager’s fiscal impact study, which the Court recognized as relevant to the urban decay analysis because it considered potential store closures that might result if the supercenter were constructed, did not suffice for a full assessment of impacts because it did not consider any effects beyond the boundaries of the City.  Other evidence submitted by Appellants “strongly suggested that the supercenter might have “substantial extraterritorial effects.”  Appellant’s expert made a specific prediction as to closure of a Wal-Mart store and Food-4-Less grocery located in Vallejo, which, as co-anchors of a shopping center, likely would lead to urban decay.  Noting that the City Council did not respond to the Appellant’s expert’s study of potential urban decay, the Court stated that “anecdotal comments” by members of the City Council on the issue of urban decay and the lack of store closures did not “fill in the gap created by the City’s failure to consider the extraterritorial environmental effects of the supercenter proposal.”

Environmental Effects of Remaining Areas of Phase II

While not at issue in the litigation, the Court addressed an “additional problem” with the City’s determination.  Not only was the overall project changed by the supercenter, but also by reserving two other areas in Phase II for future development.  The Court advised that upon remand, the City consider the environmental effects of possible future development in these reserved areas, since the increased size of the retail component of the project would be even greater with both the supercenter and development of the remaining Phase II area.

Zoning Ordinance Violations

While not part of the published opinion, the Court also considered and addressed three alleged zoning violations made by the City when it approved the design permit and sign program for the Wal-Mart supercenter.  The trial court ruled that the City violated its own Zoning Ordinance by failing to require and approve a major modification application and by approving the sign program without issuing a conditional use permit, but that these violations were not prejudicial.  The trial court determined that the City did not violate the Zoning Ordinance by failing to require a conditional use permit for the grocery component of the store.  The Court of Appeal found only that the City had violated the Zoning Ordinance by failing to require and approve a major modification application and that the violation was prejudicial.  The decision on these alleged violations were based upon the specific provisions of the City’s Zoning Ordinance as applied to the Wal-Mart proposal.

For more information please contact Lori Wider.  Lori Wider is special counsel in the Real Estate, Land Use and Environmental Practice Group in the firm’s San Francisco Office.