California courts are increasingly active in trying to clarify the question of when a government action becomes a "project" under the California Environmental Quality Act. Three recent appellate court rulings have turned on the answer to this question, and a fourth case involving a project definition is pending before the California Supreme Court. So far, however, the resulting picture is less than clear.
All three recently decided cases involved instances when public agencies did not conduct environmental review, and in two of three the court ruled the public agency was correct — the agency action did not require environmental review. Courts ruled that the Tuolumne Park and Recreation District's sale of historic railroad right-of-way to an Indian tribe did not require environmental review, and neither did the McCloud Community Services District's conditional agreement with Nestlé regarding a potential water bottling plant.
In the other case, the Second District Court of Appeal ruled that the City of West Hollywood should have completed an environmental impact report before entering into a conditional agreement with a nonprofit housing developer for the sale of city-owned real estate.
Meanwhile, the State Supreme Court is scheduled to hear oral arguments this month in a case that also involves the definition of a project. In Muzzy Ranch v. Solano County Airport Land Use Commission, the First District Court of Appeal ruled that Solano County should have completed an environmental study before adopting the Travis Air Force Base Land Use Compatibility Plan, which froze the zoning on tens of thousands of acres around the base (see CP&DR Legal Digest, March 2005). Muzzy Ranch is a bit different from the three recent appellate court cases, but all involve the trigger for environmental review.
"The real test ought to be whether the public agency has taken a step to go forward with a particular project or development," said Stephen Kostka, an attorney with Bingham McCutcheon and co-author of Practice Under the California Environmental Quality Act. "I think the West Hollywood case is sort of the outlier, but you might be able to explain it on its facts."
However, Michael Jenkins, West Hollywood's attorney, contended that the facts in his case were similar to McCloud in that both cases involved public agencies approving agreements for projects that were not fully defined. Both agreements were conditioned upon compliance with CEQA once the projects were defined.
But the ruling in Save Tara v. City of West Hollywood "seems to say that something is a project the moment you think about it," Jenkins said. "We obviously agree with McCloud. It's analogous." West Hollywood intends to seek a rehearing and could ask the state Supreme Court to review the decision.
In Concerned McCloud Citizens v. McCloud Community Services District, the Third District Court of Appeal ruled that the district's contract with Nestlé for the provision of 1,600 acre-feet of water and other measures relating to a bottling plant was not a project (see CP&DR Legal Digest, March 2007). "The agreement, while admittedly a binding contract, is conditional and does not grant Nestlé a vested right of use of the project. The agreement is predicated on a series of ifs and commits the district to sell water to Nestlé only if the described terms are successfully completed," the court ruled. Among the agreement's conditions was completion of an EIR. Project opponents have appealed to the state Supreme Court.
Jenkins brought McCloud to the attention of the Second District Court of Appeal panel considering the West Hollywood case. But the panel, which divided 2-1, did not mention McCloud in the ruling issued three weeks later.
The West Hollywood case involves the fate of Laurel Place, a colonial-style mansion built at least 84 years ago and divided into four apartments during the 1940s. The previous owner donated it to the city. In June 2003, the city signed an option agreement with WASET, Inc., and West Hollywood Community Housing Corporation that permitted the developers to apply for Department of Housing and Community Development (HUD) funding. Later that year, HUD awarded the developers $4.2 million to help pay for 30 to 35 units of very low-income senior housing through rehabilitation of Laurel Place and construction of a U-shaped apartment building around the mansion.
In May 2004, the city and developers signed a new "conditional agreement for conveyance and development of property." A group of project opponents called Save Tara (so named because the previous owner of Laurel Place loved "Gone with the Wind" and the West Hollywood estate slightly resembles the movie's mansion) filed a lawsuit. Opponents argued that the city had violated CEQA by not conducting an EIR before signing the agreement. In August, the city amended the agreement to state that CEQA must be complied with.
Los Angeles County Superior Court Judge Ernest Hiroshige ruled against opponents because the city had not given final approval for the housing project. On appeal, the Second District, Division Eight, overturned Hiroshige.
"The trial court's error is two-fold," Justice Madeline Flier wrote for the two-judge majority. "First, an EIR is not to be delayed until a ‘final' decision has been made. Second, the finding that the agreement was ‘expressly conditioned on compliance with CEQA' indicates a misunderstanding of the EIR review process. That process is intended to be part of the decision-making process itself, and not an examination, after the decision has been made, of the possible environmental consequences of the decision."
The court noted that the HUD application and subsequent agreements between the city and the developers were extremely detailed. The May 2004 agreement "presents a project for which the planning in practical fact is complete. … It is not a ‘land acquisition agreement,' as [the] city contends."
"[O]nce HUD approved the $4.2 million grant for the project in November 2003, the EIR review process should have been initiated," the court ruled.
Since the litigation was filed, the city has completed an EIR for a 28-unit senior housing project and approved the development. The EIR was certified in October 2006 and not challenged in court. Thus, the city argued, Save Tara's suit was moot. The majority disagreed, ruling that the city must "engage in the EIR review process based on the project as described in the HUD application, and without reference to the May and August 2004 agreements."
In a dissenting opinion, Presiding Justice Candace Cooper agreed with the city. The opponents sought a certified EIR and they didn't contest the one the city completed, she noted.
Attorney Jenkins said the court's decision essentially invalidates the EIR, even though the court never reviewed it. "The court seems to presume that just because we entered into a conditional agreement, our EIR is tainted," he said.
In the case involving Tuolumne Park and Recreation District's sale of railroad right-of-way, the Fifth District Court of Appeal went the other direction. Although the Tuolumne Band of Me-Wuk Indians is already developing a 300-acre parcel through which the railroad right-of-way runs, the court held that environmental review of the sale would have been premature because the tribe had announced no plans for development on the right-of-way.
"[O]rdering CEQA review in the absence of a plan involving an identifiable impact would not be meaningful," the court ruled.
Originally constructed from 1897 to 1900, the Sierra Railroad ran 56 miles from Oakdale in the San Joaquin Valley to Tuolumne in the Tuolumne County foothills. It served the mining, logging and hydroelectric industries, and carried passengers. A private operator still uses a portion of the line to haul freight and provide tourist rides.
In 1986, the Tuolumne Park and Recreation District purchased a 6.2-mile segment between the communities of Standard and Tuolumne. This segment had fallen into disuse, but the district proposed operating its own passenger excursion train. That idea was not politically popular, and by 1991 the district had abandoned it. A 2002 county recreation master plan, which the district helped write, called for extending a multi-use trail along the length of the right-of-way within Tuolumne County. Nevertheless, the district in 2005 sold the 6.2-mile-long, 100-foot-wide right-of-way to the Tuolumne Band in exchange for an office building and corporation yard, and $75,000.
A group called Friends of the Sierra Railroad opposed the sale. Friends contended the railroad is an historic asset, with its track alignment, rolling stock, and railroad structures making for the most intact historic railroad system in California. The State Historic Resources Commission found that the entire railroad is eligible for the National Register of Historic Places. Friends argued the district had to study whether the sale would impact the railroad's historic value.
The tribe already owned a 300-acre former lumber mill site that it is developing with offices, houses and a golf course, all related to the tribe's nearby Black Oak Casino. A 0.6-mile section of the right-of-way runs through the former mill site.
The district declined to perform an environmental review, so the preservationists sued. The Tuolumne County Superior Court ruled that, although the right-of-way meets the definition of an historic resource under CEQA, the transfer of title was not a project. On appeal, a three-judge panel of the Fifth District agreed.
The court's decision suggests that it is not always clear when a government action becomes a "project" for CEQA purposes. Friends argued that the transfer of the right-of-way was the "first step toward a physical change in the environment." The court conceded that the Tribe was already developing land along the right-of-way but, because no plans had been revealed for the right-of-way, there was no project to study.
"The reasonably foreseeable likelihood of some development on the West Side Lumber Company property, combined with the possibility that the development could impact the historical resource included within the larger property, does not trigger CEQA review," Justice Rebecca Wiseman wrote for the court. "CEQA review has to happen far enough down the road toward an environmental impact to allow meaningful consideration in the review process of alternatives that could mitigate the impact."
"As it was, no specific plans were on the table," Wiseman continued. "The tribe has not proposed any development that would affect the historic resource."
Friends accused the tribe of a "lack of candor." The court said even if that were true, there still was no plan to review. Friends cited Bozung v. Local Agency Formation Com., (1975) 13 Cal.3d 263, in which the state Supreme Court ruled that the commission's approval of a land annexation for a contemplated development was a project under CEQA. The group also cited Fullerton Joint Union High School Dist. v. State Bd. of Education, (1982) 32 Cal.3d 779, in which the court ruled that Yorba Linda's secession from a school district was a project.
But the Fifth District said those cases were different. In Bozung, the court found that a planning process to subdivide land had already occurred. In Fullerton, the secession necessitated construction of a new high school. With the railroad right-of-way, "no planning has taken place and no building is expected to go forward in the near future that could cause an impact on the historical resource," the court concluded.
Whitman Manley, attorney for Friends of the Sierra Railroad, said the decision is consistent with McCloud, but conflicts with Save Tara and with other cases that have "expanded on what is a project."
Perhaps most frustrating to the preservationists, is that Indian tribes do not necessarily have CEQA obligations. "This decision is basically dumping the fate of the right-of-way into a jurisdictional black hole," Manley said. "It means they could do things with the right-of-way without ever disclosing the impacts on the historic resource."
Save Tara v. City of West Hollywood, No. B185656, 2007 DJDAR 2360. Filed February 21, 2007.
For Save Tara: Jan Chatten-Brown, Chatten-Brown & Carstens, (310) 314-8040.
For the city: Michael Jenkins, Jenkins & Hogan, (310) 643-8448.
For WASET, Inc.: James Arnone, Latham & Watkins, (213) 485-1234.
Friends of the Sierra Railroad v. Tuolumne Park and Recreation District, No. F050117, 07 C.D.O.S. 1502, 2007 DJDAR 1878. Filed January 12, 2007. Ordered published February 8, 2007.
For Friends: Whitman Manley, Remy, Thomas, Moose & Manley, (916) 443-2745.
For the district: Jerome Levine, Holland & Knight, (213) 896-2400.