Having already prepared one environmental impact report that was set aside by a court, the City of Carmel-by-the-Sea undertook a new EIR for the purposes of evaluating the impacts of the city disposing, by sale or lease, of a historic mansion. 

In 1971 and 1972, the city acquired the Flanders Mansion and surrounding preserve property. Constructed in 1924, the mansion was a "two-story Tudor Revival English Cottage," designed by a prominent architect Henry Higby Gutterson. The city had used the property for various purposes: including residential, gallery, and office space, but had been vacant since 2003. Facing ongoing ownership of a property with significant deferred maintenance, the city proceeded with an EIR to deal with disposition options. 

Pursuant to the EIR, the city's primary objective was to divest itself of the mansion, with secondary objectives of (1) preserve the mansion as a historical resource; (2) put the mansion to productive use; (3) provide that ongoing use of the mansion would not impact the surrounding neighborhood; (4) protect the public's enjoyment of surrounding preserve; (5) protect the environmental resources and (6) provide the public as many park benefits as are practical. 

The DEIR included four alternatives: no project; residential lease; public use lease; sale with conservation easements and mitigations. The DEIR concluded that all the project alternatives had fewer environmental impacts than the project as proposed, but only the sale alternative would meet the basic objective of divestment. The administrative record, although not the EIR, included an economic feasibility analysis of the various options. One of the letters on the DEIR commented on the feasibility analysis, the Surplus Lands Act, and the alternative of selling the home on a smaller parcel. The FEIR responded to the first two, but not to the third comment in this particular letter. 

In May 2009, the city adopted various resolutions certifying the EIR, adopting a mitigation monitoring and reporting program, adopting a statement of overriding considerations, and approving the project (sale with conservation easements and mitigation measures). Following the CEQA challenge, the trial court held that the EIR failed to consider the impacts of selling the property in compliance with the Surplus Lands Act as well as failure to respond to one comment. The city appealed and the Flanders Foundation, the petitioner, filed a cross appeal implicitly to prevent the city from relinquishing ownership of what it considered an important public resource.

The appellate court ruled for the city on all issues save one. 

First, the court concluded that while the Surplus Lands Act applied to the sale, the evidence was that the development of an affordable project was unlikely. Therefore, sale to another government agency—at anything resembling a fair price—was irrelevant and, therefore, there was no requirement to study this potential scenario in the EIR. The appellate court also concluded that there was no obligation for the lead agency to include the economic feasibility in the analysis, and in a detailed critique, that the evidence contained within the analysis constituted substantial evidence. Notably, the court held that analytical framework in the study of what a reasonable prudent property owner would do, as compared to what the city could afford to undertake, was appropriate. 

The court writes, "The Foundation insists that…restoration and maintenance of the Mansion property ‘can be achieved" without selling the Mansion property. This argument ignores the fact that…substantial evidence supports the City's finding that it would be economically infeasible for the City to retain ownership of the Mansion property."

The appellate court also rejected the foundation's challenge to the statement of overriding considerations, after determining that there were multiple independent grounds stated in support of the override (and that the opponents failed to demonstrate a lack of substantial basis for each one). The appellate court did concur with the trial court that the City's non-response to the question regarding the viability of mitigation to park impacts through the sale of a smaller parcel (along with the home) warranted a response, and that the "City's certification of the FEIR was therefore invalid."

The Case: 

Flanders Foundation  v. City of Carmel-By-The-Sea (January 4, 2012, H035818) ___Cal.App.4th ___