Real Estate and Land Use

Evidence of Economic Infeasibility of CEQA Alternatives Explained (SPRAWLDEF v. San Francisco Bay Conservation and Development Commission)

Author: Brady R. McShane 

Why it matters: In upholding the approval of a 260-acre expansion to the Potrero Hills Landfill, this decision provides important guidance regarding the evidence that may be used to support a lead agency’s determination that a reduced-size project alternative is economically infeasible under CEQA. Specific evidence of the alternative’s net profit or loss is not necessary to demonstrate economic infeasibility. Rather, applicant-provided information showing the anticipated costs and revenues of the proposed project and alternative may constitute substantial evidence to support an infeasibility finding. The court emphasized that evidence in the record should provide “some context” that allows for an economic comparison.

Facts: Waste Connections applied for permits to expand the 320-acre Potrero Hills Landfill in Solano County by adding 260 acres to the site and extending its life by 35 years. The Landfill is located in the upland area of the Suisun Marsh. Solano County Ordinance section 31-300 prohibits modification of a marsh watercourse unless there are no other reasonable alternatives. Based on information provided by the applicant, Waste Connections, the San Francisco Bay Conservation and Development Commission (BCDC) determined that a reduced-size alternative that would add only 127 acres (instead of the proposed 260) and avoid a portion of a marsh watercourse was not “economically realistic.” Waste Connections provided evidence to BCDC that the smaller alternative would result in a 30 percent reduction in landfill capacity and a 45 percent reduction in revenue, but would only decrease the cost of the project by 10 percent. Waste Connections further explained that its profit margins were typically around 9 percent, giving it only a small margin of error for operating new or expanded sites. Accordingly, given the significant decrease in gross revenue, the project would not be “financially viable.” Waste Connections declined to provide further financial detail, such as net profit or loss, characterizing the information as confidential. BCDC approved the proposed expansion with only a slight reduction in its height, concluding that the reduced-size alternative was not “economically realistic.”

Petitioner SPRAWLDEF claimed that no substantial evidence supports BCDC’s finding that the reduced-size alternative is not economically reasonable.

Decision: Under CEQA, “[t]he fact that an alternative may be more expensive or less profitable is not sufficient to show that the alternative is financially infeasible. What is required is evidence that the additional costs or lost profitability are sufficiently severe as to render it impractical to proceed with the project.” [Citations.] Thus, when the cost of an alternative exceeds the cost of the proposed project, “it is the magnitude of the difference that will determine the feasibility of this alternative.” (Center for Biological Diversity v. County of San Bernardino (2010) 185 Cal.App.4th 866, 883). Ultimately, “the question is . . . whether the marginal costs of the alternative as compared to the cost of the proposed project are so great that a reasonably prudent [person] would not proceed with the [altered project].” (Uphold Our Heritage v. Town of Woodside (2007) 147 Cal.App.4th 587, 600 (Woodside).

Relying on CEQA’s definition of “feasible” and CEQA case law pertaining to economic infeasibility, the court determined that the reduced-size project alternative was not a reasonable alternative. The court distinguished this case from other CEQA cases in which a meaningful comparison of the project and the alternatives was not possible because there was no evidence regarding the cost of the alternatives. The court also expressly rejected the view that Waste Connections should have produced more economic data showing net profit figures. Waste Connections provided economic evidence for both the proposed expansion as well as the alternative showing the cost, capacity, and anticipated gross revenue. The court concluded that this evidence allowed the BCDC to make an economic comparison between the proposed expansion and alternative, providing “some context” to fairly determine that the reduced-size alternative was not economically reasonable.

The court also recognized that the rejection of the reduced-size alternative was not based solely on economics, but noted that BCDC also found that the alternative would still require modifications to the watercourse, and that rechanneling the watercourse as proposed by the project would actually improve marsh water quality.

Practice Pointers:

  • Arguably, this case lowers the bar just a little for what information may constitute substantial evidence to support an economic infeasibility finding. Confidential information showing net profit or loss need not be provided, but applicant-submitted information must be sufficiently detailed to allow the court to compare the project and the alternative.
  • What is sufficient will depend on the particular context. The court was clear to point out that bald assertions that a particular alternative is not economically feasible will not suffice. At a minimum, the record must contain some economic data on both the project and alternative(s) to provide the decision maker with “some context” to make a comparison.
  • As economic information pertaining to costs and revenue often can be confidential, and the courts have not established a bright-line test on the amount of economic information that must be provided, the safest course would be to: (1) avoid making economic infeasibility findings, where possible, relying instead on other reasons to support the rejection of alternatives; and (2) as in this case, cite to multiple independent bases why an alternative is infeasible, each supported by substantial evidence in the record.

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Use of an Addendum to a 1997 Airport Master Plan EIR Is Entitled to a Deferential Standard of Review (Citizens Against Airport Pollution v. City of San Jose)

Author: Susan K. Hori

Why it matters: This decision highlights the court’s very deferential standard of review that is given to the use of an addendum to a previously certified EIR. The decision also confirms the ability of a lead agency to change or delete previously adopted mitigation measures in an addendum if legitimate reasons for making the changes are stated and the reason is supported by substantial evidence.

Facts: In 1997, the City prepared and approved an updated Airport Master Plan for the San Jose International Airport. It also prepared and certified a Final EIR for the Airport Master Plan. From 1997 through 2010, the City approved amendments to the Airport Master Plan and in connection with those amendments prepared a supplemental EIR in 2003, and eight EIR addenda. As a result of the slowdown in the level of passenger activity and the reduction in air cargo volume and general aviation, the City proposed modifications to the Airport Master Plan, including changing the size and location of future air cargo facilities, conversion of planned air cargo facilities with 44 acres of general aviation facilities and the modification of two taxiways.

The City concluded that the proposed modifications will not have any significant environmental impacts not previously disclosed in the Airport Master Plan EIR, or substantially increase the severity of previously identified significant impacts. Because the City concluded that a subsequent or supplement EIR was not warranted or required, it prepared the eighth addendum to the previously certified EIR in 2010.

The petitioners challenged the use of an addendum asserting that the modifications to the Airport Master Plan constituted a new project and that the modifications constituted substantial project changes and/or changed circumstances requiring new studies.

Decision: The court applied a highly deferential substantial evidence standard of review that is used when an agency has already prepared an EIR. Citing Santa Teresa Citizen Action Group v. City of San Jose (2003) 114 Cal.App.4th 689, the court stated that reasonable doubts are resolved in favor of the administrative decision. It is not the role of the reviewing court to judge the wisdom of the agency’s action or pass judgment upon the correctness of the EIR’s conclusions. “Our function is simply to determine whether the agency followed proper procedures and whether there is substantial evidence supporting the agency’s determination that the changes in the Project (or its circumstances) were not substantial enough to require an SEIR.” (Citing Bowman v. City of Petaluma (1986) 185 Cal.App.3d 1065, 1076.)

New Project: The petitioners argued that the modifications constituted a new project because the proposed changes were not within the scope of the 1997 Airport Master Plan or its program EIR. The City’s position was that the amendments were merely an adjustment to an existing plan that had received environmental review in a project-level document, not a program EIR. The court side stepped whether the 1997 EIR was a program or project-level EIR, holding that the amendments did not constitute a new project and would not result in any new significant impacts and therefore reliance on an addendum was appropriate.

Noise Impacts: The addendum cited data showing that the number of average daily aircraft operations would be 20 percent less in 2027 than had been projected to occur in 2010 and 2017, and that over time older aircraft would be phased out and would be replaced with new and quieter aircraft. The addendum used the same methodology and thresholds as used in the 1997 EIR and 2003 SEIR and concluded that the noise levels at all of the reference point locations would be lower in 2027 than was projected for 2017. The court found that the record contained substantial evidence to support the addendum’s conclusion that the proposed modifications to the Airport Master Plan would not result in any new significant noise impacts or impacts that were substantially different from those described and analyzed in the prior EIRs.

Greenhouse Gas Emissions: Citing CREED v. City of San Diego (2011) 196 Cal.App.4th 515, the court found that information about the potential environmental impacts of GHG emissions was known or could have been known at the time the 1997 EIR and 2003 SEIR were prepared and certified. The addition of Section 15064.4 to the CEQA Guidelines in 2010 requiring the analysis of GHG emissions in environmental documents was not new information that would require preparation of an EIR.

Air Quality: The City’s addendum concluded that since none of the proposed Airport Master Plan changes would increase the activity levels at the airport beyond that identified in the Airport Master Plan, or increase the capacity of the airport beyond what was described in the Airport Master Plan, that the amendments would not result in any significant or substantially different air quality impacts since the 1997 EIR disclosed air pollution for higher levels of activity at the airport than that anticipated for 2027 under the amended Airport Master Plan. The court held that the record contained substantial evidence supporting the City’s conclusions.

Burrowing Owl Impacts:The 1997 EIR disclosed the loss of 38 acres of burrowing owl habitat as a significant impact and included measures to mitigate this impact through a Burrowing Owl Management Plan. The taxiway extensions that were approved under the Airport Master Plan amendments would result in impacts to four (4) acres of burrowing owl habitat that were originally part of an 84-acre area designated for habitat protection under the 1997 EIR. To offset the loss of 4 acres of habitat, the addendum included a number of mitigation measures, including 1:1 replacement of owl habitat, preconstruction surveys, and relocation of the burrows impacted by the new taxiways. The addendum stated, among other things, that the mitigation is part of the Burrowing Owl Management Plan. Applying the deferential standard of review, the court held that the impact on the burrowing owl population was not substantially different from or greater than the impact considered in the 1997 EIR, that there was substantial evidence in the record to support the City’s reasons for changing the mitigation measures for the impact on the burrowing owl population, and that it could be reasonably assumed that the mitigation measures incorporated in the addendum will maintain the impacts to burrowing owls to a less than significant level.

Practice Pointers:

  • Whenever a previously certified EIR has been prepared for a project, consider whether an addendum can be used for a subsequent discretionary approval for that project.
  • Always support the use of an addendum with substantial evidence in the record through preparation of an analysis demonstrating how the impacts of the subsequent project are not significantly different or substantially worse than the impacts considered in the previously certified document.
  • If previously adopted mitigation measures are changed or deleted through an addendum, clearly identify the legitimate reasons for the change and provide substantial evidence in support of the change.
  • The importance of the CREED case in being able to use and rely on previously certified documents that do not address GHG impacts cannot be overlooked.

 

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High-Speed Rail EIR/EIS Survives Challenge on Multiple Grounds (Town of Atherton v. California High-Speed Rail Authority)

Author: Christopher Burt

Why it matters: This decision further supports the use of programmatic EIRs for truly “programmatic” review of projects, even when project-level analysis has been done prior to certification of the program EIR. With respect to alternatives, a petitioner has the burden of demonstrating that a proposed alternative is not substantially similar” to an alternative already analyzed in the EIR, and a court will defer to a lead agency’s feasibility determination so long as it is supported by credible evidence.

Facts: The California High-Speed Rail Authority (Authority), the entity charged with developing a high-speed rail system within the state, prepared a programmatic EIR/EIS (“EIR”) which analyzed various potential alignments for the system between the Central Valley and the San Francisco Bay Area. The EIR was challenged on a number of grounds, including federal preemption, deferral of analysis, disagreement among experts and alternatives analysis.

Decision:

Federal Preemption: In responding to a challenge to the EIR, the Authority argued that the case must be dismissed because federal law preempted state law, including CEQA. The court sidestepped the issue by concluding that the “market participant doctrine” exception applied and there was no preemption. The market participant exception applies to protect a state’s action as a market participant, as opposed to when a state acts as a regulator.

Deferred Analysis:The court then turned to petitioners’ substantive CEQA claims. Petitioners first contended the Revised EIR improperly deferred analysis of the impacts of a vertical alignment through the Redwood City corridor to the project-level analysis. The Authority responded that the Revised EIR was programmatic and the precise alignment and structure of the system would be evaluated and refined during project-level analysis. A month before certification of the Revised EIR, Authority issued a Supplemental Alternatives Analysis Report (“SAAR”) as part of its project-level analysis. The SAAR concluded that an aerial structure was the only feasible alignment for that particular portion of the system. Petitioners contended that the SAAR eliminated all possible alignments through the Redwood City corridor, except for the raised berm option, and thus it was a foreseeable part of the future project and should have been analyzed.

The court rejected petitioners’ argument, holding that while project-level analysis had occurred prior to certification of the Revised EIR, such analysis was not required to be in the Revised EIR, a programmatic document. The court concluded that “[p]etitioners’ position would require an agency to stop all project-level analysis until after the program EIR was certified in order to avoid endless revisions.”

Ridership Model:Petitioners next challenged the ridership model used for the project description, arguing that the model was flawed and without supporting substantial evidence. The ridership model was prepared by a transportation engineering firm, with peer review done by the University of California. The peer review analysis concluded that the model contained calculations and methodologies which could result in inaccuracies. The court found that the difference of opinion between the engineering firm and the University of California was a dispute between experts that did not render the Revised EIR inadequate. The court found that the traffic engineers had explained the bases for their assumptions in the model, which constituted substantial evidence.

Alternatives:Petitioners also challenged the adequacy of the alternatives analysis, specifically arguing that the Revised EIR failed to consider the alternative alignments and features as proposed by a consultant hired by petitioners. The court, however, disagreed with petitioners. While their consultant had proposed various alternatives to the project, petitioners had failed to carry their burden to demonstrate that the alternatives proposed were not substantially similar to those already considered in the Revised EIR. According to the court, petitioners had to affirmatively show that the suggested alternatives were “sufficiently dissimilar” to those already contained in the Revised EIR. Because petitioners failed to do this, the Authority properly rejected the alternatives for further consideration in the Revised EIR.

Rejection of Infeasible Alternatives: Finally, petitioners argued that the Authority’s rejection of a proposed alternative as infeasible because it required the purchase or conversion of the Union Pacific Railroad right-of-way was inconsistent with its position to use other sections of the right-of-way. The court noted that the Authority’s determination that it was necessary and feasible to negotiate with Union Pacific as to other portions but not the alternative portion was entitled to deference.

Practice Pointers:

  • When building an administrative record for a programmatic EIR, lead agencies should take care to emphasize the programmatic nature of the decision, especially if project-level review has occurred.
  • A thorough alternatives analysis prepared at the outset may ultimately save time and effort, because project opponents must demonstrate that an alternative is not similar to one already included in the EIR.
  • A feasibility determination is entitled to deference from the court, but still must be supported by evidence in the record. An agency should take care to ensure that the record supports the determination.

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Permit Streamlining Act’s Automatic Deemed Approval of Development Projects Depends on Proper Notice (American Tower Corporation v. City of San Diego)

Author: Robia Crisp

Why it matters: In the American Tower case, the Ninth Circuit held that under the Permit Streamlining Act, CUP applications were not deemed approved before they were denied by the City where the “public notice required by law” did not “occur.”

Facts: American Tower Corporation (ATC), a leading owner and operator of telecommunications facilities around the world, applied for Conditional Use Permits (CUPs) for three existing telecommunications facilities within the City of San Diego after the original CUPs expired by their terms. The City published separate Notices of Public Hearing for each CUP application, and following public hearings, the City denied all three applications because they did not comply to the maximum extent feasible with the City’s Land Development Code. The City’s denials of each CUP application occurred more than 60 days after the City’s determinations that the applications were complete and exempt from CEQA. ATC challenged the denials, asserting that the CUPs were deemed approved as provided by Section 65956(b) of the Permit Streamlining Act (Government Code Section 65950 et seq.).

Decision: The Ninth Circuit Court of Appeals interpreted the meaning of “the public notice required by law” for purposes of the Permit Streamlining Act’s deemed approval provision to require that the public notice include notice that the CUP applications would be deemed approved if the City does not act within the 60-day time limit provided by the PSA. The court held that the applications were not deemed approved because while public notice was given in accordance with the provisions of the San Diego Municipal Code, the Municipal Code provisions did not require notice that the applications would be deemed approved if not acted on within the 60-day period and therefore the City was entitled to judgment as a matter of law with regard to ATC’s PSA Claims.

Practice Pointers:

  • If there is a concern that a public agency is not clear on the specific requirements that must be met as required by the Permit Streamlining Act, or it becomes apparent that the public agency may delay taking action on such project, an applicant should consider filing its own public notice as provided for in Section 65956(b) of the PSA in order to exercise self-help under the PSA’s deemed approval provision.

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