UPDATE: Court Of Appeal Changes Its Mind On The Issue Of Whether A City Misdescribed A Project’s Objectives

On November 27, 2012, a court of appeal ordered a city to correct the defects in a project description and alternatives discussion in a final environmental impact report (“EIR”) because the court concluded the city had misstated the project’s objectives in the draft EIR and the final EIR.  On rehearing, the court of appeal found no misstatement of the project’s objectives in the final EIR.  The court concluded, “While the draft EIR did fail to adequately delineate the project’s objectives, the final EIR corrected this problem.”  (Habitat and Watershed Caretakers v. City of Santa Cruz (--- Cal.Rptr.3d ----, Cal.App. 6 Dist., February 19, 2013). However, the court did not change its conclusion that the alternatives discussion was inadequate.

Note

This Legal Alert updates our previous Legal Alert entitled, “City Erred In Certifying Environmental Impact Report That Misdescribed Project’s Objectives,” January 22, 2013.

Facts

The Regents of the University of California (“Regents”) adopted a long range development plan (“Plan”) in 2006 contemplating development of an area of the University of California, Santa Cruz (“UCSC”) campus known as “North Campus,” which is located in an unincorporated area of the County of Santa Cruz (“County”) outside the territorial boundaries of the City of Santa Cruz (“City”).  The City, County and other parties challenged Regents’ adoption of the Plan and certification of an EIR for the Plan. 

Regents, City, and other parties entered into a comprehensive settlement agreement (“CSA”) to resolve the litigation regarding the development of North Campus.  The Regents agreed to restrict enrollment and increase on-campus housing, contingent upon (1) City seeking approval from the local agency formation commission (“LAFCO”) for an amendment to its “sphere of influence” (“SOI”), and (2) City agreeing not to oppose Regents’ request for extraterritorial water and sewer services to North Campus.  If LAFCO denied the amendment to the SOI, the CSA provides that Regents would be excused from the housing commitment.    

City certified an EIR to amend its SOI to include the undeveloped land that comprises North Campus so City could provide extraterritorial water and sewer services there.  An SOI is “a plan for the probable physical boundaries and service area of a local agency” that is determined by LAFCO.  A city may provide “services outside of its jurisdictional boundaries only if the services will be provided ‘within its sphere of influence in anticipation of a later change of organization.’” 

The project at issue here required approval of (1) City’s application for the amendment of the SOI, and (2) the application of the Regents as real party in interest for approval of its agreement with City for extraterritorial water and sewer services for North Campus.  City prepared a draft EIR that found one significant and unavoidable direct impact of the project—there is an inadequate water supply to serve the planned development for the North Campus under existing and future multiple dry year conditions. 

The draft EIR provides that the objective of the project is to implement City’s “obligations set forth in the [CSA] with regard to provision of water and sewer services to the UCSC North Campus area, and specifically to amend the City’s [SOI] boundaries to include this area to provide such services.”  The final EIR modified the description of the project’s objectives to state that the objectives are (1) implementation of City’s and UCSC’s commitments as set forth in the CSA “as related to submittal of concurrent applications to LAFCO to facilitate the provision of water and sewer services to the UCSC North Campus area,” (2) amendment of the boundaries of City’s SOI to include portions of the North Campus area, and (3) City’s provision of extraterritorial water and sewer services to the North Campus.   

The City certified a final EIR in August 2010.  Habitat and Watershed Caretakers (“Habitat”) filed a petition challenging City’s certification of the final EIR.  The trial court denied Habitat’s petition.  On appeal, the court of appeal concluded “that the City’s EIR misdescribed the project’s objectives, that this misdescription skewed its consideration of alternatives, and that the EIR was inadequate because it failed to consider any potentially feasible alternatives that would avoid or limit the significant environmental impact of the project on the City’s water supply.”  The appellate court directed the trial court “to vacate its decision and to enter a new judgment granting the petition in part and directing the City to (1) vacate its certification of the final EIR and approval of the project, and (2) correct the defects in the project description and the alternatives discussion identified in this opinion.” 

Decision on Rehearing

Habitat asserted, among other things, that the draft EIR misdescribed the project’s primary objective because although it stated that the CSA required City to provide water services to the North Campus, in fact the CSA only required City to initiate an application to LAFCO to amend City’s SOI.  Habitat asserted that City had no obligation to approve new water in any quantity to the North Campus and that the CSA does not excuse City from its duty under the California Environmental Quality Act (“CEQA”) to assess whether it should provide water to the North Campus, and if it should, in what quantity and what conditions and mitigations should be imposed.

City and Regents agreed that the CSA does not obligate City to provide water and sewer services to the North Campus without first undertaking CEQA review.  City and Regents maintained “the CSA properly ‘defined the Project objectives, which in turn necessarily limited the range of potentially feasible alternatives and mitigation measures, [but] did not bind the City’s discretion to determine whether or not to approve the Project.’”  Pursuant to the terms of the CSA, Regents will apply to LAFCO to have City provide extraterritorial water and sewer services.  City and County must negotiate an agreement to amend the SOI to include the North Campus and the agreement must be submitted as a part of City’s proposed SOI amendment concurrent with the LAFCO application submitted by Regents.     

Thus, under the terms of the CSA, Regents “‘will apply’ for extraterritorial services ‘on the . . . conditions’ that LAFCO approves the SOI amendment and the City applies for the SOI amendment.”  Regents and City view this provision of the CSA “as creating conditions on the Regents’ obligation to apply for services, rather than obligations on the part of the City, thereby preserving the City’s discretion to choose not to apply to LAFCO for an SOI amendment.”  The court stated, “In their view, the City’s obligation to provide these services hinges on its discretionary decision whether to apply for the SOI amendment.” 

The court found that because “their interpretation of the CSA is supported by substantial evidence, [the court] must defer to it.”  City’s project is described in the draft EIR “as ‘the proposed City of Santa Cruz Sphere of Influence amendment request to [LAFCO] to amend [the City’s SOI] to include [North Campus] for the purpose of providing extraterritorial water and sewer services.’”  Although the description “accurately describes the discretionary decision that was before the City,” an EIR is required to “consider the ‘whole’ of an action.”  The court concluded that while it was “the City’s decision . . . whether to propose an SOI amendment, the ‘whole’ of the action included the Regents’ request for extraterritorial services and LAFCO’s decision on both the proposal and the request.”  The EIR had to consider all of these actions. The EIR was required to provide decision makers for both City and LAFCO “with information about the environmental consequences of the decisions that they would be making with regard to the whole project.” 

The whole of the project did not just include City’s decision about whether to propose an amendment to its SOI, but also the application for extraterritorial services to be filed by Regents and LAFCO’s decision about whether to approve the proposed amendment to the SOI and the application.  The draft EIR stated the project’s objective was to implement City’s obligations as set forth in the CSA in regard to the provision of water and sewer services to the North Campus and to specifically amend the boundaries of City’s SOI to include North Campus.  It also provided, that pursuant to the CSA, City agreed to provide water service to the North Campus through its existing water connection to assist USCS in achieving its on-campus housing agreement as set forth in the CSA.  The objective also stated City agreed to submit an application to the LAFCO concurrent with USCS for provision of extraterritorial water and sewer service.

The court concluded that “[t]he draft EIR’s description of the project’s objectives is not supported by substantial evidence.”  City was not obligated under the CSA to propose an SOI amendment.  The identification of an amendment to the SOI as the project’s objective “did not illuminate the underlying purpose of the project.”  The court stated, “Of course a proposed SOI amendment is aimed at approval of an SOI amendment, but the draft EIR’s description of the project’s objectives begs the question of why the City would seek an SOI amendment.”  Because “the CSA did not obligate the City to propose an SOI amendment, the draft EIR’s description of the project’s objectives failed to illuminate the underlying purpose of the project but instead only described the nature of the project.”

The final EIR modified the description of the project’s objectives to provide that the objectives of the project are: (1) “Implementation of the City of Santa Cruz and UCSC commitments set forth in the [CSA] as related to submittal of concurrent applications to LAFCO to facilitate the provision of water and sewer services to the UCSC North Campus area,” (2) “Amendment of the City’s [SOI] boundaries to include portions of the North Campus area of UCSC;” and (3) “City provision of extraterritorial water and sewer services to portions of the North Campus.”  The court concluded the final EIR’s “statement of the project’s objectives were more illuminatory.”  The final EIR “basically said that the City’s purpose was to provide water and sewer services to North Campus in order to trigger the commitments that had been made by the Regents in the CSA.”  The court found no misstatement in the final EIR’s description of the project’s objectives.  Although the draft EIR failed “to adequately delineate the project’s objectives, the final EIR corrected this problem.”

Thus, on rehearing, the court of appeal no longer found that the final EIR misstated the project’s objectives.  The court no longer ordered City to correct the defects in the project description as it had in its original opinion.  However, on rehearing the court did not change its conclusion about the discussion of alternatives.  The court concluded that the draft EIR and final EIR were “inadequate because they failed to discuss any feasible alternative, such as a limited-water alternative, that could avoid or lessen the significant environmental impact of the project on the City’s water supply.”

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Eric N. Robinson, Jeffrey L. Massey or Leslie Z. Walker | 916.321.4500