Third District Rejects CEQA Challenges To Chico Walmart Expansion Project EIR’s Urban Decay Analysis And City’s Statement Of Overriding Considerations

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In an opinion filed September 5, and later certified for partial publication on October 3, 2019, the Third District Court of Appeal affirmed a judgment upholding the City of Chico’s EIR and related statement of overriding considerations for Walmart’s project to expand an existing store, add a gas station, and create two new outparcels for future commercial development.  Chico Advocates for a Responsible Economy v. City of Chico (Walmart Inc., Real Party in Interest) (2019) ___ Cal.App.5th ___.  The published portion of the Court’s opinion rejects plaintiff/appellant CARE’s challenges to the EIR’s “robust 43-page urban decay analysis,” holding as a matter of law that “the potential loss of close and convenient shopping is not an environmental issue that must be reviewed under CEQA” and that the EIR’s methodology for analyzing urban decay was supported by substantial evidence.  The unpublished portion of the opinion (which won’t be further discussed in detail) held that the City’s statement of overriding considerations was supported by substantial evidence, did not need to “describe in detail the weight accorded to the various aspects of the agency’s balancing of competing public objectives,” and did not need to include findings “reconciling” the project approval with the CIty’s rejection of an earlier, materially different expansion project in 2009.

Relevant Factual and Procedural Background

Walmart’s existing store, located in a regional retail center bordering the east side of SR 99 and including the Chico Mall, is 131,302 square feet in size, and the 2015 project at issue expands it by 64,000 square feet, adds an eight-pump gas station, and creates two new outparcels totaling 5.2 acres; approximately 49,000 square feet of the expanded space will be used for grocery sales with the remainder to be devoted to general merchandise sales.  In 2009, the City denied Walmart’s earlier proposed project to expand the store by 97,556 square feet with a 12-pump gas station and one 2.42-acre outparcel, finding in the related EIR that that project would have significant and unavoidable impacts and declining to adopt a statement of overriding considerations.

The scaled-down 2015 project’s EIR included a 43-page urban decay analysis supported by a 123-page study by ALH Urban & Regional Economics (ALH).  The ALH study sought “to assess the economic impact of the Project and examine whether there is sufficient market demand to support the Project without affecting existing retailers so severely as to cause or contribute to urban decay.”  It defined “urban decay” to include “visible symptoms of physical deterioration … that is caused by a downward spiral of business closures and long term vacancies … [and] … so prevalent, substantial, and lasting for a significant period of time it impairs the property utilization of the properties and structures, and the health, safety, and welfare of the surrounding community.”  The ALH study elaborated that “manifestations of urban decay include such visible conditions as plywood-boarded windows and doors, extensive graffiti, dumping of refuse on site, overturned dumpsters, dead trees and shrubbery, lack of building maintenance, homeless encampments, and unsightly and dilapidated fencing.”

The ALH study comprised an extensive scope of work that estimated the project’s economic impacts on retailers in its market area, primarily in the form of diverted sales, and then evaluated the extent to which the project may cause or contribute to urban decay, as defined.  It concluded that the project (1) “would have a negligible impact on [competing retail] sales … ranging from 0.8 to 3.1 percent, which is within the range of normal market fluctuations and is not believed to be sufficient to cause existing stores to close,” and (2) “would not [alone] cause the type of severe economic effects that could potentially lead to urban decay.”  Cumulatively, combined with other planned market area retail projects, the study found the project “could induce the closure of one existing, full-service grocery store,” but explained that would only increase the City’s market vacancy rate by one percent which is “well within the range of a robust, healthy commercial retail sector”; further, given Chico’s strong history of “backfilling,”  the well-maintained state of existing vacant retail properties, and the City’s effective regulations, even potential cumulative impacts would not be likely to result in urban decay.

Project and EIR Approval and Trial Court Litigation

The September 2016 Final EIR identified mitigation measures to address potentially significant effects, and concluded that as mitigated the project would have only a single significant and unavoidable impact in the area of transportation, in that it will cause a segment of SR 99 to operate at an unacceptable peak hour LOS.  In October 2016, the City’s planning commission held a public hearing and voted to certify the EIR, adopt a statement of overriding conditions, and approve the project.

After CARE administratively appealed, the City Council held a November 15, 2016 public hearing.  At the hearing, CARE made “last-minute arguments” challenging the EIR’s urban decay analysis and statement of overriding conditions, supported by a report prepared by its “retail expert” Area Research Associates (ARA).  The council denied the appeal, approved the project, and adopted a statement of overriding considerations setting forth 10 significant benefits “each of which [it found to] constitute[ ] a separate and independent ground to support a finding that the benefits of the Project outweigh the Project’s single significant and unavoidable environmental impact.”

In CARE’s ensuing litigation, the trial court issued a detailed statement of decision rejecting all of CARE’s arguments and entered judgment for the City and Walmart in February 2018.

The Court of Appeal’s Decision

Key takeaways from the published portion of the Court of Appeal’s opinion include:

  • The Court articulated a highly deferential standard of review of the challenge to the City’s EIR: “Where the alleged defect is that the agency’s factual conclusions are not supported by substantial evidence, the reviewing court must accord deference to the agency’s factual conclusions.  [citation]  We must indulge all reasonable inferences from the evidence that would support the agency’s finding and resolve all conflicts in the evidence in favor of the agency’s decision.  [citation]  “[T]he reviewing court ‘may not set aside an agency’s approval of an EIR on the ground that an opposite conclusion would have been equally or more reasonable,’ for, on factual questions, our task ‘is not to weigh conflicting evidence and determine who has the better argument.’”  [citation] [¶]  The power of the appellate court “‘begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the [finding].’”  [citation]  We may reverse an agency’s determination only if it is not supported by “enough relevant information and reasonable inferences from this information that a fair argument can be made to support [the] conclusion.”  [citations].”  Further:  “Regardless of what is alleged, an EIR approved by a governmental agency is presumed legally adequate, and the party challenging the EIR has the burden of showing otherwise.  [citation].”
  • The EIR’s definition of urban decay was not “unnaturally constrained” and, as a matter of law, it did not err in failing to treat “loss of close and convenient shopping” as a significant environmental impact. Interestingly, the Court of Appeal applied the Supreme Court’s newly articulated independent review standard to this particular issue (see Sierra Club v. County of Fresno (2018) 6 Cal.5th 502, 513, my December 28, 2018 post on which can be found here), which it found “present[ed] the predominantly legal question of whether the EIR includes enough detail “to enable those who did not participate in its preparation to understand and to consider meaningfully the issues raised by the proposed project.””  (Citing Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 405.)  It held:  “[T]he City did not violate CEQA because the potential loss of close and convenient shopping is not an environmental issue that must be reviewed under CEQA.”  It supported this holding with authorities establishing that “CEQA is concerned with physical changes in the environment” and that “‘[s]ocial and economic changes” are not in themselves cognizable as environmental impacts unless they will cause such physical changes:  “Although the loss of close and convenient shopping could impact some Chico residents psychologically and socially, such impacts are not, by themselves, environmental impacts.  [citations].”
  • The Court distinguished Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1184 as a “case involv[ing] a complete failure to consider urban decay impacts” and “not [one] hold[ing] that the absence of close and convenient shopping, by itself, constitutes an environmental impact [as opposed to a possible social problem].” In a footnote, it further challenged the factual premise of CARE’s argument that possible elimination of a Food Maxx less than a mile to the west would “deprive[ ] the neighborhood of “close and convenient shopping” as opposed to simply “substitut[ing] one “close and convenient” shopping option for another.”
  • The City’s definition of “urban decay” was a valid threshold of significance that was supported by substantial evidence (citing East Sacramento Partnerships for a Livable City v. City of Sacramento (2016) 5 Cal.App.5th 281, 300; Mission Bay Alliance v. Office of Community Investment & Infrastructure (2016) 6 Cal.App.5th 160, 206), and further was “consistent with definitions of urban decay approved in other cases.” (Citing, inter alia, Joshua Tree Downtown Business Alliance v. County of San Bernardino (2016) 1 Cal.App.5th 677, 685.)
  • The City’s methodology for studying urban decay was supported by substantial evidence and “all of CARE’s criticisms amount to nothing more than a disagreement among experts regarding the proper methodology and underlying data….” Such challenges “must be rejected unless the agency’s reasons for proceeding as it did are clearly inadequate or unsupported [citations]” and the issue is not whether the studies are “irrefutable” or “could have been better,” but only whether they are “sufficiently credible to be considered as part of the total evidence” supporting the agency’s findings.  The agency is entitled to rely on some experts over others, and to choose one study approach over another, and disagreement among experts does not render an EIR inadequate.

Notwithstanding CARE’s contrary preferences, its quarrels “with the EIR’s methodology amount to nothing more than differences of opinion about how the Project’s expected grocery sales should be estimated, how the Project’s market area should be defined, and which competitors are most susceptible to impacts from the Project…. In short, CARE’s challenges fail under the substantial evidence test.”  In an interesting footnoted jab at CARE’s tactic of a last minute document dump on the eve of the City Council appeal hearing – which was months after the close of the public comment period on the DEIR – the Court tersely noted that while an EIR should usually summarize the main points of disagreement among experts and the reasons for the agency’s choice, CEQA does not require an agency to respond to late comments.

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