Supreme Court of California Issues Guidelines for Determining When Agency "Approval" of a Project Occurs Under the California Environmental Quality Act

On October 30, 2008, the Supreme Court of California (Supreme Court) filed its unanimous decision in Save Tara v. City of West Hollywood, et al., S15402 (October 30, 2008) setting forth general guidelines for deciding when an agency “approval” of a project occurs thereby triggering the need for an Environmental Impact Report (EIR) under the California Environmental Quality Act (CEQA).

At issue in Save Tara was whether the City of West Hollywood’s (City) conditional agreement to sell land for private development constituted project “approval” within the meaning of Public Resources Code Sections 21100 and 21151. The Supreme Court held that “under some circumstances, such an agreement does amount to approval and must be preceded by preparation of an EIR,” and went on to conclude that the City’s “conditional agreement to sell land for private development, coupled with financial support, public statements, and other actions by its officials committing the City to development, was, for CEQA purposes, an approval of the project that was required under [S]ections 21100 and 21151 [of the Public Resources Code] to have been preceded by preparation of an EIR.”

Background
Two nonprofit community housing developers proposed to construct 35 housing units for low-income seniors on City-owned property and filed a grant application with the U.S. Department of Housing and Urban Development (HUD). To facilitate the developers’ HUD application, the City granted the developers an option to purchase its property for a “negligible cost.” The City Council then approved a Conditional Agreement for Conveyance and Development of Property (Conditional Agreement), which included a City loan of $1 million to facilitate development. Among other things, the Agreement was conditioned on the developers taking actions necessary “to comply with CEQA … .” Save Tara, an unincorporated association of City residents and neighbors, filed a petition for a writ of mandate alleging that the City had violated CEQA by failing to prepare an EIR prior to City Council approval of the loan and Conditional Agreement. In response, the City executed a revised Conditional Agreement to recognize expressly that the City retained “complete discretion over… any actions necessary to comply with CEQA” and that the Conditional Agreement did not impose any “duty on the City to approve … any documents prepared pursuant to CEQA.”

The Los Angeles Superior Court denied the mandate petition, finding that the agreement had not amounted to final City “approval” of the project and, thus, that an EIR was not required. The Court of Appeal for the Second District reversed reasoning that Public Resources Code Section 21100 requires an EIR to be prepared whenever lead agencies “propose to approve or carry out” a project with potentially significant effects rather than delaying such review until a “final” decision has been made. The Court of Appeal found that the EIR review process is “intended to be part of the decision-making process, and not an examination after the decision has been made, of the possible environmental consequences of the decision.” The Supreme Court granted review to decide whether 1) the matter was moot because the City had since certified a final EIR for the project, and 2) whether an EIR was required prior to the City’s approval of the Conditional Agreement.

Was the Matter Moot?
The City and the developers argued that because an EIR had since been prepared and certified, and because Save Tara had not challenged the adequacy of that EIR, Save Tara had already received its requested relief and, thus, the matter was moot. However, Save Tara argued, and the Supreme Court agreed, that the matter was not moot because an order setting aside the City’s approval of the Conditional Agreement could still be awarded.

Project “Approval”
On the issue of EIR preparation timing, the Supreme Court first outlined existing law and the legislative policies that shaped that law. “Approval” of a private project, which triggers CEQA review, is the “earliest commitment to issue or the issuance by the public agency of a discretionary contract, grant, subsidy, loan, or other form of financial assistance, lease, permit, license, certificate, or other entitlement for use of the project.” CEQA Guidelines, § 15352, subd. (b). Choosing the “precise time for CEQA compliance involves a balancing of competing factors” but should be “prepared as early as feasible in the planning process to enable environmental considerations to influence project program and design and yet late enough to provide meaningful information for environmental assessment.” CEQA Guidelines, § 15004, subd. (b).

The Supreme Court then looked to prior precedent and recognized two considerations of legislative policy central to EIR preparation timing: 1) a project must be well defined enough to allow for meaningful environmental evaluation prior to requiring an EIR, and 2) EIR preparation must not be delayed beyond the time when it can, as a practical matter, serve its intended function of informing and guiding decision makers. From these general policies, the Supreme Court held that “[a] CEQA compliance condition can be a legitimate ingredient in a preliminary public-private agreement for exploration of a proposed project, but if the agreement, viewed in light of all surrounding circumstances, commits the public agency as a practical matter to the project, the simple insertion of a CEQA compliance condition will not save the agreement from being considered an approval requiring prior environmental review.”

The Supreme Court rejected the City’s and the developers’ request to limit the commitment necessary to constitute project “approval” to unconditional agreements that irrevocably vest development rights. The Supreme Court discussed the reality that although a public agency may legally retain discretion to reject a proposed private project, at some point in the process, when the public agency has executed detailed agreements and has lent its political and financial assistance to the project, it has “as a practical matter[,] committed itself to the project.” The Supreme Court specifically noted that such “commitment” to a project can be evidenced when the agency has expressed its inclination to favor a project, has publicly defended it over objections, has put its official weight behind the project, has devoted substantial public resources to the project, and has announced a detailed agreement to go forward with the project.

On the other hand, the Supreme Court also rejected Save Tara’s request to find that any agreement, conditional or unconditional, would be an “approval” requiring preparation of an EIR if, at the time it was made, the project was sufficiently well defined to provide meaningful information for environmental review. In rejecting this rule, the Supreme Court acknowledged the reality that “privately conducted projects often need some form of government consent or assistance to get off the ground, sometimes long before they come up for formal approval,” and thus held that approval cannot “be equated with the agency’s mere interest in, or inclination to support, a project, no matter how well defined.”

In deciding whether the City approval of the Conditional Agreement constituted “approval” of the developers’ proposed project, the Supreme Court, in looking at the Conditional Agreement and the surrounding circumstances, concluded that the City had “approved” the project in substance even though it had reserved some of the project’s design details for later environmental analysis and final decision. In looking at the Conditional Agreement and surrounding circumstances, the Supreme Court first noted that the stated purpose was to “facilitate development of the project.” The Supreme Court also noted that the City had agreed to lend money to the developer, a condition of which was not conditioned on CEQA compliance. Also, in setting the condition that all “requirements of CEQA” be “satisfied,” the Supreme Court stated that the City “arguably left open the question whether [the] City remained free to find that the EIR was legally adequate and yet to reject the project on substantive environmental grounds.” The Supreme Court also found the City manager’s statements that it had “approved sale of the property” and that it would commit financial resources to the project, the City mayor’s statements that the project “will be used” for the proposed development, as well as the City’s actions in initiating relocation of tenants that were currently residing on the property to have been important circumstances in its determination that approval of the Conditional Agreement constituted project approval for the purposes of CEQA.

Implications of Save Tara
While the Supreme Court set forth some important general guidelines for determining the proper timing for environmental review, it left open for determination on a case-by-case basis whether the circumstances that surround a public-private agreement constitute an agency’s “approval” of a private project, thereby triggering the need to prepare an EIR. Thus, clients involved in complex project approvals with a public agency must carefully consider the many different circumstances that surround their formal agreements with those public agencies. The Supreme Court acknowledged that cities, particularly with respect to projects on public land, often reach arrangements with potential developers, including purchase option agreements, memoranda of understanding, and exclusive negotiating agreements, before deciding on the specifics of a project. The Supreme Court declined to reach a conclusion with respect to these particular forms of agreement and whether such agreements would constitute project “approval.” Nonetheless, the Supreme Court recognized the fact that requiring agencies to engage in a potentially expensive and lengthy EIR process before reaching even preliminary agreements with developers could unnecessarily burden public and private planning. Regardless, when entering into formal preliminary agreements, lead agencies and developers must be mindful of all surrounding circumstances of such agreements that could lead the public and a court to believe that the City has in effect “approved” the project.

The Supreme Court’s decision can be viewed here: http://www.foley.com/files/SaveTara_WestHollywood.pdf.

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If you have any questions about this issue or would like to discuss these topics further, please contact your Foley attorney or:

S. Wayne Rosenbaum
San Diego, California
619.685.6413
[email protected]

Elizabeth A. Cason
San Diego, California
619.685.4634
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Heidi K. Vonblum, Law Clerk
San Diego, California
619.685.4637
[email protected]