When a CEQA project proposes the modification or demolition of a historically-significant property, or the sale of such a property by a government agency owner, the potentially significant impacts to the historic resource must be analyzed and – where feasible – mitigated. A recent decision involving the City of Carmel’s proposed sale of the historic Flanders Mansion illustrates what CEQA does – and doesn’t – require when a public agency proposes to sell historic property and rejects mitigation measures discussed in an EIR as economically infeasible. (The Flanders Foundation v. City of Carmel-by-the-Sea, et al. (6th Dist., January 4, 2012) 202 Cal.App.4th 603.)
Since the early 1970’s, Carmel has owned a 35-acre nature preserve, and the Flanders Mansion property that is located within and surrounded on all sides by the preserve. The preserve is an environmentally sensitive habitat area; the mansion that is located on a 1.252-acre parcel within the preserve is a 6,000 square foot Tudor Revival English Cottage, built in 1924, designed by noted architect Henry Higby Gutterson, and listed on the National Register of Historic Places. The mansion has been vacant since 2003, but in previous years was used as a private residence, an art institute and office space.
The City proposed to sell the mansion parcel to avoid the significant expense associated with the mansion’s needed repair and rehabilitation. It prepared an EIR that analyzed four project alternatives: (1) no project; (2) residential lease; (3) public lease; and (4) sale plus conservation easements and mitigations. The lease alternatives were deemed environmentally superior because the City would retain ownership and flexibility as to the property’s use, but the EIR concluded that if the lease alternatives were found infeasible the “sale plus” alternative would be the environmentally superior alternative.
One month prior to the Draft EIR’s circulation, the City obtained an “economic feasibility analysis” from a consultant (CBRE), which it did not attach to or include in the EIR. Based on the CBRE analysis, the City found the lease and no project options to be economically infeasible, and it approved the “sale plus” alternative, along with a resolution proposing to discontinue use of the mansion parcel as a public park, after certifying the EIR and adopting a statement of overriding considerations.
The Flanders Foundation obtained a writ of mandate from the trial court, which found the City failed to comply with CEQA because it (1) failed to analyze the potential impacts of selling or leasing the property in compliance with the Surplus Lands Act, and (2) failed to respond at all to a comment on the draft EIR suggesting an additional project alternative of sale of the mansion on a smaller parcel.
The Court of Appeal affirmed the judgment as modified to uphold the City’s actions except for its failure to respond to the comment. The Court’s opinion contained significant interpretation of the Surplus Lands Act’s provisions, and reaffirmed basic CEQA principles circumscribing the role of economic analysis in the CEQA process:
- While the Surplus Lands Act required the City to offer the property to other public agencies before selling it to the general public, it was not required to analyze in the EIR the potential environmental impacts of possible uses by potential purchasers under the Surplus Lands Act; such potential uses and adverse impacts were simply not “reasonably foreseeable” under the circumstances, where the City’s sale would include mitigation conditions and conservation easements that ran with the land and bound all future owners whether governmental or private.
- Nothing in the Surplus Lands Act expressly or implicitly precluded the City’s addition of conditions on a proposed purchase, such as mitigation conditions and conservation easements created to comply with CEQA’s mandatory legal duty to mitigate where feasible.
- An EIR is an informational environmental report, and as such need not contain analysis or ultimate conclusions as to the economic feasibility of the project or alternatives; the Court rejected plaintiff’s contention that the line of cases so holding was wrongly decided, and held that the CBRE economic analysis that City relied on constituted substantial evidence supporting its ultimate findings that the lease and no project alternatives were infeasible, and did not need to be included in the EIR itself under CEQA so long as it existed in the administrative record.
- The test for economic feasibility of alternatives “is not whether [the project proponent] can afford the proposed alternative, but whether the marginal costs of the alternative as compared to the cost of the proposed project are so great that a reasonably prudent property owner would not proceed with the [alternative].” (Quoting Uphold Our Heritage v. Town of Woodside (2007) 147 Cal.App.4th 587, 600.)
- “The CBRE report [constituted substantial evidence supporting City’s findings of economic infeasibility as to the other alternatives; it] extensively analyzed the local real estate rental market and determined that it would be very difficult, if not impossible, for the City to lease the Mansion property, and that the revenue that the City could expect to receive from a lease would not recompense the City for the cost of restoring the Mansion property (to make it available for lease) for nearly a decade or more. The no project alternative would leave the City in the position of remaining liable for ongoing maintenance costs without any viable use for the Mansion property. The City explicitly found that the financial drain on the City’s resources made these alternatives infeasible.”
- The City’s required statement of overriding considerations finding that the benefits of the “sale-plus” alternative outweighed the project’s significant unavoidable environmental impacts was also supported by substantial evidence. The City identified numerous benefits, the key one being “that the Mansion property would be restored and maintained in the most environmentally sensitive manner feasible without the City bearing the expense of restoration and maintenance.” This finding was supported by substantial evidence, and the Court of Appeal did not need to address the plaintiffs’ numerous arguments challenging each and every benefit cited by the City in light of the City’s “clearly expressed … finding that “each” of the identified benefits was individually sufficient to outweigh the environmental impacts of the project.”