In 15-page opinion filed on September 15, and later certified for publication on October 16, 2017, the First District Court of Appeal affirmed the trial court’s judgment denying a writ petition challenging the Judicial Council of California’s (“Judicial Council”) EIR for its project to relocate and consolidate El Dorado County Superior Court operations into a single new building on the outskirts of Placerville.  Placerville Historic Preservation League v. Judicial Council of California (County of El Dorado, et al., Real Parties In Interest) (2017) 16 Cal.App.5th 187.  The Court of Appeal held that substantial evidence supported the EIR’s conclusion that “the possible economic impact of moving judicial activities from the downtown courthouse … was not likely to be severe enough to cause urban decay in downtown Placerville.”  It also held that the Council did not need to adopt mitigation mandating re-use of the courthouse to support this conclusion.

El Dorado County is a largely rural area and its County seat, Placerville, is a town of about 10,000 persons located in the Sierra Nevada foothills about 45 miles northeast of Sacramento.  The State Judicial Council has responsibility for altering, renovating and constructing trial court facilities, which it took over from California counties as a result of 2002 legislation.  (Gov. Code, § 70321.)  In the course of its duties, the Council pursued a project to “retire” the historic Main Street Courthouse (“courthouse”) in downtown Placerville, which was built in 1912 and renovated in 1971, and to consolidate the trial court operations formerly conducted there, and in a separate County administrative complex, into a new 3-story building near the County jail less than two miles away.  The Project’s Draft EIR (“DEIR”) acknowledged the courthouse as a CEQA “historical resource” the “material impairment” of which would constitute a “substantial adverse change” in the environment.  (Pub. Resources Code, § 21084.1; CEQA Guidelines, § 15064.5.)  The Judicial Council worked extensively with the City and County, who had also agreed to work together to pursue potential re-use options, and included in the DEIR a mitigation measure that any new use of the courthouse comply with the “Secretary of the Interior’s Standards for Rehabilitation” to insure retention of its significant, character-defining features while finding a new use compatible with its historic character.  However, other than that restriction, the mitigation measure did not mandate that the courthouse be reused in any particular manner, or at all.

The DEIR acknowledged the courthouse’s retirement could impact downtown Placerville, and that it would be required to address neighborhood deterioration as a significant effect if it was reasonably foreseeable that it would result in “urban decay.”  (Citing Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1184.)  It defined “urban decay” for CEQA purposes as “physical deterioration of properties or structures that is so prevalent, substantial, and lasting a significant period of time that it impairs the proper utilization of the properties and the structures, and the health, safety, and welfare of the surrounding community.  Physical deterioration includes abnormally high business vacancies, abandoned buildings, boarded doors and windows, parked trucks and long-term unauthorized use of the properties and parking lots, extensive or offensive graffiti painted on buildings, dumping of refuse or overturned dumpsters on properties, dead trees and shrubbery, and uncontrolled weed growth or homeless encampments.”

Based on this definition of “urban decay” – which the Court noted was endorsed in Joshua Tree Downtown Business Alliance v. County of San Bernardino (2016) 1 Cal.App.5th 677, 685, and apparently by the parties – the DEIR concluded urban decay was not a reasonably foreseeable consequence of retiring the courthouse because the City and County were highly incentivized and committed to finding a new economic use for it, and there were numerous downtown businesses and land uses independent of its operations.  At least one DEIR commenter strongly disagreed, citing an “informal poll” of local merchants indicating that 5-20% of their business was generated by courthouse activities, noting that no economic study had been performed, and expressing concern that re-use would not actually occur.  Following the DEIR comment period, a local business group expressed further economic impact concerns, and submitted a petition signed by 60 persons asking the Judicial Council to consider constructing an annex to the courthouse as an alternative to retiring it; other late comments (which the Court noted the Council accepted and responded to per its discretion) stated 38 downtown area  businesses had closed in the last 3 years, that between 150-200 persons visited the courthouse daily and spent between $1,500 – $3,000 at local businesses, and that they feared loss of the courthouse would cause “urban blight” and “economic devastation” to the downtown business community.

A responsive Judicial Council staff report concluded these comments did not require modification of the DEIR’s analysis or conclusions.  The FEIR was certified, and plaintiff citizens group (the “League”) filed its CEQA challenge asserting several deficiencies in the EIR.  By the time of trial, only the alleged “urban decay” impact remained at issue.  The trial rejected that argument – reasoning that “no evidence in the record … suggest[s] that removing courthouse operations from downtown would lead to physical impacts on the downtown environment” and that “urban decay is not reasonably anticipated” – and denied the writ petition.

Key takeaways from the Court of Appeal’s opinion affirming the trial court’s judgment include:

  • “Given its exclusive focus on environmental impacts, CEQA ordinarily does not require an EIR to address the economic and social effects of a proposed project.” (Citing CEQA Guideline, § 15064(e); Joshua Tree Downtown Business Alliance, supra, 1 Cal.App.5th at 684.) When such effects are sufficient to cause physical change to the environment, however, such physical change may be deemed significant in the same way as any other physical change within CEQA’s purview. For many decades, case law has “recognized that if the detrimental economic effects of a project are sufficient to cause “business closures and eventual physical deterioration” of a neighborhood, that physical deterioration must be assessed in the EIR.”
  • Case law further teaches that while there is no reason to presume that even large new shopping centers will result in urban decay, and many factors are relevant, “where there is evidence [in the record] suggesting that the economic and social effects caused by the proposed shopping center could result in urban decay or deterioration, then the lead agency is obligated to assess this indirect impact” and cannot summarily dismiss its possibility.
  • Whether urban decay is a reasonably foreseeable indirect effect of a project “is essentially a factual question,” and thus the conclusion that urban decay was not a reasonably foreseeable indirect impact of retiring the courthouse was subject to the deferential “substantial evidence” standard of review.
  • Significantly, the Court noted that there is no reason urban decay should be presumed, and that it “is a relatively extreme economic condition.” Per the Court: “In a dynamic urban environment, including that of a small city such as Placerville, change is commonplace” but “[i]n the absence of larger economic forces, urban decay is not the ordinary result.” Businesses “come and go” for various reasons without impacting overall economic health, as evidenced by one commenter’s statement that 38 downtown Placerville businesses had closed in the last 3 years (notwithstanding the presence of trial court operations in the area). No evidence suggested the courthouse was critical to the downtown’s economic health, given that many businesses were independent of its activities, and any dislocation from its “retirement” and the relocation of its activities was likely to be only temporary. According to the Court: “There is every reason to believe … the building will [be re-used so as to] resume its role as a source of downtown commerce” and “no evidence that the changes attendant upon the project will result in a long-term detriment to downtown Placerville, let along constitute the type of catastrophe necessary to cause urban decay.”
  • The League’s contention that the EIR’s reliance on likely re-use of the courthouse in its analysis was improper, because such re-use was not adopted as a binding mitigation measure, lacked merit. First, it did not entirely fairly represent the record because reuse of the building in a manner that would not impair its historical resource value was a mitigation measure (albeit one addressing the potential historical resources impact). Second, the Court found the argument “put the cart before the horse” since the DEIR concluded based on many factors – including the likelihood of re-use – that urban decay was not a reasonably feasible project impact. Absent finding a significant impact, there was no need to adopt courthouse re-use as a mitigation measure to address it: “The League fails to cite any prior decision holding that a lead agency must adopt as a mitigation measure the circumstances that make an impact not reasonably foreseeable, as a condition of concluding that the impact is not significant.” The lack of a binding requirement for re-use did not undercut the DEIR’s reasoning, and the Court found that while re-use was not guaranteed, “it was likely because it would be a benefit to the City and public officials were committed to realizing that benefit. This well-grounded probability is sufficient to support the Judicial Council’s conclusion that urban decay is not reasonably foreseeable.”
  • The local residents’ comments here were anecdotal evidence at best, and were insufficient to support a conclusion that retirement of the courthouse would result in urban decay. The Court distinguished Bakersfield, supra, as dealing with factual circumstances in which the lead agency had dismissed the risk of urban decay altogether in the face of a great deal of record evidence that urban decay could result from the construction of new “Supercenter” shopping centers, including a detailed economic study by a professor of economics, numerous relevant studies and articles addressing the impacts of supercenters in other communities, and the comments of numerous other individuals. The Court noted: “There is nothing similar in the present administrative record.”
  • The Court rejected the League’s argument that an economic study was necessary to support the Judicial Council’s finding of no reasonably foreseeable indirect urban decay effects. It followed well-established law in holding that the Council had discretion to design the EIR, and to determine what study and analysis were necessary, and noted: “In any endeavor of this type, financial resources are limited, and the lead agency has the discretion to direct those resources to the most pressing concerns.” That further studies could be helpful does not make them necessary under CEQA, and an EIR need only briefly address the reasons for its “no significant impact” conclusions. Under the circumstances here, “there was [thus] no requirement, that the Judicial Council perform an economic study to confirm the lack of a significant impact.”
  • In concluding its opinion, the Court emphasized the significant differences between factual circumstances like those present in the Bakersfield case and those in the case before it: “The Judicial Council proposes to relocate certain governmental functions that, as a by-product of their presence, produced some commercial activity. Unlike the circumstances in Bakersfield, the new construction will not result in a competitor to siphon business from downtown. Just as important, the relocation will leave behind a building that can be filled with other activities producing a level of commerce similar to those removed by the relocation, thereby mitigating the impact of the relocation. These factors provide substantial evidence to support the draft EIR’s conclusion that urban decay is not a reasonably foreseeable consequence of the project.”

“Staying in your own lane” has become a popular phrase in recent political and social discourse, and it well encapsulates the basic limits on CEQA that drive the result in urban decay cases like this one.  CEQA is not an economic protection statute, and its purposes do not include analyzing a project’s economic, social, or psychological impacts.  It is only when solid, reasonable and credible evidence in the record shows that such economic impacts could actually result from the project and cause significant and adverse physical environmental impacts – i.e., the “relatively extreme economic condition” resulting in “urban decay” – that an EIR need engage in more in-depth urban decay analysis that includes an economic study.  While the Court’s opinion does not appear to break new legal ground, in applying established law to a new fact pattern it serves as a good reminder that the lines between economic effects and physical impacts should not be blurred in CEQA analysis – CEQA’s sole ultimate concern is with physical environmental impacts, and practitioners and judges should take care to ensure that CEQA “stays in its own lane” in this regard.

 

Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.